Coastal Cargo Co Inc v. Gustav Sule MV ( 2000 )

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 99-31187
Summary Calendar
COASTAL CARGO COMPANY, INC,
Plaintiff-Appellee,
VERSUS
GUSTAV SULE MV; Etc; ET AL,
Defendants.
------------------------------------------
ESTONIAN SHIPPING CO, LTD,
Defendant-Third Party Plaintiff-Appellant,
and
KEGAN SHIPPING COMPANY, LTD,
Third Party Plaintiff,
VERSUS
STEAMSHIP MUTUAL PROTECTION AND INDEMNITY ASSOCIATION, LTD,
Third Party Defendant-Appellee.
Appeal from the United States District Court
For the Eastern District of Louisiana
District Court No. 96-CV-1029-K
November 14, 2000
Before EMILIO M. GARZA, STEWART, and PARKER, Circuit Judges.
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PER CURIAM:*
Estonian Shipping Company, Ltd. (“Estonian”) appeals the
judgment entered in favor of Coastal Cargo Company, Inc. (“Coastal
Cargo”) after a bench trial. We affirm.
FACTS AND PROCEDURAL HISTORY
In March 1996, Plaintiff, Coastal Cargo, a stevedoring company
in New Orleans, Louisiana, provided approximately $45,000 worth of
vessel discharging services to the M/V GUSTAV SULE.
Kegan Shipping Company (“Kegan”) owned the M/V GUSTAV SULE.
Kegan bareboat chartered the vessel to Estonian, a foreign state as
defined by the Foreign Sovereign Immunities Act (“FSIA”), 28 U.S.C.
§ 1602. Estonian then time chartered the vessel to Shelbourne
Investments, Inc., and Baff Shipping guaranteed the performance of
Shelbourne under the time charter party. Shelbourne subchartered
the vessel to American International Oil Company (“AIOC”). AIOC
hired Coastal Cargo’s stevedores to unload the vessel, but failed
to pay for their services due to insolvency. Coastal Cargo brought
suit to recover the payment due. The related third-party suit
arose from a dispute among the various owners, charterers, and
their insurers concerning who should be held responsible for the
unpaid bill. Coastal Cargo’s entitlement to payment for its
services and the amount due is not challenged on appeal.
*
Pursuant to 5TH CIR. R. 47.5, the Court has determined that this
opinion should not be published and is not precedent except under
the limited circumstances set forth in 5TH CIR. R. 47.5.4.
2
On March 20, 1996, Coastal Cargo faxed a letter to Estonian
demanding security for the stevedoring bill and advising Estonian
that it would enforce its maritime lien by arresting the vessel if
the demand was not satisfied. Estonian notified both Coastal Cargo
and Shelbourne/Baff that Shelbourne/Baff was responsible for paying
the bill pursuant to its charter agreement. On March 21, 1996,
Coastal Cargo filed its original complaint against the M/V GUSTAV
SULE in rem to enforce its lien.
Meanwhile, attorney Christopher Davis contacted Coastal
Cargo’s attorney, saying that he represented Baff and its
underwriter, Steamship Mutual Protection and Indemnity Association
Ltd. (“Steamship Mutual”). On March 22, 1996, Davis sent Coastal
Cargo a proposed letter of undertaking to be used as security for
the release of the vessel. The proposed letter of undertaking was
rejected because it did not include provisions for posting bond or
filing a claim of ownership. On March 23, 1996, the M/V GUSTAV
SULE was arrested.
Estonian, concerned that its vessel was under seizure,
contacted its underwriter, UK P&I, who hired New Orleans attorney
Dwight LeBlanc to represent Estonian’s interests in the matter.
LeBlanc contacted Coastal Cargo and Davis on March 23, 1996. A
revised letter of undertaking was issued the same day under the
signature for Steamship Mutual, representing that Steamship Mutual
would “file or cause to be filed a claim on behalf of the owners of
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the M/V GUSTAV SULE, with the in rem appearance and claim of
ownership to be consistent with the defenses available to the
vessel and its owners and which appearance and claim shall not be
a waiver of any such defenses.” Later that day, the vessel was
released. Davis faxed a letter to LeBlanc on March 27, 1996 which
stated:
I reconfirm that neither the Association (Steamship
Mutual) nor Time Charterers (Baff Shipping) will take any
action, either in rem, or otherwise, against the M/V
GUSTAV SULE or against her owners, Estonian Shipping
Company, Ltd., in connection with this matter.
LeBlanc testified at trial that upon receipt of this fax, he
closed the file and considered the matter ended as the charterers
were taking care of the problem. LeBlanc did not file an answer on
behalf of Estonian and did not file a “Claim of Owner” as provided
by Rule C, Supplemental Rules for Admiralty and Maritime Claims.
Between April 11, 1996 and July 4, 1996, Davis made three
requests for documents to be used in asserting a defense under the
FSIA in the name of Estonian. Davis’s second communication
included a copy of a federal district court opinion explaining that
if the FSIA defense to the in rem action was successful, an in
personam action may be brought in its place. Davis did not
communicate with LeBlanc during this time and at no time did he
discuss with LeBlanc the possibility or ramifications of asserting
FSIA defenses in this matter. Rather, Davis communicated with
Estonian by fax transmissions to UK P&I Club, Estonian’s
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underwriter. The UK P&I Club forwarded the request directly to
Estonian through its insurance department, and Estonian provided
Steamship Mutual the requested documents. On July 19, 1996, Davis
filed a pleading signed as counsel for Estonian making a restricted
appearance and a claim for the vessel. Davis further filed a
Motion for Release of Security along with the Estonian documents
supporting the FSIA defense. The district court granted the motion
on October 16, 1996, and the Letter of Undertaking was returned to
Steamship Mutual. In December 1996, Davis withdrew as counsel of
record in the litigation per the instruction of Steamship Mutual
and informed both Baff and Estonian that he was withdrawing and
that the trial in the matter had been continued without date.
On August 20, 1997, Coastal Cargo amended its complaint to
effect in personam jurisdiction over Estonian and Kegan under the
FSIA. Sometime during the Fall of 1997 Baff/Shelbourne became
insolvent. On May 4, 1999, new counsel for Estonian filed a third-
party action against Baff and Steamship Mutual, alleging that it
was Baff’s responsibility to pay the stevedoring charges and that
at no time had Estonian authorized Steamship Mutual or Baff to
represent its interest in the court proceedings. Estonian urged
causes of action for detrimental reliance and judicial estoppel
against Steamship Mutual.
Following a one-day trial, the district court rendered
judgment in favor of Coastal and against Estonian for $44,442.10
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plus interest, in favor of Steamship Mutual and against Estonian
and dismissed Estonian’s Third Party complaint.
DISCUSSION
A. FSIA
Section 1609 of the FSIA prohibits the arrest or attachment of
a vessel owned by a foreign government or one of its
instrumentalities. 28 U.S.C. § 1609. However, while a vessel
owned by a foreign government may not be arrested or attached under
28 U.S.C. § 1609, § 1605 provides for an in personam proceeding
against the government itself. 28 U.S.C. § 1605; see also
Maritrend, Inc. v. M/V SEBES, 1997 WL 660614 at *4 (E.D. La. Oct.
23, 1997). By entering a “Claim of Owner” for Estonian and
invoking FSIA, Steamship Mutual successfully argued that the vessel
had been wrongfully seized and that the in rem action, in which
Steamship Mutual had supplied the Letter of Undertaking, was
without merit. This left Coastal Cargo with the option of pursuing
its claims against Estonian in personam, which it did.
Estonian’s complaint begins with the undisputed premise that
AIOC should have paid for the stevedoring services and when AIOC
failed to pay them, it became the responsibility of Baff to pay
them under the terms of the Time Charter Party between Baff and
Estonian. Estonian takes the position that it did not realize that
it had potential in personam liability for the charges until after
the in rem action had been dismissed and both AIOC and Baff had
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become insolvent, and it therefore failed to protect its interests.
B. Detrimental Reliance
Estonian first appeals the adverse judgment on its Louisiana
detrimental reliance claims. Article 1967 of the Louisiana Civil
Code provides, “[a] party may be obligated by a promise when he
knew or should have known that the promise would induce the other
party to rely on it to his detriment and the other party was
reasonable in so relying.”1 Thus, to recover under its detrimental
reliance theory, Estonian had to establish that (1) Steamship
Mutual made a representation; (2) Estonian justifiably relied on
that representation; and (3) Estonian changed its position to its
detriment because of that reliance. Bernofsky v. Tulane Univ. Med.
Sch., 962 F. Supp. 895, 905 (E.D.La. 1997).
On the first element, the district court understood Estonian
to take the position that Steamship Mutual made the operative
representation in its April 11, 1996, fax to UK P&I Club by stating
that “the suit could be dismissed and the security returned if
1
On appeal, Estonian argues that it is entitled to prevail on
this issue relying on the federal admiralty law concept of
equitable estoppel. Estonian pleaded a cause of action under the
Louisiana law of detrimental reliance, then asserted its equitable
estoppel claims for the first time orally at trial. The district
court refused to allow Estonian’s eleventh-hour assertion of a new
cause of action, holding that “this invocation occurred too late in
the day, and the Court believes its application would have no real
effect on its decision.” Coastal Cargo Co., Inc. v. M/V GUSTAV
SULE, 96-CV-1029-K, 13 n.5 (E.D. La. 1999)(unpublished). Estonian
does not challenge that holding on appeal. We therefore review the
district court’s ruling in light of Louisiana detrimental reliance
law.
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evidence could be provided that head owners are a state controlled
company.” On appeal, without addressing the district court’s
opinion in that regard, Estonian contends that they relied instead
on the fax from Davis to LeBlanc on March 27, 1996, stating that
neither Steamship Mutual nor Baff Shipping would take any action,
either in rem, or otherwise, against the M/V GUSTAV SULE or
Estonian in connection with this matter. We will assume, without
deciding, that Steamship Mutual’s two statements amount to a
representation that it would protect Estonian’s interests as
opposed to that of the vessel.
On the second prong of detrimental reliance analysis, the
district court found that Estonian failed to prove that it
justifiably relied on the purported representations. First,
Estonian asserts, without reference to authority, that owners and
charterers may rely on a party that assumes defense of a maritime
matter. Eric Ringmaa from Estonian’s legal department testified
that Estonian believed that Steamship Mutual and Baff had assumed
defense of the matter and would protect its rights by virtue of the
actions it took at the time of the initial seizure. Second,
Estonian contends that they relied on Steamship Mutual’s “silence,”
because there was no mention of the FSIA defense during the
negotiations to release the vessel from seizure and because the
claim of ownership and the motion for release were filed by
Steamship Mutual on behalf of Estonian without notice to or service
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of the documents on Estonian’s counsel, LeBlanc. The district
court found that Estonian’s reliance, based on these facts, was not
justifiable. The district court, considering all of the
correspondence and testimony admitted at trial, initially found
that Estonian is a sophisticated commercial entity with two in-
house counsel at its disposal. Academy Mortgage Co. v. Barker,
Boudreaux, Lamy & Foley, 673 So.2d 1209, 1212 (La. App. 4 Cir.
1996)(“[A] promisee’s business acumen is properly considered when
determining reasonableness of the claimed reliance.”). Second, the
district court found that Steamship Mutual was not silent, but in
fact did advise Estonian of its intent to invoke FSIA and the
consequences of that decision by faxing legal authority explaining
the FSIA defense along with its request for documents necessary to
assert that defense. Based on these two findings, the district
court concluded that Estonian failed to prove that it justifiably
relied on Steamship Mutual’s purported representations, and
therefore did not consider whether Estonian established the third
element of its cause of action. We cannot say that the district
court clearly erred in holding that the evidence did not support a
finding of justifiable reliance and thereby rejecting Estonian’s
detrimental reliance claim. Lake Charles Stevedores, Inc. V.
PROFESSOR VLADIMIR POPOV MV, 199 F.3d 220 (5th Cir. 1999)(holding
that the district court’s findings of fact must be upheld unless
clearly erroneous).
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C. Judicial Estoppel
Estonian also challenges on appeal the district court’s ruling
that Steamship Mutual was not bound by judicial estoppel to defend
Estonian’s interest in this action after Davis’s motion to withdraw
was granted in December 1996. The doctrine of judicial estoppel
prevents a party from “taking a position ‘that is contrary to a
position previously taken in the same or some earlier proceeding.’”
Sabah Shipyard Sdn. Bhd. v. M/V HARBEL TAPPER, 178 F.3d 400 (5th
Cir. 1999). The doctrine “is used to protect the integrity of the
judicial process; it is intended to protect the courts rather than
the litigants.” Perez v. Brown & Williamson Tobacco Corp., 967 F.
Supp. 920, 926 n.1 (S.D. Tex. 1997).
Estonian points to pleadings filed by Davis early in the
proceedings taking the position that it was the obligation of Baff
and Steamship Mutual to defend the in rem aspects of the claim, and
argues that Steamship Mutual is thereby precluded from declining to
defend the action at trial. Estonian’s judicial estoppel theory is
bottomed on their assumption that Coastal Cargo’s claim continued
as an in rem proceeding after the district court released the
vessel and returned Steamship Mutual’s letter of undertaking and
granted Davis’s motion to withdraw. The district court
specifically declined to award judgment in this suit on the basis
of in rem liability. Estonian did not argue at trial or brief on
appeal any challenge to that ruling. Therefore Estonian’s judicial
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estoppel argument gains it nothing.
CONCLUSION
Based on the foregoing, we affirm the judgment of the district
court.
AFFIRMED.
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