Coastal Cargo Co Inc v. Gustav Sule MV

• Court: Court of Appeals for the Fifth Circuit
• Decided: November 15, 2000
• Docket: 99-31187
• Status: Unpublished

Opinion

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.

1 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 R. 47.5, the Court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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

3 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

4 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

5 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

6 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.

7 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

8 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).

9 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

10 estoppel argument gains it nothing.

CONCLUSION

Based on the foregoing, we affirm the judgment of the district

court.

AFFIRMED.