PRACTICE AND PROCEDURE

Transcription

1 RICHARD MCALPIN* 2 PRACTICE AND PROCEDURE I. [ 2.1] INTRODUCTION II. IN FEDERAL COURT A. [ 2.2] In General B. Supplemental Rules 1. [ 2.3] Rule A 2. Rule B a. [ 2.4] In General b. [ 2.5] When Available c. [ 2.6] Found Within District d. [ 2.7] Postattachment Presence e. [ 2.8] Postattachment Hearing 3. Rule C a. [ 2.9] In General b. [ 2.10] When Available c. [ 2.11] Jurisdiction Over Rule C Arrests d. [ 2.12] Arrest Procedure e. [ 2.13] Notice f. [ 2.14] Release From Arrest g. [ 2.15] Damages Resulting From Arrest 4. Rule D a. [ 2.16] In General b. [ 2.17] When Available c. [ 2.18] Petitory Action d. [ 2.19] Possessory Action 5. Rule E *J.D. with honors, 1984, Stetson University. Mr. McAlpin is a member of the Florida Bar and a founding member of McAlpin & Brais, P.A., in Miami. He is Florida Bar Board Certified in admiralty and maritime law and in civil trial law. The valuable assistance of Richard D. Rusak, Esq. and Russell M. Pfeifer, Esq. is greatly appreciated. 2 1

2 a. [ 2.20] In General b. [ 2.21] Pleading c. [ 2.22] Service Of Process d. [ 2.23] Release Of Property e. [ 2.24] Effect Of Release Of Res f. [ 2.25] Appearance g. [ 2.26] Motion To Vacate Arrest h. [ 2.27] Sale Of Property i. [ 2.28] Confirmation Of Sale j. [ 2.29] Special Requirements For Salvage Actions 6. [ 2.30] Rule F C. [ 2.31] Local Rules Of District Courts D. [ 2.32] Rule 9(h) Election III. [ 2.33] IN FLORIDA STATE COURTS 2 2

3 PRACTICE AND PROCEDURE 2.4 I. [ 2.1] INTRODUCTION This chapter covers practices and procedures that are unique to admiralty and maritime cases in Florida. II. IN FEDERAL COURT A. [ 2.2] In General In 1966 there was a unification of admiralty practice and general civil practice. The former Admiralty Rules were rescinded and superseded by the Supplemental Rules for Certain Admiralty and Maritime Claims. These Supplemental Rules, A through F, follow the Federal Rules of Civil Procedure in the United States Code. B. Supplemental Rules 1. [ 2.3] Rule A Under Supplemental Rule A, the general Rules of Civil Procedure for the United States District Courts apply in maritime cases to the extent they are not inconsistent with the Supplemental Rules. In the event of an inconsistency, the Supplemental Rules control. In explaining the scope of the Supplemental Rules, the advisory committee indicated that the rules were not intended to limit or impair the traditional power of a district court, acting consistently with the Supplemental Rules, to secure the just, speedy, and inexpensive determination of every action. Schiffahartsgesellschaft Leonhardt & Co. v. A. Bottacchi S.A. de Navegacion, 773 F.2d 1528, 1540 (11th Cir. 1985). In practice, this means that the district courts retain the power to make local rules. Accordingly, it is important for the practitioner to note the differences among the districts. This chapter highlights the distinctions between the local rules of the Northern, Southern, and Middle districts of Florida. 2. Rule B a. [ 2.4] In General Rule B provides a method for substituted service of process of in personam lawsuits by attaching property belonging to a defendant who cannot be served by conventional methods within the district in which the 2 3

4 action is pending. It also provides the practical benefit of obtaining security for prejudgment satisfaction of in personam claims. The procedure is frequently referred to as foreign attachment. It is said that this maritime attachment provides a quasi in rem method of obtaining jurisdiction over a defendant not present in the district but who has property present. There are two reasons for foreign attachment: to secure a respondent s appearance and to assure satisfaction in case the suit is successful. Swift & Co. Packers v. Compania Colombiana del Caribe, S.A., 339 U.S. 684, 693, 70 S.Ct. 861, 94 L.Ed (1950), 19 A.L.R.2d 630. b. [ 2.5] When Available If a lawsuit is based on admiralty and maritime claims, service of process of an in personam claim may be made by attaching property belonging to the defendant when the defendant cannot be found within the district in which the lawsuit was commenced for the purposes of service under Rule 4 of the Federal Rules of Civil Procedure. To use the rule, the plaintiff must show by verified complaint and affidavit that (1) the plaintiff has an in personam claim against the defendant cognizable in admiralty; (2) the defendant cannot be found within the district in which the action was commenced; (3) the property belonging to the defendant is present or soon will be present in the district; and (4) there is no statutory or general maritime law prohibition on attachment. Dannebrog Rederi AS v. M/Y True Dream, 146 F.Supp.2d 1307 (S.D. Fla. 2001). c. [ 2.6] Found Within District A two-pronged test determines whether a defendant can be found within the district : (1) whether the defendant has minimum contacts to support jurisdiction; and (2) whether the defendant can be found within the district for service of process. LaBanca v. Ostermunchner, 664 F.2d 65 (5th Cir. 1981). The first prong focuses on whether the defendant is present within the district by reason of activities on its behalf by authorized agents so as to extend in personam jurisdiction to the court. If not, then the defendant cannot be found within the district, and this ground alone is sufficient to support the attachment. Even if the foreign [defendant] can be found within the district in a jurisdictional sense, its property is not immunized from attachment. The second inquiry then becomes necessary, and the court must determine whether the [defendant] can be found within the district for service of process. Madredeus Shipping Co. v. Century Bridge Chartering Co., 2000 WL , p. 4, 2000 AMC 950 (S.D. Fla. 2000). 2 4

5 Plaintiffs must show due diligence in attempting to locate defendants within a district. The Admiralty Rules, United States District Court, for the Northern District of Florida, require that a plaintiff bringing an in personam claim under Rule B set forth in an affidavit the steps taken to determine that the defendant could not be found within the district. N.D.Fla.Loc.Adm.R. 13. However, Supplemental Rule B attachment may not be used in the Northern District of Florida against nonresident defendants. Under F.S and Fed.R.Civ.P. 4(f), the Florida Secretary of State (located in that district) may be served as the defendant s appointed representative. LaBanca. In LaBanca, the defendants in a case that was pending in the Middle District of Florida moved to quash attachment of their Florida bank funds in Pinellas County, contending that the Florida Secretary of State was authorized by F.S to accept service of process on their behalf, and thus they could be found within the district for service of process. The court disagreed, holding that service of process on the Florida Secretary of State could be accomplished only in the state capitol within the Northern District of Florida, not in the Middle District of Florida where the action was filed. The court further held that Fed.R.Civ.P. 4(f), which allows valid service of process within any district of the state, could not be used to circumvent the requirement that a defendant be susceptible to service within the actual district. See also Maritrans Operating Partners Ltd. Partnership v. M/V Balsa 37, 64 F.3d 150 (4th Cir. 1995) (attachment under Rule B is not proper if defendant can be served in accordance with federal rule governing service on foreign corporation). d. [ 2.7] Postattachment Presence A postattachment presence of the defendant or representative for service within the district will not defeat a Rule B attachment because such presence is not the type of ongoing presence within the district that was intended by Rule B. 20th Century Fox Film Corp. v. M/V Ship Agencies, Inc., 992 F.Supp (M.D. Fla. 1997). In 20th Century Fox, the defendants argued that by their counsel asserting for the first time at the postattachment hearing that he was authorized to receive and accept service of process in the Middle District of Florida for both defendants (Sturgeon Atlantic and Ship Agencies), attachment was improper, and that the presence of two individuals (Mr. O Donnel who asserted he was the personal representative of the owner of the vessel and amenable to service on behalf of both defendants, and Capt. Singh who asserted he was then 2 5

6 President of Ship Agencies who could be served in the district) precluded a Rule B attachment. The court disagreed, stating that mere after-process presence did not counter the plaintiff s representations of due diligence in attempting to locate Ship Agencies within the district. Moreover, if the court accepted the defendant s argument, maritime attachment could be avoided or rescinded simply by accepting service. A defendant may not, postattachment, appoint agents for service and defeat a writ of attachment. Id. Thus, the filing of a general appearance or an offer to accept service of process in the district after the attachment has already been effected cannot defeat the Rule B attachment. The fact that an owner who enters a personal appearance does not cause a dissolution of the attachment is premised on the idea that a Rule B attachment serves as security to satisfy a potential judgment. A Rule B attachment may be made to obtain security even if it is not necessary for jurisdiction. LaBanca v. Ostermunchner, 664 F.2d 65 (5th Cir. 1981). e. [ 2.8] Postattachment Hearing Ordinarily, under Rule B, the court will review the complaint and affidavit and if the necessary conditions appear to exist, the court will enter an order authorizing attachment. However, if circumstances make immediate action necessary, the plaintiff or his or her attorney may certify that exigent circumstances make court review impracticable, and the clerk must issue the summons and process of attachment and garnishment. The plaintiff then bears the burden in any postattachment hearing under Rule E(4)(f) to show that exigent circumstances existed. Notice of a request for attachment is not required to be served on a defendant. However, to satisfy constitutional due process requirements, the defendant is entitled to a prompt hearing to preliminarily determine the propriety of the attachment or garnishment. Supplemental Rule E(4)(f) governs postattachment hearings and provides in part that whenever property is arrested or attached, any person claiming an interest in it shall be entitled to a prompt hearing at which the plaintiff shall be required to show why the arrest or attachment should not be vacated. Similarly, M.D.Fla.Loc.Adm.R. 7.03(g) provides for a show cause hearing at which the plaintiff must show cause why the arrest or attachment should not be vacated. Local Admiralty Rule 7.02(e)(2) grants a right to a hearing within three days. Linea Naviera de Cabotaje, C.A. v. Mar Caribe de Navegacion, C.A., 169 F.Supp.2d 1341 (M.D. Fla. 2001). 2 6

7 Local rules in the Southern and Middle districts allow for recovery of attorneys fees in cases when the Rule B attachment is improper and for costs in the Northern District. See S.D.Fla.Loc.Adm.R. B(5)(b); M.D.Fla.Loc.Adm.R. 7.03(g); N.D.Fla.Loc.Adm.R. 15(B)(8) (providing for costs of hearing). The propriety of local rules allowing the recovery of attorneys fees is, however, questionable in light of the well established principle that attorneys fees can only be awarded in maritime cases where they are allowed by statute or contract or where bad faith is shown. See, e.g., Natco Ltd. Partnership v. Moran Towing of Florida, Inc., 267 F.3d 1190 (11th Cir. 2001). Attachment of property under Supplemental Rule B is to be distinguished from an in rem arrest of an offending vessel under Supplemental Rule C. See Under Supplemental Rule B the property attached may, but need not, be the offending vessel. It may be an attachment of any property belonging to the in personam defendant, such as bunkers and equipment belonging to a charterer under the terms of a charter party, Schiffahartsgesellschaft Leonhardt & Co. v. A. Bottacchi S.A. de Navegacion, 773 F.2d 1528 (11th Cir. 1985), or another vessel belonging to the owner of the offending vessel, Central Hudson Gas & Electric Corp. v. Empresa Naviera Santa, S.A., 845 F.Supp. 150 (S.D. N.Y. 1994), aff d 56 F.3d 359. Rule B may be used to obtain prejudgment security from, and in personam jurisdiction over, a debtor with no presence in the judicial district in which the asset is attached. Rule B may also be used concurrently with Rule C to provide a supplemental basis for seizing a vessel if the Rule C claim is marginal. When an in personam claim is joined with an in rem claim, attachment under Supplemental Rule B to accomplish service of process of the in personam claim may be used simultaneously with an arrest under Supplemental Rule C, which perfects the in rem claim. See Rule C a. [ 2.9] In General Rule C provides a method for proceeding in rem against an offending vessel or other maritime property. It also provides the benefit of obtaining security for the satisfaction of claims. The procedure is frequently referred to as arrest. 2 7

8 b. [ 2.10] When Available Under Supplemental Rule C, a person possessing a maritime lien (including a ship mortgage lien) may bring an in rem action in federal court against the vessel itself as the offending thing, rather than its owner, to foreclose the lien. Madruga v. Superior Court of State of California in & for San Diego County, 346 U.S. 556, 74 S.Ct. 298, 98 L.Ed. 290 (1954). According to this legal fiction, the vessel itself is considered liable notwithstanding the liability of its owner in personam. Pursuant to Rule C, a maritime lien as recognized under United States maritime law is a prerequisite to an action in rem. Maritime liens are defined under maritime law. Under American law, claims for necessaries give rise to such liens, whereas under English law they do not. Trinidad Foundry & Fabricating Ltd. v. M/V K.A.S. Camilla, 776 F.Supp (S.D. Fla. 1991), aff d 996 F.2d 613. See Chapter 12 of this manual. c. [ 2.11] Jurisdiction Over Rule C Arrests To establish jurisdiction, the vessel or property must be properly arrested under process of the court. A vessel will come into the system only when there is strict compliance with the requirements of Supplemental Rule C. Nuta v. M/V Fountas Four, 753 F.Supp. 352 (S.D. Fla. 1990). In the absence of a proper arrest or an agreement by both parties to the contrary, a decree in rem cannot be rendered against the vessel or property. Thus, arrest is a prerequisite to the court s subject matter jurisdiction. Additionally, a district court possesses the discretion to allow an in rem action to remain dormant until such time as the vessel returns to the jurisdiction and can be arrested. Vanol USA, Inc. v. M/T Coronado, 663 F.Supp. 79 (S.D. N.Y. 1987). d. [ 2.12] Arrest Procedure To arrest a vessel, a plaintiff must file a verified complaint in the federal district court where the vessel is or will be located during the pendency of the action. Supplemental Rule C(2). It is of no consequence that the maritime lien attached elsewhere or that the owner has little, if any, contact with the jurisdiction. The complaint must assert the validity of the lien, include a description of the vessel to be arrested with reasonable particularity, and assert that the vessel is within the district or will be during the pendency of the action. Id.; Platoro Ltd. v. Unidentified Remains of a Vessel, 508 F.2d 1113 (5th Cir. 1975). In most cases, the arrest warrant is issued ex parte and the vessel is seized without notice to the shipowner or 2 8

9 third parties to prevent the vessel from sailing to another unknown port and escaping arrest. Although courts generally recognize the importance of a timely decision regarding a request for issuance of an arrest warrant, an immediate response is not always possible. If circumstances make immediate action necessary, a plaintiff may certify that exigent circumstances make review by the court impracticable and obtain a summons and warrant for arrest from the clerk. However, the plaintiff then bears the burden of proving the existence of exigent circumstances at a postarrest hearing. Supplemental Rule E(4)(f). As a practical matter, most requests for in rem arrest warrants, including those claiming exigent circumstances, are referred to a federal magistrate judge for initial review. Absent exigent circumstances, once the court has determined that an arrest is proper, it will authorize a warrant for the arrest of the vessel to be issued and delivered by the clerk to the marshal for service. Notwithstanding the fact that a warrant for arrest has been issued by the clerk, the marshal normally will not arrest a vessel before an arresting party provides (1) payment of a pre-set amount determined by the marshal sufficient to cover its costs; (2) an order appointing a substitute custodian; and (3) a release and agreement to indemnify the marshal from any liability and responsibility for the subject vessel while in the care of a substitute custodian. See Donald D. Forsht Associates, Inc. v. Transamerica ICS, Inc., 821 F.2d 1556 (11th Cir. 1987). In cases involving arrest of a vessel, lienholders other than the initiating plaintiff frequently surface and seek to proceed against the vessel. Such lienholders may proceed in one of two ways. They can initiate an independent in rem action or move to intervene in the existing action. Donald D. Forsht Associates, Inc. Local Admiralty Rules in the Southern and Middle districts require that parties intervening share, pro rata, in the marshal s fees and expenses. Upon filing an intervening complaint, counsel for the intervening plaintiff must arrange for a conference between all other parties and a good faith effort must be made to allocate fees and expenses by stipulation. If a stipulation is not reached, the parties share in the fees and expenses of the marshal in proportion to their claims as stated in the original and intervening complaints. S.D.Fla.Loc.Adm.R. E(5)(b); M.D.Fla.Loc.Adm.R. 7.05(f)(2). Once a vessel is arrested, the shipowner must post bond or other security, such as a letter of undertaking, or risk having the court enter a 2 9

10 judgment against the vessel and having it sold at auction to pay the plaintiff its share of the proceeds. Gregory Boat Co. v. Vessel Big Beaut, 938 F.Supp. 414 (E.D. Mich. 1996). Supplemental Rule E(5); 2 T. Schoenbaum, ADMIRALTY AND MARITIME LAW 21-3 (West 4th ed. 2004). This rule applies similarly to property on board the vessel, such as freight. If the subject of the action consists of freight, proceeds of property sold, or other intangible property, the clerk will issue a summons directing any person having control of such property or funds to show cause why it should not be paid into the court to abide the judgment. Supplemental Rule C(3)(c). e. [ 2.13] Notice A final judgment is not obtainable in the absence of notice to the litigants. Notice is accomplished through compliance with Rule C (4) and the Local Admiralty Rules, and the requirements under these rules cannot be casually disregarded. Nuta v. M/V Fountas Four, 753 F.Supp. 352 (S.D. Fla. 1990). Further, Title 46 U.S.C (d) sets forth the requirements for notice when a mortgage holder is seeking enforcement of a preferred ship s mortgage lien against a vessel. In general, notice of arrest is made by posting the arrest on the vessel, and providing a copy to the master, owner, and all lien claimants actually known or of record. If the property is not released within 10 days after the execution, the plaintiff must promptly (or within the time the court allows) give public notice of the action and arrest in a newspaper designated by court order and having general circulation in the district. Local Admiralty Rules for the Southern and Middle districts require publication within 17 days after execution of process. S.D.Fla.Loc.Adm.R. C(4)(a); M.D.Fla.Loc.Adm.R. 7.03(d)(1). This is the only public notice required. This procedure is sufficient because the fact of seizure of a vessel alone will result in prompt, actual notice to all interested parties, without the necessity of formal personal notice,.... The publication requirement simply supplements this notice. Those with any interest in a ship, then, have a duty to stay aware of the events affecting that vessel. This removes from the plaintiff in an admiralty action the cumbersome burden of attempting to locate and notify all those in the world who have any interest in the boat that is the object of the action. 2 10

11 Tamblyn v. River Bend Marine, Inc., 837 F.2d 447, 448 n. 1 (11th Cir. 1988) (quoting United States v. Steel Tank Barge H 1651, 272 F.Supp. 658, 660 (E.D. La. 1967, which quoted New v. Yacht Relaxin, 212 F.Supp. 703, 704 (S.D. Cal. 1962)). Regardless of actual notice, the marshal s sale of a vessel operates to extinguish all other liens, including mortgage liens, on the vessel, and is the only processes which does so. Thorsteinsson v. M/V Drangur, 891 F.2d 1547 (11th Cir. 1990); Tamblyn. f. [ 2.14] Release From Arrest Supplemental Rule E(4)(f) governs the procedure for release from arrest or attachment and provides that any person claiming an interest in the property seized shall be entitled to a prompt hearing. Both the Southern and Middle districts provide that a claimant may, coincident with the filing of a claim pursuant to Supplemental Rule (E)(4)(f), file a motion and proposed order directing the plaintiff to show cause why the arrest should not be vacated. The court may then grant the order and hold a hearing. If the court vacates the arrest, Local Admiralty Rules often provide for the award of attorneys fees, costs, and other expenses incurred by any party as a result of the arrest. See, e.g., S.D.Fla.Loc.Adm.R. C(7); M.D.Fla.Loc.Adm.R. 7.03(g). Whether attorney s fees can be awarded absent a showing of bad faith is, however, questionable in light of Natco Ltd. Partnership v. Moran Towing of Florida, Inc., 267 F.3d 1190 (11th Cir. 2001) (see also 2.15). The Northern District of Florida also provides that any party asserting an interest in the seized property may move for a hearing in which the court may grant relief including an award of costs of the hearing. N.D.Fla.Loc.Adm.R. 15(B)(8). An in personam claim may be joined with an in rem claim. However, unless the in personam defendant is personally served with process, a plaintiff s recovery is limited to the in rem claim and, therefore, to the value of the property arrested. Orbis Marine Enterprises, Inc. v. TEC Marine Lines, Ltd., 692 F.Supp. 280 (S.D. N.Y. 1988). Additionally, contractual attorneys fees cannot be assessed against a defendant in rem. Rather, attorneys fees under contract require that the claim be against a defendant in personam. Bradford Marine, Inc. v. M/V SEA FALCON,

12 F.3d 585 (11th Cir. 1995). Because attorneys fees do not help a vessel to perform her particular function, they are not necessaries and do not give rise to a maritime lien under federal law. Thus, repair contracts that contain provisions for attorneys fees are not binding on the vessel in rem. Id. g. [ 2.15] Damages Resulting From Arrest Absent proof of bad faith, malice, or gross negligence on the part of the plaintiff, a vessel owner may not recover damages for losses occurring as a result of an improper vessel arrest. Furness Withy (Chartering), Inc. v. World Energy Systems Associates, Inc., 854 F.2d 410 (11th Cir. 1988). To maintain an action for wrongful arrest of a maritime vessel, the detainee must show that the arrest was not merely due to negligence, but that the action arose from malice, bad faith, or reckless disregard of the other party s legal claims. Coastal Barge Corp. v. M/V Maritime Prosperity, 901 F.Supp. 325, 328 (M.D. Fla. 1994). Thus, if a plaintiff does not act maliciously, in bad faith, or with reckless disregard in causing the arrest of a vessel or other maritime property, the plaintiff cannot be held liable for loss of profits resulting from the arrest and detainment or for depreciation of the vessel during the detainment. Conversely, if the court finds that the plaintiff acted maliciously, in bad faith, or with reckless disregard, the plaintiff may, in addition to loss of profits, be held liable for attorneys fees and costs. Id. 4. Rule D a. [ 2.16] In General Supplemental Rule D incorporates former Admiralty Rule 19 into the rules, and provides for arrest in actions for possession or partition of a vessel, or to try a vessel s title. The arrest procedures discussed in are applicable to actions under Rule D. Beluga Holding, Ltd. v. Commerce Capital Corp., 212 F.3d 1199 (11th Cir. 2000), 173 A.L.R.Fed b. [ 2.17] When Available The rationale underlying Rule D is to provide a remedy for the arrest of a vessel or maritime property in controversies involving title and possession. Rule D is also used to provide a remedy in controversies 2 12

13 between co-owners respecting the employment of a vessel, to provide a remedy of partition in controversies between co-owners, and to remedy title disputes (petitory action). Supplemental Rule D advisory committee note. c. [ 2.18] Petitory Action A petitory action is a title dispute in which the party initiating the arrest or claim has legal title to the vessel. Equitable interests in title are not sufficient. An in rem arrest is not available when a plaintiff does not assert a claim of title or any right to immediate possession of the vessel. Parcel Tankers, Inc. v. M/T Stolt Luisa Pando, 1990 WL , 1990 AMC 2934 (E.D. La. 1990). In Parcel Tankers, the plaintiff initiated an arrest pursuant to Rule D based on an alleged breach of a purchase option under a five-year time charter. The court, relying on the well-established rule that contracts for the sale of a ship are not maritime contracts and are not within admiralty jurisdiction, vacated the arrest because the sole basis of the plaintiff s complaint clearly involved a contract for sale of the vessel. However, Parcel Tanker was distinguished from Jones v. One Fifty Foot Gulfstar Motor Sailing Yacht, Hull No. 01, 625 F.2d 44 (5th Cir. 1980). In Jones, the plaintiffs purchased a yacht from Underwood Marine. Before plaintiffs were to take delivery, Underwood informed them that it had closed its business, and that General Electric Credit Corp. was claiming that it had title to, or at least a secured interest in, the yacht in question. The district court, applying Florida commercial law and federal admiralty principles, found that admiralty jurisdiction existed because the plaintiffs had completed the purchase and transferred funds which thereby provided them with a claim to title. Having a claim to legal title and the right to take immediate possession, as opposed to merely an equitable interest in the vessel, vested the court with admiralty jurisdiction to hear the Rule D claim. Conversely, the plaintiff in Parcel Tanker did not have such a claim to title or a right to immediate possession, but merely had a claim for a breach of the purchase option. d. [ 2.19] Possessory Action A possessory action is one in which a party entitled to possession of a vessel seeks to recover that vessel. It is brought to reinstate an owner of a vessel who alleges wrongful deprivation of property. Silver v. Sloop Silver Cloud, 259 F.Supp. 187 (S.D. N.Y. 1966). 2 13

14 A party seeking to arrest under Rule D must have legal title or a legal claim to possession. A legal claim, however, arises from a charterer s right to possession. For example, the Second Circuit, in The Nellie T., 235 F. 117 (2d Cir. 1916), explained this principle in a case in which a vessel owner had withdrawn a vessel from a charterer s possession for the purpose of making repairs. When the legal owner refused to return the vessel after the repairs were completed, the libelant commenced a possessory action and the owner challenged the jurisdiction of the admiralty court to entertain the suit. The district court dismissed, but on appeal the Second Circuit reversed, stating [a] right to present possession is as good as an absolute title as against the owner or anybody else who wrongfully disturbs it. Id. at 119. Thus, in a possessory action, there need not be a dispute as to who owns the vessel, but rather a claim to recover property wrongfully taken. Accordingly, Rule D permits a party to adjudicate the right to possession of property that has been wrongfully taken. Possessory and petitory suits may also be used to recover a bill of lading and the cargo covered by the bill of lading. For example, in Thypin Steel Co. v. Asoma Corp., 215 F.3d 273 (2d Cir. 2000), a possessory suit was used to recover the bill of lading (and the cargo covered by the bill of lading). The Second Circuit held that bills of lading issued to transport goods over navigable waters are maritime contracts, and thus disputes over parties entitlement to the bill of lading may be heard in admiralty. The court approved of the plaintiff s use of Rule D to arrest the bill of lading via a possessory suit. 5. Rule E a. [ 2.20] In General Supplemental Rule E provides general provisions applicable to actions for attachment (Rule B, see ), arrest (Rule C, ), and petitory, possessory, and partition actions (Rule D, ). b. [ 2.21] Pleading According to Rule E, a plaintiff who wishes to file a complaint pursuant to Rules B, C, or D must plead with particularity the circumstances from which its maritime claim arises. Additionally, whether a plaintiff is 2 14

15 proceeding in rem or in personam under the rules, the complaint must be verified on oath or affirmation by a party or an officer of a corporate party. Supplemental Rule E(2)(a) requires that the complaint must state with such particularity that the defendant or claimant will be able, without moving for a more definite statement, to commence an investigation of the facts and to frame a responsive pleading. The Local Rules within all three districts of Florida allow for an attorney of record to verify the complaint if a party or corporate officer is not found within the district. S.D.Fla.Loc.Adm.R. A(5); M.D.Fla.Loc.Adm.R. 7.01(e); N.D.Fla.Loc.Adm.R. 4. In addition, the plaintiff must also prepare the warrant of arrest or summons, or both, and deliver them to the clerk for filing and issuance. Local Admiralty Rules typically provide examples of forms. c. [ 2.22] Service Of Process Service of process in rem and of maritime attachment and garnishment must be made within the district. However, a plaintiff may ask the court to hold issuing and delivery of process in abeyance in expectation of the arrival of the property into the district. Loftin v. Maritime Overseas Corp., 1994 WL , 1994 AMC 2659 (D. Ak. 1994). Further, courts have determined the 120 day rule set forth in Fed.R.Civ.P. 4(m) is inapplicable where the subject vessel has not entered the district since commencement of the in rem action. Marine Office of America Corp. v. M/V NIKAIA, 1998 WL , 1998 AMC 1615 (M.D. Fla. 1998). If practical, the marshal will take the attached or arrested property into its custody. If the nature of the property to be attached or arrested is such that taking of possession by the marshal is impractical (i.e., if the property is a vessel), the marshal will affix a copy of the warrant in a conspicuous place on the property and leave a copy of the complaint and process with the person responsible for the property. U.S. Dept. of Justice, Manual for United States Marshals, (Rev. Oct. 2001) (portion dealing with admiralty matters reprinted at 3 Schoenbaum, ADMIRALTY & MARITIME LAW App. D-A-17 (West 4th ed. 2004) and at 2001 AMC 2705)). With respect to a vessel, the marshal will restrict customs clearance pending release or sale of the vessel. While the Coast Guard has no authority to detain a vessel itself and makes a practice of resisting court orders for it to do so, the marshal has the authority to request the Coast Guard s assistance in enabling it to fulfill the court s orders. With respect to intangible property, the marshal will serve a copy of the complaint and process on the garnishee/obligor or accept for payment into the registry of 2 15

16 the court the amount claimed by the plaintiff with interest and costs. Supplemental Rule E(4)(c). d. [ 2.23] Release Of Property Rule E(5) provides that a vessel or other maritime property subject to attachment, garnishment, or arrest may be released upon the posting of adequate security and payment of all costs and charges of the court. Generally, security is posted in the form of a bond for the value of the property to be released. However, any form of security is acceptable upon stipulation of the parties except in cases for release of property arrested subject to petitory, possessory, and partition actions. Rule E(5)(d). In such cases, the property will be released only by order of the court, on such terms and conditions as it deems appropriate. Id. The stipulation for value, bond or other security is substituted for the vessel as the res subject to the court s jurisdiction. Alyeska Pipeline Service Co. v. Vessel Bay Ridge, 703 F.2d 381, 384 (9th Cir. 1983). The plaintiff s lien against the vessel or other maritime property is transferred to the posted security. Absent fraud or misrepresentation, the release of the arrested property upon the posting of the security discharges the lien against the property. Id. The same result occurs when an owner furnishes a letter of undertaking. The release of a seized vessel upon the posting of alternative security forever discharges the lien against the vessel, and the lien is transferred to the new security, whether it be a bond or letter of undertaking. Id. In re Topgallant Lines, Inc., 154 BR 368 (S.D. Ga. 1993). A letter of undertaking is an agreement that the owner and/or its insurers will enter an appearance and acknowledge ownership as if the vessel had been arrested and to pay any judgment that may be entered against the vessel. Afram Lines International, Inc. v. The M/V CAPETAN YIANNIS, 905 F.2d 347 (11th Cir. 1990). Such informal agreements are treated as having the same legal effect as formal releases of vessels under bonds or stipulations, avoiding considerable costs and inconveniences to the parties. Continental Grain Co. v. Federal Barge Lines, Inc., 268 F.2d 240 (5th Cir. 1959), aff d 364 U.S. 19. The court, at any time, may increase or decrease the amount of security required. Supplemental Rule E(2)(b), (6); N.D.Fla.Loc.Adm.R. 15(B); M.D.Fla.Loc.Adm.R.7.05(j); S.D. Fla.Loc.Adm.R.E(9). 2 16

17 Any party claiming ownership or an interest in the vessel must appear and defend any claims against the vessel, or the plaintiff is entitled to default judgment against the vessel. Supplemental Rule C(6). Westerlind v. M/V First Northern, 1992 WL , 1993 AMC 1762 (S.D. Fla. 1992). Additionally, the interest asserted in the res must be proprietary, and claims arising under non-maritime interests, such as state created UCC security interests, do not qualify the holder as a claimant under Supplemental Rules E(9) and C(6). Id. The claimant or owner of property subject to an action in rem must file a verified notice of claim within 10 days and must file an answer in 20 days. Supplemental Rule C(6); M.D.Fla.Loc.Adm.R. 7.03(f); S.D.Fla.Loc.Adm.R. C(6). However, in possessory actions filed pursuant to Supplemental Rule D, the court may order that process be returnable at a time shorter than prescribed by Fed.R.Civ.P. 12(a). If the court shortens the time, it must specify the date on which the answer must be filed. M.D.Fla.Loc.Adm.R. 7.04; S.D.Fla.Loc.Adm.R. D. e. [ 2.24] Effect Of Release Of Res Prior to the United States Supreme Court decision in Stevedoring Services of America v. Ancora Transportation, N.V., 506 U.S. 1043, 113 S.Ct. 955, 122 L.Ed.2d 112 (1993), courts applying admiralty law recognized that if the res subject to either arrest or attachment under the Supplemental Rules was released, without substitute security, the court had no further jurisdiction, even if the release was improper. However, this is no longer the rule. Courts now generally require that the res be present in the district at the time of the commencement of the case to invoke in rem or quasi in rem jurisdiction, but such jurisdiction is not necessarily lost when the res is subsequently removed. Id. (relying on Republic National Bank of Miami v. United States, 506 U.S. 80, 113 S.Ct. 554, 121 L.Ed.2d 474 (1992)). f. [ 2.25] Appearance Under Rule E(8) a party may expressly restrict its appearance to the defense of a claim for attachment and garnishment or arrest. A restricted appearance prevents claims from being brought against the party for which process is not available or has not been served. g. [ 2.26] Motion To Vacate Arrest 2 17

18 Rule E(4)(f) entitles any party claiming an interest in arrested property to a prompt hearing. The Supplemental Admiralty Rules do not specify what form the postarrest hearing must follow. Consequently, the type of proceeding is left to the discretion of the district court. Whether a full adversary hearing with testimony and cross-examination of witnesses in open court is necessary depends on the nature of the issues in controversy. The postarrest hearing is not intended to definitively resolve the dispute between the parties, but only to make a preliminary determination of whether there were reasonable grounds for issuing the arrest warrant, and, if so, to fix an appropriate bond. The court may hear testimony and receive affidavits and supplemental legal memoranda in its discretion. Salazar v. Atlantic Sun, 881 F.2d 73 (3d Cir. 1989). A Rule E postattachment hearing is often an informal proceeding in the nature of a conference before the court with its main purpose to make a preliminary determination whether there were reasonable grounds for issuing the arrest warrant or writ of attachment. Linea Naviera de Cabotaje, C.A. v. Mar Caribe de Navegacion, C.A., 169 F.Supp.2d 1341 (M.D. Fla. 2001). The plaintiff carries the burden of proving why the attachment or arrest should not be vacated. Supplemental Rule E(4)(f). To support the arrest or attachment, the plaintiff at a Rule E postattachment hearing must establish that it was entitled to a maritime lien and that reasonable grounds existed to arrest or attach the vessel. Linea Naviera de Cabotaje, C.A. h. [ 2.27] Sale Of Property If the vessel is not released on bond or by letter of undertaking, it may be sold at an interlocutory sale prior to judgment. If sold, the proceeds are placed into the registry of court, and the plaintiff s claims attach to the proceeds in lieu of the vessel. Interlocutory sales are governed by Supplemental Rule E(9)(b), which provides for sale when property is perishable or liable to deteriorate, when the cost of keeping it is disproportionate to the amount of the claim, or when there is unreasonable delay in securing the release of the vessel. A plaintiff need only demonstrate that one of these conditions is present to justify interlocutory sale of the vessel. Id.; 20th Century Fox Film Corp. v. M/V Ship Agencies, Inc., 992 F.Supp (M.D. Fla. 1997). The vessel or maritime property is also subject to an execution sale and may be ordered sold to enforce any judgments. The marshal is 2 18

19 responsible for all sales of property, and proceeds are paid into the registry of the court pending distribution. Rule E (9). i. [ 2.28] Confirmation Of Sale Before proceeds from a marshal s sale can be distributed to claimants, the court must confirm the sale. The Local Rules in the Southern and Middle districts provide that unless an objection is timely filed (within three working days from sale unless otherwise provided by court) or the purchaser is in default for failing to pay the balance of the purchase price, the plaintiff shall proceed to have the sale confirmed on the day following the last day for filing objections. M.D.Fla.Loc.Adm.R. 7.05(r); S.D.Fla.Loc.Adm.R. E(17). To effectuate a confirmation, plaintiff s counsel must file a Request for Confirmation of Sale and also prepare and offer for filing a Confirmation of Sale on the day following the last day for filing objections. S.D.Fla.Loc.Adm.R. E(17)(f); M.D.Fla.Loc.Adm.R. 7.05(r)(6). In contrast, some districts allow for automatic confirmation; for example, Loc.Adm.R. SAR 145(e) of the Western District of Washington provides that the marshal s sale is confirmed as a matter of course without affirmative action by the court unless a written objection to the sale is timely filed. Regardless of the method of confirmation, once a sale is confirmed, a court will not set aside the sale absent a showing of fraud, collusion, or inadequacy of the price, provided the inadequacy is gross and is such as amounts to either fraud or unfairness. Once the sale is confirmed, the marshal will issue a Government Bill of Sale which may be submitted to the proper authority to pass title or to register the vessel (for example, the U.S. Coast Guard National Vessel Documentation Center). U.S. Dept. of Justice, Manual for United States Marshals, (2001). j. [ 2.29] Special Requirements For Salvage Actions The local rules of all three districts in Florida require special pleading requirements for bringing a salvage claim. In cases of salvage, the complaint must include, to the extent known, the value of the hull, cargo, freight, and other property salvaged, the amount claimed, and the names of the principal salvors, and must state whether the suit is instituted on their behalf. In the Southern and Middle districts, plaintiffs must attach as an exhibit to the complaint a list of all known salvors, and all persons believed to share in the salvage. Agreements of consortship must also be attached by plaintiffs. The Northern District requires plaintiffs likewise to attach a list of the names of all known salvors and all persons entitled to share in the salvage so far as is known, and also the agreement of consortship among 2 19

20 them to enable the court to divide the salvage according to the rights or interests of the parties. S.D.Fla.Loc.Adm.R. E(3); M.D.Fla.Loc.Adm.R. 7.05(c); N.D.Fla.Loc.Adm.R [ 2.30] Rule F Supplemental Rule F provides for bringing a limitation of liability proceeding. See Chapter 13 of this manual for further discussion of limitation of liability. C. [ 2.31] Local Rules Of District Courts When bringing an admiralty or maritime action, it is important to refer to the local rules for the district in which one wishes to proceed, which often differ. For example, the Local Rules for the Northern District of Florida require that a plaintiff bringing an in personam claim under Supplemental Rule B set forth in an affidavit the steps taken to ascertain that the defendant could not be found within the district. N.D.Fla.Loc.Adm.R. 13. D. [ 2.32] Rule 9(h) Election For the rules pertaining to admiralty procedure (including the Supplemental Rules for Certain Admiralty and Maritime Claims) to apply to a claim that has more than one basis for federal jurisdiction (e.g., diversity), a plaintiff not only must allege admiralty jurisdiction, but must identify the pleading as an admiralty or maritime claim in accordance with Rule 9(h) of the Federal Rules of Civil Procedure. If the claim is cognizable only in admiralty, such as Rule B attachment, a Rule 9(h) election is not necessary but is good practice. A Rule 9(h) election is generally made by an assertion in the pleading that this is an admiralty or maritime claim within the meaning of Rule 9(h). There is no right to a jury trial for claims pursued under the admiralty or maritime jurisdiction of the federal courts. Fed.R.Civ.P. 38(e). Under Rule 9(h) of the Federal Rules of Civil Procedure, a plaintiff having right to admiralty jurisdiction under 28 U.S.C. 1333, or another 2 20