Admiralty

Village of Bald Head Island v. U.S. Army Corps of Engineers, No. 11-2368

Decided: April 15, 2013

The Fourth Circuit affirmed the district court’s dismissal of plaintiffs’ complaint under the Administrative Procedures Act (APA) for lack of subject matter jurisdiction because the U.S. Army Corps of Engineers (“Corps”) failed to take “final agency action” that is subject to judicial review under the APA. The Fourth Circuit also affirmed the dismissal of plaintiff’s breach of contract action, finding that the letters at issue did not create a contract that would justify the exercise of admiralty jurisdiction.

In the 1980s and 1990s, the Corps advanced proposals to widen and deepen the 37-mile channel in Cape Fear that allows access to the deep-water port in Wilmington, North Carolina. Before beginning construction in 2000, the Corps discovered rock at the bottom of the channel, requiring the Corps to revise its original harbor project. Plaintiff contended that the revisions would cause ecological damage to its beaches. After exchanging letters, the Corps adopted a plan agreeable to the plaintiff. The plan included semi-yearly maintenance programs designed to replenish sand on the plaintiff’s beaches. The Corps completed the harbor project in 2002. In the winter of 2011, the Corps informed the plaintiff that it had to curtail the maintenance program for budgetary reasons. Plaintiff filed a complaint against the Corps alleging breach of the maintenance plan, seeking specific performance. The district court dismissed the complaint for lack of subject-matter jurisdiction, holding that the claims under the APA were not “final agency action” that was subject judicial review, and that the court lacked admiralty jurisdiction over the remaining claims. Plaintiff appealed on both counts.

On appeal, plaintiff first argued that its APA claims constitute “final agency action” subject to judicial review either as “physical activities in the field,” or, in the alternative, as a reviewable “failure to act.” The Fourth Circuit disagreed, holding that performance of the maintenance plan failed to meet the definition of “agency action,” much less “final agency action” under the APA. The court determined that “agency action” under the APA concerns project approval rather than the project performance, which the plaintiff challenged in this case. Additionally, the Corps’ performance in maintaining the plaintiff’s beaches could not be “agency action” because it was ongoing and not “circumscribed and discrete” as required by the APA. The court said that injecting itself into the Corps’ maintenance plan would place itself into “the role of monitoring whether the Corps had complied with vague, undefined corrective measures,” which was far from a discrete agency action. Furthermore, even assuming that the Corps’ maintenance plan constituted agency action, the court held that it still failed to rise to the level of “final agency action,” finding that the final action occurred when the Corps approved the plan in 2000, and not when the Corps implemented the maintenance plan. Similarly, the court held that the failure to comply with the maintenance plan was not a reviewable “failure to act” because failing to perform the maintenance plan did not equate to a failure to take a discrete “agency action.” The court found that the plan was only a projection of its performance, and thus, not a binding commitment to the plaintiff.

Plaintiff also argued on appeal that the district court erred in holding that it did not have admiralty jurisdiction over the contract that the plaintiff alleges was created in the the letters between itself and the Corp. The Fourth Circuit disagreed, finding that the alleged contract concerned the maintenance of beaches, rather than the required “maritime commerce” that gives rise to admiralty jurisdiction. While the harbor project as a whole constituted “maritime commerce,” the letters expressed concerns about the preservation of the plaintiff’s recreational and aesthetic interests. Moreover, the court reiterated its earlier holding that the letters did not create binding commitments on the Corps that gave rise to an enforceable contract.

Full Opinion

– Wesley B. Lambert

Vitol v. Primerose Shipping Co., No. 11-1900

Decided: February 8, 2013

This case involved a sea vessel chartering company’s attempt to reach the assets of two shipping companies—entities claimed to be controlled by the corporate owner of a certain vessel that had been the cause of an oil spill in the country of Estonia—in an effort to satisfy an outstanding judgment that the chartering company had recovered against the vessel owner in an English court.

In 2000, the plaintiff, Vitol, S.A., was chartering the Capri Marine-owned vessel, ALAMBRA, when the ship caused marine pollution in an Estonian port.  Vitol subsequently sued Capri Marine in England for breach of the warranty of seaworthiness; Vitol went on to recover a judgment for $6.1 million.  The English judgment was never paid off by Capri Marine, however, and at the time that this case reached the Fourth Circuit, with interest still accruing, the judgment totaled over $9 million.  In 2009, Vitol filed suit in the U.S. District Court for the District of Maryland against Spartacus Navigation Corp. and Primerose Shipping Company (collectively “S&P”)—two entities that Vitol claimed to be the corporate alter ego of Capri Marine.  Thus, Vitol requested that the district court pierce the corporate veil of Capri Marine and hold S&P liable for Vitol’s outstanding English judgment.  The district court granted Vitol’s motion for a maritime attachment of a Spartacus vessel that was then docked in the Baltimore harbor; however, S&P submitted to the court’s jurisdiction on a restricted basis and the court released the attachment in exchange for S&P posting $9 million as collateral.  In its 2010 order, although it ruled that it had competent jurisdiction to hear the dispute, the district court nonetheless granted S&P’s motion to dismiss for failure to state a claim.

On appeal, the Fourth Circuit first considered whether the district court had properly asserted subject matter jurisdiction over the case.  In answering that question, the court had to determine whether the plaintiff’s complaint “sound[ed] in admiralty so as to invoke the district court’s admiralty jurisdiction under [28 U.S.C.] § 1333.”  The court noted that it was well established that U.S. federal courts had admiralty jurisdiction to enforce the judgments of foreign admiralty courts.  The court rejected the argument by S&P that because the admiralty judgment was rendered in the English Commercial Court—and not the English Admiralty Court—that the claim lacked the “admiralty character” necessary to invoke the admiralty jurisdiction of the U.S. District Court.  The court pointed out that both parties’ expert witnesses on English law stated that there was overlap between those two English jurisdictions and that admiralty claims were occasionally brought in the Commercial Court.  The Fourth Circuit held, “[i]nasmuch as the English Commercial Court exercised jurisdiction over a maritime claim, we agree with the district court’s conclusion that ‘the Commercial Court was an admiralty court with respect to the English Judgment.’”

After resolving that jurisdictional question, the Fourth Circuit turned to the district court’s dismissal of Vitol’s alter ego claim.  The court was forced to determine whether Vitol had pled facts sufficient to state a claim for piercing the corporate veil of Capri Marine and thus exposing S&P to liability on the English judgment.  The court examined at depth the factual contentions in Vitol’s complaint concerning the ownership and operations of Capri Marine, focusing on the relationship between the entity that controlled Capri Marine (and its network of affiliates) and S&P.  In determining whether the alleged facts suggested that the defendants were the alter ego of Capri Marine, the court analyzed various factors including, the corporate formalities, transfers of money, comingling of funds, and corporate structures.  The court ultimately concluded that while the plaintiff had alleged a close business relationship, “there [was] nothing in the allegations of interconnectness [sic] that plausibly suggests the sort of dominion, control, failure to observe corporate formalities, or fundamental unfairness needed to state a claim for alter ego status.”  And under the pleading standards required by Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 556 U.S. 662 (2009), the complaint’s “bald allegations” and “legal conclusions couched as factual allegations” were insufficient to show that the plaintiff was entitled to relief.  Thus, the Fourth Circuit affirmed the trial court’s dismissal for failure to state a claim.

Full Opinion

-John C. Bruton, III

F.C. Wheat Maritime Corp. v. United States, No. 10-1906

Decided: Dec. 14, 2011

This case involved an allision (an admiralty term wherein a moving vessel collides with a stationary one) between an Army Corp of Engineers vessel and a private yacht owned by Wheat Maritime, the Marquessa. The Army vessel collided with the docked Marquessa when the moving vessel’s captain fell asleep at the helm.

The United States stipulated to liability and the parties proceeded to a bench trial on damages. The district judge sided with the United States’ experts, concluded the value of the yacht was $440,000 at the time of the allision, and entered judgment in that amount. Upon motion by the government, however, the amount was amended to allow no recovery because of a previous insurance subrogation. Wheat Maritime appealed.

The district judge used the doctrine of constructive total loss to determine damages. Using this analysis, “if the cost of repairing the vessel exceeds her pre-casualty fair market value, the limit of compensation is the vessel’s fair market value at the time of the casualty.” Wheat Maritime, however, argued that this formula was not proper because the Marquessa had been made unique and was therefore entitled to the cost of replacement. The Fourth Circuit considered this argument but held that the standard was based on the use of the vessel and not the cosmetic improvements or add-ons applied to the boat. Because the purpose of the boat was merely as a yacht and had no idiosyncratic use that justified calling it “unique,” the court affirmed the lower court’s finding of a constructive total loss.

The court also affirmed the lower court’s findings of fact that the United States’ experts were more credible than Wheat International’s and that the “special value” of the yacht to the owner, while relevant, only applied when it was not possible to establish a fair market value for the vessel. Next, the court affirmed the denial of damages for certain items on the boat including antennae and laptop computers because of a lack of evidence establishing the amount of loss with certainty. Finally, the court affirmed the amended judgment amount because requiring the Army Corp to pay Wheat Maritime would result in a double recovery for the vessel since the government had settled with the insurance company, who had already paid out over $600,000 for its loss.

Full Opinion

-C. Alexander Cable

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