Suing shipowners in the US

A decision of the United States Court of Appeals for the Second Circuit deals with the prerequisites for a plaintiff to establish jurisdiction in the US.

An issue that has been addressed many times in Gard News in the past is the conflict between personal injury plaintiffs, who are naturally inclined to have their claims adjudicated in the relatively generous courts of the United States, and the defendants to such claims, who will traditionally seek to resist all efforts to have the claim heard in the US for the very same reason. A recent decision in the United States Court of Appeals for the Second Circuit, Porina v. Marward Shipping Co., Ltd.,¹ illustrates this conflict and discusses in detail the jurisdictional prerequisites that need to be present in order for a particular case to be heard in US courts.

Facts
In 2004, the ASTRIDA, a Latvian fishing vessel, sank in Swedish waters. Her six crew members perished in the casualty. The Maritime Administration of Latvia (MAL) suspected that the cargo vessel VLADIMIR, a vessel owned by a Cypriot company and time chartered to a Maltese company, was involved in a collision with the ASTRIDA that resulted in the sinking. While the VLADIMIR called at Baltimore, MAL, accompanied by members of the United States Coast Guard, conducted an investigation in which it was determined that the VLADIMIR had, in fact, been involved in a collision with the ASTRIDA.

The personal representatives of the deceased members of the ASTRIDA crew, as well as the owner of the ASTRIDA, thereafter filed a complaint against the owner of the VLADIMIR in the United States District Court for the Southern District of New York, seeking damages for wrongful death and for the loss of the ASTRIDA. The defendant moved to dismiss the complaint on the grounds that, among other things, US courts did not have personal jurisdiction over the defendant and therefore could not adjudicate a claim against it.

In resisting the defendant’s motion, the plaintiffs produced evidence that the VLADIMIR was advertised as a “specialized multipurpose vessel ... dedicated to US trade,” as part of “the only direct non-stop liner service to Russia from [the] USA”. Evidence was also submitted that the VLADIMIR docked at US ports 60 times in the four-year period prior to the defendant’s ownership of the vessel, one time after the defendant had purchased the vessel (subject to its existing charter) but before the alleged collision, and fifteen more times following the collision until the time that suit was brought against the defendant. The defendant argued that, while the vessel may have been present in US ports as asserted by the plaintiffs, the charterparty at issue gave the charterer the right to direct the vessel “for worldwide trading in Charterers’ option via good, safe, berth(s)/good, safe port(s),” and that therefore the defendant owner did not have sufficient personal contacts with the US to justify the assertion of personal jurisdiction over it. The District Court agreed with the defendant and dismissed the action for lack of personal jurisdiction. The plaintiffs appealed to the United States Court of Appeals for the Second Circuit, the US appellate court with jurisdiction over appeals from the federal district courts sitting in New York, Connecticut, Rhode Island and Vermont.

Decision
The Second Circuit agreed with the defendant, holding that the plaintiffs could not satisfy the requirements set forth in Federal Rule of Civil Procedure 4(k)(2), the provision upon which plaintiffs based their argument that personal jurisdiction existed over the defendant. That rule specifies that personal jurisdiction over a given defendant exists if, among other things, the plaintiff can establish that “exercising jurisdiction is consistent with the United States Constitution and laws”. The court found that the plaintiffs could not do so because the exercise of jurisdiction on the facts before it would violate the US Constitution’s Due Process Clause of the Fifth Amendment.

In so doing, the court discussed what is necessary for a plaintiff to establish in order for jurisdiction to be proper under the Due Process Clause. First and foremost, the exercise of jurisdiction should not offend “traditional notions of fair play and substantial justice”.² To that end, US courts must ask whether a particular defendant has “sufficient minimum contacts” with the United States to justify the assertion of jurisdiction over it. Even if such “sufficient minimum contacts” can be established, the courts must be satisfied that the exercise of personal jurisdiction is “reasonable under the circumstances of the particular case.”

As to the first part of the stated analysis, i.e., whether a defendant has sufficient minimum contacts with the US, the court stated that a distinction must be made between the legal concepts of specific jurisdiction, or jurisdiction over a defendant in a suit relating to the defendant’s contacts with the forum, and general jurisdiction, or jurisdiction over a defendant based upon the defendant’s general business contacts with the forum, which must be sufficient to “permit [] a court to exercise its power in a case where the subject matter of the suit is unrelated to those contacts”.

In the case before it, the court noted that the plaintiffs could not possibly establish specific jurisdiction over the defendant, as there was no contact with the US that was relevant to the sinking underlying the suit. As such, plaintiffs had to establish that US courts had general jurisdiction over the VLADIMIR’s owner by reason of the owner’s general business contacts with the US. Noting that such general business contacts must be “continuous and systematic”, the court then addressed the plaintiffs’ argument that the standard was satisfied by the vessel’s repeated visits to US ports both before and after the collision. While the court did not dispute that the plaintiffs had established the frequent presence of the vessel at US ports over a five-year period, the court cited US Supreme Court precedent for the proposition that the continuous and systematic contacts must be purposefully conducted by the defendant. To the court, the distinction was critical in the case before it, as the vessel charterer, and not the owner, elected to call at US ports pursuant to the terms of the charterparty: “The unilateral activities of third parties – here, the charterers – cannot, in themselves, satisfy the requirement of contact with the forum”. After rejecting two more of the plaintiffs’ arguments in support of finding jurisdiction, i.e., that it was foreseeable that the vessel would call at US ports (“foreseeability alone has never been a sufficient benchmark for personal jurisdiction under the Due Process Clause”), and that the defendant benefitted monetarily from the vessel’s calls in the US (finding that the defendant’s benefit, specifically the entitlement to hire, accrued regardless of where the charterer directed the vessel), the court dismissed the action, holding that it did not have personal jurisdiction over the defendant.

Comment
This decision is certainly a very welcome one for shipowners whose vessels trade in the US. Whereas previously the fact that the subject vessel had frequently called at US ports would most probably have resulted in a finding of jurisdiction, the Porina decision will now make it much more difficult for plaintiffs in district courts overseen by the Second Circuit Court of Appeals to establish jurisdiction when the vessel is under charter and the charterer, and not the owner, is directing the movements of the vessel. While the decision is not binding on courts outside of the Second Circuit, it will be persuasive authority in other courts, and it is hoped that other circuits will follow the Second Circuit’s lead and decline to find jurisdiction on the same or similar facts.

Footnote
1 521 F.3d 122 (2d Cir. 2008).
2 Citing International Shoe Co. v. Washington, 326 U.S. 310 (1945).