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Why Jurisdiction in U.S. Maritime Cases Matters

Updated: Feb 28, 2022

Questions regarding U.S. federal courts’ maritime jurisdiction and the sources of maritime law have bedeviled practitioners since the Founding of the Republic. While such questions are often handled routinely, in some cases interesting (meaning, unwanted) disputes arise regarding the choice of law and/or the choice of forum. These disputes arise due to a shifting kaleidoscope of factors: the uncertain boundaries of maritime law, the multiple sources of law (the U.S. Constitution, federal statutes, common law, state law, treaties, other international sources, and even commercial practice), the multiple venues in which maritime disputes may be heard, and the American federal structure with dual sources of sovereignty (federal and state).

The practical effect of the kaleidoscope of jurisdictional factors can be seen in two recent federal court decisions. Both cases concerned the definition of the relevant claims for the purpose of determining federal admiralty jurisdiction. The first case raised the question whether and in what forum the United States itself may be sued, and the second raised the question whether an in personam lawsuit commenced in state court may be removed to federal court along with an in rem claim that was later dismissed.

The first case, Nederland Shipping Corp. v. United States, 2021 U.S. App. LEXIS 33920 (3d Cir. Nov. 16, 2021), concerned a refusal by US. Customs and Border Protection to clear a vessel for departure at the port of Wilmington, Delaware, because of suspected illegal discharge of “bilge” into the port waters. In order to permit departure, the vessel owner entered into a surety contract with the U.S. Government and posted a bond to cover its potential liability, but the vessel remained unreleased for several weeks. The vessel owner sued the U.S. Government in the U.S. District Court for the District of Delaware for losses caused by the delayed release of the vessel.

This dispute raised two questions: (i) whether the United States waived its sovereign immunity to be sued on the contract, and, if yes, then (ii) whether the federal district court was the appropriate forum to resolve the dispute, rather than the U.S. Court of Federal Claims (which is the default forum for non-tort monetary damage actions against the United States).[1] The trial court dismissed the case on the ground that the U.S. Government may be sued for money damages only in the Court of Federal Claims in the absence of an independent source of jurisdiction. The Court of Appeals, finding that there was such an independent source of jurisdiction, reversed.

The parties and the Court of Appeals all agreed that, if the surety contract was maritime in nature, then the answer to both questions would be affirmative, because: (i) the United States has waived its sovereign immunity for damage actions in admiralty (46 USC § 30903), and (ii) it is well established that the federal courts have the authority to hear “all Cases of admiralty and maritime Jurisdiction.” U.S. Const. Art. III, § 2; 28 USC § 1333. Relying extensively on the Supreme Court’s decision in Norfolk Southern Ry. Co. v. Kirby, 543 U.S. 14 (2004), the Court of Appeals proceeded to find that the surety contract was maritime in nature, rejecting the Government’s arguments to the contrary.

The Court of Appeals found that the “primary objective of the Agreement was . . . to set the {vessel} free to pursue maritime commerce” (at *13), and it found support in other cases involving “contracts that provide security in exchange for a vessel’s freedom to continue on its journey” (at *14). The Court distinguished cases in which there was no surety contract (i.e., cases that focused directly on the vessel owner’s liability for pollution) or in which the surety contract was not intended to enable release of a vessel to engage in seagoing commerce – the core principle underlying admiralty jurisdiction. Finally, the Court of Appeals noted that the surety contract, which was drafted by the U.S. Government, stated that any dispute regarding payment under the contract would be brought in federal district court, and provided that the Government’s in rem claims against the vessel would attach to the security per Federal Supplemental Admiralty Rule E. These contractual provisions evinced the parties’ view at the time it was negotiated that the contract was indeed maritime in nature.

The second decision, Finney v. Bd of Comm’s of Port of New Orleans, 2021 U.S. Dist. LEXIS 238412 (E.D. La. Dec. 14, 2021), concerned state-federal relations, particularly the question whether a maritime cause of action commenced in state court could be removed to federal court. The plaintiff, a crane operator at the Port of New Orleans who was injured while loading a vessel, filed suit in state court, claiming injuries due to negligence on the part of the Port, the owner of the vessel, and in rem against the vessel itself. The in rem claim was later voluntarily dismissed by the plaintiff. The Port defendant removed the case to federal district court under 28 USC § 1441, after which the plaintiff moved to remand back to Louisiana state court. The federal court agreed with the plaintiff and remanded the case.

The court noted that the claims fell within the federal “original jurisdiction,” so jurisdiction would certainly have vested if the case had initially been brought in federal court. However, since its first enactment in 1789, the statute establishing federal admiralty jurisdiction (28 USC § 1333(1)) has included a “saving to suitors” clause, which “sav{es} to suitors in all cases all other remedies to which they are entitled” – thus granting concurrent jurisdiction to state courts over maritime claims. This matters for removal purposes, because the – counter-intuitive but well-established – upshot is that, for removal purposes, federal district courts do not have “original jurisdiction” over maritime claims unless there is an independent basis for federal jurisdiction, such as diversity.

In rem proceedings provide such an independent basis for federal jurisdiction, because they have been recognized as exclusively federal in nature. In other words, an in rem proceeding is not an “other remedy” to which the authorization for remand would apply due to operation of the “saving to suitors” clause. Thus, it would appear that this case was properly removed to federal court. So why the remand?

This case, it should be recalled, involved both in personam claims against the Port and the vessel owner and an in rem claim against the vessel itself. There was no independent jurisdictional basis supporting removal of the in personam claims, and the court declined to exercise “supplemental jurisdiction” under 28 USC § 1367 to assert jurisdiction over the in personam claims after the in rem claim was voluntarily dismissed by the plaintiff. In fact, the court’s logic would have supported remand of the in personam claims even if the in rem claim had not been dismissed, which would have resulted in the potential awkwardness of parallel proceedings in state and federal courts arising from a single injury. That tension was avoided in this instance by the dismissal of the in rem claim, but it is clear that such a situation would be tolerated – indeed, anticipated – by the concept of dual sovereignties inherent in the United States’ federal system, as the court expressly noted.

One may ask, why does it matter whether a case proceeds in state or federal court? Or federal district court versus the Court of Federal Claims? To this question there are many answers – including perceived differences in procedures, scheduling, remedies, the degree of sympathy on the part of juries (if available) and judges, the level of skill and knowledge of the judges, etc. These are the sort of tactical objectives that lawyers love to thrash about and that, in fact, may very well influence the outcome of a dispute.

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[1] The appeal also involved a separate issue whether the vessel owner could commence an action against the U.S. Government for compensation arising from unreasonable detention of the vessel, under the Act for Prevention of Pollution by Ships, 33 U.S.C. § 1904(h). That aspect of the appeal is not discussed further in this note.

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