Navieros v. Coastal Ship Repair
Case Date: 07/28/1997
Docket No: 96-1850
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____________________ No. 96-1850 NAVIEROS INTER-AMERICANOS, S.A., Plaintiff, Appellee, v. M/V VASILIA EXPRESS et al., Defendants, Appellants, DUSAN JEFTIMIADES, Petitioner, Intervenor-Appellant. _________________________________ No. 96-1851 NAVIEROS INTER-AMERICANOS, S.A., Plaintiff, Appellee, v. M/V VASILIA EXPRESS et al., Defendants, Appellants, COASTAL SHIP REPAIR, INC., Petitioner, Intervenor-Appellant. _________________________________ No. 96-2174 NAVIEROS INTER-AMERICANOS, S.A., Plaintiff, Appellee, v. M/V VASILIA EXPRESS et al., Defendants, Appellants, MOTOR-SERVICES HUGO STAMP, INC., Petitioner, Intervenor-Appellant. _________________________________ No. 96-2175 NAVIEROS INTER-AMERICANOS, S.A., Plaintiff, Appellee, v. M/V VASILIA EXPRESS et al., Defendants, Appellants. _________________________________ APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO [Hon. Jose A. Fuste, U.S. District Judge] ____________________ Before Selya, Circuit Judge, Aldrich, Senior Circuit Judge, and Lynch, Circuit Judge. ____________________ Harry A. Ezratty for intervenor-appellant Dusan Jeftimiades. Francisco G. Bruno and Lilia R. Rodriguez Ruiz, with whom McConnell Valdes was on brief, for intervenor-appellant Coastal Ship Repair, Inc. Antonio M. Bird, Jr., with whom Bird Bird and Hestres was on brief, for intervenor-appellant Motor-Services Hugo Stamp, Inc. Stephen T. Perkins for defendant-appellants M/V VASILIA EXPRESS et al. Mark C. Landry, with whom Carlos J. Quilichini, Robert A. Mathis, and Newman, Mathis, Brady, Wakefield & Spedale were on brief, for appellee Gulf Coast Bank & Trust Co. ____________________ July 28, 1997 ____________________ LYNCH, Circuit Judge. This admiralty case features seven competing claimants, each trying to take from the proceeds of the sale of a seized vessel, the M/V VASILIA EXPRESS. Three claimants, in addition to the original charterer plaintiff, were allowed to intervene; all four won judgments after a three-day, expedited bench trial. Suit was originally brought in rem against the vessel. The vessel's corporate owner and its shipping agent both appeared, however, in personam to defend the action, and were also held liable on two of the judgments (for the original charterer and another intervening charterer). The proceeds of the sale are insufficient to satisfy even these four successful claims. Various other claimants, whose claims would further tax the available funds, were not allowed to intervene. Three of these, the ship's captain and two repair companies, appeal. The owner of the vessel, the shipping agent, and the vessel itself also appeal together, arguing that the district court's entry of judgment against them is in error, and hence that there should be no division of proceeds at all. Alternatively, they argue that the two charterers were awarded excessive damages. These four appeals were consolidated. We affirm the judgment against the vessel and the two in personam defendants, but we vacate the damages awards to both charterers and remand for a reassessment of damages. We also affirm the denial of intervention to the captain, but we -2- 2 reverse the denials of the two repair companies' motions to intervene and remand to the district court to entertain those companies' proof, to calculate damages due them, if any, and to determine how the proceeds from the sale of the vessel should be allocated among the various judgment winners. I. The underlying facts are not now in dispute. On the morning of March 28, 1996, Navieros Interamericanos S.A., Inc. ("Navieros"), a Florida corporation, entered a fixed time charter party with the M/V VASILIA EXPRESS on a standard New York Produce Exchange form through a ship's broker, Jan Gisholt Shipping, Inc., also of Florida. According to the charter party, the M/V VASILIA EXPRESS was owned by Royal United Shipping, Inc. ("Royal United"), and was registered in the West Indies. During this litigation it was established that, despite this written representation, the vessel was actually 1. A "charter party" is "a specialized form of contract for the hire of an entire ship, specified by name." 2 Schoenbaum, Admiralty & Maritime Law S 11-1, at 169 (2d ed. 1994). A "time charter party," one of several different types of charter parties, is a contract "to use a ship in order to ship goods for a specific period of time." Id. S 11-5, at 178. Under such agreements, "[t]he carrier makes the ship's capacity available to the time charterer for this purpose. The charterer bears the expenses connected with each voyage and pays hire to the carrier based upon the time the ship is under charter." Id. A charter party is "fixed" when there is "a meeting of the minds, evidenced by the parties' communications, on the significant 'main terms' of a charter." Id. S 11-2, at 172. -3- 3 owned by Vasilia, Inc. ("Vasilia"), a corporation with close links to Royal United. Navieros chartered the vessel for two round-trips between Florida and Guatemala, with an option for a third round-trip, for a total engagement of about 27 days, at $2,300 per day. Navieros intended to ship, on behalf of various clients, "general merchandise, freight [of] all kinds, electrical material, toys, hardware, food stuffs, . . . heavy equipment, . . . road building construction-type machinery, and . . . used vehicles." The time charter party stated that delivery of the vessel to Navieros, the charterer, was to occur upon the vessel's arrival at the pilot station in Port Everglades, Florida, where Navieros's cargo was to be loaded. The charter party stated that this would happen "any time, day, night" after the fixing of the charter on March 28. At approximately 2:00 in the afternoon on March 28, Kenneth Coleman, the President of Navieros, boarded the vessel at dock in Miami, about 30 miles from Port Everglades. Coleman discussed the stowage plan with the captain, Dusan Jeftimiades, and with Michael Psarellis and instructed the captain to berth 2. Vasilia is a Liberian corporation with its principal place of business in Greece. Steven Psarellis, a Louisiana attorney, is described as the attorney-in-fact for the corporation. Royal United is a Delaware corporation. Vasilia Psarellis, Steven's mother (and the person after whom the vessel is named), is the president. Her other son, Michael, is the "principal operating manager." -4- 4 at Pier 19 when he arrived at Port Everglades, instead of at the pilot station. The next day, the M/V VASILIA EXPRESS left its berth in Miami, apparently headed for Port Everglades. The only deviation from the written agreement that Coleman had mentioned involved the berthing of the ship at a different point in Port Everglades, but the ship never reached Port Everglades. The vessel experienced problems with its bridge tachometer and stopped for repairs at Bicentennial Park, still inside the Port of Miami. Kenneth Coleman and his brother William, also a Navieros officer, visited the ship four or five times over the next week. During this time, Navieros also ordered fuel for the vessel, confirmed its reservation of the berth space at Port Everglades, and issued the necessary check in payment of United States customs dues. During this unexpected delay, Royal United, the putative owner of the vessel, entered into a second time charter party with Comet Lines Agency, Inc. ("Comet"), which was unaware of the charter party with Navieros. Royal United apparently believed at this time that the Navieros charter party had not yet been fixed. The Comet charter party, brokered by Americana Marine Services, began on April 4 and was 3. The record does not reveal the name of the company which made these repairs. We infer that it was Motor-Services Hugo Stamp, Inc., one of the two repair company appellants denied intervention in this case. -5- 5 to last for a period of 30 days. It brought a more lucrative charter rate, $2,630 per day, than did the Navieros charter. Comet intended primarily to carry cargo between San Juan, Puerto Rico and Venezuela. Since the vessel was in Miami at the start of the charter, Comet arranged to have some Venezuela-bound cargo brought down from Jacksonville and loaded there; Comet's intention was to have the vessel proceed to San Juan where more cargo would be loaded, and then to sail to Venezuela. Upon the vessel's arrival in the port of San Juan on April 13, however, the United States Coast Guard detained the vessel for a litany of safety violations and ordered it not to proceed to sea without Coast Guard approval. Navieros subsequently learned that the vessel was being detained in Puerto Rico. On April 18, while the ship was still in detention, Navieros filed a complaint in the federal district court in Puerto Rico, initiating this litigation. Initially, the action was in rem against the vessel to enforce 4. The violations of the International Convention for the Safety of Life at Sea , 32 U.S.T. 47, T.I.A.S. No. 9700 (1974), listed in the Coast Guard citation include: intoxication of the master (Jeftimiades); inability of intoxicated master to produce the necessary documents and certificates to Coast Guard officers; non-compliance with minimum safe manning certificate; various problems with electrical wiring in the engine room; lighting in engine room not covered; watertight door in engine room could not be closed due to installation of cable through doorway; non-working aft port fire hose; unreadable fire control plan; absence of dangerous cargo manifest for dangerous cargo on board; and carbon dioxide alarm system disconnected and activation pull cable not labeled. -6- 6 an alleged maritime lien based on the breach of a time charter agreement. Later that same day, April 18, the district court, in an ex parte proceeding, ordered the arrest of the vessel pursuant to Rule C of the Supplemental Rules for Certain Admiralty and Maritime Claims to the Federal Rules of Civil Procedure. Rule C allows the holder of a maritime lien to proceed in rem against the vessel that is the subject of the lien. In its order, the court stated that Navieros had made a prima facie showing of a maritime lien against the vessel. Vasilia, as claimant of the in rem defendant M/V VASILIA EXPRESS, filed a motion for a post-arrest hearing on April 23. Vasilia claimed that the arrest of the vessel was improper because Navieros had no maritime lien. The only argument advanced by Vasilia at this point against the existence of a lien was that the charter party between Navieros and Royal United had not been fixed. A charterer's maritime lien, a right derived from a contract, will not arise in the absence of a fixed charter party, that is, in the absence of an enforceable contract. In response to Vasilia's motion, Navieros amended its complaint on April 24 and moved alternatively for attachment of 5. Later, Vasilia would argue that there was no lien because the contract was still executory at the time of the breach; maritime liens do not arise from the breach of an executory charter party. -7- 7 the vessel under Supplemental Rule B. Navieros also added Royal United as an in personam defendant. One of the pertinent differences between Rules C and B is that the latter does not require the existence of a maritime lien. Rule B allows an admiralty plaintiff to acquire quasi in rem jurisdiction over a defendant by attaching his property in the district; this approach is available only if the defendant "shall not be found within the district." As required by Rule B, Navieros submitted an affidavit stating that, to the best of its knowledge, after a diligent search, defendant Royal United could not be found within the district. The court ordered attachment of the vessel pursuant to Rule B on April 29. In its May 1, 1996 answer to Navieros's amended complaint, Vasilia reiterated that Navieros had no maritime lien because there was no fixed charter party. Vasilia also filed a counterclaim against Navieros for wrongful arrest, and asserted that if the court should find that there was a fixed charter party, then the dispute "would be subject to compulsory arbitration." Vasilia did not move to compel arbitration at this time. The next day, April 30, Vasilia filed a "request for amended process of arrest" in which it asserted that the Rule B attachment was wrongly ordered by the court because Vasilia had designated an agent in the district upon whom process could be served on behalf of Vasilia. Navieros then amended its -8- 8 complaint again to name Vasilia as in personam defendant along with Royal United. Trial ultimately proceeded on this second amended complaint. That same day, the court held a hearing and ordered the case expedited. The court accelerated discovery and set a May 23 trial date. The court later explained, in its June 7 memorandum opinion, that this rushed schedule was necessary because the vessel had "a fair market value of $500,000," it "was accruing significant expenditures incidental to the arrest," and there were "liens or potential liens exceeding its fair market value." The court also denied Vasilia's motions to vacate the Rule C arrest of the vessel and the Rule B attachment of it. The court stated that the arrest could be lifted by the posting of a $200,000 bond. No bond was posted. On May 8, Vasilia filed a "second motion to vacate arrest and attachment and for second post-arrest hearing." Vasilia now claimed that "there are new reasons" showing that the Rule C arrest was illegal. Vasilia argued that Navieros had no maritime lien because the vessel had not been delivered 6. On the first day of trial, the court again expressed its concern with the problems that would be caused by delay: "It's a vessel of marginal value in a marginal trade with charters and owners of marginal economic solvency and all that we're going to create [by transferring the case to arbitration] is a bigger problem for everybody here." 7. This motion and most subsequent submissions were filed by Vasilia alone, not by Royal United or the vessel. Hence, we often describe the collective defendants as "Vasilia." -9- 9 to Navieros, the charter party was still executory, and a maritime lien will not arise from the breach of an executory charter party. Vasilia cited for the first time Navieros's oft-repeated assertion in its pleadings that the vessel had not been delivered as required by the charter party. Both in personam defendants then waived the requirement that they be served with process and waived any objections to lack of personal jurisdiction. The court summarily denied Vasilia's motion on May 20, three days before trial commenced. On May 13, Comet and Transcaribbean Maritime Corp. ("Transcaribbean") filed motions to intervene as plaintiffs in the lawsuit. Comet is the second charterer; like Navieros, it pleaded a breach of contract claim. Transcaribbean is a San Juan-based ship's agent and stevedoring contractor which paid, on behalf of the vessel, harbor and port dues, pilot fees, and other expenses incidental to the ship's arrival and its subsequent detention in the Port of San Juan. On May 20, the court allowed both claimants to intervene. On May 22, on the eve of trial, Captain Jeftimiades filed a motion to intervene as plaintiff, asserting a maritime lien for unpaid seaman's wages. On May 23, the day the trial started, Gulf Coast Bank & Trust Co. ("Gulf Coast"), the holder of a first preferred mortgage on the vessel, filed a motion to intervene as plaintiff in order to request foreclosure. -10- 10 At the start of trial, the court ruled from the bench on the two motions to intervene. After establishing that neither Captain Jeftimiades nor his counsel were present in the courtroom, the judge ascertained from Navieros's counsel that Jeftimiades's counsel was aware that the trial was starting. The court then denied Jeftimiades's motion to intervene, stating: Well, the captain is not here. His lawyer is not here. Everybody is aware of the fact that this case was being tried or there was no reason not to know. Therefore, at this point in time I am denying for obvious lack of interest, they are not here, the motion for permission to intervene . . . . Gulf Coast's motion to intervene was granted. On this first day of trial, the court also ruled from the bench on Vasilia's motion to compel arbitration, filed the day before. Vasilia's motion relied on an arbitration clause in the charter party between Navieros and Royal United (and on a similar clause in the charter party with Comet). The motion came two days after Vasilia's pre-trial concession regarding the existence of a fixed charter with Navieros, a point Vasilia had been contesting until then. The court characterized this motion as among the "strongest" of the many pre-trial motions, but nevertheless denied it. The court stated that Vasilia had conducted itself thus far in the litigation in a manner inconsistent with a desire to enforce a contractual arbitration clause, and that it -11- 11 had "by its actions moved away from its right to arbitrate." Sending the case to arbitration, said the judge, would also, by causing further delay, increase the costs attendant to the continuing arrest of the vessel, and "create a bigger problem for everybody here." Because Vasilia admitted the existence and breach of a charter party with Navieros, trial proceeded on the question of damages alone. Vasilia argued that Navieros had no right to arrest the vessel under Rule C or to attach it under Rule B. Moreover, Navieros's resort to these procedures, Vasilia said in its counterclaim, had caused Vasilia to breach its contract with Comet and to incur other liabilities. Relying on the venerable executory contract doctrine, Vasilia argued that the Rule C arrest was improper because the vessel had not yet been delivered to Navieros at the time of the breach, and the charter party was still executory. Consequently, argued Vasilia, Navieros had no maritime lien and its resort to Rule C was invalid. Rule B attachment was also invalid, argued Vasilia, because this measure may only be invoked where the 8. Had Vasilia filed the motion to compel arbitration earlier in the pleadings, stated the court, "it would have been very difficult not to grant it." Additionally, the court indicated that, despite its belief that Vasilia had waived the right to arbitration, it might have granted the motion if Vasilia, while arguing the motion at trial, had expressed a willingness to post a $200,000 bond to release the vessel from arrest, thus hastening a conclusion to the expensive arrest. Vasilia's counsel responded, however, that his client could not post such a bond. -12- 12 defendant cannot be found within the district, and Vasilia had appointed an agent within the district for service of process on its behalf. The trial concluded on May 29, and the court issued its written memorandum and order on June 7. The court upheld both the Rule C arrest and the Rule B attachment. Rejecting Vasilia's Rule C argument, the court held that the vessel was effectively delivered to Navieros prior to the breach when Coleman boarded the vessel in Miami. The court stated: Although the vessel was to be technically delivered at the pilot station in Port Everglades, a location less than thirty nautical miles away, due to the proximity of the locations, the master and Mr. Psarellis accepted Kenneth Coleman's instructions to proceed further to Port Everglades and, with a pilot, to berth at Pier 19 in Port Everglades for loading. The vessel was, for all purposes, delivered to the charterer when Mr. Psarellis and the ship's master accepted Mr. Coleman's verbal instructions to proceed under the charter party agreement to Pier 19 at Port Everglades for loading. The court also upheld the Rule B attachment, rejecting Vasilia's argument that the attachment was improper because Vasilia had appointed an agent for service of process within the district. The court emphasized that Vasilia, a Liberian corporation, had had no corporate presence whatsoever in the district. The court stated that the eleventh hour appointment by Vasilia of counsel as local agent for service of process was -13- 13 a "strategic appointment directed at defeating the necessity of the rule" and could not be used to elude attachment. The court entered judgment against the vessel and the two in personam defendants: for Navieros in the amount of $182,952; for Comet in the amount of $100,312.13; for Transcaribbean in the amount of $24,777.26; and for Gulf Coast in the amount of $285,428.91. The total of the judgments against Vasilia amounted to $593,470.30. The court ordered that the vessel be sold by the United States Marshal at auction to satisfy these judgments. The court ruled that Gulf Coast had complied with the requirements of the Ship Mortgage Act, 46 U.S.C. S 30101 et seq., and had successfully shown that it had a preferred mortgage. The court, however, did not rank the four judgment winners. Nor did the court know, at the time the judgments were handed down, how much money would be available from the eventual sale of the vessel to satisfy the judgments. Several more would-be plaintiffs moved to intervene as a matter of right under Fed. R. Civ. P. 24(a) after the decision was handed down; these motions were denied. We discuss only those parties that appeal. The first of these post-judgment movants was Motor-Services Hugo Stamp, Inc. 9. We note that Gulf Coast's compliance with the provisions of the Ship Mortgage Act was the subject of considerable dispute in the district court. That question, however, is not before us. -14- 14 ("Motor-Services"), a Florida-based ship repair and supply company which sought to intervene on June 7, the day judgment issued. Motor-Services asserted a maritime lien in the amount of $76,460.55 for unpaid receivables due for work done on the M/V VASILIA EXPRESS and materials supplied to it between February 28 and March 29, 1996. The second post-judgment movant was Coastal Ship Repair, Inc. ("Coastal"), a Louisiana corporation which sought intervention on June 11. Coastal, too, asserted a maritime lien for moneys due for work performed and materials supplied the vessel, from May 2, 1995, through July 1, 1995. Coastal asserted a lien in the amount of $144,800. The court denied these two late motions on July 3 by separate written orders. The public auction was held July 2, but the required minimum bid of $400,000 was not achieved. A second auction was held on July 23 with a lower minimum of $300,000. Gulf Coast, the first preferred mortgage holder, bought the ship for $300,000. After confirmation of the sale, Jeftimiades, Coastal, and Motor-Services moved to stay disbursement of the proceeds until final resolution of these appeals. This motion was granted, and the proceeds of the sale, less certain administrative costs and fees, remain in an escrow account pending resolution of the appeal. II. Vasilia appeals on four grounds: (1) that the arrest -15- 15 and attachment were invalid; (2) that the motion to compel arbitration was wrongly denied; (3) that the court awarded both charterers, Navieros and Comet, excessive damages; and (3) that the court improperly pierced Vasilia's corporate veil. We resolve Vasilia's claims without the benefit of briefs from Navieros or any of the other plaintiffs in whose favor judgment was entered. A. Arrest and Attachment Vasilia admitted before trial that it was in breach of the charter party with Navieros. The main issue on appeal is whether Navieros was entitled to take the measures it took prior to trial regarding the vessel. Vasilia's position remains that (1) Navieros had no maritime lien and thus no right to arrest and (2) Vasilia had appointed an agent within the district for service of process on its behalf and so attachment was improper. Vasilia apparently infers that Navieros is responsible for the chain of events set in motion by the subsequent unavailability of the vessel: i.e., the breach of the Comet charter; Gulf Coast's decision to bring its foreclosure action; and the need for Transcaribbean to incur the custodial costs associated with the arrest of the vessel. 10. Navieros, the original plaintiff in this action, chose not to participate in this appeal. Navieros did not file a brief and did not appear at oral argument. Presumably, Navieros concluded that further participation in this litigation would be fruitless given the $285,000 judgment awarded Gulf Coast on its preferred mortgage lien. -16- 16 Vasilia's position appears to be that Navieros should have brought an in personam suit against Vasilia for breach of contract, rather than moving against the vessel under Rules C and B, and that this would not have resulted in the same domino effect. Navieros first invoked Rule C, seeking the arrest of the vessel on the basis of an asserted maritime lien. After Vasilia challenged the existence of a maritime lien, Navieros moved alternatively for Rule B attachment. The two strategies, though similar in effect, are based on entirely different theories. An in rem action [under Rule C] differs from maritime attachment [under Rule B] in that an in rem action is brought against the vessel itself as defendant. By contrast, a vessel is attached only as an auxiliary to an in personam claim because the vessel is property belonging to the defendant. 2 Schoenbaum, supra, S 21-3, at 478-79. The district court ordered both Rule C arrest and Rule B attachment of the vessel, and ruled both procedures proper in its written opinion. Vasilia challenges both rulings on appeal. Either procedure standing alone would have been sufficient to enable Navieros to 11. The two rules may be invoked simultaneously. See, e.g. , Amstar Corp. v. S/S Alexandros T. , 664 F.2d 904, 906 (4th Cir. 1981); 2 Schoenbaum, supra, S 21-2, at 469 n.2, 470. -17- 17 ensure the continued presence of the vessel in Puerto Rico while the litigation proceeded. 1. Arrest The Rule C question is a close one, and it takes us into waters uncharted by this circuit. In order to invoke Rule C to arrest a vessel, a plaintiff must have a valid maritime lien against the defendant's vessel. See Bunn v. Global Marine, Inc. , 428 F.2d 40, 48 n.10 (5th Cir. 1970) ("a maritime lien is the foundation of a proceeding in rem"); Rainbow Line, Inc. v. M/V Tequila, 480 F.2d 1024, 1028 (2d Cir. 1973) (" in rem jurisdiction in the admiralty exists only to enforce a maritime lien"); 2 Schoenbaum, supra, S 21-3, at 478-79. We affirm the district court holding that Navieros had a maritime lien. The Rule C arrest was thus valid. Under the executory contract doctrine, charterers have no maritime lien until performance of the charter contract 12. It is unclear from the record whether (and for how long) the United States Coast Guard detention of the vessel in Puerto Rico, effected on April 14, would have also detained the vessel. This could be an important matter because Vasilia's counterclaim -- based on the claim that Navieros wrongfully deprived it of the use of its vessel -- would be entirely moot if we could determine with any certainty that the Coast Guard detention would have continued at least through June 7, the date judgment was entered for Navieros. If this were the case, any wrongful arrest or wrongful attachment would likely be harmless error, cured by the judgment. The district court opinion, issued on June 7, does state "[a]s of this date, the vessel is still detained at the port of San Juan, Puerto Rico, by virtue of the U.S. Coast Guard prohibition for the cited safety violations." But there is no evidence in the record before us on this point. In the absence of such evidence, we address Vasilia's arguments on their merits. -18- 18 begins. Krauss Bros. Lumber Co. v. Dimon S.S. Corp. (The Pacific Cedar), 290 U.S. 117, 121 (1933); Osaka Shosen Kaisha v. Pacific Export Lumber Co. (The Saigon Maru), 260 U.S. 490, 495 (1923). "Liability arises in the admiralty as elsewhere from breach of any valid contract, but until the parties have entered in performance remedy for the breach is in personam only; the added advantages of lien status are reserved to claimants under executed contracts." Gilmore & Black, The Law of Admiralty S 9-22, at 635 (2d ed. 1975); see also Bunn, 428 F.2d at 48 n.10 ("The rule in admiralty is well settled that no lien attaches for the breach of an executory contract. . . . [U]ntil the parties have entered into performance, the remedy in admiralty for the breach is in personam only."); Rainbow Line, 480 F.2d at 1027 n.6; The Oceano, 148 F. 131, 133 (S.D.N.Y. 1906); Rule C(1) (setting forth when an action in rem may be brought). Here the goods to be shipped were never actually loaded on the vessel. The vessel never got to the dockside for loading. There is no evidence that the goods to be shipped were ever in the custody or control of the vessel master. Ordinarily, those facts would most likely end any claim of maritime lien. See Gilmore & Black, supra, S 9-22, at 636. The great majority of cases addressing the executory contract doctrine, however, have concerned contracts of -19- 19 affreightment evidenced by bills of lading or voyage charters. E.A.S.T., Inc. v. M/V Alaia, 673 F. Supp. 796, 802 (E.D. La. 1987), aff'd, 876 F.2d 1168 (5th Cir. 1989). This case involves a time charter agreement. The district court relied heavily on the reasoning in E.A.S.T., where the court distinguished between voyage charters and time charters as to when the contract is no longer executory (and, consequently, as to when a maritime lien arises). With voyage charters, whether control over the cargo shifted to the vessel will most likely determine whether a maritime lien exists. E.A.S.T., 673 F. Supp. at 802-04. With time charters, however, a maritime lien may arise even before control of the cargo shifts to the vessel. Id.; see also Rainbow Line, 480 F.2d at 1027 n.6 (noting that cargo need not be loaded for time charter to lose executory status). This distinction is sensible because under a time charter the shipowner agrees to put his vessel, master, and crew to the service of the time charterer for a named period. E.A.S.T., 673 F. Supp. at 802. The time charterer must begin his performance "well before cargo is, if ever, loaded on the vessel -- by paying hire, appointing and funding a port agent, 13. A "voyage charter" is a contract of affreightment under which the carrier, who either owns or manages a ship, agrees to transport a certain amount of the charterer's cargo ("freight") from one port to another. The charterer pays for the shipment of freight by the voyage. 2 Schoenbaum, supra, S 11-4, at 175- 76. -20- 20 and arranging and paying for pilotage, tug assistance and line handlers and all else necessary to berth the vessel in order to load cargo." Id. at 803. Here, the time charter form agreement specified that: Vessel to be placed at the disposal of the Charterers, at Delivery Arrival Pilot Station Port Everglades Any Time, Day, Night . . . . The president of the plaintiff charterer boarded the vessel 30 miles from Port Everglades, and changed the instructions as to the destination (berthing at Pier 19 at Port Everglades instead of at the pilot station). The vessel proceeded until it experienced mechanical problems and it stopped for repairs short of Port Everglades. While it was undergoing repairs, the charterer boarded the vessel four or five times, ordered fuel for the vessel, confirmed its reservation of a berth space, and issued a check to pay U.S. Customs fees. Under these circumstances, we cannot say that the experienced trial judge erred in concluding that there was sufficient delivery of the vessel to the charterer, Navieros, and sufficient performance of the contract that the charter was no longer "executory." Accordingly, there was a maritime lien and the Rule C arrest was proper. 2. Attachment 14. We reach this conclusion, as the district judge also did, notwithstanding Navieros's claim in its pleadings that the vessel had not been delivered to it. -21- 21 We also affirm the Rule B attachment because Vasilia was not "within the district" at the time attachment was sought and granted. On April 30 Vasilia submitted to the court a copy of a letter saying that Vasilia had appointed an agent for service in the district. The letter, dated April 26, 1996, states in its entirety: This is to confirm that owners are authorizing CALVESBERT and BROWN as attorneys to accept service of process on behalf of VASILIA INC. who is the owner of M/V VASILIA EXPRESS which was named in a suit filed by Navieros Interamericanos in Federal District Court in Puerto Rico. There is no addressee designated on the face of the letter. There is evidence at the top of the page that the letter had been sent via fax to the recipient on April 29. Rule B allows the attachment of a vessel or other tangible property under certain circumstances to gain quasi in rem jurisdiction over a defendant. A Rule B attachment may only proceed when the defendant is not "found within the district." The case law makes it clear that: whether or not [a foreign defendant] can be found within the district presents a two-pronged inquiry: first whether it can be found within the district in terms of jurisdiction, and second, if so, whether it can be found for service of process. The first inquiry is directed to whether or not the respondent is present within the district by reason of activities on its behalf by authorized agents so as to subject it to [the district court's] jurisdiction in in -22- 22 personam proceedings. If not, then the respondent cannot be found within the district and this ground alone would be sufficient to support the attachment. Even if the foreign respondent be found within the district in a jurisdictional sense, its property is not immunized from attachment. The second question . . . then presents itself. Could the respondent be found within the district with due diligence for service in the libel proceeding? United States v. Cia. Naviera Continental S.A., 178 F. Supp. 561, 563-64 (S.D.N.Y. 1959) (footnote omitted). If the respondent can be found within the district, then attachment may not proceed. As to the first inquiry, it is undisputed that by purposefully sending its vessel into Puerto Rico, Vasilia subjected itself to personal jurisdiction in that district. As to the second inquiry, Vasilia argues that the attachment was wrongful because it had appointed an agent for service of process in the district. But the fact is Vasilia's purported appointment of the agent came, at the earliest, on April 26, two days after Navieros moved for an order of attachment (and after Navieros filed an affidavit, as required by Supplemental Rule B, saying Navieros had been unable to find the defendant within the district). 15. Navieros's affidavit says that Navieros could not find Royal United within the district. No mention was made of Vasilia, the actual owner of the vessel. However, Navieros is not to blame for this. Royal United held itself out as the owner of the vessel in the charter party agreement with Navieros. The two entities are obviously closely related. -23- 23 The district court was not unjustified in stating that Vasilia's argument would eviscerate the time-honored process of maritime attachment. If we were to accept Vasilia's position, a defendant who was otherwise safely outside the service power of the district could effectively avoid Rule B attachment by waiting until after the plaintiff filed a Rule B motion to designate an agent for service. Nor was Vasilia, simply by virtue of its subsequent appearance in this action, entitled to dissolution of the attachment. Swift v. Compania Colombiana, 339 U.S. 684, 693 (1950). But Vasilia was not without options. Prior to trial, Vasilia had the opportunity, pursuant to Supplemental Rule Whatever prejudice Vasilia may have suffered by virtue of the fact that Navieros did not submit an affidavit stating that Vasilia could not be found within the district properly falls on Vasilia. 16. Moreover, the evidence defendant relies on here is simply a letter from defendant to an unstated addressee purporting to "confirm" that Calvesbert & Brown has been authorized to accept service of process on Vasilia's behalf. This letter cannot be enough to establish presence in the district within the meaning of Rule B. The letter was not published and presumably neither Navieros nor the court knew (nor could have known) about the arrangement between Vasilia and its lawyers until after Vasilia submitted a copy of the letter to the court. 17. Rule B, the modern codification of the ancient right of foreign attachment in admiralty, see Swift v. Compania Colombiana, 339 U.S. 684, 693 (1950), has two recognized purposes: (1) to assure defendant's appearance and (2) to assure satisfaction in case the suit is successful. Id. at 693-95; LaBanca v. Ostermunchner, 664 F.2d 65, 68 n.4 (5th Cir. 1981); Seawind Compania, S.A. v. Crescent Line, Inc. , 320 F.2d 580, 581-82 (2d Cir. 1963). Post-attachment appearance may moot the first purpose but it does not address the second purpose. -24- 24 E(5)(a), to post a bond of $200,000 in order to obtain the release of the vessel. Vasilia declined to exercise this right. B. Arbitration The district court found that Vasilia had waived its contractual right to arbitration by participating in the litigation for over a month before filing a motion, one day before the start of trial, to compel arbitration. Vasilia protests that this ruling was error, but its arguments are not persuasive. Vasilia complains that it could not have moved to compel arbitration earlier because it was not until two days before the start of trial that Vasilia admitted the existence of the charter party under which the right to arbitration was established. Indeed, Vasilia did assert, at various stages of the pleadings, that, if the court should determine the existence of a charter party, then the case should be removed to arbitration. Had it moved for arbitration earlier, Vasilia says, this step could have been interpreted as a concession that the charter party was fixed, because the right to arbitration comes from a clause in the charter party. By not moving until the day before trial, on the other hand, Vasilia was found to have waived the right. Vasilia says the district court's position presented Vasilia with a Hobson's choice between admission and waiver. Litigation frequently puts -25- 25 parties to hard choices, particularly as to which of seemingly inconsistent theories to pursue. Vasilia is responsible for the consequences of its choices. Review of a district court's determination of waiver of the right to arbitration is plenary. Menorah Ins. Co. v. INX Reinsurance Corp. , 72 F.3d 218 (1st Cir. 1995); Commercial Union Ins. Co. v. Gilbane Bldg. Co., 992 F.2d 386, 390 (1st Cir. 1993). The party opposing the motion to compel arbitration -- that is, the party urging a waiver -- must show prejudice. Sevinor v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 807 F.2d 16, 19 (1st Cir. 1986). There was prejudice here. The delay was not long in absolute terms; it was only one month. But in the unusual context of this litigation this delay was both long and prejudicial. The delay lasted from the filing of the complaint to the eve of trial. In the interim, in this expedited litigation, the parties scrambled to prepare their cases for trial, incurring expenses that would not have been occasioned by preparing for an arbitration. That is enough to show prejudice. Menorah, 72 F.3d at 212. The desirability of enforcing arbitration clauses is much recognized. Mitsubishi Motors Corp. v. Soler Chrysler- Plymouth Inc. , 473 U.S. 614, 633 (1985). Arbitration may be "a mutually optimal method and forum for dispute resolution [which] serves the interests of efficiency and economy." -26- 26 Menorah, 72 F.3d at 223. But we have also recognized that the very rationale for arbitration may be undercut if a party is permitted to pursue a claim through the courts and then later claim a right to arbitration. Id. Accordingly, we have repeatedly held that a party may, by engaging in litigation, implicitly waive its contractual right to arbitrate. Id.; Caribbean Ins. Servs., Inc. v. American Bankers Life Assurance Co., 715 F.2d 17, 19 (1st Cir. 1983); Jones Motor Co. v. Chauffeurs Local Union No. 633, 671 F.2d 38, 43 (1st Cir. 1982); Gutor Int'l AG v. Raymond Packer Co. , 493 F.2d 938, 945 (1st Cir. 1974). Vasilia complains of self-inflicted wounds. Vasilia denied it had a valid charter party with Navieros up until the eve of trial. It then switched positions, admitted the validity of the charter party, and sought to invoke arbitration under the charter party. We agree with the district court that this conduct amounted to a waiver. C. Corporate Status of Vessel Owners The Vasilia parties object to certain references in the district court's opinion which, they believe, imply that the court had pierced the corporate veils of Vasilia and Royal United, without conducting the proper legal analysis. They ask us to strike from the district court opinion these statements (and strike from the pleadings similar references made by plaintiffs). The argument is misplaced. It is a basic -27- 27 principle of appellate jurisdiction that we review judgments, not the editorial commentary in opinions. To the extent that appellants mean to argue that the district court's imputation of liability for the Navieros and Comet judgments to the in personam defendants -- Vasilia and Royal United -- was erroneous, they also fail. There are two distinct iss |