Nederland Shipping Corp. v. United States

18 F.4th 115

NEDERLAND SHIPPING CORPORATION; Chartworld Shipping Corporation,

v.UNITED STATES of America

Nederland Shipping Corporation, Appellant

No. 20-2269

United States Court of Appeals, Third Circuit.

Argued April 14, 2021

Filed: November 16, 2021

George M. Chalos [ARGUED], Chalos & Co., 55 Hamilton Avenue, Oyster Bay, NY 11771, Counsel for Appellant

Anne Murphy [ARGUED], United States Department of Justice, Appellate Section, Room 7644, 950 Pennsylvania Avenue, NW, Washington, DC 20004, Charles W. Scarborough, United States Department of Justice, Appellate Section, Room 7244, 950 Pennsylvania Avenue, NW, Washington, DC 20004, Counsel for Appellee

Before: CHAGARES, JORDAN, and SCIRICA, Circuit Judges.

OPINION OF THE COURT

JORDAN, Circuit Judge.

Delay is a serious problem in the transportation business, especially for shippers of perishable goods. So, when a ship called the M/V Nederland Reefer (the "Reefer" or the "Vessel"), carrying a cargo of fruit, arrived in the Port of Wilmington, Delaware in February of 2019, its crew thought the layover would be brief. Things did not turn out that way. After a Coast Guard inspection of the ship revealed evidence of an illegal discharge of bilge water,¹ the Reefer was held in port pending an investigation. The Reefer's owner, Nederland Shipping Corporation ("Nederland"), wanted to get the ship back to sea as rapidly as possible and so entered into a contract with the United States government to allow for the release of the Reefer in exchange for, among other consideration, a surety bond to cover potential fines.

Although Nederland delivered the bond and met its other requirements under the contract, the Vessel was detained in Wilmington for at least two additional weeks. Nederland sued in the United States District Court for the District of Delaware, but the government moved to dismiss the suit, arguing among other things that the District Court lacked subject matter jurisdiction.

The District Court accepted that argument and dismissed the complaint, holding that Nederland's claims had to be brought in the United States Court of Federal Claims. More specifically, the District Court held that the breach of contract claim did not invoke the Court's admiralty jurisdiction and that the statutory cause of action under the Act to Prevent Pollution from Ships (the "APPS") failed because the APPS did not waive the government's sovereign immunity. We disagree on both counts and will accordingly reverse and remand for further consideration.

I. BACKGROUND

The Reefer arrived at the Port of Wilmington, Delaware on February 20, 2019 for what Nederland expected to be a short stay. Upon shipboard inspection, however, the Coast Guard noticed evidence suggesting that the Vessel had violated the APPS.² Specifically, the Coast Guard suspected that the Vessel had discharged dirty bilge water directly overboard and misrepresented in its record book that the ship's oil water separator had been used to clean the bilge water prior to discharge. The Coast Guard accordingly detained the Reefer by withholding a departure clearance, under 33 U.S.C. § 1908(e) of the APPS.³

The Coast Guard's Captain of the Port issued a letter to the Vessel's representative on February 22, 2019, explaining the Coast Guard's authority to withhold the departure clearance and that clearance could be granted if the Vessel entered into a surety agreement that included providing a financial bond. To negotiate that agreement, Nederland sought out Commander Robert Pirone of the Coast Guard. On March 7, Commander Pirone repeated that departure clearance could be obtained upon the issuance of a bond as part of a security agreement. He also told Nederland that the alleged discharge of bilge water had been referred to the Department of Justice for criminal prosecution under the APPS.

Seeking to get the Reefer underway again, Nederland signed an "Agreement on Security" (the "Agreement") with the United States on March 8, 2019. Nederland agreed to post a surety bond of $1 million, which would act as security for any adjudicated fines or penalties for violations of the APPS.⁴ It also agreed to other provisions "[a]s consideration for surety satisfactory to the Secretary [of Homeland Security] for the release of the Vessel." (App. at 37.) Those provisions included consent to the jurisdiction of the United States over the criminal case and assurance that the thirteen crewmembers of the Reefer would remain in the United States to participate in the criminal trial, at the expense of Nederland. The Agreement also provided that "[a]ny dispute between the United States and Owner or Operator[, i.e., Nederland,] regarding payment under this paragraph shall be submitted to the United States District Court for the District of Delaware.... [T]he party asserting that there has been a breach of the Agreement shall bear the burden of proof." (App. at 39.) In addition, the parties agreed that "the criminal and civil penalty claims of the United States against the Vessel in rem shall attach to the Vessel release's security as provided pursuant to the Federal Rules of Civil Procedure, Admiralty, Maritime Claims, Supplemental Rule E(5)." (App. at 46.)

On that same day, March 8, Coast Guard agents served the Reefer's crewmembers with subpoenas to testify before a grand jury in April. Three days later, on March 11, Nederland's attorney informed Commander Pirone that all replacement crewmembers were on board the Reefer and had completed the handover from the thirteen crewmembers who were required to stay in Delaware. But the Vessel did not receive a departure clearance. After sending several emails asking for updates on the processing of paperwork for the detained crewmembers, Nederland's attorney told the government that the continuing delay of the Vessel had become unreasonable. He also highlighted Nederland's right to pursue damages under 33 U.S.C. § 1904(h).⁵ In particular, he emphasized the economic losses that the Vessel would experience if the delay continued, including the costs associated with making alternative arrangements for its perishable cargoes and missing its next commercial commitment. Nederland continued to ask for updates from the government, with little to no response, until March 28, 2019, when the Vessel was finally permitted to leave port.

Approximately three months later, Nederland filed for declaratory relief in the District Court under 33 U.S.C. § 1904(h), seeking a declaratory judgment that the Agreement was null and void ab initio and asking for damages for breach of contract and compensation for unreasonable delay in allowing the Vessel's departure. The government moved to dismiss for failure to state a claim and for lack of subject matter jurisdiction.

The District Court was persuaded by the government's attack on subject matter jurisdiction. As to Nederland's breach of contract claim, the Court held that it did not have jurisdiction in admiralty because the Agreement is not a maritime contract, as the "principal objective of the Agreement is to permit the ship's departure clearance while preserving the Government's ability to investigate." (App. at 9.) Without the waiver of sovereign immunity attendant to admiralty jurisdiction, the claim could not proceed, the Court said, because the Agreement itself did not amount to a waiver of that immunity. As to the APPS cause of action under 33 U.S.C. § 1904(h), the Court held that § 1904(h) does not expressly waive sovereign immunity. According to the Court, the waiver of sovereign immunity found in the Tucker Act, 28 U.S.C. § 1491, could instead provide an avenue for relief for Nederland, but any such claim would have to be brought in the Court of Federal Claims.

Nederland now appeals.

II. DISCUSSION⁶

Nederland argues that the District Court erred in holding that it lacked subject matter jurisdiction in this case. According to Nederland, the Agreement it entered with the government is maritime in nature and thus vested the Court with admiralty jurisdiction.⁷ Nederland also contends that its statutory cause of action for monetary damages under 33 U.S.C. § 1904(h) provides subject matter jurisdiction because it is an independent cause of action that waives the government's sovereign immunity. The government counters that the Tucker Act waives sovereign immunity for non-tort monetary claims against the United States "founded ... upon ... any Act of Congress[,] ... or upon any express or implied contract with the United States," and also provides exclusive jurisdiction for such claims in the Court of Federal Claims, 28 U.S.C. § 1491(a)(1), so that Nederland's suit must instead be brought in that court.

To prevail in this jurisdictional dispute, Nederland must clear two hurdles: it has to demonstrate that Congress provided for subject matter jurisdiction in the district courts over the claims at issue and that Congress waived sovereign immunity. See United States v. Bormes , 568 U.S. 6, 9-10, 133 S.Ct. 12, 184 L.Ed.2d 317 (2012) (explaining plaintiffs may only sue the United States for monetary damages where sovereign immunity has been waived and subject matter jurisdiction exists). The parties do not dispute that if there is admiralty jurisdiction in this case, both conditions are satisfied for the contract claim, since federal courts have power to hear "all Cases of admiralty and maritime Jurisdiction[,]" U.S. Const. art. III, § 2, cl. 1 ; 28 U.S.C. § 1333, and Congress has waived sovereign immunity for claims brought in admiralty, Henderson v. United States , 517 U.S. 654, 665, 116 S.Ct. 1638, 134 L.Ed.2d 880 (1996) ; 46 U.S.C. § 30903. The fight over the contract claim is thus whether it is a maritime claim and so properly subject to admiralty jurisdiction. As to the APPS statutory claim, the fight is whether 33 U.S.C. § 1904(h) waives sovereign immunity.

A. The Agreement is a maritime contract.

Nederland argues that the Agreement is maritime in nature and thus invokes the District Court...