Squire Patton Boggs scored a victory for International Marine & Energy (“IME), a UAE based marine and offshore services company, in an action to enforce a maritime lien by arresting a ship known as the M/V Sadlers Wells at the Port of Houston.
In IME Int’l Marine & Energy DMVV vs. M/V Sadlers Wells, S. D. Texas Case No. 4:20-CV-00395, the ship’s owner, St. Leger Shipping Ltd., a UK-based charterer, attempted to counterclaim against IME for breach of contract by invoking Supplemental Admiralty Rules C(6) and E(7). In what likely was an effort to avoid subjecting itself to the jurisdiction of the U.S. federal court in Houston, however, St. Leger avoided making any appearance in the case itself. Instead, St. Leger caused the vessel itself to answer and file counterclaims against IME, purportedly on behalf or for the benefit of St. Leger. Similarly, St. Leger caused the M/V Sadlers Wells to file a “Statement of Interest” under Fed. R. Civ. P. C(6), which attempted to assert St. Leger’s interest without St. Leger itself appearing in the case.
IME moved to dismiss the counterclaim for lack of standing and subject matter jurisdiction, arguing that the M/V Sadlers Wells, “an inanimate, unincorporated floating piece of metal” had no standing to defend or pursue any legal claims. St. Leger argued in response that the Supplemental Admiralty Rules allow a vessel to stand in the shoes of its owner by filing a Rule C(6) Statement of Interest “which serves to insert [an] owner’s interest into [a] proceeding.”
In what seems to be a case of first impression, the Texas federal court rejected St. Leger’s arguments and dismissed the counterclaim with prejudice for lack of both statutory and Article III standing. The court specifically rejected the argument that the filing of a Rule C(6) Statement of Interest by the M/V Sadlers Wells that referenced St. Leger was sufficient to allow the vessel to pursue claims belonging to its owner. The Court ruled that although the M/V Sadlers Wells had “filed an answer and asserted counterclaims on its behalf … St. Leger has not done the same.” Under Rule C(6), the court continued to hold, “as an entity asserting an ownership interest in [the defendant vessel], St. Leger was required to file” its own pleadings, including an answer and any counterclaim. Because it was not a party to the suit, and had not strictly complied with Rule C(6), the court concluded that St. Leger lacked statutory standing in the suit.
Expanding its ruling, the court continued to hold that the M/V Sadlers Wells lacked standing under Article III of the United States Constitution to pursue any claims on its own. Article III requires, among other things, that a claimant must have suffered an “injury in fact.” The pleadings in the case filed by the M/V Sadlers Wells conceded that “any damages awarded on its counterclaim would go to [its owner] St. Leger, and not Defendant.” Therefore, the court held, the M/V Sadlers Wells had “failed to meet its burden of showing that it has suffered an injury in fact sufficient to create standing.”
Squire Patton Boggs partner Greg Wehrer commented, “The case is important because no prior decision had expressly held that a vessel cannot invoke the Admiralty Rules to allow it to defend and pursue claims in litigation on behalf of its owner, without the owner itself appearing in the lawsuit. This cuts off a novel strategy that would allow foreign vessel owners to avoid subjecting themselves to the jurisdiction of U.S. courts and their expansive discovery rules, while still seeking to defeat claims and even recover damages through the U.S. litigation process.”