State creates guidelines for seizing vessels

RIGHTING THE SHIP: James Murphy, an attorney with Hanson Curran LLP, led a committee of lawyers that developed the rules recently approved for vessel seizures. / PBN PHOTO/FRANK MULLIN
RIGHTING THE SHIP: James Murphy, an attorney with Hanson Curran LLP, led a committee of lawyers that developed the rules recently approved for vessel seizures. / PBN PHOTO/FRANK MULLIN

To understand why Rhode Island recently approved a set of local admiralty rules for disputes on the high seas, it helps to know the story of the British-flagged freighter M/V Lamma Forest.
In 1985, the ship stopped in Florida to refuel for a voyage that would later include stops in Providence and Bangladesh. After taking on 500 metric tons of fuel from a company called Central Oil, the Lamma Forest headed back to sea, without paying for that fuel.
Fearing they would never see any money from the Lamma Forest, Central Oil executives hired James T. Murphy, a lawyer with Hanson Curran LLP in Providence, who specializes in U.S. admiralty law, to help apprehend the vessel at its next port of call.
Unlike the rules for most land-based property seizures, maritime law allows the rapid “arrest” of vessels to secure unpaid debts. Under a more deliberative process, an ocean-going vessel could end up halfway around the world before a creditor gets access to it.
In the case of the Lamma Forest, the freighter was stopping in Providence to pick up a shipment of scrap metal for delivery to Bangladeshi processors.
Concerned that the vessel, like its cargo, may never return from south Asia, Murphy sought a federal court order to seize the Lamma Forest in the Port of Providence. The order was granted and the vessel was seized by U.S. marshals, who handle all ship arrests under federal admiralty law.
But even though Murphy and his client got the outcome they were looking for, the vagaries of the process and judicial unfamiliarity with maritime law helped convince him the system could be more efficient.
“The judge said, ‘Can we do this?’ ” Murphy said, describing the response to his request to arrest the Lamma Forest. “If you look at most of the cases in federal court, very few of them are admiralty cases, so even experienced judges might not be familiar with the rules and procedures.”
Even after paying Central Oil to have the ship released, the owners of the Lamma Forest challenged the seizure and appealed the judge’s order to the First Circuit Court of Appeals in Boston. Although the primary tenets of admiralty law are national and have been in place for generations, more detailed rules that spell out procedures for adjudicating the laws in each jurisdiction are left to local districts.
In federal court districts with large commercial ports, such as New York or Los Angeles, local rules have been in place for years.
But New England states, which each comprise a separate federal district, have been slow to write their own local rules.
Of the districts in the first circuit – which includes Rhode Island, Massachusetts, New Hampshire, Maine and Puerto Rico, only the latter had local admiralty rules before the Ocean State approved them in January. (Connecticut and Vermont are part of the second circuit.)
The new Rhode Island district rules don’t materially change when, where or under what circumstances vessels can be seized against debts, but they outline how it should be done here, removing guesswork for judges, attorneys, U.S. marshals, vessel owners and company executives who may become involved with them.
Examples include rules for giving notice to vessel owners of impending seizure, the size of security deposit due the marshals to take the boat, an appraisal process to determine its value, how to handle onboard cargo and how a vessel should be auctioned if a settlement isn’t reached.
“For businessmen and lawyers, they now have finely tuned rules and can say ‘we know what we need to do and how much it is going to cost to do it,” Murphy said.
In both 2011 and 2012, there were nine suits filed in Rhode Island’s federal district court under admiralty laws, plus two so far this year, according to court records.
David Remington, chief deputy U.S. marshal for the district of Rhode Island, who is responsible for executing vessel arrests, said the number of actual vessel seizures has been very steady in recent years at about five annually. Although the frequency of vessel seizures isn’t high, when they do occur they can be significant and result in big court battles.
Recent high-profile cases include the 450-foot Greek chemical tanker Stavrodromi, which was seized in Providence after unloading a heating-oil shipment and ended up sitting at the former Promet Marine Services shipyard on Allens Avenue for more than a year.
Last year a 55-foot racing sailboat was arrested in Portsmouth after it broke free from its moorings off Martha’s Vineyard and collided with a charter yacht. Under maritime law, vessels can be held responsible for damages they inflict, as well as debts incurred on their behalf.
Of the two cases filed so far this year, one complaint is from the city of Newport, which seized a 50-foot sailboat that had been abandoned in the harbor.
The list of plaintiffs to use ship arrests ranges from governments and banks to insurance companies, shipyards, marine-salvage operations and anyone else who may become a creditor of a vessel owner.
As the economy picks up again and financial instruments become more complex, Murphy said he could see a point where ships are used as collateral in large securities.
Remington, the chief deputy marshal, said he does not expect the new local rules to increase the number of vessel arrests, only that the ones that do occur will be carried out more smoothly.
“It absolutely makes the process more efficient,” Remington said.
Jonathan Gutoff, a law professor at Roger Williams University Law School, said admiralty law will likely remain a small part of the legal landscape in Rhode Island unless the state takes off as an international shipping hub.
“These rules are more useful for parties engaged in global commerce,” Gutoff said. “Whenever there is more business, there is an increase in litigation, because things don’t go according to plan.” •

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