3rd Circuit Grants Delaware District Court Jurisdiction Over Detained Ship Damages Case

The U.S. Court of Appeals for the 3rd Circuit reversed a federal district court's ruling which tossed a case seeking payment from the U.S. over damages caused from a ship delay in Delaware, holding that the district court could in fact hear the case. The appellate court, in a Nov. 16 decision, said that the court had jurisdiction since the contract between the U.S. and ship owner Nederland Shipping Corporation was a maritime contract and the law giving the U.S. cover for detaining the ship waived sovereign immunity (Nederland Shipping Corporation, et al. v. United States, 3rd Cir. #20-2269).

In February 2019, a ship carrying fruit, the M/V Nederland Reefer, was detained at the Port of Wilmington, Delaware, by the U.S. Coast Guard. Upon inspection, the agency suspected that the ship was violating the Act to Prevent Pollution from Ships by illegally dumping bilge water directly overboard. Nederland signed an Agreement on Security with the U.S. in which Nederland agreed to post a $1 million surety bond to act as security for any further fines or penalties for APPS violations. In all, the vessel was held for nearly a month.

Nederland subsequently filed a case with the District Court for the District of Delaware asking the court to find the U.S. in violation of the contract and responsible for compensation for the "unreasonable delay." The court tossed the case, biting on the government's claims that the court lacked subject matter jurisdiction. The government successfully argued that the court didn't have jurisdiction in admiralty, as Nederland claimed, since the agreement is not a maritime contract and that the APPS didn't waive the government's sovereign immunity.

The 3rd Circuit reversed both aspects of the district court's ruling. For starters, Judges Michael Chagares, Kent Jordan and Anthony Scirica found that the contract is indeed a maritime contract and not "inherently local." The agreement implicates federal law and international concern with "sea-going commerce and ocean pollution," the judges said. "It is thus obviously not inherently local." Also, the primary objective of the agreement was to set the ship free to pursue maritime commerce, the opinion explained.

"Finally, we note that the Agreement, which was drafted by the government, is premised on the explicit understanding that subject matter jurisdiction is proper in the District Court," the judges said. "... Our view is that the District Court has admiralty jurisdiction over the breach of contract claim, as the primary objective of the Agreement was to secure the Vessel’s departure clearance, so that it could continue its maritime trade."

Next, the judges discussed the issue of sovereign immunity. While it is typically understood in the Tucker Act that the government's sovereign immunity is waived over monetary claims against the U.S. based on an act of Congress, the jurisdiction is only placed at the Court of Federal Claims. However, in this instance, the plain text of the APPS "explicitly waives the government’s sovereign immunity, making the Tucker Act immaterial to this dispute," the judges said.