Wrongful Arrest Requires Bad Faith, Malice Or Gross Negligence
August 19, 2015
Types : Alerts
The United States Court of Appeals for the Eleventh Circuit recently considered whether honest reliance on legal counsel versus immediately releasing a vessel and implied knowledge of the actual identity of the vessel owner constitute grounds for wrongful arrest.
On September 5, 2007, Dantzler Inc. was awarded a judgment by a Brazilian court against Monsted Chartering (“Monsted”). In an attempt to collect the judgment, Dantzler’s Brazilian counsel petitioned the Brazilian court to arrest a vessel believed to be operated by Scan-Trans Holdings A/S (“Scan-Trans”), a successor-in-interest to Monsted. On June 18, 2013, the M/V Industrial Fighter (“Industrial Fighter”) was seized pursuant to the arrest order issued by the Brazilian court.
Upon seizure of the Industrial Fighter, the current time charterer of that vessel, Industrial Maritime Carriers, LLC (“IMC”), notified Dantzler that the Industrial Fighter was being mistakenly held because neither Monsted, nor Scan-Tran or any other successor of Monsted held an interest in the Industrial Fighter. IMC evidenced this by producing copies of readily available publications which indicated that a German company, MS “ERIS J” Schiffahrtsgessellschaft mbH & co. KG (“Eris”), owned the vessel. Instead of immediately releasing the vessel, Dantzler contacted both its Brazilian and its United States counsel for advice on how to proceed. Dantzler’s United States counsel contacted IMC in an attempt to resolve the confusion. Simultaneously, Eris, the owner of the Industrial Fighter, petitioned the Brazilian court to release the vessel on June 20, 2013. On June 24, 2013, the petition was granted and the vessel was released.
Soon after, IMC filed suit in the Southern District of Florida alleging wrongful arrest of a vessel and tortious interference with contract and business relationships. Dantzler moved for summary judgment to dismiss the claims, and the District Court for the Southern District of Florida granted summary judgment. See Industrial Maritime Carriers, LLC v. Dantzler, Inc., 62 F.Supp.3d 1355 (S.D. Fla, 2014).
IMC appealed to the United States Court of Appeals for the Eleventh Circuit. On appeal, IMC argued that Dantzler was liable for wrongful arrest because Dantzler failed to provide the Brazilian court with the true identity of the vessel’s owner and Dantzler had implied knowledge that the arrest was improper because there were maritime publications that listed Eris as the owner of the Industrial Fighter.
In Indus. Mar. Carriers, LLC v. Dantzler, Inc., No. 14-15130, 2015 WL 3423103 (11th Cir. May 29, 2015), the Appellate Court found that there was no evidence that Dantzler knew that the Industrial Fighter belonged to Eris, prior to having the vessel arrested. Although Dantzler was subsequently notified of the true ownership of the vessel, Dantzler did not act with bad faith, malice or recklessness by consulting with its counsel to resolve the matter opposed to immediately releasing the vessel. Additionally, the Appellate Court found that, although Dantzler may have impliedly known the identity of the true owner of the vessel by way of maritime publications, implied knowledge only amounted to negligence. The Appellate Court confirmed that negligence alone is insufficient to prove the wrongful arrest of a vessel.
Finally, the Appellate Court held that honest reliance on advice of counsel is an absolute defense. Here, the Appellate Court found that Dantzler relied on its Brazilian counsel to handle the matter, and there was no evidence that Dantzler should have known that Madeira’s actions were inappropriate. As the Appellate Court succinctly stated, “wrongful arrest is not a tool to redress good-faith mistakes of a party’s identity or the law, even though these mistakes may turn out to be costly.”
Ultimately, IMC was unable to show bad faith, malice or recklessness on behalf of Dantzler, and the Court refused to overturn precedent and expose Dantzler to liability based on its negligent acts and representations of its attorney.