Moldy Corn and Wrongful Arrest: The Potential Costs of Sloppy Paperwork

Types : Alerts

In Casillo Commodities Italia S.p.a. v. M/V Long Cheer et al., Civ. No. 16-16612 (June 28, 2017), the charterer of the M/V LONG CHEER, Casillo Commodities (“Casillo”), attempted to obtain security from the owner of the vessel, Long Cheer Shipping (“Long Cheer”), for a claim for alleged mold damages to a shipment of Mexican white corn during a voyage from Mexico to Venezuela.

In doing so, Casillo sought the arrest and attachment of the M/V LONG CHEER under Rules B and C of the Supplemental Rules for Admiralty and Maritime Claims and Asset Forfeiture Actions of the Federal Rules of Civil Procedure.  Casillo’s application to the Court included a copy of an unsigned voyage charter party that named Long Cheer as a party to the contract.  The Court found that Casillo met its Rule B and C burden because the charterparty, even if unsigned, had named Long Cheer and gave Casillo reasonable grounds to arrest the vessel and probable cause to attach the vessel as owner’s property.

Faced with the prospect of having the vessel arrested, Long Cheer posted security in the form of a Club Letter before the vessel entered the port in the United States.   Once it avoided disruption to its business operations, Long Cheer filed a motion to vacate the arrest and attachment orders.  Long Cheer presented uncontested evidence that they were never intended to be party to the voyage charter and that correspondence regarding the negotiation of the instrument showed that the voyage charter in question was in fact between Casillo and another company, Clipper Bulk, which had previously hired the vessel on time charter from Long Cheer.  Long Cheer’s name was inadvertently included on the voyage charter between Casillo and Clipper Bulk as an oversight.

On the basis of the new evidence, Casillo no longer satisfied the reasonable grounds and probable cause burdens under Rules B and C. As such, the Court vacated the orders of arrest and attachment, and ordered Casillo to return the Club Letter.

Long Cheer also requested that the Court award wrongful arrest damages in their favor against Casillo.  However, the Court denied the request because Casillo, by relying on the unsigned charter party that undeniably had Long Cheer name on it, did not act with sufficient bad faith, malice, or gross negligence.  Although, Casillo should have known that its voyage charter was actually with another party.

Owners and operators should monitor the accuracy of their shipping contracts.  Even a small mistake may result in a potential business disruption, and unnecessary and costly litigation.