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Corporacion Mexicana De Servicios Maritimos, S.A. v. Respect

filed: July 16, 1996.

CORPORACION MEXICANA DE SERVICIOS MARITIMOS, S.A. DE C.V., A MEXICAN CORPORATION, PLAINTIFF-COUNTER-DEFENDANT-APPELLEE, PEMEX-REFINACION, PLAINTIFF-IN-INTERVENTION COUNTER-DEFENDANT-APPELLEE,
v.
THE M/T RESPECT, HER ENGINES, BOILERS, ETC., IN REM AND RESPECT SHIPPING PRIVATE LIMITED, A SINGAPORE CORPORATION AND TRANS PETROL SERVICES N.V., A BELGIAN CORPORATION, IN PERSONAM, DEFENDANTS-COUNTER-CLAIMANTS-APPELLANTS



Appeal from the United States District Court for the Central District of California. D.C. No. CV-94-06965-JMI. James M. Ideman, District Judge, Presiding. Original Opinion Previously Reported at:,.

Before Diarmuid F. O'Scannlain and Stephen S. Trott, Circuit Judges, and Bruce M. Van Sickle, District Judge.*fn* Opinion by Judge Trott.

Author: Trott

Order AND AMENDED OPINION

TROTT, Circuit Judge:

In this case we decide whether Pemex-Refinacion (Pemex-Refining), a subsidiary of Petroleos Mexicanos (Pemex), is an "agency or instrumentality of a foreign state" under 18 U.S.C. § 1603(b) and therefore eligible for the protection of the Foreign Sovereign Immunities Act (FSIA or Act), 18 U.S.C. §§ 1602-1611. It is. However, we hold that Pemex-Refining waived, in part, its immunity by intervening in this action and filing a complaint against the defendants, M/T RESPECT, Respect Shipping, and Trans Petrol Services. Finally, we hold that the district court improperly ordered the defendants to transfer $1.2 million to Pemex-Refining.

BACKGROUND

In July of 1994, Corporacion Mexicana de Servicios Maritimos, S.A. de C.V. (CMSM), a Mexican corporation, entered into a freight contract with Pemex-Refining to transport fuel. Pemex-Refining was anticipating an increase in domestic demand for automotive fuels but did not have the necessary Mexican-flag vessels to carry these fuels from its Southern Mexico refineries to its Northern Mexico users.

In furtherance of its agreement with Pemex-Refining, CMSM contracted to purchase the M/T RESPECT, a two-year old petroleum tanker owned by Respect Shipping Private Limited, a Singaporean corporation, and managed by TransPetrol Services N.V., a Belgian corporation. Later, CMSM allegedly reneged on its purchase agreement with Respect Shipping. However, CMSM promised that it would eventually purchase the M/T RESPECT, and the two companies agreed that in the meantime CMSM would timecharter the tanker.

In August 1994, Pemex-Refining asked CMSM to transport a shipment of fuel, including diesel and gasoline, from Salina Cruz, Mexico, to Rosarito, Mexico. CMSM duly ordered the defendants to carry out the request, and the M/T RESPECT was loaded with the different fuels. However, when the M/T RESPECT arrived in Rosarito, a Pemex-Refining official inspected the ship, discovered that some of the diesel fuel was contaminated with gasoline, and refused to allow the tanker to be unloaded. Respect-Shipping denied it contaminated the diesel and insisted that Pemex-Refining's facility at Salina Cruz was to blame.

The M/T RESPECT returned to Salina Cruz expecting to unload the contaminated fuel there. However, Pemex-Refining refused to allow the offloading. This effectively forced the ship out of commission because the unloaded fuel made it impossible for the ship to transport the fuel designated for the next trip.

On September 28, 1994, Pemex-Refining, Respect Shipping, and CMSM executed a written agreement (the September agreement) providing for an investigation into the contamination. The agreement required the ship to remain in Mexico until the dispute was resolved. Three days later, the defendants weighed anchor and set a course for California where they intended to exercise their carrier's lien on the fuel for their unpaid charterhire. The defendants assert that they did not believe that they could receive legal protection in Mexico because of widespread corruption.

According to the defendants, while the M/T RESPECT was on its way to California, Pemex-Refining instructed a Mexican Navy frigate to stop and board the M/T RESPECT and, if there was any reasonable pretext to do so, turn the vessel around and force it into Mexican waters. The vessel was boarded under threat of large caliber gunfire, but all of its papers were in order and it was allowed to proceed. The tanker arrived in Long Beach on October 14, 1994.

Pemex-Refining complained to the Mexican Attorney-General who invoked the Cooperation Compact with the United States. The United States Customs Service detained the M/T RESPECT in Long Beach Harbor, but later released the ship after the defendants explained what had happened in Mexican waters.

CMSM filed a complaint for conversion of the contaminated fuel and brought an ex parte motion for arrest of the M/T RESPECT, which was granted on October 18, 1994. CMSM's amended complaint added claims for conversion of the ship, breach of charterparty contract, intentional interference with economic relationships, and unseaworthiness. Defendants appeared and answered the complaint. They denied that they had damaged the cargo or that they converted the vessel.

CMSM refused to release the vessel from arrest. Following a motion brought by the defendants to set a release security, Magistrate Judge King set a full in rem security on all claims at $1.65 million (the predicted value of the contaminated fuel on the American market), permitted a bond for that amount to be substituted for the vessel, allowed the defendants to sell the contaminated fuel, and required the defendants' counsel to hold in trust the proceeds from the fuel sale. The fuel was actually sold for $1.2 million.

The defendants filed a counterclaim against CMSM on November 17, 1994 (and an amended counterclaim on February 9, 1995) seeking $28.35 million in damages, punitive damages, and rescission of the September agreement.

After the defendants filed their counterclaims, CMSM apparently lost interest in the litigation. On March 2, 1995, its lawyers were granted leave to withdraw because CMSM had stopped paying them. CMSM has not appeared in this litigation since then. Default was entered by the Clerk on the defendants' amended counterclaim against CMSM on March 9, 1995.

On May 11, 1995, Pemex-Refining intervened as a plaintiff in this action. At the time of intervention, Pemex-Refining expressly waived the doctrine of forum non conveniens, and sued the M/T RESPECT in rem for the same cargo claimed by the defaulting CMSM. Pemex-Refining's complaint-in-intervention stated that jurisdiction was proper under the court's admiralty jurisdiction and alleged five causes of action against the defendants: conversion of cargo by fleeing from Mexico with the contaminated fuel; breach of the warranty of seaworthiness by allowing the fuel ...


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