Great Lakes Insurance SE v. American Steamship Owners Mutual Protection and…

Background

Great Lakes Insurance SE sued American Steamship Owners Mutual Protection and Indemnity Association Inc., also known as The American Club, Shipowners Claims Bureau Inc., George Gourdomichalis, and Efstathios Gourdomichalis. Great Lakes brought claims in its own right and as the subrogee of Pacific Gulf Shipping Co., meaning it claimed the right to pursue claims after paying losses owed to Pacific Gulf.

The claims arose from the M/V ADAMASTOS, a vessel that grounded in Brazil in August 2014 and was later detained. Great Lakes alleged that the defendants conspired to abandon the vessel, its crew, and its cargo and to terminate the vessel’s protection and indemnity and freight, demurrage, and defense insurance coverage. Great Lakes alleged that these actions were taken to avoid paying insurance and other liabilities connected to a soyabean cargo claim.

Great Lakes alleged that it and related entities paid or resolved claims totaling $18 million and $18.5 million in connection with arbitrations involving the cargo and the charter agreements. It asserted claims for prima facie tort, promissory fraud, civil conspiracy, unjust enrichment, and negligence.

Motions and jurisdictional issue

The American Club and Shipowners Claims Bureau moved to dismiss under Rules 9(b) and 12(b)(6), and also sought sanctions and attorneys’ fees under Rules 37 and 65. George and Efstathios Gourdomichalis moved to dismiss under Rules 12(b)(1), 12(b)(2), 12(b)(5), and 12(b)(6), and also sought sanctions under Rule 37.

The court first addressed subject-matter jurisdiction, which is the court’s legal authority to hear a case. Great Lakes relied on federal admiralty jurisdiction under 28 U.S.C. § 1333. The court applied the two-part test for admiralty tort jurisdiction: the alleged tort must have occurred on navigable water or caused injury on land through a vessel on navigable water, and it must have the required connection to maritime activity.

Court’s analysis

The court held that Great Lakes failed the location requirement. The alleged torts were based on the defendants’ alleged conspiracy to abandon the vessel, terminate its insurance, and refuse to pay the cargo claim. The court found no allegation or evidence that the defendants were on the vessel or on navigable water when they allegedly took those actions. It also found that Great Lakes’ alleged injury was caused by the defendants’ land-based conduct, not by a vessel on navigable water.

The court also held that Great Lakes failed the connection requirement, even assuming the location requirement could be satisfied. The court described the general type of incident as abandonment of a detained vessel on navigable water and termination of that vessel’s insurance coverage. It found that these events would not immediately obstruct navigation, damage nearby commercial vessels, or otherwise create more than a fanciful risk to commercial shipping.

The court further concluded that the alleged conspiracy to abandon the vessel and terminate its insurance did not bear a substantial relationship to traditional maritime activity. The fact that the dispute involved a vessel, maritime insurance, a cargo claim, and charter agreements was not enough. The court emphasized that the alleged torts themselves—not merely the surrounding maritime circumstances—had to satisfy the jurisdictional test.

Disposition

The court concluded that it lacked admiralty jurisdiction over all five tort claims. The defendants’ motions to dismiss were granted, and the action was dismissed for lack of subject-matter jurisdiction. Because the court found that any proposed amendment would be futile, it denied Great Lakes’ request for leave to amend the complaint. The court did not address the defendants’ other grounds for dismissal, directed the clerk to terminate the pending motions, and closed the case.