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November 5, 1986

In the Matter of the Complaint of Rio Grande Transport, Inc., as Owner of S.S. Yellowstone, for Exoneration from or Limitation of Liability; In the Matter of the Complaint of Compagnie Nationale Algerienne De Navigation, as Owner of the Motor Vessel IBN Batouta, for Exoneration from or Limitation of Liability

The opinion of the court was delivered by: SAND


This matter, which relates to an admiralty award of prejudgment interest, is before the Court on remand from the Court of Appeals which instructed that we "modify the prejudgment interest awarded under each judgment after determining, in view of all the circumstances, including the expectations of the parties at the making of the respective settlement agreements, what constituted reasonable times for CNAN to pay." Matter of Rio Grande Transport, Inc., 770 F.2d 262, 265 (1985).

The parties have agreed to submit this question to the Court on written submissions which were comprised of the deposition testimony of Tunisia's expert witness, M. E. DeOrchis, Esq., representatives of CNAN, Ali Larbi Cherif, and its underwriter ("CAAR") Tahar Bala; Affidavits of Jerome Lipper, Esq. (counsel for Tunisia) and Robert B. Pohl, Esq. (counsel for Rio Grande), together with the Joint Appendix to the Court of Appeals ("JA") and the Exhibits to the Deposition of Cherif and Bala.

 At the outset, it should be noted that the parties are in disagreement as to whose state of mind is brought into question by the Court of Appeals' reference to the "expectations of the parties at the making of the respective settlement agreements." Tunisia interprets this language to refer to the intentions of the experienced and sophisticated New York admiralty lawyers who negotiated and reached a settlement of litigation pending in this Court. To this end it relies on the testimony of Mr. DeOrchis as to the understandings and practices of members of the local admiralty bar. This testimony is to the effect that a reasonable time between the arriving at a settlement and the payment of that settlement in admiralty disputes would be between four and eight weeks. T 8. Mr. DeOrchis further testified that in his opinion the larger the sum involved in an admiralty litigation, the more expeditious the handling, because larger claims are handled by senior people with more authority to make payment than lower level employees who handle smaller claims. It was Mr. DeOrchis' opinion that the fact that the shipowner was a foreign country should not alter these time estimates because one set of rules governs with respect to all who participate in shipping matters. Currency restrictions, in his view, were not a significant factor because "the government-owned line obviously will be able to arrange for the export of funds a lot faster than the individual, private individual." T 11-13.

 Counsel for CNAN, however, focuses on the problems of dealing with Algiers, described as a "'third world' socialist country rather than a modern industrial state such as the United States" (Memorandum on Interest in behalf of CNAN, pp.3-4) including the necessity to conduct business through an English solicitor, translate all documents from French to English or vice versa and the considerable "bureacracy" entailed in effecting payment of these settlements. Emphasizing the Court of Appeals' reference to "all of the circumstances," CNAN urges that the focus of the inquiry should not be on local admiralty practices but what could reasonably be expected of a party such as Algiers. (Both CNAN, the shipowner and CAAR, its underwriter, are agencies of the Algerian government).

 But, the short answer must be that we look to the reasonable expectations of the parties acting through their authorized representatives before this Court. The inquiry is, "at the making of the respective agreements," what would the parties, acting through these representatives, have deemed to have been a reasonable time for making payment in the light of their knowledge of the nature and practices of their respective clients.

 We set forth in Appendix A hereto a chronology of the events between March 1983 when an oral agreement of settlement was reached by counsel, and September 18, 1984 when payment was finally received. Although Appendix A is a single listing, it sets forth events occurring in New York, London and Algeria, some of which took place almost simultaneously and were not fully known to all of the participants. We agree with the observation of CNAN's counsel that ". . . we now have a far clearer picture of the situation than formerly." Memorandum on Interest in Behalf of CNAN, p.24.

 Thus, while before this Court counsel for CNAN repeatedly cited currency exchange problems -- a hardly persuasive ground for delay in a settlement with the foreign sovereign itself (JA 48) -- it now appears that three major events caused the delay in payment:

 1) The Ministry of Finance of Algeria's insistence on formal approval of CAAR;

 2) The requirement of protocoles d'accord;

 3) Use of the wrong account number and description in transmittal of funds.

 We will examine each of these to determine whether the parties reasonably expected the delay which these events occasioned.

 1. The Ministry of Finance on February 1, 1984 requested the reason why CNAN (the shipowner, a government entity) had submitted the request for payment rather than CAAR (the underwriter, another government entity).

 We need not speculate as to whether or not this event and its consequent delays were anticipated even by CNAN's/CAAR's own representatives.

 "This requirement by the Ministry of Finance was unexpected since CNAN had never been refused previously by the Ministry of Finance (Cherif 21) and, as outlined in the narrative above, the Ministry of Finance had long been aware that CNAN was processing the request. As matters turned out, although prior to the developments in this case, CNAN had made requests for payment in matters involving CAAR, after this case where CAAR was involved CAAR always had to make requests for payment (Cherif 20, 22, 25, 26)."

 Memorandum on Interest in Behalf of CNAN, p.7 (emphasis in original). See also id. at 30 "This action is, in our eyes, inexplicable . . ."

 It is clear therefore that the delay occasioned by this bureaucratic red tape between two governmental agencies was unexpected and "unreasonable," as we shall later define that term.

 2. On July 10, 1984 CAAR advised CNAN Legal of the need for protocoles d'accord. As CAAR's director Tahar Bala testified:

 "This was the first time that protocoles d'accord had been requested as indispensable by the ministry of finance, to my knowledge."

 Balas, p.7.

 Clearly the delays occasioned by this newly imposed formality were unanticipated and "unreasonable." CNAN's counsel characterized the requirement of protocoles d'accord as being imposed "unprecedentedly and unexpectedly". Memo of CNAN, p.30.

 3. Misdirection of funds.

 In transmitting funds to Chase on September 7, 1984, one numeral was omitted from the account number and the account name given was Mrs. Leon Weill Mahoney -- a distortion of the firm name for Tunisia's counsel, Messrs. Leon, Weill and Mahoney.

 The consequence of this error was that the funds were retransmitted to Algiers by Chase (despite daily checking by counsel for Tunisia with Chase) and were not actually received by Tunisia's counsel until September 19, 1984. Were we dealing solely with an inadvertent 12 day delay, the question would border on being de minimus but in evaluating this delay in the entire context of this case, it would appear that CNAN did not put ...

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