The UCC and The Restatements in American Maritime Law: Some Lessons for Europe Jonathan Gutoff Roger Williams University School of Law [email protected].

The UCC and The Restatements in American

Maritime Law: Some Lessons for Europe

Jonathan Gutoff

Roger Williams University School of Law

[email protected]

What Possible Lessons From the US

• Mostly Common Law Tradition

• A single federal maritime law

• The US Supreme Court the Last Word on US Maritime Law

For Europe

• Mostly Civil Law Tradition

• Multiple Sovereigns Control Admiralty Law

• ECJ Does Not Rule on Issues of Private Maritime Law

Similarities and Lessons• US maritime law is multivariate within a

complex federal system– 50 States along with territories and DC.– 12 geographically based, independent federal

Courts of Appeals– Infrequency of US Supreme Court Review

• “From U.S. history, continentals could draw quite valuable lessons about the complex alchemy of a legal system producing model laws and restatements along with binding state and federal law.” – Mauro Bussani, A Streetcar Named Desire: The

European Civil Code in the Global Legal Order, 83 Tul. L. Rev. 1083, 1095 (2009)

US “Alchemy” is Not Real Chemistry

• No philosopher’s stone or quintessence of federalism.

• After over 200 years US is still seeking to rationalize the law of federal-State relations.

• The observations and experience of US practice may lead to a more rational practice in Europe.

Plan

• Introduction to the Uniform Law Commission, the American Law Institute, the Uniform Commercial Code and the Restatements.

• Overview of Admiralty Jurisdiction in the United States

• Examples of the UCC and the Restatements in US Maritime Law

• Conclusion

The ULC

• Founded in 1892• Purpose to Bring Predictability to State Law

While Maintaining the Autonomy of States• Members Appointed by States• Produces Uniform Acts and Model Acts• Most Successful the UCC (with the ALI)

The ALI

• Founded 1923• 3000 elected members• Approximately 1200 life members and members ex

officio.• Best known product is the Restatements of the Law.

The UCC

• Issued in 1952

• Various Updates, 2003 update to Article 2, Sales, not adopted and withdrawn

• Adopted by all States and territories save Louisiana which has not adopted Article 2.

UCC Articles• 1. General Provisions• 2. Sales• 2A. Leases• 3. Negotiable Instruments• 4. Bank Deposits• 4A. Fund Transfers• 5. Letters of Credit• 7. Warehouse Receipts and

Bills of Lading• 8. Investment Securities• 9 Secured Transactions

Restatements• First Issued 1923-42 on 17 topics

• Second (with commentary and illustrations) 1952 onward.

• Third 1987 onward.

• Restatement (Second) Torts 402A is basis for modern US products liability law.

• Varying levels of acceptance. The US Virgin Islands has legislatively adopted the Resettlements. 1 V.I.C. § 4.

Admiralty Jurisdiction In US --The Basic Statute

• 28 U.S.C. 1333(1) gives to federal district courts exclusive jurisdiction over “[a]ny civil case of admiralty and maritime jurisdiction saving to suitors in all cases all other remedies to which they are otherwise entitled.”

Extent of The Admiralty Jurisdiction

• At the margins “a mess.” – E.g. David W. Robertson & Michael F. Sturley,

Recent Developments in Admiralty and Maritime Law at the National Level and in the Fifth and Eleventh Circuits, 16 U.S.F. Mar. L.J. 147, 201 (2004)

• Torts: Incidents on or caused by vessels on navigable waters or high seas.– See Jerome B. Grubart, Inc. v. Great Lakes

Dredge & Dock Co., 513 U.S. 527 (1995).

• Contracts: Contracts of a “maritime nature” but not construction or sale of vessels. – See East River S.S. Co. v. Transamerica Delaval,

Inc. 476 U.S. 858, 872 n.7 (1986).

What is Saved To Suitors

• Right to Bring and in personam action in State Court.

• Right to rely on state attachment procedures.

• Long-time understanding is that maritime actions are not removable.

Maritime Actions in Federal Court

• May be brought in one of 94 District Courts.

• Appeals of Right to one of 12 geographically based courts of appeal

• Discretionary Review by US Supreme Court

Maritime Actions In State Court

• In trial courts of 50 states and territories and District of Columbia.

• Appellate review varies by State and territory.

• Discretionary Review by Supreme Court

Courts in Different Circuits Not Bound By Each Other -- “Splits”

• Deviation in COGSA. Compare, e.g., Sedco Inc. v. S.S. Strathewe 800 F.2d. 27 (2d Cir. 1986) with All Mut. Ins. Co. v. Poseidon Schiffart, 313 F.2d 872 (7th Cir. 1963)

• Punitive Damages. Compare, In re P&E Boat Rentals Inc. 872 F.3d 642 (5th Cir. 1989) with CEH Inc. v. F/V Seafarer, 70 F.3d 694 (1995) with Protectus Alpha Navig. Co. v. N. Pac. Grain Growers, Inc. 767 F.2d. 1379 (9th Cir 1985); See In re Deepwater Horizon, MDL 2079, Mem. Op. ¶¶ 567-571 (E.D. La. Sept 4, 2014).

State Courts Not Bound By Inferior Federal Courts

“But we are not a higher court than the Supreme Court of California or the California Court of Appeal, or for that matter, California traffic courts. We are in a different judicial hierarchy.”

Kleinfeld, J (CTA9)

Use : Not Change Fill Interstices. • Article 2A of the UCC not an important part of

charter party litigation.• Article 1 has been used to decide whether a

purported lease was a charter party or a security interest. Interpool Ltd. v. Char Yigh Marine, SA, 890 F.2d 1453 (9th Cir. 1989)

• The BP Court used the Restatement of Torts to find meaning for “recklessness” under the CWA and OPA.

• The BP Court looked to established law from Courts of Appeals to determine whether BP would be liable for punitive damages in private law actions.

An Example of the Applicability of the UCC

• “The UCC is considered a source of federal maritime law.” Southworth Machinery Co. v. F/V Corey Pride, 994 F.2d 37 (1st Cir. 1993). (applying UCC Article 2 to a contract to sell and intall an engine).

To apply U.C.C. principles to a maritime contract for services would hinder admiralty law's goals of uniformity

.An Example of the Inapplicability of the UCC

• “To apply U.C.C. principles to a maritime contract for services would hinder admiralty law's goals of uniformity and predictability.” Princes Cruises v. Gen. Elec. Co., 143 F.3d 828 (4th Cir. 1998) (holding Article 2 did not apply to a contract to repair and supply parts to a vessel)

Problem With Restatements Not Always Consistent

• Problem of Classification Society Liability Possibility of Different Standards from Different Provisions of the Restatement.

Bases for Liability Section 552

• Restatement (Second) § 552 limits liability for false information

(a) by the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and

(b) through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction.

Bases for LiabilitySection 311

• (1) One who negligently gives false information to another is subject to liability for physical harm caused by action taken by the other in reasonable reliance upon such information, where such harm results

... (b) to such third persons as the actor

should expect to be put in peril by the action taken.

Classification Society Cases

• Otto Candies LLC v. Nippon Kaiji Kyokai Corp., 346 F.3d 530 (5th Cir. 2003) (affirming liability under Restatement (Second) of Torts, § 552)

• Isham v. Padi Worldwide Co., 208 WL 877126 (D. Hawai’i 2008) (finding possibility of liability under Restatement (finding possibility of liability under Restatement (Second) of Torts § 331).

Classification Societies Cases

• Reino de España v. American Beaurau of Shipping, 729 F.Supp. 635 (S.D.N.Y. 2010) (rejecting liability based on section reckless conduct), aff’d on other grounds 691 F.3d 461 (2d Cir. 2012) (concluding that even if there was a sufficient relationship to impose liability for recklessness Spain had not proven recklessness)

Conclusion

• Non-binding codes and rules of principles may be useful in filling gaps.

• They may even be a building block for more uniformity where if courts fill the gaps in the same way.

• Without some instrument requiring the application of particular principles or statutory provisions, do not expect any uniform changes.