Timebars for maritime claims in the United States – the equitable doctrine of laches

We are often asked by our colleagues in other offices: ‘What is the statute of limitations for maritime claims in the United States?’ Our colleagues are surprised when we tell them there is no one-line answer.¹ In this article, we attempt to provide some clarity as to why this is.

Introduction

The time you have to commence a maritime claim often depends on the state you are in. For example, under New York state law, a supplier’s lien on a ship (on the rare occasion it is not governed by federal maritime law) expires within 12 months after the subject supply, unless, at the expiration of the 12 months, the ship is not in New York. In that case, an action under the lien expires 30 days after the ship returns to New York.

Each of the 50 states has its own laws and courts to administer those laws. By ratifying the United States Constitution, those states, otherwise sovereign, ceded certain areas of their sovereignty to the United States Government. The United States Constitution provides that maritime law is federal because it should be uniform throughout the states. However, apart from personal injury and death claims (where there is a three-year time limit) and COGSA cargo claims (where a one-year time limit applies), United States Congress never actually enacted a statute of limitations for maritime claims, leaving the courts to instead apply the common law, judge-made, equitable doctrine of laches to determine the timeliness of all other maritime claims.

Essentially, to find a claim is barred by laches, a court must find that the claimant unreasonably delayed in bringing its claim and that the defendant was prejudiced by the delay.

Laches in practice

In Larios v Victory Carriers, Inc., 316 F.2d 63, 66-67 (2d Cir. 1963), the judge considered the relevance of an otherwise applicable state statute of limitations and concluded:

‘When the suit has been brought after the expiration of the state limitation period, a court applying maritime law asks why the case should be allowed to proceed; when the suit, although perhaps long delayed, has nevertheless been brought within the state limitation period, the court asks why it should not be.

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When a plaintiff who asserts a maritime claim after the state statute has run, presents evidence tending to excuse his delay, the court must weigh the legitimacy of his excuse, the inference to be drawn from the expiration of the state statute, and the length of the delay, along with evidence as to prejudice if the defendant comes forward with any.’

Laches is an equitable doctrine. A defendant who invokes this doctrine is essentially saying that the claimant has delayed in asserting its rights and, because of this delay, should no longer be entitled to bring its claim. However, delay alone is not enough to prevent a claimant obtaining relief. The consequence of the delay must also have had some detrimental effect on the defendant – say, because the defendant has changed its position due to the delay. The party asserting a laches defence has the burden of proving it.

A more recent decision reviewed and applied these principles, Leopard Marine & Trading, Ltd. v Easy Street Ltd., 2016 U.S. Dist LEXIS 51568 (S.D.N.Y. 2016), and found that the claims of a bunker supplier against a ship should not be enforced on the grounds of laches.

Easy Street supplied bunkers to the subject ship in August 2011 upon the order of the ship’s time charterer, Allied Maritime (Allied). Under United States law, Easy Street gained a maritime lien against the ship in rem. Allied subsequently went bankrupt and did not pay Easy Street for the bunkers so supplied. In April 2015, Easy Street arrested the ship in Panama. The ship’s owner filed an action against Easy Street in New York asking the court to declare that laches barred enforcement of Easy Street’s lien.

The judge acknowledged that Easy Street’s claim was not barred by New York statute, but that did not end the enquiry because, as the judge stated in Larios, the formulation was a ‘rule of thumb’. A court still has to look at the facts of the particular case and analyse whether the delay was unreasonable and the defendant had been so prejudiced. Here, the judge found that Easy Street inexcusably delayed enforcing its lien because:

• It made no attempt to arrest the ship prior to 6 November 2012, when Allied was declared bankrupt, which was more than a year after Allied’s bill had become due.
• Rather than promptly enforcing its in rem claim against the ship, Easy Street accepted assurances from Allied that it would pay the many outstanding bunker invoices, eventually.
• There were several jurisdictions that the ship visited where Easy Street could have arrested the ship, prior to Panama in August 2015, which would have enforced the United States law lien. Indeed, Easy Street arrested other ships in these jurisdictions.

The judge also found that the ship’s owner had been prejudiced by the delay:

• If it had known Easy Street had not been paid and intended to arrest the ship to enforce its lien, the owner could have exercised the contractual rights it had against Allied at the time of delivery.
• Asserting a claim in Allied’s bankruptcy proceedings now was futile.

Concluding on the issue of harm and prejudice, the judge stated:

‘The question is whether Leopard was harmed, at any time, in ways that could have been prevented by Easy Street taking action. If harm had occurred but Easy Street still timely brought its claim, then Leopard would bear the costs of the harm. But if a lienholder waits for too long with no excuse, it must bear the prejudicial costs.’

Accordingly, the judge here found that there was ‘inexcusable delay by Easy Street and prejudice to Leopard’ and held ‘that enforcement of Easy Street’s lien is barred by laches’.

Comments

The lack of a statute of limitations in United States maritime claims can be frustrating – and costly. However, this case (which is on appeal) shows that United States courts will consider the facts of each case and, when appropriate, find that a claim is untimely made and, therefore, timebarred.

^{1 This article does not concern maritime torts that result in personal injury or death. In those cases, there is a statute of limitations, 46 United StatesC 30106, which requires such claims to be brought within three years.}

カテゴリー: Defence