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Angelex Ltd. v. United States

United States District Court, D. Columbia.

August 24, 2015

ANGELEX LTD., Plaintiff,

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          For ANGELEX LTD., Plaintiff: George M. Chalos, CHALOS & CO, P.C., Oyster Bay, NY.

         For UNITED STATES OF AMERICA, Defendant: Michael Anthony DiLauro, LEAD ATTORNEY, U.S. DEPARTMENT OF JUSTICE, Civil Division, Washington, DC,

         Re Document No.: 6

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         RUDOLPH CONTRERAS, United States District Judge.

         Granting in Part and Denying in Part Defendant's motion to Dismiss

         Plaintiff Angelex Ltd. (" Angelex" ), the owner of the foreign-flagged M/V ANTONIS G. PAPPADAKIS (the " Pappadakis" ), filed his action against Defendant the United States of America (the " Government" ) under 33 U.S.C. § 1904(h) seeking compensation for losses and damages that Angelex incurred as a result of what it alleges was an unreasonable detention and delay of the Pappadakis by the Government from April to September 2013 during the Government's investigation and criminal prosecution of Angelex, the operator of

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the Pappadakis, and the Chief Engineer of the Pappadakis relating to the unlawful disposal of oily bilge waste at sea. See Complaint, ECF No. 3.[1]

         This is not the first action that Angelex has filed against the Government in connection with the detention and delay of the Pappadakis. While the Pappadakis was detained in 2013, Angelex filed an emergency petition in the Eastern District of Virginia seeking a court order fixing terms of surety for release of the Pappadakis. See Angelex Ltd. v. United States, No. 2:13-cv-237, 2013 WL 1934490 (E.D. Va. May 8, 2013) (" Angelex I " ). Though the district court in that action ordered the Government to release the Pappadakis upon the filing of a penal bond with certain conditions specified by the court, the Fourth Circuit stayed the order and, on appeal, reversed the decision and remanded the petition for dismissal for lack of subject matter jurisdiction. See Angelex Ltd. v. United States, 723 F.3d 500 (4th Cir. 2013) (" Angelex II " ).

         Following the Fourth Circuit's decision and the Government's eventual release of the Pappadakis in September 2013 after the conclusion of the criminal trial, Angelex filed this action for compensation. The Government has filed a motion to dismiss the Complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure, arguing that Angelex's claim as to the terms of the Pappadakis's detention and surety is barred under the doctrine of res judicata and that Angelex has not pleaded a plausible claim as to the withdrawal of the Pappadakis's departure clearance. See Def.'s Mot. Dismiss, ECF No. 6. For the reasons explained below, the Court will grant the Government's motion in part and deny the motion in part.

         I. BACKGROUND

         Angelex is a foreign corporation with a registered office address in Malta. See Compl. ¶ 1. The Pappadakis, an ocean-going bulk carrier registered in Malta, is Angelex's sole fee-earning asset. See id. ¶ ¶ 1, 6, 8. At all relevant times, Kassian Maritime Navigation Agency, Ltd. (" Kassian" ), a foreign corporation operating in Greece, managed the Pappadakis pursuant to a contractual agreement with Angelex. See id. ¶ ¶ 9-10. Though Kassian managed the Pappadakis, Angelex, through employment contracts, was the employer of its crew members. See id. ¶ 7.

         On or about April 14, 2013, the Pappadakis arrived at the Norfolk Southern terminal within the Port of Virginia to load a cargo of coal. See id. ¶ 13. On April 15, 2013, U.S. Coast Guard officers conducted a routine inspection onboard the Pappadakis. See id. ¶ 14. After the inspection, a member of the Pappadakis crew passed a note to Coast Guard personnel alleging that the Pappadakis had a so-called " magic pipe," meaning a temporary modification of the Pappadakis's systems intended to bypass the ship's pollution prevention equipment, known as an Oil Water Separator. See id. ¶ 15. This tip led the Coast Guard to conduct an expanded investigation concerning the Pappadakis's compliance with the Act to Prevent Pollution from Ships (" APPS" ), 33 U.S.C. § § 1901, et seq. See id. ¶ 19.

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         A. The Legal Framework

         Congress enacted APPS in order to implement two related marine environmental treaties to which the United States is a party, jointly referred to as " MARPOL" : (1) the 1973 International Convention for the Prevention of Pollution from Ships; and (2) the Protocol of 1978 Relating to the International Convention for the Prevention of Pollution from Ships. See United States v. Jho, 534 F.3d 398, 401 (5th Cir. 2008). MARPOL is aimed at preventing discharges of oily waste at sea, and, accordingly, it places limitations on how ocean-going vessels may dispose of waste. Regulations promulgated under APPS, consistent with MARPOL, require that, in order to monitor pollution from oil discharges, vessels over a certain tonnage must maintain an Oil Record Book. See 33 C.F.R. § 151.25. The Oil Record Book must contain, among other things, an accurate record of discharges of bilge water, sludge, and oily mixtures. See 33 C.F.R. § 151.25(d). The Oil Record Book must also be readily available for inspection at all reasonable times. See 33 C.F.R. § 151.25(i). Under APPS, it is a felony for any person to knowingly violate MARPOL, APPS, or regulations promulgated under APPS. See 33 U.S.C. § 1908(a). APPS also provides for civil penalties for any violation, whether knowing or not. See 33 U.S.C. § 1908(b). In addition, any ship operating in violation of MARPOL, APPS, or APPS regulations is liable in rem for any criminal fine imposed under Section 1908(a) or civil penalty assessed under Section 1908(b). See 33 U.S.C. § 1908(d). The Coast Guard has authority to board vessels and inspect them for compliance with MARPOL, APPS, and APPS regulations. See 14 U.S.C. § 89(a); 33 C.F.R. § 151.23(a). The Coast Guard's inspection authority includes the ability to examine the Oil Record Book kept by the vessel. See 33 C.F.R. § 151.23(c).

         Importantly, APPS provides that " if reasonable cause exists to believe that the ship, its owner, operator, or person in charge may be subject to a fine or civil penalty" under Section 1908, then the Secretary of Homeland Security[2] may refuse or revoke the ship's departure clearance. 33 U.S.C. § 1908(e). Without the clearance, a foreign vessel may not depart a United States port. See 46 U.S.C. § 60105(b). A ship's clearance may be granted or reinstated " upon the filing of a bond or other surety satisfactory to the Secretary" of Homeland Security. 33 U.S.C. § 1908(e). The Secretary of Homeland Security has delegated authority to detain or deny entry to ships to the Coast Guard. See 33 C.F.R. § 151.07. U.S. Customs and Border Protection (" CBP" ) is responsible for refusing, revoking, and granting a ship's departure clearance upon the request of the Coast Guard. See 19 C.F.R. § 4.66c(a). Regulations provide that if the Coast Guard requests that CBP refuse or revoke the clearance for the reasons stated in Section 1908(e), then CBP must do so. See id. The regulation also states that " [c]learance or a permit to proceed may be granted when [CBP] is informed that a bond or other security satisfactory to the Coast Guard has been filed." Id.

         Most relevant to this case, APPS also provides that " [a] ship unreasonably detained or delayed by the Secretary [of Homeland Security] acting under the authority

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of this chapter is entitled to compensation for any loss or damage suffered thereby." 33 U.S.C. § 1904(h). A separate section of the statute, titled " Legal Actions," specifically provides for causes of action under APPS with certain limitations. See 33 U.S.C. § 1910. Section 1910(a) provides four grounds for any person having an adversely affected interest to bring an action: (1) against " any person alleged to be in violation of the provisions" of APPS or its regulations; (2) against the Secretary of Homeland Security " where there is alleged a failure of the Secretary to perform any act or duty under this chapter which is not discretionary with the Secretary" ; (3) against the Administrator of the Environmental Protection Agency " where there is alleged a failure of the Administrator to perform any act or duty under this chapter which is not discretionary" ; and (4) against the Secretary of the Treasury where there is an alleged failure of the Secretary to take action under Section 1908(e). 33 U.S.C. § 1910(a). The Section also requires that the plaintiff must give notice, in writing and under oath, to " the alleged violator, the Secretary concerned or the Administrator, and the Attorney General" of the plaintiff's claim more than 60 days before commencing an action under Section 1910(a). 33 U.S.C. § 1910(b)(1).

         B. Initial Withdrawal of Departure Clearance and Surety Demands

         The Coast Guard's investigation of the Pappadakis began soon after it received the tip from one of the Pappadakis's crewmembers. In the days that immediately followed, Coast Guard officers and agents took control of the Pappadakis, performed inspections, and conducted several rounds of interviews of crewmembers. See Compl. ¶ ¶ 19-24. The Coast Guard completed its onboard investigation on April 19, 2013. See id. ¶ 24. The same day, the Coast Guard's Captain of the Port for the Hampton Roads Sector sent a letter to Angelex and Kassian informing them that the Coast Guard had collected evidence " establishing reasonable grounds to believe" that the Pappadakis had violated MARPOL and APPS. Letter (Apr. 19, 2013), Compl. Ex. 2 at 13, ECF No. 1-1.[3] The letter also stated that, pursuant to 33 U.S.C. § 1908(e), the Coast Guard had requested that CBP withhold the Customs departure clearance required for the Pappadakis to depart the port. See id. The letter stated that, pursuant to APPS, " [w]hen adequate surety has been provided to this office, we will notify CBP and request they grant departure clearance" for the Pappadakis. Id.

         Discussions between Angelex and the Coast Guard concerning the terms of a surety that would be satisfactory to the Coast Guard began soon thereafter. During these discussions, the Coast Guard made a number of demands that Angelex alleges were unreasonable and unrelated to ensuring the payment of a potential fine or penalty. See Compl. ¶ ¶ 30-31. The Coast Guard demanded, for example, that Angelex and Kassian jointly and severally post a bond in the amount of $3 million. See id. ¶ 38. The Coast Guard also demanded that Angelex agree to several non-monetary conditions, including expressly waiving all jurisdictional defenses, paying the salaries and expenses for several crewmembers to remain in the Eastern District of Virginia, stipulating to the authenticity of all documents and items seized from the Pappadakis, and assisting the Government

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in effecting service on foreign citizens not located in the United States. See id. ¶ ¶ 33 n.8. Angelex alleges that the demands were " grossly disproportionate and wholly unreasonable." Id. ¶ 39. The Coast Guard refused to negotiate on the amount of the bond and rebuffed Angelex's counter-offers. See id. ¶ 40.

         C. Litigation in the Fourth Circuit

         Unwilling or unable to meet the Coast Guard's demands, and with the Pappadakis unable to leave the port, Angelex filed an " Emergency Petition" against the Government, the Coast Guard, and CBP in the District Court for the Eastern District of Virginia on April 25, 2013 seeking a court order " set[ting] an appropriate bond for the reinstatement of the [Pappadakis's] departure clearance." Id. ¶ 42. See also Angelex I, [WL] at *3. After Angelex filed the emergency petition and before the district court held a hearing, the Coast Guard lowered its monetary demand for the bond to $2.5 million but maintained its other, non-monetary demands. See Compl. ¶ 43. Angelex counter-proposed a bond of $1.5 million but was rebuffed. See id. ¶ 44.

         District Judge Robert Doumar of the Eastern District of Virginia held a hearing on Angelex's emergency petition on May 6, 2013. See id. ¶ 48; Angelex I, [WL] at *3. During the hearing, the court recessed for a period in order to permit the parties to negotiate further. See Compl. ¶ 50; Angelex I, [WL] at *3. Though during the recess the party representatives reached an agreement in principle for a bond of $1.5 million, plus certain non-monetary conditions, subject to approval from Coast Guard headquarters, when the court reconvened, the Government informed the court that Coast Guard headquarters had rejected the settlement and refused to accept less than the $2.5 million bond it had previously offered. See Compl. ¶ 50; Angelex I, [WL] at *3. At the hearing, the Government took the position that the Coast Guard could set any bond amount that it wanted. See Compl. ¶ 49; Compl. Ex. 5 at 22. Judge Doumar disagreed and, after first finding that the court had subject matter jurisdiction to hear Angelex's emergency petition under both the Administrative Procedure Act (" APA" ) and the court's admiralty jurisdiction, held that the Coast Guard abused its discretion in demanding a bond of $2.5 million and the imposition of non-monetary conditions. See Angelex I, [WL] at *9. In reaching his holding, Judge Doumar stated that the Coast Guard's position and approach was " simply repugnant to the Constitution" and stated that " [i]n more than thirty years on the bench, this Court can recall seeing no greater disregard for due process, nor any more egregious abdication of the reasonable exercise of discretion." Id. The court then entered an order setting a bond of $1.5 million with several specific non-monetary conditions. See Angelex II at 504-05. The Government requested that the district court temporarily stay its order and simultaneously filed a notice of appeal and requested a stay from the Fourth Circuit. See id. at 505. The district court denied the stay motion, but the Fourth Circuit granted it and implemented an expedited briefing schedule. See id.

         In its brief on appeal to the Fourth Circuit, the Government argued, in part, that the APA did not permit judicial review of the Coast Guard's surety demands, because APPS commits the determination of whether and under what conditions a vessel may be granted permission to leave a United States port to agency discretion. See Pet.'s Br., Pl.'s Opp. Mot. Dismiss Ex. 3 at 4-7, ECF No. 8-3. As support, the Government argued:

Congress in APPS authorized an after-the-fact remedy for obtaining compensation from the government, further suggesting that it did not intend Coast Guard offers of surety to be judicially reviewable. Under 33 U.S.C. § 1904(h), " [a] ship unreasonably detained or delayed

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by the Secretary acting under the authority of this Act [sic] is entitled to compensation for any loss or damage suffered thereby." Congress thus did not leave vessel owners without recourse against unreasonable denials of clearance. But rather than providing for judicial review of surety negotiations, it authorized an independent ...

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