Incas and Monterey Printing and Packaging, Ltd., Plaintiffs-appellants, v. M/v Sang Jin, Her Engines, Tackle, Apparel, Etc., in Rem,joong Ang Shipping Co., Van Weelde Brothersshipping Ltd. and Grundvig Chartering,inc., Defendants-appellees.in Re Incas and Monterey Printing and Packaging Ltd., Petitioners, 747 F.2d 958 (5th Cir. 1984)

This is an appeal from an order of the district court in an admiralty case requiring plaintiffs to post counter-security under Supplemental Admiralty Rule E(7), on pain of loss of its security for its original claim, which would likely destroy the in rem jurisdiction of the district court. We review the claims, vacate the district court order, and remand.

In the Beginning

The controversy¹  spawning this legal action began in 1982, when plaintiffs arranged for the carriage of two consignments of paper aboard the M/V SANG JIN.²  Although the vessel was to proceed to East Africa, it instead made an unexpected stop in Pensacola, Florida, where plaintiffs' cargo was discharged. Plaintiffs demanded possession of their cargo from defendants, Van Weelde Bros., the time charterers, and Joong Ang Shipping, the owners of the vessel. Defendants, however, refused delivery, claiming a lien on the cargo for the expense of discharging it in Florida.³ 

Plaintiffs, seeking recovery of their cargo and damages for breach of contract of carriage, filed a complaint and had the M/V SANG JIN judicially arrested in Galveston on September 3, 1982 pursuant to Supplemental Admiralty Rule C.⁴  One week later, the district court entered an order requiring that security of $1,600,000 be posted for release of the vessel, and that plaintiffs post security of $125,000 for release of their cargo, in light of defendants' lien for discharge expenses.

On September 17, 1982, defendant Van Weelde filed its answer to plaintiffs' complaint, including counterclaims seeking $2,960,000 in damages. Van Weelde, the time charterer, alleged that plaintiffs had wrongfully seized the M/V SANG JIN with resultant commercial losses, including loss to its business reputation.⁵  On the same day, Van Weelde moved that plaintiffs be required to post counter-security for these counterclaims, as provided for in Supplemental Admiralty Rule E(7).⁶ 

On September 24, 1982, the parties reached an agreement whereby plaintiffs' cargo in Pensacola would be released without the posting of the $125,000 security required by the court's order, on condition that plaintiffs agree to accept security for the vessel for $125,000 less than the $1,600,000 previously ordered by the court, and with plaintiffs' agreement not to use the release of the cargo as an additional defense to Van Weelde's lien against the cargo. On the same day, the court ordered that, defendants having posted security of $1,475,000 in the form of $375,000 deposited in the court registry and a letter of undertaking from the vessel owner's Protection and Indemnity Club in the amount of $1,100,000, plaintiffs would be required to post equivalent counter-security for defendants' counterclaims.

Plaintiffs having failed to post counter-security, defendants moved on October 4, 1982 that the court impose sanctions in the form of a release of the security posted by the vessel interests. Plaintiffs responded by requesting the court to reconsider its order requiring counter-security, a request which was denied by the court on March 16, 1983.⁷ 

On September 13, 1983,⁸  the district court repeated its order of September 24, 1982 that plaintiffs post counter-security in the amount of $1,475,000. The court also ordered that the security posted by the vessel interests be released if counter-security was not posted within 10 days. On September 20, 1983, plaintiffs filed notice of appeal of the September 13, 1983 order. On September 22, 1983, this court granted a stay of the district court's order, pending "further orders of the court." Plaintiffs thereafter sought alternate relief from the district court's order in the form of a petition for writ of mandamus. Ultimately, this court ordered the petition for writ of mandamus carried with the case pending determination of the appealability of the district court order of September 13, 1983.

Appealability

Defendants first challenge the appealability of the September 13, 1983 order as lacking finality under 28 U.S.C. § 1291 (1982). That order required plaintiffs to furnish security for defendants' counterclaims within 10 days, or else suffer the sanction of the release of defendants' security for plaintiffs' claims.⁹  We find the court's order final, and hence appealable under Sec. 1291; we further find that, even if not final, the order is nevertheless appealable under the Cohen doctrine.

Plaintiffs have invoked the trial court's in rem jurisdiction by seizure of defendants' vessel. Upon release of the vessel in exchange for the security posted by the vessel interests, plaintiffs' in rem lien was transferred from the vessel to the fund representing the security. G. Gilmore and C. Black, The Law of Admiralty, Sec. 9-89 (2d ed.1975). Thus, cancellation of the security would in effect put an end to plaintiffs' complaint in rem, destroying the jurisdiction of the court and thus rendering moot any appeal therefrom. Seaboard and Caribbean Transport Corp. v. Hafen-Dampfschiffahrt A.G., 329 F.2d 538, 1964 A.M.C. 2109 (5th Cir. 1964). See also L.B. Harvey Marine, Inc. v. M/V "RIVER ARC," 712 F.2d 458, 459, 1984 A.M.C. 1588 (11th Cir. 1983) (in maritime action, where res is no longer before the court, in rem jurisdiction destroyed); Taylor v. Tracor Marine, Inc., 683 F.2d 1361, 1362, 1983 A.M.C. 2968 (11th Cir. 1982) (same holding), cert. denied, 460 U.S. 1012, 103 S. Ct. 1252, 75 L. Ed. 2d 481 (1983).¹⁰ 

In Seaboard, we held that a decree in an in rem admiralty action releasing the bond put an end to the libel, and hence was a final decision and immediately appealable. 329 F.2d at 540, 1964 A.M.C. at 2112. Similarly, in U.S. v. Vertol H21C, Registration No. N8540, 545 F.2d 648 (9th Cir. 1976), an order releasing the certificate of deposit securing an in rem action against a helicopter was held appealable under 28 U.S.C. § 1291, primarily because "release of the helicopter (and the substituted security) ended the in rem action." Id. at 650. Thus, where a court order vacates the attachment securing an in rem action, the order is final for purposes of Sec. 1291.

Defendants further contend, however, that the order is not final because it merely reflected the court's intention to enter sanctions if plaintiffs failed to post counter-security. It is true that the security posted by defendants has not yet been released due to an order of this court staying release of the security. But even if in rem jurisdiction has not yet been destroyed, the district court's order is still appealable under the doctrine of Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 69 S. Ct. 1221, 93 L. Ed. 1528 (1949).

Cohen created a narrow exception to the final judgment rule, permitting appeals of orders which finally determine rights separable from the merits of the action, and which are too important to be denied review. Id. at 546, 69 S. Ct. at 1225-26, 93 L. Ed. at 1536. In order to be appealable under the Cohen doctrine, an order must (1) conclusively determine the disputed question; (2) resolve an important issue completely separate from the merits of the action; and (3) be effectively unreviewable on appeal from a final judgment. Coopers and Lybrand v. Livesay, 437 U.S. 463, 468, 98 S. Ct. 2454, 2458, 57 L. Ed. 2d 351, 357-58 (1978) (footnote omitted); Oasis Oil and Refining Corp. v. Armada Transport and Refining, 719 F.2d 124, 126 (5th Cir. 1983).

We believe such compelling considerations are shown by the record in the case before us. The Supreme Court has recognized that an order vacating an attachment has Cohen-type finality. Swift & Company Packers v. Compania Colombiana del Caribe, 339 U.S. 684, 70 S. Ct. 861, 94 L. Ed. 1206 (1950). As the court there recognized, appellate review at a later date of an order releasing security "would be an empty rite after the vessel had been released and the restoration of the attachment only theoretically possible." 339 U.S. at 689, 70 S. Ct. at 865, 94 L. Ed. at 1210.

As previously discussed, entry of the order releasing the security for plaintiffs' claim would destroy the trial court's in rem jurisdiction. And even though that security has not yet in fact been released, we must remember that there is some flexibility built into the final judgment rule, and that practical, not technical considerations are to govern the principles of finality. Cohen, 337 U.S. at 546, 69 S. Ct. at 1226, 93 L. Ed. at 1536; Oswalt v. Scripto, 616 F.2d 191, 194 (5th Cir. 1980). For all practical purposes, the only remaining step necessary to end the present action is for the court formally to order the actual release of the security posted by the vessel interests, as it has specifically said it would do if counter-security is not posted.¹¹  We can imagine no more perfect example of an over-technical application of the final judgment rule than to dismiss plaintiffs' appeal merely for want of one more order affecting the release of the security posted by defendants.¹² 

We therefore find the order in question appealable under 28 U.S.C. § 1291.¹³  Given the nature of the court's order, and its practical effect on plaintiffs' claim, we believe that appellate review at this point is not only appropriate, but is necessary if the order is to be reviewable at all.¹⁴ 

Finally, the Merits

This brings us to plaintiffs' contention that Van Weelde's counterclaims are not the type for which counter-security may be required under Admiralty Rule E(7).¹⁵ 

Defendant Van Weelde's counterclaim asserts that plaintiffs (1) wrongfully seized the SANG JIN, (2) requested grossly excessive security, resulting in (3) interference with Van Weelde's contractual obligations, and (4) disparagement of Van Weelde's name in the business community.¹⁶  The cornerstone of these allegations is that plaintiffs had no right to employ the admiralty rules to arrest the SANG JIN in the first place. Since the admiralty is not concerned with common law labels as to theories of recovery, or causes of action, see Kermarec v. Compagnie Generale Transatlantique, 358 U.S. 625, 79 S. Ct. 406, 3 L. Ed. 2d 550, 1957 A.M.C. 597 (1959), we are entitled to treat this broadly as a claim for wrongful seizure, whether denominated as such or as one for abuse of process, malicious prosecution, or all three.

In Frontera Fruit Co. v. Dowling, 91 F.2d 293, 1937 A.M.C. 1259 (5th Cir. 1937), we held that the right to recover damages for wrongful seizure of a vessel is based on a showing of bad faith, malice or gross negligence on the part of the libellant. Id. at 297, 1937 A.M.C. at 1266. Since that time, we have had occasion to decide, on the basis of Frontera, whether such bad faith existed as to warrant the award of damages for a wrongful seizure in admiralty. See e.g., Cardinal Shipping Corp. v. M/S SEISHO MARU, 744 F.2d 461 (5th Cir. 1984); TTT Stevedores of Texas, Inc. v. M/V JAGAT VIJETA, 696 F.2d 1135 (5th Cir. 1983); Tampa Ship Repair & Dry Dock Co. v. Esso Export Corp., 237 F.2d 506, 1956 A.M.C. 217 (5th Cir. 1956). In none of these cases, however, were we required to decide the precise issue presented to us on this appeal: whether a counterclaim for wrongful seizure is an appropriate basis for requiring counter-security to be posted under Admiralty Rule E(7), or its predecessor, former Admiralty Rule 50.¹⁷  Upon examination of the intent of the Rule, we are of the opinion that counter-security should not be ordered for such a claim.

Under the terms of Rule E(7), counter-security may be required when a counterclaim is asserted which arises "out of the same transaction or occurrence" as the original libel. This language is identical to that defining compulsory counterclaims under F.R.Civ.P. 13(a). Thus, as Professor Moore has suggested, we can draw guidance on the proper scope of Rule E(7) by examining the test for counterclaims under F.R.Civ.P. 13(a). 7A J. Moore & A. Pelaez, Moore's Federal Practice, E-727 (2d ed.1983).

Under the broad test for Rule 13(a) adopted by this Circuit, a counterclaim is compulsory when there is any "logical relationship" between the claim and the counterclaim. Plant v. Blazer Financial Services, 598 F.2d 1357 (5th Cir. 1979). See also 6 C. Wright & A. Miller, Federal Practice & Procedure Sec. 1410 (1971) (indicating breadth of this test). However, even under this liberal standard, it is clear that an action in the nature of wrongful seizure or malicious prosecution does not lie as a compulsory counterclaim under F.R.Civ.P. 13(a). See, e.g., Olsen v. Puntervold, 338 F.2d 21 (5th Cir. 1964) (malicious prosecution); U.S. General, Inc. v. City of Joliet, 598 F.2d 1050 (7th Cir. 1979) (malicious prosecution). See generally 3 J. Moore, Moore's Federal Practice p 13.13, 13-78, n. 26 (2d ed.1984).

Such a counterclaim not "arising out of the same transaction or occurrence" as the original action for purposes of federal practice, and there being neither history nor practice in the admiralty suggesting any difference, we see no justification for applying Rule E(7) to a broader class of counterclaims than that permitted under F.R.Civ.P. 13(a).¹⁸  This is especially appropriate in light of the 1966 Unification of Admiralty and Civil Practice. We therefore conclude that, whether or not an action for wrongful seizure, abuse of process or malicious prosecution may be asserted as a counterclaim in admiralty practice, counter-security under Rule E(7) may not be required for such a claim.

This holding is supported by the decisions of the federal courts which have considered this precise question. In Amerada Hess Corp. v. S.S. ATHENA, 1984 A.M.C. 130 (D. Md. 1984), the court denied defendant's request for counter-security based on counterclaims alleging abuse of process and wrongful use of civil proceedings. In denying counter-security, the court reasoned that, since such a counterclaim would not be permitted under F.R.Civ.P. 13(a), it could not be the basis for requiring counter-security under Admiralty Rule E(7). Id. at 132.

A similar conclusion was made under former Admiralty Rule 50 in Solomon v. Bruchhausen, 305 F.2d 941, 1963 A.M.C. 210 (2d Cir. 1962), cert. denied sub nom Isbrandtsen v. Maximo, 371 U.S. 951, 83 S. Ct. 506, 9 L. Ed. 2d 499, 1963 A.M.C. 1646 (1963). There, the district court had ordered libellants to post counter-security for respondent's cross-claim of abuse of process in the arrest of respondent's vessels. The Second Circuit dismissed the cross-claim stating that an action for abuse of process could not be considered to have arisen out of the original action.¹⁹ 

We thus decide that the district court improperly ordered the posting of security for defendants' counterclaims. Having found appellate jurisdiction to decide this issue, plaintiffs' petition for Writ of Mandamus in No. 83-2627 is mooted, and is therefore dismissed.

For the foregoing reasons, the district court's order requiring appellant to post counter-security is vacated, and the cause remanded for further proceedings.

VACATED and REMANDED.