The doctrine of “laches” tells us that if a plaintiff makes an unreasonable delay for an assertion of a claim, then a court may determine that the claim is barred. Maritime courts recognize this and have a history of siding with the defense when it brings a valid laches claim. The recent case of Leopard Marine from the Second Circuit court of Appeals is another case in which the defense of laches was raised.
In 2011, Leopard Marine, the owner of a ship, leased its ship to Allied Marine at a specified price. In 2012, Allied Marine refilled the ship with gas in Chile for approximately $850,000 from a company called Easy Street. Easy Street and Allied Marine had a long history of working together so Easy Street did not immediately demand payment.
Shortly after, Allied Marine returned the ship to Leopard Marine and offset any balance owed from the approximately $450,000 worth of gas still in the ship. Not long after that, Allied Marine filed for bankruptcy.
Sensing that there was little help in pursuing an unsecured claim in bankruptcy court, Easy Street arrested the Leopard Marine ship in Panama and demanded payment from the ship in an in rem action (see our previous post on in rem property in maritime law) from Leopard Marine. The demand was for over $1.3 million, which counts fuel costs plus interest and legal fees. In response, Leopard Marine demonstrated that Easy Street was tracking the whereabouts of the Leopard Marine ship, which was docked in Vancouver, Panama, and Brazil before being docked in Panama again. As such, Leopard Marine claimed, Easy Street’s claim should be barred due to laches.
The Court cited a US Supreme Court ruling that requires two elements for laches:
- Inexcusable delay in exercising a lien and
- Prejudice to the party against whom the lien would be enforced.
First, the Court noted that Easy Street was inexcusable with its delay for enforcement against Leopard Marine. It waited to pursue its claim until Allied Marine filed for bankruptcy and did not take an in rem action against Leopard Marine until its ship was back in Panama for the second time.
Second, the Court, citing the SS Schulte case, pointed out that a prejudice against the party against whom the lien would be enforced includes the ability to absorb a loss. The Court noted that had Easy Street moved when the payment owed from Allied Marine was due, then Easy Street could have taken action against Leopard Marine that, in turn, would take action against Allied Marine in an indemnity suit. However, since Easy Street waited until Allied Marine filed for bankruptcy, a suit against Leopard Marine meant that Leopard Marine would have significant difficulty enforcing its indemnity rights against Allied Marine. As such, Easy Street’s actions constituted a prejudice against Leopard Marine. In turn, the doctrine of laches applies to bar Easy Street from recovering against Leopard Marine.
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