Case of the Day: Kiribati Seafood v. Dechert
Posted on October 20, 2017
The case of the day is Kiribati Seafood Co. v. Dechert LLP (Mass. 2017). Kiribati and Olympic Packer, LLC were Washington companies. Kiribati owned the Madee, a fishing vessel, which it chartered to Olympic and to Dojin Co. for fishing tuna in the Pacific. The ship’s rudder was damaged, and it was put in dry dock at the port of Papeete, Tahiti, for repair. The dry dock collapsed, and Kiribati’s insurer, Lloyd’s, deemed the ship a constructive total loss. Kiribati hired two lawyers with Coudert Brothers to sue the port in the Commercial Court of Papeete. The lawyers later left Coudert and joined Dechert, continuing to represent Kiribati.
Lloyd’s paid Kiribati $1.7 million on its claim and was then subrogated to Kiribati’s right to recover . Lloyd’s and Kiribati made an agreement to prosecute Kiribati’s claims and to share the fees and costs of that litigation. After Kiribati asserted that Lloyd’s was not living up to its agreement regarding payment of legal expenses, the parties entered into a new agreement. Under the new agreement, Kiribati gave Lloyd’s a release and Lloyd’s assigned its subrogation rights to Kiribati.
In 2008, the Commercial Court entered a judgment against the port in favor of Kiribati. In particular, it held that under “foreign law” (French law did not apply, it held, because the agreement was signed abroad), the assignment of the subrogation claim was valid. Thus its judgment included the $1.7 million Lloyd’s had paid to Kiribati. The port appealed to the Court of Appeals of Papeete.
On appeal, the court did not overrule the lower court’s decision on the validity of the assignment of the subrogation claim. But it held that the enforceability of the assignment in a French court had to be determined under French law. And under French law, it held, the enforceability of the assignment would depend on the value of the consideration Kiribati gave for the assignment—French law treats that as an important fact because it forbids “double recovery.” Further proceedings would be necessary to answer this question of fact.
After this decision, a Dechert lawyer informed Kiribati that he needed evidence of the consideration paid. Kiribati provided Dechert with a letter from Kiribati to Lloyd’s showing that Kiribati had paid more than its share of the legal fees incurred in prosecuting the claims against the port, including some underlying financial data, the agreement between Kiribati and Lloyd’s that included the release, and correspondence identifying the released claims. Dechert submitted to the Court of Appeals some but not all of this information. In particular, it did not submit the financial data or evidence about the released claims. The court ultimately held that Kiribati had failed to meet its burden to prove the value of the consideration paid for the assignment of the subrogation claim. Therefore, it reduced the amount of the judgment by the $1.7 million of the subrogation claim. Dechert advised Kiribati not to challenge the decision in the Court of Cassation, and Kiribati accepted the advice.
Kiribati then sued Dechert for malpractice in Massachusetts. The claim was that Dechert had been negligent in failing to provide to the Court of Appeals the evidence that would have allowed Kiribati to substantiate its claim to the amount of the subrogation claim. Dechert moved for summary judgment.
The judge granted the motion, on the perhaps surprising grounds that the Court of Appeals had erred as to French law, and that in fact there was no bar under French law to recovery of the subrogation amount. The error of law, the judge held, was an intervening cause that broke the causal connection between the supposed negligence and the damages. Kiribati appealed, and the Supreme Judicial Court took the appeal sua sponte.
The Court didn’t address the merits of the lower court’s decision about the substance of French law. Instead, it focused on the causation issue. There need not be a single proximate cause of a loss; there can be multiple proximate causes. And though an unforeseeable intervening cause can be a superseding cause that breaks the chain of causation, here the Court of Appeals telegraphed its view of the law in the first decision, so its adherence to that view in the second decision was hardly unforeseeable.
This is an interesting tort decision, but to me the most interesting piece is the piece the court didn’t address: how unusual for a US judge to hold that a foreign appellate court erred in the interpretation of its own law! Absent a showing that the foreign proceeding was somehow corrupted, this is problematic. Imagine what a classic legal realist would say!