Recent Development by Rory B. O'Halloran
Otto Candies, L.L.C. (Otto) entered into a Memorandum of Agreement to purchase the M/V SPEEDER (SPEEDER) from Diamond Ferry Co. (Diamond) contingent upon Nippon Kaiji Kyokai's (NKK) restoring the SPEEDER's lapsed coastal classification. NKK issued the required Class Maintenance Certificate and Otto tendered the purchase price for the SPEEDER. The SPEEDER was then transported from Japan to the Bender Shipyard in Mobile, Alabama, where it was surveyed by the American Bureau of Shipping (ABS) for the purpose of transferring the SPEEDER's classification from NKK to the ABS. Upon inspection, the ABS surveyor discovered numerous and significant deficiencies that would require repair before the ABS could issue a classification for the SPEEDER. Otto paid for the shipyard to complete the necessary repairs, and an interim class certificate was issued for the SPEEDER.
Otto filed suit in federal district court (Eastern District of Louisiana) against NKK to recover the cost of the repairs necessary for the ABS to issue the SPEEDER a class certificate. After a two day bench trial, the district court determined that “NKK owed a duty to Otto Candies and that NKK was liable for negligent misrepresentation.” The district court further found damages in the amount of the repair costs. NKK filed a timely appeal. The United States Court of Appeals for the Fifth Circuit held that a third party may bring a claim of negligent misrepresentation against a maritime classification society based upon statements made in a classification survey conducted as a prerequisite to the sale of a vessel. Otto Candies, L.L.C. v. Nippon Kaiji Kyokai Corp., 346 F.3d 530, 532, 538-39, 2003 AMC 2409, 2410, 2417-18 (5th Cir. 2003).
About the Author
Rory B. O'Halloran.
Citation
78 Tul. L. Rev. 1389 (2004)