## Facts

- In 1984, LQM Associates brokered a 12-year charter party for the M/V RICH DUKE between the vessel’s Japanese owners and Duke Petroleum Transport Corp., including an obligation for Duke to purchase the vessel at charter end for $2 million.
- By the mid-1990s, the vessel’s expected value rose substantially, creating economic incentives and conflict surrounding the purchase obligation.
- A principal of LQM formed Shipping Financial Services Corp., a ship brokerage firm.
- Shipping alleged it entered a brokerage arrangement with Duke Petroleum and OMI Petrolink Corp. to arrange a subcharter of the M/V RICH DUKE that would, as a practical matter, help secure Duke’s ability to realize the economic benefit of its favorable purchase obligation.
- Shipping alleged it performed brokerage services but was later excluded from the transaction and deprived of its commission.
- Shipping sued in federal court invoking admiralty jurisdiction on the theory that the claim arose from a charter party brokerage contract.
- The district court dismissed for lack of subject matter jurisdiction, concluding the alleged contract was not maritime.

## Issues

1. Whether the alleged charter party brokerage agreement was a maritime contract sufficient to support federal admiralty jurisdiction under 28 U.S.C. § 1333.
2. Whether, after recent Supreme Court guidance limiting categorical exclusions, a brokerage agreement connected to a subcharter can still fall outside admiralty because its objective is not maritime commerce or vessel operation.

## Decision

- The Second Circuit affirmed the dismissal for lack of subject matter jurisdiction.
- The court held Shipping failed to show the brokerage contract’s principal objective was maritime commerce or that it directly concerned navigation, operation, or management of a vessel.
- The court declined to decide whether the “preliminary contract doctrine” remains valid as a categorical bar, concluding that Shipping lost even without relying on any per se rule.

## Legal Principles

- Admiralty jurisdiction over contracts depends on whether the contract’s principal objective is maritime commerce and whether it has a direct relationship to traditional maritime activity (e.g., navigation, operation, or management of a vessel).
- A contract does not become maritime merely because it relates to a ship, a charter, or maritime parties; courts examine the substance and purpose of the agreement.
- Even if categorical exclusions for certain agency-type arrangements are unsettled, a brokerage agreement may fall outside admiralty when its connection to vessel operation and maritime commerce is too remote and the arrangement is primarily financial.

## Conclusion

The court affirmed dismissal because the alleged brokerage agreement, though connected to a vessel and a subcharter, was chiefly aimed at securing financial benefits tied to a purchase obligation rather than directly advancing vessel operation or maritime commerce, and thus did not support admiralty jurisdiction.


Shipping Fin. Servs. Corp. v. Drakos, 140 F.3d 129 (2d Cir. 1998)