“Law of the Flag” Held Not to Apply to Action on Unenforceable Gambling Debt in Florida Bankruptcy Court

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In this bankruptcy contract case, the debtor, a cruise vessel operating as a gambling casino, fronted $200,000 to a blackjack gambler who submitted checks for the cash but then stopped payment on the checks. The debtor sued to recover the debt for the benefit of the bankruptcy estate. The issue in the case was which law governed the dispute. The debtor claimed that under Lauritzen v. Larson, 345 U.S. 571 (1953), a “universal rule of maritime law” required that actions aboard a ship are governed by the law of the sovereign whose flag the ship flies. Here, the vessel sailed under the flag of Saint Vincent and the Grenadines, and therefore, the debtor urged that the law of these sovereign states should apply.

The bankruptcy court disagreed, finding that the vessel flew the flag only as a “flag of convenience.” Further, the court found that the debtor did not base its claim on a maritime contract, and therefore, admiralty conflict of law rules did not apply. Rather, the law of the forum – Florida – determined choice of law, and under local law, a court may not apply the law of another forum if to do so would be repugnant to Florida’s public policy. The court found such repugnance based on numerous Florida precedents on the issue, in addition to Florida Statute Section 849.26, which generally prohibits enforcement of gambling debts. For this reason, the court granted defendant’s motion for summary judgment and held that the gambling debt is unenforceable under Florida law.

 In re Titan Cruise Lines, 353 BR 919 (M.D. Fla. 2006).

 

 

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