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Wednesday March 27, 2024

Freedom Marine Sales, LLC v. Topitzhofer, 2024 U.S. Dist. Lexis 37234 (M.D. FL March 4, 2024)

Plaintiff seeks default judgment against vessel owner and vessel

This is a straightforward case of a marina enforcing foreclosing on a maritime lien for slip rent and trespass. Unfortunately, the marina suffered delays in its attempt to obtain default judgment against the defendant vessel because it failed to arrest the vessel.

On April 1, 2023, the marina served the vessel with the complaint via posting on a conspicuous place on the vessel. The complaint was served on the vessel owner 16 days later. The vessel owner failed to respond and the clerk entered default on June 2, 2023. On July 14, 2023, the marina moved for entry of default judgment against both defendants. The motion was denied because the vessel had not yet been arrested. Only then did the marina seek a warrant in rem to have the vessel arrested. Finally, once the vessel was arrested and turned over to the substitute custodian, the marina again sought default judgment. The marina finally got its wish on March 4, 2024, almost one year after the first request. The marina is fortunate the vessel was still available to be arrested, had not been sold and had not substantially deteriorated under the owner’s control.

Tuesday March 26, 2024

Olympic Tug & Barge, Inc. v. Lovel Brier, LLC, 2024 U.S. Dist. Lexis 49733 (W.D. WA March 20, 2024)

This was a dispute between a barge owner and the charterer of the barge. The charterer sued the barge owner after the latter said it would double the hire rate for the barge and declare the charterer in default.

The barge owner moved to amend its counterclaim to include a claim for breach of the duty of good faith and fair dealing based on the charterer’s refusal to turn over full insurance policies it was required to obtain pursuant to its charter agreement. The court denied the motion concluding that the amendment would be futile.

Section 7 of the charter agreement did not create a duty for the charterer to produce insurance documents at any time upon the barge owner’s demand. The agreement said that the charterer’s insurance policies (1) shall be subject to the barge owner’s approval and (2) shall be endorsed to require 30 days written notice to the barge owner in the event of any cancellation, non-renewal or other material change in policy terms or conditions. The court interpreted this language as stating conditions giving rise to the barge owner’s right to review and approve the charterer’s insurance policies after the barge owner’s initial approval of the policies. But the charterer did not have a duty to produce the policy documents absent the occurrence of the stated conditions, i.e. cancellation, non-renewal or other material change.

The lesson here for vessel owners who charter out their vessels is to include a specific provision in the charter agreement requiring the charterer to produce copies of any insurance documents on demand by the vessel owner.

Benicia Harbor Corp. v. Louise, 2024 U.S. Dist. Lexis 48835 (E.D. CA March 19, 2024)

The court was asked to confirm a vessel sale. The vessel’s owner, Lady Benjamin PD Cannon, objected alleging the plaintiff’s inventory of non-appurtenant property omitted a substantial amount of non-appurtenant property. Essentially, the owner objected to the extent her personal property may be destroyed with the vessel.

The court was sympathetic to the owner’s position. However, the court noted that the case had been pending for over a year during which time the vessel sat, decayed and incurred custia legis costs. Meanwhile, the owner offered no clear solution for removing her personal property from the vessel in the near future.

The court confirmed the sale. It also ordered any destruction of the vessel be delayed for at least 30 days so the owner can remove her personal property. The court ordered that the plaintiff was not to bear any expenses associated with removing the property. Unfortunately, the court did not order who was to bear the expense which opens the matter up to ambiguity and further motion practice.

Northrim Bank v. Pearl Bay Seafoods, LLC, 2024 U.S. Dist. Lexis 39509 (W.D. WA March 6, 2024)

The court addressed lien priorities and held that a bank’s preferred mortgage was superior to a maritime lien for necessaries for unpaid moorage and utilities.

Federal law states that a preferred mortgage lien has priority over all claims against the vessel except for custodial legis expenses, costs imposed by the court and preferred maritime liens. 46 U.S.C. sec. 31326. Preferred maritime liens are defined as (A) arising before a preferred mortgage was filed; (B) for maritime tort damages; (C) for stevedore wages; (D) crew wages; (E) for general average; or (F) for salvage. Only in the case of a foreign mortgage not filed with the Coast Guard does a maritime lien for necessaries outweigh a preferred mortgage lien.

Because the mortgage at issue was not foreign and the Port of Seattle’s necessaries lien was not preferred, the bank’s mortgage lien was superior to the maritime lien for necessaries.

The court also concluded that the bank’s attorneys’ fees and costs were included in its mortgage lien because they were provided for the mortgage agreement. “[C]ourts have held that ‘attorneys’ fees and interest accrued in the enforcement of a preferred ship mortgage are entitled to the same priority as the mortgage itself.”

Tuesday February 12, 2019

In Admiralty Complaint of Julio Salas & Monica Salas, 2019 U.S. Dist. Lexis 22605 (D. Ariz. Feb. 12, 2019)

Don’t Tell Me Lake Havasu Is Not Navigable Waters

On February 12, 2019, the district court in Arizona allowed vessel owners to pursue their limitation of liability action in a case involving a horrific incident on Lake Havasu.  These limitation actions are always unfortunate cases involving death or serious injury from boating accidents.  But federal law allows a vessel owner to limit its liability after a maritime incident to the post casualty value of the vessel except when the loss occurred due to the owner’s knowledge or privity.  Here, the court left for another day whether the owners were negligent in loaning the vessel to their 39-year old daughter.  Rather, the court held that it had jurisdiction to hear the limitations action because the incident occurred on navigable waters.  Yes, folks…the Ninth Circuit has repeatedly found Lake Havasu to be navigable water so don’t try to convince the court otherwise.

Tuesday January 29, 2019

Cove Invs., LLC v. Vessel-Cordelie, 2019 U.S. Dist. Lexis 13440 (N.D. Cal. Jan. 28, 2019)

On January 28, 2019, the Northern District of California entered default judgment against the vessel CORDELIE, Official No. 287224, in the amount of $2,916.08 and ordered that the vessel be sold at a public sale.  Plaintiff Cove Investments, LLC filed suit against the vessel to foreclose a lien for past due berthing charges.  After the vessel was arrested, it was turned over to substitute custodian Carey Clausen, Marina Administrator of Brickyard Cove Marina.  The court first held that it had jurisdiction to enforce the maritime lien because the vessel was located in the Northern District of California, was arrested pursuant to maritime process and the warrant was successfully served.  The court then held that Cove Investments gave proper notice of the action and arrest of the vessel.  Finally, it held that default judgment was proper under the circumstances.  In particular, Cove Investments provided “necessaries” to the vessel by providing berthing services and Cove Investments would be prejudiced if default was not granted because it would not be able to recover the debt it was owed.

Wednesday October 17, 2018

FIFTH CIRCUIT LACKS JURISDICTION OVER ORDER CONFIRMING LENDER HELD A PREFERRED SHIP MORTGAGE

A district court’s order that a lender has a preferred ship mortgage under the Ship Mortgage Act on a vessel is not an appealable order because it does not have “the effect of ultimately determining the rights and obligations of the parties.”  So held the Fifth Circuit in State Bank & Trust Co. v. Liftboats, 2018 U.S. App. Lexis 29072 (5th Cir. 2018).  Makes sense.  The district court did not find that the borrows defaulted on the collateral mortgage, and the borrowers denied that they were in default.  Thus, there was no final judgment regarding the parties’ substantive rights and liabilities.  Absent this, the Fifth Circuit was without jurisdiction to hear the appeal.  Next time you decide to appeal, make sure the order being appealed from finally determines the parties’ substantive rights and is not a procedural ruling, even if the order has an important procedural consequence.

Sunday October 14, 2018

NINTH CIRCUIT DENIES MARITIME LIEN FOR BUNKERS

We are seeing a lot of maritime lien cases involving bunkers (marine fuel) where the lien is denied because the supplier did not provide the bunkers on the order of the owner or a person authorized by the owner.  The Ninth Circuit recently published one such case – Bunker Holdings Ltd. v. Yang Ming Liber. Corp., 2018 U.S. App. Lexis 28668.

Yang Ming Liberia Corp., owner of the container ship M/V YM Success, ordered bunkers from O.W. Bunker Far East (Singapore) Pte. Ltd.  OWB Far East, in turn, purchased the bunkers from Bunker Holdings under a separate contract.  Bunker Holdings then supplied the bunkers to the YM Success and billed OWB Far East for payment.  OWB Far East filed for bankruptcy and Bunker Holdings filed its maritime lien action against the vessel.

A company that provides necessaries to a vessel on the order of the owner or a person authorized by the owner is entitled to a maritime lien.  46 U.S.C. § 31342(a).  Bunker Holdings provided the necessaries.  The question for the court was whether Bunker Holdings provided necessaries “on the order of the owner” or “a person authorized by the owner” of the vessel.  The court held it did neither.

Yang Ming placed its order with OWB Far East, not Bunker Holdings.  Thus, Bunker Holdings did not provide necessaries on the order of the owner.

Bunker Holdings also did not provide necessaries on the order a person authorized by the owner.  Persons with authority to procure necessaries for a vessel include the owner, the master, and a person entrusted with the management of the vessel at the port of supply.  46 U.S.C. § 31342(a).  OWB Far East did not fall into these categories.  OWB Far East also was not an “agent appointed by … the owner.”  46 U.S.C. § 31341(a)(4)(A).

It seems Bunker Holdings could have avoided this result by adding a provision in its contract with OWB Far East stating that the latter was acting as Yang Ming’s agent and Bunker Holdings was selling bunkers pursuant to an order from Yang Ming.

It was not all doom and gloom for Bunker Holdings.  The court reversed an order requiring Bunker Holdings to pay Yang Ming’s premiums for posting security to release the vessel.  Federal law specifically lists those costs that are taxable.  28 U.S.C. § 1920.  Premiums paid on undertakings or bonds are not on the list.  Further, federal law trumps any local rules of the federal courts that may state otherwise.

The court was not happy with having to deny the premiums as taxable costs analogizing those costs to marshal’s expenses which may be taxed as costs.  “If the plaintiff can be forced to bear the marshal’s expenses when the ship remains in custody, a district court should have the discretion to award a prevailing ship owner the expenses it incurs to post substitute security allowing for the ship’s release.”   Seems reasonable.  We’ll see if Congress or the Supreme Court take action.

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