On August 10, 2016, the Eastern District of Louisiana reaffirmed that a maritime lien may attach to a vessel at the moment the necessaries are provided, but that the lien may not yet be enforceable until payment is due (i.e., the debt had matured). Thus, in the typical case, the amount of security necessary to release an arrested vessel is calculated only using the value of the matured maritime lien. However, in Odyssea Marine, Inc. v. Siem Spearfish M/V, the court held that given the specific circumstances of the case the security to be posted by the vessel owner to release the arrested vessel may encompass all maritime liens asserted by plaintiff Delta Subsea, LLC (“Delta”) including those that were not enforceable. 2016 WL 4259083 (Aug. 10, 2016) (J., Barbier).
As previously discussed in earlier blog articles, maritime liens arise as a matter of law for those who provide “necessaries” to a vessel such as: repairs; supplies; towage; and the use of a dry dock or marine railway. 46 U.S.C. § 31301(4). The Fifth Circuit has held “that a maritime lien for vessel repairs attached [to the vessel] the moment the vessel left the repair yard with the bill unpaid….” See Pan American Bank of Miami v. Oil Screw Denise, 613 F. 2d 599, 602 (5th Cir. 1980). The Fifth Circuit subsequently refined its previous holding by stating that “the point at which a maritime lien attaches and the point at which it becomes enforceable are not necessarily the same.” See Bank One, Louisiana v. MR. DEAN, 293 F. 3d 830, 834 (5th Cir. 2002). Typically, in order for the lien to be enforceable, the debt must mature per the terms of the agreement between the shipowner and the shipyard. This general rationale is central to the purpose of necessary liens such that they are designed to create security for a claim while still permitting a vessel to continue on her way to earn freight or hire to cover the unpaid debts not presently due.
In Odyssea, Delta arrested the SPEARFISH on account of five allegedly unpaid invoices for ROV support services. Siem, the owner of the SIEM SPEARFISH (“SPEARFISH”), petitioned the court to set an appropriate amount of security so that the SPEARFISH could be released from the U.S. Marshal’s custody. Delta sought to require Siem to post security in the total amount of all outstanding invoices. Siem argued that at the time of arrest, only one invoice was due; therefore the amount of security should be set at the matured debt value, only. Though a maritime lien is not typically enforceable until the debt has matured, the court acknowledged that certain exceptions exist. The Odyssea court held that the owner of the vessel must post security for the aggregate value of all outstanding invoices even though not all presently due.
The court’s reasoning was based on a variety of factors. Most importantly, the court determined that at least one invoice was due at the time of arrest, thus the arrest was proper. Further, in the past four months, the SPEARFISH had been arrested by five different plaintiffs, and Delta was expressly told by Siem that it intended to move the vessel out of the district to prevent Delta from arresting the SPEARFISH. Lastly, the remaining invoices were due within weeks of the date of arrest.
In dicta, the court went one step further by stating that because“arrest is the first step to judicial sale of the vessel, which would wash the vessel [clean] of all maritime liens, it appears sensible to permit a lien holder to enforce a lien that has attached but not fully ripened once other parties have placed the vessel under arrest.” The court went on to justify its ruling by declaring that no Fifth Circuit case governed the present suit, therefore the court determined that this ruling was in line with the Eleventh Circuit’s similar holding in Dresdner Bank Ag v. M/V OLYMPIA VOYAGE, 465 F.3d 1267 (11th Cir. 2006).
From Odyssea, providers of necessaries should take note that they may seek security for all of their maritime liens not yet ripened, but one of the liens must be enforceable at the moment of arrest. Further, vessel owners should take note that terms of credit allow a vessel to proceed on her way to earn freight or hire in order to satisfy any attached liens not presently due. Thus, vessel owners should negotiate reasonable and attainable terms of credit to insure the vessel can continue to generate revenue even with encumbrances attached.