Maritime

By R. Chauvin Kean

The Eastern District of Louisiana recently held that a marine fuel supplier who provided fuel to a vessel, through two intermediaries, did not have a valid maritime lien on the vessel even though the vessel accepted and signed for the fuel delivery. See Valero Marketing & Supply Co. v. M/V ALMI SUN, 2016 WL 475905, at *9 (E.D. La. Feb. 8, 2016) (Brown, J.). 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). However, the “necessary” must also have been requested by the vessel’s owner or authorized representative to bind the Vessel, for the maritime lien to attach. Without this, the supplier does not have a right to a maritime lien and may be exposed to unnecessary liabilities should an issue of non-payment occur.

Here, the Vessel’s owner, through its agent, made a request to O.W. Bunker Malta Ltd (“O.W. Malta”) to supply the Vessel with fuel. O.W. Malta relayed the request to its U.S. affiliate, O.W. USA, who then selected Valero to ultimately provide the fuel. Valero supplied the Vessel with approximately 200 metric tons of fuel, and was never paid. Thereafter, the O.W. Bunker group of companies, including the two cited above, ceased all business operations and O.W. USA filed for Chapter 11 bankruptcy protection.

In an attempt to satisfy the outstanding debt, Valero had the Vessel arrested on allegation of a maritime lien. The Vessel Owner challenged Valero’s alleged maritime lien, arguing that no one with authority to bind the Vessel selected Valero to provide fuel. Valero argued that the Owner and agent both knew that O.W. Malta could not directly supply the Vessel with fuel, and that Valero would provide the Vessel fuel instead. Valero also argued that even though it contracted with O.W. USA, the Vessel Owner and agent both ratified that contract, making it “on the order of the owner.”

In its decision and analysis, the Court relied heavily on Martin Energy Serv’s., L.L.C. v. M/V BOURBON PETREL, 2015 WL 2354217, at *7 (E.D. La. May 14, 2015), which declared that “although a supplier of necessaries may in certain circumstances be entitled to a maritime lien, such liens are not automatic, but depend on the relationship between the various parties involved.” Therefore, the sole issue presented to the Court was whether Valero provided fuel “on the order of the owner or a person authorized by the owner.” If the Owner or an authorized representative did request the fuel from Valero, then it would be entitled to a maritime lien as a provider of a necessary. If not, Valero’s sole remedy would be to assert a claim against the now bankrupt company. To that end, the Court examined the parties’ contractual relationships to determine if the Owner had in fact authorized the US affiliate to bind the Vessel. Finding none, the Court continued to examine whether the Owner or his agent ratified O.W. USA and Valero’s contractual arrangement. Again, the Court found no ratification.

In reaching its decision, the Court relied on Lake Charles Stevedores, Inc. v. PROFESSOR VLADIMIR POPOV MV, 199 F. 3d 220, 231-32 (5th Cir. 1999), which held that “merely knowing that a subcontractor would be used, or even that a particular supplier would most likely be used, to ultimately furnish necessaries, does not necessarily create a maritime lien.” There must be more than knowledge or acceptance of necessaries in order to bind the Vessel and its Owner.

From the facts of this case, the Court held that at no point did the Owner or a person authorized to bind the Vessel actually contract, based on the nature of the relationship between the entities, for the supplied fuel. “The fact that the Vessel’s captain was forewarned by [the owner’s agent] that the Vessel would be receiving [fuel] from Valero and given instructions to coordinate with Valero neither establishes” that a party authorized to bind the Vessel selected the supplier and nor does it amount to ratification of a contractual relationship with the supplier, which may have created a maritime lien against the Vessel. This case reaffirms the Fifth Circuit’s precedent “that acceptance of services from a supplier of necessaries does not alone create a maritime lien,” but rather a maritime lien is created by a contractual relationship between the supplier and a party authorized to bind the Vessel.

Lastly, the Court also addressed Valero’s contention that the Commercial Instruments Maritime Lien Act (“CIMLA”), which provides the legal right to maritime liens, was designed to protect American companies from foreign traders’ failure to pay for necessaries. The Court rejected this argument on the basis that “[this] Court cannot favor American companies so heavily as to ignore CIMLA’s third statutory requirement for asserting a maritime lien; namely, that the provision of necessaries to a vessel be ‘on the order of the owner or a person authorized by the owner.” Therefore, despite Valero’s attempts to expand protections for American companies in terms of maritime liens, the Eastern District of Louisiana held that the statutory requirements set forth in CIMLA were not met because the fuel order was not made by the Owner or a party authorized to bind the vessel. Holding that mere acceptance of a necessary does not create a contractual relationship between a supplier and the Vessel’s owner, the Court found Valero’s maritime lien invalid.