Second Circuit Denies Local Bunker Supplier Maritime Lien No Equitable Relief Available In Rem
ING Bank N.V. v. M/V TEMARA IMO NO. 9333929 2018 U.S. App. LEXIS 15895, 2018 WL 2944306 (2d Cir. June 13, 2018)
ING Bank issued a line of credit to the subsidiaries. This agreement contained an assignment by the bunker group (excluding the local supplier) to ING including the right to payment for the delivered fuel. As assignee, the bank asserts its right to payment as does the local supplier which claims it has a maritime lien on the vessel. Naturally, the vessel is caught in a vice: Does it pay the bank? Does it also have to pay the local supplier? The result turns on which of the parties claiming payment has a maritime lien.
In dismissing the bank’s claim on summary judgment, the trial court focused on whether the first contractor “provided” necessaries within the meaning of the CMLA.[1] §31342 which states that “a person providing necessaries to a vessel on the order of the owner or a person authorized by the owner--(1) has a maritime lien on the vessel.” The trial judge determined that, as the company with which the vessel first contracted did not provide the fuel itself, it had no lien and that a provider of necessaries under the Act must assume some risk in the transaction.
The local supplier advanced two theories of recovery: (a) that it had a maritime lien as a matter of law; (b) that it had a claim of unjust enrichment as a matter of equity as the vessel was the beneficiary of the fuel for which it did not pay. The trial judge dismissed the local supplier’s claim on summary judgment holding that it had no maritime lien as well as the claim based on unjust enrichment.
Thereafter, the trial court entered summary judgment for the vessel sua sponte without notice.
To begin, the panel of the Second Circuit repeated the well-known legal maxim that maritime liens arise only by operation of law, not by contract and are stricti juris. “Strict construction of [the Act] … is intended to prevent a proliferation of liens … [which] might otherwise be a significant hindrance to maritime commerce.” [2] Whether the bank has a lien depends on whether the initial company contracting with the vessel has a lien. [3] Applying contract principles, the panel concluded that the initial contractor “provides” necessaries within the meaning of the CMLA when such necessaries are supplied by others through a series of contracts. It relied on the Restatement (Second) of Contracts as well as precedent of the Eleventh Circuit and other district courts in New York. It, thus, reversed the trial court’s dismissal of the bank’s claim.
Where does the local fuel supplier stand? Can that party assert a maritime lien or have a claim in equity for unjust enrichment or other equitable remedy against the vessel? Its right to a maritime lien depends on whether it furnished the fuel “on the order of the owner or person authorized by the owner.”[4] As a sub-contractor twice removed from the initial contractor, it had no lien as it did not “furnish” the fuel to the vessel. Rather, it furnished fuel to the subsidiary and was twice removed from the company which contracted with the vessel. Absent proof by the local supplier that the sub with which it contracted was an agent of the vessel, it had no lien. [5]
The local supplier also argued that the provisions of its contract pass through the chain of contracts of the bunker entities. Finding no support that any bunker entity was an agent of the local supplier, this claim failed. [6]
In addition, the claim for unjust enrichment and other equitable arguments were dismissed. The only relief sought was a maritime lien in remagainst the vessel. Unjust enrichment like all equitable remedies are in personam only. The trial court’s dismissal was affirmed. [7]
The appeals court criticized the trial court for granting summary judgment for the vessel sua sponte without notice. Rule 56(f) of the Federal Rules of Civil Procedure governs the process to grant summary judgment without notice. The panel vacated the trial court on this judgment and remanded the case.
In summary, the trial court’s dismissal of the claim of the bank was reversed on the basis the bank had the right to exercise a maritime lien. Summary judgment dismissing the claim of the local supplier was affirmed. Summary judgment in favor of the vessel was vacated.
[1] Commercial Maritime Lien Act, 46 U.S.C. §31341-31343[2] 2018 U.S. App. LEXIS 15895 at *14[3] It appears that the bank does not have a lien in its own right. Rather, it has the right as assignee to assert the lien of the assignor. Is this being overtechnical?[4] 46 U.S.C. §31342[5] It would seem that the local supplier would have to prove that all parties in the chain of contracts of the bunker entities are agents of the vessel.[6] This argument if valid would then allow the creation of a maritime lien by contract.[7] As noted in an earlier message, the Eleventh Circuit in Martin Energy Services, LLC v. M/V BRAVANTE IX, 2018 U.S. App. LEXIS 12402, 2018 WL 2146435 (11th Cir. May 20, 2018, per curiam) affirmed an award based on quantum meruit in favor of the supplier of fuel. I will discuss this case again after I report on the Valero Marketing case from the Fifth Circuit. Can Martin Energy be reconciled with the Second Circuit’s decision in ING Bank? In addition, I hope to address the concern of the dissent of Judge Haynes in Valero Marketing that the opinion of the majority creates a split with the Eleventh Circuit.
