Second Circuit Denies Supplier Maritime Lien But Remands for Determination if Owner Directed Sub-Charterer to be Supplier of Fuel

U.S. Oil Trading L.L.C. v. M/V Vienna Express, 2018WL6626583; 2018 U.S. App. LEXIS 35632 (2d Cir., Dec. 19, 2018).

By: Cameron Robichaux

This appeal originated in the U.S. Southern District of New York, where the trial court found U.S. Oil Trading, L.L.C.  (USOT), a supplier, which contracted with O.W. Germany as the fuel supplier could not assert a maritime lien against a vessel owned and operated by Hapag-Lloyd Aktiengesellschaft under the Commercial Instrument and Maritime Lien Act (CIMLA). The issue arose when O. W. Germany selected USOT for the bid pricing which Hapag approved, but never directly contracted with USOT. The final contracts were drafted with O.W. Germany selected as seller, Hapag as buyer, and USOT as physical supplier, sub-contractor. O.W. Germany maintained that it had the right to assert a maritime lien while USOT asserted that it had a maritime lien.O.W. Germany contended that USOT could not claim a maritime lien under the CIMLA prerequisite that USOT supplied bunkers “on the order of” the owner. USOT agreed there was no direct transaction with Hapag, but that in the order forms through O.W. Germany, Hapag explicitly listed the physical supplier must be USOT. USOT argued this created an implied agency relationship giving O.W. Germany the authority to contract on behalf of Hapag.The Second Circuit substantially agreed with the district court’s judgment that USOT did not directly contract with Hapag and thus did not have a maritime lien. It also affirmed the district court’s ruling that USOT was not entitled to a lien on equitable principles.However, the Second Circuit panel reversed and remanded the district court’s ruling that USOT fell within the exception to the general rule that subcontractors such as USOT do not have a maritime lien. A subcontract will have a maritime lien “where the general contractor was acting as an agent at the direction of the owner to engage specific subcontractors.” (2018WL6626583 at *7).  However, mere knowledge by the owner that a specific sub-contractor will be used is not evidence that the intermediary was acting as an agent for the vessel owner. This tacit acceptance is distinguished from a positive assertion that a specific sub-contractor will be used. In the current case, questions of fact are raised as to the extent of Hapag’s acceptance, including a provision stating O.W. Germany may find another supplier of equal quality only if USOT is unavailable. The court vacated and remanded the case to the district court to determine if there were sufficient facts to find that Hapag directed USOT to be the supplier of the fuel.