District Court in Cal Dive Rules Against Vessel Owner's Challenge to Maritime Lien

HIGHLIGHTS:

• The U.S. District Court for the Southern District of New York has denied a motion for summary judgment filed by a vessel owner that sought to dismiss the maritime lien claim of a provider of deck personnel.
• The court's ruling in Cal Dive Offshore Contractors, Inc., et.al. v. M/V SAMPSON, et.al., announced on March 27, 2017, serves to remind vessel owners of the need to provide actual and specific notice of "no lien" provisions to potential lienholders supplying necessaries to the vessel.
• As this decision is limited to denial of a summary judgment, a genuine dispute remains for resolution at trial whether Cal Dive had actual knowledge of the no-lien clause in the charter agreement, and moreover, whether or not a valid maritime lien arose.

The U.S. District Court for the Southern District of New York has denied a motion for summary judgment filed by a vessel owner that sought to dismiss the maritime lien claim of a provider of deck personnel. The court's ruling, announced on March 27, 2017, serves to remind vessel owners of the need to provide actual and specific notice of "no lien" provisions to potential lienholders supplying necessaries to the vessel.

The case – Cal Dive Offshore Contractors, Inc., et.al. v. M/V SAMPSON, et.al.¹ – was brought to enforce a maritime lien by plaintiffs, including Cal Dive Offshore Contractors, Inc., against the M/V Sampson as well as the vessel's owner. A maritime lien gives the creditor a special property interest in the ship, which gives the creditor the right to have the ship sold in a court sale and thereby recover the debt – in this case unpaid wages – from the sale proceeds.

Case Background

The Sampson is a Panama flag vessel involved in laying pipe for the oil industry, and was chartered to Oceanografia, S.A. de C.V. pursuant to a charter party. The charter contained a "no-lien" clause, prohibiting Oceanografia from incurring liens against the Sampson.

Cal Dive was contracted to provide a crew to supervise and assist in the Sampson's pipe-laying activities; the parties disagree whether this crew was ordered by the charterer, Oceanografia, or by (or on behalf of) the vessel owner. Cal Dive alleged a balance due of $1,623,459.92 for unpaid wages, and commenced an action to enforce a maritime lien in rem against the Sampson, as well as separate related claims in personam against the vessel owner. The owner objected, alleging that a valid maritime lien had not arisen.

In deciding the defendant's motion, the court cited the Commercial Instruments and Maritime Lien Act of 1988²,which provides that "a person providing necessaries to a vessel on the order of the owner or a person authorized by the owner . . . has a maritime lien on the vessel" and may bring a civil action against the vessel to enforce the lien.³ In addition, the court noted that prior case law has held that (1) "[a maritime] lien arises to secure creditors who provide "necessaries" – supplies, repairs and equipment . . . ordered on the credit of the ship and which are generally beneficial to the ship"⁴, and (2) "necessaries" has been broadly interpreted to include labor provided for the ship⁵.

The court further explained that, "in the case of a maritime lien, the vessel itself is viewed as the obligor, regardless of whether the vessel's owner is also obligated."⁶

However, the court noted that only certain individuals have the authority to bind the vessel so as to give rise to a maritime lien. "It is a fundamental tenet of maritime law that [c]harterers and their agents are presumed to have authority to bind the vessel by the ordering of necessaries."⁷ However, "when necessaries are ordered by one without authority to bind the vessel," and when the vessel owner can "show that the supplier of necessaries had actual knowledge of the existence of any lack of authority relied upon as a defense," no lien arises.⁸ Because "[a]ctual knowledge of a prohibition of lien clause is . . . one way of obtaining actual knowledge of one's lack of authority to bind a vessel," a vessel owner may defeat a maritime lien by establishing "that the supplier of necessaries either had actual knowledge that the person ordering the supplies lacked the authority to bind the vessel or had knowledge of a prohibition of lien clause in the charter."⁹

The vessel owner argued that Cal Dive did in fact have actual knowledge of the no-lien provision contained in the charter. Cal Dive was the vessel's manager and had received a copy of the charter. Moreover, the vessel owner presented evidence not only that notice of the no-lien clause was explicitly posted on the Sampson, but also that Cal Dive had been involved in drafting the charter (although the court noted that whether Cal Dive was involved in the drafting is contested by Cal Dive).

However, the court was unpersuaded, since precedent requires "some affirmative communication by the vessel or her owner to one of the supplier's employees" in order to demonstrate actual knowledge of the charterer's lack of authority to bind the vessel.¹⁰ In the absence of specific, affirmative communication of the no-lien provision to Cal Dive, the court was unable to find that the requisite actual notice had been given, notwithstanding that vessel owner had given Cal Dive a copy of the entire charter containing the particular no-lien provision.

As this decision is limited to denial of a summary judgment, a genuine dispute remains for resolution at trial whether Cal Dive had actual knowledge of the no-lien clause in the charter agreement, and moreover, whether or not a valid maritime lien arose. The court noted that Cal Dive's representative and primary witness, and a recipient of the charter, had so far refused to appear for depositions and had evaded service of a subpoena. The testimony of this witness could determine whether Cal Dive had actual knowledge of the no-lien clause.

Conclusion

Nevertheless, this decision is instructive for vessel owners. Whenever possible, in advance of goods or services being provided to a vessel, the vessel owner should (1) deliver, or cause to be delivered, to the provider (a potential maritime lienholder) a specific, affirmative notice that a charterer is not authorized to bind the vessel, and (2) contemporaneously document the giving of such notice and obtain acknowledgement from the provider.

Notes

¹ 2017 WL 1157125 (S.D.N.Y. March 27, 2017).
² 46 U.S.C. §§30101-31343 (2006).
³ 46 U.S.C. §31342.
⁴ Marine Oil Trading Ltd. v. Motor Tanker PAROS, 287 F. Supp. 2d 638, 640-41 (E.D. Va. 2003).
⁵ Clubb Oil Tools, Inc. v. M/V George Vergottis, 460 F. Supp. 835, 840 (S.D. Tex. 1978).
⁶ Triton Marine Fuels Ltd., S.A. v. M/V PACIFIC CHUKOTKA, 575 F.3d 409, 414 (4th Cir. 2009).
⁷ Triton Marine Fuels Ltd., 575 F.3d at 414.
⁸ Belcher Oil Co. v. M/V GARDENIA, 766 F.2d 1508, 1512 (11th Cir. 1985).
⁹ Belcher Oil Co., 766 F.2d at 1512–13 (emphasis added).
¹⁰ O.W. Bunker Malta Ltd. v. M/V TROGIR, No. 12 Civ. 5657, 2013 WL 326993 (C.D. Cal. Jan. 29, 2013).

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