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Marketing v. M/V Almi Sun

United States Court of Appeals, Fifth Circuit

June 19, 2018

VALERO MARKETING & SUPPLY COMPANY, Plaintiff-Appellant
v.
M/V ALMI SUN, IMO NO. 9579535, her engines, apparel, furniture, equipment, appurtenances, tackle, etc., in rem; VERNA MARINE COMPANY, LIMITED, appearing solely and restrictively as claimant of the M/V Almi Sun, Defendants-Appellees

          Appeal from the United States District Court for the Eastern District of Louisiana

          Before HIGGINBOTHAM, JONES, and HAYNES, Circuit Judges.

          PATRICK E. HIGGINBOTHAM, CIRCUIT JUDGE.

         This case asks whether a bunker supplier, having entered into a contract with a bunker trader that later went bankrupt, is entitled to assert a maritime lien against the vessel that physically received its fuel. Because that supplier cannot show that it provided necessaries "on the order of the owner or a person authorized by the owner, " we affirm the district court's denial of a maritime lien.

         I.

         While in Corpus Christi, Texas, the Almi Sun (the "Vessel") needed refueling. Almi Tankers S.A., an agent for the Vessel's owner Verna Marine Co. Ltd., contracted with O.W. Bunker Malta, Ltd., a fuel trader, to procure bunkers. During negotiations, Almi Tankers requested the name of the physical supplier, and O.W. Malta named Valero Marketing & Supply Company. O.W. Malta issued a final sales order confirming Valero as the supplier and listing itself as the seller. Another O.W. Bunker entity, O.W. Bunker USA, Inc., then contracted with Valero to purchase the fuel. O.W.'s involvement ended there. Valero coordinated delivery directly with the Vessel, and Vessel agents tested and verified the bunkers' quality. After delivery was completed, an authorized officer of the Vessel signed the bunkering certificate, and Valero submitted an invoice to O.W. USA.

         In early November 2014, Almi Tankers learned that the O.W. Bunker group of companies faced significant financial problems and might be unable to pay Valero. Almi Tankers requested "written confirmation and evidence of payment, " and "reserve[d] the right to make remittance directly to the physical supplier and . . . hold any balance due . . . for payment." O.W. Bunker and other related entities filed for bankruptcy shortly thereafter.

         Valero then brought this in rem action seeking a maritime lien for the amount owed for the bunkering plus interest and fees. Verna appears as the in rem claimant of the Vessel defending the action on the Vessel's behalf. Both Valero and Verna moved for summary judgment, and the district court granted summary judgment in favor of Verna. Valero timely appeals.

         II.

         We review the "'district court's grant of summary judgment de novo, applying the same standards as the district court.'"[1] Summary judgment is appropriate where "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."[2] On summary judgment, we view the evidence in the light most favorable to the nonmovant, and draw all reasonable inferences in the nonmovant's favor.[3]

         III.

         The Commercial Instruments and Maritime Liens Act ("CIMLA") governs the circumstances under which a party is entitled to a maritime lien. In relevant part, CIMLA states that a person providing necessaries to a vessel "on the order of the owner or a person authorized by the owner" is entitled to a maritime lien on the vessel.[4] Section 31341(a) lists "persons . . . presumed to have authority to procure necessaries for a vessel:"

(1) the owner;

(2) the master;

(3) a person entrusted with the management of the vessel at the port of supply; or

(4) an officer or agent appointed by—(a) the owner; (b) a charterer; (c) an owner pro hac vice; or (d) an agreed buyer in possession of the vessel.[5]

         We apply the provisions of CIMLA stricti juris to ensure that maritime liens are not "lightly extended by construction, analogy, or inference."[6]

         It is not unusual for an entity supplying necessaries to a vessel to lack privity of contract with the owner of that vessel, and to instead contract with an intermediary. In Lake Charles, we recognized two lines of cases that deal with such circumstances: the general/subcontractor line of cases and the principal/agent, or "middle-man, " line of cases.[7] To determine which line of cases applies, Lake Charles instructs that "it is not whether an intermediary can be expected to supply the necessaries itself that distinguishes instances in which the actual suppliers have liens, but it is rather the nature of the relationship between each pair of entities that are involved in the transaction at issue."[8]

         As it happened in Lake Charles, ED&F Man Sugar, Inc. entered into an agreement to purchase rice from Broussard Rice Mill, Inc. In that agreement, the parties assigned the responsibility of providing stevedoring services to Broussard. Broussard, working through an agent, awarded Lake Charles Stevedores ("LCS") the bid to load the rice onto the vessel. LCS loaded the rice, and the vessel's agents signed activity sheets and receipts. When Broussard failed to pay, LCS asserted a maritime lien for its services.[9]

         We found those facts to be "more akin to those in which general contractors have been engaged to supply a service and have called upon other firms to assist them in meeting their contractual obligations."[10] Typically, "the general contractor supplying necessaries on the order of an entity with authority to bind the vessel has a maritime lien"; however, "subcontractors hired by those general contractors are generally not entitled to assert a lien on their own behalf, unless it can be shown that an entity authorized to bind the ship controlled the selection of the subcontractor and/or its performance."[11]Because Man Sugar "retained no control over the selection of a stevedoring concern, and Broussard accepted all the risk associated, " we held that LCS was not entitled to a maritime lien.[12]

         Ken Lucky typifies the middle-man line of cases.[13] In that case, the following sequence of events occurred: Bulkferts, Inc., the vessel's subcharterer, placed an order for fuel with its managing agent, Eurostem Maritime Limited; Eurostem contacted Brook Oil Ltd., a fuel trader; Brook Oil then instructed Gray Bunkering Services to place an order for fuel with Marine Fuel, the physical supplier; Marine Fuel, in turn, asked Gray for assurances about payment before delivery of the bunkers; Gray notified Marine Fuel that it had been "nominated by the owner" of the vessel to supply the fuel; Marine Fuel delivered the fuel; and the vessel's chief engineer accepted the fuel with the approval of the vessel's master.[14] After having unsuccessfully sought payment, Marine Fuel asserted a maritime lien on the vessel.[15]

         The Ninth Circuit found that Marine Fuel was entitled to a lien because the parties agreed that the order originated from Bulkferts, the subcharterer, an entity with authority to bind the ship.[16] Due to that concession, the Ninth Circuit did not "reach . . . the district court's conclusion that Brook was not Bulkfert's agent, " concluding that Marine Fuel did not need to "establish agency between Brook and Bulkferts to fall within the scope of one entitled to a maritime lien under [CIMLA]."[17]

         IV.

         In this case, there is no dispute that bunkers qualify as necessaries and that Valero provided those necessaries to the Vessel. The sole inquiry before us is whether Valero furnished the necessaries to the Vessel "on the order of the owner or a person authorized by the owner." We conclude that it did not.

         The record shows that Verna, through its agent Almi Tankers, contacted OW Malta because it was a "reputable bunker trader[]";that during negotiations, Almi Tankers asked who would be the bunker fuel supplier, and it did not object to Valero's selection; that the sales order confirmation listed Valero as the supplier; that Valero provided the entire bunkering service that Almi Tankers contracted for, with no assistance from O.W. or its affiliates; that the Vessel's agents monitored and tested Valero's performance; and that Almi Tankers expressed concern about O.W.'s ability to pay Valero.

         These facts do not demonstrate that Valero provided the bunkers to the Vessel "on the order of the owner or a person authorized by the owner." Valero provided the bunkers at O.W.'s request, and O.W. is not a "person [] presumed to have authority to procure necessaries[.]"[18] These facts are "more akin to those in which general contractors have been engaged to supply a service and have called upon other firms to assist them in meeting their contractual obligations."[19] Thus, Valero must show that an entity authorized to bind the ship "controlled [its] selection . . . and/or its performance."[20] The record, however, proves no more than the Vessel's awareness of Valero, not that the Vessel "controlled" the selection or performance of Valero. Mere awareness does not constitute authorization under CIMLA.[21]

         Despite Valero's urging, we decline to apply Ken Lucky. As mentioned supra, the Ninth Circuit's holding—that the physical supplier could assert a lien—turns on the parties' concession that the physical supplier sold the bunkers to an entity with authority to bind the vessel.[22] Here, Valero dealt with O.W., not with Verna or Almi Tankers, and the record does not establish that O.W. served as Verna's or Almi Tankers' agent.[23] Thus, Ken Lucky is inapplicable.

         V.

         The dissent says that we fail to follow Lake Charles because in that case, "we made clear that the 'subcontractor' line of cases is itself divided into two lines of cases: (1) cases requiring 'an entity with authority to bind the vessel' to 'direct that the general contractor hire a particular subcontractor in order for that subcontractor to be entitled to a lien'; and (2) cases requiring the subcontractor to be 'identified and accepted by the vessel's owner or charterer prior to performance.'" The dissent's view likely emerges from the following passage in Lake Charles:

In keeping with the notion that subcontractors may acquire liens where the vessel's owners retain control over their selection and/or performance, the Ninth and Second Circuits require that an entity with authority to bind the vessel direct that the general contractor hire a particular subcontractor in order for that subcontractor to be entitled to a lien. See Port of Portland, 892 F.2d at 828; Farwest, 828 F.2d at 526; Integral Control Sys., 990 F.Supp. at 301. In other cases in which subcontractors have been found to be entitled to a lien, those subcontractors were identified and accepted by the vessel's owner or charterer prior to performance. See Stevens, 913 F.2d at 1525, 1534; Turecamo of Savannah, Inc. v. United States,824 F.Supp. 1069, 1072 (S.D. Ga. 1993). Owner involvement in directing, testing, and/or inspecting subcontractor performance has also been cited in support of finding a lien in favor of a subcontractor. See Stevens, 913 F.2d at 1535; cf. Marine Coatings, 932 F.2d at 1375 n.9 (listing operator's inspecting subcontractor work and giving provisional and final acceptance to work performed by the subcontractor among ...

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