Seward & Kissel Litigation Team Obtains Second Circuit Ruling that Subcontracting Physical Suppliers Do Not Have Liens in OW Bunker Case

June 14, 2018

In an opinion issued yesterday (June 13, 2018), a Seward & Kissel litigation team including Bruce Paulsen, Brian Maloney, and Laura Miller obtained a favorable ruling from the United States Court of Appeals for the Second Circuit, which affirmed in part, vacated in part and remanded for further proceedings a decision from the Southern District of New York in ING Bank N.V. v. M/V Temara et al., No. 16-3923(L), 16-4019(Con) that found, among other things, that physical suppliers of bunker fuel, acting as subcontractors, do not have maritime liens. The result further clarifies the circumstances that a person is only entitled to claim a maritime lien under the Commercial Instruments & Maritime Lien Act, 46 U.S.C. § 31342 (“CIMLA”) when it acts upon the order of the owner or a person authorized by the owner as enumerated in the statute, which subcontractors do not. Although there remain additional pending appeals on this question in the Second, Fifth and Ninth Circuit Courts of Appeal, today’s decision is notably in accord with Eleventh Circuit’s decision issued last fall in Barcliff LLC v. M/V Deep Blue, 876 F.3d 1063, 1068 (11th Cir. 2017).

In brief, the Second Circuit held that contract supplier O.W. Bunker & Trading A/S (“O.W. Denmark”) acquired a maritime lien for necessaries under CIMLA because O.W. Denmark and the vessel’s charterer entered into a contract to deliver bunkers to the vessel, and “there is no question that those bunkers were delivered pursuant to that arrangement.” See Op. at 17-20. Further, the Court held that the physical supplier did not possess a maritime lien under CIMLA, because it did not provide bunker fuel to the vessel “on the order of the owner or a person authorized by the owner.” See Op. at 21-27. Rather, the physical supplier “was acting as a subcontractor of O.W. USA (which itself was a subcontractor of O.W. Denmark) when it delivered the bunkers to the Vessel.” Id. at 23-24.

The Second Circuit accordingly concluded that the district court had erred in denying ING’s motion for partial summary judgment on its entitlement to a maritime lien, as assignee of O.W. Denmark. Op. at 20. The Second Circuit also concluded that the district court had erred when it had granted summary judgment in favor of the vessel, on its own and without notice, when the vessel had not affirmatively moved for such relief. See Op. at 28-32. The decision was remanded for further proceedings consistent with the opinion.

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