Odyssea Marine, Inc. v. Siem Spearfish M/V et al
Filing
63
REASONS FOR RULING as to Order setting amount of security (Rec. Doc. 41 . For reasons stated within document, the Court concludes that under the circumstances of this case, it is appropriate to base the amount of security on all the unpaid invo ices, not just the ones due at the time the SPEARFISH was arrested. Accordingly, the Court has granted Delta's request that security be set at 125% of $870,193.01, or $1,087,741.26. Signed by Judge Carl Barbier. (Reference: 16-13385) (gec)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
CIVIL ACTION
ODYSSEA MARINE, INC.
VERSUS
NO. 16-7722 (Lead)
C/W 16-13385 (Member)
SIEM SPEARFISH M/V, ET AL.
Applies to: 16-13385
SECTION “J” (4)
REASONS FOR RULING
[As to Order setting amount of security (Rec. Doc. 41)]
On August 4, 2016, the Court heard arguments on Siem Offshore,
LLC’s (“Siem”) Motion to Set Security (Rec. Doc. 27) relating to
the arrest of its vessel, M/V SIEM SPEARFISH (“SPEARFISH”), by
plaintiff Delta Subsea, LLC (“Delta”) in consolidated member case
16-13385. The next day, the Court issued an order setting security
at $1,087,741.26, the amount requested by Delta, and stated that
written reasons would follow.
(Rec. Doc. 41).
The Court provides
its reasons here.
On or around May 16, 2016, Siem and Delta entered into a
Master Service Agreement (“MSA”) pursuant to which Delta provided
what it calls “ROV support services” to the SPEARFISH.
The MSA
states that Delta will invoice Siem on a monthly basis and that
Siem will pay the undisputed portion of Delta’s invoices “within
thirty (30) calendar days of receipt of [Delta’s] invoice.”
§ 8.2, Rec. Doc. 34-2).
(MSA
Litigation ensued when Delta allegedly
was not paid, or was not fully paid, on one or more of its invoices.
Claiming that its work gave rise to a maritime lien for necessaries
under 46 U.S.C. § 31342, Delta sued the SPEARFISH in rem and Siem
in personam on July 28, 2016.
The Marshals Service arrested the
SPEARFISH the next day. Siem then entered a restrictive appearance
to defend against the in rem claims.
E(8).
See Fed. R. Civ. P. Supp. R.
The parties could not agree on the amount of security
required for the release of the SPEARFISH, prompting Siem to file
the instant motion under Rule E(5)(a) of the Supplemental Rules
for Admiralty and Maritime Claims. 1
(Rec. Doc. 27).
There are five invoices at issue.
At the time of the
SPEARFISH’s arrest, payment on only one of the invoices (Invoice
No. 16-01) was due, per the terms of the MSA, in the amount of
$99,010.00. 2
As to the other four invoices, 30 days had not yet
passed from the time Siem received the invoices; consequently,
these debts were not yet mature under the terms of the MSA when
the SPEARFISH was arrested. 3
1
Rule E(5)(a) states, “Whenever process of maritime attachment and
garnishment or process in rem is issued the execution of such process shall be
stayed, or the property released, on the giving of security, to be approved by
the court or clerk, or by stipulation of the parties, conditioned to answer the
judgment of the court or of any appellate court. The parties may stipulate the
amount and nature of such security. In the event of the inability or refusal of
the parties so to stipulate the court shall fix the principal sum of the bond
or stipulation at an amount sufficient to cover the amount of the plaintiff's
claim fairly stated with accrued interest and costs; but the principal sum shall
in no event exceed (i) twice the amount of the plaintiff's claim or (ii) the
value of the property on due appraisement, whichever is smaller. The bond or
stipulation shall be conditioned for the payment of the principal sum and
interest thereon at 6 per cent per annum.”
2 Siem paid a portion of this invoice ($372,348.00) but disputes the balance
of $99,010.00.
3 One invoice was due on August 5.
Another invoice is due on August 27 and
two others are due on August 30.
2
Siem argues that the Court should only consider Invoice No.
16-01 when setting the amount of security, because it represents
the only maritime lien that could be validly enforced at the time
the SPEARFISH was arrested.
associated
with
the
four
Siem contends that the maritime liens
other
unenforceable at the time of arrest.
invoices
were
inchoate
and
Siem further argues that by
arresting the SPEARFISH for charges not yet due, Delta has waived
any potential maritime lien for those charges. Delta, on the other
hand, argues that its maritime liens were enforceable the moment
the necessary service was provided to the SPEARFISH, and therefore
security should be based on the total amount owed on all of the
invoices, which it calculates to be $870,193.01.
Delta urges that
while Siem may have a contractual defense that four of the five
invoices
are
premature,
that
personam claims against Siem.
defense
only
relates
to
the
in
Delta claims that the SPEARFISH’s
in rem liability is rooted in statute, not contract, and is
independent of the Siem’s in personam liability and defenses to
same pursuant to the concept of vessel personification.
As will be explained below, the Court ultimately agrees with
Delta’s conclusion. However, the Court does not agree with Delta’s
blanket proposition that a necessaries provider may enforce a
maritime lien (i.e., arrest a vessel) from the moment the necessary
service or supply is rendered, notwithstanding a promise by the
provider that the debt is not due until sometime in the future.
3
In A.L. Veverica v. Drill Barge Buccaneer No. 7, 488 F.2d 880 (5th
Cir. 1974), a plaintiff asserted a maritime lien for salvage and
arrested the vessel one month after performing the service, despite
agreeing that payment was not due until the vessel owner received
insurance proceeds or one year had passed.
The court held that
“the remedies accorded by the [maritime] lien were suspended until
payment was due” and the salvor “had no right during the suspension
period to seize the vessel.”
Id. at 882.
It relied in part on
cases from the 19th century which “recognized that failure to honor
an agreed period of credit was a defense to an in rem proceeding.
[Those cases] permitted liens subject to an extension of credit,
but they treated them as inchoate, remediless liens until the
credit periods expired.”
Id. at 884.
In Pan American Bank of
Miami v. Oil Screw Denise, the Fifth Circuit held that a maritime
lien for vessel repairs attached the moment the vessel left the
repair yard with the bill unpaid, but this did not necessarily
mean the lien was enforceable at that time:
We conclude that the lien attached when the
[vessel] left the custody of Tracor with its repair bill
unpaid. That arrangements for subsequent payment may
have been made is material to the time at which the lien
might be enforced, but not to when it comes into being.
From the time the [vessel] left Tracor’s yard Tracor had
a lien. That there may have been a credit arrangement
making enforcement of the lien premature would not belie
existence of the lien.
4
613 F.2d 599, 602 (5th Cir. 1980) (emphasis added). 4
In a more
recent decision, the Fifth Circuit made clear in a case involving
breach of a charter party that the point at which a maritime lien
attaches and the point at which it becomes enforceable are not
necessarily the same.
See Bank One, Louisiana v. Mr. Dean MV, 293
F.3d 830, 834 (5th Cir. 2002) (“Even though the lien attaches at
the beginning of the venture, the inchoate lien cannot permit suit
against the vessel in rem until ‘perfected by a breach of the
charter.’”); see also id. at 838 (“The maritime lien attaches when
the
cargo
is
loaded
or
the
chartered
vessel
delivered,
and
continues when the debt perfects (or ‘vests’) the power to later
sue the vessel in rem. . . .
When the debt arises, what ‘arises’
is not the lien itself but rather the right to sue in rem.”).
The Court interprets the above authorities as laying out a
general rule (which, as will be seen, is not without exception)
for a maritime lien for necessaries, to wit: A maritime lien
attaches when the necessary good or service is provided, but the
lien typically will remain inchoate and may not be enforced (i.e.,
the vessel may not be arrested) until the debt has matured per the
terms of the agreement (if any). This interpretation is consistent
4
It is important to note that Oil Screw Denise concerned vessel repair,
which is expressly listed among the “necessaries” that will support a maritime
lien under Federal Maritime Lien Act. See 46 U.S.C. § 31301(4). One of the
ways Delta attempts to distinguish Buccaneer No. 7 is on the grounds that the
case concerned a salvage lien rather than a necessaries lien. Oil Screw Denise
undercuts this argument.
5
with a basic purpose of the necessaries lien: “to provide security
for a claim while permitting the ship to proceed on her way in
order to earn the freight or hire necessary to pay of the claim.”
Robert Force, Fed. Judicial Ctr., Admiralty and Maritime Law 184
(2d ed. 2013); see also Equilease Corp. v. M/V Sampson, 793 F.2d
598, 602 (5th Cir. 1986) (en banc); Buccaneer No. 7, 488 F.2d at
883 (“The very purpose of maritime liens is to encourage necessary
services to ships whose owners are unable to make contemporaneous
payment. In order to preserve this source of credit, and in order
to facilitate ordinary and reasonable commercial practices, we
align ourselves with those early cases which held that credit of
a duration consistent with the lien does not waive the lien, but
merely suspends the remedy on the lien until its expiration.”
(citation omitted)). 5
Nevertheless,
the
Court
concludes
that
given
the
circumstances surrounding this case it is appropriate to base the
amount of security on the total amount of maritime liens that have
attached to the SPEARFISH, including those securing debts that had
not yet matured at the time of arrest.
The circumstances the Court
5 As to Delta’s reliance on the concept of vessel personification, and to
the extent that argument is not completely foreclosed by the authorities already
cited, the Court adds that Delta’s blanket proposition regarding lien
enforcement stretches the concept beyond its limits. Cf. Bank One, 293 F.3d at
832 n.2 (acknowledging Professors Gilmore and Black’s critique that the “fiction
of the ship’s personality has never been much more than a literary them.”);
Grant Gilmore & Charles L. Black, Jr., The Law of Admiralty 586 (2d ed. 1975)
(“The law of maritime liens has been plagued by . . . an overdose of theory and
a failure to abide by Justice Holmes’ admonition that general propositions do
not decide concrete cases.”); id. at 589-90, 613-16.
6
refers to are: (1) at the time the SPEARFISH was arrested, one of
the invoices was due, meaning that arrest was valid at that time
with respect to at least one of the invoices; (2) since April 2016,
the SPEARFISH has been arrested by five different plaintiffs, not
including Delta; 6 (3) according to an affidavit by Delta’s Chief
Financial Officer, Siem told Delta on July 27, 2016—the day before
Delta filed this lawsuit—that Siem intended to take the SPEARFISH
out of the area to avoid further arrests (Rec. Doc. 33-1 ¶ 27);
and (4) the invoices that are not yet due will be due by, at the
latest, the end of this month.
The second and third circumstances
are, in the Court’s view, particularly significant.
Notably, there are significant distinctions between this case
and Buccaneer No. 7 and Oil Screw Denise, both discussed above.
In Buccaneer No. 7, the holder of the inchoate salvage lien was
the first party to arrest the vessel, which then prompted lowerranking lien holders to intervene and assert their liens.
In a
footnote, however, the circuit indicates that it might have reached
a different conclusion regarding the enforceability of the salvage
lien had the lower-ranking lienors precipitated the arrest.
F.2d at 884 n.5.
488
The fact that the SPEARFISH has recently been
arrested by other lien holders before Delta instituted this action
appears to bring this matter within the carve out contemplated in
6
C.A. Nos. 16-3603, 16-4302, 16-7722, 16-13305, 16-13469.
7
Buccaneer No. 7.
Furthermore, considering that in rem arrest is
the first step toward judicial sale, which would wash the vessel
of all maritime liens, see 46 U.S.C. § 31326; Bank One, 293 F.3d
at 832, it appears sensible to permit a lien holder to enforce a
lien that has attached but not fully ripened once other parties
have placed the vessel under arrest.
Oil Screw Denise also stops
short of establishing an absolute and unyielding rule for maritime
lien enforcement.
In that case a term in a ship mortgage made it
an act of default if the vessel owner permitted a lien to be placed
on the vessel.
Oil Screw Denise, 613 F.2d at 601.
The bank
arrested the vessel, arguing that the vessel owner defaulted when
it permitted a maritime lien for repairs to attach.
the repair yard to intervene and assert its lien.
This prompted
On appeal, the
vessel owner argued that the mortgage was not in default when the
bank arrested the vessel, because the vessel owner had arranged
for an extension of credit from the repair yard.
The court merely
ruled that the repair lien had attached when the vessel left the
repair yard with an unpaid bill and, consequently, the mortgage
was in default.
Although the court noted that the extension of
credit “is material to the time at which the lien might be
enforced,” it did not explicitly hold that the repair lien was
premature or unenforceable when the repair yard intervened.
Id.
at 602. In fact, the circuit left intact the district court’s
judgment in favor of the repair yard against the vessel in rem,
8
possibly indicating that the repair lien could be enforced, despite
the unexpired credit period, once the bank arrested the vessel.
See id. at 600.
this case.
Therefore, Oil Screw Denise also does not control
Given that there is no case directly on point from the
Fifth Circuit, the Court notes that Dresdner Bank Ag v. M/V Olympia
Voyage, 465 F.3d 1267 (11th Cir. 2006), supports Delta’s position.
For
these
reasons,
the
Court
concludes
that
under
the
circumstances of this case, it is appropriate to base the amount
of security on all the unpaid invoices, not just the ones due at
the time the SPEARFISH was arrested.
granted
Delta’s
request
that
Accordingly, the Court has
security
be
set
at
125%
$870,193.01, or $1,087,741.26.
New Orleans, Louisiana, this 10th day of August, 2016.
______________________________
United States District Court
9
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