In Central Boat Rentals, Inc. et al. v. M/V NOR GOLIATH, the Fifth Circuit once again considered what was a “necessary” provided to a vessel that gave rise to a maritime lien under the Commercial Instruments and Maritime Liens Act (CIMLA).
Maritime suppliers should check that when providing goods and services to a vessel that they are “necessaries” for the use of that vessel and not another or some other part of a project. If they are not, alternative arrangements should be considered for guaranteeing payment since the maritime suppliers may not have the maritime liens they thought they did.
An Epic Tale
The Fifth Circuit case arose out of the bankruptcy of Epic Companies LLC (Epic), a general contractor that decommissioned oil platforms in the Gulf of Mexico. Such operations required a large number of subcontractors, including Epic chartering the M/V NOR GOLIATH, a heavy lift vessel, which was used to lift oil platform components onto barges which were then towed away by tug boats.
Epic failed to pay many of its subcontractors, and those that had provided necessaries to the M/V NOR GOLIATH looked to the vessel for payment, asserting lien rights under CIMLA and arresting the vessel in Gulfport, Mississippi.
The tug boat companies claimed that they had provided “necessaries” to the NOR GOLIATH by towing away the barges onto which that vessel had lifted decommissioned oil platforms. The tug boats argued that the “NOR GOLIATH’S particular function as the entirety of the decommissioning process, therefore every good or service used to decommission an oil platform was a necessary to the NOR GOLIATH.” The Fifth Circuit disagreed, noting that Epic had chartered a fleet of vessels for the decommissioning of which the NOR GOLIATH was but one.
The Fifth Circuit further referenced its recent decision in Martin Energy v. Bourbon Petrel, in which it noted that a maritime lien can only arise when the “good or service was provided for use by the vessel itself.” In Martin Energy, the Fifth Circuit held that no maritime lien was created against a vessel that was transporting fuel to another vessel and essentially serving as a mobile gas station. The NOR GOLIATH did not “use” the barges that were towed away and the tug boat companies did not provide a service necessary to the NOR GOLIATH’s function.
The claim that the tug boats provided a necessary because without their services moving the loaded barges the decommissioning would have ground to a halt was also rejected by the Fifth Circuit, stressing that whatever “indirect benefit” the NOR GOLIATH received from the towing of the barges still did not give rise to a maritime lien against that vessel. “Mutually beneficial conduct alone cannot give rise to a maritime lien.”
Lastly, the tug boat companies claimed that they had protected the NOR GOLIATH from the hazards of the sea by removing the platforms that would otherwise have been suspended by the vessel’s crane. The Fifth Circuit rejected such claim finding that no evidence had been presented to support the claim.
A Narrow Lien
The Fifth Circuit characterized the arguments of the towing companies as seeking to expand reach of CIMLA. But is that fair? Maritime companies frequently provide goods and services to vessels on credit but with the knowledge that they have a maritime lien against the vessel in the event that they are not paid.
The tug boat companies clearly thought they were providing (at the very least) ancillary services to the NOR GOLIATH, albeit at the behest of the charterer of that vessel, Epic. However, since these services were not for the direct benefit of the NOR GOLIATH, the tug boat companies had no maritime lien against the vessel. The situation was perhaps even more frustrating for the fuel supplier in Martin Energy where the fuel supplier knew only that it was providing fuel to supply boats, but not that this fuel was not for consumption by those vessels but being taken to others.
The bottom line for maritime suppliers: check that you are suppling a “necessary” to make sure you will have a lien against the vessel; otherwise, look for alternative methods of guaranteeing payment and limiting credit.