The Maritime Litigation Roundup is published by Seward & Kissel LLP and covers decisions of interest in judicial, administrative, or arbitral bodies as well as notable regulatory or other newsworthy developments in the space. For any suggestions on future coverage or should you like more information about the matters addressed, please contact Brian P. Maloney at maloney@sewkis.com. Special thanks to Carmella O’Hanlon for her contributions to this month’s roundup.
This month’s roundup focuses on what constitutes a “necessary” under the Commercial Instruments and Maritime Liens Act (“CIMLA”), which provides a statutory lien to those who provide necessaries to a vessel on the order of the owner or a person authorized by the owner. In an opinion issued April 12, 2022, the Fifth Circuit Court of Appeals in Central Boat Rentals, Inc. et al v. M/V Nor Goliath reiterated a narrow construction of CIMLA and declined to recognize what it described as “indirect benefits” to a platform decommissioning project as sufficient to constitute “necessaries” to the vessel itself, and establish a maritime lien under the circumstances presented in that case.
The Parties
- Epic Companies, L.L.C. (“Epic”) was a general contractor that decommissioned oil platforms in the Gulf of Mexico. Epic would subcontract with the owners of various vessels and suppliers to complete its decommissioning projects.
- Defendant-Appellee, the M/V Nor Goliath (the “Vessel”), is a vessel equipped with a crane to perform heavy lifts for construction and platform decommission projects.1
- Intervenor-Appellants, Central Boat Rentals, Incorporated; Global Towing Service, L.L.C.; Offshore Towing, Incorporated; McAllister Towing of New York, L.L.C.; and Curtin Maritime Corporation (collectively, the “Tow Companies”), were the owners of tugboats that were used to transport barges to and from the Vessel during the decommissioning project.
Background
- The Vessel was hired and chartered by Epic to lift components of an abandoned oil platform and place them on barges. Epic also hired barges transported to and from the Vessel by tugboats owned by the Tow Companies.
- In August 2016, Epic filed for bankruptcy – leaving the Tow Companies and various other entities without payment for the goods and services they provided for the platform decommissioning project.
- Consequently, the Tow Companies intervened in an action pending in the Southern District of Mississippi seeking to assert and enforce in rem maritime liens under CIMLA against the Vessel.
- However, following cross-motions for summary judgment, the district court ruled in favor of the Vessel holding that the services rendered by the tugboats did not create a lien.
Necessaries
- Under CIMLA, “necessaries” is defined to include “repairs, supplies, towage, and the use of a dry dock or marine railway.” The Fifth Circuit, in prior precedent, has held that necessaries “includes most goods or services that are useful to the vessel, keep her out of danger, and enable her to perform her particular function.” Put another way, necessaries are those items which are “useful to vessel operations and necessary to keep the ship going.”
- When determining whether a particular good or service constitutes a necessary, the Fifth Circuit looks to the “particular function” and requirements of a ship to determine what is a necessary for that ship.
The Fifth Circuit Holds that the Tow Companies’ Services Were Not Necessaries Within the Meaning of the CIMLA
- As an initial matter, the Fifth Circuit noted that it applies the provisions of the CIMLA stricti juris to “ensure that maritime liens are not lightly extended by construction, analogy, or inference.”
- The Tow Companies put forth several arguments in support of their claim that their towing services constituted necessaries to the Vessel, all of which were rejected by the Fifth Circuit:
- The Tow Companies first argued that the Vessel’s function was the entirety of the decommissioning process and therefore every good or service used to decommission the oil platform was a “necessary” to the Vessel.
- The Fifth Circuit determined that the decommissioning process was the goal and function of Epic, not the Vessel. In the case, the panel determined that the Vessel’s function was more circumscribed, namely, to lift platform components and place them on the barges. Therefore, necessaries for the Vessel were viewed as only those goods and services relating to this particular function.
- The Tow Companies next argued that their services constituted necessaries because they provided barges to the Vessel, and the barges were necessary equipment for the function of the vessel.
- The Fifth Circuit rejected this argument as well because, in accordance with prior precedent, necessaries are goods or services that are provided for use by the vessel itself.
- The Fifth Circuit observed that because the barges did not help the Vessel’s crane raise and lower platform components, the Vessel did not actually “use” the barges.
- Therefore, the Tow Companies’ supplying of the barges was deemed not to be a service necessary to the Vessel’s function.
- Lastly, the Tow Companies argued that their services of towing the barges provided a necessary to the decommissioning project as a whole, and therefore the Vessel indirectly benefited.
- In rejecting this argument, the Fifth Circuit noted that recognizing indirect benefits as sufficient to establish a maritime lien “misapprehends the concept of liens for necessaries.”
- The Fifth Circuit noted that mutually beneficial conduct is expected when multiple vessels and services are retained by a general contractor. Thus, every ship in Epic’s fleet indirectly benefited from the barges being towed as well as from the lifting and loading by the Vessel.
- The Fifth Circuit observed that mutually beneficial conduct alone cannot give rise to a maritime lien under CIMLA, “otherwise multi-ship operations would give rise to an untenable situation where all the ships in a fleet would have liens on the other.”
1 "Decommissioning" refers to the process of deconstructing and salvaging offshore platforms for oil and gas wells that are no longer productive. See 30 C.F.R. §§ 250.1700-1704.