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ING Bank N.V. v. M/V Temara

United States Court of Appeals, Second Circuit

June 13, 2018

ING Bank N.V., Plaintiff-Intervenor-Defendant-Appellant,
v.
M/V TEMARA, IMO No. 9333929, her engines, tackle, equipment, furniture, appurtenances, etc., in rem, Defendant-Intervenor-Defendant- Appellee, CEPSA International B.V., Intervenor-Plaintiff-Appellant, CEPSA Panama, S.A., Intervenor-Plaintiff, O.W. Bunker & Trading A/S, in personam, Intervenor-Defendant.

          Argued: March 15, 2018

          Appeal from the United States District Court for the Southern District of New York Katherine B. Forrest, District Judge, Presiding.

         The assignee of a maritime fuel contract supplier and the physical supplier assert competing maritime lien claims arising from the delivery of fuel to a vessel. To effect actual delivery of the fuel, the contract supplier subcontracted with an intermediary, who re-subcontracted with the physical supplier. After delivery of the fuel but before any party received payment, the contract supplier and the intermediary declared bankruptcy. Both the assignee of the contract supplier and the physical supplier asserted maritime liens for the unpaid fuel against the vessel. The District Court denied both maritime liens and sua sponte entered summary judgment in favor of the vessel. The assignee of the contract supplier and the physical supplier appealed. We AFFIRM IN PART, VACATE IN PART, and REMAND for further proceedings consistent with this opinion.

          J. Stephen Simms and Casey L. Bryant, Simms Showers LLP, Baltimore, MD., for CEPSA International B.V.

          James D. Bercaw and Robert J. Stefani, King, Krebs & Jurgens, PLLC, New Orleans, LA, and Bruce G. Paulson and Brian P. Maloney, Seward & Kissel LLP, New York, N.Y., for ING Bank N.V.

          James H. Power and Marie E. Larsen, Holland & Knight LLP, New York, N.Y., for M/V TEMARA, IMO No. 9333929, her engines, tackle, equipment, furniture, appurtenances, etc.

          Before: PARKER, WESLEY, and LIVINGSTON, Circuit Judges.

          BARRINGTON D. PARKER, CIRCUIT JUDGE.

         This appeal requires us to decide which parties are entitled to a maritime lien under the Commercial Instruments and Maritime Liens Act ("CIMLA"), 46 U.S.C. § 31301 et seq.

         In 2014, the charterer of a vessel contracted with a supplier to buy bunkers (marine fuel). To fulfill its obligation, the contract supplier subcontracted with an intermediary, who, in turn, subcontracted with another entity, the physical supplier, who then delivered the bunkers. After the bunkers were delivered, but before anyone was paid, the contract supplier and the intermediary entered bankruptcy. In order to get paid, the assignee of the contract supplier and the physical supplier asserted competing maritime liens against the vessel. We must decide which party was entitled to do so.

         The assignee of the contract supplier and the physical supplier cross-moved for summary judgment. The United States District Court for the Southern District of New York (Katherine B. Forrest, Judge) concluded that neither the contract supplier (and, thus, its assignee) nor the physical supplier were entitled under CIMLA to maritime liens and denied their motions for summary judgment. Without providing notice to the parties, the District Court then sua sponte entered summary judgment in favor of the vessel.

         We affirm in part, vacate in part, and remand for further proceedings. We agree with the District Court that the subcontractor physical supplier was not entitled to a maritime lien because it did not provide the bunkers on the order of an entity specified in CIMLA. However, we disagree with the District Court that the bunker contract supplier-and, thus, its assignee-was not entitled to seek a maritime lien. A contractor is entitled to assert a maritime lien under CIMLA when it contracts with an entity specified in the statute for the delivery of necessaries and those necessaries are delivered pursuant to that arrangement, even if by a subcontractor. We also conclude that the District Court's sua sponte entry of summary judgment was error.

         BACKGROUND[2]

         This appeal flows from the collapse of O.W. Bunker and Trading A/S ("O.W. Denmark") and its international subsidiaries (collectively with its international subsidiaries, the "O.W. Bunker Group"), a world-wide operation which was in the business of supplying bunkers to ships operating in international commerce. Following the collapse of the O.W. Bunker Group, many of its customers were unsure where to direct payment and, because they faced competing claims from various unpaid parties, those customers were concerned that their vessels would be subject to arrest while the payment issues were sorted out.

         CIMLA provides to a specific class of creditors a special type of statutory lien-a maritime lien-as security for a discrete category of debts. Under CIMLA, a party who provides necessaries (such as bunkers) to a vessel is entitled to assert a maritime lien. 46 U.S.C. § 31342. A maritime lien grants a provider of necessaries a suite of powerful rights: the right to arrest the vessel, to have it sold, and to be paid from the proceeds. Maritime liens promote maritime commerce by providing additional recourse-beyond in personam claims against counterparties-by enabling the assertion of a lien directly against the vessel, thereby encouraging the prompt payment of debts and the existence of a reliable market for the servicing and supplying of vessels, which are obviously essential to maritime commerce. Unpaid entities who have supplied necessaries but who do not qualify for maritime liens may have in personam claims. However, due to the complexities of international maritime commerce, collection on these claims can be considerably more problematic than is the case with maritime liens.

         The relevant chain of events began in October 2014 when Copenship Bulkers A/S ("Copenship"), the time-charterer of the M/V TEMARA (the "TEMARA, " or the "Vessel"), contracted with a contract supplier, O.W. Denmark, for the delivery of 400 metric tons of bunkers to the Vessel in Balboa, Panama. After receiving the order, O.W. Denmark issued a sales order to Copenship confirming the details of the sale. The confirmation lists O.W. Denmark as the "seller, " Copenship as the "buyer, " and CEPSA International B.V. ("CEPSA")[3] as the "supplier." The confirmation provided that "acceptance of the marine bunkers by the vessel . . . shall be deemed to constitute acceptance of the said general terms[.]" The confirmation reflected the agreed-upon price for the fuel-$536.00 per metric ton-and specified that payment would be due 30 days after delivery. The sales agreement between O.W. Denmark and the charterer was governed by the "OW Bunker Group Terms and Conditions of sale [sic] for Marine Bunkers Edition 2013" (the "O.W. Terms"). JA at 103-14. Clause L.4(a) of the O.W. Terms ("Clause L.4(a)") made them fluid by providing that:

These Terms and Conditions are subject to variation in circumstances where the physical supply of the Bunkers is being undertaken by a third party which insists that the Buyer is also bound by its own terms and conditions. In such circumstances, these Terms and Conditions shall be varied accordingly, and the Buyer shall be deemed to have read and accepted the terms and conditions imposed by the said third party.

Id. at 111.

         In the next step of the transaction, O.W. Denmark subcontracted with its subsidiary, O.W. USA, for the purchase of the bunkers. O.W. USA issued a sales order confirmation to O.W. Denmark, listing O.W. Denmark as the "buyer" and O.W. USA as the "seller." The confirmation reflected a price of $529.00 per metric ton and called for payment within 30 days of delivery.[4]

         In the third and final stage of the transaction, O.W. USA subcontracted with the physical supplier, CEPSA, for the actual delivery of the bunkers. CEPSA issued a confirmation to O.W. USA listing CEPSA as the "seller, " O.W. USA as the "buyer, " and reflecting a price of $526.00 per metric ton. O.W. USA then memorialized the transaction in its own confirmation. Neither confirmation referenced O.W. Denmark or the charterer of the Vessel, but both referenced the Vessel. CEPSA physically supplied the bunkers to the Vessel and CEPSA provided a bunker receipt that the Vessel's chief engineer signed and stamped with the names of the Vessel and its owner.

         Following delivery of the bunkers, each party in the contractual chain invoiced its respective counterparty, at different prices, reflecting a markup at each stage of the transaction: O.W. Denmark invoiced the charterer, Copenship, JA at 115 ($536 per metric ton); O.W. USA invoiced O.W. Denmark, JA at 130 ($529 per metric ton); and CEPSA invoiced O.W. USA, JA at 90 ($526 per metric ton). As the invoices came due, O.W. Denmark entered insolvency proceedings in Denmark, the O.W. Bunker Group collapsed, and the various O.W. Bunker Group entities then entered insolvency proceedings around the world.

         In December 2013, almost a year before the O.W. Bunker Group's collapse, ING Bank N.V. ("ING") and O.W. Denmark entered into a $700 million revolving credit agreement, funded by a syndicate of lenders, which provided working capital for the O.W. Bunker Group. ING contends that the credit agreement was secured by, among other things, an assignment of O.W. Bunker Group receivables from the bunker transactions it had ...


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