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U.S. Oil Trading LLC v. M/V Vienna Express

United States Court of Appeals, Second Circuit

December 19, 2018

U.S. OIL TRADING LLC, Plaintiff-Appellant,
v.
M/V VIENNA EXPRESS, her tackle, boilers, apparel, furniture, engines, appurtenances, etc., in rem, M/V SOFIA EXPRESS, her tackle, boilers, apparel, furniture, engines, appurtenances, etc., in rem, Defendants-Appellees, HAPAG-LLOYD AKTIENGESELLSCHAFT, as claimant to the in rem defendant M/V VIENNA EXPRESS, Third-Party-Plaintiff-Counter-Claimant-Counter-Defendant-Appellee,
v.
U.S. OIL TRADING LLC, Counter-Defendant-Third-Party-Cross-Defendant-Appellant, ING BANK N.V., Third-Party-Defendant-Counter-Claimant-Cross-Claimant-Appellee, O.W. BUNKER GERMANY GMBH, Third-Party-Defendant-Counter-Claimant-Appellee, O.W. BUNKER & TRADING A/S, CREDIT AGRICOLE CORPORATE & INVESTMENT BANK, a division or arm of Credit Agricole S.A., Third-Party-Defendants. HAPAG-LLOYD AKTIENGESELLSCHAFT, Plaintiff-Counter-Defendant-Appellee,
v.
U.S. OIL TRADING LLC, Defendant-Cross-Defendant-Appellant, O.W. BUNKER GERMANY GMBH, Defendant-Counter-Claimant-Appellee, ING BANK N.V., Defendant-Cross-Claimant-Counter-Claimant-Appellee, O.W. BUNKER & TRADING A/S, CREDIT AGRICOLE S.A., O.W. BUNKER USA, INC., CREDIT AGRICOLE CORPORATE & INVESTMENT BANK, Defendants.

          Argued: April 19, 2018

         Appeals by U.S. Oil Trading LLC ("USOT") from orders and May 2, 2017 partial final judgments of the United States District Court for the Southern District of New York, Valerie E. Caproni, Judge, rejecting claims by USOT that it was entitled to assert maritime liens against vessels, owned or chartered by Hapag-Lloyd Aktiengesellschaft ("Hapag"), to which USOT, pursuant to arrangements with and among other entities, physically supplied marine fuel for which USOT was not paid following the bankruptcies of the entities involved in the supply contracts with USOT or Hapag. The district court denied USOT's motions for summary judgment on its maritime-lien claims and entered partial final judgments dismissing those claims, ruling that the claims were governed by the Commercial Instruments and Maritime Liens Act ("CIMLA"), 46 U.S.C. § 31301 et seq., and that physical suppliers who were subcontractors were not entitled to maritime liens because their fuel sales were not made "on the order of the owner or a person authorized by the owner" of the vessel, id. § 31342(a). See Clearlake Shipping PTE Ltd. v. O.W. Bunker (Switzerland) SA, 239 F.Supp.3d 674 (S.D.N.Y. 2017). On appeal, USOT contends principally that the district court erred in finding it was not entitled to a maritime lien in the absence of a contractual or agency relationship with the vessels or with an authorized entity specified in CIMLA, and that USOT was entitled to the liens because Hapag's purchase orders specified that the physical supplier of the fuel was to be USOT. We conclude that purchase orders and admissions by Hapag in these actions permit a conclusion that Hapag directed that USOT be the subcontractor to supply the fuel, thereby bringing USOT within an established exception that allows maritime liens to be asserted by subcontractors whose selection was controlled or directed by the vessel's owner/charterer. We therefore vacate the judgments and remand for trial on the issue of whether Hapag directed that USOT be the physical supplier.

         Vacated and remanded.

          JOHN R. KEOUGH, New York, New York (Casey D. Burlage, Corey R. Greenwald, George G. Cornell, Clyde & Co US, New York, New York, on the brief), for U.S. Oil Trading LLC.

          GINA M. VENEZIA, New York, New York (Michael Fernandez, Michael J. Dehart, Freehill Hogan & Mahar, New York, New York, on the brief), for M/V VIENNA EXPRESS and Hapag-Lloyd Aktiengesellschaft.

          BRUCE G. PAULSEN, New York, New York (Brian P. Maloney, Seward & Kissel, New York, New York, on the brief), for ING Bank N.V.

          JUSTIN M. HEILIG, New York, New York (Hill Rivkins, New York, New York; Andrew B. Kratenstein, Darren Azman, McDermott Will & Emery, New York, New York, on the brief), for O.W. Bunker Germany GmbH.

          Before: KEARSE, CABRANES, and LOHIER, Circuit Judges.

          KEARSE, CIRCUIT JUDGE.

         In these appeals, U.S. Oil Trading LLC ("USOT" or "U.S. Oil")-the plaintiff in No. 17-0922, and an interpleader defendant in No. 17-0931-challenges (a) orders entered in the United States District Court for the Southern District of New York, Valerie E. Caproni, Judge, denying USOT's motions for summary judgment on its claims of entitlement to maritime liens for physically supplying marine fuel ("bunkers") to certain vessels owned or chartered by interpleader plaintiff Hapag-Lloyd Aktiengesellschaft ("Hapag"), and (b) partial final judgments entered on May 2, 2017, dismissing USOT's maritime-lien claims. Pursuant to the Commercial Instruments and Maritime Liens Act ("CIMLA"), 46 U.S.C. § 31301 et seq., which permits a maritime lien to be asserted by "a person providing necessaries to a vessel on the order of the owner or a person authorized by the owner," id. § 31342(a)-see also Hapag-Lloyd Aktiengesellschaft v. U.S. Oil Trading LLC, 814 F.3d 146, 151 n.13 (2d Cir. 2016) ("[f]or the purposes of § 31342, bunkers are 'necessaries'")-the district court denied USOT's motions for summary judgment and entered the partial judgments dismissing USOT's claims for liens, ruling that USOT had not provided the fuel to the vessels on the order of the owner or a person authorized by the owner to place such an order. On appeal, USOT contends that the district court erred in finding it was not entitled to maritime liens in the absence of a direct contractual or agency relationship with the vessels or with an authorized entity specified in CIMLA, arguing principally that it was entitled to the liens because Hapag's purchase orders specified that the physical supplier of the fuel was to be USOT. For the reasons that follow, we conclude that purchase orders and admissions by Hapag in these actions permit a finding that Hapag directed that USOT be the subcontractor to supply the fuel, thereby bringing USOT within an established exception that allows maritime liens to be asserted by subcontractors whose selection was controlled or directed by the vessel's owner/charterer or authorized agent. We therefore vacate the judgment and remand for trial on the issue of whether Hapag directed that USOT be the physical supplier.

         I. BACKGROUND

         The present cases are among many that have their origin in the financial collapse of O.W. Bunker & Trading A/S ("O.W. Denmark") and its subsidiaries and affiliates (collectively the "O.W. Bunker Group"), a global network of traders and suppliers of bunkers. See generally ING Bank N.V. v. M/V TEMARA, 892 F.3d 511, 515 (2d Cir. 2018) ("Temara"); see also Chemoil Adani Pvt. Ltd. v. M/V MARITIME KING, No. 16-3944, 2018 WL 3359609 (2d Cir. July 10, 2018) ("Chemoil"); Aegean Bunkering (USA) LLC v. M/T AMAZON, 730 Fed.Appx. 87 (2d Cir. 2018) ("Aegean"); O'Rourke Marine Services L.P. v. M/V COSCO HAIFA, 730 Fed.Appx. 89 (2d Cir. 2018) ("O'Rourke"). Except as indicated below, the following facts, drawn from statements submitted by various parties pursuant to Rule 56.1 of the Local Rules for the Southern District of New York ("Rule 56.1 Statements"), are not in dispute.

         A. USOT's Delivery of Bunkers to Hapag Vessels

         In the fall of 2014, Hapag was the owner and operator of the M/V VIENNA EXPRESS and the M/V SOFIA EXPRESS, and was the time charterer of the M/V SEASPAN HAMBURG and the M/V SANTA ROBERTA (collectively the "Subject Vessels" or "Vessels"). The O.W. Bunker Group, an international operation that both supplied bunkers to ships and arranged the supply of bunkers by others, included O.W. Denmark, O.W. Bunker Germany GmbH ("O.W. Germany" or "OWG"), and O.W. Bunker USA Inc. ("O.W. USA"). USOT was in the business of physically supplying bunkers to oceangoing vessels.

         In September-October 2014, Hapag, upon receiving fuel replenishment requests from the masters of the respective Vessels, solicited fuel supply bids from a number of potential counterparties. In response, O.W. Germany and several others submitted bids. O.W. Germany, to do so, had requested quotes from its affiliate O.W. USA, which was in charge of the O.W. Bunker Group's bunker procurement in the Americas. O.W. USA, to obtain the necessary information, had contacted physical suppliers, including USOT. For two of the Hapag Vessels, O.W. Germany submitted several bids, each bid describing fuel to be provided by a different physical supplier; for each of the four Vessels, O.W. Germany submitted one bid that listed USOT as the physical supplier. Hapag analyzed the submitted responses in internal spreadsheets that set out for each bid the bidder, the price, details as to fuel quality, and the identity of the physical supplier.

         For each of the Subject Vessels, Hapag accepted the O.W. Germany bid that identified the physical supplier as USOT. For each contract, Hapag sent O.W. Germany a purchase order that stated that the supplier would be USOT. (See Hapag's Interpleader Complaint ¶ 20, Exhibit 2 ("SUPPLIER: U.S. OIL"); id. ¶ 23, Exhibit 3 (same); id. ¶ 26, Exhibit 4 ("SUPPLIER: U.S. Oil"); id. ¶ 30, Exhibit 5 (same).) After receiving the purchase orders, O.W. Germany sent Hapag sales order confirmations that listed the buyer as Hapag, the seller as O.W. Germany, and the supplier as USOT. (See Hapag's Response to USOT's 56.1 Statement ¶¶ 42-43, 74-75, 105-06, 136-37.)

         In order to fulfill its contracts with Hapag for the supply of bunkers to the Vessels, O.W. Germany then subcontracted to purchase the bunkers from O.W. USA. (See OWG's Rule 56.1 Statement and USOT's Response ¶¶ 36, 72, 103, 133; see, e.g., id. ¶ 39 (as to the SEASPAN HAMBURG, "on October 10, 2014, after entering into a contract with Hapag, . . . OW Germany advised . . . OW USA that OW Germany had sold to Hapag at a price of $534 per metric ton, and requested that OW USA purchase the bunker stem offered by USOT")).

         With respect to these fuel orders for the four Subject Vessels, USOT delivered the ordered bunkers in October 2014. USOT, on the premise that it had made the sales to O.W. Denmark, sent invoices to O.W. Denmark (O.W. Germany contends instead that USOT sold to O.W. USA); O.W. USA sent invoices to O.W. Germany; O.W. Germany sent invoices to Hapag. On November 7, 2014, O.W. Denmark entered bankruptcy; bankruptcy filings by other members of the O.W. Bunker Group followed. On November 6, Hapag had paid O.W. Germany for the bunkers delivered to the SANTA ROBERTA; O.W. Germany received no payments with respect to the other three Vessels. USOT has received no payments for the bunkers it supplied to any of the four Vessels.

         B. The District Court's Dismissal of USOT's Lien Claims

         Following the collapse of the O.W. Bunker Group, Hapag, faced with the prospect of competing in rem claims by USOT and by O.W. Germany or its lender-assignee, commenced its present interpleader action against USOT, O.W. Germany, O.W. Denmark, and others. Hapag provided security for the amounts due for the bunkers delivered to the Subject Vessels, in the form of a bond with respect to three of the Vessels and a letter of undertaking with respect to the fourth. Hapag requested a determination by the court as to which of the claimants was entitled to recover against the posted security, and a declaratory judgment that Hapag and the Vessels are discharged from all liability with respect to the supply of the bunkers. The court ordered that the interpleader funds would serve as a substitute res. See Clearlake Shipping PTE Ltd. v. O.W. Bunker (Switzerland) SA, 239 F.Supp.3d 674, 678 n.3 (S.D.N.Y. 2017) ("Clearlake").

         USOT commenced its present action in rem in the United States District Court for the Western District of Washington against the VIENNA EXPRESS and the SOFIA EXPRESS and commenced a similar in rem action in the Central District of California against the SEASPAN HAMBURG and the SANTA ROBERTA, seeking to assert maritime liens for the amounts due on the bunkers USOT had delivered to the Vessels. The action filed in Washington was transferred to the Southern District of New York (or "Southern District"); the other action is being held in abeyance in light of the numerous suits pending before several judges in the Southern District, see generally Clearlake, 239 F.Supp.3d at 678 ("24 interpleader cases [involving O.W. Bunker Group] . . . were pending before [Judge Caproni] as of June 30, 2015").

         Following consolidated discovery proceedings, the parties, at the request of the court, identified test cases for the efficient decision of significant legal issues with respect to the in rem claims. See generally id. at 678-79. To the extent pertinent to these appeals, USOT's present in rem action and Hapag's interpleader action were among those so identified; motions for summary judgment were filed by USOT and O.W. Germany, with each interested party (including Hapag) filing Rule 56.1 Statements as to allegations they disputed and facts they contended were undisputed.

         O.W. Germany, opposing USOT's lien claims, contended that USOT could not meet the CIMLA lien prerequisite that USOT show that it provided the bunkers to the Vessels "on the order of" an owner or a person authorized by the owner to order them, 46 U.S.C. § 31342(a). O.W. Germany asserted-and USOT agreed, to an extent-that USOT had no contract with Hapag or anyone authorized to act as Hapag's agent in the ordering of bunkers. USOT conceded that it did not enter into a contract with Hapag for the bunker sales at issue here (see, e.g., USOT's Rule 56.1 Statement and Hapag's Response ¶ 7), and that Hapag placed these fuel orders with O.W. Germany and did not contract with O.W. USA, or O.W. Denmark, or USOT (see USOT's Response to OWG's 56.1 Statement ¶¶ 26, 69, 100, 130).

         However, in response to O.W. Germany's Rule 56.1 Statement asserting that USOT had no "account or direct business relationship with Hapag in October 2014," USOT stated:

Admits that USOT did not have an account with Hapag, but denies that USOT did not have a direct business relationship with Hapag in October 2014. The undisputed record shows that Hapag, as the Vessels' owner or charterer, analyzed and compared the price and quality of the bunkers offered by USOT with the price and quality offered by other suppliers, and then selected USOT to deliver the bunkers to Hapag's Vessels. . . . Hapag specifically named USOT as the supplier of the bunkers on its . . . purchase orders, which Hapag prepared well before each delivery.

(USOT's Response to OWG's Rule 56.1 Statement ¶ 14 (emphases in original).) USOT also noted that "[t]he sales order confirmations prepared by O.W. Germany and sent to Hapag" for each delivery specified that the physical supplier would be "USOT." (Id.) For the same reasons, USOT also disputed O.W. Germany's assertion that "Hapag did not instruct OW Germany . . . to use USOT . . . for the supply of bunker fuel to [the relevant] vessels . . . and did not control the selection of a physical supplier," reiterating, inter alia, that Hapag in its purchase orders, and O.W. Germany in its sales confirmations, had specifically named USOT as the physical supplier for the bunkers ordered. (USOT's Response to OWG's Rule 56.1 Statement ¶ 19.)

         In addition, while USOT admitted that "Hapag never advised USOT" that O.W. Germany or O.W. USA would be acting as Hapag's agents for the bunker purchases (OWG's Rule 56.1 Statement and USOT's Response ¶ 31), USOT denied O.W. Germany's assertion that "Hapag never authorized or appointed OW Germany or OW USA as agents to order bunker fuel on Hapag's behalf" (USOT's Response to OWG's Rule 56.1 Statement ¶ 30). USOT stated that "[t]he undisputed record shows that O.W. Germany and O.W. USA were cloaked with at least implied authority while procuring the subject bunkers for Hapag's account." (USOT's Response to OWG's Rule 56.1 Statement ¶ 30 (citing evidence of discussions between USOT and O.W. USA).) USOT also argued that other entities with which it had contact-including Hapag's port coordinator Norton Lilly International, Inc. ("Norton Lilly"), which forwarded the Hapag bunker orders in emails to USOT, and the Vessels' masters or chief engineers who gave USOT receipts upon delivery of the bunkers-possessed at least implied or apparent authority to bind the Vessels with respect to orders of bunkers.

         USOT argued further that as it had physically supplied the fuel, the price of which was in the range of approximately $1.3-$1.5 million for each Vessel-and that as O.W. Germany was merely a middleman that could earn only a small fraction of the value of the fuel-USOT, ...


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