United States: Legal position of jurisdiction following the collapse of OW Bunkers

This information is part of a wider article which offers a broad overview of the legal position across jurisdictions following the collapse of OW Bunkers. View the complete article or alternative jurisdictions.

Leading Case

Lake Charles Stevedores, Inc. v. PROFESSOR VLADIMIR POPOV MV, 199 F.3d 220 (5th Cir. 1999)

Summary of legal position

The bankruptcies of O.W. Bunker & Trading A/S and Bunker International led to numerous interpleader actions being filed, in particular before the US Court of Appeals for the Fifth Circuit (Texas and Louisiana) and the US Court of Appeals for the Second Circuit (New York).

The common issue among these cases is whether a maritime lien may be asserted by a physical supplier of necessaries (i.e. bunkers) to a vessel.
The Commercial Instrument and Maritime Liens Act (the ‘CIMLA’) states that a person who provides necessaries; (1) to a vessel; (2) on the order of the owner, or a person authorized by the owner, has a maritime lien against the vessel. 46 U.S.C. § 31342(a).

The Fifth Circuit in Lake Charles Stevedores, Inc. v. PROFESSOR VLADIMIR POPOV MV, 199 F.3d 220 (5th Cir. 1999) formulated the following test, which has been generally accepted by multiple federal courts, to determine whether a physical supplier may assert a maritime lien where there is no direct contract, but a chain of contracts.

To determine whether a party was authorized to procure necessaries on behalf of a vessel, courts look to: (1) the “general contractor/subcontractor” line of cases; and (2) the “middleman” line of cases.

(1) The general contractor (the bunker supplier) is entitled to a maritime lien against the vessel even if it does not actually deliver the necessaries, provided, they can demonstrate that “an entity authorized to bind the ship controlled the selection of the subcontractor or its performance.”

(2) The ultimate deliverer of necessaries may be able to obtain a maritime lien. The test is not whether an intermediary can be expected to supply the necessaries itself that distinguishes instances in which the actual suppliers have liens, but it is rather the nature of the relationship between each pair of entities that are involved in the transaction at issue (e.g., agent v. independent contractor).”

Whether a claim falls within either the “general contractor/subcontractor” or the “middleman” line of cases is often a difficult fact-intensive enquiry.

Valero Mktg. & Supply Co. v. M/V Almi Sun, IMO No. 9579535, Civ. A. No. 14-2712, 2016 WL 475905 (E.D. La. Feb. 8, 2016) addressing the Lake Charles issues, is now on appeal to the Fifth Circuit. Due to the numerous O.W. Bunker filings, the Valero Marketing case has garnered significant interest, which includes the filing of several amicus briefs and presents an opportunity for the Fifth Circuit to either reaffirm the Lake Charles decision or to provide substantive changes to the law governing a physical supplier’s right to assert a maritime lien.

Contributing Authors

Michael J. Wray/Brandon K. Best – Legge Farrow Kimmitt McGrath & Brown LLP, Houston, Texas

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