United States Court of Appeals

Fifth Circuit

FILED

September 19, 2003

Charles R. Fulbruge III

Clerk

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

 

No. 02-30250

 

EFFJOHN INTERNATIONAL CRUISE HOLDINGS, INC.; EFF-SHIPPING LTD.,

Plaintiffs-Appellants,

versus

A&L SALES, INC.; RELIABLE DISPOSAL CO., INC.; FRERET MARINE

SUPPLY; AMWEST SURETY INSURANCE CO.; SWISS REINSURANCE AMERICA

CORP.; COOPER/T SMITH STEVEDORING, INC.; CRESCENT TOWING, INC.;

MARINE MEDICAL UNIT, INC.; GEORGE OTT TRANSPORTATION, INC.;

CASTROL NORTH AMERICA, INC.; ADVANCE MARINE, INC.; 

SCHEURING SECURITY, INC.,

Intervenor Plaintiffs-Appellees,

versus

ENCHANTED ISLE MV, ETC.; ET AL.,

Defendants.

 

No. 02-30335

 

EFFJOHN INTERNATIONAL CRUISE HOLDINGS, INC.; ET AL.,

Plaintiffs,

A&L SALES, INC.; RELIABLE DISPOSAL CO., INC.; FRERET MARINE

SUPPLY; AMWEST SURETY INSURANCE CO.; SWISS REINSURANCE AMERICA

CORP.; COOPER/T SMITH STEVEDORING, INC.; CRESCENT TOWING, INC.;

MARINE MEDICAL UNIT, INC.; GEORGE OTT TRANSPORTATION, INC.;

CASTROL NORTH AMERICA, INC.; ADVANCE MARINE, INC.; 

SCHEURING SECURITY, INC.,

Intervenor Plaintiffs-Appellees,

versus

ENCHANTED ISLE MV, ETC.; ET AL.,
Defendants,

CUSIMANO PRODUCE CO.,

Movant-Appellant.

 

No. 02-30360

 

FRERET MARINE SUPPLY, a division of FRERET HARDWARE, INC.,

Plaintiff-Appellee,

NOEL NOLASCO; EDUARDO SEDO; SERGIY BILOGOLOVY; 

OLEKSANDR ZHUKOV; YURIY PALAMARCHUK; ET AL., 

Intervenor Plaintiffs-Appellees,

versus

ENCHANTED CAPRI MV, Etc.

Defendant,

AMWEST SURETY INSURANCE CO.; SWISS REINSURANCE AMERICA CORP.,

Intervenor Plaintiffs-Appellants.

 

No. 02-30414

 

EFFJOHN INTERNATIONAL CRUISE HOLDINGS, INC.; ET AL.,

Plaintiffs,

EFFJOHN INTERNATIONAL CRUISE HOLDINGS, INC.,

Plaintiff-Appellee,
* District Judge for the Eastern District of Louisiana,

sitting by designation.

3

A&L SALES, INC.; RELIABLE DISPOSAL CO., INC.; 

FRERET MARINE SUPPLY,

Intervenor Plaintiffs-Appellees,

versus

AMWEST SURETY INSURANCE CO.; SWISS REINSURANCE AMERICA CORP.;

Intervenor Plaintiffs-Appellants,

versus

ENCHANTED ISLE MV, ETC.; ET AL.,

Defendants.

Appeals from the United States District Court

for the Eastern District of Louisiana

Before SMITH and BARKSDALE, Circuit Judges, and DUPLANTIER,

District Judge.*

RHESA H. BARKSDALE, Circuit Judge:

These consolidated interlocutory appeals are from admiralty

proceedings that arise out of the bankruptcy of New Commodore

Cruise Lines and its vessel-owning affiliates and concern maritime

lien claims by creditors of two Commodore cruise ships. Primarily

at issue are: (1) whether denying intervention by two maritime

lien claimants for one of those two vessels constituted an abuse of

discretion; and (2) whether the surety for a passenger vessel

surety bond has a maritime lien on both vessels. AFFIRMED.
4

I.

In December 2000, Commodore and its vessel-owning affiliates

filed for Chapter 11 bankruptcy in the Southern District of

Florida. Two of Commodore’s cruise ships, the M/V ENCHANTED ISLE

and the M/V ENCHANTED CAPRI, were then stranded in New Orleans,

Louisiana, and subject to the automatic bankruptcy stay. The

bankruptcy court in Florida lifted the stay so that these stranded

vessels could be arrested. The district court for the Eastern

District of Louisiana thus obtained admiralty jurisdiction. Each

vessel had numerous creditors, with some asserting maritime liens.

These interlocutory appeals concern such liens. See generally 1

THOMAS J. SCHOENBAUM, ADMIRALTY AND MARITIME LAW § 9 (3d ed. 2001).

A maritime lien is a special property right in a vessel,

giving the lien-holder priority over some claimants. Upon a

vessel’s sale by court order in an in rem action to enforce a lien

on that vessel, all pre-existing claims in the vessel are

terminated and attach in accordance with their priorities to the

sale proceeds. See 46 U.S.C. § 31326. Proceeds go first to

expenses, and fees allowed and costs taxed by the court. See id.

Preferred maritime liens are then satisfied, followed by preferred

mortgage liens, and then non-preferred maritime liens (except that

a preferred mortgage on a foreign vessel not guaranteed under the

Merchant Marine Act is subordinate to maritime liens). See id. 
5

Non-maritime claims are not within admiralty jurisdiction and

may not be enforced in an in rem proceeding. See id. Obviously,

creditors prefer to have a maritime lien.

Under the United States Commercial Instruments and Maritime

Lien Act (CIMLA) (formerly Federal Maritime Lien Act), any person

furnishing repairs, supplies, towage, usage of drydock or marine

railway, or other necessaries, to any foreign or domestic vessel

has a maritime lien on that vessel. 46 U.S.C. §§ 31301, 31342. 

[A] person providing necessaries to a vessel

on the order of the owner or a person

authorized by the owner —

(1) has a maritime lien on the

vessel;

(2) may bring a civil action in rem

to enforce the lien; and

(3) is not required to allege or

prove in the action that credit was

given to the vessel.

46 U.S.C. § 31342(a). 

Maritime liens for necessaries “developed as a necessary

incident of the operation of vessels”. Silver Star Enter., Inc. v.

Saramacca MV, 82 F.3d 666, 668 (5th Cir. 1996) (internal quotation

omitted). They “secure[ ] creditors who provide supplies which are

necessary to keep the ship going”. Id. (internal quotation

omitted). 

Because a ship moves from place to place, it

is peculiarly subject to the vicissitudes that

would compel abandonment of the vessel or

voyage, unless repairs and supplies are
6

promptly furnished. Moreover, a ship is often

absent from her home port without access to

funds and, as a result, must be able to obtain

upon her own account needed repairs and

supplies. That and the resulting need to

ensure that a ship did not sail away from its

debts contributed to the creation of the

maritime lien.

Racal Survey U.S.A., Inc. v. M/V COUNT FLEET, 231 F.3d 183, 187

(5th Cir. 2000)(internal citation omitted), cert. denied, 532 U.S.

1051 (2001).

The lien arises in favor of the creditor by operation of law

and grants the creditor the right to appropriate the vessel, have

it sold, and be repaid the debt from the proceeds. Silver Star

Enter., 92 F.3d at 668. The lien is against the vessel and only

indirectly connected with the owner. Equilease Corp. v. M/V

SAMPSON, 793 F.2d 598, 602 (5th Cir.), cert. denied, 479 U.S. 984

(1986). “The maritime lien concept thus somewhat personifies a

vessel as an entity with potential liabilities independent and

apart from the personal liability of its owner”. Id. 

A.

The M/V ENCHANTED ISLE (ISLE), the first Commodore vessel at

issue, was owned by Almira Enterprises, a Commodore affiliate. The

ISLE’s creditors include, among others, several of the key parties

in these consolidated actions: Effjohn International Cruise

Holdings, Inc.; Freret Marine Supply; Cusimano Produce Co.; and

Amwest Surety Insurance Co. and Swiss Reinsurance America Corp.
7

(Swiss Re; it and Amwest are collectively referred to as the

Sureties). 

Effjohn has three claims; at issue is the one it was not

permitted to add to the proceedings. The first claim concerns its

loan to Almira, secured by a foreign preferred ship mortgage

bearing against the ISLE. (At the time of the bankruptcy, Almira

owed Effjohn principal of approximately $4 million.) For this

loan, Effjohn asserts an in rem claim against the ISLE. The second

claim is a maritime lien for custodial expenses (wharfage,

insurance, and related expenses advanced while the vessel was in

legal custody of the bankruptcy court) and crew wage and related

expenses (payments to, and repatriation of, the stranded crew).

Finally, for its third claim, at issue here, Effjohn seeks to

assert domestic maritime lien claims it acquired from former ISLE

creditors by assignment and subrogation for approximately 50 cents

on the dollar. It was not permitted to do so. 

Freret provided supplies to the ISLE, on the credit of the

vessel, worth approximately $120,000. It claims “necessaries”

protection under 46 U.S.C. § 31342(a)(1).

Cusimano is a New Orleans produce company. Between October

and December 2000, Cusimano provided fresh produce and supplies

worth approximately $65,000 to the ISLE, for which it was not paid.

Cusimano claims a maritime lien for necessaries based on the
8

supplied produce. It was not permitted to intervene to make this

claim. 

The Sureties issued a Federal Maritime Commission Passenger

Vessel Surety Bond (the bond) to Commodore to cover its vessels,

including the ISLE and the M/V ENCHANTED CAPRI, discussed infra.

The bond provided security for passengers who pre-paid for cruises

on one of Commodore’s vessels, but who, through no fault of their

own, never sailed; it required the Sureties to refund unearned

passenger revenues up to $15 million if Commodore was unable to do

so. (Under 46 U.S.C. § 817e and 46 C.F.R. Part 540.1 et seq., a

passenger vessel operator must post such a bond or otherwise prove

financial responsibility.) Swiss Re reinsured the bond and was a

co-surety with Amwest. The Sureties claim a maritime lien for

necessaries against the ISLE, based on the bond. (As discussed

infra, they have the same claim against the M/V ENCHANTED CAPRI.)

Commodore’s bankruptcy filing was in December 2000. In late

August 2001, at Effjohn’s request, the bankruptcy court lifted the

automatic bankruptcy stay for the ISLE, so that Effjohn could

arrest the vessel pursuant to Supplemental Admiralty Rule C of the

Federal Rules of Civil Procedure and foreclose on its mortgage.

Shortly thereafter, Effjohn filed a verified complaint and arrested

the vessel. Numerous other creditors intervened (including Freret

and Amwest).
9

Almira was served on 4 September. In October, at Effjohn’s

request, Almira was defaulted as in rem defendant under FED. R. CIV.

P. 55(a), because Almira had expressed no interest in appearing to

defend its vessel.

That same month (October 2001), Effjohn moved unopposed for an

interlocutory sale, suggesting a sale date of 6 December 2001 and

a minimum bid of $1.5 million. It also requested permission to bid

in its mortgage and other credits (approximately $6 million). The

motion was granted 31 October, with the sale scheduled for 6

December. (31 October was also the date of the last intervention of

record.)

On 1 November 2001, Effjohn requested a second Rule 55(a)

entry of default against Almira; this was against Almira in its

capacity as an in personam defendant. The motion was granted, with

an entry of default on 8 November.

After publishing notice in compliance with Rule 55(a), Effjohn

requested an entry of default against non-parties. The motion was

granted, with entry of default on 8 November against “any person,

natural or juridical, who has not already intervened or filed a

complaint or claim in this action”.

On 21 November (approximately two weeks before the scheduled

sale), the Freret claimants, having formed a syndicate of creditors

and other investors, moved to increase the minimum bid and to allow

the syndicate to make a credit bid at the auction. Increasing the
10

minimum bid was denied as untimely; the unopposed credit bid

request, granted. 

The auction was held 6 December 2001. Effjohn was the

successful bidder (approximately $2.6 million; the sale was

confirmed in May 2002). 

On the day before the scheduled 6 December sale, and after

publishing notice as required, intervenor Amwest had moved for a

Rule 55(a) entry of default against all non-parties (as had

Effjohn). Shortly after the sale, Amwest’s motion was granted;

another Rule 55(a) entry of default against non-parties was entered

on 11 December 2001. In sum, there were four entries of default,

including two against non-parties. 

B.

The M/V ENCHANTED CAPRI (CAPRI) is the other Commodore vessel

at issue. In January 2001, the automatic bankruptcy stay was

lifted against the CAPRI; and Freret arrested the vessel under

Supplemental Admiralty Rule C. Pursuant to 46 U.S.C. § 31342,

Freret claimed a maritime lien for necessaries furnished the CAPRI.

As in the action against the ISLE, several other creditors

intervened, including Effjohn, Cusimano, and the Sureties. At

issue is the Sureties’ claim for a maritime lien for necessaries,

based on the Sureties’ passenger vessel surety bond issued to

Commodore.
11

II.

These consolidated admiralty interlocutory appeals concern

maritime lien claims from different actions. First, Effjohn and

Cusimano appeal the denial of their motions to intervene to assert

such claims in the ISLE action. (A sub-issue concerning Effjohn is

its motion to amend its complaint being construed by the district

court as one to intervene. One concerning Cusimano is the district

court’s refusing to set aside the entry of default.) Second, the

Sureties appeal the dismissal of their claims in the actions

against the ISLE and the CAPRI.

A.

Denial of a motion to intervene, based on its untimeliness, is

reviewed for abuse of discretion as long as the district court

“articulate[s] the reason the motion was untimely”, including

addressing the appropriate factors. John Doe # 1 v. Glickman, 256

F.3d 371, 376 (5th Cir. 2001). A district court’s refusal to set

aside an entry of default is likewise reviewed for abuse of

discretion. CJC Holdings, Inc. v. Wright & Lato, Inc., 979 F.2d

60, 63 (5th Cir. 1992). Factual findings are, of course, reviewed

only for clear error. E.g., id. at 64. 

1.

In the ISLE action, three days before the 6 December 2001

sale, Effjohn moved to amend its complaint. Effjohn sought to add

approximately $500,000, the earlier-described claims acquired from
12

other creditors; Freret and the Sureties opposed the motion; and

the district court scheduled a post-sale hearing.

In late December, post-sale and after hearing argument, the

district court denied as “untimely as a matter of law”, Effjohn’s

motion to amend. The court provided the following reasons: (1) it

agreed with Freret that the motion was “an ill-disguised motion for

leave to intervene” and was “not in the nature of a correction”,

because it “assert[ed] the claims of parties who did not timely

assert claims in the ... proceedings”; (2) Effjohn sought, at a

“late date”, to add more than $500,000 in “new claims”; (3) the 7

November entry of default had been at Effjohn’s request; (4) at

Amwest’s request, a second entry of default was entered 11

December; (5) the court would not permit Effjohn to “circumvent the

Entry of Default and the deadline imposed for the filing of

intervention” — the defaults “bar the addition of new claims” and

“[s]ubrogation to claims which have been barred should place the

subrogee in no better stead than the original claimants, whose

interventions were barred”; and (6) the motion to confirm the sale

was pending and, but for Effjohn’s failure to produce acceptable

security, the lien-phase of the action would have been “well on its

way”. 

Effjohn moved the court to reconsider, asserting that, even if

its motion was to intervene rather than to amend, it should have

been granted. This motion, opposed by Freret and the Sureties, was
13

denied for the following reasons: (1) “it [wa]s evident that all

parties were aware that this matter was swiftly approaching its

anticipated conclusion and deadlines ... passed unheeded”; (2) the

court had “been apprised of no circumstances that prevented those

potential lien claimants with whom Effjohn was negotiating from

timely asserting their claims, preserving their own right and the

derivative rights of any subrogee or assignee to amend and assert

the claims”; (3) “Effjohn should not be allowed to contradict the

deadlines imposed against all other potential claimants”; (4)

“[t]he facts, circumstances, and stage of this particular case,

considered together with the posturing of the parties, who are all

claimants to a limited fund, do not warrant a ruling commensurate

with the default setting of Rule 15, allowing amendments to the

pleadings liberally”; (5) “[t]he prejudice created by Effjohn’s

undue delay in attempting to add subrogated or newly assigned

claims only three days prior to the sale [was] sufficiently

detailed in [Freret’s opposition memorandum]”; (6) even a Rule 15

motion to amend should not be granted; and (7) Effjohn had

presented no new factors or changes in the controlling law. 

Effjohn maintains that the district court erred: (1) in

construing its motion as one to intervene — instead, it was to

amend or supplement a complaint; and (2) in denying the motion.

a.
14

In claiming the motion was not for intervention, Effjohn notes

it was the lead plaintiff and asserts it could not have intervened

in its own action. It insists: the proper analysis would have

been under Rule 15 (amend), which is more lenient than Rule 24(a)

(intervene); and, under Rule 15, its motion would have been

granted. The district court’s construing the motion as one for

intervention is a legal issue, reviewed de novo.

For starters, a court is not bound by how a party labels its

motion. Obviously, “[t]he relief sought, that to be granted, or

within the power of the court to grant, should be determined by

substance, not a label”. Edwards v. City of Houston, 78 F.3d 983,

995 (5th Cir. 1996) (en banc) (alteration in original; internal

quotation omitted). As noted, this principle is more than well

established. E.g., United States v. Buck, 281 F.3d 1336, 1342

(10th Cir. 2002) (“substance of the plea should control, not the

label”), cert. denied, 123 S. Ct. 1784 (2003). In this regard,

courts have applied intervention or joinder standards to motions to

amend when plaintiffs have sought, by that means, to add claims of

additional parties. Montgomery v. Rumsfeld, 572 F.2d 250, 255 (9th

Cir. 1978) (applying Rule 24 intervention standards); Trombino v.

Transit Cas. Co., 110 F.R.D. 139, 141 (D.R.I. 1986)(applying Rule

19 joinder standards).

Effjohn sought to add new claims of other creditors that it

had acquired through assignment and subrogation (at a fifty-percent
15

discount). Had those creditors attempted to assert the claims,

rather than convey them to Effjohn, they would have had to

intervene under Rule 24. Although the claims were acquired (but

not asserted) prior to the default entries, Effjohn’s theory that

amendment was appropriate would allow it to acquire claims postdefault that could no longer be brought and assert them by amending

its complaint. Under these circumstances, the district court did

not err in construing the motion as one for intervention.

b.

Effjohn next maintains that, even if its motion were for

intervention, it was timely under the intervention standards.

Effjohn urges that the denial should be reviewed de novo. However,

because the district court articulated its reasons for denying the

motion as untimely (described supra), including discussing factors

in the four-part framework for determining timeliness (described

infra), we instead review for abuse of discretion. See Glickman,

256 F.3d at 376. (Again, we review factual findings only for clear

error.)

Rule 24(a) governs interventions of right. FED. R. CIV. P.

24(a); Ruiz v. Estelle, 161 F.3d 814, 827 (5th Cir. 1998), cert.

denied, 526 U.S. 158 (1999). Pursuant to that Rule, a party is

entitled to such intervention if: (1) the motion is timely; (2)

the putative intervenor asserts an interest related to the property

or transaction that forms the basis of the controversy in the
16

action into which he seeks to intervene; (3) the disposition of the

action may impair or impede his ability to protect that interest;

and (4) it is not adequately represented by the existing parties.

E.g., Glickman, 256 F.3d at 375. Generally, intervention is proper

“where no one would be hurt and the greater justice could be

attained”. Sierra Club v. Espy, 18 F.3d 1202, 1205 (5th Cir. 1994)

(internal quotation omitted). See generally 6 JAMES W. MOORE, MOORE’S

FEDERAL PRACTICE § 24.03[1][a], at 24-23 (Matthew Bender 3d ed. 2003).

Here, of course, the only factor at issue is timeliness. For

that factor, another four-part framework is applied: (1) how long

the putative intervenor knew, or reasonably should have known, of

its stake in the action; (2) the prejudice, if any, the existing

parties may suffer because the putative intervenor failed to

intervene when it knew, or reasonably should have known, of its

stake; (3) the prejudice, if any, the putative intervenor may

suffer if intervention is not allowed; and (4) any unusual

circumstances weighing in favor of, or against, finding timeliness.

E.g., Glickman, 256 F.3d at 375-76. These factors are “not a

formula for determining timeliness”; instead, it should be

determined based on all the circumstances. Id. at 376 (internal

quotation omitted). See also, e.g., Banco De Credito Industrial,

S.A. v. Tesoreria General, 990 F.2d 827, 832 (5th Cir. 1993)

(timeliness is flexible, based on specific facts and circumstances,
17

and measured by “practical rather than technical yardstick”), cert.

denied, 510 U.S. 1071 (1994). 

Regarding how long Effjohn knew, or should have known, of its

stake, this factor weighs heavily against intervention. We

consider “the movant’s failure to apply for intervention as soon as

it knew or reasonably should have known of its interest”. E.g.,

Lelsz v. Kavanagh, 710 F.2d 1040, 1044 (5th Cir. 1983) (internal

quotation omitted; emphasis added). The assignments to Effjohn

were made between 29 June and 20 September 2001; it admits knowing

of its stake in all of these additional claims on 20 September at

the latest. Yet, from the date it acquired the last claim, it

waited approximately two and one-half months — until 3 December,

only three days pre-sale — to bring these claims to the court’s

attention. (This was well past the 8 November default entered at

Effjohn’s request.) Effjohn cites cases in which longer delays

were allowed; again, however, the length of a delay allowed depends

on the particular circumstances. E.g., Sierra Club, 18 F.3d at

1205 (absolute measure of time elapsed is not relevant). As the

lead plaintiff in these proceedings, Effjohn was obviously well

aware of the events in the litigation and cannot claim ignorance.

Prejudice to other parties also weighs against intervention.

The inquiry for this factor is whether other parties were

prejudiced by the delay, not whether they would be prejudiced by

the addition of the claim (obviously, in the sense that they may
18

obtain less, existing parties are always prejudiced by new claims).

See Assoc. of Prof’l Flight Attendants v. Gibbs, 804 F.2d 318, 321

(5th Cir. 1986) (intervention allowed as timely where no more

distressing to other parties at late date than at earlier one). As

the district court found, Freret was prejudiced by the delay

because: it relied on the amounts in Effjohn’s complaint in

determining its bidding strategy; and had it known of these claims,

it could have created a larger syndicate of investors to increase

the sale price and would have been more open to settling its

claims. 

Concerning prejudice to the would-be intervenor, Effjohn would

obviously suffer some prejudice by not being allowed to intervene

because it will not be able to assert approximately $500,000 in

maritime lien claims. On the other hand, the prejudice is not as

severe as in many cases in which intervention has been allowed.

E.g., Amberg v. Federal Deposit Ins. Corp., 934 F.2d 681 (5th Cir.

1991) (reversing to allow intervention where party had complied

with statute); Crabtree v. S/S JULIA, 290 F.2d 478 (5th Cir. 1961)

(reversing refusal to allow individual seaman to assert claim for

maintenance and injuries); Point Landing, Inc. v. Alabama Dry Dock

& Shipbuild. Co., 261 F.2d 861 (5th Cir. 1958) (reversal of

intervention denial where maritime lien-holder complied with

conditions stated in notice and court’s decree). Moreover, Effjohn

is not a stranger to the litigation which became aware of its
19

substantial new claim only shortly before the sale; nor, for

example, is it an unsophisticated ward of the court. In short, the

prejudice to Effjohn was of its own making.

Finally, two unusual circumstances weigh against allowing

intervention. First, as mentioned, Effjohn had full knowledge of

the litigation and lacked good cause for delay. It maintains,

apparently without record support, that processing these claims was

delayed by the terrorist events of 11 September 2001 (Effjohn’s New

York office was apparently handling the paperwork). However,

several of the assignments were received well before that date, and

Effjohn’s local counsel was undoubtedly aware of the existence of

the claims. Yet, Effjohn failed to bring them to the court’s

attention until 3 December.

Second, default had been entered at Effjohn’s request.

(Although Effjohn did miss Amwest’s deadline for claims (23

November), the second default against non-parties was entered 11

December at Amwest’s request, after Effjohn moved to amend.)

Effjohn sought to block others by imposing deadlines and an entry

of default; yet, it sat on its own claims. Effjohn makes much of

the fact that the default was at its own request and insists it did

not intend to block itself. However, Effjohn ignores the inequity

of its ensuring other parties could not bring late claims while

attempting to do so itself.
20

Effjohn maintains that the default did not actually bar its

claims, insisting: the default entry did not apply to it, because

it was already a party; and, even if the default did apply to

Effjohn, it should have been set aside. The default entry states:

“DEFAULT IS HEREBY ENTERED as against any person, natural or

juridical, who has not already intervened or filed a complaint or

claim in this action”.

These terms do not expressly apply to Effjohn; it was already

a party. But, they arguably apply to Effjohn’s new claims (which,

as discussed supra, were properly viewed as claims that had to be

brought through intervention). Regardless, the district court did

not hold the claims barred by the default; it considered the

default as one factor in the timeliness inquiry. Even assuming the

default technically did not apply to the claims, the purpose of the

entry of default was to ensure that all claims were before the

court. Effjohn’s delay in bringing new claims is unjustified in

the light of the default.

Under these facts, the district court did not abuse its

discretion in holding Effjohn’s motion untimely. Therefore, the

addition of Effjohn’s new claims was properly denied.

2.

As noted, Cusimano provided produce to the ISLE. When

Commodore and its affiliates filed for bankruptcy, claimants were

required to file proofs of claim in each proceeding. Cusimano
21

received personal notice of the bankruptcy for two of the cases

(those involving Commodore and the CAPRI, not the ISLE) and timely

filed proofs of claim in those proceedings. It neither received

personal notice in the proceedings involving the ISLE nor filed a

proof of claim in them. Accordingly, it did not receive notice of

the bankruptcy stay being lifted and the arrest of the ISLE.

On 7 February 2002 (over two months after the sale of the

ISLE), Cusimano moved to set aside the entry of default and for

leave to intervene. Freret and Amwest opposed the motion.

Following argument, the district court in March 2002 denied the

motion, as follows:

The Court finds that Cusimano has failed to

establish good cause for failing to file a

timely claim in this proceeding. The legal

notice published in this matter was more than

adequate, particularly given that Cusimano had

actual notice of facts leading up to this in

rem proceeding. Equally important is the

prejudice that the timely claimants will

suffer if the default is set aside and

additional claimants allowed to straggle into

these proceedings. For these reasons, and for

the reasons stated at oral argument by counsel

for Freret ... the Court finds that the

equities weigh against setting aside the

default. 

(Emphasis added.)

Cusimano maintains the district court abused its discretion by

refusing: (1) to set aside the entry of default; and (2) to allow

intervention. (Because we determine the district court was within
22

its discretion to refuse to set aside the default, we do not reach

the intervention issue.)

As stated, refusing to set aside a Rule 55(a) entry of default

is reviewed for abuse of discretion. Defaults are not favored and

their strict enforcement “has no place in the Federal Rules”.

Amberg, 934 F.2d at 686. (Our court has left open the question

whether the standard for relief from entries of default (Rule

55(a)) is more lenient than that for a default judgment (Rule

55(b)), CJC Holdings, Inc., 979 F.2d at 63 n.1; however, we

generally examine the same factors. Id. at 64. In any event,

entries of default are serious; “where there are no intervening

equities[,] any doubt should ... be resolved in favor of the movant

to the end of securing a trial upon the merits”. Lacy v. Sitel

Corp., 227 F.3d 290, 292 (5th Cir. 2000) (quotation and citation

omitted).) 

“For good cause shown the court may set aside an entry of

default....” FED. R. CIV. P. 55(c) (emphasis added). “[T]he

requirement of ‘good cause’ ... ha[s] generally been interpreted

liberally”. Amberg, 934 F.2d at 685 (internal citation omitted).

Three factors are examined for determining “good cause” vel non:

(1) whether the failure to act was willful; (2) whether setting the

default aside would prejudice the adversary; and (3) whether a

meritorious claim has been presented. Lacy, 227 F.3d at 292.

These factors are not exclusive; instead, they are to be regarded
23

simply as a means to identify good cause. Dierschke v. O’Cheskey,

975 F.2d 181, 184 (5th Cir. 1992). Other factors may be

considered, such as whether the party acted expeditiously to

correct the default. Id.

The first factor (willfulness) weighs in favor of the district

court’s not setting aside the entry of default. The court did not

find that Cusimano’s failure to respond was intentional; instead,

it found Cusimano’s neglect was not excusable. See CJC Holdings,

Inc., 979 F.2d at 64 (“willfulness” inquiry is whether neglect

excusable). 

Willfulness vel non is a finding of fact reviewed only for

clear error. See id. This finding was not clearly erroneous.

Cusimano states that it did not become aware of the action

involving the ISLE until early February 2002, shortly before filing

its 8 February intervention motion. On the other hand, Freret

represents that, prior to then, Cusimano had actual notice of the

action. It reasons Cusimano: (1) was a claimant in the

proceedings involving the CAPRI and therefore knew of the initial

underlying facts; (2) received a 20 June 2001 letter from Effjohn

offering to pay 50 percent of the face value for Cusimano’s claim

against the ISLE and responded to that letter; and (3) received a

disclosure statement in either October or November 2001 evidencing

that the ISLE was the subject of admiralty proceedings. The
24

district court found Cusimano had actual notice of the facts

leading up to the in rem proceeding for the ISLE.

Cusimano also contends it had no reason to know of the ISLEaction because it did not receive personal notice. Freret points

to several publications in the Times-Picayune (New Orleans

newspaper) that it claims constitute at least constructive notice:

(1) Effjohn’s 12 September 2001 publication of notice of the

ISLE’s arrest and the deadline for asserting new claims; (2)

Amwest’s 8 November publication of notice of arrest, providing a

second deadline for the assertion of claims; and (3) three

publications of notice of the interlocutory sale of the ISLE (16,

26, and 30 November). The district court found the published legal

notice “more than adequate”. In short, Cusimano’s neglect was not

excusable. 

For the second factor, as earlier-quoted, the court noted the

prejudice caused by allowing additional claimants “to straggle into

these proceedings”. As with Effjohn’s claim, discussed above,

there was some prejudice to other parties caused by the delay. 

Regarding the third factor (meritoriousness of Cusimano’s

claim), there is no dispute that Cusimano would have a valid

maritime lien against the ISLE. This favors setting aside the

entry of default.

In sum, although entries of default are not favored, the

district court did not abuse its discretion. 
25

B.

The Sureties’ claims involve whether a maritime lien arises

out of their bond that applied to both vessels. The Sureties

intervened in the proceedings involving each vessel, asserting

maritime liens for necessaries. In the ISLE proceedings, Freret

and Effjohn each moved in January 2002 for summary judgment against

the Sureties’ claims, contending: (1) the bond was not a maritime

contract; (2) the Sureties do not have maritime liens against the

ISLE because the bond was not a necessary and was not provided to

a particular vessel; and (3) the Sureties do not have a maritime

lien through the vessel’s passengers. In the CAPRI proceedings,

Freret filed a similar motion, which the crew joined.

Following argument, the district court granted the motions,

ruling: the bond is not a maritime contract; the Sureties do not

have a maritime lien for necessaries; and the Sureties do not have

a maritime lien through the passengers because the passengers do

not have maritime liens.

On appeal, the Sureties maintain: (1) the bond (a) is a

maritime contract (b) that gives rise to a maritime lien for

“necessaries”; and (2) in the alternative, the Sureties are

subrogated to the claims of the passengers, who have maritime liens

against the vessels. A summary judgment is reviewed de novo.

E.g., Taita Chem. Co., Ltd. v. Westlake Styrene Corp., 246 F.3d
26

377, 385 (5th Cir. 2001). See FED. R. CIV. P. 56. There are no

material fact issues. 

1.

For the bond, a maritime lien exists only if: (1) the bond is

a maritime contract subject to admiralty jurisdiction, e.g.,

Wilkins v. Commercial Investment Trust Corp., 153 F.3d 1273, 1276

(11th Cir. 1998) (“Maritime jurisdiction is a prerequisite to a

claim against a vessel asserting a maritime lien”); and (2) the

bond is a necessary provided to a vessel, see 46 U.S.C. § 31342(a)

(“[a] person providing necessaries to a vessel on the order of the

owner [or authorized person] ... has a maritime lien on the

vessel...”). 

Admiralty jurisdiction’s boundaries for contracts are

difficult to draw. Kossick v. United Fruit Co., 365 U.S. 731, 735

(1961). “[I]n determining whether a contract falls within

admiralty, the true criterion is the nature and subject-matter of

the contract, as whether it was a maritime contract, having

reference to maritime service or maritime transactions”. Exxon

Corp. v. Central Gulf Lines, Inc., 500 U.S. 603, 610 (1991)

(internal quotations omitted). The key is “whether the services

... performed [under] the contract are maritime in nature”. Id. at

612. Along this line, the “character of the work to be performed”

is determinative, not “the [contract’s] value ... to the shipping

industry”. Planned Premium Servs. of Louisiana, Inc. v. Int’l Ins.
27

Agents, Inc., 928 F.2d 164, 166 (5th Cir. 1991) (internal citation

and quotation omitted). If the “essence of the services provided”

under the contract is non-maritime (“identical to or essentially

similar to non-maritime services regularly performed by those not

involved in the operation of vessels”), it is not a maritime

contract. Id.

The Sureties urge a broad test for whether a contract is a

maritime contract, citing Archawksi v. Hanioti, 350 U.S. 532

(1956), for the proposition that, where the underlying contract is

maritime and the controversy grows directly out of a claim for nonperformance on that contract, an admiralty court has jurisdiction,

even where money damages are sought. Accordingly, they insist:

the underlying contract for the transport of passengers is a

maritime contract; and their claim arises out of that contract.

The Sureties take too broad a view of maritime jurisdiction.

“Not every contract that relates to maritime matters warrants the

invocation of admiralty jurisdiction.” Planned Premium Servs. of

Louisiana, 928 F.2d at 166. For example, “a performance bond which

compensates an obligee for loss in the event of nonperformance by

the principal obligor is not a maritime contract”. Aqua-Marine

Constructors, Inc. v. Banks, 110 F.3d 663, 671 (9th Cir. 1997).

Quoting a maritime law treatise, Aqua-Marine stated:

[A] bond securing the performance of a charter

party is not a maritime contract for the

purposes of admiralty jurisdiction, although
28

the charter party itself is a maritime

contract; the surety on the bond neither

promises performance of the charter party nor

is [s]he authorized to do so; h[er]

obligation is merely to pay damages in the

event of non-performance. Where, however,

there is a promise to perform a charter in the

default of another, there is a maritime

contract.

Id. (citing 1 STEVEN F. FREIDELL, BENEDICT ON ADMIRALTY § 183, at 12-10

(1996)) (alterations in original).

In addition to the district court in this case, at least one

other court has addressed directly whether a passenger vessel

surety bond is a maritime contract. See Patricia Hayes &

Associates, Inc. v. M/V BIG RED BOAT, II, 2002 A.M.C. 1722

(S.D.N.Y. 2002). Relying on Fednav, Ltd. v. Isoramar, S.A., 925

F.2d 599 (2nd Cir. 1991) (vessel owner’s agreement to contribute to

lessee’s settlement of claim not maritime contract because subject

matter of suit was covenant to pay damages) and Pacific Surety Co.

v. Leatham & Smith Towing & Wrecking Co., 151 F. 440 (7th Cir.

1907) (bond between surety and charterer to guarantee charterer’s

performance of charter party not maritime contract), it held: a

passenger vessel surety bond, under which sureties “merely agreed

to refund passenger monies for unperformed cruises on [the

vessel]”, was not a maritime contract and thus could not give rise

to a maritime lien. Patricia Hayes, 2002 A.M.C. 1722.

The Sureties maintain that Aqua-Marine and Patricia Hayes

conflict with New England Marine Insurance Co. v. Dunham, 78 U.S.
29

1 (1870), which held that a contract of marine insurance was a

maritime contract giving rise to maritime jurisdiction. They

contend maritime insurance is indistinguishable from surety

obligations: like the bond at issue, an insurance policy is an

agreement to pay the debts of the vessel or its owner which have

been contracted under maritime law. 

Although insurance creates an obligation for the insurer to

pay damages, rather than to perform the insured’s obligations, it

is distinguishable. Maritime insurance insures against the

considerable “risks of navigation” faced by vessels; these risks

have been long-regarded as maritime and insuring against them has

been part of the “general maritime law of the world”. Dunham, 78

U.S. at 33-34. By contrast, the passenger surety bond is not a

well-established part of maritime law and can only be drawn upon in

the event of non-navigation. Moreover, the Supreme Court has

acknowledged (post-Dunham) that merely agreeing as surety “to pay

damages for another’s breach of a maritime charter is not [a

maritime contract]” while “a contract ... to insure a ship ... is

maritime”. Kossick, 365 U.S. at 735.

The service to be performed under the bond (reimbursing those

who made a deposit for a cruise but never sail) is non-maritime in

nature. The bond is a consumer protection measure, with no direct

relationship to the operation of the vessel. The bond does not

relate to the carriage of passengers; it merely makes good on the
30

owners’ financial obligations by reimbursing the passengers if the

cruise is not performed. In sum, there is nothing inherently

maritime about the Sureties’ business or the bond. Accordingly,

it does not fall within admiralty jurisdiction.

2.

In the alternative, the Sureties claim they have a maritime

lien because they are subrogated to claims of pre-paid prospective

passengers. Of course, the Sureties do not have a maritime lien if

the passengers, involved in this regard in an executory contract,

do not have one. They do not.

An executory contract, of course, is one that has yet to be

fully performed. For example, when passengers pay in advance for

a cruise, the tickets issued them in exchange are wholly executory

until the passengers board the ship and embark.

The breach of an executory contract does not

create a maritime lien. This legal principle

has gained universal acceptance in American

law, and is applied in contracts involving the

carriage of goods, transportation of

passengers, and the provision of supplies,

repairs, and services to a vessel.

SCHOENBAUM at § 9-2. See also BargeCarib, Inc. v. Offshore Supply

Ships, Inc., 168 F.3d 227, 230 (5th Cir. 1999) (“[b]reach of a time

charter by the owner gives rise to a maritime lien as long as the

vessel has been delivered to the charterer and the contract is no

longer executory” (emphasis added)); E.A.S.T., Inc. of Stamford v.

M/V ALAIA, 876 F.2d 1168, 1174 (5th Cir. 1989) (executory contract
31

doctrine “precludes the creation of a maritime lien for breach of

a contract that is merely executory” as a “maritime lien is based

... on the fiction that the vessel may be a defendant in a breach

of contract action when the vessel itself has begun to perform

under the contract” (emphasis in original)); Belvedere v. Compania

Plomari De Vapores, 189 F.2d 148 (5th Cir. 1951) (no in rem claim

for failure to transport cargo where voyage not completed because

of engine trouble, because no cargo was loaded and vessel was never

ready to receive it at the loading port). 

The executory contract rule applies to contracts for passage

aboard vessels; and if “the vessel repudiates the contract before

passengers have boarded ... there is no lien for return of prepaid

passage money”. SCHOENBAUM at § 9-2. Likewise, Todd Shipyards Corp.

v. THE CITY OF ATHENS, 83 F. Supp. 67 (D. Md.), aff’d, 177 F.2d 96

(4th Cir. 1949), held that passengers who had not “boarded the ship

for transportation” did not have a maritime lien against the ship

for nonperformance of transportation obligations.

[E]ven if we assume that a common carrier may

be sued in tort for failure to fulfill an

executory obligation to a passenger, who did

not come within the care or control of the

carrier[,] ... it does not follow that a

breach of such executory contract creates a

lien in rem. Thus it may well be that the

shipowner in the present case may be sued in

tort by the prospective passengers either in

the civil courts or even in personam in

admiralty, but they have no maritime lien to

enforce in rem against the ship. The

shipowner, and not the ship as an entity, is

the common carrier. The obligation to
32

transport passengers either in accordance with

a previous contract or advertised schedule is

not the obligation of the vehicle used for

transportation, but of the owner or operator

of the vehicle. 

Id. at 76 (internal citations omitted). It noted the detrimental

effect granting passengers maritime liens could have on maritime

commerce.

It is highly important that a ship, especially

in a foreign port, be able to obtain supplies

or repairs on its own credit in order to

continue its voyage. It is for this purpose

among others, that admiralty law has created

the maritime lien. The credit is extended on

the faith of the value of the ship itself, and

in further support of that credit the

admiralty law gives priority to the last lien

rather than to prior liens. ... [I]f the

passenger claims are to be established as

maritime liens in tort, they would also

apparently outrank for priority of payment,

liens for very necessary repairs to the ship

in a foreign port. Since any duty to the

prospective passengers is imposed only on the

shipowner, the grant of a maritime lien for

any breach of that duty would be inconsistent

with the definition and purpose of that type

of lien, would destroy the purpose and policy

of the lien and would make it synonymous with

a right in personam. 

Id. at 76 (emphasis added).

Claiming that this executory contract doctrine is outdated,

the Sureties assert that we should disregard it and create a

maritime lien in favor of passengers. They cite no cases in

support of their position, but urge that Congress has shown an

inclination to protect consumers who contract with cruise ship

operators. In so doing, they point to 46 U.S.C. § 817e (enacted in
33

1966, post-Todd Shipyards), which, as stated, requires the

operators to reimburse passengers when a cruise does not occur and

to post a bond or otherwise show financial responsibility

concerning that reimbursement obligation.

If anything, Congress’ enacting 46 U.S.C. § 817e demonstrates

there is no maritime lien on pre-paid passenger fares. Congress

was well aware of the lack of protection for potential passengers

and acted to address it. In other words, Congress (through § 817e)

provided passengers with financial protection in the event their

cruises were cancelled, alleviating any need for a maritime lien.

Congress was capable of creating — but did not create — such a lien

in favor of passengers. 

In sum, prospective passengers with possible breach of

contract claims against Commodore for cancelled cruises on the ISLE

or the CAPRI do not have a maritime lien against either vessel.

Accordingly, the Sureties, to the extent they might be subrogated

to such claims, have none. 

III.

For the foregoing reasons, the denial of Effjohn’s motion to

amend its complaint (in reality, to intervene); the denial of

Cusimano’s motion to intervene; and the dismissal of the Sureties’

claims are AFFIRMED.

AFFIRMED