Opinion ID: 3051351
Heading Depth: 3
Heading Rank: 2

Heading: application of the fmla

Text: According to United States maritime lien law, “a person providing necessaries to a vessel on the order of the owner or a person authorized by the owner . . . has a maritime lien on the vessel” and “may bring a civil action in rem to enforce the lien.” 46 U.S.C. § 31342. Splendid’s siren song about the presumption against extraterritorial application of United States law fails to distract us from reaching the clear-cut conclusion that the FMLA’s plain language demands: A maritime lien TRANS-TEC ASIA v. M/V HARMONY CONTAINER 2269 arose in favor of Trans-Tec because it provided necessaries9 to the Harmony on the order of the Harmony’s charterer. Charterers and their agents are presumed to have authority to bind the vessel by the ordering of necessaries. Id. § 31341; see also TETLEY at 602-03; THOMAS J. SCHOENBAUM, ADMIRALTY AND MARITIME LAW § 9-3 (4th ed. 2004) (“SCHOENBAUM”). As our decision rests in part on the unique nature of the remedy sought in this case, we offer a brief primer on maritime liens. 1. BACKGROUND ON MARITIME LIENS IN THE UNITED STATES [10] A maritime lien is “one of the most striking peculiarities of Admiralty law, constituting a charge upon ships of a nature unknown alike to common law and equity.” Black’s Law Dictionary 943 (8th ed. 2004) (quoting GRIFFITH PRICE, THE LAW OF MARITIME LIENS 1 (1940)). It has been defined as: “(1) a privileged claim, (2) upon maritime property, (3) for service done to it or injury caused by it, (4) accruing from the moment when the claim attaches, (5) travelling with the property unconditionally, (6) enforced by means of an action in rem.” Id. (quoting Price at 1). The lien gives the creditor the right to appropriate the vessel, have it sold, and be repaid the debt from the proceeds of the sale. Equilease, 793 F.2d at 602. The maritime lien serves the “dual purpose of keeping ships moving in commerce while not allowing them to escape their debts by sailing away.” Id. In other words, a maritime lien may be considered “a right based upon the legal fiction that the ship is the wrongdoer—the ship itself caused the loss and can be called to the bar to make good the loss.” SCHOENBAUM § 9-1 (emphasis added). 9 Fuel bunkers are “necessaries” within the meaning of § 31342, as they were “useful” to the Harmony and “enable[d] her to perform her particular function.” See Equilease Corp. v. M/V Sampson, 793 F.2d 598, 603 (5th Cir. 1986) (en banc); accord Bominflot, Inc. v. The M/V Henrich S, 465 F.3d 144, 147 (4th Cir. 2006); Hoegh Shield, 658 F.2d at 367. 2270 TRANS-TEC ASIA v. M/V HARMONY CONTAINER The United States, through common law and statute, has long recognized and enforced maritime liens. Id. As reflected in the earliest Supreme Court cases on maritime liens, this remedy was premised on concern for the vessel. Throughout the nineteenth century, the Court recognized that maritime liens could arise for the provision of necessaries in “foreign ports,” or ports that were not the vessel’s home port, in order to keep the vessel fit for sail. See, e.g., The St. Jago de Cuba, 22 U.S. (9 Wheat.) 409, 416-18 (1824) (stating that the “consideration that controls every other” is that “[t]he vessel must get on”); The Gen. Smith, 17 U.S. (4 Wheat.) 438, 443 (1819). Conferring a lien on the vessel to “material-men” ensured the continued maintenance of vessels by encouraging suppliers to provide necessaries in foreign ports. See The J.E. Rumbell, 148 U.S. 1, 9 (1893) (observing that maritime liens for necessaries furnished “to keep a vessel fit for sea” took precedence over all other claims except seamen’s wages or salvage). Before 1910, when the FMLA was first enacted, an odd distinction existed in the American law of maritime liens: a maritime lien arose for the provision of necessaries in a port in a foreign country or foreign state, but no lien arose if necessaries were supplied in the vessel’s home port. The Roanoke, 189 U.S. 185, 193-94 (1903); The Gen. Smith, 17 U.S. at 443. As a consequence of this anomaly, a lien on a vessel for the provision of supplies in a port of the vessel’s home state could arise only if there were state legislation to that effect. The Gen. Smith, 17 U.S. at 443. The significant variance among the state statutes was of concern to the Supreme Court. Lucian Y. Ray, Maritime Contract Liens, 47 TUL. L. REV. 587, 589 (1973). In 1874, Justice Bradley, writing for the Court, hinted that Congress “might adopt a uniform rule for the whole country” to govern maritime liens. The Lottawanna, 88 U.S. (21 Wall.) 558, 577 (1874) (Bradley, J.). Congress responded in 1910 by passing the FMLA. Act of June 23, 1910, ch. 373, § 1, 36 Stat. 604. The legislative purpose was three-fold: (1) to overrule the home port doctrine; TRANS-TEC ASIA v. M/V HARMONY CONTAINER 2271 (2) to nullify the doctrine that, when a vessel’s owner contracted in person for necessaries or was present in the port when they were ordered, it was presumed that the supplier did not intend to rely upon the vessel’s credit, such that a lien did not arise; and (3) to substitute a single federal maritime statute for the varying state statutes dealing with necessaries. Piedmont & Georges Creek Coal Co. v. Seaboard Fisheries Co., 254 U.S. 1, 11 (1920); see also Dampskibsselskabet Dannebrog v. Signal Oil & Gas Co., 310 U.S. 268, 271-72 (1940) (stating that the FMLA’s purpose was to “simplify and clarify the rules as to maritime liens as to which there had been much confusion”). In addition, the FMLA, by favoring suppliers regardless of where necessaries were provided, was intended to boost a faltering merchant marine industry. Equilease, 793 F.2d at 602. In effect, the FMLA “was intended to operate in aid of those who supply necessaries to ships and it correspondingly restricted the rights of the owners of the vessels.” Dampskibsselskabet, 310 U.S. at 273. In 1920, Congress codified the FMLA as part of the Ship Mortgage Act of 1920, 46 U.S.C. §§ 971-75, but the substance of the lien law was left virtually unchanged until 1971. TETLEY at 604. Under the original legislation, a vessel owner’s insertion of a “no lien” clause in the charter-party prohibited suppliers from obtaining a lien if a provider “knew, or by exercise of reasonable diligence could have ascertained” that no lien would be available. Id. (emphasis omitted). Under the 1971 amendments, the “reasonable diligence” standard was dropped in favor of an “actual knowledge” standard. The legislation thus voids a “no lien” clause, as long as the supplier did not have knowledge of the clause. H.R. REP. NO. 92-340 (1971), reprinted in 1971 U.S.C.C.A.N. 1363. Therefore, even though the charter-party between Splendid and Kien Hung forbade Kien Hung from incurring liens on the Harmony, that fact, standing alone, does not prevent Trans-Tec from obtaining a maritime lien in this case, as nothing in the record indicates that Trans-Tec knew of the provision. 2272 TRANS-TEC ASIA v. M/V HARMONY CONTAINER In 1988, Congress repealed all previous maritime lien statutes and recodified the prior law on maritime liens as part of the Commercial Instruments and Maritime Liens Act. Pub. L. No. 100-710 (1988), 102 Stat. 4735 (codified at 46 U.S.C. § 31301 et seq.). Congressional reports indicated that the new law was not intended to make any substantive changes to the FMLA, and the lien provisions are still generally referred to as “the FMLA.” H.R. REP. NO. 100-918 (1988), reprinted in 1988 U.S.C.C.A.N. 6104, 6107, 6141; TETLEY at 587-88. 2. APPLICATION OF THE FMLA [11] The language of the FMLA is clear and unambiguous: [A] person providing necessaries to a vessel on the order of the owner or a person authorized by the owner—

enforce the lien; and
the action that credit was given to the vessel. 46 U.S.C. § 31342. The statute imposes no restriction on the nationality or other identity of the supplier or the vessel, and no geographic restriction on the place of provision of the necessaries. Splendid endeavors to shoehorn the FMLA into a narrower statute than it is by arguing that the FMLA does not give a maritime lien to a foreign necessaries provider for the provision of supplies to a foreign vessel in a foreign port. However, we are not persuaded by Splendid’s constrained and unsupported view of United States maritime lien law. [12] In accord with Supreme Court teachings, see, e.g., Leocal v. Ashcroft, 543 U.S. 1, 8 (2004), we begin our analyTRANS-TEC ASIA v. M/V HARMONY CONTAINER 2273 sis with the language of the statute. “[A] person providing necessaries” means any person, not only an “American person.” The FMLA, by its plain language, is not restricted in application to United States citizens, American companies, or companies doing business in the United States. Though Congress may have had American suppliers in mind, the statute, on its face, recognizes a maritime lien in favor of any person providing necessaries. Although we need not look beyond the plain language of the statute, we address Splendid’s argument that the House Report’s mention of “American materialmen” is reason to deny Trans-Tec a maritime lien. See H. REP. NO. 92-340 (1971), reprinted in 1971 U.S.C.C.A.N. 1363 (stating that enactment would “be of great assistance to American materialmen in collecting amounts owed on necessaries”). Splendid fails to point out that the Report did not exclude foreign “materialmen” from its reach, and the Committee’s reasons for protecting American suppliers extend to foreign suppliers, as well: Granting the materialman a lien encourages the prompt furnishing of necessaries to vessels so that they can be speedily turned around and put to sea. This is especially significant today when the emphasis on vessel performance is reduced port time and increased speed. Id. Given Congress’s expressed hope that the amended Act would “encourage[ ] the prompt furnishing of necessaries to vessels so that they can be turned around and put to sea,” id., it would undo Congress’s aim to recognize maritime liens only in favor of American materialmen. In any event, this passing reference hardly overrides the unambiguous language of the statute. The statute also states that a maritime lien arises upon the provision of necessaries to “a vessel.” Again, the statute’s lan2274 TRANS-TEC ASIA v. M/V HARMONY CONTAINER guage is not limited to American vessels. Though § 31342 mentions only “a vessel,” the “inference to be drawn from the legislative history is that section 31342 will be interpreted similarly to former sect. 971,” which stated that the lien applied to “any vessel, whether foreign or domestic.” TETLEY at 597. An abundance of case law has recognized a maritime lien under the FMLA where necessaries have been provided to a foreign-flagged vessel. See, e.g., Hoegh Shield, 658 F.2d at 368 (holding that maritime lien arose on Norwegian vessel); Loginter S.A. v. M/V Nobility, 177 F. Supp. 2d 411, 415 (D. Md. 2001) (Maltese vessel); Mobil Sales & Supply Corp. v. The Vessel Panamax Venus, 1986 A.M.C 420, 423 (C.D. Cal. 1985) (Liberian vessel). Finally, the statute does not discriminate between the provision of necessaries in the vessel’s home port and a foreign port. As previously noted, Congress expressly jettisoned the “home port doctrine” with the passage of the FMLA in 1910, thus allowing maritime liens regardless of whether necessaries were provided in the vessel’s home port or in a foreign port. See TETLEY at 597. Cases in the wake of the FMLA’s passage have faithfully recognized maritime liens where necessaries have been provided in foreign ports. See, e.g., Ryan Walsh, Inc. v. M/V Ocean Trader, 930 F. Supp. 210, 219 (D. Md. 1996) (oil provided to vessel in Indonesia); Mobil Sales, 1986 A.M.C. at 423 (oil provided to vessel in China and Japan). In sum, putting together the pieces of this statutory puzzle makes evident that because Trans-Tec provided necessaries to the Harmony on the order of its charterer, a maritime lien arose in favor of Trans-Tec. Splendid posits that applying the FMLA to a foreign supplier providing necessaries in a foreign locale to a foreign flag vessel would somehow result in the “extraterritorial” application of United States maritime lien law. Splendid’s argument obscures several important points, including the nature of admiralty law and the high seas, the parties’ agreement to apply United States maritime lien law, and the fact that the TRANS-TEC ASIA v. M/V HARMONY CONTAINER 2275 Harmony routinely sailed into a United States port and was subject to in rem jurisdiction in California when the Harmony’s insurers posted a bond to avoid its seizure. Nothing in the statute supports Splendid’s argument that the FMLA does not apply to situations involving a foreign vessel, a foreign supplier, and provision in a foreign port. Other courts facing similar scenarios have given the FMLA the fair reading that its plain language demands, and have found no reason to narrow it. See, e.g., Queen of Leman, 296 F.3d at 352-53 (stating that if United States law applied, the FMLA would create a maritime lien for the insurance provided); Kirgan Holding, [2002] F.C. 1235 (holding that a maritime lien arose under the FMLA for the provision of fuel bunkers to a foreign-flagged vessel in Malta). Hardly any area of law could be viewed as more extraterritorial than admiralty law. It is well settled that the admiralty jurisdiction of United States courts extends to the high seas: “The traditional domain of admiralty jurisdiction is, of course, the sea . . . .” SCHOENBAUM § 3-3. Save for inland navigable waters, ports, and a few other locations, admiralty jurisdiction by definition extends beyond United States territorial boundaries. Tethering United States maritime lien law to situations involving only American-flagged vessels, American suppliers, or American ports would threaten the ability of foreign vessels to move freely from port to port without the fear of going without necessaries. See The St. Jago de Cuba, 22 U.S. at 416 (stating that “the consideration that controls every other” is that “[t]he vessel must get on”). Splendid argues that extension of the FMLA to “completely foreign transactions” seriously interferes with other nations’ regulation of their commercial affairs because United States law allows for maritime liens for the provision of necessaries, and most other nations do not. But recognizing a maritime lien on the Harmony does not interfere with Malaysian law, which we applied at the outset to incorporate the United 2276 TRANS-TEC ASIA v. M/V HARMONY CONTAINER States choice of law provision, or the law of any other nation implicated in this transaction. This case presents no extraterritorial “problem” of the ilk that has troubled the Supreme Court because here the parties chose United States law to control their transaction, and the vessel sailed to a United States port. Cf. F. Hoffman-La Roche Ltd. v. Empagran S.A., 542 U.S. 155 (2004) (holding that foreign vitamin distributors could not bring a claim under the Foreign Trade Antitrust Improvements Act for solely foreign injury). Our conclusion does not curb the sovereignty of any other nation, or another country’s ability to regulate its maritime affairs. In fact, recognition of freely negotiated contract terms encourages predictability and certainty in the realm of international maritime transactions.10 Splendid also has forgotten the crucial fact that this transaction was not “completely foreign.” The subject of this in rem action is the vessel Harmony. Between October 2002 and March 2003, the Harmony transported $48.9 million in goods to and from Long Beach, California. That the Harmony was docked at Long Beach at the time that Trans-Tec filed suit was not mere happenstance: Long Beach was a regular stop on the Harmony’s route. These contacts with the United States, along with the parties’ express agreement to apply United States maritime lien law, put to rest any fears that an American court is unilaterally imposing the FMLA on other nations. 10 Given that approximately thirty nations recognize a maritime lien for the provision of necessaries, other countries have options, if desired, to address this circumstance. For example, a country could simply prohibit contracting parties from choosing United States or foreign maritime lien law in their contracts. Alternatively, national law could require charterers to inform suppliers of existing no-lien clauses in the charter-party. And, in the private arena, ship owners could take steps to give suppliers notice of the no-lien provisions, thus effecting actual notice of the provisions and preventing charterers from burdening the ship with maritime liens. See 46 U.S.C. § 31341 (stating that charterers are only presumed to have authority to bind the vessel). TRANS-TEC ASIA v. M/V HARMONY CONTAINER 2277 Our reliance on the plain language of the statute is all the more justified when one considers that the tangled web of American case law11 that bears on this issue is not particularly helpful in sorting out the answer. Compare Conti Lines S.A. v. MV Baroness V, 1992 A.M.C. 681, 683 (M.D. Fla. 1991) (holding that the “plain language of the statute and the history of the Federal Maritime Lien Act” allow foreign necessaries providers to obtain maritime liens) with Swedish Telecom Radio v. M/V Discovery I, 712 F. Supp. 1542, 1548 (S.D. Fla. 1989) (stating that the FMLA “was not intended to provide maritime liens for goods and services where . . . they are supplied by foreign companies in foreign ports”) (citations omitted). Both the district court and Splendid rely on an Eleventh Circuit case, Trinidad Foundry & Fabricating, Ltd. v. M/V K.A.S. Camilla, 966 F.2d 613 (11th Cir. 1992), as the foundation for their conclusion that the FMLA does not apply to this transaction.12 The most telling aspect of Trinidad is that the court acknowledged that the FMLA was not even in play: “§ 31342 is not even applicable to this case because, as we 11 We appreciate the straightforward approach of the Canadian federal court that evaluated a strikingly similar situation in Kirgan Holding, [2002] F.C. 1235, reprinted in 2006 A.M.C. 812. After first deciding to enforce the parties’ United States choice of law clause, the court determined that under the FMLA, a maritime lien arose in favor of the necessaries provider, without discussing any “extraterritorial” implications of doing so. Id. Despite Splendid’s assertion that the case was overruled by J.P. Morgan Chase Bank v. Mystras Maritime Corp., [2006] F.C. 409, Kirgan was merely distinguished on its facts. Though the outcomes of the two cases are difficult if not impossible to reconcile, we are persuaded by Kirgan. 12 The district court also cited to BENEDICT ON ADMIRALTY, which states that there is no maritime lien under the FMLA for a supplier of goods and services to a foreign flag vessel in a foreign port. 2 BENEDICT ON ADMIRALTY § 38, at 3-35 (7th ed. 1997). See also SCHOENBAUM § 9-8. Neither treatise addresses the circumstances of a contractual choice of FMLA as controlling law and neither offers any substantive analysis, instead basing its reasoning on Trinidad. 2278 TRANS-TEC ASIA v. M/V HARMONY CONTAINER have already held, English law governs.” Id. at 617. In Trinidad, a Trinidadian corporation made repairs to a Norwegian vessel whose owners failed to pay. Id. at 614. Despite the contractual designation of English law, which does not recognize a maritime lien for repairs, the supplier sought a maritime lien under the FMLA. The court stated that “§ 31342 does not provide for a maritime lien for goods and services supplied by a foreign plaintiff to foreign flag vessels in foreign ports.” Id. at 617 (citing Tramp Oil & Marine, Ltd. v. M/V Mermaid I, 805 F.2d 42, 46 (1st Cir. 1986); Swedish Telecom, 712 F. Supp. at 1545-46). Having already determined that United States law was not applicable, the court’s commentary— without any analysis—on § 31342 could hardly be less persuasive. One can argue about what is or is not dictum,13 but it seems to us that a clearer case than this one cannot be found. Not only did the court recognize that United States law did not apply, but it did not even analyze § 31342, the statute at issue here. The two cases cited as authority in Trinidad do not bolster its stray commentary. The plaintiff in Tramp was an English fuel broker that hired an American supplier to provide oil to a vessel. 805 F.2d at 44. Tramp paid the supplier, but Tramp was never paid, so it sought a maritime lien against the vessel. The First Circuit stated that under the FMLA, a supplier would be entitled to a maritime lien for providing fuel to the vessel. Id. However, because it was the intermediary that was unpaid, and not the fuel supplier, the FMLA did not apply to give the broker the “suppliers’ rights to the lien”: “We therefore think it unnecessary to protect American suppliers, and unfair to the vessel, to extend the availability of a maritime 13 See, e.g., United States v. Johnson, 256 F.3d 895, 914-16 (9th Cir. 2001) (en banc) (Kozinski, J., concurring); United States v. Crawley, 837 F.2d 291, 293 (7th Cir. 1988) (Posner, J.) (defining dictum as “not a fully measured judicial pronouncement . . . not likely to be relied on by readers, and . . . may not have been part of the decision that resolved the case or controversy on which the court’s jurisdiction depended (if a federal court)”). TRANS-TEC ASIA v. M/V HARMONY CONTAINER 2279 lien directly to an intermediate broker unknown to the vessel.” Id. at 44, 46. The location and nationality of the supplier were not at issue. Instead, the lack of a relationship between the vessel and the intermediate broker meant that the broker could not obtain a maritime lien for merely arranging the provision of fuel to the vessel. Id. at 46 (noting that extending the suppliers’ lien to intermediate brokers “could radically change the presuppositions of maritime commerce”). Tramp thus sheds no light here. [13] Similarly, the Eleventh Circuit misread Swedish Telecom, the other case cited in Trinidad. As in Trinidad, the court ultimately decided that Swedish law—not United States law—governed the transaction. Nonetheless, as in Trinidad, the court offered the totally irrelevant view that “a foreign supplier of goods is precluded from acquiring a lien under the federal Act even if it supplies goods or services in an American port.” Swedish Telecom, 712 F. Supp. at 1546. We are left with the firm conclusion that Trinidad is a house of cards that quickly tumbles with even the gentlest examination. Here, where the contract specified that “the laws of the United States” were to determine the existence of a maritime lien, our reliance on the plain language of the United States statute, rather than a case applying English law, comports with predictable judicial reasoning.