Court Opinion

ID: 4319382
Source: CourtListenerOpinion
Date Created: 2018-10-11 20:01:20.49603+00
Date Added: 2024-06-11T14:45:50.392007
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

BUNKER HOLDINGS LTD.,                     No. 16-35539
             Plaintiff-Appellant,
                                             D.C. No.
                 v.                       3:14-cv-06002-
                                               BHS
YANG MING LIBERIA CORP., Owner
of Defendant M/V YM Success,
               Claimant-Appellee,           OPINION

M/V YM SUCCESS (IMO 9294800),
her tackle, boilers, apparel,
furniture, engines, appurtenances,
etc., in rem,
                 Defendant-Appellee.

      Appeal from the United States District Court
        for the Western District of Washington
      Benjamin H. Settle, District Judge, Presiding

          Argued and Submitted June 14, 2018
                 Seattle, Washington

                 Filed October 11, 2018
2         BUNKER HOLDINGS V. YANG MING LIBERIA

    Before: Milan D. Smith, Jr. and Paul J. Watford, Circuit
        Judges, and Douglas L. Rayes, * District Judge.

                   Opinion by Judge Watford

                          SUMMARY **

                          Maritime Law

   The panel affirmed the district court’s summary
judgment against a supplier of bunkers (marine fuel) in the
supplier’s in rem action for a maritime lien against a
containership, and the panel reversed the district court’s
award of costs to the vessel owner.

    Assuming that United States law applies, the panel held
that, under 46 U.S.C. § 31342(a), the bunker supplier would
be entitled to a maritime lien if it provided necessaries to a
vessel on the order of the owner or a person authorized by
the owner. Agreeing with other circuits, the panel held that
the supplier did not provide the bunkers on the order of the
owner or a person authorized by the owner because the
owner ordered the bunkers from a fuel broker, which
purchased the bunkers, pursuant to a separate contract, from
the supplier and did not act as the owner’s agent or have
authority to bind the vessel.

      *
      The Honorable Douglas L. Rayes, United States District Judge for
the District of Arizona, sitting by designation.
    **
       This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
        BUNKER HOLDINGS V. YANG MING LIBERIA                 3

    The panel reversed the district court’s award of costs,
under a local rule, to the vessel owner for the cost of keeping
in place a letter of undertaking that enabled the owner to
secure the release of the ship, which had been arrested at the
outset of the action. The panel held that the local rule lacked
statutory authority because premiums paid on undertakings
or bonds are not authorized by 28 U.S.C. § 1920 or by any
other statute. The panel wrote that this result was
undesirable, but a return to an earlier practice awarding such
costs would require action by Congress or by the Supreme
Court pursuant to its delegated rulemaking authority under
28 U.S.C. § 1925.

                         COUNSEL

Briton P. Sparkman (argued) and George M. Chalos, Chalos
& Co. P.C., Houston, Texas, for Plaintiffs-Appellants.

Barbara L. Holland (argued) and Tyler W. Arnold, Garvey
Schubert Barer, Seattle, Washington, for Claimant-
Appellee.

Erich P. Wise and Alisa Manasantivongs, Flynn Delich &
Wise LLP, Long Beach, California; Bruce G. Paulsen,
Jeffrey M. Dine, and Brian P. Maloney, Seward & Kissell
LLP, New York, New York; for Amicus Curiae ING Bank
N.V.
4       BUNKER HOLDINGS V. YANG MING LIBERIA

                         OPINION

WATFORD, Circuit Judge:

     This is an in rem action for a maritime lien brought by
Bunker Holdings Ltd. against the containership M/V YM
Success. Bunker Holdings supplied bunkers (marine fuel) to
the YM Success while the ship was docked in Nakhodka,
Russia. Under United States law, which we will assume
applies here, Bunker Holdings is entitled to a maritime lien
if it “provid[ed] necessaries to a vessel on the order of the
owner or a person authorized by the owner.” 46 U.S.C.
§ 31342(a).

    Bunker Holdings provided “necessaries” to a “vessel,”
as the statute requires, because bunkers are considered
necessaries and the YM Success qualifies as a vessel. The
only issue is whether Bunker Holdings provided the bunkers
“on the order of the owner or a person authorized by the
owner.” On cross-motions for summary judgment, the
district court held that Bunker Holdings could not satisfy this
last requirement. We agree with that conclusion.

    The relevant facts are not in dispute. The owner of the
YM Success, Yang Ming Liberia Corp., ordered the bunkers
from O.W. Bunker Far East (Singapore) Pte. Ltd., which we
will refer to as OWB Far East for short. Under the terms of
their contract (simplified somewhat), Yang Ming agreed to
buy 3,500 metric tons of fuel oil from OWB Far East for
delivery to the YM Success on specified dates at a price of
$498.00 per metric ton. The contract designated OWB Far
East as the “seller” and Yang Ming as the “buyer.” Yang
Ming knew that in all likelihood OWB Far East, a fuel
broker, would not supply the bunkers itself, but it did not
direct OWB Far East to select any particular supplier. OWB
Far East decided to purchase the bunkers from Bunker
        BUNKER HOLDINGS V. YANG MING LIBERIA                5

Holdings, and those two companies entered into their own
separate contract. Under the terms of their contract, Bunker
Holdings agreed to sell 3,500 metric tons of fuel oil to OWB
Far East at a price of $480.33 per metric ton. Bunker
Holdings then supplied the bunkers to the YM Success and
billed OWB Far East for payment. Shortly thereafter, OWB
Far East filed for bankruptcy, leading Bunker Holdings to
pursue payment through this maritime lien action against the
ship.

    These facts make clear that Bunker Holdings did not
provide bunkers to the YM Success “on the order of the
owner” of the vessel. Yang Ming placed its order with OWB
Far East, not Bunker Holdings.

    Because it did not provide the bunkers on the order of the
vessel’s owner, Bunker Holdings is entitled to a maritime
lien only if it can show that it provided the bunkers “on the
order of . . . a person authorized by the owner.” 46 U.S.C.
§ 31342(a). Bunker Holdings supplied the bunkers “on the
order of” OWB Far East, so it must show that OWB Far East
was “a person authorized by the owner” to bind the vessel.
A separate statutory provision, § 31341(a), provides a list of
persons who are “presumed to have authority to procure
necessaries for a vessel” on the ship’s credit. They include
the owner, the master, and “a person entrusted with the
management of the vessel at the port of supply.”
§ 31341(a)(1)–(3). OWB Far East does not fall into any of
those categories. The statute also includes, as relevant here,
“an agent appointed by . . . the owner.” § 31341(a)(4)(A).
But Bunker Holdings submitted no evidence that OWB Far
East was acting as Yang Ming’s agent when OWB Far East
contracted with Bunker Holdings to purchase bunkers for the
YM Success.
6       BUNKER HOLDINGS V. YANG MING LIBERIA

    Unable to rely on the statutory list of persons with
presumed authority to bind the vessel, Bunker Holdings
grounds its claim on our decision in Marine Fuel Supply &
Towing, Inc. v. M/V Ken Lucky, 869 F.2d 473 (9th Cir.
1988). There, we ruled that the plaintiff was entitled to a
maritime lien in circumstances not unlike those present in
this case. Bulkferts, the subcharterer of the Ken Lucky,
placed an order for bunkers with Brook Oil, which in turn
placed an order with the plaintiff, Marine Fuel. Id. at 475.
Marine Fuel was the entity that actually supplied the bunkers
to the vessel. Id. We held that Marine Fuel was entitled to
a maritime lien, but we based our holding on a critical factual
admission made by the defendant. The defendant admitted
that Marine Fuel sold the bunkers to Bulkferts, pursuant to
an order originating from Bulkferts. Id. at 476–77. Based
on that admission, we treated the case as though Bulkferts
had ordered the bunkers directly from Marine Fuel and
hence assumed that Marine Fuel had supplied the bunkers
“on the order of” Bulkferts. Since Bulkferts was one of the
entities with presumed authority to bind the vessel, see id. at
476 & n.3, each of the statutory requirements for a maritime
lien was satisfied. In ruling for Marine Fuel, we explicitly
refused to consider whether Brook Oil was authorized to
bind the ship as Bulkferts’ agent. Id. at 477.

    Bunker Holdings cannot rely on our decision in Ken
Lucky because the critical factual admission present there is
absent here. Yang Ming never admitted that it ordered the
bunkers from Bunker Holdings; it has asserted throughout,
and the undisputed facts confirm, that it ordered the bunkers
from OWB Far East. In contrast to the single transaction we
assumed was involved in Ken Lucky, two independent
transactions are involved in this case: one between Yang
Ming and OWB Far East, and a second transaction between
        BUNKER HOLDINGS V. YANG MING LIBERIA                 7

OWB Far East and Bunker Holdings. That key factual
difference renders this case distinguishable from Ken Lucky.

    In our view, this case is controlled not by Ken Lucky, but
instead by our decisions in Port of Portland v. M/V Paralla,
892 F.2d 825 (9th Cir. 1989), and Farwest Steel Corp. v.
Barge Sea-Span 241, 828 F.2d 522 (9th Cir. 1987). In both
of those cases, ship owners entered into contracts with
general contractors for repair of the vessels. The general
contractors, in the course of performing their work,
negotiated separate agreements with subcontractors for
certain necessaries, which the subcontractors provided to the
vessels. We held that the subcontractors were not entitled to
a maritime lien because they had contractual relationships
only with the general contractors, and in most cases “a
general contractor does not have the authority to bind a
vessel.” Port of Portland, 892 F.2d at 828; see Farwest
Steel, 828 F.2d at 526. There is one exception to that general
rule, which applies when the vessel owner directs the general
contractor to use a particular subcontractor. In that scenario,
the general contractor essentially acts as the owner’s agent
and thus exercises authority to bind the vessel. Farwest
Steel, 828 F.2d at 526.

    The general rule stated in Port of Portland and Farwest
Steel governs this case because OWB Far East occupied a
position no different from that of a general contractor.
Under its contract with Yang Ming, OWB Far East assumed
the obligation to supply bunkers to the YM Success. OWB
Far East entered into a separate contract with Bunker
Holdings to assist OWB Far East in fulfilling its own
contractual obligations to Yang Ming. OWB Far East was
not acting as Yang Ming’s agent and lacked authority to bind
the vessel, so its contract with Bunker Holdings could not
give rise to a maritime lien in Bunker Holdings’ favor. The
8       BUNKER HOLDINGS V. YANG MING LIBERIA

exception to the general rule does not apply because Yang
Ming did not direct or require OWB Far East to purchase the
bunkers from Bunker Holdings.

    In sum, we agree with the district court’s conclusion that
Bunker Holdings is not entitled to a maritime lien against the
YM Success. In so holding, we join three other circuits that
have reached the same conclusion on nearly identical facts.
See Valero Marketing & Supply Co. v. M/V Almi Sun,
893 F.3d 290, 294–95 (5th Cir. 2018); ING Bank N.V. v. M/V
Temara, 892 F.3d 511, 521–22 (2d Cir. 2018); Barcliff, LLC
v. M/V Deep Blue, 876 F.3d 1063, 1071 (11th Cir. 2017).

    The one remaining issue concerns the district court’s
award of costs. After Bunker Holdings arrested the YM
Success at the outset of this action, the parties agreed that
Yang Ming could secure the ship’s release by posting
substitute security in the form of a letter of undertaking for
$2.4 million. See 28 U.S.C. § 2464(a); Supplemental
Admiralty and Maritime Claims Rule E(5). Yang Ming paid
approximately $54,000 to keep the letter of undertaking in
place during the 17 months this action remained pending in
the district court. The court awarded Yang Ming that
amount as a taxable cost under Rule 54(d)(3)(B) of the Local
Rules of Civil Procedure for the Western District of
Washington, which provides that “[r]easonable premiums
paid on undertakings or bonds or security stipulations shall
be allowed where the same have been furnished by reason of
express requirement of law, rule, or court order.” The court
viewed the cost of obtaining the letter of undertaking as
“tantamount to a premium on an undertaking, bond, or
security.”

    Bunker Holdings argues that the costs award is invalid
because Local Rule 54(d)(3)(B) lacks statutory
authorization, at least as applied in admiralty and maritime
        BUNKER HOLDINGS V. YANG MING LIBERIA                 9

cases. We agree with Bunker Holdings on this point.
Federal courts may not award costs beyond those mentioned
in 28 U.S.C. § 1920 unless another federal statute authorizes
them to do so. West Virginia University Hospitals, Inc. v.
Casey, 499 U.S. 83, 86 (1991); see Taniguchi v. Kan Pacific
Saipan, Ltd., 566 U.S. 560, 573 (2012). Premiums paid on
undertakings or bonds are not included among the six
categories of taxable costs mentioned in § 1920. A separate
statute, 28 U.S.C. § 1925, does authorize the Supreme Court
to promulgate rules specifying additional categories of costs
that may be awarded in admiralty and maritime cases. But
thus far the Supreme Court has not issued a rule allowing a
party to recover as a taxable cost the expenses incurred in
posting a bond or other security under 28 U.S.C. § 2464 and
Supplemental Rule E(5). The district court therefore lacked
authority to award Yang Ming the costs it incurred in posting
the letter of undertaking in this case.

    Although we are constrained by precedent to rule as we
have, this strikes us as an undesirable result. When a ship is
arrested and held in the marshal’s custody, the marshal’s
expenses may be taxed as costs. 28 U.S.C. § 1921(a)(1)(E).
Posting substitute security to allow for the vessel’s release
avoids those expenses, often at a lower cost. If the plaintiff
can be forced to bear the marshal’s expenses when the ship
remains in custody, a district court should have the discretion
to award a prevailing ship owner the expenses it incurs to
post substitute security allowing for the ship’s release.
Courts sitting in admiralty have historically awarded such
costs to prevailing ship owners, see, e.g., The South
Portland, 95 F. 295, 296 (D. Wash. 1899), but that was
before the Supreme Court held that each item of a costs
award must be grounded on an explicit grant of statutory
authority. A return to that earlier tradition seems warranted,
but it will require action either by Congress or by the
10       BUNKER HOLDINGS V. YANG MING LIBERIA

Supreme Court pursuant to its delegated rulemaking
authority under 28 U.S.C. § 1925. Until then, we do not
think district courts may allow prevailing ship owners to
recover as a taxable cost the expenses incurred in posting
substitute security, even if a local court rule purports to
authorize such an award. Accordingly, we reverse the
district court’s award of costs to Yang Ming.

     AFFIRMED in part; REVERSED in part.

     The parties shall bear their own costs on appeal.