Valero Mktg. & Supply Co. v. M/V ALMI SUN

NuStar Energy Services v. M/V COSCO AUCKLANDIn NuStar Energy Services, Inc. v. M/V COSCO AUCKLAND, No. 17-20246 (5th Cir. Jan. 14, 2019), the U.S. Fifth Circuit concluded NuStar, the physical supplier of bunkers/marine fuel to the M/V COSCO AUCKLAND, lacked standing to appeal the district court’s ruling that O.W. Bunker Far East (S) Pte Ltd., the contract supplier of bunkers, had validly assigned its maritime lien against that vessel to ING Bank N.V. In line with its earlier decision of Valero Mktg. & Supply Co. v. M/V ALMI SUN, 893 F.3d 290, 295 (5th Cir. 2018) and other decisions of the Second, Ninth and Eleventh Circuits, the Fifth Circuit concluded that NuStar did not hold a maritime lien against the vessel even though the vessel interests were aware that NuStar would physically supply the bunkers, and the vessel’s employees oversaw and accepted the delivery of the fuel.

Because NuStar did not have a valid maritime lien, the district court’s conclusion that OW Far East had assigned its maritime liens to ING Bank would not affect NuStar in any concrete way and thereby rendered NuStar’s interest in challenging the validity of the assignment moot. Accordingly, the Fifth Circuit concluded it lacked jurisdiction to review the district court’s ruling that OW Far East validly assigned its maritime lien to ING Bank.

The Fifth Circuit noted in closing: “Of course, our inability to review the district court’s judgment as to ING means that this case is not resulting in circuit precedent on the question whether the liens are assignable to ING. So to the extent this issue arises in other OW Bunker cases in this circuit, it remains an open question.”  While there still is no precedent emanating from the U.S. Fifth Circuit concerning the validity of the assignments of maritime liens to ING Bank, the decisions of other courts have confirmed the validity of such assignments.  See Barcliff, LLC v. M/V DEEP BLUE, 876 F.3d 1063, 1074-75 (11th Cir. 2017); ING Bank N.V. v. M/V TEMARA, ___ F. Supp. 3d ___ (S.D.N.Y. 2018), on remand; NuStar Energy Servs., Inc. v. M/V COSCO AUCKLAND, 2016 WL 9307626 at *6 (S.D. Tex. 2016), appeal dismissed on this point.

NOTE: King & Jurgens, LLC and its predecessor, King, Krebs & Jurgens, PLLC, have represented ING Bank N.V. in scores of maritime arrests and attachments of vessels in the ports of the United States to collect for non-payment of bunkers contractually supplied by the OW Bunker Group. King & Jurgens, LLC, however, was not involved in the NuStar litigation discussed in this blog post.

Bunker Holdings, Inc. v. Yang Ming Liberia Corp.Many physical suppliers of bunkers/marine fuel, who were unpaid by their contractual counterparties, have relied on a decision of the United States Court of Appeals for the Ninth Circuit, Marine Fuel Supply & Towing, Inc. v. M/V KEY LUCKY, 869 F.2d 473 (9th Cir. 1988), as jurisprudential support for the concept that the physical supplier has a maritime lien against the vessel supplied with the fuel, even though the physical supplier did not take the order for the fuel from the vessel’s owner, charterer or agent. A close reading of the KEN LUCKY decision indicated that the Ninth Circuit reached its conclusion based upon the vessel interests’ admission in the pleadings that Bulkferts, the subcharterer of the vessel, had ordered the fuel from Marine Fuel. Id. at 476-77. (The actual chain of contracts was Bulkferts ordered the fuel from Brook Oil, who then ordered the fuel from Marine Fuel.) Because the vessel interests had admitted that their subcharterer had ordered the fuel directly from the physical supplier, the physical supplier was entitled to a maritime lien. Since that time, KEN LUCKY has been routinely cited by physical suppliers as standing for the overly broad proposition that they have a maritime lien against the vessel, regardless of whether the vessel owner, charterer or agent order the necessaries from the physical supplier.

Recently, the Ninth Circuit revisited this issue in Bunker Holdings, Inc. v. Yang Ming Liberia Corp., No. 16-35539 (9th Cir. Oct. 11, 2018). The Ninth Circuit followed the prior decisions of the Eleventh, Second and Fifth Circuits in concluding that a physical supplier of fuel that received the fuel order from a bunker broker or bunker intermediary, and not the vessel owner or charterer, does not have a maritime lien against the vessel under the Commercial Instruments and Maritime Lien Act. Id. at 5.

Perhaps more significantly, the Ninth Circuit has expressly limited the KEN LUCKY decision to its unique procedural posture:

The defendant admitted that Marine Fuel sold the bunkers to Bulkferts, pursuant to an order originating from Bulkferts. 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, 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 Bulkfert’s agent.

Id. at 6 (original italics, citations omitted).

Because that critical factual admission present in KEN LUCKY was not made by the vessel interests in Bunker Holdings, the physical supplier could derive no support from that decision. In other words, the Ninth Circuit has finally relegated the KEN LUCKY decision to its own procedural peculiarity. In the future, vessel interests can rebut the suggestion that KEN LUCKY provides a bunker sub-contractor with a maritime lien by citing Bunker Holdings and paraphrasing Judge Higginbotham’s observation in the ALMI SUN decision: “In determining the law of the [Ninth] Circuit, we prefer its own statement of the law.” ALMI SUN, 893 F.3d at 296.