Case 3:16-cv-01435-HLA-JRK Document 29 Filed 12/20/16 Page 1 of 9 PageID 352 AMERICAN OVERSEAS MARINE COMPANY, LLC, UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA JACKSONVILLE DIVISION Plaintiff, IN ADMIRALTY vs. Case No. 3:16-cv-1435-J-25JRK M/V SEATTLE, Official No. 1239373, her engines, machinery, tackle, appurtenances, equipment, freights, subfreights, charter hire, etc., in rem, and Defendant, WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as owner trustee of the BBC Seattle Trust, a Delaware Statutory Trust, for the benefit of JJ Seattle LLC, Claimant. / O R D E R I. Status This cause is before the Court following a show cause hearing held before the undersigned on December 16, 2016 concerning whether the arrest of the M/V Seattle ( the Vessel ) should be vacated. See Minute Entry (Doc. No. 28); see also Rule E(4)(f), Supplemental Rules for Admiralty and Maritime Claims ( Supplemental Rule(s) ) 1 ; Local 1 Supplemental Rule E(4)(f) provides that [w]henever property is arrested or attached, any person claiming an interest in it shall be entitled to a prompt hearing at which the plaintiff shall be required to show why the arrest or attachment should not be vacated or other relief granted consistent with (continued...)
Case 3:16-cv-01435-HLA-JRK Document 29 Filed 12/20/16 Page 2 of 9 PageID 353 Admiralty Rule 7.03(g), United States District Court, Middle District of Florida ( Local Admiralty Rule(s) ) 2. The hearing was set by an Order to Show Cause (Doc. No. 15) entered December 9, 2016 upon the filing of a motion by the owner of the Vessel, Wilmington Trust Company ( Claimant ). 3 See Claimant s Motion for a Prompt Hearing and Issuance of an Order to Show Cause Why the Arrest of the M/V Seattle Should Not be Vacated (Doc. No. 11; Motion ), filed December 8, 2016. In response to the Motion, on December 15, 2016, Plaintiff American Overseas Marine Company, LLC s ( Plaintiff( s) ) Memorandum of Law in Opposition to Motion of Claimant for an Order Vacating the Arrest of the M/V Seattle (Doc. No. 25; Response ) was filed. Upon consideration of the parties arguments, the evidence presented at and before the hearing, as well as the applicable law, the undersigned finds the Motion, to the extent it seeks to vacate the arrest, is due to be denied. II. Background On November 16, 2016, Plaintiff initiated this action by filing a Verified Complaint (Doc. No. 1; Complaint or Compl. ) against the Vessel, in rem, seeking maritime liens for supply and payment of necessaries (count I) and for crew wages (count II). Plaintiff is in the business of providing technical and crew management services for commercial and government vessels. Compl. at 2 3. According to the Complaint, Claimant bareboat 1 (...continued) the[ Supplemental R]ules. 2 Local Admiralty Rule 7.03(g) provides, Coincident with the filing of a claim pursuant to Supplemental Rule (E)(4)(f), and Local Admiralty Rule 7.03(f)(1), the claimant may also file a motion and proposed order directing plaintiff to show cause why the arrest should not be vacated. If the Court grants the order, the court shall set a date and time for a show cause hearing. Thereafter, if the court orders the arrest to be vacated, the court shall award attorney s fees, costs, and other expenses incurred by any party as a result of the arrest. 3 Claimant appears not in its individual capacity, but solely as owner trustee of the BBC Seattle Trust, a Delaware Statutory Trust, for the benefit of JJ Seattle LLC. -2-
Case 3:16-cv-01435-HLA-JRK Document 29 Filed 12/20/16 Page 3 of 9 PageID 354 chartered the Vessel to Teras BBC Breakbulk Shipping, LLC ( the Charterer ). Id. at 2 7. In turn, the Charterer appointed [Plaintiff] to perform certain management services for and on behalf of the Vessel pursuant to a Ship Management Agreement dated May 7, 2012. Id. at 2 8; see also id. at Ex. A ( Management Agreement ). The Complaint and attached Management Agreement set forth in detail various crew management and technical management services that Plaintiff was obligated to provide. Id. at 2-3 9-11. The Complaint alleges that despite Plaintiff performing the crew management services from May 2012 through the date of the Complaint, and despite performing technical management services from May 2012 until approximately October 2015, when Charterer directed [Plaintiff] to discontinue the performance thereof, id. at 3-4 13-14, Charterer has failed to pay Plaintiff approximately $1,172,093.00 for such goods, services and other necessaries and approximately $2,909,204.42 in wages to the Crew..., which wages were owed by the Vessel s Charterer as owner pro hac vice, id. at 5, 6 21, 28, 29. Consequently, according to the Complaint, Plaintiff is entitled to a maritime lien enforceable in rem against the Vessel. Id. at 6, 7 25, 33. Plaintiff also filed, on December 2, 2016, a Motion for Issuance of Warrant of Arrest (Doc. No. 4) and a Motion and Memorandum of Law to Hold Process of Arrest in Abeyance (Doc. No. 5). On December 6, 2016, the undersigned entered an Order Granting the Motion for Warrant of Arrest but Directing that Issuance of the Warrant and Process of Arrest be Held in Abeyance (Doc. No. 6) pending written notification by Plaintiff s counsel to the Clerk that an arrest was necessary. Plaintiff s counsel so notified the Clerk that same day that an arrest was necessary, and the Clerk issued an arrest warrant for the Vessel (Doc. No. 9). -3-
Case 3:16-cv-01435-HLA-JRK Document 29 Filed 12/20/16 Page 4 of 9 PageID 355 Also on December 6, 2016, Plaintiff filed a Motion for Appointment of Substitute Custodian (Doc. No. 7), which the Court granted (Doc. No. 8). The Vessel was arrested by the United States Marshal on December 7, 2016. On December 8, 2016, a Notice of Restricted Appearance and Verified Claim of Owner (Doc. No. 10) was filed by Claimant, together with the Motion. III. Discussion A. Arguments/Evidence Claimant contends that the arrest must be vacated because Plaintiff acted as a general agent for the Charterer and therefore, under the law, cannot claim a maritime lien. Motion at 8-12. In the event that the Court finds Plaintiff was not a general agent, Claimant argues Plaintiff cannot claim a valid maritime lien because there was a no-lien clause in the charter agreements and Plaintiff had knowledge of it. Id. at 12-13. Plaintiff responds that it was not a general agent for two reasons: 1) because it has only limited responsibilities and exercised no control over the ship ; and 2) because it did not rely exclusively on the credit of the owners or charterers. Response at 11, 13 (emphasis omitted). If the Court does not accept Plaintiff s contention that it was not a general agent, Plaintiff argues that it is still entitled to a maritime lien by implication. Id. at 14 (emphasis omitted). Finally, Plaintiff contends that it did not possess actual knowledge of the no-lien clause in the charter parties, and therefore its assertion of a maritime lien cannot be barred. Id. at 15. In support of its arguments, Plaintiff filed, among other things, a Declaration of Christopher B. Nette, Plaintiff s Vice President of Marine Operations (Doc. No. 25-1) and a -4-
Case 3:16-cv-01435-HLA-JRK Document 29 Filed 12/20/16 Page 5 of 9 PageID 356 Declaration of Francis X. Nolan, III, an attorney for Plaintiff (Doc. No. 25-2). During the December 16, 2016 evidentiary hearing (which has not been transcribed by a court reporter), Claimant produced three witnesses: 1) Edwardo Sica, the current Captain of the Vessel, who testified generally that a mortgage letter and a sign were posted on the Vessel notifying the occupants about the no-lien clause as of June 2016, but as of November 2016, the mortgage letter and sign went missing; 2) Scott Thomas Holdsworth, a former Captain of the Vessel, who testified generally that the mortgage letter and a sign were posted on the Vessel, but in October 2016, he checked for them and they had gone missing; and 3) Robert Lee Fellows, who has worked as an engineer and project manager, among other capacities, who testified generally about compliance and regulatory issues with the Vessel and provided some background regarding Plaintiff s relationship with the Charterer. Claimant also offered, and the Court received, three exhibits into evidence (one exhibit only being partially received): 1) Exhibit WT 1 : A Standard Ship Management Agreement between Charterer and Plaintiff entered on May 7, 2012; 2) Exhibit WT 4 : a one-page letter from Claimant s Financial Services Officer to the Master of the Vessel purportedly attaching the mortgage and directing the Master to place the letter and mortgage on the Vessel 4 ; and 3) Exhibit WT 13 : a June 30, 2016 email from the current Captain of the Vessel that attaches a spreadsheet showing that the letter and mortgage were allegedly on the Vessel during inspection. B. Applicable Law A post-arrest hearing is not intended to definitively resolve the dispute between the parties, but only to make a preliminary determination whether there were reasonable grounds 4 The Court only admitted the letter into evidence; it did not admit the attached Ship Mortgage. -5-
Case 3:16-cv-01435-HLA-JRK Document 29 Filed 12/20/16 Page 6 of 9 PageID 357 for issuing the arrest warrant.... 20th Century Fox Film Corp. v. M.V. Ship Agencies, Inc., 992 F. Supp. 1423, 1427 (M.D. Fla. 1997) (quotation, citation, and footnotes omitted). [A p]laintiff has the burden under Supplemental Rule E(4)(F) to come forward with sufficient evidence to show there was probable cause [or reasonable grounds ] for the arrest or attachment of the vessel. Id. (citation omitted); see also Seatrade Group N.V. v. 785.5 Tons of Cement, No. H-05-2771, 2005 WL 3878026 (S.D. Tex. 2005) (unpublished). The plaintiff must show by a preponderance of the evidence that it is entitled to a valid lien. Seatrade Group N.V., 2005 WL 3878026 (citations omitted). In determining whether the burden has been met, the Court may consider evidence at the hearing that was not available at the time the warrant was issued. S & S Diesel Marine Servs., Inc. v. M/V F-Troop, No. 11-60020-CIV, 2011 WL 1899402, at *9 (S.D. Fla. May 18, 2011) (unpublished) (citation omitted). The Court at this stage must not engage in a mini-trial and must be careful not to impose a higher burden on [Plaintiff] than is authorized[.] PDS Gaming Corp. v. M/V Ocean Jewell of St. Petersburg, No. 07-10088, 2007 WL 2988798, at *1 (11th Cir. Oct. 15, 2007) (unpublished). With respect to Claimant s argument that Plaintiff acted as a general agent, [i]f a party contesting the maritime lien presumption establishes that the creditor was a general agent, as opposed to a special agent, then a presumption arises that the creditor looked solely to the credit of the owner. Sunrise Shipping, Ltd. v. M/V Am. Chemist, No. Civ.A 96-2849, 1999 WL 718271, at *5 (E.D. La. Aug. 31, 1999) (unpublished) (citation omitted). However, the legal distinction between general and special maritime agents is not altogether clear. Id. (quoting First Nat l Bank of Jefferson Parish v. M/V Lightning Power, 851 F.2d 1543, 1546 n.3 (5th Cir. 1988) (stating that [i]n light of the federal lien statute and the strong presumption -6-
Case 3:16-cv-01435-HLA-JRK Document 29 Filed 12/20/16 Page 7 of 9 PageID 358 that operates in favor of maritime liens, it is not wholly clear to us why the general agency presumption continues to survive )). Clearly, the determination of general or special agency depends on the facts of each case. Id. With respect to Claimant s argument that Plaintiff knew of the no-lien clause in the charter agreements and therefore it cannot now claim a lien, the [Federal Maritime Lien Act ( FMLA )] provides that a person providing necessaries to a vessel on the order of... 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. World Fuel Servs. Trading, DMCC v. Hebei Prince Shipping Co., Ltd., 783 F.3d 507, 521 (4th Cir. 2015) (quoting 46 U.S.C. 31342(a)); see also Galehead, Inc. v. M/V Anglia, 183 F.3d 1242, 1244 (11th Cir. 1999). The FMLA creates a presumption that charterers... have such authority to procure necessaries for the Vessel. World Fuel Servs. Trading, DMCC, 783 F.3d at 521 (quoting 46 U.S.C. 31341(a)(4)(B)). This statutory presumption can be rebutted only by proof that the [plaintiff] had actual knowledge that the charterer lacked the ability to bind the vessel as part of a contract for necessaries. Id. (citation omitted); see also Stevens Shipping and Terminal Co. v. Japan Rainbow, II MV, 334 F.3d 439, 443 (5th Cir. 2003) (citation omitted) (stating that a party who knows of a prohibition of liens clause before supplying goods or services to a vessel cannot later claim a maritime lien for those goods or services ). C. Findings Here, the undersigned finds that Plaintiff has established the arrest was and continues to be based on probable cause and reasonable grounds. In this regard, Plaintiff has shown by a preponderance of the evidence that it is entitled to a valid lien. For purposes of the -7-
Case 3:16-cv-01435-HLA-JRK Document 29 Filed 12/20/16 Page 8 of 9 PageID 359 show cause hearing, the underlying claims for necessaries and crew wages are not seriously contested; rather, as explained above, the dispute is whether Plaintiff should be viewed as a general or special agent and whether Plaintiff had actual knowledge of the no-liens clause. Both questions are very fact-intensive. The factual development required to resolve these questions would force the Court to engage in the sort of mini trial that it is not permitted to do in determining whether an arrest should be vacated. Although Claimant did present witnesses in support of its assertions, their testimony also raised a number of questions related to the agency relationship and whether Plaintiff had actual knowledge of the no-liens clause. Contrasting the witnesses testimony with the other evidence of record, the testimony does not carry the day on these issues, at least at this early stage. Having considered all of the evidence presented, the undersigned finds that Plaintiff has satisfied its burden, and the arrest should not be vacated. 5 IV. Conclusion After due consideration, it is ORDERED: 5 The undersigned also notes that a proposed intervening plaintiff, G.C. Maritime Services, Inc., has filed a motion to intervene (Doc. No. 26) and a motion for issuance of a supplemental warrant of arrest (Doc. No. 27) based on it having provided various services on the Vessel for which it allegedly has not been compensated. It does not appear based on the limited information before the Court that the same arguments Claimant advances in the Motion for vacating the arrest would be applicable to the proposed intervening plaintiff. -8-
Case 3:16-cv-01435-HLA-JRK Document 29 Filed 12/20/16 Page 9 of 9 PageID 360 Claimant s Motion for a Prompt Hearing and Issuance of an Order to Show Cause Why the Arrest of the M/V Seattle Should Not be Vacated (Doc. No. 11), to the extent it seeks for the Court to vacate the arrest of the Defendant Vessel, is DENIED. DONE AND ORDERED at Jacksonville, Florida on December 20, 2016. kaw Copies to: Counsel of Record (including counsel for Claimant) -9-