Northrim Bank v. Pearl Bay Seafoods, LLC

2024 U.S. Dist. Lexis 39509 (W.D. WA March 6, 2024)

The court addressed lien priorities and held that a bank’s preferred mortgage was superior to a maritime lien for necessaries for unpaid moorage and utilities.

Federal law states that a preferred mortgage lien has priority over all claims against the vessel except for *custodial legis* expenses, costs imposed by the court and preferred maritime liens. 46 U.S.C. sec. 31326. Preferred maritime liens are defined as (A) arising before a preferred mortgage was filed; (B) for maritime tort damages; (C) for stevedore wages; (D) crew wages; (E) for general average; or (F) for salvage. Only in the case of a foreign mortgage not filed with the Coast Guard does a maritime lien for necessaries outweigh a preferred mortgage lien.

Because the mortgage at issue was not foreign and the Port of Seattle’s necessaries lien was not preferred, the bank’s mortgage lien was superior to the maritime lien for necessaries.

The court also concluded that the bank’s attorneys’ fees and costs were included in its mortgage lien because they were provided for the mortgage agreement. “[C]ourts have held that ‘attorneys’ fees and interest accrued in the enforcement of a preferred ship mortgage are entitled to the same priority as the mortgage itself.”

Olympic Tug & Barge, Inc. v. Lovel Brier, LLC

2024 U.S. Dist. Lexis 49733 (W.D. WA March 20, 2024)

This was a dispute between a barge owner and the charterer of the barge. The charterer sued the barge owner after the latter said it would double the hire rate for the barge and declare the charterer in default.

The barge owner moved to amend its counterclaim to include a claim for breach of the duty of good faith and fair dealing based on the charterer’s refusal to turn over full insurance policies it was required to obtain pursuant to its charter agreement. The court denied the motion concluding that the amendment would be futile.

Section 7 of the charter agreement did not create a duty for the charterer to produce insurance documents at any time upon the barge owner’s demand. The agreement said that the charterer’s insurance policies (1) shall be subject to the barge owner’s approval and (2) shall be endorsed to require 30 days written notice to the barge owner in the event of any cancellation, non-renewal or other material change in policy terms or conditions. The court interpreted this language as stating conditions giving rise to the barge owner’s right to review and approve the charterer’s insurance policies after the barge owner’s initial approval of the policies. But the charterer did not have a duty to produce the policy documents absent the occurrence of the stated conditions, i.e. cancellation, non-renewal or other material change.

The lesson here for vessel owners who charter out their vessels is to include a specific provision in the charter agreement requiring the charterer to produce copies of any insurance documents on demand by the vessel owner.

Shark Tech. LLC v. Gagnon

Shark Tech. LLC v. Gagnon

2024 U.S. Dist. Lexis 45575 (S. Dist. Ala. March 14, 2024)

The court reminds us that attorneys’ fees are generally not recoverable in admiralty unless (1) they are provided for by the statute governing the claim, (2) the nonprevailing party acted in bad faith in the course of the litigation, or (3) there is a contract providing for the indemnification of attorneys’ fees.

Benicia Harbor Corp. v. Louise

2024 U.S. Dist. Lexis 48835 [March 19, 2024]

The District Court in the Eastern District of California was asked to confirm a vessel sale. The vessel’s owner, Lady Benjamin PD Cannon, objected alleging the plaintiff’s inventory of non-appurtenant property omitted a substantial amount of non-appurtenant property. Essentially, the owner objected to the extent her personal property may be destroyed with the vessel.

The court was sympathetic to the owner’s position. However, the court noted that the case had been pending for over a year during which time the vessel sat, decayed and incurred custia legis costs. Meanwhile, the owner offered no clear solution for removing her personal property from the vessel in the near future.

The court confirmed the sale. It also ordered any destruction of the vessel be delayed for at least 30 days so the owner can remove her personal property. The court ordered that the plaintiff was not to bear any expenses associated with removing the property. Unfortunately, the court did not order *who* was to bear the expense which opens the matter up to ambiguity and further motion practice.

Sunday, January 7, 2024

Markel Am. Ins. Co. v. McRae (M.D. North Carolina – January 5, 2024)

The court addressed the doctrine of umberrimae fidei.

Under federal maritime law, an insurer can be excused from paying on a policy if the insured party has misrepresented or failed to disclose relevant facts. This duty of utmost good fiath, known as uberrimae fidei, is only found in maritime law. 

The key inquiry is whether the insured disclosed to the insurer all known circumstances that materially affect the risk being insured. In other words, would the omitted information have reasonably affected the insurer’s determine to underwrite the risk. If the insured misrepresents a material fact in any way, they have breached their duty, even if the misrepresentation was unintentional, or due to negligence, mistake, accident, or voluntary ignorance. Any such misrepresentation results in a determination that the policy never attached and is void. 

Markel alleged that the McRaes made several misrepresentations including that Mr. McRaie did not have a previous conviction, Mr. McRae’s license had not been suspended, the vessel had been prior insured, and that another insurance company had not refused to underwrite the vessel. The court found Mrs. McRae’s lack of knowledge regarding the alleged misrepresentations or belief that the statements were not relevant, did not excuse the misrepresentation.  The court also found that the statements were material in that they were part of the insurer’s eligibility analysis. The court held that the doctrine of umberrimae fidei voided the underlying insurance policy and excused the insurers obligation to honor the policy.

Sunday, January 7, 2024

What Hurts, LLC v. Volvo Penta of the Ams., LLC (E.D. Virginia – January 5, 2024)

The court addresses whether a breach of express warranty claims falls within the court admiralty jurisdiction.

Federal courts have original and exclusive jurisdiction over any civil case of admiralty or maritime jurisdction. Contract disputes fall within admiralty jurisdiction if the nature or subject matter of the contract is maritime. 

Contracts for repair, alteration, or reconstruction of a vessel which, before such work, was actively engaged in maritime commerce or navigation, generally are considered maritime contracts. However, contracts to build a ship, or contracts involving work performed on a non-maritime object, are not maritime. Uncertainty between the two are resolved in favor of admiralty jurisdiction. 

The court found that the vessel was built before the underlying Release, that gave rise to the express warranty claim, was signed. Thus, the Release was a contract for the modification of a vessel and was properly considered a maritime contract. 

Plaintiff’s claim, however, was for breach of an express warranty and warranty claims generally do not fall within a federal court’s original admiralty jurisdictoin because they are grounded in nonmaritime contracts, such as contracts for the sale of a vessel. But because the parties agreed in the Release to create a new limited warranty as part of their agreement to alter the vessel’s engines, the limited warranty was grounded in a maritime contract and the express warranty claim was held to fall within the court’s original admiralty jurisdiction. 

 

Wednesday, January 3, 2024

Bensouna v. Someone to Do IT, Inc. (Dec. 5, 2023)

The Florida District Court addresses what is and what isn’t a vessel

Judge William P. Dimitrouleas granted a motion to dismiss because the court lacked subject matter jurisdiction. The pro per Plaintiff argued the court had admiralty subject matter jurisdction because his claims involved a “Vessel”. Court found that the structure at issue was not a vessel. The Court reiterated that not every floating structure is a vessel. “An incomplete structure that has not been put into navigation as an instrument of commerce is not a vessel.” The court said that vessels under construction do not give rise to either a maritime contract or a maritime tort.