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MARITIME LIENS AND SHIP MANAGEMENT AGREEMENTS: IS THE MARITIME LIENS UNIVERSE SHRINKING OR EXPANDING?

TABLE OF CONTENTS

I. Introduction                                            418
II. Historical Background of Maritime Liens                420
    A. In rem                                              420
    B. Crew Wages                                          422
    C. Liens for Necessaries                               422
    D. Charter Party Agreements Giving Rise to a Maritime
       Lien                                                424
       1. Time and Voyage Charters                         424
       2. Bareboat or Demise Charters                      425
    E. Prioritization of Maritime Liens                    427
    F. Circumstances in Which Liens Are Not Established    427
    G. Ship Management Agreements                          427
III. Summary of Cornar Marine Corp. v. Raider Marine
     Logistics                                             428
IV. The Fifth Circuit's Incomplete Analysis of Ship
    Management Agreements                                  431
V. Recent Case Law on Maritime Liens                       433
    A. Logistics Management, Inc. u. One Pyramid Tent
       Arena                                               433
    B. Equilease v. M/V Sampson                            436
    C. E.A.S.T., Inc. of Stamford u. M/V ALALA             437
VI. Ship Management Agreements and the Maritime Liens
    Universe                                               439
VII.Where Cornar Went Wrong                                441
    A. Could a Ship Management Agreement be a Contract
       for Necessaries?                                    441
VIII. Potential Repercussions of Cornar                    443
IX. Conclusion                                             445


I. INTRODUCTION

The right to assert a maritime lien has changed over time to ensure that the ship industry has some protection for payment of services. The right to assert a maritime lien arises from historically-recognized rights, such as contracts for necessaries (1) or bareboat charters. (2) These rights attach in rem to the vessel, giving those that possess the right the ability to arrest the vessel if they are not compensated. (3) Over time, the right to assert a maritime lien has become strictly limited to those historically-recognized rights. However, the ship industry was much less sophisticated when those rights were created. The scale on which massive containers of manufactured goods make their way around the world today was unimaginable as recently as the nineteenth century.

As business relationships become more complicated, new circumstances may leave parties uncertain as to whether any party may assert a maritime lien. Before Cornar Marine, Corp. v. Raider Marine Logistics, L.L.C., (4) courts recognized what was known as the "maritime liens universe." (5) The maritime liens universe allowed the courts to establish a right to assert a lien where new conditions warranted, while at the same time applying traditional factors that gave rise to the right. (6) Predictably, courts differ in their willingness to recognize new rights.

In Cornar, the United States Fifth Circuit Court of Appeals held that breach of a ship management agreement did not give rise to a maritime lien. (7) The court found that a vessel management agreement, where the management company was both in control of operations and responsible for supplying the crew, was neither a historical lien nor analogous to one. (8) Although the court briefly addressed the maritime liens universe, (9) it did not substantially analyze why the management agreement did not fit in that category.

First, this comment will explore the background of the historical right to establish a maritime lien and the recent emergence of ship management agreements. Next, it will summarize Cornar. Third, it will discuss the shortcomings of the court's analysis of the ship management agreement at issue in the case and how recent jurisprudence has found that a contract gives rise to a lien when it is within the maritime liens universe. Fourth, it will compare the management agreement to historical liens and the maritime liens universe. Fifth, it will explore errors that the ship management corporation likely made, and analyze alternatives that might have resulted in a different conclusion. Sixth, this comment will discuss the potential repercussions of the Cornar decision and will propose a manner to confect future management agreements to secure a maritime lien.

Ship management agreements, although varying in nature, have the potential to expand the maritime liens universe. Drafters can ensure this right is included by focusing on the allocation of liability and the priority of the lien. To determine whether a right to assert a lien under a management contract exists, attorneys should focus on expanding the maritime liens universe to include modern contracts, rather than directly comparing the agreement to historically-recognized liens.

II. HISTORICAL BACKGROUND OF MARITIME LIENS

A. In rem

Maritime liens vary greatly from common law liens, mainly because maritime liens attach to the vessel as an in rem right. (10) The theoretical basis of maritime liens arose from the legal fiction that the ship was the wrongdoer and therefore independently responsible for an injury. (11) Moreover, "it is a right in the maritime property (jus in re) and a right against the property (jus in rem)." (12) Theoretically, the "lienor" ignores the owner and has a right of action against the vessel, (13) as if the vessel is the "offending thing." (14) The vessel is competent to contract, and is thus liable for its own obligations and torts. (15) The lien attaches at the same time as the cause of action, and remains affixed to the vessel even following a change of ownership. (16)

Maritime liens were created in order to enable a ship to receive necessary services, and to create a secure credit system to protect service providers. (17) In general, a lien is a "charge on property for the payment of a debt." (18) Without a credit system, a vessel away from its home port must carry large sums of money to ensure that it will be able to procure necessaries. (19) Thus, a credit system increases the functionality of vessels in commerce.

Maritime liens also protect parties who provide services to the vessel. Under a credit system, the vessel is allowed to make a temporary pledge to service providers, which holds until the vessel makes payment or gives more formal security. (20) The ship continues moving, but is not allowed to escape its debts simply by sailing away without paying. (21)

Maritime liens are also unique in that they attach secretly. Maritime liens are non-consensual and need not be recorded. (22) "[T]his privilege of lien, though adhering to the vessel, is a secret one; it may operate to the prejudice of general creditors and purchasers without notice...." (23)

Maritime liens only attach to maritime property such as vessels, cargo, freights, and subfreights. (24) The majority view holds that a vessel that has been withdrawn from navigation cannot be the object of a maritime lien. (25) Although some of the more antiquated cases establish that a vessel may be liable when the owner of the vessel is not, (26) there is no "hard and fast rule" separating in rem and in personam claims; thus, a bar to one is usually a bar to the other. (27)

B. Crew Wages

Only a few historically-recognized maritime liens currently exist. The first of these is crew wages. These liens are sacred, insofar as if "a plank of the ship remains, the sailor is entitled, against all other persons, to the proceeds as a security for his or her wages." (28) A crewmember is a "seamen," defined as "[a worker] assigned to, or [who] performs a substantial part of his work in an employment-related connection aboard, a vessel in navigation, including special purpose floating structures such as drilling barges, and [whose] duties contribute[] to the function of welfare of the vessel." (29) This definition includes individuals such as on-vessel caterers and musicians. (30) Moreover, as in the context of maritime liens for wages, the crew "need not be employees of the shipowner to have a preferred maritime lien against the vessel for unpaid wages; rather, the crew need only provide services aboard the vessel in order to be eligible." (31)

C. Liens for Necessaries

The second remaining historical maritime lien is for necessaries. In order of ranking, liens for necessaries are last, arising only at the time of arrest. (32) The Federal Maritime Lien Act (Lien Act), (33) passed by Congress in 1910, is the authority as to what is a "necessary." (34) The Lien Act was created to boost private investment in a faltering ship industry, as well as to balance the interests of materialmen (suppliers) and shipowners. (35) Suppliers wanted easy and far-reaching liens, while shipowners wanted to avoid lien attachments. (36) In a broader sense, the Lien Act refers to goods or services that "are useful to the vessel, keep her out of danger, and enable her to perform her particular function." (37) In 1988, Congress amended the Lien Act by altering the time provisions, but enacting no substantive changes. (38) The Act now reads:
Except [for public vessels], 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; may bring a civil action in rem to enforce
the lien; and is not required to allege or prove in the action that
credit was given to the vessel.... (39)


Through judicial interpretation, the Lien Act mainly governs contract liens, including those for affreightment, stevedoring, storage, pilotage, salvage, wharfage, services of seamen and officers, marine insurance, preferred ship mortgages, and charter parties. (40) Necessaries provided to the ship need not be indispensible but should be what is "reasonably needed in the ship's business." (41) Nevertheless, some unusual items have given rise to liens, such as insurance and unpaid insurance premiums. (42) Necessaries must be "furnished" to a vessel (43) through actual physical delivery to the vessel, or more abstract delivery, such as providing insurance. (44) To determine whether a necessary has been furnished, courts look to the "apparent want of the vessel," rather than the "character of the thing supplied." (45)

The Lien Act also includes "other necessaries." This category allows courts to broadly interpret "necessaries" on a case-by-case basis. (46) This is appropriate to "encourage the provision of services that will keep ships active and... appl[ies] whenever the goods or services that were provided to the vessel were necessary for its continued operation." (47) This category broadened the interpretation of necessaries in Equilease Corp v. M/V Sampson. (48) There, the United States Fifth Circuit Court of Appeals held that vessel insurance qualified as a necessary because insurance is essential to keep a vessel in commerce. (49) As a result, more intangible services can now be recognized as necessaries because they are essential to keeping a vessel in commerce.

Historically, suppliers of ships needed assurances that they would be paid for their services to a vessel. (50) Under the Ship Mortgage Act of 1920 (Ship Mortgage Act), suppliers had to determine if a charter existed and whether that charter contained a "prohibition of lien" clause that would prevent them from any recourse if the vessel did not pay. (51) Congress amended the Ship Mortgage Act in 1971 and 1988 to remove the burden imposed upon the supplier that imputed to the supplier "actual knowledge" of charter agreement provisions, so that owners and charterers could not contract out of a maritime lien should one otherwise exist. (52) Today, maritime liens are thus created "whenever an owner or authorized individual requests that a person provide necessaries to the vessel." (53)

D. Charter Party Agreements Giving Rise to a Maritime Lien

1. Time and Voyage Charters

Breaching charter parties (54) can give rise to maritime liens "either for a charterer against the ship or for a vessel owner against cargo." (55) There are three types of recognized maritime charter party agreements: voyage charter, time charter, and demise or bareboat charter. (56) Under a voyage charter, the charterer obtains the vessel for the length of the voyage. (57) Under a time or voyage charter, the vessel remains under the possession and control of the vessel's owner, (58) who also appoints the master. (59) Both contracts are basically for the use of space on the vessel in return for payment of the charter hire. (60) The contract is for specific services rendered by the vessel owner. (61) Under a time charter, the charterer obtains a vessel for a fixed period of time. (62) A time charter is essentially a contract for affreightment, in which the owner of the vessel leases all or part of the space on a vessel to another for transporting goods. (63) The owner is responsible for hiring the crew and navigating the ship for a period of time, while the charterer directs where the vessel will go and what it will carry. (64)

2. Bareboat or Demise Charters

Most relevant to Cornar is the demise or bareboat charter. Under this type of agreement, "the owner completely relinquishes possession, command, and navigation of the vessel to the charterer or demisee for a certain period of time." (65) The bareboat charter is an almost complete transfer of ownership and thus an attractive type of charter. (66) The charterer is obligated to pay for the vessel's use and is liable for the hire of the vessel, as long as he remains in control. (67) "The owner is liable for the breach of his contract... if he uses her, [and] he must pay for the use to the extent of which it goes." (68) Because of the extent of his control, the charterer becomes the owner pro hac vice, meaning that he assumes close to, if not all, of the same risk as the actual owner. (69) This also means a charterer may be held personally liable for damages arising from any unseaworthy conditions of the vessel. (70) The owner has the burden of proving that a bareboat charter exists--an imposition that is based on the general policy that owners should not easily be able to delegate or escape all responsibility. (71) Courts are reluctant to recognize as a bareboat charter a contract with less than these characteristics. (72) If a contract is not a bareboat charter, courts assume it is a time charter, voyage charter, or not a charter at all. (73)
The agreement between the owner and charterer may expressly state that
a charter is a demise charter. However, if a contract says that it is
"non-demise," it must conform to the elements of such a charter if it
is to stand. (74) "A charter party has been held to be a demise even
though it provides in express terms that the charterer would not be
responsible for the acts of the captain in care, movement, or
navigation of the vessel." (75) In other terms, if a ship stays under
the control and navigation of the general owner, who also furnished the
master and crew, the agreement is not a demise charter. (76)


E. Prioritization of Maritime Liens

Maritime liens are generally prioritized by rank and time, (77) and over non-maritime liens. (78) Preferred ship mortgages are prioritized over all other maritime liens except '"preferred maritime liens,' which are defined as all liens arising before the recording and indorsement of the preferred mortgage....," (79) Otherwise, liens against the vessel are ranked in the following priority: crew wages, salvage, claims in tort and contract, non-maritime liens, and liens for advances. (80)

F. Circumstances in Which Liens Are Not Established

Maritime liens do not apply in many circumstances, most significantly when a claim is brought under the Jones Act, which creates only a claim in personam. (81) Moreover, a claim brought by a worker against his employer for compensation under the Longshore and Harbor Workers' Compensation Act (LHWCA), does not create a maritime lien. (82) Breach of an executory contract does not create a maritime lien because executory contracts have yet to be performed, (83) and a maritime lien does not come into existence until the start of some service. (84) This restriction does not include situations in which creditors and purchasers may not have knowledge of a lien. (85) Finally, maritime liens cannot attach to non-maritime property. (86)

G. Ship Management Agreements

Cornar was the first case in which a United States court considered whether a ship management agreement can give rise to a maritime lien. Although there are a variety of ship management contracts, there are three common forms: technical management, crew management, and commercial management. (87) The Baltic and International Marine Counsel (BIMCO) codified a model agreement as these contracts became more frequent. (88) The standard ship management agreement was labeled the "SHIPMAN" in 1988. (89) After two revisions, the modern model is now known as the "SHIPMAN 2009," and has become the "law" of ship management agreements. (90) Parties have more structure, but the same amount of freedom, in agreeing to a variety of aspects such as term limits and dispute resolution. (91)

Nevertheless, contracts based on SHIPMAN 2009 can vary in services and liability, seemingly moreso than a charter agreement. Therefore, it is unclear how to generally categorize ship management agreements. Given the facts of Cornar, it is surprising how quickly the Fifth Circuit was able to distinguish the management agreement from agreements giving rise to maritime liens.

III. SUMMARY OF COMAR MARINE CORP. V. RAIDER MARINE LOGISTICS

In 2006, Tracy Linette and Chris St. Amand (Owners) contracted with Cornar Marine Corp. (Cornar Marine) to purchase three vessels: M/V CONQUEROR, M/V RAIDER, and M/V ENFORCER, and, eventually, a fourth vessel, the M/V MAURADER. (92) After purchasing the vessels, the owners were willing to contract with Cornar Marine to manage and operate the vessels, because they did not want to assume responsibility for operation. (93) Cornar Marine had decades of experience managing vessels, and agreed to operate the vessels under a contract for each vessel, each entitled "Master Management and Operating Agreement" (Management Agreements). (94) When the owners purchased the vessels from Cornar Marine, J.P. Morgan Chase Bank, N.A. (Chase Bank) financed the purchase of M/V CONQUEROR, M/V RAIDER and M/V ENFORCER, and Allegiance Bank Texas (Allegiance Bank) financed the purchase of M/V MAURADER, (95) each through preferred ship mortgages. (96) Even before executing the contract, Cornar Marine was concerned that if the owners terminated the management agreement early it would be difficult to assess the worth of the management agreements because of market fluctuations; therefore, the parties inserted termination fees into the agreements. (97)

Cornar Marine was required to market, manage, and operate the vessels for the owners. (98) Cornar Marine furnished the "crew, supplies, equipment and necessaries, maintenance and repairs, mooring and insurance." (99) The management agreements gave Cornar Marine an option to extend a loan to the owners for vessel expenses, and if it made these loans, then Cornar Marine would use its own funds for vessel expenses. (100) The agreements specifically stated that Cornar Marine relied on the credit of the vessel and "shall have a maritime lien on the vessel and a lien on all accounts receivable of the vessel to secure any amounts advanced by or owed to Cornar [Marine] under the agreement or for any other activity of Cornar [Marine] relating to the vessel." (101)

The owners breached the management agreements by terminating them before expiration. (102) Immediately after being notified of the termination of the agreements, Cornar Marine sought arrest of the four vessels. (103) In August 2009, Cornar Marine filed suit to recover fees owed under the agreement. (104) Allegiance Bank and Chase Bank filed motions for summary judgment, which the trial court granted, arguing that they had preferred ship mortgages granting priority over other claims, and that the management agreements created no right to a maritime lien in favor of Cornar Marine. (105)

At trial, the district court held that the owners had breached the contract, that Cornar Marine did not materially breach, but that the termination fee provisions in the management agreements were unenforceable under general maritime law. (106) Thus, the owners were liable for $3,000 for each month from termination until the date each agreement would have terminated. (107)

Cornar Marine sought reversal of Allegiance Bank's motion for summary judgment, while the owners simultaneously asked the court to find that the vessels were wrongfully arrested. (108) The owners also wanted Cornar Marine to be held liable for their loss of three vessels through bankruptcy sale, which occurred four years after the vessels were released from arrest. (109) The United States Fifth Circuit Court of Appeals first reviewed the district court's grant of summary judgment in favor of Allegiance Bank and Chase Bank. (110) The district court ruled in favor of the banks because the "breach of the management agreements did not give rise to liabilities that create maritime liens," and therefore, the banks' preferred ship mortgages were prioritized over all other claims. (111) Alternatively, the court held that Cornar Marine was precluded from asserting a maritime lien because it was a "joint venture" with the owners. (112) The question then became whether the agreements created maritime liens. (113)

Cornar Marine argued that its agreements were analogous to bareboat charter parties, which give rise to maritime liens, (114) because it had full control and operation of the vessel, carried insurance for the vessel, and supplied its own crew. (115) However, the Fifth Circuit disagreed, holding that the agreements were not the "functional equivalent" of bareboat charters. (116) Cornar Marine hired charters for the owners' benefit, while the owners, in return, paid Cornar Marine a management fee and reimbursed it for any expenses incurred. (117) These facts were sufficient for the court to determine that the management agreements were not bareboat charters or their equivalent. (118) In reaching this conclusion, the court found that Cornar Marine's cited authorities did not broaden how it should interpret maritime liens. (119)

Next, the Fifth Circuit agreed with the district court that Cornar Marine acted in bad faith when arresting the vessels because Cornar Marine had access to all the information and acted to arrest the vessels before it made a complete assessment of "who owned what, and did not provide their legal counsel sufficient information." (120) Although the owners asserted that the arrest of the vessels caused their bankruptcy, the court did not find in their favor. (121)

IV. THE FIFTH CIRCUIT'S INCOMPLETE ANALYSIS OF SHIP MANAGEMENT AGREEMENTS

In Cornar, the Fifth Circuit specifically focused on the ways in which the management agreements between Cornar Marine and the owners were not the equivalents of bareboat charters. (122) In falling short of these qualifications, the general nature of the contract did not create a maritime lien. (123) The court made a direct comparison of the management agreements to the features of bareboat charters. (124) Cornar Marine had full possession and control of the vessels, used its own crew, and carried insurance; (125) however, it did not pay for the insurance or expenses, and the owners compensated Cornar Marine for its services. (126) Whether Cornar Marine's management agreements constituted a contract for a bareboat charter was easily interpreted as lacking the requirement of an almost full transfer of ownership. (127)

The court then addressed whether a contract gives rise to a maritime lien if it imposes rights and responsibilities practically identical to those in historically-recognized contracts. (128) Although Cornar Marine provided several case examples of alternative ways in which the court could have found the existence of a maritime lien outside the historical liens analysis, the court was unpersuaded. (129)

The court acknowledged that the right to a maritime lien might arise even though the right is not a historically-recognized lien. (130) However, the court did not analyze which factors would be analogous to a historical right sufficient to enforce a lien, as opposed to those that would be merely identical to a historic right. The court listed the similarities (131) and differences (132) between bareboat charters and the management agreements and concluded, with little discussion, that the two are not the same. (133)

The Fifth Circuit's refusal to analogize the contract to a bareboat charter might have stemmed from a misinterpretation of supporting case law. The Cornar opinion acknowledged that a contract may give rise to a maritime lien if the contract is analogous to a bareboat charter, but cited International Marine Towing v. Southern Leasing Partners (134) as the main authority for the decision. (135) The question in International Marine Towing was whether the fact that a bareboat charterer who was characterized as the owner pro hac vice with respect to third parties could enforce a maritime lien against the actual vessel owner. (136) The court found that a bareboat charter existed, which gave rise to a maritime lien. (137) This case does nothing to promote, deny, or provide the boundaries of when maritime contracts are analogous to bareboat charters, or when maritime contracts that are not historically-recognized give rise to a maritime lien. It appears that International Marine Towing may have led the Fifth Circuit to conclude in Cornar that analogizing to a bareboat charter essentially means that a contract must contain all of the historical characteristics of a bareboat charter.

V. RECENT CASE LAW ON MARITIME LIENS

A. Logistics Management, Inc. v. One Pyramid Tent Arena

In its filings before the Fifth Circuit, Cornar Marine cited Logistics Management Inc. v. One Pyramid Tent Arena, (138) in which a new variety of maritime lien was enforced by the Ninth Circuit. (139) In that case, TWI Ocean Logistics Services (TWI) was a non-vessel operating common carrier (NVOCC) (140) that contracted with an ocean carrier to transport cargo designated as "One (1) Pyramid Tent Arena" (the Pyramid). (141) Once the Pyramid reached California, TWI refused to deliver it as agreed to Las Vegas, alleging that the freight had not been paid. (142) TWI then filed a complaint for foreclosure of a maritime lien against the Pyramid in rem. (143)

Pebbles Music, Inc. (Pebbles), the owner of the Pyramid, argued that TWI lacked standing to assert a maritime lien because TWI was not the vessel owner in possession of the cargo. (144) Pebbles stated that courts are "reluctant to recognize new forms of maritime liens," (145) citing Melwire Trading Co., Ine u. M/V CAPE ANTIBES, (146) which held that maritime liens are stricti juris and cannot be "extended by construction, analogy or inference." (147) Melwire further stated that maritime liens only exist for historically-recognized liens or those created by statute. (148) The court responded by citing Schoenbaum, who states that: "[F]ederal courts have full authority to update old doctrines and to recognize new forms of liens if warranted by new conditions." (149)

Consequently, the United States Ninth Circuit Court of Appeals held that TWI had the right to enforce a maritime lien on the Pyramid. (150) For centuries, courts have allowed vessel owners and operators to assert a lien on cargo and eventually allowed those who simply operate a vessel without ownership to assert a lien on cargo. (151) Based on this reasoning, the court held that NVOCCs assume the same responsibilities as the vessel owners and operators for delivering cargo even though they do not own the ships. (152) NVOCCs assume "responsibility for the transportation from the port or point of receipt to the port or point of destination." (153) The court further mentioned that allowing TWI to assert a maritime lien would not expand the maritime liens universe. (154) This reflects the idea that, although courts may not expand the body of maritime liens, they may update old doctrines. (155) Therefore, the court concluded that TWI was an NVOCC and could assert a maritime lien against the cargo for unpaid freight. (156)

Comparing Cornar and Logistics, the management agreements in Cornar could be considered part of the maritime liens universe. Cornar Marine operated the vessels and carried on many of the same activities as a vessel owner; the only remarkable difference was that, instead of the operator paying the equivalent of a lease, the owners were to pay Cornar Marine for operating the vessel. (157) Although a lien was once only a right of vessel owners, that right was expanded to also include those operators. (158) The court in Logistics slightly broadened the right to include NVOCCs with responsibilities similar to an owner. (159) Cornar is an example of a way in which maritime contracts are evolving. The court had discretion to find that the management agreement was within the same universe of traditionally-recognized maritime liens without jeopardizing the stricti juris element. The Cornar opinion also recognizes the existence of the maritime liens universe in a footnote, acknowledging that "[t]he Fifth Circuit has recognized that the breach of certain types of contracts give rise to maritime liens." (160)

Although the Cornar opinion did not specify why Logistics was not persuasive, the court might have found that the responsibilities between a management agreement and a bareboat charter were too dissimilar. There is a variance in liability between an owner pro hoc vice, like a bareboat charterer, and a party managing a vessel for the benefit of the vessel owners. In Logistics, the court determined that NVOCCs were the same as traditional carriers that have the right to assert a maritime lien because NVOCCs take on the same responsibility and liability as the carriers. NVOCCs should not be treated differently merely because they are non-vessel carriers. In Cornar, Cornar Marine had the same task as an owner and operator of a vessel, but had a different degree of liability. Therefore, the logic of Logistics arguably applies to Cornar.

B. Equilease v. M/V Sampson

Equilease v. M/V Sampson, another case cited in Cornar, extended the boundaries of the maritime liens universe. Equilease provided financing for three vessels (161) and became owner when the party that purchased the vessels defaulted on its loan. (162) Equilease transferred the title of each vessel to individual corporations and issued a bareboat charter on each vessel to Dunnamis Offshore Touring, Inc. (Dunnamis). (163) Dunnamis purchased insurance for the vessels from Fred S. James, Company of Texas, Inc. (James) as required under the contract. (164) Dunnamis failed to pay more than $184,000 in insurance premiums and defaulted on its obligations under the charter agreements. (165)

James claimed it had a maritime lien against the vessel for unpaid insurance premiums. (166) In prior case law, maritime insurance had been considered to exist "for the sole and exclusive benefit 'of the vessel owners, not inuring to the benefit of the vessel, and therefore no lien arises for unpaid insurance premiums under general maritime law."' (167) James argued that this precedent should be reevaluated and that an analysis should be used that would find that insurance counts as a "necessary" to a vessel. (168) James also urged the court to consider that insurance was a "furnished supply" and was "reasonably needed in the ship's business." (169) Equilease argued that insurance was not "furnished" to a vessel and was not a necessary. (170)

The Fifth Circuit held that "furnishing" should not be read as narrowly as Equilease suggested and that it does not necessarily require actual delivery of something to the vessel. (171) To determine whether there was a lien for necessaries, the court first pointed to the history of marine insurance. (172) The court found that an insurance policy in the nineteenth century was a contract for personal indemnity but that it should no longer be viewed only this way. (173) The court reasoned that marine insurance was needed for a vessel to carry on its normal business. (174) Because insurance was essential to keeping a vessel in commerce, the court held that it was a necessary, and therefore, unpaid insurance premiums give rise to maritime liens. (175) In this way, modern contract practice replaced historical practice and thus became a new component of the maritime liens universe.

C. E.A.S.T., Inc. of Stamford v. M/V ALMA

In E.A.S.T., Inc. of Stamford, Conn v. M/V ALAIA, E.A.S.T (EAST) contracted for a time charter of M/V ALAIA, owned by Advance Co. (Advance). (176) EAST obtained two subcharters--one for wood pulp and milk carton stock, and another for soda ash. (177) The vessel arrived in New Orleans to go "on hire" and was inspected by several parties, (178) including surveyors from each subcharter, a surveyor for Advance, and a surveyor for EAST. (179) EAST's surveyor found rust, dirt, and debris, and declared the vessel unseaworthy. (180)

EAST rejected the ship and filed an in rem action to compel arbitration. (181) Advance filed an answer and counter-claim to vacate the arrest, on grounds that no time charter existed to give rise to a maritime lien and that no maritime lien could be asserted because no cargo had been loaded onto the vessel. (182) Following International Marine Towing, the district court held that a maritime lien could arise from breach of a time charter even when the breach occurred before the cargo had been loaded. (183)

On appeal, Advance attempted to invoke the executory contract doctrine, which would preclude the creation of a maritime lien for a breach of contract that was "merely executory." (184) However, the Fifth Circuit wholly agreed with the district court (185) and found that a maritime lien for a charter party existed because "a maritime lien is based... on the fiction that the vessel may be a defendant in a breach of contract action when the vessel itself has begun to perform under the contract." (186)

Regarding whether a maritime lien could arise without cargo being placed on the vessel, Advance claimed that the district court provided that the right to a maritime lien was broader than a right existing solely for contracts of affreightment. (187) Advance said that this was the only maritime lien that the Supreme Court had found that created a lien. (188) The appellate court rejected this argument, finding that the Supreme Court never said contracts for affreightment are the only maritime contracts that could give rise to a lien. (189) As the district court held, "a contract of affreightment is only a subset of the larger universe of maritime contracts which may give rise to a maritime lien." (190)

Like Logistics and Equilease, the court in EAST stated that a right to assert a maritime lien is stricti juris and cannot be extended by construction, analogy, or inference. However, these cases also mention the maritime liens universe, which lead all three courts to find that an in rem right arose even though the facts were not molded to the circumstances of a historically-recognized lean. In Cornar, the appellate court mentioned both the maritime liens universe and the rule that the right cannot be extended. However, the court in Cornar failed to analyze the maritime liens universe.

Although the opinion in Cornar did not go into detail over when an analogous contract expands the stricti juris doctrine or how it may lawfully exist in the maritime liens universe, that is the core issue of the case and an unsettled part of maritime liens doctrine. The fact that maritime liens can develop and diversify from those historically-recognized liens is summed up as follows:
There are sometimes statements in judicial opinions that admiralty law
has ceased to recognize new forms of maritime liens. In fact, courts
will not readily expand the body of recognized liens, most of which are
well established by long practice. Nevertheless, the federal courts
have full authority to update old doctrines and to recognize new forms
of liens if warranted by new conditions. (191)


The court's failure in Cornar to discuss this concept denies the conversation in recent case law and does nothing to clarify the boundaries of the maritime liens universe.

VI. SHIP MANAGEMENT AGREEMENTS AND THE MARITIME LIENS UNIVERSE

In the Cornar management agreements, Cornar Marine was responsible for vessel operations, hiring the crew, and obtaining insurance, but the owners were simply responsible for paying Cornar Marine to manage. (192) The Cornar management agreements and the BIMCO Standard Ship Management Agreement share many of the characteristics of contracts that create liens, but do not fit entirely into one category. Thus, ship management agreements are not easily included or excluded from the maritime liens universe.

Unlike a time or voyage charter, a management agreement is not akin to a contract for affreightment, nor is it limited to one voyage. (193) A voyage or time charterer entrusts the owner with where the ship will go and what it will carry. (194) However, a ship management agreement is more like an amalgamation of services provided to the owner by the manager. This provides the ship manager with substantially more control over the vessel, allowing them to make various decisions concerning matters that contribute to the ship's business success, (195) while a time or voyage charter simply leases space. (196)

On the other hand, the control devised under a bareboat charter is more than the ship management agreement. Under both a bareboat charter and a management agreement, the owner gives up "possession, command, and navigation of the vessel" to the charterer or manager. (197) Although a bareboat charterer is seen as an owner pro hoc vice, (198) the ship manager works for the owner. (199) The ship manager picks the crew, buys insurances, and operates the vessel without instructions from the owner, but profits go directly to the owner--as do certain liabilities--and the manager is compensated only for his work without sharing in the profits. (200)

There are also maritime liens for services to the vessel. Maritime liens arise for necessaries needed in the ship's business and furnished to the vessel. (201) Under a management agreement, essential and necessary services are arguably provided for the vessel and furnished as the management commences. Yet the management agreement varies from a contract for necessaries in the degree of control managers have over the vessel. As in Cornar, various damages and fees can arise from the contract other than those provided in services of necessaries. (202)

Management contracts can vary more in liability and control than contracts giving rise to historical liens, yet they carry some of the traditional concerns that prompted creating the right to a maritime lien. A ship manager provides services to the ship, but not just for ship provisions like a contract for necessaries. (203) Furthermore, ship managers' services arise out of their use of the ship in a similar fashion to a demise charter, but a management agreement is for the direct benefit of the ship owner. (204) Ship management agreements do not easily fit into one category, but they arguably belong to the same universe of maritime liens.

VII. WHERE COMAR WENT WRONG

Cornar might not necessarily control all future cases involving ship management agreements. Several other factors contributed to the holding of Cornar. The first was Cornar Marine's immediate arrest of the vessel without first checking the priority of its lien over other potential liens. (205) This made the lien less legitimate becasue the court found the arrest was in bad faith. (206) Second, Cornar Marine was unable to compare its losses to liens for necessaries because it was repaid for its services. (207) If Cornar Marine had not been repaid then asserting a lien for necessaries might have been a compelling argument. The third mistake was Cornar Marine's decision to make its main argument a direct comparison of bareboat charters to the management agreements. (208) The court could have found flexibility in the definition of a bareboat charter considering the discretion afforded courts to include new contracts that exist within the maritime liens universe. However, the ship management agreements did not fit under the historical analysis that the court followed.

A. Could a Ship Management Agreement be a Contract for Necessaries?

As mentioned, Cornar originally argued that the management agreements for services should be seen as a contract for necessaries; it eventually dropped this argument because the company had been fully paid for its services "from collecting outstanding accounts receivable." (209) Had it been owed for its services at the time of the breach of contract, the court might have analyzed whether management of a ship is a contract for necessaries, and whether the debt from services could have been a basis for a lien.

The term "other necessaries" has been interpreted broadly in the maritime liens universe in order to keep ships commercially active and protect services and goods providers. (210) Any goods or services that "are useful to the vessel, keep her out of danger, and enable her to perform her particular function are considered 'other necessaries.'" (211)

Necessaries do not have to be indispensible; however, they can include services that are merely convenient or useful to the vessel. (212) In Ajubita v. S/S Peik, (213) Adolph Ajubita piloted a vessel from the Port of New Orleans to Pilottown. (214) He was not paid for his piloting services and asserted a maritime lien on the then-bankrupt vessel. (215) When challenged as to whether pilotage services counted as necessaries, the court stated:
In tax law, the term 'necessary and ordinary business expense' has been
held to include some expenditures that are not absolutely indispensible
but are appropriate and helpful to carrying out business. So, to, the
term 'necessary' under the Maritime Lien Act has been held to include
expenditures that are not absolutely indispensible. It includes most
goods or services that are convenient or useful to the vessel, such as
the services of an advertising agency for a cruise ship, printing
supplies, or liquor for a pleasure yacht. (216)


Services of lesser importance than the management of a vessel have successfully placed a maritime lien on a vessel, such as services for advertisements by an advertising agency. (217) Services constituting "necessaries" has also been extended to stevedoring services, (218) fumigation of the vessel, and cleaning services. (219) Services giving rise to a lien must be needed by the ship, which is to be determined on a case-by-case basis; the question to be decided is whether the service is "needed." (220) Management of the vessel was a contract for many "needed" services that ensured operation of the vessel in commerce.

VIII POTENTIAL REPERCUSSIONS OF COMAR

While courts have some discretion to determine what gives rise to a maritime lien, the court in Cornar shows an unwillingness to recognize non-traditional maritime liens. (221) The court did not weigh how the management agreement was or was not like a historically-recognized lien; it only made a direct comparison to bareboat charters and found that the contracts did not create a charter. (222) However, this does not mean that all management contracts will not be able to assert a maritime lien. Cornar can provide advice to managers hoping to successfully contract into the right to assert a lien against a vessel.

First, it is not enough to include language asserting a maritime lien without the essential facts to give rise to a lien. (223) The parties in Cornar intended for Cornar Marine to have a right to assert a lien, but the right does not exist merely by virtue of using the correct language in the contract. (224) Second, special attention should be given to the priority of the lien. The right to establish a lien, legally or not, must be done at the correct time and in consideration of others' rights. As Cornar reveals, those with a low priority right to assert a lien may not have the security to which they thought they were entitled. There is a lower priority for a bareboat charter or lien for necessaries than there is for preferred ship mortgages. (225) Here, there were several ship mortgages that potentially could have taken precedent, yet Cornar Marine did not take the appropriate steps to determine whether it had the right to arrest the vessel. (226) Attempting to thwart the prioritization scheme can lead to a court finding that a party acted in bad faith, (227) and when involving arrest of the vessel this could lead to damages against the arrestor for loss of use of the vessel.

Third, contractors should be aware of the legal liability the manager is undertaking. Ship management agreements can vary depending on the circumstances. (228) In the case discussed here, Cornar Marine sold its vessels to the current owners, but Cornar Mairne had the right to continue to manage the vessels. (229) In this way, Cornar Marine reduced its liability associated with ownership but resumed most other control and use of the vessel as it had done during ownership in exchange for steady payment. There is perhaps a balance that could be struck between reduced liability and maintaining a right to a lien. While the Cornar decision does not mean that a ship management agreement will never give rise to a maritime lien, courts could continually be unwilling to extend the right without any further undertaking of liability. No case law exists for managers with an assumption of some mix of liability between that of ownership, a demise charter, and a BIMCO or Cornar ship management agreement. Any further assumption of liability could lead the court to a different conclusion.

Another issue of liability is that Cornar Marine acted as both creditor and debtor to the vessel; Cornar Marine was due a managerial fee and costs incurred, such as insurances, but also remitted the earnings of the charter to the vessel owners. Separating these obligations could potentially change the position of the court. Having a sub-company under Cornar Marine could be used to separate the management and debts. Cornar Marine would be entitled to management fees and the sub-company could undertake the expenses of the vessel. While this option has never been explored as it relates to management agreements and in rem rights to assert a maritime lien, it could be an extra precaution for managers to take in the future.

Fourth, the argument for one's right to assert a maritime lien based on a ship management agreement should be based on the agreement's individual characteristics and not on a direct comparison of historically-recognized liens rights. A ship management agreement is likely to fall short of a direct comparison to historical liens. It is not likely to be analogous to a bareboat charter, especially after the Cornar opinion. Thus, the argument for a maritime lien should address the similarities and differences in characteristics of agreements within the maritime liens universe, and conclude it is a mixture of a charter agreement and a contract for necessaries. In Cornar, the agreement was directly compared to a contract for necessaries and then to a bareboat charter. (230) After the holding of Cornar, a cogent argument exists for a new recognition of a maritime lien under the maritime liens universe. While there is a risk the court will reject the idea of a non-traditional right, this argument will require the court to better address its understanding that more non-traditional agreements may give rise to a lien when they are similar to traditional liens. (231) Having a court confront the extension of non-traditional lien rights could provide clarity for management and other agreements.

IX. CONCLUSION

Although Cornar held that a ship management agreement did not give rise to a maritime lien, this does not mean that the right will be denied in every subsequent case involving a ship management agreement. The court held that full operation and management of the vessel was not enough to assert the in rem right when the manager operates the vessel for the sole benefit of the owner. Variations in facts of the case could change this outcome. Had Cornar Marine not acted in bad faith by immediately arresting the vessel, or had advocated more for the recognition of the management agreement as part of the maritime liens universe, the court might have reached a different conclusion. Subsequent cases will now be forced to reconcile the recent case law expanding the maritime liens universe and Cornar. Going forward, ship managers should remember that contracting for the right to assert a lien does not guarantee a right. Contract drafters should be aware that the ship manager must undertake more liability if the manager intends to have the right to assert a lien. Lawyers arguing a similar case should acknowledge a ship management agreement will not likely survive a direct comparison to historically-recognized lines, and thus should ask the court to further clarify the boundaries of the maritime liens universe.

Carni Fergus (*)

(*) J.D. 2017, Loyola University New Orleans College of Law; B.A. 2013, University of Arkansas.

(1.) THOMAS J. SCHOENBAUM, ADMIRALTY AND MARITIME LAW [section] 9-1, 688 (5th ed. 2011).

(2.) Id. at 687.

(3.) SCHOENBAUM, supra note 1, at 684-685.

(4.) Cornar Marine, Corp. v. Raider Marine Logistics, L.L.C., 792 F.3d 564 (5th Cir. 2015).

(5.) See E.A.S.T., Inc. of Stamford v. M/V Alaia, 876 F.2d 1168 (5th Cir. 1989); Int'l Marine Towing, Inc. v. S. Leasing Partners, Ltd., 722 F.2d 126, 130-31 (5th Cir.1983); see also Logistics Management Inc. v. One Pyramid Tent Arena, 86 F.3d 908 (1996).

(6.) See E.A.S.T., 876 F.2d 1168; Int'l Marine Towing, 722 F.2d at 130-31; see also Logistics Management, 86 F.3d 908.

(7.) Cornar Marine, 792 F.3d at 571.

(8.) Id. at 570.

(9.) Id.

(10.) See SCHOENBAUM, supra note 1, at 683.

(11.) Id. at 684.

(12.) Id.

(13.) ROBERT FORCE & MARTIN J. NORRIS, THE LAW OF SEAMEN [section] 20:3 (5th ed. 2016).

(14.) SCHOENBAUM, supra note 1, at 684.

(15.) FORCE & NORRIS, supra note 13.

(16.) SCHOENBAUM, supra note 1, at 683.

(17.) Eric Mayer, 55 C.J.S. Maritime Liens [section] 2 (2016).

(18.) SCHOENBAUM, supra note 1, at 684.

(19.) Mayer, supra note 17.

(20.) Id.

(21.) Id.

(22.) SCHOENBAUM, supra note 1, at 698; see also FORCE AND NORMS, supra note 13.

(23.) FORCE & NORRIS, supra note 13; Vandewater v. Mills, Claimant of Yankee Blade, 60 U.S. 82 (1856).

(24.) SCHOENBAUM, supra note 1, at 693.

(25.) Id.

(26.) See The China, 74 U.S. 53, 63-64, (1868); The Barnstable, 181 U.S. 464 (1901).

(27.) SCHOENBAUM, supra note 1, at 698.

(28.) 70 AM. JUR. 2D Shipping [section] 255 (2016).

(29.) 14 LA. CIV. L. TREATISE, WORKERS' COMPENSATION LAW AND PRACTICE [section] 412, 522 (5th ed. 2010); see also LARSON, WORKERS' COMPENSATION [section] 90.00 (Desk ed. 1993).

(30.) This assessment considers the statutory provision that a seaman is defined as "an individual (except scientific personnel, a sailing school instructor, or sailing school student) engaged or employed in any capacity on board a vessel." See 46 U.S.C. [section] 10101(3) (2012) (emphasis added).

(31.) 70 AM. JUR. 2D Shipping [section] 255 (2016).

(32.) William Tetley, Maritime Liens, Mortgages And Conflicts Of Law, 6 U.S.F. MAR. L.J. 1, 5 (1993).

(33.) The Commercial Instruments and Maritime Lien Act, 46 U.S.C. [section][section] 31341-31343 (2012).

(34.) 46 U.S.C. [section] 31301(4) (2012) (defines a "necessary" as including "repairs, supplies, towage, and the use of a dry dock or marine railway"); Margaret M. Braum, Meaning and Construction of 'Furnishing' and 'Necessaries' Under the Federal Maritime Lien Act, 12 TUL. MAR. L.J. 337, 337 (1988).

(35.) Braum, supra note 34, at 337.

(36.) Braum, supra note 34, at 337.

(37.) Equilease Corp. v. M/V Sampson, 793 F.2d 598, 603 (5th Cir. 1986).

(38.) 46 U.S.C. [section] 31342 (2012).

(39.) Id.

(40.) R. Randall Bridwell, Admiralty Contract Jurisdiction And Contract Liens Under American Law, 11 WHITTIER L. REV. 171, 174 (1989) (citations omitted).

(41.) SCHOENBAUM, supra note 1, at 703.

(42.) Id. at 704.

(43.) Id. at 706.

(44.) Id.

(45.) Equilease, 793 F.2d at 603; Braum, supra note 34, at 339.

(46.) Raymond P. Hayden & Kipp C. Leland, The Uniqueness of Admiralty and Maritime Law: The Unique Nature of Maritime Liens, 79 TUL. L. REV. 1227, 1239-40 (2005).

(47.) Farrell Ocean Services, Inc. v. U.S., 681 F.2d 91, 92-93 (1st Cir. 1982).

(48.) 793 F.2d 598 (5th Cir. 1986).

(49.) Id. at 604.

(50.) Delos E. Flint, Jr., Current Developments In United States Maritime Lien Law, 8 U.S.F. MAR. L.J. 267, 269 (1996).

(51.) Id. at 271-72.

(52.) Id. at 272-74.

(53.) Id. at 274.

(54.) "A 'charter party' is a specific contract, by which the owners of a vessel let the entire vessel, or some principal part thereof, to another person, to be used by the latter in transportation for his own account, either under their charge or his." Asoma Corp. v. SK Shipping Co., Ltd., 467 F.3d 817, 823 (2d Cir. 2006) (citations omitted).

(55.) Timothy R. Hager, Fifth Circuit Extends Maritime Lien To Time Charter Contract Before Cargo Is Loaded: E.A.S.T., Inc. Of Stamford, Connecticut v. M/V Alaia, 15 TUL. MAR. L.J. 133, 134 (1990).

(56.) 22 WILLISTON ON CONTRACTS [section] 58:6 (4th ed. 2016).

(57.) Jean F. Rydstrom, What Constitutes Demise or Bareboat Charter or Vessel Imposing on Charterer Liabilities of Owner Pro Hac Vice, 14 A.L.R. Fed. 544, [section] 3 (Originally published in 1973).

(58.) 80 C.J.S. Shipping [section] 84 (2016).

(59.) Rydstrom, supra note 57.

(60.) Id.

(61.) Id.

(62.) 80 C.J.S. Shipping [section] 84 (2016).

(63.) Rydstrom, supra note 57.

(64.) 80 C.J.S. Shipping [section] 84 (2016).

(65.) 22 WILLISTON ON CONTRACTS [section] 58:6 (4th ed. 2016).

(66.) Id.

(67.) 80 C.J.S. Shipping [section] 112 (2016). And the charter is owner pro hac vice where the master is subject to his orders and directions, though appointed to his position as master by the general owner. Under pro hac vice, charters are treated as actual owners of the vessel for liability purposes. See also 80 C.J.S. Shipping [section] 113 (2016); 22 WILLISTON ON CONTRACTS [section] 58:6 (4th ed. 2016).

(68.) Work v. Leathers, 97 U.S. 379, 380 (1878).

(69.) Bergan v. International Freight, 254 F.2d 231, 232 (2d Cir. 1958) (reasoning that, under a demise or bareboat charter, the charterer has an interest "akin to that of a lessee of real property...."); 22 WILLISTON ON CONTRACTS [section] 58:6 (4th ed. 2016).

(70.) Bergan, 254 F.2d 231; 22 WlLLISTON ON CONTRACTS [section] 58:6 (4th ed. 2016).

(71.) Guzman v. Pichirilo, 369 U.S. 698, 700 (1962); 22 WlLLISTON ON CONTRACTS [section] 58:6 n. 78 (4th ed. 2016).

(72.) Guzman, 369 U.S. at 700 (1962); Reed v. U.S., 78 U.S. 591, 601 (1870).

(73.) 22 WILLISTON ON CONTRACTS [section] 58:6 (4th ed. 2016).

(74.) Id.

(75.) Id.

(76.) Id.

(77.) Note, Priorities of Maritime Liens, 69 HARV. L. REV. 525, 528 (1956).

(78.) Id. at 531.

(79.) Id. at 535.

(80.) Id. at 529-33. Contract claims for "supplies, repairs, towage, watchmen, pilotage, wharfage, and other miscellaneous claims are generally ranked equally." Id. at 531.

(81.) SCHOENBAUM, supra note 1, at 690.

(82.) Id.

(83.) Id. at 700.

(84.) SCHOENBAUM, supra note 1.

(85.) Id. at 701-702.

(86.) SCHOENBAUM, supra note 1.

(87.) John E. Bradley, Third-Party Ship Management: A Nutshell Guide For Investors, VEDDERPRICE, http://www.vedderprice.com/Third-Party-Ship-Management-A-Nutshell-Guide-for-Investors-07-11-2012/(July 2012).

(88.) BIMCO is the world's largest international shipping organization. Its core objective is to facilitate the commercial operations of their members by developing standard contracts and clauses, and providing quality information, advice and education. BIMCO, About BIMCO, https://www.bimco.org/about-us-and-our-members (last visited Feb. 6, 2017).

(89.) New Shipman agreement published, The Motorship, Mercator Media, Ltd. (Mar. 17, 2010), http://www.motorship.com/newsl01/industry-news/new-shipman-agreement-published (last visited Feb. 6, 2017).

(90.) Id.

(91.) Bradley, supra note 87.

(92.) Principal and Response Brief of Appellee Cross-Appellant Cornar Marine, L.L.C. at 13, Cornar Marine, Corp. v. Raider Marine Logistics, L.L.C., 792 F.3d 564 (5th Cir. 2015) (No. 13-30156).

(93.) Principal and Response Brief, supra note 92, at 14.

(94.) Id. at 4.

(95.) Id.

(96.) Cornar Marine, 792 F.3d at 568; see also SCHOENBAUM, supra note 1, at 714 ("[I]n order to improve the lienholders' security and to encourage the establishment of a strong U.S. merchant marine, the Congress enacted the Ship Mortgage Act, which provides for a 'preferred ship mortgage' that creates a maritime lien against the mortgaged vessel.").

(97.) Principal and Response Brief, supra note 92, at 9.

(98.) Id. at 15.

(99.) Id.

(100.) Id.

(101.) Id.

(102.) Principal and Response Brief, supra note 92, at 5, 22.

(103.) Principal and Response Brief, supra note 92, at 5.

(104.) Id. at 5-6. Comar's claims for necessaries, including some loans Cornar had advanced to pay necessaries, were satisfied prior to trial.

(105.) Cornar Marine, L.L.C., 792 F.3d at 569.

(106.) Principal and Response Brief, supra note 92, at 6.

(107.) Id. at 7. However, this award was completely offset by unrelated credit due by Comar to Owners. Id.

(108.) Id. at 7-8.

(109.) Id.

(110.) Cornar Marine, 792 F.3d at 569.

(111.) Id.

(112.) Cornar Marine, 792 F.3d at 569.

(113.) Id.

(114.) Id. at 570.

(115.) Id.

(116.) Id.

(117.) Cornar Marine, 792 F.3d at 570.

(118.) Id.

(119.) This comment will further discuss these cases in detail. Id.

(120.) Id. at 576.

(121.) Id. at 577-78.

(122.) Cornar Marine, 792 F.3d at 570-571.

(123.) Cornar Marine, 792 F.3d at 580.

(124.) Id. at 571.

(125.) Id. at 570.

(126.) Id.

(127.) Id. at 571.

(128.) Cornar Marine, 792 F.3d at 571.

(129.) Id.; see Logistics Management, 86 F.3d 908, Cardinal Shipping Corp. v. M/S Seisho Maru, 744 F.2d 461 (1984); Equilease, 793 F.2d 598; E.A.S.T., 876 F.2d 1168.

(130.) Cornar Marine, 792 F.3d at 570.

(131.) Cornar had complete possession and control of the vessel, carried insurance on the vessel, and supplied its own crew. Id.

(132.) The owners only paid Cornar a management fee, repaid any expenses of Cornar, and Cornar supplied charters for the benefit of the owners. Id.

(133.) "As discussed above, the management agreements in the present case do not impose practically identical responsibilities as charterers." Id.

(134.) International Marine Towing, Inc. v. Southern Leasing Partners, 722 F.2d 126 (5th Cir.1983).

(135.) Cornar Marine, 792 F.3d at 571.

(136.) "The fact that the charter party between IMT and Southern Leasing is a bareboat charter does nothing to eliminate the essential maritime nature of the agreement, nor the legal consequences arising therefrom. Although the bareboat charterer might be characterized as the owner pro hac vice as to third parties, the charterer is still the charterer as to the vessel owner and is thus entitled to a maritime lien against the vessel for the owner's breach of the charter party." Int'l Marine Towing, 722 F.2d at 130.

(137.) Id.

(138.) Logistics Management, 86 F.3d 908.

(139.) Id.

(140.) Id. at 910. NVOCC is defined as "[a] shipment consolidator or freight forwarder who does not own any vessel, but functions as a carrier by issuing its own bills of lading or air waybills and assuming responsibility for the shipments." Non vessel operating common carrier (NVOCC), Business Dictionary http://www.businessdictionary.com/definition/non-vessel-operating-common-carrier-NVOCC.html (last visited Jan. 31, 2017).

(141.) The Pyramid was a five-story tent-like structure to be transported from England to New Jersey, and was owned by Pebbles Music, Inc. Logistics Management, 86 F.3d at 910.

(142.) Id. at 911.

(143.) Id.

(144.) Id. at 913.

(145.) Id.

(146.) Melwire Trading Co., Inc v. M/V CAPE ANTIBES, 811 F.2d 1271 (9th Cir. 1987).

(147.) Id. at 1273 (quoting Osaka Shosen Kaisha v. Pacific Export Lumber Co., 360 U.S. 490, 499 (1923)).

(148.) Id.; see also Logistics Management, 86 F.3d at 913.

(149.) SCHOENBAUM, supra note 1, at 691.

(150.) Logistics Management, 86 F.3d at 914.

(151.) Id. at 913.

(152.) Logistics Management, 86 F.3d at 914.

(153.) Id. (citing Fireman's Fund Am. Ins. Co. v. Puerto Rican Forwarding Co., Inc., 492 F.2d 1294, 1295 (1st Cir. 1974)).

(154.) Id. at 913.

(155.) See SCHOENBAUM, supra note 1, at 690-691.

(156.) Logistics Management, 86 F.3d at 913.

(157.) Cornar Marine, 792 F.3d at 570.

(158.) Logistics Management, 86 F.3d at 913.

(159.) Id. at 914.

(160.) "[T]here is a specific 'universe of maritime contracts which may also give rise to a maritime lien....'" Cornar Marine, 792 F.3d at 570 n.7.

(161.) Equilease, 793 F.2d at 600.

(162.) Id.

(163.) Id.

(164.) Id.

(165.) Id.

(166.) Equilease, 793 F.2d at 600.

(167.) Id. at 601 (citing Learned v. Brown, 94 F. 876 (1899)).

(168.) Id.

(169.) Equilease, 793 F.2d at 601.

(170.) Id.

(171.) Id. at 603.

(172.) Id. at 604.

(173.) Id.

(174.) Equilease, 793 F.2d at 604.

(175.) Id.

(176.) E.A.S.T.,876 F.2d at 1169.

(177.) Id.

(178.) Id. at 1170.

(179.) Id.

(180.) Id.

(181.) E.A.S.T.,876 F.2d at 1170.

(182.) Id.

(183.) Id.

(184.) Id. at 1174.

(185.) Id. at 1173.

(186.) E.A.S.T., 876 F.2d at 1174.

(187.) Id.

(188.) Id.

(189.) Id. at 1175.

(190.) Id.

(191.) SCHOENBAUM, supra note 1, at 690-691.

(192.) Cornar Marine, 792 F.3d at 570.

(193.) BIMCO, Shipman 2009 Standard Ship Management Agreement, BIMCO, http://www.remedy.ru/rus/userfiles/file/documents/Shipman%202009%20IIpodpop Ma%20[??]apTepa%20Shipman%202009.pdf (last updated Jan. 31, 2017).

(194.) 80 C.J.S. Shipping [section] 84 (2016).

(195.) BIMCO, supra note 193.

(196.) 80 C.J.S. Shipping [section] 84 (2016).

(197.) Types of Maritime Charter Agreements, Contracts of Carriage by Sea and Air, 22 WILLISTON ON CONTRACTS [section] 58:6 (4th ed. 2016); BIMCO, supra note 193.

(198.) Types of Maritime Charter Agreements, Contracts of Carriage by Sea and Air, 22 WILLISTON ON CONTRACTS [section] 58:6 (4th ed. 2016).

(199.) BIMCO, supra note 193.

(200.) Id.

(201.) See SCHOENBAUM, supra note 1, at 706.

(202.) Cornar Marine, 792 F.3d at 567.

(203.) BIMCO, supra note 193.

(204.) Id.

(205.) Cornar Marine, 792 F.3d at 576.

(206.) Id.

(207.) Id. at 569.

(208.) Id. at 571.

(209.) Cornar Marine, 792 F.3d at 568.

(210.) Braum, supra note 34, at 338.

(211.) Id. at 339 (quoting Equilease, 793 F.2d at 603).

(212.) Id. (citing Ajubita v. S/S Peik, 428 F.2d 1345 (1970)).

(213.) Ajubita, 428 F.2d 1345.

(214.) Id. at 1346.

(215.) Id.

(216.) Id.

(217.) Ajubita, 428 F.2d at 1347 (citing Stern, Hays, & Lang, Inc. v. Motor Vessel Nili, 407 F.2d 549 (5th Cir. 1969)).

(218.) TTT Stevedores of Texas, Inc. v. M/V Jagat Vijeta, 696 F.2d 1135 (5th Cir. 1983).

(219.) Id.; The American, 1931 AMC 197 (D. Mass. 1930).

(220.) Hayden & Leland, supra note 46, at 1240.

(221.) Cornar Marine, 792 F.3d at 571.

(222.) Id.

(223.) SCHOENBAUM, supra note 1, at 697-698; Force & Norris, supra notel3.

(224.) Id.

(225.) Note, supra note 77, at 535.

(226.) Cornar Marine, 792 F.3d at 575.

(227.) Id. at 576.

(228.) The BIMCO agreement is only a model agreement. To learn more about BIMCO, please see: BIMCO, About US and Our Members, BIMCO https://www.bimco.org/About/About_BIMCO.aspx (last visited Jan. 31, 2017).

(229.) Cornar Marine, 792 F.3d at 567.

(230.) Cornar Marine, 792 F.3d at 570.

(231.) The opinion dismisses the idea, finding the comparison of the management agreement to a bareboat charter is not valid. Id.
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Author:Fergus, Carni
Publication:Loyola Maritime Law Journal
Date:Jun 22, 2017
Words:10565
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