ING Bank N v. v. M/V TEMARA , 892 F.3d 511 ( 2018 )

16-3923(L)
ING Bank N.V. v. M/V TEMARA
1 In the
2 United States Court of Appeals
3 For the Second Circuit
4 _________________________________
5 August Term 2017
6 _________________________________
7 Nos. 16-4019(L), 16-4019(Con)
8
9 (Argued: March 15, 2018; Decided: June 13, 2018)
10
11 ING Bank N.V.,
12 Plaintiff-Intervenor-Defendant-Appellant,
13
14 v.
15
16 M/V TEMARA, IMO No. 9333929, her engines, tackle, equipment, furniture,
17 appurtenances, etc., in rem,
18 Defendant-Intervenor-Defendant-Appellee,
19
20 CEPSA International B.V.,
21 Intervenor-Plaintiff-Appellant,
22
23 CEPSA Panama, S.A.,
24 Intervenor-Plaintiff,
25
26 O.W. Bunker & Trading A/S, in personam,
27 Intervenor-Defendant.1
28 _________________________________
29 Appeal from the United States District Court
30 for the Southern District of New York
31 Katherine B. Forrest, District Judge, Presiding.
1
The Clerk of Court is respectfully directed to amend the caption as above.
1 Before: PARKER, WESLEY, and LIVINGSTON, Circuit Judges.
2 ________
3
4 The assignee of a maritime fuel contract supplier and the physical supplier
5 assert competing maritime lien claims arising from the delivery of fuel to a
6 vessel. To effect actual delivery of the fuel, the contract supplier subcontracted
7 with an intermediary, who re-subcontracted with the physical supplier. After
8 delivery of the fuel but before any party received payment, the contract supplier
9 and the intermediary declared bankruptcy. Both the assignee of the contract
10 supplier and the physical supplier asserted maritime liens for the unpaid fuel
11 against the vessel. The District Court denied both maritime liens and sua sponte
12 entered summary judgment in favor of the vessel. The assignee of the contract
13 supplier and the physical supplier appealed. We AFFIRM IN PART, VACATE
14 IN PART, and REMAND for further proceedings consistent with this opinion.
15 ________
16
17 J. STEPHEN SIMMS AND CASEY L. BRYANT, Simms Showers LLP,
18 Baltimore, MD., for CEPSA International B.V.
19
20 JAMES D. BERCAW AND ROBERT J. STEFANI, King, Krebs &
21 Jurgens, PLLC, New Orleans, LA, and BRUCE G. PAULSON AND
22 BRIAN P. MALONEY, Seward & Kissel LLP, New York, N.Y., for
23 ING Bank N.V.
24
25 JAMES H. POWER AND MARIE E. LARSEN, Holland & Knight LLP,
26 New York, N.Y., for M/V TEMARA, IMO No. 9333929, her
27 engines, tackle, equipment, furniture, appurtenances, etc.
28 ________
29
30
31
32
33
34
2
1 BARRINGTON D. PARKER, Circuit Judge:
2 This appeal requires us to decide which parties are entitled to a maritime
3 lien under the Commercial Instruments and Maritime Liens Act (“CIMLA”), 46
4 U.S.C. § 31301 et seq.
5 In 2014, the charterer of a vessel contracted with a supplier to buy bunkers
6 (marine fuel). To fulfill its obligation, the contract supplier subcontracted with
7 an intermediary, who, in turn, subcontracted with another entity, the physical
8 supplier, who then delivered the bunkers. After the bunkers were delivered, but
9 before anyone was paid, the contract supplier and the intermediary entered
10 bankruptcy. In order to get paid, the assignee of the contract supplier and the
11 physical supplier asserted competing maritime liens against the vessel. We must
12 decide which party was entitled to do so.
13 The assignee of the contract supplier and the physical supplier cross-
14 moved for summary judgment. The United States District Court for the Southern
15 District of New York (Katherine B. Forrest, Judge) concluded that neither the
16 contract supplier (and, thus, its assignee) nor the physical supplier were entitled
17 under CIMLA to maritime liens and denied their motions for summary
3
1 judgment. Without providing notice to the parties, the District Court then sua
2 sponte entered summary judgment in favor of the vessel.
3 We affirm in part, vacate in part, and remand for further proceedings. We
4 agree with the District Court that the subcontractor physical supplier was not
5 entitled to a maritime lien because it did not provide the bunkers on the order of
6 an entity specified in CIMLA. However, we disagree with the District Court that
7 the bunker contract supplier—and, thus, its assignee—was not entitled to seek a
8 maritime lien. A contractor is entitled to assert a maritime lien under CIMLA
9 when it contracts with an entity specified in the statute for the delivery of
10 necessaries and those necessaries are delivered pursuant to that arrangement,
11 even if by a subcontractor. We also conclude that the District Court’s sua sponte
12 entry of summary judgment was error.
13 BACKGROUND2
14 This appeal flows from the collapse of O.W. Bunker and Trading A/S
15 (“O.W. Denmark”) and its international subsidiaries (collectively with its
16 international subsidiaries, the “O.W. Bunker Group”), a world-wide operation
17 which was in the business of supplying bunkers to ships operating in
2
“JA” refers to the parties’ joint appendix. “SA” refers to ING’s supplemental appendix.
4
1 international commerce. Following the collapse of the O.W. Bunker Group,
2 many of its customers were unsure where to direct payment and, because they
3 faced competing claims from various unpaid parties, those customers were
4 concerned that their vessels would be subject to arrest while the payment issues
5 were sorted out.
6 CIMLA provides to a specific class of creditors a special type of statutory
7 lien—a maritime lien—as security for a discrete category of debts. Under
8 CIMLA, a party who provides necessaries (such as bunkers) to a vessel is entitled
9 to assert a maritime lien. 46 U.S.C. § 31342. A maritime lien grants a provider of
10 necessaries a suite of powerful rights: the right to arrest the vessel, to have it
11 sold, and to be paid from the proceeds. Maritime liens promote maritime
12 commerce by providing additional recourse—beyond in personam claims against
13 counterparties—by enabling the assertion of a lien directly against the vessel,
14 thereby encouraging the prompt payment of debts and the existence of a reliable
15 market for the servicing and supplying of vessels, which are obviously essential
16 to maritime commerce. Unpaid entities who have supplied necessaries but who
17 do not qualify for maritime liens may have in personam claims. However, due to
5
1 the complexities of international maritime commerce, collection on these claims
2 can be considerably more problematic than is the case with maritime liens.
3 The relevant chain of events began in October 2014 when Copenship
4 Bulkers A/S (“Copenship”), the time-charterer of the M/V TEMARA (the
5 “TEMARA,” or the “Vessel”), contracted with a contract supplier, O.W.
6 Denmark, for the delivery of 400 metric tons of bunkers to the Vessel in Balboa,
7 Panama. After receiving the order, O.W. Denmark issued a sales order to
8 Copenship confirming the details of the sale. The confirmation lists O.W.
9 Denmark as the “seller,” Copenship as the “buyer,” and CEPSA International
10 B.V. (“CEPSA”)3 as the “supplier.” The confirmation provided that “acceptance
11 of the marine bunkers by the vessel . . . shall be deemed to constitute acceptance
12 of the said general terms[.]” The confirmation reflected the agreed-upon price
13 for the fuel—$536.00 per metric ton—and specified that payment would be due
14 30 days after delivery. The sales agreement between O.W. Denmark and the
15 charterer was governed by the “OW Bunker Group Terms and Conditions of sale
3
CEPSA Panama, S.A. originally filed the intervenor complaint, but the District Court
determined that the real party-in-interest was CEPSA International B.V.
6
1 [sic] for Marine Bunkers Edition 2013” (the “O.W. Terms”). JA at 103–14. Clause
2 L.4(a) of the O.W. Terms (“Clause L.4(a)”) made them fluid by providing that:
3 These Terms and Conditions are subject to variation in
4 circumstances where the physical supply of the Bunkers is being
5 undertaken by a third party which insists that the Buyer is also
6 bound by its own terms and conditions. In such circumstances, these
7 Terms and Conditions shall be varied accordingly, and the Buyer
8 shall be deemed to have read and accepted the terms and conditions
9 imposed by the said third party.
10 Id. at 111.
11 In the next step of the transaction, O.W. Denmark subcontracted with its
12 subsidiary, O.W. USA, for the purchase of the bunkers. O.W. USA issued a sales
13 order confirmation to O.W. Denmark, listing O.W. Denmark as the “buyer” and
14 O.W. USA as the “seller.” The confirmation reflected a price of $529.00 per
15 metric ton and called for payment within 30 days of delivery.4
4
Notably, ING failed to present the actual contract constituting this link in the contractual
chain to the District Court on its motion for summary judgment; it only presented the actual
contract as part of its motion for reconsideration, which the District Court declined to consider
when it denied the motion. See Order, ING Bank N.V. v. M/V TEMARA, No. 16-cv-95 (S.D.N.Y. Nov.
28, 2016), ECF Dkt. 181.
7
1 In the third and final stage of the transaction, O.W. USA subcontracted
2 with the physical supplier, CEPSA, for the actual delivery of the bunkers.
3 CEPSA issued a confirmation to O.W. USA listing CEPSA as the “seller,” O.W.
4 USA as the “buyer,” and reflecting a price of $526.00 per metric ton. O.W. USA
5 then memorialized the transaction in its own confirmation. Neither confirmation
6 referenced O.W. Denmark or the charterer of the Vessel, but both referenced the
7 Vessel. CEPSA physically supplied the bunkers to the Vessel and CEPSA
8 provided a bunker receipt that the Vessel’s chief engineer signed and stamped
9 with the names of the Vessel and its owner.
10 Following delivery of the bunkers, each party in the contractual chain
11 invoiced its respective counterparty, at different prices, reflecting a markup at
12 each stage of the transaction: O.W. Denmark invoiced the charterer, Copenship,
13 JA at 115 ($536 per metric ton); O.W. USA invoiced O.W. Denmark, JA at 130
14 ($529 per metric ton); and CEPSA invoiced O.W. USA, JA at 90 ($526 per metric
15 ton). As the invoices came due, O.W. Denmark entered insolvency proceedings
16 in Denmark, the O.W. Bunker Group collapsed, and the various O.W. Bunker
17 Group entities then entered insolvency proceedings around the world.
8
1 In December 2013, almost a year before the O.W. Bunker Group’s collapse,
2 ING Bank N.V. (“ING”) and O.W. Denmark entered into a $700 million revolving
3 credit agreement, funded by a syndicate of lenders, which provided working
4 capital for the O.W. Bunker Group. ING contends that the credit agreement was
5 secured by, among other things, an assignment of O.W. Bunker Group
6 receivables from the bunker transactions it had conducted—including the right
7 to payment for the bunkers delivered to the Vessel. No one has received
8 payment for those bunkers.
9 In May 2015, ING, as assignee of O.W. Denmark, filed a complaint in rem
10 against the Vessel in the United States District Court for the District of Maryland,
11 asserting a maritime lien against the Vessel for the bunkers delivered by CEPSA.
12 ING moved for a warrant of arrest, and the Vessel was then arrested in
13 Baltimore, Maryland. A few days later, CEPSA, intervened to assert a competing
14 maritime lien claim and an in personam breach of contract claim against ING. To
15 secure the release of the Vessel pending the adjudication of the competing claims,
16 its owner posted security, and the vessel was released.
9
1 In September 2015, ING moved for partial summary judgment on its lien
2 claim and on CEPSA’s claims and CEPSA cross-moved for summary judgment.
3 In January 2016, as these motions were still pending, the case was transferred to
4 the Southern District of New York. By June 2016, several other actions arising
5 out of the collapse of the O.W. Bunker Group involving similar claims were
6 pending before the District Court. The District Court entered an order
7 coordinating them, and among other things, directed ING to move for partial
8 summary judgment to test the validity of its maritime lien.
9 Initially, the District Court considered CEPSA’s entitlement to a maritime
10 lien. The District Court granted ING’s motion for summary judgment, dismissed
11 CEPSA’s maritime lien claim and denied its cross-motion for summary
12 judgment. See ING Bank N.V. v. M/V TEMARA, 203 F. Supp. 3d 355 (S.D.N.Y
13 2016) (the “August 2016 Order”).5 Noting that CIMLA requires that a party
14 asserting a maritime lien must have provided the necessaries upon the order of
15 owner of the vessel or a person authorized by the owner, the District Court
5
At the same time, the District Court issued opinions in other O.W. Bunker Group related
matters, dismissing the physical suppliers’ claims in those actions. See Aegean Bunkering (USA) LLC
v. M/T AMAZON, No. 14-cv-9447, 2016 WL 4471895 (S.D.N.Y. Aug. 24, 2016); Order, O’Rourke
Marine Servs. L.P., LLP v. M/V COSCO HAIFA, No. 15-cv-2992 (S.D.N.Y. Aug. 24, 2016), ECF Dkt.
103.
10
1 determined that CEPSA was not entitled to a maritime lien because it provided
2 the bunkers on the order of O.W. USA, an intermediary who was neither an
3 owner nor the authorized agent of the owner. See id. at 365. The District Court
4 also dismissed CEPSA’s alternative claim that it was entitled to recover on a
5 theory of unjust enrichment and on equitable principles, reasoning that because
6 maritime liens are creations of CIMLA whose terms are strictly construed,
7 generalized equitable concerns do not trump the express provisions of the
8 statute.
9 Turning to ING’s (as assignee of O.W. Denmark) assertion of a maritime
10 lien, the District Court concluded that O.W. Denmark had not “provided”
11 necessaries to the Vessel within the meaning of CIMLA and thus could not assert
12 a maritime lien. The District Court found that there was a lack of evidence with
13 respect to O.W. Denmark’s “arrangements down the chain” and that O.W.
14 Denmark could not, without proof of a fully intact contractual chain, be deemed
15 to have provided necessaries as required by CIMLA. See ING Bank, N.V. v. M/V
16 TEMARA, No. 16-cv-95, 2016 WL 6156320, at *8 (S.D.N.Y. Oct. 21, 2016) (the
17 “October 2016 Order”). In other words, the District Court concluded that the
11
1 record was uncertain as to how financial obligations and terms and conditions
2 moved down the chain from O.W. Denmark, the contract supplier, to CEPSA, the
3 physical supplier (through the intermediary, O.W. USA). Based on this view of
4 the record, the District Court reasoned that O.W. Denmark did not take on any
5 risk—financially or in terms of necessaries provided—in connection with the
6 provision of bunkers to the Vessel since “it never assumed title or possession of
7 the bunkers, it never obligated itself to pay the actual physical supplier, and it
8 never supplied the bunkers.” See id. at *3. Concluding that a provider of
9 necessaries must have taken on some risk in the transaction, the District Court
10 denied O.W. Denmark’s claim for a maritime lien because it was “steps removed
11 from the physical provision of bunkers and never . . . had a tangible financial risk
12 with regard to them[.]” See id. at *6; id. at *7 (“The case law does not support
13 awarding a maritime lien in a non-risk—and therefore non-
14 protective—circumstance.”).
15 After denying ING’s motion for partial summary judgment, the District
16 Court sua sponte—and without giving ING notice or an opportunity to
17 respond—entered summary judgment against ING and in favor of the Vessel,
12
1 even though the Vessel had not moved for summary judgment. Subsequently,
2 ING moved for reconsideration and sought to supplement that factual record
3 with additional information in order to complete the contractual links missing
4 from its original motion. The District Court denied the motion without
5 entertaining further submissions or briefing. Order, ING Bank N.V. v. M/V
6 TEMARA, No. 16-cv-95 (S.D.N.Y. Nov. 28, 2016), ECF Dkt. 181. This appeal
7 followed.
8 STANDARD OF REVIEW
9 We review a district court’s grant of summary judgment de novo. Process
10 Am., Inc. v. Cynergy Holdings, LLC, 839 F.3d 125, 133 (2d Cir. 2016). “Summary
11 judgment is proper ‘if the movant shows that there is no genuine dispute as to
12 any material fact and the movant is entitled to judgment as a matter of law.’” Id.
13 (quoting Fed. R. Civ. P. 56(a)). We construe the evidence in the light most
14 favorable to the non-moving party and draw all reasonable inferences in its
15 favor. June v. Town of Westfield, 370 F.3d 255, 257 (2d Cir. 2004).
16
17
13
1 DISCUSSION
2 A maritime lien is a “special property right in the vessel, arising in favor of
3 the creditor by operation of law as security for a debt or claim,” which “arises
4 when the debt arises[.]” Itel Containers Int’l Corp. v. Atlanttrafik Express Serv. Ltd.,
5 982 F.2d 765, 766 (2d Cir. 1992) (quoting Equilease Corp. v. M/V SAMPSON, 793
6 F.2d 598, 602 (5th Cir. 1986) (en banc)). Unlike other security arrangements, a
7 maritime lien tends to benefit both the ship and its creditors. “On the one hand,
8 it enables ships to obtain repairs and supplies on its own account that might not
9 otherwise be available.” Id. at 768 (citing Piedmont & Georges’ Creek Coal Co. v.
10 Seaboard Fisheries Co., 254 U.S. 1, 9 (1920)). On the other hand, it endows the
11 creditor with a “special property” in the ship that comes into existence when the
12 debt arises and gives the creditor the right to have the ship sold so that the
13 creditor’s debt may be paid out of the proceeds of the sale. Id. (quoting The
14 Poznan, 9 F.2d 838, 842 (2d Cir. 1925), rev'd on other grounds sub nom., New York
15 Dock Co. v. Steamship Poznan, 274 U.S. 117 (1927)); see also Schoenbaum, Thomas,
16 J., Admiralty and Maritime Law § 9-1, at 684 (5th ed. 2011); 2-II Benedict on
17 Admiralty § 22 (2017).
14
1 CIMLA is the statutory basis for maritime liens. CIMLA provides that “a
2 person providing necessaries to a vessel on the order of the owner or a person
3 authorized by the owner . . . has a maritime lien on the vessel [and] may bring a
4 civil action in rem to enforce the lien . . . .” 46 U.S.C. § 31342(a). Specifically,
5 CIMLA requires three elements for a maritime lien: (1) that the goods or services
6 at issue were “necessaries,” (2) that the entity “provid[ed]” the necessaries to a
7 vessel; and (3) that the entity provided the necessaries “on the order of the owner
8 or a person authorized by the owner.” Id.; see Barcliff LLC v. M/V DEEP BLUE,
9 876 F.3d 1063, 1068 (11th Cir. 2017). CIMLA defines “persons . . . presumed to
10 have authority to procure necessaries for a vessel” as “(1) the owner; (2) the
11 master; (3) a person entrusted with the management of the vessel at the port of
12 supply; or (4) an officer or agent appointed by—(A) the owner; (B) a charterer;
13 (C) an owner pro hac vice; or (D) an agreed buyer in possession of the vessel.” 46
14 U.S.C. § 31341(a). “Necessaries” include, among other things, bunkers. See
15 Hapag-Lloyd Aktiengesellschaft v. U.S. Oil Trading LLC, 814 F.3d 146, 151 n.13 (2d
16 Cir. 2016); see also 46 U.S.C. § 31301(4).
15
1 Maritime liens arise only by operation of law and not by contract.
2 Bominflot, Inc. v. The M/V HENRICH S, 465 F.3d 144, 146 (4th Cir. 2006)
3 (“[M]aritime liens are stricti juris and cannot be created by agreement between
4 the parties; instead, they arise by operation of law[.]”); accord Newell v. Norton, 70
5 U.S. 257, 262 (1865) (“Maritime liens are not established by the agreement of the
6 parties. . . . They are consequences attached by law to certain contracts, and are
7 independent of any agreement between the parties that such liens shall exist.”).
8 Maritime liens are disfavored by the law, and are thus construed under the
9 doctrine of stricti juris, meaning that the statutory requirements are construed
10 strictly and may not be expanded by “construction, analogy or inference.” Itel
11 Containers, 982 F.2d at 768 (quoting Piedmont, 254 U.S. at 12). The primary
12 purpose of maritime liens is to facilitate maritime commerce by reducing the
13 counterparty risk associated with supplying a vessel that may not return to the
14 same port again. Strict construction of CIMLA, among other things, is intended
15 to prevent a proliferation of liens, something that might otherwise be a
16 significant hindrance to maritime commerce. See id.
17
16
 1 A. Contract Supplier’s Claims (O.W. Denmark)
2 Whether ING, as O.W. Denmark’s purported assignee, is entitled to assert
3 a maritime lien against the Vessel depends on whether O.W. Denmark is entitled
4 to assert such a lien. The key to this inquiry is whether an entity such as O.W.
5 Denmark which agreed to supply necessaries and then contracts with one or
6 more intermediaries to supply them can itself be deemed to have “provided”
7 necessaries under CIMLA. We conclude that the answer, guided by
8 straightforward principles of contract law, is yes. A maritime lien may be
9 asserted by an entity when that entity contracts with a vessel’s owner, charterer,
10 or other statutorily-authorized person for the provision of necessaries and the
11 necessaries are supplied pursuant to that agreement even if by another party.
12 The Restatement (Second) of Contracts offers the following apt illustration:
13 “A contracts to deliver to B coal of a specified kind and quality. A delegates the
14 performance of this duty to C, who tenders to B coal of specified kind and
15 quality. The tender has the effect of a tender by A.” Restatement (Second) of
16 Contracts § 318 cmt. a., illus. 2 (Am. Law Inst. 1981). In other words, a supplier
17 may provide necessaries to a vessel indirectly through a subcontractor because
17
1 when a subcontractor does so pursuant to its contract with a contractor, the
2 subcontractor’s performance is attributable to the contractor. See Galehead, Inc. v.
3 M/V ANGLIA, 183 F.3d 1242, 1245 (11th Cir. 1999) (observing that a contract
4 supplier “‘provided’ necessaries to the vessel under the contract irrespective of
5 how, or by whom, the delivery was carried out”); see also Clearlake Shipping PTE
6 Ltd. v. O.W. Bunker (Switzerland) SA, 239 F. Supp. 3d 674, 691 (S.D.N.Y. 2017)
7 (concluding that a contractor need not have supplied fuel to have a lien, so long
8 as it, “through a chain of separate, but clearly documented transactions, caused
9 its subcontractors to deliver the necessaries to the vessels”); Exxon Corp. v. Cent.
10 Gulf Lines, Inc., 780 F. Supp. 191, 194 (S.D.N.Y. 1991).
11 That is what occurred here. O.W. Denmark agreed to supply bunkers to
12 the Vessel on the order of Copenship, the charterer. O.W. Denmark then
13 subcontracted its obligations to O.W. USA, which, in turn, subcontracted with
14 CEPSA for the actual delivery of the bunkers and who in fact delivered the
15 bunkers. Accordingly, we hold that O.W. Denmark was a provider of necessaries
16 under CIMLA and may assert a maritime lien against the Vessel. See also Barcliff,
17 876 F.3d at 1074 (holding that an O.W. Bunker Group entity acting as a contract
18
1 supplier could assert a maritime lien against a vessel because it “provided the
2 bunkers to the vessel within the meaning of § 31341(a)”).
3 The District Court reached a different result. It concluded that O.W.
4 Denmark, in subcontracting for the provision of the bunkers to the Vessel, did
5 not “provide” the bunkers to the Vessel since it did not incur any financial risk
6 down the contractual chain. See October 2016 Order, 2016 WL 6156320, at *7
7 (observing that “if Party A subcontracts to Party B for bunkers for a vessel, and B
8 subcontracts to C . . . in order for Party A to have a maritime lien . . . the
9 contractual chain between A and C (or D) must be traceable and intact,
10 ultimately placing A at financial risk for the bunkers provided” (alteration in
11 original)). We disagree with this application of CIMLA. To assert a maritime
12 lien, all a bunker contractor must establish is that it contracted with a statutorily-
13 authorized person for the delivery of bunkers and that the bunkers were
14 delivered pursuant to that contractual arrangement. Here, there is no question
15 that the Vessel’s charterer and O.W. Denmark entered into a contract to deliver
16 bunkers to the Vessel. And, there is no question that those bunkers were
19
1 delivered pursuant to that arrangement. Thus, O.W. Denmark is entitled to
2 assert a maritime lien under CIMLA.
3 The District Court’s risk analysis was beside the point. In any event, the
4 contractual chain in the record reflects routine commercial risk. Had O.W. USA
5 (through CEPSA) failed to deliver, O.W. Denmark would have been liable to
6 Copenship for the breach. O.W. Denmark bore the risk of O.W. USA’s
7 nonperformance (and, also, CEPSA’s) and would have had to find an alternate
8 bunker supplier if they failed to deliver. Moreover, O.W. Denmark would have
9 had to pay O.W. USA even in the event that Copenship failed to pay it (and
10 bankruptcy had not intervened). Insofar as the District Court determined that
11 some additional proof of financial risk (over and above the contract itself) on the
12 part of the bunker contractor was required, we conclude that such proof is not
13 required by CIMLA.
14 Accordingly, we conclude that the District Court erred in denying ING’s
15 motion for partial summary judgment on its entitlement to a maritime lien.
16
17
20
1 B. Physical Supplier’s Claims (CEPSA)
2 CEPSA claimed that it is entitled to a maritime lien for the bunkers it
3 supplied, or, in the alternative, that it is entitled to recovery based upon equitable
4 principles, such as unjust enrichment. We do not agree. Because there is no
5 dispute that CEPSA physically provided bunkers to the Vessel, “CEPSA’s
6 entitlement to a maritime lien turns on whether it furnished those bunkers ‘on
7 the order of the owner or a person authorized by the owner’” August 2016
8 Order, 203 F. Supp. 3d at 364 (quoting 46 U.S.C. § 31342(a)). We agree with the
9 District Court that CEPSA, as a subcontractor, is not entitled to a maritime lien
10 because it provided the bunkers at the direction of O.W. USA rather than at the
11 direction of the owner or the charterer of the Vessel, or any other statutorily-
12 authorized person. It is a “long-recognized rule that the services of an
13 independent subcontractor [generally] do not give rise to a maritime line.” 1
14 Admiralty & Mar. Law § 9-3 (5th ed.) Every circuit to have considered the issue
15 agrees. See Barcliff, 876 F.3d at 1071 (“Where the owner directs a general
16 contractor to provide necessaries to its vessel, a subcontractor retained by the
17 general contractor to . . . provide the supplies is generally not entitled to a
21
1 maritime line.”); Cianbro Corp. v. George H. Dean, Inc., 596 F.3d 10, 17 (1st Cir.
2 2010); Lake Charles Stevedores, Inc. v. PROFESSOR VLADIMIR POPOV MV, 199
3 F.3d 220, 229 (5th Cir. 1999); S.C. State Port Auth. v. M/V TYSON LYKES, 67 F.3d
4 59, 61 (4th Cir. 1995); Port of Portland v. M/V PARALLA, 892 F.2d 825, 828 (9th Cir.
5 1989).
6 Despite the weight of authority to the contrary, CEPSA claims nevertheless
7 that it is entitled to a maritime lien for the bunkers it supplied. Alternatively,
8 CEPSA claims that it is entitled to recovery based upon equitable principles, such
9 as unjust enrichment. We reject both of these arguments.
10 The District Court correctly concluded that there is no genuine dispute of
11 material fact as to whether CEPSA provided the bunkers at the direction of O.W.
12 USA. The record contained the sales order confirmation that CEPSA issued to
13 O.W. USA and the purchase order confirmation that O.W. USA issued to CEPSA.
14 On CEPSA’s sales order confirmation, O.W. USA is listed as the “buyer” and
15 CEPSA is listed as the “supplier.” See JA at 65 (CEPSA sales order confirmation).
16 O.W. USA’s confirmation to CEPSA is to the same effect. See id. at 66 (O.W. USA
17 purchase order confirmation). These documents indicate that CEPSA entered
22
1 into a bilateral transaction with O.W. USA and none of them indicate that O.W.
2 USA was the owner of the Vessel or an agent of the owner or any other
3 statutorily-authorized person. The nomination, confirmations of purchase and
4 sale, and invoice all denominate O.W. USA as the “buyer” and CEPSA as the
5 “seller.” None of the pertinent documents refer to O.W. Denmark or the
6 charterer. In other words, CEPSA points us to no credible evidence that the
7 charterer of the Vessel agreed to be bound by O.W. USA’s purchase of the
8 bunkers.6 See Lake Charles Stevedores, 199 F.3d at 229 (subcontracting suppliers
9 “hired by those general contractors are generally not entitled to assert a lien on
10 their own behalf, unless it can be shown that an entity authorized to bind the
11 ship controlled the selection of the subcontractor and/or its performance”). For
12 these reasons, we agree with the District Court’s conclusion that CEPSA was
13 acting as a subcontractor of O.W. USA (which itself was a subcontractor of O.W.
6
CEPSA’s argument that the Vessel’s chief engineer’s signature or CEPSA’s delivery receipt
evidences a directive from the Vessel (or an authorized agent of the owner) fails to raise a genuine
issue of material fact. Acknowledgment of delivery merely shows that the bunkers reached the
ship and is merely evidence of “acceptance of performance under a pre-existing contract.”
Clearlake, 239 F. Supp. 3d at 689. A signature on a delivery recipe alone is not enough to show that
the parties intended to alter in any way the established contractual chain well-documents by order
confirmations and invoices.
23
1 Denmark) when it delivered the bunkers to the Vessel and is, therefore, not
2 entitled to a maritime lien.7
3 Nor can CEPSA show that it was acting on the order of O.W. USA, as agent
4 of the vessel owner. See id. at 229; Marine Fuel Supply & Towing, Inc. v. M/V KEN
5 LUCKY, 869 F.2d 473, 477–78 (9th Cir. 1988). To resist this conclusion, CEPSA
6 argues that the terms and conditions in its (bilateral) agreement with O.W. USA
7 bind not just O.W. USA, but also the Vessel, the charterer, and O.W. Denmark
8 (and ING, as O.W. Denmark’s assignee). Specifically, CEPSA contends that the
9 terms of the contract between CEPSA and O.W. USA apply to the Vessel through
10 Clause L.4(a) of the O.W. Terms. In essence, CEPSA argues that, assuming those
11 terms pass through to and apply to the Vessel, then the Vessel had knowledge of
12 those terms and approved and accepted them, making any O.W. Bunker Group
13 entity an agent of the Vessel such that CEPSA, in contracting with O.W. USA,
14 provided the bunkers on the order of a statutorily-authorized person. This chain
15 of contract argument fails because, as we have seen, maritime liens are solely
7
We also note, as the District Court cogently observed, that if we were to allow a
subcontractor—without any indication that a statutorily-authorized entity provided direction—to
assert a maritime lien, we would be subjecting vessels to arrest on the basis of disputes between
contractors and their subcontractors, or in this case, a dispute between a subcontractor and a sub-
subcontractor. See August 2016 Order, 203 F. Supp. 3d at 367.
24
1 creatures of statute. If a party does not comply with the express provisions of
2 CIMLA, it is not entitled to a maritime lien. Generalized principles of contract
3 law can not be used to work around those provisions. See Itel Containers, 982 F.2d
4 at 768 (a maritime lien “aris[es] by operation of law . . . [and] is therefore stricti
5 juris”).
6 CEPSA’s related agency argument fails as well. CEPSA contends that its
7 terms and conditions pass up the contractual chain, and thus the O.W. Bunker
8 Group entities (O.W. Denmark and O.W. USA) became its agents for the supply
9 of the bunkers directly to the Vessel. In other words, the charterer (or the Vessel)
10 ordered the bunkers directly from CEPSA through O.W. Denmark and O.W.
11 USA. We are not persuaded. We see no support in the record for the proposition
12 that either or both of O.W. Denmark and O.W. USA were acting as CEPSA’s
13 agent when (i) O.W. Denmark took the initial order for bunkers from the
14 charterer of the Vessel, (ii) O.W. Denmark subcontracted with O.W. USA for
15 delivery, and (iii) O.W. USA then sub-subcontracted with CEPSA. All we see is a
16 series of counterparty transactions.
25
1 CEPSA also argues that since it supplied the bunkers, it is entitled to
2 recovery from the Vessel on a theory of unjust enrichment. The District Court
3 properly determined that CEPSA could not prevail on this theory. The District
4 Court determined, and CEPSA confirms on appeal, that the only relief sought is a
5 maritime lien against the Vessel in rem. But, as the District Court correctly
6 determined, an unjust enrichment claim must be asserted in personam. Although
7 unjust enrichment claims are available under maritime law as in personam claims,
8 Gulf Oil Trading Co. v. Creole Supply, 596 F.2d 515, 519 (2d Cir. 1979), in rem
9 maritime liens “cannot be conferred on the theory of unjust enrichment or
10 subrogation.” 2-II Benedict on Admiralty § 24 (2017); see also Mullane v. Chambers,
11 438 F.3d 132, 136 n.5 (1st Cir. 2006) (observing that the plaintiffs “mistakenly
12 thought that their maritime lien theories could create equitable liens”); The
13 Eurana, 1 F.2d 684, 686 (3d Cir. 1924) (“Maritime liens . . . cannot be conferred on
14 the theory of unjust enrichment or subrogation.”).
15 Finally, CEPSA’s other equitable arguments also fail. Observing that
16 equitable principles are “central” to admiralty law, CEPSA contends that it
17 would be a “manifest injustice” to allow ING to recover the funds that are owed
26
1 CEPSA, the entity that provided the bunkers, in circumstances where ING
2 delivered nothing and supposedly incurred no commercial risk or obligation.
3 CEPSA Opening Br. at 24. While maritime law is indeed grounded in equity, we
4 disagree that equitable principles mean that CEPSA is entitled to a de facto
5 maritime lien under CIMLA when the statue unambiguously provides otherwise.
6 As the District Court correctly observed, courts have consistently rejected the
7 concept of an equitable maritime lien. C.f. The Bird of Paradise, 72 U.S. 545, 555
8 (1866); O’Rourke Marine Servs. L.P., LLP v. M/V COSCO HAIFA, 179 F. Supp. 3d
9 333, 336–37 (S.D.N.Y. 2016). We do as well because maritime liens are strictly
10 creatures of statute and “cannot be extended argumentatively, or by analogy or
11 inference.” Osaka Shosen Kaisha v. Pac. Exp. Lumber Co., 260 U.S. 490, 500 (1923).
12 We are not unsympathetic to CEPSA’s position. After all, it supplied the
13 bunkers and our conclusion means it gets no lien and very likely could find itself
14 at the end of the day with an uncollectible receivable. But this result is a frequent
15 one in insolvencies: an unsecured entity such as CEPSA, who took an unsecured
16 credit risk, stands in line behind secured lenders.
17
27
1 C. Sua Sponte Grant of Summary Judgment to Vessel
2 Finally, we conclude that the District Court erred when it, sua sponte,
3 granted summary judgment in favor of the Vessel. See October 2016 Order, 2016
4 WL 6156320, at *9 (citing Bridgeway Corp. v. Citibank, 201 F.3d 134, 140 (2d Cir.
5 2000)).Federal Rules of Civil Procedure 56(a) and 56(b)-(e) set out the procedures
6 that apply when a party moves for summary judgment and when a district court
7 decides a such a motion. But when a party does not move for summary
8 judgment, Rule 56(f) controls and “provide[s] express procedures governing the
9 grant of summary judgment independent of a motion.” Swatch Grp. Mgmt. Servs.
10 Ltd. v. Bloomberg L.P., 756 F.3d 73, 80 n.2 (2d Cir. 2014). Rule 56(f) provides:
11 Judgment Independent of the Motion. After giving notice
12 and a reasonable time to respond, the court may:
13 (1) grant summary judgment for a nonmovant;
14 (2) grant the motion on grounds not raised by a party; or
15 (3) consider summary judgment on its own after
16 identifying for the parties material facts that may not be
17 genuinely in dispute.
18
19 Fed. R. Civ. P. 56(f).
20 As we recently stated, this Rule requires “that a court may grant summary
21 judgment sua sponte only ‘[a]fter giving notice and a reasonable time to respond’
28
1 and ‘after identifying for the parties material facts that may not be genuinely in
2 dispute.’” In re 650 Fifth Ave. and Related Props., 830 F.3d 66, 96 (2d Cir. 2016)
3 (quoting Fed. R. Civ. P. 56(f) (alteration in original)). The Supreme Court has
4 emphasized that prior notice is a prerequisite to a sua sponte grant of summary
5 judgment. See Celotex Corp. v. Catrett, 477 U.S. 317, 326 (1986) (“[D]istrict courts
6 are widely acknowledged to possess the power to enter summary judgments sua
7 sponte, so long as the losing party was on notice that [it] had to come forward
8 with all of [its] evidence.”). In addition to providing notice, a district court is also
9 required to “identify[] for the parties material facts that may not be genuinely in
10 dispute” before entering summary judgment sua sponte. Fed. R. Civ. P. 56(f)(3).8
11 A district court’s failure to provide adequate notice is almost always
12 reversible error, as it is here. A notice-free, sua sponte entry of summary
13 judgment is “firmly discouraged” and is limited only to situations when there is
14 no indication that the party against whom summary judgment would be entered
15 could present evidence that would affect the summary judgment determination.
16 Bridgeway Corp., 201 F.3d at 139; see also Coach Leatherware Co. v. AnnTaylor, Inc.,
8
The advisory committee notes to Rule 56(f) provide that “[i]n many cases it may prove
useful first to invite a motion; the invited motion will automatically trigger the regular procedure
of [Rule 56(c)].” Fed. R. Civ. P. 56, Advisory Committee Notes (2010 Amendments).
29
1 933 F.2d 162, 167–68 (2d Cir. 1991); Schwan-Stabilo Cosmetics GmbH v. Pacificlink
2 Int’l Corp., 401 F.3d 28, 33 (2d Cir. 2005); In re 650 Fifth Ave., 830 F.3d at 96–97.9
3 The District Court’s notice-free sua sponte grant of summary judgment in
4 this case was ill-advised. It concluded that the record before it did not contain
5 documentation regarding the arrangement between O.W. Denmark and the other
6 entities down the contractual chain to CEPSA. It then concluded that this lack of
7 documentation was fatal to ING’s assertion of a maritime lien by failing to
8 establish a “traceable and intact” contractual chain that would ultimately place
9 O.W. Denmark, ING’s assignor, at financial risk for the bunkers. See October
10 2016 Order, 2016 WL 6156320, at *6.
11 ING put forth evidence that tended to establish its relationships down the
12 contractual chain. ING submitted, as an exhibit to its S.D.N.Y. Local Civil Rule
13 56.1 statement in support of its motion for summary judgment, a declaration of
14 Claus Erik Mortensen, in which he attested that contractual relationships existed
15 between the contract supplier (O.W. Denmark), the subcontractor (O.W. USA),
9
In re 650 Fifth Ave., 830 F.3d at 96–97 (“We have emphasized that ‘care should be taken by
the district court to determine that the party against whom summary judgment is rendered has had
a full and fair opportunity to meet the proposition that there is no genuine issue of material fact to
be tried.’” (quoting Schwan-Stabilo Cosmetics GmbH, 401 F.3d at 33)).
30
1 and the physical supplier of the bunkers to the Vessel (CEPSA). See SA at 40–41,
2 ¶¶ 16–18. Although specifics were not provided, he attested that O.W. USA was
3 a “subcontractor” of O.W. Denmark and that CEPSA was a “sub-subcontractor of
4 [O.W. Denmark] for the delivery of bunkers to [the Vessel].” Id. at 41, ¶ 18.
5 These facts were incorporated into ING’s Rule 56.1 statement, and the Vessel did
6 not dispute them in its Rule 56.1 counter statement. Further, in its motion for
7 reconsideration, ING submitted an additional declaration and offered
8 documentation regarding the details of the contractual arrangements O.W.
9 Denmark had with its subcontractors.
10 Thus, when the District Court granted summary judgment, it knew from
11 the Mortensen declaration that some evidence existed concerning the contractual
12 arrangements between O.W. Denmark and the entities down the chain. Insofar
13 as the District Court concluded it required additional documentation on this
14 point, the information ING presented at a minimum should have alerted the
15 District Court that, given notice and an opportunity to do so, ING could have
16 provided additional information on an issue the District Court considered
17 dispositive. The availability of this information was confirmed when ING
31
1 provided it on its motion for reconsideration. To be sure, district courts are
2 ordinarily not required to accept evidence on motions to reconsider that could
3 have been adduced earlier. But here the District Court’s failure to follow Rule
4 56(f) was not a technical lapse. By sua sponte entering summary judgment
5 without affording ING the opportunity to present its relevant evidence, the
6 District Court denied ING the procedures to which it was entitled under Rule 56.
7 CONCLUSION
8 For the foregoing reasons, we AFFIRM IN PART, VACATE IN PART,
9 and REMAND to the District Court for further proceedings consistent with this
10 opinion.
11
32