September 27, 2022

Volume XII, Number 270

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September 26, 2022

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Central Boat Rentals, Inc. v. M/V Nor Goliath — The Fifth Circuit Defines What's Necessary for a "Necessary"

In a recent decision, the US Court of Appeals for the Fifth Circuit denied a group of tug owners’ attempt to extend the reach of the Commercial Instruments and Maritime Lien Act (CIMLA) in the context of a “necessaries” lien claim. The Fifth Circuit, applying the language of CIMLA stricti juris, reasoned that the services rendered were not necessary for the operation and function of the vessel; therefore, attaching a lien to the vessel would “dilut[e] the incentive to suppliers to the detriment of CIMLA’s core mission.”

In Central Boat Rentals, Inc. v. M/V Nor Goliath (No. 21-60501), Epic Companies L.L.C. (Epic), a general contractor that decommissioned oil platforms in the Gulf of Mexico, subcontracted with the heavy-lift vessel the M/V Nor Goliath to lift oil platform components from the water and place them onto barges. Those barges were then towed by tugs owned by various companies to an inland scrapyard and then returned empty to the Nor Goliath. Upon Epic’s bankruptcy, its subcontractors looked to other sources to collect payments due to them under their subcontracts with Epic. The group of tugboat owners that provided tug services to the barges filed suit seeking to assert and enforce maritime liens against the Nor Goliath under CIMLA. The towing companies maintained that the tugs provided necessary services to the Nor Goliath by towing the barges, thus creating a lien for necessaries against the vessel. Both parties filed motions for summary judgment. The US District Court for the Southern District of Mississippi granted the Nor Goliath’s motion, finding towing services rendered to barges and not the vessel itself were not “necessaries.”

On appeal, the Fifth Circuit affirmed the district court and refused to expand the reach of CIMLA. Under CIMLA, a person providing necessaries to a vessel has a lien on the vessel and may bring an action in rem to enforce the lien. The Fifth Circuit applied CIMLA stricti juris, thereby ensuring maritime liens are not “lightly extended.” Generally, necessaries are those “items useful to the vessel operations and necessary to keep the ship going.” The court will look to the particular requirements and functions of a vessel to determine what is a necessary for that particular ship.

Looking to the particulars of the Nor Goliath, the court determined the towing services provided by the plaintiffs were not necessary for the vessel’s operation. First, the towing companies argued the Nor Goliath’s particular function was decommissioning the oil platform; therefore, every service used in the process of decommissioning was a necessary. The court determined the decommissioning project was Epic’s goal, not the Nor Goliath’s, and the Nor Goliath’s particular function was limited to lifting platform components and placing them onto barges. Second, the towing companies argued the barges were equipment necessary for the Nor Goliath’s particular function — removing platform components. The court again disagreed, reasoning that the Nor Goliath did not “use” the barges because the barges did not help the Nor Goliath’s crane raise and lower the platform components. Since a lien can only arise when “the good or service was provided for use by the vessel itself,” the towing companies could not have a lien for taking and redelivering barges. Third, the towing companies argued that the barges were essential to the overall decommissioning project; therefore, the Nor Goliath indirectly benefited from their towing services. The court found this argument “misapprehend[ed] the concept of liens for necessaries” and rejected the broad implications such a rule would have. If a lien could attach to any vessel that only indirectly benefited from a service, then in a multi-ship operation, all the ships in a fleet would have liens on the other. This would be an “untenable” result. Rather, the court maintained the narrow application of CIMLA that “maritime liens for necessaries run against the vessel that received the necessary and no further.”

© 2022 Jones Walker LLPNational Law Review, Volume XII, Number 153
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About this Author

Ilsa H. Luther Maritime Attorney Jones Walker Law Firm New Orleans, LA
Associate

Ilsa Luther is an associate in the Maritime Practice Group. She is a member of the maritime transactional team and of the firm’s Energy and Natural Resources Industry Team.

As part of her maritime practice, Ilsa regularly advises clients on maritime commercial, financial, and regulatory matters. On the commercial side, she has experience in marine transportation agreements, vessel construction agreements, and vessel purchase agreements. With respect to marine finance, Ilsa’s experience includes traditional debt financings with ship mortgages and lease financings. On the maritime...

504-582-8115
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