Valero Mktg. & Supply Co. v. Sun, CIVIL ACTION NO. 14-2712

• Decision Date: 08 February 2016
• Docket Number: CIVIL ACTION NO. 14-2712
• Parties: Valero Marketing and Supply Co. v. M/V Almi Sun, IMO No. 9579535, her engines, apparel, furniture, equipment, appurtenances, tackle, etc., in rem
• Court: U.S. District Court — Eastern District of Louisiana

160 F.Supp.3d 973

Valero Marketing and Supply Co.

v.

M/V Almi Sun, IMO No. 9579535, her engines, apparel, furniture, equipment, appurtenances, tackle, etc., in rem,

CIVIL ACTION NO. 14-2712

United States District Court, E.D. Louisiana.

Signed February 08, 2016

Michael H. Bagot, Jr., Thomas Arnoult Rayer, Jr., Thomas James Wagner, Wagner, Bagot & Rayer LLP, New Orleans, LA, for Valero Marketing and Supply Co.

Gary Alan Hemphill, Adam N. Davis, Jeremy T. Grabill, Phelps Dunbar, LLP, New Orleans, LA, for Verna Marine Co. Ltd.

ORDER

NANNETTE JOLIVETTE BROWN

, UNITED STATES DISTRICT JUDGE

Before the Court is Verna Marine Co. Ltd.'s (“Verna”) “Cross Motion for Summary Judgment,”¹ wherein it contends that it is entitled to summary judgment in its favor finding that Plaintiff Valero Marketing and Supply Co. (“Valero”) does not have a maritime lien claim against the M/V Almi Sun, IMO No. 9579535 (“Vessel”).² Having considered the motion, the memoranda in support and in opposition, the oral arguments made at the hearing on the motion, the record, and the applicable law, the Court will grant the motion.

I. Background

A. Factual Background

This lawsuit arises out of a dispute wherein Valero, a marine fuel supplier, alleges that it supplied approximately 200 metric tons of marine bunker fuel to Vessel, owned by Verna Marine Co. Ltd. (“Verna”),³ on or about October 25, 2014 at Corpus Christi, Texas, for which it was never paid.⁴ Valero contends that it entered into a maritime contract for the supply of fuel bunkers to the Vessel (“Bunker Contract”) with O.W. Bunker USA, Inc. (“O.W. USA”), which Valero alleges acted as an agent or broker for the vessel.⁵ The Bunker Contract required payment for the bunkers within 30 calendar days of delivery and provided for the accrual of interest on any late payments.⁶ The Bunker Contract also contained a provision stating:

IT IS UNDERSTOOD THAT IN CONSIDERATION OF EXTENDING THE ABOVE CREDIT TERMS, VALERO IS ALSO RELYING ON THE CREDIT OF THE ABOVE VESSEL AS UNDER U.S. LAW, AND VALERO EXPRESSLY RETAINS ITS RIGHT OF MARITIME LIEN AGAINST THE VESSEL. ANY ATTEMPT TO IMPAIR OR LIMIT SAID LIEN AGAINST THE VESSEL SHALL NOT BE ALLOWED.⁷

In a practice common to the marine bunker fuel industry, O.W. Bunker Malta Ltd. (“O.W. Malta”) received requests from vessel owners or charterers, which it would then send to O.W. USA, who then selected a local fuel supplier—in this case, Valero.⁸ Valero delivered 199.98 of metric tons of fuel to the Vessel, and alleges that although the “authorized vessel officer” of the Vessel acknowledged receipt of the fuel and stamped Valero's bunkering certificate,⁹ Valero has never received the $124,388.24 that it is owed for its services.¹⁰

After Valero supplied bunkers to the Vessel, the O.W. Bunker group of companies, including O.W. Malta and O.W. USA, underwent a complete collapse of their worldwide business operation.¹¹ Valero contends that O.W. USA advised Valero that it would not make any of the required payments under their sales agreement, and that on November 13, 2014, O.W. USA and other related entities filed for Chapter 11 bankruptcy.¹² O.W. Malta, from which the bunkers had been ordered in the first place, also declared bankruptcy at about the same time.¹³ The owners of the Vessel then commenced arbitration proceedings in London against O.W. Malta and its alleged assignee bank, ING Bank, seeking a declaration of non-liability toward O.W. Malta/ING Bank with respect to their alleged claim for payment.¹⁴

B. Procedural Background

On November 26, 2014, Valero filed the instant suit and requested that this Court arrest the Vessel, which the Court granted on the same day.¹⁵ Valero and the Vessel's owner then entered into a security agreement whereby a letter of undertaking was posted as the substitute res for Valero's claim against the vessel.¹⁶ On April 10, 2015, Verna, appearing solely and restrictively as in rem claimant and owner of the Vessel, filed an answer.¹⁷ Valero filed a motion for summary judgment on June 5, 2015,¹⁸ which the Court denied on December 28, 2015.¹⁹ In that order, the Court concluded that, as a matter of law on the alleged undisputed facts presented, Valero did not have a maritime lien against the Vessel.²⁰

While Valero's motion was pending, Verna filed a cross motion for summary judgment on December 22, 2015.²¹ On December 29, 2015, Valero requested that the Court continue the submission deadline and extend trial and other deadlines in order to accommodate its intention to take a corporate deposition of Verna.²² The Court declined to continue the trial date, but granted a limited extension of the discovery deadline, and continued the submission date for the instant motion to February 3, 2016.²³

On January 25, 2016, Valero filed a motion for reconsideration of the Court's prior order denying summary judgment to Valero.²⁴ The next day, on January 26, 2016, Valero filed its opposition to Verna's cross motion for summary judgment.²⁵ The Court held oral argument on the cross motion for summary judgment on February 3, 2016.²⁶

II. Parties' Arguments

A. Verna's Arguments in Support of Summary Judgment

In Verna's cross motion for summary judgment, the Vessel owner incorporates its arguments that were made in opposition to Valero's motion for summary judgment,²⁷ and which the Court ultimately addressed in its order denying the motion.²⁸ The motion also seeks to inform the Court of several updates that occurred in the months following the initial briefing. Namely, the motion states that the O.W. Bunker bankruptcy has resulted in a tide of litigation brought by both the ultimate suppliers of bunkers, such as Valero, and in some cases by trustees of the O.W. Bunker bankruptcy estates and/or ING Bank.²⁹

Verna contends that concurrent arbitration in England will likely require Verna to pay O.W. Malta for the bunkering fuel at issue, and therefore a ruling against it in this matter would expose Verna to double payment.³⁰ Verna refers to The Res Cogitans , a recent decision by the England Court of Appeal, in which Verna was not involved, where the court held that a vessel owner was required to pay O.W. Malta for the fuel that was physically delivered to the vessel by an independent fuel supplier because title to the fuel remained with O.W. Malta.³¹

Verna also alleges that the Southern District of New York has recently recognized that the equities of the bankruptcy crisis favor vessel owners, citing a decision by Judge Valerie E. Caproni, who expressed concern that vessel owners would be put in a position of paying twice for the same fuel bunkers.³² Verna contends that Valero's proper remedy is to make a claim against O.W. USA in the company's bankruptcy proceedings, along with other creditors, rather than “jump the line” by asserting a maritime lien.³³

Finally, Verna cites a decision by another section of the Eastern District of Louisiana, Martin Energy Services, L.L.C. v. M/V Bourbon Petrel

, in which it contends that the court found that Lake Charles Stevedores, the Fifth Circuit decision relied upon by Verna, applies to disputes of this type.³⁴ Citing the Fifth Circuit, Martin Energy Services stated that “it is not whether an intermediary can be expected to supply the necessaries itself that distinguishes instances in which the actual suppliers have liens, but it is rather the nature of the relationship between each pair of entities that are involved in the transaction at issue.”³⁵ Here, Verna argues, the undisputed facts show that Verna did not have a business relationship with Valero, that it contracted only with O.W. Malta, and that the O.W. Bunker entities ultimately subcontracted with Valero.³⁶ Verna contends that neither the Vessel's owner, charterer, nor any agent with authority to bind the Vessel selected Valero to provide fuel to the Vessel.³⁷

B. Valero's Arguments in Opposition

In opposition, Valero alleges that Verna and its agent, Almi Tankers S.A. (“Almi Tankers”), knew that O.W. Malta could not itself supply and deliver the bunkers, and would have to assign a domestic supplier to do so.³⁸ Moreover, Valero argues, it was the only local bunker in Corpus Christi, where the Vessel refueled.³⁹ Valero alleges that it agreed to supply fuel subject to the standard maritime lien recognized under U.S. law in favor of American suppliers.⁴⁰ Valero contends that O.W. Malta notified the Vessel owners that Valero would supply and deliver the bunkers, and that Almi Tankers agreed to the arrangement.⁴¹ Valero argues that thereafter, the logistical supply and delivery of the bunkers was coordinated between Moran Gulf Shipping, the local agent of the Vessel, and Kirby Marine, Valero's agent and barge bunkering contractor.⁴² According to Valero, the Commercial Instruments and Maritime Liens Act (“CIMLA”) requires that on facts such as these, the Court must recognize Valero's lien against the Vessel.⁴³

Valero argues that “denying an American physical supplier a maritime lien not only financially harms that supplier, but also creates a major disincentive to supply goods on credit to foreign ships calling at U.S. ports. That disincentive harms commerce by (1) limiting the number of necessary suppliers that will provide such goods on credit, which in turns drives up the cost of such goods, (2) leads to pre-payment requirements, which drives up transactional costs, (3) slows the pace of maritime commerce, and (4) ultimately reduces the number of American suppliers of necessaries.”⁴⁴ Valero also argues that requiring a direct relationship between Valero and the ship owners ignores the business reality that middlemen such as O.W. Malta are commercially disinclined to disclose their business contacts.⁴⁵

Next, Valero argues that Verna has misstated the impact of the decision in The Res Cogitans.⁴⁶ According to Valero, The Res Cogitans rested on the question of whether the transaction between the vessel owner and O.W. Malta was governed by the English Sale of Goods Act of 1979 and...