In re Container Applications Int'l, 0011565

• Decision Date: 07 December 2000
• Docket Number: 11,0011565
• Parties: In re: CONTAINER APPLICATIONS INTERNATIONAL, INC., Debtor. Container Applications International, Inc., Plaintiff-Appellant, v. Lykes Bros. Steamship Co., Inc., Defendant-Appellee.United States Court of Appeals, Eleventh Circuit
• Court: U.S. Court of Appeals — Eleventh Circuit

In re: CONTAINER APPLICATIONS INTERNATIONAL, INC., Debtor.

Container Applications International, Inc., Plaintiff-Appellant v Lykes Bros. Steamship Co., Inc., Defendant-Appellee

No. 00-11565

United States Court of Appeals, Eleventh Circuit.

November 22, 2000.

December 7, 2000

Appeal from the United States District Court for the Middle District of Florida.(No. 97-01680-CV-T-25A), Henry Lee Adams, Jr., Judge.

Before CARNES and BARKETT, Circuit Judges, and POLLAK^*, District Judge.

BARKETT, Circuit Judge:

Container Applications International, Inc. ("CAI") appeals from a summary judgment granted by the bankruptcy court, and affirmed by the district court, in favor of Lykes Bros. Steamship Co., Inc. ("Lykes") disallowing maritime liens asserted by CAI against vessels owned by Lykes, pursuant to the Federal Maritime Lien Act, 46 U.S.C. 31341 et seq. (the "FMLA"). We affirm.

BACKGROUND

The relevant facts are undisputed. CAI leases and sells cargo containers that are used by transportation companies to transport goods, and Lykes is a shipping company providing cargo service throughout the world. In February 1993, CAI and Lykes entered into an agreement whereby CAI would lease cargo containers in bulk to Lykes for use in its shipping business. The lease agreement provided that the leased containers would be used only on vessels owned and/or operated by Lykes and would be used for oceanic transportation of goods and land transport in connection with the oceanic transportation.

From time to time Lykes picked up containers leased from CAI at locations throughout the world. No container was delivered directly to any of Lykes' vessels, nor did any of the lease documents "earmark" containers to any one vessel or otherwise make reference to any vessel. While the lease required Lykes to maintain tracking reports showing exactly which containers were used on which vessels and for how many days, neither Lykes nor CAI knew at the time of commencement of the lease on which vessels the containers would be used and Lykes, in its complete discretion, determined upon which vessels or vehicles to place the containers.

Lykes filed a petition for bankruptcy in October 1995. At the time of filing, it owed CAI a substantial amount for outstanding rental fees on the leased containers. In the bankruptcy court, CAI asserted maritime liens¹ against various vessels owned by Lykes based upon each vessel's usage of CAI's containers. In defending against the liens, Lykes argued that maritime liens can be asserted under the FMLA only when the containers are either provided directly to or are earmarked for specific vessels and cannot be claimed for containers furnished in bulk to fleet owners who then decide upon which ships the containers will be placed. The bankruptcy court agreed with Lykes and disallowed CAI's liens on the vessels. The district court affirmed, and CAI now appeals. We review the bankruptcy and district court's conclusions of law de novo. See American Dredging Co. v. Lambert, 153 F.3d 1292, 1295 (11th Cir.1998).

DISCUSSION

CAI asserts its maritime liens pursuant to the FMLA, which provides in relevant part:

(a) Except as provided in subsection (b) of this section, a person providing necessaries to a vessel on the order of the owner or a person authorized by the owner-

(1) has a maritime lien on the vessel;

(2) may bring a civil action in rem to enforce the lien; and

(3) is not required to allege or prove in the action that credit was given to the vessel.

46 U.S.C. 31342(a).²

The parties do not dispute that containers are "necessaries"³ or that Lykes owned the vessels in question and ordered the containers. The sole issue for our determination is whether CAI "provided" the containers to the vessels within the meaning of the statute when it leased the containers in bulk to Lykes without reference to any vessels.

The seminal Supreme Court case on this question is Piedmont & George's Creek Coal Co. v. Seaboard Fisheries Co., 254 U.S. 1, 41 S.Ct. 1, 65 L.Ed. 97 (1920). In Piedmont, a coal dealer supplied coal to an oil company for use at its oil refineries and on its fleet of fishing vessels. The coal was not designated "for any particular vessel or even for the vessels then comprising the fleet." Id. at 13, 41 S.Ct. 1. Rather, the coal was placed in bins at the oil company's factory where it was intermingled with other coal purchased by the oil company and then at various times used on the oil company's ships. The coal was billed to the oil company, the invoices did not reference the vessels, and the oil company controlled the distribution of the coal to its vessels. Id. at 7-8, 41 S.Ct. 1. As in this case, the question in Piedmont was whether, under the facts of the case, the coal was "furnished" or provided to the vessels by the party seeking the lien, pursuant to the meaning of the FMLA.⁴ The Court disallowed the lien, holding that the coal had not been provided to the vessels by the coal company asserting the lien, but rather by the oil company to whom the coal had been sold.

Four other circuits have subsequently applied Piedmont to the specific situation before us, that is, to the lease of containers in bulk to a shipping company which decides when, where, and how it will use the containers within its fleet of ships. All four circuits have held that under such circumstances the supplier has not "provided" necessaries to the vessel within the meaning of the FMLA. See Silver Star Enterprises, Inc. v. Saramacca MV, 82 F.3d 666 (5th Cir.1996); Redcliffe Americas Ltd. v. M/V Tyson Lykes, 996 F.2d 47 (4th Cir.1993); Itel Containers Int'l. Corp. v. Atlanttrafik Express Service, Ltd., 982 F.2d 765 (2d Cir.1992); Foss Launch & Tug Co. v. Char Ching Shipping U.S.A., 808 F.2d 697 (9th Cir.1987), cert denied, 484 U.S. 828, 108 S.Ct. 96, 98 L.Ed.2d 57 (1987).

Moreover, numerous other courts have cited to Piedmont for the proposition that the term "providing necessaries to a vessel" in the FMLA requires that there be a direct connection between the provider of necessaries and a specific vessel. See e.g., Jeffrey v. Henderson Bros., Inc., 193 F.2d 589, 593-94 (4th Cir.1951) (recognizing a lien where merchandise used to repair machinery for cleaning coal was supplied to a single vessel and the invoices asserted that the goods were intended for this operation); The Everosa; Southern Coal and Coke Co. v. Kugniecibas, 93 F.2d 732, 734-35 (1st Cir.1937) (recognizing a lien and distinguishing Piedmont based on the fact that the coal "was sent to a particular vessel, loaded on her by the coal company's representative and paid for by her master by drafts on the charterer to order of the coal company"); Bankers Trust Co. v. Hudson River Day Line, 93 F.2d 457, 458 (2d Cir.1937) (denying maritime liens to a supplier of oil and holding that necessaries, though delivered in mass to the owner of the fleet under a single contract, must be expressly ordered for the use of named vessels in specified portions); Carr v. George E. Warren Corp., 2 F.2d 333, 334 (4th Cir.1924) (recognizing a lien and distinguishing Piedmont based on the fact that "85 percent of the coal was sold directly for use of the steamers named, and so billed to the vessels, and received and used by them"); Christiana Marine Service Corp. v. THE HERCULES, 1991 AMC 1274 (E.D.Pa.1990) (recognizing a towing company's lien where all towing services were provided to a single vessel and the invoice reflected that all services were to be provided to that vessel); Northern Shipping Co. v. M/V Tivat, 1988 AMC 1468 (E.D.Pa.1987) (noting that in Piedmont there was no "attempt to designate the particular vessel to receive any portion or component of the goods" and recognizing a lien where stevedoring, berthing and wharfage services were "furnished" directly to the vessel); Atlantic Steamer Supply Co. v. The SS Tradewind, 153 F.Supp. 354, 363-64 (D.Md.1957) (recognizing a lien where advertisement was furnished to a vessel and citing Piedmont for the proposition that "necessaries are furnished to the vessel only when they are ordered for a particular vessel and thereafter are either actually put on board or brought within the control of the ship's officers is settled law"); The American Eagle, 30 F.2d 293, 295 (D.Del.1929) (holding that a coal supplier "furnishes" coal to vessels if "the supplies, though delivered in mass to the owner of the fleet under a single contract, are expressly ordered by the owner and delivered to him by the supplyman for the use of named vessels in specified portions, and are promptly delivered to the named vessels by their owner").

However, two district courts in the Eleventh Circuit have rejected a restrictive reading of the FMLA's requirements for the creation of a maritime lien.⁵ In Transamerica ICS, Inc. v. M/V Panatlantic, 1984 AMC 489 (S.D.Fla.1983), the district court suggested that "it may not be essential, and indeed may not be desirable, that the container ... be earmarked for a particular vessel." Id. at 490. Similarly, the court in Triton Container International Limited v. M/S ITAPAGE, 774 F.Supp. 1349 (M.D.Fla.1990), relying on Transamerica, held that "it is not necessary that a container be identified with a particular vessel." Id. at 1350-51.

CAI argues that we should follow Transamerica and disregard the cases from our sister circuits, arguing that these circuits have erroneously interpreted Piedmont to hold that pre-delivery earmarking of supplies for a specific vessel is a prerequisite to a maritime lien. CAI argues that not only do these cases erroneously interpret Piedmont, but that their holdings are in conflict with Piedmont. CAI suggests that two factors were critical to the Court's decision in Piedmont, both of which distinguish it from the case at hand. First, because the coal had been co-mingled with coal from other sources in Piedmont, it was impossible to determine whether the coal ultimately delivered to the vessels...