World Imports, Ltd. v. OEC Grp. N.Y. (In re World Imports Ltd.)

• Decision Date: 20 April 2016
• Docket Number: No. 15–1498.,15–1498.
• Parties: In re WORLD IMPORTS LTD., et al., Debtors. World Imports, Ltd.; World Imports Chicago, LLC; World Imports South, LLC; 11000 LLC v. OEC Group New York, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

820 F.3d 576

In re WORLD IMPORTS LTD., et al., Debtors.

World Imports, Ltd.; World Imports Chicago, LLC; World Imports South, LLC; 11000 LLC

v.OEC Group New York, Appellant.

No. 15–1498.

United States Court of Appeals, Third Circuit.

Argued Nov. 3, 2015.

Opinion Filed: April 20, 2016.

Dean E. Weisgold, Dean E. Weisgold PC, Philadelphia, PA, Brendan Collins, [Argued], GKG Law, PC, Washington, DC, Counsel for Appellant.

David L. Braverman, [Argued], John E. Kaskey, Brian J. Discount, Braverman Kaskey, P.C., Philadelphia, PA, Counsel for Appellee.

Before McKEE, Chief Judge, JORDAN, and VANASKIE, Circuit Judges.

OPINION OF THE COURT

JORDAN, Circuit Judge.

In a bankruptcy proceeding, OEC Group, New York (“OEC”) asserted maritime liens on goods then in its possession, and it now appeals a ruling of the United States District Court for the Eastern District of Pennsylvania that certain contractual modifications to those liens were unenforceable.

Because we conclude that the modifications were enforceable as to goods then in OEC's possession, we will reverse and remand for the District Court to craft an appropriate remedy.

I. Background

Although the parties dispute the legal consequences of the facts, what happened is not in dispute. World Imports, Ltd., World Imports Chicago, LLC, World Imports South, LLC, and 11000 LLC (collectively, “World Imports”)¹ are business entities [A 206] that buy furniture wholesale and sell it to retail distributors. OEC provided non-vessel-operating common carrier transportation services² to World Imports for approximately five years, including services to ensure that cargo was delivered from countries of origin to World Imports' warehouse or to other United States destinations designated by World Imports.

A. Supporting Documents

On or about January 26, 2009, World Imports, Ltd. entered into an Application for Credit with OEC (the “Application”). Page two of the Application, titled “Notice Concerning Limitation of Liability,” was signed by the vice president of World Imports, Ltd. and included the following language:

[OEC] has adopted general terms and conditions of service. These terms and conditions are printed on the back of or accompany every invoice issued by [OEC] and are incorporated herein by reference.... When [OEC] is acting as a carrier, the exact limits of liability and the other terms and conditions of carriage can be located on the ocean bill of lading or other shipping document such as the airway bill issued by the carrier (which is the contract between the parties). Unless modified or superseded by the terms of the bill of lading or other contract of carriage, [OEC's] general terms and conditions of service will also apply to the transaction. However, the terms of the bill of lading prevail in all cases.

(A 40.)

Page three of the Application, titled “Terms for Credit Accounts,” was signed by the bookkeeper of World Imports, Ltd. and said:

Specific terms and conditions of service ... apply to the services performed by [OEC]. These terms and conditions are established by contract as set forth in the governing instrument or by operation of law. [OEC's] standard payment terms require receipt of cash in advance of performance. In the event that [OEC] extends credit to [World Imports], which is defined as permitting [World Imports] to pay for service within a specified period of time after performance by [OEC], [World Imports] agrees that the following additional terms are applicable....

As security for any existing and future indebtedness of [World Imports] to [OEC], including claims for charges, expenses or advances incurred by [OEC] in connection with any shipment or transaction of [World Imports], and whether or not presently contemplated by [World Imports] and [OEC], [World Imports] hereby grants to [OEC] a general lien and security interest in any and all property of [World Imports] (including goods and documents relating thereto) then or thereafter in [OEC's] possession, custody or control or en route (the “Collateral”). This general lien and security interest shall be in addition to any other rights [OEC] has or may acquire under other agreements and/or applicable law, and shall survive delivery or release of any specific property of [World Imports]....

(A 37 (emphasis added).)

For each container of goods it transported for World Imports, OEC provided to World Imports an invoice (the “Invoice”) which contained, in its “Terms and Conditions of Service,” the following provisions:

These terms and conditions constitute a legally binding contract between the “Company” [i.e., OEC] and the “Customer” [i.e., World Imports].

...

14. General Lien and Right to Sell Customer's Property.

(a) Company shall have a general and continuing lien on any and all property of Customer coming into Company's actual or constructive possession or control for monies owed to Company with regard to the shipment on which the lien is claimed, a prior shipment (s) and/or both....

(A 42 (emphasis added).)

As required by federal law, OEC also publishes a tariff (the “Tariff”) with the Federal Maritime Commission, which governs its shipments. Included with the Tariff is a Bill of Lading whose terms and conditions provide, in pertinent part, as follows:

17. CARRIER'S LIEN

The Carrier shall have a lien on the Goods, inclusive of any Container owned or leased by the Merchant and on all equipment and appurtenances thereto, as well as on any Charges³ due any other person, and on any documents relating thereto, which lien shall survive delivery, for all sums due under this contract or any other contract or undertaking to which the Merchant was party or otherwise involved, including, but not limited to, General Average contributions, salvage and the cost of recovering such sums, inclusive of attorney's fees. Such lien may be enforced by the Carrier by public or private sale at the expense of and without notice to the Merchant.

(A 54–55 (emphasis added).)⁴

B. Procedural Background

On July 3, 2013 (the “Petition Date”), World Imports filed voluntary petitions for relief in the Bankruptcy Court pursuant to Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). OEC promptly filed a motion for relief from the automatic stay imposed by Bankruptcy Code § 362(a). It argued that it was a secured creditor with a possessory maritime lien on World Imports' goods in its possession and was entitled to refuse to release such goods unless and until certain prepetition claims were satisfied. As exhibits to its motion, OEC provided documentation that, as of July 10, 2013, the total amount owed to OEC by World Imports was $1,452,956. Of that amount, $458,251 was the estimated freight and related charges due on containers then in OEC's possession (the “Landed Goods”). The remaining $994,705 consisted of freight and related charges associated with goods for which OEC had previously provided transportation services (the “Prepetition Goods”). OEC estimated the total value of World Imports' goods then in OEC's possession was approximately $1,926,363.

World Imports responded by filing an adversary proceeding against OEC and a motion for an expedited hearing to compel OEC to turn over all of World Imports' “Current Goods,” which World Imports defined to include both the Landed Goods and goods then in transit for which OEC was to provide delivery in the near future. (A 60.) World Imports represented its willingness to pay OEC for the freight charges on those Current Goods but not for the outstanding charges associated with the Prepetition Goods. After a hearing, the Bankruptcy Court granted the injunctive relief sought by World Imports, ordering that:

Pursuant to 11 U.S.C. § [ ]542, [World Imports is] entitled to immediate delivery and possession of the Current Goods and Defendant OEC shall immediately account for and deliver the Current Goods to [World Imports];

...

Upon Defendant OEC's delivery of the Current Goods to [World Imports], [World Imports] shall pay Defendant OEC: (a) the regular freight charges on the Current Goods; (b) documented demurrage/retention charges.

(A 105.) After OEC timely filed its notice of appeal from the Bankruptcy Court's order, that court issued an opinion in support of its order. See In re World Imports, Ltd. Inc., 498 B.R. 58 (Bankr.E.D.Pa.2013).

OEC did not seek a stay of the Bankruptcy Court's order. Rather, on appeal to the District Court, it requested entry of an order requiring World Imports to pay all outstanding amounts due for OEC's transportation services or, in the alternative, providing OEC with “valid, fully enforceable replacement liens on assets of [World Imports] in the amount of $1,926,363.” (A 243.) The District Court ordered the parties to brief “whether the specific contract at issue between the parties created a maritime lien....” (A 299.) After that briefing, the Court entered an order on January 22, 2015, affirming the order of the Bankruptcy Court. Specifically, the District Court held that OEC did not possess a valid maritime lien on the Prepetition Goods because “the provisions in OEC's contract with [World Imports] purporting to give OEC a lien on goods in its possession for freight charges for the Prepetition Goods [are] unenforceable.” World Imports, Ltd. v. OEC Group New York, 526 B.R. 127, 135 (E.D.Pa.2015). Accordingly, OEC could not assert a maritime lien to supersede interests secured according to the Uniform Commercial Code as adopted in various jurisdictions. Id. at 136. OEC timely appealed.

II. Discussion⁵

OEC frames its appeal as a single question, namely, whether the Bankruptcy Court and District Court erred in holding that the contract provisions at issue, which purported to give OEC maritime liens on goods in its possession both for freight charges on those goods and for unpaid charges on prior shipments, were unenforceable. In its response, World Imports has added the further question of whether OEC's failure to obtain a stay of the Bankruptcy Court's order renders the...