The Healy Lectures

2005-2015

John Kimball

• Publisher: Routledge
• Year: 2017
• Print ISBN: 9781138679221
• eBook ISBN: 9781351543668
• Topic: Law
• Subtopic: Law Theory & Practice
• Index: Law

The Nicholas J. Healy Lectures on Admiralty Law takes place annually at New York University School. They commenced in 1992 with the aim of providing a forum for the scholarly consideration of maritime law and, delivered by expert academics and practitioners in the field, provide great insight into the development of admiralty law since then. This volume collects the seventh to thirteenth lectures, which were given from 2005 to 2015.

April 30, 2015

Wish List: Issues We Wish the US Supreme Court Would Decide^*

To Port or Starboard? Why the Supreme Court Might Provide Direction to Those Navigating Choice-of-Law Questions in Maritime-Lien Cases

The Honorable Mark S. Davis & Jonathan T. Tan

Judge Mark Davis received his BA in American government from the University of Virginia. After working on the staff of US Senator John Warner in Washington, he obtained his law degree from Washington and Lee University School of Law. Judge Davis served as a law clerk to District Judge John A. Mackenzie in the US District Court in Norfolk, Virginia. He went on to practice at the law firm of McGuireWoods in Norfolk, becoming a partner with a varied civil litigation practice, including a significant maritime practice. Judge Davis later practiced with the law firm of Carr and Porter in Portsmouth, Virginia. He left his partnership there in 2003 to become a judge on the Portsmouth Circuit Court, where he served as chief judge from 2006 to 2008. Judge Davis then assumed his current position as a US District Judge for the Eastern District of Virginia.

A British company owns two sister ships, Vessel A and Vessel B, that are identical in all relevant respects. They are both flagged in the United Kingdom. The British vessel owner charters the vessels to a Chinese shipping company, which uses the vessels to carry the same type of cargo. Indeed, Vessel A and Vessel B regularly follow the same shipping route that includes stops in Long Beach, California, and New York City. There is one difference between Vessel A and Vessel B. Vessel A is en route to New York City; Vessel B to Long Beach. During their journeys, Vessel A and Vessel B both obtain bunkers in the United Arab Emirates from a United Arab Emirates bunker supplier. The bunker supplier and shipping company use the same bunker confirmation form for both bunker transactions. The bunker confirmation form includes a choice-of-law clause that selects United States law to govern the contract. Unfortunately for the bunker supplier, the shipping company does not pay for the bunkers. As they continue on their respective routes, Vessel A sails into New York City, and Vessel B arrives at Long Beach. The bunker supplier, hoping to recover for the fuel bunkers, arrests both vessels. The bunker supplier contends that, under the Federal Maritime Lien Act (“FMLA”),¹ its provision of necessaries in the United Arab Emirates created maritime liens in its favor on each vessel. Given that the Vessel A and Vessel B transactions are eerily—perchance designedly—similar, it stands to reason that the bunker supplier possesses either a maritime lien on both vessels, or no lien on either vessel. In light of the uncanny resemblance between its transactions with Vessel A and Vessel B, how could the bunker supplier possess a maritime lien on one vessel, but not the other? After all, the only difference between Vessel A and Vessel B is the port into which the vessels sailed. But both vessels sailed into ports within the United States. Therefore, the bunker supplier’s rights with respect to each vessel would be the same regardless whether the vessels are docked in New York City or Long Beach, right?

Not so. The answer to that seemingly simple question is surprisingly difficult because the United States courts of appeals disagree on the appropriate manner in which to consider choice-of-law clauses in the context of recognizing and enforcing maritime liens. In the hypothetical above, the bunker supplier likely possesses a maritime lien against Vessel B—which it arrested within the Ninth Circuit—and likely does not possess a maritime lien against Vessel A—which it arrested within the Second Circuit. This Article explores why, as with Vessel A and Vessel B, the existence of a maritime lien could depend on the port into which a vessel sails because of the division of authority regarding choice-of-law clauses in maritime-lien cases. This Article also examines reasons why the Supreme Court may decide to address this split among the circuits over whether a contract’s choice-of-law provision determines the law governing the existence of a maritime lien.

“A maritime lien arises for contract or tort claims against a marine res for goods and services supplied to it or injury caused by it.”² “It is a privilege against property (a ship) which attaches and gains priority without any court action or any deed or any registration.”³ Thus, “[m]aritime liens generally are ‘secret’ in that neither possession nor notice through filing is required to establish their validity.”⁴ Indeed, a maritime lien “passes with the ship when the ship is sold to another owner, who may not know of the existence of the lien.”⁵ “Only an admiralty court acting in rem can foreclose a maritime lien, because admiralty law engages in the fiction that the ship itself is the ‘person’ who committed the offense and is legally responsible for the consequences.”⁶ It is in this context that the lien claims arise. We are here concerned with those claims arising from a breach of contract.

The debate between the courts of appeals, concerning whether parties can use a choice-of-law clause⁷ in a contract to establish what law determines the existence of a maritime lien, has spanned decades. In 1973, the Second Circuit pronounced the most important decision on one side of the inter-circuit dialogue on this issue.⁸ The decisions on the other side of the divide are of more recent vintage. Since 2002, three courts of appeals have, in some form or another, published opinions adopting an approach inconsistent with the Second Circuit’s approach regarding the manner in which a court should consider a contract’s choice-of-law provision in determining what law governs whether an enforceable maritime lien exists.⁹

Importantly, though the split among the courts of appeals is well-established,¹⁰ district and circuit courts throughout the United States continue to grapple with choice-of-law provisions in determining whether to enforce a maritime lien.¹¹ For example, in World Fuel Services Trading, DMCC v. Hebei Prince Shipping Co.—a case over which one author of this Article presided—the district court found that a choice-of-law clause incorporated into a bunker confirmation permitted a foreign bunker supplier to obtain a maritime lien under United States law by providing bunkers to a foreign-flagged vessel in a foreign port.¹² While the Fourth Circuit affirmed the district court,¹³ at this stage, the effects of the decision remain uncertain. However, ultimately, World Fuel may be as doctrinally significant as the courts of appeals’ decisions that initially created the current circuit split.

In light of the courts of appeals’ division on how to properly consider choice-of-law clauses when determining whether an enforceable maritime lien exists, and the Fourth Circuit’s latest opinion involving issues at the heart of the circuit split, the Twelfth Annual Nicholas J. Healy Lecture and its topic—Issues We Wish the U.S. Supreme Court Would Decide—provides an ideal opportunity to explore an issue that has perplexed maritime-law practitioners and jurists alike. This Article proceeds in three parts. First, the Article frames the issue by discussing the four major courts of appeals’ decisions on the issue and, in particular, the courts of appeals’ disparate approaches. Second, after summarizing the major cases on the issue, one the Ninth Circuit has described as creating a “tangled web of American case law,”¹⁴ the Article considers the Fourth Circuit’s recent opinion in World Fuel. Third and finally, the Article examines reasons why the Supreme Court might choose to untangle the courts of appeals’ divergent strands of authority by deciding the appropriate mechanism a court should apply when considering whether a choice-of-law provision can determine what nation’s law controls the existence of a maritime lien.

I. A Tangled Web—The Split in the Circuits

A. The Historical Context in Which the Issue Arises

To provide context, the Article will begin with a brief discussion of the history of forum-selection clauses—“contractual provision[s] in which the parties establish the place (such as the country, state, or type of court) for specified litigation between them”¹⁵—in the United States, rather than choice-of-law clauses. Such discussion is necessary to understand the development of choice-of-law clauses. “Forum-selection clauses have historically not been favored by American courts. Many courts, federal and state, have declined to enforce such clauses on the ground that they were ‘contrary to public policy,’ or that their effect was to ‘oust the jurisdiction’ of the court.”¹⁶ Under this “ouster doctrine,” the parties’ agreement to litigate their dispute in a particular forum provided no basis for another court with jurisdiction over the case to decline to exercise such authority.¹⁷ The courts re...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Contents
• Foreword
• Applying Jus Gentium to the Salvage of the R.M.S. Titanic in International Waters
• Admiralty’s Greatest Hits
• Panama Railroad Co. v. Johnson
• McDermott v. AmClyde: The Quiet Achiever
• The New Jersey Steam Navigation Co. v. Merchants’ Bank of Boston, 47 U.S. (6 How.) 344 (1848)
• Marine Pollution and the “Polluter Pays” Principle: Should the Polluter also Pay Punitive Damages?
• Celebrating Women on the High Seas—In Admiralty Law and Otherwise
• Wish List: Issues We Wish The US Supreme Court Would Decide
• What I Wish the Supreme Court Would Decide: Review by a US Court of a Foreign Arbitration Award Issued in a Dispute to which COGSA Applies—What Standard Applies?
• Wish List: Maritime Matters Our Government Might Profitably Address