Gulf Mrne Indust v. Golden Prince MV

• Court: Court of Appeals for the Fifth Circuit
• Decided: November 1, 2000
• Docket: 99-30909
• Status: Published

Opinion

Revised November 1, 2000

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

No. 99-30909

GULF MARINE AND INDUSTRIAL SUPPLIES, INC; ET AL

Plaintiffs,

v.

GOLDEN PRINCE M/V, ETC; ET AL,

Defendants,

MURPHY, ROGERS & SLOSS, APLC

Plaintiff-Appellant, v.

GOLDEN PRINCE M/V, HER ENGINES, TACKLE, APPAREL, AND APPURTENANCES, IN REM; PRINCE NAVIGATION, INC.

Defendants-Appellees,

ROYAL BANK OF SCOTLAND

Appellee

Cons/w No. 99-31293

GOLDEN PRINCE M/V, ETC; ET AL, Defendants,

GOLDEN PRINCE M/V, HER ENGINES, TACKLE, APPAREL, AND APPURTENANCES, IN REM; PRINCE NAVIGATION, INC.

Appeals from the United States District Court for the Eastern District of Louisiana

October 24, 2000

Before JONES and BENAVIDES, Circuit Judges, and COBB,1 District Judge.

EDITH H. JONES, Circuit Judge:

The law firm of Murphy, Rogers & Sloss, APLC (“MRS”)

filed suit to establish a maritime lien on the sale proceeds of the

vessel M/V GOLDEN PRINCE (“GOLDEN PRINCE”). MRS argued that legal

services it provided on behalf of the GOLDEN PRINCE were

“necessaries” under the Federal Maritime Law Act (FMLA), 46 U.S.C.

§ 31342 (2000), and that the firm therefore held a maritime lien

for its attorney fees senior to a mortgage on the vessel. The

district court rejected this claim, and MRS appeals. We affirm

1 District Judge for the Eastern District of Texas, sitting by designation.

2 because under the FMLA, legal services furnished to the vessel are

not “necessaries.”

BACKGROUND

The parties in interest in this case are MRS and the

Royal Bank of Scotland (“Bank”). MRS is a professional law

corporation based in New Orleans, Louisiana. Bank is a foreign

secured creditor of the GOLDEN PRINCE.

The managers of the three vessels related to this action

retained MRS in March 1998 to represent them and the owners of the

vessels in a wage dispute. Current and former crewmembers, seeking

wages and penalties, alleged that the owners had breached an

agreement governing their pay. The claims against the vessels were

substantively identical. The crewmembers seized two of the

vessels, including the GOLDEN PRINCE, to enforce their claims. MRS

provided legal services to settle the wage claims against all three

vessels and obtained the release of the seized vessels. MRS earned

approximately $136,000 in legal fees and disbursements between

March 1998 and January 1999, all of which remains unpaid.

In January 1999, creditors of the GOLDEN PRINCE seized

the vessel. The district court consolidated creditor suits into

this action, including in rem claims by MRS and Bank. The vessel

was sold at a public auction for $3.51 million. Bank holds a $60

million foreign first preferred ship’s mortgage on the GOLDEN

PRINCE and other vessels. If MRS does not have a maritime lien on

3 its legal fees, its claim will be inferior to Bank’s mortgage and

the firm will receive none of the sale proceeds.

MRS and Bank filed motions for summary judgment to

establish their relative priorities. The district court granted

summary judgment against MRS. The court rejected MRS’s argument

that the firm’s legal services were “necessaries” within the

meaning of 46 U.S.C. § 31342 (2000). It also ruled that MRS did

not “earmark” legal services specifically to GOLDEN PRINCE to

establish its claim for necessaries, and it found that MRS did not

rely on the credit of the GOLDEN PRINCE to secure its fees. MRS

appeals.

STANDARD OF REVIEW

This Court reviews issues of law and denials of summary

judgment de novo, applying the same standards as the district

court. See Benningfield v. City of Houston, 157 F.3d 369, 374 (5th

Cir. 1998); Associated Metals and Minerals Corp. v. Alexander's

Unity MV, 41 F.3d 1007, 1010 (5th Cir. 1995).

DISCUSSION

The terms of the FMLA lend little support to MRS’s claim

that a maritime lien secures its attorney fees. Section 31342

provides that “a person providing necessaries to a vessel . . . has

a maritime lien on the vessel.” 46 U.S.C. § 31342 (2000). Section

31301 states that “‘necessaries’ includes repairs, supplies,

towage, and the use of a dry dock or marine railway.” MRS thus

4 holds a maritime lien only if its legal services were necessaries.

While the enumerated examples in § 31301 are far from exhaustive,

legal services do not fit naturally into this list of traditional

shore-to-ship goods and services.

MRS cites no cases classifying legal services as

necessaries because there are none. The absence of precedent

signifies the weakness of MRS’s position, since admiralty enjoys an

unusually rich legal tradition and, more than nearly any other

contemporary area of federal law, relies on venerable precedents

where they exist. In fact, this Court has held that maritime liens

do not secure attorney fees in cases predating the FMLA. See

United States v. Knauth, 183 F.2d 874, 878 (5th Cir. 1950)

(attorneys defending ships from government seizure do not hold a

maritime lien for their legal fees); Gray v. Hopkins-Carter

Hardware Co., 32 F.2d 876, 879 (5th Cir. 1929) (attorney who

represented parties to a yacht seizure did not hold a lien for his

fees). Since Congress enacted the FMLA, courts have consistently

held that legal services are not necessaries. See Bradford Marine,

Inc. v. M/V SEA FALCON, 64 F.3d 585, 589 (11th Cir. 1995) (legal

services rendered for claimant of a maritime lien were not

necessaries); American Oil Trading, Inc. v. M/V SAVA, 47 F. Supp.

2d 348, 353 (E.D.N.Y. 1999) (same); James Creek Marina v. Vessel MY

GIRLS, 964 F. Supp. 20, 23 (D.D.C. 1997) (same).

5 MRS urges this Court to define necessaries expansively.

It points to the decision in Equilease Corp. v. M/V SAMPSON, which

defined necessaries to include “most goods or services that are

useful to the vessel, keep her out of danger, and enable her to

perform her particular function.” 793 F.2d 598, 603 (5th Cir.

1986) (en banc). In holding that insurance was a necessary, this

Court stated that “[n]ecessaries are things that a prudent owner

would provide to enable a ship to perform well the functions for

which she has been engaged.” Id.

MRS’s reliance on Equilease has some merit. Equilease

establishes that claimants can get a maritime lien for “providing”

intangible services.2 Id. This Court declared that the definition

of “necessaries” is particular to the vessel. “It is the present,

apparent want of the vessel, not the character of the thing

supplied, which makes it a necessary.” Id. (citing 2 Benedict on

Admiralty § 34 (7th ed. 1984)). Unlike Bradford Marine, American

Oil, and James Creek Marina, the legal services in this case did

not enforce a maritime lien against the vessel but released the

GOLDEN PRINCE from seizure. It is arguable that the legal services

that released the GOLDEN PRINCE and prevented rearrest enabled her

to perform her function and were useful to her.

2 At the time of Equilease, the statute used the term “furnishing” rather than “providing.” See 46 U.S.C. 971 (1982). The legislative history indicates that the change to “providing” made the statutory terms consistent with other laws, and did not change substantive law. See H.R. Rep. 100-918, reprinted in 1988 U.S.C.C.A.N. 6104, 6107, 6141.

6 Equilease, however, focused on the utility of the claimed

necessary to vessel operations. This Court held that because

insurance is “essential to keep a vessel in commerce,” it is a

necessary. Id. at 604. Here, the legal services were not

something the GOLDEN PRINCE needed “just to carry on its normal

business.” Id. These legal fees stemmed from a breach of contract

claim for unpaid wages and penalties. MRS settled claims from

current and former crewmembers of several vessels, many of whom may

never have served on the GOLDEN PRINCE. Not only did the legal

services protect the owners from alleged misconduct claims even

from crewmembers far removed from the GOLDEN PRINCE, but the legal

expenses would have been unnecessary had the vessel kept up with

its costs of doing business. These expenses are beyond the scope

of necessaries for the GOLDEN PRINCE’s normal operations.

MRS argues that this case is unique, and that this Court

could rule in its favor without opening the floodgates to “similar,

but less unique, claims.” We disagree. The district court’s

decision was not the first time that MRS has lost a legal challenge

for attorney fees under similar circumstances. See J.P. Provos

Maritime, S.A v. M/V AGNI et al., 1999 U.S. Dist. LEXIS 12012, 10

(E.D.La. 1999) (denying MRS’s claim that legal services were

necessaries in an unrelated case where MRS released the vessel from

seizure). Indeed, this situation is not unique enough. If legal

services that protect vessels from seizure are “necessary” for the

7 vessel to carry out its function, then all attorneys who defend

ship owners from tort claims, tax claims, or any other type of

claim will automatically hold a maritime lien for their fees.

MRS argues that there is no justification for courts to

treat attorneys differently from other suppliers of necessaries.

The First Circuit, for instance, allowed a maritime lien to the

vessel’s master for his air fare to New York from Puerto Rico as he

attempted to obtain funds from the owners to pay the crew and

prevent the vessel’s arrest. See Payne v. S/S TROPIC BREEZE, 423

F.2d 236 (1st Cir.), cert. denied sub nom. Samadjopoulos v.

National Western Life Ins. Co., 400 U.S. 964, 91 S.Ct. 363 (1970).

Reimbursing the master, who runs the vessel, and paying the owner’s

attorneys are two different things. Payne hardly compels expansion

of the necessaries lien on behalf of attorneys.

Despite its superficial similarities to other goods and

services that have been deemed necessaries, a maritime lien for

attorney fees would conflict with the purposes of the FMLA. The

FMLA “was intended to encourage private investment in the maritime

industry.” Equilease, 793 F.2d at 603. A judgment for MRS

securing attorney fees would encourage ship owners and attorneys to

spare no expense defending owner financial interests. Such a lien

would prefer ship owners to the claimants for necessaries, whose

attorneys’ fees are unsecured by the FMLA. See Bradford, supra.

If MRS’s position were the law, an owner could quickly dissipate a

8 supplier’s claim for necessaries simply by hiring attorneys and

encouraging them to run up fees that would offset the claimant’s

lien. Even the threat of such an action would tend to force

suppliers to settle, undermining the very protection the law aimed

for. Ultimately, maritime industry investment would be

discouraged.

CONCLUSION

For these reasons, we decline to become the first court

in the history of American maritime law to declare that legal

services are necessaries. We need not address MRS’s arguments

based on the assumption that they are. The district court’s

judgment is AFFIRMED.