Recognition of a Maritime Lien for Attorney s fees. By Gregory C. Buffalow *

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1 Recognition of a Maritime Lien for Attorney s fees By Gregory C. Buffalow * Routine awards of a maritime lien for attorney s fees against a vessel should be recognized as necessaries, within the meaning of the Federal Maritime Lien Act 1. While the Act provides examples of services that will support a lien for necessaries, which include repairs, supplies, towage, and the use of a dry dock or marine railway, 2 but do not expressly extend coverage to attorney s fees, the language of the statute should not be read as limiting, because case law recognizes that the illustrations in the statute are not intended to be exhaustive 3. The rationale most frequently asserted for refusal to extend coverage of FMLA for attorney s fees is that attorney s services are not necessaries 4, or that the attorney s efforts * Member, ALFORD CLAUSEN & McDONALD LLC, Mobile, Alabama. This article originally published at 72 J. Transp. Law Logistics & Pol'y 511 (2005) U.S.C , et seq., hereinafter as FMLA or the Act. 2 Necessaries are defined at 46 U.S.C Gulf Marine and Indus. Supplies v. MV GOLDEN PRINCE, 2001 AMC 817, 819 (5 th Cir. 2000). While recognizing the enumerated examples in FMLA are far from exhaustive, the Court nevertheless denied a maritime lien for attorney s fees holding that legal services do not fit naturally into the list of traditional shore-to-ship goods and services. Id., 2001 AMC at Hayes & Assoc., Inc. v. MV BIG RED BOAT, 2002 AMC 1722, 1732 (S.D.N.Y. 2002); MV GOLDEN PRINCE, supra; Bradford Marine Inc. v. MV SEA FALCON, 64 F. 3d 585, ; American Oil Trading Inc. v. MV SARA, 1999 AMC 1729, 1734 (E.D.N.Y. 1

2 do not ensure the continued operation of the vessel. 5 These conclusory statements from case law which provide little analysis, or merely recite historical reluctance of courts to reconsider settled law which does not recognize a lien for attorney s fees, 6 should require a more enlightened interpretation of the Act. The traditional definition of necessaries, which the writer suggests should be expanded to reflect the realities of modern day commerce and the ability of the maritime law to change, is said to be services that are useful to the vessel, keep her out of danger, and enable her to perform her particular function. 7 It is submitted that, in the proper circumstances, attorney s fees and services do, in fact, enable the vessel to perform more often than not, e.g., in situations where the attorney is defending the vessel, enabling refinancing or sale, or as suggested in the MV GOLDEN PRINCE, 8 settling wage claims and enabling release of vessels. 9 The utility of such efforts should be without question. The broad generalizations from the MV GOLDEN PRINCE that courts have 1999). 5 Equilease Corp. v. MV SAMPSON, 1986 AMC 1826, 793 F. 2d 598 (5 th Cir. 1986). 6 See United States v. Knauth, 1950 AMC 1438, 1444, 183 F.2d 874, 878 (5 Cir. 1950) (no maritime lien for attorneys defending ships from government arrest); Gray v. Hopkins-Carter Hardware Co., 1929 AMC 875, 879, 32 F.2d 876, 879 (5 Cir. 1929) (no maritime lien for attorney representing parties to a yacht seizure). Dictum in Knauth, however, suggests that a lien may be recognized where a lawyer s work has created a fund in the control of the courts. Knauth, supra, 1950 AMC at 1444 n. 7 citing Chaney v. Bauer, 97 F. 2d 293, 294 (5 th Cir.1938)(discussing attorney s equitable lien on recovery). 7 Equilease, supra, 1986 AMC at 1833, 793 F. 2d at Supra, n GOLDEN PRINCE, supra, 2001 AMC at

3 consistently held that legal services are not necessaries, 10 and similar language from other cases denying the attorney s lien, is not without exception. While an exception is typically recognized on contractual grounds, the fact that a lien is recognized in such cases argues for recognition generally of the attorney s services as necessaries and demonstrates their utility. The efforts of counsel in facilitating release of a vessel from arrest, sale or disposition of other potential in rem claims should be placed on equal footing with other services which enable the vessel to perform. A vessel or its Owners are equally protected from losses and delays whether the services involve the efforts of a repair facility or fuel vendor, who have maritime liens recognized by the statute, or efforts of an attorney arranging security in lieu of arrest, release from court process, or resolution of other impediments to the continuation of a voyage. A few cases uphold a contractually based award of attorney s fees for in rem claims against a vessel. An early illustration of such a result may be found in Suburban Trust Company v. O/S TEDDY BEAR. 11 The case involved an action for foreclosure of a ship mortgage and contractually based attorneys fees were awarded in rem. The court awarded the contractual attorneys fee jointly and severally against the vessel and Owners as part of a preferred mortgage lien. 12 The holding should, therefore, provide a basis for more enlightened courts to extend coverage of the Act. A similar decision, Gen. Elec. Credit 10 Id., 2000 AMC at AMC 1668 (M.D. Fla. 1975). 12 Id., 1975 AMC at

4 Corp. v. Oil Screw Triton VI, 13 held that attorney fees provided for in a mortgage agreement for collection in event of default were entitled to priority over claims of the government which had seized vessel. Contractual attorney s fees were also awarded in Int l. Marine Fuels of San Francisco v. MV CONSTELLATION GALAXY, 14 because the vendor for fuel had included a standard provision for interest and reasonable attorney s fees in the invoice. 15 Logic should dictate that if a blanket prohibition of a maritime lien for attorney s fees exists, or is required by case law, then it would also apply whether or not the vendor of necessaries or mortgagee included a collection clause in the agreement or other documentation. If mere boilerplate collection terms in a fuel invoice are sufficient to overcome a prohibition generally against a maritime lien for attorney s fees, then it is not a significant progression to find that authorization on behalf of the vessel may be based on implied contract and customary practice 16, or the demonstrated necessity for the services, sufficient for purposes of FMLA. A good analogy is the rationale for expansion of coverage of FMLA to recognize a maritime lien for the contract of a broker to obtain P&I coverage, which was based on its vital importance to the success of the vessel as a going concern, 17 or the recognition of a AMC 1583, 712 F.2d 991 (5 Cir. 1983) AMC 670 (4 th Cir. 1987). 15 Id., 1988 AMC at The general maritime law recognizes implied contracts. Stevens Technical Services Inc. v. Mormac Marine Enterprises, Inc., 2004 AMC 2513 (E.D.N.Y. 2004)(Implied agreement with Pilot recognized based on customary practice). 17 Flagship Group, Ltd. v. Peninsula Cruise Inc., 1992 AMC 815 (E.D. Va. 1991). 4

5 maritime lien for agency contracts which were necessary for continuing a voyage. 18 The analogy to the recognition of a lien for agency services is compelling because the modern day distinction between functions of ships agents versus attorneys is often blurred, with both providers often performing the same functions to facilitate continuation of a voyage, particularly in the area of resolution of threatened arrest for disputed port charges, arranging security on claims, and response to investigations or penalties, e.g. from regulatory agencies concerned with Immigration and crew repatriation, Customs, or Coast Guard issues. Consequently, re-examination of the utility of attorney s fees as necessaries should be required. A maritime lien for attorney s fees was also recognized in Galin Ataei v. MV BARBER TONSBERG, 19 for legal fees and costs incurred by a carrier in defense of a legal proceeding commenced against the vessel in rem in Bahrain. The award was justified by language of a bill of lading which specifically provided a lien for port charges and legal fees. 20 The bill of lading provision was not considered a violation of the Carriage of Goods by Sea Act 21, or otherwise contrary to maritime law. 22 The court in MV BARBER 18 Hinkins Steamship Agency, Inc. v. Freighters, Inc., 1974 AMC 1397, 1398, 498 F.2d 411, (9 Cir per curiam) (determining that work performed by a husbanding agent was maritime because the services performed were necessary for the continuing voyage. The Supreme Court has since removed the per se rule against admiralty jurisdiction for agency contracts. Exxon Corp. v. Central Gulf Lines, Inc., 500 U.S. 603, 1991 AMC 1817 (1991) AMC 1185 (S.D.N.Y. 1986). 20 Id. Paragraph 11 of the bill of lading provision in issue extended the carrier a lien for "legal fees incurred in connection with attachment, seizure, detention, condemnation or other legal proceeding brought against the shipment by authorities or by third parties." U.S.C et seq. 5

6 TONSBERG gave the contractual provision limited coverage, however, and consistent with its terms, excluded defense costs for an action against the carrier as opposed to an action against the shipment itself. 23 A similar result, based on a strict reading of bill of lading terms, is found in Maersk Inc. v. Alan Marketing, Inc., 24 for a carrier s recovery of unpaid freight and demurrage against a cargo, including reasonable attorney s fees. The rationale was that attorney s fees and costs may be awarded where the bill of lading provides for the award. 25 It is occasionally recognized that maritime law has not remained static but, like the common law, has undergone significant change. 26 Maritime law is thus necessarily subject to evolution, and change where required, because it is by definition drawn from many sources including newly created rules. As the Supreme Court has recognized, maritime law is an amalgam of traditional common-law rules, modifications of those rules, and newly created rules, drawn from both state and federal sources. 27 Consequently, it is suggested 22 The Court specifically recognized that the bill of lading terms were not contrary to COGSA finding that paragraph 11 does not violate any sections of COGSA. Id. 23 Defense costs were allowed for government action directed against the shipment as provided in paragraph 11 of the bill of lading but not for defense of action directed solely against the carrier. Id AMC 278 (S.D.N.Y. 1988). 25 Id., 1999 AMC at 281. See also, Sealand Service Inc. v. Amstar Corp., 690 F. Supp 246, 250 (S.D.N.Y. 1988)(awarding attorney s fees based on similar provisions in bill of lading). 26 Alvez v. American Export Lines, Inc., 1979 AMC 906 (N.Y. App. 1979). 27 Saratoga Fishing Co. v. Martinac & Co., 1997 AMC 2113, 2115 quoting from East River S.S. Corp. v. Transamerica Delaval Inc., 476 U.S. 858, 865, 1986 AMC 2027, 2032 (1986). 6

7 that the time has come for maritime law to recognize that provision of services by an attorney, whether defending claims against a vessel, facilitating resolution of in rem claims, or otherwise enabling the vessel to continue a voyage, should be placed on equal footing with other necessaries or similar efforts of agents which permit the vessel to perform its particular function, or remain as a going concern, so that a maritime lien for attorney s fees on behalf of a vessel should be recognized in FMLA cases. 7

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