Arresting a ShipFebruary 4, 2014
A few times a year I get a call from an out of state lawyer representing a yacht yard, crewing company or other supplier. The lawyer tells me a certain yacht is cruising Maine waters, and can I arrest it? If the facts are right, I can have the ship arrested, and the result is almost always quick settlement of the debt.
Regular readers of this column know that when a vendor supplies “necessaries” to a ship, the vendor gets an automatic maritime lien on the ship. Necessaries are things a ship needs to continue operating: fuel, repairs, crew wages, even insurance premiums. The maritime lien gains precedence over all other liens on the ship, except for the statutory Preferred Ship’s Mortgage, and except for certain “non-contractual” liens, such as a maritime lien for salvage services or collision liability. I covered all this in detail in an earlier column, which you can find in the articles link in my site, nicholaswalsh.com (look for “The Nuts and Bolts of Maritime Liens” and “No Cash, No Splash?”)
A maritime lien is all very well, and if the ship is being sold or used for collateral you may get a bank check in the mail. But to foreclose on a maritime lien you have to arrest the ship.
A ship arrest is accomplished on a federally documented vessel, and it is brought in federal district court. The action is what lawyers call “in rem”, or against the thing, and the thing here is the ship. The ship itself is the defendant, so the case might be called, for example, “John Doe v. M/V Minnow, her engines, tackle etc.” The complaint alleges that the ship, in effect, owes money for necessaries, providing appropriate detail and perhaps attaching invoices etc., and it alleges that the ship is in Maine, and it asks the court to order the United States Marshal to arrest the ship. The ship has to be within the court’s jurisdiction for the action to be brought, hence the calls I get from out of state counsel telling me a ship is in Maine.
Accompanying the complaint is a motion to arrest, and a motion for substitute custodian. As a formal matter, the Marshal, who enforces court orders, takes custody of the thing arrested. If the thing arrested is a bag of illicit cash or similar contraband, the Marshal can take and easily secure the items pending further order, but the Marshal has zero interest in assuming custody of a yacht or ship. So the Motion for Substitute Custodian asks the court to name another person to be the custodian.
Typically the substitute custodian is a boatyard, but it could be an individual shipkeeper. The critical thing is that the motion convince the court that the arrested ship will be in good hands. Therefore the motion will attach the affidavit of the substitute custodian, stating his or her qualifications and giving a plan of custody in sufficient detail, as in “yacht will be hauled and blocked in a gated yard” or “the ship will remain secured in her present berth, and I will check ship twice a day, more often as necessary”. The affidavit will also show that the substitute custodian has insurance for any damage to the ship.
Obviously an 80,000 ton tanker places different demands on a substitute custodian than does a 30 foot excursion boat. From time to time I’m asked to accomplish the arrest of a big ship that is thought to be touching in Maine. In ports such as New Orleans there exist companies which provide ship keeping services for just such arrests, but we really do not have that capacity in Maine. I suppose a deep pocketed client could fly in a crew.
The arrest itself is accomplished by the deputy Marshall, who places a large orange sticker on the boat, warning all and sundry (including the owner) to stay off. Fisherman, speaking of a vessel arrest, will say simply that a boat was “stickered”.
One of the fundamental principles of judicial due process, or fundamental court fairness, is notice and an opportunity to be heard before the court issues judgment or takes other major action. That’s why almost all civil lawsuits begin with the deputy serving the defendant with a summons to court. But a ship arrest is different – the first notice of the arrest may be when the ship owner goes down to the boat and finds that she’s been stickered. The rationale for this lack of notice is that the ship itself is the defendant. This fiction may be lost on the ship owner who discovers that, with no notice or opportunity to object, he or she has lost custody of the ship.
After the arrest, there is of course the opportunity for the owner to object and move for the arrest to be dismissed. But if the ship really does owe for the fuel, wages or other necessaries, dismissal won’t happen unless the owner can substitute other collateral, such as a bond.
After the arrest the plaintiff must publish a legal notice of the arrest in the local paper or as the court may order. The notice advises that all others claiming an interest in the ship (including other lienholders, and including the owner) must, within a stated time come forward and tell the court of the interest. Actual notice must be given to those with recorded liens.
After the arrest and publication, the case proceeds in a more conventional manner. The merits are decided – does the ship owe the money? – and if the ship loses, the owner either pays up or the ship will be auctioned off to satisfy the judgment and the liens of other interested parties.
In the meantime the costs of custody are charged to the ship, and are paid first out of any proceeds. Sometimes, if for example the costs of keeping the ship are large, the court may order the “interlocutory” sale of the ship, before the action is final. The proceeds are paid into the court pending judgment.
Ship arrests are a blunt force legal instrument, highly effective, harsh for the ship owner, and tending to result in rapid settlement.
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