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FREEHILL PREVAILS IN ANOTHER OW BUNKER CASE

FREEHILL PREVAILS IN ANOTHER OW BUNKER CASE
Following earlier Freehill wins in several OW Bunker cases, on December 1 2016 Freehill partners Jim Ross and Gina Venezia, and associate Mike Dehart, working with local counsel Royston Razor Vickery & Williams LLP, achieved another victory in the U.S. District Court for the Southern District of Texas, again successfully defeating a lien claim by a physical supplier of bunkers. In this case, Nustar Energy Services, Inc. claimed maritime liens totaling nearly $2.7M against four vessels operated by the Chinese Ocean Shipping Group (“COSCO”). Here the agent for COSCO contracted with O.W. Bunker Far East for the supply of fuel to the vessels.. O.W. Bunker Far East sub-contracted to O.W. USA who, in turn, sub-contracted to Nustar. Before Nustar was ever paid, the OW Bunker entities all entered bankruptcy. After Nustar filed suit in December 2014, COSCO, in order to avoid arrests of the vessels, placed the amount owed in an escrow account and interpleaded Nustar, ING Bank and several O.W. Bunker entities.

The multiple parties in the bunker supply chain all had potential claims against the vessel for the cost of the bunkers, as did ING Bank, which alleged that it held an assignment of OW Bunker’s accounts receivable. Both Nustar and ING moved for summary judgment, seeking rulings that they held valid maritime liens.

The court ruled that Nustar did not hold maritime liens because it had not provided the bunkers “on the order of the owner or a person authorized by the owner”, as required by the Commercial Instruments and Maritime Lien Act. While ING was granted a lien, the court denied ING’s claim for interest and fees, allegedly incurred due to COSCO’s’ late payment. The court found that COSCO did not withhold payment willfully. Instead, it did not pay the O.W. Far East invoices because Nustar had filed suit claiming it was entitled to payment The court concluded that, facing competing claims, COSCO appropriately filed an interpleader action, and that it would be unfair to penalize COSCO by awarding prejudgment interest. (Click Here for the Full Decision).