News

ING AND OW BUNKER DENIED LIENS

On October 21, 2016, Judge Kathleen Forrest of the U.S. District Court for the Southern District of New York issued an Opinion and Order in five OW Bunker cases, denying summary judgment to ING Bank N.V. and dismissing its maritime lien claims asserted against the vessels named in those cases.  Freehill represented the shipowner in one of the cases.

The facts in the five cases were similar to the many other OW cases pending around the country: a charterer ordered bunkers from an OW Bunker entity, which, through one or more OW affiliates, subcontracted the supply to a physical supplier. Shortly after the bunkers were delivered, the OW entities entered bankruptcy. The OW entity was not paid by the charterer as of the bankruptcy filing, and the physical supplier was also left unpaid by the OW entity with whom the physical supplier had contracted.

The Opinion and Order addressed only the issue of whether ING Bank, as alleged assignee of OW, possesses an enforceable maritime lien against the vessels and hence can obtain payment from the vessels under a maritime lien theory. ING Bank moved for partial summary judgment in its favor seeking rulings that: (a) OW Bunker held maritime liens on the vessels for the bunkers supplied and (b) OW Bunker validly assigned those  lien rights to ING through the Security Agreement entered between ING and OW prior to the bankruptcy filings. Judge Forrest found that OW Bunker did not hold any liens because they never actually “provided” a necessary to  the vessels, as required for a valid lien under the U.S. Commercial Instruments & Maritime Lien Act (“CIMLA”). Judge Forrest reasoned that  OW Bunker neither physically delivered the bunkers nor had any financial risk inasmuch as it had no obligation to pay the ultimate physical supplier.Given her ruling on the lien question, Judge Forrest did not need to address whether the assignment to ING encompassed maritime lien rights, an issue that was hotly contested by the parties.

As explained in our earlier news report – “Freehill Prevails in Two OW Bunker Cases” – Judge Forrest previously decided that physical suppliers in the typical OW contractual arrangement do not possess liens against the vessels. With the most recent ruling on ING’s lien claims, Judge Forrest has, essentially, determined that no maritime liens exist against the vessels in the typical OW contractual arrangement. ING has indicated that it will appeal these decisions.