United States: No Maritime Lien For The Replacement Cost Of Inventory Not Delivered To Ferry

In Maine Uniform Rental v. MV Nova Star, No. 16-2467 (1st Cir., November 7, 2017), the First Circuit declined to extend the reach of a maritime lien claim to include “a pre-established purchase cost of items rented by a charterer pursuant to a service contract.”

The case involved a ferry service between Yarmouth, Nova Scotia, and Portland, Maine. The vessel at issue was the ferry NOVA STAR, which the ferry company planned to turn into a floating hotel. Appellant was a Maine corporation that supplied linens, uniforms, mats, rugs, towels, and related items to large customers such as hotels.

The ferry company entered into an agreement with the supplier to rent linens from the supplier over five years. The agreement included a clause that required the ferry company to purchase all merchandise that had been ordered from rental service at a published replacement rate if the contract is terminated prior to expiration.

Pursuant to the contract, the supplier purchased specific items in large quantities to meet the ferry company’s needs. The ferry company also asked that the supplier leave certain items onboard the NOVA STAR at the end of the ferry service’s second season. That same year, the ferry company terminated the ferry service. The supplier realized that the agreement was in effect terminated and demanded that the ferry company purchase the stored inventory of linens and pay past-due invoices.

Thereafter, the supplier asserted a maritime lien against NOVA STAR for the replacement cost of the stored inventory and unpaid invoices. The district court concluded that the supplies and services that the supplier had provided to NOVA STAR which allowed the ferry to operate as a hotel were “necessaries.” However, the lien did not extend to the period after the termination of the ferry service when the rental items were not being used by NOVA STAR. Moreover, only the rental and cleaning services provided by the supplier before the ferry service was terminated, the specific items that the ferry company had requested to stay onboard NOVA STAR, and specialty items that had been cleaned and returned to NOVA STAR had been “delivered” for purposes of the maritime lien requirement. The lower court limited the lien to just those items that had been delivered and denied the supplier’s maritime lien claim for the replacement cost of the inventory remaining at its warehouse.

The First Circuit Court of Appeals agreed. It found that "necessaries" for purposes of a maritime lien are broadly construed and included the cleaning and providing of linens to NOVA STAR because the intended purpose of NOVA STAR was a floating hotel that needed clean linens. The Court also agreed that after the termination of the ferry service, the rental and cleaning services provided by the supplier were no longer “necessaries.”

In determining whether items had been “delivered” for purposes of a maritime lien, the First Circuit found that “necessaries” must be either physically delivered or “constructively dispatched to the vessel by the handing over of the supplies” to the vessel’s owner or agent. In the case of rental items, it found that the “use” of the necessary item – not the item itself – is what is furnished to the vessel. It found no cases that extended liens to include the replacement cost of inventory retained by a plaintiff after a rental agreement is terminated.

This decision highlights the scope of necessaries and the meaning of “delivered” in the context of a maritime lien against a vessel and illustrates the importance of understanding these two concepts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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