You’re sitting peacefully in your office and the captain of your yacht calls and says: “Boss we’re under arrest by the U.S. Marshall.”
“What did you do?” you reply.
“Not us – not the crew,” the captain elaborates. “The yacht itself is being arrested and seized by the U.S. Marshall – your boat is under arrest!”
As a yacht owner, how could your vessel be getting arrested for something you are not aware of? It is likely the claim of a mechanic who you believe overcharged or a disputed boat yard or marina bill. Such mechanics, fuel suppliers or yards may file suit to foreclose a maritime lien against your vessel. They can have it “arrested” and sold at the Courthouse steps to pay the unpaid bill.
Many yacht owners are unaware that to bind their yacht does not require their direct approval. In fact, the “lienor” need not even sue you personally. Instead, the provider can sue the boat directly in what is referred to as an “in rem” proceeding. The yard or fuel bill, or any other provisions supplied to the vessel are referred to as “necessaries” under the Maritime Lien Act, which defines “necessaries” as “repairs, supplies, towage and the use of a dry dock.”
The purpose of maritime liens is to enable a vessel to obtain supplies or repairs necessary to its continued operation by giving a temporary pledge of the vessel, which may be held, until payment can be made or more formal security given. The arrest of the vessel is to prevent the owner from sailing away without having paid for the “necessaries.”
A maritime lien is a special property right in a ship given to a creditor by law – as security for a debt or claim. Under 46 U.S.C. Section 31341, persons presumed to have authority to procure necessaries for a vessel include the owner, the master, or a person entrusted with the management of the vessel.
Hence, provided the “necessaries” were supplied to the vessel, the work order or other marine contract to provide necessaries need not be signed or even written, as long as the oral contract is clear, e.g. “fill her up” or “replace the antenna,” etc. – in which case the lien is valid and enforceable against the vessel.
When engaging a boatyard, mechanic, or other marine tradesman, boat owners should insist upon a signed work order – signed by both sides – the owner of the yard (or its agent) and the owner (or captain) of the vessel. A clear written work order eliminates surprises when it comes to paying the bill, and if a dispute does arise, the yard would be hard pressed to try to get more in court than the amount agreed upon in writing between the parties.
But be very cautious about to who you give the “keys” or let use your vessel – as even an agreed buyer in possession of the vessel or a charterer, or one entrusted with the vessel’s management is presumed, under maritime law, to have authority to bind the vessel for “necessaries.” This presumption created by section 31341 can be rebutted by showing that the provider knew of a “no-lien clause” which prevented the person who ordered those necessaries from binding the vessel. If, however, that no-lien clause is not made known to the supplier, the maritime lien stands.
An arrest of your vessel must be filed in the U.S. District Court where the vessel is located – under special procedures of arrest unique to admiralty law.
Recently, the U.S. Supreme Court reversed a judgment against a houseboat because the majority agreed with the vessel owner that the structure was not a “vessel” under the maritime lien act – even though it was at a marina and floating in a slip. (More on this case next month.)
Recently, arrest has been challenged for violating procedural due process. The Supreme Court decisions require five basic criteria for constitutional seizure of a vessel:
• Effective notice to persons having interests in the property seized;
• Judicial review prior to attachment;
• Avoidance of conclusory allegations in the complaint;
• Security posted by the plaintiff to protect the owner of the property under attachment; and
• A meaningful and timely hearing after attachment.
While these maritime procedures are seemingly straight forward, regrettably, attorneys not familiar with them often make mistakes. Non-maritime attorneys who take on the defense of a maritime lien case can unwittingly jeopardize the yacht, which may be sold by the U.S. Marshall, making matters far worse than they need be.
Procedures for the arrest of a vessel are dictated by the Supplemental Admiralty Rules, Rule C and E and the Courts enforce these rules strictly. As an owner, you must file a verified statement of right or interest within 14 days after the arrest of your vessel. The statement must describe your interest in the vessel which will support your right to defend the action. And, thereafter, a person claiming possession or any ownership interest, must file an answer and defenses within 21 days.
Failing to comply with either or both of these procedures may result in a default, thereby preventing you from stopping the sale at public auction.
An owner of a vessel may obtain release of the vessel by posting a bond approved by the court, should your vessel be arrested, the most important steps to follow are to retain a maritime attorney familiar with the defense of such claims and ensure that a verified statement of right or interest is filed within 14 days after arrest and that you serve an answer within 21 days after filing the statement of interest or right.
And remember, time is of the utmost essence.