Bankruptcy of maritime fuel broker thwarts supplier's attempt to collect $1.7M payment

By Carrie Salls | Nov 1, 2018

SEATTLE — A fuel supplier will not be allowed to seize and sell a shipping vessel over $1.7 million in unpaid marine fuel after the U.S. Court of Appeals for the Ninth Circuit upheld a lower court’s ruling denying maritime lien.

Yang Ming Liberia Corp. bought 3,500 metric tons of fuel for its YM Success vessel from middleman O.W. Bunker Far East, which procured the fuel from Bunker Holdings, according to the Oct. 11 opinion.

Bunker Holdings supplied YM Success with the fuel while the ship was docked in Nakhodka, Russia, but O.W. Bunker Far East soon filed for bankruptcy, "leading Bunker Holdings to pursue payment through this maritime lien action against the ship," the opinion said.

“Under United States law…Bunker Holdings is entitled to a maritime lien if it ‘provided necessaries to a vessel on the order of the owner or a person authorized by the owner,'” the appeals court opinion said.

U.S. Circuit Judge Paul Watford   Wikimedia Commons

Although Bunker Holdings satisfied the criteria of providing “necessaries” to the YM Success in the form of fuel and establishing that the “YM Success qualifies as a vessel,” Watford said the appeals court agreed with the district court’s finding that Bunker Holdings was not able to prove that someone at Yang Ming Liberia approved the transaction, because they had ordered the fuel from a broker and not Bunker Holdings itself.

In connection with a related district court’s ruling that awarded Yang Ming Liberia the $54,000 it paid “to keep the letter of undertaking in place during the 17 months this action remained pending in the district court,” the appeals court said it agreed with Bunker Holdings’ argument that the statute on which the lower court based that ruling does not apply in “admiralty and maritime cases.”

The appeals court heard the case in response to Bunker Holdings’ appeal of a ruling by U.S. District Judge Benjamin Settle of the U.S. District Court for the Western District of Washington.

The opinion was issued by an appeals court panel consisting of Circuit Judges Milan Smith Jr. and Paul Watford and District Judge Douglas Rayes and was written by Watford.

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