STOP: You Are Under Arrest
ARRESTING VESSELS TO ENFORCE MARITIME TORT LIENS
S. Scott Bluestein
When a plaintiff is injured on a vessel due to the negligence of the vessel’s owner, operator, or crew or, in the case of a seaman, the vessel’s unseaworthiness, the vessel itself becomes liable to the plaintiff for his damages. This results in the plaintiff acquiring a maritime tort lien against the vessel. These liens arise without the necessity of recordation, do not require possession of the vessel, and continue to encumber the vessel even if it is sold to a good faith purchaser without notice of the encumbrance. One of the strongest weapons a plaintiff and his attorney have in prosecuting a maritime tort claim is the right to use the Supplemental Rules For Certain Admiralty And Maritime Claims (hereinafter referred to as “Supplemental Rules”) to arrest the offending vessel.
The plaintiff’s maritime tort lien is enforced by arresting the vessel in a federal admiralty proceeding. The federal court’s jurisdiction over maritime tort liens is exclusive of state courts. To enforce the lien, the plaintiff is required to file a verified complaint in federal court naming the vessel as a party and requesting the court to order the vessel’s arrest. Rule C of the Supplemental Rules permits a plaintiff to arrest a vessel by having a warrant of arrest issued and served on the vessel. The vessel is physically taken into custody by the U.S. Marshal. The arrest of a vessel serves several important purposes, including obtaining jurisdiction over the vessel and pre-judgment security for the plaintiff’s claims against the vessel itself. In the event that a vessel’s owner fails to adequately compensate a plaintiff for his damages or post adequate security with the court for the plaintiff’s claims to secure the vessel’s release from the arrest, the plaintiff is entitled to have the court sell the vessel at a U. S. Marshal’s sale and use the proceeds of the sale to satisfy the plaintiff’s in rem claim against the vessel. The sale of a vessel in an action in rem is not a typical judicial sale of property, as it divests all existing liens and mortgages of any kind.
The notion of obtaining pre-judgment security for a claim is unique to maritime tort law and is largely not permitted under land based tort law. Despite the ability to arrest a vessel to enforce a tort lien and the potential risk of not being able to collect a judgment, many maritime lawyers do not investigate whether it is in their client’s best interest to arrest the vessel. This is not to suggest that a vessel must always be arrested to enforce a maritime tort lien. Instead, the decision to arrest a vessel must be made on a case by case basis with the client’s participation in the decision making process. Factors to consider in arresting a vessel include the extra cost and time in litigating a civil action in federal court compared to state court, the additional time and costs associated with arresting a vessel, and whether the client wants to abandon his right to a jury trial.
If it is determined that it is not in the client’s best interest to arrest a vessel, then another option available to preserve the plaintiff’s maritime tort lien is to file a notice of the lien with the U.S. Coast Guard National Vessel Documentation Center. The filing of this notice of lien, which can be accomplished with minimum effort and cost, will place the world on notice of the lien and place a cloud on the vessel’s title. Generally, most vessel owners will eventually satisfy the lien, because the filing of the lien may be in violation of the terms and conditions of the vessel’s preferred ship mortgage or deter potential buyers from purchasing the vessel. This paper will provide a general guide for filing the proper pleadings to arrest a vessel to enforce a maritime tort lien and will discuss the steps that must be taken in order to arrest the vessel.
II. EXISTENCE OF A MARITIME TORT LIEN
A maritime lien is a right peculiar to maritime law. Maritime tort liens arise from both contracts and torts involving vessels. The vessel, under the General Maritime Law, is held responsible for the torts and misconduct of its master, crew, owners or operators. A maritime lien is a property right of a non-vessel owner in a vessel giving the non-vessel owner, or lienholder, the right to have the vessel sold by a federal court sitting in admiralty and the proceeds of the vessel’s sale distributed to the lienholder to satisfy the in rem debt of the vessel. A plaintiff enforcing a maritime tort lien is proceeding in rem against the vessel, which is referred to as the res. The res is fictionally personified and hence, can be sued. In the case of liens on vessels, the lien is non-possessory as it does not require the lienholder to posses or control the vessel until the lien is satisfied and is indelible. The existence of a maritime lien is the prerequisite to any admiralty in rem action against the vessel. To give rise to a maritime lien, the accident of which liability arose must itself be maritime in nature. A maritime tort lien arises at the moment the accident occurs.
To arrest a vessel, the plaintiff must have a valid maritime tort lien against the vessel or other maritime property. The requirements for a maritime lien on a vessel include: (1) a maritime tort; (2) the object of the lien, the vessel, must be “in navigation” ; (3) the person in possession at the time the tort lien arose must be in lawful possession of the vessel; and (4) the lienholder or plaintiff may not be an owner, part owner, or joint venturer in ownership of the vessel .
In determining whether a vessel is in navigation, courts utilize factors similar to those used to determine seaman status. “A vessel is in navigation when ‘engaged as an instrument of commerce and transportation on navigable waters.'” In other words, a vessel will be in navigation if the accident occurs on navigable waters after the vessel’s construction has been completed and the vessel has been placed into service. Maritime tort liens do not arise from accidents that occur on vessels withdrawn from navigation.
A plaintiff will have a maritime tort lien for personal injury claims under the General Maritime Law that are a result of the fault the vessel’s master, crew, owners, or operators. Seamen who are injured have tort liens under the general maritime law and for vessel unseaworthiness that is a proximate cause of the injury. Seamen do not have maritime tort liens for Jones Act negligence claims against their employers, because Jones Act Claims are against a seaman’s Jones Act employer, not the vessel to which the seaman is assigned. Violations of The Death on the High Seas Act also give rise to a maritime tort.
III. THE DECISION TO ARREST OR NOT
Enforcement of maritime tort liens lies exclusively with a federal court sitting in admiralty. A vessel cannot be arrested in state court in order to enforce a maritime tort lien. With the assertion of a federal court’s admiralty jurisdiction pursuant to Rule 9(h) of the Federal Rules of Civil Procedure, a plaintiff loses his right to a jury trial. Thus, an attorney must decide if it is in his client’s best interest to proceed before a federal judge or to permit a jury to decide the merits of a plaintiff’s personal injury claim. Other factors must be considered by an attorney and the plaintiff in making the determination to move forward with an arrest of a vessel.
Generally, many vessel owners and Jones Act employers have indemnity insurance, not liability coverage, that requires the insurer to pay a plaintiff for his personal injuries negligently caused by the insured. Instead of being insured under insurance policies similar to the ones that cover the majority of automobile accidents, vessel owners and Jones Act employers are routinely members of Protection and Indemnity Clubs, who issue Protection and Indemnity Policies (“P & I”). Under a standard P & I policy, an insured, or member, is insured for only those personal injuries that it is liable to pay and has actually paid. In other words, a P & I Club whose member is liable for a plaintiff’s personal injuries is not obligated to fund a settlement or satisfy any judgment entered against its member. Instead, the P & I Club is only contractually obligated to reimburse the member for the amount it has actually paid the plaintiff.
Especially with regards to many maritime defendants, plaintiffs must be concerned about being able to satisfy any judgment they may obtain for their personal injuries. Defendants often do not have any offices or assets in the state where the lawsuit was filed, or are based in foreign countries located many miles away from the United States. Most maritime personal injury lawyers are probably aware of situations where vessel owners and Jones Act employers, who are insured under P & I polices, disappear, dissolve, go bankrupt, or simply refuse to satisfy a judgement. Should any of these events occur, then a plaintiff will experience great difficulty in satisfying his judgment or might not be able to satisfy the judgment at all.
To protect against difficulties in collecting a judgment, a personal injury plaintiff can arrest the offending vessel to assert his maritime tort lien. Upon the vessel’s arrest, the vessel serves as security for the plaintiff’s maritime tort lien. At this point, the vessel owner’s options include satisfying the maritime tort lien via settlement with the plaintiff, posting adequate security for the release of the vessel or permitting the vessel to remain under arrest. Adequate security under Rule E (5) of the Supplemental Rules For Certain Admiralty and Maritime Claims includes the posting of a bond, paying of cash into the registry of the court, the posting of a letter of undertaking by the P&I Club, or some other form of security acceptable to the plaintiff or ordered by the court. The typical letter of undertaking provides that the P & I Club will pay any judgment entered against the vessel or its member and fund any settlement entered into by the parties.
In the event that the vessel owner fails to post adequate security under Rule E (5) to release the vessel from arrest, then the vessel may be sold at a United States Marshal sale. The proceeds from the sale, after the Marshal’s fees, advertising costs for the sale, and custodia legis costs are paid, will be used to satisfy the plaintiff’s maritime tort lien. Thus, even if the vessel owner or Jones Act employer refuses to pay a judgment or to fund a settlement, the arrest of its vessel greatly increases the plaintiff’s chances of being compensated for his damages.
IV. HOW TO ARREST A VESSEL
A. Costs Associated With Arresting a Vessel
Before arresting a vessel, a maritime personal injury lawyer must complete a number of steps. The first step is to determine that the plaintiff has a maritime lien. The second step is to discuss the pros and cons of a vessel arrest with the client. The lawyer or client must be willing to advance the funds necessary to arrest the vessel. Depending on the size of the vessel, arresting it can be a very expensive proposition. Funds will be needed to file the complaint, (unless it is a seaman’s compliant), to pay the U.S. Marshal to arrest the vessel and to care for and protect the vessel while under arrest, to pay for custodia legis expenses to keep the vessel in good condition while under arrest , to pay for advertising costs of the vessel sale, and other incidental costs. The next step is to locate the vessel, which may be accomplished by contacting vessel watch services, harbor pilots, newspapers, boards of trade, steamship agents, your client’s fellow seamen or contacts, marine terminals, ports authorities, driving around to the different terminals.
B. The Pleadings Necessary To Arrest A Vessel
The drafting of the necessary pleadings to arrest a vessel is a very time consuming and involved process. Unfortunately, these pleadings cannot be properly drafted on a moment’s notice. Numerous district courts, including the Eastern District of Louisiana and the Southern District of Texas, have specific Local Rules for the arrests of vessels. The Local Rules should always be consulted before attempting to arrest a vessel. The following is a list of pleadings normally used to arrest a vessel to enforce a maritime tort lien:
1. Verified Complaint . In addition to meeting the requirements of Rule 8 of the Federal Rules of Civil Procedure, the complaint must assert that the plaintiff has a maritime tort lien against the vessel, name the vessel itself as a defendant, invoke the court’s admiralty jurisdiction, state that the vessel is or will be within the district during the pendency of the action, and verified by the attorney or client.
2. Summons . Must name all defendants, including the vessel, and be issued by the Clerk of Court.
3. Motion or Application for Order Issuing Warrant of Arrest . This motion requests the Court to issue an Order authorizing the Clerk’s Office to issue the Warrant to arrest the vessel.
4. Order Authorizing Warrant of Arrest : This order, issued by the federal judge after reviewing the pleadings, permits the Clerk of Court to issue the Warrant of Arrest that provides the U.S. Marshal with authority to arrest the vessel.
5. Motion to Permit Vessel to Continue Cargo Operations and to Shift Berths . This Motion requests authorization for the arrested vessel to continue cargo operations during the arrest and to move within the district.
6. Order to Permit Vessel to Continue Cargo Operations and to Shift Berths . This Order authorizes the above.
7. U.S. Marshal Service Agreement of Indemnity . This agreement, which can be obtained from the U.S. Marshal, must be signed by the plaintiff’s attorney and states that the arresting party will hold the U.S. Marshal’s Service harmless from any damages resulting from the attachment.
8. Motion for Appointment of Substitute Custodian . This motion requests the Court to appoint a third party, instead of the U.S. Marshal, as the vessel’s custodian during the arrest.
9. Order Appointing Substitute Custodian . This Order authorizes the above.
10. U.S. Marshal Form (USM) 285 . This form, which can be obtained from the U.S. Marshal, provides the U.S. Marshal with information about the vessel’s name, location, and service instructions. After the vessel is arrested, the form is executed by the U.S. Marshal and returned to the plaintiff’s lawyer.
11. Civil Action Cover Sheet .
12. Answers to Local Rule Interrogatories . These Interrogatories vary by jurisdiction.
13. Notice of Arrest . This document must be provided to the master or the person in charge at the time of arrest and will be posted on the vessel placing all parties on notice of the arrest.
Rule C also requires the plaintiff to post security for the vessel owner’s potential costs and expenses in the event that the arrest is wrongful. Rule C costs are $250.00. A cost bond issued by a respectable surety may be filed in lieu of the $250.00 paid into the registry of the court.
C. Contacting The U.S. Marshal Service
Once the vessel is located, the local U.S. Marshal’s office must be placed on notice of the pending arrest and details worked out regarding when and where the arrest will take place. The U.S. Marshal is normally required to physically place the vessel under arrest by serving copies of the pleading and Order Authorizing Warrant of Arrest on the master of the vessel or person in charge and taking the vessel into its care, custody and control. If the necessary arrangements are not made in advance with the U.S. Marshal to arrest the vessel, then the vessel may not be arrested before it leaves the district where the United States District Judge who issued the arrest order sits. The U.S. Department of Justice Manual for United States Marshals contains a great deal of useful information and guideline for arresting vessels.
D. Filing The Pleadings With The Clerk’s Office And Obtaining the Order of Arrest
Prior to an arrest, the verified complaint and supporting pleadings must be reviewed by the court. Given the number of different and unique pleadings and forms necessary to arrest a vessel and the usual time constraints due to the fear of the vessel leaving the district, it is best for one of the attorneys involved with the arrest to transport the arrest papers to the Clerk of Court’s office for filing. Once the pleadings are filed, the filing fee is paid, and the case is assigned to a particular judge, the attorney himself should carry the pleadings to the judge’s docket clerk for processing. Once the intake clerk has reviewed the pleadings, the attorney should then request the docket clerks’ permission to bring the pleadings and various proposed orders to the judge’s chambers for his execution. In the event that the judge assigned to the case is not located in his chambers, you can request that another judge authorize the arrest on his behalf.
It is best to wait in the judge’s chambers for his issuance of the various orders. Occasionally, the judge will have questions about the form of the pleadings or proposed order or the grounds for the arrest based upon the alleged maritime tort lien. If you are waiting in the judge’s chambers, you can answer the judge’s questions without delay. Interestingly, the plaintiff’s attorney is permitted to have an ex-parte conversation with the judge as to the grounds for issuance of the arrest. Upon the issuance of the orders by the court, they should be hand-delivered back to the docket clerk so that the warrant of arrest can be issued immediately.
Once the Warrant of Arrest has been issued, the Warrant of Arrest, executed Orders, and pleadings must be taken to the U.S. Marshal with a check for the U.S. Marshal’s deposit to cover its fees and insurance costs, the Indemnity Agreement, and the USM Form 285. At this time, the U.S. Marshal will indicate when it expects to arrest the vessel.
E. Publication Of Arrest and Post-Arrest Requirements
If the vessel owner fails to obtain release of the vessel within ten (10) days of the arrest, then the plaintiff is required under Rule C(4) to publish notice of the arrest in a newspaper of general circulation designated by the court. There are usually several newspapers with a wide circulation to the public from which to choose. The advertising fees may vary widely. The publication is required to state the court in which the vessel has been arrested, the vessel’s name, and the length of time within which the owner of the arrested vessel must file an Answer. The vessel owner is also required to file a “verified claim” of ownership to the arrested vessel within ten (10) days after the vessel has actually been arrested by the U.S. Marshal. The Verified Claim states that the party filing the claim is the owner of the arrested vessel. Thereafter, the vessel owner is required to file an Answer both on behalf of the vessel and on its own behalf, in the event that it has been sued in personam.
Should the case not be resolved by the parties or an agreement reached on the posting of adequate security to secure the release of the vessel, Rule E(4)(f) entitles the vessel owner to a post- arrest hearing. At the hearing, the plaintiff will be required to show why the vessel’s arrest should not be vacated or why the type or amount of security offered by the vessel owner is not adequate to secure the plaintiff’s claim. The Rule does not provide any standards for the burden of proof that the plaintiff must meet. As such, the court has wide discretion in determining whether a full adversarial hearing with testimony and cross-examination, or an informal proceeding, such as a conference with the court, is required.
V. FILING OF NOTICE OF LIEN
Another option available to a plaintiff with a maritime tort lien is to file a notice of lien . The filing of the notice of the lien will increase the plaintiff’s chances of collecting his damages from the defendant, as it places a cloud on the owner’s title. The notice of lien must include the name and address of the lienholder, vessel’s name and U.S. Coast Guard Official Number, the amount of the lien, the date the lien arose, and the type of lien. The notice of lien must be signed by the lienholder or his representative and notarized. It is filed with the National Vessel Documentation Center in West Virginia.
The cost of filing the notice of lien is only $4.00 per page. One prerequisite to filing the lien is that the vessel must have a properly filed preferred ship mortgage. If one does not exist, then the National Vessel Documentation Center will not file the lien and return it to the lienholder.
As compared to land based torts, plaintiffs with maritime personal injury cases face a greater chance of not being able to collect their damages from a defendant. This occurs due to the location of the defendant’s principle place of business, to the defendant’s corporate structure, to the tendency of maritime defendants to go out of on a regular basis business or to declare bankruptcy, and the terms and conditions of the defendant’s P&I policy. Given the numerous potential difficulties a plaintiff may experience in collecting his damages from a defendant, the ability to demand and to obtain pre-judgment security from a defendant or its insurance company greatly increases a plaintiff’s ability to collect his damages.
If used correctly, the Supplemental Rules are a great asset to a plaintiff who has a maritime tort lien against a vessel. Therefore, it is important for a lawyer with a client who has been injured in an accident involving a commercial or recreational vessel to consider whether it is in the client’s best interest to file a maritime tort lien against the vessel or to arrest the vessel under Rule C of the Supplemental Rules.
Shareholder Raley & Bluestein, P.A., Charleston, South Carolina. B.A., University of Florida; J.D., University of South Carolina; L.LM. in Admiralty, Tulane University. I would like to thank Natalie Parker Bluestein, Esq. for her assistance.
See Fed. R. Civ. P. Supp. C.
The pleadings attached to this paper have been used by the author to arrest vessels in the United States District Courts for the Eastern and Middle Districts of Louisiana and for the District of South Carolina.
The BRIG MALEK ADHEL, 43 U.S. 210 (1844).
Pierside Terminal Operators, Inc. v. M/V FLORIDIAN, 389 F. Supp. 25, 1974 AMC 1959 (E.D. Va. 1974), aff’d, 529 F.2d 221, 1975 AMC 2484 (4th Cir. 1975).
See Continental Grain Co. v. Barge FBL-585, 364 U.S. 19, 1961 AMC 1 (1960).
The Rock Island Bridge, 73 U.S. 753 (1867).
The WALTER ADAMS, 253 Fed. 20 (1st Cir. 1918).
While there are additional liens under the General Maritime Law, such as liens for unpaid master and crew wages, preferred ship mortgages, necessaries provided to vessels, cargo damage or loss, etc., this paper will focus on maritime tort liens. For a listing of other types of maritime liens, see 1 Thomas J. Schoenbaum, Admiralty and Maritime Law § 9-1, at 483-85.
The Rock Island Bridge, 73 U.S. 753 (1867).
Sasportes v. M/V Sol de Copacabana, 581 F.2d 1204, 1980 AMC 791 (5th Cir. 1978).
McCarthy v. THE BARK PEKING, 716 F.2d 130, 1984 AMC 1 (2nd Cir. 1983).
McKinley v. All-Alaskan Seafoods, Inc., 980 F.2d 507, 1993 AMC 305 (9th Cir. 1992).
Sasportes v. M/V Sol de Copacabana, 581 F.2d 1204, 1980 AMC 791 (5th Cir. 1978).
See Gilmore and Black, The Law of Admiralty 628 (2d ed. 1975).
Moragne v. States Marine Lines, 398 U.S. 375, 90 S.Ct. 1772, 1970 AMC 967(1970); Fredelos v. Merritt-Chapman & Scott, 1971 AMC 1347 (5th Cir.), modified, 1971 AMC 2192 (5th Cir. 1971).
Plamals v. The PINAR DEL RIO, 277 U.S. 151 (1928).
46 U.S.C. § 761-767.
The BUENOS AIRES, 5 F.2d 425, 436 (2d Cir. 1924).
Madruga v. Superior Court, 346 U.S. 556 (1953).
Fed. R. Civ. P. 38 (e).
2 Thomas J. Schoenbaum, Admiralty and Maritime Law §19-5, at 414-18.
Id. at 414-15 n. 2.
Custodia legis expenses can include crew wages, food, and medical care, substitute custodian fees, dockage, bunkers, fuel, vessel repairs, tugs, cargo operations, pilotage, harbor fees, U.S. Marshal fees, insurance, and crew repatriation costs.
Fed. R. Civ. P. Supp. C.
A Copy of The U.S. Department of Justice, Manual for United States Marshals may be obtained from the U.S. Marshal Service or can be found at 1987 AMC 1041-61.
Fed. R. Civ. P. Supp. C(6).
Salazar v. Atlantic Sun, 881 F.2d 73, 1989 AMC 2594 (3rd . Cir. 1989).