Ninth Circuit Limits its KEN LUCKY Decision to its Procedural Peculiarities

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Many physical suppliers of bunkers/marine fuel, who were unpaid by their contractual counterparties, have relied on a decision of the United States Court of Appeals for the Ninth Circuit, Marine Fuel Supply & Towing, Inc. v. M/V KEY LUCKY, 869 F.2d 473 (9th Cir. 1988), as jurisprudential support for the concept that the physical supplier has a maritime lien against the vessel supplied with the fuel, even though the physical supplier did not take the order for the fuel from the vessel’s owner, charterer or agent. A close reading of the KEN LUCKY decision indicated that the Ninth Circuit reached its conclusion based upon the vessel interests’ admission in the pleadings that Bulkferts, the subcharterer of the vessel, had ordered the fuel from Marine Fuel. Id. at 476-77. (The actual chain of contracts was Bulkferts ordered the fuel from Brook Oil, who then ordered the fuel from Marine Fuel.) Because the vessel interests had admitted that their subcharterer had ordered the fuel directly from the physical supplier, the physical supplier was entitled to a maritime lien. Since that time, KEN LUCKY has been routinely cited by physical suppliers as standing for the overly broad proposition that they have a maritime lien against the vessel, regardless of whether the vessel owner, charterer or agent order the necessaries from the physical supplier.

Recently, the Ninth Circuit revisited this issue in Bunker Holdings, Inc. v. Yang Ming Liberia Corp., No. 16-35539 (9th Cir. Oct. 11, 2018). The Ninth Circuit followed the prior decisions of the Eleventh, Second and Fifth Circuits in concluding that a physical supplier of fuel that received the fuel order from a bunker broker or bunker intermediary, and not the vessel owner or charterer, does not have a maritime lien against the vessel under the Commercial Instruments and Maritime Lien Act. Id. at 5.

Perhaps more significantly, the Ninth Circuit has expressly limited the KEN LUCKY decision to its unique procedural posture:

The defendant admitted that Marine Fuel sold the bunkers to Bulkferts, pursuant to an order originating from Bulkferts. Based on that admission, we treated the case as though Bulkferts had ordered the bunkers directly from Marine Fuel and hence assumed that Marine Fuel had supplied the bunkers “on the order of” Bulkferts. Since Bulkferts was one of the entities with presumed authority to bind the vessel, each of the statutory requirements for a maritime lien was satisfied. In ruling for Marine Fuel, we explicitly refused to consider whether Brook Oil was authorized to bind the ship as Bulkfert’s agent.

Id. at 6 (original italics, citations omitted).

Because that critical factual admission present in KEN LUCKY was not made by the vessel interests in Bunker Holdings, the physical supplier could derive no support from that decision. In other words, the Ninth Circuit has finally relegated the KEN LUCKY decision to its own procedural peculiarity. In the future, vessel interests can rebut the suggestion that KEN LUCKY provides a bunker sub-contractor with a maritime lien by citing Bunker Holdings and paraphrasing Judge Higginbotham’s observation in the ALMI SUN decision: “In determining the law of the [Ninth] Circuit, we prefer its own statement of the law.” ALMI SUN, 893 F.3d at 296.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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