United States District Court, S.D. New York
June 22, 2004.
In re: MILLENIUM SEACARRIERS, INC., et al., Chapter 11, Debtors. Fuel and Marine Marketing LLC, Appellant,
Allfirst Bank (f/k/a First National Bank of Maryland) and Wayland Investment Funds, L.L.C. Appellees.
The opinion of the court was delivered by: ROBERT PATTERSON, Senior District Judge
On Appeal from the United States Bankruptcy Court for the
Southern District of New York.
OPINION AND ORDER
Appellant-Adversary Plaintiff, Fuel and Marine Marketing LLC
("Appellant" or "FAMM"), appeals, pursuant to 28 U.S.C. § 158,
from the order of the Honorable Cornelius Blackshear, United
States Bankruptcy Judge, entered August 1, 2002, granting the
Motion for Summary Judgment on behalf of the Appellees-Adversary
Defendants, Allfirst Bank ("Allfirst") and Wayland Investment
Funds, L.L.C. ("Wayland") (collectively "Foreign Mortgagees" or
"Appellees") and holding that under English law, FAMM did not
have enforceable maritime liens for its provision of marine
lubricants to the vessels of the Debtors. The appeal is denied
and the Bankruptcy Court decision granting Appellee's motion for
summary judgment is affirmed.
The Underlying Proceedings
On January 15, 2002, the Debtors, Millenium Seacarriers, Inc.
(hereinafter "Millenium") and its nineteen wholly-owned
subsidiary companies (hereinafter the "Subsidiaries"), the owners
and operators of nineteen ocean-going merchant vessels, commenced
this voluntary Chapter 11 proceeding in the Bankruptcy Court due
to the inability of Millenium and the Subsidiaries to meet the
debts claimed by various creditors, among which were first
preferred mortgages on the vessels in favor of Allfirst and
claims for maritime liens asserted by various parties.
During February 2002, the Bankruptcy Court approved the
application of the Debtors to file a motion to sell substantially
all its assets, including the Vessels ("Sale Motion"). The Court
set March 22, 2002 for interested parties to object to the
proposed sale and to assert liens, if any, against the Vessels. On March 22, 2002, FAMM filed an objection to the Sale Motion
and a notice of a claim for "Preferred Maritime Liens for
Necessaries Provided in the United States in Accordance with the
Federal Maritime Lien Act, 46 U.S.C. § 31342" based on unpaid
amounts due for the supply of lubricating oils. (D-26.)*fn1
On March 27, 2002, at the conclusion of the hearing on the Sale
Motion, the Bankruptcy Court granted the Sale Motion ("Sale
Order"). (FAMM-1; FAMM-2, Transcript of March 27, 2002 Hearing
("Hearing Tr.") at 257.) The Court also instructed the Debtors to
file an Adversary Proceeding so that the priority of the various
claims could be judicially determined. (Hearing Tr. at 263.)
On March 27, 2002, the Bankruptcy Court also stated that, upon
application, he would require the prospective purchasers
(Appellees who held foreign preferred mortgages on all the
Debtors' vessels) to fund the payment of those maritime liens
which he found were superior to the lien of the Indenture
Trustee. (Hearing Tr. at 256-57.) After the hearing, the Court
issued the Sale Order for the transfer of the Debtors' assets,
including the listed vessels, free and clear of all mortgage
liens and encumbrances, etc., "provided, however, that the
Assets shall be transferred subject to such Lien and related
Claim . . . that the Court finds, after due notice and a hearing,
is superior in right to the Lien and related Claim of the
Indenture Trustee." (FAMM-1 at 12-13.)
The Indenture Trustee (Allfirst) was the successful and only
bidder for eighteen of the nineteen vessels. (FAMM-1 at 9-11.)
The Indenture Trustee was acting for Wayland, the beneficial owner of about 85% of First Preferred Mortgage
Exchange Notes ("Notes") issued by Millenium and secured by First
Preferred Ship Mortgages on each of the vessels in favor of
Allfirst, all registered with the SEC. (D-26 at ¶¶ 3-4;
D-1-D-24.)*fn2 All the Debtors' vessels were sailing under
foreign flags (D-26 at ¶ 5) and were foreign owned (D-1-D-23).
On May 31, 2002, Appellees moved for summary judgment and filed
a memorandum of law, affidavit in support and Local
Rule 56.1 Statement against the claims asserted by FAMM, stating that the
contract by which the lubricants were supplied was governed by
English law, and that under English law no maritime lien arises
from the supply of necessaries or lubricants to vessels. (FAMM-5,
6, 7, 8.) Supporting their motion, the Appellees filed affidavits
or declarations that covered each of the foreign flagged vessels,
and stated that, at all relevant times, the vessel was registered
or operated under the authority of a particular foreign country
and was subject to a first preferred mortgage in favor of
Allfirst executed under the laws of the foreign country and
registered under those laws in a public register at the Port of
Registry of the vessel or at a central office. (D-1-D-23.)
On June 7, 2002, FAMM, Inc. filed a memorandum of law,
supporting affidavit, Local Bankruptcy Rule 7056-1 Statement
setting forth additional material facts, and a declaration of
Larry A. Katz, dated June 7, 2002 ("Katz Decl."), in opposition
to Appellees' motion for summary judgment, showing that its claim
for necessaries is based on a May 27, 1999 Marine Lubricants
Agreement ("Agreement") of Fuel and Marine Marketing Limited
("FAMM Ltd.") with Millenium. (FAMM-9, 10, 11, 12.) The Agreement
contains an English choice of law provision. (FAMM-10, Ex. 1 ¶ XXIII.) Under the Agreement, FAMM,
Ltd. agreed either to supply or arrange for the supply of Marine
Lubricants specified in a price schedule to vessels owned by the
Millenium subsidiaries and operated and managed by two
sub-managing companies, Millenium Maritime Services, Inc.
("Millenium New York") and Millenium Maritime Services, Ltd.
("Millenium Piraeus"), subsidiaries of Millenium or Millenium
Management, Inc., the owner of all Millenium's stock. (FAMM-12,
Declaration of Thomas E. Willoughby, dated June 2002, Ex. 1
("Livanos Dep.") at 6-8, 19-22; FAMM-8, Ex. 1 ¶ III) FAMM's
responsive papers did not deny that the Appellees held valid
foreign first preferred mortgage liens. Instead, FAMM argued that
FAMM's liens for necessaries were of a higher priority because
the necessaries were supplied to vessels in the United States.
On June 14, 2002, Appellees filed reply papers and a Local
Bankruptcy Rule 7056-1 Statement responsive to FAMM's Local
Bankruptcy Rule 7056-1 Statement. (FAMM-13; D-24.)*fn3
On July 10, 2002, the defendants' motion for summary judgment
was granted by memorandum decision of the Bankruptcy Court.
(FAMM-14.) An order granting defendants' motion for summary
judgment and dismissing FAMM's claims was signed by Judge
Blackshear on August 2, 2002. (FAMM-16.) The Decision of the Bankruptcy Court
Judge Blackshear's decision issued July 10, 2002 held that as
FAMM did not claim the choice of law provision was unreasonable,
the choice of English law clause in the Marine Lubricants
Agreement covering transaction international in character was
presumed valid and controlled, citing Bremen, et al. v. Zapata
Offshore Co., 407 U.S. 1, 15 (1972); Roby, et al. v.
Corporation of Lloyds, et al., 996 F.2d 1353, 1362 (2d Cir.
1993); Sembawang Shipyard Ltd. v. Charger, Inc., et al.,
995 F.2d 983, 986 (5th Cir. 1992); Bolongon, et al. v. M/V Nor
Atlantic, et al., 1999 U.S. Dist. Lexis 15575 (E.D. La. 1999).
The decision of the Bankruptcy Court is affirmed. The Marine
Lubricants Agreement dated May 27, 1999 is between Fuel and
Marine Marketing Limited, Canary Wharf, London, England, and
Millenium Maritime Services (U.S.A.), New York. (FAMM-8, Ex. A;
FAMM-10, Ex. 1.) By letters dated February 16 and 29, 2000, FAMM
Ltd. (London) agreed to amend the contract to name Millenium
Seacarriers, Inc. as the contracting party. (FAMM-8, Ex. C.) The
Agreement contains a choice of law provision, which reads:
This Agreement shall be governed by and interpreted
in accordance with the laws of England and the
parties hereby submit to the jurisdiction of the
(FAMM-8, Ex. A ¶ XXIII; FAMM-10, Ex. 1 ¶ XXIII.)
Contrary to the declaration of Larry A. Katz (FAMM-10 ¶¶ 2-3),
the evidence submitted by the Appellants shows that the Marine
Lubricants Agreement was not entered into by Fuel and Marine
Marketing LLC, a Delaware corporation with offices in Texas and
New York. (FAMM-10, Ex. 1.) All purchases and deliveries to the
vessels in Millenium's fleet were made pursuant to the Agreement
with FAMM Ltd. (London). The thirty-five invoices were issued by
FAMM, Ltd. or, in the case of six invoices, by Fuel Oil Marine
Marketing Hellas A.E. of Piraeus, Greece (id., Ex. 2 at 98), as
permitted under the Agreement (id., Ex. 1 ¶ II ("Seller may
appoint an agent or supplier to undertake deliveries on its
In support of their motion for summary judgment, Appellees
submitted a comprehensive opinion by a well-qualified expert in
English law, Timothy N. Young, Q.C., who reviewed the Marine
Lubricants Agreement and related documents pursuant to which FAMM
LLC is asserting a maritime lien for necessaries. Mr. Young
concluded that under English law, (1) there is no "maritime lien"
for necessaries, and (2) the "maritime lien" of a ship mortgage
has priority over a claim for necessaries, citing Pacific, B&L
243 (1864) and Pieve Superiore, L.R. 5 C.P. 482 (1874).
(FAMM-8, Ex. E; Declaration of Timothy Nicholas Young, Q.C.,
dated May 17, 2002 ("Young Decl.") ¶ 13-14.) FAMM submitted no
evidence disputing this opinion of English counsel.
Since the commercial transactions covered by the Marine
Lubricants Agreement were clearly international in character, the
Bankruptcy Judge was correct in relying on Bremen, 407 U.S. at
20; Roby, 996 F.2d at 1360, 1361; and Sunbarwang, 995 F.2d at
Furthermore, even applying the factors cited in Lauritzen v.
Jensen, 345 U.S. 571 (1953) for use in maritime tort cases and
general maritime law, which do not seem applicable to commercial
transaction cases, or applying the factors used in Advani
Enterprise, Inc. v. Underwriters at Lloyds, et al.,
140 F.2d 157, 162 (2d Cir. 1998), the same result would obtain.*fn4 The contract was not entered into by FAMM Ltd. which conducts
business in the United States. Accordingly, the choice of law
clause in the Agreement, the English domicile and office address
of FAMM Ltd. and the invoicing by FAMM Ltd. and Fuel and Marine
Marketing Hellas to Millenium Seacarriers in Piraeus, Greece, for
numerous Millenium vessels throughout the world, would require
the Court to apply English law despite Millenium's management
location in New York.
The Appellants argue that Article VI "Orders and Delivery" of
the Agreement states, "[e]ach order and delivery hereunder shall
be deemed a separate contract," and that the orders and delivery
documents do not contain the "choice of law provision." Reading
the Agreement with the invoices, however, it is clear that the
invoices are issued pursuant to the Agreement. An invoice was
issued for each sale, purchase and delivery of marine lubricants
to Millenium's vessels at various ports throughout the world.
(FAMM-10, Ex. 1-2.) The invoices refer to the terms of the
Agreement and specifically incorporate the "In Service"
discounts, which are outlined in Schedule B of the Agreement.
(FAMM-10, Ex. 1, Contract and Schedule B.) These invoices were
issued by FAMM, Ltd. of London or FAMM Hellas P.E. of Greece
("FAMM Hellas"). (FAMM-10, Ex. 2.) The clear intent of Article VI
of the Agreement is that separate terms of price and quantity and
quality time of payment of the product can be separately billed
and collected under the Agreement. Accordingly, the Agreement's
choice of law provision applies. The decision of the Bankruptcy Court is affirmed.
IT IS SO ORDERED.