Stevens Shipping & Terminal co. v. Japan Rainbow, II M.V.

Stevens and Stevedoring Services of America (“SSA”) pursuant to Rule C of the Supplement Rules for Certain Admiralty and Maritime Claims of the Federal Rules of Civil Procedure filed suit in federal district court to arrest the JAPAN RAINBOW II alleging that they had not received payment for services provided to the vessel. SSA settled its claims before trial.

Stevens served as the stevedore and husbanding agent to the vessel. As such, Stevens would unload and load the vessel and also order goods and services on behalf of the vessel, pay for them, and receive reimbursement from the charterer. If Stevens paid a third party for services provided, it would take the maritime lien as assignee upon payment.

The operations supervisor of the vessel had been aware since late 2000 that the charterer had been experiencing financial problems and was instructed to fax a notice of the prohibition of liens clause in the charter to each agent listed in the charterer’s voyage instructions. The supervisor faxed the notice to Stevens at the fax number listed in the charterer’s voyage instructions. The fax included a letter for Stevens to notify other providers in Savannah , Georgia regarding the prohibition of liens clause. The letter also requested a return of acknowledgment for receipt of the notice. The supervisor did receive a fax confirmation establishing that both the letter and the notice were successfully faxed to Stevens’ listed fax number.

The JAPAN RAINBOW II arrived in Savannah , Georgia and the vessel’s master gave notice to Stevens of the prohibition of liens clause after Stevens had already begun working the vessel. Aware that the charterer was in financial trouble, Stevens alleges that it would not have worked the vessel but for its ability to rely on the vessel’s credit and receipt of maritime liens against the vessel. Stevens arrested the vessel in New Orleans asserting that it did not know about the faxed notice until after the arrest.

At trial the district court found that Stevens failed to offer competence evidence to rebut the presumption that the fax was received. The supervisor testified that the shipping industry used faxes as a reliable and customary means of communication. Furthermore, Stevens conceded that the fax number on the list to which the supervisor sent the fax and letter was the fax machine located in Stevens’ agency department of its downtown office. The district court held that a supplier cannot deny knowledge of a prohibition of liens clause if it receives notice pursuant to reliable and customary manner utilized in the industry. Stevens appealed this ruling.

On appeal Stevens argued that the district court erred in concluding that the fax confirmation sheet created a rebuttable presumption that it had actual knowledge of the no-lien clause, which shifted the burden to Stevens to prove it did not have actual knowledge.

The Fifth Circuit began its analysis by defining maritime liens and citing Section 31342(a) of the Maritime Commercial Instruments and Liens Act. Pursuant to Section 31342(a) a person who provides “necessaries to a vessel on the order of the owner or a person authorized by the owner – (1) has a maritime lien on the vessel; (2) may bring a civil action in rem to enforce the lien; and (3) is not required to allege or prove in the action that credit was given to the vessel.” The court stated that stevedoring services obviously constitute necessaries.

However, a party who knows about a prohibition of liens clause in a charter party before supplying goods or services to a vessel cannot claim a maritime lien for those goods or services. The court agreed in this case that the fax confirmation sheet created a rebuttable presumption that the supervisor supplied notice and that Stevens received it. The court recognized that neither party disputed the fact that faxes are a “reliable and customary method” for communicating in the shipping industry. The Fifth Circuit quoted the district court that the “law simply cannot allow a supplier to deny knowledge of a no lien clause when it was delivered in a manner that was both customary and reliable in the shipping business.” Based on the facts in the present case, the court concluded that the district court did not err in finding that Stevens had actual knowledge of the prohibition of liens clause.