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Articles Posted in Maritime Liens & Vessel Arrests

Golden Rule Midnight Express.jpgThe Florida Admiralty and Maritime Board Certified attorneys of Brais Law Firm filed a verified complaint in rem against a 43′ Midnight Express go-fast boat for allegedly running over Marc Craddock while snorkeling more than 1 mile off Haulover Inlet. The all gold colored speed boat, aptly named The Golden Rule, equipped with five outboard engines is technically owed by FLC Marine LLC., a Florida limited liability company, whose managers are Adam Gordon and his father Michael Gordon.

Court documents state The Golden Rule was returning from the Bahamas on October 17th when it ran over Mr. Craddock causing life-threatening injuries. Mr. Craddock was airlifted to Ryder Trauma Center in Miami and underwent multiple emergency surgeries before being transferred to an Orlando hospital.
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Keith Brais Arrested Yacht.jpgImagine receiving a call from your captain informing you the U.S. Marshal arrested your yacht? Keith Brais, a Florida Board Certified Maritime Lawyer, has defended yacht owners for over twenty years and will walk you through the steps needed to release your vessel.

A yacht can be arrested by a Federal Admiralty Court for a number of reasons. The two most common are the failure to make payments on a preferred ship’s mortgage and the failure to pay for goods and the services supplied to the yacht by American suppliers. Suppose you receive that dreaded call from your captain. The first thing you should do is make an appearance in the Federal Court that issued the warrant of arrest. This is done by filing a Verified Statement of Right or Interest pursuant to Federal Admiralty Rule C(6)(a). The Verified Statement must be filed within fourteen (14) days after the vessel was arrested (the Court may extend this time). The document must describe your interest in the vessel in order to support your right to defend against the arrest proceeding. Once the Verified Statement is filed, you have twenty one (21) days to answer the complaint filed by the arresting party.

After an appearance is made, the Admiralty Rules of Court provide for ways in which your yacht can be released. If you think the claim is valid, you can simply pay the demand. This will satisfy the claim. The Court on motion will then release the vessel and the case will be over. However, if you dispute the claim, you can only release your yacht by entering into a stipulation with the arresting party. It is almost a given, however, that the arresting party will require substitute security in the form of cash or bond to be deposited in the Court’s registry sufficient to satisfy the claim, interest and costs. The yacht can also be released by Court. In this situation, the Court will require the yacht owner to post a bond in an amount sufficient to cover the amount of the arresting party’s claim with accrued interest and costs. This bond, however, shall not exceed the lesser of twice the amount of the arresting party’s claim or the value of the property based upon due appraisement.

Given the current economic climate, more and more companies are filing Chapter 11 in an attempt to shed debt. We receive many calls from vessel suppliers inquiring whether the yacht’s or ship’s owner filing of Chapter 11 has any impact upon their right to enforce a maritime lien and arrest the vessel. The answer is no!

United_States_Bankruptcy_Court_Seal.pngMaritime law gives a person or company who supplies “necessaries” to a vessel the right to have an admiralty court seize and sell the vessel, its earned freight and cargo to satisfy any unpaid invoices. This right is commonly known as a maritime lien right. Maritime lien rights are given a higher priority under the law since its purpose is to encourage necessary services to ships whose operators are unable to make contemporaneous payments.

Given the nature of maritime liens, courts have found the bankruptcy code has no impact upon the right to enforce a maritime lien against a vessel even though the owner filed Chapter 11. In fact, courts have held that maritime lien rights can arise in favor of a company supplying necessaries to a vessel during the time the owner is operating under Chapter 11. It is important to note that even though Chapter 11 proceedings have no impact upon maritime lien rights against the vessel, if the vessel is sold at a Marshal auction and the proceeds of the sale do not fully cover the unpaid invoices, the remainder of the debt owed may be discharged by the Bankruptcy court.

We are often asked by our clients who refurbish yachts whether they can include a clause in their contracts which gives them a maritime lien for attorney fees paid in association with bringing a lawsuit to collect unpaid invoices. Unfortunately, the answer is no. However, maritime law does provide a remedy.

Contract.jpgMaritime liens are statutory. This means the Maritime Lien Act gives people who provide goods and services to yachts, ships and other vessels certain protections. This includes the ability to arrest the ship in order to secure payment on outstanding invoices. However, nowhere in the Maritime Lien Act does Congress give a maritime lien for attorney fees. As such, courts hold that a person cannot have a lien against the vessel for attorney fees even if the owner agreed to such a lien in a contract. However, this does not preclude a contractor from putting a clause in the contract whereby the owner agrees to be personally liable for attorney fees should a lawyer need to be hired to collect the debt.

Often times a maritime collection lawsuit has two defendants: (1) the yacht; and, (2) the yacht owner. The claim against the yacht is for the foreclosure of a maritime lien. This claim is for the amount of the unpaid invoices plus certain court costs allowed by law and prejudgment interest. The claim against the owner is for breach of contract. This claim is also for the amount of unpaid invoices, certain taxable costs provided by law, prejudgment interest plus anything else the contract may provide. If the contract is written properly, these additional damages can include costs (normally not allowed by pure operation of law) as well as attorney fees paid in the course of pursuing the collection lawsuit. As such, though the contractor cannot create a maritime lien for attorney fees he still can recoup his attorney fees against the yacht owner.

Yacht Interior [314 x 235].jpgWe receive many calls from marine contractors telling us they finished a project, the yacht owner was pleased with the work but were never fully paid. Unfortunately, this is the industry standard for the yacht refurbishing business. Luckily the law is on your side!

The Maritime Lien Act gives a lien against a vessel to:

  • Refurbishers,
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