Windspeed Enterprise Limited v. Modern American Recycling & Repair Services, LLC

USCA11 Case: 22-12242 Document: 28-1 Date Filed: 05/16/2023 Page: 1 of 10
[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 22-12242
Non-Argument Calendar
____________________
WINDSPEED ENTERPRISE LIMITED,
Plaintiff-Appellant,
versus
M/V SEMI 1 et al.,
Defendants,
MODERN AMERICAN RECYCLING & REPAIR SERVICES,
LLC,
Defendant-Appellee.
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2 Opinion of the Court 22-12242
____________________
Appeal from the United States District Court
for the Southern District of Alabama
D.C. Docket No. 1:21-cv-00523-JB-N
____________________
Before JORDAN, BRANCH, and MARCUS, Circuit Judges.
PER CURIAM:
Windspeed Enterprises Limited agreed to buy two vessels,
M/V SEMI 1 and M/V SEMI 2 (“the Vessels”), from Semi Sub Ser-
vices BV. While working under a purchase-and-sale agreement
(the “Agreement”), Windspeed provided items, crew, and services
to the Vessels. But the Agreement’s closing date came and went,
and Windspeed ended up not purchasing the Vessels. Modern
American Recycling & Repair Services, LLC (“MARRS”) swept in
to buy them instead.
After MARRS’s purchase, Windspeed filed an in rem com-
plaint to arrest the Vessels, claiming it had a maritime lien under
the Commercial Instruments and Maritime Liens Act (“CIMLA”)
because the items, crew, and services were “necessaries” provided
on Semi Sub’s orders. MARRS moved to vacate the arrests, argu-
ing that these did not amount to necessaries for purposes of the
statute, but instead were conditions precedent to the Agreement
and did not give rise to admiralty jurisdiction. The district court
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22-12242 Opinion of the Court 3
granted the motion to vacate for lack of admiralty jurisdiction, and
Windspeed appealed. After careful review, we affirm.
I.
In January 2020, Windspeed agreed to purchase the Vessels
from Semi Sub for $1,350,000. Under the Agreement, Windspeed
would take the Vessels “AS IS, WHERE IS, WITH ALL FAULTS
AND DEFECTS.” Semi Sub made no guarantee that the Vessels
were seaworthy or that they complied with any classification soci-
ety or rules, could pass any inspections, or were eligible for any
certifications.
The Agreement also placed obligations for the operation,
transport, and costs of the Vessels on Windspeed. Windspeed as-
sumed the duty to transport the Vessels and pay for any fuel, prep-
aration, or outfitting required to do so. More specifically, Wind-
speed was “responsible for . . . the cost of preparing and making
ready the Vessels at the dock for transport (including any fuel, lub-
ricants, stores, consumables, repairs, and other costs) and for
transport to International Waters.” The Agreement permitted
Windspeed to send six workers for each Vessel to familiarize them-
selves with its operation, but it placed the “sole[] responsib[ility]”
with Windspeed to cover “any and all costs[,] expenses[,] liabili-
ties[,] and obligations with respect to any of its personnel on board
the Vessels prior to Closing.”
At the time that Windspeed entered into the Agreement, the
Vessels were in inactive or port status in Coatzacoalcos, Mexico,
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where they were leased by Mantenimiento Marino de Mexico S. de
R.L. de C.V. Ten crewmembers of the leasing company worked
on each Vessel, and Windspeed sent workers of its own in February
2020 to familiarize themselves with the Vessels. The goal was to
prepare the Vessels for their eventual trip to a scrapyard in India,
so Windspeed provided “bunkers, crew, hull cleaning, cost of in-
surance survey, and flag/class charges.” The leasing company,
meanwhile, paid for its own expenses and crew.
After an amendment to the Agreement, the closing date for
the sale was set as April 22, 2020. If the closing fell through, the
Agreement stipulated that Semi Sub would retain Windspeed’s de-
posit and that neither party would have liability to the other. Due
to complications from the COVID-19 pandemic, the parties were
unable to close by April 22, and the Agreement expired by its own
terms.
Windspeed made a new offer to purchase the Vessels, but it
placed the price at $300,000 this time around. Uninterested in the
much lower price, Semi Sub declined the offer and looked for new
buyers. On June 21, 2021, it agreed to sell the Vessels to MARRS
for $560,000. They closed the deal in international waters off the
coast of Mobile, Alabama, and then MARRS towed the Vessels to
a scrapyard in the Port of Mobile.
In December 2021, as the Vessels sat in the Port of Mobile,
Windspeed filed an in rem complaint against the Vessels under the
Supplemental Rules for Admiralty or Maritime Claims and Asset
Forfeiture Actions, alleging that it had a maritime lien on them
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because it had supplied necessaries on Semi Sub’s order. See Fed.
R. Civ. P. Supp. R. C(1)(a) (allowing a plaintiff to file an in rem ac-
tion “[t]o enforce any maritime lien”). On the request of Wind-
speed, the district court issued a warrant for the arrest of the Ves-
sels and set a bond for their release. See id. C(3)(a)(i) (tasking the
district court to “review the complaint and any supporting papers”
to decide whether an arrest of the vessel and an in rem action is
appropriate).
MARRS, proceeding in a special appearance as the owner of
the Vessels, moved to vacate the arrests under Supplemental Rule
E for Admiralty or Maritime Claims and Asset Forfeiture Actions.
Id. E(4)(f) (providing the “[p]rocedure for [r]elease [f]rom [a]rrest
or [a]ttachment). After a hearing, the district court granted the mo-
tion, determining that it lacked jurisdiction because Windspeed’s
provisions were not necessaries but rather conditions precedent to
the sale of the Vessels. The court reasoned that, because a contract
over the sale of a vessel does not give rise to maritime jurisdiction,
the Agreement could not give rise to a maritime lien. As a result,
Windspeed failed to demonstrate probable cause to support the
Vessels’ arrests, and the district court lacked jurisdiction over the
matter.
This timely appeal followed.
II.
The only issue on appeal is whether the district court erred
in vacating the arrests of the Vessels for lack of admiralty
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jurisdiction because Windspeed did not have a maritime lien on the
Vessels. We review de novo a district court’s dismissal for lack of
admiralty jurisdiction. Crimson Yachts v. Betty Lyn II Motor
Yacht, 603 F.3d 864, 868 (11th Cir. 2010). We also review de novo
whether a party’s claim gives rise to a maritime lien. Minott v.
M/Y Brunello, 891 F.3d 1277, 1280 (11th Cir. 2018).
Federal courts have jurisdiction over “all [c]ases of admiralty
and maritime [j]urisdiction.” U.S. Const. art. III, § 2; see also 28
U.S.C. § 1333(1). In deciding whether a contract claim falls under
our maritime jurisdiction, we focus “on the nature of the contract,
as to whether it has reference to maritime service or maritime
transactions.” Nehring v. Steamship M/V Point Vail, 901 F.2d
1044, 1048 (11th Cir. 1990) (quotation marks omitted). But “a con-
tract for the sale of a ship is not a maritime contract.” S.C. Love-
land, Inc. v. E. W. Towing, Inc., 608 F.2d 160, 164 (5th Cir. 1979). 1
That means that contract claims over the sale of a vessel are not
cases within admiralty and maritime jurisdiction. Cooper v. Meri-
dan Yachts, Ltd., 575 F.3d 1151, 1166 (11th Cir. 2009) (“[A] contract
for the sale or construction of a ship is not within the federal courts’
admiralty jurisdiction.”); Hatteras of Lauderdale, Inc. v. Gemini
Lady, 853 F.2d 848, 850 (11th Cir. 1988); Richard Bertram & Co. v.
Yacht Wanda, 447 F.2d 966, 967 (5th Cir. 1971).
1 All Fifth Circuit decisions handed down before the close of business on Sep-
tember 30, 1981, are binding precedent in the Eleventh Circuit. Bonner v. City
of Prichard, 661 F.2d 1206, 1207 (11th Cir. 1981) (en banc).
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Cases of admiralty jurisdiction also can include in rem ac-
tions over vessels themselves, but “[a]n in rem admiralty proceed-
ing requires as its basis a maritime lien.” Crimson Yachts, 603 F.3d
at 868; see also The Rock Island Bridge, 73 U.S. (6 Wall) 213, 215
(1867) (“The lien and the proceeding in rem are, therefore, correl-
ative -- where one exists, the other can be taken, and not other-
wise.”). “A maritime lien is a special property right in a ship given
to a creditor by law as security for a debt or claim, and it attaches
the moment the debt arises.” Crimson Yachts, 603 F.3d at 1228(quotation marks omitted). Under the CIMLA, “a person provid-
ing necessaries to a vessel on the order of the owner or a person
authorized by the owner . . . has a maritime lien on the vessel . . .
[and] may bring a civil action in rem to enforce the lien.” 46 U.S.C.
§ 31342(a)(1)–(2). So, “to obtain a maritime lien, a person must:
(1) provide necessaries; (2) to a vessel; (3) on the order of the owner
or agent.” Galehead, Inc. v. M/V Anglia, 183 F.3d 1242, 1244 (11th
Cir. 1999); accord Barcliff, LLC v. M/V DEEP BLUE, IMO
No. 9215359, 876 F.3d 1063, 1068 (11th Cir. 2017). The necessaries
must also be provided at a reasonable price. Sweet Pea Marine,
Ltd. v. APJ Marine, Inc., 411 F.3d 1242, 1249 (11th Cir. 2005).
The statute defines “necessaries” to “include[] repairs, sup-
plies, towage, and the use of a dry dock or marine railway.” 46
U.S.C. § 31301(4). But “[t]he word ‘includes’ in this definition was
not intended to be exhaustive.” Bradford Marine, Inc. v. M/V Sea
Falcon, 64 F.3d 585, 589 (11th Cir. 1995). Instead, necessaries “has
been liberally construed to include what is reasonably needed in
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the ship’s business, such as goods or services that are useful to the
vessel, keep her out of danger and enable her to perform her par-
ticular function.” Id. (quotation marks omitted).
Under Supplemental Rule E for Admiralty or Maritime
Claims and Asset Forfeiture Actions, “any person claiming an in-
terest in [an arrested vessel] shall be entitled to a prompt hearing at
which the plaintiff shall be required to show why the arrest or at-
tachment should not be vacated.” Fed. R. Civ. P. Supp. R. E(4)(f).
As the parties, the district court, and other courts have all agreed,
“[t]he post-arrest hearing is not intended to resolve definitively the
dispute between the parties, but only to make a preliminary deter-
mination whether there were reasonable grounds for issuing the
arrest warrant, and if so, to fix an appropriate bond.” Salazar v.
Atlantic Sun, 881 F.2d 73, 79–80 (3d Cir. 1989); accord World Fuel
Servs. Singapore PTE, Ltd. V. M/V, 727 F. App’x 811, 814 (5th Cir.
2018); Mujahid v. M/V Hector, 948 F.2d 1282, at *1 (4th Cir. 1991)
(unpublished table opinion); 20th Century Fox Film Corp. v. M.V.
Ship Agencies, Inc., 992 F. Supp. 1423, 1427 (M.D. Fla. 1997).
Here, Windspeed did not provide “reasonable grounds” for
the arrests because Windspeed did not provide sufficient evidence
that it had a maritime lien. For starters, the Agreement at the heart
of this case is a contract for the sale of the Vessels. Consequently,
the Agreement is not a maritime contract, so it does not create a
maritime lien, and it does not give rise to maritime jurisdiction.
See Cooper, 575 F.3d at 1166. Cf. Chase Manhattan Fin. Servs., Inc.
v. McMillian, 896 F.2d 452, 457 (10th Cir. 1990) (observing that
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contracts to construct a vessel “do not create ‘maritime’ liens be-
cause such contracts are not ‘maritime’ contracts”).
Since Windspeed cannot rely on the Agreement as a mari-
time contract, it claims that it had a maritime lien on the Vessels
because its provision of “necessaries” to the Vessels created one.
We disagree. No one disputes that Windspeed delivered bunkers,
fuel, and crew to the Vessels, and also provided for cleaning ser-
vices, insurance, and flag administration and class survey costs.
But, as alleged in its own verified complaint, Windspeed did so
“[p]ursuant to the terms and conditions of the [A]greement and in
preparation to take delivery of the Vessels.” The Agreement’s
terms back this up, placing the obligation to supply for the fuel,
preparation, and costs of the Vessels onto Windspeed.
To the extent Windspeed claims that those provisions were
necessaries separable from the Agreement, again, we disagree. Its
own complaint alleged that those provisions were requirements
under the Agreement. “In order for a contract to fall within the
federal admiralty jurisdiction, it must be wholly maritime in na-
ture, or its non-maritime elements must be either insignificant or
separable without prejudice to either party.” Inbesa Am., Inc. v.
M/V Anglia, 134 F.3d 1035, 1036 (11th Cir. 1998). Windspeed of-
fered no evidence that its provisions were separable from the
Agreement, especially considering the Agreement’s repeated re-
quirement that Windspeed bear the burden of getting the Vessels
ready for sailing. See Hatteras of Lauderdale, 853 F.2d at 850–51
(holding that “customization” done under a contract for the sale of
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a vessel to make it “function as intended” did not give rise to a mar-
itime contract); Gaster Marine Recovery & Sales, Inc. v. M/V The
Restless I, 33 F. Supp. 2d 1333, 1335 (S.D. Fla. 1998) (holding that
repair work “pursuant to the parties’ Brokerage Agreement” in or-
der to assist the sale of the vessel was not “independent of and sep-
arable from the ‘nonmaritime’ sale element of the Brokerage
Agreement”).
Lastly, we are unconvinced by Windspeed’s argument that
because it never closed on the Vessels, it obtained a maritime lien
based on services performed in furtherance of the Agreement. The
purpose of Windspeed’s provisions was to secure the purchase of
the Vessels. Even though “[t]he deal for the purchase of the Ves-
sel[s] never closed,” “[t]he substance of [Windspeed’s] complaint
clearly involves a contract for the sale of the Vessel[s], which was
not maritime in nature.” Villaflores v. Royal Venture Cruise Lines,
Ltd., No. 96-2103-Civ, 1997 WL 728098, at *1, 3 (M.D. Fla. Nov. 17,
1997). Windspeed’s failure to close did not suddenly turn its con-
tractual performance into a maritime lien. It does not cite any case
law or other authority that suggests otherwise.
Without a maritime contract, Windspeed never obtained a
maritime lien, and, without a maritime lien, the district court did
not have in rem jurisdiction over the Vessels. See Crimson Yachts,
603 F.3d at 868. Vacatur of the arrests was proper.
AFFIRMED.