NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS FILED

FOR THE NINTH CIRCUIT MAR 18 2015

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS

O.W. BUNKER MALTA LIMITED, No. 13-55360

Plaintiff - Appellee, D.C. No. 2:12-cv-05657-R-FFM

v.

MEMORANDUM*

MV TROGIR, her engines, boilers, tackles, etc., in rem,

Defendant - Appellant,

And

TROGIR MARITIME INC., Specially Appearing,

Claimant - Appellant.

O.W. BUNKER MALTA LIMITED, No. 13-56124

Plaintiff - Appellant, D.C. No. 2:12-cv-05657-R-FFM

v.

MV TROGIR, her engines, boilers, tackles, etc., in rem,

* This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3. Defendant - Appellee,

And

TROGIR MARITIME INC., Specially Appearing,

Claimant - Appellee.

Appeal from the United States District Court for the Central District of California Manuel L. Real, District Judge, Presiding

Argued and Submitted February 12, 2015 Pasadena, California

Before: CALLAHAN, WATFORD, and OWENS, Circuit Judges.

O.W. Bunker Malta Limited (OWB) contracted with National Commodity

Operators S.A. (NCO), the agent of the charterer of the M/V Trogir (the Vessel) to

provide marine bunkers (or fuel) to the Vessel. The fuel was delivered to the

Vessel on December 6, 2011, in Basuo, China. OWB was not fully paid for the

fuel and when the Vessel docked in Los Angeles, OWB had the M/V Trogir

arrested, asserting that it had a maritime lien. The owner of the Vessel, Trogir

Maritime, Inc. (TMI) arranged for substitute security and the Vessel was released.

On summary judgment, the district court determined that OWB had a maritime

lien, but then issued an amended judgment concerning prejudgment interest. TMI

appeals from the district court’s finding of a maritime lien and OWB cross-appeals from the amended judgment’s treatment of prejudgment interest. TMI has not

shown that the district court erred in holding that OWB had a maritime lien.

Therefore, we affirm that determination. However, as the district court incorrectly

applied the statutory rate of interest to partial payments made by third parties under

contract, we vacate the amended judgment and remand for recalculation of

damages.

1. We review the district court’s grant of summary judgment de novo.

Trunk v. City of San Diego, 629 F.3d 1099, 1105 (9th Cir. 2011). The district

court, applying the three step standard set forth in Trans-Tec Asia v. M/V Harmony

Container, 518 F.3d 1120, 1123–24 (9th Cir. 2008), first found that: (1) Croatian

law is the governing law with respect to contract formation; and (2) under Croatian

law the choice-of-law clause was incorporated into the contract because the parties

were “sophisticated international shipping and supply companies,” and the contract

was entered into “at arm’s length.”

Having determined that the contract incorporated the choice-of-law

provision, the district court had to determine whether OWB had acquired a

maritime lien. The district court first considered whether under our precedent, the

choice-of-law clause invoked United States law.

3 We noted in Trans-Tec Asia that “[a]bsent a strong showing that it should

be set aside, the parties’ choice of law provision, as part of a ‘freely negotiated

private international agreement, unaffected by fraud, undue influence, or

overweening bargaining power . . . should be given full effect.’” 518 F.3d at 1126

(quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12–13 (1972)). We

further noted that in Liverpool & London Steamship Protection & Indemnity Ass’n

v. Queen of Leman M/V, 296 F.3d 350, (5th Cir. 2002), the choice-of-law clause

provided that the insurer could “enforce its right of lien in any jurisdiction in

accordance with local law in such jurisdiction” and that the “Fifth Circuit declared

that ‘there is nothing absurd about applying the law of the jurisdiction into which

the ship sails, as the ship’s presence in the jurisdiction represents a substantial

contact.’” Trans-Tec Asia, 518 F.3d at 1126 (quoting Queen of Leman, 296 F.3d at

353–54). We also observed that the language in the Federal Maritime Lien Act

(FMLA), 46 U.S.C. § 31342, “is clear and unambiguous,” and “imposes no

restriction on the nationality or other identity of the supplier or the vessel, and no

geographic restriction on the place of provision of the necessaries.” Trans-Tec

Asia, 518 F.3d at 1129. Pursuant to this precedent, the fact that the choice-of-law

clause did not specifically refer to the laws of the United States did not restrict the

4 district court from giving effect to the contracting parties’ intent and recognizing a

maritime lien under the FMLA when the Vessel docked in Los Angeles.

Applying our precedent to the facts in this case, we conclude there is no

question that OWB arranged for the fuel to be delivered, that the fuel was delivered

to the Vessel, and that OWB was not paid in full. There is no evidence that

OWB’s use of an intermediary to deliver the fuel had any effect on the relationship

between OWB and the charterer.

There is a presumption that a charterer may bind a vessel unless the vessel

owner shows that the supplier had knowledge that the charterer could not bind the

vessel. See id. at 1127–28; see also Gulf Oil Trading Co. v. M/V Caribe Mar, 757

F.2d 743, 749 (5th Cir. 1985). Although the Chief Engineer, when signing for the

fuel, placed a “no lien” stamp on the delivery receipts, this was not sufficient to

give OWB notice that TMI had limited the charterer’s authority to bind the Vessel.

We affirm the district court’s determination that OWB properly asserted a

maritime lien under the FMLA on the Vessel when it docked in Los Angeles,

California.

2. While the district court did not abuse its discretion by awarding

prejudgment interest at a statutory rate rather than any contractual rate, the court

5 incorrectly applied that rate to partial payments made by third parties under

contract prior to the commencement of these in rem proceedings.

The charterer and its agent made partial payments to OWB. The district

court correctly credited those payments first against interest and costs and second

against the underlying principal owed by the Vessel. The district court went astray

only insofar as it applied the statutory rate of interest not just to the sum owed by

the Vessel, but also to the partial payments made prior to the commencement of

these in rem proceedings. Because the statutory interest rate is so low, the district

court’s approach reduced the Vessel’s obligation by almost the full amount of the

partial payments. But in making those payments, the charterer and its agent were

satisfying their in personam contractual debts to OWB, not in rem debts arising

under a maritime lien. Because the partial payments were made against contractual

debts, OWB was entitled to charge the contractual rate of interest (two percent per

month) when calculating the in personam debt owed by the charterer and its agent.

Under the higher contractual rate of interest, a sizeable portion of the partial

payments pays down interest rather than principal, leaving a heftier portion of the

Vessel’s principal unpaid.

The partial payments in this case should reduce the principal owed by the

Vessel only after they have fully offset contractual interest and costs. Whatever

6 sum remains is the principal owed by the Vessel, on which statutory interest began

to run on January 4, 2012, when payment for the bunkers became due.

Accordingly, we vacate the district court’s amended judgment and remand

this case for recalculation of the amount owed by the Vessel to OWB. The

contractual rate of interest applies to partial payments made by the charterer and its

agent to OWB, prior to the commencement of these in rem proceedings, while the

statutory rate of interest applies to the sum owed by the Vessel in this action.

AFFIRMED IN PART, VACATED IN PART, AND REMANDED.

Costs awarded to O.W. Bunker.

7

FILED

O.W. Bunker Malta Ltd. v. M/V Trogir, Nos. 13-55360, 13-56124 MAR 18 2015

MOLLY C. DWYER, CLERK

WATFORD, Circuit Judge, concurring: U.S. COURT OF APPEALS

I agree with my colleagues that our decision in Trans-Tec Asia v. M/V

Harmony Container, 518 F.3d 1120 (9th Cir. 2008), requires us to affirm the

district court’s ruling that a maritime lien exists in favor of O.W. Bunker. But in

my view Trans-Tec was wrongly decided. In holding that a maritime lien arose

against the vessel, the Trans-Tec court gave effect to a choice-of-law clause in a

contract between the materialman and the charterer, even though there, as in this

case, neither the vessel nor the vessel owner was a party to the contract. Id. at

1126–27. In so holding, we purported to follow the Fifth Circuit’s decision in

Liverpool and London Steamship Protection and Indemnity Ass’n Ltd. v. Queen of

Leman MV, 296 F.3d 350 (5th Cir. 2002). Trans-Tec, 518 F.3d at 1126. But we

overlooked a basic fact of that case: While the Fifth Circuit did indeed give effect

to a choice-of-law clause when deciding whether a maritime lien arose, the contract

in that case was between the party claiming the lien (an insurer) and the vessel

owner itself. Queen of Leman, 296 F.3d at 351. The Fifth Circuit’s reasoning has

no application in a case like Trans-Tec, which involved a non-party that neither

knew about nor consented to the contractual provision at issue. Trans-Tec’s

holding is in conflict with what our court had earlier described as “an obvious

truism—nonparties cannot be bound by an agreement.” Gulf Trading & Transp. Page 2 of 2 Co. v. M/V Tento, 694 F.2d 1191, 1196 n.8 (9th Cir. 1982).

In Trans-Tec, as here, we should have applied the factors specified in

Lauritzen v. Larsen, 345 U.S. 571 (1953), to decide the choice-of-law question,

rather than relying on a contractual choice-of-law clause that did not (and indeed

could not) bind either the vessel or the vessel owner. If we applied the Lauritzen

factors in this case, we would not uphold a lien in O.W. Bunker’s favor. Each of

the countries whose law could potentially apply under Lauritzen does not

recognize the maritime lien O.W. Bunker claims in this case.