Portland Pilots, Inc. v. Nova Star

         APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAINE Hon. D. Brock Hornby, U.S. District Judge

          Robert W. Kline, with whom Kline Law Offices LLC was on brief, for appellant.

          Edward S. MacColl, with whom Thompson, MacColl & Bass, LLC, P.A. was on brief, for appellee.

          Before Howard, Chief Judge, Torruella and Barron, Circuit Judges.

          TORRUELLA, Circuit Judge.

         We have before us an appeal from the district court's judgment limiting the in rem maritime lien claim of Plaintiff-Appellant Maine Uniform Rental, Inc., d/b/a Pratt Abbott Uniform & Linen ("Pratt Abbott" or "Appellant") on the arrested ship, the M/V NOVA STAR ("NOVA STAR"). Pratt Abbott's claim arises from its agreement (the "Agreement") with the ship's charterer, Nova Star Cruises Limited ("Nova Star Cruises"), to rent linens and other related items for the ship's ferry service. Given this case's maritime and admiralty nature, ^[1]and the need to interpret the Federal Maritime Lien Act^[2] (FMLA) to reach a resolution, this case was properly before the district court. 28 U.S.C. § 1331. This Court has appellate jurisdiction of that district court's final decisions, 28 U.S.C. § 1291, and the case is now properly before us.

         We are asked to extend the reach of a maritime lien claim to encompass a pre-established purchase cost of items rented by a charterer pursuant to a temporary rental and service contract.

         After review of the record and the parties' arguments, we refrain from doing so and affirm the judgment of the district court.

         I. BACKGROUND

         A. Setting Sail (The Facts)

         Given that neither party claims to challenge the court's factual findings, we draw the facts from the district court's findings, filling in undisputed facts from the record as necessary to the analysis.

         In 2013, Singapore Technologies Marine Ltd. ("ST Marine"), owner of the NOVA STAR, and Quest Navigation, Inc. ("Quest") entered into a joint venture to operate a ferry service between Yarmouth, Nova Scotia, and Portland, Maine. Together, ST Marine and Quest incorporated Nova Star Cruises in Nova Scotia to operate the ferry service, and Nova Star Cruises chartered the NOVA STAR. The plan was to turn the NOVA STAR into a floating hotel that cruised between Yarmouth and Portland.

         Appellant is a Maine corporation in the business of supplying linens, uniforms, mats, rugs, towels, and related items to large customers, such as hotels, restaurants, medical establishments, and auto dealerships. The relationship between Nova Star Cruises and Pratt Abbott began when Nova Star Cruises reached out to Pratt Abbott asking if it would be interested in supplying linens^[3] for the NOVA STAR. While the general practice in the hotel industry is to have customers purchase their own goods with the supplier processing (wash, dry, fold, press, etc.) and returning them, Pratt Abbott offered Nova Star Cruises the option of renting the linens to reduce its upfront expenses. Nova Star Cruises opted for the rental option. In April 2014, Nova Star Cruises entered into the Agreement with Pratt Abbott, agreeing to rent linens over a five-year period. The Agreement included a clause that stated:

If the contract is terminated prior to the expiration date, [Nova Star Cruises] agrees to promptly purchase all merchandise that has been ordered for or put into service for [Nova Star Cruises] at [Pratt Abbott's] then current published replacement rate schedule (this agreed sale of all merchandise is in recognition of the substantial investment of [Pratt Abbott] including, but not limited to merchandise, equipment, labor, energy, transportation and future planning).

         Before finalizing the Agreement, Nova Star Cruises paid Pratt Abbott a deposit of $51, 536.45 and filled out a credit application through Pratt Abbott. On this application, Nova Star Cruises provided its bank account information at the Bank of Nova Scotia.

         Pratt Abbott purchased specific items in large quantities to meet Nova Star Cruises's needs pursuant to the contract, such as special linen carts that could maneuver around tight spaces on the vessel, bed sheets, table linens, and napkins. Some of these linen products, such as the table cloths, were uniquely shaped to meet the needs of the NOVA STAR. Pratt Abbott also purchased new equipment that it would not have purchased otherwise in order to meet the needs of the rental contract. Under the contract, Pratt Abbott maintained ownership of all these linens and specialty items.

         At the end of the 2015 ferry season, Nova Star Cruises asked that Pratt Abbott leave specific items onboard the NOVA STAR. Pratt Abbott did so and sent Nova Star Cruises an invoice for the cost of the items. That same year, Nova Star Cruises terminated the ferry service after just two seasons. Upon realizing that the Agreement was, in effect, terminated, Pratt Abbott demanded that Nova Star Cruises purchase the inventory of linens pursuant to the Agreement and pay past-due invoices. The unpaid invoices totaled $16, 187.50 for the last completed rental service and regular cleaning ($12, 558.21), the items that Nova Star Cruises requested remain on the ship ($3, 223.29), and the specialty items that were cleaned and returned to the ship prior to its arrest ($406). Nova Star Cruises ignored Pratt Abbott's requests for payment. The inventory of linens that Pratt Abbott had purchased for use on the NOVA STAR remains in Pratt Abbott's warehouse in Westbrook, Maine.

         The total replacement cost of the stored inventory under the Agreement is $178, 023.02.^[4]

         B. Steering the Course (Procedural History)

         A number of creditors asserted maritime liens against the NOVA STAR in the U.S. District Court for the District of Maine, and the district court issued several warrants for the ship's arrest. On November 17, 2015, Pratt Abbott filed a motion to intervene, asserting its own maritime lien against the arrested vessel for the replacement cost of the stored inventory and the balance of unpaid invoices. A week later, Pratt Abbott also filed a verified complaint against the vessel and Nova Star Cruises for the same amount, alleging breach of contract, unjust enrichment, and quantum meruit. In its in rem action, Appellant initially claimed a lien in the amount of $262, 001.50, but this claim has since been reduced to $194, 510.12 ($16, 187.50 for the unpaid invoices, and $178, 023.02 for its stored inventory). On November 30, 2015, the district court granted ST Marine's motion to substitute the vessel for a bond.

         The district court held a one-witness bench trial on Pratt Abbott's maritime lien claim on August 24, 2016. At the conclusion, the district court found that the supplies and services that Pratt Abbott had provided to the NOVA STAR under the Agreement, allowing the ship to operate as a mobile hotel, constituted "necessaries"^[5] under maritime law. However, the court found that the lien did not extend to the period after the arrest, when the rental items were no longer being used by the NOVA STAR. Additionally, the court found that only the rental and cleaning services provided by Pratt Abbott before the service ceased at the end of the 2015 season, the specialized items that Nova Star Cruises requested remain with the ship, and the specialty items that were cleaned and returned to the ship had been provided or "delivered" for purposes of the maritime lien requirement. See Cianbro Corp. v. George H. Dean, Inc., 596 F.3d 10, 14-15 (1st Cir. 2010); see also Piedmont & George's Creek Coal Co. v. Seaboard Fisheries Co., 254 U.S. 1, 6-7 (1920). The district court denied Pratt Abbott's claim for the replacement cost of the inventory remaining in its Maine warehouse, ...