I am a hull cleaner here in the Bay Area. I have a deadbeat customer who refuses to pay a $625 invoice, claiming we were never authorized to do the work (despite my showing her the text conversation we had where she did in fact, authorize the work.) The invoice covers two service events, both during 2021. Can I place a mechanic’s (or other type of) lien on her vessel? If so, what is the procedure for doing so? Thanks.
We have talked about maritime liens in quite a few installments of this column, but it seems that our readers are always able to add a new twist to the discussion. In this case, the dispute will focus on whether the work was authorized by the boat owner. But we should first review some of the fundamental characteristics of a maritime lien.
Maritime liens are not “placed” on a boat in the way that our reader has assumed by his question. They arise as a matter of law, not as a consequence of a clerical act. If a service provider completes a project on a boat, and if that project was authorized by the owner of the boat, the service provider has a maritime lien against the boat until the claim is satisfied. This assumes the project itself is a service which will qualify as a maritime lien, but in most cases any service that is actually provided to a boat will give rise to a maritime lien when the work is completed, without filing any documents with anyone.
The document “placed” on a vessel’s title history is called a Notice of Claim of Lien, and it is simply a notice that somebody claims to have a lien. The recording of that notice with the Coast Guard has no bearing whatsoever on whether the lien is valid or the filing of the notice therefore has no significant legal consequence. The sole purpose of recording the notice is to alert other parties that someone has asserted a claim against the boat, which may be helpful in resolving the claim when and if the boat is sold someday, but it will not automatically lead to the payment of the claim.
While the notice has no legal significance, the lien itself is a powerful legal device. When a maritime lien is established by the completion of the work, the lienholder may file a lawsuit in federal court to foreclose on the vessel and collect the funds that are owed to him, subject to any defenses asserted by the boat owner. No recording is necessary, and the lawsuit may be initiated as a “sneak attack” to prevent the boat from running away before things are resolved. Unfortunately, this type of lawsuit is usually very expensive. It requires the boat to be taken into custody by the U.S. Marshals at the beginning of the lawsuit and then turned over to a commercial custodian. The legal fees, court costs, and custodial fees may easily exceed the amount of a claim. In the case of our reader’s claim, it will easily exceed the amount of the claim by 30 times or more.
Looking at our reader’s claim, he will be deemed to have a maritime lien without recording anything, but only if the boat owner did in fact authorize the work to be done. Here there is a dispute. Our reader appears to have sufficient evidence to prevail in that dispute, but the existence of the dispute will increase the cost of enforcing a maritime lien even further.
Notwithstanding the high cost of enforcing the lien, our reader is entitled to compensation for his services. He has a maritime lien, but that lien may be worthless since it would not make economic sense to initiate a federal lawsuit. So, what can he do?
Under these circumstances, where a service provider has a valid but relatively small claim against a boat, the most logical solution is usually to ignore the maritime lien. Since the lien arose from a breach of contract, a lawsuit may be filed in state court, even though the contract involves a boat. The legal fees and costs for a simple breach of contract lawsuit will be a lot less than a federal court lawsuit to foreclose on a maritime lien. And for our reader, the claim is small enough to allow him to file suit in small claims court. If successful, the lawsuit will lead to a judgment that may be enforced against any of the boat owner’s property, including the boat. The only real difference with this strategy is that the boat will not be seized by the court until after the conclusion of the lawsuit.
Another approach for a relatively small claim is to use the Coast Guard’s recording system for the limited purpose of being a thorn in the side of the boat owner when it is time for him or her to sell the boat. As noted above, the recording of a Notice of Claim of Lien has no legal effect. But when a prospective buyer sees the claim on the boat’s title history it may interfere with the sale, which may in turn require the owner to pay attention to the lien claimant. Federal law requires that a claimant may not record a claim against a boat without a good faith belief that the claim is valid, and the claimant must swear to the validity of the claim under penalty of perjury when the Notice of Claim of Lien is filed. But filing the notice will definitely get the boat owner’s attention when the boat is offered for sale.
Regardless of the size of a claim against a vessel or the preferred method of enforcement, this is a very specialized area of the law. Contact an experienced maritime attorney if you are confronted with this type of claim, whether you are a boat owner or a claimant.
David Weil is licensed to practice law in the state of California and as such, some of the information provided in this column may not be applicable in a jurisdiction outside of California. Please note also that no two legal situations are alike, and it is impossible to provide accurate legal advice without knowing all the facts of a particular situation. Therefore, the information provided in this column should not be regarded as individual legal advice, and readers should not act upon this information without seeking the opinion of an attorney in their home state.
David Weil is the managing attorney at Weil & Associates (www.weilmaritime.com) in Seal Beach. He is certified as a Specialist in Admiralty and Maritime Law by the State Bar of California Board of Legal Specialization and a “Proctor in Admiralty” Member of the Maritime Law Association of the United States, an adjunct professor of Admiralty Law, and former legal counsel to the California Yacht Brokers Association. If you have a maritime law question for Weil, he can be contacted at 562-799-5508, through his website at www.weilmaritime.com, or via email at email@example.com.