Ask A Maritime Attorney: Can I record a maritime lien against the boat to secure my attorneys’ fee claim?

Question:

I am in litigation over the sale of my boat last year.  The buyer sued me, as well as my yacht broker and his own broker.  This is clearly a frivolous lawsuit, and it looks like we will be on the winning side.  My question concerns the recovery of my attorneys’ fees at the end of the lawsuit.  The purchase and sale agreement for the boat includes a provision that awards attorneys’ fees to the prevailing party, and I would like to record a maritime lien against the boat to secure payment.  My attorney is skeptical about this, but he is not a maritime attorney.  Since the attorneys’ fee claim will be related to the dispute over the sale of the boat, it seems like I should be able to assert the lien.  What are the rules for this?  Can I record a maritime lien against the boat to secure my attorneys’ fee claim?

Answer

Our reader is putting the cart before the horse here (or maybe the barge before the tugboat?).  His question concerns the possible assertion of a maritime lien to support a claim for recovery of attorneys’ fees, but the lawsuit is still ongoing.  Slow down.  Litigation often takes a few unexpected turns before the judge makes his or her final ruling.  Even so, we can take a look at his question by assuming that he will in fact win the lawsuit.  Hopefully we won’t jinx anything in the process!

Let’s jump right in and get right to the answer of our reader’s question.  The bottom line is that his attorney is correct.  He won’t have a lien aganst the boat for attorneys’ fees, even if he wins the lawsuit.

A lien is a financial security device that provides collateral to secure payment of an obligation.  Regardless of the nature of the particular lien, the question of whether a lien is valid depends on whether various requirements have been met, all separate from the question of whether the money is actually owed.  For maritime liens, the underlying claim must be something that provides a service or benefit to the vessel (rather than to the owner).

The “service to the vessel” requirement leads to some unexpected outcomes.  For example, looking at our reader’s question, a contract for the purchase and sale of a vessel would seem to most of us to be a maritime contract.  In fact, it is not.  A vessel purchase contract establishes rights and responsibilities between the buyer and seller, but it does not provide a service to the vessel.  This extends to any provision of the contract, including a provision for the recovery of attorneys’ fees in a dispute.

Technically, even if you have a true maritime contract, such as a contract to provide fuel to a vessel, and that contract calls for the recovery of attorneys fees in a dispute, a maritime lien asserted for unpaid fuel delivery invoices cannot include a claim for recovery of attorneys’ fees.  Legal fees (maritime or otherwise) do not give rise to a maritime lien, because attorneys do not provide a service to the vessel.  They provide a service to the vessel owner or other individual.

It should be noted that the exclusion of attorneys’ fees from the amount secured by a maritime lien has no effect on the underlying claim for fees.  The other side in the litigation will still owe the money.  This discussion refers only to the maritime lien, and as such, only to the question of whether the boat can be used as collateral for the recovery of the fees.

The only real exception to this rule excluding attorneys’ fees from a maritime lien relates to an attorneys’ fees clause found in a Preferred Ship Mortgage (a mortgage on a Coast Guard documented vessel).  A mortgage is technically not a maritime lien because it does not provide a service to the vessel.  Similar to a purchase and sale contract, a mortgage provides a service to the buyer or owner of the vessel.

A Preferred Ship Mortgage is a product of a statute (the Federal Ship Mortgage Act; 46 U.S. Code § 31321) that uses the same enforcement procedures that are used to enforce a maritime lien.  It is the only claim of this sort that exists only if it is supported by a written contract (verbal agreements for other services provided to a vessel do give rise to a maritime lien).  As such, courts have found that everything in that mortgage contract falls under the statutory claim against the vessel for the enforcement of the mortgage.

Like most other areas of maritime law, maritime liens in general, and specifically the recovery of attorneys fees in connection with a maritime disputed, can lead to a nuanced discussion of arcane legal concepts that may not be familiar to general legal practitioners..  Always look to an experienced maritime attorney for answers.

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 dweil@weilmaritime.com.