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Eleventh Circuit Finds a Vessel in Drydock for Extensive Repairs is Still a Vessel for Purposes of Maritime Lien

On Monday April 12, 2010, the Eleventh Circuit Court of Appeals ruled that a vessel which was in drydock for extensive repairs remains a "vessel" for the purposes of the attachment of a maritime lien. Crimson Yachts v. M/Y Betty Lyn II, 2010 U.S. App. LEXIS 7447, No. 09-11288 (11th Cir., April 12, 2010).

District Court Proceedings

In the instant matter, Crimson Yachts sought to enforce a maritime lien for substantial repairs it performed on the motor yacht Betty Lyn II. Crimson Yachts claimed unpaid invoices were due and owing totaling USD 1,200,000 for the repair work completed on the yacht and sued the Betty Lyn II, in rem, and the owner of the yacht BLYN II Holding, LLC ("BLYN"), in personam, for the outstanding debt. The Betty Lyn II is a 132 foot yacht built in 1974. In 2006, the parties agreed to have Crimson Yachts perform a major overhaul on the Betty Lyn II to include, inter alia, extension of its decks, replacement of engines, generators, electronics, navigation equipment, plumbing, and wiring. The yacht was towed to Crimson Yacht's shipyard in Alabama and the extensive repairs, which required the Betty Lyn II to be removed from the water and placed on a cradle, commenced.

When BLYN ceased paying for the repairs after a year and a half, Crimson Yachts filed suit against the yacht directly, asserting a maritime lien for the repairs. The yacht (and BLYN as owners) filed a motion to vacate for lack of admiralty jurisdiction, alleging that the Betty Lyn II was not a "vessel" subject to maritime liens. Following briefing by the parties and a hearing, the District Court concluded that a ship must be "in navigation" to be a "vessel." The Court further held that the major overhaul of the Betty Lyn II removed the yacht from navigation and divested it of its status as a vessel. The District Court dismissed the in rem claims against the Betty Lyn II and vacated her arrest. Crimson Yachts immediately filed appeal.

11th Circuit Court of Appeals

On appeal, the 11th Circuit issued a thorough decision which reviewed and analyzed the history of maritime liens and the definition of "vessel." The Court first examined the history of maritime liens and the necessary protections they provide. The Court held "maritime liens benefit those who own, lend to, and repair vessels, such that persons able to provide for ships' immediate needs are assured a significant, clear, and predictable security device that is tailored to the unique features of maritime commerce." See Crimson Yachts at *13. The Court also undertook an analysis of maritime lien legislation, which has a long, rich tradition in the United States leading up to the current version of the Federal Maritime Lien Act, enacted in 1989. The Court referenced that in each version of the Federal Maritime Lien Act, it is specified that only repairs performed on a "vessel" generate a maritime lien.

In reviewing whether the Betty Lyn II was a vessel, the Court started with the statutory definition found in Title 1 U.S.C. § 3. "The word 'vessel' includes every description of watercraft or other artificial contrivance used, or capable of being used, as a means of transportation on water." 1 U.S.C. § 3. The Court proceeded to review and analyze precedential cases from the U.S. Supreme Court and the 11th Circuit Court of Appeals for guidance on the proper application of the term "vessel" to a watercraft. In ultimately finding that the Betty Lyn II was indeed a "vessel", the Court focused on the practical capability of the yacht as opposed to its present state. The Betty Lyn II was towed in for repairs, maintained her structure despite the extensive overhaul, and could be put in the water and towed within 24 hours, and parenthetically could serve as a mode of transportation on the water. See Crimson Yachts at *22. Simply because the repairs were so extensive, the yacht was not divested of her vessel status during the repair period. Moreover, the history of maritime liens was to encourage repairs on ships in great need. "Congress created maritime liens to protect both ships in need of service and persons willing to provide such services. Congress could not have intended as the need for protection increased, the law's protection would retract." See Crimson Yachts at *29.

Accordingly, the 11th Circuit Court of Appeals reversed the decision of the District Court and remanded for further proceedings.

Read a copy of the Court's Decision

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