Newsletter for the Alaska
Maritime Community
Number 5

GETTING PAID

Delivery of quality marine products and services earns providers no assurance of payment in full. Careful application of all tools available to assure collection is likely to be essential to long term profitability, if not survival. Alaska lien statutes provide one set of important tools, but they will only be effective if technical requirements are met.

The U.S. District Court in Anchorage recently resolved a priority contest between holders of fishermen’s liens and holders of packers and processor worker’s liens in a fish processor’s bankruptcy case. Fishermen, packers and processor workers are entitled to statutory liens on the property of a fish processor for the value of fish sold to the processor, in the case of fishermen, and the value of materials and labor contributed to fish preparation, in the case of packers and processors. To create effective liens, however, claims of lien in proper form must be filed within the governing time period with the correct recorder’s office.

In this case, the sum of the many fisherman, packer and processor lien claims greatly exceeded the processor’s total asset value. The fishermen asserted that their lien claims were entitled to priority over the lien claims of the packers and processors, entitling them to payment in full before packers and processors received any payment. They claimed entitlement to priority treatment because they were the producers upon whom all other industry participants depended. The court disagreed, observing that processor workers and the suppliers of ice, salt, boxes, packaging materials and so on were as indispensable to the industry as fishermen. Accordingly, the court held that all valid lien claimants were entitled to share pro rata in the processor’s insufficient assets.

BUYERS OF USED VESSEL AND
FISHING EQUIPMENT BEWARE

Alaskan commercial vessels are commonly subject to preferred ship mortgages. A ship mortgage creates a maritime lien on the covered vessel, which serves as collateral for a debt or debts identified in the mortgage.

A mortgage generally covers not only the vessel’s hull and engines, but other "appurtenances" essential to the vessel’s operation. Traditionally, appurtenances included boats, anchors, chains, rigging, winches, pumps, and spare and replacement parts. A recently-reported decision added to that list.

The law had been unclear whether fishing gear could be subject to a mortgage lien. The federal district court for Alaska has now held that crab pots acquired and placed on board a commercial crabbing vessel subsequent to the imposition of a ship mortgage on that vessel became "appurtenances" of that vessel, subject to the mortgage lien.

Once equipment becomes subject to a mortgage lien, it remains subject to that lien even if it is removed from the vessel. It continues to be subject to the lien even if sold to a third party innocently unaware of the lien. If the mortgage is subsequently foreclosed, the mortgage holder may have the marshal recover any such equipment that has been removed from the vessel and have it returned for sale with the vessel. Innocent purchasers will usually have no defense to this action. Obviously, careful inquiry should precede the purchase of used fishing equipment that may once have been used aboard a mortgaged vessel.

BAR TO ALASKA COURTS REMOVED

The Alaska Supreme Court has invalidated a clause in an Alaskan seaman’s employment contract that prohibited him from bringing a personal injury suit against his employer in a state or federal court in Alaska, and required him to sue only in Seattle, the employer’s base. The court determined that federal statutes that bar an employer from restricting a seaman’s remedies for personal injury prohibit an employment contract provision that would restrict a seaman’s choice of court. Injured Alaskan seamen are now free to avail themselves of Alaskan state courts regardless of employment contract provisions requiring them to sue elsewhere. The decision has no direct application to other types of dispute, however.

CREW WAGES:
CLOSING THE DOOR TO MORE

Among other provisions, the Commercial Fishing Vessel Safety Act of 1988 laid down certain employment contract requirements for fishing, fish processing and fish tendering vessels of at least 20 gross tons. Such contracts are to be in writing, and signed by the crew member, by the master or other individual in charge of the vessel, and by the vessel’s owner. Other elements were also required. Failure to create the prescribed contract entitles a crew member to receive wages at the highest rate of pay for seamen of similar rating hired out of the same port of hire. The owner may also lose the benefit of a 6 month limitation on wage claims.

Naturally, logistics and other factors commonly result in failure to create the prescribed contract. In a recent case involving an Alaskan fishing operation, the federal district court sitting in Seattle held that a partially signed document did not meet the Act’s requirements because, though signed by the owner’s representative, it was not signed by the vessel’s master. The crew member had been paid in full in accord with the contract’s wage formula, but apparently had determined that he had not been paid "the highest rate of pay for seamen of [his] rating out of the same port of hire." For lack of a signature, he was not bound to the agreement, and was permitted to pursue recovery of additional wages.