World Imports, Ltd., et al. v. OEC Group New York (In re World Imports Ltd. et al.)

World Imports, Ltd., et al. v. OEC Group New York (In re World Imports Ltd. et al), Case No. 15-1498 (3d Cir. Apr. 20, 2016) (precedential)
Contractual agreement between common carrier and its customer to transfer an unwaived maritime lien in delivered goods to goods currently held by common carrier was enforceable. Current shipment of goods may be held to secure the payment of prior shipments. Reversed and remanded to District Court to craft an appropriate remedy.
Procedural context:
Appeal from the U.S. District Court for the Eastern District of Pennsylvania
World Imports (WI) buys furniture wholesale. OEC provided WI with non-vessel-operating common carrier transportation services (arranges transport of goods from port-to-port). WI signed an Application for Credit that granted a security interest in WI property in OEC’s possession, custody or control or en route. The parties agreed that OEC's liens would survive delivery or release of any specific property of WI. OEC also publishes a tariff with the Federal Maritime Commission, which provides for a carrier’s lien that survived delivery and secured all sums due for that contract and any other contract to which WI was a party. WI filed voluntary Chapter 11 bankruptcy petitions. OEC sought relief from the automatic stay, arguing that it was a secured creditor with a possessory maritime lien. The total owed to OEC by WI was approx. $1.45 million, consisting of $450,000 for freight due on containers in OEC’s possession and $1 million for freight due on goods for which OEC had previously provided services. The estimated value of WIs’ goods in OEC’s possession was $1.9 million. WI filed an adversary proceeding, seeking release of the goods, but in exchange, was only willing to pay freight charges for goods currently in OEC's possession. The bankruptcy court ruled in favor of WI, citing 11 U.S.C. 542. OEC appealed, but did not seek a stay of the court order. It complied with the order and requested payment of the entire debt or sufficient replacement liens. The district court affirmed, holding that OEC did not possess a valid maritime lien on pre-petition goods. The Third Circuit rejected WI's argument that the appeal was moot due to OEC's failure to obtain a stay. The Third Circuit reversed on the merits, noting (1) the strong presumption against waiver, absent clear indication of unconditional delivery; (2) the clear documentation that the parties intended such liens to survive delivery, (3) the familiar principle that a maritime lien may attach to property substituted for the original object of the lien, and (4) the parties’ general freedom to modify or extend existing liens by contract.
McKee, Chief Judge; Jordan (author) and Vanaskie, Circuit Judges

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