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WHAT IS A VESSEL: IMPLICATIONS FOR MARINE FINANCE,MARINE INSURANCE & ADMIRALTY JURISDICTION

By

Stewart F. Peck and David B. Sharpe

I. Introduction

A. Lozman’s four-part test for “vessel” status; actual use

B. Implications of “vessel” status

C. Difficulties with “vessel” status

II. Marine & Energy Lending in “Borderline Cases”

A. Introduction

B. The Ship Mortgage Act and Lozman

C. What if a mortgaged “vessel” loses “vessel” status?

D. Do 46 U.S.C. §12136 and related regulations prevent the loss of vessel status?

III. Vessels-to-be

IV. Appurtenances

V. Craft Withdrawn from Navigation, Dead Ships, and Permanently Moored Craft

A. Withdrawn vessels generally

B. Work Platforms

C. Quarterbarges

D. Floating offshore oil and gas platforms

What is a Vessel: Implications for Marine Finance, Marine Insurance & Admiralty Jurisdiction

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VI. Drydocks as a case study of Lozman’s effects on admiralty jurisdiction, marinefinance, and marine insurance

A. The erratic treatment of drydocks as vessels or not

B. Drydocks since Lozman

C. Impact on marine finance and marine insurance

VII. A Proposal: The Coast Guard as the “Reasonable Observer”

VIII. Conclusion


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WHAT IS A VESSEL: IMPLICATIONS FOR MARINE FINANCE, MARINE INSURANCE,AND ADMIRALTY JURISDICTION

by Stewart F. Peck & David B. Sharpe1

I. Introduction

Just over two years ago, the Supreme Court decided Lozman v. City of Riviera Beach,

Florida,2 ruling that a floating home was not a “vessel” – statutorily defined as including “every

description of watercraft or other artificial contrivance used, or capable of being used, as a means of

transportation on water”3 – and was not, therefore, subject to a city marina’s maritime liens or the

district court’s admiralty jurisdiction. The Court in Lozman narrowed and refined its prior holding in

Stewart v. Dutra Construction4 as to what constitutes a “vessel.” Certain lower courts after Stewart

had taken the notion “capable of being used for transportation” from Stewart and conflated it to

“anything that floats.”5 The Court in Lozman looked to the Rules of Construction Act and

determined that it was necessary to eliminate and avoid subjective intent and elements in the

determination of what constitutes a vessel.6 The Court’s proffered reason for formulating the criteria

to be considered was to provide guidance in “a significant number of borderline cases” – cases in

1 Stewart Peck is a senior partner and founding member of the firm Lugenbuhl, Wheaton, Peck, Rankin & Hubbard. Hislaw partner, David Sharpe, is also an Adjunct Professor of Law at Tulane Law School. The authors wish to thank theirlaw partner Nathan Horner and their associate Lance Cardwell for their colleagues’ considerable assistance with thisarticle. Any views expressed in this article are solely those of the authors and should not be attributed to their firm or thefirm’s clients.

2 Lozman v. City of Riviera Beach, FL, --- U.S. ---, 133 S.Ct. 735, 2013 AMC 1 (Jan. 15, 2013).

3 The Rules of Construction Act, 1 U.S.C. § 3 (definition of “vessel”).

4 Stewart v. Dutra Construction, 543 U.S. 481, 2005 AMC 609 (2005).

5 Lozman, 133 S. Ct. at 740; 743, 2013 AMC at 5, 10.

6 Id. at 744, 2013 AMC at 11.


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which “‘capacity’ to transport over water is in doubt.”7 Instead of guidance, Lozman has created

more uncertainty in borderline cases.

A. Lozman’s Four-Part Test for “Vessel” Status; Actual Use

Synthesizing a four-part test, Justice Breyer wrote for the majority in Lozman that a structure

does not fall within the federal statutory definition of “vessel” under the capable-of-being-used

provision unless:

1. A “reasonable observer” (purportedly objective as opposed toa subjective standard),

2. Looking at the physical characteristics and activities of thestructure determines that,

3. The structure was designed to a practical degree for the,

4. Transportation on water of things or people.8

Although lack of self-propulsion is considered in evaluating the craft’s physical

characteristics, it is not dispositive.9 Separate and apart, actual use of the craft in transporting people

or things over water can provide the basis for qualifying the craft as a vessel.10

B. Implications of “vessel” status

“Vessel” status has a number of important implications under maritime law. For example,

“vessel” status may determine whether a federal court has admiralty jurisdiction;11 what kind of

7 Id. at 745; 2013 AMC at 13.

8 Id. at 741; 2013 AMC at 5.

9 Lozman at 741, 2013 AMC at 6 (citing The Robert v. Parsons, 191 U.S. 17, 31, 24 S.Ct. 8, 48 L.Ed. 73 (1903)).

10 Id. at 745.

11 Id., 2013 AMC at 12 (since floating home was not a vessel, district court lacked admiralty jurisdiction).


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insurance coverage the craft’s owner needs to carry;12 whether a claimant can assert a maritime lien

against the craft in rem and the vessel owner in personam;13 whether the craft’s owner can encumber

the craft with a preferred ship mortgage as collateral for a loan;14 whether the craft’s owner can

petition for limitation of liability following a casualty;15 and whether a worker injured aboard can sue

his employer or is barred from doing so by a worker’s compensation statute. 16

C. Difficulties with “vessel” status

Courts struggled with “vessel” status before Lozman and “vessel” status has continued to

trouble the courts following Lozman. Stewart v. Dutra Construction was read as expanding the

universe of craft that could qualify as vessels under the statutory definition and moved more craft

into the borderline area. Lozman, on the other hand, resulted in a substantial narrowing of what

constitutes a vessel. Pleasure craft like yachts,17 waterski boats,18 and personal watercraft19 have

12 See e.g. Fireman’s Fund Ins. Co. v. Great Am, Ins. Co. of N.Y., 2013 WL 311084 *1 & n.3 (S.D.N.Y. Jan. 25, 2013),2013 AMC 567 (floating drydock not a vessel so court lacked admiralty jurisdiction over marine-insurance dispute).

13 See e.g. Warrior Energy Services v. ATP Titan, 551 Fed. Appx. 749, 752-53 (5th Cir. Jan. 6, 2014), 2014 AMC 2514(floating oil and gas production facility moored on the Outer Continental Shelf, miles offshore of Louisiana not a vesselfor purposes of maritime liens).

14 In re Biloxi Casino Belle Incorporated, 176 B.R. 427, 435 (Bankr. S.D. Miss. 1995); See also, Matter of Treasue BayCorp., 205 B.R. 490 (Bankr. S.D. Miss. 1997).

15 See e.g. Hickam v. Segars, 905 F. Supp. 2d 835, 841-45 (M.D. Tenn. 2012) (owner personal watercraft involved inaccident on Old Hickory Lake in Tennessee not entitled to limit liability; “vessel” status not disputed, but court held itlacked admiralty jurisdiction and Limitation Act did not provide an independent basis of subject-matter jurisdiction).

16 See e.g. Robert Force & Martin J. Norris, 1 THE LAW OF SEAMEN § 2:12 (5th ed. Nov. 2014) (“If a person does notwork on a vessel, he is not a seaman.”).

17 Sisson v. Ruby, 497 U.S. 358, 1490 AMC 1810 (1990) (district court had admiralty subject-matter jurisdiction under28 U.S.C. § 1333(1) in limitation of liability action commenced by owner of 56-foot pleasure yacht Ultorian that caughtfire while docked at a marina on Lake Michigan; “vessel” status not at issue).

18 Foremost Ins. Co. v. Richardson, 457 U.S. 668, 1982 AMC 2253 (1982) (collision on Amite River in Louisiana,assumed by the Court to be navigable waters, between an 18-foot pleasure boat and a 16-foot recreational fishing boat,falls within admiralty jurisdiction; “vessel” status of either craft not at issue).

19 Yamaha Motor Corp. v. Calhoun, 516 U.S. 199, 206, 1996 AMC 305, 310 (1996) (fatal “jet ski” accident thatoccurred off a Puerto Rico beach treated by the Court as “a watercraft collision on navigable waters” that “falls within


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been treated as “vessels” prior to and since Lozman. Indefinitely moored wharfboats and other

shoreside, floating-but-fixed work platforms have been consistently characterized as non-vessels.20

Floating casinos have had mixed characterizations.21 And characterization of moveable offshore

drilling rigs,22 floating living quarters,23 and drydocks24 have proved particularly troublesome

problems for admiralty jurisdiction, marine finance and marine insurance following Lozman. There

are many funny-shaped structures or special-purpose devices that float or are utilized on water that

may or may not qualify as vessels. 25

Lozman is still recent but no longer new, and much critique has been written about it

already.26 Here, the focus will be on selected post-Lozman cases and specific fields within the

admiralty’s domain”; “vessel” status of personal watercraft – a Yamaha WaveJammer – not at issue); Hickam v. Segars,supra.

20 Evansville & Bowling Green Packet Co. v. Chero Cola Bottling Co., 271 U.S. 19, 20-22, 1926 AMC 684 (1926)(wharfboat that floated next to a connected dock but was towed each winter to safe harbor to avoid ice not a “vessel”);Armand v. Terral River Serv., Inc., No. 14-610, 2014 WL 6911655, p. 1, 6, --- So. 3d --- (La. App. 3d Cir. Dec. 10,2014) (floating work platform used to facilitate barge-cargo loading and unloading that was indefinitely moored along thebank of the Red River and affixed to the river bank with a heavy catwalk and conveyor system not a Jones Act “vessel”).

21 Compare Pavone v. Miss. Riverboat Amusement Corp., 52 F.3d 560, 570, 1995 AMC 2038, 2047 (5th Cir.1995)(floating casino was no longer a vessel where it “was moored to the shore in a semi-permanent or indefinite manner”),and De La Rosa v. St. Charles Gaming Co., 474 F.3d 185, 187, 2006 AMC 2997 (5th Cir. 2006) (Structure is not a‘‘vessel’’ where ‘‘physically,’’ but only ‘‘theoretical[ly],’’ ‘‘capable of sailing,’’ and owner intends to moor it indefinitelyas floating casino.) with Board of Comm’rs of Orleans Levee Dist. v. M/V Belle of Orleans, 535 F.3d 1299, 1311-12(11th Cir. 2008) (structure is a ‘‘vessel’’ where capable of moving over water under tow, ‘‘albeit to her detriment,’’despite intent to moor indefinitely).

22 Warrior Energy Services v. ATP Titan, 551 Fed. Appx. 749, 752-53, 2014 AMC 749 (5th Cir. Jan. 6, 2014) (floatingoil and gas production facility moored on the Outer Continental Shelf, miles offshore of Louisiana not a vessel forpurposes of maritime liens).

23 Martin v. Fab-Con, Inc., 9 F. Supp. 3d 642, 652, 2014 AMC 1280, 1293-94 (E.D. La. 2014) (quarterbarge UNITYwas not a vessel).

24 See Section VI, infra (drydocks as a case study of Lozman’s effects on admiralty jurisdiction, marine finance, andmarine insurance).

25 Blanchard v. Engine & Gas Compressor Servs., Inc., 575 F.2d 1140, 1142 (5th Cir. 1978).

26 See e.g. Robert Force & Martin J. Norris, 1 THE LAW OF SEAMEN § 2:12 (5th ed.) (Lozman “further muddied the waterin determining what qualifies as a vessel.”); David W. Robertson & Michael F. Sturley, “Recent Developments inAdmiralty & Maritime Law at the National Level and in the Fifth & Eleventh Circuits,” 38 Tul. Mar. L.J. 419, 425 (“We


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maritime field – marine finance, marine insurance, and admiralty jurisdiction – to illustrate some of

the problems and unintended consequences introduced by Lozman’s “reasonable observer” and

“designed to a practical degree” tests for “vessel” status. Finally, a proposal will be offered that

Congress enact laws to have the Coast Guard deemed a “reasonable observer” under certain

circumstances.

II. Marine & Energy Lending in “Borderline Cases”

A. Introduction

If a marine or energy lender had relied upon the more accommodative ruling of Stewart

emphasizing the capability of the device in borderline cases and utilized existing marine financing

documentation, the lender could face serious vulnerabilities as to perfection in its collateral in an

insolvency situation. First, if the collateral which the lender thought constituted a vessel were

deemed not a vessel, the lender would not be able to resort to admiralty jurisdiction in the federal

courts to foreclose in rem on its collateral.27 Second, if a ship owner filed for bankruptcy and the

collateral subject to a preferred ship mortgage were held not to be a vessel, an argument could be

made that the lender’s purported security interest would be unperfected and subject to avoidance

treat the Lozman decision in a long, generally critical piece in another journal.”) (citing David W. Robertson & MichaelF. Sturley, “Vessel Status in Maritime Law: Does Lozman Set a New Course?,” 44 J. Mar. L. & Com. 393 (2013));Lindsey C. Brock, III, “The Practical Effects of Lozman,” 38 Tul. Mar. L.J. 89, 100 (Winter 2013) (“The Court’slanguage at first blush sounds quite erudite, but when we attempt to deconstruct the language into any practical orintelligible meaning, the effort is arduous at best.”); Daniel Faessler, “Defining a Vessel in Admiralty: ‘I Know It When ISee It’,” 26 St. Thomas L. Rev. 248 (Winter 2014) (Lozman “inserts a ‘reasonable observer’ standard and a ‘designed toa practical degree’ element into the vessel inquiry, which may upset long-settled law in admiralty.”).

27 See 46 U.S.C. § 31325; Detroit Trust Co. v. The Thomas Barlum, 293 U.S. 21, 33, 1934 AMC 1417, 1421 (“The grantis thus one of exclusive jurisdiction to enforce the lien of a ‘preferred mortgage.’ If the mortgage is a preferred mortgagewithin the definition of the Act, jurisdiction is granted; otherwise not.”).


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under Section 544 of the United States Bankruptcy Code, resulting in the lender holding an

unsecured claim.28

B. The Ship Mortgage Act and Lozman

Preferred ship mortgages are governed by the Ship Mortgage Act (“SMA”), found in Chapter

313 of Title 46, United States Code.29 A mortgage can be “preferred” only if it covers the “whole of”

a “documented vessel” or “a vessel for which an application for documentation is filed that is in

substantial compliance with the requirements of chapter 121 of [Title 46].”30 The Coast Guard,

through its National Vessel Documentation Center (“NVDC”), is the agency which documents

vessels. The mortgage achieves preferred status when the statutory requisites are satisfied.31

A preferred mortgage constitutes a lien on the mortgaged vessel in the amount of the

outstanding indebtedness secured by the mortgage.32 Among other remedies, the SMA provides that,

upon default under the mortgage, the mortgagee (usually the lender) may enforce the preferred

mortgage lien against the mortgaged vessel (usually owned by the mortgagor-borrower) in a civil

action in rem.33 The SMA expressly grants the district courts exclusive subject-matter jurisdiction

28 11 U.S.C. § 544. See also, 5 Colliers on Bankruptcy, ¶¶ 544.02[2], 544.03 (16th ed. 2012). Not only may 11 U.S.C. §544 be implicated, but also other avoidance sections of the Bankruptcy Code may be involved. 11 U.S.C. §§ 547-48,550. For a discussion of problems faced by a marine practitioner in the instance of a marine insolvency see Stewart F.Peck, “Navigating the Murky Waters of Admiralty and Bankruptcy Law.” 87 Tul. L. Rev. 955.

29 46 U.S.C. § 31301-31343.

30 See 46 U.S.C. § 31322(a)(1) – (3). See also 46 C.F.R. § 67.203(a). If the vessel holds a fishery endorsement, to be apreferred mortgage the mortgagee must also be a person who is qualified to hold the mortgage as mortgagee undersubsection (a) (4) of the statute. In addition, to be filed under Section 31321, the mortgage must identify the vessel (byname and official number, or if an official number has not been assigned, the manufacturer’s hull number) and meet otherformalities. See 46 U.S.C. § 31321(b).

31 U.S. v. Trident Crusader, 366 F.3d 391, 394-95 (5th Cir. 2004).

32 46 U.S.C. § 31325(a).

33 46 U.S.C. § 31325(b)(1).


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over such actions.34 Prior to the enactment of the SMA, there was no federal admiralty jurisdiction

afforded for a suit to foreclose on a ship mortgage.35 Foreclosure of a ship mortgage could only be

accomplished in state court, and any sale of the mortgaged vessel would be subject to existing

maritime liens, a situation which significantly reduced the value of the security.36

With the passage of the SMA, a sale of a mortgaged vessel by order of a federal district court

in an in rem proceeding to enforce a preferred mortgage lien terminates any claim existing against

the vessel at the time of the sale and the vessel is sold free and clear of those claims.37 Claims

terminated by sale in an in rem action attach to the proceeds of the sale in accordance with their

respective priorities.38 A preferred mortgage lien on a United States-flagged vessel has priority over

all claims against the mortgaged vessel, perfected after the preferred mortgage filing, other than

custodia legis expenses and certain statutorily-defined preferred maritime liens.39 State law liens and

security interests are subordinate to preferred mortgages and maritime liens in the same collateral.40

Whether the collateral for a loan is a “vessel” under Lozman standards is of acute concern for

a marine lender due to the interface between the SMA and Article 9 of the Uniform Commercial

Code. It is likely that most special-purpose watercraft that would fall within the Lozman “borderline

34 46 U.S.C. §31325(c)

35 J. Ray McDermott v. Vessel Morning Star, 457 F.2d 815, 817, 1972 AMC 907, 909 (5th Cir. 1972); In re Alberto, 823F.2d 712, 716, 1987 AMC 2409, 2414 (3d. Cir. 1982).

36 See Grant Gilmore & Charles Black, THE LAW OF ADMIRALTY § 9-47 (2d Ed. 1975).

37 46 U.S.C. § 31326(a).

38 46 U.S.C. § 31326(b).

39 46 U.S.C. § 31326(b)(1),

40 See e.g., The J.E. Rumbell, 148 U.S. 1, 21 (1893) (maritime liens superior to state law mortgage on vessel); ChaseManhattan Fin. Servs, Inc. v. McMillian, 896 F.2d 452, 462, 1990 AMC 1702, 1715 (10th Cir. 1990) (preferredmortgage has priority over state law liens); Matter of Topgallant Lines, Inc., 154 B.R. 368, 376, 1993 AMC 2775, 2784(S.D. Ga. 1993) (maritime lien on freights superior to UCC security interest).


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case” would also qualify as “equipment” under the U.C.C.41 Unless equipment is covered by a

certificate of title, perfection of a security interest in that collateral is normally accomplished by

filing a financing statement under U.C.C. Section 9-310(a).42 However, perfection under the U.C.C.

may not be available if the collateral is already a documented vessel.

U.C.C. Article 9 is not applicable “to the extent that … a statute, regulation or treaty of the

United States preempts [it].”43 Consistent with this exclusion, the filing of a financing statement

under the U.C.C. is “not necessary or effective to perfect a security interest in property subject to a

statute, regulation, or treaty of the United States whose requirements for a security interest’s

obtaining priority over the rights of a lien creditor with respect to the property preempt Section 9-

310(a).”44 The SMA is such a statute.45

If a mortgage covers a documented vessel, or a vessel that is subject to a pending application

for documentation, the SMA requires that the mortgage be filed with the NVDC in order for the

mortgage to be effective against third parties without knowledge – i.e. to be perfected:

A bill of sale, conveyance, mortgage, assignment, or relatedinstrument, whenever made, that includes any part of a documentedvessel or a vessel for which an application for documentation is filed,must be filed with the [NVDC] to be valid, to the extent the vessel isinvolved, against any person except – (A) the grantor, mortgagor, orassignor; (B) the heir or devisee of the grantor, mortgagor, or

41 Under the UCC, “equipment” is goods other than inventory, farm products or consumer goods. See U.C.C. § 9-102(a)(33) (2000). “Goods” is defined as “all things that are movable when a security interest attaches.” U.C.C. § 9-102(a)(44).

42 “Except as otherwise provided …, a financing statement must be filed to perfect all security interests …” U.C.C. § 9-310(a) (2000).

43 U.C.C. § 9-109(c)(1) (2000).

44 See U.C.C. § 9-311(a)(1).

45 See generally Barkley Clark and Barbara Clark, THE LAW OF SECURED TRANSACTIONS UNDER THE UNIFORM

COMMERCIAL CODE § 1.08[2][b] (3d Edition).


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assignor; and (C) a person having actual notice of the sale,conveyance, mortgage, assignment, or related instrument.46

While the SMA may not preempt application of U.C.C. Article 9 in all respects, the SMA and its

implementing regulations do contain comprehensive provisions governing the filing of instruments

affecting documented vessels (or vessels for which an application for documentation has been filed),

governing the formal requisites required for a mortgage to be preferred, and governing the

foreclosure and relative priority of preferred mortgage liens, among other subjects, which leave no

room for operation of the corresponding provisions of the U.C.C. – at least as long as the SMA

applies.47

The SMA does not directly include definitions of either the term “documented vessel” or the

term “vessel.”48 However, both of those terms are defined in Chapter 1 of Title 46, and those

definitions are applicable to all uses of the terms “in this title.”49 Title 46 includes not only the SMA

(found in Chapter 313 of Title 46), but also the provisions governing the federal documentation of

vessels, which are found in Chapter 121.50

46 46 U.S.C. § 31321(a) (emphasis added).

47 See Dietrich v. Key Bank, N.A., 72 F.3d 1509, 1513-17, 1996 AMC 609, 615-21 (11th Cir. 1996); Fourchon, Inc. v.La. Nat’l Leasing Corp., 723 F.2d 376, 383, 1984 AMC 1656, 1667-68 (5th Cir. 1984); J. Ray McDermott & Co., Inc. v.Vessel Morning Star, 457 F.2d 815, 817, 1972 AMC 907, 908-09 (5th Cir. 1972); In re McLean Industries, Inc., 132B.R. 271, 281-85, 1993 AMC 2703 (Bankr. S.D.N.Y. 1991). See generally Barkley Clark and Barbara Clark, THE LAW

OF SECURED TRANSACTIONS UNDER THE UNIFORM COMMERCIAL CODE § 1.08[2][b] (3d Edition).

48 See 46 U.S.C. § 30301.

49 See 46 U.S.C. §§ 106, 115.

50 46 U.S.C. § 12101-12152. Any vessel of at least five net tons that is not registered under the laws of a foreign countryis eligible for documentation if the vessel is owned by an eligible owner (generally an individual, association, partnership,corporation or other entity that qualifies as a citizen of the United States under applicable law and regulations). 46U.S.C. § 12103; 46 C.F.R. § 67.5. Unless exempt, any vessel of at least five net tons which engages in the fisheries on thenavigable waters of the United States or in the Exclusive Economic Zone, or in the coastwise trade, must be documentedwith the proper endorsement for that trade. 46 C.F.R. § 67.7.


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Chapter 1 of Title 46 defines “vessel” by incorporating the definition of 1 U.S.C. § 3, the

same statute construed in Lozman.51 Chapter 1 further defines a “documented vessel” as “a vessel for

which a certificate of documentation has been issued under Chapter 121 of this title.”52 Because

“vessel” is used in the definition of “documented vessel,” it is clear that a “documented vessel” must

also be a “vessel” under 1 U.S.C. § 3.

As Lozman has interpreted the meaning of “vessel” under 1 U.S.C. § 3, Lozman’s criteria as

to what constitutes a vessel should be applicable to both Chapter 121, governing vessel

documentation, and Chapter 313, which contains the SMA.53 Given that a mortgage can be

“preferred” only if it covers a “documented vessel” or “a vessel for which an application for

documentation is filed,” it logically follows that if a watercraft encumbered by a ship mortgage is

later found not to be a “vessel” under the Lozman criteria, then the purported mortgage may not

qualify as a preferred mortgage under the SMA. This finding could create a cascade of dire

consequences for the lender.

C. What happens if a mortgaged “vessel” loses “vessel” status?

As noted above, the SMA grants exclusive original jurisdiction to the district courts over a

civil action in rem in admiralty to enforce a preferred mortgage lien against the mortgaged vessel.54

However, the jurisdictional grant applies only to preferred mortgages. If the mortgage fails to qualify

51 See 1 U.S.C. § 3, 46 U.S.C. § 115.

52 See 46 U.S.C. § 106.

53 1 U.S.C. § 3; Lozman v. City of Riviera Beach, FL, 133 S.Ct. 735, 739, 2013 AMC 1 (Jan. 15, 2013).

54 46 U.S.C. § 31325(b)(1), (c).


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as a preferred mortgage, the district court has no jurisdiction in admiralty to hear an action in rem to

enforce the mortgage lien,55 leaving the problem of clearing maritime liens in a foreclosure.56

For a security interest in a “documented vessel” or a vessel subject to a pending application

for documentation, Section 9-311 of the U.C.C. directs that filing of the preferred mortgage with the

NVDC pursuant to Section 31321(a) of the SMA accomplishes perfection.57 However, if the

collateral is not a vessel under the Lozman standards, Section 31321(a) of the SMA may be

inapplicable, with the result that the security interest created by the mortgage is unperfected. U.C.C.

Section 9-317 provides that an unperfected security interest is subordinate to the rights of (a) a holder

of a perfected security interest in the same collateral, (b) a holder of an unperfected security interest

in the same collateral whose security interest was the first to attach, and (c) “a person that becomes a

lien creditor58 before the earlier of the time the security interest … is perfected or a financing

statement covering the collateral is filed.”59 In the event that the mortgagor-borrower is in

bankruptcy, the unperfected security interest (the purported ship mortgage lien) in the non-vessel

55 Detroit Trust Co. v. The Thomas Barlum, 293 U.S. 21, 33, 1934 AMC 1417, 1421 (“The grant is thus one of exclusivejurisdiction to enforce the lien of a ‘preferred mortgage.’ If the mortgage is a preferred mortgage within the definition ofthe Act, jurisdiction is granted; otherwise not.”). See also McCorkle v. First Pennsylvania Banking & Trust Co., 459 F.2d243, 246-49, 1972 AMC 1596, 1598-1604 (4th Cir. 1972) (“Although it is dictum, the rule of Detroit Trust, supra, thatnon-preferred ship mortgages cannot be enforced in admiralty has gained wide acceptance in the lower courts.”).

56 See generally Grant Gilmore & Charles Black, The Law of Admiralty § 9-47 (2d Ed. 1975). Of course if, under theLozman standards, the watercraft was never a vessel, there should be no maritime liens. See e.g. Warrior EnergyServices v. ATP Titan, 551 Fed. Appx. 749, 752-53 (5th Cir. 2014), 2014 AMC 2514.

57 U.C.C. § 9-311(2000) (provides that “compliance with the requirements of a statute … described in subsection (a) [e.g.the SMA] for obtaining priority over the rights of a lien creditor is equivalent to the filing of a financing statement underthis article.”).

58 A “lien creditor” is (a) a “creditor that has acquired a lien on the property involved by attachment, levy or the like, (b)an assignee for the benefit of creditors from the time of the assignment, (c) a trustee in bankruptcy from the date of thefiling of the petition, or (d) a receiver in equity from the time of appointment.” U.C.C. § 9-102(a)(52) (2000).

59 U.C.C. § 9-317(a) (2000).


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watercraft may be subject to avoidance under the strong arm provision of the Bankruptcy Code, 11

U.S.C. § 544, and the lender may be left holding only an unsecured claim for the debt.60

U.C.C. § 9-317 (2000) may provide something of a hedge against this result if the lender filed

a precautionary U.C.C. financing statement covering the mortgaged vessel. Although under U.C.C.

§ 9-311, the filing of a financing statement is not effective to perfect a security interest in a

documented vessel (because perfection is governed by SMA § 31321(a)), if the watercraft were

deemed not to be a vessel under the Lozman standards, then the SMA filing requirements arguably

no longer apply. If the SMA filing requirements are not applicable, it would appear, ipso facto, that

the security interest in the watercraft could be perfected by filing of a financing statement covering

that collateral. Under that scenario, although the financing statement may have been initially

ineffective by operation of U.C.C. § 9-311, the financing statement should become effective once the

SMA ceased to apply (assuming appropriate continuation statements had been filed), and perfection

of the security interest in the vessel should relate back to the original date of filing of the financing

statement.61

D. Do 46 U.S.C. §12136 and related regulations prevent the loss of vessel status?

Due to the incorporation of the Rules of Construction Act definition of “vessel” into the

SMA, the preferred status of a mortgage against any watercraft that a reasonable observer might

consider incapable, as a practical matter, of performing transportation on water may be subject to

challenge by competing creditors or a bankruptcy trustee. However, any assessment of the potential

effect that a Lozman no-vessel determination might have on the status and perfection of a mortgage

60 11 U.S.C. § 544. See also 5 Colliers on Bankruptcy, ¶¶ 544.02[2], 544.03 (16th ed. 2012).

61 See U.C.C. § 9-317(a)(2) (2000). See also U.C.C. § 9-322 (priority between competing security interests in the samecollateral dates from the earlier of the time of filing or the date of perfection).


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as a preferred mortgage under the SMA must consider the savings provisions of the vessel

documentation laws and underlying Coast Guard regulations.62

46 U.S.C. §12135(1) provides that a certificate of documentation (“COD”) is invalid if the

vessel for which it is issued no longer meets the requirements of the vessel-documentation statutes

and implementing regulations.63 Among other grounds for invalidity, Section 67.171 of the Coast

Guard vessel-documentation regulations provides that “a Certificate of Documentation together with

any endorsement(s) thereon is invalid, … and the vessel is subject to deletion from the role of

actively documented vessels when … the vessel ceases to be capable of transportation by water.”64

An invalid COD must be surrendered under regulations prescribed by the NVDC, but the NVDC

may approve the surrender of the COD of a vessel covered by a mortgage filed or recorded under the

SMA “only if the mortgagee consents.”65 Notwithstanding the invalidity of the COD, “until the

certificate of documentation is surrendered with the approval of the [NVDC], a documented vessel is

deemed to continue to be documented under [chapter 121 of title 46] for purposes of - chapter 313

[of title 46] for an instrument filed or recorded before the date of invalidation and an assignment

after that date.”66 The documentation regulations promulgated by the Coast Guard are of similar

effect.67

62 See 46 U.S.C. § 12135, et seq.; 46 C.F.R. §§ 67.161, 67.171.

63 46 U.S.C. § 12135(1).

64 46 C.F.R. § 67.171.

65 46 U.S.C. § 12136(a), (b).

66 46 U.S.C. § 12136(c)(1)(A).

67 Invalidation of a certificate of documentation under 46 C.F.R. §67.171 is subject to Section 67.161 of the regulations.Section 67.161 provides that “[n]otwithstanding any other provision of this subpart, a Certificate of Documentation butno trade endorsement thereon, issued to a vessel which is the subject of any outstanding mortgage filed or recorded inaccordance with subpart Q of this part [i.e. a preferred mortgage] … remains valid for purposes of … 46 U.S.C. chapter


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If a mortgaged vessel later ceases to be capable of performing transportation by water under

the Lozman factors, and the mortgage was filed while the vessel was used or was practically capable

of being used for maritime transportation, Section 12136 appears to preserve the preferred status and

priority of the mortgage, including the right to foreclose the mortgage in rem.68 One may argue that

this result is consistent with the legislative history of the savings statute.

Congress made substantive changes to the savings statute (then designated as section 12111

of title 46) when Congress recodified the SMA in 1988. The legislative history of the amendment

sheds some light on the intended operation of the savings statute:

[Under the law at the time of recodification], when a person violates chapter 121 oftitle 46, the certificate of documentation is rendered invalid. When this occurs, thecertificate must be surrendered to the Secretary. However, a substantive change ismade to make the surrendering process a two-step system. First, the certificate mustbe sent to the Secretary. This will stop the vessel from operating. However, until thesurrender is approved by the Secretary, the vessel is still a ‘documented vessel’ forpurposes of chapter 313 of title 46 … and any other law identified by the Secretaryby regulation… The Committee believes that this clarifies that a vessel is stillsubject to the jurisdiction of the United States even if its certificate of documentationis rendered [in]valid … because of a violation of law.69

Under the savings statute, the invalidity of a certificate of documentation is not dispositive of

the issue of whether a vessel is still a “documented vessel” under chapter 121. Until the document is

actually surrendered with the approval of the Coast Guard, the vessel remains a “documented vessel”

313 for an instrument filed or recorded before the date of invalidation, and an assignment or notice of claim of lien filedafter that date.”

68 See, Deluca v. Mystic River Marina, Inc., 976 F. Supp. 127, 128-29, 1998 AMC 652, 652-55 (D. Conn. 1997)(preferred ship mortgage filed prior to invalidation of the certificate of documentation for the mortgaged vessel; the courtheld that under the savings statute, despite invalidity, the certificate remained valid, and the vessel remained a“documented vessel” for purposes of the SMA, including for purposes of in rem jurisdiction under 46 U.S.C. §31325(b),until the certificate was surrendered).

69 House Report No. 100-918, P.L. 100-710, Ship Mortgage Laws Codification (September 15, 1988), U.S.C.C.A.N.6104, 1988 WL 169925 at 6118.


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for purposes of the SMA. “Surrender” is a term of art.70 Reading all of the provisions of the savings

statute together, the “date of invalidation” beyond which a mortgage cannot be filed and still achieve

preferred status should be the date when surrender of the certificate of documentation is approved

and not the date of the trigger event which ultimately leads to the surrender. Unless the savings

statute is to be judicially read out of title 46, if a mortgaged vessel after the filing of the mortgage is

later permanently moored, becomes a dead ship, or otherwise ceases to be capable of transportation

on water, the vessel should continue to be treated as a “documented vessel,” and the mortgage should

continue to be a “preferred mortgage,” notwithstanding a Lozman no-vessel determination.

However, can Section 12136 be extended to save a preferred mortgage on a watercraft, such

as a dry dock, which may never have been a “vessel” under the Lozman “reasonable observer”

standard, but nonetheless was issued a COD by the NVDC? The answer to that question depends on

whether the crux of preferred status under the SMA is filing and issuance of a COD rather than the

status of the craft as a “vessel” under 1 U.S.C. § 3 at the time the mortgage is filed.

The recodification of the SMA was designed, in part, “to modernize ship mortgages, the

filing and recording process, and the enforcement of liens.”71 The biggest substantive change to the

law made by Congress concerned “the filing of instruments, what constitutes a preferred mortgage,

and when a filing and a preferred mortgage becomes valid against third parties.”72 The House Report

issued in connection with the recodification provides:

Section 31321 will allow filings for vessels for which an application fordocumentation has been filed. Section 31321(d) prohibits a person from withdrawingan application for documentation without the mortgagee's consent. If the Secretary

70 Singleton v. U.S., 789 F. Supp. 492, 503–04 (D. Puerto Rico 1992).

71 House Report No. 100-918, 1988 WL 169925 at 6109.

72 Id. at 6109-10.


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determines that a vessel cannot be documented, then the Secretary is required to sendnotice of this decision to the parties to the instrument. If the parties have notcorrected the deficiencies within 90 days, the Secretary may terminate the filing andreturn the instrument to the appropriate party.

* * *

The Committee intends a mortgage to be a preferred mortgage from the timethe four conditions in section 31322(a) have been met.73 Therefore, a mortgage willusually attain its preferred status when the application for documentation and theinstrument have been filed. However … if the application for documentation isturned down and the Secretary terminates the filing, the mortgage is no longer apreferred mortgage as of the date of the termination.74

By permitting a preferred mortgage to be filed against “a vessel for which an application for

documentation is filed,”75 and by permitting a mortgage against such a vessel to be foreclosed in

rem,76 Congress intended that a preferred mortgage could be filed, become preferred, and if

necessary enforced in rem, prior to the completion of the mortgaged vessel. Indeed, the Coast Guard

application form for an initial certificate of documentation contemplates and authorizes submission

of the application while the vessel is still under construction with only an anticipated future date of

completion.77 This concept was validated by the Fifth Circuit in Trident Crusader, which held that

the determination of whether a mortgage is a preferred mortgage under the SMA properly focuses on

73 For these conditions, see note 30, supra, and related text.

74 Id. at 6111-12 (emphasis added). See 46 U.S.C. § 31321(c), (d).

75 46 U.S.C. § 31321(a)(1) (2010).

76 46 U.S.C. § 31325(b)(1) (2008).

77 Applications for documentation must contain the information prescribed by the NVDC. 46 U.S.C. §12104(a). Thecurrent form of Application promulgated by the NVDC, form CG-1258, Application for Initial, Exchange, orReplacement of Certificate of Documentation; Redocumentation, specifically covers a vessel under construction andscheduled for completion in Block 5 of the form. This information is pertinent when the application is being filed toobtain an official number and first certificate of documentation for the vessel. See form CG-1258 athttp://www.uscg.mil/hq/cg5/nvdc/nvdcforms.asp. There is a limit on how early an application, and a preferred mortgage,can be filed. If the documentation process is not completed within 90 days after notice of a deficiency from the CoastGuard, the filing is subject to termination. See 46 C.F.R. § 67.217.


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when the mortgage is filed with the NVDC under Chapter 313 and when the vessel was documented

as provided in Chapter 121, rather than whether the subject of the mortgage qualified as a “vessel”

under the Rules of Construction Act definition.78 The Fifth Circuit specifically rejected the

contention that the existence of a completed vessel was required for the mortgage to be preferred.79

The treatment under the SMA of an incomplete vessel covered by a pending application

arguably informs what should be the treatment of a documented vessel ultimately determined never

to have been a vessel under Lozman’s “reasonable observer” standards. Clearly, a vessel still under

construction is not being used for, and may not be capable of, transportation on water - at least until

it is substantially complete. Yet, under the SMA as interpreted by Trident Crusader, the mortgage of

a vessel not yet complete is preferred and enforceable in rem. If it is the documentation of the

putative vessel that makes the mortgage preferred, then under Section 12136 the preferred status so

achieved would not be lost until the document had been surrendered with the approval of the NVDC

after the consent of the mortgagee.

On the other hand, some commentary and case law support the argument that notwithstanding

the fact the Coast Guard has issued a certificate of documentation, if a court later determines that the

78 U.S. v. Trident Crusader, 336 F.3d 391, 394, 2004 AMC 1327 (5th Cir. 2004). The court in Trident Crusader appearsto conclude, erroneously, that the title 1 section 3 definition of “vessel” is not applicable to the SMA. 366 F.3d at 393.The court did, however, recognize that a vessel covered by a preferred mortgage had to be a documented vessel. Id. Atthe time of the Trident Crusader decision, the definitions of “vessel” and “documented vessel” currently found in Chapter1 of Title 46 were set forth in former section 2101 of Title 46. The definitions in former section 2101 were applicablethroughout then subtitle II of Title 46. Subtitle II contained, in Part H, Chapter 121 which then, as now, set forth theprovisions governing documentation of vessels. Thus, contrary to the opinion of the Trident Crusader court, because avessel subject to a preferred mortgage had to be a “vessel documented under chapter 121” the title 1 section 3 definitionof “vessel” was even then at least indirectly applicable to the SMA through the documentation provisions of Chapter 121.The recodification of title 46, by Pub. L. 109-304, § 4, October 6, 2006, 120 Stat. 1487, has clarified the application ofthe definitions.

79 Id.


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subject of the mortgage was not a “vessel”, any preferred mortgage on the thing would be invalid.80

The Court in In re Biloxi Casino Belle Inc.81 held that mortgages filed against documented barges

used to form the foundations of the casinos were not preferred mortgages because, to be preferred,

the mortgages must cover vessels with “valid” certificates of documentation. The barges had been

fused together to form the foundations of two floating casinos which were so permanently moored as

to have essentially become real estate. The mortgages at issue in the case were filed after

construction of the casinos had commenced. With respect to the savings statute, the court implicitly

held the two step surrender process of the savings statute inapplicable since the certificates of

documentation were invalid under 46 C.F.R. § 67.171 before the mortgages were recorded.

There is also additional jurisprudence providing that the Coast Guard’s determination that a

craft is a vessel does not bind the courts– at least in cases under general maritime law.82 In

Armstrong v. Manhattan Yacht Club, Inc.,83 the district court noted that notwithstanding the Coast

Guard’s documentation of a structure as a vessel, it was the court’s duty to evaluate the physical

characteristics and activities of the structure in question to determine if it is a vessel. To do

80 Lindsey C. Brock III, The Practical Effects of Lozman, 38 Tul. Mar. L.J. 89, 107 (Winter 2013); Brief for theMaritime Law Ass’n of the United States as Amicus Curiae Supporting Respondent, Lozman v. City of Riviera Beach,FL, 133 S.Ct. 735, 2013 AMC 1 (Jan. 15, 2013) (No. 11-626), 2012 WL 3027160 at *25-26.

81 In re Biloxi Casino Belle Incorporated, 176 B.R. 427, 435 (Bankr. S.D. Miss. 1995), (disagreed with by TridentCrusader, 366 F.3d at 393).

82 Mendez v. Anadarko Petro. Corp., 466 Fed. Appx. 316, 317-19 (5th Cir. 2012) Court found craft was not a vesseldespite being classified by the Coast Guard as an “industrial vessel”.); Pavone v. Mississippi Riverboat AmusementCorp., 52 F.3d. 560, 564, 570 (5th Cir. 1995); Warrior Energy Services Corp. v. ATP Titan, 941 F.Supp.2d 699, 703(E.D. La. Apr. 22, 2013 (“The Coast Guard’s inspection of a structure does not establish that it is a vessel . . . .”);Armstrong v. Manhattan Yacht Club, Inc., 2013 WL 1819993 at *1, 6(E.D.N.Y. 2013). See Lindsey C. Brook, III ThePractical Effects of Lozman, 38 Tul. Mar. L. J. 89 (2013).

83 Armstrong v. Manhattan Yacht Club, Inc., 2013 WL 18199931, 2013 AMC 1938 (E.D.N.Y. 2013).


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“[o]therwise, the court would be improperly delegating its analysis to the U.S.C.G. and its

classification system.” 84

This line of jurisprudence cuts against the argument that the issuance of a certificate of

documentation is the focal point of preferred status. The SMA uses the word “vessel” throughout –

for example, the “whole of the vessel” and ”documented vessel.” There is no other definition to

adopt other than that made applicable by 46 U.S.C. § 115, which has the meaning given to the term

“vessel” under 1 U.S.C. § 3. There cannot be a distinction made between the meaning of “vessel”

under Lozman and the meaning of “vessel” under the SMA.85 Although a mortgage lien (which is

not a maritime lien) can remain affixed to a “dead ship” that can no longer incur maritime liens,

inconsistent results could occur with the craft being a vessel under the SMA but not being a vessel

under general maritime law.86

Finally, under the Savings Statute, documentation continues for purposes of preferred

mortgages “filed or recorded before the date of invalidation.” Just because documentation does not

cease of record for purposes of the filed mortgage, that does not necessarily mean that documentation

breathes life into or “saves” a ship mortgage against a structure or craft found by a court never to

have been a vessel. The Savings Statute just does not help in those situations of a Lozman finding of

non-vessel status invalidating the ship mortgage. The SMA addresses a mortgage on the “whole of

the vessel.” The premise under the SMA is that the thing is a “vessel” and at least if it never

achieved that status when first documented there can be no ship mortgage because preferred

mortgage liens attach to a “vessel”, and the Coast Guard’s determination is not binding on a court.

84 Id. at *6, 2013 AMC at 1938.

85 See fn. 45. But see, Trident Crusader, 366 F.3d at 393.

86 In Section VII, below, we propose a possible solution to this vexing problem.


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The Savings Statute and a Coast Guard determination cannot undermine the Supreme Court’s ruling

as to what is a vessel under Lozman. Any argument that Congress through the Savings Statute or the

SMA extended the SMA to objects that are not and have never been vessels, may raise a

Constitutional issue of Congress usurping a determination by an Article III court as to matters

involving admiralty jurisdiction.87 While Congress has the “paramount power to determine the

maritime law which shall prevail throughout the country, … in amending and revising the maritime

law, the Congress necessarily acts within a sphere restricted by the concept of the admiralty and

maritime jurisdiction.” It is “[t]he ship, documented under the laws of the United States, [which] is

the instrumentality of our maritime enterprise, the prime object of our maritime policy.”88

The primary purpose underlying the enactment of the SMA was to induce private capital to

be deployed in the marine industry.89 Pretermitting the pros and cons, it should be beyond dispute

that this purpose is best served by a clear line of demarcation between what watercraft can be

documented and subjected to a preferred mortgage and what watercraft cannot. Lozman’s reasonable

observer test creates “borderline cases” with no real ascertainable parameters. As shown above, the

question of whether perfection of a security interest in a putative vessel is to be accomplished under

the U.C.C. or the SMA frequently boils down to whether the Coast Guard has issued a certificate of

documentation for the collateral. Should the lender be penalized with the loss of preferred status if a

court, based on Lozman’s standards, later determines that the certificate of documentation was

improvidently issued? Or should the lender know the legal risks with ignorance of the law being no

87 See Stewart F. Peck, “Navigating the Murky Waters of Admiralty and Bankruptcy Law,” 87 Tul. L. Rev. 955(2013) and applicable law cited therein.

88 The Thomas Barlum, 293 U.S. 43-44, 48.

89 J. Ray McDermott v. Vessel Morning Star, 457 F.2d 815, 817, 1972 AMC 907, 909 (5th Cir. 1972); In re Alberto,823 F.2d 712, 716-17, 1987 AMC 2409, 2414 (3d Cir. 1982).


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excuse? The courts will have to decide this difficult issue of whether ship mortgages on craft or

structures documented by the Coast Guard but later found not to be a vessel are valid or not.

III. Vessels-to-Be

It has been established that construction of a vessel is not a maritime contract within the

federal courts’ admiralty jurisdiction.90 In Cain v. Transocean Offshore USA, Inc.91 the Fifth Circuit

analyzed the application of Stewart to “vessels-to-be” and held that Stewart’s “capable of

transportation” vessel classification was not intended to apply “to watercraft that are still under

construction.”92 The well-established law with respect to vessel construction was not overruled by

Stewart93; vessels under construction are treated differently from completed vessels.94 Vessels under

construction are not the basis for a maritime contract or tort.95 An incomplete vessel is not a “vessel

in navigation” required for a party to achieve Jones Act seaman status.96 Moreover, the owner of a

not yet completed vessel under construction and not yet used for its intended purpose does not owe a

warranty of seaworthiness.97

90 Chase Manhattan Financial Services, Inc. v. McMillian, 896 F.2d 452, 462 (10th Cir. 1990) (citing cases).

91 518 F.3d 295, 2008 AMC 831 (5th Cir. 2008).

92 Id. at 300-03.

93 Id.

94 Id. at 301.

95 Id.

96 Williams v. Avondale Shipyards, Inc., 452 F.2d 955, 958 (5th Cir. 1971).

97 Hollister v. Luke Constr. Co., 517 F.2d 920, 921 (5th Cir. 1975); Case v. Omega Natchiq, Inc., 2005 WL 2714124(S.D. Tex. 2008).


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Maritime liens cannot arise with respect to new construction of vessels-to-be.98 Because

vessel construction contracts are not maritime contracts, breach of those contracts does not give rise

to maritime liens.99 The contracts are not “clearly enough related to any rights and duties pertaining

to commerce and navigation.”100 Even if a vessel were launched and then outfitted, admiralty

jurisdiction would not be implicated and no maritime lien would arise because the ship was not

advanced for the purpose for which it was designed.101 But a vessel being rebuilt using parts of the

original vessel will give rise to maritime jurisdiction and maritime liens.102 Once a vessel is

completed and launched and capable for its use then maritime liens may arise.103 But no lien arises

for outfitting the vessel before it is launched.104

In negotiating ship construction contacts, owners in most instances require the shipyard to

provide that during construction title to the hull and materials and equipment in connection therewith

be transferred to the owner to the extent of payment by the owner. While a mortgage can be filed

prior to completion once the vessel becomes the subject of an application for documentation, ship

construction lending institutions cannot utilize the SMA during construction, but must avail

themselves of state created mortgages or security interests under the U.C.C. The tricky area is that

the U.C.C. security interests may be lost upon the structure becoming a vessel at its completion

98 See generally Benedict on Admiralty, § 7.01[B]; Chase Manhattan Financial Services, Inc. v. McMillian, 896 F.2d452, 462 (10th Cir. 1990).

99 Id.

100 The Frances McDonald, 254 U.S. 242, 244, 41 S.Ct. 65 (1920).

101 The Boat Sanbra; 321 F.2d 29, 31 (9th Cir. 1963), 1996 AMC 691, 694; George Engine & Machine Works Inc. v.Stag, 222 F. Supp. 745, 748, 1964 AMC 552 (S.D. Ala. 1963).

102 The Jack-O-Lantern, 258 U.S. 96, 100, 421 S.Ct. 243 (1922).

103 Benedict on Admiralty § 7.01[B].

104 Id.


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and/or will be primed by subsequent maritime liens or preferred ship mortgage liens.105 It is thus

critical for the lender to monitor the hull’s documentation to make sure the financial indebtedness is

secured by the appropriate perfected security documents throughout the process. This is especially

true in a possible insolvency situation involving the shipyard or vessel owner, with provisions under

the Bankruptcy Code rendering certain security devices as being invalid, unperfected and/or subject

to avoidance.106

IV. Appurtenances

Lozman instructs as to whether certain items aboard or related to a structure or craft

constitutes an appurtenance. As to what constitute parts of the “vessel:” “a ship is considered as

consisting of the hull and engines, tackle, apparel and furniture of all kinds. This, of course, is

elementary and requires no citation of authority.”107 A vessel’s appurtenances have been commonly

defined as anything attached to the vessel or used by the vessel that is essential to fulfill the vessel’s

mission or operation.108 For an item related to the vessel, separate ownership is not dispositive of

whether the item is an appurtenance..109 An appurtenance can be an intangible110 and need not be

105 See 46 U.S.C. § 31321, 31326; U.C.C. § 9-311. See e.g., The J.E. Rumbell, 148 U.S. 1 (1893) (maritime liens superiorto state law mortgage on vessel); Chase Manhattan Financial Services, Inc. v. McMillian, 896 F.2d 452, 462 (10th Cir.1990) (preferred mortgage has priority over state law liens.

106 See generally 11 U.S.C. §§ 362, 544, 547, 548.

107 Gonzales v. M/V Destiny Panama, 102 F. Supp.2d 1352, 1354 (S.D. Fla. 2000) (quoting The Augusta, 15 F.2d 727,727 (E.D. La. 1920) (add’l citations omitted)).

108 See Stewart & Stevenson Servs., Inc. v. M/V Chris Way MacMillan, 890 F.Supp 552, 561-62 (N.D. Miss. (1995));Gonzales, 102 F.Supp.2d at 1054.; Gowen, Inc. v. F/V Quality One, 244 F.2d 64, 67-71 (1st Cir.) cert. denied, 534 U.S.886 (2001).

109 Gowen, Inc. v. F/V Quality One, 244 F.3d 64, 68-69 (1st Cir. 2001); Gonzales, supra.

110 Gowen, 244 F.3d at 68-69.


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aboard or installed on the vessel at the time of arrest.111 In re Deepwater Horizon, Anadarko argued

that the drilling mud that was inside the well at the time of the disaster was an appurtenance of the

vessel (Deepwater Horizon) as it was essential to the vessel’s mission and under its control; it did not

matter that it was off the vessel and in the well, it was still a vessel appurtenance.112

The notion that an appurtenance need not be owned by the vessel owner causes great

difficulty for lessors of vessel equipment, whether under true leases or financed leases. A lessor

under a finance lease of an appurtenance may only utilize Article 9 of the U.C.C. to perfect its

security interest and not a preferred ship mortgage under the SMA. The only consensual security

devices accepted by the NVDC for recordation are vessel mortgages, either ordinary or preferred.113

The NVDC does not accept leases, security agreements, or financing statements.114 The finance

equipment lease cannot meet the filing requirements as a vessel mortgage because the mortgage must

cover some interest in a vessel and a finance lease grants a security interest in the leased equipment

and not a security interest in the vessel.115

Moreover, where the lessee of the appurtenance is not the vessel owner (e.g. the lessee is a

vessel charterer), a ship mortgage may not be utilized because a mortgage can only be granted by a

vessel owner.116 The lender under a financed lease of equipment deemed an appurtenance may

perfect its security interest under Article 9 of the U.C.C. but such equipment may be vulnerable to

111 The Great Carter, 1924 A.M.C. 1074, 1075 (S.D.N.Y. 1924).

112 Second Supplemental Brief of Appellant Anadarko Petroleum Corporation in Support of Petition for Rehearing EnBanc, p. 1-3, In re Deepwater Horizon, 772 F.2d 350 (5th Cir. Nov. 5, 2014), 2014 WL 7235579 at *1-3.

113 See 46 C.F.R. § 67.200(c)(d).

114 Id.

115 See 46 C.F.R. § 67.2235(a)(2)(i), (b).


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the attachment of maritime liens.117 To the extent a maritime lien attaches to the leased equipment

(deemed an appurtenance) the maritime lien will likely prime the financing institution’s security

interest in the leased equipment.118 Leased equipment that becomes an appurtenance of the vessel

has been uniformly held to be subject to maritime liens such as seaman’s wage claims, even when

the equipment was installed by a charterer.119 If the leased equipment is integral to the vessel’s

operations, intended to be a permanent part of the vessel and cannot be removed without damage to

the vessel, such equipment has been held to be subject to a preferred mortgage lien.120 This is

particularly the case when the appurtenance is held under a lease intended as security or a conditional

sale contract under which the owner of the vessel can acquire the appurtenance.121 However, in most

instances where removal does not damage the vessel, the preferred mortgage lien will not attach to

such leased equipment (deemed an appurtenance) which the vessel owner mortgagor does not own or

have a right to acquire.122

116 See 46 C.F.R § 67.233(a)(1). Mortgage not eligible for filing if “[t]he mortgagor . . . did not actually hold legal title tothe interest in vessel being mortgaged . . . at the time of filing.”).

117 “Items of equipment installed upon a vessel, which became an integral part of the vessel and are essential to itsnavigation and operation are subject to the maritime liens, regardless of who the actual owner may be.” United States v.F/V Sylvester F. Whalen 217 F. Supp. 916, 917 (D. Maine 1963) (fathometer and radar equipment installed aboard afishing vessel.)

118 See footnote 40.

119 See Kesselring v. F/T Artic Hero, 30 F.3d 1123, 1125-26 (nets, radar and other fishing equipment leased by vessel); Inre SS Tropic Breeze, 456 F.2d 137, 141 (1st Cir. 1972) (leased loading, bagging and unloading equipment owned bycharterer); Canaveral Port Authority v. M/V Liquid Vegas, 2009 WL 3347596 *8 (M.D. Fla. 2009) (slot machinesdeemed an appurtenance of vessel subject to maritime liens.)

120 See F/V Sylvester F. Whalen, 217 F. Supp. at 917; CIT Corporation v. Oilscrew Peggy, 424 F.2d 767, 768 (5th Cir.1970); U.S. v. F/V Golden Dawn, 222 F. Supp. 186, 187–89 (E.D. La. 1963); Kesserling, 30 F.3d at 1126.

121 Seattle-First National Bank v. Southern Belle, 1995 WL 471684 *1, 1995 AMC 1535 (W.D. Wash 1995).

122 See e.g. Oil Screw Peggy, 424 F.2d at 768; Golden Dawn, 222 F. Supp. at 187, 188; First National Bank & Trust Co.,etc. v. Oil Screw Olive L. Moore, 379 F. Supp. 1382, 1386-87 (W.D. Mich. 1973) (leased air compressor not subject tomortgage lien); F/V Golden Dawn, 222 F. Supp. at 188. But see F/V Sylvester F. Whalen, 217 F. Supp. at 917.


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One of the rationales supporting the extension of maritime liens to leased property is that

suppliers of necessaries should be able to rely on appurtenances when appraising a vessel in

connection with their decision to extend credit secured by a maritime lien.123 Thus, failure of the

lessee to mark the equipment is a factor considered by the courts in determining whether a maritime

lien reaches leased property.124 Once the equipment is deemed an appurtenance, it can be reached by

maritime liens even when removed from the vessel.125

V. Craft Withdrawn from Navigation, Dead Ships, and Permanently Moored Craft

A. Withdrawn Vessels Generally

Vessels that have been withdrawn from navigation and “mothballed” vessels126 deactivated

from service are not “vessels” implicating admiralty jurisdiction.127 A structure that otherwise has

the physical characteristic of a vessel may be so old that it would be practically impossible to be

involved with waterborne transportation and therefore would not be considered a vessel.128 A vessel

that has been permanently moored or otherwise rendered practically incapable of transportation is

deemed not a vessel. For example, the Fifth Circuit has held that floating oil and gas platforms that

123 2 Benedict on Admiralty, § 32 at 303.

124 See e.g., Golden Dawn, 222 F. Supp. at 187-88.

125 See Stewart & Stevenson Servs., Inc. v. M/V Chris Way MacMillan, 890 F. Supp. 552, 561-63 (S.D. Fla. 2000);Gonzales v. M/V Destiny Panama, 102 F. Supp. 2d 1352, 1354 (S.D. Fla. 2000).

126 See Lozman v. City of Riviera Beach, FL, 133 S.Ct. 735, 750 (Jan. 15, 2013) (J. Sotomayor dissenting); Stewart v.Dutra Const., 543 U.S. 481, 495 (2005); Roper v. United States, 360 U.S. 20, 21, 82 S.Ct. 5 (1961). See generallyRutherglen Dead Ships, 30 J. Maritime L. & Conn. 677 (1999).

127 Lozman, 133 S.Ct. at 750.

128 Id. at 745; Stewart, 543 U.S. at 494; Katherine v. Unisea, Inc., 975 2d 657, 660 (9th Cir. 1992).


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are towed offshore and attached to the seafloor for extended periods of time are not vessels.129 But

how much must a craft move to qualify as a “vessel”? Work platforms, quarterbarges, and floating

offshore oil and gas facilities provide the recent context for mixed answers to this question.

B. Work Platforms

When workers are injured aboard floating work platforms, the status of the injured worker as

a Jones Act seafarer (or something else) will often turn on whether the work platform is a “vessel.”

Armand v. Terral River Service130 involved a “floating, fixed work platform located on the Red

River” near Alexandria, Louisiana. The undisputed evidence showed that the platform was not

documented by the Coast Guard and “would require a significant amount of time, two tug boats, and

five to six personnel to move.”131 Not surprisingly, the Louisiana Third Circuit Court of Appeal

affirmed the district court’s ruling that the fixed-in-place work platform was not a “vessel” as a

matter of law. The injured worker was not, therefore, a Jones Act seaman.

Gautreaux v. Trinity Trading Group, Ltd.132 involved a work platform that moved enough to

earn “vessel” status. Plaintiff Gautreaux claimed he was a Jones Act seaman injured while working

as a deckhand “on the Louisiana Midstream One (‘LMO’), a non-self-propelled barge equipped with

a conveyor system that performs midstream cargo transfer operations on the Mississippi River.”133

The LMO had a raked bow, an air-conditioned dining area for the crew, life-saving equipment, and

129 Warrior Energy Services v. ATP Titan, 551 Fed. Appx. 749 (5th Cir. 2014); Mendez v. Anadarko Petroleum Corp.,466 Fed. App. 316, 317 (5th Cir. Mar. 26, 2012); cert. denied 133 S.Ct., 979 (2013); Fields v. Pool Offshore, 182 F.3d353, 355 (5th Cir. 1999).

130 Armand v. Terral River Service, Inc., 2014-610 (La. App. 3d Cir. Dec. 10, 2014), 2014 WL 6911655 *1.

131 Id. at *5.

132 Gautreaux v. Trinity Trading Group, Ltd., No. 12-2851, 2014 WL 1414576 (E.D. La. April 11, 2014) (Zainey, J.).

133 Id., Slip Op. at 1.


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was registered with the Coast Guard as a “vessel.”134 Perhaps more important, “Each time the LMO

performs an operation, it is moved by tugboat on the river from its temporary mooring location to

one of three different buoys where it will meet ships and barges to which it will transfer cargo.”135

So unlike the fixed work platform in Armand, which also served as a cargo loading and unloading

interface, the LMO was a “vessel” because it moved regularly in the course of its operations,

transporting people and equipment in the process.

134 Id. at 2.

135 Id.


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C. Quarterbarges

In the quarterbarge or “floating dormitory” context, Martin v. Fab-Con, Inc.136 illustrates how

“vessel” status can impact both a Jones Act seaman’s claims and the district court’s admiralty

jurisdiction over claims against non-employer defendants. Martin involved a cook who alleged he

was injured when he slipped and fell in a puddle of diesel oil in the laundry room of the quarterbarge

UNITY. A quarterbarge is a barge used as a floating dormitory.137 Quarterbarges had been treated

by the Fifth Circuit as vessels pre-Lozman.138 But in Martin, the court held that Lozman compelled a

contrary result.

First, in Martin I, Judge Vance granted the employer’s motion for summary judgment,

holding that the plaintiff was not a seaman even if the quarterbarge was a vessel, because plaintiff

lacked the requisite employment-related connection to the craft.139

A few weeks later, in Martin II, Judge Vance reached the vessel-status question the court had

not reached in Martin I, holding that the quarterbarge UNITY was not a “vessel” because the UNITY

was “quite similar in most relevant respects to the houseboat at issue in Lozman.”140 On the question

of movement, the court held there was “virtually no evidence that the quarterbarge was designed to

136 Martin v. Fab-Con, Inc. (Martin I), 7 F. Supp. 3d 645, 649-51 (E.D. La. 2014) (assuming without deciding that thequarterbarge UNITY – upon which plaintiff was allegedly injured – was a “vessel,” plaintiff was not a “seaman” underthe Jones Act because he lacked a substantial connection to the UNITY in terms of duration); Martin v. Fab-Con, Inc.(Martin II), 9 F. Supp. 3d 642 (E.D. La. 2014) (subsequently deciding that since UNITY was not a “vessel,” court lackedsubject-matter jurisdiction over plaintiff’s remaining maritime claims).

137 Robert Force & Martin J. Norris, 1 THE LAW OF SEAMEN § 2:12 (5th ed. Nov. 2014).

138 Holmes v. Atlantic Sounding, 437 F.3d 441, 449 (5th Cir. 2006).

139 Martin I, 7 F. Supp. 3d at 649 (“Thus, assuming without deciding that the UNITY is a ‘vessel,’ plaintiff spent lessthan three percent of his time working for Fab-Con on board a vessel.”).

140 Martin II, 9 F. Supp.3d at 649.


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transport people or cargo over water or otherwise navigate over water, or that it ever in fact did

so.”141

D. Floating offshore oil and gas platforms

Warrior Energy Services Corp. v. ATP Titan142 was one of the first post-Lozman cases

concerning “vessel” status of floating oil and gas production facilities to reach the Fifth Circuit. But

in Warrior Energy, the Fifth Circuit found the facility was not a “vessel” or even a “borderline case”

to which Lozman applied,143 and affirmed dismissal of the underlying maritime-lien action for lack

of admiralty jurisdiction.

In Warrior Energy, the Fifth Circuit described the TITAN as “a floating oil and gas

production facility moored on the Outer Continental Shelf, miles offshore of Louisiana.”144 Citing

Stewart v. Dutra Construction, the Fifth Circuit considered the dispositive question to be “whether

the watercraft’s use as a means of transportation on water is a practical possibility or merely a

theoretical one.”145 Accordingly, the court focused on the TITAN’s moorings to the sea floor; lack

of movement over the prior four years; lack of self-propulsion; and the cost to relocate the TITAN.

Based upon those characteristics, the court agreed that “the TITAN is not practically capable of

transportation on water and is therefore, as a matter of law, not a vessel.”146

141 Id. at 650.

142 Warrior Energy Services Corp. v. ATP Titan, 551 Fed. Appx. 749 (5th Cir. 2014) (per curiam unpublished decision).The authors were counsel of record for the unsuccessful plaintiff-appellants.

143 Id. at 752 n.5.

144 Id. at 750.

145 Id. at 752 (citing Stewart v. Dutra Construction Co., 543 U.S. 481, 497 (2005)).

146 Id.


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The Fifth Circuit in Warrior Energy did not place weight on other “vessel” characteristics

offered by the plaintiff-appellant lien claimants. For example, although the TITAN was not a

“documented vessel,” the Coast Guard had issued the TITAN a Certificate of Inspection as an

“industrial vessel.”147 The TITAN’s own inventor described the TITAN as a “vessel” and the

TITAN’s patented design was described as “a moveable, towable, submersible floating offshore

vessel suitable for use in deep waters for supporting, oil and gas drilling, production, and workover

operation.”148 Although the Fifth Circuit held that the TITAN was not the kind of “borderline case”

to which Lozman applied, the court remarked that Lozman’s “reasonable observer” test would yield

the same result, since in the court’s view, “no reasonable observer, looking to the TITAN’s physical

characteristics and activities, would consider it designed to a practical degree for water

transportation.”149

VI. Drydocks as case study of Lozman’s effects on admiralty jurisdiction, marine finance,and marine insurance.

A. The erratic treatment of drydocks as vessels or not

The treatment of drydocks as vessels – or not – illustrates the impact of “vessel” status on

admiralty jurisdiction, marine insurance, and marine finance. Before the Supreme Court’s decision

in Stewart v. Dutra Construction, the Fifth Circuit held in Keller v. Dravo Corp. that a moored

147 Warrior Energy Services Corp. v. ATP TITAN, 941 F. Supp. 2d 699, 701 (E.D. La. 2013), aff’d, Warrior EnergyServs Corp. v. ATP Titan M/V, 551 Fed. Appx. 749 (5th Cir. 2014).

148 Original Brief for Appellants, Warrior Energy Services Corporation, Fastorq, LLC, Stabil Drill Specialites, LLC,Workstrings International, LLC, and Superior Energy Services, LLC d/b/a Superior Completion Servcies, p. 10, WarriorEnergy Servs Corp. v. ATP Titan M/V, 551 Fed. Appx. 749 (5th Cir. Jan. 6, 2014), Docket No. 13-30587 (SummaryCalendar).

149 Warrior Energy Servs Corp. v. ATP Titan M/V, 551 Fed. Appx. 749, 752 fn. 5 (5th Cir. Jan. 6, 2014) (citing Lozman,133 S.Ct. at 741).


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drydock was not a vessel.150 Stewart v. Dutra Construction broadened the scope of vessel status,

putting the status of drydocks as vessels back into play. In In re Two-J Ranch, Inc., a case decided

after Stewart but before Lozman, the district court considered the impact of Stewart v. Dutra

Construction on prior Fifth Circuit precedent, and held that a drydock that was capable of

occasionally moving short distances, with a yearly transit of several hundred feet, was indeed a

vessel.151 As a result, those who worked aboard could be Jones Act seamen.152 So as long as the

drydock was not “permanently moored” and was actually used for maritime transport, a drydock

could be classified as a vessel.153

B. Drydocks since Lozman

Since Lozman and its “reasonable observer” test, courts have continued to struggle with the

status of drydocks, most recently in the context of marine-insurance disputes. In Fireman’s Fund

Ins. Co. v. Great American Ins. Co. of New York, “one of the largest drydocks in the world” sank at

its berth in Texas, giving rise to an insurance-coverage dispute commenced in admiralty.154 The

district court cited but distinguished In re Two-J Ranch, Inc.155 Relying on Lozman and its emphasis

150 Keller v. Dravo Corp., 441 F.2d 1239, 1244 (5th Cir. 1971). See also Royal Ins. Co. of Am. v. Pier 39 Ltd.Partnership, 738 F.2d 1035, 1037 (9th Cir.1984) ( “[T]he general rule is that stationary floating dry docks are notvessels.”); Cook v. Belden Concrete Prods., Inc., 472 F.2d 999, 1000, 1001 (5th Cir.1973) (“Since Cope... it has beenclear that a floating drydock is not a vessel.” (internal citations omitted)); De Martino v. Bethlehem Steel Co., 164 F.2d177, 179 (4th Cir.1947) (citing Cope for the proposition that “[a] dock—even a floating dock—can hardly be considereda vessel....”)

151 In re Two-J Ranch, Inc., 534 F.Supp.2d 671, 680 (W.D. La. 2008) (“[T]he drydock and spud barge would be movedup and down the river bank as much as several hundred feet [ ]. Far more frequently, the drydock and spud barge wouldbe moved a short distance toward and away from the river bank.”).

152 See id.

153 Id. (citing Cope v. Vallette Dry-Dock Co., 199 U.S. 625, 627, 7 S.Ct. 336, 30 L.Ed. 501 (1887)).

154 Fireman’s Fund Ins. Co. v. Great Am, Ins. Co. of N.Y., 2013 WL 311084 *1 & n.3 (S.D.N.Y. Jan. 25, 2013), 2013AMC 567.

155 Id. at *3.


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on vessel-status characteristics, the district court in Fireman’s Fund held that the drydock at issue

was not a vessel.156 Since the drydock was not a vessel, the court reasoned the insurance policy for

the drydock was not a marine-insurance policy, so the court held that it lacked admiralty jurisdiction

over the dispute.157

In a subsequent marine-insurance dispute, the district court in Catlin (Syndicate 2003) at

Lloyd’s v. San Juan Towing & Marine Services, Inc., took Fireman’s Fund and Lozman one-step

further.158 In Catlin, the court initially held that the once-floating drydock PERSEVERANCE

(which subsequently sank159), was not a “vessel” despite the fact it had once “made the thousand-

mile trip from Louisiana to Puerto Rico towed by a tugboat.”160 The court therefore concluded that

since the drydock was not a vessel, no marine-insurance dispute was presented, and the court lacked

admiralty jurisdiction.161 But on reconsideration, the court found the insurance policies covering the

drydock were sufficiently maritime in nature to confer admiralty jurisdiction, regardless of whether

the PERSEVERANCE was a vessel.162 The court relied on the PERSEVERANCE being “designed,

constructed, and used to provide marine maintenance and repair services,” that workers shifted the

156 Id. at *4-5 (Among other characteristics, the court focused on the dry dock’s lack of motive power, steeringmechanism, navigational lights, lifeboats, or wheelhouse, among other items).

157 Id.

158 Catlin (Syndicate 2003) at Lloyd’s v. San Juan Towing & Marine Services, Inc. (Catlin II), 946 F.Supp.2d 256(D.P.R. May 13, 2013).

159 Catlin (Syndicate 2003) at Lloyd’s v. San Juan Towing & Marine Services, Inc. (Catlin III), 974 F.Supp.2d 64, 71(D.P.R. July 30, 2013).

160 David W. Robertson & Michael F. Sturley, Recent Developments in Admiralty and Maritime Law at the NationalLevel and in the Fifth and Eleventh Circuits, 38 Tul. Mar. L.J. 419, 431 (Summer 2014) (citing Caltin (Syndicate 2003)at Lloyd’s v. San Juan Towing & Marine Services, Inc., Nos. 11-2093 (FAB), 11-2116 (FAB), 2013 U.S. Dist. LEXIS52307, at *21 (D.P.R. Apr. 8, 2013)).

161 Catlin II, 946 F.Supp.2d at 258.

162 See Catlin II, 946 F.Supp.2d at 258, 266-67


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drydock “ten-to-fifteen feet back along the pier after the drydock had been used,” and because the

policy primarily insured against “maritime risks.”163

These drydock cases illustrate broader problems that “vessel” status creates in the marine-

finance and marine-insurance contexts following Lozman. As discussed above in the marine-finance

context, a lender who attempts to obtain collateral in a borrower’s drydock will face the quandary of

how best to secure the lender’s interest. This is especially true if the drydock were issued a COD,

which happens often with dry docks – even ones permanently moored or subject to little movement

although floating.

In the marine-insurance context, the vessel status issue causes problems for drydock owners,

their insurance brokers, and the policy underwriters. Owners would rather not pay for double

insurance: P&I and hull insurance if the drydock is a vessel, but general liability and first-party

property insurance to protect against the possibility that the drydock is not a vessel. Brokers struggle

to match their clients with the right insurance products at the right price. And underwriters struggle

with how to calculate and rate the risks posed by the drydock. For instance, will the drydock be

required to satisfy any seaworthiness requirements for coverage to be valid, can potential losses be

limited by a limitation action,164 and will coverage disputes be resolved in federal or state courts?165

The answers to these questions will feed into the premiums charged and profitability of providing

coverage for drydocks.

163 Id. at 265-66.

164 See In re Two-J Ranch, Inc., 534 F.Supp.2d 671, 674-75 (W.D. La. 2008).

165 Compare Fireman’s Fund, 2013 WL 311084 at *5, 2013 AMC 567, and Catlin II, 946 F.Supp.2d at 267.


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VII. A Proposal: The Coast Guard as “Reasonable Observer”

Lozman has created too much uncertainty about the “vessel” status of borderline craft. As we

have shown above, this uncertainty undermines marine finance, marine insurance, and admiralty

jurisdiction. To reduce this uncertainty, we propose the following solutions.

First, for the purposes of the SMA, the Coast Guard’s decision to issue a COD to a particular

craft should be dispositive of whether the craft can be encumbered with a preferred ship mortgage.

The Coast Guard has already issued guidelines for how it will exercise its authority with respect to

“permanently moored craft.”166 In response to Stewart v. Dutra Construction, the Coast Guard

published a Notice in the Federal Register that explained the Coast Guard’s practice and procedure in

issuing COIs:

Stewart implies that a “permanently moored vessel” is an oxymoron,since such a craft is neither used nor practically capable of being usedas transportation on water, and therefore cannot be considered avessel. Only a vessel can be inspected by the Coast Guard under theauthority of 46 U.S.C. 3301. Thus, in order to conform to Stewart, wehave concluded that we will issue Certificates of Inspection to craftthat routinely operate dockside and do not normally get underwayonly if they also constitute “vessels” as defined in 1 U.S.C. 3 andinterpreted in Stewart.167

If the Coast Guard follows its own guidelines and issues a COD to a craft as a “documented

vessel,” the craft should be a “vessel” for purposes of the SMA. No distinction should be made

between the meaning of “vessel” under Lozman and the meaning of “vessel” under the SMA. If the

craft later loses its “vessel” status because it is permanently moored, modified, or withdrawn from

navigation, the mortgage would not be invalidated until the COD is surrendered according to the

166 Craft Routinely Operated Dockside; Statement of Policy, 74 FR 21814-02 (May 11, 2009).

167 Id.


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savings statute.168 A lender should not be penalized with the loss of preferred status if a court, based

on Lozman standards, later determines that the COD was improvidently issued.

Second, for purposes of determining “vessel” status under 1 U.S.C. § 3 and Lozman, the

Coast Guard should be deemed a “reasonable observer” whose characterization of a craft as a

“vessel” should be entitled to a rebuttable presumption of accuracy. Treating the Coast Guard as a

“reasonable observer” would be a significant shift,169 but it would increase certainty while supporting

the Supreme Court’s stated goal of simplifying the test for admiralty subject-matter jurisdiction.170

The Coast Guard’s characterization of a craft as a “vessel” is often consistent with the court’s

independent determination of vessel status, but not invariably so.171 But even if the Coast Guard is

treated as a prima facie “reasonable observer,” the courts would retain the power to rebut the

presumption and overrule the Coast Guard’s determination on the merits, so there would be no risk

that the court’s power would be usurped by the Coast Guard. Congress has already delegated to the

Coast Guard the authority to characterize craft as vessels for purposes of documentation and

168 46 U.S.C. § 12136(c)(1)(A). See generally Section II(C), infra.

169 Armstrong v. Manhattan Yacht Club, Inc., 2013 WL 1819993, 2013 AMC 1938 (E.D.N.Y. 2013) (notwithstandingthe Coast Guard’s documentation of a structure as a vessel, it was the court’s duty to evaluate the physical characteristicsand activities of the structure in question to determine if it is a vessel); Mendez v. Anadarko Petroleum Corp., 466 Fed.App. 316 (5th Cir. 2012); cert. denied, 133 S.Ct., 979, 184 L.Ed. 760 (2013) (Coast Guard’s issuance of Certificate ofInspection to spar RED HAWK, and characterization of RED HAWK as “industrial vessel,” not dispositive of “vessel”status pre-Lozman).

170 As the Supreme Court observed in Lozman, “A court’s jurisdiction, e.g., admiralty jurisdiction, may turn onapplication of the term ‘vessel.’ And jurisdictional tests, often applied at the outset of a case, should be ‘as simple aspossible.’” Lozman, 133 S. Ct. at 745 (citing Hertz Corp. v. Friend, 559 U.S. 77, ---, 130 S.Ct. 1181, 1186, 175 L.Ed.2d1029 (2010)).

171 Compare Armand, 2014 WL 6911655 at *5-6 (work platform with no Coast Guard documentation held not a vessel)and Gautreaux, 2014 WL 1414576 at *2-3 (work platform with Coast Guard documentation held a vessel) withArmstrong, 2013 WL 1819993 at *1, 7 (craft not a vessel despite Coast Guard registration as such); Mendez, 466 Fed.Appx. at 317, 319 (spar not a vessel despite being inspected as “industrial vessel”).


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inspection.172 If Congress were to determine that, for example, floating offshore oil and gas

platforms should not be “vessels” notwithstanding the Coast Guard’s issuance to such craft of CODs

or certificates of inspection, Congress could amend the Rules of Construction Act definition of

“vessel” to exclude those craft and impart even more certainty into marine finance, marine insurance,

and admiralty jurisdiction.

VIII. Conclusion

Suffice it to say, Lozman and what constitutes a “vessel” has wide-ranging implications for

financing, insuring, and operating floating structures and craft with respect to many industries,

including vessel repair and the offshore energy industry. “Strange looking, special purpose craft for

the oil and gas business” may qualify as vessels under Lozman.173 “Exotic craft” may nevertheless

qualify as vessels” if frequently navigated or if exposed to the perils associated with maritime service

. . .”174 The challenge is for the marine practitioner to determine whether such structures or crafts

qualify as vessels or not under Lozman and that determination has implications throughout the gamut

of permutations in the marine industry – from new construction to the vessel graveyard.

* * * *

172 46 U.S.C. § 3301 (vessels subject to Coast Guard inspection); 43 U.S.C. § 1333(d) (Coast Guard authority over“artificial islands, installations, and other devices”).

173 Blanchard v. Engine & Gas Compressor Servs., 575 F.2d 1140, 1142 (5th Cir 1982).

174 Pavone 52 F.2d 560 f.n. 24 quoting from Gremillion v. Gulf Coast Catering Co., 94 F.2d 290, 293 (5th Cir 1990).

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