EXXON CORP. v. CENTRAL GULF LINES, INC.

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Argument of Armand Maurice Pare, Jr.

Chief Justice Rehnquist: We'll hear argument next in Number 90-34, the Exxon Corporation v. Central Gulf Lines, Inc.--

Mr. Pare.

Mr. Pare: Mr. Chief Justice, and may it please the Court:

On October 26, 1983, petitioner effected, that is it arranged under its contracts, advanced its credit and paid for a supply of bunker fuel oil at Jeddah, Saudi Arabia.

3 weeks earlier it had effected a similar supply in New York.

At all relevant times the vessel, William Hooper, was operating in the maritime commerce of the United States.

The district court and the court of appeals held that with respect to Exxon's delivery in New York, Exxon was entitled to admiralty jurisdiction, it was entitled to a lien, and it was entitled to summary judgment.

However, with respect to Exxon's delivery at Jeddah, Saudi Arabia, the district court and the court of appeals held that that case was outside admiralty jurisdiction.

The district court's opinion and the court of appeals' opinion was based on this Court's 1855 decision in Minturn v. Maynard.

Minturn stands for a per se rule that the services provided by general agents are outside admiralty jurisdiction.

Unknown Speaker: Mr. Pare, before you go any further, do you... what do we have before us here?

The question whether there is admiralty jurisdiction or the question whether there is an admiralty lien, or both, or is the one automatically subsumed within the other?

Mr. Pare: Your Honor, the primary question is whether there is admiralty jurisdiction.

The suit--

Unknown Speaker: Can I find that there is admiralty jurisdiction and say that I don't know whether there's a lien or not?

Is that possible?

Mr. Pare: --It is possible to find that, Your Honor.

However the evidence on this subject, as we will get to later, is crystal clear that on the facts of this case Exxon should be, but for the Minturn rule, entitled to a lien.

Since Minturn there has been a transformation in the legal thinking--

Unknown Speaker: Well, will there be cases in which there is admiralty jurisdiction but no lien when the cause of action is to recover for the furnishing of money or supplies?

Mr. Pare: --For the furnishing of--

Unknown Speaker: Of money or supplies.

Mr. Pare: --There, in such cases there will be, presuming the necessary ingredient is admiralty jurisdiction, but whether there is a lien will depend perhaps on, to some extent on the status of the party providing the lien involved.

But if there is a particular clause in the contract, such as there is in this case, then clearly under the existing law that party should be entitled to a lien.

Not all admiralty jurisdiction cases give rise to a lien.

Unknown Speaker: No, because there are admiralty collision cases, et cetera.

But will there be cases in which there are suit brought for recovery of monies on account of monies or supplies advanced to the shipper where there will be admiralty jurisdiction but no lien?

Mr. Pare: Your Honor, I could certainly conceive of... I would believe that in the area of physical supplies of necessaries to vessels, in most cases that I can conceive of right now that should probably give rise to a lien.

Unknown Speaker: Of course they could recite in the contract I am relying exclusively upon the solvency of the owner.

If they recited that in the contract there wouldn't be an implied lien, right?

Mr. Pare: That is correct, Your Honor.

Unknown Speaker: But it would still be an admiralty contract.

Mr. Pare: That is correct, Your Honor.

Unknown Speaker: So it would be resolved in an admiralty court--

Mr. Pare: That is correct.

Unknown Speaker: --but without a lien.

Mr. Pare: That is correct, and there is--

Unknown Speaker: Is it a correct... is it a correct statement of the law to say that not every maritime contract action gives right... gives rise to a maritime lien?

Mr. Pare: --Absolutely, Your Honor.

In fact, for instance, in the case of the payment of insurance premiums.

They do not give rise to a lien and are not considered necessaries under the lien act.

Unknown Speaker: Nonetheless admiralty jurisdiction would entertain that sort of suit?

Mr. Pare: Absolutely.

This Court's decision in Insurance Co. v. Dunham.

Since Minturn there has been a transformation in the legal thinking with respect to jurisdiction.

First, a contract, in order to be maritime, need not be performed substantially on the sea.

Secondly, this Court has recognized that at the heart of admiralty jurisdiction is maritime commerce.

The Minturn rule excludes the services provided by general agents, which all agree are critical to maritime commerce.

It is for that reason that the commentators and the courts, including the Second Circuit, have urged that this Court reject the Minturn rule.

Respondent argues that to reject the Minturn rule will open up the Federal courts to suits by all agents of all types.

We submit that this is incorrect.

First, Minturn itself is a discrete rule.

As the commentators, and I make particular reference to Gilmore and Black at pages 22 and 29 of their treatise, have indicated that in other areas of jurisdictional... in other jurisdictional areas the jurisdiction is fairly well defined.

Secondly, there is a rational jurisdictional boundary that has already been offered.

This Court has never ruled on the so-called preliminary contract doctrine.

However, in the recent decision in the Second Circuit of Ingersoll Milling v. Bodena, which is found at 829 F. 2d 293, specifically at page 302, that court has offered a jurisdictional rationale which seems to make sense and is consistent with the commentators.

Unknown Speaker: Well, why isn't the preliminary contract rule adequate for differentiating contracts within and without admiralty jurisdiction?

Mr. Pare: Your Honor--

Unknown Speaker: It seems to have been employed quite extensively.

Mr. Pare: --I think a redefined preliminary contract rule, as apparently exists in Bodena, would be an acceptable way to delimit admiralty jurisdiction.

Specifically in the Bodena case there was an agent involved.

That was a freight forwarding agent.

The freight forwarding agent performed certain services.

Specifically he arranged and he prepared bills of lading.

Under the old preliminary contract rule such services would be considered preliminary because they were preliminary to the actual marine contract, i.e. the bill of lading.

The Bodena court, however, did not so hold, and it held that the services provided by the freight forwarding agent were themselves, quote, "essential to the voyage", unquote, and on that basis held that those services were not preliminary services.

Unknown Speaker: Well, that's kind of a modification, is it, of that preliminary contract rule.

Now here you have a contract to make some phone calls to provide fuel in bunkers.

How is that a maritime contract, do you suppose?

Mr. Pare: Well, Your Honor, we submit that the essence of what is going on in here, as this Court has recognized, you don't look to what is going on physically on the vessel but you look at the essence of the transaction in a maritime contract.

And what was going on here was that Exxon was not only arranging under its contracts, but it was advancing its credit and it was paying for the fuel.

Without Exxon's involvement that physical delivery never would have taken place.

Perhaps more importantly, to answer Your Honor's question, the key here should be that what is being done is there is a performance of a service that is essential to the operation of the voyage.

And that, I think, would be the key to any jurisdictional rationale.

Unknown Speaker: Well, I wanted to ask you, you want the Court to overrule Minturn, but I'm curious exactly what rule you would have us adopt?

The scholarly writing on the subject suggests several different ones, and it's a little hard to understand what your proposal is.

Anything that your, would enable your client to win, or do you have--

Mr. Pare: No, Your Honor.

And in fact--

Unknown Speaker: --a more specific rule in mind?

Mr. Pare: --In fact, your Honor, we believe that rejecting the Minturn rule itself should enable any general agent to have admiralty jurisdiction.

That is not inconsistent, and in fact it is perfectly consistent with what we are saying with respect to other agents.

If you have a traditional maritime agent, such as a freight forwarder, who performs services which are essential to the operation of the voyage, not perhaps the general business of shipping but the operation of the voyage, then such services should be considered within admiralty jurisdiction.

Unknown Speaker: What about a travel agent who gets the passengers for a cruise line?

Would that be an admiralty contract?

I mean, I assume if you're carrying passengers they're just as essential for your voyage as if you're carrying freight.

I have trouble... you know, it's the devil we know is maybe better than the one we don't know.

I don't know where we're going if we--

Mr. Pare: Well, Your Honor, the devil that we do know has led to mass confusion--

Unknown Speaker: --He's a pretty bad devil, yes.

Mr. Pare: --as we have indicated in our brief.

To answer your, Your Honor's question specifically, certainly, if I may step back and take the cargo setting, if somebody performs services that lead to cargo being put on board the vessel the argument would perhaps be the same, that the cargo is the service.

I would submit that the physical operation of the vessel is a higher degree, or a stronger degree, of what is going on, and you could make a rational distinction and keep both cargo, the cargo broker and the passenger or the reservation people out, but yet keep people who run the vessel, people who provide fuel, people who provide the crew, people who provide what is necessary for navigational activity in.

Unknown Speaker: Well, Mr. Pare, you say some agents would be kept out by your rule, the general agent would be put in.

What's the difference between the general agent and the freight forwarder and the passenger agent?

Mr. Pare: Well, Your Honor, it's almost by definition that a general agent performs key services on behalf of the vessel.

And it's almost by definition that the general agent should be in because he is performing services which are essential to the voyage.

Unknown Speaker: Well, is that actually how a general agent is defined, is that he performs services that are essential to the voyage?

Or is that simply your equation of the two things?

Mr. Pare: There are several definitions of what a general agent is.

I believe in this case the district court and the court of appeals agreed the definition should really key off continuity of service.

So to answer Your Honor's question, there may conceivably be some situations in which a general agent does not provide services that are critical to the operation of the voyage, but right now I cannot conceive of any such situations.

Unknown Speaker: If the general agent in a particular case did not provide services that were essential to the operation of the voyage, would that part of the general agent's services nonetheless be subject to admiralty jurisdiction?

Mr. Pare: It would depend on what they were, Your Honor.

Unknown Speaker: So the fact you have a contract of general agency doesn't get you an admiralty jurisdiction automatically?

It depends on the nature of the services to be provided?

Mr. Pare: I would think so, but certainly in the normal course of the way the steamship business runs, as I say, I cannot conceive of a situation where a general agent would be performing services which were not essential to the voyage.

Unknown Speaker: May I ask you a question, Mr Pare?

In your view was Exxon a general agent?

Mr. Pare: Well, that certainly was something that we opposed at the court of appeals level, but lost, and we take that finding for what it is.

Unknown Speaker: So all the talk about general agents doesn't really decide this case if Exxon is not a general agent?

Mr. Pare: No, Your Honor, but the corollary or the other part of what we're arguing here is really one and the same, because if... certainly Exxon is performing an essential maritime service.

And--

Unknown Speaker: Well, I can understand an argument that an agent that performs... services essential to the voyage be the kind of relationship that supports admiralty jurisdiction.

I'm a little puzzled about all the argument about the status of general agents, and why that is relevant to this particular case.

Mr. Pare: --Well, simply because the finding, the final finding in this case, is that Exxon was a general agent.

Unknown Speaker: Was a general agent?

Mr. Pare: Yes.

And under the doctrine--

Unknown Speaker: Holding of Minturn that general agents are per se excluded from admiralty jurisdiction.

Yeah.

Mr. Pare: --That is the per se rule of Minturn, yes.

Unknown Speaker: Well, was this case even within the Minturn rule?

Mr. Pare: Well, that's what the court of appeals found, Your Honor.

Unknown Speaker: Well, do you agree with that?

Mr. Pare: Well, if you take the proposition that a general agent is one who provides continuity of service, which is what the restatement on agency provides, then we are a general agent and we are therefore covered by the Minturn rule.

Unknown Speaker: You couldn't make the argument that in Minturn there was a wide variety of services, and here just the supply of fuel?

Mr. Pare: We made that argument in the court of appeals and we lost.

Unknown Speaker: The court of appeals really thought that if you supplied napkins to the ship regularly for 20 years you become a general agent?

Is that it, just continuity?

It doesn't matter subject matter at all?

Mr. Pare: Well, I perhaps would be not speaking fairly about the court of appeals if I were to say that they would agree with that.

I believe that they would probably still be looking for some finding of an essential marine supply.

And certainly in the run-of-the-mill Minturn, Peralta, Binnings-type cases there is no question about the fact that a general agent provides key maritime services, and not simply napkins.

I have never seen such a case in the general agency setting.

Unknown Speaker: Under Minturn we know that general agents are excluded from admiralty jurisdiction.

Does it follow a fortiori from that case that freight forwarders and passenger agents are also excluded from admiralty jurisdiction?

Mr. Pare: It does not follow a fortiori.

And in fact it is only by virtue of the fact in Second Circuit, that the Second Circuit has fused the general agency rule with the preliminary contract rule, that they have cited cases like Minturn in nongeneral agency cases.

Unknown Speaker: So your position would be that you're not asking us to move admiralty jurisdiction outward all the way in a sense?

Mr. Pare: Not at all, Your Honor.

We're only asking that you overrule the per se arbitrary rule in Minturn.

And there is no danger there in setting any greater boundaries for admiralty jurisdiction because the rule simply would be that any services that are performed by a traditional maritime agent that are essential to the operation of the voyage would be entitled to admiralty jurisdiction.

Unknown Speaker: The thing that bothers me is I don't understand, you are not arguing that even if Minturn continues to state the correct rule for general agents, you should nevertheless win because you're the kind of agent that provided essential services and therefore should support admiralty jurisdiction?

Mr. Pare: If it were still within our power to argue that we weren't a general agent we would certainly argue that in the alternative.

Unknown Speaker: I see.

You think you're beaten by the findings of the lower court on that?

Mr. Pare: Yes, Your Honor.

We certainly have not urged those arguments here.

The logical corollary to this rule would be that any agent in the maritime area who provides essential maritime services and who advances his credit and pays for them is entitled to a lien.

That is consistent with the commentators and that is, I would refer the Court specifically to Gilmore and Black at pages 31 and to Benedict at section 183.

It is also, of course, consistent with the goal of admiralty jurisdiction, which is the protection and the promotion of maritime commerce, and not the lining up of contracts along a chain.

In this case Exxon, but for Minturn, should have a lien.

That is true under the decisions in the Golden Gate and it is also true by virtue of the fact that Exxon advanced its credit under Panamanian Flag Barge.

There should be no remaining issue before this Court.

We have indicated in our brief why any other points that have been urged by Central Gulf are insubstantial.

Unknown Speaker: It isn't entirely clear to me that you have even raised the lien question in your questions presented for certiorari.

It seems to me they pertain mostly to jurisdiction.

Mr. Pare: Well, Your Honor, for purposes of judicial economy and also for purposes of clarity in this confusing area, we respectfully submit that it would be appropriate and in keeping for the Court to pass on the lien question and direct the lower court below to enter judgment in favor of Exxon.

I would like to reserve the rest of my time for rebuttal.

Unknown Speaker: Very well, Mr. Pare.

Mr. Nightingale, we'll hear now from you.

Argument of Stephen L. Nightingale

Mr. Nightingale: Thank you, Mr. Chief Justice, and may it please the Court:

The Second Circuit disposed of this case its per se rule that agency contracts cannot give rise to obligations enforceable within the admiralty jurisdiction.

As the briefs demonstrate, that rule has been widely criticized by other courts, by commentators, and indeed by the Second Circuit itself in the Peralta case.

Perhaps even more important, the rule produces very anomalous results.

Two firms furnishing essentially the same goods or services, assuming the same risk of nonpayment, and occupying essentially the same relationship to maritime commerce are treated differently based solely on the legal label that is given to the relationship as a whole.

Unknown Speaker: Well, what is the label that is given to the firm that is allowed to recover in your two examples?

Mr. Nightingale: Your Honor, we believe that the test should be--

Unknown Speaker: No, I'm not asking what the test should be.

You say that the Minturn rule produces an anomaly because two people doing basically the same thing one loses and the other wins.

What is the doctrine espoused by the courts which let the second person win under the Minturn?

Mr. Nightingale: --Your Honor, this case is the perfect example.

Exxon--

Unknown Speaker: Well, this person lost.

Mr. Nightingale: --Exxon, with respect to one of the deliveries at issue, the New York delivery, it was characterized as a seller and it won.

It got a lien as xx the fuel supplied in New York because the court concluded that in that, with respect to that transaction, it was wearing its seller hat.

Unknown Speaker: So it's the intervention of an agent, basically.

Mr. Nightingale: That's correct.

The Second Circuit's rule is whether or not the agent is a so-called special agent, a general agent, or an agent under a so-called managing agreement.

That individual or that firm is out of court under admiralty jurisdiction regardless of the substance of what it does for the ship owner or the shipping industry.

And we think that's an anomalous rule.

Our--

Unknown Speaker: Now, normally someone who supplies necessaries to a vessel in reliance on the credit of the vessel is entitled to a maritime lien?

Mr. Nightingale: --That's correct, Your Honor, with this qualification.

Under the Federal Lien Act it's not necessary for that claimant to prove reliance on the credit of the vessel.

The statute establishes a presumption which unless waived by means of a showing that--

Unknown Speaker: But because of the application of Minturn that relief is denied if the supplier is characterized as a general agent?

Mr. Nightingale: --That is true, again, I'm sorry, with one qualification.

In some circuits the general agent rule is viewed as a rebuttable presumption.

In the Third, Fourth, and Fifth Circuits a general agent is allowed to come forward with an express or implied agreement showing reliance on the credit of the vessel and establish a lien.

The Second Circuit holds that the status of an agency forecloses a lien altogether.

And that is a very significant, incidentally, doctrinal difference--

Unknown Speaker: And what do you think the test should be?

You started to say.

Mr. Nightingale: --We believe that the test should be, should depend on the nature of the goods or services furnished, regardless of the legal label.

There are a number of cases that show those sorts of services that have been considered traditionally within admiralty.

Provision of fuel to a vessel is a traditionally... is a traditional necessary.

It is the sort of service that has traditionally been considered within admiralty jurisdiction.

Unknown Speaker: Would that include some general broker in the oil business who could just buy and sell oil all over the world, and just happened to fill a contract in one place?

Mr. Nightingale: My understanding, Your Honor, is that the admiralty jurisdiction extends only to those contracts providing goods or services for a particular vessel.

In other words, if the contract is I'll fill your tank every 2 months, and some of it may go into your vessels and some of it may go into your office buildings, that that would not be a contract within admiralty jurisdiction.

Unknown Speaker: What about a spot purchase just for a particular vessel?

Then it would be covered, I guess, even if just through a general broker?

It's the only contact he ever had with the company, but he arranged a purchase to fill up the ship when it left Saudi Arabia or wherever it was.

Mr. Nightingale: An owner engages someone to make a spot purchase, that person pays for the fuel, puts it... it is put aboard the vessel, whether by the spot purchaser or someone else, we believe that's within agency... I mean within, excuse me, admiralty jurisdiction.

It depends again on the substance of what happened, how closely related is the service or the provision of goods in relation to the maritime commerce.

Unknown Speaker: I take it--

--Did you understand the rule suggested by Mr. Pare, is that the same rule that you suggest or are there differences between you?

Mr. Nightingale: I don't understand there to be any differences, Your Honor.

Mr. Pare operates as an admiralty lawyer.

I don't.

He operates, I believe, with an understanding of what it is that a general agent traditionally does, and works with the understanding that a general agent is a husbanding agent who buys necessaries.

That is the central function of a general agent.

I don't believe that Mr. Pare would suggest that if, as clause 10 of a general agency contract it was agreed that the agent would build an office building, that that would be within admiralty jurisdiction.

Unknown Speaker: Tell me if I'm right.

I understand it to be the case that the question whether there's a lien and whether there's maritime jurisdiction are separate questions, but because of this Maritime Lien Act they tend to merge, because maritime jurisdiction is important not just because you get before a maritime court but because if it... if there is maritime jurisdiction the Maritime Lien Act applies and you get the lien on much more liberal terms than you otherwise would.

You don't have to show all sorts of things that you would otherwise have to show.

Is that what's going on here?

Mr. Nightingale: Yes, Your Honor.

I think it's important--

Unknown Speaker: They don't really care what court they get into, whether it's a maritime court or not.

They want the lien, right?

Mr. Nightingale: --In this particular case it's essential.

In other cases it may assure access to a Federal forum.

Let me discuss briefly the relationship between the statute and the lien, because I understand that is one of respondents' principal points in opposition to the result we suggest.

Respondents suggest that the statute forecloses adoption of the rule that we advocate here.

The statute does not speak to what causes of action are within the admiralty jurisdiction.

If, for example, Exxon had brought an in personam action, I don't believe it could fairly be argued that the lien act would foreclose admiralty jurisdiction.

So what the lien act does, as Your Honor suggested, is to provide that when admiralty jurisdiction is otherwise available, the lien act is potentially available as a means of providing a lien.

It is not even the exclusive source of a lien, incidentally.

It does not purport to occupy the field or exclude other arguments for a lien.

There are liens that exist independent of the statute.

A second point in opposition to the rule that we suggest is that it would undercut the stability and certainty in an area of jurisdiction.

The devil we know is better than the devil we don't know.

First of all, it's clear that the Minturn has not... the rule of the Minturn has not provided stability in this area.

There is disagreement among the circuits as to whether special agents are outside the rule, as to whether managing operators are outside the rule, even within the confines of general agents as to whether this rule is a presumption or a conclusive rule of law.

Secondly, this Court, of course, could select from among those approaches, choose one, and make it the national rule.

But we submit that so long as the rule depends on status and not function, that the rule will continue to generate uncertainty.

The lines between agents, special agents, managing agents, are not clear.

That's point number 1.

Second point, so long as those distinctions don't line up with the substantive considerations underlying admiralty jurisdiction they will be the subject of continuing controversy.

They are traps for the unwary, as presently constructed, as the Court indicated.

Exxon might have had trouble anticipating that it would be considered indistinguishable from Mr. Minturn.

Thirdly, it is not the case that the shipping industry is less important now than in the 1850's.

This is an industry whose importance is growing.

The grant of admiralty jurisdiction to this Court reflects, first, that... this Court and the Federal courts reflects first the national importance of that industry, and second, we believe, the judiciary's responsibility for seeing that that jurisdiction is exercised in a rational fashion, in cases like the Maret and the Genesee, in which the Court extended admiralty jurisdiction to the inland lakes and waters.

In other cases, the Court has not hesitated to reconsider decisions that have spawned uncertainty and have resulted in anomalous limitations on jurisdiction.

Thank you very much.

Unknown Speaker: Thank you, Mr. Nightingale.

Mr. Montbach, we'll hear now from you.

Argument of Francis A. Montbach

Mr. Montbach: Mr. Chief Justice, and may it please the Court:

The issue before this Court is whether the rule of law that an agency contract is not a maritime contract should be overturned.

The district court below declined to grant admiralty jurisdiction to Exxon's claim, holding that preliminary services are not within such jurisdiction.

While preliminary services may relate to maritime services and are often helpful for the operation of a vessel, they are essentially nonmaritime in nature.

They are shoreside services.

There is nothing inherently maritime about these services.

There is nothing in the nature of preliminary contracts that distinguishes them from other shoreside contracts or warrants the extra security of a lien upon a vessel.

In this instance the vessel--

Unknown Speaker: Why can't... wow.

I thought we were talking about agency contracts, general agencies, and now we're talking about preliminary versus nonpreliminary.

Why can't we adopt that rule, I mean, the rule that preliminary contracts don't make it, but no rule that agency contracts as a class don't make it at all?

Is every agency contract involved with preliminary contract?

Mr. Montbach: --Your Honor, we submit that an agency contract is, by its very nature, a preliminary contract.

It is--

Unknown Speaker: Why?

Mr. Montbach: --It is no different from any other non-maritime contract.

In this instance you had a, they were providing for a supplier.

They were not supplying themselves.

Exxon in this instance placed an order a number of weeks beforehand, in fact took over an order that had been placed beforehand, typical of an agency, and then sat back, did nothing with regard to the actual supply... someone else did that, someone that they had a separate arrangement with... and then a week or so afterwards found out that the order had actually been fulfilled and then did their other administrative function of a collection.

So that we don't think that the rule should be changed at this time.

In a commercial context it is known that agency contracts, general agency contracts, are not within admiralty jurisdiction.

Unknown Speaker: I take it, would you say that the... when Exxon itself is furnishing the fuel, such as in New York, would that contract to that extent be within maritime jurisdiction?

Mr. Montbach: At that... in their status as a physical supplier in New York, our position was that they were not entitled to a lien, but as far as being a maritime contract, as a physical supplier, as Justice O'Connor said--

Unknown Speaker: So that you think--

Mr. Montbach: --They had the--

Unknown Speaker: --that contract to that extent would be within maritime jurisdiction?

Mr. Montbach: --When they had that hat on, yes.

When they had their agency hat on to procure somebody else or to provide for somebody else, be it themselves--

Unknown Speaker: Well, didn't they do a little bit more in this case?

They not only... they not only got somebody else to furnish the fuel, but it became necessary for them to pay the supplier.

And they paid it.

It was just like they bought the oil and then sold it to the vessel, isn't it?

Mr. Montbach: --No, Your Honor.

In this instance... in fact, their contract was applied... it provided that Exxon did not buy the fuel.

Unknown Speaker: Well, yeah, but... it may not buy it, but it became necessary for Exxon to pay the supplier itself.

Mr. Montbach: That was part of their longstanding relationship, their agency relationship--

Unknown Speaker: Well, I know, but nevertheless Exxon in this case paid the supplier for the fuel that the supplier furnished to the vessel.

Mr. Montbach: --Eventually, yes, Your Honor, they did.

Unknown Speaker: Well, eventually, just as soon as it was billed it paid.

Mr. Montbach: Yes.

They were billed a number of weeks later on, Your Honor.

But this was part of the longstanding--

Unknown Speaker: You think that's legally a distinction from what its status is in New York?

Mr. Montbach: --Yes, I do, Your Honor.

I think it is because they are doing this as part of their agency relationship.

It is not an advancement, like the normal situation would be.

Unknown Speaker: You used the term, and counsel have used the term for other things... agency relationship.

Agency relationship as distinguished from what?

Mr. Montbach: From a direct supplier.

Unknown Speaker: From someone who has a direct contract with the ship or the ship's owner?

Mr. Montbach: Direct contract... contact with the navigational operation or a direct juridical contact with maritime commerce.

In this instance--

Unknown Speaker: Well, what does a direct juridical contact with maritime commerce mean?

Mr. Montbach: --I had to look up juridical myself, Your Honor.

Unknown Speaker: Well, I don't want to suggest I don't know what juridical means--

Mr. Montbach: I understand.

[Laughter]

Unknown Speaker: --but I don't understand what the phrase means.

Mr. Montbach: It means that they had to be involved in the maritime environment.

It was something that had to have a... almost a hands-on relationship with the supply.

In this instance--

Unknown Speaker: Like selling oil to the ship.

Mr. Montbach: --Pardon me?

Unknown Speaker: Like selling fuel to the ship.

Mr. Montbach: They were not selling it, Your Honor.

They were arranging for someone to sell it to the ship.

Unknown Speaker: I know, but in New York they are selling it.

Mr. Montbach: Yes, Your Honor, they were.

Unknown Speaker: And that is a direct enough connection with the ship to--

--The claimant owns the oil and supplies it directly to the ship--

Mr. Montbach: And then bills directly for that, yes.

Unknown Speaker: --and bills direct.

That is not an agent, that is a seller?

Mr. Montbach: That is a supplier, yes.

Unknown Speaker: Supplier.

Mr. Montbach: There's a direct relationship.

Unknown Speaker: But an agent is someone who is a step removed from that?

Mr. Montbach: A step removed, yes.

It is a... there is a preliminary nature.

And this is why Peralta, Binnings, and the recent case in Planned Premium Services talks about the step backwards, even though the service may be essential, not quite essential but necessary.

And a convenient usage in the maritime industry is the step backwards.

It is not a maritime contact itself.

Unknown Speaker: May I ask this question, Mr. Montbach?

Supposing Exxon had not paid the Saudi Arabian retailer, whatever, the Arabian Marine or whatever its name was--

Mr. Montbach: Arabian Marine.

Unknown Speaker: --Would Arabian Marine have had a lien on the ship?

Mr. Montbach: It is my understanding that they would have, possibly under Saudi law.

Unknown Speaker: So if looking at it from the point of view of general creditors wondering when the ship is subject to a lien, they could assume normally the supplier would have a lien, but then they'd realize they'd have these cases where there's an indirect relationship which would be excluded from what would otherwise be the general lien for fuel?

Mr. Montbach: As far as Saudi is concerned, they would not have a lien under the U.S. lien statute, because they specifically relied... I mean, Arabian Marine--

Unknown Speaker: Because they relied on Exxon.

Mr. Montbach: --They relied on Exxon's credit.

Unknown Speaker: But it's only the terms of the contract between Arabian and Marine and Exxon that brings that about, something which the other general creditors wouldn't be aware of.

Mr. Montbach: Well, Your Honor... that's true, Your Honor, but also Arabian Marine specifically in this instance said they would not supply the vessel--

Unknown Speaker: Without getting paid first.

Mr. Montbach: --They would not supply it at all unless Exxon said we will guarantee.

Unknown Speaker: Yeah, I understand.

Mr. Montbach: So they specifically relied on the credit of Exxon.

Unknown Speaker: Eventually they did, in your own words.

Mr. Montbach: I'm sorry, Your Honor?

Unknown Speaker: Eventually they relied on--

Mr. Montbach: No, they came to Exxon and said we will not supply this vessel.

Unknown Speaker: --Exactly.

Mr. Montbach: And then Exxon said we will take over the credit, the guarantee.

They relied upon Exxon's promise and not on Waterman's promise.

Unknown Speaker: Originally Arabian was furnishing oil directly to the vessel--

Mr. Montbach: Yes, they were.

Unknown Speaker: --without relying on Exxon's credit.

Mr. Montbach: For about a year-and-a-half period.

Unknown Speaker: Yes.

And then it turned out that the vessel wasn't good for it, I guess.

Mr. Montbach: No, it turned out that Waterman--

Unknown Speaker: Yeah.

Mr. Montbach: --They thought Waterman was not good for it.

Unknown Speaker: Yes, yes.

And so they relied on Exxon.

Mr. Montbach: Yes.

Unknown Speaker: And Exxon said, well, so we'll pay you.

Mr. Montbach: Yes.

Unknown Speaker: And they did.

Mr. Montbach: And they did, yes.

Unknown Speaker: And you say that doesn't change the situation at all--

Mr. Montbach: Well, it doesn't change the--

Unknown Speaker: --with respect to Exxon?

Mr. Montbach: --With respect to Exxon, no, Your Honor, it doesn't.

Because Exxon was doing so as part of their longstanding 4-year-old relationship with Waterman.

Unknown Speaker: Yes, but you haven't made anything about that.

I have not understood your... it doesn't seem to me you can equate what we're talking about here with simply proximity to maritime commerce, because the fact is that it doesn't matter if you're an agent.

You have to be a general agent to come within the disqualifying rule.

So that if the ship company had come to Exxon and simply said on a one-shot deal, had no continuing relationship with Exxon, just said, either give me oil yourself or get somebody else to give me oil, if they had said that just for this one occasion, Exxon wouldn't be a general agent.

And even if Exxon acted as an agent and got someone else to provide the oil, they wouldn't be barred from the lien, would they?

Mr. Montbach: If they had paid for it, Your Honor, then they would possibly fall within--

Unknown Speaker: Possibly?

Mr. Montbach: --within the advance theory.

Unknown Speaker: I thought it's just general agents that are covered, and I wouldn't consider that a general agent.

What does general--

Mr. Montbach: No, as a one term, as a one shot, one vessel--

Unknown Speaker: --Right.

Mr. Montbach: --one port proposal, there have been some exceptions to this Minturn rule on the basis of the--

Unknown Speaker: So it doesn't have anything to do with proximity.

It has to do with general agency.

Mr. Montbach: --It has to do with whether the contract that is entered into is a maritime contract.

The Fifth Circuit last... a week or so ago came down with a decision saying we can't look at the quantitative/qualitative aspects of this in a particular service and a particular instance.

We have to have a general rule which will serve the national interest of securing a stable, uniform rule applicable to--

Unknown Speaker: Yeah.

I thought your rule made a lot of sense.

I could figure that one out.

Is it direct?

You know, are you putting the oil on the boat or not.

But it turns out that's not the rule.

You don't have to put the oil on the boat.

It's just whether you're--

Mr. Montbach: --Some courts have held it as the exception under the preliminary contract doctrine which is part of this general agency rule, or the general agency rule is subsumed within it.

If you are not a direct supplier, you're not doing something directly or operationally involved in the maritime commerce and the navigation of the vessel, then you are not entitled to admiralty jurisdiction.

You have other forums you can go to, Your Honor.

And we need a stable rule here, not as the Second Circuit said, hair splitting a case by case.

The--

Unknown Speaker: --What do you want us to do?

You want us to reaffirm Minturn or do you want us to adopt your rule, which is--

Mr. Montbach: --We want you to reaffirm Minturn.

Unknown Speaker: --Well, but that's not the rule you have been talking about.

It doesn't have anything to do--

Mr. Montbach: Minturn, as it is part of the preliminary contract rule, yes.

Unknown Speaker: --Well, you don't have to be... it can be a preliminary contract so long as you're not a general agent, so long as you don't do this regularly.

It can still be a preliminary contract.

Mr. Montbach: Preliminary contracts do not of necessity have to be general agency rules, but general agency rules, contract, excuse me, are preliminary contracts.

Unknown Speaker: That's true.

Mr. Montbach: Just as you can have... if you don't have a maritime lien you don't have admiralty jurisdiction.

But you can have admiralty jurisdiction without having a maritime lien.

Your Honor, it is our feeling that there has to be, and based upon what this Court has said in the past, substantial justification that's apart from stare decisis.

This is a long-established rule.

It has been in effect for 135 years at least.

Exxon says it's anomalous but it doesn't effect its status.

The fact that the Minturn decision may have gone the opposite direction in 1854 doesn't change its status.

The fact is it has been a rule of law for 135 years.

Commerce has gone on for years, for 135 years on the basis of this rule of law.

If Congress at some point in time decides to change it, then it will do so prospectively, not retrospectively.

Unknown Speaker: How can Congress change it?

Can Congress change it?

Mr. Montbach: Congress has looked at this area four times.

Minturn has been the rule for 135 years.

Unknown Speaker: There's no equation between what the Constitution means by admiralty jurisdiction and what the statute does?

Mr. Montbach: Your Honor, there is an equation, yes.

And this Court can address admiralty jurisdiction.

But we're saying in this instance we'd have to take our guidance from Congress.

Congress has looked at what constitutes--

Unknown Speaker: You don't expect Congress to pass a statute... would Congress responsibly be passing a statute that ignores Minturn?

Could it do that?

Mr. Montbach: --If Congress wants to change the rule, as they did in 1910 and in 1920 to allow beneficiaries... in this instance change the Minturn rule, allow general agents to have liens... they can do so.

Unknown Speaker: To be within admiralty jurisdiction?

How can Congress--

--Congress is... our Court held in 1825 that admiralty jurisdiction was limited to tidal waters.

Congress passed a law saying no, it extends to the Great Lakes, and in the Genesee Chief we upheld that.

Mr. Montbach: Yes.

I'm saying that the Congress can add a group of beneficiaries, in effect expand the jurisdiction to include a class within admiralty jurisdiction, and include a class that will get a lien.

Congress did that in 1920 when they amended the lien act to include towage.

This Court and other courts between 1910 and 1920 said no, the lien act does not provide for towage.

Therefore--

Unknown Speaker: We're not talking the lien act, we're talking about admiralty jurisdiction.

Mr. Montbach: --I think they're mixed.

The action is based upon the lien act in part, Your Honor.

The action is based upon the lien act and traditional maritime law.

This Court has repeatedly said, and other courts have agreed with this, that maritime liens are to be interpreted strict to Uris, and that the only source is either statute xx traditional maritime law.

And if a lien did not exist under the statute or did not exist under traditional maritime law, then courts should not grant such liens.

Unknown Speaker: Are agency contracts somehow to be discouraged because they are not promotive of sound growth for admiralty and for maritime commerce?

Mr. Montbach: No, they are not, Your Honor.

They're not to be discouraged.

The point is should they be included with a group of services or groups of beneficiaries who are entitled to lien of vessel, to put a secret lien on a vessel that travels with that vessel.

If Congress or--

Unknown Speaker: Well, it's a secret lien, but the last in time always prevails, this odd rule in admiralty, so that it's not really so bad either, is it?

Mr. Montbach: --It does, but it's still secret to anyone who isn't aware of it.

If this vessel was sold--

Unknown Speaker: Well, if anybody provides services and they're last in time, then they collect.

Mr. Montbach: --If the vessel was sold subsequent to that last provision of services the new buyer has no idea that there is a lien on this vessel.

Other jurisdictions, England and Canada, create an in rem lien for someone who supplies bunkers, but that lien does not follow the vessel.

It's an in rem statutory lien.

Unknown Speaker: It's an in rem against what?

Mr. Montbach: Against the vessel, but it does not follow the vessel once the vessel is sold.

It's a statutory in rem lien, a right to an in rem action.

I shouldn't say lien.

It's an in rem action.

Unknown Speaker: Would our courts have authority to do that, or would that contradict the existing statute?

Mr. Montbach: I think the courts would have the... not the courts, Congress would have the ability--

Unknown Speaker: No, would our courts have the authority to--

Mr. Montbach: --To create a lien?

Unknown Speaker: --adopt such a rule that the lien is in rem but doesn't follow the vessel, or would that contradict the existing statute?

Mr. Montbach: I think it would contradict the existing statute.

I think the courts should not expand liens, create liens, either by analogy, this is a strict to Uris doctrine, Your Honor.

Unknown Speaker: Counsel, what's the significance of any, of the provision in the contract for a lien?

There is one, isn't there?

Mr. Montbach: Well, Your Honor, there is a general provision in Exxon's boilerplate contract which says that they reserve a right to lien--

Unknown Speaker: For what?

Mr. Montbach: --For the provision of fuel, themselves.

Unknown Speaker: And so you think that provision would only apply to situations like in New York?

Mr. Montbach: I think as far as Exxon is concerned it applies to them when they supply themselves.

It also provides that the supplying company has a lien when they supply.

Unknown Speaker: So does that add anything to maritime law?

Mr. Montbach: I don't think so, no, Your Honor.

It does not.

Unknown Speaker: Then you might as well leave it out?

Mr. Montbach: In this instance, yes.

Unknown Speaker: Yeah, but here they say they would have a lien on the vessel, wouldn't they?

You would have a lien on the vessel.

Mr. Montbach: They say they have a lien on the vessel.

Unknown Speaker: And that seems... they certainly were contemplating... both sides were, I suppose, that this would be subject to maritime law.

Mr. Montbach: I don't think both sides were contemplating that.

Remember, there are three sides here.

We have Exxon entering into a contract with Waterman, and we have Exxon now trying to enforce that against Central Gulf Lines, the owner of the vessel.

Unknown Speaker: I see.

Mr. Montbach: Central Gulf Lines had a contract with Waterman that said don't put any liens, we prohibit you from putting any liens on this vessel.

But we once again have in Exxon's instance a boilerplate global contract they use for all of their customers, and they have been using this for 40 years.

I don't think it is specific enough to show a common intent on the part of Exxon and Waterman to put a lien on the vessel involved herein.

In effect what it's saying to Waterman and Exxon, Exxon knowing full well what the financial situation of Waterman was, knowing that one supplier has already said I'm not going to advance anything to this vessel on any credit... Waterman any credit... Exxon can say it's all right, I'll loan you the money as part of our ongoing relationship.

I'm in effect making an investment in you to keep you going, because a third party over there who knows nothing about this will pay me.

They were aware this was a chartered vessel.

They had known it for 3 years.

This is the type of situation based upon this long standing agency relationship, that Exxon in effect could be considered an investor in Waterman, almost a part owner with Waterman.

They had $4 million worth of credit outstanding before this lifting.

They increased it by $1.5 million, more than the value of this lifting at that time, knowing full well of the financial condition of Waterman.

Now, going into the contract itself, Your Honor, the contract provides that Exxon has nothing to do with the navigation of the vessel, and really nothing to do with maritime commerce.

As I said before, Exxon in this instance confirmed an order that had been placed by Waterman.

But in the normal instance they take an order, they put it on a telegraph or a fax machine or a telex machine, pass it on to Arabian Marine in this instance, in general terms at least 7 days beforehand, and they want nothing else to do with this.

They say you, buyer, are responsible for letting the local person know when your vessel is going to be there exactly.

You are responsible for any mistakes you make in that.

You, buyer, are responsible for everything that has to do with loading the vessel with this fuel.

You, buyer, are responsible with everything afterwards.

You have to pay for all your permits and everything.

The next time Exxon has anything to do with this is a week or two later when the bill comes in.

They are totally an administrative, shore side, and in this instance we submit, if we're going to make a difference between a preliminary and a general agency contract, a preliminary contract situation.

So that we feel, Your Honor, that the rule in Minturn individually should be upheld or affirmed.

Any problems as far as the so-called splits in the circuit, our brief shows that the circuits are not at odds as far as the general agency rule.

As recently as a week and a half ago the Minturn holding was cited with approval in the Planned Premium Services case--

Unknown Speaker: Mr. Montbach, supposing they had constructed a little different kind of legal relationship between the marine company in Saudi Arabia and Exxon pursuant to which they had said we, Exxon, want to buy 100,000 gallons of oil to be resold to the ship owner of the ship--

Mr. Montbach: --To Waterman.

Unknown Speaker: --and then in effect said well, title will pass to us as soon as you pump it through the pipe and then it will pass from us to the ship owner 10 seconds thereafter, and you will be our agent for delivering our oil while we own it and while you're delivering it to the other.

So that they got title to the oil, you know, Exxon.

They would then have a lien, I guess, wouldn't they?

Mr. Montbach: In effect the argument could be made that they were a fictional, or legally fictional... a supplier themselves.

Because... and I think the cases that were cited for, by the other side and the Solicitor General, where they're saying someone who doesn't physically supply has been given a lien, if you... we don't have the benefit of those cases.

But in some of them they did say that there was a chain sale, the typical petroleum... and you talked about the brokerage, I don't know if it was you, sir... but the brokerage thing.

A chain sale.

Title does pass, so that this becomes a direct supplier.

Unknown Speaker: Yeah.

Mr. Montbach: Even though it is for 10 seconds.

Unknown Speaker: Yeah.

Mr. Montbach: So that we feel that this rule should be upheld.

It will continue the stability in this area of law.

Justice Scalia spoke about, cited Mr. Black's Columbia Law Review article in Sisson v. Ruby and your concurrence about the irregular verbs that are better learned rather than changing the whole grammar around.

Industry has gone along very well, with a few exceptions, and there are not a lot of exceptions to this general rule.

There has to be some special justification for overturning this rule, not just that a couple of commentators think it's an anomaly.

A ship-building contract certainly is subject to the same arguments that are being made with regard to Minturn.

It was the same court that handed down the People's Ferry case.

Unknown Speaker: Well, do you really think that all the courts of appeals that have dealt with this matter see eye to eye with you?

Mr. Montbach: I think as far as the general agency rule is, yes.

Some have carved out some exceptions, but they have recently--

Unknown Speaker: Pretty good ones, too.

Mr. Montbach: --The exceptions, Your Honor, have to do with--

Unknown Speaker: I mean pretty substantial ones.

Mr. Montbach: --The exceptions have to do with entities that are involved with the operation, the physical operation of the vessel.

The Hadjipateras case in the Fifth Circuit, which... the Fifth Circuit still follows the general agency rule... dealt with some, an entity that was involved with the physical operation of the vessel.

The Hinkins in the Ninth Circuit, Your Honor, dealt with an entity on a one-port, one-call situation where they had people down there overseeing, being involved in the physical service that was being provided.

We don't have that in this instance, and in the general rule you don't have that with husbanding agents or general agents per se.

They contact somebody.

It's basically having a black... a telephone book.

Well, if you're in Jeddah, see so and so.

If you're in Rotterdam, see somebody else.

There is no direct link with the navigation of the vessel or in maritime commerce.

It wasn't done in a maritime environment.

So the circuits are not really in disarray or discord as to the applicability of Minturn.

There have been some exceptions, but recent cases, even Justice Brown in the Fifth Circuit again restates the general agency rule with--

Unknown Speaker: What are the time limitations on enforcing a lien?

Mr. Montbach: --There are none.

It follows the vessel.

Unknown Speaker: Just laches, or--

Mr. Montbach: I think there is some laches, yes.

If a vessel comes into, leaves the United States and comes back five times and you don't catch it here, I assume... and has been sold... at some point in time the courts can apply laches to it.

And they do, have done it at times.

The statute of limitations also would apply.

Unknown Speaker: --Is it your submission that overruling of Minturn would be detrimental to the commerce of the purchase and sale of vessels?

Mr. Montbach: I think it would be detrimental to that area.

It would be detrimental in commerce in general because you would create a whole new group, just if we're talking agents alone, of all sizes, types, would be able to go into courts now and to... before they... go into courts, and seize a vessel in the United States, wherever it is in the United States.

That certainly would impede commerce.

It might get them their money, but it would impede commerce.

Unknown Speaker: Well, I don't know that that's the submission of the other side.

I thought they, I thought if they overruled Minturn you would nevertheless, you still would have to sort out all sorts of contracts to see which have enough connection with maritime commerce.

Mr. Montbach: If you overrule Minturn you're still going to have the vessel seized and an action in the admiralty courts, and then you would have the sorting out of the preliminary contract.

It's not a question of bringing an action and sorting it out and seeking if you're entitled to a lien, and then enforcing the lien.

In this instance Exxon was ready to seize the vessel.

Everybody knew of it because of the Waterman bankruptcy and a side arrangement was put up.

Typically when somebody seizes a vessel, the vessel will... the owner will bond it or put up an undertaking of some sorts.

But you're still having this continually... somebody... the marshall going out and seizing these vessels for any and every type of agent.

If we open it up for an agent we have the passenger agent.

We open it up for the cargo brokers.

We open it up for other types of agents.

Unknown Speaker: Well, I don't know--

--Yes, but aren't those statutory questions?

I mean, the lien statute doesn't necessarily cover all those.

It seems there are two different issues, one, where there's a maritime jurisdiction, and even if there is it may well be the statute doesn't cover all these different kinds of agents.

Mr. Montbach: Yes, Your Honor, if we limit ourselves to the statute.

But in this instance the action is based not only on the Maritime Lien Act, it's based on traditional maritime law.

Unknown Speaker: And you do argue, don't you, that even if there's maritime jurisdiction that the terms of the lien act don't cover this particular facts?

Mr. Montbach: Yes, Your Honor.

We're saying that the lien act in and of itself does not provide for a maritime lien for a general agent.

Or in this instance a preliminary contract.

Unknown Speaker: Or for this agent even.

Mr. Montbach: Or for this.

Specifically not this agent, Your Honor, yes.

Thank you, Your Honors.

Unknown Speaker: Thank you, Mr. Montbach.

Mr. Pare, do you have rebuttal?

You have 3 minutes.

Rebuttal of Armand Maurice Pare, Jr.

Mr. Pare: Yes, Your Honor.

First, with respect to the reference to the Columbia Law Review article by Professor Black, I believe that that article quite clearly states in the critique section that there are a list of irregular verbs that seem to have no principle, but I also believe that what the Professor says there is that in that article that is how he reads the present cases.

However, at pages 261 and then again at 273 and beyond he goes on to suggest that should not be the case.

It happens to be the case now.

Central Gulf has raised the point and says that all agency contracts are preliminary contracts.

That depends on your definition of a preliminary contract.

We have urged the definition provided by the Bodena court, provided by Benedict, and provided by Gilmore and Black, that makes sense.

It's not a mechanical lining up of the contracts.

Secondly, Exxon in this case supplied bunkers.

That is the key ingredient to make a vessel propelled... be propelled in maritime commerce.

It is the classic service.

As the decision by the Ninth Circuit in the Golden Gate indicated, it is not necessary for the physicial supply to be made by the plaintiff.

In that case the supply was made by a third-party supplier.

That is precisely the case here.

Exxon did not make the physical supply, but that should not matter.

Furthermore, clearly, under any analysis Exxon's involvement here was not preliminary.

The proof shows that the local supplier refused to make the supply.

If Exxon had not jumped in and put its contract on the line the supply would not have happened.

Exxon's involvement was essential to the voyage.

The proof also shows that Exxon advanced its credit and it paid for the fuel.

In fact it remained involved in this case by virtue of the fact that the contract provides if there was an oil spill Exxon reserved the right to clean that spill up.

Also, the contract provides that, if there was a quality or quantity claim, Waterman came to Exxon for that, not to Arabian Marine.

The Fifth Circuit case of Planned... Preplanned Premium Services does not address the general agency Minturn issue.

In fact it only involves insurance premiums, and those insurance premiums are not essential to the operation of any voyage.

In fact, as I already indicated, they do not give rise to a lien, and they are not essential services.

Unknown Speaker: Well, Exxon... Minturn has been around for a long time, yet Exxon had this sort of a contract.

Mr. Pare: Well, Your Honor, Minturn was never applied to the Exxon contract, and I think it came as... well, I know it came as quite a shock to me to see Minturn in this case.

Thank you.

Chief Justice Rehnquist: Thank you, Mr. Pare.

The case is submitted.

Unknown Speaker: The honorable court is now adjourned until tomorrow at ten o'clock.

Print this transcript Transcript: 

Argument of Speaker

Mr. Speaker: The opinion of the Court in No. 90-34 Exxon Corporation versus Central Gulf Lines will be announced by Justice Marshall.

Argument of Justice Marshall

Mr. Marshall: This case is here on certiorari to the United States Court of Appeals for the Second Circuit.

The question in this case is whether Admiral de jurisdiction extends to claims arising from agency contracts.

In an opinion filed with the clerk today, we hold that there is no per se rule following agency contracts from admiralty.

Accordingly, we reverse the judgment of the Second Circuit.