## Facts

- The *Alexander’s Unity* was a bulk carrier owned by Alexander’s Unity Shipping Co., Ltd.; Alexco Shipmanagement (Hellas) Ltd. operated the vessel.
- Banque Internationale à Luxembourg S.A. (BIL) held two preferred ship mortgages on the vessel.
- Associated Metals and Minerals Corp. (Associated Metals) chartered the vessel to transport more than 7,000 steel plates from Visakhapatnam, India, to Houston, Texas, and Mobile, Alabama.
- During the voyage, the steel plates suffered substantial seawater-rust damage, apparently due to faults attributable to the vessel interests.
- By the time the vessel arrived in New Orleans, BIL’s mortgages were in default; BIL arrested the vessel and filed an in rem foreclosure action.
- Associated Metals filed its own in rem action against the vessel (and also pursued in personam claims against the owner/operator), seeking:
  - approximately $736,873 for cargo damage; and
  - $181,340.97 for expenses incurred because the cargo had to be discharged in New Orleans rather than at Houston/Mobile; plus later-added forwarding expenses of $70,889.95.
- The U.S. Marshal sold the vessel (October 29, 1992) for $4,615,000, but the proceeds were insufficient to satisfy all claims, making priority dispositive.
- The district court entered a default judgment for Associated Metals, finding the vessel’s unseaworthiness (physical and financial) and negligence supported a maritime tort claim; it awarded cargo-damage damages and treated the forced-discharge costs as custodia legis expenses, and later added forwarding expenses to the tort award.
- BIL appealed, challenging the characterization and priority of Associated Metals’ claims and the treatment of the cargo-handling costs as custodia legis.

## Issues

1. Whether the Fifth Circuit had appellate jurisdiction to review the district court’s determinations allocating and prioritizing claims against the sale proceeds.
2. Whether Associated Metals’ cargo-damage claim (and related expenses) sounded in maritime tort (unseaworthiness/negligence), creating a preferred maritime lien with priority over BIL’s preferred ship mortgages.
3. Whether the expenses associated with the forced discharge and removal of cargo in New Orleans were properly allowed as custodia legis expenses payable from the res ahead of other liens.

## Decision

- The Fifth Circuit held it had jurisdiction to decide the appeal regarding the priority and allowance of claims against the sale proceeds.
- The court affirmed that Associated Metals’ cargo-related losses were properly treated as maritime tort claims (based on unseaworthiness and negligence), giving rise to a preferred maritime tort lien.
- The court affirmed that Associated Metals’ preferred maritime tort lien had priority over BIL’s preferred ship mortgages for purposes of distributing the judicial-sale proceeds.
- The court affirmed the district court’s allowance of the forced-discharge cargo-removal costs as custodia legis expenses, rejecting BIL’s argument that the expenses were disallowed merely because they also benefitted Associated Metals.
- The court left in place the district court’s allocation that treated certain later forwarding costs as part of the tort recovery rather than as custodia legis.

## Legal Principles

- A cargo owner may assert a maritime tort claim against a vessel for cargo damage caused by unseaworthiness and/or negligence, not merely a contract claim for breach of the carriage agreement.
- A maritime tort lien that qualifies as a “preferred maritime lien” can take priority over a preferred ship mortgage in distributing proceeds from a judicial sale.
- Custodia legis expenses are expenses incurred while property is in the court’s custody that are reasonably necessary to preserve, manage, or administer the res and facilitate the in rem proceeding.
- A district court’s decision to allow custodia legis expenses is reviewed for abuse of discretion; the expense may be allowed even if it also benefits a private party, so long as it serves the custody and administration of the res.

## Conclusion

The Fifth Circuit affirmed the district court’s judgment awarding Associated Metals recovery for seawater-rust cargo damage and related costs, holding that the losses were properly treated as maritime tort claims giving rise to a preferred maritime lien senior to BIL’s preferred ship mortgages, and also affirming the award of forced-discharge cargo-handling costs in New Orleans as custodia legis expenses payable from the sale proceeds.


Associated Metals and Minerals Corp. v. The Alexander's Unity, 41 F.3d 1007, 1995 AMC 1006 (1995)