In World Imports Ltd. v. OEC Group, the United States Court of Appeals for the Third Circuit upheld a carrier’s lien on a current cargo for freight monies that were owed by the shipper, World Imports, on other cargo that had already been delivered. This is significant because the appellate court recognized that a carrier’s possessory lien can extended by contract, even in circumstances where the carrier has surrendered possession of the original goods.

World Import had a long term contract with OEC, a NVO, for the transportation of World’s goods. The contract gave OEC a “general lien” for goods in its possession, but specifically stated that the lien survived delivery of the property. This concept was repeated on each invoice OEC sent to World. Finally, OEC’s tariff on file with the Federal Maritime Commission contained a form bill of lading with a provision that OEC had a lien for freight, deadfreight, and other charges. Most importantly, the bill repeated the proviso that the lien survived delivery of the goods and was for any monies due OEC under any bill of lading.

The underlying dispute in World Imports concerned OEC’s claim for about $1,000,000 in unpaid charges accruing on shipments other than the one in its possession. Initially, the district court denied the OEC’s claim on the grounds that the delivery of the cargo by OEC to the receiver had been unconditional, and therefore OEC had waived its lien. On appeal, the Third Circuit considered and dismissed all of World Imports legal and policy-based arguments.

In particular, the appellate court addressed the question of whether the clauses in the contract, invoices and tariff extending the lien were enforceable. World Imports argued that because maritime liens cannot be created by contract, this particular lien as a creature of the contract could not be enforced. The appeals court rejected the argument, and instead started from the proposition that the carrier’s maritime lien arises not from contract, but by operation of law. Based on this premise, the appellate court held that liens created by law could be modified, extended, or curtailed by contract. Having made this statement of the law, the appellate court then went on to hold that the language in the carrier’s contracts which ‘extended the lien to any of World’s goods which came into OEC custody was valid and enforceable. That said, the appellate court carefully limited this decision to goods in the hands of the carrier, noting that very different considerations prevailed when the attempt is to enforce a lien on goods in the hands of third parties.

In short, the appeals court reversed the lower court decision, holding instead that references to the extension of the lien in the contract, invoices, and the tariff filing established that the lien had not been waived. This decision builds on existing law and clarifies the rights of carriers as to the permissible scope of their liens. Carriers may want to review their bills of ladings, invoices, and tariffs so as to consider how best to take advantage of this ruling. Conversely, Shippers should similarly assess their exposures when they allow carriers’ charges go unpaid.