Associated Metals and Minerals Corp. v. The Alexander’s Unity

The Alexander’s Unity (defendant) was a bulk carrier owned by Alexander’s Unity Shipping Co., Ltd. Banque Internationale à Luxembourg S.A. (BIL) (plaintiff) held two mortgages on the ship. The Alexander’s Unity was loaded with steel plates for transport to Houston, Texas, and Mobile, Alabama, pursuant to a charter agreement with Associated Metals and Minerals Corp. (Associated Metals) (plaintiff). During the journey, Associated Metals’ cargo was damaged by seawater, apparently through the fault of the ship’s owners. By the time the ship arrived in New Orleans, the mortgages held by BIL were in default. BIL had the Alexander’s Unity arrested and initiated an in rem action against it. Associated Metals also initiated an in rem action. Associated Metals entered claims both for damages to its cargo and for expenses Associated Metals incurred in having to remove its cargo in New Orleans, rather than Houston and Mobile. The Alexander’s Unity was sold, but the sale price was insufficient to fully satisfy both BIL’s and Associated Metals’ claims. Associated Metals argued in its action that its claim amounted to a preferred maritime-tort lien and was therefore due priority over BIL’s mortgage claims. The court entered a default judgment for Associated Metals, awarding the full amount for both damages and the expense of the forcible cargo removal as a custodia legis expense, plus interest. BIL appealed the court’s award to Associated Metals, alleging that the court erred in finding the claim for the cargo-removal expenses was a custodia legis expense because the cargo removal ultimately benefited Associated Metals.