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NMBA sees ambiguity in Supreme Court vessel ruling

The National Marine Bankers Association is recommending that marine lenders consult their own counsel to determine lending policies on floating structures after a Supreme Court decision left “ambiguity” in answering the question: What constitutes a vessel?

Though the NMBA had hoped the court “would draw a bright line” about what constitutes a vessel, the group thought the court left some ambiguity about how to define floating structures.

“The objective standard set forth by the Supreme Court creates some ambiguity as to whether a particular structure will constitute a vessel, particularly a floating home structure or possibly houseboats; therefore the NMBA suggests that each lender consult with its own counsel to determine lending policies associated with such structures,” NMBA marketing chairwoman Peggy Bodenreider said in a statement.

The recommendation comes in light of the Supreme Court’s decision in the Lozman vs. City of Riviera Beach, Fla., case, which questioned whether a floating home was considered a “vessel” for federal maritime purposes.

The Supreme Court reversed the 11th Circuit Court of Appeals on Tuesday and held that the structure was not a vessel.

“The Supreme Court decision was made based on if a reasonable observer, looking to the home’s physical characteristics and activities, would consider it to be designed to any practical degree for carrying people or things on water,” the NMBA release said.

“Even though the Supreme Court held this particular structure was not a vessel, the Supreme Court did apply an objective standard,” the release stated.

Although there was no preferred ship mortgage in this case, the NMBA filed an amicus brief with the Supreme Court requesting, among other things, that the court not allow the subjective intent of the owner to determine the status of a vessel. The NMBA had hoped that the Supreme Court would draw a bright line as to what constitutes a vessel.

“On a positive note, the NMBA amicus brief was cited by the dissenting opinion on how important predictability is in the financing arena,” the statement read.

Discourse in the Supreme Court leading up to the decision focused on what constituted a vessel.

“You could take an inner tube and … paste a couple of pennies on the inner tube. Now it carries things. There are things on the inner tube, and it floats,” Justice Elena Kagan argued as members of the high court debated what constitutes a vessel.

Click here for the full brief in opposition.

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