I rule for State Street Bank. I doubt that the Washington state lien reaches into international waters adjacent to Alaska. Even if it does, the choice of law in this case favors the application of Alaska law.

CIT Group-Equipment Financing, Inc. (CIT) moved for a declaration that the seamen aboard the processing vessel Atlas have maritime liens for wages, etc. that attached to the flat fish or their proceeds which are superior to both State Street Bank and the Fishermen. I conclude that there are no seamen's liens for the crew of the Atlas which would prime the rights of State Street Bank or the Fishermen in the flat fish or the proceeds.

Cold Sea and the Fishermen entered into various contracts in which Cold Sea contracted to purchase flat fish from the Fishermen, which were caught in international waters and delivered in international waters to the Atlas. The parties were engaged in the fishery regulated by the National Marine Fishery Service (NMFS). While there is some variation amongst the individual parties making up the Fishermen, the following general fact pattern prevailed:

(a) All the debtors are Alaska corporations. They had a place of business at the time of the contract at 2909 Arctic Boulevard, Suite 100, Anchorage, Alaska.

(b) All the Fishermen are Washington corporations, and their principals are Washington residents.

(c) Negotiations took place by phone and fax between Seattle and Anchorage but the face-to-face meetings and execution of any contracts took place in Seattle.

      4 ABR 324 

(d) The contracts with Tracy Ann, Muir Milach, and Fierce Allegiance involved fish. The Pequod sold only crab to Cold Sea.

(e) During 1994 and 1995, the Atlas operated out of Cold Bay, but occasionally anchored at Dutch Harbor and near Akutan, Alaska.

(f) During 1994 and 1995, the vessels for the Fishermen occasionally touched Alaska ports but such visits were relatively rare and, at least in part, were occasioned by the Atlas not being prepared to take on fish.

(g) The flat fish on board the Atlas were caught during the season that ended on May 3, 1995. On May 3, 1995, the Atlas entered into Alaska waters and anchored near Akutan, Alaska with the flat fish on board. The debtors filed their chapter 11 cases on May 3 and 4, 1995.

(h) After May 4, 1995, the flat fish were eventually transported by a Korean tramper and by coastal transportation in Alaska waters.

(I) It is the custom of various processors fishing in international waters on the last trip to bring the catch to Seattle because facilities for repair are available there, and in many cases the fish would have been transported there in any event.

(j) Shortly after the bankruptcy, a cash collateral stipulation was entered into in which the debtors, State Street Bank, and Fishermen agreed that the flat fish on board could be used by debtors, but would be subject of a replacement lien. See, Preliminary Order Approving And Authorizing Debtors' Emergency Use Of Cash Collateral And Payment Of Certain Priority Liens And Prepetition Expenses (filed May 24, 1995, Docket Entry 53).

(k) During operations by the debtor-in-possession, it dealt with an organization named All Alaska Seafoods, from which it eventually recovered a judgment which the parties claim is collateral for debtors' use of cash collateral.

(l) At the time that the Fishermen delivered the fish to debtors, State Street Bank had a security interest in the inventory and accounts of the debtors. The security interest was filed under the UCC Statutes in Alaska and Washington state.

(m) After delivering the flat fish to debtors, the Fishermen timely perfected Washington state processor liens pursuant to RCW 60.13.010 et seq.

           4 ABR 325  3. ANALYSIS -

3.1. Summary Of The Parties' Legal Positions - State Street Bank and the Fishermen view this as a choice of law problem. State Street Bank argues that the choice of law is controlled by AS 45.09.103(a). This section of the Alaska UCC provides:

This subsection applies to...goods...except as otherwise provided in this subsection, perfection and the effect of perfection or non-perfection of a security interest in collateral are governed by the law of the jurisdiction where the collateral is when the last event occurs on which is based the assertion that the security interest is perfected or unperfected.

Thus, when the fish were brought into Alaska waters, State Street argues that the Alaska UCC (AS 45.09.310) favors the prior perfected secured party over a subsequently filed statutory Alaska fish processing lien under AS 34.35.020-.390.

The Fishermen allege that a Washington processor lien attached on the high seas before the State Street Bank's lien was perfected. RCW 60.13.010-.070. The Washington version of UCC, RCW 62A.9-310, reads essentially the same as AS 45.09.310, but specifically reiterates the priority of a timely filed fish processor lien over a prior or subsequently perfected security interest. This is also set out in RCW 60.13.050.

Finally, CIT submitted a brief to the effect that the liens of various unpaid seamen aboard the vessels attached to the fish and their proceeds, and should prime both the perfected security interest of State Street Bank and any liens the Fishermen have against the debtors as processors under the Washington state law.

     3.2. Extraterritorial Reach Of The Washington Fish Processor Lien Law Does Not Extend To The International Waters Off Alaska - If the Washington state processor lien does not reach fish caught on the high seas in this case, the choice of law issue is moot.

The parties have not briefed this issue and have assumed in their arguments that a Washington statute is applicable to a fish caught on the high seas in this case. I have serious doubts that this was the intent of the Washington legislature.

The fish processor lien law was added in 1985. Some of the       4 ABR 326  pertinent provisions are:

60.13.020. Processor lien

Starting on the date a producer delivers any agricultural product to a processor or conditioner, the producer has a first priority statutory lien, referred to as a "processor lien." A commercial fisherman who delivers fish to a processor also has a first priority statutory "processor lien" starting on the date the fisherman delivers fish to the processor. This processor lien shall continue until twenty days after payment for the product is due and remains unpaid, without filing any notice of lien, for the contract price, if any, or the fair market value of the products delivered. The processor lien attaches to the agricultural products or fish delivered, to the processor's or conditioner's inventory, and to the processor's or conditioner's accounts receivable. However, no processor lien may attach to agricultural products or fish delivered by a producer or commercial fisherman, or on the producer's or fisherman's behalf, to a processor which is organized and operated on a cooperative basis and of which the producer or fisherman is a member, nor may such lien attach to such processor's inventory or accounts receivable.

60.13.050. Priority of lien

(1)(a) If a statement is filed pursuant to RCW 60.13.040 within twenty days of the date upon which payment from the processor, conditioner, or preparer to the producer or commercial fisherman is due and remains unpaid, the processor or preparer lien evidenced by the statement continues its priority over all other liens or security interests upon agricultural products or fish, inventory, and accounts receivable, except as provided in (b) of this subsection. Such priority is without regard to whether the other liens or security interests attached before or after the date on which the processor or preparer lien attached. [italics added]

(b) The processor or preparer lien shall be subordinate to liens for taxes or labor perfected before filing of the processor or preparer lien.

(2) If the statement provided for in RCW 60.13.040 is not filed within twenty days of the date payment is due and remains unpaid, the processor or preparer lien shall thereupon become subordinate to:

(a) A lien that has attached to the agricultural product or fish, inventory, or accounts receivable before the date on which the processor or preparer lien attaches; and

(b) A perfected security interest in the agricultural product or fish, inventory, or accounts receivable.

There are no reported cases interpreting these provisions as they       4 ABR 327  apply to fish processing liens, let alone floating processors. A mobile, floating fishing processor was probably not contemplated by the fish processing lien law which is incorporated into a statutory scheme involving various processor and preparer liens regarding agricultural products.

Although I found no Washington state cases, the general tenor of the law regarding the reach of a state's law is found in 73 AmJur2d, Statutes § 359:

Unless the intention to have a statute operate beyond the limits of the state or country is clearly expressed or indicated by its language, purpose, subject matter, or history, no legislation is presumed to be intended to operate outside the territorial jurisdiction of the state or country enacting it. To the contrary, the presumption is that the statute is intended to have no extraterritorial effect, but to apply only within the territorial jurisdiction of the state or country enacting it. Thus, an extraterritorial effect is not to be given statutes by implication. Accordingly, a statute is prima facie operative only as to persons or things within the territorial jurisdiction of the lawmaking power which enacted it. These rules apply to a statute using general words, such as "any" or "all," in describing the persons or acts to which the statute applies. They are also applicable where the statute would be declared invalid if given an interpretation resulting in its extraterritorial operation. [footnotes omitted]

See, Swift and Company v. Peterson, 233 P2d 216, 225 (Ore 1951) (despite the breadth of the branding statute, the court held only livestock amenable to brand inspection under the statute were those which are part of a shipment originating in the state); Peerless Insurance Co. v. Clark, 487 P2d 574, 575 (Colo Ct App 1971), cert denied, which stated:

[1] We have found no Colorado case directly in point. However the law appears to be well settled that a statute cannot be presumed to have any extraterritorial effect. In Swift & Co. v. Peterson, 192 Or. 97, 233 P.2d 216, it is stated,

`No legislation is presumed to be intended to operate outside of the jurisdiction of the state enacting it. In fact, a contrary presumption prevails and statutes are generally so construed. 50 Am.Jur., Statutes, 510 § 487; Sandberg v. McDonald, 248 U.S. 185, 39 S.Ct. 84, 195, 63 L.Ed. 200; … .'

Ore-Ida Potato Products, Inc. v. United Pacific Ins. Co., 87 Idaho 185, 392 P.2d 191, is almost directly in point. In that case a produce dealer licensed and bonded in the State of Idaho made two purchases of potatoes in Oregon for which
      4 ABR 328  he failed to pay. It was undisputed that both transactions took place entirely within the State of Oregon. Had they occurred in Idaho the surety on the dealer's bond would have been liable. The claimant argued that the words, any person, any dealer or broker, every dealer, etc. used in the Idaho Statute gave it extraterritorial effect. The Idaho court held the surety not liable, stating,

An examination of this Act ... `does not disclose any express phraseology designed to extend to transactions consummated `fully, wholly and entirely,' … in a state foreign to Idaho.

Appellant cannot be permitted the extraterritorial interpretation of (the Act) which it seeks. The bond furnished by a produce dealer under the Act must be measured by the law of Idaho under which it was written, …. Statutes are intended to apply and be confined in their operation to persons, property and rights which are within the territorial jurisdiction of the law-making power. The Act does not expressly provide for extraterritorial application. In the absence of any extraterritorial phraseology contained in such Act, it cannot be construed to have an extraterritorial effect, on the theory that the legislature so intended.'

[2] We agree with the foregoing and hold that Peerless is not liable on the bond issued under the state statute for the fraud which occurred outside the State of Colorado.

See, also, State Surety Co. v. Lensing, 249 NW2d 608, 611 (Iowa 1977).

Read literally, a Washington state fisherman dealing with a floating processor in international waters might be subject to the Washington state lien law even though the fishing might have occurred off the east coast of the United States or off the coast of Africa for that matter. Such an interpretation could not have been intended.

Therefore, I determine that the definition in RCW 60.13.010(5), which defines "processor," should be limited to processors located in the territorial limits of the State of Washington, or at a minimum, relate to fish delivered or caught in the State of Washington. The present case does not fit those limitations and I hold that no Washington State processor lien attached to the flat fish in question.

     3.3. The Choice-of-Law Would Favor Alaska Law - Assuming that I am incorrect and that the Washington state processor lien statute does reach the flat fish that were caught in international waters off Alaska, the issue remains whether to apply the local law of Alaska or Washington.

The local law of Alaska would be governed by AS 45.09.103(a), which provides, with some exceptions not relevant here, that perfection and its effect with respect to security interest in collateral "are governed by the law of the jurisdiction where the collateral is when the last event occurs on which is based the assertion that the security interest is perfected or unperfected..." The parties agree that the last event concerning perfection of the flat fish involved in this case occurred when the fish were brought into the territorial waters of Alaska where State Street Bank had a perfected security interest covering those goods. State Street Bank argues that the court should look to UCC 9.-103 as interpreted by the Alaska Statute, and not Restatement 2nd of Conflict of Laws, § 251 as argued by the Fishermen. Even if Alaska law does govern, under AS 45.09.310 a statutory lien primes a prior perfected security interest if the statutory lien so provides:

Sec. 45.09.310 Priority of certain liens arising by operation of law.

If a person in the ordinary course of business furnishes services or materials with respect to goods subject to a security interest, a lien upon goods in the possession of the person given by statute or rule of law for the materials or services takes priority over a perfected security interest unless the lien is statutory and the statute expressly provides otherwise.

The Washington processor lien law does provide for a priming of a prior perfected security interest, so if such a lien attaches, the result under AS 45.09.310 will be the same as it would have been under RCW 62A.9-310.

State Street Bank argues that the Introductory Notes to §§ 244-266 of the Restatement 2nd of Conflict of Laws specifically state that the provisions of § 251 do not apply when a UCC problem susceptible to UCC 9-103 is involved. See, Restatement 2nd of Conflict of Laws, Revisions of Portions of the 1971 Text of Introductory Note for Chapter 9 - Property, Topic 3 - Movables (ALI 1989). This is too broad a reading of the Introductory Note. The note indicates that the UCC, which is intended to be a uniform law in all states, would solve most of the conflict problems, but not all of them. The present facts present such an exception.

The conflict question appears to me to be whether the court should       4 ABR 330  apply the processor lien laws of Alaska or of Washington. To resolve this problem, the Restatement is helpful authority. In re Holiday Airlines, Inc., 620 F2d 731, 733-34 (9th Cir 1980). The court also held that a bankruptcy court, in resolving a conflict of law problem, should not be constricted by diversity of citizenship cases of the forum state. See, also, In re L.M.S. Associates, Inc., 18 BR 425, 428 (Bankr SD Fla 1982).

The Restatement 2nd of Conflict of Law, § 251 states:

§ 251. VALIDITY AND EFFECT OF SECURITY INTEREST IN CHATTEL TEXT

(1) The validity and effect of a security interest in a chattel as between the immediate parties are determined by the local law of the state which, with respect to the particular issue, has the most significant relationship to the parties, the chattel and the security interest under the principles stated in § 6.

(2) In the absence of an effective choice of law by the parties, greater weight will usually be given to the location of the chattel at the time that the security interest attached than to any other contact in determining the state of the applicable law.

The Restatement 2nd of Conflict of Laws, § 6 provides:

§ 6. CHOICE-OF-LAW PRINCIPLES

(1) A court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law.

(2) When there is no such directive, the factors relevant to the choice of the applicable rule of law include

(a) the needs of the interstate and international systems,
(b) the relevant policies of the forum,
(c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue,
(d) the protection of justified expectations,
(e) the basic policies underlying the particular field of law,
(f) certainty, predictability and uniformity of result, and
(g) ease in the determination and application of the law to be applied

Judge MacDonald relied on the Restatement § 251 in In re Eagle Fisheries, L.P., 1 ABR 200, 204 (Bankr D AK 1990). Under the facts of       4 ABR 331  that case, he found Alaska law (the Alaska Fisherman's Lien Law, AS 34.35.391) applied. There were many contacts with the state in that case.

In the present case, the facts are more equivocal. The fishing and delivery to the processors took place in international waters. The processors were more connected to Alaska by corporate existence and operations. The Fishermen have many ties to Washington.

Critical to making a decision is the fact that the fishery was much closer to Alaska than Washington. The NMFS required fish to be off-loaded at a designated American port. This could have been in Alaska or Washington, but Alaska was the probable choice and the actual choice for delivery except for the end-of-the-season load, which might have been carried back to Seattle when the processor went for repairs.

Other Alaska fishers also dealt with the processors. It would be better to find a common medium for choosing the law with respect to fishers from various localities. Focusing on the processor is a more effective way of reaching a predictable, uniform result.

RCW 60.13.010 et seq gives the fishers a better priority position. AS 34.35.020 et seq seems to give the fishers more collateral (it includes the plant) to cover their liens. Each has its benefits. Cf In re Kemp Pacific Fisheries, Inc., 136 BR 268 (WD Wash 1990). That is not the basis for the choice-of-law decision. Rather, I find it somewhat strained to apply the Washington processor lien law to the events involving an Alaska processor operating in international waters relatively close to Alaska and relatively distant from Washington.

     3.4. There Are No Seamen's Liens On The Fish Delivered For Processing - CIT has filed a motion for declaratory relief. It wants the proceeds from the flat fish which were aboard the Atlas for processing, the proceeds which State Street Bank and the Fisherman are vying for, applied instead to the maritime liens of seamen. CIT hopes, by doing so, to free up some equity in its equipment which is subject to claims of maritime liens by the same seamen. None of the seamen themselves have filed any opposition to the State Street Bank or Fishermen's motions for summary judgment.

CIT has found no cases indicating that seamen per se can claim a maritime lien on the fish delivered to their floating processor. Nor has       4 ABR 332  it cited cases related to any maritime lien in favor of seamen with respect to fishing vessels or tenders.

The closest case cited by CIT was Sold Point Fish Co. v Haywood, 109 F2d 703 (4th Cir 1940) holding that the crew of a fishing vessel has a maritime lien on catch for the amount of their lay shares. See, also, Putnam v Lower, 236 F2d 561, 569-70 (9th Cir 1956):

The jurisdiction of courts of admiralty over the wage claims of seamen is anciently established. From the dawn of maritime commerce, the necessity for skilled and courageous mariners has been recognized and the law has jealously protected them as to certain and prompt payment of wages or compensation by other methods. Originally, seamen were compensated by a stake or share in the profits of the voyage. More recently, it has become customary to pay fixed wages, but the old form survives in the lay plan employed in the more speculative pursuits of sealing, whaling, and fishing. Fishermen, although possessing wages and customs peculiar to their business, are nonetheless seamen, and in general receive the same protection. Therefore, despite compensational differences, lay fishermen or sharesmen possess a right similar to that enjoyed by regular seamen, to lien the vessel and catch on board to secure their compensation, and this right is maritime in nature. [footnotes omitted]

The parties have found no cases extending to seaman on a fish processor or tender of this doctrine regarding a fisherman's lay share giving rise to a maritime lien in the catch.

State Street argues there is no rule that liens on vessels generally extend to cargo, but quite the opposite: "In general, whatever liens wharfingers, stevedores, and such persons may have, they have against the ship rather than against the cargo which they handle." Robinson on Admiralty 401 (1939). The bank notes maritime liens do not extend to property not inherently part of the ship or to property owned by a third party. See, Kesselring v. Arctic Hero, 30 F3d 1123 (9th Cir 1994) (third-party's leased equipment was subject to maritime wage liens only if it is "part" of the vessel, so essential to the operation and navigation of the vessel as to be appurtenant to, or an integral part of the vessel).

Lacking any direct authority that the wages of the seamen of the fish processor Atlas were akin to lay shares on a fishing vessel giving them a maritime lien in the "catch" (although CIT argues, without submitting evidence, that there was an incentive bonus akin to a lay       4 ABR 333  share), and noting the absence in this fray of the feisty sea lawyers representing seamen in this bankruptcy, I conclude that CIT is probably incorrect. I decline to hold that the flat fish are subject to a seamen's lien which would prime a properly perfected UCC security interest or timely filed fisherman's processing lien. I will heed the advice of State Street Bank to follow a conservative line when asked to stretch the parameters of the maritime lien law by way of construction, analogy or inference. Osaka Shosen Kaisha v Pacific Export Lumber Co., 260 US 490, 499 (1923), and Melwire Trading Co. Inc. v. M/V Cape Antibes, 811 F2d 1271, 1273 (9th Cir 1987):

A maritime action in rem has traditionally been available only in connection with a maritime lien. Claims not creating a maritime lien must be pursued in personam. The Resolute, 168 U.S. 437, 440-42, 18 S.Ct. 112, 113- 14, 42 L.Ed. 533 (1897). Maritime liens must be construed "stricti juris, and cannot be extended by construction, analogy, or inference." Osaka Shosen Kaisha v. Pacific Export Lumber Co., 260 U.S. 490, 499, 43 S.Ct. 172, 174, 67 L.Ed. 364 (1923). Consequently, "[t]he only liens recognized today are those created by statute and those historically recognized in maritime law." In re Admiralty Lines, Ltd., 280 F.Supp. 601, 604-05 (E.D.La.1968), aff'd mem., 410 F.2d 398 (5th Cir.1969).

     3.5. State Street Bank's Security Interest May Be Subject To Attack On Preference Or Perfection Grounds - In deciding this case, it was not necessary to actually uphold the validity of State Street Bank's perfection. The timing of events that occurred in April and May, 1995, is close and the relationship between the debtors is somewhat ambiguous. There may be some perfection or preference issues.

The debtors filed on May 3 and 4, 1995. The fishing season ended on May 3, 1995, and the Atlas arrived in Alaska waters on the afternoon or evening of May 3, 1995. I have not attempted to analyze if some of the fish were delivered more than a 10-day or a 20-day period before then.

The automatic stay might have gone into effect before the fish arrived in Alaskan waters, and State Street Bank's security interest might not be perfected on the flat fish unless 11 USC §§ 362(b)(3) applies.

The perfection would have occurred just before the bankruptcy filings, for an antecedent debt. Some of the transfers (i.e., attachment       4 ABR 334  of security interests) may be preferential. 11 USC 547(b) and (c)(B)(3).

     4. CONCLUSION - There are no material facts in dispute, and this matter is ripe for resolution on motions for summary judgment.

The Washington state fish processor liens claimed by the Fishermen under RCW 60.13.010 et seq did not attach to the flat fish aboard the Atlas on about May 3, 1995. Thus, they have no interest which would prime a security interest of State Street Bank. In the alternative, between Alaska and Washington fish processing lien laws, it is more rational to apply AS 34.35.020 et seq than the Washington statutes.

There are no maritime liens in favor of the seamen aboard the Atlas which attach to the flat fish. Treating CIT's motion as one for summary judgment, it will be denied.

State Street Bank had allowed the debtors' attorneys and professionals to carve out some of the cash collateral from use of the flat fish sale proceeds for professional fees. The Fishermen opposed this, and the attorneys were to disgorge if the Fishermen prevailed. Since the bank prevails, the disgorgement will not be ordered so long as my ruling stands.

DATED: May 10, 1996

HERBERT A. ROSS
U.S. Bankruptcy Judge