The U.S. Supreme Court issued a decision today in the case of Fane Lozman v. The City of Riviera Beach, Fla. The court ruled 7-2 in favor of Fane Lozman, who argued that his floating home was not a vessel and therefore not subject to arrest under maritime law. The majority opinion authored by Justice Stephen Breyer concluded that not everything that floats is a “vessel” under federal maritime law, and that, from now on, a structure does not qualify as a vessel “unless a reasonable observer, looking to the [structure’s] physical characteristics and activities, would consider it designed to a practical degree for carrying people or things over water.”  The decision and its new articulation of the vessel-status test have far-reaching implications for not only those who own or reside in floating homes, but also for a range of industries dealing with maritime vessels and off-shore and near-shore floating structures, including the equipment finance, energy, insurance and marine supply industries.

Dissenting Justice Sonia Sotomayor, joined by Justice Anthony Kennedy, largely agreed with key elements of the majority decision, such as the Court’s express rejection of an owner’s subjective intent as relevant to the vessel status inquiry and the rejection by the majority of what it viewed as the “if it floats, it’s a vessel” ruling of the court below.  The dissent took issue, however, with the majority’s new “reasonable observer” test for vessel status, likening it to the largely discredited “I know it when I see it” test for obscenity espoused nearly fifty years ago by Justice Potter Stewart.

Vedder Price has a longstanding U.S. and international maritime practice and has been involved in this case for over a year.  Its shareholders Francis X. Nolan, III and John C. Cleary submitted an amicus curiae brief in the case on behalf of The Maritime Law Association of the United States. While not for attribution to any of the firm’s clients, Vedder Price offers these observations and insights about today’s decision. These thoughts are wholly our own and not for attribution to the MLA.

Mr. Nolan is a member of Vedder’s Global Transportation Finance practice and is also a member of the Board of Directors of the Maritime Law Association and Chair of its Standing Committee on Marine Finance. Mr. Nolan stated, “By stating that a watercraft may pass in and out of ‘vessel’ status, today’s decision left lingering questions, such as whether a permanently moored structure or vessel in layup remains a vessel for purposes of vessel documentation. This ambiguity has far-reaching implications for mortgage financing of ships and insurance of ships, as well as the status of the gaming industry’s floating casinos and vessels in long term ‘cold layup.’ I would think this ruling would at least drive mortgage lenders to review and revise their loan covenants.  Also marina operators should be aware that if the ‘reasonable observer’ finds a floating structure not to be a vessel, the owner may enjoy special rights under local landlord and tenant law. The ‘reasonable observer’ standard is not the bright line we had hoped for.”

John C. Cleary, Vedder Price Shareholder in the Litigation Practice Area, in response to the ruling stated: “The Court’s new ‘reasonable observer’ test for vessel status draws upon past precedent and the facts presented in Lozman to provide practical guidance to the maritime community for future cases. It remains to be seen, however, whether the new test will achieve its intended objective of uniformity and clarity on this pivotal issue of maritime law and jurisdiction, or instead will give rise to threshold litigation of the meaning and application of the new vessel status test to particular facts.“

Experts from Vedder Price are available to comment on the Supreme Court’s decision and its implications.