Opinion
CIVIL ACTION NO: 02-0658, SECTION: "R"(3)
November 22, 2002
ORDER AND REASONS
Before the Court is the motion of plaintiffs Boland Marine and Manufacturing Company, LLC and the Board of Commissioners for the Port of New Orleans for interlocutory sale of the M/V A.G. NAVAJO. The Court GRANTS plaintiffs' motion because defendant failed to file a claim properly under the requirements of Supplemental Admiralty and Maritime Claims Rule C(6)(b) and, in any event, plaintiff meets the criteria required for an interlocutory sale.
For the Court's resolution of the Rule C(6)(b) issue, see Order and Reasons, Nov. 21, 2002, Rec. Doc. No. 34.
I. BACKGROUND
This suit arises out of two separate allisions that allegedly occurred when the tug A.G. NAVAJO and its tow struck the Perry Street Wharf in the Port of New Orleans and the GORDON GUNTER, a vessel docked at the wharf. On behalf of plaintiffs, the U.S. Marshal arrested the NAVAJO on May 17, 2002. Charles Augustine was appointed substitute custodian of the vessel by court order on June 10, 2002. The vessel is currently berthed alongside at Augustine dock facility, Rose Towing, Inc., in the Harvey Canal, a busy waterway. Plaintiffs' marine surveyor noted that the vessel floated alongside two derrick barges. ( See Pls.' Ex. 1 at 3.) The vessel is not working or earning revenue, there is no crew on board, and no maintenance work has been performed for months. ( See id.) Plaintiffs' marine surveyor stated that the aft main deck and aft controls are in poor condition. ( See id., photographs 4-5.) The last entry in the engine room logbook was on February 25, 2002. ( See id. at 3.) Defendant American Gulf Towing, Inc. admits that it is not currently operating the vessel and has no plans to do so in the immediate future. American Gulf asserts that it has been seeking buyers for the vessel. As of July 11, 2002, plaintiffs' marine surveyor valued the vessel at $300,000. ( See id.)
Since the vessel's arrest, Boland Marine asserts that it has paid $75.00 per day in custodial expenses and $23.00 per day in port risk insurance coverage, as well as $13,000 in additional custodial expenses. American Gulf claims that the vessel is berthed at the same facility where it was previously docked, and that the daily custodial expenses are the same as were incurred prior to its arrest.
American Gulf filed a claim to the vessel but has not released it by posting a bond or any other form of security. American Gulf also filed a motion for summary judgment against plaintiffs, which this Court denied. American Gulf requests that, should the Court order an interlocutory sale, American Gulf be granted ten days to decide whether to post security to avoid the sale. Plaintiffs agree to this request.
For the following reasons, the Court GRANTS plaintiffs' motion for interlocutory sale and GRANTS American Gulf's request to have ten days to decide whether to post security to avoid the sale.
II. DISCUSSION
Under Supplemental Admiralty Rule E(9)(b), interlocutory sale of a vessel is permitted as follows:
If property that has been attached or arrested is perishable, or liable to deterioration, decay, or injury by being detained in custody pending the action, or if the expense of keeping the property is excessive or disproportionate, or if there is unreasonable delay in securing the release of property, the court, on application of any party . . . may order the property or any portion thereof to be sold . . . .
28 U.S.C.S.R. E(9)(b). "In order to prevail, the lienors need only show one of the three criteria." Merchants Nat'l Bank of Mobile v. Dredge GENERAL G.L. GILLESPIE, 663 F.2d 1338, 1341 (5th Cir. 1981). Plaintiffs argue that each of the three criteria is met in this case. The Court finds that plaintiffs have shown unreasonable delay and deterioration, decay, or injury, but have not proved excessive or disproportionate expenses.
A. Unreasonable Delay
Courts have held that a lapse of three and one half months or more in securing the release of a vessel after its arrest constitutes an unreasonable delay. See Silver Star Enters., Inc. v. M/V SARAMACCA, 19 F.3d 1008, 1014 (5th Cir. 1994) (finding delay of seven months unreasonable) (citing with approval Ferrous Fin. Serv. Co. v. O/S Arctic Producer, 567 F. Supp. 400, 401 (W.D. Wash. 1983), in which delay of four months was held unreasonable); Merchants Nat'l Bank, 663 F.2d at 1342 (finding delay of eight months unreasonable, and defendants' filing of motion to vacate and invalidate seizure in the interim did not overcome finding of unreasonable delay); Bollinger Quick Repair, LLC v. Le Pelican MV et al., 2000 U.S. Dist. LEXIS 9084, *3-6 (E.D. La. 2000) (finding delay of four months unreasonable and disregarding defendant's argument that it had been trying to find a buyer of the vessel in the interim); Neptune Orient Lines v. Halla Merchant Marine Co., 1998 U.S. Dist. LEXIS 3745, *21 (E.D. La. 1998) (finding delay of three and one half months unreasonable); Triton Container Int'l Ltd. v. Baltic Shipping Co., 1995 U.S. Dist. LEXIS 8037, *3-4 (E.D. La. 1995) (finding delay of four months after defendant substituted another vessel as security unreasonable).
Courts have found a delay reasonable when the delay was very brief and/or when the shipowner demonstrated active efforts to secure the release of the vessel. See Action Marine, Inc. v. M/V NORSEMAN et al., 1997 U.S. Dist. LEXIS 5898, *3 (E.D. La. 1997) (finding five-month delay not unreasonable when parties were actively attempting to resolve the terms of the vessel's release); Entron, Ltd. et al. v. Crane Vessel Titan 2 et al., 1995 U.S. Dist. LEXIS 6005, *8-9 (E.D. La. 1995) (finding one-month delay reasonable because period was brief and because shipowner provided affidavit stating it had already obtained a letter of intent to refinance its debts and specifying a date by which owner expected to secure vessel's release).
In this case, plaintiffs filed their motion for interlocutory sale about four months after the NAVAJO was arrested. In its opposition, American Gulf provided no evidence of active efforts to secure the vessel's release or any date by which it expects to do so. American Gulf seems to assert that because it filed a motion for summary judgment, the outcome of which could have affected the plaintiffs' motion for interlocutory sale, its delay is reasonable. The filing of a substantive motion after a vessel has been arrested has not been held to overcome a finding of unreasonable delay. See Merchants Nat'l Bank, 663 F.2d at 1342. Regardless, American Gulf did not file its motion for summary judgment until September 24, 2002, over four months after the vessel was arrested.
American Gulf also states that it has been seeking buyers for the vessel and that an interlocutory sale would likely prejudice American Gulf in its attempts to obtain market value for the vessel. This type of argument was unavailing in Bollinger Quick Repair, 2000 U.S. Dist. LEXIS 9084 at *3-6. Moreover, the district court has upheld such an argument only when the delay was one month, and the shipowner provided an affidavit stating it had already obtained a letter of intent to refinance its debts and specifying a date for the vessel's release. See Entron, 1995 U.S. Dist. LEXIS 6005 at *8-9. American Gulf's unsubstantiated allegations of efforts to secure buyers are insufficient, and American Gulf has provided no evidence of efforts to provide some other form of security.
Accordingly, the Court finds that American Gulf unreasonably delayed in not securing the release of the M/V A.G. NAVAJO for four months after its arrest and prior to plaintiffs' filing of a motion for interlocutory sale. While plaintiffs need only prove one criterion under Rule E(9)(b), the Court will briefly discuss deterioration and excessive or disproportionate expense.
B. Deterioration, Decay, or Injury
Plaintiffs hired a marine surveyor to inspect the NAVAJO. As of July 11, 2002, the surveyor stated that the vessel was moored near two floating derrick barges in a busy waterway, that the vessel was not working or earning revenue, that there was no crew on board, that no maintenance work had been performed lately, and that the aft main deck and aft controls were in poor condition. ( See Pls.' Ex. 1 at 3, photographs 4-5.) American Gulf concedes that the vessel is not operating and that it has no plans to use it in the immediate future. American Gulf concludes, therefore, that the vessel is not at risk of deteriorating because it is in the same condition it was in prior to its arrest and because it is berthed in the same harbor facility. The Court finds this argument illogical. That the vessel was previously berthed at this same facility and was not being used has no bearing on the deterioration, decay, or injury the vessel is likely to suffer, or has suffered, since its arrest. Its location in a busy waterway next to floating barges and its continued exposure to the elements with no maintenance or active use is likely to cause deterioration, decay, or injury. American Gulf has provided no evidence to refute this claim.
C. Excessive or Disproportionate Expense
Since the NAVAJO's arrest, Boland Marine asserts that it has paid $75.00 per day in custodial expenses and $23.00 per day in port risk insurance coverage, as well as $13,000 in additional custodial expenses, which totals about $31,000 to date. Plaintiffs argue, without citation to any authority, that these expenses are excessive and disproportionate to the value of the vessel, which their marine surveyor estimates is $300,000. Plaintiffs also provide no invoices, affidavits, or other evidence to support their claims of expenses. In opposition, American Gulf asserts that the expenses of harboring the vessel before its arrest were the same as they are now, with the exception of the $23.00 per day port risk insurance.
Cases in which courts have found custodial expenses to be excessive or disproportionate to the vessel's value involved much higher figures than in this case. See Merchants Nat'l Bank, 663 F.2d at 1342 (finding monthly custodial costs of $17,000 excessive); Freret Marine Supply v. M/V ENCHANTED CAPRI et al., 2001 U.S. Dist. LEXIS 8161, *13, *15-16 (E.D. La. 2001) (finding daily custodial costs of $1,500 to maintain cruise ship valued at about $12 million excessive). In light of these cases, the Court finds that plaintiffs have failed to show how daily expenses of about $100 are excessive or disproportionate to the vessel's value.
III. CONCLUSION
Plaintiffs Boland Marine and Manufacturing Company, LLC and the Board of Commissioners for the Port of New Orleans have shown that they are entitled to an interlocutory sale of the M/V A.G. NAVAJO based either on American Gulf's unreasonable delay in securing the release of the NAVAJO or on the vessel's potential for deterioration, decay, or injury. Accordingly, the Court GRANTS plaintiffs' motion for an interlocutory sale and enters the following order.
IV. ORDER
IT IS ORDERED that American Gulf has ten (10) days from the date of this order to post security to avoid the interlocutory sale;
If American Gulf fails to post security by such date, IT IS FURTHER ORDERED that the U.S. Marshal for the Eastern District of Louisiana is directed to sell the M/V A.G. NAVAJO at public auction to the highest bidder, free and clear of all liens, preexisting claims, and encumbrances on the vessel. The auction shall be held on January 9, 2003 at 10:00 A.M., in the lobby of the United States Courthouse, 500 Camp Street, New Orleans, Louisiana, upon notice and the terms of the sale contained below;
IT IS FURTHER ORDERED that plaintiffs will advertise notice of the sale on three different days in the New Orleans Times-Picayune pursuant to Local Admiralty Rule 64.6, the first notice being published at least ten (10) days and the last at least three (3) days before the date of the sale. The notice will state the time and place where the auction will be conducted and will provide information on how prospective bidders may board the vessel for purposes of inspecting it. The Notice will also advise that the highest bidder will be required to deliver to the U.S. Marshal at the close of sale, in cash or by certified check or bank check drawn on a local bank, a deposit of the greater of $500 or ten percent (10%) of the bid price, the balance to be paid in cash or by certified or bank check drawn on a local bank within ten (10) days after entry of the confirmation of the sale by this Court;
IT IS FURTHER ORDERED that plaintiffs may, at their option, advertise the auction in another publication of their choosing, with the expenses of publication to be charged as a custodia legis expense;
IT IS FURTHER ORDERED that the minimum opening bid for the sale of the M/V A.G. NAVAJO be set at $200,000;
IT IS FURTHER ORDERED that after the Court has confirmed the sale of the vessel, and the purchaser has made full payment, the U.S. Marshal shall deliver a Bill of Sale for the M/V A.G. NAVAJO to the confirmed purchaser and the vessel shall be conveyed free and clear of all liens, claims, and encumbrances of whatever nature whatsoever;
IT IS FURTHER ORDERED that all charges incurred or commissions charged by the U.S. Marshal and all court-approved custodia legis expenses shall be taxed in priority against the proceeds of the sale or against the maritime lienors and claimants if the sale proceeds are insufficient;
IT IS FURTHER ORDERED that the U.S. Marshal shall deposit any proceeds of the sale into the Court registry pending any further order of the Court. The Clerk of Court is directed to deposit the funds in an interest bearing account; and
IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this case for such further proceedings as may be appropriate.