Court Orders Sale of Seized Vessel Following Default and Unnecessary Delay

Judge Ivan Lemelle recently reinforced the old adage, “if you don’t use it, you lose it,” in a suit based upon the alleged breach of a rental agreement between Essex Crane Rental Corp. and Cross Maritime.  Under the agreement, Cross was to provide a 230 ton Manitowoc lift crane, as well as various services and personnel to the DB CROSSMAR 14, in exchange for a monthly rental fee. In filing its verified complaint against the DB CROSSMAR 14, in rem, the Crane, in rem, and Cross Maritime, in personam, Essex alleged that the parties failed to pay properly presented invoices for several months. As of May 2, 2016, Essex alleged that the amounts outstanding totaled approximately $213,000.00.

On June 6, 2016, the Court issued warrants for the arrest of the vessel and the crane.  Essex arranged for Admiral Security Services to be appointed as a substitute custodian and for the vessel to remain at its berth in Houma, Louisiana until such time as the debt could be paid or the vessel could be sold to recoup the debt.  The vessel was subsequently moved to the Port of Terrebonne, to allow the removal of dive equipment belonging to an unrelated party.

Over the course of several weeks, various other creditors came forward to assert interests in the vessel; however, Cross failed to take any action, including even making an attempt to post security for the release of the vessel.

On September 2, 2016, Essex filed a Motion for Default, seeking to have the sale of the vessel set, following publication of notice. Essex argued that Cross’s failure to take any actions toward release of the vessel constituted an unreasonable delay, and also noted that the vessel was accruing $720.00 in custodial costs per day, which amounted to more than $60,000.00 as of September 2, 2016.

In opposing Essex’s motion, Cross asserted that Essex should be made to detail the exact amount of the lien before the vessel was set for sale, and that Cross had been unjustly deprived its ownership interest.  Cross also argued that absent a proper accounting, they could not be expected to determine the amount required to discharge the lien and vacate the vessel’s arrest.

In addressing Cross’s claim that Essex owed it an exact accounting of the amounts owed, the Court disagreed.  Quoting Essex’s brief, the Court noted that Cross had failed to “cite a single case in which a court delayed the sale of a vessel due to the purported need for an accounting of a lien claim or the purported issue of standing to bring a claim.”  The Court also stated that if Cross had wanted to challenge the facts surrounding the vessel’s arrest, it could have filed for an evidentiary hearing under the Supplemental Admiralty and Maritime Claims Rule E(4)(f).

Ultimately, Judge Lemelle determined that the vessel should be sold and confirmed Essex’s Motion for Default based upon the unreasonable delay caused by Cross’s failure to take any action toward achieving the release of the vessel, the risk of deterioration, decay, and/or injury posed by an idle vessel; and, the expense of keeping the vessel under arrest exceeded $17,000.00 per month.

This case highlights a crucial, but often overlooked issue in vessel seizures – what to do with the res after seizure. The instant action shows the necessity of creditors and/or their attorneys, creating a clear plan of action regarding the disposition of a seized vessel, ideally in advance of the seizure, in order to avoid excessive custodial costs. Custodial costs can add up very quickly and can be potentially fatal because those costs could potentially exceed the value of the vessel if unchecked.  This danger may become especially apparent when vessels are seized in ports located significant distances from U.S. Marshall’s offices, or from the base of operations for private custodial services (e.g., Cameron Parish, Louisiana, Port Aransas, Texas). Seizures in distant locations will incur significant charges for custodial travel expenses, for every day the vessel is held.

Essex Crane Rental Corp. v. DB Crossmar 14, et al.