Adams Offshore, Ltd. v. Con-Dive, LLC et al

Filing 311

ORDER granting in part 251 Adams' motion to recover custodia legis costs. Blake is ordered to reimburse Adams the sum of $206,463.21. Cashman is to reimburse Adams the sum of $5,898.95. To the extent Adams seeks additional or differ ent relief, its motion is denied. No further order shall be forthcoming from the Court except upon application by any party for final judgment as prescribed by Federal Rule of Civil Procedure 58. The Clerk is directed to close the file. Signed by Chief Judge William H. Steele on 5/16/2011. (mbp)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
ADAMS OFFSHORE, LTD.,

)
)
)
)
) CIVIL ACTION 09-0378-WS-B
)
)
)
)

Plaintiff,
v.
CON-DIVE, LLC, et al.,
Defendants.

ORDER
This matter is before the Court on the motion of the plaintiff Adams Offshore, Ltd.
(“Adams”) to recover custodia legis costs from claimants Blake Marine Group (“Blake”)
and Cashman Equipment Corporation (“Cashman”). (Doc. 251). The parties have
submitted briefs and evidentiary materials, (Docs. 251, 257, 270, 293-95, 301-02, 305),
the Court conducted a hearing to receive additional evidence, and the matter is ripe for
resolution.

BACKGROUND
The subject property (“the Equipment”), a highly specialized diving system owned
by defendant Oceanagrafia S.A. C.V. (“OSA”) and worth millions, was aboard a vessel
owned by intervenor McDermott Gulf Operating Company (“McDermott”) and chartered
by defendant Con-Dive, LLC (“Con-Dive”). As recounted more fully elsewhere,1
McDermott terminated the charter party for non-payment as the vessel lay in Mexican
waters. When McDermott refused to surrender the Equipment to OSA, OSA filed a
criminal complaint, which triggered a government investigation. A Mexican district

1

McDermott Gulf Operating Co. v. Con-Dive, LLC, 2009 WL 1537871 (S.D. Ala. 2009).

[1]

attorney boarded the vessel and ordered McDermott to transfer the Equipment to another
vessel pending investigation. McDermott not only refused to comply with this lawful
order but affirmatively prevented removal from being accomplished. McDermott did not
challenge the order administratively or judicially but simply ignored it and sailed the
vessel to Mobile in order to arrest and attach the Equipment here. On OSA’s motion to
vacate, the Court found these facts and ruled that they furnished grounds for an equitable
vacatur of the attachment. Id. at *3-6.2 The Eleventh Circuit affirmed, holding that the
Court had power to vacate attachment on equitable grounds and did not abuse its
discretion in doing so. McDermott Gulf Operating Co. v. Con-Dive, LLC, 371 Fed.
Appx. 67 (11th Cir. 2010).
The Court’s order vacating arrest and attachment was entered on May 29, 2009.
Adams filed this action on June 25, 2009 and sought attachment of the Equipment. The
Equipment was still in the district because McDermott’s motion to stay the Court’s
vacatur order pending appeal was under consideration and the vacatur order was
temporarily stayed pending resolution of the motion to stay. The Court issued Adams’
requested order of maritime attachment on Friday, June 26 and its order denying
McDermott’s motion for stay pending appeal on Monday, June 29. The Marshal
perfected the attachment on June 30. Blake filed its complaint in intervention, including
Rule B attachment, on July 14, and Cashman followed suit on July 15.
OSA eventually moved for vacatur of the attachment, which the Court granted. In
short, the Court ruled that the conduct of Adams, Blake and Cashman in attaching the
Equipment was an inequitable attempt to claim for themselves the benefit of
McDermott’s inequitable conduct, of which they were fully aware when they attached the
Equipment. (Doc. 229). Because the Equipment was released and never sold, there is no

2

The Court vacated the arrest of the Equipment because McDermott had no maritime
lien. Id. at *6-7.

[2]

fund out of which the custodia legis fees may be paid, precipitating this fight over
allocation.
The Equipment was offloaded from McDermott’s vessel between July 29 and
August 1, 2010. McDermott filed a motion and amended motion seeking recovery of its
alleged custodia legis costs incurred between Adams’ June 30 attachment and the August
1 completion of offloading, on the theory that it effectively served as an involuntary
custodian during this period, since the attachment precluded its vessel from leaving port
until the Equipment was offloaded. (Docs. 79, 114). The Court recently entered an
agreed order dismissing McDermott’s custodia legis claims against Adams, Blake and
Cashman and also dismissing Adams’ claim, contained in the pending motion, for
custodia legis fees as against McDermott. (Doc. 290). Except for McDermott’s claim
against Blake, all of the dismissed claims were resolved by settlement; McDermott’s
claim against Blake was dismissed pursuant to Rule 41. (Doc. 289 at 1-2). This
resolution leaves for consideration only Adams’ claim against Blake and Cashman for
custodia legis fees.
Adams initially claimed in excess of $329,000 in custodia legis fees. (Doc. 251 at
1). Before the hearing, Adams lowered its demand to $300,132.96. (Doc. 293 at 3).
Following the hearing, Adams dropped its claim again, to $281,761.11. (Doc. 301 at 2,
10). Only the latter figure remains at issue.

DISCUSSION
The local rules provide that “[i]ntervenors under this rule shall be liable for costs
together with the party originally effecting seizure on any reasonable basis determined by
the court. Intervenors may be required by the Marshal to advance their share of
reasonable accrued costs and reasonable unaccrued advance costs, giving due deference
to the respective amounts of the various claims. Relief from such assessment may be
granted by the court upon motion.” LAR 6(c) (emphasis added). The parties agree that
the Court has wide discretion to impose any reasonable allocation of custodia legis fees
[3]

as among Adams, Blake and Cashman. (Doc. 251 at 5; Doc. 257 at 1; Doc. 294 at 5;
Doc. 295 at 7).

I. Allocation Method and Adjustments.
The local rule, quoted above, indicates that the relative size of the parties’ claims
should be considered in assigning responsibility for costs. According to Blake, the model
local admiralty rules affirmatively require an allocation on this basis. (Doc. 295 at 8).
See also Beauregard, Inc. v. Sword Services L.L.C., 107 F.3d 351, 353 n.8 (5th Cir. 1997)
(“[A]n intervenor with a very small claim might not be forced to bear the same
proportion of the cost of maintenance as a claimant with a large claim. In such
circumstance, costs might be divided according to the relative size of each party’s
claim.”). A number of cases cited by the parties have allocated on this basis. E.g.,
Dedolph v. Pacatlantic Fisheries, Inc., 2000 WL 33302239 at *3 (W.D. Wash. 2000);
Hvide Marine, Inc. v. M/V Pacific Mako, 1998 WL 1108952 at *2 (S.D. Ga. 1998).
The size of the parties’ claims, as reflected in their demands, is as follows:
Adams

$7,000,000

Blake

$60,647,834

Cashman

$1,700,000

(Doc. 1 at 6; Doc. 20 at 4, 5, 6; Doc. 23 at 6). Utilizing the relative size of claims as
favored by these authorities and others cited by the parties leaves Blake holding most of
the bag. Understandably, Blake struggles to escape this measure.
In its post-hearing brief, Blake asserts that Adams should absorb all of its custodia
legis costs because, as the first to attach, its claim had priority over those of Blake and
Cashman. (Doc. 302 at 2-3). In the arrest context, the Eleventh Circuit has made clear
that “all claimants share in the administrative expenses,” Donald D. Forsht Associates,
Inc. v. Transamerica ICS, Inc., 821 F.2d 1556, 1561-62 (11th Cir. 1987), which would
preclude a 100% allocation to Adams. Blake, however, argues that attachment differs
from arrest because all lienors of equal rank share pro rata, while the first attaching party,
[4]

given its priority over later attaching parties, benefits disproportionately or – depending
on the size of its successful claim compared to the value of the vessel – exclusively.
Blake’s argument is interesting, but it comes too late, as the briefing on all issues other
than the reasonableness of Adams’ claimed expenses was closed at the hearing. Blake
offers no reason it could not have timely raised this argument in either of its pre-hearing
briefs, and the Court will not consider it now. The Court thus turns to Blake’s timely
arguments.3
First, Blake asserts that the local rule actually “contemplate[s] equal allocation.”
(Doc. 295 at 7). Blake does not explain how it derives this proposition, which is plainly
contradicted by the rule’s text. Moreover, the model local rules which Blake offers as an
alternative themselves “require sharing of custodial expenses for intervention in
proportion that the intervenor’s claim bears to the sum of all the claims.” (Id. at 8
(internal quotes omitted)).4
Second, Blake proposes that the allocation be based, not on the full amount
claimed, but only on “hard damages.” (Doc. 295 at 7-8). According to Blake, its “hard”
damages are limited to $950,000 (consisting of a forfeited down payment on the purchase
of a derrick barge and crane), perhaps amplified by other expenses totaling $371,629.
(Id. at 7, 8-9). Over $58 million of Blake’s claim, which it now deems “soft,” is for

3

Blake should not assume its argument would have carried the day had it been timely
asserted. As in the arrest context, “the possibility of recovery served as a sufficient incentive to
cause each claimant to … intervene in the action …. Pursuit of this possibility necessarily
carries with it an attendant responsibility to preserve the property, for without a preservation of
the property no recovery is even possible.” Forscht, 821 F.2d at 1562 n.8. Blake pursued the
possibility of recovery and thereby incurred an attendant responsibility to preserve the
Equipment.
4

This case presents a prime example of the grossly disparate claims which the Fifth
Circuit in Beauregard contemplated as appropriate for non-equal allocation. Blake’s claim
represents 87.5% of the total – or 35 times Cashman’s claim – yet Blake insists it should not pay
a penny more than Cashman.

[5]

unpaid net charter hire due to OSA’s breach of a maritime contract, which called for hire
at the rate of $40,000 a day for 60 months. (Doc. 20 at 2-3).
Notably, Blake offers no authority for the proposition that only “hard” damages
count, contenting itself to suggest obscurely that the Court “should look behind the bare
allegations of the complaint, much the same as the analysis in [sic] amount in controversy
for removal and remand.” (Doc. 295 at 8). The Court rejects this argument as
unsupported by authority or even an explanation why the removal rule should be
imported to the custodia legis context.
Nor would the removal scenario Blake proposes advance its position. When a
state complaint includes a specific dollar demand, that demand controls for removal
purposes unless the plaintiff establishes to a “legal certainty” that he cannot recover the
amount claimed (if over $75,000) or the defendant establishes to a legal certainty that the
plaintiff, if successful, must recover more than the amount claimed (if under $75,000).5
By Blake’s own argument, then, its $60 million-plus demand would control for allocation
purposes unless Blake showed to a legal certainty that it could not recover this amount.
Blake poormouths its claim, saying it is not “likely” to recover $60 million, (Doc. 257 at
3), but it does not come close to showing to a legal certainty that it could not recover its
demand.
Unable to reduce its own claim, Blake turns to increasing the size of Adams’
claim. Most of its arguments, however, as well as those of Cashman, center on
McDermott, not on Adams. They reason as follows: (1) McDermott cannot be required
to contribute to Adams’ custodia legis fees because it is no longer a party to the lawsuit;
(2) McDermott is no longer a party because Adams and McDermott settled their claims
against each other; (3) Adams benefited from the dismissal, since it resolved

5

Mitchell v. Brown & Williamson Tobacco Co., 294 F.3d 1309, 1315 (11th Cir. 2002)
(demand above $75,000); Burns v. Windsor Insurance Co., 31 F.3d 1092, 1095 (11th Cir. 1994)
(demand below $75,000).

[6]

McDermott’s claim against Adams; (4) but Adams did not obtain reimbursement from
McDermott for any of Adams’ custodia legis expenses; and (5) Adams should therefore
be tabbed with the allocation that would have fallen to McDermott had it remained a
party. (Doc. 294 at 5; Doc. 295 at 3-4). While there may be other weaknesses in this
argument, the dispositive one is that McDermott, had it remained a party, would not be
subject to any allocation of Adams’ custodia legis expenses. Thus, Adams’ allocation
will not be increased to account for McDermott’s non-existent allocation.
Blake and Cashman first argue that Adams’ claim should include the value of
McDermott’s claim. Even if successful, this argument would do little to dilute the shares
of Blake and Cashman, since McDermott’s claim in intervention was only $1,024,000.6
But the argument cannot succeed, because McDermott does not stand in the same
position as the remaining parties. McDermott did intervene, but not to press a claim
against the Equipment or its owner. Instead, McDermott asserted a claim only against
Adams, Blake and Cashman, for its costs as involuntary custodian of the Equipment.7
McDermott did not seek sale of the Equipment but only a designation of its claim as
custodia legis so as to be taxed against the proceeds of any sale engineered by the
attaching parties, just as any unpaid provider of custodial services might do. Under
Blake’s and Cashman’s view, any such provider, by the act of intervening in order to be
paid its due, would have its legitimate bill for services effectively written down merely
because it had the audacity to seek payment from unwilling creditors. Blake and
Cashman have advanced no discernible justification for such a result, which the Court
declines to accept.

6

(Doc. 114 at 6-7). Adams and Blake describe McDermott’s claim as just over
$1,286,000, (Doc. 293 at 2; Doc. 295 at 10), but they have improperly added together two
explicitly alternative demands for relief. (Doc. 114 at 5-7).
7

Adams’ initial assertion that “McDermott joined in the attachment of the [Equipment],”
(Doc. 251 at 4), is incorrect, as Adams appears to concede. (Doc. 270 at 1).

[7]

Blake and Cashman next propose the remarkable solution that Adams be tabbed
with most or all of the custodia legis expenses because, but for McDermott’s inequitable
conduct in bringing the Equipment to Mobile, they would not have been tempted to
engage in their own inequitable conduct by bootstrapping on McDermott’s. (Doc. 294 at
4; Doc. 295 at 4, 7).8 The suggestion is unaccompanied by any citation to authority and
by no argument save a general invocation of “equity.” McDermott’s conduct was indeed
inequitable, as the Court has previously determined, but that conduct did not cause
Adams, Blake or Cashman to attach the Equipment. These parties were not tricked by
McDermott into innocently attaching the Equipment. Rather, as the Court ruled in
vacating their attachments, they made their own independent decisions to attach the
Equipment with full knowledge that McDermott had inequitably brought it into the
District. McDermott’s prior and independent inequitable conduct furnishes no grounds to
relieve Blake and Cashman, in whole or in part, of the consequences of their own
inequitable conduct.
In a related vein, Blake argues that McDermott (and hence Adams) should be
tabbed with the entire cost of removing the Equipment from the vessel because the
removal benefited McDermott. The idea is that McDermott desired that the Equipment
be removed, both because the charter party had ended and because McDermott could not,
after attaching and arresting the Equipment, sail its vessel without offloading it. Blake
concludes that the parties herein saved McDermott the expense of removing the
Equipment itself, resulting in an unjust windfall to McDermott. (Doc. 257 at 4; Doc. 295
at 3).
As to offloading incident to arrest and attachment, once the Court denied
McDermott a stay of its vacatur order pending appeal on June 29, McDermott had no
interest in offloading the Equipment based on its vacated arrest and attachment. As to the
8

To be fair, this was also Adams’ position prior to its settlement with McDermott. (Doc.
251 at 5-6).

[8]

charter party, Blake relies on two provisions which plainly do not impose any duty on
McDermott, as opposed to Con-Dive, to offload the Equipment. (Doc. 51, Exhibit A at
4). Nor has Blake explained why McDermott or OSA – a Mexican concern working
primarily on Pemex contracts and with no Mobile connection – would desire the
Equipment to be offloaded in Mobile rather than sailed elsewhere. Blake has shown no
benefit to McDermott from the Equipment’s offloading and no unjust windfall to be
undone by an allocation of custodia legis expenses to McDermott.
Blake also complains that McDermott delayed the offloading by refusing access to
the Equipment and by requiring a Rule 34 motion to inspect. (Doc. 295 at 6). The file
reflects that Blake did not request an inspection of the Equipment until July 15 and that
McDermott agreed on July 23. (Doc. 29 at 2; Doc. 50 at 1). Blake does not explain how
this constitutes unreasonable delay; neither does it identify or quantify the harm, if any,
from this brief interval. No allocation of expenses to McDermott is justified by this
circumstance.
Blake urges that McDermott caused further delay because, the Equipment having
arrived improperly, Customs issues complicated the offloading. (Doc. 295 at 6, 9).
While McDermott’s inequitable conduct resulted in the Equipment being in the District
without legal permission to land, as noted above McDermott’s conduct did not cause or
force the remaining parties to attach the Equipment. Having elected to do so despite
knowing of the Court’s judicial finding of inequity, they took the Equipment as they
found it, including its Customs difficulties.
Finally, Blake argues that Adams “excluded” Blake from decisions concerning
removal and thereby delayed the process and prevented Blake from securing better prices
than Adams obtained. (Doc. 295 at 2, 6, 9). Blake has not shown that Adams’ conduct
delayed offloading or that Blake was harmed thereby. As discussed in Part II, Blake has
not shown that its involvement would have resulted in lower costs.

[9]

The Court concludes that the appropriate allocation of Adams’ custodia legis
expenses is in proportion to the size of the claimants’ claims. Thus, Blake is assigned
responsibility for 87.5% of those expenses, Adams 10%, and Cashman 2.5%.

II. Amount of Approved Custodia Legis Expenses.
The parties agree that only expenses necessarily or reasonably incurred and
reasonable in amount may be recovered as custodia legis expenses and that Adams bears
the burden of proof. As noted, Adams claims $281,761.11. Cashman affirmatively
agrees with the reasonableness and necessity of most components of this figure. Blake
challenges each component, suggesting no recovery at all and, in the alternative, a
reduced sum of $65,281.02. (Doc. 302 at 9-10).
The claimed expenses may be summarized as follows:
Marshal’s fees

$30,301.15

Survey

1,037.50

Shifting vessel to new custodian’s facility

10,922.14

Dockage at new facility pending offloading

20,104.00

Obtaining Customs authorization to unload

14,538.07

Physical removal of Equipment

38,061.29

Oversight of removal process

77,964.41

Storage and custodial fees

59,230.53

Insurance

29,602.00

TOTAL

$281,761.11

Shifting the vessel and dealing with Customs was accomplished through Central
Dispatch (“Central”). Dockage, the physical removal of the Equipment, and postremoval storage and custodial services were provided by Core Industries (“Core”).
Oversight was by Malin International Ship Repair & Drydock (“Malin”).
The vessel was berthed at Atlantic Marine. Atlantic Marine bid approximately
$110,000 just to remove the Equipment from the vessel. Atlantic Marine advised that an
[10]

expert in diving systems, such as Malin, would also be required. Moreover, since
Atlantic Marine had no storage facility, the Equipment would have to be transported
overland after removal, risking damage to it. The charges of Central and Core for
shifting the vessel, dockage and physical removal was approximately $69,000 and so
obviously a better deal for the same result, with less risk.
The charges of Core and Central were at or below their standard. Blake’s
representative testified that he could have obtained these same services from these same
providers for 10 to 20 per cent less, which Core’s representative denied. The Court finds
the testimony of Blake’s representative speculative and does not credit it. Nor has Blake
shown that any cost over the lowest possible cost must be deemed unreasonable. These
charges were necessarily incurred and reasonable in amount.
The Equipment is a large, complex and expensive diving system and, as Atlantic
Marine also recognized, its removal could not be properly undertaken without assistance
from one with expertise in such systems. Malin has such expertise and in fact oversaw
the loading of the Equipment on the vessel at the commencement of the charter party.
Blake does not deny that Malin’s services were appropriately utilized. Malin lost money
on the job. To the extent Blake’s representative claims he could have gotten Malin to do
the work at an even greater loss, the Court rejects his testimony as speculative and
lacking credibility. These charges were necessarily incurred and reasonable in amount.
The survey was needed in order to assess the technical difficulties of removal, and
dealing with Customs was required because the Equipment had not been cleared for
import. The Court finds the amount of these expenses to be reasonable, rejecting Blake’s
tepid argument to the contrary.
It was obviously necessary for the Equipment to be stored, and Blake does not
suggest otherwise. Core provided 10,000 square feet of storage, half of it inside with dehumidifier and all of it with power, for $3,000 a month – a blended rate of $0.30 per
square foot, a small fraction of Core’s standard rate. To the extent Blake speculates it

[11]

could have negotiated a better rate, the Court again rejects the proposition and finds the
actual charge to be reasonable.
On August 26, 2009, Adams procured insurance on the Equipment for a yearly
premium of $27,725. Adams renewed the policy approximately one month before the
Court vacated the attachments in September 2010, for which period Adams seeks an
additional $1,877. Adams’ representative conceded the insurance expense was “to some
extent superfluous,” since the Equipment was stored at Core and Core maintained
insurance. Adams argues the expense is nevertheless a proper custodia legis charge
because it “had no way of ensuring that Core’s insurance premiums where [sic] paid or
that Core’s policies otherwise stayed in place.” (Doc. 301 at 7). The Court is not
persuaded that a charge of almost $30,000 was a reasonable response to the merely
theoretical possibility that Core would not maintain its insurance. The Court rejects the
insurance charge in its entirety as unreasonably incurred.
Adams claims Marshal’s expenses of over $30,000, which it says covers three
months. Adams provided no documentation of this expense. The Court rejects Blake’s
suggestion that it exclude the Marshal’s expense in its entirety for failure to produce
documents showing the expense was incurred. The Court accepts as credible the
testimony of Adams’ representative that the Marshal charged this amount for its services
and that Adams paid this amount in full. However, the claimed amount is subject to
substantial revision downward.
Adams states that the Marshal provided the “same services” that Core ultimately
provided, i.e., “storage and custodial services,” but at twice the cost. (Doc. 301 at 4). A
reasonable plaintiff, therefore, would have transferred the Marshal’s services to Core at
the earliest possible opportunity. Adams reached agreement with Core to store the
Equipment in late July, but it did not move to have Core appointed as substitute custodian
until mid-September. (Doc. 73). In the absence of explanation for this delay, which
Adams does not provide, the Court finds the delay unreasonable. The first four weeks of
the Marshal’s charges is reasonable in amount, because Core was not yet involved. After
[12]

that, Core was providing storage services, so Adams cannot recover for the redundant
storage services provided by the Marshal. Similarly, after four weeks Core should have
been providing substitute custodial services, and Adams can for this period recover only
the $500 per week that Core charged.
The Marshal’s charges work out to $2,525 per week. The first four weeks of these
charges, or $10,100, are reasonable. For the remaining eight weeks of the Marshal’s
involvement, only $500 a week is reasonable. The portion of the Marshal’s charges that
can be charged as reasonable custodia legis expenses is thus $14,100.
The total of the claimed expenses that are properly chargeable as reasonable
custodia legis expenses is fixed at $235,957.96. Adams will absorb 10% of this amount.
Blake will reimburse Adams 87.5% of this amount, and Cashman will reimburse Adams
2.5% of this amount.

CONCLUSION
For the reasons set forth above, Adams’ motion to recover custodia legis costs is
granted in part. Blake is ordered to reimburse Adams the sum of $206,463.21.
Cashman is ordered to reimburse Adams the sum of $5,898.95. To the extent Adams
seeks additional or different relief, its motion is denied. No further order shall be
forthcoming from the Court except upon application by any party for final judgment as
prescribed by Federal Rule of Civil Procedure 58. The Clerk is directed to close the file.
DONE and ORDERED this 16th day of May, 2011.

s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE

[13]