Island Gardens Deep Harbour LLC v. M/Y Deslize et al

Filing 109

ORDER on Substitute Custodian's Motion for Payment of Custodial Fees From Funds in Court Registry. Signed by Judge Jacqueline Becerra on 9/25/2024. See attached document for full details. (nsy)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 22-cv-22991-JB
ISLAND GARDENS DEEP HARBOUR
LLC,
Plaintiff,
FLORIDA AUTO ADVANTAGE, LLC,
Intervening Plaintiff,

v.

M/Y DESLIZE, 1996 112’ Broward Port
House, in rem, et al.,
Defendants.
______________________________________/
ORDER ON SUBSTITUTE CUSTODIAN’S MOTION FOR PAYMENT OF
CUSTODIAL FEES FROM FUNDS IN COURT REGISTRY
THIS CAUSE came before the Court on Substitute Custodian RMK Merrill
Stevens, LLC’s (“RMK”) Motion for Payment of Custodial Fees From Funds in Court
Registry (“Motion”). ECF No. [92]. Plaintiff Island Gardens Deep Harbour LLC filed
a Notice of Joinder and Non-Objection in support of the Motion. ECF No. [93].
Intervening Plaintiff Florida Auto Advantage, LLC filed a response in opposition to
the Motion, and RMK filed a reply. ECF Nos. [97], [[99]. Upon due consideration of
the parties’ submissions, the record, and the relevant legal authorities, for the
reasons explained below, the Motion is granted in part and deferred in part.
I.

PROCEDURAL BACKGROUND
The facts pertinent to the Motion are as follows. On September 21, 2022, the

Court, at Plaintiff’s request, issued an Order Directing the Issuance of the Warrant

for Arrest of Defendant M/Y Deslize. ECF No. [9]. The same day, the Court also
granted Plaintiff’s Motion to appoint RMK as substitute custodian of the M/Y Deslize
(the “Vessel”). ECF No. [8]. In Plaintiff’s Motion to Appoint Substitute Custodian,
Plaintiff stated that the Vessel “will either remain at its current location [at Plaintiff’s
marina] or be moved to [RMK’s facility] in Miami, Florida . . . .” ECF No. [5] at ¶ 4.
The Motion to Appoint Substitute Custodian attached an Affidavit from the
Chief Executive Office of RMK, which stated that the “total charge for [its] services
shall be the fees as set forth in the [attached] schedule . . . .” ECF No. [5-1] at ¶ 1.
The schedule of invoices submitted therewith reflected a total daily charge of
$1,072.42 (i.e., $9.57 per foot per day), 1 id. at 10, which is the same daily custodial
rate charged by the U.S. Marshal. Despite this, the Motion stated that RMK “is
prepared to provide [custodial services] at a cost substantially less than that
presently required by the [U.S.] Marshal.” Id. at ¶¶ 3-4.

The Court’s Order

Appointing Substitute Custodian incorporated this requirement, stating that “the
Substitute Custodian will provide security, wharfage, and routine services for the
safekeeping of the [Vessel] at a cost substantially less than that presently required
by the Marshal.” ECF No. [8].
On October 18, 2022, Intervening Plaintiff filed its Intervening Complaint in
Admiralty. ECF No. [19]. Intervening Plaintiff did not file any objection to the
appointment of RMK, or the proposed charges it previously submitted. On March 8,
2023, the Court entered an Order to Sell Defendant Vessel M/Y Deslize, which

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The Vessel is 112 feet in length.
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granted Plaintiff’s Unopposed Motion for Interlocutory Sale of the Vessel. ECF No.
[48]. In the Order to Sell, which the Court entered with the agreement of the Parties,
the Court stated that “[a]ll reasonable charges incurred by . . . the Court appointed
Substitute Custodian . . . with respect to maintenance and safekeeping of the vessel
and the cost of advertisement for sale by the United States Marshal, shall be expenses
of sale and will be taxed as costs of custodia legis against the proceeds of the sale.”
Id. at ¶ 7. Again, Intervening Plaintiff did not object to or otherwise dispute the
reasonableness of RMK’s charges.
On April 26, 2023, the Vessel was sold via U.S. Marshal sale to Intervening
Plaintiff for $475,000.00. ECF No. [49]. Plaintiff then filed a Motion for Confirmation
of Sale, certifying that no objections to the sale were filed, the deadline to object had
passed, and requesting that the Clerk of Court confirm sale of the Vessel to
Intervening Plaintiff. ECF No. [52]. Accordingly, on May 4, 2023, the Clerk entered
a Confirmation of Sale. ECF No. [53].
Shortly thereafter, a dispute arose regarding payment of RMK’s custodia legis
charges. Plaintiff and Intervening Plaintiff disagreed as to the correct allocation of
responsibility between them for payment of RMK’s fees. As a result, RMK did not
release the Vessel because its custodia legis expenses had not been satisfied, and thus
custodia legis charges continued to accrue.
On October 2, 2023, the Court granted the parties’ Joint Agreed Motion to
Approve Sale of the Vessel, and the Vessel was sold to a third-party purchaser. ECF
No. [90]. RMK released the Vessel from arrest on October 31, 2023. ECF No. [92] at

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3. As such, RMK acted as Substitute Custodian of the Vessel for 396 days. Id.
II.

THE INSTANT MOTION
RMK filed its Motion for Payment of Custodial Fees From Funds in Court

Registry.

ECF No. [92].

The total custodia legis expenses that RMK seeks is

$399,751.58, or $9.01 per foot per day. Id. RMK attests that the custodial services it
provided were for “dockage, security, insurance, electricity (shore power), regular
safety checks and other routine services for the safekeeping of the Vessel.” ECF No.
[92-1] at ¶ 11. RMK also submitted copies of its invoices, which reflect that it stored
the Vessel in the water at its “MS North Yard” and provided “safe harbour [sic] for
2022 Hurricane Season,” but RMK does not explain what such services entailed. ECF
No. [92-1] at 6-40. RMK argues that its charges are reasonable and requests payment
from the monies that Intervening Plaintiff deposited in the Court registry following
its purchase of the Vessel and Court’s Order Approving Sale of the Vessel. 2 ECF No.
[92] at 5.

RMK contends that as substitute custodian, it is entitled to priority

reimbursement from the Vessel’s sale proceeds as an administrative cost. Id.
Intervening Plaintiff filed a Response in Opposition to the Motion. ECF No.
[97]. Intervening Plaintiff argues that it would be inequitable to award RMK the
total costs it seeks because its charges are unreasonable for the services provided. Id.
Intervening Plaintiff contends that the amount requested is excessive because it is
significantly more than Plaintiff charged when it provided dockage and other services

Intervening Plaintiff deposited $62,500.00 after the U.S. Marshal sale, ECF No.
[54], and $412,500.00 as required by the Court’s Order Approving Sale, ECF No. [90].

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to the Vessel, which totaled $5.40 per foot per day, and exceeds the rates charged by
substitute custodians in other cases in this District, which range between $1.25 and
$4.00 per foot per day for custodial costs. Id. at 8.
Intervening Plaintiff also argues that the charges sought are unreasonable
given the nature of the services that RMK provided. Intervening Plaintiff contends
that RMK docked the Vessel “against a seawall on an unused part of the yard” for the
14-month period it acted as Substitute Custodian. 3 ECF No. [97] at 11. Intervening
Plaintiff further complains that there is no evidence that RMK incurred any out-ofpocket costs because it did not submit any “actual invoice[s] for electric consumption,”
and it appears that RMK did not provide security to prevent entry into its shipyard
or the Vessel. Id. Intervening Plaintiff asserts that a reasonable custodial rate in
this case is $3.60 per foot per day. Id.
In its Reply, RMK argues that Intervening Plaintiff is estopped from
challenging its custodia legis rate because Intervening Plaintiff did not previously file
a motion disputing the rate, nor did it attempt to move the Vessel to a less expensive
substitute custodian. ECF No. [99] at 4-6. RMK also argues that the requested costs
are reasonable because it “acts as proxy of the U.S. Marshal” which charges a higher
rate ($9.57 per foot per day) than RMK seeks. Id. at 3. RMK further notes that the
estimate it provided to the Court with Plaintiff’s Motion for Appointment of
Substitute Custodian similarly reflected the higher daily rate of $1,072.42, or $9.57
per foot. Id. Finally, RMK contends that the daily rate it seeks ($9.01 per foot) is

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RMK does not dispute this assertion. See ECF No. [99].
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reasonable because it provided additional services beyond dockage, namely regular
inspections and on-call availability in the event of an emergency, and its rate is
consistent with those charged recently by other substitute custodians in this District
for large vessels, which it asserts range between $6.00 and $19.77 per foot per day.
Id. at 7-10.
III.

ANALYSIS
A substitute custodian is responsible for keeping an arrested vessel “in a safe

and secure manner so as to protect it from injury to end that, whether it be
condemned or restored to the owner, its value to the parties will not have been
impaired by unnecessary deterioration or damage for which the custodian could be
responsible.” Julien v. M/Y Pacific II, No. 09-cv-22457, 2010 WL 11647170, at * 4
(S.D. Fla. July 2, 2010) (citation omitted).

“[S]ervices or property advanced to

preserve and maintain the vessel under seizure, furnished upon authority of the court
or of an officer of the court should be allowed as custodia legis expenses.” Associated
Metals & Mins. Corp. v. Alexander's Unity MV, 41 F.3d 1007, 1018 (5th Cir. 1995)
(cleaned up) (quoting Gen. Elec. Credit & Leasing Corp. v. Drill Ship Mission Expl.,
668 F.2d 811, 816 (5th Cir. 1982)). Custodia legis expenses are entitled to priority
over all lien claims “when the dictates of equity and good conscience so require.”
Dresdner Nat'l Bank AG v. M/V Olympia Voyager, 465 F.3d 1267, 1272 (11th Cir.
2006).

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The Eleventh Circuit has explained that the underlying policy of the custodia
legis doctrine is to “contro[l] custodial expenses and preserv[e] the res for valid
lienholders.” Dresdner, 465 F.3d at 1274-75 (citation omitted). For this reason, courts
require that custodia legis expenses be reasonable. See e.g., Robbie’s of Key West v.
M/V Komedy III, No. 19-cv-10193, 2020 WL 13389894, at * 3 (S.D. Fla. Nov. 4, 2020)
(recognizing that “the Court must still use its ‘broad equitable powers’ to ensure that
the expenses are reasonable, and that justice is served.”); Julien, 2010 WL 11647170,
at * 5 (“Custodia legalis expenses are paid from the fund within the court’s control
‘only to the extent that they are reasonable.’”) (citation omitted).
RMK argues that its fees are reasonable because the estimate that RMK
submitted to the Court with Plaintiff’s Motion for Appointment of Substitute
Custodian reflected a daily rate of $1,072.41 (or $9.57 per foot), which is higher than
the rate it seeks now. ECF No. [99] at 3. This argument ignores the language of the
Court’s Order Appointing Substitute Custodian, which explicitly states that RMK
will provide its services “at a cost substantially less” than that presently required by
the Marshal.” ECF No. [8] (emphasis supplied). Further, a court is free to reduce the
amount claimed for custodial expenses even though the particular rate requested was
previously authorized by court order. See Julien, 2010 WL 11647170 at *6-7.
RMK also argues that its rate is reasonable because other substitute
custodians in this District have recently charged daily rates ranging between $6.00
and $19.77 per foot. ECF No. [99] at 9. The Court is not persuaded. RMK does not
cite any published decisions where these rates have been awarded, nor does it specify

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whether these rates were allowed over objection, as RMK asks the Court to do here.
The Court’s own research identified three cases that RMK referenced in its Reply
where a district court recently awarded custodia legis expenses in excess of the rate
that RMK requests. See Rybovich Boat Company, LLC v. M/Y Blue Star, No. 20-cv80136, 546 F. Supp. 3d 1270, 1275-76 (S.D. Fla. 2021) (awarding daily rate of $10.35
per foot); SHM LMC, LLC v. M/Y Triumphant Lady, No. 23-cv-61259, 2024 WL
4242283, at * 4 (S.D. Fla. Sept. 4, 2024), report and recommendation adopted, No. 23cv-61259 at ECF No. [27] (S.D. Fla. Sept. 19, 2024) (awarding daily rate of $7.61 per
foot); Centennial Bank v. M/Y Why Not, 22-cv-22883, 2023 WL 7284586, at *3-4 (S.D.
Fla. Sept. 25, 2023) report and recommendation adopted by, 2023 WL 7279411, at * 1
(S.D. Fla. Nov. 3, 2023) (awarding daily rate of $10.90 per foot). However, the Court
finds that these cases are distinguishable because no party objected to the amount of
custodia legis expenses requested. See Rybovich Boat, 546 F. Supp. 3d at 1276
(explicitly noting that award was made “without objection”); M/Y Triumphant Lady,
2024 WL 4242283 at * 1 (granting in part motion for default final judgment where no
response filed); Centennial Bank, 2023 WL 7284586, at * 1 (granting motion to tax
costs where no response filed).
For its part, Intervening Plaintiff asserts that the average rate for custodial
services charged by marinas in this District is at most $4.01 per foot, per day. ECF
No. [97] at 10. Intervening Plaintiff also notes that RMK previously charged $4.00
per foot, per day for custodial services in a different case, and Plaintiff charged $5.40
per foot, per day when it provided dockage and other services to the Vessel. Id. at 8.

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Intervening Plaintiff requests that the Court award an even lower daily rate, $3.60
per foot. Id. at 11.
It is true that courts in this District, including this Court, have recently
awarded custodia legis rates within the range that Intervening Plaintiff suggests.
See e.g., Seacoast National Bank v. M/Y Viaggio, No. 22-cv-62311, 2023 WL 6930685,
at * 7 (S.D. Fla. Oct. 2, 2023), report and recommendation adopted, 2023 WL 6908985,
at * 1 (S.D. Fla. Oct. 18, 2023) (awarding rate of $2.97 per foot, per day); Naval
Logistic, Inc. v. A 58’ Montery Motor Vessel, No. 22-cv-22539, 2024 WL 1286259, at *
4 (S.D. Fla. Jan. 16, 2024), report and recommendation adopted, 2024 WL 1285526,
at * 1 (S.D. Fla. March 26, 2024) (awarding custodia legis charges at daily rate of
$3.36 per foot); Naval Logistic, Inc. v. M/B Vamonos, No. 22-cv-22540, 2024 WL
662344, at * 5 (S.D. Fla. Jan. 16, 2024), report and recommendation adopted, 2024
WL 664535, at * 1 (S.D. Fla. Feb. 16, 2024) (awarding custodia legis charges at daily
rate of $3.41 per foot). However, as RMK points out, Intervening Plaintiff did not file
a motion challenging RMK’s daily rate, or attempt to move the Vessel to a less
expensive custodian, during the period that RMK acted as substitute custodian. ECF
No. [99] at 4. Intervening Plaintiff does not explain the reason(s) for this failure or
attempt to justify its delay.

Further, RMK’s services in preserving the Vessel

benefitted Intervening Plaintiff, and Intervening Plaintiff makes no argument to the
contrary.
In determining the reasonable value of custodia legis expenses, the Court has
“broad equitable powers . . . to ensure that justice is served.” Julien, 2010 WL

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11647170, at * 5 (citations omitted). Having fully considered the record, the
underlying policy of the custodia legis doctrine, and the range of court-approved rates
for substitute custodians, the Court concludes that $5.00 per foot, per day is
reasonable under these circumstances to adequately compensate RMK for its
custodial services in this action. See supra at 8-9; see also YCM Acquisition LLC v.
M/Y Delia, No. 22-cv-22319, 2022 WL 18705488, at * 4 (S.D. Fla. Dec. 21, 2022)
(awarding custodia legis expenses at daily rate of $5.16 per foot); P&L Towing &
Transportation v. M/V Gar-den S, No. 21-cv-23062, 2022 WL 1812386, at * 4 (S.D.
Fla. May 13, 2022), report and recommendation adopted, 2022 WL 1801235, at * 1
(S.D. Fla. June 2, 2022) (awarding custodia legis expenses at daily rate of $5.11 per
foot); Fincantieri Marine Repair LLC v. M/V Geysir, No. 22-cv-410, 2023 WL
2217272, at * 13 (M.D. Fla. Feb. 4, 2023) (awarding substitute custodian fee at daily
rate of $5.12 per foot).
Finally, the Court declines, at this time, to address the remainder of the
Motion, which requests that the custodia legis expenses awarded herein be paid
entirely from Intervening Plaintiff’s funds in the Court registry. The parties
previously attended a settlement conference before Chief United States Magistrate
Judge Edwin G. Torres, which was adjourned. ECF No. [108]. In order to allow the
parties a meaningful opportunity to exhaust their attempts at reaching an informal
resolution, the Court will defer ruling on the remainder of the Motion pending
completion of the settlement conference. An order referring this matter to Chief

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Magistrate Judge Torres for a continued settlement conference will be entered
separately.
IV.

CONCLUSION
For the reasons stated above, Substitute Custodian’s Motion for Payment of

Custodial Fees From Funds in Court Registry, ECF No. [92], is GRANTED IN PART
AND DEFFERED IN PART as set forth herein.
DONE AND ORDERED in Miami, Florida, this 25th day of September, 2024.

_______________________________________
JACQUELINE BECERRA
UNITED STATES DISTRICT JUDGE

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