Barnes v. Sea Hawaii Rafting, LLC et al

Filing 528

ORDER - re: 495 and 510 "[P]laintiff Chad Barry Barnes' (Plaintiff Barnes) Motion for an Order Appointing Himself as Substitute Custodian and Providing for Custodia Legis Expenses After Arrest, 495 , is DENIED; an d Defendant Aloha Ocean Excursions, LLCs (Defendant AOE) Motion for an Order Staying Execution of Order Authorizing Arrest of the Vessel and Appurtenances, or in the Alternative, for an Order Releasing the Vessel and Appurtenances from Arrest, Pursua nt to Supplemental Admiralty Rule E(5), 510 , is GRANTED IN PART AND DENIED IN PART." Written Order follows the Oral Order of 2/28/2019, ECF 527 Signed by JUDGE ALAN C. KAY on 3/4/2019. (jo)COURTS CERTIFICATE of Service - Non-Registered CM/ECF Participants have been served by First Class Mail to the addresses of record listed on the Notice of Electronic Filing (NEF)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAI`I
)
)
)
Plaintiff,
)
)
v.
)
)
SEA HAWAI`I RAFTING, LLC;
)
KRIS HENRY; ALOHA OCEAN
)
EXCURSIONS, LLC; JOHN
)
DOES 1-20; MARY DOES
)
1-20; DOE CORPORATIONS
)
1-20; DOE PARTNERSHIPS
)
1-20; DOE ASSOCIATES
)
1-20; DOE GOVERNMENTAL
)
AGENCIES 1-20; AND OTHER
)
ENTITIES 1-20, in personam;
)
AND M/V TEHANI, HA 1629-CP,
)
AND HER ENGINES, EQUIPMENT,
)
TACKLE, FARES, STORES,
)
PERMITS, FURNISHINGS, CARGO
)
AND FREIGHT; DOE VESSELS 1-20,)
in rem.
)
)
Defendants.
)
)
CHAD BARRY BARNES,

Civ. No. 13-00002 ACK-RLP

ORDER
For the reasons set forth below, the Court finds that
the commercial use permit under which the vessel M/V Tehani (the
“Tehani”) is operated is not an appurtenance of the vessel.

In

addition, Plaintiff Chad Barry Barnes’s (“Plaintiff Barnes”)
“Motion for an Order Appointing Himself as Substitute Custodian
and Providing for Custodia Legis Expenses After Arrest” is
DENIED; and Defendant Aloha Ocean Excursions, LLC’s (“Defendant

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AOE”) “Motion for an Order Staying Execution of Order
Authorizing Arrest of the Vessel and Appurtenances, or in the
Alternative, for an Order Releasing the Vessel and Appurtenances
from Arrest, Pursuant to Supplemental Admiralty Rule E(5)” is
GRANTED IN PART AND DENIED IN PART.
BACKGROUND
For purposes of this Order, the Court will not recount
this case’s lengthy procedural history beginning in 2013.

The

Court only discusses those facts and events of specific
relevance to the issues that this Order addresses.
On January 14, 2019, Plaintiff Barnes filed a “Motion
for an Order Appointing Himself as Substitute Custodian and
Providing for Custodia Legis Expenses After Arrest,” (“Plaintiff
Barnes’s Motion”) together with various supporting documents.
ECF No. 495.

Defendant AOE filed its Memorandum in Opposition

thereto on January 22, 2019.

ECF No. 498.

The Court held a

hearing on Plaintiff Barnes’s Motion on January 24, 2019 and
took the matter under advisement.
Before the Court issued a ruling on Plaintiff Barnes’s
Motion, Defendant AOE filed on January 31, 2019 a “Motion for an
Order Staying Execution of Order Authorizing Arrest of the
Vessel and Appurtenances, or in the Alternative, for an Order
Releasing the Vessel and Appurtenances from Arrest, Pursuant to
Supplemental Admiralty Rule E(5)” (“Defendant AOE’s Motion”),
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together with an appraisal of the vessel Tehani in support of
its Motion.

Plaintiff Barnes filed his Memorandum in Opposition

to Defendant AOE’s Motion on February 13, 2019, ECF No. 519, and
he filed an Errata thereto on February 14, 2019.

ECF No. 520.

The Court held a hearing on Defendant AOE’s Motion on February
15, 2019.

At the hearing, the Court heard oral argument

regarding both Defendant AOE’s Motion and Plaintiff Barnes’s
Motion.
Defendant AOE seeks to file a special bond, pursuant
to Supplemental Admiralty Rule E(5)(a), in order to prevent the
arrest of the Tehani or to secure the vessel’s release once it
has been arrested.

The parties are not in agreement with

respect to the value of the bond that Defendant AOE wishes to
file.

In such situations, Supplemental Admiralty Rule E(5)(a)

requires that the Court set the value of the bond at the lesser
of twice the amount of the plaintiff’s claims or the value of
the vessel.

The parties both agree that the commercial use

permit under which the Tehani operates affects the value of the
vessel; however, the parties disagree as to whether or not the
permit is an appurtenance of the vessel to which Plaintiff
Barnes’s maritime lien attaches.
At the hearing on February 15, 2019, where both
Defendant AOE’s Motion and Plaintiff Barnes’s Motion were
argued, the Court determined that it would have to rule on
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whether or not the commercial use permit is an appurtenance of
the vessel in order to accurately fix a bond value pursuant to
Supplemental Admiralty Rule E(5)(a).

The Court held a

subsequent hearing on February 28, 2019, at which William
Wynhoff (“Mr. Wynhoff”), Deputy Attorney General and General
Counsel for the Hawai`i Department of Land and Natural Resources
(the “DLNR”) testified.

Mr. Wynhoff’s testimony concerned the

transferability of commercial use permits under Hawai`i
Administrative Rules (“HAR”) § 13-231-62.

The Court also heard

oral argument from the parties on the permit issue.
DISCUSSION
In this Order, the Court addresses the commercial use
permit issue, Plaintiff Barnes’s Motion, Defendant AOE’s Motion,
and various ancillary issues.

In accordance with the

Supplemental Admiralty Rules and the Court’s equitable powers,
and under the circumstances, the Court will move forward on two
fronts—allowing Defendant AOE to file a bond, in an amount to be
determined by the Court, in order to secure the release of the
Tehani; and allowing Plaintiff Barnes to proceed with arresting
the vessel during the interim period.

Prior to addressing the

motions before the Court and the arrest of the vessel, the Court
will address the commercial use permit issue.

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I.

Whether or Not the Commercial Use Permit Is an Appurtenance
of the Vessel
Plaintiff Barnes argues that the commercial use permit

is like a fishing permit, and that because some courts have
found that fishing permits are appurtenant to vessels, the Court
should so find that the commercial use permit is appurtenant to
the Tehani.

Plaintiff Barnes also argues that the commercial

use permit is an appurtenance because it is essential to the
navigation, operation, and mission of the vessel.

Defendant AOE

argues that the commercial use permit is not appurtenant to the
vessel because the permit is issued to Defendant AOE (and not to
the vessel Tehani) and because such permits do not transfer with
a vessel when the vessel is sold.

For the reasons that follow,

the Court finds that the commercial use permit under which the
Tehani operates is not an appurtenance of the vessel.
The Court, in its Order Finding that the M/V Tehani’s
Trailer Is an Appurtenance of the Vessel, described at great
length the law concerning what constitutes an appurtenance of a
vessel to which a maritime lien attaches.
8-11.

See ECF No. 484, pp.

In summary, the key issue in determining what constitutes

an appurtenance is whether the property in question is
“essential to the ship’s navigation, operation, or mission.”
Gowen, Inc. v. F/V Quality One, 244 F.3d 64, 67-68 (1st Cir.
2001).

The Court also reiterates that the determination

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regarding what constitutes an appurtenance is a factual inquiry
that is made on a case-by-case basis.

Id. at 68 (citing Thomas

J. Schoenbaum, Adm. and Mar. Law, § 9-1 (6th ed. 2018)).
In Gowan, the First Circuit upheld the district
court’s order confirming the marshal sale of the F/V Quality
One, which included the fishing permits as appurtenances.
F.3d at 66.

244

The appellate court held that the vessel’s fishing

permits were appurtenances because treating fishing permits as
subject to a maritime lien advances one of the objectives for
which maritime liens are created—“to make readily available to a
mobile borrower the secured credit that is often necessary to
ensure that a vessel can obtain the basic supplies or services
needed for its operation.”

Id. at 68 (citing cases).

Importantly, the fishing permits in Gowan were transferable—that
is, the permits could be sold along with the vessel, which is
precisely what occurred when the marshal sold the vessel at
auction.

Id. at 66.
Thus, in order to determine whether the commercial use

permit under which the Tehani operates is an appurtenance of the
vessel, the Court must first determine whether the permit can be
transferred with the vessel when the vessel is sold.

The

transferability of commercial use permits issued to corporations
or other business entities under Hawai`i law is governed by HAR
§ 13-231-62(b), which provides in relevant part:
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(2) A commercial use permit or catamaran
registration certificate issued to a
corporation or other business entity shall
automatically expire: . . .
(B) If the vessel or vessels operated under
the commercial use permit or catamaran
registration certificate are sold or
otherwise transferred and not replaced in
accordance with the provisions of section
13-231-13(b) . . . .
Based upon the Court’s reading of HAR § 13-231-62 and
upon Mr. Wynhoff’s testimony at the hearing held on February 28,
2019 regarding the DLNR’s interpretation of the rules, the Court
finds that commercial use permits are issued to individuals or
business entities—not to vessels.

HAR § 13-231-62(a)-(b).

The

Court further finds that when a vessel operating under a valid
commercial use permit is sold or transferred, the commercial use
permit will automatically expire unless the permittee replaces
the vessel in accordance with the rules.

HAR § 13-231-

62(b)(2)(B).
Thus, based upon the plain meaning of the rules and
Mr. Wynhoff’s testimony, the Court finds that when a vessel is
sold or transferred, the commercial use permit under which the
vessel is operated cannot be transferred along with the vessel.
The commercial use permit at issue here is distinguishable from
the fishing permits in Gowan, which were able to be transferred
when the vessel was sold.

244 F.3d at 66.

By contrast, HAR §

13-231-62 precludes the transfer of a commercial use permit to

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an individual or business entity that purchases the vessel
operating under the permit.

Even if the Court were to so find,

as Plaintiff Barnes argues it should, that the permit is an
appurtenance because it is essential to the navigation,
operation, and mission of the vessel, the permit still cannot be
transferred with the vessel if the vessel sold.
Accordingly, Court finds that the commercial use
permit is not an appurtenance of the Tehani to which Plaintiff
Barnes’s maritime lien attaches.
II.

Defendant AOE’s Motion
Defendant AOE’s Motion is granted to the extent that

the Court will allow Defendant AOE to post a bond, pursuant to
Supplemental Admiralty Rule E(5)(a), to secure the release of
the Tehani.

However, the Court is not going to stay the arrest

of the vessel pending Defendant AOE’s filing of a bond because
there is no guarantee that Defendant AOE is willing or able to
file a bond in the amount that the Court determines, because the
defendants have enjoyed six years’ usage of the Tehani in the
interim period without duly paying Plaintiff Barnes maintenance
and cure, and to prevent potential exposure to other maritime
liens.

The Court also declines to fix a bond value at this

time.

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III.

The Arrest of the Vessel
The marshal is directed to proceed with the arrest of

the vessel as soon as Plaintiff Barnes submits funds for the
necessary expenses and a certificate of insurance.

Once the

vessel has been arrested, the Court directs that the vessel be
locked up and held in the storage facility at Gentry’s Kona
Marina in Honokohau Harbor, Kailua-Kona, where the vessel is
currently housed.

Plaintiff Barnes is directed to pay the

monthly rent for the storage space while the vessel is in
custody.

The marshal shall serve as custodian of the vessel.

The Court finds that this arrangement provides the most secure
and suitable housing for the Tehani while it is under arrest.
IV.

Plaintiff Barnes’s Motion
Because the marshal shall serve as custodian of the

vessel while it is under arrest, Plaintiff Barnes’s Motion to be
appointed substitute custodian is DENIED.

Plaintiff Barnes’s

Motion is also denied for the reasons that follow.
There is limited precedent for Plaintiff Barnes’s
request for an order appointing himself, the plaintiff in the
lawsuit, as substitute custodian.

In one such case, a court

allowed the plaintiff to serve as substitute custodian because
the owner of the vessel consented to the arrangement in writing.
See Mile 533 Marine Ways, Inc. v. M/V Clarissa, Civil Action No.
C-10-090, 2010 WL 1371642, at *1 (S.D. Tex. Apr. 2, 2010).
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In

two other cases, courts allowed the plaintiffs to serve as
substitute custodians where the arrested vessels were already
being kept in the plaintiffs’ boatyards.

See Nuta v. M/V

Fountas Four, 753 F. Supp. 352, 352-53 (S.D. Fla. 1990); New
River Yachting Ctr., Inc. v. M/V Little Eagle II, 401 F. Supp.
132, 134 (S.D. Fla. 1975).
Notwithstanding that some courts have appointed
plaintiffs to serve as substitute custodians of the vessels
against which they have filed suit, the Court finds that
appointing Plaintiff Barnes to serve as substitute custodian is
inappropriate.

Unlike the aforesaid cases, Defendant AOE has

not consented in writing to having Plaintiff Barnes serve as
substitute custodian, nor is the plaintiff in this case a
boatyard where the vessel is currently kept.
Additional factors also preclude the Court from
appointing Plaintiff Barnes as substitute custodian.

Although

Plaintiff Barnes has extensive experience working with the
Tehani, having previously served as captain of the vessel, Decl.
¶ 4, he has not provided the Court with enough information
regarding where he intends to house and maintain the vessel if
he is appointed as substitute custodian.

Indeed, Plaintiff

Barnes’s Declaration in support of his Motion provides no
indication regarding where he plans to store the vessel.

At the

hearing held on January 24, 2019, counsel for Plaintiff Barnes
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indicated that Plaintiff Barnes would attempt to keep the vessel
at the Honokohau Harbor in Kailua-Kona, where it is presently
housed, but would move the vessel to some other undetermined
location if doing so became necessary.

In order to grant

Plaintiff Barnes’s Motion, the Court requires more specificity
regarding where the vessel will be kept while under arrest.
In addition, Plaintiff Barnes’s Declaration indicates
that he has never before served in a substitute custodian
capacity, and that he lacks the knowledge necessary to obtain
the liability insurance policy that he is required to maintain
while serving as substitute custodian.

Decl. ¶¶ 3, 6.

For all of the foregoing reasons, and to more easily
facilitate the sale of the vessel by the marshal should
Defendant AOE fail to file a bond, the Court finds that it is
appropriate for the marshals to retain custody of the vessel
once it has been arrested.

Accordingly, Plaintiff Barnes’s

Motion to appoint himself substitute custodian is DENIED.
V.

The Appraisal
Once a vessel has been arrested, it is common practice

for courts to order an independent appraisal of the vessel
before it is sold.

See Coastal Marine Management v. M/V Sea

Hunter, 274 F. Supp. 3d 6, 10 (D. Mass. 2017) (citing Gowen,
Inc. v. F/V Quality One, No. CIV. 99-371, 2000 WL 893402, at *4
(D. Me. June 14, 2000), aff’d, 244 F.3d 64 (1st Cir. 2001)).
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Supplemental Admiralty Rule E(5)(a) states that where the
parties do not agree on the value of a special bond, the court
shall fix the value at either “(i) twice the amount of the
plaintiff’s claim or (ii) the value of the property on due
appraisement, whichever is smaller.”
Local Admiralty Rule E.10 provides guidance regarding
the appraisal of an arrested vessel when a party seeks to secure
the vessel’s release by filing a bond.

The Rule states that

“[a]n order for appraisal of property so that security may be
given or altered will be entered by the clerk at the request of
any interested party.”

The Rule further provides that “[i]f the

parties do not agree in writing upon an appraiser, a judicial
officer will appoint the appraiser.”

Plaintiff Barnes has

objected to the appraisal that Defendant AOE filed in support of
its Motion.

Accordingly, the parties will have seven days from

the date of this Order to agree in writing on an appraiser and
to request from the Court an order for the appraisal.

If the

parties do not agree on an appraiser in writing in seven days’
time, the Court will appoint an appraiser pursuant to Local
Admiralty Rule E.10.

Plaintiff Barnes also may submit an

appraisal at his expense from a reputable marine surveyor within
20 days of the date of this Order.

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VI.

Hearing and Order Setting Bond Amount
Once the appraisal by the Court-appointed appraiser

has been filed, the Court will set a hearing at which it will
determine the value of the bond that Defendant AOE must file
with the Court in order to secure the release of the vessel.
Defendant AOE will have 20 days within which to file a bond in
the amount determined by the Court.

If Defendant AOE files the

bond, then Plaintiff Barnes’s maritime lien will be transferred
from the Tehani to the bond and the Tehani will be free of the
maritime lien and released from the custody of the marshal.

See

Industria Nacional del Papel, CA v. M/V Albert F., 730 F.2d 622,
625 (11th Cir. 1984) (providing that when a vessel is released
in exchange for posting security, the effect of the release is
to transfer the lien from the vessel to the funds the security
represents).
VII.

Notice of Arrest and Sale
If Defendant AOE fails to file a bond in the Court-

ordered amount within the 20-day period, the Court will proceed
with the sale of the vessel.

Prior to setting a date for the

sale the Court will order Plaintiff Barnes to file a notice of
the action and arrest, pursuant to Supplemental Admiralty Rule
C(4), which complies with the requirements of Local Admiralty
Rule C.3.

In accordance with the Local Admiralty Rules, other

claimants will then have a chance to intervene in a time to be
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fixed by the Court.

Once the intervention period has expired,

the Court will set a date for the sale of the vessel.

IT IS SO ORDERED.
DATED:

Honolulu, Hawaii, March 4, 2019.

________________________________
Alan C. Kay
Sr. United States District Judge

Barnes v. Sea Hawaii Rafting, LLC, Kris Henry, M/V Tehani, et al., Civ. No.
13-00002 ACK-RLP, Order.

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