Barnes v. Sea Hawaii Rafting, LLC et al

Filing 739

ORDER (1) GRANTING PLAINTIFF'S MOTION FOR RECONSIDERATION, ECF NO. 724, (2) STAYING THE BOND AND INTERLOCUTORY SALE PROCESS, AND (3) IMPOSING PARTIAL ENHANCED COMPENSATORY SANCTIONS PURSUANT TO THE ENHANCED SANCTIONS ORDER, ECF NO. 657 - Signed by JUDGE ALAN C. KAY on 8/13/2020.For the foregoing reasons, the Court makes the following rulings:1. The proceedings on the bond and interlocutory sale are hereby STAYED pending the Ninth Circuit appeal addressing whether the c ommercial-use permit is appurtenant to the vessel. Accordingly, the Court ADMINISTRATIVELY WITHDRAWS Plaintiff Barness Motion for Interlocutory Sale, ECF No. 680.2. The Court ORDERS Defendant Henry and Defendant AOE to pay a portion of the compensatory enhanced sanctions previously imposed by the Enhanced Sanctions Order, ECF No. 657, as detailed above. The partial compensatory enhanced sanctions shall be for the amount of Custodial Costs paid by Plaintiff Barnes between August 29, 2019 (the date the Initial Sanctions Order was issued) and August 13, 2020 (the date of issuance of this Order), as well as for any currently-owing Custodial Costs and the ongoing Custodial Costs until the vessel is released or upon earlier Court order.3. Plaintiff Barnes's Motion for Reconsideration, ECF No. 724, is GRANTED and the Motion for Summary Judgment to pierce the corporate veil, ECF No. 703, is hereby REINSTATED. The Court sets that motion for hearing on October 15, 20 20, at 11:00 a.m.IT IS SO ORDERED.COURT'S CERTIFICATE of Service - Non-Registered CM/ECF Participants will be served by First Class Mail on 8/14/2020 to the addresses of record listed on the Notice of Electronic Filing (NEF)(jni)

Case 1:13-cv-00002-ACK-WRP Document 739 Filed 08/13/20 Page 1 of 20
10226

PageID #:

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAI`I
)
)
)
)
)
)
)
)
)
)
)
)

CHAD BARRY BARNES,
Plaintiff,
v.
SEA HAWAI`I RAFTING, LLC;
et al.
Defendants.

Civ. No. 13-00002 ACK-WRP

ORDER (1) GRANTING PLAINTIFF’S MOTION FOR RECONSIDERATION,
ECF. NO. 724, (2) STAYING THE BOND AND INTERLOCUTORY SALE
PROCESS, AND (3) IMPOSING PARTIAL ENHANCED COMPENSATORY
SANCTIONS PURSUANT TO THE ENHANCED SANCTIONS ORDER, ECF NO. 657
For the reasons set forth below, the Court GRANTS
Plaintiff Chad Barry Barnes’s Motion to Reconsider Minute Order
[ECF No. 717] Administratively Withdrawing Barnes’ Motion for
Summary Judgement to Pierce the Corporate Veil, ECF No. 724 (the
“Motion to Reconsider”).

The Court also STAYS, pending a

decision on appeal, any action regarding an interlocutory sale
and/or posting of a cash bond.

Finally, the Court imposes

partial enhanced compensatory sanctions against Defendant Kris
Henry and Defendant Aloha Ocean Excursions, LLC (“AOE”) pursuant
to the Court’s inherent power and based on the grounds set forth
in the Court’s Order Imposing Enhanced Sanctions, ECF No. 657
(the “Enhanced Sanctions Order”).

Such sanctions shall be

calculated to compensate Plaintiff Barnes for the amount of the
- 1 -

Case 1:13-cv-00002-ACK-WRP Document 739 Filed 08/13/20 Page 2 of 20
10227

PageID #:

U.S. Marshals fees (including insurance) and storage costs
(together, the “Custodial Costs”) incurred to maintain the
vessel Tehani under arrest between August 29, 2019 (the date the
Court issued the first Order Imposing Sanctions, ECF No. 608
(the “Initial Sanctions Order”)) and August, 13, 2020 (the date
of issuance of this Order), and shall require Defendant Henry
and Defendant AOE to pay any currently-owing Custodial Costs and
the ongoing Custodial Costs either until the vessel Tehani is
released by bond or sale or upon an earlier Court order.

BACKGROUND
This case has a long and complex procedural history,
which the Court does not undertake to relay here.

The Court

instead describes only those facts relevant to the issues before
it now.
I.

Sanctions Against Defendant Henry and Defendant AOE

1/

On August 29, 2019, the Court assessed sanctions on
Defendant AOE and Defendant Henry in the amount of $25,000, to
be paid jointly and severally, for conduct that the Court found
was “tantamount to bad faith.”

ECF No. 608.

Defendant AOE and

Defendant Henry were sanctioned based on bad-faith
misrepresentations Defendant Henry made in 2016 that ultimately

The Enhanced Sanctions Order contains more details about the conduct
that led to the Court to sanction Defendant AOE and Defendant Henry.
1/

- 2 -

Case 1:13-cv-00002-ACK-WRP Document 739 Filed 08/13/20 Page 3 of 20
10228

PageID #:

led to the transfer in ownership of the commercial-use permit
associated with the vessel M/V Tehani from Defendant Sea Hawai`i
Rafting, LLC (“SHR”) to Defendant AOE.

In imposing the first

round of sanctions, the Court made clear that the sanctions
would be “subject to significant enhancement” should the permit
not be reissued to Defendant SHR.
After Defendant Henry and Defendant AOE paid the
initial sanctions but failed to effectuate the reissuance of the
permit back to Defendant SHR, the Court issued a second order
imposing “enhanced sanctions” to compensate Plaintiff Barnes for
“the measurable loss resulting from Defendant AOE’s and
Defendant Henry’s sanctionable conduct,” which would be
calculated in several parts:
(1) the value of the permit, which represents
the loss suffered by Barnes as a result of the
permit being wrongfully transferred from
Defendant SHR to Defendant AOE and then never
reissued to Defendant SHR, and (2) attorney’s
fees and costs incurred by Plaintiff Barnes in
responding to Defendant AOE’s and Defendant
Henry’s sanctionable conduct.
Enhanced Sanctions Order at 2.
To calculate the first part—the value of the permit—
the Court appointed Robert Oakley to conduct an appraisal of the
vessel and the permit.

Id. at 32.

The Court also stated that

it may consider the prior appraisal submitted by Defendant AOE
in early 2019, and gave the parties permission to submit their

- 3 -

Case 1:13-cv-00002-ACK-WRP Document 739 Filed 08/13/20 Page 4 of 20
10229

own appraisal reports, which neither chose to do.2/

PageID #:

See id.

Finally, the Court allowed Plaintiff Barnes to “conduct limited
discovery to determine Defendant Henry’s and Defendant AOE’s use
of the permit since it was transferred to Defendant AOE and the
profits generated therefrom.”

Id. at 33.

To calculate the

second part—attorney’s fees and costs—the Court provided that
Plaintiff Barnes could submit materials addressing his
entitlement to such costs, which would then be reviewed by the
Magistrate Judge.

The Court stated:

After Mr. Oakley’s appraisal report is filed
and the Court has reviewed it, together with
any appraisal reports submitted by the parties
and the prior report submitted by Defendant
AOE in early 2019, the Court will hold a
hearing to allow the parties to express their
positions
and
thereafter
calculate
the
monetary amount of enhanced sanctions payable
to compensate Plaintiff Barnes for his losses
stemming from the Defendants’ sanctioned
conduct, and issue an order imposing such
enhanced sanctions accordingly.
Enhanced Sanctions Order at 34-35.
Although the Enhanced Sanctions Order broadly
described the basis for the enhanced sanctions and how they
would be calculated, no enhanced sanctions have yet been
calculated or paid.3/

The parties had 30 days from the date the Enhanced Sanctions Order
was issued to submit reports from any reputable marine surveyor. Enhanced
Sanctions Order at 32.
3/
This is partially due to delays caused by the Covid-19 pandemic,
(Continued . . . )
2/

- 4 -

Case 1:13-cv-00002-ACK-WRP Document 739 Filed 08/13/20 Page 5 of 20
10230

II.

PageID #:

Attempts to Pierce the Corporate Veil
Well before the sanctions matters arose, Plaintiff

Barnes has been seeking to pierce the corporate veil of
Defendant SHR in an attempt to hold Defendant Henry personally
liable for maintenance and cure.

See, e.g., ECF No. 157 (2015

motion seeking to pierce the corporate veil).

Several

intervening issues related to Defendant SHR’s and Defendant
Henry’s bankruptcies and the bad-faith transfer of the
commercial-use permit caused the Court to postpone ruling on
whether Plaintiff Barnes could successfully pierce the veil.
See ECF No. 158.

Several years later, in late 2019, the

bankruptcy court ruled that Defendant Henry’s bankruptcy
discharge prevented Plaintiff Barnes from recovering any
maintenance and cure from Defendant Henry personally, whether or
not the corporate veil could be pierced.
On appeal in the district court, Judge Watson affirmed
in part and reversed in part, clarifying that Plaintiff Barnes
could in fact pursue his maintenance and cure claim against
Defendant Henry personally if the corporate veil was pierced,
but only up to the value of the in rem claim against the Vessel

which prevented the Court-appointed appraiser from surveying the vessel to
determine its and the commercial-use permit’s value. Only just recently was
the inter-island quarantine lifted, allowing the appraiser to conduct the
survey. The Court just received the appraiser report, which will now allow
the Court to move forward with assigning a number to a portion of the
enhanced sanctions.

- 5 -

Case 1:13-cv-00002-ACK-WRP Document 739 Filed 08/13/20 Page 6 of 20
10231

PageID #:

Tehani (which would include the value of the permit should the
Ninth Circuit find it appurtenant).

See Barnes v. Henry,

Consolidated Case No. 1:19-cv-00210 (Doc. No. 12) (D. Haw. Jan.
13, 2020); Barnes v. Henry, Consolidated Case No. 1:19- cv-00211
(Doc. No. 12) (D. Haw. Jan. 13, 2020); see also In re Sea Hawaii
Rafting, LLC, Bankr. No. 14-01520 (D. Haw. Bankr.).

Simply put,

Judge Watson’s ruling would allow Plaintiff Barnes to recover
against Defendant Henry only for the amount of the secured
maritime lien, meaning the value of the vessel Tehani.
Following Judge Watson’s rulings, and around the time
the Enhanced Sanctions Order was issued, this Court sua sponte
reinstated Plaintiff Barnes’s prior motion to pierce the
corporate veil.

See ECF No. 658.

Meanwhile, Plaintiff Barnes

appealed Judge Watson’s rulings to the Ninth Circuit.

On July

1, 2020, Plaintiff Barnes filed the MSJ to pierce the corporate
veil.

ECF No. 703.

In it, he asks the Court to pierce the

corporate veil of Defendant SHR4/ to hold Defendant Henry
“personally liable for the Maintenance payments which SHR owes
to Barnes as part of his wages, as if Henry were standing in
SHR’s shoes.”

MSJ at 3.

At some points in the MSJ, Plaintiff Barnes seems to also reference
the idea of piercing the corporate veil of Defendant AOE. The Court makes no
finding at this time as to the merits of any arguments raised in the motion.
4/

- 6 -

Case 1:13-cv-00002-ACK-WRP Document 739 Filed 08/13/20 Page 7 of 20
10232

PageID #:

III. Attempts to Release the Vessel & the Intervening Ninth
Circuit Stay
The vessel Tehani has been under arrest since March
14, 2019.

Plaintiff Barnes has been prepaying the Custodial

Costs to maintain the vessel in the custody of the U.S.
Marshals.

In early June 2020, Plaintiff Barnes moved the Court

for an interlocutory sale, ECF No. 680, and asked it to
reconsider the prior holding that the Plaintiff must prepay the
Custodial Costs, ECF No. 681.

He represented that it was not

financially feasible for Plaintiff Barnes to continue paying the
expenses as he was living on Social Security disability
payments.

ECF No. 681 at 2.

Around the same time, the U.S.

Marshal contacted the Court to advise of late payments of fees
and costs and to caution the Court that the Marshals would need
to be relieved as custodians if they did not receive payment.
In the midst of the Court and the parties dealing with
those logistical problems, the Ninth Circuit on June 8 issued a
broad and unequivocal stay of the admiralty and bankruptcy
proceedings.

ECF No. 683.

Given several time-sensitive pending

matters—including the accruing costs for the Marshals to
maintain custody of the vessel, the need to consider proceeding
with the interlocutory sale, and the readiness to move forward
with calculating the enhanced compensatory sanctions—the Court
requested that the Ninth Circuit lift the stay.

- 7 -

See ECF No.

Case 1:13-cv-00002-ACK-WRP Document 739 Filed 08/13/20 Page 8 of 20
10233

685.

PageID #:

The Ninth Circuit granted the Court’s request and lifted

the stay on June 19.

ECF No. 688.

Pursuant to the statutory

requirement, the Court subsequently denied Plaintiff Barnes’s
motion for reconsideration of the Court’s prior order requiring
him to prepay the Custodial Costs, ECF No. 694.

Thereafter,

Plaintiff Barnes made a payment to the Marshals to maintain
custody of the vessel.
IV.

The Court’s July 17, 2020 Minute Order
On July 17, 2020, the Court issued a Minute Order, ECF

No. 717 (the “Minute Order”), which inter alia administratively
withdrew Plaintiff Barnes’s Motion for Summary Judgement and to
Pierce the Corporate Veil of Defendant Sea Hawaii Rafting, LLC,
ECF No. 703 (the “MSJ”).

The Court stated its rationale as

follows:
In light of the above and several pending
appeals, it also appears to the Court to be in
all the parties’ best interests and in the
economy of justice to defer proceeding with
the Motion for Summary Judgment to Pierce the
Corporate Veil, ECF No. 703, until the Ninth
Circuit rules on certain pending appeals,
primarily those regarding rulings by Judge
Watson with respect to the extent to which
Plaintiff Barnes may recover from Defendant
Henry personally if the corporate veil is
successfully pierced.
Because Plaintiff
Barnes’s Motion for Summary Judgment to Pierce
the Corporate Veil directly implicates issues
on appeal and may be impacted by the release
or
sale
of
the
vessel,
the
Court
ADMINISTRATIVELY WITHDRAWS that motion.
Minute Order at 2-3 (footnote omitted).
- 8 -

Case 1:13-cv-00002-ACK-WRP Document 739 Filed 08/13/20 Page 9 of 20
10234

PageID #:

In the same Minute Order, the Court advised the
parties that it was inclined to require Defendant Henry and
Defendant AOE to pay certain Custodial Costs as partial
sanctionable compensation for Barnes.

The Court allowed the

parties the opportunity to brief that issue and then held a
hearing on July 31, 2020, at which the parties and the Court
discussed several of the overlapping issues in this case.
Meanwhile, the motion for interlocutory sale remains
pending.

Defendants in response to the motion for interlocutory

sale indicated that Defendant SHR had an interest in first
having the opportunity to offer a cash bond for the release of
the vessel, which the Court agreed to.

See ECF No. 717.

In the course of recent briefings and hearings before
the Court, both parties have now suggested that the Court should
stay the interlocutory sale and bond process pending the Ninth
Circuit appeal as to whether the commercial-use permit is an
appurtenance to the vessel, which could impact the value of the
vessel (and therefore the maritime lien).

STANDARD
A party may ask the court to reconsider and amend a
previous order pursuant to Federal Rule of Civil Procedure
(“FRCP”) 59(e).

Reliance Ins. Co. v. The Doctors Co., 299 F.

Supp. 2d 1131, 1153 (D. Haw. 2003).
- 9 -

FRCP 59(e) offers “an

Case 1:13-cv-00002-ACK-WRP Document 739 Filed 08/13/20 Page 10 of 20
10235

PageID #:

extraordinary remedy, to be used sparingly in the interests of
finality and conservation of judicial resources.”

Id. (citing

Carroll v. Nakatani, 342 F.3d 934, 945 (9th Cir. 2003)).

In the

Ninth Circuit, a successful motion for reconsideration must
accomplish two goals.

First, it must demonstrate some reason

why the court should reconsider its prior decision.

Na Mamo

O’Aha ‘Ino v. Galiher, 60 F. Supp. 2d 1058, 1059 (D. Haw. 1999)
(citation omitted).

Second, a motion for reconsideration must

set forth facts or law of a strongly convincing nature to induce
the court to reverse its prior decision.

Id.

Courts have

established three grounds justifying reconsideration:

(1) an

intervening change in controlling law; (2) the availability of
new evidence; and (3) the need to correct clear error or prevent
manifest injustice.

Mustafa v. Clark Cty. Sch. Dist., 17 F.3d

1169, 1178-79 (9th Cir. 1998); Galiher, 60 F. Supp. 2d at 1059;
Reliance, 299 F. Supp. 2d at 1153.

This District has

implementing these standards in Local Rule 60.1.2.

Galiher, 60

F. Supp. 2d at 1059; Reliance, 299 F. Supp. 2d at 1153.
“Whether or not to grant reconsideration is committed to the
sound discretion of the court.”

Navajo Nation v. Confederated

Tribes & Bands of the Yakama Indian Nation, 331 F.3d 1041, 1046
(9th Cir. 2003) (citing Kona Enter., 229 F.3d at 883).

- 10 -

Case 1:13-cv-00002-ACK-WRP Document 739 Filed 08/13/20 Page 11 of 20
10236

PageID #:

DISCUSSION
I.

Stay of Interlocutory Sale and/or Bond
As noted above, both parties have suggested the Court

should stay the posting of a cash bond and/or the interlocutory
sale of the vessel until the Ninth Circuit has ruled on the
pending appeal of whether the commercial-use permit is
appurtenant to the vessel.

The Court finds that a stay of those

matters is appropriate to ensure the proper valuation for
releasing the vessel pursuant to a cash bond payment or sale.
Therefore, the Court ADMINISTRATIVELY WITHDRAWS Plaintiff
Barnes’s Motion for Interlocutory Sale, ECF No. 680, and STAYS
any action regarding the sale and/or posting of a bond.

Upon

the Ninth Circuit ruling on the permit-appurtenance issue,
either party may move the Court to reinstate the motion or to
allow Defendant SHR the opportunity to post a cash bond.
II.

Imposition of Partial Compensatory Enhanced Sanctions
Turning next to the payment of certain Custodial

Costs, the Court imposes as partial compensatory enhanced
sanctions, based on Defendant Henry and Defendant AOE’s badfaith conduct, the prior Custodial Costs between the date of the
Initial Sanctions Order and the date of this Order, as well as
any currently-owing Custodial Costs and the ongoing Custodial
Costs to maintain the vessel in custody until the vessel is
released from Plaintiff Barnes’s maritime lien or upon earlier
- 11 -

Case 1:13-cv-00002-ACK-WRP Document 739 Filed 08/13/20 Page 12 of 20
10237

Court order.

PageID #:

The Custodial Costs thus far have been prepaid by

Plaintiff pursuant to 28 U.S.C. § 1921.

See also ECF No. 315.

Ordinarily, such costs are taxable against Defendants.

See ECF

No. 315 at 3 n.1 (citing In re Lindsey, 178 B.R. 895, 902 (Bankr.
N.D. Ga. 1995)); Haw. Local Admiralty R. E.13(b).

However, were

this an ordinary case, the arrest period would have been much
shorter, and the vessel released much sooner.
As a result of various factors, the vessel remains
under arrest after almost a year and a half.

The major factor

for the delay is the sanctioned bad-faith conduct of Defendant
Henry and Defendant AOE.

See generally Enhanced Sanctions Order

(addressing the impact of Defendant Henry’s and Defendant AOE’s
bad-faith conduct and requiring that those Defendants pay
certain costs as enhanced sanctions).

Their bad-faith conduct

set in motion a series of events that contributed to the delays
in this case, precluded a feasible sale of the vessel with
access to the permit (which was necessary for meaningful
operation of the vessel), and caused Plaintiff to face
continuing payments to maintain the arrest of the vessel.

While

Defendants were attempting to stall or limit Plaintiff’s
recovery, it was not feasible to proceed with the sale of the
vessel.

The permit had been wrongfully transferred, and that

also raised questions about the proper value of the vessel.

- 12 -

Case 1:13-cv-00002-ACK-WRP Document 739 Filed 08/13/20 Page 13 of 20
10238

PageID #:

Thus, exercising its broad authority as a court
sitting in admiralty and its inherent authority as discussed in
the Enhanced Sanctions Order, the Court finds at this time that
requiring Defendant AOE and Defendant Henry—because of their
bad-faith conduct—to pay a portion of (that is, only from the
date the Enhanced Sanctions Order was issued) the prior-incurred
Custodial Costs, as well as any currently-owing Custodial Costs
and the ongoing future Custodial Costs, is the most equitable
approach to handling the unique circumstances of this case.

Cf.

Beauregard, Inc. v. Sword Servs. L.L.C., 107 F.3d 351, 353 (5th
Cir. 1997) (approving of the district court’s use of its
discretion and “inherent powers” to manage litigation and noting
that “[c]ourts routinely enter orders that divide the custodia
legis expenses among the parties of an in rem action” and
“[w]hen such orders are entered is largely discretionary and
vary in different cases”).

For purposes of equity and based on

their identified bad-faith conduct, the Court directs that
Defendant AOE and Defendant Henry are required to compensate
Barnes—as partial compensatory enhanced sanctions—in the amount
of the prior Custodial Costs from the date of the Initial
Sanctions Order through the date of this Order.

Going forward,

pending the Ninth Circuit appeals and until the vessel is
released or upon an earlier Court order, Defendant Henry and
Defendant AOE are directed to pay—as further partial
- 13 -

Case 1:13-cv-00002-ACK-WRP Document 739 Filed 08/13/20 Page 14 of 20
10239

PageID #:

compensatory enhanced sanctions based on the same sanctioned
bad-faith conduct—any currently-owing Custodial Costs and the
ongoing Custodial Costs.5/
The Court emphasizes that it is not imposing new
sanctions.

It is simply quantifying a portion of the

compensatory enhanced sanctions already assessed in the Enhanced
Sanctions Order.

The Court also notes that the imposition of

sanctions in the form of prior and ongoing Custodial Costs does
not encompass all the enhanced sanctions imposed by the Court in
the Enhanced Sanctions Order.

To the contrary, the Court will

later impose the rest of the compensatory enhanced sanctions as
described in the Enhanced Sanctions Order.

See Enhanced

Sanctions Order at 33-35.
In sum, the Court has broad discretion in an admiralty
case to fashion an equitable remedy.

It also has inherent

authority to sanction, which it has already made detailed
findings on in the Enhanced Sanctions Order.

Thus, exercising

its discretion and authority, the Court directs Plaintiff Barnes
to submit, within 20 days of issuance of this Order, an
affidavit with evidence of the prior amounts paid for the

5/
As noted above, such fees are ordinarily prepaid by the plaintiff
and taxable as costs. The Court’s imposition of enhanced sanctions now—
requiring that Defendants pay Plaintiff Barnes back for certain Custodial
Costs and pay for ongoing Custodial Costs should not be considered as
precluding the later imposing of other costs (so long as those costs are not
the same as those already reimbursed by Defendants as enhanced sanctions).

- 14 -

Case 1:13-cv-00002-ACK-WRP Document 739 Filed 08/13/20 Page 15 of 20
10240

PageID #:

Custodial Costs between August 29, 2019, and the date of this
Order, for review by the Magistrate Judge.

Defendant Henry and

Defendant AOE are ORDERED to issue payment to Barnes for those
prior Custodial Costs within 14 days after the Magistrate
Judge’s finding that Plaintiff has made the requisite showing of
such costs.

The parties also are ORDERED to immediately confer

with each other and with the U.S. Marshal about coordinating for
Defendant Henry and Defendant AOE to begin paying the currentlyowed and ongoing future payments to the Marshals and storage
costs to the marina for such Custodial Costs.
III. Motion for Reconsideration
On July 20, Plaintiff Barnes sought reconsideration of
the Court’s decision to administratively withdraw his MSJ to
pierce the corporate veil.
motion for several reasons:

As stated, the Court withdrew the
(1) the pending Ninth Circuit

appeal regarding whether the permit is appurtenant to the
vessel, which would impact the value of the maritime lien; (2)
the pending Ninth Circuit appeal of the Judge Watson order,
which would impact to what extent, if any, Plaintiff Barnes
could recover against Defendant Henry, even if he were to
successfully pierce the veil; and (3) the likelihood that the
vessel (and therefore the maritime lien) would be released
through an interlocutory sale or posting of a cash bond,
possibly making a recovery of the maritime lien claim under
- 15 -

Case 1:13-cv-00002-ACK-WRP Document 739 Filed 08/13/20 Page 16 of 20
10241

Judge Watson’s ruling duplicative.

PageID #:

The Court’s overarching

reason was an attempt to encourage efficiency and the “economy
of justice.”

Minute Order at 3.

Plaintiff Barnes argues that the Court should
reconsider its decision because “[t]he question of how much
Barnes can recover if he pierces the corporate veil does not in
anyway affect the question of whether or not Barnes can pierce
the corporate veil.”

Mot. Recon. at 3.

Defendant AOE and

Defendant Henry in response argue that “the Court’s withdrawal
of Plaintiff’s Motion for Summary Judgment was a sound judgment
call and cannot be said to be a manifest error, especially given
the number of issues on appeal and the fact that all but one of
the pending appeals were initiated by Plaintiff.”

ECF No. 735

(“Opposition”) at 3.
Under ordinary circumstances, the Court would find
Defendant AOE and Defendant Henry’s arguments persuasive and
reaffirm its prior decision, which as Defendants point out was
simply a judgment call based on the circumstances as they
existed at that time.

However, the Court—again exercising its

judgment and discretion—finds that the more appropriate course
of action would be to GRANT Plaintiff Barnes’s Motion to
Reconsider and reinstate his MSJ seeking to pierce the corporate
veil.

- 16 -

Case 1:13-cv-00002-ACK-WRP Document 739 Filed 08/13/20 Page 17 of 20
10242

PageID #:

First, it has now been some seven years since the
accident that triggered this case took place on the vessel
Tehani.

The Ninth Circuit at multiple junctures has encouraged

this Court to proceed swiftly to ensure Plaintiff Barnes’s
recovery of maintenance and cure to which he may be entitled.
See, e.g., Barnes v. Sea Haw. Rafting, LLC, 889 F.3d 517, 543
(9th Cir. 2018) (“We urge the district court to move quickly
upon remand.”); id. at 543 n.21 (approving of the district
court’s approach to sever the issue of maintenance and cure and
set it for trial and encouraging “the court and the parties to
continue to pursue it expeditiously on remand”); see also ECF
No. 688 (lifting the stay to allow the district court to move
forward with the case).

Moreover, before Judge Watson’s ruling

that Plaintiff Barnes could possibly recover for the in rem
claim/maritime lien, the bankruptcy discharge precluded any
possible recover against Defendant Henry.

And one of the

reasons the Court originally withdrew the MSJ was because of the
likelihood at that time that the vessel—and therefore the
maritime lien—would soon be released.6/

Without the maritime

lien securing the vessel, then presumably there would not have

6/ This also explains why the Court had previously—in March 2020—
reinstated the older motion seeking to pierce the corporate veil. Although
the Ninth Circuit appeal of Judge Watson’s ruling was pending, there was no
imminent likelihood of the vessel (and maritime lien) being released. It was
not until June 2020 that Plaintiff Barnes initiated the process of moving
forward with the interlocutory sale.

- 17 -

Case 1:13-cv-00002-ACK-WRP Document 739 Filed 08/13/20 Page 18 of 20
10243

PageID #:

been a way to adopt Judge Watson’s procedure (Plaintiff piercing
the veil to enforce the in rem judgment secured by the maritime
lien) without facing the potential for a double recovery of the
same secured debt.

In light of the Court’s decision to now stay

the sale and bond process (and thereby the release of the vessel
and lien), and at the parties’ joint request, the Court finds
that it would no longer be inefficient to move forward with
deciding whether Plaintiff Barnes is entitled to pierce the
corporate veil of Defendant SHR.
The Court finds that, proceeding now with the MSJ to
pierce the corporate veil could expedite Plaintiff Barnes’s
recovery after the Ninth Circuit rules on the appeal of Judge
Watson’s rulings.

In other words, if Plaintiff Barnes is

successful in piercing the corporate veil, he could then quickly
recover whatever the Ninth Circuit says he is entitled to
recover, rather than having to wait for this Court to then
commence the motions process at that time, which would take
several more months before it could be determined what recovery
Barnes might be entitled to.
In sum, while Defendant AOE and Defendant Henry’s
Opposition sets forth sound reasons for why the Court’s original
decision made sense at the time, given the unique and fastchanging facts in this case, as well as the Ninth Circuit’s
encouragement that the Court should act quickly to determine the
- 18 -

Case 1:13-cv-00002-ACK-WRP Document 739 Filed 08/13/20 Page 19 of 20
10244

PageID #:

extent to which Plaintiff Barnes may be entitled to maintenance
and cure, the Court finds that the Motion for Reconsideration
should be GRANTED, and the proceedings with respect to piercing
the veil should move forward.

CONCLUSION
For the foregoing reasons, the Court makes the
following rulings:
1. The proceedings on the bond and interlocutory sale are
hereby STAYED pending the Ninth Circuit appeal addressing
whether the commercial-use permit is appurtenant to the
vessel.

Accordingly, the Court ADMINISTRATIVELY WITHDRAWS

Plaintiff Barnes’s Motion for Interlocutory Sale, ECF No.
680.
2. The Court ORDERS Defendant Henry and Defendant AOE to pay a
portion of the compensatory enhanced sanctions previously
imposed by the Enhanced Sanctions Order, ECF No. 657, as
detailed above.

The partial compensatory enhanced

sanctions shall be for the amount of Custodial Costs paid
by Plaintiff Barnes between August 29, 2019 (the date the
Initial Sanctions Order was issued) and August 13, 2020
(the date of issuance of this Order), as well as for any
currently-owing Custodial Costs and the ongoing Custodial

- 19 -

Case 1:13-cv-00002-ACK-WRP Document 739 Filed 08/13/20 Page 20 of 20
10245

PageID #:

Costs until the vessel is released or upon earlier Court
order.
3. Plaintiff Barnes’s Motion for Reconsideration, ECF No. 724,
is GRANTED and the Motion for Summary Judgment to pierce
the corporate veil, ECF No. 703, is hereby REINSTATED.

The

Court sets that motion for hearing on October 15, 2020, at
11:00 a.m.

IT IS SO ORDERED.
DATED:

Honolulu, Hawai`i, August 13, 2020.

________________________________
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 (1) Granting Plaintiff’s Motion for Reconsideration,
ECF No. 724, (2) Staying the Bond and Interlocutory Sale Process, and (3)
Imposing Partial Enhanced Compensatory Sanctions Pursuant to the Enhanced
Sanctions Order, ECF No. 657

- 20 -