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Gulf Copper & Manufacturing Corp. v. M/V Lewek Express

United States District Court, S.D. Texas, Galveston Division

June 11, 2019

GULF COPPER & MANUFACTURING CORPORATION Plaintiff.,
v.
M/V LEWEK EXPRESS, her apparel, equipment, engines, freights, tackle, etc., in rem Defendant.

         In Admiralty, Fed. R. Civ. P . 9(h)

          ORDER

          ANDREW M. EDISON, UNITED STATES MAGISTRATE JUDGE

         Plaintiff Gulf Copper & Manufacturing Corporation (“Gulf Copper”) has filed an Opposed Motion for Pro-Rata Apportionment of Custodia Legis Expenses (“Motion for Pro-Rata Apportionment”), requesting that the intervening claimants, Gulf Marine Fabricators, LP (“Gulf Marine”) and Trevaskis Limited (“Trevaskis”), [1] share in the costs of the custodia legis expenses accrued from the arrest of the M/V LEWEK EXPRESS (the “Vessel”). See Dkt. 29. After reviewing the motion, responses, and reply, as well as the applicable law, the Court concludes that the Motion for Pro-Rata Apportionment should be GRANTED.

         BACKGROUND

         Gulf Copper filed this lawsuit on January 29, 2019, seeking to recover $442, 255.00 for berthing, mooring, and related services it provided to the Vessel through the end of January 2019. Also on January 29, 2019, pursuant to Rule C of the Supplemental Rules for Certain Admiralty and Maritime Claims, Gulf Copper submitted (1) a Motion for Warrant of Seizure of the Vessel, asking the Court to order the United States Marshals Service to arrest the Vessel; and (2) a Motion to Appoint Substitute Custodian, requesting that Gulf Copper be appointed as substitute custodian with a daily berthing rate of $4, 114.00. The following day, January 30, 2019, this Court granted both motions and the United States Marshals arrested the Vessel.

         Following notice of the Vessel's arrest in the Galveston Daily News, Gulf Marine and Trevaskis intervened in the lawsuit to assert their respective claims against the Vessel. Gulf Marine asserted a claim for $578, 743.76 arising from unpaid dockage, mooring, and towage fees. Trevaskis asserted a claim to three particular items of equipment currently onboard the Vessel valued at $9, 250, 000.00.

         The Motion for Pro-Rata Apportionment addresses who should pay the costs of maintaining and preserving the Vessel under seizure. In deciding the current motion, the Court must answer four separate questions: (1) whether the Intervenors are required to pay the custodia legis expenses from the time of arrest of the vessel or from the time the claimants intervened in the suit; (2) whether the $4, 114.00 daily docking fee charged by Gulf Copper, the substitute custodian, is reasonable; (3) whether Gulf Copper is entitled to immediate reimbursement of the custodia legis expenses; and (4) whether the expenses shall be allocated on a per capita or pro rata basis. The Court will address each issue below.

         CUSTODIA LEGIS EXPENSES

         Since the Motion for Pro-Rata Apportionment seeks to apportion custodia legis expenses among the parties, it is worthwhile to briefly explain what custodia legis expenses are and why they are important in an admiralty case.

         In custodia legis is a Latin phrase which means “in the custody of the law.” In the admiralty context, custodia legis expenses are the costs, fees, and expenses incurred by seizing a vessel. Common custodia legis expenses include dockage fees, maintenance costs, and necessary fuel and water to keep equipment operating while a vessel is under arrest. Although expenses and costs incurred while a vessel is under seizure and in judicial custody do not create a maritime lien, it is well-settled that “services or property advanced to preserve and maintain the vessel under seizure, furnished upon authority of the court, should be allowed as custodia legis expenses.” Gen. Elec. Credit & Leasing Corp. v. Drill Ship Mission Expl., 668 F.2d 811, 816 (5th Cir. 1982). See also N.Y. Dock Co. v. The Poznan, 274 U.S. 117, 121 (1927) (“[S]ervices or property furnished . . . for the common benefit of those interested in a fund administered by the court, should be paid from the fund as an ‘expense of justice.'”); Associated Metals & Minerals Corp. v. Alexander's Unity MV, 41 F.3d 1007, 1018 (5th Cir. 1995) (affirming the award of custodia legis expenses and finding that “[a]nything that maintained the value of the ship benefited all of the lienholders of the ship”). “While it is preferable to secure a court order authorizing this expense before incurring it, nevertheless even in the absence of court order these ‘custodia legis expenses' may be ordered by the court to be paid in priority to the seizing mortgage creditor if ‘equity and good conscience' so require.” Gen. Elec. Credit & Leasing Corp., 668 F.2d at 815 (citation omitted).

         As protection to parties who advance funds to seize a vessel, and to parties who render services to a seized vessel, priority is awarded to claims of custodia legis expenses over all maritime lien claims. See John W. Stone Oil Distrib., Inc. v. M/V Red Rose, 1987 A.M.C. 137, 140 (E.D. La. 1985) (“[C]ustodia legis expenses which are incurred in the care and custody of a vessel while it is within the custody of a Court enjoy a high priority in the distribution of proceeds from a judicial sale and actually outrank all maritime lien claims.”) (citation omitted).

         The Fifth Circuit has explained that “the district court enjoys broad equitable authority over the administration of maritime seizures.” Beauregard, Inc. v. Sword Servs. LLC, 107 F.3d 351, 354 (5th Cir. 1997). As such, district courts routinely “divide the custodia legis expenses among the parties” and “[w]hen such orders are entered[, ] [it] is largely discretionary and vary in different cases.” Id. at 353.

         As a final note, the party seeking to collect custodia legis expenses bears the burden of proving that those expenditures were reasonably incurred and reasonable in amount. See Nat'l Bank of N. Am. ...


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