Paradise Family, LLC v. Unknown Claimant(s)

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

TAMPA DIVISION

IN ADMIRALTY

IN THE MATTER OF:

THE COMPLAINT OF PARADISE

FAMILY, LLC, AS OWNER, AND

ANOTHER DAY IN PARADISE BOAT Case No. 8:20cv-1452-T-02CPT

CLUB, LLC AND SARAH ZIELKE,

AS OWNERS PRO HAC VICE, OF THE

M/V JUST ADD MIST (HIN: STR51255D818)

IN A CAUSE OF EXONERATION FROM

OR LIMITATION OF LIABILITY

_______________________________________/

O R D E R

Before the Court is the Motion to Approve Ad Interim Stipulation and Enter

Monition and Injunction filed by Paradise Family, LLC, as Owner, as well as by Another

Day In Paradise Boat Club, LLC and Sarah Zielke, as Owners Pro Hac Vice

(collectively, Petitioners). (Doc. 2). For the reasons discussed below, the

Petitioners’ motion is denied without prejudice.

I.

As alleged in their complaint, the Petitioners are the owners of the M/V JUST

ADD MIST (the Vessel) that was involved in a maritime incident on or about January

12, 2020, in the territorial waters in or near Hillsborough County, Florida (the

Incident). (Doc. 1 at 1-2). One or more passengers on board the Vessel were

allegedly injured during the Incident. Id.

Seeking to minimize, if not eliminate, their exposure for the Incident, the

Petitioners filed their complaint on June 25, 2020, pursuant to the Limitation of

Liability Act, 46 U.S.C. § 30501, et seq. (the Act), as well as Rule F of the Supplemental

Rules for Admiralty and Maritime Claims of the Federal Rules of Civil Procedure

(Supplemental Rule F). (Doc. 1). The Petitioners assert that their complaint was

filed within six months of their receipt of the first written notice of a possible claim

against them arising from the Incident. Id. at 2.

Contemporaneously with the filing of their complaint, the Petitioners also

submitted an Ad Interim Stipulation for Costs and Value (Ad Interim Stipulation) as

security for any claims stemming from the Incident. (Doc. 3). The Petitioners

represent in that filing that the Vessel and its freight at the time of the Incident were

valued at $17,641.39. Id. at 2; see also (Doc. 1-1).

By way of the instant motion, the Petitioners request that the Court: (1) approve

the Ad Interim Stipulation; (2) issue a monition directing all potential claimants to join

in this action; and (3) impose an injunction staying prosecution of any claim related to

the Incident in any other forum. (Doc. 2).

II.

The Act grants a vessel owner the right to confine its liability for damages or

injuries arising from a maritime accident to the vessel’s value or the owner’s interest

in the vessel and pending freight, provided that the accident occurred without the

owner’s privity or knowledge. 46 U.S.C. § 30505; Beiswenger Enters. Corp. v. Carletta,

86 F.3d 1032, 1036 (11th Cir. 1996). Federal courts have “exclusive admiralty

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jurisdiction” to determine whether a vessel owner is entitled to such a limitation of

liability. Beiswenger, 86 F.3d at 1036-37 (citations omitted).

Both the Act and Supplemental Rule F set forth the procedures for limitation

actions. Pursuant to those provisions, a vessel owner seeking to invoke the Act’s

protections must file a complaint in federal court for limitation of liability no later than

six months after receiving written notice of a claim. 46 U.S.C. § 30511; Fed. R. Civ.

P. Supp. F(1).

For the benefit of claimants, the owner must also deposit with the court (1) a

sum equal to the amount or value of the owner’s interest in the vessel and pending

freight, or (2) approved security therefor.1 Id. “The posting of proper and adequate

security is a condition precedent to obtaining the benefits of [the Act], and [a] district

court [has] discretion to require the [owners] to post security in one of the approved

forms.” New York Marine Managers, Inc. v. Helena Marine Serv., 758 F.2d 313, 317 (8th

Cir. 1985) (internal citation omitted); see also Luhr Bros. Inc. v. Gagnard, 765 F. Supp.

1264, 1268 n.4 (W.D. La. 1991) (“The court possesses great discretion in determining

just what constitutes appropriate security.”) (citing Complaint of Kingston Shipping Co.,

Inc., 1982 A.M.C. 134 (M.D. Fla. 1981)); Karim v. Finch Shipping Co., 1998 WL

713396, at *1 (E.D. La. Oct. 6, 1998) (“The Court has an absolute right to determine

what constitutes approved security.”) (internal quotation marks and citation omitted).

1 The owner may also elect to transfer such interests to a court-appointed trustee. Id.

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Once the vessel owner complies with the above provisions, the Act authorizes

the court to stay all proceedings against the owner or the owner’s property with respect

to the matter in question, and to direct all potential claimants to file their claims against

the owner in district court within a specified period. Fed. R. Civ. P. Supp. F(3), (4).

In this case, as noted above, the Petitioners request that the Court approve their

Ad Interim Stipulation for the value of their interest in the Vessel and pending freight

as security for all those who may file claims in this action. (Doc. 3). “Security is a

‘term that is usually applied to an obligation, pledge, mortgage, deposit, lien, etc.,

given by a debtor in order to make sure the payment or performance of [its] debt, by

furnishing the creditor with a resource to be used in case of failure in the principal

obligation.’” In re Hollis B. Corp., 2016 WL 8732310, at *5 n.1 (D. V.I. Sept. 30, 2016)

(quoting Black’s Law Dictionary (rev. 4th ed. 1968)). The term “security” “may also

refer ‘to one who becomes surety or guarantor for another.’” Id.

While ad interim stipulations are often deemed adequate to safeguard the

interests of potential claimants, The Ontario No. 1, 80 F. 2d 85, 87 (2d Cir. 1935), the

Petitioners’ stipulation gives the Court pause. In that stipulation, the Petitioners state

they will:

[P]ay and/or deposit a surety bond in the Court’s registry, within

fifteen (15) days after the entry of an Order confirming the report of a

commissioner to be appointed to appraise the amount or value of the

Petitioner’s interest in the Vessel, the amount or value of such interest

is thus ascertained and ordering the posting of said bond, if demanded

by any Claimant, or alternatively will file in this proceeding a Joint

Stipulation for Value in the usual form, and that after giving of the

Joint Stipulation for Value in the usual form, this Ad Interim

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Stipulation shall stand as security for all claims in [this] proceeding in

lieu of said bond, until such time as any Claimant demands the posting

of a bond or the Court so orders.

(Doc. 3 at 2).

“[W]hen a shipowner submits an ad interim stipulation, the stipulation is ‘a

substitute for the vessel itself.’” In re Hollis B. Corp., 2016 WL 8732310, at *5 (quoting

Hartford Accident & Indemnity Co. v. S. Pacific Co., 273 U.S. 207, 218-19 (1927)). To

qualify as “approved security” under Supplemental Rule F sufficient to protect the

interests of claimants, “an ad interim stipulation should [therefore] provide a guarantee

of payment in line with the guarantee afforded by holding the vessel in trust ‘for the

benefit of [the claimants].’” Id. (quoting Fed. R. Civ. P. Supp. F(1)).

The Petitioners’ Ad Interim Stipulation, however, does not identify a surety

that would guarantee payment of any potential obligations in this action. Cf. In re

Everglades Island Boat Tours, LLC, 2013 WL 315468, at *2 (M.D. Fla. Jan. 9, 2013)

(approving ad interim stipulation stating that surety will be executed by International

Fidelity Insurance Company); In re Chambers, 2010 WL 55580, at *1 (M.D. Fla. Jan.

5, 2010) (noting that ad interim stipulation was supported by OneBeacon Insurance

Company as surety).

Nor is the Ad Interim Stipulation accompanied by a letter of undertaking

(LOU) guaranteeing such payment. LOUs are customarily offered by petitioners

who opt to post security in lieu of depositing cash into the court’s registry. See In the

Matter of Carpe Diem 1969 LLC, 2018 WL 1463687, at *2 (D. V.I. Mar. 23, 2018)

(citations omitted) (stating that ad interim stipulations should require “at the very

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least” an LOU “executed by an appropriate surety” in order to “provide a guarantee

of payment in line with the guarantee afforded by holding the vessel in trust”); In re

Nat. Maint. & Repair, Inc., 2009 WL 3579161, at *1 (S.D. Ill. Oct. 27, 2009) (quoting

Matter of Compania Naviera Marasia S.A., Atlantico, 466 F. Supp. 900, 902 (S.D.N.Y.

1979)) (‘Approved security’ includes letters of undertaking, as ‘it has been the practice

for many years in the maritime industry to accept letters of undertaking given by

underwriters, domestic or foreign, in order to avoid the detention of vessels and the

expense of posting security in other forms.’”).

Absent such assurances, the Court is not persuaded that the Ad Interim

Stipulation will protect claimants in the manner contemplated by the Act and the

Supplemental Rules, even with the Petitioners’ vow to file in the future a “Joint

Stipulation for Value in the usual form.” (Doc. 3 at 2); see, e.g., Matter of Complaint of

Carpe Diem 1969 LLC, 2019 WL 332792 (D. V.I. Jan. 25, 2019) (approving amended

ad interim stipulation that cured initial deficiencies of failing to identify a surety or

provide an LOU guaranteeing surety’s payment).

Accordingly, the Petitioners’ Motion to Approve Ad Interim Stipulation and Enter

Monition and Injunction (Doc. 2) is denied without prejudice.

DONE and ORDERED in Tampa, Florida, this 29th day of June 2020.

Chance eeu Suk.

HONORABLE CHRISTOPHER P. TUITE

United States Magistrate Judge

Copies to:

Counsel of record

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