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Coastal Marine Management, LLC v. Hunter

United States District Court, D. Massachusetts

October 25, 2017

Coastal Marine Management, LLC d/b/a Boston Harbor Shipyard and Marina, Plaintiff,
v.
M/V Sea Hunter (O.N. 598425), her engines, tackle, apparel, appurtenances, etc., in rem, Defendant.

          ORDER

          Nathaniel M. Gorton, United States District Judge.

         This case involves the public auction sale of a sea vessel, the M/V Sea Hunter (O.N. 598425). On August 8, 2016, Coastal Marine Management, LLC (“plaintiff” or “Coastal Marine”) filed an in rem action against the M/V SEA HUNTER (O.N. 598425) (“the Sea Hunter”). The complaint alleges that plaintiff has not received payment for the necessary services it provided to the Sea Hunter and that plaintiff has the right to enforce its lien against the vessel. After this Court allowed plaintiff's motion for the issuance of a warrant in rem against the vessel and entered a default judgment in favor of plaintiff, it authorized an interlocutory sale of the vessel.

         The Sea Hunter was appraised at $2, 000, 000 but at the public auction on October 4, 2017 brought only two bids. One, for $30, 000 and the winning bid of $50, 000, from Linden Holdings, Inc. The Court held a confirmation hearing on October 10, 2017, to determine whether the sale of the vessel should be confirmed. Although the various intervenors and debt holders were notified of the hearing, and some appeared at the public auction, only counsel for plaintiff Costal Marine Management attended the hearing. The Court took the matter under advisement.

         On Tuesday, October 17, 2017, plaintiff filed an emergency motion to set aside the auction sale, consider upset bidding and reopen the bidding. The motion was consented to by all parties represented in this action after an “upset bid” for the vessel in the amount of $100, 000 was received from Custom Marine, Inc., of Dobbs Ferry, New York. The upset bidder submitted a bank check in the amount of $100, 000 to plaintiff's counsel, who then delivered the check to the United States Marshal who had been appointed to supervise the sale. Because of the upset bid, the represented parties now request that the court set aside the public auction sale for $50, 000 and re-open bidding for the vessel.

         The Court will allow that motion, in part, and deny it, in part.

         The policy of ensuring public confidence in sales under the supervision of the court favors confirmation of a sale made to the highest bidder at a fairly conducted public auction. Munro Drydock, Inc. v. M/V Heron, 585 F.2d 13, 15 (1st Cir. 1978). Nonetheless, an interested party may “raise a claim prior to a confirmation that [a] sale should be disapproved" because the sale price is "grossly inadequate". Id. “Gross inadequacy” exists when, apart from situations involving fraud or unfairness, there is a substantial disparity between the highest bid and the appraised fair market value, and “there is a reasonable degree of probability that a substantially better price will be obtained by a resale.” Gowen, Inc. v. F/V Quality One, 2000 WL 893402 (D. Me. June 14, 2000), aff'd, 244 F.3d 64 (1st Cir. 2001).

         In the present case, there is a substantial disparity between the $50, 000 bid at auction and the $2, 000, 000 appraisal of the vessel. Furthermore, a substantially higher price is now apparently available. The “upset bidder”, Custom Marine, Inc., has deposited $100, 000 in certified funds with the United States Marshal. Accordingly, the Court finds that the $50, 000 public auction price is grossly inadequate and declines to confirm the sale at public auction.

         In an effort to be fair to all interested parties and to provide a procedure that will elicit the highest price for the vessel, plaintiff's motion to set aside the auction sale, consider upset bid and reopen bidding (Docket No. 82) is ALLOWED, in part, and DENIED, in part, and the following procedure is hereby adopted:

- Counsel for plaintiff is to advertise the reopened sale of the M/V Sea Hunter in Boats and Harbors and gcaptain.com and submit the proposed advertisements to those publishers no later than close of business, Thursday, October 26, 2017.
- Counsel for plaintiff shall give notice of the sale, and of this order, to (i) the owner of the M/V Sea Hunter and to all lien and mortgage claimants of record (ii) the potential bidders who provided contact information at the October 4, 2017, auction and (iii) Linden Holdings, Inc.
- Bidding will be re-opened until the close of business Friday, November 3, 2017, during which time bidders other than the upset bidder, Custom Marine, Inc., may submit sealed bids in increments of not less than $10, 000 above the current upset bid of $100, 000.
- Sealed bids shall be delivered or sent to:
United States Marshals Service
via email at: John.Wickham@usdoj.go ...

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