United States v. The M/Y Amadea

Background

The United States brought a civil forfeiture action against the M/Y Amadea, a 106-meter superyacht, as property itself rather than against an individual owner. The Government alleged that Suleiman Kerimov beneficially owned the yacht and was subject to sanctions issued under the International Emergency Economic Powers Act. Eduard Khudainatov and Millemarin Investments Ltd. contested the forfeiture and claimed that they were the yacht’s actual owners.

The Government seized and transported the Amadea in or around April 2022. The yacht was in the Government’s custody in San Diego when the Government moved for an interlocutory sale—an early sale of property before the forfeiture case is resolved. The Government relied on Supplemental Rule G(7)(b)(i), which permits such a sale when keeping the property is excessively expensive or disproportionate to its fair market value, or when there is other good cause.

Excessive maintenance costs

The Government presented evidence that the Amadea’s monthly expenses were at least $743,750, including approximately $600,000 in maintenance costs and a monthly share of a $1.725 million annual insurance premium. The court held that “excessive” and “disproportionate to its fair market value” are separate grounds for an interlocutory sale. In the court’s view, “excessive” does not merely mean a large amount in absolute terms. It means more than what is usual, proper, necessary, or normal, which requires a comparison to a reasonable baseline.

For this case, the court concluded that the relevant comparison was principally the typical maintenance cost for similar yachts. The Government did not present evidence showing the usual cost of maintaining a large motor yacht or showing that the Amadea’s costs were atypical. The court therefore found that the Government had not established that the maintenance costs were excessive.

The court also rejected the Government’s argument that the costs were disproportionate to the yacht’s value. Even using the Government’s more favorable estimated value of $230 million, the court found that the maintenance-cost-to-value ratio did not justify an interlocutory sale on the record before it. The court noted that the Amadea’s large costs appeared to be a natural consequence of maintaining a vessel of its type and were relatively small compared with its total value.

Other good cause

The court separately considered whether other good cause supported a sale. It ruled that the maintenance costs, standing alone, did not establish good cause. The examples discussed by the court involved additional concerns, such as depreciation in the property’s value, rather than maintenance costs alone.

The court also rejected the argument that the Claimants’ previous efforts to sell the Amadea established good cause. That fact might weaken an argument based on sentimental attachment, but the Claimants had not made such an argument. The Government, as the party seeking the sale, still had the burden to show that an interlocutory sale was appropriate.

Disposition

The court determined that the Government had not met that burden under either the excessive-cost or other-good-cause grounds. The Government’s motion for an interlocutory sale was DENIED. The clerk was directed to close the motion at docket entry 32. The opinion did not resolve the underlying forfeiture dispute or determine ownership of the Amadea.