United States v. The M/Y Amadea

Background

The court had previously entered judgment against and ordered forfeiture of the M/Y Amadea. Eduard Khudainatov and Millemarin Investments Ltd. appealed that judgment. They then moved under 28 U.S.C. § 1355(c) for relief while the appeal was pending.

The claimants sought three alternatives: (1) a stay of the forfeiture order; (2) an order requiring the United States to post a bond equal to the yacht’s purported $230 million appraised value; or (3) an order barring the United States from selling the yacht for less than $230 million. The United States opposed the requests but stated that it would consent to a stay if the claimants posted a $10,370,000 bond for anticipated taxable costs during the appeal. The Government also reported that it had already incurred approximately $32 million in transportation, maintenance, and other costs and was continuing to incur approximately $850,000 per month.

Legal standard

The court held that relief under Section 1355(c) is discretionary, not automatic. Relying on controlling Second Circuit precedent, it held that the usual four-part test for a stay pending appeal applies regardless of whether the motion is filed by the Government or by claimants. That test considers: the likelihood of success on appeal, irreparable harm without a stay, harm to the opposing party, and the public interest.

The court also addressed the claimants’ alternative argument that a stay must issue whenever necessary to preserve their right to the property’s “full value.” It concluded that the claimants still had the burden to show that relief was necessary. The court explained that “full value” means fair market value—the amount a willing buyer would pay a willing seller with reasonable knowledge of the relevant facts—not necessarily an earlier sale price or an appraisal.

Ruling on the stay

The court found that the claimants had not shown a strong likelihood of success on appeal. The court had previously identified two grounds for striking the claim that led to default judgment against the yacht: lack of standing and case-dispositive sanctions for failure to comply with court orders. The claimants did not address the sanctions ruling in their motion and did not show a strong likelihood of success concerning the standing ruling.

The court also found no irreparable harm. The claimants’ asserted injury was the possibility that the Government might sell the yacht below its purported appraised value. The court stated that monetary loss generally is not irreparable harm and found the possibility of a below-value sale speculative on the current record. The court further found that a stay would harm the United States and the public interest because maintenance costs would continue at approximately $850,000 per month.

Even under the claimants’ proposed standard, the court found insufficient evidence that an auction would produce less than the yacht’s fair market value. Evidence about another vessel’s alleged sale price, news reports, and the Amadea’s appraisal did not establish what the yacht would actually command in a current transaction.

Other requested relief and disposition

The court also rejected the requests for an order requiring the Government to post a bond and for an injunction prohibiting a sale below a specified price. The court stated that the claimants cited no authority supporting either form of relief and had not met the applicable requirements. Judge Dale E. Ho therefore denied the claimants’ Section 1355(c) Motion in its entirety. The court directed the Clerk to terminate the motion, and stated that it would decide the Government’s separate motion requiring the claimants to post a bond later.