United States v. The M/Y Amadea

Background

This civil asset-forfeiture case concerns the M/Y Amadea, a 348-foot motor yacht seized by the United States. The Government alleged that the yacht was purportedly owned by Suleiman Kerimov, a Russian national subject to economic sanctions. Eduard Khudainatov, through his ownership of Millemarin Investments Ltd., filed a claim asserting that he was the yacht’s ultimate beneficial owner.

After an evidentiary hearing, the court struck Khudainatov and Millemarin’s claim, concluding that they lacked standing to contest the forfeiture. The court separately granted the Government’s motion for case-dispositive discovery sanctions. It then entered a judgment of forfeiture. The Claimants appealed several of those orders and sought a stay pending appeal, which the court denied.

The Government later moved for a cost bond covering taxable costs it had already incurred and expected to incur while the appeal was pending. It reported spending approximately $32 million transporting, maintaining, and storing the yacht, and said approximately $25.6 million of that amount was taxable. It also expected more than $10 million in additional taxable costs during an appeal it expected to last about one year.

Parties’ Arguments and Governing Authority

The Government relied on Local Civil Rule 54.2 of the Southern and Eastern Districts of New York and Federal Rule of Appellate Procedure 7. Those provisions allow a court, in its discretion, to require a party or appellant to provide security for costs.

The Claimants argued that 28 U.S.C. § 1355(c) is the exclusive authority for bonds in civil-forfeiture appeals. Because that statute permits a bond on the prevailing party, the Claimants argued that it did not authorize the Government’s request for a bond from them. The Government disputed that interpretation and argued that the statute did not supersede the local and appellate rules.

The court said the issue appeared to be one of first impression and that neither the parties nor the court had found a case squarely addressing whether § 1355 is the exclusive bond authority in civil-forfeiture appeals. The court did not resolve that question. It assumed, for purposes of the motion, that the Government could seek a bond under Local Rule 54.2 and/or Rule 7.

Reasons for Denying the Bond

The court explained that bonds under both authorities are discretionary. Under Local Rule 54.2, courts generally consider case-specific factors, including the merits of the underlying claims and compliance with court orders, but there are no fixed guidelines.

The court acknowledged that those factors generally favored a bond here. It noted that the Claimants’ claim had been struck after an evidentiary hearing and as a sanction for repeated violations of court orders. It also noted that the Claimants had not shown a likelihood of success on appeal regarding either issue.

The court nevertheless declined to impose a multimillion-dollar bond. First, the stated purpose of a cost bond is to ensure that assets remain available when costs are later awarded. The court found no evidence that the Claimants would be insolvent or otherwise unable to pay taxable costs in the future. It also found no reason to believe that collecting a bond now would be easier than collecting costs later.

Second, the court concluded that its denial of the stay appeared to make moot the Government’s offer to consent to a stay in exchange for a bond covering estimated future maintenance costs. Because the Government was free to sell the yacht, future maintenance costs during the appeal would result from how long it took to dispose of the vessel, not from the appeal itself.

Third, the court concluded that the equities did not support a bond designed to deter the Claimants from appealing. Although the court criticized the Claimants’ conduct during the litigation, it stated that they remained entitled to appeal. The court cautioned that a cost bond should not become a weapon that forces an opposing party to abandon its appeal.

The court applied similar reasoning under Rule 7. It emphasized that an appellate bond must not create an impermissible barrier to appeal and declined to impose the requested bond under that rule as well.

Disposition

The court declined to impose a bond on the Claimants at that time and DENIED WITHOUT PREJUDICE the Government’s motion for a cost bond. It DENIED as moot the Claimants’ request for oral argument. The court stated that the order did not address the merits of the Government’s anticipated bill of costs and directed the clerk to terminate the docket entries for the bond motion and oral-argument request.