Absolute Nevada, LLC v. Grand Majestic Riverboat Company LLC

Background

Absolute Nevada brought claims against Grand Majestic arising from a failed riverboat charter involving the M/V Americana. Absolute Nevada sought injunctive relief, attorneys’ fees, and costs. The court initially granted part of Absolute Nevada’s request for a temporary restraining order. Before the preliminary-injunction hearing, the parties resolved the injunctive-relief issues through a Stipulation and Order entered on January 6, 2020.

The order bound Grand Majestic and specified related officers, agents, employees, attorneys, and persons acting together with it. It limited claims arising from the charter to damages, required those claims to be arbitrated, barred Grand Majestic from seeking a lien or other right over the vessel, and required removal of statements suggesting that Grand Majestic owned, operated, controlled, or included the vessel in its fleet.

Absolute Nevada later sought civil contempt against Joseph L. Baer, a non-party whom the opinion identified as Grand Majestic’s president, owner, sole member, sole director, and “sole proprietor.” Baer had asserted a personal-services claim related to the charter during the arbitration process. On June 15, 2020, he sent notice of a “seaman’s wage lien” against the vessel, which was later filed with the United States Coast Guard. Grand Majestic also removed a Facebook post about the vessel on or about June 29, 2020.

Service of the Contempt Proceeding

Baer argued that Absolute Nevada’s contempt motion should be dismissed because he had not been properly served. The court held that actual notice alone was insufficient under Local Civil Rule 83.6 because Baer was a non-party who had not appeared through counsel. The rule required personal service of the order to show cause and a copy of the local rule.

The court concluded that Absolute Nevada properly served Baer under New York’s service law. Before using “nail and mail” service, Absolute Nevada made three unsuccessful personal-service attempts at Baer’s home on different days and at different times. The court found those attempts sufficiently diligent. It treated the package left at Baer’s doorstep as sufficient to satisfy the requirement that the papers be affixed to the dwelling, and noted that the order to show cause and the local rule were also mailed within the required period. The court excused a minor technical failure to include the local rule with one later service attempt because Baer had received the rule through the other service efforts.

Civil Contempt

A court may hold a non-party in civil contempt when the person is legally identified with a party or acts together with that party. The court found Baer bound by the January 6 order because of his roles at Grand Majestic and his close identification with the company.

The court found the order clear and unambiguous and found by clear and convincing evidence that Baer violated it. Specifically, the court found that:

- A claim for payment for Baer’s personal services related to making the vessel seaworthy and obtaining a Coast Guard certificate was related to the failed charter. - Baer’s later lien asserted the same claim for unpaid personal services. - The lien asserted a claim outside the required arbitration process and placed an encumbrance on the vessel rather than limiting the claim to damages. - Baer therefore violated the order’s provisions requiring arbitration and barring liens or other rights over the vessel.

The court also found that the Facebook statement remained online until about June 29, 2020, contrary to the order’s requirement that statements claiming Grand Majestic’s ownership or control of the vessel be removed immediately. But because the statement had been removed and Absolute Nevada had not shown a lack of good-faith effort to comply beyond the delay, the court declined to find Baer in contempt for that particular violation.

The court ultimately held Baer in civil contempt for: (1) bringing a claim related to the failed charter outside arbitration; (2) encumbering the vessel with a lien related to the charter; and (3) placing a lien on the vessel for a claim related to the charter.

Sanctions and Motions

The court imposed monetary sanctions to encourage compliance. It ordered that, if Baer had not complied with the January 6 order and the opinion within seven days after Absolute Nevada filed an affidavit showing service of the opinion, Baer would be subject to a sanction of $1,000 per day. The sanction would double every seven days until Baer withdrew all liens against the vessel and paid the sanctions into the court registry. The court did not set a ruinous amount because it had no evidence of Baer’s financial resources.

The court denied Baer’s motions to dismiss, for sanctions against Absolute Nevada and its counsel, and for civil contempt. It granted Absolute Nevada’s motion for civil contempt to the extent stated in the opinion.