Novum Energy Trading time chartered a Bouchard Articulated Tug Barge unit (“ATB”) (M/v Barbara E. Bouchard and Barge B. No. 240) for transporting clean petroleum products. As has been well documented in the maritime press, Bouchard Transportation encountered significant financial difficulties resulting in numerous creditors exercising their maritime lien rights by seizing Bouchard vessels. Bollinger Shipyard was one of the first to act to collect for its unpaid repair bills. Bollinger seized the Barge B. No. 240 but not the tug. Other creditors seized both vessels. Once it became clear that Bouchard was not taking action to release the vessels, Novum joined in the seizures, in order to protect its maritime lien rights. Novum also commenced arbitration in New York before the Society of Maritime Arbitrators to claim several million in damages for breach of the time charter as it had to charter another ATB for the remainder of the term at a significantly higher rate.
Many months passed without the arrested vessels being released and only settlements being reached with low dollar creditors. Bollinger and Novum obtained a court ordered sale that was scheduled for November 2020. However, in late September 2020, Bouchard filed for bankruptcy which, by virtue of the bankruptcy imposed automatic stay of all proceedings, caused the sale to be postponed sine die. Both Bollinger and Novum maintained the arrests on the grounds that they were secured creditors until a court ordered otherwise.
In early November 2020, Bollinger settled with Bouchard (Debtors) and stopped paying custodial costs for the barge. The bankruptcy proceedings dragged on for much longer than usual with Novum maintaining the arrest of the tug and barge paying thousands per month in custodial legis expenses. In the initial arrest, Bollinger paid the custodial costs for the barge and Novum paid the custodial costs for the tug. Once Bollinger settled, Novum was saddled with paying 100% of the custodial expenses for both vessels in order to maintain its maritime lien and secured creditor status.
By February 2021, as a result of motions in the bankruptcy court seeking recovery of the custodial costs as administrative expenses, Novum was able to get Bouchard (Debtors) to pay the expenses from the time of the bankruptcy filing and on a going forward basis. Indeed, Magistrate Judge Julie Hampton in Corpus Christi agreed that this was the correct approach:
Under the bankruptcy statutes, necessary expenses incurred after the filing of the bankruptcy petition that benefit the bankruptcy estate are granted priority status as administrative expenses. Matter of Whistler Energy II, L.L.C., 931 F.3d 432, 440 (5th Cir. 2019); 11 U.S.C. § 503(b), 507(a)(2).
Opinion at p. 6.
However, Bollinger resurfaced and sought from Novum reimbursement of the custodial costs from the time of the arrest until Bollinger’s settlement based on a pro rata sharing based upon the claim amounts commonly imposed by the courts. While Bollinger’s motion was pending, Novum reached a settlement of its multi-million-dollar breach of charter claim against Bouchard (Debtors) in the Houston bankruptcy.
On the custodial expense dispute pending in Corpus Christi, Novum agreed to the pro rata sharing based upon recovered or settlement amounts and in turn sought reimbursement from Bollinger for custodial expenses for the arrested tug arguing that the tug and barge were a single unit because of the articulated tug barge “ATB” status. Judge Hampton agreed in part and opined:
Given that the tug and the barge are inextricably linked to each other, and their value derives from their operation as a single unit, any expenses necessary to keep the tug operating while it was under arrest were also beneficial to the barge, and vice versa. Under these circumstances, Bollinger benefited from the maintenance of the tug as well as the barge, regardless of which it specifically arrested.
Opinion at p. 9.
Judge Hampton agreed with Novum’s position that arresting one vessel in anATB articulated tug barge unit effectively arrests the other and therefore ordered Bollinger to pay custodial expenses on the tug despite its failure to arrest the tug. This is the first time a court has imposed custodial expenses on a party to litigation when the party did not arrest one of the vessels in an ATB unit. Judge Hampton based her decision on the broad equitable powers givento courts sitting in Admiralty, stating: “[T]he district court enjoys broad equitable authority over the administration of maritime seizures.” Beauregard, Inc. v. Sword Servs. LLC, 107 F.3d 351, 354 (5th Cir. 1997).”
Opinion at p. 5.
She did not agree to the sharing based upon recovered/settlement amounts however. Magistrate Hampton’s opinion is available: Bollinger Amelia Repair v Bouchard Transportation et al., Civil Action No. 2:19-cv-370 (S.D. Tex Jul. 22, 2021).
Courts Opinion may be viewed here: https://mclauchlanlawgroupllc.box.com/s/mjaqa6wpu82z1wkylkzqgpp4hgbov9r3