RYBOVICH BOAT COMPANY, LLC

v.

SHAKRA HOLDINGS LIMITED

In this in rem admiralty action, the parties agreed to sell the M/Y Blue Star (the “Yacht” or the “Vessel”) and to use the proceeds of that sale to pay the Plaintiffs back for certain monies and services the Plaintiffs had advanced on the Yacht’s behalf. After three auctions, the Yacht finally sold. But the Plaintiffs still hold hundreds of thousands of dollars in maritime liens. To recover some portion of those liens, the Plaintiffs have asked us to sell three tenders and 14 paintings that, for years, had been kept on the Yacht. The in personam Defendants, Vladimir Gusinski¹ and Shakra Holdings Limited, concede that the tenders should be sold—but they disagree about the art. In their Motion to Separate the Artwork as a Non-Appurtenance to the Yacht (the “Motion”) [ECF No. 187], they contend that the paintings are the personal property of Gusinski, one of the Yacht’s quondam owners.2 After a careful review of the record, we DENY the Motion. The artwork—which has been fastened to the walls of the Yacht for as long as anyone can remember—was essential to the Vessel’s mission as a luxury pleasure yacht. It’s, therefore, an appurtenance of the Vessel and is subject to the Plaintiffs’ maritime liens.

BACKGROUND

For years, Gusinski and Shakra owned the Vessel—a 143-foot luxury Yacht. In early 2020, Rybovich Boat Company—the operator of a boat-repair, storage, and marine facility—sued the M/Y Blue Star, Gusinski, and Shakra for unpaid fees and other necessaries. See generally Complaint [ECF No. 1]. The Yacht’s crew intervened in the lawsuit, seeking wages, repatriation expenses, and reimbursement for monies they’d advanced on the Yacht’s behalf. See Intervening Crew Complaint (“Crew Complaint”) [ECF No. 56]. We arrested the Vessel, see Warrant for Arrest In Rem Returned Executed [ECF No. 11], and appointed Rybovich as substitute custodian for the Yacht, its jet skis, its tenders, and its artwork. See Order Permitting Credit Bidding [ECF No. 190] at 4 (recognizing that

Rybovich was entitled to custodia legis fees through July¹, 2021).

Now that the Yacht has been sold, we must decide what to do with its tenders and artwork. Although the parties agree that the tenders should be auctioned off, see Plaintiffs’ Motion to Sell In Rem Defendant M/Y Blue Star’s Tenders Through a U.S. Marshal’s Sale [ECF No. 185], they disagree about the artwork, see Plaintiff’s Notice Regarding the Court’s Order [ECF No. 213] at 2 (“Defendant Shakra Holdings Limited, wants Plaintiffs to stipulate that the Vessel’s artwork should be returned to the owner. Plaintiffs will not agree to a stipulation about the artwork because they contend the artwork is an appurtenance of the Vessel and subject to a maritime foreclosure sale to satisfy the maritime liens.” (citation omitted)). In his declaration, Gusinski says that he bought and enjoyed the paintings for years before he brought them onto the Yacht and insists that the Yacht functioned as a pleasure cruise long before the paintings appeared on its walls. See Gusinski’s Sworn Statement (“Gusinski Declaration”) [ECF No. 187-1] ¶¶ 6, 7, 13. With this declaration in hand, the Defendants advance two arguments: one, that the artwork isn’t essential to the Yacht’s ability to navigate, see Motion at 7–8; two, that the Court and the parties have already agreed that the artwork isn’t an appurtenance of the Vessel, id. at 8. For this second argument, the Defendants point to (a) the parties’ Joint Status Report on the proposed sale, which excluded “the three tenders . . . or artwork (14 paintings),” and (b) the Court’s Order approving the notice of sale, which didn’t include the artwork among the items listed for sale. Id. Rybovich responded by raising several procedural arguments—including standing and equitable estoppel. See Response at 1–7. Alternatively, it maintains that, whoever owned the paintings, those paintings have always been appurtenances of the Yacht, id. at 8. As support, Rybovich relies on the declaration of David Thornburn—the Yacht’s longtime captain and manager—who avers that, throughout his many years of service on the Vessel, the paintings—which were specially fastened onto the Yacht’s walls—were never removed. See Declaration of David Thornburn Supporting Rybovich’s Summary Judgment Motion [ECF No. 116] ¶¶ 2, 6.

THE LAW

It’s hornbook law that “[a] maritime lien is a privileged claim upon maritime property, such as a vessel, arising out of services rendered to . . . that property.” Canaveral Port Auth. v. M/V Liquid Vegas, 2009 WL 3347596, at *4 (M.D. Fla. Oct. 15, 2009) (Baker, Mag. J.) (quoting THOMAS J. SCHOENBAUM,¹ ADMIRALTY AND MARITIME LAW § 9-1 (4th ed. 2004)). It’s thus a “fundamental principle” of admiralty law that “the vessel itself, along with all equipment that is essential to the ship’s navigation and operation, is subject to maritime liens[,] . . . regardless of who the actual owner of the equipment may be.” Motor-Servs. Hugo Stamp, Inc. v. M/V Regal Empress, 165 F. App’x 837, 840 (11th Cir. 2006) (citations omitted). “This rule balances the interests of keeping ships active and protecting maritime businesses who provide goods and services on credit by making the entire vessel, including all the equipment essential to the completion of the voyage upon which it is embarked, stand as security for the debt.” Id. “The scope of a maritime lien includes the vessel and its apparel, fixtures,

and appurtenances, even if they are leased or owned by someone other than the vessel owner.” Liquid Vegas, 2009 WL 3347596, at *4 (citing Sw. Washington Prod. Credit Ass’n v. O/S New San Joseph, 1977 AMC 1123 (N.D. Cal. May 13, 1977)). “An appurtenance is commonly defined as an item that is essential to the ship’s navigation, operation, or mission.” Gonzalez v. M/V Destiny Panama, 102 F. Supp. 2d 1352, 1354 (S.D. Fla. 2000) (Jordan, J.). “To determine whether an item is an appurtenance to a vessel, we must look to the relation it bears to the actual service of the vessel.” Anderson v. United States, 317 F. 3d 1235, 1238 (11th Cir. 2003) (cleaned up). In assessing whether an item is an appurtenance to a vessel, “[n]either installation, location, nor ownership is dipositive of the matter.” Gonzalez, 102 F. Supp. 2d at 1356. “Rather, an appurtenance is any specifically identifiable item that is destined for use aboard a specifically identifiable vessel and is essential to the vessel’s navigation, operation, or mission.” Id.; see also Anderson, 317 F. 3d at 1238 (citing and applying Gonzalez’s definition of appurtenance). “The determination [of whether an item is an appurtenance] is commonly made on a case-by-case basis[.]” THOMAS J. SCHOENBAUM,¹ ADMIRALTY AND MARITIME LAW § 9-1 (6th ed. 2020). “Throughout the years, courts have ruled that radio equipment, uninstalled replacement engines, and even fishing permits were essential to their vessels’ purposes and, therefore[,] were appurtenances subject to maritime liens.” Regal Empress, 165 F. App’x at 840 (citing The Augusta, 15 F. 2d 727, 727–28 (E.D. La. 1920) (radio equipment); Gonzalez, 102 F. Supp. 2d at 1354–57 (uninstalled engines); Gowen, Inc. v. F/V Quality One, 244 F. 3d 64, 67–70 (1st Cir. 2001) (fishing permits)); see also SCHOENBAUM, supra, § 9-1 (6th ed. 2020).

ANALYSIS

We start by asking whether the artwork constitutes (1) a “specifically identifiable item,” (2) “use[d] aboard a specifically identifiable vessel,” that (3) “is essential to the vessel’s navigation, operation, or mission.” Gonzalez, 102 F. Supp. 2d at 1356. Because the answer to all three questions is “yes,” the paintings are appurtenances of the Yacht subject to the Plaintiffs’ maritime liens.

The first two elements are easy and weigh heavily in the Plaintiffs’ favor. Starting with the first, the Defendants don’t disagree that the Yacht’s 14 paintings constitute “specifically identifiable item[s].” See Gusinski Declaration ¶¶ 2, 4–5 (identifying the artwork as “[t]he 14 paintings that . . . were purchased by [Gusinski] and are part of [his] collection of classic Russian art” and as paintings “purchased at Christie’s London in 1998[,] . . . purchased in 1994 at Sotheby’s London[,] . . . [and] collected . . . between 1995 and 1996”). And this makes sense. The paintings, after all, have been separately stored and appraised during the course of this litigation. See Anubis Appraisal & Estate Services’ Appraisal of the Artwork [ECF No. 98-1] (identifying and appraising each of the 14 paintings). Nor is there any dispute about the artwork being “use[d] aboard a specifically identifiable vessel” (the second element). For as long as Captain Thornburn can remember, the artwork was aboard one specific vessel—the M/Y Blue Star. See, e.g., Declaration of David Thornburn [ECF No. 92-1] ¶ 4 (“The artwork onboard the Vessel . . . has been onboard the Vessel, secured to the walls with screws, for at least as long as I have been Captain (approximately 18 years).”); Declaration of

David Thornburn Supporting Rybovich’s Summary Judgment Motion ¶ 6 (“M/Y Blue Star’s furnishings include paintings, which are specifically secured to the walls inside the yacht. These paintings were never removed from the yacht during my tenure captain/manager.”); id. ¶ 2 (“I have served as captain and manager of M/Y Blue Star for over 10 years.”); see also Motion for Survey of Vessel and Appraisal of Artwork [ECF No. 90] at 3 n.1 (noting that the “paintings . . . have been affixed to the walls of the Vessel for approximately eighteen years”); cf. Gusinski Declaration ¶ 2 (conceding that “[t]he 14 paintings . . . were onboard the M/Y Blue Star”). Moving to the third element, the parties seem to agree that the artwork wasn’t “essential” to the Vessel’s “navigation” or “operation.” See Response at 8 (arguing only that the “[p]aintings . . . are no doubt appurtenances because they serve the yacht’s recreational mission” and that “a vessel with all equipment and appurtenances aboard it that is essential to its mission is subject to maritime liens”—

without ever suggesting that the paintings were essential to the Vessel’s “navigation” or “operation”). But, straining to read the factors in a way that best suits their position, the Defendants stop there. See Motion at 8 (“It cannot be disputed that the Artwork at [sic] has relation to the Vessel’s ability to navigate.”). In their Motion, in other words, the Defendants never contend that the artwork wasn’t essential to the Yacht’s mission. See generally Motion. They’ve thus waived any argument they could’ve made on this point. Cf. Hamilton v. Southland Christian Sch., Inc., 680 F. 3d 1316, 1319 (11th Cir. 2012) (“[T]he failure to make arguments and cite authorities in support of an issue waives it.”).³ Nor could the Defendants suggest that the words “navigation” and “operation” somehow swallow and encompass the separate noun “mission,” such that an item that isn’t necessary to the former two can never be an appurtenance—even if it is necessary to the boat’s mission. To the contrary, as we’ve said, an appurtenance is any item that “is essential to the ship’s navigation, operation, or mission.” Anderson, 317 F. 3d at 1238 (citing Gonzalez, 102 F. Supp. 2d at 1356 (emphasis added)). The test’s disjunctive “or” indicates that an item qualifies as an appurtenance if it’s essential to either the

Yacht’s “mission?” We think that it was. According to Gusinski, “[t]he Vessel functioned as a pleasure yacht.” Gusinski Declaration ¶ 13. And, indeed, the Vessel was registered as a “pleasure yacht.” Certificate of British Registry [ECF No. 1-1] (describing the “type of ship” as “pleasure yacht”). It’s not a stretch to say, in other words, that the Yacht’s mission was to bring pleasure to its occupants. It’s true, of course, that pleasure can come in many different shapes and sizes. In our case, though, the feeling of pleasure the Yacht imparted derived, at least in part, from the sense of sophisticated refinement it afforded. The artwork, remember, didn’t stand alone. It complimented the fully furnished, multi-cabin superyacht’s woodpaneled interiors, its five marble bathrooms (each with capacious soaking tubs), its stainless-steel appliances, its lavish dining room (staffed with a dedicated chef and multiple stewardesses), and its opulent main deck. See Marine Consultants Inc.’s Survey of the M/Y Blue Star [ECF No. 95-1] at 2, 5–14 (describing the Vessel and providing pictures); see also Crew Complaint at 2–3 (listing the crew should be held that nothing is to be considered as a part of the ship that is not necessary for her navigation or motion on the water, a door would be opened to many nice questions, and much discussion and cavil.”); The Dundee,¹ Hagg. 109, 127 (1813) (rejecting a test that pins the appurtenance inquiry only to whether an item was essential to navigation and espousing, as here, a broader test that encompasses the ship’s mission); cf. Ernest F. Hom, Admiralty: What Constitutes a Ship or Vessel for Purposes of Satisfaction of the Claims of Maritime Tort and Contractor Creditors, 27 CAL. L. REV. 572, 572–73 (1939) (“However questionable the authority of English admiralty decisions may generally be in this country, The Dundee and Gale v. Laurie have been cited or relied on in most of the American decisions on the subject.”). members, including a chef and multiple stewardesses); cf. Megayacht vs. Superyacht, available at https://www.worthavenueyachts.com/05-08-2019/megayacht-vs-superyacht/ (last visited Nov. 18, 2021) (“Although there is no true definition, a superyacht is considered to be a yacht that is at least 78-feet or 24-meters. A superyacht is synonymous with luxury and glamor[.]”). Viewed in this context—and against this backdrop—it’s almost silly to suggest that the paintings weren’t essential to the luxurious look-and-feel of the place. Luxury is, of course, why those 14 paintings were initially affixed to the Yacht—and it’s certainly why those paintings hadn’t come off the Yacht’s walls for the (almost) 18 years in which Captain Thornburn worked there.⁵ See Declaration of David Thornburn ¶ 4 (“The artwork onboard the Vessel . . . has been onboard the Vessel, secured to the walls with screws, for at least as long as I have been Captain (approximately 18 years).”); Declaration of David Thornburn Supporting Rybovich’s Summary Judgment Motion ¶¶ 2, 6 (“I have served as captain and manager of M/Y Blue Star for over 10 years. . . . M/Y Blue Star’s furnishings include paintings which are specially

In that case, six intervenors sought to separate their own items from the res of a seized “luxury entertainment cruise ship” that was about to be sold. See id. at *8. As relevant here, two of the intervenors wanted the return of their gambling and casino equipment. Id. at *15. After noting that “the outcome-determinative issue is whether [the] recreational gambling facilities . . . were necessary to the navigation, operation and mission of the vessel,” the court concluded that: [T]he M/V Regal Express’ mission was to serve as a recreational, luxury cruise liner, providing recreational service to her passengers. While the M/V Regal Empress is not first and foremost a gambling cruise ship, gambling is a choice of entertainment provided. Looking then to the ‘relations these services bear to the actual services of the vessel,’ the Court finds they are appurtenant to the vessel and subject to maritime liens. Id. at *16 (citing The Frolic, 148 F. 921, 922 (D.R.I. 1906)). In other words, despite acknowledging that other aspects of the ship contributed to its mission—promoting recreation and luxury⁶—the court still found that the gambling equipment was essential to that mission. Our case is very similar. In Regal Empress, after all, the gambling equipment was an appurtenance even though the vessel wasn’t “first and foremost” a gambling cruise. Here, by contrast, the paintings are essential to the Yacht’s core mission—which is luxury recreation—even though (as in Regal Empress) they aren’t the only means by which that luxury is displayed. And, despite their reliance on Liquid Vegas, that decision is equally unhelpful to the Defendants,7 not just because it reaffirms the

appurtenance.”). And that’s really all we’re saying here—that, while a luxury yacht could (at some theoretical level of abstraction) function as a luxury yacht without Russian art, the Russian art in our case was nevertheless essential to the mission of our Yacht. 8 As it turns out, it was essential to that purpose—for a little while. See First Nat’l Bank, 379 F. Supp. at 1392 (“While it can be said that the compressor briefly was necessary for the vessel’s navigation and operation in the sense that the vessel could not return to port through the St. Lawrence Seaway without powered winches in accordance with Seaway regulations, it did not become an integral part of the vessel or a segment of the vessel’s general equipment.”). “Neither installation, location, nor ownership is dipositive of the matter [of appurtenance].” Gonzalez, 102 F. Supp. 2d at 1356. Indeed, it’s an “ancient principle[] of maritime law” that “components of a vessel, even though readily removeable, which are essential . . . for the specific voyage upon which she is embarked become a part of the vessel itself and thus constitute appurtenances or apparel of the vessel.” Stewart & Stevenson Servs., Inc. v. M/V Chris Way MacMillan, 890 F. Supp. 552, 561 (N.D. Miss. 1995) (emphasis added). As these cases make plain, what matters is, not the manner of installation,

but the question we’ve already answered: i.e., whether the artwork is essential to the vessel’s mission. Having resolved that question for the Plaintiffs, we can safely ignore the fact that the artwork was “easily removable.” Gusinki’s other point—that Shakra never took title to the artwork—matters even less. Here, Gusinksi seems to think that, by not transferring title over the artwork to the company that owned the boat, he was ensuring that the paintings remained his personal property. See generally Gusinski Declaration (noting that the paintings “were purchased by [Gusinski] and are part of [his] collection of classic Russian art”). This new title-transfer rule he’s invented has the benefit of being extremely simple. It, in fact, would require us to ask only one question: Did the individual transfer ownership of the item over to the company that owns the boat? If the answer is yes, then the item is an appurtenance. If the answer is no, then it isn’t. While the simplicity of this new test may be appealing, it suffers from the obvious drawback of being rather silly. Why? Because as soon as we replaced the

Gonzalez (read: real) test with Gusinski’s, no rational individual would ever transfer to the vessel’s owner title to anything—thus ensuring that no item would ever qualify as an appurtenance. Cf. Regal Empress, slip op. at *15 (“The essential argument advanced by these claimants is that their devices should be excepted from the interlocutory sale because the claimants, on acquiescence of the ship’s owners, contractually agreed that the property would be so exempt. If that were the test, then surely all providers of equipment and supplies for the benefit of a vessel’s voyage could avoid forfeiture of their interest by merely tagging their property until their claims of lien had fully been satisfied.”). This cannot be the law—and, fortunately, it isn’t. To the contrary, it’s by now well-settled that an item can be an appurtenance “regardless of who the actual owner of the equipment may be.” Regal Empress, 165 F. App’x at 840. Indeed, where (as here) creditors loaned a ship their goods and services with the expectation that the vessel and its appurtenances would serve as security, it’d be illogical “to exonerate the vessel from the liability imposed upon the ship, her tackle, etc., to satisfy seamen’s wages and contracts entered into in good faith, for no other reason than the alleged separate ownership of the vessel and material.” The Edwin Post, 11 F. at 606. In our case, of course, the Plaintiffs extended credit to the Vessel against the backdrop of the established maritime-law “principle that the legitimate expectations of a maritime lienholder as to the property standing as security for the debt should be enforced.” Chris Way MacMillan, 890 F. Supp. at 562 (emphasis added). The Defendants then failed to pay what they owed the Plaintiffs for the goods and services the Plaintiffs provided on credit. We cannot—and, sitting as we are in equity, will not—allow the Defendants to shield themselves from these liabilities by hiding their assets in the individual, rather than the corporate, owner’s name. Holding on, the Defendants advance one final argument—that the Court has (unwittingly) already ruled that the paintings aren’t appurtenances. See Motion at 8 (contending that the Court has already decided that the artwork “should not be part of the ongoing efforts to auction the Vessel” (emphasis omitted)). This is absolute frivolity. As Rybovich rightly explains, “[t]he Court’s decision to sell the property under arrest separately was made to obtain the most money for plaintiffs. Selling the artwork attached to the vessel was unlikely to produce as much money as separating the artwork from the vessel and selling it separately.” Response at 2. From the beginning of this case, it was this Court’s view that the parties could get more money by selling the various components—the Vessel, the tenders, and the artwork—separately. That view was based on sound economic principles. Cf. Alexander Chernev, Customers Will Pay More for Less, HARV. BUS. REV. (June 2012), https://hbr.org/2012/06/customers-will-pay-more-for-less (discussing research finding that customers “shown the bundle were willing to pay less than those shown the more expensive product alone”). But here’s the point: whether we were right about the economics or not, we never meant to suggest that—by selling the items separately—we were resolving, conclusively or otherwise, the artwork’s status as personal property. eK For all these reasons, we hereby ORDER and ADJUDGE that the Motion to Separate the Artwork as a Non-Appurtenance [ECF No. 187] is DENIED. DONE AND ORDERED in Fort Lauderdale, Florida, this 29th day of November 2021.

ROYK.ALTMAN —————w

UNITED STATES DISTRICT JUDGE cc: Counsel of Record