On Wednesday, Judge Ho denied the government’s motion for a cost bond pending appeal in a civil asset forfeiture case against defendant-in-rem the M/Y Amadea, a 348-foot luxury superyacht purportedly owned by a Russian national subject to economic sanctions. Since seizing the superyacht, the government has spent approximately $32 million on transportation, maintenance and storage, and now seeks bond for approximately $25 million in incurred taxable costs. In related proceedings, the claimants have appealed the forfeiture of the Amadea, and the government estimates that the appeal will take approximately one year and incur another $10 million in taxable costs.

In a matter of “first impression,” the parties disagreed on whether 28 U.S.C. § 1355, which addresses civil forfeiture appeals, “is the exclusive bond authority in civil asset forfeiture appeals.” The claimants argued that Section 1355(c) controls, which limits bonds to prevailing parties (and is therefore inapplicable here). In contrast, the government points to SDNY Local Rule 54.2 and Federal Rule of Appellate Procedure (FRAP) 7, both of which generally govern the imposition of bonds in civil cases and are not limited by party.

The Court declined to decide whether Section 1355 controlled, and instead exercised its “broad discretion” under Local Rule 54.2 and FRAP 7 to decline to impose a bond, despite claimants failing to demonstrate a likelihood of success on appeal and having a history of violating this Court’s orders.

The Court explained that the purpose of Local Rule 54.2’s bond requirement would not be met:

First, the primary purpose of Local Rule 52.4’s bond requirement, which is to insure that whatever assets a party does possess will not have been dissipated or otherwise have become unreachable by the time such costs actually are awarded, will not be advanced by granting the Government’s Motion. Whatever difficulties may arise for the Government in collecting taxable costs, if any, from Claimants if taxable costs are ultimately awarded, there is no evidence before the Court that Claimants will be insolvent or otherwise unable to pay these costs at that time. To the extent that the Government asserts that collecting costs against Claimants will be difficult generally, there is no reason to think that collecting costs now (in the form of a bond) will be less difficult than collecting taxable costs in the future.

The Court also explained that future maintenance costs were really a matter of how long it took the government to sell the superyacht, rather than how long the appellate proceedings would take, and that it was wary of weaponizing the bond to disincentivize appeals, which would “transform this tool into a potentially formidable weapon for forcing that party into submission, a situation the court must guard against.”