Beauregard, Inc. v. Sword Services L L C

United States Court of Appeals,

Fifth Circuit.

No. 96-30433.

BEAUREGARD, INC., Plaintiff-Appellee,

Offshore Specialty Fabricators, Inc., Intervenor Plaintiff-
Appellee,

v.

SWORD SERVICES L L C, Intervenor-Appellant,

v.

DRAGON I BARGE, in rem, Defendant.

March 18, 1997.

Appeal from the United States District Court for the Eastern
District of Louisiana.

Before JOLLY, JONES and WIENER, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

I

This case, involving an in rem admiralty action against the

barge the "Dragon I," was initiated by Beauregard, Inc., an

equipment lessor who held a first preferred ship mortgage.

Beauregard properly arrested the Dragon I. Following Beauregard's

seizure of the barge, several other entities intervened claiming

maritime liens, and also seized the barge. Each intervenor was

ordered to share in the cost of the Dragon's maintenance.1

Sword Services, L.L.C., moved to intervene to assert a

maritime lien securing $654,817 owed for work on the barge. The

1
The district court ordered that each of the three parties pay
one-third of the custodia legis expenses.

1
district court unconditionally granted Sword's motion. Beauregard

then filed a motion to dismiss Sword's Complaint for Intervention,

contending that Sword should be required to arrest the Dragon, and

share in the custodia legis expenses. The district court denied

Beauregard's motion to dismiss, but ordered Sword to seize the

barge and share in the custodia legis costs of maintaining the

barge. The court expressly noted that if Sword failed to seize the

Dragon I, Sword's complaint for intervention would be dismissed.

When Sword failed to comply with this order, the district court

dismissed Sword from the case. Sword appeals this dismissal. We

affirm.

II

The narrow issue presented by the parties is whether a

district court can condition an intervenor's participation in an

admiralty in rem case, upon the intervenor arresting the vessel,

and sharing in its custodia legis expenses. We hold that it can.

Sword contends that because it is entitled as of right to

intervene under Fed. Rule. Civ. P. 24(a)(2), the district court

could not attach any conditions to its intervention.2 Although not

2
The district court granted Sword's intervention under Rule
24(b). It is undisputed that virtually any condition may be
attached to a grant of permissive intervention. See, e.g.,United
Nuclear Corp. v. Cranford Ins. Co., 905 F.2d 1424 (10th Cir.1990);
Fox v. Glickman Corp., 355 F.2d 161, 164 (2d Cir.1965); Wright,
Miller & Kane, Federal Practice & Procedure: Civil 2d, § 1913, §
1922 (1986)("Since the court has discretion to refuse intervention
altogether, it also may specify the conditions on which it will
allow the applicant to become a party."). Nevertheless, we will
assume that Sword is correct in contending that it may intervene as
of right under Rule 24(a)(2).

2
without some controversy,3 it is now a firmly established principle

that reasonable conditions may be imposed even upon one who

intervenes as of right. The Advisory Committee Note to the 1966

Amendment of Rule 24(a) provides: "An intervention of right under

the amended rule may be subject to appropriate conditions or

restrictions responsive among other things to the requirements of

efficient conduct of the proceedings."4 Courts generally have

accepted the position of the Advisory Committee Note, and allowed

various conditions to be imposed upon intervenors.5 Scholarly

commentators have also supported this view.6 Therefore, we hold

3
7C Charles A. Wright, Arthur R. Miller, Mary Kay Kane,
Federal Practice and Procedure, § 1922, at 505 ("It had been
supposed ... that conditions could not be imposed on one who
intervened of right and that he had all the privileges of an
original party. Rule 24(a) does not authorize the imposition of
conditions and the court, in theory at least, has no discretion to
refuse intervention to one who satisfies the requirements of that
rule.")
4
One court has noted that this comment "was not an innovative
suggestion but was instead the recognition of a well-established
practice." Shore v. Parklane Hosiery, Co., 606 F.2d 354 (2d
Cir.1979) citing Ross v. Bernhard, 396 U.S. 531, 541 n. 15, 90
S.Ct. 733, 740 n. 15, 24 L.Ed.2d 729 (1970); United States v.
Massachusetts Bonding & Insurance Co., 303 F.2d 823, 826, 829 (2d
Cir.1962); Klein v. Nu-Way Shoe Co., Inc., 136 F.2d 986, 989 (2d
Cir.1943); Hall County Historical Soc., Inc. v. Georgia Depart. of
Transp., 447 F.Supp. 741, 746 n. 1 (N.D.Ga.1978); Alaniz v.
California Processors, Inc., 73 F.R.D. 269, 288-89 (N.D.Cal.),
modified on other grounds, 73 F.R.D. 289 (N.D.Cal.1976).
5
See, e.g., McDonald v. E.J. Lavino Co., 430 F.2d 1065, 1073
n. 7 (5th Cir.1970); see also, Columbus-America Discovery Group v.
Atlantic Mut. Ins. Co., 974 F.2d 450 (4th Cir.1992); Southern v.
Plumb Tools, 696 F.2d 1321 (11th Cir.1983); Ionian Shipping Co. v.
British Law Ins. Co., 426 F.2d 186, 191-92 (2d Cir.1970).
6
See, e.g., Kennedy, Let's All Join In: Intervention under
Federal Rule 24, 57 Ky.L.J. 329, 375 (1969); Shapiro, Some
Thoughts on Intervention before Courts, Agencies, and Arbitrators,
81 Harv.L.Rev. 721, 752-56 (1968).

3
that the district court in this case had the power to place

conditions upon Sword's participation in this action. This

holding, however, does not resolve the separate question of whether

the conditions actually imposed were reasonable.

Contending that the district court erred in directing it to

seize the Dragon I, Sword points out that parties often intervene

in in rem actions without seizing the property and sharing in the

cost of maintaining it. This contention, however, shows at most

that the district court was not required to condition intervention

on Sword seizing the vessel, and sharing in the cost of maintaining

her.

On the other hand, in its inherent powers to manage this

litigation properly, the district court had the discretion to order

a party to seize the vessel and divide the cost of the ship's

maintenance among all the parties. Courts routinely enter orders

that divide the custodia legis expenses among the parties of an in

rem action. When such orders are entered is largely discretionary

and vary in different cases. Often the party that filed a suit

will pay the entire cost of maintaining the res until the

resolution of the case. At the judicially ordered sale, the cost

of maintenance is deducted from the sale proceeds before the

remaining proceeds are divided among the claimants. Therefore,

even when a single litigant advances the cost of maintenance, all

claimants are eventually required to share in this cost.7

7
See, e.g., Certain Underwriters at Lloyds v. Kenco Marine
Terminal, Inc., 81 F.3d 871 (9th Cir.1996).

4
 A case analogous to the one before us arose in the Eleventh

Circuit. In Donald D. Forsht Associates, Inc. v. Transamerica ICS,

Inc., 821 F.2d 1556 (11th Cir.1987) Transamerica filed an in rem

complaint against four vessels. Other creditors followed by

intervention, or by filing separate actions, later consolidated

with the Transamerica suit. Transamerica arranged for the ships to

be maintained by a private company whose rates were less than those

charged by the United States marshal. Nevertheless, the sale price

of the vessels was insufficient to cover the significant cost of

maintenance. The Eleventh Circuit held that it was "inconceivable

that by being the first party to arrest the vessels, ...

Transamerica should become wholly liable for the administrative

expense of maintaining the vessels." Id. at 1561. Similarly, we

find that the district court's requirement that Sword share in the

cost of maintaining the Dragon as the price of intervention to be

an appropriate exercise of discretion.8

We think that the district court's order also derives some

authority from 28 U.S.C. § 1921. This provision authorizes the

United States marshal to collect expenses and fees for custody,

which may be taxed by the court as litigation costs. Where a

vessel is held in custody, the marshal may collect certain costs in

advance:

8
In some circumstances, requiring an intervenor to pay a per
capita share of the cost of maintenance could be unreasonable. For
example, an intervenor with a very small claim might not be forced
to bare the same proportion of the cost of maintenance as a
claimant with a large claim. In such circumstance, costs might be
divided according to the relative size of each party's claim.

5
 The marshals shall collect, in advance, a deposit to cover the
initial expenses for special services required under paragraph
1(E), and periodically thereafter such amounts as may be
necessary to pay such expenses until the litigation is
concluded. This paragraph applies to all private litigants,
including seamen proceeding pursuant to section 1916 of this
title.

28 U.S.C. § 1921(a)(2) (emphasis added).9

Finally, the district court enjoys broad equitable authority

over the administration of maritime seizures. In New York Dock Co.

v. The Poznan, 274 U.S. 117, 121, 47 S.Ct. 482, 484, 71 L.Ed. 955

(1927), the Supreme Court reversed a decision denying a dock owner

priority for the expense it suffered while a vessel in custodia

legis was maintained at its dock, stating that "the most elementary

notion of justice would seem to require that services or property

furnished upon the authority of the court ... for the common

benefit of those interested in a fund administered by the court,

should be paid from the fund as an "expense of justice.' " Id. The

Court further explained that "[t]he court of admiralty is asked, in

the exercise of its admiralty jurisdiction, to administer the fund

within its custody in accordance with equitable principles as its

wont." Id. at 122, 47 S.Ct. at 484.

9
In some cases a district court has granted an intervenor as
of right only a limited ability to participate in a case. For
example, the district court may limit its participation to one
issue in the litigation, or may restrict the intervenor's right to
discovery. In contrast, in this case, the district court allowed
the intervenor full participation in the case. The district court
merely imposed the same conditions upon Sword, that were imposed
upon the original party, and all subsequent parties to this action.
An intervenor is generally treated as an original party to an
action. United Steelworkers of America v. Jones and Lamson Machine
Company, 854 F.2d 629, 630 (2d Cir.1988). It is hardly
unreasonable to demand that as a party, the intervenor abides by
the same rules as every other party to the action.

6
 Thus, for the foregoing reasons we think that the district

court did not err by requiring Sword to seize the vessel and share

in the in custodia legis costs.

III

Finally, we note that irrespective of whether the court

committed error in entering the underlying order, the district

court was within its authority to dismiss Sword as a sanction for

its willful disregard of the order. See, e.g., In re United

Markets Intern., Inc., 24 F.3d 650, 654 (5th Cir.1994) (citing

cases) (affirming order striking pleadings that had practical

effect of dismissing claim with prejudice). Id. The Fifth Circuit

has stated that severe sanctions should be reserved for bad faith

and willful abuse of the judicial process. Id.; Pressey v.

Patterson, 898 F.2d 1018, 1021 (5th Cir.1990). Sword's honest

belief that the order was erroneous, made its refusal to obey no

less "willful," and Sword was specifically warned that dismissal

would be the sanction. We therefore conclude that the district

court was within its discretion to dismiss Sword's intervention as

a sanction for its willful disregard of the court's order.

For the reasons set forth above, the order of the district

court is

A F F I R M E D.

7