Caught in financial musical chairs
Published on February 24th, 2020
A brand new 74-foot yacht placed under arrest at last fall’s Fort Lauderdale International Boat Show has been sprung from custody and returned to its manufacturer.
The decision by a federal judge last week to free the Sunseeker Sport Yacht leaves Wellington-based contractor Kevin Turner in the same, uh, boat as he was in before the arrest.
He’s still out $4 million that he paid a local yacht broker to have the boat built. He still has no boat. And his lawsuit against the manufacturer, England-based Sunseeker International, its subsidiary Sunseeker U.S.A. and Sunseeker’s former dealer Rick Obey & Associates is still pending in state court.
Turner says he was caught in a sort of financial musical chairs that Obey and Sunseeker had been playing for years as court filings by Turner and Obey assert how the dealer and boatmaker conducted normal business.
Obey, once Sunseeker’s largest U.S. dealer, took deposits from purchasers and sent the money to Sunseeker, which applied it to boats it was finishing for earlier buyers.
Sometimes the money was applied toward boats Sunseeker sold Obey “on spec” so he would always have something to sell to clients who didn’t want to wait. As long as the spec boats sold and Obey found new buyers, money from the new buyers would fund completion of boats bought by previous buyers. The maker and dealer got paid and buyers got their boats.
Then in May 2018 one of the engines blew up on a boat Obey had sold, but Sunseeker refused to reimburse Obey for the repair costs, Obey charged in his suit. This caused Obey to fall behind on his payments to Sunseeker, Turner asserted.
But in its own court filings, Sunseeker said Obey never paid it the full balance owed for Turner’s boat. Obey countered that he told Sunseeker to apply $4 million he had paid the company to Turner’s boat and release the vessel to him. Turner, livid over being pulled into the middle of the dispute, sued both Obey and Sunseeker last spring.
So when Turner found out that Sunseeker had brought the boat it built for him to the Fort Lauderdale Boat Show last year for its new dealer to display, he filed a federal suit asking U.S. District Judge Cecilia M. Altonaga to order it placed “under arrest” by U.S. marshals. Arresting vessels, and placing them under watch by third-party custodians, are rare but routine procedures under global maritime law when ownership disputes arise.
Sunseeker then filed a motion seeking the boat’s release, saying Turner did not have a legal claim to it under federal maritime law. Altonaga agreed, stating that a sale contract does not bestow rights of ownership and that Turner did not show that he had legal title to the yacht.
The purchase agreement, Altonaga ruled, spelled out that the title was to be transferred at closing, when full payment was to be made to Sunseeker USA. Obey never made a full and final payment to Sunseeker “and so title to the Vessel never passed to [Obey] or [Turner],” the ruling stated.
Turner is a victim, she said, of Obey’s “undeniable breach of the Purchase Agreement.”
Asked by email about the ruling, Obey responded: “Sunseeker International is currently holding [$4 million] on behalf of Rick Obey & Associates. [We] have instructed Sunseeker International to apply the balance owed and release Mr. Turner’s yacht.”
On February 20, Turner pledged to continue to press his state court case against Obey and Sunseeker. In a statement sent through a public relations firm, Sunseeker USA wrote, “Sunseeker USA properly asserted that the Court was without jurisdiction and was entitled to the return of its vessel.”
Turner responded, “As much as [Sunseeker] would like to think that this is over — it’s not.”