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Barnes v. Sea Hawaii Rafting, LLC

United States District Court, D. Hawaii

August 29, 2019

CHAD BARRY BARNES, Plaintiff,
v.
SEA HAWAI`I RAFTING, LLC; KRIS HENRY; ALOHA OCEAN EXCURSIONS, LLC; JOHN DOES 1-20; MARY DOES 1-20; DOE CORPORATIONS 1-20; DOE PARTNERSHIPS 1-20; DOE ASSOCIATES 1-20; DOE GOVERNMENTAL AGENCIES 1-20; AND OTHER ENTITIES 1-20, in personam; AND M/V TEHANI, HA 1629-CP, AND HER ENGINES, EQUIPMENT, TACKLE, FARES, STORES, PERMITS, FURNISHINGS, CARGO AND FREIGHT; DOE VESSELS 1-20, in rem. Defendants.

          ORDER IMPOSING SANCTIONS ON DEFENDANT ALOHA OCEAN EXCURSIONS, LLC AND DEFENDANT KRISTIN KIMO HENRY

          ALAN C. KAY SR. UNITED STATES DISTRICT JUDGE

         For the reasons discussed below, the Court imposes monetary sanctions in the amount of $25, 000 jointly and severally against Defendant Kristin Kimo Henry (“Defendant Henry”) and Defendant Aloha Ocean Excursions, LLC (“Defendant AOE”), subject to potential substantial enhancement as discussed more fully herein.

         BACKGROUND

         For purposes of this Order, the Court will not recount this case's lengthy procedural history beginning in 2013. The Court only discusses those facts and events of specific relevance to the issue that this Order addresses.

         On August 15, 2019, the Court issued a Minute Order (the “08/15/2019 Order”), ECF No. 601, concerning the commercial use permit and the matter of whether to sanction Defendant Henry and Defendant AOE. The Court stated the following:

In furtherance of its directive from the Ninth Circuit to proceed with establishing the rights of Plaintiff Barnes to maintenance and cure, the Court is considering whether it should sanction Defendant Henry and Defendant AOE for wrongfully transferring the commercial use permit for the vessel M/V Tehani by Defendant Henry's misrepresentation to the harbormaster that he was simply requesting a change in name from Sea Hawaii Rafting, LLC to Aloha Ocean Excursions, LLC.

08/15/2019 Order at 1. Defendant AOE and Plaintiff Barnes filed briefs on the sanctions matter on August 20, 2019. ECF Nos. 603 and 604. The Court held a hearing on the sanctions matter on August 22, 2019. ECF No. 606.

         DISCUSSION

         Based upon the authorities hereinafter discussed, the Court imposes sanctions against Defendant Henry and Defendant AOE for the reasons that follow.

         I. Events Concerning the Permit

         A review of the various events concerning the permit is necessary in order to properly understand the Court's decision to sanction Defendant Henry and Defendant AOE. Plaintiff Barnes was injured in July 2012 when the vessel Tehani, on which he was working as a seaman, exploded as it was being lowered into the water at the Honokohau Harbor in Kailua-Kona, Hawai`i. Plaintiff Barnes filed this lawsuit on January 1, 2013, which includes a maritime lien claim for failure to pay Plaintiff Barnes maintenance and cure. This Court has ruled that Plaintiff Barnes is entitled to recover for maintenance and cure from Defendant Sea Hawaii Rafting, LLC (“Defendant SHR”) as the owner of the Tehani. At the time of the accident, Defendant SHR operated the vessel Tehani under a commercial use permit issued by the Division of Boating and Ocean Recreation (“DOBOR”) as part of a maritime tourist business. The permit was issued to Defendant SHR, and the Tehani was (and still is) the vessel named on the permit. Defendant Henry is the sole member of Sea Hawaii Rafting, LLC and Aloha Ocean Excursions, LLC. The parties have always agreed that the commercial use permit significantly affects the value of the vessel.

         The commercial use permit entitles the permittee to launch the vessel named on the permit from the ramp at Honokohau Harbor. Currently, 51 such permits exist; however, the No. of permits is limited to 35 and there is a permit waitlist with six individuals or entities on it. Transcript of February 28, 2019 Hearing (“Tr.”), ECF No. 539, at 8:8, 9:1-6 (testimony of William Wynhoff, Deputy Attorney General and General Counsel for the State of Hawai`i's Department of Land and Natural Resources (“DLNR”)). This means that 16 individuals or entities must give up their permits before an individual or entity on the waitlist will be issued a permit. Tr. at 9:7-12.

         On November 3, 2014, Defendant Henry filed a voluntary chapter 13 bankruptcy petition. See In re Kristin Kimo Henry, No. 14-01475 (Bankr. D. Haw. 2014) (the “Chapter 13 Case”). On November 12, 2014, Defendant SHR filed a voluntary chapter 7 bankruptcy petition. See In re Sea Hawaii Rafting, LLC, No. 14-01520 (Bankr. D. Haw. 2014) (the “Chapter 7 Case”).

         In a Minute Order dated July 17, 2015, the Court noted that Defendant Henry represented to this Court that Defendant SHR owned the Tehani; yet in the Chapter 13 Case, Defendant Henry represented that he himself owned the Tehani. ECF No. 158 at 2. After the Court noted the inconsistency in Defendant Henry's representations, Defendant SHR amended its bankruptcy schedules on August 4, 2015 to reflect the fact that it owned the Tehani (although Defendant SHR did not disclose that it owned the commercial use permit). Chapter 7 Case, Dkt. No. 24.

         Defendant Henry formed Aloha Ocean Excursions, LLC on August 11, 2015.[1]/ Defendant Henry and Defendant AOE sought to lease the Tehani and its trailer (but not the permit) from the Chapter 7 Trustee, who then filed a motion on February 12, 2016 seeking the bankruptcy court's approval of a lease agreement. Chapter 7 Case, Dkt. No. 102. On March 17, 2016, the ...


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