Virtual Courthouse Auction for the Interlocutory Sale of the M/V EVOLUTION Held in South Carolina

Since mid-March individuals, businesses, and the Court system have turned to virtual meetings and video conferencing in response to the need to practice safe social distancing in the wake of the COVID-19 pandemic.  A byproduct of the need to shelter-in-place has been the opportunity to increase efficiency and connectivity around the world through technology.  This intersection of traditional Court business with the assistance of virtual video conference capabilities was recently on full display in Charleston, South Carolina.

U.S. District Judge Richard Gergel of the United States District Court for the District of South Carolina issued an order authorizing the interlocutory sale of the M/V EVOLUTION.  The Vessel had been under attachment and arrest since January 31, 2020, after numerous Plaintiffs had filed lien and contract claims for unpaid services and necessaries provided to the Vessel.  The Vessel’s Owners were unable (or unwilling) to post substitute security for the release of the Vessel.  Accordingly, in mid-April, Judge Gergel granted the Plaintiffs’ motion seeking to sell the Vessel.  Traditionally, vessel auctions in the United States are required to be administered by the U.S. Marshals Service “on the Courthouse steps” and the highest in-person bidder that presents a certified check representing ten percent (10%) of the purchase price wins the rights to buy the vessel free and clear of all liens, claims, and encumbrances.

In the case of the M/V EVOLUTION, the Court (and the parties) recognized that a traditional in-person auction was not going to be possible as the Courthouse had limited accessibility to the public and South Carolina remained under a directive limiting gatherings to fewer than ten (10) people.  Furthermore, with travel and self-quarantine restrictions in place, there was significant concern that a sufficient number of bidders would not be able to attend.  This presented the serious risk that the auction would not even obtain the minimum bid price of $1,250,000.  Accordingly, District Judge Gergel authorized the auction to proceed both in-person and virtually through the use of a secure Zoom meeting.   The Court appointed London-based ship broker CW Kellock & Co. Ltd. to serve as the broker for the auction in an effort to promote interest in the Vessel and assist in administering the auction.

The custodian for the Vessel conducted a walkthrough survey by video and photos, all of which were available for prospective bidders to view prior to the auction.  The Court permitted participants to satisfy the earnest money requirement through the transmission of funds to the trust account(s) of local South Carolina law firms instead of requiring the traditional hard copy check in-person.  The virtual public auction was held on May 19, 2020.

The vessel sale was administered by the Deputy Marshal for the District of South Carolina in conjunction with the broker.  To streamline the proceedings from the Courthouse and obtain a sufficient signal, the in-person auction was relocated to the corner of the parking lot with a laptop propped up on the trunk of a red convertible.  All those in attendance outside the Courthouse made sure to practice safe social distancing.  Individuals and companies from around the world were able to “log-in,” participate, and observe the proceedings.  The virtual auction was successfully completed with Wickwar Shipping Ltd. achieving the highest bid of $1,340,000.00.  The sale was confirmed by the Court on May 26, 2020.

These are indeed uncertain times we all are facing, but one thing COVID-19 has taught everyone is that the show must go on, even virtually. We look forward to the practice of law post-COVID-19 as law firms and Courthouses adjust to the “new normal” and hopefully the continued use and integration of virtual conference platforms for Court hearings, auctions, and other proceedings.

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