## Facts

- American Technical Enterprises, Inc. contracted with Hatteras of Lauderdale, Inc., a Fort Lauderdale yacht retailer, to buy a new Hatteras motor yacht, the *Gemini Lady*, for about $1.2 million.
- The sales contract included a $70,000 customization allowance covering numerous buyer-requested modifications to be completed before delivery.
- After delivering the yacht in late June 1985, Hatteras presented a closing bill for $63,279, asserting the buyer owed additional sums for work beyond the allowance.
- Hatteras alleged the extra work was authorized by a separate oral agreement with the buyer’s president and an alleged agent; the buyer disputed any such agreement and any obligation to pay.
- Hatteras filed an in rem admiralty complaint in the Southern District of Florida invoking maritime jurisdiction, initially characterizing the claim as “repairs to the machinery,” and obtained a warrant leading to the vessel’s arrest by the U.S. Marshal.
- Hatteras later amended its complaint to allege an oral agreement for “repairs, improvements or modifications” to be paid independently from the sales price.

## Issues

1. Whether the unpaid customization work connected to the purchase and delivery of a new yacht constituted a maritime contract supporting federal admiralty jurisdiction and an in rem action against the vessel.
2. Whether Rule 11 sanctions were proper where counsel invoked admiralty jurisdiction and arrested the vessel despite settled limits on maritime jurisdiction over vessel sale/construction contracts.

## Decision

- The Eleventh Circuit affirmed dismissal for lack of admiralty jurisdiction.
- The court held the dispute arose from a non-maritime contract for the sale and pre-delivery customization/initial outfitting of a new vessel, not a maritime repair contract.
- The court affirmed Rule 11 sanctions against Hatteras’s counsel for pursuing admiralty procedures, including arrest of the vessel, without a reasonable jurisdictional basis.

## Legal Principles

- Admiralty jurisdiction depends on the true nature of the underlying contract; contracts for a vessel’s construction, initial outfitting, or sale are generally non-maritime.
- Contracts for repair of an existing, completed vessel may be maritime, but sales-related customization performed as part of delivering a new yacht remains outside admiralty.
- Pleading labels (e.g., calling customization “repairs”) cannot convert a non-maritime sales/customization dispute into a maritime contract claim.
- Rule 11 requires a reasonable prefiling inquiry and a legal theory warranted by existing law (or a good-faith argument to change it); invoking admiralty in rem process on clearly non-maritime facts can warrant sanctions.

## Conclusion

Because the claimed unpaid work was part of the new-yacht sale and pre-delivery customization rather than a separate maritime repair contract, federal admiralty jurisdiction did not exist, the vessel’s arrest was improper, and Rule 11 sanctions were affirmed.


Hatteras of Lauderdale, Inc. v. Gemini Lady, 853 F.2d 848 (11th Cir. 1988)