Opinion
Civil Action No. 00-1931, Section "N" (4)
February 13, 2002
MEMORANDUM OPINION
On January 20, 2000, after having departed Torch, Inc.'s dock in Dulac, Louisiana, the M/V SEARCHER, laden with the plaintiff's jet-sled and other equipment, bound for the offshore location of the pipe-laying vessel M/V MIDNIGHT BRAVE, encountered heavy weather and high seas. Torch, Inc.'s jet sled was lost overboard in the Gulf of Mexico. Plaintiff, Torch, Inc. ("Torch"), owner of the jet-sled, brought this cargo claim for total loss of the jet-sled, claiming it was a special purpose one-of-a-kind vessel, against Gulf Tran, Inc. ("Gulf Tran"), the owner and operator of the MN SEARCHER and employer of the SEARCHER's crew. Gulf Tran counterclaimed for unpaid charter hire pursuant to the Blanket Time Charter Agreement in effect between the parties during the pertinent time frame.
The two-day bench trial commenced before this Court on January 16, 2002. At the close of the evidence the Court took the matter under submission pending receipt of post-trial memoranda of the parties. Now, after consideration of the record herein, the evidence adduced at trial, the post-trial submissions of counsel, and the law, the Court finds as follows. To the extent that any of the findings of fact constitute conclusions of law, they are adopted as such. To the extent that any of the following conclusions of law constitute findings of fact, they are so adopted.
The mailer was also held open to give plaintiffs counsel another opportunity (post-discovery) to traverse Torch Exhibit 5, a business record submitted in support of Torch's claim for damages in an amount equivalent to the total loss of its alleged one-of-a-kind special purpose vessel (the MIDNIGHT BRAVE's jet-sled).
I. FINDINGS OF FACT
Plaintiff, Torch, Inc. ("Torch") conducts offshore operations for various barges, including the pipe-laying barge known as the M/V MIDNIGHT BRAVE. From time to time, it was necessary for Torch to ship supplies and other equipment to its barges operating in the Gulf of Mexico. Equipment, supplies and other cargo bound for operating barges were warehoused at Torch's dockyard and fabrication facility at Dulac, Louisiana.
A. The Blanket Time Charter Agreement
On or about July 31, 1996, Torch and Gulf Tran entered a Blanket Time Charter Agreement which governed the voyage which is the subject of this lawsuit. Pursuant to the terms of that time charter, Gulf Tran agreed to transport certain equipment and materials, including but not limited to one jet-sled, to the offshore location of Torch's pipe-laying vessel, the MIDNIGHT BRAVE. The operative Blanket Time Charter Agreement specifically provides:
See Blanket Time Charter Agreement, dated July 31, 1996, entered by and between Gulf Tran and Torch [Torch Exhibit "4"/Gulf Tran Exh. "2"].
• Gulf Tran "shall operate, navigate, victual and supply each vessel except that [Torch] agrees . . . to furnish fuel;"
• "the entire operation, navigation, management, control, performance and use of each vessel shall be under the exclusive command of, and be actually accomplished by Owner [Gulf Tran];"
• Torch has "the right to designate the voyages to be undertaken and the services each vessel is to perform, subject always to the sole right of the [Gulf Tran] or the captain of each vessel to determine whether the movement may be safely undertaken, with the captain always being in charge;" and
• "to the extent that performance [of any obligation under the blanket time charter party] is prevented by an Act of God . . . [d]uring any such delay, charter hire shall continue to be paid to Owner at the vessel's daily rate of hire for a period of forty-eight (48) hours. . . .
Id. at para. 10.
Id. at para. 11.
Blanket Time Charter Agreement, at para. 11.
Id. at para. 19.
Ross D. Bruce ("Bruce"), manager of Gulf Tran, Inc., signed the Blanket Time Charter Agreement. Regarding the subject voyage of January 20, 2000, Mr. Donald Breaux, III ("Breaux"), Torch's logistics support supervisor in the Dulac office, contacted Bruce regarding the availability of a utility boat to transport deck equipment to offshore barges. Bruce indicated that he had a vessel available for hire, the MN SEARCHER, and entered a verbal agreement as to the day rate of $1600 a day, exclusive of fuel and lube oil for the subject voyage, activating the Blanket Time Charter Agreement [Torch Exh. "4"/Gulf Tran Exh. "2"].
Bruce testified that as owner of the chartered utility boat SEARCHER, Gulf Tran had the responsibility of supplying chains and binders to secure the cargo. Bruce admitted that he did not personally take any action to ensure that the vessel was adequately equipped for voyage. Instead, he assumed that the captain would take care to ensure that the vessel was adequately equipped for the time charter. Bruce admitted on cross-examination that if the vessel did not have equipment necessary for the voyage, that would constitute a breach of the Blanket Time Charter Agreement.
See also id. at para. 8 ("Owner specifically warrants that each vessel shall be in all respects seaworthy and properly documented, equipped and fit for the service intended. . . .").
B. Loading Operations at Torch's Dock in Dulac
On January 20, 2000 at approximately 0100, the M/V SEARCHER arrived at Torch's dock in Dulac, however, loading did not commence until approximately 0600 or 0700. Captain Gregory Daily testified that upon arrival at the dock, he inspected the equipment to be loaded, including the jet-sled. Captain Daily admitted that the vessel only had two good chains, the others were previously inspected and not useable. The captain admitted that he had been on the vessel the day before and noted the condition of the chains, however "no one had replaced the bad chains." The captain could not be sure of the size of the chains used to secure the jet-sled to the deck of the M/V SEARCHER and speculated as to their size ( i.e., "3/4's or something like that"). Captain Dailey further testified that he did not know the holding capacity of the chains that were actually utilized to secure Torch's jet-sled. It is clear from the captain's testimony, that he did not actually observe the "rigging-up" of the cargo the first time, and that he was not sure whether or not they used two good chains to secure the cargo to the deck of the SEARCHER. Captain Daily testified that he operated under the assumption that the crew would follow his loading instructions.
See M/V SEARCHER's daily log dated January 20, 2000 [Gulf Tran Exh. No. "6"]; and Testimony of Captain Gregory Dailey of the SEARCHER.
Torch's shipping records indicated six pages of items of cargo being shipped to the MIDNIGHT BRAVE. See Trial Testimony of Torch's Logistics Supervisor, Donald Breaux, III; and Torch's Shipping Records for January 20, 2000 [Gulf Tran Exh. "34"].
It is also clear from the evidence adduced at trial that more than two chains were used to secure the jet-sled. The Court credits the testimony of Breaux to the effect that Torch was not asked to supply more chains and that Torch did not supply chains to secure the cargo to the deck of the SEARCHER. It is not disputed that more than two chains ( i.e., four chains) were utilized in securing the jet-sled, and thus it is also apparent that at least two of the SEARCHER's "bad chains" were used to lash the cargo to the deck.
The "jet-sled" was a large cumbersome piece of equipment specifically configured to work in tandem with Torch's pipe-laying barge, the MIDNIGHT BRAVE. The jet sled's dimensions were approximately 20'x 20'x12' (height-length-width). It weighed approximately 12,000 pounds, and had "an approximate value of $120,000.00 to $175,000.00." The design of the jet-sled was such that in operations it would "ski" along the floor of Gulf, "jetting-out" trenches at the depth necessary to lay the pipe as it traveled along the bottom. When not in use, the jet-sled was kept in a fabricated "cradle." Both the cradle and the jet sled itself were loaded onto the SEARCHER, along with various and sundry other equipment destined for the MIDNIGHT BRAVE.
See Torch's March 21, 2000 Telefax Response (providing "Jet Sled Specifications" requested by Jules Schubert of Rivers and Gulf Marine Surveyors and Consultants, defendant's expert, regarding the dimensions, weight, and "safe pick-up points," inter alia, relative to Torch's lost jet-sled) [ Gulf Tran Exh. "22"]. As to safe pickup points, Torch was careful to note the value of a few of the jet-sled's more expensive and vulnerable component parts to steer clear of in effecting any salvage, to wit: (1) 90 steel jet nozzles @ $135.00 each; and 3 rollers @ $700.00 each. Id.
Captain Daily had several conversations with Torch employees after his arrival in Dulac on the morning of January 20, 2000. First, he inquired as to the weather report for the route to the MIDNIGHT BRAVE. His second discussion consisted of registering his disapproval of the manner in which the chains had been run to secure the jet-sled to the deck of the SEARCHER. In this vein, Captain Daily advised Torch personnel that the jet-sled "wouldn't ride" that way. His only concern about the specific item of cargo was its height, or that it was "top-heavy." The Captain ensured that the jet-sled was positioned on the deck precisely where he wanted it to ride throughout the trip. On cross-examination, Captain Daily reviewed pictures of the SEARCHER's deck. Referring to picture number 4 of Gulf Tran Exhibit "30" in globo, the captain indicated in no uncertain terms that the jet-sled was placed in the center of the boat, straddling the yellow centerline which bisected the SEARCHER's deck lengthwise, which position on the deck amidst other cargo wits exactly where he wanted the jet sled placed on the deck for the voyage to the MN MIDNIGHT BRAVE.
See Gulf Tran Exh. "30" in globo.
Captain Daily's testimony in this regard is corroborated by the trial testimony of Rodney Lugibihl ("Lugibihl") to the effect that the cargo was placed where the captain directed. He testified that it was the captain's responsibility to ensure that the cargo did not block hatchways, access to fuel tanks, etc., and thus the ship's crew supervised loading.
Captain Daily directed Torch's yard crew to re-secure the chains, and in so doing, to run them from port to starboard on the top and the bottom of the jet-sled. According to Captain Daily, Torch's yard crew originally secured the chains such that they were all running across the top some fore and aft, some port and starboard. After Torch's yard crew reconfigured the chains to secure the jet-sled in the manner that Captain Daily prescribed, there were no further requests.
Captain Daily's testimony is corroborated in this regard by the testimony of Donald Breaux, III ("Breaux"), Torch's logistics supervisor. Breaux testified that the only thing that SEARCHER's captain complained about was the way in which the chains were positioned vis a vis the load. Breaux offered to reconfigure the load to the captain's specification, which his yard crew did in fact accomplish to the letter of the captain's directions. Breaux reiterated there were no complaints about the amount of cargo; the only complaint was about the way the jet sled was secured. The chains securing the jet-sled were reconfigured exactly the way Captain Daily wanted them.
Satisfied with the cargo loading operation, Captain Daily then returned to the dispatcher to hear the VHF channel updated weather report. The report indicated winds "kicking-up" twenty to twenty-five miles per hour and eight to ten foot seas. Nevertheless, at Captain Daily's direction, the M/V SEARCHER laden with cargo departed Torch's dock in Dulac.
Captain Daily testified that he recognized that he had ultimate responsibility not only for the safety and security of the crew, but also for the safe passage of the cargo. On more than one occasion, Captain Daily acknowledged that he knew he was taking a chance departing the Dulac dock with the jet-sled secured in the manner in which it was secured. When asked if he personally believed that the jet-sled was adequately secured on his departure, the Captain answered, "No." Captain Daily agreed that he felt like he needed more chains and that he believed that if he had had more chains the jet-sled would not have been lost overboard.
The Court finds that the SEARCHER arrived in Dulac early enough to discern that the two good chains it supplied for the job were woefully inadequate to secure the jet-sled and other cargo that would be loaded onto the deck of his vessel. There was more than sufficient time to call or radio the Gulf Tran office for more chains, but Captain Daily did not do so. Captain Daily testified that he asked Torch personnel for more chains. Assuming arguendo that he did in fact request (but did not receive) more chains from Torch personnel, that is simply yet another admission that the Captain recognized that the cargo was not properly secured to the deck of SEARCHER when it departed Torch's dock in Dulac ( i.e., at the commencement of the voyage).
C. Jet-Sled Overboard
At approximately 1100 on January 20, 2000, the SEARCHER departed Torch's dock and upon entering the Gulf immediately encountered the heavy weather and high seas, which conditions were both predicted and anticipated. Captain Daily testified that he managed the "side seas on the way out" to the first sea buoy. He had passed the first sea buoy when the first chain popped or broke loose, and yet the captain did nothing to either to re-secure the load or change the navigation of the vessel. With seas port and starboard, Captain Daily continued to the ply the waters attempting to make his way to the MIDNIGHT BRAVE with the valuable cargo. According to Captain Daily, the sea conditions were so bad that he could not dispatch a crew member to the deck to check the condition of the cargo. After approximately 30 minutes and a second popped chain, Captain Daily changed the SEARCHER's course, heading the bow of his utility vessel directly into the seas. Captain Daily testified that having had radio communications with the MIDNIGHT BRAVE regarding the difficulties encountered en route, he adjusted his course to meet the pipe-laying vessel, which was heading for shallower water. The jet sled then went overboard, and promptly sank to the bottom of the Gulf Captain Daily testified that he immediately radioed to the MIDNIGHT BRAVE the longitude and latitude coordinates of the submerged jet sled at the Eugene Island area Block 172. Captain Daily then proceeded to a small satellite platform where he tied up and then conducted cargo operations at that location, off-loading the remaining cargo onto the MIDNIGHT BRAVE upon its arrival. Thereafter on January 25, 2000, Gulf Tran invoiced Torch for charter hire for the SEARCHER in the full amount of $5,072.00.
See January 20, 2000 Smooth Daily Log of the M/V SEARCHER [Gulf Tran Exh. "6"].
See January 20, 2000 Rough Log of the MOHAWK BRAVE (noting "Wind N 20-25 seas 5-7 towing MIDNIGHT BRAVE)[Gulf Tran Exh. "37"].
Gulf Tran produced no written record of the location. The SEARCHER's smooth logs did not indicate either when or where the jet-sled went overboard, and the submerged 12,000 pound jet-sled was never found at the location Captain Daily reported to the MIDNIGHT BRAVE.
See Gulf Tran Invoice No. 2478, dated January 25, 2000 [Gulf Tran Exh. "1"].
D. Images of the Deep Down Under Block 174 (the Eugene Island Area)
On January 30, 2000, acting at the instance of Rivers and Gulf Marine Surveyors, Inc.'s Jules Schubert (Gulf Tran's Expert Marine Surveyor), Tim Anselmi ("Anselmi") directed K.C. Offshore's salvage crew to the Eugene Island area Block 172 to scan the bottom for the lost jet-sled. Utilizing the SEARCHER, equipped for the job with a side-scan sonar (a single-beam transducer), a magnetometer, and a differential Global Position System (GPS), they searched to no avail. K.C. Offshore's crew read no tell-tale sonar "blip" pattern even slightly reminiscent of the configuration of the lost jet-sled. Anselmi conducted a comprehensive search pattern consisting of a pre-planned "grid" based on the GPS coordinates supplied by Captain Daily.
Throughout the search of the depths of the Block 172 area, Anselmi maintained constant contact with Schubert, who was ashore. Anselmi testified that they did find some small items of the floor of the Gulf, "but nothing with the signature of a jet-sled." Weather problems ( i.e., "5 to 7 foot seas with occasional 8 footers") caused them to abort the search the next day, January 31st, 2000, at around 8:30 A.M.
See Trial Testimony of Tim Anselmi; Trial Testimony of Jules Schubert; and Deposition Testimony of K.C. Offshore's Michael Kinsella (hereafter referred to as Kinsella Deposition), at pp. 44-46, 49
On February 5th, 2000, Anselmi directed a second search crew consisting of K.C. Offshore personnel, Mark White, Charlie Brown, Marcus Broussard and Ben Thompson. On this second search, Gulf Tran's SEARCHER was mobilized out of Berwick, Louisiana and left the dock just before midnight. The second search commenced at the Block 172 area. After eighteen hours of searching and finding nothing again, the search continued on into the Block 175 area, with the sonar equipment towed behind the vessel and then proceeded into the Block 174 area.
See Trial Testimony of Tim Anselmi; Logs of the M/V SEARCHER, dated February 5, 2000 [Gulf Tran Exh. "19"].
Kinsella Deposition, at 51-52.
A possible target was located in Block 174 by Charlie Brown. K.C. Offshore's crew ran two more lines taking a bigger shot at the target. According to Anselmi, a "metal object was found above the mudline" in approximately "seventy-three feet of water" within Block 174. He based his "opinion" that the object was made of metal on the fact that it felt like metal when a "clump weight" dragged across the bottom "made contact with the object." To the untrained eye, the side scan sonar [Gulf Tran Exhibit "3"] merely shows an irregularly shaped "blob" at the pinnacle of an arc, consisting of what appears to be the imprint of interference with the sonar. The position of the target's sonar signature was well-marked with buoys.
See Trial Testimony of Tim Anselmi; Kinsella Deposition, at p. 89 Anselmi testified that neither the GPS nor the magnetometer was ever used because they believed they had located their target. See also Gulf Tran/K.C. Offshore, SSS Search Pre Post Plot of Target Location at Block 174 of the Eugene Island Area [Gulf Tran Exhs. "4" and "29"].
See Trial Testimony of Tim Anselmi.
The Court is of the opinion that it is rank speculation that the target found and marked by the K.C. Offshore crew at Block 174 was in fact the lost jet-sled. All indications are that it could have been anything from the remains of an unknown, unconfirmed vessel collision, to a large vehicle, cargo container, or other refuse which either accidentally or purposefully found its way to the bottom of the Gulf at Block 174. The search of the area where the target was found was based on the hearsay testimony of Pierce, who happened to be on the SEARCHER at the time the jet-sled was lost overboard. Anselmi admitted that the target was located approximately five miles from the original location identified by Captain Daily. Additionally, the target was located northeast of the platform Captain Daily tied up to after losing his cargo overboard. Captain Daily testified that he headed due west until he tied up at the platform. The Court finds that based on the side-scan sonar, and that was the only reading that the K.C. Offshore personnel had to study with reference to the target located in Block 174, it was not possible to determine with any degree of reliability what the target was. Reading side-scan is a highly specialized field. Kinsella testified that with numerous passes over the target taking images from multiple angles, he would expect that his geologists could map the dimensions of an object pretty accurately. Kinsella readily admitted that there was nothing in K.C. Offshore's records that indicated what the dimensions of the target were or that K.C. Offshore personnel even knew what the dimensions of the target were at the time of the search.
See K.C. Offshore's Diagram of Target Location; and K.C. Offshore's Side Scan Sonar Search [Gulf Tran Exhs. "4" and "29"]. Both maps also indicate the location of an unknown, unconfirmed wreck location, not far from the site where a target was located.
See Kinsella Deposition at pp. 102-103.
Id. at 103-104.
The Court finds that Schubert's testimony regarding the likelihood that the sonar image was the lost jet-sled to be disingenuous at best. There is no evidence that reflects that any of K.C. Offshore's crew of February 5, 2000 were either geologists or otherwise qualified to read images with any exactitude based on a sonar side-scan alone. Additionally, neither Schubert nor Anselmi were trained in reading sonar side-scan and both admittedly relied on the expertise of K.C. Offshore personnel.
Gulf Tran Exh. No. 3.
When Schubert directed Anselmi and a K.C. Offshore crew to return to the marked location of the target, they found that the target was missing. Only a few of the buoys remained in place. On February 29, 2000, Gulf Tran dispatched Aquatica personnel to dive on the site and attempt to locate the jet sled on the bottom in the Block 174 area. The location was thoroughly searched at each buoy, utilizing circular search patterns and GPS coordinates of the various buoys as the center point. The only thing that was found on the sandy bottom at the 80 foot depth was the clump weight that K.C. Offshore personnel left behind after the second search.
See Aquatica, Inc. Underwater's Survey, showing the location of the buoys and the sweep patterns followed by the divers [Gulf Tran Exh. 5].
The record is devoid of any evidence to suggest that Torch had any contact whatsoever with the target location during the month of February 2000. Kinsella testified that K.C. Offshore had crews on all three of the Torch's vessels during the pertinent time frame. He testified that Torch's barges were all working the same project and none of their activities showed diversions over to Eugene Island area at Block 174 (the target's location).
Kinsella Deposition, at p. 94.
The Court finds as a matter of fact that it would have cost at least $100,000.00 just to locate the lost jet sled, if indeed it could be located. The MIDNIGHT BRAVE, which Gulf Tran proposed that Torch utilize in salvage operations to lift the jet-sled from the depth of seventy to eighty feet, hired out at approximately $50,000.00 (day-rate). That day-rate does not include the cost of a tug to move the pipe-laying barge to the target's location or the cost of materials, such as a magnetometer necessary to accomplish the lifting job. By the time of the second search, Gulf Tran had already invested approximately $40,000.00 just trying to locate the jet-sled on the Gulf floor in the Eugene Island area. At that point in time, no divers had yet been dispatched to verify that the target was in fact Torch's lost jet sled. The Court finds that it would be unreasonable to expect Torch "to throw away good money after bad" in a risky and expensive salvage operation, particularly considering that at the high end the jet-sled was valued at approximately $155,000.00.
E. Value of the Lost Jet-Sled
In August of 1998, Torch purchased various parts utilized in the construction of the jet-sled at the "fire sale" lump sum price of $20,000.00. McDermott sold the parts package at a greatly reduced rate because they had been acquired as part of a previous merger and were not needed in McDermott's operations. Many of the parts had languished unused in the McDermott yard. Torch utilized McDermott parts, plus additional parts and much "in-house" labor, to construct a specialized jet-sled tailor-made to work in tandem with the offshore pipe-laying barge the MN MIDNIGHT BRAVE. Torch's jet-sled, once fabricated, was a one-of-a-kind piece of equipment specifically designed and configured to work in conjunction with the MIDNIGHT BRAVE. It was placed in service in August of 1999. Later in November and December of 1999, just before the loss at issue in this lawsuit, additional modifications and upgrades were made. Essentially, the jet-sled was a brand new state-of-the-art jet-sled when it was loaded onto the SEARCHER on January 20, 2000 destined for coordinated pipe-laying operations with the MIDNIGHT BRAVE.
See Records of J. Ray McDermott, Inc. Relating to sale of Jet Parts Package to Torch, Inc. [Gulf Tran Exh. "16" in globo]
See Correspondence dated July 21, 1998, of Wayne Veillon (J. Ray McDermott's Materials Disposal Coordinator)[Gulf Tran Exh. "16" at p. 16].
See Xerox Photographs of various and sundry sled parts littering McDermott's Yard [Gulf Tran Exh. "16" at pp. 8-9].
Lugibihl testified that Torch had two jet-sleds working in January of 2000. Torch had parts for other sleds but those parts were not interchangeable. The jet-sled at issue was a hydraulic self-propelled sled. The MIDNIGHT BRAVE's sled was a unique design with a flotation device on it, which was quite unlike a runner sled, which had no buoyancy devices on it.
Accounting for "in-house" fabrication of the MIDNIGHT BRAVE's jet-sled was Bill Blackwell's ("Blackwell's") bailiwick. Blackwell was Torch's Chief Financial Officer. He testified that, like all of Torch's major projects, the Brave's jet-sled project was assigned a four digit job code. In this case, the BRAVE's jet-sled project was assigned the job code number 1322. All costs including labor, large and small purchases of outside parts, and other expenses incurred in connection with the accumulation of parts and modification costs were coded directly to the progress of this particular job. Every person working on the fabrication project coded his work sheet with the Brave's jet-sled job number (1322). The purchasing department denoted the job number on invoices and checks issued for the cost of parts purchased from outside vendors. All such costs were entered into the computer so that Torch could track the cost of a particular job by printing out a job cost history report. Blackwell explained that the internal cost accounting for this project number 1322 (Torch Exh. "5") represented pure cost accounting.
See Torch's Internal Accounting regarding the BRAVE's jet-sled project number 1322 [Torch Exh. "5" in globo].
Torch's tax records were also the subject of some discussion. Blackwell testified that for tax purposes the BRAVE's jet-sled was assigned a particular Asset ID number ( i.e., 200108). There were three entries for the jet sled at issue and the values added approximate the historical cost basis, which would be the basis utilized to depreciate the asset for federal tax purposes. The historical cost and the cost basis on which depreciation would be based for federal tax purposes was $116,206.00. As previously mentioned, although the jet sled was first-placed in service as of August 31, 1999, two major upgrades and/or modifications costing out at $33,821.00 ($4,109.00 + $29,712.00) were added to the original costs incurred in its fabrication as of August 31, 1999 ( i.e., $82,385), for total cost basis of $116,206.00. Inasmuch as the jet sled was a new piece of equipment when it took its final plunge into the depths of the Gulf off of the deck of the SEARCHER on January 20, 2000, it was not the subject of any depreciation. There is no countervailing evidence in this regard.
See Federal Book [Torch Exh. "6"].
It is noteworthy that Schubert, Gulf Tran's expert marine surveyor, reported to the defendant's underwriter, Zurich, that it was Torch's intention to hold Gulf Tran liable for the loss of their jet-sled valued at approximately $150,000.00. It is safe to assume that, on the basis of Schubert's own advices as to that approximate value of the jettisoned jet-sled, Gulf Tran's underwriter, Zurich, undertook the expensive salvage operation spear-headed by Schubert. It is not disputed that, despite Schubert's expertise in valuing marine equipment, at trial Schubert offered no counter insofar as valuation of the jet-sled was concerned. The Court does not ignore Schubert's testimony that this valuation was provided by Torch. Nevertheless, Schubert did not dispute that valuation of the vessel and in fact submitted that valuation of the vessel to Gulf Tran's underwriter, Zurich, ostensibly for purposes of its consideration in making some determination as to the cost-effectiveness of undertaking a salvage operation with respect to the lost jet-sled. .
I. CONCLUSIONS OF LAW
A. Jurisdiction and Venue
This Court has jurisdiction over the present controversy pursuant to 28 U.S.C. § 1333, which provides for original jurisdiction of the federal district court over admiralty and maritime claims. The operative July 31, 1996 Blanket Time Charter Agreement is a maritime contract, and in any event specifically provides that "it shall be deemed to be an agreement made under the General Maritime Laws of the United States and shall be construed, interpreted and enforced in accordance therewith." Jurisdiction and venue are proper and uncontested.
28 U.S.C. § 1333 provides in pertinent part that: "The district courts shall have original jurisdiction, exclusive of the States, of (1) Any civil case of admiralty or maritime jurisdiction, saving to suitors in all cases all other remedies to which they are otherwise entitled." Id.
See Blanket Time Charter Agreement [Torch Exh. "4"/Gulf Tran Exh. "2"].
Id. at para. 25.
B. Gulf Tran's Breach of the Time Charter: Unseaworthiness and Negligence
The time charter at issue is a private contract of carriage because Torch chartered the entirety of Gulf Tran's vessel, the M/V SEARCHER. The charter party's terms did not incorporate any carriage legislation such as the Harter Act or the Carriage of Goods by Sea Act (COGSA), and therefore the relationship of the parties, their duties and obligations are measured solely by the contract and not by any such legislation. A corollary of private carriage is that the parties are free to allocate the risks of loss as they deem appropriate. Evidence adduced during the trial, including but not limited to Torch's shipping records, clearly demonstrate that Torch did employ the full capacity of the SEARCHER.
See Sun Co., Inc. v. S.S. Overseas Arctic, 27 F.3d 1104, 1108 (5th Cir. 1994) (If one charters an entire vessel, the charter party controls.); Shell Oil Co. v. M/T GILDA, 790 F.2d 1209, 1212 (5th Cir. 1986) (If the shipper charters the entire vessel, the charter party rather than the bill of lading is the contract of carriage unless the parties express an intent otherwise, for instance by reference to some or all of the provisions of COGSA in a contract of private carriage.).
46 U.S.C. § 190 et seq.
46 U.S.C. § 1300 et seq.
See HEINZ HORN, 404 F.2d 422, 429 (5th Cir. 1968), cert denied, 394 U.S. 943, 89 S.Ct. 1272, 22 L.Ed.2d 477 (1969) (In private charter parties the "risks of damage may be adjusted in any manner specified by the charter.").
Gulf Tran Exh. "34".
Since this was a private contract of carriage, the burden of proof was on the plaintiff to show by a preponderance of the evidence that the damage was proximately caused by a breach of contract of carriage on the part of the defendant. Under the terms of the operative time charter, the defendant Gulf Tran undertook the obligation to properly equip the vessel, including all necessary chains to secure the cargo, and the responsibility of the entire operation, navigation, management, control, performance and use of its vessel the SEARCHER. Bruce, Gulf Tran's manager, did not dispute that placing responsibility for the operation, navigation, management, performance, control and use of the vessel with the owner constitutes standard charter language and conforms with the custom in the industry.
See Commercial Molasses Corp. v. New York Barge Corp., 314 U.S. 104, 62 S.Ct. 156, 86 L.Ed. 89 (1941); see also Cooper v. Pinedo, 212 F.2d 137 (5th Cir. 1954) (regarding claimed breach of warranty of seaworthiness, vessel's unfitness to carry shipment must be determined from the original charter agreement); In Re Complaint and Petition of International Marine Development Corp., 451 F.2d 763, 765 (5th Cir. 1971) (citing The Monarch Nassau, 155 F.2d 48, 50 (5th Cir. 1946) for the proposition that in the case of private carriage, "the parties may contract pretty much as they please" and "risks of damage may be adjusted in any manner specified by the charter").
See July 31, 1996 Blanket Time Charter Agreement, at paras. 8 and 11 [Torch Exh. "4"/Gulf Tran Exh. "2"].
After a careful review of all of the evidence, the Court concludes that the plaintiff carried its burden, and proved by a preponderance of the evidence that the failure to provide proper and suitable equipment (chains and binders) to secure the cargo constitutes an unseaworthy condition which existed prior to the commencement of the voyage. The captain of the vessel further failed to ensure that the cargo properly secured to the deck with an appropriate number of chains fit for their intended use. The captain admitted that it was his decision to depart the dock, despite the anticipated strong winds and high seas. The captain further testified that he left the dock in Dulac knowledgeable of the very real risk of losing the jet-sled overboard under the anticipated prevailing sea conditions. Under the terms of the time charter agreement, Captain Daily could have delayed his departure up to 48 hours, without risking breach of the charter party. Instead, Captain Daily made the ill-considered decision to proceed in the wake of expected eight to ten foot seas, with his vessel laden with cumbersome deck cargo, which cargo was inadequately secured with the SEARCHER's binders and chains of questionable durability. Logs dated January 20, 2000 for both the lay barge MIDNIGHT BRAVE and the MOHAWK EAGLE indicate that they were experiencing seas more in the nature of five to seven feet. Assuming without deciding that seas did in fact approximate eight feet, that was the precise sea condition that Captain Daily anticipated upon departure of the dock in Dulac. Regardless of the weather and the real risk of losing his cargo, the captain proceeded well-beyond the first sea buoy into unprotected waters, despite the fact that one of the chains securing the deck cargo popped soon after clearing that first sea marker.
In order to be seaworthy, a vessel, its appurtenances, and its crew must be reasonably fit for their intended purpose. The use of defective or inadequate equipment not reasonably suited for its intended purpose may render a vessel unseaworthy provided that the evidence adduced demonstrates that the unseaworthy condition was a substantial or proximate cause of the damages sustained. See e.g., Usner v. Luckenback Overseas Corp., 400 U.S. 494, 499, 91 S.Ct. 514, 517-18, 27 L.Ed.2d 562 (1971); Rogers v. Eagle Offshore Drilling Services, Inc., 764 F.2d 300, 303 (5th Cir. 1985) (Unseaworthiness is not restricted to claims involving operation of the vessel's equipment itself, and may include an unsafe method of work); and Johnson v. Offshore Express, Inc., 845 F.2d 1347, 1355 (5th Cir.), cert. denied, 488 U.S. 968, 109 S.Ct. 497, 102 L.Ed.2d 533 (1988).
Gulf Tran Exh. "7".
Gulf Tran Exh. "37".
Captain Daily's superseding and intervening acts of negligence relieve Torch from any comparative fault in this matter. Just after passing the first sea buoy, Captain Daily became aware that one of the chains securing the jet-sled had popped or broken loose. Instead of adjusting his course to head back to sheltered waters so that the crew could adjust or re-secure the load, Captain Daily took no such evasive or corrective action. Captain Daily proceeded on the same course without making any adjustment for another thirty minutes until a second chain broke loose. Soon thereafter, the jet sled took its final dive before reaching the MIDNIGHT BRAVE.
Failure of the SEARCHER to arrive with binders and chains fit to secure the cargo rendered the vessel unseaworthy in this case. The warranty of seaworthiness applies to the ship and such equipment as is called for by the charter party. In this case, it is uncontested that the time charter agreement called for the owner Gulf Tran to provide the chains and bindings to secure the cargo. This unseaworthiness, together with the negligence of the captain in operating the vessel knowing the vessel was not properly secured, were the sole and proximate causes of the loss of Torch's jet-sled.
The undisputed facts of this case are that Gulf Tran had the obligation of supplying chains and binders in numbers and in a condition such that they were fit and adequate to secure the cargo. Gulf Tran was apprised that Torch intended to ship an entire utility boat full of equipment to its lay barge offshore. Indeed, the captain was not surprised by the amount of Torch's cargo to be shipped to the MIDNIGHT BRAVE. Captain Daily's sole concern was the height of the jet-sled to be stowed on deck. Torch's yard crew were permitted to exercise no discretion in stowing the cargo aboard the vessel. The jet-sled was positioned on the deck of the SEARCHER exactly where the captain directed. The captain refused to depart the dock until the jet-sled's chains and binders were reconfigured and re-secured precisely to his specifications. Only when Captain Daily was satisfied with the manner in which the cargo was stored (per his specifications), did the vessel depart the dock, and then at his direction.
The Court finds that Captain Daily alone made the decision to depart Dulac for the BRAVE at 1100 on January 20, 2000; made the decision not to call Gulf Tran for more chains and binders, although there was plenty of time to do so; and made the decision to proceed in high seas, despite the unleashing of the chains en route one-by-one, regardless of the port and starboard seas testing the endurance of his rigging to the limit, without any adjustment of the load or alteration of his course until it was too late.
C. Damages
The only party to suffer loss was Torch, Inc. Gulf Tran is not entitled to recover on its counterclaim for loss of charter hire. Gulf Tran was solely at fault in causing the loss of Torch's jet-sled. Solely because of the unseaworthiness of the vessel's appurtenances/supplies and the negligence of the vessel's captain, the time charter was unsatisfactorily completed, as the jet-sled was lost overboard.
When a vessel/marine equipment (in this case the jet-sled) is a total loss, the owner is entitled to the money equivalent, which courts have long held is the market value at the time of the loss. E.I Du Pont de Nemours Co v. Robin Hood Shifting Fleeting Serv., Inc., 899 F.2d 377, 379 (5th Cir. 1990); King Fisher Marine Services, Inc. v. The NP SUNBONNET, 724 F.2d 1181, 1185 (5th Cir.), reh'g denied with opinion, 729 F.2d 315 (1984); and Standard Oil Co. v. Southern Pacific Co., 268 U.S. 146, 155, 45 S.Ct. 465, 466 (1925). Torch contends that the MIDNIGHT BRAVE's jet-sled was such a unique piece of marine equipment, and the record is uniformly to the effect that it was. The record is clear that there was no market for such a "tailor-made" jet-sled at the time of the loss in January 2000.
When there are insufficient sales to establish a market other than evidence such as replacement cost, depreciation, expert opinion and the amount of insurance can also be considered to determine the value of the lost vessel. See e.g., Margate Shipping Co. v. M/V ORGERON, 143 F.3d 976, 990 (5th Cir. 1998) (a salvage case in which "replacement cost" was determined to be the most appropriate measure to evaluate the loss of a space shuttle fuel tank); see also E.I Du Pont de Nemours, 899 F.2d at 380 (in maritime tort context, "[w]hen no market value exists for a vessel, `other evidence such as replacement cost . . . can also be considered'"); King Fisher, 724 F.2d at 1185 (same); and The F.I. Robinson, 2 F. Supp. 644, 645 (E.D.N.Y. 1933) (market value preeminent, but reproduction cost may be considered in its absence).
Replacement cost is one of several reliable methods which may be used for determining damages. This is without a doubt a "lack of market" case. The record is uncontroverted that a company such as Torch can not and could not back in January 2000 advertise for and purchase a jet-sled on the open market. The testimony was uniformly to the effect that companies that utilize such specialized marine equipment either fabricate their own in-house or commission the fabrication of a sled to their specifications and consistent with their own design.
Charles Davis ("Davis"), who was employed by the plaintiff testified that it was impossible to obtain a fair market value because no comparisons could be found. Davis testified that he had no accounting background and no formal education in engineering. However, Davis was an experienced "jet-sled tech." He had been involved in the marine industry since 1969 and had participated in the fabrication or refurbishing of approximately twenty jet-sleds.
Davis testified that he designed and did the material breakdown for a jet-sled which was built in-house while he was working for Diamond M, which jet-sled project took about a month to complete. During his employment with HPH, the jet-sled project he participated in took more than a month. Davis explained that the length of time it takes to build a jet-sled depends upon the facility available and the man hours that can be committed to the project. Davis participated in stripping down and refurbishing a jet-sled while in the employ of International Pipeline.
The three sled jobs in which Davis' actually participated from the commencement of construction to the end were not bidded out. The evidence was uniformly to the effect that such jobs were rarely if ever bidded-out. When he was initially contacted to serve as an expert for Torch in March 2000, he first contacted outside sources to determine if either there was a rental market or a market to purchase such equipment. Since there was neither, Davis drew up some plans for a jet-sled. Davis called up third parties to cost out parts and outside labor rates. Davis concluded that the cost of fabricating, coating and testing a jet-sled utilizing outside labor and new parts would run approximately $155,000.00, which was exclusive of his consulting cost and expenses entailed in connection with preparing a bid package.
The Court here notes that the Davis testified that the cost of the stand or crib, in which the jet-sled rests when not in use, is approximately $10,000.00 to $12,000.00 dollars. On January 20, 2000, only the jet sled was lost overboard, its stand or crib remained aboard the SEARCHER, and presumably was unloaded with the remaining cargo when the BRAVE met up with the utility boat.
Although the use of "replacement value" in this case could reflect sound economic reality, the Court cannot accept Davis' calculations. Davis did not qualify as an expert in the field of valuating ( i.e., bidding out) special purpose marine equipment. Over the defendant's objection, the Court allowed Davis to testify regarding costing out parts of the jet-sled and the cost of fabrication. A review of his trial testimony discloses very little proof for the basis of his estimate, other than the fact that he was experienced in the construction of jet-sleds. This `proof' is not sufficient to sustain or authenticate Davis' estimate or the method he used in determining the replacement cost. For this reason his estimate must be rejected. Moreover, in Streckfus Steamboat Line v. United States, 27 F.2d 251, 252 (5th Cir. 1928), the Fifth Circuit found that certain bids offered by the plaintiff to prove necessary repairs to its vessels were solicited "merely for the purpose of using them in evidence, and with no intention of letting the work." Id. Under the circumstances, the court held that such bids had very little, if any, probative value. Id.; see also Campania Maritima Astra, S.A. v. Archdale (The ARMAR), 134 N.Y.S.2d 20, 1954 A.M.C. 1674, 1677 (N.Y. 1954).
Notwithstanding the foregoing, the Court believes that Torch proved the actual cost of the lost jet-sled by a preponderance of the evidence. Torch's chief financial officer, Bill Blackwell, testified credibly that on the basis of pure cost alone, the BRAVE's jet-sled cost Torch $116,206.00 in out-of-pocket actual expense to both fabricate and modify it into the special purpose marine equipment utilized for it's pipe-laying operations.
It is noteworthy that Schubert, Gulf Tran's expert, who is an expert in valuating marine equipment, did not hesitate to report to Zurich that Torch submitted a valuation on its lost jet-sled of approximately $150,000 dollars, and that Torch intended to hold Zurich's insured liable for that amount. While stating that such valuation of the jet-sled came from Torch and not him, Schubert did not disagree with that valuation, and submitted Torch's quote ( i.e., 150,000.00) to Zurich knowing that such valuation would form the basis of Zurich's cost determination of whether to fund any salvage operation. Considering all of the evidence adduced at trial, equity and justice demand that Torch be fairly compensated for the total loss of the MIDNIGHT BRAVE's jet-sled.
"The Chancellor . . . may stride the quarterdeck of maritime jurisprudence and, in the role of admiralty judge, dispense . . . that which equity and good conscience impels." Compania Anonima Venzolana De Navegacion v. A.J. Perez Export Co., 303 F.2d 692, 699 (5th Cir.), cert. denied, 371 U.S. 949, 83 S.Ct. 321, 9 L.Ed.2d 276 (1962).
The Court recognizes that there were certain appurtenances of the jet sled which were not lost overboard ( i.e., the stand/crib and the control panel). Torch could definitely reuse the cradle with minor modifications to accommodate any replacement built to replace the lost jet-sled. Davis testified credibly that the cost of building a jet-sled's stand (parts and labor) was approximately $10,000.00 to $12,000.00. The Court believes that this cost ( i.e., $12,000.00) should be backed out of the pure cost figure quoted by Blackwell and reported by Torch to the Internal Revenue Service (I.R.S.) as the asset value. Torch is not entitled to recover the value of the jet-sled stand, which was not lost overboard. However, it is indeed questionable whether the control panel could be reused in connection with any jet-sled replacement. The Court here mentions that the instant jet-sled was constructed from a package bought from McDermott at a greatly reduced price. The control panel was part and parcel of the sale of parts in the package. It is indeed doubtful that Torch would stumble onto another "package deal" of similar jet-sled parts with a lump sum price of $20,000. Considering the foregoing, I believe that it would be grossly inequitable to further reduce the actual cost by an amount representing the value of the control panel which was not lost. More likely than not, the control panel could not be reused with a different package due to the special hydraulics utilized to operate the lost jet-sled. Quite simply, McDermott does not possess those same component parts, minus the control panel, and thus the necessary parts cannot be purchased at the same price.
Torch retained the design and specifications for the MIDNIGHT BRAVE's jet-sled.
In summary, the Court is of the opinion that the better course is to adopt the pure cost approach for purposes of evaluating the loss, giving Gulf Tran a $12,000.00 credit for the jet-sled cradle which remained aboard the SEARCHER. In depth study of the internal cost accounting (Torch Exhibit #5) for the jet sled project does not alter this Court's opinion. The Court's review of Gulf Tran's traverse of that document reveals that there is no basis to distrust the figures reported in that computer print-out or run of actual costs on the jet-sled project.
The Court permitted Gulf Tran an opportunity to test the accuracy of the reported figures by reviewing the actual time sheets, invoices, etc., which were contemporaneously keyed into the computer by Torch accounting personnel under the supervision of Bill Blackwell, while the jet-sled project was underway. Counsel for Gulf Tran had the opportunity to screen the paper records which were the basis for each and every contemporaneous key entry into the computer, i.e., to test the reliability of the accounting summary. Gulf Tran's counsel had the opportunity to view the time sheets of personnel who worked on the jet-sled project and paper invoices relative to expenses of that project. Counsel for Gulf Tran identified no accounting figure discrepancies ( i.e., the computer print-out reflecting one figure, while the paper record reflects another value). The Court perceives no problem with procedural due process in this case.
This should have been accomplished during the discovery phase of the proceedings. Defense counsel submits that he asked for the underlying documents, however, no motion to compel discovery was ever filed. The defendant also did not notice the deposition of Bill Blackwell and took a calculated risk in failing to do so, notwithstanding its knowledge of the fact that the plaintiff intended to call Blackwell as a witness regarding the "costing-out" of this particular asset. Indeed, the defendant filed a motion in limine to preclude relevant testimony of Torch's chief financial officer regarding the valuation of the jet-sled asset for federal tax purposes. The motion was deferred to trial on the merits.
Counsel for Gulf Tran had the opportunity to cross-examine Blackwell, Davis and other Torch personnel relative to each item of expense and did so to a certain extent. The Court did not intend to give defense counsel another opportunity to cross-examine the witnesses out of its hearing regarding the necessity of the particular expenditure. Gulf Tran could have accomplished this at trial on the merits with the computer job file relative to the jet-sled job (1322), but now attempts to do post-trial with the paper record ( i.e., time sheets and vendor's invoices).
Torch's computer records submitted as evidence are most apparently business records upon which it relies on a day-to-day basis to conduct its business. Gulf Tran has shown no inaccuracy or skew regarding any one or more of the figures reported in the computer records, on the one hand, and the hard copy documents from which computer entries were made, on the other. The total cost figure is reiterated as the asset cost in Torch's business report to the IRS ( i.e., valuation of assets for tax purposes). The defendant has failed to convince this Court that the items were key-entered into Torch's computer solely for the purposes of litigation. They clearly were not. The computer entries were made contemporaneously when the reported expenses were paid.
The fact that Torch printed out a hard copy of information which is stored on its computer hard-drive just prior to trial does not transform the record into something other than a business record. Obviously, the Chief Financial Officer relies on the figures reflected in the computer run of costs of this particular project for purposes of reporting-the cost of the particular asset to the Government.
The jet-sled is a total loss and that is undisputed. It fell overboard somewhere in the Eugene Island Area, possibly Block 172. The fact that hoses here and gaskets there may not have been connected up at the time of the loss is irrelevant for purposes of valuation of the jet-sled. There was also testimony at trial that many of the items were utilized in the fabrication process, and are properly considered costs of fabricating, modifying or refurbishing the jet-sled. The fact that Torch has not commissioned the fabrication of another jet-sled just like the one it lost is of no moment. Gulf Tran submits summarily, without any proof whatsoever, that with the exception of the jet nozzles, Torch could have fabricated a jet-sled in-house within a period of three days for substantially less than $20,000 in material and labor costs. If that were the case, the Court has no doubt that Gulf Tran would have commissioned a welder and fabricator to do just that, and presented Torch with a brand new jet-sled just like the one that was lost (minus the jet nozzles) three days post-loss ( i.e., on January 23, 2000). Instead, Gulf Tran or its underwriter Zurich spent close to $100,000.00 over the period of about a month looking for the old jet-sled eighty feet underwater, not even sure if its Block Location in the Gulf of Mexico was 172, 174, 175, or 176.
See Gulf Tran's Traverse of Torch Exhibit "5", at p. 7.
Gulf Tran interprets the term "replacement cost" too literally, losing site of economic reality of the loss that Torch sustained. The jet-sled at issue was most apparently worth a whole lot more than the sum of its parts and spare parts, which were bought at greatly reduced prices, refurbished, etc. The "package deal" Torch negotiated with McDermott cannot be replicated. That package included the control house and drive package. The "lump sum"/"fire sale" price of the parts package was $20,000.00. It is apparent to the Court that the cost of the control panel, which remained aboard the MIDNIGHT BRAVE, was de minimis and of no value to Torch without a jet sled just like the one at the bottom of the Gulf of Mexico. Gulf Tran should not receive a credit in any amount for that part. It cannot be seriously argued that Torch was the recipient of any "betterment" because it retains the control panel it cannot use and recovers costs ( i.e., costs nowhere near actual "replacement value" of the sled it lost).
See Gulf Tran Exh. 16 in globo, at pp. 10, 14-16.
Insofar as parts of the jet-sled that were definitely lost are concerned, it is uncontroverted that 90 steel jet nozzles valued @ $135.00 per nozzle, along with 3 steam rollers valued at $700.00 each were lost with the jet-sled. The total value the loss of the steam rollers and jet nozzle parts alone amounts to $14,250.00. See Correspondence addressed to Gulf Tran, dated March 1, 2000 [Gulf Tran Exh. "22" at p. 2]. The McDermott's Jet Equipment Machine "package deal" for $20,000.00 included: (1) a set of Jet Airlifts 9 Tanks Assembled; (2) a box of jet nozzle tips; (3) three boxes of spare parts; (4) three sets of Air Tanks; (5) three sets of Air Lifts; (6) three sets of jet legs; (7) three medium jet machine chassies; (8) a control room; and (9) a large jet machine assembled on stand. See Gulf Tran Exh. "19" in globo, at p. 15.
It is uncontroverted that the control panel can not be used to operate Torch's other remaining jet-sleds, which by all accounts have an entirely different design.
It is clear to the Court that the actual cost of replacing the lost jet-sled "in kind" far exceeds the value determined as a result of the pure cost analysis presented by Blackwell. However, Torch failed to prove with competent evidence the actual outside cost of constructing a comparable jet-sled.
D. Mitigation of Loss
Gulf Tran's asserted defense of failure to mitigate was predicated on the testimony of Jules Schubert. The Court rejects Schubert's opinion that the BRAVE's lost jet-sled was located on the Gulf floor in the Eugene Island Area, Block 174. The location of the "target" buoyed-off in Block 174 was approximately five miles from the location of GPS coordinates reported by Captain Daily, pinpointing the area where the jet-sled was lost overboard. Moreover, cross-examination of Schubert established the impracticality of any recovery of the jet-sled by the MIDNIGHT BRAVE. When Schubert's dive crew returned to the site of the "target" on February 19, 2000, which was as soon as the weather permitted, the "target" was gone. The only thing found on the bottom was the clump weight left by K.C. Offshore's crew after the second search.
The Court further finds that Torch had no duty to engage in salvage operations. The Fifth Circuit has explained that "[m]aritime salvage is as old and hoary a doctrine as may be found in Anglo-American law. Since time immemorial, the mariner who acted voluntarily to save property from peril on the high seas has been entitled to a reward." Margate Shipping Co. v. M/V JA ORGERON, 143 F.3d 976, 985 (5th Cir. 1998) (emphasis added). By far, the most important consideration to potential salvors contemplating performing the service of salvage is the cost. Id. at 986. Even according to the testimony of Gulf Tran's expert Schubert, the expense of salvage operations could have easily exceeded the value of the lost jet sled and to no avail. Apparently Zurich was not interested in Torch's participation on a "time and materials" basis, considering that the day rate for the services of a lay barge MIDNIGHT BRAVE ran approximately $40,000.00 to $50,000.00 per day and the valuation of the lost marine equipment at $150,000.00. As the Fifth Circuit said in Margate Shipping, "if the costs of performing the salvage are too high or the benefits to be derived too low, the parties might as well agree to call it a day and let the sea claim its prize. Id. at 986 n. 12.
E. Interest
Starting from the bedrock premise that an award of prejudgment interest in actions under the General Maritime Law is the rule rather than the exception, prejudgment interest must be awarded unless unusual circumstances make an award inequitable. The Fifth Circuit has consistently held that prejudgment interest runs from the date of the loss, even if the owner does not pay repair costs or replace the item until some later date. See Ryan Walsh Stevedoring Co. v. James Marine Services, 792 F.2d 489, 492-493 (5th Cir. 1986). These rules apply even if the plaintiff never replaces or repairs its damaged structure, vessel or equipment. See Bunge Corp. v. American Commercial Barge Line Co., 630 F.2d 1236, 1242-43 (7th Cir. 1980); United States v. Central Gulf Lines, Inc., 747 F.2d 315, 320 (5th Cir. 1984) (upholding award of prejudgment interest for cargo loss, where the government agency never replaced the cargo).
The Fifth Circuit has narrowly prescribed what may constitute "unusual" or "exceptional" circumstances to justify a district court in exercising its discretion to deny or limit prejudgment interest. See Reeled Tubing, Inc. v. M/V CHAD G, 794 F.2d 1026, 1028 (5th Cir. 1986). Deferral of repairs or replacement does not constitute "exceptional" circumstances. See Ryan Walsh, 792 F.2d at 493; In re M/V VULCAN, 553 F.2d 489, 490 (5th Cir) (per curiam), cert denied sub nom. Sabine Towing Transportation Co. v. Zapata Ugland Drilling Co., 434 U.S. 855, 98 S.Ct. 175, 54 L.Ed.2d 127 (1977); and Gulf Oil v. Panama Canal Co., 481 F.2d 561, 571 (5th Cir. 1973).
The record is devoid of evidence that the plaintiff improperly delayed in notifying the defendant of its claim, in filing suit, or in prosecuting its suit. Torch attempted to negotiate in good faith after advising Gulf Tran of its valuation of the loss. There is no evidence that the plaintiff was in any way negligent in a manner which contributed to the loss at issue. Damages awarded can not be seriously characterized as substantially less that the amount claimed for the loss ( i.e., $150,000.00 claimed loss).
The rate at which prejudgment interest is awarded is within the trial court's "broad discretion." See e.g. Reeled Tubing, 794 F.2d at 1029. The Fifth Circuit has upheld rates at the Louisiana legal rate, the federal legal rate, as well as at, among other rates, higher rates roughly equal to the plaintiff's actual cost of borrowing. See, Vulcan 553 F.2d at 491. In cases such as this, where there is no evidence that the plaintiff actually borrowed money or incurred higher interest costs, the Fifth Circuit has uniformly rejected plaintiff's claims that they should have been awarded prejudgment interest at the generally higher cost-of-borrowing rate. See Reeled Tubing, 794 F.2d at 1029 (affirming award at the federal rate, which was lower than the Louisiana state rate).
In this case plaintiff has introduced no evidence that it has borrowed money, or was prevented from paying off loans, because of this action. The federal legal rate is tied to rates of investment return, whereas the Louisiana legal rate is tied to the generally higher rates of borrowing.
See La. Civil Code art. 2924.
Accordingly, and for all of the foregoing reasons,
IT IS ORDERED THAT there be judgment in favor of the plaintiff Torch, Inc., and against the defendant Gulf Tran, Inc., on the main claim in the full amount of $104,206.00 plus interest on the award at the statutory rate set forth in 28 U.S.C. § 1961(a) compounded annually, beginning to run from the date of loss (January 20, 2000), until judgment is paid, plus the costs incurred in prosecuting this action.
IT IS FURTHER ORDERED THAT there be judgment in favor of the plaintiff Torch, Inc., and against the defendant Gulf Tran, Inc., on its counterclaim for charter hire, dismissing that claim with prejudice, the defendant to bear all costs of these proceedings.