Offshore Marine Contractors, Inc. v. Palm Energy Offshore, L.L.C. et al
Filing
258
ORDER AND REASONS granting in part and denying in part 245 Motion for New Trial; granting in part and denying in part 247 Motion to Amend/Correct; granting in part and denying in part 247 Motion to Alter Judgment; granting in part and denying in part 249 Motion to Alter Judgment, as more fully set forth in document. Signed by Chief Judge Sarah S. Vance on 12/30/2013. (Reference: All Cases)(mmm)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
OFFSHORE MARINE CONTRACTORS,
INC.
CIVIL ACTION
VERSUS
NO: 10-4151
PALM ENERGY OFFSHORE, LLC AND
CHET MORRISON WELL SERVICES,
LLC
SECTION: R(3)
ORDER AND REASONS
Chet Morrison Well Services, L.L.C. (CMWS), Offshore Marine
Contractors, Inc. (OMC), and Palm Energy Offshore, L.L.C. (PEO)
have all filed motions to alter or amend the judgment.1 The Court
GRANTS these motions insofar as they seek clarification of the
amount of prejudgment interest awarded to OMC and CMWS. The Court
also GRANTS PEO's motion insofar as it seeks relief from
liability for charter fees incurred while the L/B Nicole Eymard
was stuck on location at the West Delta 55 block. In all other
respects, the Court DENIES the motions.
I.
BACKGROUND
The Court discussed the facts giving rise to this maritime
contract dispute at length in its October 7, 2013 Order and
Reasons,2 and will not repeat them here. In that Order, the Court
1
R. Docs. 245, 247, 249.
2
R. Doc. 243.
held as follows:
CMWS owes $249,750.00 to OMC in outstanding charter fees
for the L/B Nicole Eymard for the period between July 15
and July 27, 2008. Because the invoices submitted to CMWS
provide that 1.5% interest is added after 30 days, CMWS
must add one and one half percent prejudgment interest to
each invoice to run from the date 30 days after the
invoice was issued. HCR in turn owes $249,750.00, also
with prejudgment interest, to CMWS. . . .
CMWS owes $432,125.00 to OMC in outstanding charter
fees for the L/B Nicole Eymard for the period between
July [28] and August 18, [2008],3 with one and one half
percent prejudgment interest on each invoice to run from
the date 30 days after the invoice was issued. PEO in
turn owes $432,125.00, also with prejudgment interest, to
CMWS. . . .
CMWS owes PEO the reasonable attorneys' fees and
costs that PEO incurred in defending against OMC's claims
regarding the West Delta 55 job, repair costs, and
downtime charter, as well as the fees it incurred in
bringing the crossclaim against CMWS for indemnity.4
CMWS, OMC, and PEO have each moved the Court to alter or
amend the judgment or (in CMWS's case) for a new trial, pursuant
to Federal Rule of Civil Procedure 59. These motions raise four
issues. First, the parties dispute whether the award of
prejudgment interest was appropriate and, if so, what amount of
prejudgment interest is warranted. Second, CMWS argues that PEO
should have to pay it a 15% markup on the West Delta 55 job.
Third, CMWS argues that PEO's failure to pay OMC charter fees for
the West Delta 55 job constituted a breach of contract that
absolves CMWS of its obligation to pay PEO's attorneys' fees and
3
The Court's Order mistakenly listed these dates as July
27 and August 18, 2012, respectively.
4
R. Doc. 243 at 34-35 (citations omitted).
2
costs. Finally, PEO argues that the Court should not have
adjudged PEO liable for charter fees for the L/B Nicole Eymard's
"on-site downtime" -- that is, the period from August 1, 2008 to
August 18, 2008, when the vessel was stuck in the West Delta 55
block but was not performing work.
II.
LEGAL STANDARD
A motion under Rule 59 "calls into question the correctness
of a judgment." Templet v. Hydrochem, Inc., 367 F.3d 473, 478
(5th Cir. 2004) (quoting In re Transtexas Gas Corp., 303 F.3d
571, 581 (5th Cir. 2002)). Because of the interest in finality,
Rule 59 motions may only be granted if the moving party shows
there was a manifest error of law or fact or presents newly
discovered evidence that could not have been discovered
previously. Id. at 478–79; Pluet v. Frasier, 355 F.3d 381, 385
n.2 (5th Cir. 2004). Moreover, Rule 59 motions should not be used
to relitigate old matters, raise new arguments, or submit
evidence that could have been presented earlier in the
proceedings. See Templet, 367 F.3d at 479; Rosenblatt v. United
Way of Greater Hous., 607 F.3d 413, 419 (5th Cir. 2010) ("[A]
motion to alter or amend the judgment under Rule 59(e) 'must
clearly establish either a manifest error of law or fact or must
present newly discovered evidence' and 'cannot be used to raise
arguments which could, and should, have been made before the
judgment issued.'" (alteration in original)); Pluet, 355 F.3d at
3
385 n.2. The grant of such a motion is an "extraordinary remedy
that should be used sparingly." Indep. Coca–Cola Emps.' Union of
Lake Charles, No. 1060 v. Coca–Cola Bottling Co. United, Inc.,
114 F. App'x 137, 143 (5th Cir. 2004) (citing Templet, 367 F.3d
at 479). The Court must balance two important judicial
imperatives in deciding whether to reopen a case in response to a
motion for reconsideration: "1) the need to bring litigation to
an end; and 2) the need to render just decisions on the basis of
all the facts." Templet, 367 F.3d at 479.
III. DISCUSSION
A.
Prejudgment Interest
The parties dispute both the propriety and amount of the
prejudgment interest award in this case. CMWS argues that
prejudgment interest should not have been awarded at all, and
contends that if it is awarded, it should be a one-time 1.5%
charge. OMC asserts that the award of prejudgment interest was
proper, and seeks clarification of the rate of interest.
According to OMC, an award of 1.5% interest per month is
appropriate. PEO argues that it should not have to pay CMWS
prejudgment interest. PEO further contends that, if it is held
responsible for prejudgment interest, the proper rate is 1% per
month.
1.
The Award of Prejudgment Interest Was Proper
4
The Court declines to reconsider its decision to award
prejudgment interest in this matter. It is well-settled that
"[u]nder maritime law, the awarding of prejudgment interest is
the rule rather than the exception, and, in practice, is wellnigh automatic." Reeled Tubing, Inc. v. M/V Chad G, 794 F.2d
1026, 1028 (5th Cir. 1986); accord Sea Link Cargo Servs. Inc. v.
Mar. Centre Inc., 380 F. App'x 460, 464 (5th Cir. 2010). "A trial
court has the discretion to deny prejudgment interest only where
peculiar circumstances would make such an award inequitable."
Reeled Tubing, 794 F.2d at 1028; see also Sea Link, 380 F. App'x
at 464. The Reeled Tubing court identified four such "peculiar
circumstances": "where plaintiff improperly delayed resolution of
an action, where a genuine dispute over a good faith claim exists
in a mutual fault setting, where some equitable doctrine counsels
against the award, or where the damages award was substantially
less than the amount claimed by plaintiff." 794 F.2d at 1028. The
Supreme Court has since held that "neither a good-faith dispute
over liability nor the existence of mutual fault justifies the
denial of prejudgment interest in an admiralty collision case,"
thereby abrogating the second part of Reeled Tubing's "peculiar
circumstances" test. City Of Milwaukee v. Cement Div., Nat'l
Gypsum Co., 515 U.S. 189, 199 (1995).
None of the remaining "peculiar circumstances" are present
here. First, there is no evidence in the record that OMC
5
"improperly" delayed in bringing this action. CMWS contends that
"any delayed resolution of this matter was caused by OMC pursuing
PEO, and PEO not paying,"5 but in fact the evidence indicates
that OMC pursued PEO only after CMWS told OMC to do so. CMWS,
which was ultimately adjudged liable to OMC for the charter hire
for both jobs at issue, cannot now contend that OMC improperly
delayed resolution of this case when OMC simply followed CMWS's
billing instructions. Second, CMWS has identified no equitable
doctrine that would militate against an award of prejudgment
interest. Finally, while OMC was not successful on all of its
claims in this litigation, it did recover the full amount of
charter fees it claimed it was owed for both the Chandeleur 37
and West Delta 55 jobs. Accordingly, the Court finds that there
is no reason to depart from the usual practice of awarding
prejudgment interest. Cf. Jurgens Maschinebau GmbH & Co. v. Blue
Anchor Line, No. 02-2213, 2005 WL 1309135, at *2 (E.D. La. May
16, 2005) (awarding prejudgment interest in maritime case after
finding that "the record is devoid of any evidence that the
Plaintiffs improperly delayed in notifying [defendant] of its
claim, in filing suit, or in prosecuting its suit; or that any
other peculiar circumstances exist such that an award of
prejudgment interest would be inequitable").
PEO argues that it should not be liable to CMWS for
5
R. Doc. 245-2 at 6.
6
prejudgment interest because (1) it paid the only invoice issued
by CMWS and so should not be "penalized" by a prejudgment
interest award; and (2) under the terms of a Master Service
Agreement between PEO and CMWS (the "PEO-CMWS MSA"), PEO did not
have an obligation to pay CMWS until CMWS paid OMC.
PEO's first argument, that the award of prejudgment interest
would amount to an unfair "penalty," fails. Prejudgment interest
"is not a penalty, but compensation for the use of funds
wrongfully withheld." Platoro Ltd., Inc. v. Unidentified Remains
of a Vessel, 695 F.2d 893, 906 (5th Cir. 1983); see also City of
Milwaukee, 515 U.S. at 196 ("By compensating 'for the loss of use
of money due as damages from the time the claim accrues until
judgment is entered,' an award of prejudgment interest helps
achieve the goal of restoring a party to the condition it enjoyed
before the injury occurred." (citations omitted)); Sea Link, 380
F. App'x at 464. Since the Nicole Eymard was chartered by CMWS to
perform work on PEO's wells, PEO has had use of funds that
rightfully belonged to CMWS (and ultimately to OMC). Thus, it is
only fair that PEO compensate CMWS and OMC for the use of those
funds. See City of Milwaukee, 515 U.S. at 195-96 (noting that
"[f]ull compensation has long been recognized as a basic
principle of admiralty law," and that prejudgment interest
"ensure[s] that an injured party is fully compensated for its
loss").
7
PEO's second argument is based on a clause of the PEO-CMWS
MSA that provides as follows:
[F]inal payment or any partial payment shall not become
due until . . . [CMWS] shall have furnished proof
acceptable to Palm that all claims against Contractor (by
its laborers, materialmen, suppliers and subcontractors
who provided labor, goods, equipment, services, supplies,
machinery, and/or facilities of any kind in connection
with Contractor's obligations under this Agreement) have
been fully paid and satisfied . . . .6
PEO contends that, because it had no obligation to pay CMWS under
this agreement until after CMWS paid its contractors, it should
not be held liable for prejudgment interest.
The Court finds this argument unpersuasive. Whether PEO
complied with the terms of its contract with CMWS is irrelevant
to the Court's determination of whether an award of prejudgment
interest is proper. The Court has held that, after the West Delta
55 job was completed, CMWS became liable to OMC for charter fees,
and PEO in turn became liable to CMWS for those fees, since the
work was ultimately performed for PEO's benefit. The award of
prejudgment interest is intended to compensate CMWS, and
ultimately OMC, for the use of those charter fees during the past
five years. Cf. Cashman Equip. Corp. v. Smith Mar. Towing Corp.,
No. 12-945, 2013 WL 158739, at *4-7 (E.D. La. Apr. 12, 2013)
(awarding prejudgment interest on charter fees due pursuant to a
"pay when paid" agreement, even though the party owing charter
6
R. Doc. 249-2 at 4.
8
fees had never been paid by its client).
In short, PEO has not shown that any of the "exceptional
circumstances" identified by the Reeled Tubing court exist, and
hence the Court will follow the Fifth Circuit's typical rule and
award prejudgment interest.
2.
CMWS and PEO Are Liable For Prejudgment Interest at the
Rate of 1.5% Per Month
With respect to the rate of prejudgment interest, the Court
now clarifies that CMWS is liable to OMC for prejudgment interest
at the rate of 1.5% per month, and PEO is in turn liable to CMWS
at that same rate.
"Setting the rate of interest on a judgment is within the
trial court's broad discretion." Reeled Tubing, 794 F.2d at 1029.
"The Fifth Circuit has upheld awards at the Louisiana legal rate,
at the federal legal rate, as well as at, among other rates,
higher rates roughly equal to the plaintiff's actual cost of
borrowing." Pillsbury Co. v. Midland Enters., Inc., 715 F. Supp.
738, 770-71 (E.D. La. 1989) (collecting cases). "[I]n this
Circuit prejudgment interest is ordinarily awarded from the date
of loss," because this "ensure[s] that the injured plaintiff is
compensated for the use of funds to which the plaintiff was
entitled, but which the defendant had use of prior to judgment."
Reeled Tubing, 794 F.2d at 1028; Sea Link, 380 F. App'x at 464
(stating that "the date of injury, rather than the date of
9
judicial demand," is the "proper date from which prejudgment
interest should run" (citing In re Signal Int'l, LLC, 579 F.3d
478, 500-01 (5th Cir. 2009))); see also City of Milwaukee, 515
U.S. at 196 ("By compensating 'for the loss of use of money due
as damages from the time the claim accrues until judgment is
entered,' an award of prejudgment interest helps achieve the goal
of restoring a party to the condition it enjoyed before the
injury occurred." (citations omitted)).
In its earlier Order, the Court based the rate of
prejudgment interest on OMC Exhibit 4, which is an invoice from
OMC to CMWS providing that 1.5% interest per month will be added
after 30 days.7 CMWS contends that "there is no evidence or
testimony whatsoever that CMWS knew or agreed to the terms on
OMC's invoices,"8 but the Court is unpersuaded. CMWS chartered
the Nicole Eymard and then received invoices clearly stating that
1.5% interest would be added on outstanding charter fees after
thirty days. In any event, the Court finds that 1.5% interest per
month is a reasonable interest rate for vessel charter hire
during the period in which the Nicole Eymard was hired. See
Cashman Equip. Corp., 2013 WL 158739, at *7 (finding 1.5% per
7
R. Doc. 243 at 34.
8
R. Doc. 245-2 at 5.
10
month to be a reasonable interest rate for vessel charter hire
for the period between 2008 and 2010).
PEO argues that, if it is held liable for prejudgment
interest to CMWS, the applicable rate of interest should be 1%
per month, because of the following clause in the PEO-CMWS MSA:
All [CMWS] invoices shall identify the items related to
the charges and shall provide appropriate documentation
supporting the charges (e.g. receipts, time sheets,
etc.). The invoices shall also indicate whether the
prices are the published prices, negotiated prices, or as
bid. Within thirty (30) days after receipt by Palm of
[CMWS]'s invoice, Palm shall pay to [CMWS] all undisputed
sums. Palm agrees to pay interest at the rate of 1% per
month on all undisputed sums and owed to [CMWS] that are
not paid timely.9
The Court finds that this clause of the MSA is not
applicable to the situation at hand. The 1% per month interest
rate mentioned applies to undisputed sums owed by PEO to CMWS
that are memorialized in an outstanding invoice. The charter fees
that PEO owes to CMWS are not recorded in any outstanding
invoices and were certainly not "undisputed." Accordingly, the
Court finds that a reasonable rate of interest for PEO's
obligation to CMWS is 1.5% per month. Cf. Cashman Equip. Corp.,
2013 WL 1587539, at *7.
In sum, the Court reaffirms its judgment that the proper
rate of prejudgment interest in this matter is 1.5% per month on
9
R. Doc. 249-2 at 3 (emphasis added).
11
each invoice, to run from the date thirty days after the invoice
was issued.
B.
Markup for the West Delta 55 Job
CMWS argues that it is entitled to collect a 15% markup on
the charter hire for the West Delta 55 job. It cites Jonathan
Garrett's deposition testimony, in which Garrett stated that "a
mark-up is standard in the industry when a contractor passes
along a subcontractor's costs."10 CMWS is correct that there is
evidence in the record tending to suggest that usual industry
practice is for a contractor to collect a mark-up on costs it
passes along to a customer. But, as the Court held in its earlier
Order,11 there is virtually no evidence that any representative
of PEO actually agreed to pay a mark-up in this particular case.
Accordingly, the Court declines to reconsider this portion of the
judgment. See Mitchell v. Sikorsky Aircraft, No. 12-10523, 2013
WL 3239439, at *4 (5th Cir. Mar. 5, 2013) (noting that a Rule 59
motion is not the proper vehicle to revisit matters already
argued and decided (citing Exxon Shipping Co. v. Baker, 554 U.S.
471, 485 n.5 (2008))).
10
R. Doc. 245-2 at 8.
11
See R. Doc. 243 at 21 ("There is virtually no evidence
. . . that any representative of PEO agreed to pay CMWS a 15%
markup on the liftboat.").
12
C.
CMWS's Obligation to Pay PEO's Attorneys' Fees
CMWS argues that it is not responsible for PEO's attorneys'
fees and costs under the PEO-CMWS MSA because PEO breached that
MSA in refusing to pay OMC for the West Delta 55 job. This is
incorrect. Contrary to CMWS's contention, the Court did not find
that PEO agreed to pay OMC directly for the West Delta 55 job.
Instead, the Court held that CMWS was liable to OMC for those
charter fees.12 Since PEO had no obligation to pay OMC charter
fees for the West Delta 55 job, its failure to do so cannot
constitute a breach of contract that would relieve CMWS from its
obligation under the PEO-CMWS MSA to pay PEO's reasonable
attorneys' fees and costs. Accordingly, the Court will not alter
or amend this portion of the judgment.
D.
PEO's Liability for "On-Site Downtime"
PEO argues that it should not have to pay OMC for charter
fees incurred while the Nicole Eymard was stuck on the West Delta
55 block because the MSA between CMWS and PEO operated to release
PEO from that liability. The relevant provision of the MSA
provides as follows:
Contractor [i.e. CMWS] shall release . . . Palm, its
employees, subsidiaries, affiliated companies, joint
12
R. Doc. 243 at 21-22.
13
venturers, partners, contractors and subcontractors . .
., agents, invitees, and all of their respective vessels,
officers, directors, and employees . . . from and against
all suits, actions, claims, liabilities, damages, and
demands based upon personal injury or death or property
damage or loss . . ., whenever occurring, suffered by any
of the Contractor Group . . . where the claim or loss
arises out of, is connected with, incident to, or is
directly or indirectly resulting from or relating to the
performance of this Agreement . . . .13
The Court held in its earlier order that OMC's claims
against PEO for charter fees incurred while the Nicole Eymard was
stuck on location at the West Delta 55 block are "based on . . .
property damage or loss . . . suffered by any of the Contractor
Group" that "relat[ed] to the performance of th[e] Agreement."14
CMWS's claims against PEO for those charter fees are
substantively identical to OMC's claims, and hence they fall
within the terms of the release in the PEO-CMWS MSA. Accordingly,
the Court finds that the above-quoted provision releases PEO from
its liability to CMWS for the charter fees incurred during "onsite downtime."
See Becker v. Tidewater, Inc., 586 F.3d 358, 369
(5th Cir. 2009) (noting that a release and indemnity provision in
a maritime contract "should be read as a whole and its words
given their plain meaning"); Ingram Corp. v. J. Ray McDermott &
13
R. Doc. 249-2 at 15.
14
R. Doc. 243 at 30 (citing Energy XXI, GoM, LLC v. New
Tech Eng'g, LP, 787 F. Supp. 2d 590, 605-07 (S.D. Tex. 2011)).
14
Co., Inc., 698 F.2d 1295, 1311-12 (5th Cir. 1983) ("'Unmistakably
clear' language which is contained in release negotiated by
commercial parties with substantially equal bargaining power
should be construed to mean what it says."). The Court holds that
PEO is not liable to CMWS for charter fees during the period in
which the Nicole Eymard was stuck on the West Delta 55 block
(August 1, 2008 to August 18, 2008).
IV.
CONCLUSION
In summary, the Court alters and clarifies its judgment in
this matter in the following two respects. First, PEO is liable
to CMWS only for the charter fees incurred from July 28 to July
31, 2008 on the West Delta 55 job. The PEO-CMWS MSA operates to
release PEO from liability from the remaining charter fees for
the West Delta 55 job. Second, CMWS owes OMC prejudgment interest
at the rate of 1.5% per month, to run from the date 30 days after
the invoice was issued. PEO owes CMWS prejudgment interest at
that same rate on the charter fees incurred from July 28 to July
31.
Thus, it is the judgment of this Court that CMWS owes
$249,750.00 to OMC in outstanding charter fees for the L/B Nicole
Eymard for the period between July 15 and July 27, 2008. CMWS
must add prejudgment interest at the rate of 1.5% per month to
15
each invoice, to run from the date 30 days after the invoice was
issued. HCR in turn owes $249,750.00, also with prejudgment
interest calculated at the same rate, to CMWS.
CMWS owes $77,800.00 to OMC in outstanding charter fees for
the L/B Nicole Eymard for the period between July 28 and July 31,
2008. Again, CMWS must add prejudgment interest at the rate of
1.5% per month to each invoice, to run from the date 30 days
after the invoice was issued. PEO in turn owes $77,800.00, also
with prejudgment interest calculated at the same rate, to CMWS.
CMWS owes $354,325.00 to OMC in outstanding charter fees for
the vessel for the period between August 1 and August 18, 2008,
again with prejudgment interest at a rate of 1.5% per month.
CMWS owes PEO the reasonable attorneys' fees and costs that
PEO incurred in defending against OMC's claims regarding the
West Delta 55 job, repair costs, and downtime charter, as well
as the fees PEO incurred in bringing the crossclaim against CMWS
for indemnity. The Court refers the issue of the amount of
attorneys' fees that PEO can recover to Magistrate Judge Daniel
Knowles for a report and recommendation.
New Orleans, Louisiana, this 30th day of December, 2013.
__
_________________________________
SARAH S. VANCE
UNITED STATES DISTRICT JUDGE
16
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