Mosaic Underwriting Service, Inc et al v. Moncla 101 et al
ORDER & REASONS denying as moot 81 Motion for Disbursement of Funds and denying 83 Motion to Lift Stay. Signed by Judge Martin L.C. Feldman on 8/21/2013. (caa, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
MOSAIC UNDERWRITING SERVICE, INC. ET AL.
MONCLA MARINE OPERATIONS, L.L.C. ET AL.
ORDER AND REASONS
Before the Court is Excess P&I Underwriters' motion to lift
the stay for the distribution of sale proceeds.
For the reasons
that follow, the motion is DENIED.
This dispute arises out of the salvage of a damaged vessel.
The MONCLA 101, owned and operated by Moncla Marine
Operators, LLC, is a “work-over barge” or “post-drilling rig,”
used to drive pilings and posts in maritime environments.
about May 5, 2012, the MONCLA 101 was onsite at Calliou Island in
Terrebonne Bay, Louisiana, performing a job for one of Moncla’s
In accordance with its design, the MONCLA
101 was deliberately flooded; an operation which involves filling
the hull portion of the rig with water to ballast it down so that
it sits on the seabed. On June 13, 2012, during efforts to
deballast, Moncla Marine was unable to raise and refloat the
vessel because of multiple holes in the hull.
With the MONCLA 101 still sitting on the seabed, Moncla
Marine hired divers to apply patches to the hull, but these
efforts proved futile.
Moncla Marine then retained a salvage
company, Inland Salvage, Inc., to raise the vessel.
Marine entered into a $3.55 million “no cure-no pay” contract
with Inland Salvage to remove the MONCLA 101 from the seabed.
Island Salvage successfully floated the vessel, and, on July 14,
2012, the MONCLA 101 was towed to the Bollinger Shipyard in
LaRose, Louisiana, where it remains today.
At all relevant times, Moncla Marine had numerous insurance
policies covering the MONCLA 101, which can best be grouped in
three categories: (1) Hull & Machinery Policy,1 (2) Primary
Protection & Indemnity Policy,2 and (3) Excess Protection &
Indemnity Policy;3 the Hull Underwriters, Primary P&I
Underwriters, and Excess P&I Underwriters.
The Hull & Machinery
policy and the Primary P&I policy were obtained through the
This includes Lloyds Syndicates numbers 2987, 2007, 4711, 382,
3000, 4020, 2001, and 2488, all of whom subscribed to and/or
secured Hull and Machinery Policy Number B0702HA037000b, which
was issued to Moncla Marine.
This includes Lloyds Syndicates numbers 2003, 609, 2987, 1225,
2488, 4711, 2121, 1183, 1221, 457, and 300, all of whom
subscribed to and/or secured the Primary Protection and Indemnity
Policy Number B0702PA018140b issued to Moncla Marine.
This includes Mosaic Underwriting Service, on behalf of Lloyds
Syndicate number 1861, and Navigators Insurance Company, Inc.,
which issued Excess Protection and Indemnity Policy Number
MUS334191-12-1 to Moncla Marine. Navigators Insurance is a 50%
subscriber to the Excess P&I Policy, utilizing policy number
Osprey Underwriting Agency, Ltd.
All three policies were
underwritten by multiple syndicates on a subscription basis at
Lloyds of London.
The costs for the removal of the MONCLA 101, which total
approximately $3.55 million, were covered by the Primary P&I and
the Excess P&I Underwriters.
The Primary P&I Underwriters paid
$1 million to Inland Salvage and the Excess P&I Underwriters paid
On August 31, 2012, the Excess P&I Underwriters sued for a
declaratory judgment in this Court, naming as defendants the
MONCLA 101, in rem, and Moncla Marine, in personam.
Underwriters seek a declaration that they are entitled to take
title to the vessel, sell the vessel, and have priority over
claims once the proceeds are distributed among claimants.
November 13, 2012, Moncla Marine denied Excess P&I Underwriters’
claims and affirmatively asserted a counterclaim against Excess
P&I, alleging claims of negligence under Louisiana Civil Code
articles 2315, 2316, 2320; conspiracy and collusion under article
2324; fraud; violations of the Louisiana Unfair Trade and
Practices Act; breach of fiduciary duty; and detrimental
In addition to other damages and fees, Moncla Marine
seeks a claim for punitive damages.
On the same day, November 13, 2012, Moncla Marine also filed
a third-party complaint in this Court, naming as third-party
defendants Osprey Underwriting, the Hull Underwriters, and the
Primary P&I Underwriters.
Moncla Marine asserts essentially the
same claims in its third-party complaint as it does in its
counterclaim against the Excess P&I Underwriters; in sum, Moncla
Marine asserts ten causes of action against the Hull
Underwriters, eight against the Primary P&I Underwriters, and
seven against Osprey.
The crux of Moncla Marine's claims against
the Express P&I, Hull, and Primary P&I Underwriters is that all
underwriters conspired and colluded to compensate Moncla Marine
under the Primary and Excess P&I policies, rather than the Hull
By doing so, it is argued, the P&I Underwriters would
receive a credit for the salvage value of the MONCLA 101, which
would be available under the terms of the Primary and Excess P&I
policies but not the Hull policy.
On December 6, 2012, the third-party defendants, invoking
the Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, moved the Court to stay proceedings and compel
arbitration in London pursuant to the insurance policies'
The Court granted the motion on February
20, 2013, and the proceedings between Moncla Marine and the Hull
Underwriters, Primary P&I Underwriters, and Osprey were stayed.
Excess P&I Underwriters' claims against Moncla Marine remained
pending before this Court.
On March 12, 2013, Moncla Marine
moved to stay proceedings and compel Excess P&I Underwriters to
arbitrate their claims in the third-party defendants' London
The Court denied Moncla Marine's request to compel
Excess P&I Underwriters to arbitrate, but granted the request to
stay the litigation on April 11, 2013.
Excess P&I Underwriters
moved the Court to reconsider its April 11, 2013 Order and
Reasons, or, alternatively, to grant their request to seek
The Court denied Excess P&I's motion for
reconsideration on June 12, 2013.
Excess P&I now moves to lift
the stay for the distribution of the proceeds from the sale of
the MONCLA 101.
The Court does not agree that the stay should be lifted for
the purpose of distributing the sale proceeds to Excess P&I
Underwriters, because such relief would undercut the pending
arbitration between Moncla Marine and third-party defendants
Primary P&I, Hull, and Osprey.
Excess P&I contends that the third-party defendants have no
"standing" to object to this motion because they never joined in
the initial in rem action to assert a claim to the proceeds.
the Court has previously discussed, the arbitration clause in the
third-party defendants' insurance contract mandates arbitration
for "any dispute arising under or in connection with this
To force the third-party defendants to stake a claim
to the proceeds in this Court would be in direct contravention of
their arbitration clause--the proper venue is arbitration for the
determination of whether the Primary P&I or Hull Underwriters are
entitled to a salvage credit under the terms of their insurance
See N. St., LLC v. Clipper Constr., LLC, No. 08-4604,
2010 WL 3523025, at *2 (E.D. La. Sept. 2, 2010) ("A party waives
its right to arbitrate by actively participating in a lawsuit or
otherwise taking action inconsistent with arbitral rights."
(citing Miller Brewing Co. v. Forth Worth Distrib. Co., 781 F.2d
494, 496 (5th Cir. 1986)).
In response, Excess P&I submits that the Court should
adjudicate the "narrow" legal question as to the priorities of
the parties' claims to the sale proceeds.
Excess P&I contends:
If Excess P&I Underwriters' claim takes precedence over
London Underwriters', the conditional settlement between
Excess P&I and Moncla takes effect and as to Excess P&I,
this claim is resolved. Excess P&I Underwriters will be
entitled to the res. If Primary P&I or Hull's claims
take precedence over Excess P&I's, then Excess P&I will
have no choice but to wait for arbitration.
Further, Excess P&I asserts that ranking the claims will not
prejudice the arbitration, because arbitration cannot adjudicate
the res located in the Eastern District of Louisiana.
determination by this Court as to the priority of the claims
would require interpretation of the insurance contracts, which
would frustrate the ongoing arbitration.
See Waste Management v.
Residuos Industriales Multiquim, S.A., 372 F.3d 339, 343 (5th
Cir. 2004) ("The question is not ultimately one of weighing the
potential harm to the interests of the nonsignatory, but of
determining whether proceeding with litigation will destroy the
signatories' right to a meaningful arbitration.").
reference to the Court's discussion of the third Waste Management
factor in its April 11, 2013 Order and Reasons overlooks the
other factors and considerations the Court analyzed in issuing
Accordingly, IT IS HEREBY ORDERED that Excess P&I
Underwriters' motion to lift the stay is DENIED.
IT IS FURTHER
ORDERED that Excess P&I Underwriters' motion to distribute the
funds is DENIED AS MOOT.
New Orleans, Louisiana, August 21, 2013
MARTIN L. C. FELDMAN
UNITED STATES DISTRICT JUDGE
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