Dann Marine Towing LC v. General Ship Repair Corp.

Filing 111

MEMORANDUM of DECISION. Signed by Judge Marvin J. Garbis on 9/7/2017. (hmls, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
DANN MARINE TOWING, LC

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Plaintiff
vs.

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GENERAL SHIP REPAIR CORP.
Defendant
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CIVIL ACTION NO. MJG-12-1610

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MEMORANDUM OF DECISION

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The Court has conducted the bench trial of Plaintiff Dann
Marine Towing, LC’s (“Dann Marine”) claims against Defendant
General Ship Repair Corp. (“GSR”).

The Court has heard the

evidence presented, reviewed the exhibits, considered the
materials submitted by the parties, and had the benefit of the
arguments of counsel.

The Court now issues this Memorandum of

Decision as its findings of fact and conclusions of law in
compliance with Rule 52(a) of the Federal Rules of Civil
Procedure.1

1

“In an action tried on the facts without a jury . . . the
court must find the facts specially and state its conclusions of
law separately. The findings and conclusions may be stated on
the record after the close of the evidence or may appear in an
opinion or a memorandum of decision filed by the court. Judgment
must be entered under Rule 58.” Fed. R. Civ. P. 52(a)(1).

1

The Court finds the facts stated herein based upon its
evaluation of the evidence, including the credibility of
witnesses, and the inferences that the Court has found
reasonable to draw from the evidence.

I.

BACKGROUND
In October 2011, the IVORY COAST, a Dann Marine tugboat,

caught fire and was seriously damaged while being repaired by
GSR.

In this lawsuit, Dann Marine sues GSR for damages caused

by the fire.

As discussed herein, the Court finds neither side

totally free of fault for the fire and neither side’s
contentions to be totally correct.
Since the late 1960s, Dann Marine, a Maryland corporation
based in Chesapeake City, Maryland, has been engaged in
providing marine tug and towing services on the Chesapeake Bay
and other waters along the United States East Coast, as well as
in such locations as the Great Lakes, the Gulf Coast of Mexico,
the Caribbean, and South America.

Dann Marine owns a fleet of

tugboats, one of which, built in 1967, is the IVORY COAST (“the
Boat”).
Since the 1920s, GSR has been a Maryland corporation, based
in Baltimore, Maryland, that provides ship repair services.

2

Dann Marine and GSR had a business relationship beginning about
10-15 years ago, under which GSR regularly provided repairs to
Dann Marine’s boats.

A.

Repair Agreement

In September 2011, Dann Marine’s Boat was active in service
transporting coal for a local utility, earning $4,900 per day.
Dann Marine decided to schedule needed repairs to the Boat.
Robert Dann, the Dann Marine port engineer and a part owner of
the company, contacted Derick Lynch2 of GSR and verbally
described the work wanted.

Derick Lynch arranged for the GSR

yard manager to survey the items to be repaired on the Boat.

A

proposal [Def.’s Ex. 1]3 was prepared on September 30, 2011 and
sent to Robert Dann to review.

Robert Dann responded with a

request that Dann Marine handle certain service items itself
rather than pay GSR. For example, Dann Marine indicated it would
2

Charles Frederick Lynch, Jr., commonly known as Derick, is
the President of GSR.
3
Based on the parties’ prior custom and practice, the
proposal includes terms and conditions that form part of the
final contract. The proposal states on the first page:
“IMPORTANT TERMS AND CONDITIONS: Work will be performed by us
only upon the terms and conditions set forth on the reverse of
this invoice/proposal which shall be deemed to have been
accepted by the customer upon arrival of the vessel at our yard,
or upon commencement of marine or non-marine work by us at any
location.” Proposal, Def.’s Ex. 1.

3

provide the marine chemist certificate and supply its own power
by generator rather than use GSR’s shore power.

The contract

was finalized in the form of a “yard specification” with a job
number and was dated October 5, 2011.

See Def.’s Ex. 1.

Provision number 8 on the second page of the yard
specification describes the work to be done to remove and
replace some of the steel along the starboard engine side of the
Boat.4

Id.

This required preparation of the Boat prior to

commencing hot work,5 including cleaning the Boat’s bilge and a
marine chemist’s certification that the boat was safe for hot
work.

The agreement provided that Dann Marine was to engage

4

The wording in the proposal and the yard specification was
identical: “Furnish labor, material, and equipment to crop and
renew the upper shear strake form the main deck edge 12” down
the side shell in way of the engine room for twenty-three (23)
frame spaces[about 46 linear feet]. Make necessary removals for
access from engine room side. Flush off all old steel including
the split pipe fender. Preblast and prime 35 L.F. of 1/2” x 12”
F.B. Fit up the 12” F.B. from approximately 6” aft of fwd
engine room bulkhead to 6” fwd of the aft bulkhead. Provide all
necessary fire watch during all hot work. Hose test to prove
tight. Power tool clean all new and disturbed areas. Apply all
coatings as original. Remove split pipe fwd, part of engine
room to aft end of engine room. Fit and weld a blank over split
pipe to cap same.” Def.’s Ex. 1.
5
The term “hot work” is used to describe welding, cutting,
burning, or other repair work that creates sparks and carries a
risk of fire from ignition of flammable or combustible materials
in the space or from leaks of flammable gas from the hot work
equipment into the space. 29 C.F.R. § 1915.4, 11.

4

independent cleaners and a marine chemist to certify the Boat
safe for hot work.

B.

Start of Repairs

On or about October 6, 2010, Dann Marine brought the Boat
to GSR’s facility in Baltimore, Maryland to have the repairs
performed.

Randy Ash (“Ash”), the Boat’s Chief Engineer, and a

Dann Marine deckhand, Nick Jones (“Jones”) remained aboard when
the Boat was left at GSR.
In accordance with the parties’ agreement, Dann Marine
contracted with A2Z Environmental Group (“A2Z”) to clean the
Boat’s bilge in preparation for the hot work.

One of Dann

Marine’s port engineers, Jack Collins (“Collins”), was directed
to oversee that the cleaning was done to the marine chemist’s
satisfaction and to get the hot work certificate.
Collins does not recall who contacted A2Z or the particular
instructions given A2Z. However, A2Z field supervisor, Frank
Merritt, testified that he was instructed by Collins “[t]o clean
from the centerline of the boat to the starboard side to have it
available for hot work.”

Tr.6 3, 157:20-21, 160:13-16.

6

Collins

All Tr. references herein refer to the transcripts from the
five-day bench trial held June 20-24, 2016, and closing

5

did not arrive at the Boat until the A2Z cleaning was almost
complete.

See Tr. 3, 30:21-25.

A2Z spent about eleven hours7 cleaning the Boat’s two diesel
fuel tanks and pressure washing the bilge.

The starboard and

port sides of the bilge are connected at the centerline.

A2Z

removed the deck plates and removed all the liquid from the
lowest point of the bilge.8

It then performed a more detailed

and thorough cleaning of the starboard side by scraping, bagging
any solid residue (such as rags, bottle caps, debris),
degreasing, pressure-washing, and finally, vacuuming up the
liquids again from the lowest point of the bilge.

A2Z did not

perform the detailed cleaning on the port side of the bilge.
The deck plates were left open for the marine chemist’s
inspection.
David Capen (“Capen”) has been a marine chemist since 1981
and was regularly hired by both Dann Marine and GSR.

Capen

arrived to inspect the Boat on Thursday, October 6, 2011 just as

arguments on March 8, 2017.
7
From 6:30 a.m. to 5:30 p.m. on Thursday, October 6, 2011.
Def.’s Ex. 25.
8
There is free communication of liquids in the bilge at the
centerline between port and starboard as well as from bow to
stern. Tr. 3, 173:2-14. The liquids are vacuumed up using a
vacuum truck. Tr. 1, 144:1-2, 21-23.

6

A2Z was finishing its cleaning.9

Collins, signed off on the A2Z

cleaning service, and met with Capen.
Collins described to Capen the scope of work that was
planned for the Boat.10

Capen inspected the port fuel oil tank,

the starboard aft fuel oil tank, and the engine room bilge, and
took a number of sensor readings11 to determine if the atmosphere
was safe for workers and safe for limited hot work.

At about

4:30 p.m. on Thursday, October 6, 2011, Capen issued to Dann
Marine a marine chemist certificate that stated, in pertinent
part:
Port [Fuel Oil Tank] Aft, [Starboard Fuel
Oil Tank] Aft, Engine Room > Atmosphere Safe
for Workers[,] Safe for Limited Hot Work . .
. .
9

GSR called to let Capen know when the cleaning company was
expected to finish. Tr. 1, 157:25-158:3. It is normal practice
for the cleaning company to remain for the inspection in case
the marine chemist finds areas that require further cleaning.
Tr. 5, 13:23-14:6.
10
Capen testified that he was misinformed about the
requirement for hot work inside the engine room and thought that
the hot work would be performed only from the outside. Tr. 1,
154:6-25. However, Collins testified that he clearly
communicated that the work would be done inside the engine room.
Tr. 3, 13:16-20, 14:8-19. Also, Capen had served as marine
chemist on the virtually identical work done on the port side of
the Boat. Tr. 3, 18:11-16, 19:20-20:4. The Court believes
Collins properly communicated the scope of work to Capen.
11
Such as levels of oxygen, flammable gases and vapors,
hydrogen sulfide, volatile organic compounds, carbon monoxide,
etc.

7

Notes
(1)

Hot Work Limited to replace rub rail
[Starboard] Side No Closer than 6” of
[Forward Fuel Oil Tank].

(2)

Hot Work in Aft [Fuel Oil Tanks]
([Port/Starboard]) repair of vents and
sounding Tubes.

(3)

Maintain Fire Watch and Ventilation
during all hot Work

(4)

[Shipyard Competent Person12] to Recheck
daily prior hot Work.

Pl.’s Ex. 2.
The hot work commenced on the Boat the next morning,
Friday, October 7, 2011.

Walter Wise (“Wise”), GSR’s shop

supervisor, was designated as the Shipyard Competent Person
(“SCP”).

He reviewed the hot work certificate to determine the

limitations.

Prior to starting the cutting in the engine room,

a fire watch and equipment was set up in the engine room, a fire
blanket was placed to cover the starboard generator at the aft
of the engine room, and Wise performed his SCP inspection and
report and posted the report with the chemist’s hot work

12

A “competent person” is required to be designated by a
shipyard to inspect and test the spaces in which hot work is
being performed as often as necessary to ensure that atmospheric
conditions within that space are maintained within the
conditions established by the marine chemist certificate after
the certificate has been issued. 29 C.F.R. §§ 1915.7,15.

8

certificate by the engine room door. Steven Williams
(“Williams”) began cutting out old steel at the aft of the
engine room and moving forward.

As the old steel was removed by

cutting from the inside, new steel could then be fitted and
welded on from the outside of the Boat by other GSR workers.
At some point later on Friday, Ash drained,13 dismantled,
and removed the upper part of the starboard fuel manifold to
make room for the cutting to be done on Monday.

The deckhand,

Jones, assisted with the dismantling, and Wise, noting them
struggling with the manifold, helped them lift it up and set it
down on the deck-plate on the port side of the engine room.
Later on, the GSR night-shift covered the open manifold pipes
with rags and tape to keep debris from getting in from their
needle-gunning14 activities preparing for Monday’s cutting.

13

Ash estimated that approximately three and a half gallons
drained out of the fuel manifold into a five-gallon bucket,
which he moved to the port side of the engine room. Absorbent
pads were placed below the manifold, on top of a painted wooden
box situated there, and used to collect any potential diesel
leaking during the process. The used pads were collected and
placed in a garbage container between the two engines in the
middle of the engine room.
14
Using a needle-gun to chip off the paint from the area that
will be cut or welded. This is beneficial to reduce smoke and
potential flare-up from the paint on the hull during the
cutting. Tr. 5, 49:23-50:15, 52:3-10; Tr. 4, 132:21-133:7.

9

C.

The Day of the Fire

Hot work continued on the Boat on Monday, October 10, 2011,
starting at about 7:00 a.m.

Wise performed the required SCP

inspection and report and posted the report in the envelope with
the chemist’s hot work certificate by the engine room door.

His

inspection included a visual spot check of the bilges as well as
the use of a “sniffer”15 to test O2 (oxygen) and LEL (Lower
Explosive Limit)16 levels to ensure that the area was still safe
for hot work.
Wise assigned Subhas Sankar (“Sankar”) to be the fire watch
and showed him what to do.

Sankar and Williams prepared for

cutting by setting up lights, bringing in and draping the
cutting torch hoses17 so they weren’t on the deck where they
could be tripped over, bringing in a charged garden (water) hose
with a squeeze nozzle at the end, and stuffing fire blanket
15

A portable Combustible Gas and Oxygen Alarm used to sample
the atmosphere for combustible gases and vapors.
16
“Lower explosive limit (LEL) means the minimum
concentration of vapor in air below which propagation of a flame
does not occur in the presence of an ignition source.” 29 C.F.R.
§ 1915.11.
17
“You have a source of flammable gas. In our case propylene
and oxygen combines in the torch, controlled by two valves,
ignited with a striker, and adjusted to a cutting flame which
you apply to the edge of the steel, bringing it to the heat as
required to separate it by pulling the trigger and using an air
jet to gouge the preheated steel.” Tr. 4, 13:6-11.

10

pieces in the holes on the ledge18 under the area where Williams
would be cutting.

Sankar was responsible for keeping an eye on

the welding on the outside of the engine room as well as
Williams’ cutting on the inside.
Towards the end of the morning, Wise came by to let Sankar
know he was being reassigned after lunch to a different task in
the shipyard.

The cutting stopped at about 11:15 to allow 15

minutes for a cooldown before Williams and Sankar left the
engine room for their lunch break at around 11:30.

After lunch,

Sankar did not return to the engine room but went over to dry
dock as he’d been assigned. Williams returned to the engine room
to resume work, accompanied by Wise, who took over the fire
watch duties from Sankar.

They arrived back at the engine room

at around 12:10.
Ash, the Boat engineer, was working on board during the
morning and recalls working on paperwork in either his stateroom
or the wheelhouse.

He reported taking his lunch break at noon

in the Boat’s galley.

After his lunch break, Ash went to the

engine room to perform some repair work on the starboard
generator.

Ash does not recall anyone working in the engine

18

Horizontal flange plate about six feet above the deck. Tr.
4, 22:18-21, 23:14-24:10, 31:17-33:5, 65:9-18; also see Ct. Ex.
2.

11

room while he was on lunch break, but he testified that when he
went down in the engine room after lunch to begin working on the
starboard generator, he saw a GSR worker cutting in the forward
starboard side of the engine room in the area where the fuel
manifold had been removed.

Ash Depo. 74, ECF No. 73-1.

Ash

does not recall seeing anyone other than Williams in the engine
room at that time.
When Wise and Williams arrived in the engine room after
lunch, they prepared to start the cutting work again.

Wise

spot-checked the bilge by lifting a couple of the bilge plates
in the forward engine room.

He checked with a flashlight to see

if there was any liquid and found that the bilge was dry.

Wise

gave a light spray of water up against the side of the hull to
wet it down a little in the area where Williams would be
cutting.

Williams plugged the holes in the ledge with fire

cloth under the area where he would be cutting, and Wise checked
it.

Wise positioned himself in front of the starboard engine

where he could also keep an eye on the welding in the aft part
of the engine room.
Williams resumed cutting in the starboard forward end of
the engine room.

He was crouched on the ledge, which was about

six feet above the engine room deck, and he was cutting just

12

underneath the main deck, which was about eight feet above the
engine room deck.

Just behind him and slightly aft was the

wooden toolbox that was below where the fuel manifold had been
removed.

Williams had not placed a fire blanket on the painted

wooden box because he felt it was in a “safe zone.”
30:14-24.19

Tr. 4,

As he continued to cut, Williams felt a heatwave

under him, “intense enough to burn the hair out of [his]
nostrils.”

Tr. 4, 34:14-15.

He looked down through his burning

shield20 and saw that he was engulfed in flame.

He turned off

the torch and cast it aside to his right, knocked the shield off
with his hardhat, stretched over with one foot to step down on
the wooden box and “hit the deck.”

Tr. 4, 37:17-38:14.

Williams saw Wise spraying water on the fire with the
garden hose, but the water seemed to make the fire worse rather
than better.

Wise dropped the hose, and Williams tried spraying

the fire with the garden hose but the flames reacted by
intensifying.

Wise picked the hose back up and continued

spraying water.

Believing it must be an oil fire, Williams

grabbed one of the Boat’s CO2 extinguishers and attempted to put
19

Nor did Wise put a fire blanket on the box.

Tr. 4,111:12-

17.
20

A full-face, tinted shield that is used during cutting.
Tr. 4, 37:13-14. It is attached to the hardhat with a spring
mechanism. Tr. 4, 70:18-22.

13

out the fire by aiming it at the bilge area from which it
appeared to him the flames were coming.

But, the extinguisher

didn’t have any effect at putting out the flames.

Realizing he

wasn’t doing any good, Williams threw the extinguisher down and
headed for the stairs leading out of the engine room.

On the

way out, Williams saw Ash who was about to come help him fight
the fire with another fire extinguisher.

Williams told him to

get out too, and they both exited the engine room through the
starboard side door.

Wise stayed where he was for a few seconds

longer still trying to douse the fire with water to no avail.
The smoke and heat was escalating quickly, and Wise left the
engine room shortly after Williams and Ash, exiting through the
starboard aft door.
A call was made to 9-1-1, and fire department equipment
was dispatched.

Williams was told that he secured the tanks

delivering gas and oxygen to the cutting torch, but he does not
recall doing it.

Ash saw Jones on the dock and asked him to

call the Dann Marine office to let them know about the fire.
The GSR crew nearby ran fire hoses and began to fight the fire.
By 1:30 p.m., the fire department was on the scene, Christian
LaPense (“LaPense”), Dann Marine’s compliance manager, had left
his office in Chesapeake City and was on his way to GSR, and

14

Derick Lynch was actively helping coordinate with the fire
response team.
Foam was required to fight the fire, which was designated a
Class B21 (fueled by combustible liquid) fire.

The port

generator had been left running, so Ash explained to the
firefighters how to turn it off by using the emergency shutoff
in the galley.

However, the firefighters could not access the

shutoff, because it was already under boiling water from the
firefighting.

Instead, the firefighters went down into the

engine room to shut it off according to Ash’s instructions.

By

about 2:00 p.m., the fire was out and the generator secured.
The bilge’s electrical submersible pumps stopped working
once the generator was shut off.

Because the Boat had leaking

packing glands,22 submersible pumps were used to pump overboard
any water that collected in the bilge’s containment area.
21

With

Fires are classified by the types of fuel they burn. A
Class B fire is fueled by flammable or combustible liquids, such
as oil, gasoline, and other similar materials. 29 C.F.R. §
1910.155(c)(9). See also Tr. 2, 103:15-105:10(describing sources
of combustible fuels to the fire). The most effective way to
extinguish a liquid-fueled fire is by inhibiting the chemical
chain reaction of the fire by using dry chemical extinguishing
agents, CO2, or foam. See Tr. 4, 60:4-25.
22
Packing glands are designed to keep water from coming into
the boat where the propeller shafts go through the hull of the
boat, which is under water. Ash Depo. 101:8-18. One of the
planned repairs for the Boat was to replace the leaking packing
glands with dripless seals. Tr. 2, 206:12-23, Tr. 5, 54:3-13.

15

no electricity to power the pumps, water collected in the bilge,
from both the firefighting and the leaking. Dann Marine arranged
to have the bilge pumped out by A2Z.

In addition to a

significant amount of water, about 350 gallons of fuel was
pumped out of the bilge after the fire.

This fuel may have come

from leaking fuel.
After being cleared by the firefighters, Ash returned to
the engine room and saw that the sight glass23 had been damaged
and was leaking fuel.

Ash turned off the valve, and the sight

glass leaking stopped. Ash testified that the leaking sight
glass could account for the 350 gallons of fuel that was later
pumped out of the bilge.

Ash Depo. 60:20-61:1.

Dann Marine’s compliance manager, LaPense, arrived at the
Boat around 2:45-3:00 p.m. The fire was then out and one of the
fire trucks was leaving GSR, but the fire department was still
securing the scene.

LaPense identified himself to one of the

firefighters and received permission to access the Boat and
document its condition.

At that time, it was still very hot in

the engine room, with water dripping, steam, foam, and water23

A sight glass is a clear vertical tube, made out of glass
or Plexiglas, connected to the day tank, which shows the level
of the fuel that is in the tank. There is a 90-degree valve
coming off the bottom of the tank to a 90-degree valve at the
top of the tank. Ash Depo. 99:5-12.

16

soaked debris everywhere.

The catwalk and deck around the

engine room was warped and heat-damaged. The mess deck and
galley were severely damaged, and the upper level of the Boat
was smoke-damaged.

LaPense took pictures and coordinated

getting supplies for Ash and Jones and checking them into hotel
rooms. Robert Dann arrived at GSR about an hour after LaPense
and reviewed the Boat’s damage along with Derick Lynch.
At some point in the afternoon, the Coast Guard arrived.
Seeing a potential environmental problem with the water and oil
accumulating in the bilge, the Coast Guard directed Derick Lynch
to put the Boat on dry dock the next morning.

However, Robert

Dann instructed Derick Lynch not to put the Boat on the dry dock
and made alternate arrangements to resolve the liquid
accumulation situation.24

D.

Post-fire Investigation

GSR and Dann Marine notified their respective insurers, who
dispatched fire investigators the day after the fire, October
11, 2011, to investigate the origin and cause of the fire.
Aaron Redsicker (“Redsicker”), a certified fire investigator
24

A diver was brought in to wrap plastic around the exterior
of the seals to slow down the water leaking through the packing
glands.

17

hired by Dann Marine’s insurance company, arrived at the Boat on
the morning of October 11, 2011 to begin his investigation.25
The Coast Guard26 and the Baltimore City fire department also
conducted an investigation.
On October 12, 2011, Stephen Murphy (“Murphy”), a marine
surveyor27 hired by Dann Marine and its insurer, met with Lee
Goldberg (“Goldberg”), the surveyor representing GSR and its
insurer, and LaPense, and did an initial28 walk-through of the
Boat to assess the extent of damage.

Murphy drafted an initial

report with recommendations, including a recommendation that
qualified diesel mechanics look at the engines to see whether
the fire or the efforts to put out the fire had caused any
damage to the engines.

Soon after, Flag Service and Maintenance

Inc. (“Flag”) was dispatched to do an inspection, and they

25

Redsicker also visited the Boat on October 14, 17, 21, and
28. An in-house fire investigator from GSR’s insurance company
was present at some of the same times.
26
As part of the Coast Guard investigation, remains of the
wooden box were tested and found positive for the presence of
ignitable liquids. Tr. 2, 106:23-107:19.
27
A marine surveyor inspects marine vessels such as boats,
barges, tugboats, and fishing vessels, at the request of an
owner, insurance underwriter, law firm, or other interested
party, to provide a valuation or report on the condition of the
vessel. Tr. 3, 69:21-70:9.
28
There were multiple visits to the Boat as part of the
process.

18

provided an initial estimate to repair the engines and
generators.29
GSR requested a joint survey.30

Murphy testified that he

believed he was doing a joint survey, but a joint report was
never actually produced.

Murphy testified that he drafted and

signed a survey report and provided it to Goldberg and LaPense
on October 17, 2011, but Goldberg gave it back to him unsigned.
Murphy, Goldberg, and another surveyor31 returned to the
Boat for a follow-up visit on October 26, 2011.

At that time,

GSR was re-welding the hole on the side of Boat,32 installing the
rub rail and shell plate, stripping the loose gear that had been
damaged in the fire, and cleaning the Boat in general.
29

After

An estimate was provided around November 11, 2011 to
overhaul the main engines and generators for about $272,000.00.
Tr. 2, 136:16-137:14; Tr. 3, 125:23-126:8; 147:13-20. The
estimate included a letter with a disclaimer advising that the
estimate was based on knowledge at that time, and Flag provided
a second estimate months later, after seeing the engines
disassembled, that was more than a million dollars higher. Tr.
2, 116:2-6; 137:9-14.
30
“A joint survey is between the different parties that have
an interest in the claim. I was there on behalf of the hull
underwriters and the owners of the vessel, so it was
my responsibility to actually write up the survey. And then we
would get signatures. Everybody would sign off on it, myself
and the other party.” Murphy, Tr. 3, 77:1-6.
31
There were multiple insurers and surveyors involved in the
joint survey efforts.
32
GSR completed the side shell repairs and was paid by Dann
Marine for the work performed.

19

that visit, on November 11, 2011, Murphy sent an email33 to
Goldberg confirming that he had prepared a revised Field Survey
Report but was continuing to make further corrections and
revisions and would submit a revised draft for review within a
couple weeks.

In the November 11 email, Murphy also noted that

Robert Dann would be supervising and coordinating all repair
operations on board the Boat and that Christopher Dann wanted
all future visits to the Boat to be pre-scheduled appointments
made through Dann Marine’s representative, Murphy.
Murphy visited the Boat again on December 12, 2011.
Goldberg learned of the visit and emailed Murphy to question the
status of the joint report and to schedule a visit on December
16, 2011 to check on the status of repairs.

Murphy responded on

the morning of December 16, 2011, advising that he was waiting
to update the Field Survey Report until the full extent of
damages were known given that additional damages, such as salt
water damages to the engines, were still being uncovered.
Murphy suggested that a final joint survey coincide with a visit
to the Boat and to Flag Maintenance where the main engine power
packs were being taken for inspection and overhaul.
33

Goldberg

A series of emails, including this, were admitted as Def.’s
Ex. 31.

20

responded an hour later that he planned to stop by the Boat that
afternoon for a check-up visit.

However, before he could do so,

Cary Lynch advised Goldberg that Claudio Crivici (“Crivici”),
who had been retained by GSR to provide a comprehensive damages
and repair recommendation, was in contact with Murphy and
planning a visit on Monday, December 19, 2011.

Crivici followed

up with an email to Goldberg a couple of hours later advising of
the plan to meet at the Boat on Monday morning to perform a
survey and obtain a signed survey report. Goldberg agreed to
attend the joint survey on Monday, December 19, 2011.
Late in the day on Saturday, December 17, 2011, Dann Marine
moved the Boat out of the GSR shipyard with GSR equipment still
on board,34 without GSR’s knowledge, but with approval from the
Coast Guard.

On Sunday, December 18, 2011, Christopher Dann

sent an email to Goldberg, Crivici, the Lynches, Murphy, and
others stating that no further surveys, visits, or
investigations would take place on the Boat unless Dann Marine’s
insurers expressed the need.

34

GSR’s equipment was later returned to GSR.

21

Murphy continued to work with Dann Marine’s insurance
company, reviewing the repairs and commenting on each invoice
submitted regarding whether it was claim-related35 or not.
The heads were pulled from the engines just prior to
Murphy’s survey at Dann Marine’s headquarters in Chesapeake
City, Maryland in February 2012. Murphy noted rust spots on the
heads as well as the engines.

The engines were then fully

disassembled and pulled from the Boat and delivered to Marine
Systems in Chesapeake, Virginia, where they were inspected by
Murphy in May 2012.

Murphy suggested to Dann Marine’s insurance

company that an engine specialist evaluate the engine damages.
Murphy went back to Chesapeake, Virginia in July 2012 to inspect
the engines with Robert Newman (“Newman”), who had been selected
as the engine specialist. Newman provided a report36 to the
insurance company in August 2012. Murphy and Newman were later
retained as damages experts by Dann Marine.

35

Deemed claim-related repairs ultimately added up to
$$1,280,243.92. On behalf of the insurer, Murphy approved costs
as reasonable and identified whether the invoiced amount was
wholly reimbursable or betterment, which was not reimbursable,
or a combination of the two and partly reimbursable. Enginerelated costs were deferred to Newman to assess.
36
Def.’s Ex. 24.

22

E.

The Lawsuit

Dann Marine filed the Complaint [ECF No. 1] on May 30,
2012, asserting five counts under admiralty jurisdiction:


Count I - Breach of Contract,



Count II - Breach of Implied Warranty of Workmanlike
Performance,



Count III - Negligence,



Count IV - Gross Negligence, and



Count V - Breach of Bailment.

GSR answered the Complaint on September 26, 2012, asserting
multiple defenses including one stating that the terms and
conditions of the contract contain an exculpatory clause that
expressly precludes Dann Marine from any recovery of any
damages, or in the alternative, limits GSR’s liability to the
amount of $300,000.00 of actual damages proven at trial.
Answer, ECF No. 14. GSR also asserted that Dann Marine’s own
negligence precluded recovery, it failed to mitigate damages,
and that evidence had been spoliated by not allowing proper
survey and assessment of damages.

Id.

After discovery, on January 13 and 30, 2014, Dann Marine
and GSR filed cross-motions for partial summary judgment [ECF
Nos. 32, 35] on the enforceability of the exculpatory clause in

23

GSR’s terms and conditions. The Court, by Judge Quarles, issued
its decision on July 10, 2014, holding that the exculpatory
clause did not limit GSR’s liability to Dann Marine but only to
third parties.

Mem. Opinion 13, ECF No. 38.

GSR’s motion [ECF

No. 32] was denied, and Dann Marine’s motion [ECF No. 35] was
granted.

Id. at 14; Order 1, ECF No. 39.

The five-day bench trial was held June 20-24, 2016,
followed by post-trial briefing, and closing arguments were held
on March 8, 2017.

During closing argument, GSR again raised the

exculpatory clause defense and asserted that there were two
separate clauses, one of which had not previously been ruled on
by Judge Quarles, and contending that Dann Marine was precluded
from recovering damages in the event of fire, regardless of
negligence or cause.

On April 18, 2017, Dann Marine filed

Plaintiff’s Objection & Motion to Strike [ECF No. 107] GSR’s
arguments for enforcement of the contractual exculpation of all
liability.

II.

That motion is also now ripe for decision.

DISCUSSION
A.

Breach of Contract

A contract to repair a ship is considered a maritime
contract.

Kossick v. United Fruit Co., 365 U.S. 731, 735

24

(1961); Sea Land Indus., Inc. v. Gen. Ship Repair Corp., 530 F.
Supp. 550, 556 (D. Md. 1982).

“[I]n an admiralty case, a court

applies federal common law and can look to state law in
situations where there is no admiralty rule on point.”

Ost-

West-Handel Bruno Bischoff GmbH v. Project Asia Line, Inc., 160
F.3d 170, 174 (4th Cir. 1998).

Although state law may serve to

supplement federal maritime law, maritime law controls if the
two conflict. Wells v. Libby, 186 F.3d 505, 524-25 (4th Cir.
1999) (quoting Powell v. Offshore Navigation, Inc., 644 F.2d
1063, 1065 n.5 (5th Cir. 1981)).

To the extent that state law

is not inconsistent with admiralty principles, “state contract
law may be applicable to maritime contracts.”

Ham Marine, Inc.

v. Dresser Indus., Inc., 72 F.3d 454, 459 (5th Cir. 1995). Also,
the Uniform Commercial Code (“U.C.C.”) is considered a source
for federal admiralty law. See Princess Cruises, Inc. v. General
Elec. Co., 143 F.3d 828, 832 (4th Cir. 1998) (stating that
“U.C.C. principles inform admiralty law”).
Under Maryland law, a breach of contract claim requires a
plaintiff to “prove that the defendant owed the plaintiff a
contractual obligation and that the defendant breached that
obligation.” Taylor v. NationsBank N.A., 776 A.2d 645, 651 (Md.
2001).

The plaintiff need not prove damages resulting from the

25

breach, because it is well settled that where a breach of
contract occurs, one may recover nominal damages even when there
is a failure to prove actual damages. Id. (citations omitted).
But “[u]nder both tort and contract law, one claiming damages
must prove that a tortious act or breach of contract was the
proximate cause of the damages claimed.”

CR-RSC Tower I, LLC v.

RSC Tower I, LLC, 56 A.3d 170, 196 n.41 (Md. 2012)(citations
omitted).
The parties agree that the contract contained an express
provision requiring GSR to provide a fire watch.37

Dann Marine

contends that GSR breached this express provision of the
contract by failing to provide the necessary fire watch on the
afternoon of October 10, 2011.

This contention is primarily

based on Ash’s testimony that he did not see Wise or any other
fire watch on the Boat after the mid-day lunch break.
Dann Marine also cites as additional evidence that there
was no warning to Williams about the fire, Williams rather than
Wise discharged the CO2 fire extinguisher, and Wise’s reported
escape route from the engine room is unusual and incredible.

37

“Provide all necessary fire watch during all hot work.”
Def.’s Ex. 1.

26

Both Wise and Williams credibly testified that Wise was
acting as fire watch on the afternoon of October 10, 2011.

The

Court accepts that Ash may not have seen Wise even though he was
actually there but not visible to Ash.

The Court finds that

Wise was present on the Boat as fire watch on the afternoon of
October 10, 2011.
Accordingly, GSR did not breach the express provision of
the contract that required it to provide a fire watch during hot
work.

B.

Breach of Implied Warranty of Workmanlike Performance

“[A] contractor in admiralty is to effect ship repairs in a
workmanlike manner.”

Little Beaver Enters. v. Humphreys Rys.,

Inc., 719 F.2d 75, 77 (4th Cir. 1983)(citations omitted).
“Though the implied warranty of workmanlike performance is a
legal standard, the question of what is required in a
workmanlike performance is necessarily a factual question that
naturally varies from case to case based on the scope and nature
of the service being undertaken.” N. Ins. Co. of N.Y. v. Point
Judith Marina, LLC, 579 F.3d 61, 68 (1st Cir. 2009).38

38

There is some disagreement whether the implied warranty
continues to be relevant in admiralty law. Compare Little

27

The implied warranty of workmanlike performance is broad
and has been applied to find fault where repair jobs are not
performed properly and “where efforts intended to prevent damage
to a ship have been ineffective.”
77.

Little Beaver, 719 F.2d at

While the warranty parallels a negligence standard, as

opposed to strict liability, it is not necessary to find that
the repairer was negligent, nor does negligence on the
shipowner’s part block the owner from recovering for a breach of
the performance warranty, if the circumstances warrant. Point
Judith Marina, 579 F.3d at 67 (quoting La Esperanza de Puerto
Rico, Inc. v. Perez y Cia. de Puerto Rico, 124 F.3d 10, 17 (1st
Cir. 1997)); see also Parks v. United States, 784 F.2d 20, 26-27
Beaver, 719 F.2d at 80 n.5 (“The warranty of workmanlike service
traces its origins, in the admiralty context, to the United
States Supreme Court decision in Ryan Stevedoring Co. v. PanAtlantic Steamship Corp., 350 U.S. 124 (1956). Its early
applications frequently involved shipowner suits, against
Stevedore companies, seeking indemnity for damages paid to
injured workmen. While its applicability to shipboard personal
injury cases has been statutorily changed by the 1972 amendments
to the Longshoremen’s and Harbor Workers’ Compensation Act of
1927, 33 U.S.C. §§ 901 et seq., the warranty of workmanlike
service has continued vitality in other areas of admiralty.”
(citations omitted)), with David W. Robertson & Michael F.
Sturley, Developments in Admiralty and Maritime Law at the
National Level and in the Fifth and Eleventh Circuits, 35 Tul.
Mar. L.J. 493, 532 (2011)(noting that they have “deplored the
retention by some courts of the concept of an implied warranty
of workmanlike performance,” stating that the concept became
obsolete in 1972 and “does no useful work in current maritime
law; it is just potentially confusing clutter.”).

28

(1st Cir. 1986)(“The shipowner’s negligence does not bar []
indemnity . . . arising from an implied warranty of workmanlike
service . . . . [A]pplication of [the repairer’s] indemnity
rests on elements of expertise, control, supervision and ability
to prevent accidents . . . .”).39

Although some circuits have

apportioned fault in such cases, “the Fourth Circuit has never
embraced a comparative fault approach.”

Matter of Robbins Mar.,

Inc., 906 F. Supp. 309, 316 (E.D. Va. 1995); see also Chisholm
v. UHP Projects, Inc., 205 F.3d 731, 734 (4th Cir. 2000)
(“Liability for the breach of the warranty of workmanlike
performance arises without fault and appears to approach strict
liability.” (citing Salter Marine, Inc. v. Conti Carriers and
Terminals, Inc., 677 F.2d 388, 390 (4th Cir. 1982))).

“A causal

connection must be established between the claimed breach and

39

But see In re McAllister Towing of Virginia, Inc., No.
CIV.A. 2:00CV36, 2000 WL 1881197, at *9–10 (E.D. Va. July 11,
2000)(“[W]hile an implied warranty of workmanlike service exists
in the present case, the warranty will only be breached upon
proof of negligence . . . .”). The McAllister court, however,
makes its ruling specifically with regard to a towage contract,
citing the Fourth Circuit’s unpublished decision in Cargill
affirming that “there is no implied warranty of workmanlike
service in a towage contract, at least not one that imposes
liability in the absence of negligent conduct.” Id. at 10
(quoting Cargill, Inc. v. C & P Towing Co. Inc., 943 F.2d 48
(4th Cir. 1991)(unpublished)).

29

the harm suffered.”

SS Amazonia v. New Jersey Exp. Marine

Carpenters, Inc., 564 F.2d 5, 10 (2d Cir. 1977).
The warranty does not imply a guarantee of results, and
“the extent of the warranty depends on ‘the circumstances of
(the) case relating to control, supervision, and expertise.’”
Tebbs v. Baker-Whiteley Towing Co., 407 F.2d 1055, 1059 (4th
Cir. 1969)(quoting H & H Ship Service Co., v. Weyerhaeuser Line,
382 F.2d 711, 713 (9th Cir. 1967)).

If the repairer has

performed with the requisite degree of diligence, attention, and
skill, or if the repairer’s efforts “have been hindered by the
actions of the other contracting party, the repair firm will not
be held responsible . . . .”

Little Beaver, 719 F.2d at 78.

In the instant case, GSR had a contractual duty to perform
the hot work on the Boat with care and diligence. As well, GSR
had a contractual duty to prevent fire on the Boat during the
hot work by providing the SCP, a fire watch, and taking
appropriate preventive measures.

Dann Marine contends that if

Wise was present on the Boat as fire watch, his performance was
deficient – “the functional equivalent of not having a fire
watch.”

Pl.’s Post-trial Br. 15, ECF No. 90.

The Court finds that the preponderance of the evidence
establishes that Wise, as fire watch, failed to cover or remove

30

fire hazards, such as the wooden toolbox, with fire blankets,
failed to adequately spray the hull to keep it cool, and failed
to respond diligently at the first sign of flame. Tr. 4, 37:638:22, 75:12-76:6, 111:12-17, Tr. 5, 51:14-52:8. The evidence
also establishes that flames and smoke are inevitable in a hot
work zone due to hot slag and sparks.

Tr.4, 116:24-117:14.

The

Court finds that Wise failed to use the degree of diligence,
attention, and skill adequate to the task of being a fire watch,
and, as a result, the inevitable flames were not controlled and
the Boat was damaged.

Certainly, it is foreseeable that damage

could result from a failure adequately to perform fire watch
duties in a hot work environment.
GSR asserts that Dann Marine failed to have the Boat
properly cleaned for hot work and provided inadequate
information to the chemist and argues that such failures relieve
GSR of responsibility.

However, Dann Marine did not prevent,

nor hinder, GSR from doing its duty to inspect or take
preventive measures to avoid or minimize fire during hot work.
As SCP, Wise had the expertise,40 the control, and the
supervisory duty to ensure the Boat was safe for hot work before
40

Wise was trained and certified as an SCP by the chemist.
Tr. 1, 159:11-19.

31

it commenced, and as fire watch, he had the duty to ensure it
remained safe while the hot work was ongoing.

Wise failed to

take reasonable care to fulfill his duties, and his failure
resulted in an uncontrolled fire that damaged the Boat.

Any

evidence of fault on Dann Marine’s part neither relieves GSR of
its duty to act competently nor precludes Dann Marine’s
recovery.41
Accordingly, the Court finds that GSR breached the implied
warranty of workmanlike performance.

C.

Breach of Bailment

A bailment is
the relation created through the transfer of
the possession of goods or chattels, by a
person called the bailor to a person called
the bailee, without a transfer of ownership,
for the accomplishment of a certain purpose,
whereupon the goods or chattels are to be
dealt with according to the instructions of
the bailor.

41

See Matter of Robbins Mar., Inc., 906 F. Supp. at 315–16
(“shipowner fault must be sufficient to preclude recovery”);
Fairmont Shipping Corp. v. Chevron Int’l Oil Co., 511 F.2d 1252,
1260 (2d Cir. 1975) (“But negligence alone will not bar a
plaintiff from recovering for breach of warranty of workmanlike
performance. ‘Merely concurrent fault is not enough’; there must
be ‘active hindrance.’” (citation omitted)).

32

Danner v. Int’l Freight Sys. of Washington, LLC, 855 F. Supp. 2d
433, 448 (D. Md. 2012)(quoting Broadview Apts. Co. v. Baughman,
350 A.2d 707, 709 (Md. 1976)).

Under Maryland law, a bailment

consists of the following elements:
(1)

An existing subject-matter;

(2)

A contract with a reference to the subject matter,
which involves possession of it by the bailee;

(3)

Delivery, actual or constructive; and

(4)

Acceptance, actual or constructive.

Id.
“[A] contract for the storage or repair of a boat
constitutes a bailment agreement.”

Commercial Union Ins. Co. v.

Bohemia River Assocs., Ltd., 855 F. Supp. 802, 805 (D. Md.
1991)(citation omitted).

The bailment imposes on the shipyard a

duty of reasonable or ordinary care to avoid loss or damage
during the performance of its contractual duties.

Nat’l Liab. &

Fire Ins. Co. v. R & R Marine, Inc., 756 F.3d 825, 830 (5th Cir.
2014).
Under admiralty law, a rebuttable presumption of negligence
is inferred if the bailor proves that the vessel was delivered
in good condition and was damaged while in the exclusive
possession of the bailee.

Commercial Union, 855 F. Supp. at

33

805.

The burden then shifts to the defendant, who can rebut the

presumption in two ways:
(1)

by affirmatively showing defendant’s use of
reasonable and ordinary care, or

(2)

by proving that the damage was not attributable to
the defendant’s negligence.

Id.
There is, however, no presumption of negligence inferred if
the bailor cannot establish that the bailee had exclusive
possession and control of the vessel.

Id.; see also Man

Ferrostaal, Inc. v. M/V Akili, 704 F.3d 77, 88 (2d Cir. 2012)
(“A bailment does not arise unless delivery to the bailee is
complete and he has exclusive possession of the bailed
property.”).
GSR argues that it did not have exclusive possession of the
Boat.

A Dann Marine chief engineer, Ash, and a deckhand, Jones,

stayed aboard the Boat during the time it was at GSR until the
fire.

They performed maintenance repairs, ran a generator to

provide power to the Boat, and removed the fuel manifold to make
room for GSR’s hot work.

Additionally, Dann Marine’s port

engineer, Collins, directed and inspected the cleaning of the
Boat in preparation for hot work after the Boat arrived at GSR.
Dann Marine contracted with the marine chemist, Capen, and

34

Collins met with Capen at the Boat to review the scope of work
and obtain the Marine Chemist Certificate.
A bailment becomes limited under circumstances where the
owner remains or has an agent or employee responsible for the
vessel, such that exclusivity of control is compromised.
Marine, 756 F.3d at 831.

R & R

However, mere access to the vessel by

the bailor or its agents does not affect exclusive possession.
Goudy & Stevens, Inc. v. Cable Marine, Inc., 924 F.2d 16, 19 n.3
(1st Cir. 1991).

“Rather, [exclusive possession] implies that

possession and control must be of such a nature as to permit a
reasonable trier of fact to infer that the bailee is in the
better, or sole, position to explain what actually happened.”
Id. at 19; see also Fireman’s Fund Am. Ins. Co. v. Captain
Fowler’s Marina, Inc., 343 F. Supp. 347, 350 (D. Mass.
1971)(holding that the presumption did not apply when neither
party had knowledge of the origin of a fire but the cause was
ascertained).
In Goudy, the First Circuit affirmed the lower court’s
finding that, “since both parties had equally unrestricted
access to the vessel at all times, there was no basis for an
inference of negligence . . . .”

Id.

In R & R Marine, the

Fifth Circuit upheld the lower court’s finding that the shipyard

35

had full custody of the vessel under circumstances where the
shipyard had stipulated to having full custody in the parties’
agreement, and the presence of the owner’s agents did not create
a limited bailment. 756 F.3d at 831.
In the instant case, there was no stipulation in the
parties’ agreement related to GSR accepting full custody or
exclusive control.

Rather, Dann Marine specifically retained

control over various aspects of the repairs and had employees on
board at all times prior to the fire.

GSR also argues that Dann

Marine’s removal of the Boat after the fire without notification
to GSR is evidence that GSR never had exclusive control over the
Boat.

However, the Court does not find Dann Marine’s removal of

the Boat after the fire relevant to GSR’s control prior to the
fire.
The Court finds that, under the circumstances herein, only
a limited bailment was created.

GSR’s possession and control

over the Boat was not of such a nature as to permit an inference
that GSR “is in the better, or sole, position to explain what
actually happened.”

Goudy, 924 F.3d at 19.

However, even

without any presumption of GSR’s negligence, as discussed below,
Dann Marine has met its affirmative burden to prove that GSR was
negligent.

36

D.

Negligence

Negligence causes of action in admiralty invoke principles
of maritime negligence, including the doctrine of comparative
negligence. Vollmar v. O.C. Seacrets, Inc., 831 F. Supp. 2d 862,
866 (D. Md. 2011)(citations omitted).

To prevail on a

negligence claim, the plaintiff must prove, by a preponderance
of the evidence, each element of duty, breach, causation, and
damages.

Id.

Further, a ship repairer may be liable under a

negligence theory as well as under the implied warranty of
workmanlike performance.

See, e.g., La Esperanza, 124 F.3d at

16–17 (noting that a ship repairer potentially faces three
sources of liability: breach of an express provision of the
contract; breach of an implied warranty of workmanlike
performance; and the maritime tort of negligence).

1.

Duty

The determination of the defendant’s duty is a question of
law for the court.

In re Great Lakes Dredge & Dock Co. LLC, 624

F.3d 201, 211 (5th Cir. 2010).

Generally, a defendant owes the

plaintiff a duty of ordinary care under the circumstances. Id.
To establish the existence and scope of a duty, the court
considers the foreseeability of the harm suffered by the

37

plaintiff. Id.

“In admiralty, a duty of care arises if injury

is foreseeable from the alleged negligent action, or if a
relationship between the parties imposes it.”

Commercial Union

Ins. Co. v. Bohemia River Assocs., Ltd., 855 F. Supp. 802, 806
(D. Md. 1991) (citing T. Schoenbaum, Admiralty and Maritime Law,
sec. 4–2, at 124 (1987)).
As discussed above, the Court finds that GSR had a duty to
take reasonable precautions and preventive measures to avoid
fire on the Boat while hot work was being performed.

It is

foreseeable that lack of such care could result in a fire that
would damage the Boat.

2.

Breach

The Court finds that the preponderance of evidence
establishes that GSR breached its duty to take reasonable
precautions and preventive measures to avoid fire on the Boat by
failing to remove or cover potential fire hazards in the hot
zone with fire blankets, failing to remove or cover the paint
chips42 that had fallen behind the wooden tool cabinet during the
needle-gunning in preparation for the hot work, and failing to
42

Paint is removed from the steel so it doesn’t catch fire
during cutting, so if hot slag falls on the paint chips, it is
foreseeable that they would catch fire.

38

adequately spray the hull with water to keep it cool and damp to
avoid flare-ups from the hot slag.

GSR also failed to respond

diligently to the inevitable flames that arise during hot work.
For example, the fire watch did not have a fire extinguisher
with him as part of his fire-fighting arsenal but only a water
hose.

Tr. 4, 59:12-25, 38:15-20, 67:2-21, 95:18-22.

Williams

was not warned about the rising flames by Wise but discovered
the fire by feeling a blast of heat that was hot enough to burn
his nostrils. Tr. 4, 34:4-17, 37:6-8.

If there was flammable or

combustible liquid in the bilge as GSR contends, Wise did not
discover it in his SCP inspection checks.
142:13-143:8.

Tr. 4, 119:3-122:9,

The GSR crew also failed to competently follow

standard safety regulations43 such as the 35-foot rule (Tr. 4,
61:23-62:10) and the requirement for a 30-minute cooldown watch
43

“Fire watchers shall be required whenever welding or
cutting is performed in locations where . . . [w]all or floor
openings within a 35–foot (10.7 m) radius expose combustible
material in adjacent areas including concealed spaces in walls
or floors. . . . Fire watchers shall have fire extinguishing
equipment readily available and be trained in its use. They
shall be familiar with facilities for sounding an alarm in the
event of a fire. They shall watch for fires in all exposed
areas, try to extinguish them only when obviously within the
capacity of the equipment available, or otherwise sound the
alarm. A fire watch shall be maintained for at least a half
hour after completion of welding or cutting operations to detect
and extinguish possible smoldering fires.” 29 C.F.R. §
1910.252.

39

(Tr. 4, 63:7-13).

See 29 CFR 1910.251-255 (cutting & welding

safety standards).

3.

Causation

“Under the general maritime law, a party’s negligence is
actionable only if it is the ‘legal cause’ of the plaintiff’s
injuries, which is something more than ‘but for’ causation [—]
the negligence must be a substantial factor in causing the
injuries.”

Great Lakes Dredge & Dock, 624 F.3d at 213–14

(alteration in original)(citation omitted).
“The doctrine of superceding [sic]
cause is . . . applied where the defendant’s
negligence in fact substantially contributed
to the plaintiff’s injury, but the injury
was actually brought about by a later cause
of independent origin that was not
foreseeable. It is properly applied in
admiralty cases.” When ruling upon whether
a defendant’s blameworthy act was
sufficiently related to the resulting harm
to warrant imposing liability for that harm
on the defendant, “courts sitting in
admiralty may draw guidance from, inter
alia, the extensive body of state law
applying proximate causation requirements
and from treatises and other scholarly
sources.”
In re Bay Runner Rentals, Inc., 113 F. Supp. 2d 795, 804 (D. Md.
2000)(quoting Exxon Co., U.S.A. v. Sofec, Inc., 517 U.S. 830,
837, 839 (1996)).

“Proximate cause ‘involves a conclusion that

40

someone will be held legally responsible for the consequences of
an act or omission.’”

Pittway Corp. v. Collins, 973 A.2d 771,

786 (Md. 2009)(quoting Peterson v. Underwood, 264 A.2d 851, 855
(Md. 1970)).
The parties agree that the hot work being performed in the
Boat’s engine room produced hot slag and sparks that caused the
fire.

It was certainly foreseeable that a worker using a torch

to cut steel in an area with unprotected flammable and
combustible materials could produce sparks and hot slag that
would start a fire.

The parties dispute what combustible

material caught fire.

GSR contends that it was oil and fuel in

the bilge that had not been properly cleaned by Dann Marine.
However, the Court finds credible the testimony by Dann Marine’s
expert; the preponderance of the evidence leads the Court to
find that the fire was caused by the ignition of flammable and
combustible material, notably paint chips and debris from the
needle-gunning activity, behind the unprotected wooden tool
cabinet.

If the flammable and combustible material had been

removed or covered to protect from the inevitable sparks and hot
slag, and any flare-ups been immediately dampened, the fire
would not have occurred.

GSR’s failure to take preventive

action, combined with its failure to take immediate remedial

41

action that would have contained the fire, caused the fire to
become uncontrolled and cause damage to the Boat.

The fact that

certain of Dann Marine’s actions and inactions also contributed
to the damage does not absolve GSR of responsibility.

The

comparative fault of the parties is discussed below.
The Court therefore finds that GSR’s negligence is a direct
and legally cognizable cause of the fire damage to the Boat.

4.

Damage

While there are disputes regarding the extent of the Boat’s
damage, there is no disputing that the Boat was damaged by the
fire that occurred on October 10, 2011.

The Court finds it

proven that the Boat was damaged and that Dann Marine suffered
actual loss as a result of the damage.

5.

Comparative Fault

More than “a century ago the maritime law exchanged the
common law’s rule of contributory negligence for one of
comparative negligence.”

Norfolk Shipbuilding & Drydock Corp.

v. Garris, 532 U.S. 811, 815 (2001).

In a maritime tort case

where more than one party is responsible for the damages caused,
the damages are assessed proportionately based on the

42

comparative degree of each party’s fault. See United States v.
Reliable Transfer Co., 421 U.S. 391, 411 (1975)(applying
comparative negligence principles in a collision context).

In

other words, the plaintiff’s degree of fault that caused the
damage reduces the total damage award by that percentage.
GSR contends that Dann Marine took actions that proximately
initially caused the fire as well as exacerbated the damages
resulting from the fire:


Dann Marine’s instruction to A2Z to clean only half
the bilge resulted in sufficient combustible material
in the bilge to catch fire from the sparks and hot
slag;



Dann Marine’s failure to properly describe the scope
of work to the chemist resulted in an inadequate
inspection;



Dann Marine’s failures to remove the wooden tool
cabinet from the engine room, to secure the valve to
the day tank sight glass, and to cap the ends of the
fuel oil manifold after removing it, resulted in the
provision of fuel to the fire which caused the fire to
spread and caused more damage than otherwise would
have occurred.

As discussed above, the Court finds that the fire was
initially caused by hot slag and sparks igniting combustible or
flammable material behind the wooden tool cabinet.

The weight

of evidence does not support GSR’s theory that the fire was
caused by hot slag and sparks igniting fuel that was in the

43

bilge because it was inadequately cleaned.

Even if it may have

been negligent to clean only the starboard half of the bilge,
this did not cause the fire.

There is no evidence that there

was flammable or combustible fuel in the bilge sufficient to
start a fire.

In fact, the chemist’s initial inspection and the

SCP’s inspections and meter readings confirmed that the bilge
was adequately clean for hot work in the engine room.

Further,

there was no evidence of heat damage to the port side of the
engine room, which is the side of the Boat that GSR claims was
inadequately cleaned.
The Court does not credit Capen’s testimony that he was
misinformed regarding the scope of hot work and finds that the
chemist’s inspection and certificate was sufficient for the hot
work envisioned.

Furthermore, if an additional inspection and

certificate was required after removal of the fuel manifold as
GSR contends, the Court finds that it was GSR’s responsibility
to request the inspection44 since the SCP was in the best
position to be aware of the change in the engine room’s
condition vis-à-vis safety precautions for hot work.

The Court

also finds that it was GSR’s responsibility to either remove or
44

Either directly or by asking Dann Marine to schedule an
inspection.

44

cover potential fire hazards in the engine room that were at
risk of being hit by hot slag and sparks from the hot work.
Accordingly, the Court does not find that Dann Marine’s
actions proximately caused the initial fire.

However, the Court

does find that Dann Marine shares some responsibility for the
fire’s spread, which caused increased damage to the Boat.

Dann

Marine removed the fuel manifold on the weekend prior to the
fire to make room for Williams to cut on Monday.

Although there

was no sign of dripping from the pipes, there was evidence after
the fire that the pipes had been damaged and were leaking fuel.
Tr. 2, 107:11-13, 107:24-108:1.

The Court finds that it was

negligent for Dann Marine’s chief engineer not to lock off the
fuel running to the pipes on the starboard side of the engine
room where the fuel manifold had been removed and not to cap the
open pipes after removal.

Additionally, there is evidence that

the sight glass lower valve was left in an open rather than
closed position. Ash Depo. 60-61, 99-100. The sight glass became
damaged in the fire and was leaking fuel, and this fuel also fed
the fire once started.
Upon consideration of all of the evidence, the Court finds
that Dann Marine bears responsibility for 10% of the Boat’s
damage caused by the fire.

45

E.

Gross Negligence

Courts sitting in admiralty consider comparable state law
in identifying the standard for gross negligence.

See Royal

Ins. Co. of Am. v. Sw. Marine, 194 F.3d 1009, 1015 (9th Cir.
1999) (reviewing admiralty standard for gross negligence and
citing to admiralty cases, state law, and Black’s Law
Dictionary).

Maryland law recognizes that it is difficult to

distinguish between gross negligence and negligence.
Pope, 935 A.2d 699, 717 (Md. 2007).

Barbre v.

Maryland courts define

gross negligence
“as something more than simple negligence,
and likely more akin to reckless conduct;”
gross negligence is an intentional failure
to perform a manifest duty in reckless
disregard of the consequences as affecting
the life or property of another, and also
implies a thoughtless disregard of the
consequences without the exertion of any
effort to avoid them.
Id. (quoting Taylor v. Harford County Dep’t of Soc. Servs., 862
A.2d 1026, 1035 (Md. 2004)).

The Fourth Circuit has noted that

“wanton and reckless conduct, also described as gross
negligence, is a failure to use even a slight degree of care.”
Hurd v. United States, 34 F. App’x 77 (4th Cir. 2002)(citing
Martin J. Norris, The Law of Maritime Personal Injuries, 9.4
(4th ed. 1990)).

46

Dann Marine argues that GSR’s failure to take proper
precautions during hot work constitutes gross negligence, citing
a 1931 Louisiana case that so held.

Pl.’s Post-trial Br. 17,

ECF No. 90 (citing United States v. Todd Eng’g Dry Dock &
Repair, 53 F.2d 1025 (E.D. La. 1931).

In that case, the court

found that the repairmen took “no precautions” prior to
commencing hot work in the vessel’s boiler room that was
littered with flammable debris, and there was no fire watch
while the torch was being used.

Todd Eng’g, 53 F.2d at 1031

(emphasis added).
The circumstances in the instant case are not the same as
in Todd Eng’g and do not constitute intentional failure nor
reckless disregard of the consequences.

Here, there was a fire

watch present during hot work, and the SCP performed inspections
prior to the commencement of hot work.

Although the Court has

found that GSR was negligent, it does not find that negligence
to rise to the level of gross negligence.

F.

Damages

In this case, Dann Marine seeks recovery of damages by
virtue of its successful contentions that GSR breached the
implied warranty of workmanlike performance and that the

47

negligence of GSR caused it damages.

A recovery on a negligence

claim, unlike recovery on the implied warranty claim, is subject
to reduction to take into account any plaintiff negligence that
contributed to the amount of damage.
In the instant case, Dann Marine chose to repair the Boat
to a condition better than it had prior to the fire.

Hence, the

damage award herein is limited to the pre-fire fair market value
of the Boat.
“In maritime law, when a vessel is damaged, ‘the owner is
entitled to its money equivalent, and thereby to put in as good
a position pecuniarily as if his property had not been
destroyed.’” F.C. Wheat Mar. Corp. v. United States, 712 F.
Supp. 2d 471, 473 (E.D. Va. 2010), aff’d, 663 F.3d 714 (4th Cir.
2011)(quoting Standard Oil Co. v. Southern Pac. Co., 268 U.S.
146, 155 (1925)).

The general rule for calculation of damages

in admiralty cases requires restoring the vessel owner to the
same position that it would have been in before the damage
occurred – “restitutio in integrum”45 – and in the event of a
total loss, either actual or constructive, the measure of

45

“Restoration to the previous condition or the status quo.”
Black’s Law Dictionary (10th ed. 2014).

48

damages is the market value of the property just before the
loss.

The Baltimore, 75 U.S. 377, 385–86 (1869).
The workable guides to this end,
generally stated, are these. If the ship
sinks and is beyond recovery, the damages
are her value just before she sank, plus
interest thereon until payment. If she is
not a complete loss and repossession or
repairs are both physically and economically
feasible, then the reasonable cost of
recovery, including repairs and an allowance
for deprivation of use, is the measure. But
if the reclamation expense including repairs
exceeds the ship’s just value at the time of
the casualty, or if repairs are not both
physically and economically practicable,
then it is a constructive total loss, and
the limit of compensation is the value plus
interest.

Hewlett v. Barge Bertie, 418 F.2d 654, 657 (4th Cir. 1969)
(citation omitted).
The underlying rationale in breach-of-contract actions is
to place the vessel owner, as innocent party, in the position
that it would have been in had the contract been fully
performed.

Todd Shipyards Corp. v. Turbine Serv., Inc., 467 F.

Supp. 1257, 1304–06 (E.D. La. 1978), aff’d in part, modified in
part and rev’d in part, 674 F.2d 401 (5th Cir. 1982).

“Contract

damages are awarded to give the injured party the benefit of the
bargain.”

In re Newport Offshore, Ltd., 155 B.R. 616, 620

49

(Bankr. D.R.I. 1993), subsequently aff’d sub nom. Ondine
Shipping Corp. v. Cataldo, 24 F.3d 353 (1st Cir. 1994).
In addition to these guiding principles for calculating
damages, the Court is mindful that “a federal court sitting in
admiralty is not tied to any strict rules of the common law, but
has the authority to make equitable decisions, considering all
of the facts and circumstances of the individual case.” BP Expl.
& Oil, Inc. v. Moran Mid-Atl. Corp., 147 F. Supp. 2d 333, 341
(D.N.J. 2001) (collecting cases).

1.

Repair Costs

Limited by the pre-fire value of the Boat, Dann Marine, as
the damaged vessel’s owner, is entitled to recover the
reasonable cost of repairs necessary to restore the vessel to
its pre-damaged condition, as well as fees and expenses related
to the repair work that were incurred by the owner.

Turecamo

Mar., Inc. v. Weeks Dredge No. 516, 872 F. Supp. 1215, 1232–33
(S.D.N.Y. 1994)(citations omitted).

It is the plaintiff’s

burden to prove the amount of damages to a “reasonable
certainty” and that the damage was the result of defendant’s
fault.

Id. (citing Pinto v. M/S Fernwood, 507 F.2d 1327 (1st

Cir. 1974)).

50

Dann Marine submitted detailed evidence and testimony by
Christopher Dann, Stephen Murphy, and Robert Newman to support
its position that the total cost of reimbursable repairs was
$2,526,976.14.46
Total actual expenditures incurred by Dann Marine to fix
the Boat as it wished – to a somewhat better condition than it
had prior to the fire - were more than $3.2 million.47
10.

Pl.’s Ex.

The difference between total expenditures and the amount

claimed reflects Dann Marine’s decision to repower rather than

46

The total comprises power-related repairs of $1,246,732.22
and other repair costs of $1,280,243.92. Dann Marine noted in
closing arguments that it had made a mistake in its brief, which
indicated that the total was $2,619,046.98, and clarified that
the total cost of repairs should be $2,526,976.14, which
includes power-related repairs of $1,246,732.22 and other
repairs of $1,280,243.92. See Tr. 6, 107:24-108:3. The record
reflects that Murphy testified about an additional claim-related
expense of $92,070.84 that was added to his report by addendum.
Tr. 3, 122:1-123:2. The resulting updated total other expense,
therefore, was $1,372,314.76, id., which added to the engine
repairs totaled $2,619,046.98. It is unclear from the record
whether line item 161 for the Smith invoice had been added to
the earlier total in a slightly different amount of $173,400.58.
See colloquy regarding arithmetical error, Tr. 3:117:7-123:2.
The Court accepts the modified number of $1,280,243.92 as
accurately submitted for other repairs.
47
Dann Marine received reimbursement from insurance for
$2,450,000.00 after spending $3,228,390.17 on repairs and
repair-related expenses. Tr. 3, 59:2-15; Pl.’s Ex. 10.

51

repair the engines and some reductions for the betterments48
obtained. Tr. 3, 59:22-61:11, 89:5-90:4.

a.

Power-related Repairs

Newman was retained49 by Dann Marine to provide an expert
opinion on the reasonable cost of repairs, and the value of, the
two main engines, the generators, and the marine transmissions
on the Boat.

Dann Marine made a decision to repower rather than

repair, so Newman based his repair estimate on repair quotes
provided after inspection of the damaged engines, transmissions,
and generators.
Flag provided an engine-repair quotation of $1,354,791.28
in 2012 after the engines had been removed from the Boat,

48

The absence of damages for betterment costs avoids giving
the injured party a windfall by providing a new replacement for
something that was old and depreciated and would have had to be
replaced anyway. See, e.g., Pillsbury Co. v. Midland Enters.,
Inc., 715 F. Supp. 738, 764 (E.D. La. 1989), aff’d and remanded,
904 F.2d 317 (5th Cir. 1990)(“[W]here repair or replacement
costs form the basis of the damage award, the Court must
determine whether the repair or replacement adds new value to or
extends the useful life of the property; if so, an appropriate
reduction from the full repair or replacement costs should be
made.”).
49
Newman had originally provided a damage report on the
engines for one of the insurance companies. Tr. 2, 122:2-124:11;
Def.’s Ex. 24.

52

disassembled and inspected.50 Newman discounted Flag’s quote to
allow for the engines’ condition at the time of the fire, which
were not in a newly-overhauled state.

Because Dann Marine

maintained the engines on a running overhaul basis, Newman
derived51 an average age of the engines’ 16 power packs and
crankshaft at four years.

Newman opined that such engines would

normally have a 15-year life, which would mean they had 11 years
of life remaining, so he reduced the quoted amount to 70%,52 for
an estimate of $948,353.90.
Marine Specialties quoted about $236,000.0053 to repair the
marine transmissions, and there was a quote of about $23,000.0054
to repair the generators. In total, Newman’s damages valuation
of the engines, transmissions, and generators is $1,246,732.22.
GSR’s expert opined that the engines could have been repaired to
their pre-fire condition for much less than Newman’s estimate
50

Flag had provided a proposal in November 2011 after its
initial inspection, subject to modification upon further
inspection, to overhaul the main engines and generators for
about $272,000.00. Tr. 3, 125:23-126:4, .
51
Newman explains his methodology in Tr. 2, 116:2-120:4.
52
11 years of life remaining divided by 15 years of expected
life represents 73%, which Newman rounded down to 70%.
53
Tr. 2, 120:14-21. The exact amount is not on the record.
The transmission had a rubber, bladder-type clutch and a
planetary gear set that had to be replaced after the fire. Tr.
2, 147:19-148:2.
54
Tr. 2, 120:22-23. The exact amount is not on the record.

53

and suggests that a better valuation is a fair market value prefire of less than $200,000.00.
In cases such as this one in which repairs are not actually
made, the “estimated cost of repairs at a time immediately
following the accident” is a proper measure of damages.
Yarmouth Sea Prods. Ltd. v. Scully, 131 F.3d 389, 399 (4th Cir.
1997)(quoting United States v. Shipowners & Merchants Tugboat,
103 F. Supp. 152, 153 (N.D. Cal. 1952), aff’d, 205 F.2d 352 (9th
Cir.)).55 Here, the repair estimate immediately following the
accident was Flag’s estimate to repair the engines and
generators for about $272,000.00. However, in a December email,
Murphy indicated that damage was still being discovered, noting
that Flag was still evaluating engine damages and planned to
take the engine power packs to their shop. Def.’s Ex. 31. There
is no evidence on record of any earlier estimate or quote for
repair of the transmissions.
The Court finds Newman’s and Murphy’s testimony credible.
However, based on the evidence that is in the record, the Court
cannot find sufficient support for the total of $1,246,732.22
55

Where repairs are not made, damages may also be measured by
the diminution in the market value of the vessel. Yarmouth, 131
F.3d at 399. Neither party has provided evidence to support
such a measure.

54

for power-related repair expenses.

The Court accepts Newman’s

valuation of $948,353.90 for engine repairs.

There is no detail

to support the transmission and generator quotes. There is no
evidence regarding the condition of the transmission or
generators pre-fire, nor any sound way to evaluate the cost of
the damage caused by the fire in comparison.

Therefore, the

Court finds that Dann Marine has not proven cost of repairs
related to the transmission and generators.
“[O]nce a plaintiff proves its damages, a defendant has the
burden to show the damages award should be limited because the
plaintiff failed to take reasonable measures to mitigate its
loss.” VICI Racing, LLC v. T-Mobile USA, Inc., 763 F.3d 273, 300
(3d Cir. 2014); see also Nat’l Liab. & Fire Ins. Co. v. R & R
Marine, Inc., 756 F.3d 825, 832 (5th Cir. 2014).

Recovery for

damages will be reduced to the extent that defendant proves that
damages are enhanced by the plaintiff’s unreasonable failure to
mitigate.

Tidewater Marine, Inc. v. Sanco Int’l, Inc., 113 F.

Supp. 2d 987, 1004 (E.D. La. 2000).
GSR contends that Dann Marine failed to mitigate the damage
to the engines, a failure which significantly increased the cost
of repairs.

GSR points to the million dollar difference between

Flag’s original estimate and the estimate eight months later and

55

attributes the difference to the accumulation of rust because of
failure to mitigate.

GSR’s expert, Crivici, opined that the

engines could have, and should have, been “pickled”56 to preserve
and protect them at a cost of around $2,000.00.
Newman’s original report for the insurer also included
comments related to mitigation efforts that should have been
taken:
If these engines had been carefully
flushed with fresh water and Diesel fuel,
and then misted with lubricating oil after
the fire they could have been saved to
operate in the pre-fire condition.
After removal of the power packs, and
before removal of the engines from the
tugboat, the engines were not properly
covered. The result of this lack of care or
oversight resulted in rusted crankshaft
connecting rod journals. These crankshafts
would have been useable in their pre fire
condition if they had been protected from
the dripping water.
Def.’s Ex. 24.
On October 12, 2011, the day after the fire, Murphy had
recommended that Dann Marine have qualified diesel mechanics
inspect the engines for damage.

Tr. 3, 124:1-5.

Flag performed

their initial inspection in November 2011, but after the initial
56

Opened up, flushed with fresh water and diesel fuel, and
then oil-misted to protect them from rust. Tr. 5, 167:19169:15; Tr. 2, 154:10-21; Tr. 3, 129:4:9; Def.’s Ex. 24.

56

estimate was prepared, it was discovered that the damage was
more extensive than originally believed.

The actual disassembly

and detailed inspection was not performed until months later,
and no remedial measures were taken during that time.
Newman testified that the mitigation efforts would have had
to be taken immediately because rust starts to develop on steel
immediately. Tr. 2, 154:2-155:1.

Newman estimated that, under

the circumstances after the fire on the Boat, it would take two
people about eight hours just to clean the area sufficiently to
open the engine up to begin mitigation efforts.
21.

Tr. 2, 151:18-

He added that it would be necessary to have the engines

flushed with water within four hours, and that the effort it
would take to do a proper mitigation job was not feasible.
2, 152:22-24.

Tr.

Newman also testified that if the rust had been

mitigated, it would have reduced the cost of overhauling the
engines by 10 or 15 per cent, if it could have been done.

Tr.

2, 137:25-138:10.
The evidence establishes that Dann Marine failed to
mitigate damage to the Boat’s engines.

Even if immediate

mitigation could not have been feasibly undertaken to prevent
further damage to the engines, Newman testified that some of the
damage was the result of the engines not being properly covered

57

after the power packs had been removed, resulting in rusted
crankshafts.

It was also clear that Dann Marine was aware as

early as December 2011 that water had worked its way into some
of the cylinders and had been sitting there since the date of
the fire. There was no excuse for Dann Marine’s failure to take
mitigating action that could have lessened the cost to overhaul
the engines.
Accordingly, the Court finds that Dann Marine failed to
take appropriate mitigation efforts and shall reduce the enginerelated cost of repair amount by 15%, the percentage opined by
Newman to be a reasonable reduction for the mitigation failure.
Accordingly, the Court finds that the power-related costs of
repair are $806,100.82.

b.

Other Repairs

Murphy was responsible to the insurer for determining the
reasonable cost of repairs and which repairs were attributable
to the fire versus betterment.57

He was also hired as Dann

57

For example, the galley deck was partially rusted around
the sink prior to the fire. There was also warping damage to
the galley deck from the fire. Murphy prorated the total
invoice of $68,000.00 for that repair to be $55,000.00 claimrelated to cover the warping damage from the fire and $13,000.00
as vessel betterment for repairing the rusting problem around

58

Marine’s expert to provide a report on reasonable repair costs
as well as the Boat’s pre-fire valuation.

Murphy provided a

detailed spreadsheet identifying each line item cost with
allocations related to betterment.

Pl.’s Ex. 11.

GSR contends that some repairs should be depreciated
further than Murphy allowed.

For example, GSR’s expert opines

that the paneling replaced in the galley should be depreciated
by 50%.

However, Murphy explained credibly that the paneling

had to be replaced because of the fire damage in the insulation,
and the paneling selected was a reasonable replacement. Because
it is new, it may appear to be an upgrade, but it was an
unavoidable expense because of the fire damage.

GSR also argues

that the entire Boat did not need to be rewired, so some of the
rewiring costs are betterment.

However, Murphy explained that

the engine room had to be rewired because of fire damage, which
required reconnecting the wiring to the controls in the
wheelhouse even though the wheelhouse itself may not have
suffered fire damage.

Further, some electrical wiring expenses

were deemed to be upgrades rather than claim-related.

See,

e.g., Tr. 3, 116:15-18 (testifying that line item 165 for
electrical wiring in the amount of $23,353 was not claim-related
the sink.

Tr. 3, 111:7-17.

59

but an upgrade).

The Court finds Murphy credible and accepts

his opinion that the costs were reasonably allocated with
regards to betterment.
Although GSR asserts that Dann Marine failed to mitigate
the engine damage, it has made no contentions regarding failure
to mitigate other damages.
The Court is satisfied that Dann Marine has met its burden
to prove that the “other” repair costs of $1,280,243.92 were
reasonable and were related to the fire damage with appropriate
reductions having been made for betterment.

GSR has not met its

burden to show that the claimed damages are unreasonable or
unrecoverable.

c.

Summary Cost of Repairs

The Court finds that the total cost of repairs proven by
Dann Marine is $2,086,344.74, comprised of $806,100.82 for
power-related repairs and $1,280,243.92 for other repairs.

2.

Fair Market Value

A vessel is considered a constructive total loss when the
cost of repairs exceeds its value just before the damage
occurred. F.C. Wheat, 712 F. Supp. 2d at 473 (citing Standard

60

Oil, 268 U.S. at 155–56).

In that event, the limit of

compensation is the vessel’s fair market value at the time of
injury plus interest, and there is no recovery for loss of use.
Id. (citations omitted).
The plaintiff establishes a prima facie case with proof of
repair costs.

Tidewater Marine, 113 F. Supp. 2d at 1005 (citing

O’Brien Bros. v. The Helen B. Moran, 160 F.2d 502, 505 (2nd Cir.
1947)).

The defendant may then provide evidence suggesting that

the total value of the vessel is less than the cost of repairs.
Id.

Then, “the plaintiff must rebut that evidence with proof of

a higher market value, or else recovery may be limited.” Id.
As a general rule, market value is established by evidence
of contemporaneous sales of like vessels. Standard Oil Co. v.
Southern Pac. Co., 268 U.S. 146, 155–56 (1925). However, a court
may establish market value by other means as long as its
judgment is reasonable. See id. at 156 (“The ascertainment of
value is not controlled by artificial rules. It is not a matter
of formulas, but there must be a reasonable judgment having its
basis in a proper consideration of all relevant facts.”).
If no established market exists for the damaged property, a
court may consider other evidence to determine the value of the
property, including replacement cost, expert opinion of marine

61

surveyors, the use value to the owner, depreciation, insured
valued, and other established rules of damages. See, e.g.,
Hewlett, 418 F.2d at 658; U.S. Fire Ins. Co. v. Allied Towing
Corp., 966 F.2d 820, 826 (4th Cir. 1992); see also F.C. Wheat,
663 F.3d at 722 (recognizing that a court may value a vessel for
which a market value is not ascertainable by relying upon any
number of methodologies, including the vessel’s replacement cost
depreciated).

a.

GSR’s Valuation

GSR’s expert, Crivici, opined that the maximum property
damages should be the fair market value of the Boat “at $600,000
less $75,000, plus or minus $25,000 credited for her residual
post-fire value . . . .”

Tr. 5, 133:20-23, 188:3-5.58

Crivici

assessed the condition of the Boat pre-fire and compared it to
actual sales of comparable vessels in 2011 and 2014,59 namely,
the tugs JOHN MARSHALL, the EVELYN CUTLER, the OSG SEAFARER, and
the OSG LIBERTY.

58

There is nothing on the record that clarifies what the
reduction of $75,000.00 relates to.
59
Crivici opined that the 2014 market, if anything, was
slightly better than the 2011 market. Tr. 5, 186:2-4, 195:2-16.

62

Crivici opined that the closest comparable vessel was a tug
a few years newer than the Boat named the JOHN MARSHALL,
referring to her as having almost identical dimensions, the same
engines, and the same horse power.

The JOHN MARSHALL’s 2014

survey provided an estimated fair market value of $1,040,000.00,
and sold for $750,000.00 in October 2014.

Crivici testified

that it was a sale between a willing buyer and a willing seller
without duress, although the buyer was a Canadian company who
would not be in direct competition with the seller. Tr. 5,
197:6-199:22.
The EVELYN CUTLER, a larger vessel with bigger engines than
the Boat, sold for more than a million dollars.
12.

Tr. 5, 210:2-

She underwent a capital restoration in 2004, and under a

prior name was laid up for two years before being sold as a nonworking vessel. Tr. 5, 211:4-9, 212:5-15.

There was no evidence

regarding the year in which the EVELYN CUTLER was sold.
According to reports from a broker, Marcon Tug Sales, the
OSG SEAFARER and OSG LIBERTY were sold in 2011 to a Nigerian
company for $2.5 million, or $1.25 million each.

At the time of

sale, the vessels were not operating, and the sale may have been
part of a liquidation in a bankruptcy proceeding.

63

Tr. 5, 206:9-

19, 207:5-23.

The actual sale values may have been less than

the broker reported to Crivici.

Tr. 5, 206:21-22, 207:9-208:13.

Finally GSR introduced evidence regarding an offer for sale
of the Boat by Dann Marine to Vane Brothers in 2003-2004.

Tr.

5, 75:20-76:2. Dann Marine offered the Boat for about $2-2.2
million, but Vane Brothers declined to purchase the Boat at that
price.

Tr. 5, 76:3-12.

Vane Brothers apparently wished to sell

off its older tugs and was buying newer, and it sold a tug named
the PATRIOT, which was said to be similar to the Boat, to a
Mexican company for $979,000.00 in October 2009.

Tr. 5, 77:6-

11, 78:17-79:3, 79:23-80:7, 83:5-84:15, 84:19-85:6.

Vane

Brothers sold another tug, the CHARLES BURTON, testified to be
similar but smaller than the Boat, and have smaller engines, to
a Maine company for about $650,000.00 in about 2011.

Tr. 5,

85:14-86:23.

b.

Dann Marine’s Valuation

Dann Marine’s expert, Murphy, opined that the market value
of the Boat pre-fire was between $2.5 million to $2.8 million.
Tr. 3, 91:22-92:6.

Murphy testified that he used three

different valuation methods – two to calculate and one as a
check.

Tr. 3, 98:16-21.

64

Murphy began his valuation by determining the replacement
value of the Boat, which he testified was $6 million.
92:17-93:8.

Tr. 3,

Murphy then estimated that the Boat had a useful

lifespan of 75 years, and depreciated the $6 million over the 75
years.

Tr. 3, 92:9-19.

Since the Boat was 44 years old on the

day of the fire, the value on that day was about $2.5 million.
Tr. 3, 93:19-22.
Murphy then checked brokerage listings for the used tug
market, which had a broad range from $1.5 million to $3.5
million.

Tr. 3, 94:3-14.

Murphy opined that the used tugboat

market is not an accurate representation of the value of working
tugboats because often the sellers are under duress, so they are
not actually “willing sellers.”
149:6-11.

Tr. 3, 94:12-95:2, 145:3-21,

Marcon broker’s website had eight vessels listed with

asking prices.

Tr. 3, 144:12-145:2.

Murphy did not follow up

to determine whether the vessels sold or for what price, but the
2011 Marcon broker report indicated that tugboats were selling
for 93.03 percent of their listing price.

Tr. 3, 145:25-146:4,

Tr. 5, 213:1-13.
Murphy also calculated a valuation for the Boat using the
income approach.

Tr. 3, 95:12-15.

Murphy used the average

charter rate for Dann Marine’s equivalent tugboats for 2011-12

65

and calculated the value of the Boat to Dann Marine based on the
derived annual profits over 20 years discounted for present
value.

Tr. 3, 96:17-19, 97:3-25.

Using three different

discount rates yielded valuations of $3.65 million at four
percent, $3.0 million at five percent, and $2.67 million at six
percent.

Tr. 3, 98:6-11.

Murphy testified that this

calculation validated his earlier valuations using the other two
methods, but also that he thought it was the most appropriate
under the circumstances since the Boat was productive.

Tr. 3,

98:12-21, 131:19-133:2.
Additionally as to value, the evidence established that the
vessel was insured for $2.45 million.

c.

Tr. 3, 59:2-6.

The Boat’s Valuation

Based on the testimony provided by both parties’ experts,
the Court agrees that looking only at United States tugboat
sales may not provide the most accurate representation of the
Boat’s value.

Only one of the actual sales testified to by

GSR’s expert occurred in 2011, providing insufficient market
evidence to be persuasive.

Further, the 2011 listing prices

testified to by Dann Marine’s expert, assuming a sales price at
93 percent of listing, provides a range of $1.395 million to

66

$3.255 million, which only provides some evidence regarding the
outside limits of reasonable valuation.

However, the evidence

does not provide the Court with any adequate evidence of
contemporaneous sales of comparable vessels.
The Court has considered other valuation methodologies,
such as the depreciated replacement cost ($2.5 million), the
earning capacity ($2.67 million), and the insured value ($2.45
million).

GSR’s evidence of Dann Marine’s offer to sell the

Boat for over $2 million may provide some indication of the
Boat’s stated value to its owner at that time, but the timeframe
of that offer (2003-2004) reduces its relevancy for determining
a 2011 valuation.

Considering all of the relevant facts, the

Court finds that GSR’s valuation of $600,000.00 is not
reasonable, being lower than any of the actual sales testified
to, including the only 2011 sale of two non-working boats sold
as a package at $2.5 million.
The Court finds that depreciated replacement cost provides
one of the more reasonable approaches in this case.

The parties

agree that it would cost $6 million to build a new tugboat.
GSR’s expert also agreed that a 75-year lifespan is not
unreasonable for a tugboat provided it is well maintained.
There is sufficient evidence to find that Dann Marine regularly

67

maintained its fleet, and specifically implemented a running
overhaul maintenance schedule on the Boat’s engines. Christopher
Dann testified that 9 of Dann Marine’s 20 tugboats are a similar
age as the Boat and are in running order earning money for the
company.

Tr. 3, 37:23-38:8.

Even were the Court to assume that

a more reasonable lifespan for the Boat is 65 years, the
depreciated replacement cost of the Boat would be about $2
million.

This is less than its insured value and certainly

within a value determined by reference to its earning capacity
using the income approach.
Accordingly, the Court finds that the evidence reasonably
establishes the pre-fire value of the Boat to be $2 million, an
amount somewhat lower than the damage award that would result
from the repair cost method.

Hence, the Court shall limit the

damage award to $2,000,000.00.

3.

Loss of Use

In order to recover lost profits in a maritime case, “the
plaintiff must present proof sufficient to bring the issue
outside the realm of conjecture, speculation or opinion
unfounded on definite facts.”

Cargill, Inc. v. Taylor Towing

Serv., Inc., 642 F.2d 239, 241 (8th Cir. 1981)(citations

68

omitted); see also Cent. State Transit & Leasing Corp. v. Jones
Boat Yard, Inc., 206 F.3d 1373, 1376 (11th Cir. 2000)(“There
must be a pecuniary loss, or at least a reasonable certainty of
pecuniary loss, and not a mere inconvenience arising from an
inability to use the vessel. . . .” (quoting The Conqueror, 166
U.S. 110, 133 (1897))); ConAgra, Inc. v. Inland River Towing
Co., 252 F.3d 979, 983 (8th Cir. 2001).
An appropriate measure is “the amount the vessel would have
earned in the business in which she has been customarily
employed.” Turecamo, 872 F. Supp. at 1233 (quoting MooreMcCormack Lines, Inc. v. The Esso Camden, 244 F.2d 198, 201 (2d
Cir. 1957)).

“While plaintiffs’ damages must be proven with

‘reasonable certainty,’ mathematical precision is not required
and reasonable approximations will suffice.” Great Lakes Bus.
Tr. v. M/T ORANGE SUN, 855 F. Supp. 2d 131, 148–49 (S.D.N.Y.
2012), aff’d, 523 F. App’x 780 (2d Cir. 2013)(citing Story
Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 563
(1931)).

a.

Lost Profits Amount

Christopher Dann testified that Dann Marine lost profits of
$428,187.50 as a result of the fire.

69

The Boat was taken out of

service for the scheduled repairs at GSR, but because of the
fire, it could not go back into service as planned and had to be
replaced with another boat from Dann Marine’s fleet.
40:1-41:7.

Tr. 3,

The Boat was actually out of service for more than

three years, but Christopher Dann calculated lost profits on the
basis of one year, which he deemed a reasonable approximation
for how long the repairs ideally should have taken.

Tr. 3,

41:21-42:13.
To derive the lost profits, Christopher Dann began by
taking the average daily rates that all of Dann Marine’s 3000horspower class vessels were earning, which was $5,115.00 per
day.

Tr. 3, 43:2-5.

Then, for the same class of vessels, he

determined that each vessel had an average utilization rate of
86 percent, based on the average downtime while the vessels were
not earning any revenue - 61.4 days in 2011, 41.79 days in 2012,
representing a combined average of 51.6 down days per year per
vessel.

Tr. 3, 43:6-12.

Christopher Dann then applied that

utilization rate to the average daily revenue to derive gross
revenue of $1,605,598.50.60

See Pl.’s Ex. 9, Tr. 3, 46:19-47:2.

60

$5,115.00 average daily rate x 365 days x 86% =
$1,605,598.50.

70

To derive expenses, Christopher Dann took the Boat’s actual
expenses from January 1, 2011 until the day before the fire, and
annualized them assuming the boat continued to work for the rest
of the year.

Pl.’s Ex. 9, Tr. 3, 43:21-46:13.61

The derived

total expenses were $1,177,411.00, which was then subtracted
from the projected revenue for a net profit of $428,187.50.
Pl.’s Ex. 9, Tr. 3, 47:3-5.

When the Boat was put back in

service, it went back on charter earning $5,800.00 per day.

Tr.

3, 61:12-19.
GSR argues that Dann Marine may not recover lost profits
because Christopher Dann’s testimony was unsupported by any
evidence.

Christopher Dann testified that GSR did not receive

documentation to support the actual expenses, the down-time, nor
the income figures used to calculate the average daily rate.
Tr. 3, 63:23-65:1. GSR also asserts that there is no evidence to
substantiate a single charter that Dann Marine was forced to
reject because its fleet had been reduced by one boat.
61

However,

Necessarily, some expenses, such as insurance, were already
known for the year so did not need to be annualized. Tr. 3,
45:18-46:4, 49:25-56:5. Payroll costs were calculated by taking
actual payroll from October 11, 2011 to December 31, 2011,
($19,961.16) subtracted from the actual for the year
($512,198.00), and then dividing it by 283 days (representing
January 1, 2011 to October 10, 2011) to get a true daily crew
cost of $1,739.00 per day x 365 days = $634,735.00. Pl.’s Ex.
9, Tr. 3, 44:4-45:15.

71

Dann Marine’s burden is not as onerous as GSR would have the
Court require.

See, e.g., Delta S.S. Lines, Inc. v. Avondale

Shipyards, Inc., 747 F.2d 995, 1001 (5th Cir. 1984), on reh’g,
753 F.2d 378 (5th Cir. 1985)(“To require the vessel owner to
prove that specific cargos were not carried because of the
casualty would be unsound for several reasons . . . . it would
impose an onerous burden not called for in this type of
case.”(citation omitted)).
Certainly, any award of lost profits necessarily includes
some element of speculation.

However, Christopher Dann’s

testimony was credible, included a reasonable calculation of the
Boat’s expenses, and utilization and revenue based on sister
vessels, and was sufficient to convince the Court that profits
may reasonably be supposed to have been lost.
Accordingly, the Court finds that Dann Marine has
satisfied its burden to show lost profits of $428,187.50.

The

lost profits, however, are not awardable to Dann Marine for two
reasons because, as discussed above, the cost of repairs
exceeded the fair market valuation of the Boat, so loss of use
damages are unavailable, and as discussed below, consequential
damages in the absence of gross negligence, are limited by the
parties’ contract.

72

b.

Consequential Damages Limitation

The contract between the parties states, in pertinent part,
In no event shall [GSR] be liable for any
consequential damage including, but without
limitation . . . loss of revenue . . . or
loss of use.
Def.’s Ex. 1.

GSR argues that it “is not liable for any

consequential damages, including, but not limited to, Dann
Marine’s claim for loss of use.”

Proposed Joint Pretrial Order

17, ECF No. 68.
During closing argument, Dann Marine’s counsel agreed that
the consequential damages limitation is a valid part of the
contract, which would preclude Dann Marine from recovering for
loss of use unless the Court were to find GSR liable for gross
negligence.

Tr. 6, 120:8-25.

As discussed above, the Court

does not find that GSR’s negligence rose to the level of gross
negligence.

Therefore, the contract’s consequential damages

limitation applies, and Dann Marine may not recover any loss-ofuse damages.

4.

Pre-judgment Interest

Under maritime law, an award of prejudgment interest is
“the rule rather than the exception, and, in practice, is well-

73

nigh automatic.” U.S. Fire Ins. Co. v. Allied Towing Corp., 966
F.2d 820, 828 (4th Cir. 1992) (quoting Reeled Tubing, Inc. v.
M/V Chad G, 794 F.2d 1026, 1029 (5th Cir. 1986)).

The

underlying purpose for presumptively awarding prejudgment
interest is to “ensure that an injured party is fully
compensated for its loss.” City of Milwaukee v. Cement Div.,
Nat’l Gypsum Co., 515 U.S. 189, 195 (1995).

Of course, there

may be exceptional or extraordinary circumstances which militate
against an award of prejudgment interest.

Id. at 196.

It is

within the court’s discretion to determine whether or not such
circumstances exist, as well as when interest begins and the
interest rate to be awarded.

Id. at 196; Ameejee Valleejee &

Sons v. M/V Victoria U., 661 F.2d 310, 313–14 (4th Cir. 1981);
Indep. Bulk Transp., Inc. v. Vessel Morania Abaco, 676 F.2d 23,
25 (2d Cir. 1982).
There is no dispute regarding whether there should be an
award of pre-judgment interest in this case, i.e., no
exceptional circumstances militate against such an award.

Dann

Marine requests that the interest rate be set at Maryland’s
common law rate of six percent per annum, compounded annually,
to commence on the date of loss.

GSR argues that any pre-

judgment interest awarded should be assessed in accordance with

74

28 U.S.C. § 1961(a),62 at a rate equal to the weekly average oneyear constant maturity Treasury yield, as published by the Board
of Governors of the Federal Reserve System.

GSR also argues

that any award of pre-judgment interest should not begin to run
from the date of the fire, but rather from the date the repairs
to the Boat were completed.

a.

Interest Rate

The period in question herein is a period during which the
Maryland common law rate (6% per annum simple interest)63 was
substantially in excess of market rates.64

Dann Marine’s

suggestion that the Court should use this rate and, in addition,
compound interest annually, is beyond the range of reasonable.
Moreover, Dann Marine has presented nothing to support the
contention that GSR having the use of Dann Marine’s money would

62

The federal statute regarding the award of interest on
judgments is 28 U.S.C. § 1961, which, by its terms, is silent on
the award of pre-judgment interest.
63
Md. Const. Art. III, § 57 (“The Legal Rate of Interest
shall be Six per cent. per annum; unless otherwise provided by
the General Assembly.”).
64
The long-term composite rate published by the United States
Treasury for October 11, 2011 was 2.80%, and annually
thereafter: 2012 – 2.42%, 2013 – 3.44%, 2014 – 2.79%, 2015 –
2.68%, 2016 – 2.28%. See https://www.treasury.gov/resourcecenter/data-chart-center/interestrates/Pages/TextView.aspx?data=longtermrate.

75

have resulted in a gain to GSR or loss to Dann Marine at a rate
at all near the 6% common law rate.
GSR also do not appear appropriate.65

Yet, the rates proposed by
Given that § 1961 does not

expressly govern an award of pre-judgment interest, the Court
does not believe that the § 1961 rate of interest would be an
applicable pre-judgment interest rate in this case.
Because the record does not refute GSR’s contention that
the Maryland rate was much higher than the true value of the
funds in question during the period at issue, the Court shall
award prejudgment interest at one-half the Maryland common law
rate, 3% per annum, simple interest.

This rate is reasonable

compared to commercial rates and appropriate to compensate Dann
Marine for the loss of use of money during the pendency of this
case.

b.

Date Interest Commences

“Prejudgment interest is typically awarded from the date of
the loss.”

World Fuel Servs. Trading, DMCC v. M/V HEBEI

SHIJIAZHUANG, 12 F. Supp. 3d 810, 813 (E.D. Va. 2014).

The

Court finds it appropriate to exercise its discretion and
65

GSR’s proposed one-year rates are significantly lower than
the long-term composite rate. See
https://www.federalreserve.gov/releases/h15/.

76

commence the running of prejudgment interest on the date of the
loss, i.e., October 10, 2011.

5.

Attorneys’ Fees

“[T]he ‘American Rule’ [provides] that, at least absent
express statutory authorization [or enforceable contractual
commitment] to the contrary, each party to a lawsuit ordinarily
shall bear its own attorney’s fees.”

City of Riverside v.

Rivera, 477 U.S. 561, 567 (1986)(citing Alyeska Pipeline Service
Co. v. Wilderness Society, 421 U.S. 240 (1975)); see also
Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714,
717 (1967)(“[A]ttorney’s fees are not ordinarily recoverable in
the absence of a statute or enforceable contract providing
therefor.”).

Limited exceptions have developed when overriding

considerations of justice compelled such a result.

See

Fleischmann, 386 U.S. at 718 (citing Vaughan v. Atkinson, 369
U.S. 527 (1962), which held that an admiralty plaintiff may be
awarded counsel fees); Whorton v. Home Ins. Co., 724 F.2d 427,
431 (4th Cir. 1984) (“In the absence of a statute or special
agreement allowing recovery of attorneys’ fees, a losing party
may be assessed such fees only when it has acted in bad faith or
for oppressive reasons.”).

77

Dann Marine seeks to rely on a Fifth Circuit case, Todd
Shipyards Corp. v. Auto Transp., S.A., 763 F.2d 745, 751 (5th
Cir. 1985), which states: “It is well established in this
circuit that, in an action for breach of implied warranties of
workmanlike performance, attorney’s fees are recoverable as
foreseeable damages.”

Dann Marine’s reliance is misplaced.

First, the seminal case in the Fifth Circuit related to the
recoverability of attorneys’ fees in an action involving the
warranty of workmanlike performance is Strachan Shipping Co. v.
Koninklyke Nederlandsche Stoomboot Maalschappy, N.V., 324 F.2d
746 (5th Cir. 1963), cert. denied, 376 U.S. 954 (1964).

In

Strachan, the court permitted a defendant and third party
plaintiff shipowner to recover as indemnity from the third party
defendant stevedore, as items of damages, its attorneys’ fees
incurred in defending against the plaintiff longshoreman’s
claim.

See id. at 746-47.

It did not extend a right to

attorneys’ fees in prosecuting its claim against the breaching
party.

Id. at 747.

Second, other binding Fifth Circuit cases either state the
rule clearly, or imply by their facts, that there is only an
indemnitor-indemnitee exception to the general admiralty rule
against awarding attorneys’ fees.

78

See, e.g., Platoro Ltd., Inc.

v. Unidentified Remains of a Vessel, 695 F.2d 893, 906 n. 19
(5th Cir.), cert. denied, 464 U.S. 818 (1983); Noritake, Inc. v.
M/V HELLENIC CHAMPION, 627 F.2d 724 (5th Cir. 1980); Brock v.
Coral Drilling, Inc., 477 F.2d 211, 217 (5th Cir. 1973); Lusich
v. Bloomfield Steamship Co., 355 F.2d 770, 776 (5th Cir. 1966).
Finally, the Fourth Circuit also recognizes an indemnity
exception to the general rule against awarding attorneys’ fees.
Old Dominion Stevedoring Corp. v. Polskie Linie Oceaniczne, 386
F.2d 193, 198 (4th Cir. 1967); Am. Exp. Lines v. Norfolk
Shipbuilding & Drydock Corp., 336 F.2d 525, 527 (4th Cir. 1964).
The instant case, however, is not an indemnity case, nor are
there any other exceptions to the general rule that apply.
Accordingly, Dann Marine is not entitled to recover its
attorneys’ fees.

G.

Exculpatory Clause

The contract between the parties included two exculpatory
clauses:
[GSR] shall not be liable for any
damages or delays caused by strikes, labor
difficulties or disturbances, fires, theft,
accidents of any nature, with or without
negligence on our part, except as
hereinafter provided, Acts of God,

79

restraints of Government, delays in delivery
of materials, or any other causes. . . .
. . . .
Should any provision of this contract
exempting us from liability be declared or
adjusted to be invalid, the Customer agrees
that in no event shall our aggregate
liability for all parties whether the
Customer or others exceed the sum of
$300,000.00 with respect to or arising out
of any one vessel in event of claim, suit or
other action by third parties. Customer
agrees to hold us harmless for any amount
above this sum, including, if necessary,
payment of said excess amount to said third
parties.
Def.’s Ex. 1, ¶¶ 3, 6.
In the Answer [ECF No. 14] to Dann Marine’s Complaint [ECF
No. 1], GSR included as a Second Affirmative Defense:
General Ship Repair performed its work
on plaintiff’s vessel pursuant to a binding
contract the terms and conditions of which
expressly preclude plaintiff from any
recovery of any [of] the damages which
plaintiff claims herein, or in the
alternative, limits General Ship Repair’s
liability to the amount of $300,000.00 of
any actual damage suffered and proven at
trial, and which terms and conditions
specifically exclude any recovery for any
alleged economic damages, such as loss of
use, loss of profits or other consequential
damages. A copy of General Ship Repair’s
terms and conditions, which are expressly
incorporated into the contract between
Plaintiff and General Ship Repair, are
annexed hereto as GSR Exhibit “A”.

80

Answer ¶ 31, ECF No. 14.
Dann Marine and GSR filed cross-motions for partial summary
judgment [ECF Nos. 32, 35] on the enforceability of the
exculpatory clause in GSR’s terms and conditions.

GSR requested

that its liability, if any, be limited to $300,000.00.
Mem. 8, ECF No. 32.

Mot.

This Court denied GSR’s motion because the

related clause did not limit GSR’s liability to Dann Marine but
only to third parties.

Mem. Opinion 14, ECF No. 38.

In its

cross-motion, Dann Marine requested that the Court dismiss GSR’s
Second Affirmative Defense and deny GSR’s motion for partial
summary judgment.

Cross-Mot. 12, ECF No. 35.

granted Dann Marine’s motion.

This Court

Mem. Opinion 13, ECF No. 38.

In its post-trial brief and in closing argument, GSR argued
that the Court’s analysis regarding the exculpatory clause was
limited to the red letter clause limiting liability to
$300,000.00, and stated that “[t]his Court should find that GSR
is liable for no damages at all as a result of this provision.”
Def.’s Post-trial Br. 46, ECF No. 95; Tr. 6, 121:11-125:22.

GSR

references a footnote in Judge Quarles’ opinion [ECF No. 38],
which states:
The referenced terms and conditions
contain two red letter clauses, one which
disclaims all liability and the other which

81

limits its liability to $300,000. Although
GSR references both clauses, it makes no
argument to support the enforceability of the
former clause, and, in its conclusion,
requests that the Court grant its motion
“limited its liability, if any, to $300,000.”
Id. at 4, n.3 (citations omitted).
Dann Marine contends that the Court’s granting of its
motion to dismiss GSR’s Second Affirmative Defense is the law of
the case, Judge Quarles specifically analyzed the
unenforceability of the first clause, and GSR waived the defense
by failing to raise it pre-trial.66

The Court agrees.

By granting Dann Marine’s motion, this Court held that
GSR’s Second Affirmative Defense was dismissed with regard to
the two exculpatory clauses discussed in the opinion.

Judge

Quarles explicitly stated:
In ship repair contracts, courts will
enforce a red letter clause if it: (1) is
“expressed freely,” (2) is “entered into
freely by parties of equal bargaining
power,” and (3) does “not provide for a
total absolution of liability.”
66

Further, Dann Marine argues that GSR conceded that the
first clause was unenforceable in its response to Dann Marine’s
cross-motion: “The contract then goes on to recite that [GSR]
shall not have any liability for ‘damage or delay’ caused by,
inter alia, fires. The exculpatory clause is unequivocal and
unconditional, and is applicable to all parties, including,
foremost, the Customer, Dann Marine. Recognizing that such an
absolute and unconditional exculpation clause may not be
enforceable under case law . . . .” Reply 3, ECF No. 36.

82

Mem. Opinion 7, ECF No. 38 (citations omitted).

To the extent

that there is any ambiguity to Judge Quarles’ decision, the
Court now holds that the exculpatory clause at issue is not
enforceable because it provides for a total absolution of
liability.

See, e.g., La Esperanza de P.R., Inc. v. Perez y

Cia. de Puerto Rico, Inc., 124 F.3d 10, 19 (1st Cir.
1997)(“[C]ourts today will enforce red letter clauses that are
expressed clearly in contracts entered into freely by parties of
equal bargaining power, provided that the clause not provide for
a total absolution of liability.”); Edward Leasing Corp. v.
Uhlig & Assocs., Inc., 785 F.2d 877, 888 (11th Cir. 1986)(citing
cases holding that where parties to repair contracts may validly
stipulate that the repairer’s liability is to be limited, the
cases did not allow for total absolution of liability).

The

Court declines GSR’s invitation to follow the Ninth Circuit’s
rationale in Royal Ins. Co. of Am. v. Sw. Marine, 194 F.3d 1009,
1014 (9th Cir. 1999) which concluded that “except in towing
contracts, exculpatory clauses are enforceable even when they
completely absolve parties from liability for negligence.”
Finally, because GSR did not raise this legal issue until
after trial, its contention has been waived.

See McLean

Contracting Co. v. Waterman Steamship Corp., 277 F.3d 477, 480

83

(4th Cir. 2002) (“Failure to identify a legal issue worthy of
trial in the pretrial conference or pretrial order waives the
party's right to have that issue tried.”).

The only limitation

issue that GSR raised in the pretrial order was consequential
damages. Proposed Joint Pretrial Order 17, ECF No. 68.
GSR included a brief comment in its closing brief, and
during closing arguments, GSR’s counsel asserted that GSR was
not liable for any damages whatsoever based on the exculpatory
clause.

As a result, Dann Marine filed Plaintiff’s Objection &

Motion to Strike [ECF No. 107], requesting the Court to strike
GSR’s arguments directed at enforcing contractual exculpation of
all liability and to affirm Judge Quarles’ summary judgment
opinion as the law of the case.

The Court shall grant Dann

Marine’s motion.

III. CONCLUSION
For the foregoing reasons:
1.

Count I – Breach of Contract
a.

2.

The Court finds General Ship Repair Corp.
not liable for express breach of contract.

Count II – Breach of Implied Warranty of
Workmanlike Performance

84

a.

b.

3.

The Court finds General Ship Repair Corp.
liable for breach of implied warranty of
workmanlike performance.
The Court awards Dann Marine Towing, LC
damages of $2,000,000.00 with prejudgment
interest at the rate of 3% simple interest
per year commencing October 10, 2011.

Count III – Negligence
a.
b.

The Court finds that Dann Marine Towing, LC
bears comparative fault of 10%.

c.

4.

The Court finds General Ship Repair Corp.
liable for negligence.

The Court awards Dann Marine Towing, LC no
damages for negligence in addition to those
awarded with regard to Plaintiff’s claims in
Count II.

Count IV – Gross Negligence
a.

5.

The Court finds General Ship Repair Corp.
not liable for gross negligence.

Count V – Breach of Bailment
a.

The Court finds General Ship Repair Corp.
not liable for breach of bailment.

6.

The Court grants Plaintiff’s Objection & Motion
to Strike [ECF No. 107].

7.

Judgment shall be entered by separate Order.

8.

Dann Marine Towing, LC may file a motion seeking
an award of assessable costs within fourteen days
of the entry of Judgment.
a.

Pursuant to Rule 109.2.a. of the Rules of
the United States District Court for the
District of Maryland (“Local Rules”),

85

Plaintiff may defer filing the memorandum
required by Local Rule 109.2.b. until 35
days after filing the motion or, if an
appeal is taken from the Judgment, within
fourteen days of the issuance of the mandate
of the appellate court.
b.

General Ship Repair Corp. shall file any
opposition to the said motion within
fourteen days of the service of the Rule
109.2.b. memorandum.

SO DECIDED, on Thursday, September 7, 2017.

/s/_____
_____
Marvin J. Garbis
United States District Judge

86