In Re: Otal Investment, et al v.

Filing 238

OPINION & ORDER. The Court has considered the parties' remaining arguments and finds them meritless. For the reasons stated above, the Court declines Managers' invitation to revise the original liability finding against them. The Court also concludes that Owners are not entitled to limitation under the Limitation of Liability Act. In addition, the parties advised the Court on September 19, 2013 that they had resolved all remaining quantum of damages issues without court intervention. T he Court therefore directs the parties to "submit to the Court a stipulation confirming the total amount of recoverable damages with prejudgment interest" within five days of this order, in accordance with the parties' agreement, along with a proposed judgment. (Signed by Judge Harold Baer on 12/17/2013) (lmb)

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USDSSD~1

DOCUM' :.: ".

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

ELECTp: .! '::':.LLY FILED

---------------------------------------------------------------){
In re OTAL INVESTMENTS LTD., as Owner
of the MN Kariba for Exoneration from or
limitation of liability.

DOC#:
DATF

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I

(2,//7/*201/ 3

OPINION & ORDER
03 Civ. 4304 (HB)

---------------------------------------------------------------){
HAROLD BAER, JR., United States District Judge:
On June 23, 2008, the Court issued an amended opinion and order following a remand
from the Second Circuit. See Otallnvs. Ltd v. MlV CLARY, No. 03 Civ. 4304, 03 Civ. 9962,04
Civ. 1107,2008 WL 2844019 (S.D.N.Y. June 23, 2008) ("Otal II!'); see also Otallnvs. Ltd. v.

MIV CLARY, 494 F.3d 40 (2d Cir. 2007) ("Otal I!'). On March 8, 2012, the Second Circuit
affirmed in part but vacated and remanded the question of whether the MN CLARY's owners
were entitled to a limitation of liability. Otallnvs. Ltd v. MlVCLARY, 673 F.3d 108, 112 (2d
Cir. 2012) ("Otal IV"). Familiarity with those opinions is assumed. Following the Second
Circuit's decision in Otal IV, the parties resolved "the claims of Otal Investments Limited
against Clary Shipping Pte. Ltd., MST Mineralien Schiffahrt Spedition und Transport GmbH,
Mineral Shipping Co. Private Ltd. and the MN CLARY, in rem," In re Otallnvs. Ltd., No. 03
Civ. 4304 (S.D.N.Y. Oct. 11,2013). The parties also informed the Court that they had agreed
upon a damages and prejudgment interest calculation to be submitted following this Court's
resolution of the remaining issues in this case. Thus, the only remaining issues for the Court to
resolve in this matter are the individual liability of the MN CLARY's managers, Mineral
Shipping Co. Private Ltd. and MST Mineralien Schiffahrt Spedition und Transport GmbH
(hereinafter "Managers"), and the availability of limitation to the MN CLARY's owners
(hereinafter "Owners").

BACKGROUND
Familiarity with the opinions listed above is assumed, and the facts are repeated here only
to the extent they inform the remaining issues on remand. In the early morning of December 14,
2002, three ships sailing in the English Channel were involved in a collision with restricted
visibility due to fog. In re Otallnvs. Ltd (Otall), No. 03 Civ. 4304, 03 Civ. 9962, 04 Civ. 1107,

1

2006 WL 14512, at *1 (S.D.N.Y. Jan. 4, 2006). As a result of the collision, the MN
TRICOLOR sank and its cargo was lost.
The Court deemed the MN CLARY partially responsible for this disaster. First, its
failure to take avoiding action was a partial cause of the collision between the other two ships.
Indeed, that failure violated the International Regulations for Preventing Collisions at Sea (the
"COLREGS"), Oct. 20, 1972,28 U.S.T. 3459, codified at 33 U.S.C. § 1602, et seq. Second, the
Court also determined that the MN CLARY violated COLREGS 2(a) and 5. In particular,
COLREG 5 requires that "[e]very vessel shall at all times maintain a proper look-out by sight
and hearing as well as by all available means appropriate in the prevailing circumstances and
conditions so as to make a full appraisal of the situation and of the risk of collision." Id. This
failure also contributed to the accident. Further, at some point prior to trial, someone altered the
MN CLARY's logbook to reflect additional lookouts stationed on the bridge at the time of the
accident. But in reality, only a single individual manned the bridge at that time. Coupled with
the enhanced culpability reflected by this deception, the Court allocated 20% of the liability for
the accident to the MN CLARY interests. Otal III, 2008 WL 2844019, at * 14. The Second
Circuit did not disturb this allocation on appeal.
In assessing the relative liability of the parties, this Court also concluded that Second
Officer Igor Toncic, the Watchkeeping Officer at this time and the lone individual on the bridge
that morning, ''was properly educated and trained and was fully qualified and competent." Otal
III, 2008 WL 2844019, at *15. Owners' mandatory operating procedures also mandated the

posting of additional lookouts during periods of restricted visibility. Specifically, those
procedures required, inter alia, that an Able-Bodied Seaman ("AB") "shall be posted as Lookout
as required by the Watch Condition which has been set and ... [d]uring reduced visibility."
(Trial Ex. 60, at CLARY 2043.) Indeed, per the onboard navigation manual, "[e]ven when
circumstances permit the Watchkeeping Officer to be the sole lookout, he must maintain strict
compliance with [COLREG 5]," including "anticipat[ing] ... possible danger and taking
appropriate action in time to prevent a dangerous situation developing." Id. The MN CLARY's
procedures also required that "[w]hen the Watchkeeping Officer is the sole look-out he must
summon assistance (the AB on watch) to the bridge to relieve him ofthe duty of being a look out
under circumstances which may divert his attention." Id As this Court previously observed,

2

these procedures were contained in a manual kept on the MN CLARY at all times. (Trial Ex.
55, at CLARY 158.)
To ensure that proper lookout procedures were followed, MST representatives inspected
the MN CLARY five to six times per year, along with conducting a more thorough annual audit.
(Ruttman Dep. 32:8-16.) Among other areas, these audits focused on the crew's compliance
with and knowledge of the navigational manuals. (Trial Ex. 313, at CLARY 2637 to CLARY
2646.) Lastly, the MN CLARY's classification society, Lloyd's Register, also conducted an
audit twice every five years. (Ruttman Dep. 105:13-106:2.) According to Jurgen Ruttman,
MST's managing director, MST representatives also met weekly to discuss all of the ships under
MST's purview. This review would have included discussing any problems identified during
audits of the MN CLARY. (Ruttman Dep. 26:5-27:6.) But no meeting minutes or other
documentary evidence that these gatherings took place was produced at trial.
Yet MST's audits of the MN CLARY were flawed. First, auditors that year were not
initially aware of the MN CLARY's involvement in the collision between the MN TRICOLOR
and the MN KARIBA, despite the audit occurring just days after that event. Indeed, on
December 19, five days after the collision, MST auditors noted that "entries in the CM logbook
are conducted as per company's requirements." (Trial Ex. 313, at CLARY 2642.) Thus, these
auditors also apparently did not discover the alteration of the December 14 logbook entries. And
regarding lookouts, MST auditors also noted that the crew recorded "use of the 'Restricted
Visibility' Checklist." (ld) This checklist required posting of an AB lookout in restricted
visibility conditions like those in the early morning hours of December 14. (Trial Ex. 60, at
CLARY 2078.) But records of these checklists were apparently destroyed prior to trial. And
neither the MN CLARY's master, chief mate, nor any MST auditor submitted any sworn
testimony at trial to explain these discrepancies.
To be sure, T oncic testified that an AB was "usually" present during the evening watch
along with an officer. (Trial Tr. 500:11-18.) Yet he also stated that "sometimes" there was no
AB stationed as a lookout, including when the collision occurred. (Trial Tr. 498:23-25; Toncic
Decl.,-r 9.) And Toncic also admitted that the MN CLARY's logbook had been altered both to
indicate clear visibility conditions and to list three men on deck at the time of the accident. Otal
11,494 F.3d at 49. As noted above, neither of these notations were accurate.

3

DISCUSSION

A. Managers'Liability
The Court turns first to Managers' liability. The parties offer opposing interpretations of
the Court's June 23, 2008 opinion in Otal III as to whether the Court already found Managers
liable. But the plain language of that opinion indicates that the Court found liability against
Managers. Indeed, the Court made clear that "the Clary [was] 20% liable." Otal III, 2008 WL
2844019, at *1. That "Clary" appellation was defined as "the owners and other companies
affiliated with the MN Clary," including "Clary Shipping Pte. Ltd., MST Mineralien Schiffahrt
Spedition and Transport GmbH, [and] Mineral Shipping Co. Private Ltd." Id. at *1 n.1. And the
Court also observed that Managers "may not limit their liability" under the Limitation of
Liability Act because they "are not owners or bareboat charterers." Id. at * 14 n.8. Read
together, the Court thus found Managers as well as the other MN CLARY's interests jointly
liable. This finding is therefore the law of the case. See Am. Hotel Int'l Grp., Inc. v. OneBeacon

Ins. Co., 611 F. Supp. 2d 373,378 (S.D.N.Y. 2009) ("Under the law of the case doctrine, 'a
decision on an issue of law made at one stage of a case becomes binding precedent to be
followed in subsequent stages of the same litigation.'" (quoting In re PCH Assocs., 949 F.2d
585,592 (2d Cir. 1991))).
Yet Managers now urge that because the Court did not discuss the standard for imposing
liability upon them, that finding cannot stand. Managers also made this same argument on
appeal, urging that "the district court merely 'classified both the Owners and the vessel managers
as one' and the acts of negligence found by the lower court were linked to the responsibility of
the owners, not the managers." Otal IV, 673 F.3d at 120. But because Managers failed to raise
previously this issue with this Court before they appealed, the Second Circuit "decline[d] to
consider" this argument "in light of the well-established general rule that a court of appeals will
not consider an issue raised for the first time on appeal." Id
Managers now press this argument for the first time in this Court.

The various cargo

claimants and the owner of the MN KARIBA respond that the law ofthe case mandates a
finding that Managers are liable. But that doctrine does not preclude the Court's reconsideration
ofthis issue at this late stage. Indeed, while ''the district court is obliged, on remand, to follow
the decision of the appellate court" where an issue "ha[s] been explicitly or implicitly decided on
appeal," that is not the case here. See Burrell v. United States, 467 F.3d 160, 165 (2d Cir. 2006)
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(quoting United States v. Minicone, 994 F.2d 86, 89 (2d Cir. 1993)). Rather, as noted above, the
Second Circuit expressly avoided resolving Managers' claim. Thus, this Court retains "the
discretion to determine whether its prior determination on an issue should be disturbed." Am.

Hotel Int'l Grp., 611 F. Supp. 2d at 379 (citing In re PCH Assocs., 949 F.2d at 593).
Nevertheless, while not foreclosed from doing so, the law of the case doctrine still
"counsels against" reconsideration of a previous decision. Id. Under that doctrine, "the principal
bases for departure from a prior ruling include 'an intervening change of controlling law, the
availability of new evidence, or the need to correct a clear error or prevent manifest injustice. '"

Laurent v. PriceWaterhouseCoopers LLP, No. 06 Civ. 2280, 2013 WL 4028181, at *2 (S.D.N.Y.
Aug. 8,2013) (quoting Doe v. NY.C. Dep't o/Soc. Servs., 709 F.2d 782,789 (2d Cir. 1983)).
Here, the parties do not point to any changes in law or new evidence. Rather, Managers urge
that any finding of liability against them is clearly erroneous because that issue was not properly
before the Court and, therefore, the Court failed to apply the correct standard.
But Managers raise this argument too late. Indeed, Managers have been named
Defendants in the third-party complaint against them since at least December 17, 2003. And in
their papers prior to the bench trial in this action, the owners of the MN KARIBA asked for
liability to be apportioned to Managers on the same lines as the other MN CLARY interests.
(Brief for Otal Invs. Ltd. at 2 n.2, 12, In re OtalInvs. Ltd., No. 03 Civ. 4304 (S.D.N.Y. Oct. 7,
2005).). Following the Second Circuit's first remand in 2007, cargo claimants also asked
specifically that the Court find liability against the MN CLARY "along with [its] owners,
charterers and managers." (Reply Brief for Cargo Claimants at 23, In re OtalInvs. Ltd., No. 03
Civ. 4304 (S.D.N.Y. Jan. 11,2007) (emphasis added).) Yet despite multiple parties grouping
Managers with the rest of the MN CLARY interests, Managers do not explain their failure to
argue until now that the Court should consider them separately. The Court declines to reopen
consideration of that issue as it was raised for the first time after this Court had already issued its
liability findings. See Richard Feiner & Co., Inc. v. BMG Music Spain, No. 01 Civ. 0937,2003
WL 21496812, at *1 (S.D.N.Y. June 27,2003) ("[P]laintiffis advancing new arguments without
excuse as to why these argument were not raised previously, and these arguments are therefore
not cognizable on a motion for reconsideration.").
Nor is it clear error to find Managers liable. See Am. Hotel Int'! Grp., 611 F. Supp. 2d at
379-80 (finding no clear error or manifest injustice in refusing to reconsider law of the case

5

where prior ruling had not been challenged until after appeal). Indeed, the Second Circuit held
that the MN CLARY violated COLREGS 2(a) and 5 "in staffing its bridge with a lone mariner"
as well as CO LREG 19(d) when it failed "to take avoiding action promptly." Otal II, 494 F.3d at
56--57. These COLREG violations "helped to cause the collision." Otal III, 2008 WL 2844019
at *16. And the sole individual manning the MN CLARY's bridge at the time of the accident,
Second Officer Toncic, "admitted that 'someone' had altered his logbook pages" to mask the
bridge's understaffing. Id *8-9 (quoting Otal II, 494 F.3d at 58). It is not clear error to
conclude that these findings also impute liability to Managers, particularly given Managers'
failure to address their individual liability and their overall responsibility for the operation of the

MN CLARY. See Quinn v. Southgate Nelson Corp., 121 F.2d 190, 191 (2d Cir. 1941) (finding
manager "responsible for the acts of the master, officers, and crew" where "[i]t had a most
substantial measure of control over the operation of the vessel"); see also Johnson v. Holder, 564
F .3d 95, 100 (2d Cir. 2009) (no clear error where issue was "not of such a character as to
obviously compel a result contrary to the one reached"). Indeed, MST's managing director
testified that there was not "any part of the management of the ship that CLARY did not appoint
MST as management for." (Ruttman Dep. 15:2-11.) I therefore decline to overturn Managers'
liability at this stage.

B. MN CLARY Owners' Limitation of Liability
I turn next to whether the MN CLARY's owners may limit their liability under the
Limitation of Liability Act, 46 U.S.C. § 30505, following the Second Circuit's remand.
Under that statute, "the owner's liability is limited to the value of the ship," including pending
freight, "unless the owner himself had 'privity or knowledge' of the negligent acts." § 30505(a);

Otal IV, 673 F.3d at 115 (quoting In re City o/N.y., 522 F.3d 279,283 (2d Cir. 2008)). But if
Owners had "privity or knowledge," then they are liable "for the full extent of any [damages]
caused by the negligence of the captain or crew employed to operate the ship." Otal IV, 673
F.3d at 115 (alteration in original) (quoting In re City o/N.y., 522 F.3d at 283); see § 30505(b).
This analysis requires first determining "what acts of negligence ... caused the accident." Otal

IV, 673 F.3d at 115 (alteration in original) (quoting In re Moran Towing Corp., 166 F. Supp. 2d
773, 775 (E.D.N.Y. 2001)). Then, "the court must determine whether the ship owner had
knowledge or privity of those same acts of negligence." Id (quoting In re Moran Towing Corp.,
166 F. Supp. at 775). Once a cargo claimant proves negligence, "the burden shifts to the
6

shipowner to prove lack of knowledge or privity." Id. (quoting In re Moran Towing Corp., 166
F. Supp at 775). Regarding the first prong, Cargo Claimants have already proved negligence in
this case. Indeed, the Second Circuit accepted the Court's allocation of liability among the
vessel parties, including the finding that the MN CLARY's negligent operation partially caused
the collision. Id.
I tum then to the second prong. Because cargo claimants do not argue that Owners
"knew that the Clary failed to take avoiding action promptly," the Second Circuit instead focused
upon the Court's finding that Owners knew of the failure to post sufficient lookouts. Id. at 115
n.2. In reaching that conclusion, this Court had previously relied on the lack of overtime records
for lookouts as supporting constructive knowledge. But the Second Circuit held that the
evidence at trial did not permit an inference that all lookouts would necessarily have been paid
overtime. Because lookouts could have been posted without overtime being recorded, the
Second Circuit directed the Court to reconsider the issue of Owners' knowledge of negligence
aboard the MN CLARY, free from any erroneous inferences previously drawn from the lack of
overtime records. Id. at 118-19.
Limitation is thus available only if Owners have met their burden of establishing that they
"were without knowledge of the negligence that contributed to the collision"; i.e., that the MN
CLARY failed to keep proper lookouts. Id. at 119. Where "the shipowner is a corporation" like
Owners here, "privity and knowledge means 'privity and knowledge by a managing agent,
officer, or supervising employee ofa ship.'" Id. at 115 (quoting atal III, 2008 WL 2844019, at
*15). But privity or knowledge "can be actual or constructive," and is present where "the
exercise of reasonable diligence could have prevented the commission of the act." Id. (quoting

Carr v. PMS Fishing Corp., 191 F.3d 1,4 (1st Cir. 1999)); In re Moran TOWing Corp., No. 10
Civ. 4844, 2013 WL 6068454, at *26 (S.D.N.Y. Nov. 18,2013) (limitation unavailable where
owner '''should have known' ofthe breach" (quoting In re Marine Sulphur Queen, 460 F.2d 89,
101 (2d Cir. 1972))). Thus, "[t]he question with regard to corporate owners is not what the
corporation's officers and managers actually knew, but what they objectively ought to have
known." In re Moran Towing Corp., 2013 WL 6068454, at *26 (quoting In re Patton-Tully

Transp. Co., 797 F.2d 206, 211 (5th Cir. 1986)).

7

1. Competence of the Crew
Owners first urge that because Second Officer Toncic was competent, they cannot be
charged with knowledge or privity of any negligence or navigational errors on his part. But
without more, that fact alone does not entitle Owners to limitation. Indeed, that argument is
foreclosed by implication from the decision in Otal IV. There, the Second Circuit noted
expressly this Court's finding that Toncic was "properly educated and trained and was fully
qualified and competent." Otal IV, 673 F.3d at 119 (quoting alai 111,2008 WL 2844019, at
'" 15). Yet the Second Circuit still remanded for a determination of whether the "conflicting
inferences" to be drawn from the evidence demonstrated that Owners' had met their burden of
demonstrating lack of knowledge. Id Toncic's competence thus does not automatically entitle
Owners' to limitation.
Cases stating that a competent captain's negligence "are not within the knowledge or
privity of the owner" do not suggest a different conclusion. See, e.g., In re Sea WolfMarine
Towing & Transp., Inc., No. 03 Civ. 5578,2007 WL 3340931, at "'3-4 (S.D.N.Y. Nov. 6,2007).

Indeed, while mere negligence of a competent crew alone is insufficient to pierce an owner's
right to limitation, an owner's knowledge or privity can still be demonstrated in other ways. See
id (noting captain's competence but weighing whether other evidence demonstrated

knowledge); Bankers Trust Co. v. Bethlehem Steel Corp., 761 F.2d 943, 952 (3d Cir. 1985)
(noting that limitation is unavailable where "management knew or should have known of the
master's regular and consistent practice of" understaffing watches). It is not remarkable to
require Owners to exercise proper supervision and inspection practices, even when they employ
competent officers. See In re Moran Towing Corp., 2013 WL 6068454, at "'26 (noting "recent
trend has been to enlarge the scope of activities within the 'privity or knowledge' of the
shipowner, including ... requiring shipowners to exercise an 'ever-increasing degree of
supervision and inspection'" (quoting In re Oil Spill by Amoco Cadiz Offthe Coast ofFrance on
March 16, 1978,954 F.2d 1279, 1303 (7th Cir. 1992»); see also Otal IV, 673 F.3d at 115 ("Both

privity and knowledge 'turn[] on the facts ofparticular cases.''' (alteration in original) (quoting
Coryell v. Phipps, 317 U.S. 406,411 (1943»); In re Seiriki Kisen Kaisha & Dragon Navigation,

S.A., No. 82 Civ. 2718, 1986 WL 2466, at "'9 n.19 (S.D.N.Y. Feb. 19, 1986) ("[T]he mere fact
that a vessel owner gives instructions to its crew is insufficient to prove the lack of privity and
knowledge since a shipowner has a duty to insure that its directives are being followed by

8

making inspection and inquiry." (quoting In re Hercules Carriers, Inc., 566 F. Supp. 962,981
(M.D. Fla. 1983»).
Nor does the master's competence affect the outcome of this case. Even if the master's
competence alone could resolve the limitation issue, Owners did not provide evidence
demonstrating his competence. But see Otal IV, 673 F.3d at 119 (availability oflimitation still
an open question even if master were competent). Indeed, the master did not testify at trial, nor
did Owners provide any evidence of his qualifications. The Court did not conclude otherwise in
Otal III. See Otal 111,2008 WL 2844019, at *15 (describing but not expressly adopting Owners'

argument that "they selected a competent master"). On the other hand, Cargo Claimants also did
not meet their burden of demonstrating the master's incompetence or that the MN CLARY was
otherwise unseaworthy. See In re Guglielmo, 897 F.2d 58, 61 (2d Cir. 1990) (claimants' burden
to "establish either that the vessel was unseaworthy-for instance, being operated by an
incompetent crew-or that the accident was caused by negligence" (internal citations omitted».
With neither party meeting their respective burdens as to the master's competence, that issue
does not affect the availability of limitation here.
2. Owners' Knowledge of Understaffing Lookouts on the MN CLARY
Instead, the proper focus on remand, as the Second Circuit noted, is whether Owners'
operating procedures and other safeguards indicate that they did not have knowledge or privity of
the MN CLARY's failure to post adequate lookouts under the COLREGS. The unexplained
alteration of the MN CLARY's logbook is informative in that regard. As noted in Otal II,
alterations in a ship's logbook "should give rise to a presumption the logbook contained entries
adverse to the vessel's contentions at trial." Otal 11,494 F.3d at 58. While the Court does not
conclude that Owners knew of the inadequate lookouts on this basis alone, this admitted
alteration leads to the inference that the MN CLARY often operated without necessary lookouts.
See id. at 59 (noting that "[i]n some cases an issue might arise as to whether the fact of an

alteration gives rise to a presumption that facts, other than those concealed by the alteration, are
adverse to the party responsible for the alteration").
That alteration and the likelihood of others also calls into question Toncic's credibility
regarding his testimony that lookouts were "usually" staffed properly aboard the MN CLARY.
(Trial Tr. 500: 11-18.) According to Toncic, he "routinely acted as Watchkeeping Officer on the
bridge" of the MN CLARY. (Toncic Decl. ,-r 8.) Yet Toncic also acknowledged that on this
9

particular voyage, he "always held ... watch" alone and that "[t]here are times when there's no
able body who is looking out at the bow." (Trial Tr. 498:23-499:9.) But for every log entry
from December 1,2002 to December 14, 2002-the length of the MIV CLARY's voyage-an
additional lookout is listed in the logbook as keeping watch. (See Toncic Decl. ~ 7; Trial Ex. 52,
at CLARY 0041 to CLARY 0054.) These entries directly contradict Toncic's testimony that he
"always" kept watch alone. Thus, not only were sole watches on the bridge apparently a regular
occurrence at least whenever Toncic held watch, but the logbook also apparently contained more
false entries than just those from December 14. The record thus supports the conclusion that
lookouts were regularly understaffed aboard the MIV CLARY.
Nor have Owners met their burden of proving that they lacked knowledge and privity
regarding this regular understaffing. First, Owners' reliance on the positive results of MST's
audits to prove lack of knowledge is misplaced. In that regard, the Court previously noted its
concern regarding Owners' "diligence" due to their failure to "inform their auditor that the Clary
had recently reacted to and then sailed around a major collision." Otal III, 2008 WL 2844019, at

*16.

Toncic, the sole individual on the bridge and the person who ignored the distress calls

immediately following the accident, admitted that he "did not report to the safety auditor" and he
"[didn't] know ... if anybody else did." (Trial Tr. 467:11-468:19,497:24-498:4.) And the
auditors failed to discover the MIV CLARY's involvement independently. Thus, regardless
whether Owners themselves knew of the collision at the time of the December 19 audit, these
flaws in the audit process demonstrate that reliance on those audits does not satisfy Owners'
burden of proving lack of knowledge.
Indeed, reasonable diligence by Owners and the auditors they employed may have
revealed the habitual practice of staffing a sole lookout on the bridge. For example, testimony
from MST's managing director showed that auditors would have been able to "cross
reference ... labor sheets, working hours of crew members and so on" with the logbooks to
verify the logbooks' accuracy. (Ruttman Dep. 77:22-78:9.) Yet there is no evidence that any
auditors ever examined these records to confirm that the proper number of lookouts were where
they should have been when they should have been. Thus, the Owners have failed to establish
that reasonable efforts with respect to the lookouts could not have prevented the MIV CLARY's
involvement in the December 14 collision. See Otal IV, 673 F.3d at 115 (noting that privity or
knowledge exists where owners' "reasonable diligence could have prevented" the negligent act).

10

The lack of testimony from key witnesses who could have shed light on Owners' policing
of lookouts aboard the MN CLARY-including the MN CLARY's master, chief mate, or the
auditor following the collision-reinforces Owners' failure to meet their burden. The Court may
draw a negative inference against Owners due to these witnesses' absences. See United States v.

Rabbani, 382 F. App'x 39, 41 (2d Cir. 2010) ("[W]hen a witness is equally available to both
sides, the failure to produce is open to an inference against both parties." (alteration in original)
(quoting United States v. Torres, 845 F.2d 1165, 1169 (2d Cir. 1988))). Indeed, all three of these
possible witnesses were employed by one of the interests associated with the MN CLARY,
making a negative inference even more appropriate. See Sagendorf-Teal v. Cnty. ofRensselaer,
100 F.3d 270, 275 (2d Cir. 1996) ("Whether a witness is equally available depends ... on all the
facts and circumstances bearing on the relationship of the witness to the parties." (citing Torres,
845 F.2d at 1170)). These witnesses could have provided clarity with respect to the nature of the

MN CLARY's audits, the actual practice regarding staffing of lookouts beyond the prescribed
procedures, and the training and instruction provided to Second Officer Toncic with respect to
lookouts. And by failing to call these witnesses, Owners leave the Court to speculate as to
whether reasonable diligence would have ensured conformity with the lookout procedures they
had implemented.
Testimony from MST's managing director, Jurgen Ruttman, further illustrates why these
witnesses would have aided in the Court's analysis. Owners ask the Court to conclude that the

MN CLARY's auditors scrupulously performed their duties, despite their failure to ascertain the
MN CLARY's involvement in the December 14 collision. Yet even Ruttman could not describe
the nature of the inspections that the auditors performed, particularly regarding the logbooks and
the record of lookouts posted. Instead, Ruttman noted that "it's up to the discretion of the person
going on board the ship" to decide the scope of the examination of the logbooks. (Ruttman Dep.
77:22-78:9.) Indeed, according to Ruttman, auditors generally do not "verify what has been
filled out [in ship logbooks] is correct." (Ruttman Dep. 77: 13-21.) Without any witness
available to clarify this apparent lack of oversight, coupled with the evidence described above
indicating that reasonable measures to discover the improper lookout practice were available but
not taken, Owners are not entitled to limitation here.

11

CONCLUSION

The Court has considered the parties' remaining arguments and finds them meritless. For
the reasons stated above, the Court declines Managers' invitation to revise the original liability
finding against them. The Court also concludes that Owners are not entitled to limitation under
the Limitation of Liability Act. In addition, the parties advised the Court on September 19,2013
that they had resolved all remaining quantum of damages issues without court intervention. The
Court therefore directs the parties to "submit to the Court a stipulation confirming the total
amount of recoverable damages with prejudgment interest" within five days of this order, in
accordance with the parties' agreement, along with a proposed judgment.

SO ORDERED.

1>4?t 10"

Date:
New York, Ne York

H ROLD BAER, JR.
United States District Judge

12