Paragon Asset Company Ltd
Filing
473
AMENDED ORDER AND OPINION entered. (Signed by Judge Fernando Rodriguez, Jr) Parties notified.(EdnitaPonce, 1)
Case 1:17-cv-00203 Document 473 Filed on 08/17/22 in TXSD Page 1 of 83
United States District Court
Southern District of Texas
ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
BROWNSVILLE DIVISION
August 17, 2022
Nathan Ochsner, Clerk
CONSOLIDATED
PARAGON ASSET COMPANY LTD,
AS OWNER OF THE DRILLSHIP DPDS1,
§
§
§
§
§
§
§
V.
GULF COPPER & MANUFACTURING
CORPORATION, et al.,
CIVIL ACTION NO. 1:17-CV-203
*******
SIGNET MARITIME CORPORATION,
AS OWNER OF THE TUG SIGNET
ENTERPRISE, ITS ENGINES, TACKLE, ETC.,
IN A CAUSE OF EXONERATION FROM OR
LIMITATION OF LIABILITY,
§
§
§
§
§
§
CIVIL ACTION NO. 1:17-CV-247
*******
SIGNET MARITIME CORPORATION,
AS OWNER OF THE TUG SIGNET
ARCTURUS, ITS ENGINES, TACKLE, ETC.,
IN A CAUSE OF EXONERATION FROM OR
LIMITATION OF LIABILITY,
§
§
§
§
§
§
CIVIL ACTION NO. 1:18-CV-035
AMENDED ORDER AND OPINION1
On August 25, 2017, Hurricane Harvey made landfall near Corpus Christi as a Category 4
hurricane. In nearby Port Aransas, the drillship DPDS1 lay docked, with no crew, but with two
tug boats alongside to help keep her in place during the storm. Shortly before 11:00 p.m., the
DPDS1 broke free from her moorings. The drillship immediately propelled the two tug boats into
adjacent semisubmersible oil rigs, damaging those vessels and sinking one tug boat and impairing
This Amended Order and Opinion supersedes the Order and Opinion (Doc. 461) that the Court issued on March 31,
2022. The Amended Order and Opinion takes into consideration the arguments that the parties presented in Signet’s
Motion to Supplement and Modify the Court’s Order and Opinion (Doc. 463), Paragon’s Motion to Amend or Clarify
(Doc. 464-1), and the related briefing.
1
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the other. The DPDS1 itself moved into and grounded in the ship channel, but refloated three
days later, traveling across the channel and alliding with and damaging a research pier. The
alleged damages total well over $10,000,000.
Three Complaints in Limitation ensued, filed by the respective owners of the DPDS1
(Paragon) and the two tug boats (Signet). Each party filed counterclaims, and the owner of the
semisubmersible oil rigs (Noble) and the research pier (The University of Texas) filed claims for
the damage to their property. Gulf Copper, which owned the pier to which the DPDS1 had been
docked, also filed a claim for damage to that pier. And Paragon made claims against Signet’s
insurer, American Club.2
The parties completed extensive discovery and motion practice, and in the process settled
the claims that Noble, the University of Texas, and Gulf Copper filed. In July and August of 2021,
the Court held a five-day bench trial on the claims remaining between Paragon, Signet, and
American Club. At trial, 19 witnesses testified, and the Court admitted over 1,200 exhibits.3
In this Order and Opinion, based on the voluminous trial record and the applicable law,
the Court renders its findings of fact and conclusions of law as to the damages caused by the
relevant events, and the comparative liability for those damages as between Signet and Paragon.
I.
Findings of Fact
A. The History of the DPDS1
In 1979, the Dynamically Positioned Drillship Number 1 (“DPDS1”) began operating as a
449-foot, Liberian flagged, deep water drilling ship. The vessel possessed thrusters that enabled
it to remain dynamically positioned over a drilling site in deep water. Over the decades, various
Several parties possess a complex corporate structure, which the parties do not dispute and which they set out as
Admissions of Fact within the Joint Pretrial Order. (Joint Pretrial Order (“JPO”), ¶¶ 1–4, 6, (Doc. 314, 35–40)) The
Court adopts those admitted facts and for convenience will refer to the respective corporate parties as Paragon, Signet,
American Club, Noble, Gulf Copper, and the University of Texas.
3 The parties also presented 16 witnesses by deposition. See P.Ex.45–P.Ex.56 (Docs. 446-1–12); S.Ex.331–S.Ex.334
(Docs. 431-2–5). The Court accepted the deposition excerpts as if the witnesses had testified at trial.
2
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owners maintained and upgraded the drillship.
For example, in 2008, the owners fully
refurbished the vessel at an estimated cost of $350-500 million.
In 2010, Noble, Paragon’s parent company at the time, acquired the DPDS1. Over the next
few years, Noble added new equipment and otherwise improved the vessel in preparation for work
off the Brazilian coast. Aldert Schenkel, Paragon’s Vice President of Engineering, oversaw this
work and stated that the DPDS1 “was in really good shape” at that time.4
In 2014, Noble spun off Paragon, which became the sole owner of the DPDS1. The drillship
continued operations in Brazil. The following year, a downturn in the crude oil market decreased
the demand for deep water drilling ships. As a result, Paragon decided to move the vessel to Port
Arthur, Texas, and the drillship never again had commercial working ventures. By no later than
mid-August 2017, Paragon intended to scrap the DPDS1.5
Between 2015 and 2017, the DPDS1 remained “cold stacked”—i.e., the vessel was
essentially shut down without a crew onboard—at two separate locations in Texas: Port Arthur
and Port Aransas. During these years, four Paragon employees held primary responsibility for
the DPDS1’s management and care: Charlie Yester (Senior Vice President of Operations), Aldert
Schenkel (Vice President of Engineering), Michael Koenig (Marine Operations Manager), and
Jason Petten (Technical Marine Manager). They each possessed significant experience in the
maritime drilling industry, although they possessed limited experience preparing for hurricane
season in the Gulf of Mexico.
B. Paragon and Signet Business Relationship
1. The Master Charter Agreement (“MCA”)
In June 2015, Paragon and Signet began their business relationship by jointly creating a
Master Charter Agreement (MCA) to govern at least some of their business dealings. Within the
industry, companies who plan to repeatedly work together commonly use an MCA to “pre-
4
5
Schenkel Dep. (Vol. II), 180:12–13, P.Ex.45 (Doc. 446-1, 129).
Koenig Day 2 Tr., 19:15–24 (Doc. 448).
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negotiate such things as the indemnities, warranties, [and] governing law”.6 Each company
assigned an in-house counsel—Jay Oliver, Assistant General Counsel for Paragon, and Scott Reid,
General Counsel for Signet—to represent its respective interests in the negotiations.
The parties ultimately signed the MCA.7 This successful conclusion, however, did not
create an enforceable contract. Rather, the signed document solely provided a form to shorten
the negotiation and drafting process when Paragon required vessel-chartering services for specific
projects. The MCA established a standard base of legal terms for certain work that Paragon might
contract in the future from Signet, and allowed the companies’ respective commercial teams to
finalize individual vessel hires more quickly by providing only the details needed for the vessel
specifications, such as the rate, time, and pick up and redelivery locations. Reid testified that one
of Signet’s primary motivations for entering into the MCA was that the company viewed Paragon
as a desirable customer in the Gulf of Mexico.
The MCA contained three sections: (1) a three-page manuscript outlining the intent of the
agreement; (2) Part I of the Baltic & International Maritime Council (BIMCO) SUPPLYTIME
2005 Uniform Charter Party for Offshore Service Vessels; and (3) Part II of the BIMCO form,
which contained detailed provisions that would govern all services provided. The BIMCO form
functioned as a towage contract. Part I contained 35 blank boxes that the parties filled with each
job’s specific commercial terms, such as the services to be provided, the vessel that would be
supplied, the time and place of delivery, and the rates. Such terms varied from project to project,
and the companies’ business representatives, rather than in-house counsel, would agree upon
them. Oliver testified that absent completion of Part I, “you don’t have a charter.”8
Within Part II, Section 1.3 indicated that the MCA “shall control and govern in all
situations in which Owners [(Signet)] charter to Charterers [(Paragon)] a vessel or vessels, and
Oliver Day 2 Tr., 297:8–18 (Doc. 448).
Master Charter Agreement, P.Ex.4 (Doc. 409-2).
8 Oliver Day 2 Tr., 310:24–311:9 (Doc. 449).
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the terms and conditions of this Agreement shall be deemed incorporated by reference”. 9 At the
same time, other sections of Part II noted that the contract applied to “offshore activities” and
“voyages”,10 and no section referenced hold-in-place or in-harbor services.
2. The Signet Tariff
In August 2016, Signet published its tariff terms and conditions for the Ingleside division
of its operations, a document referred to as the “Tariff”.11 The agreement applied to tug services
that Signet provided to customers within the greater Corpus Christi port area.
Tug companies in United States ports commonly use tariffs, which establish the terms of
service, such as the applicable rate and indemnity obligations, so that all entities receive tug
services within a specific port on equal terms. During the relevant period, Signet’s competitors
within the Greater Port of Corpus Christi maintained tariffs with set rates, terms, and conditions.
Signet delivered its Tariff to customers every January and after significant modifications.
The parties did not provide evidence as to whether or when Signet delivered the Tariff to Paragon
before August 2017. At the same time, Paragon does not dispute that it could have accessed the
Tariff, as Signet had published it.
C. The DPDS1 in Port Arthur, Texas
In 2015, Paragon cold stacked the DPDS1 at the Gulf Copper berth in Port Arthur, Texas.
The vessel had no permanent crew onboard, but a mooring crew and Paragon employees regularly
performed inspections. The DPDS1 always remained afloat and maintained its navigational aids,
including battery-operated lights. Paragon also installed a RigStat GPS system to track small
movements by the rig and to detect any leakage on the vessel through level sensors on the bilges.
At least once a week, Koenig would check on the DPDS1 to do “whatever needed to be done”.12
Master Charter Agreement, P.Ex.4 (Doc. 409-2, 1).
Id. at 11 (Section 6(a)).
11 Signet 2016 Ingleside Tariff, S.Ex.1 (Doc. 414).
12 Koenig Day 1 Tr., 162–63 (Doc. 448).
9
10
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In early 2017, however, the dock owners in Port Arthur decided to convert the dock’s use.
This decision forced Paragon to relocate the DPDS1.
Koenig oversaw the site-selection process for the new location, and he ultimately chose to
dock the DPDS1 at Port Aransas. He considered several potential sites along the Gulf Coast,
factoring in water and land access points, potential hazards beneath the water’s surface, the
quality of the dock bollards, and the potential effect that adjacent ship traffic could have on
devising a suitable mooring arrangement. He considered each site’s proneness to hurricanes,
weighing the potential berth’s location and possible hurricane landfalls. This analysis included
reviewing studies of the historical tracks of hurricanes approaching the Texas coastline. Koenig
did not detail the specific historical information that he reviewed, but Signet’s weather expert,
Joseph Spain, testified that between 1951 and 2020, 23 hurricanes passed or made landfall within
50 nautical miles of Port Aransas. He explained that in a ten-year period, a 41.1% chance exists
of a major hurricane striking the Texas coast, and that in his opinion, “in any given year,” a vessel
owner along this coastline “[has] to be prepared for a major hurricane.”13
Paragon maintained a general written hurricane plan, but prepared such plans for
individual vessels only if local laws required it. In Port Aransas, no laws or local authorities
imposed such a requirement for a docked vessel.14 Still, Paragon understood that when tropical
weather activity posed a threat to a docked vessel, Paragon had to choose between leaving the
vessel docked during the storm or towing the vessel out to sea. In making this decision, Paragon
would weigh the potential risks, benefits, and costs of each option.
To track potential threats, Paragon monitored tropical weather activity by receiving daily
weather reports, principally from WeatherOperations (“WeatherOps”), which reported a storm’s
current intensity, conditions, location, and anticipated landfall. In addition, Paragon monitored
the general and specific hurricane weather reports from the National Hurricane Center (“NHC”).
Spain Day 5 Tr., 90:18–20 (Doc. 452).
In contrast, when Paragon docked a drillship in Puerto Rico, local laws required a written hurricane plan for the
vessel, so Paragon prepared one. Koenig Day 2 Tr., 36:4–16 (Doc. 449).
13
14
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Although Koenig testified about the analysis he undertook during the site-selection
process, no Paragon representative testified about what the company learned from that
assessment. For example, Schenkel could not recall any specific reports that Koenig (or anyone
else at Paragon) generated from the analysis.15
Ultimately, Paragon decided to moor the DPDS1 at the Gulf Copper dock in Port Aransas.
On May 30, Paragon had the DPDS1 towed to its new berth. Before the tow, Paragon hired Hugh
Gallagher with Dutton’s Navigation, an outside marine survey firm, to inspect the DPDS1.
Gallagher certified that the drillship was in good condition for the tow.16
D. Port Aransas, May–July 2017
For the move to Port Aransas, Paragon required the services of tug boats to tow the DPDS1
from Port Arthur to Harbor Island, near the port of Corpus Christi. Paragon negotiated with
Signet under the MCA for the services of its tugs. The parties agreed on Part I of the BIMCO, but
never executed the document for these services. Paragon ultimately chose another tow service
provider, which towed the DPDS1 to Harbor Island. From that point, Paragon hired four Signet
tugs to assist the DPDS1 to the Gulf Copper dock. For these services, the parties never discussed
the MCA, and Signet invoiced Paragon in accordance with the Tariff.
On May 30, the DPDS1 arrived at her new berth. The vessel lay bow in to the slip, with the
dock to her port, and with the Noble semisubmersible oil rigs moored across the slip to the
DPDS1’s starboard.
Schenkel, Koenig, and Petten designed the mooring system for the drillship at this
location. To evaluate the strength of the system, Paragon hired the consulting company Genesis
Engineering. The first evaluation occurred in late May, before the DPDS1 reached the Gulf Copper
dock. Paragon provided Genesis with the line types, which included 10 three-inch Dyneema ropes
and 10 three-inch polyester ropes. In general, different lines exhibit varying breaking strengths
15
16
Schenkel Dep. (Vol. I), 168:14–25, 172:22, 173:1–9, P.Ex.45 (Doc. 446-1, 44–45).
Gallager Dep., 81:1-8, P.Ex.50 (Doc. 446-6, 22).
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and elasticity. The Dyneema lines represented class two ropes, possessing higher breaking
strength and lower elasticity. Class one ropes, such as polyester lines, exhibit higher elasticity,
but possess lower breaking strength. In addition, the tension on the ropes, and the evenness of
the tension across all the lines, can impact the overall strength of a mooring system. For its initial
report, Genesis applied assumed tension metrics. Although Paragon received the first Genesis
report, it is apparent that Paragon never utilized the mooring system depicted in that analysis.
Shortly after docking the DPDS1 at the Gulf Copper dock, an issue arose regarding the
mooring system. On at least five occasions between May 31 and June 6, large tanker vessels
passing near the docked DPDS1 caused “surge incidents”, in which a tanker vessels’ passage
caused the water level to rise and fall rapidly. Several mooring lines holding the DPDS1 in place
parted, and metal mooring components called double bits or double bollards broke away from
their welded bases on the vessel’s deck. The DPDS1 never broke away from the dock, but on
numerous occasions, Paragon hired Signet tugs to come alongside the vessel to ensure that it
remained in place.
In response to the surge incidents, Paragon took steps to strengthen the mooring system,
including installing new bollards and upgrading at least some of the mooring ropes from
polypropylene to higher-quality Dyneema lines.
Paragon also replaced all the bits on the
drillship’s port side, regardless of whether they had broken during the surge incidents.
Additionally, Paragon installed chains, which were “heavy-duty steel wire/chain combinations”
that absorbed the energy of the surges.17 Koenig explained that Paragon used “two different
class[es] of rope” to create “a more balanced system”.18
He estimated that the overall
improvements and the analysis cost approximately $500,000.
Koenig Day 2 Tr., 203 (Doc. 449); Yester Day 2 Tr., 57 (Doc. 449); Schenkel Dep. (Vol. I), 71:21–72:23, (Vol. II),
229:3–230:11, P.Ex.45 (Doc. 446-1, 20, 142).
18 Koenig Day 1 Tr., 203:19–205:25 (Doc. 448) (“[I]f you’re mooring up to stay for a while, like we were, that’s important
to have a balanced system and one that’s analyzed by an engineering company.”).
17
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After Paragon completed the improvements, Petten conferred with Genesis to re-evaluate
the mooring system. Paragon again informed Genesis of the line types, which consisted of thirteen
lines, including six three-inch Dyneema lines, two wire-chain-wire combinations, and five threeinch polyester lines. In its June report, Genesis concluded that the mooring system could
withstand sustained winds of approximately 75 miles per hour without exceeding industry
recommended stress levels on each mooring line.19
Standard mooring-marine guidelines
recommend that the lines possess a minimum factor of safety (“FOS”) of 2.0, which means that
the tension on the rope is half of its minimum breaking strength.20 As the factor of safety
decreases, the probability that the mooring line will fail increases.
The Genesis reports
consistently reported conclusions based on a 2.0 FOS.
The improvements resolved the issue of the surge incidents.
In July, Genesis conducted another analysis, again relying upon the line types that
Paragon provided. In this evaluation, Genesis assumed a mooring system composed of eleven
lines, including four three-inch Dyneema lines, five three-inch polyester lines, and two wirechain-wire combinations.21 Not only did the total number of lines decrease by two as compared
to the June report, but the placement of the lines between the available anchor points shifted. The
record does not make clear what prompted Paragon to request this analysis, or whether the
changes reflected actual modifications to the mooring system. In this July report, Genesis
concluded that the depicted mooring system could withstand sustained wind speeds of
approximately 77 to 80 miles per hour, which represents a low-level Category 1 hurricane.22
In early August, based on the Genesis reports, Paragon representatives communicated
regarding the conditions that would require the DPDS1’s evacuation. Petten concluded that the
Genesis Engineering Report, June 26, 2017, S.Ex.160 (Doc. 423-13). Various sources utilize both knots per hour and
miles per hour when reporting wind speeds. For consistency, the Court converts all wind speed measurements to miles
per hour.
20 Greiner Day 4 Tr., 279:7-8 (Doc. 451).
21 Genesis Engineering Report, July 3, 2017, S.Ex.161 (Doc. 423-14).
22 See Saffir-Simpson Hurricane Wind Scale (defining a Category 1 hurricane as possessing sustained winds between
74 and 95 miles per hour).
19
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mooring analysis “show[ed] the facility could stay on location up to a Category 1 hurricane”. 23
Koenig reached the same conclusion, and he intended to order the DPDS1’s evacuation if a
predicted storm threatened to exceed the mooring system’s capacity.24 Schenkel recommended a
conservative approach: “[T]o be sure we leave port in time, the word ‘hurricane’ needs to be
broadly interpreted as a severe storm.”25 He continued: “Due to the uncertainty in the predictions
the DPDS1 should depart (10 days prior land fall) when a storm is approaching with a predicted
wind speed of approx. [63+ miles per hour] which is equivalent to a BF 10 storm (range [55 to 63
miles per hour]).”26 Shortly after this communication, he followed up to clarify that the vessel
would “leave port 3 days prior to landfall” and would spend 10 days offshore.27
Consistent with these email communications, Schenkel testified that Paragon always
planned to tow the DPDS1 into the Gulf of Mexico in advance of a storm.28 As a result, he was not
concerned that the mooring system was incapable of withstanding more severe hurricane
conditions. In other words, Paragon had designed its system to withstand no more than the winds
of a Category 1 hurricane, intending to evacuate the DPDS1 from the port in the event of a stronger
storm.
At trial, Koenig and Yester described the competing risks involved in the decision to keep
a drillship such as the DPDS1 in port or to tow it out to sea when a storm approached. Koenig
emphasized the safety risks posed by towing a cold-stacked vessel like the DPDS1 out to sea. The
tugboat crew would face inherent threats. For example, the fact that the drillship would have no
crew meant that if a tow line became unattached while at sea, no one would be onboard to reattach
the line. In addition, if the vessel collided with an offshore oil platform or another vessel in the
Petten Day 2 Tr., 175:23–25 (Doc. 449).
Koenig Day 1 Tr., 147–49, 209 (Doc. 448).
25 Schenkel Email, S.Ex.271 (Doc. 429-10, 1–2).
26 Id.; Schenkel Dep. (Vol. I), 77:9–21, P.Ex.45 (Doc. 446-1, 21).
27 Schenkel Email, S.Ex.271 (Doc. 429-10, 1).
28 Schenkel Dep. (Vol. I), 193:1–21, P.Ex.45 (Doc. 446-1, 50).
23
24
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Gulf of Mexico, the tugboat would need to cut loose from the vessel or potentially be damaged. In
addition, the drillship itself could sink and hit a pipeline, causing environmental damage.
Yester explained that in general, he would “wait as long [as he could] to make the decision”
of whether to remain in port or tow the DPDS1 out to sea, because of the unpredictable nature of
tropical weather events, combined with the slow speed at which a vessel must be towed.29 As he
explained, taking a drillship to sea could inadvertently place the vessel directly in the storm’s
path.30 In addition, towing a vessel out to sea entailed a cost ranging from $300,000 to $900,000.
E. Hurricane Harvey
1. Thursday and Friday, August 17–18, 2017
On Thursday, August 17, the NHC issued an advisory for Potential Tropical Cyclone Nine,
reporting that the storm had strengthened into Tropical Storm Harvey and lay east of the
Caribbean Sea.31 The WeatherOps report for the same day forecasted that the storm would travel
in a westward direction and reach Honduras and Guatemala within three and four days,
respectively. WeatherOps noted that “some model guidance does continue to strengthen the
system to a low-end Category 1 Hurricane just before it reaches Belize.”32 At the same time, the
report clarified that because of “low confidence in the intensity forecast beyond 36 hours”,
WeatherOps did not forecast that Tropical Storm Harvey would become a hurricane.33
On Friday, August 18, the WeatherOps report maintained Tropical Storm Harvey on a
westwardly track, with little to no change in trajectory as compared to the previous day’s
forecast.34 The report continued to predict that the storm would not reach hurricane strength.
The NHC advisory reported that “slow strengthening is possible during the next 48 hours.”35
Yester Day 1 Tr., 65:1–2 (Doc. 448).
Id. at 64:13–66:19.
31 NHC Potential Tropical Cyclone Nine Forecast/Advisory 1, P.Ex.13 (Doc. 410-14, 7).
32 WeatherOps Active Storm Advisory # 9, P.Ex.13 (Doc. 410-14, 13).
33 Id.
34 WeatherOps Active Storm Advisory # 10, P.Ex.13 (Doc. 410-14,21).
35 NHC Tropical Storm Harvey Advisory 3A, P.Ex.13 (Doc. 410-14, 23).
29
30
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Both Paragon and Signet received these reports. Signet personnel believed that Tropical
Storm Harvey’s “current predictions should have her clear of all Signet Vessels” in the Port
Aransas area.36 Paragon employees noted the storm, but when they “left work Friday, it was, well,
let’s see Monday what’s going on. Because it was on the other side of Mexico, . . . and we didn’t
know what was going to happen.”37
2. Saturday and Sunday, August 19–20
At 4:00 p.m. on Saturday, August 19,38 the NHC advised that Tropical Storm Harvey had
weakened to a tropical depression.39 WeatherOps predicted that the storm would make landfall
over the Yucatan Peninsula and was unlikely to reach the Texas coast.40 By late Saturday evening,
the NHC advised that the “Remnants of Harvey” had degenerated into a “Tropical Wave,” and
that the NHC would not release another public advisory on the system “unless regeneration
occurs”.41 Similarly, the WeatherOps report indicated that “Harvey has weakened below tropical
depression level and is no longer considered a threat.”42
During the early hours of Sunday, August 20, WeatherOps continued to monitor the
situation, noting that while the system had “weakened into an open wave”, the “remnants may
reintensify toward the end of the week over the Bay of Campeche”.43
By mid-morning,
WeatherOps reported that the remnants had “become better organized” and that a “moderate
potential [existed] for restrengthening into a minimal depression or tropical storm prior to
reaching northern Honduras and the Yucatan peninsula.”44
The accompanying graphical
“Forecast Track” depicted a path that would have the storm make landfall as a tropical storm near
Tampico, Mexico, with the cone of uncertainty possibly reaching into deep south Texas, but not
Signet E-mail, P.Ex.13 (Doc. 410-14, 47).
Yester Day 1 Tr., 69:23–70:3 (Doc. 448).
38 Various exhibits utilize different time zones. For convenience, the Court converts all time references to Central
Daylight Time.
39 NHC Tropical Depression Harvey Advisory # 10, P.Ex.13 (Doc. 410-14, 66).
40 WeatherOps Atlantic Tropical Daily Planner, P.Ex.13 (Doc. 410-14, 64).
41 NHC Remnants of Harvey Advisory # 11, P.Ex.13 (Doc. 410-14, 71).
42 WeatherOps Active Storm Advisory – Tropical Depression Harvey 18, P.Ex.13 (Doc. 410-14, 72).
43 WeatherOps Atlantic Tropical Daily Planner, P.Ex.13 (Doc. 410-14, 75).
44 WeatherOps Significant Tropical Disturbance Advisory – Harvey 9, P.Ex.13 (Doc. 410-14, 76).
36
37
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as far north as Port Aransas.45 Yester testified that he understood that the cone of uncertainty
meant that the storm’s track could fall within any portion of the cone.46 Six hours later, the next
report communicated similar information.47
That Sunday evening, WeatherOps reported that the storm remained likely to develop, at
most, into a tropical storm.48 For the first time, however, the long range (i.e., 120-hour) cone of
uncertainty included the Port Aransas area.49 The new projection meant that a tropical storm
could make landfall near the DPDS1 by the end of the week. Koenig testified that at some point
over the weekend, the storm “got my attention and I started letting [Schenkel] and [Yester] know
that we needed to watch [ ] the weather [ ] and consider moving the DPDS1 out of port.”50
The storm also captured the attention of at least one other vessel owner, Noble, which had
two drill ships docked further south in Port Isabel, Texas. On Sunday, the WeatherOps projected
track for the weather system placed Port Isabel slightly outside the cone of uncertainty’s northern
boundary, with the storm’s landfall projected for Friday, August 25, south of Tampico, Mexico,
with maximum sustained winds of 70 miles per hour.51 Based on its severe weather plan, Noble
immediately began evacuating its drill ships.52
3. Monday, August 21
By 10:00 a.m. on Monday morning, WeatherOps had released two more reports, which
proved significant. The storm remained a tropical disturbance and was “generally not wellorganized”.53 In the 4:00 a.m. report, WeatherOps predicted that on August 25, Harvey would
reach maximum wind speeds of 65 miles per hour.54 Six hours later, WeatherOps reduced this
WeatherOps Tropical Disturbance Harvey Advisory # 19, P.Ex.13 (Doc. 410-14, 77).
Yester Day 1 Tr., 139:5–21 (Doc. 448).
47 WeatherOps Tropical Disturbance Harvey Advisory # 20, P.Ex.13 (Doc. 410-14, 80).
48 WeatherOps Tropical Disturbance Harvey Advisory # 21, P.Ex.13 (Doc. 410-14, 83).
49 Id.
50 Koenig Day 1 Tr., 227:1–15 (Doc. 448); see also Yester Day 1 Tr., 80–81 (Doc. 448).
51 WeatherOps Tropical Disturbance Harvey Advisory # 20, P.Ex.13 (Doc.410–14, 80).
52 Report for the SIGNET ARCTURUS, S.Ex.29 (Doc. 416-3, 5–9).
53 WeatherOps Tropical Disturbance Harvey Advisory # 23, P.Ex.13 (Doc. 410-14, 89).
54 WeatherOps Tropical Disturbance Harvey Advisory # 22, P.Ex.13 (Doc. 410-14, 86).
45
46
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forecast, indicating that maximum winds on August 25 would reach only 60 miles per hour.55 In
both reports, the forecasted track had shifted significantly northward, placing Port Aransas well
within the long-term cone of uncertainty. At the same time, the predicted landfall remained in
northern Mexico.56
At 11:05 a.m. that morning, Schenkel communicated to Koenig that while concern existed,
they had time before making a definitive decision regarding the DPDS1:
The storm Harvey is moving in and get[ting] closer to the DPDS1 (within 96 hours)
than anticipated and will be at [60 miles per hour] within 96 hours (reduced over
the last 6 hours). The max allowable wind speed for the DPDS1 [to tow out to sea]
was set at [72 miles per hour] and notice period for readiness 72 hours. We have
to make a decision within the next 24 hours about the next step since the speed is
close to the acceptable speed of [63 miles per hour] to start preparing departure.
It seems we don’t have to do anything yet.57
A few minutes later, Yester forwarded the WeatherOps reports to Schenkel, opining that he did
not “see where we are in any danger unless something causes a drastic turn to the North.” 58
Koenig disagreed, testifying that based on these reports, he recommended that morning that
Paragon evacuate the DPDS1.59 Paragon chose to wait before making a definitive decision.
At the same time, Yester “decided to start whatever process it took to get port clearance
and tugboats and everything ready to go” to prepare for the possibility that the storm would take
a turn to the North.60 He recognized that he had to start the process as soon as possible because
it required two to three days to obtain the necessary approvals and secure the required logistical
support. Late that morning, he called Patrick McTigue of Signet to reserve tugs to tow the DPDS1
into the Gulf of Mexico in the event that Paragon decided to evacuate the vessel. Koenig testified
that Signet was going to be the only vendor to assist the DPDS1 with an evacuation, meaning that
Signet would provide both the harbor tow and offshore tow services. McTigue provided a “Scope
WeatherOps Tropical Disturbance Harvey Advisory # 23, P.Ex.13 (Doc. 410-14, 89).
WeatherOps Significant Tropical Disturbance Advisory – Harvey # 24, S.Ex.74 (Doc. 419-8, 41–46) (“The GFS and
ECMWF are in rather good agreement, bringing Harvey as a tropical storm to a position just south of Brownsville by
Friday afternoon.”).
57 Schenkel Email, S.Ex.271 (Doc. 429-10, 4).
58 Yester Email, P.Ex.17-A-Part 1 (Doc. 410-31, 252).
59 Koenig Day 2 Tr., 41:11–13 (Doc. 449).
60 Yester Day 1 Tr., 71:7–9 (Doc. 448).
55
56
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of Work Estimated Cost Analysis” shortly after Koenig called him.61 The same day, Koenig began
to fill out the applications for the United States Coast Guard and port authorities and contacted
Dutton’s Navigation to have a surveyor visit the vessel to obtain a certification approving the
towing gear and towing arrangement. He took these steps “while we were seeing the storm
progress and people above [him]” made the decisions regarding the vessel.62
That afternoon, at 4:00 p.m., WeatherOps released its next report, forecasting that Harvey
would make landfall “just south of Brownsville” on Friday, August 25, with maximum winds of 70
miles per hour.63 Corpus Christi lay well within the cone of uncertainty. The projected track had
shifted to the north, and WeatherOps explained that certain factors “may result in additional
northward adjustments.”64
Six hours later, in its final report for Monday, WeatherOps indicated “[n]o significant
changes . . . regarding the track or intensity forecast”.65 The report forecasted that Harvey would
“make landfall over northern Mexico or the Lower Texas Coast as a strong tropical storm or
hurricane between 72 and 96 hours.”66 The maximum sustained wind speeds for Friday, August
25 were still predicted to be 70 miles per hour. Paragon representatives do not appear to have
commented upon either of these latest revised forecasts.
At least one company, Rowan Companies, decided by no later than Monday to evacuate
the Port Aransas port. Rowan contacted Captain Jay Rivera, the presiding officer of the AransasCorpus Christi Pilots Association, to express the company’s intent to evacuate.67
4. Tuesday, August 22
The early Tuesday morning report from WeatherOps made significant changes to the
storm’s forecasted track and strength. The storm remained a “Tropical Disturbance”, but was now
Signet’s “Scope of Work Estimated Cost Analysis”, P.Ex.17-A-Part 1 (Doc. 410-31, 1–2).
Koenig Day 1 Tr., 230:20–23 (Doc. 448).
63 WeatherOps Tropical Disturbance Harvey Advisory # 24, P.Ex.13 (Doc. 410-14, 93).
64 Id.
65 WeatherOps Tropical Disturbance Harvey Advisory # 25, P.Ex.13 (Doc. 410-14, 96).
66 Id.
67 Rivera Day 3 Tr., 256:19–257:16 (Doc. 450) (testifying that the initial call occurred on either Sunday or Monday).
61
62
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expected to strengthen into a Category 1 hurricane with sustained wind speeds of 75 miles per
hour by Friday, August 25.68 The most likely path had again shifted northward, projecting landfall
just south of Corpus Christi as a tropical storm. The system also had slowed, so that landfall was
predicted for early morning on Saturday, August 26.
At around 6:00 a.m. that morning, Yester forwarded the report to Koenig and Schenkel,
asking, “What Now?”69 Schenkel responded at 6:51 a.m., noting that the storm’s intensity had
increased, but opining that “the storm . . . might move up North East even more and clear the
DPDS1 on the clean side within 84 hours (might know within 6 to 12 hours).” 70 He asked about
certain preparations: “Mike [Koenig] is talking to Signet for Tug and port Captain about the
preparations (yes/no?).”71 A few minutes later, Koenig responded, commenting that “[t]he
forecaster is confident the track will go more to the north. This puts the DPDS1 on the clean
side.”72 When referencing “clean side”, Yester meant that in Port Aransas, the DPDS1 would be
on the storm’s west wall, which would deliver less intense winds and surges. 73 In essence, Yester
read the forecast as predicting that the storm would make landfall well north of Port Aransas, with
the center of the storm passing to the east. As moving the DPDS1 out to sea meant traveling
eastward—i.e., into the stronger side of the storm—“we would have a bit of a hard time finding
anywhere to go”, he testified.74
In addition, given that the storm’s winds blew in a
counterclockwise rotation, Yester’s interpretation of the WeatherOps report meant that “the
winds would be pushing the vessel against our bulkhead and not pulling it away from the
bulkhead, which would be good news for us if that’s what happened.”75 Yester responded to both
of these emails separately.
To Schenkel, he recommended that “[w]e should start some
WeatherOps Tropical Disturbance Harvey Advisory # 26, P.Ex.13 (Doc. 410-14, 99).
Yester Email, P.Ex.17-A-Part 1 (Doc. 410-31, 253).
70 Schenkel Email, P.Ex.17-A-Part 1 (Doc. 410-31, 254).
71 Id.
72 Koenig Email, P.Ex.17-A-Part 1 (Doc. 410-31, 253).
73 Yester Day 1 Tr., 83:15–20 (Doc. 448).
74 Id. at 83:25–84:1.
75 Id. at 84:3–7.
68
69
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preparations but hold off for another 12–24 hours, unless [Koenig] has another view.”76
Simultaneously, in a message to both Koenig and Schenkel, he merely noted, “OK–we’ll see what
happens.”77
At 10:00 a.m., WeatherOps released Advisory # 27, again shifting the forecasted path
slightly northward. The “consensus forecast” was “for a strong tropical storm or category one
hurricane to reach the central Texas coast Friday.”78 Three hours later, WeatherOps released
Advisory # 27A, which reported that “recently available forecast guidance continues to indicate
significant intensification on Thursday and Friday.”79
At 1:00 p.m. on Tuesday, the Coast Guard Captain for Port Aransas set “Port Condition
WHISKEY” for the ports of Brownsville, Corpus Christi, and Victoria. This alert level meant that
the Coast Guard anticipated sustained gale force winds (39 to 54 miles per hour) at the port from
a tropical or hurricane force storm within 72 hours. Signet advised its captains that “several of
our customers are making plans to activate their Hurricane Response Plans within the next 24 to
36 hours” and directed captains to “ensure all crew members are made aware of these potential
operations and all vessels are readied should the orders begin to come in.”80
At 4:00 p.m., WeatherOps projected that the storm would make landfall in 72 hours (i.e.,
Friday afternoon) as a Category 1 hurricane with sustained wind speeds of 80 miles per hour and
with the center of the storm striking just north of the Corpus Christi area. 81 Shortly after this
report issued, a Signet employee reported that “Sector Corpus Christi has been notified that they
are in Condition X-Ray (48 hours) and vessel traffic is starting to leave the area.”82
Yester Email, P.Ex.17-A-Part 1 (Doc. 410-31, 253–54).
Id. at 255.
78 WeatherOps Tropical Disturbance Harvey Advisory # 27, P.Ex.13 (Doc. 410-14, 105).
79 WeatherOps Tropical Disturbance Harvey Advisory # 27A, P.Ex.13 (Doc. 410-14, 108).
80 Gibson Email, P.Ex.23 (Doc. 439-43).
81 WeatherOps Tropical Disturbance Harvey Advisory # 28, P.Ex.13 (Doc. 410-14, 111).
82 Johnson Email, P.Ex.13 (Doc. 410-14, 113). Hurricane Port Condition X-RAY means that the weather advisories
indicate sustained gale force winds (39 to 54 miles per hour) from a tropical or hurricane force storm are predicted to
impact the port within 48 hours.
76
77
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5. Wednesday, August 23
On Wednesday at 4:00 a.m., WeatherOps reported “[a] slight shift northward in the
forecast track . . . where the center makes landfall over the Middle Texas Coast. The intensity
forecast still has Harvey becoming a tropical storm or possibly a hurricane over the western Gulf
prior to landfall.”83
About four hours later, Yester formally notified Paragon employees of the decision to
evacuate the DPDS1: “Due to the impending arrival of Tropical Storm ‘Harvey’ we are compelled
to move the DPDS1 out of its mooring to open water.” 84 He reported that Paragon intended to
“move the rig this evening or tomorrow morning, depending upon timing of port clearance and
harbor tugs to assist with the movement.”85 Schenkel responded almost immediately, asking
Paragon employees to “inform DNV about the planned move”.86 He echoed Yester’s message that
the vessel’s departure would occur “this afternoon or early in the morning”, with Signet tugs
assisting with the dead tow.87 Over the next few hours, Paragon’s employee, Ray Carrera, notified
various agencies and companies about Paragon’s decision, although he noted his “sense . . . that
this storm will not be too bad.”88
By late morning, Paragon learned that the DPDS1’s departure would not occur that day
due to ship traffic, but was “planned for tomorrow at first day light.”89 A few hours later, the
anticipated departure time was delayed again, to Thursday afternoon.
At some point on Wednesday, in-house counsel for Paragon and Signet began discussions
regarding the contract that would govern Signet’s provision of tug services for towing the DPDS1
out to sea. Signet’s counsel (Reid) and Paragon’s counsel (Oliver) exchanged various e-mails
throughout the day, focusing on finalizing the terms of Part I and Part II of the Master Charter
WeatherOps Tropical Disturbance Harvey Advisory # 30, P.Ex.13 (Doc. 410-14, 124).
Yester Email, P.Ex.17-A-Part 2 (Doc. 410-32, 2).
85 Id.
86 Schenkel Email, P.Ex.17-A-Part 2 (Doc. 410-32, 1).
87 Id.
88 UT Email, P.Ex.28-D (Doc. 441-31, 1).
89 Koenig Email, P.Ex.17-A-Part 1 (Doc. 410–31, 3).
83
84
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Agreement. The negotiations fixated on the insurance and indemnification provisions within Part
II.
By late afternoon, Paragon had accepted Signet’s revisions to Part II, “except for the
modifications we made to your proposed insurance revisions.”90 Paragon acknowledged that the
amendments to Part II of the MCA placed greater exposure on Paragon and would cause it to be
responsible for any damage to a Signet tug in a salvage-type operation or loss to third-party
property, and any costs associated with cleanup. The terms of the insurance were also amended
to require Paragon to name Signet as an additional insured on its insurance policies. 91 By late
afternoon, Signet “agree[d] that the changes to the insurance addendum are acceptable”.92 Late
in the evening, Paragon requested that Signet prepare Part I and Part II for signature.
During the afternoon, the situation regarding the DPDS1’s tow out worsened. Port
authorities gave priority to U.S. Navy vessels “departing en-masse from [Corpus Christi]”,93 and
Tropical Storm Harvey “appear[ed] to be headed straight to” the area.94 Signet advised Paragon
that it would attempt to tow the DPDS1 out to sea after the priority vessels departed, “if the port
has not been closed” by that time.95 If the port closed, Signet would ask Captain Gibson, one of
its local tug boat operators, “to put a tug or two onto DPDS1 to hold her to the dock at Gulf
Copper”, but the ultimate decision would remain the captain’s, as another company had a right of
first refusal for his services.96 At 5:12 p.m., Schenkel forwarded Signet’s communication to Yester,
warning him that the DPDS1 “might not be able to leave the port anymore”.97 He noted that they
had “to work on a plan B which consist[ed] of keeping the rig at the current berth and using 2
Signet tugs to stabilize the rig.”98 Later that evening, Koenig responded that “[d]epending on the
Oliver Email, P.Ex.17-A-Part 2 (Doc. 410-32, 9).
Modified Part I, Master Charter Agreement, AC.Ex.9, (Doc. 436-7, 5).
92 Oliver Email, P.Ex.17-A-Part 1 (Doc. 410–31, 272).
93 Snyder Email, P.Ex.17-A-Part 2 (Doc. 410-32, 11).
94 Id.
95 Id.
96 Id.
97 Schenkel Email, P.Ex.17-A-Part 2 (Doc. 410-32, 10).
98 Id.
90
91
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forecast in the morning it might be best to stay in the berth with two tugs rather than go outside
and possibly be in the middle of the storm.”99
6. Thursday, August 24
At 4:00 a.m. on Thursday morning, the NHC issued an official Storm Surge and Hurricane
Warning for the Port Aransas area. In this advisory, the NHC forecasted Harvey to strengthen
into a hurricane for the first time.100
Less than an hour later, Signet’s counsel confirmed that he would “generate the BIMCO
agreement for today’s tow”.101 It is unclear whether Signet actually prepared the final form of the
contract, but the parties agree that neither side signed such a document.
And by early morning, the issue became moot. Around 8:00 a.m., Signet’s Captain Gibson
informed Snyder that he had just been advised that the DPDS1 would not be allowed to leave the
port; the Coast Guard was closing the Port of Corpus Christi. Captain Gibson agreed “with the
need to have hold tugs at Harbor Island with the [DPDS1] to keep her alongside at Gulf Copper.”102
Minutes later, Snyder informed Paragon of the development.
And at 9:30 a.m., Paragon
communicated to stakeholders that the DPDS1 “will not be towed out and will remain in port.”103
Shortly after these communications, Snyder e-mailed his Signet colleagues that the
company desired to provide the new services under the Tariff: “We need to pass onto [Paragon’s
representatives] we’ll operate under our tariff for this.”104 Later that morning, Snyder spoke with
Schenkel to discuss the situation. According to Snyder, Schenkel requested that Signet provide
two z-drive tug boats to remain with the DPDS1 during the hurricane.105 Snyder agreed, but
Koenig Email, P.Ex.17-A-Part 2 (Doc. 410–32, 10).
NHC Tropical Storm Harvey Advisory # 15, P.Ex.13 (Doc. 410-14, 173); NHC Tropical Storm Harvey Intermediate
Advisory # 15A, P.Ex.13 (Doc. 410-14, 177).
101 Reid Email, P.Ex.17-A-Part 1 (Doc. 410-31, 273).
102 Gibson Email, P.Ex.17-A-Part 2 (Doc. 410-32, 23).
103 Carrera Email, P.Ex.17-A-Part 2 (Doc. 410–32, 13) (emphasis in original).
104 Snyder Email, S.Ex.125 (Doc. 421-22, 30).
105 Schenkel Day 5 Tr., 202:3-6 (Doc. 452). A “z-drive” refers to a propulsion system that can rotate 360 degrees,
enabling the tug boat to direct thrust in any direction. Id. at 140:16–18.
99
100
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expressly indicated that the services would be performed under the Tariff. At trial, Snyder
recounted the exchange they had on the matter:
And [Schenkel] said, Barry, is that the best you can do, I don’t care to use the tariff,
I’d prefer to use the old contract.
I said, absolutely not, sir, it’s very dangerous to use that.
He said, all right, is that the best you can do?
I said, yes, Aldert, we’ve been friends a long time, this is protecting both of us.
He said, all right, get it done.106
Schenkel testified that he could not recall the phone conversation with Snyder, and that it may or
may not have occurred.107
After the phone call, Snyder instructed Signet’s attorney (Reid) to communicate with
Paragon’s counsel (Oliver) about using the Tariff for the revised assignment. That afternoon, Reid
e-mailed Oliver, advising him that “[b]ecause we will not be towing, but instead will be holding
the DPDS1 in place, Signet’s work will be governed by our Ingleside Tariff”, which he attached to
the message.108 Reid noted his understanding that the companies’ respective commercial teams
had agreed to this contractual arrangement. In response, Oliver wrote, “Thanks for the update –
much appreciated.”109
By hiring Signet’s services, Paragon believed that the tug boats pushing the DPDS1 against
the mooring side would “reduce the tension on the mooring lines”. In addition, if the DPDS1
broke lose, “there would be two tugboat[s] tied to the ship that could sort of keep it under some
kind of control”, and could help keep the drillship from alliding with other objects and vessels in
the port.110
Snyder Day 5 Tr., 203:1–10 (Doc. 452).
Schenkel Dep. (Vol. I), 57:1–18, P.Ex.45 (Doc. 446-1, 16).
108 Reid Email, S.Ex.125 (Doc. 421-22, 32).
109 Oliver Email, S.Ex.125 (Doc. 421-22, 33).
110 Koenig Day 1 Tr., 244-45 (Doc. 448); see also Yester Day 1 Tr., 73-74 (Doc. 448).
106
107
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In addition to hiring the Signet tugs, Paragon also bolstered the DPDS1’s mooring system.
Koenig was at the dock that morning, and he consulted with the surveyor he had previously
contacted—Hugh Gallagher of Dutton’s Navigation—whose task changed from certifying the
DPDS1 for a tow out to inspecting the mooring system for a hold-in-place operation. Koenig and
his crew of six to eight men “used everything he could find” to strengthen the mooring system. 111
They located three additional lines in a nearby warehouse and added them, using Koenig’s pickup truck to tighten the lines.112 As to the condition of these new ropes, Gallagher testified that
they looked like weaker polypropylene lines, were deteriorated, and would part easily due to their
condition.113 Koenig conceded that the mooring lines had some chaffing and were “used”, and
that degradation reduced their effectiveness.114
Paragon also provided information about a mooring arrangement to Genesis for an
updated analysis. Based on that data, the revised Genesis analysis concluded that the mooring
system could withstand wind speeds of up to 78 miles per hour. This result represented a small
increase in the mooring system’s strength as compared to the July mooring analysis.115 The new
report, however, reflected a materially different mooring system, composed of thirteen Dyneema
lines and two wire-chain-wire combinations.116 In essence, the report assumed that Paragon had
replaced multiple polyester lines with Dyneema lines, which have a higher breaking strength, but
less elasticity.
In the end, between May 26 and August 24, Genesis analyzed four different mooring
systems for the DPDS1. Each mooring arrangement contained a different number of lines, varying
line types, and shifting arrangements among the anchors. The trial record, however, casts doubt
on the accuracy of any of those reports. While Genesis appears to have applied its software
Koenig Day 1 Tr., 240–43 (Doc. 448).
Id. at 241:7–11.
113 Id. at 240:8–14; Gallagher Dep., 50:3–51:15, P.Ex.50, (Doc. 446-6, 15).
114 Koenig Day 2 Tr., 94:23–25 (Doc. 449).
115 Genesis Engineering Report, August 24, 2017, S.Ex.162 (Doc. 423-15, 3); Genesis Engineering Report, June 26, 2017,
S.Ex.160 (Doc. 423-13, 3).
116 Genesis Engineering Report, August 24, 2017, S.Ex.162 (Doc. 423-15, 3).
111
112
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correctly when preparing the reports, it also relied solely on data that Paragon provided. And
ample evidence revealed the inaccuracy of that data. For example, in all four reports, Paragon
represented that the mooring arrangement included three-inch Dyneema Proton-8 ropes, which
Koenig identified to Paragon’s mooring expert, Christopher Brown, as blue lines in available
photographs. Brown testified, however, that Proton-8 ropes at the time were available only in
yellow, suggesting that Koenig misidentified those lines.117 The distinction is material because
each type of rope possesses unique mechanical properties and will react distinctly under stress.
The evolution of the mooring systems in the Genesis reports also reveals the absence of
a rigorous design process. For example, the initial report in May contemplated 20 lines securing
the DPDS1 to the dock, but the record reflects that Paragon never utilized that many lines to moor
the drillship. The next two reports from June and July depicted differing numbers of lines and
arrangements. The June report evaluated a system with five three-inch Dyneema ropes, five
three-inch polyester ropes, and two wire-chain-wire combinations.118 The following month’s
report analyzed a system with one less three-inch Dyneema rope, and the remaining ropes in a
slightly differing arrangement on the available anchors.119 No evidence explained why Paragon
changed the lines, whether it did so, or whether either report reflected reality. Finally, the August
report—representing Paragon’s understanding of the mooring arrangement on the eve of
Hurricane Harvey—stated that Paragon used thirteen three-inch Dyneema ropes, two wire-chainwire combinations, and no polyester ropes.120 According to this final report, Paragon at some
point in July and August removed all of the polyester ropes mooring the DPDS1 and replaced them
with new Dyneema ropes. No Paragon witness testified about such a wholesale change to the
mooring system, and such a system would be inconsistent with the analyses of both Paragon’s and
Signet’s experts, based on photographs taken after the breakaway occurred. Those photos
The Breakaway of the DPDS1, Report of Christopher Brown, P.Ex.17-L-1 (Doc. 424-43, 7); Brown Day 2 Tr., 235:6–
22 (Doc. 449).
118 Genesis Engineering Report, June 26, 2017, S.Ex.160 (Doc. 423-13).
119 Genesis Engineering Report, July 3, 2017, S.Ex.161 (Doc. 423-14).
120 Genesis Engineering Report, August 24, 2017, S.Ex.162 (Doc. 423-15).
117
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confirmed that the mooring system at the time of Hurricane Harvey included at least some
polyester ropes. Not surprisingly, the parties’ experts agreed that the final August 24 report did
not reflect the actual composition of lines that secured the DPDS1 when Hurricane Harvey made
landfall.121 Don Barnes, another Paragon expert, agreed that it was “logical” for a vessel owner to
know the size and composition of the lines in its mooring system.122 Paragon does not appear to
have possessed such knowledge.
In addition, throughout these months, Paragon never provided Genesis with metered
measurements for the line tensions. As to the August 24 report, Gallagher testified that he
believed the lines were “very tight” and that it was “reasonable to assume” that the tension figures
in the reports were accurate, but he also conceded that he based the line tensions solely on
observations, rather than actual measurements.123
Given Paragon’s lack of accurate data about the lines used in its mooring system and the
tension on those lines, the Court finds that in connection with its decision process related to
Hurricane Harvey, Paragon possessed no reliable information about the strength of its mooring
system.
7. Friday, August 25
a. The Breakaway
Around 8:00 a.m. on August 25, two Signet tugs, the SIGNET ARCTURUS and the
SIGNET ENTERPRISE, arrived at the Gulf Copper dock to assist the DPDS1. The ENTERPRISE
crew boarded the DPDS1 to “visually look at [the moorings] and then help get the other [ ] tugs
tied up.”124 Captain Grant Taylor of the ARCTURUS understood that his job was to “hold the ship
to the dock during the storm.”125 He did not discuss the feasibility of the job or any potential
Petten Day 2 Tr., 193:20–196:9 (Doc. 449); Barnes Day 2 Tr., 104: 11 – 105:22 (Doc. 449); Brown Day 2 Tr., 264:23–
266:12 (Doc. 449); Greiner Day 4 Tr., 61:19–61:25 (Doc. 449).
122 Barnes Day 2 Tr., 105:23–107:9 (Doc. 449).
123 Gallagher Dep., 159:11–19, P.Ex.50 (Doc. 446-6, 42).
124 Taylor Dep., 26:20–23, P.Ex.53 (Doc. 446-9, 9).
125 Id. at 27:16.
121
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problems with completing this mission with Snyder or Captain Dale Decker of the
ENTERPRISE.126
Both vessels’ captains provided status updates to Signet and Paragon throughout the day.
As the hurricane approached Corpus Christi, they consistently reported that the mooring
arrangement continued to hold the DPDS1. Around 6:00 p.m., the captains reported winds of 80
to 104 miles per hour, although they noted that other vessels in the area blocked the anemometer,
so they were providing estimated wind speeds.127 At that time, the winds blew from the northnorthwest, almost directly at the bow of the vessel.128 Each captain reported that “all is well”.129
As evening fell, however, the hurricane neared, conditions worsened, and the wind
direction rotated in a counterclockwise direction. At 8:42 p.m., the wind speeds peaked at 111
miles per hour, with gusts up to 129 miles per hour, and had shifted to a 45% angle off the port
bow of the DPDS1.130
At 10:25 p.m., Schenkel confirmed to Koenig that based on the RigStat system onboard
the DPDS1, “the wind speed has dropped suddenly at Port Aransas.” He concluded that “the eye
of the storm passes.”131 At 10:48 p.m., the approximate time of the breakaway, the hurricane’s
sustained wind speed at the ANPT2 weather station near the Gulf Copper dock was 92 miles per
hour, with gusts of 115 miles per hour.132 By that time, the hurricane’s winds came from the
southwest, at an almost 90% angle to the DPDS1’s bow.133 In essence, the winds blew directly
perpendicular to the entire portside of the vessel, pushing it away from the dock. Gallagher, the
Id. at 28:15–21, 169:9–20, 190:13–191:18.
SIGNET ARCTURUS Email, P.Ex.17-A-Part 1 (Doc. 410-31, 287–90).
128 Estimated Wind Direction at the Gulf Copper Dock, Wrisk Consulting, S.Ex.133-2 (Doc. 422-12, 5).
129 SIGNET ARCTURUS Email, P.Ex.17-A-Part 1 (Doc. 410-31, 287–90).
130 Estimated Wind Direction at the Gulf Copper Dock, Wrisk Consulting, S.Ex.133-2 (Doc. 422-12, 25). The weather
analysis that Wrisk Consulting performed, which Paragon’s and Signet’s weather experts credited, reported slightly
different wind speeds than the NHC. For example, for 9:00 p.m., Wrisk Consulting reports sustained wind speeds of
106 miles per hour, with gusts up to 130 miles per hour, whereas the NHC reported sustained wind speeds of 92 miles
per hour, with gusts up to 120 miles per hour. Id. at 28; NHC Hurricane Harvey Tropical Cyclone Update, P.Ex.13 (Doc.
410-14, 320). The Court accepts the wind speeds in the Wrisk Consulting report and concludes that any discrepancies
reported by the NHC do not affect the legal conclusions.
131 Schenkel Email, P.Ex.17-A (Doc. 410-31, 294).
132 Estimated Wind Direction at the Gulf Copper Dock, Wrisk Consulting, S.Ex.133-2 (Doc. 422-12, 42).
133 Id.
126
127
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Genesis consultant who inspected the DPDS1 the day before, testified that such a wind
represented a “worst case scenario”, as the DPDS1 would “present the largest sail area” under such
conditions, placing maximum pressure on the mooring lines.134 At 10:26 p.m., Snyder informed
Paragon that the tug boats were “extremely busy holding onto DPDS1 in [132 miles per hour] gusts
and from what I am hearing, 96-100 mph sustained.”135 At 10:44 p.m., the ARCTURUS emailed
to both Paragon and Signet representatives: “Can’t really tell much. Visibility is next to
nothing.”136 That was the final communication before the breakaway.
Captain Taylor recalled that as night fell around 7:30 p.m., and the storm intensified, all
he could do was increase the power on the tug boat. The ENTERPRISE and ARCTURUS at the
time ran their engines at 75–80% capacity, as the tug boats could not be run at 100% for any
period of time without overheating.137 The captains of both vessels recalled that the darkness and
conditions reduced visibility almost completely. At some point between 10:44 p.m. and 11:00
p.m., as Captain Taylor was reading his instruments, “the ship just took off backwards and it felt
like we were flying forwards”.138 He immediately told the ENTERPRISE “to go to full power.”139
Captain Decker confirmed receiving the message to “give it everything you got.”140 He continued,
“[T]he next thing I know I’m looking up and I see this – wall come up in the lights of the rig, like,
they finally came into the flood lights where I could see the rig and then we hit.”141 Captain Taylor
described the moment as “chaos”, and recalled that the bow of the DPDS1 “came out a bit further”,
that the ARCTURUS then “went up against the [Noble] rigs”, and the DPDS1 “just took off and it
was going.”142
Gallagher Dep., 41:10–42:15, P.Ex.50 (Doc. 446-6) (stating that a beam wind was a “worst case scenario”); see also
Schenkel Dep. (Vol. II), 88:21–90:1, P.Ex.45 (Doc. 446-1).
135 Snyder Email, P.Ex.17-A (Doc. 410-31, 297).
136 Koenig Email, P.Ex.17-A-Part 1 (Doc. 410-31, 296).
137 Decker Day 4 Tr., 209:10–15 (Doc. 451).
138 Taylor Dep., 49:16–17, P.Ex.53 (Doc. 446-9, 14); see also JPO, Admissions of Fact ¶ 6.24 (Doc. 314, 36) (“At some
point around that time, between 10:30p.m. and 11:00 p.m., the DPDS1 broke free of her moorings.”).
139 Taylor Dep., 50:13–14, P.Ex.53 (Doc. 446-9).
140 Decker Day 4 Tr., 210:14–19 (Doc. 451).
141 Id.
142 Taylor Dep., 50:20–51:1, P.Ex.53 (Doc. 446-9, 15).
134
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The ENTERPRISE and ARCTURUS both allided with the Noble semisubmersible oil rigs
docked parallel to the DPDS1.
The ENTERPRISE sank, and the ARCTURUS sustained
considerable damage. Fortunately, while the ENTERPRISES’s crew spent hours in the water and
on a powerless tug in the midst of a powerful hurricane, they were successfully rescued the next
morning and did not sustain significant physical harm.
The DPDS1 moved into the Corpus Christi ship channel and eventually grounded on the
north side near St. Joseph Island.
b. The Cause of the Breakaway
The parties dispute the cause of the DPDS1’s breakaway from the Gulf Copper dock. In
general, Signet contends that Paragon relied upon an unreasonably inadequate mooring system
to keep the DPDS1 moored. Paragon responds that its mooring system was adequate, that a
microburst occurred directly over the DPDS1, and that no reasonably designed mooring system
could have kept the DPDS1 in place through such an event. When determining the cause of the
breakaway, two factors prove particularly relevant: (1) the strength of the mooring system; and
(2) the weather conditions near the DPDS1.
With respect to the mooring system’s strength, the parties’ experts on the matter—
Christopher B. Brown for Paragon and Bill Greiner for Signet—relied exclusively on indirect
evidence regarding the type, size, and condition of the lines that held the DPDS1. They had no
access to the actual lines, as both the lines that remained on the DPDS1 and the lines that
remained on the dock after the hurricane were discarded. And as previously explained, the
Genesis reports were not a trustworthy source as to the composition and arrangements of the lines
holding the DPDS1. As a result, the experts attempted to reconstruct the mooring system based
on photographs that Gallaher and the dock’s general manager took before and after the storm, an
analysis of the August 24 Genesis report, drawings of the DPDS1, and an affidavit by Koenig.
Ultimately, the experts reached consensus as to the likely size and composition of the mooring
lines, but disagreed about the condition of those lines at the time of the breakaway.
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Paragon’s expert, Brown, concluded that the DPDS1’s mooring arrangement was actually
more robust than what Genesis reported. He calculated the strength of a mooring system with
eighteen lines, which included the three lines that Koenig added on August 24, and opined that
the mooring system, coupled with the Signet tugs, would have withstood sustained wind speeds
of 110 miles per hour, which was significantly higher than the 80 miles per hour estimate that
Genesis reported.143 When the DPDS1 broke away from the dock, the hurricane’s sustained wind
speeds were approximately 92 miles per hour, with gusts of 115 miles per hour.144 Based on this
data, Brown reasoned that the mooring system should have held. As a result, and also relying on
data from Paragon’s weather expert, Brown concluded that a tornado or wind burst “likely
resulted in exceptional mooring loads being placed on the mooring arrangement that it could not
withstand.”145
Signet’s mooring expert, Greiner, challenged Brown’s conclusions. Greiner testified that
Brown’s computer model simulations assumed ideal conditions, such as accurate wind
coefficients, accurate mooring line pretensions, and new or like-new mooring components. He
noted that in actuality, many lines in the available photographs showed significant degradation,
and that the high stiffness of the Dyneema ropes and wire-chain-wire combinations would prove
detrimental in a hurricane. As a result, he opined that Paragon’s mooring system possessed a very
small margin of safety against mooring line failure.146 In addition, he concluded that the Signet
tug boats reduced the tension on the mooring lines by less than 3% because the thrust of the
tugboats, acting close to the water line, could not counter the effect of the perpendicular wind on
the port side of the DPDS1.147
The Breakaway of the DPDS1, Report of Christopher Brown, P.Ex.17-L-1 (Doc. 424-43, 2).
Estimated Wind Direction at the Gulf Copper Dock, Wrisk Consulting, S.Ex.133-2 (Doc. 422-12, 42).
145 The Breakaway of the DPDS1, Report of Christopher Brown, P.Ex.17-L-1 (Doc. 424-43, 1).
146 Greiner Day 4 Tr., 26:12 –29,4 (Doc. 451); Third report of Bill Greiner dated September 12, 2020, S.Ex.223 (Doc.
426-29, 3); First report of Bill Greiner, March 1, 2019, S.Ex.221 (Doc. 426-27, 4).
147 First Report of Bill Greiner dated March 1, 2019, S.Ex.221 (Doc. 426-27, 18–21); Third Report of Bill Greiner dated
September 30, 2020, S.Ex.223 (Doc. 426-29, 4).
143
144
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As to weather conditions, Paragon offered the testimony of its expert, Dr. David Mitchell,
who opined that a “lightning wind”, or microburst, represented the most likely cause of the
breakaway. He explained that a mesocyclone is a supercell thunderstorm “embedded in the larger
eye wall” of a hurricane, and that such a supercell can create a microburst–i.e., a lightning wind.148
Signet’s meteorological expert, Joseph Spain, described a microburst as “an intensely descending
column of air that originates from inside a mesocyclone within a severe thunderstorm.” 149 Both
Dr. Mitchell and Dr. Spain agreed on various facts:
•
Mesocyclones are typically 2 to 6 miles in diameter;
•
Microbursts are less than two and a half miles wide and have peak winds
lasting less than 5 minutes;
•
Radar can detect mesocyclones, but not microbursts;
•
Most mesocyclones do not produce microbursts; and
•
Data from the KCRP WSR-88D radar in Corpus Christi can identify, at five
minute intervals, the presence or absence of mesocyclones in the general
area of the Gulf Copper dock.150
The experts disagreed, however, as to whether a microburst occurred at or near the Gulf Copper
dock at the time of the breakaway. Dr. Mitchell highlighted that the breakaway occurred well after
Hurricane Harvey reached its maximum sustained wind speeds of 111 miles per hour, with gusts
of 131 miles per hour.151 At the time of the breakaway, the hurricane’s sustained winds near Port
Aransas were 92 miles per hour, with gusts up to 115 miles per hour.152 Dr. Mitchell reasoned that
as the DPDS1 did not break away during the height of the storm, the lower wind speeds at the
moment of the breakaway could not have caused the mooring system to fail. Rather, he concludes,
a sudden and much stronger burst of wind must have caused the event. A microburst represents
the most likely cause of such a wind burst.
Mitchell Day 3 Tr., 106:9–14 (Doc. 450).
Spain Day 5 Tr., 54:22–24 (Doc. 452).
150 Mitchell Day 3 Tr., 145–148, 163 (Doc. 450); Spain Day 5 Tr., 53–56 (Doc. 452).
151 Mitchell Day 3 Tr., 99:15–17 (Doc. 450).
152 Mitchell Day 3 Tr., 142:20–143:2 (Doc. 450); Spain Day 5 Tr., 39:17–40:1 (Doc. 452).
148
149
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In contrast, Dr. Spain opined that no data directly evidenced a microburst at any point at
the Gulf Copper dock, and that the probability that a microburst occurred is “less than one
percent”.153 For example, he explained that for the time period of 10:30 p.m. to 11:00 p.m. on
August 25, the seven composite radar reports show that the closest mesocyclone to the Gulf
Copper dock was too distant for even a mesocyclone with an above-average-diameter to have
impacted the DPDS1.154
Based on the trial record, the Court finds that the most likely cause of the DPDS1’s
breakaway stemmed from hurricane winds of about 92–96 miles per hour exceeding the mooring
system’s capacity. The evidence does not support the occurrence of a microburst near the DPDS1
at the time of the breakaway. Rather, the winds, at the moment when they blew almost directly
perpendicular to the port side of the vessel, pushed the DPDS1 away from the dock and applied
greater force against the DPDS1 than the mooring lines could withstand. Although the reported
wind speeds were higher at an earlier point that evening, they also blew at an angle relative to the
DPDS1, reducing the effective strain on the mooring system. At the time of the breakaway, the
wind speed coupled with its direction (perpendicular to the port side) overwhelmed the mooring
system, even with the Signet tugs attempting to push the DPDS1 toward the dock.
8. Saturday, August 26, through Monday, August 28: The Ship Channel
Within half an hour of breaking away from the Gulf Copper dock, the DPDS1, unmanned
and without power, quickly drifted across the Corpus Christi ship channel and grounded near St.
Joseph Island.155
The morning after the breakaway, Schenkel stated that “we will leave the rig on the beach
over the next [few] days anticipating the storm will hit the rig again within 72 hours.”156 Paragon
and Signet discussed whether Signet tug boats could help monitor the DPDS1 at her grounded
Spain Day 5 Tr., 68:14–70:23 (Doc. 452).
Id. at 59–63.
155 Roy Aff., P.Ex.19-B (Doc. 439, 2); JPO, Admission of Fact ¶ 44 (Doc. 314, 39).
156 Schenkel Email, S.Ex.89 (Doc. 420-8, 1).
153
154
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location. During these discussions, Paragon requested that Signet provide its services under the
MCA. But Signet again stated that the in-harbor ship assist services would “continue to be
governed by our tariff”.157
Snyder testified that Paragon asked Signet to “keep an eye on” the DPDS1 and “monitor
where she was going”.158 Koenig agreed that Signet would “keep an eye on” the DPDS1, but he
recalled more specificity—i.e., that Signet would “keep one of their tugs at our ship watching over
[the vessel].”159 The Signet tug would “stay there and monitor the ship and stay close by to it”, in
order to “to prevent that [DPDS1] from drifting.”160 In addition, at night, the Signet tug could
keep a light on the DPDS1 to alert passing vessels and prevent them from alliding with the DPDS1.
Schenkel recalled that he or Koenig spoke with Snyder because they “wanted to have a tug close
by to at least to report whether the rig was moving or not”.161
Rear Admiral Joel Whitehead testified that maintaining a tug boat aside the DPDS1 “was
a prudent thing to do”, and believed that the port captain may have required as much. 162 He
expected that the Signet tug boat would have remained “close” to the DPDS1 to be able to hold it
in place. As he read the tug boat’s log books, an entry to “Hold DPDS1” was consistent with his
understanding of what the port captain required and what Paragon prudently would have hired
Signet to do.163
Signet assigned the tug boat CONSTELLATION to the job. Captain Tringali maneuvered
the vessel close to the DPDS1, but then reported that lines dangling off the vessel rendered it
impossible for the tug boat to safely come alongside the DPDS1 and remain there to keep the
drillship from moving. As a result, the CONSTELLATION did not station itself next to the DPDS1,
but remained at a nearby dock. The tug boat’s crew enjoyed line of sight of the DPDS1 during the
Oliver and Reid Emails, S.Ex.126 (Doc. 422, 1–3).
Snyder Day 5 Tr., 214:4-13 (Doc. 452).
159 Koenig Day 1 Tr., 251:24-252:2 (Doc. 448).
160 Id. at 252:5-13.
161 Schenkel Dep. (Vol. II), 145:6–8, P.Ex.45 (Doc. 446-1, 120).
162 Admiral Whitehead Day 3 Tr., 202:20-22 (Doc. 450).
163 Id. at 202-203; Marine Operation Log, P.Ex.27 (Doc. 441-8).
157
158
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day, and monitored the DPDS1 at night by radar. The crew could respond to any movement within
20 minutes due to the short distance between the dock and the DPDS1’s stranded location. On
the morning of Sunday, August 27, Signet confirmed that until Paragon personnel were able to
travel to Harbor Island, Signet would monitor the DPDS1. The parties agree that during this time,
the DPDS1 could be detected visually, by radar, and by GPS.
On the Saturday and Sunday after Hurricane Harvey made landfall, the weather reports
anticipated that the storm had the “potential to move back into the gulf next week.”164 And around
4:00 a.m. on Monday, August 28, the NHC warned that Tropical Storm Harvey was moving back
toward the coast. The reports indicated that “rain accumulations of 5 to 15 inches” were expected
to fall on the middle Texas coast, and that “[t]he combination of a dangerous storm surge and the
tide will cause normally dry areas near the coast to be flooded by rising waters moving inland from
the shoreline.”165
At mid-morning, the CONSTELLATION traveled by the DPDS1, visibly
inspected the vessel, and returned to the Gulf Copper dock.166 The drillship was “hard aground,
had a starboard list, [and] broken lines”.167
At 6:00 p.m., Captain Upton relieved Captain Tringali on the CONSTELLATION. Captain
Tringali briefed the incoming captain, telling him that “we were keeping an eye on the drilling
rigs, the Signet ENTERPRISE, the Signet ARCTURUS, and the drillship.”168 The DPDS1 could be
seen from their vantage point during the day with binoculars, but there were no lights in the
channel, so it was “pitch black” at nightfall.169 Captain Upton testified that at night, he had to rely
solely on radar to monitor the ship, and he would check the radar “every 30 to 60 seconds.”170
Around 7:00 p.m. on Monday evening, the DPDS1 refloated when Hurricane Harvey’s
return to the Gulf of Mexico caused the water level in the channel to rise and the wind speeds to
WeatherOps Tropical Daily Planner – Atlantic – Saturday, August 26, 2017, P.Ex.13 (Doc. 410-14, 398–99).
NHC Tropical Storm Harvey Advisory # 32A, P.Ex.13 (Doc. 410-14, 503–04).
166 Deck Log, P.Ex.27 (Doc. 441-11, 2).
167 Capt. Upton Day 4 Tr., 252:3–6 (Doc. 451).
168 Id. at 250:18–235.
169 Capt. Tringali Day 3 Tr., 290:3 (Doc. 450).
170 Capt. Upton Day 4 Tr., 250:24–251:3 (Doc. 451).
164
165
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increase, as predicted by the weather advisories early that morning.171 RigStat data recorded the
DPDS1’s movements, reflecting that the vessel refloated and drifted across the channel from
approximately 7:00 p.m. to 11:00 p.m.–i.e., over a four-hour period.172
The CONSTELLATION’s crew failed to detect the DPDS1’s initial movements, and did not
become aware that the DPDS1 was drifting until the United States Coast Guard notified Signet
Captain Josh Macklin, one of the two points of contact between the Coast Guard and Signet at
that time, who attempted “two or three times” to contact Captain Upton.173 Captain Macklin
finally reached Captain Upton, who reported that he was “chasing it down.”174 Captain Upton
testified that even after getting the call, he did not see any movement by the DPDS1 reflected on
the radar.175
In the end, the CONSTELLATION was unable to prevent the DPDS1 from alliding with the
University of Texas’s research pier on the south side of the channel, resulting in significant
damage to the pier. After the allision, Captain Upton maneuvered the CONSTELLATION up to
the DPDS1’s portside and pinned the DPDS1 against the shore. In the ensuing days, Signet
provided Paragon with three tugs to maintain the DPDS1 in place until the drillship could be
towed to another dock.
As has been noted, Paragon equipped the DPDS1 with Rigstat GPS, which reported the
vessel’s exact location and movement. The Rigstat device sounded an alarm if the DPDS1 moved.
Schenkel and another Paragon employee, Richard Sporn, became aware that the DPDS1 had
experienced initial movements on the morning of August 28.176 Despite this knowledge, at no
time during that day did they notify Signet, the Coast Guard, the local Pilot’s Association, or the
Port of Corpus Christi that the Rigstat device was suggesting movement by the DPDS1.
Koenig Day 1 Tr., 279–81 (Doc. 448).
Roy Aff., Paragon Trial Tx. P.Ex.19-B (Doc. 439).
173 Capt. Macklin Dep., 48-50, 57:20–24, P.Ex.54 (Doc. 446-10, 14–17).
174 Id. at 53:4.
175 Capt. Upton Day 4 Tr., 253:5–19 (Doc. 451).
176 Schenkel Dep. (Vol. II), 110:21 111:13, P.Ex.45 (Doc. 446-1, 112); Schenkel Email, S.Ex.91 (Doc. 420-10) (“Richard,
the trim and list suddenly started changing. Please check location. Sent me recent file with coordinates.”).
171
172
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9. Relocating the DPDS1
Once Hurricane Harvey fully cleared the area, Paragon began the process to move the
DPDS1 to the Gulf Marine Fabricators graving yard at Port Aransas.177 Paragon relied on three
Signet tugs to keep the DPDS1 in place on the ship channel shore during the week after the allision.
Signet invoiced for those service applying the Tariff rate, and Paragon paid the invoices in full.178
In late September, Crosby Tugs, LLC towed the DPDS1 from the Gulf Marine Fabricators
Dock to the International Shipbreaking Dock at the Port of Brownsville.179 Shortly thereafter,
Paragon had the drillship dismantled.180
II.
Procedural History and Alleged Damages
The Court possesses jurisdiction under the admiralty and maritime laws of the United
States. See 28 U.S.C. § 1333; FED. R. CIV. PROC. 9(h). Venue lies in this judicial district under 28
U.S.C. § 1391(b)(2) because a substantial part of the events or omissions giving rise to the claims
occurred in this district.
A. Complaints in Limitation
In September 2017, Paragon filed its Complaint in Limitation. Signet filed an Answer and
counterclaims.
In December 2017, Signet filed a Complaint in Limitation as owner of the ENTERPRISE.
Three months later, Signet filed a Complaint in Limitation as owner of the ARCTURUS. In each
matter, Paragon submitted a claim along with an Answer and Counterclaims.
On March 7, 2018, the Court consolidated the three limitation actions into this proceeding.
Those three cases have proceeded in tandem and were tried as a consolidated matter.
Three other parties filed claims: (1) Noble Drilling (U.S.) LLC; Noble Bob Douglas LLC;
and Noble Drilling NHIL LLC; (2) Certain Underwriters and Insurers of the University of Texas
Matthews Daniel Interim Report, P.Ex.10-B (Doc. 409-46, 19).
Signet Invoice 517935, S.Ex.293 (Doc. 433-4).
179 Signet and Paragon Stipulations of Fact, S.Ex.244 (Doc. 427-16).
180 Matthews Daniel Interim Report, P.Ex.10-B (Doc. 409-46, 8).
177
178
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as the Owner of the Port Aransas Research Pier and The University of Texas as Owner of the
Marine Science Institute; and (3) Gulf Copper & Manufacturing Corporation and Gulf Copper
Ship Repair, Inc. Each of these entities entered into settlement agreements with Paragon and
Signet and were dismissed from this matter.
In November 2017, at the inception of this case, the Court approved the value of Paragon’s
interest in the DPDS1 and its pending freight in the amount of $150,000, and added $18,000 in
interest to reflect a total limitation fund of $168,000.181 Paragon deposited this amount into the
registry of the Court. This amount was based on the post-casualty fair market value of the DPDS1,
as the vessel lay in the ship channel. In March 2019, Signet moved to increase Paragon’s limitation
fund on the grounds that the DPDS1 was sold for approximately $2.5 million six weeks after the
incident.182 The Court denied the motion, finding that the actual sales price did not controvert
the limitation value of $150,000.183
The Court also made findings as to the limitation fund in the limitation actions that Signet
filed as the owner of the ENTERPRISE and the ARCTURUS. As to the ENTERPRISE, the Court
approved the value of Signet’s interest in the tug and its pending freight in the amount of
$536,738.58, with interest at a rate of 6% per annum.184 As to the ARCTURUS, the Court
approved the value of Signet’s interest in the tug and its pending freight in the amount of
$11,536,738.58, with interest at a rate of 6% per annum.185
In July 2018, Paragon initiated a Third-Party Complaint against the American Club, which
filed an Answer.186 The American Club served as the protection and indemnity (P&I) marine
insurer for Signet at all times relevant to this lawsuit. On February 14, 2017, the American Club
Amended Order Approving Plaintiff in Limitation’s Ad Interim Stipulation for Value Directing Issuance of Notice
and Restraining Prosecution of Claims (Doc. 9).
182 Signet’s Motion for an Order to Increase Paragon Asset Company Ltd.’s Limitation Fund (Doc. 108).
183 Order (Doc. 173).
184 Signet Maritime Corporation as the Owner of the Tug SIGNET ENTERPRISE v. Liability, Civil Case No. 1:17cv247
(Order Doc. 6, Dec. 19, 2017).
185 Signet Maritime Corporation as the Owner of the Tug SIGNET ARCTURUS v. Liability, Civil Case No. 1:18cv035
(Order, Doc. 7, Feb. 28, 2018).
186 JPO, Admission of Fact ¶ 32 (Doc. 314, 37). (See Docs. 1., 10, 11, 74, 89, 92, 299, 300, 201, 372, and 373).
181
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issued a Certificate of Entry with respect to the ENTERPRISE and the ARCTURUS for the 2017/18
policy year. Paragon alleges that under the MCA, Signet bore responsibility to identify Paragon
as an insured under Signet’s insurance policy with the American Club. American Club responds
that as the Tariff and not the MCA applies to the services that Signet provided, the American Club
bears no insurance obligation as to Paragon.
B. Alleged Damages
Five vessels and two structures sustained damages: Paragon’s DPDS1, Signet’s tug boats
the ARCTURUS and the ENTERPRISE, the Noble semisubmersible oil rigs DANNY ADKINS and
JIM DAY, the University of Texas’s research pier, and the Gulf Copper pier. The parties entered
into settlements as to Noble, the University of Texas, and Gulf Copper, and Paragon. The Court
makes no findings as to the amount of the damages to the DANNY ADKINS, the JIM DAY, or the
piers.
With respect to the DPDS1 and the two tug boats, Paragon and Signet each seek various
categories of alleged damages. As to the DPDS1, Paragon seeks $4,135,401.00 in damages,
comprised of the following:
Category
Amount187
Tugs for Tow to Yard & from Yard to Port of
Brownsville
Regulatory Survey/Engineering Fees
Reactivation Survey by Insurance Agents
Project Management Team Labor
$ 9,953.00
$ 12,099.00
$2,871.00
Shipyard Labor
$2,934,642.00
Consulting Fees for Third Party
Engineering Companies
187
$1,072,473.00
$103,363.00
Paragon’s and Signet’s Revised Stipulations of Fact as to Their Contentions Regarding Damages (Doc. 392, 2–4).
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As to the ARCTURUS, Signet seeks $2,364,059.87 in damages, comprised of the following:
Category
Amount188
$ 37,055.74
$ 54,225.74
$ 1,517,311.08
$ 755,467.31
Salvage costs
Surveyor expenses
Repair costs
Loss of charter hire damages
As to the ENTERPRISE, Signet seeks $6,969,373.51 to $7,469,373.51 in damages,
comprised of the following:
Category
Wreck removal services
Surveyor expenses
Fair market replacement costs
Amount189
$1,735,607.78
$41,412.17
$5,150,000.00 –
$5,650,000.00
$42,353.56
Loss of charter hire damages
III.
CONCLUSIONS OF LAW
Paragon and Signet each claim that the other’s negligence proximately caused the damages
resulting from the DPDS1’s breakaway from the Gulf Copper dock when Hurricane Harvey made
landfall. In particular, Signet argues that Paragon unreasonably failed to act with sufficient speed
to evacuate the DPDS1 from the port, and having failed to do so, that Paragon utilized an
inadequate mooring system to keep the vessel at the dock during the storm. In response, Paragon
contends that it acted reasonably when considering whether to tow the DPDS1 out to sea, and that
unpredictable weather conditions and port events thwarted its efforts. In addition, Paragon
argues that Signet’s tug boats failed to fulfill their contractual obligations with respect to the
DPDS1.
The two parties devote significant argument to whether the MCA or the Tariff governs
Signet’s provision of tug boat services during Hurricane Harvey. This issue primarily impacts the
indemnity issues that the parties have raised. The Court will first determine the apportionment
188
189
Id.
Id.
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of liability as between Paragon and Signet, and will then turn to whether the MCA or the Tariff
governed during the relevant events.
A. Apportionment of Liability
Since 1975, courts in admiralty actions have applied the concept of comparative fault to
determine the respective liability for damages among the parties: “We hold that when two or more
parties have contributed by their fault to cause property damage in a maritime collision or
stranding, liability for such damage is to be allocated among the parties proportionately to the
comparative degree of their fault, and that liability for such damages is to be allocated equally only
when the parties are equally at fault or when it is not possible fairly to measure the comparative
degree of their fault.” United States v. Reliable Transfer Co., 421 U.S. 397, 411 (1975); see In re
Omega Protein, Inc., 548 F.3d at 370 (“In admiralty cases, federal courts allocate damages based
upon the parties’ respective degrees of fault.”). When making this determination, a court applies
a negligence analysis.
1. Maritime Negligence
“The elements of a maritime negligence cause of action are essentially the same as landbased negligence under the common law.” Withhart v. Otto Candies, LLC, 431 F.3d 840, 842 (5th
Cir. 2005). To establish maritime negligence, “a plaintiff must demonstrate that there was (1) a
duty owed by the defendant to the plaintiff; (2) a breach of that duty; (3) injury sustained by the
plaintiff; and (4) a causal connection between the defendant’s conduct and the plaintiff’s injury.
GIC Servs., L.L.C. v. Freightplus USA, Inc., 66 F. 3d 649, 659 (5th Cir. 2017). The element of
causation requires that the negligence be “a substantial factor” in the injury, although “[t]he term
‘substantial factor’ means more than ‘but for the negligence, the harm would not have resulted.’”
Donaghey v. Ocean Drilling & Exploration Co., 974 F.2d 646, 649 (5th Cir. 1992) (quoting Spinks
v. Chevron Oil Co., 507 F.2d 216, 223 (5th Cir. 1975)). In addition, the foreseeability of the
damages can affect the proximate-cause determination. See In re Signal Int’l, LLC, 579 F.3d at
490 n.12.
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In the seminal decision The Louisiana, the Supreme Court articulated that a shipmaster
must “use reasonable skill and care to prevent mischief to other vessels, and the liability is the
same whether his vessel be in motion or stationary, floating or aground . . . . In all these
circumstances the vessel may continue to be in his possession and under his management.” The
Louisiana, 70 U.S. 164, 169 (1865); see also Boudoin v. J. Ray McDermott & Co., 281 F.2d 81, 85
(5th Cir. 1960) ( “[A shipmaster] has . . . a special duty to take all reasonable steps consistent with
safety to [his] ship and her crew, to avoid or minimize the chance of harm to others.”). The
shipmaster owes the duty to those who would be foreseeably injured should the shipmaster fail to
take reasonable steps to keep its vessel from harming others or their property. See Prosser and
Keeton on Torts, Duty § 53 (5th ed. 1984); Harper, James & Gray, The Law of Torts, Scope of Duty
in Negligence Cases § 18.2 at 655 (2d ed. 1986) (“Duty . . . is measured by the scope of the risk that
negligent conduct foreseeably entails.”). Of particular relevance to the present case, the Fifth
Circuit has explained that “[a]llision with fixed structures is one of the principal risks of a vessel,
moored inland, that breaks from its negligently executed moorings.” In re Signal Int’l, LLC, 478
F.3d at 492.190
In cases involving storms, a court determines whether the vessel owner “took reasonable
precautions under the circumstances as known or reasonably to be anticipated”. Petition of U.S.,
425 F.2d 991, 995 (5th Cir. 1970). The shipmaster must act reasonably in the assessment of “the
severity of the impending storm” and must undertake “reasonable preparations in light of such
anticipation”. Id. A court holds the shipmaster to the standard of reasonableness of prudent
people familiar with the ways and vagaries of the sea. Id. With respect to docked vessels, three
factors prove particularly relevant to determine the scope of the duty that the shipmaster owes:
“Since there are occasions when every vessel will break from her moorings, and
since, if she does, she becomes a menace to those about her; the owner's duty, as
in other similar situations, to provide against resulting injuries is a function of
three variables: (1) The probability that she will break away; (2) the gravity of the
resulting injury, if she does; (3) the burden of adequate precautions.”
Neither Paragon nor Signet challenge that the property owners involved in this consolidated action fall within the
entities “foreseeably injured” from the DPDS1 breaking away from the dock.
190
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United States v. Carroll Towing Co., 159 F.2d 169, 174 (2d Cir. 1947).
In the present matter, the Court identifies two discrete events for which liability must be
apportioned: (1) the initial breakaway of the DPDS1 and the damages that Paragon, Signet, Noble,
and Gulf Copper incurred immediately after that breakaway; and (2) the re-floating of the DPDS1
on August 28 and the damages caused by the allision of the drillship with the University of Texas
research pier.
2. The Breakaway of the DPDS1
The Court concludes that Paragon failed to take reasonable precautions under the
circumstances as known or that it reasonably could have anticipated before Hurricane Harvey
made landfall in Port Aransas. A key factor as to whether Paragon acted reasonably is evaluating
Paragon’s assessment of the probability that the DPDS1 would break away from the dock in light
of the anticipated strength of the storm.
As to this factor, Paragon’s assessment proved
unreasonable on two important data points–the mooring system’s strength, and the hurricane’s
projected path, anticipated force, and arrival date.
As to the first data point, the trial record demonstrates that when Paragon considered
whether and when to tow the DPDS1 out to sea as Hurricane Harvey approached, company
decision makers knew or should have known that they possessed inaccurate information about
the mooring system installed to keep the DPDS1 docked. In other words, Paragon had no reliable
basis to determine whether the mooring system could withstand a tropical storm, much less a
hurricane.
Between May and June 2017, Paragon contracted Genesis to assess various mooring
systems. Paragon relied on those analyses to conclude that it should tow the DPDS1 out to sea if
a tropical system threatened to strike the Port Aransas area with anticipated wind speeds of at
least 63 miles per hour.
Paragon’s reliance on the Genesis analysis, however, proved
unreasonable. The initial Genesis report analyzed a 20-line system, but the record does not even
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suggest that Paragon ever used that many lines to moor the drillship. As for the final, August 24
report, experts from both parties agreed that Paragon provided inaccurate information to Genesis.
The experts compared the mooring lines that Genesis assumed for its analysis—and which
Paragon provided—against the available information about the lines actually used during the
hurricane. They identified material discrepancies between the data that Paragon reported to
Genesis, and the lines that most likely moored the DPDS1. In particular, on August 24, Paragon
asked Genesis to assume a mooring system with thirteen 3-inch Dyneema lines and two wirechain-wire combinations. The record reflects that Paragon never utilized such a system, and that
the actual lines included at least some weaker polyester lines. In addition, Paragon also asked
Genesis to assume certain tension values for the lines, but conceded that it never measured the
tension, rendering any assumed values suspect. In short, both sides’ experts agreed that on
August 24, Genesis assessed a mooring system that did not exist. In fact, no evidence clearly
demonstrates that any of the Genesis reports reflected a mooring system that Paragon actually
used.
Paragon knew—or should have known—that it provided faulty information to Genesis.
While some data points have inherent uncertainties, such as the impact of normal wear and tear
on mooring lines over time, other information is relatively easy to confirm, such as the type of line
used and its size. As shipmaster, Paragon held the best position to understand the system meant
to keep the DPDS1 at the dock. But it failed to obtain such data and, as a result, had no reasonable
grounds to rely upon any of the Genesis evaluations.191
One of a shipmaster’s primary responsibilities is to restrain a docked vessel adequately, so
that the vessel does not break away from the dock and impact nearby property. See Carroll
Towing Co., 159 F.2d at 172. Vessel owners can use a variety of restraining devices to fulfill this
duty. The shipmaster does not have to create a perfect system, but must install a reasonable
No evidence indicates that Paragon gathered such information, but then intentionally provided different data to
Genesis.
191
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system considering the risks of a breakaway at that location. Fulfilling that duty requires that a
vessel owner possess an adequate understanding of the installed system. Absent an accurate
understanding of the mooring system actually in place, a vessel owner has no basis on which to
conclude whether its mooring system can withstand an incoming storm. In essence, a shipmaster
without an accurate understanding of its own mooring system leaves the results to chance. In the
current matter, Paragon took this chance, and in doing so, fell short of fulfilling its duties under
maritime law.
As to the second data point, Paragon also acted unreasonably when assessing the strength
and anticipated arrival of Hurricane Harvey. It is instructive to recall Paragon’s own assessment
regarding the conditions that would require towing the DPDS1 out to sea. On August 2, Schenkel
had communicated his view on this issue: “[T]o be sure we leave port in time, the word ‘hurricane’
needs to be broadly interpreted as a severe storm.”192 He recommended that “the DPDS1 should
depart ([3] days prior land fall) when a storm is approaching with a predicted wind speed of
approx. [63+ miles per hour]”.193
In late August, Paragon disregarded Schenkel’s own recommendation. Monday, August
21, proved the critical moment. By 9:00 a.m. that morning, WeatherOps had released two reports.
The 4:00 a.m. report predicted that the tropical system would reach 65 mile per hour winds,
striking northern Mexico on Friday. Six hours later, the WeatherOps report placed Port Aransas
well within the storm’s long-term cone of uncertainty, although the predicted landfall remained
in northern Mexico. That report reduced the anticipated maximum winds to 57 miles per hour.
Two hours later, and based on these reports, Schenkel communicated to Koenig that while
concern existed, they had time before making a definitive decision regarding the DPDS1: “It seems
we don’t have to do anything yet.”194 He estimated that they had 24 hours to make a decision,
“since the speed is close to the acceptable speed of [63 miles per hour] to start preparing
Schenkel Email, S.Ex.271 (Doc. 429-10, 1–2).
Id.; see also Schenkel Dep. (Vol. I), 77:9–21, P.Ex.45 (Doc. 446-1, 21).
194 Schenkel Email, S.Ex.271 (Doc. 429-10, 4).
192
193
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departure.” Yester viewed that morning’s reports with even greater optimism, messaging that he
did not “see where we are in any danger unless something causes a drastic turn to the North.” 195
In contrast, Koenig testified that his recommendation that morning was to “take the DPDS1
out”.196 He agreed that Paragon should have made the decision to evacuate “immediately”.197
Instead, the decisionmakers decided “to wait and watch the weather for a little bit longer to see if
we really need to carry out that plan or not.”198
Schenkel and Yester reached their conclusions despite Port Aransas being within the cone
of uncertainty, and despite the fact that one report that morning had predicted maximum wind
speeds exceeding the 63 miles per hour benchmark. While the second report decreased the
estimated maximum wind speed to 57 miles per hour, the two reports, taken together, in no
manner communicated the absence of “any danger”. And six hours later, the next WeatherOps
report erased any doubts. Issued around 4:00 p.m., this report forecasted that the system would
make landfall in northern Mexico on Friday, August 25, with 70 mile per hour winds.199 The
Corpus Christi area remained well within the cone of uncertainty. Schenkel and Yester do not
appear to have communicated about this report, but based on Schenkel’s August 2
recommendation, this new information would have decidedly indicated that Paragon should tow
the DPDS1 out to sea. Rather than make such a decision, however, Paragon took no concrete steps
in response to the updated information.
Not only did Paragon’s decision to wait run counter to Schenkel’s earlier guidance, it also
was based on a faulty premise—i.e., that the Genesis evaluation was accurate. It was not, and
Paragon should have known as much. Given that Paragon did not have a reasonable basis on
which to gauge the strength of its mooring system, the only reasonable decision would be to
immediately evacuate the DPDS1 once the Port Aransas area fell within the cone of uncertainty
Yester Email, P.Ex.17-A-Part 1 (Doc. 410-31, 252).
Koenig Day 2 Tr., 41:13 (Doc. 449).
197 Id. at 43:13–15.
198 Id. at 42:11.
199 WeatherOps Tropical Disturbance Harvey Advisory # 24, P.Ex.13 (Doc. 410-14, 93).
195
196
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for any type of major storm, and certainly including a tropical storm. That moment arrived by no
later than the afternoon on Monday, August 21. Paragon has provided no compelling justification
for a delay beyond that point.
Paragon’s reactions to the Monday reports unquestionably delayed the evacuation of the
DPDS1, and more likely than not made the difference between towing the DPDS1 out to sea and
having the drillship ride out the storm at its dock. First, Schenkel’s and Yester’s perspectives
demonstrated a lack of urgency and full appreciation for the dangers that the tropical system
posed. At important junctures, they interpreted the weather reports in an overly optimistic
manner. For example, on Monday, they focused on the 9:00 a.m. report, which contained the
lowest forecasted maximum winds, instead of the prior and subsequent reports with higher
forecasted maximum winds. The next day, they chose to believe that the tropical system would
continue on a northward path, making landfall well north of Corpus Christi and placing the DPDS1
on the “clean side” of the storm, even though the Gulf Copper dock lay squarely within the cone
of uncertainty. Their interpretation of the reports led them to reject Koenig’s recommendation to
immediately issue an evacuation order and delayed urgent actions. For example, to obtain a
certain departure time with the port authorities, Paragon had to issue an evacuation order. Until
then, even if Signet communicated its readiness to tow out the drillship, Paragon could not ensure
an available departure time. Paragon did not issue the evacuation order until Wednesday. By
then, many factors lay beyond its control, but only due to Paragon’s own delayed response.
Captain Jay Rivera testified that if Paragon had placed an evacuation order on Monday, there
would have been a “pretty good chance and a high likelihood” that the DPDS1 would have been
towed out to sea before Hurricane Harvey’s arrival.200 Yester agreed that if Paragon had issued
the evacuation order on Tuesday, the DPDS1 “might have gotten out”.201 A reasonable shipmaster
would understand the urgency to make an evacuation decision, as the “chances [get] smaller as
200
201
Capt. Rivera Day 3 Tr., 283:12 (Doc. 450).
Yester Day 1 Tr., 109:9–13 (Doc. 448).
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time passes.”202 Instead of acting with urgency, Paragon chose to wait, hoping for a favorable
outcome, despite the unambiguous dangers that the reports communicated.
In addition, the experience of Rowan strongly suggests that had Paragon made the
definitive decision on Monday morning to evacuate its drillship, it is probable that Paragon would
have succeeded in doing so. Rowan moored two drillships near the DPDS1 at the Port of Corpus
Christi. On Monday morning, Rowan decided to evacuate those vessels, and ultimately succeeded
in doing so.203 Paragon could have followed a similar course. Notably, of the five drillships docked
along the Texas Gulf Coast, the DPDS1 was the only one not evacuated before Harvey made
landfall. Both Noble and Rowan successfully evacuated two of their respective docked drillships.
Paragon relies on Yester’s testimony that on Monday morning, he “decided to start
whatever process it took to get port clearance and tugboats and everything ready to go”,204 in case
Paragon chose to evacuate the drillship. While Yester appears to have taken some steps, he did
not file the Deadship Tow Application or communicate effectively with the port authorities. He
agreed that on Monday or Tuesday, he could have issued an order of evacuation, and then
rescinded it if the weather forecast improved. But he did not take this route. At best, on Tuesday,
he issued an internal “order to get ready to go”, rather than the official order of evacuation, which
Paragon did not issue until Wednesday.205 This delay precluded Paragon from obtaining a
definitive departure zone for the drillship.206
Paragon also argues that it acted in a timely manner, but that other factors thwarted its
decision to evacuate the DPDS1.
In particular, Paragon highlights the Navy’s decision on
Thursday, August 24, to evacuate several of its vessels, as well as another company’s vessels
having priority over Paragon’s for leaving the port. While it is true that these circumstances arose
Capt. Rivera Day 3 Tr., 283:23 (Doc. 450).
Id. at 300:3–21 (Doc. 450).
204 Yester Day 1 Tr., 71:7–9 (Doc. 448).
205 Id. at 108:25–109:1 (Doc. 448).
206 In addition, Paragon did not direct its in-house counsel to begin negotiating with his counterpart at Signet until
Wednesday. This delay further reveals a wait-and-see approach, rather than a level of urgency proportional to the
increasing threat from the storm.
202
203
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on Thursday, it is equally true that prudent shipmasters foresee such situations and factor them
into their decision-making timetable. A prudent shipmaster docked at a port that houses naval
vessels should anticipate that the Navy may evacuate before a threatening storm, and that those
vessels command priority over commercial vessels. A prudent shipmaster ascertains whether
other vessel owners possess port priority, so as to ensure that it properly weighs the additional
time required to evacuate its own vessels. In addition, Paragon notes that other unexpected
circumstances arose, such as mechanical problems that delayed the departure of another vessel
and the unanticipated rapid intensification of the storm.207 Such occurrences, however, fall within
matters that can arise in the normal course of implementing hurricane evacuation plans. A
prudent shipmaster cannot rely on a plan that assumes a best-case scenario with no sudden
changes in circumstances. Paragon appears to have been surprised by these developments, but
any surprise only underscores that Paragon failed to appreciate and take into account factors that
reasonable shipmasters would consider.
a. Paragon’s Defenses
Paragon relies on three primary defenses to reduce or negate its responsibility for the
damage that the DPDS1 caused after it broke away from the dock. The Court finds each argument
unpersuasive.
i. Signet’s Negligence
Paragon first contends that Signet did not exercise reasonable care when providing tug
boat services to the DPDS1 at the dock, and that Signet’s negligence led to the damages to the
various vessels and piers. The trial record, however, undermines this argument. No evidence
demonstrated that the Signet tugs ENTERPRISE and ARCTURUS rendered services negligently.
The tug boats possessed z-thrust propulsion systems, which enabled them to direct thrust in any
direction. With such systems, the tug boats could push the DPDS1 against the dock irrespective
207
Paragon’s Motion to Amend or Clarify (Doc. 464-1, 17–18).
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of whether the tug boats themselves were stationed perpendicular to the drillship. During the
storm, the tug boats reported that as the storm intensity increased, the captains of the two vessels
increased the thrust level. At the time of the breakaway, the captains ran their tug boats at 80%
thrust capacity. No witness testified that this thrust level was unreasonable. On the contrary,
Captain Taylor testified that no tug boat captain operates the vessel at 100% capacity for any
length of time, due to the stress that doing so places on the engine.208 In short, the evidence at
trial demonstrated that Signet’s captains operated their tug boats reasonably under the
circumstances and did not contribute to the DPDS1 breaking away from the dock.
ii. Force Majeure Defense
Paragon also argues that Hurricane Harvey represented an Act of God that negates any
liability that Paragon may otherwise bear.
General maritime law provides for a force majeure defense to liability. A party asserting
such a defense must satisfy two elements: (1) the weather was heavy; and (2) the shipmaster “took
reasonable precautions under the circumstances as known or reasonably to be anticipated.”
Petition of U.S., 425 F.2d at 995. The standard of reasonableness mirrors the analysis for
negligence–i.e., “that of prudent men familiar with the ways and vagaries of the sea”. Id. The
party asserting the defense bears the burden of proof. In re Marine Leasing Servs., 471 F.2d 255,
257 (5th Cir. 1973).
In the current matter, no party disputes that Hurricane Harvey brought heavy weather to
Port Aransas. The Fifth Circuit and its district courts have repeatedly found that storms like
Hurricane Harvey qualify as Acts of God. See, e.g., Boudoin, 281 F.2d at 88 (concerning Category
3 Hurricane Audrey, which made landfall with “[w]inds of over 100 mph, driving rain and a storm
tide of over 10 feet above mean sea level”); Petition of U.S., 425 F.2d at 993–94, 996 (describing
Category 3 Hurricane Betsy’s 120-150 mph winds as “vengefully furious” and “of unprecedented
force”); Pioneer Nat. Res. USA, Inc. v. Diamond Offshore Co., 638F. Supp. 2d 665, 690 (E.D. La.
208
Taylor Dep., 40:12–25, P.Ex.53 (Doc. 446-9, 12).
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2009) (describing Category 3 Hurricane Ivan as “a classic ‘Act of God’”); Valley Line Co. v.
Musgrove Towing Serv., Inc., 654 F. Supp. 1009, 1012 (S.D. Tex. 1987) (involving Category 3
Hurricane Alicia). And courts have concluded that Hurricane Harvey itself represented an Act of
God. See Landgraf v. Nat'l Res. Conservation Serv., No. 6:18-CV-0061, 2019 WL 1540643, at *2
(S.D. Tex. Apr. 9, 2019); see also In re Downstream Addicks, 147 Fed. Cl. 566 (2020).
Paragon fails, however, to establish that it “took reasonable precautions under the
circumstances as known or reasonably to be anticipated” in the days before the hurricane made
landfall. On the contrary, the Court has found that Paragon’s delayed decision and inadequate
mooring system represented unreasonably deficient actions by Paragon. As a result, Paragon
cannot rely on the force majeure defense.
The Fifth Circuit’s opinion in Boudoin proves instructive. In that case, a tug captain
secured his barge to a dock situated in the direct path of Hurricane Audrey, which made landfall
less than two days later. During the hurricane’s passage, the ship broke free of its moorings,
resulting in damage to a nearby dock. The Fifth Circuit acknowledged that the storm was “surely”
an Act of God, but concluded that the shipmaster could not rely on the force-majeure defense
because he failed to evacuate the vessel–i.e., he did not take the reasonable precaution under the
known circumstances to move the vessel upstream. Boudoin, 281 F.2d at 88; see also Crescent
Towing & Salvage Co. v. M/V CHIOS BEAUTY, No. CIV. A. 05-4207, 2008 WL 3850481 (E.D.
La. Aug. 14, 2008) (rejecting the defense because the shipmaster’s negligence in response to the
threat of Hurricane Katrina was a contributing cause to the resulting damages: “The defendants
either chose to ignore . . . information or misinterpreted it. In either case defendants did so at
their peril.”). In the same manner, Paragon’s delay in deciding to tow the DPDS1 out to sea
ultimately caused the drillship to remain at the dock. And Paragon’s inadequate mooring system
rendered the DPDS1 vulnerable to the force of Hurricane Harvey, leading to its foreseeable
breaking free of its moorings.
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iii. Assumption of Risk
With respect to the damage to Signet’s tug boats, Paragon argues that Signet willingly
undertook to place those tugs at DPDS1’s side to help keep the vessel from becoming unmoored
during Hurricane Harvey. In doing so, Signet understood that the storm represented a grave
threat of causing the drillship to break free. As any damage to Signet’s tug boats stemmed from
the very danger that Signet agreed to guard against–i.e., the breakaway of the DPDS1–Signet
cannot seek recovery from Paragon as to that damage.
Maritime law recognizes that contracted parties cannot recover for harm suffered from
“dangers which the contractor was hired to correct”. Duplantis v. Zigler Shipyards, Inc., 692 F.2d
372, 374–75 (5th Cir. 1982). The defense typically arises in the context of shipyard contractors
performing services for shipowners.
In those situations, courts have denied recovery to
contracted individuals who suffered injury when addressing the very problem the contractor was
hired to remedy. See, e.g., Hess v. Upper Mississippi Towing Corp., 559 F.2d 1030, 1033 (5th
Cir. 1977) (“[T]he duty to provide a safe place to work does not extend to protect employees of an
independent contractor from dangers the contractor was hired to correct.”).
In Hess, the
contractor agreed to remove residual gasoline and vapors from a vessel. An explosion during the
removal process injured one of the contractor’s employees. Because the shipmaster had not
controlled the removal process, the shipmaster owed no duty to protect the contractor’s employee
engaged in the dangerous process that the work entailed. Id. at 1036; see also Casaceli v. Martech
Int'l, Inc., 774 F.2d 1322, 1331 (5th Cir. 1985) (concluding that a shipmaster owed no duty to a
diver hired to repair a fouled propellor in muddy waters with significant debris, when the diver
died after his air hose snagged on the debris); Scindia Steam Nav. Co. v. De Los Santos, 451 U.S.
156, 172 (1981) (articulating the principles that “the shipowner has no general duty by way of
supervision or inspection to exercise reasonable care to discover dangerous conditions” on the
vessel, and that the shipowner is entitled to rely on an independent contractor to perform its work
with reasonable care).
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Paragon concedes that these cases concern a distinct context, but urges their “logical
application” to the present matter. The Court declines to do so. In Hess, Casaceli, and similar
cases, the contractors’ employees suffered harm when working directly with the dangerous
component that the work entailed. The employees had some level of control over their work so as
to mitigate the known danger. For example, the diver in Casaceli could take precautions against
his air hose becoming entangled with the known dangers of diving, such as debris. The employee
in Hess controlled the gas-removal process to help avoid explosions caused by the removal process
itself. The worker in Scindia could avoid remaining underneath a loaded pallet when moving
wheat bags. In these scenarios, the employees undertook dangerous work and possessed means
to reduce or avoid the inherent danger.
When the employees’ mitigation efforts proved
insufficient and harm ensued, the employees could not recover from the shipmaster. In contrast,
in the present case, Signet agreed to help keep the DPDS1 moored to the dock, but had no control
over whether the mooring system would suffice. Paragon contracted Signet to help strengthen
the overall system keeping the DPDS1 in place, but the presence of Signet’s tug boats neither
weakened the mooring system nor contributed to its failure. As a result, the line of cases
represented by Scindia, Casaceli, and Hess does not apply to the present context.
In essence, Paragon argues that it owed no duty to Signet, as opposed to the owners of
fixed structures in the area, because Signet willingly undertook the job to assist with holding the
DPDS1 at the dock. In making this argument, Paragon relies primarily on the law regarding
vessels under towage. Under the law of tug and tow, the towing contractor “must know all
conditions essential to the safe accomplishment of the undertaking or voyage”, including
assessing “the nature of the undertaking it assumes”, and becoming “sufficiently knowledgeable
about its vessel, its customer’s ship and the interaction of the two upon the sea.”209 In this matter,
however, Signet never undertook the tow of the DPDS1, and at no point did Paragon relinquish
custody of the DPDS1 to the Signet tugs. As a result, the law of tug and tow does not apply. Rather,
209
Paragon’s Motion to Amend or Clarify (Doc. 464-1, 13–14).
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the principles of general maritime negligence control, and under those authorities, Paragon owed
a duty to those who would be foreseeably injured should Paragon as shipmaster fail to take
reasonable steps to keep the DPDS1 from harming others’ property. By contracting Signet to
assist in keeping the DPDS1 at the dock, Paragon did not shift to Signet the duties that Paragon
owed to ensure that the drillship was properly moored to prevent allision with objects within the
scope of danger should the mooring system fail. And Signet did not waive the right to seek
compensation should Paragon’s negligence damage the Signet tugs involved in the hold-in-place
operation. Even if the law of tow and tug applied, Signet at most would have waived the ability to
“complain about a condition of unseaworthiness or other weakness that caused the loss if it knew
of the condition and failed to use reasonable care under the circumstances.” King Fisher Marine
Serv., Inc. v. NP Sunbonnet, 724 F.2d 1181, 1184 (5th Cir. 1984). Here, Signet had no opportunity
to determine whether the DPDS1’s mooring system would prove adequate to withstand Hurricane
Harvey. Although Signet could see the mooring system, a mere visual inspection would not place
the company on notice of the system’s strength in tempestuous conditions.
b. Resulting Allocation of Liability
The Court concludes that Paragon’s negligence caused the DPDS1 to break away from the
dock, resulting in foreseeable damages to the Gulf Copper dock, the Signet tug boats, and the
Noble semisubmersible oil rigs. As a result, the court allocates full responsibility on Paragon for
those damages. In addition, to the extent that the DPDS1 suffered damage from the initial
breakaway, Paragon is solely responsible for those damages.
c. Limitation of Liability
The Limitation of Liability Act provides that “the liability of the owner of a vessel for any
claim, debt, or liability . . . arising from . . . any act, matter, or thing, loss, damage, or forfeiture,
done, occasioned, or incurred, without the privity or knowledge of the owner . . . shall not exceed
the value of the vessel and pending freight.” 46 U.S.C. § 30505(a)–(b); see also SCF Waxler
Marine, L.L.C. v. Aris T M/V, 24 F.4th 458, 473 (5th Cir. 2022). Whether a vessel owner is
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entitled to limitation is a two-step inquiry: (1) What “acts of negligence or conditions of
unseaworthiness caused the accident”? and (2) Did the vessel owner have privity or knowledge of
those negligent acts or unseaworthy conditions? Farrell Lines Inc. v. Jones, 530 F.2d 7, 10 (5th
Cir. 1976).
“[I]f the vessel’s negligence or unseaworthiness is the proximate cause of the
claimant’s loss, the [ship owner] must prove it had no privity or knowledge of the
unseaworthy conditions or negligent acts.” Trico Marine Assets Inc. v. Diamond B Marine
Servs. Inc., 332 F.3d 779, 789 (5th Cir. 2003).
When a corporation owns the vessel, “knowledge . . . is judged not only by what the
corporation’s managing officers actually knew, but also by what they should have known.” Id. at
789–90. That is, if the unseaworthy “condition could have been discovered through the exercise
of reasonable diligence” by a managing agent, a corporate owner is deemed to have knowledge of
it and cannot limit its liability. In re Omega Protein, Inc., 548 F.3d 361, 371 (5th Cir. 2008)
(quoting Brister v. A.W.I., Inc., 946 F.2d 350, 356 (5th Cir. 1991)). “Managing officers” includes
executive officers, managers, vessel captains, or other employees who had authority over the
sphere of activities in question.’” In re Signal Int’l, LLC, 579 F.3d 478, 496 (5th Cir. 2009)
(quoting Petition of Kristie Leigh Enters. Inc., 72 F.3d 479, 481 (5th Cir. 1996)). The Fifth Circuit
has articulated a number of non-exhaustive factors that courts may consider to determine
whether an employee is a managing agent, including the scope of the employee’s authority
regarding the relevant field of operations, “the relative significance of this field of operations to
the business of the corporation, and the duration of the employee’s authority. In re Hellenic Inc.,
252 F.3d 391, 397 (5th Cir. 2001).
“Seaworthiness is defined as reasonable fitness to perform or do the work at hand.”
Farrell Lines, Inc., 530 F.2d at 10 n.2. As both the seaworthiness analysis and the negligence
analysis rely on the reasonableness standard, a finding of negligence will overlap with a finding of
unseaworthiness. Id. Proper equipment, such as proper mooring lines, are an indicator of
seaworthiness. Id. at 12.
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Applying these principles to the trial record, the Court concludes that Paragon is not
entitled to limitation of liability. First, the design of the DPDS1’s mooring system and Paragon’s
decision regarding evacuation fell within Schenkel, Koenig, and Yester’s scopes of authority, all of
whom qualify as Paragon’s managing agents. As previously described, Paragon acted negligently
by delaying its decision to evacuate and by mooring the drillship with an inadequate system, which
rendered the DPDS1 unseaworthy. Second, Paragon possessed privity or knowledge of these
negligent acts, as its managing agents—Yester, Koenig, and Schenkel—knew or should have
known that the DPDS1’s mooring system was incapable of withstanding the conditions of the
incoming storm, and by their delay in ordering the DPDS1’s evacuation until Wednesday, August
23.
3. The Allision with the Research Pier
On August 28, the DPDS1 refloated, moved across the ship channel, and allided with the
University of Texas research pier. As to this casualty, the Court concludes that both Signet and
Paragon acted unreasonably, and that each party’s respective negligence contributed to the
allision.
A shipmaster must “use reasonable skill and care to prevent mischief to other vessels, and
the liability is the same whether his vessel be in motion or stationary, floating or aground . . . .”
The Louisiana, 70 U.S. at 169; see also Boudoin, 281 F.2d at 85 ( “[A shipmaster] has . . . a special
duty to take all reasonable steps consistent with safety to this ship and her crew, to avoid or
minimize the chance of harm to others.”). In the present case, Paragon had a duty to take
reasonable precautions to ensure that the DPDS1 did not move from its grounded position, or that
if it did, that it would not allide or collide with nearby vessels and property. In large measure,
Paragon contracted with Signet to satisfy this duty. Paragon possessed no vessels of its own that
could aid the DPDS1, and Signet’s tug boats remained available to assist.
As for Signet,
“[a]lthough a tug is neither a bailee nor an insurer of the tow it is obligated to provide reasonable
care and skill ‘as prudent navigators employ for the performance of similar services.’” King Fisher
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Marine Serv., Inc., 724 F.2d at 1184 (quoting Stevens v. The White City, 285 U.S. 195, 202
(1932)).210
As a starting point, the Court concludes that Signet agreed to not only maintain a tug boat
in the general vicinity of the DPDS1 to monitor it, but to also take measures to control the drillship
should it re-float. Signet disputes this issue, claiming that it agreed to solely monitor the DPDS1,
and that it did so from a dock situated about a mile away, from which the CONSTELLATION’s
crew had a line-of-sight to the DPDS1 during the day, and radar for nighttime monitoring.
According to Signet, the CONSTELLATION could mobilize and reach the DPDS1 within about 20
minutes. The trial record, however, reveals that Signet’s duty went beyond merely monitoring the
drillship. Although Snyder testified that Signet only agreed to “keep an eye on” the DPDS1 and
“monitor where she was going”, Koenig recalled that Signet would “keep one of their tugs at our
ship watching over [the vessel]”, so as to “to prevent [the DPDS1] from drifting.” 211
The
CONSTELLATION’s log book confirms that Captain Tringali understood his duty to be to “Hold
DPDS1”, consistent with Koenig’s testimony. The Court accepts Koenig’s testimony as evidencing
the agreement’s scope.
In any event, the CONSTELLATION neither reasonably monitored the DPDS1 nor took
any measures to prevent it from alliding with other vessels and property. During the evening of
Monday, August 28, the DPDS1 refloated and moved approximately one mile across the ship
channel over a period of four hours. While the CONSTELLATION’s Captain testified that he
monitored the radar regularly, he failed to notice the DPDS1’s movement. He became aware that
the DPDS1 had refloated only when the Coast Guard notified Signet. By then, it was too late. Once
the Captain received notification, he immediately attempted to intercept the DPDS1, but the tug
boat arrived after the drillship allided with the University of Texas research pier. Once at the
In connection with these events, Signet did not undertake a tow of the DPDS1. As a result, as with the events of
August 25, the law of tug and tow does not govern.
211 Koenig Day 1 Tr., 252:5–13 (Doc. 448).
210
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scene, the CONSTELLATION successfully pinned the DPDS1 to the shore to prevent it from
moving again.
These facts demonstrate that Signet failed to properly monitor the DPDS1 and did not take
reasonable actions to prevent the allision with the research pier. Had the CONSTELLATION
remained next to the DPDS1 or effectively monitored the radar, the tug boat would have
undoubtedly reached the drillship before it allided with the research pier, and the
CONSTELLATION could have taken steps to prevent the allision. As a starting point, the weather
forecasts rendered foreseeable that the DPDS1 would refloat. In particular, after Hurricane
Harvey traveled inland, WeatherOps and the National Hurricane Center issued reports predicting
that the hurricane would return to the Texas coast, bringing turbulent weather, heavy rainfall, and
rising waters in the Port Aransas area. These forecasts placed Signet and Paragon on notice that
the DPDS1 would likely refloat once the water level rose. In light of such information, Signet, as
a prudent tug boat owner, should have ensured accurate and constant monitoring of the DPDS1,
from a position that would enable the tug boat to prevent the drillship from alliding with other
vessels. As it turned out, the CONSTELLATION’s inadequate monitoring of the DPDS1 provided
the tug with no opportunity to even attempt to alter the drillship’s course before the allision.
Signet responds that loose wires on the DPDS1 rendered it unsafe for the tug boat to get
close to the drillship when it lay grounded, and that, as a result, it would have been impossible for
the CONSTELLATION to prevent the DPDS1 from refloating and alliding with other property.
The trial record, however, negates this argument. Swiftly after the allision, the CONSTELLATION
successfully located a safe location on the DPDS1 that enabled the tug boat to pin and maintain
the drillship immobile. As the DPDS1’s movement across the ship channel proved relatively
slow—i.e., covering about a mile over a four-hour period—had the CONSTELLATION monitored
the DPDS1 adequately, the tug boat would have had ample opportunity to locate a safe area on the
drillship that the tug boat could utilize to alter the drillship’s trajectory to avoid any allision.
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At the same time, Paragon also bears responsibility. The company reviewed the weather
forecasts leading up to the allision indicating that conditions would render it likely for the DPDS1
to refloat. And the parties agree that at all times, Paragon maintained access to the Rigstat GPS,
which reported the DPDS1’s exact location and movement and sounded an alarm if the DPDS1
moved.
Schenkel and another Paragon employee first became aware that the DPDS1 had
experienced initial movements on the morning of August 28. Despite this knowledge, at no time
during that day did Paragon notify Signet, the Coast Guard, the local Pilot’s Association, or the
Port of Corpus Christi that the Rigstat device was suggesting movement by the DPDS1.
Had Paragon notified Signet of the DPDS1’s movement, Signet could have mobilized the
CONSTELLATION to either prevent the DPDS1 from moving further, or to guide the DPDS1 to a
safe location. As shipmaster, Paragon maintained a duty to take reasonable steps to prevent its
drillship from harming other’s property. Although it contracted with Signet, doing so did not
absolve Paragon of all responsibility, especially when Paragon remained in a position to assist
Signet by providing important information that could have aided the CONSTELLATION. See
King Fisher Marine Serv., Inc., 724 F.2d at 1184 (explaining that “a tug is neither a bailee nor an
insurer of the tow”); Zurich Ins. Co. v. Crosby Tugs, L.L.C., 46 Fed. App’x. 732, *1 (5th Cir. 2002)
(unpublished) (“A tug is neither a bailee nor an insurer of its tow . . . .”). Paragon inexplicably
chose to not convey that data to Signet. In failing to do so, Paragon acted unreasonably as
shipmaster.
Both Signet and Paragon, had they fulfilled their respective duties properly, could have
prevented the DPDS1’s allision with the University of Texas research pier. At the moment that
the DPDS1 lay grounded in the ship channel, the critical need was to prevent it from moving, and,
if that could not be prevented, to keep it from alliding with others’ property. Signet and Paragon
each possessed a duty to take reasonable actions to prevent such an allision, and each had the
means to enable the CONSTELLATION to intercept the DPDS1 in a timely manner. Neither
fulfilled its duty. The Court concludes that each party was equally responsible for the allision with
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the research pier. As a result, the Court allocates 50% responsibility on each party for the damage
to the University of Texas’s property.
B. Governing Contracts
Having determined the allocation of liability as between Paragon and Signet for each of
the two distinct occurrences between August 25 and 28, the Court turns to whether the parties
entered into a written contract for the services that Signet provided. Paragon claims the MCA
governs, while Signet argues that its Tariff controls. Each contract contains differing insurance
obligations and indemnity provisions that could impact the parties’ ultimate responsibility for the
damages that occurred after the DPDS1 broke away from the Gulf Copper dock.
General rules of contract law apply to maritime contracts. Marine Overseas Servs., Inc.
v. Crossocean Shipping Co., 791 F.2d 1227, 1234 (5th Cir. 1986). Whether a contract is a maritime
contract depends on the “nature and character of the contract” and “whether it [references]
maritime service or maritime transactions.”212 Norfolk Southern Railway Co. v. Kirby, 542 U.S.
14, 24 (2004) (citations omitted). Courts apply federal common law to resolve maritime disputes,
and state contract law may be used to supplement federal law where it is not inconsistent with
admiralty principles. Albany Ins. Co. v. Anh Thi Kieu, 927 F.2d 882, 866 (5th Cir. 2015); see also
E. River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 864–65 (1986) (“Drawn from
state and federal sources, the general maritime law is an amalgam of traditional common-law
rules, modifications of those rules, and newly created rules.”).
The Restatement (Second) of Contracts, which is recognized as instructive by both federal
and Texas law, defines a contract as a “promise or set of promises for the breach of which the law
gives a remedy, or the performance of which the law in some way recognizes a duty.” Restatement
(Second) of Contracts § 1 (1981). A contract is formed when at least two parties reach a “meeting
of the minds” on all essential terms of the contract. Fischer v. CTMI, L.L.C., 479 S.W.3d 231, 237
(Tex. 2016). “The determination of a meeting of the minds, and thus offer and acceptance, is
212
The parties do not dispute that the MCA and the Tariff each represent a maritime contract.
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based on the objective standard of what the parties said and did and not on their subjective state
of mind.” In re Capco Energy, Inc., 669 F.3d 274, 280 (5th Cir. 2012) (citations omitted); see
also Haws & Garrett Gen. Contractors, Inc. v. Gorbett Bros. Welding Co., 480 S.W.2d 607, 609
(Tex. 1972). Essential terms are those that “parties would reasonably regard as ‘vitally important
ingredient[s]’ of their bargain.” Fischer, 479 S.W. 3d at 237 (quoting Neeley v. Bankers Tr. Co.,
757 F.2d 621, 628 (5th Cir. 1985)). In general, the scope and nature of the services to be performed
would be an essential term.
“Whether a signature is required to bind the parties is a question of the parties’ intent.”
Huckaba v. Ref-Chem, L.P., 892 F.3d 686, 689 (5th Cir. 2018). To ascertain the parties’ intent at
the time of contracting, courts must “consider the entire writing in an effort to harmonize and
give effect to all the provisions of the contract so that none will be rendered meaningless.” J.M.
Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003). Signatures are not required where
the parties have agreed to the essential terms of a contract and “there is no evidence of an intent
to require both signatures as a condition precedent to it becoming effective as a contract”. Perez
v. Lemarroy, 592 F. Supp. 2d 924, 930 (S.D. Tex. 2008).
1. The Master Charter Agreement
Paragon contends that the MCA governs Signet’s provision of tug boat services related to
the DPDS1 during Hurricane Harvey. Signet responds that the two companies never reached a
meeting of the minds as to this contract. Based on the trial record and the applicable law, the
Court concludes that Paragon and Signet did not agree that the latter would provide tug boat
services under the MCA to help keep the DPDS1 at the dock during Hurricane Harvey.
Both parties accept that in 2015, they signed the MCA. That document, however, did not
represent a binding contract for any specific performance of services. Rather, the MCA provided
a framework through which the two companies could contract for specific services. See Great
Circle Lines, Ltd. v. Matheson & Co., 681 F.2d 121, 125 (2d Cir. 1982) (describing the first stage of
a charter agreement as negotiating the “bare-bones” of the contract). By its own terms, the MCA
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did “not obligate [Signet] to charter their vessels to [Paragon], nor [ ] obligate [Paragon] to hire
any vessel or vessels owned by [Signet]”.213 As a result, at trial, Paragon had to prove that Signet
specifically agreed that the MCA would govern for the charter of tug boat services actually
provided.
Beginning on Wednesday, August 23, Paragon’s and Signet’s respective corporate counsel
began discussions regarding Signet’s anticipated tow out of the DPSD1. Consistent with the
framework that the MCA provided, they exchanged e-mails focused on Part II of the MCA. In
particular, Signet requested revisions to the standard insurance and indemnity provisions. This
focus stemmed from the uncommon risks that Hurricane Harvey presented for the anticipated
tow out services. As a result, the insurance and indemnity provisions represented an essential
term that the parties negotiated. Late that evening, their communications reflected an agreement
on all material terms, and Paragon requested that Signet’s counsel prepare the BIMCO.
Importantly, at that moment, both counsel understood that Signet’s services would entail towing
the DPDS1 out to sea. That understanding continued the following morning around 5:00 a.m.,
when Signet’s counsel agreed to “generate the BIMCO agreement for today’s tow”.214
About three hours later, Signet’s Captain Gibson informed Snyder that the Coast Guard
was closing the Port of Corpus Christi and that the DPDS1 would not leave the port. At that
moment, the parties’ agreement regarding the MCA became moot, as any agreement had
envisioned towing the DPDS1 out to sea. The project shifted to keeping the DPDS1 at the dock,
which represented a material change in the nature of the services that Paragon requested from
Signet. The two services—i.e., towing the drillship out to sea and maintaining the DPDS1 at her
dock—entailed different risks, duties, and obligations. And neither Paragon nor Signet considered
the two options interchangeable.
213
214
Master Charter Agreement, P.Ex.4 (Doc. 409-2, 1).
Reid Email, P.Ex.17-A-Part 1 (Doc. 410-31, 273).
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Given that the services that Paragon sought to purchase from Signet materially changed
on the morning of August 24, Paragon had to demonstrate that Signet agreed to provide the new
services under the MCA. And as to this point, the evidence is unambiguous: Signet expressly
refused to do so. On the morning of Thursday, August 24, Snyder (Signet) spoke with Schenkel
(Paragon). Schenkel expressed Paragon’s preference “to use the old contract”—i.e., the MCA.
Snyder responded directly: “I said, absolutely not, sir, it’s very dangerous to use that.” 215 While
Schenkel does not remember this conversation, he does not contest that it occurred, and the Court
finds that it did. As a result, Paragon cannot demonstrate that Signet agreed that the MCA would
govern the provision of tug boats to assist in keeping the DPDS1 at the dock during Hurricane
Harvey.
Other factors further demonstrate that Signet did not agree to provide tug boat services
under the MCA. First, the parties never completed the BIMCO on the morning of August 24,
despite Signet’s counsel’s agreement to do so. While the MCA did not require a signed Charter
Order, the fact that the parties expressly anticipated signing the document for the planned tow
out operation, and then never followed through with the signatures, indicates that both parties
understood that the MCA was no longer relevant to the new services that Signet would provide.
Signet emphasizes that the absence of a signed BIMCO automatically meant that the MCA could
not control. The MCA, however, did not require as much. On the contrary, the MCA expressly
contemplated that “[u]pon reaching an agreement to charter a vessel from Signet”, the parties
“may issue” a Charter Order, which included the BIMCO (Part I) and that contained the agreed
terms.216 This language within the MCA unambiguously reflects that the parties could reach “an
agreement” before they issued a Charter Order, and that the MCA did not require the issuance,
much less the signing of, a Charter Order for the MCA to apply. Still, while the MCA did not
require a signed Charter Order, the absence of a signed document, in the context of the parties’
215
216
Snyder Day 5 Tr., 203:1–10 (Doc. 452).
Master Charter Agreement, P.Ex.4 (Doc. 409-2).
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negotiations, demonstrates that Paragon understood that the MCA would not control for the
services that Signet ultimately provided.
Second, the MCA’s own language runs counter to Paragon’s attempt to enforce it as an
agreement. Paragon focuses on Paragraph 1.3 of the MCA, which indicated that the document
“shall control and govern in all situations in which [Signet] charter[ed] to [Paragon] a vessel or
vessels”.217 Paragon also explains that under the MCA’s language, the contract would “control and
govern, absent a separate written charter specifically made applicable.” This argument, however,
fails to take into account the entire MCA. “A maritime contract. . . should be read as a whole and
its words given their plain meaning unless the provision is ambiguous.” Weathersby v. Conoco
Oil Co., 752 F.2d 953, 955 (5th Cir. 1984). Part II of the BIMCO clarified that the MCA applied to
“offshore activities” and “voyages.”218 In the present case, the anticipated towing of the DPDS1
out to sea involved a “voyage” to an “offshore” location—i.e., the Gulf of Mexico. In contrast,
assigning tug boats to help keep the DPDS1 at its docked location involved no voyage, much less
one offshore. The first project fell within the plain meaning of the MCA’s terms, but the latter
project did not.
And third, the parties’ conduct proves illustrative. In spring and early summer 2017,
Signet provided tug boat services to Paragon for the DPDS1 on several occasions. In particular,
Signet’s tug boats helped keep the DPDS1 from breaking away from its dock when passing vessels
caused water surges. For these services, Signet’s invoices to Paragon applied pricing consistent
with the Tariff, and Paragon paid those invoices without objection. No party presented evidence
that for the provision of these services, the parties discussed the MCA or sought the completion
or signature of the BIMCO. In contrast, in August, when Paragon contemplated towing the DPDS1
out to sea, the parties initiated discussions specific to the MCA. In addition, another example
arose in September, after Hurricane Harvey cleared the area. Signet provided tugs to hold the
217
218
Id.
Id. at 11.
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DPDS1 stationary in its grounded position on the ship channel shore, until it was towed to a
shipyard for repairs. Later, Signet and Paragon discussed the possibility of Signet towing the
drillship to Brownsville, Texas, to be scrapped. For the initial in-port services, the parties never
discussed the MCA and Signet invoiced Paragon under Tariff rates. For the tow to Brownsville,
the parties prepared a BIMCO form under the MCA.219 As with previous engagements, for inharbor services, the parties applied the Tariff with no mention of the MCA. For the voyages, the
reverse occurred.
For these reasons, the Court concludes that Paragon and Signet did not agree that the MCA
would govern when Signet provided tug boat services to help keep the DPDS1 at the dock during
Hurricane Harvey.
2. The Tariff
The Court’s conclusion that Signet and Paragon did not agree to operate under the MCA
for the services that Signet actually provided does not necessarily require the determination that
the Tariff governed. Signet and Paragon could have reached no agreement on any written
contract. At trial, Signet bore the burden to demonstrate that the parties reached a meeting of the
minds to operate under the Tariff’s terms. And based on the record and the applicable law, the
Court concludes that they did.
As an initial matter, the Court has found that on Thursday, August 24, Paragon’s and
Signet’s principals discussed and agreed that Signet would provide tug boats to help keep the
DPDS1 in place, under the terms of the Tariff. Snyder provided clear testimony on this issue;
Schenkel did not dispute that the discussion occurred. In addition, about two hours before that
conversation, Snyder e-mailed his Signet colleagues that Signet desired to provide the services
under the Tariff: “We need to pass onto [Paragon’s representatives] we’ll operate under our tariff
for this.” While Paragon did not see that e-mail, the communication corroborates Snyder’s
219
BIMCO Form, P.Ex.17-A-Part 2 (Doc. 410-32, 101).
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recollection of his conversation with Schenkel about two hours later and lends credibility to his
testimony regarding their discussion.
The oral nature of the agreement poses no difficulties to Signet. Maritime law recognizes
the validity of oral contracts. See Kossick v. United Fruit Co., 365 U.S. 731, 734 (1961); John W.
Stone Oil Distributer, L.L.C. v. Penn Maritime, Inc., 2018 WL 6018804, No. 17-4942 c/w 17-5700
(E.D. La. Nov. 16, 2018). Under federal maritime law, an oral agreement can incorporate the
terms of a written document, such as the Tariff, by reference. See, e.g., Complaint of Moran
Philadelphia, 175 F. Supp. 3d 508, 522 (E.D. Pa. 2016) (concluding that a written Schedule of
Rates, Terms, and Conditions was incorporated into an oral towage contract). While the record
does not reflect that Signet sent the Tariff to Paragon before August 2017, Signet published the
document. Within the maritime industry, courts have recognized the enforceability of published
tariffs. See, e.g., One Beacon Ins. Co. v. Crowley Marine Servs., Inc., 648 F.3d 258, 268 (5th Cir.
2011) (finding that contract terms posted on a website were incorporated by reference because the
terms were easily accessible to the party and unambiguously incorporated into the agreement);
John W. Stone Oil Distributor, L.L.C., 2018 WL 6018804, at *8 (enforcing a tug company’s tariff
even though the other party did not sign a copy of the document). Additionally, “[c]ertain longstanding customs of the shipping industry”, such as the use of tariffs, “are crucial factors to be
considered when deciding whether there has been a meeting of the minds on a maritime contract.”
Great Circle Lines, Ltd., 681 F.2d at 125.
The course of dealing between Paragon and Signet further supports the enforceability of
the Tariff for the services that Signet provided. A course of dealing is “a sequence of previous
conduct between the parties to an agreement which is fairly to be regarded as establishing a
common basis of understanding for interpreting their expressions and other conduct.’” One
Beacon Ins. Co., 648 F.3d at 265 (quoting Restatement (Second) Contracts § 223 (1981)). Courts
may infer that the parties “were aware of and consented to [ ] additional contractual terms” based
on as few as three or four transactions. One Beacon Ins. Co., 648 F.3d at 265 (concluding that
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eight prior transactions between the parties established a course of dealing); see also Royal Ins.
Co. v. Sea-Land Serv., Inc., 50 F.3d 723, 727 (9th Cir. 1995) (relying on three invoices as evidence
of a course of dealing).
In the present matter, between May and June of 2017, Signet provided tug boat services
on at least five occasions to assist the DPDS1 at the Gulf Copper dock, and Signet invoiced Paragon
for these services in accordance with the Tariff. Paragon paid for those services without objection.
Although the invoices did not explicitly reference the Tariff, it is reasonable to infer that Paragon
was aware that the charges were based on the Tariff’s terms, as that practice is consistent with
maritime industry customs. The Court finds that these previous transactions established a course
of conduct between the parties. In August 2017, when Snyder asked Schenkel to accept the Tariff,
Snyder could rely on those previous transactions to establish that Paragon understood and
assented to the full terms for the contract, even if the two men did not discuss all those terms in
their conversation.
Paragon advances various arguments against the formation and enforceability of the
Tariff, but none of those arguments prevail.
First, Paragon contends that under Paragraph 5 of the Tariff, the agreement did “not cover
Services to vessels aground or in distress, including assistance to a deadship . . . , or when Services
are performed during heightened Coast Guard port conditions.”220 Under federal maritime law
and Texas law, however, a party may unilaterally waive a provision of a contract that is solely
intended for that party’s benefit. See, e.g., Shute v. Thompson, 82 U.S. 151 (1872); Johnson v.
Structured Asset Servs., LLC, 148 S.W.3d 711, 722 (Tex. App.—Dallas 2004, no pet.). “Waiver is
an intentional relinquishment of a known right or intentional conduct inconsistent with claiming
that right.” Sun Expl. & Prod. Co. v. Benton, 728 S.W.2d 35 (Tex. 1987); see also Bott v. J.F. Shea
Co., 388 F.3d 530 (5th Cir. 2004) (finding that the subcontractor’s conduct implicitly waived a
2016 Signet Ingleside Tariff, S.Ex.1 (Doc. 414, 5). The Court previously concluded that the DPDS1 was not a
deadship under the Limitation of Shipowners’ Liability Act. Paragon Asset Co. Ltd. V. Gulf Copper & Manufacturing
Corp., et al., 519 F. Supp. 3d 424, 429 (S.D. Tex. 2021).
220
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contractual requirement to name a party as an additional insured on its insurance policy). A party
can implicitly waive a contract provision through its conduct, so that conduct inconsistent with
one contract term will not necessarily negate that the parties mutually assented to the agreement’s
essential terms. See Stauffer Chem. Co. v. Brunson, 380 F.2d 174 (5th Cir. 1967).
In the current matter, Paragraph 5 of the Tariff exists for Signet’s sole benefit. Signet
provided services to vessel owners within the harbor based on the published and understood
terms of the Tariff. A vessel owner would request services, and Signet would assign tug boats to
that project. The ability to conduct business in this manner, without having to negotiate a contract
for each occasion, facilitated fluid business relationships. But Paragraph 5 of the Tariff protected
Signet by ensuring that the contract did not automatically apply when the requested services
entailed riskier operations, such as tug boat services for a deadship or during heightened Coast
Guard port conditions. On August 24, Signet chose to waive this provision when it expressly
agreed to perform the services under the Tariff.
Paragon also argues that the Tariff cannot govern because it represents a contract of
duress, or alternatively, a contract of adhesion. In the Fifth Circuit, “[t]he party seeking to
establish economic duress must show that a wrongful threat was made which was of such
character as to destroy the free agency of the party to whom the threat was directed.” Palmer
Barge Line, Inc. v. S. Petroleum Trading Co., 776 F.2d 502, 505 (5th Cir. 1985). For example, “a
showing of imminent financial distress coupled with the absence of any reasonable alternative to
the terms presented by the wrongdoer may be sufficient to establish economic duress.” Id.
Paragon relies on various decisions in support of its economic-duress defense, including:
The Elfrida, 172 U.S. 186, 192 (1898); Magnolia Petroleum Co. v. Nat’l Tranps. Co., 286 F. 40,
42 (5th Cir. 1923); and Blue Water Marine Servs. v. M/V Natalita III, 2009 U.S. App. LEXIS
29119 (11th Cir. Sept. 8, 2009). But those decisions do not support Paragon’s position. In The
Elfrida, the Supreme Court established that a salvage contract “will not be set aside unless
corruptly entered into, or made under fraudulent representations, a clear mistake or suppression
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of facts, in immediate danger to the ship, or under other circumstances amounting to compulsion,
or when their enforcement would be contrary to equity and good conscience”. 172 U.S. at 192.
Paragon argues that as the DPDS1 was in “immediate danger” on August 24, Paragon should not
be bound to the Tariff.
This argument fails, however, for at least two reasons. First, in The Elfrida, the Supreme
Court recognized that in “most of the cases where the contract was held void, the facts showed
that advantage was taken of an apparently helpless condition to impose upon the master an
unconscionable bargain.” Id. at 196; see also Magnolia Petroleum Co., 286 F. at 42 (“The refusal
of the master of the Greer to render assistance, and his threat to leave the Bolikow unless his
exorbitant demand was acceded to, amounted to moral compulsion, and the contract, which he
procured by the methods adopted, is not protected or made binding and valid by the rule laid
down in The Elfrida”.). In essence, the defense of economic duress protects against one party
taking advantage of extreme conditions to force otherwise unacceptable terms on another party.
Under such circumstances, courts will void the unconscionable terms. In the present matter,
however, the Tariff does not constitute “an unconscionable bargain.” In fact, Paragon and Signet
had conducted business on numerous occasions under the Tariff.
This course of conduct
demonstrates that the Tariff contained terms that both sides had accepted for tug boat services
within the harbor. Second, it is not apparent that Paragon viewed itself as in a “helpless condition”
when it agreed to the Tariff. According to Paragon, on August 24, it believed that its mooring
system would withstand Hurricane Harvey’s anticipated wind speeds. Paragon contracted for
Signet’s services not because it believed that absent such services the DPDS1 would surely come
unmoored, but to provide additional support for that mooring system.
Similarly, Paragon cannot demonstrate that the Tariff represents a contract of adhesion
that the Court should find unenforceable. As a general matter, “adhesion contracts are not
automatically void. Instead, the party seeking to avoid the contract generally must show that it is
unconscionable.” Dillard v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 961 F.2d 1148, 1154 (5th
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Cir. 1992). Unconscionability may be procedural or substantive. To show that an agreement is
procedurally unconscionable, a party must show more than an imbalance of power or time
pressure. Fleetwood Enter., Inc. v. Gaskamp, 280 F.3d 1069, 1077 (5th Cir. 2002). As for
substantive unconscionability, “[t]he test . . . is whether, ‘given the parties’ general commercial
background and the commercial needs of the particular trade or case, the clause involved is so
one-sided that it is unconscionable under the circumstances existing when the parties made the
contract.’” In re Palm Harbor Homes, Inc., 195 S.W. 3d 672, 678 (Tex. 2006) (quoting In re
FirstMerit Bank, 52 S.W. 3d 749, 757 (Tex. 2001)); see also Hafer v. Vanderbilt Mortg. & Fin.,
Inc., 793 F. Supp. 2d 987, 1004 (S.D. Tex. 2011) (finding that an arbitration agreement between a
mortgage and finance corporation and the homeowner was not so one-sided to render the terms
unconscionable).
With respect to procedural unconscionability, in the present matter, no
imbalance of power existed between Paragon and Signet, each of which represented a
sophisticated commercial enterprise. And the mere fact that the approaching hurricane created
an urgent need did not render an agreement to the Tariff unconscionable. As to substantive
unconscionability, no evidence demonstrates that the Tariff’s provisions were significantly onesided. On the contrary, on August 24, when Paragon’s in-house counsel received an e-mail
indicating that the business representatives had agreed to apply the Tariff to the engagement, he
merely replied, “Thanks for the update–much appreciated.”221 As the lawyer for Paragon, bound
to represent the company’s best interests, he expressed no concerns—either to Signet or internally
at Paragon—about applying the Tariff. And his reaction is not surprising. Paragon and Signet
previously had conducted business under the Tariff, which itself represented a standard
agreement within the industry that was meant to facilitate fluid engagement between Signet and
vessel owners. In fact, Paragon does not object to the Tariff’s substantive terms, but seeks to void
the agreement because certain provisions within the Tariff concerning indemnity and insurance
221
Oliver Email, S.Ex.125 (Doc. 421-22, 33).
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favor Signet, based on the events that ultimately unfolded. But this fact does not render the
contract’s terms unconscionable.
Not only do Paragon’s attacks on the formation and enforceability of the Tariff fail, but its
conduct also demonstrates that it ratified the agreement. Under Texas law, “if a party acts in a
manner that recognizes the validity of a contract with full knowledge of the material terms of the
contract, the party has ratified the contract and may not later withdraw its ratification and seek
to avoid the contract.” Malin Intern. Ship Repair & Drydock, Inc. v. Oceanografia, 817 F.3d 241,
250 (5th Cir. 2016). A party can ratify an agreement by accepting the services or benefits of a
contract and paying invoices pursuant to that agreement. Id.; see also Sitco Enterprises, LLC v.
Tervita Corp., 2018 WL 3032579 (S.D. Tex. 2018) (finding that performance of contract
obligations, such as payment of invoices, ratifies the contract and subjects that party to liability);
Chopra & Assocs., PA v. U.S. Imaging, Inc., 2014 WL 7204868, at *3 (Tex. App.—Houston [14th
Dist.] Dec. 18, 2014) (“A party cannot avoid an agreement by claiming there was no intent to ratify
after that party has accepted the benefits of the agreement.”). In the current case, Signet invoiced
Paragon for the services of the ENTERPRISE, the ARCTURUS, and the CONSTELLATION,
reflecting charges consistent with the Tariff rates. Paragon approved and paid those invoices in
full.
The Court also concludes that the Tariff continued to control the services that Signet
provided through the August 28 incident. The day after the DPDS1’s breakaway on August 25,
Signet verbally agreed to assign a tug boat to assist with the drillship, now grounded in the ship
channel. On Sunday, August 27, Paragon’s counsel requested that Signet provide the services
under the MCA. Signet responded that the in-harbor ship assist services would “continue to be
governed by our tariff”.222 Paragon does not appear to have contested the matter, and Signet
eventually invoiced for the services based on Tariff rates. Paragon paid those invoices without
objection.
222
Reid Email, S.Ex.126 (Doc. 422, 3).
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For these reasons, the Court concludes that the Tariff governs Signet’s provision of tug
boat services in connection with the DPDS1 during the August 25 and August 28 events.223
C. American Club
American Club requests a take-nothing judgment in its favor because Paragon is not an
insured or an additional insured under the Protection and Indemnity Insurance Contract with
Signet. Paragon contends that it enjoys coverage under the P&I Insurance Contract because
Signet agreed under the MCA to provide such coverage. In the alternative, Paragon argues that it
qualifies for coverage under the Additional Assureds and Waiver of Subrogation Clause of the P&I
Insurance Contract.224
As previously indicated, the Tariff governs in this action. This conclusion proves fatal to
Paragon’s argument regarding American Club, as absent the MCA’s application, Paragon presents
no argument indicating that American Club would have any obligations as to Paragon. As a result,
American Club bears no liability as to Paragon for any of the damages at issue in this lawsuit.225
D. Damages
The Court turns now to the measure of damages and the impact of the Tariff’s provisions
regarding the parties’ liability for those damages. This analysis turns largely on the following
findings: (1) With respect to the initial breakaway of the DPDS1, Paragon bears full responsibility
for the damages to the Gulf Copper dock, the Noble semisubmersible oil rigs, the Signet tug boats,
and the DPDS1 itself; (2) As to the damages to the University of Texas research pier, Signet and
Paragon each bear 50% responsibility; and (3) The Tariff governs as to Signet’s provision of
services from August 25 through 28.
This finding applies to all Paragon entities that are parties in this case. See JPO, Admission of Fact ¶ 39 (Doc. 314,
38) (“Any actions or inactions of employees within [the Paragon entities] are attributable to the liability of the Paragon
Asset Company Ltd. And Paragon DPDS1 in rem.”).
224 Confidential Protection and Indemnity Insurance Contract, AC.Ex.3 (Doc. 437, 9).
225 American Club also contends that even if Paragon qualified as an insured under the P&I Insurance Contract, Paragon
failed to provide prompt notice of the casualty, as the policy required. The Court does not reach this alternative
argument, given its conclusion that the Tariff controls in this matter.
223
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Signet and Paragon have entered into settlement agreements with Noble, the University
of Texas, and Gulf Copper. The parties have not requested that the Court enter findings as to the
amount of damages to those parties’ property.
1. The DPDS1
The Court has concluded that Paragon bears full responsibility for the DPDS1’s initial
breakaway, and that Paragon and Signet each bear 50% responsibility for the drillship’s allision
with the research pier. Based on these findings, Paragon cannot recover for any damages to the
drillship that stemmed solely from the initial breakaway. Signet, however, is liable for 50% of the
damages to the DPDS1 occasioned by the allision with the research pier.
Paragon bore the burden to establish its recoverable damages. See Gaines Towing &
Transp., Inc. v. Atlantia Tanker Corp., 191 F.3d 633, 635 (5th Cir. 1999) (“[A] defendant cannot
be held liable for damages that he has not been shown to have caused”.). But Paragon presented
no evidence segregating the damages to the drillship, which could have suffered damage at any
number of points. For example, in the breakaway from the dock, the drillship forced the Signet
tug boats into the Noble semisubmersible oil rigs. The ensuing contact between the vessels likely
damaged the DPDS1. Also, the drillship grounded in the ship channel with a noticeable list,
indicating that it may have taken on water through an opening caused by the breakaway or the
grounding itself. Signet would have no liability as to any damages to the DPDS1 through the initial
grounding in the ship channel. As to the allision with the research pier, although it is likely that
the allision damaged the drillship, Paragon presented no evidence identifying the damages
attributable solely to this event. As a result, Paragon cannot recover any damages from Signet as
to such damages.
In addition, Paragon requests damages that do not stem from the breakaway or the allision
with the research pier. For example, Paragon includes as damages the expenses related to the
towing of the DPDS1 from Corpus Christi to Brownsville to be scrapped. But Paragon cannot
recover such damages, as the purposes of compensatory damages in tort cases “is to place the
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injured person as nearly as possibly in the condition he would have occupied if the wrong had not
occurred.” Freeport Sulphur Co. v. S/S Hermosa, 526 F.2d 300, 304 (5th Cir. 1976). Here, the
record demonstrates that before Hurricane Harvey, Paragon had already decided to scrap the
DPDS1, and to do so by October 2017. This evidence reveals that the scrapping of the DPDS1 did
not arise from the events surrounding Hurricane Harvey, but was a decision that Paragon reached
before the casualty. And no evidence indicates that the casualty increased the cost of scrapping
the DPDS1, or decreased its value as a vessel to be scrapped.
2. The ENTERPRISE
As to the ENTERPRISE, Signet seeks $6,969,373.51 to $7,469,373.51 in damages,
comprised of the following:
Category
Amount
Wreck removal services
$1,735,607.78
Surveyor expenses
$41,412.17
Fair market replacement costs
$5,150,000.00 –
$5,650,000.00
Loss of charter hire damages
$42,353.56
The parties agree that after the casualty, the ENTERPRISE was a constructive total loss–
i.e., the damage to the vessel was repairable, “but the cost of repairs exceed[ed] the fair market
value of the vessel immediately before the casualty.” Gaines Towing & Transp., 191 F.3d at 635.
“If a loss is deemed a constructive total loss, damages are the ship’s value at the time of collision,
less salvage.” Zanzibar Shipping, S. A. v. R.R. Locomotive Engine No. 2199, 533 F. Supp. 392,
394 (S.D. Tex. 1982); see also Factory Mut. Ins. Co. v. Alon USA L.P., 705 F.3d 518, 521 (5th Cir.
2013) (“A plaintiff whose property has been destroyed by the tortious acts of another is generally
entitled to recover the market value of the property at the time of its loss.” (cleaned up)).
The owner of a vessel considered a constructive total loss may also recover consequential
damages, including for wreck removal services and surveyor expenses. Sunglory Mar. Ltd. v. Phi,
Inc., No. CV 15-896, 2016 WL 852476, at *2 (E.D. La. Mar. 4, 2016); see also Truong v. St. Paul
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Fire & Marine Ins. Co., 345 F. App'x 948, 953 (5th Cir. 2009) (unpublished) (stating that recovery
costs for a vessel that is a total constructive loss should include expenses “necessary to deliver the
ship from its peril to a port of safety”). The owner recovers surveyor expenses “only for surveys
which estimated the damages or repair costs,” but not for surveys related to designing repair work.
Zanzibar Shipping, S.A., 533 F. Supp. at 398.
“The established rule is that in a case of total loss, the owner is not compensated for the
loss of use of the boat.” E.I. DuPont de Nemours & Co. v. Robin Hood Shifting & Fleeting Serv.,
Inc., 899 F.2d 377, 382 (5th Cir. 1990) (citing King Fisher Marine Serv., Inc., 724 F.2d at 1185).
Applying these principles to the requested damages, Signet may recover $1,735,607.78 for
wreck removal services and $41,412.17 for surveyor expenses. But Signet may not recover its
alleged damages for loss of charter.
As to fair market value, the parties agree that the recoverable amount is the fair market
value minus $500,000 from the sale of the ENTERPRISE in December 2018. Signet claims that
the fair market value of the ENTERPRISE is between $5,650,000 and $6,150,000, based
primarily on the testimony of Barry Snyder, who stated that based on his experience and
knowledge of the industry, the ENTERPRISE on August 25, 2017, had a fair market value of at
least $6,150,000.226 In support of his belief, Snyder pointed to the sale of the INTREPID, which
was the ENTERPRISE’s sister ship. That vessel sold in 2019 for $6,150,000, and Snyder testified
that only “minimal” changes in the relevant market occurred between August 2017 and the date
of the INTREPID’s sale.
Paragon argues that the correct value is $4,100,000. In reaching this figure, Paragon
relies on two reports. First, in October 2017, American Club retained Dufour, Laskay and Strouse
to determine the value of the ENTERPRISE. Using the cost approach, the Laskay Report
calculated $4,100,000 as the theoretical fair market value of the ENTERPRISE in working
226
Snyder Day 5 Tr., 221:19 (Doc. 452).
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condition at the time of the casualty.227 Second, in connection with the litigation, Paragon
retained Peter Roberts as a valuation expert. He opined that the Laskay Report accurately valued
the ENTERPRISE at $4,100,000.228
The Court accepts the valuations by Laskay and Roberts. Snyder disagreed with the
Laskay Report, but did not provide any compelling arguments that called into question that
report’s conclusions. In addition, in reaching his own opinion, Snyder relied on one sale (i.e., the
INTREPID in 2019) and his general knowledge and experience. The Court finds the reports by
Laskay and Roberts more amply supported and, as a result, more reliable.
Reducing the fair market value by the $500,000 from the sale of the ENTERPRISE, Signet
is entitled to recover $3,600,000 for the constructive total loss of that vessel.
3. The ARCTURUS
As to the ARCTURUS, Signet seeks $2,364,059.87 in damages, comprised of the following:
Category
Amount
Salvage costs
$
37,055.74
Surveyor expenses
$
54,225.74
Repair costs
$ 1,517,311.08
Loss of charter hire damages
$
755,467.31
When a damaged vessel in a maritime accident is not a total loss, the owner is entitled to
recover “the reasonable cost of repairs necessary to restore it to its pre-casualty condition and
actual profits lost during the detention necessary to make repairs.” Gaines Towing and Transp.,
Inc., 191 F.3d at 636–37 (citing The Tug June S v. Bordagain Shipping Co., 418 F.2d 306, 307
(5th Cir. 1969)). The claimant must establish the amount of repair costs “with reasonable
certainty that the damages claimed were actually or may be reasonably inferred to have been
incurred as a result of the collision.” Marine Transp. Lines, Inc. v. M/V Tako Invader, 37 F.3d
Dufour, Laskay & Strouse, Inc., Signet ENTERPRISE Appraisal Report, S.Ex.146 (Doc. 423, 2).
Supplementary Report on Damages claims to Signet Maritime Tugboats Arcturus & Enterprise, P.Ex.17-I (Doc. 42418, 10).
227
228
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1138, 1140 (5th Cir. 1994) (citations omitted); see also United States v. John Stapp, Inc., 448 F.
Supp. 2d 819, 824–25 (S.D. Tex. 2006) (explaining that the party seeking repair costs must prove
the reasonableness of the amount). As to loss of charter hire damages, the vessel owner must
establish that the vessel was capable of being engaged in profitable commerce during the repair
period. See Delta S.S. Lines Inc. v. Avondale Shipyards, Inc., 747 F.2d 995, 1001 (5th Cir. 1984)
(explaining that the correct figure for lost profit is the revenue less expenses).
Signet claims that the cost of repairing the ARCTURUS totaled $1,517,311.08. Paragon
challenges this amount, arguing that $454,221.78 is unrecoverable because it stemmed from
unreasonable steps that Signet took during the repairs, such as failing to conduct a detailed
inspection of the vessel when initially dry docked.229 Based on the trial record, however, the Court
concludes that Signet has demonstrated that it incurred repair costs of $1,517,311.08 as a result
of the DPDS1 breaking away, and that those costs were reasonable and necessary. For example,
the Chief Engineer for the ARCTURUS, Loren Smith, testified that when Signet initially dry
docked the vessel, various representatives from Signet, the Coast Guard, Rolls-Royce (the maker
of the Z-drive), and the American Bureau of Shipping (ABS) visually inspected the vessel,
including opening up the top of the Z-drive. Based on their collective discussion and inspection,
they collectively “decided not to open up the hub because we had no indication of any damage
internally.”230 Doing so may have uncovered the internal damage to the Z-Drive at that moment,
but would have required substantial time and costs. Although a vessel owner can inspect all
possibly damaged areas after a casualty, Smith explained that “it’s just not good engineering
practice just to start tearing apart stuff.”231 Here, based on the available data, Signet acted
reasonably when not ordering a full inspection of the Z-drive. Later, after the first sea test, Signet
realized that issues persisted, and that an internal analysis would be required. At that time, the
repair dock was no longer available for an extended period, and as a result, Signet dry docked in
Paragon’s and Signet’s Revised Stipulations of Fact as to Their Contentions Regarding Damages (Doc. 392, 6).
Smith Dep., 117:18–23, S.Ex.334 (Doc. 431-5).
231 Id. at 185:9–11.
229
230
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that location solely for the short period necessary to make temporary repairs so that the
ARCTURUS could then proceed to an available repair dock in Pascagoula. This series of events
explains the three separate dry docks for the ARCTURUS, and the sequence of repairs was not
unreasonably undertaken. Other evidence demonstrated that the damages to the tug boat arose
from the DPDS1 breaking away, and supported the amount paid for the repairs. As a result, Signet
is entitled to recover $1,517,311.08 in repair costs. And related to the repairs, Signet also has
demonstrated entitlement to the $37,055.74 expended in salvage costs and $54,225.74 incurred
for surveyor expenses.
Finally, Signet requests $755,467.31 for loss of charter hire, relying principally on an
analysis by Stephen Key, Signet’s Vice President for Corporate Accounting and Treasury. As to
this category of damages, Paragon argues that Signet incorrectly bases the requested amount on
“gross, unreduced revenue and utilization calculations” and fails to account for various market
factors, such as whether “Signet’s Ingleside operations returned to normal operations prior to the
completion of repairs to the tug.”232
Based on the trial record, the Court concludes that Paragon’s arguments have significant
force, and that Signet has not proven its requested damages by a preponderance of the evidence.
First, to the extent that Key calculated gross revenue, that amount would not be recoverable. The
law affords vessel owners lost profits, not lost revenue. And the $755,467.31 that Signet requests
represents “implied lost revenue”, not profits. In his testimony, Key confirmed that when
calculating this amount, he did not take into account operating expenses, maintenance and
repairs, and similar factors that would be deducted to arrive at actual profits.233 In fact, a profit
and loss statement for the ARCTURUS reflects that for the January 2016 through August 2017
time period, the ARCTURUS reported negative net income.234 In addition, Key applied an 80%
utilization rate, which he arrived at by averaging the rate over the six to seven months before
Paragon’s and Signet’s Revised Stipulations of Fact as to Their Contentions Regarding Damages (Doc. 392, 7).
Key Dep., 114–115, S.Ex.333 (Doc. 431-4).
234 Confidential Signet Revenues and Utilization Memo, Signet Ex. 289 (432-10, 4).
232
233
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Hurricane Harvey.235 But calculating an average over a longer time period would have reduced
the utilization rate.236 And Key acknowledged that the Port of Ingleside experienced “slow starting
up” after Hurricane Harvey, strongly suggesting that in the months after the storm, Signet would
not have realized the same utilization rate for the ARCTURUS that it experienced before the
hurricane.237
Ultimately, the evidence on which Signet relies does not demonstrate that the company
lost $755,467.31 in profits from loss of charter hire for the ARCTURUS. On the contrary, the
record supports the conclusion that any profits would have been significantly lower, and may have
proven fully elusive in the dampened market in the months after Hurricane Harvey. As a result,
the Court concludes that Signet is not entitled to any damages for loss of charter hire.
4. Indemnity
Signet argues that under the Tariff, Paragon possesses a contractual obligation to
indemnify Signet for any damages arising from the services provided under that contract,
including for settlement payments that Signet made to third parties whose property was damaged
by the events at issue in this lawsuit. In particular, Section 16(h)(ii) of the Tariff specified that
“Owners [Paragon] agree to indemnify Signet Group from and against third party liabilities
arising out of this agreement not covered by the other indemnity provisions of this Tariff, but only
to the extent of the negligence or other fault of the Owners Group.”238
“The interpretation of an indemnity provision in a maritime contract is ordinarily
governed by federal maritime law rather than by state law.” Corbitt v. Diamond M. Drilling Co.,
654 F.2d 329, 332 (5th Cir. 1981); see also Channette v. Neches Gulf Marine, Inc., 440 F. App’x
258 (5th Cir. 2011). An indemnity provision should be construed to cover “all losses, damages, or
liabilities which reasonably appear to have been within the contemplation of the parties.” Corbitt,
Id.
Id. (reflecting a 65% utilization rate for the January 2016 through August 2017 period).
237 Key Dep., 117:4–5, S.Ex.333 (Doc. 431-4).
238 2016 Signet Ingleside Tariff, Section 16(h)(ii), S.Ex.1 (Doc. 414, 8). Section 16(h)(i) represents an analogous
provision containing Signet’s indemnity obligations towards Paragon.
235
236
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654 F.2d at 333. In the context of multi-party litigation, an indemnitee may establish entitlement
to contractual indemnification for a settlement where the indemnitee can establish that potential
liability existed as to the original plaintiff. Fontenot v. Mesa Petroleum Co., 791 F.2d 1207, 1218
(5th Cir. 1986). Courts may consider whether the claim against the indemnitee was frivolous,
whether the settlement was reasonable, and whether “the indemnitee settled under a reasonable
apprehension of liability.” Id.
Based on a straightforward application of Section 16(h)(ii) of the Tariff, Signet is entitled
to contractual indemnification from Paragon for any damages or settlement amount that Signet
has paid related to the Noble semisubmersible oil rigs. The Court has concluded that Paragon’s
negligence proximately caused those damages in full. Additionally, Signet had a reasonable
apprehension of liability because Noble alleged a negligence claim against Signet on the grounds
that the tugs were unseaworthy at the time of the breakaway. Signet ultimately settled those
claims for $875,000.239
When the parties reached this settlement, Noble’s drilling expert
estimated the damages to the NOBLE JIM DAY and NOBLE DANNY ATKINS as between $11
million and $17.8 million.240 In light of the potential exposure that Signet faced, the Court finds
the settlement for $875,000 reasonable, and Signet is entitled to recover that amount from
Paragon.
With respect to the damages upon the University of Texas research pier, the Court
concludes that neither Paragon nor Signet are entitled to indemnity from the other, as the Court
found both parties equally responsible for the damages. The Tariff’s third-party indemnity
provisions apply only “to the extent of the negligence or other fault of” the other party to the
contract. As a result, the Tariff would require only that Paragon indemnify Signet for any thirdparty liabilities that exceeded 50% of the damages to the pier. The same would hold true as to
Signet’s indemnity obligations toward Paragon.
239
240
Signet’s Motion to Supplement and Modify the Court’s Order and Opinion (Doc. 463, 12).
Id.
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Signet and Paragon each entered into a settlement with the University of Texas as to the
claims that the institution alleged against them.241 Neither party contends that through those
settlement agreements, it incurred any liability beyond 50% of the damages to the pier. As a
result, the Tariff’s third-party indemnity provisions do not obligate either party to indemnify the
other.242
5. Prejudgment Interest
Signet contends that it is entitled to prejudgment interest on all recoverable damages and
argues that the Court should fix the rate at Signet’s borrowing cost, which was at 5–6% from
August 25, 2017, through July 2019, and at 17.5% from July 2019 on.243 Paragon argues that a
prejudgment interest award is discretionary and should not be given here because the increase in
Signet’s interest rate from 5–6% to 17.5% in 2019 is excessive, Signet’s losses should have been
covered by the American Club, and the length of time over which the amount will be calculated
was driven by a number of claims on which Signet did not prevail, which will make it difficult to
determine an equitable pre-judgment interest award.244
Paragon also states that “Signet’s
representations about its costs of capital are vague as to whether the subject lending was related
to this loss, and questionable given Signet was insured for the loss.”245
a. Recoverability of Prejudgment Interest
Under maritime law, an award for prejudgment interest “is the rule rather than the
exception; prejudgment interest must be awarded unless unusual circumstances make an award
inequitable.” Ryan Walsh Stevedoring Co. v. James Marine Servs., Inc., 792 F.2d 489, 492 (5th
Cir. 1986). The purpose of prejudgment interest is to compensate the prevailing party for the loss
of use of funds between the time of the injury and the date of judgment, not to penalize the party
Id. at 21. Signet informed the Court that it paid $775,000 to the university as part of the settlement. The Court is
unaware of the terms of the Paragon settlement.
242 In light of this conclusion, the Court does not reach whether Section 16(d) of the Tariff would limit Signet’s indemnity
obligations toward Paragon to $200,000.
243 Signet’s Motion to Supplement and Modify the Court’s Order and Opinion (Doc. 463, 12); Steve Key Dep., 110:23112:17, S.Ex. 333 (Doc. 431-4).
244 Paragon’s Motion to Amend or Clarify (Doc. 464-1, 25).
245 Paragon’s Response to Signet’s Motion (Doc. 468, 8).
241
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at fault. Jauch v. Nautical Servs., Inc., 470 F.3d 207, 215 (5th Cir. 2006); Todd Shipyards Corp.
v. Turbine Serv., Inc., 674 F.2d 401, 415 (5th Cir. 1982).
Although prejudgment interest is not “automatic” in admiralty collision cases, courts deny
such an award only in exceptional circumstances, such as the prevailing party’s undue delay in
prosecuting the lawsuit or its bad faith conduct. City of Milwaukee v. Cement Div., Nat. Gypsum
Co., 515 U.S. 189, 196, 199 (1995); Jauch, 470 F.3d at 215. In contrast, “neither a good-faith
dispute over liability nor the existence of mutual fault justifies the denial of prejudgment interest
in an admiralty collision case.” Cement Div., 515 U.S. at 196, 199.
In the current matter, no exceptional circumstances warrant the denial of prejudgment
interest. Paragon has not demonstrated that Signet engaged in bad faith conduct or caused undue
delay in the prosecution of this lawsuit. While considerable delay occurred in bringing the matter
to trial, the delays arose primarily from the voluminous discovery that the lawsuit generated and,
perhaps more significantly, the COVID-19 pandemic that hindered discovery and the prosecution
of all litigation. In the absence of exceptional circumstances that warrant otherwise, the Court
finds that Signet is entitled to prejudgment interest on the amounts awarded it based on the
damages to the ARCTURUS and the ENTERPRISE, as well as on the amount of the settlement
payment to Noble.
b. Applicable Interest Rate and Date that Interest Began to Accrue
Traditional federal principles govern the applicable rate for prejudgment interest. See
Cement Div., Nat. Gymsom Co., 515 U.S. at 194. Courts have “broad discretion in setting
prejudgment interest rates,” and may look to the judgment creditor’s actual cost of borrowing
money, to state law, or to other reasonable guideposts indicating a fair level of compensation.
Gator Marine Service Towing, Inc. v. J. Ray McDermott & Co., 651 F.2d 1096, 1101 (5th Cir.
1981) (affirming a prejudgment interest rate 0f 10%, below the prevailing party’s actual cost of
borrowing); see also Perez v. Bruister, 823 F.3d 250, 274 (5th Cir. 2016) (explaining that in the
absence of federal law governing prejudgment interest rates, courts look to state law); Pillsbury
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Co. v. Midland Enterprises, Inc., 715 F. Supp. 738, 772 (E.D. La. 1989), aff'd and remanded, 904
F.2d 317 (5th Cir. 1990) (applying prejudgment interest rate equal to the statutory rate for
postjudgment interest). Based on these principles, courts at times apply varying prejudgment
interest rates for different time periods. See, e.g., Todd Shipyards Corp v. Turbine Service, Inc.,
592 F. Supp. 380, 386 (E.D. La. 1984), aff'd in part, rev'd in part sub nom. Todd Shipyards Corp.
v. Auto Transp., S.A., 763 F.2d 745 (5th Cir. 1985) (relying on a Louisiana statute to apply interest
rates of 7%, 10%, and 12% for different time period). And under the general rule of admiralty,
“interest on damages should be allowed uniformly from the date of the loss, unless for good
reasons it is determined otherwise.” Esso Int'l, Inc. v. S.S. Captain John, 443 F.2d 1144, 1151 (5th
Cir. 1971). The interest “on repair costs runs from the date of the accident even though the owner
does not pay these costs until some later date.” Ryan Walsh Stevedoring Co., 792 F.2d at 493.
In the present lawsuit, the Court has concluded that Signet may recover $5,377,019.97 for
damages related to the ENTERPRISE, $1,608,592.56 for damages related to the ARCTURUS, and
$875,000 for the amount paid in settlement with Noble. The loss as to the ENTERPRISE and
ARCTURUS arose almost immediately after Hurricane Harvey, as Signet began the salvage and
repair efforts within days of the storm. As a result, the Court will apply prejudgment interest as
to these amounts from August 25, 2017, the date of the DPDS1’s breakaway during Hurricane
Harvey. As to the Noble settlement payment, the Court finds that Signet’s “loss” occurred upon
the payment of the settlement—i.e., when Signet lost the use of the monies. Under the terms of
the Settlement, Release, and Indemnity Agreement, Signet paid the $875,000 by no later than
May 22, 2020.246 As a result, the Court will apply prejudgment interest on the $875,000
beginning on May 22, 2020.
Finally, the Court finds that prejudgment interest of 4% represents a fair level of
compensation. Signet requests the rate of 5-6% from August 25, 2017, through July 2019, and
246
Noble Drilling and Signet Settlement, Release, and Indemnity Agreement, S.Ex.240 (Doc. 432-7, 4).
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17.5% thereafter, based on its cost of borrowing.247 In its briefing, however, Signet provides no
explanation for the significant increase in its cost of borrowing in mid-2019. And the Court finds
an interest rate of 17.5% excessive, especially when the general cost of borrowing remained at
historically-low levels. In addition, since 2018, the statutory rate for postjudgment interest has
not exceeded 3.5% and has remained below 1% for considerable lengths of time. See, e.g.,
https://www.txs.uscourts.gov/page/post-judgment-interest-rates-2018.
postjudgment interest is 3.28%.
The current rate for
See https://www.txs.uscourts.gov/page/post-judgment-
interest-rates-2022. Based on the relevant factors, the Court will apply prejudgment interest at
the rate of 4%.
6. Postjudgment Interest
Under federal law, “[i]nterest shall be allowed on any money judgment in a civil case
recovered in a district court”. See 28 U.S.C. § 1961. The statute applies in maritime actions, and
also establishes the applicable interest rate. See, e.g., Meaux Surface Prot., Inc. v. Fogleman, 607
F.3d 161, 173 (5th Cir. 2010) (vacating the district court’s denial of postjudgment interest in a
maritime action because an award of postjudgment interest pursuant to the Section 1961 rate “is
not discretionary”). In the present matter, the Court will award Signet postjudgment interest at
the rate applicable at the time of entry of the Final Judgment.
7. Court Costs
Signet requests recovery of its court costs under Federal Rule of Civil Procedure 54(d)(1)
and 28 U.S.C. § 1920. Rule 54(d)(1) “creates a presumption in favor of awarding costs to the
prevailing party”, and a court may not deny costs without articulating the reason for doing so.
Manderson v. Chet Morrison Contractors, Inc., 666 F.3d 373, 383 (5th Cir. 2012). At the same
time, a party may only recover costs related to the claims on which it prevailed. See e.g., Fogleman
v. ARAMCO, 920 F.2d 278, 285 (5th Cir. 1991). In the current matter, Signet prevailed as to the
claims surrounding the initial breakaway of the DPDS1 on August 25, but not as to the claims
247
Signet’s Motion to Supplement and Modify the Court’s Order and Opinion (Doc. 463, 26).
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involving the allision with the University of Texas pier. As a result, Signet is entitled to recover
its taxable costs stemming from the claims related to the events of August 25, but not as to the
events of August 28.
IV.
Conclusion
The Court bases the preceding findings of fact and conclusions of law on the trial record
and the applicable law. As explained in this Opinion, Paragon bears sole responsibility for the
initial breakaway of the DPDS1 from the Gulf Copper dock, and is liable for the damages that
resulted in the immediate aftermath of that event. The damaged vessels and structures include
the DPDS1 itself, the Gulf Copper dock, the Signet tug boats ENTERPRISE and ARCTURUS, and
the Noble semisubmersible oil rigs DANNY ADKINS and JIM DAY. As to the ENTERPRISE,
Signet may recover $1,735,607.78 for wreck removal services, $41,412.17 for surveyor expenses,
and $3,600,000 as the fair market value of the vessel at the time of casualty. As to the
ARCTURUS, Signet may recover $1,517,311.08 in repair costs, $37,055.74 in salvage costs, and
$54,225.74 for surveyor expenses.
The subsequent allision with the University of Texas research pier represents a separate
incident that both Paragon and Signet could have avoided. Each party bears 50% responsibility
for the resulting damages to the research pier. The parties have each entered into a settlement
agreement with the University of Texas as to the institution’s claims. Neither Paragon nor Signet
is entitled to indemnity from the other for any amounts paid pursuant to those settlement
agreements.
As to each of these two incidents, Signet’s Ingleside Tariff governed as to the services that
the tug boats provided.
As to prejudgment interest, the Court finds that prejudgment interest is to accrue as simple
interest at the rate of 4% on $6,985,612.51, beginning on August 25, 2017, and on $875,000,
beginning on May 22, 2020, through the date of the Final Judgment.
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The Court also awards Signet postjudgment interest at the statutory rate applicable at the
time of Final Judgment, until it is paid in full.
The Court also awards Signet its court costs incurred as to the claims surrounding the
initial breakaway of the DPDS1 on August 25.
The Court will issue a separate Order establishing a briefing schedule on the issue of
attorney’s fees and the amount of recoverable court costs.
Signed on August 17, 2022.
____________________________
Fernando Rodriguez, Jr.
United States District Judge
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