International Marine, L.L.C. v. Delta Towing, L.L.C.
704 F.3d 350
| 5th Cir. | 2013Background
- International Marine and Delta Towing entered a Vessel Sales Agreement in 2006 for two tugboats at $4 million.
- The VSA includes a non-compete (Paragraph 11F) and a liquidated damages provision (Paragraph 11G).
- 11F requires notification and a time-charter option to Delta if International competes for third-party charters, with revenue sharing (Delta 90%, International 10%).
- 11G provides liquidated damages: the greater of $250,000 per incident or the gross revenue from the violation, payable within 30 days and stated as a good faith estimate.
- Delta later learned International chartered the vessels without Delta’s knowledge, leading to a breach finding; International admitted 27 charters breached the VSA.
- District court granted summary judgment that the LD Provision is enforceable; Fallon Order reaffirmed; 54(b) final judgment certified and appealed; Fifth Circuit affirms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the LD provision enforceable or a penalty under Restatement §356? | International argues it is a penalty; not a reasonable forecast. | Delta contends it is a valid liquidated damages clause. | Enforceable; not a penalty. |
| What standard of review applies to the summary judgment on enforceability? | Strict de novo review of contract interpretation. | Review limited to district court’s reasoning. | De novo review; uphold district court. |
| Did the district court properly consider the parties’ bargaining power and foreseeability of damages? | Negotiate-laden context supports reasonableness. | Evidence of bargaining power not controlling. | Yes, consideration proper and supports enforceability. |
| Did Restatement factors support reasonable foreseeability and difficulty of proving damages? | Damages hard to prove; LD reasonable forecast. | Higher damages may be excessive without proof. | Factors support reasonableness; not a penalty. |
Key Cases Cited
- Farmers Export Co v. M/V Georgis Prois, 799 F.2d 159 (5th Cir. 1986) (difficulty of proving loss; liquidated damages may forecast anticipated damages)
- Louis Dreyfus Corp. v. 27,946 Long Tons of Corn, 830 F.2d 1321 (5th Cir. 1987) (liquidated damages excessive when breach is shorter than full period)
- QT Trading, L.P. v. M/V Saga Morus, 641 F.3d 105 (5th Cir. 2011) (summary judgment standard and de novo review applied to maritime contracts)