636 B.R. 704
Bankr. E.D. La.2021Background
- Chester J. Marine, LLC (Chester) is a small towing company that performed two maritime tows for barge broker Russell Marine Towing, LLC (Russell) in February 2020; no written master contract was executed—services were agreed orally.
- During the first tow a barge (SCF 16109 B) took on water due to overloading while in Chester’s custody; Russell paid $15,000 for repairs but did not pay Chester’s $35,909.01 invoice.
- During the second tow the tug experienced a starter/engine problem; Chester’s crew repaired the problem but Russell’s principal, Lawtum, told Chester to stop, fired Chester’s crew, and said he would send a replacement tug.
- Chester stayed with the barges ~72 hours, inspected and secured them, then accepted another job; Russell’s principal later (and his employee/wife) negotiated a promissory note, which Chester did not accept or sign.
- Russell filed suit and recorded a maritime lien on Chester’s tug; Chester sued in state court for nonpayment and placed liens on barges; matters were removed/ consolidated and tried in the bankruptcy court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice of law: which law governs towing contracts | Chester: maritime (federal) law governs towing contracts | Russell: no special state interest requires Louisiana law | Held: Federal maritime contract law governs (contracts maritime and not inherently local). |
| Breach for First Tow (nonpayment) | Chester: performed tow; Russell failed to pay $35,909.01 | Russell: asserted various defenses; paid $15,000 for barge repair | Held: Chester performed; Russell breached by nonpayment; offset of $15,000 for repairs; net owed $20,909.01. |
| Breach/repudiation of Second Tow | Chester: mechanical delay occurred but crew repaired; Russell repudiated by firing and instructing them not to proceed | Russell: Chester breached/abandoned tow or feigned mechanical issue to get paid | Held: Russell anticipatorily repudiated and waived claims; Chester entitled to damages for partial performance and standby. |
| Damages (lost profits, standby fees, invoices, prejudgment interest) | Chester: seeks full invoice balance, standby fees, and lost profits | Russell: contests lost profits and excessive fees; seeks offset for barge repair | Held: Chester awarded $65,616 for Second Tow (partial invoice + $36,000 standby); no lost profits; total judgment to Chester $86,525.01 after offset; prejudgment interest awarded at 1% on specified amounts. |
| Maritime liens & attorneys' fees | Chester: seeks enforcement of liens and attorneys' fees | Russell: lien on tug should secure its offset claim; disputes bad faith | Held: Russell’s lien discharged to extent of court’s holdings; Chester’s liens to be released upon payment; attorneys’ fees denied (no bad faith). |
Key Cases Cited
- Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14 (2004) (federal maritime law controls interpretation of maritime contracts not inherently local)
- Kossick v. United Fruit Co., 365 U.S. 731 (1961) (oral contracts are valid in admiralty; maritime contract inquiry focuses on maritime service)
- Knapp, Stout & Co. v. McCaffrey, 177 U.S. 638 (1900) (contracts to tow vessels are maritime contracts)
- Galveston County Nav. Dist. No. 1 v. Hopson Towing Co., 92 F.3d 353 (5th Cir. 1996) (charterer in sole custody may be liable for damage to a barge; notice considerations)
- Freeport Sulphur Co. v. S/S Hermosa, 526 F.2d 300 (5th Cir. 1976) (compensatory damages in admiralty aim to restore injured party)
- Delta S.S. Lines, Inc. v. Avondale Shipyards, Inc., 747 F.2d 995 (5th Cir.) (lost profits recoverable in admiralty if proved with reasonable certainty)
- Canal Barge Co. v. Torco Oil Co., 220 F.3d 370 (5th Cir. 2000) (framework for proving lost profits in maritime cases)
- Comar Marine Corp. v. Raider Marine Logistics, L.L.C., 792 F.3d 564 (5th Cir. 2015) (denial of lost-profits award where proof lacked reasonable certainty)
- Mobil Oil Expl. & Producing Se., Inc. v. United States, 530 U.S. 604 (2000) (principles on restitution and damages for repudiation)
- Deloach Marine Servs., L.L.C. v. Marquette Transp. Co., L.L.C., 974 F.3d 601 (5th Cir. 2020) (prejudgment interest in maritime cases is ordinarily awarded)