547 F. App'x 432
5th Cir.2013Background
- Superior Derrick Services (Superior) contracted with Lonestar Drilling Nigeria (Lonestar) to refurbish two drilling barges under two Refurbishment Agreements (each ~$14.49M). Work occurred in Louisiana; Lonestar personnel had access to the site.
- Numerous disputes and >100 change orders led the parties in March 2008 to replace a Time-and-Materials arrangement with a written Turnkey agreement, which fixed a balance “due and payable” of $3,396,901.37 (after a $5.4M payment on account).
- Lonestar paid $5.4M and $396,901.37 but did not pay the remaining $3M; Superior sued in rem asserting maritime liens and breach of contract; Lonestar counterclaimed for delay damages (~$28M).
- The district court granted partial summary judgment for Superior on the Turnkey claim (Lonestar breached by not paying the Turnkey balance) and dismissed Lonestar’s counterclaims; after a bench trial the court awarded Superior damages for breach of the Refurbishment Agreements, less a 3% credit for incomplete work.
- On appeal, the Fifth Circuit affirmed: it held Louisiana law governed (Turnkey incorporated the Refurbishment Agreements’ choice-of-law clause), the Turnkey balance was presently due, Lonestar’s breach justified dismissal of its delay counterclaims, the 3% credit for incomplete work was proper, and Superior failed to prove several additional claims (implied contract payment, insurance premiums, tank-cleaning overcharges, living-expense necessaries, and prejudgment interest arguments).
Issues
| Issue | Plaintiff's Argument (Superior) | Defendant's Argument (Lonestar) | Held |
|---|---|---|---|
| Governing law for Turnkey | N/A (Superior relied on incorporated Refurbishment choice clause) | Turnkey lacks choice-of-law clause so federal maritime law applies | Turnkey incorporated the Refurbishment Agreements; Louisiana law governs |
| Meaning of “due and payable” in Turnkey; summary judgment on Turnkey breach | Superior: amount was presently due; Lonestar breached by nonpayment | Lonestar: term ambiguous; payment due only on completion | Court: “due and payable” meant a presently owed debt; Lonestar breached; summary judgment for Superior; counterclaims dismissed |
| Remedy for substantial performance under Refurbishment Agreements | Superior: performed ~97–100%, entitled to full contract price | Lonestar: incomplete work; should get full final-payment credit (~$4.24M) | Substantial performance found (~97%); owner entitled to reduction equal to cost/percentage of uncompleted work; 3% credit affirmed |
| Recovery for extra-contractual/undocumented work and costs (implied contract, insurance premiums, tank cleaning, living expenses) | Superior: entitled to reasonable value/reimbursement for extra work, insurance, extra tank cleaning costs, and living/incidental expenses (necessaries) | Lonestar: either previously waived, had its own coverage, or costs were not proven or not necessaries | Court: district court’s factual findings not clearly erroneous — implied contract intended no pay; Superior failed to prove insurance coverage or extra tank costs; living expenses not proven to be "necessaries" for maritime lien |
| Prejudgment interest date and rate | Superior: higher rate; interest from date of loss | Lonestar: lower rate and from judicial demand acceptable | District court acted within discretion applying §1961 rate and interest from date of judicial demand; affirmed |
Key Cases Cited
- Haverda v. Hays Cnty., 723 F.3d 586 (5th Cir. 2013) (summary judgment review standard)
- Stevens Shipping & Terminal Co. v. JAPAN RAINBOW II MV, 334 F.3d 439 (5th Cir. 2003) (bench admiralty trial review standards)
- One Beacon Ins. Co. v. Crowley Marine Servs., Inc., 648 F.3d 258 (5th Cir. 2011) (incorporation of referenced documents into a contract)
- In re Ripley, 926 F.2d 440 (5th Cir. 1991) (meaning of “payable” in contract interpretation)
- Olympic Ins. Co. v. H. D. Harrison, Inc., 463 F.2d 1049 (5th Cir. 1972) (substantial breach excuses other party's performance)
- Equilease Corp. v. M/V SAMPSON, 793 F.2d 598 (5th Cir. 1986) (broad meaning of "necessaries" for maritime lien)
- J. Ray McDermott & Co. v. Off-Shore Menhaden Co., 262 F.2d 523 (5th Cir. 1959) (definition and scope of necessaries)
- Racal Survey U.S.A., Inc. v. M/V COUNT FLEET, 231 F.3d 183 (5th Cir. 2000) (maritime liens stricti juris; limits on extending liens)
- Reeled Tubing, Inc. v. M/V CHAD G, 794 F.2d 1026 (5th Cir. 1986) (district court discretion in setting prejudgment interest)