815 F.2d 1037 (5th Cir. 1987), 85-3388, Dow Chemical Co. v. M/V Roberta Tabor

Docket Nº:85-3388, 86-3251.
Citation:815 F.2d 1037
Party Name:The DOW CHEMICAL COMPANY, Plaintiff-Appellant, v. The M/V ROBERTA TABOR, and M/V SUGARLAND etc., et al., Defendants, American River Transportation Company and Scott Chotin, Inc., Defendants- Appellees.
Case Date:May 04, 1987
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 1037

815 F.2d 1037 (5th Cir. 1987)

The DOW CHEMICAL COMPANY, Plaintiff-Appellant,

v.

The M/V ROBERTA TABOR, and M/V SUGARLAND etc., et al., Defendants,

American River Transportation Company and Scott Chotin,

Inc., Defendants- Appellees.

Nos. 85-3388, 86-3251.

United States Court of Appeals, Fifth Circuit

May 4, 1987

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[Copyrighted Material Omitted]

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Richard B. Foster, Lemle, Kelleher, Kohlmeyer, Dennery, Hunley, Moss & Frilot, New Orleans, La., for Dow Chemical Co.

Robert T. Lemon, II, Jones, Walker, Waechter, Poitenent, Carrer & Denegre, New Orleans, La., for American River Transp.

Paul N. Vance, Phelps, Dunbar, Marks, Claverie & Sims, New Orleans, La., for Scott Chotin, Inc.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before REAVLEY and RANDALL, Circuit Judges, and WOODWARD, [*] District Judge.

RANDALL, Circuit Judge:

Dow Chemical Company ("Dow") appeals the district court's judgment denying Dow's claim for loss of use damages against American River Transportation Company ("Artco") and awarding Scott Chotin, Inc. ("Chotin") attorneys' fees and costs against Dow. For the reasons that follow, we affirm in part, reverse in part, and remand for further proceedings.

I.

This litigation arose out of a collision between two tugs in the lower Mississippi River on September 20, 1979. The tugs were the M/V Roberta Tabor, owned by Artco, and the M/V Sugarland, owned by Chotin, but fully chartered to Dow. Three barges were damaged as a result of the collision: The barge ART-488, which was owned by Artco and which was in the tow of the Roberta Tabor, and the barges PTC-501 and SC-303L, which were bareboat chartered by Dow and which were in the tow of the Sugarland.

The charter agreement ("Bareboat Charter Party") between Dow and Chotin for the barge SC-303L required Dow to obtain hull insurance and protection and indemnity ("P & I") insurance on the barge and to name Chotin as an additional assured with a waiver of subrogation. Dow could, however, elect to self-insure. 1 If Dow elected to self-insure, however, the charter agreement provided that Dow was to pay Chotin for any losses, and was to indemnify Chotin for any claims that would have been covered by insurance, including reasonable attorneys' fees and costs. 2

The towing contract ("Fully Found Charter Out of Boat") for the Sugarland required Dow to obtain hull and P & I insurance on the barges to be towed, to name

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Chotin as an additional assured on the P & I policies, and to waive subrogation on the hull policies. The fully found charter required Chotin to obtain hull, P & I, and tower's liability insurance on the Sugarland. The fully found charter also provided that if Dow elected to self-insure, Dow would defend and indemnify Chotin to the same extent as would be required if Dow had purchased the specified insurance coverage. 3 There is no dispute that Dow in fact elected to self-insure for losses under $1 million, and that Chotin was not named as an additional assured in Dow's hull and P & I insurance policies covering losses in excess of $1 million. Finally, the fully found charter purported to relieve Chotin of any liability for negligent towing. 4

II.

On December 27, 1982, Dow sued Artco and Chotin for the damage to the barges and for the loss of their use. On February 9, 1983, Artco answered Dow's complaint and cross-claimed against Chotin for indemnity and contribution for its liability, if any, to Dow, and for damage to its barge, the ART-488. Chotin defended against Dow's claim for damage to and loss of use of the barges and against Artco's cross-claim for indemnity and contribution, and Artco's claim for damage to its barge. On February 25, 1985, Chotin filed a counter-claim against Dow for indemnity from its liability, if any, to Artco and for attorneys' fees and costs incurred in defending against Dow's claims.

On March 7 and 8, 1985, the case was tried to the district court. On March 8, 1985, the district court issued its findings of fact and conclusions of law from the bench. The district court found that the negligence of the Roberta Tabor was the sole cause of the collision. The district court held that Dow was therefore entitled to recover from Artco $28,645.03, the stipulated amount of the physical damage to the barges chartered by Dow. On Dow's loss of use claim, however, the district court held that Dow had failed to prove by a preponderance of the evidence the amount of its loss. The district court stated that Dow had failed to establish that it had no other substitute barges available to replace the two damaged barges, or that it had to turn away business due to the temporary loss of the barges. Hence, the district court denied Dow's loss of use claim. Finally, the district court granted Dow prejudgment interest from the date of the collision.

On March 22, 1985, the district court entered judgment in favor of Dow and against Artco for $28,645.03, plus prejudgment interest and costs. The court also entered judgment in favor of Chotin and the Sugarland and against Dow on Dow's claim for damages and against Artco on Artco's cross-claims for indemnity and contribution and for damage to its barge.

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In its findings and conclusions disposing of the above claims, the district court did not rule on Chotin's claim against Dow for attorneys' fees and costs, but instead instructed the parties to pursue that claim in a supplemental proceeding. In essence, the basis for Chotin's counter-claim for damages was that Dow's claim against Chotin constituted a breach of Dow's obligations under the charter parties to defend and indemnify Chotin against such claims. In response, Dow argued that the insurance that it was obligated to obtain would only have required it to indemnify Chotin for claims based on the negligence of the vessels named in the insurance policies, i.e., the barges, and not the negligence of the Sugarland. Therefore, Dow argued, since its suit against Chotin was based upon the negligence of the Sugarland, it had no duty to indemnify Chotin for the costs in defending that action.

After receiving additional briefing by Dow and Chotin on the issue of Chotin's counter-claim for attorneys' fees and costs, the district court issued its first set of findings of fact and conclusions of law relating to Chotin's counter-claim. In this set of findings and conclusions, the district court stated that in order to determine whether Dow could properly maintain its claim against Chotin, it was necessary to determine what the effect would have been of the insurance that Dow was to provide under the Bareboat Charter Party and the Fully Found Charter Out of Boat. The district court, after examining the provisions of the charter parties and standard maritime hull insurance policies, concluded that the barge insurance specified in the charter parties would not have provided for the defense or indemnification of Chotin against the claims asserted by Dow. Hence, the district court held that Chotin could not recover attorneys' fees and costs from Dow because the policies required under the charter parties would not have covered losses stemming from the negligent operation of the Sugarland. Finally, the district court also held that the clause in the fully found charter purporting to relieve Chotin for any negligence in the operation of the Sugarland was void as against public policy. On June 3, 1985, judgment was entered in favor of Dow on Chotin's counter-claim.

On June 10, 1985, Chotin filed a motion to amend the judgment. In a minute entry of August 16, 1985, the district court granted Chotin's motion to amend. The district court held that since Dow elected to self-insure, it was effectively Chotin's hull underwriter for the barges, and that Dow therefore could not maintain a suit against its own assured. The district court held that in bringing such a suit, Dow was in breach of its contractual obligations to Chotin under the charter parties, and was therefore liable to Chotin for the attorneys' fees expended by Chotin in defending against Dow's claim. The court instructed Chotin to submit either a stipulated amount of attorneys' fees or an affidavit on the amount of attorneys' fees. After more briefing and argument by the parties on the issue of the quantum of attorneys' fees to be awarded Chotin, the district court, in a minute entry dated February 25, 1986, concluded that all of the reasonable attorneys' fees and costs incurred by Chotin in connection with this case were the direct and foreseeable result of Dow's bringing suit in breach of the charter parties. The district court therefore awarded Chotin attorneys' fees in the amount of $24,489.48. An order reflecting this minute entry was entered on March 18, 1986.

On March 27, 1986, Dow filed its notice of appeal from this judgment and from the judgment of March 21, 1985. On April 3, 1986, Artco filed its notice of cross-appeal. Amended notices of appeal were filed by Dow and Artco on April 9 and 10, 1986, to correct errors in the stated date of the district court's March 18, 1986 Order.

On appeal, Dow argues that the district court erred in holding that Dow had failed to prove its loss of use damages with reasonable certainty, erred in holding that Dow could not sue Chotin without breaching the charter agreements, and erred in holding that all of Chotin's attorneys' fees were a result of Dow's suit against Chotin. After setting out the applicable standard of

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review, we will address each of Dow's contentions separately.

III.

Our standard of review of decisions of district courts sitting in admiralty is well-settled. "[F]indings of fact by the trial court in admiralty cases are subject to the clearly erroneous rule. However, when essentially based on an incorrect legal principle, Rule 52(a) clearly erroneous does not apply and we...

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