Birmingham Southeast, LLC v. M/V Merchant Patriot

• Decision Date: 17 February 2000
• Docket Number: No. CV 498-010.,No. CV 499-33.,No. CV 498-007.,No. CV 498-271.,No. CV 499-116.,No. CV 498-252.,No. CV 498-282.,CV 498-007.,CV 498-271.,CV 498-282.,CV 498-010.,CV 499-33.,CV 498-252.,CV 499-116.
• Citation: Birmingham Southeast, LLC v. M/V Merchant Patriot, 124 F.Supp.2d 1327 (S.D. Ga. 2000)
• Parties: BIRMINGHAM SOUTHEAST, LLC, et al., Plaintiffs/Claimants, v. M/V MERCHANT PATRIOT, etc., et al. Defendants/Petitioners.
• Court: U.S. District Court — Southern District of Georgia

124 F.Supp.2d 1327

BIRMINGHAM SOUTHEAST, LLC, et al., Plaintiffs/Claimants, v. M/V MERCHANT PATRIOT, etc., et al. Defendants/Petitioners.

No. CV 498-007.

No. CV 498-271.

No. CV 498-282.

No. CV 498-010.

No. CV 499-33.

No. CV 498-252.

No. CV 499-116.

United States District Court, S.D. Georgia, Savannah Division.

February 17, 2000.

Walter Charlton Hartridge, II, Edwin D. Robb, Jr., Bouhan, Williams & Levy, Savannah, George R. Zacharkow, Mattioni, Mattioni & Mattioni, Ltd, Philadelphia, PA, Frederick J. Cuccia, Cuccia, Oster & Hansburg, Larchmont, NY, Machale A. Miller, Iliaura Hands, Miller & Williamson, LLC, New Orleans, LA, for plaintiffs.

Robert Edward Warren, Kimberly Held Israel, Moseley, Warren, Prichard & Parrish, Jacksonville, FL, Robert S. Glenn, Jr., George M. Earle, Hunter, Maclean, Exley & Dunn, Marc Gordon Marling, Hunter, Maclean, Exley & Dunn, Savannah, Eugene J. O'Conner, Freehill, Hogan & Mahar, New York City, James F. Moseley, Jr., Moseley, Warren, Prichard & Parrish, Jacksonville, FL, Edward A. Keane, Mahoney & Keane, LLP, New York City, for defendants.

MEMORANDUM DECISION AND ORDER

NANGLE, District Judge.

A. Background

The petitioners¹ in the above-captioned case have filed a petition for Exoneration from or Limitation of Liability, pursuant to the Limitation of Liability Act, 46 U.S.C.App. §§ 183-89. The petitioners seek to limit the liability that they have incurred as a result of a massive vessel casualty that occurred on December 30, 1997, causing the loss and damage of over $10 million worth of steel mill products owned by the claimants.

Throughout 1998, the claimants filed separate actions in this Court and in the Southern District of New York, seeking recovery for over $11 million worth of lost or damaged cargo. All of the cases, including the instant petition for exoneration/limitation of liability, were then transferred to this Court. The cases were consolidated on May 28, 1999. See Order dated May 28, 1999 (Doc. 64). With regard to the petition for limitation of liability, this Court bifurcated the action on the issues of liability and damages.

The "limitation of liability" portion of the case came before the Court for a bench trial, prior to which trial, joint stipulations of fact were filed by the parties, which the Court has adopted. Consolidated Pretrial Order, Dec. 30, 1999 (Doc. 71) (hereinafter, individual stipulations from this document are designated as "Stip. ___"). The issue is whether the petitioners are entitled to limit their liability in the case. At the Court's direction, attorneys filed post-trial briefs with proposed findings of fact and conclusions of law. Having carefully reviewed these post-trial documents, together with the pleadings, the testimony of the witnesses, the exhibits before the Court and the stipulations of the parties, the Court makes the following findings of fact and conclusions of law. Fed.R.Civ.P. 52.

B. Findings of Fact

The Voyage

1. On December 19, 1997, the M/V MERCHANT PATRIOT departed from Praia Mole, Brazil en route to Savannah, Georgia. The vessel was transporting a cargo of steel products and part of a knocked-down steel mill. (Stip.9, 10, 61).

2. The first ten days of the voyage were uneventful, but on the evening of December 29, 1997, members of the crew discovered that seawater was flooding the engine room. The crew determined that the source of the water was a failed pipe in the seawater circulating system. (Stip.62, 66, 69).

3. The failed pipe was a 150mm pipe leading from the 300mm aluminum brass pipe (T joint) to the forward fire, bilge, and ballast pump. The 150mm pipe ruptured near the flange and was leaking. The pipe itself was below the surface of the seawater that had leaked into the engine room. (Stip.69).

4. In order to patch the failed pipe, members of the crew shut down the main engine for approximately forty-five minutes. During that time, the ship was unable to steer or make headway and therefore could not maneuver to minimize the effects of the wind and the sea. As a result, some of the cargo began to shift. (Stip.70, 72).

5. Members of the crew secured a temporary patch on the pipe, and the main engine was restarted. However, at approximately 7:00 a.m. on the next morning, December 30, 1997, the patched pipe again ruptured. (Stip.73).

6. As a result of this rupture, seawater entered the lube oil sump for the main engine, affecting the viscosity of the lube oil. This contamination caused the main engine to shut down again, and the crew was unable to get the engine restarted. (Stip.75).

7. As had occurred the evening before, cargo began shifting when the main engine was shut down for a second time. At approximately 8:20 a.m., the Captain ordered the crew to abandon the vessel, and they were rescued by the Coast Guard. (Stip.76).

8. Smit Americas, Inc., a salvor, was hired to recover the M/V MERCHANT PATRIOT. By the time the salvors found the vessel, a significant portion of the deck cargo had been lost overboard or damaged. The salvors towed the vessel to Freeport, in the Bahamas, where she was dewatered and destabilized. In March 1998, the vessel was towed to Charleston, South Carolina, where all of the remaining cargo was discharged. The vessel was eventually salvaged. (Stip. 78, 79; Claimants' Ex. OOO p. 4).

The Parties

9. Cenargo Navigation Ltd ("Cenargo") purchased the M/V MERCHANT PATRIOT in February 1988. Cenargo was the owner and operator of the vessel since the time of the purchase and through the completion of the voyage at issue. (Stip.4).

10. Mr. Michael Hendry is the principal of Cenargo, and he was the primary contact person for the M/V MERCHANT PATRIOT. (Stip 4).

11. On March 7, 1989, Cenargo transferred management of the M/V MERCHANT PATRIOT to V Ships (UK) Ltd. ("V Ships"). V Ships managed the vessel at the time of the casualty. V Ships also managed several other vessels owned by Cenargo. (Stip.5).

12. At the time of the voyage at issue, Cenargo and V Ships did not have a written management agreement in place with respect to the management of the M/V MERCHANT PATRIOT, and no written Management Agreement was in place for most of the time since 1989. (Stip.5).

13. Although there was no written management agreement in place at the time of the casualty, both Cenargo and V Ships understood that an agreement did in fact exist. (Trial testimony of Hendry).

14. V Ships hired and managed the crew of the M/V MERCHANT PATRIOT, acting as an agent for Cenargo. V Ships operated on an annual budget, subject to the approval of Mr. Hendry, the principal of Cenargo. Cenargo paid the expenses for ship operation and maintenance, including crew wages. Cenargo also paid V Ships a management fee. (Trial testimony of Hendry, Rosseter).

15. V Ships oversaw the maintenance of the vessel. With regard to that responsibility, as well as all others, V Ships operated as an agent of Cenargo. (Trial testimony of Hendry, Rosseter).

16. V Ships and Cenargo are independent companies. V Ships did not have any ownership or financial interest in the M/V MERCHANT PATRIOT. V Ships was not a charterer of the vessel and was not involved in the commercial aspects of which ports the vessel called at and what cargoes she carried. (Stip.19.)

The Vessel

17. The M/V MERCHANT PATRIOT, a general cargo vessel, was built by Scotts Shipbuilding Company, Ltd, Greenock, Scotland in 1980. The vessel was built under the supervision and approval of Lloyd's Register of Shipping, and she has been classed with Lloyd's since she entered service. (Stip.11).

18. The vessel was 540 feet in length and weighed 16,482 gross tons. She had five holds, all forward of the accommodation house. (Stip.11).

19. The vessel had a main engine and three auxiliary engines. All four of those engines were cooled by seawater passing through the seawater circulating system. (Stip.12, 14).

20. The seawater circulating system was a critical system on the M/V MERCHANT PATRIOT, as it is on any vessel. (Stip.14).

21. The following is a description of the seawater circulating system on the vessel:

There were high and low sea chests on the port and starboard side of the vessel where sea valves controlled the entry of seawater into the seawater circulating system. The sea chests were connected by a nonferrous 450mm pipe, which was made of aluminum brass. The water that entered the circulating system was moved through the piping network by the main seawater pump. (Stip.14).

On the port side of the vessel, a 300mm aluminum brass pipe was connected to the transverse 450mm pipe by flanges and it ran aft (longitudinally) along the port side of the vessel, between the main engine and the side (skin) of the ship. A similar pipe ran aft along the starboard side of the ship. (Stip.14).

The 300mm pipe on the port side had two T joints branching off of it toward the skin of the ship. These T joints were made up of a short section of 150mm aluminum brass pipe and flanges. These T joints were connected by another flange to ferrous, carbon steel 150mm pipes, which continued (in several sections) toward the outboard, port side of the ship. The steel pipe leading from the forward T joint was connected to the fire, bilge and ballast pump, sometimes referred to as the forward fire, bilge pump. (The section of pipe that failed during the voyage at issue was the first section leading from the T joint toward the pump, and the failure occurred adjacent to the T joint flange.) The steel pipe leading from the aft T joint was connected to the fire, bilge and general service pump, sometimes referred to as the aft fire, bilge pump. The steel pipes running from the forward and aft T joints to the pumps were within three feet of each other. (Stip.14).

Part of the 150mm piping for the seawater circulating system, including that leading to the forward and aft pumps, was located below the floor plates in the engine room, approximately two feet above the tank tops. The pipes could be...