Sea Byte v. Hudson Marine Management Services

• Citation: 565 F.3d 1293
• Decision Date: 20 April 2009
• Docket Number: No. 08-14069.,08-14069.
• Parties: SEA BYTE, INC., Plaintiff, Hudson Marine Management Services, Inc., Plaintiff-Appellant Cross-Appellee, v. HUDSON MARINE MANAGEMENT SERVICES, INC., Defendant, Thomas Miller (Miami), Inc., Thomas Miller P&I Ltd., Defendants-Appellees Cross-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

565 F.3d 1293

SEA BYTE, INC., Plaintiff Hudson Marine Management Services, Inc., Plaintiff-Appellant Cross-Appellee, v. HUDSON MARINE MANAGEMENT SERVICES, INC., Defendant Thomas Miller (Miami), Inc., Thomas Miller P&I Ltd., Defendants-Appellees Cross-Appellants.

No. 08-14069.

United States Court of Appeals, Eleventh Circuit.

April 20, 2009.

Scott Andrew Wagner, Moore & Co., P.A., Coral Gables, FL, for Hudson Marine Management Services, Inc.

John D. Kimball, Blank Rome LLP, New York City, for Thomas Miller (Miami), Inc.

Jack A. Greenbaum, Blank Rome, LLP, New York City, Andrew W. Anderson, Houck Anderson, P.A., Miami, FL, for Thomas Miller P&L, Ltd.

Appeals from the United States District Court for the Southern District of Florida.

Before BARKETT and FAY, Circuit Judges, and TRAGER,^* District Judge.

FAY, Circuit Judge:

This case arises out of a fixed-price contract between Appellant Hudson Marine Management Services, Inc. ("Hudson") and Appellee Thomas Miller ("Miller") in which Miller hired Hudson to restore a damaged underwater reef. Before Hudson could complete the restoration, the area experienced a series of hurricanes which expanded the scope of the project. Hudson never finished the job, and Hudson and Miller each filed claims against each other. The district court held that neither party breached their contract, but rather the contract terminated by its own terms when the hurricanes struck. The court declined to award any contractual damages, but awarded Hudson damages based on quantum meruit for work it performed after the contract terminated.

Hudson appealed the court's determination that Miller did not breach the contract, as well as the court's calculation of damages. Miller cross-appealed, also disputing the court's calculation of damages. After review and oral argument, we affirm in part and reverse in part.

I. FACTS

A. Background

On March 26, 2004 the vessel M/V EASTWIND ("EASTWIND") ran aground on an underwater coral reef in the Atlantic Ocean just off the Fort Lauderdale coast. According to Florida law when a ship runs aground on a reef in Florida's waters, the ship's owner must arrange for a damage assessment survey, reattach live coral heads (in a process known as "triage"), and repair damage to the site. These tasks are completed with oversight from state and county officials known as "Trustees."

The EASTWIND is owned by Eastwind Special Maritime Enterprise, which is a member of the United Kingdom Mutual Steam Ship Assurance Association ("the UK Club"). The UK Club is a mutual insurance association comprised of vessel owners, and Miller is its manager.¹ Miller contracted with Hudson, a "marine environmental casualty management corporation," to restore the grounding site. Specifically, Miller and Hudson entered into a "Time and Materials" contract for a damage assessment survey, reef restoration, and rubble stabilization or removal. Hudson was to be compensated on a time and materials basis at the rates specified in Hudson's rate sheet; reimbursed for travel, living and other expenses at cost plus 15%; and reimbursed for divers' per diem at an agreed rate.

Hudson subcontracted with marine biologist Jeffrey Waxman and Sea Byte, Inc. ("Sea Byte") to assess the grounding site, confer with the Trustees, and restore the reef. Sea Byte began work in April 2004.² Thereafter Miller grew concerned about the high cost of the project under the Time and Materials contract, and in July 2004 the parties began renegotiating. On July 25, 2004 they agreed to modify their previous contract to a "Lump Sum" contract for a total price of $5,200,000, which included $1,798,000 Miller had already paid to Hudson. The $5,200,000 was intended to cover the entire scope of the project.

The Lump Sum contract was actually composed of a variety of email statements and telephone conversations. The email exchanges negotiating the Lump Sum contract in July 2004 reflect that the parties agreed Miller would make "regular" and/or "installment" payments. Whereas Miller preferred payments linked to progress, Hudson initially preferred payments linked to specific dates. It appears that while the parties later agreed that Miller's payments pursuant to the Lump Sum contract were to be linked to actual progress milestones, such as the removal of certain amounts of rubble, they never reached an agreement as to which ones. Nevertheless, Miller made a series of payments to Hudson between July 25, 2004 and the end of August 2004 totaling $900,000.³

The Lump Sum contract also contained a "severe weather" provision as articulated in a July 25, 2004 email from Ms. Hudson, Hudson's representative, which stated: "Effects to Reef from severe weather conditions: ... Should changes occur due to severe weather, the Club, ourselves, and the Trustees would then need to readdress the scope of the project." In the same email Ms. Hudson agreed to Miller's offer of $5,200,000 "to complete the reef restoration and rubble removal project within the present, understood and agreed scope of work."

Beginning in early September the area experienced a series of hurricanes which further damaged the reef, including Hurricane Frances on September 2 and Hurricane Jeanne on September 25. Hudson contended that the hurricanes increased the scope of the work — apparently, the hurricanes scattered the stacks of rubble that Sea Byte's divers made both underwater and on dry land. Hudson requested an additional $2,100,000 to complete the project. The parties attempted to negotiate a new price, but were ultimately unable to reach an agreement. Hudson did some work after hurricanes, but on October 26, 2004 informed the Trustees it was ceasing operations as of October 29, 2004. Miller ultimately hired another entity (Marine Resources Inc., or "MRI") to complete the restoration project for $1,357,921.

B. Procedure

On October 26, 2005 Hudson filed suit in New Jersey district court against Miller for non-payment, and the case was later transferred to the Southern District of Florida. Hudson's complaint included four claims. The first three claims were for breach of the Time and Materials contract, unjust enrichment, and quantum meruit, all seeking the same relief: payment of $1,870,000 allegedly owed under the Time and Materials contract. The fourth claim sought a declaratory judgment to determine the amount Hudson owed to Sea Byte if Hudson did not recover the full amount of damages from Miller. Miller counterclaimed and alleged it overpaid Hudson for faulty and/or incomplete work, seeking at least $500,000 in damages. Sea Byte filed a separate lawsuit against Hudson in Florida state court for non-payment, which was removed to the Southern District of Florida and consolidated with Hudson's suit against Miller. Following a mediation involving Hudson, Miller, and Sea Byte, Sea Byte received $750,000 from Miller and $100,000 from Hudson. Thereafter Sea Byte dismissed its claims against Hudson.

Trial on Hudson's and Miller's claims began on September 17, 2007. On September 20, 2007 the court held that Miller breached the Lump Sum contract by failing to make regular payments to Hudson as required, causing Hudson to experience a cash shortage and walk off the job on October 29, 2004.⁴ However, the court reversed itself after reviewing the parties' evidence and post-trial submissions, holding that neither party breached the Lump Sum contract because the hurricanes triggered a provision allowing the contract to expire on its own. See Order, D.E. # 99 at 13.⁵

The court also found that Hudson performed quasi-contract work after the Lump Sum contract expired, and was thus entitled to recover in quantum meruit for the reasonable value of this work. The court examined the rates Sea Byte charged and used them as a guide to award Hudson $229,427 for the work it performed between September 2 and October 29 (or "post-hurricane" work). The court also held that Miller was entitled to a credit for the $750,000 it paid to Sea Byte following mediation.

Hudson appealed, disputing the court's determination that Miller did not breach the Lump Sum contract.⁶ Hudson also disputes the court's calculation of damages for Hudson's work both before and after the hurricanes, and court's award of the $750,000 credit to Miller. Miller cross-appealed, arguing that the court erred in calculating the value of work Hudson performed prior to September 2 (or "pre-hurricane" work).

II. DISCUSSION

A. Standard of Review

"We review a district court's factual findings when sitting without a jury in admiralty under the clearly erroneous standard. We review the district court's conclusions of law de novo." Venus Lines Agency, Inc. v. CVG Int'l Am., Inc., 234 F.3d 1225, 1228 (11th Cir.2000). "A finding of fact is clearly erroneous when the entirety of the evidence leads the reviewing court to a definite and firm conviction that a mistake has been committed." Dresdner Bank AG v. M/V Olympia Voyager, 446 F.3d 1377, 1380 (11th Cir.2006).

Where a case arises in admiralty, we apply the general maritime law. See, e.g., Coastal Fuels Mktg., Inc. v. Fla. Express Shipping Co., Inc., 207 F.3d 1247, 1250 (11th Cir.2000). General maritime law is federal law. Id. at 1251. However, "when neither statutory nor judicially created maritime principles provide an answer to a specific legal question, courts may apply state law provided that the application of state law does not frustrate national interests in having uniformity in admiralty law." Id.

B. Analysis

1. Termination of the Lump Sum Contract

As stated above, the "severe weather" provision of the Lump Sum contract provided: "Effects to Reef from severe weather conditions: ... Should changes occur due to severe weather, the Club, ourselves, and the Trustees would then need to readdress the scope of the project." The district court found that the Lump Sum contract expired by its own terms because the hurricanes triggered its severe weather provision. Sp...