Deutsche Shell Tanker v. Placid Refining Co., Civ. A. No. 86-5683.
Decision Date | 08 July 1991 |
Docket Number | Civ. A. No. 86-5683. |
Citation | 767 F. Supp. 762 |
Parties | DEUTSCHE SHELL TANKER-GESELLSCHAFT mbH v. PLACID REFINING COMPANY. |
Court | U.S. District Court — Eastern District of Louisiana |
Richard Ashworth, Michael Sommer, Haight, Gardner, Poor & Havens, New York City, Francis Barry, Deutsch, Kerrigan & Stiles, New Orleans, La., for plaintiff.
James G. Burke, Jr., Andrew C. Wilson, Burke & Mayer, New Orleans, La., for defendant.
This matter came before the Court for trial without a jury on the issue of liability only. The Court now rules as follows. To the extent the following findings of fact constitute conclusions of law, the Court adopts them as such; to the extent the following conclusions of law constitute findings as fact, the Court adopts them as such.
This is a general average case under maritime law. Shell seeks a general average contribution from Placid for expenses in degrounding Shell's tanker DIALA during a voyage in June 1983 when the DIALA grounded while carrying crude oil from Sullom Voe, United Kingdom to Placid's facilities in Port Allen, Louisiana. Placid defends on three general grounds: first, Shell's claim is barred by the admiralty doctrine of laches; second, Placid did not own any cargo on the DIALA at the time of the voyage when the DIALA encountered its difficulties; and third, the DIALA was unseaworthy when it began its voyage by being overloaded for travel on the Mississippi River and by having defective radar equipment.
The Court rejects Placid's first and second defenses and finds that the DIALA was not overloaded on this voyage. Concluding, however, that there was no general average act and alternatively that defective radar equipment from Shell's poor maintenance had made the DIALA unseaworthy before its voyage and was a proximate cause of the grounding, the Court holds that Placid is not responsible for a general average contribution here.
The plaintiff in this action is Deutsche Shell Tanker-Gesellschaft mbH (Deutsche Shell),1 a German corporation with its principal place of business in Germany. Shell International Marine Limited (Shellimar) and Shell International Trading Company (Shell Trading) are separate divisions of Shell International Petroleum Company Limited, which is a corporate affiliate of Deutsche Shell (collectively, Shell).
At all material times, Deutsche Shell owned and operated the DIALA, an 800-foot long steam tanker built in 1966 and capable of carrying up to 70,000 tons of crude oil, and had the DIALA under a long-term time charter to Shellimar.
The defendant in this action is Placid Refining Company (Placid), a Delaware corporation with its principal place of business in Texas. Placid owns a crude oil refinery on the Mississippi River at Port Allen, Louisiana.
By the late 1970s, Shell had amassed one of the world's largest fleets of oil tankers. Shell Trading was formed, among other reasons, to offer crude-oil transportation and trading services to non-Shell entities. Among the services Shell Trading developed were "Crude Freight Service Arrangements" (CFSAs). Under a CFSA, Shell would buy oil in one location from a party at some established price and then later, when the party was ready for delivery of the oil at a different location, would sell and deliver at the different location an equivalent quantity of oil to the party under the same established pricing system, with an additional agreed-upon rate for freight, with or without insurance at the party's option. The oil that Shell would sell to complete a single CFSA transaction might or might not be the same oil that Shell had bought; generally, the oil Shell would buy passed into "the Shell system" for use by Shell or some third-party, and Shell would obtain another load of oil for delivery to the contracting party when the contracting party was ready for delivery. These contracts, which would generally apply over a six-month or one-year period, gave the contracting party a degree of flexibility in the timing between the production and delivery-for-refining of quantities of oil.
Sometime in late 1979, David J. Fruin of Shell Trading telephoned Paul B. Wehner, Placid's crude oil manager, to offer Shell's CFSA services to carry oil cargo for Placid. The call was successful. Shell Trading and Placid entered into a series of six-month or one-year term CFSAs, all of which Shell drafted. For the portion of the CFSAs whereby Placid would buy back the oil from Shell, Placid always agreed that it, and not Shell, would obtain insurance for Shell's carriage of such cargo. That is, Placid chose to buy the oil back on C & F terms, and not on CIF terms.
Over time, market conditions changed in the oil industry, and Placid and/or Shell no longer wanted to continue the CFSAs on an extended basis. Thus, by at least the beginning of 1983, the parties did not renew in effect any CFSA. The parties did not, however, intend to cease doing business. In January 1983, they agreed to a proposed "blanket" CFSA (to be completed with details on price, quantity, and time) for possible later use.
Around May 9, 1983, Wehner of Placid telephoned Fruin of Shell Trading to hire Shell's services for the transportation of a single load of crude oil from Sullom Voe, Shetland Islands, United Kingdom to Placid's refinery at Port Allen, Louisiana. Rather than use a voyage charterparty more typical for a spot contract for the carriage of a single shipment of cargo,2 Fruin suggested to use the proposed CFSA from January as the basis for the governing terms, notwithstanding that the CFSAs were designed for term, and not spot, contracts; Fruin agreed.
The parties reached an agreement by telephone on May 10, 1990. The following day, Fruin sent a telex, which reads in whole:
See Exh. P1, at 2-3. Concurring in the confirmation, Wehner sent a reply telex, which reads in whole:
We hereby agree to the C.F.S.A. terms as stated in your telex of 11 May 1983, whereby Shell International Trading Company lifts 60,000 tonnes of Brent crude oil from Sullom Voe terminal 21-23 May on vessel DIALA for delivery to Placid Refining Company at Port Allen, Louisiana.
See Exh. P1(1). Soon thereafter, Fruin mailed Placid a written CFSA, effective May 10, 1983, to reflect fully the terms of the parties' contract; both Shell Trading and Placid signed this CFSA, which, like all the earlier CFSAs, Shell Trading had drafted. This CFSA contains the following pertinent terms:
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