KAI Enterprises, L.L.C. v. Boh Bros. Const. Co., L.L.C.

Decision Date09 August 2010
Docket NumberCivil Action No. 09-118
Citation731 F.Supp.2d 568
PartiesKAI ENTERPRISES, L.L.C. v. BOH BROS. CONSTRUCTION CO., L.L.C.
CourtU.S. District Court — Eastern District of Louisiana

Harold J. Flanagan, Jamie Dodds Cangelosi, Stephen M. Pesce, Thomas M. Flanagan, Flanagan Partners, LLP, New Orleans, LA, for Kai Enterprises, L.L.C.

John Fredrick Kessenich, Ryan M. Bourgeois, Daigle & Fisse, Covington, LA, Salvador Joseph Pusateri, Francis A. Jurovich, III, Johnson, Johnson, Barrios & Yacoubian, New Orleans, LA, for Boh Bros. Construction Co., L.L.C.

ORDER AND REASONS

SARAH S. VANCE, District Judge.

Plaintiff KAI Enterprises moves for summary judgment in this suit involving an alleged breach of a maritime contract (R. Doc. 40). Defendant Boh Bros. files a cross-motion for summary judgment (R. Doc. 75). The motions are both DENIED to the extent discussed in this Order.

I. Background

On June 1, 2007, KAI and defendant Boh Bros. entered into a bareboat charter under which Boh Bros. was to use the quarters barge ESCAPE to house workers during a maritime project.1 The contract specified that Boh Bros. was to pay KAI $1,200 for every day of use, with a minimum of fifteen days. 2 According to KAI,the contract also specifies that if there is any damage to the vessel, Boh Bros. shall, at KAI's option, either repair the vessel or pay a repair estimate. Finally, the charter states that Boh Bros., by its acceptance of the vessel, stipulates that the barge is seaworthy and in good condition, and that KAI makes no representation or warranty about the condition of the vessel or its fitness for Boh Bros.'s purposes.

According to KAI, Boh Bros. returned the ESCAPE on June 30, 2007, with a hole in its hull. The ESCAPE was allegedly towed from Boh Bros.'s work site by two vessels: the M/V CAJUN III, which is owned and operated by Stagg Marine, Inc., and the M/V ZIP II, which is owned and operated by Transinland Marine, Inc. After the ESCAPE was returned to the dock and all Boh Bros. personnel had departed, KAI alleges that its employees noticed that the vessel was listing.

After making this observation, the employees discovered a hole in the hull of the vessel and noticed that compartments of the barge contained water. 3 They began to pump water out of the barge between June 30 and July 2, and on July 2, KAI employees contacted J & J Diving Company to apply a salvage patch to the barge's hull. After J & J applied the patch, KAI pumped out the remaining water.4 The barge remained dry and the employees returned home on July 3. KAI employees returned on July 5, 2007, at which point KAI discovered that the ESCAPE had sunk in the marina.5 The vessel was rendered a total loss.

On July 6, after the loss of the ESCAPE, KAI sent Boh Bros. a letter explaining the damage and stating that the boat would remain on charter until repairs or an inquiry into the damage could be made.6 The parties do not appear to dispute that this was the first time KAI contacted Boh Bros. about the condition of the barge. Boh Bros., in response, denied all liability.7 Apparently after an investigation, KAI informed Boh Bros. that it had determined that the damage was caused by Boh Bros.'s activities and that the charter had not yet terminated.8 It later made demand on Boh Bros. to pay $250,000, the value of the ESCAPE, in addition to the accrued charter hire of "no less than $470,000." 9 According to KAI, Boh Bros. did not respond to these demands. KAI also asserts that, because the barge was a total loss, it could not charter it to another party to mitigate damages, nor did it have the funds to acquire a new barge. This condition lasted until November of 2008, when KAI's hull insurer-Continental Insurance Company-paid KAI the full value of the ESCAPE.10

KAI filed this suit for breach of contract in January of 2009. It contends that the charter did not terminate when Boh Bros. returned the ESCAPE because the barge was returned damaged, and Boh Bros. neither made neither repairs nor payment.It seeks more than $500,000 of unpaid charter hire that accrued from the date Boh Bros. returned the vessel in June of 2007 until the time that Continental paid KAI the value of the ESCAPE in November of 2008. It also seeks attorneys' fees and other costs. KAI amended its complaint to add Stagg and Transinland as defendants, alleging that they are responsible in solido for their neglect, fault, want of due care, and breach of warranty for their towing of the ESCAPE.

Continental filed a separate suit against Boh Bros., Stagg, and Transinland in February of 2009,11 alleging that the agreement it had with KAI contains a subrogation provision that allows Continental to bring suit based on defendants' negligence and breach of the charter party. It seeks $250,000 for the full cost of the ESCAPE as well as an additional $100,000 for the salvage expense of the ESCAPE, which Continental also paid.

Boh Bros. filed a third-party complaint against J & J Diving and its comprehensive liability insurer, claiming that the sinking of the ESCAPE was J & J Diving's fault and not Boh Bros.'s. Specifically, Boh Bros. alleges that J & J Diving failed to determine the condition of the ESCAPE's hull properly, failed to repair and patch the hole in the vessel, failed to monitor the ingress of water into the ESCAPE's hull, and failed to pump the water that did enter the vessel.

KAI now moves for summary judgment on its claim. Boh Bros. opposes summary judgment on several grounds. First, it seeks to present evidence that the hull was in poor condition when it took possession of the ESCAPE. Next it argues that issues of fact exist as to the ownership of the ESCAPE, and thus KAI's ability to lease it. It contends that, to the extent that the ESCAPE was returned damaged, there are issues of fact that surround the cause of the damage, specifically whether the damage was the result of ordinary wear and tear. Finally, it argues that, under the doctrines of frustration and impossibility, the charter terminated when the ESCAPE sank. In addition, Boh Bros. files a separate cross-motion for summary judgment, alleging that the charter terminated at some point between the return of the ESCAPE and its sinking several days later.

II. Legal Standard

Summary judgment is appropriate when "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." 12 When assessing whether a dispute as to any material fact exists, the Court considers "all of the evidence in the record but refrains from making credibility determinations or weighing the evidence." 13 All reasonable inferences are drawn in favor of the nonmoving party, but "unsupported allegations or affidavits setting forth 'ultimate or conclusory facts and conclusions of law' are insufficient to either support or defeat a motion for summary judgment." 14

If the dispositive issue is one on which the moving party will bear the burden of proof at trial, the moving party "mustcome forward with evidence which would 'entitle it to a directed verdict if the evidence went uncontroverted at trial.' " 15 The nonmoving party can then defeat the motion by either countering with sufficient evidence of its own, or "showing that the moving party's evidence is so sheer that it may not persuade the reasonable fact-finder to return a verdict in favor of the moving party." 16

If the dispositive issue is one on which the nonmoving party will bear the burden of proof at trial, the moving party may satisfy its burden by merely pointing out that the evidence in the record is insufficient with respect to an essential element of the nonmoving party's claim.17 The burden then shifts to the nonmoving party, who must, by submitting or referring to evidence, set out specific facts showing that a genuine issue exists. 18 The nonmovant may not rest upon the pleadings, but must identify specific facts that establish a genuine issue for trial.19

III. Analysis
A. Contractual Terms and Effect of Stipulation

The charter between the parties is a maritime contract, which is interpreted in accordance with general common-law principles of contract law.20 A court will first look to the intent of the parties as expressed by the terms of the agreement.21 The contractual language should be given its plain meaning unless the terms are ambiguous.22 A court should read the contract as a whole, and if the language is not ambiguous, the court "should not look beyond the written language of the contract to determine the intent of the parties." 23 If the language is ambiguous, a court may consider extrinsic evidence to determine the parties' intent at the time of agreement. 24 When maritime law is silent about a question, the Court looks to general common law or, in some circumstances, state law.25 "To the extent that it is not inconsistentwith admiralty principles ... state contract law may be applied to maritime contracts." 26

Here, the bareboat charter between the parties specifies that "[a]cceptance or use of the vessel by the charterer will be deemed to be an acknowledgment that the vessel is seaworthy, in good condition, and fit for the charterer's purpose." 27 It also states that KAI "does not make any representation, warranty, or covenant, express or implied, with respect to the condition, quality, durability, or suitability for charterer's intended use of the vessel." 28 The section discussing liability for damage to the vessel reads as follows:

LIABILITY FOR LOSS OR DAMAGE
Charterer assumes all risk of loss of and damage to the vessel from any cause. In the event of loss of or damage to the vessel, charterer, at the option of owner, shall:
a. Place the vessel in good repair; or
b. Surrender the vessel to owner and pay the lowest of three shipyard repair estimates obtained by owner, whereupon this agreement shall terminate.
c. If the vessel is lost, pay owner in cash the value of the vessel
...

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