Nat'l Liab. & Fire Ins. Co. v. R&R Marine, Inc.

• Decision Date: 30 June 2014
• Docket Number: No. 10–20767.,10–20767.
• Citation: 756 F.3d 825
• Court: U.S. Court of Appeals — Fifth Circuit
• Parties: NATIONAL LIABILITY & FIRE INSURANCE COMPANY, Plaintiff–Appellant, v. R & R MARINE, INC.; R & R Marine Offshore, Inc.; R & R Marine Maintenance, Inc.; R & R Shipbuilders, Inc., Defendants–Appellants, v. Hornbeck Offshore Services, L.L.C., Defendant–Appellee.

756 F.3d 825

NATIONAL LIABILITY & FIRE INSURANCE COMPANY, Plaintiff–Appellant,

v.R & R MARINE, INC.; R & R Marine Offshore, Inc.; R & R Marine Maintenance, Inc.; R & R Shipbuilders, Inc., Defendants–Appellants,

v.Hornbeck Offshore Services, L.L.C., Defendant–Appellee.

No. 10–20767.

United States Court of Appeals, Fifth Circuit.

June 30, 2014.

Machale Andrew Miller, Iliaura Hands, Ira Matthew Williamson, Miller & Williamson, L.L.C., New Orleans, LA, Defendants–Appellants.

Frederick William Mahley, Strasburger & Price, L.L.P., Houston, TX, Machale Andrew Miller, Miller & Williamson, L.L.C., New Orleans, LA, for Defendants–Appellants.

Alanson T. Chenault, IV, Michael Andrew Harowski, Antonio Jose Rodriguez, Esq., Fowler Rodriguez, New Orleans, LA, Stacey T. Norstrud, Fowler Rodriguez Valdes–Pauli, Houston, TX, for Defendant–Appellee.

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

Before HIGGINBOTHAM, OWEN, and GRAVES, Circuit Judges.

PRISCILLA R. OWEN, Circuit Judge:

This case arises out of the sinking of a vessel owned by Hornbeck Offshore Service (Hornbeck) while at R & R Marine's (R & R) shipyard for repairs. R & R's liability insurer, National Liability & Fire Insurance Company (National), initiated this suit to disclaim liability under its policy. Hornbeck counterclaimed that the policy obligated National to cover all sums for which R & R became obligated to pay and cross-claimed against R & R to assert that R & R's negligence caused the sinking of its vessel. The district court found that R & R was negligent and that National was liable for the ensuing damage. National and R & R appeal. We affirm in part, reverse in part, and remand for entry of judgment consistent with this opinion.

I

Hornbeck engaged R & R to repair and refit two vessels: the Erie Service, and the Superior Service. Only the repair of the Erie Service is at issue here. R & R was to perform the work at its shipyards on Lake Sabine in Port Arthur, Texas, subject to the terms of the Shipyard Repair and Drydock Agreement (Agreement). Under this Agreement, “[t]he Vessel(s) [were] deemed accepted into the ‘Custody’ of the Shipyard when the Vessel(s), with prior notice to the Shipyard, arrive[d] afloat ready to be moored.” The Erie Service was afloat upon delivery and R & R was aware of and anticipated its arrival. It is undisputed that the Erie Service was in R & R's custody as of June 2007.

Prior to arrival, much of the vessel's deck plating and bulwarks had been removed in order for R & R to replace deteriorated steel. From June through September, only R & R performed the overhaul work on the Erie Service. Under the Agreement, however, Hornbeck retained access to its vessel so that it could inspect the work and ensure compliance with specifications. To that end, Hornbeck maintained two on-site project managers at R & R's facilities. If these managers observed an issue with or objected to an aspect of R & R's performance, they had the authority to give, and R & R was obligated to follow, orders. Hornbeck's on-site managers also monitored the subcontractors on the Erie Service who were performing work unrelated to R & R's responsibilities.

On September 12, it began to rain and R & R sent its workers home at approximately 9:00 a.m. R & R notified Hornbeck by email of this decision, requesting an extension due to weather delay. At 10:00 a.m., the National Hurricane Center (Center) advised the public that Tropical Depression No. 9 had formed and issued a tropical storm warning for an area that included Port Arthur. This meant that sustained winds within the range of 39 to 73 miles per hour could be expected within 24 hours or less. R & R promptly forwarded this warning to Hornbeck to substantiate its request for an extension. In response, one of Hornbeck's project managers asked what actions R & R would be taking for “water entry issues.” R & R responded at 10:49 a.m. that the dock was “monitored around the clock everyday” and that it kept “pumps on hand to pump out rain water when required.”

By 1:00 p.m., Tropical Depression No. 9 had intensified into Tropical Storm Humberto. Though the Center changed the warning area's boundaries throughout the day, Port Arthur always remained, and in fact became more centered within, the region of concern. Nevertheless, all R & R personnel left the shipyard at 5:00 p.m. without taking any precautions. A hurricane warning did not issue until 12:15 a.m. on September 13. When R & R employees arrived that morning, the Erie Service was listing severely and sinking. Sometime before 7:00 a.m., the Erie Service sank. The parties have stipulated that the Erie Service sank because rainfall and waves from Lake Sabine caused water to enter through the vessel's openings.

Hornbeck received several salvage bids for its vessel, including a “no cure, no pay” option, pursuant to which Hornbeck would have paid $298,000 for a successful salvage. Hornbeck, however, accepted a time-and-materials bid, which cost $245,000 but was subject to unlimited increase if the job proved more difficult than anticipated. The salvage company initially dispatched two derrick barges, but it was necessary to use a third. The salvage work ultimately cost $627,324.64. Hornbeck and R & R demanded that National, R & R's insurer, pay these salvage costs directly.

Shortly thereafter, National commenced this litigation against both R & R and Hornbeck to seek a declaratory judgment that it was not required to pay for the salvage costs under a commercial marine liability policy that National had issued to R & R. Hornbeck filed a counterclaim against National asserting, among other things, that “the Policy provide[d] coverage for all sums, including salvage, for which R & R bec[ame] obligated to pay for damage to the ERIE SERVICE while in the care, custody, or control of R & R.” Hornbeck also filed a cross-claim asserting that R & R's negligence proximately caused the sinking of the Erie Service.

After eight hearings and two trials, the district court issued a final judgment, which held, in relevant part, that R & R was negligent in failing to secure the Erie Service and protect her from damage by the storm, and that National was required to pay Hornbeck $1,076,843.09 for losses to the Erie Service and additionally to pay to Hornbeck 18 percent interest on this amount, plus $213,683.95 in attorney's fees.

Appeals by National and R & R followed.

II

We first address National and R & R's assertion that the district court erred in finding that R & R's negligence caused the sinking of the Erie Service. Negligence and proximate cause are factual findings that we review for clear error.¹ “A finding is clearly erroneous when, although there is evidence to support it, the reviewing court, based on all of the evidence, is left with a definite and firm conviction that a mistake has been made.” ² But “[i]f the district court's finding is plausible in light of the record as a whole, [this court] cannot reverse even though, if sitting as the trier of fact, it would have weighed the evidence differently.” ³

R & R argues that it never had full custody of the Erie Service and alternatively, Hornbeck failed to meet its burden of proof. We conclude that the district court did not clearly err in finding that R & R was negligent.

A

Bailment law governs where, as here, a vessel is left in the shipyard's custody for repairs.⁴ Bailment imposes a duty of ordinary care upon the bailee.⁵ While the “burden of proof of negligence is on the bailor,” by showing that the “vessel was delivered to the bailee in good condition and damaged while in his possession, the bailor makes out a prima facie case of negligence; and the duty then devolves upon the bailee to go forward with the evidence and show affirmatively that he exercised ordinary care.” ⁶

Here, the district court determined that Hornbeck had established a prima facie case of negligence because it found that the Erie Service was delivered to R & R afloat, R & R had full custody of the vessel, and the vessel sank while under R & R's care. Therefore, the court imposed a presumption of negligence that R & R was required to rebut. R & R, however, contends that such a presumption was erroneous because only a limited bailment was created. It argues that Hornbeck's agents' unconditional access to the Erie Service to oversee R & R's performance, authority to give orders to R & R, and the presence of other subcontractors on the Erie Service undermine the finding that R & R had full custody.

A bailment becomes limited “[w]here the delivery of the thing is not complete, as when the owner remains with the thing or has an independent agent or employee responsible for it or for certain aspects of its care.” ⁷ A limited bailment occurs when exclusivity of control over the bailed object is compromised.⁸ However, neither the presence and authority of Hornbeck's agents to ensure compliance nor the presence of other subcontractors affected R & R's exclusive control over the Erie Service, its movement within R & R's shipyard, or most importantly, its integrity during the storm. As the district court found, R & R's stipulation to full custody in the Agreement,⁹ its control over the worksite, and R & R's responsibility for disaster preparation were all indicators of full custody, at least during the period leading up to and through the Erie Service's sinking.

This finding of full custody is not clearly erroneous in light of the record as a whole. The initial exchange of emails shows that both Hornbeck and R & R understood R & R to be responsible for protecting the vessel. Furthermore, R & R alone had control over when, where, and how to moor the vessel. R & R stated during trial that if it had had more time, it would have moved the Erie Service to another shipyard. R & R even had a plan in place for Hurricane Dean—which occurred one month before Hurricane Humberto—to move the Erie Service to another...