SHIPCO 2295 INC. v. Avondale Shipyards, Inc.

• Decision Date: 25 March 1986
• Docket Number: Civ. A. No. 82-5650 and 83-2494,84-4361.
• Citation: 631 F. Supp. 1123
• Court: U.S. District Court — Eastern District of Louisiana
• Parties: SHIPCO 2295 INC., et al., v. AVONDALE SHIPYARDS, INC. SHIPCO 2295 INC., et al., v. AVONDALE SHIPYARDS, INC. SHIPCO 2295 INC., et al., v. AVONDALE SHIPYARDS, INC., et al.

631 F. Supp. 1123

SHIPCO 2295 INC., et al., v. AVONDALE SHIPYARDS, INC.

SHIPCO 2295 INC., et al., v. AVONDALE SHIPYARDS, INC.

SHIPCO 2295 INC., et al., v. AVONDALE SHIPYARDS, INC., et al.

Civ. A. Nos. 82-5650 and 83-2494, 84-4361.

United States District Court, E.D. Louisiana, Section "A" Division.

March 25, 1986.

Antonio J. Rodriguez and Sean F. Murphy, Phelps, Dunbar, Marks, Claverie & Sims, New Orleans, La., for Shipco.

John V. Baus & Michael A. Chernekoff, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, La., for Avondale Shipyards, Inc.

John P. Hammond, Montgomery, Barnett, Brown, Read, Hammond & Mintz, New Orleans, La., for Allgemeinr Elektricitats Gesellschaft Telefunken.

AMENDED OPINION

CHARLES SCHWARTZ, Jr., District Judge.

This matter came before the Court on December 5 and 6, 1985, for summary non-jury trial and hearing on the motion of defendant AEG Telefunken for judgment on the pleadings. Having considered the testimony of the witnesses, the exhibits introduced at trial and the legal contentions of the parties, the Court rules as follows. To the extent any of the following findings of fact constitute conclusions of law, they are adopted as conclusions of law; to the extent any of the conclusions of law stated below constitute findings of fact, they are so adopted.

Introduction

These consolidated cases arise out of certain vessel construction contracts between defendant Avondale Shipyards, Inc. and Standard Oil Company (Ohio) hereinafter "Sohio". At issue in Civil Action No. 83-2494 are certain hull stress fractures appearing in four vessels built by Avondale for Sohio, at issue in Civil Action No. 82-5650 is a propeller casualty sustained by one of the vessels (M/V ATIGUN PASS, Hull 2295); at issue in Civil Action No. 84-4361 are certain steering mechanism failures experienced by the four vessels.

The issues forming the subject of this opinion were originally brought before the Court by Avondale upon motion for summary judgment in connection with the three consolidated cases. Avondale there sought determinations that all claims with respect to the alleged vessel defects had been settled, that plaintiffs have no contractual causes of action against Avondale; that plaintiffs have no tort causes of action against Avondale as a matter of law; and that plaintiffs have no right of action in either contract or tort against Avondale. On June 20, 1985, the Court denied Avondale's motion for summary judgment by minute entry without a formal hearing, but to facilitate resolution of the issues implicit in the motion, the Court bifurcated two questions for trial:

A. Whether the original contracts were modified by certain warranties alleged to have been made by Avondale on August 17-18, 1976, and

B. The effect of an alleged compromise and/or accord and satisfaction of December 1981 upon any claim found to exist in light of the first stated matter to be tried.

Thereafter, AEG Telefunken, designer of the steering mechanism and named defendant in Civil Action No. 84-4361, joined the fray by filing a motion for judgment on the pleadings, which the Court set for hearing in conjunction with the bifurcated trial.

Pursuant to the minute entry, the parties submitted various stipulations, statements of fact, deposition testimony and exhibits. The issues were also extensively briefed. The matter proceeded to trial before the Court sitting without a jury on December 5 and 6, 1985, at which time the Court heard the testimony of Avondale representatives Richard Brunner, Darold Poulin, and Rene J. Meric, Jr.; and Sohio's Richard Whiteside.

The parties also submitted to the Court designated deposition testimony of Michael Harbottle, Ian Telfer, John Rutter, John Clinton, Daniel Melitz, and David Webb, all naval architects with BP Shipping Limited "BP", a subsidiary of British Petroleum Co. BP acted as Sohio's contract representative during vessel construction. Also submitted was the deposition testimony of James Cross, Purchasing Manager at Sohio from 1972 to 1977, chief Sohio negotiator of the Sohio-Avondale construction contracts in 1974 and negotiator of a BP-Sohio "Supervisory Agreement" dated July 1, 1975.

Although Avondale's motion for summary judgment was filed in connection with all three consolidated matters, the alleged warranty modifications affect only the claims for structural failures experienced by the Shipco vessels and do not involve any claims made in Civil Action No. 82-5650 or Civil Action No. 84-4361. The alleged compromise and/or accord and satisfaction was, however, raised as a defense to all claims of purported vessel defects and has accordingly been so considered by the Court. The Court has also reconsidered all arguments raised in Avondale's original motion for summary judgment and plaintiffs' responses.

For the reasons set forth below, the Court determines there was no modification of the construction contract warranties¹ so as to afford plaintiffs a cause of action for breach of warranty due to the appearance of the stress fractures, and in any event, all claims arising out of the vessel construction were settled as a result of the Sohio-Avondale negotiations in 1981. Moreover, plaintiffs have no maritime tort causes of action against Avondale and AEG Telefunken as a matter of law, and the claims of SPC Shipping as time charterer are barred by Robins Drydock and its progeny. Accordingly, the Court rules in favor of Avondale on the warranty questions and dismisses plaintiffs' claims in light of the bifurcated trial. As to any remaining claims, Avondale's motion for summary judgment is well founded. The Court further grants the motion of AEG Telefunken for judgment on the pleadings.

Findings of Fact

The Court will first discuss its findings based upon the parties' stipulations. Thereafter, the Court will address the trial testimony and depositions, in light of the documentary evidence.

The corporate status of the parties is stipulated. On December 30, 1974 Sohio entered into six separate but identical contracts with Avondale for the construction of six tankers bearing Avondale Hull Numbers 2295-2300. Defects regarding Hulls 2295-98 are at issue in this litigation.

Prior to negotiating the Sohio-Avondale contracts, Sohio obtained technical assistance from naval architects and marine engineers at BP,² relying upon BP's experience in operating a tanker fleet. It is stipulated that BP was not involved in the execution or signing of the Sohio-Avondale contracts, which reflect the signatures of Mr. M. Lee Rice, Chairman of the Board of Avondale, and Mr. Frank Mosier, Vice-President, Supply and Distribution for Sohio. Following execution of the contracts, BP was designated as Sohio's contract representative pursuant to Article 5 of the Sohio-Avondale contracts and a "Supervisory Agreement" between BP and Sohio dated July 1, 1975. See Joint Exhibit 3; Joint Exhibit 6 (signed by Mr. Cross on behalf of Sohio; signature on behalf of BP illegible). Accordingly, BP provided technical advice to Sohio during its contract negotiations with Avondale and further represented Sohio in ongoing meetings and negotiations with Avondale during the course of construction. BP also reviewed and approved each of the many Avondale design and construction drawings on Sohio's behalf. See Joint Stipulations of Undisputed Facts, Document No. 55 hereinafter "Stipulation", Nos. 21-23.

Avondale and BP communicated modifications and approvals to Avondale's construction drawings by telex, letter and/or by conference. The many conferences resolving such matters were held either at Avondale's offices in Louisiana or at BP's office in London. BP prepared and distributed conference notes or minutes of the London meetings; Avondale prepared and distributed conference notes of the Louisiana meetings. Generally, Sohio was not sent copies of these notes. See Stipulation No. 29.

The Sohio-Avondale contracts contained certain builder's warranty provisions in Article 9³ of the contracts.⁴ Section (d) of Article 9, entitled "Limitations on Builder's Warranty," provides in pertinent part:

The warranties, guaranties and remedies set forth in this Article 9 are in substitution of any and all other warranties, guaranties and remedies expressed or which might be implied (including but not limited to any implied warranties of merchantibility, fitness for a particular purpose and workmanlike services) with respect to the construction, delivery and sale of the Vessel; and Builder shall, following said delivery and sale, in no event be liable to Purchaser for the breach of any warranty, guarantee, or remedy, expressed or implied, in fact or in law, except as specifically hereinbefore set forth. In no event, shall Builder be liable to Purchaser for consequential damages as a result of any such breach. Builder's total liability on account of liquidated damages for Performance Deficiencies and delayed delivery and on account of correction of Warranty Deficiencies shall not exceed $3,500,000.

Joint Exhibit 3, pp. 41-42 (emphasis added.)

The contracts merge all prior negotiations into the contract documents and state that no changes, amendments or modifications shall be valid unless reduced to writing and signed by the parties. Joint Exhibit 3, Article 22(a), p. 62. The term "parties" is defined in Schedule 1, "Definitions": "`Parties' means Builder and Purchaser." Joint Exhibit 3, p. iii. Specific procedures for change orders and conflicts between contract plans and specifications are addressed in Article 1(b) and Article 8(b). Article 1 further provides for specifications to prevail over contract plans, but the contract is to prevail over both contract plans and specifications. Article 8 provides that all change orders incorporated into the contract work shall be the subject of specific written agreement between the parties.

During construction of the Sohio vessels by Avondale, BP discovered certain structural...