Opinion
Civil Action No: 03-489, Section: "R" (3).
December 15, 2004
ORDER AND REASONS
In late March of 2001, the M/V ENSCO TITAN suffered a catastrophic failure of the controllable pitch propeller (CPP) system. On February 14, 2003, ENSCO Marine Company sued Bird-Johnson Company for breach of the warranty of workmanlike service. ENSCO alleges that repair work that Bird-Johnson performed on the TITAN during the spring and summer of 2000 caused the TITAN's failure. ENSCO seeks (1) reimbursement for the repairs the TITAN underwent after the failure, (2) damages for loss of use during that time, and (3) attorney's fees. Bird-Johnson counterclaimed against ENSCO for $11,047.28 for unpaid repair work it performed after the TITAN's failure. After holding a bench trial and considering the parties' arguments, the Court finds that Bird-Johnson breached the warranty of workmanlike service, that its breach caused 50% of ENSCO's damages, and that ENSCO is not entitled to attorney's fees. Furthermore, the Court rejects Bird-Johnson's counterclaim.
I. FINDINGS OF FACT
A. March of 2000 to September of 2001
During the spring and summer of 2000, ENSCO drydocked the TITAN to complete two projects: to refurbish the CPP system hubs and to repower the engines. ENSCO hired Lloyd Marshall to oversee the entire project, and ENSCO hired Bird-Johnson to refurbish the TITAN's CPP system hubs. The repowering of the engines took place at the Bollinger ship yard in Morgan City, Louisiana, and it entailed removing the main propulsion engines and the main propulsion gears, replacing the engines, and modifying the foundation to accept the new engines. The refurbishing of the hubs did not take place in Morgan City. Instead, the hubs were removed and sent to Bollinger Quick Repair in Harvey, Louisiana. The hub job entailed tearing down, inspecting, repairing, and reassembling the hubs.
Testimony of Bellingham.
Testimony of Bellingham, Marshall.
PTO Stip. 3-4.
Testimony of Bellingham.
Testimony of Bellingham.
Pl.'s Ex. 1.
The contract to refurbish the hubs between ENSCO and Bird-Johnson is represented by Purchase Order form No. 4213-28597-ZPE. Under the terms of the Purchase Order, Bird-Johnson agreed to provide technical support for the teardown, inspection, repair and reassembly of the TITAN's CPP system. The back of the Purchase Order form contains the Standard Terms of the agreement. Specifically, the form contains a warranty provision that reserves all warranties implied in fact or in law and provides that "Seller" expressly warrants "all items" to be free from defects in design, material, and workmanship, to conform to specifications, and to be merchantable.
PTO Stip. 3-4.
Pl.'s Ex. 1.
Pl.'s Ex. 1.
The TITAN's CPP system is a German-manufactured Escher-Wyss propeller system. The CPP system starts with an actuating unit inside the ship in the engine room. From there, a propeller shaft extends to the outside of the ship. At the end of the propeller shaft outside of the hull of the vessel are the propeller hubs, and the propeller blades are attached to the propeller hubs. The propeller hubs house the mechanical linkages that physically rotate the propeller blades to change the pitch from forward to astern. The actuating unit in the engine room directs hydraulic fluid through the propeller shaft and to the propeller hubs.
Testimony of Przygoda.
Testimony of Przygoda.
Testimony of Przygoda.
Testimony of Przygoda.
Testimony of Przygoda.
ENSCO and Bird-Johnson had a 10-year business relationship in which ENSCO regularly hired Bird-Johnson to perform maintenance on the TITAN's CPP system. At the outset of the job in 2000, Bird-Johnson's only involvement was to provide the technical expertise and supervision for the teardown, inspection, repair, and reassembly of the hubs, the outermost part of the CPP system. ENSCO asked that Bob Davis of Bird-Johnson act as the Bird-Johnson technical representative on the job because he had experience with the TITAN, and ENSCO had been satisfied with his work in the past. Bird-Johnson informed ENSCO that Davis was not available. Instead, Bird-Johnson provided the services of Tony Minkoff.
Pl.'s Ex. 1; testimony of Bellingham, Minkoff.
Testimony of Bellingham.
Testimony of Bellingham.
Testimony of Bellingham.
When the work on the TITAN's hubs began on May 17, 2000, Minkoff was not present because he encountered difficulties in crossing the border from Canada into the United States. Bird-Johnson sent Harold Roland to fill in from May 17 to May 18, 2000, and Mark Riskin from May 17 to May 20, 2000. Minkoff arrived on the job on May 31, 2000. There appears to be a gap between Riskin's last day, May 20, 2000, and Minkoff's arrival on May 31, 2000, in which no Bird-Johnson employees were present to supervise the work.
Testimony of Minkoff.
PTO Stip. 9.
PTO Stip. 10.
After Minkoff arrived, Lloyd Marshall asked Minkoff to rebuild the CPP system to within factory specifications. Minkoff documented Marshall's request in his service log notes. Specifically, on June 6, 2000, Minkoff noted " Important. Mr. Lloyd Marshall arrived and was shown all components. He has indicated that the owner does not want to short-cut any repairs on the hubs and wants them returned to within factory specifications." Minkoff said at trial that he wrote the note to express his concerns that he would be unable to return the CPP system to factory specifications and that he expressed his concerns to ENSCO. The Court does not credit this testimony because the note does not corroborate these concerns, nor does any other document. Additionally, ENSCO's witnesses deny that Minkoff told them of such reservations.
Testimony of Marshall, Minkoff, Bellingham, and Pl.'s Ex. 14.3.
Pl.'s Ex. 14.3.
Testimony of Marshall, Houghton.
Minkoff admits that he did not return the hubs to factory specifications. Specifically, he said that he modified the design of the hubs so that each bearing in the hubs was supported by washers of varying thickness on either side of it.
Testimony of Minkoff.
PTO Stip. 15.
According to Escher-Wyss expert Dieter Przygoda, factory specifications require each bearing in the hubs to have a washer of equal size on either side of it. Additionally, according to Przygoda, Minkoff did not simply install washers of varying sizes on each bearing. Instead, Minkoff deviated even further from the proper design and installed only one washer to support each bearing. Significantly, Przygoda identified a washer that fit with a particular bearing at trial. Przygoda was able to conclude that the washer and bearing were assembled together because the grooves between them fit together like puzzle pieces. He then demonstrated that this washer and bearing fit tightly between the ears of the crank ring. There was no space whatsoever for another washer to fit on the other side of the bearing. Based on Przygoda's testimony, the Court finds that Minkoff did not use two washers of unequal size per bearing, as he testified; rather, the Court credits Przygoda's testimony that he used only one. The Court notes that Przygoda has twelve years of experience servicing Escher-Wyss CPP systems, he was trained at the Escher-Wyss factory in Germany, and he holds the German equivalent to a Master's Degree of Mechanical Engineering. Moreover, Escher-Wyss considers him the foremost expert in Escher-Wyss systems in North America.
Testimony of Przygoda.
Testimony of Przygoda.
Notably, Minkoff's job performance was a subject of concern to Bollinger Quick Repair Project Coordinator, Arthur Nunez, from the outset. Specifically, Nunez thought that Minkoff appeared to be unfamiliar with the TITAN's Escher-Wyss CPP system. He did not know what the parts were and how they went together. Additionally, Minkoff did not seem to have a coherent plan to conduct the job.
Testimony of Nunez.
Testimony of Nunez.
Testimony of Nunez.
After Minkoff finished reassembling the hubs in Harvey, he went to Morgan City, where the TITAN was in drydock having its engines refurbished. Although Minkoff was not initially hired to participate in any aspect of the job that took place in Morgan City, he agreed to stay on and assist in that portion of the job as well. As noted supra, this aspect of the project was under the direction and supervision of Marshall. According to Marshall's testimony, Minkoff worked under his direction and reported to him during this portion of the job. Minkoff worked on several systems, including the dirty oil systems, fresh oil systems, fuel systems, saltwater systems, freshwater cooling systems, and the oily water separates. ENSCO was in the process of hooking all of the systems back up, and they needed guidance on how to hook the hydraulic piping system to the control system. Therefore, Minkoff produced a layout drawing of the hydraulic piping system. Minkoff also produced several other sketches to guide the Bollinger employees in the re-installation of the TITAN's systems. In addition, Minkoff took apart actuating unit several times to clean it and he reassembled it. ENSCO also had Vulcan-brand couplings to hook the gearbox up to the engines. Since Minkoff was a Vulcan representative, he performed that portion of the job. At some point during the installation in Morgan City, Minkoff warned ENSCO that the spool valve was worn and needed to be replaced. ENSCO did not replace the spool valve.
Testimony of Marshall, Minkoff.
Testimony of Minkoff.
Testimony of Marshall.
Testimony of Marshal, Minkoff. See also Def.'s Ex. 6 (Minkoff's layout sketch of the hydraulic piping system).
Testimony of Minkoff.
Testimony of Minkoff.
Testimony of Marshall.
Def.'s Ex. 21.
Testimony of Bellingham.
The TITAN's systems were all reconnected and ready for use by September 25, 2000. On September 26, 2000, the TITAN returned to sea, but it immediately experienced problems. Specifically, the starboard propeller got stuck while being operated in the ahead position. ENSCO drydocked the TITAN on October 9, 2000. Bird-Johnson representatives Minkoff and John Scheibe met the TITAN at port and undertook to repair it on October 11-12, 2000. ENSCO port captain J.D. Houghton expressed his concern that the problem was in the hubs, but both Minkoff and Schiebe opined that dirt in the spool valve of the starboard CPP system was the cause of the TITAN's problems. Minkoff and Schiebe had someone hit the starboard propeller with a sledgehammer to knock it free. Then Minkoff and Schiebe concentrated their efforts on the engine room. Schiebe tested the starboard spool valve and determined that it was completely locked. He disassembled the spool valve, cleaned it, and re-installed it. Minkoff and Schiebe then determined that one of the oil tubes leading to the distribution box was a quarter of an inch too long. Therefore, they shortened the tube. The TITAN returned to sea October 16, 2000.
PTO Stip. 37.
PTO Stip. 39.
Testimony of Houghton, Minkoff, Schiebe; PTO Stip. 40.
See testimony of Minkoff, Schiebe, Houghton.
Testimony of Schiebe.
Testimony of Schiebe, Minkoff, Houghton.
Testimony of Minkoff, Houghton.
Between October 16, 2000 and the date of the TITAN's failure, the vessel experienced unusual problems and required high maintenance. Houghton testified that there were problems with the functioning of the controls on the vessel. On October 17, 2000, the crew changed a PSI switch on the CPP system. On November 10, 2000, the crew changed the aft fuel filter and the CPP fluid filter on the starboard side of the vessel. On November 18, 2000, the crew changed the forward fuel filter on the starboard side and both of the CPP filters on the port side. On November 25, 2000, a line for the port CPP pressure gauge ruptured. On December 3, 2000, the crew again changed the forward CPP filter on the port side. On December 10, 2000, the crew performed preventive maintenance on the spool valve because it did not line up with the actuator correctly. On December 11, 2000, a hydraulic repairman was on board to perform maintenance and reported that he thought there were problems in the CPP system. During the maintenance, threads from the spool valve came loose and got stuck in the CPP outer tube. On December 22, 2000, the crew changed the forward CPP filter on the port side again. On January 15-16, 2001, the crew changed both the starboard and the port CPP filters and the oil.
Def.'s EX. 26.25.
Def.'s EX. 26.32.
Def.'s EX. 26.35.
Def.'s EX. 26.38.
Def.'s EX. 26.41.
Def.'s EX. 26.43.
Def.'s EX. 26.44.
Def.'s EX. 26.43.
Def.'s EX. 26.45.
Def.'s EX. 26.50, 26.51.
On January 27, 2001, there was an oil leak at the CPP switches and a ruptured switch on the port side. The entry for January 27 contains a special note:
Def.'s EX. 26.57.
The switch that is leaking oil [the port CPP switch #1] is a used switch installed by me on 01-22-01. The new switch taken off on 1-22-01 was also leaking. This switch was installed on 1-16-01 by a marine one tech. The switch that marine one took off [port CPP #1] on 01-16-01 was also leaking. Three bad switches on the same system in less than 2 weeks is cause for concern. The system oil pressure fluctuates from 225 PSI to 555 PSI, 100 times a minute. The upper limits of the pressure switches is 500 PSI.
Def.'s Ex. 26.57.
As the log entry demonstrates, the system was experiencing pressures in excess of what its equipment was designed to withstand.
On January 29, 2001, the crew once again changed the forward CPP filter on the port side. On February 5, 2001, the crew made out work order forms for more CPP PSI switches. The same day, the crew drained and cleaned the port CPP sump tank and filled it with clean oil. On February 17, 2001, the crew cleaned the starboard CPP sump tank and added new oil. On February 22, 2001, the crew changed the forward CPP filter on the starboard side, only to change the starboard CPP filters again four days later. On March 6, 2001, the crew changed the forward CPP filter on the port side. Less than a week later, the crew changed the aft CPP filter on the port side. On March 16, 2001, the crew changed the oil and the filters on the port CPP tank. Eleven days after that, the crew drained the port CPP tank, cleaned it and filled it with fresh oil, and changed the filters again. On March 29, 2001, the crew once again changed the aft CPP filter on the port side.
Def.'s Ex. 26.59.
Def.'s Ex. 26.65.
Def.'s Ex. 26.65.
Def.'s Ex. 26.
Def.'s Ex. 27.12.
Def.'s Ex. 26.71.
Def.'s Ex. 26.73.
Def.'s Ex. 26.78.
Def.'s Ex. 26.79.
Def.'s Ex. 26.81.
Def.'s Ex. 26.83.
Def.'s Ex. 27.20.
Finally, the TITAN's CPP system failed. Bird-Johnson representative Bob Davis met the TITAN at port to investigate the problem. Davis disassembled the hubs and determined that the TITAN had sustained extensive internal damage that he could not repair without factory assistance. Therefore, Davis recommended that ENSCO retain a factory representative from Escher-Wyss to perform the repairs. On April 16, 2001, Dieter Pryzgoda of Wartsila North America arrived to repair the vessel. He completely rebuilt the hubs, reusing the parts that sustained little or no damage and replacing the destroyed parts. He also restored the hydraulic piping system and reset the pressure valves. Przygoda completed the repairs around May 20, 2001.
Testimony of Davis.
Testimony of Davis. See also testimony of Przygoda.
Testimony of Davis.
Testimony of Przygoda.
Testimony of Przygoda.
Testimony of Przygoda.
Testimony of Przygoda.
ENSCO made a formal demand on Bird-Johnson for breach of warranty by letter dated September 12, 2001. In the letter, ENSCO informed Bird-Johnson that ENSCO "is making a claim against Bird-Johnson Company for the damages it sustained as a result of the CPP System failure" on the TITAN as a result of, inter alia, breach of warranty of workmanlike service.
See Pl.'s Ex. 49.
B. Causation
The Court finds that two causes contributed to the TITAN's failure: (1) Minkoff's modified washer and bearing design, and (2) the extraordinary pressure fluctuations created by problems in the control system. (1) Minkoff's Washer and Bearing Design
According to Przygoda, Minkoff made a critical error in designing the bearing set up in the propeller hubs. As noted supra, Minkoff used only one washer per bearing. Contrary to Minkoff's design, each bearing should have a washer of equal size on either side. This is because the washers and bearings must properly support and center the linkarms in the ears of the crankrings. Minkoff's modified design failed to center the bearings properly. As a result, the single washers applied an excessive load to the outer races of the bearings and caused them to fail. This, in turn, caused the spherical bearings to shatter into small pieces. As a result, there were hundreds of small pieces of metal in the hubs. When the propeller hubs were in pitch and rotating, the metal pieces ground the insides of the hubs and destroyed their internal structures. The crankrings show this damage by their shaved appearance. The collar bushings also show striations along their inside walls. Przygoda testified that only metal particulate could have made the rough, deep scores. Accordingly, Court finds that Minkoff's washer set-up contributed to the failure of the TITAN in the spring of 2001. (2) The Control System and Fluctuating Pressures
Testimony of Przygoda. See also Pl.'s Ex. 32.4 (picture showing only one washer).
Testimony of Przygoda.
Testimony of Przygoda.
Testimony of Przygoda.
Testimony of Przygoda. See also Def.'s Ex. 46A (photograph 6 shows a broken outer race); Pl.'s Ex. 32.3 (pieces of broken bearing race).
Testimony of Przygoda.
Testimony of Przygoda.
Testimony of Przygoda.
Testimony of Przygoda. See also Pl.'s Ex. 32.1, 32.4, 57.
Testimony of Przygoda. See also Pl.'s Ex. 56.
Testimony of Przygoda.
According to Przygoda, Minkoff's bearing and washer design was not the only cause of the TITAN's failure. The TITAN's control system was also to blame. In the months leading up to the TITAN's failure, the control system was not functioning correctly, which created pressure inside the TITAN's hydraulic system that was out of control. The high maintenance that the TITAN required from October of 2000 up to the time of its failure provides evidence of the pressure control problems, and it is documented in the rough engineer's log. At the outset, the Court notes that it was not Przygoda's initial position that pressure fluctuations caused the TITAN to fail. This is because ENSCO did not provide Przygoda with the rough engineer's log when he formed his expert opinion. Przygoda was visibly surprised when he was confronted with evidence from the log at trial, and upon questioning from the Court, Przygoda admitted that the pressure problems contributed to the TITAN's failure. He attributed the problems to the controls inside the actuating unit, which was corroborated by symptoms Houghton observed in October of 2000 and by Schiebe's reference to "instability in the control circuit."
Testimony of Przygoda, Schiebe.
Przygoda also admitted that the TITAN's systems were not designed to handle the high pressures that the crew reported in the log. The severe pressure fluctuations created intense vibrations in the TITAN's systems. These vibrations likely shook the hubs so violently that the internal hub mechanisms shattered. Przygoda explained that the pressure fluctuations could have caused the broken spool valve in December of 2000 and the continuous problems with the failing pressure switches. He reluctantly concluded that the control system problems contributed to the TITAN's failure.
Testimony of Przygoda. See also testimony of Schiebe.
Testimony of Przygoda.
Testimony of Przygoda, Schiebe.
See also testimony of Schiebe.
Ultimately, according to Przygoda, the pressure-induced, high frequency vibrations coupled with Minkoff's modified bearing and washer design caused the TITAN's failure. Bird-Johnson is clearly at fault for Minkoff's modified design. However, ENSCO has failed to prove that Bird-Johnson caused the problems in the controls inside the actuating unit and the attendant inability to control the pressure. Although ENSCO provided evidence that Minkoff was involved in the re-installation of the hydraulic piping system and that Bird-Johnson may have supplied some of the parts for the control system ten years earlier, ENSCO never demonstrated by a preponderance of the evidence what Minkoff did to cause the problems in the control system. Furthermore, there was no evidence that one of the contributing causes contributed to a greater extent than the other in this failure. The Court therefore concludes that the two causes contributed equally. For this reason, the Court finds that ENSCO proved only that Bird-Johnson caused one half of its damages.
See testimony of Przygoda (stating that Bird-Johnson installed the control valves in 1990).
(3) Bird-Johnson's Alternative Theories
Bird-Johnson offers several alternative theories to shift the blame for the TITAN's failure entirely to ENSCO. All of these theories are without merit. First, Bird-Johnson argues that ENSCO is at fault because ENSCO did not properly plan for the repairs. This is because ENSCO did not order parts from Escher-Wyss, the CPP system manufacturer, before the repairs began. As the witnesses for both parties pointed out, however, it was Minkoff's job to inform ENSCO what parts that he needed, and Minkoff did not request any parts from ENSCO. Bird-Johnson also argues that the Japanese manufactured IKO bearings that ENSCO provided Minkoff contributed to the failure. This is because Escher-Wyss typically uses European manufactured SKF bearings. The experts for both sides, however, testified that IKO and SKF bearings are interchangeable and that the use of the IKO bearings did not contribute to the TITAN's failure.
Testimony of Minkoff.
Testimony of Schiebe, Marshall, Houghton, Tom Quinn.
Testimony of Marshal, Houghton.
Relatedly, Bird-Johnson argues that ENSCO is at fault because the proper drawings were not available to Minkoff. Again, Minkoff had the responsibility to inform ENSCO of what drawings he needed. Minkoff asked for, and received, drawings from ENSCO during the course of the repairs. Moreover, some of the necessary drawings were already aboard the ship and available to Minkoff during the repairs. Thus, the Court finds that ENSCO is not at fault for the alleged failure to properly plan for the repairs.
Testimony of Marshall, Minkoff.
Testimony of McGuire, Minkoff.
Bird-Johnson also contends that ENSCO and Bollinger are to blame because contamination in the hubs caused the failure. Specifically, Bird-Johnson's expert John Scheibe testified (1) that dirty conditions at the Bollinger yards introduced contamination into the TITAN's CPP system, and (2) that water leaked into the hubs when the TITAN came off of drydock during the refurbishment and repowering in 2000. Contrary to Scheibe's opinion, Stress Engineering, a company specializing in metallurgical analysis, examined samples from the TITAN and concluded that exposure to seawater did not contribute significantly to the failure. Specifically, the Stress Engineering report notes that there were few to no chlorides present in the samples and none of the sliding surfaces of the bushings were visibly rusted or pitted. Similarly, Przygoda pointed out that sand contamination could not have made such rough, deep striations on the damaged portions of the hubs. Therefore, the Court finds that contamination did not cause the TITAN to fail.
Pl.'s Ex. 35.4.
Pl.'s Ex. 35.8.
Testimony of Przygoda.
Additionally, Bird-Johnson argues that ENSCO is to blame for the pressure control problems. This is because the header tank valves were closed when Bob Davis arrived to repair the vessel in 2001. Although some witnesses testified that closed header tank valves could cause the pressure in the system to rise, Davis concluded that this was not the case. Furthermore, in addition to Davis's testimony, the January 10, 2002 rough engineer's log entry indicates that the crew kept the valves closed after the 2001 repairs, and there is no evidence that the TITAN has experienced significant pressure control problems as a result. Based on the foregoing evidence, the Court finds that the closed header tank valves did not contribute to the vessel's failure.
See Def.'s Ex. 26.124.
See testimony of McGuire.
Finally, Bird-Johnson contends that ENSCO failed to mitigate its damages and essentially drove the TITAN to failure. Specifically, Bird-Johnson alleges that ENSCO should have brought the TITAN in for repairs before the failure because Houghton expressed concerns about the hubs in October of 2000 and because the TITAN experienced ongoing problems between October of 2000 and March of 2001. Bird-Johnson's argument is without merit. When the TITAN came in for repairs in October of 2000, Bird-Johnson's service representatives Minkoff and Scheibe were aware of Houghton's concerns. Despite his concerns, they assured ENSCO that the hubs were in fine working condition. ENSCO hired Minkoff and Scheibe for their expertise in ship repair, not Houghton. Therefore, it was reasonable for ENSCO to rely on Minkoff's and Scheibe's assessments of the TITAN's problems. Moreover, Bird-Johnson fails to pinpoint any particular time at which ENSCO should have known to bring the TITAN to shore. Notably, Scheibe testified that the TITAN's failure occurred in a relatively short period of time, and the ship's engineers are expected to handle day-to-day problems on the vessel. Therefore, the Court does not find that ENSCO failed to mitigate its damages.
Testimony of Houghton, Scheibe, Minkoff. See also Pl.'s Ex. 21, 40.34, 41.
Testimony of Houghton.
III. ANALYSIS
A. Breach of Warranty of Workmanlike Service
Admiralty law recognizes an implied warranty of workmanlike service. See Employers Ins. of Wausau v. Suwannee River Spa Lines, Inc., 866 F.2d 752, 763 n. 17 (5th Cir. 1989). The warranty means that the obligor in a service contract has a duty to perform his services with reasonable care, skill, and diligence. Carribean Bulk Carriers, Ltd. v. Motor-Services Hugo Stamp, Inc., 1996 WL 210716, at *3 (E.D. La. Apr. 26, 1996). See also T. Schoenbaum, 1 Admiralty and the General Maritime Law § 5-8 at 219 (4th ed. 2004). The warranty of workmanlike service has its roots in the tort concept of negligence. Schoenbaum, supra, § 5-8 at 219. Thus, comparative fault principles apply to actions for maritime property damage. See Bosnor v. L.A. BARRIOS, 796 F.2d 776 (5th Cir. 1986). See also Agrico Chem. Co. v. M/V BEN W. MARTIN, 664 F.2d 85 (5th Cir. 1981) (apportioning fault between stevedore who breached its warranty of workmanlike service and tug operator who was negligent in taking the unstable barge in tow).
Bird-Johnson breached the warranty of workmanlike service in repairing the hubs of the TITAN. Significantly, Minkoff's deviation from the proper hub design contributed to the TITAN's failure in the spring of 2001. Therefore, the Court finds that Bird-Johnson breached the warranty of workmanlike service. Cf. B B Schiffahrts GMBH Co. v. Am. Diesel Ship Repairs, Inc., 136 F.Supp.2d 590, 597 (E.D. La. 2001) (finding that the subcontractor breached the warranty of workmanlike performance when it did not perform the repairs according to the contractor's measurements and repair instructions).
As noted, ENSCO failed to prove that Bird-Johnson's services were the sole cause of the TITAN's failure. This is because the fluctuating pressures caused by the faulty control system contributed to the failure, and ENSCO failed to prove that Bird-Johnson caused the problems in the control system. As the Court has found, Bird-Johnson is only fifty percent liable for the TITAN's failure.
B. Bird-Johnson's Other Defenses
Bird-Johnson argues that, regardless of its liability, ENSCO cannot recover for breach of the express and implied warranties of workmanlike service. First, Bird-Johnson asserts that ENSCO did not make its warranty claim timely under the contract. Second, Bird-Johnson argues that the warranty provision limits ENSCO's remedies in two ways. Bird-Johnson contends that the warranty provision precludes ENSCO from recovering for loss of use. Additionally, Bird-Johnson urges that the remedy clause in the warranty provision limits ENSCO to reimbursement for the work that Bird-Johnson performed in 2000 instead of damages for the repair work that occurred after the failure. The Court finds that all of Bird-Johnson's arguments are without merit.
A contract to repair a vessel is maritime, and the terms of the repair contract are construed in accordance with federal law. Huffman Towing, Inc. v. Mainstream Shipyard Supply, Inc., 388 F.Supp. 1362, 1367 (N.D. Miss. 1975) (citing North Pacific S.S. Co. v. Hall Bros. M.R. S. Co., 249 U.S. 119 (1919)). When a contract is expressed in unambiguous language, the court will give its terms their plain meaning and will enforce the contract as it is written. Reliant Energy Svs., Inc. v. Enron Canada Corp., 349 F.3d 816, 822 (5th Cir. 2003); Poly-America, Inc. v. Beech Street Corp., 2001 WL 1326450, at *2 (N.D. Tex. Oct. 12, 2001). The court should ultimately determine the parties' intent, and to do that, the court should consider the plain language of the contract, the commercial context in which it arose, and its purposes. Reliant Energy, 349 F.3d at 822.
As noted supra, the parties have stipulated that the contract between them is the March 20, 2000 Purchase Order form number 4213-28597-ZPE. This contract contains a general warranty provision that provides:
Warranties — General. In addition to any warranties implied by fact or law, Seller expressly warrants all items to be free from defects in design (except Buyer's design), workmanship and material; to conform strictly to applicable specifications, drawings and approved samples, if any; and to be fit and sufficient for the purpose intended and to be merchantable. Such warranties, together with all other service warranties of Seller, shall run to Buyer, its successors, assigns and customers. All warranties shall survive inspection, testing and acceptance of payment by Buyer. In the event of breach of warranty, Buyer may, at its option, either return for credit at Seller's expenses or require prompt correction or replacement of the defective or non-conforming goods. Seller guarantees the performance, design, workmanship and material entering into items supplied on this Order and agrees to replace or repair, without cost to Buyer, any item on which defective performance, design, workmanship or materials if found, provided claim is made within one year from date of initial operation. Seller warrants that it will convey good title to all goods and that such goods will be delivered free of any security interest or other lien or encumbrances.
First, ENSCO timely made its warranty claim to Bird-Johnson. The warranty provision of the contract provides that claims must be "made within one year from date of initial operation." In light of the plain language and context of the contract, the "date of initial operation" means the first day that the vessel was in service after repairs. September 26, 2000 is the first day that the TITAN set sail after the initial round of repairs. Therefore, the one-year period began to run on September 26, 2000 and it ended on September 26, 2001. ENSCO made a formal demand on Bird-Johnson for breach of warranty by letter dated September 12, 2001. In the letter, ENSCO informed Bird-Johnson that ENSCO "is making a claim against Bird-Johnson Company for the damages it sustained as a result of the CPP System failure" of the TITAN as a result of, inter alia, breach of warranty of workmanlike services. Therefore, ENSCO's warranty claim is timely.
See Pl.'s Ex. 49.
Bird-Johnson argues that the one-year period began to run on July 12, 2000. This is because the work that forms the basis of ENSCO's theory of liability, the repair of the hubs, was completed on July 12, 2000. Bird-Johnson's interpretation is contrary to the plain language of the contract, and the Court rejects it.
Second, Bird-Johnson's argument that ENSCO cannot recover for loss of use is unavailing. This is because ENSCO has the benefit of the implied warranty of workmanlike service, the breach of which entitles ENSCO to recover for loss of use. There is typically an implied warranty of workmanlike service in maritime service contracts unless the parties' agreement expressly excludes it. Carribean Bulk Carriers, LTD v. Motor-Services Hugo Stamp, Inc., 1996 WL 210716, at *3 (E.D. La. Apr. 26, 1996). See also Parfait v. Jahncke Svs. Inc., 484 F.2d 296, 301 (5th Cir. 1973) (applying the implied warranty of workmanlike service in the context of a ship repair). There is no language disclaiming the implied warranty of workmanlike service in the contract. On the contrary, the warranty provision is broadly drafted to preserve ENSCO's rights. Specifically, the warranty provision states at the outset that the express warranties are " [i]n addition to any warranties implied by fact or law." (Emphasis added.) The provision goes on to specify that the express warranties, " together with all other service warranties of Seller, shall run to Buyer, its successors, assigns and customers." (Emphasis added.) Therefore, Court finds that the contract preserves the implied warranty of workmanlike service. As noted supra, ENSCO is entitled to recover for loss of use for breach of the implied warranty of workmanlike service. See East River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 875 (1986). Further, as noted below, the express contractual warranty on this form contract is designed for the sale of goods, not services, and does not foreclose the application of the implied warranty of workmanlike service.
Bird-Johnson's argument that ENSCO can recover only for the work it performed in 2000 is also without merit. Specifically, Bird-Johnson argues that ENSCO can recover only for the work it performed in 2000 because (1) Bird-Johnson was not on notice of ENSCO's warranty claim until after ENSCO had the TITAN repaired in 2001, and (2) the remedy clause of the express warranty provision limits ENSCO's remedies to reimbursement for the work Bird-Johnson performed in 2000. First, Bird-Johnson's contention that it was not on notice of ENSCO's warranty claim until after Przygoda repaired the vessel in 2001 is disingenuous. The TITAN experienced problems in the fall of 2000, immediately after the spring/summer 2000 overhaul. At that time, ENSCO notified Bird-Johnson and Bird-Johnson sent representatives to remedy the defects. ENSCO again notified Bird-Johnson when the TITAN failed in the spring of 2001, and Bird-Johnson again sent a representative to address the problem. Significantly, Thomas Quinn, Bird-Johnson's company representative at trial, testified that ENSCO tied the amounts it incurred for the repairs in 2001 to the work that Bird-Johnson did in 2000. Despite its arguments to the contrary, Bird-Johnson was on notice of ENSCO's warranty claim before ENSCO had the vessel repaired.
Furthermore, the express warranty provision does not limit ENSCO's compensatory damages to the cost of replacing or correcting the work that Bird-Johnson performed in 2000. This is primarily because the express warranty provision does not apply to a contract for technical services. The contract is on a purchase order form, and the express warranty provision contemplates a sale of goods, not an agreement to provide technical services. The provision explicitly states that it goes to the design, material, fitness for use, and merchantability of "items" sold by the "Seller." These guarantees apply to goods, not services. Notably, the remedies for breach of these warranties also apply to a sale of goods, and not to an agreement to provide services. Specifically, the remedy clause provides that "[i]n the event of breach of warranty, Buyer may, at its option, either return for credit at Seller's expenses or require prompt correction or replacement of the defective or non-conforming goods." (Emphasis added.) The remedy clause thus provides for a correction or replacement of defective goods, or a return of those goods for a credit. Notably, neither of these remedies applies to a sale of services. Bird-Johnson did not sell any "goods" that ENSCO could return for credit. Under the language of the contract, the express warranty provision does not apply to limit ENSCO's compensatory damages.
Additionally, even if the express warranty provision were to apply to a contract for technical services, there is no language in the contract stating that the warranty provision's remedy clause provides for the exclusive or sole remedies available to ENSCO. Significantly, the contract has a specific remedies provision that is broadly drafted to preserve ENSCO's rights to relief. That provision explicitly states that "[t]he rights and remedies of Buyer set forth in this Order are not exclusive and are in addition to all other rights and remedies available to Buyer."
C. Damages
ENSCO is entitled to damages for the costs of the repairs that took place after the TITAN's failure. ENSCO is also entitled to damages for loss of use of the TITAN during that time. ENSCO is not, however, entitled to attorney's fees.
(1) Compensatory Damages
Julie Slocum, a claims manager for ENSCO, testified that the invoices summarized in ENSCO's exhibit 45.1 and contained in exhibit 45 in globo are charges ENSCO incurred in the repairs attendant upon the failure of the TITAN. The ENSCO accounting department coded these invoices as charges and associated expenses incurred for the repairs of the TITAN after its failure in the spring of 2001. These include charges for towage, drydocking, parts, and repairs. During trial, Bird-Johnson pointed out an error in the calculation of damages in exhibit 45.1. Specifically, the invoice for the work that Davis performed on the TITAN after the failure was included in the calculation. This invoice totaled $11,047.28, and it is the same invoice that forms the basis of Bird-Johnson's counterclaim. ENSCO acknowledged the error, and ENSCO admits that it never paid the invoice. Ultimately, discounting the unpaid invoice, ENSCO incurred $347,015.68 in repair costs and expenses. Because Bird-Johnson is fifty percent liable for the TITAN's failure, ENSCO is entitled to $173,507.84 in damages from Bird-Johnson for the repairs.
Testimony of Slocum. See also testimony of Bill Landen.
Pl.'s Ex. 45.4.
(2) Loss of Use
ENSCO is also entitled to loss of use for the 52 days that the TITAN was out of service for repairs that took place following the TITAN's failure. ENSCO submitted two sets of calculations for the TITAN's loss of use. One set of calculations estimates loss of use based on the utilization rate and the average daily rate for the months immediately before and after the TITAN was out of service. The other estimates loss of use on the basis of the utilization rate and the average daily rate over a six-month period, from December 2000 through July of 2001. The Court finds that the calculation focusing on the months immediately before and after the TITAN was out of service most accurately reflects the damages ENSCO suffered for loss of the use of the TITAN. This is because the months before, during, and after the TITAN was out of service were calm weather months when vessels like the TITAN typically complete projects. Therefore, the months immediately before and after the TITAN was out of service most accurately reflect ENSCO's damages for loss of use.
Pl.'s Ex. 44.
See testimony of Landen.
Testimony of Landen.
The TITAN's average daily rate for the relevant time period was $11,906.00. The TITAN was in use approximately 93% of the days of that period. The Court notes that the average utilization rate may have been higher because the TITAN was in service for 100% of June, but ENSCO submitted the conservative estimate of 93%, presumably because it is more accurate. Therefore, of the 52 days that the TITAN was out of service, it likely would have been in service for 93% of those days, or 48.36 days. Over 48.36 days at an average rate of $11,906.00, the TITAN would have made a total of $575,744.16. Bird-Johnson is liable for half of this amount, or $287,872.08.
Testimony of Landen.
See testimony of Landen.
(3) Attorney's Fees
Finally, ENSCO argues that it is entitled to attorney's fees under the indemnification provision of the contract. That provision states:
Seller's Indemnification for Losses. Seller shall indemnify and save Buyer harmless from and against any and all claims, demands, liabilities, suits or actions, including all reasonable expenses and attorney's fees, for injuries to or the death of any person or persons, including the employees of each party hereto and for the loss of or damage to the property of any person or persons, including the property of Buyer, caused by or resulting from the negligence of Seller or any of its employees or from poor, improper, or defective workmanship or materials and Seller agrees to reimburse Buyer for all sums which it may pay or be compelled to pay in settlement of any claim on account thereof including any claim under provisions of Workman's Compensation law or other similar law, except that Seller shall not be liable for any claim resulting from the sole negligence of Buyer or its employees.
ENSCO argues that the provision entitles it to recover the attorney's fees that it incurred in the prosecution of this action. Although the language of the indemnity provision is somewhat ambiguous, it suggests that Bird-Johnson will reimburse ENSCO for all reasonable expenses and attorney's fees ENSCO incurs in an action against ENSCO. Moreover, the general rule is that a vessel owner can recover attorney's fees in defending against a claim that is a result of a breach of the warranty of workmanlike service, but not in prosecuting its own suit for determination of liability. See In re TPT Transp., 191 F.Supp.2d 717, 724 (M.D. La. 2001). See also Nathaniel Shipping, Inc. v. General Electric Co., 920 F.2d 1256, 1269 (5th Cir. 1991). In light of the arguably ambiguous language, which the Court must construe against ENSCO, the drafter, and the general rule, the Court finds that ENSCO is not entitled to attorney's fees under the contract.
D. Bird-Johnson's Counterclaim
Bird-Johnson has filed a counterclaim against ENSCO under the Louisiana open accounts statute for the unpaid $11,047.28 for work that Davis performed in April of 2001. Bird-Johnson argues that the work Davis did constituted a new job, unrelated to any warranty claim that ENSCO might have made, and that it is entitled to payment for the work Davis performed. As noted above, however, Bird-Johnson was aware of ENSCO's warranty claim. Significantly, Thomas Quinn, Bird-Johnson's company representative at trial, testified that he still would have sent Davis to work on the TITAN even if ENSCO had told him from the outset that it was not going to pay for Davis's work. Therefore, this amount more appropriately qualifies as repair work performed in an attempt to remedy Bird-Johnson's breach of warranty rather than expenses incurred in an open account under La.R.S. 9:2781. Accordingly, the Court denies Bird-Johnson's counterclaim.
III. CONCLUSION
For the above reasons, the Court finds that Bird-Johnson is liable to ENSCO for the breach of workmanlike service. ENSCO is entitled to damages in the amount of $461,379.92. ENSCO is further ordered to submit a judgment consistent with this order within ten days. It must serve its proposed judgment on opposing counsel.