Maritime Update: Court Of Appeals Protects Mariner From Dishonest Salvor
On July 22, 2015, the U.S. Sixth Circuit Court of Appeals, in the case St. Clair Marine Salvage, Inc. v. Michael Bulgarelli, et al., affirmed a ruling in favor of a vessel owner in a salvage contract dispute. This ruling illustrates the importance of exercising care when negotiating and documenting a salvage contract.
Michael Bulgarelli ("Bulgarelli"), the owner of a 36 foot Sea Ray boat, ran aground in Michigan's Lake St. Clair. Bulgarelli called Tow Boat US, which dispatched a salvage vessel from St. Clair Marine Salvage ("St. Clair Marine") commanded by Captain William Leslie ("Leslie") to assist Bulgarelli.
Leslie claimed that when he arrived he conferred with Bulgarelli and quoted a price of $250 per foot for the Sea Ray's 36 ft. length. Bulgarelli maintained the price quoted was $1,000 - $1,200, and Leslie assured him insurance would pay the bill. Bulgarelli signed a written contract that did not include a printed price and the sole copy of the contract remained in the possession of Leslie once he and his vessel departed.
St. Clair Marine filed suit in the U.S. District Court for the Eastern District of Michigan, invoking admiralty jurisdiction, seeking enforcement of a maritime lien, alleging breach of a maritime salvage contract, and claiming unjust enrichment. Bulgarelli counterclaimed for fraud, innocent misrepresentation, and reformation.
Following a bench trial, the court found Bulgarelli and his corresponding witness credible and Leslie not credible. The court determined that Leslie had quoted a price of $1,000 - $1,200 to Bulgarelli while assuring him that his insurance would pay the costs, and that Leslie added a note of $250 per foot to the sole copy of the contract after Bulgarelli had signed it. The court determined Leslie engaged in fraud in the procurement of the contract and voided the contract. St. Clair Marine appealed.
The Six Circuit noted that courts have traditionally been vigilant in protecting mariners from dishonest salvors. Given the heightened vulnerability of a vessel's master when his ship is in distress, the law takes a dim view of salvors who engage in dishonesty. It added that a salvage contract can be set aside when it is corruptly entered into.
The Six Circuit affirmed the district court, concluding that the salvage contract was void since Leslie made a material misrepresentation that he knew was false to get Bulgarelli to rely on it and Bulgarelli did so to his financial detriment.
D. Why Is This Important?
- Diligence in documenting an agreed salvage price in writing before the job begins can help prevent being surprised by an invoice that is nine times the quoted price.
- Credibility of witnesses wins disputes. Have someone witness discussions of the terms of a proposed salvage operation and have them observe and/or record the weather conditions, equipment used, and effort and time expended by the salvor.
- Retaining copies of documents can help should a dispute arise. Request a copy of any document you sign in connection with a salvage operation, including incident reports and/or narrative reports prepared by the salvor and/or investigators.
- Documenting the names and contact information of everyone present during the salvage operation, including U.S. Coast Guard personnel, is another important consideration.
- Salvors should consider preparing a narrative report to include a diagram of the vessel in peril, the time expended, the equipment used, the services performed, and the outcome. Before departing the area, ask the owner/master of the vessel in peril to review, sign, and date the narrative report.