Maritime Update: Sanction Against Inland Towing Company Affirmed
On September 29, 2016, in the case of Moench v. Marquette Transportation Co. Gulf-Inland, LLC, the U.S. Fifth Circuit Court of Appeals affirmed an attorney fee award of $295,436 against an inland towing company. This ruling illustrates the inherent power federal courts have to impose sanctions in maritime disputes involving bad faith and abuse of process.
This dispute arose from an allision (contact of a vessel with a stationary object such as an anchored vessel) on the Atchafalaya River in Louisiana.
George T. Moench ("Moench") purchased the SES EKWATA, a 116-foot-long fiberglass-hulled vessel, for $200,000. Between 2005 and 2011, Moench spent $217,000 to refurbish the vessel as a pleasure/house boat. In May 2011, the EKWATA was moved to a fleeting facility on the Atchafalaya River due to high water.
On June 10, 2011, the M/V SALVATION, a steel-hulled tug owned and operated by Marquette Transportation Co. Gulf-Inland, LLC ("Marquette"), was towing two barges on the Atchafalaya River. When the SALVATION arrived at a holding position, the captain left the controls for a cup of coffee while the on-duty deckhand, who was supposed to be on watch, was below deck. By the time the captain returned to the controls, the river's current had taken control of the SALVATION. The captain could not regain control and ran into the EKWATA, severely damaging the EKWATA.
Moench sued Marquette for damages to the EKWATA. Following a bench trial, the court found Marquette solely at fault and awarded Moench $322,890, which represented the pre-casualty value of the EKWATA, less the value of the materials and equipment that could have been preserved following the allision.
The court also determined that Marquette's liability defense was an abuse of process and bad faith given Marquette's clear liability. To sanction Marquette, the court awarded Moench reasonable attorneys' fees and costs in the amount of $295,436. Marquette appealed.
On appeal, Marquette argued, among other things, that the trial court erred in its damage evaluation and by awarding the plaintiff attorneys' fees as a sanction. The Fifth Circuit affirmed, holding that in the case of a total (or constructive total) loss, the owner is entitled to recover the pre-casualty value of the vessel. Marquette's decision to contest liability up to and through trial, even though it clearly knew the extent of its liability based on the circumstances and the actions of the captain and was fully aware that the plaintiff had no liability properly supported the sanction imposed by the district court.
D. Why is This Important?
- Advocacy for the sake of burdening an opponent with unnecessary expenditures of time and effort is an abuse of process.
- Federal courts have inherent power to sanction a party engaging in bad faith and abuse of process even though extent of damages remains in dispute.
- A sizable attorneys' fee sanction may not be covered by insurance.
- Being willing to stipulate to facts not genuinely in dispute is a gesture of good faith.