Attorneys’ Fees Sanction Results in Constructive Total Loss for Bad Faith Defendant

Attorneys’ Fees Sanction Results in Constructive Total Loss for Bad Faith Defendant

By: Alec Szczechowski

Moench v. Marquette Transp. Co. Gulf-Inland, 2016 WL 5485122 (5th Cir. 2016).

Defendant-Appellant Marquette Transportation Company Gulf-Inland, L.L.C., (“Marquette”) appealed the judgment of the Western District Court of Louisiana in favor of Plaintiff-Appellees, George T. Moench and Jennifer J. Aregood, co-trustees of the George T. Moench Irrevocable Trust (“Moench”). Marquette’s appeal had four key bases, namely that the District Court erred: (1) in determining the vessel in question was a “constructive total loss,” (2) when it refused to allow certain testimony of an expert witness, (3) when it imposed attorneys’ fees as a sanction, and (4) in its determination of the amount of attorneys’ fees awarded. For the reasons described below, the Fifth Circuit affirmed the District Court’s judgment.The captain of the M/V SALVATION, a steel-hulled tug owned and operated by Marquette, admitted that he decided to allide with the EKWATA, the vessel at issue in this case which was owned by Moench. The allision severely damaged the fiberglass-hulled EKWATA. Moench wished to dry-dock the vessel, but no one would accept liability to do so. He then filed suit invoking admiralty and maritime jurisdiction of the District Court and asserted general maritime negligence and unseaworthiness claims.Moench claimed EKWATA was a total or constructive total loss and sought the pre-casualty value of the vessel. Up to and through the trial, Marquette contested its liability for the damages to the EKWATA, even though its captain admitted to causing the allision. Both parties elicited experts to assist the court in determining damages. The vessel was purchased in 2005 for $200,000 and Moench made improvements on the vessel in the amount of $217,000. Moench’s expert testified the pre-casualty value of the EKWATA was between $850,000 and $1,500,000 and that the replacement cost would be between $5,000,000 and $7,500,000. Marquette called three experts who testified that the value was $75,000 to $285,000. In its judgment, the District Court found the following: (1) Marquette was solely at fault, (2) the pre-casualty value was $417,000, (3) the cost of repairs would exceed that amount, (4) the EKWATA was a constructive total loss, (5) Moench was entitled to $322,890 for damages, (6) Marquette abused the process and acted in bad faith, and (7) an award of attorneys’ fees was justified as a sanction in the amount of $295,436.09.The Fifth Circuit found all four of the assignments of error were without merit or harmless.With regard to the first assignment of error, Marquette argued that the record did not support the court’s determination that the vessel was a constructive total loss or its valuation of the pre-casualty value. Absent comparable sales, a court should consider any and all evidence that bears on value but is not bound by any single piece of evidence. The District Court’s valuation fell squarely within the range of figures properly introduced into evidence ($50,000-$1.5 million) and was based on the purchase price of the vessel plus the cost of its improvements. Thus, the court could not find the District Court was clearly erroneous in its valuation. Given that all of the experts and evidence agreed that repair costs would exceed the pre-casualty value of the vessel – the very definition of a constructive total loss – the court could not find the District Court was clearly erroneous in this determination either.In reviewing the second assignment, the court reviewed the District Court’s exclusion of expert testimony for abuse of discretion. Marquette maintained that the District Court should have allowed Strouse to testify on the pre-casualty value of the vessel. However, the court stated that even assuming the District Court abused its discretion by disallowing Strouse’s testimony, Marquette failed to show that his testimony would have substantially affected the outcome of the trial. Marquette even stated that Strouse’s testimony would have simply confirmed the opinions of its other two experts, making the testimony cumulative evidence. Because cumulative evidence cannot affect a party’s substantial rights, any possible abuse was harmless.In reviewing the third assignment, the court reviewed the imposition of attorneys’ fees as a sanction for abuse of discretion and finding of fact supporting that sanction for clear error. Marquette argued only that it had a good faith basis for questioning the pre-casualty valuation of the vessel. The District Court found that Marquette “clearly knew” Moench had no liability whatsoever, but continued to contest liability up to and through trial. The District Court also found that Marquette’s experts were so clearly lacking “they could not even properly name the vessel” at issue in the case. Marquette did not dispute this conduct in its appeal. Based on the record, the court could not say the findings were clearly erroneous or that the court abused its discretion in awarding attorneys’ fees as a sanction for such bad faith.In reviewing the fourth assignment, the court reviewed the amount of attorneys’ fees awarded for abuse of discretion. Marquette contended that the court did not follow the framework of prior precedent and that the amount of fees awarded was excessive based on the degree of success obtained by Moench. However, the court found that the District Court had properly used the precedential framework and already reduced the amount of attorneys’ fees awarded based on the amount involved and the results obtained. Thus, the court did not find that the District Court abused its discretion by declining to make a greater reduction than it already did.