Recoverable Damages for Mitigation of Damages and Damages Under General Maritime Law

Author: Paige Stein

In Re GH Storm Cat, LLC, No. 20-3085, 2022 U.S. Dist. Lexis 139403*, 2022 WL 3139129 (E.D. La., August 5, 2022).

In In Re GH Storm Cat, LLC, the court provides an explanation of recoverable damages by discussing both mitigation of damages and damages under general maritime law for an incident that caused physical damage to a loader and allegedly caused a loss of grain trading for the grain company.

On November 10, the M/V GH STORM CAT berthed at ZGC grain terminal to load corn. STORM CAT agreed to provide a crew member to operate the vessel’s cranes and move a small tractor belonging to ZGC to and from the dock and between the vessel’s cargo holds. For whatever reason, there was no signalman to guide the stevedore as he lifted the tractor towards the dock, which lead to the tip of the crane coming into contact with two of the ship loaders and piercing the wall of the conveyor gallery. ZGC did not allow STORM CAT to leave the berth until the next day. None of the terminal ship loaders were damaged; and ZGC did not lose any grain product as a result of the incident, but the loaders were unavailable. At the time of this incident, the parties were governed by a dock tariff, No. 7. The tariff provided that “the vessel, its owners, charters, operators, and agents shall be liable for the cost of restoration, replacement, and repair for damage to or destruction of terminal property or equipment caused by any user and for any loss of revenue to ZGC. The tariff also provided that ZGC shall have all remedies available at law, in equity and under maritime, federal, and state law to collect the damages. Failure to vacate within one hour of completion of loading, for any reason, are subject to a $7,500.00 fine for each hour/half hour that the vessel remains in berth.”

The day after the incident ZGC filed suit against STORM CAT and its owners for damages and sought and obtained an arrest warrant against the vessel in the amount of $460,957.00 for property damage and $16,778,038.00 for business interruption. The vessel owners filed a complaint for exoneration from or limitation of liability and sought summary judgment, asserting that the dock tariff precluded recovery of many of the damages sought by the grain facility. Therefore, the court had to decide what type of damages the grain facility could recover under the dock tariff between the vessel and the onshore facility and ultimately decided that summary judgment was not appropriate after analyzing both the interpretation of the tariff and the foreseeability of the damages.

First, under the interpretation of the tariff analysis, the court looked at whether the extra business expenses and business interruption cost sought by claimants, in the amount of $132,000,000.00 in mitigation of damages was recoverable under the terms of the tariff. ZGC submitted that the mitigation damages should be recoverable because it incurred that amount in lost revenue. The court found that the petitioner’s reading of the tariff was too narrow as it disregarded certain provisions within the tariff that expressly provided the remedies available to ZGC and ordinary remedies typically available to an aggrieved party under a contract, and or under maritime, federal, or state law to collect damages. In cases such as these, remedies available to an injured party include the right to recover damages for its mitigation expenses whether the claim is viewed as one involving a maritime contract or a maritime tort.  The court found that the vessel liability provision can be and should be read in harmony with the remedies provision. Thus, while the vessel liability provision limits damages for the terminal’s physical damage to cost, repairs, and loss of revenue, the remedies provision preserves the claimant the right to seek recovery for damages by pursing ordinary remedies available under maritime claims.

 Furthermore, regarding the tariff, the court was not convinced that the liquated damage provision applies to this situation because the tariff does not state that the liquidated damages it provides were intended to serve as a proxy for damages for physical harm to the terminal caused by the vessel using the terminal. In addition, the prevision in question states that “assessment of liquidated damages shall not preclude ZGC from ordering the vessel to vacate the berth at the vessel’s own expense.”  Furthermore, the court found that the delay that prevented STORM CAT from leaving was not the vessel’s choice but was ZGC’s choice; and therefore, liquidated damages would likely not be available.

Second, under the foreseeability analysis, it looked at whether Zen-Noh’s massive grain trading loss, as a commodities trader was foreseeable or not. “In the context of maritime torts, harm [is] a foreseeable consequence of an act or omission ‘if harm of a general sort of person of a general class might have been anticipated by a reasonably thoughtful person, as a probable result of act or omission, considering the interplay of natural forces and likely human intervention.’” The question is whether the shipowners could have foreseen the general sort of damages that could have occurred. The “general sort” of damages in this case are mitigation damages. The court found that it was “entirely foreseeable” that a company would participate in mitigation efforts to maintain the contractual obligations, while the scale of the efforts may have been alarming to the petitioners, the type of efforts was not. The court also found that the petitioner’s argument that the $585,000,0000.00 worth of grain was not foreseeable was flawed because the question regarding whether the amount was accurate was one of reasonableness, not foreseeability. Furthermore, it found that ZGC was directly harmed because the chain of events that took place allegedly rendered ZGC’s terminal inoperable by the damage caused by STORM CAT, causing ZGC to find other means to fulfill its contracts. Additionally, it reasoned that the use of the crane was out of the ordinary because the crane was not supposed to be used for cargo operations and that the type of danger and the physical damage that occurred was certainly what the provision had in mind during the creation of the policy.  Thus, the sum of the mitigation expenses were of the kind that a reasonable ship owner could have expected in the event of an accident which cause physical damage to a loader.

Ultimately, the court found that summary judgment was not appropriate because there is still a genuine issue of material fact-whether the damages was as substantial as ZGC claims it was, and whether the mitigation expenses were reasonable.