The opinion of the court was delivered by: Katherine B. Forrest, District Judge:
The NEW YORK (referred to "the Dredge") is the biggest and most powerful backhoe excavator dredge authorized to carry out dredging in U.S. waters. On January 24, 2008, it was stationary and carrying out dredging operations in Newark Bay. At just before 2:00 p.m. that day, the M/T ORANGE SUN, an ocean-going cargo vessel, collided with the Dredge, causing extensive damage. Defendants M/T ORANGE SUN, Arctic Reefer Corp.--that vessel's owner, and Atlanship, S.A., the operator and manager of the M/T ORANGE SUN, conceded liability and paid between $5 and $6 million to settle the costs of salvage and repair.
Plaintiffs Great Lakes Business Trust ("Great Lakes")--the Dredge's owner--and Great Lakes Dredge & Dock Co., LLC ("GLDD"), which chartered the Dredge, brought this action for consequential damages: loss of use or lost profits damages, overhead, liquidated damages and prejudgment interest. Each category of damages relates to plaintiffs' claim that during the period in which the Dredge was under repair, plaintiffs were unable to put the Dredge to productive use. The most significant damages claim is that for loss of use. Altogether, however, plaintiffs have asserted a damage claim in excess of $13 million.
This Court held a bench trial on January 23-25, 2012.*fn1
The following individuals testified on plaintiffs' behalf:
Bruce Biemeck, President and Chief Financial Officer of Great Lakes,
Christopher Gunsten, Project Manager for Great Lakes, Brian Goetchius,
the Northeast Region Port Engineer and Dredge New York Technical
Manager for Great Lakes, John Vickers, who testified as both an expert
on vessel repairs and as a fact witness who had seen certain of the
repairs in progress, and Samuel Rosenfarb, a damages expert who
testified as to an appropriate measure of lost profits. This Court found each of plaintiffs' fact
witnesses credible. In addition, this Court found that the expert
testimony of Messrs. Vickers and Goldfarb was helpful to the Court,
and based in sound analytics and experience; the Court therefore
credits their testimony.
The defendants did not present any percipient witnesses. They presented testimony from three experts: Rik Van Hemmen, an expert on vessel repair, Robbert Ten Veen, an expert on vessel repair, and Louis Magnan, a damages expert who testified that no lost profits ought to be awarded. Each of Messrs. Van Hemmen and Ten Veen work with individuals who were in the presence of the Dredge for periods of time in which repairs to it were ongoing. (Those individuals included Wayne Thomas, who worked for defendants' insurer and wrote a number of reports about the Dredge's repairs, see Exs. 36-42, none of which contains a single complaint regarding the repair process.) Defendants did not call those individuals.
This Court found defendants' experts ultimately unhelpful to the determinations that it needed to make in this matter. Neither of the experts on the repairs to the Dredge offered specific, detailed opinions based in more than ipse dixit, that particular repair items took an unreasonable length of time.*fn2
While both testified that the overall period was unreasonable, and Mr. Ten Veen testified that the repairs associated with the crane were unreasonable, those opinions were without sufficient basis in the actual facts relating to the repair situation of the Dredge. Defendants' damages expert opined that various assumptions contained in Mr. Rosenfarb's analysis were flawed. However, after careful consideration of the reports of both damages experts and their testimony at trial, this Court credits the testimony of Mr. Rosenfarb and not that of Mr. Magnan.
Neither party made any Daubert motions to preclude the testimony of any proposed expert.
This Opinion constitutes the Court's findings of fact and conclusions of law. As set forth below, this Court finds that the plaintiffs are entitled to an award of demurrage damages in the amount of $11,736,643 and prejudgment interest calculated at the rate of 3.66 percent.
This Court declines to award liquidated damages or overhead. The testimony at trial was sufficiently unclear as to the reasons why the Army Corps of Engineers might have withheld liquidated damages and whether it would in fact continue to withhold such monies. In addition, the Court did not find that plaintiffs proved by a preponderance of the evidence the amount of overhead recoverable.
Few facts are in dispute. The parties agree on when and how the allision (i.e., when a moving, waterborne vessel collides with another, stationary vessel) occurred and that, as a result, the Dredge required significant repairs.
The outcome of this matter, and the primary focus at trial, turns on two sets of related legal and factual issues:
(1) whether plaintiffs proved their claimed lost profits with the requisite level of "reasonable certainty;" and (2) for what period of time should lost profits be calculated? Put another way, for what period of time should defendants be charged for the plaintiffs' inability to put the Dredge to productive use during repairs?*fn3 Issues relating to liquidated damages, overhead and prejudgment interest were tangential to these two primary issues.
1. Plaintiff GREAT LAKES BUSINSS TRUST No. 1998-Dtd 10/10/98 (defined above as "Great Lakes") is a trust organized under Delaware law. (Joint Pretrial Order (Dkt. No. 40), Stipulated Facts (cited herein as "SF") ¶ 1.)
2. The Dredge NEW YORK (defined above as the "Dredge") is a backhoe-type dredge based in New York Harbor. Great Lakes owns the Dredge New York and chartered it to GLDD. (Biemeck Aff. ¶¶ 14, 16-17.) Pursuant to the terms of the bareboat charter, Great Lakes has the use of the Dredge through April 1, 2020. The term of the charter is fixed and was not extended as a result of the allision and the subsequent repair period. (Biemeck Aff. ¶ 51.) As a result, there are a fixed number of days for which Great Lakes can use the Dredge to earn income. (Id.)
3. Plaintiff GLDD is a dredging company that performs dredging work around the world--both in North America and elsewhere. GLDD operates a fleet of dredges and other support vessels. (Biemeck Aff. ¶¶ 9, 11-12.)
4. Great Lakes' most significant client in and around the New York Harbor is the U.S. Army Corps of Engineers (the "Army Corps"). (Biemeck Aff. ¶ 24, 34-36, 38.)
5. Defendant ARCTIC REEFER CORP., INC. ("Arctic Reefer") is a corporation organized under the laws of Liberia. (SF ¶ 5.) Defendant Arctic Reefer owns the M/T Orange Sun, an ocean-going cargo tanker. (SF ¶¶ 4-5.) Defendant ATLANSHIP, S.A. is a Swiss corporation that operates and manages the M/T ORANGE SUN. (SF ¶ 6.)
6. No one has disputed that the Dredge has characteristics that set it apart from any other dredge currently operating in U.S. waters. It is a mechanical dredge that uses a large, sophisticated excavator with a suspended bucket to excavate the sea bottom. The Dredge is 192.1 feet long, 57.4 feet in breadth, and is capable of operating with bucket sizes from 13 to 24 cubic yards. It is unique in its size and power. (Biemeck Aff. ¶ 20; see also SF ¶¶ 23-24; Tr. 65:5-9 (Biemeck).)
7. The Dredge was built in the United States in 1999 to provide efficient excavation capabilities for U.S. dredging projects, although it is capable of overseas operations as well. The Dredge has operated primarily in the Port of New York and New Jersey, but has also operated in other ports. (Biemeck Aff. ¶ 21; see also Goetchius Aff. ¶¶ 6-14.)
8. Although there are other excavator dredges owned by U.S. competitors, their size, efficiency and capacity are not comparable to the Dredge. And, while there are similarly sized dredges elsewhere in the world, because they were not built in the U.S. and not owned by U.S. citizens, they are not permitted to engage in dredging in U.S. waters because of the U.S. Dredging Act (46 U.S.C. § 55109). (Biemeck Aff. ¶ 22.)
9. The Dredge is non-self-propelled, but can hold itself in place with three large vertical steel supports (called "spuds") that can be set down into the bottom of a waterway or lifted up, one on each side and one at the stern. The spud at the stern is called a "traveling spud," because it can be moved to reposition the Dredge. The spuds allow the Dredge to be held in position while working; the traveling spud allows the Dredge to make incremental adjustments to its position. The spuds are approximately 110 feet long, and weigh approximately 100 tons. (Goetchius Aff. ¶ 12.)
10. The Dredge includes a "Liebherr P996" excavator, manufactured by Liebherr Group, a Swiss company, which is operated from a multi-story "house." The extension arm of the excavator is multi-sectioned, with the large first section referred to as the "boom," the second section as the "stick," and the scoop referred to as the "bucket." The Dredge can use different bucket sizes, including various 13-cubic yard and 17-cubic yard buckets, as well as the 24-cubic yard bucket. For certain operations, including operations using the 24-cubic yard bucket, the excavator uses a "Boom Assist System," which includes an A-frame structure with a heavy duty winch that controls a lifting cable that can be attached to the excavator boom to provide additional lifting force. (Goetchius Aff. ¶ 6.)
11. The hydraulic power for digging by the excavator is provided by two large Cummins engines and a complement of hydraulic pumps located in the excavator house. (Goetchius Aff. ¶ 10.)
12. In addition to its capabilities as an excavator capable of digging hardened materials and broken rock, the Dredge also has a computerized Dredge Position Monitoring System ("DPMS"). That computer system incorporates various sensors on the excavator boom and stick, along with GPS and other inputs, providing the operator an ability to carefully position and monitor dredging operations for a much higher level of precision and productivity than available with other vessels. Those capabilities make the Dredge a very useful and unique dredging vessel. (Biemeck Aff. ¶ 23; see also Goetchius Aff. ¶ 13.)
13. The Dredge has various other mechanical, electronic, electrical, and hydraulic control systems and circuits, including winches used to raise and lower the port and starboard spuds, hydraulic power unit (including one called the "HYTOP" used for regulating hydraulic power to the excavator) and associated electrical control cabinets, a fire suppression system, bilge pumps, fire pumps, oil pumps, a marine sanitation system, a potable water system, a hydraulic power unit for the general ship service crane, and a pull-back winch power unit (used to pull the A-frame into an upright position). The Dredge also carries various tools, supplies, and stores. (Goetchius Aff. ¶ 11.)
14. The Dredge is the only excavator dredge in Great Lakes' fleet. It was specifically built to provide a highly efficient means of dredging hard materials and broken rock from the subsurface. It is the only vessel in Great Lakes' fleet that can efficiently and economically dredge the hardest rock materials, a necessary capability for certain contracts (particularly in the New York/New Jersey area). (Biemeck Aff. ¶ 23.)
15. Great Lakes also has "clamshell" dredges in its fleet. Clamshell dredges are neither designed for nor capable of dredging the hardest materials found in the New York and New Jersey waterways. (Biemeck Aff. ¶ 23.)
C. The New York Harbor Deepening Project
16. The New York Harbor Deepening Project is a comprehensive project undertaken by the U.S. Army Corps of Engineers which involves a phased program to deepen the channels within the Port of New York and New Jersey to 37' then to 42', then to 47', and eventually to 52' to accommodate larger vessels. (Biemeck Aff. ¶ 26; SF ¶ 25.)
17. The project entails a total of eighteen dredging contracts designed and contracted by the Army Corps of Engineers. Current projections are that the project will continue through at least 2015 and will require spending in excess of $2 billion. (Biemeck Aff. ¶ 27.)
D. The Dredge's Utilization Rate
18. The Dredge was built specifically to work on projects such as the New York Harbor Deepening Project, which requires dredging and removal of the hardest rock materials. Such projects are not limited to the New York/New Jersey area. From time to time, the Dredge has been subcontracted to third parties within and outside the New York/New Jersey area. (Biemeck Aff. ¶ 28.)
19. When in use, the Dredge and the other vessels in Great Lakes' fleet do not work an eight-hour day--they work continuously. (Tr. 81:24-25-82:1 (Biemeck).) The Dredge is designed to work 24 hours a day and has a crew 24 hours a day. (Tr. 87:24-25, 88:1-7 (Biemeck).)
20. During the period from 1999-2006 (i.e., after the Dredge's completion in 1999 and before the expansion of the New York Harbor Deepening Project in 2007), Great Lakes employed the Dredge on various contracts in New York, San Juan, Wilmington, and Boston. In addition, Great Lakes also subcontracted the Dredge to other dredging companies. (See Exs. 8-10.) In 2004, the Dredge was chartered to Donjon (see Ex. 8), and in 2006 it was chartered twice to Bean Stuyvesant, LLC (see Exs. 9-10; Biemeck Aff. ¶¶ 29-30).
21. At trial, Mr. Biemeck testified credibly that the Dredge can and does sometimes actually work on more than one project in a day. (Tr. 51:5-9 (Biemeck).)
22. Great Lakes performed a 10-year study that encompassed the period from 1999 to 2006 that determined that the Dredge had a 51 percent utilization rate over that period of time. Messrs. Biemeck and Rosenfarb confirmed that during the period from 1999 through 2006, Great Lakes achieved a utilization rate of (give or take) approximately 51 percent for the Dredge. (Ex. 14; see also Tr. 60:14-61:1 (Biemeck), 137:6-138:7, 188:24-189:2 (Rosenfarb).)*fn4
23. Mr. Biemeck also testified credibly that in late-2007, the utilization of the Dredge increased significantly. The most immediate reason for the increase was due to a reduction in competition: in April 2007, the Dredge TAURACAVOR, which had similar characteristics and capabilities to the Dredge, was lost at sea. Mr. Biemeck testified that this increased the specific demand for the Dredge. (Biemeck Supp. Aff. ¶ 13.) In addition, in 2007, the New York Harbor Deepening Project began in earnest--creating additional opportunities for the Dredge. Notably, the New York Harbor Deepening Project is still ongoing. (Biemeck Aff. ¶¶ 31.)
24. Mr. Biemeck testified that Great Lakes calculated that (i) from November 1, 2007 (when the Newark Bay contract, one of the contracts under the project, began) until the time of the allision on January 24, 2008 (a total of 85 days), and (ii) from September 1, 2008 (when the Dredge came back online) until March 31, 2010 (a total of 577 days), the Dredge's utilization rate rose to 92.19 percent. The Court found Mr. Biemeck's testimony to be credible and Great Lakes' calculations to be reasonable and based in the evidentiary record. (Biemeck Aff. ¶¶ 32, 73.) Mr. Rosenfarb tested and confirmed those calculations. (Rosenfarb Aff. ¶ 59; Tr. 188:20-23 (Rosenfarb).)
25. There were times, however, that the Dredge was not utilized. That accounts for the delta between 92.19 percent and a 100 percent utilization rate: for the first 24 days of January 2008, the Dredge was under repair and unable to be put to productive use for all or part of the day. (Ex. A-4; see also Tr. 270:11-14 (Goetchius).) As a general matter, in several areas within the scope of the Newark Bay and Port Jersey Contracts, environmental regulations prevented Great Lakes from dredging silt materials for the period from February 1 through May 31, and non-silt materials for the period from April 1 through May 31. (Exs. A-5, A-10, A-11, B-4, B-5 & C-5.)
26. The Dredge also has to have periodic maintenance--some of this can be done without removing the Dredge from service; other types of maintenance require the Dredge to be taken out of service. (Tr. 273:4-7 (Goetchius).)
27. To the extent that particular jobs had environmental restrictions at a point in time, Great Lakes would have focused on jobs that did not have such restrictions. (Tr. 80:21-23 (Biemeck).)
28. When the Dredge returned to service on August 5, 2008, Great Lakes deployed it on the contract that had the earliest completion date relating to Newark. (SF ¶ 33; Ex. D-11; Gunsten Aff. ¶ 4.)
29. In addition to a daily utilization rate there is also an efficiency rate. Pre-allision, Great Lakes calculated that the Dredge operated at an efficiency rate of 65 percent; post-allision, that efficiency rate has declined to 45 percent. (Tr. 68:5-7 (Biemeck).) Utilization rate measures revenue earning; efficiency rate measures how efficient the Dredge is when it is earning revenue. (Tr. 73:18-21 (Biemeck).)
30. Mr. Biemeck testified at trial that calculations of the efficiency of the Dredge include a certain percentage for down time for repairs and maintenance. (Tr. 66:17-18 (Biemeck).) Some minor repairs (such as changing the oil and the like) can be done while the Dredge is operating. (Tr. 66:12-13 (Biemeck).)
31. Mr. Goetchius testified that there was a period of one month on 2008 and for over a month in 2009 in which the Dredge was dry docked for repairs that had nothing to do with the allision. (Tr. 351:1, 352:6-12 (Goetchius).) In 2011 the Dredge also had a boom cylinder failure that had nothing to do with the allision. (Tr. 353:4-6 (Goetchius).)
E. The Dredge's Employment History and Future opportunities
32. Great Lakes has been awarded a number of the contracts under the New York Harbor Deepening Project. (Biemeck Aff. ¶¶ 34-38.)
33. Specifically, on June 21, 2007, the Army Corps of Engineers awarded Great Lakes Contract W912DS-07-C-0015 to deepen the Newark Bay Channel. (See Exs. 2-3; SF ¶ 27.) The Corps estimated that once started, the work on this contract would take 310 days to complete. (Biemeck Aff. ¶ 35.)
34. On October 19, 2007, the Army Corps awarded Great Lakes Contract W912DS-08-C-002 to deepen the Port Jersey Channel. (See Exs. 4-5; SF ¶ 28.) The Corps intended this contract to begin before the end of 2007 and estimated that once started, it would take two years to complete. (Biemeck Aff. ¶ 36.)
35. At the time of the allision, the Dredge was working on these two contracts. (Biemeck Aff. ¶ 37; see generally Gunsten Aff.)
36. Mr. Rosenfarb performed a bidding analysis that was neither addressed nor contradicted by defendants. This analysis determined that Great Lakes obtained a large share of deep port projects, winning 95 percent of such bids in 2007 alone. (Rosenfarb Aff. ¶ 48.)
37. On June 27, 2008, while the Dredge was being repaired after the allision, the Army Corps of Engineers awarded Great Lakes Contract W912DS-08-C-0016 to deepen the Kill van Kull Channel. (See Exs. 6-7; SF ¶ 29.) The Corps estimated the contract would entail 950 days of dredging. (Biemeck Aff. ¶ 38.)
38. During the period of time that the Dredge was under repair, Great Lakes continued to perform works on these contracts with its clamshell dredges. The clamshells did not, however, do the work that was anticipated to be done by the Dredge New York because the clamshells could not handle the harder material; the clamshells dredged the softer, maintenance type material. (Tr. 78:10-16 (Biemeck).) The cost of drilling, blasting and excavating with a clamshell dredge is something on the order of 40 percent higher than using the Dredge New York. (Tr. 79:23-25 (Biemeck).) The clamshells could not "pick up the slack" for the work that the Dredge was unable to do while it was out for repairs since they were not capable of dredging the material that the Dredge New York is capable of dredging. (Tr. 82:9-11 (Biemeck).)
39. After the repairs were completed, the Dredge continued work on the Newark Bay and Port Jersey contracts and was also used on the Kill van Kull contract. All three of those contracts were fulfilled, and Great Lakes has continued to obtain contracts for the New York Harbor Deepening Project. (Biemeck Aff. ¶ 39.)
40. The Dredge removed blasted rock in Area D of the Newark Bay Contract during the period from August 5 to August 15, 2008. (SF ¶ 34; Ex. D-11.)
41. On August 7, 2008 and again on November 4, 2008, Great Lakes announced that "[w]ith the dredge now operational, the Company currently believes it will meet its obligations under both its Newark Bay and Port Jersey ...