Paragon Asset Co. v. Copper

1

PARAGON ASSET COMPANY LTD, AS OWNER OF THE DRILLSHIP DPDS1, v. GULF COPPER & MANUFACTURING CORPORATION, et al.,

SIGNET MARITIME CORPORATION, AS OWNER OF THE TUG SIGNET ENTERPRISE, ITS ENGINES, TACKLE, ETC., IN A CAUSE OF EXONERATION FROM OR LIMITATION OF LIABILITY, SIGNET MARITIME CORPORATION, AS OWNER OF THE TUG SIGNET ARCTURUS, ITS ENGINES, TACKLE, ETC., IN A CAUSE OF EXONERATION FROM OR LIMITATION OF LIABILITY,

Civil Action Nos. 1:17-CV-203, 1:17-CV-247, 1:18-CV-035

United States District Court, S.D. Texas, Brownsville Division

March 8, 2023

ORDER AND OPINION

Fernando Rodriguez, Jr. United States District Judge

On August 25, 2017, the DPDS1, a drilling ship owned by Paragon Asset Company Ltd., unmoored from its dock during Hurricane Harvey. The ship allided with the dock and collided with two tugboats that had been tasked with holding the ship in place during the storm. The DPDS1 propelled the tugboats into adjacent semisubmersible oil rigs, drifted out to sea, and about two days later allided with a University of Texas research pier.

Three Complaints in Limitation ensued, filed by Paragon as the owner of the DPDS1 and by Signet Maritime Corporation as the owner of the two tugboats. The Court consolidated the Complaints in Limitation, and Noble as the owner of the rigs Gulf Copper as the owner of the dock, the American Club as Signet's insurer, and the University of Texas as the owner of the research pier all filed various claims and counterclaims.

Before trial, Noble, Gulf Copper, and the University of Texas settled. In July and August of 2021, the Court held a bench trial and then decided the issues as between Paragon, Signet and the American Club.^[1] (See Amended Order and Opinion, Doc. 473) Now, all that remains is resolution of Signet's Motion to recover attorney's fees, related nontaxable expenses, and taxable costs. (Motion, Doc. 475)

I. Analysis

A. Claims at Issue

The Court's Amended Order and Opinion (Doc. 473) outlines the factual and procedural history of this case in detail. See Paragon Asset Co. Ltd. v. Gulf Copper & Mfg. Corp., No. 1:17-CV-203, 2022 WL 3445744, at *1-20 (S.D. Tex. Aug. 17, 2022). For purposes of Signet's Motion, the following four categories of the claims and defenses that Signet raised during the litigation prove relevant:

(1) The “Noble Claim” refers to Signet's efforts in “defending against Noble Drilling's action for damages to its two semi-submersible drilling rigs and pursuing recovery from Paragon for contractual indemnification for its settlement payment to Noble Drilling and its attorney's fees, related nontaxable expenses, and taxable costs incurred in defending and pursuing this claim”. (Motion, Doc. 475, 12 (footnote omitted))

(2) The “Paragon Claim” refers to Signet's efforts “defending against Paragon's action for damages to the DPDS1 and pursuing recovery from Paragon for contractual indemnification for its attorney's fees, related nontaxable expenses, and taxable costs incurred in defending and pursuing this claim”. (Id.)

(3) The “Signet Claim” encompasses Signet's work “pursuing Paragon for its recoverable damages to its two tugs based on claims of negligence and unseaworthiness”. (Id.)

(4) The “UT Claim” refers to Signet's work “defending against UT's action for damages to its dock and pursuing recovery from Paragon for contractual indemnity for its settlement payment to UT and its attorney's fees and costs incurred in defending and pursuing this claim”. (Id.)

Signet seeks recovery of attorney's fees, costs, and expenses incurred in connection with the Noble and Paragon Claims. (Id.) Signet also requests its costs expended in connection with the Signet Claim. (Id. at 12-13) Signet does not request recovery of its attorney's fees, costs, or expenses related solely to the UT Claim. (Id. at 12)

B. Attorney's Fees and Expenses Under the Tariff

In “[m]aritime disputes generally . . . ‘litigants must pay their own attorneys' fees.'” Tex. A&M Rsch. Found. v. Magna Transp., Inc., 338 F.3d 394, 405 (5th Cir. 2003) (quoting Galveston Cnty. Nav. Dist. No. 1 v. Hopson Towing Co., 92 F.3d 353, 356 (5th Cir. 1996)). However, parties can contract otherwise, such as through indemnification agreements. See Becker v. Tidewater, Inc., 586 F.3d 358, 375 (5th Cir. 2009). A “general indemnity provision typically includes recovery of attorneys' fees incurred in defending against a claim covered by the indemnity provision”. Id. An indemnity provision can encompass damages occasioned by an indemnitee's own negligence if that coverage is “clearly and unequivocally expressed.” See Seal Offshore, Inc. v. Am. Standard, Inc., 736 F.2d 1078, 1081 (5th Cir. 1984).

When interpreting an indemnity provision under federal maritime law, courts follow general principles of contract construction, looking “first to the contract language”. Ingalls Shipbuilding v. Fed. Ins. Co., 410 F.3d 214, 220 (5th Cir. 2005). “A maritime contract containing an indemnity agreement . . . should be read as a whole and its words given their plain meaning unless the provision is ambiguous.” Weathersby v. Conoco Oil Co., 752 F.2d 953, 955 (5th Cir. 1984).

In its Amended Order and Opinion (Doc. 473), the Court concluded that the Signet Tariff is an enforceable contract that governs the dispute between Paragon and Signet. (Id. at 62) The Tariff contains provisions that Signet contends warrant the recovery that it seeks in its Motion.

As to claims between Paragon and Signet, Section 16(f) states that Paragon “agree[s] to indemnify the Signet Group from and against any and all claims for or in respect of (i) damage to or loss of property including vessels and equipment of [Paragon], whether owned, leased, or hired, in excess of the applicable amounts set forth in Clause 16(D) above, . . . regardless of legal fault of Signet Group, Owners Group, or any third parties or their respective vessels, equipment, or other property.” (Tariff, Doc. 414, 10)

With respect to third party actions, Section 16(h)(ii) provides that “[Paragon] agree[s] to indemnify Signet Group from and against third party liabilities arising out of this agreement . . . to the extent of the negligence or other fault of [Paragon].” (Id.)

More generally, Section 20(c) provides that a “prevailing party in asserting a claim for money due or indemnification under this Tariff shall be entitled to recover its attorneys fees and costs and expenses from the other party.”^[2] (Id. at 12)

1. The Noble Claim

Signet requests recovery of its attorney's fees, expenses, and costs incurred in connection with its defense against claims by Noble for damage to its rigs occurring when Signet tugs allided with those rigs.

The Court previously determined that Paragon bore 100% responsibility for the allision of the Signet tugs with Noble's rigs. Section 16(h)(ii) of the Tariff requires that Paragon “indemnify Signet Group from or against third party liabilities arising out of this agreement . . . to the extent of the negligence or other fault of [Paragon].” (Id. at 10) Section 16(h)(ii) thus entitles Signet to full indemnity from Paragon for any liabilities as to Noble. (Amended Order and Opinion, Doc. 473, 76-77, 81-82)

Signet now relies on Section 20(c), arguing that it is a “prevailing party in asserting a claim for money due or indemnification under this Tariff” and, as a result, is “entitled to recover its attorneys fees and costs and expenses from the other party [i.e., Paragon].” (Tariff, Doc. 414, 12)

Paragon responds with a narrow construction of the Tariff, arguing that Signet does not qualify as a “prevailing party” for purposes of Section 20(c) until the Court enters a Final Judgment against Paragon. (Response, Doc. 481, 8) Under this reading, Paragon continues, Signet can recover as a “prevailing party” only those attorney's fees, costs, and expenses incurred after the entry of Final Judgment. According to Paragon, reading the Tariff otherwise impermissibly renders the provision a penalty clause.^[3] (Id. at 11)

The Court finds that the natural construction of Section 20(c) renders Signet a prevailing party and entitles it to recovery of its attorney's fees, costs, and expenses incurred in connection with the Noble Claim. Generally, courts consider a “prevailing party” as a “party in whose favor a judgment is rendered”. See, e.g. Jones v. Diamond, 594 F.2d 997, 1026 (5th Cir. 1979), on reh'g, 636 F.2d 1364 (5th Cir. 1981) (quoting 6 Moore's Federal Practice ¶ 54.70(4)). “[I]n the context of a maritime contract dispute”, the Fifth Circuit has “adopt[ed] the same definition of ‘prevailing party' [ ] as in the [42 U.S.C.] § 1988 context.” Genesis Marine, L.L.C. of Delaware v. Hornbeck Offshore Servs., L.L.C., 951 F.3d 629, 631 (5th Cir. 2020). Thus, under maritime contract law, a prevailing party is one who obtains a judgment that “materially alters the relationship between the parties.” Id. While a litigant may not be recognized as a “prevailing party” until the entry of final judgment-i.e., the moment that a court confirms that the party prevailed-that fact does not preclude the recovery of its attorney's fees incurred during the litigation that resulted in the final judgment. Section 20(c) of the Tariff contains no language imposing a temporal limitation on the attorney's fees, expenses, and costs that the prevailing party may recover. The most natural and generally understood meaning of the provision's text is that a party that successfully “assert[s] a claim for money due or indemnification under this Tariff” can recover from the opposing party the attorney's fees, costs, and expenses required to prevail on the claim. In the current matter, Signet prevailed in connection with its claim for indemnification from Paragon as to the...