Industry News & Tips

Salvage Awards

January 15, 2007

Gene Horton

Pure Salvage Award Proper Notwithstanding EvidenceOf Pre-negotiated Towing Contract 

In Joseph v. J.P. Yachts, LLC, 436 F. Supp. 2d 254 (D. MA. 2006), the district court found that New Bedford Marine, a marine towing and salvage company, was entitled to recover a pure salvage award notwithstanding evidence of an oral fixed-fee agreement entered with the boat owner prior to the services being rendered. At around 0300 on September 2, 2003, the M/Y LADY MAZTF, a three million dollar motor yacht owned by Jerry Prescott, grounded in the outer harbor at Cuttyhunk Island, Massachusetts. Prescott was a member of Boat U.S. and was familiar with the organization's on-water towing services agreement. After the grounding Prescott called Boat U.S. and was provided with contract details for New Bedford Marine, an approved Boat U.S. towing services provider. According to the trial court, Prescott intentionally waited until after 0500 to contact New Bedford Marine in order to obtain the lower $125 per-hour daytime towing rate. Prescott spoke with Ralph Joseph, the owner of New Bedford Marine.

 

Prescott informed Joseph that he had dragged anchor, but did not disclose that he was aground, precipitously close to a rocky beach, with strengthening winds and waves pushing the vessel ashore. The trial court found that during the conversation with Joseph, Prescott (an experienced boater who once held a 100 ton master's license) intentionally minimized the nature of the problem and was emphatic that he only needed one assist boat to keep the yacht's stem from going on the beach. Asked for a price, Joseph quoted the discounted rate of $125 per-hour for one boat captained by Clinton Allen to tow the yacht and reset the anchor. Prescott agreed and Joseph dispatched Allen with a 23 foot tow boat equipped with a hawser. When Allen arrived, the vessel was aground with 18 inches of bottom paint visible, listing, and lurching towards shore. Allen immediately informed a member of the vessel's crew that they were in a salvage situation. With the crew's assistance Allen attached the towing hawser to the yacht's starboard quarter and kept a strain on it to minimize the yacht's contact with the rocks. He then called Joseph and requested a second boat. A shallow-water Kencraft was dispatched, captained by Joseph Moniz. The two rescue boats were able to keep tension on the yacht's stem until the rising tide lifted her off the ground at approximately 1020. The yacht sustained no damage. Allen released his hawser, leaving the Kencraft's towing line in place. To confirm that the yacht's engines were operating properly, Allen then carefully instructed Prescott to momentarily "bump it in gear" while the Kencraft's line was still attached. Instead, Prescott put the yacht in first gear for a full minute, causing the Kencraft assist boat to capsize. Allen rescued Moniz, retrieved the Kencraft, and gave Prescott a salvage invoice. Prescott refused to sign.

New Bedford Marine filed suit against Prescott seeking a pure salvage award of $350,000.00, or approximately 12% of the post-salvage value of the undamaged LADY MAZI  N;. The district court noted that in order to recover a salvage award a claimant must establish the existence of the following elements: (1) a marine peril; (2) service voluntarily rendered when not required as an existing duty or from a special contract; and (3) success in whole or in part, or that the service rendered contributed to such success. The district court found that the yacht was clearly subject to a marine peril and that the services rendered were successful.Prescott argued that New Bedford was precluded from obtaining a pure salvage award because the initial conversation between Prescott and Joseph created an oral fixed-fee contract based on a quoted rate of $125 per-hour. Rejecting this argument, the court noted that in order to establish the existence of a fixed salvage contract, there must not only be evidence of an agreement regarding the amount of compensation but, in addition, the evidence must establish that there was a mutual understanding and agreement that the requested services are in the nature of salvage. The court found that the initial agreement between Prescott and New Bedford was a contract for simple towage based on Prescott's description of the yacht's situation, which was not accurate or complete. The scope of this towage contract did not extend to the services required by the actual marine peril, nor was there an agreement to modify the contract to encompass the circumstances encountered by Allen when he arrived on scene. Relying on Flagship Marine Services, Inc. v. Belcher Towing Company, 966 F.2d 602 (11th Cir. 1992), Prescott also argued that the absence of a specific "no cure, no pay" agreement precluded the claim for pure salvage. The court agreed with Prescott's argument that the initial towage contract contemplated payment regardless of success, and found that the existence of a contract for salvage which guarantees payment regardless of the outcome will bar a claim for pure salvage. However, the court reiterated its finding that the initial contract was for towage, and not salvage. The court distinguished Flagship as involving a prior business relationship between the parties which involved salvage services.

The court considered several factors in assessing the amount of the salvage award to Joseph, including the labor, promptitude, skill, and energy of the rescuers, the value of the property employed by the rescuers, the risks they faced, the value of the property saved, and the degree of danger from which the property was rescued. Notable among these factors was the value of the capsized Kencraft, and the risk and degree of danger faced by the vessel as a result of the hawser remaining attached to the moving yacht. The court awarded an $80,000.00 salvage fee to Joseph, representing 2% of the post-salvage value of the yacht.