Note: Rozel Operating Company (Charterer) chartered the barge JMC 109 (barge), from Cashman Equipment Corporation (Owner) in 2007 to use as a breaker barge "to alleviate wave action near [Charterer's] natural gas production platform in the Gulf of Mexico." Charterer hired Stokes & Spiehler Offshore, Inc. (Contractor) to sink the barge on Charterer's behalf but they were not able to raise it again. In 2008, when Charterer had not returned the barge, Owner sued Charterer and Continental Insurance Company (Insurer), which had insured the barge. In 2010, Owner amended the complaint to include Contractor as a defendant, alleging negligence in the manner Contractor sank and attempted to raise the barge. In its counterclaim, Charterer alleged that Owner fraudulently induced Charterer into chartering the barge, or alternatively, that Owner misrepresented the barge's fitness for use as a breaker barge, and Charterer detrimentally relied on Owner's representations.

Prior to trial, Charterer, Owner, and Insurer entered into a settlement agreement. Insurer deposited USD 1,500,000 into the registry of the court. Charterer and Owner dismissed claims against Insurer and agreed not to litigate their claims to insurance funds on policy language, instead consenting to terms specifying that disbursement would be determined by the court based on the settlement agreement and the jury verdict. Because a jury could award Owner judgment against Charterer in excess of the USD 1,500,000 deposited by Insurer, as part of the settlement agreement Charterer was also required to obtain a standby LC for USD 1,300,000.

The jury found that Owner did not commit fraud or fraudulently induce Charterer to enter into the charter for the barge, and that Charterer did not detrimentally rely on representations made by Owner. The jury concluded that Charterer had breached by failing to return the barge to Owner in the same seaworthy condition. The jury found the fair value of the barge to be USD 200,000, and decided that Contractor's negligence resulted in USD 200,000 damage. It determined further that Charterer was responsible for 40% of damage (USD 80,000) and Contractor was responsible for 60% (USD 120,000).

Owner filed for appeal and moved for stay of judgment pending appeal. Charterer and Contractor motioned to enforce settlement, to cancel the LC that had been required as part of the settlement agreement, and for partial prevention of stay pending appeal. U.S. District Court for the Middle District of Louisiana, Lemmon, J., dismissed the motion to enforce settlement and cancel the LC, and granted the motion to stay execution of judgment pending appeal.

Charterer and Contractor seek execution of the portion of the judgment that incorporated the pretrial settlement agreement, and enforcement of the portion of the settlement regarding funds deposited by Insurer. Specifically, Charterer and Contractor requested reimbursement out of Insurer funds deposited with the district court registry if they were able to reclaim the barge before conclusion of Owner's appeal. They would also like an order permitting cancelation of the LC because the totality of Owner's judgment including potential interest and fees did not exceed the USD 1,500,000 deposited by Insurer. The judge dismissed, noting that submission of Owner's appeal divested the district court of authority relating to matters of appeal, leaving it without subject matter jurisdiction to rule on the motions.

The Judge granted Owner's motion to stay execution of judgment pending appeal noting that Owner's request that the USD 1,500,000 deposited by Insurer in the court's registry act as supersedeas bond pending appeal was unnecessary. While losing parties may generally only obtain a stay of execution of judgment by giving a supersedeas bond - meant "to preserve the status quo while protecting the non-appealing party's rights pending appeal" - the Supreme Court of the United States has clarified that a supersedeas bond is only required of the losing party in such circumstances. When a prevailing party appeals the district court's judgment, asserting error, such judgment may be suspended without bond when the relief sought is inconsistent with enforcement of the judgment. As the relief Owner sought on appeal was inconsistent with the judgment as regards Charterer and Contractor, the judgment of the court was stayed pending appeal.



The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.