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Fifth Circuit Asked to Clarify ‘Prevailing Party’ in Maritime Law

February 12, 2020 | Posted in : Expenses / Costs, Fee Entitlement / Recoverability, Fee Issues on Appeal, Fee Jurisprudence, Fee Shifting, Prevailing Party Issues

A recent Law 360 story by Michelle Casady, “5th Circ. Asked to Clarify Prevailing Party in Maritime Law,” reports that the Fifth Circuit was urged during oral arguments to provide lawyers clarity on what it means to be the prevailing party entitled to attorney fees and costs in a maritime contract dispute.  Presenting it as an "undecided issue in federal law," Marty McLeod of Phelps Dunbar LLP, who represents Genesis Marine in a dispute against Hornbeck Offshore Services, asked the court to consider establishing a "bright-line rule" based on who prevails on the "main issue" in a case.

"I'm not asking the court to do anything other than apply what it's already done in other cases … to federal maritime law," he said.  In the underlying dispute, Genesis is seeking $102,789 in attorney fees and costs, arguing it was the prevailing party in the lawsuit it filed in the Eastern District of Louisiana in July 2017 against Hornbeck, which it had chartered its vessels to.

As Genesis sees it, because it prevailed on the main issue in the case — which asked whether it provided appropriate notice to terminate ship management agreements after about $722,000 in invoices went unpaid — it's entitled to recover the fees and costs. Hornbeck unsuccessfully argued the termination was not proper and therefore it was entitled to $2.95 million in unpaid ship management fees.

But Hornbeck contends that while Genesis prevailed on the main issue of the case, Hornbeck similarly prevailed on the "main issue" of its counterclaim, which was its entitlement to about $117,000 for fuel, lube and shoreside services under the master charter agreement that allows for the recovery of fees and costs.  According to court records, Genesis stipulated to that amount it owed Hornbeck at the end of trial and the judge reduced Genesis' award by that amount, which Hornbeck said means it, too, is a prevailing party.

Circuit Judge Gregg J. Costa said the record seems to support the trial judge's contention that both sides prevailed and the requests for fees offset each other. McLeod said that can't be.  "There cannot be more than one prevailing party under the contract," he said, explaining the contract allows for fees to be recouped by "the prevailing party," which is singular, rather than "a prevailing party," which could mean multiple parties.

A bench trial in the case began in June 2018.  In August 2018, U.S. District Judge Ivan L.R. Lemelle issued a ruling that Hornbeck pay Genesis about $722,000, minus $117,000 for fuel, lube and shoreside services.  He also dismissed with prejudice Hornbeck's counterclaims.

In March 2019, Judge Lemelle issued an order denying the motion for attorney fees, explaining in a seven-page order that the parties had agreed the main issue in the case was whether Genesis had improperly terminated the ship management agreements, which would have allowed Hornbeck to offset its invoices for unpaid ship management fees. The court ruled for Genesis on the issue but decided that because the dispute didn't fall under the master time charter agreement — the only agreement that allowed for fee recovery — it couldn't award Genesis attorney fees.

"Simply put, the agreed-upon main issue of this case was found to not fall under the master time charter — the only relevant contract that provides recovery of attorneys' fees and costs," Judge Lemelle wrote.  "The master time charter provides recovery of reasonable attorneys'  fees and costs from the other party for not just any dispute, but only disputes falling under the master time charter."