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Semco, LLC v. The Grand Ltd.

Court of Appeals of Louisiana, Fifth Circuit

May 31, 2017

SEMCO, LLC
v.
THE GRAND LTD.

         ON APPEAL FROM THE TWENTY-FOURTH JUDICIAL DISTRICT COURT PARISH OF JEFFERSON, STATE OF LOUISIANA NO. 732-374, DIVISION "B" HONORABLE CORNELIUS E. REGAN, JUDGE PRESIDING

          COUNSEL FOR PLAINTIFF/APPELLANT, SEMCO, LLC S. Gene Fendler, Kelly T. Scalise, William W. Hall.

          COUNSEL FOR DEFENDANT/APPELLEE-2ND APPELLANT, THE GRAND LTD. Richard K. Leefe, Michael R. Gelder, James K. Sticker, III.

          Panel composed of Fredericka Homberg Wicker, Jude G. Gravois, and Robert A. Chaisson.

         AFFIRMED AS AMENDED

         FHW

         JGG

         RAC

          FREDERICKA HOMBERG WICKER JUDGE.

         In this appeal, Semco, L.L.C. and The Grand Ltd. seek review of the trial judgment, rendered following a nearly three-week jury trial, awarding $4, 831, 144.00 in favor of Semco and $680, 845.00 in favor of The Grand for damages arising out of the construction of a multi-million dollar liftboat. For the following reasons, we affirm the trial court judgment but amend the judgment to award judicial interest from the date of demand.

         PROCEDURAL HISTORY

         On October 28, 2013, Semco filed suit against The Grand for claims arising out of the parties' January 30, 2012 contract to construct a liftboat. In its petition, Semco, the builder, alleged that, in light of various changes requested by the owner, The Grand, in addition to design difficulties in reaching the desired tonnage for the vessel, the construction cost far exceeded the $15, 934, 000.00 contract price. Semco asserted claims for reformation or rescission of the contract and sought first the total construction cost, minus the amounts already paid by The Grand, or, alternatively, the cost of the specific changes that increased the contract price. Semco filed an amended petition, additionally asserting claims for detrimental reliance and unjust enrichment.[1]

         The Grand filed an answer to Semco's petition, asserting that the contract at issue is a fixed-price contract and, thus, with the exception of the approved change orders executed, Semco assumed the risk of any additional construction costs incurred. The Grand additionally filed a reconventional demand against Semco, alleging that the vessel was defective in several respects upon delivery and, further, that The Grand sustained monetary damages related to the delay of the completion and delivery of the vessel.[2]

         On July 31, 2015, the Grand filed a motion for partial summary judgment as to several of Semco's claims, including its causes of action alleged for total cost damages and for reformation and/or rescission of the contract.[3] After taking the matter under advisement, the trial judge denied The Grand's motion.

         The matter proceeded to trial by jury on September 8, 2015. During a jury charge conference, The Grand objected to the trial court's denial of its proposed jury charge concerning the law pertinent to lump-sum or fixed-price contracts. At the conclusion of Semco's case-in-chief, The Grand moved for a directed verdict on Semco's contract rescission and reformation claims as well as its claims for unjust enrichment and detrimental reliance. The trial judge denied the motion for directed verdict without reasons. Following a nearly three-week trial, the jury returned a verdict in favor of Semco in the amount of $4, 831, 144.00, with legal interest from the date of judgment, and in favor of The Grand as to its reconventional demand in the amount of $680, 845.00. Both parties have appealed, challenging the amounts awarded by the jury and raising other specific assignments of error addressed below.

         FACTUAL BACKGROUND

         This litigation arises out of the construction of a liftboat. A liftboat is a large vessel with retractable legs that imbed into the sea bottom and allow the vessel to be elevated-providing offshore working and living spaces for the onboard workers. Semco, formed by John Powers, is a marine engineering and construction company that developed a unique patented crane design, which allows the liftboat's crane to be placed on a leg of the vessel, rather than on the deck, thereby providing more valuable open deck or work space on the vessel. The Grand is a holding company formed by Bob Springob for vessels and equipment operated by a group of other companies started by Springob, namely Laredo Construction, Laredo Offshore, and Springob Enterprises.

         On January 30, 2012, Semco and The Grand entered into a contract for the construction of a liftboat, the Brazos.

         The Contract

         The January 30, 2012 written contract at issue between Semco and The Grand provides that Semco would construct a vessel for The Grand in accordance with the attached Contract Specifications and Drawings, for the contract price of $15, 934, 000.00. Attached to the contract are extensive specifications which provided for the construction of a 230-foot leg length jack-up barge with a 200-ton leg crane capacity and a 120-foot boom length. The parties revised the Contract Specifications in May 2012 and June 2012. The written amendments to the contract relevant to this appeal are (1) the original Contract Specifications provided that the vessel, including the hull and structural bulkheads, would be of steel construction; the June 2012 revised Contract Specifications provided that the structural bulkheads in the interior spaces would be of aluminum construction; and (2) the original Contract Specifications provided that Semco would obtain ABS/ANSI certification and the June 2012 amendment reflects that the "API 2C, 7th Edition only" is required.

         The Contract Specifications further provided that the vessel would be under 200 U.S. regulatory gross tons. However, the contract contained a provision which stated that if Semco could not achieve a tonnage under 200 gross tons through normal methods, the parties would negotiate a solution, which may result in increased construction costs.[4] The language in the contract provided:

Builder shall make all practical efforts to obtain U.S. regulatory tonnage of less than 200 gross tons. If not practical or possible by normal methods, a satisfactory solution shall be negotiated between the builder and the owner which may include additional cost.

         The contract further contained a warranty clause, indicating that the vessel would be delivered in accordance with the contract specifications and drawings and free from defects. The contract required The Grand to give prompt notice to Semco of any alleged defects upon discovery but in no event would Semco be responsible for any alleged defect not reported within 180 days from delivery of the vessel. In the event Semco was timely notified of any defect, the contract instructs that Semco would be responsible to correct the defect or to allow The Grand to correct the defect, subject to a specified reimbursement claim. The contract contained a "Waiver of Consequential Damages" provision, stating that both parties waived any indirect, incidental, or consequential damages arising out of the contract.

         Concerning the paint application for the vessel, the contract provided that Semco would use Carboline paint and apply the same in accordance with the manufacturer's specifications and instructions. The warranty provision, however, specifically excluded any warranty for defects related to the manufacture of the paint itself or the manufacturer's recommendations for application.

         The contract provided that only Springob and Powers, as the designated representatives for The Grand and Semco respectively, could modify or change the contract terms.[5] The contract provided that the written contract superseded any prior oral agreements or understandings and that any changes to the Contract Specifications must be requested in the form of a change order and approved in writing. The contract provided that, if The Grand failed to respond to a requested change order, the change order would be deemed rejected and the changed work would not be performed.

         The contract stated that each party materially contributed to the terms of the contract and that the contract should be considered mutually drafted.

         Factual Testimony and Evidence Presented at Trial

         At trial, both parties presented testimony and evidence surrounding the January 30, 2012 written contract as well as the relationship and discussions between the parties prior to and during the Brazos' construction. To support its claims to recover the amount of the increased construction costs, Semco presented evidence concerning the disputed changes to the contract, or extra work performed, namely (1) the costs for work performed to achieve the desired tonnage of the vessel; (2) the costs associated with the change in the deckhouse construction from steel to aluminum material; (3) the increased costs for the installation of larger generators than those provided in the original contract; and (4) the additional costs associated with increasing the crane's lift capacity.[6] The Grand presented evidence to support its claims for damages related to Semco's allegedly defective work, including defective paint application, as well as to prove it was entitled to credit for work Semco allegedly failed to perform as required under the contract.

         Powers testified at trial that he formed Semco in the 1990s after working with his family business, Powers Offshore Services, since 1981. At the time of the contract at issue, he considered Semco to be a global leader in the liftboat industry.[7] Powers described the characteristics of a liftboat and testified that the most important utility aspects of a liftboat are the crane, the deck space, the living quarters for the workers, and the platforms or workspace for workers.

         Powers testified that he and Springob have been friends and business associates since the 1980s. In 2011, Springob located a foreign buyer for a liftboat that Semco built, and the two shared the profits from that sale. Shortly thereafter, Springob approached Powers about building a liftboat for The Grand's fleet. Powers testified that Springob wanted a liftboat for The Grand under 200 U.S. gross tons, to avoid the requirement for a licensed engineer on board the vessel. Powers testified that he made it clear to Springob that Semco had never built a liftboat under 200 gross tons. He told Springob "if it was only issues of applying tonnage openings in the quarters, we [Semco] felt we could do that." However, he informed Springob he was not completely "comfortable" with estimating the construction costs without consultation with a tonnage expert. Semco retained a tonnage expert to consult regarding calculating tonnage for the Brazos project prior to execution of the contract.[8]

         According to Powers, Semco noticed an increase in man-hours and overall design and construction costs for the Brazos project in November or December 2012, and scheduled a meeting with Springob. At that January 2013 meeting, according to Powers, he informed Springob and Nadja Knoulton, the Vice-President of The Grand and Springob's daughter, of the increased costs he believed were primarily related to the tonnage design and changes requested by The Grand. Powers testified that Springob repeatedly instructed him at that meeting to "Keep building the boat. Do not cut corners." He testified that Springob assured him that The Grand "would not hurt" him or Semco.

         Powers discussed an April 16, 2013 email from Allen Moore, Semco's engineer, to Springob discussing the increased construction costs.[9] The email discussed the major contested issues on the project related to the increased construction costs-the extra work performed to reach the desired tonnage under 200 gross tons; an increased crane load capacity; the increased size of the generators; and the aluminum construction deckhouse.[10]

         Powers testified that, following that email, he met with Springob again to discuss various options concerning the increased construction costs. At that second meeting, he and Springob discussed "outside the box" ideas to handle the cost increases, such as selling the boat to Nigerians that Springob had prior business dealings with and splitting the profit. Powers further testified that he offered at that point to return to The Grand all monies it had paid on the project. Powers testified that at some point he offered to buy the Brazos back from The Grand for $28 million dollars, which The Grand refused. Powers indicated that The Grand did indicate that it would accept a $50 million dollar offer for the Brazos.[11] According to Powers, Springob again encouraged him to "keep building the boat" and not to cut any corners during construction.

         Powers testified that to some extent, Semco and The Grand "got away from the change order program" during construction and The Grand failed to respond or provided delayed responses to multiple change orders.[12] He testified that change orders and other informal requests were approved by email and/or verbally by Springob as well as other Grand employees.[13]

         Following the April 2013 email and discussions, Powers offered for Springob and other Grand representatives to come to Semco and inspect its financial records related to the Brazos project to justify the increased costs. In July 2013, Springob and Knoulton went to Semco's offices and reviewed some financial documentation and, according to Powers, the three again sat down for a meeting to discuss the construction cost increase. Semco subsequently retained two experts, Bill Coneybear and his colleague Al Nierenberg, to review Semco's financial records related to the Brazos project to determine the exact cause of the cost increase. Semco also retained Norman Dufour, Jr. with Dufour, Laskay & Strouse, Inc., to perform an appraisal of the Brazos. Powers sent correspondence to Springob in August 2013, informing him that Semco retained experts to review its books and to appraise the value of the Brazos.

         Powers discussed his business relationship with Springob and All Coast, a separate company run by Powers and his colleague John Nesser. Powers and Nesser, during the construction of the Brazos, approached Springob about merging All Coast with Springob's fleet of vessels owned by his company, Laredo Offshore. Powers testified that All Coast together with Springob submitted a bid on a Derrick barge vessel to incorporate into All Coast. Although that bid was rejected, Powers testified that he continued to discuss the possibility of Springob's involvement in All Coast. He stated they discussed the possibility of purchasing an even larger fleet, the Hercules Fleet, to merge with the All Coast and Laredo fleets.[14] However, Powers testified that this deal never occurred because Springob did not want to merge his fleet with All Coast. Powers testified that the deal would not be beneficial to All Coast, as one of Laredo's competitors, without merging the Laredo fleet.[15]

         For this proposed business venture, however, both Semco and the Laredo companies had to submit financial documentation to Whitney Bank to obtain financing for the Derrick barge bid. Powers testified that Springob submitted his financial documentation to Nesser, who then forwarded it to Whitney Bank, and that he personally never viewed Laredo or Springob's financial documentation.

         Springob testified at trial that he owns four companies-Laredo Construction, Laredo Offshore Services, Springob Enterprises (which owns and maintains a shipyard in Galveston, Texas), and The Grand. He testified that he has known Powers for more than 25 years and has successfully done business with him in the past. Springob testified that Semco was the only shipbuilder at the time of the contract that could build a 225-foot leg length liftboat and was further the only company that could build a liftboat with its patented leg crane design. Springob testified that he was aware that Semco had never built a vessel under 200 gross tons and recognized that he knew, at the time the contract was executed, that there could be additional costs associated with achieving that tonnage. Springob then testified to his opinion that, because Semco retained a tonnage expert pre-contract, any additional costs associated with achieving the desired tonnage were costs related to the vessel's design and were Semco's responsibility under the contract.

         Springob's testimony concerning the time at which Powers informed him of the cost increases differs from Powers' testimony. Springob denied that Powers informed him in January 2013 of the increased construction costs. Rather, Springob testified that he first learned of the increased costs in April 2013. He stated initially that he told Powers that Semco alone would be responsible for the increased costs, but admitted that, in that same April 2013 meeting, he instructed Powers to keep building the boat-he further admitted to telling Powers that he would work with him and "help" him deal with the cost increase. Springob explained that he did not intend to incur any additional costs to "help" Semco. Rather, he meant that he would pay outstanding payments under the contract and pay for the approved change orders, to provide Semco with additional cash flow to continue building the boat. He further acknowledged that he and Powers discussed "several schemes" to handle the cost increases.

         Springob acknowledged that he and Knoulton reviewed Semco's books at the Semco yard in July 2013 and that he had several meetings specifically concerning increased construction costs. Further, Springob testified that Rory Hebert, a Grand employee, was at Semco's yard "weekly, sometimes daily, and we felt secure" about the construction.

         Springob testified concerning changes to the contract and admitted that other Grand employees approved change orders and may have had authority to communicate approvals to Semco employees.[16] Springob testified that, in January 2013, he received an email with an attached "Master Change Order List" from Semco and that no change order related to increased costs associated with achieving the desired tonnage, the aluminum construction of the deckhouse, or the vessel's crane lift capacity.[17] He further testified that as late as April 2013, he had not received any invoice for any changes to the contract-including change orders approved in writing.[18]

         As to the Brazos' increased crane lifting capacity, which became available with the Coast Guard's release of its 7th edition load charts after the January 30, 2012 contract date, Springob acknowledged that the change was desirable to The Grand because the greater the lifting capacity, the more attractive or useful the boat is for clients. He testified that he received correspondence from Semco concerning the Coast Guard's 7th edition load charts and that The Grand instructed Semco to use the revised load charts to increase the crane's lift capacity. However, he testified that Semco never informed him that the revision would cost The Grand any additional money.[19]

         Concerning the construction of the deckhouse, Springob testified that he contemplated that the deckhouse of the Brazos would be aluminum construction, not steel, and that the omission of this detail in the contract was an oversight. He testified that he discussed with Powers and other Semco employees pre-contract that The Grand wanted the Brazos' deckhouse to be aluminum construction. Springob further challenged a disputed written change order related to increasing the number of planetaries on the vessel from six to eight per leg, indicating that the contract provided for a minimum of six planetaries per leg and, thus, Semco should be responsible for the additional planetaries as part of the design of the vessel.[20]

         On September 11, 2013, Springob received an email from Powers with an appraisal attached, performed by Dufour, valuing the Brazos at $28.5 million. Springob testified to his theory that Powers obtained an appraisal of the Brazos with such a high valuation as a "scheme" to get Springob to walk away from the Brazos so that Powers could sell the vessel to All Coast.[21] Springob testified that he had worked with Dufour in the past, and decided to contact him by telephone to discuss Dufour's valuation of the Brazos. Springob expressed concern to Dufour that he did not want the vessel valued at $28.5 million because The Grand would then have to insure the vessel at a much higher value than the original contract price. He asked Dufour to draft correspondence, to utilize for insurance purposes, appraising the Brazos at a much lower figure and did not disclose to Dufour that any dispute concerning construction costs existed between Semco and The Grand.

         On October 13, 2013, Dufour drafted correspondence to Springob, as he requested, indicating an "error" in his initial appraisal of the Brazos and stating an accurate valuation of the Brazos to be $18 million. Subsequently, on October 30, 2013, Dufour drafted a second letter to Springob, stating that he recently became aware of the dispute between The Grand and Semco. Dufour's correspondence stated that, "[g]iven the circumstances, I would request that you not use my letter for any purpose as it was based on apparently incomplete information." At trial, Semco introduced into evidence The Grand's insurance policy for the Brazos, which insures the vessel for an increased amount of $21 million.

         Springob testified generally that the Brazos contained numerous defects upon delivery, requiring The Grand employees to spend approximately 30 days preparing the Brazos for offshore utilization.

         Tarn Springob, Bob Springob's son and President of Laredo Construction, testified that he has a law degree as well as a degree in civil engineering. He testified that as an attorney he occasionally engages in private practice and reviews all contracts for his father's companies. In 2011, he and his family began discussions of building a new vessel and they obtained estimates from various shipyards. He testified that they ultimately selected Semco because of its reputation and the quality of its vessels. He testified that he reviewed the January 30, 2012 contract at issue from both a civil engineer and legal perspective and further forwarded the contract to outside counsel for review as well. Tarn testified that The Grand's fleet is used by the Laredo companies to perform offshore work.

         Concerning the steel versus aluminum construction, he testified that all of Laredo's vessels have deckhouses and pilothouses with aluminum construction. He testified that aluminum construction is important because it is much lighter than steel and, thus, allows a vessel to have more equipment and cargo weight onboard. He stated that the parties agreed pre-contract that the hull and the deck would be of steel construction but the pilothouse and deckhouse would be aluminum. Tarn further testified that Semco was well aware that The Grand wanted a vessel under 200 gross tons to avoid having to pay an engineer to remain on the vessel and, further, to decrease the overall cost of manning the vessel-boat captains are paid according to the tonnage that they are certified to operate.

         Tarn testified that he first learned of the cost increases in April 2013 and that he was "shocked." Tarn acknowledged that Powers at one point offered to buy the Brazos back from The Grand and return all monies it had invested into the Brazos construction. He further acknowledged that neither he nor Springob told Powers to stop construction on the Brazos, but rather told him "we will do what we can." He stated that, because he considered Powers to be a friend to his father, he would do what he could to help him out-but it was his understanding that Semco as the designer and builder was ultimately responsible for any cost overruns.

         After Tarn received an email from Semco indicating that the cost of the vessel had reached approximately $28 million, he forwarded that email to outside counsel and asked if he should "burst that $28 million bubble right now?, " to which outside counsel responded affirmatively. Thereafter, Tarn emailed the bank officer handling The Grand's construction loan and asked him to set up a new survey for the Brazos. The bank officer responded that he would schedule a survey but mentioned that if the survey came out at a higher value than Semco's survey, it may not be in the bank or The Grand's best interest to do so. Soon thereafter, in October 2013, Tarn accompanied Rory Hebert and two naval architects to review Semco's documents at the Semco yard, including "boxes and boxes of time cards" and man-hour time sheets as well as material and equipment invoices, to calculate the alleged construction costs. Tarn reviewed documents for two and a half days and further retained an expert, David Bourg, to review the documents for three days. Following the review of Semco's construction records reflecting the costs associated with the Brazos project, Tarn emailed the bank officer again and stated "Our current inclination may be to hold off on the survey[.]"

         Nadja Knoulton, Springob's daughter and The Grand's Vice-President[22], testified that Powers and her father had a professional relationship for approximately 35 years.[23] Concerning the contract at issue, Knoulton testified that the contract went through a few drafts and revisions prior to its execution. She testified that The Grand retained outside counsel to review the contract and that her brother, Tarn, also reviewed the contract prior to executing it. Nevertheless, Knoulton indicated that Semco "snuck in" the tonnage provision but acknowledged that The Grand never objected to the additional language.

         Concerning the construction cost increase, Knoulton acknowledged that Powers informed her and Springob by April 2013 of the alleged overruns. She testified that she felt sorry for Powers because it seemed as if the project had gotten away from him. She admitted that she and her father told Powers to keep building the boat and that they would help "look into" the increased construction costs and reach a resolution. Knoulton affirmed her father's suspicions concerning Powers' alleged scheme to gain control of the Brazos for the All Coast fleet.[24]

         Concerning changes to the Brazos' design, Knoulton testified that the crane's lift capacity is the most important factor to The Grand for marketing liftboats to their clients. She testified that, when the new load charts came out indicating that the crane's lift capacity could be increased, that was certainly beneficial to The Grand. She alleged, however, that The Grand was never informed that there would be any additional cost associated with the increased capacity.

         Christian Pierce, Semco„s only naval architect, testified that Semco has built the largest liftboats in the Gulf of Mexico, and that the Brazos was the smallest vessel Semco has built. Pierce reiterated that Semco had never built any vessel under 200 gross tons. At the early stages of the vessel's design, he consulted with a former colleague stating that for the first time in his career he was playing the "tonnage game." Pierce stated that, pre-contract, Semco retained a tonnage expert to assist in designing the vessel to meet the desired tonnage under 200 gross tons; however, he testified that, without a written contract, it was difficult to justify spending substantial money on an expert. In February 2013, Pierce stated the tonnage expert informed him that the framing for the vessel needed to be changed from 5-foot spacing throughout, as provided in the original specifications, to 4-foot spacing throughout to meet the tonnage requirement. Pierce testified this change required Semco to essentially reconstruct the interior of the vessel, which also added to the weight of the vessel.[25]

         He further stated that the vessel's design upon its inception was a simple one but that it evolved during construction. Pierce testified that the Brazos' design in early discussions started out as a 200-foot leg length, which became a 225-foot leg length as provided in the original contract, and then increased eventually to a 230-foot leg length. Pierce explained how a change in a liftboat's leg length affects the overall design and structure of a liftboat, stating, "the interaction between hull size and legs size are very dependent on one another…I need a bigger boat to hold up longer legs. When the boat is jacked up I need stronger legs to hold up a bigger boat and vice versa." Further, Pierce stated that there were significant changes to the crane's lifting capacity, which is the amount of weight the crane can lift at a certain radius-the initial specifications provided for a lifting capacity of 200 tons at a 35-40 foot radius and the Brazos' lifting capacity upon delivery was 200 tons at a 65 foot radius. Pierce testified that the structure of the leg did not change as a result of this increased lifting capacity, but the design of the jack tower did change which increased the weight of the jack tower. The jack tower on the Brazos is the heaviest jack tower Semco has ever used on a vessel. Pierce reiterated that Semco's estimate of construction costs is generally based upon the weight of the vessel.

         Allen Moore, Semco's general manager, testified that he is an engineer who has worked with Powers continuously since 1981. Moore testified that the preliminary discussions for the Brazos build began with a relatively simple design-he referenced an email to Shankar Mody, a structural engineer, in which he asked Mody for an estimated price for the build and stated that the boat is planned to be a very "plain" liftboat without any extras. Moore stated, however, that the liftboat delivered to The Grand was anything but plain.

         Moore drafted the contract's tonnage provision after discussion with Powers about the vessel's design. He testified that, because Semco had never built a vessel under 200 gross tons, he thought the language would be beneficial to protect Semco should it not be able to achieve the desired tonnage within the contract drawings and specifications. To his knowledge, no one at The Grand objected to the addition of the tonnage provision. Moore testified that, in the beginning stages of the design, Semco was under the impression that it could simply exempt much of the vessel's space below the deck from the tonnage calculation to achieve the desired tonnage. Moore stated this method to exempt certain areas from tonnage calculations was the "normal methods" he anticipated under the contract. However, he stated that as the experts became more involved and the tonnage was continuously calculated, Semco was told that it could not exempt those areas with the five-foot framing it designed.

         Moore testified that he oversaw the Brazos project until Steve Juul, a Semco employee and Powers' son-in-law, took over as project manager. Moore testified that in the beginning of the project, he would submit change orders and requests to The Grand and would not receive a timely response until an in-person meeting with Mike Babin or Rory Hebert, Grand employees, who would relay Springob's approvals.

         Concerning the aluminum versus steel construction, Moore testified that Semco and The Grand went back and forth on that selection-he stated that precontract they discussed several options: all aluminum, all steel, or one deck aluminum and a separate steel deck. He admitted that in January 2012, immediately before the execution of the contract, he sent an email to Mody regarding weight calculations which stated that The Grand wanted aluminum construction for the deckhouse. Moore testified that he referenced The Grand's preference for aluminum construction for the deckhouse to Mody because Semco typically does steel construction and he wanted to bring to Mody's attention that the boat may be different from what he quoted for Semco in the past. Concerning the larger generators installed, Moore testified that Semco initially informed The Grand that larger generators would likely be needed, but The Grand still requested that the smaller generators be included in the initial specifications. However, after further calculations and inspections, Semco's experts determined that the larger generators were needed to support the Brazos. Moore testified that The Grand had knowledge of the larger generators being installed and never objected.

         Concerning the crane's increased lift capacity, Moore testified that he first learned of the newest edition of the API guidelines in May 2012, which raised the crane's load lifting capacity and allowed the Brazos' crane to reach out and lift at a farther radius. He further testified that the increased costs related to the increased lift capacity were not the result of changes to the crane itself. Rather, the increased costs arose because "the supporting structure for the crane had to be increased in order to handle the higher loads that the crane was putting into the boat." Moore testified that this increased lifting capacity was "a big deal in the boat world." Moore acknowledged that he did not inform Springob of the exact cost increase for the increased crane lifting capacity. However, he maintained that Springob had asked several times throughout the contract if there was a possible way to increase the crane's lift capacity and that there is no way that Springob, as an experienced vessel and shipyard owner, did not know and understand that the supporting structure would need to be modified and that there would be additional costs associated with an increased crane lift capacity.

         Moore testified that Semco noticed an overall cost increase to the project in late 2012, and that he, thereafter, contacted Dufour to perform the survey of the Brazos. He testified that Dufour boarded and inspected the vessel by himself. He stated that Dufour did not review the contract itself but did review the specifications. Moore testified that Dufour did not ask, and Moore did not disclose, the contract price nor the overall construction costs to date.[26]

         Steve Juul, Powers' son-in-law and project coordinator for Semco, testified that he became involved in the Brazos project in the summer of 2012. He stated that he coordinated with Moore, who provided him with a Master Change Order list of all requested changes to date. However, according to Moore, The Grand failed to respond to many of the change orders and many of the approvals were verbal or in person during meetings. Juul testified that, when he took over the project, it appeared as if "that's the kind of company we were dealing with at that point, a company where we could talk. We knew the owners were friends. They could just communicate. We assumed at that point that's how the project was going to go." Juul acknowledged that there are no written change order requests concerning aluminum versus steel construction, increased crane lifting capacity, or design changes related to the desired tonnage under 200 gross tons. He further stated that he did not submit weekly progress reports to The Grand because he was informed at some point by Mike Babin, a Laredo employee, that The Grand did not need them weekly but rather only required reports when they needed an additional draw of funds from the bank for the construction.

         Concerning the change from steel to aluminum deckhouse construction, Juul testified-consistent with Moore's testimony-that the parties had repeatedly discussed the possibility of and desire to have aluminum construction but had discussed all options, from an all-steel construction, an all-aluminum construction, or one deck aluminum and one deck steel construction. He maintained, however, that in the summer of 2012, when the Contract ...


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