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State v. Taira Lynn Marine Limited No 7, L.L.C.

Court of Appeals of Louisiana, Fifth Circuit

April 11, 2018

STATE OF LOUISIANA, THROUGH ITS DEPARTMENT OF TRANSPORTATION AND DEVELOPMENT
v.
TAIRA LYNN MARINE LIMITED NO 7, L.L.C., D & S MARINE SERVICE, L.L.C., AND JOHN DOE

          ON APPEAL FROM THE TWENTY-THIRD JUDICIAL DISTRICT COURT PARISH OF ST. JAMES, STATE OF LOUISIANA NO. 33, 114, DIVISION "A" HONORABLE JASON VERDIGETS, JUDGE PRESIDING

          COUNSEL FOR PLAINTIFF/APPELLEE, STATE OF LOUISIANA, THROUGH ITS DEPARTMENT OF TRANSPORTATION AND DEVELOPMENT Jose' R. Cot Robert K. Denny

          COUNSEL FOR DEFENDANT/APPELLANT, TAIRA LYNN MARINE LIMITED NO 7, L.L.C., D & S MARINE SERVICE, L.L.C. Wayne G. Zeringue, Jr. Jefferson R. Tillery Christopher K. Ulfers

          Panel composed of Judges Susan M. Chehardy, Hans J. Liljeberg, and Marion F. Edwards, Judge Pro Tempore.

          MARION F. EDWARDS, JUDGE PRO TEMPORE JUDGE

         The issue presented for our review in this matter relates to the proper method of calculating depreciation for purposes of awarding compensatory damages in a case involving an allision[1] of a towboat and barges with a fender of the Sunshine Bridge. For reasons that follow, we affirm.

         The parties stipulated to the facts, liability and cost of repairs before trial. According to the joint stipulation, on April 11, 2008, the M/V RICKY J. LEBOUEF, owned by Taira Lynn Marine Limited No. 7, L.L.C. (Taira Lynn), and operated by D&S Marine Services, L.L.C. (D&S), allided with the Sunshine Bridge Pier No. 4 fender system. At the time of the allision, the M/V RICKY J. LEBOUEF was towing two barges. River currents caused the tow to allide with the downstream fender of the Sunshine Bridge, causing extensive damage and requiring an expenditure of $1, 569, 544.75 for repairs. Both Taira Lynn and D&S stipulated to liability for the allision, but reserved their right to litigate all aspects of damage claims.

         The State of Louisiana, through its Department of Transportation and Development (DOTD), filed suit against Taira Lynn and D&S to recover the cost of repairs to the bridge. As a result of the joint stipulation, the only remaining issues before the trial court at the trial on the merits concerned:

1.) whether the claims of the DOTD are subject to a reduction for depreciation, and if so, the appropriate rate of depreciation;
2.) whether the value engineering proposal to replace the timber Pier No. 4 fender system with a timber and steel fender system was properly accepted, and if so whether Taira Lynn is entitled to any credit for the savings realized pursuant to the value engineering proposal;
3.) Whether Taira Lynn is entitled to a credit for the bid bond forfeited by Johnson Bros. Construction when it withdrew its successful bid for State Project No. H. 002926.6.

         After a trial on the merits, the trial court rendered judgment decreeing that the DOTD was entitled to a recovery of $720, 696.58 plus judicial interest pursuant to La. R.S. 13:4203[2]. The trial court issued written reasons for judgment in which it detailed the reasoning for the reduced award. Specifically, the court made a determination that a 50% depreciation rate was appropriate, and that defendants were entitled to a bid bond credit in the amount of $64, 075.80.[3] Both defendants appealed that judgment, arguing that the trial court erred in its determination that depreciation should be "capped" at 50%.

         DISCUSSION

         The sole issue presented to this Court relates to the determination of depreciation applicable to the award of damages. As previously stated, the trial court used a 50% depreciation rate in its award of damages.

         Defendants/appellants, Taira Lynn and D&S, argue that the trial court erred as a matter of law by applying a portion of the Truman-Hobbs Bridge Act of 1940 (Truman-Hobbs) embodied in 33 C.F.R. § 277.8(g)(2), which suggests a 50% depreciation on the expired service life of the structure in establishing depreciation. Appellants assert that a straight-line depreciation analysis using a ratio of the property's actual life divided by the property's expected useful life at acquisition is appropriate. Using that analysis, appellants argue that, in this instance, the actual life is 45 years and the expected useful life at acquisition is 50 years, resulting in a depreciation of 90%. Appellants conclude the trial court's ruling on this issue is an error of law which invokes a de novo review in this Court.

         DOTD counters appellants' arguments by pointing out that general maritime law does not impose a fixed rule for the calculation of depreciation. DOTD asserts that other factors, such as the type of materials originally used, the care and use, and the state of repair maintained are all essential elements to be considered in the determination of the applicable rate of depreciation. DOTD also disputes appellants' conclusion that the applicable standard of review is de novo, and asserts that the award of damages should be upheld because it is not clearly erroneous.

         Testimony at trial established that the Sunshine Bridge is a steel continuous truss bridge built in 1963. The top is the superstructure, or the actual truss. From the truss down is soft structure, incorporating wood timbers. There is a fender system to protect the bridge in the event of an extreme impact. Pier 4, part of the fender system, was damaged in this incident. Repair was an "in kind" repair, meaning that the same configuration and clearances as originally constructed were used.[4]

         The trial court heard testimony from two experts in bridge engineering on the topic of depreciation analysis. DOTD presented evidence from Zolan Prucz, Ph.D, P.E., whose firm was hired to repair the bridge. Dr. Prucz recommended a 50% depreciation based on the Truman-Hobbs guidelines as evaluated, and on all other conditions of this specific bridge as it relates to similar structures spanning the Mississippi River nearby, namely the Huey P. Long Bridge and the Crescent City Connection.

         Dr. Prucz explained that the factors used to determine the service life of a fender system include the type of structure, the material used, the function and conditions to which it is exposed, performance expectations, age, and maintenance and repair history. Dr. Prucz testified that the Truman-Hobbs Bridge Act provides guidance in this determination in that it contains service life estimates agreed upon in the industry.

         Dr. Prucz clarified the difference between the expected service life of a structure and the actual service life. He stated that values presented relating to expected service life refer to the expectation of a structure when new, i.e., the probable life. These values do not take into account the condition of the structure at any given time. They are based on statistics of service life of similar structures in the past. In short, the concept of expected useful life applies to a future projected useful life of a new structure. Actual service life, in comparison, relates more to structures that have been in existence and have a history of performance, and/or a quantifiable nature of deterioration over the years.

         In evaluating and rendering a professional opinion on the useful life of a structure such as Pier 4, the actual useful life, as opposed to the expected useful life, is a more accurate and a better measure of the useful life of the structure for purposes of depreciation in Dr. Prucz's professional opinion. Dr. Prucz estimated a 50 year expected useful life for the Sunshine Bridge. He stated that the fender was in good condition when it was removed, with some newer timbers showing ongoing maintenance.

         Taira Lynn and D&S offered the testimony of Donald Barnes, P.E. who opined that the depreciation rate should be increased to 75% based on inadequate maintenance and condition of the pier. Although Mr. Barnes did find some newer timbers, he disagreed with Dr. ...


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