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Reel Pipe, LLC v. United States Comserv, Inc.

United States District Court, E.D. Louisiana

December 6, 2019

REEL PIPE, LLC
v.
USA COMSERV, INC.

         SECTION "L" (5)

         I. FINDINGS OF FACT AND CONCLUSIONS OF LAW

         This action arises out of a time charter agreement (“the Charter”) between Reel Pipe, LLC (“Reel Pipe”) and USA Comserv, Inc. (“USA Comserv”). USA Comserv builds, maintains, inspects, and repairs cell phone towers. After Hurricane Maria struck Puerto Rico in September 2017, USA Comserv was contacted by several cell phone tower owners and operators to perform repairs and provide fuel for generators and other backup energy equipment.

         USA Comserv claims it chartered Reel Pipe's vessel, the M/V Carol Chouest (“the Vessel”), to transport equipment and 850, 000 gallons diesel fuel to Puerto Rico for the generators. The Vessel went on charter hire to USA Comserv beginning on October 2, 2017 and went off charter on October 30, 2017. Reel Pipe subsequently invoiced USA Comserv for a total of $303, 008.33 for daily charter hire and other costs and expenses under the Charter, but has not been paid. Accordingly, Reel Pipe sued USA Comserv for breach of the Charter and under Louisiana's open account statute.

         In answer, USA Comserv alleges that Reel Pipe breached the Charter by delivering a vessel that was unfit for its intended voyage and was incapable of transporting the amount of fuel required by USA Comserv. Furthermore, USA Comserv claims that Reel Pipe breached its contractual obligations to obtain necessary certifications and regulatory permitting for the Vessel so that she could successfully complete her voyage to Puerto Rico. Specifically, USA Comserv alleges that Reel Pipe represented that the Vessel was capable of transporting the desired 850, 000 gallons of fuel by storing additional fuel in her liquid mud tanks, but to do so, Reel Pipe needed United States Coast Guard approval. USA Comserv alleges that Reel Pipe and C-Logistics, LLC (“C-Logistics”), an affiliate of Reel Pipe, represented that the Vessel's liquid mud tanks had already been inspected and that the Vessel would easily obtain regulatory approval. Even after the Charter was executed, USA Comserv claims that Reel Pipe and C-Logistics continued to represent that the Coast Guard permit was merely a formality. USA Comserv claims it had little to no past experience chartering vessels and relied on Reel Pipe and C-Logistics as experienced vessel owners and logistics coordinators.

         USA Comserv claims that Reel Pipe and C-Logistics did not secure Coast Guard approval to transport the fuel in the Vessel's liquid mud tanks. Furthermore, USA Comserv contends that the Vessel could not receive the approval because she was not a double-hulled vessel as required by regulations, a requirement Reel Pipe knew or should have known. USA Comserv states the Vessel departed for Puerto Rico with fuel stored only in the Vessel's fuel tanks, limiting the amount of fuel that could be transported. Upon arrival in Puerto Rico, the Coast Guard did not allow the Vessel to offload any fuel on the mainland because the Vessel lacked the required certificates. This allegedly forced USA Comserv to sell the excess fuel to another vessel offshore at a loss.

         USA Comserv further alleges that it entered into a separate agreement with C-Logistics, in which C-Logistics agreed to coordinate all logistics and related services under the Charter. USA Comserv claims that C-Logistics failed to perform its contractual duties and that Reel Pipe has attempted to double-bill USA Comserv, once through C-Logistics for the $1, 200 per day logistics fee, and again by seeking an additional 10 percent surcharge on services that should have been performed by C-Logistics. Additionally, USA Comserv avers that C-Logistics owed it a duty to obtain all necessary permits and certificates for the Vessel's voyage to Puerto Rico and for unloading and discharging fuel in Puerto Rico, which C-Logistics failed to do. Finally, USA Comserv alleges that C-Logistics owed it a duty to use commercially reasonable efforts to contract with suppliers of goods and services at competitive market rates, but instead engaged in self-dealing and contracted with affiliates of Reel Pipe and C-Logistics at rates that were higher than other non-affiliated suppliers.

         Accordingly, USA Comserv brings counterclaims against Reel Pipe and C-Logistics for breach of the Charter, breach of contract, negligent misrepresentation, and unfair trade practices.

         This matter came before the Court without a jury on October 21, 2019. The Court has carefully considered the testimony of all the witnesses, the exhibits entered into evidence during trial, and the record. Pursuant to Rule 52(a) of the Federal Rules of Civil Procedure, the Court hereby enters the following findings of fact and conclusions of law. To the extent that any findings of fact may be construed as conclusions of law, the Court adopts them as such. To the extent that any conclusions of law constitute findings of fact, the Court adopts them as such.

         II. FINDINGS OF FACT

         1. On September 24, 2017, USA Comserv, through its chief executive officer, Mr. Jim Goff, contacted Mr. Dino Chouest and Reel Pipe concerning the rental of a vessel to carry diesel fuel and other cargo to Puerto Rico to aid USA Comserv's cell phone tower customers following Hurricane Maria. See Tr. Ex. 101; Tr. at 245 ll. 13-25; Tr. at 285 ll. 7-18.

         2. During the initial email exchange between Jim Goff and Dino Chouest, Jim Goff asked about “transferable gas and diesel capacities.” Tr. Ex. 101; Tr. at 246 ll. 11-15; Tr. at 284 l. 25, 285 ll. 1-3.

         3. In response to Jim Goff's request, on September 25, 2017, Dino Chouest recommended the M/V ALYSSA CHOUEST (“ALYSSA”) to USA Comserv. Tr. Ex. 102 at 1; Tr. at 285 ll. 19-23.

         4. In response to Dino Chouest's recommendation, Jim Goff inquired about the ALYSSA's gasoline storage capacity. Tr. Ex. 103; Tr. at 286 ll. 9-14.

         5. On September 25, 2017, Dino Chouest suggested that USA Comserv retain C-Logistics to assist USA Comserv with coordinating its shipments to Puerto Rico. Tr. Ex. 1; Tr. at 260 ll. 14-25, 261 ll. 1-3; Tr. at 38 ll. 3-10; Tr. at 287 ll. 2-10.

         6. In a separate email chain from September 25, 2017 negotiating the Charter, Matthew Van Hoesen of USA Comserv inserted a comment to the PDF under subsection “17. Compliance with Applicable Laws” that asked, “Any reason for us to think that Puerto Rico would have any additional requirements that you are not aware of? I know that they are a U.S. territory, but I am not aware if the shipping regulations are the same.” Tr. Ex. 105 at 15; Tr. at 458 ll. 4-14.

         7. In response to Matthew Van Hoesen's email attaching his comments to the draft Charter, Tracee Cloutier sent an email on behalf of Edison Chouest Offshore, [1] stating, in relevant part, “[t]o our knowledge, there should be no additional regulations for Puerto Rico since the vessel will be sailing as a U.S. flagged vessel.” Tr. Ex. 7 at 4; Tr. at 458 ll. 15-21.

         8. In the same email chain, Matthew Van Hoesen asked if the 15 percent administrative fee for third-party costs was negotiable down to 10 percent, which is what another company had quoted. Tr. Ex. 105 at 9; Tr. at 483 ll. 10-25, 484 ll. 1-4.

         9. Tracee Cloutier responded on behalf of Edison Chouest Offshore that the 10 percent rate was acceptable. Tr. Ex. 7 at 4; Tr. at 484 ll. 5-10.

         10. In a September 26, 2017 email, Dino Chouest stated that “Dane and his team could help with any logistics needs [USA Comserv] may have and they are [a] great asset to imbed with [USA Comserv's] teams.” Tr. Ex. 158 at 1.

         11. Jim Goff then began to email Mr. Dane Vizier of C-Logistics, which included a September 26, 2017 email asking about gasoline storage on the ALYSSA. Tr. Ex. 2 at 2; Tr. at 288 ll. 21-25, 289 ll. 1-11.

         12. In response, Dane Vizier responded that the ALYSSA could carry 550 gallon tote tanks and that he would need to order them. Tr. Ex. 2 at 2; see Tr. at 99 ll. 10-20.

         13. During the September 26, 2017 email exchange between Dane Vizier and Jim Goff, Dane Vizier requested that USA Comserv send C-Logistics a Purchase Order for $1, 200/day. Tr. Ex. 2 at 1; see Tr. at 41 ll. 1-23.

         14. On September 26, 2017, Mr. Ken Goff, on behalf of USA Comserv, sent an email to the Coast Guard advising them that USA Comserv would be chartering the LIAM MCCALL (a fast boat for which USA Comserv contracted with a separate entity, Seacor Marine, LLC) and ALYSSA, and on arrival of the ALYSSA, USA Comserv would have approximately 150, 000 gallons of transferable diesel available. Tr. Ex. 93 at 1; Depo. Kenneth Goff at 15 ll. 18-25, 16 ll. 1-19.

         15. Meanwhile, on September 27, 2017, Dane Vizier emailed quotations for ten empty diesel tote tanks and five filled gas tanks to Jim Goff. Tr. Ex. 6; Tr. at 100 ll. 8-18, 101 ll. 1-5; Tr. at 289 ll. 1-7.

         16. Also on September 27, 2017, the president of USA Comserv sent an email to Sprint stating that it would have two ships arriving in Puerto Rico carrying diesel fuel, the second of which would be carrying 200, 000 gallons of diesel fuel for purchase at $3.00 per gallon. Tr. Ex. 63 at 3; Tr. at 290 ll. 14-21, 291 ll. 7-12.

         17. In the email exchange negotiating the terms of the Charter, Matthew Van Hoesen sent an email on September 28, 2017 on behalf of USA Comserv asking what day should be written as the execution date. He also wrote, “I would think it would be whatever day you have voyage approval from the USCG, please advise.” Tr. Ex. 107 at 1; Tr. at 459 ll. 10-25, 460 ll. 1-2.

         18. Dino Chouest responded the same day, “USCG does not approve our voyages. Once we start to take on Fuel for this charter is the on-hire time. We will sail to Tampa and then on to PR as directed.” Tr. Ex. 107 at 1; Tr. at 250 ll. 17-22; Tr. at 460 ll. 3-10.

         19. However, in an internal email involving Reel Pipe and its affiliates dated the same day, Dino Chouest mentioned “need[ing] a solution to Load our boats with Fuel including [Liquid Mud] tanks and go pump off shoreside in PR.” Tr. Ex. 45 at 6; see Tr. at 254 ll. 12-21.

         20. Dino Chouest also specified, “Issue is USCG approvals.” Tr. Ex. 45 at 5; Tr. at 266 ll. 20- 21.

         21. Also on September 28, 2017, the Coast Guard said in an email to Ken Goff that “the M/V Alyssa COI does not has [sic] the ability to carry passengers but can carry cargo e.i. [sic] fuel in deck tanks.” Tr. Ex. 95.

         22. In response, Ken Goff emailed the Coast Guard on September 28, 2017 and stated that the “Alyssa would be transporting additional vehicle, construction supplies, and a large quantity of fuel in the vessel's below deck tanks.” Tr. Ex. 96 at 1.

         23. Separately, on September 29, 2017, Mr. Pat Flood of Edison Chouest Offshore sent an email to the Coast Guard which read, in relevant part:

Edison Chouest Offshore would like to request a waiver to allow the U.S. flagged vessels . . . Carol Chouest . . . to bring diesel fuel in their cargo / liquid mud tanks to Puerto Rico for aid relief . . . If the vessels were to carry diesel fuel from Port Fourchon, LA to San Juan, PR this would be outside the scope of their COI and would require them to be inspected as tank ships. We would like to request a waiver to allow them to bring diesel fuel carried in their cargo tanks to the island while acting as an OSV in accordance with their current COI.

Tr. Ex. 9; Tr. at 168 ll. 13-25, 169 ll. 1-20.

         24. In response to Pat Flood's email, Lt. Jennifer Proctor of the USCG acknowledged receipt of the waiver request. Specifically, she wrote that “[d]ue to the surge in requests, we will get back to you on what the Coast Guard intends to do regarding Waivers for your vessels.” Tr. Ex. 126; Tr. at 172 ll. 18-24.

         25. Pat Flood then replied to Lt. Proctor asking her if she had a timeframe on when to expect an answer to the waiver request. Tr. Ex. 129; Tr. at 173 ll. 1-5.

         26. The next day, on September 30, 2017, Pat Flood again asked Lt. Proctor if there was any update on his waiver request. Tr. Ex. 130; Tr. at 173 ll. 13-21.

         27. Meanwhile, on September 29, 2017, Jim Goff sent an email to Dane Vizier and Dino Chouest following up on a conversation that Jim Goff and Dane Vizier had the previous day regarding “a substitute for the Alyssa that had more fuel capacity.” Tr. Ex. 17; Tr. at 43 ll. 14-19; Tr. at 104 ll. 24-25, 105 ll. 1-8; see Tr. at 268 ll. 22-25, 269 ll. 1-8; Tr. at 293 ll. 10-23.

         28. In the same email, Jim Goff also mentioned that the Coast Guard had informed USA Comserv that the “certificate for the vessel only allows it to operate in the Gulf and a waiver would have to be obtained” and while he did not know if the waiver would be difficult to obtain, he guessed “it needs to be obtained if [USA Comserv] stay[ed] with the Alyssa.” Tr. Ex. 17; see Tr. at 110 ll. 11-23; see Tr. at 292 ll. 14-24.

         29. Also on September 29, 2017, Tracee Cloutier sent an email on behalf of Edison Chouest Offshore to Matthew Van Hoesen of USA Comserv stating that “the vessel will be changing to the CAROL CHOUEST to meet your company's need for more capacity.” Tr. Ex. 7 at 1; Tr. at 490 ll. 19-25; see Tr. at 269 ll. 9-14.

         30. The Charter was thus executed by and between Reel Pipe and USA Comserv for the CAROL on September 29, 2017. Tr. Ex. 10 at 1.

         31. Although the Charter does not specifically identify what cargo is being transported, it does specifically reference the option to carry fuel as cargo in Section 2d and mentions that the Charterer is limited to using the Vessel for “lawful movement of supplies, equipment and other materials incidental to its operations” in Section 10a. Tr. Ex. 10 at 1, 3.

         32. On the same date as the Charter's execution date, September 29, 2017, Jim Goff inquired about the status of the liquid mud tanks. Dane Vizier responded that he was “[a]waiting ABS decision on the mud tanks.” Tr. Ex. 8 at 1; Tr. at 108 ll. 9-21; Tr. at 299 ll. 24-25, 300 ll. 1-4.

         33. The next day, on October 1, 2017, Jim Goff and Eric Pogoda sent emails to clients stating that USA Comserv would have 200, 000 gallons of diesel fuel available for purchase in Puerto Rico. Tr. Ex. 65 at 1; Tr. Ex. 66 at 1-2; see Tr. at 301-02.

         34. On October 2, 2017, the CAROL went on hire to USA Comserv. Tr. Ex. 117.

         35. Pursuant to the Charter's requirement that all “fuel carried aboard the Vessel as cargo be paid in full by CHARTERER at the point of sale, ” Tr. Ex. 10 at 1, USA Comserv purchased 220, 000 gallons of diesel fuel from a Chouest affiliate on October 2, 2017, Tr. Ex. 122 at 3, and 49, 750 gallons of diesel fuel on October 3, 2017, Tr. Ex. 123 at 3. See Tr. at 115 l. 25, 116 ll. 1-6.

         36. The total cost of the invoices was $510, 097.25, from which Reel Pipe deducted USA Comserv's $115, 000 pre-payment for fuel. Tr. Ex. 122; Tr. Ex. 123.

         37. On October 3, 2017, Pat Flood sent a follow-up email to Patrick Grizzle of the USCG asking for an update on Reel Pipe's request for a waiver for the CAROL. Tr. Ex. 136 at 1; Tr. at 173 ll. 22-25, 174 ll. 1-7.

         38. That same day, USA Comserv sent an email to U.S. Senator Bill Nelson's office to request assistance with access to Puerto Rico for the vessels being chartered. Tr. Ex. 67 at 1.

         39. On October 4, 2017, meanwhile, Pat Flood sent an email to Pat Grizzle at the USCG to ask: “How likely is it for us to be able to get some type of exemption or amendment to carry fuel in our mud tanks to PR? . . . Right now we are only looking at the Carol Chouest but my [sic] add more vessels depending on the time frame to get approved.” Tr. Ex. 14; Tr. at 174 ll. 19-22, 175 ll. 8-11.

         40. In a separate email exchange, Dane Vizier sent an email on October 6, 2017 informing the Coast Guard that “[t]he Carol is currently loading at Tampa Shipyard in Tampa Florida. She will be sailing from Tampa to Puerto Rico on multiple trips with relief supplies and Diesel Fuel to supply Generators for electrical facilities.” Tr. Ex. 162 at 1.

         41. On the same day, Lt. Proctor sent an email to vessel operators, as well as Jim Goff and Ken Goff of USA Comserv, advising that:

Vessels seeking to transit to Puerto Rico/USVI must be certificated for international voyages with the appropriate manning as specified on the vessel's Certificate of Inspection (COI), hold the appropriate international certificates, and be multi-certificated as a freight vessel (subchapter ā€œIā€) in order to carry cargo and transit to Puerto Rico/USVI. Vessels are expected to operate within ...

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