Hornbeck Offshore Operators, LLC v. Cross Group, Inc.

207 So. 3d 1141, 2016 La.App. 1 Cir. 0174, 2016 La. App. LEXIS 1996
CourtLouisiana Court of Appeal
DecidedOctober 31, 2016
DocketNO. 2016 CA 0174
StatusPublished
Cited by9 cases

This text of 207 So. 3d 1141 (Hornbeck Offshore Operators, LLC v. Cross Group, Inc.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hornbeck Offshore Operators, LLC v. Cross Group, Inc., 207 So. 3d 1141, 2016 La.App. 1 Cir. 0174, 2016 La. App. LEXIS 1996 (La. Ct. App. 2016).

Opinion

HIGGINBOTHAM, J.

| ¿This appeal concerns a dispute involving the commercial lease of a large base-mounted winch that was intended for use aboard a vessel in the Gulf of Mexico. After a two-day bench trial, the district court found that the winch was suitable for the purpose of the lease, and awarded damages pursuant to the defendant’s re-conventional demand for rental payments, attorney fees, costs, and interest.

BACKGROUND

The plaintiff, Hornbeck Offshore Operators, LLC (“Hornbeck”), owns and operates a fleet of vessels that provide offshore services in the Gulf of Mexico. As part of the cleanup and remediation efforts related to the tragic Macondo/Deepwater Horizon oil spill incident in 2010, Hornbeck contracted with BP Exploration and Production, Inc. (“BP”) to charter a vessel that was capable of lifting 130-ton suction pilings/anchors that were embedded in the muddy gulf seabed. To fulfill the BP charter, Hornbeck leased a Mitsubishi Model 147 single drum winch (“the winch”) from the defendant, Cross Rentals, Inc. (“Cross”), a rental business that supplied winches and other heavy equipment for offshore vessels and platforms.1 The winch was capable of lifting loads weighing up to 300 tons and was to be installed on one of Hornbeck’s vessels, the M/V HOS IRON HORSE (“the vessel”). Representatives for Hornbeck and Cross entered into a Master Service Agreement (“MSA”) on September 8, 2010. The MSA governed each parties’ obligations. Additionally, Hornbeck issued a work order directed to Cross on September 14, 2010. The work order incorporated all of the terms of the MSA and specifically defined the parties’ understanding of the lease details for the winch, a control station, a floating sheave, and two winch operators. Pursuant to the work order, rent began to accrue when the lawinch left Cross’s equipment yard, and continued to accrue on a daily basis until the winch was returned to Cross’s yard.

Before the winch was transported from Cross’s equipment yard to Hornbeck’s vessel that was docked at Port Fourchon, Louisiana, the winch passed a visual inspection by Hornbeck’s representative, Robert Schenkenberg, and a function test supervised by Cross’s project manager, Michael Dean Hall. On September 8, 2010, Cross arranged for the winch to be transported from its yard to Hornbeck’s vessel. The vessel had been specifically modified at Hornbeck’s expense to accommodate the installation of the winch. Hornbeck accepted delivery of the winch and proceeded to install it on the prepared vessel.

At some point shortly after the winch was delivered and installed on the vessel, Hornbeck hired a third-party inspector, Northshore Crane & Equipment, Inc. (“Northshore Crane”), to inspect and function test the winch. Northshore Crane’s visual inspection revealed several cracks in [1145]*1145the winch’s seal welds, which are basically cap welds that are designed to keep moisture and debris out of the winch and to prevent corrosion. While Cross maintained that the seal weld cracks were purely a cosmetic issue and bore absolutely no significance concerning the winch’s structural integrity, performance, or safety, Cross agreed to hire a welding company as a courtesy to Hornbeck in order to repair the cracks as Hornbeck requested.

Following the repair of the cracked seal welds, Hornbeck transmitted BP’s mandate to Cross that the winch be tested and certified using the American Society of Mechanical Engineers (“ASME”) B30.7 Standard. Prior to September 19, 2010, Hornbeck had not specifically mentioned and Cross had never certified any of its winches to ASME standards. However, Cross agreed to work with Hornbeck to develop and implement a process for performing an offshore load test aboard the vessel so that the winch could be certified according to Hornbeck’s charter with BP. Cross’s expert engineer, Laird A. Willis, reviewed and approved the certification [.¡process, and pursuant to BP’s recommendation, Hornbeck identified Standard Crane & Hoist, L.L.C. (“Standard Crane”) as an independent third-party ASME inspector.

Standard Crane sent Robert Lee Radcliffe to oversee the ASME certification process for the winch. The certification process included a load test to be performed onboard the vessel while it was offshore in the gulf. During the load test, the winch successfully lifted a 210-ton load, which was well above the 130-ton weight of the suction piling/anchors that needed to be lifted pursuant to the BP charter. Mr. Radcliffe declared that the winch had passed the certification and the vessel was returned to the dock. Mr. Radcliffe left the vessel after the load test, even though the certification procedure called for a second step that involved the unspooling of wire from the- winch for another visual inspection.

After the winch’s wire was unspooled, more cracks in the seal welds were discovered. Hornbeck promptly requested that Cross repair the second set of cracks. Cross declined to make the repairs, again maintaining that the seal weld cracks were cosmetic in nature and non-structural, that the cracks did not affect the safe operation of the winch, that operation of the winch was safe even without seal welds, and that the cracks in the seal welds would continue to repeat after each load test due to the natural flexing design of the winch when it was loaded.

Mr. Radcliffe was summoned back to the vessel, where he participated in a meeting with a representative from BP, Hornbeck, and InterMoor, a contractor that was responsible for rigging/lifting operations on the vessel. No Cross representative was invited to the meeting, even though Mr. Hall was present on the vessel and had observed the entire testing/certification process. After the meeting, Mr. Radcliffe abruptly disqualified the winch and left the vessel. Standard Crane, through Mr. Radcliffe, later issued a report stating that the winch had failed the load test certification process and was tagged “unsafe for operation.” When Cross continued to refuse to repair the second set of seal weld cracks, Hornbeck rejected the winch |fias defective and demanded that it be removed from the vessel. The winch was transported back to Cross’s equipment yard on October 5, 2010, effectively terminating the MSA and related work order.

On January 25, 2011, Hornbeck filed a petition against Cross, seeking $282,214.20 for damages related to expenses it incurred due to Cross’s alleged breach of the MSA and work order. Cross filed a recon-ventional demand against Hornbeck, seek[1146]*1146ing to collect all of the past-due daily-rental payments totaling $260,592.08 for Hornbeck’s lease of the winch from September 8, 2010, through October 5, 2010, as well as attorney fees and costs. During a two-day bench trial in February 2015, the district court admitted many exhibits and heard testimony from representatives of Hornbeck and Cross, as well as Cross’s engineer, Mr. Willis, who was tendered and accepted as an expert in mechanical engineering with a specialization in large, base-mounted winches. No one, including Mr. Radcliffe, from Standard Crane testified at trial regarding the circumstances surrounding Mr. Radcliffe’s rejection of the winch’s certification or the issuance of the Standard Crane report that ultimately tagged the winch as unsafe for operation.

After taking the matter under advisement, the district court issued reasons for judgment on April 28, 2015, finding that Cross, not Hornbeck, had carried its burden of proof regarding a breach of contract.

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207 So. 3d 1141, 2016 La.App. 1 Cir. 0174, 2016 La. App. LEXIS 1996, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hornbeck-offshore-operators-llc-v-cross-group-inc-lactapp-2016.