United States District Court, D. Maryland
CATHERINE C. BLAKE, District Judge.
Great Lakes Dredge & Dock Co., LLC ("Great Lakes"), seeks exoneration or limitation of liability under 45 U.S.C. § 30505 for claims arising out of its dredging of the Martin Peña canal in San Juan, Puerto Rico. The Puerto Rico Electric Power Authority ("PREPA") has filed such a claim. It now moves under Supplemental Admiralty Rule F(7) to increase the security that Great Lakes previously deposited with the court. That motion has been fully briefed, and no hearing is necessary to its resolution. See Local Rule 105.6 (D. Md. 2014). For the reasons explained below, it will be granted.
In late June 2010, the United States Army Corps of Engineers ("Corps") hired Dragados USA ("Dragados") to complete a project in San Juan, known as the "Rio Puerto Nuevo Flood Control Project Margarita Channel Improvements and Miscellaneous Features." ( See Mot. Increase Security Ex. B, Mendoza Decl. ¶ 4, ECF No. 25-4.) Dragados, in turn, hired Great Lakes to complete some of the dredging work Dragados had contracted to perform. ( See id. at ¶ 5; see also Mot. Increase Security Ex. B, Mendoza Decl. Ex. 2, Great Lakes Subcontract Art. XXXVI & Ex. C, Subcontract Scope, ECF No. 25-5.) The subcontract between Dragados and Great Lakes incorporated by reference the contract between Dragados and the Corps, which was described as the "Contract Documents." ( See Great Lakes Subcontract Art. 1.2.) In that subcontract, Great Lakes "agree[d] to be bound to [Dragados] by all items of agreement between [Dragados] and the [Corps] in the Contract Documents and to assume towards [Dragados] all obligations and responsibilities that [Dragados] by those instruments assumes toward the [Corps]." ( See id. ) To perform the subcontract, Great Lakes used its Dredge 51, as well as several other vessels. ( See Mendoza Decl. ¶ 6; see also Mendoza Decl. Ex. 3, Quality Control Report 6/29/2011, ECF No. 25-6.) The subcontract provided a separate line-item price for mobilization and demobilization, dredging, turbidity monitoring, and debris removal for dredging. ( See Great Lakes Subcontract Ex. C.)
On June 29, 2011, Great Lakes completed a quality control report that indicated it had "dug up underwater cables in A/S #2 on two separate occasions-delaying dredging each time." (Quality Control Report 6/29/30 at 2.) On that day, explained a subsequent report,
the dredge encountered a power cable in A/S #2. The dredge commenced to pull on the cable with the bucket in an attempt to dislodge it from the dig area. The cable proved to be extensively long (the total length remains unknown), and attempts to remove it were abandoned. Later in the day the dredge encountered another cable in A/S #2. Instead of pulling on the cable, the dredge moved to another dig area and resumed operations.
(Opp. Mot. Increase Security Ex. 1C, Quality Control Report 6/30/2011 at 2, ECF NO. 32-4.) A chain of emails sent the next day suggests that Great Lakes discussed the matter with Dragados and the Corps. ( See Opp. Mot. Increase Security Ex. 1A, Email Chain, ECF No. 32-2.) The parties agreed that Great Lakes would remove the cables and place them on the shore for Dragados to pick up at a later date. ( See Email Chain, Email from Elizondo to Rodriguez 6/30/2011.) They treated the matter as "a differing site condition" or "modification, " for which the Corps agreed to pay a stated hourly rate greater than the contractual line-item price for dredging or removal. (Email Chain, Email from Rodriguez to Elizondo 6/30/2011.) Great Lakes removed the cable, as well as other obstructions, on June 30, 2011. ( See Quality Control Report 6/30/2011 at 2.)
PREPA alleges that it owns the cable that Great Lakes allegedly damaged and removed. ( See PREPA Claim ¶¶ 6, 15-17, ECF No. 14.) Specifically, PREPA owns and operates a 115 kV underground power line, known as the "Lazo Metropolitano Line 38000, " in San Juan. ( See Mot. Increase Security Ex. A, Perez Decl. ¶ 5.) A section of that line runs underwater through the Martin Peña canal, pursuant to a permit granted by the Corps. ( See id. at ¶ 6-8.) In 2011, the Lazo Metropolitano served "as an emergency line should the need [for it] arise or should expansion to the power grid in Puerto Rico be required." ( Id. at ¶ 11.) That need arose in 2013, when a power failure prompted PREPA to attempt to use the line. ( See id. at ¶ 15.) Upon inspection, however, PREPA discovered that the Lazo Metropolitano had been removed and related equipment damaged. ( See id. at ¶ 16.) PREPA traced that loss to Great Lakes' dredging of the Martin Peña canal, ( see id. at ¶ 20), and informed Great Lakes of its claim in late October 2013, ( see Compl. ¶ 8, ECF No. 1).
In late April 2014, Great Lakes filed this action, seeking exoneration or limitation of liability. ( See id. ) Great Lakes estimated that the maximum value of its Dredge 51 on June 29, 2011, was $4, 775, 000.00. ( See id. at ¶ 13.) That estimate was premised on the "experience and knowledge" of Great Lakes' senior vice president of mechanical engineering, Steven Becker. ( See Compl. Ex. A, Becker Decl. ¶ 4.) And it estimated that the maximum value of the freight pending at the time of the incident amounted to $23, 080.00. ( See Compl. ¶ 13.) That estimate was based on Great Lakes' assertion that, at the time of the accident, it "was operating under an agreement to remove existing underwater obstructions/debris in the Martin Pena Canal, " at a specified hourly rate for a maximum of eight hours of work. ( See Compl. Ex. B, Zimmerman Decl. ¶ 2.)
Consistent with Great Lakes' estimate of the combined value of the vessel and pending freight, it filed alongside its complaint a motion for the court to accept security in the form of three letters of undertaking, worth a total of $4, 798, 080.00. ( See Mot. to Accept Ad Interim Stipulations for Value, ECF No. 2.) The court approved that security. ( See Order, ECF No. 3.)
PREPA subsequently filed its claim. ( See PREPA Claim, ECF No. 14.) This motion followed.
The Limitation Act, see 45 U.S.C. §§ 30501-30512, "allows a vessel owner to limit liability for damage or injury, occasioned without the owner's privity or knowledge, to the value of the vessel or the owner's interest in the vessel." Lewis v. Lewis & Clark Marine, Inc., 531 U.S. 438, 446 (2001). By capping damages, the Act seeks "to encourage ship-building and to induce capitalists to invest money in this branch of industry." Id. (quoting Norwich & N.Y. Transp. Co. v. Wright, 80 U.S. (13 Wall.) 104, 121 (1871)). Specifically, the Act limits an eligible owner's liability to "the value of the vessel and pending freight, " 46 U.S.C. § 30505(a), and authorizes such an owner to initiate an action for limitation in federal court upon notice of a claim against the owner, see 46 U.S.C. § 30511(a). "In limitation proceedings, the vessel owner is thus interested in setting a low value for its vessel [and pending freight], while the claimants seek a high value." In re N. Am. Trailing Co., 763 F.Supp. 152, 154 (E.D. Va. 1991). The burden of proof lies with the party seeking to limit its liability. See, e.g., In re W.E. Hedger Co., 59 F.2d 982, 983 (2d Cir. 1932).
Where, as here, an owner seeks to limit its liability, it must deposit funds or security with the court equal to the value of the vessel and pending freight, or transfer such assets to a court-appointed trustee. See 46 U.S.C. § 30511(b); Supp. Admiralty Rule F(1). A claimant, in turn, may move to increase that security "on the ground that [it is] less than the value ...