Recently, the US Fifth Circuit Court of Appeals decided an issue of first impression as to what constitutes a "prevailing party" in the context of a maritime contract dispute. The issue had not been decided by the US Supreme Court or the Fifth Circuit. The opinion does not mention whether other circuit courts had considered the issue.
The case, decided February 26, 2020, is Genesis Marine LLC v. Hornbeck Offshore Services LLC, No. 19-30313, 2020 U.S. App. LEXIS 5833 (5th Cir. 2020).
Facts of the Case
Genesis Marine had a number of contracts with Hornbeck Offshore Services (HOS) related to crew management, ship management, and "back-to-back" time charters HOS had with Anadarko. Genesis sought to terminate the ship management contracts, and a dispute arose over the propriety of such termination.
Genesis sued HOS, alleging breach of contract for monies owed Genesis on the unpaid balance on an Anadarko charter hire of about $722,000. HOS asserted affirmative defenses of setoff and accord and satisfaction for fuel, lube, and shore-based services of about $117,000. HOS also counterclaimed for $3 million for unpaid ship management fees.1
After a bench trial, the district court issued a judgment for Genesis for the $722,000 on the unpaid charter hire and also awarded $117,000 to HOS for fuel, lube, and shore services. Both Genesis and HOS asked for attorneys' fees as a "prevailing party." The district court denied fees to both parties on the basis of the following.
(1) [F]ees were not authorized by the [ship management] agreement, which controlled the litigation, and, in the alternative, (2) both Genesis and Hornbeck were prevailing parties, thus nullifying any award.
Appellate Court Decision
On appeal, the Fifth Circuit noted the general rule in admiralty is that attorneys' fees are not recoverable by the prevailing party, "but parties are entitled to contract for attorney's fees in the event of a dispute. [Citation omitted.] This appeal asks us, for the first time, to determine what constitutes a 'prevailing party' in the context of a maritime contract dispute."
Although there was no maritime law precedent, the court explained that it has decided what constitutes a "prevailing party" in a nonmaritime context and, without explanation, cited a case under Civil Rights statute, 42 U.S.C. § 1988, that a "plaintiff 'prevails' when actual relief on the merits of his claim materially alters the legal relationship between the parties by modifying the defendant's behavior in a way that directly benefits the plaintiff."
This understanding of "prevailing party" in the § 1988 context guides our decision here. We see no reason to apply a different definition in the maritime context. We therefore adopt the same definition of "prevailing party" here as in the § 1988 context.
The court then ruled that both Genesis and HOS "prevailed" because the district court's judgment forces each party to pay the other the monetary amounts each would not otherwise have paid to the other. Consequently, there were two prevailing parties. "And, given that fact, the district court was entitled in its discretion to make an assessment as to the reasonableness of awarding fees to both parties or, conversely, neither."
The district court here concluded that, because both parties prevailed, neither should be awarded attorney's fees. It did not abuse its considerable discretion in so deciding. Because we affirm on this basis, we do not consider the district court's alternative rationale that the [ship management] agreements did not authorize fees. [Footnote omitted.]
It is refreshing to see such a common-sense approach to a situation in which the court of appeals had no prior controlling precedent in maritime law, even though it is a bit unusual to see the use of precedent from such a dissonant federal statute. The district court, having made the decision not to award fees to either party, also seems a sensible ruling. It was a good day for the federal courts applying maritime law fairly!
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1 The opinion makes no mention of the disposition of HOS's counterclaim for $3 million.