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GATEWAY WESTERN RY. CO. v. AMERICAN RIVER TRANSP. CO.

May 24, 1995

GATEWAY WESTERN RAILWAY COMPANY, PLAINTIFF,
v.
AMERICAN RIVER TRANSPORTATION COMPANY, AND M/V JOYCE HALE IN REM, AND JOHN RONNIE FRIDELL AND CURTIS WHITEHEAD, DEFENDANTS.



The opinion of the court was delivered by: Richard Mills, District Judge:

OPINION

Admiralty.

A question of lost profits.

On the morning of April 19, 1992, the tow of the M/V JOYCE HALE collided with a railroad bridge spanning the Mississippi River. The Plaintiff owns the bridge and the Defendants own and operate the vessel. The narrow issue before the Court is whether as a matter of law recovery for lost profits is limited to the period in which the bridge was out of service for repairs.

Defendants maintain that under maritime law lost profits are limited to the period the bridge was out of commission being repaired — approximately two months. Conversely, Plaintiff contends that all lost profits proximately caused by the collision, including lost profits after the bridge was fixed, are recoverable. Both sides cite authority for their respective positions.

I. Applicable Law

Because the damage to the bridge was allegedly caused by a vessel on a navigable water, the Court has maritime jurisdiction. 46 U.S.C.App. § 740.*fn1 When jurisdiction is based in admiralty, substantive admiralty law applies. East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 864, 106 S.Ct. 2295, 2298, 90 L.Ed.2d 865 (1986). According to the Supreme Court, substantive admiralty law is "an amalgam of traditional common law rules." Id.

The "amalgam" of admiralty rules must be applied with due consideration of the underlying purpose of maritime jurisdiction. As explained by Justice Story over a century-and-a-half ago:

  A court of admiralty is, as to all matters falling
  within its jurisdiction, a court of equity. Its hands
  are not tied up by the rigid and technical rules of
  the common law, but it administers justice upon the
  large and liberal principles of courts which exercise
  general equity jurisdiction.

The David Pratt, 7 Fed.Cas. 22, 24 (D.C.Me. 1839) (No. 3597), quoted in Pizani v. M/V Cotton Blossom, 669 F.2d 1084, 1089 (5th Cir. 1982). In other words, a court sitting in admiralty is "privileged to exercise flexibility and award what is fair." Complaint of Valley Towing Service, 629 F. Supp. 139, 147 (E.D.Mo. 1985).

In admiralty, the maxim for computing damages in a collision case is restitutio in integrum or restoration to the previous condition. The Baltimore, 75 U.S. (8 Wall) 377, 385, 19 L.Ed. 463 (1869). In the case of two vessels colliding, if a vessel is a total loss, the standard measure of damages is the market value of the ship plus interest and freight pending her salvage value. THOMAS J. SCHOENBAUM, ADMIRALTY AND MARITIME LAW, § 13-5 (1987).

If the damaged vessel is not a total loss, the owner is entitled to the cost of repairs, salvage expenses, out of pocket expenses and detention damages. Id. Detention damage — sometimes called loss of use damage — is the amount of profit lost during the period of detention. Id.

Detention damage is traditionally calculated using the three voyage rule. Kim Crest, S.A. v. M.V. Sverdlovsk, 753 F. Supp. 642, 650 (S.D.Tex. 1990). Pursuant to the three voyage rule, detention damage is computed by determining the charter rate for the voyage immediately preceding the collision, the charter rate during the collision, and the charter rate of the first voyage succeeding the casualty and averaging them. The average is then applied to all charters lost during the detention. Id.

When a vessel negligently strikes a shore structure or other fixed object, detention damage is also recoverable. See e.g., Crown Zellerbach Corp. v. Willamette-Western Corp., 519 F.2d 1327 (9th Cir. 1975). How detention damage is calculated in such a situation, however, varies. Compare Continental Oil Co. v. S.S. Electra, 431 F.2d 391 (5th Cir. 1970), cert. denied, 401 U.S. 937, 91 S.Ct. 925, 27 L.Ed.2d 216 (1971) (allowing oil company to recover for lost profits on 130 days worth of production) with Bolivar County Gravel Co. v. Thomas ...


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