IN RE TT BOAT CORPORATION, (E.D.La. 1999)

STANWOOD R. DUVAL, United States District Judge.

Before the court is the motion of Island Operating to set the value of the litigious rights which Tidewater acquired from Global in their settlement agreement dated April 16, 1999. Pursuant to that settlement agreement, Global assigned to Tidewater all of its claims against Island. Under the terms of the April 16, 1999 agreement, however, the value of the assignment was unliquidated. Island has requested that the court set such value in order that Island might exercise its option to redeem those rights from Tidewater pursuant to Louisiana Civil Code article 2652.

Both parties have suggested methods of valuing the assigned rights. Both Tidewater and Island have submitted written briefs. In addition, Tidewater has submitted to the court, for its in camera inspection, a letter containing its retrospective valuation of the assigned rights. George Gilly, counsel for Global at the time of the settlement, acquiesced in Tidewater's valuation. The letter was submitted in camera as some of the information discussed in the letter relates to evaluations, perceptions of liability, and other legal strategy which would be unduly prejudicial to Tidewater if made available to its opponents in this litigation. Island offered the expert opinion of the esteemed Saul Litvinoff on the valuation of litigious rights. Finally, a sealed hearing was conducted on September 7, 1999, and the court heard the testimony of two witnesses, George Gilly and Steven Roberts, counsel for the Walter Oil Gas claimants.

At the hearing, Gilly testified as to Global's perceptions at the time of its settlement with Tidewater, and Roberts testified as to Walter's perception of its unrelated settlement with Tidewater. The thrust of Gilly's testimony was that Tidewater initially offered sixty percent of the damages to the Cherokee, but ultimately Tidewater agreed to ninety percent, with Global assigning its rights against Island to Tidewater. The thrust of Roberts' testimony was that Walter settled with Tidewater for seventy-five percent of its property damage. He discounted the claim twenty-five percent — ten percent of that related to Tidewater's potential ability to limit and fifteen percent to Island's potential negligence. Walter did not assign its rights against Island and Roberts admitted Walter had no claim against Island by virtue of a contractual provision.

Counsel for both Tidewater and Global assert that they had reached a settlement prior to March 27, 1999. Both Tidewater and Global maintain that their original agreement was unaffected by the court's April 14 ruling on Tidewater's inability to limit its liability. The settlement agreement, memorialized in the letter dated April 16, 1999, reads in pertinent part:

A. Global agrees that it will:

1. Release Tidewater and the M/V GULF CAJUN from all liability for damages of any types or nature arising out of or relating to the allision on February 16, 1998 with the Walter platform, including but without limitation damages to the Barge CHEROKEE, damages to the KINGFISH, loss of use of those or any other vessels, and any other consequential damages suffered or sustained by Global or any of its related or subsidiary companies.

2. Assign to Tidewater an interest in all of its claims for damages of any kind arising out of or relating to the aforesaid allision with the Walter platform, including particularly but without limitation, those damages set forth in Global's Claim filed against Tidewater in this proceeding.

3. Assign to Tidewater the sole right to prosecute said claims in Global's name and to compromise, settle or otherwise adjust and conclude said claims for a sum and on such terms and conditions as Tidewater in its sole discretion shall determine is appropriate.

5. Agree that any recovery by way of settlement or otherwise from the claims prosecuted as set forth in the preceding subsections shall be paid as follows:

(a) All costs and attorneys fees incurred in prosecuting the above-described claims shall first be satisfied;

(b) Reimbursement in full of the amounts expended by Tidewater pursuant to paragraph B(1) below shall be paid to Tidewater;

(c) Any amounts in excess of those described in subparagraphs (a) and (b) shall be paid to Global . . .

B. In consideration for the foregoing released ans assignment by Global, Tidewater agrees that it will:

1. Pay a sum to Global equal to 90% of the legally recoverable CHEROKEE physical damages and related repair expenses such as towage, drydock, survey and similar incidental repair expenses resulting from the allision on February 16, 1998. However, as reflected by Paragraph 17 of the Master Time Charter Agreement between the parties, the sum referred to in this paragraph shall not include indirect, special or consequential damages, including but without limitation, loss of use, loss of profit or business interruption of any kind at anytime.

2. Prospectively defend, indemnify and hold harmless Global and the CHEROKEE for liability to the personal injury claimants, including the pending suits in state court against Global employees.

3. As of March 27, 1999, assume liability for any prospective maintenance and cure obligations of Global to personal injury claimants which are incurred subsequent to march 26, 1999.

4. Reimburse reasonable out-of-pocket expenses (such as mileage, travel, etc.) incurred by Global employees or other Global personnel whose presence is requested by Tidewater in connection with the litigation.

2. The Court's Method of Evaluating the Value of the Assigned Rights

Under the terms of the Tidewater-Global settlement agreement, Tidewater received both an assignment of Global's rights against Island and Global's release of it's claims against Tidewater. In exchange, Tidewater agreed to pay to Global 90% of the provable damages to the CHEROKEE and to indemnify Global for liability to personal injury claimants, among other things. In essence, Tidewater purchased Global's claims against Island. However, the settlement agreement recited no price for the assignment.

So that Island may exercise its option to redeem the rights assigned to Tidewater, the court must apportion the price paid by Tidewater. In several instances, under Louisiana's law of contracts, the court is called upon to fix a price. For example, the Louisiana Civil Code contemplates that it is the court's responsibility to determine the reasonable price in a contract of sale when the parties have left its determination to a third person who is unable to do so. La.Civ. Code article 2465. Additionally, in Slocum-Stevens Ins. v. International, 666 So.2d 352 (La.App. 2nd Cir. 1995), the Second Circuit concluded that when a litigious right is transferred together with a non-litigious right for a lump sum, an apportionment of the price must be made in order to determine the part paid for the litigious right.

Island expressed some concern as to the timing of fixing the value of the rights assigned, as Tidewater has settled with some of the personal injury claimants and taken assignments from them. According to Professor Litvinoff, the court should value the rights assigned as of the date of the assignment, in essence, the "original price," and the value of the assigned rights was unaffected by subsequent settlements of Tidewater and certain personal injury claimants. The court agrees with Professor Litvinoff.

Therefore, to determine the value of the rights assigned to Tidewater, the court will engage in a "reasonable person" analysis. That is, prior to March 27, when the settlement agreement was reached, what would reasonable parties have agreed was the value paid by Tidewater for the claims of Global against Island? The total reasonably estimated value that Tidewater paid to Global minus the reasonable value of Global's release of Tidewater equals the value of the assignment. The Court does not make this analysis in a vacuum. The Court has been intimately involved with all aspects of this complex limitation proceeding as the result of numerous motions, a bifurcated trial to determine Tidewater's ability to limit, and multiple conferences.

3. The Total Value Paid by Tidewater Under the Terms of the Agreement, as Perceived by the Parties at the Time of Settlement

The first issue to be addressed by the court is what reasonable parties would have believed was the total amount of legally recoverable physical damages to the CHEROKEE. To fix the redemption value, the Court must ascertain the parties' intentions at the time of the settlement agreement. Based on material submitted for the court's in camera review and the briefs of the parties, the court concludes that on March 27, 1999, the reasonable fixed value of provable loss to the CHEROKEE damages totals $2,778,932. Tidewater agreed to pay ninety percent of the provable loss to the CHEROKEE, that is, $2,500,103.

Next, the court must value Tidewater's indemnification of Global for the personal injury claims. The court finds that, as of March 27, 1999, the reasonably anticipated value of all personal injury claims which might have been asserted against Global was $2,200,000. Tidewater and Global could reasonably have believed that Global's portion of the exposure to personal injury claimants was forty percent of $2,200,000, or $880,000. At the time of the settlement, the parties knew the number of personal injury claimants and generally the potential exposure to the respective claims. However, discovery as to the extent of the injuries was not extensive at that time.

Furthermore, Tidewater implicitly agreed to bear the costs associated with the personal injury claims. If Global had to defend itself against the claims of the personal injury claimants, it would have incurred substantial defense costs, including the trial of this multi-claimant case. The sum of $150,000 is a reasonable value to Global in view of the circumstances involved in this case.

Additionally, Tidewater purchased Global's claims against Island for loss of use of the Cherokee and damages to the KINGFISH. The KINGFISH was another drilling barge which was in distress and was the impetus for the voyage which ended in the allision. However, pursuant to the agreement, Global will receive all damages recovered in excess of Tidewater's payments and costs incurred as a result of the agreement. The right to pursue Global's claims against Island relating to the loss of use of the CHEROKEE and damage to the KINGFISH were apparently of minimal value to Global. One of Global's experts, Guy Clark, had opined in an expert opinion submitted to the Court that Island's failure to sound the foghorn was not causally related to the allision. Perhaps Tidewater placed a greater value on these assignment rights, but an estimate of $100,000 in payment for these claims is more than reasonable considering the circumstances at the time the settlement was completed.

In addition to its agreement to indemnify Global for the personal injury claims, Tidewater agreed to pay Global's prospective maintenance and cure and reimburse Global's out-of-pocket expenses. On March 27, 1999, it would have been reasonable to anticipate that Global would owe $100,000 in prospective maintenance and cure and that Global would spend $10,000 in out-of-pocket expenses in assisting in this litigation.

By adding these figures, we arrive at the reasonable value of Tidewater's compromise, or $3,740,103.

Global released its claims against Tidewater for the physical damage and loss of use of the CHEROKEE. As of March 27, 1999, the reasonable value of those claims was $2,084,199. This is computed by taking seventy-five percent of the $2,778,932.00 sum. In addition, Global released its claims against Tidewater for the physical damage and loss of use of the KINGFISH, as well as loss of use of the Cherokee. Tidewater could have reasonably estimated its exposure for these claims to be $500,000. Hence, the total value of Global's release of Tidewater was $2,584,199.

By subtracting the value of Global's release ($2,584,199) from the total amount paid by Tidewater ($3,740,103), we are left with the value of the assigned rights, or $1,115,904. Accordingly,

IT IS ORDERED that Island must state its intention to redeem the rights assigned to Tidewater for $1,115,904 within 24 hours of issuance of this ruling.

IT IS FURTHER ORDERED that if Island so states its intention to redeem the rights assigned to Tidewater, payment is due within 30 days.

New Orleans, Louisiana, this 8th day of September, 1999.