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FSS, Inc v. W-Class Yacht Company, LLC

United States District Court, D. Maine

February 20, 2018

FSS, INC., d/b/a FRONT STREET SHIPYARD, Plaintiff,
v.
W-CLASS YACHT COMPANY, LLC and W-US-1, LLC, Defendants.

          FINDINGS OF FACT AND CONCLUSIONS OF LAW

          GEORGE Z. SINGAL, UNITED STATES DISTRICT JUDGE.

         The Court conducted a five-day bench trial in this admiralty action from August 8-14, 2017, at which it received witness testimony and documentary evidence. The bench trial transcript was filed on October 5 and 6, 2017 (ECF Nos. 95-98, 100).[1] The parties submitted proposed findings of fact and conclusions of law on November 6, 2017 (ECF Nos. 103 & 104) and responses to the proposed findings of fact and conclusions of law on November 27, 2017 (ECF Nos. 110 & 111). In accordance with Federal Rule of Civil Procedure 52, the Court has reviewed all of the evidence presented and now FINDS for Plaintiff. Specifically, the Court makes the following findings of fact and conclusions of law.

         I. FINDINGS OF FACT[2]

Parties and Vessels

         1. W-Class Yacht Company, LLC (“W-Class”) is a Delaware limited liability company in the business of building, marketing, and selling vessels ranging from 22 to 135 feet. Donald Tofias is W-Class's managing member and president. Tofias is generally known as a conscientious and fastidious yacht owner who often has people working on his vessels.

         2. W-Class has maintained its principal office at Newport Shipyard in Newport, Rhode Island, for at least the past fifteen years and has used that yard's services to do repair, painting, refit, and other work on W-Class vessels for the past fifteen to nineteen years. At all times relevant to this matter, the vessels at issue were officially or unofficially “home ported” at Newport Shipyard.

         3. The Motor Vessel Mare (hereinafter “M/V Mare” or “Mare”) is a 45-foot, steel-hulled, 1946 Navy workboat built in Brooklyn, New York. W-Class acquired the M/V Mare (USCG Official No. 250428) in September 2009 and has owned the vessel through the time of trial in this matter. During the periods of 2012-13 and 2016-17, Mare was insured for $250, 000.

         4. W-Class used Mare to assist in the marketing of W-Class vessels, as a place to entertain guests, and sometimes as a place for Tofias to live. Prior to the periods at issue in this matter, W-Class undertook a number of improvements to the vessel, including adding a mast, spreaders, a boom and gaff, a stainless steel barbecue grill, a swim platform, a stainless steel swim ladder, and a stainless steel ladder from the deck to the roof of the wheelhouse. W-Class also installed a new turbo diesel engine.

         5. W-US-1, LLC (“W-US-1”) is a Rhode Island limited liability company and a wholly owned subsidiary of W-Class. Tofias is the managing member.

         6. The Sailing Vessel Wild Horses (hereinafter “S/V Wild Horses” or “Wild Horses”) is a 76-foot, cold-molded wooden vessel built in 1997-98 at Brooklin Boatyard in Brooklin, Maine. W-US-1 owned the S/V Wild Horses (USCG Official No. 1064210) at all times relevant to this matter and used the vessel to run races.

         7. FSS, Inc., d/b/a Front Street Shipyard (“Front Street”) is a full-service marine facility in Belfast, Maine, that undertakes new construction and vessel refit and repair, with a focus on larger vessels over 150 tons. Front Street has been in business since 2011. At all times relevant to this matter, John B. “J.B.” Turner was Front Street's president. As part of his duties at Front Street, Turner organizes the general work flow in the yard with two service managers and one project manager and oversees particular refit projects.

         8. Tofias first did business with Front Street in August 2011. At that time, Tofias asked Front Street to set up an account in the name of W-Class for work to be done on Wild Horses. That work is not at issue in this matter.

         9. Payments against invoices issued by Front Street for work on Mare or Wild Horses as described below were made by check from a W-Class bank account or by credit cards issued to Tofias personally or to one of his companies.

         10. It was the practice of W-Class and W-US-1 to keep maintenance logbooks aboard their vessels. A maintenance log is an ongoing record of maintenance required on a vessel and what maintenance steps are being taken. Prior to trial, Plaintiff requested the production of logbooks from both vessels for the period between January 1, 2013, and January 1, 2015. W-Class and W-US-1 have not produced any logbooks whatsoever for Mare and have produced only one logbook covering the period from July 2013 to October 2015 for Wild Horses. Tofias is unable to offer any explanation for his inability to locate the missing logbooks. (See Pl.'s Ex. 67.) The Mare logbooks would have notations about maintenance and what was and was not working on the vessel. The Wild Horses logbooks that were produced noted maintenance needs and vessel conditions.

         M/V Mare

         11. On August 2, 2012, Tofias was seriously injured in a sailing accident that incapacitated him for the following six months. Because of Tofias's injury and his inability to use Mare, he decided to undertake significant renovations to the vessel.

         12. True Course Yachting, Inc. (“True Course”) is a yacht management company that assists vessel owners with vessels under 100 feet by providing crew services, project management, cleaning, and detailing. Regarding the project management component of the business, True Course generally acts as the “eyes and ears” for vessel owners during a yard project. Ben Davis is the founder and principal owner of True Course and a licensed captain.

         13. Due to his incapacity, Tofias retained Davis and True Course to be W-Class's project manager for the Mare refit.[3]

         14. Davis retained Joseph Lombardi of Ocean Technical Services, LLC, a marine surveying company, to survey Mare and prepare a proposed scope of services for necessary repairs, including replating the vessel's bottom. Lombardi prepared and provided to Davis a written survey report regarding the condition of Mare dated August 27, 2012. Lombardi also prepared a document entitled “Requirements and Specifications for Drydocking and Repair of M/V ‘Mare'” dated September 1, 2012.

         15. In the survey report, Lombardi noted, inter alia:

• “Moderate failure of the paint system throughout the maindeck (foredeck, amidships and aft) and cabin trunk area is causing rust/scale to break through.” (Defs.' Ex. 38, Bates No. 004349.)
• “The bottom paint system has not been correctly applied to recent shell plating doublers and is currently peeling away.” (Id., Bates No. 004351.)
• “Condition of [the forepeak tank] is fair/good with much rust/scale and some wastage of transverse frames and intercostals due to water entering through BOMAR hatch. Shell plating in space in poor condition.” (Id., Bates No. 004353.)

         In light of the survey, Lombardi made several recommendations, including:

• “Anti-fouling paint system is somewhat failing below the waterline and particular care must be taken with respect to the bottom coatings as absence of coatings inevitably lead[s] to plate loss due to potential (galvanic corrosion). Remove existing paint system and renew with a steel primer and an ablative anti-fouling system compatible with an impressed cathodic system for the habitual berth of the vessel.” (Id., Bates No. 004358.)
• “Repair/replace BOMAR dogging hatches and gaskets on foredeck and aft deck.” (Id.)
• “Properly clean bilges of standing oil/water.” (Id., Bates No. 004359.)
• “Replace broken bilge pump in engineroom.” (Id.)[4]

Lombardi concluded: “This vessel is in good cosmetic condition, but requires significant steel shell plate work and interior framing under the head. . . . Choices made to double plate on hull [are] only delaying the day of reckoning and this should be addressed; other areas of original shell plating (bow and chines) need immediate repair.” (Id.) Lombardi also concluded that the plate on Mare's hull was ¼-inch thick.

         16. Davis sent copies of the Lombardi reports to a number of shipyards in the process of determining which yard should do the Mare refit. Davis may have provided Front Street with one or both of the Lombardi reports.

         17. Although Davis compiled research and information on several yards, Tofias did not rely on this research in choosing to give the Mare refit to Front Street. Tofias ultimately selected Front Street based on the recommendation of Steve White, the owner of Brooklin Boatyard who also has a stake in Front Street, and based on Turner's representation that Front Street could handle the work and had the necessary experience. Davis believed that Front Street was in fact overqualified to do the work based on the positive reputation in the yachting industry of the individuals who ran the yard.

         18. Front Street had worked on steel-hulled vessels before, but not on steel-hulled vessels with as much square area as Mare. Prior to the fall of 2012, Davis had never been involved in a major refit of a steel-hulled vessel such as Mare or overseen the replating of the bottom of such a vessel.

         19. On September 25, 2012, Turner sent an email to Tofias and Davis with the subject “Mare and 135.” As an attachment to the email, Turner included a “bid for the work this winter on Mare.”

         (Defs.' Ex. 35.) Under “Plating Project, ” the attached bid states, in relevant part:

The following estimate is for replating the hull on Mare per the specifications provided. The replating work will begin 2 feet above the chine as marked on the boat. . . . Three frames under the head will be replaced. The pipe used to create the chine and receive the plating from the topsides and bottom will be completely replaced. Sandblasting, priming and painting will follow to create a seal against corrosion.

(Id.) The Court infers from the final sentence in context that Front Street represented it would sandblast, prime, and paint the new steel plates, as opposed to every element in the vessel's bilge, to “create a seal against corrosion.”

         20. In the body of his September 25, 2012 email, Turner states that “as soon as there are drawings to begin the new project, Front Street will be ready to start” (Defs.' Ex. 35), but the reference to drawings is for a different project than the Mare refit, a proposed project to construct a new vessel.

         21. Tofias did not accept the “bid” attached to Turner's September 25, 2012 email. After further discussion, Front Street submitted a second bid dated October 23, 2012. The primary difference between the September and October bids is a reduction in the number of hours that Front Street indicated would be needed to complete the project and a reduction in the hourly rate in an effort by Front Street to secure the project. Turner has no recollection of what work, if any, was removed from the September bid to account for the reduction in the number of estimated hours.

         22. Tofias accepted the October bid, which was the final formal written document concerning the Mare refit and provided the baseline for the project. Neither the Lombardi reports nor a separate Lombardi document superimposing hull thickness readings on a drawing of Mare (Defs.' Ex. 172) were used as a basis for Front Street's work on the vessel.[5] There was no written contract. Tofias declined to sign a written contract offered by Front Street.

         23. Front Street undertook the Mare refit between October or November of 2012 and June or July of 2013.

         24. Tofias authorized Davis to communicate progress on the project to him, to approve invoices, and to represent to Front Street what Tofias's decisions were regarding issues that arose during the project. Once Tofias gave Davis approval or authorization to take a position or to make a move on the project, Davis was authorized to act as Tofias's mouthpiece with Front Street and to pass along Tofias's approval. Davis exercised such authority.

         25. Two to four days a week during the course of the project, Davis provided Tofias with project updates, including sending Tofias via email photos and comments on the progress, advising him of additions to the scope of work recommendations from the yard, and reviewing and approving Front Street invoices. Tofias asked Davis to review the invoices because, as the person at the site, Davis had a better understanding of the hours and tasks on the project. During the periods of highest activity on the project, Davis was at Front Street daily.

         26. Tofias was only physically present at Front Street one time during the Mare refit, but he was kept up-to-date and fully informed of all aspects of the work done on Mare by Front Street as a result of the frequent and consistent flow of emails between him and Davis, as well as between him and Turner.[6] Davis discussed every aspect of the Mare refit with Front Street because it was such an extensive project.

         27. Mare's hull at the time it was hauled at Front Street was 3/16-inch thick.[7] When the vessel was hauled, the yard cut a small sample from the vessel's hull to determine the overall thickness of the hull plating but did not retain the piece or record from where it was cut. Turner advised Davis via email that it was a good thing that Front Street had not ordered a lot of ¼-inch steel plate because it appeared that the plating was in fact 3/16-inch thick. Davis read this email and was present at Front Street during the replating. Tofias was also aware that Front Street was replating Mare's bottom with 3/16-inch plate. Three-sixteenths-inch steel plating is structurally adequate for Mare.[8]

         28. As part of replacing Mare's bottom, Front Street applied two coats[9] of Micron CSC anti-fouling paint to the new steel plates after it properly prepared, profiled, and primed them. “Profiling” steel is the process of creating a rough surface on new steel to which primer can adhere. If the steel is profiled to an insufficient degree, the primer may not adhere. If the primer is applied too thinly, the steel under the primer and bottom paint coat may rust.

         29. Front Street did not gauge the degree of profiling and the thickness of the primer or keep detailed records of the temperature and other conditions during the coating of Mare's plates. However, the preponderance of the evidence does not establish that Front Street applied the coatings improperly, and Davis was satisfied with Front Street's coatings work.[10]

         30. Front Street asked for authority to paint the bottom of the fuel tanks on Mare, which authority was provided by Tofias through Davis. However, Front Street failed to coat the interior side of the new steel under the fuel tanks. There was no reason why Front Street could not have applied coatings to this area, and it was poor marine practice for Front Street to leave this new steel uncoated.

         31. The welds made by Front Street during the replating of Mare's bottom were not “pretty” (8/10/17 Trial Tr. (ECF No. 97), PageID # 1354) but were sound. The welds met applicable standards, had structural integrity, and did not compromise the vessel's seaworthiness.[11]

         32. A Seakeeper gyro stabilizer reduces the side-to-side rolling motion of a vessel. Although Tofias understood that the purpose of a Seakeeper is to substantially eliminate the rolling motion of a vessel in rough waters, the Court understands that a Seakeeper also reduces a vessel's rolling motion in all conditions.

         33. At some point, the possibility of installing a Seakeeper on Mare arose in conversations between Turner, Davis, and Tofias. Based on these conversations and Davis's recommendation, the decision was made to install a Seakeeper.[12] Neither Front Street institutionally nor the lead electrician who did the installation had ever previously installed a Seakeeper on a vessel. Tofias considers the Seakeeper to be an improvement to Mare.

         34. The preponderance of the evidence does not establish that Front Street overcharged W-Class for the Seakeeper installation.[13]

         35. Tofias was advised by Front Street that the existing wiring on Mare should be replaced or rewired because it was not up to current standards, but he was not told that the existing wiring was unsafe.[14] Tofias did not authorize the rewiring work because it was not in his budget for the project. He would have authorized the work, however, if he had been told that the wiring was unsafe.

         36. Front Street also painted some portion of Mare's topsides, including the vessel's railings, decks, and wheelhouse. There is no credible evidence that this work by Front Street was deficient or was the cause of any subsequent problem with the paint on Mare's topsides.[15]

         37. Whenever Front Street suggested to Tofias that additional work was required during the refit, including additional work on Mare's steel frames, Tofias authorized the work. The only work suggested by Front Street or mentioned in the written bids that Tofias did not authorize was the addition of teak decks, rewiring the boat, and renovating the windows and portholes. Although the Lombardi reports mentioned that the Bomar hatches merited replacement, hatch replacement or repair was not discussed with Front Street and was never within the scope of work for the Mare refit. Recoating every existing surface within the bilge was also not within the scope of work.

         38. When Mare left Front Street in the summer of 2013, Davis was satisfied with all the work ...


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