Margate Shipping Co. v. M/V JA Orgeron , 143 F.3d 976 ( 1998 )

REVISED - JULY 1, 1998
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 96-30950
_____________________
MARGATE SHIPPING COMPANY,
Plaintiff-Appellee,
versus
M/V JA ORGERON, her engines, tackle,
apparel, etc., in rem,
Defendant,
UNITED STATES OF AMERICA,
Third-Party Plaintiff-Appellant,
versus
CONTINENTAL UNDERWRITERS, LTD.
Third-Party Defendant.
*****************************************************************
MONTCO OFFSHORE, INC., Owner and
operator of the M/V JA ORGERON for
exoneration from or limitation of
liability,
Plaintiff,
versus
MARGATE SHIPPING CO., ET AL.,
Claimants,
MARGATE SHIPPING CO.,
Claimant-Appellee,
versus
UNITED STATES OF AMERICA,
Claimant-Appellant.
_________________________________________________________________
Appeal from the United States District Court for the
Eastern District of Louisiana
_________________________________________________________________
June 29, 1998
Before GARWOOD, JOLLY, and HIGGINBOTHAM, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
This appeal arises from the grant of what appears to be the
largest maritime salvage award in recorded history. During a
severe tropical storm off the Florida coast, the M/V Cherry Valley,
an oil tanker belonging to Margate Shipping Co., rescued a barge
containing a valuable external fuel tank for NASA’s space shuttle.
The district court awarded Margate approximately $6.4 million in
salvage. The United States appeals only as to the amount of the
award. Based on the district court’s mistaken valuation of the
fuel tank, we reduce the award to $4.125 million and render.
I
‘Twas a dark and very stormy night, November 14-15, 1994, and
the situation looked bleak for the barge Poseidon. Caught in the
clutches of Tropical Storm Gordon, Poseidon and her escort, the
J.A. Orgeron, were without power and adrift. Driven on the gales
of the tempest, the flotilla was swiftly approaching the Bethel
2
Shoal; if they ran aground, the ships were sure to founder and be
lost. Acutely aware of the danger, Orgeron’s captain radioed for
help. Alas, the Coast Guard was not in a position to mount a
rescue. In despair, the captain made plans to release Poseidon and
her valuable cargo, an external fuel tank for the space shuttle.
Although this action would result in the certain loss of Poseidon
and the tank, the captain hoped thereby to save Orgeron and her
crew.
The voyage had begun some five days earlier. On November 10,
Orgeron left New Orleans harbor with Poseidon in tow. Orgeron was
an ocean-going tug being operated by Montco Offshore, Inc., under
contract for NASA. Under that contract, Orgeron’s principal task
was to transport space shuttle fuel tanks from Martin Marietta’s
assembly plant in Michoud, Louisiana, around the Florida peninsula
to Kennedy Space Center on Cape Canaveral. For this work, Orgeron
used Poseidon, a NASA-owned ocean-going barge that had been
specially fitted with a covered hangar large enough to contain a
fuel tank. On this trip, Poseidon was loaded with the freshly
manufactured tank designated ET-70 and an associated transport.
Shortly after leaving New Orleans, Orgeron’s “jockey arm,” a
bar connecting its two rudders, broke, resulting in the complete
disabling of the starboard rudder for the duration of the voyage.
Rather than put in for repairs, however, Orgeron pressed on,
relying on the still functional port rudder to see her through.
3
On November 13, as Orgeron and Poseidon rounded the southern
tip of Florida, they began to encounter increasingly severe winds
and heavy seas generated by Tropical Storm Gordon.1 Concerned by
the rapidly worsening weather, Orgeron’s captain radioed Montco,
asking for permission to seek refuge from the storm in Miami.
Permission was denied, as reflected by the following notation in
Orgeron’s Weather Log: “Recommendation to put into Miami--NASA
requested to continue on.”
At approximately 2:00 a.m. on November 15, Orgeron lost the
effective use of both her engines.2 At the time, the flotilla was
between ten and eighteen miles off Florida’s Atlantic coast,
somewhere between Fort Pierce and Cape Canaveral. Without
Orgeron’s engines, the tug and barge were left adrift, and began to
be blown west towards shore.3 Orgeron immediately notified the
Coast Guard of her predicament, and requested assistance. Because
1
The winds ranged from thirty-four to sixty knots, and the
seas from fifteen to twenty feet.
2
The port engine’s gear box failed, rendering it completely
inoperable. The starboard engine, which Orgeron had apparently not
been using since the problem with the rudder arose, caught fire
when it was started and quickly became completely disabled as well.
3
Orgeron did, of course, have an anchor, which she deployed.
This anchor was apparently not even remotely sufficient to hold the
flotilla’s position in the severe winds and heavy seas generated by
the storm, however, and it was simply dragged across the seabed as
the whims of the tempest dictated. There was an additional anchor
on Poseidon that might have helped, but, unfortunately, it could
only be deployed from Poseidon itself, and no one was on the barge
at the time the engines failed, nor could anyone be transferred in
the storm.
4
of the storm’s ferocity, however, the Coast Guard was unable to
help.
Without hope of rescue, Orgeron’s captain considered his
options. He surmised that the flotilla was being blown toward
shore chiefly because of the sail effect of Poseidon’s tall hangar.
He concluded that Orgeron and her crew might be able to stave off
grounding in the storm by releasing Poseidon and delivering the
barge to her fate. Preparations were made, but before this
contingency became necessary, the captain received word that help
was on the way after all.
Orgeron’s distress call had been picked up by the M/V Cherry
Valley. Cherry Valley was a 688-foot oil tanker owned by Margate
with a crew of 25 and a value of $7.5 million. On November 15, the
ship was fully laden with nine million gallons of heavy fuel oil
and had a draft of about 35 feet. She was pursuing a course in
deep water somewhat south of Orgeron’s position when she picked up
the distress call. Although under no obligation to assist, Cherry
Valley’s master, the suitably named Captain Strong,4 immediately
altered course to rendezvous with the tug. In so doing, he took
4
Captain Prentice Strong III was a graduate of the Maine
Maritime Academy, and had been going to sea for over ten years at
the time of the events in this case. It is a substantial testament
to his ability that he reached the pinnacle of his profession,
master of a large ocean-going tanker, at the remarkably youthful
age of 32. Given this record, we are not surprised that Captain
Strong displayed exemplary seamanship throughout this incident.
5
his relatively unmaneuverable craft into perilous shoal waters in
direct violation of standing orders.
Cherry Valley arrived on the scene shortly after 4:00 a.m.,
whereupon Captain Strong decided to try to pass a line to Orgeron
and tow the flotilla to safety. To do this, however, he would need
to maneuver clumsy Cherry Valley directly alongside Orgeron in the
churning seas. Time was short, as the vessels were rapidly
approaching the Bethel Shoal; the Shoal had depths of six to seven
fathoms in places, far too shallow for Cherry Valley, which
required at least ten fathoms for safe operation in heavy seas.
The flotilla had almost reached this depth when Cherry Valley
arrived.
Captain Strong’s plan was to pass close enough to Orgeron to
send over a messenger line on a line-throwing rocket. This line
could then be used to transfer larger mooring lines capable of
sustaining the tow. Captain Strong ordered several crewmen onto
deck to conduct the line-passing operation. Throughout the salvage
operation, Cherry Valley’s deck would be awash with green seas and
extremely dangerous, even for experienced seamen.5
On Cherry Valley’s first pass, the messenger line fell short,
and Captain Strong was forced to bring the ship about for another
attempt. This time, he passed even closer to Orgeron, and the
5
Not terribly surprising, given that the vessels were in the
midst of a tropical storm, a weather phenomenon only one step short
of a hurricane.
6
messenger line was successfully transferred. It parted, however,
before the deck crew was able to transfer a mooring line, and
Captain Strong was compelled to bring Cherry Valley about once
more.
Time was becoming increasingly critical. The vessels were now
less than one mile from the Shoal, and the water was becoming quite
shallow. If Cherry Valley ran aground in the storm, she would
likely break up and cause a massive oil spill. In full awareness
and express consideration of this danger, Captain Strong informed
Orgeron that he would only make one more attempt.
Fortunately, the third effort was successful. Cherry Valley’s
deck crew managed to pass two hawsers6 to Orgeron, which were
quickly made fast. During the transfer, however, Cherry Valley
passed over the tow line running between Orgeron and Poseidon.
Captain Strong held his breath waiting to know if the line would
foul Cherry Valley’s rudder or propeller. It did not. If it had,
Cherry Valley likely would have found herself in the same
predicament as Orgeron and Poseidon.
At 6:20 a.m., Cherry Valley finally was able to take the
flotilla in tow. By this time, her propeller was churning mud and
the fathometer indicated that there were less than ten feet between
her keel and the bottom.
6
Strong mooring or towing lines.
7
With Orgeron and Poseidon in tow, Cherry Valley steamed slowly
southeast, back into deep water. The tow put great strain on the
hawsers and chocks, however, which required constant attention in
the form of “slushing.”7 In addition to the inherent dangers of
being on deck in the storm, slushing put Cherry Valley’s deck crew
in constant danger of being struck by a parting line; a hawser that
parts under great strain can snap like a giant rubber band, causing
severe injury to all nearby.
At 11:00 a.m., the tug South Bend arrived on the scene from
Fort Pierce and attempted to assist. Because of the extreme sea
and weather conditions, however, South Bend was unable to pass a
line to Orgeron, or to put a crewman aboard Poseidon to operate her
anchor. Unable to help and now fearful for his tug’s own survival,
South Bend’s master decided to retreat. His fears were justified.
While returning to port, South Bend was overcome by the seas and
began to sink. She issued a mayday call, but no one could assist.
She was just able to pass within the Fort Pierce harbor jetty,
where her captain intentionally grounded her to avoid a total loss.
It was the district court’s undisputed finding that the actions of
South Bend would have had no effect on the outcome for Orgeron and
Poseidon in the absence of Cherry Valley, both because she would
have arrived too late and because she would have been unable to
render effective assistance in the storm.
7
Basically, lubrication.
8
At this point, the tempest began to overcome even Cherry
Valley. Because of the strain on the hawsers, she was not able to
steam directly into the wind. As the storm worsened, she was
pushed westward, back into the shallows. Out of options, Captain
Strong decided to anchor and ride out the rest of the storm.
Although this operation exposed the deck crew to additional risks,
it was accomplished without incident at 5:00 p.m.
While anchored, one of the mooring lines parted. Cherry
Valley’s deck crew was able to replace and supplement it, and the
flotilla remained intact.
The vessels remained at anchor throughout the night of
November 15 and the following day, with Cherry Valley’s deck crew
constantly tending the lines. During that day, NASA was able to
contract with the tug Dorothy Moran to relieve Orgeron and bring
Poseidon into port. On the evening of November 16, Dorothy Moran
arrived on the scene. Like South Bend, however, she was unable to
pass a line to Orgeron or Poseidon, or to put a crewman aboard the
barge. After several unsuccessful attempts, Dorothy Moran returned
to Fort Pierce to await daybreak and better weather.
By midmorning of November 17, the storm had finally passed and
Dorothy Moran and another tug were able to relieve Cherry Valley.
Orgeron was towed to Fort Pierce, while Dorothy Moran completed
Orgeron’s contract and towed Poseidon to Port Canaveral. ET-70 was
9
delivered intact and completely unharmed, and was later used in a
successful space shuttle launch.
ET-70 itself had been manufactured under a long-term contract
between NASA and Martin Marietta. The contract provided for the
production of sixty fuel tanks for a total price of $3.4 billion,
with the last tank to be delivered on September 29, 2000. Every
tank was needed for NASA’s planned series of missions. Under
NASA’s plan, however, a minimum of four tanks were slotted to be
complete and available (“in circulation”) at all times relevant to
this case.
As part of NASA’s standard procurement procedure, each tank
produced under the contract was accompanied by a “Material
Inspection and Receiving Report,” otherwise known as a “DD-250.”
Among other things, the DD-250 contained an estimated production
cost of the particular tank being delivered. In the case of ET-70,
the DD-250 cost was $53,834,000. The next tank in the production
cycle, ET-71, had a DD-250 cost of $51,387,000. The difference in
price is basically attributable to the fact that, as the contract
progressed, various overhead items declined in cost. There is no
dispute that, had ET-70 been lost, ET-71 would likely have taken
its place on the designated mission.
On December 21, 1992, acting on NASA’s specific request,
Martin Marietta gave the government an “option” on up to four
additional tanks to be produced during the course of the contract
10
for a total additional cost of $19,014,479 per tank. The option
provided for a thirty-six month minimum lead time for the order of
an additional tank, and although NASA provided no consideration for
the option, Martin Marietta declared that its terms constituted a
“firm price” offer. The government never accepted this offer,
however, and it was eventually withdrawn, again at NASA’s specific
request, approximately six months before the events in this case.
II
On December 12, 1994, Margate filed an action for salvage
against the J.A. Orgeron in the Federal District Court for the
Eastern District of Louisiana. Montco answered, and then filed its
own claim for limitation of liability. The United States, fearing
an eventual salvage action against itself, filed a claim in the
limitation action seeking indemnification from Montco. Margate
then filed a cross-claim for salvage against the United States.
Eventually, everything was settled except for Margate’s cross-claim
against the United States, which went to trial in July 1996 before
District Judge Stanwood Duval.
On July 9, after a brief bench trial, Judge Duval read his
findings of fact and conclusions of law into the record. In a
reasoned oral ruling, he found that, based on the entirety of the
evidence, Margate was entitled to a salvage award equal to 12.5% of
the value of the salved property, Poseidon and ET-70.
11
In reaching this figure, Judge Duval relied on the six
traditional salvage factors first announced8 in The Blackwall, 77
U.S. 1, 14 (1869). He determined that the facts of the case
pointed to the highest possible award under each of the factors,
and chose what he considered to be a high percentage of a high
salved value to reflect this circumstance. Judge Duval also
considered the application of a seventh factor, the “salvors’ skill
and effort in preventing or minimizing damage to the environment,”
as announced in Trico Marine Operators, Inc. v. Dow Chemical Co.,
809 F. Supp. 440, 443 (E.D. La. 1992), but ultimately concluded
that it was not applicable to the case. He did consider the risk
of environmental liability incurred by Cherry Valley under the
rubric of the traditional factors, however.
With regard to ET-70, Judge Duval determined that it was
specialized property without a market value, and therefore most
appropriately appraised at its “replacement cost.” This value, he
found, was the production cost of ET-71, $51,387,000, because ET-71
was the likely “replacement” of ET-70. In making this finding,
Judge Duval explicitly rejected the government’s argument for a $19
million replacement cost based on the withdrawn 1992 option,
8
And, interestingly, last announced as well. The Blackwall
contains the most recent bit of guidance that the Supreme Court has
deigned to give on the subject of the calculation of salvage
awards.
12
calling it “much too speculative.” He also rejected Margate’s
argument for a $92 million “cost-accounting” valuation.
Combining this $51 million value for ET-70 with the $2 million
stipulated value of Poseidon, Judge Duval declared a total award of
$6,406,440 based on the 12.5% figure. He noted in the alternative
that, even if the value of ET-70 were only $19 million as the
United States claimed, the award would be the same as he would
adjust the percentage accordingly. On July 12, final judgment was
entered for Margate in the amount of $6,406,440. The United States
appeals the amount of this award.
III
Because of the fact-specific nature of the calculation of a
salvage award, “the amount allowed is to be decided by the district
court in its sound discretion.” Allseas Maritime, S.A. v. M/V
Mimosa, 812 F.2d 243, 246 (5th Cir. 1987). “[A]n award will be
altered only if it was based upon incorrect principles of law or
misapprehension of the facts or it is either so excessive or so
inadequate as to indicate an abuse of discretion.” Id. This
standard of appellate review is a time-honored and integral part of
American maritime law, and has changed little since its infancy.
See, e.g., Hobart v. Drogan, 35 U.S. (10 Pet.) 108, 119 (1836)
(Story, J.) (“[T]his court is not in the habit of revising such
decrees as to the amount of salvage, unless upon some clear and
palpable mistake or gross over-allowance of the court below.”);
13
Oelwerke Teutonia v. Erlanger & Galniger, 248 U.S. 521, 524 (1919)
(Holmes, J.) (“Unless there has been some violation of principle or
clear mistake, appeals to this Court concerning the amount of the
allowance are not encouraged.”); 3A Martin J. Norris, Benedict on
Admiralty § 311 (7th ed. 1997) (“An appellate court is, generally
speaking, loath to change a salvage award.”). We keep this well-
hewn principle firmly in mind as we embark upon the somewhat more
intensive investigations necessitated by the instant case.
IV
An award of salvage is generally appropriate when property is
successfully and voluntarily rescued from marine peril. The
Sabine, 101 U.S. 384 (1880). As Justice Marshall noted long ago,
this rule is peculiar to maritime law, and utterly at variance with
terrene common law. Mason v. The Blaireau, 6 U.S. 240, 266 (1804)
(Marshall, J.) (although it is true that, when property on land
exposed to grave peril is saved by a volunteer, no remuneration is
given, “[l]et precisely the same service, at precisely the same
hazard, [b]e rendered at sea, and a very ample reward will be
bestowed in the courts of justice”). Because of the peculiar
dangers of sea travel, public policy has long been held to favor a
legally enforced reward in this limited setting, to promote
commerce and encourage the preservation of valuable resources for
the good of society. See B.V. Bureau Wijsmuller v. United States,
702 F.2d 333, 337 (2d Cir. 1983) (“The law of salvage originated to
14
preserve property and promote commerce.”) (citing Seven Coal
Barges, 21 F. Cas. 1096, 1097 (C.C.D. Ind. 1870) (No. 12,677) (“The
very object of the law of salvage is to promote commerce and trade,
and the general interests of the country, by preventing the
destruction of property.”)).
In this case, there can obviously be no dispute that the basic
elements supporting a salvage award are present, and the United
States has expressly conceded that Margate is entitled to some
award. As noted, the question for this court is simply how high
that award should be.
The district court traditionally determines the amount of a
salvage award according to the six Blackwall factors.9 Allseas,
812 F.2d at 246 & n.2. They are (in order of original listing):
1. The labor expended by the salvors in rendering the
salvage service.
2. The promptitude, skill, and energy displayed in rendering
the service and saving the property.
3. The value of the property employed by the salvors in
rendering the service, and the danger to which such
property was exposed.
4. The risk incurred by the salvors in securing the property
from the impending peril.
5. The value of the property saved.
6. The degree of danger from which the property was rescued.
9
At least in theory. Some commentators have said that the
district court traditionally “pull[s] an arbitrary figure out of
the air.” Grant Gilmore & Charles L. Black, Jr., The Law of
Admiralty 563 (Foundation 2d ed. 1975).
15
The Blackwall, 77 U.S. 1, 14 (1869) (Clifford, J.). Although old,
“[t]hese guidelines have weathered the storms of the past century.”
St. Paul Marine Transport Corp. v. Cerro Sales Corp., 505 F.2d
1115, 1120 (9th Cir. 1974).
In this case, the district court made the following findings
under the factors, listed here in order of the court’s assessment
of their importance to the calculation of an award:
1. (Blackwall 6.) Poseidon and ET-70 were in imminent
danger of complete loss.
2. (Blackwall 5.) The combined value of Poseidon and ET-70
was $53,387,000.
3. (Blackwall 4.) The salvors incurred extremely high risk
in securing Poseidon and ET-70, both as
to loss of their ship and lives and as to
the creation of substantial environmental
liability in the event of an oil spill.
4. (Blackwall 2.) The salvors displayed extremely high
promptitude, skill, and energy in
rescuing Poseidon and ET-70 by virtue of
their daring and successful seamanship
under very difficult conditions.
5. (Blackwall 3.) The value of Cherry Valley was $7.5
million.
6. (Blackwall 1.) The salvors expended two and one-third
days of labor in rendering the salvage
service.
As noted, the district court determined that each factor indicated
the highest possible award, and it chose 12.5% of the salved value
as an appropriate figure.
16
The United States makes three basic challenges to the district
court’s analysis. First, it argues that the court erred in its
general application of the Blackwall factors, by giving too much
weight to the value of the salved property, by counting the
potential for environmental liability as risk to the salvors, and
by using a percentage of the salved value to fix ultimately the
award. Second, even assuming that the district court made a
correct legal interpretation of the factors, the United States
argues that the district court clearly erred in its valuation of
ET-70. Finally, even assuming that the district court made a
correct legal interpretation of the Blackwall factors and properly
valued ET-70, the United States argues that the court nonetheless
abused its discretion in picking such a high percentage and
generally making such a large award in this case. We address each
argument in turn.
A
To address properly the United States’s first contention, it
is necessary to excavate the somewhat obscure foundations of the
Blackwall rule. As many commentators have noted, the sense and
contours of the factors are less than plainly engraved upon their
face.10 In this case, however, the United States squarely asks us
10
See, e.g., Gilmore & Black at 559 (noting that the
traditional “recitation of Justice Clifford’s six ‘ingredients’
[really just] serves the useful purpose of indicating that the
variables are so many and so incapable of exact measurement that it
will probably be fruitless for either party to take an appeal
17
to decide whether the particular interpretation and application
adopted by the district court comports with the factors’ essential
meaning. In order for us to answer this question, we must first
ascertain what purpose the factors serve.
1
Maritime salvage is as old and hoary a doctrine as may be
found in the Anglo-American law. Since time immemorial, the
mariner who acted voluntarily to save property from peril on the
high seas has been entitled to a reward. This simple rule has been
an integral part of maritime commerce in the western world since
the western world was civilized.11
merely on the ground that the award was incorrectly computed”). As
we shall see, we ultimately take a somewhat more sanguine view of
the rationality of the factors as a legal rule.
11
The earliest incarnation of the doctrine can be found in the
celebrated maritime code of the island of Rhodes, from about 900
B.C. The Rhodian law is thought to have provided that “if a ship
be surprised at sea with whirlwinds, or be shipwrecked, any person
saving anything of the wreck, shall have one-fifth of what he
saves.” Norris § 5. Similarly, “[i]f the ropes break, and the
boat goes adrift . . . [a]nd if any person finds the boat, and
preserves it safe, he shall restore everything as he found it, and
receive one-fifth part as a reward.” Id.
The Rhodian law was adopted en masse by the Romans, who first
enunciated the tradition that the law of the sea belonged to the
ius gentium, and was thus outside of the legislative jurisdiction
of any one people. Dig. 14.2.9 (Volusius Mæcianus, Ex Lege Rodia)
(citing adoptions by Augustus and Antoninus).
Even after the Romans and Rhodians had become a faint memory
on the italic peninsula, their doctrine of salvage remained. The
Marine Ordinances of Trani, promulgated in 1063 A.D., provided that
the finder of goods cast upon the sea was entitled to retain half
of them if the owner came forward within thirty days, and to the
entirety if he did not. Ordinances and Custom of the Sea,
Published by the Consuls of the City of Trani art. XIX (1063),
18
Simple in principle, in the many centuries of its existence,
the law of salvage has become encrusted with a multitude of court-
created doctrinal complexities; the Blackwall factors are merely
the most prominent example of this phenomenon. As modern
scholarship has taught us, these legal barnacles are the natural
and desirable results of the common law process. Court by court
and case by case, the law of salvage has been steadily honed to
ever greater levels of efficiency over the years, with the
resultant rules serving as a convenient shorthand for the complex
calculations of compiled experience. In examining the underlying
logic of the Blackwall factors, we do not take lightly their role
in summarizing this most succinct and practical of legal processes.
reprinted with English translation in 4 Black Book of the Admiralty
522, 536-37 (Twiss ed. 1876).
Inspired by Trani and other like-minded port towns of the
Mediterranean, the French dukedom of Guienne adopted a similar law
some two centuries later:
If a vessel departing with her lading from Bordeaux, or
any other place, happens in the course of her voyage, to
be rendered unfit to proceed therein . . . [and] if the
master can readily repair the vessel, he may do it . . .
and if he has promised the people who helped him to save
the ship the third, or the half part of the goods for the
danger they ran, the judicatures of the country should
consider the pains and trouble they have been at, and
reward them accordingly, without any regard to the
promises made them.
Roll d’Oleron art. IV, reprinted in English translation with
commentary in 30 F. Cas. 1171, 1172. When Richard I inherited
Guienne from his mother, Duchess Eleanor, he introduced the
doctrine of salvage (and the rest of the Laws of Oleron, as they
came to be known) into the English law. 30 F. Cas. at 1171.
19
Still, in the light of the United States’s challenge in the instant
case, we think that this is an appropriate time for the underlying
rationale of Justice Clifford’s venerable factors to be formally
recognized.
2
Fortunately, the principles underlying the Blackwall factors
have not escaped the attention of our most prominent modern
scholars. See William M. Landes & Richard A. Posner, Salvors,
Finders, Good Samaritans, and Other Rescuers: An Economic Study of
Law and Altruism, 7 J. Leg. Stud. 83 (1978). Beginning with our
first principle that the law of salvage seeks to preserve society’s
resources, they explain that “the purpose of [court-granted]
salvage awards is to encourage rescues in settings of high
transaction costs by simulating the conditions and outcomes of a
competitive market.” Id. at 100. In an ideal world, every meeting
of salvor and salvee would result in a freely negotiated contract
for salvage services priced at a competitive level.12 Id. at 89.
In the real world, however, most meetings of salvor and salvee
cannot be resolved in this fashion.
To accommodate this reality, the law of salvage aims to create
a post-hoc solution that will induce the parties to save the ship
12
Provided, of course, that it makes sense for a salvage to
happen at all. As explained in greater detail below, if the costs
of performing a salvage are too high or the benefits to be derived
too low, the parties might well agree to call it a day and let the
sea claim its prize.
20
without first agreeing on terms. Id. at 100. As Justice Clifford
himself noted, “[c]ompensation as salvage is . . . viewed by the
admiralty courts . . . as a reward given for perilous services,
voluntarily rendered, and as an inducement to seamen and others to
embark in such undertakings to save life and property.” The
Blackwall, 77 U.S. at 14 (emphasis added).
In order properly to induce the salvor (and salvee) to act,
however, the law must provide for a proper and reasonable salvage
award, one that gives neither the salvor too little incentive to do
the salvage properly, nor the salvee too little reason to care if
his property is saved. Landes & Posner, 7 J. Leg. Stud. at 102.
By definition, this “efficient” fee is the one that would have been
reached by the parties through voluntary negotiation in an open and
competitive market, and its value will depend on a number of
factual considerations. Id. By far the most important of these
considerations, however, will be the cost13 to potential salvors of
performing the service and the benefit to the salvee of it being
performed; obviously, no voluntary salvor would be willing to
perform a salvage for less than it would cost him to do it, just as
no salvee would agree to pay more for a salvage than the loss he
could thereby avoid. Id. In a voluntary agreement between salvor
and salvee, therefore, as in any agreement between arm’s-length
13
Including risk-based costs.
21
parties in any context, the twin considerations of cost and benefit
will form the poles of negotiation between which any fair bargain
must be struck. Should the gap between cost and benefit prove
illusory, as when the costs of the service outweigh the benefits to
be derived, then no agreement will be possible, and the parties
must go their separate ways.
With this background in mind, it becomes immediately apparent
that the Blackwall factors represent an explicit guide for the
court to use in measuring these two most significant considerations
for voluntary negotiation in the salvage context. Id. at 101-04;
see also Allseas, 812 F.2d at 246 (“the[] factors guide the trial
court in fulfilling the public policy behind salvage awards”).
Labor expended by the salvors (1.), their promptitude and skill
(2.), value of the salving property (3.), risk to the salvors (4.),
and risk to the salved property (6.)14 are all direct or indirect
measures of the actual cost to the salvor of performing the salvage
in question, which should in turn be at least indicative of the
costs that would have prevailed. Correspondingly, value of the
14
Because the salvor gets nothing for an unsuccessful rescue,
see The Sabine, 101 U.S. at 384, one of his legitimate costs is
that risk. To even things out, the salvor will want to receive a
premium in the instances where he is successful. See Landes &
Posner, 7 J. Leg. Stud. at 101. Although not of particular
relevance to this case, this circumstance is reflected in Justice
Clifford’s well known statement that salvage is not to be
calculated “merely as pay, on the principle of a quantum meruit, or
as a remuneration pro opere et labore.” The Blackwall, 77 U.S. at
14.
22
salved property (5.) and risk to the salved property (6.) are
measures of the benefit that the salvage has conferred on the
salvee. By giving the court a framework in which to analyze cost
and benefit in the salvage context, the Blackwall factors plainly
intend to guide it in a rational process of determining and
weighing the costs and benefits of the particular transaction so
that the award chosen will give the proper inducement to the saving
of life and property.
3
With this rationale in mind, we turn to the specifics of the
United States’s initial argument. There are three parts, all
revolving around a core contention that the district court erred in
its general assessment and application of the Blackwall factors.
Essentially, the United States argues that the court erred: (a) by
giving too much weight to the value of the salved property; (b) by
counting the potential for environmental liability as risk to the
salvors; and (c) by using a percentage of the salved value
ultimately to fix the award. We address each point in turn.
(a)
The United States first complains that the district court gave
too much weight to the fifth factor--value of the salved property--
by ranking it second in its assessment of the considerations
bearing upon an award. In the light of our just-concluded
23
explication of the function of that factor, this contention is
readily seen to be wholly lacking in merit.
As the principal measure of the benefit of the salvage to the
salvee, the fifth is clearly one of the most important of the
Blackwall factors, and must be accorded substantial deference in
the calculation of any award. As our above discussion begins to
clarify, salvage awards are not based on the altruistic principle
of good samaritanism--that virtue is its own inducement and its own
reward. To paraphrase and distill its many distinguished
commentators, the very object of the law of salvage is to provide
an economic inducement to seamen and others to save property for
the good of society by bestowing a fitting reward for their
services in the courts of justice. It is profit, not principle,
that is the driving force behind the law of salvage, and the
question for the court is simply what amount of profit is fitting
in the case before it. The general economic reality is simply
that, the greater the value of the threatened property, the greater
the potential loss, and, consequently, the more the salvee would be
willing to pay to save that property from destruction. To
approximate properly the incentive that the salvee himself would
offer, it follows that the law of salvage must generally grant its
highest awards where the property has highest value (assuming the
24
other factors remain constant).15 See Landes & Posner, 7 J. Leg.
Stud. at 103-04.16
In setting the price for the salvage service, therefore, the
court must consider--and consider primarily--the benefit that the
service conferred on the recipient. In a case like the one before
us, where the benefits of the salvage are numerically so far in
excess of the costs--that is, the value of the property so high and
the risk of loss so great--this primary consideration becomes
dispositive. We are therefore confident that the district court
did not overly emphasize the fifth factor in its analysis in this
case, and are skeptical that an overemphasis would have been
possible. See also Platoro Ltd. v. The Unidentified Remains of a
Vessel, Her Cargo, Tackle, and Furniture, in Cause of Salvage,
15
Indeed, the only one of the factors that can arguably be said
to carry greater weight in this analysis is, as the district court
correctly concluded, the sixth--risk to the salved property--for it
is the other component of benefit conferred (i.e., the greater or
lesser the threat of loss, the greater or lesser the benefit, and,
consequently, the greater or lesser the price for the salvage
service). Where, as here, the risk is essentially conceded to have
been a 100 percent chance of total loss, the value of the salved
property obviously takes on added significance in measuring
benefit.
16
To those who would generally emphasize the cost factors over
benefit, we can only respond that no seller truly operates on the
principle of selling at cost; a seller is induced to provide his
goods or services by the opportunity for profit. The strong
influence of benefit (as determined by the value of the property
and the risk of loss) will often allow the salvor to extract a
significant amount of profit in a voluntary transaction, and the
law of salvage must reflect this circumstance, because it serves
the very purpose of the law of salvage to provide the correct
amount of incentive for the saving of property in every instance.
25
Civil and Maritime, 965 F.2d 893, 904 n.16 (5th Cir. 1983); Norris
§ 237; Gilmore & Black at 560 (all ranking the factors as the
district court did here, with the sixth and fifth factors being the
first and second most important, respectively).
(b)
The United States next argues that the district court erred by
counting the risk of environmental liability as risk to the salvors
under the fourth factor, when it should more properly have counted
against them in some way. There is no merit to this contention
either.
As just discussed, the fourth factor is intended to provide a
direct measure of some of the salvor’s actual salvage costs. In
this context, there is no principled reason to distinguish between
the costs imposed by the risk of injury or death, and those costs
imposed by the risk of negligence liability or strict environmental
damage liability. All are actual costs to the salvor, and he would
presumably be unwilling to perform the salvage service without
their recompense. For this reason, the risk of environmental
liability was properly counted under the rubric of the fourth
factor.17
17
To the extent the United States is actually arguing that
maritime law be altered to reduce the incentive for overeager
salvors to wreck environmental havoc in pursuit of their prize, we
note that there is no need for such a change in the law. As the
United States itself admits, applicable law already made Margate
strictly and completely liable for any oil spill that might have
resulted from the salvage operation. See, e.g., 33 U.S.C.
26
This analysis is not altered by the fact that the district
court did briefly consider the extra-Blackwall environmental
protection factor announced in Trico. That case announced an
additional factor, general protection of the environment by the
salvors, see 809 F. Supp. at 443, which has never been endorsed by
this court. In this case, the district court concluded that the
salvors did not achieve any significant protection of the
environment, and therefore it did not apply the factor. That
decision did not preclude the court from properly considering all
of the legal risks that Margate incurred, environmental or
otherwise, under the rubric of the traditional factors.
(c)
Finally, and most significantly, the United States also
complains that the district court erred by using a percentage of
the salved value in its ultimate calculation of the salvage award.
There is no merit to this contention either.
§ 2702(a) (“Notwithstanding any other provision or rule of
law . . ., each responsible party for a vessel or a facility from
which oil is discharged . . . into or upon the navigable waters or
adjoining shorelines . . . is liable for the removal costs and
damages . . . that result from such incident.”); see also 33 U.S.C.
§ 2718(c). As such, the environment was and is adequately
protected, and there is no need to conscript admiralty law for that
purpose. Putting this concern to one side, Margate was entitled to
the benefit of all the calculated risks it ran in the determination
of its award. This is not to say, of course, that any amount of
environmental risk could justify an award for more than the value
of the salved property. The maximum limitations and general
principles of salvage apply regardless.
27
We note at the outset that this court itself applied a
percentage-based calculation in modifying an award in our most
recent salvage case. See Allseas, 812 F.2d at 247. Furthermore,
and as we just stated above, our analysis of the economic
foundations of the Blackwall rule indicates that the value of the
salved property is one of the most important of the factors. The
most natural way to effectuate its salient character is simply to
make the award a function of that value. See Landes & Posner, 7 J.
Leg. Stud. at 103-04 (concluding that this is what courts have
correctly done); accord Gilmore & Black at 563. Indeed, since the
era of the Rhodian law itself,18 courts have applied percentages of
salved value in calculating awards. Although Justice Clifford’s
opinion in The Blackwall itself heralded an end to the earlier
practice of using a fixed percentage or “moiety” across all
situations, see Gilmore & Black at 563; Jones v. Sea Tow Services
Freeport NY Inc., 30 F.3d 360, 364 (2d Cir. 1994); The Kia Ora, 252
F. 507, 511 (4th Cir. 1918), we see no reason why the district
court may not use the other five factors to set a customized
percentage to be applied to the salved value for purposes of
calculating an award in the case before it. See Compagnie
Commerciale de Transport à Vapeur Francaise v. Charente Steamship
Co., 60 F. 921 (5th Cir. 1893) (acknowledging the incorrectness of
the fixed percentage method, yet upholding a customized percentage
18
See note 11.
28
award). Based on our interpretation of the purpose of the
Blackwall factors, we can indeed think of no more appropriate way
to effectuate their goals.
Consistent with our earlier analysis of the factors, we
therefore expressly state (to the extent that the issue may have
been in doubt) that an approved method for calculating salvage
awards is to use the first, second, third, fourth, and sixth
factors to arrive at a percentage to be applied to the fifth
factor, salved value, for purposes of establishing the award. In
setting the percentage, some care should of course be taken to stay
within the bounds of historical practice, see Section C, supra, and
to account for all of the relevant circumstances of the specific
salvage at issue. The predominant consideration, however, should
always be to arrive at an award that reasonably reflects the price
upon which the parties would have agreed. To the extent that the
district court merely applied this formula and adopted a
calculation based upon a percentage of salved value, it committed
no abuse of discretion in this case.
(d)
Although none of the United States’s own arguments with regard
to interpretation of the factors bears any fruit, we feel compelled
to raise one additional concern that has been fairly implicated,
even if not squarely addressed.
29
For what the district court did in this case goes just a bit
beyond the approach that we have outlined and approved. The court
first held that the Blackwall factors indicated an award of 12.5%
of the salved value in this case. So far, so good.19 After
determining that the salved value was $53 million, however, the
court also noted that, even if the value were actually lower, as
the United States argued, the dollar amount of the award would
remain the same, as the court would adjust the percentage
accordingly.
Based on our above interpretation of the Blackwall factors, we
cannot approve this alternate holding. To do so would completely
vitiate the effect of the fifth factor, and it is clear that such
a holding would exceed the district court’s discretion. Under our
longstanding precedent, the district court is bound to apply all of
the factors. Allseas, 812 F.2d at 246; Platoro, 695 F.2d at 903.
Furthermore, as the often critical measure of the arm’s-length
salvage price that the Blackwall rule attempts to ascertain, it is
clear that value of the salved property is one of the most
important of the factors, and the one that truly cannot be ignored.
To the extent that the district court attempted to evade the fifth
factor by tying the percentage to a fixed dollar amount, we reverse
that portion of its ruling. For the remainder of this opinion, we
19
At least as to general approach. With regard to the specific
percentage and overall amount, see Section C, infra.
30
may therefore restrict our discussion to the district court’s
primary holding that an award of 12.5% of the salved value was
appropriate, and that this figure was approximately $6.4 million.
To determine whether that holding may be allowed to stand, we
must consider the United States’s two remaining major complaints,
i.e., that the value assigned to ET-70 was a clear error, and that
the overall award was excessive both as to percentage and total
dollar value. We address each in turn.
B
The United States’s second major contention is that the
district court clearly erred in its valuation of ET-70. In this
complaint, we must agree.
1
At the outset, we note that “[i]n reviewing a district court’s
valuation . . . in a bench trial, we must accept all factual
findings unless clearly erroneous.” E.I. DuPont de Nemours & Co.
v. Robin Hood Shifting & Fleeting Service, Inc., 899 F.2d 377, 379
(5th Cir. 1990). Nonetheless, where valuation is concerned, the
district court’s methodology must be based upon principles that
reflect sound reasoning. See, e.g., Compagnie Commerciale, 60 F.
at 923-25. In this case, it was not.
Generally, the value of property for salvage purposes is its
market value as salved. See Norris § 263; Gilmore & Black at 561
n.89a; Nolan v. A.H. Basse Rederiaktieselskab, 267 F.2d 584, 588
31
(3d Cir. 1959). In the case of a unique good like a space shuttle
fuel tank, however, this measure is clearly inapposite; as there is
no market of any kind for space shuttle fuel tanks, there can be no
market value.
In this situation, and bearing in mind that ET-70 remained in
perfect condition despite the trials of the storm, the parties now
agree that the most appropriate measure of value is “replacement
cost.” This conclusion accords with this circuit’s decisions in
other areas of maritime law. See, e.g., E.I. DuPont de Nemours &
Co., 899 F.2d at 380 (in maritime tort context, “[w]hen no market
value exists for a vessel, ‘other evidence such as replacement cost
. . . can also be considered’”) (quoting King Fisher Marine
Service, Inc. v. NP Sunbonnet, 724 F.2d 1181, 1185 (5th Cir.
1984)); cf. The F.I. Robinson, 2 F. Supp. 644, 645 (E.D.N.Y. 1933)
(market value preeminent, but reproduction cost may be considered
in its absence). The question becomes how replacement cost is to
be determined.
The United States argues that the district court erred by
using the DD-250 cost of ET-71 to measure the replacement cost of
ET-70. It contends that the court should have based its valuation
on what it would actually have cost NASA to purchase a replacement
tank, and that this figure was conclusively established to be $19
million by the 1992 option.
2
32
Based on our earlier discussion of the purposes of salvage
law, we are convinced that the United States is quite correct, at
least in part. The purpose of establishing the value of the salved
property is to ascertain what benefit the salvage service conferred
on the salvee; what we wish to know, in the end, is what the salvee
was saved from so that we may establish what he reasonably would
have paid for the benefit of the saving. Where the benefit to the
salvee must be measured by the replacement cost of the salved
property, that figure should reflect the contemporary price to the
salvee of actual replacement. In this case, that price would
simply be the amount that NASA would actually have had to pay
Martin Marietta for them to make a new ET-70.
The district court made no effort to ascertain this figure,
despite ample evidence in the record. Instead, it engaged in a
semantic analysis of the literal meaning of the word “replacement,”
an analysis that failed to capture the economic reality of
determining actual replacement costs. If a party has several of
something, and one is destroyed, his substitution of a second thing
from his inventory simply does not constitute a “replacement” of
the destroyed item for valuation purposes, since the party owned
the “replacement” all along. In this case, NASA would not have
replaced ET-70 by using ET-71 on its designated mission; in the
end, NASA would still have had one less tank in its inventory than
it had before the storm. The question the district court should
33
have asked is what it would have cost NASA to get Martin Marietta
to build another tank. This, in the end, was the replacement
expense that NASA was saved from by Captain Strong’s decisive
action.
On this point, the evidence was absolutely undisputed that
NASA could have purchased an additional tank for approximately $19
million20 in out of pocket expense at the time of the salvage.
Martin Marietta had made a binding offer to produce up to four
additional tanks for this price, and although the offer had been
recently withdrawn, there was no evidence to suggest that it no
longer accurately reflected what Martin Marietta would charge.
True, the district court held that the “option” was too
“speculative” to be relied on. This finding, however, was
completely at odds with the record. In the light of all the
evidence, we are convinced that it was in clear error.
We find this to be the case principally because the “option”
was not really an option at all, but simply a firm offer. It
represented Martin Marietta’s unilateral offer to produce up to
four additional tanks for a price certain, and was not in any
20
This lower price was the natural result of increased
economies of scale and fixed overhead items that had already been
paid for. It represented Martin Marietta’s marginal cost of
producing an additional tank, which was substantially lowered by
the existence of NASA’s ongoing contract for the original sixty
tanks. Because NASA had already committed to that contract at the
time of the salvage, the United States is well justified in
claiming its benefits in this context, and we reject Margate’s
argument that this would somehow be unfair.
34
respect an option contract supported by separate consideration. As
such, the fact that it had been technically withdrawn, at NASA’s
request, six months before the salvage is of no moment. The only
thing that might have cast doubt on the accuracy of the option’s
price would have been evidence of changed circumstances in the
intervening time period. As there was no evidence of such changed
circumstances, the district court was bound to accept the
implications of the option.21
3
Unfortunately for the United States, this holding does not
quite end our inquiry. For although the “option” price was
conclusive as to NASA’s probable out of pocket expense in obtaining
a replacement for ET-70, it did not address all of the probable
replacement costs.
Any calculation of replacement cost must be based on a
replacement that is comparable to the lost item in all material
respects. E.I. DuPont de Nemours & Co., 899 F.2d at 382. In order
truly to replace ET-70, Martin Marietta would have had to provide
NASA with a new tank that incorporated all of the material features
21
We note in passing that this holding is somewhat contrary to
the Third Circuit’s decision in Nolan, which held that the district
court was allowed to rely on the “invoice” cost of a unique good
for salvage purposes in the face of conflicting evidence of
replacement cost. 267 F.2d at 588-89. We would suggest that the
instant case is distinguishable in that it involves absolutely
uncontradicted evidence of replacement cost. We also note,
however, that much of the reasoning behind Nolan does not seem to
be consistent with sound economic principles.
35
of the old one, both physical and temporal. Although payment of
the option price would have been sufficient to obtain a new tank
with all the requisite physical characteristics, that tank would
have been somewhat faulty as a temporal matter in that it would
only have become available for use three years after ET-70’s
designated mission. In a very real sense, ET-70’s value to NASA
was enhanced by the fact that it was a completed tank, available
for immediate use.22 Although the record is clear that no mission
need necessarily have been postponed by a delay in ET-70’s
replacement, it is also clear that for three years’ time NASA would
have had three usable tanks in circulation instead of its desired
minimum of four. Because ET-70’s existence avoided this three-year
shortfall, any acceptable replacement plan would have had to
address it as well. Because the tank available under the option
could not have done so,23 it would have been partially defective.
Where the available replacement is less than comparable in
some material way, the court must take the defect into account in
calculating the overall replacement cost. E.I. DuPont de Nemours
& Co., 899 F.2d at 382 (where replacement cost of large unique
22
An assessment that is, we note, substantially supported by
NASA’s haste to have ET-70 delivered, as evidenced by its abject
unwillingness to allow Orgeron to put into Miami to seek refuge
from the storm.
23
We note that neither party seems to have introduced any
evidence that there was a way to obtain a replacement tank any
faster than under the terms of the option.
36
barge was partially based on multiple smaller replacement barges,
district court should have taken the increased costs associated
with multiple trips into account). To complete ET-70’s valuation
in this case, we must therefore calculate an appropriate addition
to address NASA’s probable costs in curing the temporal defect. To
do so, the question this court must ask is exactly how much the
avoidance of a three-year, one-tank shortfall in NASA’s tank
circulation plan would have been worth.
Convenient to our decision today, the evidence on that point
was undisputed and conclusive, as it came directly from NASA
itself. In setting a minimum circulation of four tanks, NASA
determined that it was worthwhile to have four tanks in circulation
at all times instead of three. The reasons for this judgment no
doubt included a desire to allow for additional defects, a
commitment to avoid all foreseeable delays, and a host of other
factors irrelevant to the instant analysis. The important point is
simply that to fulfill its goals NASA itself decided to immobilize
approximately $50 million24 in additional capital every year to
ensure that there were four tanks in circulation instead of three.
In more colloquial terms, by keeping four tanks in circulation at
all times instead of three, NASA was making a conscious choice to
24
I.e., the approximate amount that NASA actually paid for each
additional tank during the relevant time period.
37
take $50 million from its budget and put it on a shelf instead of
spending it on other things.
Although the government is sometimes wont to think otherwise,25
money is now well known to have a time value. See Atlantic Mutual
Ins. Co. v. Commissioner of Internal Revenue, 118 S. Ct. 1413, 1415
(1998). The three-year treasury bill rate on November 15, 1994,
was 7.41%, and we are confident that the cost to the United States
of immobilizing $50 million over the three years in question was
approximately (1.07413 - 1) x $50 million = $12 million. Whatever
risks and costs NASA would have incurred by having three tanks in
circulation instead of four, NASA itself determined that these
risks were worth about $12 million to avoid. By rescuing ET-70,
Captain Strong saved NASA from this $12 million in additional risks
and costs as well, and it must be counted towards a proper
valuation of the tank.
Combining this additional $12 million with the $19,014,479
figure from the option, we arrive at a total replacement cost for
ET-70 of approximately $31 million. We therefore hold that the
district court was clearly in error in valuing ET-70 at
$51,387,000, and that the correct value was $31 million. Adding
the $2 million stipulated value of Poseidon, this leaves a total
25
See, e.g., Gore, Inc. v. Glickman, 137 F.3d 863, 869 (5th
Cir. 1998).
38
value for the salved property of $33 million.26 Applying the
district court’s 12.5% salvage percentage, see Compagnie
Commerciale, 60 F. at 924 (applying the district court’s choice of
customized salvage percentage to a corrected salved value in
computing the ultimate modified award), we are left with a new
salvage award of $4.125 million.
C
With this new figure in hand, we may address the United
States’s final complaint. Essentially, the United States argues
that, even assuming a correct and error-free assessment of the
Blackwall factors, any award in excess of either $2.5 million or
10% of the salved value constitutes an abuse of discretion in this
case. The United States made this argument originally with respect
to the district court’s $6.4 million/12.5% award. As it is equally
applicable to our amended $4.125 million/12.5% figure, we must
briefly address it before we can bring this case to a close. For
the reasons that follow, we hold that a $4.125 million/12.5% award
is not so excessive as to constitute an abuse of discretion in the
context of this case.
Consistent with our earlier analysis of the economic
principles underlying the law of salvage, the only hard numerical
26
In making this admittedly rough-and-ready valuation, we rely
on the fact that the value of the salved property need not be
determined with great precision in order to calculate an
appropriate award, even under the customized percentage method.
See Compagnie Commerciale, 60 F. at 924.
39
limitation that this court has ever placed on salvage awards is the
full value of the salved property. Allseas, 812 F.2d at 246-47
(reducing an award of 150% of the value of the salved property to
67.5% thereof). As we have already said, no reasonable salvee
would ever contract for the salvage of property at a price greater
than its value.
For awards, like the current one, that are far below the
absolute limit of Allseas, we have repeatedly emphasized that the
determination of the particular amount (or percentage) is a factual
inquiry best left to the sound discretion of the district court.
See Allseas, 812 F.2d at 246; Platoro, 695 F.2d at 903; Compania
Galeana, S.A. v. M/V Caribbean Mara, 565 F.2d 358, 360 (5th Cir.
1978). Where, as here, the district court has applied the
Blackwall factors in an appropriate way with a correct
understanding of their underlying purpose, the only useful review
that this court can conduct of the ultimate award is a general
comparison to similar decisions. Indeed, even this limited type of
review has been criticized by some courts, see, e.g., B.V. Bureau
Wijsmuller, 702 F.2d at 339, and we will conduct it in only the
most deferential and general way.27
27
Before embarking upon it, we do note, as have many others,
that there are essentially two ranges for percentage-based salvage
awards, one somewhat lower one for property of high value (as
compared to the costs of the salvor), and one somewhat higher one
for property of comparatively low value. See, e.g., Compagnie
Commerciale, 60 F. at 924. Although not particularly relevant to
this case, we note that this anomaly is not inconsistent with an
40
After some fairly extensive research, we have compiled a list
of the nine largest federal salvage awards in comparable high-
value, high-order cases since the advent of the Blackwall rule.
All amounts have been adjusted to 1994 dollars on the basis of the
relevant U.S. Consumer Price Index deflator. See John J. McCusker,
How Much Is That in Real Money? A Historical Price Index for Use as
a Deflator of Money Values in the Economy of the United States
(American Antiquarian Society 1992).
economic theory of salvage. Where the salved value is particularly
low compared to the costs of the salvor, the percentage of value
awarded must be higher in order to assure that the salvor at least
recovers his costs. For this reason, these low salved value cases
correctly produce anomalously high percentage awards. See, e.g.,
Allseas, 812 F.2d at 246-47 (awarding 67.5% in the case of a
relatively run-down and low-value salved vessel). For purposes of
this case, we may obviously constrain our analysis to cases
involving comparatively high salved values (and low percentage
awards).
41
Total Date General Description Labor Skill, Value of Risk to Value of Risk to Award
Award of etc. Salving Salvors Salved Salved as % of
Salv Property Property Property Salved
$3.5m 1941 German merchant vessel 67 men High $130.2m Avg $22.7m High and 15.4%
scuttled and abandoned by 11 days Imminent
crew; U.S. Navy boarding
party repaired scuttling
damage and navigated her
into port. The Omaha, 71 F.
Supp. 314 (D. P.R. 1947).
$2.5m 1896 Large liner aground on New 205 men High $7.6m Low $37.8m High but 6.6%
Jersey beach; professional 11 days not
salvors pulled her free. The Imminent
St. Paul, 82 F. 104 (S.D.N.Y.
1897).
$1.7m 1917 Vessel aground on remote 70 men 6 High $5.2m Low $44.9m High but 3.8%
coral reef; professional days not
salvors travelled 360 miles Imminent
and pulled her free. The Kia
Ora, 252 F. 507 (4th Cir.
1918).
$1.2m 1977 Vessel aground on rocky $245k Avg N/A Low $15.9m Avg 7.5%
ledge; professional salvors
removed fuel, laid out
beaching gear, and refloated
and towed her some
distance. B.V. Bureau
Wijsmuller v. United States,
702 F.2d 333 (2d Cir. 1983).
$1.1m 1942 Neutral tanker twice Minimal Low N/A N/A $11.0m High but 10.0%
torpedoed and abandoned; not
U.S. Navy picked up crew Imminent
and replaced on board.
Crew navigated ship to port.
Usatorre v. Compania
Argentina Navegacion
Mihanovich, Ltda., 64 F.
Supp. 370 (S.D.N.Y. 1945),
reversed on other grounds,
172 F.2d 434 (2d Cir. 1949).
$944k 1983 Vessel aground at remote 1 ship High $5.6m High $10.8m High but 8.7%
location in high winds; 2 days not
nonprofessional salvors Imminent
pulled her free. Vessel then
fouled her own propeller
while retrieving mooring line;
salvors helped to clear.
Walter Kuhr, Sr. v. Sea-
Alaska Products, Inc., 1986
A.M.C. 2299 (W.D. Wash.
1985).
$825k 1968 Vessel afire and abandoned; 1 ship High $20.2m Avg $7.8m High and 10.6%
nonprofessional salvors 26 hours Imminent
boarded and kept her from
sinking, then made
unsuccessful attempt to tow.
St. Paul Marine Trans. Corp.
v. Cerro Sales Corp., 505
F.2d 1115 (9th Cir. 1974).
$793k 1919 Large liner holed by collision 186 men Low $2.1m N/A $12.4m High but 6.4%
and beached; professional 63 hours not
salvors (and others) towed, Imminent
beached, patched, refloated,
and navigated her into port.
Merritt & Chapman Derrick &
Wrecking Co. v. United
States, 63 Ct. Cl. 297 (1927).
$750k 1880 Vessel aground on Virginia 100 men High N/A Low $3.0m High but 25.0%
beach; professional salvors 7 days not
pulled her free. The Imminent
Sandringham, 10 F. 556
(E.D. Va. 1882).
42
For this case, a comparable listing is:
Total Date General Description Labor Skill, Value of Risk to Value of Risk to Award
Award of etc. Salving Salvors Salved Salved as % of
Salv Property Property Property Salved
$4.125m 1994 Two vessels adrift and in 2 1/3 High $7.5m High $33.0m High and 12.5%
imminent danger of days Imminent
grounding in severe
storm. Nonprofessional
salvors ventured into
perilous shoal waters and
towed vessels to safety.
In the context of these past awards, it is difficult to say
that the reduced $4.125 million/12.5% award here is wrong, much
less an abuse of discretion. The range of percentages appears to
run from about 4% to 25%,28 and the percentage here is smack in the
middle of that range. Furthermore, as the district court noted, it
is rare that a salvage action would involve such high ratings on
each of the factors as was the case here. The only case in the
list that is fairly comparable in this respect is The Omaha, and
there the salvors did not incur great risk to themselves.
Furthermore, that case resulted in a higher award in percentage
terms. Although the dollar amount of the award in this case would
still appear to be the highest ever, even after our modification,
in the light of all its factors, it simply does not look out of
place in the context of high-value, high-order salvage cases. For
28
Which is consistent with the judgment of most modern
commentators, see, e.g., Gilmore & Black at 563 (finding an upper
limit of about 20% in high-value cases), and the practice of courts
since the time of the Rhodian law itself, see note 11, supra.
43
this reason, it is not so excessive as to constitute an abuse of
discretion.
V
CONCLUSION
In conclusion, we AFFIRM the district court’s interpretation
of the Blackwall factors and choice of salvage percentage. In
particular, we AFFIRM and sanction the district court’s decision to
use the first, second, third, fourth, and sixth factors to
calculate a percentage to be applied to the fifth factor, salved
value, for purposes of fixing an award, because this practice is
inherently consistent with the underlying purpose of salvage awards
and the Blackwall factors (i.e., to simulate the price that the
parties would have agreed to in a competitive negotiated setting).
We also AFFIRM the district court’s assessment of environmental
liability as a risk properly considered under the rubric of the
fourth factor. Finally, we also AFFIRM the district court’s
specific choice of percentage in this case, because it is
consistent with the historical pattern in cases of similar nature,
and therefore is not so excessive as to constitute an abuse of
discretion. We REVERSE the judgment of the district court as to
the value of the salved property, however, and must therefore
MODIFY its ultimate salvage award. For the stated reasons, we
REDUCE Margate’s salvage award from $6,406,440 to 4,125,000 and
direct that judgment be entered in that amount.
44
AFFIRMED in part, REVERSED in part, award REDUCED, and RENDERED.
45