VL8 Pool, Inc. v. Glencore Ltd.

Background

VL8 time chartered the vessel M/V NAVE PHOTON from a non-party. It obtained marine fuel through Integr8 Fuels, Inc., which arranged fueling by Glencore Limited. The fuel was delivered in Texas on or about March 11, 2018. VL8 alleged that, when the vessel later used the fuel, its filters, pumps, injectors, engines, tanks, and fuel system were damaged; the vessel had to reduce speed, shut down several times, obtain salvage services, go off-hire periodically, and divert to obtain replacement fuel. Later testing allegedly found fatty acids and other materials and showed that the fuel did not meet industry specifications.

VL8 alleged that Glencore knew or should have known that the fuel was defective and dangerous but did not warn customers or end users. The complaint asserted four counts: breach of contract and warranty, negligence, product liability, and indemnity and contribution. Glencore moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint plausibly states a claim for relief.

Count I: Contract and Warranty

The court dismissed Count I. The parties’ general terms and conditions excluded consequential or indirect damages, including deviation costs, demurrage, damage to vessels and their engines or tanks, and lost profits. VL8 argued that the limitation was unenforceable because Glencore could not limit damages caused by intentional misconduct or gross negligence. The court rejected that argument because VL8 had not alleged facts showing that Glencore knew or should have known about the fuel problem at the relevant time, much less that Glencore acted recklessly.

The court also rejected VL8’s argument that its damages were direct because the fuel directly caused the damage. It explained that direct damages compensate for the promised performance, while consequential damages compensate for additional losses caused by a breach. The court concluded that VL8 had pleaded only consequential damages, which the contract barred. It therefore dismissed Count I. The court did not need to decide Glencore’s separate argument that VL8 failed to provide timely notice.

Counts II and III: Negligence and Product Liability

The court dismissed Counts II and III under the maritime rule commonly called the Robins Dry Dock rule. As described by the court, that rule generally bars recovery for economic losses caused by an unintentional maritime tort unless the claimant alleges physical damage to property in which it has a proprietary interest. The court stated that the rule also applied to VL8’s product-liability claim.

Although VL8 alleged physical damage to the vessel, the court held that VL8 had not adequately pleaded the required proprietary interest. The relevant interest required allegations of actual possession or control, responsibility for repair, and responsibility for maintenance. VL8 relied mainly on allegations that it paid for salvage services to tow the vessel into port. The court found those allegations insufficient. It also declined to consider whether a contract shifting the vessel owner’s losses to VL8 could create an exception because VL8 had not alleged such a contract.

Count IV and Leave to Amend

VL8 requested permission to amend if the court dismissed its claims. The court granted that request under the rule that courts should generally allow amendment when justice requires it. Because amendments to Counts I, II, and III could affect the indemnity-and-contribution claim, the court declined to reach the merits of Count IV. The opinion does not state a separate dismissal or other final disposition for Count IV.

Disposition

The court granted Glencore’s motion to dismiss and granted VL8 leave to amend. VL8 was ordered to file an amended complaint within 14 days.