Lost Profits in an Allision

An expert witness should always prepare sufficient evidence and testimony to support his or her opinion in order to convince the trier of fact that their opinion is correct. Most cases are interesting to work on, but sometimes, you get to work on one that is more interesting than most. That was the case in Great Lakes Dredge & Dock Co., LLC v. M/T Orange Sun which had to do with an allision.

Very few people know what an allision is. A ship colliding with another ship at sea is called a collision. A ship colliding with a stationary object is called an allision. So when the Titanic collided with an iceberg, that was an allision because the iceberg wasn’t moving.

Today’s large supertankers require a deep passage. Most of the harbors throughout the United States and the world aren’t deep enough to accommodate the supertankers. Recognizing this, the U.S. Army Corps of Engineers retained the services of the Great Lakes Dredge & Dock Company (the “dredge company”) and spent hundreds of millions of dollars to deepen New York’s harbors.

A few years ago, while a tanker (the “M/T Orange Sun”, aka the “tanker company”) was going through New York’s harbor, there was an allision with Great Lake’s dredge. A dredge is nothing more than a crane, which removes dirt/sand/rock, attached to a barge. As a result of the allision, the dredge was out of commission for 9 months. While the dredge repair costs were reimbursed by the owner of the tanker, the dredge company was of the opinion that as a result of the dredge being out of commission, the dredge company deserved compensation for lost profits.

The tanker company was of the opinion that prior to the dredge being involved in this allision, this particular dredge was working on three contracts to deepen the New York Harbors, each for about a $100 million. While the dredge was out of commission, it wasn’t able to work on these contracts, but after the 9 months it took to be repaired, the dredge completed the three contracts and obtained the balance of the contract revenues, so where were the lost profits?

It was the dredge company’s position that those three contracts would have been completed earlier, leaving the dredge available to work on other projects. It was the tanker’s position that there were no other projects, and they alleged that the dredge wouldn’t have been able to work on other projects because its only customer was the U.S. Army Corps of Engineers and no other contracts were issued by the Army Corps of Engineers, so therefore there were no lost profits.

That case was before a U.S. Federal Judge, the Hon. Katherine B. Forrest, in the U.S. District Court for the Southern District of New York.

Rosenfarb LLC calculated that those 9 months would have resulted in approximately $12 million worth of lost profits. The tanker company retained their own expert who said there were no lost profits, so we had the battle of the experts before Judge Forrest. With a possible award between $0 and $12 million, you might think the judge would award something in between, but not in this case. Here the judge found in favor of Great Lakes Dredge & Dock Company, awarding them $12 million in lost profits. The judge said that the lost profits didn’t need to be calculated with complete certainty, but with reasonable certainty. The judge ruled that Rosenfarb LLC had proved reasonable certainty of $12 million of lost profits.

The calculation of lost profits are prophecies of the future – and like all prophecies they are subjective. At Rosenfarb LLC we produce well-supported, well-reasoned and well-communicated damage calculations that withstand the rigors of litigation. We are a firm of forensic accounting and valuation experts. We understand business, have keen insights and always connect the dots. We understand the litigation process. We frame the issues simply and in alignment with the litigation strategy. We use logic to support our opinions, while creating compelling stories. We are sincere, professional and credible. We are accounting experts with legal acumen.

Rosenfarb LLC
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