PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT
This memorandum constitutes a privileged and confidential communication between Calderwood & Harkness LLP and its client, Thalassa Shipping & Logistics SA. It contains information protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the addressees. Any distribution, copying, or disclosure to any person not authorized to receive this communication is strictly prohibited and may constitute a waiver of applicable privileges. If you have received this document in error, please contact Calderwood & Harkness LLP immediately.
CALDERWOOD & HARKNESS LLP One Liberty Plaza, 50th Floor New York, NY 10006 Telephone: (212) 558-4000 Facsimile: (212) 558-3588
October 30, 2024
MEMORANDUM
TO:
Alexandros Stavridis, Chairman and Chief Executive Officer, Thalassa Shipping & Logistics SA
Markos Theodorakis, General Counsel, Thalassa Shipping & Logistics SA
Elena Papadimitriou, Chief Financial Officer, Thalassa Shipping & Logistics SA
FROM:
Douglas Carmichael, Responsible Partner, Calderwood & Harkness LLP
Francesca Morano, Billing Partner, Calderwood & Harkness LLP
RE:
Mediation Result and Settlement Terms — Northwind Maritime Corporation v. Thalassa Shipping & Logistics SA and Aegean Fortuna Shipholding Ltd., Index No. 655421/2023, Supreme Court of the State of New York, New York County, Commercial Division (Part 49, Hon. Lorraine K. Chen, J.S.C.)
C&H Matter No.: 1044-00006
CC:
Carlos Espinoza, Lead Associate, Calderwood & Harkness LLP
Hannah Brinkley, Working Associate, Calderwood & Harkness LLP
I. Executive Summary
The purpose of this memorandum is to report on the successful conclusion of the mediation in the above-referenced matter and to describe in detail the settlement in principle reached on October 29, 2024. This memorandum also identifies the immediate action items that require management's attention in order to finalize the settlement and achieve a prompt and orderly resolution of this litigation.
The mediation was conducted over two days, October 28–29, 2024, before the Honorable Gerald K. Fitzpatrick (Ret.), a retired Justice of the Appellate Division, First Department, at the offices of Bayside Dispute Resolution Services LLC, 140 Broadway, Suite 3200, New York, NY 10005. After extensive negotiations involving numerous caucus sessions and joint discussions, the parties reached a settlement in principle on the afternoon of October 29, 2024 for a total payment by Thalassa Shipping & Logistics SA ("TSL" or "Thalassa") to Northwind Maritime Corporation ("Northwind") of $7,850,000. The principal terms of the settlement were memorialized in a one-page mediator's term sheet signed by counsel for both parties on October 29, 2024. A copy of the term sheet is enclosed with this memorandum.
The settlement resolves all claims, counterclaims, and cross-claims in the litigation, including Northwind's breach of charter-party claims, TSL's $1,620,000 counterclaim for unpaid hire, and any related third-party claims, all arising out of the charter-party (Reference No. NW-TSL-CP-2020-1203) for the M/V Aegean Fortuna.
We consider this a favorable result for Thalassa. The settlement represents approximately 42.9% of Northwind's total claimed damages of $18,300,000, a significant discount from Northwind's asserted exposure. Importantly, when the economic value of TSL's waiver of the $1,620,000 counterclaim is taken into account, the net economic cost to TSL is approximately $6,230,000. Furthermore, the Oceanus Mutual Protection & Indemnity Club is expected to contribute $2,500,000 toward the settlement under TSL's P&I policy, reducing TSL's corporate cash outlay to approximately $5,350,000. The settlement falls comfortably within the $6.5 million to $9 million range recommended by our Settlement Authority Memorandum dated October 15, 2024, and well below the $8.5 million ceiling authorized by the TSL Board of Directors on October 18, 2024.
The following sections of this memorandum address: (i) the background and litigation posture at the time of mediation; (ii) a summary of the mediation proceedings; (iii) the specific settlement terms as reflected in the mediator's term sheet; (iv) a financial analysis and evaluation of the settlement; (v) lender notification requirements; (vi) insurance matters; (vii) detailed next steps and action items; and (viii) our overall recommendation. We request that management review this memorandum carefully and direct any questions to Douglas Carmichael or Francesca Morano at their earliest convenience.
II. Background and Litigation Posture at Mediation
A. Case Overview
This case arises out of a 36-month time charter-party for the M/V Aegean Fortuna, a Supramax dry bulk carrier (IMO 9847231, 58,200 DWT, Liberian flag), entered into between Northwind Maritime Corporation, as disponent owner, and Thalassa Shipping & Logistics SA, as charterer. The charter-party was executed on December 3, 2020, on a New York Produce Exchange (NYPE) 2015 form, as amended by Riders A through E (Reference No. NW-TSL-CP-2020-1203). The charter period commenced on January 15, 2021 and was scheduled to expire on January 14, 2024. The daily hire rate was $14,750, yielding a total charter value over the full 36-month term of approximately $16,166,000.
Northwind filed its complaint in the Supreme Court of the State of New York, New York County, on October 2, 2023. The case was assigned to the Commercial Division, Part 49, before the Honorable Lorraine K. Chen, J.S.C. Northwind's complaint alleged three principal categories of breach by TSL:
(1) Failure to maintain the vessel in seaworthy condition — Northwind alleged that TSL failed to maintain the M/V Aegean Fortuna in a seaworthy and cargo-worthy condition, resulting in three separate mechanical incidents: (a) a main engine turbocharger failure off the coast of Durban, South Africa in March 2022 ("Incident 1"); (b) a ballast pump malfunction and subsequent cargo contamination in the port of Richards Bay, South Africa in July 2022 ("Incident 2"); and (c) a hydraulic crane failure during cargo operations in Qingdao, China in November 2022 ("Incident 3").
(2) Unauthorized route deviation — Northwind alleged that TSL ordered the M/V Aegean Fortuna to make an unauthorized call at the port of Maputo, Mozambique in September 2022, deviating from the approved voyage route and resulting in additional port costs, bunker consumption, and a laycan miss at the next scheduled load port.
(3) Liquidated damages under Clause 28 — Northwind alleged that the mechanical incidents and the unauthorized deviation triggered the liquidated damages provision in Clause 28 of the charter-party, entitling Northwind to liquidated damages calculated at 150% of the daily hire rate for each day of delay, up to a cap of $4,500,000.
Calderwood & Harkness LLP was engaged by TSL on October 16, 2023, promptly following Northwind's filing of the complaint. TSL's Answer and Counterclaim were filed on November 17, 2023. The counterclaim asserted a claim for $1,620,000 in unpaid hire for the period from October 1, 2022 through December 31, 2022 (110 days at $14,750 per day), which Northwind had withheld on the asserted basis that the vessel was off-hire during that period due to the mechanical incidents and deviation.
B. Key Litigation Milestones Prior to Mediation
The litigation progressed through several significant milestones in the approximately twelve months between the filing of TSL's Answer and the commencement of mediation. The following summary highlights the key procedural and substantive developments that shaped the parties' respective positions and informed the settlement negotiations:
Motion to Dismiss. On December 15, 2023, TSL filed a motion to dismiss Counts III and V of Northwind's complaint pursuant to CPLR 3211(a)(7). Count V alleged a claim for unjust enrichment, which we argued was duplicative of Northwind's breach of contract claims. Count III asserted claims for third-party shipper damages that we argued were improperly pleaded and lacked the requisite privity or assignment. Justice Chen issued her decision on March 8, 2024. The Court dismissed Count V (unjust enrichment) in its entirety, agreeing with TSL's position that the claim was duplicative of the contract-based causes of action where the charter-party governed the parties' relationship. The Court narrowed Count III, limiting Northwind's third-party shipper claims to those where Northwind could demonstrate a valid assignment or subrogation interest, but declined to dismiss the count entirely. This ruling significantly reduced Northwind's potential recovery on the third-party shipper claims, which Northwind had originally valued at $5,634,400.
discovery Period. The discovery period ran from January through August 2024. Document discovery was extensive, encompassing vessel operational records, maintenance logs, classification society reports, voyage instructions, hire invoices and payment records, correspondence between the parties, and communications with the Oceanus P&I Club and Fortis Marine Underwriters Ltd. E-discovery was managed by Lighthouse Data Analytics Inc., which hosted the parties' document review platforms and processed approximately 1.2 million documents.
Depositions. Fact depositions were conducted between April and July 2024. The following witnesses were deposed on behalf of, or in connection with, TSL:
• Alexandros Stavridis, Chairman and CEO, Thalassa Shipping & Logistics SA — April 22, 2024
• Captain Nikolaos Giannopoulos, Master, M/V Aegean Fortuna — May 10, 2024
• Chief Engineer Petros Vlahos, M/V Aegean Fortuna — June 28, 2024
The following witnesses were deposed on behalf of, or in connection with, Northwind:
• Viktor Lindgren, Chief Operating Officer, Northwind Maritime Corporation — May 30, 2024
• Sandra Chow, Chartering Manager, Northwind Maritime Corporation — June 14, 2024
Three additional fact witnesses were deposed in July 2024, including a representative of the vessel's classification society, a representative of the bunker supplier at Maputo, and a representative of Eastbourne Bulk Carriers Ltd., Northwind's sub-charterer.
Expert Reports. Expert reports were served on the following schedule:
• TSL's experts: Dr. Henrik Sørensen of Nordic Maritime Consulting Group ApS (Copenhagen), who opined on vessel seaworthiness, maintenance standards, and the latent defect defense, and Dr. Constance Albright of Clearwater Economics LLC (New York), who opined on damages valuation and the proper construction of the liquidated damages cap — reports served August 5, 2024.
• Northwind's experts: Captain Julian Blackmore of Blackmore Maritime Advisory Ltd. (London), who opined on vessel maintenance standards and the deviation claim, and Dr. Rajesh Anand of Pinnacle Valuation Partners LLP (New York), who opined on damages valuation — reports served August 19, 2024.
• Rebuttal reports from all experts were served on September 9, 2024.
Motion for Partial Summary Judgment. On September 20, 2024, TSL filed a Motion for Partial Summary Judgment addressing two key issues: (1) the proper interpretation of the liquidated damages cap under Clause 28, and (2) the deviation claim relating to the Maputo call. On the LD cap issue, TSL argued that the $4,500,000 cap was a single aggregate cap applicable to the entire charter period, rather than a per-incident cap that could be applied separately to each of the three mechanical incidents and the deviation. On the deviation claim, TSL argued that the Master's exercise of discretion in calling at Maputo was authorized under the charter-party's employment and indemnity clause and was necessitated by legitimate safety and operational concerns. Oral argument on the motion was scheduled for December 6, 2024 before Justice Chen. As discussed below, this motion will now be withdrawn as part of the settlement.
Court-Ordered Mediation. Justice Chen ordered the parties to participate in mediation no later than October 31, 2024. The parties jointly selected the Honorable Gerald K. Fitzpatrick (Ret.) as mediator and scheduled the mediation for October 28–29, 2024.
C. TSL's Defenses and Settlement Authority
As detailed in our Settlement Authority Memorandum dated October 15, 2024, C&H conducted a comprehensive risk assessment of the litigation and recommended a settlement range of $6.5 million to $9 million, reflecting the strengths and weaknesses of both parties' positions. The TSL Board of Directors, by resolution dated October 18, 2024, authorized settlement of the dispute for an amount not to exceed $8.5 million.
The settlement of $7,850,000 falls within the recommended range and well below the $8.5 million ceiling authorized by the Board.
TSL's negotiating position was materially strengthened by several defenses that created meaningful litigation risk for Northwind and significant downside exposure in the event of an adverse ruling on TSL's pending summary judgment motion. The key defenses that drove the negotiation dynamics included the following:
(1) Liquidated Damages Cap Interpretation (Clause 28). TSL advanced a strong argument that the $4,500,000 liquidated damages cap in Clause 28 of the charter-party constituted a single aggregate cap applicable to the entire charter period, not a per-incident cap. Under TSL's interpretation, Northwind's maximum recovery on its liquidated damages claim would have been limited to $4,500,000 in the aggregate, rather than the $4,500,000 per incident that Northwind argued (which, across three incidents and the deviation, could have yielded liquidated damages approaching $18 million on its face). Dr. Albright's expert analysis supported TSL's interpretation and calculated that under the proper reading of Clause 28, the liquidated damages exposure would be limited to approximately $1,504,500 (68 days of delay × $14,750/day × 150%).
(2) Latent Defect Defense (Incident 1). TSL asserted that the turbocharger failure in Incident 1 was caused by a latent manufacturing defect in a replacement part installed by Glenrock Industries during a scheduled drydocking prior to the charter period, and that TSL had exercised due diligence in maintaining the vessel. This defense, if successful, would have negated liability for Incident 1 entirely.
(3) Charterer Causation (Incident 2). TSL asserted that the ballast pump malfunction in Incident 2 was caused or contributed to by contaminated ballast water introduced into the vessel's ballast system by Northwind's agents at the port of Richards Bay. The evidence on this point was contested, but TSL had supporting testimony from Chief Engineer Vlahos and corroborating analysis from Dr. Sørensen.
(4) Master's Discretion Defense (Maputo Deviation). TSL asserted that the call at Maputo was authorized under the Master's general discretion to deviate for safety, operational, or bunkering reasons, and that the deviation was necessitated by weather conditions and a fuel supply concern. Captain Giannopoulos's deposition testimony was generally supportive of this defense.
(5) Inter-Club Agreement Bar on Cargo Damage Claims. TSL argued that the cargo damage claims relating to the iron ore oxidation during Incident 2 were subject to the Inter-Club New York Produce Exchange Agreement (ICA) and that Northwind bore responsibility for cargo damage under the applicable ICA allocation provisions.
(6) Non-Recoverability of Third-Party Shipper Claims. TSL argued that the third-party shipper claims asserted in Count III were not recoverable as a matter of law because Northwind had not demonstrated valid assignments or subrogation interests. This argument was partially vindicated by Justice Chen's March 8, 2024 ruling on the Motion to Dismiss, which narrowed Count III and significantly reduced Northwind's potential recovery on these claims.
(7) Failure to Mitigate. TSL argued that Northwind failed to take reasonable steps to mitigate its damages, including by failing to source a substitute vessel in a timely manner and by failing to take commercially reasonable steps to minimize cargo damage after Incident 2.
These defenses, taken together, created substantial downside risk for Northwind and positioned TSL favorably entering the mediation.
III. Mediation Summary
A. Format and Participants
The mediation was conducted over two full days, October 28 and October 29, 2024, at the offices of Bayside Dispute Resolution Services LLC, located at 140 Broadway, Suite 3200, New York, NY 10005. The sessions commenced at approximately 9:30 a.m. each day and concluded at approximately 7:00 p.m. on October 28 and approximately 4:45 p.m. on October 29, when the settlement in principle was reached.
The mediator was the Honorable Gerald K. Fitzpatrick (Ret.), a retired Justice of the Appellate Division, First Department, who served on the bench for 18 years and developed a recognized expertise in complex commercial disputes, including maritime and international trade matters. Justice Fitzpatrick is a senior mediator with Bayside Dispute Resolution Services LLC and was jointly selected by the parties.
The mediation began with a brief joint session in which each side presented opening statements, followed by extended caucus sessions throughout the remainder of both days. The mediator conducted numerous private caucuses with each side, shuttling proposals and counterproposals throughout the process.
TSL was represented at the mediation by Douglas Carmichael, Partner, and Carlos Espinoza, Lead Associate, of Calderwood & Harkness LLP. Markos Theodorakis, General Counsel of TSL, participated on behalf of TSL management and was present throughout both days of the mediation.
Northwind was represented at the mediation by Margaret Delacroix and Jason Trumbull of Hargrove, Delacroix & Stern LLP. Viktor Lindgren, Chief Operating Officer of Northwind Maritime Corporation, participated on behalf of Northwind management.
B. Key Negotiation Dynamics
Northwind opened the negotiation with a demand of $14,000,000, which reflected a modest reduction from its full claimed damages of $18,300,000 but remained aggressively positioned. TSL opened with an offer of $4,000,000, which was consistent with TSL's assessment of its reasonable worst-case downside exposure after accounting for the strength of its defenses on the LD cap interpretation, charterer causation, and the narrowed third-party shipper claims.
Throughout the first day of mediation, the parties exchanged several rounds of proposals, with each side making incremental moves. The negotiation focused on several key areas of dispute:
• The Liquidated Damages Cap Dispute. This was the single most significant issue in the negotiation. The parties' competing interpretations of Clause 28 produced dramatically different damages calculations. Northwind contended that the $4,500,000 cap applied separately to each qualifying incident, while TSL maintained that the cap applied once in the aggregate for the entire charter period. The mediator observed to both sides in caucus that this was a question of first impression under New York law with respect to the specific contractual language at issue, and that neither party could have certainty regarding how Justice Chen would rule on TSL's pending summary judgment motion.
• The Strength of TSL's Summary Judgment Motion. Northwind expressed confidence that it would prevail on the summary judgment motion, while TSL maintained that it had a strong likelihood of success on at least the LD cap issue. The mediator acknowledged the strength of TSL's arguments but noted the inherent unpredictability of motion practice on a question of first impression.
• Cargo Damage and Third-Party Shipper Claims. The cargo damage claims ($3,420,000) and third-party shipper claims ($5,634,400) represented a significant portion of Northwind's total claimed damages. TSL maintained its defenses on these claims, including the Inter-Club Agreement allocation, charterer causation for the ballast contamination, and the narrowing of Count III by Justice Chen. Northwind acknowledged the impact of the MTD ruling but argued that it retained viable claims on the remaining assigned shipper claims.
• The Counterclaim Offset. TSL's $1,620,000 counterclaim for unpaid hire was a significant factor in the negotiation. Northwind recognized that any settlement would need to account for the counterclaim exposure, which effectively reduced the net amount Northwind would realize from the settlement.
• Overall Litigation Risk. The mediator emphasized to both sides the inherent risks and costs of proceeding to trial, including the risk of an adverse verdict, the costs of expert testimony, the unpredictability of jury or bench trial outcomes (the parties had not yet resolved the trial forum), and the executive time and distraction associated with continued litigation.
By the end of the first day, the parties had narrowed the gap significantly but had not reached agreement. Northwind's last position on October 28 was approximately $10,500,000, while TSL's last position was approximately $6,200,000. The mediator encouraged both sides to reflect overnight and return prepared to make further movement.
On the second day, the mediator conducted extensive separate caucuses, pushing both parties toward the zone of potential agreement. After several additional rounds of proposals and counterproposals, the parties reached a settlement in principle at approximately 4:30 p.m. on October 29, 2024 at a total settlement figure of $7,850,000.
The principal terms were promptly memorialized in a one-page term sheet prepared by the mediator and signed by counsel for both parties. It is important to note that the term sheet is not intended to constitute a binding and enforceable settlement agreement; rather, it memorializes the parties' agreement in principle on the principal economic and structural terms, pending the negotiation and execution of a definitive Settlement Agreement and Mutual General Release. Nevertheless, the term sheet does reflect a genuine meeting of the minds on the core terms, and both sides expressed their commitment to finalizing the settlement documents promptly.
IV. Settlement Terms
The following is a detailed summary of the settlement terms as reflected in the mediator's term sheet executed on October 29, 2024, together with additional provisions that will need to be incorporated into the definitive Settlement Agreement.
A. Settlement Amount
The total settlement amount is $7,850,000 (Seven Million Eight Hundred Fifty Thousand Dollars), to be paid by TSL to Northwind in three installments according to the following schedule:
The "Effective Date" will be defined in the Settlement Agreement as the date of execution of the Settlement Agreement by all parties. The three-installment structure was negotiated to accommodate TSL's cash flow considerations and to allow time for the Oceanus P&I Club contribution to be processed.
The sum of the three installments ($4,000,000 + $2,000,000 + $1,850,000) equals the total settlement amount of $7,850,000.
B. Funding Sources
The settlement will be funded from two sources:
(1) TSL Corporate Funds: $5,350,000
(2) Oceanus Mutual Protection & Indemnity Club Contribution: $2,500,000, payable under Policy No. OCE-P&I-2020-TSL-0047
The P&I Club contribution is subject to approval by the Oceanus Board of Directors. Based on C&H's discussions with the Club's claims handler, David Okafor, we expect that Board approval will be obtained by November 22, 2024. As discussed in Section VII below, C&H will submit a formal claim letter to the Oceanus P&I Club imminently and will transmit the execution version of the Settlement Agreement for Board review as soon as it is finalized.
The allocation of the settlement payment between TSL corporate funds and the P&I Club contribution will need to be coordinated with Elena Papadimitriou's office to ensure that funds are available to meet the payment deadlines set forth above. We recommend that TSL and the P&I Club agree in advance on which installments will be funded by the Club contribution, in whole or in part, to avoid any ambiguity or delay.
C. Escrow Arrangements
All settlement payments will be deposited into an escrow account maintained by Atlantic Fiduciary Trust Company, located at 60 Wall Street, Suite 2800, New York, NY 10005. The escrow contact is Martin Schreiber, Vice President, Escrow Services. The escrow account, designated as Escrow Account No. ESC-2024-NYK-08831, will be established upon execution of a separate Escrow Agreement.
Funds held in the escrow account will be released to Northwind upon joint written instruction of both parties (or, in certain default scenarios, upon order of the court). The Escrow Agreement will set forth the specific terms governing the deposit, investment, and release of funds, as well as the escrow agent's fees, duties, and standard indemnification provisions.
C&H will prepare a first draft of the Escrow Agreement and circulate it to Hargrove, Delacroix & Stern LLP for review by November 8, 2024. The Escrow Agreement is to be negotiated and executed simultaneously with the Settlement Agreement.
D. Mutual General Release
The settlement will include a full mutual general release of all claims, counterclaims, cross-claims, and third-party claims arising out of or related to the charter-party (Reference No. NW-TSL-CP-2020-1203) and the M/V Aegean Fortuna. The release will be comprehensive in scope and will encompass all causes of action, whether known or unknown, that arise from or relate to the charter-party, the vessel, and the events giving rise to the litigation.
Critically, the mutual release encompasses TSL's counterclaim for $1,620,000 in unpaid hire covering the period from October 1, 2022 through December 31, 2022 (being 110 days at $14,750 per day). As a result, from TSL's internal accounting perspective, the net economic cost of the settlement is the $7,850,000 payment less the $1,620,000 waived counterclaim, or approximately $6,230,000. Management should understand that while this counterclaim offset is not reflected as a cash credit against the settlement payment, it represents real economic value that TSL is forgoing as part of the global settlement and was a significant factor in the negotiation dynamics.
The release will run to and from the following parties and their respective officers, directors, employees, agents, affiliates, successors, and assigns:
• Thalassa Shipping & Logistics SA
• Aegean Fortuna Shipholding Ltd.
• Northwind Maritime Corporation
The precise scope and language of the mutual release will be set forth in the definitive Settlement Agreement and will be subject to negotiation with Northwind's counsel. C&H will ensure that the release is drafted broadly enough to preclude any future claims arising from the charter-party or the vessel while preserving any rights that are outside the scope of the released subject matter.
E. Counterclaim Disposition
TSL's counterclaim for $1,620,000 in withheld hire will be released and extinguished as part of the global settlement. While the counterclaim represented a genuine claim for which TSL had strong supporting evidence — the hire invoices, the charter-party provisions governing off-hire, and the absence of a proper off-hire notice from Northwind — the counterclaim was ultimately a component of the overall negotiation dynamics. The settlement figure of $7,850,000 was negotiated with the understanding that TSL would waive the counterclaim, and this waiver was explicitly accounted for in arriving at the settlement amount. Had the counterclaim not been waived, the cash settlement figure would have been commensurately higher. Management should accordingly view the net economic cost to TSL as approximately $6,230,000.
F. Consent Judgment Provision
The term sheet provides that in the event TSL defaults on any scheduled settlement payment, Northwind shall be entitled to entry of a consent judgment for the unpaid balance of the settlement amount, together with interest at the rate of 9% per annum, which is the statutory rate under New York CPLR 5004.
The form of consent judgment will be prepared by C&H and will be held in escrow or lodged with the Court in accordance with the terms of the Settlement Agreement. The consent judgment will be filed with the Court only upon TSL's default in making a scheduled payment and only after any applicable notice and cure period (to be negotiated) has expired.
C&H will analyze the enforceability of the consent judgment provision under New York law and will advise management separately on any potential issues. Consent judgment provisions are commonly used in commercial settlement agreements and are generally enforceable in New York, provided that they are supported by adequate consideration and are entered into voluntarily by the consenting party. We do not anticipate any material enforceability issues, but we will confirm this analysis in connection with the drafting of the Settlement Agreement.
It is imperative that TSL make all settlement payments on time to avoid triggering the consent judgment provision. We will coordinate closely with Elena Papadimitriou's office to ensure that the payment schedule is monitored and that funds are available when due.
G. Confidentiality
The settlement terms will be subject to strict confidentiality. Neither party, nor their respective counsel, may disclose the terms of the settlement to any third party except for the following permitted disclosures:
• Insurers: Oceanus Mutual Protection & Indemnity Club; Fortis Marine Underwriters Ltd.; Castellan Professional Liability Insurers Ltd.
• Lenders: Meridian Capital Bank AG
• Auditors: Lysander & Associates
• As required by applicable law, regulation, or court order
Both parties and their counsel will be bound by the confidentiality provisions. The Settlement Agreement will include customary provisions regarding the confidential treatment of the settlement amount, the payment structure, and all other terms, as well as provisions requiring each party to instruct its permitted disclosees to maintain the confidentiality of the information disclosed to them.
H. No Admission of Liability
The Settlement Agreement will expressly provide that the settlement does not constitute an admission of liability, fault, or wrongdoing by either party. This provision is standard in commercial settlement agreements and will apply equally to TSL, Aegean Fortuna Shipholding Ltd., and Northwind Maritime Corporation. Neither party may cite the settlement or its terms as evidence of the other party's liability in any other proceeding.
I. Representations and Warranties
Each party will make certain representations and warranties in the Settlement Agreement, including:
• That it has full corporate authority to enter into the Settlement Agreement and to perform its obligations thereunder;
• That it has not assigned, transferred, or encumbered any of the claims released under the Settlement Agreement;
• That no bankruptcy, insolvency, receivership, or similar proceeding is pending or, to its knowledge, contemplated with respect to such party; and
• That the execution, delivery, and performance of the Settlement Agreement will not conflict with or violate any applicable law, regulation, or contractual obligation.
With respect to TSL's corporate authority, we will coordinate with Konstantinou & Rizos Law Offices in Athens (Dimitrios Konstantinou, lead partner) to confirm that TSL has the requisite Greek corporate authority to enter into the Settlement Agreement and to prepare any necessary supplemental board resolutions. We note that the TSL Board Resolution dated October 18, 2024 authorized settlement up to $8.5 million, and the $7,850,000 settlement falls within that authorization. However, it may be necessary or prudent to obtain a confirmatory resolution specifically authorizing execution of the Settlement Agreement on its final terms.
With respect to Northwind's corporate authority, the marshall Islands corporate formalities for Northwind will be handled by Pacific Maritime Legal Associates (Thomas Nauru, lead counsel), as Northwind is incorporated in the Republic of the marshall Islands. C&H will confirm with Hargrove, Delacroix & Stern LLP that Northwind will deliver appropriate evidence of corporate authority at the time of execution.
J. Stipulation of discontinuance
A stipulation of discontinuance with prejudice will be filed with the Court within ten (10) business days of the final settlement payment (i.e., within ten business days of Payment 3). The stipulation will provide for the discontinuance of all claims, counterclaims, and cross-claims in the action with prejudice and without costs to either party.
The Court will retain jurisdiction for a period of 180 days following the Effective Date of the Settlement Agreement for the limited purpose of enforcing the Settlement Agreement, including entry of the consent judgment upon TSL's default. This jurisdictional retention provision is standard in commercial settlement agreements involving installment payments and provides Northwind with a readily available enforcement mechanism in the event of default.
K. Withdrawal of Pending Motions
Upon execution of the Settlement Agreement, all pending motions will be withdrawn with prejudice. Specifically, TSL's Motion for Partial Summary Judgment filed on September 20, 2024 will be withdrawn, and the oral argument currently scheduled for December 6, 2024 before Justice Chen will be vacated.
C&H will prepare and file the necessary stipulation withdrawing the motion and will coordinate with Hargrove, Delacroix & Stern LLP on a joint letter to Justice Chen advising the Court of the settlement and requesting that the December 6, 2024 conference be removed from the Court's calendar.
L. Return/Destruction of discovery Materials
All discovery materials exchanged during the litigation — including documents, deposition transcripts, expert reports, and electronically stored information — will be returned to the producing party or destroyed within sixty (60) days of the final settlement payment. This includes all e-discovery materials hosted by Lighthouse Data Analytics Inc. on behalf of the parties.
The Settlement Agreement will include customary provisions requiring each party to certify its compliance with the return/destruction obligation and to retain only such copies as may be required by applicable law or professional responsibility obligations. C&H will coordinate with Lighthouse Data Analytics Inc. regarding the disposition of the e-discovery platform and hosted data in accordance with this provision.
V. Financial Analysis and Evaluation
A. Settlement vs. Claimed Damages
Northwind's total claimed damages in the litigation were $18,300,000. The settlement of $7,850,000 represents approximately 42.9% of Northwind's claimed damages — a significant discount from Northwind's full asserted exposure. The following table summarizes Northwind's claimed damages by category, together with C&H's assessment of each category:
As reflected in the table above, several of the larger damage categories were subject to substantial defenses. The liquidated damages claim, at $4,500,000, was the single largest contested category and was subject to TSL's strong cap interpretation argument. The third-party shipper claims, at $5,634,400, had already been significantly narrowed by the MTD ruling. The cargo damage claim, at $3,420,000, was subject to the Inter-Club Agreement and charterer causation defenses. Collectively, these three categories alone totaled $13,554,400, or approximately 74% of Northwind's total claimed damages, and all three were subject to meaningful defenses.
B. Net Cost to TSL
The following summary reflects the net cost of the settlement to TSL, taking into account the P&I Club contribution and the economic value of the waived counterclaim:
In addition to the settlement payment, TSL has incurred the following legal fees and costs in connection with the litigation through the date of settlement:
The total all-in cost to TSL is calculated as $5,350,000 (corporate settlement contribution) + $2,180,000 (C&H fees) + $645,000 (C&H costs) = approximately $8,175,000. This figure represents the total cash outlay by TSL in connection with the litigation, inclusive of the settlement and all legal fees and costs, but exclusive of the economic value of the waived counterclaim and the P&I Club contribution.
C. Risk-Adjusted Assessment
We believe the settlement represents a favorable risk-adjusted outcome for TSL. The settlement of $7,850,000 falls within the $6.5 million to $9 million range recommended in our Settlement Authority Memorandum dated October 15, 2024, and comfortably below the $8.5 million ceiling authorized by the TSL Board of Directors.
The settlement avoids several significant litigation risks that could have materially increased TSL's exposure had the case proceeded to trial:
(1) LD Cap Interpretation. The liquidated damages cap interpretation under Clause 28 was a question of first impression under New York law. An adverse ruling on TSL's Motion for Partial Summary Judgment could have exposed TSL to up to $4,500,000 in liquidated damages alone — an amount nearly equal to the net economic cost of the entire settlement. While we believe TSL had the stronger argument, the absence of controlling precedent meant that there was no guarantee of success.
(2) Trial Risk on Cargo Damage and Deviation Claims. The cargo damage and deviation claims presented substantial factual disputes that would have been resolved at trial by the trier of fact. The outcome on these claims was inherently uncertain, and an adverse finding on either the Inter-Club Agreement defense or the Master's discretion defense could have resulted in significant additional liability.
(3) Adverse Publicity. A trial on the merits would have involved public testimony regarding the mechanical incidents, the alleged maintenance failures, and the deviation, which could have generated adverse publicity for TSL in the maritime industry and potentially affected TSL's relationships with charterers, insurers, and classification societies.
(4) Additional Litigation Costs. Had the case proceeded to trial, TSL would have incurred significant additional legal fees and costs, including trial preparation, expert witness fees for trial testimony, and the costs of additional depositions. We estimated trial preparation and trial costs at approximately $1.5 million to $2 million, in addition to the fees and costs already incurred.
In light of these considerations, we are confident that the settlement at $7,850,000, with a net economic cost to TSL of approximately $6,230,000 and a corporate cash outlay of $5,350,000 (after the P&I contribution), represents a prudent and favorable resolution of this dispute.
VI. Lender Notification Requirement
The settlement payment of $7,850,000 exceeds the $5,000,000 notification threshold set forth in Section 8.14 of the Credit Agreement dated April 1, 2019 between Thalassa Shipping & Logistics SA, as borrower, and Meridian Capital Bank AG (Ballindamm 40, 20095 Hamburg, Germany), as administrative agent and lender, in connection with a secured credit facility in the aggregate principal amount of $340,000,000 secured by vessel mortgages.
Under Section 8.14, TSL is required to notify Meridian Capital Bank AG within five (5) business days of the execution of any settlement agreement in litigation where the settlement amount exceeds $5,000,000. Accordingly, TSL must notify Meridian within five business days of the execution of the definitive Settlement Agreement.
C&H will prepare the notification letter addressed to Lukas Brandt, Relationship Manager, Meridian Capital Bank AG, Hamburg, and will circulate a draft to Markos Theodorakis and Elena Papadimitriou for review prior to transmission. The notification letter will summarize the litigation, the settlement terms, the payment schedule, and the funding sources.
In addition, C&H will review the Credit Agreement to analyze whether any additional covenants may be implicated by the settlement payment, including financial maintenance covenants, negative covenants restricting extraordinary payments or expenditures, and reporting covenants. We will advise management separately if any additional lender consents or notifications are required.
VII. Insurance Matters
A. P&I Club Contribution
As noted above, the Oceanus Mutual Protection & Indemnity Club is expected to contribute $2,500,000 toward the settlement payment under Policy No. OCE-P&I-2020-TSL-0047. The following immediate steps will be taken in connection with the P&I Club contribution:
(1) C&H will prepare and send a formal claim letter to David Okafor, Claims Manager, Oceanus Mutual Protection & Indemnity Club (Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda), requesting the $2,500,000 contribution. The target date for the claim letter is October 31, 2024.
(2) Upon finalization, C&H will transmit the execution version of the Settlement Agreement to the Oceanus P&I Club for review and approval by the Oceanus Board of Directors. Based on discussions with Mr. Okafor, we expect that the Board will consider and approve the contribution at its next scheduled meeting, with approval anticipated by November 22, 2024.
(3) C&H will prepare a supporting analysis of P&I coverage for charter-party breach claims, demonstrating that the claims asserted by Northwind fall within the scope of the P&I Club's coverage obligations. This analysis will be submitted to the Club together with the claim letter and the Settlement Agreement.
We emphasize that the $2,500,000 P&I Club contribution is subject to Board approval and is not yet committed. While we have every reason to expect that the Board will approve the contribution, the settlement payment obligations run to TSL, and TSL must be prepared to fund the full $7,850,000 if the P&I Club contribution is delayed or reduced. We will keep management informed of all developments in the P&I approval process.
B. Hull & Machinery Insurer
Notice of the settlement will be provided to Catherine Allsworth, Claims Manager, Fortis Marine Underwriters Ltd. (50 Fenchurch Street, London EC3M 3JY, United Kingdom), under Policy No. FMU-HM-2020-4892. The notification will confirm that the Settlement Agreement does not impair Fortis's subrogation rights with respect to any hull and machinery claims arising from the mechanical incidents. C&H will review the Settlement Agreement to ensure that the mutual release does not inadvertently extinguish any rights that Fortis may have against third parties, including the turbocharger manufacturer in connection with the latent defect alleged in Incident 1.
C. D&O Insurer
Notice of the claim resolution will be sent to Castellan Professional Liability Insurers Ltd. (25 St. Stephen's Green, Dublin 2, Ireland), which provides directors and officers liability coverage for TSL's management. The notice will confirm that the settlement resolves the underlying litigation and that no claims against TSL's directors or officers are anticipated in connection with this matter. To our knowledge, no party has asserted or threatened any D&O claims, and we do not expect any such claims to arise.
VIII. Next Steps and Action Items
The following is a comprehensive summary of the action items required to finalize the settlement and achieve the orderly resolution of this litigation. We have organized the action items by timeframe and category for ease of reference.
A. Immediate Actions (Week of October 30 – November 8, 2024)
1. Settlement Agreement Draft. C&H will prepare and circulate a first draft of the Settlement Agreement and Mutual General Release. Target: November 5, 2024.
2. Escrow Agreement Draft. C&H will prepare a first draft of the Escrow Agreement with Atlantic Fiduciary Trust Company. Target: November 8, 2024.
3. P&I Club Claim Letter. C&H will prepare and send a formal claim letter to David Okafor at Oceanus Mutual Protection & Indemnity Club, requesting the $2,500,000 contribution under Policy No. OCE-P&I-2020-TSL-0047. Target: October 31, 2024.
4. Consent Judgment Analysis. C&H will analyze the enforceability of the consent judgment provision under New York law and will prepare the form of consent judgment for inclusion in the Settlement Agreement.
5. Greek Corporate Authority. Konstantinou & Rizos Law Offices (Dimitrios Konstantinou) will confirm TSL's Greek corporate authority and will prepare any necessary supplemental board resolutions for execution of the Settlement Agreement. C&H will coordinate with Konstantinou & Rizos to ensure that all corporate formalities are completed in advance of the target execution date.
B. Negotiation of Settlement Documents (November 2024)
6. Transmit Draft to Opposing Counsel. Upon internal review and approval by TSL management, C&H will transmit the first draft of the Settlement Agreement to Margaret Delacroix at Hargrove, Delacroix & Stern LLP for review and comment.
7. Negotiate and Finalize. C&H will negotiate and finalize the Settlement Agreement, Escrow Agreement, and all ancillary documents with Hargrove, Delacroix & Stern LLP. We anticipate two to three rounds of markup and revision before the documents are in final form.
8. Target Execution. The target date for execution of all settlement documents is mid-to-late November 2024. We will endeavor to complete the documentation process on an expedited basis, recognizing the need to obtain Oceanus Board approval and to meet the payment deadlines under the Settlement Agreement.
C. Court Filings (Upon Execution)
9. Joint Letter to Justice Chen. C&H will prepare a joint letter to Justice Chen advising the Court of the settlement in principle and requesting removal of the December 6, 2024 summary judgment argument from the Court's calendar. This letter will be sent promptly upon execution of the Settlement Agreement, or earlier if appropriate.
10. Withdrawal of Summary Judgment Motion. C&H will prepare and file a stipulation withdrawing TSL's Motion for Partial Summary Judgment (filed September 20, 2024) with prejudice.
11. Stipulation and Order Retaining Jurisdiction. C&H will prepare and file a stipulation and proposed order providing for the Court to retain jurisdiction for 180 days following the Effective Date to enforce the Settlement Agreement, including entry of the consent judgment upon default.
12. Stipulation of discontinuance. C&H will prepare a draft Stipulation of discontinuance with prejudice, to be filed within ten (10) business days of the final settlement payment.
13. Form of Consent Judgment. C&H will prepare the form of consent judgment, to be held in escrow or lodged with the Court and filed only upon TSL's default in making a scheduled settlement payment.
D. Lender and Insurer Notifications
14. Meridian Capital Bank AG. C&H will prepare and send the notification letter to Lukas Brandt, Relationship Manager, Meridian Capital Bank AG, within five (5) business days of execution of the Settlement Agreement, as required by Section 8.14 of the Credit Agreement.
15. Fortis Marine Underwriters Ltd. C&H will prepare and send notice of the settlement to Catherine Allsworth, Claims Manager, Fortis Marine Underwriters Ltd., confirming that the Settlement Agreement does not impair Fortis's subrogation rights.
16. Castellan Professional Liability Insurers Ltd. C&H will prepare and send notice of the claim resolution to Castellan Professional Liability Insurers Ltd., confirming that no D&O claims are anticipated.
17. Oceanus P&I Club — Execution Version. C&H will transmit the execution version of the Settlement Agreement to Oceanus Mutual Protection & Indemnity Club for Board review and approval.
E. Payment Schedule Monitoring
18. Track Payment Deadlines. C&H will maintain a payment schedule tracker and will provide advance reminders to TSL management of each upcoming payment deadline:
• Payment 1: $4,000,000 — due within 30 days of the Effective Date
• Payment 2: $2,000,000 — due within 90 days of the Effective Date
• Payment 3: $1,850,000 — due within 150 days of the Effective Date
19. Corporate Funding Coordination. C&H will coordinate with Elena Papadimitriou, CFO, on the timing and funding of TSL's $5,350,000 corporate contribution to ensure that funds are available to meet each scheduled payment.
20. P&I Contribution Coordination. C&H will coordinate with Oceanus Mutual Protection & Indemnity Club on the timing and mechanics of the $2,500,000 contribution, including the allocation of the Club's contribution across the three installment payments.
IX. Conclusion and Recommendation