CALDERWOOD & HARKNESS LLP One Liberty Plaza, 50th Floor New York, NY 10006
Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com
November 25, 2024
VIA INTERNATIONAL COURIER AND EMAIL
Castellan Professional Liability Insurers Ltd. 25 St. Stephen's Green Dublin 2, D02 XY47 Ireland
Attention: Claims/Notifications Department
Re: Notice of Litigation Settlement and Confirmation of No Anticipated D&O Claim
Insured: Thalassa Shipping & Logistics SA, Société Anonyme organized under the laws of the Hellenic Republic, headquartered at 42 Akti Miaouli, Piraeus 185 38, Greece (Greek Tax ID / AFM: 998342671)
Litigation: 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)
C&H Matter No.: 1044-00006
Dear Sir or Madam:
We write on behalf of our client, Thalassa Shipping & Logistics SA ("TSL"), in connection with the above-referenced litigation. Calderwood & Harkness LLP has served as defense counsel to TSL throughout the course of these proceedings. The purpose of this letter is twofold: first, to notify Castellan Professional Liability Insurers Ltd. ("Castellan"), in its capacity as TSL's directors and officers liability insurance carrier, of the resolution of the above-captioned litigation by settlement; and second, to confirm that, based on the outcome of this matter, no claim under the D&O policy issued by Castellan to TSL is anticipated in connection with the underlying dispute or its resolution. We provide this notification as a matter of good insurance practice and in the interest of ensuring that Castellan's records accurately reflect the final disposition of this matter.
I. Background of the Litigation
On October 2, 2023, Northwind Maritime Corporation ("Northwind"), a corporation incorporated under the laws of the Republic of the marshall Islands with principal offices at 1700 Harbor Gateway, Suite 500, Stamford, Connecticut 06902, filed a complaint in the Supreme Court of the State of New York, New York County, Commercial Division, against TSL and its wholly owned subsidiary, Aegean Fortuna Shipholding Ltd. ("Aegean Fortuna"), a Liberian limited liability company (Registration No. LR-C-20167845). Aegean Fortuna is the registered owner of the M/V Aegean Fortuna (IMO No. 9847231), a Liberian-flagged Supramax dry bulk carrier of approximately 58,200 deadweight tonnage.
The claims asserted by Northwind arose out of a thirty-six (36) month time charter-party entered into between Northwind (as charterer) and TSL (as disponent owner) on December 3, 2020. The charter-party was executed on the NYPE 2015 form, as amended by the parties, and bears Charter-Party Reference No. NW-TSL-CP-2020-1203. The charter-party provided for an original commencement date of January 15, 2021 and a daily hire rate of $14,750.
Northwind's complaint alleged breach of the charter-party on two principal grounds:
(i) Three separate mechanical failures aboard the M/V Aegean Fortuna during the 2022 calendar year, which Northwind alleged resulted in a total of sixty-eight (68) off-hire days. Specifically, Northwind identified the following incidents: (a) a turbocharger failure occurring from March 12 through April 2, 2022 (twenty-two days off-hire); (b) a combined ballast water treatment system and auxiliary boiler failure occurring from July 8 through July 29, 2022 (twenty-one days off-hire); and (c) a cylinder liner failure requiring emergency drydocking at a repair facility, occurring from November 15 through December 10, 2022 (twenty-five days off-hire); and
(ii) An alleged unauthorized route deviation to the port of Maputo, Mozambique in September 2022, which Northwind claimed constituted a material breach of the charterers' voyage instructions and the charter-party's trading limits provisions.
Northwind asserted total claimed damages of $18,300,000, composed of multiple categories including, inter alia, off-hire deductions under Clause 17 of the charter-party, liquidated damages pursuant to Clause 28, substitute charter costs incurred during off-hire periods, cargo damage attributed to mechanical failures and delays, demurrage and dead freight charges assessed by sub-charterers, and indemnification for third-party shipper claims. The complaint set forth five causes of action, including claims for breach of contract, breach of the implied warranty of seaworthiness, and consequential damages.
On November 17, 2023, TSL filed its Answer, denying the material allegations of the complaint and asserting numerous affirmative defenses, including that the mechanical failures were not attributable to any failure of due diligence on the part of TSL or Aegean Fortuna, that Northwind had failed to mitigate its damages, and that certain of Northwind's claimed damages were barred or limited by the contractual framework of the charter-party. Contemporaneously, TSL filed a Counterclaim against Northwind seeking recovery of $1,620,000 in hire that Northwind had unilaterally withheld for the period October 1 through December 31, 2022, which TSL contended had been improperly deducted from hire payments.
The matter was assigned to Justice Lorraine K. Chen, J.S.C., Commercial Division, Part 49, where it remained throughout the proceedings.
II. Summary of Key Litigation Events
The litigation proceeded through significant motion practice and extensive discovery over the course of approximately thirteen months.
On December 15, 2023, TSL filed a Motion to Dismiss Counts III and V of Northwind's complaint pursuant to CPLR § 3211(a)(7). By Decision and Order dated March 8, 2024, Justice Chen granted the motion in part, dismissing Count V in its entirety with prejudice and narrowing the scope of Count III to exclude certain categories of consequential damages that the Court determined were not recoverable under the terms of the charter-party as a matter of law. The partial dismissal was a significant development in the litigation, as it eliminated Northwind's claim for indemnification on account of third-party shipper claims and substantially reduced the maximum potential exposure.
Discovery was conducted between January 2024 and August 2024 and was extensive in scope. The parties exchanged voluminous document productions encompassing, among other categories, vessel maintenance records, class society survey reports, engine room logs, voyage communications, charter-party accounting records, and internal corporate correspondence. Depositions were taken of numerous fact witnesses, including the following individuals:
• Alexandros Stavridis, Chairman and CEO of TSL;
• Captain Nikolaos Giannopoulos, Master of the M/V Aegean Fortuna during the relevant period;
• Petros Vlahos, Chief Engineer of the M/V Aegean Fortuna during the relevant period;
• Viktor Lindgren, President of Northwind Maritime Corporation; and
• Sandra Chow, Chief Financial Officer of Northwind Maritime Corporation.
Additional depositions of subordinate crew members, classification society surveyors, and third-party repair yard personnel were also conducted.
Both parties retained expert witnesses who prepared detailed reports and rebuttal reports. TSL retained Dr. Henrik Sørensen of the Nordic Maritime Consulting Group ApS, Copenhagen, Denmark, as its maritime engineering expert, and Dr. Constance Albright of Clearwater Economics LLC, Washington, D.C., as its damages expert. Northwind retained Captain Julian Blackmore (Ret.) of Blackmore Maritime Advisory Ltd., London, United Kingdom, as its maritime operations and engineering expert, and Dr. Rajesh Anand of Pinnacle Valuation Partners LLP, New York, New York, as its damages expert. Expert reports and rebuttal reports were exchanged in accordance with the Court's scheduling order, and expert depositions were completed in August 2024.
On September 20, 2024, TSL filed a Motion for Partial Summary Judgment pursuant to CPLR § 3212, addressing two principal issues: (a) the proper interpretation of the liquidated damages cap contained in Clause 28 of the charter-party, which TSL argued limited Northwind's aggregate recovery for mechanical off-hire events to a fixed amount substantially below Northwind's claimed damages; and (b) the deviation claim, which TSL argued was not actionable under the terms of the charter-party because the call at Maputo was within the scope of the permissible trading area as defined in Rider Clause 56 and was, in any event, necessitated by a bona fide operational requirement related to bunkering. The motion was fully briefed and pending before Justice Chen at the time the matter was resolved.
Pursuant to a court order, the parties participated in mediation on October 28 and 29, 2024. The mediation was conducted before the Honorable Gerald K. Fitzpatrick (Ret.), a former Justice of the Appellate Division, First Department, who served as mediator through Bayside Dispute Resolution Services LLC, located at 140 Broadway, Suite 3200, New York, New York 10005. Justice Fitzpatrick (Ret.) is widely recognized for his expertise in complex commercial and maritime disputes and was selected by agreement of the parties.
III. Settlement Resolution
Following two full days of mediation and further negotiations between counsel, a settlement in principle was reached on October 29, 2024, at the conclusion of the mediation session. After several weeks of negotiation over the definitive documentation, the parties executed a Settlement Agreement and Mutual General Release (the "Settlement Agreement") on November 20, 2024.
The material terms of the settlement are as follows:
Settlement Amount. TSL has agreed to pay a total settlement amount of $7,850,000.00 (Seven Million Eight Hundred Fifty Thousand United States Dollars), payable in three installments:
• Payment 1: $4,000,000.00, due and payable within thirty (30) days of the Effective Date of the Settlement Agreement;
• Payment 2: $2,000,000.00, due and payable within ninety (90) days of the Effective Date of the Settlement Agreement; and
• Payment 3: $1,850,000.00, due and payable within one hundred fifty (150) days of the Effective Date of the Settlement Agreement.
Mutual Release. The Settlement Agreement includes a mutual general release by all parties of all claims, counterclaims, cross-claims, and causes of action of any kind whatsoever, whether known or unknown, arising out of or in any way related to the charter-party, the M/V Aegean Fortuna, or any of the transactions or occurrences forming the basis of the litigation. TSL's counterclaim for $1,620,000.00 in withheld hire is released as part of the global settlement.
No Admission of Liability. The Settlement Agreement contains no admission of liability, fault, or wrongdoing by any party.
Escrow Arrangements. All settlement funds are to be deposited into and disbursed from an escrow account maintained at Atlantic Fiduciary Trust Company, 60 Wall Street, Suite 2800, New York, New York 10005 (Escrow Account No. ESC-2024-NYK-08831), in accordance with the terms of a separate escrow agreement executed by the parties and the escrow agent.
In connection with the settlement, TSL's pending Motion for Partial Summary Judgment has been withdrawn with prejudice by stipulation of the parties dated November 25, 2024. A joint letter has been submitted to Justice Chen advising the Court of the resolution of the matter and requesting that the previously scheduled December 6, 2024 status conference be vacated and the action be discontinued upon the completion of the settlement payments.
IV. Funding Sources
The total settlement amount of $7,850,000.00 will be funded from the following sources:
• TSL Corporate Funds: $5,350,000.00, to be paid from TSL's general operating accounts; and
• Oceanus Mutual Protection & Indemnity Club: $2,500,000.00, contributed pursuant to the terms of TSL's P&I club coverage under Policy No. OCE-P&I-2020-TSL-0047. Board approval by the Oceanus Mutual P&I Club Board of Directors for this contribution was confirmed on November 22, 2024.
No contribution is being sought, and no claim is being made, under Castellan's D&O policy in connection with this settlement or the underlying litigation.
V. Conduct of TSL Directors and Officers
We wish to bring the following facts to Castellan's attention regarding the conduct of TSL's directors and officers in connection with this matter.
Throughout the entirety of the litigation, the claims asserted by Northwind were directed exclusively at TSL in its corporate capacity as disponent owner under the charter-party and at Aegean Fortuna Shipholding Ltd. as the registered owner of the M/V Aegean Fortuna. The claims were commercial in nature, arising from alleged operational and maintenance failures in connection with the vessel's performance under the charter-party. At no point during the litigation did Northwind assert, or seek to assert, any claim of personal wrongdoing, fraud, breach of fiduciary duty, mismanagement, or personal liability against any individual director or officer of TSL. This includes, without limitation, the following individuals:
• Alexandros Stavridis, Chairman of the Board and Chief Executive Officer of TSL;
• Elena Papadimitriou, Chief Financial Officer of TSL; and
• Markos Theodorakis, General Counsel and Secretary of the Board of Directors of TSL.
The decision to resolve the litigation by settlement was made with the full knowledge and authorization of TSL's Board of Directors. A formal board resolution authorizing the settlement on the terms described herein was duly adopted on October 18, 2024, following deliberation by the Board and with the benefit of advice from both this firm, as U.S. litigation counsel, and Konstantinou & Rizos Law Offices, Athens, Greece, as Greek local counsel, regarding the implications of the settlement under applicable Greek corporate law.
The settlement amount of $7,850,000.00 represents a significant reduction from Northwind's original claimed damages of $18,300,000.00 — a discount of approximately 57.1%. When viewed in the context of TSL's financial position — TSL's annual revenue was approximately $612 million and its EBITDA was approximately $98 million for fiscal year 2022 — the settlement amount represents a commercially reasonable and proportionate resolution of the dispute. The settlement was reached only after more than thirteen months of active litigation, including extensive fact and expert discovery, dispositive motion practice, and a rigorous two-day mediation conducted by a retired Appellate Division Justice with significant experience in complex commercial matters. TSL's Board, in authorizing the settlement, considered the litigation risks, the costs of continued litigation through trial and any potential appeals, and the desirability of eliminating uncertainty and preserving the company's commercial relationships.
Based on the foregoing, there is no basis for any claim or suggestion that TSL's directors or officers acted improperly, negligently, or in breach of their fiduciary duties or other obligations in connection with either (a) the underlying charter-party performance and the mechanical and operational issues that gave rise to the dispute, or (b) the conduct of the litigation and the authorization and execution of the settlement.
VI. Confirmation of No Anticipated D&O Claim
Calderwood & Harkness LLP hereby confirms, on behalf of TSL, that based on the resolution of the above-captioned litigation, no claim under Castellan's D&O policy is anticipated in connection with this matter. Specifically:
(a) No shareholder derivative action has been filed against any director or officer of TSL in connection with the M/V Aegean Fortuna charter-party dispute, the mechanical incidents giving rise to the claims, or the terms of the settlement;
(b) No regulatory proceeding or investigation has been commenced by any governmental or regulatory authority against any director or officer of TSL in connection with this matter; and
(c) To TSL's knowledge, after reasonable inquiry, no action, claim, or proceeding of any kind against TSL's directors or officers has been threatened in connection with the foregoing.
TSL is providing this notification as a matter of prudent insurance practice, to ensure transparency with its insurers, and to confirm that Castellan's records reflect the final disposition of the litigation and the absence of any anticipated claim under the D&O policy.
VII. Request for Acknowledgment
We respectfully request that Castellan acknowledge receipt of this notice in writing at its earliest convenience. Any correspondence or communications regarding this matter may be directed to the following:
Douglas Carmichael Partner Calderwood & Harkness LLP One Liberty Plaza, 50th Floor New York, NY 10006 Telephone: (212) 558-4127
Email: d.carmichael@calderwoodharkness.com
Markos Theodorakis General Counsel and Secretary of the Board Thalassa Shipping & Logistics SA 42 Akti Miaouli Piraeus 185 38, Greece Telephone: +30 210 429 8800
Email: m.theodorakis@thalassashipping.gr
VIII. Reservation of Rights
This letter is provided for informational purposes and in the interest of maintaining complete and transparent communications between TSL and its insurers. Nothing in this letter shall constitute, or be construed as, a waiver of any rights, claims, or defenses that TSL, or any of its directors or officers, may have under the D&O policy issued by Castellan, whether arising out of this matter or otherwise. TSL expressly reserves all rights under the policy, including any right to provide notice of a claim or potential claim in the future should circumstances change, notwithstanding this notification and the confirmations set forth herein.
We appreciate Castellan's attention to this matter and trust that this letter provides a comprehensive summary of the litigation and its resolution. Should you have any questions or require any additional information, please do not hesitate to contact the undersigned directly.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Douglas Carmichael Partner
Direct Telephone: (212) 558-4127 Direct Facsimile: (212) 558-3691
Email: d.carmichael@calderwoodharkness.com
cc:
Markos Theodorakis, General Counsel, Thalassa Shipping & Logistics SA Alexandros Stavridis, Chairman and CEO, Thalassa Shipping & Logistics SA Elena Papadimitriou, CFO, Thalassa Shipping & Logistics SA Francesca Morano, Partner, Calderwood & Harkness LLP Dimitrios Konstantinou, Konstantinou & Rizos Law Offices, Athens, Greece
Enclosures: None. The execution version of the Settlement Agreement and Mutual General Release dated November 20, 2024 is available upon request; however, it is subject to confidentiality provisions contained therein and accordingly has not been enclosed with this correspondence. A copy will be provided to Castellan promptly upon receipt of a written request, subject to such confidentiality restrictions as may apply.