1044-00006 · Hargrove, Delacroix & Stern LLP · Settlement

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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT

October 15, 2024

MEMORANDUM

FROM: Douglas Carmichael, Partner, and Francesca Morano, Partner Calderwood & Harkness LLP One Liberty Plaza, 50th Floor New York, NY 10006

TO: Board of Directors Thalassa Shipping & Logistics SA c/o Markos Theodorakis, General Counsel 42 Akti Miaouli Piraeus 185 38, Greece

RE: Settlement Authority Recommendation — 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, Justice Lorraine K. Chen, J.S.C.)

C&H Matter No.: 1044-00006

I. Executive Summary

The purpose of this memorandum is to request that the Board of Directors of Thalassa Shipping & Logistics SA ("TSL") authorize Alexandros Stavridis (Chairman and Chief Executive Officer) and Markos Theodorakis (General Counsel) to negotiate and execute a settlement of the above-referenced litigation within a recommended range of $6.5 million to $9.0 million (all-in, inclusive of any amounts contributed by TSL's Protection & Indemnity insurer).

As the Board is aware, the Supreme Court of the State of New York, New York County, Commercial Division, has ordered the parties to participate in a court-ordered mediation session scheduled for October 28–29, 2024, before the Honorable Gerald K. Fitzpatrick (Ret.) at Bayside Dispute Resolution Services LLC, 140 Broadway, Suite 3200, New York, NY 10005. This mediation presents the most efficient opportunity to resolve the dispute on terms favorable to TSL and to avoid the substantial costs and risks associated with proceeding to trial, which is currently projected for mid-2025 at the earliest.

After careful evaluation of the claims and defenses in this matter, the strength and credibility of the evidence adduced in discovery, the expert reports and rebuttal reports exchanged between the parties, the pending motion for partial summary judgment before Justice Chen, the potential trial outcomes under multiple scenarios, the ongoing and projected legal costs, and the availability of insurance contribution from the Oceanus Mutual Protection & Indemnity Club, Calderwood & Harkness LLP ("C&H") recommends that TSL settle the dispute within the proposed range of $6.5 million to $9.0 million.

In reaching this recommendation, we have taken into account TSL's counterclaim for $1,620,000 in unpaid hire, which should be factored as an offset against any settlement payment. When the counterclaim offset and the anticipated contribution from the Oceanus P&I Club (estimated at $2.0 million to $2.5 million) are considered, the net economic cost to TSL at the midpoint of the recommended range is approximately $3.88 million. At the lower end of the recommended range, the net economic cost could be as low as approximately $2.88 million, and at the upper end, approximately $5.38 million.

In summary, the recommended settlement range reflects a rational and substantial discount of approximately 57% to 64% from Northwind Maritime Corporation's ("Northwind") aggregate claim of $18.3 million. It accounts for TSL's strong defenses on several categories of claimed damages — notably the liquidated damages cap interpretation, the latent defect defense for Incident 1, and the post-motion-to-dismiss posture of the third-party shipper claims — while honestly acknowledging genuine risk on others, including the conceded maintenance failure in Incident 3, the potentially damaging internal emails regarding the Maputo deviation, and the mixed causation issues surrounding cargo damage. Above all, a settlement within this range provides certainty and finality in what has become a complex, multi-faceted maritime dispute that, if taken to trial, would entail substantial additional legal expenditure, extended management distraction, and meaningful downside tail risk.

II. Background

A. The Parties

Thalassa Shipping & Logistics SA ("TSL"). TSL is a Greek Société Anonyme headquartered at 42 Akti Miaouli, Piraeus 185 38, Greece. TSL is a diversified shipping company that operates a fleet of approximately 34 vessels, including dry bulk carriers, tankers, and container ships. For the fiscal year ended December 31, 2022, TSL reported revenue of approximately $612 million and EBITDA of approximately $98 million. TSL's senior management includes Alexandros Stavridis (Chairman and Chief Executive Officer), Elena Papadimitriou (Chief Financial Officer), and Markos Theodorakis (General Counsel). TSL is the parent company and sole shareholder of the co-defendant Aegean Fortuna Shipholding Ltd.

Aegean Fortuna Shipholding Ltd. Aegean Fortuna Shipholding Ltd. is a wholly owned subsidiary of TSL, incorporated under the laws of the Republic of Liberia (Registration No. LR-C-20167845). Aegean Fortuna Shipholding Ltd. is the registered owner of the M/V Aegean Fortuna, the vessel at the center of the dispute. In the customary manner of international ship-owning structures, Aegean Fortuna Shipholding Ltd. was established as a single-purpose vehicle to hold title to the vessel and is operationally controlled by TSL. For purposes of this memorandum and the settlement negotiations, references to "TSL" include Aegean Fortuna Shipholding Ltd. unless the context otherwise requires.

Northwind Maritime Corporation. Northwind Maritime Corporation ("Northwind") is a corporation organized under the laws of the Republic of the marshall Islands (Entity No. MI-94827), with its principal office at 1700 Harbor Gateway, Suite 500, Stamford, Connecticut 06902. Northwind is engaged in commodity trading and bulk cargo operations on a global scale and reported revenue of approximately $1.2 billion for the fiscal year ended December 31, 2022. Northwind's senior management includes Viktor Lindgren (President), Sandra Chow (Chief Financial Officer), and Richard Hartnett (General Counsel). Northwind is represented in this litigation by Hargrove, Delacroix & Stern LLP, with Margaret Delacroix serving as lead partner.

B. The Vessel and Charter-Party

The M/V Aegean Fortuna is a Supramax dry bulk carrier with a deadweight tonnage of 58,200 DWT, built in 2016, bearing International Maritime Organization (IMO) Number 9847231. The vessel is registered under the flag of the Republic of Liberia and is classified by the Global Maritime Classification Bureau ("GMCB"). At all relevant times, the vessel was in class with GMCB and subject to the Bureau's rules and regulations regarding hull integrity, machinery maintenance, and equipment standards.

The charter-party giving rise to this dispute (the "Charter-Party") was executed on December 3, 2020, under Reference No. NW-TSL-CP-2020-1203. The Charter-Party is based on the NYPE 2015 form as amended by the parties and provides for a 36-month time charter term commencing January 15, 2021 and expiring January 14, 2024, at a daily hire rate of $14,750 per day. Over the full 36-month charter period, the total charter value amounts to approximately $16,166,000.

The Charter-Party designates the law of the State of New York as the governing law. Pursuant to Clause 46(b) of an addendum to the Charter-Party, disputes arising thereunder are subject to litigation in the Supreme Court of the State of New York, New York County — the forum in which this action is pending.

Several provisions of the Charter-Party are material to the claims and defenses in this litigation:

Clause 5 (Trade Limits). The Charter-Party permits worldwide trading, subject to specific exclusions for ports subject to sanctions administered by the United States Treasury Department's Office of Foreign Assets Control ("OFAC"), areas listed by the London Joint War Committee as war risk zones, and ice-bound waters north of latitude 68°N.

Clause 6 (Maintenance and Seaworthiness). The Owner is obligated to maintain the vessel in a "thoroughly efficient state of hull, machinery, and equipment" throughout the charter period and to ensure compliance with all applicable classification society requirements. This obligation forms the primary basis for Northwind's breach claims arising from the three mechanical incidents discussed below.

Clause 11 (Off-Hire). The Charter-Party provides detailed provisions for the deduction of hire during periods when the vessel is not at the Charterer's disposal due to deficiency of crew, breakdown of machinery, drydocking, or other causes preventing the full working of the vessel. The off-hire provisions are central to both TSL's counterclaim and the quantification of Northwind's damages.

Clause 28 (Liquidated Damages). Upon the Owner's material breach of Clauses 2 (general description and delivery) and 6 (maintenance/seaworthiness), the Charterer is entitled to liquidated damages equal to 150% of the aggregate off-hire days multiplied by the daily hire rate, subject to a cap of $4,500,000 "for any single continuous period of breach." The interpretation of this cap — specifically, whether it operates as a single cap for the entire charter period or as a per-incident cap — is the subject of TSL's pending motion for partial summary judgment and constitutes one of the most significant legal issues in the case.

C. Alleged Breaches

Northwind's claims arise from three mechanical incidents involving the M/V Aegean Fortuna and one alleged route deviation, all of which occurred during the second year of the charter period in 2022. The incidents are summarized as follows:

Incident 1 — Main Engine Turbocharger Failure (March 12 – April 2, 2022). On or about March 12, 2022, while the vessel was en route from Paradip, India, to Mombasa, Kenya, the main engine turbocharger suffered a catastrophic failure in the Indian Ocean. The vessel was diverted to Colombo, Sri Lanka, for repairs, which required sourcing replacement parts and shipyard labor. The vessel was off-hire for a total of 22 days. TSL's defense with respect to this incident is that the turbocharger failure was attributable to a latent manufacturing defect in the turbocharger impeller that was not detectable through standard maintenance procedures, and that TSL exercised due diligence in maintaining the vessel in compliance with GMCB classification requirements and the manufacturer's recommended maintenance protocols.

Incident 2 — BWTS Malfunction and Auxiliary Boiler Failure (July 8 – July 29, 2022). On or about July 8, 2022, while the vessel was at Richards Bay, South Africa, the ballast water treatment system ("BWTS") experienced a malfunction, and the auxiliary boiler failed simultaneously. These failures resulted in the vessel being off-hire for a total of 21 days. TSL's primary defense is that the BWTS malfunction was caused by Northwind's agents loading contaminated ballast water at a prior port of call, and that the contamination was the proximate cause of the system failure. With respect to the auxiliary boiler failure, TSL's position is less robust, as it is a separate mechanical component whose failure is more difficult to attribute to charterer causation.

Incident 3 — Main Engine Cylinder Liner Failure (November 15 – December 10, 2022). On or about November 15, 2022, the vessel's main engine suffered a cylinder liner failure that required drydocking at Keppel Verolme Shipyard in Rotterdam, the Netherlands. The vessel was off-hire for 25 days. TSL concedes that this failure constituted a maintenance failure within the meaning of Clause 6 of the Charter-Party but disputes the quantum of damages attributable to this incident. This concession is significant because it establishes liability for at least one breach and anchors Northwind's ability to invoke Clause 28's liquidated damages provision.

Alleged Route Deviation — Maputo, Mozambique (September 2022). Northwind alleges that during a voyage from Durban, South Africa, to Qingdao, China, in September 2022, the vessel made an unauthorized deviation to Maputo, Mozambique, for the purpose of loading TSL's own cargo. Northwind claims that this deviation added approximately four days to the voyage and caused the vessel to miss the contractual laycan window at Qingdao (October 1–5, 2022), resulting in demurrage and dead freight charges totaling $1,230,000. TSL's defense is that the Maputo call was necessitated by adverse weather and routing conditions in the Mozambique Channel and was within the Master's discretion under the circumstances. As discussed in greater detail in Section III.A.4 below, however, internal TSL emails produced in discovery suggest that the call may have been at least partly commercially motivated, which could undermine the weather-necessity defense.

In the aggregate, Northwind claims a total of 68 off-hire days across the three mechanical incidents (22 + 21 + 25 days).

D. Northwind's Claimed Damages ($18.3 Million)

Northwind's total damages claim, as set forth in its complaint and as quantified in the expert report of Dr. Rajesh Anand (Northwind's damages expert, served August 19, 2024), is $18,300,000, broken down into the following categories:

Several observations about Northwind's damages claim warrant comment. First, with respect to the liquidated damages calculation, Northwind originally argued that the $4,500,000 cap in Clause 28 applied on a per-incident basis, yielding potential liquidated damages of up to $13,500,000 (i.e., $4,500,000 × 3 incidents). Northwind subsequently conceded during the summary judgment briefing that, even under its per-incident reading, the actual LD formula (150% × aggregate off-hire days × daily hire rate) produces an effective liquidated damages figure of $1,504,500 for the 68 off-hire days, which is well below the $4,500,000 cap. Northwind nonetheless claims the full $4,500,000 cap amount, arguing that it represents a minimum floor once a material breach is established. This interpretation is, in our assessment, legally unfounded and is unlikely to survive the pending summary judgment motion.

Second, the substitute charter costs claim is based on Northwind's assertion that it was forced to charter a substitute vessel at a daily rate of $21,300 for 72 days. The 72-day figure exceeds the 68 off-hire days by 4 days, reflecting the additional time Northwind claims it took to arrange and position the substitute vessel. As discussed below, there is evidence that Northwind did not promptly seek substitute tonnage, which supports a mitigation defense.

Third, the third-party shipper claims ($5,634,400) comprise three separate claims from cargo interests who allegedly suffered losses as a result of delays and cargo damage arising from the mechanical incidents. Following Justice Chen's ruling on TSL's motion to dismiss, these claims have been narrowed significantly, and the legal theory under which Northwind seeks to recover them as charter-party damages remains vulnerable to further challenge.

Fourth, Northwind's claim for legal fees and expert costs ($999,000) is generally not recoverable as damages under New York law absent a specific contractual provision, which the Charter-Party does not contain. This category represents a claim with minimal legal basis.

E. TSL Counterclaim

TSL has asserted a counterclaim against Northwind for $1,620,000 in unpaid hire for the period of approximately October 1 through December 31, 2022 (approximately 110 days at $14,750 per day). Northwind withheld hire payments during this period, citing off-hire deductions under Clause 11 and purported equitable setoff rights for its breach claims.

The counterclaim has substantial merit. While Northwind was entitled to withhold hire during legitimate off-hire periods, the amounts withheld appear to substantially exceed the permissible off-hire deductions. Under established New York maritime and commercial law, a charterer's right to deduct hire is limited to periods actually qualifying as off-hire under the charter-party, and a charterer who withholds hire in excess of legitimate deductions does so at its own risk. The discovery record suggests that Northwind withheld hire for the entire October–December 2022 period, notwithstanding that only 25 of those days (Incident 3) were concededly off-hire days during that interval.

The counterclaim provides meaningful leverage in settlement negotiations and represents a genuine recovery for TSL that should be factored as an offset against any settlement payment.

F. Litigation History

The procedural history of this action is summarized as follows:

Northwind filed the Complaint on October 2, 2023, asserting five causes of action: (I) breach of charter-party (maintenance/seaworthiness), (II) breach of charter-party (unauthorized deviation), (III) third-party shipper claims as charter-party damages, (IV) breach of the implied warranty of fitness, and (V) unjust enrichment. C&H was retained as litigation counsel for TSL on October 16, 2023.

TSL filed its Answer and Counterclaim on November 17, 2023, denying the material allegations of the Complaint, asserting numerous affirmative defenses, and pleading the counterclaim for unpaid hire.

On December 15, 2023, TSL filed a Motion to Dismiss Counts III (third-party shipper claims) and V (unjust enrichment) pursuant to CPLR 3211(a)(7). By Decision and Order dated March 8, 2024, Justice Chen granted the motion in part: Count V (unjust enrichment) was dismissed in its entirety, and Count III (third-party shipper claims) was narrowed to exclude claims for which Northwind could not demonstrate that it had assumed contractual liability to the shippers in question. This ruling was a meaningful victory for TSL, as it eliminated an entire cause of action and significantly constrained the universe of third-party shipper claims that Northwind may pursue at trial.

discovery was conducted from January through August 2024 and was extensive. Document production included approximately 85,000 documents (over 400,000 pages), processed and reviewed with the assistance of Lighthouse Data Analytics Inc. The parties completed eight depositions, including the following key witnesses:

• Alexandros Stavridis, Chairman and CEO of TSL — April 22, 2024

• Captain Nikolaos Giannopoulos, Master of M/V Aegean Fortuna — May 10, 2024

• Viktor Lindgren, President of Northwind — May 30, 2024

• Sandra Chow, CFO of Northwind — June 14, 2024

• Chief Engineer Dimitris Vlahos, M/V Aegean Fortuna — June 28, 2024

• Three additional fact witnesses — July 2024

Expert reports were exchanged in accordance with the Court's scheduling order. TSL served the reports of Dr. Henrik Sørensen (maritime engineering) and Dr. Constance Albright (damages) on August 5, 2024. Northwind served the reports of Captain Julian Blackmore (maritime operations) and Dr. Rajesh Anand (damages) on August 19, 2024. Rebuttal reports from both sides were served on September 9, 2024.

On September 20, 2024, TSL filed its Motion for Partial Summary Judgment under CPLR 3212, seeking two forms of relief: (1) a declaration that the Clause 28 liquidated damages cap of $4,500,000 operates as a single aggregate cap for the entire charter period, rather than as a per-incident cap; and (2) dismissal of the deviation claim (Count II). Argument on the motion is scheduled for December 6, 2024 before Justice Chen. The strategic implications of the pending motion for the settlement analysis are discussed in Section VII below.

III. Assessment of Litigation Risk

Based on our review of the complete discovery record, the deposition testimony, the expert reports and rebuttal reports, the applicable law, and our experience in comparable maritime commercial disputes, we have prepared the following assessment of TSL's litigation risk on a claim-by-claim basis.

A. TSL's Defenses — Strengths

1. Liquidated Damages Cap Interpretation (Strong)

The interpretation of Clause 28 of the Charter-Party represents TSL's strongest defensive position and is the subject of the pending summary judgment motion. TSL's argument is straightforward: the plain language of Clause 28 provides for a cap of $4,500,000 "for any single continuous period of breach," and the three mechanical incidents alleged by Northwind constitute a single pattern of alleged maintenance failure under one charter — i.e., a single continuous period of breach of the Clause 6 maintenance obligation — rather than three separate "periods" of breach.

The textual analysis strongly supports TSL's position. The phrase "any single continuous period of breach" is most naturally read to encompass the entirety of the Owner's alleged course of conduct constituting breach of the maintenance obligation, rather than each individual mechanical event. This reading is consistent with the purpose of a liquidated damages cap, which is to limit the breaching party's aggregate exposure to a commercially reasonable ceiling. Under Northwind's alternative reading — that the cap applies independently to each discrete incident — the cap provision would effectively be rendered meaningless as a risk-management tool, since any number of incidents could be separately capped at $4,500,000 each, yielding unlimited aggregate exposure. New York courts have consistently declined to interpret contractual provisions in a manner that renders other provisions superfluous or meaningless, and this principle strongly favors TSL's interpretation.

Moreover, even if Northwind were to prevail on its per-incident reading (which we believe is unlikely), the practical impact would be limited. The LD formula set forth in Clause 28 — 150% of aggregate off-hire days multiplied by the daily hire rate — yields a total of only $1,504,500 when applied to the 68 off-hire days (68 × $14,750 × 1.5 = $1,504,500). This figure is well below the $4,500,000 cap regardless of whether the cap is applied once or per-incident. Northwind's attempt to claim the full $4,500,000 as a "minimum floor" rather than a cap is, in our assessment, unsupported by the text of Clause 28 and is unlikely to be credited by Justice Chen or by a trier of fact.

We assess the probability of TSL prevailing on the cap interpretation issue at 70–80%. This is TSL's most favorable area of defense and provides significant leverage in settlement negotiations.

2. Latent Defect Defense — Incident 1 (Moderate-Strong)

With respect to the March 2022 turbocharger failure (Incident 1), TSL has a credible defense based on the theory of latent defect. Dr. Henrik Sørensen, TSL's retained maritime engineering expert, opines in his report dated August 5, 2024 that the catastrophic turbocharger failure was attributable to a pre-existing manufacturing defect in the turbocharger impeller that was not detectable through standard maintenance and inspection procedures. Dr. Sørensen's analysis is based on a metallurgical examination of the failed impeller and comparison with manufacturer specifications, and his conclusions are supported by independent third-party analysis from the turbocharger manufacturer's own quality assurance department, which acknowledged anomalous stress fracture patterns inconsistent with normal operational wear.

TSL exercised due diligence in maintaining the turbocharger system in accordance with both the manufacturer's recommended maintenance schedule and the classification requirements of GMCB. The vessel's class surveys were current at the time of the failure, and the maintenance records reflect that the scheduled inspection intervals were generally adhered to.

The principal risk to TSL's latent defect defense arises from the testimony and opinions of Northwind's expert, Captain Julian Blackmore, who opines that certain maintenance records for the turbocharger exhibit delayed inspection intervals and that these delays may have contributed to the failure or, at a minimum, may have allowed detection of the developing defect at an earlier stage. Captain Blackmore points to specific maintenance log entries that, in his view, reflect inconsistencies and gaps that are inconsistent with the exercise of due diligence. While we believe Dr. Sørensen's opinions are more persuasive and better supported by the physical evidence, the documentary gaps identified by Captain Blackmore could create a triable issue of fact that would preclude summary judgment on this claim and, at trial, could sway a trier of fact.

We assess the probability of TSL prevailing on the latent defect defense for Incident 1 at 60–65%. This is a moderately favorable defense that materially reduces but does not eliminate TSL's exposure on this category of damages.

3. Charterer Causation — Incident 2 (Moderate)

TSL's defense to the July 2022 BWTS malfunction and auxiliary boiler failure (Incident 2) is that the BWTS malfunction was caused by contaminated ballast water loaded at a prior port of call by Northwind's agents. This defense, if established, would shift liability for the BWTS failure to Northwind as the party responsible for the contamination.

The evidentiary foundation for this defense is meaningful but not overwhelming. Chief Engineer Dimitris Vlahos testified in his deposition on June 28, 2024 that the BWTS system had been functioning properly prior to the loading of ballast water at the prior port and that, following the loading, the system's sensors registered abnormal readings consistent with biological or chemical contamination. Additionally, water sample analysis performed by a laboratory in Colombo, Sri Lanka, following the vessel's arrival for repairs identified contaminants in the ballast water that, in TSL's view, are consistent with contamination at the point of loading rather than degradation in transit.

However, the defense is undermined by two factors. First, the chain of custody of the water samples was not fully or contemporaneously documented. Northwind's experts have challenged the reliability of the laboratory results on the ground that the samples were not collected, preserved, or transmitted in accordance with standard evidentiary protocols, and there are gaps in the documentation that could support an argument that the samples were compromised. Second, the auxiliary boiler failure that occurred simultaneously with the BWTS malfunction is a separate mechanical component, and TSL has a less persuasive explanation for why both systems failed at the same time. The simultaneous nature of the failures may, in the eyes of a trier of fact, suggest a systemic maintenance issue rather than a charterer-caused contamination event.

Northwind's expert, Captain Blackmore, has offered an alternative causation theory attributing both failures to inadequate preventive maintenance and corrosion in the BWTS piping system, which he contends was detectable during routine inspections.

We assess the probability of TSL prevailing on the charterer causation defense for the BWTS component of Incident 2 at 50–55%, and the likelihood of prevailing on the auxiliary boiler component as somewhat lower. On balance, Incident 2 represents a genuinely contested factual dispute with meaningful risk on both sides.

4. Deviation Claim — Maputo Call (Moderate-Strong)

Northwind alleges that TSL's vessel made an unauthorized deviation to Maputo, Mozambique during a Durban-to-Qingdao voyage in September 2022. TSL's defense is that the call at Maputo was necessitated by adverse weather and routing conditions in the Mozambique Channel and was within the Master's professional discretion.

Captain Giannopoulos's deposition testimony on May 10, 2024 provides a detailed account of the weather conditions encountered in the Mozambique Channel during the relevant period, including heavy swells, sustained high winds, and reduced visibility that, in his judgment, warranted a decision to shelter at Maputo and await improved conditions before proceeding northward. Contemporaneous weather data from meteorological services corroborates that adverse sea conditions existed in the Mozambique Channel during the relevant dates in September 2022, lending some objective support to the weather-necessity defense.

The weakness of this defense is significant, however: Discovery produced internal TSL emails that suggest the Maputo call was at least partly commercially motivated. Specifically, emails between TSL's commercial department and the vessel's agents in Maputo, dated in early September 2022, discuss the availability of a cargo parcel at Maputo and the feasibility of loading TSL's own cargo during the vessel's passage through the area. While these emails do not conclusively establish that the weather justification was pretextual, they create a strong inference that commercial considerations played a role in the decision to call at Maputo, which could substantially undermine the weather-necessity defense at trial.

If a trier of fact credits the internal emails as evidence that the Maputo call was commercially motivated rather than weather-necessitated, TSL would likely be liable for the full $1,230,000 in demurrage and dead freight arising from the missed Qingdao laycan window, plus related consequential damages.

TSL's motion for partial summary judgment addresses this claim, seeking dismissal of the deviation cause of action. Our assessment is that the motion has a reasonable prospect of success, but the internal emails present a factual issue that may preclude summary disposition.

We assess the probability of TSL prevailing on the deviation defense at 55–60%. The weather evidence provides a credible foundation, but the internal emails create genuine risk.

5. Inter-Club Agreement / Cargo Damage (Moderate-Strong)

Northwind's cargo damage claim of $3,420,000 relates to iron ore oxidation that allegedly occurred during the off-hire period associated with Incident 2 (the Richards Bay BWTS malfunction and boiler failure). Northwind contends that moisture exposure caused by the BWTS malfunction led to oxidation of the iron ore cargo, rendering a substantial portion of it commercially unfit upon discharge.

TSL's primary defense to the cargo damage claim is based on the Inter-Club Agreement ("ICA"), which governs the apportionment of cargo claims as between owners and time charterers. Under the ICA, cargo claims arising from unseaworthiness are typically the Owner's responsibility, while claims arising from cargo handling, stowage, or care of cargo are typically the Charterer's. In this case, the causation of the cargo damage is mixed: the proximate cause of the moisture exposure was the BWTS malfunction (an alleged unseaworthiness issue), but the iron ore cargo's susceptibility to oxidation is also related to loading and stowage conditions that were under Northwind's operational control during the voyage.

Additionally, if TSL prevails on its charterer causation defense for the BWTS malfunction (i.e., that the failure was caused by Northwind's agents loading contaminated ballast), the ICA analysis would shift further in TSL's favor, as the underlying cause of the alleged unseaworthiness would itself be attributable to the Charterer.

The mixed causation issues make this claim difficult to predict with certainty. We assess the probability of TSL substantially reducing its exposure on the cargo damage claim at 50–55%. Even if TSL does not escape liability entirely, there is a reasonable prospect of apportioning the cargo damage between the parties under the ICA framework, which could substantially reduce the $3,420,000 claim.

6. Third-Party Shipper Claims (Strong After MTD Ruling)

Northwind seeks to recover $5,634,400 in third-party shipper claims — comprising three separate claims from cargo interests who allegedly suffered losses arising from delays and cargo damage attributable to the mechanical incidents. The legal theory under which Northwind advances these claims is that TSL's breaches of the Charter-Party caused Northwind to incur liability to third-party shippers, and that Northwind is entitled to recover those liabilities as consequential damages under the Charter-Party.

This category was significantly affected by Justice Chen's March 8, 2024 Decision and Order on TSL's motion to dismiss. The Court dismissed Count V (unjust enrichment) in its entirety and narrowed Count III (third-party shipper claims) by excluding claims for which Northwind could not demonstrate a contractual assumption of liability to the relevant shippers. As a result of the narrowing, Northwind's ability to prove the remaining third-party shipper claims at trial faces substantial legal hurdles.

Fundamentally, Northwind is seeking to recover as charter-party damages what are essentially third-party tort claims — claims asserted by cargo interests against cargo carriers. The causal chain required to establish these damages as recoverable consequential damages of the Charter-Party breach is attenuated and faces potential challenges on foreseeability, remoteness, and the rule against speculative damages. Under New York law, consequential damages must have been within the reasonable contemplation of the parties at the time of contracting, and the recovery of third-party claims as charter-party damages is not universally recognized.

We assess the probability of TSL excluding or significantly reducing the third-party shipper claims at trial at 65–70%. This is one of TSL's stronger defensive positions, particularly in light of the motion to dismiss ruling that has already narrowed the scope of these claims.

7. Failure to Mitigate (Moderate)

TSL has asserted a failure-to-mitigate defense against several categories of Northwind's damages, most prominently the substitute charter costs ($471,600). The evidence adduced in discovery supports this defense to a meaningful extent. Northwind's claim for substitute charter costs is based on its engagement of a replacement vessel at a daily rate of $21,300 for 72 days — four days longer than the 68 actual off-hire days. However, the evidence suggests that Northwind did not promptly seek substitute tonnage upon learning of each mechanical incident. The deposition of Sandra Chow (CFO) on June 14, 2024 revealed limited contemporaneous documentation of mitigation efforts, including no evidence that Northwind solicited competitive bids from other vessel operators for substitute tonnage during the initial periods of off-hire.

Under New York law, a non-breaching party has a duty to take reasonable steps to mitigate damages, and a failure to do so may result in the reduction or denial of damages that could have been avoided through reasonable efforts. The evidence regarding Northwind's delayed and limited mitigation efforts could support a reduction of the substitute charter damages, and potentially other consequential damages categories as well.

We assess the probability of successfully reducing Northwind's damages through the mitigation defense at approximately 55%. The defense is not a complete bar to the substitute charter claim but is likely to result in some reduction of the quantum.

B. TSL's Defenses — Weaknesses

While TSL possesses strong defenses on several fronts, the Board should be aware of the following areas where TSL's position is weaker and where significant litigation risk exists.

1. Incident 3 Concession

TSL has conceded that the cylinder liner failure in November–December 2022 (Incident 3, resulting in 25 days of off-hire) constituted a maintenance failure within the meaning of Clause 6 of the Charter-Party. This concession was made after a thorough review of the maintenance records, the engineering analysis, and the deposition testimony of Chief Engineer Vlahos, all of which indicated that the failure was attributable to inadequate maintenance rather than a latent defect or external cause.

The practical consequence of this concession is significant. It establishes breach of the Charter-Party as a matter of law for at least one incident, which anchors Northwind's overall breach claim and triggers the applicability of Clause 28's liquidated damages provision. At a minimum, TSL is liable for the off-hire deduction for 25 days ($368,750) and the related consequential damages flowing from this particular incident. The dispute with respect to Incident 3 is thus limited to quantum rather than liability, and any damages attributable to Incident 3 will be awarded to Northwind absent a settlement.

2. Internal Emails on Maputo Deviation

As discussed in Section III.A.4 above, the internal TSL emails relating to the September 2022 Maputo call represent a meaningful vulnerability. The emails, which were produced in discovery pursuant to the Court's standard discovery orders, contain communications between TSL's commercial operations team and the vessel's agents in Maputo that discuss the availability of cargo for loading and the commercial benefit to TSL of routing the vessel through Maputo. While the emails do not contain an explicit instruction to the Master to deviate for commercial purposes, the strong inference of commercial motivation could be devastating at trial if presented alongside Northwind's narrative that the weather-necessity defense is pretextual.

If the deviation claim survives the pending summary judgment motion and proceeds to trial, the internal emails would likely be a centerpiece of Northwind's trial presentation on Count II. The risk that a trier of fact would conclude that the Maputo call was commercially motivated — and therefore an unauthorized deviation — is substantial.

3. Documentary Gaps in Maintenance Records

Certain maintenance records for the turbocharger system aboard the M/V Aegean Fortuna contain gaps and inconsistencies that have been highlighted by Northwind's expert, Captain Blackmore. Specifically, inspection log entries for the turbocharger impeller during the period preceding Incident 1 do not consistently reflect adherence to the manufacturer's recommended inspection intervals. While TSL maintains that all scheduled maintenance was performed and that the log entries reflect administrative oversights rather than deferred maintenance, the documentary record is not as clean as it should be, and a trier of fact may view the gaps with skepticism.

These documentary gaps could undermine TSL's latent defect defense for Incident 1 if the Court or jury concludes that TSL failed to exercise the due diligence required by Clause 6. In the worst case, the gaps could be viewed as evidence of a broader systemic maintenance failure that supports Northwind's overarching narrative that TSL did not adequately maintain the vessel throughout the charter period.

C. Summary Risk Assessment Table

Based on the foregoing analysis, the following table summarizes our assessment of TSL's probable exposure for each category of Northwind's claimed damages:

The midpoint of TSL's estimated probable exposure at trial is approximately $5,700,000. This figure represents the risk-adjusted expected damages award before accounting for TSL's counterclaim offset, insurance contribution, or additional legal costs to trial.

IV. Potential Trial Outcomes

To further inform the Board's settlement decision, we have modeled three potential trial outcome scenarios — a best case, a most likely case, and a worst case — together with their estimated probabilities. These scenarios are not predictions but rather a framework for evaluating the range of reasonably possible outcomes.

A. Best-Case Scenario for TSL

In the best-case scenario, TSL prevails on its latent defect defense for Incident 1, its charterer causation defense for Incident 2, and the weather-necessity defense for the Maputo deviation claim. TSL's liability would be limited to Incident 3 (the conceded maintenance failure) and modest consequential damages flowing from that single incident. The third-party shipper claims would be excluded or drastically reduced under the reasoning of Justice Chen's prior ruling, and the cargo damage claim would be substantially diminished given the successful charterer causation defense on Incident 2.

Under this scenario, the estimated damages award against TSL would be in the range of $1.5 million to $2.5 million, primarily reflecting the Incident 3 off-hire deduction, a limited amount of liquidated damages, and some consequential damages. TSL would recover its full counterclaim of $1,620,000 (or a substantial portion thereof), yielding a net exposure to TSL of approximately $0 to $900,000.

We assign a probability of 15–20% to this scenario. While it is a plausible outcome, it requires TSL to prevail on virtually every contested issue, which is inherently uncertain.

B. Most Likely Outcome

The most probable outcome, in our assessment, is a mixed verdict in which TSL is found liable for Incident 3 and partially liable for one or both of the other incidents (most likely Incident 1 or Incident 2, but not both to the full extent claimed by Northwind). The deviation claim would either be dismissed (if the summary judgment motion is granted) or partially sustained. Cargo damage would be partially awarded, with some reduction for mixed causation and ICA apportionment. The third-party shipper claims would be substantially reduced from the $5,634,400 claimed.

Under this scenario, the estimated damages award against TSL would be in the range of $5 million to $8 million. TSL's counterclaim would be partially sustained, yielding an offset of approximately $800,000 to $1,200,000. The resulting net exposure to TSL would be approximately $3.8 million to $7.2 million, before accounting for additional legal costs and insurance contribution.

We assign a probability of 50–60% to this scenario. It represents the center of gravity of the likely trial outcomes and is the primary driver of our settlement range recommendation.

C. Worst-Case Scenario for TSL

In the worst-case scenario, TSL loses on all three mechanical incidents, the deviation claim is sustained in full, the LD cap is interpreted on a per-incident basis (though as noted, the formula still yields only $1,504,500 for 68 off-hire days), the cargo damage claim is awarded substantially as claimed, and the third-party shipper claims are substantially awarded. While this scenario does not assume that every dollar of Northwind's $18.3 million claim would be awarded, it contemplates an adverse outcome on most contested issues.

Under this scenario, the estimated damages award against TSL would be in the range of $10 million to $14 million. TSL's counterclaim might be entirely offset by Northwind's withholding defense, or awarded only to a minimal extent. The net exposure to TSL would be approximately $10 million to $14 million.

We assign a probability of 15–20% to this scenario. While it represents a tail risk rather than a likely outcome, it is not implausible, particularly if the internal emails on the Maputo deviation prove as damaging at trial as they appear on paper, and if the maintenance record gaps undermine the latent defect defense.

D. Expected Value Calculation

Using the probability-weighted scenario analysis described above, the expected value of the trial outcome (before additional legal costs) is as follows:

• Best case (17.5% probability × $1.0 million midpoint net exposure) = $175,000

• Most likely (55% probability × $5.5 million midpoint net exposure) = $3,025,000

• Worst case (17.5% probability × $12.0 million midpoint net exposure) = $2,100,000

• Remaining probability (10%) allocated proportionally across scenarios

The resulting weighted expected value of the trial outcome (before additional legal costs) is approximately $5.2 million to $6.8 million.

When the estimated additional litigation costs of $800,000 to $1,200,000 for summary judgment reply briefing, trial preparation, the trial itself (estimated at 10–14 trial days), and post-trial motions are added, the total expected cost including legal fees is approximately $6.0 million to $8.0 million.

This expected cost range aligns closely with the recommended settlement range of $6.5 million to $9.0 million, confirming that settlement within the recommended range represents an economically rational outcome for TSL when the risk-adjusted expected trial cost is properly accounted for — particularly given the elimination of downside tail risk and the certainty of resolution that settlement provides.

V. Cost-Benefit Analysis of Settlement Versus Continued Litigation

A. Costs Incurred to Date

TSL has incurred substantial legal costs in this litigation since C&H's engagement in October 2023. The costs incurred through the date of this memorandum (October 15, 2024) are as follows:

We estimate that an additional approximately $230,000 in C&H fees and $65,000 in costs will be incurred through the completion of the mediation, bringing the estimated total legal expenditure through settlement to approximately $3,470,000 if the case resolves at the October 28–29 mediation.

B. Estimated Additional Costs if Case Proceeds to Trial

If the case does not settle at mediation and proceeds through summary judgment argument, trial preparation, trial, and post-trial motions, the estimated additional costs are as follows:

The grand total of legal costs from inception through trial would therefore be approximately $4,225,000 to $4,775,000. These costs are sunk to the extent already incurred but provide important context for the settlement cost-benefit analysis, as the incremental additional costs of proceeding to trial ($1,050,000 to $1,600,000) represent a significant expenditure that can be avoided through settlement.

C. Settlement Economics

The following analysis compares the net economic cost to TSL under a settlement scenario versus the expected cost of proceeding to trial.

Settlement Scenario (at midpoint of recommended range: $7,750,000):

Trial Scenario (most likely outcome, midpoint estimates):

The comparison demonstrates that a settlement at the midpoint of the recommended range would yield a net economic cost to TSL of approximately $3,880,000, compared to an estimated net trial cost in the most likely scenario of approximately $4,825,000 to $6,825,000. Settlement thus provides estimated cost savings of approximately $945,000 to $2,945,000 over the expected trial outcome.

Critically, these savings figures account only for the most likely trial scenario (50–60% probability). When the worst-case tail risk is factored in — a scenario with 15–20% probability that could result in net exposure of $10 million to $14 million — the risk-adjusted benefit of settlement is even more compelling. Settlement at the midpoint of the recommended range eliminates this downside tail risk entirely, providing certainty and finality.

We note that the anticipated P&I Club contribution may be somewhat lower in the trial scenario than in the settlement scenario. The Oceanus P&I Club Board is generally more favorably disposed toward contributing to negotiated settlements than to judgments following contested trials, as settlements allow the Club to manage its exposure and avoid the precedential implications of adverse court rulings. Accordingly, the assumed P&I contribution in the trial scenario ($1,500,000 to $2,000,000) is conservatively lower than in the settlement scenario ($2,000,000 to $2,500,000).

D. Non-Monetary Considerations

In addition to the quantitative cost-benefit analysis, several non-monetary factors weigh in favor of settlement:

Management Distraction. A trial in this matter is estimated to require 10 to 14 trial days in the Commercial Division. The trial would demand extensive preparation time from TSL's senior management and key operational personnel, including Alexandros Stavridis (who would likely be required to testify), Markos Theodorakis (who would be coordinating with counsel throughout the trial), Captain Giannopoulos (a critical fact witness), and Chief Engineer Vlahos (whose testimony is central to the defense on Incidents 1 and 2). The opportunity cost of diverting these individuals from their operational responsibilities for several weeks of trial preparation and testimony is substantial and difficult to quantify but is nevertheless a meaningful consideration for the Board.

Reputational Risk. A public trial involving allegations of seaworthiness failures, deferred maintenance, and unauthorized deviation carries reputational risk for TSL. The maritime industry is a relatively small and interconnected community, and a public trial record documenting maintenance deficiencies — even if TSL ultimately prevails on most issues — could affect TSL's charter-party negotiations with other counterparties, its standing with GMCB and other classification societies, and its relationships with insurers and P&I clubs. Trial proceedings in the Commercial Division are public, and the allegations made at trial would be a matter of public record.

Lender Relations. TSL's credit facility with Meridian Capital Bank AG ($340 million facility) is subject to a requirement under Section 8.14 of the Credit Agreement dated April 1, 2019 that TSL provide notice of material litigation settlements exceeding $5 million. While this notification requirement applies regardless of whether the case settles or proceeds to judgment, the prolonged uncertainty associated with continued litigation could affect TSL's credit terms, borrowing capacity, or lender confidence. A prompt settlement resolves this uncertainty and allows TSL to address the notification requirement in a controlled manner.

Confidentiality. A settlement agreement would include strict confidentiality provisions protecting the financial terms of the resolution from public disclosure. By contrast, a trial verdict and any subsequent judgment would be a matter of public record, disclosing the specific amounts awarded and the factual findings underlying the judgment. For a publicly active company like TSL, the ability to maintain confidentiality of the settlement terms is a significant advantage.

Business Relationships. While TSL and Northwind are unlikely to engage in future charter-party dealings given the current adversarial posture, a settlement avoids further confrontational proceedings in a relatively small maritime community. The international shipping industry depends heavily on reputation and relationships, and a resolution that avoids the acrimony of a public trial is generally preferable from a commercial perspective.

Timing. Settlement at the October 28–29 mediation would allow prompt resolution of the dispute, enabling TSL to close this chapter and focus on its forward-looking business operations. If the case does not settle, the trial would not occur until mid-2025 at the earliest, extending the period of uncertainty by another six to nine months. During this period, TSL would continue to incur legal costs, devote management attention to the litigation, and remain subject to the risk of an adverse outcome.

VI. Proposed Settlement Parameters

A. Recommended Range

C&H recommends that the Board authorize a settlement within the range of $6.5 million to $9.0 million, all-in, inclusive of any amounts contributed by the Oceanus P&I Club. This range is derived from the expected value analysis set forth in Section IV.D, the cost-benefit comparison in Section V.C, and professional judgment informed by our experience in comparable maritime commercial disputes.

The upper limit of $9.0 million provides adequate negotiating room above the expected settlement zone of approximately $7 million to $8 million. In mediation, it is common for the parties to begin at widely separated positions and converge toward a mutually acceptable figure through successive rounds of negotiation. Having authority to move to $9.0 million if necessary — while targeting a resolution in the $7.5 million to $8.0 million range — provides the negotiating team with sufficient flexibility to reach an agreement without the need to revert to the Board for additional authority during the mediation session.

The lower limit of $6.5 million reflects our assessment that a settlement below this figure is unlikely to be achievable given the magnitude of Northwind's $18.3 million claim, the genuine exposure on Incident 3 (where TSL has conceded liability), the cargo damage claim, and the strength of Northwind's position on several categories of damages. While TSL will of course endeavor to settle at the lowest possible figure, a target below $6.5 million is not realistic in the context of this dispute and would risk a failed mediation that could weaken TSL's negotiating posture in subsequent discussions.

B. Anticipated Settlement Structure

Based on our experience with comparable settlements and our preliminary discussions with opposing counsel, we anticipate that the settlement agreement would include the following principal terms:

Payment Terms. The settlement payment would be structured as either a lump-sum payment or installment payments. If installment payments are necessary given the magnitude of the settlement relative to TSL's cash position, we would recommend a structure consisting of an initial payment of approximately 50–60% of the total settlement amount within 30 days of execution, with the balance payable in two or three quarterly installments over the following 6–9 months. Installment payments would be secured by TSL's corporate guarantee and, if required by Northwind, by a standby letter of credit from a mutually acceptable financial institution.

Mutual General Release. The settlement would include a full mutual general release of all claims, counterclaims, cross-claims, and third-party claims arising from or related to the Charter-Party (Reference No. NW-TSL-CP-2020-1203), the M/V Aegean Fortuna, and the transactions and occurrences giving rise to the litigation. The mutual release would encompass all known and unknown claims, whether asserted or unasserted, and would run in favor of and bind all parties, their affiliates, subsidiaries, predecessors, successors, assigns, officers, directors, employees, agents, and insurers.

TSL Counterclaim. TSL's counterclaim for $1,620,000 in unpaid hire would be released as part of the mutual general release. The release of the counterclaim has been factored as an offset in the net economic cost analysis set forth in Section V.C above. While the counterclaim has substantial merit as a standalone claim, its value as settlement currency — reducing the net economic cost of the settlement — exceeds the risk-adjusted expected recovery if the counterclaim were litigated to judgment, particularly when the costs of continued litigation are considered.

Confidentiality Provisions. The settlement agreement would include strict confidentiality provisions prohibiting the parties from disclosing the financial terms of the settlement to any third party, subject to specifically enumerated exceptions for disclosures to:

(a) TSL's and Northwind's respective insurers (Oceanus P&I Club, Fortis Marine Underwriters Ltd., and Northwind's insurers);

(b) TSL's lender (Meridian Capital Bank AG), as required by the Credit Agreement;

(d) The parties' respective legal, tax, and accounting advisors;

(e) As required by applicable law, regulation, or order of a court or governmental authority; and

(f) The parties' respective officers, directors, and senior management with a need to know.

No Admission of Liability. The settlement agreement would include a standard provision expressly stating that neither party admits any liability, fault, or wrongdoing by entering into the settlement, and that the settlement shall not be construed as evidence of or an admission of any claim or defense in any other proceeding.

Consent Judgment Provision. The settlement agreement would include a standard mechanism allowing Northwind to enter a consent judgment for the unpaid balance of the settlement payment upon TSL's default in making any installment payment, at the New York statutory interest rate of 9% per annum from the date of default. This provision is customary in commercial settlement agreements involving installment payments and provides Northwind with adequate security while incentivizing timely payment by TSL.

Escrow. Settlement funds would be deposited with a mutually acceptable escrow agent pending release upon joint written instruction of the parties (or upon satisfaction of any conditions precedent specified in the settlement agreement). The escrow arrangement provides both parties with assurance that the funds will be available and properly disbursed in accordance with the terms of the agreement.

Stipulation of discontinuance. Upon completion of all settlement payments, the parties would file a stipulation of discontinuance with prejudice with the Supreme Court, terminating the litigation in its entirety.

Withdrawal of Pending Motions. TSL's motion for partial summary judgment, currently pending before Justice Chen with argument scheduled for December 6, 2024, would be withdrawn with prejudice upon execution of the settlement agreement. This is a standard provision in pre-trial settlements and reflects the fact that the motion becomes moot upon resolution of the underlying dispute.

C. Insurance Contribution

Oceanus Mutual Protection & Indemnity Club. TSL's P&I coverage for the M/V Aegean Fortuna is provided by the Oceanus Mutual Protection & Indemnity Club under Policy No. OCE-P&I-2020-TSL-0047. Based on preliminary discussions with the Club and our review of the policy terms, we anticipate that the Oceanus P&I Club will contribute approximately $2,000,000 to $2,500,000 toward the settlement.

P&I policies generally cover third-party liabilities arising from vessel operations, including liabilities for cargo damage, personal injury, and certain contractual liabilities. The extent to which charter-party breach claims fall within P&I coverage depends on the nature of the underlying liabilities giving rise to the claim. In this case, several categories of Northwind's claims — including the cargo damage claim ($3,420,000) and certain third-party shipper claims — are grounded in seaworthiness and vessel operational issues that fall within the traditional scope of P&I coverage. Other categories — such as the liquidated damages claim and the substitute charter costs — may fall outside coverage to the extent they represent purely contractual liabilities unrelated to third-party injury or damage.

We recommend that a formal notice of claim and contribution request be submitted to David Okafor at the Oceanus P&I Club promptly following Board authorization of the settlement. Based on our experience with Oceanus and comparable P&I clubs, we anticipate that the Club's Board will consider and approve the contribution request by approximately November 22, 2024 — in advance of the mediation or, if the mediation is delayed or the parties require additional time to finalize terms, within a reasonable period following the mediation.

Fortis Marine Underwriters Ltd. TSL's Hull & Machinery ("H&M") insurance for the M/V Aegean Fortuna is provided by Fortis Marine Underwriters Ltd. under Policy No. FMU-HM-2020-4892. While the H&M policy is not directly implicated by the settlement payment, Fortis's subrogation rights may be affected depending on how the settlement is structured. If TSL has made or may make claims under the H&M policy for the repair costs associated with the three mechanical incidents, Fortis may assert subrogation rights against recoveries made from third parties (including Northwind, to the extent the charterer causation defense shifts liability). The settlement agreement should be drafted to preserve Fortis's subrogation rights to avoid any coverage complications or potential disputes with the H&M insurer.

D. Lender Notification

Under Section 8.14 of the Credit Agreement dated April 1, 2019, between TSL and Meridian Capital Bank AG, TSL is required to provide notice to the lender of any material litigation settlement exceeding $5,000,000. A settlement within the recommended range of $6.5 million to $9.0 million would

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT
October 15, 2024
MEMORANDUM
FROM: Douglas Carmichael, Partner, and Francesca Morano, Partner Calderwood & Harkness LLP One Liberty Plaza, 50th Floor New York, NY 10006
TO: Board of Directors Thalassa Shipping & Logistics SA c/o Markos Theodorakis, General Counsel 42 Akti Miaouli Piraeus 185 38, Greece
RE: Settlement Authority Recommendation — 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, Justice Lorraine K. Chen, J.S.C.)
C&H Matter No.: 1044-00006
I. Executive Summary
The purpose of this memorandum is to request that the Board of Directors of Thalassa Shipping & Logistics SA ("TSL") authorize Alexandros Stavridis (Chairman and Chief Executive Officer) and Markos Theodorakis (General Counsel) to negotiate and execute a settlement of the above-referenced litigation within a recommended range of $6.5 million to $9.0 million (all-in, inclusive of any amounts contributed by TSL's Protection & Indemnity insurer).
As the Board is aware, the Supreme Court of the State of New York, New York County, Commercial Division, has ordered the parties to participate in a court-ordered mediation session scheduled for October 28–29, 2024, before the Honorable Gerald K. Fitzpatrick (Ret.) at Bayside Dispute Resolution Services LLC, 140 Broadway, Suite 3200, New York, NY 10005. This mediation presents the most efficient opportunity to resolve the dispute on terms favorable to TSL and to avoid the substantial costs and risks associated with proceeding to trial, which is currently projected for mid-2025 at the earliest.
After careful evaluation of the claims and defenses in this matter, the strength and credibility of the evidence adduced in discovery, the expert reports and rebuttal reports exchanged between the parties, the pending motion for partial summary judgment before Justice Chen, the potential trial outcomes under multiple scenarios, the ongoing and projected legal costs, and the availability of insurance contribution from the Oceanus Mutual Protection & Indemnity Club, Calderwood & Harkness LLP ("C&H") recommends that TSL settle the dispute within the proposed range of $6.5 million to $9.0 million.
In reaching this recommendation, we have taken into account TSL's counterclaim for $1,620,000 in unpaid hire, which should be factored as an offset against any settlement payment. When the counterclaim offset and the anticipated contribution from the Oceanus P&I Club (estimated at $2.0 million to $2.5 million) are considered, the net economic cost to TSL at the midpoint of the recommended range is approximately $3.88 million. At the lower end of the recommended range, the net economic cost could be as low as approximately $2.88 million, and at the upper end, approximately $5.38 million.
In summary, the recommended settlement range reflects a rational and substantial discount of approximately 57% to 64% from Northwind Maritime Corporation's ("Northwind") aggregate claim of $18.3 million. It accounts for TSL's strong defenses on several categories of claimed damages — notably the liquidated damages cap interpretation, the latent defect defense for Incident 1, and the post-motion-to-dismiss posture of the third-party shipper claims — while honestly acknowledging genuine risk on others, including the conceded maintenance failure in Incident 3, the potentially damaging internal emails regarding the Maputo deviation, and the mixed causation issues surrounding cargo damage. Above all, a settlement within this range provides certainty and finality in what has become a complex, multi-faceted maritime dispute that, if taken to trial, would entail substantial additional legal expenditure, extended management distraction, and meaningful downside tail risk.
II. Background
A. The Parties
Thalassa Shipping & Logistics SA ("TSL"). TSL is a Greek Société Anonyme headquartered at 42 Akti Miaouli, Piraeus 185 38, Greece. TSL is a diversified shipping company that operates a fleet of approximately 34 vessels, including dry bulk carriers, tankers, and container ships. For the fiscal year ended December 31, 2022, TSL reported revenue of approximately $612 million and EBITDA of approximately $98 million. TSL's senior management includes Alexandros Stavridis (Chairman and Chief Executive Officer), Elena Papadimitriou (Chief Financial Officer), and Markos Theodorakis (General Counsel). TSL is the parent company and sole shareholder of the co-defendant Aegean Fortuna Shipholding Ltd.
Aegean Fortuna Shipholding Ltd. Aegean Fortuna Shipholding Ltd. is a wholly owned subsidiary of TSL, incorporated under the laws of the Republic of Liberia (Registration No. LR-C-20167845). Aegean Fortuna Shipholding Ltd. is the registered owner of the M/V Aegean Fortuna, the vessel at the center of the dispute. In the customary manner of international ship-owning structures, Aegean Fortuna Shipholding Ltd. was established as a single-purpose vehicle to hold title to the vessel and is operationally controlled by TSL. For purposes of this memorandum and the settlement negotiations, references to "TSL" include Aegean Fortuna Shipholding Ltd. unless the context otherwise requires.
Northwind Maritime Corporation. Northwind Maritime Corporation ("Northwind") is a corporation organized under the laws of the Republic of the marshall Islands (Entity No. MI-94827), with its principal office at 1700 Harbor Gateway, Suite 500, Stamford, Connecticut 06902. Northwind is engaged in commodity trading and bulk cargo operations on a global scale and reported revenue of approximately $1.2 billion for the fiscal year ended December 31, 2022. Northwind's senior management includes Viktor Lindgren (President), Sandra Chow (Chief Financial Officer), and Richard Hartnett (General Counsel). Northwind is represented in this litigation by Hargrove, Delacroix & Stern LLP, with Margaret Delacroix serving as lead partner.
B. The Vessel and Charter-Party
The M/V Aegean Fortuna is a Supramax dry bulk carrier with a deadweight tonnage of 58,200 DWT, built in 2016, bearing International Maritime Organization (IMO) Number 9847231. The vessel is registered under the flag of the Republic of Liberia and is classified by the Global Maritime Classification Bureau ("GMCB"). At all relevant times, the vessel was in class with GMCB and subject to the Bureau's rules and regulations regarding hull integrity, machinery maintenance, and equipment standards.
The charter-party giving rise to this dispute (the "Charter-Party") was executed on December 3, 2020, under Reference No. NW-TSL-CP-2020-1203. The Charter-Party is based on the NYPE 2015 form as amended by the parties and provides for a 36-month time charter term commencing January 15, 2021 and expiring January 14, 2024, at a daily hire rate of $14,750 per day. Over the full 36-month charter period, the total charter value amounts to approximately $16,166,000.
The Charter-Party designates the law of the State of New York as the governing law. Pursuant to Clause 46(b) of an addendum to the Charter-Party, disputes arising thereunder are subject to litigation in the Supreme Court of the State of New York, New York County — the forum in which this action is pending.
Several provisions of the Charter-Party are material to the claims and defenses in this litigation:
Clause 5 (Trade Limits). The Charter-Party permits worldwide trading, subject to specific exclusions for ports subject to sanctions administered by the United States Treasury Department's Office of Foreign Assets Control ("OFAC"), areas listed by the London Joint War Committee as war risk zones, and ice-bound waters north of latitude 68°N.
Clause 6 (Maintenance and Seaworthiness). The Owner is obligated to maintain the vessel in a "thoroughly efficient state of hull, machinery, and equipment" throughout the charter period and to ensure compliance with all applicable classification society requirements. This obligation forms the primary basis for Northwind's breach claims arising from the three mechanical incidents discussed below.
Clause 11 (Off-Hire). The Charter-Party provides detailed provisions for the deduction of hire during periods when the vessel is not at the Charterer's disposal due to deficiency of crew, breakdown of machinery, drydocking, or other causes preventing the full working of the vessel. The off-hire provisions are central to both TSL's counterclaim and the quantification of Northwind's damages.
Clause 28 (Liquidated Damages). Upon the Owner's material breach of Clauses 2 (general description and delivery) and 6 (maintenance/seaworthiness), the Charterer is entitled to liquidated damages equal to 150% of the aggregate off-hire days multiplied by the daily hire rate, subject to a cap of $4,500,000 "for any single continuous period of breach." The interpretation of this cap — specifically, whether it operates as a single cap for the entire charter period or as a per-incident cap — is the subject of TSL's pending motion for partial summary judgment and constitutes one of the most significant legal issues in the case.
C. Alleged Breaches
Northwind's claims arise from three mechanical incidents involving the M/V Aegean Fortuna and one alleged route deviation, all of which occurred during the second year of the charter period in 2022. The incidents are summarized as follows:
Incident 1 — Main Engine Turbocharger Failure (March 12 – April 2, 2022). On or about March 12, 2022, while the vessel was en route from Paradip, India, to Mombasa, Kenya, the main engine turbocharger suffered a catastrophic failure in the Indian Ocean. The vessel was diverted to Colombo, Sri Lanka, for repairs, which required sourcing replacement parts and shipyard labor. The vessel was off-hire for a total of 22 days. TSL's defense with respect to this incident is that the turbocharger failure was attributable to a latent manufacturing defect in the turbocharger impeller that was not detectable through standard maintenance procedures, and that TSL exercised due diligence in maintaining the vessel in compliance with GMCB classification requirements and the manufacturer's recommended maintenance protocols.
Incident 2 — BWTS Malfunction and Auxiliary Boiler Failure (July 8 – July 29, 2022). On or about July 8, 2022, while the vessel was at Richards Bay, South Africa, the ballast water treatment system ("BWTS") experienced a malfunction, and the auxiliary boiler failed simultaneously. These failures resulted in the vessel being off-hire for a total of 21 days. TSL's primary defense is that the BWTS malfunction was caused by Northwind's agents loading contaminated ballast water at a prior port of call, and that the contamination was the proximate cause of the system failure. With respect to the auxiliary boiler failure, TSL's position is less robust, as it is a separate mechanical component whose failure is more difficult to attribute to charterer causation.
Incident 3 — Main Engine Cylinder Liner Failure (November 15 – December 10, 2022). On or about November 15, 2022, the vessel's main engine suffered a cylinder liner failure that required drydocking at Keppel Verolme Shipyard in Rotterdam, the Netherlands. The vessel was off-hire for 25 days. TSL concedes that this failure constituted a maintenance failure within the meaning of Clause 6 of the Charter-Party but disputes the quantum of damages attributable to this incident. This concession is significant because it establishes liability for at least one breach and anchors Northwind's ability to invoke Clause 28's liquidated damages provision.
Alleged Route Deviation — Maputo, Mozambique (September 2022). Northwind alleges that during a voyage from Durban, South Africa, to Qingdao, China, in September 2022, the vessel made an unauthorized deviation to Maputo, Mozambique, for the purpose of loading TSL's own cargo. Northwind claims that this deviation added approximately four days to the voyage and caused the vessel to miss the contractual laycan window at Qingdao (October 1–5, 2022), resulting in demurrage and dead freight charges totaling $1,230,000. TSL's defense is that the Maputo call was necessitated by adverse weather and routing conditions in the Mozambique Channel and was within the Master's discretion under the circumstances. As discussed in greater detail in Section III.A.4 below, however, internal TSL emails produced in discovery suggest that the call may have been at least partly commercially motivated, which could undermine the weather-necessity defense.
In the aggregate, Northwind claims a total of 68 off-hire days across the three mechanical incidents (22 + 21 + 25 days).
D. Northwind's Claimed Damages ($18.3 Million)
Northwind's total damages claim, as set forth in its complaint and as quantified in the expert report of Dr. Rajesh Anand (Northwind's damages expert, served August 19, 2024), is $18,300,000, broken down into the following categories:
Several observations about Northwind's damages claim warrant comment. First, with respect to the liquidated damages calculation, Northwind originally argued that the $4,500,000 cap in Clause 28 applied on a per-incident basis, yielding potential liquidated damages of up to $13,500,000 (i.e., $4,500,000 × 3 incidents). Northwind subsequently conceded during the summary judgment briefing that, even under its per-incident reading, the actual LD formula (150% × aggregate off-hire days × daily hire rate) produces an effective liquidated damages figure of $1,504,500 for the 68 off-hire days, which is well below the $4,500,000 cap. Northwind nonetheless claims the full $4,500,000 cap amount, arguing that it represents a minimum floor once a material breach is established. This interpretation is, in our assessment, legally unfounded and is unlikely to survive the pending summary judgment motion.
Second, the substitute charter costs claim is based on Northwind's assertion that it was forced to charter a substitute vessel at a daily rate of $21,300 for 72 days. The 72-day figure exceeds the 68 off-hire days by 4 days, reflecting the additional time Northwind claims it took to arrange and position the substitute vessel. As discussed below, there is evidence that Northwind did not promptly seek substitute tonnage, which supports a mitigation defense.
Third, the third-party shipper claims ($5,634,400) comprise three separate claims from cargo interests who allegedly suffered losses as a result of delays and cargo damage arising from the mechanical incidents. Following Justice Chen's ruling on TSL's motion to dismiss, these claims have been narrowed significantly, and the legal theory under which Northwind seeks to recover them as charter-party damages remains vulnerable to further challenge.
Fourth, Northwind's claim for legal fees and expert costs ($999,000) is generally not recoverable as damages under New York law absent a specific contractual provision, which the Charter-Party does not contain. This category represents a claim with minimal legal basis.
E. TSL Counterclaim
TSL has asserted a counterclaim against Northwind for $1,620,000 in unpaid hire for the period of approximately October 1 through December 31, 2022 (approximately 110 days at $14,750 per day). Northwind withheld hire payments during this period, citing off-hire deductions under Clause 11 and purported equitable setoff rights for its breach claims.
The counterclaim has substantial merit. While Northwind was entitled to withhold hire during legitimate off-hire periods, the amounts withheld appear to substantially exceed the permissible off-hire deductions. Under established New York maritime and commercial law, a charterer's right to deduct hire is limited to periods actually qualifying as off-hire under the charter-party, and a charterer who withholds hire in excess of legitimate deductions does so at its own risk. The discovery record suggests that Northwind withheld hire for the entire October–December 2022 period, notwithstanding that only 25 of those days (Incident 3) were concededly off-hire days during that interval.
The counterclaim provides meaningful leverage in settlement negotiations and represents a genuine recovery for TSL that should be factored as an offset against any settlement payment.
F. Litigation History
The procedural history of this action is summarized as follows:
Northwind filed the Complaint on October 2, 2023, asserting five causes of action: (I) breach of charter-party (maintenance/seaworthiness), (II) breach of charter-party (unauthorized deviation), (III) third-party shipper claims as charter-party damages, (IV) breach of the implied warranty of fitness, and (V) unjust enrichment. C&H was retained as litigation counsel for TSL on October 16, 2023.
TSL filed its Answer and Counterclaim on November 17, 2023, denying the material allegations of the Complaint, asserting numerous affirmative defenses, and pleading the counterclaim for unpaid hire.
On December 15, 2023, TSL filed a Motion to Dismiss Counts III (third-party shipper claims) and V (unjust enrichment) pursuant to CPLR 3211(a)(7). By Decision and Order dated March 8, 2024, Justice Chen granted the motion in part: Count V (unjust enrichment) was dismissed in its entirety, and Count III (third-party shipper claims) was narrowed to exclude claims for which Northwind could not demonstrate that it had assumed contractual liability to the shippers in question. This ruling was a meaningful victory for TSL, as it eliminated an entire cause of action and significantly constrained the universe of third-party shipper claims that Northwind may pursue at trial.
discovery was conducted from January through August 2024 and was extensive. Document production included approximately 85,000 documents (over 400,000 pages), processed and reviewed with the assistance of Lighthouse Data Analytics Inc. The parties completed eight depositions, including the following key witnesses:
• Alexandros Stavridis, Chairman and CEO of TSL — April 22, 2024
• Captain Nikolaos Giannopoulos, Master of M/V Aegean Fortuna — May 10, 2024
• Viktor Lindgren, President of Northwind — May 30, 2024
• Sandra Chow, CFO of Northwind — June 14, 2024
• Chief Engineer Dimitris Vlahos, M/V Aegean Fortuna — June 28, 2024
• Three additional fact witnesses — July 2024
Expert reports were exchanged in accordance with the Court's scheduling order. TSL served the reports of Dr. Henrik Sørensen (maritime engineering) and Dr. Constance Albright (damages) on August 5, 2024. Northwind served the reports of Captain Julian Blackmore (maritime operations) and Dr. Rajesh Anand (damages) on August 19, 2024. Rebuttal reports from both sides were served on September 9, 2024.
On September 20, 2024, TSL filed its Motion for Partial Summary Judgment under CPLR 3212, seeking two forms of relief: (1) a declaration that the Clause 28 liquidated damages cap of $4,500,000 operates as a single aggregate cap for the entire charter period, rather than as a per-incident cap; and (2) dismissal of the deviation claim (Count II). Argument on the motion is scheduled for December 6, 2024 before Justice Chen. The strategic implications of the pending motion for the settlement analysis are discussed in Section VII below.
III. Assessment of Litigation Risk
Based on our review of the complete discovery record, the deposition testimony, the expert reports and rebuttal reports, the applicable law, and our experience in comparable maritime commercial disputes, we have prepared the following assessment of TSL's litigation risk on a claim-by-claim basis.
A. TSL's Defenses — Strengths
1. Liquidated Damages Cap Interpretation (Strong)
The interpretation of Clause 28 of the Charter-Party represents TSL's strongest defensive position and is the subject of the pending summary judgment motion. TSL's argument is straightforward: the plain language of Clause 28 provides for a cap of $4,500,000 "for any single continuous period of breach," and the three mechanical incidents alleged by Northwind constitute a single pattern of alleged maintenance failure under one charter — i.e., a single continuous period of breach of the Clause 6 maintenance obligation — rather than three separate "periods" of breach.
The textual analysis strongly supports TSL's position. The phrase "any single continuous period of breach" is most naturally read to encompass the entirety of the Owner's alleged course of conduct constituting breach of the maintenance obligation, rather than each individual mechanical event. This reading is consistent with the purpose of a liquidated damages cap, which is to limit the breaching party's aggregate exposure to a commercially reasonable ceiling. Under Northwind's alternative reading — that the cap applies independently to each discrete incident — the cap provision would effectively be rendered meaningless as a risk-management tool, since any number of incidents could be separately capped at $4,500,000 each, yielding unlimited aggregate exposure. New York courts have consistently declined to interpret contractual provisions in a manner that renders other provisions superfluous or meaningless, and this principle strongly favors TSL's interpretation.
Moreover, even if Northwind were to prevail on its per-incident reading (which we believe is unlikely), the practical impact would be limited. The LD formula set forth in Clause 28 — 150% of aggregate off-hire days multiplied by the daily hire rate — yields a total of only $1,504,500 when applied to the 68 off-hire days (68 × $14,750 × 1.5 = $1,504,500). This figure is well below the $4,500,000 cap regardless of whether the cap is applied once or per-incident. Northwind's attempt to claim the full $4,500,000 as a "minimum floor" rather than a cap is, in our assessment, unsupported by the text of Clause 28 and is unlikely to be credited by Justice Chen or by a trier of fact.
We assess the probability of TSL prevailing on the cap interpretation issue at 70–80%. This is TSL's most favorable area of defense and provides significant leverage in settlement negotiations.
2. Latent Defect Defense — Incident 1 (Moderate-Strong)
With respect to the March 2022 turbocharger failure (Incident 1), TSL has a credible defense based on the theory of latent defect. Dr. Henrik Sørensen, TSL's retained maritime engineering expert, opines in his report dated August 5, 2024 that the catastrophic turbocharger failure was attributable to a pre-existing manufacturing defect in the turbocharger impeller that was not detectable through standard maintenance and inspection procedures. Dr. Sørensen's analysis is based on a metallurgical examination of the failed impeller and comparison with manufacturer specifications, and his conclusions are supported by independent third-party analysis from the turbocharger manufacturer's own quality assurance department, which acknowledged anomalous stress fracture patterns inconsistent with normal operational wear.
TSL exercised due diligence in maintaining the turbocharger system in accordance with both the manufacturer's recommended maintenance schedule and the classification requirements of GMCB. The vessel's class surveys were current at the time of the failure, and the maintenance records reflect that the scheduled inspection intervals were generally adhered to.
The principal risk to TSL's latent defect defense arises from the testimony and opinions of Northwind's expert, Captain Julian Blackmore, who opines that certain maintenance records for the turbocharger exhibit delayed inspection intervals and that these delays may have contributed to the failure or, at a minimum, may have allowed detection of the developing defect at an earlier stage. Captain Blackmore points to specific maintenance log entries that, in his view, reflect inconsistencies and gaps that are inconsistent with the exercise of due diligence. While we believe Dr. Sørensen's opinions are more persuasive and better supported by the physical evidence, the documentary gaps identified by Captain Blackmore could create a triable issue of fact that would preclude summary judgment on this claim and, at trial, could sway a trier of fact.
We assess the probability of TSL prevailing on the latent defect defense for Incident 1 at 60–65%. This is a moderately favorable defense that materially reduces but does not eliminate TSL's exposure on this category of damages.
3. Charterer Causation — Incident 2 (Moderate)
TSL's defense to the July 2022 BWTS malfunction and auxiliary boiler failure (Incident 2) is that the BWTS malfunction was caused by contaminated ballast water loaded at a prior port of call by Northwind's agents. This defense, if established, would shift liability for the BWTS failure to Northwind as the party responsible for the contamination.
The evidentiary foundation for this defense is meaningful but not overwhelming. Chief Engineer Dimitris Vlahos testified in his deposition on June 28, 2024 that the BWTS system had been functioning properly prior to the loading of ballast water at the prior port and that, following the loading, the system's sensors registered abnormal readings consistent with biological or chemical contamination. Additionally, water sample analysis performed by a laboratory in Colombo, Sri Lanka, following the vessel's arrival for repairs identified contaminants in the ballast water that, in TSL's view, are consistent with contamination at the point of loading rather than degradation in transit.
However, the defense is undermined by two factors. First, the chain of custody of the water samples was not fully or contemporaneously documented. Northwind's experts have challenged the reliability of the laboratory results on the ground that the samples were not collected, preserved, or transmitted in accordance with standard evidentiary protocols, and there are gaps in the documentation that could support an argument that the samples were compromised. Second, the auxiliary boiler failure that occurred simultaneously with the BWTS malfunction is a separate mechanical component, and TSL has a less persuasive explanation for why both systems failed at the same time. The simultaneous nature of the failures may, in the eyes of a trier of fact, suggest a systemic maintenance issue rather than a charterer-caused contamination event.
Northwind's expert, Captain Blackmore, has offered an alternative causation theory attributing both failures to inadequate preventive maintenance and corrosion in the BWTS piping system, which he contends was detectable during routine inspections.
We assess the probability of TSL prevailing on the charterer causation defense for the BWTS component of Incident 2 at 50–55%, and the likelihood of prevailing on the auxiliary boiler component as somewhat lower. On balance, Incident 2 represents a genuinely contested factual dispute with meaningful risk on both sides.
4. Deviation Claim — Maputo Call (Moderate-Strong)
Northwind alleges that TSL's vessel made an unauthorized deviation to Maputo, Mozambique during a Durban-to-Qingdao voyage in September 2022. TSL's defense is that the call at Maputo was necessitated by adverse weather and routing conditions in the Mozambique Channel and was within the Master's professional discretion.
Captain Giannopoulos's deposition testimony on May 10, 2024 provides a detailed account of the weather conditions encountered in the Mozambique Channel during the relevant period, including heavy swells, sustained high winds, and reduced visibility that, in his judgment, warranted a decision to shelter at Maputo and await improved conditions before proceeding northward. Contemporaneous weather data from meteorological services corroborates that adverse sea conditions existed in the Mozambique Channel during the relevant dates in September 2022, lending some objective support to the weather-necessity defense.
The weakness of this defense is significant, however: Discovery produced internal TSL emails that suggest the Maputo call was at least partly commercially motivated. Specifically, emails between TSL's commercial department and the vessel's agents in Maputo, dated in early September 2022, discuss the availability of a cargo parcel at Maputo and the feasibility of loading TSL's own cargo during the vessel's passage through the area. While these emails do not conclusively establish that the weather justification was pretextual, they create a strong inference that commercial considerations played a role in the decision to call at Maputo, which could substantially undermine the weather-necessity defense at trial.
If a trier of fact credits the internal emails as evidence that the Maputo call was commercially motivated rather than weather-necessitated, TSL would likely be liable for the full $1,230,000 in demurrage and dead freight arising from the missed Qingdao laycan window, plus related consequential damages.
TSL's motion for partial summary judgment addresses this claim, seeking dismissal of the deviation cause of action. Our assessment is that the motion has a reasonable prospect of success, but the internal emails present a factual issue that may preclude summary disposition.
We assess the probability of TSL prevailing on the deviation defense at 55–60%. The weather evidence provides a credible foundation, but the internal emails create genuine risk.
5. Inter-Club Agreement / Cargo Damage (Moderate-Strong)
Northwind's cargo damage claim of $3,420,000 relates to iron ore oxidation that allegedly occurred during the off-hire period associated with Incident 2 (the Richards Bay BWTS malfunction and boiler failure). Northwind contends that moisture exposure caused by the BWTS malfunction led to oxidation of the iron ore cargo, rendering a substantial portion of it commercially unfit upon discharge.
TSL's primary defense to the cargo damage claim is based on the Inter-Club Agreement ("ICA"), which governs the apportionment of cargo claims as between owners and time charterers. Under the ICA, cargo claims arising from unseaworthiness are typically the Owner's responsibility, while claims arising from cargo handling, stowage, or care of cargo are typically the Charterer's. In this case, the causation of the cargo damage is mixed: the proximate cause of the moisture exposure was the BWTS malfunction (an alleged unseaworthiness issue), but the iron ore cargo's susceptibility to oxidation is also related to loading and stowage conditions that were under Northwind's operational control during the voyage.
Additionally, if TSL prevails on its charterer causation defense for the BWTS malfunction (i.e., that the failure was caused by Northwind's agents loading contaminated ballast), the ICA analysis would shift further in TSL's favor, as the underlying cause of the alleged unseaworthiness would itself be attributable to the Charterer.
The mixed causation issues make this claim difficult to predict with certainty. We assess the probability of TSL substantially reducing its exposure on the cargo damage claim at 50–55%. Even if TSL does not escape liability entirely, there is a reasonable prospect of apportioning the cargo damage between the parties under the ICA framework, which could substantially reduce the $3,420,000 claim.
6. Third-Party Shipper Claims (Strong After MTD Ruling)
Northwind seeks to recover $5,634,400 in third-party shipper claims — comprising three separate claims from cargo interests who allegedly suffered losses arising from delays and cargo damage attributable to the mechanical incidents. The legal theory under which Northwind advances these claims is that TSL's breaches of the Charter-Party caused Northwind to incur liability to third-party shippers, and that Northwind is entitled to recover those liabilities as consequential damages under the Charter-Party.
This category was significantly affected by Justice Chen's March 8, 2024 Decision and Order on TSL's motion to dismiss. The Court dismissed Count V (unjust enrichment) in its entirety and narrowed Count III (third-party shipper claims) by excluding claims for which Northwind could not demonstrate a contractual assumption of liability to the relevant shippers. As a result of the narrowing, Northwind's ability to prove the remaining third-party shipper claims at trial faces substantial legal hurdles.
Fundamentally, Northwind is seeking to recover as charter-party damages what are essentially third-party tort claims — claims asserted by cargo interests against cargo carriers. The causal chain required to establish these damages as recoverable consequential damages of the Charter-Party breach is attenuated and faces potential challenges on foreseeability, remoteness, and the rule against speculative damages. Under New York law, consequential damages must have been within the reasonable contemplation of the parties at the time of contracting, and the recovery of third-party claims as charter-party damages is not universally recognized.
We assess the probability of TSL excluding or significantly reducing the third-party shipper claims at trial at 65–70%. This is one of TSL's stronger defensive positions, particularly in light of the motion to dismiss ruling that has already narrowed the scope of these claims.
7. Failure to Mitigate (Moderate)
TSL has asserted a failure-to-mitigate defense against several categories of Northwind's damages, most prominently the substitute charter costs ($471,600). The evidence adduced in discovery supports this defense to a meaningful extent. Northwind's claim for substitute charter costs is based on its engagement of a replacement vessel at a daily rate of $21,300 for 72 days — four days longer than the 68 actual off-hire days. However, the evidence suggests that Northwind did not promptly seek substitute tonnage upon learning of each mechanical incident. The deposition of Sandra Chow (CFO) on June 14, 2024 revealed limited contemporaneous documentation of mitigation efforts, including no evidence that Northwind solicited competitive bids from other vessel operators for substitute tonnage during the initial periods of off-hire.
Under New York law, a non-breaching party has a duty to take reasonable steps to mitigate damages, and a failure to do so may result in the reduction or denial of damages that could have been avoided through reasonable efforts. The evidence regarding Northwind's delayed and limited mitigation efforts could support a reduction of the substitute charter damages, and potentially other consequential damages categories as well.
We assess the probability of successfully reducing Northwind's damages through the mitigation defense at approximately 55%. The defense is not a complete bar to the substitute charter claim but is likely to result in some reduction of the quantum.
B. TSL's Defenses — Weaknesses
While TSL possesses strong defenses on several fronts, the Board should be aware of the following areas where TSL's position is weaker and where significant litigation risk exists.
1. Incident 3 Concession
TSL has conceded that the cylinder liner failure in November–December 2022 (Incident 3, resulting in 25 days of off-hire) constituted a maintenance failure within the meaning of Clause 6 of the Charter-Party. This concession was made after a thorough review of the maintenance records, the engineering analysis, and the deposition testimony of Chief Engineer Vlahos, all of which indicated that the failure was attributable to inadequate maintenance rather than a latent defect or external cause.
The practical consequence of this concession is significant. It establishes breach of the Charter-Party as a matter of law for at least one incident, which anchors Northwind's overall breach claim and triggers the applicability of Clause 28's liquidated damages provision. At a minimum, TSL is liable for the off-hire deduction for 25 days ($368,750) and the related consequential damages flowing from this particular incident. The dispute with respect to Incident 3 is thus limited to quantum rather than liability, and any damages attributable to Incident 3 will be awarded to Northwind absent a settlement.
2. Internal Emails on Maputo Deviation
As discussed in Section III.A.4 above, the internal TSL emails relating to the September 2022 Maputo call represent a meaningful vulnerability. The emails, which were produced in discovery pursuant to the Court's standard discovery orders, contain communications between TSL's commercial operations team and the vessel's agents in Maputo that discuss the availability of cargo for loading and the commercial benefit to TSL of routing the vessel through Maputo. While the emails do not contain an explicit instruction to the Master to deviate for commercial purposes, the strong inference of commercial motivation could be devastating at trial if presented alongside Northwind's narrative that the weather-necessity defense is pretextual.
If the deviation claim survives the pending summary judgment motion and proceeds to trial, the internal emails would likely be a centerpiece of Northwind's trial presentation on Count II. The risk that a trier of fact would conclude that the Maputo call was commercially motivated — and therefore an unauthorized deviation — is substantial.
3. Documentary Gaps in Maintenance Records
Certain maintenance records for the turbocharger system aboard the M/V Aegean Fortuna contain gaps and inconsistencies that have been highlighted by Northwind's expert, Captain Blackmore. Specifically, inspection log entries for the turbocharger impeller during the period preceding Incident 1 do not consistently reflect adherence to the manufacturer's recommended inspection intervals. While TSL maintains that all scheduled maintenance was performed and that the log entries reflect administrative oversights rather than deferred maintenance, the documentary record is not as clean as it should be, and a trier of fact may view the gaps with skepticism.
These documentary gaps could undermine TSL's latent defect defense for Incident 1 if the Court or jury concludes that TSL failed to exercise the due diligence required by Clause 6. In the worst case, the gaps could be viewed as evidence of a broader systemic maintenance failure that supports Northwind's overarching narrative that TSL did not adequately maintain the vessel throughout the charter period.
C. Summary Risk Assessment Table
Based on the foregoing analysis, the following table summarizes our assessment of TSL's probable exposure for each category of Northwind's claimed damages:
The midpoint of TSL's estimated probable exposure at trial is approximately $5,700,000. This figure represents the risk-adjusted expected damages award before accounting for TSL's counterclaim offset, insurance contribution, or additional legal costs to trial.
IV. Potential Trial Outcomes
To further inform the Board's settlement decision, we have modeled three potential trial outcome scenarios — a best case, a most likely case, and a worst case — together with their estimated probabilities. These scenarios are not predictions but rather a framework for evaluating the range of reasonably possible outcomes.
A. Best-Case Scenario for TSL
In the best-case scenario, TSL prevails on its latent defect defense for Incident 1, its charterer causation defense for Incident 2, and the weather-necessity defense for the Maputo deviation claim. TSL's liability would be limited to Incident 3 (the conceded maintenance failure) and modest consequential damages flowing from that single incident. The third-party shipper claims would be excluded or drastically reduced under the reasoning of Justice Chen's prior ruling, and the cargo damage claim would be substantially diminished given the successful charterer causation defense on Incident 2.
Under this scenario, the estimated damages award against TSL would be in the range of $1.5 million to $2.5 million, primarily reflecting the Incident 3 off-hire deduction, a limited amount of liquidated damages, and some consequential damages. TSL would recover its full counterclaim of $1,620,000 (or a substantial portion thereof), yielding a net exposure to TSL of approximately $0 to $900,000.
We assign a probability of 15–20% to this scenario. While it is a plausible outcome, it requires TSL to prevail on virtually every contested issue, which is inherently uncertain.
B. Most Likely Outcome
The most probable outcome, in our assessment, is a mixed verdict in which TSL is found liable for Incident 3 and partially liable for one or both of the other incidents (most likely Incident 1 or Incident 2, but not both to the full extent claimed by Northwind). The deviation claim would either be dismissed (if the summary judgment motion is granted) or partially sustained. Cargo damage would be partially awarded, with some reduction for mixed causation and ICA apportionment. The third-party shipper claims would be substantially reduced from the $5,634,400 claimed.
Under this scenario, the estimated damages award against TSL would be in the range of $5 million to $8 million. TSL's counterclaim would be partially sustained, yielding an offset of approximately $800,000 to $1,200,000. The resulting net exposure to TSL would be approximately $3.8 million to $7.2 million, before accounting for additional legal costs and insurance contribution.
We assign a probability of 50–60% to this scenario. It represents the center of gravity of the likely trial outcomes and is the primary driver of our settlement range recommendation.
C. Worst-Case Scenario for TSL
In the worst-case scenario, TSL loses on all three mechanical incidents, the deviation claim is sustained in full, the LD cap is interpreted on a per-incident basis (though as noted, the formula still yields only $1,504,500 for 68 off-hire days), the cargo damage claim is awarded substantially as claimed, and the third-party shipper claims are substantially awarded. While this scenario does not assume that every dollar of Northwind's $18.3 million claim would be awarded, it contemplates an adverse outcome on most contested issues.
Under this scenario, the estimated damages award against TSL would be in the range of $10 million to $14 million. TSL's counterclaim might be entirely offset by Northwind's withholding defense, or awarded only to a minimal extent. The net exposure to TSL would be approximately $10 million to $14 million.
We assign a probability of 15–20% to this scenario. While it represents a tail risk rather than a likely outcome, it is not implausible, particularly if the internal emails on the Maputo deviation prove as damaging at trial as they appear on paper, and if the maintenance record gaps undermine the latent defect defense.
D. Expected Value Calculation
Using the probability-weighted scenario analysis described above, the expected value of the trial outcome (before additional legal costs) is as follows:
• Best case (17.5% probability × $1.0 million midpoint net exposure) = $175,000
• Most likely (55% probability × $5.5 million midpoint net exposure) = $3,025,000
• Worst case (17.5% probability × $12.0 million midpoint net exposure) = $2,100,000
• Remaining probability (10%) allocated proportionally across scenarios
The resulting weighted expected value of the trial outcome (before additional legal costs) is approximately $5.2 million to $6.8 million.
When the estimated additional litigation costs of $800,000 to $1,200,000 for summary judgment reply briefing, trial preparation, the trial itself (estimated at 10–14 trial days), and post-trial motions are added, the total expected cost including legal fees is approximately $6.0 million to $8.0 million.
This expected cost range aligns closely with the recommended settlement range of $6.5 million to $9.0 million, confirming that settlement within the recommended range represents an economically rational outcome for TSL when the risk-adjusted expected trial cost is properly accounted for — particularly given the elimination of downside tail risk and the certainty of resolution that settlement provides.
V. Cost-Benefit Analysis of Settlement Versus Continued Litigation
A. Costs Incurred to Date
TSL has incurred substantial legal costs in this litigation since C&H's engagement in October 2023. The costs incurred through the date of this memorandum (October 15, 2024) are as follows:
We estimate that an additional approximately $230,000 in C&H fees and $65,000 in costs will be incurred through the completion of the mediation, bringing the estimated total legal expenditure through settlement to approximately $3,470,000 if the case resolves at the October 28–29 mediation.
B. Estimated Additional Costs if Case Proceeds to Trial
If the case does not settle at mediation and proceeds through summary judgment argument, trial preparation, trial, and post-trial motions, the estimated additional costs are as follows:
The grand total of legal costs from inception through trial would therefore be approximately $4,225,000 to $4,775,000. These costs are sunk to the extent already incurred but provide important context for the settlement cost-benefit analysis, as the incremental additional costs of proceeding to trial ($1,050,000 to $1,600,000) represent a significant expenditure that can be avoided through settlement.
C. Settlement Economics
The following analysis compares the net economic cost to TSL under a settlement scenario versus the expected cost of proceeding to trial.
Settlement Scenario (at midpoint of recommended range: $7,750,000):
Trial Scenario (most likely outcome, midpoint estimates):
The comparison demonstrates that a settlement at the midpoint of the recommended range would yield a net economic cost to TSL of approximately $3,880,000, compared to an estimated net trial cost in the most likely scenario of approximately $4,825,000 to $6,825,000. Settlement thus provides estimated cost savings of approximately $945,000 to $2,945,000 over the expected trial outcome.
Critically, these savings figures account only for the most likely trial scenario (50–60% probability). When the worst-case tail risk is factored in — a scenario with 15–20% probability that could result in net exposure of $10 million to $14 million — the risk-adjusted benefit of settlement is even more compelling. Settlement at the midpoint of the recommended range eliminates this downside tail risk entirely, providing certainty and finality.
We note that the anticipated P&I Club contribution may be somewhat lower in the trial scenario than in the settlement scenario. The Oceanus P&I Club Board is generally more favorably disposed toward contributing to negotiated settlements than to judgments following contested trials, as settlements allow the Club to manage its exposure and avoid the precedential implications of adverse court rulings. Accordingly, the assumed P&I contribution in the trial scenario ($1,500,000 to $2,000,000) is conservatively lower than in the settlement scenario ($2,000,000 to $2,500,000).
D. Non-Monetary Considerations
In addition to the quantitative cost-benefit analysis, several non-monetary factors weigh in favor of settlement:
Management Distraction. A trial in this matter is estimated to require 10 to 14 trial days in the Commercial Division. The trial would demand extensive preparation time from TSL's senior management and key operational personnel, including Alexandros Stavridis (who would likely be required to testify), Markos Theodorakis (who would be coordinating with counsel throughout the trial), Captain Giannopoulos (a critical fact witness), and Chief Engineer Vlahos (whose testimony is central to the defense on Incidents 1 and 2). The opportunity cost of diverting these individuals from their operational responsibilities for several weeks of trial preparation and testimony is substantial and difficult to quantify but is nevertheless a meaningful consideration for the Board.
Reputational Risk. A public trial involving allegations of seaworthiness failures, deferred maintenance, and unauthorized deviation carries reputational risk for TSL. The maritime industry is a relatively small and interconnected community, and a public trial record documenting maintenance deficiencies — even if TSL ultimately prevails on most issues — could affect TSL's charter-party negotiations with other counterparties, its standing with GMCB and other classification societies, and its relationships with insurers and P&I clubs. Trial proceedings in the Commercial Division are public, and the allegations made at trial would be a matter of public record.
Lender Relations. TSL's credit facility with Meridian Capital Bank AG ($340 million facility) is subject to a requirement under Section 8.14 of the Credit Agreement dated April 1, 2019 that TSL provide notice of material litigation settlements exceeding $5 million. While this notification requirement applies regardless of whether the case settles or proceeds to judgment, the prolonged uncertainty associated with continued litigation could affect TSL's credit terms, borrowing capacity, or lender confidence. A prompt settlement resolves this uncertainty and allows TSL to address the notification requirement in a controlled manner.
Confidentiality. A settlement agreement would include strict confidentiality provisions protecting the financial terms of the resolution from public disclosure. By contrast, a trial verdict and any subsequent judgment would be a matter of public record, disclosing the specific amounts awarded and the factual findings underlying the judgment. For a publicly active company like TSL, the ability to maintain confidentiality of the settlement terms is a significant advantage.
Business Relationships. While TSL and Northwind are unlikely to engage in future charter-party dealings given the current adversarial posture, a settlement avoids further confrontational proceedings in a relatively small maritime community. The international shipping industry depends heavily on reputation and relationships, and a resolution that avoids the acrimony of a public trial is generally preferable from a commercial perspective.
Timing. Settlement at the October 28–29 mediation would allow prompt resolution of the dispute, enabling TSL to close this chapter and focus on its forward-looking business operations. If the case does not settle, the trial would not occur until mid-2025 at the earliest, extending the period of uncertainty by another six to nine months. During this period, TSL would continue to incur legal costs, devote management attention to the litigation, and remain subject to the risk of an adverse outcome.
VI. Proposed Settlement Parameters
A. Recommended Range
C&H recommends that the Board authorize a settlement within the range of $6.5 million to $9.0 million, all-in, inclusive of any amounts contributed by the Oceanus P&I Club. This range is derived from the expected value analysis set forth in Section IV.D, the cost-benefit comparison in Section V.C, and professional judgment informed by our experience in comparable maritime commercial disputes.
The upper limit of $9.0 million provides adequate negotiating room above the expected settlement zone of approximately $7 million to $8 million. In mediation, it is common for the parties to begin at widely separated positions and converge toward a mutually acceptable figure through successive rounds of negotiation. Having authority to move to $9.0 million if necessary — while targeting a resolution in the $7.5 million to $8.0 million range — provides the negotiating team with sufficient flexibility to reach an agreement without the need to revert to the Board for additional authority during the mediation session.
The lower limit of $6.5 million reflects our assessment that a settlement below this figure is unlikely to be achievable given the magnitude of Northwind's $18.3 million claim, the genuine exposure on Incident 3 (where TSL has conceded liability), the cargo damage claim, and the strength of Northwind's position on several categories of damages. While TSL will of course endeavor to settle at the lowest possible figure, a target below $6.5 million is not realistic in the context of this dispute and would risk a failed mediation that could weaken TSL's negotiating posture in subsequent discussions.
B. Anticipated Settlement Structure
Based on our experience with comparable settlements and our preliminary discussions with opposing counsel, we anticipate that the settlement agreement would include the following principal terms:
Payment Terms. The settlement payment would be structured as either a lump-sum payment or installment payments. If installment payments are necessary given the magnitude of the settlement relative to TSL's cash position, we would recommend a structure consisting of an initial payment of approximately 50–60% of the total settlement amount within 30 days of execution, with the balance payable in two or three quarterly installments over the following 6–9 months. Installment payments would be secured by TSL's corporate guarantee and, if required by Northwind, by a standby letter of credit from a mutually acceptable financial institution.
Mutual General Release. The settlement would include a full mutual general release of all claims, counterclaims, cross-claims, and third-party claims arising from or related to the Charter-Party (Reference No. NW-TSL-CP-2020-1203), the M/V Aegean Fortuna, and the transactions and occurrences giving rise to the litigation. The mutual release would encompass all known and unknown claims, whether asserted or unasserted, and would run in favor of and bind all parties, their affiliates, subsidiaries, predecessors, successors, assigns, officers, directors, employees, agents, and insurers.
TSL Counterclaim. TSL's counterclaim for $1,620,000 in unpaid hire would be released as part of the mutual general release. The release of the counterclaim has been factored as an offset in the net economic cost analysis set forth in Section V.C above. While the counterclaim has substantial merit as a standalone claim, its value as settlement currency — reducing the net economic cost of the settlement — exceeds the risk-adjusted expected recovery if the counterclaim were litigated to judgment, particularly when the costs of continued litigation are considered.
Confidentiality Provisions. The settlement agreement would include strict confidentiality provisions prohibiting the parties from disclosing the financial terms of the settlement to any third party, subject to specifically enumerated exceptions for disclosures to:
(a) TSL's and Northwind's respective insurers (Oceanus P&I Club, Fortis Marine Underwriters Ltd., and Northwind's insurers);
(b) TSL's lender (Meridian Capital Bank AG), as required by the Credit Agreement;
(c) TSL's auditor (Lysander & Associates), for financial reporting purposes;
(d) The parties' respective legal, tax, and accounting advisors;
(e) As required by applicable law, regulation, or order of a court or governmental authority; and
(f) The parties' respective officers, directors, and senior management with a need to know.
No Admission of Liability. The settlement agreement would include a standard provision expressly stating that neither party admits any liability, fault, or wrongdoing by entering into the settlement, and that the settlement shall not be construed as evidence of or an admission of any claim or defense in any other proceeding.
Consent Judgment Provision. The settlement agreement would include a standard mechanism allowing Northwind to enter a consent judgment for the unpaid balance of the settlement payment upon TSL's default in making any installment payment, at the New York statutory interest rate of 9% per annum from the date of default. This provision is customary in commercial settlement agreements involving installment payments and provides Northwind with adequate security while incentivizing timely payment by TSL.
Escrow. Settlement funds would be deposited with a mutually acceptable escrow agent pending release upon joint written instruction of the parties (or upon satisfaction of any conditions precedent specified in the settlement agreement). The escrow arrangement provides both parties with assurance that the funds will be available and properly disbursed in accordance with the terms of the agreement.
Stipulation of discontinuance. Upon completion of all settlement payments, the parties would file a stipulation of discontinuance with prejudice with the Supreme Court, terminating the litigation in its entirety.
Withdrawal of Pending Motions. TSL's motion for partial summary judgment, currently pending before Justice Chen with argument scheduled for December 6, 2024, would be withdrawn with prejudice upon execution of the settlement agreement. This is a standard provision in pre-trial settlements and reflects the fact that the motion becomes moot upon resolution of the underlying dispute.
C. Insurance Contribution
Oceanus Mutual Protection & Indemnity Club. TSL's P&I coverage for the M/V Aegean Fortuna is provided by the Oceanus Mutual Protection & Indemnity Club under Policy No. OCE-P&I-2020-TSL-0047. Based on preliminary discussions with the Club and our review of the policy terms, we anticipate that the Oceanus P&I Club will contribute approximately $2,000,000 to $2,500,000 toward the settlement.
P&I policies generally cover third-party liabilities arising from vessel operations, including liabilities for cargo damage, personal injury, and certain contractual liabilities. The extent to which charter-party breach claims fall within P&I coverage depends on the nature of the underlying liabilities giving rise to the claim. In this case, several categories of Northwind's claims — including the cargo damage claim ($3,420,000) and certain third-party shipper claims — are grounded in seaworthiness and vessel operational issues that fall within the traditional scope of P&I coverage. Other categories — such as the liquidated damages claim and the substitute charter costs — may fall outside coverage to the extent they represent purely contractual liabilities unrelated to third-party injury or damage.
We recommend that a formal notice of claim and contribution request be submitted to David Okafor at the Oceanus P&I Club promptly following Board authorization of the settlement. Based on our experience with Oceanus and comparable P&I clubs, we anticipate that the Club's Board will consider and approve the contribution request by approximately November 22, 2024 — in advance of the mediation or, if the mediation is delayed or the parties require additional time to finalize terms, within a reasonable period following the mediation.
Fortis Marine Underwriters Ltd. TSL's Hull & Machinery ("H&M") insurance for the M/V Aegean Fortuna is provided by Fortis Marine Underwriters Ltd. under Policy No. FMU-HM-2020-4892. While the H&M policy is not directly implicated by the settlement payment, Fortis's subrogation rights may be affected depending on how the settlement is structured. If TSL has made or may make claims under the H&M policy for the repair costs associated with the three mechanical incidents, Fortis may assert subrogation rights against recoveries made from third parties (including Northwind, to the extent the charterer causation defense shifts liability). The settlement agreement should be drafted to preserve Fortis's subrogation rights to avoid any coverage complications or potential disputes with the H&M insurer.
D. Lender Notification
Under Section 8.14 of the Credit Agreement dated April 1, 2019, between TSL and Meridian Capital Bank AG, TSL is required to provide notice to the lender of any material litigation settlement exceeding $5,000,000. A settlement within the recommended range of $6.5 million to $9.0 million would

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