Fast ferry lawsuit defendant sinks under bankruptcy

There’s one less defendant in the state’s lawsuit against builders of the fast ferries.

Superior Court Judge Philip Pallenberg says he received notice of a bankruptcy filing by Derecktor Shipyards of Connecticut. That means the state’s case against them is put on hold indefinitely. But the case against the builders of the engines for the vessels is still expected to go to trial in September. Derecktor employees can testify as witnesses, but they are no longer defendants. At least for now.

The sudden turn of events seemed to catch all the attorneys off-guard during a Monday hearing in Juneau Superior Court. Even Judge Pallenberg admitted, that in this circumstance with multiple defendants in a civil suit, he had not encountered it before.

MTU Friedrichshafen and MTU Detroit Diesel, German builders of the engines and American company that did the engine repairs for the fast vehicle ferries Chenega and Fairweather, abruptly cancelled depositions in the case that were scheduled to start this week. Attorney Jon Dawson said they needed to get a handle on “where they were in the process.” Attorneys Dana Burke and Micheal Lessmeier, representing the State and the Alaska Marine Highway System, were worried that the stay would become a mechanism for other parties to to be uncooperative in the discovery process and delay a trial. Dawson said he took umbrage at that, and said that they were being cooperative.

Adding to the complications, Derecktor’s legal representative in Alaska, retired Superior Court Judge Douglas Serdahaly, who is a lawyer experienced in other maritime and fishing cases, abruptly pulled out last week. The motion to withdraw was filed under seal known only to Judge Pallenberg. It was open to speculation that it was because of either some unknown conflict by Serdahaly or the developing bankruptcy. The lack of Alaska representation may hobble Derecktor’s efforts to defend their interests should they emerge from bankruptcy.

Multiple media outlets (one noted here) in the Northeast have reported on last month’s bankruptcy filing for Derecktor’s Bridgeport, Connecticut operation. A weak economy and lack of funds is blamed. Liabilities may range from $1 million to $10 million with the shipyard landlord second on the creditor list. Bridgeport Port Authority says it’s owed $387,000. Derecktor had just emerged from a 2008 bankruptcy about five months ago.

In a hearing in Juneau Superior Court last October that played out much like a naval skirmish, all the parties in the fast ferry case argued over interpretations of warranty and liability law, whether the engines were defective at the start, and whether the builders already knew that. An opinion has yet to be issued from that hearing. But because the State’s claims against Derecktor are intertwined with those filed against MTU, it’s unclear if that opinion will now ever be signed and issued.

The state essentially alleges the engines were not up to the task and the manufacturers tried to hide that fact. In filings made in November, state attorneys say the original design and construction contract specified a hundred-thousand hours for the high-performance diesel engines to power the high-speed catamarans. That comes out to about 25 years at about 4,000 hours a year. According to court documents, the State and Alaska Marine Highway System say that the hundred-thousand hour, 25-year specification was later deleted from the subsequent purchase order contract by Derecktor and MTU, and that both companies denied any obligation for a 25-year service life. The state is trying to add new charges including tortious abetment and breach of implied warranty.

The next hearing in the case is set for April 24th.