Mounties Must Pay $19M to Cruise Line

WASHINGTON (CN) - The Royal Canadian Mounted Police must pay $19 million in damages for its promise to house security staff on cruise ships during the 2010 Winter Olympics in Vancouver, a federal judge ruled.

During the Winter Olympics, the Canadian Mounted Police, often called mounties, used cruise ships docked in Vancouver's Ballentyne Pier as "floating hotels" for about six weeks.

Cruise Connections Charter Management (CCCM) was picked to broker a deal between Canada and cruise ships after a bidding process in 2008, but the deal went south and CCCM and the Canadian government blamed each other.

In November 2008, Cruise Connections sued the Mounted Police, the Canadian attorney general, and the Queen in Right of Canada, alleging breach of contract involving the broker services.

The parties each blamed the others for breaching the contract. U.S. District Judge Rosemary Collyer granted Cruise Connections summary judgment in 2013, finding the police repudiated the contract in September 2008 and formally terminated it the next month.

"Cruise Connections argues that RCMP's refusal to cover these costs made it impossible for Cruise Connections to finalize charter agreements and bank financing. RCMP insists that it never agreed to pay the taxes in dispute and that Cruise Connections breached its own contract obligations and missed key deadlines," Collyer summarized in a September 2013 ruling .

Collyer agreed with Cruise Connections that the taxes owed the Canadian government were a crucial component of the bidding.

"CCCM could neither obtain financing if it were required to pay Canadian taxes nor execute charter party agreements with any cruise line," Collyer wrote. She said Cruise Connections, with no standing capital and narrow margins of credit, "had no means to finance a contingency of approximately $6 million on its own."

"RCMP breached its contract with CCCM by anticipatorily repudiating its obligation to pay Canadian taxes that might be imposed on the cruise lines as a result of the 2010 Olympics charter," Collyer ruled. She added that Cruise Connections "is not liable to RCMP for any of the contract breaches alleged by RCMP."

A three-day trial was held in November 2013, and the Canadian defendants submitted a closing trial brief instead of a closing argument.

In a 53-page order issued Monday, Collyer assessed damages that the Canadian police should pay Cruise Connections for lost revenue onboard.

Among other things, Collyer found that Cruise Connections exaggerated certain contract expenses, such as the cost of snow removal. Collyer also found that Cruise Connections cannot recover onboard revenue from the sale of repositioning cruises.

The mounted police failed to convince Collyer that damages should be reduced by 25 percent because Cruise Connections failed to mitigate damages.

"The question of mitigation devolves into whether CCCM could have chartered other ships to serve as floating hotels during the 2010 Vancouver Olympics," Collyer wrote.

"But RCMP presented no evidence to demonstrate that CCCM had an opportunity to charter Holland America or Royal Caribbean ships, much less any other cruise ships, during the 2010 Olympics, which was the period during which mitigation might be measured."

The judge noted that there was no specific evidence that Cruise Connections had an opportunity to mitigate damages.

The court awarded $19,001,707 in damages to Cruise Connections.

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