FEDERAL MARINE TERMINALS, INC. v. BURNSIDE SHIPPING CO., LTD.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT.
Argued January 15, 1969.
Decided April 1, 1969.
Petitioner, Marine Terminals, was hired by its affiliate, the time charterer of respondent's ship, to continue readying the vessel, then in Chicago, for its grain cargo. While that operation (which the ship's crew had begun) was in progress, one of petitioner's employees was killed by falling into an unprotected deep tank opening. The employee's widow filed a claim under the Longshoremen's and Harbor Workers' Compensation Act, and compensation was awarded against petitioner for weekly payments, the potential total liability for which is about $70,000. As administratrix of the estate the widow also filed a wrongful death action against respondent in the District Court, under an Illinois statute which then limited the amount recoverable to $30,000. Respondent sued Marine Terminals for indemnification for any judgment it might be required to pay in the wrongful death action, charging that petitioner's negligence had breached its warranty that services to the vessel would be performed "in a safe, workmanlike and seamanlike manner," and gave rise to an obligation to save respondent harmless from liability occasioned by the employee's death. Petitioner counterclaimed for compensation benefits paid or to be paid to the employee's dependents, alleging that respondent owed petitioner as stevedoring contractor, "the duty of providing and maintaining a safe place to work" which respondent allegedly breached by failing to protect the deep tank opening. The District Court granted respondent's motion to dismiss petitioner's counterclaim. Though it recognized the availability at common law in certain situations of a direct right over, the court concluded that petitioner's sole remedy is under 33 of the Longshoremen's and Harbor Workers' Compensation Act, which provides that an employer paying compensation benefits to a deceased employee's representative may be subrogated to the rights of the representative against third persons. The Court of Appeals, holding the statutory remedy in any event exclusive, affirmed. Held:
John W. Hough argued the cause for petitioner. With him on the briefs was Robert C. Keck.
Paul McCambridge argued the cause for respondent. With him on the brief was Lucian Y. Ray.
MR. JUSTICE STEWART delivered the opinion of the Court.
Under 33 of the Longshoremen's and Harbor Workers' Compensation Act, 1 an employer who pays compensation [394 U.S. 404, 406] benefits to the representative of a deceased employee may be subrogated to the rights of the representative [394 U.S. 404, 407] against third persons. 2 The question presented by this case is whether a stevedoring contractor whose longshoreman employee was killed in the course of his employment is limited to this subrogation remedy in seeking reimbursement from a shipowner on whose vessel the longshoreman met his death. Both the District Court 3 and the Court of Appeals 4 held that statutory subrogation is the stevedoring contractor's exclusive remedy against the shipowner, and we granted certiorari to consider this novel question under the Act. 5
Marine Terminals' employees began working on the Otterburn after it had been removed to Chicago. On the morning of the third day of work, a group of Marine Terminals' stevedores, supervised by Gordon McNeill, arrived at approximately 7 o'clock to continue with carpentry work in the 'tween deck as part of the last stages of completing a grain feeder in the area of the "winged out" deep tank lids. McNeill was last seen alive shortly after 8 a. m. At 8:45 a. m. his lifeless body was discovered lying at the bottom of one of the deep tanks. There were no witnesses to his 30-foot fall.
McNeill's widow filed a claim for benefits under the Act for herself and three minor children, and the Department of Labor entered a compensation order for weekly payments of $36.75 to the widow and $33.25 to the children. The potential total liability of Marine Terminals for these payments is approximately $70,000. As administratrix of McNeill's estate, his widow also filed a maritime wrongful death action against Burnside Shipping Co. in the United States District Court for the Northern District of Illinois. Burnside answered the complaint, denying that McNeill's death had been caused by its negligence or by its failure to furnish a seaworthy vessel.
Burnside also commenced a separate action in the same court against Marine Terminals seeking indemnification for any judgment it might be required to pay in the wrongful death action. The libel charged that, by virtue [394 U.S. 404, 409] of the agreement with the time charterer to prepare the ship for its cargo, Marine Terminals "warranted that its services to the vessel would be performed in a safe, workmanlike and seamanlike manner." That warranty was alleged to have been breached and the accident caused by Marine Terminals' negligence, giving rise to an obligation to save Burnside harmless from all liability and expense occasioned by McNeill's death.
Marine Terminals filed an answer denying most of the allegations of the libel, and also filed a counterclaim seeking damages from Burnside for "all sums which have been paid or will be paid" as compensation benefits to McNeill's dependents. The counterclaim alleged that Burnside, as owner and operator in control of the Otterburn, owed the stevedoring contractor "the duty of providing and maintaining a safe place to work so that injury to the employees . . . would be avoided." Burnside had violated that duty, according to the counterclaim, by its negligence
The District Court, finding that material factual disputes existed concerning the conduct of both parties, denied Burnside's motion for summary judgment on its [394 U.S. 404, 410] complaint. 6 But it did grant the motion to dismiss Marine Terminals' counterclaim. The court noted Marine Terminals' concession that its theory of a direct action against the shipowner was novel. Normally the stevedoring contractor is content with its remedy of subrogation to the rights of the deceased longshoreman's representative against whatever third party may be liable for the death, usually the shipowner. In this case, however, the applicable Illinois Wrongful Death Act limited the amount recoverable by the decedent's representative to $30,000, 7 far short of Marine Terminals' potential liability of $70,000. The court recognized that "[t]he existence of such a direct right over is well established in [394 U.S. 404, 411] certain situations," 8 but concluded that the employer's rights provided by the Longshoremen's and Harbor Workers' Compensation Act are exclusive and "prevent him from maintaining an independent cause of action against the third party tortfeasor." 9
The Court of Appeals affirmed, agreeing that Marine Terminals' sole remedy is by subrogation under the Act. But while the District Court had implied that the stevedoring contractor would have had a direct action had it not been abrogated by the Act, the Court of Appeals appeared to assume that, in the absence of the statutory remedy, federal maritime law would permit no direct recovery from the shipowner:
Nothing in the legislative history of the Act remotely supports the construction adopted by the courts below. And we can perceive no reason why Congress would have intended so to curtail the stevedoring contractor's rights against the shipowner. The exclusivity of the statutory compensation remedy against the employer was designed to counterbalance the imposition of absolute liability; there is no comparable quid pro quo in the relationship between the employer and third persons. On the contrary, as we emphasized in Ryan Stevedoring Co. v. Pan-Atlantic S. S. Corp., 350 U.S. 124 , the Act is concerned only with the rights and obligations as between the stevedoring contractor and the employee or his representative. It does not affect independent relationships between the stevedoring contractor and the shipowner. Neither this Court 13 nor, before this case, any other [394 U.S. 404, 414] court 14 has held that statutory subrogation is the employer's exclusive remedy against third party wrongdoers, and we decline to so hold today.
We do not, of course, hold that the shipowner's duty to the employer is the same as to the employee. Nor do we disapprove the Court of Appeals' holding that the shipowner does not owe to the stevedoring contractor the absolute duty of seaworthiness owed to individual longshoremen. 15 But Marine Terminals' counterclaim in this action did not rely on the unseaworthiness of the ship. Rather it charged that Burnside had been negligent in certain particular respects. 16 And we have suggested before this that, while "the duties owing from [the shipowner] to [the longshoreman] were not identical with those from [the shipowner] to [the stevedoring contractor]," the shipowner can be negligent with respect [394 U.S. 404, 416] to the stevedoring contractor as well as to the longshoreman. Weyerhaeuser S. S. Co. v. Nacirema Operating Co., 355 U.S. 563, 568 . 17 Neither court below reached the question whether the counterclaim sufficiently alleged a breach of the duties owed by Burnside to Marine Terminals, and relevant factual questions remain unresolved. With the case in its present posture, therefore, we express no opinion as to whether the conduct of Burnside's employees amounted to a breach of the duty it owed to Marine Terminals. 18 We hold only that federal maritime [394 U.S. 404, 417] law does impose on the shipowner a duty to the stevedoring contractor of due care under the circumstances, and does recognize a direct action in tort against the shipowner to recover the amount of compensation payments occasioned by the latter's negligence.
This holding is in no wise a departure from our decision in Halcyon Lines v. Haenn Ship Ceiling & Refitting Corp., 342 U.S. 282, 285 , that we would not "fashion [394 U.S. 404, 418] new judicial rules of contribution" between the shipowner and the stevedoring contractor as joint tortfeasors. Marine Terminals is not seeking contribution. It is not asking Burnside to share responsibility for their joint negligence with respect to McNeill. Rather the counterclaim seeks recovery of the full amount of Marine Terminals' liability under the Act to McNeill's representative; and it is founded not on Burnside's wrong to McNeill but on its independent wrong to Marine Terminals.
We further note that at this stage of the case it must be assumed that Marine Terminals was faultless vis-a-vis Burnside, for the claim that Marine Terminals breached its Ryan warranty of workmanlike service has not yet been adjudicated and is not before us. We decide nothing today with respect to the interaction between the shipowner's breach of warranty claim and the stevedoring contractor's tort claim. Marine Terminals has charged Burnside with negligence not as a defense to the latter's Ryan claim but in a counterclaim for damages, and we have considered that claim without regard to the implications of the shipowner's countervailing cause of action. Our holding is perforce limited to a rejection of Burnside's argument that "a shipowner's tortious conduct may be used as a shield, but not as a sword."
Marine Terminals has also argued that, aside from any express or implied-in-fact contract, it has a quasi-contractual right of indemnity for the liability which it incurred under the Act on account of the shipowner's wrong. This right, which was evidently recognized by the District Court, 21 is said not to stem solely from the pre-existing contractual relationship between the parties, but to be conferred by law in order to place the liability where it justly belongs. 22 As one court has described it,
We express no opinion on the validity of this indemnity theory or its application to this case, but hold only that Marine Terminals is not foreclosed by any decision of this Court from raising it in the District Court. We have cautioned that "in the area of contractual indemnity an application of the theories of `active' or `passive' as well as `primary' or `secondary' negligence is inappropriate," Weyerhaeuser S. S. Co. v. Nacirema Operating Co., 355 U.S. 563, 569 . 24 But that proscription in terms applied only "in the area of contractual indemnity" under Ryan. In Ryan itself we specifically did "not meet the question of a noncontractual right of indemnity or of the relation of the Compensation Act to such a right." 350 U.S., at 133 . 25 By leaving open the question of such an indemnity action by the shipowner against the stevedoring contractor, a fortiori we did not decide anything with respect to such an action by the stevedoring contractor against the shipowner. 26 [394 U.S. 404, 422]
Because, as we hold today, 33 of the Longshoremen's and Harbor Workers' Compensation Act is not the exclusive source of the stevedoring contractor's remedies against the shipowner, and the former may have a cause of action in tort for the compensation payments caused by the shipowner's negligence, we reverse the judgment of the Court of Appeals and remand this case to the District Court for further proceedings consistent with this opinion.
[ Footnote 2 ] If the representative decides to bring suit against the third person within six months of the award, as in this case, the employer's liability for compensation is reduced by the amount recovered by the representative from the third person. See 33 (f), supra, n. 1.
[ Footnote 3 ] 284 F. Supp. 740.
[ Footnote 4 ] 392 F.2d 918.
[ Footnote 6 ] The District Court found that crucial factual issues existed regarding the longshoremen's knowledge of the open hatch and the parties' relative duties of inspection. McNeill had been present at the time the hatch lids were "winged out," but the court noted that the factual question was posed whether McNeill could reasonably have assumed that the covers would be replaced and had merely entered the area to check it for safety.
[ Footnote 7 ] The Illinois Wrongful Death Act was amended in 1967 to remove the ceiling on damages, but the amendment was made prospective only, and the Act still limits the recovery to $30,000 "where such death occurs on or after July 8, 1957 and prior to the effective date [August 18, 1967] of this amendatory Act of 1967 . . . ." Ill. Rev. Stat., c. 70, 2.
The District Court has reserved the question whether, suing as subrogee, the employer's recovery would be limited by the Illinois statute:
[ Footnote 8 ] 284 F. Supp., at 744. The District Court noted that the petitioner's theory is summarized in 96 of the Restatement of Restitution:
[ Footnote 9 ] 284 F. Supp., at 744.
[ Footnote 10 ] 392 F.2d, at 920.
[ Footnote 11 ] Ibid.
[ Footnote 12 ] Section 5, 44 Stat. 1426, as set forth in 33 U.S.C. 905, reads as follows:
[ Footnote 13 ] Both the District Court and the Court of Appeals relied upon Doleman v. Levine, 295 U.S. 221 , citing it for the proposition that the employer's "rights are derived from the person entitled to compensation." The decision, however, held only that, under the predecessor of 33, the employer could not maintain a wrongful death action in his own name if he was subrogated to the rights of only one of the dependents entitled to bring the action. Not a word of the opinion in that case suggests that 33 of the Act was the only source of the employer's rights against third persons for liability to his employees.
[ Footnote 14 ] The District Court rested on the following rationale of the District Court for the Southern District of California in California Casualty Indemnity Exchange v. United States, 74 F. Supp. 401, 404:
Nor did the District Court for the Northern District of Ohio so hold in Reiss S. S. Co. v. Cyr, 138 F. Supp. 834, aff'd, 229 F.2d 849, another case relied on by the District Court below. Language in the Reiss opinion to the effect that 33 "governs exclusively in instances of third party liability," id., at 836, referred only to the relationship between employer and employee under the Act, not to the relationship between the employer and third parties.
[ Footnote 16 ] See supra, at 409.
[ Footnote 17 ] The context of this statement in Weyerhaeuser was our treatment of the stevedoring contractor's contention that the shipowner's conduct had been such as to preclude recovery for the stevedoring contractor's breach of warranty. The statement that the shipowner owed the stevedoring contractor certain duties did not identify the source of those duties, but our discussion of the subject was in terms of obligations imposed by law:
[ Footnote 18 ] The Federal District Court for the Southern District of California has held that the shipowner owes the stevedoring contractor at least the following obligations:
In the case of Mickle v. The Henriette Wilhelmine Schulte, 188 F. Supp. 77, 80, the District Court for the Northern District of California, while rejecting the argument that such obligations were contractual, agreed that the occupier of a ship
[ Footnote 19 ] Such reciprocal contractual warranties were recognized in Ryan, Marine Terminals argues, by the Court's statement that "the stevedoring contractor . . . has received a contractual quid pro quo from the shipowner for assuming responsibility for the proper performance of all of the latter's stevedoring requirements . . . ." 350 U.S., at 129 , n. 3. (Emphasis in original.) Other courts have most often dealt with the shipowner's duties only in the context of a stevedoring contractor's defense to a shipowner's claim for breach of Ryan warranties. See, e. g., D/S Ove Skou v. Hebert, 365 F.2d 341; T. Smith & Son v. Skibs A/S Hassel, 362 F.2d 745; Albanese v. N. V. Nederl. Amerik Stoomv. Maats., 346 F.2d 481, rev'd on other grounds, 382 U.S. 283 ; Misurella v. Isthmian Lines, Inc., 328 F.2d 40; Pettus v. Grace Line, Inc., 305 F.2d 151; Drago v. A/S Inger, 305 F.2d 139, cert. denied, 371 U.S. 925 ; Calmar S. S. Corp. v. Nacirema Operating Co., 266 F.2d 79, cert. denied, 361 U.S. 816 . They have on occasion, however, stated or intimated that the shipowner makes certain affirmative warranties to the stevedoring contractor whose breach would support an action for damages. See, e. g., The No. 34, 25 F.2d 602; Pettus v. Grace Line, Inc., 305 F.2d 151, 155 (dissenting opinion of Judge Clark); Cusumano v. Wilhelmsen, 267 F. Supp. 164; Ring v. Motor Vessel Cape Clear, 226 F. Supp. 709. See also Mowbray v. Merryweather, 1895. 2 Q. B. 640. See generally Proudfoot, "The Tar Baby": Maritime Personal-Injury Indemnity Actions, 20 Stan. L. Rev. 423, 442-445 (1968).
[ Footnote 20 ] The stevedoring contractor's warranty of workmanlike service under Ryan extends to the shipowner even in the absence of contractual [394 U.S. 404, 420] privity between the parties. Waterman S. S. Corp. v. Dugan & McNamara, Inc., 364 U.S. 421 ; Crumady v. The Joachim Hendrik Fisser, 358 U.S. 423 . For the suggestion that the stevedoring contractor may be the beneficiary of certain of the shipowner's obligations under the charter agreement, see Drago v. A/S Inger, 305 F.2d 139, 143.
[ Footnote 21 ] See supra, at 410-411.
[ Footnote 22 ] This Court has recognized the objective under the Compensation Act of "placing the burden ultimately on the company whose default caused the injury." Italia Societa per Azioni di Navigazione v. Oregon Stevedoring Co., 376 U.S. 315, 324 . And see Reed v. The Yaka, 373 U.S. 410, 414 .
[ Footnote 23 ] Davis v. American President Lines, 106 F. Supp. 729, 730. For other decisions recognizing such a quasi-contractual right of indemnity under federal maritime law, see, e. g., Parenzan v. Iino Kaiun Kabushiki Kaisya, 251 F.2d 928, cert. denied, sub nom. [394 U.S. 404, 421] International Terminal Operating Co. v. Iino Kauin Kaisha, 356 U.S. 939 ; American President Lines, Ltd. v. Marine Terminals Corp., 234 F.2d 753, cert. denied, 352 U.S. 926 ; Berti v. Compagnie de Navigation Cyprien Fabre, 213 F.2d 397; States S. S. Co. v. Rothschild Int'l Stevedoring Co., 205 F.2d 253; United States v. Rothschild Int'l Stevedoring Co., 183 F.2d 181; Standard Oil Co. v. Robins Dry Dock & Repair Co., 32 F.2d 182; McFall v. Compagnie Maritime Belge, 304 N. Y. 314, 107 N. E. 2d 463.
[ Footnote 25 ] See also 350 U.S., at 132 , n. 6. The Ryan opinion also recognized the difference between, and treated separately, the noncontractual right of indemnity and the claim for contribution from a joint tortfeasor. Id., at 133.
[ Footnote 26 ] Some have thought that the exclusivity of the employer's statutory liability to the employee would prevent the shipowner from asserting a right of indemnity against the stevedoring contractor based on the latter's wrong to the employee. See, e. g., Ryan, supra, at 142 (BLACK, J., dissenting); Brown v. American-Hawaiian S. S. Co., 211 F.2d 16; Slattery v. Marra Bros., 186 F.2d 134, [394 U.S. 404, 422] cert. denied, 341 U.S. 915 . But there is no such barrier, of course, to a direct action by the stevedoring contractor against the shipowner. [394 U.S. 404, 423]