Norman BURRIS v. GLOBAL BULK CARRIERS, INC., Appellant, v. LAVINO SHIPPING COMPANY, Third-Party-Defendant
No. 74-1120
United States Court of Appeals, Third Circuit
Argued Sept. 18, 1974. Decided Oct. 30, 1974.
505 F.2d 1173
Judgment affirmed.
John T. Biezup, and Carl D. Bucholz, 3d, Rawle & Henderson, Philadelphia, Pa., for appellant.
John P. Penders, Marshall, Dennehey, & Warner, P.A., Philadelphia, Pa., for Lavino Shipping Co., appellee.
Before VAN DUSEN, HUNTER and WEIS, Circuit Judges.
OPINION OF THE COURT
VAN DUSEN, Circuit Judge.
This is an appeal by the third-party plaintiff, Global Bulk Carriers, Inc., from a November 19, 1973, judgment in the United States District Court for the Eastern District of Pennsylvania in favor of the third-party defendant, Lavino Shipping Company. On August 4, 1972, a longshoreman, Norman Burris, filed suit against Global for injuries sustained in an accident aboard a ship owned by Global. Global joined Lavino, the stevedoring concern which was the employer of Burris at the time of his accident, as a third-party defendant, claiming, inter alia, counsel fees and litigation expenses. Prior to trial Lavino and Burris settled; pursuant to their agreement, Burris’ suit against Global
This appeal presents the narrow question of the circumstances under which a stevedore is liable to a shipowner for the latter‘s litigation expenses in defending a suit brought by an employee of the stevedore for injuries sustained while working onboard the shipowner‘s vessel. In Ryan Stevedoring Co. v. Pan-Atlantic S. S. Corp., 350 U.S. 124, 76 S.Ct. 232, 100 L.Ed. 133 (1956), the Supreme Court held that a shipowner can recover indemnification from a stevedore even where, as in the case before us, the shipowner‘s failure to correct hazards in the stow may have been partly responsible for the longshoreman‘s injury.1 350 U.S. at 134-135, 76 S.Ct. 232. Accord, Italia Soc. per Azioni di Navigazione v. Oregon Stevedoring Co., 376 U.S. 315, 321, 84 S.Ct. 748, 11 L.Ed.2d 732 (1964); Humble Oil & Refining Co. v. Philadelphia Ship Maintenance Co., 444 F.2d 727, 731 (3d Cir. 1971); Gilchrist v. Mitsui Sempaku K. K., 405 F.2d 763, 767 (3d Cir. 1968). The Ryan decision was an effort to alleviate the shipown-
The Supreme Court has never been called upon to decide whether litigation expenses incurred by a shipowner in defending a suit brought by a longshoreman are included in the damages recoverable under Ryan. However, the Ryan Court did cite Restatement of Contracts, § 334, in its analysis of the contract between shipowner and stevedore. See Ryan, supra, 350 U.S. at 129 n. 3, 76 S.Ct. 232. Section 334 provides as follows:
“If a breach of contract is the cause of litigation between the plaintiff and third parties that the defendant had reason to foresee when the contract was made, the plaintiff‘s reasonable expenditures in such litigation are included in estimating his damages.”
It thus appears that in creating the shipowner‘s right to sue for indemnification, the Court contemplated that the shipowner‘s litigation expenses would be part of the damages. This view is consistent with the ordinary law of indemnification, see A. C. Israel Commodity Co. v. American West African Line, Inc., 397 F.2d 170, 172 (3d Cir.), cert. denied, 393 U.S. 978, 89 S.Ct. 446, 21 L.Ed.2d 439 (1968), and has been adopted repeatedly in decisions of this court and other circuits subsequent to Ryan. See Guarracino v. Luckenbach Steamship Co., 333 F.2d 646, 648 (2d Cir.), cert. denied, 379 U.S. 946, 85 S.Ct. 439, 13 L.Ed.2d 543 (1964); Brown v. San Alberto CIA Armadora S.A., 305 F.2d 602, 603 (3d Cir. 1962); Rogers v. United States Lines Co., 303 F.2d 295, 298-299 (3d Cir.), cert. denied, 371 U.S. 876, 83 S.Ct. 148, 9 L.Ed.2d 114 (1962); Paliaga v. Luckenbach Steamship Co., 301 F.2d 403, 407-411 (2d Cir. 1962). See also H. Baer, Admiralty Law of the Supreme Court, § 8-4 (1969).
Contrary to the approach of the foregoing cases, the appellee relies on language in Gilchrist v. Mitsui Sempaku K. K., supra, where this court stated that the shipowner‘s counsel fees should be indemnified only if the stevedore‘s breach of contract is the sole responsible cause of the longshoreman‘s injury. See Gilchrist, supra, 405 F.2d at 769.2 For this proposition, the Gilchrist court relied on dicta in Ellerman Lines, Ltd. v. Atlantic & Gulf Stevedores, Inc., 339 F.2d 673 (3d Cir. 1964), cert. denied, 382 U.S. 812, 86 S.Ct. 23, 15 L.Ed.2d 60 (1965). In Ellerman, the shipowner had alleged that the stevedore‘s breach of warranty was the sole responsible cause of the longshoreman‘s injury and the court observed in passing that, if this allegation were true, the shipowner would be able to recover its litigation expenses as part of the damages in its indemnification action against the stevedore. Id. at 674. This was not a holding that the shipowner could not recover its litigation expenses if the stevedore‘s breach were not the sole cause of the injury, and the Ellerman court cited with approval the Guarracino and Brown cas-
The Gilchrist court was undoubtedly motivated by the extraordinary circumstances of that case. In Gilchrist, the shipowner had failed to introduce at trial evidence regarding the amount of its counsel fees. In a post-trial memorandum, the shipowner requested that “the judgment be formed to include the shipowner‘s counsel fees and expenses in defending the principal action.” Gilchrist, supra, 405 F.2d at 768. Although this request was not granted, the district court reserved the question of the shipowner‘s right to counsel fees and, over a year after the entry of judgment, informed counsel that if they could not agree on the amount of counsel fees, the issue would be brought to trial before a jury. Id., 405 F.2d at 768-769. The case thus raised difficult questions concerning res judicata and the power of the district court to grant a separate trial on its own motion more than ten days after the entry of judgment. See
The only cases which have followed Gilchrist have similarly involved exceptional circumstances which required the courts to create an “equitable modification of the normal rule of indemnification.” Farrell Lines, Inc. v. Carolina Shipping Co., Nos. 73-2079/80, slip opinion at 9 (4th Cir., June 7, 1974). Farrell involved a “unique”4 factual situation in which the shipowner sued the stevedore who loaded the ship for the liability and litigation expense the shipowner had incurred as the result of injuries suffered by the employee of the stevedore who unloaded the ship. In this situation, the court of appeals found that it had not been error for the district court to deny the shipowner recovery from the loading stevedore of the litigation expenses it incurred in an earlier action involving the shipowner, the longshoreman, and the
Since the district court did not include in its findings any similarly extenuating circumstances in the instant case, we find that the normal rule of indemnification, stated by this court in Rogers and Brown, supra, should be applied to the facts on which the district court reached its judgment.7 In reaching this decision, we are not unmindful of Lavino‘s argument that Gilchrist represents a general relaxation of the strictness of the Ryan doctrine. It must be noted, however, that in Humble Oil, supra, 444 F.2d at p. 731, Judge Aldisert carefully described the limitations inherent in the Ryan doctrine:
“In Weyerhaeuser S.S. Co. v. Nacirema Operating Co., 355 U.S. 563, 78 S.Ct. 438, 2 L.Ed.2d 491 (1958), the Supreme Court, again faced with facts indicating that the stevedore was substantially responsible for a longshoreman‘s injuries, reaffirmed the shipowner‘s right to indemnification created in Ryan, but not without reservation: ‘If [the stevedore] rendered a substandard performance which led to foreseeable liability of [the shipowner], the latter was entitled to indemnity absent conduct on its part sufficient to preclude recovery.’ Id. at 567, 78 S.Ct. at 441 (emphasis supplied).”
The court in Humble Oil remanded to determine “whether the shipowner‘s breach of his absolute duty to furnish a safe and seaworthy vessel so prevented or hindered the stevedore from complet-
The appellee finally contends that the court should stay its hand because the issue raised by this case will soon be mooted by the recent amendments to the Longshoremen‘s and Harbor Workers’ Compensation Act, Act of October 27, 1972, Pub.L. 92-576, § 18(a), 86 Stat. 1263, codified at
The November 19, 1973, judgment will be reversed and the cause remanded for proceedings consistent with this opinion. Costs to be taxed against the appellee.
JAMES HUNTER, III, Circuit Judge (concurring):
I agree with the majority opinion insofar as it reverses the judgment of the district court and remands for consideration of whether, under Ryan and Weyerhaeuser, Global‘s conduct might have been such as to preclude recovery in this action. However, rather than try to limit Gilchrist to its facts, I would prefer to have this Circuit call an en banc hearing to reconsider its validity. I believe that the “sole responsible cause” test adopted by Gilchrist is contrary to general principles of indemnity, which permit indemnification for the full loss suffered by the indemnitee. Where the indemnitor‘s breach has caused the indemnitee to incur reasonable costs and legal expenses in connection with the defense of the principal action, those costs and expenses are recoverable as part of the loss suffered by the indemnitee. This general principle is explicitly adopted in section 334 of the Restatement of Contracts, cited by the Supreme Court in Ryan, and had been recognized in several other decisions of this Circuit. See A. C. Israel, supra; Brown, supra; Rogers, supra.
Nowhere do any of these authorities carve out a special rule for legal fees and expenses where the fault between the indemnitor and indemnitee is mutually shared, and such a rule is hard to
I agree with the majority that there may be unusual circumstances which would justify the denial of attorney‘s fees and expenses despite the right to recover indemnity proper. However, for such circumstances to create “an equitable modification of the normal rule of indemnification,” it would appear necessary that those circumstances be such as to require modification so as to prevent undue hardship to one of the parties. I agree that Farrell, supra, might well be such a case, since it involved two stevedores, both of whom, along with the shipowner, had been found partially negligent. I do not see how the facts in Gilchrist required such a modification, as there was no logical nexus between the unusual circumstances present in that case and any harshness that might result from application of the general rule of indemnification. As the majority notes, the court in Gilchrist applied the “sole responsible cause” test in part to avoid resolving the difficult issues of res judicata and the trial court‘s grant of a separate trial. While these unusual circumstances may have motivated the Gilchrist court in reaching its decision, I do not see how they would justify a departure from or a modification of the established law of indemnity. In short, I am concerned that today‘s decision does not offer a clear framework as to what kinds of circumstances would justify “an equitable modification of the normal rule of indemnification.”
I concur in the majority‘s disposition of this case, however, since it reverses the district court judgment and since I agree that the district court should consider on remand whether Global‘s conduct might constitute such unusual circumstances as to affect its right of indemnification. See note 7 supra. While I disagree with the majority‘s distinguishing of Gilchrist, I believe that any uncertainty that the majority‘s opinion may create for other litigants is minimal in light of the recent amendments to the Longshoremen‘s and Harbor Workers’ Compensation Act. Those amendments seem to have mooted the issues raised by this case for accidents occurring after November 26, 1972, by prohibiting shipowner indemnity actions against stevedore/employers.
Notes
“In the case of Ellerman Lines, Ltd. v. Atlantic & Gulf Stevedores, Inc., 339 F.2d 673, Judge Hastie, now Chief Judge of this Court, said at p. 674: ‘If conduct of [the stevedore company] in violation of its warranty to [the shipowner] was the sole responsible cause of the longshoreman‘s] injury, as the libel alleges, the expense to which [the shipowner] is subjected in defending [the longshoreman‘s] suit against it to recover for that injury is an element of damages caused by the [stevedoring company‘s] breach of warranty, even if [the shipowner] succeeds in defeating [the longshoreman‘s] claim.’ (Cited cases omitted and emphasis added.) There has been no showing in the actions here involved that the conduct of the stevedoring company was the sole responsible cause of the plaintiff-longshoreman‘s injury. Therefore, the shipowner was not entitled to recover the expenses to which it was subjected in defending the plaintiff-longshoreman‘s action against it from the stevedoring company. Hence we need not determine whether the verdict was res adjudicata on the defending expense issue and whether the district court had the power to sever that issue and grant a separate jury trial on its own motion, and even though it did have such power in this action, whether it had to be exercised within ten days from the entry of judgment on the verdict.”
This holding was never appealed to the Supreme Court. The stevedore filed a petition for writ of certiorari, but since it had prevailed on the counsel fee issue it did not include that issue in its petition. The questions presented by the petition for writ of certiorari appear in the joint appendix filed in this action at 48a. The Supreme Court denied the petition. Jarka Corp. v. Mitsui Sempaku K. K., 394 U.S. 920, 89 S.Ct. 1195, 22 L.Ed.2d 453 (1969). It is noted that Judge Hastie wrote the opinion in Miller v. A/B Svenska Amerika Linien, 454 F.2d 1094 (3d Cir. 1971), where the court pointed out at note 2, p. 1096:
“We do not reach the question of indemnifying stevedore‘s liability for the shipowner‘s litigation expenses where stevedore and shipowner shared responsibility for longshoreman‘s injury, a situation considered in Gilchrist . . . .”
(a) Aliens who are subject to the numerical limitations specified in section 201(a) shall be allotted visas or their conditional entry authorized, as the case may be, as follows:
* * * * *
(7) Conditional entries shall next be made available by the Attorney General, pursuant to such regulations as he may prescribe and in a number not to exceed 6 per centum of the number specified in Section 201(a)(ii), to aliens who satisfy an Immigration and Naturalization Service officer at an examination in any non-Communist or non-Communist-dominated country, (A) that (i) because of persecution or fear of persecution on account of race, religion, or political opinion they have fled (I) from any Communist or Communist-dominated country or area, or (II) from any country within the general area of the Middle East, and (ii) are unable or unwilling to return to such country or area, on account of race, religion, or political opinion, and (iii) are not nationals of the countries or areas in which their application for conditional entry is made; . . .
Although the court in Farrell based its decision on the ground that the loading stevedore was not solely responsible for the longshoreman‘s injuries. Farrell, supra at p. 9 of slip opinion, the result might also be explained on the ground that the loading stevedore was entitled to contribution from the vessel as a joint tortfeasor. Cf. Cooper Stevedoring Co. v. Fritz Kopke, Inc., 417 U.S. 106, 94 S.Ct. 2174, 40 L.Ed.2d 694 (1974).