Petition — Sentry Insurance v. Todd Shipyards Corp.

in the

Supreme Court of the An

OCTOBER TERM, 1982

NO.

THE TRAVELERS INSURANCE COMPANY,

Petitioner

TODD SHIPYARDS CORPORATION AND

THE VESSEL S/S KATRIN

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

FRED E. SALLEY*

ESTELLE MAHONEY

Jones, Walker, Waechter, Poitevent,

Carrere & Denegre

225 Baronne Street, 28th Floor

New Orleans, Louisiana 70112

Telephone: (504) 581-6641

Attorneys for Petitioner

*Counsel of Record

a

A B Letter Service, inc., 327 Chartres St., New Orleans, Le. (504) 581-5555

i

QUESTIONS PRESENTED FOR REVIEW

1. Whether prevailing party litigants in contract

disputes are automatically entitled to an award of at-

torney’s fees and the Supreme Court’s “American Rule”

abdicated?

2. Whether the withered Ryan Doctrine should be ex-

panded to apply to any and all breaches of implied

maritime warranties?

3. Whether the Federal Courts will now refuse to en-

force any and ail express contractual indemnity clauses?

4. Whether the Federal District Courts no longer

have discretion with regard to the issue of pre-judgment in-

terest awards in admiralty cases?

5. Whether this Court will sanction the unequal

treatment of similarly situated parties by the Federal

Courts?

6. Whether Insurers are no longer free to contract

the liabilities they wish to insure by the use of unam-

bigious language in their policies? 4

ii

LIST OF INTERESTED PARTIES

Counsel of record for The Travelers Insurance

Company, insurer of Turbine Service, Inc. certifies and

represents, in order that the Justices of this Court may

evaluate possible disqualification or recusal, that the

parties in the United States Court of Appeals for the Fifth

Circuit are:

1. Auto Transportation S.A.

2. Todd Shipyards Corporation

3. Turbine Service, Inc.

4. Gonzales Manufacturing & Industrial Machine

Works, Inc.

5. The Travelers Insurance Company

6. Sentry Insurance Company, a Mutual Company

TRAVELERS INSURANCE COMPANY

SUBSIDIARIES AND AFFILIATES

Travelers Insurance Company lists the following

subsidiaries and affiliates: Adria - TIC Interuational

Holdings, S.A.; Alt Management Corp.; American Liquid

Trust; Ashland-Akaskan, Ltd.(Okla.); Auger Insurance

Agency, Inc.; Charles A. Boyer, Inc.; Brookview Village,

Ltd.-IiL.); C.S.1., Inc.; Caribbean Atlantic Life Insurance

Company Limited; Caribbean Atlantic Life Insurance

Company of Jamaica Ltd.; Caribbean Atlantic Life In-

surance Company Trinidad and Tobago; Carpenter

Brothers Insurance Agency, Inc.; The Charter Oak Fire In-

surance Company; The Connecticut Fire Insurance Com-

pany; William F. Connelly, Jr., Inc.; H. C. Copeland Ad-

ministrative Services, Inc.; H. C. Copeland and Associates

Equities, Inc.; H. C. Copeland and Associates, Inc.; Con-

stitution Fund; The Constitution State Insurance Com-

pany; Constitution State Management Company; Con-

stitution State Service Company; Cornutt & McIntire In-

surance, Inc.; Dana Point Marina Company-(Cal.); Derby

Advertising, Inc.; Dugdale of Nebraska, Inc.; 89th and

York Avenue Corporation; Employee Retirement Income

Systems Company; Exsure, Inc.; Fiduciary Investment

Company, Inc.; 400 University Avenue Prospect

Company-(Canada); Four S Corporation; The Authur B.

Fowler Agency, Inc.; Fund Administrators Inc.; Hilstead

Insurance Agency, Inc.; Investment Companies Services

Corporation; KCF Insurance Agency Inc.; Keystone

Custodian Funds, Inc.; Keystone Custodian Funds Series

iv

$1, S-3, S-4, K-1, K-2, B-1, B-2 and B-4; Keystone Interna-

tional Fund, Inc.; Keystone Investment Management

Company, Inc.; Keystone Massachusetts Inc.; Keystone

Massachusetts Life Insurance Company; Keystone Provi-

dent Life Insurance Company; Keystone Real Estate Com-

pany; Keystone Securities Co., Inc.; LA Metropole S.A.;

The Massachusetts Companies, Inc.; The Massachusetts

Company Distributor, Inc.; Massachusetts Fund; The

Massachusetts Fund For Tax Exempt Income; Massco In-

vestment: Management Corporation; Master Reserves

Trust; Money Market/Option Investments, Inc.; Oak

Creek Apartments-Calif.}; William F. O’Connor, Inc.;

O’Hare Lake Office Plaza, Ltd.-(IIl.); Panther Valley Coun-

try Club, Inc.; Panther Valley Inc.; Panther Valley,

Ltd.{N.J.) and Subsidiaries; Panther Valley Service, Inc.;

Park Newport Ltd.-Calif.); Pequest Sewer Company; Pe-

quest Water Company; The Phoenix Insurance Company;

The Plaza Corporation (Formerly Constitution Plaza, Inc.);

The Prospect Company; Prospect Management Services

Company (Del.); E. Broox Randall & Sons, Inc.; Terra Nova

Insurance Company Limited; TIC Auto Body Co., Inc.;

TMC Insurance Agency, Inc.; Syd Tozier & Associates In-

surance Brokers, Inc; TRAVCAN Limited; Travelers

American Properties (Five) N.V.; Travelers American Prop-

erties (Four) N.V.; Travelers American Properties (One)

N.V.; Travelers American Properties (Six) N.V.; Travelers

American Properties (Three) N.V.; Travelers American

Properties (Two) N.V.; Travelers Asset Management Inter-

national Corporation; Travelers Canada Corporation; The

Travelers Corporaticn of Asia Limited; The Travelers Cor-

v

poration of Bermuda Limited; Travelers Equities Fund,

Inc.; Travelers Equities Sales, Inc.; The Travelers Equity

Fund No. 100 (Canada); The Travelers Equity Fund No. 10

(Bermuda); The Travelers Fund A for Variable Annuities;

The Travelers Fund A-1 for Variable Annuities; The

Travelers Fund 8B for Variable Contracts; The Travelers

Fund B-1 for Variable Contracts; Travelers General Agen-

cy of Hawaii, Inc.; Travelers General Agency of Puerto

Rico, Inc.; The Travelers Indemnity Company; The

Travelers Indemnity Company of America; Travelers In-

demnity Company of Canada; The Travelers Indemnity

Company of Illinois; The Travelers Indemnity Company of

Rhode Island; The Travelers Insurance Company of IIli-

nois; Travelers Insurance Corporation Proprietary

Limited; The Travelers Investment Management Com-

pany; The Travelers Life and Annuity Company; The

Travelers Life Insurance Company; Travelers Life In-

surance Company of Canada; The Travelers Life Insurance

Company (Overseas) Ltd.; The Travelers Marine Corpora-

tion; The Travelers Massachusetts Option Income Trust;

The Travelers Pension & Life Insurance Company; The

Travelers Pooled Separate Account “A”; The Travelers

Pooled Separate Account “B”; The Travelers Pooled

Separate Account ‘‘C’”’; The Travelers Pooled Separate Ac-

count “DD”; The Travelers Pooled Separate Account “M”’;

The Travelers Pooled Separate Account ‘“N”; The

Travelers Pooled Separate Account “‘R”; The Travelers

Pooled Separate Account “S”; The Travelers Pooled

Variable Annuity Fund ‘‘V” and “‘VI"’; The Travelers Rein-

surance Company of Bermuda, Limited; The Travelers

vi

Separate Account “K”; The Travelers Separate Accounts

for particular employers-13 Different Accounts; The

Travelers Syndicate #1, Inc.; Travelers U.S. Property Ber-

muda, Limited; Travelers Variable Annuity Account V-1;

Tri County Grove-(Fla.); West Village(Penn.); Wibesla,

Inc.; Joseph A. Wynne Agency Yorba Linda Apartments

Ltd.4Calif.); Yorba Linda 1-Calif.).

PAGE

*Although the rules of the Supreme Court require this title to be includ-

ed in the Table of Contents, Travelers has included no particular con-

stitutional provisions or statutes in its petition.

viii

TABLE OF AUTHORITIES

CASE PAGE

Afran Transport Co. v. THE BERGECHIEF,

285 F.2d 119 (2nd Cir. 1960) 23

Agrico Che.xical Co. v. M/V BEN W. MARTIN,

664 F.2d 85 (5th Cir. 1981), reh. den.

669 F.2d 733 (3 cases) 14

Aleyska Pipeline Co. v. Wilderness Society,

421 U.S. 240, 95 S.Ct. 1612,

44 L.Ed. 2d 141 (1945) 5, 6,8

Bisso v. Inland Waterways Corp.,

349 U.S. 85, 75 S.CT. 629, 99 L.Ed. 911 (1955)............ 17

Breaux v. St. Paul Fire & Marine Insurance Company,

345 So.2d 204 (La. App. 1st Cir. 1977) 20

Cole v. Chevron Chem. Co.,-Oro Nite Div.,

477 F.2d 361 (5th Cir. 1973), reh. den. 478 F.2d 1402

cert. den. 414 U.S. 978 (1973) 12

Continental Cas. Co. v. Canadian Universal Ins. Co.,

605 F.2d 1340 (5th Cir. 1979), cert. den. sub. nom.

Canadian Universal Ins. Co. v. Continental Casualty

Co. 455 U.S. 929 (1979) 11, 12,19

Esso International, Inc. v. The S.S. CAPTAIN JOHN,

443 F.2d 1144 (5th Cir. 1971) 21

FMC Corp. v. Continental Grain Co.,

355 So.2d 953 (La. App. 4th Cir. 1977) 17

Fairmont Shipping Corp. v. Chevron International

Oil Co., Inc., 511 F.2d 1252 (2nd Cir. 1975), cert. den.

sub. nom. Chevron International Oil Co. v.

Fairmont Shipping Corp. 423 U.S. 838 15

Grace Line, Inc. v. Todd Shipyards

500 F.2d 361 (9th Cir. 1974) 23

Grace Circle Line Sightseeing Yachts, Inc. v.

Storbeck, 325 F.2d 338 (2nd Cir. 1963) 22, 23

Hartford Accident & Indemnity Company v. Case

Foundation Co., 10 Ill. App. 3d 115, 294 N.E.2d

7 (1st Dist. 1973) 20

v=

ix

Havis v. Petroleum Helicopters, Inc.,

664 F.2d 54 (5th Cir. 1981) 21

Holmes v. J. Ray McDermott & Co., Inc., __ F.2d _

Slip Op. No. 81-3486 (5th Cir., August 9, 1982).............x

Jig The Third Corp. v. Puritan Marine Insurance

Underwriters Corp., 519 F.2d 171 (5th Cir. 1975),

reh. den. 522 F.2d 1280 cert. den. sub. nom.

Atlantic Marine, Inc. v. Jig The Third Corp.,

424 U.S. 954 17

M.O.N.T. Boat Rental Services, Inc. v. Union Oil Co.,

613 F.2d 576 (5th Cir. 1980) 11,17

Mecom uv. Levingston Shipbuilding Co.,

622 F.2d 1209 (5th Cir. 1980) 21

Nationwide Bidg. Maintenance, Inc. v. Sampson,

559 F.2d 704 (D.C. Cir. 1977) 6

Norfolk v. Western R. Co. v. Liepelt,

444 U.S. 490, 100 S.Ct. 755, 62 L.Ed.2d 689

(1980) reh. den. 445 U.S. 972 6

Ryan Stevedoring Co. v. Pan-Atlantic S.S. Co.,

350 U.S. 124, 76 S.Ct. 232, 100 L.Ed 133 (1956).......... 14

Twenty Grand Offshore, Inc. v. West India Carriers,

Inc., 492 F.2d 679 (5th Cir. 1974), cert. den. sub.

nom. West India Carriers, Inc. v. Twenty Grand

Offshore, Inc., 419 U.S. 836 17

Vobill Homes, Inc. v. Hartford Accident & Indemnity,

Co., 179 So.2d 496 (La. App. 3rd Cir. 1965),

writ. ref. 248 La. 698, 181 So.2d 398 20

Weyerhauser S.S. Co. v. Nacirema Operating Co.,

355 U.S. 563, 78 S.Ct. 438, 2 L.Ed.2d 491 (1958)...12, 19

Williamson v. Dick Alevine, d/b/a Dick's Garage &

Truck Sales, Slip Op. No. 82-32 (La. App. 3rd

Cir. July 2, 1982) 20

The Opinion and Judgment of the Court of Appeals

affirming in part, modifying in part, reversing in part and

remanding the District Court’s judgment against peti-

tioner appears in Appendix A to this Petition, and is

reported at __ F.2d __ Slip op. No. 79-1685 (5th Cir. April

29, 1982). The orders of the Court of Appeals denying a

Petition for Rehearing and a Petition for Rehearing En

Banc appear in Appendix B. The Opinion and Order of the

District Court appears in Appendix C, and is reported at

467 F.Supp. 1259 (E.D. La. 1981).

JURISDICTION

The Fifth Circuit’s Opinion and Judgment of April

29, 1982, affirming in part, modifying in part, reversing in

part and remanding the District Court’s judgment against

petitioner is set forth in Appendix A (p. A-1). Its orders of

June 14, 1982, denying timely Petitions for Rehearing and

Rehearing En Banc, are set forth in Appendix B (p. A-56).

This Petition for Certiorari is being filed within the

prescribed period of ninety (90) days after June 14, 1982.

The jurisdiction of this Court is invoked under 28 U.S.C.

$1254(1).

However, although petitioner believes it must pre

serve its rights by applying to this Court for writs, it feels

that it must apprise the Court that the petition may be pre

mature. That is, under Holmes v. J. Ray McDermott & Co.,

xi

Inc. _. F.2d — Slip Op. No. 81-3486 (5th Cir. August 9,

1982), as the amount of attorneys’ fees, awarded by the

District Court as an element of damages, was not determin-

ed in that court, the Fifth Circuit may not have had

jurisdiction to hear the appeal.

1

STATEMENT OF THE CASE

This case involves an attempt by the Owners of the

vessel KATRIN, Auto Transportation, S.A. (““Owners”’ or

“Shipowners’’) to recover damages due to faulty repairs

performed by Todd Shipyards Corporation (“Todd”) and

other repairers, Turbine Service, Inc. (“Turbine Service’’)

and Gonzales Manufacturing and Industrial Machine

Works, Inc. (‘Gonzales’). The dispute arose out of

allegedly faulty repairs performed to the Low Pressure

(“LP”) turbine of the vessel KATRIN. In February of

1975, the vessel entered Todd’s repair yard in Algiers,

Louisiana for, inter alia, inspection of the vessel’s LP

turbine. Todd engaged Turbine Service to open up the

turbine for inspection. Todd obtained a bid from Turbine

Service for the required repair of the LP turbine. Turbine

Service, in turn, subcontracted a substantial portion of the

work to Gonzales.

The work done on the LP turbine included the

replacement and the repair of numerous blades of the

KATRIN’s LP turbine. The work performed on the LP

turbine was accomplished during March, April, and May of

1975. The turbine was tested during two dock trials

without major incident. However, on May 24, 1975, during

the KATRIN ’s river trial, a “pinging’’ noise developed in

the LP turbine. The KATRIN was returned to Todd's

repair yard by tow, the LP turbine opened and considerable

damage found. At that point, the Owners elected to ship

the LP turbine to its original manufacturer, Siemens A.G.

(‘‘Siemens’’) in Germany. Some eight months later the LP

turbine was returned to New Orleans and reinstalled by the

Owners’ own contractor, outside Todd's repair yard, under

the supervision of the manufacturer's and Owners’

representatives. The vessel sailed out of New Orleans on

March 2, 1976.

The vessel then traded commercially for the next

four months, albeit experiencing excessive temperatures in

its condensor top. In July of 1976, while passing the Irish

coast at Cork, the vessel’s turbines suddenly seized and

stopped. The vessel began drifting toward the coast, and

preparations were made to abandon ship. Pursuant to

orders given by the master, the chief engineer started the

turbines and operated them long enough to bring the

vessel away from the coast and subsequently, into Cork

harbor. The damage to both the LP turbine and the High

Pressure turbine due to this casualty was so extensive that

the vessel was sold for scrap.

Suit was initiated on July 11, 1975. Todd sued Tur-

bine Service and Gonzales demanding return of certain

damaged turbine parts of the KATRIN; however, the true

nature of the litigation was an action by the Shipowners to

recover for damage to their vessel, the KATRIN. The main

action had various interrelated claims, counter-claims, and

cross-claims of the parties engrafted onto it. The parties’

claims, summarized by the Trial Court at 467 F.Supp.

1269, were as follows:

(1) Shipowners sought recovery of an amount in ex-

cess of $3,000,000.00, the cost of repairing the LP turbine

in Germany, loss in value by reason of the casualty off

Cork, detention of the vessel during the various repairs,

and related survey fees, export fees, and expenses. The

Shipowners sued Todd, Turbine Service, Gonzales, and

Turbine Service’s and Gonzales’ respective insurers, The

Travelers Insurance Company (‘“Travelers’’) and Sentry

Insurance Company (‘‘Sentry”’).

(2) Todd counter-claimed against the Shipowners for

the balance due on its repair invoices and an additional

amount due for work ordered by the Shipowners’ represen-

tative after the river trial casualty. Todd also cross-claimed

against Turbine Service and Gonzales, as well as their

respective insurers, for indemnity in the event that Todd

was found liable to the Shipowners. Todd also sought the

cost of its defense from those defendants. Todd, moreover,

sought to recover sums paid to Turbine Service on account. —

(3) Turbine Service and Travelers cross-claimed

against Gonzales and Sentry for indemnity for negligent

workmenship by Gonzales; Turbine Service counter-

claimed against Todd and against the vessel to recover the

unpaid balance of its invoices for the initial turbine repairs.

(4) Gonzales cross-claimed against the Shipowners to

recover on its unpaid invoices. Gonzales also sought indem-

4

nity from Turbine Service for any liability it may have had

to the Shipowners or Todd.

Trial of this matter began November 14, 1977, and

ended May 23, 1978. After sixty-seven days of trial,

twenty-eight witnesses, over seven thousand pages of

deposition testimony and more than six hundred exhibits,

the Triel Judge, Fred J. Cassibry, Jr., entered a judgment

for the Owners, held Todd entitled to indemnity from Tur-

bine Service and Gonzales, and held no exclusion of the in-

surance policies of Travelers or Sentry covering the sub-

contractors relieved those insurers from liability for

damages caused by the subcontractors.

All of the parties, except the insolvent Turbine Ser-

vice, appealed. Oral argument in the appeal was heard on

February 1, 1982, and on April 29, 1982, the Court of Ap-

peals, Dyer, Circuit Judge for the Eleventh Circuit, sitting

by designation, held, inter alia, that:

(1) Turbine Service and Gonzales were required to in-

demnify Todd, but Turbine Service was not entitled to in-

demnity from Gonzales.

(2) The KATRIN’s Owners were entitled to at-

torneys’ fees and pre-judgment interest.

(3) Turbine Service’s and Gonzales’ insurers were not

excluded from liability for damage to the entire ship or

5

damages attributable to the ship’s ‘down time.”

The Travelers Insurance Company filed timely Peti-

tions for Rehearing and for Rehearing En Banc which were

denied. Travelers now seeks relief from.this Court.

REASONS FOR GRANTING WRIT OF CERTIORARI

THE COURT OF APPEALS’ AFFIRMANCE

OF THE TRIAL COURT’S AWARD OF AT-

TORNEYS’ FEES TO THE OWNERS OF THE

S/S KATRIN IS IN DIRECT CONFLICT WITH

THE APPLICABLE DECISIONS OF THIS

COURT.

This Court in Alyeska Pipeline Co. v. Wilderness

Society, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1945)

with regard to the propriety of an award of attorneys’ fees

to a prevailing litigant stated:

In the United States, the prevailing litigant is or-

dinarily not entitled to collect a reasonable at-

torneys’ fee from a loser. We are asked to fashion

a far-reaching exception to this ‘American Rule’”’;

but, having considered its origin and develop-

ment, we are convinced that it would be inap-

the manner and to the extent urged by

and by the Court of Ap-

peals.* 421 U.S. at 247

Bis, Destine Bie set forth eto Seening exvattons tn Gn

The Supreme Court recently reaffirmed its commit-

ment to the “American Rule’’ of non-recoverability of at-

torneys’ fees in Norfolk v. Western R. Co. v. Liepelt, 444

U.S. 490, 100 S.Ct. 755, 62 L.Ed.2d 689 (1980) [citing

Alyeska Pipeline Co., supra, with approval].

Moreover, the Fifth Circuit’s disregard of the

American Rule brings it squarely in conflict with the Court

of Appeals for the District of Columbia Circuit. In refusing

to award attorneys’ fees to the prevailing litigant, the

court in Nationwide Bldg. Maintenance, Inc. v. Sampson,

559 F.2d 704 (D.C. Cir. 1977) stated:

For our purposes, the most significant aspect of

Alyeska is the Court’s statement that its holding

was based not on any evaluation of the merits of

the rule barring attorney fees, 421 U.S. at 270, 95

S.Ct. 1612, but only on its conclusion that a rule

so deeply rooted in court practice and congres-

sional policy should not be departed from by

courts, acting on their own, without legislative

(Footnote 1 continued)

In more recent cases, we havi reiterated the same theme:

while as a general rule attorneys’ fees are not to be awarded

to the successful litigant, the courts as well as the

Legislature may create exceptions to that rule. See Mills v.

Electric Auto-Lite Co., 396 U.S. at 391-392; Hail v. Cole, 412

US., at 5. Under the judgment exceptions, attorneys’ fees

have been assessed, without statutory authorization, for

willful violation of a court order, Toledo Scale Co. v. Com-

puting Scale Co., 261 U.S. 399, 426-428 (1923); for bad faith

or oppressive litigation practices. Vaughan v. Atkinson, 369

U.S. 527, 530-531 (1962); and where the successful litigants

have created a common fund tor recovery or extended a

substantial benefit to a «ia>s. Central Railroad & Banking

Co. v. Pettus, 113 U.S. 116 (1885); Mills v. Electric Auto-Lite

Co., supra. 421 U.S. at 275.

7

guidance. Jd. at 271, 95 S.Ct. 1612. Alyeska, thus,

does not condemn the awarding of attorney fees

to successful litigants per se; it only admonishes

the courts not to take the initiative in fashioning

‘drastic new rules with respect to‘a policy matter

that Congress has reserved for itself’ Jd. at 269,

95 S.Ct. at 1627. 559 F.2d at 709.

The Trial Judge rejected the defendants’ arguments

that the proper measure of damages in this case was a tort

measure of damages and instead awarded the Owners

damages for breach of contract. The Trial Judge determin-

ed that the “proper measure of damages to be awarded

Shipowners in this case’’ was:

..the sum of the cost of repairs to return the LP

turbine to the state it would have been in had the

contract been performed, necessary expenses

during down time of the vessel, loss of profits

during down time ... and costs and attorney's

fees. (citations omitted.] (emphasis supplied). 467

F.Supp. at 1304.

The Fifth Circuit affirmed the award of attorneys’

fees to the Owners and stated:

{in this circuit foreseeable damages recoverable

for breach of warranty of workmanlike perfor-

mance include reasonable attorneys’ fees and

litigation expenses. [citing: Strachan Shipping

Co, v. Koinklyke Nederlandsche, 324 F.2d 746

(5th Cir. 1963); McCawley v. Ozeanosun Com-

pania, Maritime, S.A., 505 F.2d 26 (5th Cir. 1974);

548 F.2d 581 (5th Cir. 1977)]. Slip Op. at 2163.

However, the cases relied upon by the Fifth Circuit

to uphold the award of attorneys’ fees and costs to the

Owners are totally inapposite; they all involve the award of

attorneys’ fees and litigation expenses to parties forced to

defend actions brought by third-parties to recover

damages for personal injuries. These cases stand only for

the proposition that damages recoverable for breach of

warranty of workmanlike performance include the costs of

defense of an action for personal injuries (1) caused by that

breach and (2) brought by a person not a party to the con-

tract.

The instant case is a suit by the Owners for breach of

contract. The owners are claiming damages in their own

name, and not as a result of being forced to defend a claim

for personal injuries asserted against them by some third

party. The contract between the KATRIN’s Owners and

Todd contained no specific provision in regard to the

recovery of attorneys’ fees for the breach thereof, although

such a provision presumably would have been enforced.

The parties, specifically found by the Trial Court at 467

F.Supp. 1274 to have been of equal bargaining power,

chose not to address the issue of attorneys’ fees in their

contract. The absence of such a provision should result in a

presumption that the issue was considered and rejected.

The Fifth Circuit’s sanctioning of the Trial Court’s con-

trary holding constitutes an impermissible exercise in con-

tract reformation under the guise of interpretation, as well

as disregard for this Court’s decision in Aleyska, supra.

There is only one conclusion that can be drawn from

the Fifth Circuit’s sanction of the award of attorneys’ fees

to the Owners. That is, in all future contract disputes, the

Fifth Circuit, in contravention of this Court’s mandate of

the application of the “American Rule,” will award at-

torneys’ fees to a disgruntled party who did not have the

business acumen to provide specifically for attorneys’ fees

in his contract and who manufactures a claim for breach of

commercial warranty.

THE COURT OF APPEALS’ AFFIRMANCE

OF THE TRIAL COURT’S AWARD OF IN-

DEMNITY TO THE NEGLIGENT TODD

SHIPYARDS AND OF THE TRIAL COURT’S

DENIAL OF INDEMNITY TO TURBINE SER-

VICE FROM GONZALES IS IN DIRECT CON-

FLICT WITH THE APPLICABLE DECI-

SIONS OF THIS COURT, AND DENIES PETI-

TIONER EQUAL PROTECTION OF THE

LAW

The purchase orders issued by Todd to Turbine Ser-

vice, which the Trial Court found at 467 F.Supp. 1274 to be

the ‘‘best reflection of the contract between [them],”’ con-

tained the following clause:

INDEMNIFICATION AND INSURANCE—

Seller [Turbine Service] shall be liable for the loss

coverage on all such property and to indemnity

and save Buyer harmless from any and all judg-

The Fifth Circuit's decision contains two completely

contrary conclusions with regard to the nature and effect

of this clause, neither of which is cerrect. The Fifth Circuit

upheld the Trial Court's finding that the “sole negligence”

exemption in the “red-letter clause” in the contract bet-

ween the Owners and Todd was inapplicable and stated:

Understandably, Todd has not favored us with

any authority to support its position. (emphasis

supplied.) Slip Op. at 2158.

However, in upholding the Trial Court’s award of in-

demnity from Turbine Service to Todd on the basis of Tur-

bine Service’s breach of its implied warranty of

workmanlike performance, the Fifth Circuit stated with

regard to the same clause:

..the ‘Indemnification and insurance’ clause in

the Purchase Order does not speak to the indem-

This is perfectly clear by a mere readir 4 of the

clause. (emphasis supplied.) Slip Op. ¢. 2164.

As to the latter finding, a “mere reading of the

clause’’ should have revealed that it is not limited to mere-

ly requiring Turbine Service to secure and maintain in-

surance on Todd's “property or employees.” Turbine Ser-

vice agreed also:

The former finding that Todd “covered itself by pro-

viding for a full indemnity from its subcontractor Turbine

Service”’ is also erroneous for the indemnity provision con-

tains no reference to indemnity for the consequences of

Todd's own negligence. Prior to the Fifth Circuit's decision

in the instant case, it was thought well-settled that an in-

tent to indemnify the indemnitee for the consequences of

his own negligence would not be inferred; the contract

must clearly and specifically so provide. M.O.N.T. Boat

Rentals, Inc. v. Union Oil Co., 613 F.2d 576 (5th Cir. 1980);

Continental Cas. Co. v. Canadian Universal Ins. Co., 605

12

F.2d 1340 (5th Cir. 1979), cert. den. 455 U.S. 929 (1979);

Cole v. Chevron Chem. Co., 477 F.2d 361 (5th Cir. 1973),

cert. den. 414 U.S. 978 (1973).

Further, although the Fifth Circuit conceded, as did

the Trial Court, that the purchase orders issued by Todd to

Turbine Service contained an express warranty that:

...all [Turbine Service's] goods and labor were to

be merchantable and fitting in all respects for the

purpose for which intended; and that Turbine

Service's guarantee of «'] material, equipment,

and labor would be coextensive with Todd's

guarantee to its customers, Slip Op. at 2164, n.8,

the panel nevertheless held:

[t}he district court properly relied upon breach of

demnification from Turbine Service. See Parfait v.

Jahncke Service, Inc., 484 F.2d 296, 302 (5th Cir.

1973); Garner v. Cities Service Tankers Corp., 456 %

F.2d 476, 481 (5th Cir. 1972); Waterman Steam-

ship Corporation v. David, 353 F.2d 660, 665 (5th

Cir. 1965); cert. den., 384 U.S. 972, 86 S.Ct. 1863,

16 L.Ed.2d 683 (1966). (emphasis supplied.) Id.

The Fifth Circuit in so holding has apparently revers-

ed this Court’s holding in Weyerhauser S.S. Co. v. Nacirema

Operating Co., 355 U.S. 563, 78 S.Ct. 438, 2 L.Ed. 491

(1958), as well as the longstanding precedent in the Fifth

Circuit, succinctly stated in Continental Casualty Co. v.

Canadian Universal Insurance Co., supra:

355 U.S. 563, 569, 78 S.Ct. 438, 442, 2 L.Ed. 491,

495; Evans v. Triple R Welding & Oil Field

Maintenance Corp., 5th Cir. 1973, 472 F.2d 713,

ed by the express provisions of the contract. (em-

phasis partially added.) 605 F.2d at 1347-48.

More importantly, however, is the fact that even ab-

sent any express indemnity agreement between Todd and

Turbine Service, an indemnity award on the basis of breach

of an implied warranty of workmaniike performance is in-

appropriate under the facts of this case.

14

The Fifth Circuit upheld the Trial Court’s award of

indemnity under the Ryan Doctrine. [Ryan Stevedoring

Co. v. Pan Atlantic Steamship Co., 360 U.S. 124, 76 S.Ct.

232, 100 L.Ed. 133 (1956)}. However, in the recent case

Agrico Chemical Co. v. M/V BEN W. MARTIN, 664 F.2d

85 (5th Cir. 1981), the Fifth Circuit articulated a contrary

position with regard to the “withered” Ryan Doctrine:

to serve special problems in maritime law aris-

ing from the absolute and nondelegable duty of

seaworthiness which general maritime law im-

poses upon all vessel owners.’ Hobart v. Sohio

Petroleum Co., 445 F.2d 435, 438 (5th Cir.), cert.

den. 404 U.S. 942, 92 S.Ct. 288, 30 L.Ed.2d 266

(1971). ‘[T\he predicate of the doctrine is the

shipowner's absolute liability under

nondelegable

the seaworthiness guaranty.’ Id. at 439. Therefore,

in Hobart, we refused to extend Ryan's indemnity

to protect a party who ‘owes no more than or-

dinary duty to act as would a reasonably prudent

person.’ 445 F.2d at 440 (in that case, the shipper,

pops Scart gpinape com a data bd

the warranty of workmanlike performance does

not ipso facto establish a right to indemnity

by the vessel.’ F. J. Walker Ltd. v. Motor Vessel

'LEMONCORE’. 561 F.2d 1138, 1148 (5th Cir.

1977). (emphasis supplied.) 664 F.2d at 86.

15

Moreover, as noted iin Fairmont Shipping Corp. v. Chevron

International Oil Co., Inc., 511 F.2d 1252 (2d Cir. 1975):

Hobart was one of a series of Fifth Circuit cases

steadfastly refusing to extend Ryan indemnity to

situations other than those involving a ship-

owner's liability for unseaworthiness. [citing]

Smith Petroleum Service Inc. v. Monsanto

Chemical Co., 420 F.2d 1103, 1109 n.9 (5th Cir.

1970); Loffland Brothers Co. v. Roberts, 386 F.2d

540, 549 (5th Cir. 1967), cert. denied, 389 U.S.

1040, 88 S.Ct. 778, 19 L.Ed.2d 830 (1968); Cen-

traal Stikstof Verkoopkanter, N. V. v. Walsh

Stevedoring Co., 380 F.2d 523, 529 (5th Cir.

1967); Ocean Drilling & Exploration Co. v. Berry

Brothers Oi.jield Service, Inc., 377 F.2d 511, 613

(5th Cir.), cert. denied, 389 U.S. 849, 88 S.Ct. 102,

19 L.Ed.2d 118 (1967). 511 F.2d at 1257, n.7

In the instant case, Todd was under no such absolute

and nondelegable duty with regard to its contract with the

owners. Furthermore, Todd was found by the Trial Court

and the Fifth Circuit to have negligently breached its con-

tract with the owners, not merely vicariously responsible

to them for Turbine Service's negligence. Therefore, since

the ‘‘predicate”’ of absolute, nondelegable liability without

regard to fault is absent, any award of indemnity under

Ryan is completely without support in the law.

The Agrico Court recognized that, ‘Proportional

damages based on degrees of fault is now the general rule

for damages in maritime property damage cases.”’ 664 F.2d

at 86.

16

Travelers submits that, as in Agrico, disputes such as that

between the instant parties ‘“‘are best accommodated by a

straightforward application of the usual comparative fault

system.”’ Id.

The Trial Court's decision granting Todd indemnity

against Turbine Service avoided reference to the contrac-

tual indemnity provisions of Todd’s Purchase Order con-

tract and instead relied on what was deemed to be an im-

plied warranty of diligent and workmanlike performance.

Cn the other hand, the Trial Judge relied upon a “release”

in favor of Gonzales to deny Turbine Service's claim for in-

demnity based upon a breach of the warranty of diligent

and workmanlike performance by Gonzales. 467 F.Supp. at

1303-1304. This so-called release was presented by Ron

Hoover of Gonzales to Mr. Sheridan at the conclusion of

Gonzales’ welding work but before redelivery of the tur-

bine parts. The release was not supported by any addi-

tional consideration from Gonzales and Jon Sheridan had

no authority from Turbine Service to enter into contracts

containing exculpatory clauses. (Reconstructed Woods’

testimony, certified March 24, 1981). Mr. Wood's

testimony that Sheridan had no authority to enter any

such contracts was not refuted; no other evidence was of-

fered on this point during the trial.

2 “Gonzales Manufacturing & Industrial Machine Works, Inc.

makes no warranty as to the suitability of such repairs and accepts no

lability for any possible failure in service or consequential damage aris-

ing from such failure."’ (emphasis added.)

17

Not only did the Fifth Circuit’s sanction of the

District Court’s approach to indemnity for Todd and Tur-

bine Service demonstrate an unequal treatment of these

two parties, but it also constitutes failure to apply

established principles of contract construction and inter-

pretation of what was considered to be a binding agree-

ment between these two parties.

Exculpatory clauses are not favored by the courts.

See, e. g. Bisso v. Inland Waterways Corp., 349 U.S. 85

(1955) and Twenty Grand Offshore, Inc. v. West India Car-

riers, Inc., 492 F.2d 679 (5th Cir. 1974). Louisiana law re-

quires that exculpatory clauses and/or limitations of war-

ranties meet certain standards. First, they must be ex-

press; second, they must result from mutual consent or a

meeting of the minds; third, they must be made in good

faith by the party relying upon them; and fourth, they

must not contravene public policy. FMC Corp. v. Continen-

tal Grain Co., 355 So.2d 953 (La. App. 4th Cir. 1977). Ad-

miralty law also requires that exculpatory clauses of con-

tracts be strictly construed. See, e.g., M.O.N.T. Boat Ren-

tal v. Union Oil, etc., supra, and Jig The Third Corp. v.

Puritan Marine Insurance Underwriters Corp., supra.

The Trial Court held that the river trial breakdown

was caused by “failure of a weld in one or two row 14 rotor

blades causing the fracture of the blades at the weld’’. 467

F. Supp. at 1279. Gonzales’ negligence was based upon im-

proper and inadequate welds and welding procedures. 467

F.Supp. at 1289-91.

18

When the exculpatory clause of Gonzales’ last

minute “‘release”’ is construed in accordance with the prin-

ciples cited in the preceding cases, it is clear that the ex-

culpation for Gonzales’ negligence in welding is not

covered. (See 467 F.Supp. at 1303, n.29). The release merely

states that Gonzales “makes no warranty as to the

suitability of such repairs.’’ Therefore, Gonzales’ release

only extended to the question of whether or not welding

rotor blades was a suitable repair. It did not attempt to ex-

cuse Gonzales for negligently welding blades even if

welding rotor blades was not a suitable repair. This point is

especially important in this case since the District Court

found that negligently welded blades were the cause of the

river trial breakdown.

The refusal to grant Turbine Service indemnity

against Gonzales is completely inconsistent with the ex-

isting principles of implied warranty of workmanlike per-

formance which do apply between those parties because

Turbine Service’s agreements with Gonzales were all oral.

No express contractual indemnity ever existed between

Turbine Service and Gonzales. The District Court’s deci-

sion denying Turbine Service indemnity was therefore er-

roneous and should be reversed as a mattcr of law.

The Fifth Circuit's decision to ignore, or at least dis-

count, the existence of the express indemnity provision in

the contract between Todd and Turbine Service rendered

moot the issue of the watercraft exclusions in the policies

issued to Turbine Service by Travelers. However, Travel-

19

ers believes that this Court has not choice but to correct

the error, alter the Fifth Circuit’s decision to conform with

the principles espoused in Weyerhauser Steamship Co.,

supra, and Continental Casualty Co., supra, and give effect

to the express indemnity provision in that contract.

Once it does, Travelers’ watercraft policy exclusion

defense will relieve Travelers from liability for virtually all

of the Shipowners’ claims. The insuring agreements of

Travelers’ Contractual Liability Endorsement provided,

inter alia:

...the following exclusions also apply to contrac-

tual liability assumed by the Insured under any

agreement relating to construction operations:

(16) to bodily injury or property damage arising

out of construction, maintenance or repair of

watercraft or unloading thereof. (emphasis

added.)

This watercraft exclusion is clear and free of all am-

biguity. All of the services “for” the KATRIN performed

by Turbine Service pursuant to its contract with Todd con-

stituted “the maintenance and repair of a vessel.”

Travelers assumed no liability for those damages.

The only basis for indemnity from Turbine Service to

Todd is under the repair contract. However, the Travelers’

insurance policy explicitly excluded liability arising out of

Turbine Service’s contract if the contract related to the

repair or maintenance of a vessel.

With regard to the other Travelers’ policy exclusions,

it should be noted that the Fifth Circuit’s affirmance of the

Trial Court’s refusal to give effect to exclusions (k), (I) and (n)

and its restrictive application of exclusion (o) are also incor-

rect, as they are in direct conflict with Louisiana law. As

stated in Breaux v. St. Paul Fire & Marine Insurance Com-

pany, infra, Louisiana courts “recognize that liability

policies are not Performance Bonds.”

Williamson v. Dick Alevine d/b/a Dick's Garage and

Truck Sales, Slip Op. No. 82-32, (La. App. 3d Cir. July 2,

1982),2 and Breaux v. St. Paul Fire & Marine Insurance

Company, 345 So.2d 204 (La. App. 3rd Cir. 1977)4 would ex-

clude from Travelers’ coverage the Owners’ claims for loss

of use and for the entire cost of repairing the LP turbine.

Further, the language of Travelers’ exclusion (n) (er-

roneously referred to as the “sistership exclusion’’) if

analyzed with a little common sense, rather than viewed

with slavish adherence to the gospel according to Long,®

should have revealed to the Fifth Circuit that this exclusion

is not limited to “recalls” but rather unambiguously ex-

cludes coverage for damages caused by and to the defective

product itself.

3 Reaffirming Vobill Homes, Inc. v. Hartford Accident & Indemnity

Co., 179 So.2d 496, (La. App. 3rd Cir. 11965), writ. ref 248 La. 698, 181

So.2d 398.

4 While also reaffirming Vobill Homes, supra, note 5, this case

“adopts” Hartford Accident & Indemnity Co. v. The Case Foundation

Co., 10 Ill. App. 3d 115, 294 N_E. 2d 7 (1st Dist. 1973).

5 R. Long, The Law of Liability Insurance (1981) cited at Slip Op.

page 2167.

21

THE COURT OF APPEALS’ AWARD, SUA

SPONTE, OF PRE-JUDGMENT INTEREST IS

IN DIRECT CONFLICT WITH THE DECI-

SIONS OF THE SECOND AND NINTH CIR-

CUITS ON THAT ISSUE.

In awarding the Owners pre-judgment interest, the

Fifth Circuit noted that the District Court had awarded

post-judgment interest and stated:

No peculiar circumstances are apparent from the

record which would permit the exercise of discre-

tion not to award pre-judgment interest. On re-

mand, the district court will be directed to

calculate and award pre-judgment interest. See

International Paint Co., Inc. v. M/V MISSION

VIKING, 637 F.2d 382, 386 (5th Cir. 1981). (em-

phasis supplied). Slip Op. at 2163.

That finding is, in itself, incorrect. First, it must be

assumed that the District Court was intimately more

familiar with the 83 volumes of the record of this

“maritime blockbuster,” as the Fifth Circuit termed the

case. Slip Op. page 2151. This greater familiarity alone

should have warranted affirming the Trial Court’s refusal

to award pre-judgment interest.

Second, the issue of pre-judgment interest was fully

briefed by the parties at the request of the Trial Court.

After due consideration of the issue, the Trial Court denied

the Owners recovery of this claimed element of damages in

an exercise of its “broad discretion.” See, e.g., Havis v.

Petroleum Helicopters, Inc., 664 F.2d 54 (5th Cir. 1981) and

citations therein at 55; Esso International, Inc. v. S.S.

CAPTAIN JOHN, 443 F.2d 1144 (5th Cir. 1971.

Third, in Mecom v. Levingston Shipbuilding Co., 622

F.2d 1209 (5th Cir. 1980) the Fifth Circuit stated:

Several factors may serve as an adequate basis

for awarding interest only from the date of judg-

ment. Among them are..., the existence of a ge-

nuine dispute regarding ultimate liability or the

of the factual and legal issues to be

resolved, United States v. Cook, 5 Cir. 1972, 463

F.2d 123, and judgment in an amount substan-

tially less than that claimed. Kawasaki Zosensho

v. Cosulich Societa Triestina Di Navigazione, 5

Cir. 1926, 11 F.2d 836. (emphasis supplied.) 622

F.2d at 1210.

All of these enumerated factors are present in this case,

and are apparent from the record. Accordingly, it was clear

error for the Fifth Circuit to hold, in essence, that the Trial

Court abused its discretion in denying the Owners’ claim

for pre-judgment interest. At the very least, instead of

ordering the Trial Court to award pre-judgment interest,

the Fifth Circuit should have remanded the issue to the

Trial Court, as well as the others it remanded, for specific

findings with regard to the denial.

Most important, however, is the fact that the Fifth

Circuit’s decision is in direct conflict with the decisions of

the Second and Ninth Circuits on the issue of pre-judgment

interest in admiralty cases. Both Circuits adhere to the rule

that the decision with regard to entitlement (or non-

entitlement) to pre-judgment interest is committed to the

broad discretion of the trial judge. See, e.g. Grace Circle

Line Sightseeing Yachts, Inc. v. Storbeck, 325 F.2d 338 (2d

Cir. 1963); Afran Transport Co. v. THE BERGE CHIEF,

285 F.2d 119 (2d Cir. 1960); Grace Line, Inc. v. Todd

Shipyards Co., 500 F.2d 361 (9th Cir. 1974). Those Courts

of Appeals correctly refuse to disturb the findings of trial

courts with regard to pre-judgment interest unless there is

present an abuse of discretion. See, Grace Circle Line

Sightseeing Yachts, Inc. v. Storbeck, supra; Afran

Transport Co. v. THE BERGE CHIEF, supra; Grace Line,

Inc. v. Todd Shipyards Co., supra. The Fifth Circuit has ap-

parently chosen a conflicting standard of review with

regard to this issue and this conflict in the Circuit Courts

of Appeals must be resolved by this Court.

CONCLUSION

For the foregoing reasons—as well as any additional

reasons presented by other parties who may seek certiorari

to review these portions of the Fifth Circuit's decision—the

Petition for Certiorari should be granted.