# Petition — Sentry Insurance v. Todd Shipyards Corp.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1982
- **Citation:** 459 U.S. 1036

## Text

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.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385009_0871%3A1. Public record. Not legal advice.