Petition for A Writ of Certiorari — Alcoa Steamship Co. v. Charles Ferran & Co.

Supreme Court brief1968

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OPINION BELOW —

The opinion of the United States Court of Appeals for '

* the Fifth Circuit! is reported at 383 F. 2d 46, 1967 AMC

2578 and the order of that court denying rehearing? is _

unreported. The trial court, the United States District —

Court for the Eastern District of Louisiana, New Or-

leans Division, rendered an original opinion’ at 242 F.

Supp. 962, 1966 AMC 1029 which was modified by its

opinion on rehearing4 ee at 251 F. sine 823,

1966 AMC 1049.

JURISDICTION

The judgment of the Court of Appeals was entered on

September 12, 1967 and a petition for rehearing en banc

- was timely filed by petitioner herein. The order deny-

ing rehearing was entered on April 11, 1968.

The jurisdiction of this Court.is invoked under 28

USCA 1254(1).

QUESTIONS PRESENTED

This is a suit in admiralty on a maritime claim and

the decision presents the following questions:

1. Whether a clause limiting liability for negligence,

omitted from the express terms of the agreement of

‘Appendix A, infra. -

2Appendix B, infra.

sAppendix C, infra.

4Appendix D, infra. wr ™

> as ath ala a .

the parties, may be incorporated in that agreement by. ©

implication.

2.° Whether the public policy of thie United States,

as enunciated by this Court, precludes the ship repair

yards of the United States, which possess a statutory

monopoly on repairs to American flag vessels, from

exacting such clauses limiting liability for negligence

| from ship owners who are required to utilize their serv-

ices:

3. Whether such a clause limiting liability for negli-

gence is ‘to be construed, beyond its express terms, to

. grant such limitation to parties not named therein.

‘STATUTES INVOLVED |

The statutory authorities involved here are 19 USCA

257, imposipg a 50% duty on repairs to American flag

vessels performed. abroad, and. the Louisiana Direct

Action Statute, La. R. S. 22: "655 enabling injured parties

to proceed directly against ‘a tort feasor’s liability in- ~

surer. Both statutes are printed as Appendix E, infra.

STATEMENT OF THE CASE -

The respondent, Ferran, is a ship repair contractor

at New Orleans, Louisiana which entered into an oral

agreement to perform certain repairs to petitioner’s

vessel, the SS ALCOA CORSAIR, at New Orleans. Both

courts below found that Ferran’s negligence in per-

. forming these repairs caused a fire which resulted in

approximately $1,000,000 damages being sustained by

. RO Pe Ae a

the vessel under repair. The remaining respondents are

the Ferran liability insurers who had issued insurance

_ policies providing liability. insurance coverage to

$1,000,000.

The oral agreement for the performance of the re-

pairs in question did not in any manner include, by

reference or otherwise, any limitation on Ferran’s

liability for negligence. The Court of Appeals for the

' Fifth Circuit, however, implied a limitation clause in

the agreement based on the theory that since Ferran

had performed prior repairs on petitioner’s vessels

which ultimately had been invoiced on a billhead form ~

‘which included the limitation clause, this clause was

to be “implied” in all contracts between these parties.

Suit had been filed against Ferran and against its

liability insurers pursuant to the provisions of the

Louisiana Direct Action Statute, La. R.S. 22:655. The

limitation clause printed on the Ferran billhead forms

did not name the Ferran liability insurers as parties”

whose liability was limited thereby but the decision of

the court below, nevertheless, allowed those parties to

receive the benefit of the limitation which the court

had incorporated, by implication, in the contract of the '

parties. = i

_ ARGUMENT

The decision below plainly is at odds with the deci-|

sions of this Court striking’ down as invalid under

similar circumstances clauses providing for exonera-

tion from or limitation of liability for negligence. As a

Ne cette aE in AS MANE IS SRE.

result of its failure to recognize the underlying public

policy established by the decisions of this Court, the

Court of Appeals has incorporated by implication a

limitation clause which was not a part of the agree-

‘ment entered into between the parties, has extended

that clause to afford protection to parties not included

in-its terms and has upheld the validity of the clause

_ where the party- obtaining limitation of its liability for

its negligence is a member of a class which possesses

and ‘exercises a statutory monopoly under which the

class members uniformly seek to impose such limita-

_ tion clauses on the parties forced to deal with them, as

a condition of obtaining the nae required by their

vessels. :

As nature abhors a vacuum, so have the decisions of

this Court established the abhorrence of our laws for

contractual provisions denying or limiting liability for

negligence. In no other area of admiralty law can a

longer and more unbroken chain of decisions of this

Court be found than those striking down such exonera-

tion and/or limitation clauses. From the “both to

blame” collision clause of the. ESSO BELGIUM — NA-

THANIEL BACON case," to the efforts by liability in-

‘surers to bring themselves within the purview of the

Limitation of Shipowners’ Liability Act,® to the Bisso

and related decisions,” to the efforts by stevedore con-

tractors to include themselves within the carriers’ stat-

sUnited States vs. Atlantic Mutual Insurance Company, 343 US 236.

6Maryland Casualty Company vs. Cushing, 347 US 409. —

7Bisso vs. Inland Waterways Corporation,.349 US 85; Boston: Met-

als Co. vs. SS WINDING GULF, 349 US 122; United States

. vs. Nielson, 349 US 129.

eh II AE il on sy Th

utory and bill of lading limitations of liability for dam-_

age to “packages”® and finally to the reaffirmation

of its rejection of the tower’s release from liability

clauses of Bisso in the Dixilyn case,® the-decisions of

this Court have created an entire and comprehensive

body of law governing such clauses. The Court of Ap-

_peals for the Fifth Circuit, in the present case, con-

tinues in its refusal to adhere to the decisions of this

Court, which refusal had been manifested previously in

the Bisso and Dixilyn cases and in its decision in Collins

& Co. vs. Panama R. Co.'° .

ras

oY Mathes a

The Fifth Circuit’s Doctrine of Inclusion by

Implication is Diametrically Opposed to this

Court’s Holdings that Such Limitation/Exon-

eration Clauses must be Strictly Construed.

The decision.of the Fifth Circuit notes" that during

the course of prior dealings between the parties, Fer-

_ran normally would perform repairs and after their

completion forward an invoice which ‘‘was the only

document to contain the so-called ‘Red Letter’ clause”.

Failure to protest the receipt of these billhead forms —

which, when they were received were moot and mean-

ingless as to all prior repairs performed by Ferran —

8Herd & Co. vs. Krawill Machinery Corp., 359 US 297.

9Dixilyn. Drilling Corp. vs. Crescent Towing & Salvage Co., 372

_US 697. .

10197 F. 2d 893, as overruled by this Court in Herd & Co. vs.

Krawill Machinery Corp., footnote 8, supra.

11Appendix A, infra. ;

was characterized by the court as “acquiescence” in

the “continued presence” of the clause on the invoices.

This, by the decision of the Fifth Circuit was “suffi-

_ cient to put Alcoa on full notice that the clausé was

implied in every repair contract”. The philosophy and

legal theory underlying this decision cannot be recon-

ciled with the repeated decisions ‘of this Court striking

down limitation and exoneration clauses.

The inquiry here, of course, is whether such limita:

tion of liability clauses. are contractual provisions of

such a beneficent nature as to permit the courts to con-

strue them freely and liberally so as to find their very

existence by implication. The answer, an emphatic

“NO”, has been unequivocally furnished by the deci-

- sions of this Court. As stated by Mr. Justice Frank-

furter in his disseriting opinion in the Bisso case:'2

‘“* * * Since negligence is the ordinary basis for

liability, relief from it should be clearly agreed

upon between the parties and ambiguity should

not leave the extent of such relief in doubt. Ac-

cordingly provisions for exemption are closely

scrutinized by courts and doubt either as to

the existence of the provision of exemption or

its scope are resolved against relief from re-

sponsibility ** *.”-

‘

12Supra, footnote 7, 349 US 85, 100. In the same vein Justice Frank-

furter’ in his dissent in Boston Metals Co. vs. SS WINDING

GULF, 349 US 122, 124 noted that release’ was not to be al-

lowed “unless the clarity of the language used expresses such

to be the understanding of the contracting parties” and “un-

less the clause wy requires this result’.

7 °

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oa Ff

- Again in Herd & Co. vs. Krawill Machinery Corp.,'

this Court held that :

“* * * Any such rule of law, being in deroga-

~tion of the common law, must be strictly con-

strued for ‘[n]o statute is to be construed as

altering the common law, farther than ‘its

words import. It is not to be construed as mak-

ing any innovation upon the common law which

it does not fairly express’. * * * Similarly, con-

. tracts purporting to grant immunity from, or

limitation of, liability must be strictly con-

strued and limited to intended beneficiaries, for

they ‘are not to be applied to alter familiar —

rules visiting liability upon a tort feasor for the

consequences of his negligence, unless the

clarity of the language used expresses such to

be the understanding of the contracting par-

ties’.’’'4

In. contrast with these statements of the applicable.

law we find that the Fifth Circuit has allowed the

limitation cluase to be “implied in every repair con-

tract” between these parties on the most tenuous of

grounds possible. These, specifically, are the fact that

the ship repair industry in the United States generally

seeks to extort such clauses from contracting ship-

owners coupled only with the fact that in the course of

prior repair contracts, Ferran had forwarded billheads

containing the “Red Letter” clause — where the re-

13Supra, footnote 8, 359 US 298, 304-305,

14Citations omitted. : ‘ 66

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pairs had-been performed without incident and without

giving rise to any circumstances which would have

caused the clause to come into operation or otherwise

to receive consideration by petitioner.'® ;

® The Fifth Circuit Has Refused to Follow the

Public Policy Considerations Enunciated in

this Area by the Decisions of this Court |

We believe that the decision of the court below and

its error-can best be characterized by its own language

in which it states that “no overwhelming public policy

requires” it to declare the limitation invalid. We frank-

-ly do not know what would constitute, in the eyes of

the court below, an““overwhelming” public policy con-

Sideration which would absolutely “require” -it to con-

clude that the clause was invalid. We submit, however, |

that under the decisions of this Court and the public

policy considerations enumerated therein, the clause

plainly is invalid here.

First, there is no doubt but that the clause, as stated

by the Fifth Circuit, ‘‘was standard in repair con-

tracts with other domestic shipyards”, 16 j.e., such yards

15The clause itself was printed in such a manner that the Second

Circuit, commenting on an identical. form of, “Red Letter”

clause, had noted that the repair yard “contrived the repro-

duction of it in such fine print as to be readable only by the ~

use of a magnifying glass’, California Tanker Company vs.

Todd Shipyards Corporation, 339 F. 2d. 426 (CA, 2, 1964). A

reproduction of the clause is contained in the transcript cgr-

tified by the Clerk of the Court of Appeals herein, p. 1790.

16Appendix A, infra.

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uniformly have sought to obtain its inclusion in their

contracts,plainly a monopolistic practice.

Purthetmers, since the ALCOA CORSAIR was an

American flag vessel, it was subject to a 50% duty on

' any repairs which were not performed in domestic

shipyards.'? This imposition of a 50% duty on foreign |

repairs obviously precludes the American flag shipown-

er, such as petitioner, from effecting its repairs other

than in the domestic yards. Having this statutory mo-

‘ nopoly, established in this record beyond cavil, the

‘shipyards in this country, in the language of the Fifth

Circuit, have caused the “Red Letter” clause to become

“standard in repair contracts with [such] domestic

‘ shipyards’’. All the monopolistic elements ‘of Bisso are

present here; if this is not sufficient to require the court ~

‘below to find that the clause contravenes public policy,

_-we can visualize no circumstances under which it

would find that such public policy considérations ex-

_ ist.

The Fifth Circuit’s Liberal Construction of the °

Limitation Clause to Include as Beneficiaries.

the Insurers of Ferran who were not named

therein is Directly Contrary to the Decisions of

this Court. . i

Once the court below had brought the limitation

clause into existence by its doctrine of implication,

1719 USCA 257, Appendix E, infra.

DE iat CIID RIED nig ER AER NE oO EO Nt a Aa Fen Gitte spdo Fad

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> : 11

presumably it was only a short step then to breathe

as much life as possible into its offspring by construing

_ its terms so as to include parties who plainly were

neither enumerated nor otherwise included therein. ‘

The.clause was one under which Ferran stated that

“we” limit ‘‘our” liability but said nothing about the

liability of its insurers. At the same time Ferran ob-

tained, for the. benefit of its customers,'® liability in-

surance _ of $1, 000,000. Quite obviously, had Ferran

sought to include its liability insurers ‘in the limitation

clause, this could have been accomplished simply by

‘stating that “we limit our liability and that of our

liability insurers” to the limitation figure. This was not

done. Under the express terms of the clause the,liabili-

ty insurers were not included until the Fifth Circuit, by

its most generously loose construction of the clause,

enabled them to come within its shelter.

The court. below, to reach this end, held that" the

limitation of the “Red Letter” clause was not a ‘“‘per-

sonal defense” under Louisiana law. Since “personal

_ defenses”? are defenses afising by operation of law,

’

(

teIt is well settled that a policy of liability insurance, under the

. Louisiana Direct Action Statute, is for the benefit of parties

injured in their dealings with the assured. Jones vs. Mid-South

Insurance Company 358 F. 2d 887 (1966), citing West vs.

Monroe Bakery, 217 La. 189, 46 So. 2d 122 (1950); Musmeci

vs. American Auto Ins. Co., 146 So. 2d 496 (La. App., 1962). As

stated by the dissent in Maryland Casualty Company vs. Cush- .

ing, footnote 6, supra, “Louisiana has tried to make certain

that all liability insurance will get to those for whose ‘pro-

tection it .was' purchased”. The statute expressly so provides:

“It is alsa, the intent of this Section that all liability policies

within their terms and limits are executed for the benefit of

* all injured persons . . . to whom the assured is liable”.

COSTE AES LAE PEL IET HIVE LIM 1

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i.e., “granted by law” as stated by the decision of the

Fifth Circuit, this obviously is correct but does not

support, in any manner, the conclusion reached by the

decision below.

The ‘“Red ‘Letter” clause is a contractual defense,

' the application of which-can be determined only on

the basis of the language and intent of the parties. Here

. the plain and express language of the limitation clause

- did not pretend to include the lability insurers whose

liability remained limited ‘only to those limits which. -

were established by their. policies of insurance. Fur-

ther, the very reference to Louisiana law in this area

dealing with a maritime contract manifestly is erro-

neous and certainly the gratuitous and unsupported.

statement that “an analysis of this issue on the general

maritime law yields the same results” can.add nothing

to this portion of the decision.

“ 5 de

In the language of the Herd decision, the Ferran

underwriters, in fact, find themselves in a situation

where “no statute has limited: [their] liability, and

[they were] not a party to nor a beneficiary of the con-:

tract * * * and. hence [their ] seared was not limited

by that contract.'®

s CONCLUSION |

As stated by Mr. Justice Harlan ,2°- “certainty in the

law governing commercial transactions of this kind is

an overriding conaitoraten which would not be pro-

19Herd & Co. vs. Krawill seeietee Corp., feotnote 8, supra.

20In the concurring opinion in the Dixilyn case, footnote 9, supra.

cece elie: HO a OE a PLEO hat Shes SA A lS ss A

_ 23.

_ moted by opening the Bisso rule to indeterminate ex-

ceptions”. This is precisely the result which has been

obtained by the Fifth Circuit in pursuing its own policy

of dealing with release and limitation clauses on'the

basis of a. liberality of construction ahd application

which cannot be reconciled with the decisions of this.

Court. For the foregoing reasons we submit that a writ

of certiorari should be granted herein and that the

decision of the court below should be reversed by this

Court, to avoid conflict one confusion in this important a

area of law.

' Respectfully submitted,

BENJAMIN W. YANCEY

‘EDWARD S. BAGLEY

FRANCIS EMMETT

Attorneys for Petitioner,

. Alcoa Steamship Company,

Inc.

2141 International Trade

Mart Bldg.

New Orleans, Louisiana 70130,

TERRIBERRY, RAULT, CARROLL,

YANCEY & FARRELL

Of Counsel

Pee eli hb

'14

CERTIFICATE /

I, Benjamin W. Yancey, a member of the bar of this

Court, do hereby certify that I have this day servéd a

copy of the above and foregoing application to respond-

‘ ents’ counsel of record, Messrs. George B. Matthews

and Leon Sarpy, by mailing a copy thereof, postage pre-

‘paid,to them at their offices at New Orleans, Louisiana

on this day of June, 1968.

Benjamin W. Yancey

APPENDIX A

Opinion of the |

United States Court of Appeals

for the Fifth Circuit

(No. 23,555 — Title Omitted)

(September 12, 1967.)

Before BROWN, Chief Judge, MOORE* and BELL,

Circuit Judges.

MOORE, Circuit Judge: Alcoa Steamship Company,

Inc, (Alcoa) brought a libel in the United States Dis-

trict Court for the Eastern District of Louisiana be-

fore Hon. Frank B. Ellis, against Charles Ferran &

Co., Inc. (Ferran), a ship repair contractor, and Fer-

ran’s liability underwriters (providing coverage up to

‘ $1,000,000) to recover damages caused to Alcoa’s ship,

the SS Alcoa Corsair, by a fire allegedly caused by

‘the negligence of Ferran in executing certain repairs

to the Corsair’s boiler. The district court found Ferran

liable for the damages, but further found that the con-

tract to repair was governed by a “Red Letter” clause

limiting Ferran’s liability to $300,000. In addition, the

district court determined that the doctrine of avoidable

consequences was applicable and left it to a Special.

Master, appointed to resolve the issue of damages, to

assess the portion of damages (not recoverable by

Alcoa) attributable to Alcoa’s negligence in failing

*Of the Second Circuit, sitting by designation.

Sete Sead lai Nites t i

speedily to arrest the spreading of the fire. Ferran has

appealed from the district ‘court’s finding of negli- ©

gence chargéable to Ferran and from that court’s

failure to conclude that the unseaworthiness of the

vessel at the time of the accident should mitigate, if

not foreclose, Ferran’s accountability for damages;

Alcoa has appealed from the findings that (1) the “Red

Letter’? clause was a part. of the repair contract, (2)

the clause was not invalid as against public policy, and |

(3)- the ‘clause, if valid, was available as a defense to

° the underwriters. In addition, Alcoa urges that Fer-

ran did not sustain its burden of proof below in es-

tablishing any acts.of Alcoa’s negligence that would

bring the doctrine of avoidable consequences into

play. : |

The District Court’s findings:

‘The facts.as found by the district court are sub-

‘stantially as follows:' the Corsair arrived in New Or-

leans from Mobile, Alabama, on October 4, 1956, at

which time Alcoa’s. local port captain notified Ferran

of certain general repairs which the ship needed (as

will be discussed later, Ferran had traditionally done

most of the Corsair’s repair work since the vessel’s

commission in 1947). One of the repairs requested was

the rebricking of the floor of the fire box of the star-

board boiler. No work was done on the boiler on that

1The district court wrote two opinions reported in 242 F. Supp.

962 (E.D. La. 1965) and in 251 F. Supp. 823 (E.D. La. 1966); the

findings with respect to the historical facts reported in the

first opinion were not altered in the second opinion which

was directed chiefly at legal points raised tac the parties during

reargument. —~

day, but Ferran assisted the United‘States Coast Guard

and the American Bureau of Shipping on their inspec- .

tion of the Corsair, both agencies concluding at the.

. end of their inspection the following day that the ship’s

gear, equipment and fittings, including its fire-fight-

ing system, were in good order.

On the morning of October Sth, Ferran’s labor gang

boarded the Corsair to begin the work on the fire box.

. Some description of the boiler in question is necessary

in order to understand the sequence of events that

followed. The two identical boilers on the ship operate

on a combustion principle, burning a mixture of air

and oil, the oil being pre-heated to about 230 degrees F.

by circulation through a heating system. The oil de-

scends from a manifold pipe located along, the top of

the boiler through four “droplines” — coupled to

valves at both top and bottom of each — into four.

burners spaced along the side of the boiler, where it’

is atomized, mixed with gir (driven in by a forced air

blower) and sprayed into the firebox. The burner posi-

tions along the boiler are commonly known as regis-

ters, To gain access to the firebox, any one register

may be removed upon disconnecting its dropline at

both ends:and undoing a series of bolts, thus creating.

an. opening wide enough to pass materials through.

The registers are numbered arbitrarily one through

_four from forward to aft with numbers‘two and three

being lower on the boiler than the other two. On each

boiler there is also an access door which is large

enough to allow a man to enter the firebox.

PEER. Ce

' The district court found that to rebrick the firebox,

Ferran employees opened the access door and re-

moved register #3, thus by necessity removing the

#3 dropline by uncoupling it at its top and bottom,

At 9:30 in the evening of the 5th, the brickwork was

finished and the’ Ferran workers replaced the regis-

ter. At the point where the #3 dropline was to be re-

connected at its upper end, there was a male fitting

whose threads were worn and which should have been >

‘replaced by Ferran. A Ferran employee nevertheless

tightened the defective fitting. The job completed, the

Ferran employees cleaned up the area, took their tools

-.and left the ship, leaving instructions written on a

blackboard -for the night fireman to fire the burners

for short periods of time to dry the brickwork.

Alcoa’s fireman Gomez came on duty at 2:00 A.M.

and fired two of the burners, including the burner on

‘the #3 register, for 10 to 15 minutes, experiencing no

difficulty. At 4:00 A.M., fireman, Deale relieved Gomez,

all of the burners at that point being off. At about

4:20-A.M., Deale made preparations to contiriue the

rotation of the burners. Desiring to fire burner #3, he

circulated the oil to raise it to the proper temperature

' and probably turned on the forced draft blower (ap-

parently necessary to clear the firebox of any fumes

prior to the insertion of a lighted torch). He then lit a

torch, turned on the fuel valve at the top of dropline

#3, inserted the torch into the burner barrel, and began

to open the valve at the bottom of dropline #3. At this

point, hot oil hit him in the face and arm “from up

above” (Deale’s words), causing him to jump back,

thereby ‘withdrawing the torch from the burner, the

torch igniting the oil now gushing from the parted

’ defective fitting to which the #3 dropline had been con-

nected.

The intense heat of the fire prevented Deale from

reaching the fuel shut-off valve located, unfortunate-

ly, at the forward end of the boiler and thus totally

inaccessible once the fire had begun. Rushing to the

after end of the engine room, hoping to go through

the CO, room to reach the remote controls for the

fuel oil system, Deale found the door to the CO, room ,

locked. Although Deale nevertheless managed to es-

cape. from the engine room, he was unable to do any-

thing to control the fire. Night Relief Engineer

Moses, overcome by smoke and heat, was the sole

casualty of the fire, dying of asphyxiation on the gen-

. erator flat one level above the fire room.

The fire raged on for ‘some forty ‘minutes before.

the Corsair’s Chief Engineer, not on board at the

time the fire started, arrived on the scene and suc-

cessfully cut off the supply of boiler fuel feeding the

fire. There was evidence that the skeleton crew of

20 on board at the time of the fire were unable to

cut off the fuel supply due to their ignorance as to |

the location of the controls. The district court also

; found that two doors leading out of the engine spaces,

clearly marked “KEEP THESE DOORS ‘CLOSED

‘AT ALL TIMES”, were wide open at the time of the

fire, thus aggravating the extent of the damages caused

by the fire. The Corsair was badly damaged.

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The applicable law:

Alcoa seeks to recover $1,000,000 in damages, either

in contract on the theory that Ferran breached its

warranty of workman-like service, see Ryan Steve-

doring Co. v. Pan-Atlantic Steamship Corp., 350 U.S.

124, 133-34 (1956), or in tort on the theory that Fer-

ran was negligent in repairing the boiler. The ques-

tion immediately arises as to what law governs the.

various facets of Ferran’s repair contract with Al-

coa. This involves a two-step procedure: (1) Was the

contract maritime and, thus, subject to maritime

law? (2) If so, is the particular issue to be resolved

of such a local nature that state law should be ap-

plied? See Kossick v. United Fruit Co., 365 U.S.,731

(1961), Wilburn Boat Co. v.-Fireman’s Fund Ins. Co., .

348 U.S. 310 (1955). For even though admiralty suits

are governed by federal substantive and procedural

_ law, courts applying maritime law may adopt state ©

law by express or implied reference or by virtue of

the interstitial nature of federal law. See’ Wilburn,

supra, SS Philippine Jose Abad Santos v. Bannister,

335.F..2d 595 (5th Cir. 1964). ae

It is well settled that a contract to repair a vessel

is maritime. North American Steamship Co.. v. Hall

Brothers Co., 249 U.S. 119 (1919), 1. Benedict on Ad-

miralty, §66 n.32 (6th ed., 1966 Supp. by C. R. Knauth).

Consequently, a shipowner has a maritime cause of

action whether he sues in contract for a breach of

warranty of workmanlike service or in tort for the

negligent performance of a maritime contract. See

Southport Transit Co. v. Avondale Marine Ways, Inc.,

a ere tee ie eT ee eT Ae ee

234 F. 2d 947, 955 (5th Cir. 1956). Federal law governs

the construction of the terms of the repair contract,

see: Booth Steamship Co. v..Meier & Oecelhof Co., 262

F.. 2d 310 (2d Cir. 1958); and would also appear to gov-

ern the standard of performance due under the con-

tract. See Southport Transit Co., supra.'Thus the ap-

plicability of state law in repair cases is sharply

limited to issues not touched by maritime law where

state statutes fill in the gap in a manner not destruc-

tive of the uniformity admiralty seeks. See The Tungus —

v. Skovgaard, 358 U.S. 588, 594 (1959), see. generally

Comment, Admiralty Jurisdiction: Airplanes . and

Wrongful Death in Territorial Waters, 64 Colum. L.

Rev. 1084, 1092-96 (1964). In the context of the instant

case, federal law governs every issue with the excep-

tion of the applicability and effect of the Louisiana

direct action statute discussed infra.

Ferran’s negligence:

sd °

Ferran attacks the district court’s findings that (1)

Ferran’s employeés removed register #3. at all (thus

Ferran maintains that the upper coupling on the #3_

‘dropline was never undone), and (2) the coupling was

defective prior to the fire (it being established at the |

trial that the coupling was in a damaged condition

after the fire). Ferran further contends that the break

in the coupling was caused ‘by an explosion set off

when Deale negligently put the lighted torch into the

burner without having turned on the forced draft

blower to clear the fumes out of the fire box.

Pree Poe,

Ferran recognizes that in reviewing the judgment

of a district court sitting without a jury in admiralty,

an appellate court exercises no greater scope of re-

view than it exercises under F. R. Civ. Pro. 52(a)

and, thus, may not set aside a district court finding

\ unless “clearly erroneous.” McAllister wv. United

\States, 348 U.S. 19 (1954). Ferran argues, however,

that the “clearly erroneous” test does not apply to

a district court’s findings on negligence as an appel-.

late court is just as able to determine whether a

given fact situation constitutes negligence as the dis-

trict court. See Mamiye Bros. v. Barber Steamship

Lines, Inc., 360 F. 2d 774 (2d Cir. 1966). Correct as

this statement may be, a glance at Ferran’s allega-

tions of error discloses that it-is attacking not the

district court’s conclusions on negligence but that

court’s findings with regard to the underlying, his-

torical facts. Thus,‘we may not set aside the above

lower court’s 11a unless we find them to be

“clearly erroneous”

‘

With respect to whether Ferran did or did not re-

- move register. #3, thus necessitating the removal of.

the #3 ,dropline, the evidence was highly conflicting.

_A brief review of the ‘testimony of several witnesses

illustrates the difficulty. the district court faced in at-

tempting to reconstruct the course of events at a trial

held six and one-half years after the fire.

' None of Ferran’s witnesses testified directly that

‘the #3 register, had been removed. Hubert H. Ham-

brice, Ferran’s then labor superintendent who was on

duty from 8:00 A.M. to 5:00 P.M. on October 5th in

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charge of the labor crew working on the Corsair’s

starboard boiler, identified on a photograph of .the

boiler the #2 register (lower front). as the one that

' had been removed to facilitate the repairs. He‘ further

indicated that the access door had been opened, but

that no other registers had-been removed. Hambrice

could not recall, however, whether the register had:

been removed before or after he came aboard, wheth-

er it had been replaced before he left or any other

details about the job. In fact, the only thing he could

rémember clearly was that the #2 register had been

removed.. hee | }

Willie Harris, a Ferran day shift:laborer who had

worked on the ‘boiler, testified that the lower front

earlier deposition, however, Harris had been unable

to recall which register had been removed. At the

trial, he explained this discrepancy by remarking,

“it came to me [after the ps just how this

thing could be done.” ie &

UR FT SS

Louis G. Tavan, Ferran’s superintendent of repairs, :

agg that the #2 register was off, but conceded - !

on crodss-examination that there may have been two

registers off; he could not recall the conditions of the i

various droplines. |

Daniel Reed, a labor pusher for.Ferran whose job

it was to get men to clean up the trash in the boiler

room, stated that “the lower register next to the ac-

cess door” (#2) was the only one’ that was removed.

In an earlier deposition, however, he had identified

24 |

the #3 register as the one removed, by pointing to it \

on a photograph that distinctly showed the positions

of the various registers in relation to the access door.

_ His explanation at trial that he had been confused

as to the numbering of the registers at the previous

. identification did not explain his earlier unequivocal

designation on the photograph of the lower aft register |

away from the access door.

Two other Ferran employees present during: the

repair job, James Hill and Fee Carr, could not re--

' member which register had been removed. |

Alcoa’s. witnesses had a different story to tell. Roy

T. Lemon, who had been Chief Engineer on the Cor-

sair in October, 1956, was quite sure that both lower

registers (#s 2 and 3) and the access door had been

removed. Similarly, Floyd L. Johnson who had been

Third Assistant Engineer testifed that both lower

registers were out. Night relief engineer, Donald Kent,

who came on board.at 5:00 P.M. on October 5th stated

at the trial that, although he could not remember

clearly, his best. recollection was that the lower aft

_register. (#3) was out. He was unable; however, to

explain why he.had told the Coast Guard at an enquiry

held shortly after the fire that the #2 register was the

one that was removed. Alcoa’s version of which regis-

ter was off was further weakened by the adverse in-

ference that arose when it failed to produce its day

fireman, who was readily available, who had been on

duty in the boiler room tending the port boiler from

8:00 A.M. to 4:00 P.M. on the day the repairs were

carried out by Ferran.

_ *

Somewhere in between these two versions is the

ee Peter J. Marchetta, Ferran’s night labor

foreman who came on board the Corsair shortly

after 5:00 P.M. He testified that the boiler rebricking

was almost completed when he arrived and that the

registers were “all in”. Marchetta recalled that he

set about to hook up the. various droplines; that he

had hooked up the bottom/and the top of dropline #1,

but had only fastened the bottom fittings of droplines

2, 3 and 4 which were already attached at their tops.

He did check the tops of those droplines, however,

_ and finding the top of #3, loose, he had tightened it

with his wrench two half-turns, thus allowing the in-

ference that some one else had done it up hand tight

shortly before. He further remembered that the upper

fitting on the #3 dropline had been painted with ©

aluminum paint.

The district court found as a fact that the #3 register

and the #3 dropline had been removed and replaced

by .Ferran employees, apparently believing Alcoa’s

witnesses while disbelieving most of Ferran’s. This

conclusion was based to a large extent on Marchetta’s

testimony, the one Ferran witness the court found

credible, that he had tightened the upper fitting on the

#3 dropline, as the court stated:

‘“) . , one or more of the Ferran employees

re-engaged the female fitting of the #3 drop-

Hine with [the] improper male fitting.

“The identity of the Ferran employee or em-

ployees who made this reconnection is not

a ee Eee

_ absolutely clear, as there may have been

someone other than Marchetta who had pute ©

the fittings together hand tight before Mar-

chetta used a wrench to tighten the coupling.

“The Court finds as a matter of fact that

what is absolutely clear is that Ferran em-

ployees did reconnect the upper coupling of >

the #3 dropline with a worn and consequent- —

ly improper fitting ... .” 242 F. Supp. at 968.

In-:view of the conflicting testimony on this issue, the

. trial judge had to resolve this dispute largely upon

his judgment of the credibility of the witnesses. His

finding that Ferran had disconnected and reconnect-

ed the #3 dropline is certainly not clearly erroneous.

The same conclusion must be reached, we believe,

with respect to the district court’s finding that the

‘male fitting to which the upper end or dropline #3

was connected was defective: when the Ferran em-

_ ployee reconnected the coupling, and should have

been replaced (that Ferran’had a duty to replace de-

fective parts was admitted by its superintendent -

Tavan). Once again, however, the evidence is sus-

ceptible of differing interpretations. For example, Al-

coa’s fireman Gomez had fired the burner at the #3

‘register for 10 to 15 minutes to dry the brickwork

after the repairs had been completed but before the

fire. During this time, dropline #3 was subjected to

the usual oil pressures incurred in feeding the burn-

er, but did not part. Relying on the testimony of its

expert’ metallurgist, Dr. M. M. Gilkeson, that ‘a fit-

ting is either good or bad and either holds pressure

or does not, Ferran argues that if the fitting held

pressure during Gomez’ operation of the boiler, it

must have been in good condition. Ferran contends

that the damage to the fitting — the fitting itself was

introduced into evidence at the trial and shown to be

in a badly stripped condition — must have been in-

curred during the firé, probably as a result of a flare-

back caused by Deale’s negligence in attempting to

light the #3° burner. See discussion, infra. On the

other hand, Ferran’s own machinist superintendent,

Benjamin G. Morrison, testified on cross-examination

that the damaged condition of the fitting was prob-

ably due to constant wear and strain and not from

fire. Similarly, Dr. Gilkeson conceded on cross-exam-. . |

ination that it is conceivable that a long seriés of re-

movals and replacements might have stripped the

fitting and further conceded that the, fitting could

have been defective during Gomez’ firing and yet

held together only to ‘part finally when Deale went to

‘light the .burner. Concerning Ferran’s explosion or

flareback theory, the expert commented that al-

though he had examined the fitting with the explo-

sion theory in mind, he could detect no evidence that

the damage to the fitting was caused by a sudden

explosion.

Ferran also contends that there was a failure of

proof that the condition of the fitting at the trial was

the same as immediately after the fire and was

ON IE PT

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_ neither caused by, nor aggravated by, severe tests*

performed on it prior to trial. This point is without

merit as (1) Morrison testified that the damaged con-

Sole ey bP Ge Rl ee HA

dition of the fitting had been brought to his atten-

tion shortly after the fire, (2) Lieutenant Command-

er Walton D. Alley, Jr., the Coast Guard’s Investi-

gating Officer, testified that he had gone aboard the

Corsair the day after the fire, had examined the fit-

ting then and there and had found the threads ‘‘def-

initely upset’, and (3) Dr. Gilkeson, an observer at

the various tests performed on the fitting, related in

detail the steps taken to test the condition of the fit-

ting, his testimony allowing only the conclusion that

the fitting was badly damaged prior to the tests.

The foregoing discussion demonstrates, we believe,

that the district court’s finding with respect to the

condition of the fitting prior to the fire is amply sup-

ported by the record.

Finally, Ferran contends that the district court

erred in rejecting its explosion theory. Although its

expert Dr. Gilkeson could report no evidence of an

explosion from the fitting itself, he did not foreclose

the possibility that an explosion caused the fitting

to part. Ferran’s hypothesis is that the fire was caused,

at least in part, by Deale’s negligent lighting of the

burner without having turned on the forced draft

blower, apparently necessary to clear the boiler of ex-

cessive fumes prior to the insertion of a lighted torch:

‘In support of its position, Ferran points to the testi-.

mony of Machinist Superintendent Morrison that he

found the valve for the forced draft blower in ap eed

position immediately after the fire and the fact th

the steel burner head Deale had inserted in the #3

29°

Once again, however, there is evidence on the rec- .

ord to ‘contradict Ferran’s position. Ferran’s’ General

Manager, Albert M. Kreihs, had gone into the engine

room on the day’of the fire and testified at the trial

on cross-examination that to the best of his knowledge

from examining the boiler after the fire there was no

explosion, and Commander Alley recalled that there

was “no evidence of an explosion of any magnitude ©

whatsoever,” although he did indicate that flarebacks .

_ normally leave no evidence within a ‘boiler. Comman-

der Alley also expressed his opinion that the burner ~

throat was probably fractured either on account of

the intense heat of the fire or by striking something,

but would not have been fractured by internal ‘pres-

sure inside the boiler.

The testimony of Ferran’s expert Jawn W. Marques,

who held a Chief Engineer license and had worked on

‘vessels with power plants similar to the Corsair’s,

- that, on the basis of a hypothetical question posed to

him, the casualty was caused by a flareback is not too

helpful as this opinion was based on the assumption

that Deale had not turned on the forced draft blower,

a question of fact in controversy. Deale himself testi-

fied that he had turned the blower on and Alcoa’s Chief

Engineer Lemon testified in direct opposition to Fer-

ran’s Morrison that in his inspection immediately after

the fire he had found the valve of the forced draft .

blower “opened slightly” in a normal operating: posi-

tion.

The district court found Deale’s testimony to be

clear and credible and further found that the physi-

eb J

cal facts did not support the explosion theory. The

record clearly supports these findings thus reenforc-

ing the conclusion that the sole proximate cause. of

the fire was the defective fitting on the #3 dropline.

“

Avoidable consequences:

In its first opinion, the district court found that the

Corsair was unseaworthy due to the inaccessibility

of the shut-off valve on the boiler and the locked CO,

room and, also, indicated that the crew had beer neg-

ligent in not knowing where the control valves were

located on the ‘ship. The court concluded “that these

acts of negligence and unseaworthiness warrant the

application of the doctrine of ‘avoidable corise-

_ quences’.” In its second opinion, after reargument, the

court qualified this statement by agreeing with Alcoa

that the doctrine of avoidable consequences ‘‘does not

_ apply to conditions or conduct attributable to Alcoa

which preceded Ferran’s negligence.” The court then

reserved the question of whether there was a suffi-

cient failure on Alcoa’s part to mitigate damages

after the fire had begun to bring the doctrine into play,

stating that such a question was an issue of damages

to be decided by the Special Master.

The court relied on Southport Transit Co. v. Avon-

dale Marine Ways, Inc., 234 F. 2d 957 (5th Cir. 1956),

' for the proposition that “avoidable consequences”

apply only after a defendant’s negligence is complete.

In the instant case, Ferran’s negligence was com-

plete when its employees left the ship. The fire itself

‘ was started ‘solely on account of Ferran’s negligence,

so there: is no question of ‘contributory negligence

barring or reducing recovery. The district court fur-

ther relied on the principle that a tortfeasor takes

his victim as he finds him.

The district court was correct in its second opin-

ion in limiting the application ‘of the doctrine to acts

attributable to Alcoa after the fire. The general rule

has been stated as follows:

“After the original impact or injury (to which

plaintiff's negligence did not contribute),

plaintiff’s negligence may intervene to aggra-

vate its consequences. Thus he may neglect. °

to carelessly treat a wound, so that it gets

infected and ihe ioses his limb or his life. Or

he may fail to take reasonable steps to pro-

tect property damaged or exposed by defend-

ant’s negligence. In cases like. these plain-

tiff may not recover for the aggravation to

-his injury toward, which his negligence con-

tributes. This notion is sometimes referred

to as the ‘duty’ to mitigate damages or the

rule of avoidable consequences.” 2 Harper

_& James, The Law of Torts §22.10. at pp. 1231-

82 (1956) (footnotes oe

. Here, the condition of the ais at the time of the

fire, whether unseaworthy or seaworthy, is irrele>.

vant to the question of damages as the sole cause of.

the fire was Ferran’s negligence. Thus, for example,

the fact that someone had locked the door to the CO2

room and had thus prevented Deale from reaching ©

i ll a ala Ce

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sl a

Pee ee a ee en Ota t

vital controls does not of itself reduce the damages

recoverable by Alcoa as the door was locked before

the fire and in no way was a cause of the fire. Any

negligent facts attributable’ to Alcoa after the fire,

however, such as a failure of crew members to act,

consistent with their then existing state of knowledge

and skill, with due- dispatch in arresting the confla-

‘gration, can be considered ‘in mitigation of damages.

Alcoa, in its appeal, argues that Ferran failed to

sustain its burden below of establishing any negli-

‘ gence on Alcoa’s part after the fire began as the dis- |

trict court stated that “facts relating to possible re-

‘duction of any damage.award due to Alcoa’s failure

to mitigate such’ damages were not presented with

sufficient particularity to support a finding, one way

or the other.” Thus, Alcoa argues, Ferran should be

foreclosed from relitigating the issue. The district

court, however, expressly found that the propriety of

Alcoa’s conduct after the fire began was an issue

of damages to be tried before the Special Master.

Thus, the court’s above-quoted statement cannot be

read to foreclose Ferran from submitting further evi-

dence on this point at any future proceedings held

before a Special Master.

Applicability and validity of the “Red Letter” clause:

'As mentioned earlier, Ferran had performed re-

pairs on the Corsair many times prior to the time of

the fire, and had an informal understanding with Al-

coa to handle all the repairs to the Corsair when

she was in New Orleans. The usual repair contract

. 33 ye Ae :

was made and performed in roughly the following

manner: Upon the Corsair’s arrival into port, Alcoa

would notify Ferran of the repairs needed. Ferran’s

superintendent would go on board, survey the work:

to be done, and submit a. written estimate to Alcoa.

_If Alcoa approved, it would send Ferran an-order on

- Alcoa’s form and the work would be done. Upon com-

pletion of the work, Ferran would” send Alcoa an

invoice, usually after the Corsair had sailed. The in-

voice was the only document to contain the so-called

“Red Letter” clause which read in part:

“We contract only upon the following terms,

applicable to every contract,....

“Furthermore, we undertake to perform work

on vessels . . . only upon the condition that

we shall not be liable in respect to any one

vessel, directly or indirectly in contract, tort

or otherwise, to its owners ... for any in-

jury to such vessel . . . unless such injury

is caused by our negligence ... and in no

event shall our aggregate liability . +. @X-

ceed the sum of $300,000.00.”’

Alcoa admits receiving an invoice ‘for the October

5th repairs. to the starboard boiler containing the

above clause. Alcoa also admitted that it was aware

of the existence of the clause on the various invoices

and had read it. The company also knew that such

a clause was standard in repair contracts with other

domestic shipyards.

PI ran ek

IAEA UR OTR ETM ALS ST

ere res

FedeoMaR, no see

Ferran maintains, and the district court so con-

cluded, that the ‘“‘Red Letter” clause was implied in

every repair contract from the fact that Alcoa knew

of the clause and acquiesced in its continued pres-_

ence on the invoices. Alcoa argues strenuously that

as the clause was never put on any document until

after a repair contract was completed, it never be-

came a part of any repair contract. While this issue

may be a good deal closer than the district court in-

dicated, the practice in the industry and the previous

Alcoa-Ferran relations were sufficient to put Alcoa

on full notice that the clause was implied in every

repair contract. - See 3 Corbin on Contracts, $556

(1960 ed.).

Alcoa’s second line of assault, challenges the clause

as invalid as against public policy, relying on Bisso v.

Inland Waterways Corp., 349 U.S. 85 (1955), where

the Supreme Court knocked down a clause purporting

to release a tug owner from all liability for negligence

in connection witha towage contract. The Court cited

two reasons for the decision: (1) to discourage neg-

ligence by making wrongdoers pay damages, and (2)

to protect those in an inferior bargaining position.

349 U.S. at 91. Neither reason is applicable to the in-

stant case as (1) potential liability for $300,000 should

deter negligence, and (2) Alcoa’s bargaining position

is not that inferior as evidenced by the fact that in a

repair contract with Ferran subsequent to the fire,

the “Red Letter” clause was specifically excluded.

No overwhelming public policy requires us to declare

a $300,000.00 limitation invalid. |

Ore, Cs ee RDG eNO LE LE a aan itt Pe - ‘ aoe

Availability of limitation to Ferran’s underwriters: if

In addition to suing Ferran, Alcoa sued Ferran’s

‘underwriters pursuant to the Louisiana Direct Action

Statute, LSA-Rev, Stat. 22:655. The applicability of .

‘this Louisiana statute in a federal admiralty action

against a shipowner’s insurer has, for a long time,

been the subject of controversy, see Marylana Casiual-

ty Co. v. Cushing, 347 U.S. 409 (1954) (court ‘split 4-4-i

on whether the statute was invalid as conflicting with

‘ the 1851 federal limitation of shipowner’s liability act).

The case of In the Matter of Independent Towing Co.,

242 F. Supp. 950 (E.D. La. 1965), represents the most

recent attempt to resolve the federal-state conflict,

allowing an injured party to recover to the full extent

of policy coverage from a shipowner’s insurer, but

at the same time preserving for the shipowner in-

surance proceeds to cover his limited liability. See also.

Guillot et al. v. Cénac Towing iii Inc., 336 F. 2d

898 (5 Cir., 1966). °

The instant case does not present that particular

state-federal conflict, as the applicability of a state

direct action statute against a ship repairer’s insurer

is not inconsistent with any overriding federal ad-

miralty policy. The remaining question ‘is whether

Ferran’s $300,000 limitatiém is available to its under-

' writers. ; :

Given the applicability of the. Louisiana statute to

give Alcoa a direct cause of action against Fer-

ran’s underwriters, the question arises whether state

law or general maritime law should be applied to de-

“se =

ONO SRT RY Ie ee

Ra OT Re FN RS I CBO OE OT

‘

AID Sone © Ns anal

Se ee OS SEES atest ets wale caren

termine what defenses are available to the under-

writers. This choice of:law problem does not involve

an Erie* or Klaxon® issue as a federal court resolv-

ing an admiralty question does not sit, in effect, as

only another state court. See Kenney v. Trinidad

Corp., 349 F. 2d 832, 834-35 (5th Cir. 1965), cert. de-

nied 382 U.S. 1030 (196 ). Instead the question to

‘be answered is, when a federal court adopts a state

‘cause of action in an admiralty case, how much non-

procedural state law rides along with it? the

Tungus v. Skovgaard, 358 U.S. 588 (1959), Kenney,

supra. However, in this case, application of state or

federal law yields. the same result; therefore, we need

not resolve the choice of law problem, although we

note that the general policy of leaving the regulation

of matters touching upon insurance to the states

would tend to support the district court’s application

of state law below. ‘

The district court applied Art. 2098 of the Louisiana

= eee SEN lS Cte ee oy

Civil Code and concluded that Ferran’s contractual |

lumnitation of liability was not a “‘personai” defense

unavailable to its underwriters, pointing out that with-

in the meaning of Art. 2098, “personal” defenses were

limited to the type of defense — such as lunacy,

bankruptcy, minority, governmental immunity, etc.

— granted by law to all members of a particular class

as a matter of public policy. A limitation of liability

agreed to by parties in relatively equal bargaining

positions does not fall into that category. As the dis-

2Erie R. Co. v. Tompkins, 304 U.S. 64 (1938).

3Klazon Co. v. Stentor Mfg. Co., 313 U.S. 487 (1941).

, A

trict court stated, “Insurers are not entitled to bene-

fit from a defense based on the insurer’s publicly

protected legal status, but should benefit from the

contractual defenses of their insured.” An analysis.

of this issue under general maritime law yields the

same result.

| Fomgun affirmed.

_ APPENDIX B

Order of The

_ United States Court of Appeals

For the Fifth Circuit

On Petition for Rehearing

(No. 23,555 - Title Omitted)

4 (April 11, 1968)

Before BROWN, Chief Judge, MOORE* and BELL,

Circuit Judges PER CURIAM: )

The Petition for Rehearing is DENIED and no mem-

ber of this panel nor Judge in regular active serviee

on the Court having requested that the Court be polled

on rehearing en banc, Rule 25(a), subpar. (b), the

. Petition for Rehearing En Banc is DENIED.

*Of the’ Second Circuit, sitting by designation.

Ww eeegrors:

(eer i heist iat ial

APPENDIX C

Opinion of the District Court ~

No. 3390 — In inelie

(Title Omitted).

(April 22, 1965)

FRANK B. ELLIS, District J udge.

This libel has been brought by the Alcoa Steamship |

‘Company, Inc.,-a corporation organized and existing

under the laws of the State of New York, as owner of

the S/S ALCOA CORSAIR, against respondent Charles

' Ferran & Company, Inc., a Louisiana Corporation

“domiciled in ‘the City of New Orleans and engaged in |

the business as a ship repair contractor, and: Ferran’s

liability. underwriters, that is, respondents Glens-Falls

Indemnity Company, a New York corporation, Under-

writers at Lloyds, London, Andrew Weir Insurance

Company, Inc., Fine Art and General Insurance Com-

pany, Ltd., National -Provincial Insurance Company,

Lets.,. Orion Insurance Company, Ltd., English and

American Insurance Company, Let. .“M”, and Eco-

nomic Insurance Company, Ltd. (

The libel is for the. recovery of one“million dollars

plus, resulting from the fire on the CORSAIR caused

by the allegedly negligent repairs to the starboard

boiler done by Ferran in an alleged breach of the im-

plied warranties in the undertaking.

The case was tried in Court and on depositions on

the question of liability vel non. After having carefully

' * analyzed briefs-and rebuttal briefs submitted by proc-

tors for all parties, and, after an even more careful

analysis of the evidence and exhibits submitted the :

Court now makes the following findings of fact and con-°

clusions of law on the question of liability.

The S/S ALCOA CORSAIR was constructed, at the

instance of the United States Maritime Commission, in

Portland, Oregon, at the end of World War II. Subse-

quent negotiations transferred the ownership of the

vessel, while under construction, to the Alcoa Steam-

ship Company, Inc. She was completed, with some

modifications, in 1946-47 and began her life in the ad-

miralty. :

' The CORSAIR was a modified Victory Ship, designed

for transportation of both cargo and passengers. She

was four hundred and sixty five feet long by sixty

five feet in beam and manned by its crew of some one

hundred men. She served the shippers and residents

of the Gulf States area from 1947 until October 1956,

trading on a rum-and-romance run between ‘Mobile,

New Orleans, and a number of ports of the Carribean

Sea. ,

The CORSAIR was driven by a single propeller which

was powered by a steam turbine engine. Steam for the

propulsion machinery and auxiliary equipment was

supplied by two (port and starboard) high pressure.

boilers located in the fire room on the hold deck, at the.

ae i i ee

forward lower level of the engine spaces, which are lo-

cated in the amidship area of the vessel.

The CORSAIR’S boilers are her initial power source,

and their functioning at maximum efficiency is vital

to the mechanical operation of the entire ship. To

obtain the intense heat. essential for generating steam,

each boiler, operating on a combustion principle, burns

a mixture of air and pre-heated oil.

A system of piping adjoining each boiler circulates

black bunker oil through a heating system. When the

fuel has reached ‘a temperature of about 230 degrees

" F., the re-circulating valve is closed and the oil is held

under pressure in a header. or manifold pipe located

on the upper outer casing of the boiler front. For the

oil to move from the header into the interior or fire

box of the boiler, where it is ignited, it must flow

through an upper coupling, down through a dropline,

and then through a lower coupling and lower valve

into a burner which is inserted in a burner barrel,

‘where it is atomized and sprayed into the arch of the

fire box. On each boiler there are four identical burn-

er positions, commonly referred to as registers. The

boiler may be fired at one or more, or all, of the reg-

isters.

‘The: mischievous device giving rise to this million

dollar libel for damages is that coupling mentioned

in italicized print in the preceeding paragraph.

To operate the boilers, air, driven by the forced

air blower, is introduced into the fire box through the

space between the casings and then through the regis-

ters. The forced draft blower is a fan located several

levels above the fire room but operated by a wheel

valve from the fire room. It blows air into the opening

between the inner and outer casing walls of the boiler

beneath the floor plate; level so that the air is forced

under pressure through the ventilator blades of the

registers between the casings. From the blades the

air flows into the fire box. —

On each boiler there are four registers, arbitrarily

numbered from forward to aft one through four. The

end registers, one and four, are situated at a higher

level than are the middle registers, two and three.

Each register is actually a circular housing for air

ventilator blades. The register is bolted flush against

the outer wall or casing of the boiler, and the fuel.

carrying burner barrel, to which the dropline is con-

nected, passes through its center. In this way, the two

combustible elements, oil and air, are introduced into

the fire box at the same point.

Ignition of the oil-air mixture is effected by the use

of a simple torch, pushed through the peephole located

on the face of the register, just above the burner barrel

assembly. This ignition phase of operation follows the .

clearing phase in which the forced draft blower is first .

’ used, before insertion of the torch, to expel from the fire

box any residual fumes which might have accumu-

lated there. vet

It is well to note, at this juncture, that the position of

the droplines in relation to their respective registers

Sob mE ore

is such that it is mechanically impossible to remove the

which is effected by disconnecting both the upper and

lower fittings.

The interior of the boilers, that is, the fire box, has

walls and flooring of firebrick. On the inner front wall

there are four arches made of tile, surrounding the

aperture where each register sits. Periodic mainte-

nance repair of this brick and tile work is necessary

for efficient. steam generation. © | |

Because of the pre-heated oil used under pressure,

and because of the steam produced, great care is re-

quired at all stages of working with the boilers: at

construction, at operation and certainly at every re-

pair.

The constant maintenance which a ship requires is

* best handled when one reliable ship repairer does all or

nearly all of the work. With this in mind, Alcoa came

to an informal understanding with Charles Ferran &

Company, Inc., that the latter should handle the re- .

pairs to the CORSAIR when she was in her base port

of New Orleans. Even during the building of the COR-

SAIR, the then vice-president and general manager

of Ferran, A. N. Kreihs, had gone to the construction

site at Portland, Oregon, in order to familiarize him-

self with her characteristics. This general understand-

ing bound neither party to perform; at any time Alcoa

could have employed another New Orleans repairer,

and Ferran was free to refuse to. work on the COR-

SAIR.

Rather than a general contract, there was a series

of individual contracts whereby Ferran worked on

a’cost-plus or time-and-material basis. And it was on

this basis that Ferran had made from time to time

virtually all the repairs.to the CORSAIR, including

necessary boiler work, from the time she went into

service until the repair of the fire damage, which

is the subject of this litigation.

There were no other terms in these individual con-

tracts, with the exception of a “Red-Letter” clause.

In order that proper attention may be focused on this

clause, it is here quoted in full:

‘‘We contract only upon the following terms, . .

applicable to every contract; in the case of a

vessel we have a lien upon the vessel for our

bills; all time contracts are subject; without

responsibility on our part, to delay in case of

strike, labor difficulties, fire of causes beyond

our control; or liability in case of defective

workmanship or material is limited strictly to

the proper replacement thereof.

“Furthermore, we undertake to perform work .

on vessels and provide berth, wharfage, towage

and other services ‘and facilities only upon

condition that we shall not be liable in respect

to any one vessel,.directly or indirectly in con-

tract, tort or otherwise, to its owners, chart-

erers or underwriters for any injury to such

-vessel, its cargo, equipment or movable stores, °

or for any consequences thereof, unless such

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injury is caused by our negligence or the neg-

ligence of our employees and in no event shall

our aggregate liability to all such parties in

_ interest for damage sustained by them, as a

result of such injury, exceed the sum of $300,-

» 000.00.

“In connection with the accident and/or in-

demnity and/or insurance clauses, if any, con-

tained in your specifications, relating to lia-

bility for personal injuries, please note that

we do not agree to same, in so far as they un-

dertake to impose any liability or any obliga-

tion to take out or maintain insurance beyond |

the liabilities or the obligations to -insure

imposed upon us by law.” ape

Alcoa asserts without serious contestation, and the _

court finds, that in a typical instance an individual

contract was made and performed in the following

manner. Initially, work was assigned to Ferran by

Alcoa, either by telephoning work items in broad out-

line or by sending brief, undetailed memoranda. Up- |

on arrival, of the vessel, Louis Tavan, the Ferran

- superintendent in charge of work on Alcoa ships,

boarded the ship, inspected the. items to be repaired, |

and thereafter prepared rough specifications for each

of these items. Upon completion of the work, Tavan

rewrote the specifications to conform with actual

work, and these “rewrites’’, with prices itemized, were

then sent to Alcoa. If it agreed to the prices, Alcoa

then typed Ferran’s rewritten specifications on an

Alcoa job order form and sent this to Ferran. Shortly

after the ship in question had sailed, Ferran mailed

Alcoa an invoice listing the cost of each item.

Alcoa admits that on October 31st, twenty-six days

following the fire, an invoice was transmitted covering

the work in question which .embraced the red-letter

clause, Ferran exhibit #13. Apparently subsequent

billings on numerous Alcoa vessels contained the red-

letter clause. In addition to ‘exhibit #13 Ferran has

proved that prior billings contained the clause, ex-

hibits Ferran #7 through #12. It is true that the applica-

bility of this clause has never béen tested since no loss

has ever occurred which exceeded the $300,000 limita-

tion. ;

Ferran counters, and this court agrees, that both

‘ parties were fully aware of the practice in the trade,

and further that Alcoa made no objection, and no one

connected with Alcoa did anything to indicate their

intention to exclude the red-letter clause in this par-

ticular case or any other. until the New York contract -

of October 8, 1956. Under the usages of the trade, the

exhibits and the evidence, the clause was in force

and effect in this case. The applicability of the clause

is further borne out by the witnesses, the most sig-

nificant of which is Alcoa’s Superintendent of Engi- ©

neering, Lyndon L. Watts, who represented Alcoa: and

negotiated repair contracts with Ferran, and who

testified that he knew that the red- letter clause was

on the invoices and had seen it several times prior to

.1956. Apparently Watts had read the clause on this

ahd several other repair’ contractors’ invoices prior

: a * PERRET

to October of 1956 and was familiar with the fact that it.

had been used in the trade. .

‘This Court further agrees with Ferran that Alcoa’s

Port Captain, R. W. Davis, admitted that he probably

saw the red-letter clause but did not pay much atten

* tion to it until the time of the sncicomt in: question.

The Court recognizes, Alcoa Exhibit #10, that a con-

tract was entered into on October 8, 1956, in New York,

to repair damage to the burned out S/s ALCOA COR-

SAIR. This contract obligated Ferran to carry -com-

prehensive public liability insurance with limits of

$500, 000/$1,000,000 for bodily injury and $50, 000/$100,000

for property damage. The red-letter clause was not

included into this specific contract, not even by ref-

erence.

> °

Alcoa exhibit #10 marks the first time, as far as the

record reflects, that Alcoa sought, in writing, to get out

from under the limitation expressed by the red-letter

clause. |

Article 13, mandatory insurance coverage, and Ar-

' ticle 14, the hold harmless clause, appeared to the

court:as an obvious effort to circumvent the limita-

tion of liability which controlled prior relationships

between Alcoa and its repairman, Ferran.

The Court finds, as’a matter of fact, that the red-

letter clause was common in the trade and had been

used by Ferran on many prior occasions in billing

Alcoa for repair work and had been used on other

~ fi-06 Asem dee AQ Bi Wi a Ne onic ee SC Sie 5S ARE

Alcoa repair jobs subsequent to the accident. Under

all these facts this Court is compelled to find that the .

limitation of the red-letter clause was in effect when

the repair work on the job at issue was done.

Turning now to the main body of facts, the COR-

SAIR sailed from Mobile, Alabama,.and arrived in -

New Orleans in the early morning of October 4, 1956.

At some time before the CORSAIR docked at the Bien-

ville Street Wharf, O. W. Davis, Alcoa’s local port cap-

tain, notified Ferran of certain general repairs which

the ship needed. One of the repairs requested was the

re-bricking of the floor of the fire box of the star-

board boiler. The CORSAIR arrived in New Orleans at

about 6:30 A.M. on.Thursday, October 4, 1956, with both

its port and starboard boilers in use and working well.

After arrival, the fires of the starboard boiler were

' turned. off to permit the fire box to cool for the brick-

work. The port boiler thereafter supplied the ship’s

power. Ferran’s Superintendent in charge, Louis

Tavan, inspected the items to be repaired and wrote the

preliminary specifications, which were actually an

itemization and/or extension of Captain Davis’ orders.

_ No work was done on the starboard boiler that day.

| Ferran, however, was engaged i in making other repairs

aboard ship and in assisting the U. S. Coast Guard and

the American Bureau of Shipping on their inspection

of the CORSAIR. At the conclusion of their inspection

_ the following day, both agencies found the ship’s gear,

equipment, and fittings, including its fire-fighting sys-

tem, in good order.

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Shortly after 8:00 A.M. on the morning of Friday,

- October 5, 1956, Ferran’s labor gang boarded the COR- _.

SAIR to begin the brickwork in the fire box of the star-

board boiler, after the Ferran employees had opened

the boiler. Although the work was under the ‘general

supervision of Mr. Tavan, Hubert W. Hambrice, one of

Ferran’s labor foremen, was in immediate charge of

the operation from 8:00 A.M. to 5:00 P.M. On this job,

Hambrice used three bricklayers and several laborers.

The job Ferran had to do consisted of.these steps:

opening up the boiler, removing the old bricks and de-

bris from the fire box, passing this material up and

off the ship, lowering the new brick and tile from the

dock down into the fire room and, into the boiler’s fire

box, laying the bricks and tiling the arches, and then

_ finally closing up and checking the boiler. As Alcoa

had simply instructed Ferran to rebriek the starboard

boiler, Ferran was free to perform the job in any rea-

sonable way it saw fit.

Ferran went about the job 5 following fashion: it

en to facilitate the re-

moval of the old brick and debris, to provide ventila-

tion in the fire box, and to make it possible to tile the

arches of the fire box, Ferran removed two of the

_ registers.

Alcoa contends that the two lower registers, num-

bered two and three, were removed. Ferran contends

the #1 dropline was connected at the top, disconnected

at the bottom, and turned to one side. The tops of the #2,

#3, and #4 droplines were connected and the bottoms

. etneineetiedienieinetitie th hee

disconnected and that the only opening in the boiler

was the access door. The Court finds as a matter of

fact that the register in question, #3, had been re-

moved. This controversy will be further discussed in

— paragraphs.

_ ‘To remove the registers it was necessary to remove

the droplines at these registers by disconnecting their

upper and lower fittings. The droplines at #2 and #3

registers were removed and placed on the burner

bench.

The bricklayers entered the fire box and began re-

moying the old brick and debris. This was passed out

to the laborers, who hoisted it from the hold deck to

‘the second deck, where it was moved through the door

on the starboard side of the machinery spaces. From

there it was passed through a fuel-oil loading com-

partment and then through a wing port on the star-

board skin of the vessel and onto the dock.

The new brick and tile were brought to the brick-.

layers in the fire box along the same route. The brick-

layers had’about 1,000 bricks to lay and the four arches

to tile. Consequently, the work was not finished at 5:00

P.M.

_ During the regular work day from 8:00 A.M. to 5:00

P.M. a fireman from the crew of the CORSAIR was on >

duty in the fire room maintaining steam on thé port

boiler and checking the operation of other machinery

then in operation. The ship’s engineering officers, not

on leave, were working about the vessel under the

ss saithiarie of the chief engineer, Mr. Lemon.

At 5: 00. P.M. there was a change in both the engi-

“neering personnel of Alcoa and in some of the boiler

workers of Ferran. The ship’s engineering officers

were off duty, but the Chief Engineer left Second En-

gineer Floyd L. Johnson aboard, since there was still

work being performed ‘on the engine room pumps and ©

on the starboard boiler.

Plumber-Machinist Lee A. Smith was standing the

‘watch as fireman-watertender until midnight. Night .

‘Relief Engineer Kent assumed the watch in the ma-

'chinery spaces until midnight. J ohnson, Smith and

Kent were the only. Alcoa personnel in the machinery

spaces from 5:00 P. M. to midnight.

Nioo Alcoa employee had anything whatsoever to do

with any of the brickwork, or with disassembling’ the

' droplines and removing the registers, or with replac-

ing the registers and reassembling the droplines.

Ferran employees, and only they, performed those

steps as. necessary steps in performance of their

rebricking work. :

As for personnel in Ferran’s gang working on the

boiler. Foreman .Hambrice was relieved at 5:00 P.M.

by Labor Foreman Marchetta, who assumed responsi-

bility for the completion of the work. The labor force

was relieved by a new gang, but the bricklayers stayed

on overtime. In addition to this work party, Ferran

had General Superintendent Tavan and an undeter-

mined number of machinists and- skilled laborers

working on the engine room pumps.

At about 9:30 P.M. the brickwork on the starboard _

boiler was finished and the bricklayers left. The

Ferran workers ‘replaced the registers and began to

attach the droplines. At the point where the #3 drop-

line was to be reconnected at its upper end, there was

a male fitting (introduced into evidence as Alcoa-8),.

whose threads were worn, and/or may have been

stripped or in a cross-threaded state. _

_ This fitting, the source of much mischief, at this

time, on the basis of its:worn condition alone, was not

proper for further safe use.

Nevertheless, one or more of the Ferran employees

re-engaged the female fitting of the #3 dropline wie

this i improper male fitting.

The identity of the Ferran employee or employees

who made this reconnection is not absolutely clear, as

there may have been someone other than Marchetta

who had put the fittings together hand tight before

Marchetta used a wrench to tighten the coupling.

The Court finds as a matter of fact that what is

absolutely clear is that Ferran employees did recon-

nect the upper coupling of the #3 dropline with a worn

and consequently improper fitting. The Court also’

finds, as a matter. of fact, that the’ fitting in question

was made of bronze and painted silver in lieu of steel

which made a stronger connection.

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| 52

Ferran’s General Superintendent Tavan stated that —

the job of closing up a boiler, i. e., replacing and re- .

engaging registers, droplines and fittings and’ check-

ing, is the work of a qualified boiler maker of ma-

chines. Marchetta, who did close up the boiler, was

not qualified in either capacity.

‘Mr. Tavan stated that is was the duty of Ferran to

- check any dropline fittings it had disconnected, before

°re-engaging them. If defects were found, they were to

be reported to the ship’s personnel, or were to be re-

_ placed properly with non-defective fittings.

As to checking the fitting by touch, Marchetta, who

tightened the fitting, stated that all he did was turn

the female fitting on the male with two half-turns, of

awrench., _

A summary inspection of the brickwork was made

by Alcoa’s Second Engineer Johnson after Marchetta

and Tavan advised that the job was finished. Before

leaving the engine room, Johnson wrote on the black-

board instructions for the firemen coming on at mid-

night and at 4:00 A.M. the next morning.

These orders called for lighting off the burners in the

starboard boiler in rotation in order to facilitate the

drying of the brickwork. The Ferran laborers finished

cleaning up the area and removing their tools, then

they left the ship. : :

Thereafter no one touched the starboard boiler | un-

til 2:00 A.M. the following day.

oo * m

_ From midnight on, Relief Engineer Moses, an el-

derly but qualified chief engineer assigned to the

CORSAIR by the Engineers Union, was standing the

engineer’s watch. Francis F. Gomez relieved Lee A.

Smith as fireman- watertender.

At 2:00 A.M. on October 6, Gomez, pursuant to John- >

son’s instructions, began lighting off the burners of

the starboard boiler to dry the brickwork. This was

thé first time that the starboard boiler had been touch-

ed by anyone since Férran’s Marchetta closed it up.

Gomez was supposed to burn one fire for 10 to 15

_ minutes, turn it off, and, after a lapse of 10 or 15 min-

utes, fire another burner for a 10 to 15 minute period,

continuing the process until he went off duty at 4:00

A.M.

Gomez, however, lit off only two burners between |

2:00 A.M. and 4:00 A.M. and left each burning for a 10

to 15 minute period. One of the two burners he said

he used was the burner on the #3 register. He ex-

perienced no difficulty.

Shortly before 4:00 A.M. on October 6, Thomas C.

Deale, relieved Gomez as fireman. When the watch was

exchanged, Deale found all burners on the starboard

boiler off; and Gomez made only routine reports to him.

At about 4:20 A.M. Deale. made preparations to con-

tinue the rotation of burners in the registers of the

starboard boiler.

He inserted a burner in the burner barrel of the #3

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| lating the oil under préssure, Deale raised its tempera-

ture to about 230 degrees F.,'the proper level for

lighting off. a

At this point the evidence conflicts as to whether

or not Deale turned on the forced draft blower ‘to the

_ Starboard boiler to blow out any fumes which might

be lingering in the fire box. In any event, Deale turned

off the fuel oil circulating line and lit his torch.

.He then opened the upper dropline valve at the #3

through the register’s peephole, and with his right

hand he began opening the lower valve on the reg-

ister’s Gropline. .. |

The critical moment. has now arrived and Deale ©

testifies as follows: Paes

“oe © * and after circulating my oil for 10 or 15

minutes to get it up to the pressure which I

would say we burn it at, then I put my fan on

and brought my air up to better than three

inches or three inches and circulated the boiler

' good to make sure that it.is no fumes in.the

boiler. Then I slowed my fan back down, be-

cause with a high fan you can’t light that boiler

with a torch. It would blow it out every time you

put. it in there. So I slowed it back down, and

* * * which I am left handed * * * I opened the

top: valve to the * * coming off of your burner |

* * and I reached over and shut may circu-

lating line off, and then when'I reached to open

the valve to the burner, which I would say I

opened it a turn and a half, well, that is when

the hot oil hit me on my face and arms, which

I jumped * * * and bringing the torch with

me * * * that is when the: boiler ignited and it

just was a mass of flames, that was all.” Depo- -

sition, page 19.

“I closed it. Then I sil my. peephole open,

which I stuck my torch into the boiler, and

‘-with my right hand I opened the valve about

one turn and a half, and that is. when the oil

hit me from. up above, side of my face (indi-

cating.)”’ Deposition, page 38. |

ised itis you close it, then yet just stick your.

torch right into the boiler and open it, and that

is when the oil.hit me, like I said, on. the side *

down on this arm.” Deposition, page 42.

The clarity of this testimony is indicative that the

procedure’ followed by this witness in firing the #3

cise, sail iniciniaee and impressive to the Court.

When . Deale inserted his torch into: the ofbphele

nothing at that moment happened as it would have had

there been an accumulation of inflammable vapor be- -

hind the register. |

As he opened the valve and pressure developed on

the line the male and female units, Alcoa 7 and 8, parted

company spraying oil at random.

“ ,

PCT MRARATEI ts LGN Sh a sai SAAS Sh tis sh RL et

Deale: was sprayed. and partially covered with. in-

tensely hot, 230-degrees F., fuel oil which struck him on

‘the left side of his head and on the back of his left

upper arm. Scalded with boiling oil, Deale instinctively :

jumped back, in his reflexive recoil pulling the torch

from the peephole of thé boiler.

The torch instantaneously ignited the spray of oil,

and an intense blaze was set off.in the fire room. The

very heart-of the flames separated Deale from a quick

shut-off valve on the fuel oil: header located forward

of the #1 register which he tried to reach.

‘In order to: get to the quick shut-off valve Deale

would have thad to return through the fire area. It ap-

péars that the quick shut-off valve was located at the

forward end of the boiler, in a cul- dé-sac. Unwilling to

risk entrapment in an attempt to close the quick shut-

off valve, Deale ran to the after end of the engine room

with the intent of entering the co, room and going |

through it. to reach the remote controls for the fuel

oil system.

Unfortunately the CO, room was locked and Deale ©

was thus prevented from reaching the CO, room. By

deposition at page 61 he states:

“Q. Suppose. you could have gotten through the

CO, room. Would that have helped matters

‘ any, in your estimation? ©

“A. You could have stopped the fire.

“Q. How?

“A. By shutting off the settling valve.

“Q. And what would the effect have been?

“A. It would have stopped the flow of oil. ?

“Q. ‘And, of course, you would have done that

' had you gotten into that room? . .

“A. That was in my mind to do.”

The now raging fire filled the engine spaces with

that mass of flame and black.smoke that only an oil

fire can produce. The heat was intense. Night Relief

- Engineer Moses, overcome by the smoke and heat,

died of asphyxiation, his body later being found on the

generator flat one level above the fire room.

Shortly after the blaze began a fire bell was sounded

by someone unknown. The alarm wakened the skeleton

crew of 20 aboard the vessel and they awcke to

find their living quarters en engulfed in dense

black smoke.

At the second deck, the flames poured out of the side

port and out of the engine-spaces. Both doors were

open. On each door there was a brass ‘plate with the

inscription reading: “KEEP THESE DOORS CLOSED

AT ALL TIMES.”

The ship’s personnel, in their movements about the

upper decks, were confronted with: severe heat and

were blocked by. walls of dense smoke. Two men knew —

the cause of the fire; one “was dead and the other badly

burned, and presumably ina state of shock.

The fire raged on. eee

de OB Toa pan AE Bee at An

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The next person to gain knowledge of the fire. was

night relief mate, Mr. Graham. Mr. Graham testified

quite candidly that he did not know the location of the

_ control station, another apparatus for the fuel oil sys-

‘tem. As expeditiously‘ as possible, Graham went be-

low in an attempt to shut down. the fuél supply. The

lighting below decks was insufficient and _ Graham

found himself ‘‘very much lost”.

The New Orleans Fire Department was summoned

by a watchman at the gangway of the CORSAIR, and

fire engines arrived at about the same time-as Chief

Engineer Lemon, that is, about 4:40 A.M. :

It is not clear to the Court whether Chief Lemon .

_.. first tried to reach the control station or the CO, room.

It is borne out by the testimony, however, that he did

make one unsuccessful attempt to reach the control

station and one successful attempt. He successfully

cut off the supply of boiler ‘wel seeding the fire at

about 5:00 A.M.

His attempt to reach the control station had been :

abortive. He testified on two occasions, once before

the Coast Guard and once on deposition; that he made

an attempt to reach the controls system just aft of the

engine room. door, port side. Whether Mr. Lemon was

' confused by the urgency of the ‘situation, or the holo-

caust that confronted him, is not clear, however it is

clearly demonstrated that the control station was lo-

‘cated on the starboard side of the vessel and not the

port side.

Compounding the inaccessibility of the controls, the

Court notes that Mr. Smith, the fireman on watch dur-

ing the day, testified that the control station was on

the port side of the vessel; Mr. Kent, the night relief

engineer from 4:00 P.M: to midnight testified that he

was not familiar with ‘the location of the control stay ,

tion; Mr. Graham, the night relief mate, on watch at the -

‘time of the fire, did not know the location of the sta--

‘ tion on the starboard side of the second deck, amid-.

ships, and more important, neither did Mr. Deale who

_ Was on watch at the boilers. Mr. Deale testified as fol-

‘” lows:

2. And if the ( CO, room 1 had. not been locked,

would you have been able to start that

system?

“A. No,I wouldn’t have tried to start that sys-

"tem. while I was down there.

- “Q. Why?

“A. You couldn’t start it iin en

“Q. Where do youstart itfrom?- _

Mi Well, I presume on there it was up on the

top deck, on the passenger ship. I just don’t

‘know exactly where the main pulling valve —

. was to them or not, to set them bottles off,

but my idea was to go through the ©,

room as an escape.” °

_ (Deposition pages 53-54.)

The control station is to be distinguished from the

CO, room in that the CO, room is located in the hold.

aft of the starboard machinery spaces. If the Co, .

room had’ not been locked and ™ ventilating fans

‘

off, the fire could have been brought under early con-

trol and damage minimized. In this light Mr. Deale

testified as follows: |

“Q. .Suppose you could have gotten through the

CO, room. Would that have helped matters

_ any, in your estimation?

“A. You could have stopped the fire.

“Q. How?

/ “A. By shutting off the settling valve.

“Q. And what would the. effect have been?.

“A, It would have stopped the flow of oil.

“Q. And, iof course, you-would have om that

had you gotten into that room?

“A. That was in my mind to.”

(Deposition, page 61.)

_To make the CORSAIR case even more difficult to |

accept, it appears from Captain Davis’ testimony that

had the CO, been activated, it would not have been

effective in extinguishing the fire. The engine room

of the CORSAIR was equipped with a ventilating sys-

tem consisting of certain fans which would move

approximately 56,000 cubic feet of air per minute in -

and out of the engine room. There was no remote

control for this ventilating system and the ventilating

» fans were accordingly on after the fire was extin-

guished.

Therefore, even if the CO, system had been acti-

vated, the CO, would have been withdrawn from the

engine room as fast as it was put in. Hence we have

a system designed to fight fire consisting of carbon

61.

dioxide which would have. been totally ineffective be-

cause the fire fighting chemical would have been

pulled out of the area of the fire by ventilating fans *

as fast as it was discharged from the fire fighting

system.

So even if the CO, system had been activated the

_lack of automatic stops for the ventilating system

would have prevented the carbon dioxide from serv-

ing its purpose. It would thus appear that the COR-

SAIR, in this respect, was unseaworthy by naval archi-

tectural design and standards.

. After Chief Engineer Lemon reached the remote fuel

oil controls the fire was quickly extinguished, its source

cut off. It was not until 6:30 A.M. that the machinery

spaces had cooled sufficiently to allow entry.

At that time Chief Engineer Lamon and Port Cap-

taif? Davis went below to search for the missing Night

Relief Engineer, Mr. Moses. As stated before, his

_ corpse lay on the generator flat.

While below, both Davis and Lemon found the drop-

line at the ‘#3 register separated at its upper coupling.

The next group to enter the engine room consisted

of Benjamin J. Morrison, then employed by Ferran,

Louis Tavan, Ferran’s superintendent, and Captain

Davis. They went down about 9:00 A.M., Saturday, to

examine the damage in connection with the repairs to

be made. Morrison held‘a license as a marine engineer

and had worked for many years in the oil field and

ac ti HF a

ATONE: NINH AR LIT a eH

peerres

ship repair business. He’ was naturally curious about

possible causes of the fire.

In his examination, Mr. Morrison testifies that he

found that the valve’ of the forced draft blower was in

the closed position. Not only did he check the position

of the valve wheel, but he asserts that he checked the

thread stem at the forced draft blower itself and found

that it also was closed.

Although hie ‘Was not with the Morrison inspection

group, Chief Leman found the valve of the forced draft

blower open and in operating position on his inspec-

tion after the fire.

Whether or not Deale turned on the forced draft

blower prior to insertion of the lighter to ignite the —

third register is a subject of conflicting testimony.

Nevertheless, the Court finds that Deale did turn on

the blower before seeking to ignite the register. Dis-

regarding the human testimony, the inescapable physi- - .

cal facts indicate that no explosion occurred when the

torch was first inserted into the peephole. Had there

been residual oil and vapor behind the register an

explosion would probably have occurred within the

eration. |

The clearest and most reasonable construction of the

testimony is that the critical valve was parted simul-

taneously or just prior to the fire. This could only have’

occurred as a.result of a defective connection or as a

result of an explosion due to combustion of residual

a .

oil and fumes which Deale had failed to solve by prop-

er use of the blowers. 7

Thg Court has discarded the premise that combus-

tion within the register caused fire because it is felt

that an entirely different type of damage would have

resulted, that is, the register would have been blown

off, there would have been inside damage to the regis-

ter and boiler, whereas it is an accepted fact that there

_ Was no damage except the difiocation of the critical

valve.

- The face of the register was scorched and the in-

tense heat left its mark, but there was no serious

mechanical damage, all leading to the inescapable

conclusion that this fire had its inception when -the

male and female components of ‘the valve parted,

Spraying boiling oil over the area and onto the face and

neck of the man who stood at the register. —

Thus it is that we may discard the testimony of the

several witnesses and decide this matter on the physi-

Cal facts as heretofore decided, that the blowers were —

turned on before ignition took place.

. 4

With evidence so hopelessly in conflict, the Court

notes that the photographic evidence of the scene of

the calamity taken’ Shortly after the fire shows the

plate housing the #3 register intact, but the dropline

parted at the upper coupling. Strange how a flareback

would not damage the outside casing or register hous-

ing but still part the upper coupling. |

On October 8, 1956, Alcoa and Ferran entered into a .

general written contract (the only written contract

ever made between the parties) to repair the fire

damage on the CORSAIR. Payment was again to be on

a time-and-materials basis: This written contract

specifically called for Ferran to carry insurance in the

- amount of one million dollars for the al damage re-

pairs, as previously discussed.

Alcoa re-engaged the services of Ferran at this point. |

because Ferran was most familiar with the CORSAIR

and it. was expedient that the CORSAIR be returned ae

Service as soon-as possible.

| First of all, there can no longer be any doubt that a .-

_contract to repair a vessel is a maritime contract.

Such has long been the law, The General Smith, 4

Wheat. 438, 17 U.S. 438, 4 L.Ed. 609; North Pacific

Steamship Company v. Hall Brothers Company, 249

U.S. 119, 31 S.Ct. 221, 63 L.Ed. 510, and accordingly

federal maritime law governs the construction of the

. agreement, even if consensual, Booth Steamship Com-

pahy v. Meier & Oelhaf Company, 262 F.2d 310 (2 Cir.

1958).

It is also old hat that when a shipowner and an ex-

pert independent contractor enter into a service agree-

ment,-the shipowner is entitled to indemnification for:

all damages sustained‘ as a result of the contractor’s’

breach of its warranty of workmanlike service, all as

brought out in the Longshoreman versus Shipowner ~

versus Stevedore cases, Ryan Stevedoring Company v.

Pan-Atlantic Steamship Corporation, 350 U.S.. 124, 76

S.Ct. 232, 100 L.Ed. 133; Weyerhaeuser Steamship Com-

pany v. Nacirema Operating Company, Inc., 355 U.S.

563, 78 S.Ct. 438, 2 L.Ed.2d 491; Crumady v. Joachim

Hendrik Fisser, 358 U.S. 423, 79 S.Ct. 445, 3 U.E.d2d 413.

It is not a gigantic step forward to hold the “warranty

of workmanlike service that is comparable to the |

manufacturer’s warranty of the soundness of its manu-

factured product’’, Ryan, supra, 350 U.S. at pages 133-

134, 76.S.Ct. at. page 237, to a ship repairman. Such a

Step has been made on several occasions. Booth Steam-

ship Company v. Meier & Oelhaf Company, 262 F.2d 310

(2 Cir. 1958); Hershey Chocolate Corporation v. The

S.S. Robert Luckenbach, 184 F. Supp. 134 (D.Ore. 1960),

affirmed 295 F. 2d 619 (9 Cir. 1961).

In the latter’ case, Judge Kilkenny, ‘considering the

liability of a ship repairer, Albina Engine & Machine

Works, stated: _ - ;

_ “Albina argues that these cases should be dis-

tinguished in that. they involve personal in-

_juries to a stevedore, rather than property

damage to a vessel. I am unable to’ distinguish

the logic or the soundness of the reasoning in

the stevedoring cases from what should be the

logic and the soundness of the reasoning in ar-

riving at a proper conclusion in this case. The

decisions in the Stevedore cases control. I see

no distinction between liability by way of in-

demnity and liahility by way of direct damage

_ Or compensation.” Hershey, supra, 184 F. Supp.

_ at pp. 140-141. ‘

_ Thus the court is presented with a register, #3 star-

board, which was not prone to spraying boiling oil

about the engine room prior to October 6, 1956, such

tractor in re-bricking the starboard boiler on October

4th and 5th, being re-assembled and after being used

once, spraying boiling oil about the engine room and

onto the ship’s personnel from the upper dropline coup-

ling.

. The Court finds that Ferran’s negligent, assembling

of the upper coupling of the dropline on the #3 register:

was, in fact, a breach of its warranty of workmanlike

service and liability is thus imposed under the authori-

ties cited heretofore. _ |

If the register had not been removed, as asserted by

Ferran, there is positive evidence to the effect that

Marchetta sought to tighten the defective coupling in .

‘question with a hand wrench. The Court concludes that

Ferran is liable for its negligence in violating the war-

ranty of workmanlike service as the proximate cause

of this accident. ~

Thus far, this Court has cast Ferran both factually -

and legally in liability to Alcoa for the damage result-

ing from its breach of warranty. Now the scorching,

searing question is whether an award should or should

not be reduced due to unseaworthiness of the vessel, if

any, and acts of negligence, if any, which existed before

or transpired after the inception of the fire.

First of all, the Court notes that the fire could have

been extinguished in a matter of seconds had the quick

Shut-off valve been located in a more accessible area.

The two boilers of the CORSAIR were located at the

forward end of the engine room space, and almost im- .

mediately forward of the boiler was a thwartship bulk-

~ head which had no openings in it. Crew members work- _. j

ing at the boilers and suddenly confronted with an

emergency Situation had to make their exits from the

after end of the engine room. Thus in the event of a fuel

oil fire inthe machinery spaces, the one piece of safe.

ty equipment to cut: the source of oi] feeding the fire.

is inaccessible. ' _&

This piece of safety equipment was inaccessible by

the vessel’s ‘very design. The Court finds a patent case

of ,unseaworthiness when a piece of safety equipment

, is rendered inaccessible by the very catastrophe which

it was designed to prevent. :

¢ .

LOE ERODE Peer e

Secondly, a locked CO, room is as good as no CO,

room at all. This ‘elementary point is too obvious to

cry out for an elaborate dissertation on the functions

of CO, and the purposes of the room which stores it.

” EE I OL Tae Oy CN PAY

is a 7

Inasmuch as the CO, was not activated, the Court

will not again stress the fact that a ventilating system

Capable of removing 56,000 cubic feet, of air per min- ' &§

ute would have removed the CO, as fast as it was put

into the engine room.

Third, the court should point out that, compounding

the negligence of locking the CO, room, Deale could

‘have stopped the fire by shutting the “settling valve”

the effect of which would have been to stop the. flow of

oil, for, in his own words, ‘‘that was in my mind to do”.

Fourth, the Court finds that those members of the

crew on watch: at the time, officer and rank-and-file,

did not know the location of the control station for the.

machinery spaces which were located on the starboard

side, second deck, amidships. |

Fifth, doors leading to the engine room were left

wide operi, even though they were supposed to be

“closed at all times”. Black, dense smoke from the fire

spewed into the crew’s quarters further compounding -

the pandemonium that ensued after the fire bell was

sounded and making things quite difficult for officers.

and men who did not know the location of the control

station for the machinery spaces. Indubitably, a rag-

ing fire that might have been stopped at a relatively

early stage escalated and raged on, fed by oil until

Chief Engineer Lemon finally turned the valves off

from the remote control station some 40 minutes later.

This‘ Court finds that these acts of negligence and

unseaworthiness warrant the application of the doc-

trine of “Avoidable Consequences”.

In legal support of the doctrine, see Southport Trans-

it Co. v. Avondale Marine Ways, 234 F.2d 947, 951-954

(5 Cir. 1956) and extensive authorities cited therein.

According to that theory, “a plaintiff, with an otherwise

valid right of action, is denied recovery for so much

of the losses as are shown to have resulted from failure

on his part to use reasonable efforts to avoid or pre-

vent them.” 234 F.2d at 951-952. Therefore the question

arises whether, and to what extent, if any, the losses’

Sustainéd could have been averted or diminished by

the performance of any reasonable efforts or responsi-

bilities imputable to Alcoa. In other words, after the

initial damages had resulted from the acts of respond-

ent Ferran, were any of the subsequent damages at-

tributable to libelant Alcoa’s own negligence or the un-

. Seaworthiness of the vessel. The Court feels so, for

much of the damage resulted from’ Alcoa’s failure to

have reasonable fire fighting apparatus available and

usable, as well as its failure to perform certain duties

- which would have curtailed the heavy losses that oc-

curred. -

In conclusion the Court holds:

1) That the Red-Letter clause is applicable to and

binding upon libelant Alcoa and respondent Ferran;

2). Ferran’s negligence was the papaimate cause of

the start of the fire; i

3) The negligent acts of Alcoa and unseaworthy

condition of the CORSAIR as specified in this opinion

must be construed to mitigate the damages which oc-

curred. .

As stipulated by counsel, this Court is not called upon

to determine the quantum nor to apportion the dam-

ages which ensued as a result of the initial fire and

those damages which resulted from the escalation of

* ~ .

SARIS Bhesins ates ay Naka ips eR ashes tata

Ps]

the fire and smoke that could at some point have been

"avoided had the vessel been seaworthy and Alcoa free ~

of negligence.

APPENDIX D _

Opinion of the District Court on Rehearing

ei a

No. 3390 — In Admiralty

’

(Title Omitted)

+ (March 2, 1966)

_ . FRANK B. ELLIS, District Judge.”

On October 6, 1956, a devastating oil-fed blaze aboard

the SS ALCOA CORSAIR gutted a major portion of the

-vessel’s engine spaces, killed one man and left another

badly burned. The owner of the vessel, Alcoa Steamship

Company, Inc. (Alcoa) then instituted this million

dollar libel.for damages against the ship's repairers,

Charles Ferran & Company, Inc. (Ferran), and against

Ferran’s, insurers. Ferran had just a few hours ear-

lier completed rebricking the starboard boiler. The

parties, reserving the determination of the quantum

of damages for a later date, tried the questions of liabili-

ty to the Court without a jury, and om April 22, 1965, .

this court filed written findings of fact and conclusions

of law. Aleoa Steamship Company, Inc. v. Charles Fer-

ran & Company, The. 242 F. rien 962-975 (E.D.La.1965).

In brief this Court held. ;

1) That the “Red Letter” clause uniformly in-

‘ serted in all prior Ferran-Alcoa repair contracts

limiting Ferran’s liability vis-a-vis Alcoa to

$300,000.00 was binding and enforceable;

2) That-Ferran’s negligence in improperly re-con-

necting the dropline which supplied pre-héated

oil to the starboard boiler through the #3 burner.

ception; and .

3) That the negligent acts of Alcoa and the unsea-

-worthy condition of the CORSAIR warrant ap-

plication of the “avoidable consequences” doc- .

trine and. an ultimate apportionment of the total

damages.

None of the parties being satisfied, motions for rehear-

ing and for supplemental and amended findings of fact

and ‘conclusions of law were filed, followed by oral

argument. ;

a) Prior findings of fact.

At the outset of this petaieinetien. a skeleton restate-

ment of the original fact findings is appropriate. The

CORSAIR is an oil burning, steam-driven, single screw,

modified Victory Ship constructed in 1947. Its oil is pre-

, heated to 230 degrees Fahrenheit and piped through

droplines into the four burnef registers on each of the

two boilers where the oil is then mixed with air and

ignited to heat the boiler, produée steam and turn the

propellor. Ferran removed the #3 register on the star-

board boiler to rebrick the inside and, in re-attaching

the dropline to the register after finishing the work in-

side the boiler, one of Ferran’s employees re-engaged

the female fitting on the #3-dropline with the cor-

responding male fitting “whose threads were worn,

and/or may have been stripped or in a cross-threaded

state.” 242 F.Supp. at 968. This was shortly after 9:30

P.M. the night of October 5th. |

_ At about 4:35 A.M. the morning of October 6th, the

CORSAIR’S Fireman, Thomas C. Deale, after -having

re-circulated the oil to build up.pressure and raise its

temperature to 230 degrees, opened the valve above the.

defective coupling with his one hand and was sprayed

ing backwards, the lighting torch which he had been

holding to the register’s peephole ignited the uncontrol-

led flow of oil and sparked the holocaust that followed.

The rapidly expanding inferno separated Deale from

the “quick shut-off valve’”’ which, had it been reached

and closed, would have minimized the damages. And

-Deale’s heroic efforts to reach the settling valve, a

remote fuel oil system control, were thwarted by a

locked door on the CO, room through which he would

have had to pass. No one else aboard the ship at the

time knew how or where to cut off, by use of remote

controls, the flow of oil that continued to feed the fire.

The CORSAIR’S Chief Engineer, Mr. Lemon, was sum-

moned, but it was not until about 5 A.M. that he finally |

73 |

| succeeded in his efforts to cut off the flow of fuel oil

feeding the fire.

b) Ferran’s negligence.

We remain unswayed by Winnie Ss continued argu-

ments that the blaze’s beginning did not result from

negligence attributable to Ferran. As set forth at length

in our original opinion, the physical facts, supported

by testimony from some of the witnesses, leads ‘‘to the

inescapable conclusion that this fire had its inception

when the male and female components of the valve

parted,” the same components that Ferran had a few

c) Applicability of ‘Red Letter” clause.

Equally unpersuasive is Alcoa’s ‘argument, incor-

porated only by reference in its original memorandum

on rehearing, that the “Red Letter” clause, purporting

to limit Ferran’s liability-to $300,000.00, was not a part.

of the contract ostensibly cornpleted just prior to the

fire. The common practice between these parties, not

their explicit words prior to the fire, belied the true

relationship.

“Usages and customs may be proved * * * to

affect the contractual relations of the parties

by adding a provision. to the contract that the

words of the parties cun scarcely be said to

have expressed.” 3 Corbin on Contracts, § 556,

p. 240 (1960 Ed.)

1See especially, 242 F. Supp. at 972. .

BELL RES LOLI ORGS, PCMDI :

“ .

REGEN ET

Dee HK og

The Ferran-Alcoa repair.contract relationship is ex-

plained in 242 F.Supp. at 965-966. We therefore re-

affirm. the findings that the ‘‘Red Letter” clause form-

ed part of the contract at issue.

d) Validity of “Red Letter” clause. 7 ‘

‘The next step, not fully developed in the original

opinion, is whether the “Red Letter” clause, limiting

Ferran’s liability, stands invalid as against public pol-

icy. This mutually agreed upon clause purports to re-

lieve Ferran from liability for damages in excess of

_ $300,000.00, caused by Ferran’s own negligence or

breach of contract.2 In Bisso v. Inland Waterways °

Corp., 349 U.S. 85, 75 S.Ct. 629, 99 L.Ed. 911 (1955) the

negligent towage by those operating the Tug Cairo

caused-the oil barge Bisso to collide with a bridge pier

and sink. The Tug owners had exacted a “release-from-

liability-clause’”’ from the barge interests as part of the

towage contract. In effect, the release clause purported

to relieve the tug owners from all liability for their own |

negligence. The Supreme Court sovaiidbte the release

clause for two main reasons:

“(1) to discourage negligence by making

wrongdoers pay damages, and (2) to protect

those in need of goods or services from being

overreached by others who have power to

drive hard bargains.’’? 349 U.S. at 91, 75 S.Ct.

at 632.

2The “Red Letter” clause is set forth in full at 242 F. Supp. 965.

Ai toayeets

75,

Briefly stated, the Court in Bisso held “that tow and

tug: may not by agreement relieve the tug of liability

for damage to the tow caused by the tug’s negligence.”

Alcoa here attempts to analogize its position with the

Bisso holding by parodying “that ship and repairer.

may not by agreement relieve the repairman of liabil-

ity for damage to the ship caused by the repairman’s

negligence.’’ The whole tenor of the majority opinion

in Bisso, however, as well as the dissenters’ analysis

of the majority holding, fails to adequately support

Alcoa’s argument. Significant factual differences exist.

First, while relief from all liability for negligence

might not discourage negligence, potential responsi

bility for $300,000.00 in damages would have the effect

of discouraging negligence. Under the “Red Letter”

clause Ferran remains responsible for a substantial

amount of damages. Secondly, it is the general rule of

contracts that ‘‘with certain exceptions the courts see

no harm in express agreements limiting the damages

to be recovered for breach of contract.” The “excep-

tions” referred to. involve, generally, contracts of the

adhesion-type wherein the bargaining power of one

party is extremely restricted to the point where coun-

tenancing the limitation becomes ‘unconscionable.

When a limitation does not résult from inequality of

bargaining power, the courts prefer to let parties lie

on the bed they make.®

2349 U.S. at 98, 75 S.Ct. at 637; Mr. Justice Frankfurter, joined by

Mr. Justice’ Reed and Mr. Justice Burton, dissenting.

45 Corbin on Contracts, § 1068, p. 386 (1960 Ed.)

SIbid.

ERG: Ae EY

ai a a

| iain

. 16

In Bisso the Supreme Court ruled that contracts re-

leasing a tug or its owners from all liability are,

the powerful bargaining position enjoyed by tugs when

dealing with barge owners.” Similarly leashed are

common carriers,® employers,® and manufacturers or .

dealers in a position to utilize adhesion contracts.'®

In sharp contradistinction stands the situation where

the bargaining power of the parties approximates

equality.'' Alcoa has not proven. that Ferran held a

severely imbalanced upper hand.'2 Nor was evidence

produced to show that all ship repairers’, or all Ferran

company contracts with all vessel owners included a.

$300,000.00 limitation clause. In fact, the Ferran-Alcoa

contract for post-fire repairs to the CORSAIR express-

ly excluded the “Rea Letter’’ clause. Consequently, un- -

der the circumstances, this court does not consider

Ferran’s limiting of its liability to $300,000.00 to be un-

conscionable, and hen ‘e concludes that the clause is

valid. See Sun Oil Co. v. Dalzell Towing Co., 287 US.

291, 53 S.Ct. 135, 77 L.Ed. 311 (1932).

6349 U.S. at 90, 75 S.Ct. 629.

7Id. at 89, 75 S.Ct. 629.

86A Corbin on Contracts, § 1472, p. 592 (1960 Ed. ).

91d. at 598.

10Id. at 599, citing Henningsen v. Bloomfield Motors, Inc., 32 N.J.

358, 161 A.2d 69, 75 A.L.R.2d 1 (1960).

11Id. at 601-602: “One who employs another to install machinery

and equipment can lawfully agree to exempt him from liabili-

ty for negligence in the process.” i

12See Bisso, 349 U.S. at 117-121. 75 S.Ct. 629, Frankfurter, J.,

dissenting.

e) ‘Applicability of the “Red Letter” clause to Alcoa’s

Direct Action against Ferran’s insurers.

In addition to its action against Ferran, Alcoa sued

Ferran’s insurers pursuant to the Louisiana Direct

Action Statute, LSA-Rev.Stat. 22:655. This Statute -

creates a cause of:action in favor of persons injured in

Louisiana which can be asserted directly against the

' public liability carrier of a tortfeasor, regardless of the

tortfeasor’s joinder in the suit. While there exists re-

spectable authority for the proposition that suits solely

ex contractu are not cognizable within the Direct Ac-.

tion Statute,'*. we need not resolve that issue here.

_ A mere reading of libellant’s petition makes it evident

that libellant seeks recovery both in contract and in

tort. See Newport News Shipbuilding & Drydock Co. v.

United States, 226 F.2d 137 (4th Cir.. 1955). This Court’s

finding of tortious negligence on the part of Ferran

supports the Direct Action against Ferran’s insurers.

From the outset, though, Ferran’s insurers have con-

tended that they stand in the same shoes as does Fer-

.' Tan, especially with respect to the “Red Letter”

clause’s $300,000.00 limitation on liability. The issue

received little attention until this. court, virtually con-

temporaneously with rendition of the initial opinion

' in the present case, announced its decision in the I TCO.

case, In the Matter of Independent Towing Company,

EA lac Ra” i

‘f 18

Inc., 242 F.Supp. 950 (E.D.La.1965).'* There we held

that the ‘Limitation of Vessel Owner’s Liability” pro-

visions, originally. enacted by. Congress in 1851,'5

created a defense to actions asserted by injured per-

. sons against vessel owners, but did not inure to the

benefit of the vessel owner’s insurers or the vessel’s .

underwriters since such provisions were traditionally

considered a defense personal to the vessel interests

and of the type generally denied ‘insurers by Louisiana

courts. See ITCO, 242 F.Supp. at 954.

The ITCO decision built upon one corner of’ the

Supreme Court’s ruling in Maryland Casualty Co. v.

Cushing, 347 U.S. 409, 74 S.Ct. 608, 98 L.Ed: 806 (1954). ~

In Cushing, the issue faced by the Court involved -the

compatability of the Louisiana Direct Action Statute

and the same congressionally enacted limitation pro-

visions. Under: the_procedural circumstances of that

litigation, wherein direct actions and a limitation pro-

ceeding were pending simultaneously, but were not

consolidated, Justices Frankfurter, Reed, Jackson and

Burton concluded that the “direct action statute —

clashes with the federal ‘system for marshalling all

claims arising from certain maritime causes of ac-

tion,’’ 347 U.S. at 415, 74 S.Ct. at 611, for two reasons,

one being that permitting separate judgments “would

detract from the benefit of a concursus and undermine

the operation of the congressional scheme for the

‘complete and just disposition of a many cornered con-

14The ITCO case was settled prior. to trial on the merits, without

appeal.

159 Stat. 635; now 46 U.S.C.A. § 181 et sea.

a a a ac I eee eens

fringement upon federal law,” 347 U!S, at 421, 74 S.Ct.

at 615. - .

ana policy of protecting people within its borders by |

. Permitting prosecution of actions directly against a

proposed to accord recognition to both Statutes, the

federal limitation act by protecting first the “owner’s

the insurance companies on the remaining coverage

of the policies.”. 347° U.S. at 425, 74 S.Ct. at 617.

+ CORTE Ee EE

eb |

sO Goud? mala

eo,

2s Den ee ee

a ;

he was joined by Justices Frankfurter, Reed, Jackson

and Burton in establishing the sequence in which the

two would be determined — the procedural question. °

347 U.S. at 423,74 S.Ct. 608.

At the time the Cushing decision was announced, the

posture of that case and its related lawsuits was such

that issuance of a stay order was equitably necessary

to effectuate the procedural majority’s holding. In .

‘practice, application of the principles stated in the

Cushing case became difficult, if not impossible. See

Gilmore and Black, Admiralty, §10-31, p. 715 (1957 ed. )5

and Ex parte Tokio Marine & Fire Insurance Co., 322

F.2d 113 (5th Cir. 1963). One problem appears to be

whether the “substantive majority” exists at all. In

Coleman v. Jahncke Service, Inc., 341 F.2d 956 (5th Cir.

1965), certiorari denied Jahncke Service, Inc. v. Great-

er New Orleans Expressway Comm., 86 S.Ct. 538 (1966),

the Court recognized this substantive problem but “cir-

cumnavigated”’ it. See 341 F.2d at 960. |

Gilmore and Black concluded that tly Cushing case

“presumably establishes a procedure to be followed

by “lower courts in handling similar cases until the

Supreme Court further clarifies the isues.”"* The prac-

tice has since developed that all vessel owners praying

for limitation of liability under the federal act con- —

sider themselves to be involved :in ‘‘similar cases’”’ and

therefore mechanically request a broad injunction or

restraining order prohibiting the filing and prosecution ~

of actions against themselves, their insurers, vessels

16Gilmore and Black, Admiralty, § 10-31, p. 715 (1957 Ed.).

and underwriters. In effect, vessel owners read Cush-

ing as establishing an inflexible procedural rule: no

direct action until limitation ‘is terminated. Such a. ;

reading of course guarantees a concursus in all limita- |

tion-related proceedings, but at the same time this

inflexible procedural rule denies injured claimants

their right of direct action in part by delaying the fil-

ing and prosecution of the direct action. In the Eastern

District of Louisiana where the largest caseload per

judgeship exists, and the average delay from , filing

to trial approximates three years, this means that di-

rect action-limitation claimants can anticipate an

even longer delay since their state-created right can

not even be filed until the limitation proceeding is

terminated. But is the procedural majority’s rule so

inflexible? We submitted in the ITCO decision that

it is not, and there enumerated several situations,

_ where the recognition and prosecution of direct action

rights concurrently with the limitation _ proceeding

would not impinge on the substantive rights created .

by the ‘federal limitation act. See 242 F.Supp. at 956.

We concluded, in short, that the procedural majority’s

Tule of limitation-before-direct-action should be in-

voked only in those situations where a substantive right

might be irretrievably lost; the Cushing case’s pro-

cedural majority rule need not be mechanically and au-

tomatically applied in all limitation-direct action situa- |

tions. We consider this an equitable rule of reason, and

can not countenance. any conclusion that the procedural

rule announced in Cushing, which was certainly an

equitable result under the circumstances of that litiga-

tion, would produce an inflexible rule and oftentimes in-

equitable result. When there can arise no infringement

Leen”

of a federally protected right, the Ninth'? and Tenth'®

amendments to the Constitution of the United States

require recognition and protection of a state-created

right, here the right of an injured party to a direct ac-

tion against the tortfeasor’s insurer.'®

One recent application of the ITCO decision’s pro-

cedural rule of reason illustrates its practical flexibili-

ty. In Singer v. Dorr, 38 F.R.D. 167 (E.D:La. 1965), a

widow sued for damages resulting from the wrongful

17“The enumeration in the Constitution, of certain rights, shall not

.be construed to deny or disparage others retained by the peo-

ple. _ ay

18“The powers not delegated to the United States by the Constitu-

tion, nor prohibited by it to the States, are reserved to the

States respectively, or to the people.”

19For direct actions to be permitted at all, the cause of action must

Jhave arisen within the borders of a state permitting direct

actions. See Guess v. Read, 290: F.2d 622 (5 Cir. 1961). The

theoretical situation posed in Cushing where twenty people

from twenty different states are injured by a large wave is,

at best, a remote possibility within the borders of the two

states presently recognizing direct actions, Louisiana and Wis-

consin. Far more ccmmon are situations where one deckhand —

falls overboard from a barge on the Mississippi River, or a

master is trapped in the wheelhouse of a capsized tug, or a local

. workman is injured when a barge being repaired explodes, or

a tug and tow strikes the Lake Pontchartrain Causeway. State

court direct actions in other states, if not precluded by local

public policy, would in most instances be susceptible to remov-

al and once in federal court transferable, for ‘the convenience

of the parties and the witnesses, to the district wherein the

limitation proceeding is pending so that consolidation may be

effected. The insurers would bear the responsibility for effect-

ing this total consolidation. Whenever total consolidation

could not for some reason, be effected, the limitation court

could, in aid of its jurisdiction, at that point enjoin other

actions rather than doing so at the outset. See 28 U.S.C.A. §2283

and Ex parte Tokio Marine and Fire Ins. Co., 322 F.2d 113

(5th Cir. 1963).

L-7)

death of her deckhand husband who fell overboard and

— in the Mississippi River. The suit named both

the decedent’s employer and its insurer as defendants.

" Limitation of Liability pursuant to the federal statute

was asserted in the answer as ‘@ special defense. Rely- .

ing on the ITCO decision, pad exercising its discretion

under Rule 42(b),?° a ‘discretion that would be ab-

solutely precluded if the Cushing “procedural majori-

ty” were uniformly invoked in all situations, this court

ordered a separate trial of the limitation of liability

issues to take place subsequent to trial of the other

issues. The expectatién that trial of the limitation

issues would be unnecessary came to realization when

the jury found for plaintiff in an amount well within ‘?

policy limits, — | - |

In a sense, the ITCO decision presupposes the exist-

ence of the Cushing “‘substantive majority.” Chief Jus- * 4

tice Warren and Justices Black, Douglas and Minton ;

clearly refuted the insurance companies’ constitutional

objections urged against the Louisiana public policy

as expressed in its Direct Action statute. The opening

sentence of Justice Clark’s concurring opinion indicates

that he perceived “no necessity for invalidating Louisi-

ana’s law by dismissing these direct. actions.” 347 U.S.

at 423, 74 S.Ct. at 615. He later stated that “[w]hen the

issue is so close, I would resolve it in favor of uphold- |

ing rather than invalidating a state statute,” and con- -

cluded with the observation that the claimants could

assert their substantive direct action rights after the

' limitation proceedings were concluded. 347 U.S. at 426-

ane oet Sag

20F.R.Civ.P., 28 U.S.C.A.

PARI Rin A aespe EE

427, 74 S.Ct. at 617. Justice Clark’s attention was .

focused on making certain “that such [direct] actions

do not interfere with the Federal Limitation proceed-

ing.” 347 U.S. at 425, 74 S.Ct. at 616. We carefully note

here that, based on these excerpts, Justice Clark did

not consider the Louisiana Direct Action Statute a per

se infringement of the federal admiralty jurisdiction.

In this sense he created the “substantive majority” by

declaring the Direct Action statute ‘applicable in aa-

'- miralty. Only when the application of that statute in

admiralty jurisdiction procedurally interfered with

the federal limitation proceeding, as it did in the pre-

. cise. nature of the Cushing situation, would Justice

Clark stay the direct action: Consequently, we hold that

_ the “substantive majority” rule of Cushing does, in fact,

exist, precluding the filing or prosecution of direct

actions, or the execution of a judgment secured through

a direct action, only when the direct action unreason-.

ably interferes with the limitation proceeding.

So stated, recognition of the Cushing ‘substantive

‘majority’ lends further support to the proposition, if °

only by negative inference, that the “procedural ma-

jority” rule was not. intended to be inflexible. Lack of

interference with the limitation proceeding would per-

mit concurrent prosecution of the direct action.

_ Interestingly, counsel for Alcoa subscribe to the ITCO

rationale and in fact echo that decision’s holding as ,

legal authority for the proposition “‘that the ‘red letter’

clause does not extend in favor of the Ferran liability

insurers and that the latter are liable without limita-

Vn A Cll = allen, pe 8 cabs EE S

tion herein.”?' While it is true that insurers were de-

nied the benefits of statutory federal limitation of liabil-

ity in ITCO, it does not automatically follow that in-|

Surers should be denied the benefits of a contractual

limitation of liability here. The similarities may only

be superficial. Since the McCarran Act, 59 Stat. 33-34, -

15 U.S.C.A. § 1011 et seq., prohibits federal regulation

of the “business. of insurance” and expressly reserves

such regulation to “the several States,”22 we turn to

the law of Louisiana for the legal principles on which

to base our resolution of the issue here presented.

Under the Louisiana Direct. Action Statute, a tort-

_ feasor and the tortfeasor’s insurer are considered co-

‘debtors in solido, each liable for the full amount of

damages suffered by an injured party. The defenses —

which may be asserted by each codebtor in solido are

established by the Louisiana Civil Code:

“Ar. 2098. _ A codebtor in solido, being sued by

the creditor may plead all the exceptions re-

Sulting from the nature of the obligation, and

all such.as are personal to himself, as well as

Such as are common to all the codebtors.

‘ “He can not plead such exceptions as are mere-

ly personal to some of the other codebtors.”

21Libellant’s Memorandum in Support of Motion For Rehearing

' and for Supplemental and amended Findings of' Fact and

22See Maryland Casualty Co. yv Cushing, 347 U‘S. 409, 436-437,

74 S.Ct. 608, 98 L.Ed. 806 (1954); and Coleman v. Jahncke

Service, Inc., 341 F.2d 956, 960-961 (5 Cir. 1956), cert. denied,

Jahncke Service, Inc. v. Greater New Orleans Expressway

Comm., 86 S.Ct. 538 (1966). :°

‘

~ “ ‘ alias Uk Ts aate on 2 ee

.¥ PR RENIN =) Mew, ORR a ree 5

jew

LINNEA OS Ra ea

This codal article permits an insurer to assert three

a" types of defenses:

(1) Those resulting from: the nature of the obliga-

tion;

(2) Those which are personal to the insurer; and

(3) Those which are common to’all the codebtors;

but prevents the insurer from asserting as a defense

one which is merely personal to another codebtor.

In the ITCO decision we referred to numeous ex-

- amples of defenses which are considered “personal” —

. under Louisiana law, and hence defenses which can-

not be asserted by a tortfeasor’s insurer. These de-

fenses included infancy, LSA-Rev.Stat. 9:571 and Rou-

ley v. State Farm Mutual Automobile Ins. Co., 235 F.

Supp. 786, 793 (W.D.La.1964); coverture, Edwards v.

Royal Indemnity Co., 182 La. 171, 161 So. 191 (1935) and

Dumas v. United States Fidelity & Guaranty Co., 241

La. 1096, 134 So.2d 45, 50 (1961); charitable immunity, -

- Lusk v. United States Fidelity & Guaranty Co., La.

App., 199 So. 666 (Orleans 1941); and governmental im-

munity, Brooks v. Bass, La. App., 184 So. 222 (Orleans

1938), certiorari denied, November 28, 1938. As succinct-

ly stated in Simmons. v. Clark, La.App., 64 So.2d 520 (1°

Cir. 1953), ‘“‘[p]ersonal defenses are such as infancy,

interdiction, coverture, lunacy,. bankruptcy and the

like.” 64 So.2d at 523. In ITCO we merely alded to this

list “vessel owners who assert their federal reated

right of limitation of liability.”

Amongst these apparently varied .“personal” de-

fenses, one common denominator is discernible — each .

person possessing a “personal” defense obtained that

' defense because the law granted it to-all members of

his class as a.matter of public policy. The personal de-

fense attaches to the status. Hence parents, children,

husbands, Wives, governmental] units, ‘charitable -or-

ganizations, bankrupts, lunatics, intérdicts, vessel own-

ers, and the like possess a defense denied their ;e-

spective insurers.

On the other hand, insurers may assert defenses

which result from the nature of the obligation — con-

tributory negligencse, assumption of risk, confusion,

collateral estoppel, and res judicata, for example, as

_ Well as those common to all codebtors. In tort actions,

. Most conceivable defenses common to all codebtors :

will arise from the nature of the obligation. Additional-

ly, insurers enjoy and frequently assert defenses per-

Sonal to themselves, such as coverage, policy limits,

and procurement by misstatement of material facts °

in the application. Not having been mentioned in. the

“‘Red Letter” clause, Ferran’s insurers‘cannot claim

the limitation provision therein as their personal de-

fense. The defense asserted here by Ferran stems from

the repair contract .Which established the relative

rights and obligations between Ferran and Alcoa. Fer-

ran breached its duty and thereby became obligated

to Alcoa. But the agreement between these two parties

stated that Ferran’s obligation would not “exceed

$300,000.00. This limitation of liability constitutes a de-

fense resulting from the nature of the obligation with-

in the plain meaning of Article 2098. Here the size of

TAT PUSS Ce mR RI MEE INN Sai ot

2 TE AR YO ee “

the obligation was part of the obligation. No codal ar-

ticle, no statute, no jurisprudential rule grants ship re-

pairers any given immunity or limitation merely be-

cause of their status as ship repairers. The public pol-

icy favoring infants, interdicts, wives, lunatices, bank- —

rupts, vessel owners and the like has not been extend-

ed to ship papers.

‘We therefore conclude that the “Red Letter” clause’s

limitation of liability provisions. constituted part of the

' obligation and created a defense inuring to the benefit

of Ferran’s insurers as contemplated by Louisiana

Civil Code Article 2098. To hold otherwise would effec-

tively nullify practically all liability limitations con-

tained on coat and hat checks, parking garage stubs,

- automotive and other consumer goods guarantees, and

a myriad of similar contractual agreements. Insurers

are not entitled to benefit from a defense based on the

insured’s publicly protected legal status, but should

benéfit from the contractual defenses of their insured.

f) Avoidable Consequences Doctrine.

In our original opinion certain instances of conduct

and conditions attributable to Alcoa, and Southport

Transit Co. v. Avondale Marine Ways, Inc., 234 F.2d

947 (5 Cir. 1956), were relied upon as authority for in-

‘vocation of the “Avoidable Consequences” doctrine.

These instances included the loéation of the quick shut-

off valve in relation to the boilers, the uncontrolled

_- ventilating system, the locked CO, room, the crew’s

unfamiliarity with the location of remote control de-

vices, and the opened passageway doors.?3 Counsel for

Alcoa urges numerous legal arguments in support of

their contention that the “Avoidable Consequences”

doctrine is here inapplicable. Several of Alcoa’s argu-

ments, but not all, are wel] founded. | |

Considering initially Alcoa’s argument that the

“Avoidable Consequences” doctrine does not apply to

conditions or conduct attributable to Alcoa which pre- |

- §ence or the CORSAIR’S unseaworthiness, that is, not.

by the shut-off valve’s location, nor by the ventilators,

nor by the locked CO, room, nor by the CORSAIR’S

crew, nor by the open doors. Ferran cannot be heard

to complain that these Conditions existed since a tort-_

feasor is considered to take his victim as he finds

him.24 The tortieasor is only responsible, however, for

those damages which proximately result from his

negligent conduct.

The “Avoidable Consequences” doctrine denominates

a corollary to this general rule of damages wherein an

injured party is required to exert reasonable efforts to

minimize the extent of his damages after he has been

23See 242 F. Supp. at 974. \ ;

24“The negligent actor is subject to liability for harm to another

have foreseen as a probable result of his conduct.” Restate-

ment of Torts 2d, § 461.. ;

a or ae Le te

| 90.

tortiously injured. Irrespective of the variable con-

ceptual explanations supporting the “Avoidable Con-

sequences” doctrine the Fifth Circuit Court of Appeals

in Southport Transit Co. v. Avondale Marine Ways,

Inc., 234 F.2d 947 (1956), annpres the rationale espoused

in the Restatement:

“[A] person injured by the tort of another is

. not entitled to recover damages for such harm

as he could have avoided by the use of due

‘care after the commission of the tort. ” Re-

statement of Torts, § $918.

_ As a result, Alcoa was obliged to exercise due care af-

ter the commission of the tort to mitigate.its damages,

failing which, Alcoa would be precluded from recover-

ing that portion of its damages resulting from its lack

of due care.25 |

Alcoa cannot sit back, without taking timely action

and then attempt to escape the obligation to exercise

due care in avoiding damages by relying on insurance

- coverage or an indemnity situation ‘arising from a

breach of the repair contract: Even though Alcoa

might, in some circumstances, be entitled to full in-

demnity when Ferran breaches its warranty of work-

-manlike service, where possible, Alcoa must still ex-

ercise due care to mitigate its damages. “[P]ublic pol-

28The test used in applying the avoidable consequences doctrine

is one of “due care”. Hence, even assuming arguendo that

Alcoa owed its ship’s repairer, Ferran, the warranty of sea-

worthiness, unseaworthiness would be irrelevant since it in-

volves liability regardless of due care.

icy requires that persons should be discouraged from

wasting their resources both physical or economic.” ~

Restatement of Torts, § 918, p. 602; Southport Transit

Co. v. Avondale Marine Ways, Inc., 234 F.2g 947, 954

(5 Cir. 1956). See also. Restatement of Torts, § 918,

especially Illustration 7 at pp. 604-605. It therefore be- —.

comes necessary to ‘determine whether Alcoa’s action

subsequent to the negligence -of Fereran constituted a

failure to make reasonable efforts towards diminish-

ing its damages. |

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able Consequences” doctrine, or some other rule of

damages, may be applicable. Coriversely, the facts

As part of the original stipulation that.determinatioh-’~

of damages would be deferred, it was understood by the

parties and the Court that if within a reasonable time

a eI Arm unemag peek

2 Se. WN tit oosate** os

no agreement as to quantum of damages was reached,

‘a Special-Master would be appointed to decide the

damages question. Therefore,

It is ordered that Richard B. Montgomery, Esq., 806

National Bank of Commerce Bldg., New Orleans, La.,

70112, be and he is hereby appointed Special Master to

hear and determine the question of damages in this

action including the question of the total damages re-

sulting from the’ fire aboard the S. S. ALCOA CORSAIR .

on October 6, 1956, the question of the failure, if any, of

Alcoa, its agents or employees to exercise due care in,

diminishing Alcoa’s damages, and the question of the

rule of damages to be applied in this case; this appoint-

ment is subject to the condition that it, will be auto-

matically terminated, without cost to the parties or

fees to the Special Master, if within thirty (30) days

from date hereof the parties shall notify the Court and

the Special Master that they have agreed, stipulated,

or compromised all questions of damages referred to

or referable to the Special Master.

APPENDIX E

Statutes Involved’

19 U.S.C.A. 257. Duty on equipments or repair parts

for vessels

The equipments, or any part thereof, including, boats,

purchased for, or the repair parts or materials to be

. ; 93 :

used, or the expenses of repairs made in a foreign

country upon a vessel documented under the laws

‘the United States to engage in the foreign or coasting

trade, or a vessel intended to be employed. in such

trade, shall, on the first arrival of Such vessel in any

port of the United States, be liable to entry and the

payment of an ad valorem duty of 50 per centum on

the cost thereof in such foreign country; and if the

‘owner or master of such vessel shall willfully and

knowingly neglect or fail to report, make entry, and

pay duties as herein required, such vessel, with her

tackle, apparel, and furniture, shall be seized and for-

feited. For the purposes of this section, compensation

- paid to members of the regular crew of such vessel in

connection with the installation of any such equip-

ments or any part thereof, or the making of repairs,

in a foreign country, shall not be included in the cost

of such equipment or part thereof, or of such repairs.

Louisiana Retised Statutes 22:655

Section 655. Liability policy; insolvency or’

bankruptcy of insured; direct action against in-

surer |

-No policy or contract of liability insurance. ,

Shall'be issued or de ivered in this State, unless

it contains provisions to ‘the effect that the in-

solvency or bankruptcy of the insured shall not

release the insurer from the payment of dam-

ages for injuries sustained or loss occasioned

during the existence of the policy, and any

judgment which may be rendered against the

Pe ten ee >} ors ee

«-

A PROB, ane

LLL LILI SIAL EL LN:

, 94

insured for which the insurer is liable which

shall have become executory, shall be deemed

prima facie evidence of the insolvency of the

insured, and an action may thereafter be main-

tained within the terms and limits of the policy

by the injured person, or his or her survivors

‘mentioned in Revised Civil Code Article 2315,

or heirs against the insurer. The injured per-

_ sori or his or her survivors hereinabove re-

ferred to, or heirs, at their option, shall have a —

right of direct action against the insurer with-

parish where the accident or injury occurred

or in the parish where the insured or insurer

is domiciled, and said action may be brought

against the insurer alone or against both the

insured and insurer, jointly and in solido, at

either of their domiciles or principal place of

business in Louisiana. This right of direct ac-

tion shall exist whether the policy of insur-

-ance sued upon was written or delivered in the |

State of Louisiana or not and whether or not

such policy contains a provision forbidding

such direct action, provided the accident or iri-

jury occurred: within the State of Louisiana.

Nothing contained in this Section shall be con-

strued to affect the provisions of the policy or

contract if the same are not in violation of the

laws of this state. It is the intent of this Section

ject to all the lawful conditions of the policy or

contract and the defenses which could be urged

by the insurer to a direct action brought by the

_ insured, provided the terms and conditions of

such policy or contract are not in violation of

the laws of this state.

It is also the intent of‘this Section that all

liability policies’ within their terms and limits

are executed for the benefit of all injured per-

sons, his or her survivors or heirs, to whom

the insured is liable; and that it is the pur-

pose of all.liability policies to give protection

and coverage to all insureds, whether they are

named insureds or additional insureds under —

the omnibus clause, for any legal liability said

insured may have as or for a tort-feasor within

the terms and limits of said policy, __

ee mR YO RR

° as ;

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.