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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for A Writ of Certiorari
- **Published:** January 1, 1968
- **Citation:** 393 U.S. 836

## Text

2
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 .

3

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

4

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.

5

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
a

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 °
a CLAP ali hss 7's

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3:

- Again in Herd & Co. vs. Krawill Machinery Corp.,'
this Court held that :

as
oo

“* * * 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

Rie be alpha ANS Ai 2 tates

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.'® ;

B.

® 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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10

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.

C.
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

a eae ec

> : 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,
%

’
(

4

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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12

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
~~

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_ 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

15

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

a

.

*Of the Second Circuit, sitting by designation.

Sete Sead lai Nites t i

16

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. —~

ia
i,

17

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

18

' 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

19
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.

gone

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Sinan Cia an lt le »

20
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

21

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

g 2 q

are ole Athan f na! at LR BY ata og Sten A eh ee Sa aha

23

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
register (#2) was the only register removed. In an
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

7

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.

id

\

_ *

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

26

_ 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-

oe

27

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

Nee ogy tae tomy Rey

SRN Tay

FM WMO RMRTOY

_ 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-

2s
Sole ey bP Ge Rl ee HA

28

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
register was found smashed into several fragments.

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

4
+

30
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,

31

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

ee

re Cita

sl a

Pee ee a ee en Ota t
e

32

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

34

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. |

Vv

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

36

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).

37

, 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:

Ne
.

(eer i heist iat ial

38
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.

*
.

39

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

40

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

41

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

42

is such that it is mechanically impossible to remove the
register without removing the dropline, removal of
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.

43

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

Coenen pet wore

A ie ee ee se oe |

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D6 ie bts aw

44

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

45

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

46

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

47

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.

PCRS TPO ey yy

DPN ORE NFO YH RAO E DELI GE.

PME OS ESOS.

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AEST PRIEST ONS 2 eT” ET

Wi eS as

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‘

first opened the access door,.

ssteatieemieeh ames dite os ge a ee —— Say hire

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

i

49

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

50

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-

a

51

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.

Bx ES

‘ RP PE Je

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PLE NES I NI LN

BF AOE A ORS

APA LIE YS i ea a i aed ul LOBOS LROT. ATO:

LEN EEE ERT TEN MT BRIA NP EIT

WER Saimin

| 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
register and prepared to light that one off. By circu-

Smetana

PE NORE NR

eR HOR MRR num Sr

LPL APL IEE MEME rr ORE RIT ee
.

-
coer PNA IIE BIT. LY Gee # I
.

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sie

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54

| 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
register; with his left hand he ‘inserted the torch —
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

55

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
register of the starboard boiler nas been clear, con-
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
-

vs

56

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

. pee
© Raasini OR er agedle vec { a OS use Tce

58

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.

59

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

%

‘

60

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

ba

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
.

62

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
register and. boiler if the blower had not been in op-
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. |

64

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

65

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. ‘

J

66

_ 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
register being removed by an expert ship repair con-
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.

67

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

68

‘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

69

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]

70

4

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-

71

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.
register was the proximate cause of the fire’s in- »
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

72

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
with superheated oil under pressure. Instinctively fall- ©
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
hours earlier re-connected.' ©

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

74

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,
“based on public policy,” invalid,© and emphasized
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.

77
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

79

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 ;

e

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. |
I

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.).

81

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”

82

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)

ee

83

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 th

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385603_1558%3A1. Public record. Not legal advice.