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Penoro v. Disa

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT


decided: April 3, 1967.

BERNARDO PENORO, PLAINTIFF,
v.
REDERI A/B. DISA AND VESSEL DISA, HER MOTORS, ENGINES, BOILERS, GEAR AND TACKLES, DEFENDANTS. REDERI A/B. DISA, DEFENDANT AND THIRD-PARTY PLAINTIFF-APPELLANT, V. CUNARD STEAMSHIP COMPANY, LTD., THIRD-PARTY DEFENDANT-APPELLEE

Friendly, Anderson and Feinberg, Circuit Judges.

Author: Anderson

ANDERSON, Circuit Judge:

On October 14, 1963, Bernardo Penoro, a longshoreman employed by appellee, Cunard Steamship Company, Ltd., was seriously injured while unloading a ship owned by appellant, Rederi Aì Disa, in New York harbor. On May 15, 1964, Penoro commenced suit for $100,000 against Rederi as shipowner. On June 23, 1965, Rederi, alleging that Penoro's injuries had been caused by the fault of Cunard, moved to implead Cunard as a third party defendant on the ground that Ryan Stevedoring Co., Inc. v. Pan-Atlantic Steamship Corp., 350 U.S. 124, 76 S. Ct. 232, 100 L. Ed. 133 (1956) entitled appellant to indemnity from appellee for any liability appellant might have to Penoro. In Ryan the Supreme Court held that a shipowner has a right of indemnity to recover from a stevedore the amount of judgment which the shipowner was required to pay to one of the stevedore's employees for injuries incurred on its vessel but caused by the fault of the stevedore; the stevedore was said to have breached an "implied warranty of workmanlike service."

On March 23, 1966, appellee stevedore moved in the trial court for a dismissal of the third party indemnity action or in the alternative for a stay from the prosecution of that action pending arbitration.*fn1 The crux of appellee's motion was the somewhat unusual circumstance that at the time of the injury of its employee Cunard was not only the stevedore but also the charterer of the ship. Under the time charter between Rederi and Cunard, entered into on April 10, 1963, Cunard, as the charterer, was responsible for arranging and paying for the loading and unloading of the vessel;*fn2 and Cunard had elected to do its own stevedoring in New York. The time charter also provided that any dispute between the shipowner and charterer, arising under the charter, would be referred to arbitration.*fn3 The issue presented was whether or not Rederi's Ryan indemnity action against Cunard, as stevedore, was subject to the arbitration agreement in which Cunard is described only as charterer.

In the court below appellant contended that its Ryan action was independent of the charter, and that the holding in that case provided it with a right to indemnity from Cunard as stevedore wholly apart from the charter and from Cunard's status as charterer; that, in fact, as charterer Cunard was not subject to any duty of indemnity under the Ryan doctrine;*fn4 and that consequently the Ryan action did not "arise under" the charter. Cunard, on the other hand, claimed that a stevedore's implied warranty under Ryan must inhere in some contract made by the stevedore.*fn5 It argues that here the stevedore had made no contract with the charterer, because they were in fact the same person, and the only contract the stevedore had made with the shipowner was the time charter, which it had made in its capacity of charterer. Cunard asserts that any Ryan implied warranty therefore must inhere in, i.e. "arise under," the time charter and fall within the scope of the arbitration clause.*fn6

The trial court apparently adopted Cunard's theory of the case and on July 5, 1966, decided the issue in its favor.*fn7 Rederi's action was not dismissed but was ordered stayed pending arbitration pursuant to the charter. Rederi now seeks review, under 28 U.S.C. § 1292(a) (1), of the interlocutory order granting the stay.*fn8 Cunard moves to dismiss the appeal on the ground that § 1292(a) (1) does not apply. We grant the motion.

Section 1292(a) (1) provides:

"(a) The courts of appeals shall have jurisdiction of appeals from:

(1) Interlocutory orders of the district courts * * * granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions, except where a direct review may be had in the Supreme Court * * *."

Whether or not a stay of court proceedings is an "injunction" within the meaning of § 1292(a) (1) has depended on what proceedings are stayed by what court. The general principle is that where a court stays a proceeding on its own docket, that is not an injunction but merely a calendar order issued under the court's inherent power to regulate the administration of its own business. On the other hand, where a court stays a proceeding in another court, that stay is considered to be an injunction. Traditionally, only a court of equity could stay proceedings in another court.

In Enelow v. New York Life Insurance Company, 293 U.S. 379, 55 S. Ct. 310, 79 L. Ed. 440 (1935), the Supreme Court first considered the problem of stays of court proceedings under Title 28 U.S.C. § 129, predecessor to § 1292(a) (1). There the trial court had granted defendant's petition to try his equitable defense before trying plaintiff's action at law. Although there was only one court involved, the Supreme Court treated the court as consisting of two separate "sides" and held that the equity side of the court had enjoined the law side. The order was therefore appealable. In Shanferoke Coal & Supply Corp. v. Westchester Service Corp., 293 U.S. 449, 55 S. Ct. 313, 79 L. Ed. 583 (1935), decided the same day, defendant in a suit on a contract pleaded an exclusive arbitration clause in the contract; the court denied a stay of the contract action pending arbitration. The Supreme Court held that the issue of the arbitration clause raised an equitable defense and that the order denying the stay was appealable under Enelow, which the Court interpreted as holding,

"An order granting or denying a stay based on an equitable defense or cross-bill interposed in an action at law * * * is appealable under [present 1292(a) (1)] * * *."

293 U.S. at 452, 55 S. Ct. at 314.

Enelow was decided shortly before the unification of law and equity under the Federal Rules of Civil Procedure, and it might have been thought that this unification would have spelled the end for Enelow's "two sides" approach to § 1292(a) (1). Indeed, that was the position of this court in Beaunit Mills, Inc. v. Eday Fabric Sales Corp., 124 F.2d 563 (2 Cir. 1942). The Supreme Court, however, reaffirmed Enelow, on virtually the same facts, in Ettelson v. Metropolitan Life Insurance Co., 317 U.S. 188, 63 S. Ct. 163, 87 L. Ed. 176 (1942). In two later cases, City of Morgantown v. Royal Insurance Co., Ltd., 337 U.S. 254, 69 S. Ct. 1067, 93 L. Ed. 1347 (1949) and Baltimore Contractors, Inc. v. Bodinger, 348 U.S. 176, 75 S. Ct. 249, 99 L. Ed. 233 (1955), the Court was presented with a reverse situation from Enelow-Ettelson : the plaintiff's action was one originally cognizable in equity rather than in law. In Morgantown the defendant interposed a counterclaim in law, and in Baltimore Contractors the defendant raised an equitable defense. As a court at law could not enjoin the equitable action, and as a court of equity would not enjoin itself, the orders below were both held non-appealable. In both cases the equity side had merely exercised its inherent power to regulate proceedings before it; no injunction had been issued.

The result of the Supreme Court's decisions is that an order granting or denying a stay of an action at law pending determination of an equitable defense or counterclaim is appealable. But if the original action is equitable or if the defense or counterclaim is legal, then the order is not appealable. Schine v. Schine, 367 F.2d 685 (2 Cir. 1967). Needless to say, this anomalous result, based on historical distinctions rather than on policies relevant to the desirability of allowing interlocutory appeals, has not escaped adverse criticism. See, e.g., 5 Moore, Federal Practice (2d ed. 1966) para. 39.13[2]; 75 Harv.L.Rev. 351, 371-375 (1961). The Court itself has acknowledged the "incongruity" which "springs from the persistence of outmoded procedural differentiations" but has decided to wait for Congress to make an amendment if it should choose to do so. Baltimore Contractors, Inc. v. Bodinger, supra, 348 U.S. at 184-185, 75 S. Ct. 249.

Orders by courts in admiralty granting or denying stays of proceedings before them have been spared the confusion of Enelow-Ettelson-Morgantown-Baltimore Contractors. Such orders have consistently been held not to be injunctions within the meaning of § 1292(a) (1) even if based on equitable defenses or counterclaims. In Schoenamsgruber v. Hamburg American Line, 294 U.S. 454, 55 S. Ct. 475, 79 L. Ed. 989 (1935), decided the same term as Enelow, a court in admiralty had stayed proceedings before it pending arbitration between the parties. Despite the similarity to the Shanferoke case, the Supreme Court held that admiralty courts had the power, without need to resort to the aid of equity, to delay actions before them pending the outcome of some other proceeding. Such an order was not one issued by equity*fn9 and therefore not appealable. This court has consistently followed the holding of Schoenamsgruber. Moran Towing & Transportation Co. v. United States, 290 F.2d 660 (2 Cir. 1961); Solomon v. Bruchhausen, 305 F.2d 941 (2 Cir. 1962); Lowry & Co. v. SS LeMoyne D'Iberville, 2 Cir., 372 F.2d 123, January 21, 1967 [proceedings stayed pending foreign arbitration].

Rederi now contends that Schoenamsgruber, and our own decisions following it, are in some fashion undercut by the unification of civil and admiralty rules which became effective July 1, 1966.*fn10 Syllogistically summarized its argument is:

(1) The grant or denial of a stay of an action at law pending arbitration is appealable (Shanferoke).

(2) After unification actions in admiralty are to be treated no differently than actions in law.

(3) Therefore the grant or denial of a stay of an action in admiralty is appealable.

The difficulty lies in the second premise. The new rules make clear that actions in admiralty are not to be treated like actions in law in every respect (e.g., right to jury trial). Rule 9(h) provides:

"A pleading or count setting forth a claim for relief within the admiralty and maritime jurisdiction that is also within the jurisdiction of the district court on some other ground may contain a statement identifying the claim as an admiralty or maritime claim for the purposes of Rules 14(c), 26(a), 38(e), 73(h), 82 and the Supplemental Rules for Certain Admiralty and Maritime Claims."

Although none of the rules referred to in Rule 9(h) deal directly with interlocutory appeals under § 1292(a) (1), the absence of such a reference does not mean the draftsmen intended to change § 1292(a) (1) in any way.*fn11 The Ettelson case teaches that the separate "sides" of the district court may survive unification for purposes of § 1292(a) (1). Since a court in admiralty had the power to stay its own proceedings without the aid of equity prior to unification, there is no reason to believe that it somehow lost that power as a result of unification.

Even if we were to bring stays in admiralty into the thicket of Enelow-Ettelson-Morgantown-Baltimore Contractors, it would still be necessary to decide whether to apply Enelow-Ettelson (appealability) or Morgantown-Baltimore Contractors (non-appealability). There is no need to disturb existing practice by applying Enelow-Ettelson. While neither of those decisions turned expressly on the right to trial by jury, both opinions mentioned that right, and it is likely that the Supreme Court was concerned in those decisions that there be a right to immediate appeal from a ruling, the effect of which might be to keep plaintiff from a jury in the event that the equitable defense or counterclaim should be decided against him. 75 Harv.L.Rev. 351, 373-374 (1961). Since there is no right to jury trial in admiralty, this concern for access to the jury is inapplicable.

Stays of the kind with which this case is concerned are merely calendar orders. They do no more than delay proceedings; in the great majority of cases they do not, in practical effect, determine substantial rights of the parties or cause irreparable harm. They demonstrate no crying need for an exception to the final judgment rule. See Moore, Federal Practice (2d ed. 1966) para. 39.13[1]. In the instant case, Rederi, the appellant, may receive satisfaction for its idemnity claim in the arbitration proceeding.*fn12 If it does not, or if it receives only partial satisfaction, then it will be free to renew its Ryan indemnity claim in the district court. If, as the appellant argues, the Ryan claim against appellee, Cunard, as stevedore is independent of the time charter, then no decision or award by the arbitrator will have any effect on that claim (except to the extent that a partial award by the arbitrator would reduce the amount of indemnity to which appellant is entitled).

The appeal is dismissed.

Disposition

Dismissed.


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