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Fanetti v. Hellenic Lines Ltd.

UNITED STATES COURT OF APPEALS, SECOND CIRCUIT


decided: May 6, 1982.

PASQUALE FANETTI, PLAINTIFF-APPELLEE.
v.
HELLENIC LINES LTD., DEFENDANT-APPELLANT.

Appeal from a judgment of the United States District Court for the Southern District of New York, following a jury trial before Judge Constance Baker Motley, and from the denial of defendant's motion for a new trial, remittitur or judgment notwithstanding the verdict. Affirmed.

Before Oakes and Newman, Circuit Judges, and Haight, District Judge.*fn*

Author: Haight

Hellenic Lines Ltd. ("Hellenic") appeals from a plaintiff's verdict following a jury trial in the United States District Court for the Southern District of New York, Constance Baker Motley, Judge, in an action brought under the Longshoremen's and Harbor Workers' Compensation Act ("LHWCA"), 33 U.S.C. §§ 901-950 (1976). The significant questions on the appeal concern Hellenic's liability, within the statutory scheme, as both shipowner and stevedore; and whether the calculation of lost future wages should be made on the basis of gross wages, or net wages after deduction for income taxes. We affirm.

I.

On May 6, 1980, plaintiff Pasquale Fanetti was working as a longshoreman on board the M/V HELLENIC SPLENDOR, then berthed at Brooklyn, N. Y. Fanetti was part of a work gang, supervised by hatch boss Allesandro DeLiso, and engaged in loading containers at the No. 2 hatch. Fanetti operated a winch which swung one of the vessel's booms inshore and offshore.

Hellenic owned the HELLENIC SPLENDOR. It also acted as stevedore, procuring longshoremen labor directly from the union hiring hall in Brooklyn in accordance with the needs of Hellenic's vessels. The longshoremen thus hired were paid by Hellenic Lines Ltd. salary checks. This arrangement contrasts with the retention by a shipowner of an independent stevedoring contractor. Hellenic's commercial practice of assuming the dual roles of shipowner and stevedore has previously come to the attention of this Court. Napoli v. (TransPacific Carriers Corp.,) 536 F.2d 505 (2nd Cir. 1976).

Fanetti was injured at about 2:55 p.m. on May 6, as he was proceeding toward his place of work at the winch controls. The controls for the boom being used were located on a raised deck extending from the No. 2 hatch forward. Two ladders, one on the inshore side of the vessel and the other on the offshore side, gave access to the raised deck; the winch controls themselves were 10 feet forward of the hatch. Thus to get to the winch controls from a position on the deck aft of the hatch, one had to go up either of the two ladders, and then walk 10 feet to the controls. Fanetti, returning from a "blow" (rest period from work), climbed the offshore ladder and headed across the raised deck toward the winch controls. When he was about four feet away from the ladder, he slipped and fell, suffering the injuries complained of.

Fanetti alleged, and the jury was entitled to find, that the passageway he was required to transverse across the raised deck to get to his work site was obstructed by lashing gear, including greased and oily turnbuckles, chains and wires, and that the deck itself was oily and greasy. These hazards were generated by the actions of the vessel's crew. After the longshoremen finished loading the containers, the crew was responsible for lashing them securely in place. In preparation for that work crew members brought lashing equipment onto the raised deck and dumped it on the walkways. That equipment consisted of metal turnbuckles 21/2-3 feet long, wires the thickness of a finger 20-25 feet long, and chains. These artifacts were greased and oiled to prevent rusting. When laid down upon the deck, they rendered portions of the deck oily and greasy. When the longshoremen commenced work at the No. 2 hatch at 8:00 a.m. there were a few turnbuckles on the deck, but throughout the day the crew brought more lashing equipment and placed it on the raised deck, so that by the time of the accident in mid-afternoon the area from the ladders to the controls was so obstructed that one had to walk over the equipment to get to the controls. While so engaged, Fanetti slipped and fell.

Fanetti and his hatch boss DeLiso both testified that they complained to "seamen" or "crewman" about the obstructions, to no avail. There was no evidence that the condition was called to the attention of a ship's officer.

The jury, after hearing this evidence and medical testimony, returned a verdict in Fanetti's favor for $511,190. Hellenic moved for judgment n.o.v., remittitur or a new trial, all of which the District Judge denied. This appeal followed.

II.

We do not understand Hellenic to dispute on the appeal that the vessel's crew, in the performance of work unrelated to the longshoremen's loading of cargo, created a condition on deck dangerous to the longshoremen who had to work there. Rather, Hellenic taxes the trial court with error in its jury charge by failing to distinguish between shipowner and stevedore safety responsibilities. That distinction, or as alternatively phrased, "(t)he dichotomy between shipowner and stevedoring functions" (Hellenic brief at 3), is said to apply with full force and effect even though Hellenic, opting not to hire an independent contractor, instead acted as its own stevedore. In the light of that distinction, the argument continues, Judge Motley's charge on the subject of Hellenic's duty to plaintiff qua shipowner*fn1 was inadequate. Hellenic views itself as entitled to a charge based on the standards promulgated by this Court for the situation in which a shipowner hires an independent contracting stevedore. Evans v. Transportation Maritime Mexicana SS. "CAMPECHE", 639 F.2d 848 (2d Cir. 1981), is cited as a recent, salutary example. Evans, following earlier cases decided by this Court, held that "a vessel is not liable for injuries resulting from known or obvious dangers unless the shipowner should anticipate the harm despite the obviousness of the danger," 639 F.2d at 855; the "sine qua non of a ship's liability for an obviously dangerous condition arising during the process of loading or unloading is reasonable anticipation that the longshoreman will not be able to avoid it." Id. at 856, quoting Giglio v. Farrell Lines, Inc., 613 F.2d 429, 432-33 (2d Cir. 1980). "If a charge were given to the jury along the guidelines of the Evans case," Hellenic argues in its brief, "the verdict may have been for the shipowner rather than the plaintiff."

In particular, Hellenic argues that Judge Motley should have informed the jury that the stevedore bears the primary responsibility to correct dangerous conditions, and that the shipowner will often rely on the stevedore to do so. The charge is criticized for failing to discuss "the unique degree of anticipation to which the shipowner is entitled, based on its functional relationship with its stevedore," brief at 8. In that regard, Hellenic complains that the judge did not inform the jury that the "stevedore" was responsible for insuring compliance with relevant safety and health regulations for longshoring.*fn2

Even if the requested charge had been given, the exoneration of Hellenic on the evidence in this case is unlikely. Crew negligence created the hazard, just as in Doca v. Marina Mercante Nicaraguense, S.A., 634 F.2d 30 (2d Cir. 1980), where a longshoreman fell on deck as the result "of a general obstruction of the walking area by various types of refuse." Id. at 33. The shipowner in Doca hired an independent stevedoring contractor. The district court, trying the case without a jury, assessed 90% liability against the shipowner. We affirmed, observing that "(t)he ship's crew had created this hazard, and the ship was primarily responsible for it." Ibid.

Nonetheless, the independent stevedoring contractor in Doca bore the remaining 10% of liability because a regulation promulgated by the Occupational Safety and Health Administration, 29 C.F.R. § 1918.91(a) (1979), required stevedores to keep their work area free of "tripping or stumbling hazards"; we affirmed the district court's conclusion that the regulation created a non-delegable duty to remove the hazard, adding that "(t)he fact that the hazard was primarily the ship's responsibility does not excuse the stevedore from fulfilling its regulatory obligation," ibid. In the case at bar, we are not prepared to say that no reasonable jury could find that the obstruction was at a place where an independent contractor (if one existed) would have been expected to remove it. We therefore confront the question posed by Hellenic on this appeal: whether a shipowner choosing to act as its own stevedore is entitled to that insulation from liability, partial or total, which hiring an independent contractor might have afforded.

We answer that question in the negative, for the reason stated by Judge Friendly in Napoli v. TransPacific Carriers Corp., supra, 536 F.2d at 508, where Hellenic was also the shipowner:

"... a charge which relieves a shipowner of liability for a dangerous condition which was "known to the stevedore or to any of its employees' is clearly inappropriate where the shipowner, itself, is the stevedore."

See also Canizzo v. Farrell Lines, Inc., 579 F.2d 682, 689-90 (2d Cir. 1978), Friendly, J., dissenting:

"Where, as in (Napoli), there is no independent contractor, it is part of the ship's duty to exercise reasonable care to inspect its own workers' workplace, to remove grease spills, etc. In such a case there is no "independent contractor' with primary responsibility upon whom the ship may properly rely ... Things are very different when the longshoreman works for an independent stevedore who has primary responsibility for the workplace." (emphasis in original).

The concept of stevedoring contractor as independent expert upon whom the shipowner may reasonably rely runs like a leitmotiv through the cases, most recently Evans, supra, 639 F.2d at 856:

"In determining whether a shipowner should anticipate injury to longshoremen resulting from a known dangerous condition, courts must take into consideration the independent-contractor status of the stevedore. See Giglio v. Farrell Lines, Inc., supra, 613 F.2d at 435; Canizzo v. Farrell Lines, Inc., supra, 579 F.2d at 688 (Friendly, J., dissenting). Lubrano v. Royal Netherlands Steamship Co., (2nd Cir.) supra, 572 F.2d (364) at 372 (Moore, J., dissenting). See also Comment, supra, at 749, 751-52; Robertson, supra, at 451. The stevedore is specifically hired for its expertise in coping with the dangers inherent in loading and unloading cargo, and in many cases it will be perfectly reasonable for the shipowner to assume that the stevedore will correct the defect. See Giglio v. Farrell Lines, Inc., supra, 613 F.2d at 433; Canizzo v. Farrell Lines, Inc., supra, 579 F.2d at 689 (Friendly, J., dissenting) ("No decision of this court requires us to ignore the ship's justifiable reliance on the independent contractors to perform their duty.')."

A shipowner is, of course, at liberty to refrain from hiring an independent stevedoring contractor. Presumably it does so to save money. However, that saving is accomplished at the cost of not having an independent expert on board. As myriad cases in this field demonstrate, the presence of the expert independent stevedoring contractor furnishes the shipowner with significant protection, in the form of insulation from liability for its own acts which would otherwise attach. But the shipowner cannot save the premium and still claim the protection.

Hellenic argues that the analyses quoted from Napoli and Canizzo would never have been articulated if the Supreme Court's decision in Edmonds v. Compagnie Generale Transatlantique, 443 U.S. 256, 99 S. Ct. 2753, 61 L. Ed. 2d 521 (1979), had then been available. We do not agree. In Edmonds the injured longshoreman was employed by an independent stevedoring company. The jury determined that he was responsible for 10% of the total negligence resulting in his injury, that the stevedore's fault, through a co-employee's negligence, contributed 70%, and that the shipowner was accountable for 20%. The district court reduced the longshoreman's recovery by 10%, but refused further to reduce the award against the shipowner in proportion to the fault of the employer. The Fourth Circuit reversed and held the shipowner liable only for that share of the total damages equivalent to the ratio of its fault to the total fault, regarding that result as necessary to reconcile two sentences added as part of the 1972 amendments to LHWCA at 33 U.S.C. § 905(b). Those sentences read:

"In the event of injury to a person covered under this chapter caused by the negligence of a vessel, then such person, or anyone otherwise entitled to recover damages by reason thereof, may bring in action against such vessel as a third party in accordance with the provisions of section 933 of this title, and the employer shall not be liable to the vessel for such damages directly or indirectly and any agreements or warranties to the contrary shall be void. If such person was employed by the vessel to provide stevedoring services, no such action shall be permitted if the injury was caused by the negligence of persons engaged in providing stevedoring services to the vessel."

The Supreme Court reversed and reinstated the judgment of the district court. The Court observed that the first sentence of § 905(b) was drafted by Congress to overrule the express or implied warranty of a stevedore's workmanlike service declared in Ryan Stevedoring Co. v. Pan-Atlantic S.S. Corp., 350 U.S. 124, 76 S. Ct. 232, 100 L. Ed. 133 (1956), which could result in indemnification of the shipowner by the stevedore for the former's liability to the longshoreman. By overruling Ryan, the first sentence of § 905(b) "prevents the vessel from recouping from the stevedore any of the damages that the longshoreman may recover from the vessel." 443 U.S. at 264, 99 S. Ct. at 2758. The Court continued:

"But the sentence neither expressly nor implicitly purports to overrule or modify the traditional rule that the longshoreman may recover the total amount of his damages from the vessel if the latter's negligence is a contributing cause of his injury, even if the stevedore, whose limited liability is fixed by statute, is partly to blame." Ibid.

Rather than stopping there, the Court in Edmonds went on to analyze the second sentence of § 905(b). Although recognizing that application of the second sentence "is not involved in this case," id. at 265, 99 S. Ct. at 2758, the Court engaged in the analysis to deal with inconsistencies between the two sentences perceived by the Fourth Circuit. The Court stated:

"The second sentence of the paragraph is expressly addressed to the different and less familiar arrangement where the injured longshoreman loading or unloading the ship is employed by the vessel itself, not by a separate stevedoring company-in short, to the situation where the ship is its own stevedore. In this situation, the second sentence places some limitations on suits against the vessel for injuries caused during its stevedoring operations. Whatever these limitations may be, there is no conflict between the two sentences, and one arises only if the second sentence is read, as the Court of Appeals read it, as applying to all injured longshoremen, whether employed by the ship or by an independent stevedore. Nothing in the legislative history advises this construction of the sentence, and we see no reason to depart from the language of the statute in this respect." Id. at 264-65, 99 S. Ct. at 2758 (footnotes omitted).

To avoid any other practical difficulties, the Court continued:

"... it is necessary only to construe the second sentence to permit a third-party suit against the vessel providing its own loading and unloading services when negligence in its nonstevedoring capacity contributes to the injury. The second sentence means no more than that all longshoremen are to be treated the same whether their employer is an independent stevedore or a shipowner-stevedore and that all stevedores are to be treated the same whether they are independent or an arm of the shipowner itself.

"This leaves the question of the measure of recovery against a shipowner, whether or not it is doing its own stevedoring, when as shipowner it is only partially responsible for the negligence, but we are quite unable to distill from the face of the obviously awkward wording of the two sentences any indication that Congress intended to modify the pre-existing rule that a longshoreman who is injured by the concurrent negligence of the stevedore and the ship may recover for the entire amount of his injuries from the ship." Id. at 266, 99 S. Ct. at 2759 (emphasis added).

Hellenic relies upon the italicized language as supporting its contention that a shipowner acting as its own stevedore should be entitled to rely upon itself as expert stevedoring contractor, thereby insulating itself from the consequences of its negligence as shipowner. Additional authority for this proposition is also said to be found in the legislative history of the 1972 amendments.*fn3 In our view, however, the Edmonds Court's attempted clarification of "the obviously awkward wording of the two sentences" of this statute should not be so far removed from the context in which it was given as to require what we continue to consider, with Judge Friendly in Napoli and Canizzo, an illogical result. The Court's purpose in Edmonds was to achieve a statutory construction which would permit an injured longshoreman to recover his full damages from a shipowner only concurrently negligent. That was also the thrust of the legislative history, with its articulated belief "that the rights of an injured longshoreman ... shall not depend on whether he was employed directly by the vessel or by an independent contractor." That salutary purpose may be preserved without requiring trial judges to give juries instructions about the shipowner's right to rely upon an expert contractor who, in fact, was not there. The concept is schizophrenic and the predictable effect upon the jury one of bafflement. The Supreme Court itself, in the later case of Scindia Steam & Navigation Co. v. De Los Santos, 451 U.S. 156, 101 S. Ct. 1614, 68 L. Ed. 2d 1 (1981), emphasized that "the legal duties placed on the stevedore and the vessel's justifiable expectations that those duties will be performed are relevant in determining whether the shipowner has breached its duty." Id. at 176, 101 S. Ct. at 1626. Implicit in that analysis is the existence of an independent, expert stevedore upon whom the shipowner's "justifiable expectations" may reasonably fall. In those circumstances, and as Judge Friendly said in Canizzo, "things are very different"; and we do not read in Edmonds anything which requires us to accede to Hellenic's request that illusion be substituted for reality.

We hold that the requested charge is not appropriate where, as here, the shipowner acted as its own stevedore. In consequence, we find no error with the district court's instructions.*fn4

III.

Hellenic complains of the district judge's charge on the subject of income taxes. The court's charge on that subject in its entirety was as follows:

"If you make an award to the plaintiff, the amount so awarded is not subject to federal or state income taxes and no amount may be added to the award believing that such taxes would be due."

Hellenic made no objection to the charge as given. However, in a post-verdict motion it asserted that a new trial was required because the jury was not also instructed to deduct future income taxes from its determination of the amount of future lost wages. Reliance was placed upon Norfolk & Western Railway Co. v. Liepelt, 444 U.S. 490, 100 S. Ct. 755, 62 L. Ed. 2d 689 (1980).

Liepelt, a death action brought under the Federal Employers' Liability Act ("FELA"), held that the trial court erred in excluding the defendant's proffered testimony of an expert witness that the decedent's federal income taxes, during the period of lost future wages, would have amounted to a particular figure, which defendant wished to urge in reduction of damages. The Court held in Liepelt that under the FELA, the measure of recovery is the damages that flow from the deprivation of the pecuniary benefits which the beneficiaries might have reasonably received. Since it is after-tax income, rather than gross income before taxes, that provides the only realistic measure of a wage earner's ability to support his family, it necessarily follows "that the wage earner's income tax is a relevant factor in calculating the monetary loss suffered by his dependents when he dies." 444 U.S. at 493-94, 100 S. Ct. at 757-58. The Court rejected "the notion that the introduction of evidence describing a decedent's estimated after-tax earnings is too speculative or complex for a jury," ibid., and remanded the case for further proceedings consistent with its opinion.*fn5

Although for the reasons stated infra Hellenic is not in a position to benefit from it, we take this opportunity to extend the Liepelt decision at least to all claims for future wages based solely on federal law. In McWeeney v. New York, New Haven & Hartford R. R. Co., 282 F.2d 34 (2d Cir.) (en banc), cert. denied, 364 U.S. 870, 81 S. Ct. 115, 5 L. Ed. 2d 93 (1960), an FELA case, we held that the district court had not committed error in refusing defendant's request that the jury be instructed to "calculate any past or future loss of earnings on the basis of (plaintiff's) net income after deduction of income taxes." Id. at 35. But Judge Lumbard's dissenting observation-"it seems to me that it is manifestly unfair to a defendant to ignore the substantial item of income tax payments on future income," id. at 43-forecast the Supreme Court's identical conclusion in Liepelt ; and we see no basis for distinguishing in this regard between FELA and LHWCA cases. Focusing upon after-tax earnings is an exercise in economic fairness; by this decision we extend it at least to all federal law claims for future lost wages. Cf. Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 101 S. Ct. 2870, 2880, 69 L. Ed. 2d 784 (1981), a personal injury case arising under the Outer Continental Shelf Lands Act, 43 U.S.C. § 1331 et seq., ("OCSLA"), in which the Court characterized the Liepelt instruction that damage awards are not subject to federal income taxation as an instruction which furthers "strong federal policies of fairness and efficiency in litigation of federal claims."*fn6

However, to take advantage of the after-tax principle, a defendant must invoke it in timely and proper fashion. In the case at bar, Hellenic cited Liepelt in its original request that the judge charge the jury:

"If you find that plaintiff's damages from his accident include lost wages, then you must subtract the amount of income taxes plaintiff would have had to pay on those lost wages."

But Hellenic, unlike the defendant in Liepelt, offered no evidence to establish what amount of future taxes plaintiff would have incurred.*fn7 Hellenic did not seek a stipulation from plaintiff on the point before resting its case. While plaintiff's more recent tax returns had been received in evidence to prove his past earnings, Hellenic did not indicate before the evidence closed that it would rely on those returns to quantify future taxes, thereby depriving plaintiff of an opportunity to offer his own evidence, expert or otherwise, of what his future taxes might be. For that reason we reject Hellenic's argument that the trial judge should have instructed the jury on the basis of the past tax returns, or used them to make future tax calculations herself. Finally, Hellenic did not object to the charge ultimately given by the district court on the general subject of taxes. In these circumstances, Hellenic is not entitled to relief on appeal.

For the future guidance of the district courts and trial bar, we hold that a defendant confronted with a claim for future lost wages is entitled to an after-tax charge based on Liepelt when there is present in the record a stipulation of future taxes; or evidence of future taxes; or evidence of past taxes, in which event the jury should be instructed that it is entitled to assume a future tax amount or tax percentage of wages comparable to the past tax years.*fn8

We have considered Hellenic's other points on appeal, and find them without merit.

Affirmed.


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