UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
July 21, 1983
In the Matter of the Complaint of AMERICAN EXPORT LINES, INC., formerly known as AMERICAN EXPORT ISBRANDTSEN LINES, INC., as owner of the S/S C.V. SEA WITCH, seeking exoneration from or limitation of liability.
The opinion of the court was delivered by: TENNEY
The government moves for summary judgment dismissing the third-party complaint asserted against it by American Export Lines, Inc. ("AEL") and the cross-claims asserted against it by Bath Iron Works Corporation ("Bath") and Sperry Rand Corporation ("Sperry"). For the reasons discussed below, the government's motion is denied.
On June 2, 1973 the S/S C.V. Sea Witch collided with the S/S Esso Brussels in the New York harbor. Shortly thereafter, AEL, owner of the Sea Witch, filed a petition for limitation of liability pursuant to 46 U.S.C. § 183. Claims were filed against AEL by the Esso Brussels' interests, by injured and dead seamen aboard both vessels, and by owners of cargo aboard the Sea Witch, including the United States.
One of the alleged causes of the collision was the failure of the Sea Witch's steering system. Accordingly, in December 1973 AEL filed third-party complaints against Bath, who built the Sea Witch; Sperry, who manufactured some of the Sea Witch's steering gear components; and Bond Hydraulic Equipment Service, Inc ("Bond") who modified the Sea Witch's steering gear.
In early 1977, AEL sought leave to file a third-party complaint against the United States. The complaint alleged that if AEL were found liable by reason of its negligence or the Sea Witch's unseaworthiness, then the government -- upon whose expertise and approval AEL relied in its decision not to provide a dual steering system for the Sea Witch -- is bound to indemnify AFL. The Court permitted AEL to file its third-party complaint, and to advance therein both contractual and tort bases for its claim over. Shortly thereafter, the Court permitted Bath and Sperry to file similar cross-claims against the government.
Since that time, the parties to this case have engaged in extensive settlement negotiations. AEL has, in fact, settled a number of the claims against it. The government, however, has steadfastly maintained that it has no liability to AEL or any of the other parties under the circumstances of this case. The government now moves to dismiss the claims for indemnity against it.
The government advances a number of arguments in support of its motion for summary judgment. The Court will consider here only those arguments which concern this Court's jurisdiction to entertain the claims that have been made against the government.
First, the government argues that the tort indemnity claims are essentially claims for contribution from a joint tortfeasor that accrued at the time of the collision, and that these claims are therefore barred by the two year statute of limitations for claims against the United States.
Second, the government argues that the contractual indemnity claims can be brought only in the Court of Claims.
AEL, in response, argues first that its claims are for indemnity rather than simply for contribution from a joint tort-feasor; that the indemnnity claims accrued only when AEL settled the underlying cargo and personal injury claims; and that there is, therfore, no statute of limitations bar.
Second, AEL argues that the government has forfeited reliance on its time bar defense by asserting its cargo claims in this action.
The United States as sovereign "is immune from suit save as it consents to be sued." United States v. Testan, 424 U.S. 392, 399, 47 L. Ed. 2d 114, 96 S. Ct. 948 (1976) (quoting United States v. Sherwood, 312 U.S. 584, 586, 85 L. Ed. 1058, 61 S. Ct. 767 (1941)). Thus, "Congressional waiver of sovereign immunity is a prerequisite to any suit brought against the United States under admiralty law or otherwise." Roberts v. United States, 498 F.2d 520, 525 (9th Cir.), cert. denied, 419 U.S. 1070, 42 L. Ed. 2d 665, 95 S. Ct. 656 (1974). The Suits in Admiralty Act ("SIAA"), 46 U.S.C. §§ 741-52, constitutes a waiver of sovereign immunity by the United States for certain maritime actions against the federal government. Blanco v. United States, 464 F. Supp. 927, 930 (S.D.N.Y. 1979). The SIAA provides that:
In cases where if such vessal were privately owned or operated, or if such cargo were privately owned or possessed, or if a private person or property were involved, a preceeding in admiralty could be maintained, any appropriate nonjury proceeding in personam may be brought against the United States. . . .
46 U.S.C. § 742. The statute further provides that such actions shall be brought in the district courts. Id.
AEL argues that pursuant to the SIAA this Court has jurisdiction over its claims for indemnity. The Court will consider first the jurisdictional basis for any claim AEL may have for contractual indemnity.
The contract on which AEL bases its indemnity claim is the contract for the construction and the payment of a construction differential subsidy entered into by AEL, Bath and the Maritime Administration ("MARAD"), on behalf of the government. The contract contains no express indemnity provision. Nevertheless, AEL argues that it has an implied right to indemnity. It compares itself to a vessel owner held vicariously liable to a party injured through a contractor's negligence, citing Ryan Stevedoring Co. v. Pan-Atlantic S.S. Corp, 350 U.S. 124, 100 L. Ed. 133, 76 S. Ct. 232 (1956), and other cases which hold that a vessel has an implied contractual right to indemnity from a contractor who breached his duty to provide workmanlike service and so caused an accident for which the vessel owner was vicariously liable. Apparently, AEL relies on the provisions of the contract in which MARAD represented that the plans for the Sea Witch had the approval of MARAD and the Navy. AEL contends that the plans for the steering system were approved despite the fact that they were not in accordance with the applicable regulations, and that if the government had insisted on the dual steering system required by the regulations, the accident would not have occurred. The SIAA provides a waiver of sovereign immunity only "if a proceeding in admiralty could be maintained" were a private person involved.46 U.S.C. § 742. It is "firmly established, albeit arguably inconsistent and illogical" that "agreements for the construction of vessels are not maritime contracts and, hence, not within the purview of admiralty jurisdiction." Ohio Barge Line, Inc. v. Dravo Corp., 326 F. Supp. 863, 864 (W.D. Pa. 1971) (footnotes omitted). See Kossick v. United Fruit Co., 365 U.S. 731, 735, 6 L. Ed. 2d 56, 81 S. Ct. 886 (1961); Thames Towboat Co. v. The "Francis McDonald", 254 U.S. 242, 65 L. Ed. 245, 41 S. Ct. 65 (1920); Walter v. Marine Office of America, 537 F.2d 89, 94 (5th Cir. 1976). See generally 1 E. Jhirad & A. Sann, Benedict on Admiralty § 188 (7th ed. 1981). The contract here involved is one for the construction of, and payment of a construction subsidy for, a vessel. The conclusion that the contract is not a maritime contract is inescapable. The contract could not, therefore, be the basis of an admiralty proceeding against a private person. Accordingly, this Court has no jurisdiction pursuant to the SIAA to entertain a contract claim based on the subsidy contract against the United States.
No other statute provides the requisite waiver of sovereign immunity necessary to bring this contract action against the United States in a federal district court. Only contract actions against the United States seeking recovery of $10,000 or less may be brought in a district court. 28 U.S.C. § 1346(2). Contract actions against the United States seeking $10,000 or more must be brought in the Court of Claims. Id. § 1491.
However, counterclaims against the United States in the nature of recoupment do not require a statutory waiver of sovereign immunity. A recoupment is "the right of a defendant, "to cut down the plaintiff's demand either because the plaintiff has not complied with some cross obligation . . . or because he has violated some duty which the law imposes upon him. . . ." United States v. Wilson, 523 F. Supp. 874, 900 (N.D. Iowa 1981) (quoting 20 Am. Jur. 2d, Counterclaim, Recoupment and Setoff, § 1 at 228 (1965)). A counterclaim for recoupment must arise from the same transaction or occurrence as the plaintiff's claim. Id.; 3 J. Moore, Moore's Federal Practice P13.02 at 13-13 n.1 (2d ed. 1983).The United States, by bringing suit,
waives immunity as to claims of the defendant which assert matters in recoupment -- arising out of the same transaction or occurrence which is the subject matter of the government's suit, and to the extent of defeating the government's claim, but not to the extent of a judgment against the government which is affirmative in the sense of involving relief different in kind or nature to that sought by the government or in the sense of exceeding the amount of the government's claims.
Frederick v. United States, 386 F.2d 481, 488 (5th Cir. 1967) (footnote omitted).See United States v. Bedford Associates, 618 F.2d 904, 917 (2d Cir. 1980), appeal after remand, 657 F.2d 1300 (2d Cir. 1981), cert. denied, 456 U.S. 914, 102 S. Ct. 1767, 72 L. Ed. 2d 173 (1982); United States v. Frank, 207 F. Supp. 216, 221 (S.D.N.Y. 1962).
In the instant case, AEL's claim -- like that of the government -- arises from the collision of the Sea Witch and the Esso Brussels. The government claims damages for cargo lost in the collision; AEL claims that the government was at fault in causing the collision. Both parties seek the same kind of relief: money damages. Thus, although this Court has no power to award affirmative relief on AEL's contractual claim against the government, AEL is entitled to assert its claim to diminish or defeat recovery by the government on its claim.
Cf. United States v. Wessel, Duval & Co., 115 F. Supp. 678, 686-87 (S.D.N.Y. 1953), adhered to, 123 F. Supp. 318 (S.D.N.Y. 1954). The foregoing analysis applies as well to the claims of Sperry and Bath, since the government asserted claims against both parties shortly after this action was commenced.
Accordingly, the claims for contractual indemnity against the government will not be dismissed for lack of jurisdiction.
The government also moves to dismiss, on jurisdictional grounds, the tort indemnity claims asserted against it. The government argues that the SIAA and the Federal Tort Claims Act ("FTCA"), 28 U.S.C. §§ 1346(b), 2671-80, have two year statutes of limitations, after which the right to sue the United States is entirely extinguished; that the claims for tort indemnity accrued at the time of the collision; and that this Court therefore has no jurisdiction to entertain those tort indemnity claims, which were not asserted until more than three years after the collision.
At the outset, the Court finds that the tort indemnity claims against the United States are maritime in nature and therefore properly brought pursuant to the SIAA, rather than the FTCA. As noted earlier, the SIAA provides a waiver of sovereign immunity in certain cases involving the United States in which, if a private person were involved, a proceeding in admiralty could be maintained. 46 U.S.C. § 742. "Admiralty jurisdiction in tort exists when the wrong (1) took place on navigable waters ("situs") and (2) "bear[s] a significant relationship to traditional maritime activity" ("status")." Keene Corp. v. United States, 700 F.2d 836, 843 (2d Cir. 1983) (citing Executive Jet Aviation, Inc. v. City of Cleveland, 409 U.S. 249, 254-61, 34 L. Ed. 2d 454, 93 S. Ct. 493 (1972) and Foremost Ins. Co. v. Richardson, 457 U.S. 668, 102 S. Ct. 2654, 2658, 73 L. Ed. 2d 300 (1982)). The situs of the collision was the New York harbor. The question then, is whether the government's alleged tortious acts and omissions -- which AEL claims caused the collision -- have a sufficient relationship to traditional maritime activity. As indicated earlier, shipbuilding activity is not itself maritime in nature. However, it would be absurd to conclude that vessal plan approval and inspection activities, undertaken by the government to ensure safety and security in navigation and commerce, are not closely related to traditional maritime activities. Therefore, the claims against the government for tort indemnity, if timely, are properly brought undeer the SIAA.
Suits against the United States under the SIAA must be brought "within two years after the cause of action arises." 46 U.S.C. § 745. It is undisputed that the parties did not seek to amend their pleadings to assert indemnity claims against the United States until more than three years after the collision. Therefore, the timeliness of the indemnity claims against the government and, consequently, the jurisdiction of this Court to entertain those claims pursuant to the SIAA depends on when the indemnity cause of aciton arose.
It is generally held that a cause of action for indemnity based on tort is separate and distinct from a cause of action for the underlying tort; the indemnity cause of action accrues not when the tort is committed, but when the underlying claim, a judgment on that claim, or a settlement of that claim is paid or discharged. See, e.g., Mack Trucks, Inc. v. Bendix-Westinghouse Automotive Air Brake Co., 372 F.2d 18, 20 (3d Cir. 1966), cert. denied, 387 U.S. 930, 18 L. Ed. 2d 992, 87 S. Ct. 2053 (1967); Prudential Lines, Inc. v. General Tire Int'l Co., 440 F. Supp. 556, 558 & n.3 (S.D.N.Y. 1977), adhered to, 448 F. Supp. 202 (S.D.N.Y. 1978) (collecting cases); Department of Transp. v. Superior Court of Los Angeles County, 26 Cal. 3d 744, 608 P.2d 673, 163 Cal. Rptr. 585 (1980); McDermott v. City of New York, 50 N.Y.2d 211, 406 N.E.2d 460, 428 N.Y.S.2d 643 (1980).See generally Annot., 57 A.L.R. 3d 867, 881-900 (1974). This is the prevailing rule in suits in admiralty. See, e.g., Hercules, Inc. v. Stevens Shipping Co., Inc., 698 F.2d 726 (5th Cir. 1983) (Former 5th en banc); Prudential Lines, Inc. v. General Tire Int'l Co, supra; Francosteel Corp v. S.S. Tien Cheung, 375 F. Supp. 794 (S.D.N.Y. 1973). This rule has been applied in actions against the United States pursuant to the FTCA to allow parties to maintain actions against the United States that would otherwise be barred by the FTCA's two year limitations period. See, e.g., United States Lines, Inc., v. United States, 470 F.2d 487 (5th Cir. 1972); Chicago, Rock Island & Pacific Ry. Co. v. United States, 220 F.2d 939 (7th Cir. 1955); cf. Keleket X-Ray Corp. v. United States, 107 U.S. App. D.C. 138, 275 F.2d 167 (D.C. Cir. 1960).This rule has also been applied, by some courts, in admiralty actions against the United States. See, e.g., Thornton v. Town of Hull, 515 F. Supp. 715 (D. Mass. 1981); Central Soya Co. v. Economy Boat Store, 411 F. Supp. 214 (E.D. Mo. 1976).
The government nevertheless argues that the tort indemnity claims are barred because they were filed more than two years after the collision. The government cites a number of cases in support of its argument,
the most significant of which is United New York Sandy Hook Pilots' Association v. United States, 355 F.2d 189 (2d Cir. 1965) (hereinafter "Sandy Hock").
The United New York Sandy Hook Pilots' Association ("the Association") was sued in state court by a crewman on a Coast Guard cutter injured in a collision between the cutter and an Association boat. The Association filed suit against the United States pursuant to the Public Vessels Act ("the PVA"), 46 U.S.C. § 781 et seq., claiming that the government's negligence was the sole cause of the accident and that the government should therefore be liable for any recovery by its employee. The PVA incorporates the SIAA's two year limitations period, id. § 782; the Association's suit was filed more than two years after the collision.
The district court dismissed the suit. 191 F. Supp 893 (S.D.N.Y. 1961) (Dawson, J.). The court concluded that the cause of action accrued on the day of the acccident, and was therefore barred by the statute of limitations. Id. at 894. According to Judge Dawson, "[i]f . . . this action is one for indemnification, the statute would not begin to run until the liability becomes fixed, or as here, until the Supreme Court action is determined. But the libel does not allege any cause of action for indemnification." Id. (emphasis added). He observed that "[n]o contract exists calling for indemnification. . . . Rather the Government's liability, if it exists at all, is that of a tort-feasor and not as an indemnitor." Id. at 895 (emphasis added).
The Association subsequently settled the claim, and filed a second action in district court for the entire amount of the settlement. Judge McMahon, in an unreported decision, held that Judge Dawson's decision was controlling. 355 F.2d at 190. He observed, as had Judge Dawson, that there were no allegations of an indemnity agreement, express or implied, and concluded that the complaint "asserted only a claim for contribution which was time-barred." Id. (emphasis added).
The Association appealed, but the court of appeals affirmed the lower court's ruing. 355 F.2d 189. The cuort, relying on Judge Dawson's reasoning, concluded that the facts pleaded by the Association "gave rise only to a claim against a tortfeasor" rather than to a claim "for indemnity based on contract." Id. at 190-91.
According to the government, the court in Sandy Hook held that a claim for tort indemnity arises at the time of the accident, rather than at the time settlement or judgment is paid.This interpretation warrants careful scrutiny, since it is clearly at odds with the weight of the law concerning the time of accrual of a tort indemnity claim.
Having carefully considered the Sandy Hook opinions, as well as Hallmark Ins. Co. v. Canadian Pacific R.R., 1978 A.M.C. 409 (W.D. Mich. 1977) and Twenty Transfer Corp. v. Tracy Towing Line, Inc., 1969 A.M.C. 1207 (S.D.N.Y. 1969) -- both of which rely on Sandy Hook -- the Court must conclude that the government interprets Sandy Hook incorrectly.
Sandy Hook involved a distinction, for purposes of determining when a cause of action arises, between claims for contribution and claims for indemnity. It specifically discussed claims for contractual indemnity because no claim for tort indemnity was involved in Sandy Hook. On the facts, none was possible. A party may sue in admiralty for tort indemnity if he is vicariously liable for the culpable conduct of another, but he may not recover on this theory if he himself has been guilty of negligence.
Araujo v. Woods Hole, Martha's Vineyard, Nantucket S.S. Auth., 693 F.2d 1, 3 (1st Cir. 1982); United States Lines, Inc. v. Newport News Shipbuilding & Dry Dock Co., 688 F.2d 236, 240-41 (4th Cir. 1982); White v. Johns-Manville Corp., 622 F.2d 243, 249-50 (4th Cir. 1981).
In Sandy Hook, the Association's action in federal court was based on a suit filed against it in state court.Significantly, the state court action was brought by a government employee who had been aboard the cutter, and not by an Association employee. There is nothing to suggest that the Association might have been vicariously liable for negligence on the part of the government, or that the state court suit and the subsequent settlement were premised on anything other than negligence on the part of the Association or its own employees. The Association's claims were for contribution, and thus barred by the statute of limitations, absent allegations of a contract of indemnity. The language of the Sandy Hook opinions indicates that the courts, not being faced with the situation, simply did not envision the possibility of vicarious liability -- a necessary requisite to a claim for tort indemnity -- in the absence of a contract governing the wrongs complained of. For instance, Judge Dawson, noting that the libel did not allege "any cause of action for indemnification," 191 F. Supp. at 894, distinguished between a claim against a tortfeasor and a claim against an indemnitor. Id. at 895 (emphasis added).As Judge McMahon observed, the libel in Sandy Hook alleged a claim for contribution. 355 F.2d at 190.Thus, when the court of appeals referred to "a claim against a tortfeasor" that was barred by the two year limitations period, 355 F.2d at 190-91, it was referring to a claim for contribution.AEL, in contrast, alleges a claim for indemnification premised on its vicarious liability. And on actions "for indemnification" the statute of limitations does not begin to run "until the liability becomes fixed." 191 F. Supp. at 894.
Twenty Transfer Corp. v. Tracy Towing Line, Inc., supra, and Hallmark Ins. Co. v. Canadian Pacific R.R., supra, both cited by the government in support of its argument, are consistent with this conclusion. Twenty Transfer involved a tug that went aground while towing plaintiff's barge.Three years after the accident, defendant Tracy, owner of the tug, filed a third-party complaint against the United States alleging negligence in the maintenance of buoys. 1969 A.M.C. at 1207-008. The court dismissed the third-party complaint, declaring that "there seems to be no possibility that either could be vicariously responsible for the breach [of duty] of the other. Indemnity does not arise out of a joint tortfeasor relation and there is no contractual indemnity relationship between Tracy and the United States." Id. at 1208.
In Hallmark, plaintiff sued to recover for damages to a sailboat caught beneath a drawbridge operated by Central Pacific.Central Pacific sought to implead the United States, shortly after Hallmark's complaint was filed but more than two years after the accident. Central Pacific complained that the government was liable for failing to warn it of the presence of a boat in the Soo Canal. 1978 A.M.C. at 409.
The court stated in dicta that the two year limitation period applied "[i]f the United States is impleaded as a tortious indemnitor." Id. at 411-12. However, the court went on to hold that the facts in the third-party complaint did not make out a claim for indemnification, since "at no time is it alleged that the United States delegated a non-delegable duty or turned over control of property to [Central Pacific]. As such, [Central Pacific's] suit against the government is one seeking contribution rather than indemnification. The suit for contribution is barred by the two year limitation of [ § 745]." Id. at 412.
Thus, the Hallmark court, like the court in Twenty Transfer, plainly felt that it was necessary to preclude the possibility that the party seeking "indemnity" might be vicariously liable, before concluding that the two year limitations period applied. In fact, both cases involved claims for contribution. In the instant case, however -- assuming AEL's allegations to be true -- AEL could be held vicariously liable for the government's negligence.
Therefore, the Court holds that the claims against the government for indemnity did not accrue at the time of the collision. They were timely filed.
Jurisdiction over the tort indemnity claims against the government is proper under the SIAA.
Accordingly, the government's motion for summary judgment is denied.