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STANLEY v. BERTRAM-TROJAN

November 8, 1994

CAROLYNN ANNE STANLEY, Plaintiff,
v.
BERTRAM-TROJAN, INC., d/b/a BERTRAM YACHT CORP., Defendants.



The opinion of the court was delivered by: JOHN G. KOELTL

 JOHN G. KOELTL, District Judge:

 The plaintiff in this case, Carolynn Anne Stanley, commenced this products liability and negligence action in June, 1989 against the defendant Bertram Trojan, Inc. This is a maritime case in which both admiralty and diversity jurisdiction are asserted. The jury rendered a special verdict for the plaintiff, particularizing damages in the amount of $ 1,267,000.00, consisting of medical expenses, pain and suffering, and loss of earnings, with each category divided between damages to date and future damages. The award was subject to a thirty percent reduction because the jury apportioned thirty percent of the fault to a former party to the action, Christopher Blackwell. See Stanley v. Bertram-Trojan, Inc., 781 F. Supp. 218 (S.D.N.Y. 1991) (Mukasey, J.) and see generally McDermott, Inc. v. AmClyde, 128 L. Ed. 2d 148, 114 S. Ct. 1461 (1994). The jury found no fault by the plaintiff. Therefore, the defendant's liability amounts to $ 886,900.

 The parties have made several applications to the Court regarding issues in connection with the judgment to be entered. The issues include: first, whether the collateral source rule applies; second, whether Section 5041 of the New York CPLR applies with respect to a portion of future damages; and third, whether the plaintiff is entitled to pre-judgment interest.

 I. The Collateral Source Rule

 The defendant has argued that because the plaintiff, in bringing her claim, has relied on both the Court's admiralty jurisdiction and its diversity jurisdiction, New York law -- specifically New York CPLR Section 4545(c) -- applies and requires the Court to reduce the amount of the award for the plaintiff by any payments that the plaintiff has received, or with reasonable certainty will receive, from collateral sources such as insurance for medical and other expenses incurred, minus an amount equal to certain past and future premiums paid or to be paid by the plaintiff. In essence, the defendant's argument is that the collateral source rule, which prohibits such setoffs, does not apply in this case.

 Despite the complexity of the role of state law in admiralty, several themes in the Supreme Court's jurisprudence are clear. First, the concern for the development of a uniform body of maritime law is pervasive. See, e.g., Southern Pacific Co. v. Jensen, 244 U.S. 205, 218, 61 L. Ed. 1086, 37 S. Ct. 524 (1917) (New York workmen's compensation statute held not applicable to maritime claim). This pervasive concern for uniformity in admiralty law exists even if jurisdiction is grounded on diversity as well as admiralty. See, e.g., Pope v. Talbot, 346 U.S. 406, 409-11, 98 L. Ed. 143, 74 S. Ct. 202 (1953) (pursuant to admiralty rule, plaintiff's negligence only reduced damages, and Pennsylvania's contributory negligence rule, which completely barred a negligent plaintiff from recovering, did not apply in maritime case). Second, the preference for uniformity does not totally preclude the application of state law in the appropriate circumstances. See, e.g., Kossick v. United Fruit Co., 365 U.S. 731, 738-39, 742, 6 L. Ed. 2d 56, 81 S. Ct. 886 (1961) (explaining that the determination of whether to apply state law in admiralty involves an accommodation of interests and holding that the New York statute of frauds did not apply to maritime contract). Accordingly, state law applies where no applicable admiralty rule exists, where local and state interests predominate and where the uniformity principle is not crucial. T. J. SCHOENBAUM, 1 ADMIRALTY AND MARITIME LAW 143-44 (2d ed. 1994). State law also applies where it supplements, but does not contradict, an admiralty rule that does not constitute a pervasive system. Id. at 145.

 The collateral source rule applies as a matter of federal law and therefore applies in admiralty cases. See, e.g., Thyssen, Inc. v. S/S Eurounity, 21 F.3d 533, 537-38 (2d Cir. 1994) (collateral source rule applies in COGSA cases); Gypsum Carrier, Inc. v. Handelsman, 307 F.2d 525, 535 (9th Cir. 1962) (holding that Jones Act recovery was not subject to reduction by amount of unemployment benefits received and noting that federal courts recognize the collateral source rule as a "generally prevailing" federal rule); Perry v. Metro-North Commuter R.R., 716 F. Supp. 61, 62 (D. Conn. 1989) (collateral source rule applies in FELA cases).

 The absence of cases in which a court has applied the collateral source rule to a claim brought under maritime law, where the court's diversity jurisdiction also was invoked, requires this Court to evaluate the importance of achieving and maintaining uniformity in maritime law in the context of applying the collateral source rule.

 Even though a maritime claim includes a diversity basis for jurisdiction, the parties' rights and liabilities are controlled by federal principles of maritime law. Neal v. McGinnis, Inc., 716 F. Supp. 996, 998 (ED. Ky. 1989).

 Neither party has been able to cite a case, and we are aware of none, where the court's admiralty and diversity jurisdiction were involved and a state rule was applied to overrule the general federal rule -- applicable in admiralty cases -- that the collateral source rule applies. The need for uniformity in admiralty law, and the consistent pattern of cases that recognize the application of admiralty law to the issues of liability and damages to make the plaintiff whole, argue strongly that federal and not state law controls the application of the collateral source rule.

 For example, in Carey v. Bahama Cruise Lines, 864 F.2d 201 (1st Cir. 1988), the Court of Appeals for the First Circuit held that the district court erred in applying the Massachusetts rule of comparative negligence (that bars recovery by a plaintiff who is more that fifty percent at fault), instead of the maritime rule (that reduces the plaintiff's damages by the percentage of the plaintiff's fault, but does not bar recovery). The court found the two rules totally incompatible. Id. at 207-08. The court noted that "the source of subject matter jurisdiction is not always dispositive of the substantive law that governs the case" and that "the mere fact that the plaintiffs invoked the diversity of citizenship jurisdiction of the district court does not preclude the application of maritime law." Id. at 206.

 Similarly, in Robinson v. Pocahontas, Inc., 477 F.2d 1048 (1st Cir. 1973), the Court of Appeals for the First Circuit explained that the federal admiralty rule, under which an award of pre-judgment interest falls within the discretion of the trier of fact, and not the state pre-judgment interest statute, applied in a diversity case where the plaintiff pursued claims under maritime law. The court reasoned:

 
'The fortuitous circumstance that in the present case there was diversity of citizenship between the parties plaintiff and defendant may give an added basis for jurisdiction in the federal district court [. . . .] But whether such diversity existed or not, it is still true that the substantive law to be applied in determining both liability and ...

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