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IN RE KRETA SHIPPING

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK


December 23, 1997

In the Matter of the Complaint of KRETA SHIPPING, S.A., as owner of M/V AMPHION for Exoneration from or Limitation of Liability.

The opinion of the court was delivered by: PECK

REPORT AND RECOMMENDATION

 ANDREW J. PECK, United States Magistrate Judge:

 To the Honorable Kimba M. Wood, United States District Judge:

 This admiralty action arises from the abandonment of the vessel M/V AMPHION during a storm and resulting cargo damage. The issue before the Court on this motion is whether the AMPHION's sub-charterer, defendant Combined Atlantic Carriers, GmbH ("COMBAC"), may seek indemnity from the AMPHION's owner, plaintiff Kreta Shipping, S.A., for actions brought against COMBAC in Belgium and Germany that are still pending with no finding of liability as of yet. In the alternative, COMBAC asks for permission to amend its pleadings to include a declaratory judgment claim seeking a declaration that COMBAC has a right to indemnity from Kreta upon a finding of liability in the foreign actions. Kreta argues that German and Belgian law does not provide for an indemnity action and, therefore, that COMBAC's indemnity claim must be dismissed. COMBAC argues that federal maritime law, not German or Belgian law, applies and that, under federal maritime law, COMBAC has a right of indemnity against Kreta which is now ripe.

 For the reasons set forth below, the Court finds that German and Belgian law, the law which applies to the underlying claims, is applicable to COMBAC's indemnity claim, and therefore recommends that COMBAC's indemnity claim be dismissed with prejudice.

 FACTS

 This case arises out of the abandonment of the cargo vessel M/V AMPHION during a storm. (Cplt. P 3; COMBAC Am. Claim PP 3, 5.) Kreta, a Liberian corporation that owns the AMPHION, chartered the AMPHION to Metafret, S.A. pursuant to a time-charter *fn1" ; the AMPHION was being operated under that time charter at the time of the voyage which is the subject of this limitation action. (Cplt. P 2; COMBAC Am. Claim P 3; Lyons Dec. P 10; 6/11/97 Thuysen Letter Ex. B: Metafret Time-Charter; Kreta Reply Br. at 5.) On December 21, 1995, Medafret sub-chartered the vessel to COMBAC, a German corporation, pursuant to a time charter. (COMBAC Am. Claim P 2; Lyons Dec. P 9; 6/11/97 Thuysen Letter Ex. A: COMBAC time-charter; Kreta Rely Br. at 5.) Under this sub-charter, COMBAC arranged to transport steel cargo for various cargo interests from Antwerp, Belgium and Brake, Germany to ports along the eastern coast of the United States. (Cplt. P 4; COMBAC Am. Claim P 4; Kreta Reply Br. at 5.) COMBAC's agents issued bills of lading for the cargo, using a form prepared by COMBAC and signing the bills "for the Master." (Burnett Aff. Ex. 1: Bill of Lading; Kreta Reply Br. at 5; Kreta 6/5/97 Letter to the Court at 1-2.)

 The AMPHION set sail with its steel cargo on December 31, 1995. (Cplt. P 4; COMBAC Am. Claim P 4; see 1/3/97 Tr. at 4.) During the voyage, the AMPHION was damaged by a storm. (Cplt. P 5; COMBAC Am. Claim P 5; see 1/3/97 Tr. at 4.) The crew abandoned the AMPHION on January 11, 1996. (Cplt. P 5; COMBAC Am. Claim P 5; see 1/3/97 Tr. at 5.) The AMPHION was later salvaged and repaired in Halifax and completed its voyage. (Cplt. P 7; COMBAC Am. Claim P 6; Burnett Aff. Ex. 2; see 1/3/97 Tr. at 5.) Various cargo claimants allege that the AMPHION's steel cargo was damaged by exposure to seawater.

 Kreta commenced the instant proceeding, pursuant to the Shipowner's Limitation of Liability Act, 45 U.S.C. § 181 et seq. Kreta's complaint seeks exoneration from or limitation of liability for all loss or damage occurring on the voyage. (Cplt. P 14.) COMBAC and various cargo interests have filed claims in the limitation action for damages arising from this incident. (See Lyons Dec. P 2.) Certain cargo interests also commenced separate actions in this Court which were consolidated with this limitation action. (Lyons Dec. P 2.) Four other lawsuits arising from this incident are pending against, inter alia, COMBAC in Belgium and Germany. (Kreta 3(g) PP 2, 3; Singleton Aff. PP 4, 5; COMBAC Am. claim P 7; Lyons Dec. P 3 & Exs. A, B.) COMBAC has incurred legal fees in defending the foreign actions. (Lyons Dec. Ex. A: Roosendaal Dec. P 6; Lyons Dec. Ex. B: Strube Dec. P 6.) *fn2"

 The present motion addresses whether COMBAC presently may maintain an indemnity action here against Kreta for liability that COMBAC may face in the foreign proceedings, as well as legal costs incurred in defending those proceedings, or may amend its claim to seek a declaratory judgment that COMBAC would be entitled to indemnity from Kreta should COMBAC be found liable in the foreign proceedings.

 ANALYSIS

 Kreta argues that COMBAC does not have an indemnity right under German and Belgian law, which Kreta argues is the applicable law since the underlying claims upon which COMBAC seeks indemnity are governed by German and Belgian law. COMBAC argues that federal maritime law, not German and Belgian law, applies. Since the outcome of this motion depends on which law applies, the Court must decide a maritime choice of law issue: Whether the law which applies to the claims underlying a noncontractual indemnity claim necessarily applies to the indemnity claim as well, or if the traditional Lauritzen factors must be examined.

 In Lauritzen v. Larsen, 345 U.S. 571, 73 S. Ct. 921, 97 L. Ed. 1254 (1953), the Supreme Court set forth the choice of law analysis for maritime torts, which involves a review of a number of factors. *fn3" Lauritzen 's analysis also extends to maritime contracts. See, e.g., State Trading Corp. of India, Ltd. v. Assuranceforeningen Skuld, 921 F.2d 409, 416 (2d Cir. 1990) ("Lauritzen dealt with choice of law in a maritime personal injury action under the Jones Act; however, its broad choice of law principles are not limited to maritime torts, but 'were intended to guide courts in the application of maritime law generally.' . . . Lauritzen 's approach to choice of law issues is relevant in addressing matters involving maritime contracts.").

 COMBAC argues that Lauritzen 's choice of law analysis applies to its noncontractual indemnity claims. (COMBAC 8/22/97 letter at 2-5.) However, neither Lauritzen nor the cases applying Lauritzen to which COMBAC cites (Id. at 2 & n.3) involve noncontractual indemnity claims. See Hellenic Lines Ltd. v. Rhoditis, 398 U.S. 306, 90 S. Ct. 1731, 26 L. Ed. 2d 252 (1970) (injury to seaman); Romero v. International Terminal Operating Co., 358 U.S. 354, 79 S. Ct. 468, 3 L. Ed. 2d 368 (1959) (injury to seaman); Sundance Cruises Corp. v. American Bureau of Shipping, 7 F.3d 1077 (2d Cir. 1993) (contract to inspect ship), cert. denied, 511 U.S. 1018, 114 S. Ct. 1399, 128 L. Ed. 2d 72 (1994); State Trading Corp. of India, Ltd. v. Assuranceforeningen, 921 F.2d 409 (direct action under state statute against insurance company). The Court's independent research has failed to uncover any cases applying the Lauritzen analysis to noncontractual indemnity claims.

 I. UNDER MARATHON, THE LAW GOVERNING THE UNDERLYING CLAIM GOVERNS THE NON-CONTRACTUAL INDEMNITY CLAIM

 While no court in the Second Circuit appears to have grappled with this issue, the Fifth Circuit in Marathon Pipeline Co. v. Drilling Rig ROWAN/ODESSA, 761 F.2d 229 (5th Cir. 1985), did not apply the Lauritzen factors in an analogous situation, instead holding that the law governing the underlying claims also governs the noncontractual indemnity claims. In Marathon, defendant Rowan caused damage to an underwater oil pipeline owned by plaintiff Marathon. Marathon was unsuccessful in its first attempt to repair the pipeline due to its use of faulty parts produced by Hydrotech. This necessitated a second effort and raised the costs of repair. Marathon then sued Rowan for damages to the pipeline, and won on liability after trial before the district court. While the parties were preparing for the damages trial and an appeal was pending concerning the liability issue, Rowan filed a third-party action against Hydrotech for common law indemnity for any repair costs attributable to Hydrotech's error. 761 F.2d at 231-32. Prior to the appeal, Rowan and Marathon settled. Id. The district court dismissed Rowan's action against Hydrotech. Id.

 The Fifth Circuit in Marathon determined that, had Marathon sued Hydrotech directly, Louisiana law would govern. Id. at 234-35. Despite this, the Fifth Circuit held that general maritime law applied to Rowan's claim for indemnity against Hydrotech because Rowan's liability to Marathon arose under general maritime law. The Fifth Circuit explained:

 

This requires us to choose the law governing the third party action brought by a defendant liable under general maritime law against a third party liable for the same item of damage under a different body of law, here Louisiana law. We conclude that the indemnity or contribution claim is governed by general maritime law. This court has held that the body of law establishing the indemnitee's primary liability governs his claim for indemnity or contribution against a third party. "Any non-contractual right to indemnity in respect of established tort liability arises out of the tortious conduct upon which the indemnitee's liability was established." It is thus of no consequence that the third party indemnitor may be liable to the primary plaintiff under a different body of law, whether contract law [or] the law of a foreign nation. . . .

 Id. at 235 (fns. omitted & emphasis added).

 Thus, under Marathon 's reasoning, an indemnitee's noncontractual indemnity claim is governed by the same law that established the indemnitee's primary liability. Other courts have held likewise in the maritime context. See, e.g., Hardy v. Gulf Oil Corp., 949 F.2d 826, 830 n.7 (5th Cir. 1992) ("the body of law that governs a claim for indemnity or contribution usually is the same body of law that establishes the indemnitee's primary liability to the plaintiff. [citing Marathon ] In the instant case, maritime law established plaintiff's cause of action against [defendant] and, under the general rule, should govern [defendant's] claim for indemnity or contribution. . . ."); Vaughn v. Farrell Lines, Inc., 937 F.2d 953, 956 (4th Cir. 1991) ("This court has previously recognized that 'any noncontractual right to indemnity in respect of established tort liability arises out of the tortious conduct upon which the indemnitee's liability was established.' . . . We have determined that the underlying tort claims from which the indemnity claim is derived in this action are maritime tort claims to be adjudicated under federal admiralty jurisdiction. Therefore, '[a] noncontractual indemnity claim arising therefrom is similarly a maritime claim.'"); White v. Johns-Manville Corp., 662 F.2d 243, 247 (4th Cir. 1981) ("Any noncontractual right to indemnity in respect of established tort liability arises out of the tortious conduct upon which the indemnitee's liability was established. Such a noncontractual indemnity claim is not based on any preexisting relationship between the indemnitor and indemnitee independent of the injuries for which recovery is sought. It arises rather from an equitable assessment of the fault of each in relation to the wrong done. . . . This court has now determined that the main claims from which the noncontractual indemnity claim are derived are maritime tort claims to be adjudicated under federal admiralty jurisdiction. . . . A noncontractual indemnity claim arising therefrom is similarly a maritime claim, . . . to be assessed under principles of maritime law."); Avondale Shipyards, Inc. v. Vessel Thomas E. Cuffe, 434 F. Supp. 920, 927 (E.D. La. 1977) ("An action for indemnity based upon a maritime tort is governed by maritime law."); Sheffield v. Owens-Corning Fiberglass Corp., 595 So. 2d 443, 447 (Ala. 1992)("Although the claims of the plaintiffs against the shipowners for Jones Act negligence and unseaworthiness are not at issue in this appeal, it is undisputed that federal law governs those claims. It follows, therefore, that federal maritime law also governs the indemnity claims of the shipowners") (fn. omitted); Swogger v. Waterman S.S. Corp., 151 A.D.2d 100, 109, 546 N.Y.S.2d 80, 85 (1st Dep't 1989) ("Because Admiralty law applies to the rights of the underlying claimant, the [indemnity claims] should be determined under Admiralty law."). *fn4"

 Therefore, the Court holds that COMBAC's indemnity claims are governed by the law which governs the underlying claims against COMBAC in the foreign (German and Belgian) proceedings. *fn5"

 II. THE INDEMNITY CLAIM HERE IS TORT, NOT CONTRACT, BASED, SO THE MARATHON RULE IS APPLICABLE

 COMBAC argues that Marathon is not applicable here because the primary liability in Marathon was tort-based, while here the primary liability, if any, would be based on breach of contract. COMBAC asserts:

 

Marathon. . . does not require application of Belgium [sic] or German law. Marathon and the cases on which it relies were all pure tort cases, meaning that the primary liability of the indemnitee was in tort and the claim over against the indemnitor was also in tort.

 

Here, however, COMBAC's primary liability, if any, to cargo interests in Belgium or Germany would be based on alleged breach of the contracts of carriage - the bills of lading issued by COMBAC for the carriage of the cargo from Belgium and Germany to the United States. Indeed, in Belgium and Germany cargo interests have relied on the bills of lading issued by COMBAC as the basis for their claims against COMBAC.

 (8/22/97 COMBAC letter.)

 COMBAC has provided no rationale for the distinction it draws between a tort and contract basis for the primary liability, and the Court does not discern any. COMBAC seems to be seizing upon the "noncontractual indemnity" language contained in Marathon. COMBAC, however, misses the point. Marathon was referring to the basis for the indemnity claim, not the primary liability: if the indemnity claim is based in a contract which creates an indemnitor/indemnitee relationship between the parties, then the indemnity claim does not merely arise from the primary liability like a common law indemnity claim; it arises from the contract between the parties. In that event, there is no reason for the law applicable to the indemnity claim to depend upon the law establishing the primary liability. Rather, the Court must undertake an inquiry into the law that governs the contract, and traditional choice of law analysis applies. For example, in State Trading Corp. of India, Ltd. v. Assuranceforeningen Skuld, 921 F.2d 409, 416-17 (2d Cir. 1990), the Second Circuit applied the traditional Lauritzen maritime choice of law analysis to an indemnity claim based in contract.

 This point is further demonstrated by Avondale Shipyards, Inc. v. Vessel Thomas E. Cuffe, 434 F. Supp. 920 (E.D. La. 1977), a case upon which Marathon relied. See Marathon, 761 F.2d at 235 & n.23 (citing Avondale and other cases for the proposition that "this court has held that the body of law establishing the indemnitee's primary liability governs his claim for indemnity or contribution against a third party"). In Avondale, the plaintiff put forth two different indemnity theories against the third-party defendants, the first based in contract, the second noncontractual. The Court applied a traditional choice of law analysis to the contract-based indemnity claim. Id. at 926 ("Because the original construction contract and technical service contract relating to ship construction are non-maritime contracts, any warranty of workmanlike performance in those contracts must be implied by state, and not maritime, law.") (fn. omitted). As to the noncontractual indemnity claim, the Court explained: "An action for indemnity based upon a maritime tort is governed by maritime law. . . . Therefore, although Louisiana law governs the issue of contractual indemnity, maritime law governs the issue of tort indemnity." Avondale, 434 F. Supp. at 927. See also, e.g., Hardy v. Gulf Oil Corp., 949 F.2d 826, 834 (5th Cir. 1992) ("Express contractual indemnity agreements generally are enforceable under maritime law. . . . The usual rules of contractual interpretation determine the availability of indemnity under such agreements."); White v. Johns-Manville Corp., 662 F.2d 243, 247 (4th Cir. 1981) ("The contractual basis on which the manufacturers claim indemnity an implied warranty arising from the purchase contracts to use due care in the use of the asbestos purchased is clearly non-maritime. Virginia law thus controls in assessing this contractual claim. . . . The noncontractual tort indemnity claim is a different matter," for the reasons discussed at page 9 above).

 III. THE CASES CITED BY COMBAC ARE NOT CONVINCING

 COMBAC cites four cases in support of its position that the Court need not apply the law establishing COMBAC's liability to its indemnity claim. The first case COMBAC cites, while less than clear, does not support its position. In fact, if anything, it seems to support the application of the law establishing plaintiff's primary liability to an indemnity claim. In Prudential Lines, Inc. v. General Tire Int'l Co., 448 F. Supp. 202, 205 (S.D.N.Y. 1978), the plaintiff ocean carrier settled a suit brought against it in Rumania by the goods' consignee. 448 F. Supp. at 204. The Court first determined that plaintiff's primary liability to the consignee was governed by Rumanian law. The Court explained that under Rumanian law, the Carriage of Goods by Sea Act ("COGSA"), the terms of which had been incorporated in the contract between the plaintiff and the settling party, would have been applied to the claim merely as a contractual provision. Id. at 205. The Court further explained that plaintiff's liability in the underlying action would not have been limited to COGSA's $ 500 per package limitation because plaintiff's gross negligence would render the contractual limitation provision unenforceable under Rumanian law. Id. The Court then went on to hold that defendant's liability in plaintiff's indemnity action also would not be limited to $ 500 per package, explaining that "since plaintiff would not have enjoyed a $ 500 per package ceiling in the Rumanian action, these defendants have no such ceiling here." Id. Thus, the Court apparently applied Rumanian law to the indemnity action because plaintiff's primary liability had been established under Rumanian law.

 The remaining three cases cited by COMBAC assumed, without discussion, that law other than that establishing the primary liability applied to the noncontractual indemnity claim. See Mathiesen v. Panama Canal Co., 551 F.2d 954 (5th Cir. 1977); *fn6" Compania Sud Americana De Vapores, S.A. v. I.T.O. Corp., 940 F. Supp. 855, 872 (D. Md. 1996); Anglomar Bulcarriers, Ltd. v. Maecom, S.A., 1982 AMC 1549, 1552, 1554 (S.D.N.Y. 1981), aff'd mem., 685 F.2d 423 (2d Cir.), cert. denied, 456 U.S. 977, 102 S. Ct. 2243 (1982). The Court chooses to follow the reasoned opinions of Marathon and its progeny, rather than the cases cited by COMBAC.

 IV. THE PARTIES AGREE THAT UNDER GERMAN AND BELGIAN LAW, COMBAC IS NOT ENTITLED TO INDEMNITY

 Kreta and COMBAC agree that German and Belgian law govern the claims in the foreign proceedings pending against COMBAC and, further, that COMBAC cannot maintain an indemnity claim under either German or Belgian law. (See 9/9/97 Kreta letter at 3 ("The underlying foreign claims against COMBAC will be decided under the laws of Belgium and Germany. COMBAC's indemnity rights therefore must be decided under the laws of Belgium and Germany. Since, as it fully admits, COMBAC has no right of indemnity under those laws, its foreign indemnity claims should be dismissed."); Kreta 7/3/97 letter at 2 P 2 ("Since COMBAC has admitted in its opposition papers that it has no right to indemnity under Belgian or German law, . . . Kreta's motion to dismiss should be granted."); Lyons Dec. Ex. A: Roosendaal Dec. P 5 ("I understand there is no direct contract between COMBAC and the vessel owner, Kreta. . . . As such, COMBAC has no right under Belgium [sic] law to claim against Kreta for indemnity and contribution in these lawsuits or in any independent lawsuit against Kreta which may be filed in Belgium."); Lyons Dec. Ex. B: Strube Dec. P 5 ("I understand there is no direct contract between COMBAC and the vessel owner, Kreta. . . . As such, COMBAC has no right under German law to claim against Kreta for indemnity and contribution in this lawsuit or in any independent lawsuit against Kreta which may be filed in Germany."); COMBAC Br. at 6 ("In the foreign proceedings, COMBAC cannot, as a matter of law, file an indemnity claim against Kreta," citing Lyons Aff. Exs. A-B); COMBAC Br. at 9, 10 ("there is no legal basis under the laws of Belgium or Germany for COMBAC to claim indemnity against Kreta."); Kreta Reply Br. at 11 ("As COMBAC itself points out, under the laws of Belgium and Germany COMBAC is not entitled, under any circumstances, to indemnification from Kreta based on the claims asserted against it in the actions in those countries.").)

 Since COMBAC has no right of indemnity against Kreta under German or Belgian law, COMBAC's claim for indemnity based upon the foreign proceedings should be dismissed with prejudice.

 CONCLUSION

 For the reasons set forth above, I recommend that the Court dismiss COMBAC's indemnity claim against Kreta with prejudice. *fn7"

 FILING OF OBJECTIONS TO THIS REPORT AND RECOMMENDATION

 Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties shall have ten (10) days from receipt of this Report to file written objections. See also Fed. R. Civ. P. 6. Such objections (and any responses to objections) shall be filed with the Clerk of the Court, with courtesy copies delivered to the chambers of the Honorable Kimba M. Wood, 500 Pearl Street, Room 1610, and to the chambers of the undersigned, 500 Pearl Street, Room 1370. Any requests for an extension of time for filing objections must be directed to Judge Wood. Failure to file objections will result in a waiver of those objections for purposes of appeal. Thomas v. Arn, 474 U.S. 140, 106 S. Ct. 466, 88 L. Ed. 2d 435 (1985); IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1054 (2d Cir. 1993), cert. denied, 513 U.S. 822, 115 S. Ct. 86, 130 L. Ed. 2d 38 (1994); Roldan v. Racette, 984 F.2d 85, 89 (2d Cir. 1993); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir.), cert. denied, 506 U.S. 1038, 113 S. Ct. 825, 121 L. Ed. 2d 696 (1992); Small v. Secretary of Health & Human Servs., 892 F.2d 15, 16 (2d Cir. 1989); Wesolek v. Canadair Ltd., 838 F.2d 55, 57-59 (2d Cir. 1988); McCarthy v. Manson, 714 F.2d 234, 237-38 (2d Cir. 1983); 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72, 6(a), 6(e).

 DATED: New York, New York

 December 23, 1997

 Andrew J. Peck

 United States Magistrate Judge


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