United States District Court, S.D. New York
July 9, 2004.
In the Matter of the Complaint of: RATIONIS ENTERPRISES, INC. OF PANAMA, as Owner, and MEDITERRANEAN SHIPPING CO. S.A. OF GENEVA, as Bareboat Charterer of the MSC CARLA for Exoneration from or Limitation of Liability.
The opinion of the court was delivered by: RICHARD OWEN, Senior District Judge
OPINION AND ORDER
On November 24, 1997, the MSC Carla, a fully-loaded 900 foot
containership, was on a voyage from LeHavre to Boston following a
recent month-long dry-docking with a "Special 25 Year" Survey by
Lloyd's Register at which time over 100 men did a lot of work on
the vessel and Lloyds' issued a clean certificate of class.
The first days of the voyage were uneventful. The Carla had
loaded cargo at various ports such as Hamburg, Bremerhaven and
left LeHavre for Boston on November 21. The vessel was properly
loaded and its stability was satisfactory. Captain Giuseppe
Siviero, an experienced master, described the Carla as being in
good to optimum condition. On November 24, however, weather
conditions began deteriorating and wind speed increased steadily
until by 4 o'clock that afternoon wind from the west reached force 10 or 11 on the Beaufort Scale, approximately 55 to 72
miles per hour, with wave heights of 11 to 12 meters. The
vessel's heading was 250 degrees with seas coming at its
starboard bow at an approximately 20 to 40 degree angle and
swells from a previous storm coming at its port bow from a
southwesterly direction. Thus, approaching from different
directions, the storm waves were confused. At 6 o'clock, the
vessel suddenly rolled heavily about 25 degrees several times
and then steadied somewhat. These several rolls, in addition to
tossing and breaking all the dishes in the crew dining room,
caused all three engines the major center one and two side
engines to stop running because of lack of oil pressure. The
engineer was shortly able to get the center engine going and the
Carla continued on its 250 degree course but at minimal speed.
Shortly after regaining power on its central engine, the
Carla encountered the first of at least two large, steep waves.
Captain Siviero (through an interpreter) testified as to what
Q. Now what happens after 1830 hours?
* * *
A. Well, of course the first thing we did was we tried to put a
little bit of order because of everything having been thrown all
over the place, and to try to put the situation, the conditions
was they were prior to that incident of rolling. And of course
the engineer below was trying to get the two side engines started
again. As we were adjusting and increasing the pitch, of course
we were gaining a little bit more speed. . . . six maybe seven
knots, because it's only one engine. We started climbing a wave,
and you could see that the bow light kept coming up and up and up
and up, and I could see that the ship was going up this wave.
Q. And then what happened?
A. So I was trying to judge how big this wave was by the
inclination of the ship, and I noticed that the bow light was
lower than where one would expect it to be in relationship to the
pitch of the ship. (Tr. 122-23).
* * * Then as we started going down the other side of this
wave, . . . the ship made a very strange motion as if
it had wanted to screw itself into the wave . . . I
heard a very sharp hit, impact, and of course the
noise had been carried through the hull, but a very
sharp staccato noise, and then going up this second
wave, and I noticed that there was something
absolutely wrong. As a matter of fact my first
officer, I noticed that the bow was going down. The
ship was going up, the bow was going down, and the
first officer was saying we've broken apart, we've
broken apart and I was able to see. I immediately ran
out to the wing on the observation wing and what I
noticed is that this part, the bow was actually
separating itself to port, away from the rest of the
ship. And we broke apart. (Tr. 123-24).
* * *
Q. When did it break?
A. On the first wave. Here is hogging started, to crack here.
When it go down, the big shock break, go up again, split. (Tr.
* * *
Q. What happened after that?
A. The wave passed, the impact passed also, went away, of
course. When we went so, there was the impact. The impact
stopped. The wave passed over us*fn1 but we started going up
that wave and that's when the ship broke. That's when it
separated, split. (Tr. 129).
* * *
Q. In your opinion, captain, based on being up on the bridge on
November 24th at approximately 1830 hours, at what point did the
ship begin to break in half in events, over the series of waves
that he has just talked about?
A. I would say that the ship started breaking apart on top of
the first wave. . . . That's when I believe that the cracking
Q. Captain, exactly why do you think it cracked at that
particular moment, at the top of the first wave?
A. Because we saw that the bow light had started to lower
itself relative to the position where it should have been, and
the line of containers, the surface of containers was not in line
with the containers aft of them. They had shifted as though they
had shifted position, because they were lower. (Tr. 124).
* * * The hull of the Carla broke apart roughly in a complete
circle at or just in front of the welding at the back of a 15
meter elongation section defendant Hyundai Corporation ("HC"),
had built and inserted in its mid section in front of the bridge
some 13 years earlier. The front half of the vessel moved to port
and fortunately the captain was able to turn the stern half of
the vessel (with the rudders) to starboard and thus avoided
hitting the separated forebody. The front half, over 5 days,
slowly filled up with water and sank. The stern half was towed to
Los Palmas Island, the cargo unloaded, then towed to Gijon,
Spain, where it was scrapped.
Going back those 13 years to February 20, 1984, HC, involved in
the ship building services, entered into a ship elongation
contract with the then-owner of the vessel, Brostrom Shipping
Co., Ltd., under which HC, identified as the "contractor,"
undertook to lengthen the NIHON, as the Carla was then named,
by adding approximately 15 meters length in its middle in
accordance with its plans and specifications annexed to the
contract. Bostrom was to pay HC some $2,000,000 for the work with
liquidated damages under the contract of $25,000/a day for
failure to deliver the vessel by the 25th day delivery date.
HC obtained the builders' risk insurance. HC did not perform
the work but delegated it to its shipyard, specifically Hyundai
Mipo Dockyard ("HMD"). HMD fabricated the new midbody section in
its shipyard in Ulsan, Korea. It cut the vessel in half, put in
the new midbody which was then joined by welding to the old
aftbody and forebody. In addition to the work on the NIHON, HMD
was more or less simultaneously doing three other lengthening projects for the group of which
Brostrom was a member, and as to one, the M/V JUTLANDIA, HMD's
work on that vessel overlapped with its work on the NIHON by
approximately twenty days. Consequently, from the trial
testimony, it appears that the many labor demands on HMD were
causing the JUTLANDIA to be nine days behind delivery schedule
and the NIHON (now named Carla) three days behind schedule. To
avoid or minimize liquidated damages under the contract, HMD
contracted with quite a number of outside welders to supplement
HMD's welding staff but their quality, as I conclude here, had
disastrous consequences thirteen years later.
Six months after the NIHON's delivery, it was discovered that
all 76 butt welds to the doubler straps on the deck of the
Carla were deficient and HMD acknowledged to officials at
Lloyd's Register in early June of 1985 that the outside welders
brought in had done a poor job. The doubler straps referred to,
three on each side of the deck for much of its length, to be made
continuous, were to be welded between each section with what is
called full penetration welds. This requirement, imposed by
Lloyd's Register, was to provide adequate deck strength
especially across the newly-installed midsection. Normally, it
appears HMD's welders did their work in the shop which would have
made it easy to do a two-sided transverse butt weld bottom to
top. Instead, here, HMD elected to install the doublers plate by
plate onto the deck. As a result, the welders not being able to
come up from the underside, failed to do "full penetration welds"
which obviously markedly weakened the straps which were there to
strengthen the deck while the vessel would be bending and turning in waves.*fn2 It also appears
that for the 60 HMD welders Lloyd's Register had only one hull
surveyor present and he did not have the ability to observe every
weld. One of HMD's top vice-presidents acknowledged that HMD's
quality assurance department did not radiograph all of the welds
to ensure they were of good quality. Instead it appears HMD
decided to only perform random radiographic inspections which did
not catch a number of faulty welds. How many were missed and
unexplained is not clear. This, in addition to the new doubler
joints not being staggered relative to the joints of the plates of old body part, made it
even weaker (see, infra).
Also, a substantial number of design and construction flaws
were concentrated in a relatively small area. The most
significant of these was a cavity of an undetermined number of
inches in length and irregular in shape where there should have
been solid welding where the deck and the starboard topside
joined at the rear of the inserted section. This should never
have existed. And not only did the cavity increase the stresses
in that area but welding irregularities high and low points of
welding material inside the cavity also created additional
points of stress.*fn3
Next there was a 7 mm gap from a misalignment of a sheer strake
plate and the deck plate at one point. This misalignment was
purportedly compensated for by the welders filling the gap with
welding material but which, according to engineering testimony in
fact increased stresses at that point. Further, as mentioned
above, in a number of places there was a failure to have the
doubler welds "bridge" the erection joint weld. In homely terms,
this is like a bricklayer building a brick wall by putting one
brick one exactly on top of another without alternating the
bricks. In some cases there was insufficient beveling on the deck
plate, meaning the HMD workers beveled at a 25 degree angle from
the vertical where drawings specified 45 degrees, which made it
impossible for welders thereafter to fully insert a welding tool
into the crevice for a full penetration weld. Many butt welds
also contained slag which weakened their ability to bear loads that they were designed to carry.
Joseph Winer testified as an expert for the plaintiffs'
interests and was personally involved in supervising the
lengthening of a number of vessels over the years. He went aboard
the Carla's aft section the moment it was towed to Los Palmas
immediately after the break-up in December 1997 and visited it
later four times over a one year period in Gijon, Spain. He
concluded that quality assurance was lacking and that the
inspection practices and procedures were inferior which permitted
defective welds to go uncorrected. He faulted HMD's planning,
particularly as to the design and construction of the deck
Winer, after being very specific about the defects in the
workmanship by HMD's welders, testified that from the
observations and measurements he made aboard the vessel the ship
failed on deck, and the fracture ran around the perimeter of the
vessel's hull. He testified:
Q. Which of those two occurred first, crack in the starboard
torsion box structure or failure at the bottom?
A. The crack in the starboard torsion box structure.
* * *
Because the crack under my conclusion traveled from
the box girder, the torsion box down the side of the
ship until it reached that heavy structure which
extends up from the bottom of the ship to five meters
above. That's coincidental with the turn of the
bilge. And looking at Exhibit 126A, the five meter
above baseline is precisely where the heave structure
starts. As we can see over the side, all the heavy
structure is over here. The heavy structure goes up
to this point here. So the fracture traveled easily
down between the transverse frames. But when it got
to this point it stopped, and I guess the initial
hinging point was the entire lower structure. And
then that separated and not in one motion but I think
in several episodes the crushing of these lower port and
starboard bilge regions occurred and occurred, and
the final hinging caused the tank top to fracture in
tension and the ultimate hinge with the separation of
the hull at the bottom of frame P. (Tr. 774-75).
Winer also testified, confirming the break at the deck, that
the pivoting was at the bottom at the tank top plate; since
across the bottom it was "folded down and broken . . ." whereas
if the break had occurred at the bottom, it would have been
Dr. Charles Cushing, another expert witness for plaintiffs with
a substantial background in naval architecture and marine
engineering including supervising more than twenty conversions of
ships by lengthening, personally examined the rear section of the
Carla at Las Palmas and Gijon. He testified:
So what we have at the outboard edge of the erection
butt where the two ships, the new midbody and the
old forebody were attached is an arrangement
represented by this diagram that shows the fillet
weld, a massive amount of welding as we show in the
photograph, a massive amount of welding that extends
over to the region and connects up with the
heat-affected zones of the fillet welds.
And then of course, the concentrations that we have
discussed so many times in the last yes, the
cavity. And then the stress concentrations that are
also caused by the defective welding that include
undercut, overlap, excessive crown, all of these are
And, in addition to that, because of the size of this
particular weldment and it's pretty massive
taking the doubler at the top, the deck and the side,
this is a lot of concentrated welding that creates
When you, as you described earlier, your Honor, melt
the steel and melt the electrodes to get them to bond
together, and then they cool, in the cooling process
they create a lot of internal stresses. Those are
called residual stresses. And this whole corner where
you have very heavy welding builds up these residual
stresses. And there is no way of knowing the quantity
of those stresses, but it's known that it's a high
Added to those residual stresses are the normal
longitudinal bending stresses that a ship experiences
that are in the deck and in the doubler. There are
transverse stresses. The ship is twisting. There are
torsional stresses, and there are shear stresses in
the ship. So this corner, with all of these
concentrations, are expected to carry all of these
different stresses, not only the longitudinal but the
other ones. And then finally, in this particular corner, because
of the massive amount of material in there you have
what are called triaxial stresses. (Tr. 963-64).
* * *
From personal observation Cushing stated:
A. Well, I think that the most powerful evidence in the case is
obviously the appearance of the fractured end of the ship. First
the appearance of the vessel across the deck and down the sides,
this somewhat clean break in the ship.
The next would be that when the ship was on the beach
in Gijon, the appearance of the bottom of the ship
with the crushing that existed down at this hinge but
very localized, the absence of this crushing damage
in the open area between the two wing tanks, in the
cargo hold there was an absence of crushing except
for some cell guides which were I think which I
think can easily be explained by the fact that there
were nearly 100 containers in that hold, each of them
weighing anywhere up to 20 tons, collapsing.
Q. In making that statement, are you relying on the visual
evidence seen in Plaintiff's Exhibit 213-1?
A. Yes, sir.
Q. Go on please. I'm sorry.
A. And then of course, the absence of what could be the
characteristic of wrinkling or crushing along the sides of the
ship in the various photos on the stern end, and then there were
salvor's photos that are available that also show a lack of this
crushing or wrinkling up the side of the ship on the forebody.
And then of course as you work your way around, there were very
obvious defects as shown in this macro photograph of overlaps and
excessive crowns which are all stress risers. The massive amount
of welding is a stress riser.
But the thing that was to me the most interesting about this
corner here is that this is one of the crucial corners on the
ship. You don't play around with the top of the sheer stake.
That's the source of fracture on so many ships, is problems
occurring in this connection and in this corner.
THE COURT: How does that happen? Why is it?
THE WITNESS: Well, this is supposed to be, if I can mark this,
this is supposed to be right out to the side like this.
THE COURT: I understand Why if you fill it up with welding
material does it become one of the weakest places in the vessel?
THE WITNESS: Because there was an obvious misfit of this plate.
What happens in shipyards
THE COURT: Where is this weakness conveyed to the vessel
because of that? THE WITNESS: Because in this area, in this whole area is
welding that should have been roll plate of homogenous
characteristic, but instead somebody's in there filling and
filing and filling adding a lot of residual stress.
THE COURT: But you say this has caused a lot of problems on a
lot of vessels and where does it start breaking a lot of vessels?
THE WITNESS: Right here. (Tr. 933-34).
* * *
THE WITNESS: If somebody welds something onto here and leaves a
stress concentration all the Liberty ships I shouldn't say all,
many of the Liberty ships and the T2 tankers during World War II,
that was a contributing factor. They had problems here.
THE COURT: What kind of problem, pick up the weld?
THE WITNESS: Because it is such a constrained and stressed
area, if you had a stress concentration to what is already a
constrained area it triggers the fracture.
THE COURT: I understand, doctor where does the fracture
occur? . . .
THE WITNESS: It occurs usually where the defect is. If the
defect is in the weld here, it will start there. If you have a
sharp corner at the top it will start there. But it is right
wherever the defect is and the concentration is.
THE COURT: I'm sorry I'm not, I can see from what I have
heard from the witnesses so far that if you have bending and
twisting of the vessel and there's a hole that's going to cause
all kinds of problems around that hole.
THE WITNESS: Yes, sir. (Tr. 935).
Dr. Cushing concluded clearly that the welding defects of HMD
added residual stresses to the starboard sheer strake and deck
area, and that these "welding defects" were enough when added to
other normal stresses so as to cause the ship to break in half:
THE WITNESS: Because the process of welding adds residual
stress that could be as high as 50 to 80 percent of the yield of
the material. You are locking in very high stress. You only have
to add another 20 percent to the ship before it leaves the
shipyard in order to have it yield. So by putting massive amount
of welding up here you are putting residual stresses in there
that stay there, and those stresses are locked in.
THE COURT: When it breaks where does it break?
THE WITNESS: For wherever you put the additional problem, the
additional stress concentration, such as a tip in the cavity
would be stress concentration. Or these excessive crowns or some
of the other welding defects are enough to add to all of these
other things to cause it to fracture. (Tr. 936).
Plaintiffs' metallurgist, Dr. John E. Slater, testified as
follows: Q. Dr. Slater, were there any other defects or flaws that you
A. Yes, there were, Mr. Olson. And this if you like is a sort
of package. What I have discussed previously is the fact that
there was a lack of penetration in the doublers that led to
fatigue cracking in the doublers.
Now, if you look at the fracture as it runs across
the vessel on the starboard side we note that the
deck fracture specifically in the weld area, which is
shown in 228B, is very close to the fatigue fractures
that occurred in the doublers. In other words, what
we have is a very close juxtaposition between the
doubler butt weld and the deck butt weld.
Now, when we start looking at the deck butt weld in
this failure area which extends a significant
distance in this fracture we note that the weld
itself has failed in a low ductility manner, in quite
a brittle appearing manner, and that the fracture is
associated with the heat effected zone of the weld.
Now, this is an undesirable situation. When you put a
weld in a component you do not want any type of
fracture or anything else to occur actually in the
weld or the weld heat affected zone.
In fact, when a weld procedure is written it is
typical for a tensile test to be performed right
across the weld through inter-bas metal and you want
the fracture to occur in the base metal.
And the fact that we have here a problem with the
weld which is allowing a fracture in a low ductility
manner through the weld heat affected zone in my
opinion is a significant problem here because it
clearly is a plane of weakness the structure.
What I am trying to say is we sort of got a level of
three situations here. We have, first of all, the
doublers that have a lack of penetration; we have the
doublers that failed by fatigue; the doubler weld,
which has now fatigued is very close to the deck
plate weld which itself has a defect in it from the
viewpoint of fracturing in the weld heat affected
So what you really have is this sort of unholy
trinity if you like of three situations occurring:
Bad welding in the doublers leading to fatigue,
juxtaposition of the butt welds in the doublers, and
the butt weld in the deck and failure of the deck
probably due to stress transfer after the doublers
have already failed in this weld heat affected zone.
Of confirmatory significance to all of the above were the
existence along the break at the point where the starboard
topside and the deck met (see p. 7, supra) of certain
"chevrons" like private first-class chevrons in the tear of
the metal both leading up the topside to the hole and across the deck to the hole. A number
of these chevrons not far apart from each other, both pointed at
where the experts say the "brittle fractures initiated."
THE COURT: [interrogating Dr. Slater] You are in effect telling
me that these chevrons are pointing and saying "he did it, he did
it, he did it" right?
* * *
THE WITNESS: Yes. I'm saying that the chevrons are pointing to
an area where those brittle fractures initiated.
THE COURT: Where it started?
THE WITNESS: Yes. (Tr. 318-19).
* * *
THE WITNESS: Well, we know that the chevrons point back towards
the area where that brittle fracture in fact started. We know
that this brittle fracture started on either side of this area
which contains the weld cavity. (Tr. 321).
* * *
THE COURT: And that caused the chevrons?
THE WITNESS: And then the brittle fractures arose and the
chevrons formed. Which is why I call the cavity and the area
around the cavity an initiating point for the fracture. (Tr.
Even HC's metallurgist David Hughes acknowledged that a defect
can cause a brittle fracture if the overloaded conditions are
Given all the foregoing, I am completely satisfied by more than
a fair preponderance of credible evidence that this vessel broke
apart starting at the point of the negligently created cavity
where the starboard topside and the deck met at the juncture
between the back of the HC insert and the forward edge of the
rear section of the vessel. The break then ran across the deck and down both topsides. This
is not only based on the first hand observations of the captain,
but on all the for lack of a better overall term
metallurgical "evidence" that the fracture left behind, i.e., the
hole, the chevrons pointing to the hole, and the absence of
wrinkles or accordion pleats in the topsides, both starboard and
Virtually none of these serious welding flaws were visible to
anyone neither metallurgist nor sailor after the vessel left
the Hyundai Dockyard in 1984. Obviously the hole in the starboard
topside/deck joint was not visible. The absence of
"full-penetration" welds in the deck doublers was not visible
because the shortfall was below the joints and against the deck,
and as to this, HMD had played it down. Then, there was
duplicative and unnecessary welding filler and quality-damaging
slag included in the welding material which was neither visible
nor could it be discovered absent metallurgical testing, thus
obviously not available to those in charge of operating the
vessel. Accordingly this flawed lengthening insert met its
grievously distressing end without any reason to anticipate it on
the part of the owners, the captain, the mates or seamen, in
which while a major storm though not unusual the vessel took
a number of unexpected stresses of some very major rolling and climbing
and falling in conflicting seas with a number of unusual waves.
The Hyundai defendants, relying mainly on computerized input
from a "finite element analysis" assert the conclusion that the
vessel failed first at the bottom. This is not only contrary to
the captain's personal observations from the bridge, see
supra*fn5 but, I conclude, had not taken sea conditions
into consideration (see Tr. 1556) and completely disregards the
absence of wrinkles, etc. I reject the Hyundai defendants'
suggestions that the master's route was negligently
inappropriate; that alleged flaws in the forward hatch covers
were the cause of the eventual sinking of the bow;*fn6 or
that the vessel's destruction was caused by its being overloaded. Under the circumstances, the Hyundai defendants are liable to
the plaintiffs and third-party plaintiffs on principles of strict
liability flowing from § 402A & § 400 of the Restatement,
(Second) of Torts and its successor of § 14 of the Restatement
(Three) for the faulty manufacture and sale of the lengthening
insert in 1984. At the outset, I conclude that the addition of
the insert to the Carla was clearly a "sale" and not a repair.
A repair generally is where something is broken and then is
fixed. Here the contract was to manufacture a new elongation
section of the vessel and place it in the vessel's middle.
Nothing was broken or repaired and such ship elongation was
within the normal and continuing course of the Hyundai business
calling for the creation of a new section and its installation.
Given this, it was built for sale by Hyundai and was placed in
position and attached in the regular course of Hyundai business
for a given contract price a sale price. The failure to
properly fabricate the installment to this section is within this
doctrine. Hyundai Corporation and its Hyundai Nipo Dockyard had a
duty to use reasonable care in designing and manufacturing the
product to enable it to avoid foreseeable risk of injury. Sprung
v. MTR Ravensburg, Inc., 99 N.Y.2d 468, 758 N.Y.S.2d 271 (2003).
The design and manufacturing defects cited above were such that
in foreseeable normal use, even though a number of years later,
the Hyundai defendants' workmanship would fail with the obvious
risk of damage to the vessel and its cargo. See Sears Roebuck
and Co. v. American President Lines, Ltd., 345 F. Supp. 395
(N.D.Cal. 1971). The Hyundai defedants suggest that the plaintiffs' warranty
claims fail for lack of privity, but whatever else, that is not
the law in admiralty cases. See Todd Shipyards Corp. v. Turbine
Service, Inc., 467 F. Supp. 1257 (E.D. La. 1978); In re American
Export Lines, Inc., 620 F. Supp. 490 (S.D.N.Y. 1985). All that
the cargo interest must show and the Court here has so
(1) that the product was defectively designed or
manufactured; (2) that the defect existed when the
manufacturer delivered it to the purchaser or user;
(3) that the defect is a proximate cause of the
See American Express Lines, Inc., 620 F. Supp. 490 (S.D.N.Y.
1985) at 517, and Cigna Property and Casualty Insurance Co.,
1995 WL 125, 386 (S.D.N.Y. 1995) to identical effect.
The Hyundai defendants are also liable in negligence on the
estabished facts above, see Sears Roebuck and Co. v. American
President Lines, Ltd., 345 F. Supp. 395 (N.D.Cal. 1971) at 399.
In defense they assert that the cargo interest claims, to the
extent that there have been insurance settlements, are barred by
a New York principle called the Settlor Bar Rule which provides
in part that: "[a] a tortfeasor who has obtained his own release
from liability shall not be entitled to contribution from any
other person." N.Y. Gen. Oblig. Law § 15-108(c). This is however
inapplicable here for these claims arise not in tort but in contract on the basis of bills of lading issued to the cargo
interests. In addition, these claims have already been ruled on
adversely during the course of the trial and are therefore no
longer before me.
Next, notwithstanding the Hyundai defendants' claims, the North
of England's (NOE) Indemnity Claims are proper. This argument is
not only premature, for damage issues have not yet been tried,
but the principle applicable here is articulated in Atlantic
Richfield Co. v. Interstate, 784 F.2d 106, 113 (2d Cir. 1986)
cert. denied 479, U.S. 817, 107 S.Ct. 75 (1986). The necessary
showing being only that of "potential liability", NOE's indemnity
action meets this requirement.
I decline to consider the Hyundai interests reraising the claim
of lack of personal jurisdiction of the NOE complaint, for in the
well-over-a-year since that complaint was filed in May 2002 and
the briefing here, the Hyundai interests have filed and argued a
summary judgment motion and participated in a thirteen day trial
before the Court without raising the jurisdictional issue. I find
this to be a waiver of this defense, particularly against the
background of their waffling on the New York City telephone
Finally, the Hyundai Corporation endeavors to separate itself
from tort liability on the ground that it had "no role to play in
performing or controlling any of the work done under the
conversion contract," asserting as to it the mere existence of a
nominal contract status. This argument fails because HC is a "manufacturer" and "seller"
under products liability law regardless of whether the action is
in strict liability or negligence making HC's assertion of
exculpatory minimal "contractual status" irrelevant. Further,
plaintiffs are proceeding against HMD and HC under a theory of
products liability based on (a) strict liability and (b)
negligence which is:
One engaged in the business of selling or otherwise
distributing products who sells or distributes as its
own a product manufactured by another is subject to
the same liability as though the seller or
distributor were the products manufacturer.
But, in addition, undisputedly established on this record, HC
is the party named in the construction contract as the
"contractor" and was the recipient of the agreed-upon price for
the work. HC was the party obliged to pay liquidated damages if
required, and was required to maintain builders' risk insurance.
HC was the party designated in the letter of commitment and in
the refund guarantee. Moreover, aside from the contract, HC
listed itself as the "exporter of record" on the export
declaration. HC held out the elongated vessel as a product which
HC manufactured and sold. Accordingly, under the Restatement, HC
is a manufacturer and seller for the purposes of plaintiff's and
third party plaintiffs' claims.
Accordingly, all parties are directed to appear before me on
July 26, 2004 at 3:30 p.m. in Courtroom 1106 to schedule the next
steps to the hearing of damage issues against the Hyundai
defendants. The foregoing constitutes the Court's findings of fact and
conclusions of law and is So Ordered.