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Otal Investments Limited, As Owner of the M/V Kariba, For Exoneration v. M/V Clary

March 8, 2012

OTAL INVESTMENTS LIMITED, AS OWNER OF THE M/V KARIBA, FOR EXONERATION FROM OR LIMITATION OF LIABILITY, PLAINTIFF-COUNTER DEFENDANT-THIRD-PARTY-PLAINTIFF-APPELLEE-CROSS-APPELLANT, M/V TRICOLOR, HER ENGINES, BOILERS, ETC., CONSOLIDATED-DEFENDANT-APPELLEE, N.V. FORTIS CORPORATE INSURANCE, UNITED SERVICES AUTOMOBILE ASSOCIATION, ASI AUTO SHIPMENT GMBH, CHARLES BROOMFIELD, MORGAN MOON, PATRICIA YORK, APLINA INSURANCE CO., TED L. RAUSCH CO., AUGUSTA ASSICURAZIONI S.P.A., CNH ITALIA S.P.A, CNH TRADE N.V., NEW HOLLAND NORTH AMERICA INC., FEDEX TRADE NETWORKS TRANSPORT & BROKERAGE INC., O & K ORENSTEIN & KOPPEL A.G., CASE CORPORATION AND TOWER GROUP INTERNATIONAL, ZURICH INSURANCE CO., GERLING INSURANCE CO., AS SUBROGEE AND/OR ASSIGNEE OF SCHEMPP-HIRTH FLUGZEUG-VERTRIEBS GMBH, DAVID GREEN HILL, LIEBHERR-MISCHTECHNIK GMBH, LCT LIEBHERR CONCRETE TECHNOLOGIE, LIEBHERR-WERK NENZIG GMBH, LIEBHERR AMERICA INC., E.H. HARMS GMBH & CO., JOHN DEER WEREKE MANHEIM, LLOYD`S SYNDICATE NO. WTK 457, PJG 2724, CMA 839, MLM 1221, GOS 102, EUL 1243, WHS 2, AML 2001, MKL 300, COP 1036, TAL 1183, NLU 2323, AND KLN 510, DEER & CO., TIMBERJACK AB HARVESTER PLANT, JOHN DEER CONSTRUCTION EQUIPMENT COMPANY, VOLVO CAR CORPORATION, VOLVO CARS OF NORTH AMERICA INC., ZURICH INTERNATIONAL (UK) LIMITED, CAN MARITIME, IF P & C INSURANCE LTD., FORSAKRINGSBOLAGET ZURICH-SCHWEIZISKT AKTIEBOLAG, NAVIGATORS INSURANCE COMPANY, EURO MACHINERY B.V. USED EQUIPMENT, SUPERIOR USED EQUIPMENT, AXA-UK, AXA-CANADA, WILCO MACHINERY B.V., FCI EQUIPMENT, TELCO B.V., AIS CONSTRUCTION MACHINERY, STEVENSON EQUIPMENT LTD., ARING EQUIPMENT COMPANY INC., KOMATSU UTILITY EUROPE S.P.A., KOMATSU AMERICA CORPORATION, AS SUCCESSOR TO KOMATSU UTILITY CORPORATION AND KOMATSU AMERICA INTERNATIONAL COMPANY, THE TOKIO MARINE AND FIRE INSURANCE CO. LTD., NACCO MATERIALS HANDLING B.V., NACCO MATERIALS HANDLING GROUP, ROUNDO AB, ACE USA, SAMUEL SHAPIRO & COMPANY INC., SANDVIK SRP AB, AGGREGATE CRUSHER SPEC. LLC & NANSSON AGGREGATES, LANDINI S.P.A., LANDINI U.S.A. INC., FIREMAN`S FUND MCGEE, BAYERISCHE MOTOREN WERKE AKTIENGESELLSCHAFT, BMW OF NORTH AMERICA LLC , HAFTPFLICHTVERBAND DER DEUTSCHEN INDUSTRIE VAG., XL WINTERTHUR INTERNATIONAL INSURANCE COMPANY LTD., AIG EUROPE, FRANKFORT, DBV WINTERTHUR VERSICHERUNGEN, GERLING ALLGEMEINE VERSICHERUNGS AG, SAAB AUTOMOBILE AB, SAAB DEUTSCHLAND GMBH, SAAB CARS USA INC., ALLIANZ MARINE & AVIATION VERSICHERUNGS AG, ZURICH GLOBAL ENERGY, AMERICAN INTERNATIONAL MARINE AGENCY, CLAIMANTS-APPELLEES,
v.
M/V CLARY, THIRD-PARTY-DEFENDANT-CROSS-DEFENDANT-APPELLANT-CROSS-APPELLEE, MINERAL SHIPPING CO., MST MINERALIEN SCHIFFAHRT SPEDITION UND TRANSPORT GMBH, CLARY SHIPPING PTE LTD., THIRD-PARTY-DEFENDANTS-APPELLANTS-CROSS-APPELLEES, ACTINOR CAR CARRIER I AS, CAPITAL BANK PUBLIC LIMITED COMPANY, WALLENIUS WILHELMSEN LINES AS, WILH. WILHELMSEN ASA, THIRD-PARTY-DEFENDANTS-COUNTER CLAIMANTS-APPELLANTS-CROSS-APPELLEES.



Appeal from the amended opinion and order of the United States District Court for the Southern District of New York (Baer, J.) allocating liability for a collision that led to the sinking of the M/V Tricolor in the English Channel.

Per curiam.

08-3031-cv(L), 08-3032-cv(XAP), & 08-3324-cv(CON)

Otal Investments, Ltd. v. M.V. Tricolor

Argued: November 2, 2009

Before: B.D. PARKER, HALL, and LYNCH, Circuit Judges.

The owners of each of the three vessels involved in the collision have appealed that allocation. In addition, the owners of the M/V Clary contend that they are entitled to limit their liability under the Limitation of Liability Act, and the manager of that vessel asserts that the district court erred in finding it liable for the collision under common law. For the reasons that follow, we AFFIRM the district court's allocation of liability, VACATE and REMAND the issue of whether the shipowners are entitled to limit their liability under the statute, and decline to address the manager's argument, as it was raised for the first time on appeal.

Nine years ago, on a foggy night in the English Channel, three vessels--the M/V Kariba (the "Kariba"), the M/V Tricolor (the "Tricolor"), and the M/V Clary (the "Clary")--came into close proximity of one another. The Kariba altered course to avoid the Clary and, in doing so, struck the Tricolor, causing it to sink. Subsequently, the owners of the Kariba brought an action for exoneration or limitation of liability. The parties filed cross-claims, counter-claims, and third-party claims. After a bench trial in 2005, the district court (Baer, J.) held the Kariba 100% liable for the collision. In re Otal Invs. Ltd., Nos. 03-civ-4304, 03-civ-9962, 04-civ-1107, 2006 WL 14512 (S.D.N.Y. Jan. 4, 2006) ("Otal I"). The owners of Kariba and the owners of the cargo on the Tricolor (the "Cargo Claimants") appealed. We reversed in part, holding that all three vessels had violated international regulations and were partially responsible for causing the collision, and remanded for the district court to consider the relative culpability of each vessel and the extent to which that culpability caused the collision. Otal Invs. Ltd. v. M.V. Clary, 494 F.3d 40, 63 (2d Cir. 2007) ("Otal II"). In its June 28, 2008 amended opinion and order, the district court allocated 63% liability to the Kariba, 20% liability to the Clary, and 17% liability to the Tricolor. Otal Investments Ltd. v. M/V Clary, No. 03-civ-4304, 03-civ-9962, 04-civ-1107, 2008 WL 2844019 (S.D.N.Y. June 23, 2008) ("Otal III"). Among other holdings, the district court did not permit the Clary's Owners to limit their liability under the Limitation of Liability Act. All of the ships' interests appealed, arguing that the district court erred in allocating liability. The Clary Owners also contend that the district court erred in denying its motion for limitation of liability, and the Clary manager claims that the district court erred by imposing liability upon it. We find no error in the district court's allocation of liability. However, we find clear error in the district court's determination that the Clary Owners were not entitled to limit their liability. We decline to address the Clary manager's argument that its liability is limited because that argument was not raised below. We therefore AFFIRM in part, and VACATE and REMAND in part, for further proceedings consistent with this opinion.

I. Background

The facts surrounding the collision have been set forth in Otal I and Otal II, and it is not necessary to restate them here. In Otal III, the district court made additional findings applicable to the issues framed on remand. We will reference those facts only as necessary to explain our reasoning.

II. Allocation of Liability

A. Standard of Review

The Supreme Court has articulated a standard for allocation of liability involving the collision of vessels. In United States v. Reliable Transfer Co., 421 U.S. 397 (1975), the Court held:

when two or more parties have contributed by their fault to cause property damage in a maritime collision . . . , liability for such damage is to be allocated among the parties proportionately to the comparative degree of their fault, and that liability for such damages is to be allocated equally only when the parties are equally at fault or when it is not possible fairly to measure the comparative degree of their fault.

Id. at 411. Subsequently, in Getty Oil Co. (Eastern Operations) v. SS Ponce De Leon, 555 F.2d 328 (2d Cir. 1977), this Court determined that allocation of liability under Reliable Transfer Co. is a question of fact and therefore reviewable only for clear error. Id. at 334; see also Ching Sheng Fishery Co. v. United States, 124 F.3d 152, 157-58 (2d Cir. 1997) ("A district court's . . . allocation of fault among negligent parties continues to be subject only to clearly erroneous review, and so long as the district court's factual findings are supported by the record, we will not overturn them . . . ." (citation omitted)). "A finding is 'clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948). "On the comparative fault inquiry, . . . [the district court] has considerable discretion in determining the relative degrees of each party's fault[.]" Arabian Am. Oil Co. v. Hellenic Lines, Ltd., 633 F. Supp. 659, 670 (S.D.N.Y. 1986) (considering "all the facts and circumstances of this case," allocating fault "in the interests of justice," and noting that "damages, when ascertained, shall be apportioned accordingly"); see also Elenson v. SS Fortaleza, No. 90 Civ. 437, 1991 WL 254571, at *11 (S.D.N.Y. Nov. 21, 1991) (observing that a district court has "considerable discretion in determining the relative degrees of each party's fault in contributing to the collision").

B. Analysis

In our opinion remanding this case, we directed the district court to consider the relative culpability of each vessel and the relative extent to which the culpability of each caused the collision. In making the culpability comparison, the district court should include in its consideration of the fault of the Clary the fact that its logbook was altered. We hasten to add, however, that allocation of liability for damages, requiring consideration of matters not readily amenable to precise analysis, does not oblige an admiralty judge to do more than provide ultimate percentages of allocation, accompanied only by sufficient explanation to provide a reviewing court with some general understanding of the basis for the decision.

Otal II, 494 F.3d at 63.

The district court followed this directive. It first focused on culpability, or "'how extensively each ship departed from a proper standard of care,' i.e., here, the standard of care as set forth in the COLREGS," and analyzed the COLREG*fn1 violations of each vessel. Otal III, 2008 WL 2844019, at *4 (quoting Otal II, 494 F.3d at 62). The district court began by allocating 33 1/3% culpability each to the Kariba, the Tricolor, and the Clary, finding that each vessel "made two acts or omissions that violated the COLREGS," id. at *11--a reasonable starting point in its allocation analysis. The court then factored in the relative seriousness of the COLREG violations, finding in this regard that the Kariba's infractions were the most egregious. The evidence, which shows, among other things, that the Kariba made an abrupt turn directly into the Tricolor rather than slowing its speed, amply supports this conclusion. See Elenson, 1991 WL 254571, at *11 (analyzing number and seriousness of each vessel's COLREG violations to determine relative culpability). The district court also enhanced the Clary's culpability, based on the alteration of its logbook, and determined that the Kariba was 40% culpable for the collision, the Clary was 36% culpable, and the Tricolor was 24% culpable. Otal III, 2008 WL 2844019, at *11-12.

The district court then examined the issue of causation, or "'the extent to which each ship's culpable conduct contributed to causing the collision.'" Otal III, 2008 WL 2844019, at *4 (quoting Otal II, 494 F.3d at 62). The district court assigned the highest percentage of liability to the Kariba because its "culpable acts caused the collision to a far greater extent than did the Tricolor's and the Clary's." Id. at *13. The Tricolor, however, was at greater fault than the Clary because its "unsafe speed and overtaking put it in such close proximity with the Kariba that the collision was certain to occur once the Kariba made its abrupt turn." Id. The district court found the Clary's "omissions were less causative than the Tricolor's commissions because it was farther away, and its failures therefore had less of a direct impact." Id. The court assessed the vessels' relative causation as follows: Kariba-86%; Tricolor-10%; Clary-4%. Id.

In order to reach the ultimate allocation of liability, the district court "considered culpability and causation as equally determinative and computed the average of each vessel's culpability and causation percentages." Id. The court's final allocation of liability for the collision was: Kariba-63%; Clary-20%; and Tricolor-17%. Id.

All three of the vessel parties have appealed either the liability formula, the allocation percentages, or both. We find nothing amiss with the district court's carefully considered and thoroughly explained formula or its allocation percentages. The district court followed this Court's directive on remand to assess the relative culpability and relative causative impact of each vessel, then merged the two numbers. We vested the district court with broad latitude to fashion a reasonable allocation among the parties. The district court provided "sufficient explanation to provide a reviewing court with some general understanding of the basis for the decision." Otal II, 494 F.3d at 63 (citing Seiriki Kisen Kaisha, 629 F. Supp. at 1382). Accordingly, we find no clear error in the district court's ultimate allocation of liability among the vessel parties.

III. Clary Owners' Request for Limitation of Liability

The Clary Owners maintain that the district court erred in denying them a limitation of liability under the Limitation of Liability Act because the record did not show that they were aware that the Clary sometimes operated without a lookout. The Cargo Claimants counter that the Clary Owners made no attempt to satisfy their burden under the Limitation ...


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