Federal Marine Terminals, Inc. v. Burnside Shipping Company

PETITIONER:Federal Marine Terminals, Inc.
RESPONDENT:Burnside Shipping Company
LOCATION:W. R. Grace & Co. Corporate Headquarters

DOCKET NO.: 291
DECIDED BY: Warren Court (1967-1969)
LOWER COURT: United States Court of Appeals for the Seventh Circuit

CITATION: 394 US 404 (1969)
ARGUED: Jan 15, 1969
DECIDED: Apr 01, 1969

Facts of the case

Question

Audio Transcription for Oral Argument – January 15, 1969 in Federal Marine Terminals, Inc. v. Burnside Shipping Company

Earl Warren:

Number 291, Federal Marine Terminals Incorporated, petitioner versus Burnside Shipping Company Limited.

Mr. Hough.

John W. Hough:

Mr. Chief Justice, may it please the Court.

One Gordon McNeill, stevedore employee of the petitioner, Federal Marine Terminals Inc. fell into the number 3 deep tank of the vessel Otterburn owned by the respondent on June 2, 1965 and was killed.

Thereafter, his widow filed a wrongful death action against the vessel owners.

In a separate action the vessel owners, Burnside Shipping Company, the respondent filed an action under the Ryan Stevedoring doctrine seeking indemnification of — the amounts which they had to pay to the widow.

In a counterclaim of this petitioner, petitioner sought to bring a direct action against the vessel, the petitioner being a stevedoring contractor and thought to recover all the damages that it was exposed to under the Longshoremen’s and Harbor Workers’ Compensation Act which had a potential total liability of $70,000.00.

That counterclaim was dismissed upon the motion of the respondent in the District Court.

The — this vessel was affirmed in the Seventh Circuit.

We are here on the limited question and we submit to this Court that the question is, is there a contract, stevedoring contract implied in fact running directly between the vessel owner and the stevedoring contractor?

And we submit the corollary question fairly encompassed within that issue is, does the Longshoremen’s and the Harbor Workers’ Compensation Act, acts as a shield to the vessel owner to isolate the vessel owner from any liability directly against the stevedoring contractor?

Was the stevedoring contract made by the owner, vessel owner or the terminal?

John W. Hough:

It is outside the record Your Honor.

Well, I didn’t asked that question, I noticed (Inaudible) —

John W. Hough:

There is an allegation in the brief of the respondent that the stevedoring contract was made between the timed charterer and the —

That is in fact (Voice Overlap) —

John W. Hough:

— the stevedoring contractor.

— basis for — via contract, by the vessel owner?

John W. Hough:

We submit not Your Honor.

The charterer is not in control of the vessel.

It’s controlled in the control — since this insofar as before this Court, it was an unwritten contract.

And the time charterer only controls where the vessel is going, not the crew or the operation of the vessel by its crew, the crew being under the control of the vessel owner.

The time charterer controlling the — if the vessel is going from one city or one port to another, we submit that it is not dispositive at all of this issue or that it does not fire this question.

Byron R. White:

And your claim then is entirely contractual in nature and doesn’t rest in tort at all?

John W. Hough:

Not at all.

It is based on the contract.

Byron R. White:

Could you — is there any tort theory which should be of any aid to you?

I suppose the — whoever is responsible for the condition of the vessel would have some obligations to people who are on it just in ordinary tort.

John W. Hough:

Yes, Your Honor.

But we submit that this is based purely on the contract.

John W. Hough:

We abandon any resort to a tort theory.

Byron R. White:

Or is it — should I ask it why or is that forbidden?

John W. Hough:

I would state bluntly under a tort theory, if we sued, we would sue as subrogee.

Byron R. White:

Why?

Because you think that — the Harbor Workers’ Act would catch you there?

John W. Hough:

Yes, Your Honor.

We would sue a subrogee and then under the Ryan doctrine, the ship owner would turn around and sue the stevedoring contractor and it —

Byron R. White:

Let’s assume — if because of some negligence of the one in control of the ship, certain equipment of the stevedore which is brought on the ship is damaged along with an employee of the stevedore, certainly the stevedore might in tort be able to recover for damages for the equipment, wouldn’t it?

John W. Hough:

Yes, Your Honor.

But that is not the instant case before this Court.

We suggest and urge to this Court that the Ryan Stevedoring Company case in 1956 established that there was a stevedoring contract even though unwritten which was implied in fact.

Under the stevedoring contract, certain duties were owed by the stevedoring contractor directly to the vessel owner.

If a violation of those duties by the stevedoring contractor and the very essence of that duty having been defined in that case as being the proper performance of the stevedoring contract either offloading or unloading the cargo, if there be a violation of those duties, the vessel owner could recover complete indemnification from the stevedoring contractor for any amount that the vessel owner became obligated to pay to the — to an employee of the stevedoring contractor who was injured aboard the vessel.

That case focused on side of that relationship.The duties owed by stevedoring contractor to the vessel owner.

It also stated that the Longshoremen’s and Harbor Workers’ Compensation Act did not preclude the vessel owner from being sued by the employee of the stevedoring contractor under a tort theory.

And the stevedoring of the vessel owner turning around if there was a judgment against him by the stevedore and recovering the full amount of that judgment directly from the stevedoring contractor based on a breach of contract theory, the — this Court announced in that decision that the tort theory was not to be confused with the contract theory that the action by the vessel owner against the stevedoring contractor was directly based on contract and not any tort theory.

We read in the Weyerhaeuser Steamship Company case in 1958, the warning announced by this Court that the vessel owner can be precluded from recovering directly from the stevedore contractor if there might be conduct on its part to preclude such recovery.

This Court did not go further to define what that might be.

In 1959, in Hugev versus Dampskisaktieselskabet International, the District Court which was affirmed by the Ninth Circuit and certiorari was denied by this Court.

The District Court announced what the duties of the vessel owner were under the stevedoring contract even though it be unwritten stating that these were implied in fact.

In essence these duties were to provide a reasonable, reasonably safe place to work and to give warning of any latent danger.

These duties we have quoted in length in our brief and I briefly summarize them but in essence those are the duties.

In the Hugev case, because the stevedoring contractor knew of a violation of these duties by the vessel owner and thereafter assumed the risk, recovery was denied.

But these duties were thoroughly announced in that case.

We — in the Hugev case, there was a statement that the stevedoring contractor does not board the vessel at its own peril.

The owner does not turn over to the stevedoring contractor a vessel.

In any condition, we submit to this Court that there must be a reasonable time where the stevedoring contractor to inspect that vessel and to discover and correct any false in that vessel that might exist.

If this ship owner can turnover to the stevedoring contractor a vessel in any condition, be there exports or otherwise which are misplaced for a week, then we suggest this would encourage willful and wanton misconduct because under the Ryan doctrine, the stevedoring contractor has almost an absolute liability for indemnification to the vessel owner.

Potter Stewart:

What your — the shipowner is always going to be liable to the injured workman?

John W. Hough:

Yes Your Honor, usually.

John W. Hough:

Usually.

Potter Stewart:

Well, actually something very close to absolute viability under the unseaworthiness doctrine.

John W. Hough:

Yes sir.

Potter Stewart:

Plus viability for negligence I suppose if — and this I should I think would operate it something of a sanction against the shipowner to keep it seaworthy and the ship, safe ship, wouldn’t it?

John W. Hough:

But it doesn’t in all cases.

Potter Stewart:

When I was — if any — this theory of yours, does any court accepted it ever?

John W. Hough:

The — in the Hugev case it was announced.

There was a contract in the (Voice Overlap) —

Potter Stewart:

I mean this theory of yours of recovery over it.

John W. Hough:

Of a contract?

Potter Stewart:

By the employer who has to pay under the Longshoremen’s and Harbor Workers’ Compensation Act —

John W. Hough:

No, that — and that —

Potter Stewart:

— recovering over against the ship (Voice Overlap) —

John W. Hough:

(Voice Overlap)That theory has never been tested before —

Potter Stewart:

Your theory has never been (Voice Overlap) —

John W. Hough:

(Voice Overlap) —

Potter Stewart:

Much less — much less prevail, is that right?

John W. Hough:

It’s never been tested in any court other than in this case.

Potter Stewart:

You do have a — of course, under the statute rights, certain rights of subrogation, don’t you?

John W. Hough:

We have rights of subrogation, yes Your Honor.

Potter Stewart:

And it’s only because of the statute that you’re liable at all, isn’t it?

John W. Hough:

No Your Honor.

Before that statute —

Potter Stewart:

You were liable with —

John W. Hough:

(Voice Overlap) both liabilities.

Potter Stewart:

It’s only because the statute that you’re liable without fault.

John W. Hough:

Was extended to without (Voice Overlap) —

Potter Stewart:

Isn’t that true?

John W. Hough:

Under the Longshoremen’s and Harbor Workers’ Compensation Act, yes.

The Ryan case announced that there was an implied — in fact a contract.

John W. Hough:

This Court has announced only what duties flow from the vessel owner to this — pardon me, from the stevedoring contractor to the vessel owner under that contract.

This Court has never announced what duties flow from the vessel owner to the stevedoring contract under that contract.

We suggest that it’s not a unilateral contract and that, duties must flow from each side to the other.

Hugo L. Black:

Well, are you claiming on an implied standard?

John W. Hough:

Yes Your Honor.

And that — as Your Honor — even though Your Honor disagreed with the majority opinion in the Ryan case, we rely on the majority opinion on that.

And since there is a contract announced in implied fact, say it has to flow both ways, duties that they are on.

What would be the implied standard?

John W. Hough:

The implied duties are announced in the Hugev case and are essentially summarized as a duty by the vessel owner to provide a reasonably safe place to work.

We don’t say a safe place.

We don’t say to the — hand over it and unseaworthy or a seaworthy vessel.

We say only a reasonably safe place to work.

So you in the form of a contract, what essentially might be termed a tort law or to visitor or invitees.

John W. Hough:

Essentially.

Not invitees, no, pardon me, just a reasonably safe place to work.

For whom?

John W. Hough:

For the employees of the stevedoring contractor and for the stevedoring contractor when he puts his employees aboard.

Which is what the standard duty or (Inaudible)?

John W. Hough:

Oh, the employees or the stevedore — it can vary.

The stevedore and the employees?

John W. Hough:

For the — no, Your Honor because under the admiralty law, to the employees of the stevedore under the Sieracki doctrine, the vessel owner is to supply that those employees with a seaworthy vessel.

That is a liability without fault for a violation thereof.

We don’t claim them.

Can a stevedore sue under seaworth — he can sue under seaworthiness doctrine?

John W. Hough:

Yes, both.

So if you’re really saying as you’re implying the negligence standard that — as you called (Inaudible)?

John W. Hough:

I differentiate, I must because of the announcement of this Court between the stevedore contractor and his employees.

I repeat under the Sieracki doctrine, the duty of the vessel owner to supply to the stevedore employees —

Potter Stewart:

How did the Hugev case arise?

John W. Hough:

The Hugev case arose in a very similar manner as the instant case and an employee sued the vessel for unseaworthy condition.

Potter Stewart:

Well, here that’s not this case.

But that’s the —

John W. Hough:

That’s — I mean, I — I’m sorry Your Honor I relate previous cases that — this is two, a different cases, but this was two cases below.

The employee filed an action against the vessel thereafter in this instant action and a separate action, the vessel sought complete indemnification from the stevedoring contractor under the theory of the Ryan case.

The employer, defect contract as announced.

Potter Stewart:

Now, are you telling about this case or the Hugev case in described — in that description?

John W. Hough:

And —

Potter Stewart:

I beg your pardon.

John W. Hough:

In this case, that’s the way this — this latter case grew up to.

Potter Stewart:

Yes, now how did the Hugev case arise?

John W. Hough:

The same situation, an employee, a stevedoring employee sued the vessel owner and thereafter the vessel owner sought indemnification from the stevedoring contractor.

And —

Potter Stewart:

And what — then what happened?

John W. Hough:

The stevedore employee recovered.

Potter Stewart:

Against the shipowner?

John W. Hough:

Against the shipowner and the stevedoring contractor had sought indemnification.

And was prohibited from it due to the fact that they had assumed the risk but in the Hugev case and we have set forth in out opening brief the duties that the vessel owner owes directly to the stevedoring contractor.

The — in the Hugev case, the court decided there was a contractor relationship directly between the vessel owner and the stevedoring contractor even though unwritten.

This Court has said that in the Ryan case to.

But this Court has never asked upon the question of the duties flowing from the vessel owner to the stevedoring contractor.

Was never announced though, that’s only been announced below and certiorari has been denied here — in that case.

Now, it was held by the Seventh Circuit that the Longshoremen’s and Harbor Workers’ Compensation Act isolated the vessel owner from all liability directly to the stevedoring contractor.

That case, the decision rendered by the Seventh Circuit went further to state that the Longshoremen’s and Harbor Workers’ Compensation Act is the source of all remedies existent to the stevedoring contractor against the vessel owner.

We submit to this Court that that is far beyond the intendments of the Act.

Section 904 (a) imposes on the stevedoring contractor a liability without fault.

Taking away from the employee his common law liability and giving him a quid pro quo.

Section 904 (b) provides that the liability of the stevedoring employee — employer is the exclusive liability to a certain class, namely the stevedore and all persons claiming under and through him.

However, Section 933 (i) of the Act warns that the Longshoremen’s and Harbor Workers’ Compensation Act only applies to this class of people.

It does not go further.

The basic provision and reason for the Longshoremen’s and Harbor Workers’ Compensation Act was to replace the common law liability which was only possible with an absolute liability which was completely without fault but a liability in a lesser — a liability by the stevedoring contractor to his employees in a — result from a lesser liability.

John W. Hough:

The Act we submit has no bearing whatsoever on the relationship between the stevedoring contractor and the vessel owner.

True, there is a right to subrogation by the stevedoring contractor to the claims of his employees against third-party tort.

These are under Section 933 (b) prior to the Ryan case, it was mandatory.

Perhaps the dissenting opinion in the Ryan case caused Congress to change its mind and amend it so that now only if the person on — who is entitled to compensation under the Act commences an action against a third-party within that six months after an award of compensation is the action assigned.

Hugo L. Black:

Is what?

John W. Hough:

Is the cause of action assigned to the employer.

Earl Warren:

Mr. McCambridge.

Paul McCambridge:

Thank you Mr. Chief Justice, may it please the Court.

I would first direct my answer to Mr. Justice Harlan’s inquiry about whether the vessel was in time charter or whether the owner was had entered into some contractual relationship with the stevedore.

The answer is in the record.

There was an allegation in the liability that the — it’s on — it’s on page 5 of the appendix and it’s paragraph 7 of the liable in which we alleged that the work of the respondent was being performed pursuant to agreement between the respondent and the time charter the vessel, Federal Commerce and Navigation Company Limited, a corporation affiliated with the respondent.

And then on page 9 of appendix that allegation in the liable is admitted so I don’t — there’s too much question that the vessel was under time charter and certainly that leads us right into — immediately one of the principal contentions that we make to this Court.

And that which that there is no affirmative contract between the stevedore and the petitioner or — I’m sorry, the stevedore and the shipowner and that therefore there — absent a contractual relationship certainly there cannot be any implied duties running from the shipowner to the stevedore.

Would the stevedore or the shipowner (Inaudible)?

Paul McCambridge:

I — yes sir.

The —

In spite of the liability?

Paul McCambridge:

Yes sir.

I think this — that has been decided —

(Inaudible)

Paul McCambridge:

Yes sir that was decided by this Court that the shipowner was a beneficiary of the contract between the stevedore and the time charterer, I think it was Reed versus Yaka.

(Inaudible)

Paul McCambridge:

Well, I think this is one of my opponent’s principle, the things that really trouble him under the — he feels that he doesn’t have an equal — in equal side of shipowner that he is into some more stringent obligation to the ship rather than the shipowner is to the stevedore.

The petitioner’s counterclaim upon which it basis its claim to indemnity is based upon allegations — that the shipowner was negligent and the shipowner breached a duty old to the stevedore that it furnish its longshoremen employees a safe place to work onboard the vessel.

Potter Stewart:

All we have before us in this case and you’d — you tell me if I’m mistaken because maybe I am.I had understood that all we have before us this case was the — the grant of a summary judgment to your client, on the petitioner’s counterclaim, is that right?

Paul McCambridge:

That’s — that is correct.

The — Mr. Justice, the Court agreed with us that the — complaint or the counterclaim was defective as a matter of law because essentially —

Potter Stewart:

As a matter of law.

Paul McCambridge:

— stated a tortuous claim of action rather than one under contract.

Potter Stewart:

The Court denied a counterclaim — well, on the other branch of the case.

Paul McCambridge:

The —

Potter Stewart:

Did they deny the summary judgment on the other branch —

Paul McCambridge:

Yes sir, yes sir.

Potter Stewart:

— denied of summary judgment on the claim that granted a summary judgment on the counterclaim as a matter of law holding one other things that the federal statute was controlling in that situation —

Paul McCambridge:

That is correct sir.

Potter Stewart:

— which granted subrogation

Paul McCambridge:

That —

Potter Stewart:

Do I misunderstand what’s it about?

Paul McCambridge:

You know that’s correct Mr. Justice.

Oh, I get it, you argue then that whether there’s an implied provision of the contract, between the time charter, stevedore or shipowners, does that not make you (Inaudible)?

Paul McCambridge:

This is a question that is not really before this Court.

This — this could arise and it will arise I think with the efforts being made by shipowners to contractually — I’m sorry, not shipowners, by stevedores to contractually work their way out of the predicament, they are in where they find themselves on may times responding for what they consider is the ship’s liability in this area of the law where the shipowner has his right to indemnity against the stevedore for a breach of its worthy of safe performance in the service of a vessel.

Well, in any event you don’t (Inaudible) simply because there’s a back contributor?

Paul McCambridge:

No sir, no sir, this is ancillary to the argument.

He’s liable here because there’s no provision in the contract, isn’t that right?

Paul McCambridge:

That is correct.

That is one — that is —

(Inaudible)

Paul McCambridge:

No sir.

Doesn’t matter to me.

The judgment were deferred.

We maintain that in this field of indemnity in Longshoreman personal injury cases, indemnity as between a shipowner and a stevedore can be predicated only upon a contract theory of warranty.

Now the stevedores counterclaim in — for indemnity is premised entirely upon what we considered to be tortuous conduct of the shipowner which we say is not — they are duties that arise by virtue of any contractual relationships.

These are duties which exist irrespective of any contractual relationship between the shipowner and a stevedore.

The petitioner’s counterclaim essentially has been changed.

The — Mr. Hough has mentioned to the court now that he is — looking only for a reasonably safe place for his stevedore employees to work.

However the counterclaim itself specifically says it is based upon a purported duty owed by the shipowner to the stevedore to furnish a safe place to work.

Now, this duty to furnish a safe place to work is clearly a duty owed to the individual longshoreman working onboard the boat — onboard the ship.

It’s the — if the species of liability that was enunciated without thought.

It was enunciated by this Court in Sieracki.

Yes.

But what if the — because of the non — furnish of an unsafe — an unsafe place to work not only for stevedores were injured but some equipment was destroyed belonging to the stevedore?

Paul McCambridge:

I would say —

(Voice Overlap) duty owed at all or in the — of the kind — of the employee?

Paul McCambridge:

This would depend upon — on the contract, I think between the shipowner and the stevedore and this —

(Inaudible)

Paul McCambridge:

Well, I don’t think in this particular case.

I thought Your Honor or the court was referring to a general obligation.

No, I think damage —

(Voice Overlap) whether it’s tort.

I mean, is there any —

Paul McCambridge:

Oh.

The shipowner frustrated all the stevedores.

Paul McCambridge:

There — there’s — I don’t think there’s any question but that a —

Wouldn’t there?

Paul McCambridge:

Because this is a duty generally owed to everyone.

This duty to exercise ordinary care which is spoken of by the petitioner and the duty to warn of a hidden defect, these are tort obligations and this Court in Ryan admonished that in ascertaining a shipowner’s liabilities and his responsibilities that resort may not be had to principals of quasi contract or to principles of tort liability.

Mr. Justice White, you addressed yourself to the question what duties are owed to and when it comes aboard a ship.

And I think it was — but that question was put to rest in the Kermarec that the shipowner owes the duties to use ordinary care and to warn of hidden defects.

He owes these to all persons who are lawfully aboard his vessel.

Therefore, it is clear I believe, it’s obvious that is are not duties arising by virtue of contract but that they are independently owed duties and they’re tort duties.

Now the shipowner of the — pardon me, the stevedore has brought his counterclaim alleging that he has a independent cause of action against this — against the shipowner under contract and separate from the action which is given him under the Longshoremen’s and Harbor Workers’ Compensation Act.

He says that Section 33 of that Act provides a statutory method by which an employer may be reimbursed for the compensation expenditures that must pay for — to its injured employees but he says because the Act is not specifically barring independent cause of action therefore it should not preclude this action.

We feel that that argument is false or at least the fallacy can be demonstrated by the fact that prior to the enactment of compensation statutes generally in this statute in particular, an employer no — had no non-negligent liability for injuries to its employees.

Therefore we feel that proper construction of the statute says that if the liability standards from the statutes certainly, then the corresponding right to be reimbursed must also be predicated upon that statute.

The — and I feel that the petitioner’s principal complaint here is that he doesn’t have a complete remedy under the Longshoreman’s Act by reason of the fact that if he takes under that Act is the assignee or the subrogee of the employee’s claim then he will be limited to the $30,000.00 maximum recovery which was permitted under Illinois law in effect to the time of this accident.

However, it is maintained that the employers are as carriers, insurance carriers potential liability is $70,000.00 therefore he is going to be at least $40,000.00 out of pocket rate — right away if he cannot find a way to get around the Longshoremen’s and Harbor Workers’ Compensation Act.

I believe that this question, this possibility or likelihood that there would be cases in which the injured employee in bringing his cause of action against a negligent third party, there were cases in which he would recover less from the negligent third party than he might against — as a right — result of his entitlement to compensation benefits.

The Congress covered this in subsection (f) of Section 33.

It isn’t in the appendix but it is in the petitioner’s brief on page 3 of petitioner’s brief.

Paul McCambridge:

In contemplating what would occur when there was a deficiency in the employees recovery, the Congress did not say or did not enact that the employer or his compensation carrier might have a separate cause of action or additional cause of action against the negligent third party to recover the deposit that it might have from its right to be reimbursed from — or to recover from the employees recovery but instead in protecting the employee it said that the employer shall pay to the employee any deficiency between whatever it recovers from the negligent third party and what it was entitled to under the compensation act.

The Act, I think it’s designed to protect employees rather than employers to some extent anyway.

We feel that the Congress in enacting this statute specified — set forth a particular manner in which reimbursement could be achieved by the employer and we feel that the mode of reimbursement under the statute is very, very plain.

The compensation statutes have been consistently interpreted to cover the entire area of industrial injuries and basically where Congress has provided a means of recovery, I don’t think it’s necessary to go outside the Act.

I think the recovery must be found within the four corners of the Act.

We certainly we feel that Congress did not intend that there should be two recoveries for a single tort.

The second aspect of this question is before the Court is how can the — or what rules do govern this area of indemnity?

I think it’s clear from the decisions of this Court beginning with Ryan going under Weyerhaeuser, Crumady that indemnity in these cases must be predicated entirely upon contractual warranty.

Hugo L. Black:

You mean by implied contract, don’t you?

Paul McCambridge:

Oh, it could be implied or expressed.

We wouldn’t have a problem where it’s expressed —

Hugo L. Black:

But that was the Ryan case.

Paul McCambridge:

Yes sir, implied warranty.

And yet there —

Hugo L. Black:

Why would that — why would not that carry over to the stevedore if he was made liable by reason of the neglect of the ship?

Paul McCambridge:

Because it is narrowly a contractual duty owed to the —

Hugo L. Black:

But the court held it was implied contract.

Paul McCambridge:

I’m sorry, maybe I’m misunderstood.

Hugo L. Black:

In the Ryan case.

Paul McCambridge:

Yes sir.

Hugo L. Black:

As I understand it here, an employee of the ship — of the stevedoring company was killed by an alleged neglect of the ship.

Paul McCambridge:

Yes sir.

Hugo L. Black:

He had gone in there as a stevedore’s employee.

Now, under the Ryan case, what would happen if he should sue and get a judgment against the ship?

Paul McCambridge:

The shipowner would pay the judgment and following —

Hugo L. Black:

Then what?

Paul McCambridge:

— Ryan he would bring his indemnity action against the stevedore employer for alleging any way a breach of the stevedores warranty of safe performance.

Hugo L. Black:

But suppose in reality it was neglect of the ship and not the neglect of the stevedore?

Paul McCambridge:

The courts in following this Court’s several decisions in this area of the law have examined the shipowner’s conduct in the context of whether it — its conduct has actively hindered or whether it has prevented the stevedore from safely performing its services to the vessel.

If the shipowner’s conduct has been of that nature, then the courts merely say you have no right to indemnity for the amounts that you have paid to the injured employee.

Paul McCambridge:

You cannot recover this from his employer.

But the courts have not gone further.

They have not created the — you might say the reverse warranty or the reverse obligation that the — there might be an affirmative recovery by the stevedore against the shipowner on that case.

Hugo L. Black:

Well, is this right with the controversy, I’m trying to get just what it is.

The man was killed, why sue?

Did she get something from the stevedore?

Paul McCambridge:

She is being paid compensation benefits, yes sir.

Hugo L. Black:

By the stevedore?

Paul McCambridge:

Yes sir.

Hugo L. Black:

Now, the stevedore sets up a claim against the ship?

Paul McCambridge:

Yes sir.

Hugo L. Black:

It says I’ve had to pay under the law because of your neglect and I want you to indemnify is that what the case is about?

Paul McCambridge:

That is what the case is about, yes sir.

Hugo L. Black:

That’s the whole thing.

What law was it, it was passed by Congress after the Ryan case?

Paul McCambridge:

They amended the provision in Section 33 required an automatic assignment of employees’ cause of action against the third party to the employer.

There’s an automatic assignment under the old Act —

Hugo L. Black:

Automatic assignment from the injured man —

Paul McCambridge:

To his employer or —

Hugo L. Black:

To his employer.

Paul McCambridge:

And —

Hugo L. Black:

Assignment of what?

Paul McCambridge:

His cause of action against a negligent third party.

Hugo L. Black:

Against the ship?

Paul McCambridge:

Yes sir.

Hugo L. Black:

Well, now why can’t they recover on those things?

Paul McCambridge:

They can recover on that assignment as a matter subrogation Mr. Justice Black however they take it as an assigned cause of action, they — therefore stand in the employee’s stead in bringing that suit.

The employee is limited to the maximum recovery of $30,000.00 which was in effect, under the Illinois wrongful death action at that time.

Hugo L. Black:

And you therefore say that the shipowner, the stevedoring company would be limited to just what the employee could get —

Paul McCambridge:

Yes sir.

Hugo L. Black:

— from his employer, the stevedore.

Paul McCambridge:

Yes sir.

Hugo L. Black:

And that’s your issue —

(Voice Overlap) — or that the stevedore has been paying out under the Longshoremen’s and Harbor — $70,000.00 (Voice Overlap) —

Paul McCambridge:

This is a potential liability which they alleged.

Yes sir.

Now can the employee, stevedore could sue the shipowner for either — in either — or the negligent theory or seaworthiness?

Paul McCambridge:

Yes sir and in the —

Now, was there a wrongful death action for unseaworthiness?

Paul McCambridge:

Not as such.

This — following this Court’s decisions, I think in the late 1950’s, the —

Now, that there was a state government where that statute can be borrowed?

Paul McCambridge:

This — can borrow the concept of unseaworthiness.

Whatever cause of action be raised here, compensation of $30,000.00?

Paul McCambridge:

Yes sir.

Hugo L. Black:

Do they admit that, the other side?

Paul McCambridge:

Oh, yes sir.

That is their — that’s what —

Hugo L. Black:

For that all they claim?

Paul McCambridge:

I cannot speak for Mr. Hough but what he wants to do is avoid the impact of the compensation act.

He wants to say regardless of whether there’s a Compensation Act or not.

I have a separate cause of action against the shipowner because the shipowner has been negligent.

Byron R. White:

In addition to the subrogation right given by the Act, I have my own cause of action as the shipowner?

Paul McCambridge:

Yes Mr. Justice White.

Hugo L. Black:

Not for the death of the man though that he’d have to pay, does he?

Paul McCambridge:

No, not for the death of the man —

Hugo L. Black:

Then what is it he claims?

Paul McCambridge:

That he claims that he has been damaged in the amount of a potential liability of $70,000.00 which represents the total amount of compensation benefits which may have to be paid to the decedent’s widow and to his dependent children.

Hugo L. Black:

Do you believe or what — why would he have to pay that if he is limited –?

Paul McCambridge:

The —

Hugo L. Black:

The man is limited to $30,000.00?

Paul McCambridge:

The man is limited in — to $30,000.00 in his recovery against me, the negligent shipowner, however, under the Act there is no maximum limitation then —

Byron R. White:

That’s the compensation under the Longshoremen’s Act.

Paul McCambridge:

That is correct sir.

There is no — an action —

Byron R. White:

Given his own employer is (Inaudible)?

Paul McCambridge:

That is correct.

Abe Fortas:

Is this — I might be — I beg your pardon, am I correct in understanding that the question is whether the liability imposed by the Longshoremen’s Act must be born by the stevedore employer and it stops there or whether he can consider that as an element of damages and recover therefore against the shipowner.

Paul McCambridge:

I think that is an aspect of the case Mr. Justice Fortas.

The —

Abe Fortas:

Your difference here is, there’s no doubt that he — that the stevedore could recover 30 — up to $30,000.00 from the shipowner.

And the question is, can he recover up to $70,000.00 or which is the estimated amount that he would have to pay out as in substance and insure of under the Act.

Paul McCambridge:

Yes sir.

We — we say that the petitioner, stevedore has not stated a cause of action on which he can recover.

He has not spoken once in the area of whether there has been a breach of any implied warranty by the shipowner.

We claim he is alleging merely tortuous conduct.And —

Earl Warren:

May I — may I interrupt there just a moment.

I understood you a moment ago to say to Mr. Justice Fortas that the petitioner is entitled to subrogation of the $30,000.00.

Paul McCambridge:

Yes sir.

Earl Warren:

Now you say that he is entitled to no relief.

Paul McCambridge:

He is entitled to subrogation through his employee, in his employee’s cause of action against us.

But I say — my position is sir that he does not have an independent cause of action other than that given by the — other than given by the Compensation Act.

Under the Act he is subrogated to his employee’s recovery.

Earl Warren:

I see.

Hugo L. Black:

Well, are you just claiming if he’s proceeding in the wrong way?

Is that what the price to pay?

Paul McCambridge:

I am —

Hugo L. Black:

You admit liability for $30,000.00.

Paul McCambridge:

We admit that we may be liable —

Hugo L. Black:

Yes.

Paul McCambridge:

–for as much as $30,000.00, yes sir.

Hugo L. Black:

But you are claiming that he is not bringing suit in the right manner?

That’s likely —

Paul McCambridge:

I say he has no cause of action against us.

Hugo L. Black:

Well —

Paul McCambridge:

Because his —

Hugo L. Black:

Well if it’s subrogated to him, why hasn’t he?

Paul McCambridge:

His employee has already brought a cause of action.

There was a parallel case, two cases will be tried by the District Court.

One is the widow’s action against us for — under the wrongful death action for $30,000.00.

Now, he — the longshoreman — I’m sorry the stevedore company or its insurance company will be entitled to — to be reimbursed from the — whatever the widow’s recovery is against us, up to the amount of the compensation payments they have made.

Now if she —

Hugo L. Black:

Was on the subrogation idea?

Paul McCambridge:

Yes sir.

This of course is the puzzling thing if the — to me anyway if the stevedore felt that it had a — an independent cause of action not against the — not under the Compensation Act, why didn’t it bring it direct against us rather than after the widow’s action had been brought and then we had to go back and sue the — bring our action for indemnity —

Hugo L. Black:

Well, has the employ — has the stevedoring company been paid, what it’s entitled to do with subrogee?

Paul McCambridge:

It has not — has yet been paid Your Honor.

The —

Hugo L. Black:

You said they could sue you directly?

Paul McCambridge:

Well, they say they can sue us directly.We say, no you cannot.

Earl Warren:

How can they get it?

Paul McCambridge:

They can get it through their employee’s recovery against us.

The only way that they can get it is by virtue of their employee’s recovery against the —

Hugo L. Black:

Why can they get it from him?

Paul McCambridge:

Because this is the manner in which the Act says it will be recovered.

What —

Hugo L. Black:

Well, you mean it — you pay the employee for damages.

Paul McCambridge:

Yes sir.

Hugo L. Black:

And they have to sue him for damages.

Paul McCambridge:

No, as a — they — as a matter of law, they have a lien against his recovery.

Paul McCambridge:

We cannot — we — as I — representing a shipowner, I cannot effectively enter into a settlement compromise without the approval of the — of the in — the compensation carrier because if I do — as in this instance.

Byron R. White:

You owe him.

Do you owe him too?

Paul McCambridge:

I may owe him but it also would cut off the employee’s right to any deficiency if we settle the claim with the compensation carrier without their written approval of the settlement.

Hugo L. Black:

It looks to me like under your plan, stevedoring company is going to lose its right to recover which you say it has as a subrogee?

Paul McCambridge:

Oh, no sir.

Because it had — there isn’t — there’s a separate action in which the widow is bringing — has brought her cause and —

William O. Douglas:

(Voice Overlap) tried you?

Paul McCambridge:

No sir.

Byron R. White:

Now, if she gets judgment right after you, it can (Inaudible).

Paul McCambridge:

Oh, I — no, we will pay the widow off but —

Byron R. White:

That’s the point though (Voice Overlap).

Paul McCambridge:

Well, I — no, I don’t know what the employer would be entitled to receive from the check that we pay her, whatever compensation it has already paid.

Now, for example —

Byron R. White:

Well, let’s assume that it paid up the (Inaudible)

Paul McCambridge:

Then they would get the whole $30,000.00 in —

Byron R. White:

How did they get it?

Do they enter the lawsuit between that of the widow and say, please pay off the widow.

Paul McCambridge:

They are in the lawsuit right now.

They are the employer.

Byron R. White:

There is a (Inaudible).

You’re probably thinking of, just an employer.

Paul McCambridge:

I think the effect of that would — said what is that it would it be, yes sir.

Hugo L. Black:

Maybe because I just stand on the standard.

Paul McCambridge:

Well —

Hugo L. Black:

I must confess, I don’t quite understand —

Paul McCambridge:

Well, that’s my fault sir, then it’s not yours because my job is to make it understandable.

Hugo L. Black:

Oh, it’s my mine.

And as I — I just can’t quite understand the defense.

Paul McCambridge:

Our —

Hugo L. Black:

And the facts are that the — this woman is getting so much a week, now isn’t she?

Paul McCambridge:

Yes sir.

Hugo L. Black:

Under the Longshoremen’s Act?

Paul McCambridge:

Yes sir.

Hugo L. Black:

And whatever is paid, I understand the amendment to the law use the stevedoring company a right to be treated, subrogated to the employee’s claims.

He — and therefore the employer, the stevedore would be entirely recover from somebody.

Paul McCambridge:

That is correct sir.

Now, if you want to look behind the scenes in this case and I don’t think it really affects —

Hugo L. Black:

(Voice Overlap)

Paul McCambridge:

— what he has done.

The steve — the insurance company is actually — has brought the suit in the widow’s name.

And the insurance suing as Mrs. McNeill has sued the shipowner.

Hugo L. Black:

Oh, I’m sure this is just a suit between the insurance company —

Paul McCambridge:

Oh it is, I mean —

Potter Stewart:

Well, the factual difference is — the difference between $30,000.00 and $70,000.00 because of the impact of the Illinois wrongful death statute.

Paul McCambridge:

Yes sir.

Hugo L. Black:

Well, that’s all the man could be — or so the stevedoring company will be held liable, isn’t it?

Paul McCambridge:

No, stevedore —

Hugo L. Black:

70,000.

Paul McCambridge:

The stevedoring company can have a potential liability of $70,000.00 if the widow doesn’t remarry until the children are — reached the age of 18.

Hugo L. Black:

And the subrogation you are talking about is that — is the subrogation under the Longshoremen’s Act which does not give $30,000.00?

Potter Stewart:

The Illinois wrongful death statute.

Paul McCambridge:

The Illinois wrongful death action would limit the subrogated right to $30,000.00, yes sir.

Potter Stewart:

Although it hasn’t been definitely decided that that is applicable to this claim, has it?

I noticed the Court of Appeals from the Seventh Circuit put it as a quite a tentative conclusion.

Paul McCambridge:

I don’t think there’s too much question —

Potter Stewart:

Well, perhaps not but it hasn’t been decided, has it?

Paul McCambridge:

In this area of the law?

Potter Stewart:

In this case.

Paul McCambridge:

Oh, this is — was not a question before the Court of Appeals.

Potter Stewart:

No, exactly.

Paul McCambridge:

The question merely went to whether the counterclaim for indemnity for all the cause that the stevedore might have to pay its — in compensation to recover its attorney’s fees for suing us.

The only thing that was before the Court of Appeals was whether it stated a cause of action.

Potter Stewart:

Whether or not the statutory right of subrogation was a — was an exclusive right.

Paul McCambridge:

Yes sir.

Potter Stewart:

That was what I want to say.

Paul McCambridge:

Absent in expressed agreement between the parties.

I would have to make that very clear that this of course, the parties are free to contract but that — the Court of Appeals from the Seventh Circuit held that by virtue of the relationship between the parties, there was not necessarily implied any warranty running from the shipowner to the stevedore.

And the Court of Appeals correctly reasoned that absent such an expressed agreement that the stevedore’s exclusive means of recovering its compensation was by the vehicle of the action under the Longshoremen’s and Harbor Workers’ Compensation Act.

Hugo L. Black:

Well, are they claiming if there was an implied agreement to compensate them equip — give them a complete equipment anything they had to pay out on account of that inquiry to the man.

Paul McCambridge:

Oh, I — whether they state it in so many words, I think that’s that —

Hugo L. Black:

That’s their claim?

Paul McCambridge:

That — that is the claim, yes sir.

Hugo L. Black:

Now, and we have held that there is an implied contract on the part of the stevedoring company?

Do you compensate the ship for any injuries brought by its nature?

Paul McCambridge:

An implied warranty —

Hugo L. Black:

Well, now why should not that imply more?It exists on both sides.

Paul McCambridge:

Because this Court held in Ryan that the stevedore’s obligation to safely perform was truly of the essence of the stevedoring contract.

It was performing services to the vessel and it essent — it — the essence of the contract was, we will safely perform this and the Court compared that —

Hugo L. Black:

I was wondering why if this Court can find an implied contract in favor of the ship — in favor of the ship against the stevedoring company for it’s — not doing anything they can didn’t it?

That — may cause us damage, why can’t the Court find the same implied contract on the other side?

Paul McCambridge:

I read your dissent in the Ryan case sir and I can understand that the — that you know, that this would be a reasonable approach to the question —

Byron R. White:

Well, what is your — what is your — wasn’t your answer to that is that the Act, the Longshoremen’s and Harbor Workers’ Compensation Act (Inaudible) —

Paul McCambridge:

I — that is one answer Mr. Justice White.

I don’t think it necessarily would prevent it if it were expressly agreed upon but the duties that — which the stevedore urges that we owed to them as a matter of contract are tort duties, the duty to use ordinary care, the duty to warn of hidden defects.

These are tort duties.

Hugo L. Black:

Well, (Voice Overlap)?

Paul McCambridge:

They are duties, we would — I would acknowledge that these are duties we owed them to everyone who is aboard the ship but they do not arise necessarily by virtue of the stevedoring contract whereas this Court has expressed —

Hugo L. Black:

Well that — that’s only a matter of semantics.

Paul McCambridge:

Well, two District Court decisions in California which interpreted the Hugev which is relied upon by my opponent said it isn’t just a matter of semantics.

Paul McCambridge:

It really is the true perspective of the reasoning is that these duties existed independent of contract and that they do not arise by virtue of the contract.

And in this area —

Hugo L. Black:

What if they do, you would admit liability, wouldn’t you?

If the law does make that a — give liability against the ship on that basis, would you deny liability?

Paul McCambridge:

I — no sir, but this — I think this really goes to the real crux of why this case possibly could be important.

Hugo L. Black:

Wasn’t it?

Paul McCambridge:

And if I may have just a moment, I —

Earl Warren:

Yes, you may answer the question.

Paul McCambridge:

If the shipowner does in fact impliedly warrant that it will observe a tort obligation to use ordinary care or to warn of hidden defects or if it owes the duty to furnish a safe place to work not only to the individual longshoreman which Sieracki says it owes.

But it also owes that same to the stevedore employer to furnish its employee’s a safe place to work.

The whole balance in this area of indemnification between shipowners and stevedores will be thrown out of balance because in every case, the fact that a shipowner has failed to furnish a safe place to work and that is this liability would have to fall.

It’s the absolute non-delegable liability duty that it has in every case that would prevent its recovery of indemnity against a stevedore because it would be a breach contract.

It would be a breach of warranty that it would furnish a safe place to work.

Now, the cases have never held — in fact the cases are in accord that the shipowner does not furnish — does not warrant to a stevedore that it will furnish a seaworthy vessel.

A seaworthy vessel, the duty to furnish a seaworthy vessel and the duty to provide a safe place for a longshoreman to work is identical, it’s the identical obligation really.

And it — and the injured longshoreman recover in these cases because the shipowner has breached this duty to furnish a safe place to work.

Now —

Hugo L. Black:

Suppose — may I ask you just this one question.

Suppose they had made a contract with the stevedoring company and says, “You are to bring your man over this gangway, this water freight right here.”

He brings him over.

It is discovered that was the knowledge of the owner of the ship that the thing has been so defective, that is absolutely bound to break, let him go in the sea.

And it broke and went into the sea and was drowned.

What about that?

Paul McCambridge:

In that case, I would say that the injured or decedent — the deceased could recover from the shipowner and the shipowner would be prevented from recovery of indemnity from the stevedore because obviously the ship’s gangway is something that is furnished by the shipowner.

Therefore in the first instance, the longshoremen recover.

The second aspect of that question would be that in the first time up a gangway, the stevedore does not necessarily have a duty to inspect.

This is something that is — this was in the — that is within the realm of the shipowner’s responsibility.

Therefore in this case, the furnishing of the defect of the gangway would prevent the stevedore —

Hugo L. Black:

Then I suppose that stood in the way of the stevedore any protection because of the decision by this Court that had held that he must be — indemnify the shipowner even though it’s the shipowner’s negligence.

Paul McCambridge:

Those are — these are not the decisions of this Court.

Paul McCambridge:

This — the decisions —

Hugo L. Black:

Well, I rather thought it was in the Ryan case.

I’d still think so.

I think, that is your trouble.

Paul McCambridge:

I think I might —

Earl Warren:

You may answer very briefly if you wish but we —

Paul McCambridge:

(Voice Overlap) —

Earl Warren:

— are running concern of your time.

Paul McCambridge:

I know, I’m satisfied if the Court has heard me completely.

Thank you.

Earl Warren:

Very well.

Mr. Hough, you have a few moments if you wish to use them.

John W. Hough:

I would like to point out to the Court that respondent recognize that changing the law here would perhaps have a decided impact on the industry and that Ryan changed the law existent up to that time and had as have been enacted under the Longshoremen’s and Harbor Workers’ Compensation Act long before the advent of Ryan.

I would like to point out to the Court that the position of the law now is in the Ninth Circuit, affirmed by the Ninth Circuit, the Hugev case makes the very definite statement that the law prompt the holding that the ex — the absent a span, they expressed a provision to the contrary.

The shipowner owes to the stevedoring contractor under the stevedoring contract the implied in fact obligations.

The Ninth Circuit holds there is an implied in fact contract.

The Seventh Circuit holds there is none.

We ask this Court to clarify the law and we urge that there is this implied in fact contract under which duties flow both ways.

And secondly, that the Longshoremen’s and Harbor Workers’ Compensation Act was not designed to and does not isolate the shipowner from liability to the stevedoring contract for a breach of that contract.

That Act has no bearing on that relationship, we suggest to this Court.

Thank you.

Earl Warren:

Very well.