Ryan Stevedoring Company, Inc. v. Pan-Atlantic Steamship Corporation

PETITIONER:Ryan Stevedoring Company, Inc.
RESPONDENT:Pan-Atlantic Steamship Corporation
LOCATION:

DOCKET NO.: 4
DECIDED BY: Warren Court (1955-1956)
LOWER COURT: United States Court of Appeals for the Second Circuit

REARGUED: Oct 11, 1955 / Oct 12, 1955
DECIDED: Jan 09, 1956
ARGUED: Mar 03, 1955 / Mar 04, 1955

Facts of the case

Question

Media for Ryan Stevedoring Company, Inc. v. Pan-Atlantic Steamship Corporation

Audio Transcription for Oral Reargument – October 11, 1955 in Ryan Stevedoring Company, Inc. v. Pan-Atlantic Steamship Corporation

Audio Transcription for Oral Reargument – October 12, 1955 in Ryan Stevedoring Company, Inc. v. Pan-Atlantic Steamship Corporation

Earl Warren:

— Ryan Stevedoring Company versus Pan-Atlantic Steamship Corporation

Mr. Behrens.

Edward J. Behrens:

May it please the Court.

When we adjourned yesterday, I had practically completed the presentation of my views concerning the possible effect upon Section 905, the Longshoremen and Harbor Workers’ Act, upon those they were not employees or claiming by subrogation through employees.

I have referred to the two lines of obligation which I thought were in existence.

Those two separate lines of obligations which have been found by every state court, dealing with every state compensation statute which counsel confined in this case.

When the question of the constitutionality of the Longshoremen and Harbor Workers’ Act was before this Court, this Court adjudged it constitutional referring to the fact that as between stevedore and longshoremen, between employer and an employee, there was indeed quid pro quo, each was giving up something, each was getting something.

Under the old law, without a workmen’s compensation law in effect, a longshoreman would sue his stevedore employer in negligence.

The amount he could recover, if he could prove negligence was without limit but he had to prove negligence.

On the other hand, the employer had certain defenses with negligence of a fellow servant, assumption of risk and his other common law defenses.

So the Longshoremen and Harbor Workers’ Act as a compensation act stripped those defenses from the employer but in turn put a ceiling upon his obligation to his employee.

He said how much in compensation he would have to pay for?

Now, on the employee’s side, he gave up something, an unlimited recovery but in turn, he — he received something and namely, a right to receive compensation without regard to fault.

So that negligence was removed from the field of employer-employee relationships and that was the quid pro quo, the something for something upon which the constitutionality of this Act was originally adjudged.

It is obviously a question of fairness as to whether those not in the employer-employee relationship should be brought within the compass of this Act if they get nothing in return for it.

Professor Larson has expressed it in this way.

Now, he’s dealing not only with this Compensation Act but all state compensation laws.

“The question here becomes very precise that the compensation acts in conferring immunity on the employer from common lawsuits mean to do so only at the expense of the injured employee or also at the expense of outsiders, that’s the problem we have here.”

One question is that the injured — one answer is that the injured employee cut for it quid pro quo in receiving assured compensation payments as a substitute for tort recoveries while the third party has received absolutely nothing.

The third party here being the shipowner and hence, should not be impliedly held to have given up rights which he had before.

It is unfair to pull the third party within the principle of mutual sacrifice when his part is to be all sacrifice and no corresponding gain.

Earl Warren:

Mr. Behrens, there’s an intimation here that to sustain your position would change the relationship between the employer and the employee.

In that, the employer would have charge of the litigation if he should go to a – to an order of the Commission before he made any payments and that — that if he could not be liable otherwise and if he could control the litigation, that perhaps he wouldn’t be as — as free to make these voluntary payments as he would under the other construction of the — the Act.

What — what have you to say to that?

Edward J. Behrens:

Well, I think there are several facets to that.

The first one is this, that the law requires the employer to make compensation payments promptly and without any folderol unless the employer honestly controverts his obligation to pay compensation.

The law requires him to do that.

The Longshoremen and Harbor Workers’ Act said that if you don’t controvert your obligation to pay on the ground that the employee was not injured in the course of his employment, they must pay promptly.

That’s the first thing.

So that in effect, the argument is, is that we will violate the law which makes us pay promptly in order to accomplish another result.

Edward J. Behrens:

In other words, there — the argument is that they will force an injured longshoreman to an award before they will make their compensation payments.

Now, once the award is made, the employer will have control of the third-party suit.

But the answer is, they can’t compel an employee to take an award either.

Now, most of these third-party cases, all of them to my knowledge are all started by the longshoremen and there is no award.

I don’t know of a case in the last 12 years where there has been an award because once there is, there is this assignment.

Let us assume, Mr. Chief Justice, that for the purpose of discussion in this case, Ryan had said to Mr. Palazzolo, “True it is, you were injured in the course of your employment, true it is, it’s an industrial accident but we’re not going to pay you a dime in compensation, you’ll have to go to an award.”

Now then, he has the problem.

He can go to the Compensation Commission and demand a hearing and ask these people why — why don’t you pay this man or he can start his lawsuit against us.

The choice is in the hands of the employee.

They purport to have the choice by violating the law but actually they don’t.

In other words, they can force the employee to do something by holding up his compensation but it’s the employee to make the decision.

Earl Warren:

Well, is there any penalty against the employer if he does go to an award?

Edward J. Behrens:

The — not if he goes there honestly, no.

Earl Warren:

Well, let’s say — let’s say he just — just said, well, we controverted and we want a hearing and we want — we want to determine — want to determine by the Commission whether we’re liable.

And suppose the Commission finds that he is entitled to an award.

Is there any penalty against the employer?

Edward J. Behrens:

No — no penalty whatever but in the —

Earl Warren:

Well, then he could do it but the —

Edward J. Behrens:

No, in the mean time, the employee starts his action against the vessel.

Earl Warren:

Well, what —

Edward J. Behrens:

If Your Honor is speaking of economic pressures which they might put on —

Earl Warren:

No, but I’m thinking of this, suppose — suppose in the mean time, the employee did file a suit then he’d be out on his compensation?

Edward J. Behrens:

There — no, he wouldn’t be out of his compensation.

Earl Warren:

Wouldn’t he?

Edward J. Behrens:

No.

There would be no award pending the outcome of the third-party action.

But in the event he doesn’t recover from the third party, what he would’ve had in compensation, he gets that from his employer anyway.

Earl Warren:

By an award?

Edward J. Behrens:

That’s —

Earl Warren:

By a subsequent award?

Edward J. Behrens:

Yes, Your Honor.

Earl Warren:

I see.

Edward J. Behrens:

In other words, once he sues — in order to sue, he files a notice of election with the Compensation Commission.

He files a form that says, “I choose, now, instead of taking compensation, I choose to sue the third party.”

Earl Warren:

Yes.

Edward J. Behrens:

That’s his election.

Earl Warren:

Yes.

Edward J. Behrens:

Ryan can’t force him to that.

Earl Warren:

Yes.

Edward J. Behrens:

That he can either go along with his compensation rights or he can sue the third party and he says to the Commission, “I choose to sue the third party.”

Therefore, no award will be forthcoming.

Nothing will be done in his compensation case until the third-party suit has been decided.

Let’s suppose he loses it and it’s adjudged that there is no third-party liability, he goes back in the compensation and he gets all of those rights he would’ve gotten had he never started the suit.

Earl Warren:

Thank you.

That — that answered my question.

Stanley Reed:

So you mean the limitation has suspended during that time?

Edward J. Behrens:

Oh, the limitation is for the presentation of the claim through the Commission —

Stanley Reed:

And not for the —

Edward J. Behrens:

— Mr. Justice Reed, not for the award.

Stanley Reed:

So he — he files this — he files this claims with the Commission —

Edward J. Behrens:

That’s correct.

Stanley Reed:

— then elects to sue the third party?

Edward J. Behrens:

That is correct.

Stanley Reed:

Yes.

Tom C. Clark:

(Inaudible)

Edward J. Behrens:

I didn’t hear, Your Honor.

Tom C. Clark:

(Inaudible)

Edward J. Behrens:

That’s just what was done in this case.

You see they continue throughout the years to pay this injured man his compensation because in honesty, they couldn’t go before the compensation authorities and say, “We controvert his right to compensation, I mean no one could put signature to such a oath.”

He was a man working in the hold in the course of his employment.

Edward J. Behrens:

The roll of pulp comes down and hits him.

In theory perhaps, somebody could go before the compensation people and say, “We controverted but how long would that last?”

Any insurance company that followed that course of — of practice would be barred in one fashion or another from writing further insurance in the Compensation Commission.

Tom C. Clark:

(Inaudible)

Edward J. Behrens:

They could prevent him?

Yes, Your Honor.

Tom C. Clark:

(Inaudible)

Edward J. Behrens:

The —

Tom C. Clark:

(Inaudible)

Edward J. Behrens:

Mr. Justice Clark, the possibilities there are absolutely infinite.

Every case really doesn’t have a kin.

Each one of these cases has other angles of aspects in it.

In one case as in this, the compensation carrier intervenes and says I want my money back.

In other cases, they have reimbursement agreements with the injured man that they’ll get their money without getting into the lawsuit.

In some cases, they continue to pay compensation even after a notice of election to sue, as they did here.

In other cases they don’t but I say that as far as — and I can’t say that in every case a compensation carrier could not put some economic pressure upon an injured man, I don’t say that.

I can see the possibility in some instances but I don’t know how long that kind of an insurance company would last before the Commission.

If they do not honestly controvert the man’s right but it’s his election.

He may either take his compensation or he can sue the third party.

It’s only in default of the employee’s election that then the compensation carrier has an assignment of the claim by operation of law.

Now, we come to another aspect.

Felix Frankfurter:

May I ask before you move on.

Did I understand you to say that — that in your experience, the employee invariably elects the cause against the third party?

Edward J. Behrens:

I have never had a case of an award.

No, I think I see what you mean, Mr. Justice Frankfurter.

I — I mean to say this that in any case where I have thought my shipowners might be involved, I have never had a case where the injured man went to award and then the compensation carrier by assignment, operation of law, came over against the ship.

I have never had a case.

Felix Frankfurter:

But before you start with those requisites?

Edward J. Behrens:

Yes, Your Honor.

Felix Frankfurter:

Is the — is this usual here that voluntary payments are made and accepted?

Edward J. Behrens:

Well, I can’t say how usual that is.

Felix Frankfurter:

You would say —

Edward J. Behrens:

In other words, that’s a matter of private agreement between the compensation carrier, the injured man and his attorney.

In short, in most cases as I understand it, the attorney for the injured man would agree with the compensation carrier that out of the recovery he will see to it that they are protected, that he will see they get back everything they paid.

But in this case for reasons unknown to me, the attorney and the injured man would not do that.

And that’s why the compensation carrier actually came in and intervened in this case and was a party to the judgment.

Because from a compensation standpoint in the present posture of this case, the compensation carrier has got back every penny he had put in.

But by intervention, barring this agreement which I think is rather customary, by intervention becoming a party to the lawsuit, the final judgment directed that out of the recovery compensation cannot get everything back.

Now, is that usual?

I can’t say that with any degree of assurance but they continue payment afterwards.

I know sometimes they have and sometimes they haven’t.

But to say the usual course, I don’t know.

Tom C. Clark:

(Inaudible)

Edward J. Behrens:

They will get it back if the amount of recovery exceeds what the man’s total compensation rights were.

Now, in a case like this, if the judgment instead of paying for $75,000, had only been for — or say $10,000 or $12,000, they wouldn’t have got all that back.

They’d already put in above $13,000 in compensation payments and medical payments and if that was the amount of the judgment they wouldn’t be able to get all of that back because this man had further rights in compensation.

He had never had an award for a permanent partial or total disability.

All these payments that had been made were based upon temporary disability of complete character but he had never had an adjudication of those rights.

Perhaps, he was entitled to another $10,000 or $20,000 or $30,000 in compensation and so that if his recovery here was about $10,000 or $12,000 or $15,000, they would not have got their money back.

Felix Frankfurter:

The point of my question was whether the finance need of the injured employee has to deal by a district, his normal way of financing, he’s going to need an ultimate determination whether by an award or a third-party action because I too instead of saying, ultimately deciding it’s not financed.

I don’t — is that in your point?

Edward J. Behrens:

That and — and — that I will state in my general understanding is — is true that these injured longshoremen generally are impecunious, not universally but generally.

The — how commonly the compensation carrier will continue on in order to keep the third-party suit alive, I’m not in the position to say.

But obviously, it would be to the dollar interest of compensation carriers in some cases to continue paying compensation after the election to sue because they feel that keeping the third-party suit alive and looking at the facts, the day will come when they’re going to get all of that money back and they’re going to be relieved of any obligation to pay compensation at all, so that in some cases it’s obviously good business to do that.

I’m not prepared because I don’t have the knowledge to say, Mr. Justice Frankfurter, that that is the usual practice.

But there is a further factor too, the petitioner has taken the position here that if they do have an assignment because the case has gone to award, there are no restrictions of any kind, nature or description upon what they can do if they choose.

They have pointed to some New York cases under the New York compensation law.

I doubt — I doubt that under the Longshoremen and Harbor Workers’ Act, after an award to an injured employee, if there is third-party prospect that the compensation carrier can just sit back and do nothing particularly in bad faith.

If — if they continue with an action after award, they are a trustee.

They are a trustee for the benefit of the injured man and they say that they don’t ever have to become that trustee.

Edward J. Behrens:

If they have an assignment by operation of law, they can say they’re not going to pay any heed to your further rights.

Is that the law?

I’m not satisfied it is.

I’m not satisfied that if they ever tried that sort of a thing under the Longshoremen and Harbor Workers’ Act that they get away with it.

Earl Warren:

Well, do they have under the — under the statute the right to settle litigation as well as to go to judgment, do they not?

Edward J. Behrens:

Yes, Your Honor.

Earl Warren:

Could they not settle for the amount that they have coming and forget about the rights of the injured employee?

Edward J. Behrens:

Would not any District Court Judge look into the good faith of that — of that situation.

Earl Warren:

Well, if you have to — if a company has put $25,000, well say into compensation, would the District Judge say, “No, I think jury would give $35,000 so there’d be $10,000 left over to — for the employee,” or would he say, “Well, it was settled for $25,000, why — maybe that’s reasonable?”

Edward J. Behrens:

That would be question of judgment.

But, Your Honor, as presupposing — what I’m presupposing that at least the judge would look into it.

In other words, that these people don’t have that absolute unrestricted high hand to do anything they choose if they get an assignment under operation of law.

But there’s another reason why — why that situation would be looked into very carefully.

In one of the briefs submitted here by the petitioner, the insurance phases of the case were pointed out, although they were not in the record, namely, this that the insurance company for Ryan has two separate obligations.

They write compensation insurance, cover injured employees and they have a so-called 1B coverage which you might call Ryan’s public liability, a sort of a liability that we have involved here.

Now, thus they are in a dual capacity so that if having driven — unjustifiably driven an employee to an award solely for the purpose of seizing his cause of action against the third party, although I still say it’s the employee’s choice.

But suppose they drove in their economically then they say, “Well, we’re going to sit on this because if we start a third-party action we’re going to have to pay under 1B coverage.”

There they are in a duel position as trustee.

Now, I simply say that if they ever started on such a program, I doubt they’d get very far at least in the Southern District.

I think that any judge there would want to know what goes on here because you have a trustee with an adverse interest.

Earl Warren:

Did Ryan have 1B coverage here?

Edward J. Behrens:

Mr. Schwartz says they haven’t, I have no reason to suspect that the contrary is so.

I will accept it for the purpose of this case if they did have 1B coverage and that’s what — where we come down to the dollar aspects of this case.

Their insurance company, represented here by Mr. Schwartz, paid out $13,000 roughly under that part of the policy which deals with compensation to Palazzolo, under the judgment they got that back.

So now as a compensation carrier they’re very happy, they have been made whole and though we had an industrial accident, they have not — to pay anything.

But now, under the other coverage of the policy, here comes the shipowner and said, “You breached your obligation to us.

All right you took care of Palazoolo but you breached your contract with us.

Now, under your general public liability part of the policy, you pay out.”

And that’s the way that the twofold problem is — is created in dollars so that here we have no compensation phases at all.

Those are all behind us and now we are down to a point of 1B coverage in behalf of the stevedore, should that insurance company pay over to the ship for breach of the contract, I mean that’s about the dollar size.

Edward J. Behrens:

Now, as far as 905 is concerned and its possible effect on the case of this type, not employer-employee but strangers.

That argument in our Second Circuit has been worn out.

Our Second Circuit doesn’t even write on that subject anymore.

It was argued here as usual but the Court has written so often and so fully and I think so clearly on this question of the utter inapplicability of 905 that every state court in dealing with state compensation with having reached the same conclusion.

Our Court of Appeals doesn’t even write on it anymore.

Well, it was argued here, it was briefed here.

Quite for a long time now, they thought that the matter had been set at rest.

Now, we have another problem here concerning which I should speak very, very briefly and that is contribution and indemnity.

Says the petitioner, if indemnity is only a big form of contribution and this Court has said in maritime matters you can’t have any contribution, referring to the Halcyon case, then of course indemnity should die too.

What’s wrong?

Well, that’s the major premise.

We might say from a grammatical standpoint or an oratorical standpoint that you can express it from those words but they’re too separate and distinct subjects, they arise from different sources and they result in entirely different results.

Contribution means that several people owing a common annuity to the injured man have to pay their aliquot share.

Indemnity simply means the making whole of someone.

Now, contribution, generally speaking, depends upon a legislative will.

Contribution is not ordinarily the result of the exercise of the judicial function.

This Court pointed it out very clearly in Halcyon.

There’s no such thing as contribution as an old common law principle.

We find statutes in modern days in the various states now giving contribution on joint tortfeasors but it’s the legislature that speaks.

As this Court said, common law courts are very reluctant to create that new right of contribution and said if you want contribution, this aliquot share business, go to the legislature before you get it.

But indemnity has never depended upon the legislative will.

That’s been a part of our common law from the beginning, we’ve always has that.

We’re not here asking the Court to come up with some new right.

We’re asking the Court to go along with the right that’s always existed.

Sixty years ago, 1895, in Washington Gas Light, this Court recognized that the common law right of indemnity, not contribution, indemnity was even then an old doctrine.

That it had been applied in all the manner of cases in order to work out a proper solution of a problem as between two persons, each of whom may have been wrong to a degree.

Contribution of course can only arise from a tort, two or more people owing the plaintiff a duty that injured him.

On the other hand, indemnity may arise from a contract, as the Court of Appeals said in this case or it can arise from tort.

The courts have said that if in effect one of the parties can be held partially at fault.

In a negative way, they failed to discover such things as we have in this case.

Edward J. Behrens:

The primary actor can be made to indemnify, isn’t anything new in the law on that.

It’s somewhat analogous to the collision cases in this way.

That if you find one vessel with enormous fault and you find a little bit of fault over here on the other side, you’re not going to go half damage, you’re going to throw out a little fault.

And in a sense, the old law of indemnity which is applied both on the land and the sea has that sort of a thought behind it.

Now, as questions were being put yesterday and my learned adversary was answering them, it came to my mind, something I haven’t put in the briefs or something that I’d refer to the citation, the case.

But when Mr. Justice Cardozo sat on our Court of Appeals in New York, he wrote an opinion in a case that sort have become all casebook case called Palsgraf against The Long Island Railroad.

And then Mr. Justice Cardozo wrote in effect, there is no such thing as negligence in the air so to speak.

One must always make the inquiry to whom is the obligation hold.

There isn’t any such thing as an act of being simply negligent.

The question is whose acts was (Inaudible)

Now, when we apply that theory, that fundamental proposition to this case, the error that persisted in the trial and in the resolution of the problem between shipowner and stevedore, I think this manifest.

Judge Inch called shipowner and stevedore joint tortfeasors.

What duty in negligence did Ryan owe Palazzolo and the answer is none.

They couldn’t have been negligent as to Palazzolo.

Their relationship to Palazzolo has been removed from the realm of negligence, where the very legislation we’re talking about here.

You can’t say Ryan is negligent as to Palazollo.

Why?

Because they don’t owe him any duty of care, the statute — that’s all they have to do is pay him compensation so that when you can’t be a tortfeasor it becomes manifest.

I think it becomes manifest that there was that fundamental error in the case if — because that was the basis of the denial of our right to indemnity that we were joint tortfeasors of the scope of appellate review.

I think it is important because the judge did not find properly as a matter of fact, that they were joint — we were joint tortfeasor.

He put a legal label on the relationship of the parties.

Felix Frankfurter:

If there’d been no Longshoreman’s Act, (Inaudible)

Edward J. Behrens:

Yes, Your Honor.

Felix Frankfurter:

(Inaudible)

Edward J. Behrens:

It has that ultimate effect.

Felix Frankfurter:

(Inaudible)

Edward J. Behrens:

Well, whether it’s a violation of the negligence or the effect of it —

Felix Frankfurter:

But the fact does (Inaudible)

Edward J. Behrens:

Oh, I’m sure it does.

Except on the most — well, let’s see if we went on a completely academic proposal to it that might be all right but to assert a right without a remedy and say that the right continues to exist, I don’t think has any practical impact.

Felix Frankfurter:

(Inaudible)

Edward J. Behrens:

Well —

Felix Frankfurter:

(Inaudible)

Edward J. Behrens:

What duty of care under the Longshoremen and Harbor Workers’ Act does it exist?

What duty of care is owed by an employer to his employee?

Negligence is out and negligence, I’ve always thought was something that referred to a duty of care.

Under the Longshoremen and Harbor Workers’ Act, no stevedore employer owes any degree of care to his employee.

If he procures the payment of compensation, he can be careless in the abstract or concrete or any other one.

Felix Frankfurter:

(Voice Overlap)

if he’s too careless, he might be — and the fellow died, he might be valid to manslaughter as ultimately (Inaudible)

Edward J. Behrens:

Well, in the criminal field he would under the — the example Your Honor has — has given me.

But in the civil field, I find it difficult to see how he can be negligent to a man where negligence has been taken out of the relationship.

Felix Frankfurter:

(Inaudible)

Edward J. Behrens:

No, they would not have been since this Court spoke in Halcyon.

Felix Frankfurter:

Yes.

Edward J. Behrens:

Up until that time this Court wrote in the Halcyon case, contribution was very commonly granted in various districts of the United States, but this Court has decided that in a case involving a maritime court and in the contribution it would be discussing an underlying maritime court.

(Inaudible)

Edward J. Behrens:

I didn’t hear, Your Honor.

(Inaudible)

Edward J. Behrens:

No, Your Honor, I don’t because I still think that I have a right under the law of active and passive, primary and secondary fault, even in the lower court I have a right of indemnity.

That what this Court did was to rule out contribution, put indemnity as just a different sort of an animal and that therefore when the Court of Appeals for the Second Circuit decided this on two basis.

They took Court is one basis for giving me my relief and they took contract as the other.

And I say frankly, I think I’m entitled to recovery on either one.

Well, in my approach to it, I have always approached this from the standpoint of contract because it seems to me, at least to my own mind, to make the whole picture look clearer.

Because here we have a stevedore, an expert that breached their contract, that’s admitted, and what’s the result of it?

Their breach of contract results in they — or their compensation carrier getting $13,000 back and paying nothing.

In other words, they profit from this sort of a situation.

Certainly, it was an industrial acts that happened in the course of employment and one would expect the employer to pay the $13,000.

But if I don’t get indemnity in this case then they have actually profited because they did a bad job at Georgetown and they breached their contract, it comes out in dollars.

They are $13,000 ahead in this case because they breached their contract and gave as a bad stow at Georgetown.

Tom C. Clark:

(Inaudible)

Edward J. Behrens:

Yes, because he has two coverages, Your Honor.

Tom C. Clark:

(Inaudible)

Edward J. Behrens:

Yes, because he’s — he’s got a relationship with two different people and he’s got two different kinds of insurance coverage.

Tom C. Clark:

How about the (Inaudible)

Edward J. Behrens:

Yes.

He’s —

Tom C. Clark:

(Inaudible)

Edward J. Behrens:

No, as far as that goes, Mr. Justice Clark, he is fully protected under the Longshoremen and Harbor Workers’ Act and you say the $13,000 was the full measure he have to pay under that Act and he’s been protected.

Palazzolo could not get anything other than the Act said but that doesn’t protect him under his 1B with his relationships with the rest of the world, his landlord, his contractors and so on and so forth.

In short, as between employer-employee which I have said in my view is all that Congress intended to legislate about.

As far as employer-employee is concerned, this case indicates all of the protection and so on and so forth that Ryan has received under the law and the rights that Palazzolo had under the law.

Those case — those parts of the case have all been removed and now we’re left — what about strangers?

What about shipowner?

What about the member of the crew having been hurt and suing the shipowner?

What about the ships cleaner having been hurt by the stow and so on?

We’re off into that field now and because they took care of Palazollo, does that mean they can give me a bad stow.

Then one of the members of my crew comes along, the stow falls down, bangs him up, he sues me under the Jones Act for the bad stow, a page judgment and Ryan says, “Yes, I gave you bad stow but I don’t pay you anything.

Because why?

I complied with the Longshoremen and Harbor Workers’ Act as is good to my employees.”

As I say, I — I felt from the beginning that this case has those two separate and distinct lines of obligation.

I think that the insurance, the phases of the case as we’ve discussed have indicate that very thing that there is coverage for corporate sinners and other kind of a coverage.

And we’re talking about the other kind of coverage here.

I feel that I have expressed generally my views or perhaps did supplement slightly what I have written in my briefs.

And I am sure the Court will, after study, do justice in the premises.

Earl Warren:

Thank you.

Mr. Schwartz.

Sidney A. Schwartz:

I assume that the thrust of Mr. Chief Justice Warren’s inquiry of counsel with respect to what the compensation carrier could do is directed towards the effect that the construction of this statute will have on the injured longshoreman and his ability hereafter to recover either compensation or damages in his third-party lawsuit.

Now —

Earl Warren:

Of the whole.

Sidney A. Schwartz:

That’s right.

Now, I know of no reason why and no provision of the law and the — particularly this statute.

Why if an employer is exposed to being impleaded by the third party who has been sued by his injured longshoreman, why that employer or the compensation carrier, assuming that he’s covered by a compensation carrier, cannot controvert by filing a notice of controversy, the claim of the longshoreman for compensation?

Now, the only penalty that the statute prescribes is if the controversion was not a good one.

And that they controverted it without any real ground that there is a 10% penalty that is affixed to the award, so that if the man were entitled to $2000 as compensation, the compensation carrier would then be liable for $2200.

And that is the only penalty that the statute prescribed in — in the event that there is a controverted claim.

Now, if —

Felix Frankfurter:

Do I understand that for that reason, I was hoping employees had been working for a proper judgment as I construe it (Inaudible) if the law says that is either to recommend — initiate a compensation (Inaudible)

Sidney A. Schwartz:

No, that doesn’t — I don’t mean that at all, Your Honor.

Felix Frankfurter:

Then what is it?

Sidney A. Schwartz:

If a man is injured, in the State of New York, he has three years to bring an action in negligence as against a third party.

Under a recent decision of the Court of Appeals for the Second Circuit, if he predicates his right upon a breach of warranty of seaworthiness as against the shipowner, they say he has six years.

Now, during that interim of three years within which he can bring his lawsuit or within six years, depending upon the theory, that man would be entitled to compensation.

And the compensation carriers today, all of them that I know of have voluntarily paid this man compensation during either those three years or during the six years.

But the moment that he files his election to sue a third party, the statue has been construed to mean that all compensation payments may then be suspended by the compensation carrier.

So now, let’s see what they do in mechanics.

A longshoreman, having three years to bring his action as against the third party, takes compensation voluntarily given to him by the compensation carrier prior to, just shortly before that three years expires, he then brings his action against the third party.

Felix Frankfurter:

Are you not speculating or is that the normal course (Voice Overlap) —

Sidney A. Schwartz:

That is the normal course of all these proceedings.

Felix Frankfurter:

(Inaudible)

Sidney A. Schwartz:

That’s right and some of them don’t even file their notice of election to sue a third party so that the compensation carrier won’t know that they have a third-party action going because once the third-party action has commenced, payments under the Act can be suspended and compensation carriers do.

And that what was done in this case.

There was some indication.

I think Your Honor used the word “financing the lawsuit.”

We didn’t finance this lawsuit at all.

When this man instituted his third party action against Pan-Atlantic Steamship Corporation, we stopped paying compensation as we were entitled to do under the statute.

Compensation at that time had run to approximately $2 thousand odd.

Also, we had paid medical expenses roughly $10,000 so that at that time, at the institution of his third-party action, we had paid benefits of approximately $13,000.

Now, if we have this open-ended liability on an impleaded situation and Ryan is indeed lucky in this case because in contrast to most stevedoring companies who have no 1B coverage and I’ll indicate to the Court how that works.

Ryan in this case was fortunate enough to have $25,000 coverage but in dollars and cents to Ryan it means that if this recovery over is against them, which now is approximately $80 odd thousand with interest and — and cost is to stand Ryan’s compensation carrier because they have a 1B coverage on their workmen’s compensation policy, we’ll pay $25,000.

Sidney A. Schwartz:

Ryan, out of their own pocket, will have to pay some $50 or $60 odd thousand to the insurer of the steamship company because there the construction of the statute has gone against him.

Felix Frankfurter:

But there’s nothing to prevent them or any other stevedore for carrying insurers and they will —

Sidney A. Schwartz:

At — at prohibited rates if they can get it if their experience is good enough.

Lots of insurance companies won’t write this coverage because of the hazardous industry that we’re dealing with.

Felix Frankfurter:

Presumably, because of these utterances —

Sidney A. Schwartz:

Of accident.

Felix Frankfurter:

(Voice Overlap)

of — of whatever you call it, this conduct or adequate conduct, in the part of the stevedoring company.

Sidney A. Schwartz:

And on the part of the shipowners in which they — they have this situation where there is a concurrent negligence and where they —

Hugo L. Black:

I don’t —

Sidney A. Schwartz:

— can be impleaded.

Hugo L. Black:

I don’t suppose the stevedores can get insured, cover the fact — accident of this kind.

Sidney A. Schwartz:

Retrospective?

Hugo L. Black:

You — what you’re saying is they could readjust the business in the future on the basis that now, they’re going to have this liability which the evidence says that they’re going to have to on this substance that you impose it and they can — and they can readjust for the future but there’s no way they can readjust for the past.

Sidney A. Schwartz:

That’s right.

I would —

Hugo L. Black:

Ryan — Ryan cannot readjust for the 1955.

Now, what has been the fact in connection with this insurance, has it been on the basis that where a stevedoring company was liable only for the amount which the Longshoremen’s Act did or that he might be held for liability such as here?

Sidney A. Schwartz:

As I intended to indicate to the Court, Your Honor, in answer to your question on the assumption that their compliance with the statute exonerated them from all further exposure and accidents of this kind, most insurance companies don’t have this coverage.

I for one have two — two stevedoring companies in my office who don’t have any coverage.

So that when they are impleaded in a lawsuit in the same situation that we find ourselves now where an employee sues a shipowner and then they — there’s a claim over for indemnity implied in law, they will have to come out of there pocket because they don’t have any insurance, they didn’t think they needed it.

They construed this statute as other courts have construed the statute.

Stanley Reed:

But — but some of the stevedores do have the coverage as to protect against this situation.

Sidney A. Schwartz:

Some of them do.

Stanley Reed:

Because to the question it wasn’t settled up to now.

Sidney A. Schwartz:

That is correct.

Stanley Reed:

And the careful ones took out additional insurance.

Sidney A. Schwartz:

Well, when you say the careful ones, they got the normal coverage under 1B that they could’ve got as a matter of cause.

And they — they didn’t assume that they’d have this opened-ended liability but the reason — the reason 1B was taken out, Your Honor, is because under some circumstances certain employees yet could still sue their employer, could stand — and that’s sounds funny.

Now, you have — you have the question of a man on barges, non-self — self propelled barges.

Sidney A. Schwartz:

Are they under the Longshoremen’s Act or are they crewmen under the Jones Act?

Nobody knows definitely.

So in order to cover that situation, they get a $25,000 endorsement under 1B so that if a barge captain had sue them, acclaiming that he was a member of the crew or a seaman and entitled to bring suit under the Jones Act, that 1B coverage would pick up that kind of a situation but that’s why they buy it with that purpose in mind in connection with that type of employee.

Felix Frankfurter:

Mr, Schwartz, we can’t decide — construe the statutes (Inaudible) on the assumption as to what was the understanding of the stevedoring industry of what we have before us, adequate (Inaudible) negligent part of the justice —

Sidney A. Schwartz:

Well —

Felix Frankfurter:

— for what was the justice.

Sidney A. Schwartz:

Then —

Felix Frankfurter:

What kind of a legal advice saying — sought or what kind of a legal advice they’ve got, what kind of difficulty they put, two way of determining of what’s the statute.

Sidney A. Schwartz:

But then I say to Your Honor that we, as the petitioner here, with this statute by many courts having been held to be clear and unambiguous and if we assume that that is so —

Felix Frankfurter:

But it shouldn’t be so clear and unambiguous that we justified the one here that as clear and unambiguous sort of way.

Sidney A. Schwartz:

Well, you have the other judges that have gone the other way —

Felix Frankfurter:

And therefore, I’d say should be either question.

There’s no use of that to me to construe this statute on an assumption that for 20 years this statute has been enforced, every loyal that saw clearly the way you argued.

Sidney A. Schwartz:

Well —

Hugo L. Black:

Mr. Schwartz, which — which judge has said this is clear and unambiguous (Voice Overlap) —

Sidney A. Schwartz:

There are two judges in the District of Columbia —

Felix Frankfurter:

That has said it’s clear and unambiguous —

Sidney A. Schwartz:

And unambiguous.

Felix Frankfurter:

— in the other way.

What are those (Voice Overlap) —

Sidney A. Schwartz:

In my say — in my favor (Inaudible) against —

Hugo L. Black:

I’m talking about the way the Court decide it here.

What court has yet said, I don’t know any one of those case decisions, that the language of this statute clearly and unambiguous to mean that there are circumstances under which the stevedoring company can be made to face somebody more than the Longshoremen’s Act provide?

Sidney A. Schwartz:

Well, one case is (Inaudible) against McCain Inc (Voice Overlap) —

Hugo L. Black:

Underneath what?

Sidney A. Schwartz:

Federal Supplement 553.

Another case is Coates against Potomac Electric Power Company 95 Federal Supplement 779, subsequent opinion in 96 Federal Supplement 1019.

Felix Frankfurter:

Well, it must have been created as a pre-judge of — they couldn’t have advocated judgment.

Sidney A. Schwartz:

I think, Your Honor, it’s — it’s the same story of the — a court having decided before a proposition or having spoken on the subject.

When confronted again have the unhappy choice of saying, shall we retract what we said before or shall we not cover the point.

Sidney A. Schwartz:

Now, I think that as my brief shows the Court of Appeals for the Second Circuit before this case, in three cases, American Mutual against Matthews, Gill against United States, and Mikkelsen against S.S.Granville, all cited in my brief, have held this statute to be a complete law in connection with a claim for contribution or for indemnity.

Now, they never referred in their opinion, their opinion is entirely silent as to the statute.

Felix Frankfurter:

Probably, couldn’t have decided what they did if the statute had barred recovery, could they?

These aren’t logically free lawyers.

Sidney A. Schwartz:

No questions about it, Your Honor.

I say that they never could have reached the result that they arrived at if they had agreed with the petitioner’s contention, no question about that.

But they have said nothing about the construction of the statute, haven’t even said in disposing of it that it was raised and we decide against the petitioner.

The opinion is completely silent, that’s all I say.

Felix Frankfurter:

What inference you draw with that?

Sidney A. Schwartz:

I draw the inference that they disagree with the petitioner, obviously, otherwise they never would have gotten to the factual question.

And that’s why I present to this Court as a question of logical sequence or at least I thought on behalf of the petitioner that the statute construction is a question of law.

If the statute is construed as we contend for then you’ll never get to the facts, you’ll never get to the facts in this case.

Now, as to the construction of this statute and whether it takes money out of the pocket of the employer and really serves as a conduit to give it to his employee.

I would like to just indicate to the Court and its found at page 20 of the petitioner’s main brief that the Third Circuit, when dealing with this problem, in the case of the Baccile against Halcyon which was reversed under the name of Halcyon against Haenn on another proposition said nevertheless the device of the Act, dealing with this longshore statute, must be frustrated if the negligent employer is subject to full contribution for then the third party, that’s the shipowner, is merely the conduit between employer and employee for the transfer of damages in excess of compensation.

Now, let’s see too what the Court of Appeals for Maryland in the case of Standard Wholesale said and there Your Honors will find the quotation from which I read at page 4 of the petitioner’s reply brief to that of the Government.

And there, the Court of Appeals for Maryland in dealing with this very statute and in dismissing and affirming the dismissal of the third-party complaint said this, in the absence of waiver, now obviously that must mean by contract or something by which the employer divest himself of the immunity of the statute which we contend for, the employer’s conformance with the statute by providing compensation in all cases regardless of fault prevents recovery against him on the ground of negligence.

The statute declares his liability for compensation to be exclusive if it should be construed to preserve his liability for the payment of a sum measured in whole or in part by the damages sustained by the employee merely because the negligence of a third party concurred or is claimed to have concurred with his own in producing the injury, his liability for compensation would not be exclusive.

It is probable that his liability would in most cases exceed the limits setup in the statute.

We think it is immaterial whether his liability to a joint tortfeasor stems from a statutory right that contribution opens general principles of the admiralty law.

In either event, it is essentially a liability to pay or share in the payment of damages for the injury to his employee of which the statute relieves him.

And I say those two cases dealing with this very statute has set the pattern for those particular courts of the construction that should be accorded for this statute.

Felix Frankfurter:

May I ask you whether if there’d been an implicit agreement between (Inaudible) where and these kind of facts, where under (Inaudible) to be declared against public policy and unimportant.

Sidney A. Schwartz:

No, Your Honor.

I don’t say that at all.

I say —

Felix Frankfurter:

But then would — It would put a principle in case they use it.

Sidney A. Schwartz:

Well, that’s right.

But that’s because the stevedore by his own expressed act has waived the immunity of the statute which he had before.

He set it down in contract — contrary to what the statute said.

And then I might indicate —

Felix Frankfurter:

When you say by his own — own act, is there a contrast in facts, doesn’t deal whether the contract (Inaudible) words, does it?

Sidney A. Schwartz:

Now, there — there would we — the contract —

Felix Frankfurter:

(Inaudible)

Sidney A. Schwartz:

There’s no question about the fact that we’re dealing with here expressed or implied contracts.

Felix Frankfurter:

Well, implied in the connection of words (Inaudible)

Sidney A. Schwartz:

Your Honor said a contract in fact —

Felix Frankfurter:

In fact, this is for me a very different thing from imply because if the Court acknowledges the way imply is used to this, he’d be required to (Inaudible)

I’m not talking about it.

I’m talking about (Inaudible) inceptions and inscriptions from one side to the other.

Sidney A. Schwartz:

I think —

Felix Frankfurter:

— because I’m talking about (Voice Overlap) —

Sidney A. Schwartz:

I think I can best answer your question this way, Your Honor.

If there is a writ expressed contract between two people that says that, “I will indemnify you for your negligence,” which could have been done in this case but which was not done.

Then I say if that is an unequivocal hold harmless agreement, I am obligated to indemnify you even for your own negligence and there are many such contracts which have been construed by this and other courts.

Felix Frankfurter:

Suppose there’d been say expressly, I will indemnify you, they say that I am responsible for all the damage I caused you through my negligence.

Sidney A. Schwartz:

Then I say that isn’t — then you have to get —

Felix Frankfurter:

Set up like that in those words.

Sidney A. Schwartz:

Then I say that isn’t good enough to claim indemnity.

Felix Frankfurter:

But if it says, “And I shall indemnify you, therefore from innocence.”

Sidney A. Schwartz:

I shall indemnify you for your — your negligence?

It — it has to — it has to say that, Your Honor, because these statutes have been construed.

Your Honors had my case of American Stevedores against Porello several years ago, where the question there was whether that contract between the Government and American Stevedores was an unequivocal hold harmless agreement so that American Stevedores there was obligated as construed by the Court of Appeals for the Second Circuit to indemnify the United States for its own negligence.

Your Honors decided that the contract was ambiguous.

Your Honors remanded it to the District Court for a determination.

Now, I say if you have an unequivocal hold harmless agreement, then you have no problem as we have here.

Felix Frankfurter:

If you’re right in your argument we should have — it shouldn’t (Inaudible) itself.

It was decided clearly, not unequivocally, in as much as there is no explicit assumption of indemnity, of course there is no basis.

Sidney A. Schwartz:

That’s —

Felix Frankfurter:

That case — that case, I do not imply you think that helps you.

Sidney A. Schwartz:

No.

Sidney A. Schwartz:

I say that — I only cite that as an example to Your Honors that there are contracts which attempt to cover the situation that I assumed Your Honor was speaking of.

Those contracts sometimes are not clearly drawn, they must be construed then you have the problem of the construction of a written contract.

Felix Frankfurter:

To contemplate fitness of all those words.

Words have to be construed for their (Inaudible)

Well, I say to you I do not see anything that encroach the trouble of policies of the Longshoremen’s Act, will allow (Inaudible) it is very clear, I shall indemnify you for what you have to say because of my negligence and — and the situation in which that inference, as a matter of fact, can be drawn up by a virtual transactions between the parties.

As a matter of law, I see no difference.

If you say as you do, correct, this word inclusively and that can be — that can be subordinated when explicitly I see nothing improbably that prevent this from being for me subordinate — subordinated with agreement in fact that doesn’t use the magic word “indemnity.”

Sidney A. Schwartz:

Well, I think Your Honor will find the decisions and — and the approach to this problem still an indemnity situation which is predicated on the quality of a tort even though you may have a contract with me to do a particular job on your house.

There are cases, I’ve cited them in my brief that when you stand by or when you discover the danger then when you are held liable to a third party who has come upon your premises and you are under a duty of care to him, then despite the fact that I may have done the work negligently and not perform properly my contract with Your Honor to do the work that you contracted me for.

Nevertheless, it’s for the trier of the facts to imply a contract of indemnity, because the parties haven’t done so by their own expressed act, if Your Honor has the claimed indemnity, has not participated in the tort to the extent that Your Honor’s negligence to the plaintiff can be found to be active negligence.

Felix Frankfurter:

I understand that and I follow you because in those cases, the Court say that the damage didn’t fall from you anymore that that goes for me, is that right?

Sidney A. Schwartz:

Yes.

And — and there’s another reason, Your Honor.

In this particular case, Pan-Atlantic Steamship Company wasn’t held liable because our negligence was imputed to them, the charge of Judge Inch to the jury, put up to the jury for determination, did Pan-Atlantic furnished proper appliances?

Felix Frankfurter:

I understand all that and (Inaudible)

But I suggest — suggested — anyway, I suggest it now that if they’re not clear review of Judge Inch’s decision of what the validity of what the Court of Appeals did (Inaudible)

Sidney A. Schwartz:

That’s right.

And on the last proposition and that is the third point that the —

Hugo L. Black:

May I ask you again?

The citation you gave me, the Ninth or Fifth Circuit is definitely wrong.

Federal Supplement, what page do you have that?

Sidney A. Schwartz:

Well, I have it in the index here, Your Honor, without going to the thing at 95 Federal Supplement 779.

Hugo L. Black:

779, was it?

Sidney A. Schwartz:

That’s Coates against Potomac.

Hugo L. Black:

That’s all right.

I’ll look (Voice Overlap) —

Sidney A. Schwartz:

I should indicate this in closing with respect to an inquiry that was made yesterday accounts by Mr. Justice Clark.

Although they may testify that chocks were available at the port of loading, all the witnesses of the plaintiff, Mr. Palazzolo, testified the Pan-Atlantic didn’t use wedges or chocks, never believed in them.

They may testify in fact and the references are in the brief that at the port of loading, he saw this bottom tier which is the tier involved in — in this accident, chocked.

Indeed he testified that when he was in the hold where the accident occurred and by the way this was not a latent situation because you have a 20-foot square area which is the square of the hatch would be roll of the paper pulp on the side, clearly visible with whatever is underneath them that when he was in this hatch by the 10 minutes before the accident occurred and throughout those five to ten minutes he saw chocks in the bottom tier holding them in place.

Sidney A. Schwartz:

Now, the plaintiff’s witnesses testified there were no chocks.

They never had been supplied.

Pan-Atlantic didn’t believe in them.

The only thing that had been supplied was scraps of dunnage which are mere boards which had been jammed underneath the rolls to stop them from rolling out.

Now, whom did the jury believe?

Obviously, as the cargo mate’s testimony been believed, they wouldn’t have found that he was — that Pan-Atlantic was negligent, having found that Pan-Atlantic was negligent inherent in the jury’s verdict and so found by the trial court is the fact that the shipowner did not furnish proper appliances.

Now, if you can say that where a shipowner who was obligated as the cargo mate said that it was the duty of the ship to furnish the wedges and chocks, if you can say that they, having furnished defective or insufficient appliances, are merely guilty of passive negligence and can get it all over from us then I say that’s profitable negligence in their favor because whatever they’ve been held liable for, they recoup from us.

Well, we had assumed that being under the control and supervision of the cargo mate, having done everything satisfactory as far as he was concerned with overall complete authority in him to stop the work anytime he was dissatisfied, which he was not dissatisfied with that he is negligent.

It is certainly at best, akin to us that we are no worst than he is, our qualities therefore are the same at best.

And if that be true, we stand a joint tortfeasor as the District Court found which is substantiated by the evidence in this record, which was beyond the scope of review for the Court of Appeals.

Now, the only thing —

Do you — do you think that there’s any real difference between the character of the negligence as were lied down by the Court of Appeals if the character of negligence is surrounded by Judge Inch?

Isn’t the Court of Appeals just putting a label on what Judge Inch found at all?

Sidney A. Schwartz:

I think the character of negligence must be different for the Court of Appeals to arrive at the result that they did.

You think there’s a change in — a change of his findings in the fact?

Sidney A. Schwartz:

I think there’d have to be for the Court of Appeals to have granted full indemnity over and reverse the trail court who had found that they were joint tortfeasors because as far as he was concerned, this — this entire operation was a joint operation.

And he found them both to be guilty of negligence with the same quality of negligence.

Otherwise, that he found — that he found there to be merely passive negligence on the part of the shipowner and our — our negligence being affirmative and active in being the soul affirmative negligence, he would have granted recovery over against and he must have under the law.

Now, the only — the only other thing I would like to add to my presentation is that the full argument of the petitioner.

Unfortunately, because of the many briefs that have been filed in this case by various amici and by the parties themselves, they’re found in three briefs, the main brief, the reply of the petitioner to that of the respondent and the reply of the petitioner to that of the United States as amicus.

Could I ask, Mr. Schwartz — may I ask a question, Chief Justice?

Sidney A. Schwartz:

Certainly.

I wanted to make sure I understood something that you said.

Do you agree that if there is nothing more than passive negligence involved here, only want to use that term, on the part of Pan-Atlantic that there would be a right of recovery over contribution by way of contribution or indemnity leaving out the statute provision?

Sidney A. Schwartz:

If Your Honors find that there — a right of indemnity exists in admiralty under the general admiralty law and if the statute is not a bar then I say if you determine that Pan-Atlantic is passive, they would be entitled to indemnity.

Leavenworth Colby:

May it please the Court.

As amicus curiae for this case, the Government is interested in spite a different problem.

As you have heard here today, the shape of this case is determined by the peculiar organization of Waterman Steamship Company and its two subsidiaries, Ryan Stevedoring and Pan-Atlantic Steamship Company on the one hand and the circumstance that in the compensation insurance policy of Ryan Stevedoring Company, there is in addition to the compensation coverage a clause 1B of the standard New York form policy which to the extent of $25,000 will indemnify Ryan Stevedoring Company against secondary losses arising out of injury to their employee.

The United States in its capacity of stevedore does not insure its risks and in its capacity of shipowner does not insure very many of its risks.

Now, at the time that the litigation now pending in the District Courts arose, the Government was primarily a shipowner.

Leavenworth Colby:

Indeed, in Mr. Schwartz’s petition for rehearing, Your Honors may have noticed that the vast majority, I think about 65% of the cases involving this problem that are listed as pending, are cases in which the United States were shipowner.

At the present time however, we are operating only an average of 20 vessels at the end of each month.

That’s the way they make up the statistics form.

So that we are not so important as a shipowner.

We continue to be very important as a stevedore and as a ship repairman.

I have had some difficulty getting statistics in respect of the Government’s interest as stevedore and ship repairman because except for the Panama Canal, the Panama Canal Company, they do not make very good statistics.

But I would like to call your attention to the fact that during the fiscal years, 1955 and the preceding year 1954, the Panama Canal Company alone stevedored 3118 vessels in 1955 and stevedored 2882 vessels in 1954.

It was a ship repair contractor in respect of 1254 vessels in 1955 and 1169 vessels in 1954.

And so, the Government feels that by a reason of its large interest, both as a Stevedore contractor and as a ship repair contractor and after all the rights are similar and as a shipowner we are entitled to point out that our view of this — of the problems here is somewhat different.

As Mr. Behrens has pointed out, he feels and I think correctly that the Court of Appeals found in his favor on two theories, not one.

One of the theories was the theory of indemnity for major and minor fault under the law of something very similar to joint tortfeasorship.

And he has explained to you in his closing argument here why he thought that the Court of Appeals was correct in upholding him on that ground.

Now, this is important in this particular case because such a liability is clearly within clause 1B of the standard form Compensation Act and he’s indemnified for with respect to Masters Ryan, the subsidiary of Pan-Atlantic — the subsidiary of Waterman to be extended $25,000.

So that’s $25,000 that Waterman subsidiary don’t have to pickup.

Now, on the other theory which the Court of Appeals equally sustained the case on that is to say breach of the contract for professional employment.

It is highly doubtful in my mind that clause 1B applies.

And of course if it doesn’t apply, why that’s $25,000 more that Ryan Stevedoring has got to pay for.

So the necessity for dealing with this as a joint tortfeasorship problem is barely obvious as between the advocates who’ve addressed the Court today.

Now, as I say the Government doesn’t insure itself and its problems are different.

And we believe that the correct approach to the problem is the old familiar one that when you hire the garageman to repair the car, you don’t undertake to hire someone else or yourself to test the car to see whether he performed his contract and that’s what this is about.

Now, there are of course considerations on both sides and the Government is interested on both sides.

But basically, what Mr. Schwartz is trying to tell us here today is that the view previously taken by the courts in respect of professional employment shall be changed in order to conform that abuse that the Court have taken with respect to joint tortfeasorship and with this the Government disagrees.

In work, the question that we think has to be resolved here is whether it is compatible with public policy to read Section 5 of the Compensation Act as exonerating an expert contractor from liability to his customer for breach of his contract caused by his own negligence in badly performing the work he contracted to do with professional skill and care.

Now, Mr. Schwartz says that when you hire a stevedore to stevedore a vessel properly and he doesn’t do it, you may not recover the damages that you suffered by reason of his breach of contract.

And he said that is due to Section 5 of the Longshoremen’s Act.

Now, I find it extremely unlikely that this is the law.

Mr. Schwartz has cited you the cases that hold that indemnity being joint tortfeasorship cases is to go by the same rule as contribution and that there isn’t any.

That maybe correct.

We are not interested but Mr. Schwartz has an obligato to his argument in which he contends that Section 5 has also exonerated an expert contractor from liability to his customer for breach of contract.

Now, much has been made to the question —

Harold Burton:

Mr. Colby, he says it has not exonerated him if he makes in the agreement of indemnity.

Leavenworth Colby:

That is right, sir.

Harold Burton:

And if he doesn’t make an agreement of indemnity, you say it doesn’t exonerate him either?

Leavenworth Colby:

Now —

Harold Burton:

Is that right?

Leavenworth Colby:

That is right.

Now, if Your Honor will recall, when you hire the garageman, when you hire a furnish repairman, when you hire an elevator repairman and it’s just the same when you hire a ship repairer or a stevedore, 9 times out of 10 you don’t sign with him a written contract which contains any clauses whatsoever, you call him up on the telephone and say I want it fixed.

You take the car into the garage and you say fix it.

And nobody signs anything and there are no clauses in there that say that he does promise to do the work skillfully and respond in damages if he does it badly or that he won’t.

Now, most stevedoring at least where the Government is concerned is done on the same basis.

Some naval supply officer calls up a stevedoring company on the phone and says, “You stevedored for us before, will you take care of this?

We don’t have the personnel to see to it.”

Comes under all circumstances, they sometimes stevedore aboard regular battleships due to the fact that enough of the crew is going on leave and are not regarded as skillful in shore sided operations.

The Court is not a — the pier is not a military pier, all sorts of variations like this.

It also goes on with respect to other vessels.

Now, the Army has a habit of signing formal stevedoring contracts by the year at the port of New York and we had one such contract before this Court in the Porello case.

But those are quite exceptional from the standpoint of number of contracts.

I suspect they’re barely exceptional even from the standpoint of volume, dollars and cents wise, the payments made by the Government for stevedoring the vessel.

I also have the impression, not dignify it further, that by and large when we’re acting as stevedore through the Panama Canal and through other facilities, we don’t ordinarily sign when we’re the stevedore contractor, formal contracts with anybody.

Now, from time immemorial, it has been assumed that when a professional contractor, a lawyer, a garageman, an elevator repairman, a ship repairman, a stevedore holds himself out to do a good professional job and he doesn’t do a good professional job and the client suffers damage.

The client can recover those damages that are consequent upon the expert’s reach of his duty that he assumed to do the job right.

Felix Frankfurter:

Has the Government been sued for stevedoring (Inaudible)

Leavenworth Colby:

I believe we had.

We’ve been sued for about everything.

They are not numerically large at the present time.

One of the reasons, there’s been so little litigation on this subject is that until Mr. Schwartz begun his contentions that the same rule applied to the garageman, didn’t apply to the stevedore, there was very little of this.

But he won a case in Matthews and the American Casualty Company, at least the other way around, American Casualty Company and Matthews, and he has been endeavoring to extend the rule since with great success.

But we don’t think he should extend to take in quite everything.

Now, coming back —

Tom C. Clark:

Mr. Colby, before you leave that, suppose the — when you took the car into the garage that you said well, I’ll furnish the parts.

Tom C. Clark:

Are you referring to the garageman’s bad part?

Would he be liable there for such (Inaudible)

Leavenworth Colby:

If the accident was due to the defective part, I assume he would not and those holdings have been made with respect to ship repairmen and stevedores and this Court has denied certiorari.

The same things would be true, I think for the garageman.

But now, the type of situation that we have in this case really, we will now adjudge it to the garageman, as I take my car into the garage to have the brakes fixed and I come in as I always do at 6 o’clock when they’re trying to shut the door and I come to take my car away and they’ve got it aimed out so I can go out the door and I get in and I start the car and I press on the brake and I pushed the accelerator pedal a couple of times and everything seems all right but I don’t make any test, I don’t go into anything in detail although I have done it.

I start to drive the car out, the accelerator pedal jammed because of something that they did when they were fixing the brake.

And I could have –if I had continued my investigation there, as I owe the duty to outsiders to do, I could have known that it would jam but I didn’t and I started out the accelerator pedal jammed, the car went forward, the car strikes another customer’s car and in the other customer’s car is riding the customer and a car jockey employed by the garage contractor who just did the job for me.

And I injured the other customer’s car and I injured the other customer and I injured the car jockey employed by my garageman.

And the customer sues me for his personal injuries and for the damage to his vehicle and the car jockey brings a third-party suit against me for his personal injuries.

It may all recover because it’s holding that I should have been more careful in testing the car and should have discovered this defectual performance by my garageman.

So now, I turn and I tried to sue my garageman for the damage that he’s caused me by doing my work badly.

And of course this is in the District of Columbia where the Longshoremen’s and the Harbor Workers’ Compensation Act is the local Compensation Act and what this Court decides today will govern what is done in the case of the garageman.

So I am met by the contention of the garageman, “Oh, you can’t recover because the Longshoremen’s and Harbor Workers’ Compensation Act, which is the Compensation Act to the District of Columbia, exonerates me from liability because it says that when I pay my employees, as the garageman, that’s the extent of my liability.”

Now, I don’t understand Mr. Schwartz’s contention point.

I don’t know whether he says it exonerates the garageman from liability for damage to the other customer’s car liability over.

My right of recovering my damages in the form of what I had to pay then which is sometimes called indemnity which is a very different thing from indemnity and contribution.

I don’t know whether Mr. Schwartz says, “I can’t recover what I had to pay the customer for damage to his car.”

I don’t know whether Mr. Schwartz says, “I can’t recover for the injury to the other customer.”

I am clear that Mr. Schwartz says, “I can’t recover back the money I have to pay the car jockey because of the breach of contract by my garageman.”

Now, this has never been the law, I’m sure, up until the present time but that is what Mr. Schwartz is asking this Court to decide.

Judge Inch had submitted.

Leavenworth Colby:

Judge Inch, I take it must have had in his opinion in mind only the question of joint tortfeasorship and indemnity as another aspect of contribution.

I do not think that Judge Inch paid any attention at all in his opinion that the fact that this was a suit by a ship against the people that the ship had employed to load the vessel and unload it properly.

So I don’t think that Judge Inch had decided the question of contractual liability to respond in damages for all consequences including liability to pay other people damages of a breach of a professional contract of employment.

Tom C. Clark:

(Inaudible)

Leavenworth Colby:

Well, I suppose it would at some extent but —

Tom C. Clark:

That’s a fact.

Leavenworth Colby:

— we think that it could be explained in a way and you’ll notice that when the case got to the Court of Appeals, the Court of Appeals was apparently aware of the coin having two sides, one, breach of a professional contract of employment with the liability to respond in damages therefore and the other, contribution and indemnity in a joint tortfeasorship sense.

Now, I read the opinion like Mr. Behrens as having held that the ship should have recovered on both theories.

Now, I’m sure that Waterman Steamship Company represented by Mr. Schwartz and Mr. Behrens in both in a sense, although they both represent underwriters too.

Leavenworth Colby:

I’m sure that Waterman Steamship Company would prefer to have this case rested upon the ground of joint tortfeasorship type indemnity because then clearly the underwriter on Ryan Stevedoring’s clause 1B coverage, we’ll pay $25,000 and if it’s rested on breach of the contract of professional employment, I’m not sure that they will.

I don’t think that any of the decided cases on clause 1B have said that you pay for a liability rested on that theory.

Now, they might so hold when they got around to decided it but the New York case which would govern the 1B coverage in this case of Cardinal Engineering Company, which you’ll find somewhere in the Government’s brief there, did not deal with a recovery on the theory of breach of a contractual duty owed to the client.

Now, that’s what this is about and I’d like to comment on the facts of this situation that we’re being asked to put the burden on the ship.

Your Honors will notice on this record that there was a mate here, just one mate, the cargo mate.

He is supposed to be in general supervision of the ship.

Now, what does that mean from the standpoint of supervising the stevedores?

There were five hatches and number three was a double hatch.

So in number three there were two stevedore gangs working and in each one of the other hatches, there was one stevedore gang working.

Now, that’s six stevedore gangs.

Each stevedore gang consists of 21 men, the record so show us.

Now, these 21 men are divided as follows.

There are three men who look after the winches.

There is a hatch boss.

In other words, six hatch bosses for the — for the six gangs operating on the four single and one double hatch.

One hatch boss, one gangway man who does the signaling for the lifts, then there are eight men on the dock and eight men in the hold.

And the eight men in the hold are divided into four offshore men and four inshore men or four at the side of the ship towards the dock.

Now, that is the personnel right on the ship.

Now, I think the record shows, but I wouldn’t prepare — pretend to sufficiently accurate knowledge, I may have been mistaken but the usual practice is in addition the stevedore has a ship supervisor and ordinarily a pier supervisor.

So now, you have six foremen, six hatch bosses which are supervisory personnel for the stevedore contractor.

You have at least a ship supervisor, who is supervisory personnel for the stevedore contractor, and you may have a pier supervisor besides who would be over all the ships that were loading at that pier at that time and would come down with chain of command to the ship supervisor.

Now, with all these supervisory personnel and all these group of men stevedoring the vessel and remember the contracting stevedore has been employed for his expertise in how to load a vessel.

He’s employed to know something that a cargo mate is not supposed to.

The cargo mate is to be made on behalf of the shipowner absolutely responsible to see that the stevedore contractor does his work right.

One little man who has to go in to five hatches then and be omnipresent and see what six gangs of 21 men each are supposed to do and he is supposed to be the man that’s going to decide whether or not this expert, for whom the ship has paid, has done his work right.

Now, we’ve got in our brief a lot of cases and I never thought it was controverted until today that when you hire an expert, you don’t owe him any duty to inspect his work, to see that he does it right.

He owes the duty to you to do it right because you’re paying him to do it right.

But Mr. Schwartz says that the ship was in control through it’s cargo mate and it was the responsibility of the ship to see that this professional stevedore did right what it was paid to do and because they didn’t do their work right, the ship is responsible and then he says, “And besides in any event, Section 5 — Code Section 905, the Compensation Act says that they can’t be responsible if they’re good boys and pay their employees the compensation that Congress is providing.”

Now, I do not think that’s the law and we’ve explained it very plain in our brief why we think it isn’t.

Now, I would like to comment briefly about the general situation that develops in the course of these cases with respect to reading Section 5.

Leavenworth Colby:

Now, as the Court has noticed, everybody says the legislative history was silent.

All this Court has really ever been able to find out about the Longshoremen’s and Compensation — Longshoremen’s and Harbor Workers’ Compensation Act in any case is that Congress patterned it after the New York Compensation Act because as Mr. Behrens explained yesterday, they had been unsuccessful in having the local compensation acts applied in maritime cases.

Afterwards, Congress applied the same Longshoremen’s Compensation Act to the District of Columbia as the local Compensation Act and applied it to the overseas defense basis as the Defense Basis Act.

Both the D.C.Compensation Act and the Defense Basis Act, in other words, the one section in the acts state the rights are governed by the Longshoremen’s Act.

Now —

Stanley Reed:

Does the Federal Compensation Act invite an injured employee to sue a third party?

Leavenworth Colby:

Does Your Honor talking now about the Federal Employees Compensation Act that covers government employees?

Stanley Reed:

No, no.

That governs the Longshoremen’s.

Leavenworth Colby:

The Longshoremen’s?

Oh, yes.

That is of course what was done here.

Mr. Palazzolo, the man who was injured on —

Stanley Reed:

I understand but what — what section is that (Inaudible) do you happen to know?

Leavenworth Colby:

I don’t think I can recall all of them.

Stanley Reed:

(Inaudible)

Leavenworth Colby:

It —

Stanley Reed:

It’s in the regular Longshoremen’s Compensation Act?

Leavenworth Colby:

Yes, as Mr. Schwartz explained the injured employee under the Longshoremen’s Act just the same as the injured employee under a state compensation —

Stanley Reed:

I don’t — I’m not going to interrupt you anymore.

Leavenworth Colby:

— may — may sue a third party.

Now, that’s all taken place, he got his money, the compensation carrier got their money back.

Now, that’s this case.

That’s true in every case.

Now, what we’re concerned with here is the question of whether Section 5 or whether the circumstances of these cases prevent the person who employs the garageman or the stevedore or whatever, recovering his damages in the form of what he had to pay a third party who was injured.

And as I say, I find no cases cited that hold that he has.

I find cases cited by Mr. Schwartz very well that in respect of joint tortfeasorhip, indemnity goes by the same rule as contribution.

There are a lot of cases the other way too and I wouldn’t say that Mr. Behrens is not more than correct in saying that he thinks so as a better reason.

But now, that’s the problem.

Now, looking at Section 5 and applying the — the just and generous rule, we would reach the conclusion that the obligations arising out of a contract of professional employment of the professional contractor to respond in damages to his client.

Leavenworth Colby:

We’re not within the universe that Congress intended to take away liability.

Now, that’s the — that’s the first consideration.

Then there is the phenomena that as I say state and federal cases on this problem of professional responsibility have not gone that way.

Finally, we think that public policy requires, just like in the both-to-blame situation, Both-To-Blame Clause in the cargo case, the Atlantic Mutual Insurance Company case.

Public policy requires leaving the responsibility or the professional expert’s negligence on the professional expert and not shifting it to the client or customer.

So that we think that in the absence of a legislative history that should compel a construction that Section 5 didn’t apply.

Now additionally, if Your Honors will recall what we had before us in the Atlantic Mutual Insurance Company, both-to-blame case, they have the same problem that Mr. Schwartz talked about here today.

The question was that it was anomalous that the ship should be fully exonerated from paying for cargo damage if it was solely at fault.

But when the other ship was at fault too, it should have to pay half the damages.

But Your Honors had no difficulty with that.

Now, that litigation through the years followed the same pattern as we have here today.

In the Delaware, back in volume 161 of the United States reports.

The question had come up of whether since the ship, the other ship, a non-carrying ship with respect to the cargo in a both-to-blame situation would be able if — would be able to pay the cargo owner the full value of his cargo that was lost and then collect over against the carrying ship, did Section 3 of the Harter Act, which was written with the same universality as Section 5 of the Compensation Act, exonerate the carrying vessel from liability to the non-carrying vessel.

In other words, could they, like Mr. Schwartz wants to do with the stevedore here, put all of the burden on to the non-carrying vessel and treat the Section 3 of the Harter Act as a sword as well as the shield, just as my brother here wants to preach — to treat Section 5 the Compensation Act, as a sword as well as the shield and the Court said, “Oh, no.”

And so, form the time of the Delaware on, it was necessary for the carrying ship, although it was free when it was solely at fault, to pay half the damage to the cargo in those cases where the other ship was also at fault.

And then in Atlantic Mutual, last term, we got up to the problem of could the carrying ship by contract take the position that Mr. Schwartz wants to take here today.

He was asked this very question.

Now, we held in the Atlantic Mutual Insurance Company that he couldn’t, although it was not more symmetrical for the carrying ship not to pay anything when it was jointly at fault.

The same as it did when it was solely at fault.

Still the public policy of making the contractor liable for his own negligence dictated the contrary solution.

And we think that’s the situation here today that the policy, the general public policy of making the contractor, the professional contractor to pose himself out, solely liable for his fault, shouldn’t bring about the construction of Section 5 to exonerate it.

Thank you.

Earl Warren:

Thank you, Mr. —