Great Lakes Dredge & Dock Co. v. City of Chicago

• Decision Date: 07 October 1993
• Docket Number: No. 93-1421,93-1421
• Citation: 3 F.3d 225
• Parties: , 1993 A.M.C. 2984, 62 USLW 2145 GREAT LAKES DREDGE & DOCK COMPANY, Plaintiff-Appellant, v. CITY OF CHICAGO, an Illinois municipal corporation, Defendant-Appellee, and Jerome B. Grubart, Inc., an Illinois Corporation, Claimant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 225

3 F.3d 225

1993 A.M.C. 2409, 1993 A.M.C. 2984,

62 USLW 2145

GREAT LAKES DREDGE & DOCK COMPANY, Plaintiff-Appellant, v. CITY OF CHICAGO, an Illinois municipal corporation, Defendant-Appellee, and Jerome B. Grubart, Inc., an Illinois Corporation, Claimant-Appellee.

No. 93-1421.

United States Court of Appeals, Seventh Circuit.

Argued April 26, 1993.

Decided August 24, 1993.

Rehearing and Suggestion for Rehearing En Banc Denied Oct.

7, 1993. ^*

Duane M. Kelley, Jack J. Crowe, Winston & Strawn, Paul Kozacky, Jeffrey E. Stone, Douglas M. Reimer (argued), William P. Schuman, John T. Schriver, Stewart W. Karge, McDermott, Will & Emery, Chicago, for plaintiff-appellant Great Lakes Dredge & Dock Co.

Barry Sullivan (argued), Theodore Tetzlaff, Russ M. Strobel, Richard C. Bollow, Jeffrey T. Shaw, Jenner & Block, Alan W. Brothers, Hubert O. Thompson, Lori A. Owens, Carney & Brothers, Kelly R. Welsh, Asst. Corp. Counsel, Office of Corp. Counsel, Appeals Div., Chicago, for defendant-appellee City of Chicago.

William J. Harte, and Robert A. Holstein, Aron D. Robinson, Bruce J. Goodhart, Holstein, Mack & Klein, Ben Barnow (argued), Barnow & Hefty, Chicago, for appellee Jerome B. Grubart.

Warren J. Marwedel, Dennis Minichello, Shari L. Friedman, Robert A. Roth, Robert L. Reeb, Keck, Mahin & Cate, Chicago, IL, George W. Healy, III, Maritime Law Ass'n, New Orleans, LA, for amicus curiae Maritime Law Ass'n of U.S.

Before CUDAHY and EASTERBROOK, Circuit Judges, and EISELE, Senior District Judge. ^**

CUDAHY, Circuit Judge.

On April 13, 1992, the Chicago River "sprung a leak." Mike Royko, Putting in a Plug for the City that Leaks, Chi. Trib., Apr. 14, 1992, at 3. On that date, a breach occurred in the roof of a freight tunnel running beneath the river. Water rapidly filled that tunnel and spread to the web of tunnels located throughout the city's downtown area. A number of buildings connected to this tunnel system were flooded and seriously damaged. Business in Chicago's downtown district was disrupted for many days as was maritime traffic on the portion of the river near the rupture in the tunnel wall. ¹ Shortly after the leak was plugged, thousands of plaintiffs, including individuals, businesses and the City of Chicago (the City), filed suit in the Cook County Circuit Court against Great Lakes Dredge & Dock Company (Great Lakes), a contractor hired by the City to replace pile clusters (known in the trade as "dolphins") at five bridge sites along the Chicago River. ² These claimants, for the most part, allege that Great Lakes negligently installed dolphins in the vicinity of the Kinzie Street Bridge and, as a result, caused the breach in the tunnel which, in turn, caused the flood.

On October 6, 1992, Great Lakes filed a three-count complaint in the district court, claiming the existence of federal admiralty jurisdiction. Count I demands exoneration from or limitation of liability pursuant to the Limitation of Vessel Owner's Liability Act, 46 U.S.C.App. Secs. 181-96 (the Limitation Act). In Counts II and III, Great Lakes requests indemnity or contribution from the City for any damages that Great Lakes may be adjudged liable to pay. ³ Great Lakes contends that the City alone was responsible for the flood either because it failed to disclose to Great Lakes the existence of the tunnel near the Kinzie Street Bridge or because it failed to adequately repair and maintain the tunnel. Jerome B. Grubart, Inc. (Grubart), a downtown business which allegedly suffered damage as a result of the flood, filed a claim in the federal proceeding. The City and Grubart moved the district court to dismiss Great Lakes' complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction or, in the alternative, pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted. The district court granted these motions. Great Lakes appeals, and we, considering the matter de novo, now reverse.

Article III, section two of the United States Constitution provides that "the judicial power shall extend ... to all Cases of admiralty and maritime Jurisdiction," and 28 U.S.C. Sec. 1333(1) places such power exclusively within the jurisdiction of the United States district courts. Our first task is to determine whether the tort at the heart of this litigation, Great Lakes' alleged negligence, is within the admiralty jurisdiction. We conclude that it is.

Before the last twenty years, admiralty jurisdiction over torts turned on the satisfaction of a so-called "locality" (or "situs") test. Under this test, "every species of tort, however occurring, and whether on board a vessel or not, if upon the high seas or navigable waters, is of admiralty cognizance." The Plymouth, 70 U.S. (3 Wall.) 20, 36 18 L.Ed. 125 (1865). This principle, however, never took the form of a holding of the Supreme Court, and, as early as 1850 the author of a noted treatise on admiralty law expressed doubt that admiralty jurisdiction depended solely on a maritime location. He suggested that admiralty jurisdiction existed, in tort cases, only if the tort bore some relationship to navigation or maritime commerce. See Erastus C. Benedict, The Law of American Admiralty 173 (1850). The Supreme Court, however, did not squarely address this issue until 1972. Nonetheless, generations of admiralty practitioners and students believed that the locality test alone was controlling.

In Executive Jet Aviation, Inc. v. City of Cleveland, 409 U.S. 249, 93 S.Ct. 493, 34 L.Ed.2d 454 (1972), an aircraft crashed into the navigable waters of Lake Erie after striking a flock of sea gulls while taking off. The Court held that there was no admiralty jurisdiction, despite the existence of a maritime situs, because "the wrong [did not] bear a significant relationship to traditional maritime activity." Id. at 268, 93 S.Ct. at 504. Although the Court explicitly limited the application of this new "nexus" requirement to cases involving aviation torts, some courts applied it more broadly. See, e.g., Kelly v. Smith, 485 F.2d 520 (5th Cir.1973), cert. denied, 416 U.S. 969, 94 S.Ct. 1991, 40 L.Ed.2d 558 (1974).

Ten years after Executive Jet, the Supreme Court first said, although technically in dictum, that the "nexus" requirement was not moored to aviation disasters. In Foremost Insurance Co. v. Richardson, 457 U.S. 668, 102 S.Ct. 2654, 73 L.Ed.2d 300 (1982), a case involving the collision of two pleasure boats in navigable waters, the Court expanded its holding in Executive Jet in two ways. First, the "requirement that the wrong have a significant connection with traditional maritime activity" was incorporated into all assertions of maritime tort jurisdiction. Id. at 674, 102 S.Ct. at 2658. Second, the Court concluded that "traditional maritime activity" was not limited to commercial maritime activity. Id. The Court found that the "federal interest in protecting maritime commerce cannot be adequately served if admiralty jurisdiction is restricted to those individuals actually engaged in commercial maritime activity." Id. at 674-75, 102 S.Ct. at 2658. It was enough, therefore, for purposes of sustaining admiralty jurisdiction, that the collision in Foremost had a "potentially disruptive impact" on maritime commerce. Id. at 675, 102 S.Ct. at 2658.

After Foremost, many courts, prominently including this one, grappled with the precise meaning of the "nexus" requirement. The Supreme Court provided additional guidance in Sisson v. Ruby, 497 U.S. 358, 110 S.Ct. 2892, 111 L.Ed.2d 292 (1990), rev'g Complaint of Sisson, 867 F.2d 341 (7th Cir.1989) (Cudahy, J.). In Sisson, a fire erupted in the washer/dryer unit of a large pleasure yacht docked at a recreational marina on Lake Michigan, a navigable waterway. The fire spread to other recreational vessels and the marina itself. No commercial vessels were damaged since none were docked at the marina at the time of the fire (nor were any ever likely to be docked there). In reversing this Circuit to find admiralty jurisdiction, the Court bifurcated its analysis of the "nexus" requirement. The Court began by assessing the relationship between admiralty jurisdiction and the disruption of maritime commerce. The Court stated that the jurisdictional inquiry does not require an assessment of the incident's actual effects on maritime commerce. Rather, admiralty jurisdiction can exist if an incident creates a "potential hazard to maritime commerce," even though maritime commerce is in no way disturbed. Id. at 362, 110 S.Ct. at 2895 (quoting Foremost, 457 U.S. at 675 n. 5, 102 S.Ct. at 2658 n. 5 (emphasis supplied)). Moreover, in determining the existence of such a "potential hazard," a court does not consider the particular facts of the case before it, but "must assess the general features of the type of incident involved to determine whether such an incident is likely to disrupt commercial activity." Id. at 363, 110 S.Ct. at 2896. The Court concluded that the fire in Sisson "plainly satisf[ied]" this requirement, presumably because it could have damaged commercial vessels, had any been docked at the recreational marina at the time, or because the damage to the marina itself might have disturbed commercial maritime traffic. ⁴ Id. This seemingly rather remote possibility of impact on maritime traffic appeared to be enough to support admiralty jurisdiction.

The Court also reiterated its holding in Foremost that admiralty jurisdiction does not exist, notwithstanding an incident's potential impact on maritime commerce, unless there is "a substantial relationship between the activity giving rise to the incident and traditional maritime activity." Id. at 364, 110 S.Ct. at 2897. The Court stressed that the relevant activity is "defined not by the particular circumstances of the incident, but by the general conduct from which the incident arose." Id. Accordingly, the Court characterized the relevant conduct in Sisson as ...