General Electric Co. v. Cuban American Nickel Co.

• Decision Date: 01 July 1968
• Docket Number: No. 23008.,23008.
• Citation: 396 F.2d 89
• Parties: GENERAL ELECTRIC COMPANY and Electric Mutual Liability Insurance Company, Appellants, v. CUBAN AMERICAN NICKEL COMPANY et al., Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

396 F.2d 89 (1968)

GENERAL ELECTRIC COMPANY and Electric Mutual Liability Insurance Company, Appellants, v. CUBAN AMERICAN NICKEL COMPANY et al., Appellees.

No. 23008.

United States Court of Appeals Fifth Circuit.

February 7, 1968.

Rehearing Denied July 1, 1968.

Harrison G. Ball, Lynn, Mass., William A. Porteous, III, William A. Porteous, Jr., New Orleans, La., for appellants.

John V. Baus, Charles W. Lane, III, Carl J. Schumacher, Jr., New Orleans, La., for appellees.

Before WISDOM and GODBOLD, Circuit Judges, and McRAE, District Judge.

WISDOM, Circuit Judge:

"Perhaps the most evenly-balanced controversy in all of compensation law is the question whether a third party in an action by the employee can get contribution or indemnity from the employer, when the employer's negligence has caused or contributed to the injury." 2 Larson, Workmen's Compensation Law § 76.10, at 228 (1952). Under Erie we are called upon to resolve this controversy in accordance with the as yet undeveloped Louisiana law on the subject.

Indemnity may arise either in contract or in tort: by an express or implied contract to indemnify; or by equitable concepts based on the tort theory of indemnity, for example, when one party has been only "technically" or constructively at fault and the indemnitee has been actively at fault. Whether Cuban American, the defendant-appellee, is entitled to indemnity from G.E. under any of these theories is the focal point of our inquiry.

Salvadore Locicero sued the Cuban American Nickel Company (formerly Freeport Nickel Company), and its insurer, Liberty Mutual Insurance Company, for personal injuries arising out of an industrial accident at the Company's metal recovery plant in Port Nickel, Plaquemines Parish, Louisiana. Locicero, at the time of the accident, was working for General Electric Company as an electrician and a member of a repair crew. July 29, 1959, G.E. dispatched Locicero to a switching station (substation) at the Port Nickel plant to repair certain equipment G.E. had warranted. Cuban American was in possession and control of the plant and, of course, the switching station, and had an electrical engineer and several electricians in its employ.

On the day in question the repair party was admitted to the premises at Port Nickel and escorted to the switching station by Aubrey Covington, the Cuban American employee charged with the responsibility for the station. Covington unlocked a gate to the fence surrounding the station and unlocked the door to the building containing the electrical equipment to be repaired. The repair party was supplied with a diagram of the wiring of the station and, after receiving assurances from Covington that it was safe to work on the equipment, proceeded to repair the broken equipment. The G.E. engineer in charge of the party, relying upon the assurances of Covington, made no independent examination of the diagram and conducted no independent tests to determine whether the station was deenergized. While working in the lower compartment of the switching station Locicero came in contact with an electrical conduit carrying over 13,000 volts. As a result of this contact he received extensive burns causing severe disfigurement.

Locicero brought a negligence action against Cuban American and its liability insurer for the personal injuries he sustained. Electric Mutual Liability Insurance Company, the compensation insurer of G.E., intervened to recover compensation benefits paid to Locicero and the medical expenses paid over and above the statutory limits.¹

Cuban American brought a third-party indemnity demand against C. F. Braun and Company, which had purchased the equipment from G.E. and had built the switching station for Cuban American, and against G.E. and its liability insurer. After trial was commenced Cuban American settled with Locicero for $150,000 and continued its indemnity suit as third-party plaintiff against G.E.² The trial judge charged the jury both on tort indemnity and on implied contractual indemnity. On special interrogatories, the jury found that both G.E. and Cuban American were negligent, that Locicero was not negligent, and that Cuban American's negligence was "passive", while G.E.'s was "active". Accordingly, the jury found that Cuban American was entitled to indemnity against G.E. The court entered judgment for Cuban American in the amount of $150,000 on the indemnity claim and denied Electric Mutual's compensation recovery, although acknowledging the validity of its subrogation rights. G.E. and Electric Mutual moved for a judgment n. o. v. or alternatively for a new trial principally on the ground that the third-party plaintiffs could not recover under any legally acceptable theory of indemnity. The district court denied these motions, giving written reasons. Locicero v. Freeport Nickel Company, E.D.La.1965, 243 F. Supp. 828. G.E. and Electric Mutual appeal. We reverse.

I.

It is undisputed that there was no express indemnity agreement between G.E. and Cuban American. Thus any contractual indemnity must be implied. Cuban American's claim is predicated on the theory that G.E. owed Cuban American an implied contractual duty to perform the warranty repair work with due care in a competent, safe, and workmanlike manner; that G.E.'s breach of this contractual duty caused Locicero's injury and the resulting loss to Cuban American; and that, as a matter of law, because of this breach of a contractual obligation G.E. is obligated to indemnify Cuban American for the amount which Cuban American was required to pay Locicero.

When the employer\'s relation to the third party is that of a contractor doing work for the third party, there may be an implied obligation to perform the work with due care. If, by failing to use such due care, the employer causes an incident injuring his own employee, it may be said that the employer has simultaneously breached two duties of care. The one is toward the employee, and it is for this breach that the compensation bars any common law remedy. The other is toward the third party contractee, and among the damages flowing from the breach of this separate duty are any damages the third party may be forced to pay the employee because of their relation. Larson § 76.43, at 236-37.

In the instant case the jury found that G.E. had breached its implied obligation to perform the repair work with due care, giving rise to the obligation to indemnify Cuban American.

A. The concept of an implied obligation to indemnify is traceable to Westchester Lighting Co. v. Westchester County Small Estates Corp., 1938, 278 N.Y. 175, 15 N.E.2d 567. In that case the court refused to hold the exclusive-remedy clause of the Workmen's Compensation Act a bar to a third-party indemnity suit against the employer. The court observed: "Plaintiff does not sue for damages `on account of' Haviland's death. Plaintiff asserts its own right of recovery for breach of an alleged independent duty or obligation owed to it by the defendant." 15 N.E.2d at 568. Not until Ryan Stevedoring Co. v. Pan-Atlantic Steamship Corp., 1955, 350 U.S. 124, 76 S.Ct. 232, 100 L.Ed. 133, was this concept fully developed into an independent theory of indemnification.

Ryan Stevedoring Company, under contract with Pan-Atlantic, had improperly stowed goods aboard a vessel, and Pan-Atlantic had carelessly failed to discover the defect. One of Ryan's employees was injured as a result. He accepted compensation under the Longshoremen's and Harbor Workers' Compensation Act and then sued the shipowner, who impleaded Ryan. The Supreme Court, in a five-to-four decision, held that the exclusiveremedy clause of the Act did not bar the shipowner's indemnity claim and that Pan-Atlantic was therefore entitled to indemnification for Ryan's breach of an implied promise to do the stevedoring work in a proper manner.

The shipowner\'s action here is not founded upon a tort or upon any duty which the stevedoring contractor owes to its employee. The third-party complaint is grounded upon the contractor\'s breach of its purely consensual obligation owing to the shipowner to stow the cargo in a reasonably safe manner. * * *

The shipowner here holds petitioner\'s uncontroverted agreement to perform all of the shipowner\'s stevedoring operations at the time and place where the cargo in question was loaded. That agreement necessarily includes petitioner\'s obligation not only to stow the pulp rolls, but to stow them properly and safely. Competency and safety of stowage are inescapable elements of the service undertaken. This obligation * * * is of the essence of the petitioner\'s stevedoring contract. 350 U.S. at 131-133, 76 S.Ct. at 236, 100 L.Ed. at 141-142.

Ryan and its progeny,³ and their impact in admiralty law, have been extensively and ably discussed in law review commentary.⁴ The complexities and nuances involved in application of the Ryan doctrine in admiralty do not now concern us: The instant case turns on Louisiana law, not on federal admiralty law. We consider the Ryan doctrine inapplicable to the present case. We therefore need not discourse on what the doctrine covers when, for independent reasons, we have concluded that the doctrine does not cover this case.

B. In many jurisdictions it is generally accepted that "the right to indemnity is not confined to the admiralty field or to the issue of seaworthiness of a vessel." Bielawski v. American Export Lines, E.D.Va.1963, 220 F.Supp. 265, 269. Perhaps the leading case expanding the Ryan doctrine's application to nonmaritime situations is General Electric Company v. Moretz, 4 Cir. 1959, 270 F.2d 780, cert. denied, Mason & Dixon Lines, Inc. v. General Electric Co., 361 U.S. 964, 80 S.Ct. 593, 4 L.Ed.2d 545.⁵ Moretz, an employee of Mason & Dixon Lines (M. & D.), brought suit against G.E. for injuries sustained while driving a trailer truck which G.E. had negligently loaded. Heavy electrical equipment had been placed in the center of...