Sundance Cruises Corp. v. American Bureau of Shipping, 1141

• Citation: 7 F.3d 1077
• Decision Date: 15 October 1993
• Docket Number: D,No. 1141,1141
• Parties: SUNDANCE CRUISES CORPORATION, SCI Cruises, Inc., also known as Sundance Cruises, Inc., Plaintiffs-Appellants, v. The AMERICAN BUREAU OF SHIPPING, Defendant-Appellee. ocket 92-9153.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 1077

7 F.3d 1077

1994 A.M.C. 1

SUNDANCE CRUISES CORPORATION, SCI Cruises, Inc., also known as Sundance Cruises, Inc., Plaintiffs-Appellants, v. The AMERICAN BUREAU OF SHIPPING, Defendant-Appellee.

No. 1141, Docket 92-9153.

United States Court of Appeals Second Circuit.

Argued March 10, 1993.

Decided Oct. 15, 1993.

Brian D. Starer, New York City (Haight, Gardner, Poor & Havens, of counsel), for plaintiffs-appellants.

John J. Loflin, New York City (Lord Day & Lord, Barrett Smith, of counsel), for defendant-appellee.

Before: TIMBERS, KEARSE, and PRATT, Circuit Judges.

GEORGE C. PRATT, Circuit Judge:

On June 29, 1984, the luxury cruise ship SUNDANCER struck an underwater rock off the coast of British Columbia and sank. The ripples caused by the sinking spread beyond the Pacific waters of Discovery Passage to the United States District Court for the Southern District of New York, where the owners of the SUNDANCER, Sundance Cruises Corp. ("SCC") and Sundance Cruises, Inc. ("SCI") (collectively, "Sundance"), filed suit against the American Bureau of Shipping ("ABS"), a classification society headquartered in New York. A classification society such as ABS develops rules, guides, standards, and other criteria for the design and construction of ships. When requested, a society reviews the design and surveys a ship before, during, and after construction to verify compliance with the relevant international safety conventions and applicable rules of the classification society.

Less than two weeks before the SUNDANCER foundered, ABS had issued certificates to Sundance representing that the vessel complied with international safety standards and with ABS's own rules for classifying vessels. Sundance raised claims in contract and tort, alleging that in carrying out its contractual duties of inspecting the vessel ABS raised numerous defenses to liability, including a claim that Bahamian law, the law of the vessel's flag, immunized ABS from any liability arising from safety inspections it performed for the Bahamian government. In a thorough opinion, the district court, Whitman Knapp, Judge, agreed; on motion for reargument, the court held that in addition, Sundance had provided no evidence that it was damaged by ABS's purported errors in issuing the classification certificate, and granted ABS's motion for summary judgment. 799 F.Supp. 363 (S.D.N.Y.1992). Sundance now appeals from final judgments of the district court entered on July 31 and September 21, 1992, which dismissed its complaint with prejudice.

and issuing safety and classification certificates, ABS had failed to detect and advise Sundance that the watertight integrity required of the vessel was compromised by holes in one of its bulkheads and by the absence of valves in its sanitary or "grey-water" piping system.

FACTS AND BACKGROUND

We recount only the facts necessary to this appeal; a more detailed recitation of facts may be found in the district court's opinion at 799 F.Supp. 363.

In early 1984 Sundance purchased an overnight car ferry and converted it at a Swedish shipyard into a luxury cruise ship capable of making week-long voyages along the west coast of North America, with accommodations for over seven hundred passengers. Sundance sought to register the converted vessel with the Bahamian government; the Bahamian Merchant Shipping Act requires that Bahamian flag ships evidence their compliance with several international safety conventions to which the Bahamas adheres. Accordingly, Sundance needed (1) a safety certificate representing the ship's compliance with the 1974 Convention on the Safety of Life at Sea ("SOLAS"); (2) a certificate showing compliance with the Load Line Convention; and (3) a Tonnage certificate, not at issue in this case. These certificates are referred to herein variously as the "statutory" or "safety" certificates. In addition, in order to obtain insurance for the vessel, Sundance also needed a classification certificate, a document that certified the vessel's compliance with the classification society's own rules. 799 F.Supp. at 369.

On March 5, 1984, Sundance formally retained ABS by executing, in Sweden, an agreement denoted "Request for Classification Survey and Agreement". By that agreement, ABS was engaged to inspect the vessel to determine its compliance with ABS class rules and to perform regulatory checks on behalf of the Bahamian government in connection with the issuance of the above mentioned statutory and class certificates. Classification of a vessel by ABS represents that the ship has been found structurally and mechanically fit for a particular use or service in accordance with ABS rules and standards.

ABS representatives were on site during some portions of the conversion process in the Swedish shipyard. Sundance provided ABS with many plans for the vessel, although for some reason no plans for the grey-water piping system, which channels water from the ship's showers and sinks, were ever provided. 799 F.Supp. at 369. Inspections of the converted ship took place in Sweden and on board the vessel during its initial voyages. Id.

On June 14, 1984, acting on behalf of the Bahamian government, ABS issued a five-month provisional Load Line certificate and a SOLAS passenger ship safety certificate to the vessel. The SOLAS certificate represented, among other things, that the vessel possessed the water-tight integrity required by the SOLAS Convention. Shortly thereafter, ABS issued a provisional classification certificate to the vessel, which represented that the vessel was in compliance with ABS's rules, including rules on the watertight integrity of vessels.

The SUNDANCER was a two-compartment ship, meaning that it could survive the flooding of any two of the watertight compartments of its thirteen. When the SUNDANCER struck the underwater rock, its hull was breached below the waterline. While only two watertight compartments initially flooded, progressive flooding of other The absence of valves in the grey-water system was a SOLAS violation; the two holes in bulkhead 124 were a violation of both SOLAS and ABS's rules. Neither violation had been reported by ABS. The SUNDANCER was declared a constructive total loss, and some passengers and crew members were injured. Fortunately, no lives were lost.

                compartments occurred when water passed through two holes in bulkhead 124 and through the unvalved grey-water system.   As a result of the progressive flooding, the vessel listed heavily and eventually sank at a nearby pier
                

Sundance claims that the vessel would not have sunk but for ABS's (1) negligence, (2) gross negligence, (3) negligent misrepresentation, (4) breach of contract, and (5) breach of the Ryan implied warranty of workmanlike performance in issuing the relevant certificates, see Ryan Stevedoring Co. v. Pan-Atlantic S.S. Corp., 350 U.S. 124, 76 S.Ct. 232, 100 L.Ed. 133 (1956). ABS was paid a fee of $85,000 under the contract. Sundance seeks actual and punitive damages totalling $264,000,000.

The district court held that the law of the vessel's flag, Bahamian law, shielded ABS with immunity for its actions in issuing the SOLAS and Load Line certificates for the Bahamian government. Irrespective of immunity, the court concluded that Sundance had not produced any evidence to sustain a charge of gross negligence, and that Sundance's negligent misrepresentation claim failed for lack of "a scintilla of evidence * * * that plaintiff had asked defendant to provide it with any information for its guidance". 799 F.Supp. at 382. Finally, the court held that no Ryan implied warranty existed in a ship-inspection setting. 799 F.Supp. at 385-86.

In contrast, the court denied ABS's motion for summary judgment on Sundance's breach of contract claim, and denied the motion in part concerning Sundance's assertions of ABS's negligence. Regarding the negligence claim, the court held that the Supreme Court's decision in East River S.S. Corp. v. Transamerica Delaval Inc., 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986), barred Sundance's recovery in tort of damages for harm to the ship, but did not bar those damages Sundance sought to indemnify it for paying personal injury claims arising from the incident. The court held that significant issues of material fact would remain for these claims, requiring further exploration, were ABS not immunized for its conduct. On motion for reargument, the district court clarified its earlier holding: although ABS had no immunity for issuing the classification certificate, Sundance had provided no evidence that it was "in any way damaged by possible errors in issuing that particular certificate." Id. at 393.

This appeal requires us to review, in turn, the district court's determinations that (1) Bahamian law applies here, (2) the Bahamian immunity statute shields ABS from liability for certificates issued on behalf of the Bahamian government, and (3) Sundance presented no evidence of damages flowing from ABS's issuance of the classification certificate.

ANALYSIS

We review the grant of a motion for summary judgment de novo, construing all facts in favor of Sundance, the nonmoving party. Summary judgment is proper when the moving party establishes an absence of genuine issues of material fact. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986).

A. Applicable Law.

Federal maritime law, including federal maritime choice-of-law rules, applies to maritime contracts. Kossick v. United Fruit Co., 365 U.S. 731, 735, 81 S.Ct. 886, 889, 6 L.Ed.2d 56 (1961). A contract may acquire a maritime quality when the "the matters performed or entered upon under it pertain to the fitment of [the] vessel for navigation". Cox v. Murray, 6 F.Cas. 681, 682 (S.D.N.Y.1848). A maritime contract is one that " 'relat[es] to a ship in its use as such, or to commerce or to navigation on navigable waters, or to transportation by sea or to...