Todd Shipyards Corp. v. Auto Transp., S.A.

• Decision Date: 24 June 1985
• Docket Number: No. 84-3589,84-3589
• Citation: 763 F.2d 745
• Parties: TODD SHIPYARDS CORPORATION, Plaintiff-Appellee Cross-Appellant, v. AUTO TRANSPORTATION, S.A., Intervenor-Appellee, v. TURBINE SERVICE, INC., et al., Defendants-Appellants Cross-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 745

763 F.2d 745

1987 A.M.C. 1831

TODD SHIPYARDS CORPORATION, Plaintiff-Appellee Cross-Appellant, v. AUTO TRANSPORTATION, S.A., Intervenor-Appellee, v. TURBINE SERVICE, INC., et al., Defendants-Appellants Cross-Appellees.

No. 84-3589.

United States Court of Appeals Fifth Circuit.

June 24, 1985.

Fred E. Salley, Estelle E. Mahoney, New Orleans, La., for Travelers Ins. Co., and Turbine Service, Inc.

Hulse, Nelson & Wanek, John I. Hulse, IV, New Orleans, La., for Sentry Ins., Gonzales Mfg. and Indus. Machine Works.

Chaffee, McCall, Phillips, Toler & Sarpy, J. Francois Allain, New Orleans, La., Donald F. Mooney, New York City, for Auto Transp. S.A.

Phelps, Dunbar, Marks, Claverie & Sims, George Fowler, James B. Feinman, New Orleans, La., Richard A. Hagen, New York City, for Todd Shipyards Inc.

Allen F. Campbell, New Orleans, La., for Gonzales Mfg. & Indus. Appeals from the United States District Court for the Eastern District of Louisiana.

Before RANDALL, JOHNSON and GARWOOD, Circuit Judges.

RANDALL, Circuit Judge:

This blockbuster maritime action, ¹ initiated ten years ago, is before us for the second time. On the first appeal, we affirmed the district court's findings of liability but directed the district court on remand to modify its judgment to take into account, inter alia, (1) the awarding of prejudgment interest; (2) the validity of the red-letter clause in the contract between Auto Transportation, S.A., and Todd Shipyards Corporation; and (3) the full scope of the damages excludable under the work-product exclusion in the subcontractors' insurance policies. We also instructed the district court to make a final determination of damages as to all of the parties. On remand, the district court carefully sifted through the evidence and contentions of the parties, made additional findings of fact and conclusions of law, and entered judgment accordingly.

On appeal from this judgment, the appellants launch what can be regarded as a two-prong attack. First, they urge us to engage in a de novo review of a number of issues already resolved in the first panel opinion. Second, they challenge almost all aspects of the district court's opinion. We hold that the law of the case doctrine bars further consideration of the issues already resolved by this Court. With respect to the judgment of the district court, we affirm in all respects but one. Because attorney's fees in this case is a component of foreseeable damages recoverable for breach of implied warranties of workmanlike performance, we find that the district court erred in excluding Todd's liability for attorney's fees from coverage of the red-letter clause. Consequently, we remand the case solely for the reallocation of the fee award among the appropriate parties.

I. BACKGROUND

A. Facts

In Todd Shipyards Corp. v. Turbine Service, Inc., 467 F.Supp. 1257, 1270-81 (E.D.La.1978) (Todd I ), the district court set forth in detail the facts of this case. ² We repeat them here summarily and only to the extent made necessary by our analysis.

This litigation concerns an attempt by Auto Transportation, S.A. (Auto), owners of the vessel KATRIN, to recover damages due to faulty repairs performed by several repairers. In February of 1973, Auto brought the vessel to the repair yard of Todd Shipyards Corporation (Todd) for boiler and bulkhead repairs and for inspection of its high pressure (HP) and low pressure (LP) turbines. The contract contained Todd's standard "red-letter" clause and conditions. The boiler and bulkhead repairs were accomplished satisfactorily and are not implicated in this action.

Todd engaged a subcontractor, Turbine Service, Inc., (Turbine Service) to open up the turbines for inspection. Although the HP turbine required relatively minor repairs, the LP turbine was found badly damaged. Todd and Turbine entered into a contract for the repair of the LP turbine. Under this agreement, Turbine was required, among other things, to remove and replace four rows of blades from the LP turbine; to fair, dress and reinstall the remaining blades; and, as found necessary, to straighten and renew the stationary blades in the upper and lower casing.

Turbine Service in turn subcontracted a substantial portion of the work to Gonzales Manufacturing and Industrial Machine Works, Inc. (Gonzales). When replacement blades for the LP turbine could not be found, Turbine Service decided to modify blades not otherwise compatible with the turbine by milling off their airfoils--that portion of the blades that protrudes into the stream flow--and welding them onto the roots of the old blades for insertion into the turbine rotor. Because the fabricated blades were shorter than the original KATRIN blades, "spacer rings," annular steel rings, were manufactured and attached to the inside of the turbine casing to reduce the space between the casing and the modified blades. Turbine Service never had the blades tested and failed to disclose the modification of the blades to either Todd or Auto. ³

After reinstallation, the KATRIN passed two dock trials. During the river trial, however, a Todd observer heard noises inside the turbine. The LP turbine was opened, and considerable damage was found inside. At trial, the district court determined that the damage was precipitated by a defective weld on one or two rotor blades. Auto shipped the LP turbine to Siemens A.G. in Germany, the original manufacturer, for rebuilding. Eight months later, the LP turbine was returned to the United States and installed. The KATRIN thereafter traded commercially for the next few months. In July of 1976, for reasons having no bearing on this appeal, the vessel sustained extensive damage off the Irish coast at Cork and was sold for scrap. ⁴

B. Prior Proceedings

This action was originally brought by Todd in June of 1975 against Turbine Service and Gonzales demanding the return of certain damaged turbine parts of the KATRIN, which were removed after the river trial casualty and taken to the shops of Turbine Service and Gonzales. By the time of trial, however, the nature of the litigation had changed considerably. Auto had intervened to recover for damages to its vessel, and the insurers of Turbine Service and Gonzales--Travelers Insurance Company (Travelers) and Sentry Insurance Company (Sentry), respectively--were brought into the suit. The parties' claims, counterclaims, and cross claims included the following:

(1) Auto sought to recover from all other parties for the cost of repairing the KATRIN's LP turbine in Germany, loss of use of the vessel during the repair period, and related expenses.

(2) Todd sought to recover from Auto the balance of its repair invoices and indemnity from Turbine Service and Gonzales and their respective underwriters in the event Todd was found liable to Auto.

(3) Turbine Service and Travelers sought indemnity from Gonzales and Sentry for negligent workmanship by Gonzales and sought to recover from Todd and Auto unpaid repair invoices.

(4) Gonzales and Sentry sought to recover unpaid repair invoices from all other parties and sought indemnity from Turbine Service for any liability imposed on Gonzales or Sentry.

The trial lasted sixty-seven days over a six-month period and was the longest non-jury maritime trial in the history of the Eastern District of Louisiana. ⁵ After trial, the district court in a comprehensive opinion held that Todd, Turbine Service, and Gonzales were negligent and in breach of implied warranties of workmanlike performance. As a result, all were liable in solido to Auto for $967,633.20 in damages for repair and reinstallation costs, loss of use during the down time of the vessel, and certain necessary expenses. The district court also (1) found applicable the work-product exclusion of Travelers' and Sentry's insurance policies, (2) granted Todd full indemnity over against both Turbine Service and Gonzales, and (3) denied all indemnity as between Turbine Service and Gonzales. Finally, post-judgment interest was awarded, and Auto was held entitled to attorney's fees "[to] be tried in due course." Todd I, supra, at 1311.

On appeal, we upheld both the in solido liability of Todd, Turbine Service, and Gonzales and Todd's right to indemnification from Turbine Service and Gonzales. Todd Shipyards Corp. v. Turbine Service, Inc., 674 F.2d 401, 424-25 (5th Cir.1982) (Todd II ). In addition, we affirmed the district court's judgment denying such a right between Turbine Service and Gonzales. We, however, concluded that the district court had erred in several respects. First, we found that, inasmuch as the case was within the admiralty jurisdiction of the district court, prejudgment interest should have been awarded. Second, we held that, contrary to the conclusion of the district court, the red-letter clause in Todd's contract with Auto was effective in limiting Todd's liability under the circumstances of this case. Third, we determined that additional costs needed to be excluded under the work-product exclusion of the Travelers and Sentry policies. We remanded the case with directions that the district court recalculate the respective liabilities of the parties in light of the foregoing, fix the award of costs and attorney's fees owing to Auto, and make a final determination of damages with respect to all the parties. Id. ⁶

On remand, ⁷ the district court set prejudgment interest, determined attorney's fees and costs, and modified its damage award, Todd Shipyards Corp. v. Turbine Service, Inc., 592 F.Supp. 380 (E.D.La.1984) (Todd III ), all of which is described more fully below. From the final judgment of the district court, Todd, Travelers, and Sentry appeal. ⁸

II. CONTENTIONS ON APPEAL

As mentioned above, the contentions of the parties fall within two general categories. First, Travelers and Sentry at great length urge us to reopen a number of issues already determined by the prior panel decision. It is argued that the law of the case...