764 F.2d 50 (1st Cir. 1985), 84-1851, Barber Lines A/S v. M/V Donau Maru

Docket Nº:84-1851.
Citation:764 F.2d 50
Party Name:BARBER LINES A/S, et al., Plaintiffs, Appellants, v. M/V DONAU MARU, et al., Defendants, Appellees.
Case Date:June 14, 1985
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

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764 F.2d 50 (1st Cir. 1985)

BARBER LINES A/S, et al., Plaintiffs, Appellants,


M/V DONAU MARU, et al., Defendants, Appellees.

No. 84-1851.

United States Court of Appeals, First Circuit

June 14, 1985

James B. Conroy, Boston, Mass., with whom Charles R. Parrott, Robert S. Brintz and Nutter, McClennen & Fish, Boston, Mass., were on brief, for plaintiffs, appellants.

E. Susan Garsh, Boston, Mass., with whom Thomas H. Walsh, Jr. and Bingham, Dana & Gould, Boston, Mass., were on brief, for defendants, appellees.

Before BREYER, Circuit Judge, ROSENN, [*] Senior Circuit Judge, and TORRUELLA, Circuit Judge.

BREYER, Circuit Judge.

In December 1979 the ship Donau Maru spilled fuel oil into Boston Harbor. The spill prevented a different ship, the Tamara, from docking at a nearby berth. The Tamara had to discharge her cargo at another pier. In doing so, she incurred significant extra labor, fuel, transport and docking costs. The Tamara, her owners, and her charterers sued the Donau Maru and her owners in admiralty. Insofar as is here relevant, they claimed negligence and sought recovery of the extra expenses as damages. The district court denied recovery on the basis of the pleadings, citing as

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authority Petition of Kinsman Transit Co., 388 F.2d 821 (2d Cir.1968) ("Kinsman II"). The plaintiffs have appealed. We believe the district court was correct, and we affirm its judgment, for three related sets of reasons.

1. Plaintiffs-appellants seek recovery for a financial injury caused by defendants' negligence. We assume that the injury was foreseeable. Nonetheless controlling case law denies that a plaintiff can recover damages for negligently caused financial harm, even when foreseeable, except in special circumstances. There is present here neither the most common such special circumstance--physical injury to the plaintiffs or to their property--nor any other special feature that would permit recovery. See pp. 55-56, infra.

The leading "pure financial injury" case is Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303, 48 S.Ct. 134, 72 L.Ed. 290 (1927) (Holmes, J.). Flint had chartered a ship, agreeing with its owners to have the ship docked for repairs every few months. During that time Flint would neither use the ship nor pay rent. The dry dock negligently damaged the ship's propeller, delaying repairs, and causing Flint to lose the use of the ship for two weeks. The Court held that the ship's owners might sue for negligent damage to the ship, but the charterer, suffering no physical injury to himself or to his property, could not do so. Justice Holmes wrote,

as a general rule, at least, a tort to the person or property of one man does not make the tortfeasor liable to another merely because the injured person was under a contract with that other unknown to the doer of the wrong. See Savings Bank v. Ward, 100 U.S. [ (10 Otto) ] 195 [25 L.Ed. 621]. The law does not spread its protection so far. A good statement, applicable here, will be found in Elliot Steam Tug Co., Ltd. v. The Shipping Controller, [1922] 1 K.B. 127, 139, 140. Byrd v. English, 117 Ga. 192 [43 S.E. 419]. The Federal No. 2, 21 F.2d 313.

Robins Dry Dock & Repair Co. v. Flint, 275 U.S. at 309, 48 S.Ct. at 135. The facts of Robins are strikingly similar to the present case. Just as the damaged propeller prevented Flint from using the ship, so the oil spill prevented the appellants from using the dock. The defendants in both cases were negligent. The injury in both cases (despite Holmes' use of the word "unknown") seems likely foreseeable. The harm in both cases was purely financial, without accompanying physical harm to person or property.

While we see three possible grounds of distinction, we do not believe them controlling. First, Flint alleged a specific contract with the shipowner, while the appellants here do not allege a contract with the dock. The authority that Justice Holmes says contains a "good statement" of the legal principle does not, however, turn so much on the existence of a formal contract as on the existence of limitations upon tort recovery for financial injury, see Elliot Steam Tug Co., Ltd. v. The Shipping Controller, supra; Byrd v. English, 117 Ga. 192, 43 S.E. 419 (1902). Moreover, the present appellants must have had a "right" to use the dock; and interference with that "right" caused the loss. It is difficult in this instance to see why the technical legal label applied to that right should make a legal difference.

Second, Flint apparently sued for lost profits. Appellants here sue for expense. Typically, an extra expense is more easily proved than a lost profit. Again, however, Justice Holmes points to authority that includes both added expenses and lost profits, see Savings Bank v. Ward, 100 U.S. (10 Otto) 195, 25 L.Ed. 621 (1879); The Federal No. 2, 21 F.2d 313 (2d Cir.1927). Other cases, decided both before and after Robins, for the most part make no such distinctions. E.g., Hercules Carriers, Inc. v. Florida, 720 F.2d 1201 (11th Cir.1983), aff'd by an equally divided court, 728 F.2d 1359 (1984) (en banc); Marine Navigation Sulphur Carriers, Inc. v. Lone Star Industries, Inc., 638 F.2d 700 (4th Cir.1981); Ultramares Corp. v. Touche, 255 N.Y. 170, 174 N.E. 441 (1931); Connecticut

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Mutual Life Insurance Co. v. New York & New Haven Railroad, 25 Conn. 265 (1856); Caltex Oil v. The Dredge "Willemstad", 11 A.L.R. 227 (Austl.H.C.1976); Chargeurs Reunis Compagnie Francaise de Navigation a Vapeur v. English & American Shipping Co., 9 Lloyd's List, L.R. 464 (1921); Cattle v. Stockton Waterworks Co., L.R. 10 Q.B. 453 (1875).

Third, one might claim that Robins is wrong or out of date and, therefore, that the inferior courts are free to "limit" it through a narrow reading. For reasons set out below, however, we think the principles underlying Robins remain legally sound insofar as they place plaintiffs like those before us "outside the scope" of those to whom defendant owes a legal duty of care. Cf. Sinram v. Pennsylvania Railroad, 61 F.2d 767 (2d Cir.1932) (Hand, J.); Palsgraf v. Long Island Railroad, 248 N.Y. 339, 162 N.E. 99 (1928) (Cardozo, J.).

In Kinsman II, supra, another leading case, the Second Circuit more recently came to the same result as the Supreme Court in Robins Dry Dock. In Kinsman II, defendant's ship broke loose from her moorings, crashed into another ship, then into a bridge, and, subsequently, with the help of ice floes, created a barrier that prevented other ships from moving upstream to unload cargo. The Second Circuit held that the financial injuries suffered by these other ships--extra unloading expenses--were too "remote" to warrant recovery. The court analogized the careening ship to a negligent driver who crashes into another car in a tunnel. Such a driver, though negligent, is not thought liable for all the inevitable (and foreseeable) financial losses resulting from the delays that he has caused. We can find in the case before us no relevant distinction from Kinsman II.

Appellants argue that Kinsman II raises a factual issue of "foreseeability." We read Kinsman II, however, not as saying that the injury, as a matter of fact, was unforeseeable but, rather, as drawing a legal line, based on considerations of policy, cf. Sinram, supra, that forbids compensation for certain types of foreseeable, negligently caused, financial injury. The details of the Kinsman II accident were unusual, but the precise details of many, or most, accidents cannot be foreseen in advance. Rather, foreseeability is a matter of a class, or type, of harm. And, in terms of perfectly traditional, reasonably specific, commonsense classes, the Kinsman II blockade, delay, and extra cost were foreseeable. Still more so are the extra costs involved in the analogous Kinsman II example, the extra trucking costs arising from tunnel accident delays. Viewing the legal implications of Kinsman II in this way, we cannot distinguish a barrier created by an oil spill from a barrier created by a careening ship, each of which increases unloading costs by requiring other ships to go elsewhere. It is still more difficult for us to distinguish this case from delays created by, say, tunnel accidents, which are likely to mean extra cost for truckers, shippers and merchants, all of which are foreseeable.

A third major, and recent, decision is that of the Fifth Circuit in Louisiana ex rel. Guste v. M/V Testbank, 752 F.2d 1019 (5th Cir.1985). The majority in that case sets forth a reasonably clear rule, which says that one who suffers only financial loss, unaccompanied by physical injury, cannot recover damages from a negligent defendant, whether or not the financial loss is foreseeable. The holding is consistent with the way in which most commentators have characterized pre-existing case authority. See James, Limitations on Liability for Economic Loss Caused by Negligence: A Pragmatic Appraisal, 25 Vand.L.Rev. 43 (1972) ("[A] plaintiff may not recover for his economic loss resulting from bodily harm to another or from physical damage to property in which he has no proprietary interest."); Atiyah, Negligence and Economic Loss, 83 L.Q.Rev. 248, 249 (1967) (no "remedy for purely financial loss in the law of negligence to a person who had suffered such loss as a result of damage to, or the destruction of, a chattel in which he had no proprietary or possessory interest"). The holding also invalidates the authority of

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several Fifth Circuit cases on which appellants here rely, and which in any event expressed a minority view. See Micmar Motorship Corp. v. Cabaneli Naviera, S.A., 477 F.Supp. 45 (E.D.La.1979); vacated and remanded, 620 F.2d 298 (5th Cir.1980); In re Lyra Shipping Co., 360 F.Supp. 1188 (E.D.La.1973); In re China Union Lines, Ltd, 285 F.Supp. 426 (S.D.Tex.1967). We...

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