SCAC Transport (USA) Inc. v. S.S. Danaos

• Decision Date: 25 April 1988
• Docket Number: D,187,Nos. 135,s. 135
• Citation: 845 F.2d 1157
• Parties: SCAC TRANSPORT (USA) INC. and United Nations Development Programme Office for Projects Execution, Plaintiffs, v. S.S. "DANAOS," her engines, boilers, etc., and Big Lift USA, Inc., Big Lift Shipping Company (N.A.) Inc. d/b/a Big Lift and Danais Shipping Company, Defendants-Appellants-Cross-Appellees, DANAIS SHIPPING COMPANY, Third-Party Plaintiff, v. UNIVERSAL MARITIME SERVICE CORP., Third-Party Defendant-Appellee-Cross-Appellant. ockets 87-7386, 87-7414.
• Court: U.S. Court of Appeals — Second Circuit

Page 1157

845 F.2d 1157

1988 A.M.C. 1827

SCAC TRANSPORT (USA) INC. and United Nations Development

Programme Office for Projects Execution, Plaintiffs, v. S.S. "DANAOS," her engines, boilers, etc., and Big Lift USA, Inc., Big Lift Shipping Company (N.A.) Inc. d/b/a Big Lift and Danais Shipping Company, Defendants-Appellants-Cross-Appellees, DANAIS SHIPPING COMPANY, Third-Party Plaintiff, v. UNIVERSAL MARITIME SERVICE CORP., Third-Party

Defendant-Appellee-Cross-Appellant.

Nos. 135, 187, Dockets 87-7386, 87-7414.

United States Court of Appeals Second Circuit.

Argued Sept. 17, 1987.

Decided April 25, 1988.

Richard J. Reisert, New York City (Terry L. Stoltz, Burlingham Underwood & Lord, of counsel), for defendants-appellants-cross-appellees.

William E. Bell, New York City (Celestino Tesoriero, Grainger, Tesoriero & Bell, of counsel), for third-party defendant-appellee-cross-appellant.

Before CARDAMONE, WINTER and MINER, Circuit Judges.

WINTER, Circuit Judge:

This appeal and cross-appeal concern an indemnity claim arising out of an accident during the loading of a truck on board the S.S. DANAOS. The principal issue is whether a stevedore may be vouched into an arbitration without its consent.

After the vessel's owner, Danais Shipping Company ("Danais"), settled with the cargo interests, Danais and the charterer, appellants-cross-appellees Big Lift USA, Inc. and Big Lift Shipping Company (N.A.) Inc. (collectively "Big Lift"), submitted their dispute over responsibility for the accident to arbitration in London, as required by their charter party. Big Lift then sought to have the stevedore, appellee-cross-appellant Universal Maritime Service, Corp. ("Universal"), assume its defense in the London arbitration, which Universal declined to do. After the arbitrators ruled in favor of Danais, Big Lift sought indemnification from Universal on the basis of the arbitrators' finding that Universal had been negligent in unloading the cargo. Judge Keenan denied Big Lift's motion for summary judgment on the ground that a party who had not consented to be bound by arbitration cannot be vouched into such a proceeding. SCAC Transport (USA) Inc. v. S.S. Danaos, 578 F.Supp. 327, 331 (S.D.N.Y.1984). After trial, the district court ruled that Universal had been negligent and must indemnify Big Lift. The court did not, however, award Big Lift all of its costs and attorney's fees incurred as a result of the London proceeding or the preaward interest and attorney's fees awarded to Danais by the London arbitrators.

Big Lift now appeals from both the denial of summary judgment and the denial of full indemnity. In its cross-appeal, Universal claims that the district court's finding of liability was clearly erroneous and that the district court erred in awarding to Big Lift any of its costs incurred as a result of the London proceeding. Because the district court erred by denying Big Lift's motion to bind Universal to the results of the London arbitration after Universal had been properly vouched into that proceeding and by not awarding Big Lift full indemnity, the award to Big Lift must be modified. The modification should include the $129,393.42 in interest actually paid by Big Lift to Danais pursuant to the arbitration award and $77,319.58 for costs and attorney's fees associated with the London arbitration plus prejudgment interest on those sums from the date of actual payment by Big Lift at nine percent, the rate set by the district court. Universal's cross-appeal is therefore without merit.

BACKGROUND

On December 23, 1977, the vessel S.S. DANAOS was loading cargo at Port Newark, New Jersey. The vessel, owned by Danais, was under time charter to Big Lift, which had contracted with Universal for stevedoring services. That morning, the vessel's Stulken Boom collapsed when a pin in a winch block failed during the loading of a water tank truck bound for West Africa. The truck, the boom and related parts of the vessel were damaged.

On December 22, 1978, the truck's owners, SCAC Transport (USA) Inc. and the United Nations Development Programme Office for Projects Execution (collectively "SCAC"), commenced this action in admiralty in the Southern District of New York against the DANAOS in rem, Danais and Prior to discovery, Danais settled SCAC's claim for $10,000. The remaining claims in this action were then stayed pending arbitration between Danais and Big Lift. Clause 17 of the charter party between Danais and Big Lift provided that "any dispute" between them would be arbitrated in London. Universal was not a party to this agreement.

Big Lift. Danais cross-claimed against Big Lift for indemnity of any amounts for which it might be held liable. Danais also brought a third-party claim against Universal. Big Lift subsequently brought a cross-claim against Universal for any amounts for which it might be required to indemnify Danais, while Universal filed counterclaims against Danais and Big Lift alleging that all damages were caused by their failure to provide a seaworthy vessel.

On September 30, 1980, Big Lift tendered the defense of the London arbitration to Universal, stating that:

PLEASE TAKE NOTICE that an arbitration in London has been instituted by Danais Shipping Company against Big Lift Shipping Company (N.A.) Inc. to recover damages including indemnity for sums paid to the plaintiff herein, offhire and damage to the vessel allegedly resulting from negligent operation of a winch during cargo operations on or about December 23, 197, at which time the winch was being operated by your personnel. Demand is hereby made upon you, under your contract with Big Lift Shipping Company (N.A.) Inc., and as the party with exclusive knowledge of grounds for defense, to appear, defend and indemnify Big Lift Shipping Company (N.A.) Inc. from the results of said arbitration.

If you refuse or neglect to honor this demand, you will be precluded from objecting to the outcome of said arbitration proceeding whether terminated by settlement or by an award, and Big Lift Shipping Company (N.A.) Inc. will claim over against you for any and all sums which it may be required to pay to Danais Shipping Company, or which they may reasonably pay in settlement of the London arbitration, and/or all disbursements, expenses and costs incurred in defending the London arbitration, including attorneys' fees.

Universal acknowledged receipt of the notice but refused to participate in the arbitration.

On August 11, 1982, the London arbitrators ruled in favor of Danais, finding that the "proximate cause" of the accident was the stevedore's negligence and that the accident was not the result of "any defect in any part of the [vessel's] equipment." Holding the charterer liable for its stevedore's negligence as required by the charter party, the arbitrators awarded Danais $74,293.61 for repair to the vessel, and $75,245.63 for withheld charter hire. Interest was awarded on the sum of these amounts ($149,539.24) at the rate of sixteen percent from March 1, 1978 through August 11, 1982, the date of the arbitration award. This preaward interest totalled $106,455.54. Danais was also awarded the $10,000 paid in settlement of SCAC's claim, and interest on that amount at fourteen percent ($3,118.36) from May 20, 1980, the date this sum was paid, to August 11, 1982. Postaward interest at a twelve percent rate totalling $19,819.52 was awarded on $269,113.14 ($159,539.24 (award) + $109,573.90 (preaward interest)) from August 11, 1982 until March 23, 1983, the date Big Lift paid Danais on the arbitration award. Finally, the London arbitrators ruled that Big Lift would have to bear the costs and fees of Danais' London solicitors and the costs of the arbitration, which totalled $32,822.56 when paid on March 23, 1983.

On September 24, 1982, Big Lift sent Universal a copy of the London arbitrators' award, explaining that an "appeal" could be had in the form of a "special case" before the Commercial Court in London. Moreover, Big Lift again tendered the defense of the claim to Universal, stating that:

We hereby again tender defense of the claim and prosecution of the Special Case in the Commercial Court to Universal Maritime Service Corp. If Universal chooses to decline this tender, the action After Universal declined to assume defense of the claim and prosecution of the special case, Big Lift instructed its London solicitors to terminate the appeal.

in London will be discontinued and our client will seek to enforce its remedies against Universal in the action pending in New York.

The litigation returned to the Southern District of New York when, after removing the case from the district court's suspense docket, Danais sought summary dismissal of Universal's counterclaims against it, and Big Lift sought summary indemnification for the amounts it had paid to Danais under the arbitration award. Both parties claimed that the arbitrators' findings were dispositive of the factual issues raised in the case--the cause of the collapse of the Stulken Boom--because Universal had been vouched into that proceeding. Judge Keenan disagreed and denied both motions. He held that Universal was not estopped from contesting factual issues decided by the London arbitrators because it did not participate in or consent to be bound by that tribunal. SCAC Transport (USA) Inc., 578 F.Supp. at 331.

A six-day bench trial was subsequently held on Big Lift's indemnity claim against Universal and Universal's counterclaim against Danais Shipping. The cause of the collapse of the Stulken Boom was the central issue at trial. On March 9, 1987, Judge Keenan found that the boom collapsed because Universal's winch operator failed to maintain an adequate safety margin between the purchase blocks and drew the two blocks together, that the Stulken Boom was not negligently designed, and that Danais was not negligent in the maintenance of the boom. These findings were identical to the findings of the London...