866 F.2d 752 (5th Cir. 1989), 86-3218, Employers Ins. of Wausau v. Suwannee River Spa Lines, Inc.

Docket Nº:86-3218, 86-3473 and 87-3549.
Citation:866 F.2d 752
Party Name:EMPLOYERS INSURANCE OF WAUSAU as Representative of Those Certain Underwriters Subscribing to Certificate No. 14880 and Certificate no. 14482, Plaintiff- Appellee, v. SUWANNEE RIVER SPA LINES, INC., Suwannee River Chartering, Inc., Permian Trading Corporation, Occidental Export, Inc., Occidental Chemical Agricultural Products, Inc., and Occidental P
Case Date:February 13, 1989
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 752

866 F.2d 752 (5th Cir. 1989)

EMPLOYERS INSURANCE OF WAUSAU as Representative of Those

Certain Underwriters Subscribing to Certificate

No. 14880 and Certificate no. 14482,

Plaintiff- Appellee,

v.

SUWANNEE RIVER SPA LINES, INC., Suwannee River Chartering,

Inc., Permian Trading Corporation, Occidental Export, Inc.,

Occidental Chemical Agricultural Products, Inc., and

Occidental Petroleum Corp., Plaintiffs-Appellants,

v.

AVONDALE SHIPYARDS, INC., et al., Defendants,

J.J. Henry Co., Inc., and Victoria Machine Works, Inc.,

Defendants-Appellees.

OCCIDENTAL PETROLEUM CORP., et al., Plaintiffs-Appellants,

v.

AVONDALE SHIPYARDS, INC., et al., Defendants,

Victoria Machine Works, Inc., Defendant-Appellee.

OCCIDENTAL PETROLEUM CORP., et al., Plaintiffs-Appellants,

v.

AVONDALE SHIPYARDS, INC., et al., Defendants,

Victoria Machine Works, Inc., Defendant-Appellee.

EMPLOYERS INSURANCE OF WAUSAU as Representative of those

Certain Underwriters Subscribing to Certificate

No. 14880 and Certificate no. 14482,

Plaintiff- Appellee,

Suwanne River Spa Lines, Inc., et al., Plaintiffs-Appellees,

v.

AVONDALE SHIPYARDS, INC., et al., Defendants-Appellants.

EMPLOYERS INSURANCE OF WAUSAU as Representative of those

Certain Underwriters Subscribing to Certificate

No. 14880 and Certificate no. 14482, et

al., Plaintiffs-Appellees,

v.

AVONDALE SHIPYARDS, INC. and Ogden Corporation, Defendants-Appellants.

Nos. 86-3218, 86-3473 and 87-3549.

United States Court of Appeals, Fifth Circuit

February 13, 1989

Rehearing and Rehearing En Banc Denied March 20, 1989.

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Geoffrey J. Ginos, Herbert M. Lord, Burlingham, Underwood & Lord, New York City, John J. Weigel, Stewart E. Niles, Jr., New Orleans, La., for Ogden and Avondale.

Norman C. Sullivan, Jr., Gelpi, Sullivan, Carroll & Laborde, New Orleans, La., Terence Gargan, New York City, for Hvida, et al.

James B. Kemp, Jr., George R. Wentz, Jr., George B. Hall, Jr., New Orleans, La., for appellees.

John J. Weigel, Stewart E. Niles, Jr., Madeleine Fischer, Edward H. Bergin, George R. Alvey, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, La., for Avondale.

Charles E. Lugenbuhl, Nathan P. Horner, Lugenbuhl, Wheaton, Peck & Rankin, New Orleans, La., for Employers Ins. and Am. Underwriters.

Phillip A. Wittmann, Denise M. Pilie, Stone, Pigman, Walther, Wittmann & Hutchinson, New Orleans, La., Jesse Climenko, John B. Grant, Jr., New York City, for J.J. Henry Co., Inc.

James B. Kemp, Jr., Margot Mazeau, New Orleans, La., for Certain Underwriters at Lloyds.

Paul A. Nalty, Joel L. Borrello, Michael D. Carbo, New Orleans, La., for Victoria Machine Works.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before KING and JOHNSON, Circuit Judges, and BOYLE, District Judge. [*]

KING, Circuit Judge:

I.

This lawsuit arises from the ill-fated voyage of the Oxy Producer, a catamaran integrated

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tug barge. While en route to the Soviet Union with a cargo of chemicals, the linkage system that held the tug and barge together as a single unit failed. Efforts to repair the vessel while at sea proved fruitless and the tug sank in heavy weather off the Azores. This lawsuit ensued, replete with claims and cross-claims against and between the owner and insurers of the vessel and various parties who played a role in its construction.

On appeal, we affirm the district court's holding that the vessel was improperly mated and unseaworthy on delivery and that this was the sole cause of the damage to the vessel and the loss of the tug. We hold, however, that the economic loss rule adopted in the East River case precludes recovery in maritime tort for purely economic loss stemming from the negligent performance of a contract for professional services where those services are rendered as part of the construction of a vessel. The plaintiffs are therefore limited to their contractual remedies against the contract supervisor. While the maritime tort claims must consequently be dismissed, we retain pendent jurisdiction over the remaining claims.

We hold further that the contract supervisor's acceptance of the vessel in its improperly mated condition was not binding on the purchaser, and that the shipbuilder is therefore fully liable to the owner for breach of contract. We find, however, that the Construction Contract effectively limits the shipbuilder's liability to the cost of repairing or replacing deficiencies in the contract work.

Finally, we hold that the district court improperly dismissed two parties from the suit following its conclusion that they were not liable for damage to the Oxy Producer. While we affirm that finding, we hold that dismissal was premature and remand for specific findings regarding the liability of all defendants for the damage to the Oxy Producer's two sister ships.

  1. The Cast

    1. Plaintiffs

    Plaintiffs below were Suwannee River Lines, Inc., Suwannee River SPA Lines, Inc., and Suwannee River Phosphate Lines, Inc. (collectively, the "lines"), the bareboat charterers of, respectively, the Oxy Trader, the Oxy Producer, and the Oxy Grower (collectively, the "ships"); Suwannee River Chartering, Inc. ("Chartering"), the time-charterer of the ships; Occidental Export, Inc. ("Export"), the seller of certain chemicals transported by the ships; and Occidental Petroleum Corp. ("Occidental"), the parent corporation of all of the preceding plaintiffs. Additionally, the American underwriters and certain underwriters at Lloyds assert subrogated claims.

    Lines, Chartering, Export, Chemical, and Occidental are referred to collectively as "Occidental" or as the "Oxy plaintiffs." Because this lawsuit focuses primarily on the sinking of the Oxy Producer, it will be referred to most often, and the Oxy Grower and Oxy Trader will be referred to as the "sister ships."

    2. Defendants

    The defendants are J.J. Henry Co. ("Henry"), a naval architectural firm; Avondale Shipyards, Inc. ("Avondale"); Ogden Corp. ("Ogden"), guarantor and former parent of Avondale; Victoria Machine Works, Inc. ("Victoria"), the manufacturer and supplier of certain component parts for the ships; and Seabulk Transmarine I, Inc., Seabulk Transmarine II, Inc., Hvide Marine International, Inc., and Hvide Shipping, Inc. (collectively, "Hvide"), supervisors of the design and construction of the vessel. Hvide also provided the crew of the Oxy Producer and thus appears in this law suit in two roles.

  2. The Claims

    In the early 1970's, Occidental entered an agreement to manufacture, sell, and transport superphosphoric acid ("SPA") to the

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    Soviet Union. Shortly thereafter, Occidental arranged for the construction of three catamaran integrated tugbarges ("catug ITBs") to transport the SPA to the Soviet Union. 1 The unique feature of a catug ITB is the interconnection system between the tug and barge units consisting of bumper pads, link arms, and greenheart-bearing surfaces which are designed to hold the tug and barge together as a single rigidly connected unit.

    Defendant Hvide holds a patent on the catug design and was retained, because of its expertise with this type of vessel, to supervise the design and construction of the vessels for Occidental ("Supervision Agreement"). Hvide contracted in turn with J.J. Henry to prepare the plans and specifications for the vessels ("Henry Agreement"). Hvide assigned the Henry Agreement to Occidental. Occidental then engaged Avondale to construct the vessel ("Construction Contract"). Avondale entered into a subcontract ("Purchase Order") with Victoria to manufacture the bumper pads for the catug's interconnection system.

    The vessels were completed and delivered between March and September of 1981. The Oxy Producer was delivered on June 9, 1981 and made one uneventful round-trip voyage between the United States and the Soviet Union. Its second voyage, however, was disastrous. The Oxy Producer embarked from Jacksonville, Florida on September 5, 1981. On the evening of September 11, the Oxy Producer encountered weather conditions more severe than any it had previously encountered. During the early morning hours of September 12, a crewmember on watch first noticed relative movement between the tug and the barge. The movement increased and the crew discovered, on examination, that parts of the linkage system were damaged. The crew attempted to make temporary repairs but the movement worsened and the linkage system deteriorated further. The captain of the Oxy Producer, Captain Kanellos, decided to divert the vessel to the Azores in order to make repairs. The vessel arrived at the Port of Ponta Delgada in the Azores on September 14 but was denied entry into the harbor. While the crew awaited the result of further efforts to obtain permission to enter the harbor, they effected further repairs to the ship which remained at anchor a half mile off the breakwater at Ponta Delgada. The weather forecast on September 18 was for heavy weather on September 20 due to tropical storm Harvey, passing to the southwest of the Azores. On the night of the 19th, Captain Kanellos evaluated possible responses to the predicted change in weather. Afraid of dragging anchor and spilling his hazardous cargo if the ship remained anchored near the breakwater, the captain decided early on the morning of the 20th to weigh anchor and maneuver the vessel away from the breakwater. Before the vessel could proceed, however, a second storm, coming from the north, passed over the area, creating confused seas and causing even greater movement between the tug and the...

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