Alabama Great Southern R. Co. v. Allied Chemical Corp.

Decision Date19 September 1974
Docket NumberNo. 73-3057,73-3057
Citation501 F.2d 94
PartiesALABAMA GREAT SOUTHERN RAILROAD COMPANY, Plaintiff-Appellee, v. ALLIED CHEMICAL CORPORATION, Armco Steel Corporation, and General American Transportation Corporation, Defendants-Appellants.
CourtU.S. Court of Appeals — Fifth Circuit

Sherwood W. Wise, Thomas G. Lilly, Jackson, Miss., for Allied Chem.

Junior O'Mara, Jackson, Miss., for General Am. Transportation.

W. F. Goodman, Jr., Jackson, Miss., for Armco Steel.

Lewis T. Booker, Robert F. Brooks, Richmond, Va., Tally D. Riddell, Quitman, Miss., for plaintiff-appellee.

Before COLEMAN, CLARK and GEE, Circuit Judges.

CLARK, Circuit Judge:

Alabama Great Southern Railroad Company (AGS) train No. 154 left New Orleans, Louisiana just after midnight on January 25, 1969 with four engines pulling 113 freight cars and a caboose. At Dragon, Mississippi No. 154 picked up a 'cut' of 26 jumbo tank cars, each filled with 32,000 gallons of liquefied propane gas, placed them in line behind the sixtieth car, and proceeded north. As the second jumbo tank car, No. ACSX 932003, traversed a crossing of AGS and Gulf, Mobile & Ohio Railroad (GM&O) tracks at 4:20 A.M. in Laurel, Mississippi, the second wheel on the left side (designated the L-3 wheel) fractured and broke, causing the 003 and 17 other tank cars to derail and detonate. Fire and explosions killed or injured a number of people and inflicted extensive property damage. The 003 tank car was owned by the Allied Chemical Corporation (Allied). Armco Steel Corporation (Armco) had manufactured the L-3 and other wheels and sold them to the General American Transportation Corporation (GATX), which had assembled them on the 003 car purchased by Allied in 1962.

On the day following the derailment AGS began processing the damage claims of third parties, ultimately paying out over 7,395,000 dollars to settle 3,492 claims and defray expenses. The railroad then brought this diversity action in the Eastern District of Virginia against Allied, GATX and Armco to recover 10,000,000 dollars in property damages and indemnity for payments to third parties injured or damaged by the accident. Pursuant to 28 U.S.C. 1404(a), the litigation was transferred to the Southern District of Mississippi. Alabama Great Southern Railroad Co. v. Allied Chemical Corp., 312 F.Supp. 3 (E.D.Va.1970). 1

In its complaint AGS predicated recovery on (1) defendants' negligence in the design, manufacture, testing and inspection of the L-3 wheel, (2) strict liability in tort and (3) warranty. Defendants denied liability, asserting that AGS could not recover indemnity because it had acted as a volunteer in settling with third parties, or because it had been negligent in maintaining the roadbed, track and crossing in an unsafe and dangerous condition, operating the train at an excessive and unreasonable speed, and failing properly to control, inspect and manage the train and equipment. In addition, Allied and GATX filed counterclaims sounding in negligence against the railroad for the value of the tank cars and liquefied propane gas destroyed in the derailment.

During closing argument AGS dropped its breach of warranty claims against all defendants and its claim of strict liability against Allied. At the close of a five week trial the district court reserved a ruling on defendants' motions for directed verdicts and excluded the railroad's claim for property damages, thus casting AGS' action in indemnity only. The various claims of negligence and the remaining claims for strict liability were submitted to a jury, which returned general verdicts for AGS on its indemnity claim and the counterclaims of Allied and GATX. The district court denied defendants' motions for directed verdicts, judgments N.O.V. and for new trials. Defendants appeal from the judgment for AGS in the amount of 3,600,000 dollars on its claim for indemnity. Allied and GATX appeal from the judgment for AGS on their counterclaim. We affirm the judgment for AGS on the counterclaim, but reverse the judgment for AGS on its indemnity claim. 2

In reviewing the record in order to determine whether this case should have been sent to the jury or a verdict directed as a matter of law, an appellate court under both Mississippi and federal law '(is) duty bound to accept all evidence in favor of the verdict as true and to give such evidence the benefit of all permissible inferences that would help sustain the jury's decision.' Little v. Green, 428 F.2d 1061, 1066 (5th Cir. 1970); accord Ayers v. Wolfinbarger, 491 F.2d 8, 13 (5th Cir. 1974); Hubbard v. Morris,275 So.2d 858 (Miss.1973). Thus, all conflicts in the evidence must be resolved in favor of the prevailing party. Accordingly, we recapitulate the evidence substantially as it was stated in the brief of the plaintiff railroad.

The L-3 wheel was defectively manufactured. During the manufacturing process at Armco's Wheel Works at Butler, Pennsylvania, grooves and tears were machined into the surface of its plate. The grooves and tears greatly weakened the wheel by concentrating stresses in the grooves and tears, thereby greatly reducing the wheel's ability to resist the type of sudden impact any railroad wheel receives from passing over a crossing. The wheel was manufactured to meet the governing specifications of the Association of American Railroads (AAR), published in its Manual of Standard and Recommended Practices. While the wheel met the chemical and dimensional standards of that specification, it did not meet the requirements of paragraph 16(c), which provides:

Wheels shall be given a thorough surface examination and gaging at the place of manufacture before being offered for inspection. They shall have a workmanlike finish and must be free from defects liable to develop in or cause removal from service.

After the L-3 wheel was received at General American's plant, it remained in inventory there for approximately two months. GATX had ample opportunity to inspect it at that time. In addition, GATX also had the right, if it desired, to visit Armco to inspect the L-3 and other wheels before they left the factory. The wheel should have been, but was was not, rejected by either Armco's or General American's inspectors.

When Allied ordered a series of 135 jumbo tank cars from GATX in 1962, it directed General American to use as many Armco parts as possible on the cars. Allied had the right to inspect the cars during the course of their manufacture and to inspect them upon completion of manufacture.

Once car 003 entered railroad service the L-3 wheel quickly became covered with grease, dust and road grime as a result of normal operating conditions. Because the plate of the wheel was coated and a normal view of the plate is largely obscured by the truck, it would have been impossible within a short period of time after the car went into service for a railroad car inspector to have detected these machining defects. Thus, the grooves and tears in the wheel's plate were not discerned by the car inspector who made the regular interchange 3 inspection of the wheel at the time it was received by AGS on January 24, 1969.

At the time of the derailment Train No. 154 was proceeding at 30 miles per hour, a speed within the authorized limit for the train at that point. The track, while scheduled for heavy maintenance within a few weeks, was nevertheless in good condition and entirely satisfactory for trains going 40 miles per hour. Neither the condition of the roadbed nor the speed of the train contributed in any way to the derailment.

Immediately after the accident, members of the AGS legal staff and its division counsel in Mississippi came to Laurel, and, after investigating the circumstances, determined that AGS should attempt to settle the claims of those injured or damaged by the derailment. AGS immediately began to compromise and settle claims on the fairest and most equitable basis it could.

I.

Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), mandates that we apply the substantive law of Mississippi. 'In arriving at our decision, our goal is, of course, to reach that result which would most probably be reached had this action been litigated in the State Court.' Mississippi Power Company v. Roubicek, 462 F.2d 412, 417 (5th Cir. 1972).

The common law obligation of implied indemnity is rooted in the notion that every person should be responsible for his own negligence. Hence, an individual without fault who is legally compelled to pay damages to a third party on account of the negligent or tortious conduct of another is vested with an action in indemnity against the active wrongdoer for recovery of the amount paid. This is the rule which has been applied by the courts of Mississippi. See Home Insurance Co. v. Atlas Tank Mfg. Co., 230 So.2d 549 (Miss. 1970); Bush v. City of Laurel, 215 So.2d 256 (Miss.1968); St. Louis & San Francisco Rwy. v. United States, 187 F.2d 925, 927 (5th Cir. 1951). See also 41 Am.Jur.2d Indemnity 20 (1968); 42 C.J.S. Indemnity 20 (1944).

'Two critical prerequisites are generally necessary for the invocation of noncontractual implied indemnity in Mississippi: (1) The damages which the claimant seeks to shift are imposed upon him as a result of some ligal obligation to the injured person; and (2) it must appear that the claimant did not actively or affirmatively participate in the wrong.' Home Insurance Co. v. Atlas Tank Mfg. Co., supra. 230 So.2d at 551.

Adhering to the universal rule, the Mississippi courts have qualified the principle of implied indemnity with the corollary that no right of indemnity exists between joint tortfeasors 4 or parties in pari delicto, that is 'where the injury resulted from the concurring negligence of both parties.' Bush v. City of Laurel, supra, 215 So.2d at 260. An action for indemnity will arise 'when one party does the act or creates a dangerous situation and the...

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