Alcoa Steamship Company v. Charles Ferran & Company

• Decision Date: 02 March 1966
• Docket Number: Adm. No. 3390-B.
• Citation: 251 F. Supp. 823
• Court: U.S. District Court — Eastern District of Louisiana
• Parties: ALCOA STEAMSHIP COMPANY, Inc., Libellant, v. CHARLES FERRAN & COMPANY, Inc., et al., Respondents.

251 F. Supp. 823

ALCOA STEAMSHIP COMPANY, Inc., Libellant, v. CHARLES FERRAN & COMPANY, Inc., et al., Respondents.

Adm. No. 3390-B.

United States District Court E. D. Louisiana, New Orleans Division.

March 2, 1966.

Joseph M. Rault, Benjamin W. Yancey, Edward S. Bagley, Francis Emmett and Terriberry, Rault, Carroll, Yancey & Farrell, New Orleans, La., for libellant, Alcoa S. S. Co., Inc.

George B. Matthews, George A. Frilot, III, and Lemle & Kelleher, New Orleans, La., for respondents Charles Ferran & Co., Inc., and others.

Leon Sarpy, James G. Burke, Jr., and Chaffe, McCall, Phillips, Burke, Toler & Hopkins, New Orleans, La., for other respondent insurers.

FRANK B. ELLIS, District Judge.

On October 6, 1956, a devastating oilfed blaze aboard the SS ALCOA CORSAIR gutted a major portion of the vessel's engine spaces, killed one man and left another badly burned. The owner of the vessel, Alcoa Steamship Company, Inc. (Alcoa) then instituted this million dollar libel for damages against the ship's repairers, Charles Ferran & Company, Inc. (Ferran), and against Ferran's insurers. Ferran had just a few hours earlier completed rebricking the starboard boiler. The parties, reserving the determination of the quantum of damages for a later date, tried the questions of liability to the Court without a jury, and on April 22, 1965, this court filed written findings of fact and conclusions of law. Alcoa Steamship Company, Inc. v. Charles Ferran & Company, Inc., 242 F.Supp. 962-975 (E.D.La.1965). In brief this Court held:

1) That the "Red Letter" clause uniformly inserted in all prior Ferran-Alcoa repair contracts limiting Ferran's liability vis-a-vis Alcoa to $300,000.00 was binding and enforceable;

2) That Ferran's negligence in improperly re-connecting the dropline which supplied pre-heated oil to the starboard boiler through the #3 burner register was the proximate cause of the fire's inception; and

3) That the negligent acts of Alcoa and the unseaworthy condition of the CORSAIR warrant application of the "avoidable consequences" doctrine and an ultimate apportionment of the total damages.

None of the parties being satisfied, motions for rehearing and for supplemental and amended findings of fact and conclusions of law were filed, followed by oral argument.

a) Prior findings of fact.

At the outset of this consideration, a skeleton restatement of the original fact findings is appropriate. The CORSAIR is an oil burning, steam-driven, single screw, modified Victory Ship constructed in 1947. Its oil is pre-heated to 230 degrees Fahrenheit and piped through droplines into the four burner registers on each of the two boilers where the oil is then mixed with air and ignited to heat the boiler, produce steam and turn the propellor. Ferran removed the #3 register on the starboard boiler to rebrick the inside and, in re-attaching the dropline to the register after finishing the work inside the boiler, one of Ferran's employees re-engaged the female fitting on the #3 dropline with the corresponding male fitting "whose threads were worn, and/or may have been stripped or in a cross-threaded state." 242 F.Supp. at 968. This was shortly after 9:30 P.M. the night of October 5th.

At about 4:35 A. M. the morning of October 6th, the CORSAIR'S Fireman, Thomas C. Deale, after having re-circulated the oil to build up pressure and raise its temperature to 230 degrees, opened the valve above the defective coupling with his one hand and was sprayed with superheated oil under pressure. Instinctively falling backwards, the lighting torch which he had been holding to the register's peephole ignited the uncontrolled flow of oil and sparked the holocaust that followed. The rapidly expanding inferno separated Deale from the "quick shut-off valve" which, had it been reached and closed, would have minimized the damages. And Deale's heroic efforts to reach the settling valve, a remote fuel oil system control, were thwarted by a locked door on the CO2 room through which he would have had to pass. No one else aboard the ship at the time knew how or where to cut off, by use of remote controls, the flow of oil that continued to feed the fire. The CORSAIR'S Chief Engineer, Mr. Lemon, was summoned, but it was not until about 5 A.M. that he finally succeeded in his efforts to cut off the flow of fuel oil feeding the fire.

b) Ferran's negligence.

We remain unswayed by Ferran's continued arguments that the blaze's beginning did not result from negligence attributable to Ferran. As set forth at length in our original opinion, the physical facts, supported by testimony from some of the witnesses, leads "to the inescapable conclusion that this fire had its inception when the male and female components of the valve parted," the same components that Ferran had a few hours earlier re-connected.¹

c) Applicability of "Red Letter" clause.

Equally unpersuasive is Alcoa's argument, incorporated only by reference in its original memorandum on rehearing, that the "Red Letter" clause, purporting to limit Ferran's liability to $300,000.00, was not a part of the contract ostensibly completed just prior to the fire. The common practice between these parties, not their explicit words prior to the fire, belied the true relationship.

"Usages and customs may be proved * * * to affect the contractual relations of the parties by adding a provision to the contract that the words of the parties can scarcely be said to have expressed." 3 Corbin on Contracts, § 556, p. 240 (1960 Ed.)

The Ferran-Alcoa repair contract relationship is explained in 242 F.Supp. at 965-966. We therefore re-affirm the findings that the "Red Letter" clause formed part of the contract at issue.

d) Validity of "Red Letter" clause.

The next step, not fully developed in the original opinion, is whether the "Red Letter" clause, limiting Ferran's liability, stands invalid as against public policy. This mutually agreed upon clause purports to relieve Ferran from liability for damages in excess of $300,000.00, caused by Ferran's own negligence or breach of contract.² In Bisso v. Inland Waterways Corp., 349 U.S. 85, 75 S.Ct. 629, 99 L.Ed. 911 (1955) the negligent towage by those operating the Tug Cairo caused the oil barge Bisso to collide with a bridge pier and sink. The Tug owners had exacted a "release-from-liability-clause" from the barge interests as part of the towage contract. In effect, the release clause purported to relieve the tug owners from all liability for their own negligence. The Supreme Court invalidated the release clause for two main reasons:

"(1) to discourage negligence by making wrongdoers pay damages, and (2) to protect those in need of goods or services from being overreached by others who have power to drive hard bargains." 349 U.S. at 91, 75 S.Ct. at 632.

Briefly stated, the Court in Bisso held "that tow and tug may not by agreement relieve the tug of liability for damage to the tow caused by the tug's negligence."³

Alcoa here attempts to analogize its position with the Bisso holding by parodying "that ship and repairer may not by agreement relieve the repairman of liability for damage to the ship caused by the repairman's negligence." The whole tenor of the majority opinion in Bisso, however, as well as the dissenters' analysis of the majority holding, fails to adequately support Alcoa's argument. Significant factual differences exist. First, while relief from all liability for negligence might not discourage negligence, potential responsibility for $300,000.00 in damages would have the effect of discouraging negligence. Under the "Red Letter" clause Ferran remains responsible for a substantial amount of damages. Secondly, it is the general rule of contracts that "with certain exceptions the courts see no harm in express agreements limiting the damages to be recovered for breach of contract."⁴ The "exceptions" referred to involve, generally, contracts of the adhesion-type wherein the bargaining power of one party is extremely restricted to the point where countenancing the limitation becomes unconscionable. When a limitation does not result from inequality of bargaining power, the courts prefer to let parties lie on the bed they make.⁵

In Bisso the Supreme Court ruled that contracts releasing a tug or its owners from all liability are, "based on public policy," invalid,⁶ and emphasized the powerful bargaining position enjoyed by tugs when dealing with barge owners.⁷ Similarly leashed are common carriers,⁸ employers,⁹ and manufacturers or dealers in a position to utilize adhesion contracts.¹⁰ In sharp contradistinction stands the situation where the bargaining power of the parties approximates equality.¹¹ Alcoa has not proven that Ferran held a severely imbalanced upper hand.¹² Nor was evidence produced to show that all ship repairers', or all Ferran company contracts with all vessel owners included a $300,000.00 limitation clause. In fact, the Ferran-Alcoa contract for post-fire repairs to the CORSAIR expressly excluded the "Red Letter" clause. Consequently, under the circumstances, this court does not consider Ferran's limiting of its liability to $300,000.00 to be unconscionable, and hence concludes that the clause is valid. See Sun Oil Co. v. Dalzell Towing Co., 287 U.S. 291, 53 S.Ct. 135, 77 L.Ed. 311 (1932).

e) Applicability of the "Red Letter" clause to Alcoa's Direct Action against Ferran's insurers.

In addition to its action against Ferran, Alcoa sued Ferran's insurers pursuant to the Louisiana Direct Action Statute, LSA-Rev.Stat. 22:655. This Statute creates a cause of action in favor of persons injured in Louisiana which can be asserted directly against the public liability carrier of a tortfeasor, regardless of the tortfeasor's joinder in the suit. While there exists respectable authority for the proposition that suits solely ex contractu are not cognizable within the Direct Action Statute,¹³ we need not resolve that issue here.

A mere reading of...