Bethlehem Steel Corp., Matter of, s. 78-3137

• Decision Date: 02 October 1980
• Docket Number: 78-3138,Nos. 78-3137,s. 78-3137
• Citation: 631 F.2d 441
• Parties: In the Matter of the Complaint of BETHLEHEM STEEL CORPORATION, etc. BETHLEHEM STEEL CORPORATION, Plaintiff-Appellee-Cross-Appellant, v. MARRIOTT CORPORATION et al., Claimants-Appellants-Cross-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 441

631 F.2d 441

In the Matter of the Complaint of BETHLEHEM STEEL CORPORATION, etc.

BETHLEHEM STEEL CORPORATION, Plaintiff-Appellee-Cross-Appellant, v. MARRIOTT CORPORATION et al., Claimants-Appellants-Cross-Appellees.

Nos. 78-3137, 78-3138.

United States Court of Appeals, Sixth Circuit.

Argued April 9, 1980.

Decided Oct. 2, 1980.

Thomas O. Murphy, Thompson, Hine & Flory, Cleveland, Ohio, for claimants-appellants-cross-appellees.

John H. Hanninen, Ray, Robinson, Keenen & Hanninen, Lucian Y. Ray, Cleveland, Ohio, for plaintiff-appellee-cross-appellant.

Before EDWARDS, Chief Judge, and LIVELY and ENGEL, Circuit Judges.

LIVELY, Circuit Judge.

This admiralty case presents several issues related to limitation of liability ¹ which have not been decided previously by this court.

I.

The Steelton, a Great Lakes steamship owned by the plaintiff Bethlehem, collided with a highway bridge which spanned the Welland Canal. The Welland Canal lies wholly within the territorial boundaries of Canada. The bridge, owned by the St. Lawrence Seaway Authority, was extensively damaged and the canal was completely blocked for approximately two weeks. A number of ships were required to interrupt their voyages and stand by until the canal was cleared. Shortly after the collision Bethlehem filed an action in the Federal Court of Canada for limitation of liability under Canadian law, naming as defendants the Seaway Authority "and all other persons having claims against the plaintiff, its ship 'Steelton' or the fund hereby to be created." The Canadian court entered an order limiting liability to $671,489 (Canadian), plus interest to date of deposit. Bethlehem deposited with the Canadian court $680,733, including interest ($691,761 (U.S.)). The Canadian court stayed all further proceedings arising out of the collision and entered a notice with provision for publication, requiring all persons who claimed damage from the collision to file their claims with that court.

A number of actions asserting claims arising out of the Steelton incident were filed against Bethlehem in the United States District Court for the Northern District of Ohio. Thereafter Bethlehem filed the present action in that court petitioning for limitation of liability under 46 U.S.C. § 185 ² while claiming the benefit of the lesser limitation provided by the Canada Shipping Act. ³ The district court then ordered all persons claiming damage from the Steelton incident to file claims with it, and enjoined the institution and prosecution of any actions arising from the incident, except the instant proceeding and the one already pending in the Federal Court of Canada. The total claims filed in the two actions were far in excess of the amount available for their satisfaction under the limitation provisions of either Canadian law or 46 U.S.C. § 183.

II.

A.

The district court recognized the general rule that the right to recover for a tort is governed by the law of the place where the tort occurred. At the same time, the court recognized that the law of the forum determines procedural matters. Thus, the district court convened a hearing to determine whether the Canadian limitation law is substantive or procedural. Both Bethlehem and the claimants produced expert witnesses, Canadian attorneys, who agreed that there are no Canadian cases which define the nature of the limitation law. However, the experts disagreed in their opinions on the nature of the law, Bethlehem's witness proclaiming it substantive and the claimants' witness labeling it procedural.

After considering the expert testimony and several English decisions, the district court concluded that "the limitation of liability provisions of the Canada Shipping Act are procedural and do not attach to the rights created by that Act." Thus, the court held that 46 U.S.C. § 183, the law of the forum, determines the maximum limitation of the fund created in this action. The effect of this ruling was to set Bethlehem's potential liability at $850,000 rather than.$691,000. This is the holding from which Bethlehem has filed its cross-appeal.

B.

The judgment was first appealed by a group of shipowners and charterers whose claims were dismissed by the district court. The claimants, of which Marriott Corporation is one, are owners and charterers of vessels which were detained by reason of the obstruction of the Welland Canal following the Steelton's collision with the bridge. During the pendency of the district court action, the Canadian trial court entered a judgment dismissing all claims filed in that court based on detention of vessels. The judge of that court, Justice Addy found that under Canadian law when a claim is only for economic loss, with no actual physical injury to the claimant, damages are generally not recoverable even where the injury might have been foreseeable and a proper causal relationship between act and injury exists. A case from the Supreme Court of Canada, Rivtow Marine Ltd. v. Washington Iron Works, (1974) S.C.R. 1189, (1973) 6 W.W.R. 692, was distinguished on the ground that "a proximity of relationship giving rise to a duty to warn" justified an award of damages for economic loss unaccompanied by physical injury in that products liability case. Concluding that the ruling of Justice Addy in a case involving the identical facts and legal issue presented in the instant case stated the controlling law of Canada, the district court held there could be no recovery for economic loss resulting from vessel delay. This holding presents the second issue for determination on this appeal. ⁴

III.

In Ocean Steam Navigation Co. v. Mellor (The Titanic), 233 U.S. 718, 34 S.Ct. 754, 58 L.Ed. 1171 (1914), the primary question was whether the owner of a foreign ship may limit its liability for losses on the high seas by resort to the courts of the United States. The Supreme Court held that when a foreign ship is sued in the courts of this country it may invoke limitation under U.S. law. This is so even though the foundation for recovery is a British tort and under the circumstances of the case the ship in not subject to the substantive law of the United States.

Lower court decisions following Titanic have concluded that limitation of liability statutes relate to remedy rather than to liability or the right to recover. E. g., Royal Mail Steam Packet Co. v. Companhia de Navegaco Lloyd Brasileiro, 31 F.2d 757 (E.D.N.Y.1928), aff'd, 55 F.2d 1082 (2d Cir.), cert. denied, 287 U.S. 607, 53 S.Ct. 11, 77 L.Ed. 528 (1932); The Mandu, 102 F.2d 459 (2d Cir.1939). The Supreme Court cast some doubt on the accepted rule of The Titanic in Black Diamond Steamship Corp. v. Robert Stewart & Sons, Ltd. (Norwalk Victory), 336 U.S. 386, 69 S.Ct. 622, 93 L.Ed. 754 (1949). In that case the only issue decided was the amount of bond required to be posted in the United States district court by the shipowner seeking to limit its liability for losses which occurred in foreign waters. The plaintiff sought limitation under the Brussels Convention and tendered a bond which would have satisfied the requirements of the Convention. The district court dismissed the action for failure to post the larger bond required by the American limitation statute. The Supreme Court reversed and remanded with directions to set aside the dismissal and make a determination of which limitation provision to apply. The Court also required the plaintiff to post the larger American bond to preserve the status quo pending appeal from the district court's ultimate decision. Norwalk Victory recognizes that the limitation statute of the forum does not always apply-contrary to the assumption of a number of courts following The Titanic. In looking at "the question whether there are any circumstances under which the Belgian limitation would be enforceable by our courts," the Supreme Court stated, ". . . if, indeed, the Belgian limitation attaches to the right, then nothing in The Titanic, 233 U.S. 718, 34 S.Ct. 754, 58 L.Ed. 1171, stands in the way of observing that limitation." 336 U.S. at 395, 69 S.Ct. at 626.

In Norwalk Victory, Justice Frankfurter did not disagree with the rule of The Titanic. He noted that the Court was dealing in that case with "a liability assumed already to exist on other grounds." Id. On the other hand, the district court in Norwalk Victory dismissed on the assumption that the law of the forum controlled because limitation laws are always procedural. Upon remand the district court was to determine "if it is the law of Belgium that the wrong creates no greater liability than that recognized by the Convention . . . ." Id. In other words, an American court may not assume that a foreign limitation of liability act is procedural. It must make a determination whether an independent basis of liability exists or whether under that nation's law "the wrong creates no greater liability than that recognized . . ." by the limitation act. If the right to recover is coextensive with the limitation on amount of recovery, then a limitation act is substantive and must be enforced by the forum. Viewed in this light Norwalk Victory does not represent a departure from the doctrine of The Titanic. Rather, it commands an inquiry into the nature of a foreign limitation act where it may not be assumed that liability already exists on other grounds.

In Kloeckner Reederei Und Kohlenhandel G.M.B.H. v. A/S Hakedal (The Western Farmer), 210 F.2d 754, 757 (2d Cir.1954), Judge Learned Hand wrote, "The Titanic . . . finally settled it for us that such statutes (limitation acts) are part of the remedy, and that the law of the forum applies." He found nothing in Norwalk Victory which qualified this rule. Implicit in the holding is the assumption that liability for the tort existed on other grounds.

In Petition of Chadade Steamship Co. (The Yarmouth Castle), 266 F.Supp. 517 (S.D.Fla.1967), the Panamanian owner of a cruise ship which burned and sank on the high seas...