City of Milwaukee v. Cement Div. Nat'l Gypsum

• Decision Date: 12 June 1995
• Docket Number: 94788
• Citation: 115 S.Ct. 2091,515 U.S. 189,132 L.Ed.2d 148
• Parties: CITY OF MILWAUKEE, Petitioner, v. CEMENT DIVISION, NATIONAL GYPSUM COMPANY, et al
• Court: U.S. Supreme Court

515 U.S. 189

115 S.Ct. 2091

132 L.Ed.2d 148

CITY OF MILWAUKEE, Petitioner,

v CEMENT DIVISION, NATIONAL GYPSUM COMPANY, et al.

No. 94-788.

Supreme Court of the United States

June 12, 1995.

Syllabus^*

After a ship owned by the Cement Division of National Gypsum Co. and insured by the other respondents sank in a winter storm while berthed in a slip owned by petitioner Milwaukee (City), National Gypsum brought this admiralty suit for damages, alleging that the City had negligently breached its duty as a wharfinger. The City denied fault and filed a counterclaim for damage to its dock, alleging that National Gypsum was negligent in leaving the ship virtually unmanned. During the course of the litigation, the District Court, inter alia, found that both parties were negligent and apportioned liability primarily to National Gypsum; entered a partial judgment for the stipulated amount of respondents' damages, excluding prejudgment interest; and denied respondents' request for such interest, holding that the fact that National Gypsum's loss was primarily attributable to its own negligence and the existence of a genuine dispute over the City's liability were special circumstances justifying a departure from the general rule that prejudgment interest should be awarded in maritime collision cases. The Court of Appeals disagreed and reversed the latter ruling, holding, among other things, that mutual fault cannot provide a basis for denying prejudgment interest after this Court, in United States v. Reliable Transfer Co., 421 U.S. 397, 95 S.Ct. 1708, 44 L.Ed.2d 251, announced a rule requiring that damages be assessed on the basis of proportionate fault when such an allocation can reasonably be made.

Held: Neither a good-faith dispute over liability nor the existence of mutual fault justifies the denial of prejudgment interest in an admiralty collision case. Throughout history, such cases have established a general rule that prejudgment interest should be awarded, subject to a limited exception for "peculiar" or "exceptional" circumstances. The existence of a legitimate difference of opinion on the liability issue is not such a circumstance, but is merely a characteristic of most ordinary lawsuits. Nor does the magnitude of the plaintiff's fault qualify as a "peculiar" feature. Although it might appear somewhat inequitable to award a large sum in prejudgment interest against a relatively innocent party, any unfairness is illusory, because the relative fault of the parties has already been taken into consideration under the Reliable Transfer rule in calculating the amount of the loss for which the relatively innocent party is responsible. In light of Reliable Transfer, a denial of prejudgment interest on the basis of mutual fault would unfairly penalize a party twice for the same mistake. Pp. ____.

31 F.3d 581 (CA7 1994), affirmed.

STEVENS, J., delivered the opinion of the Court, in which all other Members joined, except BREYER, J., who took no part in the consideration or decision of the case.

David A. Strauss, Chicago, IL, for petitioner.

Harney B. Stover, Jr., Milwaukee, WI, for respondents.

Justice STEVENS delivered the opinion of the Court.

This is an admiralty case in which the plaintiff's loss was primarily attributable to its own negligence. The question presented is whether that fact, together with the existence of a genuine dispute over liability, justified the District Court's departure from the general rule that prejudgment interest should be awarded in maritime collision cases.

I

Respondents are the owner and the insurers of the E.M. Ford, a ship that sank in Milwaukee's outer harbor on Christmas Eve of 1979. At the time of this disaster, the Ford was berthed in a slip owned by the city of Milwaukee (City). In the course of a severe storm, she broke loose from her moorings, battered against the headwall of the slip, took on water, and sank. She was subsequently raised and repaired.

In 1980 the Ford's owner, the Cement Division of National Gypsum Co. (National Gypsum), brought suit against the City, invoking the District Court's admiralty and maritime jurisdiction.¹ The complaint alleged that the City had breached its duty as a wharfinger by assigning the vessel to a berthing slip known to be unsafe in heavy winds and by failing to give adequate warning of hidden dangers in the slip. The plaintiff sought damages of $4.5 million, later increased to $6.5 million. The City denied fault and filed a $250,000 counterclaim for damage to its dock. The City alleged that National Gypsum was negligent in leaving the ship virtually unmanned in winter, with no means aboard for monitoring weather conditions or summoning help.

In 1986 the District Court conducted a 3-week trial on the issue of liability. Finding that both National Gypsum and the City had been negligent, the court determined that the owner bore 96% of the responsibility for the disaster, while the City bore 4% of the fault. Given the disparity in the parties' damages, a final judgment giving effect to that allocation (and awarding the damages sought in the pleadings) would have essentially left each party to bear its own losses.

Respondents took an interlocutory appeal from the District Court's ruling.² The Court of Appeals for the Seventh Circuit agreed with the District Court's conclusion that both parties were at fault, and that the owner's negligence was "more egregious" than the City's, but it rejected the allocation of 96% of the responsibility to the owner as clearly erroneous. Cement Div., Na- tional Gypsum Co. v. Milwaukee, 915 F.2d 1154, 1159 (1990), cert. denied, 499 U.S. 960, 111 S.Ct. 1583, 113 L.Ed.2d 648 (1991). After making its own analysis of the record, the Court of Appeals apportioned liability two-thirds to National Gypsum and one-third to the City. Id., at 1160.

[3]

Thereafter the parties entered into a partial settlement fixing respondents' damages, excluding prejudgment interest, at $1,677,541.86.³ The parties agreed that any claim for interest would be submitted to the District Court for decision. A partial judgment for the stipulated amount was entered and satisfied.

Respondents then sought an award of over $5.3 million in prejudgment interest.⁴ The District Court denied respondents' request. It noted that "an award of prejudgment interest calculated from the date of the loss is the rule rather than the exception in cases brought under a district court's admiralty jurisdiction," App. to Pet. for Cert. 21a, but held that special circumstances justified a departure from that rule in this case. The court explained:

"In the instant case the record shows that from the outset there has been a genuine dispute over [respondents'] good faith claim that the City of Milwaukee was negligent for failing to warn the agents of [National Gypsum] (who were planning to leave the FORD unmanned during the Christmas holidays) that a winter storm could create conditions in the outer harbor at Milwaukee which could damage the ship. The trial court and the court of appeals both found mutual fault for the damage which ensued to the ship and to the [City's] dock. The court of appeals ascribed two-thirds of the negligence to [National Gypsum]. Thus, in this situation the court concludes that [National Gypsum's] contributory negligence was of such magnitude that an award of prejudgment interest would be inequitable." Id., at 22a.⁵

The Court of Appeals reversed. 31 F.3d 581 (CA7 1994). It noted that prior to this Court's announcement of the comparative fault rule in United States v. Reliable Transfer Co., 421 U.S. 397, 95 S.Ct. 1708, 44 L.Ed.2d 251 (1975), some courts had denied prejudgment interest in order to mitigate the harsh effects of the earlier rule commanding an equal division of damages whenever a collision resulted from the fault of both parties, even though one party was only slightly negligent. In the court's view, however, after the divided damages rule was "thrown overboard" and replaced with comparative fault, mutual fault could no longer provide a basis for denying prejudgment interest. 31 F.3d, at 584-585. The Court of Appeals also read our decision in West Virginia v. United States, 479 U.S. 305, 311, n. 3, 107 S.Ct. 702, 706, n. 3, 93 L.Ed.2d 639 (1987), as disapproving of a "balancing of the equities" as a method of deciding whether to allow prejudgment interest. 31 F.3d, at 585.

The Court of Appeals' decision deepened an existing circuit split regarding the criteria for denying prejudgment interest in maritime collision cases. Compare, e.g., Inland Oil & Transport Co. v. Ark-White Towing Co., 696 F.2d 321 (CA5 1983) (genuine dispute over good-faith claim in mutual fault setting justifies denial of prejudgment interest), with Alkmeon Naviera, S.A. v. M/V Marina L, 633 F.2d 789 (CA9 1980) (contrary rule). We granted certiorari, 513 U.S. ----, --- S.Ct. ----, --- L.Ed.2d ---- (1995), and now affirm.

II

Although Congress has enacted a statute governing the award of postjudgment interest in federal court litigation, see 28 U.S.C. § 1961, there is no comparable legislation regarding prejudgment interest. Far from indicating a legislative determination that prejudgment interest should not be awarded, however, the absence of a statute merely indicates that the question is governed by traditional judge-made principles. Monessen Southwestern Railway Co. v. Morgan, 486 U.S. 330, 336-337, 108 S.Ct. 1837, 1842-43, 100 L.Ed.2d 349 (1988); Rodgers v. United States, 332 U.S. 371, 373, 68 S.Ct. 5, 6-7, 92 L.Ed. 3 (1947). Those principles are well developed in admiralty, where "the Judiciary has traditionally taken the lead in formulating flexible and fair remedies." Reliable Transfer, 421 U.S., at 409, 95 S.Ct., at 1715.

Throughout our history, admiralty decrees have included provisions for prejudgment interest. In Del Col v. Arnold, 3 U.S. (3 Dall.) 333, 1 L.Ed. 624, a prize case decided in 1796, we affirmed a decree awarding the...