COMPLAINT OF AMERICAN EXPORT LINES, INC.

• Decision Date: 21 July 1983
• Docket Number: No. 73 Civ. 2507 (CHT).,73 Civ. 2507 (CHT).
• Citation: 568 F. Supp. 956
• Parties: In the Matter of the Complaint of AMERICAN EXPORT LINES, INC., formerly known as American Export Isbrandtsen Lines, Inc., as owner of the S/S C.V. Sea Witch, seeking exoneration from or limitation of liability.
• Court: U.S. District Court — Southern District of New York

568 F. Supp. 956

In the Matter of the Complaint of AMERICAN EXPORT LINES, INC., formerly known as American Export Isbrandtsen Lines, Inc., as owner of the S/S C.V. Sea Witch, seeking exoneration from or limitation of liability.

No. 73 Civ. 2507 (CHT).

United States District Court, S.D. New York.

July 21, 1983.

COPYRIGHT MATERIAL OMITTED

Haight, Gardner, Poor & Havens, New York City, for Farrell Lines, Inc., successor by merger to American Export Lines, Inc.; Chester D. Hooper, Cary Wiener, M.E. Deorchis, Manuel R. Llorca, New York City, of counsel.

Burlingham, Underwood & Lord, New York City, for Bath Iron Works Corp.; Kenneth Volk, Armen Vartian, New York City, of counsel.

Townley & Updike, New York City, for Sperry Rand Corp.; Richard B. Kelsky, New York City, of counsel.

Vincent, Berg, Russo, Marcigliano & Zawacki, New York City, for Bond Hydraulic Equipment Service, Inc.; Harry A. Gavalas, Dennis Cammarano, New York City, of counsel.

Kirlin, Campbell & Keating, New York City, for S/S Esso Brussels; Paul F. McGuire, New York City, of counsel.

J. Paul McGrath, Asst. Atty. Gen., Washington, D.C., John S. Martin, Jr., U.S. Atty., S.D.N.Y., Dept. of Justice, Torts Branch, Civ.Div., New York City, for the Government; Janis G. Schulmeisters, James J. D'Alessandro, New York City, of counsel.

OPINION

TENNEY, District Judge.

The government moves for summary judgment dismissing the third-party complaint asserted against it by American Export Lines, Inc. ("AEL") and the cross-claims asserted against it by Bath Iron Works Corporation ("Bath") and Sperry Rand Corporation ("Sperry"). For the reasons discussed below, the government's motion is denied.

Background

On June 2, 1973 the S/S C.V. Sea Witch collided with the S/S Esso Brussels in the New York harbor. Shortly thereafter, AEL, owner of the Sea Witch, filed a petition for limitation of liability pursuant to 46 U.S.C. § 183. Claims were filed against AEL by the Esso Brussels' interests, by injured and dead seamen aboard both vessels, and by owners of cargo aboard the Sea Witch, including the United States.

One of the alleged causes of the collision was the failure of the Sea Witch's steering system. Accordingly, in December 1973 AEL filed third-party complaints against Bath, who built the Sea Witch; Sperry, who manufactured some of the Sea Witch's steering gear components; and Bond Hydraulic Equipment Service, Inc. ("Bond") who modified the Sea Witch's steering gear.

In early 1977, AEL sought leave to file a third-party complaint against the United States. The complaint alleged that if AEL were found liable by reason of its negligence or the Sea Witch's unseaworthiness, then the government — upon whose expertise and approval AEL relied in its decision not to provide a dual steering system for the Sea Witch — is bound to indemnify AEL. The Court permitted AEL to file its third-party complaint, and to advance therein both contractual and tort bases for its claim over. Shortly thereafter, the Court permitted Bath and Sperry to file similar cross-claims against the government.¹

Since that time, the parties to this case have engaged in extensive settlement negotiations. AEL has, in fact, settled a number of the claims against it. The government, however, has steadfastly maintained that it has no liability to AEL or any of the other parties under the circumstances of this case. The government now moves to dismiss the claims for indemnity against it.

Arguments

The government advances a number of arguments in support of its motion for summary judgment. The Court will consider here only those arguments which concern this Court's jurisdiction to entertain the claims that have been made against the government.² First, the government argues that the tort indemnity claims are essentially claims for contribution from a joint tortfeasor that accrued at the time of the collision, and that these claims are therefore barred by the two year statute of limitations for claims against the United States.³ Second, the government argues that the contractual indemnity claims can be brought only in the Court of Claims.

AEL, in response, argues first that its claims are for indemnity rather than simply for contribution from a joint tortfeasor; that the indemnity claims accrued only when AEL settled the underlying cargo and personal injury claims; and that there is, therefore, no statute of limitations bar.⁴ Second, AEL argues that the government has forfeited reliance on its time bar defense by asserting its cargo claims in this action.

Discussion

The United States as sovereign "`is immune from suit save as it consents to be sued.'" United States v. Testan, 424 U.S. 392, 399, 96 S.Ct. 948, 953, 47 L.Ed.2d 114 (1976) (quoting United States v. Sherwood, 312 U.S. 584, 586, 61 S.Ct. 767, 769, 85 L.Ed. 1058 (1941)). Thus, "Congressional waiver of sovereign immunity is a prerequisite to any suit brought against the United States under admiralty law or otherwise." Roberts v. United States, 498 F.2d 520, 525 (9th Cir.), cert. denied, 419 U.S. 1070, 95 S.Ct. 656, 42 L.Ed.2d 665 (1974). The Suits in Admiralty Act ("SIAA"), 46 U.S.C. §§ 741-52, constitutes a waiver of sovereign immunity by the United States for certain maritime actions against the federal government. Blanco v. United States, 464 F.Supp. 927, 930 (S.D.N.Y.1979). The SIAA provides that:

In cases where if such vessel were privately owned or operated, or if such cargo were privately owned or possessed, or if a private person or property were involved, a proceeding in admiralty could be maintained, any appropriate nonjury proceeding in personam may be brought against the United States....

46 U.S.C. § 742. The statute further provides that such actions shall be brought in the district courts. Id.

AEL argues that pursuant to the SIAA this Court has jurisdiction over its claims for indemnity. The Court will consider first the jurisdictional basis for any claim AEL may have for contractual indemnity.

The contract on which AEL bases its indemnity claim is the contract for the construction and the payment of a construction differential subsidy entered into by AEL, Bath and the Maritime Administration ("MARAD"), on behalf of the government. The contract contains no express indemnity provision. Nevertheless, AEL argues that it has an implied right to indemnity. It compares itself to a vessel owner held vicariously liable to a party injured through a contractor's negligence, citing Ryan Stevedoring Co. v. Pan-Atlantic S.S. Corp., 350 U.S. 124, 76 S.Ct. 232, 100 L.Ed. 133 (1956), and other cases which hold that a vessel has an implied contractual right to indemnity from a contractor who breached his duty to provide workmanlike service and so caused an accident for which the vessel owner was vicariously liable. Apparently, AEL relies on the provisions of the contract in which MARAD represented that the plans for the Sea Witch had the approval of MARAD and the Navy. AEL contends that the plans for the steering system were approved despite the fact that they were not in accordance with the applicable regulations, and that if the government had insisted on the dual steering system required by the regulations, the accident would not have occurred. The SIAA provides a waiver of sovereign immunity only "if a proceeding in admiralty could be maintained" were a private person involved. 46 U.S.C. § 742. It is "firmly established, albeit arguably inconsistent and illogical" that "agreements for the construction of vessels are not maritime contracts and, hence, not within the purview of admiralty jurisdiction." Ohio Barge Line, Inc. v. Dravo Corp., 326 F.Supp. 863, 864 (W.D.Pa. 1971) (footnotes omitted). See Kossick v. United Fruit Co., 365 U.S. 731, 735, 81 S.Ct. 886, 890, 6 L.Ed.2d 56 (1961); Thames Towboat Co. v. The "Francis McDonald", 254 U.S. 242, 41 S.Ct. 65, 65 L.Ed. 245 (1920); Walter v. Marine Office Of America, 537 F.2d 89, 94 (5th Cir.1976). See generally 1 E. Jhirad & A. Sann, Benedict on Admiralty § 188 (7th ed. 1981). The contract here involved is one for the construction of, and payment of a construction subsidy for, a vessel. The conclusion that the contract is not a maritime contract is inescapable. The contract could not, therefore, be the basis of an admiralty proceeding against a private person. Accordingly, this Court has no jurisdiction pursuant to the SIAA to entertain a contract claim based on the subsidy contract against the United States.⁵

No other statute provides the requisite waiver of sovereign immunity necessary to bring this contract action against the United States in a federal district court. Only contract actions against the United States seeking recovery of $10,000 or less may be brought in a district court. 28 U.S.C. § 1346(a)(2). Contract actions against the United States seeking $10,000 or more must be brought in the Court of Claims. Id. § 1491.

However, counterclaims against the United States in the nature of recoupment do not require a statutory waiver of sovereign immunity. A recoupment is "the right of a defendant, `to cut down the plaintiff's demand either because the plaintiff has not complied with some cross obligation ... or because he has violated some duty which the law imposes upon him....'" United States v. Wilson, 523 F.Supp. 874, 900 (N.D.Iowa 1981) (quoting 20 Am.Jur.2d, Counterclaim, Recoupment and Setoff, § 1 at 228 (1965)). A counterclaim for recoupment must arise from the same transaction or occurrence as the plaintiff's claim. Id.; 3 J. Moore, Moore's Federal Practice ¶ 13.02 at 13-13 n. 1 (2d ed. 1983). The United States, by bringing suit,

waives immunity as to claims of the defendant which assert matters in recoupment — arising out of the same transaction or occurrence which is the subject matter of the government's suit, and to the extent of defeating the government's claim, but not to the extent of a judgment against the government which is affirmative in the sense of

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