Hyman v. Pottberg's Ex'rs

• Decision Date: 23 January 1939
• Docket Number: No. 209.,209.
• Citation: 101 F.2d 262
• Parties: HYMAN et al. v. POTTBERG'S EX'RS et al.
• Court: U.S. Court of Appeals — Second Circuit

101 F.2d 262 (1939)

HYMAN et al. v. POTTBERG'S EX'RS et al.

No. 209.

Circuit Court of Appeals, Second Circuit.

January 23, 1939.

Adele I. Springer and John Tilney Carpenter, both of New York City, for appellants.

George Whitefield Betts, Jr., and Oscar R. Houston, both of New York City, for appellees.

Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

L. HAND, Circuit Judge.

This cause comes up upon appeal from a decree in the admiralty, denying the application of certain claimants to a fund, whom we shall call the plaintiffs, to vacate or reduce awards made to certain other claimants. All claimants to the fund were either passengers, or owners of chattels, upon the S. S. "Morro Castle", which burned, off the Jersey Coast, on the evening of September 8, 1934. The owner and the charterer of the ship filed a joint limitation proceeding, in which after extended negotiations all parties interested agreed to the entry of a "final decree". The substance of this was as follows. The sum of $890,000, when paid, was to be in full of all liability of the owner and charterer to those claimants who accepted the settlement: the claims of all others were dismissed. An agreement of settlement, already made, was confirmed, and the owner and the charterer were directed to pay the sum mentioned — the "Morro Castle Fund" — to the Equitable Trust Company with "the same effect as though paid into court in full satisfaction of this decree, and deposited by the court as funds in court to be dealt with and distributed as provided in said settlement agreement." The risk and expense of defending against the claims of any claimants who had not accepted the settlement, if there were any, should be borne by those who had, up to 25% of their shares in the fund; and the owner and charterer were to be discharged from any such claims and indemnified for the expense of defending them. All suits against the owner and charterer were enjoined, "other than the liquidation out of the aforesaid Morro Castle Fund of claims in this limitation proceeding, as provided in said memorandum of settlement". The settlement is too long to state in detail, but those parts of it material to the issues before us are as follows. A committee of five proctors of the largest claimants was appointed, which all asserting claimants authorized "to act for them * * * in all matters in connection with this settlement * * * and to arbitrate, agree or otherwise determine the validity and amounts of all claims * * * and to make distribution of said Morro Castle settlement fund * * * All determinations of said Committees shall be final and binding * * * except that any claimant * * * may appeal * * * to the full Proctors' Committee. * * * Such appeal may be taken only within ten days after the mailing by the Committee to the proctor of the claimant * * * of the notice of the valuation or other determination put upon his claim * * * If such appeal is taken the full Proctors' Committee * * * may decrease, increase or confirm the valuation or affirm or reverse or modify the determination, and such decision shall be final and binding upon the claimants". Both committees were empowered to make rules of procedure and did so. The rules of the committee of first instance provided that if "any dissent arise in the Committee on any question of substantive law * * * the Committee will, if it deems necessary, request judge Knox or some other District Judge for his views on the law"; and that if the committee becomes "deadlocked" about a claim "such claim shall be submitted to Judge Knox * * * and in such case the Committee shall accept such decision as its own."

The members of both committees were all proctors for claimants to the fund, and therefore acted in a dual capacity; but although this was understood by all the claimants, no member took part in fixing the award of his client; and any charge against the committee for partiality must rest upon the theory that there was a covert, or perhaps only a half conscious, understanding between the members that the awards to their clients should be disproportionately large. The committee held a great many meetings, received a great deal of evidence and in the end made nearly 400 awards aggregating about $1,400,000, so that the dividend upon each claim was in the neighborhood of 60%. In some cases it kept minutes of its proceedings; in some it did not; but there was a separate file for each claim. After the awards had all been made, the plaintiffs moved the district judge — who had conducted the limitation proceeding, but who had had no part in the settlement — for various relief, including an inspection of all the documents in the possession of the committee: this last was granted, and the present appeal does not go to anything then denied. Later the plaintiffs moved again, this time that the awards be all "rescinded and impartially reviewed", or if not that, then that some thirty awards be "reviewed and modified by the Court on the ground that the majority members of the Morro Castle Committee made such awards unfairly and partially resulting in an inequitable disposition of the settlement fund". This motion was supported by voluminous affidavits, the upshot of which was that the members of the committee had acted with partiality in the manner above suggested; that they had refused to receive evidence in reduction of some of the challenged awards; and that they had denied to the plaintiffs the privilege of an appeal to the proctors' committee from awards to other claimants. The two committees answered with voluminous affidavits, and the plaintiffs replied, until in the end more than 800 pages of assertion and counter-assertion had been piled up without any defined issues. (It is difficult to say whether the members of the committees meant to answer as arbitrators, or as proctors for their clients; and except upon the chance that they might be held liable for costs, they cannot be heard as arbitrators. However, since all represented claimants, the point is only one of form.) The judge examined this documentary mass, together apparently with the files of the disputed awards, and concluded, without making findings as required by Admiralty Rule 46½, 28 U.S.C.A. following section 723, that although some of the awards seemed to him too large, the plaintiffs had not proved that the committee had been partial. He therefore denied all the relief prayed.

The first question is as to the nature of the proceeding which ended in the order appealed from. The plaintiffs argue that the settlement was a step in the limitation proceeding, not an independent agreement to arbitrate; and that therefore the district court was not limited in its review by Title 9 of the U.S.Code, 9 U.S.C.A., but should have treated the awards like the report of a master. We do not agree. Even though the settlement were not an independent arbitration, but only an incident in the limitation proceeding, it was still an arbitration, and the judge's powers to review it were governed by Title 9, U.S.Code, 9 U.S.C.A. Admiralty Rule 43½ is plain as to this: when "any issue is referred by consent and the intention is plainly expressed in the consent order that the submission is to the commissioners or assessors as arbitrators, the court shall review the same only in accordance with the principles governing a review of an award and decision by an arbitrator". There cannot be the least doubt that the "submission" here was to the committee "as arbitrators"; and that concludes the matter, even though in addition they could be regarded as "commissioners or assessors", which seems somewhat unreal. Nor was it any less an arbitration because of the clause in the committee's rules of procedure that the members might in their discretion consult a judge upon a point of law, and that he should decide any claim upon which they were deadlocked. Whatever...