Jones v. Bender Welding & Mach. Works, Inc.

• Decision Date: 10 August 1978
• Docket Number: 76-2114,Nos. 76-2684,s. 76-2684
• Citation: 581 F.2d 1331
• Parties: Harold R. JONES, Plaintiff-Appellant/Cross-Appellee, v. BENDER WELDING & MACHINE WORKS, INC. and Caterpillar Tractor Co.,Defendants-Appellees/Cross-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1331

581 F.2d 1331

Harold R. JONES, Plaintiff-Appellant/Cross-Appellee, v. BENDER WELDING & MACHINE WORKS, INC. and Caterpillar Tractor

Co.,Defendants-Appellees/Cross-Appellants.

Nos. 76-2684, 76-2114.

United States Court of Appeals, Ninth Circuit.

Aug. 10, 1978.

As Amended on Denial of Rehearing Sept. 12, 1978.

Andrew C. Gauen (argued), of Merrick, Hofstedt & Lindsey, Seattle, Wash., for plaintiff-appellant/cross-appellee.

Douglas M. Fryer (argued), of Moriarty, Long, Mikkelborg & Broz, Seattle, Wash., for defendants-appellees/cross-appellants.

On Appeal from the United States District Court for the Western District of Washington at Seattle.

Before DUNIWAY, CUMMINGS, ^* and SNEED, Circuit Judges.

CUMMINGS, Circuit Judge.

In this admiralty and diversity suit brought under 28 U.S.C. §§ 1332 and 1333, plaintiff, a citizen of Alaska, sued Bender Welding & Machine Works, Inc., an Alabama corporation with its principal place of business in Mobile, and Caterpillar Tractor Company, a Delaware corporation, with its principal place of business in Peoria, Illinois, for damages to plaintiff's fishing vessel MARCY J and other consequential damages. In June 1972, plaintiff bought the MARCY J, an 86-foot steel fishing vessel, from Bender for $278,499.30. The ship's main engine was manufactured by Caterpillar in December 1970. According to the complaint, the MARCY J's oil cooler supply line fractured three times in April and May 1973. The essence of the claim against the manufacturer was that the oil cooler supply line was improperly designed and that dealers were not properly advised on how to repair the line; the line did not have a bracket and therefore was subject to movement and pressure that encouraged fractures such as the one suffered by plaintiff's MARCY J. Because of Caterpillar's allegedly defective design and negligence and because of Bender's alleged breach of warranty and negligence, plaintiff sought $160,673.60 from the defendants.

Pursuant to the contract of sale between Jones and Bender, their dispute was referred to arbitrators whose award was in favor of Bender "for unspecified reasons" (R. 8.1). Therefore, the district court dismissed the present complaint as against Bender.

The two-day bench trial of the claims against Caterpillar led the district judge to adopt the following findings of fact: ¹

The engine on the MARCY J was manufactured by Caterpillar and shipped to its authorized dealer, Mustang Tractor & Equipment Company in Houston, Texas, in December 1970. Mustang adapted the engine for marine use and installed it in the shrimp trawler RANEY GRASSO, later rechristened the MARCY J. Bender purchased the vessel in 1972 and in June of that year plaintiff bought it from Bender for $278,499.30. After converting the vessel into an Alaskan shrimp and crab fishing-boat, Bender delivered the MARCY J to Jones in March 1973.

Plaintiff left Bender's shop in Mobile, Alabama, on April 7, 1973, aboard the MARCY J bound for Puget Sound, Washington. Jones was planning to operate the vessel in the crab and shrimp industry out of Kodiak, Alaska.

On April 19, 1973, a Caterpillar dealer boarded the MARCY J in Balboa, Canal Zone, for engine work. At that time he noted a small crack in the oil cooler supply line but did not have the part in stock and could not obtain it "in a timely fashion due to local (Easter) holidays" (R. 111). Therefore, Jones, with the assistance of a workshop on a nearby vessel, brazed the crack. The MARCY J sailed on April 20 and no more leakage occurred during the next several days.

While the MARCY J traveled north on April 22, 1973, a hose connected to its oil pressure alarm system cracked. Emergency repairs failed on the following day and the cracked hose was removed; as a result the oil pressure alarm system became inoperative. In addition to that alarm system, the MARCY J had another oil level alarm system known as a Murphy switchgage. The Murphy switchgage was neither manufactured nor installed by defendant Caterpillar. This switchgage was inoperative during the entire voyage. ²

On April 24, the day after the attempted repair, ³ the MARCY J was disabled off the coast of Guatemala after the oil cooler supply line cracked in the same place that had been repaired in the Canal Zone. Consequently, plaintiff had the MARCY J towed to San Diego, California, ⁴ arriving there on May 7, 1973. In San Diego an authorized Caterpillar dealer undertook diesel engine repairs on the MARCY J from May 8 to 27, including the installation of a new unbracketed oil cooler supply line.

While the MARCY J was at sea off the coast of California on May 31, 1973, it again became disabled due to engine failure caused by the cracking of the new oil cooler supply line in the same place as previously. Because the MARCY J's oil pressure alarm system had been repaired in San Diego, the plaintiff was warned of impending engine problems in time to shut off the engine on May 31, so that the engine did not suffer serious damage. During the ensuing tow to Fort Bragg, California, for repairs, including installing a makeshift bracket for the oil cooler supply line, by a Caterpillar dealer, the Coast Guard ordered the MARCY J to raise its outriggers because of the narrow entrance to that harbor. Due to the rough weather, these poles were damaged. The vessel departed from Fort Bragg on June 3 and finally arrived in Seattle on June 7, 1973, where further engine repairs, including a Caterpillar bracket for the oil cooler supply line, were accomplished by a Caterpillar dealer and another concern.

The MARCY J left Seattle on July 12 and arrived in Kodiak, Alaska, on July 19, where she has been engaged in the crab and shrimp fishery business since July 28.

The district court found that the foregoing casualties were "the direct result of a failure of the (Caterpillar) oil cooler supply line" (R. 113) and were not caused by the failure of the oil alarm hose (on the MARCY J) and/or the Murphy switchgage (R. 115). Failure reports and warranty claims about the oil cooler supply line had previously been received by Caterpillar, which was found negligent for failing to design a longer-lived oil cooler supply line and for failure to advise dealers to add a bracket assembly (manufactured by Caterpillar) to the oil cooler supply line or to retrofit a bracket to existing engines. Judge McGovern found that plaintiff's oil cooler supply line failed on April 19, 24 and May 31, 1973, as a direct result of Caterpillar's negligence, forcing plaintiff to pay $39,030.22 for engine repairs, towing ⁵ and repairs to MARCY J's outriggers. ⁶ Concluding that its jurisdiction was based on diversity and not admiralty, the court refused to accept plaintiff's $107,000 claim for lost profits because they assertedly were barred by the law of the applicable state. ⁷

The court also found that the damages were not caused by plaintiff's contributory negligence and that the failures of the oil alarm system and the Murphy switchgage were not due to his negligence and were not the proximate cause of the damages.

Caterpillar has appealed from the $39,030.22 (plus 8% Interest) judgment entered against it, and plaintiff has cross-appealed on the ground that the district court had admiralty jurisdiction and should have awarded him $107,000 for lost profits. We affirm with respect to Caterpillar's appeal and reverse and remand with respect to Jones' cross-appeal.

I. Liability for Negligence

Plaintiff concedes that "the case is one purely of negligence" (Br. 13) because he has not attacked the trial court's dismissal of any strict liability claims as not being properly raised by the pleadings. The basis of the claim of liability centers on the fact that although Caterpillar designed the oil cooler supply line to last the life of the engine under normal use, plaintiff's line failed three times because it was not supported by a bracket. Once even a makeshift bracket was installed in June 1973, no more problems occurred.

Caterpillar's initial challenge to the judgment below is that the district court erred in finding negligence liability on this claim. It argues first that the evidence was insufficient to support the finding that it was negligent, alternatively that its negligence was not the proximate cause of plaintiff's damages, and finally that plaintiff should be deemed contributorily negligent.

A. Caterpillar's Negligence

In seeking to establish Caterpillar's negligence, plaintiff relies on three alternate theories: that Caterpillar was negligent in its design of the oil cooler supply line, that it negligently analyzed warranty and similar claims, and that it was negligent in failing to give sufficient advice to its dealers of the bracket assembly change. Without implying the inadequacy of the first two theories, in affirming the finding of negligence we focus on the third theory because it is sufficient itself to justify liability for negligence.

The evidence showed that after Caterpillar was advised in 1970 of the problem with the line by one service engineer, a different engineer, Milford Morgan, designed a support bracket that was described as change no. 4 to the oil lines group. Change no. 4 was dated October 29, 1970, and given an urgent classification. It was designed to apply to earlier engines, and Morgan specifically advised Caterpillar's Service Engineering Department that it was possible to retrofit the change to earlier engines.

Nonetheless, apparently the Caterpillar dealers in the Canal Zone, San Diego and Fort Bragg all had not been notified effectively of the change at the time they were visited by the MARCY J. Caterpillar's San Diego dealer first heard of the bracket only through a second call to Caterpillar in Peoria, Illinois, on June 1, 1973. He had not received Caterpillar's May 7, 1971, product bulletin nor otherwise known of the bracket. He communicated the news of the bracket to the caterpillar's Fort Bragg dealer while...