McGehee v. Panama Canal Com'n

• Decision Date: 19 May 1989
• Docket Number: No. 88-3230,88-3230
• Citation: 872 F.2d 1213
• Parties: Patricia McGEHEE, wife of/and W.R. McGehee, Plaintiffs-Appellees, v. The PANAMA CANAL COMMISSION and S/S TEXACO KENTUCKY, in rem, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1213

872 F.2d 1213

1989 A.M.C. 2112

Patricia McGEHEE, wife of/and W.R. McGehee, Plaintiffs-Appellees, v. The PANAMA CANAL COMMISSION and S/S TEXACO KENTUCKY, in rem, Defendants-Appellants.

No. 88-3230.

United States Court of Appeals, Fifth Circuit.

May 19, 1989.

Cynthia J. Thomas, Francis M. Kirk, Panama Canal Com'n, Office of General Counsel, Miami, Fla., for defendants-appellants.

Andrew C. Wilson, Daniel E. Knowles, III, New Orleans, La., for plaintiffs-appellees.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before REAVLEY, POLITZ and SMITH, Circuit Judges.

POLITZ, Circuit Judge:

The sole question posed by this appeal is whether the district court erred in awarding interest to Patricia and W.R. McGehee on their judgment against the

Panama Canal Commission. Concluding that interest should not have been awarded, we reverse.

Background

On July 26, 1982, the TEXACO KENTUCKY, a tanker under the control of a Panama Canal Commission pilot, crashed into a pier in Cristobal, Republic of Panama, and damaged several yachts, including the S/K MATANG, a sailing ketch owned by the McGehees. The collision occurred outside the locks of the Panama Canal. The Commission's Board of Local Inspectors conducted a prompt inquiry and concluded that the Commission's employee was at fault and that the Commission was responsible. The Commission attempted to adjust the claim pursuant to section 1412 of the Panama Canal Act of 1979, ¹ but the parties could not agree on a settlement figure. The McGehees' demand exceeded $120,000 and the Commission reported the claim to Congress, as then required by sections 1412 and 1415 of the Act.

In 1985 Congress amended section 1416 of the Act ² to permit an aggrieved party to sue the Commission in the United States District Court for the Eastern District of Louisiana. ³ The McGehees did so. Liability was stipulated; damages were contested. The district court awarded the McGehees $93,900 for property damage, the cost of transporting the ketch, living expenses during the repair period, and other miscellaneous expenses. The court also awarded 8 1/2 prejudgment interest from date of the casualty to date of judgment, and thereafter postjudgment interest at the legal rate. The government appeals.

Analysis

We begin with the general proposition that sovereign immunity bars an award of interest against the United States. Perez v. United States, 830 F.2d 54 (5th Cir.1987). The rule admits of exceptions, two of which are relevant in this case. ⁴ The United States may be ordered to pay interest when Congress has expressly consented to such an award, Library of Congress v. Shaw, 478 U.S. 310, 106 S.Ct. 2957, 92 L.Ed.2d 250 (1986), and when Congress has

shed the cloak of sovereignty and given an agency the status of a commercial operation, Loeffler v. Frank, --- U.S. ----, 108 S.Ct. 1965, 100 L.Ed.2d 549 (1988). The focus of the first exception is whether the legislation giving rise to the cause of action expressly subjects the government to interest payments. The second exception turns on whether Congress, in creating the agency, intended a waiver of immunity from interest awards. In the case at bar, the statutory scheme giving rise to the McGehees' cause of action--the Panama Canal Act of 1979, implementing the Panama Canal Treaty of 1977, T.I.A.S. No. 10030--also creates the agency involved, the Panama Canal Commission. ⁵

1. Express waiver

In Library of Congress v. Shaw, the Supreme Court considered whether Congress had expressly waived interest immunity when it enacted section 706(k) of Title VII of the Civil Rights Act of 1964, 42 U.S.C. Sec. 2000e-5(k). In discussing the issue, the Court observed:

This basic rule of sovereign immunity, in conjunction with the requirement of an agreement to pay interest, gave rise to the rule that interest cannot be recovered unless the award of interest was affirmatively and separately contemplated by Congress. See, e.g., United States ex rel. Angarica v. Bayard, 127 U.S. 251, 260 [8 S.Ct. 1156, 1161, 32 L.Ed. 159] (1888) ("The case, therefore, falls within the well-settled principle, that the United States is not liable to pay interest on claims against them, in the absence of express statutory provision to that effect"). The purpose of the rule is to permit the Government to "occupy an apparently favored position," United States v. Verdier, 164 U.S. 213, 219 [17 S.Ct. 42, 44, 41 L.Ed. 407] (1896), by protecting it from claims for interest that would prevail against private parties. See 4 Op.Atty.Gen. 136, 137 (1842).

For well over a century, this Court, executive agencies, and Congress itself consistently have recognized that federal statutes cannot be read to permit interest to run on a recovery against the United States unless Congress affirmatively mandates that result.

Shaw, 478 U.S. at 315-16, 106 S.Ct. at 2962-63.

The Court concluded that section 706(k), which renders the government liable "the same as a private person" for costs and attorneys' fees in a Title VII action, does not contain an express waiver of immunity from interest payments. In making that determination, the Court stated:

In analyzing whether Congress has waived the immunity of the United States, we must construe waivers strictly in favor of the sovereign, see McMahon v. United States, 342 U.S. 25, 27 [72 S.Ct. 17, 19, 96 L.Ed. 26] (1951), and not enlarge the waiver " 'beyond what the language requires,' " Ruckelshaus v. Sierra Club, 463 U.S. 680, 685-686 [103 S.Ct. 3274, 3277-78, 77 L.Ed.2d 938] (1983), quoting Eastern Transportation Co. v. United States, 272 U.S. 675, 686 [47 S.Ct. 289, 291, 71 L.Ed. 472] (1927). The no-interest rule provides an added gloss of strictness upon these usual rules.

Shaw, 478 U.S. at 318, 106 S.Ct. at 2963.

The McGehees' suit against the Panama Canal Commission was brought under section 1416 of the Panama Canal Act of 1979, which contains no reference to an award of interest. ⁶ Section 1413 of the Act ⁷ provides Congress cited Gulfspray III in the House Report accompanying H.R. 111, the bill that eventually became the 1979 Act. Specifically, in explaining the scope of a provision that became section 1416, the House Report states:

                the measure of damages "for injuries to a vessel for which the Commission is determined to be liable."    In adopting section 1413, Congress reenacted almost verbatim the provisions of section 293 of the Canal Zone Code, legislation ordained pursuant to the Panama Canal Treaty of 1903.  In Gulf Oil Corp. v. Panama Canal Co., 481 F.2d 561, 569 (5th Cir.1973) (Gulfspray III ), we held that section 293 provided for "a recovery of damages substantially parallel to that accorded by the general maritime law."    In addition to discussing a number of damages recoverable under section 293, we concluded that the Panama Canal Company was liable for prejudgment interest
                

Measure of damages generally.--This section would reenact the provisions of paragraph (c) of 2 C.Z. Code 293....

This section has been construed by the U.S. Court of Appeals for the 5th Circuit as establishing rules for recovery of damages substantially parallel to that accorded by general maritime law. Gulf Oil Corp. v. Panama Canal Company, 481 F.2d 561 (5th Cir.1973).

H.R.Rep. No. 98, 96th Cong., 1st Sess. 65-66, reprinted in 1979 U.S.Code Cong. & Admin.News 1034, 1068.

The McGehees refer to this portion of the legislative history and to Gulfspray III as authority for the proposition that there exists express congressional consent to an award of interest. To accept this proposition we would have to assume that in enacting section 293 Congress impliedly waived immunity from interest vulnerability, ⁸ an assumption which is impermissible after Shaw. Nor is the reference to Gulfspray III in the legislative history sufficient to carry the day. Several items of damages were at issue in that case. We are not persuaded that the general legislative reference may be taken as specifically blessing over the interest award. ⁹ Even if Congress so intended, such intent would not cross the Shaw threshold:

"[T]here can be no consent by implication or by use of ambiguous language. Nor can an intent on the part of the framers of a statute or contract to permit the recovery of interest suffice where the intent is not translated into affirmative statutory or contractual terms. The consent necessary to waive the traditional immunity must be express, and it must be strictly construed."

Shaw, 478 U.S. at 318, 106 S.Ct. at 2963 (quoting United States v. N.Y. Rayon Importing Co., 329 U.S. 654, 659, 67 S.Ct. 601, 604, 91 L.Ed. 577 (1947)).

Absent express statutory consent to an

award of interest, ¹⁰ we conclude, as did the court a quo, that interest cannot be assessed against the Commission on the basis of the express-waiver exception to the no-interest rule.

2. Commercial enterprise

In allowing interest on a judgment ordering payment under insurance policies issued by the United States, the Court opined in Standard Oil Co. v. United States, 267 U.S. 76, 79, 45 S.Ct. 211, 212, 69 L.Ed. 519 (1925):

When the United States went into the insurance business, issued policies in familiar form and provided that in case of disagreement it might be sued, it must be assumed to have accepted the ordinary incidents of suits in such business.

Three score years later in Shaw, the Court cited Standard Oil, observing:

The no-interest rule is similarly inapplicable where the Government has cast off the cloak of sovereignty and assumed the status of a private commercial enterprise.

Shaw, 478 U.S. at 317 n. 5, 106 S.Ct. at 2963 n. 5. While merely dicta in Shaw, the commercial-enterprise exception to the no-interest rule served as the basis for an award of interest against the United States Postal Service in Loeffler v. Frank. Loeffler sued the Postal Service under Title VII and won reinstatement with back pay. The trial court and court of appeals...