Signal Oil & Gas Co. v. Barge W-701

• Citation: 654 F.2d 1164
• Decision Date: 04 September 1981
• Docket Number: No. 79-2791,W-701,79-2791
• Parties: SIGNAL OIL & GAS COMPANY, et al., Plaintiffs-Appellees, Cross-Appellants, v. The BARGE, et al., Defendants, Sun Oil Company and Acquitaine Oil Corporation, Defendants-Appellees, Appellants-Cross-Appellees, Williams-McWilliams Company, Defendant-Appellee, Cross-Appellee-Cross-Appellant, Employer Surplus Lines Insurance Company, et al., Defendants-Cross-Appellees, Cross-Appellants, J. Ray McDermott and Company, Inc., Defendant-Appellant, Cross-Appellee. . Unit A
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1164

654 F.2d 1164

SIGNAL OIL & GAS COMPANY, et al., Plaintiffs-Appellees Cross-Appellants, v. The BARGE W-701, et al., Defendants Sun Oil Company and Acquitaine Oil Corporation Defendants-Appellees, Appellants-Cross-Appellees Williams-McWilliams Company, Defendant-Appellee, Cross-Appellee-Cross-Appellant, Employer Surplus Lines Insurance Company, et al., Defendants-Cross-Appellees, Cross-Appellants, J. Ray McDermott and Company, Inc., Defendant-Appellant, Cross-Appellee.

No. 79-2791.

United States Court of Appeals, Fifth Circuit.

Unit A

Sept. 4, 1981.

Robert B. Acomb, Jr., New Orleans, La., for defendant-appellant, cross-appellee.

P. A. Bienvenu, New Orleans, La., for Sun Oil & Gas Co. and Aquitiane Oil Corp.

Henry J. Read, A. Gordon Grant, Jr., New Orleans, La., for Signal Oil, La. Land & Exp., Amerada Hess and Marathon Oil.

Deutsch, Kerrigan & Stiles, Bert M. Cass., Jr., Brunswick G. Deutsch, New Orleans, La., for Williams-McWilliams and Employers Surplus Lines Ins. Co.

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

Before GEE, TATE and WILLIAMS, Circuit Judges.

GEE, Circuit Judge:

This appeal marks the second time this sad affair of a ruptured pipeline has been before this court. A bifurcated trial was ordered below, and the liability findings and conclusions were affirmed per curiam in an unpublished opinion by a panel of this court in 1976. The decision rendered by the district court in the damages portion of these proceedings, recorded at 468 F.Supp. 802 (E.D.La.1979), prompts the present appeal. An abbreviated summary of pertinent facts is presented here; the factual situation and the attendant relationships among the several parties are more than a little confusing, and the district court opinion adequately sets out the facts of the accident and the course of proceedings below.

Signal Oil & Gas Company, Louisiana Land & Exploration Company, Amerada Hess Corporation, and Marathon Oil Company ("SLAM") jointly operated an oil production rig in the Gulf of Mexico off the coast of Louisiana. The SLAM pipeline was the conduit for production from the SLAM platform to shore. Sun Oil Company ("Sun") operated a platform nearby but did not enjoy a similar access to shore. SLAM and Sun negotiated an agreement allowing Sun to hook up to the SLAM pipeline. Sun agreed to indemnify SLAM for any losses it might suffer thereby. Sun contracted with J. Ray McDermott ("McDermott") to handle this construction. McDermott, in turn agreed to indemnify Sun for any losses incident to the construction. McDermott contracted with Williams-McWilliams ("Williams"), the vessel owner, for the use of a barge and crew in aid of its construction activities. McDermott and Williams did not enter into any indemnity agreement.

While operating near the SLAM platform, the Williams barge fouled anchor on an obstruction the SLAM pipeline, as was shortly seen. Meeting resistance in his efforts to retrieve the anchor and change positions, the barge superintendent, Southon, ordered a "dogging" technique to free it. In "dogging," the anchor line is drawn tight and secured while the barge is in a trough; when the barge is lifted by the next swell, the power of the sea itself is used to dislodge the anchor. Unfortunately for all concerned, this retrieval also "dislodged" a chunk of SLAM pipeline. SLAM production operations were interrupted and substantial repairs required.

A roundrobin of claims were consolidated for trial. In the liability phase of this bifurcated trial, the judge arrived at the following conclusions: (1) the negligence of the barge superintendent, for which Williams bore full responsibility, was the sole proximate cause of the accident; (2) Williams was consequently liable to SLAM in tort; (3) Sun was liable to SLAM on its contract of indemnity; (4) McDermott was liable on its indemnity agreement to Sun; and (5) Williams was liable for tort indemnity to Sun and McDermott. These findings were affirmed on appeal in an opinion of this court dated November 29, 1976, and are not before us on this appeal.

The tidy circle above, in which the negligent party was to bear the loss, was broken by the judge's more recent decision on damages that prompts this appeal. The district court found SLAM entitled to full recovery of its loss $1,116,234.62. The tortfeasor Williams, however, pursuant to 46 U.S.C. § 181 et seq., was entitled to limit its legal liability to the value of the barge, subsequently found by the district judge to be $450,000. The insurance carried by Williams in excess of its first $500,000 of coverage was held not subject to the Louisiana direct action statute. The combined effect of Williams' resort to the limitations statute and the inaccessibility to suit of its excess insurance coverage produced a maximum recovery, extractable from Williams and its insurers, of $500,000. Plaintiff SLAM consequently turned to indemnitor Sun for relief and Sun to McDermott. McDermott, left holding the bag with instructions to fill it, is the chief appellant here. It maintains that the district court erred (1) in allowing Williams to limit its liability for the results of this accident; (2) in allowing Williams an improper filing of this limitation; (3) in arriving at an incorrect valuation of the barge; (4) in awarding SLAM recovery of initial, unsuccessful repair costs; (5) in finding the umbrella insurance policy covering Williams unreachable under the Louisiana direct action statute; and (6) in finding McDermott liable on its contract of indemnity to Sun. Plaintiff SLAM, awarded recovery from Williams, its insurers, and McDermott, complains of an insufficient award of interest on its judgment and seeks attorneys' fees expended in securing its tort and indemnity recoveries.

We find no merit in any of McDermott's objections or in SLAM's complaint of an improper rate of interest; accordingly, we affirm the district court on those questions. We remand for computation and award to plaintiff SLAM of its attorneys' fees incurred in prosecuting its tort claim against Williams.

I. Williams' Right to Limit its Liability.

McDermott, a nonnegligent party, has been cast in judgment for over half the award to the SLAM group. McDermott implores this court to reverse a result "based upon a fragile, interrelated structure of erroneous findings and conclusions, reversal of any one of which will cause the structure to topple." We reject that characterization of the judgment below. McDermott's plight stems from a contract willingly signed and a federal statute of ancient and venerable origin. In rejecting its claims, we turn first to its attacks on the statute's application to this case.

McDermott does not dispute that the nature of the accident and the parties makes this incident generally the kind in which the vessel owner may move to limit its liability. Rather, the argument that this limitation defense should have been denied Williams relies on McDermott's allegations that by its actions Williams has incurred liability that traditionally escapes the statute's protective sweep. McDermott argues that Williams' actual liability should exceed the limitation amount under the "Personal Contract Doctrine."

Properly invoked, this doctrine deprives a shipowner of the benefits of limitation and exposes him to the full burden of liability his actions produced. Surveying the history and purpose of the limitations statute, the Supreme Court in Richardson v. Harmon, 222 U.S. 96, 107, 32 S.Ct. 27, 30, 56 L.Ed. 110 (1911), wrote:

Thus construed, the section harmonizes with the policy of limiting the owner's risk to his interest in the ship in respect of all claims arising out of the conduct of the master and crew, whether the liability be strictly maritime or from a tort nonmaritime, but leaves him liable for his own fault, neglect, and contracts.

McDermott argues that Williams now must answer for its "own fault, neglect, and contracts" apart from its vicarious liability for the negligence of its barge superintendent, which latter liability has been limited under the federal statute. The elements of this alleged fault are: (1) provision to McDermott of an unseaworthy vessel; (2) breach of an implied warranty to perform services in a workmanlike manner; and (3) breach of Williams' warranty to McDermott that it enjoyed "effectual" insurance coverage.

Before further considering its application to this case, we examine briefly the nature of the Personal Contract Doctrine. The cryptic reference in Richardson to the vessel owner's inability to limit liability for his own fault, neglect, and contracts, rather than those of his captain and crew, does not offer much guidance. This language could have been read to mean that limitation was available only against tort claims that such a contractual undertaking by a vessel owner as with a shipper, for example, was not subject to the statute despite satisfaction of the stated requirements for limitation. As noted by G. Gilmore & C. Black, The Law of Admiralty § 10-26, at 899 (2d ed. 1975) (hereinafter Gilmore & Black), subsequent cases have rendered such a reading of the doctrine improper. "It is by no means clear exactly what a 'personal contract' is, but it is clear that not all contracts are 'personal', even though entered into personally by the shipowner." Id. Analysis of the cases delineating the types of contracts that fall within the designation "personal" is of scant assistance to our inquiry. For example, bills of lading have been held not to be personal contracts, Earle & Stoddart, Inc. v. Ellerman's Wilson Line, Ltd., 287 U.S. 420, 53 S.Ct. 200, 77 L.Ed. 403 (1932); Gilmore & Black, § 10-26 at 899. Charter parties, on the other hand have been four times treated as personal contracts by the Supreme Court in denying limitation to vessel owners. Gilmore & Black, id. The parties have not directed our attention to, nor have we found, any case discussing...