Smith v. United States

• Decision Date: 03 May 1965
• Docket Number: No. 9704.,9704.
• Parties: Sarah SMITH, Administratrix of the Estate of John C. Smith, Deceased, and George Thomas Holley, Appellants, v. UNITED STATES of America and Marine Transport Lines, Inc., as owners of the U.S.N.S. POTOMAC, for exoneration from or limitation of liability, Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

346 F.2d 449 (1965)

Sarah SMITH, Administratrix of the Estate of John C. Smith, Deceased, and George Thomas Holley, Appellants, v. UNITED STATES of America and Marine Transport Lines, Inc., as owners of the U.S.N.S. POTOMAC, for exoneration from or limitation of liability, Appellees.

No. 9704.

United States Court of Appeals Fourth Circuit.

Argued February 3, 1965.

Decided May 3, 1965.

Donald E. Klein, New York City (Schwartz & O'Connell, New York City, William K. Rhodes, Jr., Wilmington, N. C., and Amato, Babalas, Breit, Cohen, Rutter & Friedman and C. Arthur Rutter, Jr., Norfolk, Va., on brief), for appellants.

Louis R. Harolds, New York City (Harvey Goldstein, New York City, on brief), for The American Trial Lawyers Ass'n, amicus curiae.

William E. Gwatkin, III, Atty., Dept. of Justice (John W. Douglas, Asst. Atty. Gen., Morton Hollander and Leavenworth Colby, Attys., Dept. of Justice, and Robert H. Cowen, U. S. Atty., on brief), for appellees.

Before BRYAN and BELL, Circuit Judges, and CHRISTIE, District Judge.

ALBERT V. BRYAN, Circuit Judge.

In this maritime cause the question is whether in its contract with the United States for the management of United States Naval Ship (USNS) Potomac, Marine Transport Lines was an "agent" within the intent of the Public Vessels Act, 46 U.S.C. §§ 781-782. The decisive term appears in the following proviso which is engrafted by and upon that act from the Suits in Admiralty Act, 46 U.S.C. §§ 741, 745, both allowing an in personam libel against the United States:

"* * * Provided, That where a remedy is provided by this chapter it shall hereafter be exclusive of any other action by reason of the same subject matter against the agent or employee of the United States * * * whose act or omission gave rise to the claim. * * *" (Accent added.)

The District Judge concluded that Marine was such an agent. We hold he was right.

The decision meant that the appellants, Potomac crewman George Thomas Holley and the personal representative of crewman John C. Smith, could not sue Marine, but could sue only the United States, for damages for injury to Holley and the death of John Smith. These misfortunes, they charged, were the result of a fire and explosion, caused by Marine's negligence, aboard the Potomac at Morehead City, North Carolina, September 26, 1961. The vessel was a complete loss, the cost to refloat and repair exceeding her value.

Appellants' complaint is that the ruling of the District Judge deprived them of the jury trial guaranteed by the Jones Act, 46 U.S.C. § 688, for now their only recourse is a suit against the Government under the Public Vessels Act before the admiralty judge. The issue arose in proceedings initiated by the United States and Marine for exoneration or limitation of liability for the catastrophe. 46 U.S.C. § 183 et seq.; Supreme Court Admiralty Rule 51. Prosecution in any other forum against the United States and Marine of claims arising from the disaster was restrained. Each of the claimants moved for modification of the injunction to allow them to file actions elsewhere against Marine under the Jones Act with a jury trial, in the event exemption, exoneration or limitation were denied Marine. Save to permit the filing of protective suits against the bar of time pending determination of the issue here, the District Court denied the motions. From that ruling this appeal is prosecuted; it was allowed by special leave under 28 U.S.C. § 1292(b).

The Potomac, a Navy tanker owned by the United States, was a public vessel. Employed exclusively in hauling petroleum products to various military bases for national defense, she was under the direction and control of the Military Sea Transportation Service (MSTS). Subject to the other provisions of the contract with the Government, which was dated June 22, 1961, Marine undertook to "manage and conduct the business regarding the operation of such tankers", including the Potomac, "as may be furnished to it by the Government from time to time. * * *"

Contrary to claimant-appellants' assertion that Marine was in control of the vessel as a principal and not as an agent, we think the relevant portions of the agreement clearly demonstrate that the United States remained in control of the vessel at all times, with only her physical conduct delegated to Marine. In this Marine was acting solely as the Government's agent, an agent within the intent of the Public Vessels Act. With the particularly relevant portions emphasized, the key paragraphs are these:

"(b) The Contractor undertakes and promises to manage and conduct the business of the Government with respect to such tankers in accordance with such written directions or orders as to voyages and cargoes as the Government may from time to to time prescribe, and upon the terms and conditions herein provided, * * *. Commander Military Sea Transportation Service will issue to each Contractor operating instructions, which may be revised and supplemented from time to time. The Contractor shall authorize the Master of each tanker, in the Contractor\'s behalf, to receive and carry out orders, directions or instructions as regards employment of the vessel and prosecution of voyages, which may be issued by Commander Military Sea Transportation Service, * * *." Article 1.

"All tankers utilized in the operation of the contract are owned by the Government and are public vessels. * * * Article 2.

"(a) The Contractor shall operate the tankers in such services as the Government by written or telegraphic order may direct, * * *.

"(b) The Contractor shall equip, fuel, supply, maintain, man, victual and navigate the tankers.

"(c) The Contractor shall procure all personnel necessary to fill the complement of each tanker subject to the limitations listed below:

* * * * *

"(2) Any Master or Chief Engineer so procured and the compensation to be paid therefor shall be subject to approval by the Contracting Officer. * * *

* * * * *

"(6) * * * no deck or engineer officer shall be employed on any tanker unless he is a member of the United States Naval Reserve. * * *

* * * * *

"(9) The officers and members of the crew shall be subject only to orders of the Master or Contractor. All personnel of the Contractor employed in the performance of work under this contract, including the Master, other officers and crew members shall be employees of the Contractor at all times and not of the Government." Article 5. (All accent added.)

With its compensation put on a fixed fee basis, the Contractor was to be reimbursed for the costs incurred in the management and maintenance of the tanker. A part of the allowable costs were these:

"(i) Crew expenditures accruing during the term hereof in connection with the tankers hereunder, including

(a) Wages * * *, damages or compensation for death or personal injury * * *." Article 8. (Accent added.)

Insurance, the agreement directed, was to be taken out by the Contractor if required by the Government. In addition to its covenant to indemnify the Contractor for an uninsured responsibility, the Government was to be the dominus litis in the defense of all uninsured claims against the Contractor. Thus it was agreed that:

"(b) The contractor shall be reimbursed by the Government (1) for the cost of such insurance as may be required or approved by the Government; and (2) for liabilities of the Contractor to third parties * * * for * * * death or bodily injury not compensated by insurance or otherwise, arising out of the operation of the tankers in the performance of this contract, whether or not such liabilities are caused by the negligence of the Contractor, * * * provided such liabilities are represented by final judgments * * *.

* * * * *

"(d) The Contractor shall give the Government immediate notice of any suit or action filed, or any claim made, against the Contractor arising out of the performance of this contract, the cost and expense of which is reimbursable to the Contractor under the provisions of this contract, and the risk of which is then uninsured or in which the amount claimed exceeds the amount of insurance coverage * * *. If the liability is not insured, the Contractor shall, if required by the Government authorize representatives of the Government to settle or defend any such claim and to represent the Contractor in or take charge of any litigation in connection therewith.

"(e) * * * all officers and members of the crew of said tankers * * * shall be deemed to be third parties, and not employees of the Government." Article 14. (Accent added.)

Article 29 expressly empowered the Government to terminate the employment of the master or any member of the crew whose continued retention was considered prejudicial to the interest of the United States.

The Operating Instructions, which the Commander MSTS issued to the Contractor pursuant to the contract, further accent the constant control of the Government, with Marine only to run the ship as its agent. Specifying explicitly and in detail the responsibilities of the Contractor, they begin with the requirement that the ship carry the certificate of the Navy Secretary declaring the ship's status as a public vessel. They stress the continuing national character of the ship, underscoring the entitlement of the vessel to all the sovereign immunities and privileges of any Navy ship, including those of international and diplomatic stature, which Marine on its own could neither enjoy nor insist upon.

Just how the respective positions of the Government as principal, and Marine as agent, could have been drawn more distinctly is not readily conceivable. While there may be a variation in the interrelation of the crew and the Government in the two agreements, the present contract structures no less an agency than that constituted by the contract considered in Cosmopolitan Shipping Co. v. McAllister, 337 U.S. 783, 69 S.Ct. 1317, 93 L.Ed. 1692 (1949), and there held to retain for the Government the same control...