Sosa v. M/V Lago Izabal

• Citation: 736 F.2d 1028,1986 A.M.C. 1426
• Decision Date: 19 July 1984
• Docket Number: No. 83-2199,83-2199
• Parties: Gonzalo SOSA, Plaintiff-Appellee, v. M/V LAGO IZABAL, her engines, etc. and Tracey Navigation Co., Ltd., Defendants, Tracey Navigation Co., Ltd., Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 1028

736 F.2d 1028

1986 A.M.C. 1426

Gonzalo SOSA, Plaintiff-Appellee, v. M/V LAGO IZABAL, her engines, etc. and Tracey Navigation

Co., Ltd., Defendants,

Tracey Navigation Co., Ltd., Defendant-Appellant.

No. 83-2199.

United States Court of Appeals, Fifth Circuit.

July 19, 1984.

Ross, Griggs & Harrison, James E. Ross, J. Douglas Sutter, Houston, Tex., for defendant-appellant.

Stevens F. Mafrige, Houston, Tex., Arnold R. Ginsberg, Charles R. Lipcon, Miami, Fla., for plaintiff-appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before BROWN, GEE and RUBIN, Circuit Judges.

GEE, Circuit Judge:

Plaintiff Gonzalo Sosa, a Mexican seaman, brought this action against his employer, Tracey Navigation Co. ("Tracey"), and its vessel, the M/V LAGO IZABAL, for damages allegedly sustained as a result of the unseaworthiness of the defendant vessel. Tracey appeals from the district court's finding of unseaworthiness and award of substantial damages.

On January 21, 1980, the engine of the M/V LAGO IZABAL exploded as the ship attempted to dock at the Adams Terminal in Houston. Sosa, who was in the engine room at the time of the explosion, was covered with burning diesel fuel. As a result, over 80 percent of Sosa's body was burned; one-half of these burns were third degree.

The district court held that the vessel was unseaworthy and that its unseaworthiness proximately caused Sosa's injuries. The court awarded damages as follows:

(1) $19,723 for past lost earnings,

(2) $2,157,376 for future lost earning capacity,

(3) $42,547 for past medical expenses,

(4) $42,300 for future recommended medical procedures,

(5) $10,937,094.51 for future annual expenses,

(6) $10,000,000 for pain and suffering, and

(7) $2,644,863.26 for prejudgment interest.

From this judgment, Tracey appeals.

I. Choice of Law

Tracey argues that the district court erred in applying American law to this case and that the case thus should have been dismissed for lack of subject matter jurisdiction. Tracey confuses the concepts of subject matter jurisdiction and choice of law. Admiralty jurisdiction exists wherever the injuries occur on navigable water in connection with the navigation of a vessel. Fisher v. Danos, 671 F.2d 904, 906 (5th Cir.), cert. denied sub nom. Gulf Oil Corp. v. Fisher, 459 U.S. 840, 103 S.Ct. 89, 74 L.Ed.2d 83 (1982); Kelly v. Smith, 485 F.2d 520, 524 (5th Cir.1973), cert. denied sub nom. Chicot Land Co. v. Kelly, 416 U.S. 969, 94 S.Ct. 1991, 40 L.Ed.2d 558 (1974). Sosa was injured on navigable water in connection with the navigation of the M/V LAGO IZABAL; admiralty jurisdiction is present. Consequently, the only issue is whether the district court should have applied American or foreign maritime law. See G. Gilmore & C. Black, The Law of Admiralty 473 (2d ed. 1975). ¹

In deciding whether to apply American or foreign law, we examine the eight factors discussed in Lauritzen v. Larsen, 345 U.S. 571, 73 S.Ct. 921, 97 L.Ed. 1254 (1953), and Hellenic Lines, Ltd. v. Rhoditis, 398 U.S. 306, 90 S.Ct. 1731, 26 L.Ed.2d 252 (1970). ² As applied in our case, these are:

In examining these factors, we do not "merely add up the scores for and against, for the test is neither arithmetic nor mechanistic." DeOliveira v. Delta Marine Drilling Co., 707 F.2d 843, 845 (5th Cir.1983) (on rehearing). The trial court's choice of law is reviewed by us de novo. Diaz v. Humboldt, 722 F.2d 1216, 1218 (5th Cir.1984).

Tracey argues that the district court was clearly erroneous in finding that the place of the wrong was in the United States. While conceding that Sosa was actually injured in the Houston Ship Channel, Tracey maintains that the wrongful act "occurred" in Mexico before the vessel began its voyage to Houston because the Chief Engineer and Master of the vessel were made aware while in Mexico that the vessel's engine was in need of repair. While this may indicate that the wrongful acts occurred partly in Mexico, it does not show that the wrongful acts occurred exclusively in Mexico. Indeed, this unseaworthy condition--the unrepaired, damaged engine--was present throughout the voyage to Houston. Moreover, the actual use of the engine, an unseaworthy condition independent from the failure to repair, occurred only in Houston. Thus, many of the wrongful acts took place in the United States and this weighs in favor of applying American law.

Tracey also contends that the district court's finding of an American base of operations was clearly erroneous. We have held that an American base of operations is shown when a foreign owner is engaged in extensive business operations in this country. Diaz, 722 F.2d at 1218. The necessary operational contacts with the United States must relate to both the shipowner and the ship, Fajardo v. Tidewater, Inc., 707 F.2d 858, 862 (5th Cir.1983), and must be substantial, Diaz, 722 F.2d at 1218. The district court's determination of base of operations is a factual finding not to be disturbed on review unless clearly erroneous. Fisher v. Agios Nicolaos V, 628 F.2d 308, 318 (5th Cir.1980), cert. denied sub nom. Valmas Bros. Shipping, S.A. v. Fisher, 454 U.S. 816, 102 S.Ct. 92, 70 L.Ed.2d 84 (1981).

Tracey's answers to plaintiff's interrogatories along with the testimony of Arriaga, a Tracey shareholder, conclusively establish substantial operational contacts:

(1) the M/V LAGO IZABAL regularly loaded cargo in Houston, see Moncado v. Lemuria Shipping Corp., 491 F.2d 470, 473 (2d Cir.1974), cert. denied, 417 U.S. 947, 94 S.Ct. 3072, 41 L.Ed.2d 667 (1974) (base of operations established in part by frequency of shipowner's voyages beginning or ending in American ports);

(2) all operations for the management of the vessel were conducted out of a Houston office, see Diaz, 722 F.2d at 1218 ("[a]n important consideration for determining the base of operations is the location at which the day-to-day operating activities are conducted");

(3) actual maintenance of the vessel, other than that done by the crew, was performed in Houston;

(4) the vessel's shipping agent was a corporation located in Houston.

Consequently, the trial judge was not clearly erroneous in finding a Houston base of operations.

An examination of the Lauritzen/Rhoditis factors demonstrates that American law was properly applied. Aside from the American place of wrongful act and base of operations, we note that over 90% of Tracey's stockholders were United States residents; we look through the facade of foreign incorporation to the American ownership behind it. Rainbow Line, Inc. v. M/V TEQUILA, 480 F.2d 1024, 1027 (2d Cir.1973); Bartholomew v. Universe Tankships, Inc., 263 F.2d 437, 442 (2d Cir.1959). Accord, Rode v. Sedco, Inc., 394 F.Supp. 206, 209 (E.D.Tex.1975). We hold that these factors support the district court's application of American law. ³

II. Damages

A. Sosa's refusal to accept Tracey's offer of medical treatment.

Tracey argues that the district court erred as a matter of law in awarding past and future medical expenses to Sosa because Sosa refused the medical treatment offered by Tracey in Guadalajara. It cites Oswalt v. Williamson Towing Co., 488 F.2d 51, 53 (5th Cir.1974), for the proposition that a seaman who refuses medical treatment proffered by the vessel owner cannot hold the vessel owner liable for maintenance and cure. Here, however, the district court did not award maintenance and cure but, rather, awarded damages resulting from the unseaworthiness of the M/V LAGO IZABAL. Consequently, Sosa was not required to accept the medical treatment offered by Tracey.

B. Effect of inflation on lost future earnings.

Tracey argues that the district court failed to follow our holding in Culver v. Slater Boat Co., 688 F.2d 280 (5th Cir.1982) (Culver I ), ⁴ in adjusting the award of lost future earnings to take into account the effects of inflation. Culver I held that a trial judge could consider inflation in determining an appropriate damage award. One method of calculating the effect of inflation, approved by the Culver I court, requires a three step calculation:

(1) the fact finder projects plaintiff's annual earnings for the remainder of his estimated income-generating years using the average annual rate of increase in his own salary in the years prior to the incapacitating event, or, in the alternative, using the average wage increase of workers nationally or in the decedent's occupation and geographic area;

(2) the above lifetime earnings are converted to an average annual income by dividing the lump sum by the number of income-generating years;

(3) the present value of plaintiff's average annual income is then computed by determining how much money must be invested at the present time to yield each year the average income for the remaining income-generating years.

Culver I, 688 F.2d at 309.

The district court properly followed this formula in ascertaining the effect of inflation on Sosa's future earnings. Using a growth rate of 8.10% (the average annual rate of growth of compensation for American workers of all occupations), the district judge determined that Sosa's projected annual earnings would be $4,734,941. He then determined Sosa's average annual income and discounted this figure to present value at a rate of 6.98%. This figure, when combined with Sosa's pretrial loss of income, equalled $1,113,878.

Tracey complains, however, that the 8.10% growth rate does not apply to Mexican seamen. Plaintiff's economics expert, Dr. Allen, testified that the 8.10% rate would reflect the growth rate of compensation for Mexican seamen in that "the wage rates of individuals in different countries will be determined or influenced by ... factors" similar to those used in rates for American workers. Tracey offered no evidence contradicting this testimony. Consequently, we believe the district court was not clearly erroneous in applying the 8.10% rate to Sosa and we affirm its findings of lost future...