Vaughn v. Farrell Lines, Inc., 89-2221
| Citation | 937 F.2d 953 |
| Decision Date | 20 June 1991 |
| Docket Number | No. 89-2221,89-2221 |
| Parties | , Prod.Liab.Rep.(CCH)P 12,952 Margaret E. VAUGHN, Personal Representative of the Estate of Bernice W. Vaughn, Jr., Deceased; Margaret E. Vaughn, Plaintiffs, v. FARRELL LINES, INC., for itself, and as Successor to American Export Lines, Inc., Chevron, U.S.A., Inc., Successor to Gulf Oil Corporation, Isco, Inc., Successor to States Marine Lines, Keystone Shipping Company, Amoco Oil Company, Texaco, Inc., a Delaware Corporation, Defendants-Appellees. and MARINE TRANSPORT LINES, INC., Central Gulf Lines, Inc., Lykes Brothers Steamship Company, Inc., United Brands Company, Successor to United Fruit Company, a New Jersey Corporation; Trinidad Corporation, Defendants, v. FOSTER WHEELER CORPORATION, Third-Party Defendant-Appellant, and Armstrong Contract & Supply, Inc., a/k/a A C and S, Inc., A.P. Green Refractories Company, Armstrong Cork Company, Armstrong World Industries, Inc., Babcock & Wilcox Co., Carey Canada, Inc., Celotex Corporation, Combustion Engineering Inc., Eagle-Picher Industries, Inc., Fibreboard Corporation, GAF Corporation, H.K. Porter Company, Inc., Keene Corporation, National Gypsum Company, Owens-Corning Fiberglass Corporation, OCG, Inc., formerly known as Owens-Illinois Glass Company, Pittsburgh Corning Corporation, Raymark Industries, Inc., Turner & Newall, PLC, XYZ Companies (John Doe Third-Party Defendants), Third-Party Defendants. |
| Court | United States Courts of Appeals. United States Court of Appeals (4th Circuit) |
James Wilson Bartlett, III, argued (Aaron I. Lubling, on brief), Wilson, Elser, Moskowitz, Edelman & Dicker, Baltimore, Md., for third-party defendant-appellant.
John Thomas Ward, argued (Kathryn Miller Goldman, on brief), Quinn, Ward and Kershaw, P.A., Baltimore, Md., for defendants-appellees.
Before WIDENER and SPROUSE, Circuit Judges, and TILLEY, District Judge for the Middle District of North Carolina, sitting by designation.
This appeal arises from a judgment for indemnity against the third-party defendant, Foster Wheeler Corporation, by Farrell Lines and five other United States flag shipowners (shipowners). The district court, after a bench trial, held that the shipowners were entitled to recover on their claim for indemnity. 723 F.Supp. 1126. It also held that Foster Wheeler was not entitled to recover on certain of its cross claims against other third-party defendants. We affirm in part, reverse in part, and remand.
This controversy originated in an action instituted against the shipowners by the wife of a seaman for damages occasioned by his death from the asbestos related disease of mesothelioma. The decedent, Vaughn, was a seaman who worked for most of his career as a fireman/watertender, engineman, oiler and wiper on various vessels owned by U.S. flag shipowners. During the course of his employment he was exposed to the asbestos, which caused his death, in the boilers and engine rooms of the vessels in which he served. His wife, on her own behalf and as the representative of the estate, brought suit against the shipowners, asserting claims for unseaworthiness, as well as claims under the Jones Act.
The shipowners brought in as third-party defendants the manufacturers of the asbestos products involved and the boilers (containing asbestos insulation) that had been used on their ships. They sought indemnification. The shipowners tendered defense of plaintiff's claims to the third-party defendants and, pursuant to Federal Rules of Civil Procedure 14(c), demanded judgment in favor of the plaintiff against the third-party defendants. 1
Prior to trial, the plaintiff settled with the shipowners and all of the third-party defendants with the exception of appellant Foster Wheeler. The settlement provided for payment of $316,500 to be paid by the settling defendants in varying amounts. The share of the shipowners whose vessels contained Foster Wheeler boilers amounted to $54,883.17. 2 The plaintiff gave releases to the shipowners and to all third-party defendants, except, of course, Foster Wheeler. The releases did not contain a provision which released Foster Wheeler from liability. On the day of trial, Foster Wheeler settled with the plaintiff, for the amount of $4,000, and obtained a release.
In the non-jury trial which followed, the six shipowners whose vessels were equipped with Foster Wheeler boilers claimed indemnity against Foster Wheeler for the full amount they paid in settlement of plaintiff's claim, as well as for their attorneys' fees.
At the indemnity trial, Foster Wheeler alleged in its defense that the shipowners negligently increased the seaman's exposure to the asbestos by improper operational practices which caused the boilers to be repaired more frequently than would otherwise be necessary, and by performing repairs on the boilers at sea, which should have been performed at shipyards. The district court, in its oral opinion dated March 31, 1989, found that the presence of asbestos insulation in the Foster Wheeler boilers on the vessels in question caused the vessels to be unseaworthy and that Foster Wheeler had not proven its claims of wrongdoing against the shipowners. In its later written opinion, these findings were confirmed and the additional finding was made that the amount that the shipowners paid to the plaintiff in settlement of the underlying action was reasonable. 3
In its separate order dated October 18, 1989 the court entered judgment in favor of the shipowners and against Foster Wheeler in the amount of $72,883.17 which represented the full amount the six shipowners who sought indemnity from Foster Wheeler paid to plaintiff plus their attorneys' fees.
It is from this judgment that Foster Wheeler appeals.
Before we address the merits, we must first determine whether the shipowners' indemnity claim should be considered in admiralty. This court has previously recognized that "[a]ny noncontractual right to indemnity in respect of established tort liability arises out of the tortious conduct upon which the indemnitee's liability was established." White v. Johns-Manville Corp., 662 F.2d 243, 247 (4th Cir.1981). We have determined that the underlying tort claims from which the indemnity claim is derived in this action are maritime tort claims to be adjudicated under federal admiralty jurisdiction. Therefore, "[a] noncontractual indemnity claim arising therefrom is similarly a maritime claim." White, 662 F.2d at 247. Accordingly, we assess the shipowners' claim for indemnity under principles of maritime law.
The principal issue presented by this appeal is whether non-contractual indemnity is available after a settlement when the proposed indemnitor was notified of the underlying claim and tendered the defense, but refused to participate in the settlement. 4 We are of opinion that indemnity will be permitted on such a settled claim where four elements are established. First, the party seeking indemnity must initially show that an indemnitor-indemnitee relationship existed between itself and the proposed indemnitor. See e.g., Parfait v. Jahncke Service, Inc., 484 F.2d 296, 301 (5th Cir.1973), cert. denied, 415 U.S. 957, 94 S.Ct. 1485, 39 L.Ed.2d 572 (1974). Second, the indemnitee must demonstrate that it was under some compulsion to satisfy the claim of the original plaintiff. Glover v. Johns-Manville Corp., 662 F.2d 225, 229-30 (4th Cir.1981); Parfait, 484 F.2d at 303-05. Third, the indemnitee must prove that its settlement with the plaintiff in the underlying action was reasonable. Glover, 662 F.2d at 230; Parfait, 484 F.2d at 303-05; see also Wisconsin Barge Line, Inc. v. Barge CHEM 300, 546 F.2d 1125, 1129-30 (5th Cir.1977). Finally, the indemnitee must show that the unlawful action of the indemnitor proximately caused the injury to the original plaintiff. It is not sufficient that compulsion for the indemnitee to satisfy the plaintiff's claim be shown. The indemnitor "is entitled to try the question of its own [wrongdoing]." Maritime Overseas Corporation v. United States, 608 F.2d 1260, 1261 (9th Cir.1979).
We first address the showing the shipowners must make that an indemnitee-indemnitor relationship existed between themselves and Foster Wheeler. Parfait, 484 F.2d at 301. In the underlying action, the plaintiff's claims were based on theories of unseaworthiness, negligence, and strict liability. Therefore, the shipowners, through their third-party action for indemnity, can seek to transfer the ultimate liability to Foster Wheeler on the theory that Foster Wheeler was guilty of active or primary wrongdoing while they were innocent, or only passively or secondarily liable. This theory of indemnity is recognized in admiralty. See e.g., White v. Johns-Manville Corp., 662 F.2d 243, 249 (4th Cir.1981); Tri-State Oil Tool Industries, Inc. v. Delta Marine Drilling Co., 410 F.2d 178 (5th Cir.1969). It applies a principle of restitution to the situation where one person discharges liability that has been imposed on him by operation of law, but which should have been discharged by another. White, 662 F.2d at 249.
This active-passive theory typically arises when the indemnitee has been held absolutely liable for the wrongful act of another as in an "admiralty context where a shipowner held liable on an unseaworthiness claim is awarded indemnity against a third party whose negligence caused the unsafe condition resulting in injury to a seaman." White, 662 F.2d at 249; see also Simpson Timber Co. v. Parks, 390 F.2d 353 (9th Cir.), cert. denied, 393 U.S. 858, 89 S.Ct. 130, 21 L.Ed.2d 127 (1968). It was in almost this same context that the shipowners' right to indemnity arose in this case. In the indemnity trial, the district court found that the presence of asbestos insulation in the boilers manufactured by Foster Wheeler on shipowners' vessels rendered them unseaworthy; that such unseaworthiness caused the shipowners' to become liable to seaman...
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