Southworth v. F ( 1993 )

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
No. 92-1693
SOUTHWORTH MACHINERY CO., INC.,
Plaintiff, Appellee,
v.
F/V COREY PRIDE, ET AL.,
Defendants, Appellees,
ALL TRAWL, INC. AND ROBERT ANDERSON,
Defendants, Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Marianne B. Bowler, U.S. Magistrate Judge]
Before
Selya, Cyr and Boudin, Circuit Judges.
John H. Ronan for appellants.
D. Alice Olsen with whom Joseph A. Regan, Debra A. Joyce and
Morrison, Mahoney and Miller were on brief for appellees.
June 2, 1993
BOUDIN, Circuit Judge. On October 19, 1987, Southworth
Machinery, Inc. ("Southworth") filed in the district court an
admiralty suit in rem against the vessel F/V Corey Pride
("Corey Pride") and in personam against All Trawl, Inc. ("All
Trawl"), Robert Anderson, and James Corey for breach of
contract. All Trawl is a Massachusetts commercial fishing
corporation which owns the Corey Pride and Anderson is All
Trawl's president. James Corey is identified in Southworth's
complaint as either an agent or principal of All Trawl.
Southworth sought to recover a balance of $12,148.28 due
for its assembly and installation of a refurbished diesel
engine for the Corey Pride pursuant to an oral contract
between itself and Anderson. Shortly after the engine was
installed on the vessel by a Southworth employee, a fire
broke out on the Corey Pride while it was out at sea on a
fishing expedition. Claiming that the fire was caused by
defective engine parts and faulty installation, defendants
Corey Pride, All Trawl, and Anderson filed counterclaims
against Southworth for breach of contract, breach of express
and implied warranties, and breach of the Massachusetts
Consumer Protection Act, Mass. Gen. L. ch. 93A ("chapter
93A"). An additional claim for negligence was later asserted
at trial.
Southworth's claims against Anderson and James Corey
were dismissed without objection prior to trial. As a
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result, James Corey was out of the case altogether and
Anderson continued only as a counterclaimant. The remaining
claims were tried in December 1990 before a magistrate judge
by consent of the parties. 28 U.S.C. 636(c). At the
conclusion of the trial, the magistrate judge found that
Southworth had breached express and implied warranties, its
duty of care, and chapter 93A in connection with its sale and
installation of the engine, and that these breaches caused
the fire aboard the Corey Pride. Specifically, the
magistrate judge found that the fire was caused by a
defective makeshift oil pressure line connected to the engine
and installed by Southworth's agent. All Trawl and Anderson
were awarded $38,509 in damages together with interest and
costs.
The magistrate judge declined to award multiple damages
under chapter 93A for willful or knowing violations of the
statute. The magistrate judge also declined to award
attorney's fees to All Trawl and Anderson under chapter 93A,
concluding that such an award would conflict with general
federal maritime law under which the parties bear their own
legal fees. Lastly, the magistrate judge held that All
Trawl was liable to Southworth for the $12,148.28 balance due
under the contract for the purchase of the engine, which
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remained in workable condition after the fire and which the
Corey Pride continued to use.1
Judgment was entered by separate order on January 3,
1992. In this appeal, All Trawl and Anderson contend that
the magistrate judge erred in disallowing multiple damages
and attorney's fees and in holding All Trawl liable to
Southworth for the balance due under the purchase and sale
contract. Southworth has not appealed the judgment against
it.
We address at the outset a question concerning our
appellate jurisdiction. The judgment entered by the
magistrate on January 3, 1992, did not formally dispose of
all of the claims against all of the parties. See Fed. R.
Civ. P. 54(b). Accordingly, this court issued an order to
the parties raising the subject of our jurisdiction to
consider this appeal. Southworth responded with a motion to
dismiss the appeal, contending that the judgment was a
nonfinal and hence unappealable order. See 28 U.S.C. 1291.
Our subsequent review of the record has revealed that
certain claims omitted from the January 3 judgment were
dismissed prior to trial and others were disposed of in the
magistrate judge's written decision. The "separate document"
1The magistrate judge also held that Anderson was liable
for the balance of the purchase price. At oral argument in
this court, Southworth conceded that the judgment against
Anderson was incorrect since all claims against Anderson had
been dismissed before trial.
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rule does not defeat appellate jurisdiction where a timely
appeal is filed and the parties do not suffer any prejudice
from the absence of a separate document entering judgment on
claims that were clearly disposed of in an earlier order.
Smith v. Massachussetts Dep't of Correction, 936 F.2d 1390,
1393-94 (1st Cir. 1991); Smith-Bey v. Hospital
Administrator, 841 F.2d 751, 756 (7th Cir. 1988).
The only seemingly unresolved matter that may be of
lingering interest to the parties is Southworth's in rem
claim against the Corey Pride under a maritime lien. The
magistrate judge's opinion did not explicitly address the in
rem claim. However, under 28 U.S.C. 1292(a)(3), we have
jurisdiction over interlocutory decrees in admiralty cases as
long as the order appealed from finally determines the rights
and liabilities of the parties on a particular claim or
issue. See Martha's Vineyard Scuba Headquarters, Inc. v.
Unidentified, Wrecked & Abandoned Steam Vessel, 833 F.2d
1059, 1062-64 (1st Cir. 1987). Since the claims involved in
this appeal were conclusively decided by the magistrate
judge, we have jurisdiction over them.
Turning to the merits, we affirm the magistrate's
disallowance of multiple damages under chapter 93A. Section
11 of chapter 93A governing business disputes provides for up
to three times the amount of actual damages for "willful or
knowing" violations of section 2, which prohibits unfair or
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deceptive trade practices.2 Anderson and All Trawl premise
their claim for multiple damages on Southworth's failure to
adequately investigate the cause of the fire and to make a
reasonable settlement offer. This failure to fully
investigate, say Anderson and All Trawl, constituted a bad
faith response to their demand for relief under chapter 93A.
It is unclear whether section 11 permits recovery of
multiple damages under such a theory where bad faith is
proved. Section 9 provides for multiple damages where a
demand is refused in bad faith, but section 9 is by its terms
inapplicable (see note 2, above) and section 11 has no such
counterpart language. Massachusetts case law is murky as to
whether the bad faith refusal concept can be read into
section 11. Glickman v. Brown, 21 Mass. App. Ct. 229, 238 n.
7, 486 N.E.2d 737, 743 n. 7 (1985), expressly holds that the
bad faith response provision "has no application" to claims
governed by section 11. On the other hand, the Massachusetts
Supreme Judicial Court has employed language that may look
2Section 11 applies to claims brought by "[a]ny person
who engages in the conduct of any trade or commerce and who
suffers any loss of money or property . . . as a result of
[unfair competition or unfair or deceptive practices] by
another person who engages in any trade or commerce . . . ."
Mass. Gen. L. ch. 93A, 11. Section 9, which has a
different multiple damage provision, applies to "[a]ny
person, other than a person entitled to bring an action under
section eleven of this chapter . . . ." Mass. Gen. L. ch
93A, 9(1). There is no question that the parties here were
acting in a business context. At trial, Anderson testified
that he purchased the engine for business reasons.
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the other way. International Fidelity Ins. Co. v. Wilson,
387 Mass. 841, 857, 443 N.E.2d 1308, 1318 (1983).
We need not pursue the issue because the magistrate
judge found that Southworth did not act in bad faith. The
magistrate judge agreed that Southworth did not conduct a
full investigation of the accident when rejecting liability
but found that this was due to its reasonable belief, after
some amount of investigation, that the cause of the fire was
electrical. Shortly after receiving notice of the fire,
Southworth sent its employee who had installed the engine to
investigate. The employee did not observe any problems with
the engine and reported that the fire was possibly caused by
an electrical failure. An electrician not associated with
Southworth had installed temporary wiring on the Corey Pride
days before the fire broke out.
All Trawl's own investigator determined that the fire
was caused by oil leaks from the engine but Southworth not
surprisingly chose to rely on its employee's assessment.
Based on this evidence the magistrate judge concluded that
Southworth's belief that it was not responsible for the fire
was "not unfounded," and thus its failure to conduct
additional investigation did not warrant multiple damages.
The magistrate judge's finding is supported by the record,
has not been challenged on appeal, and therefore ends the
matter.
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We also affirm the magistrate judge's determination that
All Trawl is liable for the unpaid portion of the purchase
price of the engine. Because the engine was not damaged by
the fire aside from some minor paint peeling, All Trawl
decided to keep the engine for use on the Corey Pride. At
trial, Anderson testified that the engine was still in use
and that he was satisfied with its operation. Under section
2-607 of the Uniform Commercial Code,3 a buyer who accepts
goods is liable for the contract price, although the buyer
may recover damages resulting from any defect. 4 Anderson,
Uniform Commercial Code 2-607:15 (3d ed. 1983); Micromedia
v. Automated Broadcast Controls, 799 F.2d 230, 235-36 (5th
Cir. 1986).
All Trawl argues that the contract is a service contract
and therefore is not governed by the policies of the UCC's
sale of goods provisions. The magistrate judge found that
the predominant purpose of the contract was to provide an
engine and that the supply of labor was only incidental. See
Cambridge Plating Co., Inc. v. Napco, Inc., No. 92-2242,
3Although the contract (involving the sale and
installation of a rebuilt engine for use on an existing
commercial vessel) is maritime in nature and therefore
governed by general federal maritime law, 1 Friedell,
Benedict on Admiralty 186-87 (7th ed. 1993), the UCC is
considered a source for federal admiralty law. Interpool
Ltd. v. Char Yigh Marine, S.A., 890 F.2d 1453, 1459 (9th
Cir. 1989), amended, 918 F.2d 1476 (9th Cir. 1990); Clem
Perrin Marine Towing, Inc. v. Panama Canal Co., 730 F.2d 186,
189 (5th Cir.), cert. denied, 469 U.S. 1037 (1984).
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slip. op. at 7 (1st Cir., April 22, 1993). In any event, by
retaining the engine and obtaining damages for the harm done
through misinstallation, All Trawl has been restored to the
position it would have been in had the contract been
performed. This is the general aim of suits for contract
damages, Farnsworth, Contracts 12.8, at 871 (2d ed. 1990),
and there is no reason why All Trawl should be placed in a
position even better than it would have obtained if
Southworth had flawlessly performed the original contract.
The remaining issue concerns attorney's fees under
chapter 93A. Prevailing claimants under chapter 93A are
ordinarily entitled to recover reasonable attorney's fees
incurred in connection with the chapter 93A claim. Mass.
Gen. L. ch. 93A, 11. Although finding that Southworth had
breached chapter 93A, the magistrate judge declined to award
attorney's fees. She reasoned that such an award would
conflict with federal maritime law under which the parties
pay their own fees absent bad faith or oppressive litigation
tactics. See Templeman v. Chris Craft Corp., 770 F.2d 245,
250 (1st Cir.) cert. denied, 474 U.S. 1021 (1985); Goodman v.
1973 26 Foot Trojan Vessel, 859 F.2d 71, 74 (8th Cir. 1988).
Under the "saving to suitors" clause, 28 U.S.C.
1331(1), claimants in an admiralty case are not restricted to
maritime relief but may also pursue remedies provided by
state law. E.g., Ellenwood v. Exxon Shipping Co., 984 F.2d
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1270, 1279 (1st Cir. 1993). However, "the extent to which
state law may be used to remedy maritime injuries is
constrained by a so-called ``reverse-Erie' doctrine which
requires that the substantive remedies afforded by the States
conform to governing federal maritime standards." Offshore
Logistics, Inc. v. Tallentire, 477 U.S. 207, 223 (1986).
Thus, where the subject-matter falls within the admiralty
jurisdiction, state law may ``supplement' federal maritime law
but may not directly contradict it. Gilmore & Black, The Law
of Admiralty 1-17, at 49-50 (2d ed. 1975); Austin v.
Unarco Industries, Inc., 705 F.2d 1, 6 n. 1 (1st Cir.), cert.
dismissed, 463 U.S. 1247 (1983).
Pertinently, in Templeman, 770 F.2d at 250, we held that
a Puerto Rico rule providing for attorney's fees, although
part of the substantive law of the Commonwealth, was
inapplicable in an action cognizable in admiralty. This was
so, we noted, even though the underlying cause of action was
created by Puerto Rico law and federal court jurisdiction
happened to be based on diversity. Accord Sosebee v. Rath,
893 F.2d 54 (3d Cir. 1990) (Virgin Islands attorney's fees
statute; territorial jurisdiction); 1 Benedict on Admiralty
114, at n.2 (1993 Supp.) (approving Sosebee). See also
Carey v. Bahama Cruise Lines, 864 F.2d 201, 206-08 (1st Cir.
1988) (Massachusetts bar to recovery if plaintiff is more
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than 50% negligent incompatible with admiralty rule that
contributory negligence only mitigates damages).
State statutes providing for attorney's fees may
sometimes be given effect in admiralty cases, notably, where
the attorney's fees are awarded incident to a dispute that is
not normally a subject of maritime law. For example, in Pace
v. Insurance Company of North America, 838 F.2d 572, 578-79
(1st Cir. 1988), we held that maritime law did not preempt a
Rhode Island cause of action allowing recovery of damages and
attorney's fees for an insurer's bad faith refusal to pay or
settle claims; the refusal to settle claims is normally left
untouched by maritime law. More recently, in Ellenwood, we
held that admiralty law likewise did not foreclose state
claims based upon state handicap discrimination statutes, for
maritime law did not address the subject of handicap
discrimination. 984 F.2d at 1280.
Turning to the case at hand, Southworth's liability
under chapter 93A was not predicated on any ground novel to
or unaddressed by maritime law. Rather, Southworth was found
liable as a result of its breach of its express warranty for
parts and workmanship incident to the repair of a ship, a
standard contractual breach to which maritime law has always
applied. See Zych v. Unidentified, Wrecked & Abandoned
Vessel, 941 F.2d 525, 531 (7th Cir. 1991). The conduct found
to violate chapter 93A falls squarely within the focus of
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existing maritime law, and chapter 93A's attorney's fee
provision, being inconsistent with maritime law, cannot be
applied in this case.
Affirmed.