American Petroleum & Transport, Inc. v. City of New York , 737 F.3d 185 ( 2013 )


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  • 12-4505-cv
    American Petroleum and Transport v. City of New York
    UNITED STATES COURT OF APPEALS
    FOR THE SECOND CIRCUIT
    August Term 2013
    Heard: August 27, 2013                          Decided: December 6, 2013
    Docket No. 12-4505-cv
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    AMERICAN PETROLEUM AND TRANSPORT, INC.,
    Plaintiff-Appellant,
    v.
    CITY OF NEW YORK, DEPARTMENT OF TRANSPORTATION
    OF THE CITY OF NEW YORK,
    Defendants-Appellees.
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    Before: NEWMAN, RAGGI, and LYNCH, Circuit Judges.
    Appeal from the October 11, 2012, judgment of the United
    States District Court for the Southern District of New York (Paul
    A. Engelmayer, District Judge), dismissing a complaint by a
    vessel owner alleging economic losses for a maritime tort in the
    absence of property damages.
    Affirmed.
    James M. Maloney, Port Washington, NY
    (Law Office of James M. Maloney,
    Port Washington, NY, on the brief),
    for Appellant.
    Michael J. Pastor, Senior Counsel, New
    York, NY, (Michael A. Cardozo,
    Corporation Counsel of the City of
    New    York,    Kristin     Helmers,
    Corporation Counsel of the City of
    New York, New York, N.Y., on the
    brief), for Appellees.
    JON O. NEWMAN, Circuit Judge.
    The issue on this appeal is whether, under maritime law, an
    owner of a vessel may be awarded damages for economic loss due
    to negligence in the absence of physical damage to its property.
    For many years a number of courts have derived from the Supreme
    Court’s opinion in Robins Dry Dock & Repair Co. v. Flint, 
    275 U.S. 303
    (1927), a “rule” prohibiting such damages.      Plaintiff-
    Appellant American Petroleum and Transport, Inc. (“American”)
    appeals from the October 11, 2012, judgment of the United States
    District Court for the Southern District of New York (Paul A.
    Engelmayer, District Judge), granting a motion to dismiss by
    Defendants-Appellees City of New York and the New York Department
    of Transportation (“City”). See American Petroleum and Transport,
    Inc. v. City of New York, 
    902 F. Supp. 2d 466
    (S.D.N.Y. 2012).
    Although we conclude that Robins Dry Dock has been
    overread to establish a rule barring damages for economic loss
    in the absence of an owner’s property damage, we believe the rule
    has been so consistently applied in admiralty that it should
    continue to be applied unless and until altered by Congress or
    the Supreme Court.
    Background
    American    is   a   corporation   in   the   business   of
    transporting petroleum products by water. At all relevant times,
    American was the registered owner of a barge, the John Blanche,
    -2-
    and the demise charterer1 of a tug, the Caspian Sea.     The City
    operates a drawbridge, the Pelham Parkway Bridge, over the
    Hutchinson River.    In March 2011, the tug and the barge, after
    passing upstream on the Hutchinson River under the opened bridge,
    requested the City to open the bridge for the downstream voyage.
    Due to a mechanical malfunction, which American alleges was the
    result of negligence, the City did not open the bridge, delaying
    the tug and the barge for approximately two and one-half days.
    As a consequence of the delay, American alleges that it
    suffered $28,828 in economic losses.   American acknowledges that
    it did not suffer any property damage.
    In May 2012, American brought claims against the City
    for common law negligence and for violation of 33 U.S.C. § 494,
    which requires that a drawbridge over navigable water “be opened
    promptly by the persons owning or operating such bridge upon
    reasonable signal for the passage of boats and other water
    craft.”2   In October 2012, the District Court, relying on Robins
    1
    In a demise or bareboat charter, the charterer is owner
    pro hac vice of the vessel, and the charterer is treated as
    the owner of the vessel with a sufficient property interest to
    recover lost profits. The demise charter is “tantamount to,
    though just short of, an outright transfer of ownership.”
    Guzman v. Pichirilo, 
    369 U.S. 698
    , 700 (1962).
    2
    The District Court ruled that the City’s Department of
    Tansportation was an improper defendant, and American does not
    challenge that ruling on appeal. See American 
    Petroleum, 902 F. Supp. 2d at 467
    n.1.
    -3-
    Dry Dock v. Flint, 
    275 U.S. 303
    (1927), granted the City’s motion
    to   dismiss    under     Fed.   R.   Civ.     P.   12(b)(6).    See      American
    
    Petroleum, 902 F. Supp. 2d at 468-71
    .               The Court stated:
    The issue presented by the City’s motion
    to dismiss is whether the “Robins Dry Dock
    rule,” as the case law has come to refer to
    it, precludes American from recovery here.
    American is quite correct that, on its facts,
    Robins Dry Dock itself does not address the
    situation here: a claim for economic damages
    by a vessel’s owner (as opposed to a time
    charterer). However, since that decision, the
    courts in this Circuit have extracted from it
    a broader prohibition with respect to maritime
    tort suits that is fatal to American’s
    negligence claim here.
    Specifically, as the Second Circuit has
    stated, the Robins Dry Dock rule “effectively
    bars recovery for economic losses caused by an
    unintentional maritime tort absent physical
    damage to property in which the victim has a
    proprietary 
    interest.” 902 F. Supp. 2d at 468-69
    (quoting G & G Steel, Inc. v. Sea Wolf
    Marine Transportation, LLC, 380 Fed. Appx. 103, 104 (2d Cir.
    2010) (summary order), and citing Gas Natural SDG S.A. v. United
    States, No. 07-2129-CV, 
    2008 WL 4643944
    , at *1 (2d Cir. Oct. 21,
    2008) (summary order)).           Although both G & G Steel and Gas
    Natural    were   non-precedential           summary   orders,      see    2d   R.
    32.1.1(a), we had unequivocally stated in the latter decision,
    “[T]here exists a bright line rule barring recovery for economic
    losses caused by an unintentional maritime tort absent physical
    damage    to   property    in    which   the    victim   has    a   proprietary
    -4-
    interest.”    Gas    Natural,    
    2008 WL 4643944
    ,     at   *1   (internal
    quotation marks and citations omitted) (emphases in original).
    The District Court also concluded that most Circuits
    have held that 33 U.S.C. § 494 does not give rise to an implied
    private right of action. American 
    Petroleum, 902 F. Supp. 2d at 470
    .
    Discussion
    In Robins Dry Dock, a dry docking company damaged a
    propeller on a steamship, rendering the vessel unusable for two
    weeks.    The steamship’s time charterer sued the dry dock company
    to recover its lost profits resulting from the delay.                       The
    Supreme Court denied recovery.          See Robins Dry 
    Dock, 275 U.S. at 308-10
    .    The Court first ruled that the time charterer could not
    prevail as a third-party beneficiary of the contract between the
    vessel owner and the dry docking company. See 
    id. at 307-08.
    Turning to the time charterer’s tort claim, the Court first
    stated generally that whether the dry dock company repaired the
    owner’s vessel “promptly or with negligent delay was the business
    of the owners and of nobody else,” and more specifically that
    “[t]he    injury    to   the   propeller     was   no   wrong   to   the   [time
    charterer] but only to those to whom it belonged.” 
    Id. at 308.
    The Court next considered what effect, if any, the charterparty
    had on the time charterer’s claim: “But as there was a tortious
    damage to a chattel [the propeller of the owner’s vessel] it is
    -5-
    sought to connect the claim of the [time charterer] with that in
    some way.” 
    Id. The Court
    observed that the time charterer’s loss
    “arose only through their contract with the owners,” 
    id., and then
    rejected the time charterer’s claim in the passage most
    often quoted from Robins Dry Dock:
    [A]s a general rule, at least, a tort to the
    person or property of one man does not make
    the tort-feasor liable to another merely
    because the injured person was under a
    contract with that other unknown to the doer
    of the wrong.   The law does not spread its
    protection so far.
    
    Id. at 309
    (internal citation omitted). 3
    Robins Dry Dock made two explicit rulings.          The first
    ruling    –    that   the   time   charterer   was   not   the   third-party
    beneficiary of the contract between the vessel owner and the
    drydocker – has no relevance to the pending case. The drawbridge
    operator has no contract with anyone. The second ruling was that
    the fact that the time charterer had a contract with the vessel
    owner whose property had been damaged by an unintentional tort
    gave the time charterer no right to recovery of its economic
    losses.       This ruling, which we will call the “narrow ruling” of
    3
    The Court also rejected the theory, which our Court had
    used to uphold the time charterer’s claim, see Flint v. Robins
    Dry Dock & Repair Co., 
    13 F.2d 3
    , 6 (2d Cir. 1926), that the
    time charterer should receive an appropriate portion of the
    damages that the drydocker paid to the owner for loss of use
    because the owner could have sued on the time charterer’s
    behalf. See Robins Dry 
    Dock, 275 U.S. at 309-10
    .
    -6-
    Robins Dry Dock, also seems to have no relevance to the pending
    case: American Petroleum is not grounding its claim for economic
    losses on a contract between the negligent operator of the
    drawbridge and some other party whose property was damaged.
    Therefore, if American Petroleum’s claim is barred, as the
    District Court held, by a Robins Dry Dock “rule” that economic
    losses cannot be recovered for an unintentional maritime tort in
    the absence of physical damage to the claimant’s property, it
    must be because either there is some additional broader ruling
    implicit      in   that   decision,   or    the   narrow   ruling   has   been
    extended, whether justifiably or not, into a broader ruling. 4
    Justice Holmes’s text, however, gives no hint of either
    an implicit broader ruling or a basis for an extended broader
    ruling.       He stated the Robins Dry Dock rule in narrow terms,
    explicitly declining to permit recovery just because the claimant
    has a contract with a party damaged by the tort. “[A]s a general
    rule, at least, a tort to the person or property of one man does
    not make the tort-feasor liable to another merely because the
    injured person was under a contract with that other unknown to
    4
    Dissenting in State of Louisiana ex rel. Guste v. M/V
    TESTBANK, 
    752 F.2d 1019
    (5th Cir. 1985), Judge Wisdom
    contended that the narrow rule of Robins Dry Dock “has been
    expanded now to bar recovery by plaintiffs who would be
    allowed to recover if judged under conventional principles of
    foreseeability and proximate cause.” 
    Id. at 1039
    (Wisdom, J.,
    with whom Rubin, Politz, Tate, and Johnson, JJ, join,
    dissenting) (footnote omitted).
    -7-
    the doer of the wrong.” Robins Dry 
    Dock, 275 U.S. at 309
    .
    Moreover,   the   three   cases   Justice   Holmes    cited   as a “good
    statement,” 
    id., of the
    “general rule” all involved a claimant
    seeking recovery because of its contract with the tort victim.
    See The Federal No. 2, 
    21 F.2d 313
    (2d Cir. 1927)5; Elliott Steam
    Tug Co. v. Shipping Controller, 1 K.B. 127 (1921); Byrd v.
    English, 
    117 Ga. 191
    , 
    43 S.E. 419
    (1903).6           Nowhere in the text
    5
    The Federal No. 2 was “abandoned” by our Circuit in
    Black v. Red Star Towing & Transportation Co., 
    860 F.2d 30
    , 34
    (2d Cir. 1988).
    6
    In The Federal No. 2, a seaman was injured due to the
    negligence of a tug whose towing hawser swept the deck of the
    barge on which he was working. The seaman could have sued for
    negligence but did not. The owner of the barge was required
    by its contract with the seaman to provide maintenance and
    cure, and did so. The barge owner then made a claim against
    the tug to recover the cost of providing maintenance and cure,
    i.e., the hospital expenses.      We ruled against recovery.
    After pointing out the barge owner had no right of
    subrogation, we said that “damage suffered by one whose
    interest in the party or thing is contractual is too remote
    for recovery, unless the wrong is done with intent to affect
    the contractual 
    relations.” 21 F.2d at 314
    . Interestingly, we
    cited our decision in Robins Dry Dock v. Flint, 
    13 F.2d 3
    (2d
    Cir. 1926), before it was reversed by the Supreme Court.
    In Elliott Steam Tug, a time charterer sued the agency
    that had requisitioned the vessel, seeking lost profits. In
    dictum, before the Court upheld a statutory indemnity claim,
    the Court said that the plaintiff had no claim at common law
    for injury to its contractual rights. See 1 K.B. at 140.
    In Byrd, a printing company lost power for several hours
    during which it lost profits it could have earned. The loss
    of power resulted from the excavation of a nearby site, which
    -8-
    of Robins Dry Dock is there a broad statement that economic
    losses for an unintentional maritime tort are not recoverable in
    the absence of physical damage to the claimant’s property.
    A    leading   treatise    on   maritime    law    has   candidly
    acknowledged that the broad rule is not to be found in Robins Dry
    Dock.   Referring to the broad rule, Professor Schoenbaum states,
    “This is the interpretation accorded to the case of Robins Dry
    Dock and Repair Co. v. Flint, 
    275 U.S. 303
    (1927).” 1 Thomas J.
    Schoenbaum, Admiralty and Maritime Law § 5-16, at 317 n.3 (5th
    ed. 2011) (emphasis added), and also acknowledges that the
    “Robins Dry Dock holding was later transformed into a bright-line
    rule against liability for pure economic loss that has been
    consistently applied in admiralty in a wide variety of contexts
    . . . .” 2 Schoenbaum, supra § 18-4, at 319 (emphasis added).
    Since Robins Dry Dock, the Supreme Court has cited it
    three   times,      all    without    illuminating     its    meaning.    In
    Aktieselskabet Cuzco v. The Sucarseco, 
    294 U.S. 394
    , 404 (1935),
    the Court only distinguished the narrow contract rule of Robins
    Dry Dock.       In Caldarola v. Eckert, 
    332 U.S. 155
    , 158 (1947), it
    caused a quantity of earth to fall on underground conduits
    through which an electric company’s power lines ran.       The
    plaintiff sued the company doing the excavating, relying on
    the plaintiff’s contract with the company that supplied
    electric power. The Court rejected the claim, ruling that the
    wrong was done to the power company, and that the plaintiff
    had only a claim against the power company, not the excavating
    company. 
    See 43 S.E. at 420-21
    .
    -9-
    simply noted that no claim was made under the narrow contract
    rule of Robins Dry Dock.          The third case, East River Steamship
    Corp. v. Transamerica Delaval, Inc., 
    476 U.S. 858
    (1986), was a
    products liability ruling, made under maritime law.             The Court’s
    narrow     holding   was   that    “a   manufacturer   in   a   commercial
    relationship has no duty under either a negligence or strict
    products-liability theory to prevent a product from injuring
    itself.”     
    Id. at 871.
       Notably, the Court explicitly left open
    the question whether a broad rule is to be derived from Robins
    Dry Dock:
    We do not reach the issue whether a tort cause
    of action can ever be stated in admiralty when
    the only damages sought are economic. Cf.
    Ultramares Corp. v. Touche, 
    255 N.Y. 170
    , 
    174 N.E. 441
    (1931). But see Robins Dry Dock &
    Repair Co. v. Flint, 
    275 U.S. 303
    (1927).
    East 
    River, 476 U.S. at 871
    n.6.
    Two opinions of Courts of Appeals have thoughtfully
    endeavored to explain why the broad rule attributed to Robins Dry
    Dock exists: State of Louisiana ex rel. Guste v. M/V TESTBANK,
    
    752 F.2d 1019
    , 1022 (5th Cir. 1985) (in banc), and Barber Lines
    A/S v. M/V Donau Maru, 
    764 F.2d 50
    (1st Cir. 1985).
    The argument that such a broad rule is implicit in the
    narrow rule that Justice Holmes stated was expressed by Judge
    Higginbotham for the 10-5 majority of the in banc court in Guste.
    Guste involved numerous claims for economic losses suffered as
    -10-
    a result of the temporary closing of the Mississippi River Gulf
    outlet because of chemicals that had spilled into the outlet
    after a collision of two vessels. None of the plaintiffs claimed
    to have had a contract with either of the vessels involved in the
    collision.7 After noting the plaintiffs’ attempt to limit Robins
    Dry Dock to claimants relying on a contract with the victim of
    a maritime tort, Judge Higginbotham seemed to find the broader
    rule   implicit   in   what   he   terms   Justice   Holmes’s   “delphic”
    opinion. 
    Guste, 752 F.2d at 1022
    .          Judge Higginbotham stated:
    If a time charterer’s relationship to its
    negligently injured vessel is too remote,
    other claimants without even the connection of
    a contract are even more 
    remote. 752 F.2d at 1023
    .
    For Judge Higginbotham, the rationale animating the
    narrow rule of Robins Dry Dock was the avoidance of recovery for
    losses thought to be too remote from a defendant’s negligence,
    from which he reasoned that claimants without a contract to a
    party suffering a tort are more remote than claimants with a
    contract.    Although we agree that remoteness of losses is always
    relevant to tort recoveries, a concept usually expressed in terms
    of the extent of the tortfeasor’s duty, see Palsgraf v. Long
    Island R.R., 
    248 N.Y. 339
    , 
    162 N.E. 99
    (1928), or foreseeability
    7
    The opinion does not indicate which vessel was
    considered the maritime tort victim, perhaps because
    negligence was apportioned between the two colliding vessels.
    -11-
    or proximate cause, see In re Kinsman Transit Co. (“Kinsman II”),
    
    388 F.2d 821
    , 823 (2d Cir. 1968),8 we are not as sure as Judge
    Higginbotham that the losses of a claimant without a contract
    with a tort victim are inevitably more remote from the tort than
    the losses of those with such a contract.9   Even if the drydocker
    8
    “In the final analysis, the circumlocution whether
    posed in terms of ‘foreseeability,’ ‘duty,’ ‘proximate cause,’
    ‘remoteness,’ etc. seems unavoidable.” Kinsman 
    II, 388 F.2d at 825
    .
    9
    In dissent, Judge Wisdom has endeavored to refute Judge
    Higginbotham’s argument that a claim for economic losses in
    the absence of a contract with the tort victim is inevitably
    less meritorious than a claim invoking such a contract:
    This argument would be sound in instances where
    the plaintiff suffered no loss but for a contract
    with the injured party.        We would measure a
    plaintiff’s connection to the tortfeasor by the only
    line connecting them, the contract, and disallow the
    claim under Robins [Dry Dock]. In the instant case
    [involving an economic loss resulting from a
    collision of two ships producing an oil spell that
    blocked a Mississippi outlet to all shipping],
    however, some of the plaintiffs suffered damages
    whether or not they had a contractual connection
    with a party physically injured by the tortfeasor.
    These plaintiffs do not need to rely on a contract
    to link them to the tort: The collision proximately
    caused their losses, and those losses were
    foreseeable. These plaintiffs are therefore freed
    from the Robins [Dry Dock] rule concerning the
    recovery of those who suffer economic loss because
    of an injury to a party with whom they have
    contracted.
    
    Guste, 752 F.2d at 1040
    (Wisdom, J., with whom Rubin, Politz,
    Tate, and Johnson, JJ, join, dissenting).
    -12-
    in Robins Dry Dock could not reasonably foresee that the vessel
    owner would charter his vessel, which strikes us as an unlikely
    supposition, the drawbridge operator in the pending case could
    surely have expected that its negligent delay in opening the
    bridge for a vessel not chartered would likely cause economic
    losses.
    Judge Higginbotham also explained Robins Dry Dock as
    based on “a principle . . . which refused recovery for negligent
    interference with ‘contractual rights,’” 
    Guste, 752 F.2d at 1022
    ,
    and on what he called the “well established” principle “that
    there could be no recovery for economic loss absent physical
    injury to a proprietary interest,” 
    id. at 1023.
               Although this
    principle     has   been      articulated    by   distinguished    torts
    commentators, see, e.g., 4 Fowler V. Harper, Fleming James, Jr.,
    Oscar S. Gray, The Law of Torts § 25.18A, at 619 (2d ed. 1986),
    these same commentators have noted that “[c]ourts are, however,
    beginning to disclaim the existence of any such ‘absolute rule,’
    and   to    refer   instead    to   the    applicability   of   pragmatic
    considerations,” 
    id. at 619-20
    n.1, and have more recently
    observed that the “rule” is permeated with numerous exceptions,
    see 
    id. at 326
    n. 9a (cumulative supp. 2005).          Several of these
    exceptions are catalogued in Union Oil Co. v. Oppen, 
    501 F.2d 558
    , 565-68 & n.9 (9th Cir. 1974).
    -13-
    Barber Lines, like Guste, also involved an oil spill
    caused by a ship’s negligence, this one causing economic losses
    to a vessel delayed from docking at its assigned berth.   Unlike
    Judge Higginbotham, however, then-Judge Breyer did not contend
    that the rationale of Robins Dry Dock, which he called “[t]he
    leading ‘pure financial injury’ 
    case,” 764 F.2d at 51
    , was the
    remoteness of the claimed economic losses.   On the contrary, he
    “assume[d] that the [financial] injury was foreseeable.” 
    Id. Nor did
    he express the view that the absence of a contract between
    the claimant and a tort victim made the claim more remote than
    that of a claimant with a contract.      Indeed, he stated that
    “[t]he authority that Justice Holmes says contains a ‘good
    statement’ of the legal principle does not, however, turn so much
    on the existence of a formal contract as on the existence of
    limitations upon tort recovery for financial injury.” 
    Id. (citing Elliott
    Steam and Byrd).10
    10
    In a somewhat perplexing attempt to show that the
    circumstances of the claim in Barber Lines were not
    significantly different than those of the claim in Robins Dry
    Dock, then-Judge Breyer explicitly rejected a distinction
    based on the time charterer’s contract. He stated that “the
    present appellants must have had a ‘right’ to use the dock,”
    that “interference with that ‘right’ caused the loss,” and
    that “[i]t is difficult in this instance to see why the
    technical legal label applied to that right should make a
    legal 
    difference.” 764 F.2d at 51
    . We can accept that the
    claimant in Barber Lines likely had a right to use the dock,
    which is arguably similar in law to the time charterer’s
    contract with the vessel owner in Robins Dry Dock, but this
    -14-
    Instead of relying on remoteness, he simply embraced
    what he understood to be the holdings of post-Robins Dry Dock
    cases, which, he stated, “refuse to hold a defendant liable for
    negligently caused financial harm without accompanying physical
    injury or other special circumstances.” 
    Id. at 53.
                          And he
    candidly acknowledged that he favored the broad rule claimed to
    be   derived    from   Robins   Dry    Dock   because   of   “pragmatic       or
    practical      administrative    considerations      which,       when     taken
    together, offer support for” the broad rule. 
    Id. at 54
    (emphasis
    in original).     Among these, he noted, were that “[t]he number of
    persons    suffering    foreseeable      financial   harm    in    a     typical
    accident is likely to be far greater than those who suffer
    traditional (recoverable) physical harm,” id.; the share of
    amounts paid by tort suit defendants to victims is less than the
    share of premium dollars earned by insurance companies that is
    paid out to victims who insure themselves; and the typical victim
    of financial losses is a business firm that is able to purchase
    first-party insurance, see 
    id. at 54-56.
    Judge Higginbotham also
    invoked these considerations. See 
    Guste, 752 F.2d at 1029
    .
    comparison overlooks the very point Justice Holmes was making:
    the time charterer was trying to benefit from a contract it
    had with the victim of a tort; the dock in Barber Lines
    suffered no tort injury, and the claimant was not trying to
    use its right (or contract) to dock to support its claim.
    -15-
    Other circuits have also found in Robins Dry Dock a
    broad rule barring economic losses for unintentional maritime
    torts   in the   absence   of physical   injury.   See   Channel   Star
    Excursions, Inc. v. Southern Pacific Transportation Co., 
    77 F.3d 1135
    , 1137-38 (9th Cir. 1996); Getty Refining & Marketing Co. v.
    MT FADI B, 
    766 F.2d 829
    , 831-33 (3d Cir. 1985); Kingston Shipping
    Co. v. Roberts, 
    667 F.2d 34
    , 35 (11th Cir. 1982); see generally
    Trey D. Tankersley, The Robins Dry Dock Rule: The Tar Baby of
    Maritime Tort Law, 25 Tul. Mar. L. J. 371 (2000) (The “Tar Baby”
    allusion is borrowed from Judge Wisdom’s dissent in 
    Guste, 752 F.2d at 1035
    .).     In the Fourth Circuit, Robins Dry Dock was
    followed to disallow a time charterer’s claim for lost profits,
    but its claim for the amount it paid the owner for the period the
    vessel was out of service was allowed. See Venore Transportation
    Co. v. M/V Struma, 
    583 F.2d 708
    , 710-11 (4th Cir. 1978).            The
    Ninth Circuit has made exceptions to a broad Robins Dry Dock rule
    for seamen’s lost wages, see Carbone v. Ursich, 
    209 F.2d 178
    ,
    181-82 (9th Cir. 1954), and commercial fishermen’s lost profits
    resulting from an oil spill, see Union 
    Oil, 501 F.2d at 565-71
    .
    Our Circuit’s view of the broad rule attributed to
    Robins Dry Dock has followed a somewhat uneven course.       Prior to
    the Supreme Court’s decision, our Court had allowed the time
    charterer’s claim for economic losses when the case was here, see
    Flint v. Robins Dry Dock & Repair Co., 
    13 F.2d 3
    , 5-6 (2d Cir.
    -16-
    1926), rev’d, 
    275 U.S. 303
    (1927), deeming the economic losses
    to   have     been   the   “proximate    results”   of   the   tortfeasor’s
    negligence, 
    id. at 6.
                  Our first direct reckoning with the Supreme Court’s
    decision in Robins Dry Dock occurred in Agwilines, Inc. v. Eagle
    Oil & Shipping Co., 
    153 F.2d 869
    (2d Cir. 1946).11             Agwilines is
    a slightly more complicated version of Robins Dry Dock.                The
    owner of a time chartered ship, the Agwidale, sued the owner of
    the San Veronica, with which it had collided.             Pursuant to the
    charterparty, the time charterer paid the Agwidale’s owner for
    an interval when the Agwidale was out of service. The Agwidale’s
    owner then sued the San Veronico’s owner for what was alleged to
    be the time charterer’s loss.           Judge Learned Hand’s opinion for
    a divided panel12 rejected the claim stating:
    11
    Two prior decisions had cited Robins Dry Dock for the
    accepted proposition that liability would exist for an
    intentional interference with contractual relations. See New
    York Trust Co. v. Island Oil & Transport Corp., 
    34 F.2d 649
    ,
    652 (2d Cir. 1929); Sidney Blumenthal & Co. v. United States,
    
    30 F.2d 247
    , 249 (2d Cir. 1929). A third prior decision, The
    Toluma, 
    72 F.2d 690
    , 693 (2d Cir. 1934), aff’d sub nom.
    Artieselskabet Cuzco v. The Sucarseco, 
    294 U.S. 394
    (1935),
    had cited Robins Dry Dock for what we have called the “narrow
    rule,” but found the rule inapplicable because of the special
    circumstances that the claim was for return of a cargo owner’s
    contribution in general average, which had been made pursuant
    to a so-called “Jason clause,” (named for The Jason, 
    225 U.S. 32
    (1912)). See The 
    Toluma, 72 F.2d at 693-94
    .
    12
    Judge Clark dissented. 
    Agwilines, 153 F.2d at 872
    .
    -17-
    [The Supreme Court] thought that the only
    basis   for   charging   the  drydocker   with
    liability was because he had prevented the
    performance of the charterparty by the
    promisor – the owner – and that interference
    by a third person with the performance of a
    contract was an actionable wrong only if it
    was intentional.       The Court thought it
    irrelevant that this resulted in exonerating
    the drydocker from nearly all liability
    through the fortuity that the profitable use
    of the ship had been divided between the owner
    and the charterer: The difficulty went deeper;
    the drydocker had committed no legal wrong
    against the charterer a[t] all, though he had
    caused it serious damage.
    
    Id. at 871.
        Thus, Agwilines appears to have recognized both a
    narrow Robins Dry Dock rule – the contract with the owner does
    not help the time charterer – and a broad rule – a negligent
    tortfeasor has no legal liability for economic losses in the
    absence of physical damage.
    Our next significant consideration of Robins Dry Dock
    occurred in Kinsman II, 
    388 F.2d 821
    (2d Cir. 1968), so named
    because it was preceded by In re Kinsman Transit Co. (“Kinsman
    I”), 
    338 F.2d 708
    (2d Cir. 1964).13        The Kinsman litigation
    13
    Decisions of our Court citing Robins Dry Dock after
    Agwilines and before Kinsman I and II shed no new light on its
    proper interpretation. See Paragon Oil Co. v. Republic
    Tankers, S.A., 
    310 F.2d 169
    , 175 (2d Cir. 1962) (bailee
    entitled to value of damaged goods);      Hanlon v. Waterman
    Steamship Corp., 
    265 F.2d 206
    , 207 (2d Cir. 1959) (claimant
    not third-party beneficiary of contract); International
    Brotherhood of Electrical Workers v. NLRB, 
    181 F.2d 34
    , 38 &
    -18-
    concerned an extraordinary series of calamities of the sort more
    likely found in a law school torts exam than occurring in the
    real world.     In brief, a vessel, inadequately moored, drifted
    down the Buffalo River, and collided with another vessel; both
    vessels drifted farther down the river and collided with a third
    vessel; a lift bridge farther downstream was not raised despite
    a warning; the second vessel crashed into the bridge causing a
    tower to fall into the river; the obstruction formed by the first
    two vessels and ice caused water to overflow the river banks; the
    overflowing water damaged a grain elevator located three miles
    upstream.    The facts are more fully elaborated in Kinsman 
    I, 338 F.2d at 711-713
    , 714-16.
    Judge Friendly upheld the various claims for physical
    injuries to property, deeming them foreseeable under traditional
    tort principles.    He acknowledged, however, that “[s]omewhere a
    point will be reached when courts will agree that the link
    [between negligent conduct and injury] has become too tenuous –
    that what is claimed to be consequence is only fortuity.” 
    Id. at 725.
      In the absence of a claim for economic losses, he had no
    occasion to consider Robins Dry Dock.
    n.11 (2d Cir. 1950) (referring generally to tort of
    interference with contractual obligation); Conmar Products
    Corp. v. Universal Slide Fastener Co., 
    172 F.2d 150
    , 155 & n.2
    (2d Cir. 1949) (same); Ozanic v. United States, 
    165 F.2d 738
    ,
    743 (2d Cir. 1948) (vessel owner’s contract to pay part of
    economic losses of crew members could not create liability for
    second vessel with which first vessel collided).
    -19-
    Claims for economic losses were before us, however, when
    the same litigation returned four years later in Kinsman II.
    Cargill, Inc., sought to recover the expenses of its extra
    transportation and storage costs incurred because the river
    flooding prevented it from unloading wheat on a vessel in the
    Buffalo harbor, and it was obliged to obtain replacement wheat
    to fulfill its contracts.    See Kinsman 
    II, 388 F.2d at 823
    .
    Cargo Carriers, Inc., sought to recover the extra expenses of
    unloading its cargo of corn from yet another vessel that had been
    struck by the original two colliding vessels, the damage to this
    vessel necessitating special equipment for unloading cargo. See
    
    id. Judge Kaufman
    began his consideration of these claims
    by noting that the District Court, in the absence of proof of
    intentional interference with contracts, had rejected what the
    Court deemed interference-with-contract claims on the authority
    of Robins Dry Dock. See 
    id. He then
    stated, “We too deny recovery
    to the claimants, but on other grounds.” 
    Id. Leaving what
    he
    termed “the rock-strewn path of ‘negligent interference with
    contract,’” he grounded decision on “more familiar tort terrain.”
    
    Id. at 824.
      Judge Kaufman rejected the claims as simply “too
    ‘remote’ or ‘indirect’ a consequence of defendants’ negligence.”
    
    Id. Rather than
    invoking the narrow rule of Robins Dry Dock,
    -20-
    rejecting a claim for economic losses sought to be based on the
    victim’s contractual relation to an injured vessel, or the broad
    rule identified in Agwilines, rejecting all claims for economic
    losses in the absence of physical injury, Judge Kaufman used the
    traditional tort concept of foreseeability and rejected the
    claims as too remote. 
    Id. at 825.
                All that he drew from Robins
    Dry    Dock    was   Justice   Holmes’s       statement,   appended   to   his
    rejection of a contract-related claim, that “[t]he law does not
    spread its protection so far.” 
    Id. (quoting Robins
    Dry 
    Dock, 275 U.S. at 309
    ).14
    Seven years later, however, a panel with two members
    from    the    Kinsman   II    panel    (Judges    Kaufman   and   Feinberg)
    explicitly applied Robins Dry Dock to reject a time charterer’s
    claim for economic losses. See Federal Commerce & Navigation Co.
    14
    In Guste, Judge Higginbotham endeavored to enlist
    Kinsman II in support of his categorical rejection of economic
    losses in the absence of physical injury by claiming that
    Judge Kaufman had recognized “the need for the imposition of
    limitations on recovery for the foreseeable consequences of an
    act of negligence,” an analysis he deemed “compatible with our
    own.” 
    Guste, 752 F.2d at 1026
    (emphasis added) (footnote
    omitted).   In fact, Judge Kaufman had rejected liability
    because he thought the claimed losses were not foreseeable.
    Kinsman 
    II, 388 F.2d at 824-25
    . As Judge Wisdom noted in
    Guste, Kinsman II “rejected the requirement of physical
    damages without even bothering to distinguish Robins, and
    instead relied on customary negligence principles.” 
    Guste, 752 F.2d at 1042
    (Wisdom, J., with whom Rubin, Politz, Tate, and
    Johnson, JJ, join, dissenting).
    -21-
    v. M/V Marathonian, 
    528 F.2d 907
    , 908 (2d Cir. 1975).                The per
    curiam opinion noted an effort “to justify the [narrow] rule [of
    Robins Dry Dock] on the basis of remoteness of injury,” and
    added,   perhaps      nostalgically,   “If    free   to do so,     we might
    question whether at least the damage to the principal time
    charterer is not so reasonably to be expected as to justify
    recovery.” 
    Id. (citing Kinsman
    II).          The retreat from Kinsman II
    is brought into sharp focus by the District Court’s opinion,
    which our Court labeled “considered and thorough,” 
    id. at 907,
    in which Judge Canella had written:
    [W]ere this Court . . . not constrained by the
    weight of precedent, we would reject the
    negligent interference with contract doctrine
    in   favor    of    a    negligence-causation-
    foreseeability analysis, such as that adopted
    by Chief Judge Kaufman in Petition of Kinsman
    Transit Co. [Kinsman II].
    Federal Commerce & Navigation Co. v. M/V Marathonian, 392 F.
    Supp. 908, 913 (S.D.N.Y. 1975).
    Our Court’s next three encounters with Robins Dry Dock
    before today were all non-precedential summary orders, each of
    which, without elaboration, approved or announced what has become
    the broad rule that economic losses for an unintentional maritime
    tort are not recoverable in the absence of physical injury.                   In
    Allders International (Ships) Ltd. v. United States, 
    100 F.3d 942
    (2d   Cir.    1996)   (summary   order),     we   rejected   a   claim   by    a
    -22-
    concessionaire that lost revenue when a cruise ship canceled
    voyages because of a grounding accident.               We affirmed “for
    substantially the same reasons set forth” in the District Court’s
    opinion, 
    id. at 942,
    in which Judge Martin had dismissed as dicta
    the tort-based approach of Kinsman II in favor of a “bright line
    approach.” Allders International (Ships) Ltd. v. United States,
    No. 94 CIV. 5689, 
    1995 WL 251571
    , at *1-2 (S.D.N.Y. Apr. 28,
    1995).   Next   came   the   two    summary   orders    on   which   Judge
    Engelmayer relied in the pending case, Gas Natural, 
    2008 WL 4643944
    , at *1 (stating “a bright line rule barring recovery for
    economic losses caused by an unintentional maritime tort absent
    physical damage to property in which the victim has a proprietary
    interest”) (emphases and internal quotation marks omitted), and
    G & G Steel, 380 Fed. App’x at 104 (same).
    Although, since Marathonian, we have not considered
    Robins Dry Dock in a published opinion, the district court
    decisions in our Circuit, in addition to Judge Engelmayer’s
    decision in the pending case, have regularly invoked the “bright
    line rule” barring economic losses in the absence of physical
    damage. See G & G Steel, Inc. v. Sea Wolf Marine Transportation,
    LLC, No. 06 Civ. 1840, 
    2008 WL 192049
    , at *3 (S.D.N.Y Jan. 23,
    2008); Gas Natural SDG S.A. v. United States, No. 04 CIV. 8370,
    
    2007 WL 959259
    , at *6 & n.5 (S.D.N.Y. Mar. 22, 2007); Conti Corso
    -23-
    Schiffahrts-GMBH & Co. KG NR. 2 v. M/V “Pinar Kaptanoglu”, 414
    F.   Supp.    2d   443,   446-47   (S.D.N.Y.      2006);    Brown   v.   Royal
    Caribbean Cruises, Ltd., No. 99 Civ. 11774, 
    2000 WL 34449703
    , at
    *5 (S.D.N.Y. Aug. 24, 2000); American Dredging v. Plaza Petroleum
    Inc., 
    845 F. Supp. 91
    , 93 (E.D.N.Y. 1993); Plaza Marine, Inc. v.
    Exxon Corp., No. 92 Civ. 1189, 
    1992 WL 197398
    , at *1 (S.D.N.Y.
    Aug. 5, 1992).
    Having surveyed the field and our own slightly wavering
    contribution to it, we now explicitly accept the broad rule
    attributed to Robins Dry Dock that economic losses are not
    recoverable for an unintentional maritime tort in the absence of
    physical injury, mindful that for some categories of claims,
    exceptions may well be appropriate.                We see little point in
    endeavoring to determine whether the broad rule that has been
    attributed to Robins Dry Dock was implicit in that decision or
    has resulted from an unstated extension of the narrow rule there
    announced.      Instead, as then-Judge Breyer did in Barber Lines,
    we simply accept the broad rule, and do so for four main reasons.
    First, the rule has been accepted by a clear consensus of courts
    throughout the country, including many district courts within our
    Circuit.       Second,     Congress,   possessing      full   authority     to
    legislate     on   maritime   matters,      see   Panama   Railroad   Co.   v.
    Johnson, 
    264 U.S. 375
    , 386 (1924), has neither altered the broad
    -24-
    rule nor made any serious attempts to do so.15     Third, the rule
    has the virtue of certainty.16    Fourth, the context in which the
    broad rule primarily applies – financial losses incurred in the
    course of commercial shipping – is marked by the well recognized
    availability of first-party insurance to cover such losses and
    the frequent purchase of such insurance. 17
    15
    Judge Rubin, in dissent in Guste, has replied to this
    point:
    The constitutional grant of jurisdiction to federal
    courts over cases and controversies not only
    empowers but requires us . . . to decide . . . cases
    within our jurisdiction whether or not Congress has
    provided a rule of decision and even when we think
    Congress should have acted and has not done so.
    
    Guste, 752 F.2d at 1053
    (Rubin, J., with whom Wisdom, Politz,
    and Tate, JJ, join, dissenting).
    16
    Even in dissent, Judge Wisdom acknowledged this virtue:
    There is only one justification for the requirement
    of physical injury: If Robins [Dry Dock] establishes
    a policy of restricting the type of plaintiff who
    can recover for a defendant’s negligence, physical
    property damage furnishes an easily discernible
    boundary between recovery and nonrecovery.
    
    Guste, 752 F.2d at 1045
    (Wisdom, J., with whom Rubin, Politz,
    Tate, and Johnson, JJ, join, dissenting).
    17
    In dissent in Guste, Judge Wisdom disputed the validity
    of this factor:
    The  Robins   [Dry   Dock]   approach
    restricts liability more severely than the
    policies behind limitations on liability
    -25-
    We are not unsympathetic to the Appellant’s earnest plea
    that, even if a broad Robins Dry Dock rule exists, recovery could
    be allowed in this case without countenancing an unbounded
    exposure of maritime tortfeasors to a vast number of economic
    loss claims that would stretch the concept of foreseeability up
    to and often beyond any discernible limit.           It was surely
    foreseeable that an operator who had opened a drawbridge to let
    vessels move upriver and negligently failed to open the bridge
    when the vessels returned will cause economic losses to at least
    some of the vessels expecting to pass under the bridge.     And when
    that operator is a governmental entity, the burden of such
    foreseeable losses can be spread narrowly through user fees or
    broadly through taxation.18     Although the argument for a fact-
    require and imposes the cost of the
    accident on the victim, who is usually not
    in a superior position to obtain insurance
    to cover this 
    loss. 752 F.2d at 1052
    (Wisdom, J., with whom Rubin, Politz, Tate,
    and Johnson, JJ, join, dissenting).
    18
    Discussing the liability of the municipal operators of
    a drawbridge, the negligently delayed opening of which
    contributed to a variety of claims for physical damage, Judge
    Friendly wrote:
    Here it is surely more equitable that the losses
    from the operators’ negligent failure to raise the
    Michigan Avenue Bridge should be ratably borne by
    Buffalo’s taxpayers than left with the innocent
    victims of the flooding.
    Kinsman 
    I, 338 F.2d at 726
    .
    -26-
    specific     exception   to   Robins   Dry   Dock   gives   us   pause,   we
    ultimately conclude that the case for such an exception on the
    particular facts here is outweighed by the benefits of adhering
    to the general rule that denies recovery for economic losses from
    unintentional maritime torts in the absence of physical damage.
    In weighing the case for exceptions to the general rule, the
    benefits of its certainty, the customary use of first-party
    insurance to mitigate or eliminate its effects, and its long
    recognized establishment within maritime jurisprudence weigh
    heavily.19
    Conclusion
    The judgment of the District Court is affirmed.
    19
    American seeks to draw support for its position from 33
    U.S.C. § 494, which imposes duties upon bridge owners and
    operators. Recognizing that the statute does not create an
    implied private right of action, American nonetheless contends
    that it states a federal policy that we should enlist to
    narrow the broad rule of Robins Dry Dock.         We are not
    persuaded. Accepting American’s suggestion would effectively
    adopt a statutory private right of action in the guise of a
    tort rule.
    -27-
    

Document Info

Docket Number: 12-4505-cv

Citation Numbers: 737 F.3d 185, 2014 A.M.C. 17, 2013 U.S. App. LEXIS 24277, 2013 WL 6332548

Judges: Newman, Raggi, Lynch

Filed Date: 12/6/2013

Precedential Status: Precedential

Modified Date: 10/19/2024

Authorities (28)

Channel Star Excursions, Inc. v. Southern Pacific ... , 77 F.3d 1135 ( 1996 )

Robins Dry Dock & Repair Co. v. Flint , 48 S. Ct. 134 ( 1927 )

petitions-of-the-kinsman-transit-company-as-owner-and-operator-of-the , 338 F.2d 708 ( 1964 )

Flint v. Robins Dry Dock & Repair Co. , 13 F.2d 3 ( 1926 )

Ozanic v. United States , 165 F.2d 738 ( 1948 )

Conmar Products Corp. v. Universal Slide Fastener Co. , 172 F.2d 150 ( 1949 )

getty-refining-and-marketing-company-v-mt-fadi-b-her-engines-tackle , 766 F.2d 829 ( 1985 )

William Joseph Hanlon, Jr. v. Waterman Steamship ... , 265 F.2d 206 ( 1959 )

Andrew G. Black v. Red Star Towing & Transportation Co., ... , 860 F.2d 30 ( 1988 )

Caldarola v. Eckert , 332 U.S. 155 ( 1947 )

Sidney Blumenthal & Co. v. United States , 30 F.2d 247 ( 1929 )

New York Trust Co. v. Island Oil & Transport Corporation , 34 F.2d 649 ( 1929 )

East River Steamship Corp. v. Transamerica Delaval Inc. , 106 S. Ct. 2295 ( 1986 )

Ultramares Corp. v. Touche , 255 N.Y. 170 ( 1931 )

International Brotherhood of Electrical Workers, Local 501 ... , 181 F.2d 34 ( 1950 )

Panama Railroad v. Johnson , 44 S. Ct. 391 ( 1924 )

Barber Lines A/s v. M/v Donau Maru , 764 F.2d 50 ( 1985 )

Aktieselskabet Cuzco v. the Sucarseco , 55 S. Ct. 467 ( 1935 )

The Federal No. 2 , 21 F.2d 313 ( 1927 )

venore-transportation-company-a-corporation-of-the-republic-of-liberia-v , 583 F.2d 708 ( 1978 )

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