Usinas Siderurgicas v. Scindia Steam ( 1997 )

REVISED
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 96-30876
USINAS SIDERUGICAS DE MINAS GERAS, SA - USIMINAS;
USIMINAS IMPORTACAO E EXPORTACAO, SA - USIMPLEX
Plaintiffs-Appellants,
versus
SCINDIA STEAM NAVIGATION COMPANY, LTD., in personam;
JALAVIHAR M/V, in rem
Defendants-Appellees.
Appeal from the United States District Court
For the Eastern District of Louisiana
July 17, 1997
Before HIGGINBOTHAM, WIENER, and DENNIS, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
While executing a routine turning maneuver in the Mississippi,
the JALAVIHAR was grounded, destroying her steering mechanism. The
owner of the JALAVIHAR, Scindia Steam Navigation Company, Ltd.,
declared a general average event and filed the present claim
against the cargo owners, Usinas Siderugicas de Minas Geras, SA and
Usiminas Importacao e Exportacao, SA (hereinafter referred to
collectively as Usiminas), for contribution. The district court
found that a general average event occurred and found for Scindia.
Usiminas brings this appeal claiming that this judgment was in
error. We AFFIRM the judgment of the district court.
2
I.
On March 7, 1994, the JALAVIHAR was docked at the Electro-Coal
facility on the east bank Mississippi River, bow into the current
and starboard side against the dock. After loading some coal owned
by Usiminas, she was to depart the Electro-Coal facility, turn, and
proceed to a nearby anchorage to await Usiminas’ instructions
regarding her next loading port. At the time that the JALAVIHAR
was ready to depart the Electro-Coal facility, there was a group of
barges moored on the west bank slightly downstream of the Electro-
Coal facility. Another ship was moored slightly downstream on the
east bank which had a crane barge alongside it. The pilot
testified that because of this second ship, the turn would have to
occur some distance from the east bank or else the JALAVIHAR would
be pushed downstream into the second ship. At the time the pilot
commenced the maneuver, visibility was limited and had been reduced
to zero by the time the JALAVIHAR was turning.
The turn was to be executed with the assistance of two tugs,
the SANDRA KAY and the BILLY SLATTEN. The pilot testified that he
told the tugs that initially the SANDRA KAY would be attached by a
line to JALAVIHAR’s port bow and would be pushing the vessel
against the dock, and the BILLY SLATTEN would be on her port stern,
without a line, pushing the JALAVIHAR towards the dock. After the
lines attaching the JALAVIHAR to the dock were cast off, the SANDRA
KAY would pull the JALAVIHAR’s bow away from the dock with the
current keeping her parallel to the dock. While the SANDRA KAY was
pulling the JALAVIHAR away from the dock, the BILLY SLATTEN would
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move to the starboard bow. After the JALAVIHAR was about 200 feet
from the dock, the BILLY SLATTEN would move in between the
JALAVIHAR and the dock and push her away from the dock and the
SANDRA KAY would move back to the port stern to push it towards the
dock, turning the JALAVIHAR around. The pilot also testified that
he informed the master of the maneuver, but the master testified
that he was not told of the specifics of the turning procedure.
As visibility was limited and getting worse, the master posted
the chief officer as lookout on the JALAVIHAR’s bow and put the
duty officer in charge of monitoring the radar. The chief officer
was also in charge of making sure the crewmembers on the bow
unfastened the lines which attached the JALAVIHAR to the dock and
to the SANDRA KAY. The duty officer was in charge of carrying out
engine orders given by the pilot and entering them in the ship’s
log. The master testified that he also was monitoring the radar,
as well as walking around with the pilot.
All went as planned until the JALAVIHAR began to move away
from the dock. At that time, the pilot radioed the BILLY SLATTEN
and asked the tug whether there were any lines on the bow. The
captain of the BILLY SLATTEN radioed back that he didn’t know
because he was stand by on the port stern. The pilot radioed back
that he should have been stand by on the starboard bow and that he
should move there immediately. The BILLY SLATTEN complied but in
the time it took to move to the starboard bow, the JALAVIHAR had
drifted further than anticipated toward the west bank and the
barges.
4
Despite the unexpected drift, the JALAVIHAR continued its
maneuver as planned. The pilot testified that he was aware of the
location of the barges on the west bank and that he knew that the
turn was going to be close but that at all times he thought the
JALAVIHAR would clear the barges. The JALAVIHAR did in fact
contact the barges and shortly thereafter ran aground, destroying
her steering mechanism and necessitating the unloading of the
cargo.
Scindia, the owner of the JALAVIHAR declared the grounding a
general average event, and demanded contribution from Usiminas.
Usiminas refused, and Scindia instituted the present suit. The
district court found that the cause of the accident was a
miscommunication between the pilot of the JALAVIHAR and the captain
of the BILLY SLATTEN. The district court also found that the
voyage of the JALAVIHAR had commenced at the time it left the dock
and therefore any subsequent events did not render it unseaworthy
and that Scindia exercised due diligence to render the JALAVIHAR
seaworthy before beginning its voyage. The district court also
rejected Usiminas’ assertion that the accident was caused by
Scindia’s failure to require the master to discuss the maneuver
with the pilot, post an adequate lookout, monitor the radar
sufficiently, and maintain the anchor in a condition of readiness.
II.
The principle of general average provides that losses for the
common benefit of participants in a maritime venture be shared
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ratably by all who participate in the venture.1 Pacific Employers
Insurance Coverage v. M/V Capt. W.D. Cargill, 751 F.2d 801, 803
(5th Cir.), cert. denied, 474 U.S. 909 (1985). A vessel owner at
fault is not able to collect a general average contribution from
the cargo owner. Gilmore & Black, The Law of Admiralty 266 (2d ed.
1977).
The contract between Usiminas and Scindia, however, included
a “New Jason Clause,” which requires general average contribution
even if the carrier is negligent unless the carrier is found liable
under the Carriage of Goods by Sea Act.2 COGSA provides immunity
to a carrier where the damage was caused by an error in navigation
or management, but not for damage caused by unseaworthiness unless
the carrier exercised due diligence to prepare the vessel for its
voyage. Once a carrier has shown that the accident was caused by
an error in navigation or management, it is entitled to general
1
The parties have stipulated that if the accident is declared
a general average event, Usiminas will pay $185,659.67 plus costs
and interest, and if Usiminas prevails, Scindia will pay $208,754
plus costs and interest.
2
The JALAVIHAR was chartered by Vale do Rio Doce Navegacao
S.A. Docenave and subchartered to Usiminas. The “New Jason Clause”
was included in the charter agreement between Docenave and Scindia
and incorporated into the subcharter between Docenave and Usiminas.
The clause reads in part:
In the event of accident, danger, damage or disaster before or
after commencement of the voyage, resulting from any cause
whatsoever whether due to negligence or not, for which or for
the consequence of which, the Owner is not responsible by
statute, contract, or otherwise, the goods, shippers,
consignees or owners of the goods shall contribute with the
carrier in general average to the payment of any sacrifices,
losses or expenses of a general average nature that may be
made or incurred in respect of the goods.
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average unless the cargo owner shows that the vessel was
unseaworthy and that the unseaworthy condition was a concurrent
cause of the accident. Once unseaworthiness and causation have
been established, the burden shifts back to the carrier to
demonstrate the exercise of due diligence in preparing the vessel
for departure. Deutsche Shell Tanker Gesellschaft v. Placid
Refining Co., 993 F.2d 466 (5th Cir. 1993).
Usiminas challenges the district court’s holding on three
grounds. First, Usiminas claims that the district court applied
the wrong burden of proof structure and instead it should have
applied the rule of The Pennsylvania, 86 U.S. 125 (1873). Second,
Usiminas claims that any error in navigation that causes damage to
a vessel prior to the commencement of a voyage should be considered
a lack of due diligence and therefore the vessel owner is not
entitled to general average. Third, Usiminas claims that the
district court erred in finding that none of the alleged
unseaworthy conditions caused the grounding of the JALAVIHAR. We
consider these arguments in turn.
A.
Under the rule of The Pennsylvania, a vessel in violation of
a statute bears the burden of showing not only that the violation
did not cause the damage, it could not have. We decline to apply
the rule of The Pennsylvania in this case, where COGSA clearly
provides the burden of proof structure.
The Pennsylvania provides a burden of proof structure for
causation in maritime incidents. In California & Hawaiian Sugar
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Co. v. Columbia S.S. Co., Inc., 391 F. Supp. 894 (E.D. La. 1972),
affd., 510 F.2d 542 (5th Cir. 1975), however, the district court
held that the rule of The Pennsylvania does not apply where COGSA
provides the burden of proof structure. Id. at 898; see also
Director General of India Supply Mission v. The S.S. Maru, 459 F.2d
1370, 1375 (2d Cir. 1972)(rejecting the rule of The Pennsylvania
where COGSA provides the burden of proof), cert. denied, 409 U.S.
1115 (1973). We affirmed that decision under the burden of proof
in COGSA. We decline to deviate from the holding in California &
Hawaiian Sugar Co. in this case and allocate the burdens of proof
in this case according to the scheme set out in COGSA.
B.
The district court found that Scindia had established that the
accident was caused by navigational or managemental error, an
excepted cause under COGSA, which therefore created a general
average event. The district court then turned to Usiminas’
argument that the accident was also caused by the unseaworthiness
of the JALAVIHAR. Because a vessel owner’s duty to provide a
seaworthy vessel only applies prior to the commencement of the
voyage, the district court addressed the question of whether the
voyage had begun. The district court found that the voyage had
commenced at the time the vessel left the dock. Further, the
district court held that even if the unseaworthy conditions
proffered by Usiminas caused the accident, that Scindia carried its
burden of showing due diligence prior to the voyage.
8
Usiminas asserts that the district court erred in finding that
Scindia had proven navigational or managemental error. Usiminas
claims that the voyage had not commenced and that navigational or
managemental errors that occur before the commencement are best
viewed as a failure of the carrier to exercise due diligence.
Under this view, COGSA would only except navigational or
managemental errors that occur after the voyage has commenced.
We see no reason to restrict the navigational error exception
to errors occurring after the commencement of a voyage. We
therefore agree with Scindia that COGSA excepts navigational errors
regardless of whether they occur before or after a voyage commences
and do not reach the question of whether a voyage had commenced in
this case. Usiminas’ argument against this proposition relies upon
language from this court’s opinion in Louis Dreyfus Corp. v. 27,946
Long Tons of Corn, 830 F.2d 1321 (5th Cir. 1987). The shipbuilder
who constructed the Louis Dreyfus improperly installed a valve
position indicator system. The system had two devices to indicate
whether the valve was open or closed: a light and a mark on the
shaft that actually opens and closes the valve. Incorrect readings
from this faulty system caused an engineer to flood the engine room
which caused damage while the vessel was still docked. The
district court found that the improper indicator system rendered
the Louis Dreyfus unseaworthy and that the ship owner had not
exercised due diligence to discover the problem by detecting it
during construction, docking, or at the time the engineer flooded
the engine room. On appeal, the ship’s owner claimed that the
9
engineer’s negligence in flooding the engine room resulted from
managemental error and was therefore excepted under COGSA.
The Louis Dreyfus court rejected this argument, citing
International Navigation Co. v. Farr & Bailey Mfg. Co., 181 U.S.
218, 226 (1901), and determined that “[t]he word ‘management’ is
not used without limitation, and is not, therefore applicable in a
general sense as well before as after sailing.” Based on this
principle, the Louis Dreyfus court held that “[b]ecause the
critical error of the engineer in this case occurred before the
commencement of the voyage, [the ship owner] is not shielded from
liability by § 1304(2)(a).” Id. at 1328. Usiminas urges that this
language in Louis Dreyfus means that any error in management or
navigation that occurs before the commencement of a voyage is not
excepted error under COGSA.
We interpret Louis Dreyfus to stand for the proposition that
a failure of the ship owner and its employees to detect a
manufacturing flaw, if it occurs before the commencement of a
voyage, is best viewed as a failure to exercise due diligence, and
not an error in management. There is a fine line between actions
that constitute errors in management and inaction that constitutes
a lack of due diligence and the Louis Dreyfus court found that the
timing of the engineer’s action best qualified it as a lack of due
diligence.3 Indeed, the Supreme Court case relied upon by the
3
Similarly, the other case relied upon by Usiminas for the
proposition that error that occurs before the commencement of a
voyage is unexcepted error considered an error in management, not
an error in navigation. See American Mail Line Ltd. v. United
States, 377 F. Supp. 657 (W.D. Wash. 1974).
10
Louis Dreyfus court only considered managemental error occurring
prior to the commencement of a voyage. International Navigation
Co., 181 U.S. at 226. In contrast, this case presents the question
of whether an error in navigation which occurs when a vessel is
shifting from a dock to a temporary anchorage is an excepted cause
under COGSA.
Scindia claims that this court should look to the prior case
of Mississippi Shipping Co. v. Zander, 270 F.2d 345 (5th Cir.
1959), vacated as moot, 273 F.2d 618 (5th Cir. 1960), in deciding
whether the district court could find navigational error occurred
prior to the commencement of the voyage. The vessel in Mississippi
Shipping, while departing, hit the dock it was attached to and
developed a hole in its hull. The hole was not discovered until
two ports later, when the crew found that water had destroyed some
of the vessel’s cargo. The cargo owners in Mississippi Shipping
conceded that the hole in the vessel was caused by negligent
navigation of the vessel, an excepted cause. However, they argued
that a concurrent cause of the cargo damage was the ship owner’s
failure to exercise due diligence to discover and repair the hole
before commencing the voyage. The ship owner’s duty to exercise
due diligence only applies prior to the commencement of a voyage.
On appeal, therefore, the issue had been distilled to whether the
voyage had commenced at the time the ship hit the dock. The court
found that the voyage had commenced and that therefore any failure
to discover and fix the hole could not be characterized as a lack
of due diligence.
11
Prior to its discussion of the commencement of the voyage, the
Mississippi Shipping court noted that both parties had agreed that
the hole was caused by negligence in the navigation of the vessel.
The parties had both conceded that, “unlike the former days of the
Harter Act when its Section 3 error in management exception was
confined to events occurring after the commencement of the voyage,
Cogsa’s Section 4(2)(a) is now unconditional both as to due
diligence and point in time.” Id. at 348 (citations
omitted)(citing Isbrandtsen Co. v. Federal Insurance Co., 113 F.
Supp. 357 (S.D.N.Y. 1952), affd. per curiam, 205 F.2d 679 (2d Cir.
1953), cert. denied, 346 U.S. 866 (1953)). The Mississippi
Shipping court then went on to consider the result of the case if
the cargo had been immediately damaged by the inrush of water, and
noted that “the Section 4 defense would have been absolute whether
the ship was deemed to be on her voyage, making ready for her
voyage, or simply undocking preparatory to commencing her voyage.”
In other words, the Mississippi Shipping court expressed an opinion
on the resolution of the issue presently before this court.
Mississippi Shipping’s consideration of the issues presented
here is dicta, however, we find its reasoning persuasive and adopt
its approach and resolution to the present issue. Usiminas seeks
to have this court declare that any navigational error that occurs
prior to the commencement of a voyage results from a lack of due
diligence to make a ship seaworthy. COGSA’s exception for
navigational or managemental error, however, is not restricted to
navigational errors occurring after the commencement of a voyage.
12
The plain language of the statute excepts the carrier for liability
from damage caused by “[a]ct, neglect, or default of the master,
mariner, pilot, or the servants of the carrier in the navigation or
in the management of the ship.” 46 U.S.C. § 1304(2)(a).
The Mississippi Shipping court used the example of immediate
damage from navigational error to contrast the problem that arises
when a vessel has a latent defect prior to the commencement of a
voyage. That court was faced with the latter question, which it
addressed by finding that the voyage had commenced at the time the
defect was incurred and therefore the failure to detect and repair
the defect could not be attributed to a lack of due diligence. The
court in Louis Dreyfus directly faced the issue of whether a
failure to detect a latent defect is an error in management or a
failure to exercise due diligence. The Louis Dreyfus court found
that failure to detect a latent defect is best characterized as a
lack of due diligence. This is not the situation we are faced with
here. Damage from the navigational error was immediate and no time
for discovery lapsed. Therefore, the damage to the vessel was not
caused by a failure to detect the damage but by the navigational
error itself.
The only court to have ruled on the issue of whether
navigational error prior to the commencement of a voyage is
excepted error was the court in Isbrandtsen Co. v. Federal Ins.
Co., 113 F. Supp. 357 (S.D.N.Y. 1952), affd. per curiam, 205 F.2d
679 (2d Cir. 1953), cert. denied, 346 U.S. 866 (1953). In
Isbrandtsen, the vessel had fully loaded and moved to a temporary
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anchorage before departing the port. While moving, the vessel
stranded and had to be refloated and repaired. The cargo owners
admitted that the stranding was caused by navigational error but
argued that the voyage had not commenced and therefore the vessel
owner could not take advantage of the navigational error exception
to COGSA. The Isbrandtsen court rejected this argument, stating
that “[t]he exception of the carrier and ship for loss or damage
arising from negligence or default of the master, mariner, pilot,
or servant of the carrier in the navigation or management of the
ship is unconditional in [COGSA].” Isbrandtsen, 113 F. Supp. at
358.
We agree with Isbrandtsen and Mississippi Shipping that
navigational error that occurs prior to the commencement of a
voyage is excepted under 46 U.S.C. § 1304(2)(a). Any error by the
pilot, therefore, was properly construed by the district court as
navigational error. This court has noted that responsibilities of
a pilot are broad and encompass, “the command and navigation of the
ship.” Avondale Ind. v. International Marine Carriers, 15 F.3d 489
(5th Cir. 1994). We therefore find that the district court in this
case did not err in finding that Scindia bore its burden of
establishing navigational error.
C.
Once the carrier has established navigational or managemental
error as a cause of the accident, the burden shifts to the cargo
owner to prove that a concurrent cause of the accident was an
unseaworthy condition. The carrier will then be afforded an
14
opportunity to show that it exercised due diligence in preparing
the vessel for its voyage. In this case, the district court found
that the ship was seaworthy when it left the dock and that even if
there was an unseaworthy condition, it was not a concurrent cause
of the grounding and Scindia exercised due diligence in preparing
the ship for its journey. Therefore, Usiminas may only prevail on
appeal by proving that the district court erred in finding that
Scindia exercised due diligence to make the JALAVIHAR seaworthy and
that an unseaworthy condition was a concurrent cause of the
grounding.
The district court determined that no unseaworthy conditions
existed because the voyage had commenced, however, it also found
that none of the conditions asserted by Usiminas as evidence of
unseaworthiness were causally related to the grounding. Because we
uphold the district court’s finding that the alleged unseaworthy
conditions did not contribute to the grounding, we decline to reach
the issue of whether the voyage had commenced. Usiminas claims
that the JALAVIHAR was unseaworthy in three respects: 1) the
posted lookout had duties in addition to lookout and therefore was
not a competent lookout; 2) there was not a dedicated radar
monitor; and 3) Scindia company policy does not require the master
to discuss routine turning maneuvers with the pilot.4
4
On appeal, Usiminas has dropped its contention that the
JALAVIHAR was unseaworthy because her anchor was not ready to be
dropped. The district court found that the order to drop anchor
occurred after the ship had grounded and Usiminas has not
challenged this factual finding.
15
Usiminas initially argued that the master’s failure to discuss
the maneuver with the pilot was an unseaworthy condition which
caused the grounding. Scindia, however, correctly states that in
Avondale Ind. v. International Marine Carriers, 15 F.3d 489 (5th
Cir. 1994), a panel of this court found that the master’s failure
to adequately discuss the maneuver constituted negligence on the
part of the master. Any negligence of the master concerning the
movement of the vessel would be considered a navigational or
managemental error, not an unseaworthy condition. Usiminas’
response to this argument is that Scindia’s lack of a company
policy requiring the master to discuss routine maneuvers with the
pilot constitutes an unseaworthy condition. First, however,
Usiminas must show that the district court was incorrect in
rejecting a failure to discuss as a cause of the grounding of the
JALAVIHAR.
The district court found that in the time it took the BILLY
SLATTEN to shift its position, the JALAVIHAR drifted too far
towards the west bank to facilitate the turn and therefore the
accident was caused by a miscommunication between the pilot and the
BILLY SLATTEN. Usiminas claims that the master was aware of the
actual position of the BILLY SLATTEN at all times and that if he
was aware of the intended position of the BILLY SLATTEN, he would
have been able to inform the pilot that it was out of position.
The pilot testified that he discussed the position of the tugs with
the master. The master testified that he did not discuss the
position of the tugs with the pilot before the maneuver, however,
16
he did testify that at the time of the maneuver he was aware that
the BILLY SLATTEN should have been stand by at the starboard bow.
Under these circumstances, the district court did not err in
finding that Scindia’s lack of a policy requiring the master to
discuss routine maneuvers with the pilot caused the accident. At
the critical moment, the master was aware of the intended position
of the tugs and that the BILLY SLATTEN was improperly positioned.
Prior discussion would have given him no more information than he
had at the crucial moment.
Usiminas has also not shown that the district court erred in
finding that the lack of a dedicated lookout and radar monitor were
concurrent causes of the accident. The district court found that
at all times the pilot was aware of the position of the barges and
that he thought the turn was going to be successful. His opinion
was seconded by the captain of the BILLY SLATTEN. Radar and visual
observation would have given him no more useful information than he
already had. As we uphold the district court’s findings that none
of the conditions that allegedly rendered the JALAVIHAR unseaworthy
were concurrent causes of the grounding, we need not address
Usiminas’ contention that the district court erred in finding that
Scindia exercised due diligence in preparing the JALAVIHAR for her
voyage.
III.
For the foregoing reasons, we find that the district court
correctly found that the damage to the JALAVIHAR was caused by an
excepted COGSA error. Scindia may therefore recover in general
17
average pursuant to the New Jason clause in its contract with
Usiminas. The judgment of the district court is affirmed.
AFFIRMED.
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