American Petroleum & Transport, Inc. v. City of New York

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
- - - - - - - - - - - - - - - - - - - - - -
AMERICAN PETROLEUM AND TRANSPORT, INC.,
Plaintiff-Appellant,
v.
CITY OF NEW YORK, DEPARTMENT OF TRANSPORTATION
OF THE CITY OF NEW YORK,
Defendants-Appellees.
- - - - - - - - - - - - - - - - - - - - - -
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-