Smith v. United States

ALBERT V. BRYAN, Circuit Judge.

In this maritime cause the question is whether, in its contract with the United States for the management of United States Naval Ship (USNS) Potomac, Marine Transport Lines was an “agent” within the intent of the Public Vessels Act, 46 U.S.C. §§ 781-782. The decisive term appears in the following proviso which is engrafted by and upon that act from the Suits in Admiralty Act, 46 U.S.C. §§ 741, 745, both allowing an in personam libel against the United States:

“ * * -x- Provided, That where a remedy is provided by this chapter it shall hereafter be exclusive of any other action by reason of the same subject matter against the agent or employee of the United States * * * whose act or omission gave rise to the claim. * * * ” (Accent added.)

The District Judge concluded that Marine was such an agent. We hold he was right.

The decision meant that the appellants, Potomac crewman George Thomas Holley and the personal representative of crewman John C. Smith, could not sue Marine, but could sue only the United States, for damages for injury to Holley and the death of John Smith. These misfortunes, they charged, were the result of a fire and explosion, caused by Marine’s negligence, aboard the Potomac at More-head City, North Carolina, September 26, 1961. The vessel was a complete loss, the cost to refloat and repair exceeding her value.

Appellants’ complaint is that the ruling of the District Judge deprived them of the jury trial guaranteed by the Jones Act, 46 U.S.C. § 688, for now their only recourse is a suit against the Government under the Public Vessels Act before the admiralty judge. The issue arose in proceedings initiated by the United States and Marine for exoneration or limitation of liability for the catastrophe. 46 U.S.C. § 183 et seq.; Supreme Court Admiralty Rule 51. Prosecution in any other forum against the United States and Marine of claims arising from the disaster was restrained. Each of the claimants moved for modification of the injunction to allow them to file actions elsewhere against Marine under the Jones Act with a jury trial, in the event exemption, exoneration or limitation were denied Marine. Save to permit the filing of protective suits against the bar of time pending determination of the issue here, the District Court denied the motions. From that ruling this appeal is prosecuted; it was allowed by special leave under 28 U.S.C. § 1292(b).

The Potomac, a Navy tanker owned by the United States, was a public vessel. Employed exclusively in hauling petroleum products to various military bases for national defense, she was under the direction and control of the Military Sea Transportation Service (MSTS). Subject to the other provisions of the contract with the Government, which was dated June 22, 1961, Marine undertook to “manage and conduct the business regarding the operation of such tankers”, including the Potomac, “as may be furnished to it by the Government from time to time. * * * ”

Contrary to claimant-appellants’ assertion that Marine was in control of the vessel as a principal and not as an agent, we think the relevant portions of the agreement clearly demonstrate that the United States remained in control of the vessel at all times, with only her physical conduct delegated to Marine. In this Marine was acting solely as the Government’s agent, an agent within the intent of the Public Vessels Act. With the particularly relevant portions emphasized, the key paragraphs are these:

“(b) The Contractor undertakes and promises to manage and conduct the business of the Government with respect' to such tankers' in accordance with such written directions or orders as to voyages and cargoes as the Government may from time to to time prescribe, and upon the terms and conditions herein provided, * * *. Commander Military Sea Transportation Service will issue to each Contractor operating instructions, which may be revised and supplemented from time to time. The Contractor shall authorize the Master of each tanker, in the Contractor’s behalf, to receive and carry out orders, directions or instructions as regards employment of the vessel and prosecution of voyages, which may be issued by Commander Military Sea Transportation Service, * * Article 1.

“All tankers utilized in the operation of the contract are owned by the Government and are public vessels. * * * Article 2.

“(a) The Contractor shall operate the tankers in such services as the Government by written or telegraphic order may direct, * * *.

“(b) The Contractor shall equip, fuel, supply, maintain, man, victual and navigate the tankers.

“(c) The Contractor shall procure all personnel necessary to fill the complement of each tanker subject to the limitations listed below:

* * * * *

“(2) Any Master or Chief Engineer so procured and the compensation to be paid therefor shall be subject to approval by the Contracting Officer. * * *

* * * * *

“(6) * * * no deck or en-

gineer officer shall be employed on any tanker unless he is a member of the United States Naval Reserve.

* * -X-

•X- * * -X- *

“(9) The officers and members of the crew shall be subject only to orders of the Master or Contractor. All personnel of the Contractor employed in the performance of work under this contract, including the Master, other officers and crew members shall be employees of the Contractor at all times and not of the Government.” Article 5. (All accent added.)

With its compensation put on a fixed, fee basis, the Contractor was to be reimbursed for the costs incurred in the management and maintenance of the tanker. A part of the allowable costs were these:

“(i) Crew expenditures accruing during the term hereof in connection with the tankers hereunder, including

(a) Wages * * *, damages or compensation for death or personal injury * * Article 8. (Accent added.)

Insurance, the agreement directed, was to be taken out by the Contractor if required by the Government. In addition to its covenant to indemnify the Contractor for an uninsured responsibility, the Government was to be the dominus litis in the defense of all uninsured claims against the Contractor. Thus it was agreed that:

“(b) The contractor shall be reimbursed by the Government (1) for the cost of such insurance as may be required or approved by the Government; and (2) for liabilities of the Contractor to third parties * * * for * * * death or bodily injury not compensated by insurance or otherwise, arising out of the operation of the tankers in the performance of this contract, whether or not such liabilities are caused by the negligence of the Contractor, * * * provided such liabilities are represented by final judgments * -X- -X*

* * * * *

“(d) The Contractor shall give the Government immediate notice of any suit or action filed, or any claim made, against the Contractor arising out of the performance, of this contract, the cost and expense of which is reimbursable to the. Contractor under the provisions of this contract, and the risk of which is ■then uninsured or in which the amount claimed exceeds the amount of insurance coverage * * *. If the liability is not insured, the Contractor shall, if required by the Government authorize representatives of the Government to settle or defend any such claim and to represent the Contractor in or take charge of any litigation in connection therewith.

“(e) * * * all officers and members of the crew of said tankers * * * shall be deemed to be third parties, and not employees of the Government." Article 14. (Accent added.)

Article 29 expressly empowered the Government to terminate the employment of the master or any member of the crew whose continued retention was considered prejudicial to the interest of the United States.

The Operating Instructions, which the Commander MSTS issued to the Contractor pursuant to the contract, further accent the constant control of the Government, with Marine only to run the ship as its agent. Specifying explicitly and in detail the responsibilities of the Contractor, they begin with the requirement that the ship carry the certificate of the Navy Secretary declaring the ship’s status as a public vessel. They stress the continuing national character of the ship, underscoring the entitlement of the vessel to all the sovereign immunities and privileges of any Navy ship, including those of international and diplomatic stature, which Marine on its own could neither enjoy nor insist upon.

Just how the respective positions of the Government as principal, and Marine as agent, could have been drawn more distinctly is not readily conceivable. While there may be a variation in the interrelation of the crew and the Government in the two agreements, the present contract structures no less an agency than that constituted by the contract considered in Cosmopolitan Shipping Co. v. McAllister, 337 U.S. 783, 69 S.Ct. 1317, 93 L.Ed. 1692 (1949), and there held to retain for the Government’ the same control which we now find. On this precedent we found’ in Williams v. United States, 228 F.2d 129 (4 Cir. 1955) cert. den. 351 U.S. 986, 76 S.Ct. 1054, 100 L.Ed. 1499, the physical operator of the Government ship to be such an agent as the Public Vessels Act declares immune from suit.

The argument of the claimants that by the agreement Marine was, in effect, shipowner as well as the crew’s employer rests on their interpretation of the contract as a splicing of two charter parties; a bare-boat charter out of the Government to Marine with a time charter back from Marine to the Government. The result, say the appellants, is not simply Marine’s appointment as an agent but rather its creation as a charterer, an owner pro hac vice or other independent contractor with the same incidents of possession and control as an owner. Cf. Reed v. Yaka, 373 U.S. 410, 412, 83 S.Ct. 1349, 10 L.Ed.2d 448 (1963). On these premises it is said that Marine is subject to suit under the Jones Act before a jury, should exoneration or limitation not be granted Marine.

As proof of their argument claimants refer primarily to the contract stipulations that the ship’s company shall not be considered employees of, but rather as third parties towards, the Government. The very terms of the present contract, claimants contend, were deliberately and intentionally chosen to remove the crewmen from the classification of Government employees, so as to reserve to them all the subsisting remedies of seamen as against Marine. The current contract, they aver, was substituted for the previous General Agency Agreement to avoid this classification, for that agreement put the ship’s complement in the objectionable category. Cosmopolitan Shipping Co. v. McAllister, supra, 337 U.S. 783, 69 S.Ct. 1317; Hanlon v. Waterman Steamship Corporation, 265 F.2d 206 (2 Cir. 1959), cert. den. 361 U.S. 822, 80 S.Ct. 69, 4 L.Ed.2d 67; Williams v. United States, supra, 228 F.2d 129 (4 Cir. 1955).

Appellants are mistaken. Whether the agreement constituted Marine a charterer, an owner pro hac vice or an independent contractor is merely an academic ascertainment. In any of these capacities Marine could still be an agent. An owner pro hac vice is a charterer, and its competency to act as an operating agent has been expressly recognized. Reed v. Yaka, supra, 373 U.S. 410, 412, 83 S.Ct. 1349; United States Shipping Board Emergency Fleet Corp. v. Greenwald, 16 F.2d 948, 951 (2 Cir. 1927). An independent contractor too may be an agent; the terms are not mutually exclusive. Restatement, Agency, 2d., § 14N. However acting, Marine could sign on sailors as its employees. But the question here is not whether the Potomac’s crew were employees of Marine, nor whether Marine is to be categorized as a bare-boat or time charterer, an owner pro hac vice, or an independent contractor. Indeed, the contract may have established a relation sui generis, not fitting into any of these terminologies, but that, again, is not the issue. The question now determinative is whether Marine was an “agent”.

The desired alteration of the seaman’s status was achieved, certainly in part, in the new form of contract by the express provision that they should not be employees of the United States. The change benefitted the seamen in that it confirmed that they should not be restricted, as Government employees, to relief under the Federal Employees Compensation Act, 5 U.S.C. §§ 751-803. They have still, by virtue of the Public Vessels Act, the traditional remedies of seamen, as well as suit under the Jones Act, but these are now enforceable against the Government in the place of the actual navigator of the vessel. Thus the seamen are assured a solvent respondent. However, the innovation did not affect, or purport to affect, the relationship between the Government and the manager of its ship, that is of principal and agent.

The intent of the 1950 amendment to the Suits in Admiralty Act, promulgating the proviso excluding the agent from suability, was not to keep alive the liability of a private person, firm or corporation having charge of a Government ship. It was just to the contrary. It was the adoption by Congress of the exclusivity principle enunciated in Cosmopolitan Shipping Co. v. McAllister, supra, 337 U.S. 783, 69 S.Ct. 1317. Another purpose was to designate unequivocally the one to whom a claim for loss caused by the Government’s ship should be directed, and to afford extra time for suit by those who had before erroneously proceeded against the contractor. The legislative history avows this intent and object of the Act. Sen.Rep.No.1782, 81st Cong.2d Sess. (1950); 1950 U.S. Code Cong. Service, p. 4209. As we find MSTS has not endeavored to do so instantly, the question is not before us of whether it can legally execute a contract in which the manager of the ship is not the Government’s agent and so without the immunity conferred by the 1950 Amendment. Cf. 10 U.S.C. § 2306(a) and 32 CFR 1.401(c) and 1.402.

Marine’s recourse to the limitation statute, even with the joinder of the United States, does not concede or imply that Marine was the principal rather than an agent in the ship's management. The statute contemplates access to the limitation proceeding for the resolution of doubts as to liability as well as the determination of the extent of it. See British Transport Commission v. United States, 354 U.S. 129, 77 S.Ct. 1103, 1 L.Ed.2d 1234 (1957); Star Brick Corp. v. Johnson, 262 F.2d 251 (2 Cir. 1959); Petition of Spearin, Preston & Burrows, 190 F.2d 684, 686 (2 Cir. 1951). Indeed, claimants’ attribution of character or owner pro hac vice to Marine vouches it as one privileged to seek the lee of the limitations act, for the statute expressly harbors charterers who, like Marine, “man, victual and navigate” the vessel. 46 U.S.C. § 186. That it was a haven the Potomac might enter is acknowledged by the authority the appellants cite. Petition of the United States, 155 F.Supp. 714 (D.Del.), affirmed 259 F.2d 608 (3 Cir. 1958).

Continuance under the contract of the immunity accorded the agent by the statute is not put in doubt by the fact that judgments against Marine have, with the knowledge of the United States, been entered for personal injuries or other liabilities. E.g. Chowaniec v. United States (S.D.N.Y.1956) 149 F. Supp. 251. The fact is, too, that the agreement speaks of “judgments” which might be rendered against Marine in the course of the contract. But in the same context the agreement provides for acceptance of the agent’s “settlements approved in writing by the Government”. This tolerance and these provisions merely indicate that the Government has or may allow judgments against Marine as fair ascertainments of the amounts for which the agent seeks' reimbursement. In no event, however, could the Public Vessels Act be nullified by practice or agreement.

Congress unquestionably had the power to withhold from a crewman shipping on a publicly owned, but privately managed, cargo vessel the right to sue the contractor. Anniston Manufacturing Co. v. Davis, 301 U.S. 337, 341-343, 57 S.Ct. 816, 81 L.Ed. 1143 (1937); Crowell v. Benson, 285 U.S. 22, 45, 52 S.Ct. 285, 76 L.Ed. 598 (1932). The evident reason for the exemption is that, as the United States binds itself to hold the agents harmless against liabilities arising in the conduct of the ships, it is in reality the respondent to all such claims. For the same reason a jury trial is withheld, the United States seldom leaving to a jury the determination of the sum to be assessed for its liability. The withdrawal of a jury trial is altogether permissible. Maricopa County v. Valley National Bank, 318 U.S. 357, 63 S.Ct. 587, 87 L.Ed. 834 (1943); Lynch v. United States, 292 U.S. 571, 54 S.Ct. 840, 78 L.Ed. 1434 (1934).

Our conclusion is that Marine should now be declared exonerated, by reason of the statute, of any liability to the appellant-claimants. As this in effect was the conclusion of the District Court, its judgment will be affirmed.

Affirmed.