The vanishing doctrine of implied indemnity in maritime actions: maritime law has evolved to shape the needs of a changing society, and the Supreme Court has made serious inroads in simplifying the law.
Indemnity is a shifting of the entire loss from one party to another and applies generally when one party, by virtue of his relationship with the injured person or the tortfeasor who actually caused the injury, has to answer in damages for wrongdoing which is the fault of another. The common law is rife with such relationships: master--servant, employer-employee, owner-operator. (1) While liability is imposed by law on the passive or vicariously liable tortfeasor in some cases (e.g., a vehicle and traffic law which makes an automobile owner liable for injuries caused to a pedestrian or other motorists when the vehicle is driven by an operator with the owner's consent), the common law has imposed such vicarious or passive liability in other situations. One such example is in the field of admiralty law, when the ship owner is generally held strictly liable under the unseaworthiness doctrine for injuries caused to persons aboard a ship or working on a vessel based on the ship owner's duty to ensure that the vessel is reasonably fit to be at sea. (2) While contractual indemnification clauses typically govern the rights of the ship owners and those with whom they contract, there were cases where a ship owner, who had hired a stevedoring company to handle the loading and unloading of its vessels, found itself facing liability where the stevedoring company negligently performed its work, causing injury to the stevedoring company's own employee. Because of the bar of the workmen's compensation statutes, (3) which prohibited the stevedoring employee from suing his own employer, the ship owner was frequently faced with defending an unseaworthiness claim, often based on conduct or activities over which the ship owner had little or no control.
To remedy this situation and to protect the ship owners in such cases where they had no ability or means to control the wrongful conduct for which they were being held liable, courts created the doctrine of implied contractual indemnity. The doctrine, best typified by the Supreme Court's decision in Ryan Stevedoring Co. v. Pan-Atlantic Steamship Corp. (4) holds that when a ship owner is found liable in negligence based on unseaworthiness for a violation over which the ship owner had no control (i.e., the ship owner's negligence, if any, was only passive or secondary), then the ship owner has an implied fight of indemnity against the stevedoring company whose actual wrong-doing caused the injury for breach of a contractually implied duty of workmanlike performance. Such an implied indemnity was permitted even in the absence of an express indemnification clause in the contractual arrangement between the ship owner and stevedoring company. The Supreme Court in Ryan said that this arrangement would place the loss squarely on the shoulders of the party whose wrongful conduct caused the injury.
Ryan gained acceptance among the lower courts and was expanded to include situations beyond the actual stevedoring ship owner context, for example, to non-stevedore maritime contractors such as repairmen, electricians, cleaners, and painters. (5) But the engrafting of Ryan to cases beyond its initial application created vexing problems for the courts. While the majority in Ryan talked of implied contractual indemnity based on breach of warranty of workmanlike performance of services, the Ryan dissenters talked about implied indemnity in terms of negligence concepts. In his dissent, Judge Black wrote that "common-law indemnity may sometimes arise where two people commit a tort or wrong which hurts the same person." (6) Cases following Ryan expanded the doctrine to permit tort indemnity where the vicariously liable wrongdoer was only "passively" or "secondarily" negligent while the indemnitor was "actively" or "primarily" negligent. What if the "passive" or "secondarily" liable ship owner was just a tiny bit negligent? Did that take away his fight of implied indemnification under Ryan? Could the ship owner still recover based on an implied indemnity theory if his wrongdoing, even to a small degree, caused the injury? This theory sounds much like the contribution doctrine, where tortfeasors contribute to the plaintiff's recovery based upon their own proportionate share of fault.
While Ryan was frequently applied from the time of its decision in 1956, the crack in the Ryan armor was another Supreme Court decision, United States v. Reliable Transfer Co., Inc., 7 where the Court abandoned the century old "divided damages" rule in admiralty. The "divided damages" rule held that when two or more parties were found to be at fault in a collision involving property damage, each party paid an equal share of the damages. For example, where two vessels collided, each ship owner paid half of the damages, no matter which ship owner's fault was greater.
The abolition of the divided damages rule in Reliable Transfer led the courts to believe that the fairer way to allocate damages in maritime actions, rather than deciding whether one party was "actively" or only "passively" negligent, or whether there was a breach of an implied warranty of workmanlike performance so as to allow an implied indemnity claim, was to allocate liability among all of the tortfeasors based on their percentage of fault as found by a jury. This eliminated the old "active/passive" and "primarily/secondarily" incantations of negligence and substituted a more real-world approach to the calculus of determining liability among multiple tortfeasors in an admiralty action.
What Reliable Transfer initiated, McDermott, Inc. v AmClyde, (8) finished. In McDermott, the Supreme Court adopted a rule of contribution among tortfeasors in damage actions absent a contractual indemnification relationship among the parties. Each tortfeasor would pay only for his or her own share of the damages and the artificial distinctions of "active/passive" and "primary /secondary" liability were eliminated. Perhaps even more importantly, a tortfeasor who had settled the plaintiff's claim against it had truly "bought his peace" and could not be brought back into the litigation since suits for contribution against settling tortfeasors were neither required nor permitted.
What then of implied indemnity? As a Second Circuit case held, the death of Ryan was an interesting phenomenon. No statute overruled Ryan. No Supreme Court decision repudiated it. Ryan was emasculated first by amendments to the Longshore and Harbor Workers' Compensation Act, which specifically barred third-party claims by stevedores against ship owners, and then relegated to the judicial dustbin by the Supreme Court's decisions in Reliable Transfer and McDermott. The rise and fall of the implied indemnity doctrine is a good case study of how the courts, even in the absence of the legislative mandates, shape the needs of the law to a changing society.
I. The Ryan Doctrine
In Ryan, the Supreme Court recognized, under the special circumstances of the ship owner-stevedore relationship, a right of implied non-contractual indemnity between them. Ryan Stevedoring had contracted with Pan-Atlantic to perform all cargo loading and unloading operations on Pan-Atlantic's vessels. A cargo worker employed by Ryan was injured while unloading a Pan-Atlantic ship in Brooklyn, allegedly because his co-employee in South Carolina had improperly stowed the cargo. Because the provisions of the Longshore and Harbor Workers' Compensation Act (LHWCA) (9) forbade the employee from suing his employer Ryan Stevedoring, the injured employee sued Pan-Atlantic Steamship, who in turn sued Ryan Stevedoring for indemnity. While the Ryan Stevedoring-Pan Atlantic agreement did not contain an express indemnity clause, the Supreme Court allowed an action for implied indemnity to proceed by Pan-Atlantic against Ryan, reasoning that the agreement by Ryan to perform all of Pan-Atlantic's stevedoring operations necessarily includes petitioner's obligation not only to stow the pulp rolls, but to stow them properly and safely. Competency and safety of stowage are inescapable elements of the service undertaken. This obligation is not a quasi-contractual obligation implied in law or arising out of a noncontractual relationship. It is of the essence of petitioner's stevedoring contract. It is petitioner's warranty of workmanlike service that is comparable to a manufacturer's warranty of the soundness of its manufactured product. The shipowner's action is not changed from one for a breach of contract to one for a tort simply because recovery may turn upon the standard of the performance of petitioner's stevedoring service. (10)
Ryan was a 5-4 decision with the dissenters, led by Justice Black, arguing that the ship owner had been actively negligent, thus defeating an indemnity claim, and further contending that the allowance of such third-party actions defeated the congressional intent to give injured workers through the LHWCA "a more certain and less expensive recovery, even though far less in amount than some tort recoveries might be." (11)
II. The Expansion Of Ryan
After Ryan, the lower courts expanded the reach of the Ryan doctrine to non-stevedore maritime contractors, particularly in those parts of the United States where maritime shipping was a prominent economic activity. One of the leading cases extending the implied indemnity doctrine beyond the stevedoring ship owner context was Parfait v. Jahncke Service, Inc. (12) Parfait, an employee of Yo-Ro Diesel, was injured while working on a dredge owned by Jahncke. Jahncke in turn sued Yo-Ro, plaintiff's employer, seeking implied indemnity under the Ryan doctrine. The Firth Circuit in Parfait, recognizing the equitable spirit behind the Ryan doctrine, held that the purpose of the Ryan doctrine was generally to place "the burden ultimately on the company whose default caused the injury," citing the U.S. Supreme Court case, Italia Societa v. Oregon Stevedoring Co. (13)
While the Parfait Court allowed the expansion of the Ryan doctrine beyond the stevedoring-ship owner relationship by allowing Jahncke to pursue an implied indemnity claim against Yo-Ro, the Fifth Circuit put its finger on the problem with Ryan indemnity: "The Ryan doctrine is not, however, a precision instrument for allocating the burden according to the relative amounts of fault, but a rough all-or-nothing device." (14)
Parfait was followed by Hudson Waterways Corp. v. Coastal Marine Service, Inc., (15) where Behm, an employee of Hudson Waterways, sued his employer when he was injured when he fell on a muddy plank going from ship to shore. The Longshore and Harbor Workers' Compensation Act did not bar Behm's claim against Hudson since Behm was a Jones Act seaman, not a longshoreman or harbor worker. Hudson settled with Behm and then sued Coastal Marine for indemnity. The Court allowed recovery based on the active-passive negligence dichotomy and held that the failure of the contractor (Coastal Marine) to keep the ramp clean from its work barge to the shore was active negligence and was the proximate cause of Behm's injury. Hudson's failure to object to the muddy ramp and to request that Coastal Marine furnish a safer ramp was held to be only passive and secondary negligence. However, despite the allowance of a claim for implied tort indemnity, the court ultimately barred Hudson from recovering against Coastal Marine Service based on a "red letter clause" in the contract between Hudson and Coastal Marine. The clause provided that Coastal Marine "... shall not be liable in any respect to or by any vessel, job or individual person, directly or indirectly in contract, tort or otherwise" (16) The court found this contractual term enforceable, barring Hudson's claim for indemnity or contribution from Coastal Marine.
While the majority in Ryan framed the issue as whether there was an implied contractual indemnity and distinguished cases of tort indemnity which were based on the concepts of active and passive negligence, the lower courts were nonetheless analyzing both contract and tort principles in deciding implied indemnity cases. In Tri-State Oil Tool Industries v. Delta Marine Drilling Co., (17) the Fifth Circuit allowed a tort based implied indemnity doctrine based on common law principles of active and passive negligence, in addition to the implied contractual indemnity under Ryan.
In Tri-State, a roughneck was seriously injured aboard a Delta Marine submersible drilling barge when he was struck by a piece of pipe which had dropped from an elevator belonging to Tri-State. The roughneck, an employee of Delta Marine, filed a complaint under the Jones Act and the general maritime law against his employer and in maritime tort against Tri-State. Both Tri-State and Delta were found liable at trial. The district court dismissed the cross-claims for indemnity filed by Delta Marine and Tri-State against each other and only that issue went to the Fifth Circuit. It was undisputed that there was no contractual relationship between Delta Marine and Tri-State which would have provided a right of indemnity in favor of one against the other. The case focused on who had actual operational control of the enterprise when the plaintiff was injured. Finding that the Ryan Court had specifically left open the question of recovery on an implied tort indemnity basis, the Tri-State court held that non-contractual indemnity continued to be recognized in post-Ryan maritime cases. (18) In finding that "it would be wrong to assess damages against a non-negligent or passively negligent ship owner for loss or injury suffered solely as a result of active negligence of another party, regardless of the absence of a contractual relationship between the parties," the court allowed the cross-claims to be asserted among the parties and remanded the case to the district judge for determination of whether Delta Marine committed active or primary negligence as opposed to passive, vicarious, or secondary negligence, and if such negligence was a proximate cause of the accident. If the court made a finding that there was such active or primary negligence committed by Delta Marine, then Delta Marine's cross-claim against Tri-State should be dismissed. However, should the court find on remand that Delta Marine was passively, vicariously, or secondarily at fault, the cross-claim by Delta Marine against Tri-State should be allowed to stand. Thus, the Fifth Circuit specifically expanded the Ryan rationale of implied indemnity on a noncontractual basis to include an implied fight of indemnity based on concepts of active-passive and primary-secondary negligence.
Tri-State appears to be the high water mark of the implied tort indemnity doctrine in maritime actions. Later Fifth Circuit cases have found occasion to limit the extension of the Ryan doctrine and even to label it, as it did in 1985, as a "withered" doctrine. (19) While Tri-State has not been specifically overruled, it has a significant negative indirect history where it has been disagreed with, called into doubt, and distinguished by both the Fifth Circuit and district courts within that circuit. (20)
III. The Crack In The Ryan Armor: Reliable Transfer
The crack in the Ryan armor came in 1975 when the United States Supreme Court decided United States v. Reliable Transfer Co. (21) which arose out of a claim brought by the owner of a tanker vessel which ran aground off the shores of Rockaway Point in Queens. The district court, in a non-jury trial, found that twenty-five percent of the vessel's grounding was caused by the failure of the Coast Guard to properly maintain lighting at the Rockaway inlet and seventy-five percent was caused by the crew of the Mary A. Whalen, the vessel owned by Reliable Transfer, which went aground. Despite the fact that the United States was found only twenty-five percent responsible for the loss, the United States was found liable to pay half of the damages to the vessel in accordance with the divided damages doctrine.
The basis for the so-called divided damages rule rested in a hundred year-old Supreme Court decision, the Sapphire, where the Court held that it was the rule in admiralty that "where both vessels are in fault the sums representing the damage sustained by each must be added together and the aggregate divided between the two." (22) The Sapphire court went on to state that "[i]f one in fault has sustained no injury, it is liable for half damages sustained by the other, though that other was also in fault." (23) After reviewing this century-old doctrine, the Supreme Court ultimately found it to be unsatisfactory.
It is no longer apparent, if it ever was, that this Solomonic division of damages serves to achieve even rough justice. An equal division of damages is a reasonably satisfactory result only where each vessel's fault is approximately equal and each vessel thus assumes a share of the collision damages in proportion to its share of the blame, or where proportionate degrees of fault cannot be measured and determined on a rational basis. The rule produces palpably unfair results in every other case. For example, where one ship's fault in causing the collision is relatively slight and her damages small, and where the second ship is grossly negligent and suffers extensive damage, the first ship must still make a substantial payment to the second. "This result hardly commends itself to the sense of justice anymore appealingly than does the common law doctrine of contributory negligence...." (citation omitted). (24)
The "archaic" divided damage rule continued to prevail by sheer inertia rather than intrinsic merit, and the Court noted that "[w]orldwide experience has taught that that goal [the just and equitable allocation of damages] can be more nearly realized by a standard that allocates liability for damages according to comparative fault whenever possible." (25) Accordingly, the Supreme Court announced a new rule for damages in admiralty collision cases:
We hold that when two or more parties have contributed by their fault to cause property damage in a maritime collision or stranding, liability for such damages is to be allocated among the parties proportionately to the comparative degree of their fault, and that liability for such damages is to be allocated equally only when the parties are equally at fault or when it is not possible fairly to measure the comparative degree of their fault. (26)
Comparative negligence, said the Court, has taught that a rule of fairness in court will produce fair out of court settlements. The Court said that it could no longer countenance the operation of an archaic rule because while its easy applicability may provoke quick, though inequitable, settlements and relieve the courts of litigation, that rule could not be justified if it produces unfair results simply to encourage speedy out of court accommodations. (27)
IV. Ryan's Retreat
After the Supreme Court's decision in Reliable Transfer, the implied indemnity doctrine fell into judicial disfavor. Ryan was sparingly employed, even in the Fifth Circuit which had embraced the Ryan implied indemnity doctrine to the fullest extent.
The Second Circuit has concluded that the 1972 amendments to the Longshore and Harbor Workers' Compensation Act overruled Ryan by abolishing the vessel owner's right to indemnity from the stevedore. (28) The LHWCA was amended to provide that "the employer shall not be liable to the vessel for such damages directly or indirectly and any agreements or warranties to the contrary shall be void." (29) The stevedore's obligation to indemnify the ship owner if the ship owner was held liable to the seaman was abolished. (30) Even if Ryan indemnity survived the 1972 amendments to the Longshore and Harbor Workers' Compensation Act, it is not applicable where the party seeking indemnity has been exposed to liability based on his fault. (31) Ryan indemnity would apply only if the ship owner was exposed to strict liability under the doctrine of unseaworthiness. (32)
In Lubrano, the Second Circuit noted that, "Ryan indemnity is virtually dead, at least in this circuit. How this came to be, and in particular how it happened that a Supreme Court doctrine that was neither abrogated nor expressly overruled came no longer to apply, is a long and tortured tale." (33)
While reading a covenant to indemnity for breach of a warranty of workmanlike performance into the stevedore ship owner contract no longer made sense after the 1972 Amendments to the LHWCA and Fairmont Shipping, contribution was available as a remedy in maritime multiple tortfeasor cases.
The theory of implied or equitable indemnification based on "active/passive" or "primary/secondary" negligence no longer has wide acceptance in admiralty law. The "implied indemnity" theory is now recognized only in the Fourth Circuit Court of Appeals. In Vaughn v. Farrell Lines, Inc. (34) and White v. Johns-Manville Corp., (35) courts permitted ship owners to seek indemnity against the manufacturers of asbestos after they had paid injured seamen for asbestos-related diseases they had contracted from exposure on their ships. In those situations, where the ship owners paid the injured seamen, an implied right of indemnity in favor of the paying ship owner was recognized against the asbestos producers who had refused to participate in the settlements.
Vaughn v. Farrell Lines was a wrongful death action brought against ship owners by the widow of a seaman who died from the asbestos related disease of mesothelioma. The decedent allegedly contracted the disease through asbestos exposure in the engine rooms of vessels where he worked during his sea-faring career. The ship owners settled with the widow and sought indemnification from Foster-Wheeler, whose ship boilers had asbestos insulation. Following earlier Fourth Circuit precedent in White v. Johns-Manville Corp., (which involved personal injury claims by workers at a shipbuilding and repair facility who alleged that they became ill from asbestos exposure), the Vaughn Court allowed the settling ship owners to make an indemnity claim. The ship owners had paid the claims of the decedent's widow against the non-settling asbestos manufacturer based on the "active-passive" theory of negligence:
Therefore, the ship owners, through their third party action for indemnity, can seek to transfer the ultimate liability to Foster Wheeler on the theory that Foster Wheeler was guilty of active or primary wrongdoing while they were innocent, or only passively or secondarily liable. This theory of indemnity is recognized in admiralty. (citations omitted). It applies a principle of restitution to the situation where one person discharges liability that has been imposed on him by operation of law, but which should have been discharged by another. (citation omitted).
This active-passive theory typically arises when the indemnitee has been held absolutely liable for the wrongful act of another. (36)
Indemnity between liable maritime tortfeasors is available only where the proportionate degrees of fault cannot be measured and determined on a rational basis. (37)
General maritime law, like Texas law, no longer recognizes a plethora of tort indemnity theories. The availability of common law indemnity under maritime law is instead quite limited. In United States v. Reliable Transfer Co., 421 U.S. 397, 95 S.Ct. 1708, 44 L.Ed.2d 251 (1975), the Supreme Court abandoned the archaic concept of tort indemnity and replaced it with the doctrine of comparative fault. Indemnity between liable maritime tortfeasors is now available only "where proportionate degrees of fault cannot be measured and determined on a rational basis." Id. at 405, 95 S.Ct. at 1713. (38)
After Reliable Transfer, "[o]nly a handful of viable indemnity theories remain." (39) Only those defendants who are held vicariously liable are viewed as "non-negligent" tortfeasors who can pursue a claim for implied indemnity.
In Self v. Great Lakes Dredge & Dock Co., (40) the district court granted summary judgment to Chevron, the operator of a vessel which struck a barge on which the decedent was working. The barge was owned by Great Lakes, who asserted indemnification and contribution claims against Chevron. In affirming the district court's granting of summary judgment to Chevron on the indemnification claim and noting that Great Lakes retained its contribution claim against Chevron, the court abolished the active-passive negligence rule. It held that "in an admiralty case where the district judge assesses the relative degrees of fault, there is no place for the active-passive negligence doctrine. A tortfeasor only passively negligent will presumably bear a smaller percentage of the fault for an injury." (41)
The Sixth Circuit Court of Appeals decisively rejected the "active-passive" negligence and "primary-secondary" negligence theories of implied indemnity in Miller v. American President Lines, Ltd., (42) holding that "[t]he active-passive negligence theory is doctrinally inconsistent with the general system of comparative fault in maritime law and we reject this approach. Instead we adopt a comparative causation approach to apportioning damages between tortfeasors ..." (43) The court concluded that indemnity, "an all-or-nothing remedy that shifts the entire amount of a loss from one party to the other," is enforced when the parties to contractual arrangements agree to express contractual provisions providing indemnity. Tracing the history of the indemnity doctrine, the court considered the evolutionary process by which the law sought to ameliorate the harshness of the older forms of indemnity "in an ongoing quest to make damage apportionment more closely reflect the relative culpability of each defendant." (44) Allowing implied indemnity based on active-passive negligence was inconsistent with the evolution of the indemnity doctrine. The Miller court when on to state:
The Supreme Court dealt the divided damages rule a final blow in United States v. Reliable Transfer Co., Inc., (citation omitted). There the Court adopted a comparative fault rule for maritime cases, noting that, "the rule of divided damages has continued to prevail in this country by sheer inertia rather than by reason of any intrinsic merit." (citation omitted). The Court held that maritime liability "is to be allocated among the parties proportionately to the comparative degree of their fault, and that liability for such damages is to be allocated equally only when the parties are equally at fault or when it is not possible fairly to measure the comparative degree of their fault." (citation omitted). (45)
While the Third Circuit has not specifically rejected the active-passive negligence doctrine as a basis for implied tort indemnity, no Third Circuit decision since McDermott has used the active-passive distinction even in the context of vicarious liability. The Court's reasoning in Griffith v. Wheeling-Pittsburgh Steel Corp., (46) a post Reliable Transfer case, is indicative of the Third Circuit's views on implied indemnity in maritime cases:
[W]e think that the law of maritime indemnity has been substantially altered by the Supreme Court's decision in United States v. Reliable Transfer Co., (citation omitted). In that case the Court abandoned the traditional rule of "divided damages" for maritime collision cases. That rule required "the equal division of property damage whenever both parties are found to be guilty of contributing fault, whatever the relative degree of their fault may have been." (citation omitted), h the future, the Court held, collision damages should be apportioned on a comparative fault basis. The rationale behind that decision was simple: allocation of liability directly in proportion to fault was a much fairer method of determining damages than the rough and ready 50-50 division imposed by the traditional rule. The rule of non-contractual indemnity pressed by Wheeling, like the contribution rule at issue in Reliable Transfer, is designed to shift the primary burden of reparations to the party more at fault, thereby avoiding unjust, or at least unsatisfactory results. But the rule performs that task by relieving a concededly negligent tortfeasor-albeit his negligence was "passive" from any liability for the damage that occurred. That result seems strongly at odds with the preference for comparative fault expressed in Reliable Transfer. (47)
V. Contribution As The Sole Non-Express Contractual Method Of Allocating Fault Maritime Actions
Under general maritime law, an alleged tortfeasor may seek contribution, indemnity, or apportionment from one who may be comparatively negligent or a joint tortfeasor. (48) Maritime contribution law provides that the liability of joint tortfeasors be apportioned according to principles of comparative fault. In 1993, in Miller v. American President Lines, Ltd., the Sixth Circuit held that comparative fault principles apply in maritime negligence and strict products liability claims as well as in claims governed by the Jones Act and DOHSA (49) Comparative fault principles require the court to make a "complete apportionment [of liability] between the negligent parties, based on their respective degrees of fault." (50)
The applicability of comparative fault to contribution actions under maritime law originated in United States v. Reliable Transfer Co., Inc. (discussed infra) where the Supreme Court held that liability in a maritime case is to be allocated equally only when the parties are equally at fault or when it is not possible fairly to measure the comparative degree of their fault.
Consistent with the comparative fault doctrine promulgated in Reliable Transfer, the Supreme Court in McDermott, Inc. v. AmClyde, adopted the so-called "proportionate share" approach in determining the proper allocation of damages when a plaintiff settles with one or more tortfeasors prior to trial. In McDermott, the Court had to decide the appropriate means of allocation when a settlement with less than all the defendants in an admiralty case would affect the liability of the non-settling defendants. The McDermott Court adopted the third approach set forth in the Restatement Second (Torts) [section] 886A(3), which provided a credit for the settling defendants' "proportionate share" of responsibility for the total obligation.
In McDermott, the Supreme Court rejected the argument that adopting the proportionate share approach to liability may result in overcompensation to plaintiff by violating the "one satisfaction rule" which barred a plaintiff from litigating against one joint tortfeasor if he had settled with another tortfeasor. The basis for the bar was that a plaintiff was only entitled to make one recovery. While the original version of the "one satisfaction rule" had been repudiated by the courts, (51) some courts still invoked a milder form of the "one satisfaction rule" whereby a plaintiff's recovery against a non-settling defendant was reduced in order to ensure that the plaintiff did not secure any more than necessary to compensate for his or her loss.
The Supreme Court in McDermott declined to apply the "one satisfaction rule" for several reasons. First, the law contained no rigid rule against overcompensation. Second, any excess recovery may be attributable to the fact that certain tortfeasors may have made an unwise settlement, for which the plaintiff should not be penalized. The Court recognized "that settlements frequently result in the plaintiff's getting more than he would have been entitled to at trial," and that a plaintiff's good fortune in striking a favorable bargain with one defendant gives the other defendants no claim to pay less than their proportionate share of the total loss. (52)
The proportionate share approach was deemed by the Court to be the fairest to all parties. The plaintiff's recovery against the settling defendant was not limited by anything other than the plaintiff's own agreement to settle. Any shortfall (i.e., if the plaintiff settles for less than the case is worth) is not attributable to the other defendants who are not parties to the settlement. Since the other defendants are not entitled to a reduction in liability when the plaintiff negotiates a generous settlement, defendants are not required to shoulder a disproportionate liability when the plaintiff negotiates a meager settlement which does not fully compensate him or her for the loss. In short, the proportionate approach, whereby each defendant pays only his own share of the liability as found by the trier of fact, was found by the Court to be the fairest method for allocating liability among tortfeasors.
The McDermott Court recognized that under this approach, no suits for contribution may be brought by the non-settling tortfeasors against the settling defendants, nor are such suits necessary, because the non-settling defendants pay no more than their share of the judgment. In a case decided the same day as McDermott, the Supreme Court stated that "the plaintiff's settlement with one defendant bars a claim for contribution brought by non-settling defendants against the settling defendant." (53) The Boca Grande Court explained its rationale, by o saying that "actions for contribution against settling defendants are neither necessary nor permitted."
Under McDermott and Boca Grande, non-settling tortfeasors would have no right to seek contribution against settling parties. However, the McDermott rule "does not preclude a contribution suit against a tortfeasor who is released by the settlement even though not a party to it." (54) McDermott did not change the well-established maritime rule permitting contribution claims between joint tortfeasors. The McDermott court distinguished released parties from settling parties and held that settling defendants may seek contribution from fully released, non-settling defendants.
Hence, a settling defendant who has obtained a release for his liability and the liability of the non-settling defendant may file a contribution claim against the released but non-settling party. On the other hand, non-settling, released parties will never be liable for more than their proportionate share of responsibility under McDermott and consequently, there is no need for them to seek contribution from any other entity. They are barred from doing so by McDermott and Boca Grande. (55)
District court cases after McDermott have adhered to the same view. The Eastern District of Louisiana reiterated that the Supreme Court "adopted the proportionate share approach in resolving claims between settling and non-settling defendants in a maritime setting. (56) Remaining defendants do not face prejudice since they are only liable for their respective percentages of negligence. (57)
The leading appellate case applying McDermott is Murphy v. Florida Keys Electric Cooperative Association, Inc. (58) The Eleventh Circuit phrased the issue as whether a defendant in an admiralty tort action who settled with the plaintiff without obtaining a release from liability for other potential tortfeasors can make a contribution claim against those tortfeasors with a view toward reducing the amount that the defendant paid to settle its own liability. Answering in the negative, after an extensive historical review of the Eleventh Circuit's decision on the issue of contribution among joint tortfeasors, the court reasoned that under McDermott, a settling tort defendant cannot bring an action for contribution against a non-settling defendant who was not released from liability to the plaintiff under the settlement agreement. The Murphy Court found that MeDermott's prohibition against contribution from a settling party did not preclude a contribution suit against a tortfeasor who was released by a settlement even though not a party to it. "A release is not the same as a settlement and a released party is not a settling party within the meaning of McDermott, which does not purport to eliminate altogether the 'well-established maritime rule allowing contribution between joint tortfeasors.'" (59)
The Supreme Court has sought to alleviate the confusion about the legal basis for the assertion of contribution and indemnity claims among defendants in maritime actions. By allowing only a contribution remedy in the absence of an express contractual agreement among the parties, and by allowing a party who has settled out not to be subject to any further claims, the Court has made serious inroads in clarifying and simplifying the law and in requiring each party to pay its fair share, and only its own fair share, in the resolution of such claims.
(1) See e.g., Scull v. New Mexico, 236 F.3d 588, 600 (10th Cir. 2000); Williams v. Rene, 72 F.3d 1096 (3d Cir. 1995); Krueger v. Mammoth Mountain Ski Area, Inc., 873 F.2d 222 (9th Cir. 1989).
(2) Lewis v. Lewis & Clark Marine, Inc., 531 U.S. 438 (2001); Fairmont Shipping Corp. v. Chevron Int'l Oil Co., Inc., 511 F.2d 1252 (2d Cir.), cert. denied, 423 U.S. 838 (1975).
(3) Longshore and Harbor Workers' Compensation Act, 33 U.S.C. [section] 905(a).
(4) 350 U.S. 124 (1956).
(5) United New York Sandy Hook Pilot's Assoc. v. Rodermond Industries, Inc., 394 F.2d 65, 71 (3d Cir. 1968); Lusich v. Bloomfield S.S. Co., 355 F.2d 770 (5th Cir. 1966); American Export Lines v. Northfolk Ship Building and Dry Dock Corp., 336 F.2d 525 (4th Cir. 1964); H. & H. Ship Service Co. v. Weyerhaeuser Line, 382 F.2d 711 (9th Cir. 1967).
(6) Ryan Stevedoring Co., 350 U.S. at 141-42.
(7) 421 U.S. 397 (1975).
(8) 511 U.S. 202 (1994).
(9) 33 U.S.C.A. [section] 901, et seq.
(10) Ryan Stevedoring Co., 350 U.S. at 133-34.
(11) Id. at 140. (Black, J., dissenting).
(12) 484 F.2d 296 (5th Cir. 1973).
(13) 376 U.S. 315, 324 (1964).
(14) Parfait, 484 F.2d at 302.
(15) 436 F.Supp. 597 (E.D. Tex. 1977).
(16) Id. at 604.
(17) 410 F.2d 178 (5th Cir. 1969).
(18) Id. at 184.
(19) See Hardy v. Gulf Oil Corp., 949 F.2d 826, 834 (5th Cir. 1992).
(20) See, e.g., Bertram v. Freeport McMoran, Inc., 35 F.3d 1008 (5th Cir. 1994); Roberts v. Williams-McWilliams Co., Inc., 648 F.2d 255 (5th Cir. 198l); Horton and Horton, Inc. v. T./S. J.E. Dyer, 428 F.2d 1131 (5th Cir. 1970); Boyett v. Keane Corp., 815 F.Supp. 204 (E.D. Tex. 1993).
(21) 421 U.S. 397 (1975).
(22) 18 Wall 51 (1874).
(24) Reliable Transfer Co., 421 U.S. at 405.
(25) Id. at 410.
(26) Id. at 411.
(27) Id. at 408.
(28) Gravatt v. City of New York, 226 F.3d 108, 116 (2d Cir. 2000), cert. denied, 532 U.S. 957 (2001).
(29) 33 U.S.C. [section] 905(b)
(30) Scindia Steam Navigation Co. v. De Los Santos, 451 U.S. 156, 165 (1981).
(31) Lubrano v. Waterman S.S. Co., 175 F.3d 274, 283 (2d Cir. 1999).
(32) See Fairmont Shipping Corp., 511 F.2d at 1252.
(33) Lubrano, 175 F.3d at 276-77.
(34) 937 F.2d 953 (4th Cir. 1991).
(35) 662 F.2d 243 (4th Cir. 1981).
(36) Vaughn, 937 F.2d at 957.
(37) Lakes of Gum Cove Hunting and Fishing, LLC v. Weeks Marine, Inc., 182 F. Supp. 2d 537, 547 (W.D. La. 2001).
(38) Hardy, 949 F.2d at 833.
(40) 832 F.2d 1540 (11th Cir. 1987), cert. denied, 486 U.S. 1033 (1988).
(41) Id. at 1557.
(42) 989 F.2d 1450, 1459 (6th Cir.), cert. denied, 510 U.S. 915 (1993).
(43) Id. at 1459.
(45) Id. at 1460.
(46) 610 F.2d 116 (3d Cir. 1979).
(47) Id. at 129. (Emphasis in original).
(48) See Cooper Stevedoring Co. v. Fritz Kopke, Inc., 417 U.S. 106 (1974); Edmonds v. Compagnie Generale Transatlantique, 443 U.S. 256, 260 (1979); Simeon v. T. Smith & Son, Inc., 852 F.2d 1421, 1428 (5th Cir. 1988), cert. denied, 490 U.S. 1106 (1989).
(49) Miller, 989 F.2d at 1460-62; Loeber v. United States, 803 F. Supp. 1154, 1156 (E.D La. 1992); Carpenter v. U.S., 710 F. Supp. 747, 751 (D. Nev. 1988).
(50) Texas Eastern Transmission v. McMoran Offshore Exploration Co., 877 F.2d 1214, 1221 (5th Cir.), cert. denied, 493 U.S. 937 (1989). See also Thomas J. Schoenbaum, Admiralty and Maritime Law [section] 5-18, at 231 (3d ed. 2001).
(51) See W. PAGE KEETON ET AL., PROSSER AND KEETON ON THE LAW OF TORTS [section] 49, at 333-334 (5th ed. 1984); RESTATEMENT (SECOND) OF TORTS [section] 8850), Comment b, page 334.
(52) McDermott, 511 U.S. at 219.
(53) Boca Grande Club, Inc. v. Florida Power & Light Co., 511 U.S. 222 (1994).
(54) Murphy v. Florida Keys Elec. Coop. Assoc., 329 F.3d 1311, 1318 (11th Cir. 2003).
(55) McDermott did not change the law of indemnity in maritime actions where the claim is based on a written agreement; See Boykin v. China Steel Corp., 73 F.3d 539, 542 (4th Cir. 1996).
(56) Cargill Ferrous Int'l Division of Cargill, Inc. v. M/V Princess Margarita 2001 WL 1426678 at * 1 (E.D. La. 2001).
(58) 329 F.3d 1311 (11th Cir. 2003).
(59) Id. at 1318.
IADC member Michael J. Holland is a partner in the New York office of Condon & Forsyth LLP where he specializes in tort and commercial litigation on behalf of the firm's airline clients. He has extensive experience in major litigation involving foreign air carriers in state and federal courts, and he has represented air carriers in liability litigation in the United States for more than thirty years.
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|Author:||Holland, Michael J.|
|Publication:||Defense Counsel Journal|
|Date:||Apr 1, 2005|
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