Ryan Stevedoring Company v. Pan-Atlantic Steamship Corporation/Dissent Black

by Hugo Black

United States Supreme Court

350 U.S. 124

Ryan Stevedoring Company  v.  Pan-Atlantic Steamship Corporation

 Argued: Oct. 11, 12, 1955. --- Decided: Jan 9, 1956

Mr. Justice BLACK, with whom THE CHIEF JUSTICE, Mr. Justice DOUGLAS, and Mr. Justice CLARK concur, dissenting.

The petitioner, Ryan Stevedoring Company, is an employer subject to the Longshoremen's and Harbor Workers' Compensation Act. ^[1] Section 5 of that Act completely abolished all rights of longshoremen to sue their employers for injuries resulting from negligence of the employer or his employees. The Act substituted for old tort remedies a prescribed schedule of compensation for employees' injuries or death which was declared to be 'exclusive and in place of all other liability of such employer to the employee * * * and anyone otherwise entitled to recover damages from such employer at law or in admiralty on account of such injury or death * * *.' I think the Court's holding today breaks promises the Act made both to employers and employees. My view requires a more detailed statement of the facts and circumstances of this case than appears in the Court's opinion.

Palazzolo, an employee of Ryan, the stevedore, was injured while unloading cargo on a ship owned by the respondent, Pan-Atlantic Steamship Corporation. As authorized by § 33 Palazzolo elected to sue the shipowner rather than accept a compensation award. In his complaint he charged that his injury was solely due to the negligent manner in which a number of heavy rolls of paper pulp had been stowed, or to the resulting unseaworthiness of the vessel. One of these rolls weighing about 3,200 pounds had broken loose from its position and seriously injured Palazzolo. The shipowner answered denying the allegations of negligence and unseaworthiness. At the same time the shipowner filed a complaint of its own against Ryan, the stevedore, alleging that any injury Palazzolo had received was solely attributable to the negligent manner in which the stevedore's employees had stowed the rolls of pulp. On this basis the shipowner asked the court to compel the stevedore to reimburse the shipowner for any judgment Palazzolo might obtain against the shipowner. Palazzolo's case against the shipowner was submitted to a jury; the shipowner's claim for reimbursement by the stevedore was tried by the judge largely on the same evidence and issues submitted to the jury. The facts in summary were these:

The stevedore's employees loaded the rolls of pulp in Georgetown, South Carolina, and four or five days later different employees of the same stevedore unloaded them in New York. This was pursuant to a general contract under which Ryan had agreed to perform the shipowner's stevedoring services along the Atlantic and Gulf coasts. The terms of the contract were set out in written memorandums prepared by the shipowner and agreed to by the stevedore. These memorandums contained a simple agreement to do the stevedoring for an agreed compensation plus, in some circumstances, cost of the stevedore's insurance. There was nothing further from which it could possibly be inferred that Ryan would be under a duty to indemnify the shipowner for losses resulting from any negligent stowage by Ryan's employees. To prevent injuries to cargo, crew and longshoremen, it is necessary and customary to put some kind of props or supports under or against the heavy pulp rolls to keep them stationary until such time as they are unloaded. Some witnesses testified that a thick, heavy, strong piece of lumber cut into a special wedge shape, called a 'chock,' is a satisfactory kind of support under the rolls. Failure to use 'chocks' may, as testified by one of the ship's officers, permit the rolls to run 'rampant.' Other witnesses testified that in addition to chocking, safety required that wooden floors be placed between the layers of rolls. All agreed, however, that indiscriminate scraps of wood called 'dunnage' are wholly inadequate supports. All but one witness who testified swore that the roll that broke loose and injured Palazzolo in New York had nothing but 'dunnage' under or against it. The lone exception was the ship's officer who swore that he saw wedges under the rolls in New York. No one testified that wooden floors were used or that they were made available by the shipowner. There was testimony that this shipowner never used chocks or wooden flooring and that in New York the longshoremen had looked for chocks but none were to be found on the ship. An officer of the shipowner testified that he was on the ship in Georgetown, South Carolina, while it was being loaded; that it was his primary duty to watch and see that the rolls were properly stowed and chocked; that the did watch; that chocks were available as part of the ship's 'gear'; that he saw chocks, not dunnage, put under the rolls; that had any attempt been made to stow the rolls without using chocks he would have tried to stop the stevedore; that 'the stevedores and the chief officer and the mate on watch generally cooperate and work together in the stowage in the overall stowage of the cargo.' Thus the uncontradicted testimony of the ship's officer was sufficient to support a finding that he as a representative of the ship actively joined in stowing the rolls in the way in which they arrived at New York. And other evidence was sufficient to support a finding that the cargo arrived in New York unprotected by chocks.

These issues were properly submitted to the jury by the judge in his charge. He told the jury that it could not find the ship unseaworthy on account of the way in which the goods were unloaded in New York. The issue thus revolved around stowage in South Carolina which was actively supervised by the ship's officers. The court submitted to the jury the questions, among others, as to whether the ship had available for use proper equipment to stow these dangerous rolls and whether the ship's officers were guilty of negligent loading and stowage in South Carolina. The jury gave Palazzolo a verdict for $75,000. The trial judge found in deciding the shipowner's indemnity claim against the stevedore that the ship's officer present at the stowage 'did not properly perform his admitted duty to supervise the safe and careful loading of the vessel', although he had 'authority to remedy the condition or halt the work.' 111 F.Supp. 505, 507. He concluded from this and other findings ^[2] that the ship and the stevedore were 'joint-tortfeasors' and therefore declined to order the stevedore to reimburse the shipowner.

The Court of Appeals held that there was adequate evidence to support the jury's finding that the shipowner was negligent and that the ship was unseaworthy because of the defectively stowed rolls. That court nevertheless held that the stevedore had to reimburse the shipowner for its loss despite the findings of the jury and the trial court that the loss occurred because of the shipowner's negligence. ^[3] The Court of Appeals justified imposing payment of the $75,000 verdict on the stevedore on the ground that Palazzolo's injury was due to the 'sole,' 'primary,' or 'active' negligence of the stevedore's employees. But the court's suggestion that the injury could have been due to the 'sole' negligence of the stevedore is answered by the part of the court's opinion holding that there was adequate evidence to support the jury and trial court findings that the shipowner itself was negligent. Use of the words 'primary' and 'active' seems to indicate that the Court of Appeals believed it should look at this cold record and find for itself whether the stevedore's employees or the ship's employees were guilty of this type of negligence. I do not agree that the Court of Appeals should make such findings. And if the Court of Appeals' cryptic statements about 'sole,' 'active' and 'primary' can be considered as upsetting any of the findings of the trial court, I think the Court of Appeals' action should be set aside as clearly erroneous. McAllister v. United States, 348 U.S. 19, 75 S.Ct. 6.

I have set out the evidence in some detail because I think it shows almost beyond doubt that this stevedoring company is being required to pay a $75,000 verdict 'on account of' injuries to an employee received in the line of that employee's duties. This is at least $60,000 more than it would have to pay under the Longshoremen's Act. That Act was revolutionary in its field. It took away from longshoremen the right to sue their employers for negligence and substituted a fixed schedule of compensation for injuries regardless of fault. Many workers and employers opposed the compensation scheme. The workers deplored loss of their chance to get big tort verdicts. But Congress thought it best to give them a more certain and less expensive recovery, even though far less in amount than some tort recoveries might be. Many employers preferred to take their chance on defeating employees' damage suits under the old tort system. The idea of 'liability without fault' was abhorrent to them. Congress weighed the conflicting interests of employers and employees and struck what was considered to be a fair and constitutional balance. ^[4] Injured employees thereby lost their chance to get large tort verdicts against their employers, but gained the right to get a sure though frequently a more modest recovery. However, § 33 did leave employees a chance to recover extra tort damages from third persons who negligently injured them. And while Congress imposed absolute liability on employers, they were also accorded counterbalancing advantages. They were no longer to be subjected to the hazards of large tort verdicts. Under no circumstances were they to be held liable to their own employees for more than the compensation clearly fixed in the Act. Thus employers were given every reason to believe they could buy their insurance and make other business arrangements on the basis of the limited Compensation Act liability. More than that, § 33 of the Act also provides that for compensation paid an employee an employer shall himself be reimbursed or indemnified out of any money collected as a result of an employee's claim for negligent injury by a third person. But the end result here is that this employer is actually mulcted in damages because its employee successfully prosecuted a third-party action. Liability is thus imposed because of the negligence of the employer's other employees. This the Act forbids. Whether called 'common-law indemnity,' ccontribution,' 'subrogation,' or any other name, the result is precisely the same. The employer has to pay more 'on account of' an injury to his employee than Congress said he should

I agree, of course, that if the employer here had made a contract, oral or written, agreeing to hold this shipowner harmless or to indemnify the shipowner against liability for injuries to petitioner's employees caused by the shipowner's negligence in whole or in part, the contract would have been valid and indemnity could have been obtained. For the Longshoremen's Act does not forbid employers under it to make independent agreements to indemnify others. But I think there is not the slightest support in this record for a finding that any such contract was made. No such allegation was made in the shipowner's complaint. And the shipowner's counsel was careful to stipulate during the course of the trial that his action was not based on a contract but on common-law indemnity. ^[5] I recognize that common-law indemnity may sometimes arise where two people commit a tort or wrong which hurts the same person. As between wrongdoers the courts will under some circumstances impose the total liability on the 'primary' or 'active' wrongdoer, apparently meaning the wrongdoer the court deems to be the most negligent. But indemnity so imposed is plainly 'on account of' the negligence of the wrongdoer or his employees. The Act expressly forbids such a recovery by 'anyone' from a stevedoring company 'on account' of an injury to one of its longshoremen. Plainly, common-law indemnity should not be used to fasten such a liability on a stevedoring company. I suppose it is for this reason that the Court purports to find an actual contract to indemnify and thus decides the case on an issue neither presented in the complaint nor considered by the trial court.

A genuine contract as distinguished from a liability imposed by law, sometimes called a 'quasi-contract,' requires mutual agreement of the parties. It is for this reason that the courts have frequently said that the cardinal rule in the interpretation of contracts is that the intention of the parties should be ascertained and enforced. ^[6] And courts do not ordinarily stretch language in order to find that one person has agreed to indemnify another when the latter negligently hurts someone. ^[7] Special caution should be used in construing contracts so as to impose indemnity liability on companies not engaged in the business of writing indemnity insurance.

I think there is not a shred of evidence to support the Court's inference that this stevedore voluntarily agreed to give up the limited liability which the Longshoremen's Act was deliberately designed to afford. The Court finds nothing to support such a conclusion except that the stevedore agreed to do a stevedoring job. From that the Court implies that it was to do a good workmanlike job. From there it takes the next step-which should be more difficult than it appears to be-and says that the stevedoring company also agreed to give up its immunity under the Act and pay any judgments that might be rendered in favor of the stevedore's employees against the shipowner for its negligence. The precise scope of the indemnity which the Court finds the stevedore intended to assume is left in doubt. Are we to assume that the stevedore agreed to an unlimited liability for indemnity without regard to the comparative or qualitative proportions of negligence as between its employees and the employees of the shipowner? Are we even to assume that the stevedore deliberately and intentionally agreed to indemnify the shipowner upon a court's finding that the stevedore's negligence was the 'sole,' 'primary,' or 'active' cause of injury? Findings of fact based on these standards are never easy. And in efforts to formulate a common-law indemnity remedy courts themselves have groped considerably in trying to give meaning to the terms 'primary' and 'active.' Is an understanding of the different nuances of 'sole,' 'primary' and cactive' to be attributed to stevedoring companies in judicial rewriting of work contracts so as to make them indemnity contracts? Surely before this Court determines the existence of a contract and the scope of its coverage the case should be sent back to the trial court so that these issues could be determined after a full hearing on the facts. The issues were not tried in the District Court and not tried in the Court of Appeals. The issues have never been tried. In American Stevedores v. Porello, 330 U.S. 446, 67 S.Ct. 847, 91 L.Ed. 1011, we remanded a case to the trial court for a hearing on evidence as to the scope of a contract of indemnity even though it was written. Here there is not even an oral contract to indemnify. Before creating a contract it might be appropriate to follow the course we did in Porello. Or is the Court rejecting this phase of Porello? Cf. Halcyon Lines v. Haenn Ship Ceiling & Refitting Corp., 342 U.S. 282, 284, 72 S.Ct. 277, 279, 96 L.Ed. 318.

Finally, the Court's action here not only deprives the employer of his limited liability, it makes the right of employees to recover damages from third parties a barren promise. Section 33 of the Act provides two ways for an injured employee to obtain damages from a negligent third person: (1) The employee may elect to waive statutory compensation from his employer and sue the negligent third person directly for damages. (2) If the employee accepts a compensation award the employer may sue the third person as statutory assignee of the employee's claim, but all the employer recovers in excess of the amount of the compensation award must be paid over to the employee. Palazzolo was able to make an election and bring his own suit because his employer was financially interested in the outcome of his case and therefore advanced money to Palazzolo to sustain him during his injury until his case against the third party could be tried. The Court takes away all incentive for employers to follow this course in the future. Hereafter stevedoring companies under circumstances like this will know that it is decidedly to their advantage that no third-party actions be brought. An employer like Ryan will hereafter know that if he or his employee prosecutes a claim against a third party and obtains a judgment for the employee's benefit, every dime of the judgment will have to be paid by the employer himself. Human nature and habits being what they are, employers will not be eager to finance suits against themselves. Injured longshoremen are not ordinarily wealthy enough to support themselves without work pending the trial of lengthy lawsuits. Yet if an employee accepts a compensation award only his employer can bring suit against the third person, and the employer will not be overly anxious to sue himself. It has been suggested that we can expect the courts to protect employees under such circumstances. In other words, the employee who had accepted compensation must go into court to protect himself against his employer before he goes into court to protect his claim against a third party who has negligently injured him. I cannot believe Congress would have given employers such complete control over these suits if it had thought the employers could be held liable for everything recovered. The actual effect of the Court's holding is this: The employer as an assignee of an employee's claim will know that if he wins a lawsuit, he loses a lawsuit. This knowledge will not give him a yearning anxiety to file suit. Even though he yields to the call of duty and files the lawsuit, he might not be exceedingly anxious to write a good complaint. His other pleadings might not be all that a zealous lawyer would desire. Although the employer must pay the judgment, his will be the opening argument to the jury. And when the last word is said in the closing argument, it will be made by counsel who knows that if he persuades the jury to give his client a verdict his client will have to pay it. Counsel will also know that if he happens to lose the case his client will be the winner. Such is the state of affairs brought about by the Court's holding that this employer intended to make a contract which would subject him to the very liability that Congress had abolished.

There has been considerable disagreement in this Court and among other courts about three of our recent holdings, Seas Shipping Co. v. Sieracki, 328 U.S. 85, 66 S.Ct. 872, 90 L.Ed. 1099; Halcyon Lines v. Haenn Ship Ceiling & Refitting Corp., 342 U.S. 282, 72 S.Ct. 277, 96 L.Ed. 318, and Pope & Talbot v. Hawn, 346 U.S. 406, 74 S.Ct. 202, 98 L.Ed. 143. In each of these cases a worker in the same position as Palazzolo sued a shipowner alleging negligence and unseaworthiness. Judgments were obtained against the shipowners. We held in the Halcyon case that the shipowner could not under the common-law doctrine of 'contribution' force injured employees' employers to pay part of the judgment against the shipowner. The Sieracki and Halcyon cases were reaffirmed in Pope & Talbot. In that case we refused to permit a shipowner to shift part of his loss to the injured person's employer on his argument that the employer, who was under the Longshoremen's Act, negligently contributed to the injury. We rejected the contention on the ground that if accepted it 'would frustrate this (Act's) purpose to protect employers who are subjected to absolute liability by the Act.' 346 U.S. 412, 74 S.Ct. 206. The Court's opinion today provides a way under which by simple change of words and remedial formulas the results reached in our three former cases can be undermined. Employees like Sieracki and Palazzolo will find it practically impossible to get their cases for injuries against third persons tried in a court. And a shipowner who wants to shift liability wholly to a stevedoring company can do so by a very simple method. He can allege that the stevedoring company intentionally made a contract agreeing to indemnify him under circumstances like those in this case; that allegation will be automatically proved by simply establishing the fact that the stevedoring company contracted to do some work on the ship; the result will be that the employer is wholly deprived of the protection of limited liability which the Act was intended to provide. And while this will be accomplished under the name of 'contract,' it will really by achieved because the Court has announced as an absolute principle of law that without regard to whether a stevedoring company intends to agree to indemnify, it has so agreed if it agrees to do a job. Thus by indirection rights of longshoremen and their employers recognized by this Court in Sieracki, Halcyon, and Pope & Talbot are taken away. In effect the Sieracki case is rejected.

I would reverse this case.

Notes

1. 44 Stat. 1424, as amended, 33 U.S.C. § 901 et seq., 33 U.S.C.A. § 901 et seq.
2. The trial court also found that the ship's officer 'in the exercise of reasonable care should have discovered and corrected' the defective stowage conditions. Had this been the only ship's negligence found it might be material in considering the question of common-law indemnity. But this Court relies on contractual indemnity.
3. Even though the question of unseaworthiness was also submitted to the jury, it depended wholly upon whether there was negligent stowage. Under the undisputed testimony of the ship's officer the jury and judge had to find that the shipowner was guilty of negligence if the stevedore was. Moreover, if the shipowner failed to provide the proper gear in the way of chocks or lumber, the shipowner was guilty of negligence whether the stevedore was or not. In this case, therefore, the shipowner's negligence and unseaworthiness were one and the same thing. And if the shipowner failed to supply needed gear in the way of chocks or lumber, it would have been permissible to find that this was the 'sole' cause of Palazzolo's injuries.
4. See Crowell v. Benson, 285 U.S. 22, 37-42, 52 S.Ct. 285, 287-289, 76 L.Ed. 598; New York Central R. Co. v. White, 243 U.S. 188, 201-202, 37 S.Ct. 247, 252, 61 L.Ed. 667. Cf. Ives v. South Buffalo R. Cr., 201 N.Y. 271, 94 N.E. 431, 34 L.R.A.,N.S., 162.
5. 'Mr. Behrens (counsel for shipowner): This right of indemnity alleged by Pan-Atlantic is a right of common-law indemnity rather than a contractual provision. My question is how to get such facts before your Honor.
6. See, e.g., Mauran v. Bullus, 16 Pet. 528, 534, 10 L.Ed. 1056; Canal Co. v. Hill, 15 Wall. 94, 99-100, 21 L.Ed. 64.
7. See, e.g., cases collected in Note, 175 A.L.R. 8, 29-32.