Professional Documents
Culture Documents
United States Court of Appeals, Fifth Circuit
United States Court of Appeals, Fifth Circuit
2d 366
Except that the majority (Judges Reavley and Higginbotham) would grant
At the outset, we question whether Nathaniel has any rights against G.E. under
the warranty of workmanlike performance, as its origins are in contract rather
than tort. The warranty arose as a response to the doctrine of seaworthiness,
best stated in Seas Shipping Co. v. Sieracki, 328 U.S. 85, 66 S.Ct. 872, 90
L.Ed. 1099 (1945). In Ryan Co. v. Pan-Atlantic Corp., 350 U.S. 124, 76 S.Ct.
232, 100 L.Ed. 133 (1956), the Supreme Court held that a vessel's owner was
entitled to indemnity from a stevedoring contractor for its liability for personal
injuries resulting from the contractor's negligence. The owner was himself
liable for the injuries because of his non-delegable duties under the doctrine of
seaworthiness. The Court reasoned that the stevedoring contract "necessarily
include[d]" a requirement that the contractor perform its obligations "properly
and safely." Ryan, 350 U.S. at 133, 76 S.Ct. at 237. The warranty was thus
contractual. "The obligation is not a quasi-contractual obligation implied in law
or arising out of a non-contractual relationship. It is the essence of the
petitioner's stevedoring contract." Id. The Court has twice found a vessel's
owner entitled to indemnity absent a contract between the owner and a
stevedoring contractor, but only because it concluded that the owner was
essentially a third-party beneficiary of an agreement between the contractor and
a third party. See Waterman Co. v. Dugan & McNamara, 364 U.S. 421, 424, 81
S.Ct. 200, 202, 5 L.Ed.2d 169 (1960); and Crumady v. The JH Fisser, 358 U.S.
423, 428, 79 S.Ct. 445, 448, 3 L.Ed.2d 413 (1959).1
In Todd Shipyards Corp. v. Turbine Serv., 674 F.2d 401, 417 (5th Cir.1982),
this court extended the warranty of workmanlike performance to require a subsubcontractor to indemnify a general contractor against its liability for
economic damages, but the extension was dubious at best. The opinion cited
Whisenant v. Brewser-Bartle Offshore Company, 446 F.2d 394, 401 (5th
Cir.1971), for the proposition that implied warranties of workmanlike
performance may extend to parties not in privity, or a third-part beneficiary
relationship, but Whisenant had already been called into doubt in Hercules, Inc.
v. Stevens Shipping Co., Inc., 629 F.2d 418, 422 (5th Cir.1980), reheard en
banc and reversed on other grounds, 698 F.2d 726 (5th Cir.1983).2 Several
recent decisions have also questioned the application of the warranty beyond its
groundings in personal injuries resulting from unseaworthiness. See Bosnor
S.A. De C.V. v. Tug L.A. Barrios, 796 F.2d 776, 784-86 (5th Cir.1986);
Hercules, 698 F.2d at 737-38; and Gator Marine Serv., Etc. v. J. McDermott &
Co., 651 F.2d 1096, 1100 (5th Cir.1981).
6
Fortunately, we need not pursue the issues raised by the Todd Shipyards
opinion here, for any extra-contractual liability for Nathaniel's economic losses
is foreclosed by the Supreme Court's opinion in East River S.S. Corp. v.
Transamerica Delaval, 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986).
In East River, noting its fear of "contract law drown[ing] in a sea of tort," the
Supreme Court held 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, 106 S.Ct. at 2302. Thus, a party who
suffers only economic losses, as opposed to personal injury or property damage,
must recover in contract. We extended East River to a contract for professional
services in Employers Ins. of Wausau v. Suwannee River Spa L., 866 F.2d 752,
763 (5th Cir.1989). See also PPG Industries v. Sundstrand Corp., 681 F.Supp.
287 (W.D.Penn.1988); AFM Corp. v. Southern Bell Tel. and Tel. Co., 515
So.2d 180 (Fla.1987); and Gulf Boat Marine Services v. George Engine Co.,
659 F.Supp. 6 (E.D.La.1986).3
In Part II, Judge Brown suggests that East River and Wausau are
distinguishable because Nathaniel and G.E. were not in privity. But there was
also no privity between the parties in East River. The plaintiffs had entered a
charter contract with a trust created by the vessel's owners, and it was the
owners who entered the contract with the defendants. East River, 476 U.S. at
859-60, 106 S.Ct. at 2296. In evaluating the plaintiffs' claims, the Court looked
to the contract between the plaintiffs and the trust and concluded that the
plaintiffs took the vessels "as is." Id. at 875, 106 S.Ct. at 2304.
Judge Brown further concludes that there was no possibility of bargaining over
the allocation of the risk of defective performance by G.E. either between
Nathaniel and LGS or between Nathaniel and G.E. We believe, however, that
Nathaniel and LGS could and did bargain over this risk in their contract. Todd
Shipyards, and the cases cited therein, stand only for the proposition that a
contractor is not liable in tort for the negligence of its carefully chosen subcontractor. See Todd Shipyards, 674 F.2d at 410 (discussing the negligence of
Todd Shipyards). By contrast, LGS clearly would be liable in contract if G.E.'s
negligence caused LGS to breach its own contract with Nathaniel. Thus, as in
East River, Nathaniel's rights, if any, arose from its contract with LGS. LGS, in
turn, could seek indemnity from G.E., subject to the limitations of the contract
between LGS and G.E.
In sum, the Court (per Judges Reavley and Higginbotham) holds that East
River precludes Nathaniel's claim against G.E. The judgment of the District
Court on this issue is therefore reversed.
10
For reasons set forth in his dissent (Part II, 1259-63), Judge Brown would grant
rehearing.
11
The Petition for Rehearing having been DENIED by separate order and the
Court having been polled at the request of one of the members of the Court, and
a majority of the Circuit Judges who are in regular active service not having
voted in favor of it, (Federal Rules of Appellate Procedure and Local Rule 35)
the Suggestion for Rehearing En Banc is also DENIED.
14
JOHN R. BROWN, Circuit Judge, with whom Judge Politz joins, dissenting
from failure to grant rehearing en banc.
15
My reasons why en banc review should have been granted are essentially set
forth in the panel opinion, see the introductory paragraph (p. 1257) which is
expanded at length in my "dissent" in Part II of the panel opinion (p. 1259-63).
16
Essentially, my main argument is that East River does not substitute contract
for maritime tort principles where there is no contract as between the shipowner
(Nathaniel) and the negligent1 repair sub-contractor (General Electric).
17
The only contract covering the work (drilling holes in the thrust block) was
between Nathaniel, shipowner, and LGS (Louisiana Gulf Shipyards), the repair
yard, who in turn employed GE to drill the holes.
18
Since the whole theory of East River is that the respective duties, rights and
liabilities must be found in the contract, not in tort law, I urge the simple
proposition: how is this theory met when there is no contract, nor can one be
implied, spelling out responsibilities and liabilities for economic damages as
between the party injured (Nathaniel) and the party bringing about such
damage (GE)?
19
20
21
Any such requirement would have two consequences. First, it would force a
contract on parties otherwise free of such an obligation or substantively
unwilling to enter into that legally formal relationship. Second, in today's
industrial complex,2 it involves the wholly unworkable scheme of seeking
solicited side agreements with each and all and everyone of the employees who
might be engaged in working on the sub-contract, their sub-contractors, sub-sub
contractors, sub-sub-sub contractors ad infinitum.
allocating the risk of defective performance in their contract. See Wausau, 866
F.2d at 763-65
1
To overcome any possible implication that using this typically tort expression
necessarily begs the question, I point out that it is used loosely in the sense that
the work was not done properly because of significant errors in performance
See, wholly for purposes of illustration and not for its legal significance, Todd
Shipyard Corp. v. Turbine Service, 674 F.2d 401 (5th Cir.1982) which
illustrates the many different artisans involved in a shipyard completing a major
classification overhaul of a large ocean-going vessel