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Johnson v. Sword Line Inc.

decided as amended aug. 13 1958.: July 15, 1958.


Author: Biggs

Before BIGGS, Chief Judge, and GOODRICH and McLAUGHLIN, Circuit Judges.

BIGGS, Chief Judge.

This is the second time this case has been before us on appeal. Our previous opinion is reported at 1957, 240 F.2d 954. Upon remand, for the reasons stated hereinafter, the court below granted a motion for summary judgment filed by Sword, D.C.E.D.Pa.1957, 153 F.Supp. 691, and the second or instant appeal followed.

A brief summary of the operative facts and reference to the opinions cited are necessary for an understanding of the nature of the instant appeal. The plaintiff, Johnson, was a longshoreman employed by Lone Star Stevedoring Company, Inc. (Lone Star), and was injured while working in the hold of a ship owned by Sword. Johnson's complaint alleges that he was injured when iron pigs which were being hoisted from the hull of the ship fell from a bucket in which they were being lifted from ship to shore. Johnson alleges that the injury resulted from the failure of a complicated wiring system which was rigged by the stevedoring crew and which was employed because two of the ship's winches were defective. The failure of this wiring, it is asserted, caused the bucket containing pig iron to be joggled and the iron fell on Johnson.

An amended award of compensation*fn1 under the Longshoremen's and Harbor Workers' Act, 33 U.S.C.A. § 901 et seq., was made to Johnson on November 23, 1951, against Lone Star and its insurance carrier, American Mutual Insurance Company (American Insurance). American Insurance was not and is not the insurance carrier of Sword. Johnson conceded that he received the compensation award and that no election to sue a third party was made by him as required by Section 33(a) of the Act, 33 U.S.C.A. § 933(a).*fn2

Section 33(b),*fn3 33 U.S.C.A. § 933(b), of the Act provides that acceptance of compensation under an award filed by the Commissioner shall act as an assignment to the employer, Lone Star, of all right of the person, Johnson, entitled to compensation to recover damages against a third person, here Sword. Section 33(i), id. n., 33 U.S.C.A. § 933(i), provides that where the employer, Lone Star, was insured and the insurance carrier, American Insurance, has assumed the payment of compensation, the insurance carrier shall be subrogated to all rights of the employer, Lone Star, under the law. Section 33(e) of the Act, 33 U.S.C.A. § 933(e),*fn4 states that any amount recovered by the employer, here Lone Star, in a suit based upon the assignment effected by operation of Section 33(b), shall be first applied against the expenses and costs of the suit and by way of reimbursement of the amount paid as compensation to the employee, and that the employer "shall pay any excess to the person entitled to compensation or to the representative", here Johnson.

As we pointed out in our original opinion, Johnson brought the instant suit against Sword on October 4, 1951 before the Commissioner had made the final award but that over five years had elapsed since the autumn of 1951 and that Lone Star, the assignee, had not brought any suit against Sword. Sword filed a motion for summary judgment, holding that the assignment was a bar against Johnson's right to sue Sword. We reversed, citing Czaplicki v. The Hoegh Silvercloud, 1956, 351 U.S. 525, 76 S. Ct. 946, 100 L. Ed. 1387, pointing out that Lone Star and its insurance carrier, American Insurance, which up to the time of our opinion, had not stated any reason why it had not brought suit, could not be permitted "to stand pouting in a corner like a sulky milkmaid at a barn dance and simply refuse to bring suit without adequate reason", 240 F.2d at page 956.

We remanded the case so that the status of the interests involved might be subject to thorough inquiry by the trial court. Following the remand the deposition of Winfield N. Brown, District Claim Manager for Philadelphia of American Insurance, was taken and is now in evidence. Numerous interrogatories were filed and answered. Upon consideration of a motion for summary judgment the court below concluded that Johnson was not entitled to maintain his suit since there had been no reassignment of the cause of action and entered summary judgment.*fn5 1957, 153 F.Supp. 691. The appeal followed.

In Czaplicki v. The Hoegh Silvercloud, supra [351 U.S. 525, 76 S. Ct. 950], the Court stated: "In giving the assignee exclusive control over the right of action * * * we think that the statute presupposes that the assignee's intevests will not be in conflict with those of the employee." Thus, the Supreme Court held that in any case in which the longshoreman's right of action is held by the party most likely to suffer were the longshoreman's right of action successfully enforced, there is such a conflict of interests as will authorize the injured longshoreman to maintain the third-party action without a reassignment to him by his employer. It follows, therefore, that given a conflict of interest between the employer and the employee and inaction by the statutory assignee, the injured longshoreman may maintain his third-party action even after accepting a formal award without first receiving a reassignment of the claim from his employer.

The reasons for the refusal of a reassignment to Johnson are best known to American Insurance which is in a superior position to state those reasons.It seems unjust to impose on the plaintiff, Johnson, the burden of proving American Insurance's state of mind, and its motives and reasons for its refusal to assign the cause of action to Johnson. To impose such a duty on Johnson is to compel him to analyze and to demonstrate an insurance company's subjective motives. Accordingly, since the answer to why American has neither sued Sword Line nor reassigned the claim to Johnson is obviously more readily accessible to American Insurance than to the injured longshoreman we hold that the burden of establishing a valid basis for inaction must be placed upon American.*fn6 If the burden is not met by the insurance carrier we hold that it will be necessary to presume that a conflict of interest exists.

We take this position for the following reasons. First, the decision in Ryan Stevedoring Company v. Pan Atlantic Steamship Corp., 1956, 350 U.S. 124, 76 S. Ct. 232, 100 L. Ed. 133, has demonstrated that under the circumstances of that case the interest of the stevedoring company, its insurance carrier and the employee were of necessity in conflict. The Supreme Court held that a steamship company which was forced to pay damages to a harborworker who had been injured as a result of the unseaworthy condition of the vessel which he was unloading, a condition created by the stevedoring company, was entitled to recover damages from the stevedoring company. The Court based its ruling on the theory that there is a "warranty of workmanlike service" by the stevedoring company, and, when a ship is rendered unseaworthy by the act of a stevedoring company, there arises by implication a contractual right to indemnity for the benefit of the shipowner. This contractual obligation to perform its duties with reasonable safety relates not only to the handling of cargo but also to the use of equipment incidental thereto. Weyerhaeuser S.S. Co. v. Nacirema Operating Co., 1958, 355 U.S. 563, 78 S. Ct. 438, 2 L. Ed. 2d 519. This is not a claim for contribution from a joint tortfeasor and therefore lies without the ruling of the Court in Halcyon Lines v. Haenn Ship Ceiling & Refitting Corp., 1952, 342 U.S. 282, 72 S. Ct. 277, 96 L. Ed. 318. In concluding that the shipowner's right to recovery arose under a right of indemnification, implied contractually, the Court necessarily held that the doctrine of the employer's statutory defense of immunity*fn7 for liability arising out of the injury was inapplicable to the action since recovery was not based on injury to the employee.*fn8

If the facts alleged in the complaint can be proved, substantial issues will be raised as to whether the stevedoring company was concurrently negligent in setting up the wire or caused the ship to be made unseaworthy.Alaska S.S. Co. v. Petterson, 1954, 347 U.S. 396, 74 S. Ct. 601, 98 L. Ed. 798; Rogers v. United States Lines, 1954, 347 U.S. 984, 74 S. Ct. 849, 98 L. Ed. 1120; Grillea v. United States, 2 Cir., 1956, 232 F.2d 919. In either case the shipowner could implead the stevedoring company, American President Lines v. Marine Terminals Corp., 9 Cir., 1956, 234 F.2d 753, certiorari denied 352 U.S. 926, 77 S. Ct. 222, 1 L. Ed. 2d 161; Parenzan v. Iino Kaiun Kabushiki Kaisya, 2 Cir., 1958, 251 F.2d 928, without concern as to an application of the theories of "active" or "passive" as well as "primary" or "secondary" negligence. Weyerhaeuser S.S. Co. v. Nacirema Operating Co., supra, 355 U.S. at page 569, 78 S. Ct. at page 441. Cf. Hagans v. Farrell Lines, Inc., 3 Cir., 1956, 237 F.2d 477.

To sum up: Applying the doctrine of Ryan, if the cause of the longshoreman's injury is the stevedoring company's negligence, the shipowner would be entitled to maintain a separate action against the stevedoring company for indemnification, and this may be so in some instances even though the shipowner was also negligent. Since any recovery by the injured employee against the shipowner could be recouped in an action by the shipowner against the stevedoring company, the practical effect of the Ryan case is to cause the employer-stevedoring companies, who may anticipate a shipowner's claim to indemnity to resist the making of any payment to the injured stevedore until an award is made, at which time assignment of the cause of action by reason of the provisions of the statute takes place. When the statutory assignment has taken place the employer-stevedoring company will then refuse to bring an action against the shipowner, and by the same token would also refuse to reassign the cause of action to the injured stevedore, for to do so might result in an eventual high award by way of indemnification against the stevedoring company and hence against the insurance carrier. See dissenting opinion of Mr. Justice Black in Ryan, supra, 350 U.S. at page 135, 76 S. Ct. at page 238. See also, Gilmore & Black, The Law of Admiralty, p. 370.

We therefore are of the opinion that a court is entitled to assume, where there is nothing on the record to demonstrate the contrary, that the assignee of the injured longshoreman's claim, i.e., the stevedoring company and its insurance carrier, are the parties most liable to suffer*fn9 monetary loss if the claim of the longshoreman was successfully ...

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