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HAAS v. 653 LEASING CO.

January 25, 1977

JOHN HAAS and CATHERINE HAAS, h/w
v.
653 LEASINGG COMPANY. JOHN HAAS and CATHERINE HAAS, h/w v. SUN SHIPBUILDING & DRYDOCK COMPANY



The opinion of the court was delivered by: BECKER

 EDWARD R. BECKER, J.

 I. Preliminary Statement

 This case concerns the right of the employee of a shipbuilding company, seriously injured while working to complete a ship which had undergone sea trials but was not yet commissioned, to assert a personal injury claim under the maritime law against his employer or against his employer's wholly owned subsidiary which held title to the hull, as against the claim that the employee's exclusive remedy is compensation under the Longshoremen's and Harbor Workers' Compensation Act, 33 U.S.C. § 901 et seq. ("LHWCA") (the so-called "comp bar").

 On September 20, 1971, plaintiff John Haas, a citizen of Pennsylvania and an employee of defendant Sun Shipbuilding and Drydock Company, a Pennsylvania corporation ("Sun Ship") was working as a pipefitter on Hull 653 which, at the time, was moored in the Delaware River, a navigable waterway, at Chester, Pennsylvania. *fn1" Hull 653 was being built by Sun Ship but was owned by defendant 653 Leasing Company ("653"), a Delaware corporation formed by Sun Ship as a vehicle for financing construction of the hull which, after christening, was known as the SS "Sohio Resolute." Hull 653 had undergone sea trials, after which it returned to the Sun Ship yard for the completion of unfinished work. On September 20, 1971, in the course of that work, plaintiff slipped and fell down a ladder leading to the engine room of Hull 653, injuring his back. He received compensation from Sun Ship under the LHWCA. Two separate actions are before us (one against each defendant). Jurisdiction is founded upon 28 U.S.C. § 1333 (our admiralty jurisdiction). *fn2" This opinion addresses the motion of the defendants for summary judgment.

 In terms of legal theory, plaintiff asserts a breach of defendants' warranty of seaworthiness as well as of their (federal) maritime law duty to provide plaintiff with a safe place to work. *fn3" Sun Ship bases its motion for summary judgment primarily on the ground that plaintiff's exclusive remedy against his employer for work-related injuries is the compensation provided for by the LHWCA, which plaintiff has already received. *fn4" Moreover, Sun Ship and 653 claim that they are entitled to summary judgment on plaintiff's unseaworthiness claim because Hull 653 was not a vessel in navigation as to which a warranty of seaworthiness existed at the time of plaintiff's accident. 653 also asserts that a negligence claim cannot be made against it because it was not in control of Hull 653 at the time of the accident.

 Plaintiff has been unable to mount a serious contest to defendants' arguments regarding the warranty of seaworthiness. However, with regards to defendants' contentions about plaintiff's maritime negligence claim, plaintiff has mounted two highly sophisticated challenges. The first is that his employer Sun Ship is liable to him notwithstanding the LHWCA compensation bar because of its role as an owner pro hac vice of the virtually completed hull which, though not a vessel in commerce, was nonetheless in navigable waters, hence subject to maritime jurisdiction. This argument proceeds from an analysis of the Supreme Court case of Reed v. The Yaka, 373 U.S. 410, 10 L. Ed. 2d 448, 83 S. Ct. 1349 (1963) and confronts the outer limits of what Judge Gibbons has described as the "Sieracki-Ryan end-run." *fn5" As will be seen, we must reject the owner pro hac vice argument because of its inapplicability (at least prior to the 1972 amendments to the LHWCA) to negligence as opposed to unseaworthiness claims, and grant Sun Ship's motion.

 Plaintiff's second approach, almost as highly conceptual, relates to his claim against 653. Plaintiff submits that because the Sun Ship employee in control of the construction of the hull was also an officer of 653, there is a genuine issue of material fact as to whether 653 controlled the hull at the time of plaintiff's accident, and alternatively, that 653 is a joint venturer with Sun Ship in the building of the hull and, as such, is vicariously liable for any negligence of Sun Ship which caused plaintiff's injuries. In such event plaintiff asserts the right to sue 653 as a third party under 33 U.S.C. § 933(a). Needless to say, 653 also counters the plaintiff's contentions, maintaining that the plaintiff's control argument is skewed and misconceived, and that the joint venture argument does not defeat the "comp bar." We find no dispute as to the material facts which have been developed from an extensive discovery record, and, for reasons which will at length appear, we will also grant 653's motions.

 As our recital of the arguments and counter-arguments of the parties suggests, the legal contention of the parties on the present motion cannot be understood without a recitation of the history of Hull 653 and an understanding of the corporate and financial relationship of the defendants. The following description is based on undisputed facts culled from the record.

 Pursuant to a charter agreement reached in the late 1960's between Sun Ship and Mathiasen's Tanker Industries, Inc. (Mathiasen's), Sun Ship commenced to build a group of three oil tankers. Construction of the third tanker in the group, Hull 653, began in 1970. To facilitate federally insured financing of the construction of Hull 653, Sun Ship organized 653 to own the ship. Sun Ship holds all of 653's outstanding stock, and all of 653's officers and directors are also Sun Ship officers. 653's officers and directors are not compensated for their services, aside from the salary they receive from Sun Ship. The officers and directors of 653 do not have offices other than their Sun Ship offices, and 653's board of directors meetings are held in Sun Ship's Engineering Management Building in Eddystone, Pennsylvania.

 On June 15, 1971, Sun Ship and 653 entered into a construction agreement which required 653 to pay Sun Ship $20,600,000.00 for the completed vessel, an amount which 653 would raise by issuing federally guaranteed bonds, with Philadelphia National Bank as trustee. Under the contract, title to the hull, to the extent completed, was vested in 653. It is undisputed that 653 was the actual owner of the hull at the time of plaintiff's accident. 653, shortly after contracting with Sun Ship, entered into a bareboat charter agreement with Mathiasen's in which Mathiasen's agreed to charter the completed vessel for a term of 18 years, in exchange for monthly payments equal to 653's monthly bond payments.

 Hull 653 was launched on August 21, 1971 and underwent sea trials on September 16 and 17, 1971. Plaintiff was not aboard Hull 653 during the sea trials, and Hull 653 was not commissioned at the time of the sea trials. It was allowed to go to sea for limited purposes under a master carpenter's certificate. After the sea trials were completed, Hull 653 returned to the Sun Ship dock for further work (it was moored in the Delaware River), and it was in the course of performing this work (on September 20, 1971) that plaintiff was seriously injured. A work force of Sun Ship employees performed this construction as it had all other work on Hull 653. Robert Galloway, vice president of operations of Sun Ship and a vice president and director of 653, supervised the construction work.

 On September 30, 1971, ten days after plaintiff's accident, and after it was certified, Hull 653 was formally delivered to its owner, 653. The ship was accepted on behalf of 653 at Sun Ship's offices by George Liacouras, treasurer of Sun Ship and Treasurer and Assistant Secretary of 653. On the same day, 653 transferred the watch of Hull 653 to the licensed officers of Mathiasen's. Documents entitling the vessel to sail were posted, and keys to the stateroom were given to the ship's officers. The ship remained in the Sun Ship yard until November 5, 1971, when it began trading.

 The foregoing undisputed facts form the basis for the discussion which follows and the granting of summary judgment for defendants. There are no material facts as to which there is a genuine issue, hence the questions before us are purely legal ones.

 III. Discussion

 A. Plaintiff's Unseaworthiness Claim

 The doctrine of seaworthiness is not applicable to a maritime personal injury case unless (1) the obligation to provide a seaworthy vessel is owed to the plaintiff; and (2) the vessel is in navigation. See 2 M. Norris, The Law of Maritime Personal Injuries § 321 (3d ed. 1975). Although we have serious doubts as to whether a pipefitter working on the construction of a vessel is a person to whom the duty to provide a seaworthy vessel is owed, the parties have not addressed, and we need not reach that issue. For, we do agree with defendants that a launched but uncommissioned vessel which has returned to the yard for further work after sea trials is not a vessel in navigation. The case law on this point is rather clear.

 In Williams v. Avondale Shipyards, Inc., 452 F.2d 955 (5th Cir. 1971), the court defined the analogous "in navigation" requirement of the Jones Act *fn6" as follows:

 
The term 'in navigation' means 'engaged as an instrument of commerce and transportation on navigable waters.

 Id. at 958. Here the parties agree that the ship did not engage in commerce and transportation until after it left the Sun Ship yard over a month after the accident. It in fact could not have legally done so prior to receiving its Coast Guard certificate of inspection on September 30, 1971, ten days after the accident. Merely because the ship was launched and sailing upon navigable waters during sea trials does not mean that it was "in navigation," a term of art. The purpose of sea trials is to test the ship, not to engage in commerce or transportation. *fn7" In Williams, the plaintiff, who was employed by the ship builder, was injured during the ship's final sea trials. The court stated:

 
[No] warranty of seaworthiness was owed to anyone. The whole purpose of the sea trial was to ascertain what additional work would be required to make the [ship] fully fit. . . . At this stage of construction no one was holding forth to any persons going aboard the vessel that she was in fact completed, fit and seaworthy.

 452 F.2d 955 (5th Cir. 1971). See also West v. United States, 361 U.S. 118, 122, 80 S. Ct. 189, 192, 4 L. Ed. 2d 161 (1959); Frankel v. Bethlehem-Fairfield Shipyard, 132 F.2d 634 (4th Cir. 1942). Although here the accident occurred three days after sea trials, the Williams principle still applies.

 Plaintiff asserts that the test is not whether the vessel is engaged as an instrument of commerce and transportation but rather whether it is completed and delivered at the time of the accident. Second, he claims that when Hull 653 was to be completed and delivered in this case was not the subject of arms length negotiations, since the builder and the owner are so closely related, leaving it for the court to determine whether the ship could have been completed and delivered prior to plaintiff's accident. We find the former argument to be contrary to precedent and the latter argument without precedent and unpersuasive. We hold that the proper test is whether the vessel is engaged as an instrument of commerce or transportation, not whether it is completed or delivered.

 The cases which plaintiff cites in support of his position are not contrary to the above view. *fn8" The cases, Rogers v. M/V Ralph Bollinger, 279 F. Supp. 92 (E.D. La. 1968); Frankel, supra; Williams, supra; and Alfred v. M/V Margaret Lykes, 398 F.2d 684 (5th Cir. 1968), merely state at most that the warranty of seaworthiness does not arise if the ship is uncompleted, not that completion triggers the existence of the warranty. From these cases we may only conclude that an uncompleted vessel is not in navigation, not that a completed vessel is automatically in navigation. Since the parties agree that Hull 653 was not engaged as an instrument of commerce ...


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