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In re Complaint of Bankers Trust Co.

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT


May 13, 1985

IN THE MATTER OF THE COMPLAINT OF BANKERS TRUST COMPANY AS OWNER-TRUSTEE AND MONSANTO COMPANY AS CHARTERED OWNER, AND KEYSTONE SHIPPING CO., AS CHARTERED OWNER AND OPERATOR OF THE SS. EDGAR M. QUEENY, FOR EXONERATION FROM AND LIMITATION OF LIABILITY AND VILLANEUVA COMPANIA NAVIERA, S.A., AMOCO OVERSEAS OIL COMPANY AND AMOCO TRANSPORT COMPANY., THIRD-PARTY PLAINTIFFS
v.
BETHLEHEM STEEL CORPORATION, GENERAL ELECTRIC COMPANY AND THE WILLIAM POWELL COMPANY, THIRD-PARTY DEFENDANTS, BP OIL, INC. AND SOHIO PETROLEUM COMPANY, APPELLANTS IN 84-1051; BANKERS TRUST COMPANY, MONSANTO COMPANY AND KEYSTONE SHIPPING CO., APPELLANTS IN 84-1052

On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civ. No. 75-0364).

Hunter, Higginbotham, Circuit Judges, and Debevoise, District Judge*fn*

Author: Higginbotham

Opinion OF THE COURT

A. LEON HIGGINBOTHAM, JR., Circuit Judge:

Presently before this court is a consolidated appeal (No. 84-1052) and cross-appeal (No. 84-1051) in a protracted admiralty proceeding for limitation of or exoneration from liability pursuant to the Limitation of Liability Act, 46 U.S.C. §§ 181-195 (1982), arising out of a disastrous vessel collision which occurred over ten years ago. The shipping interests and certain property damage claimants now seek review of a final order of the United States District Court for the Eastern District of Pennsylvania denying claimants' motion to vacate a prior order of the district court which, following a bifurcated trial on damages and entry of judgment in favor of the claimants, determined the rate and schedule for payment of pre- and post-judgment interest, set the value of the damaged vessel for purposes of establishing the amount of the limitation fund, and calculated the interest on the fund.*fn1

Despite previous complicated appeals from both the liability and damages components of this bifurcated litigation,*fn2 this action is once more before us and again we face the troublesome task of reversing the district court and remanding this matter for further proceedings. Yet, we hasten to note that we reverse not because we find that the district court incorrectly decided the damages issues raised on this appeal and cross-appeal*fn3 but because we find that the judgment in the limitation of liability action has been entered prematurely. On remand, following our reversal of its original denial of limitation of liability, the district court apparently misconstrued the scope the mandate set forth in Complaint of Bankers Trust Co., 651 F.2d 160 (3d Cir. 1981), and thus failed to make specific factual findings on several unresolved liability issues which, in our view, have a direct bearing on the property of limitation in this case.

I.

This limitation action, and hence these appeals, are the offshoots of the January 31, 1975 collision of the American chemical carrier S.S. EDGAR M. QUEENY ("QUEENY") and the Liberian steam tanker S.T. CORINTHOS ("CORINTHOS") on the Delaware River in Marcus Hook, Pennsylvania. The resulting explosion and fire contaminated the Delaware River, claimed 26 lives, damaged the QUEENY, destroyed the CORINTHOS, and caused numerous personal injuries and extensive property damage to the BP Oil, Inc. and Sohio Petroleum Company pier and refinery as well as to neighboring properties.*fn4

The owners and operators of the QUEENY, appellants/cross-appellees Bankers Trust Company (owner/trustee), Monsanto Company (chartered owner) and Keystone Shipping Company (chartered owner/operator) (collectively referred to as "Keystone") filed a petition for exoneration from or limitation of liability, in accordance with the Limitation of Liability Act, 46 U.S.C. § 183(a).*fn5

The issue of Keystone's right to limit liability was tried non-jury from July 18, through August 27, 1979. On February 19, 1980, the district court issued an opinion in the limitation action in which it held that Keystone was not entitled to limit liability. Complaint of Bankers Trust Co. 503 F. Supp. 337 (E.D. Pa. 1980). Keystone appealed. This court reversed on May 15, 1981 and remanded "for further proceedings consistent with this opinion". Complaint of Bankers Trust Co., 651 F.2d 160, 173, 175 (3d Cir. 1981). We are primarily concerned here with the district court's treatment of this action following our May 15, 1981 reversal and remand.*fn6

The issue of the amount of damages to be awarded property damage claimants, appellees/cross-appellants BP Oil, Inc. (operator/lessee of the Marcus Hook facility) and Sohio Petroleum Company (owner/lessor of the Marcus Hook facility) (collectively referred to as "BP/Sohio"), had been bifurcated from the trial of the liability issues and tried separately on April 21, 1980.

At the conclusion of the damages trial on July 18, 1980, the district court entered judgment in favor of BP/Sohio in the amount of $16,188,531.00 as per the stipulation of the parties.*fn7 However, the district court concluded that BP/Sohio was not entitled to pre-judgment interest. The court then applied the legal rate of interest in Pennsylvania to the post-judgment interest award. Complaint of Bankers Trust Co., 503 F. Supp. 350, 353 (E.D. Pa. 1980). BP/Sohio appealed. On August 13, 1980, then Chief Judge Seitz, speaking for this court, remanded for further proceedings specifically on the questions of when pre-judgment interest should begin to run on the individual items of damages and the appropriate award of post-judgment interest. Matter of Bankers Trust Co., 658 F.2d 103, 112 (3d Cir. 1981).

On remand, the district court issued a July 5, 1983 memorandum opinion and order in which it awarded pre-judgment interest to BP/Sohio and entered judgment in favor of BP/Sohio for post-judgment interest.*fn8 The district court also set a value for the QUEENY at the time of collision at $19.05 million dollars.*fn9 Petition of Banker 's Trust Co., 569 F. Supp. 386, 393 (E.D. Pa. 1983).*fn10

BP/Sohio subsequently moved to vacate the July 5th ruling. In an unpublished opinion and order dated December 27, 1983, the district court:

(1) denied BP/Sohio's motion to vacate the July 5th order, unpersuaded by

BP/Sohio's insistence that a number of material issues impacting on

the ultimate disposition of the case were still unresolved;

(2) denied BP/Sohio's outstanding November 15, 1982 Motion for Action Consistent with the Court of Appeals' Mandate on Remand on the ground that this court's May 15, 1981 reversal of the earlier denial of limitation in effect granted limitation, explicitly or implicitly, as to all issues raised; and

(3) denied BP/Sohio's pending Motion to Set Time Limits for Filing Pro Tanto claims.*fn11 Appendix ("App") at 448a-451a.

Keystone appeals the district court's reaffirmation of its July 5th valuation determination.*fn12 BP/Sohio cross-appeals, again asserting, inter alia, that the district court deviated from our mandate by failing to rule on outstanding limitation issues on remand. In reviewing the action of the district court, we address only the latter assignment of error.*fn13

Our analysis of whether the district court proceeded in accordance with our mandate must necessarily begin with a review of the district court's disposition of the liability phase of this matter in its February 1980 decision, an examination of our May 1981 decision on appeal, and clarification of the scope of our mandate. We will then proceed to briefly consider seriatim the issues which BP/Sohio maintains have been left undecided.

II.

The gravamen of the instant dispute concerns the scope and execution of our mandate and turns on an evaluation of certain factual findings made by the court below as they relate to the underlying limitation issues of negligence and unseaworthiness. Thus, the only point in issue is whether this court's May 1981 reversal of the district court's denial of limitation of liability operated to conclusively grant limitation as to all questions in issue below.

A. Disposition At Trial and On Appeal

The operative statute provides that a shipowner's liability shall be limited to the "value of the interest of the vessel and her freight" for any act which occurs "without the privity or knowledge" of the owner. 46 U.S.C. § 183 (a). The right to seek exoneration from or limitation of liability in accordance with 46 U.S.C. § 183 places upon the shipowner the affirmative duty to establish that the damage caused by the vessel was occasioned without the shipowner's privity or knowledge.*fn14

In analyzing the evidence adduced at the 1979 limitation proceeding to determine whether the shipping interests satisfied the statutory requisites, the district court engaged in a two-part inquiry: (1) what acts of negligence or conditions of unseaworthiness caused the accident; and (2) did the shipowner have knowledge of privity of those same acts of negligence or conditions of unseaworthiness. Complaint of Bankers Trust Co., 503 F. Supp. at 342.

BP/Sohio alleged three acts of negligence and/or conditions of unseaworthiness which contributed to the accident:

(1) The failure of Shoreside Management to use due diligence to discover

and remedy the damage to the astern turbine which reduced the QUEENY's

astern power by 40% and rendered her unseaworthy;

(2) The commitment by management of discretion to the master to disregard

company instructions requiring an anchor watch while maneuvering in

congested waters which precluded the dropping of the anchors, which

could have prevented the collision; and

(3) The continued pressure of Monsanto and Keystone to cut costs, which

resulted in the failure to use the bridge control and premature relief

of the bow detail without posting an anchor detail.

Complaint of Bankers Trust Co., 503 F. Supp. at 342.

Mindful that "the claimants in this case . . . have argued and presented voluminous testimony and exhibits to the effect that other acts and/or conditions of which the QUEENY interests had knowledge or were privy to contributed to the accident", id., the district court went on to hold:

Because we have determined that the astern guardian valve and the astern turbine were defective at the time of the collision, we shall not make a finding regarding the claimants other alleged causes of the collision.

Id. at 345 (emphasis added).

The district court did make a finding that the collision was attributable primarily to the pilot's and the captain's negligence in executing a 180 degree turn, but that the collision was also caused in part by the failure of the shipping interests to correct a defective astern guardian valve and turbine. It found that this defective condition rendered the QUEENY unseaworthy.

The district court further determined that Keystone was not entitled to limit liability because Keystone had the requisite privity and knowledge of a contributing cause of the collision: loss of astern power due to astern turbine damage attributable to a defective astern valve.

We so interpreted the lower court's findings on appeal:

The district court found that the QUEENY's astern guardian valve and astern turbine were defective on the night of the accident and that these defective conditions were a contributing cause of the tragic collision. It ruled that Keystone should have known of this defective condition and held them in privity. Hence, it denied Keystone's petition for limitation of liability.

Complaint of Bankers Trust Co., 651 F.2d at 167 (emphasis added). In reversing, we held: "the separate and distinct events relied on by the trial court are, as a matter of law, not significant enough to support a ruling that Keystone had knowledge or privity of either the acts of negligence on board the QUEENY, or her purported unseaworthiness." Id. at 173 (emphasis added). We simply reiterated in a footnote, with no elaboration, the other contributing causes asserted by BP/Sohio in the lower court. Id. at 169 n.11. In our mandate, we directed that the case be remanded "to the trial court for further proceedings consistent with this opinion." Id. at 175.

B. The Scope of the Mandate

After careful reflection we are not satisfied that the district court acted in accordance with the mandate which issued from our May 15, 1981 decision.

It is axiomatic that on remand for further proceedings after decision by an appellate court, the trial court must proceed in accordance with the mandate and the law of the case as established on appeal. Briggs v Pennsylvania R. Co., 334 U.S. 304, 306, 92 L. Ed. 1403, 68 S. Ct. 1039 (1948); Seese v. Volkswagenwerk, A.G., 679 F.2d 336, 337 (3d Cir. 1982); Noel v. United Aircraft Corp., 359 F.2d 671, 674 (3d Cir. 1966); Matter of Beverly Hills Bancorp, 752 F.2d 1334, 1337 (9th Cir. 1984); Stevens v. F/V Bonnie Doon, 731 F.2d 1433, 1435 (9th Cir. 1984).

A trial court must implement both the letter and spirit of the mandate, taking into account the appellate court's opinion and the circumstances it embraces. Piambino v. Bailey, 757 F.2d 1112 (11th Cir. 1985). See also Colville Confederated Tribes v. Walton, 752 F.2d 397, 400 (9th Cir. 1985); Wheeler v. City of Pleasant Grove, 746 F.2d 1437, 1440 n.2 (11th Cir. 1984).

"Where the reviewing court in its mandate prescribes that the court shall proceed in accordance with the opinion of the reviewing court, such pronouncement operates to make the opinion a part of the mandate as completely as though the opinion had been set out at length." Noel, 359 F.2d at 674. In the absence of specific directions, the question as to what further proceedings can be had consistent with the opinion of the appellate court must be determined from the nature of the case and the pertinent statutory provisions. The mandate and the opinion must be considered together in their entirety with particular reference to the issues considered. United States v. Iriarte, 166 F.2d 800, 803 (1st Cir. 1948), cert. denied, 335 U.S. 816, 93 L. Ed. 371, 69 S. Ct. 36 (1948). From the proposition that a trial court must adhere to the decision and mandate of an appellate court there follows the long-settled corollary that upon remand, it may consider, as a matter of first impression, those issues not expressly or implicitly disposed of by the appellate decision. Quern v. Jordan, 440 U.S. 332, 347 n.18, 59 L. Ed. 2d 358, 99 S. Ct. 1139 (1979); Sprague v. Ticonic National Bank, 307 U.S. 161, 168, 83 L. Ed. 1184, 59 S. Ct. 777 (1939); United States ex rel. Johnson, 531 F.2d 169, 172 (3d Cir. 1976); Piambino, F.2d at ; Stevens, 731 F.2d at 1435; Beltran v. Myers, 701 F.2d 91, 93 (9th Cir. 1983) cert. denied sub. nom. Rank v. Beltran, 462 U.S. 1134, 103 S. Ct. 3115, 77 L. Ed. 2d 1369 (1983); United States v. Cirami, 563 F.2d 26, 33 (2d Cir. 1977) on remand 92 F.R.D. 483. A trial court is thereby free to make any order or direction in further progress of the case, not inconsistent with the decision of the appellate court, as to any question not settled by the decision.

Although we gave no specific instructions as to the nature of "the further proceedings" to be conducted by the trial court in order to conform to our opinion, the general rule applied: upon a reversal and remand for further consistent proceedings, the case goes back to the trial court and there stands for a new determination of the issues presented as though they had not been determined before, pursuant to the principles of law enunciated in the appellate opinion, which must be taken as the law of the case. Iriarte, 166 F.2d at 803.

The district court in the instant case consulted our opinion in order to ascertain the scope of our mandate and concluded:

The Court of Appeals has already spoken and determined

that the petition of limitation of liability to the QUEENY

interests should be granted.

App. at 450a. In arriving at this conclusion, the district court relied upon our above-quoted statement that "the separate and distinct events relied on by the trial court are . . . not significant enough to support a ruling [of] knowledge of privity . . . ." Complaint of Bankers Trust Co., 651 F.2d at 173. We believe, however, that the district court did not construe this language in light of the opinion in its entirety. Consequently, it acted inconsistently with the letter and spirit of our mandate.

Inasmuch as the traditional function of an appellate court is merely to apply the law to the findings of fact made below, we reviewed only those factual findings specifically made by the district court - namely, that the defective astern guardian valve and the defective astern turbine contributed to the collision. We indicated that "[t]o hold Keystone privy . . . the evidence must show that some individual at the management level of Keystone had, or should have had, knowledge of the QUEENEY's damaged astern guardian valve." Complaint of Bankers Trust Co., 651 F.2d at 169 (emphasis added). We did not consider, explicitly or otherwise, the other alleged causes raised at trial by BP/Sohio because the district court had expressly declined to make findings on those issues.

Therefore, our determination that certain events relating to those defects*fn15 were not, either individually or in combination significant enough to place the vessel owner on notice of negligence or unseaworthiness, does not ipso facto mean that the other contributing causes alleged by BP/Sohio, but undecided below or on appeal, were equally insufficient, as a matter of law, to preclude limitation of liability. Simply stated, we reversed the district court's denial of the petition for limitation of liability because the evidence was insufficient to sustain a finding of privity or knowledge of the deficient astern guardian valve. Therefore, our May 1980 reversal of the district court's denial of liability did not conclusively grant limitation as to all questions raised below. We thus conclude that BP/Sohio is correct in its charge that the district court acted inconsistently with our mandate by failing to rule on material issues of privity and knowledge.

III.

As framed by BP/Sohio, the unresolved privity and knowledge issues are:

1. The commitment by management of discretion to the master to disregard any accompanying instructions requiring an anchor watch while maneuvering in congested waters, precluding the dropping of the anchors which would have prevented the collision.

2. The failure of Monsanto and Bankers Trust to affirmatively establish that the damage caused by their vessel was occasioned without their privity and knowledge.

3. Whether the privity and knowledge of the master, in prematurely releasing the tug and anchor detail, should eliminate from the limitation fund the QUEENY interests' pro tanto credit for payments made to the personal injury and death claimants.

We accept BP/Sohio's proposition as to the first and the third issues and will therefore address those initially. We are not, however, persuaded by the contention that our mandate encompassed the second issue.

A. The Anchor Watch Theory

BP/Sohio urged at the 1979 limitation of liability trial and again on the Motion for Action that Keystone should not be entitled to limit its liability because it allegedly failed to have an anchor watch. According to BP/Sohio, the QUEENY's master chose to ignore the QUEENY management's explicit instructions to post an anchor detail in congested waters and that the failure to post an anchor watch was a contributing cause of the collision.*fn16 It is Keystone's position that the posting of anchor watch and the use and control of tugs are activities traditionally entrusted to the discretion of the ship's master. Therefore, even if negligence was proved, it is outside the privity and knowledge of the vessel owner. According to Keystone, the lower court was correct in assuming that this "weaker ground" for finding privity was implicitly overruled by our holding that the management of Keystone lacked privity and knowledge of the defective astern guardian valve and turbine. We disagree.

As we establish on the prior appeal, corporate shipowners are held liable for the acts or knowledge of managing officers or supervisory employees . . . Usually, however, they will not be held liable for the actions of crew members in the navigation or operation of the ship at sea.

Complaint of Bankers Trust Co., 651 F.2d at 169 (emphasis added); (citations omitted). Thus, in the typical situation of a corporate-owned ocean vessel, privity and knowledge scrutiny focuses on whether the shore-based high-level management was aware or should have been aware of the likelihood of the occurrence before the ship's departure. Tittle v. Aldacosta, 544 F.2d 752 (5th Cir. 1977); Waterman Steamship Corporation v. Gay Cottons, 414 F.2d 724, 728-735 (9th Cir. 1969). According to BP/Sohio, the QUEENY management knew or should have known of the master's regular and consistent practice of dismissing the bow detail/anchor watch as soon as he left the pier, leaving only a bow lookout who was, alone, unable to drop anchor.

Although the district court acknowledged this argument below, it made no findings of fact on this issue.*fn17 Moreover, this court also paraphrased the argument without further comment:

In the lower court, BP/Sohio argued that there were numerous contributing causes to the collision: * * * (2) Keystone's decision to give the captain the discretion to ignore company instructions to require an anchor watch to maneuver in congested waters - a decision that made it impossible to drop the anchors (which might have prevented the collision).

651 F.2d at 169 n.11. (emphasis added).

Because no findings of fact were made by the district court with respect to the issue presented, we are of the opinion that it was not implicitly within the purview of our mandate, and intimate no view as to the merit of BP/Sohio's arguments, or lack thereof, at this time. We simply could not overrule that which was not determined below.

B. The Privity and Knowledge of the Master

BP/Sohio further claims that another point which has never been addressed by the district court is whether the privity and knowledge of the master of the QUEENY, in prematurely dismissing the tug and the anchor watch, can be imputed to Keystone with respect to the death and personal injury claimants under 46 U.S.C. § 183(e). 46 U.S.C. § 183(e) provides that the master's knowledge regarding the unseaworthiness of his vessel, at the beginning of the voyage, is imputed to the owner for the purposes of establishing privity and knowledge as to death and injury claimants.

In reversing the lower court, we overturned the denial of Keystone's limitation as to the property damage claimants on the basis that the QUEENY management did not have the requisite privity and knowledge of the astern machinery defects. BP/Sohio contends that the privity and knowledge of the master with respect to the tug and anchor watch should eliminate Keystone's pro tanto credit for settlement payments to personal injury and death claimants.*fn18 If limitation is granted as against the property damage claimants on the anchor watch theory, we believe that the question of limitation under 46 U.S.C. § 183(e), relating to personal injury and death claimants, becomes a relevant issue which the district court should also address.

C. The Grant of Limitation of Liability to Monsanto and Bankers Trust

BP/Sohio also presents the theory that Monsanto and Bankers Trust are not entitled to limitation of liability because of the failure of each to establish a lack of privity and knowledge of the defective astern guardian valve. As to Monsanto and Bankers Trust's alleged failure to establish lack of privity and knowledge, BP/Sohio contends that a review of the trial transcript and proofs offered by each named petitioner, reveals that only Keystone affirmatively put forth any proof to support their claim of limitation. BP/Sohio would therefore have us hold, as a matter of law, that Monsanto and Bankers Trust are entitled to limit their liability and thus are liable for all of BP/Sohio's provable damages. We decline to do so because we have already decided this issue.

Throughout this litigation, Bankers Trust, Monsanto, and Keystone have been treated as a single party with identical interests. In our amendment of our July 24, 1981 order, we clarified that our reversal of the district court was not directed solely to Keystone Company, but that our holding of lack of privity or knowledge with respect to the defective astern guardian valve and turbine applied to all three petitioners.*fn19 We also believe that this collective treatment should continue on remand for the sake of consistency. Therefore, any findings to be made by the district court on remand of the unresolved issues of the alleged failure to post an anchor watch and the alleged privity and knowledge of the master in dismissing the tug and anchor watch should take this into account.

IV.

For the aforestated reasons, the judgment of the court below will be reversed and this case remanded to the district court with instructions to address the two issues in question, make specific findings of fact, and apply to those facts the law of the case as determined on appeal.


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