JON O. NEWMAN, Circuit Judge.
The issue on this appeal is whether, under maritime law, an owner of a vessel may be awarded damages for economic loss due to negligence in the absence of physical damage to its property. For many years a number of courts have derived from the Supreme Court's opinion in Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303, 48 S.Ct. 134, 72 L.Ed. 290 (1927), a "rule" prohibiting such damages. Plaintiff-Appellant American Petroleum and Transport, Inc. ("American") appeals from the October 11, 2012, judgment of the United States District Court for the Southern District of New York (Paul A. Engelmayer, District Judge), granting a motion to dismiss by Defendants-Appellees City of New York and the New York Department of Transportation ("City"). See American Petroleum and Transport, Inc. v. City of New York, 902 F.Supp.2d 466 (S.D.N.Y.2012).
Although we conclude that Robins Dry Dock has been overread to establish a rule barring damages for economic loss in the absence of an owner's property damage, we believe the rule has been so consistently applied in admiralty that it should continue to be applied unless and until altered by Congress or the Supreme Court.
American is a corporation in the business of transporting petroleum products by water. At all relevant times, American was the registered owner of a barge, the John Blanche, and the demise charterer
As a consequence of the delay, American alleges that it suffered $28,828 in economic losses. American acknowledges that it did not suffer any property damage.
In May 2012, American brought claims against the City for common law negligence and for violation of 33 U.S.C. § 494, which requires that a drawbridge over navigable water "be opened promptly by the persons owning or operating such bridge upon reasonable signal for the passage of boats and other water craft."
902 F.Supp.2d at 468-69 (quoting G&G Steel, Inc. v. Sea Wolf Marine Transportation, LLC, 380 Fed.Appx. 103, 104 (2d Cir.2010) (summary order), and citing Gas Natural SDG S.A. v. United States, No. 07-2129-CV, ___ Fed.Appx. ___, ___, 2008 WL 4643944, at *1 (2d Cir. Oct. 21, 2008) (summary order)). Although both G&G Steel and Gas Natural were non-precedential summary orders, see 2d R. 32.1.1(a), we had unequivocally stated in the latter decision, "[T]here exists a bright line rule barring recovery for economic losses caused by an unintentional maritime tort absent physical damage to property in which the victim has a proprietary interest."
The District Court also concluded that most Circuits have held that 33 U.S.C. § 494 does not give rise to an implied private right of action. American Petroleum, 902 F.Supp.2d at 470.
In Robins Dry Dock, a dry docking company damaged a propeller on a steamship, rendering the vessel unusable for two weeks. The steamship's time charterer sued the dry dock company to recover its lost profits resulting from the delay. The Supreme Court denied recovery. See Robins Dry Dock, 275 U.S. at 308-10, 48 S.Ct. 134. The Court first ruled that the time charterer could not prevail as a third-party beneficiary of the contract between the vessel owner and the dry docking company. See id. at 307-08., 48 S.Ct. 134 Turning to the time charterer's tort claim, the Court first stated generally that whether the dry dock company repaired the owner's vessel "promptly or with negligent delay was the business of the owners and of nobody else," and more specifically that "[t]he injury to the propeller was no wrong to the [time charterer] but only to those to whom it belonged." Id. at 308, 48 S.Ct. 134. The Court next considered what effect, if any, the charterparty had on the time charterer's claim: "But as there was a tortious damage to a chattel [the propeller of the owner's vessel] it is sought to connect the claim of the [time charterer] with that in some way." Id. The Court observed that the time charterer's loss "arose only through their contract with the owners," id., and then rejected the time charterer's claim in the passage most often quoted from Robins Dry Dock:
Id. at 309, 48 S.Ct. 134 (internal citation omitted).
Robins Dry Dock made two explicit rulings. The first ruling — that the time charterer was not the third-party beneficiary of the contract between the vessel owner and the drydocker — has no relevance to the pending case. The drawbridge operator has no contract with anyone. The second ruling was that the fact that the time charterer had a contract with the vessel owner whose property had been damaged by an unintentional tort gave the time charterer no right to recovery of its economic losses. This ruling, which we will call the "narrow ruling" of Robins Dry Dock, also seems to have no relevance to the pending case: American Petroleum is not grounding its claim for economic losses on a contract between the negligent operator of the drawbridge and some other party whose property was damaged. Therefore, if American Petroleum's claim is barred, as the District Court held, by a Robins Dry Dock "rule" that economic losses cannot be recovered for an unintentional maritime tort in the absence of physical damage to the claimant's property, it must be because either there is some additional broader ruling implicit in that decision, or the narrow ruling has been
Justice Holmes's text, however, gives no hint of either an implicit broader ruling or a basis for an extended broader ruling. He stated the Robins Dry Dock rule in narrow terms, explicitly declining to permit recovery just because the claimant has a contract with a party damaged by the tort. "[A]s a general rule, at least, a tort to the person or property of one man does not make the tort-feasor liable to another merely because the injured person was under a contract with that other unknown to the doer of the wrong." Robins Dry Dock, 275 U.S. at 309, 48 S.Ct. 134. Moreover, the three cases Justice Holmes cited as a "good statement," id., of the "general rule" all involved a claimant seeking recovery because of its contract with the tort victim. See The Federal No. 2, 21 F.2d 313 (2d Cir.1927)
A leading treatise on maritime law has candidly acknowledged that the broad rule is not to be found in Robins Dry Dock. Referring to the broad rule, Professor Schoenbaum states, "This is the interpretation accorded to the case of Robins Dry Dock and Repair Co. v. Flint, 275 U.S. 303, 48 S.Ct. 134, 72 L.Ed. 290 (1927)." 1 Thomas J. Schoenbaum, Admiralty and Maritime Law § 5-16, at 317 n. 3 (5th ed.2011) (emphasis added), and also acknowledges that the "Robins Dry Dock holding was later transformed into a bright-line rule against liability for pure
Since Robins Dry Dock, the Supreme Court has cited it three times, all without illuminating its meaning. In Aktieselskabet Cuzco v. The Sucarseco, 294 U.S. 394, 404, 55 S.Ct. 467, 79 L.Ed. 942 (1935), the Court only distinguished the narrow contract rule of Robins Dry Dock. In Caldarola v. Eckert, 332 U.S. 155, 158, 67 S.Ct. 1569, 91 L.Ed. 1968 (1947), it simply noted that no claim was made under the narrow contract rule of Robins Dry Dock. The third case, East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986), was a products liability ruling, made under maritime law. The Court's narrow holding was 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. 2295. Notably, the Court explicitly left open the question whether a broad rule is to be derived from Robins Dry Dock:
East River, 476 U.S. at 871 n. 6, 106 S.Ct. 2295.
Two opinions of Courts of Appeals have thoughtfully endeavored to explain why the broad rule attributed to Robins Dry Dock exists: State of Louisiana ex rel. Guste v. M/V TESTBANK, 752 F.2d 1019, 1022 (5th Cir.1985) (in banc), and Barber Lines A/S v. M/V Donau Maru, 764 F.2d 50 (1st Cir.1985).
The argument that such a broad rule is implicit in the narrow rule that Justice Holmes stated was expressed by Judge Higginbotham for the 10-5 majority of the in banc court in Guste. Guste involved numerous claims for economic losses suffered as a result of the temporary closing of the Mississippi River Gulf outlet because of chemicals that had spilled into the outlet after a collision of two vessels. None of the plaintiffs claimed to have had a contract with either of the vessels involved in the collision.
752 F.2d at 1023.
For Judge Higginbotham, the rationale animating the narrow rule of Robins Dry Dock was the avoidance of recovery for losses thought to be too remote from a defendant's negligence, from which he reasoned that claimants without a contract to a party suffering a tort are more remote than claimants with a contract. Although we agree that remoteness of losses is always relevant to tort recoveries, a concept usually expressed in terms of the extent of the tortfeasor's duty, see Palsgraf v. Long Island R.R., 248 N.Y. 339, 162 N.E. 99 (1928), or foreseeability or proximate cause, see In re Kinsman Transit Co. ("Kinsman II"), 388 F.2d 821, 823 (2d
Judge Higginbotham also explained Robins Dry Dock as based on "a principle... which refused recovery for negligent interference with `contractual rights,'" Guste, 752 F.2d at 1022, and on what he called the "well established" principle "that there could be no recovery for economic loss absent physical injury to a proprietary interest," id. at 1023. Although this principle has been articulated by distinguished torts commentators, see, e.g., 4 Fowler V. Harper, Fleming James, Jr., Oscar S. Gray, The Law of Torts § 25.18A, at 619 (2d ed.1986), these same commentators have noted that "[c]ourts are, however, beginning to disclaim the existence of any such `absolute rule,' and to refer instead to the applicability of pragmatic considerations," id. at 619-20 n. 1, and have more recently observed that the "rule" is permeated with numerous exceptions, see id. at 326 n. 9a (cumulative supp.2005). Several of these exceptions are catalogued in Union Oil Co. v. Oppen, 501 F.2d 558, 565-68 & n. 9 (9th Cir.1974).
Barber Lines, like Guste, also involved an oil spill caused by a ship's negligence, this one causing economic losses to a vessel delayed from docking at its assigned berth. Unlike Judge Higginbotham, however, then-Judge Breyer did not contend that the rationale of Robins Dry Dock, which he called "[t]he leading `pure financial injury' case," 764 F.2d at 51, was the remoteness of the claimed economic losses. On the contrary, he "assume[d] that the [financial] injury was foreseeable." Id. Nor did he express the view that the absence of a contract between the claimant and a tort victim made the claim more remote than that of a claimant with a contract. Indeed, he stated that "[t]he authority that Justice Holmes says contains a `good statement' of the legal principle does not, however, turn so much on the existence of a formal contract as on the
Instead of relying on remoteness, he simply embraced what he understood to be the holdings of post-Robins Dry Dock cases, which, he stated, "refuse to hold a defendant liable for negligently caused financial harm without accompanying physical injury or other special circumstances." Id. at 53. And he candidly acknowledged that he favored the broad rule claimed to be derived from Robins Dry Dock because of "pragmatic or practical administrative considerations which, when taken together, offer support for" the broad rule. Id. at 54 (emphasis in original). Among these, he noted, were that "[t]he number of persons suffering foreseeable financial harm in a typical accident is likely to be far greater than those who suffer traditional (recoverable) physical harm," id.; the share of amounts paid by tort suit defendants to victims is less than the share of premium dollars earned by insurance companies that is paid out to victims who insure themselves; and the typical victim of financial losses is a business firm that is able to purchase first-party insurance, see id. at 54-56. Judge Higginbotham also invoked these considerations. See Guste, 752 F.2d at 1029.
Other circuits have also found in Robins Dry Dock a broad rule barring economic losses for unintentional maritime torts in the absence of physical injury. See Channel Star Excursions, Inc. v. Southern Pacific Transportation Co., 77 F.3d 1135, 1137-38 (9th Cir.1996); Getty Refining & Marketing Co. v. MT FADI B, 766 F.2d 829, 831-33 (3d Cir.1985); Kingston Shipping Co. v. Roberts, 667 F.2d 34, 35 (11th Cir.1982); see generally Trey D. Tankersley, The Robins Dry Dock Rule: The Tar Baby of Maritime Tort Law, 25 Tul. Mar. L.J. 371 (2000) (The "Tar Baby" allusion is borrowed from Judge Wisdom's dissent in Guste, 752 F.2d at 1035.). In the Fourth Circuit, Robins Dry Dock was followed to disallow a time charterer's claim for lost profits, but its claim for the amount it paid the owner for the period the vessel was out of service was allowed. See Venore Transportation Co. v. M/V Struma, 583 F.2d 708, 710-11 (4th Cir.1978). The Ninth Circuit has made exceptions to a broad Robins Dry Dock rule for seamen's lost wages, see Carbone v. Ursich, 209 F.2d 178, 181-82 (9th Cir.1953), and commercial fishermen's lost profits resulting from an oil spill, see Union Oil, 501 F.2d at 565-71.
Our Circuit's view of the broad rule attributed to Robins Dry Dock has followed a somewhat uneven course. Prior to the Supreme Court's decision, our Court had allowed the time charterer's claim for economic losses when the case was here, see Flint v. Robins Dry Dock & Repair Co., 13 F.2d 3, 5-6 (2d Cir.1926), rev'd, 275 U.S. 303, 48 S.Ct. 134, 72 L.Ed. 290 (1927), deeming the economic losses to have been
Our first direct reckoning with the Supreme Court's decision in Robins Dry Dock occurred in Agwilines, Inc. v. Eagle Oil & Shipping Co., 153 F.2d 869 (2d Cir.1946).
Id. at 871. Thus, Agwilines appears to have recognized both a narrow Robins Dry Dock rule — the contract with the owner does not help the time charterer — and a broad rule — a negligent tortfeasor has no legal liability for economic losses in the absence of physical damage.
Our next significant consideration of Robins Dry Dock occurred in Kinsman II, 388 F.2d 821 (2d Cir.1968), so named because it was preceded by In re Kinsman Transit Co. ("Kinsman I"), 338 F.2d 708 (2d Cir.1964).
Judge Friendly upheld the various claims for physical injuries to property, deeming them foreseeable under traditional tort principles. He acknowledged, however, that "[s]omewhere a point will be reached when courts will agree that the link [between negligent conduct and injury] has become too tenuous — that what is claimed to be consequence is only fortuity." Id. at 725. In the absence of a claim for economic losses, he had no occasion to consider Robins Dry Dock.
Claims for economic losses were before us, however, when the same litigation returned four years later in Kinsman II. Cargill, Inc., sought to recover the expenses of its extra transportation and storage costs incurred because the river flooding prevented it from unloading wheat on a vessel in the Buffalo harbor, and it was obliged to obtain replacement wheat to fulfill its contracts. See Kinsman II, 388 F.2d at 823. Cargo Carriers, Inc., sought to recover the extra expenses of unloading its cargo of corn from yet another vessel that had been struck by the original two colliding vessels, the damage to this vessel necessitating special equipment for unloading cargo. See id.
Judge Kaufman began his consideration of these claims by noting that the District Court, in the absence of proof of intentional interference with contracts, had rejected what the Court deemed interference-with-contract claims on the authority of Robins Dry Dock. See id. He then stated, "We too deny recovery to the claimants, but on other grounds." Id. Leaving what he termed "the rock-strewn path of `negligent interference with contract,'" he grounded decision on "more familiar tort terrain." Id. at 824. Judge Kaufman rejected the claims as simply "too `remote' or `indirect' a consequence of defendants' negligence." Id. Rather than invoking the narrow rule of Robins Dry Dock, rejecting a claim for economic losses sought to be based on the victim's contractual relation to an injured vessel, or the broad rule identified in Agwilines, rejecting all claims for economic losses in the absence of physical injury, Judge Kaufman used the traditional tort concept of foreseeability and rejected the claims as too remote. Id. at 825. All that he drew from Robins Dry Dock was Justice Holmes's statement, appended to his rejection of a contract-related claim, that "[t]he law does not spread its protection so far." Id. (quoting Robins Dry Dock, 275 U.S. at 309, 48 S.Ct. 134).
Federal Commerce & Navigation Co. v. M/V Marathonian, 392 F.Supp. 908, 913 (S.D.N.Y.1975).
Our Court's next three encounters with Robins Dry Dock before today were all non-precedential summary orders, each of which, without elaboration, approved or announced what has become the broad rule that economic losses for an unintentional maritime tort are not recoverable in the absence of physical injury. In Allders International (Ships) Ltd. v. United States, 100 F.3d 942 (2d Cir.1996) (summary order), we rejected a claim by a concessionaire that lost revenue when a cruise ship canceled voyages because of a grounding accident. We affirmed "for substantially the same reasons set forth" in the District Court's opinion, id. at 942, in which Judge Martin had dismissed as dicta the tort-based approach of Kinsman II in favor of a "bright line approach." Allders International (Ships) Ltd. v. United States, No. 94 CIV. 5689, 1995 WL 251571, at *1-2 (S.D.N.Y. Apr. 28, 1995). Next came the two summary orders on which Judge Engelmayer relied in the pending case, Gas Natural, 2008 WL 4643944, at *1 (stating "a bright line rule barring recovery for economic losses caused by an unintentional maritime tort absent physical damage to property in which the victim has a proprietary interest") (emphases and internal quotation marks omitted), and G & G Steel, 380 Fed. Appx. at 104 (same).
Although, since Marathonian, we have not considered Robins Dry Dock in a published opinion, the district court decisions in our Circuit, in addition to Judge Engelmayer's decision in the pending case, have regularly invoked the "bright line rule" barring economic losses in the absence of physical damage. See G & G Steel, Inc. v. Sea Wolf Marine Transportation, LLC, No. 06 Civ. 1840, 2008 WL 192049, at *3 (S.D.N.Y Jan. 23, 2008); Gas Natural SDG S.A. v. United States, No. 04 CIV. 8370, 2007 WL 959259, at *6 & n. 5 (S.D.N.Y. Mar. 22, 2007); Conti Corso Schiffahrts-GMBH & Co. KG NR. 2 v. M/V "Pinar Kaptanoglu", 414 F.Supp.2d 443, 446-47 (S.D.N.Y.2006); Brown v. Royal Caribbean Cruises, Ltd., No. 99 Civ. 11774, 2000 WL 34449703, at *5 (S.D.N.Y. Aug. 24, 2000); American Dredging v. Plaza Petroleum Inc., 845 F.Supp. 91, 93 (E.D.N.Y.1993); Plaza Marine, Inc. v. Exxon Corp., No. 92 Civ. 1189, 1992 WL 197398, at *1 (S.D.N.Y. Aug. 5, 1992).
Having surveyed the field and our own slightly wavering contribution to it, we now explicitly accept the broad rule
We are not unsympathetic to the Appellant's earnest plea that, even if a broad Robins Dry Dock rule exists, recovery could be allowed in this case without countenancing an unbounded exposure of maritime tortfeasors to a vast number of economic loss claims that would stretch the concept of foreseeability up to and often beyond any discernible limit. It was surely foreseeable that an operator who had opened a drawbridge to let vessels move upriver and negligently failed to open the bridge when the vessels returned will cause economic losses to at least some of the vessels expecting to pass under the bridge. And when that operator is a governmental entity, the burden of such foreseeable losses can be spread narrowly through user fees or broadly through taxation.
The judgment of the District Court is affirmed.
In Elliott Steam Tug, a time charterer sued the agency that had requisitioned the vessel, seeking lost profits. In dictum, before the Court upheld a statutory indemnity claim, the Court said that the plaintiff had no claim at common law for injury to its contractual rights. See 1 K.B. at 140.
In Byrd, a printing company lost power for several hours during which it lost profits it could have earned. The loss of power resulted from the excavation of a nearby site, which caused a quantity of earth to fall on underground conduits through which an electric company's power lines ran. The plaintiff sued the company doing the excavating, relying on the plaintiff's contract with the company that supplied electric power. The Court rejected the claim, ruling that the wrong was done to the power company, and that the plaintiff had only a claim against the power company, not the excavating company. See 43 S.E. at 420-21.
This argument would be sound in instances where the plaintiff suffered no loss but for a contract with the injured party. We would measure a plaintiff's connection to the tortfeasor by the only line connecting them, the contract, and disallow the claim under Robins [Dry Dock]. In the instant case [involving an economic loss resulting from a collision of two ships producing an oil spell that blocked a Mississippi outlet to all shipping], however, some of the plaintiffs suffered damages whether or not they had a contractual connection with a party physically injured by the tortfeasor. These plaintiffs do not need to rely on a contract to link them to the tort: The collision proximately caused their losses, and those losses were foreseeable. These plaintiffs are therefore freed from the Robins [Dry Dock] rule concerning the recovery of those who suffer economic loss because of an injury to a party with whom they have contracted.
Guste, 752 F.2d at 1040 (Wisdom, J., with whom Rubin, Politz, Tate, and Johnson, JJ, join, dissenting).
Guste, 752 F.2d at 1053 (Rubin, J., with whom Wisdom, Politz, and Tate, JJ, join, dissenting).
Guste, 752 F.2d at 1045 (Wisdom, J., with whom Rubin, Politz, Tate, and Johnson, JJ, join, dissenting).
752 F.2d at 1052 (Wisdom, J., with whom Rubin, Politz, Tate, and Johnson, JJ, join, dissenting).
Kinsman I, 338 F.2d at 726.
