Case: 10-30466 Document: 00511447884 Page: 1 Date Filed: 04/15/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
April 15, 2011
No. 10-30466 Lyle W. Cayce
Clerk
CATALYST OLD RIVER HYDROELECTRIC
LIMITED PARTNERSHIP,
Plaintiff-Appellant
v.
INGRAM BARGE CO.; JOHN DOE; A B C INSURANCE CO.;
JAMES ROE; X Y Z INSURANCE CO.; AMERICAN RIVER
TRANSPORTATION CO.,
Defendants-Appellees
Appeal from the United States District Court
for the Western District of Louisiana
Before DAVIS, WIENER, and BENAVIDES, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge:
Catalyst Old River Hydroelectric Limited Partnership (“Catalyst”) appeals
the judgment of the district court dismissing on summary judgment its claims
for damage arising out of a maritime tort. Specifically, Catalyst argues that the
district court erred by finding that the entry of the barge of defendant American
River Transportation Co. (“ARTCO”) into the intake channel of Catalyst’s
hydroelectric facility did not satisfy the damage requirement of Louisiana ex. rel.
Guste v. M/V TESTBANK, 752 F.2d 1019 (5th Cir. 1985) (en banc), cert. denied,
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No. 10-30466
477 U.S. 903 (1986), so as to allow Catalyst to recover its economic losses. We
agree with Catalyst and reverse.
I.
Catalyst owns and operates a hydroelectric station on a privately owned
channel from the Mississippi River, just upriver from the Mississippi River Flood
Control Structures at Old River in Concordia Parish, Louisiana. The station is
comprised of the intake channel which diverts water from the Mississippi River,
a dam structure which contains the turbines, generators and other machinery
of the station, and the outflow channel which directs water from the dam to the
Old River/ Red River/ Atchafalaya River. As indicated, the station is not on the
Mississippi but rather in a channel off the river. Catalyst owns the station and
the surrounding property necessary for its operation. This includes the banks
of the Mississippi River, the intake channel, and the abutment on which the dam
structure sits. The intake channel and a small island located in the mouth of the
intake channel where it meets the Mississippi River are functional elements of
the hydroelectric facility, acting as a pipe would to direct water into the station’s
eight turbines in order to produce electricity.
ARTCO and Ingram Barge Co. (“Ingram”) operate tug boats with barge
tows on the Mississippi River. On December 24, 2007, shortly before 9:00 p.m.,
two tows operated respectively by ARTCO and Ingram (collectively, the
“Defendants”) collided on the Mississippi River approximately 2.5 miles upriver
from Catalyst’s intake channel. ARTCO was operating the M/V DAN
MACMILLAN and its tow, and Ingram was operating the M/V JOHN M
DONNELLY and its tow. As a result of the collision, several barges broke free
from the tow of the M/V DAN MACMILLAN, including Barge TILC-37. Barge
TILC-37 then drifted downriver into the intake channel of Catalyst’s facility and
became grounded on the east bank of the intake channel, lodged against the
station and abutment. The physical presence of Barge TILC-37 obstructed the
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intake channel, which provides water to the turbine / generators of the electric
power generation facility.
The presence of the barge forced Catalyst to reduce the flow of water in the
intake channel into the turbines, and thus its output of electricity to prevent the
barge from sinking and to allow safe access to the barge for its removal. Around
10:30 p.m., Catalyst shut down six turbines and reduced the remaining two to
minimum power because of the decreased flow of water directed to the turbines
from the intake channel. A barge crane and a vessel were thereafter able to
enter the intake channel, offload the barge’s cargo, and tow the damaged barge
away from the station where a larger barge crane could unload the barge’s cargo,
so it could safely re-enter the Mississippi River. Catalyst restarted the dormant
turbines and restored the two running turbines to normal capacity around 6:30
p.m. on December 25, 2007.
Catalyst filed suit in Louisiana state court seeking damages for the value
of the electrical power it was unable to generate due to the intrusion of the
barge. The Defendants removed the suit to federal district court. Following
limited discovery, the Defendants jointly filed a motion for summary judgment
seeking dismissal of all claims. The district court granted the motion and
Catalyst timely appealed.
II.
The district court’s decision on a motion for summary judgment is
reviewed de novo. Maher v. Strachan Shipping Co., 68 F.3d 951, 954 (5th Cir.
1995). Summary judgment is proper if there is no genuine issue of material fact
and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P.
56(c); Maher, 68 F.3d at 954.
III.
It is well settled under the general maritime law that there can be no
recovery for economic loss absent physical damage to or an invasion of a
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proprietary interest. Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303
(1927); TESTBANK, 752 F.2d 1019. The question in this case is whether
Catalyst suffered such damage to its propriety interest in its hydroelectric
station as to satisfy this test and justify the recovery of the economic damages
Catalyst seeks in this suit. In order to analyze how the Robins rule applies to
the facts of this case and Catalyst’s alleged physical harm, we must first lay out
the contours and purpose of the rule.
The rule of Robins can be stated in several ways: as refusing recovery for
negligent interference with “contractual rights”, as denying recovery for
economic loss if that loss resulted from physical damage to the property of
another, and as a rule that a tort to the person or property of one man does not
make the tortfeasor liable to another merely because the injured person was
under contract with one unknown to the wrongdoer. TESTBANK, 752 F.2d at
1022. The purpose of the rule is pragmatic: to limit the consequences of
negligence and exclude indirect economic repercussions, which can be
widespread and open-ended. Id. In other words, as we said in TESTBANK, the
Robins rule is a pragmatic restriction on foreseeability. Id.
This court has faithfully applied the Robins rule and consistently denied
recovery for economic loss to parties who have suffered no harm to a proprietary
interest. For example, in Kaiser Aluminum and Chemical Corp. v. Marshland
Dredging Co., 455 F.2d 957 (5th Cir. 1972), the plaintiff was denied recovery for
losses resulting when its gas service was interfered with after the defendant
negligently broke an upstream gas pipeline belonging to another. In Dick
Meyers Towing Service, Inc. v. United States, 577 F.2d 1023 (5th Cir. 1978), the
plaintiff tug boat operator was denied economic damages resulting when the tug
was unable to timely deliver its tow after a lock on a river was closed as a result
of defendant’s negligence. In Louisville & Nashville Railroad Co. v. M/V
BAYOU LACOMBE, 597 F.2d 469 (5th Cir. 1979), we held that a railroad’s right
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to use a bridge damaged by defendant’s vessel was not a property right sufficient
to support recover for economic expectancy when the railroad was unable to
traverse a bridge damaged after a vessel collided with it.
However, when the plaintiff does incur damage to his property, recovery
for economic losses is allowed. For example, in Vicksburg Towing Co. v.
Mississippi Marine Transport Co., 609 F.2d 176 (5th Cir. 1980), the owner of a
dock damaged by defendant’s negligence was allowed recovery for economic
losses that it suffered when the defendant damaged its dock. “[T]he distinction
between recovery by an owner when his property was damaged and recovery by
others, as applied in Robins, Dick Meyers, and M/V BAYOU LACOMBE, was
‘meaningful, real and dispositive.” TESTBANK, 752 F.2d at 1024 (citing
Vicksburg, 609 F.2d at 177). These cases demonstrate the consistent application
of the rule stated by the majority in TESTBANK that “there can be no recovery
of economic loss absent physical injury to a proprietary interest.” Id. at 1023.
Or, as stated in Judge Garwood’s concurrance in TESTBANK, “physical harm
to or invasion of a proprietary interest is generally an appropriate condition for
recovery of negligently caused economic loss.” Id. at 1035.
The Defendants argue that Catalyst suffered no physical harm and that
the facts of this case are indistinguishable from those in Reserve Mooring, Inc.
v. American Commercial Barge Line, LLC, 251 F.3d 1069 (5th Cir. 2001).
Reserve Mooring operated a midstream mooring facility on the Mississippi River.
The mooring facility consisted of five buoys and anchor piles, which were
installed pursuant to a permit from the United States Army Corps of Engineers.
In Reserve, the plaintiff sought economic losses caused when the defendant’s
barge sank while the barge was anchored at Reserve’s mooring facility. Because
the site remained blocked and unavailable for use by other vessels for over three
months, Reserve sued seeking its lost revenue resulting from loss of use of the
mooring. Because the sunk barge only interfered with Reserve’s business
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expectancy by preventing other vessels from mooring at the facility for a period
of time, this court concluded that Reserve’s claim for purely economic damages
must be denied. The key feature distinguishing this case from Reserve is that
“Reserve [did] not dispute that it suffered no physical damage to its buoys and
anchor piles and that its suit is for lost income only.” Id. at 1070. Catalyst’s
claims in this case are markedly different as it argues that its facility suffered
physical damage prior to the removal of defendant’s barge.
Catalyst argues that the presence of the barge in the intake channel,
which is a functional component of Catalyst’s hydroelectric generating facility,
interfered with the unobstructed continuous flow of water in the channel,
impairing the ability of the facility to operate as designed. We agree with
Catalyst that this harm qualifies as damage to its proprietary interest.
The summary judgment record is not well developed. Although the
Defendants argue that the facts Catalyst relies on do not satisfy the Robins /
TESTBANK requirement, the Defendants do not challenge the factual basis
relied on by Catalyst. Catalyst presented the affidavit of the general manager
of the hydroelectric facility which established the basic facts of the ownership
and design of the facility and stated
The physical presence of barge TILC-37 damaged the ability of the
intake channel to safely deliver water from the Mississippi River to
the turbine/generators of the electric power generation facility,
requiring a reduction in the flow in the intake channel to prevent
the barge from sinking and allow safe access to the barge for it’s
removal.
Although the exact nature of the barge’s interference with the flow of water is
not explained in any detail, the Defendants presented no evidence that the barge
did not disrupt the water flow, which everyone agrees is critical to Catalyst’s
operations. In fact, the Defendants’ Statement of Uncontested Material Facts
includes the following statements which support Catalyst’s position. After the
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collision, the barge “drifted down river and entered into the station’s inlet
channel and ran aground in front of the station on the channel’s east bank.”
Also, “As a consequence of the grounding of Barge TILC-37, the production
output of the station’s eight hydroelectric generating units was reduced.”
Finally, the Defendants’ Statement of Uncontested Material Facts also contains
Catalyst’s answer to an interrogatory, which answer states
The barge physically entered plaintiff’s private leasehold property,
and damaged the inlet canal portion of the Old River hydroelectric
station by obstructing the safe and continuous flow of water into the
hydroelectric station’s turbines and creating an immediate hazard.
After entering the inlet canal, the barge ran aground and began
sinking. The Old River station operator’s action to reduce the inlet
channel’s flow prevented the grounded barge from breaking free and
causing further physical damage to the Old River hydroelectric
station. The inlet channel is Old River’s private leasehold property
and is the conduit portion of the facility which directs water in the
turbines which power the Old River station. The barge’s recovery
led to further vessels entry into Old River’s private leasehold
property. The barge’s physical entry into Old River’s leasehold
property, its running aground on Old River’s leasehold property, the
physical recovery effort to secure and remove the barge from Old
River’s private leasehold property obstructed the conduit, thereby
damaging it, and physically prevented Old River from using its only
source of power for its generators. Fred O. Budwine repaired the
damage by removing the barge from Old River’s inlet channel. The
physical damage was effectively repaired when the last vessel left
the channel.
The Defendants produced no summary judgment evidence inconsistent
with the above facts. These uncontested facts support Catalyst’s claims of
damage in two ways. First, this evidence demonstrates that the presence of the
barge on Catalyst’s property physically interfered with the flow of water through
the intake channel to the turbines, interfering with Catalyst’s use of the
property as a hydroelectric station. The intake channel the barge intruded upon
is an excavation from the Mississippi River to the dam which functions as a
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conduit for water to flow into Catalyst’s turbines. The intake channel, owned by
Catalyst, is an integral part of its facility, built specifically for the purpose of
delivering water to the turbines, which use the flow of water to generate
electricity. By interfering with the flow of water, Catalyst’s proprietary interest
in its facility was invaded and harmed.
Our decision in Consolidated Aluminum Corp. v. Bean Corporation, 772
F.2d 1217 (5th Cir. 1985), supports this conclusion. In Consolidated, Bean, while
conducting a dredging operation, ruptured a gas pipeline belonging to Texaco
which caused damage to Consolidated’s processing facility when the gas supply
to the facility was interrupted. Id. at 1219. We reversed the district court’s
dismissal of Consolidated’s claims against Bean, finding that Consolidated met
the prerequisite of physical harm to property in which it has a proprietary
interest. Like Catalyst, Consolidated suffered property damage and economic
losses when Bean’s negligence caused the flow of gas, a key supply component to
its facility, to be interrupted. We held that harm resulting from the interruption
of the gas supply to Consolidated’s facility satisfied TESTBANK. Id. at 1222. In
this case, the presence of the barge in Catalyst’s intake channel caused damage
to its hydroelectric facility by obstructing the supply of water, which was critical
to its operations.
Second, because of the location of the barge in the channel, Catalyst feared
that it would break free and cause further damage to the hydroelectric station.
Removal of the barge was therefore necessary. In order for a tug to enter the
intake channel to access the grounded barge safely, and to prevent damage to the
station, Catalyst had to reduce the channel’s water flow and shut down six of its
eight turbines and reduce the remaining two to minimum power. Thus, the
physical recovery effort to secure and remove the barge from the intake channel
required a reduction in the flow of water necessary for the turbines to operate
properly and generate the power they were designed to generate.
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Acts taken in mitigation to prevent permanent physical damage can serve
as the physical damage requirement in the TESTBANK rule. Corpus Christi Oil
& Gas Co. v. Zapata Gulf Marine Corp., 71 F.3d 198 (5th Cir. 1995). In Corpus
Christi, a towboat collided with gas and condensate producing platform, owned
by Corpus Christi, damaging a gas riser connected to the platform through which
Corpus Christi’s gas production flowed. Id. at 199. The gas riser was owned by
Houston Pipeline. Id. As a result of the damage to the riser, Corpus Christi
could not flow its gas through the riser, and in order to prevent damage to its
producing wells, Corpus Christi shut in its wells and flared gas to preserve the
wells during the repair period. Id. at 200. Except for this act in mitigation,
Corpus Christi’s damages from the loss of the wells would have been much
greater than the value of the flared gas. Id. at 202. This court held that Corpus
Christi’s costs incurred in flaring the gas to save its wells constituted physical
damage to a proprietary interest sufficient to satisfy the requirements of
TESTBANK and entitled them to recover their economic losses equal to the value
of the flared gas. Id.
TESTBANK must not be construed as mandating the narrow and
impractical result urged by Zapata: finding a defendant free of
liability when the plaintiff incurs losses, although "voluntarily" so,
that nevertheless are directly attributable to its efforts to avoid the
physical damages that would have rendered that defendant liable for
much larger sums.
Id. Citing Corpus Christi, we endorsed the idea that costs incurred to mitigate
damages satisfy the physical damage requirement of TESTBANK in In re: TAIRA
LYNN MARINE LTD. NO.5, LLC., 444 F.3d 371, 379 (5th Cir. 2006) (noting that
certain plaintiffs did not establish either physical damage or that they mitigated
damages by shutting down operations to attempt to satisfy TESTBANK).
In this case, Catalyst shut in and reduced production of power at its
hydroelectric facility to allow removal of the barge and to prevent further damage
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to its facility. Without its acts in mitigation, Catalyst would have run the
unacceptable risk of incurring physical damage to its hydroelectric station.
Accordingly, under Corpus Christi, Catalyst’s economic losses incurred as a
result should have been allowed.
Defendants repaired the physical damage under both theories by removing
the barge. Defendants argue that after the barge was removed, there was no
remaining physical damage to the intake channel or the rest of Catalyst’s facility.
Thus they argue that Catalyst did not suffer any physical injury to a proprietary
interest, which is the requirement for recovery of economic losses. It is true that
there was no permanent damage to the intake channel after the barge was
removed. However, simply because the physical damage to or invasion of
Catalyst’s facility has been repaired by removal of the barge without cost to
Catalyst does not mean that no physical damage occurred by the intrusion of
Defendants’ barge into Catalyst’s facility.
IV.
Based on our conclusion that the entry of ARTCO’s barge into Catalyst’s
privately owned hydroelectric facility caused physical damage to Catalyst’s
property and invasion of its proprietary interest, we reverse the judgment of the
district court dismissing its claims on summary judgment and remand for further
proceedings.
REVERSED and REMANDED.
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