REVISED - December 5, 2000
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 99-30535
In Re: In the Matter of the Complaint of
ADM/GROWMARK RIVER SYSTEM, INC.,
as Owner Pro Hac Vice of the Barge Rebecca,
Praying for Exoneration From or Limitation of Liability
ADM/GROWMARK RIVER SYSTEM, INC.,
Petitioner-Appellee,
versus
LEE ROY LOWRY,
Claimant-Appellee,
versus
KOSTMAYER CONSTRUCTION, INC.,
Claimant-Appellant.
--------------------
Appeal from the United States District Court
for the Eastern District of Louisiana
--------------------
November 30, 2000
Before REAVLEY, BENAVIDES and DENNIS, Circuit Judges.
BENAVIDES, Circuit Judge:
This case requires that we determine whether section 905(b) of the Longshore and Harbor
Worker’s Compensation Act (LHWCA) invalidates certain liability allocation provisions in an
agreement between two vessel owners, one of which also employs a harbor worker injured on the
job. After thoroughly considering the language of section 905(b), the legislative history of the
statute, as well as the cases interpreting the provision, we conclude that Congress did not intend
its prohibition of liability allocation agreements to protect dual capacity employers beyond the
extent of their immunity from tort liability as employers under section 905(a). As a consequence,
we hold that a dual capacity employer sued for negligence in its capacity as vessel owner may
terminate its rights to contribution from another vessel by agreeing to contractually indemnify that
vessel. Based on this holding, we find that the liability allocation provisions relevant to this case
are valid to the extent that they preclude a contribution claim by Kostmayer Construction, Inc.
(Kostmayer), as a vessel owner, against ADM/Growmark River System, Inc. (ADM). We
therefore AFFIRM the rulings of the district court.1
FACTUAL AND PROCEDURAL BACKGROUND
ADM owns a grain elevator in Ama, Louisiana used to transfer cargo to and from ships
and river barges. In August 1995, ADM shut down its cargo operations to perform maintenance
work on the elevator facility and the channel through which barges and ships access the facility.
On August 15, 1995, ADM and Kostmayer Construction, Inc. (Kostmayer) executed a written
contract in which Kostmayer agreed to replace a fender system in the access channel for a
specified sum of money (the “Agreement”). The Agreement included four provisions allocating
financial responsibility for injuries to Kostmayer’s employees to Kostmayer (the “Liability
Allocation Provisions”).2 Specifically, Kostmayer agreed to fully indemnify ADM and hold ADM
1
ADM filed a Motion to Supplement the Record prior to oral argument in this case.
That motion is denied.
2
The Liability Allocation Provisions of the Agreement provide in relevant part:
1. Section V(A): “Contractor [Kostmayer] . . . is solely responsible for the safety and
health of its employees.”
2. Article X Insurance. “In consideration of the parties’ desire to effectively identify and
manage certain liability risks, . . . liability of contractor [Kostmayer] . . . shall not be
limited . . . and owner [ADM] shall have no liability whatsoever for injuries to the
employees of contractor or its subcontractors regardless of owner’s sole or concurrent
negligence . . . or other owner fault, if such injuries arrive out of the work of contractor or
its subcontractors by or for owner.”
3. “Indemnification. . . . liability of contractor [Kostmayer] . . . for injuries to their
employees shall not be limited . . . and that owner [ADM] shall have no liability
whatsoever for injuries to the employees of contractor. . . .”
4. XI. “Contractor [Kostmayer] agrees to . . . hold owner [ADM] . . . harmless . . .
against any and all claims, . . . for personal injuries . . . suffered by employees of
2
harmless for any injuries suffered by Kostmayer employees during the course of the Kostmayer’s
work under the contract.
On August 19, 1995, Lee Roy Lowry, an employee of Kostmayer, suffered personal
injuries while repairing ADM’s fender system on behalf of Kostmayer.3 On March 20, 1998,
Lowry filed a personal injury suit in Louisiana state court against Kostmayer and ADM seeking
damages pursuant to the general maritime law and LHWCA. Lowry’s state court petition alleges
that independent negligence by both Kostmayer and ADM vessels caused his injuries. On
September 15, 1998, ADM filed a Complaint for Exoneration From Or Limitation Of Liability in
the United States Court for the Eastern District of Louisiana citing section 183(a) of the
Limitation Act. See 46 U.S.C. App. § 183(a). Lowry filed an Answer to the complaint, as well as
a Claim in the proceeding. Kostmayer filed an Answer and Claim preserving its rights to
indemnity or contribution from ADM in the event that Kostmayer should be cast in judgment in
favor of Lowry. Kostmayer’s federal claim for contribution against ADM does not seek
reimbursement of benefits paid or payable to Lowry under the LHWCA. Rather Kostmayer’s
contractor . . . even if caused by the sole or concurrent negligence or fault of the owner.”
3
The facts of the accident that gave rise to Lowry’s injury are not directly relevant to this
appeal. Nevertheless, they help to provide some context to the present indemnity dispute. We
recite them here as they have been recited in the briefs solely for that purpose and without making
any determinations regarding their accuracy. On August 19, 1995, two barges controlled by
Kostmayer and one controlled by ADM operated in the access channel to ADM’s grain facility.
One of Kostmayer’s barges drove pilings near ADM’s elevator facility using a movable land crane
that had been placed on the barge (the “Piling Barge”). ADM had leased a deck barge, the
REBECCA, to perform maintenance work in the access channel unrelated to Kostmayer’s fender
repair project. ADM had moored the REBECCA to the grain facility using two land-based winch
cables; by tightening or loosening the tension on these cables, ADM could position the
REBECCA to perform maintenance work at various places in the channel. Finally, a second
Kostmayer barge, on which Lowry worked, collected garbage and other materials some 200 to
300 feet from the Piling Barge and the REBECCA (the “Garbage Barge”).
While operating in the access channel August 19, the Piling Barge dropped a 10,000
pound piling from its crane into the water. As the piling fell to the bottom of the channel, it
clipped the underwater winch cables connecting the REBECCA to the grain facility. The force of
the piling falling against the cables allegedly caused the REBECCA to surge towards the Garbage
Barge on which Lowry stood. Fearing a collision (which did not occur), Lowry ran toward the
center of his barge but slipped on the mud, water and other debris that had been collected during
the course of the day. As a result of the fall, Lowry suffered injury.
3
claim is limited to contribution for any negligence liability that Kostmayer may incur to Lowry in
its capacity as a vessel owner.
ADM filed Motions for Summary Judgment seeking dismissal of both Lowry’s and
Kostmayer’s claims. Kostmayer filed its own Motion for Partial Summary Judgment seeking to
nullify the Liability Allocation Provisions in the Agreement using section 905(b) of the LHWCA.
Kostmayer also sought dismissal of Lowry’s claims against it. Finally, Lowry filed an Unopposed
Motion for Modification of Stay and Restraining Order requesting that the district court lift the
stay on his state court proceeding. Immediately following oral argument on these motions, the
district court granted ADM’s motion for summary judgment with respect to Kostmayer and
Lowry’s motion seeking to lift the stay. With respect to the grant of summary judgment, the
district court interpreted the Liability Allocation Provisions to contain a “covenant not to sue” not
prohibited by section 905(b) of the LHWCA. Finding Kostmayer’s contribution action barred by
the covenant not to sue, the court granted summary judgment for ADM. Left with a single-
claimant exoneration action, the district court lifted the stay on state court proceedings based on
appropriate stipulations by Lowry on the scope of ADM’s liability and the continuing jurisdiction
of the federal court to resolve issues related to that limit.4 Kostmayer now appeals these rulings of
the district court.
DISCUSSION
Lee Roy Lowry is an injured longshoreman seeking to exercise his rights under the savings
to suitors clause to try his maritime personal injury claims against Kostmayer and ADM in the
forum of his choice - Louisiana state court. See 28 U.S.C. § 1333(1) (granting federal courts
exclusive jurisdiction over admiralty and maritime cases, but “saving to suitors in all cases all
other remedies to which they are otherwise entitled.”) At the same time, ADM has exercised its
4
The district court remanded the case to the state court to resolve all remaining motions.
Because we affirm the district court’s grant of summary judgment with respect to Kostmayer’s
claim for contribution against ADM, we need not take jurisdiction over the district court’s order
lifting the stay and state no opinion as to our power to accept jurisdiction over that order.
4
right to limit its liability in federal court under the Limitation Act. See 46 U.S.C. App. § 181 et
seq.5 In balancing the interests of an injured plaintiff in a particular forum against the right of a
vessel owner to limited liability, we have previously recognized that the “primary concern is to
protect the shipowner’s absolute right to claim [the Limitation Act’s] liability cap, and to reserve
the adjudication of that right in the federal forum.” See Magnolia Marine Transport Co. v.
Laplace Towing Corp., 964 F.2d 1571, 1575 (5th Cir. 1992); ODECO Oil & Gas Co. v. Bonnette,
74 F.3d 671, 675 (5th Cir. 1996) (“ODECO II”) (“The shipowner’s right to limitation takes
precedence over the claimant’s rights to proceed in the forum of their choice.”).
In order for claims to proceed in state court after an exoneration or limitation action has
been filed in federal court, all claimants must sign a stipulation protecting the vessel owner’s
rights under the Limitation Act. In re Complaint of Port Arthur Towing, Co., 42 F.3d 312, 316
(5th Cir), cert. denied, 116 S.Ct. 87 (1995); ODECO Oil & Gas Co., Drilling Division v.
Bonnette, 4 F.3d 401, 405 (5th Cir. 1993), cert denied, 511 U.S. 1004, 114 S.Ct. 1370 (1994). In
the present case, Lowry and ADM have agreed to appropriate stipulations, but Kostmayer has
not. This circuit has previously held that “parties seeking indemnification and contribution from a
shipowner must be considered claimants within the meaning of the Limitation Act.” ODECO II,
74 F.3d at 675. So long as Kostmayer retains a valid contribution claim against ADM,
Kostmayer must also agree to stipulations protecting ADM’s right to limited liability under the
Limitation Act before any claims against ADM may proceed in state court.
The district court granted summary judgment for ADM on Kostmayer’s contribution
claim, thus allowing Lowry’s state court claims to go forward based on the stipulations between
Lowry and ADM. We review a district court's grant of summary judgment de novo, applying the
same standard of review as would the district court. See Merritt-Campbell, Inc. v. RxP Products,
Inc., 164 F.3d 957, 961 (5th Cir. 1999). The present appeal does not depend on the factual
5
Kostmayer has not claimed the right to limited liability under the Limitation Act.
5
findings, but the resolution of legal questions. The district court’s grant of summary judgment
turned on its determination that (1) section 905(b) does not invalidate “covenants not to sue,” and
(2) the Agreement contained such a covenant.6 We review questions of statutory interpretation
de novo. U.S. v. Lowe, 118 F.3d 399, 400 (5th Cir. 1997); Estate of Bonner v. United States, 84
F.3d 196, 197 (5th Cir. 1996). Should we ultimately disagree with the trial court’s reasoning, we
may nevertheless affirm the summary judgment on any basis raised below and supported by the
record. See Rushing v. Kansas City Southern Ry. Co., 185 F.3d 496, 517 (5th Cir. 1999); see also
10A CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE s.
2716, at 290 (3d ed.1998).
The LHWCA provides a comprehensive workers compensation scheme for longshoreman,
harbor workers and other maritime laborers injured during the course of their employment. As
with any workers compensation scheme, this one has always balanced the interests of injured
workers in receiving substantial monetary relief quickly and irrespective of fault against the
interests of employers in limited liability. See THOMAS J. SCHOENBAUM, ADMIRALTY AND
MARITIME LAW §7-1, 371 (2d ed. 1994). To this end, Congress guaranteed covered maritime
workers injured on the job compensation from their employers without requiring proof of the
employer’s fault, but only up to certain statutory limits. See 33 U.S.C. § 904; Levene v. Pintail
Enterprises, Inc., 943 F.2d 528, 531 (5th Cir. 1991). In exchange for accepting no-fault liability,
employers of longshoreman and harbor workers also received immunity from suit for their
negligence as employers or the negligence of their employees. See 33 U.S.C. § 905(a) (providing
6
Kostmayer never disputes that the Liability Allocation Provisions, if upheld, merit
summary judgment for ADM on Kostmayer’s contribution claim. Indeed, an indemnitor cannot
claim contribution from their indemnitee on matters covered by the indemnity agreement without
creating a circle of contribution to indemnitor followed by indemnity repayment to indemnitee.
The issue of whether the Agreement in fact contains a covenant not to sue as opposed to a
different type of agreement has been hotly debated in this appeal. We need not reach this issue
since we ultimately interpret the scope of section 905(b) differently than the district court.
6
that compensation benefits under section 904 “shall be exclusive and in place of all other liability
of such employer to the employee. . . .”)
Though limiting the tort liability of employers, Congress expressly provided in section
905(b) that third party vessels could be sued in tort for their own negligence in causing personal
injury to longshore and harbor workers. Section 905(b) provides that:
In the event of injury to a person covered under this chapter caused by the
negligence of a vessel, then such person, or anyone otherwise entitled to recover
damages by reason thereof, may bring an action against such vessel as a third party
in accordance with the provisions of section 933 of this title, and the employer
shall not be liable to the vessel for such damages directly or indirectly and
any agreements or warranties to the contrary shall be void. If such person was
employed by the vessel to provide stevedoring services, no such action shall be
permitted if the injury was caused by the negligence of persons engaged in
providing stevedoring services to the vessel. If such person was employed to
provide shipbuilding, repairing, or breaking services and such person’s employer
was the owner, owner pro hac vice, agent, operator, or charterer of the vessel, no
such action shall be permitted, in whole or in part or directly or indirectly, against
the injured person's employer (in any capacity, including as the vessel's owner,
owner pro hac vice, agent, operator, or charterer) or against the employees of the
employer. 33 U.S.C. § 905(b) (emphasis added).
In this case, we must decide the scope of the highlighted language, specifically whether that
language invalidates all liability allocation agreements between vessel owners and dual capacity
employers. On its face, section 905(b)’s prohibition invalidates only those “agreements or
warranties” that render an employer liable to a vessel owner for damages levied against that
vessel owner in a third party action. This Court has previously interpreted the prohibition
narrowly as it applies to dual capacity employer/vessel owners, holding that section 905(b) does
not invalidate third party contribution claims against a vessel owner that also employs stevedores.
See Tran v. Manitowoc Engineering Co., 767 F.2d 223, 227 (5th Cir. 1985)(“[W]e hold that a
third party claim for joint tort feasor contribution against a vessel owner/stevedore employer for
negligent acts as a vessel owner is not barred by the LHWCA.”). Building on our holding in Tran
and the plain language of the statute, we conclude that the scope of section 905(b)’s prohibition
on liability allocation agreements should be limited by the prohibition’s purpose - the protection of
employers immune from direct personal injury suits. As a consequence, we hold that liability
7
allocation agreements between two vessels, one of which also employs longshoreman, are invalid
only when they infringe on the statutory immunity of the dual capacity vessel-employer.
Our reasoning is well supported by the history of section 905(b). Between 1946 and
1972, two Supreme Court decisions complicated the operation of the LHWCA’s workers
compensation scheme by making it possible for employers immune from direct suit under section
905(a) to nevertheless incur liability indirectly through indemnification or contribution.
Difficulties arose in 1946 when the Supreme Court allowed injured longshore and harbor workers
to maintain actions for unseaworthiness - essentially a strict liability action - against the vessels on
which they worked. See Seas Shipping Co. v. Sieracki, 328 U.S. 85 (1946). Because this remedy
exposed vessel owners to liability for the negligence of the stevedoring company hired to load or
unload their ships, the Supreme Court eventually found an implied warranty in all stevedoring
contracts. This implied warranty permitted vessel owners to bring indemnity actions against their
stevedore contractors and thus recoup damages paid out to injured workers. See Ryan
Stevedoring Co. v. Pan-Atlantic S.S. Corp., 350 U.S. 124 (1956). Through this circuitous chain
of liability, employers became strictly liable for the full amount of personal injury awards in favor
of their injured employees, despite Congress’ declaration that employers were immune from direct
suits by their injured employees. See S. REP. NO. 92-1125, at 9 (1972) (“The end result [of
Sieracki and Ryan] is that, despite the provision in the Act which limits an employer’s liability to
the compensation and medical benefits provided in the Act, a stevedore-employer is indirectly
liable for damages to an injured longshoreman who utilizes the technique of suing the vessel under
the unseaworthiness doctrine.”)
In 1972, Congress amended section 905(b) to break this indemnity circle. See Cooper
Stevedoring Co. v. Fritz Kopke, Inc., 417 U.S. 106, 113 n.6 (1974). First, in the initial clause of
905(b), then later in the fourth sentence of the provision, Congress overruled Sieracki by limiting
vessel owners’ liability to those injuries caused by vessel owners’ negligence. See S. REP. NO. 92-
1125, at 10 (1972). Next, Congress eliminated the implied warranty found by the Supreme Court
8
in Ryan by specifying that an “employer shall not be liable to the vessel” for damages caused by
the vessel’s negligence “directly or indirectly.” See id. at 11. Finally, and of particular
importance to this case, Congress declared invalid as a matter of public policy any contractual
provision that imposes tort liability on employers of longshoreman that would otherwise be
immune from tort liability. See id. Congress feared that if such provisions were available, vessel
owners would use their superior bargaining power to include them in all stevedoring contracts and
thus circumvent the allocation of liability envisioned by the statute. See id.; H. REP. NO. 92-1441
(1972), reprinted in U.S.S.C.A.N. 4698, 4704 (“[U]nless . . . hold-harmless, indemnity or
contribution agreements [between a stevedore and a vessel owner] are prohibited as a matter of
public policy, vessels by their superior economic strength could circumvent and nullify the
provisions [limiting the potential liability of owners] by requiring indemnification from a covered
employer for employee injuries.”). Through these three amendments, Congress sought to protect
employers from liability outside the constraints of the worker’s compensation scheme, while
subjecting vessels to tort liability, but only in relation to their own negligence. Interpreting this
provision in traditional stevedoring operations, the Supreme Court has held that vessel owners
may not claim indemnity or contribution from employers, even though this may mean that through
joint and several liability, the vessel owner may in fact be liable for the negligence of an employer.
See Edmonds v. Compagnie Generale Transatlantique, 443 U.S. 256, 268-69 (1979).
The case before us does not arise in the context of a traditional stevedoring arrangement
because Kostmayer, the employer seeking to invalidate a liability allocation agreement, also faces
liability under section 905(b) as a vessel. Congress addressed the potential tort liability of the
“dual capacity” employers in the second and third sentences of section 905(b). In essence,
Congress intended that “the same principles apply in determining liability of the vessel which
employs its own longshoremen or shipbuilders or repairmen as apply when an independent
contractor employs such persons.” S. REP. NO. 92-1125, at 12 (1972). Thus, dual capacity
employers remain immune from direct suits by employees injured during the course of standard
9
stevedoring operations, shipbuilding, repair work and breaking services. In all other instances,
however, injured employees may sue their dual capacity employers for vessel negligence and
receive damages outside the scope of the statutory compensation scheme. See Jones & Laughlin
Steel Corp. v. Pfeifer, 462 U.S. 523, 532 (1983); Levene, 943 F.2d at 531 (when an employer
acts in “dual capacity” as vessel owner “the entity retains its immunity for acts taken in its
capacity as employer, but may still be sued ‘qua vessel’ for acts of vessel negligence.”).
Kostmayer contends that, even as a vessel owner subject to direct liability in tort, it should benefit
from the prohibition of liability allocation provisions that Congress adopted to protect employers
otherwise immune from tort liability by section 905(a). Like the district court we reject
Kostmayer’s position, but for reasons slightly different from those relied upon by the district
court.
In granting summary judgment in favor of ADM, the district court focused (1) on the
presence of a covenant not to sue in the Agreement, and (2) the exclusion of covenants not to sue
from section 905(b)’s prohibition of certain liability allocation agreements. To the extent that the
district court reasoned that a “covenant not to sue” is not subject to section 905(b) simply
because it is a “covenant not to sue,” we agree with Kostmayer that the district court is incorrect.
Congress did not limit its prohibition of liability allocation agreements to provisions of any
particular nomenclature, the prohibition applies to “any agreement or warranty” that disrupts the
statutory allocation of liability among employers, vessels and vessel owners. Prohibited
agreements may be drafted as covenants not to sue or as indemnity agreements. The crucial
inquiry is not the classification of the contract provision at issue but the effect of that provision on
an employer’s liability for the personal injuries of its employees. A provision offends section
905(b)’s prohibition if it imposes any liability on an employer that is otherwise immune from suit
under section 905(a).
The Liability Allocation Provisions of the Agreement in this case are valid to the extent
that they bar a contribution claim by Kostmayer against ADM because in this context the
10
provisions do not impose liability on Kostmayer as an employer otherwise immune from suit
under section 905(a). Indeed, the only basis for Kostmayer’s contribution claim against ADM is
Kostmayer’s prospective liability as a vessel.7 Should Kostmayer be determined to have acted
solely as an employer, it will be immune from suit under sections 905(a) and (b). In that event,
the question of Kostmayer obtaining contribution from ADM will be moot.
Kostmayer maintains that our decision could result in Kostmayer, the employer of the
injured longshoreman, having to bear responsibility for the negligence of ADM, a result that
contradicts the intent of Congress. We agree that if both Kostmayer and ADM are found to have
been negligent as vessels, our decision today will prevent Kostmayer, as owner of a negligent
vessel, from seeking contribution from ADM based on the Liability Allocation Provisions of the
Agreement. Moreover, our decision will allow ADM to seek indemnification from Kostmayer, as
a liable vessel owner, for damages that it is required to pay Lowry. This result comports with
Congress’ intent to prevent vessels from pressuring employers immune from tort liability under
section 905(a) to accept such liability indirectly through contract. Nothing in the legislative
history of section 905(b) suggests that the prohibition on contractual indemnity between
employers and vessels should be extended to protect dual capacity employers facing direct liability
in their vessel capacity. In fact, as vessel owners, neither party needs Congress’ protection
because both share equal bargaining power. In sum, we feel comfortable refusing to extend the
scope of Congress’ prohibition of liability allocation provisions to include those provisions
negotiated between vessel owners, at least so far as the effect of the provision is solely to prevent
one vessel owner from seeking contribution from another.
Our holding is limited by the procedural posture of the case before us. Like the district
court, we do not determine whether ADM is entitled to enforce the Liability Allocation Provisions
7
We note that no determination has been made regarding Kostmayer’s liability as a vessel
owner. That determination will be made on remand to the state court.
11
against Kostmayer in all circumstances.8 Our holding relates only to the validity of the Liability
Allocation Provisions against Kostmayer as a vessel owner. As previously explained, Kostmayer
will only require contribution from ADM in the event that Kostmayer is found liable to Lowry for
damages. Since Kostmayer can only be liable to Lowry for damages as a vessel owner, we are
able to conclude, even prior to litigation on the merits, that the Liability Allocation Provisions will
be valid to the extent that they bar Kostmayer’s contribution claim against ADM. Upon remand
to state court, however, Kostmayer may be found immune from direct suit by Lowry, either as an
employer or otherwise under section 905(b). In this event, section 905(b)’s prohibition would
seem to invalidate the Liability Allocation Provisions and prevent ADM from seeking indemnity
against Kostmayer. Otherwise, the provisions would enable ADM as a vessel to impose tort
liability on Kostmayer as an employer immunized from direct suit by section 905(a). We do not
attempt to address this or other factual variations today; we point out this limit on our holding to
emphasize that the validity of the Liability Allocation Provisions depends on Kostmayer’s status
as employer or vessel owner. ADM is entitled to enforce its Liability Allocation Provisions
against Kostmayer only to the extent that Kostmayer is found liable to Lowry as a vessel.
CONCLUSION
If Kostmayer incurs liability in this case under the LHWCA, it will be as a vessel owner,
not as an employer. As a vessel owner, Kostmayer is not entitled to the benefits of section
905(b)’s prohibition on certain liability allocation agreements. Thus, we are able to affirm the
district court’s grant of summary judgment in favor of ADM because Kostmayer’s claim for
contribution is barred by the Liability Allocation Provisions of the Agreement. Since Kostmayer
cannot maintain its claim for contribution, the district court properly lifted the stay on Lowry’s
state court proceedings based on the agreed stipulations between Lowry and ADM.
8
In ruling that section 905(b) did not prohibit a covenant not to sue contained in the
Agreement, the district court granted only ADM’s motion to dismiss Kostmayer’s claim for
contribution. The district court expressly did not rule on ADM’s claim for indemnity against
Kostmayer.
12