United States District Court, Southern District of Illinois
January 8, 2002
ORGULF TRANSPORT CO., PLAINTIFF,
HILL'S MARINE ENTERPRISES, INC., DEFENDANT, THIRD-PARTY PLAINTIFF, V. CONSOLIDATED GRAIN AND BARGE COMPANY AND OHIO POWER COMPANY, THIRD-PARTY DEFENDANTS.
The opinion of the court was delivered by: J. Phil Gilbert, U.S. District Judge
Before the Court is a motion to dismiss (Doc. No. 16) made pursuant to
Federal Rule of Civil Procedure 12(b)(6) by third-party defendant Ohio
STANDARD OF REVIEW
When reviewing a Rule 12(b)(6) motion to dismiss, the Court accepts all
allegations as true and draws all reasonable inferences in favor of the
plaintiff. Holman v. Indiana, 211 F.3d 399, 402 (7th Cir.), cert. denied,
121 S.Ct. 191 (2000). The Court should not grant a motion to dismiss
unless it appears beyond doubt that the plaintiff cannot prove his claim
under any set of facts consistent with the complaint. Id. at 405. "The
reason why judges accept a complaint's factual allegations when ruling on
motions to dismiss under Rule 12(b)(6) is that a motion to dismiss tests
the legal sufficiency of a pleading. Its factual sufficiency will be
tested later — by a motion for summary judgment under
Rule 56, and if necessary by trial." Szabo v. Bridgeport Machines, Inc.,
249 F.3d 672, 675 (7th Cir. 2001).
When evidence outside the pleadings is attached to a motion labeled as
a motion to dismiss, a court may construe the motion as a motion for
summary judgment. See Wilkow v. Forbes, Inc., 241 F.3d 552, 555 (7th
Cir. 2001); Berthold Types Ltd. v. Adobe Systems Inc., 242 F.3d 772, 775
(7th Cir. 2001). However, a motion styled as one to dismiss is not
automatically rendered a motion for summary judgment at the instant of
its filing just because the movant attaches extra documents. See
Berthold, 242 F.3d at 775. "It is, rather, that once the district court
actually considers additional documents, the motion must be treated as
one for summary judgment." Id.
In this case, an affidavit is attached to Ohio Power's motion to
dismiss. The Court will not, however, construe the motion as a motion for
summary judgment. Rather, the Court will simply disregard the attached
On June 13, 2001, Orgulf Transport Co. ("Orgulf") filed the underlying
complaint invoking the admiralty or, alternatively, the diversity
jurisdiction of Court. Orgulf's Complaint ¶¶ 1-3 (Doc. No. 1). The
complaint contains two counts against Hill's Marine Enterprises, Inc.
(Hill's), one for negligence (Id. at ¶¶ 18-20) and one for breach of
contract (Id. at ¶¶ 21-24).
The complaint alleges that Orgulf was the owner of three barges-barge
numbers T13645B, SCF9102 and OR-7028 ("the barges"). Id. at ¶ 6. In
March and April 2000, Orgulf delivered the barges to Trico Steel
Company, LLC ("Trico") at its facility in Alabama. Id. at ¶ 7;
Hill's Answer ¶ 7. The barges were allegedly loaded with HBI
briquettes and pig iron. Id. Orgulf alleges that pursuant to a contract
with Orgulf, Trico was responsible for unloading and cleaning the
barges. Id. at ¶ 8. Orgulf alleges that Trico contracted with Hill's
to unload and clean the barges. Id. at ¶¶ 9-10.
Orgulf alleges that Hill's unloaded the cargo from the barges but
improperly and negligently cleaned the barges, leaving pig iron and HBI
briquette debris on the barges. Id. at ¶¶ 11-16. Orgulf further
alleges that the barges were loaded with coal and transported by Orgulf
to a Gulf Power Company Power Plant in Pensacola, Florida. Id. at ¶
15. Orgulf alleges that Gulf Power refused the shipment because the coal
had been contaminated by the HBI briquette and pig iron debris. Id. at
¶ 16. Orgulf claims that it sustained more than $75,000 in damages as
a result of Hill's allegedly negligent conduct.
On July 25, 2001, Hill's filed a third-party complaint against Ohio
Power Company ("Ohio Power"). Hill's Third-Party Complaint (Doc. No. 4).
Hill's claims that it properly swept and cleaned the barges. Id. at
¶ 6. Hill's further alleges that after it cleaned the barges, the
barges were taken to a loading facility in Illinois and loaded with
coal. Id. at ¶ 7. Hill's further alleges that Ohio Power Company was
responsible for loading one or more of the barges. Finally Hill's alleges
Assuming that the barges were not cleaned properly by
Hill's, which Hill's stringently denies, then Third
Party Defendants negligently inspected said barges and
should have rejected said barges for loading until the
barges could be properly cleaned. . . . The negligence
of the Third Party Defendants was the sole proximate
or contributing legal cause of any damages sustained
by the Plaintiff.
Id. at ¶ 11. On September 24, 2001, Ohio Power filed a motion to
dismiss the third-party complaint. (Doc. No. 16). Both
Hill's and Orgulf have responded to the motion. (Doc. Nos. 21 and 22).
Ohio Power has replied to those responses. (Doc. No. 23).
For the reasons discussed below, the Court will deny the motion to
The claims in this case fall within the admiralty jurisdiction of this
Court. The Constitution extends to Article III courts the power to hear
"all Cases of admiralty and maritime Jurisdiction." U.S. Const. art.
III, § 2. That power was codified at 28 U.S.C. § 1333(1), which
provides for "original jurisdiction exclusive of the courts of the
States, of . . . [a]ny civil case of admiralty or maritime
jurisdiction. . . ." 28 U.S.C. § 1333; see also Weaver
v. Hollywood Casino-Aurora, Inc., 255 F.3d 379, 382 (7th
If the plaintiff properly invokes admiralty jurisdiction "neither
complete diversity of citizenship nor a minimum jurisdictional amount in
controversy is required, and the fact that diversity jurisdiction also
can be alleged by the plaintiff as a basis of subject matter jurisdiction
is of no moment." Wright & Miller 14A Fed. Prac. & Proc. Juris.3d §
3676 (2001). Federal Rule of Civil Procedure 9(h) sets forth the
procedure for invoking a federal court's admiralty jurisdiction. It
provides as follows:
A pleading or count setting forth a claim for relief
within the admiralty and maritime jurisdiction that is
also within the jurisdiction of the district court on
some other ground may contain a statement identifying
the claim as an admiralty or maritime claim for the
purposes of Rules 14(c), 38(e), 82, and the
Supplemental Rules for Certain Admiralty and Maritime
Claims. If the claim is cognizable only in admiralty,
it is an admiralty or maritime claim for those
purposes whether so identified or not. The amendment
of a pleading to add or withdraw an identifying
statement is governed by the principles of Rule 15. A
case that includes an admiralty or maritime claim
within this subdivision is an admiralty case within
28 U.S.C. § 1292(a)(3).
Fed.R.Civ.P. 9(h). Both the plaintiff and the defendant/third-party
plaintiff have invoked admiralty jurisdiction, expressly citing Rule 9(h).
The plaintiff has invoked this Court's diversity jurisdiction only
as an alternative source of jurisdiction.
The mere invocation of the Court's admiralty jurisdiction and reference
to Rule 9(h) does not necessarily make this an admiralty case. There must
be a proper basis for this Court to assert admiralty jurisdiction over
the claims presented.
In this case, in the underlying complaint, Orgulf has made tort and
contract claims against Hill's. Hill's has made a negligence claim
against Ohio Power, seeking "contribution and/or indemnity."
1. Admiralty Tort Jurisdiction
"A party seeking to invoke federal admiralty jurisdiction pursuant to
28 U.S.C. § 1333(1) over a tort claim must satisfy conditions of
location and of connection with maritime activity." Jerome B. Grubart,
Inc. v. Great Lakes Dredge & Dock Co., 513 U.S. 527, 531, 115 S.Ct. 1043
(1995). The Seventh Circuit has recently discussed the two-prong test for
admiralty tort jurisdiction and stated as follows:
The locality test reflects the traditional requirement
that a tort occur on navigable waters. The requirement
of a connection with maritime activity, also known as
the nexus test, raises two issues. The court must
first determine whether the incident involved has a
potentially disruptive effect on maritime
commerce, and second, whether the general character of
the activity giving rise to the incident shows a
substantial relationship to traditional maritime
Weaver, 255 F.3d at 382 (internal citations and quotations omitted).
In this case, Orgulf alleges that Hill's negligently unloaded cargo
from three barges causing damages to Orgulf. Hill's alleges that Ohio
Power negligently loaded the same barges, thereby contributing to
Orgulf's damages. These claims meet both the "locality" and the "nexus"
As for the locality prong, no party disputes that the ships were moored
on navigable waterways. Claims involving the loading and unloading of
ships moored on navigable waterways fall within admiralty tort
jurisdiction. See Thomas J. Schoenbaum, Admiralty and Maritime Law §
3-4, at 73 (1987); see also Ashland Oil, Inc. v. Third National Bank of
Ashland, 557 F. Supp. 862 (F. Supp. 862) (asserting admiralty
jurisdiction in case involving personal injuries and property damage
caused by explosion during the unloading of gasoline from a river
barge). Assertion of jurisdiction in this case is also consistent with
the scope of admiralty jurisdiction as defined by the Extension of
Admiralty Jurisdiction Act ("the Act"), which provides as follows:
The admiralty and maritime jurisdiction of the United
States shall extend to and include all cases of damage
or injury, to person or property, caused by a vessel
on navigable water, notwithstanding that such damage
or injury be done or consummated on land.
46 U.S.C. § 470. It is not clear that the Act applies to this case
because this case does not involve damages "caused by a vessel." The
Act, however, is an indication of Congress' intent that cases arising out
of the loading and unloading of ships be included within the Federal
Courts' admiralty jurisdiction. Regardless of whether the Act applies to
the situation presented by this case, this case falls within the
traditional scope of admiralty tort jurisdiction because the allegedly
negligent acts or omissions occurred on navigable water. The Act expanded
the scope of the admiralty jurisdiction; it did not reduce its
This case also passes the so-called "nexus test." First, the loading
and unloading of commercial barges with cargo is directly related to
maritime commerce. Second, the loading and unloading of commercial barges
with cargo is substantially related to traditional maritime activity.
Therefore, in this case, the negligence claims fall within the admiralty
tort jurisdiction of this court.
2. Admiralty Contract Jurisdiction
Admiralty contract jurisdiction "extends to all contracts that `have
reference to maritime service or maritime transactions.'" Continental
Casualty Co. v. Anderson Excavating & Wrecking Co., 189 F.3d 512, 517
(7th Cir. 1999) quoting North Pacific S.S. Co. v. Hall Bros. Marine Ry. &
Shipbuilding Co., 249 U.S. 119, 125, 39 S.Ct. 221 (1919). "Contracts for
weighing, inspecting, and measuring cargo preparatory to its delivery are
under the maritime jurisdiction, as are contracts for storage services
incidental to the maritime event." Moore's Federal Practice, §
703.04[c][v], at 703-26.
In this case, assuming that contracts existed between the parties for
either the unloading or loading of the barges, those contracts were in
reference to maritime services. It is appropriate for this Court to
assert admiralty jurisdiction over disputes arising from such contracts.
ANALYSIS OF OHIO POWER'S MOTION TO DISMISS
Ohio Power argues that Hill's third-party complaint should be dismissed
federal maritime law or, alternatively, under Illinois law. Ohio
Power argues that Hill's third-party complaint should be dismissed under
maritime law for several reasons, namely: (1) Hill's negligence claim
must be dismissed because Hill's fails to state any duty owed to it by
Ohio Power; (2) Hill's is too remote to be a third-party beneficiary of
any contract between Orgulf and Ohio Power; (3) Hill's negligence claim
must be dismissed because Hill's wrongfully seeks to recover purely
economic damages, and (4) Hill's complaint must be dismissed because
Hill's improperly prays for indemnification where Hill's is a wrongdoer.
Ohio Power also argues that Hill's third-party complaint should be
dismissed under Illinois law for several reasons. Illinois law, however,
is not applicable to this case. The original complaint invoked the
Court's admiralty jurisdiction; the third-party plaintiff's complaint
invoked the Court's admiralty jurisdiction, and the Court has
determined, based on the pleadings, that admiralty jurisdiction does
exist in this case. Because the admiralty jurisdiction is aimed at
providing the shipping industry with a uniform body of law, a federal
court must apply federal admiralty law to admiralty cases when possible.
See Continental Cas. Co. v. Anderson Excavating & Wrecking Co.,
189 F.3d 512, 519 (7th Cir. 1999). Federal courts should not borrow state
law unless there is no applicable federal admiralty law. Id. In this
case, the Court need not consider Ohio Power's arguments based on
Illinois law. Federal admiralty law is sufficient.
For reasons discussed below, Ohio Power's arguments based on federal
admiralty law have not persuaded this Court to dismiss Hill's third-party
1. The Tort Claim
Hill's, in its third-party complaint, claims that Ohio Power
negligently loaded the barges and thereby caused or contributed to
Orgulf's damages. Ohio Power contends that the negligence claim of the
third-party complaint should be dismissed, arguing that no duty has been
pled by Hill's.
The Court agrees that, even accepting Hill's allegations as true, Ohio
Power owed no duty directly to Hill's. However, Federal Rule of Civil
Procedure 14(c), which governs third-party practice in admiralty cases
provides, in part:
The third-party plaintiff may also demand judgment
against the third-party defendant in favor of the
plaintiff, in which event the third-party defendant
shall make any defenses to the claim of the plaintiff
as well as to that of the third-party plaintiff in the
manner provided by Rule 12 and the action shall
proceed as if the plaintiff had commenced it against
the third-party defendant as well as the third-party
Fed.R.Civ.P. 14(c). Thus, in admiralty cases, a third-party defendant may
be brought in not only under a theory that the third-party defendant is
liable to the third-party plaintiff (the original defendant), but also
"under a theory that the third-party defendant is directly liable to the
original plaintiff either jointly with the original defendant or instead
of the original defendant." 3 J. Moore, Federal Practice 14.34 (2d ed.
In this case, Hill's complaint against Ohio Power states as follows:
This is a case favorable to jurisdiction within the
(sic) Rule 9(h) of the Federal Rules of Civil
Procedure. Pursuant to Fed.R.Civ.P. 14(C) (sic), Third
Party Plaintiff is pursuing this Third Party Complaint
against the Third Party [Defendant Ohio Power]
requiring Third Party [Defendant Ohio Power] to answer
its Third Party Complaint and the attached Complaint
Hill's Third-Party Complaint ¶ 4 (Doc. No. 4). Hill's Complaint
further alleges that "Assuming that the barges were not cleaned properly
by Hill's, which Hill's stringently denies, then Third Party [Defendant
Ohio Power] negligently inspected said barges and should have rejected
said barges for loading until the barges could be properly cleaned."
Hill's Third-Party Complaint ¶ 11 (Doc. No. 4). Finally, Hill's
alleges that Ohio Power's negligence was the "sole proximate or
contributing legal cause of any damages sustained by [Orgulf]."
Thus, Hill's has clearly alleged the following: (1) that Ohio Power was
negligent in its failure to inspect or in conducting an improper
inspection prior to loading the barges, and (2) that such failure
proximately caused damages to Orgulf. Certainly, under the federal notice
pleading rule, that is sufficient to allege a duty owed by Ohio Power to
Orgulf and breach thereof.
Although Hill's has not pled that Ohio Power owed a duty directly to
Hill's, Hill's third-party complaint has effectively tendered Ohio Power
to Orgulf as an additional defendant pursuant to Rule 14(c). See Royal
Insurance Company of America, 194 F.3d 1009, 1018-19 (9th Cir. 1999);
Riverway Company v. Trumbull River Services, Inc., 674 F.2d 1146, 1154
(7th Cir. 1982).
2. The Contract Claim
Ohio Power contends that Hill's has failed to allege that Ohio Power
owed any contractual duty to Hill's. The Court agrees. Neither does
Hill's third-party complaint allege that Ohio Power owed contractual
duties to Orgulf. Moreover, while Orgulf's original complaint against
Hill's does assert a contract claim against Hill's, that complaint does
not allege that Ohio Power owed Orgulf any contractual duty. In short,
there is no allegation in any complaint before the Court that Ohio Power
owed any party any contractual duty.
The Court is puzzled by the thrust and parry between the parties over
the scope of Ohio Power's contractual duty and the scope of the implied
warranty of workmanlike performance, all taking place in the absence of
any contract claim against Ohio Power. First, in its motion to dismiss,
Ohio Power denied that any contract ever existed between Ohio Power and
Orgulf. Ohio Power even attached an affidavit to that effect to its
motion to dismiss.*fn1 Hill's responded to the affidavit, arguing "it is
immaterial as to whether there was a specific contract or not concerning
the loading, since there is an implied warranty of workmanlike
performance that Ohio Power, as stevedore, owes to all interested
parties. . . ." Hill's Response to Ohio Power's Motion to Dismiss, p. 3.
Actually, the entire argument is immaterial because no party has made a
contract claim against Ohio Power.*fn2
As for the stevedore's implied warranty of workmanlike performance, it
is true that the warranty "arises by operation
of law without regard to actual contract or privity of contract."
Waterman S.S. Corp. v. Dugan & McNamara, Inc., 364 U.S. 421,
81 S.Ct. 200 (1960). The stevedore has an implied contractual duty to
"`perform his task properly.'" United States v. C-Way Construction Co.,
909 F.2d 259, 263 (7th Cir. 1990) quoting Scindia Steam Navigation
Co. v. De Los Santos, 451 U.S. 156, 170, 101 S.Ct. 1614, 1623
(1981). It arises by operation of law without regard to actual contract or
privity of contract. Waterman S.S. Corp. v. Dugan & McNamara, Inc.,
364 U.S. 421, 81 S.Ct. 200 (1960).
However, Hill's invocation of the implied warranty in its response to
Ohio Power's motion to dismiss misses the mark. The implied warranty
might very well support a contract claim — even one made in the
absence of an actual contract. Such a claim might be labeled as a
contract claim or as a warranty claim. This Court is aware of the federal
liberal pleadings standards and does not require artful pleading. See
Fed.R.Civ.P. 8.*fn3 In this case, however, Hill's invoked the warranty
for the first time in its response to the motion to dismiss and did so in
support of a contract claim that was never even arguably made.*fn4
Despite the federal system's notice pleading rule, the Court cannot
pretend to see what does not exist.*fn5 Despite the stevedore's implied
warranty, the Court may not write a contract claim into the pleadings on
behalf of the parties. And, despite the liberality of Rule 14(c), the
Court cannot order Ohio Power to answer an allegation that has not been
made by either the original plaintiff or the third-party plaintiff (the
original defendant). Neither may the Court dismiss a claim that has not
3. The Nature of the Alleged Damages.
Ohio Power contends that the negligence claims against Ohio Power
should be dismissed because Orgulf has alleged only purely economic
damages. Orgulf contends first that it has alleged property damage, and
not purely economic damages, and secondly that even if it had alleged
purely economic damages, such damages are available in this case.
The Supreme Court set forth the rule against purely economic damages in
admiralty cases in Robins Dry Dock and Repair Co. v. Flint, 275 U.S. 303,
48 S.Ct. 134 (1927). Under Robins, "purely economic damages" are not
available in admiralty for negligence claims. In Robins, the charterer of
a vessel sued a
repair company that negligently damaged the vessel's propeller while it
was in dry dock, alleging that the resulting delay caused the charterer
to lose profits it otherwise would have derived from the use of its ship
had the ship been operable. The Supreme Court denied recovery for lost
profits, noting also that the charterer did not have a proprietary
interest in the vessel. Id. at 309.
The Fifth Circuit has stated, "The rule's purpose is to prevent
limitless liability for negligence and the filing of law suits of a
highly speculative nature." Akron Corp. v. M/T Cantigny, 706 F.2d 151,
152 (5th Cir. 1983). The rule against recovery of damages for "economic
loss" is generally seen as establishing a line between tangible physical
property damage — which is not barred by the rule — as opposed
to the intangible economic injuries of lost expectations or advantages
normally associated with contract theories. In some cases, particularly
those involving the business context, "there is not always a bright line
separating `economic losses' from `damages to property'; indeed, the two
categories tend to overlap." Dixie-Portland Flour Mills, Inc. v. Nation
Enterprises, Inc., 613 F. Supp. 985, 987 (N.D.Ill. 1985).
In this case, it would be imprudent for the Court to attempt to draw
the line between `economic losses' and `property damage' without further
development of the facts. It is clear that Orgulf seeks damages which
allegedly resulted from the contamination of its barges and the cargo
which was carried in them. At this point in the case, however, the nature
of the damages that Orgulf seeks is not clear. Moreover, whether Orgulf
actually had or has a proprietary interest in the cargo is another issue
of fact that must be clarified by discovery.
The Court cannot state at this time that the plaintiff has not
sustained damages recoverable under a tort theory. Whether the
plaintiff's damages consist of "damage to property" or "purely economic
loss" is simply not clear. Therefore, the Court will not dismiss the
claim for negligence against Ohio Power.
4. Right to Indemnification.
Ohio Power argues that Hill's complaint must be dismissed because
Hill's improperly prays for indemnification where Hill's is a wrongdoer.
As noted above, indemnification principles are inapposite to the
negligence claim against Ohio Power, because Hill's third-party complaint
effectively tenders Ohio Power to Orgulf as an additional defendant. See
Royal Insurance Company of America, 194 F.3d 1009, 1018-19 (9th Cir.
1999) and Riverway Company v. Trumbull River Services, Inc., 674 F.2d 1146,
1154 (7th Cir. 1982).
Any liability of the parties flowing from their negligent conduct will
be apportioned according to each party's collective fault. Id.; see also
United States v. Reliable Transfer Co., 421 U.S. 397, 95 S.Ct. 1708
(1975) (authorizing utilization of comparative fault principles in
admiralty cases) and Agrico Chemical Co. v. M/V Ben W. Martin, 664 F.2d 85,
93 (5th Cir. 1981) (apportioning liability according to comparative
fault); Purnell v. Norned Shipping B.V., 801 F.2d 152 (3d Cir. 1986)
(same); Gordon H. Mooney Ltd. v. Farrell Lines, Inc., 616 F.2d 619,
625-26 (2d Cir. 1980) (same).
Proceeding in this manner is consistent with the language and the
purpose of Rule 14(c). Rule 14(c) provides that when a third-party
plaintiff demands judgment on behalf of the original plaintiff "the action
shall proceed as if the plaintiff had commenced it against the
third-party defendant as well as the third-party plaintiff." Fed.R.Civ.P.
14(c); See Rodi Yachts,
Inc. v. National Marine, Inc., 984 F.2d 880, 882 (7th Cir. 1993).
"The significance of Rule 14(c) is that it permits the plaintiff to obtain
relief directly from the third-party defendant, cutting out the middleman,
the third-party plaintiff." Greenwell, 268 F.3d at 493.
Rule 14(c), is a rule "`designed to expedite and consolidate admiralty
actions by permitting a third-party plaintiff to demand judgment against
a third-party defendant in favor of the plaintiff.'" Greenwell,
268 F.3d 486, 493 (7th Cir. 2001) quoting Texaco Exploration & Production
Co. v. AmClyde Engineered Products Co., 243 F.3d 906, 910 (5th Cir.
2001). In this case, Hill's does not seek recovery for damages that it
sustained; it merely desires to avoid liability for any portion of a
judgment that may be entered against it and in favor of Orgulf.
Accordingly, the Court will treat the negligence claim against Ohio Power
as if Orgulf had stated the claim against Ohio Power when it commenced
the action. See Riverway Company v. Trumbull River Services, Inc.,
674 F.2d 1146, 1154 (7th Cir. 1982).
Therefore, in this case, Orgulf can recover its damages from Ohio Power
if the latter was negligent and its negligence was a cause of Orgulf's
damages, and from Hill's on the original complaint if Hill's was
negligent and its negligence a cause of Orgulf's damages. The Court will
not dismiss the negligence claim against Ohio Power found in the
third-party complaint. Rather, Ohio Power must answer that claim as if it
had been made by Orgulf.
For the reasons discussed above, the motion to dismiss (Doc. No. 16) is
The third-party defendant, Ohio Power, is ORDERED to answer the
IT IS SO ORDERED.