Fifth Circuit Refuses To Recognize Exception To Economic Damage Rule
October, 2006
The Fifth Circuit recently reiterated its longstanding rule: “It is unmistakable that the law of this circuit does not allow recovery of purely economic claims absent physical injury to a propriety interest in a maritime negligence suit.” In re Taira Lynn Marine Ltd. No. 5, LLC, 444 F.3d 371, 377, 2004 AMC 1886, 1888 (5th Cir. 2006), citing Robins Dry Dock & Repair v. Flint, 275 U.S. 303, 309 (1927).
Facts
Taira Lynn involves the allision of the barge MR. BARRY and T/B/ KIRBY with the Louisa swing bridge in Louisiana. The cargo aboard the barge, a gaseous combination of propylene and propane, was released into the atmosphere as a result of the allision. Because of the chemical discharge, the Louisiana State Police ordered a mandatory evacuation of all homes and businesses within a certain radius of the release. Numerous business owners brought claims against the defendants for losses arising out of the accident and the subsequent evacuation.
The United States District Court for the Western District of Louisiana recognized that under existing Supreme Court and Fifth Circuit precedent, claims for economic loss unaccompanied by physical damage to proprietary interest were not recoverable in maritime tort. Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303, 1928 AMC 61 (1927); State of La. ex rel Guste v. M/V TESTBANK, ETC., 752 F.2d 1019, 1985 AMC 1521 (5th Cir. 1985) (en banc). However, in Union Oil Co. v. Oppen, 501 F.2d 558, 559 1975 AMC 416 (9th Cir. 1974), the Ninth Circuit upheld that rule but carved out a specific exception for commercial fishermen harmed economically by an oil spill, concluding that the fishermen were foreseeable plaintiffs.
Based primarily on the Ninth Circuit’s exception for commercial fishermen, the district court rejected TESTBANK’s bright-line rule. In the opinion of the district court, the injuries suffered by the residents and businesses in the geographic area of the allision were just as foreseeable as the injuries suffered by the commercial fishermen in Union Oil because damage to the swing bridge “would disrupt the only means of ingress and egress to Cypremore Point, effectively cutting off all means of transportation to and from the island.”
Analysis
The Fifth Circuit reversed the district court, declining to recognize a “geographic exception” to the TESTBANK rule. The court also rejected the district court’s position that the viability of economic damage claims should be determined on a case-by-case basis with consideration given to the number of claimants.
In considering whether the claimants had sustained physical injury sufficient to survive the TESTBANK rule, the Fifth Circuit rejected the proposition that the presence of gasoline on property owned by certain claimants was sufficient to constitute property damage because
the claimants had not shown that the gas had physically damaged their property or caused personal injury. The Fifth Circuit also rejected the claims of plaintiffs whose frozen seafood spoiled because law enforcement authorities shut off electricity during the evacuation and plaintiffs who lost materials as a result of interruption in manufacturing runs during the power shutdown. The court reasoned that the allision “did not physically cause the disruption in electrical power nor did it physically impact [the manufacturer’s] facilities.” Any damage suffered by the plaintiffs was caused by loss of electricity, “not because of contact with the barge, the bridge or the gaseous cargo.”
The Fifth Circuit also reversed denial of summary judgment on claims asserted under The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), 42 U.S.C. §§ 9601 et seq., and the Oil Pollution Act of 1990 (“OPA”), 33 U.S.C. § 2702. The CERCLA claims were precluded because none of the claimants alleged that they incurred costs in acting to contain the gaseous cargo. The OPA claims failed because there was no direct injury to claimant’s property as a result of a pollution incident.
Learning Point:
The Robins Dry Dock rule is alive and well in the Fifth Circuit and the majority of admiralty courts that have resisted efforts to “chip away” at its rule against the recovery of economic damage without physical injury. Few exceptions to that rule have been recognized. Where the rule threatens recovery for substantial economic loss, an admiralty practitioner should be consulted to attempt to carefully frame the facts of the case into a recognized exception.
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