DMC Category Rating: Developed

Background
Plaintiff, a longshoreman, was injured aboard the M/V Clio Pacific when an unstable bundle of plywood fell from a stack and landed on him during discharging operations in New Orleans, Louisiana. The plywood bundles were shipped from Indonesia where Indonesian stevedores had improperly stacked the plywood bundles causing the instability.

Plaintiff sued, among others, the owner and timecharterer of the vessel for compensation under the Longshore and arbor Workers’ Compensation Act ("LWHCA"), enacted in 1927, which provides an injured longshoreman with redress for damages caused by a "vessel," a term whose definition includes timecharterers. The LWCHA has been interpreted to place the primary responsibility for the safety of longshoremen with the stevedore, but a "vessel" may be liable if, inter alia, on turning over the vessel to a stevedore, the vessel owner fails to warn of hidden defects of which the owner should have known. This is commonly referred to as the "turnover" duty. Plaintiff claimed that owner and charterer violated the turnover duty by failing to warn him about the unstable plywood bundles.

Owner and charterer moved for summary judgment on the theory that there was no hidden defect. In deciding the motions, the district court found that the improperly stacked plywood bundles were not a latent defect and granted owner’s motion for summary judgment. The district court denied the charterer’s motion on the basis that a clause in the time charterparty made the charterer liable for the negligent stowage of the cargo, regardless of the existence of a hidden defect. That clause stated that "Charterers are to perform all cargo handling at their risk and expense." Charterer appealed the decision to the Fifth Circuit Court of Appeals.

Judgment
Relying on the holdings of factually analogous cases from the Courts of Appeals of the Second and Ninth Circuits, the Fifth Circuit Court of Appeals held that the language of the contested charterparty clause served to allocate ultimate responsibility between the owner and charterer, that is, the owner could pursue an indemnity claim against charterer for any liability to the plaintiff assessed against it, but did not create a new duty flowing from the charterer to the injured longshoreman. The Fifth Circuit reasoned that there was no basis, and indeed there was no precedent, for holding the charterer liable to the plaintiff for the negligent stowage by the Indonesian stevedore it did not control. Accordingly, the Fifth Circuit reversed the district court’s decision denying the charterer’s motion and remanded the case to the district court with instructions to analyze charterer’s motion under the same standard it applied in granting owner’s motion, that is, whether the negligently stacked plywood constituted a latent defect thereby triggering charterer’s duty to warn the plaintiff of that defect.

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