DMC Rating Category: Confirmed

This case note is contributed by Healy & Baillie, LLP in New York, who are the International Contributors to the website for the United States

Facts
On or about September 15, 2000, Plaintiff shipyard, Stevens Technical Services, Inc. ("Stevens") entered into a contract with Defendant, Mormac Marine Enterprises, Inc. ("Mormac"), operator of the "Cape Archway", to provide services associated with the vessel’s drydocking, activation, sea trial and lay-up. The terms of the contract between Stevens and Mormac stated that Stevens was to provide "the services of tugs, pilots, and line-handlers when necessary to move the vessel." Stevens contracted Moran Towing Corporation ("Moran") to provide tug assistance and a docking pilot for the manoeuvre. On May 13, 2001 the vessel grounded on a sunken pier at Erie Basin, Brooklyn, while under the control of docking pilot Russell, causing damage to her propeller.

In the litigation which ensued, Pilot Russell moved for summary judgment dismissing the claims against him and holding Mormac liable to indemnify him. Mormac moved for summary judgment against Stevens, and Moran also moved for summary judgment, seeking dismissal of Stevens’ cross-claim against it on the basis of an exculpatory clause in their contract relating to pilot services.

Judgment
The Court addressed four main issues in granting Pilot Russell’s motions. First, it held that the exculpatory clause in Russell’s pilot ticket, which is standard in the maritime industry, effectively barred claims against him for simple negligence. The Court observed that "U.S. Courts have regularly upheld as valid, enforceable and consistent with public policy, both agreements in pilotage clauses and agreements in pilot tickets that exculpate pilots from personal liability for negligent performance of their services."

Second, the Court found that Russell’s pilot ticket and its exculpatory clause were effective against Mormac even though a third-party tug company (Moran) had arranged for Russell’s services. The Court found that an implied contract arose when Mormac directed Stevens to secure docking pilot services. Within this implied contract there was an acknowledgment that the pilot would tender a standard pilot ticket and that it would include an exculpatory clause that the vessel would honor. The Court found persuasive the decision in Dominion Terminal v. M/V Cape Daisy, 24 F.Supp.2d 532, 535, 1998 A.M.C. 2955 (E.D.Va. 1998), where it was held that the exculpatory clause in the pilot ticket, tendered to the master, was valid against the owner even though a third party tug company had secured the services of the docking pilot. The Court in Dominion Terminal found the implied contract was valid because it is common industry practice that the ship’s agent would call for tug services and that the towing company would subsequently call a docking pilot for assistance. In addition, there was an established course of dealing between the parties. In the present case, the undisputed evidence established that Mormac was well aware of the standard industry practice.

Third, the Court found that there was no evidence Russell had acted with gross negligence or wilful misconduct in performing his pilotage services. A pilot is employed for his particular knowledge of local conditions and it is a pilot’s duty to make reasoned judgments in berthing the vessel based on this expertise. In the present case, the Court found there was no evidence that Russell asserted his own judgment "without concern for the safety of others" and concluded that he had acted within the scope of his authority. The Master was free to reassume control of the vessel; however, he chose to continue to entrust the navigational control to the pilot. Based on all these factors, the Court concluded that Russell’s operation of the vessel did not rise to the level of gross negligence or wilful misconduct.

The Court also granted Russell’s second summary judgment motion, holding that Mormac was required to indemnify Russell - pursuant to Russell’s pilot ticket - against Stevens’ third-party claim. In addition to the exculpatory clause, Russell’s pilot ticket contained language requiring an owner/operator to indemnify the pilot against third-party claims for any negligent act or omission committed by him while acting as docking pilot of the vessel. The Court relied on the decision in Enterprise Ship Co. v. Norfolk S. Ry. Co., 185 F.Supp.2d 622, 626 (2001), which stated that courts have traditionally enforced indemnification clauses in cases where "a party clearly expresses its intent to indemnify another." The Court found no reason to treat this indemnification clause differently from the other exculpation clauses in the pilot ticket.

The court denied Mormac’s motion for partial summary judgment holding Stevens responsible for Russell’s performance of his duties in piloting the vessel and the damage to the vessel’s propeller. Mormac alleged that - in its contract with Stevens - Stevens expressly assumed responsibility for Russell’s proper and successful performance of his piloting duties. The Court concluded, however, that the contract was capable of more than one interpretation; therefore the standard for summary judgment was not met. Mormac also alleged that Stevens was liable for the damage to the ship’s propeller caused by Russell’s negligent piloting because in securing Russell’s services as docking pilot, Stevens breached the warranty of workmanlike performance implied in the contract. The Court again found that there existed genuine issues of material fact regarding this issue and denied Mormac’s summary judgment motion.

Finally, the Court granted Moran’s summary judgment motion to dismiss Stevens’ third-party complaint, which sought to hold Moran liable for damage to the "Cape Archway" caused by the negligence of docking pilot Russell or the tugs used in the docking maneuver. Stevens did not contest the proposition that Moran’s pilotage clause was effective in exculpating Moran from liability to Mormac for pilotage negligence. Stevens contended, however, that it was not bound by Moran’s pilotage clause for two reasons. First, Stevens claimed that it was merely acting as an agent, and not as a contracting party, in securing the pilotage services from Moran. Second, Stevens claimed that it was not bound by Moran’s pilotage clause because the wording of the clause specifically referred only to the vessel, its owner and its operator.

The Court disagreed with both of Stevens’ arguments. Stevens explicitly undertook to provide services of tugs and pilots in conjunction with services it provided to the "Cape Archway" in its contract with Mormac. To fulfil this obligation, Stevens contacted Moran to obtain services of tugs and a docking pilot. Moran invoiced Stevens for the tug services, and Moran’s invoice contained a standard pilotage clause, which stated that any pilot supplied by Moran would be a servant of the assisted vessel and its owners or operators, and that Moran would not be held liable for any actions of the pilot. Stevens had also signed numerous Moran invoices containing the identical terms many times prior to this incident.

These undisputed facts convinced the Court that Stevens was not merely an agent for the vessel but was a party to the contract with Moran, and could be bound by the terms of Moran’s pilotage clause. In addition, the Court found no language in Moran’s pilotage clause that limited the application of the exculpatory provisions solely to the owner or operator of the vessel. Accordingly, Moran’s summary judgment motion dismissing Stevens’ claim holding Moran liable for the acts of docking pilot Russell was granted.