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Panama Canal Comm. v. Atlantic Shipping Agencies

United States District Court, E.D. Louisiana
Sep 20, 2002
CIVIL ACTION NO. 00-1716, SECTION "L" (4) (E.D. La. Sep. 20, 2002)

Opinion

CIVIL ACTION NO. 00-1716, SECTION "L" (4)

September 20, 2002


ORDER REASONS


Plaintiff, the Panama Canal Commission (PCC), moves this court to dismiss the defendant's counterclaim for failure to state a cause of action, or alternatively for summary judgment on the counterclaim. For the reasons set forth below, the Court finds that the defendants have failed to state a cause of action for which relief may be granted. Therefore, the PCC's motion is GRANTED, and the counterclaim is DISMISSED WITH PREJUDICE.

The Panama Canal Act of 1979, 22 U.S.C. § 3601-3872, created the Panama Canal Commission and charged it with responsibility for the "maintenance and operation of the Panama Canal and the facilities and appurtenances related thereto." Id. § 3611. This includes the right to initiate litigation on the government's behalf. See infra footnote 2.

BACKGROUND

On December 2, 1999, the defendant's vessel, the M/V AVON was engaged in the northbound transit of the Panama Canal. At approximately 11:38 p.m., the vessel struck miter gates Nos. 68 and 69 of the west side of the Pedro Miguel locks. The allision allegedly caused extensive damage to the locks, resulting in the temporary shut down of traffic in the west lane of the locks. The vessel was also damaged in the allision. On December 17, 1999, the vessel owners advised the PCC that the AVON was scheduled to return to Balboa, Panama for repairs. Although the PCC initially indicated that the vessel would be cleared for movement the following day, it delayed the AVON's departure several days, and on December 21, the PCC informed the vessel owners that the AVON would not be allowed to move for repairs unless the vessel's Protection and Indemnity (P I) Club posted a letter of undertaking in the amount of $1,100,000 to cover the costs of repairing the damaged gates. Two days later, the PCC increased its demand to $1,500,000, refused a standard letter of undertaking, and further delayed the vessel's departure from the canal. Finally, on January 3, 2000, upon verbal assurances that a letter of undertaking would be forthcoming, the PCC permitted the vessel to complete its transit and exit the Panama Canal.

On December 29, 1999, the vessel owners, pursuant to 22 U.S.C. § 3771 (a), brought a formal complaint against the PCC for damages arising from what they termed to be the unreasonable detention and delay of the AVON. On June 6, 2000, the Department of Justice sent to the vessel owners an official notice of the PCC's rejection of these damages. On June 12, 2000, the PCC, pursuant to its statutory authority over the canal, filed the main demand in this action claiming that the vessel, her crew, officers, and employees were at fault for the damages to the canal. In its answer, defendants counter-claimed against the PCC for the "arbitrary, capricious, and illegal detention of the M/V AVON." Defendant alleged that the detention caused it lost charter hire and demurrage.

Section 3771 requires that an injured party first file a formal complaint with the PCC for damages before proceeding with litigation. See 22 U.S.C. § 3771 1(a).

35 C.F.R. § 117.6 imposes liability on a vessel and its owners and operators for any damages that the vessel's negligence causes injury or damage to the canal. Id. The Commission is responsible for maintaining such litigation. Id.

The PCC challenges this counterclaim and moves this Court to dismiss it arguing that the PCC being a governmental subdivision is immune from suit to recover detention damages.

LAW ANALYSIS

Standard for Motions to Dismiss

Motions to dismiss for failure to state a claim are viewed with disfavor and rarely granted." Southern Christian Leadership Conference v. Supreme Court of State of Louisiana, 252 F.3d 781, 786 (5th Cir. 2001) (internal quotations omitted). When considering a motion to dismiss, the district court should construe the complaint liberally and in favor of the plaintiff, assuming the truth of all facts plead in the complaint. See id. Dismissal of a complaint under Rule 12(b)(6) is not proper "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Brown v. NationsBank, 188 F.3d 579, 586 (5th Cir. 1999) (internal citations omitted). "Conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss." Fernandez-Montes v. Allied Pilots Ass'n, 987 F.2d 278, 284 (5th Cir. 1993). "The question therefore is whether, in the light most favorable to the plaintiff and with every doubt resolved in his behalf, the complaint states any valid claim for relief." 5 CHARLES ALAN WRIGHT ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1357, at 601 (1969).

Sovereign Immunity of the United States Government

From 1979 to the end of 1999, the Panama Canal was operated by the Panama Canal Commission, a subdivision of the United States government. As a general rule, the federal government, including its subdivisions, is "immune from suit unless express permission to sue it has been granted by Congress. Therefore, in an action instituted by the government a counter-claim, like any other claim against the United States, can be interposed only when the government has waived its immunity from suit on that claim." CHARLES ALLEN WRIGHT ARTHUR R. MILLER FEDERAL PRACTICE PROCEDURE § 1427, at 194 (2d ed. 1990). The Supreme Court has noted that waivers of government immunity must be express and will be construed strictly in favor of the government. Library of Congress v. Shaw, 478 U.S. 310, 318, 106 S.Ct. 2957, 2963 (1986). In order to determine whether the government has waived its immunity for detention damages, the statutes relevant to the operation of the Panama Canal must be examined.

The Panama Canal Act of 1979 permits a claimant to seek damages from the Commission when he, his crew, or his vessel have suffered injury resulting from the negligence of an officer or employee of the PCC during passage through the locks. See 22 U.S.C. § 3771. The cases arising under this act often involve situations in which the vessel, passing through the canal while under the control of a Commission Pilot, allides with the canal locks as a result of the pilot's negligence. See generally Sun Line Greece Special Shipping Co. v. Panama Canal Commission (Sun Line), 583 P. Supp. 1180 (E.D. La. 1984); Natalie Tankships Corp. v. Panama Canal Commission, 506 F. Supp. 281 (E.D. La. 1980).

22 U.S.C. § 3773 sets out the extent of the damages recoverable as a result of the commission's fault or negligence. It provides:

In determining the amount of the award of damages for injuries to a vessel for which the Commission is determined to be liable, there may be included — (1) the actual or estimated cost of repairs;
(2) charter hire actually lost by the owners, or charter hire actually paid, depending upon the terms of the charter party, for the time the vessel is undergoing repairs;
(3) maintenance of the vessel and wages of the crew, if they are found to be actual additional expenses or losses incurred outside of the charter hire; and
(4) other expenses which are definitely and accurately shown to have been incurred necessarily and by reason of the accident or injuries. . . . If the charter vale cannot be determined, the value of the vessel to its owners in the business in which it was engaged at the time of the injuries shall be used as a basis for estimating the damages for the vessel's detention
Id.

Further, 22 U.S.C. § 3774 seeks to limit the PCC's liability for detention damages, providing:
The Commission is not responsible, and may not consider any claim, for demurrage or delays caused by —

(1) landslides or other natural causes;

(2) necessary construction or maintenance work on Canal locks, terminals, or equipment;

(3) obstruction arising from accidents;

(4) time necessary for admeasurement;

(5) congestion of traffic;

(6)investigation of a marine accident that is conducted within 24 hours after the accident occurs, except that any liability of the Commission beyond that 24-hour period shall be imited to the extent to which the accident was caused, or contributed to, by the negligence of an employee of the Commission acting within the scope of the employee's official duties; or
(7) except as specially set forth in this subpart, any other cause.
Id.

Section 3773 is a verbatim copy of the former Section 293 of the Canal Zone Code, which was superceded by the 1979 Panama Canal Act. In considering the scope of Section 293, the Fifth Circuit in Gulf Oil Corp. v. Panama Canal Co. (Gulfspray III), 481 F.2d 561 (5th Cir. 1973), concluded that, according to the language of Section 293, not only were repair costs recoverable but so were damages for the loss of use of the vessel when the canal authorities were responsible for the allision. Id. at 570.

The same issue was also before the court in Natalie Tankships Corp. v. Panama Canal Commission, 506 F. Supp. 281 (E.D. La. 1980). Just as Gulfspray III, this case also involved an allision between the plaitniff's vessel and the canal locks, with the commission's pilots at fault. Id. at 282. The court turned to the language of Section 293 and concluded that the general maritime law on collisions and damages was applicable against the government. As such, the court noted that "there can be no doubt that in ancient precedent of the Fifth Circuit, `it is well settled that the loss of profits or of the use of a vessel, pending repairs or other detentions arising from a collision is a proper element of damages.'" Id. at 285 (quoting EL MONTE, 252 F. 59, 64 (5th Cir. 1918).

In addition to the above cases, this Court also notes that another case found consequential damages were recoverable when the canal authorities unreasonably detained the vessel for the purposes of conducting an investigation of the collision. See Sun Line Greece Special Shipping Co. v. Panama Canal Commission (Sun Line), 583 F. Supp. 1180, 1183-84 (E.D. La. 1984). While there are some similarities to the present case (both involve the Commission's wrongful detention of a vessel), it is again important to note that the PCC in Sun Line was at fault for the allision that resulted in the detention. This distinction is critical because the damages defendant seeks to recover in its counterclaim do not result from the PCC's fault in the collision; rather, the damages result from the PCC's actions after the collision. Therefore, this Court must consider the extent to which 22 U.S.C. § 3773 applies when the PCC is not at fault in causing the allision. In doing so, this Court finds that 22 U.S.C. § 3774 provides the key.

A careful reading of the section shows that the cases cited above in support of detention damages when the PCC is at fault in the allision are not affected by the statute's limiting language regarding detention damages. The statute sets out six specific events precluding recovery of detention or demurrage damages. In the last paragraph, the statute includes a broader, all-encompassing provision, providing that these damages are not recoverable "for any other cause" except as specially set forth in the subpart. 22 U.S.C. § 3774 (7). The only exception the subpart provides is found in the sixth paragraph, which allows detention damages but limits them to those occurring after the 24-hour period allocated for investigation of the accident; the statute further limits damages "to the extent to which the accident was caused, or contributed to, by the negligence of an employee of the Commission acting within the scope of the employee's official duties." 22 U.S.C. § 3774 (6).

When Sections 3773 and 3774 are read together, detention damages are allowed only in connection with an accident caused or contributed to by the negligence of an employee of the PCC and only for the period exceeding 24 hours after the accident. In all other instances, Congress has provided that the federal government is not liable for detention or demurrage damages outside of that narrow window. This Court has previously noted that the government is immune from suit unless it expressly waives that privilege. The Supreme Court's holding in Shaw will not permit this Court to construe Section 3773's allowance of detention damages broadly in face of the limitations imposed by Section 3774. This case falls outside of that window of opportunity, for defendant does not allege that the PCC was responsible for the damages to the AVON resulting from the allision. Therefore, Section 3774 applies and precludes recovery. Accordingly, the Court finds that defendant has failed to state a claim for which relief can be granted; the defendant's claim must be dismissed as a matter of law.

CONCLUSION

For the reasons stated above, the Court finds that the Panama Canal Commission, as a creation of the United States government, is immune from suit unless Congress expressly waives that right. In this case, Congress has not waived that right and has stated that the PCC shall not be liable for damages resulting from the wrongful detention of a vessel when the accident giving rise to those damages was due to the fault or negligence of the Commission or its employees. Thus, defendants have failed to assert a claim for damages. Accordingly, their counterclaim fails as a matter of law and is hereby DISMISSED WITH PREJUDICE.


Summaries of

Panama Canal Comm. v. Atlantic Shipping Agencies

United States District Court, E.D. Louisiana
Sep 20, 2002
CIVIL ACTION NO. 00-1716, SECTION "L" (4) (E.D. La. Sep. 20, 2002)
Case details for

Panama Canal Comm. v. Atlantic Shipping Agencies

Case Details

Full title:PANAMA CANAL COMMISSION v. ATLANTIC SHIPPING AGENCIES ET AL

Court:United States District Court, E.D. Louisiana

Date published: Sep 20, 2002

Citations

CIVIL ACTION NO. 00-1716, SECTION "L" (4) (E.D. La. Sep. 20, 2002)