State of Louisiana ex rel. Guste v. M/V Testbank

Brief Fact Summary. Two ships collided, causing toxic chemicals to be released into the environment and causing the United States Coast Guard (Coast Guard) to close a Mississippi River outlet. Numerous lawsuits were filed by those affected by the closing of the outlet. The district court granted a motion for summary judgment on all claims for economic loss unaccompanied by physical damage to property.

Synopsis of Rule of Law. The majority rule does not allow recovery for economic loss, unless physical damage to property occurs.

Facts. On the evening of July 22, 1980, the M/V Sea Daniel, an inbound bulk carrier, and the M/V Testbank, an outbound container ship, collided on the Mississippi River. Containers aboard the Testbank were damaged and lost overboard. During the wreck, hydrobromic acid and pentachlorophenol (PCP), were released into the environment. The Coast Guard closed the outlet until August 10, 1980 and all fishing, shrimping and related activities were temporarily suspended. Numerous lawsuits representing the affected parties were filed and consolidated before the same judge in the Eastern District of Louisiana. Defendants moved for summary judgment on all claims for economic loss unaccompanied by physical damage to property. The district court granted the summary judgment and on appeal a panel of this court affirmed. Judge Wisdom specially concurred urging reexamination en banc, with which the court agreed.

Issue. Is physical damage to a proprietary interest still a prerequisite to recovery for economic loss in cases of unintentional maritime tort?

Held. Yes. Decision of district court granting summary judgment to defendants on all claims for economic losses unaccompanied by physical damage is affirmed.
* The well settled present rule is demonstrated in Robins [Robins Dry Dock v. Flint, 275 U.S. 303 (1927)]. This case, stated broadly, denied a plaintiff recovery for economic loss if that loss resulted from physical damage to property in which he had no proprietary interest. The reason for this rule is strictly pragmatic, otherwise liability would be virtually open-ended.
* Plaintiff tries to confine Robins to losses suffered from the inability to perform contracts between a plaintiff and others. However, if a plaintiff connected to the damage by contract is denied recovery, it is indisputable that others more remotely situated cannot recover.
* Plaintiffs further urge that the present rule is arbitrary and unfair and should be replaced by a rule allowing the trier of fact to determine questions of remoteness. The court feels that doing away with the present bright line rule would create a situation where there is no determinable measure on the limit of foreseeability, forcing the trier of fact to make an arbitrary judgment.
* Although the present bright line rule may result in unjust decisions for some plaintiffs, this court feels that it is justified when compared to other options. The bright line rule allows for extensive losses, such as the losses in the present case to be spread over first party or loss insurance. If liability were to be spread by a new rule, the change would create a shift to more costly third party insurance to protect defendants.
* Plaintiff’s final contention is that the damages that occurred can be characterized as damages caused by a public nuisance. To do so, would create a nearly impossible task of determining who in the community suffered a pecuniary loss so great to justify distinguishing his losses from similar losses suffered by others. Based on these conclusions, the pragmatic approach of not allowing claims for economic loss unaccompanied by physical damage to property is affirmed.

Dissent. Circuit Judge Wisdom, with whom Rubin, Politz, Tate and Johnson, Circuit Judges, join:
* Robins is out of step with modern tort doctrine and works injustice on innocent victims. The dissenters would analyze the plaintiff’s claims under conventional tort principles of foreseeability and proximate cause. This would cause a case-by-case analysis, but would be worth the extra costs and time for an increase in justice
* In the Robins case, the court prevented plaintiffs who were neither proximately nor foreseeably injured by a tortious act from recovery. These facts are not applicable to the present case. I would confine Robins to its facts and apply the principles of negligence, foreseeability, and proximate causation to the present case and require that the claimant prove particular damages.
Circuit Judge Rubin, with whom Wisdom, Politz and Tate, Cricuit Judges, join:
* Robins should not be extended beyond its actual holding and is not applicable to the present case
Concurrence. The dispute resolution system of the courts is not equipped to manage disasters of the magnitude of this case. To allow unnumbered claimants under plaintiff’s suggestion may visit destruction on multiple enterprises.

Discussion. This case represents the clear American majority rule, but disagreement persists.