Second Circuit Firmly Aligns (for now) with the Robins Dry Dock Rule on Non-Recoverability of Pure Economic Damages Absent Physical Damage Under Maritime Law

by Baker Donelson
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The United States Court of Appeals for the Second Circuit in American Petroleum & Transport, Inc. v. New York, 2013 WL 6332548 (2d Cir. Dec. 6, 2013) recently - albeit reluctantly - joined the fleet of other federal circuit courts that have applied the United States Supreme Court's decision in Robins Dry Dock as a per se bar against purely economic damages resulting from a maritime tort (i.e. economic damages in the absence of any physical property damage). Nonetheless, the court voiced its doubts regarding the validity of the majority rule derived from Robins Dry Dock: "Although we conclude that Robins Dry Dock has been overread to establish a rule barring damages for economic loss in the absence of an owner's property damage, we believe the rule has been so consistently applied in admiralty that it should continue to be applied unless and until altered by Congress or the Supreme Court."

This rule against recovery of purely economic damages is a hot button issue in many types of maritime casualties, including most notably in pollution cases (i.e. the DEEPWATER HORIZON litigation) and collisions. In American Petroleum, the issue arose in the context of economic loss claims by a tug owner whose tug and barge had been delayed for two and a half days (but not physically damaged in any way) when the Pelham Parkway drawbridge failed to open to vessel traffic despite a request.

By way of background, the Robins Dry Dock rule, as originally stated (and recently reaffirmed) by the Fifth Circuit - and followed by the First, Third, Ninth and Eleventh Circuits (i.e. essentially every other major maritime jurisdiction) - provides that "claims for economic loss unaccompanied by physical damage to a proprietary interest [are] not recoverable in maritime tort." State of La. ex. rel Guste v. M/V TESTBANK, 752 F.2d 1019 (5th Cir. 1985); In Re Bertucci Contracting Company, LLC, 712 F.3d 245 (5th Cir. 2013). Breaking ranks with the majority of the federal circuits, the Second Circuit (along with numerous district courts under its authority) has followed a somewhat erratic tack regarding Robins Dry Dock over the years, as discussed in detail by the American Petroleum court. See 2013 WL 6332548 at *19-24. Briefly stated, the Second Circuit ostensibly refused to apply any per se Robins Dry Dock rule in In Re Kinsman Transit Co., 388 F.2d 821 (2d Cir. 1968), but subsequent panels of the court (as well as numerous district court's within the Second Circuit) did in fact apply the per se bar against pure economic damage claims in maritime tort.

Notwithstanding its criticism of the analytical underpinnings of the rule, the American Petroleum court reluctantly recognized four main, pragmatic reasons for firmly entrenching the Robins Dry Dock rule once and for all in the Second Circuit, including the availability of first-party insurance for most pure economic losses:

Having surveyed the field and our own slightly wavering contribution to it, we now explicitly accept the broad rule attributed to Robins Dry Dock that economic losses are not recoverable for an unintentional maritime tort in the absence of physical injury, mindful that for some categories of claims, exceptions may well be appropriate. We see little point in endeavoring to determine whether the broad rule that has been attributed to Robins Dry Dock was implicit in that decision or has resulted from an unstated extension of the narrow rule there announced. Instead . . . we simply accept the broad rule, and do so for four main reasons. First, the rule has been accepted by a clear consensus of courts throughout the country, including many district courts within our Circuit. Second, Congress, possessing full authority to legislate on maritime matters, has neither altered the broad rule nor made any serious attempts to do so. Third, the rule has the virtue of certainty. Fourth, the context in which the broad rule primarily applies—financial losses incurred in the course of commercial shipping—is marked by the well recognized availability of first-party insurance to cover such losses and the frequent purchase of such insurance.

The American Petroleum court's ruling is an important decision that definitively harmonizes the law of the maritime circuits regarding the Robins Dry Dock rule against pure economic damages in maritime tort.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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