Mr. GERITY. It is my pleasure if I can answer them, sir. Mr. KENNEY. In the aviation field, as I suspect you are well aware, the Government has denounced the Warsaw Convention, leaving, as of May 15, the international air carriers without any limitation on liability. This bill, I presume, follows the same kind of reasoning. Can you advise the committee on what basis they could differentiate between the treatment of shipping and aviation in this respect. This is undoubtedly going to be asked of the committee. If we adopt your recommendation Mr. GERITY. I have anticipated it in the aforesaid memorandumincluding the Warsaw Convention. First of all, if I may say so, I fail to appreciate how you can equate or even correlate traffic of passengers by air and of those by sea. By air, first of all, the Warsaw Convention of 1929 and its limits of liability were adopted to help a fledging industry get started. Today, the airlines are in a very fine competitive and financial position. The American merchant marine is still staggering along on marginal profits. Second, I think that the proposal, as I read it in the newspapers, is unrealistic, and I think liability without fault may very well have drastic results. But how can the United States of America go to the world and say, "We insist upon liability for $75,000 per seat," when in 12 States of the United States of America they may only get a fraction of that sum by statutory law. In Massachusetts the limits are $50,000 and in some Western States, the limits are $25,000. Yet in travel, say, to England, you are burdening American aircraft with the expense of $75,000 cover per seat. Mr. KENNEY. Or unlimited. Mr. GERITY. And they are privately or commercially owned. Practically all other passenger aircraft are Government owned. If I travel to England and my aircraft goes down, my heirs get $75,000. If I am in, say, an American Airlines plane and it falls down in Colorado, my heirs can't get more than $25,000, even though a jury may give them $150,000. So I cannot reconcile our Government's position with respect to airlines and I do not think it can be correlated to merchant shipping. Now, you find here in this memorandum-may I just touch the topics for a moment-limitation of liability and wrongful action generally. You will find airline cases. You will find references to the Warsaw Convention. You will find reference to the Jones Act and the Death on the High Seas Act, and how damages are generally assessed in such cases. I would be glad to go on and on, but I think you will find it here. Mr. KENNEDY. What kind of difficulties with respect to jurisdiction are likely to result from a repeal of imitation of liabilities, both in cruise and in liner trades? For instance, let us say passengers and crew members on the United States are injured in a British port, which law would apply there? Mr. GERITY. Which law would apply? Mr. KENNEY. Would limitation of liability in the British law be applicable? Mr. GERITY. It depends where the suits are brought. If the suits are brought in the United Kingdom, in the High Court of Justice. and the claims exceeded the limitation fund which the statute provides under the English act, which is the 1957 Brussels convention, then the United States Lines would have the right to limit in the English court against those claims-to invoke the English 1957 act which this committee recommended in 1962. Now, if claimants came back to this country-and they will, with unlimited liability-there is available in Black Diamond v. Robert Stewart & Sons, Ltd., a plea to the United States Lines as follows: "My liability should be limited. I have unlimited liability in the United States." But they can plead the law of the place, and if an English barrister comes in and says, "That law is substantive; it is a matter of right and not a remedy in my country," our court may have to apply the English law, despite the provisions of this bill. And I might also add, sir, that Mr. Mann of the State Department was a very firm advocate of the 1957 convention as being enlightened, modernistic legislation. Mr. KENNEY. You just lost a supporter down there. [Laughter.] Thank you, Mr. Gerrity. Mr. GERITY. Thank you, sir. Senator PROUTY. Thank you, Mr. Gerrity. (Supplementary statement received from Mr. Gerrity for the record.) My name is John F. Gerity. I am a member of the Bar of the State of New York and of the law firm of Kirlin, Campbell & Keating, having offices in New York City and Washington, D.C. On April 29, 1966, I testified before this committee on S. 3251, on behalf of the Committee of American Steamship Lines, American Merchant Marine Institute, Inc., Pacific American Steamship Association and the Lake Carriers' Association-representing the great majority of American-flag passenger and dry cargo vessels, tankers and colliers engaged in the domestic and foreign commerce of the United States. On behalf of the aforesaid associations I respectfully beg leave to file this statement in reply to the testimony given before this Committee by Mr. Abraham E. Freedman on June 7, 1966. (Page 325 infra.) 1. Integrity of Delegates. To impugn the integrity of the authors of the Brussels International Convention of 1957 as having used "false and most misleading" language and as being "dominated" by outside interests labelled "foreign cartels", is completely irresponsible. The Convention was written at the Diplomatic Conference on Maritime Law attended by the official designees of thirty-two nations, including the United States, and to which six other nations sent observers. Those present were eminent jurists, respected members of the executive departments of their various governments, renowned professors and other outstanding dignitaries of the major maritime countries of the world. Attached to this statement as an Addendum is an exact reproduction of Documents N. 11-N. 12 which identifies each of the representatives of the countries who participated at the Convention. In point of fact, it has been acknowledged that the representatives of the United States government actively participated' in drafting the Convention, and that they were able to achieve most United States objectives. Among those who endorsed its terms are the Department of State, the Department of Justice, the Maritime Administration, the Treasury Department and the American Bar Association (p. 8 Senate Report No. 1602). The United States was not a signatory although its delegation actively par ticipated in drafting the Convention" Letter of March 2, 1962, to Honorable W. G Magnuson from the Under Secretary of Commerce. Senate Report No. 1602. The United States was represented at the Brussels Conference, and its delegation was successful in securing most United States objectives." Letter of February 28 1962 to Honorable W. G. Magnuson from the Assistant Secretary of State, Senate Report No 2. Misinterpretation of Cushing decision. No disclosure is made in Mr. Freedman's statement that the interpretation placed on Maryland Casualty Co. v. Cushing, 347 U.S. 409 (1954) and the quotations extracted therefrom, are from the dissenting opinion and that they do not represent the views of the United States Supreme Court. Indeed, as we shall see, had the Court's opinion and holding been quoted instead of the dissenting views, sound answers to most of the objections advanced would have been provided. 3. Mr. Freedman's recognition of the Convention's merit. Reliance on the 1958 report of Mr. Harold M. Kennedy as representing the views of the United States Maritime Law Association, is misguided. The 1958 report was a preliminary one. Upon further study that Association endorsed the Brussels Limitation Convention of 1957, and Mr. Kennedy joined in the endorsement (Maritime Law Association, Document No. 450 October 23, 1961 p. 4747). Although at that time Mr. Freedman filed a minority report objecting to the Maritime Law Association's approval of the Convention, he found no "mirage" in the $207 limitation and indeed, it was his recommendation that if the limitation statutes are not to be abolished. "The fund should be enlarged from $60 per gross ton to $207 per gross ton or to the value of the vessel whichever is higher as under the existing American rule." 3 4. The fictitious average claim. By using the amount of $90,000 as representing the average value of a marine disaster bodily injury claim, the statement goes on to urge that an increase to $207 a ton would result in claimants recovering a fractional percentage of the sum to which they should be entitled. This approach is obviously fallacious. Firstly, it assumes that everyone aboard is seriously injured or killed-something which history demonstrates rarely, if ever, occurs in marine disasters. On this assumption, the limitation fund is divided among more claimants and hence is artificially reduced. Secondly, it presupposes the average claim is worth $90,000, but it is based on one case, viz.; the gross recoveries in the Mission San Francisco, in which Mr. Freedman represented the claimants. These were not average recoveries and the case itself was an extraordinary one in that, as the Court itself reported in the Mission San Francisco, the defense "*** ranged from mere laxness to complete abandonment of the interests of its clients." Mission San Francisco, 236 F. Supp. 895, at p. 899 f.n. 4 (D.C. Del. 1964). But there is no need to conjecture on the average value of a claim for bodily injury. In 1965, the Court of Appeals for the Second Circuit in Arnold v. Troccoli, 344 F (2) 842, quoting from a statistical survey, which included "maritime accident" claims noted (at p. 844): "It is well known that very few of the many such cases brought in the federal courts result in judgments or settlements for more than $10,000. The records compiled by the Judicial Conference of the State of New York, for the years 1961 through 1964, as to attorneys practicing in state and federal courts show that 97% of all accident claims result in judgments or settlements of less than $10,000." In footnote 5 the Court stated: "In each instance, the recoveries in excess of $10,000 number approximately 3% of the total reported by the Judicial Conference. Indeed for 1964 these figures show that 81% of all claims result in judgments or settlements under $2000." Moreover, the fund under the Convention is not as limited as the statement implies. In cases of serious collision the limitation fund of each vessel is available and hence the claimants share in two funds. Furthermore, to the $140 per ton allocated exclusively to injury or death, must be added $67 more per ton in which claimants for personal injury share with property damage claimants. There is no doubt that the use of this formula “* * * would provide a larger fund in the preponderance of cases ***" (Senate Report No. 1602 p. 10).* 5. Safeguards against forum-shopping. It is misleading to say that a shipowner filing a petition to limit liability "can pick any place in the world that he wants under this Brussels Convention." The Convention protects the shipowner Actually, under the existing American rule the $60 per ton fund for personal injury and death claims is not involved until after a determination that the value of the vessel and her freights following the incident is insufficient to pay all claims. The illustration given in Senate Report No. 1602 at p. 7 relates to an average freighter of 8.000 tons, which would produce a minimum of $480.000 under the $60 per ton rate, as contrasted with the fund under the Convention of $1,120,000 exclusively for bodily injury plus $536,000 to be shared with property damage claimants. from being sued elsewhere and providing security there, only if he has started a limitation suit in one of two forums (at the port of accident or, where not in port, the next port of call; or at the port of disembarkation or discharge). The Convention contains safeguards which have been acknowledged "*** as sufficient to deter shipowners from seeking to limit their liability in unreasonable, out-of-the-way places," and that rather than encourage forum-shopping, the Convention "*** will do much to curb abuses which may currently exist in this field." (Senate Report No. 1602 p. 12) 6. The Court's reaffirmance of the need for limitation. Although Mr. Freed man's statement quotes from the dissenting opinion in Maryland Casualty Co. v. Cushing, 347 U.S. 409, he overlooks completely that the Supreme Court's holding in that case, decided in 1954, reaffirmed the dual purpose of the limitation statute, namely (1) to place United States shipowners on an equal footing with foreign competitors, and (2) to provide for a concursus of all claims as follows (347 U.S. at pp. 413-414): "Legislation limiting shipowners' liability was first enacted in 1851 to provide assistance to American shipowners and thereby place them in a favorable position in the competition for world trade. 9 Stat. 635 ***. "The legislation was designed to induce the heavy financial commitments the shipping industry requires by mitigating the threat of a multitude of suits and the hazards of vast, unlimited liability as a result of a maritime disaster." In explaining that one of the vital and most desirable purposes of limitation of shipowners' liability is that of securing concursus, a result which benefits claimants, Justice Frankfurter, speaking for the Court, wrote (at p. 417): "Moreover, it is important to bear in mind that the concursus is not solely for the benefit of the shipowners. *** They ensure that all claimants, not just a favored few, will come in on an equal footing to obtain a pro rata share of their damages." 7. The effect of increased premiums on our commerce. In this same Cushing case the United States Supreme Court held that there is no substance to the contention that limitation of liability provides a bounty to insurance companies. Mr. Justice Frankfurter said, 347 U.S., p. 417 at f.n. 6: "That the cost and indeed the availability of insurance depends on limited liability was brought to the attention of Congress in the hearings on the 1936 amendments to the Limitation Act." and at p. 417: "Furthermore, insurers, unable to rely on the limitation of liability of their insured and denied the benefits of the concursus, would in all likelihood reflect the increased costs in their premiums. * * *” Increased premiums means increased operating costs which will be passed along to passengers as well as shippers of goods to and from the United States. In turn, increased rates will drive prospective business to foreign competitors with the result that the general scheme of federal legislation intended to place United States flag shipowners on an equal footing with foreign competition will be aborted. When other maritime nations exempted their shipowners from all liability for cargo damage resulting from fire, Congress passed comparable legislation for the benefit of United States shipowners, recognizing that if our merchant marine was to survive it had to meet the competition. 46 U.S.C. 182; The Venice Maru, 320 U.S. 249 (1943). In that case, the Supreme Court recognized the effect of modifying this exoneration on foreign competition by saying (at p. 256) "This would restore the insurance burden at least in large part to the cost of carriage and hamper the competitive opportunity it was purposed to foster by putting our law on an equal basis with that of England." The $207 limitation fund established by the Brussels International Convention of 1957 has been adopted by other major maritime nations, including England. No greater burden should be placed on our merchant marine if it is to maintain a competitive basis with foreign shipowners. 8. Hull insurance and the investment in ships. The holding in The City of Norwich, 118 U.S. 468 (1886) excluding hull insurance from the limitation fund, is based on sound reasoning, as was reaffirmed, not repudiated, in the Cushing case. Mr. Justice Clark, concurring in the opinion of the Court observed (347 U.S. at pp. 423–424) : "The basis of the decision [in The City of Norwich] was that Congress intended the Act to protect the investment of the shipowners, and if the latter were prevented from indemnifying themselves from loss of their investment in the ship it would be contrary to the purpose of Congress as well as to the spirit of commercial jurisprudence. * * * Unless the owner is afforded an opportunity to provide for such protection, the purpose of Congress to encourage investment in American ships will be just as much thwarted as it would have been had the owner's right to buy insurance protection in The City of Norwich not been recognized." "To say that this view benefits the shipowner 'at the expense of the families of the deceased seamen' is to ignore the realities of the case," as was stated by Mr. Justice Clark in his concurring opinion in the Cushing case, since the shipowner is only "* ** permitted to receive the protection for which he paid." (347 U.S. at pp. 424-425) 9. The fallacy of direct action clauses. Section 2 of the bill as proposed contains adequate provision as to financial security, and it would frustrate rather than enhance this purpose by requiring insurance with a direct action clause permitting suit by claimants against the insurer. The Cushing case, 347 U.S. 409, recognizes this, and here again does not stand for the proposition for which it is quoted in Mr. Freedman's statement. Mr. Justice Frankfurter, speaking for the Court, stated (347 U.S. at pp. 416-417): "Direct actions against the liability underwriter of the shipowner or charterer would detract from the benefit of a concursus and undermine the operation of the congressional scheme for the 'complete and just disposition of a many cornered controversy.' Hartford Accident & Indemnity Co. v. So. Pacific Co., 273 U.S. 207, 216. The ship's company would be subject to call as witnesses in more than one proceeding, perhaps in diverse forums. Conflicting judgments might result. Ultimate recoveries might vary from the proportions contemplated by the statute. * * * To permit direct actions to drain away part or all of the insurance proceeds prejudices the rights of those victims who rely, and have every reason to rely, on the limitation proceeding to present their claims." Accordingly, if all the claimants are to be benefited by the security required, under no circumstances should a direct action clause against insurers be promulgated. 10. Only shipowners would bear unlimited absolute liability. If the Mission San Francisco had been a plane instead of a vessel, since there were no passengers, there would have been no claims for damages whatever because the crew (as employees) would have been restricted to limited workmen compensation benefits. Workmen compensation laws in every state provide for limited liability to employers for injury and death of employees. These limited benefits are made the exclusive remedy of the employee who is prohibited from recovering any damages from his employer. Every industry, including air transportation (Kreindler, Aviation Law (1963) §3.14, p. 170; § 2.11, p. 86) is entitled to this protection whether engaged in interstate or foreign commerce, with two exceptions; railroads and private shipowners who are excluded by federal law. Railroads in interstate commerce are not protected by compensation laws, but their employees may not recover damages for injury or death unless negligence is proven. (45 U.S. Code § 51) This is not so, however, with respect to Steamship companies, who under decisional law are absolutely liable for unseaworthiness regardless of fault. Moreover, with respect to longshoremen who are employed by shipowners under Reed v. Yaka, 373 U.S. 410 (1963) they may collect federal compensation from the shipowner as well as sue it for unlimited damages regardless of fault. No other industry is saddled with these heavy burdens of absolute liability. No more justification would seem to be necessary for a limited liability statute. Thank you, Mr. Chairman, JOHN F. GERITY. 5 Airlines. 1. Passengers: As to airlines their liability for injury and death is as follows: A. Domestic: No absolute liability; fault must be proven. 2. Employees: Only for limited compensation benefits as stated above. 65-535 0-66 -15 |