James P. Rufolo v. Midwest Marine Contractor, Incorporated, Defendant-Counter and Service Welding & Shipbuilding, Incorporated, Defendant-Counter

6 F.3d 448, 1994 A.M.C. 226, 1993 U.S. App. LEXIS 25013, 1993 WL 382496

• Court: Court of Appeals for the Seventh Circuit
• Decided: September 29, 1993
• Docket: 92-1593
• Status: Published

Opinions

CUMMINGS, Circuit Judge.

This case was brought under the Jones Act, 46 U.S.C.App. § 688, and general maritime law. The plaintiff, James Rufolo, a shipping pilot, slipped and fell and hurt his back on the oil-slicked stairway of a barge called the M/V Shoreline II. Rufolo sued Midwest Marine Contractor, Inc., the barge’s charterer, and Service Welding & Shipbuilding, Inc., a firm whose arguably negligent repair work on the vessel may have caused oil to collect on the stairs. Midwest Marine brought a cross-claim against Service Welding for indemnification and contribution. A jury found that the M/V Shoreline II was unseaworthy and that Midwest Marine was negligent. It awarded Rufolo $375,000, which was reduced to $251,000 because the plaintiff was found to have been 33 percent negligent. Before trial, though, Rufolo and Service Welding agreed to settle for $1,000. The district judge held that this settlement excused the ship repair outfit from liability; Midwest Marine of course disagrees. Last year in Matter of Oil Spill by the Amoco Cadiz, 954 F.2d 1279 (7th Cir.1992), we were able to avoid deciding under federal maritime law what effect the settlement of one defendant has on another. Able to escape this question no longer, we opt for a settlement-bar rule.¹ This means that in a maritime case, a settling party is excused from liability for contribution if the settlement is in good faith. Midwest Marine claims that Service Welding’s $1,000 settlement with Rufolo was not in good faith, but the district judge disagreed, as do we.

Rufolo was a seaman pilot working for Midwest Marine out of Chicago, primarily on Lake Michigan aboard the M/V Shoreline II, a self-propelled jack-up barge. The barge’s most distinctive feature is legs, or spuds as they are called, which can be lowered by hydraulics and attached to the bottom of the lake, and then lifted again when the barge is in motion. The barge is used to take crew members out to sea so that divers can work under water. In September 1988 the M/V Shoreline II was partially capsized because of vandalism. Service Welding was hired to repair the hydraulic jacks on the spuds. Midwest Marine later engaged Modern Fluid Technology, Inc. to replace the vessel’s hydraulic pump. Modern Fluid recommended that additional work be done on the hydraulics, but Midwest Marine declined. The barge was in a state of great disrepair at this time: the engine batteries were dead, part of a starboard spud had fallen off, hydraulic fluid leaked constantly from the legs. In Rufolo’s words, the vessel was a “mess,” but Midwest Marine continued to operate it. On the day of the accident, June 2, 1989, the M/V Shoreline II plied the waters from Ke-nosha, Wisconsin, to Evanston, Illinois.

Off the Evanston coast, Captain Paul Rufo-lo (the plaintiffs father) raised the M/V Shoreline II out of the water despite the missing foot on the starboard spud. The captain then returned to shore and left his son in charge. Later in the afternoon the younger Rufolo decided to raise' the barge another couple of feet notwithstanding the constant hydraulic leak in the rear leg. At some point during this operation a hydraulic pipe on the deck burst and spewed twenty-five to thirty gallons of oil across the deck. Rufolo and two deckhands tried to clean up the spill, which left hydraulic fluid at least two or three inches deep at the entrance to the engine room. After a time they ran out of cleaning materials and Rufolo decided not to call the Coast Guard for more supplies because “[i]t’s a lot of problems when you involve the Coast Guard in a little minor clean-up” (transcript of Dec. 9, 1991 at 424). The men went to the galley to watch television and eat dinner. Rufolo was later beckoned by a crew member to help start one of the engines. But on his way down the still-treacherous stairs to the engine room, where the safety grid on the second step from the top was missing, Rufolo in his oil-soaked shoes slipped and fell and sustained the injuries that gave rise to this suit. In his trial testimony, Rufolo admitted seeing the oil on the stairs — not much of an admission since the oil spill had been several inches deep and Rufolo had just spent an hour trying to clean it up. The jury sorted out the various liabilities of the parties under the Jones Act and general maritime law, and as noted found that Midwest Marine owes Rufolo $251,000; the district judge found that Service Welding, having settled with Rufolo separately, owes Midwest Marine nothing.

Midwest Marine’s first argument is that it cannot be sued by the plaintiff because he owns it. Actually, he owns 10 percent of Midwest Marine’s stock; his mother, father and two sisters own the rest. We assume that the reason a party sues a company of which he is part owner is because someone other than the company (usually an insurance carrier) is footing the bill. In any event, the Jones Act creates a cause of action for seamen who are injured by the negligence of owners of unseaworthy vessels. Rufolo cites a district court case from Washington state, Strom v. M/V “Western Dawn’’, 698 F.Supp. 212, 214 (W.D.Wash.1986), for the common-sense proposition that one must be an employee, not an owner, to have a cause of action against a ship’s owners under the Jones Act. As the statute says, “Any seaman who shall suffer injury in the course of his employment may, at his election, maintain an action for damages at law * * 46 U.S.C.App. § 688(a). “The key to seaman status is employment-related connection to a vessel in navigation.” McDermott Int’l, Inc. v. Wilander, 498 U.S. 337, 355, 111 S.Ct. 807, 817, 112 L.Ed.2d 866; see also Southwest Marine, Inc. v. Gizoni — U.S. -, - -, 112 S.Ct. 486, 490-491, 116 L.Ed.2d 405. The district court held that Strom was not binding because it involved partnership and Washington state law.

In any event, we cannot accept Midwest Marine’s contention that Rufolo was not an employee. In Strom, the plaintiff was an active partner who had helped design the very gate latch system that caused his injury. 698 F.Supp. at 214. Rufolo, by contrast, is merely a 10 percent shareholder in a corporation and was not shown to be active or influential in its business affairs. Of course the stockholders own the corporation. But mere ownership of some small amount of stock cannot deprive one of employment status; otherwise, the thousands of workers who have invested in the companies that employ them or received stock options as compensation would be deprived of the protections Congress intended to provide to seamen when it passed the Jones Act. Self v. Great Lakes Dredge & Dock Co., 832 F.2d 1540, 1548 (11th Cir.1987), certiorari denied, 486 U.S. 1033, 108 S.Ct. 2017, 100 L.Ed.2d 604.² In this case we have no evidence that the younger Rufolo acted in an ownership capacity other than sometimes serving as captain when the actual captain was absent. Also, whatever hand Rufolo might have played in causing his own injuries — by, for example, making bad decisions as acting captain — were taken into account by the jury when it found him 33 percent negligent.

Rufolo would have been able to collect his award from either defendant had he not settled on the eve of trial for $1,000 with Service Welding. The district court applied the Illinois Contribution Among Joint Tortfeasors Act, 740 ILCS 100/1, rather than federal law, and concluded that Service Welding extinguished its liability to Midwest Marine when it settled separately with Rufolo. We agree with that result but hold that the district court should have applied federal maritime law rather than Illinois contribution law. Amoco Cadiz left open the choice of law question, 954 F.2d at 1315, but other circuits that have considered rules of eontri-button in admiralty eases have fashioned federal law and not relied on state law. See Edmonds v. Compagnie Generate Transatlantique, 443 U.S. 256, 99 S.Ct. 2753, 61 L.Ed.2d 521; Associated Elec. Coop., Inc. v. Mid-America Transp. Co., 931 F.2d 1266 (8th Cir.1991); Miller v. Christopher, 887 F.2d 902 (9th Cir.1989); Hernandez v. M/V Rajaan, 841 F.2d 582 (5th Cir.1988), certiorari denied, 488 U.S. 981, 109 S.Ct. 530, 102 L.Ed.2d 562, 488 U.S. 1030, 109 S.Ct. 837, 102 L.Ed.2d 970; Self, 832 F.2d 1540 (11th Cir.1987); Joia v. Jo-Ja Serv. Corp., 817 F.2d 908 (1st Cir.1987), certiorari denied, 484 U.S. 1008, 108 S.Ct. 703, 98 L.Ed.2d 654. The benefit of applying federal law in admiralty is uniformity. Romero v. International Terminal Operating Co., 358 U.S. 354, 373, 79 S.Ct. 468, 480, 3 L.Ed.2d 368. Service Welding points out the obvious — not all circuits have opted for the same rules of contribution — and would have us conclude that uniformity is not served by applying federal admiralty law. But federal law promises at least the potential of uniformity should the Supreme Court decide the issue. And even a circuit split here or there gives parties eminently greater guidance and reliability than having to discern a different rule for every state. We conclude, therefore, that this case should be decided under federal, not Illinois, law.

As we explained in Amoco Cadiz, there are four potential rules. In a no-contribution system, all defendants are jointly and severally liable, the plaintiff may collect the entire award from any defendant, and no defendant may obtain contribution from any other. A contribution system is the same as a no-contribution system except that a defendant who pays more than his share of the apportioned fault may be reimbursed by other defendants. In a claim reduction world, defendants are also jointly and severally liable, but if the plaintiff settles with one defendant, the non-settling defendants are excused from any damages caused by the settling party. For example, if three defendants are each a third liable and one settles, the plaintiff may only collect two-thirds of the award from the non-settling parties. Finally, a settlement bar excuses a settling defendant from all liability (that is, other defendants cannot obtain contribution from him) so long as the settlement is made in good faith. Amoco Cadiz, 954 F.2d at 1315. None of the approaches is a panacea, id. at 1318, and there is certainly no uniformity among the circuits.³ Even the Restatement (Second) of Torts § 886A has not decided which rule to adopt. The concurrence argues in favor of the claim reduction rule, but this option complicates litigation and lowers recoveries for the injured, and in any event was expressly foreclosed by Amoco Cadiz. Id. at 1316 (quoting Edmonds, 443 U.S. at 268-273, 99 S.Ct. at 2760-2763).

It is clear that the Supreme Court still adheres to the principle that an injured party may collect the whole amount of his award from any defendant. United States v. Reliable Transfer Co., Inc., 421 U.S. 397, 95 S.Ct. 1708, 44 L.Ed.2d 251; Edmonds, 443 U.S. 256, 99 S.Ct. 2753. As the Court noted in Edmonds,

Nothing is more clear than the right of a plaintiff, having suffered such a loss, to sue in a common-law action all the wrongdoers, or any one of them, at his election; and it is equally clear, that, if he did not contribute to the disaster, he is entitled to judgment in either case for the full amount of his loss.

443 U.S. at 260 n. 7, 99 S.Ct. at 2756 n. 7 (quoting The Atlas, 93 U.S. 302, 315, 23 L.Ed. 863). But the principle enunciated in these cases — redress plaintiffs deprivation first and let the defendants fight over the scraps later — offers no guidance about how to treat settling parties since each contribution rule already incorporates the notion that plaintiff compensation takes precedence. Miller, 887 F.2d at 904. We are at liberty, therefore, to choose any of these contribution systems and we opt for the settlement bar. Its advantages are obvious: parties can buy certainty. If they work out a deal sufficiently appealing to the plaintiff, defendants can evade the hazards of trial and the pitfalls of post-trial contribution. There is thus a huge incentive to settle cases. We are mindful that courts should not shirk their duty to decide genuine cases and controversies by tipping the scales so heavily in favor of settling that it never pays to adjudicate, but considering how clogged the court system is and how bulging the federal reporters have become, it is appropriate to encourage parties to negotiate their own solutions. One drawback of the settlement bar is that defendants who go to trial may be saddled with an unfair share of the liability merely because they are available to sustain the jury’s wrath for the defendants’ collective wrongdoing. But that logic would counsel against all settlements not joined by every defendant. Also, the good faith requirement ensures that plaintiffs and settling parties do not scheme to put the onus unfairly on the remaining defendants, although having to ensure that settlements are in good faith can be a drawback if a mini-trial is required to determine the true extent of a party’s liability. Amoco Cadiz, 954 F.2d at 1317.

But no solution is perfect, id. at 1318, and we think the settlement bar comes closer than the alternatives. A no-contribution system, though easy for courts to administer, creates massive distortion by saddling defendants who may be only slightly at fault with complete liability and no recourse for collecting from the other wrongdoers. The contribution alternative eliminates that problem, but it also makes settling a nearly worthless proposition because even if a defendant settles, he is still responsible for his full share of the fault. The only benefit to settling in such circumstances is to save on litigation costs, but since the settling defendant is responsible anyway, he is likely to want to participate in the trial to control how much of the wrongdoing is attributed to him. Also, the burdens of administering a contribution system — figuring out how much fault belongs with each current and former defendant — are staggering. In short, we think the settlement bar has the most advantages and the fewest drawbacks. See Miller, 887 F.2d at 903-907.

The settlement bar approach is also consistent with the district court’s determination of these parties’ liabilities under Illinois law. Under the Illinois Contribution Among Joint Tortfeasors Act, 740 ILCS 100/1, where a joint tortfeasor reaches a good faith settlement, the claimant is released from liability for contribution to other joint tortfeasors. Frazer v. A.F. Munsterman, Inc., 123 Ill.2d 245, 123 Ill.Dec. 473, 527 N.E.2d 1248 (1988); Ballweg v. City of Springfield, 114 Ill.2d 107, 102 Ill.Dec. 360, 499 N.E.2d 1373 (1986). Because Service Welding chose to settle with the plaintiff before trial, it is completely immune to the $251,000 judgment rendered against Midwest Marine — that is, so long as the settlement of $1,000 was in good faith. Midwest Marine contends that it wasn’t.

The district court disagreed. It found no reason “to think that this case is being settled for anything other than what it’s worth” (transcript of Nov. 1, 1991 at 11-12). Good faith equates with a bona fide estimate of liability at trial, Amoco Cadiz, 954 F.2d at 1315, and a district court’s decision to approve a settlement will be upheld barring an abuse of discretion. Donovan v. Robbins, 752 F.2d 1170, 1177 (7th Cir.1985). The gist of Midwest Marine’s argument is that, having asked for $500,000 in damages from two defendants, the plaintiffs decision to settle for $1,000 from one defendant is tantamount to bad faith. But we are unwilling to say that a disproportionately low settlement in relation to the amount of liability found at trial automatically demonstrates unsavory collusion; a low settlement may merely reflect that plaintiff has a weak case against the settling defendant. Rufolo’s counsel explained the $1,000 settlement in oral argument as a matter of basic trial strategy: get rid of the weak link in your case and go head to head with one defendant rather than two. The settlement with Service Welding did not come until extensive discovery had been completed. Clearly, Rufolo had it within his power not to have sued Service Welding in the first instance. It is logical to assume, then, absent some evidence to the contrary, that the plaintiff learned in discovery that he would be better served at trial by concentrating on Midwest Marine alone. Why? The most obvious reason to have discarded the case against Service Welding is that it only fixed the hydraulic systems on the spuds, or legs, while the oil spill that prompted Rufo-lo’s fall down the engine room stairs came from a hydraulic pipe on the deck. Service Welding was not the only firm to work on the hydraulics either; a firm called Modern Fluid Technology replaced a hydraulic pump on the deck. Rufolo may have simply calculated that the jury would find Service Welding innocent of wrongdoing and thus dilute the ease against Midwest Marine, about whom there was ample evidence of wrongdoing: ignoring Modern Fluid’s suggestion that the hydraulics undergo further repairs, continuing to operate the M/V Shoreline II when its condition was so fragile, allowing oil to collect on the stairs as a matter of course, and failing to replace a missing grid on the second step. Midwest Marine, sent to the ■witness stand an expert who tried to foist all the blame on Service Welding, but there were expert witnesses on the other side and the jury was entitled to disbelieve Midwest Marine’s witness. Not only is there no evidence of bad faith in the settlement, but Midwest Marine has not suggested, and we cannot conceive of, any reason why plaintiff would have colluded with Service Welding. There is no suggestion Rufolo received information or anything else from Service Welding that benefitted him in the trial. If any party suffered from the low settlement figure, it was Rufolo, not Midwest Marine.

Midwest Marine last argues that it should be indemnified by Service Welding. In the classic indemnity ease in maritime law, the owner of the ship has relinquished control of the vessel to another party whose negligence subjected the owner to liability. Ryan Stevedoring Co. v. Pan-Atlantic Steam Corp., 350 U.S. 124, 76 S.Ct. 232, 100 L.Ed. 133; Boyle v. Pool Offshore Co., 893 F.2d 713, 719 (5th Cir.1990); Bass v. Phoenix Seadrill/78, Ltd., 749 F.2d 1154, 1167 (5th Cir.1985); Hobart v. Sohio Petroleum Co., 445 F.2d 435, 438 (5th Cir.1971), certiorari denied, 404 U.S. 942, 92 S.Ct. 288, 30 L.Ed.2d 256. But Midwest Marine never relinquished control of the M/V Shoreline II and the jury plainly found that Midwest Marine bore the brunt of fault for Rufolo’s accident.

To summarize, we hold that Rufolo has standing as a seaman-employee under the Jones Act to bring this suit, that the federal law of admiralty applies rather than Illinois law, that a settling defendant is excused from contribution so long as the settlement is made in good faith, and that this settlement was indeed conceived of and executed in good faith. For these reasons, the district court’s decision is affirmed.

1 . The concurring opinion suggests that we could avoid deciding this question because under Rule 51 of the Federal Rules of Civil Procedure, Midwest Marine waived any objection concerning its liability by failing to submit a jury instruction about the settlement with Service Welding, despite an invitation by the district judge to do so. However, Rule 51 says merely that one may not object to a jury instruction if one has not submitted an alternative. Midwest Marine does not object to any jury instruction; therefore, Rule 51 is inapplicable. To find waiver in these circumstances would mean that a party must invite error. Midwest Marine should not have been required to submit a jury instruction based on claim reduction guidelines because claim reduction is not the law of this circuit and could not be under our decision in Matter of Oil Spill By The Amoco Cadiz, 954 F.2d 1279, 1318 (1992). If the district judge had accepted such an instruction as the concurrence says Midwest Marine should have submitted, we would now be reversing that decision for error.

2 . A subsequent Eleventh Circuit case, Great Lakes Dredge & Dock Co. v. Tanker Robert Watt Miller, 957 F.2d 1575 (1992), does not detract from this principle.

3 . See Amoco Cadiz for the status of each rule in the various circuits. 954 F.2d at 1315-1318.