ELR Citation: ELR 20835
No(s). s. 90-2832 et al (7th Cir. Jan 24, 1992)

The court rules that the Amoco Corporation must pay the French government and other parties approximately $204 million in damages for the 1978 oil spill that damaged 180 miles of the Brittany coastline in France. Four cases filed in Illinois and New York were consolidated in the Northern District of Illinois by the Judicial Panel on Multidistrict Litigation, and the court generally upholds the district court's rulings on jurisdiction, liability, and damages, with certain exceptions. The court holds that the doctrine of law of the case protects from review the district court's judgment that it had personal jurisdiction over the Amoco Cadiz shipbuilder. In granting a default judgment, the district court held that it had jurisdiction over the shipbuilder, and if the shipbuilder believed the default judgment rested on improper procedure, it should have so argued on appeal. With respect to the due process prong of the jurisdictional question, the court holds that the district court could assert jurisdiction based on the shipbuilder's combined contacts in New York and Illinois. The Due Process Clause requires only that the defendant possess sufficient contacts with the United States. The court holds substantial evidence supports the district court's decision to pierce the corporate veils of the various Amoco Corporation parties in order to find that the shipbuilder entered into a contract with an Illinois entity. The dispute rests on whether the action against the shipbuilder arises from its negotiation of the contract to build the Amoco Cadiz, and it was not clearly erroneous to hold that the causes of action arose from the discussions in Chicago about building the ship. Although the prior decision is not law of the case in the New York action, it has strong precedential value. New York's and Illinois' long-arm statutes are very similar, and the factual differences between the New York and Illinois cases as to contacts with the forum are relatively small. Negotiations between the Amoco Corporation and the shipbuilder in New York concerned the plans and designs for ships upon which the Amoco Cadiz was modeled. The court holds that sanctions against the shipbuilder on the jurisdictional issue are not appropriate.

Turning to the question of liability, the court upholds the district court's finding that the failure of the steering gear system of the Amoco Cadiz was proximately caused by the shipbuilder's improper design and construction and Amoco's negligence in failing to make repairs. The court found that the flange assembly installed by the shipbuilder did not meet code requirements for high-pressure systems. The court further found that Amoco was negligent in failing reasonably to perform its obligations to repair and maintain the steering gear, to properly train its crew, to provide the vessel with a redundant steering system with which to steer in the event of failure of the hydraulic system, and to fulfill its duty as the party who supervised and approved the design to ensure that the design and construction were properly carried out. The record is replete with references to Amoco's deliberate policy to defer drydocking and repairs in order to minimize the loss of charter hire that would be incurred by taking the ship out of service. For example, an Amoco director endorsed a superintendent's recommendation that Amoco should turn down the shipbuilder's offer of replacement parts, take a cash credit, and defer repair. An overwhelming amount of evidence supports the district court's conclusion that Amoco's negligence caused the grounding of the Amoco Cadiz. Even if the evidence does not support the conclusion that Amoco's negligence caused the rupture of the hydraulic steering system, there was adequate evidence that Amoco's negligence caused the grounding and ultimate spill by making the crew unable to get the rudder back under control after the rupture occurred. The court holds that the district court's ultimate conclusion that the grounding of the Amoco Cadiz was caused by the negligence of the Amoco parties and the shipbuilder was not clearly erroneous. The court next holds that only Amoco Transport, the registered owner of the Amoco Cadiz, was entitled to limit its liability as an "owner" under the Limitation of Liability Act. Ultimate authority for maintenance and operation of the Amoco Cadiz remained with Amoco Transport alone. It was not contradictory for the district court to deny other Amoco parties the right to rely on the Limitation Act on the theory that they were corporate entities legally separate from Amoco Transport, and later, in the damages phase, refuse to recognize separateness. Liability for damages is another matter completely, and even if the other Amoco parties were "owners," they cannot prove their freedom from privity or knowledge of the negligence that caused the grounding. The corporate structure was so highly integrated that each of the subdivisions was a mere instrumentality of the parent corporation.

Reviewing the district court's rulings on damages, the court holds that hearsay documents pertaining to cleanup damages were admissible under the public document exception to the hearsay rule, which is founded on the belief that public employees are generally reliable. The documents were generated or collected by the national government in the course of its public functions. Whether the charges reflected in these documents are attributable to the spill from the Amoco Cadiz is a distinct question that was addressed with live testimony from public officials whom Amoco was free to cross-examine. Further, Amoco had other ways to test the connection between the exhibits and the spill, including representatives on the scene monitoring the cleanup from the start. The court next holds that a French statute governing oil pollution accidents on the high seas applies to oil that reaches the shore and thus authorizes an award for the costs public agencies incurred in responding to the spill. The court holds that France is entitled to 3.5 million francs for the costs of holding military personnel and material at the ready, in addition to the expenses awarded by the district court for salaries and equipment during the cleanup. Even though an economist testified that the opportunity costs for military personnel and equipment are zero because their only alternative use is to invade a neighbor, some of the military personnel, such as civil engineers, had clear alternative uses. The court holds that the district court properly found that Amoco is not entitled to a reduction in the French plaintiffs' claims by the amount for which they settled claims against the American Bureau of Shipping for the Bureau's annual certification that the Amoco Cadiz was seaworthy. Amoco's suit seeking contribution against the Bureau remains on the district court's docket, and claim reduction would create a substantial possibility of unmeritorious extended collateral litigation.

The court next turns to four additional disputes. The court holds that under French law, two trade associations lack standing to collect damages on behalf of their members, and the district court awards in their favor are vacated. The court next holds that the district court did not err in awarding 2.25 million francs to private parties who presented their claims through an accountant who gathered data relating to business reverses and performed a simple linear regression. The award is based on the plaintiffs' evidence, and they did not fail to prove their claims. With respect to claims related to tourism businesses' lost reputations, the court holds that the district court did not err in concluding that the efforts to establish such moral damages had failed. The court also holds that the district court's failure to implement its decision to impose a 30 percent reduction for the French Navy's ineptitude in applying dispersants to the oil is not reversible error, because the reduction itself is not justified. Tort victims are entitled to complete compensation for their losses, and better application of the dispersants to prevent the oil from spreading to the land might even have increased the costs of removing the oil from the beaches.

The court next rules that the district court erred in converting a dollar award for an insurance company's contract claim into pounds sterling, having found that sterling is the currency in which the buyers felt the loss. The district court computed the loss in dollars and should have entered judgment in dollars. When all of the transactions occur in dollars, the judgment should always be in dollars. The court observes that certainty in this practice will enable parties to hedge against currency risks. The court also eliminates the district court's 00.5 percent reduction for shrinkage of the shipment in transit. The court next holds that the French plaintiffs are entitled to compound prejudgment interest at market rates that prevailed in the 1980s—a rate of 11.9 percent per annum from January 1, 1980, implying a multiplier of 3.3162. None of the considerations Amoco offers—passage of time, exaggerated or fraudulent claims, and the absence of compound prejudgment interest awards under French law—could support a denial of interest even if the district court had exercised its discretion in Amoco's favor. The court also holds that the insurance company is entitled to prejudgment interest on its contract claim at the prime rate of 12.31 percent per annum from March 16, 1978. The award is at the same rate of interest as the award for the French plaintiffs, but without compounding, because British law awards simple rather than compound prejudgment interest.

Counsel for Amoco Parties
Frank Cicero Jr.
Kirkland & Ellis
200 E. Randolph Dr., Chicago IL 60601
(312)861-2000

Counsel for Cotes-du-Nord
T. Barry Kingham
Curtis, Mallet-Prevost, Colt & Mosle
101 Park Ave., New York NY 10178
(212) 696-6000

Counsel for Republic of France
Christopher B. Kende
Holtzmann, Wise & Shepard
745 5th Ave., New York NY 10151
(212) 753-4300

Before BAUER, Chief Judge, EASTERBROOK, Circuit Judge, and FAIRCHILD, Senior Circuit Judge.