Yarmouth Sea Products Ltd. v. Scully
131 F.3d 389, 1997 WL 739416 (1997)
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Rule of Law:
The general maritime rule precluding recovery for purely economic losses resulting from negligent interference with a contract does not apply to commercial fishermen working on a lay share agreement, who may recover their share of lost profits from a tortfeasor who negligently damages their vessel, provided the loss is proven with reasonable certainty.
Facts:
- David Scully was sailing the 60-foot sailboat COYOTE alone as part of a 2,000-mile qualifying voyage for a race.
- Yarmouth Sea Products, Ltd. owned the 65-foot fishing vessel LADY OLIVE MARIE, which was operated by a captain and crew under a lay share agreement where they received 60% of the value of the catch, less expenses.
- At approximately 4:30 a.m. on August 24, 1994, the COYOTE collided with the LADY OLIVE MARIE about 130 miles from Nova Scotia.
- At the time of the collision, the LADY OLIVE MARIE was drifting with her engines in neutral, while the COYOTE was sailing at 5 to 8 knots.
- Scully conceded at trial that he may have dozed off and that the collision would not have happened if he had been on full alert.
- The COYOTE's radar, radios, and mast top navigation lights were not operational; emergency flashlights rigged as lights were not illuminated at the time of the collision.
- The collision punctured the hull of the LADY OLIVE MARIE, causing significant flooding and forcing the vessel to abandon its fishing voyage and return to port for repairs.
Procedural Posture:
- Yarmouth Sea Products, Ltd. filed suit against David Scully in the U.S. District Court (trial court) for damages from a maritime collision.
- After a two-day bench trial, the district court found Scully 100% at fault for the collision.
- The district court entered a judgment of $78,616.81 in favor of Yarmouth, which included damages for the crew’s lost profits and the captain’s fee.
- Scully, as appellant, appealed the district court's judgment to the U.S. Court of Appeals for the Fourth Circuit, challenging both the liability determination and the calculation of damages. Yarmouth is the appellee.
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Issue:
Does the rule from Robins Dry Dock & Repair Co. v. Flint, which generally bars recovery for purely economic losses from a tort committed against a third party's property, prohibit commercial fishermen working on a lay share agreement from recovering their lost profits from a third party who negligently damages their fishing vessel?
Opinions:
Majority - Davis, District Judge
No. The rule from Robins Dry Dock does not bar recovery for commercial fishermen on a lay share agreement. The court held that the unique relationship between fishermen on a lay and the vessel owner is more akin to a joint venture than the purely contractual relationship of the time charterers in Robins Dry Dock. The court embraced the reasoning of other circuits that have created a 'fishermen's exception,' recognizing that seamen are 'favorites of admiralty' and their economic interests warrant special protection. The fishermen's lost profits were a direct and foreseeable consequence of the tortfeasor's negligence, unlike the remote damages the Robins Dry Dock rule is meant to prevent. While affirming that the crew could recover lost profits, the court found the district court's calculation of those damages, which relied solely on the catch of a single other vessel (the ENDURANCE) without a reasoned explanation or comparison to the LADY OLIVE MARIE's own history, did not meet the 'reasonable certainty' standard. Therefore, the court affirmed Scully's 100% liability for the collision but vacated the damage award and remanded for reconsideration of the amount of lost profits.
Analysis:
This decision formally establishes a 'fishermen's exception' to the economic loss rule of Robins Dry Dock within the Fourth Circuit, aligning it with the Ninth and Eleventh Circuits. By characterizing the lay share arrangement as a joint venture, the court provides a doctrinal basis for treating fishermen's economic losses as direct, rather than remote, consequences of a tort against the vessel. The ruling solidifies special legal protections for seamen's livelihoods, reinforcing their status as 'favorites of admiralty.' The case also underscores the critical importance of evidentiary standards for damage calculations, instructing lower courts that awards for lost profits must be based on a well-reasoned analysis of all available data to meet the 'reasonable certainty' test.
