Defendant & Third Party

                                                No. 99-1018

Third Party Defendants.

Appeal from the United States District Court
for the Eastern District of Virginia, at Norfolk.
Robert G. Doumar, Senior District Judge.

Argued: November 30, 1999

Decided: March 8, 2000

Before WILKINSON, Chief Judge, KING, Circuit Judge,
and Cynthia Holcomb HALL, Senior Circuit Judge of the
United States Court of Appeals for the Ninth Circuit,
sitting by designation.


Affirmed by published opinion. Senior Judge Hall wrote the majority
opinion, in which Chief Judge Wilkinson joined. Judge King wrote a
dissenting opinion.



ARGUED: David Joel Berg, LATTI ASSOCIATES, L.L.P., Boston,
Massachusetts, for Appellant. Temple Witt Cabell, SCHAFFER &
CABELL, P.C., Richmond, Virginia, for Appellee. ON BRIEF:
David H. Sump, CRENSHAW, WARE & MARTIN, Norfolk, Vir-
ginia, for Appellant.



CYNTHIA HOLCOMB HALL, Senior Circuit Judge:

Philip Chisholm ("Chisholm") appeals the district court's order set-
ting aside damages in the amount of $90,000 awarded against UHP
Projects ("UHP") for breach of the warranty of workmanlike perfor-
mance. We have jurisdiction pursuant to 28 U.S.C.S 1291, and we


UHP is a company that cleans tanks and holds for ocean vessels
with ultra high pressure water jets. Sealift, Inc. ("Sealift") owned the
ship S.S.ULTRAMAX which on July 1, 1994, was moored at Cargill
South Terminal in Chesapeake, Virginia. On this particular day,
Sealift had contracted with UHP to remove dust and scale from the
ULTRAMAX's ballast tanks. The pump and hoses used to operate the
ballast tank were owned by UHP. Chisholm was aboard the ULTRA-
MAX as a first assistant engineer.

Early that morning, as UHP employees were preparing to begin
cleaning one of the ballast tanks, Patrick Courville, a UHP supervisor,
noticed a leak in a connector between the two end fittings of the ultra
high pressure hoses. He readjusted the connector to stop the leak and


then directed another UHP employee to begin the blast. Within a few
seconds of the jet reaching full power, the hose and/or a fitting failed
causing the hose to blow apart from the end-fitting. The loose hose
veered and struck Chisholm who was standing approximately 10 to
15 feet away from the ballast tank. Chisholm suffered a compound
depressed skull fracture and a lacerated dura. Chisholm fully recov-
ered from this serious injury and returned to work approximately 8 or
9 months later.

Chisholm presented a claim against the ship for maintenance and
cure benefits, and for unseaworthiness, to which Sealift responded by
tendering $29,025.93 for the maintenance and cure benefits. Sealift
demanded that UHP participate in settlement negotiations with Chis-
holm and pay around $200,000 in indemnity. UHP refused Sealift's
demand so Sealift filed suit against UHP in federal district court
alleging causes of action arising under implied contractual indemnity
and tort indemnity. Prior to summary judgment, UHP accepted that
it had a duty to indemnify Sealift in accord with the admiralty war-
ranty of workmanlike performance and agreed to tender Sealift the
amount which Sealift settled with Chisholm. This amount was
$200,000 plus the $29,025.93 in maintenance and cure benefits, a
total payment by Sealift to Chisholm of $229,025.03. This exact
amount was then tendered by UHP to Sealift as indemnity on or about
December 11, 1996.

Meanwhile, on June 5, 1996, Chisholm filed a complaint against
UHP pleading causes of action for negligence and an admiralty law
claim for breach of the implied warranty of workmanlike perfor-
mance. On cross-motions for summary judgment, the district court
granted summary judgment for UHP on the negligence claim which
left the admiralty claim as the sole surviving cause of action. See
Chisholm v. UHP Projects, Inc., 30 F. Supp. 2d 928, 929 (E.D.Va.
1998). As a result, the district court concluded that Chisholm did not
have a right to a jury trial but impaneled a jury anyway to function
as an advisory body.1 See id.  at 929-30. The admiralty claim pro-
1 The fact that the district court ruled that Chisholm did not have a right
to a jury because he presented no viable negligence claim rebuts the dis-
sent's assertion that UHP's liability was "not without fault." The dissent
goes to great lengths to breath a negligence cause of action into Chis-
holm's claim against UHP for breach of the warranty of workmanlike
performance. However, if negligence were a part of this claim, then
Chisholm would have had a right to a jury.


ceeded to a two day trial in which the jury found liability and imposed
$90,000 of damages against UHP. See id. at 930. The district court
adopted the jury's verdict as its own and after post-trial briefing held
that the prior settlement between Chisholm and Sealift, which
exceeded the jury's award, operated to negate the award against UHP.
See id. at 938-39. Consequently, the district court ordered this case
dismissed on the merits and judgment entered in favor of UHP. See
id. at 939. Chisholm appeals this ruling.


Because this appeal is purely on a question of law, the standard of
review is de novo. See United States v. Han, 74 F.3d 537, 540 (4th
Cir. 1996). Chisholm's claim against Sealift arose under the doctrine
of seaworthiness while his claim against UHP arose under the cause
of action for breach of the implied warranty of workmanlike perfor-
mance. The doctrine of seaworthiness arises by operation of law and
states that a ship owner owes the seaman an absolute, non-delegable
duty to provide a seaworthy vessel. See Mitchell v. Trawler Racer,
Inc., 362 U.S. 539, 549-50 (1960) (seaworthiness is defined as a ves-
sel that has a hull and equipment that are reasonably adequate in
design and maintenance, and a crew that is of sufficient character to
perform its intended function in the operation of the vessel). Liability
for violation of the doctrine of seaworthiness is without fault. See id.

The implied warranty of workmanlike performance ensures that the
stevedore will warrant the quality of his services while onboard the
vessel. See Ryan Stevedoring Co. v. Pan-Atlantic Steamship Corp.,
350 U.S. 124, 132-33 (1956) (overruled by Congress on different
grounds, see Ducrepont v. Baton Rouge Marine Enterprises, Inc., 666
F. Supp. 882, 884-85 (1987) (stating that the congressional enact-
ments sought to overrule only the damages aspect of the Ryan hold-
ing)). The warranty arises under operation of contract but extends to
all foreseeable parties, including the employees of the shipowner. See
Sanderlin v. Old Dominion Stevedoring Corp., 385 F.2d 79, 81-82
(4th Cir. 1967). Liability for the breach of the warranty of workman-
like performance arises without fault and appears to approach strict
liability. See Salter Marine, Inc. v. Conti Carriers and Terminals,
Inc., 677 F.2d 388, 390 (4th Cir. 1982).


The issue of whether, under admiralty law, a nonsettling defendant
is entitled to an offset of damages it owes because of the prior settle-
ment between the plaintiff and a third party has been recently
addressed by the Supreme Court. See McDermott, Inc. v. AmClyde,
511 U.S. 202 (1994). McDermott involved several joint tortfeasors
who were found to be proportionately negligent in causing damage to
a crane and oil and gas production platform owned by plaintiff. See
id. at 204. Plaintiff settled with three out of the five defendants for $1
million and proceeded to trial against the remaining two nonsettling
defendants. See id. A jury assessed plaintiff's damages in the amount
of $2.1 million and allocated fault in the proportionate amounts of
32% and 38% respectively to the remaining defendants. See id. The
question presented to the Supreme Court was whether the damages
should be calculated with reference to the jury's allocation of propor-
tionate responsibility, "or by giving the nonsettling defendants a
credit for the dollar amount of the settlement." Id. The Supreme Court
opted for the proportionate approach.

The Supreme Court first stated that fashioning such remedies in the
ambit of admiralty law was not unusual because traditionally the judi-
ciary has taken the lead in such matters. See id. at 207 (citing United
States v. Reliable Transfer Co., Inc., 421 U.S. 397 (1975)). The
Supreme Court's analysis began from the premise that"when a plain-
tiff settles with one of several joint tortfeasors, the nonsettling defen-
dants are entitled to a credit for that settlement." Id. at 208. In
choosing the proportionate approach, the Supreme Court balanced
three policy considerations: consistency with its precedent that dic-
tated a proportionate fault approach in terms of joint tortfeasor's lia-
bility, promotion of settlement, and judicial economy. See id. at 211.

With respect to the promotion of settlement and judicial economy
criteria, the Supreme Court concluded that both the proportionate
fault and dollar-for-dollar offset approaches produced the same
results. See id. at 214-217. Hence, the clinching factor was compli-
ance with its precedent that dictated a proportionate fault approach in
terms of joint tortfeasor's liability. The Supreme Court stated that the
dollar-for-dollar approach would produce frequent deviations from
the equitable apportionment of damages, see id.  at 212-13, and conse-
quently adopted the proportionate rule on fairness grounds. See id. at


In so doing, the Supreme Court explicitly rejected the "one satis-
faction rule." The "one satisfaction rule" operates to "reduce a plain-
tiff's recovery against a nonsettling defendant in order to ensure that
the plaintiff does not secure more than necessary to compensate him
for his loss." Id. at 218. The Supreme Court first noted that the "one
satisfaction rule" only comes into play in those instances where the
plaintiff would be overcompensated (a fact not present in
McDermott). See id. at 218-19. Regardless of that factual scenario, the
Supreme Court then added that it would still apply the proportionate
approach even if it would result in overcompensation because "[t]he
law contains no rigid rule against overcompensation." Id. at 219. It
stated that this was a policy consideration that valued imposing pay-
ments on tortfeasors who cause damage more than avoiding overcom-
pensating plaintiffs. See id. The Supreme Court recognized that
settlements "frequently result in the plaintiff's getting more than he
would have been entitled to at trial" but refused to penalize such
plaintiff by opining that "a plaintiff's good fortune in striking a favor-
able bargain with one defendant gives other defendants no claim to
pay less than their proportionate share of the total loss." Id. at 219-20.

Even though both parties and the district court below recognize that
Sealift and UHP are not joint tortfeasors because their duties towards
Chisholm arose from independent sources, the parties still urge us to
look to McDermott in resolving this case. Similarly, the dissent would
refer to McDermott "for guidance." Such reliance is inapposite for one
overriding reason. As illustrated above, even though the Supreme
Court considered three factors in deciding whether to adopt the pro-
portionate approach versus the dollar-for-dollar approach, the only
dispositive factor was based on the equitable considerations on the
apportionment of degrees of fault. See id. at 212-14; see also Gravatt
v. City of New York, ___ F. Supp. 2d ___, 1999 WL 1024551, at *2
(S.D.N.Y. Nov. 5, 1999) (stating that the promotion of settlement and
judicial economy factors were a wash as between the proportionate
share and dollar-for-dollar approaches). In this case, both Sealift and
UHP owed Chisholm duties which impose liability without fault.
Consequently, there can be no allocation of proportion of fault as a
matter of fact and law.

Precedent since McDermott offers little guidance on the issue at
hand when the settling and nonsettling defendants are not joint tort-


feasors. Boykin v. China Steel Corp., 73 F.3d 539 (4th Cir. 1996), an
admiralty case relied on heavily by Chisholm, is not particularly
instructive. In Boykin, the plaintiff's decedent was killed as the result
of the negligence of the nonsettling defendants. See Boykin, 73 F.3d
at 541. After the settlement between the settling defendant and the
plaintiff, the settling defendant filed a lawsuit seeking indemnity from
the nonsettling defendants. The settling defendant, a ship owner, was
found to be "zero percent at fault" at trial but was nevertheless found
liable by virtue of the no-fault doctrine of seaworthiness. See id. at
544. The settling defendant was therefore not a joint tortfeasor for two
distinct reasons: (1) he had 0% of fault in the negligence action; and
(2) his liability was premised on a no-fault doctrine. See id. at 544
n.4. Because the settling defendant was not a joint tortfeasor,
McDermott was deemed inapplicable and the settling defendant was
entitled to full indemnity from the nonsettling defendants. See id. at

The only element truly instructive about Boykin  is the statement
that the McDermott proportionate allocation scheme would be inap-
plicable in cases not involving joint tortfeasors. Otherwise, the rest of
the case is so factually different from the one at hand that no general
rule can be articulated. The two key differences that render Boykin
inapposite are: (1) at least some of the defendants, be it settling or
nonsettling, were deemed to be at fault; and, (2) the case involved an
indemnity claim between defendants. Boykin therefore stands for the
proposition that a settling defendant without fault can secure full
indemnity from other defendants at fault regardless of the those other
defendants' degree of culpability. See also Bertram v. Freeport
McMoran, Inc., 35 F.3d 1008, 1013 (5th Cir. 1994).

Westinghouse Credit Corp. v. M/V New Orleans, 39 F.3d 553 (5th
Cir. 1994), similarly states that McDermott"applies only to cases in
which there has been a settlement by a joint tortfeasor." Id. at 555. In
Westinghouse, two nonsettling defendants were seeking to offset the
damages award against them with the award received by the plaintiff
from a settling defendant. In ruling that damages had been incurred
in two separate and independent instances, the court stated that
"[b]ecause the essential relationship of joint tortfeasors does not exist
between [the nonsettling defendant] on the one hand and the settling


defendants on the other, [the nonsettling defendant] is not entitled to
any settlement credit." Id. at 555-56.

Chisholm has seized on the seemingly sweeping nature of this last
sentence to state that the only circumstance in which credit is due to
nonsettling defendants following a prior settlement is that scenario in
which there is a joint tortfeasor relationship between all defendants
involved. This reads Westinghouse out of context. The above sentence
is found immediately following the passage below:

      The photos taken by Webster in November 1985 and Sep-
      tember 1986, along with his reports and the corroborating
      testimony, confirm that what we have here is two separate
      torts resulting in two different harms -- one occurring over
      a period of two days as a result of a negligent towage of the
      vessel and one occurring over a subsequent period of one
      year as a result of negligence in the care and custody of the
      vessel during storage.

Id. Thus, when using the term "joint tortfeasor" following the above
passage, the Westinghouse court was referring to the two independent
sources of the damage suffered by the plaintiff and not to a definition
of the term "joint tortfeasor" that limits the term's application to situa-
tions in which two defendants are liable to a plaintiff under the same
cause of action. I.e.- the Westinghouse court focused on the harm suf-
fered by the plaintiff and declared that the defendants in
Westinghouse were not "joint tortfeasors" because the damage that
they caused the plaintiff could be traced to two separate and indepen-
dent events. Westinghouse, therefore, stands for the proposition that
a nonsettling defendant cannot receive credit from a prior settling
defendant when the defendants each independently caused the plain-
tiff's divisible injury.

The dissent would begin the analysis in this case by applying the
"collateral source rule." The "collateral source rule" prevents the
defendant from claiming an offset from compensation already
received by the plaintiff from a different source when this source is
collateral to the defendant. See United States v. Price, 288 F.2d 448,
449 (4th Cir. 1961). The two policies underlying this rule are "(1) to
punish the tortfeasor, or (2) to ensure that the injured party receives


benefits for which he or she has contracted." Clausen v. Sea-3, Inc.,
21 F.3d 1181, 1193 n.18 (1st Cir. 1994). Because UHP is liable under
a strict liability doctrine, and consequently liable without fault, UHP
does not fall within the scope of the first policy rationale. The dissent
sees the jury verdict finding UHP liable for breach of the warranty of
workmanlike performance as a vindication of its assertion that
"UHP's liability before the jury depended upon a demonstration of
fault." Nothing in the record can be construed to support this asser-
tion. The district court dispensed with Chisholm's demand for a jury
because no negligence claim, i.e.- no fault-based claim, remained in
the case. Likewise, the doctrine of workmanlike performance is not
premised on any showing of fault. The second policy rationale is
inapplicable because Chisholm is not claiming benefits for which he
contracted. Therefore, neither of these policies are at play here and
reliance on the "collateral source rule" in this case is inapposite.

The "one satisfaction rule" offers us the best starting point for
resolving the issue at hand. Even though this rule is traditionally
employed in cases involving joint tortfeasors, its equitable consider-
ations operate equally well in the strict liability arena. As noted, this
equitable doctrine operates to reduce a plaintiff's recovery from the
nonsettling defendant to prevent the plaintiff from recovering twice
from the same assessment of liability. See Krieser v. Hobbs, 166 F.3d
736, 743 (5th Cir. 1999); see also Marcus, Stowell & Beye Govern-
ment Securities, Inc. v. Jefferson Investment Corp. , 797 F.2d 227, 233
(5th Cir. 1986) ("[t]he one satisfaction rule is based on the notion that
allowing a double recovery is ordinarily against legal policy");
Restatement (Second) of Torts S 885(3) (1979). The essential require-
ment for the "one satisfaction rule" is that the amounts recovered by
settlement and the judgment must represent common damages arising
from a single, indivisible harm.2See Howard v. General Cable Corp.,
674 F.2d 351, 358 (5th Cir. 1982); see also Harris v. Union Elec. Co.,

2 Chisholm argues that the terms"common damages" and "single, indi-
visible harm" are terms of art that apply exclusively to joint tortfeasors.
This argument is not borne out by the relevant caselaw. Courts use these
terms in their plain meaning to refer to the same injury caused by differ-
ent parties. See e.g. Howard, 674 F.2d at 358; Ratner v. Sioux Natural
Gas Corp., 719 F.2d 801, 803 (5th Cir. 1983).


846 F.2d 482, 485 (8th Cir. 1988) (characterizing the "one judgment
rule" as entitling the plaintiff to one satisfaction for each injury).

The above inquiry into the origin of the harm could yield two pos-
sible answers: (1) the harm is separate and clearly delineated for each
defendant; or (2) the harm is single and indivisible. If the factual
inquiry yields the former answer, then the analysis terminates because
the nonsettling defendant cannot claim credit for a settlement on a
cause of action in which he took no part. See Westinghouse, 39 F.3d
at 555-56. However, if the defendants caused a single and indivisible
harm then the analysis must proceed to a determination of whether the
plaintiff has been overcompensated.

The determination into whether or not the plaintiff has been over-
compensated will necessarily begin with the presentation of two sets
of figures: (1) the amount received from the settling defendant; and
(2) the amount awarded after trial against the nonsettling defendant.
If the former amount is larger than the latter amount, then the plaintiff
has been overcompensated in the settlement. If the latter amount is
larger than the former amount, then the plaintiff has been undercom-
pensated in the settlement. No apportionment of culpability between
the defendants is possible because the whole premise of this scenario
is that both defendants, settling and nonsettling, are liable for a no-
fault, single, indivisible harm and therefore the amount imposed at
trial against the nonsettling defendant will necessarily be the full
amount of damages.

In cases where the trial award results in an overcompensation in the
settlement to the plaintiff, the district court should negate the jury
award. See Singer v. Olympia Brewing Co., 878 F.2d 596, 600-01 (2d
Cir. 1989) (stating that a court will not help a plaintiff achieve a total
recovery that exceeds the amount received in the litigated case and
that the reduction will be assessed against the court judgment). How-
ever, in those cases where the trial's verdict fixing the total harm to
the plaintiff indicates an undercompensation in the settlement, the
amount should be reduced, but only to the extent that the plaintiff still
comes away with the full recovery as deemed by the fact-finder. See
Strachan Shipping Co. v. Nash, 782 F.2d 513, 520 (5th Cir. 1986).

The following two examples illustrate the above concept: In an
action where both defendants breach no-fault duties, plaintiff settles


with defendant 1 for $200,000. Defendant 2 proceeds to trial, loses
and has $100,000 of damages awarded against him. The $100,000
award is offset resulting in a judgment for the defendant. Plaintiff still
receives $100,000 more than the total amount of damages as deter-
mined by the fact-finder but does not further benefit from a second
windfall. The dissent seems to ignore the fact that plaintiff has already
benefitted from a $100,000 windfall and it is a second windfall that
the application of the "one satisfaction rule" is designed to prevent in
this circumstance.

The second example occurs in an action where two defendants both
breach no-fault duties and defendant 1 settles with plaintiff for
$100,000. Defendant 2 proceeds to trial, loses and has a $500,000
award assessed against him. This time the trial award is reduced by
the $100,000 amount that plaintiff received through his settlement
with defendant 1, thus resulting in a net award of $400,000 against
defendant 2. The "one satisfaction rule" now operates to level plain-
tiff's recovery to the full amount of his damages.

Because the no-fault breaches apply to both defendants, the focus
in the above examples is not on whether one defendant pays more
than the others or whether a particular defendant receives a windfall.
Rather, the focus is exclusively on the amount the plaintiff is entitled
to receive.3 The dissent, in applying the collateral source rule, states
that the majority is giving UHP an incentive not to settle the first suit
which Chisholm brought against Sealift. That is, the dissent seems to
premise its reasoning on the assumption that a prior settlement will
always be larger than a subsequent damages award at trial. It is hard

3 The district court, in its opinion, implied that it was using the "one
judgment rule" to prevent UHP from being unduly penalized in light of
the fact that it had already indemnified Sealift for over double the
amount the jury said UHP was liable for. See Chisholm, 30 F. Supp. 2d
at 937-38. From the opposite angle, the dissent also asserts that we
should be wary of giving UHP a windfall. Even though we do not believe
that UHP is getting a windfall, for the purposes of the "one satisfaction
rule," the amounts that each defendant will have to pay are immaterial
because the "one judgment rule" concerns itself with preventing over-
compensation to the plaintiff regardless of the source of that overcom-


to see why this is so. If the jury had assessed a $1,000,000 damages
award in Chisholm's favor in the second suit (i.e. the suit brought by
Chisholm against UHP), under the "one satisfaction rule" UHP would
have been saddled with another payment of approximately $800,000.
Now UHP's incentive to settle the first suit is readily apparent
because a prior settlement in which UHP was a participant would
have precluded Chisholm's second suit. Thus, each defendant and
plaintiff will, on a case-by-case basis, assess the advantages and risks
of settling versus going to trial. The test formulated above does not
alter the traditional risk-weighing that parties continuously have to
make in developing litigation strategy. It provides a structure that
contains trial damage awards in cases where both defendants breach
a no-fault duty towards the same plaintiff.

The following three-part test summarizes the considerations that
courts must make in situations where a plaintiff receives an award of
damages in cases where there are multiple defendants, some of whom
have settled with the plaintiff prior to the trial proceedings: (1) Are
the settling and nonsettling defendants both solely liable for breaches
of no-fault duties? (2) Did both defendants' breaches result in a single
indivisible harm to the plaintiff? (3) Did the jury award result in the
prior settlement being an overcompensation or an undercompensa-
tion? If the first two questions are answered in the affirmative, the
inquiry proceeds to the final question.

If the first question is answered in the negative, then the inquiry
might shift either to a McDermott scenario where both defendants
breach fault-based duties or to a Boykin-type situation where only one
defendant is culpable. If the second question is answered in the nega-
tive, then the nonsettling defendant is not entitled to a credit from the
prior settlement. See Westinghouse, 39 F.3d at 555-56.


Applying the three-part test to the facts of this case it appears that
both Sealift and UHP solely breached no-fault duties: Sealift was lia-
ble under the doctrine of seaworthiness while UHP breached the
implied warranty of workmanlike performance. Neither of these par-
ties are liable for any fault-based breaches. The harm to Chisholm
was single and indivisible being the injury he sustained from being


struck by the wild hose. Chisholm received approximately $230,000
from Sealift and was awarded $90,000 by the trial court against UHP.
Hence, the settlement was an overcompensation. Therefore, the
$90,000 is reduced to zero as an offset to the amount received by
Chisholm in the prior settlement.


KING, Circuit Judge, dissenting:

On July 1, 1994, Ultra High Pressure Projects, Incorporated
("UHP"), breached its duty to provide workmanlike performance on
board the ULTRAMAX, and this breach was the proximate cause of
Mr. Chisholm's severe injuries. As such, UHP is, under any modern
definition of the term, a "tortfeasor." Because well-established legal
principles do not permit such tortfeasors to offset tort damage awards
with payments the plaintiff receives from a collateral source, UHP
should be required to pay, in its entirety, the tort award fixed against
UHP at trial. Therefore, I would reverse the district court's "equita-
ble" offset that permitted UHP to avoid paying the $90,000 damage

The majority, by contrast, has fashioned, from whole cloth, a land-
mark "equitable" rule that benefits, ironically, a defendant (UHP) with
none of the equities on its side. This new remedy not only affords
UHP an offset it does not deserve; it also undermines core values --
including the promotion of settlements and judicial economy and effi-
ciency -- encompassed in the law of admiralty. In fact, our existing
scheme of admiralty remedies accounts for each of the equitable con-
cerns that have driven the majority to create, without supporting
authority, this new rule. In the end, the majority confirms that for
every problem, there is one solution that is simple, neat and wrong.
The majority has reached such a result in this case, and I therefore




When the "ultra high pressure" hose fitting struck Mr. Chisholm
while he was at work on board the ULTRAMAX, he suffered a com-
pound depressed skull fracture with lacerated dura. 1 This fractured
skull required three days of in-patient hospitalization, after which Mr.
Chisholm spent three months recuperating at his home with no physi-
cal activity. In September 1994, over three months after the accident,
Mr. Chisholm undertook his first post-accident physical activity, and
he could not attempt a return to work until January 1995. Even then,
a physician hired by Sealift (Mr. Chisholm's employer and the owner
of the ULTRAMAX) opined that Mr. Chisholm could not return to
work until March 1995; as a result, Mr. Chisholm did not resume his
duties as a seagoing engineer for nearly seven months after his injury.


Having incurred burdensome expenses and losing seven months of
income as a result of his fractured skull, Mr. Chisholm requested
compensation from Sealift for: (1) maintenance and cure benefits2 and
(2) damages as a result of the unseaworthiness of the ULTRAMAX.3
Sealift responded by paying Mr. Chisholm $29,025.93 in maintenance
1 The "dura" is the outermost membrane covering the brain, adhering
to the inner layer of the skull. See Dorland's Medical Dictionary, at 512
(28th ed. 1994).
2 "Maintenance and cure -- a right given by the general maritime law
in consequence of the seaman's status resulting from any shipping con-
tract between the seaman and the master or the vessel -- gives to the sea-
man, ill or injured in the service of the ship without willful misbehavior
on his part, wages to the end of the voyage and subsistence, lodging and
care to the point where the maximum cure attainable has been reached."
See Martin J. Norris, The Law of Seamen S 26:2 (4th ed. 1985).
3 Shipowners owe seamen a nondelegable duty to provide a ship --
including the "ship's hull, gear, appliances, ways, appurtenances and
manning" -- that will be "reasonably fit for its intended purpose." Norris
at S 27:2. This is a "species of liability without fault and is not limited
by conceptions of negligence." Id. atS 27:3.


and cure benefits. However, Sealift reserved the unseaworthiness
claim until it could provide UHP the opportunity to participate in the
settlement of that claim.

Sealift thereafter repeatedly sought to involve UHP in settlement
negotiations in a continuing effort to avoid litigation. First, on April
18, 1996, Sealift requested that UHP: (1) take-over the defense of Mr.
Chisholm's claim; (2) indemnify and hold Sealift harmless; and (3)
approve a proposed settlement. UHP did not accept any of these
requests; thus, on May 10, 1996, Sealift repeated these three requests,
specifying that Mr. Chisholm and Sealift had agreed in principle upon
a proposed settlement of $200,000 and that there was a May 24, 1996
deadline for UHP's participation in negotiations. Again, no UHP
acceptance was forthcoming. Finally, on June 5, 1996, Sealift made
a third (and final) attempt to include UHP in the settlement discus-
sions. In its June 5, 1996 request, Sealift noted that there was a June
7, 1996 deadline for UHP's participation in the settlement negotia-
tions. Again, UHP refused to join the negotiations.

On June 11, 1996, Sealift -- having tendered its defense and hav-
ing requested UHP's participation in the settlement negotiations three
separate times to no avail -- entered into a settlement agreement with
Mr. Chisholm. Pursuant to that settlement, Sealift received a general
release and Mr. Chisholm received $200,000. Because UHP refused
to participate in the settlement negotiations, the settlement did not
release UHP, and Mr. Chisholm specifically retained the option of
seeking compensation from UHP separately.


On July 17, 1996, Sealift filed suit in the Eastern District of Vir-
ginia against UHP for indemnity on theories of: (1) breach of the
implied warranty of workmanlike performance; and (2) negligence,
seeking the settlement amount Sealift had paid to Mr. Chisholm. The
indemnity suit proceeded to the summary judgment stage, and on
December 11, 1996, before the court heard oral argument on Sealift's
motion for summary judgment, UHP and Sealift entered into a settle-
ment whereby UHP paid Sealift $229,025.93 to settle the indemnity
claim. This settlement represented 100% of the payments Sealift had


made to Mr. Chisholm arising out of his fractured skull and lacerated


On June 5, 1996, before Mr. Chisholm settled with Sealift, he filed
suit in the Eastern District of Virginia against UHP on: (1) a claim of
common law negligence4 and (2) an admiralty claim of breach of
implied warranty of workmanlike performance. The case proceeded
to trial, where the district court empaneled an advisory jury. That jury
determined that Mr. Chisholm suffered $90,000 in damages as a result
of UHP's breach of the implied warranty of workmanlike performance,5
and after determining that Mr. Chisholm was not entitled to a jury
trial, the district court adopted the jury's damage determination as its
own. However, rather than entering judgment for Mr. Chisholm on
the damage award, the district court entered judgment on behalf of
UHP, holding that the "single recovery rule," when coupled with the
"proportionate share rule," negated the award of damages. The result
was that Mr. Chisholm received nothing from UHP, the sole tortfea-
sor here.



Courts have long recognized that allowing the tortfeasor a credit
for payments from a collateral source detracts from the function of
deterrence in tort law and that the defendant deserves to pay for his
fault. See, e.g., Clausen v. Sea-3, Inc., 21 F.3d 1181, 1192-93 & n.18
(1st Cir. 1994); 22 Am. Jur. 2d Damages S 566 (1988 & Supp. 1999.)
Thus, "where the injured plaintiff's compensation comes from a `col-
lateral source,' it should not be offset against the sum awarded for the
tort nor considered in determining that award." United States v. Price,
288 F.2d 448, 449 (4th Cir. 1961). Often termed the"collateral
4 The district court granted partial summary judgment to UHP on Mr.
Chisholm's negligence claim after determining that Mr. Chisholm had
"no evidence of negligence." J.A. 103.
5 According to the district court,"[t]he jury was unaware of the prior
settlements." J.A. 108.


source" rule,6 it provides that "compensation from a collateral source
should be disregarded in assessing tort damages[.]" Id. at 449-50.
Under this well-established rule, UHP is not entitled to an offset if:
(1) UHP's liability at trial was based on a jury determination that
UHP was a tortfeasor; and (2) the settlement between Mr. Chisholm
and Sealift constituted a "collateral source" payment. Because this test
is squarely satisfied here, UHP should not receive an offset for
monies paid by Sealift to Mr. Chisholm.


First, under the facts before us, there is no doubt that UHP is a tort-
feasor. A stevedore7 -- like UHP -- cannot be liable to either a ship
or seaman unless it is established that the stevedore was at fault. For
example, in order for a seaman to recover against a stevedore, the sea-
man must establish fault on the part of the stevedore: that the steve-
dore breached the warranty of workmanlike performance. See
Sanderlin v. Old Dominion Stevedoring Corp., 385 F.2d 79, 81-82
(4th Cir. 1967). In this case, Mr. Chisholm presented his case to a
jury, and that jury was properly instructed that UHP's liability was
not without fault. In fact, the district court's instructions to the jury,
without objection from UHP, underscored that UHP's liability
depended upon its breach of a duty running to Mr. Chisholm.8 In find-
6 The "collateral source" rule has been often applied in admiralty cases.
See, e.g., Bourque v. Diamond M. Drilling Co., 623 F.2d 351, 354 n.2
(5th Cir. 1980) ("The collateral source rule is applicable to suits brought
under the Jones Act").
7 A "stevedore" is technically "[a] person employed in loading and
unloading vessels." See Black's Law Dictionary 1414 (6th ed. 1990).
However, parties that perform maintenance on vessels, like UHP, are
effectively treated as stevedores, see infra note 13, and I therefore use the
term "stevedore" to include third parties like UHP.
8 The district court's instructions relating to UHP's liability provided,
it pertinent part:

      In order to recover on this claim, the plaintiff has the burden of
      proving two essential elements by a preponderance of the evi-
      dence. These elements are, first, the defendant breached its war-
      ranty of workmanlike performance; and, second, that this breach
      was a proximate cause of the injury to the plaintiff.


ing UHP liable, the jury thus determined that UHP had utilized equip-
ment that was not "reasonably safe and fit for its intended use,"
notwithstanding the court's instruction that: (1)"there is no require-
ment that the defendant supply absolutely perfect equipment[;] and
(2) "[m]erely because the equipment may have resulted in an injury
to the plaintiff is not of itself sufficient to prove that the defendant
breached its warranty of workmanlike performance." In this regard,
the jury determined that UHP was at fault9  in this accident, and on
      The implied warranty of workmanlike performance applies to all
      work done by a contractor, such as a defendant who performs
      maintenance or repair services on a ship or vessel. Accordingly,
      as a matter of law, the defendant warranted and promised to
      Sealift and to all of its employees, including the plaintiff, that it
      would perform its work on the ULTRAMAX in a workmanlike
      manner. The implied warranty of workmanlike performance
      required the defendant to perform and complete its work with
      reasonable safety and to supply reasonably safe equipment.
      Under this implied warranty, there is no requirement that the
      defendant supply absolutely perfect equipment.

      With this in mind, you must find that the defendant breached its
      implied warranty of workmanlike performance if you find the
      defendant did not perform its work in the ULTRAMAX with
      reasonable safety or if you find that the defendant's equipment
      used on the ULTRAMAX was not reasonably safe.

      This suit is not based on the negligence of the defendant, as there
      is no proof of any negligence on the part of the defendant, nor
      is there any showing that the defendant did not perform its work
      with reasonable safety. The only issue that you may consider in
      this case is whether the defendant's equipment was in fact rea-
      sonably safe and fit for its intended use. Merely because the
      equipment may have resulted in an injury to the plaintiff is not
      of itself sufficient to prove that the defendant breached its war-
      ranty of workmanlike performance.

Transcript of Trial Proceedings, August 19, 1998, at 341-42.
9 Although the district court framed the issue as one of strict liability,
the court's instructions -- by utilizing the term"reasonable" -- actually
required a finding less like "strict liability" and more akin to "negli-
gence." See supra note 8 ("The implied warranty of workmanlike perfor-
mance required the defendant to perform and complete its work with
reasonable safety and to supply reasonably safe equipment. . . . The
only issue that you may consider in this case is whether the defendant's
equipment was in fact reasonably safe and fit for its intended use.")


this basis, UHP satisfies the first element of the collateral source rule
-- that UHP is a tortfeasor.10

To avoid the label "tortfeasor," the majority relies upon the fact
that UHP was strictly liable for all damages caused by its breach of
the implied warranty of workmanlike performance. This argument is
a red herring. Even the majority would concede that a product manu-
facturer is a tortfeasor if the manufacturer is held strictly liable for
damages caused by its defective product. See, e.g., Lui v. Barnhart,
987 P.2d 942, 944-45 (Colo. Ct. App. 1999) ("Strict liability in tort
does not require proof of fault. Generally, it is applied in those situa-
tions -- such as those involving product liability, ultrahazardous
activities, and trespass -- that inherently may inure to the harm of
another regardless of the conduct of the tortfeasor. Such liability is
established by proving the nature of the dangerous product or activity
without regard to a defendant's actions.") (citations and quotations
omitted and emphasis added) (citing Restatement (Second) of Torts
S 402A (elements of strict liability in tort for product liability claims)
& S 520 (abnormally dangerous activities) (1965)); Wagatsuma v.
Patch, 879 P.2d 572, 582 (Haw. Ct. App. 1994) ("A party who asserts
that his or her injuries were caused by a defective product may pro-
ceed against the alleged tortfeasor under principles of negligence
and/or strict liability.") (citations omitted and emphasis added);
Reed v. Central Soya Co., Inc., 621 N.E.2d 1069, 1073 (Ind.
1993)("[I]n the same way that negligent tortfeasors are subject to lia-
bility for property damage caused by their negligence, sellers became
subject to strict liability in tort for property damage caused by a
defective product.") (emphasis added).

Like any product manufacturer that releases a defective product, a
stevedore that breaches the implied warranty of workmanlike perfor-
mance is thus a tortfeasor.11 Indeed, "the Supreme Court has analo-

10 A "tortfeasor" is "[a] wrongdoer; an individual or business that com-
mits or is guilty of a tort." Black's Law Dictionary 1489.
11 Put simply, there is a significant difference, as a matter of law,
between "negligence," "strict liability," and "no fault liability." That the
majority can promulgate its new equitable offset only by obfuscating the
difference between these theories of liability further underscores the


gized the stevedore's warranty to that of a manufacturer, who
expressly or impliedly guarantees the fitness of his product for normal
use. Consequently, the developing jurisprudence of the stevedore's
warranty directly parallels the burgeoning law of manufacturer's
product liability." Sanderlin, 385 F.2d at 81 (citations omitted).
Because UHP's liability before the jury depended upon a demonstra-
tion of fault and because Mr. Chisholm has made that showing, the
first element of the collateral source rule -- that UHP is a tortfeasor
-- is clearly satisfied.


Turning to the second element of the collateral source rule --
whether Sealift's settlement with Mr. Chisholm constitutes a "collat-
eral source" payment -- there is no doubt that Sealift's obligations
and settlement thereof were separate from, and collateral to, UHP's
liability. A ship -- unlike a stevedore -- is the virtual insurer of a
seaman, and Sealift's settlement with Mr. Chisholm was truly based
incorrect nature of the result reached here. The record is clear that UHP
was held strictly liable (and not held liable without fault), and, by con-
trast, that Sealift was liable without fault. Because strict liability is not
the same as liability without fault, the majority's incorrect premise --
that UHP was "liable without fault" (ante  at 9) -- leaves the majority's
conclusions therefrom fatally flawed.

In a similar vein, the majority opinion artfully relies upon the district
court's holding that Mr. Chisholm was not entitled to a jury, claiming
that this holding means that UHP was liable without fault. Ante at 5 n.1.
This assertion is both wrong and misleading. In truth, Mr. Chisholm's
only common law claim (and the only claim that permitted him to
demand a jury) was his negligence claim, which was dismissed. Mr.
Chisholm then successfully proceeded on his claim in admiralty --
breach of the implied warranty of workmanlike performance -- for
which he was not entitled to a jury, and which is a strict liability claim.
Lack of negligence is not co-extensive with lack of fault; therefore, by
conceding that there was no evidence of UHP's negligence, Mr. Chis-
holm did not concede, and the district court did not conclude, that UHP
was liable without fault. In short, the dismissal of the negligence claim
is irrelevant to the ultimate basis of UHP's liability: strict liability, which
is liability with fault.


on liability without fault. We must therefore answer the question
posed by the second element in the affirmative.

At the outset, wages, vacation, sick pay, and workers' compensa-
tion benefits paid by an employer are time-honored collateral sources.
See 22 Am. Jur. 2d Damages SS 574, 576 & 579 (1988 & Supp. 1999)
(e.g., "Recovery under workers' compensation statutes usually does
not reduce the liability of a tortfeasor, who is not the plaintiff's
employer, for damages"). Here, the ship's settlement with Mr. Chis-
holm sought to compensate him for, inter alia , "wages to the end of
the voyage and subsistence, lodging and care." See supra note 2.
Because these payments were truly without regard to the ship's fault
(and UHP does not argue otherwise), and because these payments
were virtually identical to these established collateral sources --
wages, vacation, sick pay, and workers' compensation benefits -- the
ship's settlement is a collateral source payment.

However, even to the extent that Sealift's settlement is not pre-
cisely the same as workers' compensation or the other established col-
lateral sources, that settlement clearly meets the more general
definition of a collateral source. When we evaluate whether a source
is collateral, our determination depends upon "the purpose and nature
of the fund, and not merely . . . their source." 12 Russo v. Matson Navi-
gation Co., 486 F.2d 1018, 1020 (9th Cir. 1973) (quotation and cita-
tion omitted). In this vein, the "liability to which the undoubted
[breach of duty] of [UHP] exposed [Sealift] was not merely that of
a joint tort-feasor, it was the liability without fault attaching to an
unseaworthy ship." Boykin, 73 F.3d at 544. Because Sealift's pay-
ments for, inter alia, unseaworthiness and maintenance and cure
sought to satisfy legal obligations separate and collateral to the tort
damages award against UHP, the ship's settlement is properly to be
regarded as a collateral source payment.
12 Under this analysis, it makes no difference that UHP has settled with
Sealift -- thereby reimbursing Sealift for its settlement with Mr. Chis-
holm -- inasmuch as a defendant himself may be the"collateral source"
from which the additional benefit comes. Price , 288 F.2d at 450 ("The
plaintiff may receive benefits from the defendant himself which, because
of their nature, are not considered double compensation for the same
injury but deemed collateral.").


Put simply, the collateral source rule recognizes that: (1) granting
an offset would permit a "windfall to the defendant wrongdoer[;]" and
(2) "ordinary damages [are unable] to adequately compensate an
injured accident victim." Clausen, 21 F.3d at 1193 n.18 (quotation
omitted). In avoiding a windfall to the tortfeasor, it is true that "the
most obvious effect of the collateral source rule is that it enables a
plaintiff to reap a double recovery in certain circumstances. In other
words, the collateral source rule is an exception to the general rule
that damages in tort should be compensatory only." Id. at 1192 (quo-
tation and citation omitted). However, as between the party solely at
fault here -- UHP -- and the innocent accident victim -- Mr. Chis-
holm, the "windfall" should inure to Mr. Chisholm, and the collateral
source rule should be applied to that end. As a result, I would reverse
the district court's judgment.


The majority's "equitable" offset thus inappropriately rewards a
tortfeasor by voiding the victim's tort damages award. Unfortunately,
however, this new rule will have more damaging consequences
beyond this case. That is, the circumstances present here -- a steve-
dore's breach of duty causing an injury to a seaman in the course of
the seaman's service to a vessel -- is not new to the federal courts,
and the Supreme Court and the other federal courts have developed
a comprehensive scheme that fully allocates the risks, equities, and
procedures between the seaman, the ship, and the stevedore. In the
careful development of this scheme, the federal courts sitting in admi-
ralty have explicitly and repeatedly rejected the"equitable" offset
adopted by the majority in this case. This offset has been rejected for
good reason: the existing scheme promotes core values, like the
encouragement of settlements and judicial economy, and an equitable
offset undermines these values.

Under the existing scheme, the interests of the injured seaman are
paramount, and for that reason, the shipowner bears the first line of
liability to a seaman for any injuries during his service to the ship.
"The doctrines of maintenance and cure and of unseaworthiness have
been developed to give seamen no-fault damage recovery in recogni-
tion of the dangerous character of their work and their quasi-captive
status during their voyage." Flunker v. United States, 528 F.2d 239,


242 (9th Cir. 1975) (citing G. Gilmore & C. Black, The Law of
Admiralty, 281, 393 (1975)). Thus, a shipowner must cover, without
regard to fault, inter alia, the expenses and wages of a seaman injured
in the course of his service to the ship.

However, it had been widely recognized that under this scheme,
shipowners "often are held vicariously liable for the acts of third per-
sons causing injury to seamen[.]" Flunker , 528 F.2d at 242. To ease
this burden, the Supreme Court developed a theory of indemnifica-
tion, whereby a shipowner may recover in indemnity from an at-fault
stevedore13 under certain circumstances. See Ryan Stevedoring Co.,
Inc. v. Pan-Atlantic S.S. Corp., 350 U.S. 124 (1956).14 This right to
indemnification is not without limits; in fact, in applying this indem-
nity doctrine, courts have erected numerous protections, in favor of
the stevedore, against unfair liability and unequal damages. For exam-
ple, before a ship can recover in indemnity against a stevedore, the
ship must meet a burdensome test:

      [F]irst, an indemnitor-indemnitee relationship must exist;
      second, the indemnitee must demonstrate that it was under
      some compulsion to satisfy the original claim of the plain-
      tiff; third, the indemnitee must prove that its settlement with
      the plaintiff in the underlying action was reasonable; and
      fourth, the indemnitee must show that the unlawful act of
      the indemnitor proximately caused the injury to the original
      plaintiff. An additional requirement is that the proposed
      indemnitor be notified of the underlying claim and tendered
      the defense of the claim.

13 Ryan, supra, initially applied only to stevedores, but this indemnifi-
cation doctrine has since been applied to non-stevedore tortfeasors, like
UHP. See Tebbs v. Baker-Whitely Towing Co., 407 F.2d 1055, 1058 n.1
(4th Cir. 1969). In addition, the doctrine now applies even where no con-
tractual indemnitor-indemnitee relationship exists. Waterman S.S. Corp.
v. Dugan & McNamara, Inc., 364 U.S. 421, 423-24 (1960).
14 Ryan has been overruled in part by statute; however, the part over-
ruled is not of relevance here. See Int'l Surplus Lines Ins. Co. v. Marsh
& McLennan, 838 F.2d 124 (4th Cir. 1988).


Boykin, 73 F.3d at 543; see also Vaughn v. Farrell Lines, Inc., 937
F.2d 953, 956-57 (4th Cir. 1991) (quotations and citations omitted).
Thus, among other protections, the shipowner must establish that the
stevedore acted "unlawful[ly]" before a shipowner can recover in
indemnity. Vaughn, 937 F.2d at 957. Therefore, "[i]t is not sufficient
that compulsion for the indemnitee to satisfy the plaintiff's claim be
shown. [Rather, t]he indemnitor `is entitled to try the question of its
own wrongdoing.'" Id. (quoting Maritime Overseas Corp. v. United
States, 608 F.2d 1260, 1261 (9th Cir. 1979)). This same rule is fol-
lowed with respect to a suit by a seaman directly against a stevedore,
and, as indicated above, a seaman may only recover if he can demon-
strate that the stevedore was at fault.

In this regard, the existing scheme addresses each of the "equita-
ble" concerns raised by UHP, the district court, and the panel major-
ity. For example, UHP asserts that the existing scheme forces the
stevedore to pay twice -- once in strict liability to the seaman and
once in indemnity to the shipowner. This assertion is simply wrong.
Under the existing scheme, if the stevedore causes an injury to a sea-
man in the course of the seaman's service to a ship, the stevedore is
given the right to take charge of the defense of all claims arising out
of that injury and litigate (or settle) them together. In fact, if the ship-
owner does not notify the stevedore of the claim and tender the
defense, the stevedore cannot be liable in indemnity. See Boykin, 73
F.3d at 543. Our scheme also gives the stevedore additional leverage
under these circumstances: the stevedore tortfeasor can refuse to settle
any of the claims without a global settlement releasing both the ship
and the stevedore. Thus, if the stevedore participates within the exist-
ing scheme, there should be no danger of double liability.

Similarly, UHP contends that the district court's offset was justi-
fied because "the shipowner has no incentive to strike a fair or reason-
able settlement, but rather, to strike any settlement." Br. for Appellee
at 8 (emphasis in original). This is entirely incorrect; in truth, the
shipowner has the burden, in an indemnity suit, to"prove that its set-
tlement with the plaintiff in the underlying action was reasonable[.]"
Boykin, 73 F.3d at 543. Thus, even if there were no inherent incentive
in avoiding an unreasonable settlement, the indemnity rules require as
much. To the extent that the shipowner's settlement is unreasonable,


the ship may be unable to establish the stevedore's liability for that
settlement, or some part thereof.

The existing scheme of liability and indemnity thus fairly and
appropriately allocates the risks and responsibilities. But our existing,
carefully developed scheme does more; it also advances two of the
"[paramount] considerations" that guide the development of remedies
in admiralty law: "promotion of settlement[ ] and judicial economy."
McDermott v. AmClyde, 511 U.S. 202, 211 (1994). That is, the exist-
ing scheme encourages the ship, the stevedore, and the seaman to
negotiate, litigate, and settle the claims together. Notably, if any of
the defendants opt-out of the scheme, that party bears risks; to wit, if
the ship elects not to notify and tender the defense of the claim to the
stevedore, the ship is not entitled to indemnity. Similarly, if the steve-
dore declines to defend the ship under these circumstances, then the
stevedore loses, inter alia, the ability to leverage the ship's settlement
against its own settlement. This scheme also promotes judicial econ-
omy by effectively requiring the parties to litigate these claims in a
single lawsuit.

Applying this scheme to the facts here, UHP is the last party that
would be entitled to an "equitable" offset. Sealift tendered the defense
Mr. Chisholm's claim three separate times -- in April, May and June
of 1996. UHP consistently declined to participate in any respect, leav-
ing the ship with the burden of settling Mr. Chisholm's claims. Then,
UHP litigated two separate cases: one against Sealift and one against
Mr. Chisholm. Rather than settling Mr. Chisholm's case, UHP
decided to settle Sealift's indemnity claim. Thus, UHP's conduct led
to two separate lawsuits -- clearly undermining the goals of judicial
economy and promotion of settlement. We should not endorse this
obstreperous conduct by now permitting UHP an "equitable" offset.

In this light, the majority's rule effectively permits UHP a second
opportunity at an offset, duplicating the opportunity that UHP would
have had if it had taken over the defense of Mr. Chisholm's claim
against Sealift. But this new rule is not mere benign redundancy.
Practically speaking, the tortfeasor is now in "the catbird seat," and
under the majority's rule, stevedores should never settle. Rather, the
tortfeasor should take UHP's posture: (1) force the ship to defend
itself and settle the case on its own; then (2) litigate against ship and


the seaman, content in the knowledge that no matter what the ultimate
award, the tortfeasor will be entitled to an offset.


In fact, the Supreme Court has flatly rejected the application of a
"single recovery" rule in circumstances closely analogous to those
here, and the reasons underlying that rejection recognize the compre-
hensive nature of the existing scheme. See McDermott, 511 U.S. at
202. In McDermott, the plaintiff was moving an oil and gas produc-
tion platform ("deck") from a barge to a structural steel base affixed
to the floor of the Gulf of Mexico using a newly-purchased crane,
when one of the prongs on the crane's main hook broke, causing
extensive damage to both the deck and the crane. The plaintiff sued
five parties in admiralty: (1) the crane manufacturer ("crane defen-
dant"); (2) the hook manufacturer ("hook defendant"); (3) and three
manufacturers of the supporting steel slings incorporated into the
crane (collectively the "sling defendants"). Id. at 205. On the eve of
trial, the plaintiff settled with the three sling defendants for $1 mil-
lion. The case then went to trial, and the jury assessed the plaintiff's
total damages at $2.1 million, allocating responsibility among the par-
ties: 32% to the crane defendant; 38% to the hook defendant; and
30% jointly to the plaintiff and the sling defendants. The district court
thereafter entered a judgment against the crane defendant for
$672,000 (32% of $2.1 million) and against the hook defendant for
$798,000 (38% of 2.1 million), even though these two payments,
when coupled with the sling defendants' settlement, permitted the
plaintiff to receive a total of $2.47 million, $370,000 more than the
jury had assessed as the plaintiff's total damages. The Fifth Circuit
Court of Appeals then reversed this judgment, opting instead for an
offset in favor of the non-settling defendants.

The Supreme Court reversed the Court of Appeals, and it reinstated
the district court's judgment. In so doing, the Court denied the offset
and permitted the plaintiff to collect damages that totaled an amount
greater than that awarded by the jury. Justice Stevens, writing for a
unanimous Court, underscored why an offset was not appropriate, and
the language utilized is closely applicable to this case. I therefore
quote the relevant portion in some length:


      Even if the Court of Appeals were correct in finding that the
      proportionate share approach would overcompensate[the
      plaintiff], we would not apply the one satisfaction rule. The
      law contains no rigid rule against overcompensation. Sev-
      eral doctrines, such as the collateral [source] rule, recognize
      that making tortfeasors pay for the damage they cause can
      be more important than preventing overcompensation. In
      this case, any excess recovery is entirely attributable to the
      fact that the [settling] defendants may have made an unwise
      settlement. It seems probable that in most cases in which
      there is a partial settlement, the plaintiff is more apt to
      accept less than the proportionate share that the jury might
      later assess against the settling defendant, because of the
      uncertainty of recovery at the time of settlement negotia-
      tions and because the first settlement normally improves the
      plaintiff's litigating posture against the nonsettlors. In such
      cases, the entire burden of applying a proportionate share
      rule would rest on the plaintiff, and the interest in avoiding
      overcompensation would be absent. More fundamentally,
      we must recognize that settlements frequently result in the
      plaintiff's getting more than he would have been entitled to
      at trial. Because settlement amounts are based on rough esti-
      mates of liability, anticipated savings in litigation costs, and
      a host of other factors, they will rarely match exactly the
      amounts a trier of fact would have set. It seems to us that
      a plaintiff's good fortune in striking a favorable bargain
      with one defendant gives other defendants no claim to pay
      less than their proportionate share of the total loss. In fact,
      one of the virtues of the proportionate share rule is that,
      unlike the pro tanto rule, it does not make a litigating defen-
      dant's liability dependent on the amount of a settlement
      negotiated by others without regard to its interests.

McDermott, 511 U.S. at 219-220. If, in McDermott, a unanimous
Supreme Court declined to offset the judgment against a non-settling
tortfeasor by the amounts paid by a settling tortfeasor, then surely the
award against a non-settling tortfeasor (UHP) should not be offset by
the payments by an innocent insurer (Sealift).


In other words, the proportionate share rule, as articulated by the
Supreme Court, is that: "The money paid [by a settling tortfeasor]
extinguishes any claim that the injured party has against the released
tortfeasor and also diminishes the claim that the injured party has
against the other tortfeasor by the amount of the equitable share of the
obligation of the released tortfeasor." McDermott, 511 U.S. at 209
(emphasis added). In this case, where the non-settling party (UHP)
bears 100% of the fault and the settling party (Sealift) bears 0% of the
fault, the proportionate share rule, by definition, would not "apply in
favor of non-settling defendants." Boykin, 73 F.3d at 544. An applica-
tion of that rule to this case illustrates why this is so: Because UHP
is completely at fault and Sealift bears none of the fault, the propor-
tionate share rule would work to diminish UHP's $90,000 damage
award by absolutely nothing.15

We should not ignore the guidance16 that McDermott provided in
denying an offset, notwithstanding the fact that the plaintiff's recov-
ery exceeded the plaintiff's total damages as determined at trial. In
fact, this case presents facts that form a much stronger basis for the
denial of an offset than those present in McDermott. While the
McDermott Court denied an offset relying generally upon "[s]everal
doctrines, such as the collateral [source] rule, [which] recognize that
making tortfeasors pay for the damage they cause can be more impor-
tant than preventing overcompensation[,]" in this case, the offset must
be denied, not only under the general guidance of McDermott, but
also directly under the collateral source rule.


That the majority's new rule undermines core values encompassed
in our existing scheme and runs contrary to Supreme Court guidance
15 That is, the offset under the proportionate share rule would be
Sealift's share of the obligation (0%) multiplied by the factfinder's
assessment of the plaintiff's damages ($90,000), which equals zero.
16 I have no quarrel with the majority that McDermott does not control
this case because the award of damages there followed a determination
that the defendants were joint tortfeasors, while no such determination
can be made here. Nonetheless, UHP is a tortfeasor, and the case thus
provides clear guidance for ruling against an offset for UHP's benefit.


is all the more frustrating given that it is unsupported by any prece-
dent. Indeed, UHP conceded that there is no legal authority for an off-
set in these circumstances. Nonetheless, the majority artfully attempts
to create the illusion of legal support by relying upon four cases in
which, outside the admiralty context,17  courts permitted one joint tort-
feasor to offset its damages with a settlement by the other joint
tortfeasor.18 First, the majority's reliance on this joint-tortfeasor
17 See Howard v. General Cable Corp., 674 F.2d 351, 358 (5th Cir.
1982) (applying Texas law); Ratner v. Sioux Natural Gas Corp., 719
F.2d 801 (5th Cir. 1983) (applying Texas law and federal securities
laws); Marcus, Stowell & Beye Government Sec., Inc. v. Jefferson Invest-
ment Corp., 797 F.2d 227, 233 (5th Cir. 1986) (applying Texas law);
Harris v. Union Electric Co., 846 F.2d 482, 485 (8th Cir. 1988) (apply-
ing federal securities laws).

18 In Howard, 674 F.2d at 358, the plaintiff had sued all of the defen-
dants -- settling and nonsettling -- under tort theories of liability. The
plaintiff then settled with two of the defendants and, subsequently, won
an award of tort damages against the third defendant. The only question
was whether the three tortfeasors caused "common damages" or separate
damages. The Fifth Circuit determined that the damages were "common
damages" because: (1) the two settling defendants had divided the settle-
ment equally (and if the settlement had included exemplary damages
(sought against only one of the settling defendants), the party against
whom those damages were sought would have been required to pay a
larger share); (2) there was a "remarkable similarity between the settle-
ment figure and the amount of damages assessed by the jury[,]" which
supported the notion that the settlement and the jury award represented
the total damages to the plaintiff. Having effectively determined that
three tortfeasors caused common damages, the court permitted an offset
under Texas's "one satisfaction" rule.

Similarly, in Ratner, supra, the court noted that for the one satisfaction
rule to apply, the "credit to be claimed by a joint tort-feasor is confined
to those damages for which all tort-feasors are equally liable.'" Ratner,
719 F.2d at 804 (quoting Hill v. Budget Finance & Thrift Co., 383
S.W.2d 79, 81 (Tex. Civ. App. 1964)). Nonetheless, the court remanded
the case for a determination of the applicability of the "one satisfaction"
rule under Texas law after noting that the district court had held "all four
defendants jointly and severally liable for both actual and punitive dam-
ages." Ratner, 719 F.2d at 804. See also Marcus, Stowell & Beye, 797
F.2d at 233 (Fifth Circuit permits offset under"one satisfaction" rule


authority is ironic to say the least: Before citing these cases, the
majority explained, at length, that the McDermott rule, which was
applied in both Boykin and Westinghouse  to deny an offset, only
applies to prohibit an offset when the settling and non-settling parties
are determined to be joint tortfeasors. Because, the majority reasons,
UHP and Sealift are not joint tortfeasors, the McDermott rule prohib-
iting an offset is not available to Mr. Chisholm. Ante at 5-9. Then, in
the same breath, the majority relies upon these four cases to justify
the application of the "single recovery rule." Significantly, each of
those cases permitted an offset only after determining that the settling
and non-settling defendants were, in fact-- in each instance -- joint
tortfeasors. Under this reasoning, the majority's authority is inapplica-
ble for the same reason that McDermott's rule would be inapplicable:
UHP and Sealift are not joint tortfeasors. Further, the discrepancy
revealed by the majority's reasoning -- that "single recovery" offsets
are permitted between joint tortfeasors in other contexts but are not
permitted in admiralty -- serves only to illustrate that admiralty law
is different. In admiralty, these offsets have been rejected in favor of
a comprehensive scheme, and the majority's legal authority -- based
upon non-admiralty law -- is thus inapposite.

Second, one of the authorities relied upon by the majority actually
does much to demonstrate why no offset should be permitted in this
case. In that case, Kreiser v. Hobbs, 166 F.3d 736, 743 (5th Cir.
1999), the Fifth Circuit explained:

      Set-offs for settlement and the "one-satisfaction" rule exist
      to prevent the plaintiff from recovering twice from the same
      assessment of liability.19 But, where liability is not joint-
(Text continued on page 32)
only because "the breaching party[ ] and. . . the party inducing the
breach, were jointly and severally liable under Texas law for [plaintiff's]
single injury."); Harris, 846 F.2d at 485 (holding that "one satisfaction"
rule offset was warranted only after determining that the liabilities of the
settling party and the non-settling party were "joint and concurrent.")
19 That there is no single "assessment of liability" is another deficiency
in application of the "one satisfaction" rule in these circumstances,
because the absence of this "assessment" requires district court to specu-
late in order to apply this new offset. Prior to this case, courts could only


apply the "one satisfaction rule" offset after the factfinder determined:
(1) the plaintiff's total damages; and (2) that the settling and non-setting
parties were jointly and severally liable. Following these findings of fact,
the court could then offset the non-settling party's damage award by the
settlement paid by the settling party (against whom co-extensive liability
had been established) if the plaintiff would otherwise recover an award
in excess of his total damages. Because the factfinder had made the nec-
essary determinations, the court could reasonably conclude that monies
paid by the settling party sought to extinguish the same liability for
which the non-settling joint tortfeasor was subsequently held liable.

By contrast, the majority's new application of the"one satisfaction
rule" forces courts to speculate about whether the liability of the settling
and non-settling parties, although under different theories of liability,
was, nonetheless, co-extensive. For example, in this case, the majority,
by offsetting the damage award against UHP by Sealift's settlement,
implicitly concludes that Sealift's liability was co-extensive with UHP's
liability. As is illustrated below, this conclusion is based on nothing but

First, as UHP made clear at oral argument, Sealift's suit against UHP
for indemnity was based upon two theories of liability: (1) breach of the
implied warranty of workmanlike performance; and (2) negligence. In
fact, Sealift was seeking $200,000 for UHP's negligence, in addition to
the $229,025.93 that Sealift had paid to Mr. Chisholm. Faced with these
two theories of liability, UHP chose to settle for $229,025.93 and thereby
obtain a release against both the negligence and strict liability claims.
Second, UHP's counsel asserted at oral argument that: "there was evi-
dence at trial that there was . . . a problem with the ship's water supply."
In other words, even at trial, there was some evidence that Sealift could
have been partially at fault in this accident, although this theory was not
litigated at trial. Thus, UHP and Sealift arguably faced liabilities in tort
that were not co-extensive.

These facts notwithstanding, the majority speculates that Sealift's set-
tlement with Mr. Chisholm relieved liabilities caused entirely by UHP,
and that UHP's settlement with Sealift satisfied all claims for damages
arising out of UHP's breach. Were we to speculate in this manner, how-
ever, an equally plausible scenario is that Sealift settled with Mr. Chis-
holm because "there was a problem with the ship's water supply" that
caused part of Mr. Chisholm's injury, and Sealift settled immediately to
avoid extensive liability. Similarly, an equally plausible alternative is


      and-several, and each defendant instead bears liability for
      damages only proportionate to his own fault, there is no
      assessment of liability for damages common to the settling
      and non-settling defendants. Accordingly, the settlement has
      an entirely separate basis from the apportioned damages,
      and the one-recovery rule does not apply. The "one satisfac-
      tion" rule applies to situations like the one in[Turner v.
      Pickens, 711 So. 2d 891 (Miss. 1998)], in which liability
      from two parties is rooted in a single source (there, the
      remittitur). Where, as here, liability or payment is separately
      rooted, the rule is inapposite.

In other words, what may seem at first blush to be"unfair" is not
unfair, not only because admiralty law has decided to promote other
values, including, inter alia, the interests of the seaman, the encour-
agement of settlements, and judicial economy, but also because
Sealift and UHP had different sources of liability. Put simply, the
majority has cited no authority that supports the application of this
new "equitable" rule, and I am unable to endorse it.


This decision rewards UHP -- an obstreperous tortfeasor -- by
permitting an offset for monies that Mr. Chisholm received from a
collateral source; the net result being that Mr. Chisholm receives no
damages in tort. As such, the majority opinion is unsupported by any
legal authority; it misapprehends the facts; it misapplies the law to the
facts; and the landmark result it reaches inadvertently undermines a
carefully developed, comprehensive scheme. I believe that this tort-
feasor -- UHP -- should be required to fully satisfy the damages
awarded against it in tort, but unfortunately, because this tribunal

that UHP settled with Sealift to avoid an additional $200,000 in liability
arising out of UHP's negligence. That there are equally plausible but
similarly speculative scenarios merely reveals that the liabilities of UHP
and Sealift were not necessarily coextensive; indeed, we will never know
what liability these two parties would have faced had their cases gone to
trial. In this light, the majority's new rule unreasonably forces courts to
speculate about what liabilities moved the settling party to settle.


blunders, the tortfeasor goes free. I cannot endorse this new "equita-
ble" rule or join in this result, and I therefore dissent.