In Re Hellenic Inc.

Hellenic was installing a pipeline for Texaco when a spud barge it was operating struck and ruptured a natural gas pipeline owned by another company. A construction superintendent employed by Hellenic made the decision to leave the barge unmanned and anchored by its spuds. He had worked on this particular project for fifteen years and had authority over all four vessels used on the project. He also supervised two contract divers employed to bury the pipeline. The superintendent could not make business decisions on behalf of the company, however. For instance, he could not bind the company by contract, set prices, or hire and fire employees.

Hellenic filed a complaint for exoneration from or limitation of liability. Both Texaco and the owner of the ruptured pipeline filed a complaint seeking costs. The trial court determined that Hellenic was 60% negligent and Texaco was 40% negligent and awarded damages to the pipeline owner. Hellenic appealed the court’s denial of limited liability.

A party is entitled to limitation only if it is without privity or knowledge of the cause of the loss. If the shipowner is a corporation, knowledge is judged by what the corporation’s managing agents knew or should have known with respect to the conditions or actions that caused the loss. Courts are to determine whether the employee is a managing agent with respect to the field of operations in which the negligence occurred. This determination is case-specific, and courts can look to the following factors:

the scope of the agent’s authority over day-to-day activity in the relevant field of operations;

the relative significance of this field of operations to the business of the corporation;

the agent’s ability to hire or fire other employees;

the agent’s power to negotiate and enter into contracts on behalf of the company;

the agent’s authority to set prices;

the agent’s authority over the payment of expenses;

whether the agent’s salary is fixed or contingent; and

the duration of the agent’s authority.

Applying these factors to the instant case, the Court of Appeals noted that the superintendent only exercised authority over one of the company’s four construction projects. He could not make business decisions for the company. Therefore, he did not possess managing authority over the field of operations in which the negligence occurred, and the company was found to be without privity or knowledge of the superintendent’s negligent decision to leave the spud barge unmanned.