How evading oil spill liability is helped by a Seattle tragedy
There are tragic Seattle echoes in a move by the operators of the Deepwater Horizon drill rig to limit their liability for the worst oil spill in U.S. history. Transocean Ltd. has asked a federal judge in Houston to pre-empt pending lawsuits by capping the company's liability at less than $27 million.
The company claims its financial responsibility is limited, under the Limited Liability Act of 1851, to the value of the oil platform and its cargo.
A ruling often cited in such cases came in a Seattle courtroom, following a shipwreck that killed 353 people including at least 149 from Seattle.
On Oct. 25, 1918 the luxury ship Princess Sophia left Skagway, Alaska for Vancouver, Victoria, and Seattle. The ship was licensed to carry 200 passengers, but it was freeze-up season in Skagway and thousands were willing to pay a premium for almost any space. The Sophia's owners, Canadian Pacific Railway, arranged for a special one-trip license to carry an extra 100 people.
At 3 a.m. Sophia smashed into Vanderbilt Reef, south of Juneau. The ship's speed carried it high onto the rocks where it hung, firmly wedged, for 40 hours, as a wind and snow storm raged.
By daylight, eight rescue ships were circling. Cornelius Stidman of Seattle, a deck hand on the harbor boat Peterson, wrote the Seattle Times that two of the rescue ships moved within a few feet of an open cargo port on the Sophia during a lull in the storm, and offered to attempt a transfer of the passengers, but Capt. Leonard Locke refused. The passengers were better off where they were, Locke insisted. A sister ship of the Sophia was said to be on its way, to take on the passengers soon as the storm cleared.
"There is no appropriate comment on this needless loss of life," Stidman wrote. "They all could have been taken off."
By nightfall of the second day, all but one of the rescue ships had run for shelter. At 5:20 p.m. the Sophia's radio operator signaled, "For God's sake come and save us." It was the last anyone heard from the ship. Huge waves tore it from the rocks, turned it end-for-end, and dumped it into the sea. Everyone died.
Canadian Pacific was a huge corporation for its time, with more than $1 billion in assets when a billion was serious money. CPR's brochures, hawking tourism on the Sophia and ten other Princess ships running the Inside Passage, emphasized the skill and competence of their captains and crews. But when the Sophia smashed the reef, it was running an estimated 11 knots, in the dark, in a blizzard, with no forward watch. Electronic navigation aids were years away; ships' navigators plotted their way through the darkness by sounding their whistle and timing the echoes from the shoreline. The Sophia was a mile-and-a-half off course in notably dangerous waters.
The owners quickly denied responsibility, fighting even the payment of workers' compensation to the families of the crewmembers. Canadian Pacific's attorneys, Bogle and Gates of Seattle, fought off years of lawsuits by families of the passengers, most of them represented by Seattle attorney William Martin.
In 1921, U.S. District Judge Jeremiah Neterer issued a preliminary ruling against CPR. If the company were found negligent, which he indicated it would be, it would owe $2.5 million to the families of the victims, plus another $1 million in attorneys' fees.
The company filed for a rehearing on the same testimony the judge had already heard, and ten days later Neterer overruled himself.
He found that Canadian Pacific's liability, under the 1851 Limited Liabilities Act, was for only the total passenger and freight fares and baggage, plus the salvage value of the wreck at the bottom of the Inside Passage. The 9th U.S. Circuit Court of Appeals upheld Neterer and the U.S. Supreme Court declined to take the case.
Lloyd's of London had insured the Sofia, and Canadian Pacific collected $250,000. But that payment belonged to the company, not the heirs of the doomed.
Transocean says it will net $270 million from its insurance policy on the Deepwater Horizon. The company also announced plans to distribute $1 billion to its shareholders, at the same time as it seeks to limit its liability for 11 deaths and what may be the world's worst environmental disaster.
Eighteen Democratic U.S. Senators including Washington's Patty Murray have asked the Justice Department to investigate Transocean's finances. Meanwhile, Sen. Charles Schumer of New York says he'll introduce a bill to repeal the law that has for 159 years provided a peculiar legal shelter to ship owners. The shelter worked out for Canadian Pacific, which settled damage claims for $643.50 — that's $1.82 for each life lost aboard the Princess Sophia.
Footnote: Portions of this story appeared in the Seattle Weekly in October 1993. That story resulted from the author's access to the files of the late Alex Johnson of Lake Forest Park, including letters from Johnson's uncle, D.A. Muirhead, a land-based agent for CPR steamships. For a more detailed account, see Ken Coates and Bill Morrison, The Sinking of the Princess Sophia: Taking the North Down With Her, University of Alaska Press, 1991. See also "Shippers' Limitations of Liability," by Walter W. Eyer, Stanford Law Review, 1964.