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December 27, 1973

STONE MANGANESE MARINE, LTD., et al., Defendants. AMERICAN SMELTING & REFINING CO., Defendant, Third-Party Plaintiff, v. AVONDALE SHIPYARDS, INC., Third-Party Defendant

Lacey, District Judge.

The opinion of the court was delivered by: LACEY

This is a motion for summary judgment pursuant to Rule 56(c), Fed. R. Civ. P., by defendant American Smelting and Refining Company (Asarco), a New Jersey corporation, against plaintiff States Steamship Company (States), a Nevada corporation. Asarco asserts there is no dispute as to any material fact and that it is entitled to a judgment dismissing States' claims against it, as a matter of law. After considering the affidavits and briefs submitted by both parties, and having heard oral argument, I find Asarco's motion must be denied. I must emphasize, however, that this denial is made in light of the facts as they have been presented herein to date.

 Plaintiff herein seeks a recovery in excess of $2.8 million for damages allegedly suffered as a result of the purchase of seven allegedly defective propellers cast by third-party defendant, Avondale Shipyards, Inc. (Avondale), from an alloy, Superston, supplied to Avondale by Asarco. In its action, jurisdiction of which is based on diversity of citizenship, 28 U.S.C. Section 1332, plaintiff seeks to recover damages not only from Asarco, but from Stone Manganese Marine, Ltd. (Stone), Stone Platt Industries, Ltd. (Stone Platt), Stone Platt Overseas, Ltd. (Stone Platt Overseas) and Superston Corporation (collectively, the Stone Companies) as well. Liability as to Asarco is alleged on theories of negligence, strict liability in tort, breach of implied warranties and breach of express warranty, founded upon a claim that the alloy as produced by Asarco was defective insofar as its use in propellers was concerned. Crossclaims for contribution and indemnification were filed by and between the Stone Companies and Asarco.

 The facts giving rise to this action are both complex and disputed in many material respects. On May 20, 1966, States entered into a contract with third-party defendant Avondale and the United States Government. The agreement provided that Avondale would construct five ships (and the propellers for them) in accordance with plans already drawn for States by George C. Sharp Company.

 Prior to January 1966 it was decided that the ships' propellers were to be made of Nialite, a material somewhat different from the Superston alloy eventually used. Defendants claim the decision to change to Superston was made by Sharp, on advice of the Columbian Bronze Corporation, in January 1966. It appears, however, the orders were not given to Avondale before October 1966.

 The Superston material was cast into ingots by Asarco at its Houston, Texas, plant (although plaintiff claims it was likely that ingots used in the one spare propeller cast in New Jersey by Ferguson Propeller and Reconditioning, Ltd., were made in Asarco's New Jersey plant). The Houston ingots were delivered F.O.B. New Orleans, to Avondale, and there cast into propellers which were installed on the constructed vessels.

 Plaintiff and the moving defendant are in dispute as to where delivery of the ships and spare propellers took place, Plaintiff designating California, Defendant contending for New Orleans, at various times between September 1968 and August 1969. Defendants also claim that the two ships first experiencing propeller difficulties were "launched" from California.

 Problems with the propellers apparently began on the high seas in March of 1969. The Montana, one of the five ships constructed by Avondale with propellers of Superston, while en route from Japan to Korea, suffered fractures in several propeller blades. Not only were the propellers themselves damaged but the main stern tube bearings were damaged, as well. Asarco claims the latter damage was minor; States, of course, disagrees.

 On March 23, 1969, thirteen days after the Montana mishap, another of the five Avondale-built and States-owned vessels, the Colorado, also sustained a broken propeller while at sea in the Far East. Damage to the main stern tube bearings and the tail shaft is again claimed to have resulted from the failure; and the parties are once again at odds as to the seriousness of this damage.

 Both damaged vessels were repaired in Asian ports and returned to California. Meanwhile the Superston propellers on the three remaining Avondale-built ships were removed by States and stored with the spare propellers after the American Bureau of Shipping declared all of the Superston propellers "unacceptable for use on a vessel classed with the Bureau." [Affidavit of J. W. Dickover, Paragraph 6(a)-(f).]

 Superston, the allegedly defective alloy that is said to have caused the propeller failures, was first developed by Stone, a subsidiary of Stone Platt, a British corporation. Rights to Superston were licensed to Superston Corporation, a New Jersey corporation owned and controlled by Stone Manganese. Superston Corporation, in turn, granted licenses to manufacture the alloy to Asarco and to Avondale to fabricate it.

 As noted above, there is a dispute as to when the decision to use Superston was made. The 10-month disparity between the date proffered by Asarco and that tendered by States derives significance from plaintiff's assertion that its personnel had seen Asarco brochures on Superston prior to the supposed October decision date, but only after the January 1966 decision date defendants urge. Prior to this time, States claims, it was only generally aware that Asarco marketed Superston to the industry. Asarco contradicts States by asserting that prior to 1971 States had not known that Asarco supplied any ingots whatsoever.

 Asarco claims States "discovered" its connection with the propellers while conducting discovery in a suit brought by States against Avondale in September 1969 in the United States District Court for the District of Columbia. In this action States alleged that Avondale had breached its contract and warranties and was "grossly negligent" in the construction of the propellers here in question. The suit was settled by the parties and dismissed with prejudice, by stipulation, on February 18, 1972. Asarco was not a party to these proceedings.

 Before I deal with Asarco's motion for dismissal on the merits, it is appropriate to review the principles that guide this court on motions for summary judgment. Rule 56(c) of the Federal Rules of Civil Procedure sets forth the ...

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