TORT CLAIMS AGAINST THE PANAMA RAILROAD

COMPANY

JUNE 15, 1949.-Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

Mr. WALTER, from the Committee on the Judiciary, submitted the

following

REPORT

[To accompany S. 1168

The Committee on the Judiciary, to whom was referred the bill (S. 1168) to amend section 2680 of title 28, United States Code, having considered the same, report favorably thereon without amendment and recommend that the bill do pass.

PURPOSE

The bill would exclude claims against the Panama Railroad Company from the provisions of chapter 171, sections 2671 to 2680, inclusive, and section 1346 (b), of title 28, United States Code, which sections incorporate in substance the Federal Tort Claims Act, originally enacted in title IV of Public Law 601 of the Seventy-ninth Congress.

STATEMENT

The definition of "Federal agency" in the Federal Tort Claims Act was so broad as to include the Panama Railroad Company, a company which was originally incorporated by an act of the legislature of the State of New York in 1849, and reincorporated by Public Law 808 of the Eightieth Congress as "an agency and instrumentality of the United States, and as an adjunct of The Panama Canal.'

The varied activities of the Company, which include the operation of a railroad across the Isthmus of Panama with terminals in the Republic of Panama, the operation of a steamship line between the Isthmus and American ports, the operation of hotels and commissary stores, and the operation of related commercial enterprises, are not those to which the principle of governmental immunity to suit should be applied. The Company has long been registered as a foreign cor

poration in Panama, and has designated agents in Panama to receive service of process in suits brought against it in the courts of the Republic of Panama. Before the enactment of the Federal Tort Claims Act, the Company was subject to suit on all claims, tort as well as contract, in the same manner as any private corporation. As a ship operator, it was subject to suit in the same manner as any shipping company, and was expressly excluded from the Suits in Admiralty Act.

The detailed provisions of chapter 171 of title 28 of the United States Code, entitled "Tort Claims Procedure," are not adaptable to the activities of the Company, as a corporation engaged in business as a common carrier and one operating out of earnings rather than from appropriated funds.

The inapplicability of the said tort-claims procedure to claims arising from certain types of activities is recognized in the enumeration, in section 2680 of title 28, of exceptions to the provisions of the said chapter. Included in the exceptions enumerated therein, for example, are: any claim arising from injury to vessels, or to cargo, crew, or passengers of vessels, while passing through the locks of The Panama Canal or while in the Canal Zone waters; and any claim arising from the activities of the Tennessee Valley Authority.

It is the view of the committee that any claim arising from the activities of the Panama Railroad Company should properly be included among the enumerated exceptions.

Attention is invited to the following letters, one dated February 23, 1949, to the Honorable Emanuel Celler, chairman, Committee on the Judiciary, United States House of Representatives; and another dated July 24, 1947, from the Assistant to the Attorney General to the Director, Bureau of the Budget:

Hon. EMANUEL CELLER,

DEPARTMENT OF THE ARMY, Washington, D. C., February 23, 1949.

Chairman, Committee on the Judiciary,

House of Representatives, Washington, D. C.

DEAR MR. CELLER: I submit herewith a draft of bill to amend section 2680, title 28, United States Code, to exclude claims against the Panama Railroad Company from the coverage of chapter 171 (secs. 2671 to 2680, inclusive) and section 1346 (b) of title 28 of the United States Code, which as originally enacted in title IV of Public Law 601, Seventy-ninth Congress, approved August 2, 1946, comprised the Federal Tort Claims Act. The purposes of the proposed legisla tion and the reasons for recommending its enactment are set forth in the following statement of the Governor of the Panama Canal, who is also President of the Panama Railroad Company:

"The Panama Railroad Company was originally incorporated by an act of the legislature of the State of New York for the operation of a railroad across the Isthmus of Panama and related activities. At the time of the construction of the Panama Canai all the stock in the corporation was acquired by the United States and the corporation was used extensively in the construction of the Canal, and thereafter continued to operate as an adjunct of the Canal. The Company was reincorporated by Public Law 808, Eightieth Congress, approved June 29, 1948, as an agency and instrumentality of the United States and as an adjunct of the Panama Canal.

"The Federal Tort Claims Act was originally enacted as title IV of Public Law 601, Seventy-ninth Congress, approved August 2, 1946. In the revision, codification, and enactment into positive law of title 28 of the United States Code, the provisions of the Federal Tort Claims Act were incorporated in substance in chapter 171 and section 1346 (b) of the title. Although the designation of these provisions as the Federal Tort Claims Act was not included in the codification, it is convenient so to refer to the provisions of chapter 171 and section 1346 (b) of title 28 for the purposes of the following discussion.

"The Federal Tort Claims Act is now applicable to tort claims against the Panama Railroad Company by reason of the definition of the term 'Federal agency' in section 2671 of title 28 so as to include 'corporations primarily acting as instrumentalities or agencies of the United States. Although the effect of this definition is to bring the Panama Railroad Company within the coverage of the act, the other provisions of the act, considered in the light of its legislative history, indicate that claims against the Company were not within the actual contemplation of Congress and in fact are outside the purposes of the act.

"The legislative history of the various bills culminating in the Federal Tort Claims Act discloses that one of the primary purposes of the act was to supplement the Suits in Admiralty Act of 1920 and the Public Vessels Act of 1925, authorizing suits against the United States in maritime causes of action, and the Tucker Act and Court of Claims Act authorizing suits against the Government in contractual causes of action, by providing for suits against the Government on common-law torts (H. Rept. No. 1287, 79th Cong, 1st sess., on H. R. 181). Another pur

pose of the act was to broaden the authority contained in the act of December 28, 1922 (31 U. S. C. 215), by authorizing the settlement and payment of claims for property loss or damage and personal injury caused by the negligence or wrongful act or omission of Government employees. The act of December 28, 1922, did not cover claims for personal injury or death and required certification of claims to Congress for payment

"Although the language of the act is sufficiently broad to include the Panama Railroad Company, the act is not in fact suitable to the various operations of the Company, and certain detailed provisions are plainly not adaptable to the handling of claims against the Company.

"The Panama Railroad Company operates a railroad across the Isthmus of Panama, the freight and passenger terminals of which are located in the cities of Colon and Panama in the Republic of Panama. Naturally, a large percentage of the business of the railroad consists in the carriage of passengers and freight between the terminal cities in the Republic of Panama: and, as a result, a large number of claims against the Company are made by or on behalf of residents in the Republic of Panama. For many years the Company has been registered and qualified to do business as a foreign corporation in Panama; and necessarily. under the laws of that country the Company has designated agents in Panama to receive service of process in suits brought against the Company in the courts of the Republic. Although claims arising in a foreign country are excluded from the coverage of the Federal Tort Claims Act by title 28, United States Code, section 2680, that section does not exclude claims made by residents of a foreign country on a cause of action arising in territory subject to the jurisdiction of the United States, as for example, the Canal Zone, and the Panama Railroad Company is amenable to such suits in the courts of the Republic. It is scarcely to be expected that the courts of the Republic of Panama would decline to accept jurisidiction of a suit on a tort claim against the Company brought by a resident of Panama because of the provisions of the Federal Tort Claims Act (cf United States v. Deutches Kalisyndicat Gesellschaft, 31 F. (2d) 199 (S. D. N. Y.)), and as a matter of policy it is doubtful whether the United States would deem it advisable to assert a claim of sovereign immunity to protect the Company against suits in Panama arising out of the purely commercial transactions of the Company in that country

"Prior to the enactment of the Federal Tort Claims Act, the Panama Railroad Company was subject to suit on all claims against the corporation whether sounding in tort or contract (Panama Railroad Company v. Minnix, 282 F. 47). As a steamship operator, the corporation was expressly excluded from the coverage of the Suits in Admiralty Act by section 1 of that act (46 U. S. C. 741), and the Company and its ships were subject to ordinary process in admiralty suits. As the operator of a steamship line, the Company was subject to suit under the Jones Act (46 U. S. C. 688) for injuries to seamen employed by the Company caused by the Company's negligence, and the remedies provided by the Longshoremen and Harbor Workers' Compensation Act (33 U. S. C. 901-950) were available to the employees covered by that act for injuries received on the navigable waters of the United States. As the operator of the only railroad in the Canal Zone, the Company was subject to suit under the Federal Employers' Liability Act, which was expressly made applicable to 'Every common carrier by railroad in * ** * the Panama Canal Zone' (45 U. S. C. 52).

"As a necessary correlative to such liability to suit, claims against the Company could be settled either before or after commencement of suit. Section 215 of title 31 of the United States Code was inapplicable to such settlements because that

H. Repts., 81-1, vol. 4- -62

section was inapplicable to Government corporations generally. Furthermore, apart from the inapplicability of the section to corporations there was no reason for application of the section to claims against the Panama Railroad Company, because that Company operates out of earnings and not with appropriated funds.

"Under title 28, United States Code, section 2679, the authority of a Federal agency to sue and be sued may no longer be construed to authorize suits against such agency on claims on which suit is authorized by the Federal Tort Claims Act, and the remedies provided by the act are made exclusive. Although the act is made inapplicable to claims for which a remedy is provided by the Suits in Admiralty Act, the exclusion of the Panama Railroad from the coverage of that act operates to bring within the scope of the Tort Claims Act maritime claims against the Company which are not within the coverage of the Tort Claims Act as applied to other Government agencies. In addition, the provisions of the Federal Tort Claims Act making exclusive the remedies provided by that act nullifies the application to employees of the Panama Railroad Company of the provisions of the Jones Act, the Longshoremen and Harbor Workers' Compensa tion Act, and the Federal Employers' Liability Act, thereby depriving such employees of the procedural and substantive benefits of such legislation_representing policies of the Congress developed over a long period of years in reference to the handling of claims for injuries by employees in the maritime and railroad industries.

"The substitution of the Federal Tort Claims Act for the remedy provided by the Jones Act eliminates the injured seamen's choice of forum as between State and Federal courts, and his right to jury trial, and substitutes a 1-year period of limitation for the 3-year period applicable under the Jones Act, thereby placing the seaman employed by the Panama Railroad.Company in a comparatively disadvantageous position in reference to seamen employed on privately owned and operated vessels. These departures from the established policy of the Congress in reference to maritime and railroad employees appear not to have been within the contemplation of the Congress in the enactment of the Federal Tort Claims Act and further appear to be foreign to the general purposes of the

act.

"In view of the operation of the Panama Railroad Company out of earnings rather than appropriated funds, the inapplicability of the provisions of the Federal Tort Claims Act to the conditions under which the Panama Railroad Company operates is also shown by the provision of title 28, United States Code, section 2672, for the payment of claims 'by the head of the Federal agency concerned out of appropriations that may be made therefor.'

"Apart from the foregoing considerations, the broader reason for the exclusion of the Panama Railroad Company from the Tort Claims Act is that the act is not designed to fit the needs of a corporation acting as a common carrier and performing the other commercial functions which are a part of the Company's operations Since it is engaged in business as a common carrier and in other commercial enterprises, the basic policies underlying governmental immunity from suit do not apply to the Company, and it is desirable if not essential to continue unimpaired the ability of the Company to effect prompt settlement of meritorious claims and the amenability of the Company to suit in the ordinary course."

I concur in the views and recommendations of the Governor of the Panama Canal.

I am advised by the Director of the Bureau of the Budget that there is no objection to the submission of this letter and its accompanying draft of bill to the Congress for its consideration.

MY DEAR MR. WEBB: This is in response to your request for the views of the Department of Justice concerning the enclosed proposed draft of a bill submitted by the War Department to amend the Federal Tort Claims Act.

The purpose of the bill is to exclude the operations of the Panama Railroad Company from coverage by the Tort Claims Act in the same manner as the proviso to 46 United States Code 741 excludes that company from coverage by the Suits

in Admiralty Act of 1920. This is to be accomplished by adding at the end of section 421 (28 U. S. C. 943), which lists the exceptions to the Tort Claims Act, a new subsection reading: "(m) Any claim arising from the activities of the Panama Railroad Company."

The Panama Railroad Company operates a line of railroad across the Isthmus of Panama, roughly parallel to the Canal, but its freight and passenger terminais are located in the cities of Colon and Panama, in territory of the Republic of Panama and outside the Canal Zone. Much of the railroad's business consists in carriage between the terminal cities. In addition, the railroad operates hotels and commissary stores on the Isthmus and provides terminal and contracting stevedore services. It also maintains a steamship line between the Isthmus and American ports. A large number of claims against the company are. consequently, made by or on behalf of residents of the Republic of Panama.

Prior to the adoption of the Tort Claims Act, the Panama Railroad Company, as a corporation organized under the laws of New York, was subject to suit on all claims, whether sounding in tort or contract, in the same manner as any private corporation (Panama Railroad Co. v. Minnix Fifth Circuit, 1922: 282 F. 47). It handled its own litigation without the assistance of the Department of Justice. As a steamship operator, it was expressly excluded from the coverage of the Suits in Admiralty Act and was sued like any shipping company. As a contracting stevedore and terminal operator, the longshoremen which it employed were covered by the Longshoremen and Harbor Workers' Compensation Act (33 U. S. C. 901 et seq.) the same as any other longshore workers. As operator of the only railroad in the Canal Zone, it was subject to suit under the Federal Employers' Liability Act, 1908, which is expressly applicable to every common carrier by railroad in the Panama Canal Zone (45 U. S. C. 52)

For many years, the Panama Railroad Company has been registered and qualified to do business in the Republic of Panama as a foreign corporation, and under its laws has designated agents in Panama to receive service of process in suits brought against the Company in the courts of that Republic. While claims

arising in foreign countries are excluded from the coverage of the Tort Claims Act by section 421 (k), that does not exclude from exclusive coverage by the act the claims of residents of a foreign country for wrongs occurring in territory such as the Canal Zone, subject to the jurisdiction of the United States It is scarcely to be expected that the courts of Panama, in suits brought against the Company by local residents, will decline jurisdiction of suits brought on such claims Indeed, as a matter of policy, the railroad would probably hesitate to assert a claim of sovereign immunity in the courts of Panama. It seems obvious that many situations involving possible embarrassment must inevitably result unless the Company is excluded from the coverage of the Tort Claims Act

In its statement accompanying the draft of the proposed bill. the War Department has aptly summed up the matter as follows

(* * * the broader reason for the exclusion of the lanama Railroad Company from the Tort Claims Act is that the act is not designed to fit the needs of a corporation acting as a common carrier and performing the other commercial functions which are a part of the Company's operations. Since it is engaged in business as a common carrier and in other commercial enterprises the basic policies underlying governmental immunity from suit do not apply to the Company, and it is desirable if not essential to continue unimpaired the ability of the Company to effect prompt settlement of meritorious claims and the amenability of the Company to suit in the ordinary course

This Department would have no objection to the submission to the Congress and eventual enactment of the draft of the bill proposed by the War Department. Sincerely yours,

DOUGLAS W. MCGREGOR,
The Assistant to the Attorney General.

CHANGES IN EXISTING LAW

In compliance with clause 2a of rule XIII of the House of Representatives, existing law in which no change is proposed is printed below in roman, with matter proposed to be omitted enclosed in black brackets, and new matter proposed to be inserted printed in italic.