LAW : In Flood Case, Water Seeks Its Own Level : Supreme Court to decide if barge accident that led to Chicago mishap is covered by maritime or state statute.

This year’s “landmark” case in maritime law began, of all places, along Kinzie Street in downtown Chicago.

On April 13, 1992, the basements of buildings all over downtown were flooded. Electricity and phone service were cut off. For days, the central business district sat paralyzed.

Eventually, investigators determined the Chicago River had “sprung a leak” when a barge, hired by the city to repair the Kinzie Street Bridge, had inadvertently poked a hole in an underground tunnel. This in turn allowed water to pour into a network of century-old rail tunnels that were once used to deliver coal throughout the center city.

Now the Supreme Court gets to answer what could be a $1-billion question. Was this a “maritime” accident, like two ships colliding on the high seas?

If the answer is yes, the barge owners probably will escape the huge liability for the accident because maritime laws, which would supersede Illinois state law in the case, protect the owners of vessels from liability in most circumstances. The city of Chicago would then be forced to pay the cost.

Last year, the U.S. appeals court in Chicago dealt the city a stunning setback when it ruled that admiralty laws did apply, for several reasons. The repair barge was a “vessel” that was capable of moving. It was sitting on a “navigable waterway.” And it was engaged in something akin to “traditional maritime activity”--in this case, repairing a bridge.

But lawyers both for the city and for the thousands of downtown business owners have appealed to the high court, calling this an “absurd result” that could shield the barge owner from paying for the damage. Court claims have ranged from $300 million to $400 million in direct damages and up to $1 billion if lost business is included.

Since the mid-19th Century, the admiralty laws have usually protected shipowners from paying the full cost of accidents on the high seas.

Congress granted the protection in 1851 to encourage the development of an American merchant fleet, following the same legal rule that had protected British shippers and financiers. Under the Limitation of Vessel Owner’s Liability Act, owners of U.S. vessels were not responsible for damage caused by their ships, so long as they did not have direct knowledge of or personally cause the accident.

That law still stands. But it has been amended in recent decades to allow damage suits when people are injured or killed, and it now excludes shippers who cause pollution damage, such as in the Exxon Valdez accident.

Not surprisingly then, vessel owners fight hard to force lawsuits into federal admiralty court, where a judge presides, rather than go before a state court jury.

“They are looking at a difference in liability between $600,000 (the cost of their two repair barges and a tugboat) and $400 million,” said University of Texas law professor Michael F. Sturley, an expert in maritime law. “That’s certainly worth fighting over.”

The stakes are high for the city of Chicago too. If the damage suits are ultimately tried in state court, the city will not have to pay. Under Illinois law, a city is not responsible for damage caused by negligent contractors.

However, if the damage suits go to a federal admiralty court, the barge owners could escape liability, while the city would lose the immunity it has in state courts.

The Supreme Court of late has not had an easy time determining what is a maritime case. For most of American history, the rule was simple: If an accident took place on water, it was a maritime case.

In 1972, the court amended the rule when faced with the case of a small private jet that took off from Cleveland and crashed in Lake Erie. This was not a maritime accident, the court said, because it had nothing to do with “traditional maritime activity.”

More recently, the justices broadened the definition of “traditional maritime activity” to include docked pleasure boats.

On Sept. 24, 1985, Everett Sisson’s boat sat at a marina on Lake Michigan when a washer-dryer on board short-circuited. The fire not only destroyed Sisson’s boat but also burned much of the marina. The damage claims amounted to $275,000.

But in 1990, the Supreme Court threw out all the claims against the boat owner and ruled this was a maritime accident. Why? Because the “storage and maintenance of a boat” is a “traditional maritime activity,” the justices said in Sisson vs. Ruby.

Last year, the U.S. appeals court in Chicago relied on this precedent for its decision calling the downtown flood a maritime accident.

On Oct. 12, the Supreme Court heard the case, Chicago vs. Great Lakes Dredge and Dock Co., 93-762. Predictably, the argument had moments that were all wet.

A lawyer for the business owners said his case was “buoyed” by maritime precedents that speak of ships and vessels that move on their own power. The barge in this case was “stationary, more like a dock or platform.”

But that argument “evaporates,” a justice commented, when you recognize the barge moved up and down the river for repair jobs.

In all, the argument did not go well for the city’s lawyers. While they stressed the damage “involves an injury on land,” the justices sounded more inclined to rule that an accident that begins on water is a maritime case, regardless of whether all the damage occurs on land.

The court will likely issue a written opinion in the case early next year, and then it will go back for trial in Chicago.