American Steamship Owners v. Dann Ocean Towing, Inc.
Filing
PUBLISHED AUTHORED OPINION filed. Originating case number: 1:08-cv-02195-CCB. [999383606]. [13-1495]
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-1495
AMERICAN STEAMSHIP OWNERS MUTUAL PROTECTION AND INDEMNITY
ASSOCIATION, INC.,
Plaintiff - Appellant,
v.
DANN OCEAN TOWING, INC., in personam; THE TUG CAPTAIN DANN,
in rem; DANN TOWING COMPANY,
Defendants - Appellees.
Appeal from the United States District Court for the District of
Maryland, at Baltimore.
Catherine C. Blake, District Judge.
(1:08-cv-02195-CCB)
Argued:
May 13, 2014
Decided:
June 26, 2014
Before WILKINSON, KEENAN, and DIAZ, Circuit Judges.
Affirmed by published opinion. Judge Keenan wrote the opinion,
in which Judge Wilkinson and Judge Diaz joined.
ARGUED: David H. Fromm, BROWN GAVALAS & FROMM LLP, New York, New
York, for Appellant.
Allen K. von Spiegelfeld, BANKER LOPEZ
GASSLER, PA, Tampa, Florida, for Appellees.
ON BRIEF: Patrick
R. O'Mea, BROWN GAVALAS & FROMM LLP, New York, New York, for
Appellant. James W. Bartlett, III, Alexander M. Giles, SEMMES,
BOWEN & SEMMES, Baltimore, Maryland, for Appellees.
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BARBARA MILANO KEENAN, Circuit Judge:
In
this
appeal,
we
consider
whether
the
district
court
erred in concluding that a choice-of-law provision in a maritime
insurance contract required use of New York’s six-year statute
of limitations, rather than the equitable doctrine of laches
ordinarily
applied
timeliness
of
contract.
Upon our review, we hold that the district court
properly
under
certain
determined
maritime
claims
that
the
law,
brought
to
determine
under
choice-of-law
the
the
insurance
provision
in
the
parties’ contract required application of New York’s statute of
limitations to the claims at issue.
Therefore, we affirm the
district court’s judgment.
I.
The
American
Steamship
Owners
Mutual
Protection
and
Indemnity Association, Inc. (the Club) is a non-profit provider
of protection and indemnity insurance, which insurance covers
vessel
owners
and
charterers
against
third-party
liabilities
arising from the ownership and operation of insured vessels.
Members
of
the
Club
pay
insurance
premiums
and
assessments,
which the Club uses to reimburse members for covered losses.
The Club issues to each of its members a Certificate of Entry,
which
reflects
that
the
member
2
has
entered
into
a
marine
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insurance contract with the Club subject to the Club’s By-Laws
and Rules (Rules).
The
Club’s
Rules
include
a
choice-of-law
provision
selecting New York law and a two-year statute of limitations for
claims
against
exhausting
litigation.
the
Club,
insurance
in
addition
disputes
and
to
requirements
selecting
a
forum
for
for
The relevant section of the Rules reads as follows:
If any difference or dispute shall arise between a
Member and the [Club] concerning the construction of
these Rules, or the insurance afforded by the [Club]
under these Rules, or any amount due from the [Club]
to the Member, such difference or dispute shall in the
first instance be referred to and adjudicated by the
Board of Directors.
No Member shall be entitled to
maintain any action, suit or other legal proceedings
against the [Club] upon any such difference or dispute
unless and until the same has been submitted to the
Directors and they shall have given their decision
thereto, or shall have been in default for three
months in so doing.
These Rules and any contract of
insurance between the [Club] and a Member shall be
governed by and construed in accordance with the law
of the State of New York.
In no event shall suit on
any claim be maintainable against the [Club] unless
commenced within two years after the loss, damage or
expense resulting from liabilities, risks, events,
occurrences and expenditures specified under this Rule
shall have been paid by the Member.
Any such suit
against the [Club] shall be brought in the United
States District Court for the Southern District of New
York. (Emphasis added.)
Dann Ocean Towing, Inc. (Dann) was a member of the Club
between 1995 and 2001.
Dann obtained insurance through the Club
for
damaged
a
tugboat,
which
a
3
barge
when
the
tugboat
ran
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aground on a coral reef in 1998.
The barge’s owner asserted a
claim against Dann for property damage, and the United States
asserted a claim against Dann for environmental damage to the
reef.
Dann settled both parties’ claims in November 2001 for a
total amount of $2,170,000.
The Club originally agreed to contribute $1,170,000 toward
the settlement.
liability
However, one of the underwriters for Dann’s
insurance
became
insolvent
and
could
not
pay
its
portion of the settlement, in the amount of $278,552.55 (the
shortfall).
Although
both
Dann
and
the
Club
denied
responsibility for the shortfall, the Club paid the shortfall to
preserve
a
settlement
offer
that
it
considered
“extremely
favorable,” but indicated that the Club would seek reimbursement
from Dann.
Dann refused to reimburse the Club for the shortfall.
response,
the
Club
declined
to
reimburse
Dann
for
In
certain
insurance claims that otherwise would have been payable to Dann,
and withheld a total amount of $131,085.43 in covered losses
that the Club later used to offset the shortfall.
Thereafter,
Dann refused to pay its insurance premiums to the Club for the
policy years 1999, 2000, and 2001.
The total amount of Dann’s
unpaid premiums was $452,610.23.
In August 2008, the Club filed a civil action against Dann
and
the
tugboat,
alleging
that
4
Dann
breached
the
insurance
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contract by failing to reimburse the Club for the shortfall and
by failing to pay the overdue insurance premiums.
Dann filed a
counterclaim against the Club, alleging that the Club breached
the insurance contract by failing to indemnify Dann for covered
losses.
The Club and Dann each alleged that the respective
claims against them were time-barred, posted $500,000 bonds as
security and counter-security for the various claims, 1 and filed
cross-motions for summary judgment.
In August 2010, the district court initially ruled that the
equitable doctrine of laches, rather than New York’s six-year
statute
of
limitations
for
contract
claims,
timeliness of the Club’s claims against Dann.
that
all
the
Club’s
claims,
except
one
governed
the
The court found
involving
an
unpaid
insurance premium in the amount of $76,925.56, accrued more than
six years before the Club filed suit.
In its laches analysis,
the
claim
court
concluded
that
the
Club’s
relating
to
the
shortfall was not barred because the Club’s delay in filing suit
was
reasonable,
in
that
the
Club
made
various
out-of-court
attempts to obtain reimbursement from Dann and the delay did not
prejudice Dann.
1
Dann posted a $500,000 vessel release bond as security for
the claims against the tugboat, and the Club posted a $500,000
bond as counter-security for Dann’s claims.
5
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In May 2012, however, upon further briefing by the parties,
the district court reconsidered its ruling.
that
although
there
is
a
“typical
The court observed
presumption
that
courts
sitting in admiralty jurisdiction apply the equitable doctrine
of laches rather than a specific statute of limitations,” the
choice-of-law
application
clause
of
limitations.”
in
the
the
parties’
“compels
the
jurisdiction’s
elected
contract
statute
of
Accordingly, the district court held that “claims
arising from the maritime insurance contract between [Dann] and
the
Club
are
subject
to
New
York’s
six-year
statute
of
limitations,” which barred all the Club’s claims except for the
one concerning the $76,925.56 premium.
Because
the
parties’
contract
expressly
provided
that
claims brought against the Club were subject to an even shorter
two-year
claims
limitation,
against
the
the
Club
court
were
ruled
that
time-barred
Dann’s
under
indemnity
the
parties’
contract, but that those claims could be employed defensively
under the doctrine of recoupment to offset the entirety of the
Club’s
surviving
premium.
claim
for
the
$76,925.56
unpaid
insurance
Thus, although the court granted summary judgment to
the Club on its surviving unpaid insurance claim and dismissed
the
parties’
other
claims,
the
court
ultimately
held
that
“neither party can recover against the other,” granted Dann’s
motion
to
reduce
the
amount
of
6
its
bond
from
$500,000
to
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$100,000, and directed that the case be closed.
The Club timely
appealed.
II.
We consider on appeal whether the district court erred in
concluding that the timeliness of the Club’s contract claims
against
Dann
limitations
is
for
governed
contract
by
New
York’s
actions,
six-year
based
on
statute
the
of
parties’
agreement that the insurance contract “shall be governed by and
construed in accordance with the law of the State of New York.”
The Club contends that because this case arises under admiralty
jurisdiction,
the
district
court
was
required
to
apply
the
doctrine of laches as the procedural law of the maritime forum,
rather than New York’s statute of limitations.
We disagree with
the Club’s argument.
Laches is an equitable doctrine that can be raised by a
defendant as an affirmative defense to a claim, and requires
that the defendant show “(1) lack of diligence by the party
against whom the defense is asserted, and (2) prejudice to the
party asserting the defense.”
Giddens v. Isbrandtsen Co., 355
F.2d 125, 127 (4th Cir. 1966) (citation and internal quotation
marks
omitted).
In
assessing
the
timeliness
of
a
maritime
claim, the doctrine of laches typically applies rather than any
fixed statute of limitations.
See id. at 126-27.
7
However,
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there are many examples of exceptions to this general rule, such
as statutory provisions that impose time bars on personal injury
actions arising out of maritime torts, see 46 U.S.C. § 30106, on
certain cargo loss contract claims under the Carriage of Goods
by Sea Act, see 49 Stat. 1207, 1209 (1936) (codified at 46
U.S.C. § 30701 note), and on maritime salvage actions, see 46
U.S.C. § 80107(c).
In this case, the district court ultimately agreed with
Dann that parties to a maritime insurance contract may elect to
avoid the doctrine of laches by including in their contract an
enforceable choice-of-law provision that requires application of
another jurisdiction’s law and, implicitly, that jurisdiction’s
statute of limitations.
The court based its analysis on two
cases, namely, Cooper v. Meridian Yachts, Ltd., 575 F.3d 1151
(11th
Cir.
2009),
and
Italia
Marittima,
S.P.A.
v.
Seaside
Transportation Services, LLC, 2010 WL 3504834 (N.D. Cal. Sept.
7, 2010) (unpublished).
In
Cooper,
the
Eleventh
Circuit
considered
a
claim
for
indemnification and contribution brought by a ship owner against
a ship builder for injuries sustained by a worker on the ship.
The parties’ contract provided that “all disputes arising out of
or in connection with [the contract] . . . shall be construed in
accordance with and shall be governed by the Dutch law.”
F.3d at 1162.
575
The court held that this provision was “clearly
8
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meant to be read broadly” and that the parties’ choice of Dutch
law governed not only the timeliness of pure contract claims,
but also the timeliness of the indemnification and contribution
action for related tort claims.
Id.
Similarly, in Italia Marittima, a district court considered
claims for negligence and breach of contract arising from the
performance
of
stevedoring
services
aboard
a
vessel
sustained a loss of cargo during inclement weather.
3504834, at *1-3.
that
2010 WL
The court held that California’s statutes of
limitations applied to both the breach of contract claims and
the negligence claims based on a choice-of-law provision in the
parties’ contract stating that the contract “shall be construed,
interpreted
and
enforced
in
accordance
with
the
laws
of
the
State of California without reference to the laws of any other
jurisdiction,
except
to
the
extent
that
the
laws,
rules
regulations of the United States of America shall apply.”
at *8.
and
Id.
Because the choice-of-law clause clearly “promote[d]
California law,” and because laches is a common law doctrine
rather than codified federal law, the court reasoned that the
contract
required
limitations.
We
federal
do
application
of
California’s
statutes
of
Id.
not
court
discern
sitting
any
in
contrary
admiralty
authority
from
preventing
enforcing
a
a
valid
choice-of-law provision in a maritime contract incorporating a
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statute of limitations, in place of the traditional doctrine of
laches.
Accordingly, we agree with the district court, and with
the reasoning of the decisions in Cooper and Italia Marittima,
that an otherwise valid choice-of-law provision in a maritime
contract
is
enforceable
and
may
require
application
of
a
jurisdiction’s statute of limitations, in lieu of the doctrine
of laches, to govern issues regarding the timeliness of claims
asserted under that agreement.
We find no merit in the Club’s alternative argument that
the decisions in Cooper and Italia Marittima are distinguishable
because, in contrast to the provision before us, the choice-oflaw
clauses
interpreted
in
those
cases
were
sufficiently
detailed to incorporate the “procedural” rules in addition to
the
“substantive”
rules
of
the
chosen
jurisdictions.
Even
assuming that New York’s statute of limitations constitutes a
“procedural” rule of law in this context, the Club’s argument is
unpersuasive
because,
under
New
York
law,
we
must
accord
unambiguous provisions of an insurance contract their plain and
ordinary meaning.
See, e.g., White v. Cont’l Cas. Co., 878
N.E.2d
(N.Y.
1019,
contract
shall
stated
before
be
signals
1021
“governed
the
in
us
The
plain
unambiguously
provides
by”
law.
parties’
the
2007).
New
intent
York
contract,
New
that,
York
10
that
This
subject
law
language
to
will
the
phrase
any
be
of
the
contract
clearly
exceptions
applied
as
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“governing”
the
contract.
Because
contractual
in
exception
for
choice-of-law
Thus,
the
timeliness
the
nature
of
claims
and
are
claims
brought
clause
amply
plain
Pg: 11 of 12
language
claims
at
not
issue
against
the
in
the
to
Club,
the
parties’
under
the
case
are
this
subject
encompasses
of
asserted
the
the
present
contract
stated
parties’
claims.
fails
to
contain any indication that the parties intended to preserve
application of the doctrine of laches for any claims brought
under the contract.
Additionally, even if we were to assume, without deciding,
that
the
choice-of-law
provision
is
ambiguous
regarding
the
parties’ intent to incorporate New York’s statute of limitations
for
contract
actions,
we
would,
under
basic
principles
of
contract interpretation, resolve any such ambiguity against the
insurer and in favor of the insured party.
See id. (stating
that if the terms in an insurance contract are ambiguous, any
ambiguity must be construed in favor of the insured and against
the insurer); see also McCarthy v. Am. Int’l Grp., Inc., 283
F.3d 121, 124 (2d Cir. 2002) (observing that under New York law,
courts construe ambiguities in insurance contracts against the
drafter).
Here, it is undisputed that the Club, as insurer,
supplied Dann with the contract of insurance and drafted the
Rules governing the parties’ insurance contract.
Therefore, we
construe any ambiguity regarding the intended breadth of the
11
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choice-of-law
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provision
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against
the
Club
and
in
favor
of
applying New York’s statute of limitations to the Club’s claims
against Dann.
III.
Accordingly,
we
hold
that
the
district
court
correctly
applied New York’s six-year statute of limitations to the Club’s
claims arising under its maritime insurance contract with Dann.
We therefore affirm the district court’s judgment. 2
AFFIRMED
2
In affirming the district court’s judgment, we also affirm
the court’s decision granting Dann’s motion to reduce the amount
of its bond.
Although Dann requested in its brief that we
discharge the bonds posted by both parties, we do not address
this issue because Dann did not seek a full discharge of the
bonds from the district court in the first instance, and did not
appeal the district court’s order.
Therefore, Dann’s request
for relief is not properly before us on appeal.
12
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