Excellence Charters LLC et al v. Coleman Marine Diesel, Inc. et al

Filing 30

ORDER denying 24 Defendant's Motion to Dismiss and Motion to Strike. request for sanctions is also denied. Signed by Judge M. James Lorenz on 3/30/2017. (sjt)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 EXCELLENCE CHARTERES LLC, Case No.: 3:16-cv-633-L-JMA Plaintiff, 12 13 v. 14 COLEMAN MARINE DIESEL, INC., ORDER DENYING DEFENDANT'S MOTIONS TO DISMISS AND TO STRIKE Defendant. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Pending before the Court in this admiralty action is Defendant’s motion to dismiss the second amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) and a motion to strike pursuant to Rule 12(f). Plaintiff filed an opposition and requested sanctions. Defendant replied. The Court decides the matter on the papers submitted and without oral argument. See Civ. L. R. 7.1 (d)(1). For the reasons stated below, the motions are denied. Plaintiff's request for sanctions is also denied. I. BACKGROUND Plaintiff entered into an agreement with Defendant for repair of the Excellence, a fishing vessel. Plaintiff alleges that due to Defendant's defective installation of the fuel line and vent systems, the vessel drew water into the engine fuel systems, which caused extensive damage, expensive repairs, and lost chartering opportunities. 1 3:16-cv-633-L-JMA 1 2 Plaintiff asserts six causes of action: (1) breach of oral maritime contract; (2) 3 breach of implied maritime contract; (3) third party beneficiary claim for breach of 4 contract; (4) breach of warranty of workmanlike performance; (5) negligence; and (6) 5 bailment. The Court has jurisdiction pursuant to 28 U.S.C. § 1333. Defendant filed a 6 motion to dismiss the entire complaint under Rule 12(b)(6), 1 or alternatively, to strike 7 certain requests for relief under Rule 12(f). 8 II. 9 A motion under Rule 12(b)(6) tests the sufficiency of the complaint. Navarro v. 10 Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal is warranted where the complaint 11 lacks a cognizable legal theory. Shroyer v. New Cingular Wireless Serv., Inc., 622 F.3d 12 1035, 1041 (9th Cir. 2010). Alternatively, a complaint may be dismissed where it 13 presents a cognizable legal theory, yet fails to plead essential facts under that theory. 14 Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984). 15 DISCUSSION In reviewing a Rule 12(b)(6) motion, the Court must assume the truth of all factual 16 allegations and construe them most favorably to the nonmoving party. Huynh v. Chase 17 Manhattan Bank, 465 F.3d 992, 997, 999 n.3 (9th Cir. 2006). Even if doubtful in fact, 18 factual allegations are assumed to be true. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 19 (2007). “A well-pleaded complaint may proceed even if it strikes a savvy judge that 20 actual proof of those facts is improbable, and that a recovery is very remote and 21 unlikely.” Id. at 556 (internal quotation marks and citation omitted). On the other hand, 22 legal conclusions need not be taken as true merely because they are couched as factual 23 allegations. Id. at 555; see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 24 Generally, the Court does not “require heightened fact pleading of specifics, but 25 only enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 26 27 28 1 All references to a Rule are to Federal Rules of Civil Procedure. 2 3:16-cv-633-L-JMA 1 U.S. at 570. Nevertheless, a plaintiff’s obligation to provide the ‘grounds’ of his 2 ‘entitlement to relief’ requires more than labels and conclusions, and a formulaic 3 recitation of the elements of a cause of action will not do.” Id. at 555 (quoting Papasan 4 v. Allain, 478 U.S. 265, 286 (1986)). Thus, “[t]o survive a motion to dismiss, a complaint 5 must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is 6 plausible on its face.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). “A 7 claim has facial plausibility when the plaintiff pleads factual content that allows the court 8 to draw the reasonable inference that the defendant is liable for the misconduct alleged.” 9 Id. at 678. “The plausibility standard is not akin to a ‘probability requirement,’ but it 10 asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting 11 Twombly, 550 U.S. at 556). “Determining whether a complaint states a plausible claim 12 for relief will … be a context-specific task that requires the reviewing court to draw on its 13 judicial experience and common sense.” Iqbal, 556 U.S. at 679. 14 In support of dismissal, Defendant argues the complaint does not include sufficient 15 factual allegations to meet the notice pleading requirement, and that the action is barred 16 by the doctrine of laches. Defendant also moves to strike the request for special damages 17 under Rule 12(f).2 18 Defendant argues special damages are not recoverable because Plaintiff did not 19 include sufficient factual allegations. Under Rule 12(f), “the court may strike from a 20 pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous 21 matter." According to its plain meaning, Rule 12(f) does not authorize striking requests 22 for relief. Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 973-74 (9th Cir. 2010). 23 To the extent Defendant suggests that Plaintiff is not entitled to special damages, its 24 argument is considered under Rule 12(b)(6). See id. at 974. 25 26 27 28 2 In the moving papers Defendant also includes a request to strike attorneys' fees and punitive damages (Mot. at 3); however, the second amended complaint does not include a prayer for these items (cf. Sec. Am. Compl. at 7-8). 3 3:16-cv-633-L-JMA 1 2 3 A. 4 Defendant claims that the complaint does not sufficiently allege the contract, its Breach of Oral and Implied Contract 5 terms, and breach. Plaintiff alleges it exchanged oral and written communications with 6 Defendant between March 2010 and January 2011 for Defendant to "repower [the 7 Excellence], remove its engines, replace its engines with MAN diesel engines, install a 8 fuel line system, and install a fuel vent system, and to do all such work properly, 9 carefully, and skillfully" in return for payment. Defendant worked on the vessel from 10 May 2010 through about January 2011 under specific job numbers listed in the 11 complaint. Plaintiff performed its obligations under the contract. When problems were 12 reported after completion of the work, Defendant performed an inspection and additional 13 work, and communicated with the vessel's captain. Plaintiff alleges Defendant breached 14 the contract by defective installation, which caused damage to the vessel, and by 15 representing that the fuel line and vent systems were installed in working condition. 16 (Sec. A. Compl. ("SAC") at 2-4.) These factual allegations are sufficient to meet the 17 notice pleading requirements of Rule 8 and Iqbal v. Ashcroft for breach of contract under 18 either oral or implied theory. See Restatement (Second) of Contracts § 4 et seq.3 19 Defendant next contends that the breach of contract claims fail because the parties 20 had a written contract, and that as a matter of law, a party cannot state a claim for breach 21 of an oral or implied contract contradicting the terms of the written agreement. In 22 support of this argument, Defendant submits its invoices. (Luk Decl. Ex. A.) 23 24 25 26 27 28 3 Throughout the motion Defendant relies on California substantive law. In an admiralty action such as this, federal substantive law applies. Golden Pisces, Inc. v. Fred Wahl Marine Constr., Inc., 495 F.3d 1078, 1080-81 (9th Cir. 2007 (relying on Restatement (Second) of Contracts as source of federal common law)). 4 3:16-cv-633-L-JMA 1 As a general rule, in ruling on a motion under Rule 12(b)(6), a court may not 2 consider any material beyond the pleadings, or the motion must be treated as a motion for 3 summary judgment and the parties provided an opportunity to present all pertinent 4 material. Fed. R. Civ. Proc. 12(d); United States v. Corinthian Colleges, 655 F.3d 984, 5 998-99 (9th Cir. 2011). The court may, however, consider materials that are submitted 6 with and attached to the complaint as well as "unattached evidence on which the 7 complaint necessarily relies if: (1) the complaint refers to the document; (2) the document 8 is central to the plaintiff's claim; and (3) no party questions the authenticity of the 9 document." Corinthian Colleges, 655 F.3d at 999 (internal quotation marks and citation 10 omitted). Plaintiff's complaint references oral and written communications regarding the 11 alleged contract, and necessarily relies on the existence of invoices. Plaintiff does not 12 question their authenticity. The invoices may therefore be considered for purposes of the 13 pending motion. Nevertheless, the court may not, on the basis of the invoices, "draw 14 inferences or take notice of facts that might reasonably be disputed." Id. at 999. 15 Defendant argues that the invoices are at odds with Plaintiff's allegations at least on 16 the issue of the identity of the contracting parties, i.e., that Plaintiff's member Shawn 17 Sweeny, rather than Plaintiff itself, contracted for the repairs, and that Defendant did not 18 warranty the repair. At most, the invoices show the extent and nature of Defendant's 19 work. They do not suffice to show that the parties had an exclusively written agreement, 20 or conclusively establish its terms. As is evident from the complaint and Defendant's 21 motion, the precise terms of the agreement and identity of the contracting parties are a 22 matter of factual dispute which cannot be resolved at the pleading stage. 23 B. 24 As an alternative, Plaintiff alleges breach of contract as a third party beneficiary. Third Party Beneficiary 25 (SAC at 5 ("If the Court nevertheless should find that the oral and implied contracts were 26 between Shawn Sweeney individually and Coleman Marine, then Excellence Charters 27 was a third party beneficiary of those contracts."). Pleading alternative causes of action 28 is permitted by Rule 8(d)(2). 5 3:16-cv-633-L-JMA 1 Defendant argues the claim should be dismissed because intent to benefit Plaintiff 2 is not sufficiently alleged. The argument is unsupported. The complaint alleges, "Shawn 3 Sweeney was a members of Excellence Charters and acted as the agent of and on behalf 4 of Excellence Charters for the transaction described below," and "Coleman Marine 5 understood or should be deemed to have understood that Shawn Sweeney intended the 6 contracts to benefit the owner of the vessel, which was Excellence Charters." (SAC at 1 7 & 5.) Defendant also suggests that the claim should be dismissed because the intent to 8 benefit is not reflected in the invoices. As stated above, the invoices at most show the 9 nature and extent of Defendant's work, and are therefore not sufficient to establish, as a 10 matter of law, the disputed fact whether Plaintiff was an intended third party beneficiary. 11 C. 12 Plaintiff seeks $73,064 in damages for loss of use of the vessel. Defendant 13 contends that Plaintiff cannot recover special damages for breach of contract4 because it 14 did not allege that loss of the vessel's use for charter hire was reasonably foreseeable at 15 the time for contracting. See Restatement (Second) of Contracts §351. Although 16 Plaintiff is not entitled to recover special damages unless it ultimately proves 17 foreseeability, id., it has sufficiently alleged the underlying breach of contract, including 18 causation and other damages, to survive a motion to dismiss. Special Damages 19 D. 20 The complaint alleges claims for bailment and breach of the implied warranty of Bailment and Breach of Implied Warranty 21 workmanlike performance. As to both claims, Defendant argues they should be 22 dismissed because Plaintiff did not sufficiently allege the existence of the underlying 23 contract. For the reasons discussed above, Plaintiff sufficiently alleged a contract. 24 E. Negligence 25 26 27 4 28 Although Defendant cites to references of special damages throughout the complaint, its argument is directed only to the breach of contract claims. (Mot. at 19-20.) 6 3:16-cv-633-L-JMA 1 Defendant next argues that Plaintiff's negligence claim should be dismissed 2 because it rests on breach of the same duty as the contract claims, i.e., defective 3 installation of the fuel line and vent systems, and because Plaintiff cannot allege breach 4 of any legal duty of care other than the alleged contractual duty. Plaintiff alleges 5 negligence as an alternative to breach of contract and adds a negligent misrepresentation 6 theory. (See SAC at 7 ("negligently misrepresented . . . that it had put [the fuel line and 7 vent] systems into good and operable working order").) While Plaintiff may not receive 8 double recovery, it has the option of proceeding either under a contract or negligence 9 theory. See In re Newport Offshore, 155 B.R. 616, 619 (Bkrtcy. D.R.I. 1993). At the 10 pleading stage, Plaintiff may pursue both alternatives. See Fed. R. Civ. Proc. 8(d)(2). 11 F. 12 Finally, Defendant maintains that the entire action should be dismissed based on Laches 13 laches. Defendant's repairs were completed in January 2011. In September 2011, 14 Defendant inspected the fuel line system and reported it was properly installed and in 15 good working order. Subsequently, the Excellence experienced oil and fuel leaks. In late 16 August 2012, Defendant sent mechanics to address those problems and make other 17 engine repairs. When the Excellence later began to take water into the engine fuel 18 system, its captain had numerous communications with Defendant to address the 19 problem. In February 2015, Plaintiff became aware that the cause of the problems was 20 Defendant's faulty installation of the fuel line and vent systems. On March 14, 2016, 21 Plaintiff filed the instant action, alleging that the nature of improper installation made it 22 impossible to discover the defect during normal operation or by normal inspection of the 23 vessel. (SAC at 2-3.) 24 "Laches is an equitable affirmative defense available for actions that do not have a 25 specific applicable statute of limitations." Hauseman v. Icicle Seafoods, Inc., 471 F.3d 26 1116, 1125 (9th Cir. 2006). Both sides assume that laches applies to all claims asserted 27 in this case. Defendant argues the action is barred because the analogous statutes of 28 limitations expired before filing. "Although courts often have presumed that laches is 7 3:16-cv-633-L-JMA 1 applicable in a suit filed beyond the analogous state limitations period, the presumption is 2 weak." Id. at 1126. What is required is “particularized evidence to support the assertion 3 that the time lag between knowledge of the potential action and the filing of the action 4 was unreasonable in length. Mere delay alone will not establish laches . . . . Even for 5 lawsuits filed beyond the analogous statutory period, the party asserting laches must 6 show that (1) plaintiff's delay in filing suit was unreasonable, and (2) defendant would 7 suffer prejudice caused by the delay if the suit were to continue.” Id. (internal quotation 8 marks, brackets, citations and ellipsis omitted). 9 At the pleading stage, the Court looks to the allegations in the complaint to 10 determine whether the action is time barred. See Huynh, 465 F.3d at 997 (statute of 11 limitations). Plaintiff alleged the continuing nature of the water problems and 12 Defendant's continuing engagement to address them, and that due to the nature of the 13 improper installation, it was very difficult to determine that the cause of the problems 14 was defective installation. Although Defendant argues prejudice in its motion, the 15 prejudice is not apparent from the face of the complaint, especially in light of Defendant's 16 alleged continued involvement in the repairs. Because neither unreasonableness of the 17 delay nor Defendant's prejudice is apparent, at this stage, the action cannot be dismissed 18 for laches. See id.; Jablon v. Dean Witter & Co., 614 F.2d 677, 682 (9th Cir. 1980) (no 19 dismissal unless time bar apparent on the face of the complaint). 20 21 22 For the foregoing reasons, Defendant's motion to dismiss is denied. Plaintiff's request for sanctions is also denied. IT IS SO ORDERED. 23 24 Dated: March 30, 2017 25 26 27 28 8 3:16-cv-633-L-JMA

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