Neal v. Christini

Filing 37

ORDER GRANTING DEFENDANT CHRISTINI'S MOTION TO DISMISS BASED ON LACK OF SUBJECT MATTER JURISDICTION 14 . Signed by JUDGE DERRICK K. WATSON on 10-11-2016. -- Plaintiffs are GRANTED leave to file a First Amended Complaint by no later than November 1, 2016 in order to cure the deficiencies noted in this order. j (ecs, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAI`I

CHARLES C. NEAL; MOLOKINI
DIVERS, INC.; and NEALCO
INTERNATIONAL, LLC dba SCUBA
SHACK,
Plaintiffs,
vs.

CIVIL NO. 16-00242 DKW-RLP
ORDER GRANTING DEFENDANT
CHRISTINI’S MOTION TO
DISMISS BASED ON LACK OF
SUBJECT MATTER
JURISDICTION

CAROL CHRISTINI; INSURANCE
MANAGEMENT SERVICES, INC.;
PATRICK KUDLICH; OCEAN
MARINE INSURANCE AGENCY,
INC.,
Defendants.

ORDER GRANTING DEFENDANT CHRISTINI’S MOTION TO DISMISS
BASED ON LACK OF SUBJECT MATTER JURISDICTION
Defendant Carol Christini moves to dismiss for lack of subject matter
jurisdiction, asserting the absence of admiralty or maritime jurisdiction under 28
U.S.C. § 1333. Dkt. No. 14. Because this case arises out of allegations of
professional negligence, with the alleged torts occurring entirely on land, the Court
agrees and GRANTS Christini’s Motion to Dismiss.

BACKGROUND
Plaintiffs operate a scuba diving and snorkeling tour enterprise in the State
of Hawaii. Complaint ¶¶ 1-3, 12. At some unspecified date, but prior to July 20,
2014, Plaintiffs sought and obtained maritime insurance through Christini, an
insurance broker, and/or her employer, IMS, “for the purpose of being protected
against claims arising from scuba diving and snorkeling tours[.]” Id. ¶ 16.
Christini subsequently “improperly terminated” her business relationship with
Plaintiffs, who then used the services of co-defendants Patrick Kudlich and Ocean
Marine Insurance Agency, Inc. (“OMIA”) for their insurance needs. Id. ¶¶ 19-20.
On July 20, 2014, Plaintiffs were involved in an incident that occurred off of
Molokini Island, Maui, Hawaii, which resulted in the death of one person and
injuries to two others.1 Id. ¶ 29. One of the injured individuals made claims for
maintenance and cure under the Jones Act. Id. Plaintiffs tendered these claims to
their insurers and were denied coverage. Id. ¶ 30. Plaintiffs later discovered,
allegedly for the first time that, according to their insurers, their insurance policy or
policies were not “MEL” policies and/or insurance policies that would provide full
coverage for injuries to employees and customers. Id.

1

There are two cases before this district court related to these series of events: Strickert v. Neal,
CV 14-00513 DKW-RLP; and Osaki v. Neal, CV 15-00409 DKW-RLP.

2

On May 19, 2016, Plaintiffs instituted the instant action against Defendants,
asserting jurisdiction solely under 28 U.S.C. § 1333. Dkt. No. 1. In Count I,
Plaintiffs allege as follows:
31. Plaintiffs repeat and re-allege all prior allegations as if fully
set forth herein.
32. Christini and/or IMS, individually and jointly, owed a duty
to Plaintiffs to recommend, offer, and/or provide MEL
insurance policies and/or insurance policies which would
provide full coverage for injuries to employees and customers
that would protect Plaintiffs against claims arising from scuba
diving and snorkeling tours, including but not limited to Jones
Act claims.
33. Based on the denials of coverage referenced above,
Christini and/or IMS, individually and jointly, failed to
recommend, offer, and/or provide MEL insurance policies
and/or insurance policies which would provide full coverage for
injuries to employees and customers that protected Plaintiffs
against claims arising from scuba diving and snorkeling tours,
including but not limited to Jones Act claims.
34. Christini and/or IMS’ acts and omissions were the
proximate cause of the harm suffered by Plaintiffs, namely the
denial of coverage after tender of claims arising from scuba
diving and snorkeling tours, including but not limited to Jones
Act claims.
35. As a result of Christini and/or IMS’ failure to recommend,
offer, and/or provide MEL insurance policies and/or insurance
policies which would provide full coverage for injuries to
employees and customers that protected Plaintiffs against
claims arising from scuba diving and snorkeling tours,
including but not limited to Jones Act claims, Plaintiffs have
been injured in an amount to be proven at trial.

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36. Christini and/or IMS’s actions and omission in failing to
provide MEL insurance policies and/or insurance policies
which would provide full coverage for injuries to employees
and customers to a scuba diving/snorkeling entity were grossly
negligent, outrageous, willful, wanton, and/or made in reckless
indifference to the rights of Plaintiffs, such that punitive
damages should be awarded in an amount to be determined a
trial.
Id. ¶¶ 31-36.
Counts II, III, and IV, respectively, allege vicarious liability, negligent
supervision, and negligent employment against IMS. Id. ¶¶ 37-52. Count V alleges
negligence against Kudlich and/or OMIA. Id. ¶¶ 54-60. Counts VI, VII, and VIII,
respectively, allege vicarious liability, negligent supervision, and negligent
employment against OMIA. Id. ¶¶ 61-76.
On August 9, 2016, Christini filed a Motion to Dismiss Based on Lack of
Subject Matter Jurisdiction and, in the alternative, Motion for Judgment on the
Pleadings. Dkt. No. 14. Plaintiffs opposed the motion, while co-defendants
Kudlich and OMIA took no position. Dkt. Nos. 22, 35. The Court held a hearing
on the Motion on September 30, 2016.
STANDARD OF REVIEW
I.

Subject Matter Jurisdiction
Christini brings her Motion to Dismiss pursuant to Federal Rule of Civil

Procedure 12(b)(1). Rule 12(b)(1) authorizes a district court to dismiss an action
for lack of subject matter jurisdiction. “[T]he party asserting subject matter
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jurisdiction has the burden of proving its existence.” Robinson v. United States,
586 F.3d 683, 685 (9th Cir. 2009). As part of its jurisdictional evaluation, the
Court may consider evidence outside the pleadings and should not presume that the
allegations of the complaint are true. White v. Lee, 227 F.3d 1214, 1242 (9th Cir.
2000); McCarthy v. United States, 850 F.2d 558, 560 (9th Cir. 1988).
II.

Judgment on the Pleadings
In the alternative, Christini moves under Federal Rule of Civil Procedure

12(c), which permits a party to move for judgment on the pleadings after the
pleadings are closed. Fed. R. Civ. P. 12(c). “Analysis under Rule 12(c) is
‘substantially identical’ to analysis under Rule 12(b)(6) because, under both rules,
‘a court must determine whether the facts alleged in the complaint, taken as true,
entitle the plaintiff to a legal remedy.’” Chavez v. United States, 683 F.3d 1102,
1108 (9th Cir. 2012) (quoting Brooks v. Dunlop Mfg. Inc., No. 10-04341 CRB,
2011 WL 6140912, at *3 (N.D. Cal. Dec. 9, 2011)).
When evaluating a Rule 12(c) motion, the allegations of the nonmoving
party are accepted as true, while the contradicting allegations of the moving party
are assumed to be false. See MacDonald v. Grace Church Seattle, 457 F.3d 1079,
1081 (9th Cir. 2006). “The Court inquires whether the complaint at issue contains
‘sufficient factual matter, accepted as true, to state a claim of relief that is plausible
on its face.’” Harris v. Cnty. of Orange, 682 F.3d 1126, 1131 (9th Cir. 2012)
5

(quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). Therefore, “‘[a] judgment
on the pleadings is properly granted when, taking all the allegations in the nonmoving party’s pleadings as true, the moving party is entitled to judgment as a
matter of law.’” Marshall Naify Revocable Trust v. United States, 672 F.3d 620,
623 (9th Cir. 2012) (quoting Fajardo v. Cnty. of L.A., 179 F.3d 698, 699 (9th Cir.
1999)).
DISCUSSION
I.

Admiralty Tort Jurisdiction
The Complaint solely alleges tortious conduct by Defendants. The parties

agree that the test for general maritime jurisdiction over torts under 28 U.S.C.
§ 1333 consists of a “location” prong and a “connection” (or nexus) prong. Jerome
B. Grubart, Inc. v. Great Lakes Dredge & Dock Co., 513 U.S. 527, 534 (1995).
Under the first prong, a court must determine whether the tort occurred on
navigable water or whether the injury suffered on land was caused by a vessel on
navigable water. Id. Under the second prong, the court must determine: (1)
whether the incident has a “potentially disruptive impact on maritime commerce”;
and (2) whether the “general character” of the “activity giving rise to the incident”
bears a “substantial relationship to traditional maritime activity.” Id. (quoting
Sisson v. Ruby, 497 U.S. 358, 363-65 (1990)). As set forth below, Defendants fail

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to satisfy the locality requirement. Accordingly, this Court lacks admiralty
jurisdiction over this case.
The first prong, the locality test, requires that the incident have occurred on
navigable waters, or that the injury suffered on land was caused by a vessel on
navigable water. Here, the tort at issue is not the July 20, 2014 snorkeling incident
off of Molokini Island, as Plaintiffs’ opposition brief asserts. Rather, the relevant
tort for purposes of this case is the negligent provision or sale of insurance by
Defendants sometime prior to July 20, 2014, insurance that turned out to be
inadequate to meet the needs of Plaintiffs once their employees and customers
suffered injury. More specifically, Plaintiffs allege that Christini and the other codefendants negligently sold insurance policies to Plaintiffs that were not MEL
insurance policies and/or insurance policies that would provide full coverage for
injuries to employees and customers. The sale of and negotiation over these
insurance policies did not occur on navigable water, nor did the subsequent denial
of coverage. As such, the tort alleged here does not satisfy the locality test for
admiralty jurisdiction.2 See, e.g., Broughton v. Florida Int’l Underwriters, Inc.,
139 F.3d 861, 864 (11th Cir. 1998) (concluding that the district court did not have
admiralty jurisdiction to adjudicate an insured boat owner’s claim against his

2

Because the locality test is not satisfied, the Court need not determine whether the nexus test is
satisfied, as both are required for the Court to exercise admiralty jurisdiction. See Grubart, 513
U.S. at 534.

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broker where the alleged tort did not occur on navigable water, nor was there an
injury on land that was caused by a vessel on navigable water); see also
LaMontagne v. Craig, 817 F.2d 556, 557 (9th Cir. 1987) (holding that the alleged
defamation occurred on land, rather than on navigable waters, and thus, the district
court lacked admiralty jurisdiction).
II.

Admiralty Contract Jurisdiction
As currently pled, the Complaint does not allege a breach of contract claim,

and no such claim may lie. However, Plaintiffs request that if the underlying July
20, 2014 incident which gave rise to the uncovered Jones Act claim does not
satisfy the locality requirement, then “Plaintiffs seek leave to amend the complaint
to add claims against all defendants for breach of contract to provide proper
maritime insurance to Plaintiffs sufficient to cover Plaintiffs for Jones Act claims
and a breach of the [covenant] of good faith and fair dealing.” Dkt. No. 22 at 12.
Prior to 1991, it was generally well-established that contracts to procure
maritime insurance were not within the admiralty jurisdiction of the federal courts.
See, e.g., Frank B. Hall & Co. v. S.S. Seafreeze Atlantic, 423 F. Supp. 1205, 1209
(S.D.N.Y. 1976) (“It is well settled that contracts and agreements to procure
marine insurance on vessels and their cargoes are not maritime and, consequently,
are outside the admiralty jurisdiction.” (internal quotations marks and citation
omitted)); Continental Cameras Co., Inc. v. Foa & Son Corp., 658 F. Supp. 287,
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289 (S.D.N.Y. 1987) (“Further support for our analysis lies in the case law which
holds that contracts to procure marine insurance are not within the admiralty
jurisdiction of a federal court.”). This was based on the rationale that preliminary
contracts, such as contracts leading up to a maritime contract, were not considered
maritime. Under this view, a maritime insurance policy was considered maritime,
while a contract to procure such a policy was not. See, e.g., Princess Cruises
Corp., Inc. v. Bayly, Martin & Fay, Inc., 373 F. Supp. 762 (N.D. Cal. 1974)
(noting that “marine insurance policies and the claims that arise directly from them
are within admiralty jurisdiction, while contracts and agreements to procure marine
insurance are outside admiralty jurisdiction” (citation omitted)); David W.
Robertson, et al., Admiralty and Maritime Law in the United States 54 (2d ed.
2008) (“At least until recently, it was generally thought that certain contracts that
lead up to a maritime contract are not maritime. Under this view, for example,
although a marine insurance policy is maritime, a contract to procure such a policy
was not.”); 1 Thomas J. Schoenbaum, Admiralty and Maritime Law § 3-10 (5th ed.
2011).
In Exxon Corp. v. Central Gulf Lines, Inc., 500 U.S. 603 (1991), the United
States Supreme Court held that “[r]ather than apply a rule excluding all or certain
agency contracts from the realm of admiralty, lower courts should look to the
subject matter of the agency contract and determine whether the services
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performed under the contract are maritime in nature.” Exxon, 500 U.S. at 612.
Following Exxon, the Ninth Circuit has declared that “[t]o ascertain whether an
insurance policy is maritime, [a court] must examine the ‘nature and subjectmatter’ of the contract[.]” Sentry Select Ins. Co. v. Royal Ins. Co. of America, 481
F.3d 1208, 1217 (9th Cir. 2007) (quoting Exxon, 500 U.S. at 611). To that end,
“the true criterion is whether it has reference to maritime service or maritime
transactions[.]” Id. (internal quotation marks and citation omitted).3
In the instant case, the subject matter of the contract that Plaintiffs attempt to
rely on apparently relates to “a contract to provide proper maritime insurance[.]”
Dkt. No. 22 at 12. Without more, the Court is unable to determine whether any
alleged contract between Plaintiffs and Defendants would satisfy the contract test
for admiralty jurisdiction. The Court grants Plaintiffs until November 1, 2016 to
file an amended complaint that clearly establishes this Court’s subject matter
jurisdiction over this matter.
CONCLUSION
For the foregoing reasons, the Court GRANTS Christini’s Motion to
Dismiss for Lack of Subject Matter Jurisdiction (Dkt. No. 14). 4 Plaintiffs are
3

The Court acknowledges that following Exxon, several courts have concluded that contracts
with insurance brokers to procure maritime insurance are within the admiralty jurisdiction of
federal courts. See, e.g., Fernandez v. Haynie, 120 F.Supp.2d 575 (E.D. Va. 2000), aff’d, 31
Fed.Appx. 916 (4th Cir. 2002).
4
Because the Court lacks subject matter jurisdiction over this matter, it does not reach Christini’s
alternative argument under Federal Rule of Civil Procedure 12(c).

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GRANTED leave to file a First Amended Complaint by no later than November 1,
2016 in order to cure the deficiencies noted in this order.
IT IS SO ORDERED.
DATED: October 11, 2016 at Honolulu, Hawai‘i.

Neal v. Christini; CV 16-00242 DKW-RLP; ORDER GRANTING
DEFENDANT CHRISTINI’S MOTION TO DISMISS BASED ON LACK OF
SUBJECT MATTER JURISDICTION

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