Dredging Supply Rental, Inc. et al v. USA DeBusk, LLC

Filing 29

ORDER AND REASONS denying 21 Defendant's Motion to Dismiss for Lack of Jurisdiction. The Motion is DENIED, as set forth in document. Signed by Judge Jane Triche Milazzo on 8/10/2018. (sa)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
DREDGING SUPPLY
RENTAL, INC., ET AL.

CIVIL ACTION

VERSUS

NO: 17-12200

USA DEBUSK, LLC

SECTION: “H”(5)

ORDER AND REASONS
Before the Court is Defendant’s Motion to Dismiss for Lack of Subject
Matter Jurisdiction (Doc. 21). For the following reasons, the Motion is
DENIED.
BACKGROUND
This action arises from an incident in which a dredge sank in the
Yellowstone River. The essential facts relating to this Court’s jurisdiction are
not disputed. Plaintiffs Dredging Supply Rental, Inc. and Deep South
Dredging, Inc. owned the dredge KATHY, a 34-foot vessel registered with the
United States Coast Guard. The KATHY maneuvered itself with three spuds,
pilings that can be raised and lowered into the riverbed. It dredged with a
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cutting head that loosened sediment and soil from the river bed, which was
then sucked up by a suction head and pumped ashore through pipelines
attached to the dredge. The KATHY was portable; it could be disassembled,
packed into several trucks for transport over land to another location, and
reassembled.
Defendant USA Debusk, LLC contracted with ExxonMobil to clear
sediment away from a water intake pipe used by an ExxonMobil refinery in
Montana. The refinery was based on land and drew water from the adjacent
Yellowstone River to use as coolant. Defendant entered into an oral contract
with Plaintiffs to rent the KATHY in order to complete the ExxonMobil job.
Pursuant to the contract, Plaintiffs delivered three truckloads of parts to the
ExxonMobil site where Defendant then assembled the KATHY and launched
it into the Yellowstone River. The assembly process took longer than
Defendant expected. On October 22, 2017, shortly after operations commenced,
the KATHY began to take on water and eventually settled onto the bottom of
the river.
Plaintiffs filed suit on November 10, 2017 invoking this Court’s
admiralty jurisdiction and seeking to recover damages incurred in connection
with the sinking of the KATHY, including the value of the vessel, unpaid
amounts on the contract to hire the vessel, lost future profits, and any cost to
salvage the vessel. Intervenor Great American Insurance Co., the hull and
protection and indemnity insurer of Plaintiffs, filed a Complaint of
Intervention on January 30, 2018 incorporating the allegations of Plaintiffs’
Complaint and asserting its own claim of subrogation against Defendant to
recover payments made to Plaintiffs under its policies.
Defendant now moves to dismiss Plaintiffs’ and Intervenor’s complaints
pursuant to Federal Rule of Civil Procedure 12(b)(1) on the ground that the
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this Court lacks subject matter jurisdiction. Plaintiffs and Intervenor
separately oppose the Motion.
LEGAL STANDARD
Pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure, a
complaint may be dismissed for lack of subject matter jurisdiction. A complaint
lacks federal subject matter jurisdiction when the district court “lacks the
statutory or constitutional power to adjudicate a case.” 1 District courts are
granted federal admiralty jurisdiction in 28 U.S.C. § 1333. A district court has
the power to dismiss a complaint for lack of subject matter jurisdiction on three
separate bases: “(1) the complaint alone; (2) the complaint supplemented by
undisputed facts evidenced in the record; or (3) the complaint supplemented by
undisputed facts plus the court’s resolution of disputed facts.” 2 The party
asserting federal admiralty jurisdiction bears the burden to prove that federal
admiralty jurisdiction exists. 3
LAW AND ANALYSIS
Plaintiffs assert claims against Defendant sounding in tort and contract.
The Court will address its jurisdiction over each set in turn. Intervenor does
not assert a basis for jurisdiction independent of Plaintiffs’ Complaint and
therefore its Complaint of Intervention will not be examined separately.
A. Contract Claims
Federal admiralty jurisdiction over a contract claim “‘depends upon . . .
the nature and character of the contract,’ and the true criterion is whether [the

1
2
3

Home Builders Ass’n of Miss., Inc. v. City of Madison, 143 F.3d 1006, 1010 (5th Cir. 1998).
Williamson v. Tucker, 645 F.2d 404, 413 (5th Cir. 1981).
Jerome B. Grubart, Inc. v. Great Lakes Dredge & Dock Co., 513 U.S. 527, 534 (1995).

3

contract] has ‘reference to maritime service or maritime transactions.’” 4 A
contract is subject to admiralty jurisdiction when “the principal objective of a
contract is maritime commerce.” 5 “A charter party is a classic example of a
maritime contract.” 6
The Court has admiralty jurisdiction over the contract at issue because
it was a charter party with the principal objective of supplying a vessel to
perform dredging operations on a navigable waterway. Defendant attempts to
avoid this conclusion by characterizing the contract as one for the transport
and rental of equipment that Defendant would assemble and use to maintain
a land-based facility. However, the straightforward facts of the arrangement
and Defendant’s own pleadings in this and a related lawsuit belie such
rhetorical gymnastics.
In Defendant’s Counterclaim in this suit, Defendant states that
Plaintiffs “offered to rent a dredge to [Defendant] for a project with one of
[Defendant]’s most important customers.” 7 Defendant obtained assurances
that the “dredge was in good condition,” and, “[i]n reliance on Plaintiffs’
representations, [Defendant] rented the dredge.” 8 Defendant asserts a contract
claim on the basis that Plaintiffs, “breached their rental agreement with
[Defendant] by providing a dredge that was not in good condition.” 9 Similarly,
in a suit that Defendant filed in Texas state court, Defendant described the
nature of this dispute thusly:

4
5

6
7
8
9

Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 24 (2004).
Id. at 25; see also Robert Force, The Aftermath of Norfolk Southern Railway v. James N.
Kirby, Pty Ltd.: Jurisdiction and Choice-of-Law Issues, 83 TUL. L. REV. 1393, 1397 (2009)
(collecting cases applying Norfolk Southern).
Fontenot v. Mesa Petroleum Co., 791 F.2d 1207, 1214 (5th Cir. 1986).
Doc. 15 at 7.
Doc. 15 at 7.
Doc. 15 at 8–9.

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This is a negligence suit for damages involving a capsized dredging
vessel owned by Deep South that it rented to Debusk. Deep South
negligently represented to Debusk that the vessel was seaworthy
and otherwise in good condition for dredging operations. In fact,
Deep South knew that the vessel was damaged and unseaworthy. 10
In that suit, Defendant also asserted a contract claim against Plaintiff Deep
South Dredging Co. on the basis that “[Deep South] breached its rental
agreement with Debusk in that it failed to comply with the warranty of
seaworthiness.” 11
Up until this Motion was filed, then, the parties appear to have agreed
that the contract at issue was for the rental of a seaworthy dredging vessel.
Documents preceding the incident also support that conclusion. Plaintiff Deep
South Dredging, Inc. provided Defendant with a quote “to provide 1-fully
operated 10 inch ladder dredge with sufficient pipeline to dredge the Exonn
Intake on the Yellowstone River.” 12 The estimate sets forth lump sum prices
for mobilization and demobilization and a daily rate for dredge operation. 13
Ultimately the parties entered into a contract with the same payment
structure but in which Defendant would operate the dredge itself.
That the KATHY had to be transported a significant distance over land
or that it required some assembly after being delivered does not change the
fact that the principal objective of the contract was to obtain the use of a
seaworthy dredging vessel. 14 Nor does the fact that the KATHY was to be

Doc. 22-2 at 2.
Doc. 22-2 at 4.
12 Doc. 21-4 at 1.
13 Doc. 21-4 at 1.
14 See Norfolk S. Ry. Co., 543 U.S. at 15 (“Under a conceptual rather than spatial approach,
the fact that the bills call for the journey’s final leg to be by land does not alter the contracts’
essentially maritime nature.”).
10
11

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employed for the benefit of a land-based interest. 15 Unlike the test for
admiralty jurisdiction over a tort, which looks to the general activity that the
tortfeasor was engaged in, the test for admiralty jurisdiction over a contract
looks only to the nature of the contract itself. Here, the contract was for the
charter of a dredging vessel for operations on navigable waters. That is a
maritime contract, and this Court therefore has admiralty jurisdiction over
disputes arising from it.
B. Tort Claims
Federal admiralty jurisdiction over a tort claim requires that the tort
have a maritime location and maritime connection. 16 “The location test is
satisfied if the tort occurred on navigable waters or if the injury occurred on
land but was caused by a vessel on navigable waters.” 17
The connection test is satisfied if two conditions are met. First, the
general features of the type of incident involved must have a
potentially disruptive impact on maritime commerce. The court
uses a description of the incident at an intermediate level of
possible generality, that is neither too broad to distinguish among
cases nor too narrow to recognize potential effects on maritime
commerce. Second, the general character of the activity giving rise
to the incident must show a substantial relationship to traditional
maritime activity. The court considers whether a tortfeasor’s
activity, commercial or noncommercial, on navigable waters is so
closely related to activity traditionally subject to admiralty law
that the reasons for applying special admiralty rules would apply
in the suit at hand. 18

See Warren & Arthur Smadbeck, Inc., v. Heling Contracting Corp., 50 F.2d 99, 101 (2d Cir.
1931) (holding that a charter for a sand dredge to be used to build up new land was within
the court’s admiralty jurisdiction because “the charter upon which the suit rests was a
maritime contract”).
16 See Grubart, 513 U.S. at 534.
17 In re La. Crawfish Producers, 772 F.3d 1026, 1029 (5th Cir. 2014).
18 Id. (quotations and citations omitted).
15

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Defendant does not contest that the location test is satisfied. The
KATHY sank in the Yellowstone River, a navigable waterway. As to the
connection test, the first requirement is also easily satisfied. At an
intermediate level of generality, the general features of the incident are that a
dredge sank in navigable waters while dredging the bottom of those waters.
The sinking of a vessel in navigable waters while performing work on the
bottoms of the waters has the potential to disrupt maritime commerce by, for
example, blocking traffic or damaging passing vessels. Defendant does not
substantively contest this point either, instead focusing exclusively on the
second prong of the connection test.
The issue before the Court is therefore whether the general character of
the activity giving rise to the incident shows a substantial relationship to
traditional maritime activity. The parties dispute how to generally
characterize the activity giving rise to the incident. Defendant describes the
KATHY’s activity as the maintenance of a land-based refinery. Plaintiffs
describe it as dredging a navigable waterway.
In Jerome B. Grubart, Inc. v. Great Lakes Dredge & Dock Co., a tunnel
under a navigable river was damaged by a barge driving piles into the riverbed
in order to create a structure that would mitigate collisions between the piers
of a bridge and passing vessels. 19 For the purposes of the second prong of the
connection test, the Court described this activity as, “repair or maintenance
work on a navigable waterway performed from a vessel,” and found the activity
to be maritime. 20 In In re Katrina Canal Breaches Litigation, plaintiffs invoked
the court’s admiralty jurisdiction over tort claims arising from breach of the

19
20

Grubart, 513 U.S. at 540.
Id.

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17th Street Canal during Hurricane Katrina. 21 Plaintiffs argued that
admiralty jurisdiction extended to the dredging of the canal, performed from a
floating

dredge. 22

The

Fifth

Circuit

described

the

activity

as

“construction/repair work performed from a vessel to allow proper drainage of
the City’s flood water,” and held that it was not substantially related to
traditional maritime activity. 23 The court reasoned that the “project implicated
only local, land-based interests, and the connection, if any, to admiralty law is
‘wholly fortuitous’.” 24 Similarly, in Texaco Exploration & Production, Inc. v.
AmClyde Engineered Products Co., a vessel-based crane failed while being used
to construct an oil and gas production facility in the Gulf of Mexico. 25 In holding
that maritime jurisdiction did not apply, the Fifth Circuit described the
activity as construction for the purpose of “development of the resources of the
Outer Continental Shelf.” 26
Using a comparable approach, the activity giving rise to the incident here
was maintenance work of a refinery performed from a vessel. Such activity is
not substantially related to traditional maritime activity and therefore fails to
satisfy the second prong of the connection test. The common thread in Grubart,
Katrina Canal Breaches Litigation, and Texaco is that the court should look to
the overall purpose of the project, not the immediate means used to carry out
that purpose. In Grubart, the purpose of the project was the installation of
pilings, which benefitted both the bridge footing they surrounded and maritime

In re Katrina Canal Breaches Litig., 324 F. App’x 370, 372–75 (5th Cir. 2009)
(unpublished).
22 Id. at 377.
23 Id. at 380.
24 Id. (quoting Exec. Jet Aviation, Inc. v. City of Cleveland, Ohio, 409 U.S. 249, 267 (1972)).
25 Texaco Expl. & Prod., Inc. v. AmClyde Engineered Prod. Co., 448 F.3d 760, 765, amended
on reh’g on other grounds, 453 F.3d 652 (5th Cir. 2006).
26 Id. at 771.
21

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traffic on the river. 27 In Katrina Canal Breaches Litigation and Texaco, on the
other hand, the purpose of the projects was construction that benefitted only a
non-maritime interest. 28 The use of maritime means, such as dredging, did not
extend admiralty jurisdiction to an otherwise non-maritime project. Here, the
entire purpose of the project was to maintain a coolant intake for a land-based
refinery. The location of the intake in navigable waters or the use of a floating
dredge to accomplish that maintenance does not provide a maritime connection
when the general character of the activity giving rise to the incident is not
maritime. Accordingly, this Court does not have admiralty jurisdiction over
Plaintiffs’ tort claims.
This Court, however, does have supplemental jurisdiction over the tort
claims. A court may exercise supplemental jurisdiction over a claim for which
it lacks original jurisdiction if that claim is so related to a claim over which the
court does have original jurisdiction that it “form[s] part of the same case or
controversy.” 29 “[A] third-party claim lacking independent grounds of
jurisdiction may be appended to an admiralty action and is cognizable in
federal court under the doctrine of ancillary jurisdiction so long as the ancillary
claim arises out of the same core of operative facts as the main admiralty
action.” 30 Claims arise from a single case or controversy when all the claims
“derive from a common nucleus of operative fact,” such that one would expect
them to be tried in a single judicial proceeding. 31 “A court’s determination of

Grubart, 513 U.S. at 540.
See In re Katrina Canal Breaches Litig., 324 F. App’x at 380; Texaco Expl. & Prod., Inc.,
448 F.3d at 771.
29 28 U.S.C. § 1367(a); see Miller v. Griffin-Alexander Drilling Co., 873 F.2d 809, 814 (5th Cir.
1989); Derouen v. Hercules Liftboat Co., LLC, No. 13-4805, 2016 WL 5869786, at *5 (E.D.
La. Oct. 7, 2016).
30 Joiner v. Diamond M Drilling Co., 677 F.2d 1035, 1041 (5th Cir. 1982).
31 United Mine Workers of America v. Gibbs, 383 U.S. 715, 725 (1966).
27
28

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whether to exercise supplemental jurisdiction is guided by considerations of
judicial economy, convenience and fairness to litigants.” 32
Plaintiffs’ claims for breach of contract, and the defenses that Defendant
has raised, involve the same nucleus of operative facts as Plaintiffs’ claims
sounding in tort. The reason that the KATHY sank will be central to all claims;
trying them separately would be neither efficient nor fair. The Court therefore
exercises its supplemental jurisdiction over Plaintiffs’ tort claims.
CONCLUSION
For the foregoing reasons, Defendant’s Motion to Dismiss is DENIED.

New Orleans, Louisiana this 10th day of August, 2018.

____________________________________
JANE TRICHE MILAZZO
UNITED STATES DISTRICT JUDGE

32

Id.

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