SEA VILLAGE MARINA, LLC v. A 1980 CARLCRAFT HOUSEBOAT, HULL ID NO. LMG37164M80D et al

Filing 75

MEMORANDUM OPINION. Signed by Chief Judge Jerome B. Simandle on 4/11/2013. (tf, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

SEA VILLAGE MARINA, LLC.,
Civil Action
No. 09-3292 (JBS-AMD)

Plaintiff,
v.

MEMORANDUM OPINION

A 1980 CARLCRAFT HOUSEBOAT,
HULL ID NO. LMG37164M80D, et
al.,
Defendants.

SIMANDLE, Chief Judge:
This matter comes before the Court on its own motion
pursuant to Fed. R. Civ. P. 12(h)(2) to determine whether the
Court has subject matter jurisdiction in light of Lozman v.
Riviera Beach, 133 S. Ct. 735, 2013 WL 149633 (2013), which held
that Petitioner Lozman’s floating home was not a vessel for
purposes of admiralty jurisdiction. The Court lacks subject
matter jurisdiction and will dismiss this action. The Court
finds as follows:
1.

In 2009, Sea Village Marina (“SVM”) filed this in rem

action to obtain maritime liens against four houseboats whose
owners had not paid dockage fees since 2007. On October 19,
2009, after conducting several hearings on the question of
subject matter jurisdiction, the Court issued an Opinion and
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Order establishing that it had admiralty jurisdiction over the
dispute under 28 U.S.C. § 1333 because the houseboats were
vessels. [Docket Items 29 & 30.]
2.

On November 24, 2009, during the third hearing

regarding admiralty jurisdiction, the Court saw indications that
SVM’s bookkeeping was “unorthodox.” Sea Vill. Marina, LLC v. A
1980 Carlcraft Houseboat, 09-3292 (JBS-AMD), 2010 WL 338060, *3
(D.N.J. Jan. 26, 2010). For example, at the hearing, SVM
attempted to introduce spreadsheets showing the dockage owed,
but the dockage rates for each month had been “edited” and “rerevised.” Id.

Plaintiff's counsel described the revised numbers

as “doing [Defendants] a favor by reducing the amount of the
claim.” Id. Defendants asserted that Plaintiff SVM and SVM’s
counsel “committed fraud upon the Court by asserting knowingly
false amounts of lien claims in the Verified Complaint . . . and
in statements of account submitted as evidence in Court
knowingly and falsely inflating the amounts invoiced . . . .”
[Docket Item 47 at 1.]
3.

On January 25, 2010, the Court entered an Order to

Show Cause (“2010 Rule 11 Show Cause Order”) and scheduled a
hearing to investigate whether SVM and its counsel had
“knowingly asserted false claims and submitted to the Court
false statements of account . . . and, if so, whether sanctions
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should be imposed for misconduct upon Plaintiff or Plaintiff’s
counsel or both under Rule 11, Fed. R. Civ. P., and/or under the
inherent power of the Court . . . .” [Docket Item 47 at 1-2.]
The Court noted that “sanctions may include but not be limited
to the striking of claims, the limitation of claims, the
retention of a forensic accountant at Plaintiff’s expense, an
award of attorneys’ fees in favor of Defendants, and/or referral
to disciplinary authorities.” [Docket Item 47 at 2.]
4.

The Court held a show cause hearing on February 19,

2010 and March 1, 2010. Before the Court issued an Opinion on
the Rule 11 show cause hearings, Plaintiff SVM filed a
suggestion of bankruptcy on March 17, 2010, noting that SVM had
filed a voluntary petition under Chapter 11 of Title 11 of the
United States Code. [Docket Item 57.] On March 23, 2010, the
Court issued an Order holding that the motion for sanctions
should be stayed pursuant to the automatic stay provision of 11
U.S.C. § 362 pending the bankruptcy proceedings. [Docket Item
58.]
5.

On May 4, 2012, in conjunction with approving SVM’s

Second Amended Reorganization Plan, the Bankruptcy Court granted
relief from the automatic stay so that this action could
proceed. [Bankr. No. 10-17235, Docket Item 549, at 13 ¶ 54.]

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6.

On January 15, 2013, the United States Supreme Court

decided Lozman v. Riviera Beach, 133 S. Ct. 735, 2013 WL 149633
(2013), and held that Petitioner Lozman’s floating home was not
a vessel. After Lozman, the Court doubted that it had admiralty
jurisdiction under 28 U.S.C. § 1333 to hear an action for
maritime liens with regard to unpaid houseboat slip rentals. On
January 17, 2013, the Court, on its own motion pursuant to Fed.
R. Civ. P. 12(h)(2), issued a show cause order (“2013 Subject
Matter Jurisdiction Show Cause Order”) [Docket Item 66] asking
the parties to submit briefing regarding whether the Court had
subject matter jurisdiction in light of Lozman.
7.

Instead of submitting briefing regarding subject

matter jurisdiction, Plaintiff SVM filed a letter asking the
Court to dismiss the case pursuant to Fed. R. Civ. P. 41(a)(2)
without prejudice because SVM “ha[d] determined that it did not
wish to proceed with this action.” [Docket Item 67.] Defendant
John Allen, owner of one of the floating homes, filed a letter
in response [Docket Item 68], arguing that the Court must rule
on the 2010 Rule 11 Show Cause Order and that he was entitled to
damages from Plaintiff for violation of his constitutional
rights in seizing his home and for the improper invocation of
this Court’s jurisdiction. Plaintiff filed a response letter
[Docket Item 69] arguing that Defendants’ constitutional rights
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were not violated because (1) the Court conducted a prompt
hearing in 2009 to address the jurisdictional question, and (2)
before Lozman, there was ample precedent indicating that
houseboats were subject to admiralty jurisdiction. Plaintiff
argued that Defendants were not entitled to damages or to
attorneys’ fees.
8.

Plaintiff then filed a formal brief [Docket Item 72]

as directed by the Court’s 2013 Subject Matter Jurisdiction Show
Cause Order. Plaintiff argued that the houseboats in this case
and the houseboat in Lozman share the same relevant attributes
because they are intended for use as stationary residences, not
for transporting passengers or cargo. Plaintiff requested
dismissal of this action without prejudice.
9.

Defendant Allen filed a response [Docket Item 73]

arguing that the 2010 Rule 11 Show Cause Order remains
outstanding and that the Court “was properly and vigorously
advised that this was not an admiralty matter and that
Plaintiff’s utilizing the admiralty procedures . . . was in bad
faith, malicious and unsupportable at law . . . .” [Docket Item
73 at 2.] Allen asks the Court to “conduct the appropriate
hearings and issue the appropriate orders in relation to the
Rule 11 sanctions and the damages flowing from the undisputedly

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unlawful and unconstitutional taking of Allen’s floating home.”
[Docket Item 73 at 6.]
10.

Plaintiff filed a Reply noting that Allen is “not a

party to this action and has filed no claim for wrongful arrest
or any other claim upon which the Court could render a
judgment.” [Docket Item 74 at 2.] Plaintiff also argued that,
even assuming that a wrongful arrest claim had been properly
presented, the claim would be unavailing because there is no
proof that the arrest warrant was procured maliciously or in bad
faith. Plaintiff also noted that, even if Rule 11 sanctions were
warranted, Defendants would not be entitled to a fee award
because they did not file a motion for fees.
11.

The Court lacks subject matter jurisdiction in this

matter because the Lozman case established that floating homes
which do not transport passengers or cargo, such as the
residences in this action, are not subject to federal admiralty
jurisdiction. Defendant Allen has not submitted any argument
that, even after Lozman, the Court retains jurisdiction over an
unpaid dockage fee case involving houseboats. This action will
be dismissed without prejudice to Plaintiff’s right to seek
relief for unpaid dockage fees in another court. See Willy v.
Coastal Corp., 503 U.S. 131, 137 (1992) (“A final determination

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of lack of subject-matter jurisdiction of a case in a federal
court, of course, precludes further adjudication of it.”).
12.

Defendant Allen is not entitled to damages from

Plaintiff for initiating this action. In 2009, it was not clear
that houseboats were not subject to admiralty jurisdiction;
Plaintiff’s initiation of an admiralty action was not
unreasonable. In 2009, the Court found that jurisdiction was
proper because the houseboats were not permanently moored, were
floating, could be towed to other locations, had hull
identification numbers assigned by the Coast Guard, had shore
connections that could be disconnected at any time, and were
capable of being used for transportation.

Sea Vill. Marina, LLC

v. A 1980 Carlcraft Houseboat, CIV 09-3292 JBS-AMD, 2009 WL
3379923 (D.N.J. Oct. 19, 2009). Lozman abrogated the Court’s
finding that the houseboats were vessels subject to admiralty
jurisdiction, but the Lozman opinion was not unanimous: the
dissent specifically noted that several district court opinions,
including this Court’s October 19, 2009 Opinion, “looked
carefully at these crafts' structure and function, and
determined that these ships had capabilities similar to other
long-established vessels, suggesting a significant maritime
transportation function.” Lozman, 133 S. Ct. at 753. The Lozman

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dissent further noted that “the majority works real damage to
what has long been a settled area of maritime law.” Id.
13.

In sum, Defendant Allen cannot argue that Plaintiff’s

invocation of admiralty jurisdiction was unreasonable in 2009.
Moreover, “it cannot be said that [Plaintiff’s] counsel was
guilty of attempting to bring [this] action . . . in bad faith
because he did not prognosticate that the rationale of [Lozman]
would bar the suit.” See Smith v. Detroit Fed'n of Teachers
Local 231, Am. Fed'n of Teachers, AFL-CIO, 829 F.2d 1370, 1376
(6th Cir. 1987).
14.

The Court’s determination that it lacks subject matter

jurisdiction to adjudicate the merits of this case does not
automatically obviate the Court’s jurisdiction to rule on its
2010 Rule 11 Show Cause Order. Generally, even a determination
that a federal court lacks subject matter jurisdiction does not
preclude Rule 11 sanctions: “imposition of a Rule 11 sanction is
not a judgment on the merits of an action. Rather, it requires
the determination of a collateral issue: whether the attorney
has abused the judicial process, and, if so, what sanction would
be appropriate.” Willy, 503 U.S. at 138. The rationale behind
permitting sanctions after determining the absence of subject
matter jurisdiction is to preserve courts’ interest in “the
maintenance of orderly procedure.” Id. at 137. Essentially,
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“courts are vested with certain inherent powers that . . . are
necessary to all other functions of courts [and] implicit in all
these powers is the power to sanction.” In re Orthopedic "Bone
Screw" Products Liab. Litig., 132 F.3d 152, 156 (3d Cir. 1997).
15.

But the Court’s inherent power to sanction, even when

subject matter jurisdiction is absent, does not extend to
circumstances in which the sanction would be dispositive of the
case’s merits. “[W]here . . . the court lacks subject matter
jurisdiction, it may not act in a way that determines the cause
of action.” Bone Screw, 132 F.3d at 156. In other words, “where
jurisdiction is found to be lacking, there can be no
adjudication of the merits of the case. This prohibition must
bar the imposition of a sanction which will terminate the case
on the merits.” Id. at 157. In Bone Screw, the Third Circuit
emphasized that, after subject matter jurisdiction is found
lacking, a district court may only impose sanctions that are
“collateral to the merits of the case.” Id. at 156. The Bone
Screw court vacated the district court’s dismissal of the
plaintiff’s case because that sanction adjudicated the merits,
but it affirmed the imposition of a monetary sanction that was
collateral to the merits. Id. at 157.
16.

The key factor, therefore, in determining the Court’s

power to impose sanctions after subject matter jurisdiction is
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absent is whether the sanction is dispositive of or collateral
to the merits of the case. In the present action, the Rule 11
inquiry is intertwined with the merits of the quantum of damages
owed by the Defendant houseboats.
17.

The Court’s 2010 Rule 11 Show Cause Order addresses

concerns about the accuracy of spreadsheets that Plaintiff SVM
introduced showing the dockage owed. There was never a dispute
that the Defendant houseboats had not paid rental fees to
Plaintiff for years. See Sea Vill. Marina, LLC v. A 1980
Carlcraft Houseboat, 09-3292 (JBS-AMD), 2010 WL 338060, at * 6
(D.N.J. Jan. 26, 2010) (“Allen and Patterson acknowledged they
owe some amount for dockage . . . . Plaintiff has established
that the Allen and Patterson vessels have not paid for their
dockage”). The 2010 Rule 11 Show Cause hearing explored the
accuracy of Plaintiff’s assertions about how much money was owed
and whether higher rents had been properly put into effect.
Before the Court can determine whether sanctions are warranted,
regardless of the form of the sanctions, the Court must
determine the accuracy or reasonableness of Plaintiff’s
assertions about the amount of unpaid dockage fees. If the Court
made such a determination, it would be adjudicating the merits.
The Court must dismiss its 2010 Rule 11 Show Cause Order because

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the Court lacks subject matter jurisdiction and may not
adjudicate the merits.
18.

After Lozman, the Court lacks subject matter

jurisdiction over this action for unpaid dockage fees. This case
will be dismissed without prejudice to Plaintiff’s right to seek
relief in another court. Moreover, the Court will dismiss its
2010 Rule 11 Show Cause Order because that Order reaches the
merits of this action. The accompanying order will be entered.

April 11, 2013
Date

s/ Jerome B. Simandle
JEROME B. SIMANDLE
Chief U.S. District Judge

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