Lake Champlain Community Sailing Center, Inc.
Filing
25
OPINION AND ORDER granting 12 Motion for Extension of Time to File Response/Reply re 9 MOTION for Summary Judgment ; denying 13 Motion to Dismiss for Failure to State a Claim. Signed by Judge William K. Sessions III on 8/13/2014. (law)
UNITED STATES DISTRICT COURT
FOR THE
DISTRICT OF VERMONT
IN RE: THE COMPLAINT AND
PETITION OF LAKE CHAMPLAIN
COMMUNITY SAILING CENTER,
INC. AS OWNER OF CLUB 420
SAILBOAT FOR EXONERATION
FROM OR LIMITATION OF
LIABILITY
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Case No. 2:13-cv-251
OPINION AND ORDER
This admiralty case arises out of injuries allegedly
suffered by Nathalie Kelly during a sailing lesson on Lake
Champlain in 2010.
The lesson was conducted by staff of
petitioner Lake Champlain Community Sailing Center, Inc.
(“Petitioner” or “LCCSC”).
Claiming negligence and loss of
consortium, Ms. Kelly and members of her family filed an action
for damages in state court.
LCCSC subsequently filed a petition
in this Court seeking exoneration, or a limitation of its
liability to the value of the sailboat, pursuant to the
Limitation of Liability Act, 46 U.S.C. § 30505(b) (“Limitation
Act” or “LOLA”).
As a result of LCCSC’s filing, the state court
action has been stayed.
Ms. Kelly now moves to dismiss the petition, arguing that
LCCSC is not entitled to relief under the Limitation Act.
Also
pending is LCCSC’s motion for summary judgment on the basis of a
release signed by Ms. Kelly.
For the reasons set forth below,
the motion to dismiss is DENIED, and a response to the summary
judgment motion shall be filed on or before September 1, 2014.
Factual and Procedural Background
On June 29, 2010, Nathalie Kelly participated in a sailing
lesson provided by LCCSC.
According to Ms. Kelly’s statement of
claim (ECF No. 4 at 3-13), the morning weather forecast that day
warned of isolated afternoon thunderstorms and wind gusts up to
25 miles per hour.
The forecast for Lake Champlain predicted
winds over 10 knots and waves of one to two feet, with higher
winds and waves in the vicinity of the thunderstorms.
Ms.
Kelly’s evening sailing class encountered a storm, and at 6:45
p.m. her boat capsized.
The class instructor, driving a
motorized boat, allegedly instructed Ms. Kelly and a classmate to
try to right the sailboat.
Their efforts were unsuccessful, and
they were ultimately rescued by the United States Coast Guard.
Ms. Kelly claims to have suffered permanent injuries as a result
of the incident.
In June 2013, Nathalie and Selina Kelly, and Nathalie Kelly
as parent and next friend of Adrian Kelly, a minor, filed suit in
the Chittenden Civil Division of the Vermont Superior Court
seeking damages (the “Kelly lawsuit”).
The Complaint alleges
that Ms. Kelly was an inexperienced sailor when she sustained her
injuries, and that LCCSC’s agents should have known that a storm
was approaching; should have known that inexperienced sailors
should not be sailing in an area where a storm has been forecast;
should have had more than one safety boat on the water; should
2
have provided more instructors; should have adequately trained
the instructor; and should have rescued Ms. Kelly from the water
rather than instructing her to try to right the boat.
On September 13, 2013, LCCSC filed in this Court a petition
under the Limitation Act for exoneration or limitation of
liability with regard to the Kelly lawsuit.
The petition asserts
that “[a]ny and all injuries and damages allegedly resulting from
the incident were not caused by or attributable to any fault,
design, neglect, or want of due care on the part of [LCCSC], or
anyone for whom [LCCSC] may be responsible,” and that any damage
“occurred without [LCCSC]’s privity or knowledge.”
2.
ECF No. 1 at
Accordingly, LCCSC: (1) denies liability and demands
exoneration, and (2) in the alternative, claims that under the
Limitation Act its liability is limited to the value of the
sailboat.
LCCSC submits that the boat’s value after the incident
was approximately $5,000.
ECF No. 1-1 at 2.
As noted above, the
state court action has been stayed as a result of LCCSC’s filing
in this Court.
Respondents Nathalie Kelly and her children, Selina and
Adrian, (collectively “Respondents”) have moved to dismiss
LCCSC’s petition.
Respondents argue that the “savings to
suitors” clause in 28 U.S.C. § 1333 preserves their right to
proceed in state court, and that LCCSC is not entitled to limit
its liability because LCCSC’s “privity or knowledge” is
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established in the pleadings.
LCCSC disputes whether privity or
knowledge is established, and has filed a motion for summary
judgment on the basis of a release signed by Ms. Kelly prior to
her lesson.
Respondents have moved the Court for leave to
respond to the summary judgment motion within 15 days after the
Court rules upon their motion to dismiss.
Discussion
I.
Legal Standard
Respondents submit their motion to dismiss pursuant to Fed.
R. Civ. P. 12(b)(6).
Because they filed their motion to dismiss
after filing an answer, the motion must be considered under Fed.
R. Civ. P. 12(c) as a motion for judgment on the pleadings.
See
Patel v. Contemporary Classics of Beverly Hills, 259 F.3d 123,
126 (2d Cir. 2001).
The applicable legal standard, however, is
the same under either rule, see Cleveland v. Caplaw Enters., 448
F.3d 518, 521 (2d Cir. 2006), requiring the Court to determine
whether the complaint states “‘a claim to relief that is
plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)).
When considering a motion to dismiss, a court should “draw
all reasonable inferences in Plaintiffs’ favor, assume all
well-pleaded factual allegations to be true, and determine
whether they plausibly give rise to an entitlement to relief.”
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Faber v. Metro. Life, 648 F.3d 98, 104 (2d Cir. 2011) (internal
quotation marks omitted).
While factual allegations in the
complaint are assumed to be true, the same assumption does not
apply to legal conclusions.
Iqbal, 556 U.S. at 678.
Review of a
motion to dismiss “is limited to the facts as asserted within the
four corners of the complaint, the documents attached to the
complaint as exhibits, and any documents incorporated in the
complaint by reference.”
McCarthy v. Dun & Bradstreet Corp., 482
F.3d 184, 191 (2d Cir. 2007) (citing Taylor v. Vt. Dep’t of
Educ., 313 F.3d 768, 776 (2d Cir. 2002)).
II.
The Limitation Act
The Limitation Act limits the liability of a boat owner for
“any loss, damage, or injury by collision . . . done, occasioned,
or incurred without the privity or knowledge of the owner” to
“the value of the vessel and pending freight.”
30505(b).
46 U.S.C. §
The Act, which dates back to 1871, was designed “to
encourage ship building and to induce capitalists to invest money
in this branch of industry.”
Lewis v. Lewis & Clark Marine,
Inc., 531 U.S. 438, 446 (2001) (citing Norwich & N.Y. Transp. Co.
v. Wright, 80 U.S. 104, 121 (1871)).
Although “the inclusion of
pleasure craft in the limitation provision seems rather unrelated
to the legislative goal of fostering investment in commercial
shipping,” the Second Circuit has concluded that “pleasure craft”
as well as commercial vessels “are subject to the Act’s
5
limitation on liability.”
In re Guglielmo, 897 F.2d 58, 60-61
(2d Cir. 1990).
The LOLA establishes a procedure by which a boat owner can
deposit a sum equal to the value of its ownership interest in the
vessel and file suit to limit its liability.1
Once the initial
procedural requirements of a LOLA filing have been satisfied, the
federal court conducts a proceeding known as concursus.
The
Supreme Court has described concursus as follows:
In these proceedings, the court, sitting without a
jury, adjudicates the claims. The court determines
whether the vessel owner is liable and whether the
owner may limit liability. The court then determines
the validity of the claims, and if liability is
limited, distributes the limited fund among the
claimants.
Lewis, 531 U.S. at 448.
The Lewis decision acknowledged that the
concursus process is in “some tension” with the “savings to
suitors” clause set forth in 28 U.S.C. § 1333(1).
1
Section
The owner of a vessel must bring a civil action in federal
district court within six months after a claimant gives the owner
written notice of a claim. 46 U.S.C. § 30511(a); Fed. R. Civ. P.
Supp. R. F(1). The limitation of liability complaint must state the
facts on which the right to limitation is asserted, as well as any
facts that the court would need to determine the amount of limited
liability. Fed. R. Civ. P. Supp. R. F(2). The owner must then either
deposit with the court or transfer to a court-appointed trustee an
amount equal to the owner’s interest in the vessel and an amount fixed
by the court. See 46 U.S.C. § 30511(b). Once the owner has brought
the limitation action and complied with subsection (b), “all claims
and proceedings against the owner related to the matter in question
shall cease.” Id. § 30511(c). The federal court must then provide
notice to all persons asserting the claims for which the owner seeks
limitation, and must file their claims against the owner in the
federal action. In this case, neither party has raised any issue with
respect to compliance with these procedures.
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1333(1) provides that “[t]he district courts shall have original
jurisdiction, exclusive of the courts of the States, of . . .
[a]ny civil case of admiralty or maritime jurisdiction, saving to
suitors in all cases all other remedies to which they are
otherwise entitled.”
28 U.S.C. § 1333(1).
Accordingly, the
savings to suitors clause “gives suitors the right to a choice of
remedies,” including a jury trial in state court, while the LOLA
“gives vessel owners the right to seek limitation of liability”
and a determination of negligence by means of a federal bench
trial.
Lewis, 531 U.S. at 448.
In recognition of this tension, courts have identified at
least two situations in which concursus is unnecessary.
In the
first, there is no need to limit liability because the aggregate
value of the injured party’s claims is less than the value of the
vessel and its cargo.
See Lewis, 531 U.S. at 450; Dammers, 836
F.2d at 755 (collecting cases).
In the second, when a “lone
claimant” files an action against a shipowner seeking an amount
in excess of the limitation fund, that claimant may pursue his or
her personal injury claim in state court provided that the
claimant stipulates to “the admiralty court’s exclusive
jurisdiction to determine all issues relating to the limitation
of liability.”
Dammers, 836 F.2d at 755.
These exceptions do
not apply here, as according to the Respondents their claims
“could potentially exceed [LCCSC’s] interest in the Vessel,”
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ECF
No. 13-1 at 2, there are multiple claimants, and there is no
evidence in the record of any relevant stipulations.2
Respondents argue that concursus is not warranted because
LCCSC’s admissions in the state court pleadings establish its
privity or knowledge, thereby barring it from seeking a
limitation of liability.
Typically, a court will first determine
negligence and then proceed to the question of privity or
knowledge.
See Otal Invs. Ltd. v. M/V Clary, 673 F.3d 108, 115
(2d Cir. 2012) (describing “two-step analysis”).
“Blind
adherence” to this approach, “however, ignores a claimant’s
important rights to a jury trial and to the full compliment [sic]
of common law remedies available in state court.”
18 F. Supp. 2d 126, 128 (D. Mass. 1998).
In re Martin,
The Court will
therefore consider Respondents’ contention that LCCSC’s petition
should be dismissed on the basis of privity or knowledge, without
first deciding the question of negligence.
III. Privity or Knowledge
Privity or knowledge is “often defined as ‘complicity in the
fault that caused the accident.’”
Tug Ocean Prince, Inc. v.
United States, 584 F.2d 1151, 1159 (2d Cir. 1978) (quoting Nuccio
v. Royal Indemnity Co., 415 F.2d 228, 229 (5th Cir. 1969)).
2
With regard to loss of consortium claims by family members,
the Second Circuit has allowed such claimants to proceed with common
law claims in other forums if they stipulate to the priority of their
claims against the shipowner(s). Dammers, 836 F.2d at 756. Again, no
such stipulations have been presented here.
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“Privity or knowledge is thus not established by mere vicarious
liability, but the concept does prohibit limitation of liability
in situations where the vessel owner knew of a dangerous
condition onboard the vessel or hired an incompetent crew.”
In
re Miller Marine Servs., Inc., 2013 WL 5460937, at *3 (E.D.N.Y.
Sept. 30, 2013) (citing In re Messina, 574 F.3d 119, 126–28 (2d
Cir. 2009)); see also In re City of New York, 522 F.3d 279, 283
(2d Cir. 2008) (“[t]he statute . . . alters the normal rules of
vicarious liability.
Instead of being vicariously liable for the
full extent of any injuries caused by the negligence of the
captain or crew employed to operate the ship, the owner’s
liability is limited . . . unless the owner himself had ‘privity
or knowledge’ of the negligent acts.”).
“Where the owner of a
ship is a corporation, the corporation is not entitled to limit
its liability ‘where the negligence is that of an executive
officer, manager or superintendent whose scope of authority
includes supervision over the phase of the business out of which
the loss or injury occurred.’”
In re City of New York, 522 F.3d
at 283 (quoting Coryell v. Phipps, 317 U.S. 406, 410 (1943)).
Respondents contend that LCCSC has admitted facts about the
conduct of its employees, and in particular Ms. Kelly’s sailing
instructor, sufficient to establish privity or knowledge.3
3
Those
Respondents also suggest that the LOLA may not apply since
LCCSC is being sued for its sailing school operations, not its
ownership of a vessel. At least one court has applied the LOLA to a
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facts include Ms. Kelly’s participation in an LCCSC sailing
class, her capsize, the directions from her instructor, and her
rescue by the Coast Guard.
LCCSC has admitted that it knew or
should have known to check the weather, but denies that inclement
weather was forecast.
LCCSC further denies that Ms. Kelly was
“under the supervision, direction, and instruction” of its
employees and/or agents at the time of the incident, and denies
any allegation of misconduct, including the failure to properly
train its instructors.
ECF No. 13-1 at 7, 18.
Acknowledging that a corporate defendant’s privity or
knowledge arises out of the negligence of a supervisor, ECF No.
13 at 9, Respondents argue that Ms. Kelly’s sailing instructor
“was the employee supervising the beginner class outing on Lake
Champlain that day,” and that her actions are therefore
“imputable to [LCCSC].”
ECF No. 19 at 3.
In designating the
sailing instructor as a supervisor, Respondents cite Great Lakes
Dredge & Dock Co. v. City of Chicago, 3 F.3d 225 (7th Cir. 1993)
(hereinafter “Great Lakes”) for the proposition that a court
determining privity or knowledge may “divide [the corporation’s]
employees into two groups.
One consists of corporate managers
vested with discretionary authority.
The other contains
sailing lesson accident without questioning the statute’s
applicability. In re Longshore Sailing School, Inc., 2010 WL 326210,
at *1 (D. Conn. Jan. 19, 2010). It has also been held that sailing
schools are subject to admiralty law. See Oran v. Fair Wind Sailing,
Inc., 2009 WL 4349321, at *5 (D.V.I. Nov. 23, 2009).
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ministerial agents or employees.”
Great Lakes, 3 F.3d at 231.
Respondents contend that because the sailing instructor’s work
was not merely ministerial, her actions gave rise to corporate
privity or knowledge.
Respondents’ argument with respect to supervisory liability
is not supported by the parties’ pleadings.
On a motion filed
pursuant to Rule 12(c), judgment is only appropriate “where
material facts are undisputed and where a judgment on the merits
is possible merely by considering the contents of the pleadings.”
Sellers v. M.V. Floor Crafters, Inc., 842 F.2d 639, 642 (2d Cir.
1988).
The pleadings in this federal action consist of the
petition for limitation of liability and Respondents’ answer,
neither of which sets forth sufficient facts to establish
potential liability of a person in a supervisory role.
Specifically, LCCSC’s petition under the Limitation Act denies
negligence, privity, or knowledge, and Respondents’ answer is
correspondingly sparse.
If the Court considers the more-detailed
state court pleadings, as incorporated into the federal pleadings
by reference, LCCSC has denied any supervisory role by its
employees and/or agents.
LCCSC has also denied a failure to
train, a failure to adhere to the weather report, and a failure
to provide a sufficient number of safety boats and instructors.
Accordingly, even if the Court were to accept the
supervisory/ministerial rubric set forth in Great Lakes, the
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pleadings do not present undisputed facts in support of
dismissal.
See In re Franz, 2014 WL 1031574, at *3 (N.D.N.Y.
Mar. 17, 2014) (holding that allegation in complaint that event
occurred without privity or knowledge is sufficient to withstand
motion to dismiss).
Furthermore, in In re City of New York, the Second Circuit
focused upon the potential liability of an “‘executive officer,
manager or superintendent’” when considering a corporation’s
privity or knowledge.
522 F.3d at 283 (quoting Coryell, 317 U.S.
at 410); see also Great Lakes, 3 F.3d at 232 (“Great Lakes is
vicariously liable for the negligence of all of its employees.
But it will be charged, for purposes of the Limitation Act, with
the privity and knowledge only of certain managerial
employees.”).
In Coryell, the Supreme Court noted “the search in
those cases to see where in the managerial hierarchy the fault
lay.”
317 U.S. at 411.
In this case, the pleadings do not
reveal LCCSC’s “managerial hierarchy” such that the Court can
determine whether a sailing instructor’s actions may be
considered within the privity or knowledge of the owner.
Some courts have determined that a petition for limitation
of liability should not be dismissed under Rule 12.
See, e.g.,
In re Matter of Weeks Marine, Inc., 2011 WL 3273611, at *4 (E.D.
Pa. July 29, 2011) (holding that determination of privity or
knowledge “is a matter to be stowed until the bench trial”); cf.
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Complaint of Ingoglia, 723 F. Supp. 512, 515 (C.D. Cal. 1989)
(noting that determination of limitation is inappropriate on a
motion to dismiss).
While this Court declines to adopt such a
per se rule, this case illustrates why dismissal on the basis of
Limitation Act pleadings is generally premature.
Given the
disputed facts and the emphasis in the law upon supervisory
employees, the Court cannot conclude at this time that LCCSC will
be unable to claim a limitation of liability.
Accordingly,
Respondents’ motion to dismiss, construed as a motion for
judgment on the pleadings under Rule 12(c), is DENIED.
Conclusion
For the reasons set forth above, Respondents’ motion to
dismiss (ECF No. 13) is DENIED.
Respondents’ motion for
extension of time to respond to LCCSC’s motion for summary
judgment (ECF No. 12) is GRANTED, and their response to the
summary judgment motion shall be filed on or before September 1,
2014.
Dated at Burlington, in the District of Vermont, this 13th
day of August, 2014.
/s/ William K. Sessions III
William K. Sessions III
District Court Judge
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