National Union Fire Insurance Company of Pittsburgh, PA v. Brickyard Vessels, Inc.
Filing
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MEMORANDUM OPINION. Signed by District Judge James C. Cacheris on 11/4/2014. (rban, )
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA,
Plaintiff/
Counter-Defendant,
v.
BRICKYARD VESSELS, INC.,
Defendant/
Counter-Claimant.
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M E M O R A N D U M
1:14CV921 (JCC/IDD)
O P I N I O N
This matter is before the Court on Plaintiff National
Union Fire Insurance Company of Pittsburgh, PA’s (“National
Union” or “the insurer”) Motion to Dismiss Defendant Brickyard
Vessels, LLC’s (“Brickyard” or “the insured”) Amended
Counterclaim.
[Dkt. 25]
For the reasons discussed below, the
Court will grant National Union’s Motion to Dismiss the Amended
Counterclaim.
I. Background1
On March 9, 2014 in the Biscayne Bay off the coast of
Miami, Florida, marine vessel CONTENDER 36 collided with
1
In considering a motion to dismiss for failure to state a claim, as is the
case here, “a court accepts all well-pled facts as true and construes these
facts in the light most favorable to the plaintiff[.]” Nemet Chevrolet, Ltd.
v. Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir. 2009) (citations
omitted). Accordingly, the following facts, taken from Plaintiff’s Complaint
and Defendant’s Amended Answer and Counterclaim, are accepted as true for
purposes of this motion. See Erickson v. Pardus, 551 U.S. 89, 94 (2007).
1
MASTERPIECE, a marine vessel owned by Brickyard, causing injury
to two passengers aboard the CONTENDER 36 and physical damage to
both vessels.
(Compl. [Dkt. 1] at 3.)
At the time of
collision, Brickyard was the named insured and MASTERPIECE was
the covered vessel under an AIG Recreational Marine Insurance
Policy (“the Policy”) issued by National Union.
37.)
(Id. at ¶¶ 8,
Brickyard submitted a claim under the Policy for damage to
the MASTERPIECE.
(Id. at ¶ 16.)
National Union investigated
the claim but determined there was no coverage for any loss
stemming from the collision because Brickyard breached certain
warranties contained in the Policy.
(Id. at ¶ 33.)
First, National Union contends MASTERPIECE was
ineligible to carry any passengers for hire as a foreign-built
vessel, and by chartering and carrying passengers for hire at
the time of the collision, MASTERPIECE breached the Occasional
Charter Warranty. (Compl. ¶¶ 19, 20.)
Second, National Union
alleges that MASTERPIECE violated U.S. Coast Guard regulations
because at the time of the collision, the Captain of MASTERPIECE
did not possess a U.S. merchant mariner credential or U.S. Coast
Guard license, and the number of passengers aboard MASTERPIECE
exceeded the maximum number permitted by U.S. Coast Guard
regulations.
(Id. at ¶ 26-29.)
Two days after notifying
Brickyard of the coverage denial, National Union filed this suit
pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201,
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seeking a declaration from this Court that it is not obligated
to cover any damage, injury and/or loss arising out of the
collision, nor is it obligated to provide a defense or liability
coverage for Brickyard against any claims arising out of the
collision.
(Id. at 4, 6.)
Brickyard filed an answer and counterclaim for one
count of “statutory bad faith” against National Union,
contending National Union violated Florida law by failing to
honestly settle Brickyard’s claim under the Policy in good
faith.
(Answer & Countercl. [Dkt. 5] at 11-12 (citing Fla.
Stat. §§ 624.155(1)(b)(1), 626.9541(1)(i)(3)(a)-(b)).)
In count
two, Brickyard claims it is entitled to punitive damages as a
result of National Union’s alleged bad faith.
(Id. at 12-13.)
Brickyard filed an amended answer and counterclaim as a matter
of right under Rule 15 of the Federal Rules of Civil Procedure.
(Am. Answer & Countercl. [Dkt. 15].)
Brickyard’s two-count
counterclaim brought pursuant to Florida law, however,
substantively remained the same.
National Union now moves to dismiss Brickyard’s
amended two-count countcounterclaim pursuant to Rule 12(b)(6) of
the Federal Rules of Civil Procedure.
[Dkt. 25]
National Union
contends that Virginia law applies to the underlying substantive
claims in this admiralty action, and thus argues that
Brickyard’s counterclaim brought under Florida statute fails to
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state proper claim for relief.
(Pl.’s Mem. [Dkt. 26] at 2-9.)
Brickyard opposes National Union’s motion and argues that
Florida law applies to the substantive claims as this Court sits
in diversity.
(Def.’s Opp’n [Dkt. 28] at 7-11.)
If the Court
determines that Virginia law applies, Brickyard asks in the
alternative for leave to amend the counterclaim, and does not
attempt to argue the sufficiency of the counterclaims under
Virginia law.
(Id. at 11-12.)
The Court finds that Virginia law applies to the
substantive claims in this admiralty action, and therefore,
because Brickyard’s counterclaim fails to state a cognizable
claim for relief under Virginia law, the motion to dismiss will
be granted.
II. Standard of Review
In deciding a Rule 12(b)(6) motion, a court must be
mindful of the liberal pleading standards under Rule 8, which
require only “a short and plain statement of the claim showing
that the pleader is entitled to relief.”
Fed. R. Civ. P. 8.
While Rule 8 does not require “detailed factual allegations,” a
plaintiff must still provide “more than labels and conclusions”
because “a formulaic recitation of the elements of a cause of
action will not do.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544,
555-56 (2007) (citation omitted).
To survive a motion to
dismiss, “a complaint must contain sufficient factual matter,
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accepted as true, to ‘state a claim to relief that is plausible
on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Twombly, 550 U.S. at 570).
“A claim has facial
plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”
Id.
However,
“[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice” to meet
this standard, id., and a plaintiff’s “[f]actual allegations
must be enough to raise a right to relief above the speculative
level . . . .”
Twombly, 550 U.S. at 555.
Moreover, a court is
not required to accept legal conclusions as true.
District 28,
United Mine Workers of Am., Inc. v. Wellmore Coal Corp., 609
F.2d 1083, 1085 (4th Cir. 1979).
III. Analysis
Before the Court analyzes the sufficiency of
Brickyard’s counterclaim, it must first determine what law
governs those substantive claims.
A. Choice of Law
“The first step in a choice of law analysis involving
multiple grounds for subject matter jurisdiction is to determine
the basis of the court’s jurisdiction.”
Zepsa Indus., Inc. v.
Kimble, No. 3:08cv4-RJC, 2008 WL 4891115, at *1 (W.D.N.C. Nov.
11, 2008).
The parties agree that the underlying dispute in
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this matter sounds in contract; specifically, a recreational
marine insurance policy.
National Union asks for a declaration
that it is not required to pay out insurance proceeds under the
Policy, and Brickyard brings counterclaims relating to National
Union’s performance under the Policy.
(Pl.’s Mem. at 1
(“National Union filed its Complaint for Declaratory Judgment on
July 23, 2014 seeking a declaration that there is no coverage
under a contract of recreational marine insurance . . . for
damages.”); Def.’s Opp’n at 8 (“Brickyard’s Counterclaims
implicate performance of a contract because they concern
National Union’s failure to pay for collision-related losses and
to otherwise satisfy its obligations to Brickyard under the
Policy.”).)
The parties disagree, however, as to the basis of
this Court’s jurisdiction, and relatedly, as to what choice-oflaw rules this Court should employ to determine what state law
applies to the substantive contract claims.
In the Complaint, National Union invokes this Court’s
jurisdiction under theories of diversity jurisdiction pursuant
to 28 U.S.C. § 1332 and admiralty jurisdiction pursuant to 28
U.S.C. § 1333.
(Compl. ¶¶ 3, 4.)
Brickyard only invokes this
Court’s diversity jurisdiction in the Amended Counterclaim.
(Am. Answer & Countercl. ¶ 4.)
National Union urges the Court
to apply federal choice-of-law rules as a federal court sitting
in admiralty, (Pl.’s Mem. at 2-5.), while Brickyard asks the
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Court to apply Virginia choice-of-law rules as a federal court
sitting in diversity, (Def.’s Opp’n at 7).
If jurisdiction is
based upon admiralty, then federal common law governs the
choice-of-law determination, State Trading Corp. of India, Ltd.
v. Assuranceforeningen Skuld, 921 F.2d 409, 414 (2d Cir. 1990),
but if jurisdiction is based upon diversity, then the Court must
apply Virginia choice-of-law rules as the law of the forum
state.
Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496
(1941).
Federal district courts have original jurisdiction
over “[a]ny civil case of admiralty or maritime jurisdiction[.]”
28 U.S.C. § 1333(1).
As stated, this dispute involves
performance obligations under a contract, i.e., the Policy, and
thus, the Court examines the subject matter of the contract to
“determine whether the services performed under the contract are
maritime in nature.”
U.S. 603, 612 (1991).
Exxon Corp. v. Cent. Gulf Lines, Inc., 500
An action involving a marine insurance
policy “is indisputably within the original admiralty and
maritime jurisdiction of the federal courts.”
Wiles v.
Boat/U.S., Inc., No. 2:07cv524, 2008 WL 501265, at *4 (E.D. Va.
Feb. 20, 2008) (citing Wilburn Boat Co. v. Fireman’s Fund Ins.
Co., 348 U.S. 310, 313-14 (1955) (“Since the insurance policy
here sued on is a maritime contract the Admiralty Clause of the
Constitution brings it within federal jurisdiction.”)).
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The
contract at issue here is a marine insurance policy; indeed, the
AIG Recreational Marine Policy expressly provides insurance
coverage for MASTERPIECE, an 80-foot Motor Yacht.
Thus, the
contract is “maritime in nature” and jurisdiction of this Court
lies in admiralty.
Accordingly, the Court applies federal
common law in its choice-of-law determination.
1. Admiralty Choice-of-Law Analysis
A federal court sitting in admiralty must apply
federal choice-of-law rules.
F.2d at 414.
Assuranceforeningen Skuld, 921
“Under federal choice-of-law rules, we determine
which state law to use by ‘ascertaining and valuing points of
contact between the transaction [giving rise to the cause of
action] and the states or governments whose competing laws are
involved.’”
Advani Enterprises, Inc. v. Underwriters at Lloyds,
140 F.3d 157, 162 (2d Cir. 1998) (quoting Lauritzen v. Larsen,
345 U.S. 571, 582 (1953)) (additional citations omitted).
This
analysis, better known as the “most significant relationship
test,” includes an assessment of the following factors:
(1) any choice-of-law provision contained in
the contract; (2) the place where the
contract was negotiated, issued, and signed;
(3) the place of performance; (4) the
location of the subject matter of the
contract; and (5) the domicile, residence,
nationality, place of incorporation, and
place of business of the parties.
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Advani Enterprises, 140 F.3d at 162 (citations omitted); see
also Carney Family Inv. Trust v. Ins. Co. of N. Am., 296 F.
Supp. 2d 629, 632 (D. Md. 2004) (applying these factors as set
forth in the Restatement (Second) of Conflict of Laws § 188
(1971)).
In Wilburn Boat Co., the Supreme Court held that even
though cases involving a maritime insurance policy fall within
the original jurisdiction of federal courts, a district court
must apply state law in the absence of federal legislation or an
otherwise conflicting federal rule.
348 U.S. at 320-21.
Consequently, at issue here is whether Virginia law or
Florida law applies to Brickyard’s substantive counterclaims.
The “most significant relationship test” suggests that Virginia
law applies, given the significant “points of contact” between
Virginia and the “transaction,” i.e., the Policy.
Advani
Enterprises, 140 F.3d at 162.
The first factor is inapplicable because the Policy
does not contain a choice-of-law provision.
(See Compl. Ex. A.)
Accordingly, this factor does not weigh in favor of Virginia law
or Florida law.
The second factor slightly favors application of
Virginia law.
National Union claims the Policy was “delivered”
to Brickyard at its principal place of business in Herndon,
Virginia, and that it was negotiated and entered into in
Virginia.
But Brickyard denies these claims.
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At the hearing,
Brickyard’s counsel contended that the Policy was delivered to
an agent in Florida, who eventually delivered the Policy to
Brickyard’s principal place of business in Virginia.
Given that
Brickyard’s Virginia address is on the face of the Policy, and
that the Policy was ultimately delivered to that Virginia
address – even if it was delivered in a round-about way – this
suggests Virginia law governs the substantive claims.
See
Seneca Specialty Ins. Co. v. Dockside Dolls, Inc., No. 3:12cv19REP-DJN, 2012 WL 3579879, at *3 (E.D. Va. June 22, 2012)
(“Dockside’s Virginia business address is on the face of the
Policy, and there is no allegation otherwise disputing that the
policy was delivered to its offices in Virginia . . . . Thus,
Virginia law governs the interpretation of the Policy.”), Report
& Recommendation adopted by, 2012 WL 3562755 (E.D. Va. Aug. 17,
2012).
Third, National Union’s performance under the Policy
would occur in Virginia, and thus, this factor weighs in favor
of applying Virginia law.
At issue in this case is whether
National Union must pay insurance proceeds or otherwise provide
coverage to Brickyard under the Policy for the damage sustained
by MASTERPIECE.
Such proceeds would necessarily be delivered to
Brickyard at its principal place of business in Herndon,
Virginia, the address listed on the Policy.
Stated differently,
“[National Union’s] failure to pay insurance proceeds does not
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implicate a duty that it perform any act in [Florida],
regardless of whether the subject property is located therein.
Rather [National Union’s] duty to perform, if any, required it
to deliver insurance proceeds to [Brickyard’s] offices in . . .
Virginia.”
Seneca Specialty Ins. Co., 2012 WL 3579879, at *3
(citing Sandefer Oil & Gas, Inc. v. AIG Oil Rig of Texas, Inc.,
846 F.2d 319, 325 (5th Cir. 1988) (finding that the place of
performance was in Texas, because “payment of insurance proceeds
was also to occur in Texas at the plaintiff’s place of
business”); Recreonics Corp. v. Aqua Pools, Inc., 638 F. Supp.
754, 757 (D.S.C. 1986) (additional citation and explanatory
parentheticals omitted)).
Accordingly, the third factor
suggests Virginia law applies.
The fourth factor weighs in favor of applying Florida
law, because the location of the subject matter of the Policy,
MASTERPIECE, is moored in Miami Beach, Florida.
A. at 3.)
(See Compl. Ex.
This is the only factor, however, that supports
application of Florida law.
Lastly, the fifth factor weighs in favor of applying
Virginia law, because Brickyard’s principal place of business is
in Virginia.
(Compl. ¶ 2; Am. Answer & Countercl. ¶ 2.)
Otherwise, the parties do not have significant contacts to
either Virginia or Florida.
National Union is incorporated in
Pennsylvania with its principal place of business in New York,
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and Brickyard is incorporated in Delaware.
Answer & Countercl. ¶ 2.)
(Compl. ¶ 1; Am.
Accordingly, Brickyard’s principal
place of business in Virginia suggests Virginia law should
apply.
Moreover, as a corporate defendant, Brickyard should
know generally that suits are likely to be brought in Delaware
where it is incorporated, or in Virginia where it is principally
located.
See Daimler AG v. Bauman, 134 S. Ct. 746, 760 (U.S.
Jan. 14, 2014) (“These [two] bases afford plaintiffs recourse to
at least one clear and certain forum in which a corporate
defendant may be sued on any and all claims.”).
Ultimately, Brickyard’s principal place of business in
Herndon, Virginia is most significant to this choice-of-law
analysis.
The Policy was allegedly delivered in Virginia, and
National Union’s performance under the policy would occur in
Virginia.
Thus, the Court concludes that Virginia law should
apply to the substantive claims in this case.
B. Sufficiency of Brickyard’s Counterclaims
National Union argues that both Count One and Count
Two in Brickyard’s Amended Counterclaim should be dismissed for
failure to state a claim under Virginia law.
9.)
(Pl.’s Mem. at 6-
Count One in Brickyard’s Amended Counterclaim alleges
“statutory bad faith” pursuant to Fla. Stat. §§
624.155(1)(b)(1), 626.9541(1)(i)(3)(a)-(b).
Countercl. ¶¶ 28-31.)
(Am. Answer &
Brickyard claims that National Union
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“failed to attempt in good faith to settle the Claim when . . .
it should have done so . . . failed to adopt and implement
standards for the proper investigation of the Claim . . . [and]
made a material misrepresentation to Brickyard for the purpose
and with the intent of [a]ffecting settlement of claims, loss,
or damage.”
(Id. at ¶ 29.)
punitive damages.
In Count Two, Brickyard requests
(Id. at ¶ 32-35.)
While the Virginia Unfair Insurance Practices Act
“forbids various insurance practices, including failure in bad
faith to settle claims for which liability is reasonably clear .
. . . It is clear that the Virginia Supreme Court would not read
the Unfair Insurance Practices Act to create a private right of
action in tort.”
A & E Supply Co. v. Nationwide Mut. Fire Ins.
Co., 798 F.2d 669, 674 (4th Cir. 1986).
Additionally, under
Virginia law, breach of contract or liability for acting in bad
faith in relation to contractual duties alone is insufficient
for an award of punitive damages.
Kamlar Corp. v. Haley, 299
S.E.2d 514 (1983) (citing Wright v. Everett, 90 S.E.2d 855
(1956)).
Instead, punitive damages are only allowed in a breach
of contract action when accompanied by an allegation “of an
independent, willful tort, beyond the mere breach of a duty
imposed by contract . . . .”
Kamlar Corp., 299 S.E.2d at 518.
Brickyard does not attempt to argue that the amended
counterclaim states a proper claim for relief under Virginia
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law, but instead requests leave to amend.
12.)
(Def.’s Opp’n at 11-
Even construing the factual allegations in the
counterclaim in a light most favorable to Brickyard, both Counts
One and Two fail to state a claim for relief under Virginia law,
as briefly discussed above.
Accordingly, the motion to dismiss
will be granted, and Brickyard will be granted leave to amend.
IV. Conclusion
For the foregoing reasons, the Court will grant
National Union’s Motion to Dismiss the Amended Counterclaim.
An appropriate Order will issue.
November 4, 2014
Alexandria, Virginia
/s/
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE
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