Opinion
CV-99-1294 (ILG) (MDG)
October 2, 2003
REPORT AND RECOMMEMDATION
Plaintiffs Patsy and Donna Esposito assert claims under the Jones Act, 46 App, U.S.C.A. § 688, and the maritime doctrine of unseaworthiness to recover damages for personal injuries suffered by Patsy Esposito while he was employed as a tug captain. His employer, defendant and third party plaintiff Great Lakes Dredge Dock Company ("GLDD"), and the defendant tugboat Cavalier State ("Cavalier") have moved for an order to vacate the stay of the warrant of arrest issued by this Court for the arrest of the defendant tugboat Flossie Gellatly, formerly known as the Dakota ("the Tug"). Non-party Gellatly Criscione Services Corp. ("Gellatly"), the Tug's current owner, has moved to vacate the warrant of arrest and to dismiss the Tug from this action.
Because the legal issues underlying both motions are intertwined and determination of the motion to dismiss is dispositive of the motion to vacate, I am addressing both motions on a report and recommendation basis.
BACKGROUND
On March 5, 1999, plaintiffs commenced this action claiming that Patsy Esposito was injured on August 2, 1997 while he was employed by GLDD as captain of the tugboat Cavalier., owned by GLDD, See Answer of GLDD and the Cavalier dated September 9, 1999, at 6. The injuries occurred during a towing operation involving the Tug and the Cavalier.
On the date of the accident, the Tug was owned by Century Marine Towing ("Century") and under bareboat charter to United Newport.See Declaration of Simon Harter, Esq. ("Harter Decl.") at 5, 17, Gellatly is the present owner of the Tug. See Declaration of Alexander Gellatly ("Gellatly Decl.") at ¶¶ 2-3, In this action, plaintiffs have sued GLDD, the Cavalier, United Newport Marine Towing, Inc. ("United Newport"), and the Tug.
See discussion of bareboat charter, infra, at p. 8.
In the complaint, plaintiffs originally named United Pilots Association as the entity that operated the Tug, See Complaint at ¶ 22, 24, 27 (ct. doc. 1), They later amended the complaint naming United Newport as the entity that controlled and operated, the Tug.See First Amended Complaint at 20, 21, 27 (ct. doc. 5).
On June 8, 1939, GLDD answered the complaint and asserted cross-claims against United Newport and the Tug. On September 21, 1999, United Newport, in personam, and the Tug, in rem, filed an answer to plaintiff's amended complaint and a cross-claim against GLDD and the Cavalier for indemnity. See Answer and Cross-Claim of United Newport Associates, Inc. ("United Answer") (ct. doc. 8) attached as Exh. A to Harter Decl. In their answer, these defendants denied that United Newport owned, managed or controlled the Tug, but admitted that it operated the Tug. See id. at ¶¶ 18-21. In its cross-claim against GLDD, United Newport alleged that it "was and now is, the bareboat charterer of the Tug," Id. at 58. Although the Tug asserted various defenses, it did not object to this Court's assertion of in rem jurisdiction over it. Rather, the Tug admitted that it "is currently or will during the pendency of this action be within the jurisdiction of this court." Id. at ¶ 23. The Tug also admitted that it participated in a towing operation on or about August 2, 1997, Id. at ¶ 27.
GLDD recently impleaded Century as a third party defendant, in its answer to the third party complaint, ("Century Ans.") (ct. doc. 62), Century admitted that it owned the Tug on the date of the accident and entered into a bareboat charter of the Tug with United Newport. Id. at ¶¶ 9, 10. In accordance with Rule 14(h) of the Federal Rules of Civil Procedure, Century also filed an answer to plaintiffs' original complaint, rather than the amended complaint, denying sufficient knowledge to respond to the allegation regarding the control of the Tug by United Pilots Association,Id. at ¶¶ 24, 27.
On June 1, 2001, Gellatly purchased the Tug from Century and subsequently renamed the Tug Flossie Gellatly. Declaration of Alexander Gellatly ("Gellatly Decl.") at ¶¶ 2, 4. Century represented in the Bill of Sale that the Tug was "free and clear of all liens, mortgages, and other encumberances of any kind and nature." Id., Exh. 1. Alexander Gellatly, President of Gellatly, reviewed the Abstract of Title for the Tug numerous times from February 2001 through June 1, 2001, the closing date. Id. at ¶ 10. Prior to GLDD's recent attempts to arrest the Tug in New York, Gellatly was not aware of any lien on the Tug or a lawsuit involving the Tug. Id. at ¶ 12.
On August 8, 2001, United Newport filed a petition in bankruptcy under Chapter VII of the Bankruptcy Code. Declaration of Simon Harter, Esq. ("Harter Decl.") at ¶ 21. By letter dated October 26, 2002, Simon Harter, counsel of record for United Newport and the Tug, informed the Court that United Newport was in the final stages of Chapter VII liquidation and requested that he be allowed to withdraw, Harter Decl. at ¶ 22, Exh. H. On July 1, 2003, this Court granted Harter's request to withdraw as counsel for United Newport but ordered that he remain counsel of record for the Tug. See 7/1/03 Order [ct. doc. # 54).
After requesting and receiving two extensions of discovery in order to locate the Tug, on February 6, 2003, GLDD moved for an order to issue a warrant of arrest of the Tug. See Motion for Warrant of Arrest (ct. doc. 38), This Court granted GLDD's motion but stayed execution of the warrant at a conference which this Court scheduled following receipt of a letter from James Mercante, counsel for Gellatly, advising that Gellatly is the current owner of the Tug. (A copy of this letter will be docketed herewith). See Order dated February 6, 2003 (ct. doc. # 43); Order dated June 9, 2003 (et. doc. #49). In accordance with the schedule set at the conference, GLDD moved to vacate the stay. In response, Gellatly and the Tug have opposed the motion and moved to dismiss the Tug from this action.
DISCUSSION
In moving to vacate the warrant of arrest and dismiss the Tug from the action, Gellatly and the Tug argue that the Court lacks in rem jurisdiction over the Tug. They further contend that GLDD and plaintiffs cannot now arrest the Tug approximately four years after the action was filed.
Plaintiffs alleged in the amended complaint that suit "is brought under the Admiralty Law as modified by the Jones Act, 42 U.S.C. § 688 and an Admiralty Action in rem pursuant to Rule 9(h) and the Special Admiralty Rules." See First Amended Complaint at ¶ 11. Under maritime law, an action in rem is available "only in connection with a maritime lien." Hunley v. Ace Maritime Corp., 927 F.2d 493, 496 (9th Cir. 1991) (quotingMelwire Trading Co., Inc. v. M/V Gape Antibes., 811 F.2d 1271, 1273 (9th Cir.). amended on other grounds, 830 F.2d 1033 (1987); Garcia v. M/V Kubbar, 4 F. Supp., 2d 99, 109 (N.D.N.Y. 1998). A maritime lien arises where a seaman makes a claim, as in this case, of injuries suffered through the unseaworthiness of a vessel.The Navarino, 7 F.2d 743, 744 (E.D.N.Y. 1925); cf. Cannella v. Lykes Bros. S.S. Co., 174 F.2d 794, 796 (2d Cir. 1949) (per curiam) (lien arises where longshoreman asserts unseaworthiness claim). The lien on the vessel for injuries sustained by a seaman arises even if the vessel is in the hands of a bareboat charterer. The Barnstable, 181 U.S. 464 (1901).
Generally, the power of the court to exercise jurisdiction in rem over a vessel is dependent upon the arrest of the vessel within the court's territorial jurisdiction. See Dluhos v. Floating and Abandoned Vessel, Known as New York, 162 F.3d 63, 68 (2d Cir. 1998);United States v. Republic Marine, Inc., 829 F.2d 1399, 1401 (7th Cir. 1987); Alveska Pipeline Serv. Co. v. Vessel Bay Ridge, 703 F.2d 381, 384 (9th Cir. 1983). However, arrest is not required if a vessel makes a general appearance and fails to raise the defense of lack of jurisdiction, thereby waiving the defense. See. Republic Marine, 829 F.2d at 1402; Cactus Pipe Supply Co., Inc. v. M/V Montmartre, 756 F.2d 1103, 1107 (5tb Cir. 1985); Garcia, 4 F. Supp.2d at 108;see also Booth Steamship Co., Ltd. v. Tug Dalzell No. 2. 1966 AMC 2615 (S.D.N.Y. 1966) (claimant submitted vessel to jurisdiction of court by admitting presence of res within district, filing a claim and filing and serving a general appearance).
Whether a party has the right to answer an admiralty suit in rem depends upon the party's right to claim the res. In re The Cartona, 297 F. 827, 828 (2d Cir. 1924). The foundation of the right to defend is "the right of possessing the quasi personified vessel proceeded against in rem." Id.: see Cactus Pipe, 756 F.2d at 1107 n. 5 ("A claim of owner is a verified document filed by the claimant stating its possessory interest in the vessel, demanding restitution and the right to defend the vessel").
In this case, United Newport filed an answer to the amended complaint on behalf of itself and the Tug and asserted cross-claims against GLDD and the Cavalier. See ct. doc. 8 at prefatory paragraph ("Now comes, Defendants, United Newport Associates, Inc., d/b/a, United Newport Towing Inc. ("United"), and the tugboat DAKOTA ("Tug") . . .") (emphasis added). In the answer, United Newport and the Tug did not object to service of process — neither raising the defense of lack of jurisdiction nor restricting its appearance. They also admitted that the Tug participated in the tugging operation at issue and would be within the jurisdiction of this Court during the pendency of the action, but denied liability for plaintiffs' injuries. Id. at ¶¶ 23, 27-30, 32-34, 38-39, 41-44, 46-48, 51. Rather than claiming actual ownership, United Newport identified itself in its cross-claim as the bareboat charterer of the Tug. Id. at ¶ 58.
A bareboat charterer "`takes complete control over the vessel, mans it with his own crew, and is treated by law as its legal owner.'"Mediterranean Shipping Co. v. Pol-Atlantic, 229 F.3d 397, 399 n. 1 (2d Car. 2000] (quoting 2 Thomas J. Schoenbaum, Admiralty and Maritime Law § 11-1, at 169 (2d ed. 1994)); see Guzman v. Pichirilo, 369 U.S. 693, 700 (1962) (bareboat charter is "tantamount to, though just short of, an outright transfer of ownership");United States v. Shea, 152 U.S. 178, 186-87 (1894) ("the hirer becomes the owner during the term of the contract"); Leary v. United States, 81 U.S. 607, 610 (1871) ("charterer becomes the owner of the vessel chartered for the voyage or service stipulated"). Under general admiralty law, the bareboat charterer is called the pro hac vice owner, to be treated as the owner. See Reed v. Steamship Yaka, 373 U.S. 410, 412 (1963); Forrester v. Ocean Marine Indem. Co., 11 F.3d 1213, 1215 [5th Cir. 1993). During the duration of the charter, a bareboat charterer is subject to the duties and responsibilities of ownership. Shea, 152 U.S. at 1S6; Leary, 81 U.S. 607, 610; Reed v. United States, 78 U.S. 591, 600-01 (1870).
By identifying itself as bareboat charterer and making admissions and denials on the Tug's behalf, United Newport effectively entered an appearance for the Tug and consented to this Court's in rem jurisdiction. See Republic Marine, 829 F.2d 1399, 1403 (7th Cir. 1987) (bareboat charterer "identifying itself as the claimant to [a barge] and entering admissions and denials on the barge's behalf thus entered an appearance in the case for [the barge]"). In Republic Marine, the Seventh Circuit held that a vessel had subjected itself to the admiralty jurisdiction of the district court under circumstances identical to those at hand. 829 F.2d 1399. There, the plaintiff brought suit in rem against a barge and in personam against its bareboat charterer to recover for damage to a canal lock. The plaintiff neither arrested the vessel nor sued the owner of the barge. The charterer filed an answer admitting that it was the charterer of the barge and that the barge would be within the district during the suit. The charterer also denied the liability of both the charterer and the barge. However, the charterer did not specifically declare in its answer that its counsel was appearing on behalf of the barge, but it also did not raise the defense of lack of jurisdiction as to the barge. Although the charterer did not file a claim of possession or ownership as required by Rule C(6)(b) of the Supplemental Rules for Certain Admiralty and Maritime Claims, it identified itself in an answer to a cross-claim as the claimant to the vessel and denied the cross-claim on behalf of itself and the barge in rem. The Seventh Circuit held that "[o]nce a person, or here a vessel, requests a court to exercise judicial authority in its behalf on the merits of a case, that person or vessel has effectively appeared in the case," 829 F.2d at 1403. In other words, in identifying itself as a claimant and entering; admissions and denials on the barge's behalf, the charterer is deemed to have entered an appearance in the case for the barge and submitted the barge to the jurisdiction of the court. Id. at 1404.
Gellatly and the Tug do not dispute that the Tug entered a general appearance in this case, but argue that the Tug's appearance could be deemed to be consent only to jurisdiction of United Newport's interest in the Tug, rather than Gellatly's interests as the Tug's new owner. However, when United Newport and the Tug answered, Gellatly was not the Tug's owner and had no interest in the Tug whatsoever. In fact, Gellatly did not become owner of the Tug until nearly two years after the Tug answered. See Gellatly Decl. at ¶¶ 2, 4. Nor has Century, the Tug's owner at the commencement of this action, objected either to this Court's in rem jurisdiction or contested United Newport's authority to appear for the Tug. See Century Ans.
In addition, prudential concerns militate in favor of finding jurisdiction over the Tug. A contrary ruling would "contribute to even greater uncertainty and complexity in maritime jurisdiction by making it impossible for parties to rely on the voluntary appearance of a vessel and the waiver of the defense of lack of jurisdiction over the party. To refuse to find jurisdiction in this case would be to encourage a shipowner to enter litigation and avoid formal attachment by seeking to rely on a favorable result, while at the same time standing ready to contest jurisdiction should the result be unfavorable." Republic Marine, 829 F.2d at 1404.
Under the circumstances of this case, plaintiffs and GLDD could reasonably infer from the United Answer that the Tug was making a general appearance by answering and admitting that the Tug would be within this Court's jurisdiction during the pendency of this action. See Nassau Terminals, Inc. v. M/V Bering Sea, No. 99-104-CIV-J-20C, 1999 WL 1293476, at *2 (M.D. Fla. July 1, 1999) ("Where an in personam defendant gives the appearance of representing the vessel without objecting to jurisdiction, it is likely that the vessel will be found to have consented to jurisdiction"). United Newport's position is understandable since it, the bareboat charterer, rather than the actual owner, faced, disruption to its commercial activities if the Tug had been arrested. On the other hand, Century was entitled to compensation under the charter whether or not the Tug was arrested or entered a voluntary appearance. By consenting to this Court's jurisdiction, United Newport thus forestalled arrest of the Tug and disruption of its operations.
For most of this litigation, neither United Newport nor the Tug objected to this Court's jurisdiction. However, by letter dated October 26, 2002, Simon Harter indicated his client, United Newport, was "in the final stages of Chapter VII liquidation" and that the Tug "had been redelivered to its owner some time ago." Harter Decl., Exh. F at 2. But for the bankruptcy and eventual liquidation of United Newport, there would have been no reason for United Newport to disavow the Tug's original appearance. It would be unfair now to rule that the Tug has not appeared and consented to this Court's jurisdiction, particularly since plaintiffs and GLDD reasonably relied on the Tug's answer during the preceding four years.
Relying on Cactus Pipe, Gellatly argues that a party can consent to jurisdiction only to the party's interest in the vessel. 756 F.2d at 1107. The court's ruling in that case is circumscribed by the fact that the owner appeared "for the interest of itself as owner" of the vessel in a proceeding characterized expressly in the complaint as bothin rem and in personam. Id. at 1106, 1108. No process was issued against the vessel and the vessel was never arrested. Moreover, the vessel owner answered only for itself, and not the vessel.Id. at 1108. The court thus held that by filing a claim of owner without reserving jurisdictional objections, the owner waived the requirement of in rem seizure and consented to both in rem and in personam jurisdiction. Id. at 1107-08.
Gellatly and the Tug also incorrectly cite Lee v. Percy Marine, Inc., No. CIV. A. H-91-0700, 1994 WL 759929 (S.D. Tex. June 16, 1994) for the proposition that an appearance is not sufficient to constitute consent to in rem jurisdiction. That case is not binding on this Court and its reasoning is not persuasive in light of the reasoning in Republic Marine. Although seemingly presenting similar facts, where a seaman sued the bareboat charterer of the vessel and the vessel in rem, the answer filed in Lee did not purport to be on behalf of any specific party. instead, the answer was offered on behalf of "the Defendants in this case" and contained a denial by the bareboat charterer that the court had jurisdiction over the vessel, Id. at *2 n. 1. After entry of judgment against the vessel, its owner intervened to vacate the judgment. The trial court held that given the particular wording of the answer and the owners' objection to jurisdiction over a vessel, there was no waiver of in rem jurisdiction on behalf of the vessel or consent to jurisdiction by a bareboat charterer. Therefore, the Lee court's opinion regarding a bareboat charterer's authority to consent to jurisdiction on behalf of a vessel is at best dicta. Moreover, unlike the vessel owner in Lee, which intervened to vacate the judgment, Century has not argued that Mr. Harter was unauthorized to represent it or file an answer on its behalf.
Because the Tug consented to this Court's jurisdiction and plaintiffs and GLDD reasonably relied on that consent, I find that the Tug has generally appeared in this action. Thus, this Court improvidently issued the warrant for arrest of the Tug, since it was not necessary. However, if this Court needs to address the motion to vacate the warrant of arrest, I would not find either plaintiffs or GLDD guilty of laches due to their reliance on the Tug's apparent consent to jurisdiction.
Gellatly and the Tug further argue that GLDD has no maritime lien because its lien is based on an inchoate claim for contribution or indemnity. Gellatly and the Tug are correct that contribution under admiralty law is treated as an inchoate right not available as a remedy until after a tortfeasor has paid more than its share of a judgment.See 1 Thomas Schoenbaum, Admiralty Mar. Law § 5-18 (3d ed.). However, GLDD did not seek contribution in its cross claim against United Newport and the Tug; rather, it claimed entitlement to indemnification or, in the alternative, for apportionment of liability.See GLDD Answer at ¶ 33 (et. doc. 7), Several courts have recognized that maritime liens arise from indemnity claims prior to judgment in a variety of contexts. See, e.g., Ellexman Lines, Ltd., v. Atlantic k Gulf Stevedores, inc., 339 F.2d 673, 674-75 (3d Cir. 1964) (breach of warranty); Sherfy v. Barge Marin Horizon, 76 F. Supp.2d 1054 (ELD. Cal. 1999) (claim for indemnity and contribution arising out of a maritime tort gives rise to maritime lien as basis for vessel arrest); Bay Casino, LLC., v. M/V Royal Empress, 20 F. Supp.2d 440, 450, 452 (E.D.W.Y. 1998) (breach of charter agreement); Louis Furth, Inc. v. S.S. Srbija, 330 F. Supp. 305, 307 (S, D, N, Y, 1970) (court had admiralty jurisdiction with regard to indemnity action by defendant in event of recovery against the ship). In Ellerman, the Third Circuit held that a shipowner's action for indemnification against a stevedore was not premature because the action was commenced after the shipowner had incurred some expenses in defending the personal injury lawsuit brought against the shipowner. See 339 F.2d at 674-75. In contrast, the sole case cited by GLDD, Induron Corp. v. M/V Aigianis, CIV. A. No. 89-305, 1989 WL 225023 (D. N.J. Sept. 5, 1989), is inapposite, since it involved a claim for contribution. There, the court held that no lien arose "for the simple reason that no basis for indemnification is before this court" and there was no basis for payment of legal expenses. Id. at *7. Here, GLDD has a claim for indemnity which has matured into a lien because GLDD has already incurred expenses in defending this suit.
Furthermore, GLDD's claim for apportionment of liability is clearly not premature as asserted against a co-defendant. A cross claim based on comparative fault comports with the approach the Second Circuit and several other circuits have taken in personal injury cases brought by seamen bringing claims for unseaworthiness and Jones Act negligence. See Black v. Red Star Towing Transp. Co., 860 F.2d 30, 34 (2d Cir. 1988) (rejecting Ryan indemnity and applying comparative fault to liability for maintenance and cure); see also Knight v. Alaska-Trawl Fisheries. Inc., 154 F.3d 1042, 1045 (9th Cir. 1998) (affirming allocation of liability among defendants asserting cross claims); Smith Kelly Co. v. S/S Concordia TADJ. 718 F.2d 1022, 1028 (11th Cir. 1983) ("[t]he clear trend in maritime cases is to reject all-or-nothing or other arbitrary allotments of liability in favor of a system that divides damages on the basis of the relative degree of fault of the parties"); Loose v. Offshore Navigation, Inc., 670 F.2d 493, 501-02 (5th Cir. 1982) (rejecting "the need for the active-passive indemnification rule in a comparative fault system" that "not only eliminates the doctrine of contributory negligence but also apportions fault among joint tortfeasors in accordance with a precise determination, not merely equally or all-or-none"). In any event, since plaintiff's lien arises out of a direct claim, there would be no bar to the in rem action even in the absence of GLDD's lien.
CONCLUSION
For the foregoing reasons, I respectfully recommend that the motion to dismiss plaintiffs' claim and GLDD's cross claim against the Tug be denied. If the Court accepts this recommendation and the underlying finding that the Tug consented to this Court's jurisdiction, the arrest of the Tug is unnecessary. I further recommend that the Tug and Gellatly's motion to vacate the warrant of arrest be granted and the motion to vacate the stay of arrest be denied as moot.This report and recommendation is being sent by telecopier to the parties listed herein and counsel for Gellatly. Any objections to the Report and Recommendation must be filed with the Clerk of Court, with a copy to the undersigned, by October 17, 2003. Failure to file objections within the time specified waives the right to appeal. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b).