Summary
concluding that the "Drydock," a structure that floated on an intricate pontoon system, and was one of the world's largest drydocks, was not a vessel
Summary of this case from Armstrong v. Manhattan Yacht Club, Inc.Opinion
10 Civ. 1653 (JPO)
01-25-2013
FIREMAN'S FUND INSURANCE COMPANY, ONE BEACON INSURANCE COMPANY, NATIONAL LIABILITY AND DIRE INSURANCE COMPANY and QBE MARINE & ENERGY SYNDICATE 1036, Plaintiffs, v. GREAT AMERICAN INSURANCE COMPANY OF NEW YORK, MAX SPECIALTY INSURANCE COMPANY and SIGNAL INTERNATIONAL, LLC, Defendants.
MEMORANDUM AND ORDER
:
Fireman's Fund Insurance Company, One Beacon Insurance Company, National Liability and Fire Insurance Company, and QBE Marine & Energy Syndicates (together, "Plaintiffs") brought this action against Great American Insurance Company of New York ("Great American"), Max Specialty Insurance Company ("MSI"), and Signal International, LLC ("Signal"). Crossclaims and counterclaims were subsequently filed by MSI, Great American, and Signal.
Plaintiffs' Complaint alleges that this Court has admiralty jurisdiction over this matter under 28 U.S.C. § 1333. Dkt. No. 1 ("Compl.") at ¶ 2. MSI has similarly alleged that "this Court has [admiralty] jurisdiction over the subject matter of this action pursuant to 28 U.S.C. § 1333(1) because Signal's and [MSI's] crossclaims concern disputes regarding marine insurance contracts on vessels and are admiralty claims within the meaning of Rule 9(h) of the Rules of Civil Procedure." Dkt. No. 84, ¶ 17. In its Motion for Partial Summary Judgment against MSI, Signal argued that this Court lacks admiralty jurisdiction over this action. For the reasons set forth below, this Court holds that admiralty jurisdiction is indeed lacking in this case. As explained below, Plaintiffs are ordered to show cause as to why all claims before this Court should not be dismissed for lack of jurisdiction.
As of now, Plaintiffs has not pleaded diversity jurisdiction pursuant to 28 U.S.C. § 1332.
I. Discussion
Article III, § 2 of the Constitution vests the federal courts with jurisdiction over "all Cases of admiralty and maritime Jurisdiction." Pursuant to 28 U.S.C. § 1333(1), "district courts shall have original jurisdiction, exclusive of the courts of the States" over "[a]ny civil case of admiralty or maritime jurisdiction, saving to suitors in all cases all other remedies to which they are otherwise entitled."
Inquiries into whether contracts are sufficiently of the sea to constitute maritime contracts are notoriously murky. Accord Folksamerica Reinsurance Co. v. Clean Water of New York, Inc., 413 F.3d 307, 312 n.3 (2d Cir. 2005) (quoting Professor Charles Black's quip that "in this field . . . [t]he attempt to project some 'principle' is best left alone. There is about as much 'principle' as there is in a list of irregular verbs" (citation omitted)); see also Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 23 (2004) (noting the lack of "clean lines between maritime and nonmaritime contracts"); Kossick v. United Fruit Co., 365 U.S. 731, 742 (1961) (Harlan, J.) (resorting to the observation that a contract is maritime if it has a "genuinely salty flavor"). However, it is clear that, in order for a contract to be maritime, it must involve a vessel.
This case concerns insurance for a drydock AFDB-5 ("the Drydock"), which sank at its berth in Texas on August 20, 2009. Thus, the central jurisdictional question to be resolved is whether the Drydock constituted a "vessel" as defined under federal law pursuant to 1 U.S.C. § 3. If in fact the Drydock was a vessel, there can be no dispute that the insurance contract that provides coverage for losses associated with the Drydock is maritime in nature. See Sirius Ins. Co. (UK) v. Collins, 16 F.3d 34 (2d Cir. 1994) ("There are few objects - perhaps none - more essentially related to maritime commerce than vessels."); see also 1 T. Schoenbaum, Admiralty and Maritime Law § 3-6, p. 155 (5th ed.2011) ("Vessel status is important in determining jurisdiction since acts that occur aboard a vessel will be presumed, absent unusual circumstances, to meet the maritime relationship requirement.")
At the time of the Drydock's sinking, Signal had five lines of insurance that provided coverage with respect to the Drydock: (1) a marine general liability ("MGL") policy subscribed to by Fireman's Fund and One Beacon on a 50-50 basis with Fireman's Fund being the lead insurer ("the MGL Insurers"), (2) a Bumbershoot policy subscribed to by Fireman's Fund, National Liability, and QBE, with Fireman's Fund being the lead insurer ("the Bumbershoot Insurers"), (3) a pollution liability policy issued by Great American, (4) a primary property policy issued by Westchester Surplus Lines Insurance Company ("Westchester") for $10 million ("the PPI Policy"), and (5) a following form excess property policy with limits of $15 million in excess of the PPI Policy, issued by MSI ("the EPI Policy"). Primarily at issue in the instant Motions are the PPI and EPI Policies.
The Drydock—which, until its sinking, was one of the largest drydocks in the world—consisted of eight 240' x 101' x 23.5' pontoons, each complete with one fixed wing wall and one removable wing wall moored together in two pontoon by four pontoon arrangement, otherwise known as a "ring configuration." It had been constructed during World War II, during which it was towed to the western Pacific Ocean to service Navy vessels engaged in the war effort. After the war, the Drydock spent several decades in Hawaii, before being towed to Texas. The Drydock remained in Texas from 1984 until its demise in 2009.
While the EPI Policy also covered several shore-based items, such as a Guard House and a Cafeteria, the Drydock was by far the most expensive asset insured. Thus, if the Drydock is in fact a vessel, the insurance's predominant purpose was to insure maritime risks. See Folksamerica, 413 F.3d at 315 (finding that an insurance contract was maritime despite the fact that the contract contained "incidental non-maritime elements").
A. Defining "Vessel" under § 3
Section 3 defines "vessel" to "include[] every description of watercraft or other artificial contrivance used, or capable of being used, as a means of transportation on water." Many items are clearly vessels, while others are clearly not; courts, however, have long struggled to apply § 3 to the "marginal cases." Lozman v. City of Riviera Beach, 2013 WL 149633, at *13 (Jan. 15, 2013).
The Supreme Court first addressed whether a drydock constitutes a vessel in Cope v. Vallete Dry-Dock Co., 119 U.S. 625 (1887), a case concerning a possible award for salvage after a ship collided with a drydock. In Cope, the Supreme Court held that the federal courts did not have admiralty jurisdiction over the case involving the sunken structure. Justice Bradley explained that
[a] fixed structure, such as this dry-dock is, not used for the purpose of navigation . . . any more than is a wharf or a warehouse when projecting into or upon the water. The fact that it floats on the water does not make it a ship or vessel . . . .Id. at 627. Rather, wrote Justice Bradley, the term "vessel" is "used, in a very broad sense, to include all navigable structures intended for transportation." Id. at 629.
In the aftermath of Cope, it was often assumed that by lower courts that a drydock was categorically not a vessel under federal law. See, e.g., Royal Ins. Co. of Am. v. Pier 39 Ltd. P'ship, 738 F. 2d 1035, 1037 (9th Cir. 1984) ("[T]he general rule is that stationary floating dry docks are not vessels."); Cook v. Belden Concrete Prods., Inc., 472 F.2d 999, 1000 (5th Cir. 1973) ("Since Cope . . . it has been clear that a floating drydock is not a vessel." Id. (citations omitted)); De Martino v. Bethlehem Steel Co., 164 F.2d 177, 179 (4th Cir. 1947) (citing Cope for the proposition that "[a] dock—even a floating dock—can hardly be considered a vessel . . . .")
However, in Stewart v. Dutra Const. Co., 543 U.S. 481 (2005), the Supreme Court clarified its holding in Cope. Stewart was a Jones Act case concerning an enormous accident that took place on the dredge used in Boston's now infamous Big Dig. This dredge, known by its admirers as the Super Scoop, was a floating platform with a bucket that removed silt from the ocean floor and dumped it onto adjacent scows. The Super Scoop could travel long distances by tugboat, but it had "only limited means of self-propulsion." Id. at 484. The question before the Court was whether this contraption constituted a vessel under federal law, and to the surprise of many, the Stewart Court found that it did. In so doing, Justice Thomas, writing for a unanimous Court, proffered a far narrower reading of Cope—and by extension, a broader understanding of the meaning of "vessel" under federal maritime law. The Stewart Court read Cope simply as holding that a fixed structure that had been anchored at the same location for over two decades was not a vessel. Id. at 493. In other words, according to Justice Thomas, Cope did nothing more than reaffirm the "distinction drawn by the general maritime law between watercraft temporarily stationed in a particular location and those permanently affixed to shore or resting on the ocean floor. . . . Simply put, a watercraft is not 'capable of being used' for maritime transport"—and is thus not a "vessel" under § 3 and general maritime law—"if it has been permanently moored or otherwise rendered practically incapable of transportation or movement." Id. at 493-94.
Among the lower courts, Stewart resulted in a "significant broadening of the set of unconventional watercraft that must be deemed vessels . . . . [A]s long as a water-borne structure is practically capable of being used for transportation on navigable waters, it is a 'vessel.'" Holmes v. Atl. Sounding Co., 437 F.3d 441, 448 (5th Cir. 2006). Thus, in In re Two-J Ranch, Inc., 534 F. Supp. 2d 671 (W.D. La. 2008), it was held that a drydock and spud barge that were moved up and down a riverbank annually and were moved shorter distances more frequently were vessels. In so holding, the Two-J Ranch Court noted that "[t]his movement shows that not only were the drydock and spud barge capable of being used for maritime transport, they actually were used for that purpose." Id. at 679.
However, in its recent opinion, Lozman, the Supreme Court has sent a shot across the bow of those lower courts that have "endorse[d] the 'anything that floats' approach" to defining vessels. 2013 WL 149633, at *7. (citation omitted). In Lozman, the Court reviewed the Eleventh Circuit holding that a houseboat was a vessel because it was "practically capable of transportation over water by means of a tow, despite having no motive or steering power of its own." City of Riviera Beach v. That Certain Unnamed Gray, Two Story Vessel Approximately Fifty-Seven Feet in Length, 649 F.3d 1259, 1269 (11th Cir. 2011). Justice Breyer, writing for the Court, reversed, explaining that the fact that a floating structure is literally "capable" of transportation on water does not make it a vessel; rather, the central question is whether a "reasonable observer . . . would consider it designed to a practical degree for carrying people or things over water." Lozman, 2013 WL 149633, at *4. This test requires an examination of both "the physical attributes" of the watercraft, as well as the "behavior of the structure"—which is to say, its design, as well as its use. Id. at *9.
For example, the Court cites Holmes, supra, as an example of a lower court case that provided an overbroad definition of vessel. Id.
Noting that §3 defines a vessel as that which is "capable of being used . . . as a means of transportation on water," the Court pointed out that, by definition, "'[t]ransportation' involves the 'conveyance (of things or persons) from one place to another.' Id. (citing 18 Oxford English Dictionary 424 (2d ed. 1989) (OED).) Thus, the fact that a craft moves does not necessarily mean that it "transports."
While the Lozman Court did not dispute that a watercraft can be a vessel even if it is not used primarily for transportation purposes, or if it is not in motion at the time in question, or if it is attached, albeit temporarily, to land, it underscored that the dredge in Stewart was a vessel in spite of these attributes, not because of them; Stewart does not, said the Court, "impl[y] a universal set of sufficient conditions for application of the definition [of a vessel]. Rather," Stewart "say[s], and . . . mean[s], that the statutory definition may (or may not) apply—not that it automatically must apply—where a structure has some other primary purpose, where it is stationary at relevant times, and where it is attached—but not permanently attached—to land." Id. at *6. Similarly, while Lozman noted that "lack of self-propulsion is not dispositive," it instructed lower courts that "it may be a relevant characteristic" in determining if a purpose of the watercraft is transportation. Id. at *5 (citation omitted); see also id. at *8 (the fact that Lozman "cannot easily escape liability by sailing away in his home" cuts against his houseboat constituting a vessel). Nonetheless, the Lozman Court affirmed Stewart on the ground that "the dredge was regularly . . . used (and designed in part to be used) to transport workers and equipment over water . . . ." Id. at *7; see also id. at *6 (noting that the dredge in Stewart, "[l]ike more traditional seagoing vessels, . . . had, e.g., a captain and crew, navigational lights, ballast tanks, and a crew dining area" (citation and internal quotation marks omitted)). --------
B. The Application of the Vessel Jurisprudence to the Facts
Applying the standard outlined in Lozman, it is clear that the Drydock was not a vessel.
There is, to be sure, some evidence indicating that the Drydock had some attributes of a vessel. For instance, the deposition testimony of Patrick Cates, Signal's Maintenance Superintendent at the time of the Drydock's sinking, indicates that the Drydock could become free floating within a matter of hours. Supp. Straus Decl., Ex. A ("Crane Dep."), at 228:5-230:6. Moreover, David L. Porter, a marine structural engineer with four years experience, has testified that the Drydock had ship-shaped hulls, indicating that the Drydock was built to travel long distances over the water. Dkt No. 176 ("Straus Decl."), Ex. M ("Porter Decl.") at ¶ 13. The pontoons also contained crews' quarters. Straus Decl., Ex. L at KC9600. Moreover, the Drydock was towed, in the distant past, thousands of miles across the Pacific. Porter Decl. at ¶ 11; cf. Stewart, 543 U.S. at 484 (finding probative that the Super Scoop was "moved long distances by tugboat").
However, this evidence, while arguably sufficient in a pre-Lozman landscape to prove the Drydock a vessel, falls short post- Lozman. Simply put, this Court cannot say that a reasonable observer would consider the Drydock designed, or "regularly" used, to transport persons or things over water. While towable, the Drydock lacked the ability to propel itself. Accord Lozman, 2013 WL 149633, at *5 (citing the fact that "Lozman's home was able to travel over water only by being towed" as evidence that the houseboat was not "designed to any practical degree to transport persons or things over water"). Nor did the Drydock have a steering mechanism. Accord id. (citing as additional evidence that "[Lozman's home] had no rudder or other steering mechanism"). Similarly, it lacked navigational lights, life boats, a wheel house or other equipment that would allow it to be used for the transportation of passengers. Dkt. No. 202, Ex. C; accord Lozman. 2013 WL 149633, at *9 (noting that whether a boat is "designed to any practical degree" for the transportation of cargo or people is relevant to the inquiry). In addition, the Drydock was never used to transport cargo or people, and the living quarters were no longer in use when the Drydock was stationed at Port Arthur. Dkt. 202, Ex. B ("Cates Dep.") at 212-213.
Moreover, while the Drydock has been moved long distances at least twice in the distance past, it was, in the years leading up to its destruction, more or less permanently moored in one place. Dkt. No. 164 ("Haley Decl.) at ¶ 10. Although the Drydock was still moved away from its mooring at least every two to three years for dredging of the sea floor beneath the drydock, Lozman makes plain that this amount of transportation is not sufficient. Lozman, 2013 WL 149633, at *5. (Lozman's house was not a drydock in part because "[p]rior to its arrest, that home's travel by tow over water took place on only four occasions over seven years."). More to the point, the Drydock's later movements were brief and of short distances, and the short trips were made solely to allow for dredging the slip, Cates Dep. at 114-115, which is self-evidently not the sort of "transportation" contemplated by the Supreme Court in Lozman. Indeed, this type of movement is not "transportation" at all. See supra, note 5.
MSI, which has argued that admiralty jurisdiction exists, has unwittingly made a particularly persuasive case for why, in the post-Lozman world, the Drydock is not a vessel under federal law. In its brief opposing Signal's Motion, MSI asked this Court to postpone deciding this jurisdictional question until the Court decided Lozman, since, according to MSI, "the floating structure at issue" in Lozman and "the drydock at issue in the instant matter are materially indistinguishable." Dkt. No. 173 at 20 (emphasis added). MSI went on the note some of the similarities between the two items:
• both floating structures did not have motive capabilities or steering mechanisms;Id. at 21.
• both floating structures were capable of being towed over water and were towed hundreds (in the case of the houseboat) and thousands (the [Drydock]) of miles to the places where they rested when the events at issue occurred;
• both floating structures were located at specific resting places pursuant to fixed term leases with local municipalities;
• both floating structures were moved and returned to their original locations during their respective tenancies; and
• both floating structures were the subject of maritime liens at the time of the events at issue.
Because "no reasonable observer . . . would consider [the Drydock] designed to a practical degree for carrying people or things over water," the Drydock is not a vessel under federal law. Because the predominant item covered under the PPI and EPI policies was not a vessel, those policies do not constitute maritime insurance. This Court therefore lacks jurisdiction over this matter under § 1333.
II. Conclusion
For the foregoing reasons, this Court lacks admiralty jurisdiction over all claims, counterclaims, and cross-claims asserted in this action.
Accordingly, Plaintiffs are ORDERED TO SHOW CAUSE, on or before February 6, 2013, as to why this action should not be dismissed for lack of jurisdiction. Any other party to this action may also provide relevant submissions by the same date. If Plaintiffs are able to prove by affidavit that diversity jurisdiction exists, this Court will retain jurisdiction over Plaintiffs claim pursuant to 28 USC § 1332, as well as over MSI, Signal, and Great Americans' counterclaims and crossclaims pursuant to 28 USC § 1367(a). SO ORDERED. Dated: New York, New York
January 25, 2013
/s/_________
J. PAUL OETKEN
United States District Judge