Opinion
C.A. No. NC-2009-0382
03-02-2016
MAINSTAY FISHERIES, INC. AND RICHARD F. MUDD, SR. v. NORTHERN WATERFRONT ASSOCIATES, L.P. and NORTHERN WATERFRONT ASSOCIATES CO., LLC v. KANE AND KANE, INC.; EAST PASSAGE REAL ESTATE ASSOCIATES, L.P.; MT. HOPE MARINE CONTRACTORS, INC.; AND MICHAEL VIERA; SHELTOW I, INC. and JOHN SHELTON
ATTORNEYS: For Plaintiff: John D. Deacon, Esq. For Defendant: Robert J. Quigley, Jr., Esq. Kenneth J. Hill, Esq. Robert Edward Collins, Esq. Kenneth R. Tremblay, Esq.
DECISION STONE , J. Before the Court is Defendants Sheltow I, Inc. and John Shelton's (jointly, Defendants) Motion for Partial Summary Judgment on the issue of damages relating to Plaintiffs Mainstay Fisheries, Inc. and Richard F. Mudd, Sr.'s (collectively, Plaintiffs) Complaint. Likewise, Northern Waterfront Associates, L.P. and Northern Waterfront Associates Co., LLC move for partial summary judgment, adopting the arguments of Defendants. In response, Plaintiffs filed a timely objection. This Court heard arguments from the parties on March 2, 2015. Jurisdiction is pursuant to Rule 56 of the Rhode Island Superior Court Rules of Civil Procedure. For the reasoning set forth in further detail below, the Defendants' motion is granted in part and denied in part.
Following the hearing, on March 5, 2015, Plaintiffs filed a letter with the Court addressing alleged deficiencies in Defendants' arguments, which was also sent to Defendants.
I
Background
The following facts are undisputed by the parties. Plaintiff Mainstay Fisheries, Inc. (Mainstay) is a Rhode Island corporation, which at all times material hereto, had a principal place of business in Portsmouth, Rhode Island. Plaintiff Richard F. Mudd, Sr. is a resident of Tiverton, Rhode Island and was the sole shareholder and officer of Mainstay. He was the Captain of the F/V KISMET, a 65-foot single-crew offshore wooden lobster boat. The F/V KISMET was built in 1981, and it was owned and operated by Mainstay. Throughout its service, it was operating as an offshore lobster/gill net fishing vessel for Mainstay. The vessel was surveyed in 2006 by Richard Learned of Learned Associates Inc. and given an appraised value of $160,000.
Defendant/Third-Party Plaintiff Northern Waterfront Associates, L.P. is a Delaware Limited Partnership, with a principal place of business in Pennsylvania. Pertinently, it was the owner of the Weyerhaeuser Pier (the Pier) in Portsmouth, Rhode Island at all relevant times. Defendant/Third-Party Defendant John Shelton (Mr. Shelton) is a resident of Tiverton, Rhode Island and the President of Defendant/Third-Party Defendant Sheltow I, Inc. (Sheltow). Sheltow consisted of a tug boat, HOPE, and a barge, which were used for tasks like taking fresh water out to vessels. Sheltow was doing business out of the Pier until it could locate a more permanent base of operations.
Sheltow had purchased a crane and other equipment from Defendant Mt. Hope Marine Contractors, Inc. On July 3, 2007, Mr. Shelton was on the Pier working on the crane. On that day, there was a great deal of activity happening on the Pier; there were adolescents in the area preparing a bonfire, there were individuals walking on the beach, including Sarah Edelstein (Ms. Edelstein), and there were laborers working, including Mr. Shelton and Mike Kelly (Mr. Kelly). According to Mr. Shelton, both he and Mr. Kelly worked on the Pier until approximately 4:00 pm. At that time, Mr. Shelton left for a meeting in Tiverton, Rhode Island.
A permit had been obtained for the fire in the vicinity of the Pier.
Sometime later that evening, the Pier caught on fire. Michael Viera and Ms. Edelstein—two eye witnesses—were talking when Mr. Viera observed smoke on the Pier, in the vicinity of the pump and crane. Ms. Edelstein proceeded to take pictures, fully documenting the fire from its onset. At some point, the F/V KISMET, which was docked on the Pier, caught on fire and drifted out into the waters surrounding the Pier. The F/V KISMET became a total loss from the damages sustained in the fire.
As a result, on July 24, 2009, Plaintiffs filed a Complaint alleging negligence on the part of various defendants in Newport County Superior Court. Defendants were brought into the case by way of an Amended Third-Party Complaint filed on August 5, 2011. In addition to the value of the vessel itself, Plaintiffs claim additional damages for a life raft, an Emergency Position Indicator Radio Beacon, bait, fuel onboard the vessel, coils of line, steel weights, balls, hi-flyers, slip gun (collectively, the Equipment), fork truck, prepaid dockage, and a deductible paid to Reagan Construction to remove the vessel's wreck. In addition, Plaintiffs seek damages for offshore lobster traps that were lost after the fire in the amount of $116,640 and loss of business in the amount of $156,000, based on a business valuation expert report. Although Defendants concede that the value of the vessel is recoverable if they are found to be liable, they assert that these other damages are not.
Consequently, on January 29, 2015, Defendants filed the instant Motion for Partial Summary Judgment. In their Motion, Defendants assert that Plaintiffs are not entitled to the other assorted damages in the Complaint, aside from the actual value of the vessel. Relying on federal admiralty law, Defendants insist that Plaintiffs' recovery is limited to the value of the vessel and expressly seek to exclude the damages for the Equipment and loss of business income. Therefore, the Defendants seek a ruling by this Court that Plaintiffs' claims for damages beyond the fair market value of the vessel—including fuel, bait and other items, loss of business income, and loss of offshore lobster traps—are not recoverable.
In response, Plaintiffs insist that this case is governed by state law not federal maritime law as Defendants propose. More specifically, Plaintiffs argue that because the Defendants' asserted acts of negligence took place on the Pier—and because piers are treated as extended parts of the land—state law applies. Moreover, they claim that even if maritime law is applicable they can still recover for lost profits and the other miscellaneous damages.
For the purpose of the present Motion, the parties have agreed that the following facts are also not in dispute: each of the Defendants is presumed to be liable to Plaintiffs on the claims asserted for the purposes of assessing damages; the tortious conduct of all defendants occurred entirely on the Pier; Defendants' tortious actions and omissions proximately caused the complete destruction of all the items of tangible and intangible property for which Plaintiffs claim damages in the present case and the cessation of Mainstay's business operations; and that Plaintiffs lacked the financial capability to replace the tangible property destroyed by the fire, so as to be able to continue operation of Mainstay's business.
II
Standard of Review
As an initial matter, this Court acknowledges that summary judgment "is a harsh remedy and must be applied cautiously." Mallette v. Children's Friend and Serv., 661 A.2d 67, 69 (R.I. 1995); see also McPhillips v. Zayre Corp., 582 A.2d 747, 749 (R.I. 1990). In passing upon a summary judgment motion, "it is the province of the trial justice to determine, by an examination of the pleadings, depositions, answers to interrogatories, admissions on file, and the affidavits of the parties, whether these documents present a genuine issue of material fact, 'and, if not, whether the moving party is entitled to judgment under the applicable law.'" Volino v. Gen. Dynamics, 539 A.2d 531, 532-33 (R.I. 1988) (quoting Ludwig v. Kowal, 419 A.2d 297, 301 (R.I. 1980)). The trial justice views the evidence in a light most favorable to the party against whom the motion is made, drawing from that evidence all reasonable inferences in support of the nonmoving party's claim but without resolving any factual disputes. Holliston Mills, Inc. v. Citizens Trust Co., 604 A.2d 331, 334 (R.I. 1992).
However, the party opposing a summary judgment motion "cannot rely solely on mere allegations or on the denials contained in the pleadings to defeat the motion." Hydro-Mfg. Inc. v. Kayser-Roth Corp., 640 A.2d 950, 954 (R.I. 1994). "Rather, the nonmoving party must affirmatively assert facts that raise a genuine issue to be resolved." Id.; see also Super. R. Civ. P. 56(e). A party opposing a motion for summary judgment must show to the satisfaction of the court that there is a substantial material factual issue in dispute and must state in definite terms the basis of the defense, as well as evidential facts, and may not simply rely upon asserted conclusions. See Gen. Accident Ins. Co. of Am. v. Cuddy, 658 A.2d 13, 17 (R.I. 1995); Avco Corp. v. Aetna Cas. & Sur. Co., 679 A.2d 323, 327 (R.I. 1996).
III
Analysis
In ruling on Defendants' Motion, the Court must undertake a two-step analysis. First, the Court must address the threshold issue of whether maritime or state law is applicable to the Plaintiffs' claims. If the Court determines that state law is controlling, then the Defendants' arguments as to damages would be without merit, but if maritime law is applicable, the Plaintiffs' damages must be analyzed under the so-called "total loss" doctrine, relied upon by Defendants. The Court will address each issue in seriatim below.
A
Applicable Law
The United States Supreme Court has enumerated a two-part test to determine whether a claim is cognizable in admiralty: (1) the injury must occur on or over navigable waters; and (2) the activities giving rise to the casualty must have a "maritime nexus," insofar that there was a significant relationship to traditional maritime activity. See Foremost Ins. Co. v. Richardson, 457 U.S. 668, 673-74 (1982); Exec. Jet Aviation, Inc. v. City of Cleveland, Ohio, 409 U.S. 249, 268 (1972). As it relates to federal maritime law, docks, piers, and wharves are not navigable waters, but rather they are held to be "extensions of land." Victory Carriers, Inc. v. Law, 404 U.S. 202, 206-07 (1971). Nonetheless, with regard to a docked vessel, "the storage and maintenance of a vessel at a marina on navigable waters is substantially related to 'traditional maritime activity' . . . ." Sisson v. Ruby, 497 U.S. 358, 367 (1990).
Traditional Locality Requirement
"[F]or purposes of admiralty jurisdiction, . . . the tort occurs where the negligence 'takes effect,' not where the negligent act occurred." Butler v. Am. Trawler Co., 887 F.2d 20, 21 (1st Cir. 1989) (citing Exec. Jet Aviation, Inc., 409 U.S. at 268); see also Sisson, 497 U.S. at 362-63 (maritime law applied where fire commenced on a docked vessel and spread to other docked vessels and the owners of the other docked vessels brought suit). That the negligent act took place on land is of no relevance to the application of maritime law. See Sperry Rand Corp. v. Radio Corp. of Am., 618 F.2d 319, 321 (5th Cir. 1980) ("[A]ll of the pertinent cases before and since Executive Jet have held that, so long as the place of the injury to a vessel occurs upon navigable waters, the fact that the negligent act may have occurred on shore is of no relevance." (footnote omitted)).
Here, although the Defendants' alleged negligence occurred on land, Plaintiffs sustained injuries to the vessel while it was docked on navigable waters. Where the negligence that gives rise to the injury occurs on land but the injury itself is a maritime casualty, maritime law applies. See Butler, 887 F.2d at 21. It follows then that the Court must apply maritime law to the facts of the present case in determining what damages will potentially be available to the Plaintiffs.
In Sperry Rand Corp., the United States Court of Appeals for the Fifth Circuit provided a particularly illustrative example of this general principle. 618 F.2d at 321. There, a ship was damaged as it traveled through navigable waters, allegedly due to a defect in the ship's navigational equipment. Id. at 320. The manufacturer of the equipment brought suit in federal district court against the manufacturers of various component parts used in the equipment, claiming admiralty jurisdiction. Id. The district court dismissed the case for lack of admiralty jurisdiction, but, on appeal, the United States Court of Appeals for the Fifth Circuit found that the fact that the injury occurred on navigable waters, and while engaged in traditional maritime activity, was sufficient to confer admiralty jurisdiction on the district court. See id. at 321-22.
Similarly, in Butler, the United States Court of Appeals for the First Circuit held that the primary concern in establishing the applicable law was where the tortious conduct "takes effect." 887 F.2d at 21. The plaintiff in that case claimed that because her injuries occurred while going from the wharf, technically land, to the ship state law should govern. Id. The court did not agree. The First Circuit held that "[w]hether or not the wharf itself counts as part of the land, the injury occurred on the ship. And, for purposes of admiralty jurisdiction, . . . the tort occurs where the negligence 'takes effect,' not where the negligent act occurred." Id. (emphasis supplied) (internal citations omitted).
In the present case, it is undisputed that the alleged negligence of the Defendants took place entirely on land. This alone, however, does not answer the question of whether state or maritime law applies. As the court made clear in Sperry Rand Corp., a negligent act that occurs wholly on land can still give rise to admiralty jurisdiction. 618 F.2d at 321; see also Butler, 887 F.2d at 21. Just as the land-based negligence of the defendants in that case gave rise to admiralty jurisdiction, so too does the land-based negligence of the Defendants in the present case dictate the application of maritime law. Here, the result of Defendants' negligence took effect entirely on navigable waters where it caused the destruction of the F/V KISMET, thereby satisfying the initial prong of the jurisdictional test.
The Defendants concede that there is one item that was on the dock and, therefore, governed by state law. That item, the forklift, is exempt from the Court's ruling on the application of maritime law. Indeed, Defendants concede that Plaintiffs can recover separately for this item upon satisfying their burden of proof.
Maritime Nexus
In addition to occurring on navigable waters, there must be "a significant relationship [between the activity giving rise to the incident and] traditional maritime activity," and the activity must implicate the protection of maritime commerce. Foremost Ins. Co., 457 U.S. at 674. In making a determination of whether those factors have been met, the Court must look to the "general conduct from which the incident arose." Sisson, 497 U.S. at 364. Therefore, in a case involving a fire at a dock, the Court need not determine the cause of the fire because "the relevant activity was the storage and maintenance of a vessel at a marina on navigable waters." Id. at 365. Just as the nature of the relationship is viewed in terms of the "general conduct," so too does the Court look to the "general features of the type of incident involved to determine whether such an incident is likely to disrupt commercial activity." Id. at 363.
Both of these aspects of the jurisdictional analysis require the Court to view the facts surrounding the tort in generality. Interestingly, the United States Supreme Court encountered an extremely similar factual situation in Sisson. In that case, a ship caught fire while it was docked which in turn caused damage to other vessels in the area. Id. at 360. The Court determined that, under those circumstances, both aspects of the jurisdictional test were satisfied. The court noted that "a fire on a vessel docked at a marina on navigable waters[] plainly satisf[ies] the requirement of potential disruption to commercial maritime activity." Id. at 363 (emphasis supplied). The general circumstances surrounding the F/V KISMET's sinking are indistinguishable from those in Sisson; the F/V KISMET was docked at the Pier—storage at a pier is a traditional maritime activity—and the fire had the potential to disrupt commercial maritime activity. See id. Accordingly, the maritime nexus aspect of the jurisdictional test is satisfied. As both prongs of the jurisdictional analysis have been met, the Court finds that federal maritime law is applicable to Plaintiffs' claims.
B
Damages
The Rhode Island Supreme Court has held that "in an admiralty action in state court, issues which would be considered 'substantive' are governed by federal maritime law." King v. Huntress, Inc., 94 A.3d 467, 499 (R.I. 2014). Generally, issues relating to the measure of damages are substantive. See id. at 500 (citing Chesapeake & Ohio Ry. Co. v. Kelly, 241 U.S. 485, 491 (1916); Robinson v. Pocahontas, Inc., 477 F.2d 1048, 1052 (1st Cir. 1973)).
Under federal maritime law, the general rule limits damages in cases where the vessel is a total loss to the fair market value of such vessel, plus interest and net freight. As the United States Supreme Court has stated:
"It is fundamental in the law of damages that the injured party is entitled to compensation for the loss sustained. Where property is destroyed by wrongful act, the owner is entitled to its money equivalent, and thereby to be put in as good position pecuniarily as if his property had not been destroyed. In case of total loss of a vessel, the measure of damages is its market value, if it has a market value, at the time of destruction." Standard Oil Co. of New Jersey v. S. Pac. Co., 268 U.S. 146, 155 (1925).
Only if the item is not inherently part of the vessel can it be separately recovered. See F.C. Wheat Maritime Corp. v. U.S., 663 F.3d 714, 725 (4th Cir. 2011) (noting that, to recover for items separately, litigant argued the items "[we]re not inherently part of the vessel"); see also Rev-Lyn Contracting Co. v. Patriot Marine, LLC, 760 F. Supp. 2d 162, 165 n.1 (D. Mass. 2010) (allowing separate recovery for a crane because it was not a "fixture" of the vessel but rather a sea-land vehicle that could be operated separately). Furthermore, pursuant to general maritime law, where a vessel is a total loss, damages for "[l]oss of use [or lost profits] is not allowable." A & S Transp. Co. v. Tug Fajardo, 688 F.2d 1, 2 (1st Cir. 1982) (citing The Umbria, 166 U.S. 404, 17 S.Ct. 610, 41 L.Ed. 1053 (1897)). However, a narrow exception exists for the benefits of a voyage in fieri, or under way. See The Umbria, 166 U.S. at 421-422 (citing The Amiable Nancy, 16 U.S. 546, 560, 4 L.Ed. 456 (1818)).
Damages for Miscellaneous Items
In the matter at hand, it is undisputed that the vessel was a total loss, but Plaintiffs attempt to further recover damages for the miscellaneous Equipment lost as a result of the F/V KISMET's sinking, in addition to offshore lobster traps in the amount of $116,640 and loss of business in the amount of $156,000. As it relates to the Equipment which Plaintiffs seek to recover for separately, those items were inherently a part of the vessel, and their value should be calculated as they relate to the market value of the F/V KISMET at the time of its loss. Without the aforementioned Equipment, the vessel would have been either impracticable to use for its intended purpose—as a fishing vessel—or lacking with regard to safety equipment. In addition, the prepaid dockage—valued at $1400—is not recoverable because it is a consequential damage. See In re Hlywiak, 613 F. Supp. 2d 647, 652 (D.N.J. 2009) (noting that items "such as annual licenses, docking fees, maintenance, and publicity—are not recoverable" because they "fall under the general rule that consequential damages are not recoverable in total loss cases"). Therefore, the Court finds those items are not recoverable separately pursuant to federal maritime law.
However, the offshore lobster traps and the cost of removing the wreck may be recovered in addition to the value of the F/V KISMET. Indeed, by virtue of the fact that the traps were not on the ship and could still be operated with another vessel, they cannot be said to be an inherent part of the ship. Applying maritime law in Fitzgerald v. Merryman, the United States District Court for the District of Maine found that damages for lost lobster traps could be recovered separately from the value of the ship. 865 F. Supp. 9, 12 (D. Me. 1994). However, that court noted that plaintiff failed to show he would not have lost some traps anyway in the regular course of business, and it adjusted damages accordingly. Id. Similarly, here, Plaintiffs can recover the value of the traps that they would have retained but for the Defendants' alleged negligence.
Interestingly, the court there did not expressly determine whether the boat was a total or partial loss in calculating damages. See id. However, this Court finds it particularly instructive that the District of Maine found that the plaintiff "was entitled to replace the boat." Id. Such an award is consistent with a finding of a total loss or a constructive loss, and yet, the court still awarded separate damages for the lobster traps.
Also, courts have held that "[i]f the owner has acted reasonably, in the circumstances of the wreck, he may recover from a tortfeasor his reasonable expenses for removal." Tucker Energy Servs., Ltd. v. Hydraquip Corp., No. H-05-1265, 2007 WL 2409571, at *1 (S.D. Tex. Aug. 20, 2007) (citing In re Sincere Navigation Corp., 327 F. Supp. 1024, 1026 (E.D. La. 1971); O'Brien Bros. v. The Helen B. Moran, 160 F.2d 502, 504 (2d Cir. 1947)). Therefore, if Plaintiffs acted reasonably, they can recover for the costs associated with removing the F/V KISMET's wreck. The parties have not sufficiently briefed either the value of the traps and the causal connection between the fire and their loss or whether the removal of the wreck was reasonable in these circumstances, and as such, they are left to their burdens of proof on those respective matters.
In sum, the Court finds that the Equipment's value should be calculated as a part of the vessel's overall market value. This does not include the value of the lobster traps and the cost to remove the wreck which may be recovered separately. To the extent that Plaintiffs can prove an appreciation in the value of the F/V KISMET, based on the Equipment added to the vessel, those damages can be recovered as they relate to the ship's value but not separately. See Greer v. U.S., 505 F.2d 90, 93 (5th Cir. 1974) (noting a court may not "exclude[] consideration of the fair value of" improvements to the vessel in calculating its fair market value). To allow separate recovery for all of the individualized items on the ship would render the clear limitation on damages to a ship's fair market value meaningless because plaintiffs could attempt to recover for each and every item supposedly onboard a vessel at the time of its demise. See Standard Oil Co., 268 U.S. at 155.
Lost Profits
The lost profits claimed by Plaintiffs are likewise subject to the general maritime rule that lost profits are not recoverable where a vessel is a total loss. As the United States Supreme Court stated, "'[t]he probable or possible benefits of a voyage as yet in fieri can never afford a safe rule by which to estimate damages in cases of a marine trespass.'" The Umbria, 166 U.S. at 422 (quoting The Amiable Nancy, 16 U.S. at 546). Here, the lost profits of the F/V KISMET's future voyages are too speculative to afford a proper basis for calculating damages. See id. Indeed, there are too many variables present to be able to determine with any legal certainty the potential lost profits of any future voyages of the F/V KISMET and, consequently, the business. See id. Plaintiff is subject to the general rule "that consequential damages are not recoverable in total loss cases." In re Hlywiak, 613 F. Supp. 2d at 652.
The F/V KISMET was Mainstay's only ship, and the ship's lost profits can be characterized as the business's lost profits.
Plaintiffs cite to Barger v. Hanson, 426 F.2d 640 (9th Cir. 1970) for the proposition that future profits, beyond the voyage in fieri, are generally recoverable. However, Barger has been described as the "only deviation from th[e general] rule" that a total loss vessel's damages are measured by the ship's value at the time of the loss. A & S Transp. Co., 688 F.2d at 3; see also In re Complaint of Atl. Mariner, Inc. for Exoneration From or Limitation of Liab., 239 F. Supp. 2d 77, 79 (D. Me. 2002) (noting that "[t]he basis for the Ninth Circuit's departure from the general rule [in Barger] is not entirely clear"). Therefore, Plaintiffs' reliance on Barger is without merit and does not afford them a means to collect lost profits under federal maritime law.
Plaintiffs also argue that because the vessel was scheduled to leave on a fishing voyage on the day of the fire they should be allowed to recover lost profits. However, the controlling precedent in The Umbria is quite clear that "in cases of total loss the probable profits of a charter not yet entered upon are always rejected." 166 U.S. at 421 (emphasis supplied). In that case, the ship—which was a total loss—had previously been contracted to perform a charter, but that was not adequate to exempt it from the general rule that lost profits are not awarded for a ship that is a total loss. The scenario described in The Umbria is directly analogous to Plaintiffs' present argument that the ship was going to leave on a fishing trip. As a result, Plaintiffs' instant claim for future profits must be denied.
In the event of a partial loss, "the net profits of a charter which [a ship] would have performed except for the delay may be treated as a basis for estimating the value of [the ship's] use." The Umbria, 166 U.S. at 421 (citing The Potomac, 105 U.S. 630 (1881); Williamson v. Barrett, 54 U.S. 101 (1851)). --------
IV
Conclusion
For the reasons set forth above, Defendants' Motion for Partial Summary Judgment on the issue of damages is granted in part and denied in part. The Court finds that federal maritime law applies, except as to the fork lift. Additionally, the Court finds that the Plaintiffs can only recover separately for the lobster traps and costs associated with removing the F/V KISMET's wreck. The individualized damages sought for other various items and lost profits are dismissed. Counsel shall confer and submit an order for entry that is in accordance with this Decision. ATTORNEYS:
For Plaintiff:
John D. Deacon, Esq.
For Defendant:
Robert J. Quigley, Jr., Esq. Kenneth J. Hill, Esq. Robert Edward Collins, Esq. Kenneth R. Tremblay, Esq.