Spencer v. Alonzo

• Court: Court of Appeals for the First Circuit
• Decided: May 13, 2021
• Docket: 19-1112P
• Status: Published

Opinion

United States Court of Appeals For the First Circuit No. 19-1112

AFUNDAY CHARTERS, INC.,

Plaintiff,

v.

ABC INSURANCE COMPANY,

Defendant,

SPENCER YACHTS, INC.,

Defendant, Cross-Claimant, Third-Party Plaintiff,

JOSEPH DANIEL SPENCER,

Defendant, Cross-Claimant, Third-Party Plaintiff, Appellant,

SEAN ALONZO; ANTHONY NORMAN SABGA,

Third-Party Defendants, Appellees,

TRINIDAD AND TOBAGO INSURANCE LIMITED; ABC INSURANCE COMPANY,

Third-Party Defendants,

CHUBB CORPORATION; ACE AMERICAN INSURANCE COMPANY; CHUBB INSURANCE COMPANY, f/k/a ACE AMERICAN INSURANCE COMPANY,

Cross-Defendants.

No. 19-1114

Plaintiff, v.

TRINIDAD AND TOBAGO INSURANCE LIMITED; ABC INSURANCE COMPANY,

CHUBB CORPORATION; ACE AMERICAN INSURANCE COMPANY; CHUBB INSURANCE COMPANY, f/k/a ACE American Insurance Company,

APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO

[Hon. Gustavo A. Gelpí, Jr., U.S. District Judge]

Before

Kayatta, Lipez, and Barron, Circuit Judges.

James W. Stroup, with whom Stroup & Martin, P.A., Alberto J. Castañer-Padro, III, and Castañer & Cia P.S.C. were on brief, for appellant Joseph Daniel Spencer. David Y. Loh, with whom KMA Zuckert LLC was on brief, for appellant Spencer Yachts, Inc. Clay M. Naughton, with whom Michael T. Moore and Moore & Company, P.A., were on brief, for appellees.

May 13, 2021 KAYATTA, Circuit Judge. This admiralty proceeding

arises out of the grounding and constructive total loss of a

brand-new seventy-four-foot yacht. Afunday Charters, Inc., had

purchased the yacht from its builder, Spencer Yachts, Inc. Those

on board the yacht at the time of the grounding included Sean

Alonzo -- who was hired by Afunday's owner, Anthony Norman Sabga

-- and Joseph Daniel Spencer -- an employee of Spencer Yachts.

Afunday sued Spencer and Spencer Yachts, alleging that Spencer

negligently ran the yacht aground and that Spencer and Spencer

Yachts were jointly and severally liable for the yacht's loss.

Spencer and Spencer Yachts each denied responsibility, raised an

affirmative defense of negligence by Afunday's agents Sabga and

Alonzo, and filed a third-party complaint against Sabga and Alonzo.

This appeal arises out of the subsequent dismissal of the third-

party complaints pursuant to Fed. R. Civ. P. 12(b)(6). Afunday

Charters, Inc. v. Spencer Yachts, Inc., Civil No. 16-3141 (GAG),

2018 WL 10878066 (D.P.R. Dec. 18, 2018). We have jurisdiction

over this interlocutory appeal under 28 U.S.C. § 1292(a)(3). And

our standard of review is de novo. For the following reasons, we

affirm.

I.

As in a normal civil action, a defendant in an admiralty

proceeding can file a third-party complaint contending that, if

the defendant is liable to the plaintiff, a third party is in turn

- 4 - liable to the defendant. Compare Fed. R. Civ. P. 14(a)(1) ("A

defending party may, as third-party plaintiff, serve a summons and

complaint on a nonparty who is or may be liable to it for all or

part of the claim against it."), with Fed. R. Civ. P. 14(c)(1)

(permitting an admiralty defendant to "bring in a third-party

defendant who may be wholly or partly liable . . . to the third-

party plaintiff"). An admiralty defendant may also file a

different type of third-party complaint, alleging that the third

party is directly liable "to the [original] plaintiff" for the

damages claimed. Fed. R. Civ. P. 14(c)(1). This distinct feature

of Rule 14(c) promotes efficient apportionment of liability in

admiralty suits. See generally 6 Arthur R. Miller, Mary Kay Kane

& A. Benjamin Spencer, Federal Practice & Procedure (Wright &

Miller) § 1465 (3d ed. 2020). Here, Spencer and Spencer Yachts

sought to include both types of third-party claims in their

respective third-party complaints.

Sabga and Alonzo moved to dismiss the third-party

complaints pursuant to Rule 12(b)(6), arguing that, as a matter of

law, Spencer and Spencer Yachts could never have any recovery or

benefit from the complaints. This was so, they contended, because

if Sabga or Alonzo were responsible for the loss, that

responsibility would reduce commensurately any liability of

Spencer or Spencer Yachts to Afunday. Spencer and Spencer Yachts

opposed the motions, arguing that Sabga and Alonzo's negligence

- 5 - would not necessarily be attributable to Afunday, a distinct legal

entity. In reply, Afunday, Sabga, and Alonzo all conceded without

reservation or right of rescission that any comparative fault on

the part of Sabga or Alonzo would be attributed to Afunday and

thus reduce to the extent of that fault any liability of Spencer

or Spencer Yachts. Sabga and Alonzo argued that this concession

supported dismissal because it made the third-party complaints

duplicative of Spencer's and Spencer Yachts's affirmative defenses

of negligence.

Some courts applying Rule 14(a) in non-admiralty

proceedings have accepted this precise reasoning. See, e.g.,

Gabriel Cap., LP v. Natwest Fin., Inc., 137 F. Supp. 2d 251, 266

(S.D.N.Y. 2000) (dismissing third-party claim for contribution

"against a plaintiff's agent where that claim [was] identical to

defendant's affirmative defense"); cf. Loreley Fin. (Jersey) No. 3

Ltd. v. Wells Fargo Sec., LLC, No. 12-cv-3723 (RJS), 2017 WL

985875, at *3 (S.D.N.Y. Mar. 10, 2017) (noting that this doctrine

does not apply when "the third-party defendant acts outside of the

scope of its agency"). Rule 14(a) provides a textual toehold for

such a practical approach. It allows a defendant in the original

action to bring a third-party complaint only against one "who is

or may be liable to [the defendant] for all or part of the claim

against [the defendant]." Fed. R. Civ. P. 14(a)(1). Where a third

party's comparative negligence is properly attributed to the

- 6 - original plaintiff, a Rule 14(a) complaint against the third party

would do no work because the defendant in the original action will

not be liable for the negligence attributed to the original

plaintiff. So if an original plaintiff's concession means that a

third party can never be liable to a defendant in the original

action for any part of a claim against that defendant, then one

can see how text might welcome practicality in such a case.

Here, though, we have third-party complaints under

Rule 14(c) as well. The fact that there can never be any liability

of Sabga and Alonzo to Spencer or Spencer Yachts does not by itself

preclude the filing of Rule 14(c) complaints against Sabga and

Alonzo, as long as Sabga and Alonzo may be directly liable to the

original plaintiff, Afunday. Spencer and Spencer Yachts

confusingly label the counts of their third-party complaints as

claims for indemnification or contribution, but both complaints

invoke Rule 14(c) and seek the entry of judgment in Afunday's favor

against Sabga and Alonzo. See Fed. R. Civ. P. 14(c)(2) ("The

third-party plaintiff may demand judgment in the plaintiff's favor

against the third-party defendant.").

It is not clear that Spencer or Spencer Yachts have

plausibly pleaded that Sabga and Alonzo are directly liable to

Afunday. Cf. Royal Ins. Co. of Am. v. Sw. Marine, 194 F.3d 1009,

1018 (9th Cir. 1999) (holding that third-party complaints

satisfied Rule 14(c) by referring to the rule and explaining how

- 7 - and why third-party defendants were liable to the original

plaintiff). The facts alleged do not suggest that Sabga and Alonzo

acted as individuals rather than as Afunday's agents. And Spencer

and Spencer Yachts have not contended that, as agents, Sabga and

Alonzo would be liable to Afunday. But the district court does

not appear to have relied on this arguable deficiency. And Spencer

and Spencer Yachts also appeal the denial of leave to amend their

third-party complaints to make pellucid the basis for claiming

that Sabga and Alonzo acted independently, on Sabga's behalf. So

we put to one side the issue of whether the third-party complaints'

factual allegations are sufficient to state a Rule 14(c) claim.

We instead train our attention on whether the district

court properly relied on Afunday's concession accepting

responsibility for any fault of Sabga or Alonzo as a basis to

dismiss the Rule 14(c) complaints seeking to assert that the third-

party defendants are directly liable to the original plaintiff.

In the district court's view, the third-party complaints did not

plausibly allege that Sabga and Alonzo "were acting in their own

self-interest," and the court did not discern a difference between

either holding them liable as individuals based on the third-party

complaint or reducing Afunday's recovery in proportion to their

comparative fault based on an affirmative defense. Put another

way, the district court concluded that dismissal was warranted

- 8 - because neither Spencer nor Spencer Yachts would incur any

meaningful benefit from impleading Sabga and Alonzo.

Rule 14(c) itself contains no requirement that the

pleading pose a potential benefit. On the other hand, Rule 16

bears on this matter. It grants the district court discretion to

"take appropriate action" to "facilitat[e] . . . the just, speedy,

and inexpensive disposition of the action." Fed. R. Civ.

P. 16(c)(2)(P). It also allows a district court, when appropriate,

to set a separate trial for the adjudication of a third-party

claim, Fed. R. Civ. P. 16(c)(2)(M), and to otherwise "simplify[]

the issues," Fed. R. Civ. P. 16(c)(2)(A). Here, for example, the

court could have simply reserved adjudication of the third-party

complaints until after the respective faults of all parties were

adjudicated in resolving Afunday's claim. At that point, at least

as these parties describe the dispute, there would be nothing left

to decide.

We therefore see no practical difference between

delaying the adjudication of the third-party complaints and

dismissing them. In either event, Spencer and Spencer Yachts would

end up in exactly the same place because they are guaranteed that

any negligence by Sabga and Alonzo would reduce a damage award

against Spencer or Spencer Yachts. Far from creating a risk of

duplicative proceedings, this method of apportioning comparative

- 9 - fault obviates the need for follow-on litigation seeking

contribution from Sabga and Alonzo.

If the third-party plaintiffs had shown that dismissal

of their pleadings would harm them, we would likely reverse. When

we explored the possibility of prejudice by asking for supplemental

filings addressing possible prejudice to Spencer or Spencer

Yachts, the Spencer parties pointed to an unsupported assertion

that Sabga's personal insurance would be triggered only by a direct

claim against him. This response hardly answered the question.

Regardless of whether the policy covers the incident, neither

Spencer nor Spencer Yachts will incur any liability or share of

liability for fault attributed to Sabga for actions that Afunday

concedes Sabga performed as its agent.

At oral argument, counsel for the Spencer parties

suggested that the policy, once triggered, would pay for Spencer's

legal defense. But if that is really the reason for objecting to

the district court's ruling, one would have expected that reason

to have been trotted out front and center in the district court,

and certainly in the Spencer parties' various briefs on appeal.

Forfeited arguments in civil cases fare poorly. See Teamsters

Union, Loc. No. 59 v. Superline Transp. Co., 953 F.2d 17, 21 (1st

Cir. 1992). And arguments withheld from the briefs on appeal fare

even worse. See Piazza v. Aponte Roque, 909 F.2d 35, 37 (1st Cir.

1990) ("Except in extraordinary circumstances . . . , a court of

- 10 - appeals will not consider an issue raised for the first time at

oral argument."). Noting that even now the Spencer parties do not

explain how the policy works in the asserted manner, we see no

extraordinary circumstances that would justify our consideration

of this argument forfeited in the district court and waived on

appeal.

Spencer and Spencer Yachts have also suggested in their

supplemental filing and at oral argument that discovery against

Sabga might be easier if Sabga and Alonzo are parties to the action

rather than witnesses. But we understand that Sabga and Alonzo --

represented by Afunday's counsel to be Afunday's agents -- will

not attempt to gain any advantage not available to a party. And

if that turns out to be wrong, or if there should develop any

presently unforeseeable prejudice to Spencer or Spencer Yachts due

to the lack of a third-party complaint, the district court on

remand can always revisit the pleadings to the extent necessary.

Fed. R. Civ. P. 15(a)(2) (allowing amendment "when justice so

requires").

II.

For the foregoing reasons, we affirm the judgment of the

district court. Each party shall bear its own costs.

– Dissenting Opinion Follows –

- 11 - BARRON, Circuit Judge, dissenting. I read the District

Court to have ruled that the claims for contribution that the

third-party plaintiffs -- Joseph Daniel Spencer and Spencer

Yachts, Inc. ("Spencer")1 -- brought pursuant to Federal Rule of

Civil Procedure 14 against Sean Alonzo and Anthony Norman Sabga

fail plausibly to allege that either man was not acting merely as

an agent of Afunday Charters, Inc., ("Afunday") at the relevant

times, at least given the stipulation by Afunday, Alonzo, and Sabga

that the two men were acting as Afunday's agents. I further read

the District Court to have concluded that, in consequence of that

pleading deficiency, these contribution claims under Rule 14(a)

may not go forward because they are necessarily redundant of

Spencer's own affirmative defense of comparative negligence that

it asserts in response to the claims that Afunday has brought

against Spencer.

But, while Spencer's complaint is hardly as fulsome as

one might hope, it states that Sabga was acting "in his capacity

as the chief executive officer or president of Afunday Charters,

Inc., or alternatively, in his capacity as the sole shareholder of

Afunday Charters, Inc.," (emphasis added), and that Sabga hired

Alonzo. Under the notice pleading standard, see Fed. R. Civ. P.

1 As no party asserts there is any legally meaningful distinction between Spencer and Spencer Yachts with respect to the issues before us on appeal, I refer to both third-party plaintiffs collectively.

- 12 - 8(a), I cannot see why more was required for Spencer plausibly to

allege that neither Alonzo nor Sabga was acting merely as an agent

of Afunday during the period that mattered. Accordingly, as

Spencer's comparative negligence defense is premised on the two

men having acted as Afunday's agents, I conclude that the District

Court has failed to offer an adequate rationale for dismissing

Spencer's Rule 14(a) claims for contribution against Alonzo and

Sabga insofar as they allege that the two men were acting for

themselves and not for Afunday.

There remains to address the District Court's dismissal

of Spencer's Rule 14(c) claims regarding Alonzo and Sabga. These

claims are not for contribution. They allege instead that the two

men are directly liable to Afunday. Here, too, I read the District

Court to have dismissed the claims based on the understanding that

they could not go forward because they plausibly plead only that

Alonzo and Sabga were acting as Afunday's agents at the times that

mattered and thus necessarily rise and fall with the comparative

negligence defense that Spencer asserts against the claims that

Afunday brings. But, as I have explained, Spencer's complaint

does not allege that the two men were acting only as Afunday's

agents. It alternatively pleads that they were acting for

themselves. Accordingly, I cannot see how the District Court's

dismissal of these Rule 14(c) claims can be upheld either.

- 13 - Moreover, I read Spencer's briefing to us to argue that,

even insofar as the Rule 14(c) claims characterize Alonzo and Sabga

as Afunday's agents, they may go forward, notwithstanding the

nature of the comparative negligence defense that Spencer asserts

against the claims that Afunday brings as a plaintiff in its own

right. And, I read the District Court to have dismissed this

variant of Spencer's Rule 14(c) claims based solely on the finding

of redundancy that it made as to the Rule 14 claims generally --

and thus without accounting for this type of claim being one for

direct liability under Rule 14(c) rather than contribution under

Rule 14(a). I thus would require the District Court to address

this variant of Spencer's Rule 14(c) claims on remand as well.

I do recognize that if we were to vacate the order

dismissing Spencer's Rule 14 claims, as I conclude that we must,

then the District Court on remand might well choose to proceed

just as the majority concludes that it is entitled to under Federal

Rule of Civil Procedure 16. But, even if the District Court chose

to follow that course, Spencer then could challenge that exercise

of discretion on appeal by advancing contentions like those that

it has made to us about the advantages that keeping the Rule 14

claims in the case would have in terms of discovery and enforcement

of insurance policy terms. And, were Spencer to do so, we then

would have the benefit of something that we now lack -- an

assessment of those contentions by the adjudicator most conversant

- 14 - with the ins and outs of the case. Thus, slow as the usual process

of adjudication may be, I would not short-circuit it by effectively

affirming a ruling that has not yet been made.

For these reasons, I respectfully dissent.

- 15 -