Star & Crescent Boat Company, Inc. v. Sunsplash Marina LLC

• Court: District Court, S.D. California
• Decided: February 16, 2021
• Docket: 3:21-cv-00169
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 In the matter of the Complaint of STAR & ) Case No.: 3:21-cv-00169-BEN-JLB CRESCENT BOAT COMPANY, INC., as ) 12 owner of the Motor Vessel M/V ) ORDER 13 PATRIOT, U.S. Coast Guard Official No. ) 1246882, and her engines, equipment, ) (1) REJECTING PLAINTIFF IN 14 tackle, apparel, appurtenances, etc., for ) LIMITATION’S STIPULATION 15 Exoneration from or Limitation of ) FOR VALUE AND LETTER OF Liability, ) UNDERTAKING; 16 ) 17 STAR & CRESCENT BOAT ) (2) DENYING PLAINTIFF’S COMPANY, INC. dba FLAGSHIP ) APPLICATION FOR 18 CRUISES & EVENTS ) INJUNCTION; and 19 ) Plaintiff, ) (3) DENYING PLAINTIFF IN 20 v. ) LIMITATION’S REQUEST 21 SUNSPLASH MARINA LLC, a New ) NOTICE OF COMPLAINT FOR Jersey Limited Liability Company; ) EXONERATION FROM OR 22 OCEANROCKETS, INC., a New Jersey ) LIMITATION OF LIABILITY 23 Corporation; YANK MARINE INC., a ) TO ISSUE New Jersey Corporation; H.O. ) 24 BOSTROM COMPANY, INC., a ) [ECF No. 4, 5] 25 Wisconsin Corporation; ) SEATBELTPLANET.COM, LLC, an ) 26 Oklahoma Limited Liability Company; ) 27 and DOES 1 through 10, ) ) 28 Defendants. 1 I. INTRODUCTION 2 Plaintiff in Limitation STAR & CRESCENT BOAT COMPANY, INC., dba 3 FLAGSHIP CRUISES & EVENTS (“Plaintiff in Limitation”), as owner of the Motor 4 Vessel PATRIOT, U.S. Coast Guard Official No. 124682, and her engines, equipment, 5 tackle, apparel, appurtenances, etc. (the “Vessel”), brings this admiralty action pursuant 6 to 46 U.S.C. § 30501 et seq., the Shipowners’ Limitation of Liability Act (the “Limitation 7 Act”), for exoneration from or limitation of liability against Defendants SUNSPLASH 8 MARINA LLC, a New Jersey Limited Liability Company (“Sunsplash Marina”); 9 OCEANROCKETS, INC., a New Jersey Corporation (“Oceanrockets”); YANK 10 MARINE INC., a New Jersey Corporation (“Yank Marine”); H.O. BOSTROM 11 COMPANY, INC., a Wisconsin Corporation (“H.O. Bostrom”); and 12 SEATBELTPLANET.COM, LLC, an Oklahoma Limited Liability Company 13 (“Sealbeltplanet.com”) (collectively, “Defendants”). Compl., ECF No. 1 at 2.1 14 Before the Court is Plaintiff in Limitation’s (1) Ad Interim Stipulation for Value 15 and Costs, ECF No. 4; (2) Letter of Undertaking, ECF No. 4-1; (3) Application for 16 Injunction and Monition, ECF No. 4-2; and (4) Notice of Complaint for Exoneration from 17 or Limitation of Liability, ECF No. 5. After considering the papers submitted, supporting 18 documentation, and applicable law, the Court rejects Plaintiff in Limitation’s (1) 19 Stipulation for Value and Costs and Letter of Undertaking as sufficient security; (2) 20 request for an injunction of all proceedings arising out of the Incident, as defined below, 21 giving rise to this limitation action; and (3) request for the Clerk of the Court to issue 22 notice out of and under the seal of this Court. 23 / / / 24 / / / 25 / / / 26 / / / 27 1 Unless otherwise indicated, all page number references are to the ECF generated 28 1 II. BACKGROUND 2 A. Statement of Facts2 3 On or about December 18, 2012, Defendant Sunsplash Marina entered into a 4 contract with Plaintiff in Limitation for the construction of the Vessel. ECF No. 1 at 5, ¶ 5 17. Defendants Sunsplash Marina, Oceanrockets, and Yank Marine were all involved in 6 the design and construction of the Vessel (collectively, “Builder Defendants”).” Id. at 5, 7 ¶ 17. In 2013, Sunsplash Marina built the Vessel in Tuckahoe, New Jersey. ECF No. 1- 8 3 at 3, ¶ 4. 9 Defendants H.O. Bostrom and Sealbeltplanet.com manufactured and supplied 10 Builder Defendants with the passenger seats and seatbelt equipment, which Builder 11 Defendants installed on board the Vessel. ECF No. 1 at 5, ¶ 18, 8, ¶ 35. Plaintiff in 12 Limitation alleges that it did not replace the seatbelts or passenger seats on board prior to 13 the date of the alleged incident. Id. at 7-8, ¶ 34. 14 On August 5, 2018, Jade Spurr boarded the Vessel for a regularly scheduled jet 15 boat tour of the San Diego Bay. ECF No. 1 at 5, ¶ 19. Ms. Spurr alleges that, during a 16 high-speed turning maneuver, her safety belt became undone, and she hit her head on a 17 metal railing attached to the Vessel adjacent to her seat (the “Incident”). Id. at 5, ¶ 19. 18 On July 31, 2020, Ms. Spurr filed a Complaint for damages in San Diego Superior 19 Court, Case No. 37-2020-00026937-CU-PO-CTL, alleging “traumatic brain injuries and 20 other serious personal injury” as a result of the Incident (the “State Court Action”). ECF 21 No. 1 at 5, ¶ 20. As of the date of the filing of the complaint in this case, no other lawsuits 22 have been filed by any other person or entity related to the Incident. Id. at 5, ¶ 21. On 23 July 31, 2020, Ms. Spurr gave Plaintiff in Limitation notice of her lawsuit. Id. at 6, ¶ 27. 24 Plaintiff in Limitation alleges that the value of its interest in the Vessel, at the end 25 of the voyage on August 5, 2018, after the Incident, was no more than $775,000. ECF 26 No. 1 at 6, ¶ 27. 27 2 The majority of the facts set forth are taken from the operative complaint, and in 28 1 B. Procedural History 2 On January 28, 2021, Plaintiff in Limitation filed this action for exoneration of 3 limitation of liability for damages for (1) strict liability, (2) indemnity, and (3) 4 contribution. ECF No. 1. Plaintiff in Limitation’s complaint, inter alia, asks the Court 5 to (1) accept its appraised value of $775,000 as the value of the Vessel; (2) enjoin further 6 prosecution of any actions relating to the Vessel; (3) approve the security offered by 7 Plaintiff in Limitation; (4) adjudge that Plaintiff in Limitation is not liable; (5) limit 8 liability, as requested, to the value of the Vessel at the conclusion of the voyage if Plaintiff 9 in Limitation is adjudged liable; (6) hold Defendants liable in products liability for any 10 injuries and damage; (7) order Defendants to indemnify Plaintiff in Limitation for any 11 injuries and damage; (8) order Defendants to contribute to any liability of Plaintiff in 12 Limitation for any injuries and damages; (9) dismiss with prejudice any claims Ms. Spurr 13 may file; and (10) order that if Ms. Spurr is entitled to recover, she may only recover 14 against Defendants. ECF No. 1 at 9-10, ¶¶ 1-10. 15 Although the summons issued on January 29, 2021, Plaintiff has not filed a proof 16 of service indicating any of the defendants have been served. See ECF No. 3. 17 On January 29, 2021, Plaintiff also filed a (1) Ad Interim Stipulation for Value and 18 Costs, ECF No. 4; (2) Letter of Undertaking, ECF No. 4-1; (3) Application for Injunction 19 and Monition, ECF No. 4-2; and (4) Notice of Complaint for Exoneration from or 20 Limitation of Liability, ECF No. 5. 21 III. LEGAL STANDARD 22 The owner of a seagoing vessel “may bring a civil action in a district court of the 23 United States for limitation of liability” so long as the owner brings the action “within 6 24 months after a claimant gives the owner written notice of a claim.” 46 U.S.C. § 30511(a); 25 FED. R. CIV. P., Supp. R. F(1). “The complaint may demand exoneration from as well as 26 limitation of liability.” FED. R. CIV. P., Supp. R. F(2). This complaint must state: (1)“the 27 facts on the basis of which the right to limit liability is asserted,” (2) “all facts necessary 28 to enable the court to determine the amount to which the owner’s liability shall be 1 limited,” (3) “the voyage if any, on which the demands sought to be limited arose, with 2 the date and place of its termination,” (4) “the amount of all demands including all 3 unsatisfied liens or claims of lien . . . arising on that voyage, so far as known to the 4 plaintiff,” (5) “what actions and proceedings, if any, are pending thereon,” (6) “whether 5 the vessel was damaged, lost, or abandoned, and, if so, when and where,” (7) “the value 6 of the vessel at the close of the voyage or, in case of wreck, the value of her wreckage,” 7 and (8) “the amount of any pending freight recovered or recoverable.” FED. R. CIV. P., 8 Supp. R. F(2). The plaintiff in limitation must file the complaint “in any district in which 9 the vessel has been attached or arrested to answer for any claim with respect to which the 10 plaintiff seeks to limit liability,” or where “the vessel has not been attached or arrested, 11 then in any district in which the owner has been sued with respect to any such claim.” 12 FED. R. CIV. P., Supp. R. F(9). 13 Once the owner brings such an action, the owner must provide security for the 14 benefit of the claims either in an amount “equal to the value of the owner’s interest in the 15 vessel and pending freight, or approved security” or “that the court may fix from time to 16 time as necessary to carry out this chapter.” 46 U.S.C. § 30511(b); FED. R. CIV. P., Supp. 17 R. F(1). This security may be provided by either depositing the amount with the court or 18 transferring the amount to a trustee appointed by the Court. 46 U.S.C. § 30511(b); FED. 19 R. CIV. P., Supp. R. F(1). Once the owner has complied with the aforementioned security 20 requirement, “all claims and proceedings against the owner related to the matter in 21 question shall cease.” 46 U.S.C. § 30511(c); FED. R. CIV. P., Supp. R. F(1), (3); In re 22 Complaint of Ross Island Sand & Gravel, 226 F.3d 1015, 1017 (9th Cir. 2000). “On 23 application of the plaintiff the court shall enjoin the further prosecution of any action3 or 24

25 3 Generally, Rule 65 of the Federal Rules of Civil Procedure only allows for the issuance of a temporary restraining order or injunction if the adverse party receives notice. 26 FED. R. CIV. P. 65(a). However, the Supplemental Rules of Civil Procedure govern, inter 27 alia, “the procedure in admiralty and maritime claims within the meaning of Rule 9(h) with respect to . . . actions for exoneration from or limitation of liability.” FED. R. CIV. P., Supp. 28 1 proceeding against the plaintiff or the plaintiff’s property with respect to any claim subject 2 to limitation in the action.” FED. R. CIV. P., Supp. R. F(3). 3 After the vessel owner provides the required security, the Court will also “issue a 4 notice to all persons asserting claims with respect to which the complaint seeks limitation, 5 admonishing them to file their respective claims with the clerk of the court and to serve 6 on the attorneys for the plaintiff a copy thereof on or before a date to be named in the 7 notice.” FED. R. CIV. P., Supp. R. F(4). This notice will set a claim filing deadline at least 8 30 days after the Court issues the notice and will “be published in such newspaper or 9 newspapers as the court may direct once a week for four successive weeks prior to the 10 date fixed for the filing of claims.” Id. 11 IV. DISCUSSION 12 Federal courts have exclusive jurisdiction over admiralty and maritime claims. 28 13 U.S.C. § 1333(1); Newton v. Shipman, 718 F.2d 959, 961 (9th Cir. 1983). Congress has 14 authorized a vessel owner to seek to “limit liability for damage or injury, occasioned 15 without the owner’s privity or knowledge, to the value of the vessel or the owner’s interest 16 in the vessel.” Lewis v. Lewis & Clark Marine, Inc., 531 U.S. 438, 446 (2001) (citing the 17 Limitation Act). The Limitation Act services to protect maritime commerce, encourage 18 investment in “the American merchant fleet,” and “protect vessel owners from unlimited 19 exposure to liability.” Id. at 453; Maryland Cas. Co. v. Cushing, 347 U.S. 409 (1954). 20 “A limitation of liability action is a proceeding in admiralty for vessel owners that permits 21 them to limit their liability (if any) to their interest in the vessel and its freight, provided 22 that the loss was incurred without their privity or knowledge.” Ross Island, 226 F.3d at 23 foregoing proceedings except to the extent that they are inconsistent with these 24 Supplemental Rules.” FED. R. CIV. P., Supp. R. A(2). Because Supplemental Rule F 25 provides that an injunction shall issue once the plaintiff provides the required security and/or applies to the Court without requiring notice to any adverse parties, the Court 26 interprets the notice requirements of Rule 65 as inconsistent with Supplemental Rule F and 27 46 U.S.C. § 30511(c), resulting in Supplemental Rule F applying over Rule 65. Thus, the fact that Defendants have not been served does not prevent this Court from issuing the 28 1 1016-18 (9th Cir. 2000) (affirming the district court’s denial of a motion to dissolve the 2 injunction of other proceedings) (citing 46 U.S.C. § 183). 3 Once a vessel owner invokes the protections of the Limitation Act, the Court may 4 restrain all other proceedings against the vessel owner arising out of the same incident. 5 Ross Island, 226 F.3d at 1017; see also FED. R. CIV. P., Supp. R. F(1), (3). Following the 6 issuance of or concurrently with the injunction, the district court “notices all potential 7 claimants and requires them to file claims with the court within a specified time.” Id.; see 8 also FED. R. CIV. P., Supp. R. F(3), (4). Thereafter, in a proceeding known as a concursus, 9 the district court determines whether there is liability and whether it should be limited. 10 Complaint of Dammers & Vanderheide & Scheepvaart Maats Christina B.V., 836 F.2d 11 750, 755 (2d Cir. 1988). 12 In this case, Plaintiff in Limitation has provided an Ad Interim Stipulation for Value 13 and Letter of Undertaking in lieu of depositing the funds or transferring its interest in the 14 Vessel. ECF No. 4. As outlined below, the Court finds this provides inadequate security 15 to allow the Court to enjoin all related proceedings, including the State Court Action, and 16 as such requires the Court to deny Plaintiff in Limitation’s requests. 17 A. Security 18 Both section 30511 of the Limitation Act and Supplemental Rule F require a plaintiff 19 in limitation to provide security in order to commence a limitation of liability action. 20 However, the Supreme Court has approved alternatives to depositing the funds or 21 transferring the vessel interest by allowing the plaintiff in limitation to stipulate to the value 22 of the vessel. See, e.g., Hartford Acc. & Indem. Co. of Hartford v. S. Pac. Co., 273 U.S. 23 207, 218-19 (1927) (“Whenever a stipulation is taken in an admiralty suit, for the property 24 subjected to legal process and condemnation, the stipulation is deemed a mere substitute 25 for the thing itself, and the stipulators liable to the exercise of all those authorities on the 26 part of the court, which it could properly exercise, if the thing itself were still in its 27 custody.”). “[A] stipulation is generally accepted as security if backed up by insurance 28 covering the vessel’s potential liabilities.” 29-708 Moore’s Fed. Prac.—Civ. § 708; see 1 also 3 Benedict on Admiralty § 14, at 2–12 (7th ed. 2008) (“If the ship is still useful to [the 2 shipowner], and he desires to keep her in operation, he will have her appraised and furnish 3 the court with an approved surety company stipulation or pay the cash value for which the 4 ship is appraised, plus freight.”). Courts have held that such a stipulation coupled with a 5 letter of undertaking qualifies as sufficient security. See, e.g., Chan v. Soc’y Expeditions, 6 Inc., 123 F.3d 1287, 1294, n. 4 (9th Cir. 1997) (holding that the defendants’ “of 7 undertaking, which remains in effect, is sufficient to perfect in rem jurisdiction in the 8 absence of the ship’s arrest”); Dammers, 836 F.2d at 753 (approving the use of a letter of 9 undertaking from an insurer, “agreeing to assume any liability of the shipowners up to the 10 stipulated amount of $7,671,000” as security). 11 Concurrently with its complaint, Plaintiff in Limitation submitted the Declaration of 12 Kells Christian Attesting to the Fair Value of the Vessel. ECF No. 1-3. Mr. Christian attested 13 to the fact that he is an accredited marine surveyor with the Society of Accredited Marine 14 Surveyors, conducted a valuation appraisal survey of the Vessel, and believes the value of the 15 Vessel is $775,000. Id. at 3-5. As stated, rather than deposit a sum equal to the Vessel’s value 16 with the Court, Plaintiff in Limitation filed an Ad Interim Stipulation for Value and Costs and 17 Letter of Undertaking. ECF No. 4. Plaintiff in Limitation’s Ad Interim Stipulation stipulated 18 to its filing of the Letter of Undertaking to pay up to $775,000 for any liability in this action, 19 as outlined therein, and other sums the Court finds necessary. ECF No. 4 at 2. The Letter of 20 Undertaking from United States Fire Insurance Company and Continental Insurance Company 21 (the “Insurers”), as insurers for both Plaintiff in Limitation and the Vessel (the “Insureds”), 22 indicates the letter will “serve as security for costs within the meaning of Rule F(1) of the 23 Federal Rules of Civil Procedure, Supplemental Rules of Certain Admiralty and Maritime 24 Claims . . . and the Court’s Local Rules.” ECF No. 4-1 at 2-3. It states that it will serve as an 25 obligation for the Insurers to pay any judgment entered against the Insureds, excluding 26 punitive and/or exemplary damages, up to $750,000.00, or the value of the Vessel with interest 27 at the legal rate of six percent (6%), plus security for costs in the amount of $500.00. ECF 28 No. 4-1 at 3; see also S.D. Cal. Civ. R. F(1) (“Unless otherwise ordered by a judge, the 1 amount of the security for costs required to be filed in an action for limitation of liability 2 under Rule F(1) is $500.00.”). The Insurers list three policies, which the Court finds 3 adequately cover the value of the Vessel. Id. However, the Court notes that there is an 4 inconsistency here: The Complaint, ECF No. 1 at 6, ¶ 27, Kells Christian Declaration, ECF 5 No. 1-3 at ¶ 6, and Stipulation, ECF No. 4 at 2:14-21, all reference the Vessel as having a 6 value of $775,000.00, and the Stipulation references the Letter of Undertaking, stating, 7 “Plaintiff in Limitation hereby stipulates to the filing of the Letter of Undertaking . . . in the 8 total sum of $775,000,” id. at 4:17-18. However, the Letter of Undertaking itself only 9 undertakes “an obligation for . . . Seven Hundred Fifty Thousand Dollars ($750,000.)—the 10 value of the Vessel together with simply interest thereon at the legal rate of six percent (6%).” 11 ECF No. 4-1 at 3. The Stipulation does not address the $25,000 difference, including but not 12 limited to whether the discrepancy is the result of a typographical error or whether Plaintiff in 13 Limitation intends to cover any difference that Insurers will refuse to cover. Because the 14 security provided must be “equal to the value of the owner’s interest in the vessel and 15 pending freight, or approved security,” 46 U.S.C. § 30511(b); FED. R. CIV. P., Supp. R. 16 F(1), and the Letter of Undertaking is not, the Court finds that Plaintiff in Limitation’s 17 Stipulation and Letter of Undertaking provide insufficient security. 18 B. Stay and/or Injunction 19 Plaintiff in Limitation also seeks an order enjoining the prosecution of the State 20 Court Action against it. As noted above, both the Limitation Act and Supplemental 21 Admiralty Rules contemplate such a stay once proper security has been provided. 22 However, approval of the security is a condition precedent to the issuance of the restraining 23 order. Dammers, 836 F. 2d at 753. Because the Court finds Plaintiff in Limitation provided 24 inadequate security, the Court denies Plaintiff in Limitation’s request for an injunction 25 without prejudice to Plaintiff filing a new Stipulation and Letter of Undertaking. 26 C. Notice 27 Finally, Plaintiff in Limitation requests an order directing the issuance of notice to 28 potential claimants. Plaintiff in Limitation assures the Court that once presented with the | Order and a copy of the Notice, it will publish the Notice as directed by the Court. ECF 2 No. 4-2 at 7. However, because providing the required security also serves as a condition 3 precedent to the provision of notice, FED. R. Civ. P., Supp. R. F(4), the Court must deny 4 || this request as well. 5 |/v. CONCLUSION 6 For the above reasons, the Court ORDERS that: 7 1. The Ad Interim Stipulation Regarding Security for Value and Costs of the 8 Vessel and Letter of Undertaking are inadequate security as they contain inconsistent ? amounts, and the Letter of Undertaking undertakes an obligation in an amount that is 10 $25,000.00 less than the appraised value of the Vessel. 2. Because the security is inadequate, Plaintiff in Limitation’s request for an 12 injunction and notice from the Clerk of the Court are DENIED without prejudice to 13 || Plaintiff in Limitation re-submitting the Stipulation, Letter of Undertaking, and 14 Application for Injunction explaining and/or remedying fhe discrepancy in value. 15 IT IS SO ORDERED. 16 || DATED: February 16, 2021 17 HON. ROGER T. BENITE 18 United States District Judge 19 20 21 22 23 24 25 26 27 28 -10-