Eldon E. Fallon, U.S. District Court Judge.
Before the Court is a motion to dismiss filed by Third-Party Defendant Ausca Shipping Limited ("Ausca"). R. Doc. 34. Defendant and Third-Party Plaintiff Progressive Barge Line Inc. ("Progressive") opposes the motion. R. Doc. 43. Ausca has filed a reply, R. Doc. 50, to which Progressive has filed a surreply, R. Doc. 54. The Court heard oral argument on the motion on December 19, 2018. R. Doc. 51. Having considered the parties' arguments and reviewed the applicable law, the Court is ready to rule.
This case arises out of an oil spill in the Mississippi River that occurred during the refueling of the M/V VITAHORIZON, for which the vessel's owner, Plaintiff Horizon Navigation Ltd. ("Horizon"), seeks to recover "fines, penalties, response costs and/or damages exceeding $1.1 million" from Defendant Progressive. R. Doc. 1 at ¶ 14. According to Horizon's complaint, Progressive overfilled the M/V VITAHORIZON's fuel tanks after allegedly failing to inform those aboard the vessel that the amount of the original fuel order had been increased from 1600 metric tons to 1650 metric tons. Id. at ¶¶ 6-12.
Prior to the spill, Ausca entered into a time charter with Horizon for the M/V VITAHORIZON. R. Doc. 28 at ¶ 11.
Horizon alleges that, "[d]espite the increased order amount, on or about September 2, 2017, Progressive informed the VITAHORIZON that it would be delivering 1,600 metric tons of [heavy fuel oil ("HFO")] to the ship. Progressive never informed the VITAHORIZON that the amount of HFO ordered for delivery had been increased to 1,650 metric tons, or that it would pump more than 1,600 metric tons to the VITAHORIZON." Id. at ¶ 8. As a result, on September 3, 2017, "Progressive's crew overfilled the VITAHORIZON's bunker tanks causing HFO to spill onto the ship's deck, down her side, onto one or more of Progressive's vessels and into the Mississippi River." Id. at ¶ 12.
On May 1, 2018, Horizon filed suit against Progressive for "damages, expenses, costs and all other losses resulting from the incident," alleging the damage was caused by Progressive's negligence and its vessels' unseaworthiness. Id. at ¶ 15.
In its motion, Ausca seeks dismissal or a stay of Progressive's claims against it, including both Progressive's direct claims and Progressive's Rule 14(c) tender of Horizon's compliant. First, Ausca argues Progressive's direct claims sound in negligence; thus, Ausca contends, because Progressive's complaint does not allege Ausca owed any duties to Progressive, Progressive has failed to state a claim for negligence upon which relief may be granted. R. Doc. 34-1 at 2, 10. Second, with respect to Progressive's Rule 14(c) tendering of Horizon's complaint to Ausca and its claim seeking contribution, Ausca contends this claim turns on whether Ausca may be held directly liable to Horizon for its claimed losses. Id. at 2, 7-9. According to Ausca, its time charter with Horizon for the M/V VITAHORIZON contains an arbitration clause, calling for any disputes between Horizon and Ausca to be resolved through binding arbitration in London pursuant to English law. Thus, according to Ausca, because Progressive's tender and contribution claims would require Ausca to directly or derivatively defend itself against Horizon, any such claims must be submitted to arbitration. Id. at 8. As a result, Ausca contends the Rule 14 tender should be dismissed or stayed pending the outcome of arbitration between
In opposition, Progressive contends that, as there currently is not arbitration pending between those entities and it does not appear either party intends to engage in arbitration, granting a stay pending arbitration between Horizon and Ausca would serve only to prevent any recovery from Ausca in this case and "is nothing more than an attempted `end run' around Progressive's Rule 14(c) rights." R. Doc. 43 at 3, 9-12. With respect to its direct claims against Ausca, Progressive points out that, "[u]nder general maritime law, ... `[w]hether a defendant owes a plaintiff a legal duty is a question of law.'" R. Doc. 54 at 4 (quoting Canal Barge Co., Inc. v. Torco Oil Co., 220 F.3d 370, 376 (5th Cir. 2000)). Thus, according to Progressive, because "an allegation that is simply couched as a legal conclusion (such as `Ausca owed Progressive a duty under general maritime law') is not considered to be true for purposes of determining whether a claim for relief has been properly stated, .... it has pled sufficient facts to not only state a claim for relief against Ausca that is plausible on its face, but also to place Ausca on fair notice of the claims that it is directly liable to Horizon and to Progressive." Id. at 4-5.
In its motion, Ausca moves to stay or dismiss Progressive's direct claims for failure to state a claim. Ausca also seeks dismissal of Progressive's Rule 14(c) tender of Horizon's complaint or a stay of those claims pending arbitration between Ausca and Horizon. The Court considers each issue in turn.
Ausca argues that, to the extent Progressive brings direct claims against it, Progressive has failed to allege facts that, if true, demonstrate Ausca owed Progressive a duty of care related to the refueling of the M/V VITAHORIZON. Progressive disagrees, arguing it was not required to state in its complaint specifically that "Ausca owed Progressive a duty under general maritime law"; rather, Progressive contends its complaint states a claim for relief against Ausca, as the complaint "place[s] Ausca on fair notice of the claims that it is directly liable to Horizon and to Progressive." R. Doc. 54 at 4-5.
"[N]egligence is an actionable wrong under general maritime law," and the elements of that tort are "essentially the same as land-based negligence under the common law." Withhart v. Otto Candies, L.L.C., 431 F.3d 840, 842 (5th Cir. 2005). Thus, to state a claim for negligence under maritime law, a "plaintiff must `demonstrate that there was a duty owed by the defendant to the plaintiff, breach of that duty, injury sustained by [the] plaintiff, and a causal connection between the defendant's conduct and the plaintiff's injury.'" Canal Barge Co. v. Torco Oil Co., 220 F.3d 370, 376 (5th Cir. 2000) (quoting In re Cooper/T. Smith, 929 F.2d 1073, 1077 (5th Cir. 1991)). "Under maritime law, a plaintiff is owed a duty of ordinary care under the circumstances." In re Great Lakes Dredge & Dock Co. LLC, 624 F.3d 201, 211 (5th Cir. 2010). "Determination of the tortfeasor's duty is a question of law ...." Id. (quoting Miss. Dep't of Transp. v. Signal Int'l LLC (In re Signal Int'l LLC), 579 F.3d 478, 490 (5th Cir. 2009)).
The determination of the existence and scope of a duty "involves a number of factors, including most notably the foreseeability of the harm suffered by the
In the context of maritime torts, a harm can be considered a foreseeable consequence of an act or omission "if harm of a general sort to persons of a general class might have been anticipated by a reasonably thoughtful person, as a probable result of the act or omission, considering the interplay of natural forces and likely human intervention." Id. The "determination of duty [must be made] by reference to the general sorts of harms that are reasonably foreseeable consequences of the scope of danger risked by the negligence involved." In re Signal Int'l LLC, 579 F.3d at 493.
The Fifth Circuit has on several occasions examined foreseeability of harm in the context of maritime torts. In Consolidated Aluminum Corporation v. C.F. Bean Corporation, for example, after the defendant's dredge negligently ruptured a natural gas pipeline, the plaintiff, a business that relies on the supply of natural gas, sued to recover for physical damage caused to its manufacturing facilities and attendant economic loss due to the disruption of its natural gas supply. 833 F.2d at 66. The Fifth Circuit refused to impose liability, noting it was "not persuaded [the defendant] could have anticipated that its failure to follow safe dredging practices would likely result in physical damage to the equipment and work-in-progress at [the plaintiff's] aluminum reduction plant several miles away." Id. at 68. The court explained:
Id. Thus, because the damages the plaintiff sustained were not reasonably foreseeable, the defendant owed the plaintiff no duty, and thus, the Fifth Circuit held the defendant was entitled to judgment as a matter of law. Id. at 67.
Contrastingly, in In re Signal International LLC, after negligently-moored barges broke free and allided with a
Similarly, in Thomas v. Chevron U.S.A., Inc., 832 F.3d 586, 592 (5th Cir. 2016), the plaintiff, the captain of a supply vessel supporting Chevron's platform operations off the Nigerian coast, alleged he was attacked and kidnapped by pirates after the defendant, Chevron, negligently broadcast the vessel's "route information and locations over easily-accessible VHF radios," despite knowing "about of the real risk of piracy in the region and of the specific threats received by the [vessel]." Id. at 588-89, 592. Vacating the district court's grant of summary judgment in favor of Chevron, the Fifth Circuit explained, "These allegations are sufficient to suggest that the harm suffered by Thomas was reasonably foreseeable to Chevron and that Chevron consequently owed him a duty not to subject him to the conditions he encountered on his October 22, 2013 voyage." Id. at 592-93.
In this case, assuming the allegations in Progressive's third-party complaint against Ausca are true, which the Court must at this stage in the litigation, Ausca was responsible for paying for and providing all fuel for the M/V VITAHORIZON. R. Doc. 28 at ¶¶ 11, 12. Attendant to that responsibility, Progressive claims Ausca was responsible for communicating the amount of fuel to be delivered to the vessel. Id. Ausca, through its agents, hired Progressive to refuel the vessel, but negligently ordered more fuel than the vessel could hold. Id. at ¶¶ 6, 15, 17. Despite knowing that the amount of fuel ordered exceeded the vessel's capacity, Ausca did not inform Horizon, the M/V VITAHORIZON, or those aboard the vessel of the increased fuel order. Id. at ¶¶ 19-22, 26(1)(7). The logical outcome of attempting to refuel a vessel with more fuel than the vessel can carry is that the fuel will overflow, damaging both the vessel being refueled as well as the bunker barge refueling it and the waters in which the vessel sits. As the Fifth Circuit concluded in Signal, the harm in this case arises "from the risk of danger created by negligence," unlike Consilidated Aluminum, which "involved [an] improbable interplay of natural and human forces." 579 F.3d at 495 n.19. Thus, the Court concludes Progressives' allegations are sufficient to suggest the harm suffered by Progressive was reasonably foreseeable to Ausca and that Ausca consequently owed Progressive a duty not to subject it to the damages it sustained as a result of the September 3, 2017 oil spill. Accordingly, the Court will deny Ausca's motion to dismiss Progressive's direct claims against it.
Having concluded Progressive's third-party complaint states a direct maritime claim for negligence against Ausca, the Court now considers whether to stay Progressive's Rule 14(c) tender of Horizon's complaint to Ausca in light of the arbitration agreement contained in the time charter between Ausca and Horizon, notwithstanding
"One of the prominent aspects of admiralty procedure has been liberal third-party practice." 6 CHARLES ALAN WRIGHT, ET AL., FEDERAL PRACTICE & PROCEDURE § 1465 (3d ed.). This feature of admiralty law originally derived from "the inherent power of a court, having jurisdiction of a cause, to bring into the suit other parties whose presence would enable the court to do substantial justice in regard to the entire matter." EDWARD GRENVILLE BENEDICT, THE AMERICAN ADMIRALTY ITS JURISDICTION AND PRACTICE WITH PRACTICAL FORMS AND DIRECTIONS 277 (1910). This policy acknowledges that, although a defendant could file a separate suit against a potentially liable third-party, to allow two suits based on the same incident to proceed separately is judicially inefficient.
The Hudson, 15 F. 162, 169-170 (S.D.N.Y. 1883).
In 1989, the U.S. Supreme Court adopted Admiralty Rule 59 to govern the procedure used for impleading third parties in admiralty actions. See In re New York & P.R. Steamship Co., 155 U.S. 523, 528, 15 S.Ct. 183, 39 S.Ct. 246 (1895). "This rule provided for procedure through which, in a suit against one vessel for damage by collision, process might be issued in the same suit against any other vessel charged with contributing to the same collision, or any other party, and for proceedings thereon." Id. Admiralty Rule 59 was later re-designated as Admiralty Rule 56.
"An important feature of Admiralty Rule 56 was that it allowed impleader not only of a person who might be liable to the defendant ... but also of any person who might be liable to the plaintiff. The importance of this provision was that the defendant was entitled to insist that the plaintiff proceed to judgment against the third-party defendant." Montauk Oil Transportation Corporation v. Steamship Mutual Underwriting Association (Bermuda) Ltd., 859 F.Supp. 669, 675 (S.D.N.Y. 1994) (citing Fed. R. Civ. P. 14 & 1996 committee notes). Federal Rule of Civil Procedure 14 was modeled on Admiralty Rule 56. The Rule provides that, after a defendant tenders the complaint to a third-party, the action "shall proceed as if the plaintiff had commenced it against the third-party defendant as well as the third-party plaintiff." Fed. R. Civ. P. 14. At base, the Rule was adopted to protect defendants' interests as well as to promote judicial economy.
The FAA also safeguards litigants' rights. Pursuant to the FAA, any party "aggrieved by the ... failure or refusal of another to arbitrate under a written agreement for arbitration may petition any
In this case, Ausca's contract with Horizon provides in pertinent part:
R. Doc. 111-2 at 10.
The U.S. Court of Appeals for the Fifth Circuit confronted a similar issue in Texaco Exploration & Production Co. v. AmClyde Engineered Productss Co., 243 F.3d 906, 908 (5th Cir. 2001). There, the Fifth Circuit considered whether to carve out an exception to the FAA, where, in admiralty cases, its enforcement would deny a party the ability to implead a third-party defendant pursuant to Federal Rule of Civil Procedure 14(c). In Texaco, following an accident at Texaco's production facility, Texaco sued several entities allegedly at fault for the accident, including AmClyde. Id. Texaco, having a mandatory arbitration clause in its contract with McDermott, did not file a complaint against that entity. Id. "Texaco attempted to avail itself of this alternative dispute resolution provision [with McDermott], but was frustrated when AmClyde tendered McDermott as a third-party defendant under Federal Rule of Civil Procedure 14(c)." Id. Noting that the FAA's purpose "is to enforce private arbitration agreements `even if the result is piecemeal litigation,'" the Fifth Circuit reversed the district court's decision not to enforce the arbitration agreement between Texaco and McDermott and remanded the case to the district court for the issuance of an order staying the litigation pending the outcome of the contractually mandated arbitration. Id. at 912. Ultimately, the Fifth Circuit concluded that the policy of liberal joinder in maritime cases embodied in Rule 14(c) does not supersede the statutory right to enforce contractual arbitration guaranteed by the FAA. Id. at 910.
Progressive argues Texaco is materially different from the case at bar, and thus
Despite the procedural differences in the case at bar and the litigants in Texaco, the Fifth Circuit's holding was clear: "the policy of liberal joinder in maritime cases embodied in Rule 14(c) does not supersede the statutory right to enforce contractual arbitration guaranteed by the [Federal Arbitration Act]." Texaco Explor. & Prod. Co. v. AmClyde Engineered Prods. Co., 243 F.3d 906, 908 (5th Cir. 2001). This holding is binding on this Court, notwithstanding the fact that no arbitration is currently pending. "Section 3 [of the FFA] empowers a district court only to stay an action, leaving to the claimant the choice of arbitrating the claims or abandoning them." LaPrade v. Kidder Peabody & Co., Inc., 146 F.3d 899, 903 (D.C. Cir. 1998). Thus, as the Fifth Circuit has explained, "so long as a written agreement to arbitrate exists there is no specific requirement that arbitration actually be pending before a stay of litigation can be granted." Midwest Mech. Contractors, Inc. v. Commonwealth Constr. Co., 801 F.2d 748, 753 (5th Cir. 1986). "In other words, once a stay is granted under Section 3, litigation of the dispute may end there if the claimant chooses not to pursue its claims in arbitration. Because a stay under Section 3 need not result in arbitration..., there is little reason to require that an arbitration be commenced by a defendant against itself before a stay can be ordered." Sims v. Montell Chrysler, Inc., 317 F.Supp.2d 838, 841 (N.D. Ill. 2004). In fact, the U.S. Supreme Court has affirmed a stay of litigation in which no affirmative demand for arbitration had been made, no motion to compel arbitration had been sought, and there were, at that point in the litigation, apparently no ongoing arbitration proceedings. See Shanferoke Coal & Supply Corp. v. Westchester Service Corp., 293 U.S. 449, 453-54, 55 S.Ct. 313, 79 S.Ct. 583 (1935).
Although such a holding will potentially result in piecemeal litigation, the FAA's purpose is to enforce private arbitration agreements "even if the result is `piecemeal litigation,' at least absent a countervailing policy manifested in another federal statute." Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 219-20, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985). As the Fifth Circuit noted in Texaco, Rule 14(c) may not be used to override the FAA's strong policy favoring arbitration. See Texaco, 243 F.3d at 910. Moreover, even if Horizon never brings claims against Ausca, Progressive's interests will be protected, as apportionment of liability exists whether or not Ausca is impleaded under Rule 14(c). See id. Finally, "[t]he fact that [a] defendant has successfully impleaded a third party does not guarantee that the third-party claim will be adjudicated in conjunction with the main claim." WRIGHT, ET AL., FEDERAL PRACTICE & PROCEDURE 533 § 1460 (2010). Thus, guided by the Fifth Circuit's holding in Texaco, the Court will stay Horizon's claims against Ausca pending the outcome of the arbitration, if any,
Accordingly;
