HAIGHT, Senior District Judge.
"If the highest aim of a captain were to preserve his ship, he would keep it in port forever." This aphorism is attributed to St. Thomas Aquinas,
The ship involved in this action, an ocean racing yacht, did not remain in port. Rather, in August 2011, while participating in a race off the coast of Ireland, the yacht capsized in heavy seas and suffered severe damage. This litigation is about who should
The former plaintiff, Federal Insurance Company ("Federal" or "Plaintiff"), commenced the action against its insured, Speedboat Racing Ltd. ("Speedboat"), by filing a "Complaint in Admiralty" [Doc. 1], alleging that Federal has no duty to pay Speedboat for damages that occurred to the mast, sails and spars of Speedboat's racing yacht known as Rambler 100 (the "Yacht") on August 15, 2011.
"Rambler 100," the Yacht referred to in Federal's complaint, was formerly named "Speedboat," and was owned by the corporate party also called Speedboat. The Yacht was insured under a "Masterpiece Yacht insurance policy" issued by Federal (Policy No. 0037009323) (the "Policy") to the corporate Speedboat, as assured, for up to $5,000,000 in damages to the Yacht. Id., at 2 (¶ 7).
Pursuant to its terms, the Agreement was to be "governed by and construed in
On August 15, 2011, Rambler raced the Yacht in the 2011 Rolex FastNet Race off the coast of Ireland. Doc. 20 (Speedboat's "Amended Third-Party Complaint"), at 5 (¶ 21). But, as all sailors know, "[t]he sea hath no king but God alone."
In its Complaint, Federal requested declaratory judgment pursuant to 28 U.S.C. § 2201 that it has no duty to pay Speedboat for the damages at issue to the "spars and sails" of the Yacht which occurred on the occasion of the 2011 Rolex Fastnet Race.
Doc. 1, at 1 (¶ 1).
With respect to the damages claimed by Speedboat, Federal asserted that they occurred "[d]uring a race" when "the keel failed and the Yacht immediately heeled over," causing the mast and sails to break off and suffer damage. Id. Consequently, Federal sought "a declaratory judgment claiming that it has no duty to pay the damages for the mast and sails because they were damaged while the Yacht was being raced[,] which loss is excluded under the [P]olicy." Id.
Speedboat answered the Complaint [Doc. 8] and filed a Third-Party Complaint [Doc. 10] against Rambler, alleging that Rambler had breached the Agreement. In its third-party complaint, Speedboat specified that "[t]his Court has diversity jurisdiction over this action pursuant to 28 U.S.C. § 1332 because Speedboat and Rambler are citizens of different States and the amount in controversy exceeds $75,000, exclusive of interest and costs." Doc. 10, at 2 (¶ 6). Speedboat also asserted that the Court "has jurisdiction of this action pursuant to 28 U.S.C. § 1367 because the claims asserted in this Third-Party Complaint are within the Court's supplemental jurisdiction, as the claims in this Third-Party Complaint are so related to the claims in the Complaint previously filed by the Plaintiff [Federal] that they form part of the same case of controversy."
Speedboat thereafter filed an "Amended Third-Party Complaint" [Doc. 20] pursuant to Federal Civil Rule 15(a)(1)(B), as a
Rambler filed counterclaims against Speedboat for breaches of the Agreement and for failing to disclose to Rambler that the keel fin was dangerously defective. In its pleading, Rambler, like Speedboat, pled that the Court has supplemental jurisdiction over its claims under 28 U.S.C. § 1367. See Doc. 29 (Rambler's Answer to Amended Third Party Complaint), at 15 (¶ 3). As pled by Speedboat and Rambler, all claims between them ultimately became "based only on the Court's section 1367 supplemental jurisdiction" without citing an underlying jurisdictional basis.
Thereafter, the Court referred the action to Magistrate Judge Joan G. Margolis for a settlement conference in January of 2013. That conference occurred in March of 2013 and was followed by a second conference in May of 2013. The entire case did not settle. However, on June 7, 2013, Federal and Speedboat filed a "Stipulation of Discontinuance," which stated that "plaintiff's action against the defendant Speedboat Racing Ltd[.] is hereby discontinued with prejudice and without cost to either party." Doc. 43, at 1. Federal was terminated as Plaintiff in this action and, as Speedboat asserts, "the only remaining, unsettled claims in this suit are the claims between Speedboat and Rambler."
The first motion the Court will resolve is Speedboat's motion to dismiss for lack of subject matter jurisdiction. Speedboat argues that due to changed circumstances — the termination of Federal as Plaintiff in this action — the Court lacks subject matter jurisdiction. Id. Specifically, "the remaining parties in this case lack diversity of citizenship."
Rambler "concedes that this Court has no diversity jurisdiction over this case," Doc. 48, at 5. However, Rambler objects to Speedboat's "Motion to Dismiss" and moves for leave to amend its pleadings to "clarify that this Court has (a) admiralty jurisdiction pursuant to 28 U.S.C. § 1333 over all of Speedboat's claims and over six of Rambler's counterclaims because they concern a maritime contract and (b) supplemental jurisdiction pursuant to 28 U.S.C. § 1367 over Rambler's two additional counterclaims because they form part of the same case or controversy." Doc. 48, at 4. In particular, Rambler asserts that the parties' pleadings demonstrate that the "Share Issuance and Shareholder Agreement" is a maritime contract and that agreement's choice-of-law provision does not defeat admiralty jurisdiction. In sum, Rambler concludes that the Court has admiralty subject matter jurisdiction and may move forward with this action.
The Court will resolve Speedboat's "Motion to Dismiss" [Doc. 44] by determining whether this Court's admiralty jurisdiction extends to the remaining disputes between the remaining parties, Speedboat and Rambler. If the Court has subject matter jurisdiction on that basis, the Court will also rule on Rambler's "Motion for Leave to Amend" [Doc. 46] its Answer and Counterclaims, Speedboat's "Motion to Stay Discovery" [Doc. 52], and Rambler's "Motion to Compel Discovery" [Doc. 57].
Federal district courts are courts of limited jurisdiction under Article III, Section 2 of the United States Constitution. See, e.g., Chicot Cnty. Drainage Dist. v. Baxter State Bank, 308 U.S. 371, 376, 60 S.Ct. 317, 84 L.Ed. 329 (1940), reh'g denied,
If subject matter jurisdiction is lacking, the action must be dismissed. See Fed. R. Civ. P. 12(h)(3) ("If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action."). See also Manway Constr. Co. v. Housing Auth. of Hartford, 711 F.2d 501, 503 (2d Cir.1983) ("It is common ground that in our federal system of limited jurisdiction any party or the court sua sponte, at any stage of the proceedings, may raise the question of whether the court has subject matter jurisdiction; and, if it does not, dismissal is mandatory.") (citations omitted).
In general, a federal district court may exercise subject matter jurisdiction over an action if there is either: (1) "federal question" jurisdiction, applicable to "all civil actions arising under the Constitution, laws, or treaties of the United States," 28 U.S.C. § 1331; or (2) there exists "diversity of citizenship," complete diversity of citizenship between the plaintiff and all defendants and the amount in controversy "exceeds the sum or value of $75,000, exclusive of interest and costs," 28 U.S.C. § 1332(a).
In the case at bar, there are no pending federal claims. Moreover, neither Speedboat nor Rambler has presented sufficient facts to establish its citizenship for diversity purposes as either a limited liability company or a corporation. See n.12, supra. Therefore, if diversity of citizenship were asserted as the only potential basis for subject matter jurisdiction, the Court would be forced to inquire further of the parties regarding their citizenship.
Pursuant to 28 U.S.C. § 1333(1), Congress granted district courts "admiralty" jurisdiction over "[a]ny civil case of admiralty or maritime jurisdiction." That jurisdiction encompasses "all contracts ... which relate to the navigation, business, or commerce of the sea." Atl. Mut. Ins. Co. v. Balfour Maclaine Int'l Ltd., 968 F.2d 196, 199 (2d Cir.1992) (internal quotation marks and citations omitted), aff'd, 968 F.2d 196 (2d Cir.1992); accord Garanti Finansal Kiralama A.S. v. Aqua Marine & Trading, Inc., 697 F.3d 59, 65 (2d Cir.2012) ("[T]he delegation of cognizance of `all civil cases of admiralty and maritime jurisdiction' to the courts of the United States ... extends over all contracts, (wheresoever they may be made or executed, or whatsoever may be the form of the stipulations,) which relate to the navigation, business or commerce of the sea.") (quoting DeLovio v. Boit, 7 F.Cas. 418, 444 (C.C.D.Mass.1815) (No. 3,776) (Story, J.) (emphasis added)).
"Admiralty jurisdiction over contract claims is determined by reference to the nature and subject of the contract." Ziegler v. Rieff, 637 F.Supp. 675, 677 (S.D.N.Y.1986).
As the United States Supreme Court has articulated, "[t]he only question is whether the transaction relates to ships and vessels, masters and mariners, as agents of commerce." Kossick v. United Fruit Co., 365 U.S. 731, 736, 81 S.Ct. 886, 6 L.Ed.2d 56 (1961) (citation and quotation marks omitted).
For example, it is well established that contracts relating to service or repair of a vessel are maritime in nature. Ziegler, 637 F.Supp. at 677 (citation omitted). Moreover, contracts providing for seasonal storage of a vessel are maritime contracts. Id. See also Selame Assoc., Inc. v. Holiday Inns, Inc., 451 F.Supp. 412, 418 (D.Mass.1978) ("A contract to provide wharfage or storage is a maritime contract and a breach of this contract is cognizable in admiralty.")(citations omitted).
In addition, an admiralty court generally has jurisdiction over contracts to charter a boat or vessel. Armour & Co. v.
On the other hand, in general, "[i]t is well settled that, while a contract for the use or charter of a vessel is maritime in nature, the contract for a sale of a vessel is non-maritime." Sea Trade Mar. Corp. v. Coutsodontis, No. 09-CV-488 (BSJ) (HBP), 2012 WL 3594288, at *4 (S.D.N.Y. Aug. 16, 2012) (citing, inter alia, The Ada, 250 F. 194, 196 (2d Cir.1918)). See also Aggelikos Prostatis Corp. v. Shun Da Shipping Grp. Ltd., 646 F.Supp.2d 330, 332 (S.D.N.Y.2009) ("It is `elementary hornbook law that a contract for the sale of a vessel is not within the admiralty jurisdiction of the district courts.'") (quoting Int'l Shipping Co., S.A. v. Hydra Offshore, Inc., 675 F.Supp. 146, 150 (S.D.N.Y. 1987), aff'd, 875 F.2d 388 (2d Cir.1989)); Kalafrana Shipping Ltd. v. Sea Gull Shipping Co., 591 F.Supp.2d 505, 507 (S.D.N.Y. 2008) ("It has long been the rule in the Second Circuit that a contract for the sale of a vessel is not a maritime contract."). See also generally 12 Am. Jur. 2d Admiralty § 60 ("A contract for the sale of a vessel is generally not within a federal court's admiralty jurisdiction because such a contract is not maritime in nature.").
Nonetheless, if the maritime part of a contract is the primary objective of the contract and/or separable from the nonmaritime part, then admiralty jurisdiction exists. See, e.g., Compagnie Francaise De Navigation a Vapeur v. Bonnasse, 19 F.2d 777, 779-80 (2d Cir.1927) (Hand, J.), cert. denied, 275 U.S. 551, 48 S.Ct. 114, 72 L.Ed. 421 (1927); Atl. Mut. Ins. Co. v. Balfour Maclaine Intern. Ltd., 775 F.Supp. 101, 104 (S.D.N.Y.1991). See also Sirius Ins. Co. (UK) v. Collins, 16 F.3d 34, 36 (2d Cir.1994) ("The test [for determining a maritime contract] has ... been loosened considerably so that admiralty jurisdiction is held to cover also contracts whose nonmaritime elements are `incidental' to a primarily maritime purpose, as well as the separable maritime portions of mixed contracts that are not primarily maritime, if these can be separately litigated without prejudice.") (citations omitted); Tradhol Int'l, S.A. v. Colony Sugar Mills Ltd., No. 1:09-CV-00081 (RJH), 2009 WL 2381296, at *5 (S.D.N.Y. Aug. 4, 2009) ("The premise of the severability doctrine is that a court may divide a contract into its component parts and pronounce some but not all of them `salty.'"), aff'd, 354 Fed.Appx. 463 (2d Cir.2009); Jack Neilson, Inc. v. Tug Peggy, 428 F.2d 54, 60 (5th Cir.1970) ("it has long been recognized that where the maritime elements of a contract are susceptible to separate adjudication admiralty jurisdiction may be exercised to that extent") (citation and internal quotation marks omitted), cert. denied, 401 U.S. 955, 91 S.Ct. 973, 28 L.Ed.2d 238
Recently, courts have blurred the bright line between the sale of a vessel and certain maritime provisions to find that "when determining whether a contract is a maritime contract, one should focus on whether the principal objective of the contract is maritime commerce, rather than on whether the non-maritime components are properly characterized as more than `incidental' or `merely incidental' to the contract." Kalafrana Shipping Ltd. v. Sea Gull Shipping Co. Ltd., 591 F.Supp.2d 505, 509 (S.D.N.Y.2008).
Under this "conceptual" or "principal objective" approach, endorsed by the Second Circuit, "if the maritime elements of a contract are the principal or primary objective of the contract," there is admiralty jurisdiction. F.H. Bertling Holding KG v. Ranhill Engineers & Constructors Sdn. Bhd., 591 F.Supp.2d 377, 383 (S.D.N.Y.2008) (citing, inter alia, Folksamerica Reinsurance Co. v. Clean Water of New York, Inc., 413 F.3d 307, 314-15 (2d Cir.2005)). Alternatively, employing the "severability" exception, if "the claim [at issue] arises from a breach of maritime obligations that are severable from the non-maritime obligations of the contract," there is "federal maritime jurisdiction." F.H. Bertling Holding KG, 591 F.Supp.2d at 383 (citation omitted).
Implementing the conceptual approach to determine whether there is admiralty jurisdiction, the Court must focus its inquiry on whether the nature of the contract or transaction includes maritime elements: whether provisions relate to the navigation, business or commerce of the sea. If the Court finds that the primary objective of the contract is maritime in nature, there is admiralty jurisdiction. Otherwise, under the severability test, if certain components of the contract are maritime, while others are not, the Court must determine whether the maritime provisions are separable from the non-maritime ones. If the maritime provisions are separable, there is admiralty jurisdiction over the claims arising under them.
"The rules for the construction and interpretation of maritime contracts are essentially the same as those delineated in the non-maritime caselaw." Sea Hunters, LP v. S.S. PORT NICHOLSON,
The basic principles of contract interpretation under Connecticut law, which governs, are well established: "(1) [t]he intention of the parties is controlling and must be gathered from the language of the [contract] in the light of the circumstances surrounding the parties at the execution of the instrument; (2) the language must be given its ordinary meaning unless a technical or special meaning is clearly intended; [and] (3) the [contract] must be construed as a whole and in such manner as to give effect to every provision, if reasonably possible." Sartor v. Town of Manchester, 312 F.Supp.2d 238, 242-43 (D. Conn.2004) (quoting Peter-Michael, Inc. v. Sea Shell Assoc., 244 Conn. 269, 275, 709 A.2d 558 (1998)). The parties' "intention is to be determined from the language used, the circumstances, the motives of the parties and the purposes which they sought to accomplish." Sartor, 312 F.Supp.2d at 243 (citing Peter-Michael, 244 Conn. at 276, 709 A.2d 558). Where the language of a contract is clear and unambiguous, the court's determination of contractual intent becomes a question of law for the court. See, e.g., Tallmadge Bros., Inc. v. Iroquois Gas Transmission Sys., L.P., 252 Conn. 479, 495, 746 A.2d 1277 (2000) ("the interpretation and construction of a written contract present only questions of law, within the province of the court ... so long as the contract is unambiguous and the intent of the parties can be determined from the agreement's face") (quoting 11 S.Williston, Contracts, at 77-83 (§ 30:6) (4th ed. 1999)).
"Contract language is unambiguous when it has a definite and precise meaning, unattended by danger of misconception in the purport of the [contract] itself, and concerning which there is no reasonable basis for a difference of opinion." Brunoli v. Brunoli & Sons, 993 F.Supp. 66, 73 (D.Conn.1997) (quoting Care Travel Co. v. Pan Am. World Airways, 944 F.2d 983, 988 (2d Cir.1991)). Moreover, "the mere fact that the parties advance different interpretations of the language in question does not necessitate a conclusion that the language is ambiguous." Levine v. Massey, 232 Conn. 272, 279, 654 A.2d 737 (1995). Rather, the court must give the terms "their natural and ordinary meaning," Kelly v. Figueiredo, 223 Conn. 31, 35, 610 A.2d 1296 (1992), and interpret them "with each provision read in light of the other provisions," United Illuminating Co. v. Wisvest-Connecticut, LLC, 259 Conn. 665, 670, 791 A.2d 546 (2002).
In the case at bar, the Agreement's terms are clear and unambiguous and should be given their natural and ordinary meaning. Their interpretation by the Court thus presents a question of law.
The Agreement, entitled "Share Issuance and Shareholder Agreement," states that 49,999 out of 50,000 shares of Speedboat — "a Cayman Islands exempted company limited by shares" — each valued at one dollar ($ 1.00), are owned by one Alexander Jackson. Doc. 10-3, at 2. The remaining individual share ("New Share") was to be issued to Rambler for the purchase price of "One Dollar," and become "redeemable by [Speedboat] upon the terms set forth" in the Agreement, which included, if no prior terminating event occurred, automatically upon termination of the Agreement (i.e., after the conclusion of the races for which the Yacht was leased).
Most importantly to Rambler, under the Agreement, Rambler obtained "[e]xclusive use of the Yacht" to participate in the series of "eight races in the Atlantic Ocean Racing Series in 2011." Id., at 4-5 (§ 4.1). In return, Rambler was required to pay all operating expenses, repair and maintenance costs, racing fees, crew employee salaries and benefits, and all ancillary costs of such races.
Even during the races, Speedboat retained certain control over the Yacht by requiring Rambler to hire Speedboat's captain, Chris Higgins, on a full-time basis "through the last race sailed under this Agreement," and hire crew member Bill Erkelens to serve "as a crew member in each sailboat race in which the Yacht participates."
There are essentially two components to the "Share Issuance and Shareholder Agreement" (herein "Agreement") with respect to the Yacht: (1) a sale of one share of ownership ("one (1) redeemable share of a nominal par value of U.S. $1.00") in Speedboat, Doc. 10-3, at 2; and (2) a charter or lease for the use of the Yacht for a set period to sail in the 2011 season of the Atlantic Ocean Racing Series, id., at 4-5 (§ 4.1). The first contract component of a sale is non-maritime in nature. See, e.g., The Ada, 250 F. at 196. However, the second portion of the Agreement, the lease or charter of the Yacht for the specified racing season, is maritime by its terms. See, e.g., Armour & Co., 270 U.S. at 256, 46 S.Ct. 212.
At its core, this was an agreement for Rambler to sail a world-class yacht in a series of international races in the hopes
Moreover, even if the charter were not the primary objective of the Agreement, the charter provisions are separable from the stated sale of the Speedboat share. Therefore, employing "severability," even if the primary objective of the Agreement were not the charter, there is admiralty jurisdiction over the claims at bar under the "separable provision" test.
Examining the terms giving rise to the charter, Section 4.1(a) of the Agreement provides Rambler with "[e]xclusive use of the Yacht" from October 14, 2010 to March 15, 2012 for racing purposes.
"As a condition to Rambler's exclusive use of the Yacht," Rambler agreed to "pay all operating expenses, repair and maintenance costs for the Yacht and its Equipment." Id., at 5 (§ 4.1(a)). In addition, pursuant to Section 4.1(b), Rambler agreed to retain two former Speedboat crew members. Specifically, Rambler was bound to retain the "current captain of the Yacht," Chris Higgins, on a full time basis and with "a competitive salary consistent with the other senior members of the Yacht's crew;" and Rambler was required to hire Bill Erkelens as a crew member in each sailboat race in which the Yacht would participate.
Under Section 4.1(c), Jackson and Speedboat agreed to "deliver the Yacht... to Rambler at Newport Shipyard, Newport, Rhode Island," or at another agreed upon location, in "ship shape, sailable racing condition" and to inform Rambler of any "conditions, flaws, damages, or defects (latent or otherwise) of the Yacht which would render or cause the Yacht not to be in ship shape, sailable racing condition." Id., at 5 (§ 4.1(c)). Section 4.1(d) outlined the terms for redelivery of the Yacht by Rambler to Jackson and Speedboat at the conclusion of the Agreement's term; and Section 4.1(e) defined restrictions on the use of the Yacht, including the navigational limits of the Yacht's operation. Id., at 6 (§ 4.1(e)).
These provisions are typical of those found in maritime contracts of charter party. By the same token, the claims Speedboat asserts against Rambler in its Third Party Complaint, and Rambler asserts in its counterclaims to that pleading, are typical of the sort traditionally charged as breaches of a maritime charter.
In addition, as Rambler asserts, four of its proposed counterclaims, "as set forth in its proposed amended pleadings, concern Jackson's and Speedboat's breaches of Sections 4.1, 4.1(a), and 4.1(c) of the Agreement," and therefore also relate to the charter or lease of the Yacht.
Given these circumstances, there is no substance to Speedboat's contention that the Agreement is not maritime in nature, but rather "a shareholders' agreement by which Jackson and Defendant became co-owners of [the] Speedboat entity, provided for its governance, provided that Rambler would finance the maintenance and operation of the Yacht ..., and provided Rambler as a co-owner with temporary use of the Yacht, subject to certain conditions." Doc. 50, at 7.
Speedboat asserts that "a contract under which co-owners provide for the management and operation of a vessel is entirely non-maritime in character, and is distinguishable for purposes of admiralty jurisdiction from a third-party charter." Id., at 7-8 (citing, inter alia, Ward v. Thompson (The Detroit), 63 U.S. (22 How.) 330, 333, 16 L.Ed. 249 (1859)). This argument fails because Speedboat's interpretation of the Agreement as a "co-owners' management agreement" for operation of a vessel misses the mark. It exalts form (such as the caption, "Share Issuance and
The essence of the contract at bar was not a joint enterprise. Rather, examining the terms of the contract as a whole and interpreting all terms to give them their full meaning, the contract was primarily designed to provide Rambler with use of the Yacht "in ship shape, sailable racing condition" to participate in the Atlantic Ocean Racing Series. Rambler's nominal, one-share ownership interest expressly and automatically terminated "upon completion of the [Agreement's] Term" and for the price of "One Dollar ($1.00)."
In sum, the main and severable purpose of the Agreement was to lease or charter to Rambler the Yacht to participate in races. "Without doubt a contract for hire either of a ship or of the sailors and officers to man her is within the admiralty jurisdiction." Kossick v. United Fruit Co., 365 U.S. 731, 735, 81 S.Ct. 886, 6 L.Ed.2d 56 (1961) (citing 1 Benedict, Admiralty, 366).
Speedboat has argued that the Agreement's choice-of-law provision, stating that the Agreement "shall be governed by and construed in accordance with the laws of the State of Connecticut," Doc. 48-2 (¶ 5.4, at 9), defeats admiralty jurisdiction. I do not agree. The Second Circuit has clearly held that choice-of-law provisions, in and of themselves, do not defeat admiralty jurisdiction. See Williamson v. Recovery Ltd. P'ship, 542 F.3d 43, 49 (2d Cir.2008) ("The fact that a choice-of-laws provision exists in a contract does not, by itself, remove the contract from the scope of maritime law."). "To allow a plaintiff to elect a state forum would defeat the uniformity the Constitution requires in maritime law." Jack Neilson, Inc. v. Tug Peggy, 428 F.2d 54, 60 (5th Cir.1970), cert. denied, 401 U.S. 955, 91 S.Ct. 973, 28 L.Ed.2d 238 (1971).
As one commentator aptly summarized:
29 A.L.R. Fed. 325. See also, e.g., Ocean Sci. & Eng'g Inc. v. Int'l Geomarine Corp., 312 F.Supp. 825, 828-29 (D.Del.1970) ("Once the contract is found to be maritime and within admiralty jurisdiction, an agreement amounting to a private repeal of 28 U.S.C. § 1333 would be a nullity.").
"As the Supreme Court explained, the first step of the analysis is determining whether something is a maritime contract; then, once a contract has been deemed a maritime contract, the next step is determining whether a specific state's laws should be used to supplement any area of contract law for which federal common law does not provide."
Admiralty speaks through the decisions of federal judges in admiralty cases, a body of law often referred to as "the general maritime law,"
In the case at bar, the Court has found that a maritime contract exists for the use of the vessel, and the claims in dispute arise out of that contract. Federal admiralty jurisdiction exists. The application of Connecticut's state laws, as chosen by the parties, may supplement certain legal areas that the federal maritime law does not provide. See, e.g., Williamson, 542 F.3d at 49; Norfolk S. Ry. Co., 543 U.S. at 27, 125 S.Ct. 385; Farrell Lines Inc. v. Columbus Cello-Poly Corp., 32 F.Supp.2d 118, 127 (S.D.N.Y.1997). But the limited effect of Connecticut law does not extend beyond that. Any such supplementation does not deprive this Court of admiralty jurisdiction, which is determined by the nature of the contract.
A century ago the United States Supreme Court held that admiralty jurisdiction extends only to "wholly maritime contracts" — i.e., "contracts, claims, and services purely maritime, and touching right[s] and duties appertaining to commerce and navigation." The Eclipse, 135 U.S. 599, 608, 10 S.Ct. 873, 34 L.Ed. 269 (1890). However, this restriction has been modified over time. In Compagnie Française de Navigation a Vapeur v. Bonnasse, 19 F.2d 777 (2d Cir.1927), Judge Learned Hand held that the fact that a contract encompasses both maritime and non-maritime subject matter does not prevent the court from exercising its admiralty jurisdiction.
In general, the sale of stock in a vessel transfers a percentage of ownership to the buyer. In the case at bar, the incidental sale of a $1.00 share or "New Share" in the Yacht created a temporary 1% interest in the vessel for Rambler. Upon termination of the contract, Rambler's New Share was automatically redeemed by Speedboat and Jackson. The Agreement's provisions giving rise to the sale were non-maritime in nature.
Sale of the New Share was not, however, the principal objective of the Agreement. Rather, the contract's main purpose was Speedboat's charter of the Yacht to Rambler to compete in the Atlantic Ocean Racing Series of 2011. By its terms, Rambler was granted use of the vessel for racing in a specified list of races; and Speedboat retained considerable control over the vessel by dictating terms for use during the races (including employing Speedboat's captain and one crew member). The charter provisions of the Agreement are distinctly maritime in nature and also separable from the sale of the New Share. The charter terms, and their alleged breaches, are also the bases of the majority of claims pending between Speedboat and Rambler. These claims address such issues as the proper use and repair of the Yacht. Pursuant to the primary and separable maritime charter provisions in the Agreement, the Court possesses admiralty jurisdiction over this action.
The remaining two non-contract counterclaims, as proposed by Rambler, arise out of the same nucleus of operative facts which pertain to the formation and breach of the Agreement. These claims are "so related to claims in the action" within the Court's admiralty jurisdiction "that they form part of the same case or controversy under Article III of the United States Constitution." 28 U.S.C. § 1367(a). The Court thus possesses supplemental jurisdiction over the non-contract claims pursuant to 28 U.S.C. § 1367.
Finally, in light of the Court's admiralty jurisdiction, federal maritime law prevails. However, Connecticut state law, which was expressly chosen by the parties in the Agreement, will supplement legal areas that the federal common law does not provide, such as the elements of state law claims.
Having found the existence of admiralty jurisdiction over this matter, the Court turns to the question of whether Speedboat may, in any event, withdraw this action. Speedboat was originally the defendant in this action, and then became the third-party plaintiff in suing Rambler and the defendant on Rambler's counterclaims. With the exit of Federal, Speedboat stands in the shoes of the plaintiff. Federal Rule 41(a) of Civil Procedure sets forth the procedures and grounds upon which a plaintiff may request a voluntary dismissal of an action.
Specifically, under Rule 41(a)(1)(A), "the plaintiff may dismiss an action without a court order by filing: (i) a notice of dismissal before the opposing party serves either an answer or a motion for summary
Consequently, Speedboat may only withdraw the action under Rule 41(a)(2) "by court order." Under that provision, "an action may be dismissed at the plaintiff's request only by court order, on terms that the court considers proper." Moreover, "[i]f a defendant has pleaded a counterclaim before being served with the plaintiff's motion to dismiss, the action may be dismissed over the defendant's objection only if the counterclaim can remain pending for independent adjudication." Fed. R. Civ. P. 41(a)(2).
Rambler filed counterclaims prior to Speedboat's filing of the motion to dismiss; and Rambler has objected to dismissal of the action at this time. See Doc. 29 (Rambler's Answer) and Doc. 44 (Speedboat's Motion to Dismiss). Rambler's counterclaims, both pending and proposed, respond to and counter the claims brought by Speedboat so that allowing Rambler's claims to go forward independently would only necessitate Speedboat's refiling of its present claims as counterclaims. This would simply create a circular pattern going round like a carousel. In other words, a court cannot adjudicate Rambler's claims without considering Speedboat's counter-allegations or counterclaims, and vice versa. The claims of both parties arise out of the same nucleus of operative facts — namely, the parties' actions and duties in relation to the Agreement with respect to the charter of the Yacht.
In general, a court "has discretion to deny voluntary withdrawal." Zagano v. Fordham Univ., 900 F.2d 12, 14 (2d Cir.1990), cert. denied, 498 U.S. 899, 111 S.Ct. 255, 112 L.Ed.2d 213 (1990). However, that discretion must be exercised after careful analysis. "[T]he presumption in this circuit is that a court should grant a dismissal pursuant to Rule 41(a)(2) absent a showing that defendants will suffer substantial prejudice as a result." Harlem Teams for Self-Help, Inc. v. Abyssinian Baptist Church of City of New York, 189 F.R.D. 284, 286 (S.D.N.Y.1999) (quoting Gap, Inc. v. Stone Int'l Trading, Inc., 169 F.R.D. 584, 588 (S.D.N.Y.), aff'd, 125 F.3d 845 (2d Cir.1997)). Legal prejudice has been defined as the impairment of "some legal interest, some legal claim, [or] some legal argument." Westlands Water Dist. v. United States, 100 F.3d 94, 97 (9th Cir. 1996) (identifying as examples of legal prejudice, such as loss of a federal forum, the loss of jury trial rights, the loss of a statute-of-limitations defense).
With respect to voluntary dismissal, the court primarily seeks to protect a defendant who is ready to pursue a claim or defense "in the same action that the plaintiff is seeking to have dismissed."
In Zagano v. Fordham University, the Second Circuit enunciated a list of factors relevant to the determination of whether a Rule 41(a)(2) motion should be granted. 900 F.2d at 14. The factors include: "(1) the plaintiff's diligence in bringing the motion [to dismiss]; (2) any `undue vexatiousness' on plaintiff's part; (3) the extent to which the suit has progressed, including the defendant's effort and expense in preparation for trial; (4) the duplicative expense of relitigation; and (5) the adequacy of plaintiff's explanation for the need to dismiss." Catanzano v. Wing, 277 F.3d 99, 110 (2d Cir.2001) (quoting Zagano, 900 F.2d at 14). See also Brown v. Nat'l R.R. Passenger Corp., 293 F.R.D. 128, 131 (E.D.N.Y.2013) (same).
In the case at bar, one or more of the Zagano factors militate against granting dismissal of the action. First, if the action is dismissed, there will likely be duplicative expense for the parties to relitigate this matter in federal or state court. As described supra, Rambler, having already been put to the trouble and expense of drafting and filing its counterclaims, would have to refile its claims in a new action. To defend itself, Speedboat would then respond by filing its current claims as counterclaims so that the litigation would recommence, creating additional expense. Second, and most importantly, Speedboat's sole stated basis to warrant dismissal is lack of subject matter jurisdiction and that argument is meritless in light of the Court's finding of admiralty jurisdiction. Therefore, even if Rambler were willing to pursue its counterclaims independently and with additional expense, the lack of merit in Speedboat's motion to dismiss militates against, rather than warrants, an order of dismissal.
Because this Court has admiralty jurisdiction and Speedboat's request for voluntary dismissal will be denied, Rambler's motion to amend or correct its answer and counterclaims must be resolved. In requesting leave to amend pursuant to Rule 15(a)(2), Fed. R. Civ. P., Rambler seeks to "(1) amend its allegations of jurisdiction, (2) add additional causes of action, and (3) clarify and add facts in its answer and its counterclaims." Doc. 46, at 1. In addition, under Federal Civil Rule 21, Rambler moves the Court to join Alexander E. Jackson as a defendant to Rambler's counterclaims.
In general, a party may amend its pleading once as a matter of course within 21 days after serving it.
Because this Court in fact has admiralty jurisdiction, it has discretion to decide whether to grant leave to amend. The Court must examine the proposed amendments, guided by the last sentence of Rule 15(a)(2), which instructs that justice be done.
"In the absence of any apparent or declared reason — such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of the amendment, etc. — the leave sought should, as the rules require, be `freely given.'" Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). See also Milanese v. Rust-Oleum Corp., 244 F.3d 104, 110 (2d Cir.2001) ("Leave to file an amended complaint `shall be freely given when justice so requires,' Fed. R. Civ. P. 15(a), and should not be denied unless there is evidence of undue delay, bad faith, undue prejudice to the non-movant, or futility.").
Applying the Foman standard to the case at hand, there is no evidence that the proposed amendments are the product of any undue delay or bad faith. In particular, Rambler filed its motion to amend the pleadings and to join Jackson as a party within the deadlines of the current scheduling order. The motion is thus timely on its face. Furthermore, there is no evidence demonstrating that Rambler sought to delay the proceedings, only to enhance the pleadings and add all necessary parties.
In particular, Rambler represents that it has a good faith basis to amend its allegations of jurisdiction to specify the presence of admiralty jurisdiction pursuant to 28 U.S.C. § 1653, which provides that "defective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts." Id. (citing Johnson Prods. Co., Inc. v. M/V La Molinera, 619 F.Supp. 764, 767 (S.D.N.Y.1985) ("It is well settled that, pursuant to 28 U.S.C. § 1653, the court may allow amendments of the pleadings to cure defective allegations of jurisdiction.")). In addition, Rambler asserts that it has a "good faith basis" to join Jackson as a party because he is "a party to the [Agreement] that forms the basis of many of Rambler's claims and because Jackson was intimately involved in the facts giving rise to this dispute." Doc. 46, at 2.
Furthermore, the Court notes that because this case remains in its early stages, there is no evidence that there will be any undue prejudice to Speedboat in allowing the amendments to be made at this time. In sum, unless there would be futility of amendment, which will be examined infra, Pt. II.B.3., justice will require that the
With respect to the proposed addition of Jackson as a counterclaim defendant, although Rambler solely cites Federal Civil Rule 21 regarding misjoinder and nonjoinder of parties, Rules 19 and 20 also address joinder. Under Rule 19, a required party is one in whose absence "the court cannot accord complete relief among existing parties," or who "claims an interest relating to the subject of the action and is so situated that disposing of the action in [his or her] absence may: (i) as a practical matter impair or impede the person's ability to protect the interest; or (ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest."
Rule 20 directs "permissive joinder of parties," and provides in relevant part:
Fed. R. Civ. P. 20.
It is unclear whether Rambler seeks to add Jackson as a "required" or "permissive" defendant; Rambler simply asserts that the failure to join him is a "misjoinder." In any event, given the fact that Jackson participated in and was a party to the Agreement at issue, he is at the very least a permissive, and more likely a required, defendant. As Rambler asserts, Jackson is "the principal of Speedboat and has been intimately involved in this dispute and the facts giving rise to this dispute." Doc. 46, at 3. He was a party to the Agreement at the very heart of this litigation. It is arguable that his absence from the action may impair the Court's ability to grant complete relief to the existing parties. Moreover, as Speedboat's principal, Jackson is likely already fully aware of the action so not subject to the prejudice of surprise of its existence. After all, he allegedly resides at 33 Gilliam Lane, Riverside, Connecticut, which is the same address as Speedboat's principal place of business. See Doc. 46, at 21 (¶ 3). Practically speaking, as the principal of Speedboat, Jackson is likely already participating in this action in all but name. Furthermore, his presence in this action would not deprive the Court of subject matter jurisdiction, which is based in admiralty.
The Court will thus examine the remaining ground for denying amendment of the pleading: the prospect of futility with respect to the proposed amendments. As set forth supra, although leave to amend must be freely given under ordinary circumstances, denial is proper where the proposed amendment would be "futile." Foman, 371 U.S. at 182, 83 S.Ct. 227. An amendment is considered "futile" if the amended pleading fails to state a claim or would be subject to a successful motion to dismiss on some other basis. See, e.g., Lucente v. Int'l Bus. Machs. Corp., 310 F.3d 243, 258 (2d Cir.2002) ("An amendment to a pleading is futile if the proposed claim could not withstand a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6).") (citing
Examining the proposed amendments for "futility," Rambler first seeks to supplement and clarify subject matter jurisdiction as "admiralty jurisdiction." As set forth supra, such amendment is proper under 28 U.S.C. § 1653 and clearly not futile. In the Answer portion of its pleading, Rambler also seeks to correct citation to the Agreement (Section 4.1(m) versus 4.1(h), at ¶ 13). Throughout the pleading, Rambler inserts Jackson's name as a party, including in the factual allegations (e.g., Answer, ¶¶ 19, 23, Parties, ¶ 3), and provides additional background facts regarding the manufacture of the Yacht's keel, which eventually cracked, giving rise to this litigation.
As to Rambler's proposed counterclaims, the first four allege breach of contract. Under Connecticut law, the state law chosen by the parties (in instances where federal maritime law does not control), "[t]he elements of a breach of contract action are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages."
Because they contain the requisite elements for a prima facie contract claim, these four proposed contract claims, set out in Rambler's amended Counterclaims I-IV, may proceed as facially plausible claims.
The remaining proposed amended counterclaims are breach of the implied warranty of seaworthiness (against Speedboat) (Count V), breach of the covenant of good faith and fair dealing (against Jackson and Speedboat) (Count VI), negligent misrepresentation (against Jackson and Speedboat) (Count VII), and violation of the Connecticut Unfair Trade Practices Act (Conn. Gen. Stat. §§ 42-110a, et seq.) (against Speedboat) (Count VIII). The Court will examine these claims to see whether their amendment would be futile — i.e., whether, as drafted, these claims are capable of withstanding a motion to dismiss for failure to state a valid claim.
As to Count V, under federal maritime law, "[t]he general rule is that a warranty of seaworthiness attaches to every charter." McAllister Lighterage Line v. Ins. Co., 244 F.2d 867, 871 (2d Cir. 1957).
The warranty of seaworthiness is absolute so that the shipowner's liability does not depend on a finding of negligence or a lack of due diligence. Mitchell, 362 U.S. at 549, 80 S.Ct. 926. Moreover, when the charter delineates a set term of time, "the warranty generally extends through[out] the entire charter term." JJ Water Works, Inc. v. San Juan Towing & Marine Servs., Inc., 59 F.Supp.3d 380, 395 (D.P.R.2014). See also Matter of P & E Boat Rentals, Inc., 872 F.2d 642, 647 (5th Cir.1989) ("a time charterer who has no control over the vessel, assumes no liability for ... unseaworthiness of the vessel absent a showing that the parties to the charter intended otherwise.") (citation and internal quotation marks omitted). See also generally 2 Thomas J. Schoenbaum, Admiralty and Maritime Law § 11-5 (5th ed. 2013).
In the case at bar, Rambler alleges that the implied warranty of seaworthiness was violated by Speedboat because Speedboat was obligated to provide Rambler with the exclusive use of the Yacht for a set term for the purpose of racing in the Atlantic Ocean Racing Series, so that "seaworthiness was necessary and inherent to Speedboat's performance of its obligations under the contract." Doc. 46, at 30-31 (¶¶ 67-68). Speedboat thus allegedly breached the implied warranty of seaworthiness in the Agreement by "providing the Yacht in a defective condition that was unfit for the agreed intended use of the Yacht." Id., at 31 (¶ 69). In particular, "the Yacht's keel fin was in a defective condition because it contained multiple cracks and at least one defective repair, had been defectively manufactured using poor quality and defective welds, had been manufactured with a limited expected life of as short as one to two years, and was unusually fragile." Id. Under these circumstances, Speedboat has pled a plausible claim for breach of the implied covenant of seaworthiness.
With respect to Count VI, breach of the implied covenant of good faith and fair dealing (against Jackson and Speedboat), under Connecticut state law, "[i]t is axiomatic that the ... duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship." De La Concha of Hartford, Inc. v. Aetna Life Ins. Co., 269 Conn. 424, 432, 849 A.2d 382 (2004). Specifically, "every contract carries an implied duty requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement." 269 Conn. at 432, 849 A.2d 382 (citation and internal quotation marks omitted). The covenant, therefore, "presupposes that the terms and purpose of the contract are agreed upon by the parties and that what is in dispute is a party's discretionary application or interpretation of a contract term." Id. at 433, 849 A.2d 382 (quoting Celentano v. Oaks Condo. Ass'n, 265 Conn. 579, 617, 830 A.2d 164 (2003)).
In order to constitute a breach of the implied covenant of good faith and fair dealing, the defendant's acts which deprive the plaintiff of its right to receive the
In the instant case, Rambler's proposed Count VI alleges actions by Jackson and Speedboat which were taken in bad faith and deprived Rambler of its intended purpose of racing the Yacht in the 2011 Atlantic Ocean Racing Series. Specifically, Rambler alleged that Jackson and Speedboat breached the implied covenant of good faith and fair dealing because: (1) "they knew of but failed to disclose the crack in the keel fin that was discovered on or about March 17, 2008;" (2) "knew of but failed to disclose the repair to the crack by Eligi Re Fraschini Spa and/or Re Fraschini" between March 17 and 28, 2008; (3) "knew but failed to disclose that the keel fin had been manufactured with a limited expected life of as short as one to two years and that simply hitting obstructions at speeds as low as six knots could introduce cracks into the keel fin;" (4) "knew of but failed to disclose one or more additional cracks in the Yacht's keel fin that developed after the crack discovered on or about March 17, 2008 and the defective and improper repair work on the keel fin that took place after the repair by Eligi Re Fraschini Spa and/or Re Fraschini Components prior to March 28, 2008;" and (5) "refus[ed] to allow Rambler to repair the Yacht so that Rambler could continue racing the Yacht through the end of the term of the Agreement." Doc. 46, at 31-32 (¶¶ 72-76). Each of these alleged actions created "conditions, flaws, damages, or defects that rendered or caused, or would render or cause, the Yacht not to be in ship shape, sailable racing condition." Id., at 31-32 (¶¶ 72-75).
As a result of Jackson's and Speedboat's alleged actions in breach of the implied covenant of good faith and fair dealing, Rambler "incurred millions of dollars in operating expenses, repair, and maintenance costs, racing fees, crew and employee salaries and benefits, and other ancillary costs in connection with the Yacht," "sustained damages by having to pay these and other costs and expenses," and "was denied the benefit of its bargain by not being able ... to complete the racing program contemplated by the Agreement." Id., at 32-33 (¶ 77).
Upon review of these allegations, the Court finds that Count VI states a facially plausible claim for breach of the implied covenant of good faith and fair dealing. Under the Agreement, Rambler was expressly granted the use of the Yacht to sail in the races of the 2011 Atlantic Ocean Racing Series. Moreover, the Yacht was intended to be in "ship shape, sailable racing condition" upon delivery to Rambler so that the Yacht could compete in those races. Doc. 10-3, at 5 (§ 4.1(c)). Each of the alleged violations of the implied breach are actions which Jackson and Speedboat knew or should have known would render the Yacht unsailable, and thus unfit for its intended purpose. Consequently, Rambler allegedly incurred millions of dollars in costs and expenses while being denied the benefit the bargain, namely the opportunity to compete in the
Next, Rambler's proposed Count VII attempts to state a claim for negligent misrepresentation against Jackson and Speedboat. In Connecticut, the "governing principles" of this tort are "set forth in similar terms in § 552 of the Restatement Second of Torts (1977): One who, in the course of business, profession, or employment ... supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information." Restatement (Second) of Torts § 552 (1977) (emphasis in original; internal quotation marks omitted). See also Savings Bank of Manchester v. Ralion Fin. Servs., Inc., 91 Conn.App. 386, 389-90, 881 A.2d 1035 (2005). Put simply, "an action for negligent misrepresentation requires the plaintiff to establish (1) that the defendant made a misrepresentation of fact (2) that the defendant knew or should have known was false, and (3) that the plaintiff reasonably relied on the misrepresentation, and (4) suffered pecuniary harm as a result." Nazami v. Patrons Mutual Ins. Co., 280 Conn. 619, 626, 910 A.2d 209 (2006). "Even an innocent misrepresentation can give rise to liability if the speaker reasonably should have known the truth." Nat'l Groups, LLC v. Nardi, 145 Conn.App. 189, 193, 75 A.3d 68 (2013) (citing Glazer v. Dress Barn, Inc., 274 Conn. 33, 72-73, 873 A.2d 929 (2005)).
In order for the plaintiff to prevail on a negligent misrepresentation claim, the plaintiff must prove reasonable reliance on the defendant's misrepresentation. Visconti v. Pepper Partners Ltd. Partnership, 77 Conn.App. 675, 682, 825 A.2d 210 (2003). Reliance on a particular statement may become reasonable based on the statement's context, formal nature, the relationship between the parties, or the communicator's status as an individual with specialized knowledge. Nat'l Groups, LLC, 145 Conn.App. at 194, 75 A.3d 68 (citations omitted). Reasonableness is a question of fact and typically "determine[d] based on all of the circumstances." Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 580, 657 A.2d 212 (1995). Therefore, "[r]eliance on a contractual term or a writing is not automatically reasonable — a court still must give due consideration to the surrounding circumstances." Nat'l Groups, LLC, 145 Conn. App. at 194, 75 A.3d 68 (citing Savings Bank of Manchester, 91 Conn.App. at 391-92, 881 A.2d 1035 and Petitte v. DSL.net, Inc., 102 Conn.App. 363, 373, 925 A.2d 457 (2007)). "The plaintiff's knowledge is particularly relevant to determining whether, under all the circumstances, reliance was reasonable." Nat'l Groups, LLC, 145 Conn. App. at 194, 75 A.3d 68 (citing Gibson v. Capano, 241 Conn. 725, 733-34, 699 A.2d 68 (1997))
In the case at bar, in Count VII Rambler alleges that Jackson and Speedboat made representations to Rambler that they knew or should have known were false. Doc. 46, at 33 (¶ 80). Included in these alleged misrepresentations were "representations that the Yacht was in ship shape, sailable racing condition, and free of material defects." Id., at 33 (¶ 79). Also, Jackson and Speedboat allegedly failed to "disclose material facts" such as "the defective condition of the Yacht's keel fin, cracks in the Yacht's keel fin, defective and improper repair work on the keel fin," the manufacture of the keel fin with "a limited expected life span of as short as
Examining all of the circumstances alleged, Rambler has pled sufficient facts to state a facially plausible claim for negligent misrepresentation. The terms of the Agreement specifically stated that the Yacht was to be delivered in ship shape, sailable racing condition. It was reasonable for Rambler to believe that Jackson and/or Speedboat, as the Yacht's owners, possessed sufficient information regarding the condition of the Yacht to assess its condition. Furthermore, it was clear in the Agreement that Rambler's intended use of the Yacht was to compete in a series of sailing races. Rambler's allegations thus suggest it justifiably relied on Jackson's and Speedboat's statements regarding the seaworthiness of the Yacht while contracting for the benefit of the bargain — participation in the racing series. When the Yacht turned out to be defective (possessing cracks in its keel fin), Rambler incurred pecuniary losses (costs and expenses) and lost the opportunity to complete the series of races. Due to its justifiable reliance on Jackson's and Speedboat's representations that the Yacht was in ship shape, sailable racing condition, Rambler was allegedly denied the benefit of the bargain, resulting in damages.
Finally, in Count VIII, Rambler alleges that Speedboat's actions in forming the Agreement "as part of its business" violated Connecticut's Unfair Trade Practices Act ("CUTPA"), Conn. Gen. Stat. § 42-110a, et. seq. That statute provides that "[n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." Conn. Gen. Stat. § 42-110b. Moreover, "[a]ny person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a method, act or practice prohibited by section 42-110b" may bring a civil action based on CUTPA. Conn. Gen. Stat. § 42-110g.
The Connecticut Supreme Court has adopted the "cigarette rule by the federal trade commission for determining when a practice is unfair" under CUTPA: "(1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise — in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; [and] (3) whether it causes substantial injury to consumers, [competitors or other businesspersons]." Ventres v. Goodspeed Airport, LLC, 275 Conn. 105, 155, 881 A.2d 937 (2005) (citation omitted). See also Garcia v. Fry, No. 3:15-CV-597 (AWT), 186 F.Supp.3d 228, 233, 2016 WL 2944517, at *4 (D.Conn. May 12, 2016). All three criteria need not be satisfied to support a finding of unfairness. Ventres, 275 Conn. at 155, 881 A.2d 937. Moreover, a practice may be unfair due to the degree
In the case at bar, Rambler alleges that Speedboat's conduct in failing to disclose material facts of the defective condition of the Yacht's keel fin — i.e., its unsailable ("unfit") condition for racing — was "unfair and deceptive," and "unscrupulous, unethical, and immoral." Doc. 46, at 34 (¶¶ 86, 88-90, 92). Moreover, such conduct was "part of [Speedboat's] business," in formulating the Agreement. Id., at 34 (¶ 87).
As to damages, Speedboat's conduct not only allegedly "put lives at risk," resulting in a catastrophic capsize; such conduct also caused Rambler to sustain the ascertainable loss of "millions of dollars in operating expenses, repair, and maintenance costs, racing fees, crew and employee salaries and benefits, and other ancillary costs in connection with the Yacht." Id., at 34 (¶¶ 91, 93).
The allegations of Count VIII thus include assertions that Speedboat engaged in unfair, deceptive behavior in business, failing to disclose key material facts regarding defects in the Yacht's keel fin, while forming the Agreement with Rambler. Id., at 34 (¶¶ 86-89). In light of Rambler's stated purpose to sail the Yacht in the Atlantic Ocean Racing Series, Speedboat's failure to disclose these defects was "unscrupulous, unethical, and immoral." Id. (¶ 92). Furthermore, the alleged failure to disclose offended public policy, risking the lives of others, and resulted in the ascertainable loss of millions of dollars. Id., at 34 (¶¶ 91, 93). In total, Rambler's allegations in Count VIII describe business conduct which (1) offends public policy under common law (e.g., misrepresentation, breach of contract) and/or under established notions of unfairness; (2) was "immoral, unethical, [and] unscrupulous;" [and] (3) caused substantial injury (loss of millions of dollars) to Rambler, a business entity. These allegations thus state a plausible claim for violation of CUTPA by Speedboat.
In sum, after careful review, the Court finds that Rambler's proposed amendments to its answer and counterclaims would not result in futility under Foman. These claims possess facial plausibility under Iqbal and accordingly would not be subject to dismissal. Rambler will thus be granted leave to amend its pleading as requested.
"In the interest of saving the time, expense and burden of discovery," Speedboat filed a motion to request "that discovery be stayed until the Court rules on Speedboat's pending Motion to Dismiss for lack of subject matter jurisdiction." Doc. 53 (Speedboat's brief in support of motion to stay discovery), at 4. The Court has found that it has admiralty jurisdiction so will deny the Motion to Dismiss [Doc. 44] in this Ruling. Accordingly, Speedboat's "Motion to Stay Discovery" [Doc. 52] will be denied as moot.
With respect to the status of discovery, Rambler filed a "Motion to Compel" [Doc. 57]. In that motion, Rambler requested that Speedboat turn over additional documents with respect to Rambler's document requests, served on Speedboat on January 17, 2013, and Rambler's second set of four interrogatories, served on May 30, 2013. At the time Rambler filed the motion, Speedboat had only returned 35 pages of documents, compared to 4,500 pages of documents Rambler had produced to Speedboat in response to its document requests.
Based on the parties' briefs, Speedboat's asserted justification for failing to turn over additional documents to Rambler was
Given the passage of time since the discovery dispute arose and the Court's current finding that it has admiralty jurisdiction, Rambler's motion to compel will be denied without prejudice to renewal. Speedboat can no longer rely on its jurisdictional argument and must, if it has not already done so, produce relevant, responsive, and non-privileged documents to Rambler. Should Speedboat fail to respond, Rambler may renew its motion to compel, if so advised.
For purposes of clarity, pursuant to Federal Civil Rule 41(a)(2), the Court hereby APPROVES the joint "Stipulation of Discontinuance" [Doc. 43] filed by Federal and Speedboat on June 7, 2013, with respect to Federal's claims against Speedboat. That dismissal was "proper" in that it resolved Federal's claims in this action, Speedboat expressly approved the stipulation, Rambler made no objection to the stipulation, and Speedboat and Rambler continued litigating their claims against each other without asserting any prejudice by Federal's "discontinuance" in the action. Accordingly, as stated in the stipulation, Federal's "action against the defendant Speedboat Racing Ltd[.] is hereby discontinued with prejudice and without cost to either party." Doc. 43, at 1.
With respect to Speedboat's "Motion to Dismiss" [Doc. 44], asserting lack of subject matter jurisdiction, that motion is DENIED. The Court possesses admiralty jurisdiction over the pending claims relating to the Agreement pursuant to 28 U.S.C. § 1333. The primary objective of the Agreement was to create a lease or charter for Rambler's use of the Yacht in the 2011 Atlantic Ocean Racing Series. The charter provisions create a maritime contract, which is related to the navigation, business or commerce of the sea.
Moreover, the maritime provisions are separable from the incidental, non-maritime sale of one share of ownership in Speedboat to Rambler. That "sale" was ancillary to the grant of use or charter of the Yacht and severable. Rambler's ownership was also severely undercut, circumscribed, and diminished by the many provisions under which Speedboat and Jackson retained control of the Yacht and regained full ownership upon termination. In essence, this was an agreement for Rambler to utilize its sailing expertise to race Speedboat's Yacht to glorious victory. After this charter, the Yacht would then be returned to Speedboat.
Employing either the Second Circuit's "conceptual" approach, focusing on the primary objective, or its "severability" test, the Court possesses admiralty jurisdiction over the pending claims and counterclaims which relate to the Agreement, its formation, and breach.
The two non-contract counterclaims by Rambler, a tort action for negligent misrepresentation and a Connecticut state statutory claim under CUTPA, arise out of the same nucleus of operative facts, and thus form part of the same case or controversy, as the contract claims. In particular, they address Speedboat's conduct in negotiating
Rambler's "Motion to Amend or Correct" [Doc. 46] its answer and counterclaims, including the request for leave to add Alexander E. Jackson as a party, is GRANTED pursuant to Federal Civil Rules 15(a)(2) and 19-21, respectively. As to the proposed amendments in general, there is no evidence of "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of the amendment" so that the leave sought shall be `freely given.'" Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). Moreover, the addition of Jackson as a party is permissible, if not required, in light of his participation as a party to the Agreement at issue.
Rambler must file and serve its proposed "Second Amended Answer and Counterclaims" on or before
In light of the Court's finding of admiralty jurisdiction, Speedboat's "Motion to Stay Discovery" [Doc. 52] is DENIED as moot. In addition, given the passage of time since the discovery dispute arose and the Court's current finding of admiralty jurisdiction, Rambler's "Motion to Compel Discovery" [Doc. 57] is DENIED WITHOUT PREJUDICE. Speedboat must respond to Rambler's discovery requests on or before
Finally, the Court takes judicial notice that the media has reported that the Yacht has been reborn and relaunched as "Perpetual Loyal" and resumed racing. See, e.g., http://www.sailingscuttlebutt.com/2016/01/04/48454/; www.facebook.com/perpetual.loyal; and http://www.rolexsydneyhobart.com/the-yachts 2015/perpetual-loyal/. If this rebirth has indeed occurred, the parties may be inclined to expedite resolution of this matter. To that aim, the parties are reminded that, if so advised, they may once again jointly request referral to a magistrate judge for a settlement conference.
All of the foregoing is SO ORDERED.
The Court notes that Speedboat's respective descriptions of Speedboat and Rambler as "an entity" in the Third Party Complaint were insufficient to establish their citizenship. If they are limited liability companies, "the citizenship for diversity purposes of a limited liability company ... is the citizenship of each of its members." Wise v. Wachovia Securities, LLC, 450 F.3d 265, 267 (7th Cir.2006)(emphasis added), cert. denied, 549 U.S. 1047, 127 S.Ct. 582, 166 L.Ed.2d 458 (2006). Specifically, the "citizenship of a limited liability company is not the state in which it is organized or has its principal place of business, but rather, each of the states in which it has members." Lewis v. Allied Bronze LLC, No. 07 Civ. 1621 (BMC), 2007 WL 1299251, at *1-2 (E.D.N.Y. May 2, 2007) (citing Handelsman v. Bedford Vill. Assoc. Ltd. P'ship, 213 F.3d 48, [51-52] (2d Cir.2000) and remanding removed action for lack of diversity jurisdiction).
And if any party or member of a limited liability company is a corporation, for diversity purposes, "a corporation shall be deemed to be a citizen of every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business." 28 U.S.C. § 1332(c)(1). If Speedboat and Rambler are actually corporations, Speedboat failed to provide their principal places of business.
Also, with respect to timing of citizenship, "[i]n an action in which jurisdiction is premised on diversity of citizenship, diversity must exist at the time the action is commenced," Universal Licensing Corp. v. Lungo, 293 F.3d 579, 581 (2d Cir.2002).
In any event, the Court does not find subject matter jurisdiction based on a party's label for an agreement, but rather upon consideration of all contents of that agreement. The fact that the terms may have created a lease or charter arrangement for the vessel is the Court's concern, not whether Speedboat chose to characterize the Agreement's title in one way. After all, a party may not concede, forfeit, or waive subject matter jurisdiction over an action.
Doc. 50, at 10 (emphasis added). One can infer that Speedboat believed it was necessary to include an element of ownership by Rambler in the Agreement to make the contract legal. After all, the Yacht was to be delivered and returned to ports on the East Coast of the United States, Doc. 48-2, at 5, 6 (§§ 4.1(c)-(d)). However, Speedboat's broad interpretation of the overall contract as one in "coastwide trade" fails to take into account that nine of the eleven races specified were located outside the coastal waters of the United States. See Doc. 10-3, at 5 (§ 4.1(b)) (including, inter alia, the following races: Pineapple Cup — Montego Bay Race, RORC Caribbean 600, Les Voiles de St. Barth, Transatlantic Race 2011, Rolex Fastnet Race, Biscay Race, Les Voiles de St. Tropez, Rolex Middle Sea Race, Sydney-Hobart). The contract at bar was more than one for "transportation of passengers or merchandise between points embraced within the coastwise laws of the United States;" it also included several races to occur in foreign and/or international waters.
