Sea Star Line Caribbean, LLC. v. M/V Sunshine Spirit, No. 3:2009cv01152 - Document 113 (D.P.R. 2009)

Court Description: OPINION AND ORDER GRANTING IN PART AND DENYING IN PART 60 MOTION for Partial Summary Judgment AND 95 MOTION for Summary Judgment filed by Radiance Shipping Line, LLC; GRANTING IN PART AND DENYING IN PART 79 MOTION to Dismiss/Lack of Jurisdictio n, filed by Sea Star Line Caribbean, LLC.; DENYING 83 MOTION to transfer case; DENYING AS MOOT 100 MOTION to Strike Affidavits, AND 101 MOTION requesting That Plaintiff's First Request for Admissions Be Deemed Admitted; and DENYING 110 M OTION to Continue filed by Radiance Shipping Line, LLC. We DISMISS WITH PREJUDICE Claimant's complaint only with respect to the portion of its claim for unjust enrichment that is based upon benefits conferred by Hugo Stamp. We VACATE the arrest of M/V Sunshine Spirit. Trial will proceed on the remaining issue of the extent of Libelant's liability to Claimant. Parties strongly urged to sit down and settle the case before the November 16 trial. Signed by Chief Judge Jose A Fuste on 11/13/09.(mrj)

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1 2 3 4 5 6 7 8 9 UNITED STATES DISTRICT COURT DISTRICT OF PUERTO RICO SEA STAR LINE CARIBBEAN, LLC, Libelant, Civil No. 09-1152 (JAF) v. M/V SUNSHINE SPIRIT, Libelee in rem. 10 --------------------------------- 11 RADIANCE SHIPPING LINE, LLC, 12 Third-Party Plaintiff, 13 v. 14 15 SEA STAR LINE CARIBBEAN, LLC, Third-Party Defendant. OPINION AND ORDER 16 17 Libelant, Sea Star Line Caribbean, LLC, institutes libel in 18 admiralty against Libelee, M/V Sunshine Spirit (the vessel ). 19 (Docket No. 1.) 20 owner, brings an action against Libelant, alleging wrongful arrest, 21 unjust enrichment, and breach of charter party. Claimant Radiance Shipping Line, LLC, the vessel s (Docket No. 19.) 22 Libelant moves to dismiss Claimant s complaint under Federal 23 Rule of Civil Procedure 12(b)(1) (Docket No. 79); Claimant opposes 24 (Docket No. 82); and Libelant replies (Docket No. 87). 25 moves to transfer this case to the Middle District of Florida (Docket Claimant Civil No. 09-1152 (JAF) -2- 1 Nos. 82; 83); Libelant opposes (Docket No. 91); and Claimant replies 2 (Docket No. 92). Claimant also moves for summary judgment under Rule 3 56(c) (Docket Nos. 60; 95); Libelant opposes (Docket No. 103); and 4 Claimant replies (Docket No. 109). 5 Libelant moves to strike Claimant s affidavits submitted in 6 support of its motion for summary judgment (Docket No. 100), and 7 Claimant opposes (Docket No. 102). 8 certain statements admitted under Rule 36(a)(6) (Docket No. 101), and 9 Claimant opposes (Docket No. 111). 10 I. 11 Factual and Procedural Synopsis Libelant further moves to deem 12 We derive the following facts from the parties pleadings, 13 briefs, statements of uncontested material facts, and exhibits, and 14 Libelant s motion in compliance. 15 100; 101; 102; 103; 107; 111.) (Docket Nos. 1; 19; 26; 60; 95; 96; 16 Libelant is an international common ocean carrier engaged in the 17 container shipping business throughout the Caribbean and has a 18 principal place of business in Jacksonville, Florida. 19 Florida corporation that owns the vessel in dispute. Interline 20 Connection, N.V. ( Interline ) is incorporated under the laws of the 21 Netherlands Antilles and is engaged in the carriage of goods by sea. 22 On July 6, 2007, Interline and Libelant formed a confidential 23 sub-charter agreement, under which Interline furnished the vessel for 24 Libelant s use between the ports of St. Maarten, Claimant is a Saint Kitts, Civil No. 09-1152 (JAF) -3- 1 Antigua, Tortola, and San Juan, Puerto Rico.1 2 Interline undertook to ensure that the vessel would be berthed at 3 Libelant s terminal at Puerto Nuevo, Puerto Rico, each Friday at 4 10:00 am for loading of cargo. 5 vessel under this time charter, which commenced on July 27, 2007, and 6 concluded on January 22, 2008. (Docket No. 107-3.) Interline retained control over the 7 On December 12, 2007, Claimant and Interline formed a bareboat 8 charter party (the charter ) in St. Maarten under the laws of the 9 Netherlands West Indies. (Docket No. 102-2.) This demise charter 10 tendered 11 charterer. 12 and, under Clause 31, title ownership of the vessel would transfer to 13 Interline at the end of the period. 14 designed the charter hire as a conditional sale of the vessel. 15 Furthermore, Clause 15 of the charter obliged Interline to prevent 16 all liens from attaching to the vessel and to indemnify Claimant if 17 Interline breaches this clause. 18 full use and control of the vessel to Interline as The duration of the charter was for forty-eight months In other words, the parties On February 8, 2008, Libelant and Interline concluded a sales 19 agency 20 Libelant in the eastern Caribbean Sea. (Docket No. 107-2.) Under this 21 sales agency, Interline undertook to solicit and promote Libelant s 22 cargo transport services exclusively for five years, commencing on 1 agreement whereby Interline became the sales agent for The record is silent as to Interline s authority to form a subcharter for the vessel in July 2007. Civil No. 09-1152 (JAF) 1 February 15, 2008. 2 -4- The sales agency continues in force to this day. (Docket No. 95-3 at 116.) 3 Libelant and Interline drafted a memorandum of understanding 4 relating to their operations over the entire eastern Caribbean region 5 that was meant to become effective on February 1, 2008. (Docket 6 No. 107-4.) Under this agreement, Interline was to integrate, in its 7 entirety his [sic] weekly San Juan, Puerto Rico service . . . over to 8 [Libelant]. 9 vessel under a two-year time charter and Libelant s provision for the This agreement also contemplated Libelant s use of the 10 vessel s maintenance and repair. Libelant insists that 11 it and Interline never executed this agreement. (Docket No. 107-1.) 12 However, during his deposition of September 2, 2009, Neal 13 Perlmutter, Libelant s chief financial officer, testified that the 14 agreement became effective at some time around February 1, 2008. 15 (Docket No. 95-3 at 27, 45-47, 54-55.) Under this arrangement, 16 Libelant took over Interline s inter-island services in the eastern 17 Caribbean. (Id. at 30.) The vessel was to be the sole ship for their 18 combined services. 19 and Interline contemplated a formal sharing of equity ownership in 20 the vessel, one-half to each party. 21 the two companies engaged in discussions around April 2008 over the 22 anticipated sharing of profits from their operation of the vessel. 23 (Id. at 90-91.) (Id. at 90.) Perlmutter testified that Libelant (Id. at 65-66.) Furthermore, Civil No. 09-1152 (JAF) 1 Responding to an -5inquiry from Claimant, Ellen Ehrenkranz 2 confirmed on October 18, 2008, that Libelant had reviewed the charter 3 between Claimant and Interline. (Docket No. 60-6.) According to 4 Perlmutter, Ehrenkranz is the sister of Mark Swerdel, the managing 5 director of Interline. 6 a ship broker and accountant for Interline. 7 On June 12, (Docket No. 95-3 at 34-35.) 2008, Interline and Claimant She worked as agreed to a 8 modification of their charter, under which Interline assigned all 9 rights as charterer to Inter-Island Maritime, Ltd., but retained all 10 obligations under the charter. (Docket No. 102-2.) According to 11 Perlmutter, Libelant held a meeting with Interline in late 2008, 12 during which Libelant became aware that Claimant had not been paid 13 charter hire under the charter. (Docket No. 95-3 at 108.) 14 On February 18, 2009, Libelant filed libel in this court. 15 (Docket No. 1.) In support of its claim for liens against the vessel, 16 Libelant appended a table of services rendered for the benefit of the 17 vessel, dating from March to December 2008. (Docket No. 1-2.) 18 On March 11, Claimant included a complaint against Libelant in 19 its answer to the libel. (Docket No. 19.) On July 7, Claimant moved 20 for partial summary judgment on its claims. (Docket No. 60.) On 21 August 19, Libelant moved to dismiss Claimant s complaint (Docket 22 No. 79); Claimant opposed on September 7 (Docket No. 82); and 23 Libelant replied on September 16 (Docket No. 87). On September 7, 24 Claimant moved to transfer venue (Docket Nos. 82; 83); Libelant Civil No. 09-1152 (JAF) -6- 1 opposed on September 24 (Docket No. 91); and Claimant replied on 2 October 6 (Docket No. 92). On October 16, Claimant renewed its motion 3 and moved for summary judgment on all claims and counterclaims 4 (Docket No. 95); Libelant opposed on November 2 (Docket No. 103); and 5 Claimant replied on November 12 (Docket No. 109). 6 ordered Libelant to produce all of its contracts relating to the 7 vessel and its agency relationship with Interline (Docket No. 106); 8 Libelant complied the next day (Docket No. 107). 9 On October 29, Libelant moved to On November 9, we strike two affidavits 10 supporting Claimant s motion for summary judgment (Docket No. 100), 11 and 12 October 30, Libelant moved to deem certain statements admitted 13 (Docket 14 No. 111). Claimant No. opposed 101), the and following Claimant day opposed 15 on No. November 102). 12 On (Docket II. 16 (Docket Analysis 17 18 A. Motion to Dismiss Libelant moves for dismissal on the grounds that Claimant has 19 failed to sufficiently plead a basis for our subject-matter 20 jurisdiction over Claimant s claims. (Docket No. 79.) Libelant argues 21 that we lack the competence to hear Claimant s claims in admiralty 22 because Claimant filed its complaint as a counterclaim when Libelant 23 had merely brought libel against the vessel in rem. (Id.) Civil No. 09-1152 (JAF) -7- 1 Under Federal Rule of Civil Procedure 12(b)(1), a movant may 2 challenge the sufficiency of the plaintiff s averments in support of 3 the court s subject-matter jurisdiction. Valentín v. Hosp. Bella 4 Vista, 254 F.3d 358, 363 (1st Cir. 2001). The court takes the 5 plaintiff s 6 assess[es] whether the plaintiff has propounded an adequate basis 7 for subject-matter jurisdiction. 8 Records, LLC, 504 F.3d 151, 162-63 (1st Cir. 2007). The party 9 asserting jurisdiction bears the burden of showing its existence. 10 11 jurisdictionally-significant facts as true and Id.; see Torres-Negrón v. J & N See Skwira v. United States, 344 F.3d 64, 71 (1st Cir. 2003). Libelant commenced this case in admiralty to enforce its 12 putative liens against the vessel in rem. (Docket No. 1.) Rule 13 14(c)(1) permits claimants in admiralty to implead third-parties who 14 may be liable to claimant. 15 erroneously called its complaint a counterclaim (Docket No. 19) when 16 Libelant never brought libel against Claimant in personam (Docket 17 No. 1), Rule 14 permits Claimant to bring a third-party complaint, 18 provided that we have jurisdiction over its claims. 19 Fed. R. Civ. P. 14(c)(1). While Claimant This court is vested with admiralty jurisdiction by virtue of 28 20 U.S.C. § 1333. Claimant s complaint charges Libelant with wrongful 21 arrest of the vessel, unjust enrichment, and breach of charter party. 22 (Docket No. 19.) 23 have always been the province of courts in admiralty. 24 v. Carr, 49 U.S. 1 (8 How. 1) (1849). Disputes over the performance of charter parties United States Similarly, federal courts in Civil No. 09-1152 (JAF) -8- 1 admiralty have always permitted cross-libel for wrongful arrest where 2 the libelant had maliciously prosecuted libel. 3 Fruit Co. v. Dowling, 91 F.2d 293 (5th Cir. 1937). See, e.g., Frontera 4 In arguing against our competence, Libelant cites the Fifth 5 Circuit decision in Incas & Monterey Printing & Packaging, Ltd. v. 6 M/V Sang Jin, 747 F.2d 958 (1984). (Docket No. 79.) 7 inapposite as the issue before the court was the necessity of 8 counter-security under Supplemental Rule E(7), not jurisdiction over 9 the claim for wrongful arrest itself. See id. at 965. We are, 10 therefore, satisfied that we possess maritime jurisdiction over two 11 of three claims in Claimant s complaint. This case is 12 Accordingly, we may also entertain Claimant s claim against 13 Libelant for unjust enrichment arising out of Libelant s alleged 14 failure to recompense Claimant for use of the vessel (Docket No. 19). 15 See 28 U.S.C. § 1367(a). 16 resembles 17 Libelant s breach of charter party, it is properly within the scope 18 of our admiralty jurisdiction. 19 500 U.S. 603, 610 (1991). indebitatus Furthermore, to the extent that the claim assumpsit at common law resulting from See Exxon Corp. v. Cent. Gulf Lines, 20 We qualify our exercise of supplemental jurisdiction, however, 21 by noting that Claimant lacks standing to pursue a remedy in quantum 22 meruit for services rendered by Motor-Services Hugo Stamp, Inc. 23 ( Hugo Stamp ) (Docket No. 19). The loss, if any, is not borne by Civil No. 09-1152 (JAF) -9- 1 Claimant.2 2 between Claimant and Hugo Stamp such that Claimant could represent 3 Hugo Stamp in a lawsuit. 4 B. Furthermore, there is no indication of a relationship Motion to Transfer Venue 5 Claimant moves to transfer this case to the Middle District of 6 Florida pursuant to 28 U.S.C. § 1404(a). (Docket No. 28.) Claimant 7 argues that (1) both Libelant and Claimant maintain a principal place 8 of business in that district; (2) ten of sixteen witnesses are 9 domiciled in the United States proper, five of whom reside in 10 Florida; and (3) that, as the vessel has been sold by judicial decree 11 and remains only as proceeds deposited in the court s registry, there 12 is no substantial connection with this district. (Id.) 13 Under 28 U.S.C. § 1404(a), [f]or the convenience of the parties 14 and witnesses, in the interest of justice, a district court may 15 transfer any civil action to any other district or division where it 16 might have been brought. 17 denying a motion for transfer. 18 Co., 321 F.3d 60, 64 (1st Cir. 2003). We have broad discretion in granting or See Auto Europe, LLC v. Conn. Indem. 19 While the proceeds relating to this vessel could be easily 20 remitted to the Middle District of Florida, we find compelling 21 reasons to retain this case for the convenience of the parties. 22 First, we are moments away from trial and the parties have presumably 2 See Lance v. Coffman, 549 U.S. 437, 439 (2007) (noting that standing is necessary for a court s subject-matter jurisdiction). Civil No. 09-1152 (JAF) -10- 1 provided for the contingency of litigation in Puerto Rico by this 2 point. 3 resources in this case. 4 C. Second, this district has already expended considerable We, therefore, decline to transfer venue. Motion for Summary Judgment 5 Claimant argues that it is entitled to summary judgment on all 6 claims because, inter alia, the charter included a no-liens clause ; 7 Libelant was aware of the prohibition against liens; and Libelant, as 8 co-venturer, could not attach a lien on the vessel. 9 95.) (Docket Nos. 60; We address these contentions with respect to the validity of 10 the vessel s arrest and Claimant s claims for wrongful arrest, breach 11 of charter party, and unjust enrichment. 12 1. 13 Under the Federal Maritime Lien Act, the owner or master of the 14 vessel, a person entrusted with the vessel s management at the port, 15 or any of their agents, is presumed to have authority to procure 16 necessaries for [the] vessel. 17 provides such necessaries creates a maritime lien against the vessel 18 and may enforce his right as a lien creditor. 19 Validity of Arrest 46 U.S.C. § 31341(a). A person who Id. § 31342(a). However, where the putative lienor is actually aware of a clause 20 in the charter party that prohibits liens, no liens may attach. Gulf 21 Oil Trading Co. v. M/V Caribe March, 757 F.2d 743 (5th Cir. 1985). 22 Furthermore, it remains the rule in admiralty that the owner of the 23 vessel cannot create liens against it. 24 296. Frontera Fruit, 91 F.2d at The charterer under a demise charter party is treated as the Civil No. 09-1152 (JAF) -11- 1 vessel s owner pro hac vice. 2 (1920). 3 The South Coast, 251 U.S. 519, 523 With respect to co-venturers, common-law principals of agency 4 apply to cases in admiralty. 5 704 (1st Cir. 1995); accord Kirno Hill Corp. v. Holt, 618 F.2d 982, 6 985 (2d Cir. 1980). However, we look to Puerto Rico law for the 7 choice-of-law rule to determine the existence of a partnership. 8 Allstate Ins. Co. v. Occidental Int l, Inc., 140 F.3d 1, 3 (1st Cir. 9 1998). Puerto Rico applies the dominant or significant contacts 10 test to find the appropriate rule of decision to resolve contractual 11 relationships. 12 CEH, Inc. v. F/V Seafarer, 70 F.3d 694, Id. In the case at bar, it is beyond dispute that the charter 13 between Claimant and Interline included a no-liens clause. 14 No. 102-2.) 15 aware of this provision or if it was legally barred from creating 16 liens on account of its ownership pro hac vice. 17 (Docket The pertinent question, then, is whether Libelant was Claimant contends that Interline and Libelant are co-venturers. 18 (Docket No. 95.) Libelant and Interline entered into a series of 19 agreements in 2007 and 2008. The confidential sub-charter emphasized 20 the importance of berthing the vessel at San Juan, Puerto Rico, on a 21 weekly basis for Libelant s operations. (Docket No. 107-3.) 22 the sales agency, Interline undertook to promote Libelant s services 23 in the eastern Caribbean. 24 understanding between the companies evinces a clear intent to merge (Docket No. 107-2.) Under The memorandum of Civil No. 09-1152 (JAF) -12- 1 their operations and subsume Interline under Libelant s banner, with 2 the primary base of operations in San Juan, Puerto Rico. 3 No. 107-4.) Therefore, Libelant and Interline were parties to a 4 business relationship governed by Puerto Rico law. See Allstate Ins. 5 Co., 140 F.3d at 3. (Docket 6 The Civil Code of Puerto Rico recognizes general partnerships, 7 which may consist of all the present property or of the profits. 8 31 L.P.R.A. §§ 4317-4318 (1990). 9 implied authority may incur obligations on behalf of the partnership. 10 Id. § 4371. 11 In A partner acting under express or his deposition testimony, Perlmutter emphasized the 12 collaboration between Libelant and Interline in operating the vessel 13 for their combined eastern Caribbean services. (Docket No. 95-3.) 14 The parties contemplated equal shares in the vessel and division of 15 profits from operation of the vessel. 16 vessel was essential to the purpose of their joint venture. 17 together, the memorandum of understanding, sales agency agreement, 18 and Perlmutter s testimony demonstrate that, as of February 2008, 19 Libelant and Interline had formed a general partnership as implied in 20 Puerto Rico law. 21 Perlmutter affirmed that the Taken In her role as accountant for Interline, Ehrenkranz statements 22 by e-mail are attributable to Interline as her principal. See Fed. 23 R. Evid. 801(d)(2). Because Interline and Libelant are general 24 partners, Interline s awareness of the no-liens clause is imputed to Civil No. 09-1152 (JAF) -13- 1 Libelant under the rules of agency. See id.; Restatement (Third) of 2 Agency § 5.04 (2006). 3 of the no-liens clause by February 2008. Accordingly, we find that Libelant was aware 4 Moreover, Libelant could not have created liens against the 5 vessel as its charterer. Although Interline and Claimant formed their 6 charter on December 12, 2007 (Docket No. 102-2), prior to the 7 formation of the general partnership in February 2008, Interline s 8 demise 9 Libelant became part owner pro hac vice of the vessel. charter became a joint asset of the partnership. Thus, See The South 10 Coast, 251 U.S. at 523. It follows that Libelant could not have 11 created valid liens after the formation of the partnership. 12 Frontera Fruit, 91 F.2d at 296. 13 asserted in its libel post-dated the creation of this partnership. 14 (Docket No. 1-2.) Therefore, Libelant had no legal basis to prosecute 15 libel and arrest the vessel. See All of the charges that Libelant 16 2. Wrongful Arrest 17 To 18 demonstrate 19 constitute bad faith on Libelant s part in prosecuting libel. 20 Frontera Fruit, 91 F.2d at 294. 21 legal basis for Libelant s arrest of the vessel, we also find that 22 Libelant acted with malice or gross negligence in instituting this 23 case. 24 liens clause, and it is a sophisticated business entity engaged in recover bad damages faith, for wrongful malice, or arrest, such Claimant negligence as must would For the same reasons that we find no Libelant is charged with implied actual knowledge of the no- Civil No. 09-1152 (JAF) -14- 1 the trade of carriage of goods by sea. Furthermore, the patent 2 incongruity 3 Interline had concluded their memorandum of understanding (Docket 4 No. 95-3) and Libelant s argument in opposition to summary judgment 5 (Docket No. 107-1) hints at bad faith. 6 culpable of wrongful arrest as a matter of law. between Perlmutter s admission that Libelant and We, therefore, find Libelant 7 3. 8 Furthermore, we find Libelant liable for breach of the charter 9 Breach of Charter Party party as a matter of law. Interline s rights and obligations under 10 the charter became part of its partnership with Libelant. See 31 11 L.P.R.A. § 4318. 12 the charter, even though it assigned the rights to another entity in 13 June 2008. 14 the charter by permitting the attachment of liens is imputed to 15 Libelant as a general partner. Moreover, Interline retained its obligations under (Docket No. 102-2.) Accordingly, Interline s breach of See 31 L.P.R.A. § 4371. 16 4. Unjust Enrichment 17 Finally, because Libelant has breached the charter party, it may 18 be held to account for debts owed under the charter. See Exxon 19 Corp., 500 U.S. at 610. Moreover, Libelant has admitted its awareness 20 that Claimant was owed charter hire under the charter. (Docket 21 No. 95-3.) 22 for some period of time not covered by the demise charter, it must be 23 liable to Claimant in quantum meruit. Therefore, Claimant is entitled 24 to summary judgment on its claim for unjust enrichment. Furthermore, to the extent that Libelant used the vessel Civil No. 09-1152 (JAF) 1 D. -15- Evidentiary Motions 2 We need not consider Libelant s motion to strike because we have 3 not relied on the deposition testimonies of Swerdel or John Ludwig. 4 (See Docket No. 100.) 5 not have created valid liens against the vessel, we need not address 6 Libelant s motion to deem admissions. Furthermore, as we find that Libelant could 7 III. 8 (See Docket No. 101.) Conclusion 9 In view of the foregoing, we hereby: 10 1) GRANT IN PART and DENY IN PART Libelant s motion to dismiss 11 (Docket No. 79). We DISMISS WITH PREJUDICE Claimant s complaint only 12 with respect to the portion of its claim for unjust enrichment that 13 is based upon benefits conferred by Hugo Stamp (id.). 14 2) DENY Claimant s motion to transfer venue (Docket No. 83). 15 3) GRANT IN PART and DENY IN PART Claimant s motions for summary We VACATE the arrest of M/V Sunshine 16 judgment (Docket Nos. 60; 95). 17 Spirit. Trial will proceed on the remaining issue of the extent of 18 Libelant s liability to Claimant. 19 20 4) DENY AS MOOT Libelant s motion to strike affidavits (Docket No. 100) and motion to deem admissions (Docket No. 101). 21 5) DENY Claimant s motion to adjourn (Docket No. 110). 22 Parties strongly urged to sit down and settle the case before 23 the November 16 trial. Civil No. 09-1152 (JAF) -16- 1 IT IS SO ORDERED. 2 San Juan, Puerto Rico, this 13th day of November, 2009. 3 4 5 s/José Antonio Fusté JOSE ANTONIO FUSTE Chief U.S. District Judge

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