Rivera v. Atlass Insurance Group of Florida, Inc. et al, No. 3:2009cv01434 - Document 25 (D.P.R. 2010)
Court Description: ORDER denying 8 Motion to Dismiss for Lack of Jurisdiction; denying 10 Motion for Judgment as a Matter of Law. Signed by Judge Raymond L. Acosta on 1/13/10. (ans)
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Rivera v. Atlass Insurance Group of Florida, Inc. et al Doc. 25 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO 1 2 3 4 JOSUE RIVERA, Plaintiff, 5 v. 6 7 CIVIL NO. 09-1434 (RLA) ATLASS INSURANCE GROUP OF FLORIDA, INC., et al., 8 Defendants. 9 10 ORDER DENYING MOTIONS TO DISMISS FOR LACK OF ADMIRALTY JURISDICTION 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Plaintiff instituted these proceedings against VICTOR CURET (“CURET”), GUARANTY INSURANCE AGENCY, CORP. (“GUARANTY”) and ATLASS INSURANCE GROUP, INC. (“ATLASS”) claiming that they failed in their duty as brokers to procure adequate insurance for his vessel “Amanecer” which sank on January 1, 2007. Codefendants CURET and GUARANTY have moved the court to dismiss the instant complaint pursuant to the provisions of Rule 12(b)(1) Fed. R. Civ. P. alleging that we lack jurisdiction over plaintiff’s claims against them. The court having reviewed the arguments presented by the parties in light of the applicable legal precedent finds that it does have authority to entertain the claims before us under admiralty jurisdiction. 25 26 Dockets.Justia.com 1 CIVIL NO. 09-1434 RLA) Page 2 2 Standard of Review 3 The court’s authority to entertain a particular controversy is 4 commonly referred to as subject matter jurisdiction. “In the absence 5 of jurisdiction, a court is powerless to act.” Am. Fiber & Finishing, 6 Inc. v. Tyco Healthcare Group, LP, 362 F.3d 136, 138 (1st Cir. 2004). 7 “The party invoking federal jurisdiction has the burden of 8 establishing that the court has subject matter jurisdiction over the 9 case.” Amoche v. Guarantee Trust Life Ins. Co. 556 F.3d 41, 48 (1st 10 Cir. 2009). “[L]itigants cannot confer subject-matter jurisdiction, 11 otherwise lacking”. Whitfield v. Municipality of Fajardo, 564 F.3d 12 40, 44 (1st Cir. 2009). 13 Federal courts are courts of limited jurisdiction and hence, 14 have the duty to examine their own authority to preside over the 15 cases assigned. Further, as it involves a court's power to hear a 16 case, it may be raised at any time. Kontrick v. Ryan, 540 U.S. 443, 17 124 S.Ct. 906, 157 L.Ed.2d 867 (2004); United States v. Cotton, 535 18 U.S. 625, 122 S.Ct. 1781, 152 L.Ed.2d 860 (2002). “The objection that 19 a federal court lacks subject-matter jurisdiction... may be raised by 20 a party, or by a court on its own initiative, at any stage in the 21 litigation, even after trial and the entry of judgment.” Arbaugh v. 22 Y&H Corp., 546 U.S. 500, 506, 126 S.Ct. 1235, 163 L.Ed.2d 1097 23 (2006). [F]ederal courts have an omnipresent duty to take notice of 24 jurisdictional defects, on their own initiative if necessary. 25 Whitfield, 564 F.3d at 44. “It is black-letter law that a federal 26 1 CIVIL NO. 09-1434 RLA) Page 3 2 court has an obligation to inquire sua sponte into its own subject 3 matter jurisdiction.” McCulloch v. Velez, 364 F.3d 1, 5 (1st Cir. 4 2004). See also, Bonas v. Town of North Smithfield, 265 F.3d 69, 73 5 (1st Cir. 2001) (“Federal courts, being courts of limited 6 jurisdiction, have an affirmative obligation to examine 7 jurisdictional concerns on their own initiative.”) 8 The proper vehicle for challenging the court’s subject matter 9 jurisdiction is Rule 12(b)(1). 10 There are two types of challenges to a court’s subject 11 matter jurisdiction: facial challenges and factual 12 challenges. Facial attacks on a complaint require the court 13 merely to look and see if the plaintiff has sufficiently 14 alleged a basis of subject matter jurisdiction, and the 15 allegations in plaintiff’s complaint are taken as true for 16 purposes of the motion. However, when a motion to dismiss 17 for lack of subject matter jurisdiction under Fed. R. Civ. 18 P. 12(b)(1) involves factual questions, the court engages 19 in a two-part inquiry. 20 First, the court must determine whether the relevant 21 facts, which would determine the court’s jurisdiction, also 22 implicate elements of the plaintiff’s cause of action... 23 Second, if the facts relevant to the jurisdictional inquiry 24 are not intertwined with the merits of the plaintiff’s 25 claim, the trial court may proceed as it never would under 26 1 CIVIL NO. 09-1434 RLA) Page 4 2 12(b)(6) for Federal Rule of Civil Procedure 56. Because at 3 issue in a factual 12(b)(1) motion is the trial court’s 4 jurisdiction - its very power to hear the case - there is 5 substantial authority that the trial court is free to weigh 6 the evidence and satisfy itself as to the existence of its 7 power to hear the case. 8 Torres-Negron v. J&N Records, LLC, 504 F.3d 151, 162-63 (1st Cir. 9 2007) (internal citations, quotation marks and brackets omitted). See 10 also, Gonzalez v. United States, 284 F.3d 281, 288 (1st Cir. 2002); 11 Aversa v. United States, 99 F.3d 1200, 1210 (1st Cir. 1996). 12 In this particular case the relevant facts necessary for our 13 limited inquiry are straightforward and uncontested. 14 THE FACTS 15 Plaintiff, JOSUE RIVERA, is a resident of Puerto Rico. 16 Codefendant CURET is an insurance broker and resident of Puerto 17 Rico. 18 Codefendant GUARANTY is an insurance agency with its principal 19 offices in Puerto Rico. 20 Codefendant ATLASS is an insurance broker with its principal 21 place of business in the state of Florida. 22 GREAT LAKES REINSURANCE (UK) PLC, an insurer, denied coverage 23 for the vessel’s accident under various policy provisions. 24 25 26 1 CIVIL NO. 09-1434 RLA) Page 5 2 GREAT LAKES filed a declaratory judgment action against 3 plaintiff in this forum, Civ. No. 07-1318(ADC), which concluded by a 4 settlement between the parties on June 26, 2009. 5 ADMIRALTY JURISDICTION 6 Generally 7 Jurisdiction regarding the claims asserted against CURET and 8 GUARANTY1 will depend on whether a broker’s agreement to procure 9 maritime insurance for a private vessel falls within our admiralty 10 jurisdiction.2 Pursuant to 28 U.S.C. § 1333(1), district courts are 11 vested with original jurisdiction in “[a]ny civil case of admiralty 12 or maritime jurisdiction.” 13 “The boundaries of admiralty jurisdiction over contracts - as 14 opposed to torts or crimes - being conceptual rather than spatial, 15 have always been difficult to draw.” Kossick v. United Fruit Co., 365 16 U.S. 731, 735, 81 S.Ct. 886, 6 L.Ed.2d 56 (1961). “The principle by 17 reference to which the cases are supposed to fall on one side of the 18 line or the other is an exceedingly broad one. The only question is 19 whether the transaction relates to ships and vessels, masters and 20 mariners, as agents of commerce.” Kossick, 365 U.S. at 736 (citation 21 and quotation marks omitted). 22 23 24 25 26 1 There is diversity jurisdiction with respect to ATLASS, the additional defendant, who is not a party to the instant petitions to dismiss. 2 No diversity of citizenship exists between plaintiff and movants nor are there any other grounds for federal jurisdiction to attach regarding the claims asserted against them in the complaint. 1 CIVIL NO. 09-1434 RLA) Page 6 2 “The Supreme Court has reiterated that the fundamental interest 3 giving rise to maritime jurisdiction is the protection of maritime 4 commerce. Therefore, in determining whether a contract falls within 5 maritime jurisdiction, we focus our inquiry on whether the nature of 6 the transaction was maritime, that is, whether the contract relates 7 to the navigation, business or commerce of the sea.” Puerto Rico 8 Ports Auth. v. Umpierre-Solares, 456 F.3d 220, 224 (1st Cir. 2006) 9 (citations and internal quotation marks omitted). 10 “To ascertain whether a contract is a maritime one, we cannot 11 look to whether a ship or other vessel was involved in the dispute, 12 as would in a putative maritime tort case... Nor can we simply look 13 to the place of the contract’s formation or performance. Instead, the 14 answer depends upon the nature and character of the contract, and the 15 true criterion is whether it has reference to maritime service or 16 maritime transactions.” Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 2317 24, 125 S.Ct. 385, 160 L.Ed.2d 283 (2004) (internal citations and 18 quotation marks omitted). 19 “Congress has granted district courts the power to entertain any 20 civil case of admiralty or maritime jurisdiction. 28 U.S.C. 21 § 1331(1). That jurisdictional power encompasses all contracts which 22 relate to the navigation, business, or commerce of the sea. In 23 determining whether admiralty jurisdiction exists with regard to a 24 contract claim, a court must refer to the nature and subject of the 25 contract. When a contract relates to ships in their use as ships or 26 1 CIVIL NO. 09-1434 RLA) Page 7 2 to commerce or transportation in navigable waters, there is admiralty 3 jurisdiction.” Commercial Union Ins. Co. v. Blue Water Yacht Club 4 Ass’n, 239 F.Supp.2d 316, 319 (E.D.N.Y. 2003). 5 Following the Kirby precedent, “our inquiry into whether a 6 contractual dispute falls within our maritime jurisdiction must focus 7 on whether the contract’s ‘primary objective’ has an ‘essentially 8 maritime nature’ and relates to ‘maritime commerce.’” New Hampshire 9 Ins. Co. v. Home Sav. and Loan Co., 581 F.3d 420, 424 (6th Cir. 2009). 10 (citation omitted, italics in original). 11 “[U]nlike tort doctrine the availability of admiralty 12 jurisdiction over a contract dispute derives not from the 13 circumstances surrounding an alleged breach and attendant injury, but 14 instead from whether the relevant contractual relationship embodied 15 in the parties’ agreement incorporates a uniquely maritime concern.” 16 Am. Home Assurance Co. v. Merck & Co., Inc., 329 F.Supp.2d 436, 442 17 (S.D.N.Y. 2004) (internal citations and quotation marks omitted). “As 18 the Court explained in Kirby, Kossick stands for the proposition that 19 a dispute involving a ‘fringe benefit’ of maritime contract 20 nevertheless falls within the purview of federal admiralty 21 jurisdiction so long as that promise, although itself attenuated from 22 the business of maritime commerce, was in furtherance of a peculiarly 23 maritime concern.” New Hampshire Ins. Co., 581 F.3d at 426 (citation 24 and internal quotation marks omitted). 25 26 1 CIVIL NO. 09-1434 RLA) Page 8 2 The Supreme Court has expanded the reach of maritime coverage 3 beyond the limited traditional concepts. See i.e., Norfolk, where it 4 held that bills that included transportation both by land and sea 5 were maritime contracts. It reasoned that “their primary objective 6 [was] to accomplish the transportation of goods by sea from Australia 7 to the eastern coast of the United States. Ideally, the admiralty 8 jurisdiction over contracts ought to include those and only those 9 things principally connected with maritime transportation. To be 10 sure, the two bills call for some performance on land; the final leg 11 of the machinery’s journey to Huntsville was by rail. But under a 12 conceptual rather than a spatial approach, this fact does not alter 13 the essentially maritime nature of the contracts.” Id., 543 U.S. at 14 24 (citation, internal quotation marks and brackets omitted). 15 Additionally, in Kossick, the court found that the shipowner’s 16 duty to provide maintenance and cure extended to its agreement to 17 assume responsibility for the consequences of improper or inadequate 18 medical treatment received by a seaman at public facilities. The 19 court concluded that “the alleged contract related to and stood in 20 place of a duty created by and known only in admiralty as a kind of 21 fringe benefit to the maritime contract of hire.” Id., 365 U.S. at 22 736. “So viewed, we think that the alleged agreement was sufficiently 23 related to peculiarly maritime concerns as not to put it, without 24 more, beyond the pale of admiralty law.” Kossick, 365 U.S. at 738. 25 26 1 CIVIL NO. 09-1434 RLA) Page 9 2 Agency contracts 3 For over one and a half century, based on the precedent 4 established in Minturn v. Maynard, 58 U.S. (17 How.) 477, 15 L.Ed. 5 235 (1854), the courts declined to find agency contracts to be within 6 admiralty jurisdiction. In Exxon Corp. v. Central Gulf Lines, Inc., 7 500 U.S. 603, 111 S.Ct. 2071, 114 L.Ed.2d 649 (1991), the Supreme 8 Court overturned Minturn and ruled that agency contracts are not per 9 se excluded under § 1333(1). Rather, the Supreme Court directed the 10 courts to examine the characteristics of the agency contract at issue 11 to ascertain whether the services to be performed thereunder 12 qualified as maritime. 13 In justifying its departure from prior precedent, the court 14 explained that “the trend in modern admiralty case law, by contrast, 15 is to focus the jurisdictional inquiry upon whether the nature of the 16 transaction was maritime.” Exxon, 500 U.S. at 611. “[L]ower courts 17 should look to the subject matter of the agency contract and 18 determine whether the services performed under the contract are 19 maritime in nature.” Id. at 612. 20 Most courts which have examined this issue subsequent to Exxon 21 have held that suits based on the breach of agreements to procure a 22 policy of marine insurance are deemed within the court’s admiralty 23 jurisdiction.3 In reaching their decisions, the courts have 24 25 26 3 We do not give weight to the contrary ruling in Sealink, Inc. V. Frenkel & Co., Inc., 441 F.Supp.2d 374, 385-86 (D.P.R. 2006). In that case, the court’s determination was conclusory without any 1 CIVIL NO. 09-1434 RLA) Page 10 2 specifically relied on the importance of maritime insurance for the 3 protection of maritime commerce. 4 “The weight of authority is that an agreement to procure marine 5 insurance is within the Courts’ admiralty jurisdiction... Given the 6 historically recognized uniqueness and importance of marine insurance 7 and maritime risks, it cannot be said that the provision of marine 8 insurance is identical or essentially similar to the provision of 9 non-maritime insurance.... Nor can it be said that the provision of 10 marine insurance is not necessary to the operation, navigation, or 11 management of a ship.” Dao v. Knightsbridge Int’l Reinsurance Corp., 12 15 F.Supp.2d 567, 575 (D.N.J. 1998). 13 While taking into consideration the protection of maritime 14 commerce the court in Illinois Constructors Corp. v. Morency & 15 Assoc., 794 F.Supp. 841, 843 (N.D.Ill. 1992) further noted that “a 16 vessel owner’s use of brokers for the procurement of such insurance 17 is not only customary but is nearly indispensable for the insured 18 owner’s benefit.” See also, Fernandez v. Haynie, 120 F.Supp.2d 575, 19 585 (E.D.Va. 2000) (broker services were “of vital importance in 20 today’s maritime community to the success of plaintiff’s vessel and 21 business as a going concern.”) 22 23 24 25 26 particularized discussion of the legal standard and its application to the facts. We also note that contrary to the situation before us, there was diversity of citizenship between the parties. 1 CIVIL NO. 09-1434 RLA) Page 11 2 In Pacific Growth S.A. v. AON Corp., 1999 WL 787659 (S.D.N.Y.) 3 the court further described the significance of the underlying 4 brokerage agreement to maritime interests as follows: 5 [I]t appears that the subject matter of the agreement in 6 this case was a marine insurance policy, and the subject 7 matter of that marine insurance policy was... [the] fleet 8 of vessels. The object of the parties’ agreement was the 9 procurement and maintenance of marine insurance coverage 10 for [the] fleet. In other words, it was defendants’ 11 responsibility to make sure that [the] fleet was insured, 12 premiums were paid, and material changes reported to the 13 insurers. The result of defendants’ alleged breach of the 14 insurance brokerage agreement was loss of coverage and 15 uncompensated damage to one of those vessels. The agreement 16 between the parties cannot be divorced from the fleet 17 itself; though its subject matter may technically have been 18 the marine insurance policy, the insurance brokerage 19 agreement would not have existed without the fleet, and the 20 sole motivation for performance of duties under the 21 agreement was the interest of protecting the fleet. 22 Therefore, the insurance brokerage agreement is properly 23 within the Court’s admiralty jurisdiction. 24 Additionally, in Illinois Constructors Corp., 794 F.Supp. at 25 843, a suit filed against an insurance broker for failure to obtain 26 1 CIVIL NO. 09-1434 RLA) Page 12 2 adequate pollution coverage the court further described the 3 connection between the agreement with the broker and maritime 4 commerce as follows: 5 The obligation to secure insurance which contains pollution 6 coverage of a vessel is integral to the maritime activities 7 of the vessel. The importance of insurance for maritime 8 operations is evidence in view of the devastation to 9 maritime commerce that accidents at sea engender and the 10 protection insurance may afford shipowners from the 11 overwhelming costs of clean-up. 12 See also, Romen, Inc. v. Price-Forbes, LTD., 824 F.Supp. 206, 208 13 (S.D.Fla. 1992) (“the insurance brokers’ services impacted such 14 maritime matters as the identity of the vessel’s purchaser and 15 voluntary limitations on its insurance coverage. Hence, the Court 16 finds that the insurance brokers’ services were maritime in nature.”) 17 Pleasure Boats 18 As previously noted, to come within admiralty jurisdiction the 19 nature and subject matter of the brokerage contract at issue must be 20 maritime and the exercise of jurisdiction must be consistent with 21 purpose of admiralty jurisdiction, i.e., the protection of maritime 22 commerce. In other words, the nature and subject matter of the 23 contract are the controlling factors in determining when a contract 24 for services anteceding a maritime insurance policy falls within 25 admiralty jurisdiction. In this case it is crucial to bear in mind 26 1 CIVIL NO. 09-1434 RLA) Page 13 2 that defendants are not parties to the maritime insurance contract 3 but rather, they were agents responsible for procuring a policy that 4 was maritime in nature. 5 Defendants posit that the ample precedent regarding insurance 6 brokers’ agreements as maritime is inapposite to the situation 7 presently before us because the vessel at issue in this litigation 8 was a pleasure boat not connected to a commercial enterprise. 9 However, as the Supreme Court has indicated, there is no legal 10 distinction between these two categories of crafts for purposes of 11 the maritime interests at stake. It has specifically rejected the 12 distinction between “pleasure” boats and “commercial” boats 13 admiralty jurisdiction. 14 Although the primary focus of admiralty jurisdiction 15 is unquestionably the protection of maritime commerce, 16 petitioners take too narrow a view of the federal interest 17 sought to be protected. The federal interest in protecting 18 maritime commerce cannot be adequately served if admiralty 19 jurisdiction is restricted to those individuals actually 20 engaged in commercial maritime activity. This interest can 21 be fully vindicated only if all operators of vessels on 22 navigable waters are subject to uniform rules of conduct. 23 The failure to recognize the breadth of this federal 24 interest ignores the potential effect of noncommercial 25 maritime activity on maritime commerce. 26 in 1 CIVIL NO. 09-1434 RLA) Page 14 2 Foremost Ins. Co. v. Richardson, 457 U.S. 668, 674-75, 102 S.Ct. 3 2654, 73 L.Ed.2d 300 (1982) (italics in original). 4 “In maritime law, vessels include crafts capable of use on 5 oceans, rivers, seas, and navigable waters. Since pleasure boats 6 constitute an important part of maritime commerce, admiralty 7 jurisdiction extends to pleasure craft.” Acadia Ins. Co. v. McNeill, 8 116 F.3d 599, 602 n.2 (1st Cir. 1997) (citations and internal 9 quotation marks omitted). 10 Similarly, insurance coverage for this type of boats represents 11 an important maritime concern. 12 There are few objects - perhaps none - more 13 essentially related to maritime commerce than vessels. They 14 have no utility on land; they are taken ashore solely to 15 make or keep them fit for use in the water, or to transport 16 them from one body of water to another. Furthermore, taking 17 smaller boats ashore for these purposes is important or 18 essential to their use on the water. The risk of theft of 19 boats is an important concern of maritime commerce. And 20 whether the theft of a vessel occurs while it is afloat or 21 ashore, the impact of the theft is on maritime commerce. 22 Policies providing insurance covering such theft relate 23 importantly to the protection of maritime commerce. 24 Sirius Ins. Co. (UK) Ltd. v. Collins, 16 F.3d 34, 36-37 (2nd Cir. 25 1994). 26 1 CIVIL NO. 09-1434 RLA) Page 15 2 CONCLUSION 3 Based on the foregoing, we find that the claims asserted against 4 codefendants CURET and GUARANTY for their alleged failure as brokers 5 to procure adequate insurance coverage for the “Amanecer” fits 6 squarely within the court’s admiralty jurisdiction.4 7 Accordingly, the Motion to Dismiss filed by Curet (docket No. 8)5 8 and Defendant Guaranty Insurance Motion to Dismiss (docket No. 10)6 9 are DENIED. 10 IT IS SO ORDERED. 11 San Juan, Puerto Rico, this 13th day of January, 2010. 12 S/Raymond L. Acosta RAYMOND L. ACOSTA United States District Judge 13 14 15 16 17 18 19 20 21 22 23 4 We need not address defendants’ arguments relying on the preliminary contract doctrine as we find that our final determination in this case would be the same. See, i.e., Robert J. Guendel and Angelique M. Crain, The Maritime Contract and Admiralty Jurisdiction: Recent Developments Help Clarify an Inherently Confused Landscape, 77 TLNLR 1235, 1249 (June 2003) (“[A]s they have struggled in the post-Exxon era, courts seem to be coalescing around adoption of a nature and subject matter test regardless of whether the contract is viewed as ‘agency’ or ‘preliminary services’”). See also, Robert Force, The Aftermath of Norfolk Southern Railway v. James N. Kirby, Pty Ltd: Jurisdiction and Choice-of-Law Issues, 83 TLNLR 1393 (June 2009); Anthony Michael Sabino, Admiralty Jurisdiction over General Agency Contracts: The Final Voyages of Minturn and the Modern Doctrine of Exxon v. Central Gulf, 4 USFMLJ 41 (Summer 1992). 5 See Memorandum of Law (docket No. 9); Opposition (docket No. 13) and Reply (docket No. 19). 24 6 25 26 See Opposition (docket No. 13) and Reply (docket No. 18). Defendant’s arguments regarding plaintiff’s failure to comply with the provisions of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions are misplaced. This is not an in rem proceeding.
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