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Neely v. Club Med Management Services

filed: July 26, 1995.


On Appeal From the United States District Court For the Eastern District of Pennsylvania. (D.C. Civ. No. 91-cv-07416).

Argued: August 8, 1994 Before: Mansmann, Cowen, and McKEE, Circuit Judges. Reargued in banc February 7, 1995 Before: Sloviter, Chief Judge, Becker, Stapleton, Mansmann, Greenberg, Hutchinson, Scirica, Cowen, Nygaard, Alito, Roth, Lewis, McKEE, and Sarokin, Circuit Judges.

Author: Becker



I. Facts and Procedural History

II. The Lauritzen Triad and Subject Matter Jurisdiction

A. The Non-Jurisdictional Nature of the Lauritzen Choice-of-Law Analysis

B. Federal Question and Admiralty Jurisdiction

1. Federal Question Jurisdiction Under 28 U.S.C. § 1331

2. Admiralty Jurisdiction Under 28 U.S.C. § 1333

III. Applicability of American Law Under the Lauritzen Triad

A. Introduction

B. Purposes of and Problems with the Lauritzen Analysis

C. The Two Steps of the Lauritzen Choice of Law Inquiry

1. Do the Contacts Show a Basis for Prescriptive Jurisdiction?

2. Are the Contacts Such That Application of American Law Would Be Reasonable?

a. Inaccessibility of a Foreign Forum

b. Law of the Forum

c. Place of the Wrongful Act

d. Place of Contract

e. Law of the Flag

f. Defendants' Allegiance, Bases of Operations, and Other Contacts with the United States

g. Domicile or Allegiance of the Injured Seaman

h. Summary and Conclusion

IV. The Molding of the Verdict

A. Waiver of Comparative Causation on the Unseaworthiness Claim

B. Lack of Authority to Mold the Verdict

C. Joint and Several Liability

V. Conclusion


BECKER, Circuit Judge.


Plaintiff Eileen Anne Neely, a young American employed at a Club Med resort in St. Lucia, was seriously injured when she was sucked into the propellers of a scuba diving vessel, the Long John. Plaintiff was a member of the crew of the vessel, which was in St. Lucian coastal waters at the time of the accident. She brought suit in the District Court for the Eastern District of Pennsylvania, and a jury there, responding to special interrogatories, found her employers negligent and the vessel unseaworthy, and awarded plaintiff a large verdict on her Jones Act, general maritime law, and maintenance and cure claims. Molding the verdict in response to post-trial motions, the court modified and substantially reduced the verdict by applying to the unseaworthiness claim the percentage of contributory negligence found by the jury with respect to the Jones Act claims. Then, on cross-appeals, a panel of this court, invoking Lauritzen v. Larsen, 345 U.S. 571, 73 S. Ct. 921, 97 L. Ed. 1254 (1953), vacated the entire judgment for the plaintiff on the ground that the district court had lacked subject matter jurisdiction over the action. We granted rehearing in banc and vacated the panel opinion and judgment.

While the appeals present a large number of questions, we address only the subject matter jurisdiction, choice of law, and verdict molding issues.*fn1 With respect to subject matter jurisdiction, we conclude that the multi-factored analysis established by Lauritzen, Romero v. International Terminal Operating Co., 358 U.S. 354, 79 S. Ct. 468, 3 L. Ed. 2d 368 (1959), and Hellenic Lines Ltd. v. Rhoditis, 398 U.S. 306, 90 S. Ct. 1731, 26 L. Ed. 2d 252 (1970) (together, the "Lauritzen triad"), governs choice of law, not subject matter jurisdiction, in Jones Act and American general maritime law claims. Then, applying the usual analyses for federal question and admiralty jurisdiction, we conclude that the district court had subject matter jurisdiction over this suit.

Turning our attention to the multi-factored "substantial contacts" test of the Lauritzen triad, we adopt a two-stage interpretation of that test, subjecting the Lauritzen factors to a relatively simple sufficiency test followed by a more involved reasonableness inquiry. We first find American maritime law potentially applicable in this case because the plaintiff is an American citizen. Accordingly, we consider whether applying American law is reasonable under the circumstances. Because the defendants did not inform the district court of the content of St. Lucian law, any interests St. Lucia might have in this case are undefined and, consequently, do little to render application of American law unreasonable. Additionally, in considering the significance of the various Lauritzen factors, we pay heed to the non-traditional context of this suit. By this we do not mean that the vessel involved here was unlike those in traditional, international shipping cases; rather, the activity here was non-traditional, for the Long John did not take its crew from sea to sea in pursuit of international commerce but rather only from beach to reef in aid of scuba diving adventures.

The accident occurred in St. Lucian waters, which as we explain is an important consideration in non-shipping contexts. And one of the defendants is a corporation organized under the laws of St. Lucia, a factor that also reflects some interest on the part of St. Lucia in applying its law. But these factors do not mean that American law may not be reasonably applied under the circumstances. Even when we add to these some evidence that the Long John, the vessel that injured plaintiff, was registered in St. Lucia, we cannot conclude that St. Lucia's interests, whatever they may be, are so threatened or so strong that America's interests must be ignored.

As our opinion explains, the United States has an overriding interest in assuring adequate compensation for its injured seamen. In the non-shipping context of this case, the significance of plaintiff's American allegiance is an especially important factor, and the relevance of the plaintiff's having entered into her employment contract in the United States is also enhanced. Conversely, the law of the flag of the Long John is of diminished importance in the non-traditional context, and, at all events, the law of the flag would be entitled to virtually no significance here both because there was no evidence that the Long John actually flew the flag of St. Lucia (or any other nation) and because the district court was presented with no information as to the content of St. Lucian law.

Additionally, two of the defendants are American corporations, the Long John was built in America to American specifications, and the St. Lucian defendant, whose operations are in large measure run by one of its affiliated American co-defendants, derives the majority of its income from American tourists booked by another affiliated American co-defendant. Because the connections between this incident and the United States implicate significant American interests, and because consideration of all the circumstances confirms the reasonableness of applying United States law, we conclude that the contacts with the United States are "substantial," and American laws, both the Jones Act and our general maritime law, apply to this suit.

We also conclude that the district court erred in molding the verdict to apply the percentage of comparative negligence found by the jury with respect to the Jones Act claim to the unseaworthiness claim. We so hold because the defendants waived the issue, and because the court, which did not submit it to the jury, lacked authority to later make the omitted factual determinations sua sponte. We will therefore affirm the order of the district court holding two of the defendants liable under American law, but will vacate the district court's order of January 26, 1993, and direct it, on remand, to enter judgment for the plaintiff against Club Med Management and Holiday Village in the full amount of damages found by the jury, as more fully explained below.


The defendants in this action are Club Med, Inc., Club Med Sales, Inc., and Club Med Management Services, Inc., all of which have offices in New York, and Club Med, Inc.'s wholly owned subsidiary Holiday Village (St. Lucia) Ltd. Of the 10,000 to 15,000 people per year who vacation at the Club Med Holiday Village resort, approximately seventy to eighty percent come from the United States. Seventy to eighty percent of Holiday Village's annual income of approximately fifteen million dollars is generated by Holiday Village's American sales bureau, Club Med Sales.

Plaintiff is an American citizen domiciled in Telford (Montgomery County), Pennsylvania. After vacationing at a Club Med resort, she applied to Club Med for a position as a scuba diving instructor. Plaintiff was interviewed in New York by Club Med Management, a New York corporation. Following the interview, plaintiff received a letter of interest from the defendants, followed several months later by a phone call, initiated in New York by Club Med Management, offering her a position at Holiday Village, which she accepted. In early May of 1991, the defendants arranged and paid the travel expenses for her to go to Holiday Village in St. Lucia.

Plaintiff was hired to work as an "au pair" for a six-week period. She was not given a cash salary, but rather received room and board in exchange for her work. Once at Holiday Village, she served as either Scuba Diving Instructor or Divemaster on approximately thirteen or fourteen voyages from May 13 to May 23, 1991. She typically had trips twice in the morning and once in the afternoon. She was responsible for checking and preparing all equipment (which was stored aboard scuba diving boats) for each voyage. During the trips, she provided instruction and warnings to the Club Med guests who would be diving.

The scuba expeditions on which plaintiff worked were conducted by a small fleet operated by Holiday Village. The fleet consisted of the Blue Lagoon, owned by Club Med, and the Long John, chartered by Holiday Village for use as a diving vessel from its title owner Joseph LeMaire (who lives in Miami, Florida but is not a United States citizen). A declaration executed by LeMaire claimed that the Long John, which was built in the United States, was "registered" in St. Lucia, but the charter left blank the state of registry.

On May 23, 1991, plaintiff served Club Med guests on a scuba diving excursion on the Long John, which was captained by Philipe Le Cann. When the boat arrived at the dive site in coastal waters off St. Lucia, the passengers and dive crew prepared to enter the water. The boat was put in neutral, and, after donning her gear, plaintiff entered the water.

It was disputed whether Stephane Gaudry, the Divemaster, had given the signal to enter the water before plaintiff jumped in: the uncontroverted testimony was that Gaudry made no entry of plaintiff's dive time on the dive log. Whatever the precise sequence of events, after plaintiff had entered the water, the captain put the ship's engines into reverse. The churning propellers of the twin 350 horsepower diesel engines sucked plaintiff under the boat and into the ship's propellers, which were not shielded by propeller guards, and she emerged on the starboard side with extremely serious injuries to various parts of her body. She was brought on board the ship, taken immediately to shore, and thereafter to a clinic and then a hospital.

After being treated, plaintiff was out of work for approximately five and one half months. During this time, she convalesced at her parents' home in Telford, where they cared for her on a daily basis. Despite two surgeries for nerve damage, her use of her right arm was permanently restricted; she also will require plastic surgery for her numerous conspicuous scars.

Plaintiff eventually brought suit in the District Court for the Eastern District of Pennsylvania, pleading the federal question and admiralty statutes, 28 U.S.C. §§ 1331 and 1333 (1988), as bases for subject matter jurisdiction. She alleged that her injuries were caused by negligence in violation of the Jones Act, and by the unseaworthy condition of the vessel in violation of the general maritime law. The defendants interposed a host of defenses, including contributory negligence and, relying on Lauritzen v. Larsen, 345 U.S. 571, 73 S. Ct. 921, 97 L. Ed. 1254 (1953), and Hellenic Lines Ltd. v. Rhoditis, 398 U.S. 306, 90 S. Ct. 1731, 26 L. Ed. 2d 252 (1970), the claim that the district court lacked subject matter jurisdiction to apply American law. Although they argued that St. Lucia had a greater interest in having its law applied, the defendants did not present the court with any information concerning the law of St. Lucia.

The district court denied defendants' motion to dismiss for lack of subject matter jurisdiction and failure to state a claim, and allowed the suit to go to trial. During trial, the court ruled, without objection from the defendants, that contributory negligence was not a defense to the unseaworthiness claim. At the close of trial, the court instructed the jury and provided it with a special verdict form, the first draft of which had been prepared by defense counsel. The form required the jury to answer a number of specific questions, grouped and captioned as we now describe.

The first set of questions were presented under the heading "Jones Act Claim." In these, the jury was asked whether plaintiff was employed by one or more of the defendants; if so, which defendant or defendants were her employer; whether her employer or employers were negligent; whether any such negligence was a substantial factor in bringing about plaintiff's injuries; whether plaintiff was contributorily negligent; whether any such contributory negligence was a substantial factor in bringing about her injuries; and how the causal negligence should be allocated (totalling 100%) among the employer or employers and, if appropriate, the plaintiff.

The second set of questions were grouped under the caption "General Maritime Claim." In this section of the form the jury was required to answer whether any of the defendants owned or sufficiently controlled the Long John to qualify as owner or owner pro hac vice ; if so, which defendant(s) controlled the vessel; whether the plaintiff had shown that the vessel was unseaworthy; and if so, whether the unseaworthiness was a substantial factor contributing to plaintiff's injuries. This section asked no questions about contributory responsibility.

The third section of the special verdict sheet was labeled "Damages." The jury was there directed to "state the amount of damages, if any, sustained by the Plaintiff as a result of the accident, without regard to and without reduction by the percentage of causal negligence, if any, that you have attributed to the plaintiff."

The fourth and final portion of the verdict sheet was captioned "Maintenance." There, the jury was asked whether it found the plaintiff entitled to maintenance, and whether any of the defendants (and, if so, which) acted unreasonably in denying maintenance to her.

On the Jones Act questions, the jury found that plaintiff was employed by Club Med Management and by Holiday Village, that those defendants had been negligent, and that their negligence was a substantial factor in causing the plaintiff's injuries. The jury also found, however, that the plaintiff was contributorily negligent. It allocated the total causal negligence thirty percent to Club Med Management, ten percent to Holiday Village, and sixty percent to the plaintiff. In answer to the General Maritime Law questions, the jury found that Holiday Village exercised sufficient control over the Long John to be its owner pro hac vice. It also found the Long John to have been unseaworthy, and that the unseaworthiness was a substantial factor causing plaintiff's injuries.

On the remaining questions, the jury found the plaintiff's total damages sustained from the accident, without regard to any causal negligence on her own part, to be $545,000. It also found that the plaintiff was entitled to maintenance, but that none of the defendants had acted unreasonably in withholding payment. Thereupon, the district court molded the verdict to reflect plaintiff's comparative negligence: On the Jones Act claim, the court entered judgment against Club Med Management and Holiday Village in the amount of forty percent of $545,000, that is, $218,000. On the maintenance claim, the court entered judgment against the same defendants for $11,700, but denied attorney's fees to plaintiff because the jury had found that the denial of maintenance was not unreasonable. On the unseaworthiness claim, the court entered judgment in plaintiff's favor against Holiday Village in the full amount of $545,000.

A week later the defendants moved the district court to mold the verdict on the unseaworthiness claim. Relying upon case law holding that comparative fault is a partial defense to general maritime law unseaworthiness claims, the defendants urged the district court to reduce the unseaworthiness verdict by sixty percent, the percentage of the plaintiff's contributory negligence on the Jones Act claim. Over plaintiff's objection, the district court entered an order so modifying the judgment.

Plaintiff filed a timely appeal, and defendants cross-appealed. Under 28 U.S.C. § 1291 (1988), we have appellate jurisdiction over the final orders of the district court.


Beginning with their initial answer in the district court, the defendants have argued that, pursuant to the multi-factored analysis developed in Lauritzen v. Larsen, 345 U.S. 571, 73 S. Ct. 921, 97 L. Ed. 1254 (1953), and Hellenic Lines, Ltd. v. Rhoditis, 398 U.S. 306, 90 S. Ct. 1731, 26 L. Ed. 2d 252 (1970), the district court lacked subject matter jurisdiction over plaintiff's Jones Act and general maritime law unseaworthiness claims. Because subject matter jurisdiction restrictions impose a limit on the power of the federal courts to entertain an action, we must first consider whether the district court had subject matter jurisdiction over plaintiff's suit. If the district court lacked such jurisdiction, it would be our duty to vacate the judgments in plaintiff's favor and direct the district court to dismiss her action.

We hold that the district court had subject matter jurisdiction over this suit. This ruling primarily reflects a disagreement with defendants' premise that the Lauritzen triad (composed of Lauritzen, Rhoditis, and Romero v. International Terminal Operating Co., 358 U.S. 354, 79 S. Ct. 468, 3 L. Ed. 2d 368 (1959)) provides the framework for determining whether a district court has subject matter jurisdiction in Jones Act or general maritime law cases.

A. The Non-Jurisdictional Nature of the Lauritzen Choice-of-Law Analysis

In Lauritzen v. Larsen, 345 U.S. 571, 73 S. Ct. 921, 97 L. Ed. 1254 (1953), the Supreme Court enunciated a number of factors to be considered by courts evaluating whether a plaintiff may sue under the Jones Act. These factors include:

(1) the place of the wrongful act,

(2) the law of the flag,

(3) the allegiance or domicile of the injured plaintiff,

(4) the allegiance of the defendant,

(5) the place of contract,

(6) the inaccessibility of a foreign forum, and

(7) the law of the forum.

See Lauritzen, 345 U.S. at 583-92, 73 S. Ct. at 928-33. The Court reiterated the relevance of these factors in Romero, see 358 U.S. at 383, 79 S. Ct. at 486, and in Hellenic Lines, Ltd. v. Rhoditis, 398 U.S. 306, 90 S. Ct. 1731, 26 L. Ed. 2d 252 (1970), it added the defendant's base of operations to this list, id. at 309, 90 S. Ct. at 1734.

Defendants believe that this inquiry determines whether the district court has subject matter jurisdiction. This view was not challenged in the district court, which considered the factors and found subject matter jurisdiction, or before the panel, which reconsidered them but found no jurisdiction. Moreover, a number of cases in various jurisdictions so hold. However, after granting rehearing in banc, we sua sponte directed the parties to prepare supplemental briefing on the question whether the Lauritzen -Romero -Rhoditis factors (henceforth referred to as the "Lauritzen factors" for simplicity) in fact go to subject matter jurisdiction. With the benefit of counsel's briefing and argument, and after studying the Supreme Court's opinions and numerous cases interpreting them, we conclude that the Lauritzen factors are not a test for subject matter jurisdiction, but rather constitute a non-exhaustive list of contacts for choice of law analysis in suits for maritime injuries with foreign connections.

In Lauritzen, the Supreme Court was called on to answer a question of the extraterritorial applicability of the Jones Act. While in New York, Larsen, a Danish seaman, had signed onto a ship of Danish flag and registry owned by Lauritzen, another Danish citizen. The ship's articles that Larsen signed were written in Danish and specified that Danish law would govern the crewmembers' rights. After being injured in the course of his employment while in Havana harbor, Larsen brought suit against Lauritzen in the District Court for the Southern District of New York, seeking to recover damages under the Jones Act. Over Lauritzen's objection that Danish law rather than American law governed, the district court allowed the case to go to the jury under the Jones Act, which rendered a verdict in Larsen's favor. The Court of Appeals for the Second Circuit affirmed, and the Supreme Court granted certiorari.

The Court formulated the "key issue" as "whether statutes of the United States should be applied to this claim of maritime tort." Lauritzen, 345 U.S. at 573, 73 S. Ct. at 923. As did the defendants herein, Lauritzen had framed his objection in terms of subject matter jurisdiction, but the Court quickly disposed of this argument:

The question of jurisdiction is shortly answered. . . . As frequently happens, a contention that there is some barrier to granting plaintiff's claim is cast in terms of an exception to jurisdiction of subject matter. A cause of action under our law was asserted here, and the court had power to determine whether it was or was not well founded in law and in fact.

Id. at 574, 73 S. Ct. at 924. Thus, the Court's later analysis introducing the now-famous Lauritzen factors was directed to choice of law, see id. at 583, 73 S. Ct. at 928, not subject matter jurisdiction, which the Court had already determined was present.

Similarly, in Romero v. International Terminal Operating Co., 358 U.S. 354, 79 S. Ct. 468, 3 L. Ed. 2d 368 (1959), the Court faced suit brought under American law by a foreign sailor. Romero, a Spanish seaman, had signed onto the crew of a vessel of Spanish registry that sailed under the Spanish flag and was owned by a Spanish corporation. After departing from a Spanish port, the ship made numerous stops, including one in Hoboken, where Romero was injured when struck by a cable on the ship's deck. He filed suit in the District Court for the Southern District of New York, contending inter alia that the shipowner ("Compania") was liable to him under the Jones Act and under the general maritime law of the United States for unseaworthiness of the ship, maintenance and cure, and maritime tort. The alleged bases for jurisdiction were the Jones Act, federal question jurisdiction, and diversity jurisdiction.

The district court dismissed the complaint after a pre-trial hearing. It concluded that the Jones Act provided no right of action to an alien seaman under the circumstances involved, and thus that the court lacked jurisdiction over the Jones Act claim against Compania. The court dismissed the general maritime claim against the corporation because the company was not of diverse citizenship from Romero and because of its Conclusion that the federal question statute did not embrace general maritime law claims.

The Court of Appeals affirmed the dismissal of the complaint, and the Supreme Court granted certiorari. In Part I of its opinion, entitled "Jurisdiction," id. at 359, 79 S. Ct. at 473, the Court concluded that the district court possessed subject matter jurisdiction of the claims. With respect to the Jones Act claims, it noted:

The question whether jurisdiction exists has been confused with the question whether the complaint states a cause of action. Petitioner asserts a substantial claim that the Jones Act affords him a right of recovery for the negligence of his employer. Such assertion alone is sufficient to empower the District Court to assume jurisdiction over the case and determine whether, in fact, the Act does provide the claimed rights.

Id. (internal quotation marks and citation omitted). The Court then affirmed Lauritzen 's holding that the usual federal question approach to subject matter jurisdiction governs Jones Act suits. See id.*fn2

Importantly, the Romero Court turned to the Lauritzen factors (in Part II of its opinion, entitled "The Claims Against Compania Transatlantica--The Choice-of-Law Problem," id. at 381, 79 S. Ct. at 485) only after concluding that the district court had erred in dismissing Romero's suit for lack of subject matter jurisdiction. Thus, the Court's decision in Romero confirms that the Lauritzen factors are not a test for subject matter jurisdiction but rather govern choice of law. The innovation in Romero was its pronouncement that the Lauritzen analysis should govern not only Jones Act claims but also claims under the general maritime law for personal injury damages. Id. at 382, 79 S. Ct. at 485.

Our understanding of these precedents is confirmed by a leading admiralty treatise. See GRANT GILMORE & CHARLES L. BLACK, JR., THE LAW OF ADMIRALTY § 6-63 (2d ed. 1975) [hereinafter LAW OF ADMIRALTY]. Discussing "Choice of Law in Actions Brought in the United States by Seamen Injured on Foreign-Flag Ships," the authors explain that when "a seaman brings an action to recover for personal injuries, the court must initially decide whether it has jurisdiction and, if it has, whether United States law or the law of a foreign nation is applicable." Id. at 471. They go on to discuss Lauritzen and Romero as follows:

The majority of the Court concluded that neither the situs of the injury nor Romero's treatment in this country made a case, under the Lauritzen criteria, for application of American law in Romero's action against his employer, the Spanish Line. Justice Frankfurter's opinion emphasized that the issue was one of choice of law and not of subject matter jurisdiction. That is, the District Court, having decided that Romero's action against his employer was not governed by American law, could have retained jurisdiction of the action and decided it under Spanish law.

Id. at 473 (emphasis supplied).*fn3

The Supreme Court's third and latest pronouncement on the role of the Lauritzen factors came in 1970. While the Court's opinion in Hellenic Lines, Ltd. v. Rhoditis, 398 U.S. 306, 90 S. Ct. 1731, 26 L. Ed. 2d 252 (1970), is partially opaque, it does not signal a change in the purpose and use of the Lauritzen analysis. Rhoditis concerned a suit under the Jones Act by a Greek seaman for injuries he suffered aboard a ship in the Port of New Orleans. Because the Supreme Court agreed with the trial and appellate courts that the Jones Act applied, the Court did not need to differentiate between subject matter jurisdiction and the plaintiff's entitlement to proceed under the Jones Act--both were present. But the opinion's description of the Lauritzen analysis makes clear that the Court viewed the factors as bearing on applicability of the Act, rather than subject matter jurisdiction.

The Court explicitly endorsed the description of the Lauritzen analysis offered by Judge Medina, who in Bartholomew v. Universe Tankships, Inc., 263 F.2d 437 (2d Cir. 1959), had written:

The decisional process of arriving at a Conclusion on the subject of the application of the Jones Act involves the ascertainment of the facts or groups of facts which constitute contacts between the transaction involved in the case and the United States, and then deciding whether or not they are substantial.

Id. at 441 (quoted in Rhoditis, 398 U.S. at 309 n.4, 90 S. Ct. at 1734 n.4) (emphasis supplied here). Furthermore, in adding the shipowner's base of operations to the analysis, the Court characterized it as "another factor of importance in determining whether the Jones Act is applicable." Rhoditis, 398 U.S. at 309, 90 S. Ct. at 1734 (emphases supplied).

It is true that the Court's opinion in Rhoditis twice used the word "jurisdiction."*fn4 However, the presence of two occurrences of the word "jurisdiction" is too ambiguous to mandate a change in the jurisprudence,*fn5 particularly since the Court likely meant to refer to "legislative jurisdiction," see id. at 314 & n.2, 90 S. Ct. at 1736-37 & n.2 (Harlan, J., Dissenting) (which is also known as prescriptive jurisdiction, see RESTATEMENT (THIRD) OF FOREIGN RELATIONS LAW Pt. IV, at 230 (1987)). Moreover, subject matter jurisdiction was not presented in the Questions for Review in the petition for certiorari. See Petition for Writ of Cert. at 2-3, Hellenic ...

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