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In re Complaint of Weeks Marine

June 30, 2006

IN RE: COMPLAINT OF WEEKS MARINE, INC. AS OWNER OF THE WEEKS 263 LOADLINE DECK BARGE, WEEKS 272 CARFLOAT AND WEEKS 254 GANTRY CRANE, FOR EXONERATION FROM OR LIMITATION OF LIABILITY


The opinion of the court was delivered by: Wolfson, United States District Judge

OPINION

Before the Court is the Motion for Summary Judgment filed by Defendant S.T. Hudson Engineers, Inc. ("Defendant"), on the Cross-Claim of Plaintiff South Jersey Port Corporation ("Plaintiff"). Plaintiff alleges that the collapse of Berths 1 and 2 of its Beckett Street Marine Terminal ("Beckett Street Terminal"), along the east shore of the Delaware River in Camden, New Jersey, was caused by an underwater landslide that resulted from vibrations created by pile driving conducted by Weeks Marine, Inc., and overseen by Defendant, during construction of the Battleship USS New Jersey Memorial Pier. After an initial coverage dispute, Plaintiff reached a settlement with its insurance carrier, Lexington Insurance Company ("Lexington"), in which Lexington paid Plaintiff $7,315,926 for Plaintiff's damages associated with the collapse at the Becket Street Marine Terminal. As part of that settlement, Lexington purported to assign its right to pursue an action in subrogation against any third-party tortfeasor to Plaintiff.

Plaintiff bases this action against Defendant on two separate theories. First, Plaintiff asserts that, as the assignee of Lexington's subrogation rights, Plaintiff stands in Lexington's shoes and may assert any action Lexington would have been entitled to initiate against Defendant. Consequently, Plaintiff argues that it may recover damages to the extent of Lexington's rights against a tortfeasor. Second, Plaintiff asserts that, notwithstanding the operation of equitable subrogation or Plaintiff's status as assignee of Lexington's subrogation rights, Plaintiff retains an independent right to sue a tortfeasor for the balance of Plaintiff's losses not compensated by its insurance settlement with Lexington.

In this Motion for Summary Judgment, Defendant argues that Plaintiff is precluded from pursuing an action against it for damages arising out of the Beckett Street Terminal collapse because: (1) Plaintiff's independent right to assert a claim against Defendant, or any other tortfeasor, was extinguished upon Plaintiff's settlement with Lexington, by the operation of equitable subrogation; (2) Lexington's purported assignment of its subrogation rights to Plaintiff violates the Supreme Court of New Jersey's prohibition against pre-judgment assignment of tort claims; (3) even if Lexington's assignment to Plaintiff is valid, Plaintiff is bound by judicial estoppel to the factual position taken by Lexington in earlier litigation, during which Lexington disputed Defendant's responsibility for Plaintiff's damages; and (4) Plaintiff has been fully compensated by its settlement with Lexington, thus a successful action against Defendant would result in a double recovery, in violation of the equitable principles underlying subrogation. The Court has jurisdiction pursuant to 28 U.S.C. § 1331. For the reasons that follow, Defendants' Motion for Summary Judgment is granted.

I. BACKGROUND

Plaintiff is an agency of the State of New Jersey and statutorily responsible for operation of the Beckett Street and Broadway Marine Terminals on the east shore of the Delaware River in Camden, New Jersey. See N.J. Stat. Ann.§ 12:11A-1, et seq. In Fall 2000, Plaintiff purchased an insurance policy from Lexington for coverage of all risks associated with its operation of the Beckett Street and Broadway Marine Terminals during the period between December 15, 2000 and December 15, 2001. See Certification of Dante C. Rohr ("Rohr Cert."), submitted in support of Plaintiff's Opposition Brief ("Pf Opp. Br."), Ex. 1. The policy was subject to a specified list of exclusions, and carried a maximum of $15 million in coverage per single occurrence. Id.

Defendant has served as the Port Engineer for Plaintiff since its formation in 1969 See Plaintiff's Cross-Claim against Defendant ("Cross-Claim"), at ¶ 11. For over thirty years, Defendant has controlled the marine engineering for Plaintiff's terminals, and has maintained responsibility for, among other things, the conduct of periodic condition surveys of the berths at the Becket Street Terminal, as well as inspection of its other marine structures. Id. In 1998, after a condition survey of Berths 1 and 2 of the Beckett Street Terminal, Defendant designed a repair plan to be carried out by W.H. Streit*fn1 , in early 2001, on the number 1 steel auxiliary H-piles of Berths 1 and 2. Id. at ¶¶ 15, 18, 20. At the same time, Defendant served as the design engineer overseeing Weeks Marine's construction of Memorial Pier. Id. at ¶¶ 20-22. Memorial Pier is located upriver and adjacent to Berth 1 of the Beckett Street Terminal. Id. ¶ 16. Construction of the pier required "the driving of numerous large piles including 16 and 18 inch steel pipe piles, plate anchors and eight foot diameter monopiles." Id. at ¶¶ 24-35.

On August 22, 2001, a section of Berth 1 of the Beckett Street Terminal collapsed and sank into the Delaware River, along with Plaintiff's Number 5, Clyde-Whirley crane. Id. at ¶ 38. An additional section of Berth 1 collapsed on December 5, 2001. Id. at ¶ 41. On November 14, 2001, Plaintiff filed a claim with Lexington in which Plaintiff alleged losses in excess of $15 million and asserted that the pile driving conducted by Weeks Marine during the construction of the Memorial Pier caused the collapse at the Beckett Street Terminal. See Rohr Cert., Ex. 3. On November 30, 2001, Plaintiff sent Lexington a "Sworn Statement in Proof of Loss" which itemized $14,716,328 worth of losses Plaintiff allegedly suffered. See Affidavit of Edward V. Cattell ("Cattell Aff."), submitted in support of Defendant's Summary Judgment Brief ("Df Br."), Ex. B. On December 11, 2001, Plaintiff sent Lexington a supplemental "Sworn Statement in Proof of Loss" which included an additional $36,183 in business interruption losses. See Cattrell Cert., Ex. C.

Lexington retained an engineering firm to perform an independent evaluation of Plaintiff's losses, and, relying on the firm's report, denied Plaintiff's claim. Id. at Ex. 4. Lexington took the position that Plaintiff's losses did not occur during the policy period. Id. Specifically, Lexington asserted that the collapse of Berth 1 did not result from a landslide caused by Weeks Marine's pile driving activity at the Memorial Pier, but rather, that it resulted from broken pilings, damaged long before the policy period began, that failed due to normal wear and tear. Id. On December 19, 2001, Plaintiff filed a Declaratory Judgment Action against Lexington in the Superior Court of New Jersey, alleging breach of contract and bad faith. See Rohr Cert., Ex. 5. Lexington removed the matter to a court in this District on January 18, 2002. Id.

Before trial, Lexington and Plaintiff reached a settlement and, on April 23, 2004, executed a Release and Settlement Agreement ("Settlement Agreement"). Id. at Ex. 7. Pursuant to the terms of the Settlement Agreement, Lexington paid Plaintiff $7,315,926.00 as "full and final payment under the Policy for all losses and/or claims arising out of the collapses." Id, at Ex. 7, ¶ 1. In exchange, Plaintiff "release[d] and fully discharge[d] all claims . . . for coverage under the Policy . . . against . . . Lexington...." Id. at ¶ 4. The Settlement Agreement also incorporated the terms of an Assignment and Relinquishment of Subrogation Rights executed between Plaintiff and Lexington, under which Lexington assigned its rights of subrogation to Plaintiff, and relinquished those rights.*fn2 Id. at Ex. 8, ¶¶ 1, 4.

Subsequently, in this case, Plaintiff filed claims against various defendants, some of whom responded with cross-claims, and counter-claims. The details of those various claims are unnecessary for the disposition of this Motion, except to note that on July 13, 2004, Plaintiff filed a cross-claim against Defendant for negligence, breach of contract, trespass, and nuisance.*fn3 On October 31, 2005, Defendant filed this Motion, pursuant to Fed. R. Civ. P. 56(c), seeking Summary Judgment on Plaintiff's Cross-Claim. Id. at Ex. 9 at ¶¶ 46-68.

III. DISCUSSION

A. Summary Judgment Standard

Summary judgment is appropriate where the Court is satisfied that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 330 (1986). A dispute is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is "material" only if it might affect the outcome of the suit under the applicable rule of law. Id. Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment. Id. The burden of establishing that no "genuine issue" exists is on the party moving for summary judgment. Celotex, 477 U.S. at 330. Once the moving party satisfies this initial burden, the non-moving party "must set forth specific facts showing that there is a genuine issue ...


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