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In re Complaint of Seastreak, LLC

United States District Court, D. New Jersey

March 27, 2014

IN THE MATTER OF THE COMPLAINT OF SEASTREAK, LLC, AS OWNER OF THE VESSEL SEASTREAK WALL STREET FOR EXONERATION OR LIMITATION OF LIABILITY

OPINION

WILLIAM J. MARTINI, District Judge.

Petitioner Seastreak, LLC ("SeaStreak") brings this action seeking exoneration from or limitation of liability under the Limitation of Liability Act (the "Limitation Act"), 46 U.S.C. § 30501 et seq. This matter comes before the Court on (1) Petitioner's motion to strike the affirmative defenses based on the flotilla doctrine and the jury demands from Claimants' answers, and (2) Petitioner's motion to disqualify counsel from representing multiple Claimants. There was no oral argument. Fed.R.Civ.P. 78(b). For the reasons set forth below, Petitioners motion to strike is DENIED and (2) Petitioner's motion to disqualify counsel is DENIED.

I. BACKGROND

This maritime case involves the SEASTREAK WALL STREET (the "Vessel"), a passenger ferry that allided with Pier 11 in New York City on January 9, 2013. Compl. ¶ 3, ECF No. 1. The allison allegedly caused injuries to a number of the 326 passengers on board. Compl. ¶ 4.

The Limitation Act provides that when a maritime accident occurs "without the privity or knowledge of [the] owner, " the shipowner's liability "shall not... exceed the amount or value of the interest of such owner in such vessel, and her freight then pending." 46 U.S.C. § 30505. To receive protection under the Limitation Act, a shipowner facing potential liability must file a complaint for limitation of liability in a federal district court and deposit an amount equal to the value of the vessel and its pending freight - the limitation fund - with that court. Fed.R.Civ.P. Supp. Rule F(2). The shipowner may also demand exoneration from liability in the complaint. Id. The court then stays all other proceedings against the shipowner and receives all claims. 46 U.S.C. § 30505; Fed.R.Civ.P. Supp. Rule F(4).

On January 16, 2013, the Vessel's owner, SeaStreak, filed a Complaint under the Limitation Act in this Court seeking either exoneration from liability or to limit its liability to the value of its interest in the Vessel - $7.6 million. Compl. ¶¶ 7, 11. On January 16, 2013, the Court entered an interim order limiting liability to the value of the Vessel and directing potential claimants to file claims by May 16, 2013. Forty-six claims were filed prior to that deadline, some with multiple Claimants. The total value of the claims filed exceeds the $7.6 million limitation. Most Claimants also filed answers to SeaStreak's Complaint. See, e.g., The Claim and Answer of John Urbanowitcz ("Urbanowitcz Answer"), ECF No. 10.

II. MOTION TO STRIKE

In their respective answers, Claimants rely upon an affirmative defense known as the "flotilla doctrine" to argue that the limitation fund should be increased to include the value of every ferry owned by SeaStreak. See, e.g., Urbanowitcz Answer, Aff. Def. ¶ 4. The answers also include jury demands. See, e.g., Urbanowitcz Answer at 5.

SeaStreak, in a motion filed on August 27, 2013, seeks to strike both the affirmative defenses under the flotilla doctrine and the jury demands. Pet'r's Mot. to Strike, ECF No. 225. Seastreak argues that the flotilla doctrine does not apply because the allision involved a single vessel that was not part of any common enterprise or venture. Seastreak further argues that claimants have no right to a jury trial in a proceeding under the Limitation Act.

A. The Affirmative Defenses under the Flotilla Doctrine

Federal Rule of Civil Procedure 12(f) provides that a "court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent or scandalous matter." Fed.R.Civ.P. 12(f). An affirmative defense is insufficient if it is not recognized as a legal defense to the cause of action or it cannot succeed under any set of facts that may be inferred from the allegations of the pleading. Tonka Corp. v. Rose Art Industries, Inc., 836 F.Supp. 200, 217 (D.N.J. 1993) (citing Total Containment, Inc. v. Environ Products, Inc., No. 91-7911, 1992 WL 208981 at *1 (E.D. Pa. Aug.19, 1992)). Striking legally insufficient defenses saves time and expense by making it unnecessary to litigate defenses that will not affect the outcome of the case. Glenside West Corp. v. Exxon Co., 761 F.Supp. 1100, 1115 (D.N.J.1991).

However, a court should grant a motion to strike a defense only where the "insufficiency of the defense is clearly apparent." Cipollone v. Liggett Group, Inc., 789 F.2d 181, 188 (3d Cir. 1986). Courts generally disfavor motions to strike because they require the court to evaluate legal issues before the factual background of a case has been developed through discovery. See United States v. Sensient Colors, Inc., 580 F.Supp.2d 369, 374 (D.N.J. 2008). Thus, a court should deny the motion where the sufficiency of a defense depends on disputed issues of fact. Glenside, 761 F.Supp. at 1115. Moreover, even where the facts are not in dispute, a motion to strike is an inappropriate means of testing the legal merits of a defense. Tonka Corp. v. Rose Art Indus., Inc., 836 F.Supp. 200, 218 (D.N.J. 1993). Courts should only determine disputed issues of fact or substantial questions of law after opportunity for discovery and a hearing on the merits. In re Merck & Co., No. 08-1974, 2010 WL 2557564, at *3 (D.N.J. June 23, 2010).

Petitioner moves to strike the affirmative defense under the flotilla doctrine from Claimants' answers. Typically, in a proceeding under the Limitation Act, the shipowner's liability is limited to the value of the vessel on which the injury occurred plus any pending freight. However, if the flotilla doctrine applies, a court may increase the limitation fund to include the value of other vessels. Complaint of Patton-Tully Transp. Co., 715 F.2d 219, 222 (5th Cir. 1983).

The flotilla doctrine's applicability depends on the legal relationship between the shipowner and the injured party. Where the damage was inflicted tortiously, the shipowner must surrender only the value of the "offending" or "actively responsible" vessel. Liverpool, Brazil and River Plate Steam Nav. Co. v. Brooklyn Eastern District Terminal, 251 U.S. 48, 52 (1919). If, however, the shipowner was engaged in the performance of a contract with the injured party at the time of the wrong, surrender of the combined means by which the owner undertook performance of the contract is required. Sacramento Nav. Co. v. Salz, 273 U.S. 326, 332 (1927). Attending vessels necessary to the performance of the contract will be included in the "flotilla." Id. at 329-30; In re Drill Barge No. 2, 454 F.2d 408, 412 (5th Cir. ...


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