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Cape Flattery Limited v. Titan Maritime LLC Dba Titan Salvage

July 31, 2012

CAPE FLATTERY LIMITED,
PLAINTIFF,
v.
TITAN MARITIME LLC DBA TITAN SALVAGE, A CROWLEY COMPANY, DEFENDANT.



The opinion of the court was delivered by: J. Michael Seabright United States District Judge

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION TO STRIKE ALLEGATIONS AND AFFIRMATIVE DEFENSES

IN DEFENDANT TITAN MARITIME, LLC, DBA TITAN SALVAGE, A CROWLEY COMPANY'S ANSWER [DOC. 61] TO COMPLAINT OF PLAINTIFF CAPE FLATTERY LIMITED

I. INTRODUCTION

On October 24, 2008, Plaintiff Cape Flattery Limited ("Plaintiff") filed a Complaint asserting that Defendant Titan Maritime, LLC dba Titan Salvage, a Crowley Company ("Defendant") was grossly negligent in salvaging Plaintiff's boat, the M/V CAPE FLATTERY ("the Vessel"). The Complaint seeks (1) a declaration that Plaintiff is entitled to indemnity or contribution from Defendant under the Oil and Pollution Act of 1990 ("OPA 90"), 33 U.S.C. § 2701 et seq.; and

(2) injunctive relief enjoining Defendant from requesting arbitration or seeking an Anti-Suit Injunction in the courts of England to compel arbitration pursuant to the parties' Salvage Contract dated February 4, 2005 (the "Agreement"), which provides that disputes arising under the Agreement shall be settled by arbitration in London, England with English law and practice to apply.

In response to the Complaint, Defendant filed a Motion to Compel Arbitration. On March 19, 2009, the court denied the Motion on the basis that the dispute does not fall within the scope of the agreement to arbitrate. See Cape Flattery LTD v. Titan Mar. LLC, 607 F. Supp. 2d 1179 (D. Haw. 2009). On July 26, 2011, the Ninth Circuit affirmed. See Cape Flattery LTD v. Titan Mar. LLC, 647 F.3d 914 (9th Cir. 2011), certiorari denied,132 S. Ct. 1862 (2012). Despite these Orders determining that the parties' dispute is not subject to arbitration, on April 26, 2012 Defendant filed an Answer asserting various affirmative defenses based on the parties' Agreement and its arbitration provision.

Currently before the court is Plaintiff's Motion to Strike Allegations and Affirmative Defenses in Defendant's Answer. Plaintiff asserts that Defendant's affirmative defenses based on the Agreement are precluded by the March 19, 2009 Order and July 26, 2011 Opinion, and that other defenses are insufficiently pled. Based on the following, the court GRANTS in part and DENIES in part Plaintiff's Motion to Strike.

II. BACKGROUND

A. Allegations in the Complaint

As alleged in the October 24, 2008 Complaint, on February 2, 2005, the Vessel ran aground on a submerged reef off Barbers Point, Oahu, Hawaii. Doc. No. 1, Compl. ¶ 4. In response, the United States Coast Guard issued a Notice of Federal Interest in connection with the grounding of the Vessel and activated Unified Command to respond to the threat of oil discharge. Id. ¶ 5.

On February 4, 2005, Pacific Basin Shipping (HK) Ltd., acting on behalf of Plaintiff as owner of the Vessel, signed an Agreement for Defendant to salve (i.e., refloat) the Vessel. Id. ¶ 21. The Agreement includes a clause whereby the parties agree to arbitrate any disputes "arising under" the Agreement in London under English Law. Id. ¶ 23.

Defendant participated in removing the Vessel from the reef and eliminating the threat of oil discharge. Id. ¶ 6. Plaintiff alleges that Defendant acted with gross negligence by using tugs with submerged heavy tow lines which damaged the coral reef, even though Defendant was expressly warned not to use such tow lines and had previously used floating tow lines that would not cause coral damage. Id. ¶¶ 8-11. On February 10, 2005, the United States Coast Guard designated Plaintiff the responsible party for costs and damages arising from the response to the oil spill threat pursuant to OPA 90.*fn1 Id. ¶ 13. On August 8, 2008, Plaintiff was informed that it may be liable for restoration of the coral in an amount in excess of $15 million. Id. ¶15.

Based on these factual allegations, the Complaint asserts two claims. The first claim, for declaratory relief, seeks a judgment declaring that Defendant's use of submerged lines during the salve of the Vessel was grossly negligent such that Plaintiff has the right to indemnity and contribution from Defendant, as is authorized by OPA 90, 33 U.S.C. § 2709.*fn2 Id. ¶¶ 18-20. The second claim, for injunctive relief, seeks to prevent Defendant from either requesting arbitration or seeking an Anti-Suit Injunction in the courts of England to compel Plaintiff to arbitrate its claims. Id. ¶ 25. The Complaint asserts that Plaintiff's gross negligence claim does not "arise under" the Agreement and therefore is not subject to arbitration. Id. ¶ 23.

B. Events in the District Court After the Complaint

With its Complaint, Plaintiff also filed an Ex Parte Motion for Temporary Restraining Order ("TRO") to enjoin Defendant from seeking arbitration or an Anti-Suit Injunction in the English Courts to compel Plaintiff to arbitrate. Doc. No. 6. On November 4, 2008, the parties entered into a Stipulation whereby Plaintiff withdrew its Motion for TRO without prejudice and Defendant agreed not to initiate arbitration under the Agreement or seek an Anti-Suit Injunction in the English courts "unless and until this Court grants a Motion to Compel Arbitration and/or Motion to Dismiss to be filed by Defendant." Doc. No. 15 at 2-3. The Stipulation further provides that "[n]othing in this stipulation is to be construed as a waiver of Defendant's right to move this Court to compel arbitration or of any other defense." Id. at 3.

Defendant subsequently filed its Motion to Compel Arbitration, which this court denied on March 19, 2009. The March 19, 2009 Order explained that under Ninth Circuit law, the provision in the Agreement providing that the parties would arbitrate any dispute "arising under" the Agreement is narrow and "reaches only those disputes between the parties that relate to the interpretation and performance of the Agreement itself." Cape Flattery, 607 F. Supp. 2d at 1188. The March 19, 2009 Order found that Plaintiff's assertion that Defendant was grossly negligent in salving the Vessel does not relate to the interpretation and performance of the Agreement because this alleged breach of duty is wholly separate from any duties arising under the Agreement. The March 19, 2009 Order reasoned:

Because damage to the reef as a result of using submerged tow lines was clearly foreseeable, and because Plaintiff is strictly liable under the law for damage to the reef, the court concludes that a duty of care was owed by Defendant to Plaintiff.

This duty -- to prevent foreseeable damage to the coral reef -- is separate from and above and beyond Defendant's duties under the Agreement. . . . The parties point to no Agreement provision that Defendant allegedly breached -- the Agreement is silent regarding what tow lines Defendant must use, how precisely Defendant must salve the Vessel, and whether Defendant must take precautions to prevent harm to the coral reef. Simply put, finding a breach of Defendant's duty to prevent foreseeable harm to the reef will not require determining whether Defendant performed under the Agreement. Defendant's duty to prevent foreseeable harm to the coral reef exists regardless of the Agreement.

Id. at 1190 (footnotes omitted). As a result, the March 19, 2009 Order concluded that Plaintiff raised claims "sound[ing] wholly in tort [that] do not relate to 'the interpretation and performance' of the Agreement" such that the dispute is not arbitrable. Id.

C. The Ninth Circuit's July 26, 2011 Opinion

Defendant appealed the March 19, 2009 Order to the Ninth Circuit, which affirmed in a July 26, 2011 Opinion. The July 26, 2011 Opinion confirmed that the arbitration provision in the Agreement must be read narrowly and therefore had "no difficulty concluding that the present dispute is not arbitrable." Cape Flattery, 647 F.3d at 923. The July 26, 2011 Opinion reasoned:

The present dispute does not turn on an interpretation of any clause in the contract. As the district court noted, "[t]he parties point to no Agreement provision that Defendant allegedly breached -- the Agreement is silent regarding what tow lines Defendant must use, how precisely Defendant must salve the Vessel, and whether Defendant must take precautions to prevent harm to the coral reef." Cape Flattery, 607 F. Supp. 2d at 1190 (footnote omitted). Nor does the dispute turn on Titan's performance under the contract. Instead the dispute involves a tort claim based on Hawaii and maritime tort law, incorporated as part of the Oil Pollution Act of 1990, and limited by that federal statute to grossly negligent acts.

Id. at 924.

Defendant's petitions for rehearing en banc and for a writ of certiorari were denied. See Titan Maritime, LLC v. Cape Flattery Ltd., 132 S. Ct. 1862 (2012).

D. Defendants' Answer to the Complaint

After the resolution of the appeal on Defendant's Motion to Compel Arbitration, Defendant filed an Answer on ...


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