Opinion
Case No. 04-20741-CIV-SEITZ/BANDSTRA.
March 22, 2005
Order Granting in Part and Denying in Part Defendant Wärtsilä North America Inc.'s Motion to Dismiss
THIS CAUSE is before the Court on Defendant Wärtsilä North America, Inc.'s ("WNA") Motion to Dismiss Plaintiffs' Complaint. [DE 9]. WNA seeks to dismiss Plaintiffs' breach of a bailment contract claim (Count III), contending that Plaintiffs failed to allege privity of contract in the Complaint as required. Moreover, WNA argues that the Court should dismiss Plaintiffs' negligence claim (Count IV), stating that Plaintiffs cannot maintain a tort cause of action for economic damages and that the alleged damages were not foreseeable. Upon review of the motion, the response, and the reply thereto, WNA's Motion to Dismiss is granted as to Count III with leave to amend and denied as to Count IV.
Background
Plaintiff Ice Fern Shipping Co., Ltd. ("Ice Fern") is the owner of M/V Ice Fern, an ocean-going vessel of 5,966 gross tons (the "Vessel") that carries commercial cargo from ports around the world in exchange for payment of hire or freight. Compl. ¶ 4. In August 2002, Ice Fern, through its management company, Dobson Fleet Management, entered into a maritime contract with Golten Service Co., Inc. ("Golten" and collectively with WNA the "Defendants"), whereby Golten agreed to perform services to the Vessel in the Port of Miami/Port Everglades (the "Contract"). Id. ¶ 9. Pursuant to the Contract, Golten was to perform a "Standard Overhaul" of the Woodward PGA-200 governor (the "governor"), which included the removal of the governor, maintenance and overhaul of the governor, reinstallation and/or reassembly of the governor on the Vessel's main engine, and testing and calibration of the governor. Id. ¶ 10.
The purpose of a ship's governor is to regulate the speed of the ship's engine. See Pls.' Resp. Opp'n Def.'s Mot. Dismiss.
Sometime during August 2002, Golten subcontracted a portion of the overhaul services on the governor to WNA. Id. ¶ 12. Thereafter, the Vessel was in the care and custody of Defendants, for, inter alia, the maintenance and overhaul of the governor. Id. ¶ 13. Between August 2002 and October 2002, Defendants disassembled, cleaned, maintained, overhauled, replaced parts, reassembled, adjusted, tested, and calibrated the governor; once Defendants completed this work, the Vessel was returned to Ice Fern. Id. ¶¶ 13, 14.
In mid-October 2002, a perishable cargo of Chiquita Brand green bananas (the "cargo") was loaded onto the Vessel in Puerto Cortes, Honduras, which were to be delivered to Bandar-Abbas, Persian Gulf. Id. ¶ 15. However, while the Vessel was crossing the Atlantic Ocean, the governor failed, causing the Vessel's engine to over-speed, resulting in the breakdown of, and substantial damage to, the Vessel's main engine. Id. ¶ 16. As a result, the Vessel was unable to complete its intended voyage, and was instead towed to Lisbon, Portugal, where it arrived on November 18, 2002. Id. ¶ 17. Thus, because of the failure of the governor, Plaintiffs sustained salvage and towing expenses, as well as charges for cargo and engineering surveyors, charges for local correspondents, and port charges and agency fees. Id. ¶¶ 17, 21.
Discussion
I. Standard of Review
To survive a Rule 12(b)(6) motion to dismiss, a complaint need only provide a short and plain statement of the claim and the grounds on which it rests. Conley v. Gibson, 355 U.S. 41, 47 (1957). A Rule 12(b)(6) motion tests not whether the plaintiff will prevail on the merits, but instead, whether the plaintiff has properly stated a claim for which relief can be granted. See Fed.R.Civ.P. 12(b)(6); Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). Thus, a court may dismiss a complaint for failure to state a claim only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations. See Hishon v. King Spalding, 467 U.S. 69, 73 (1984). In deciding such a motion, the court must accept all the complaint's well-pled factual allegations as true and draw all reasonable inferences in the nonmovant's favor. See Scheuer, 416 U.S. at 236. Moreover, the threshold of sufficiency that a complaint must meet to survive a motion to dismiss is exceedingly low. Ancata v. Prison Health Servs., Inc., 769 F.2d 700, 703 (11th Cir. 1985) (citation omitted). In short, the complaint must allege enough facts, rather than conclusions, to show there is a legal claim for which relief can be granted.
II. Plaintiff's Claim for Breach of a Bailment Contract
WNA first contends that Plaintiffs failed to state a claim for breach of a bailment contract. Federal common law recognizes the existence of a bailment relationship when one takes exclusive control of another's cargo. See Highlands Ins. Co. v. Strachaun Shipping Co., 772 F.2d 1520 (11th Cir. 1985). In Thyssen Steel Co. v. M/V Kavo Yerakas, 50 F.3d 1349 (5th Cir. 1995), the Fifth Circuit described the law of bailment as developed by federal courts sitting in admiralty:
Bailment is the delivery of goods or personal property to the bailee in trust, under an express or implied contract, which requires the bailee to perform the trust and either to redeliver the goods or otherwise dispose of the goods in conformity with the purpose of the trust. Under general admiralty law, bailment does not arise unless delivery to the bailee is complete and he has exclusive possession of the bailed property, even as against the property owner.Id. at 1354055 (citations omitted). Accordingly, in order for Plaintiffs to state a claim against WNA for breach of a bailment contract, Plaintiffs must allege (1) that the cargo was delivered to WNA under an implied or express contract to hold it in trust and redeliver it to Plaintiffs; (2) that WNA had exclusive possession of the cargo; and (3) that WNA failed to redeliver the cargo in good condition.
Here, Plaintiffs failed to allege an implied or express contract between WNA and Plaintiffs, which is fatal to this claim. In addition, Plaintiffs failed to allege that WNA had exclusive possession of the cargo; rather, the Complaint alleges that the cargo was in possession of both Defendants. Accordingly, the Court must dismiss Plaintiffs' breach of a bailment contract claim.
III. Plaintiff's Negligence Claim A. Plaintiffs may maintain a cause of action against WAR for damages to "other property"
WAR moves to dismiss Plaintiffs' negligence claim stating that the economic loss doctrine prohibits recovery under a tort cause of action. Under the "economic loss doctrine," a plaintiff may not maintain a tort cause of action under admiralty law "when a defective product, purchased in a commercial transaction malfunctions, injuring only the product itself and causing purely economic loss." E. River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 859 (1986). Instead, when a product malfunctions and injures itself, the purchaser must rely on contract law to maintain a claim for recovery. Id. at 871-72.
The economic loss doctrine does not, however, completely exclude tort claims for economic harms caused by a defective product. A plaintiff may maintain a tort cause of action in admiralty when a defective product causes damage to "other property." Id. at 867; Saratogo Fishing Co. v. J.M. Martinac Co., 520 U.S. 875 (1997). In determining whether an item constitutes "other property," one must look to the "object of the bargain." Sea-Land Service v. Gen. Elec. Co., 134 F.3d 149 (3rd Cir. 1998). Thus, in Sea-Land, where the parties bargained for an engine, the Third Circuit concluded that every component of the engine, including its replacement parts, were integrated into the product and did not constitute other property. Id. at 153 (citations omitted); see also Lease Navajo v. Cap Aviation, Inc., 760 F. Supp. 455-59 (E.D. Pa. 1991) (stating, "When one purchases an integrated unit and a part of the integrated unit fails . . . the damage is to the product itself. It would not be proper in such a case to distinguish between components and units as there was no such distinction upon the purchase of the unit.").
Although WAR maintains that this action is similar to Sea-Land, where the plaintiff could not recover in tort for damages to a vessel's engine, the instant case is distinguishable. In Sea-Land, the parties contracted for a single product (the engine), with integrated parts (the connecting rod), and the integrated part was defective. Here, according to the Complaint, the parties' contract covered repairs to the governor only, and its failure caused damage to the engine. Accordingly, because only the governor was covered under the terms of the contract, and the failure of the governor caused damages to the Vessel's engine, Plaintiffs may recover for such damages under a negligence theory. See Irish Ventures, Inc. v. Fleetguard, Inc., 270 F. Supp. 2d 84, 85-86 (D. Mass. 2003) (permitting tort recovery for damages to a vessel's engine that were caused by the malfunctioning of a separately purchased engine filter). B. Forseeability and Robins Dry Rock
See also Mem. Reply Pls' Opp'n WAR's Mot. Dismiss at 3 (stating, "The contract shows that the only thing that was in the possession of Golten was the governor, and the allegations further assert that Golten subcontracted the overhaul of the governor to Wärtsilä.").
See also Transco Syndicate #1, Ltd., v. Bollinger Shipyards, Inc., 1 F. Supp. 2d 608, 612-13 (E.D. Louis. 1998) (allowing tort recovery for damages to a vessel that were caused by separately purchased and manufactured engines); Lease Navajo, Inc., 760 F. Supp. at 459 (stating, "[T]he reality is that the engines and the allegedly defective components were not purchased as integrated units. Rather, the record shows that Cap Aviation purchased a component part only . . . which it then installed in an engine. . . . [Consequently,] [t]he failure of the component caused the damage to other distinct property.").
WAR next contends that even if Plaintiffs can recover for damages to the Vessel's engine, Plaintiffs' claims for towing charges and losses stemming from the devaluation of the cargo are not recoverable because such damages were not foreseeable. In Robins Dry Rock Repair Co. v. Flint, 275 U.S. 303 (1927), the Supreme Court established a bright-line rule whereby a plaintiff cannot recover for economic losses absent physical injury to a proprietary interest. See id. at 308-09. According to the Court, "a tort to the person or property of one man does not make the tort-feasor liable to another merely because the injured person was under a contract with that other unknown to the doer of wrong." Id. at 309. Thus, in In re D H Corp., No. 2:92CV1039, 1994 WL 574143 (E.D. Va. Aug. 4, 1993), the district court dismissed cross-claimants' claims for negligent service of a barge, noting that their only interest in the barge was for lost cargo, and determining that such damages were not foreseeable. Id., at *2.
In the instant case, Plaintiffs have alleged that they have a proprietary interest in the Vessel and that the Vessel was physically damaged, thus circumventing the prohibition against recovery under Robins Dry Rock. "The rule of Robins Dry Rock was never intended to apply to cases in which the plaintiff has suffered some physical damage to property in which he has a proprietary interest." Pennzoil Producing Co. v. Offshore Express, Inc., 943 F.2d 1465, 1473 (5th Cir. 1991). Indeed, "[i]n those cases in which a plaintiff suffers physical damage to some property in which it has a proprietary interest, the rules of Robins Dry Rock and M/V Testbank do not apply." Id. (citation omitted); see also Getty Refining Mktg. Co. v. MT Fadi B, 766 F.2d 829 (3rd Cir. 1985) (stating, "Clearly, a plaintiff may recover for negligence that results in physical harm to his person or land or chattels and causes pecuniary loss because of the nonperformance of a contract with him."). Accordingly, because Plaintiffs may recover for economic losses incurred as a result of the physical damage to the Vessel, WAR's motion to dismiss must be denied.
WAR did not contest these assertions, and accordingly, the Court will assume such facts as true at this stage of the litigation.
IV. Conclusion
For the reasons stated above, it is hereby
ORDERED that WNA's Motion to Dismiss Plaintiffs' Complaint [DE 9] is GRANTED IN PART AND DENIED IN PART; and it is
FURTHER ORDERED that Plaintiffs' claim for breach of a bailment contract with respect to WNA (Count III) is DISMISSED WITHOUT PREJUDICE; and it is
FURTHER ORDERED that to the extent Plaintiffs can address the deficiencies noted with respect to Count III, Plaintiffs may file an Amended Complaint within ten (10) days of the date of this Order; and it is
FURTHER ORDERED that Defendant shall serve its responsive pleading regarding Count IV within twenty (20) days of the date of this Order.
ORDERED.