Source: http://ny.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20070117_0000034.SNY.htm/qx
Timestamp: 2017-11-21 08:25:20
Document Index: 721445832

Matched Legal Cases: ['§ 3', '§ 183', '§ 185', '§ 22', '§ 183', '§ 1404']

The instant action arises out of extensive litigation in the aftermath of Hurricane Katrina, which devastated New Orleans in August of 2005. The dispute at bar was triggered by the breakaway of a barge moored in New Orleans during the hurricane and its subsequent collision with one of the levees protecting the city. This was one of the levees that broke, flooding the city. The offending barge, Barge ING 4727, was owned and operated by Ingram Barge Company ("Ingram"), which had contracted in December of 2004 with Lafarge, a construction materials company and supplier of cement and other construction materials, to transport cement from Lafarge's plant in Illinois to its New Orleans facility. The barge had been moored at Lafarge's terminal in New Orleans at the time of the storm, pursuant to a Transportation Agreement between the two companies which stated that "Shipper [Lafarge] shall assume the duty and responsibility of the safety of each barge in its possession." Decl. of Robert B. Fisher, Jr., in Supp. of Def.'s Mot. Transfer, dated Jul. 7, 2006 ("Fisher Decl.") ¶¶ 2, 3.
Lafarge is a defendant in a number of federal actions filed in the Eastern District of Louisiana that seek to hold it responsible for damage allegedly caused as a consequence of the ING 4727 striking the levee.*fn1 Ingram is also a defendant in these lawsuits, together with various federal, state, and municipal government entities and officials who have been sued for numerous torts, including defective and negligent design, construction, operation, and maintenance of the New Orleans navigable waterway system and failure to take precautions prior to the hurricane to prevent the ING 4727 from causing or contributing to the breaching of the levee. See 3d Party Compl., 05 Civ. 4419 (filed E.D. La. Aug. 31, 2006) §§ 3, 4.
In response to this deluge of litigation, Ingram as owner of the barge petitioned for exoneration from or limitation of liability pursuant to 46 U.S.C. App. § 183 et seq. in the Eastern District of Louisiana. Under this statute, known as the Limitation of Liability Act, a vessel owner may, if it meets certain criteria, be exonerated from liability or limit its liability to the value of the vessel after the accident. See Maryland Cas. Co. v. Cushing, 347 U.S. 409, 414 & n.4 (1954). Thus, even if found liable for the injuries alleged by the class action plaintiffs, Ingram hopes to limit its liability to the value of the ING 4727, an insignificant sum given the vast damages presumably at stake. When a limitation of liability petition is filed, all claims and proceedings against the owner with respect to the matter in question are enjoined except insofar as they are part of the Limitation Proceeding. See 46 U.S.C. App.§ 185. Chief Judge Berrigan of the Eastern District of Louisiana issued such an injunction and additionally consolidated all the other pending actions in the Hurricane Katrina litigation into the Limitation Proceeding. See Fisher Decl., Ex. H.
The involvement of the American Club, a nonprofit mutual protection and indemnity ("P&I") association of which Lafarge is a member, arises in this manner. P&I policies cover the insured against costs and liability arising out of death, injury, or property damage suffered by third parties. While at common law the doctrine of privity of contract prevented a third party injured by an insured from suing the insurer, a number of states now have "direct action" statutes that permit an injured party to sue a tortfeasor's insurer directly. See generally Mark Christian Elmer, Note, Marine P&I Insurers No Longer Safe from the Louisiana Direct Action Statute (If They Ever Were): Grubbs v. Gulf International Marine, Inc., 18 Tul. Mar. L.J. 371, 372 (1994). Louisiana is one of these states. See La. Rev. Stat. Ann. § 22:655. Exercising their right to proceed directly against the insurer, plaintiffs in the Hurricane Katrina class actions filed amended complaints in the Eastern District of Louisiana naming the American Club as a defendant once they learned about Lafarge's policy with the American Club from interrogatories in the litigation.*fn2 See Def.'s Mem. in Supp. of Mot. Transfer ("Def.'s Mem."), at 4. The American Club has filed answers in these cases. See Fisher Decl. ¶ 8, Exs. F, G.
Under Fifth Circuit case law, the shipowner's ability to limit its liability under 46 U.S.C. § 183 does not affect its insurer's exposure, unless the terms of the policy themselves exclude coverage in such a situation. See Crown Zellerbach Corp. v. Ingram Indus. Inc., 783 F.2d 1296 (5th Cir. 1986). The American Club's exposure could therefore potentially be great even if Ingram successfully limits its liability in the Limitation Proceeding. Nevertheless, to prevail against the American Club on their direct action for damages at large, the direct action claimants will have to prove that the barge caused the damage alleged and that the barge was covered under Lafarge's P&I policy with the American Club. The Club's action in this Court seeks a declaratory judgment that the policy did not cover the barge.
Despite the complexity of the Hurricane Katrina litigation, the coverage issue presented by the case at bar appears to be a straightforward question of contract law. On September 23, 2005, Lafarge gave the American Club written notice that it might be subject to claims for the ING 4727's breach of the 17th Street Canal Levee.*fn3 See Aff. ofMichael J. Mitchell in Opp'n to Def.'s Mot. Transfer, dated Aug. 18, 2006 ("Mitchell Aff."), Ex. 6. In a letter to the American Club dated October 24, 2005, Lafarge's representative explained why Lafarge took the view that the Transportation Agreement, the contract with Ingram governing shipment of cement via the ING 4727, brought the barge within the coverage of Lafarge's P&I policy with the American Club. See Mitchell Aff., Ex. 8.
Each member of the American Club is issued a Certificate of Entry ("COE") with the Club that recites the terms of the governing P&I policy. The policy is in turn governed by the American Club's Bylaws and Rules (collectively known as the "Club Rules"), together with any special terms and conditions applicable to that member. Lafarge's COE contains a provision under the "Member Specific Clauses" that states as follows:
Clause 51 of the Transportation Agreement between Ingram and Lafarge states: Independent Contractor: Nothing contained in this Contract shall be construed as a contract by Shipper [Lafarge] for the chartering, hiring or leasing of any barge, or other equipment of Carrier [Ingram] to be provided hereunder; nor shall any of the agents, servants, subcontractors or employees of Carrier be regarded as employees of Shipper, it being understood that Carrier is in all respects an independent contractor and that Shipper shall exercise no control over the operation of any barge, towboat or other equipment of Carrier or over Carrier's agent servants, subcontractors or employees.
In the present motion, Lafarge claims, inter alia, that because the direct actions against the American Club were filed in the Eastern District of Louisiana prior to the declaratory action in this Court, the rule of judicial administration known as the "first-filed rule" should cause this Court to transfer the instant case to that district. See generally First City Nat. Bank & Trust Co. v. Simmons, 878 F.2d 76, 79 (2d Cir. 1989) (it is a "well-settled principle in this Circuit that where there are two competing lawsuits, the first suit should have priority, absent the showing of balance of convenience . . . or special circumstances . . . giving priority to the second") (internal quotations and citation omitted). Alternatively, defendant seeks a stay of this action pending resolution of the issue in New Orleans.
28 U.S.C. § 1404(a) provides, "For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." The objectives of Section 1404(a) are "to prevent waste of time, energy and money and to protect litigants, witnesses and [the] public against unnecessary inconvenience and expense." Beatie & Osborn LLP v. Patriot Scientific Corp., 431 F. ...