Court Opinion

ID: 152315
Source: CourtListenerOpinion
Date Created: 2010-08-06 00:00:26+00
Date Added: 2024-06-11T17:24:28.178710
License: Public Domain

Not for Publication in West’s Federal Reporter

           United States Court of Appeals
                       For the First Circuit

No. 09-1730

                       IN RE: PHILIP R. MARTIN

                 TRAVELERS INSURANCE CO., ET AL.,

                       Plaintiffs, Appellants,

                                     v.

                  METROPOLITAN YACHT CLUB, INC.,

                         Defendant, Appellee.

            APPEAL FROM THE UNITED STATES DISTRICT COURT
                  FOR THE DISTRICT OF MASSACHUSETTS
         [Hon. Robert B. Collings, U.S. Magistrate Judge]

                                  Before

                      Boudin, Circuit Judge,
                    Souter, Associate Justice,*
                    and Howard, Circuit Judge.

     Steven E. Kramer for appellant Donald Salvucci, Robert E.
Kiely, with whom Regan & Kiely LLP was on brief, for appellants
Travelers Insurance Co. and International Marine Underwriters, and
Brian Keane, with whom The Kaplan/Bond Group was on brief, for
appellant Philip R. Martin.
     David J. Farrell, Jr., with whom Admiralty Office of David J.
Farrell, Jr. was on brief, for appellees.

                             August 5, 2010

     *
          The Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
           SOUTER, Associate Justice.   The appellee Metropolitan

Yacht Club, Inc. is a non-profit association of voluntary members.

Appellant Phillip R. Martin and other members of the Club applied

and paid for winter wet storage of their boats on Club premises,

where a fire that broke out there destroyed several boats and

damaged others.     State investigators concluded that the fire

originated in faulty wiring beneath the dock adjacent to Martin’s

boat; but Martin, concerned about possible claims against him,

petitioned the district court for a decree exonerating him or

limiting his liability under maritime law, 46 U.S.C. § 30501 et

seq.   The judicial proceedings ballooned as more Club members with

damaged boats and various insurers joined in, asserting claims

against Martin, the Club, or both.

           Eventually the Club moved for summary judgment that it

was liable to no one, including Martin, under governing maritime

law, owing to the fact that members were subject to the following

Club by-law:

           “The Club expressly absolves itself . . . and
           each member agrees that the Club may absolve
           itself from any liability for damages to any
           boat, property, appurtenances and contents
           thereof . . . .        Said absolution from
           liability shall include but not be limited to:
           (a) Fire; (b) Theft; (c) Vandalism; (d) Water
           Damage; (e) Negligent acts or omissions.”

A magistrate judge granted the motion, and Martin and others

brought this interlocutory appeal under 28 U.S.C. § 1292(a)(3). On

                                -2-
de novo review, Rosario v. Dept. of Army, 607 F.3d 241, 246 (1st

Cir. 2010), we affirm.

           There is no claim that the Club was at greater fault than

simple negligence, so the issue is over the effectiveness of the

by-law term of exculpation from negligence liability for property

damage to a Club member.       No maritime case in this circuit is

directly on point, although the leading opinion (dealing with

exculpatory language in commercial circumstances) addresses two

points of maritime law of interest here: (1) “an exculpatory clause

limited to barring liability for ordinary negligence would be

valid, assuming it were not inflicted by a monopolist or one with

greatly superior bargaining power”; and (2) a court may sever or

divide   an   overbroad   clause,   “retaining   those    provisions   or

applications of them that are permissible.”       Broadley v. Mashpee

Neck Marina, Inc., 471 F. 3d 272, 274, 275 (1st Cir. 2006).        While

the court did not sever the clause then at issue, it observed that

“[a]ny competent lawyer could write a straightforward exclusion of

liability for negligence that we would sustain.”         Id. at 276.

           Our road to decision is not as short as this considered

dictum might suggest, however, given some details said to be in

tension with a “straightforward” classification for the exclusion

here.    The owners and insurers make much of the fact that the

exculpation clause is contained in a by-law that was bargained for

neither when the boat owners joined the Club, nor when they applied

                                    -3-
for winter storage of the boats.         They portray themselves as the

weaker   contracting   parties   outmatched    by   the   Club’s   “greatly

superior bargaining power.”      But it would be unfair to compare the

clause here either to one inflicted, or to one devised by a

monopolist to extract a benefit from a helpless counterparty.            As

an initial matter, there is no monopoly on boat storage; commercial

marinas may be found nearby the Club’s premises.           Yet there is a

more fundamental feature of this case in the relationship between

an association and its members that makes the Club’s initial

bargaining power less significant than it would be in a standard

commercial transaction.    The limit on liability is one of several

terms of a compact of the members with each other to limit the cost

of membership,1 and every prospective member who joins immediately

shares in its benefits.    And by the very nature of such a compact,

the by-laws are voted on by the Club membership, and the limitation

on liability is open to revision by Club members (never attempted

by the boat owners here).         Membership agreements of voluntary

associations like the Club were not what the Broadley panel had in

mind when it spoke of monopolies and other situations of uneven

bargaining power.2

     1
       Another is the requirement that all members annually
contribute eight hours of personal labor (or pay the Club $25.00
for each hour not worked).
     2
       Cf. Post v. Belmont Country Club, Inc., 60 Mass. App. Ct.
645, 649-50, 805 N.E.2d 63, 68-69 (2004) (noting that the indemnity
clause in a club’s by-laws “was in fact more likely to have worked

                                   -4-
                Objection is also made to the omission of the by-law from

the written terms of the “Winter Storage Application” itself (in

contrast to the standard summer slip rental form).                      But the

appellants’       attempt   to   rely   exclusively   on   the   text   of   the

application is misplaced.           The by-laws govern the relationship

between its members and the Club, and these make binding upon all

members     a    rule   specifically    governing   application   for    winter

storage.3       It is simply not reasonable to assert that submission of

such an application proposed a contractual relationship wholly

distinct from membership.         Nor do the appellants fare any better

with their suggestion that the Club was deficient in bringing the

by-laws to members’ notice at any time.         Since there is no question

that the by-laws were readily available, no more need be said,

given our agreement with the Massachusetts common law rule that a

member generally is responsible for knowing his organization’s by-

laws.    Post v. Belmont Country Club, Inc., 60 Mass. App. Ct. 645,

648-49, 805 N.E.2d 63, 67-68 (2004).

in [an individual member’s favor] than not, shielding him and the
other members from increased dues related to payment of claims or
additional insurance costs” and reasoning that “[b]ecause members
retain . . . constant opportunity to ‘negotiate’ changes in the
membership agreement, [such a contract] differs substantially from
that where a consumer, in order to acquire needed goods and
services, is required to accept its terms on a take it or leave it
basis”).
     3
       That rule, consistent with the limitation of liability by-
law, provides (among other things) that boat owners assume the risk
of property damage.

                                        -5-
            Next, the objectors point out that the exculpatory clause

here may be read as going beyond what the court in Broadley thought

was acceptable, since the “absolution” is not limited to simple

negligence; it also applies by reference to specific sources of

damage (fire, etc.) without reference to degree of fault.            While

this is true, any supposedly excessive favor to the Club may be

pared down by a process of severance so long as the clause was

devised in good faith and obtained in accordance with reasonable

standards of fair dealing.       Broadley, 471 F.2d at 275 (quoting

Restatement (Second) of Contracts § 184).           Both conditions are

satisfied here.    What has already been said about the nature and

purpose of the amendable by-law answers any question about good

faith, and the consistency with fair dealing is shown by its

clarity in expressly excluding ordinary negligence, whatever else

it may purport to do.     See id. (clear and specific disclaimer of

negligence   liability   would   be   likely   to   convey   an   effective

warning).

            Remaining arguments based on standards for reforming

defective contract documents are beside the point here.           The Club

does not seek reformation for failure of a document to express the

true agreement, and the by-law is not just another conventional

contract between parties bound solely by commercial terms of

agreement. Indeed, the very fact that the contractual relationship

it governs is between an association and its voluntary members so

                                  -6-
far distinguishes this case from one (such as Broadley) involving

a purely business relationship as to admit of a question whether a

membership corporation in circumstances like these may effectively

contract   out   of    liability   for    greater   fault   than   ordinary

negligence.   But that issue is not before us.4

           Affirmed.

     4
       Nor are there any issues about application of the by-law to
contract as distinct from tort liability, or to the bailment
relationship, matters ruled upon by the magistrate judge but not
pursued here.

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