Court Opinion

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Opinions of the United
1994 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

11-15-1994

Neely v. ClubMed
Precedential or Non-Precedential:

Docket 93-2069

Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1994

Recommended Citation
"Neely v. ClubMed" (1994). 1994 Decisions. Paper 189.
http://digitalcommons.law.villanova.edu/thirdcircuit_1994/189

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                 UNITED STATES COURT OF APPEALS
                     FOR THE THIRD CIRCUIT

                    Nos. 93-2069 and 93-2102

                         EILEEN ANNE NEELY,

                                  Appellant in No. 93-2069

                                 v.

    CLUB MED MANAGEMENT SERVICES, INC.; CLUB MED SALES, INC.;
             CLUB MED, INC., Third-Party Plaintiffs;
                HOLIDAY VILLAGE (ST. LUCIA), LTD.

                                 v.

                          JOSEPH LEMAIRE,

                                  Third-Party Defendant

             Club Med Management Services, Inc. and
                Holiday Village (St. Lucia) Inc.,

                                  Appellants in No. 93-2102

          Appeal from the United States District Court
            for the Eastern District of Pennsylvania
                  (D.C. Civil No. 91-cv-07416)

                      Argued August 8, 1994

               Before:   MANSMANN, COWEN and McKEE,
                           Circuit Judges

           (Filed   November 15, l994                 )

M. Kelly Tillery (argued)
Michael V. Tinari
Leonard, Tillery & Davison
1515 Market Street
18th Floor
Philadelphia, PA   19102

          Counsel for Eileen Anne Neely

Bettina B. Plevan (argued)
Proskauer, Rose, Goetz & Mendelsohn
1585 Broadway
New York, NY 10036

          Counsel for Club Med Management
          Services, Inc.; Club Med, Inc.; Holiday
          Village (St. Lucia), Ltd.

Louis Bell
Marshall, Dennehey, Warner,
 Coleman & Goggin
1845 Walnut Street
Philadelphia, PA 19103

          Counsel for Club Med Management
          Services, Inc.; Holiday Village,
          (St. Lucia) Ltd.

                        OPINION OF THE COURT

COWEN, Circuit Judge.

          This personal injury action was filed with the United

States District Court for the Eastern District of Pennsylvania

under the Jones Act, 46 U.S.C. § 688, and the General Maritime

Law of the United States.   The plaintiff was a scuba diving

instructor who received injuries from a diving accident that took

place in the coastal waters of St. Lucia.      On motion by the

defendants,1 the district court reduced the verdict in favor of
1
 . Defendants in this action are: Club Med Management Services,
Inc.; Club Med Sales, Inc.; Club Med, Inc. (collectively "Club
Med"); and Holiday Village (St. Lucia), Ltd.
the plaintiff on the theory that the plaintiff was contributorily

negligent.    In this appeal, the plaintiff contends the district

court improperly reduced the jury verdict.      In a cross-appeal,

the defendants challenge the order of the district court denying

their motion to dismiss the complaint for lack of subject matter

jurisdiction.    Because we will reverse the order of the district

court which concluded there was subject matter jurisdiction, we

need not address plaintiff's appeal regarding the reduction of

the jury verdict.

                                  I.

                        A. Factual Background

             Plaintiff Eileen Neely ("Neely") applied for a position

as a scuba diving instructor with Club Med after vacationing at

one of their resorts.    Neely traveled to New York City to

interview with Club Med.    During a subsequent telephone call to

her home in Pennsylvania from Club Med in New York City, Neely

was offered a position at the Club Med resort, Holiday Village

(St. Lucia) Ltd.

             In May of 1991, Neely began work at the Holiday Village

as a scuba diving instructor.    On May 23, 1991, the vessel Long

John, a diving boat used by Holiday Village for diving

excursions, left the resort area for a group dive.       On board the

vessel was Neely (who was acting in her capacity as a dive

instructor), another dive instructor, the Dive Master, the

captain, and a number of Club Med guests.       As they neared the

dive sight, the captain slowed the forward direction of the boat,
and put the engines in neutral.   He did not shut off the engines.

The guests were instructed to put on their diving gear and await

the signal from the Dive Master before entering the water.

          What happened next remains in dispute.    Neely claims

that she received the "O.K." signal from the Dive Master, and

entered the water.   Defendants insist that the signal was never

given, and Neely entered the water prematurely from the stern and

without authorization.   In any event, while (unknown to the

captain of the Long John) Neely was in the water, the captain

shifted the engines from neutral to reverse.    The churning

propellers of the twin 350 horsepower diesel engines sucked her

under the boat and into the ship's propellers.    Seconds later,

she reappeared on the starboard side of the boat and was rescued

by the other dive instructor.   Neely sustained multiple severe

injuries to various parts of her body.

                     B. Procedural Background

          Plaintiff Neely is a United States citizen who resides

in Pennsylvania.   Defendant Club Med Management Services, Inc.,

is organized under the laws of New York State; Club Med Sales,

Inc., under the laws of the State of Delaware; Club Med, Inc.,

under the laws of the Cayman Islands; and Holiday Village (St.

Lucia), Ltd., under the laws of St. Lucia.

          Neely filed suit in the United States District Court

for the Eastern District of Pennsylvania under the Jones Act, 46

U.S.C. § 688, and the General Maritime Law of the United States.

The defendants filed a motion to dismiss for lack of subject
matter jurisdiction, which was denied by the district court.     The

case proceeded to trial and the jury awarded the plaintiff

$545,000.00 in damages.   After factoring in the percentage of

contributory negligence which was determined by the jury on the

Jones Act count of the complaint, the district court entered

judgment for the plaintiff in the amount of $229,700.00.      These

appeals followed.   We have jurisdiction over the appeal and

cross-appeal, which were taken after a final judgment was entered

by the district court, pursuant to 28 U.S.C. § 1291 (1988).

                               II.

          Defendants argue that the district court lacked subject

matter jurisdiction over plaintiff's complaint alleging claims

under the Jones Act and General Maritime Law.   We exercise

plenary review, and thus employ the same standard that the

district court used to determine whether subject matter

jurisdiction properly lies in the district court:
          [A] court reviewing a claim to Jones Act
          coverage should determine the substantiality
          of the links to the United States and the
          links to the foreign sovereignty. This
          process is undertaken in order to discern in
          whose "domain" the paramount interest lies.
          Under certain circumstances the Jones Act may
          be far-reaching. However, when the links to
          the United States are weak and the interests
          of another sovereign are substantial, the
          Jones Act is not applicable.

Chirinos de Alvarez v. Creole Petroleum Corp., 613 F.2d 1240,

1246 (3d Cir. 1980)(citation omitted).   As the party who invoked

the jurisdiction of the district court, Neely bears the burden of
proving subject matter jurisdiction when put in issue by the

defendants and where there are disputed jurisdictional facts.

Matute v. Procoast Navigation Ltd., 928 F.2d 627, 632 (3d Cir.),

cert. denied, 112 S. Ct. 329 (1991).    See also Trentacosta v.

Frontier Pacific Aircraft Indus., Inc., 813 F.2d 1553, 1559 (9th

Cir. 1987)("[t]he party invoking the federal court's jurisdiction

has the burden of proving the actual existence of subject matter

jurisdiction . . . .").

              The district court correctly found that resolution

of the jurisdictional issue turned on the application of the

eight factor test set forth by the Supreme Court in Lauritzen v.

Larsen, 345 U.S. 571, 73 S. Ct. 921 (1953), and Hellenic Lines

Ltd. v. Rhoditis, 398 U.S. 306, 90 S. Ct. 1731 (1970).    Neely v.

Club Med Sales, Inc., No. 91-7416, 1992 WL 398378, at *2-3 (E.D.

Pa. Dec. 31, 1992).    The eight factors to be considered in Jones

Act and maritime jurisdictional disputes are the:    (1) law of the

flag; (2) shipowner's base of operations; (3) allegiance of the

defendant shipowner; (4) inaccessibility of a foreign forum; (5)

place of the wrongful act; (6) place of the employment contract;

(7) allegiance or domicile of the injured party; and (8) law of

the forum.   Id. at *3.   We conclude that the district court erred

when it found that these factors indicated that the United States

was the appropriate forum for this lawsuit.   We will address each

of these factors seriatim.

1.   Law of the Flag
          The nationality of the vessel's flag is the single most

important factor in the Jones Act jurisdictional equation.     The

Supreme Court stated in Lauritzen that "the most venerable and

universal rule of maritime law relevant to our problem is that

which gives cardinal importance to the law of the flag."    345

U.S. at 584, 73 S. Ct. at 929.    With respect to this factor, the

district court found that "the diving vessel flies the flag of

St. Lucia."    Neely, 1992 WL 398378, at *3.   Neely maintains that

there was no evidence presented before or during trial to

establish that the vessel Long John actually flies the flag of

St. Lucia.    However, the defendants point out that the finding of

the district court was based on the pre-trial declaration of

vessel owner, Joseph LeMaire, which was submitted in support of

his successful motion to dismiss the third-party complaint

against him.   LeMaire stated that the Long John is registered in

St. Lucia, and his sworn declaration has not been contradicted.

          Defendants argue that registration of a vessel in a

particular country is equivalent to "flagging" the vessel.

Although no authority explicitly states that registration and

flagging a vessel are one and the same, there is authority which

indicates that "[a] ship navigating the seas may sail only under

the flag of the nation in which it is registered . . . ."    1

Thomas J. Schoenbaum, Admiralty and Maritime Law § 2-21, at 46
n.1 (2d ed. 1994)(citation omitted).   Thus, since the Long John

was registered in St. Lucia, it was required to fly a St. Lucian

flag.
            Neely argues that registration is not the same as

flagging because a shipowner could register a vessel for a

variety of purposes, such as obtaining a docking permit.

However, no country may place its flag on a ship that is already

registered in another country, except pursuant to a transfer of

registration, id. at 46, and no proof of such transfer of

registration has been offered by the plaintiff.    The substance of

Neely's argument concerning the law of the flag factor is that

the shipowner was flying a flag of convenience -- the occasional

practice of some American shipowners to sail under the flag of

another country whose shipping laws and registry requirements are

not as stringent as the United States.    However, at no time

during the proceedings did Neely offer any evidence to prove that

the Long John was merely flying a flag of convenience.     Nor did

Neely offer any evidence to indicate that the registration of the

Long John in St. Lucia was only for docking or other limited

purposes.

            Because the plaintiff bears the burden of proving

subject matter jurisdiction, it would even be insufficient if she

proved that the Long John was not flying a St. Lucian flag.      The

plaintiff still has the additional hurdle of proving that the

vessel was flying an American flag in order for this factor to

weigh in favor of subject matter jurisdiction in the district

court.   Since the only evidence pertaining to law of the flag

adduced in the district court indicates that the vessel was a St.

Lucian flagged vessel, we conclude this factor weighs heavily
against finding subject matter jurisdiction in the district

court.

2.   Shipowner's Base of Operations

             Neely argues that the base of operations is that of

LeMaire, the shipowner.     Evidence in the record indicates that

LeMaire's part-time residence in the United States is Miami,

Florida.     Defendants contend that base of operations means the

base of operations of the particular vessel, which is clearly St.

Lucia.     The district court, looking at the base of operations of

the owner, concluded that this factor was unclear, and favors

neither the United States nor St. Lucia as the appropriate forum

for this dispute.

             Even assuming arguendo that plaintiff's definition of

base of operations, i.e. as that of the shipowner, is correct, we

find that this factor weighs against finding subject matter

jurisdiction in the district court.     Plaintiff argues and the

record supports the conclusion that Holiday Village chartered

this vessel from the actual shipowner in a manner consistent with

a bareboat or demise charter.2    A "bareboat" charter or "demise"

charter exists whenever the:

            vessel is chartered or "leased" to another

            who takes possession, custody and control of

            the vessel.   The master is hired and paid by

            the charterer and becomes the agent and

2
.    Appellant/Cross-Appellee's Reply/Answering Brief at 40-47.
           representative of the charterer.   The

           operating expenses of the vessel, such as

           wages, fuel, subsistence, wharfage charges,

           etc., are paid by the charterer.   The owner

           surrenders entire control and possession of

           the vessel and subsequent control over its

           navigation to the bareboat charterer, who

           becomes the owner pro hac vice.

2 Martin J. Norris, The Law of Seamen § 30:14, at 372 (4th ed.

1985).   Thus, by contracting a demise charter with the actual

shipowner, Holiday Village became the owner pro hac vice of the

Long John.    Since we look to Holiday Village (a St. Lucian

corporation), rather than LeMaire of Miami, as the owner of the

vessel, we hold that this factor also weighs against finding

subject matter jurisdiction in the district court.

3.   Allegiance of the Defendant Shipowner

           The district court made no definitive finding as to the

allegiance of the defendant shipowner.   The only finding of the

district court was that, "Mr. LeMaire is neither a citizen of St.

Lucia, [n]or the United States, but lives in Miami, Florida.     He

claims to have dual citizenship in Canada and Guadeloupe."

Neely, 1992 WL 398378, at *3.   Additionally, in his declaration,

LeMaire stated that he currently resides in both Florida and

Guadeloupe.   On the facts of this case, the allegiance or

domicile of the actual shipowner is not relevant, since the Long
John was the subject of a demise charter to Holiday Village.     As
we related above, Holiday Village is the owner pro hac vice of

the vessel.   The allegiance or domicile of Holiday Village is St.

Lucia.   This factor also weighs against finding subject matter

jurisdiction in the district court, and points to St. Lucia as

the appropriate forum.

           Alternatively, even assuming arguendo that we look to

LeMaire rather than Holiday Village as the defendant shipowner,

we note that he is both a citizen and resident of Guadeloupe.

However, he is only a resident of the United States.   Therefore,

we conclude that LeMaire owes his allegiance to Guadeloupe and

this factor weighs against finding jurisdiction in the district

court.

4.   Inaccessibility of a Foreign Forum

           Plaintiff puts forth the argument that St. Lucia is an

inaccessible forum because she is in no financial position to

travel to St. Lucia, hire St. Lucia counsel, and pursue an action

against the defendants in the St. Lucian courts.   Additionally,

she claims that St. Lucia is an inconvenient forum.

           Similar to Neely, in Rodriguez, the plaintiff argued
that a foreign forum was not convenient to him because his

physicians and medical records were in the United States and

because he had retained American counsel who would not represent

him in Colombia.   Rodriguez v. Flota Mercante Grancolombiana,

S.A., 703 F.2d 1069, 1075 n.3 (9th Cir.), cert. denied, 464 U.S.

820, 104 S. Ct. 84 (1983).   The Court of Appeals for the Ninth

Circuit in rejecting the plaintiff's argument stated that:
         Convenience of the witnesses and attorney are
         not factors cited by the Court in Lauritzen
         and Rhoditis as determinators of the Jones
         Act jurisdiction. Although these factors
         "might be a persuasive argument for
         exercising a discretionary jurisdiction to
         adjudge a controversy . . . it is not
         persuasive as to the law by which it shall be
         judged." Lauritzen, 345 U.S. at 589-90, 73
         S.Ct. at 931-932. Thus, the costs and loss
         of time entailed in deposing the medical
         witnesses and sending the records and the
         American attorney to . . . [a foreign forum]
         while relevant to the issue of forum non
         conveniens are not relevant factors in
         determining whether Jones Act jurisdiction is
         present.

Rodriguez, 703 F.2d at 1075 n.3.

          We agree with the Court of Appeals for the Ninth

Circuit that the Supreme Court in Lauritzen did not intend the

"inaccessibility of a foreign forum" factor to require a forum

non conveniens analysis.   The Supreme Court in Lauritzen rejected

the argument "that justice requires adjudication under American

law to save seamen the expense and loss of time in returning to a

foreign forum."   345 U.S. at 589, 73 S. Ct. at 932.   Lauritzen

indicates that inaccessibility of the forum and forum non

conveniens are two separate and distinct matters.   Therefore,

discounting any claim of inconvenience by Neely in bringing this

suit in a foreign forum, it is not clear why a forum in St. Lucia

would be inappropriate.    Neely has offered no credible evidence

to indicate that St. Lucia will not entertain such a suit or that

there are other barriers to her being heard in that jurisdiction.

Since plaintiff bears the burden of proof on this issue, this
factor weighs against finding subject matter jurisdiction in the

district court.

5.   Place of the Wrongful Act

           Although this issue was disputed prior to trial,

plaintiff now concedes that the accident took place within two

hundred meters of the St. Lucian shoreline.    This factor,

therefore, favors jurisdiction in St. Lucia rather than the

United States.    However, Neely contends that this factor is

accorded little weight because of the fortuity of the sailing

vessel being in the particular place where the accident occurred.

Indeed, in Lauritzen, the Supreme Court stated that, "[t]he test

of location of the wrongful act or omission, however sufficient

for torts ashore, is of limited application to shipboard torts,

because of the varieties of legal authority over waters she may

navigate."    Lauritzen, 345 U.S. at 583, 73 S. Ct. at 929.

           Normally, the place of accident might well be

fortuitous.    Here, however, the vessel was chartered by Holiday

Village to be used specifically by diving parties in and around

St. Lucia.    St. Lucia has set its territorial waters at a breath

of 12 nautical miles.    6B Benedict on Admiralty Doc. 10-3A, at
10-62, 10-62.2 (Frank L. Wiswall, Jr., ed., 6th ed. 1994).

Rarely if ever during its demise charter did the Long John leave

the territorial waters of St. Lucia.    It is true that the vessel

had the capability of traveling vast distances, and even

worldwide.    However, when analyzing whether the location of the

accident in St. Lucian waters was fortuitous, it becomes clear
that if the vessel never left the territorial waters, then an

accident in St. Lucian waters was not simply fortuitous.      In

fact, anyone sailing aboard the Long John, whether as crew or

otherwise, would reasonably conclude (as occurred in this case),

that any accident would occur in the territorial waters of St.

Lucia.    This factor weighs against finding subject matter

jurisdiction in the district court and points instead to St.

Lucia as the proper forum.

6. Place of Employment Contract

            The district court made a factual finding that the oral

employment contract entered into between Club Med and Neely, by

virtue of a phone call from Club Med's offices in New York to

Neely's residence in Pennsylvania, was situated in Pennsylvania.

Neely, 1992 WL 398378, at *4.     Defendants do not challenge the

district court's finding as clearly erroneous, but instead argue

that the factor should be given diminished weight since the

employment services were to be performed outside the United

States.   The Supreme Court in Lauritzen has explained that,

"[t]he place of contracting in this instance, as is usual to such

contracts, was fortuitous . . . .    We do not think the place of

contract is a substantial influence in the choice between

competing laws to govern a maritime tort."    Lauritzen, 345 U.S.
at 588-89, 73 S. Ct. at 931-32.     Thus, although this factor

points to subject matter jurisdiction in the district court, it

will be accorded little weight in our analysis.
7.   Allegiance or Domicile of the Injured Party

           Plaintiff Neely is a United States citizen who lived

permanently in Pennsylvania until she was hired by Club Med.     She

returned immediately to the United States for medical attention

and rehabilitation after the accident.   Thus, this factor favors

jurisdiction in the United States.

8.   Law of the Forum

           The district court found that this factor did not weigh

in favor of either the United States or St. Lucia.   Neely, 1992

WL 398378, at *4.   Neither party contends on appeal that this

factor strongly supports one jurisdiction over another, and we

cannot say as a matter of law that the district court committed

error.   As such, we conclude that this factor is neutral and does

not point to either the district court or to some other court as

the proper forum for this dispute.

                         III.   Conclusion

           Based on the totality of these eight factors, we

conclude that the district court erred in exercising subject

matter jurisdiction in this suit.    Plaintiff Neely has failed to

prove that substantial links with the United States exist:    (1)

the law of the flag, the most important factor, does not point to

the United States, but rather to St. Lucia; (2) the shipowner's

base of operations because of the demise charter clearly

indicates that St. Lucia is the appropriate forum; (3) the
allegiance of the defendant shipowner points to St. Lucia; (4)

there is no indication that a St. Lucian court is inaccessible to

the plaintiff; and (5) the wrongful act occurred in St. Lucian

territorial waters.   The only factors that weigh in favor of

jurisdiction in a United States court are: (1) the plaintiff is a

citizen of the United States; and (2) the place of the employment

contract was the United States.    However, the latter factor

receives less weight because of the fortuity of the place of

contracting.   The law of the forum is a neutral factor.

          After carefully balancing these factors, we conclude

that subject matter jurisdiction does not exist in the district

court to entertain this lawsuit.    We will remand this case to the

district court with directions to dismiss this action for lack of

subject matter jurisdiction.   Each party is to bear its own costs

on the appeal and the cross-appeal.