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In re Complaint and Petition of Lake Champlain Community Sailing Center, Inc.

United States District Court, D. Vermont

August 14, 2014

IN RE: THE COMPLAINT AND PETITION OF LAKE CHAMPLAIN COMMUNITY SAILING CENTER, INC. AS OWNER OF CLUB 420 SAILBOAT FOR EXONERATION FROM OR LIMITATION OF LIABILITY

OPINION AND ORDER

WILLIAM K. SESSIONS, III, District Judge.

This admiralty case arises out of injuries allegedly suffered by Nathalie Kelly during a sailing lesson on Lake Champlain in 2010. The lesson was conducted by staff of petitioner Lake Champlain Community Sailing Center, Inc. ("Petitioner" or "LCCSC"). Claiming negligence and loss of consortium, Ms. Kelly and members of her family filed an action for damages in state court. LCCSC subsequently filed a petition in this Court seeking exoneration, or a limitation of its liability to the value of the sailboat, pursuant to the Limitation of Liability Act, 46 U.S.C. § 30505(b) ("Limitation Act" or "LOLA"). As a result of LCCSC's filing, the state court action has been stayed.

Ms. Kelly now moves to dismiss the petition, arguing that LCCSC is not entitled to relief under the Limitation Act. Also pending is LCCSC's motion for summary judgment on the basis of a release signed by Ms. Kelly. For the reasons set forth below, the motion to dismiss is DENIED, and a response to the summary judgment motion shall be filed on or before September 1, 2014.

Factual and Procedural Background

On June 29, 2010, Nathalie Kelly participated in a sailing lesson provided by LCCSC. According to Ms. Kelly's statement of claim (ECF No. 4 at 3-13), the morning weather forecast that day warned of isolated afternoon thunderstorms and wind gusts up to 25 miles per hour. The forecast for Lake Champlain predicted winds over 10 knots and waves of one to two feet, with higher winds and waves in the vicinity of the thunderstorms. Ms. Kelly's evening sailing class encountered a storm, and at 6:45 p.m. her boat capsized. The class instructor, driving a motorized boat, allegedly instructed Ms. Kelly and a classmate to try to right the sailboat. Their efforts were unsuccessful, and they were ultimately rescued by the United States Coast Guard. Ms. Kelly claims to have suffered permanent injuries as a result of the incident.

In June 2013, Nathalie and Selina Kelly, and Nathalie Kelly as parent and next friend of Adrian Kelly, a minor, filed suit in the Chittenden Civil Division of the Vermont Superior Court seeking damages (the "Kelly lawsuit"). The Complaint alleges that Ms. Kelly was an inexperienced sailor when she sustained her injuries, and that LCCSC's agents should have known that a storm was approaching; should have known that inexperienced sailors should not be sailing in an area where a storm has been forecast; should have had more than one safety boat on the water; should have provided more instructors; should have adequately trained the instructor; and should have rescued Ms. Kelly from the water rather than instructing her to try to right the boat.

On September 13, 2013, LCCSC filed in this Court a petition under the Limitation Act for exoneration or limitation of liability with regard to the Kelly lawsuit. The petition asserts that "[a]ny and all injuries and damages allegedly resulting from the incident were not caused by or attributable to any fault, design, neglect, or want of due care on the part of [LCCSC], or anyone for whom [LCCSC] may be responsible, " and that any damage "occurred without [LCCSC]'s privity or knowledge." ECF No. 1 at 2. Accordingly, LCCSC: (1) denies liability and demands exoneration, and (2) in the alternative, claims that under the Limitation Act its liability is limited to the value of the sailboat. LCCSC submits that the boat's value after the incident was approximately $5, 000. ECF No. 1-1 at 2. As noted above, the state court action has been stayed as a result of LCCSC's filing in this Court.

Respondents Nathalie Kelly and her children, Selina and Adrian, (collectively "Respondents") have moved to dismiss LCCSC's petition. Respondents argue that the "savings to suitors" clause in 28 U.S.C. § 1333 preserves their right to proceed in state court, and that LCCSC is not entitled to limit its liability because LCCSC's "privity or knowledge" is established in the pleadings. LCCSC disputes whether privity or knowledge is established, and has filed a motion for summary judgment on the basis of a release signed by Ms. Kelly prior to her lesson. Respondents have moved the Court for leave to respond to the summary judgment motion within 15 days after the Court rules upon their motion to dismiss.

Discussion

I. Legal Standard

Respondents submit their motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6). Because they filed their motion to dismiss after filing an answer, the motion must be considered under Fed.R.Civ.P. 12(c) as a motion for judgment on the pleadings. See Patel v. Contemporary Classics of Beverly Hills, 259 F.3d 123, 126 (2d Cir. 2001). The applicable legal standard, however, is the same under either rule, see Cleveland v. Caplaw Enters., 448 F.3d 518, 521 (2d Cir. 2006), requiring the Court to determine whether the complaint states "a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

When considering a motion to dismiss, a court should "draw all reasonable inferences in Plaintiffs' favor, assume all well-pleaded factual allegations to be true, and determine whether they plausibly give rise to an entitlement to relief." Faber v. Metro. Life, 648 F.3d 98, 104 (2d Cir. 2011) (internal quotation marks omitted). While factual allegations in the complaint are assumed to be true, the same assumption does not apply to legal conclusions. Iqbal, 556 U.S. at 678. Review of a motion to dismiss "is limited to the facts as asserted within the four corners of the complaint, the documents attached to the complaint as exhibits, and any documents incorporated in the complaint by reference." McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007) (citing Taylor v. Vt. Dep't of Educ., 313 F.3d 768, 776 (2d Cir. 2002)). II. The Limitation Act

The Limitation Act limits the liability of a boat owner for "any loss, damage, or injury by collision... done, occasioned, or incurred without the privity or knowledge of the owner" to "the value of the vessel and pending freight." 46 U.S.C. § 30505(b). The Act, which dates back to 1871, was designed "to encourage ship building and to induce capitalists to invest money in this branch of industry." Lewis v. Lewis & Clark Marine, Inc., 531 U.S. 438, 446 (2001) (citing Norwich & N.Y. Transp. Co. v. Wright, 80 U.S. 104, 121 (1871)). Although "the inclusion of pleasure craft in the limitation provision seems rather unrelated to the legislative goal of fostering investment in commercial shipping, " the Second Circuit has concluded that "pleasure craft" as well as commercial vessels "are subject to the Act's limitation on liability." In re Guglielmo, 897 F.2d 58, 60-61 (2d Cir. 1990).

The LOLA establishes a procedure by which a boat owner can deposit a sum equal to the value of its ownership interest in the vessel and file suit to limit its liability.[1] Once the initial procedural requirements of a LOLA filing have been satisfied, the federal court conducts a proceeding ...


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