375 F.Supp.2d 62 (2005) | Cited 4 times | D. Connecticut | June 27, 2005


Plaintiff John Dominici alleges that his boat was vandalizedand sank while in the custody and care of defendant Between theBridges Marina ("BTB"). Defendant removed plaintiff's suit fromstate court under the Court's original admiralty and maritimejurisdiction, and now moves to dismiss pursuant to Fed.R. Civ.P. 12(b)(6) on grounds that the parties' storage contractexculpates BTB from any liability for damage to plaintiff'svessel. For the reasons that follow, defendant's motion is denied.

I. Background

Plaintiff John Dominici was the owner of a 1975 Betram 46 FootOff Shore Fly Bridge Sport Fisherman boat named the "Irish Mist."Complaint [Doc. # 1] at First Count, ¶ 1. He entered into awritten agreement with defendant BTB on September 23, 2003 forthe winter storage of his boat, paying BTB $1,104 for thestorage. Id. at ¶ 3. On October 18, 2003, Dominici delivered hisboat to defendant's marina, and was told that it would be hauledout of the water and stored within a day or so. Id. at ¶ 4. At some time between October 18 and October 29, 2003, however,plaintiff's boat was vandalized, and sank. Id. at ¶ 5.Plaintiff alleges that BTB was negligent, and breached thestorage contract, in failing to timely haul and store his boat,failing to properly inspect and maintain the marina so as toprevent vandals from causing damage to vessels within BTB'scustody and control, failing to properly secure his boat andpersonal property from damage and loss, and failing to warn theplaintiff of the insecure conditions. Id. at First Count ¶ 6,Second Count ¶ 5.

The Winter Storage Contract between Dominici and BTB,incorporated by reference in plaintiff's complaint and attachedto defendant's motion to dismiss, provides: INSURANCE: TENANT agrees that he will keep the boat fully insured with complete marine insurance, including hull coverage and indemnity and/or liability. THE LANDLORD DOES NOT CARRY INSURANCE covering the property of the TENANT. THE LANDLORD WILL NOT BE RESPONSIBLE for any injuries or property damage resulting, caused by, or growing out of the use of the dock or harbor facilities; that the TENANT RELEASES ANS [sic] DISCHARGES THE LANDLORD from any and all liability from loss, injury (including death), or damages to persons or property sustained while in or on the facilities of LANDLORD, including fire, theft, vandalism, windstorm, high or low waters, hail, rain, ice, collision or accident, or any other Act of God, whether said boat is being parked or hauled by an AGENT of LANDLORD or not.Winter Storage Contract [Doc. # 14, Ex. 2] at ¶ 18.

Based on this clause, defendant argues that it cannot be heldliable for the losses plaintiff has sustained. Plaintiff,however, contends that the clause is unenforceable on public policy grounds, and because he received no notice of the contractterms at issue.

II. Standard

When deciding a 12(b)(6) motion to dismiss, the Court mustaccept all well-pleaded allegations as true and draw allreasonable inferences in favor of the pleader. Hishon v. King &Spalding, 467 U.S. 69, 73 (1984). A complaint should not bedismissed for failure to state a claim unless it appears beyonddoubt that the plaintiff can prove no set of facts in support ofhis claim which would entitle him to relief. Swierkiewicz v.Sorema N.A., 534 U.S. 506, 513-14 (2002); Conley v. Gibson,355 U.S. 41, 45-46 (1957). "The issue is not whether a plaintiffwill ultimately prevail but whether the claimant is entitled tooffer evidence to support the claims. Indeed it may appear on theface of the pleadings that a recovery is very remote and unlikelybut that is not the test." Scheuer v. Rhodes, 416 U.S. 232, 236(1974).

III. Discussion

Whether the exculpatory clause in BTB's Winter Storage Contractfully absolves BTB from all liability for its own negligence, andif so, whether it is enforceable, implicates this Court'sadmiralty jurisdiction, which extends to "all contracts . . .which relate to the navigation, business, or commerce of thesea," Atlantic Mutual Ins. Co. v. Balfor Maclaine Int'l, Ltd., 968 F.2d 196, 199 (2d Cir. 1992), and requires application of thefederal body of maritime law. See East River S.S. Corp. v.Transamerica Delaval, Inc., 476 U.S. 858, 864 (1986) ("Withadmiralty jurisdiction comes the application of substantiveadmiralty law. Absent a relevant statute, the general maritimelaw, as developed by the judiciary, applies. Drawn from state andfederal sources, the general maritime law is an amalgam oftraditional common-law rules, modifications of those rules, andnewly created rules.") (citations omitted); La Esperanza deP.R., Inc. v. Perez y Cia de P.R., Inc., 124 F.3d 10, 16 (1stCir. 1997) ("[A]dmiralty jurisdiction brings with it a body offederal jurisprudence, largely uncodified, known as maritimelaw."); Sander v. Alexander Richardson Invs., 334 F.3d 712(8th Cir. 2003).

All circuits to address this issue are in agreement that theintent to fully exonerate a party from its own negligence must"be clearly and unequivocally expressed." Sander,334 F.3d at 715 (8th Cir. 2003) (quoting Randall v. Chevron U.S.A.,Inc., 13 F.3d 888, 905 (5th Cir. 1994)); see alsoEdward Leasing Corp. v. Uhlig & Assocs., Inc., 785 F.2d 877,889 (11th Cir. 1986); M/V Am. Queen v. San Diego Marine Const.Corp., 708 F.2d 1483, 1488 (9th Cir. 1983). There is a split ofauthority, however, as to whether such agreements areenforceable, and the Second Circuit has not addressed the issue. A. Scope of the Exculpatory Clause

While the exculpatory clause in BTB's Winter Storage Contractdid not expressly absolve BTB of liability for its ownnegligence, the import of the clause is clear and unequivocal.The clause "releases ans [sic] discharges the LANDLORD from anyand all liability from loss, injury (including death), ordamages to persons or property sustained while in or on thefacilities of the LANDLORD, including . . . vandalism . . .whether said boat is being parked or hauled by an Agent ofLANDLORD or not." Winter Storage Contract [Doc. # 14, Ex. 2] at ¶18 (emphasis added). The clause's broad absolution of "any andall liability," specific reference to vandalism, as is at issuehere, and implication that the limitation of liability holds evenwhere the boat is in the care or custody of BTB or its agents,together plainly encompass liability arising from the marina'sown negligence. Examining an exculpatory clause nearly identicalto BTB's,1 the Eighth Circuit in Sander,334 F.3d at 716, reversed recovery granted to plaintiff boat owners for fire damage totheir boats caused by the marina's negligence, because "theclause releasing the Yacht Club `from any and all liability for. . . damages to . . . property . . ., including fire,'unambiguously released it from liability stemming from its ownnegligence." As the circuit court reasoned, "[t]he slip agreementclearly shifted the risk of loss to the boat owners by requiringthe boat owners to fully insure their boats, including hullcoverage. The agreement informed the boat owners in capitalletters that the marina did not carry insurance that would coverthe property of the boat owners. The term `any and all' used inthe exculpatory clause is all-encompassing and leaves littledoubt as to the liability from which the boat owners released theYacht Club." Id. As in Sander, the contract here is clear inits shifting of the risk of loss to the boatowner.

B. Enforceability of Exculpatory Clause

Given the clear and unequivocal limitation in the WinterStorage Contract on BTB's liability for damages to the boatowner's property, it is necessary to examine whether public policy supports restricting such absolution of all liability forthe marina's own negligence and outweighs the liberty tocontract. Exculpatory clauses are not per se unlawful, andmay be enforced in appropriate circumstances based on "theconsideration that businessmen can bargain over which party is tobear the risk of damage and set the price accordingly, thusachieving a more rational distribution of the risk and allocationof price than the law would otherwise allow." Sander,334 F.3d at 717 (quoting La Esperanza, 124 F.3d at 19). In weighingcompeting public policy considerations, there is generalagreement among the circuits that the following three factors arerelevant in determining whether to enforce an exculpatory clausein a marine contract: (a) the nature of services covered by thecontract; (b) whether the exculpatory clause is being applied tointentional, reckless, or grossly negligent behavior or rather toordinary negligence; and (c) whether the exculpatory provisionswere obtained through overreaching. See Sander,334 F.3d at 717, Royal Ins. Co. of America v. Southwest Marine,194 F.3d 1009, 1014 (9th Cir. 1999), La Esperanza, 124 F.3d at 19,Edward Leasing, 785 F.2d at 889. The test in the First and theEleventh Circuits, however, is more restrictive, and would alsoinvalidate any exculpatory clause seeking to absolve a party ofall liability for its own negligence. See La Esperanza,124 F.3d at 19; Edward Leasing, 785 F.2d at 888-89. a. Nature of the Services

The nature of the services covered by the contract alters thepublic policy prism through which exculpatory clauses are viewedbecause some relationships may have inherently unequal bargainingpower permitting the taking of unfair advantage, monopolistictendencies may be greater in some industries, or there may beinsufficient alternative deterrents to negligence in certaincontexts. In Bisso v. Island Waterways Corp., 349 U.S. 85(1955), for example, the Supreme Court invalidated a towagecontract releasing the tower from all liability for its ownnegligence on public policy grounds. The Court noted that such arule was "merely a particular application to the towage businessof a general rule long used by courts and legislatures to preventenforcement of release-from-negligence contracts in manyrelationships such as bailors and bailees, employers andemployees, public service companies and their customers," 90-91, and reasoned that the purpose of the rule was "(1) todiscourage negligence by making wrongdoers pay damages, and (2)to protect those in need of goods and services from beingoverreached by others who have power to drive hard bargains."Id. at 91. Applying the rule to the towage context wasappropriate, the Supreme Court found, because of the risksinvolved and because "increase maritime traffic of today makes itnot less but more important that vessels in American ports be able to obtain towage free of monopolistic compulsions." Id.The Supreme Court distinguished pilotage contracts, in which ithad previously found exculpatory clauses to be valid, see SunOil Co. v. Dalzell Towing Co., 287 U.S. 291 (1932), in partbecause pilots, unlike towage employees, operate with a highdegree of independence from the towing company. The Supreme Courtthus reasoned, "[i]t is one thing to permit a company to exemptitself from liability for the negligence of a licensed pilotnavigating another company's vessel on that vessel's own power. . . .It is quite a different thing, however, to permit a towingcompany to exempt itself by contract from all liability for itsown employees' negligent towage of a vessel." Id. at 94.

Circuits interpreting Bisso have underscored that Bisso'sholding was grounded in a recognition of the unequal nature ofthe relationship between towing companies and ships seekingaccess to a port, and the otherwise inadequate incentives fortowing companies to use reasonable care.2 Thus, whilecareful to examine the particularized facts of a defendant'soverreaching, the circuits generally agree that Bisso islimited to towage contracts. As the Eighth Circuit in Sander explained: The doctrine prohibiting a party from completely absolving itself from liability for its own negligence is limited to circumstances involving relationships similar to towage agreements, such as bailment, employment, or public service relationships. The Supreme Court has explained the circumstances justifying the limitation of exculpatory clauses in those situations as those involving a monopoly or unequal bargaining power. Where the peculiarities of those types of relationships do not justify application of the doctrine, we uphold the strong public policies of recognizing parties' liberty to contract and enforcing contracts as written.334 F.3d at 719. See also B.H. Morton v. ZidellExplorations, Inc., 695 F.2d 347, 351 (9th Cir. 1982) (percuriam) (holding that an exculpatory clause in a marine repaircontract was enforceable, absent evidence of overreaching, andfinding Bisso limited to towage contracts); Fireman's Fund Am.Ins. Co. v. Boston Harbor Marina, Inc., 406 F.2d 917, 921 (1stCir. 1969) (remanding to the district court for development ofthe factual record on the issue of whether there was overreachingby the marina, and noting that "the breadth of the Court'slanguage [in Bisso] does not encourage us to be quick todistinguish it").

b. Gross Negligence

The Circuits considering the issue also agree that "a party toa maritime contract should not be permitted to shield itselfcontractually from liability for gross negligence." Royal Ins.,194 F.3d at 1016; see also La Esperanza, 124 F.3d at 19-20(affirming the district court's determination enforcing thelimitation of liability clause in the parties' contract, reasoning while such clauses cannot validly "provide for a totalabsolution of liability," and "may not limit liability on amarine contract for gross negligence," the liability limitationclause in the parties' contract was enforceable where onlyordinary negligence by the shipyard had been proven.); ToddShipyards Corp. v. Turbine Serv., Inc., 674 F.2d 401, 411 (5thCir. 1982) ("Gross negligence, which will invalidate an exemptionfrom liability, has been defined as `. . . harm wilfullyinflicted or caused by gross or wanton negligence.'") (quoting 6ACorbin On Contracts § 1472 (1964 ed.)). Such a public policyexception is well-established at common law, see, e.g. Rest.(2d) Contracts § 195(1) & cmt. a (1979) ("A term exempting aparty from tort liability for harm caused intentionally orrecklessly is unenforceable on grounds of public policy . . . Thelaw of torts imposes standards of conduct for the protection ofothers against unreasonable risk of harm. One cannot exempthimself from such liability for harm that is caused eitherintentionally or recklessly."), and appears based on arecognition that sound public policy requires greater deterrentsto gross negligence or intentional misconduct than to ordinarynegligence. Moreover, enforcing an exculpatory clause as appliedto a party's gross misconduct does little to aid the freedom ofcontract, because while businesspersons may reasonably anticipateaccidents or ordinary negligence and account for who bears therisk of damage in setting the price of a contract, contracting parties rely onthe other's good faith and fair dealing.

c. Overreaching

Finally, the circuits are in agreement that exculpatory clausesin marine contracts may not be enforced where there is evidenceof overreaching, which is defined as the "act or an instance oftaking unfair commercial advantage of another." Black's LawDictionary (7th ed. 1999). Where the parties have equalbargaining power, overreaching is unlikely to be found. In B.H.Morton, for example, the Ninth Circuit found no overreachingevident in the contract reached between boat owners and a marinerepair and construction company refurbishing the boat, becausethe boat owners were "knowledgeable businessmen," and "in signingthe contract [they] neither objected to nor mentioned the`red-letter' clause," and "there was nothing to prevent [the boatowners] from taking their vessel to another yard" two monthslater, when the boat owners brought their account current andboat conversion resumed. 695 F.2d at 349, 351. See alsoDiesel "Repower", Inc. v. Islander Invs. Ltd., 271 F.3d 1318,1325 (11th Cir. 2001) (finding no overreaching because "the`businessmen' possessed equal bargaining power upon entering thecontract."). Likewise, unequal bargaining power of the partiescannot, in itself, support a finding of overreaching. SeeCarnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 593 (1991).The test, rather, is whether the disparity in bargaining power was used totake unfair advantage of a party to the contract. For example, inSander, the Eighth Circuit explained that "the mere fact thatthe contracts were form contracts does not per se lead to theconclusion that the Yacht Club engaged in overreaching," as"[t]here must be some evidence that the party holding thesuperior bargaining power exerted that power in overreaching theless sophisticated party by, for example, engaging in fraud orcoercion or by insisting on an unconscionable clause."334 F.3d at 720. See also Royal Ins., 194 F.3d at 1014 (holding thatthe exculpatory clause in a contract for rental of space in aboat yard was not invalid for overreaching, because "[e]ven if[the ship owner] objected to an exculpatory provision duringcontract negotiations, he ultimately `assented withoutcomplaint.'"); Fireman's Fund, 406 F.2d at 921 (in remandingfor consideration of overreaching, noting, "a boatowner whoalready has a comprehensive marine policy might be pleased to paya storage rate that did not include any charge for the yard'sobligation of reasonable care, but we do not know that allboatowners carry such insurance, or would wish, if they had thechoice, to release a yard from responsibility.").

d. Total Absolution of Liability

The First and Eleventh Circuits require additionally thatparties may not totally absolve themselves of all liability. The concern here is that the "prospective wrongdoer's `potentialliability' should be enough to `deter negligence.'" EdwardLeasing, 785 F.2d at 888 (quotation omitted); Diesel"Repower", 271 F.3d at 1325; La Esperanza, 124 F.3d at 19.Thus, in finding the liability limitation clause enforceable inDiesel "Repower", the Eleventh Circuit relied on the fact thatthe clause at issue did not absolve Diesel of all liability, asDiesel would remain responsible for "replacing parts free ofcharge within the warranty period, refunding the $45,000 purchaseprice of the equipment, and going uncompensated for numeroushours of labor expended on replacement of parts under thewarranty or on original installation." Id. at 1125. The totalabsolution of liability in the contract between the ship ownerand ship repairer in Edward Leasing, however, rendered theexculpatory clause unenforceable.

The rule in Edward Leasing and La Esperanza depended on theassumption that there could be no other alternative deterrents tonegligence, and that the parties themselves could not agree toallocate the risk of loss from that negligence. There is reasonto be skeptical of such assumptions, and this Court thereforedeclines to adopt such an encompassing rule. For example, otherfactors such as the cost of failing to perform the contract, orreputational harm, may well provide a sufficient deterrent tonegligence. In this context, the negligence plaintiff has alleged is distinguishable from the towing company's negligencein Bisso or the ship repairer's negligence in La Esperanzaand Edward Leasing, as BTB is claimed only to have unreasonablyfailed to take proper measures to prevent the vandalism ofplaintiff's boat, and while the vessel was in BTB's custody andcare, it is not claimed that BTB's agents were activelymanipulating the boat. As the Sander court recognized, a "shiprepairer who takes control of a vessel and enters an agreement toperform work on the vessel is in a much different situation thana marina that provides a dock to which numerous boat owners haveaccess and dock their boats." Sander, 334 F.3d at 719.

Moreover, this Court concludes that it cannot be determined asa matter of law that boat owners seeking winter storage areunable to rationally choose to bear the risk of accident or themarina's negligence, and carry the appropriate insurance, giventhe contractual price for the winter storage. Thus, anycategorical rule prohibiting or permitting the exculpatory clausein BTB's Winter Storage Contract is inappropriate. The publicpolicy concerns with exculpatory clauses are instead bestchanneled into a fact-specific examination of whether BTB engagedin overreaching, or gross misconduct.3 Theseconsiderations require further factual development. Given the highlyparticularized inquiry that therefore must precede anydetermination of the enforceability of an exculpatory clause, itis inappropriate to decide the issue on a Rule 12(b)(6)motion.4 IV. Conclusion

For the foregoing reasons, defendant's motion to dismiss [Doc.# 12] is DENIED.


1. The exculpatory clause at issue in Sander provided: 19. INSURANCE: TENANT AGREES that he will keep the boat fully insured with complete marine insurance, including hull [property] coverage and indemnity and/or liability insurance. THE LANDLORD DOES NOT CARRY INSURANCE covering the property of the TENANT. THE LANDLORD WILL NOT BE RESPONSIBLE for any injuries or property damage resulting, caused by or growing out of the use of the dock or harbor facilities; that the TENANT RELEASES AND DISCHARGES THE LANDLORD from any and all liability from loss, injury (including death), or damages to person or property sustained while in or on the facilities of LANDLORD, including fire, theft, vandalism, windstorm, high or low waters, hail, rain, ice, collision or accident, or any other Act of God, whether said boat is being parked or hauled by an AGENT of LANDLORD or not.Sander, 334 F.3d at 714.

2. The Supreme Court in Bisso reviewed in broad terms thecontractual relationship between a towing company and boatownerand nature of the tugboat industry, but as the Supreme Courtlater observed, the Bisso decision "was perforce reachedwithout consideration of particularized economic and otherfactors relevant to the organization and operation of the tugboatindustry." Southwestern Sugar & Molasses Co. v. River,360 U.S. 411, 416 (1959).

3. Plaintiff has not specifically pled "gross negligence," and"gross negligence has never been recognized in [Connecticut] as aseparate basis of liability in the law of torts." Decker v.Roberts, 125 Conn. 150, 157 (1939). Nonetheless, as the degreeof defendant's culpability is highly relevant to the generalissues at hand under maritime law and this court's admiraltyjurisdiction, the Court identifies it as a factor withoutdeciding its applicability to this case.

4. Plaintiff's argument that he did not receive notice of theexculpatory clause in the contract also requires further factualdevelopment. Relevant considerations include, for example,whether the "physical characteristics" of the contract"reasonably communicated" the existence of the clause, and "thecircumstances surrounding the [signing of the contract] permittedthe [plaintiff] to become meaningfully informed of thecontractual terms at stake." Ward v. Cross Sound Ferry,273 F.3d 520, 523 (2d Cir. 2001) (citation and internal quotationmarks omitted). Here, the signature page of the 2003-2004 WinterStorage Contract contains the following language: We ask that you please read the General Conditions and Yard Rules on the reverse side of this contract. . . . I, the undersigned, have read and understand the General Conditions and accept all the terms and conditions.Winter Storage Contract [Doc. # 16, Ex. 2]. Plaintiff states that he received only the front side of thecontract containing the signature page, and never received theGeneral Conditions page. Because the signature page clearlyinformed plaintiff of the existence of further contractual terms,it becomes relevant to the notice inquiry whether plaintiff wasafforded sufficient time and opportunity to obtain a copy of theGeneral Conditions prior to signing the contract. There is afurther factual dispute as to whether plaintiff was supplied withGeneral Conditions on a separate sheet of paper. See Affidavitof Michael Pendleton, attached to [Doc. # 19] at ¶ 6.

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