Curtin Maritime Corp. v. Pacific Dredge & Construction, LLC

76 Cal.App.5th 651

291 Cal.Rptr.3d 639

CURTIN MARITIME CORP., Plaintiff and Respondent,

v.PACIFIC DREDGE AND CONSTRUCTION, LLC, et al., Defendants and Appellants.

D078217

Court of Appeal, Fourth District, Division 1, California.

Filed March 22, 2022

Law Offices of Clinton D. Hubbard, Clinton D. Hubbard, San Diego; Miller Johnson Law, Jon B. Miller, Scott A. Johnson; and Kevin C. Young, San Diego, for Defendants and Appellants.

King & Spalding, Joseph N. Akrotirianakis, Aaron Craig, Los Angeles, and Matthew V.H. Noller for Plaintiff and Respondent.

McCONNELL, P. J.

Curtin Maritime Corp. (Curtin) filed suit against its competitor, Pacific Dredge and Construction, LLC (Pacific), asserting one cause of action for violation of the Unfair Competition Law (UCL, Bus. & Prof. Code, § 17200, et seq. ). The parties operate dredging vessels, which are designed to clear sediment from harbor entrances, and compete for contracts awarded by the U.S. Army Corps of Engineers (USACE). In its complaint, Curtin alleged Pacific was ineligible for two contracts it was awarded over Curtin because its vessel was not "entirely" built in the United States, a violation of the federal Merchant Marine Act of 1920 (commonly referred to as the Jones Act), and Pacific defrauded the Coast Guard in its successful application for certification that the vessel was U.S.-built. These allegations served as the sole basis for Curtin's UCL claim.

In response to the complaint, Pacific brought a motion under Code of Civil Procedure section 425.16 to strike Curtin's claim, asserting it arose from protected speech and that Curtin could not show a probability of prevailing on the merits of its claim.¹ The trial court agreed with Pacific that the claim arose from protected activity, but concluded Curtin had met its burden at this early stage of litigation to show the claim had minimal merit and denied the motion. Pacific appeals the ruling, contending the trial court erred because the claim is preempted by the Jones Act.

After Pacific filed its notice of appeal, Curtin dismissed the underlying lawsuit and filed a motion to dismiss the appeal as moot. Pacific opposed the motion, asserting the appeal was viable since reversal of the trial court's order would provide Pacific the opportunity to seek attorney fees under the anti-SLAPP statute. We agree with Pacific that the appeal is not moot, and dismissal of the appeal is not appropriate. Further, we conclude Curtin has not shown a probability of prevailing on the merits of its claim. Accordingly, we reverse the trial court's order denying Pacific's motion to strike and direct the court to reinstate the case and issue an order granting the anti-SLAPP motion and striking Curtin's claim.

FACTUAL AND PROCEDURAL BACKGROUND

In 2015, Pacific purchased a barge-mounted dredging vessel called the La Encina. The vessel was built in the United States in 1954 by the American Steel Dredge Company for its original owner, the San Diego Gas & Electric Company. At the time of Pacific's purchase, the vessel was in poor condition and needed a hull replacement.

To begin the renovation of the vessel, Pacific purchased 58 pre-fabricated steel panels from a domestic manufacturer and arranged for delivery of 39 of the panels to a shipyard located in Ensenada, Mexico. Pacific planned to have the panels welded together in Ensenada and shipped back to Pacific's shipyard for installation as part of a new hull for La Encina. Before that work occurred, Pacific's maritime and Coast Guard documentation consultant, Paul Larson, provided an opinion letter to Pacific's president, Grant Westmorland, concerning whether the foreign work would "disqualify La Encina from being considered U.S. built" for purposes of the Jones Act.

Larson explained in his letter that Title 46, Code of Federal Regulations, section 67.177 prescribes whether rebuilding in a foreign shipyard of a U.S. built vessel results in the vessel losing its eligibility to engage in coastwise trade.² Larson opined that under the regulation, a vessel is considered "rebuilt foreign" (and thus ineligible for coastwise trade) if "any considerable part of its hull or superstructure is built upon or substantially altered outside of the United States." ( 46 C.F.R. § 67.177.) The regulation contains a safe harbor for rebuilt vessels where work performed outside the country on the hull or superstructure "constitutes 7.5 percent or less of the vessel's steelweight prior to the work." (Id. , (b)(3).)

Larson concluded that so long as the La Encina had an existing coastwise endorsement, the work planned in Ensenada would not jeopardize its coastwise eligibility because it constituted just .004 % of the vessel's steelwork. However, Larson explained that the safe harbor would only apply if Pacific possessed a coastwise endorsement for the vessel. If not, Larson recommended Pacific cancel the planned foreign work and instead construct the new hull in Pacific's domestic shipyard, then apply to the Coast Guard for a coastwise determination in accordance with the regulations governing new vessels.

Although the La Encina was built in the U.S., Pacific could not obtain a coastwise endorsement because the builder had gone out of business long before. As a result, Pacific abandoned its plan to assemble a new hull for the La Encina in Ensenada. The Ensenada shipyard had not completed the welding work. It had moved the panels into place and supported them with tack-welding, which the shipyard owner described as a temporary process to keep metal pieces aligned before permanent welding occurs. The panels were then sent to Pacific's shipyard in San Diego.

There, the tack welds to the 39 panels were gouged or grinded out and the 58 new steel panels were incorporated into a new vessel Pacific named the Sandpiper. The construction of the Sandpiper occurred in San Diego in Pacific's shipyard. Pacific reused some parts of the La Encina, but the parts for the vessel's hull and superstructure were sourced, assembled, and constructed entirely in the United States. After the Sandpiper was constructed, Pacific petitioned the Coast Guard for a certificate of documentation and coastwise endorsement, which was granted on October 25, 2016.

In 2016, the USACE solicited bids for a multi-year dredging project at the Santa Barbara harbor. Curtin and Pacific were the only two bidders and the USACE awarded the contract to Pacific, which had the lower bid and would use the Sandpiper to perform the work. Thereafter, the Coast Guard's National Vessel Documentation Center (NVDC) received a complaint that the Sandpiper was not eligible for a coastwise endorsement because it was built in Mexico, and therefore had been improperly awarded the contract.

On December 13, 2017, the director of the NVDC, Christina Washburn, notified Pacific that the agency had opened an investigation into whether certain vessels were foreign rebuilt, and made a demand under its regulations for information and documentation. Washburn's letter noted that Pacific's responses were subject to penalties under the Jones Act if misrepresentations were made to the Coast Guard. On January 7, 2018, an NVDC staff attorney sent an email to Westmorland seeking additional specific information about the construction of the Sandpiper.

Pacific provided the requested information and documents to the NVDC and retained Larson to investigate its vessels and prepare a report addressing the NVDC's concerns. The information and Larson's report were sent to the NVDC staff attorney on January 11, 2018. Larson's report provided detailed information regarding the original repair plans for La Encina, the work performed in Mexico, the termination of that work, and the return to San Diego of the 39 steel panels later incorporated into the Sandpiper. On January 18, 2018, the staff attorney emailed Westmorland and stated that based on the information Pacific provided, the NVDC's review of Pacific's vessels was closed. The coastwise endorsement previously granted for the Sandpiper remained valid.

In 2019, the USACE solicited bids for another multi-year contract to perform dredging services in the Santa Barbara harbor. On October 21, 2019, days before the bids were due, Curtin filed the underlying complaint in this case against Pacific. As noted, the complaint contains just one cause of action, violation of the UCL based solely on Curtin's allegation that the Sandpiper was not eligible for its coastwise endorsement.³ Curtin asserted that Pacific fraudulently misrepresented information about the construction of the Sandpiper to the Coast Guard.

After Curtin's complaint was filed, both parties submitted their bids for the USACE contract for dredging work in the Santa Barbara harbor. Pacific's bid was again lower than Curtin's bid. Before the contract was awarded, Curtin submitted a bid protest to the USACE asserting that the Sandpiper was a foreign-built vessel and that Pacific had defrauded the Coast Guard in obtaining its coastwise endorsement. In December 2019, the USACE rejected the protest, concluding Pacific's bid was sufficiently responsive and that a disputed coastwise endorsement was not an adequate basis under the applicable laws for the rejection of a bid.

Shortly after, Pacific filed its anti-SLAPP motion, asserting Curtin's claim was based on Pacific's exercise of its right to petition and free speech in the form of its application for a coastwise endorsement to the Coast Guard. Pacific also asserted Curtin could not show a probability of prevailing on its complaint. Curtin was granted leave to conduct limited discovery and then filed its opposition to the motion, arguing both that its claim did not arise from protected speech and that even if it did, it had a probability of prevailing.

Pacific's reply brief was supported by additional evidence of the work in Ensenada and the Coast Guard's issuance of the coastwise endorsement, which it had also submitted to the NVDC. Pacific argued Curtin had...