Kelly v. PORTER, INC.

687 F.Supp.2d 632

John J. KELLY, et al. v. PORTER, INC., et al.

Civil Action Nos. 08-4310, 08-4311.

United States District Court, E.D. Louisiana.

January 22, 2010.

Leonard Cardenas, III, Cardenas & Saunders, Baton Rouge, LA, James Buckner Doyle, Heath Joseph Dorsey, Law Offices of James B. Doyle, APLC, Lake Charles, LA, for Plaintiffs.

C. Michael Hart, Taylor, Porter, Brooks & Phillips LLP, Baton Rouge, LA, Gregory William Roniger, Law Offices of Sheryl Story, Metairie, LA, Bradley Joseph Schlotterer, Brett P. Fenasci, Sean T. McLaughlin, Kean Miller, New Orleans, LA, for Defendants.

ORDER

DANIEL E. KNOWLES, III, United States Magistrate Judge.

Before the Court are the Motion for Partial Summary Judgment filed by defendants Louisiana Yachting and Boating Center, L.L.C., Porter, Inc. and Charles Industries, Ltd. Doc. #51 and the Motion for Summary Judgment, or in the Alternative, Motion for Partial Summary Judgment filed by defendants Louisiana Yachting and Boating Center, L.L.C., Porter, Inc. and Charles Industries, Ltd. Doc. # 61. This case is before the undersigned Magistrate Judge pursuant to the consent of the parties. 28 U.S.C. § 636(c).

On January 13, 2010, the motions came on for oral hearing before the undersigned. Present were Leonard Cardenas on behalf of plaintiffs John J. Kelly and Maverick Motor Sports II, L.L.C., James Doyle on behalf of plaintiff Great Lakes Reinsurance Co., C. Michael Hart on behalf of defendant Porter, Inc., Gregory Roniger on behalf of defendant Charles Industries, Ltd. and Bradley Schlotterer and Sean McLaughlin on behalf of defendant Louisiana Yachting and Boating Center, L.L.C. After oral argument, the Court took the motions under advisement. The Court has reviewed the motions, the oppositions thereto, the reply memoranda, the applicable law and the parties' oral argument. For the following reasons, the Court GRANTS the Motion for Partial Summary Judgment filed by defendants Louisiana Yachting and Boating Center, L.L.C. Porter, Inc. and Charles Industries, Ltd. Doc. # 51. The Court further GRANTS IN PART AND DENIES IN PART the Motion for Summary Judgment, or in the Alternative, Motion for Partial Summary Judgment filed by defendants Louisiana Yachting and Boating Center, L.L.C., Porter, Inc. and Charles Industries, Ltd. Doc. # 61.

I. Background

In 2007, plaintiff Maverick Motor Sports II, L.L.C. ("Maverick") purchased a 2007 Formula recreational boat, the M/V MAVERICK ("the vessel"), from Louisiana Yachting and Boating Center, L.L.C. ("Louisiana Yachting") in Madisonville, Louisiana. Maverick is a Delaware limited-liability company whose sole member is plaintiff John J. Kelly. Kelly intended the vessel for personal use but formed Maverick to purchase it to avoid Louisiana sales tax.

Kelly moored the boat in Destin, Florida. On September 1, 2007, Kelly intended to take the vessel to Crab Island with some friends. While Kelly performed the pre-departure check, he noticed that the toilets, several lights and most of the dash controls did not work. Kelly took the vessel out despite the problems. The vessel later returned safely to its slip. While securing the vessel, however, Kelly noticed that the air-conditioning system had shut down. Believing that a clogged sea strainer had caused the problem, Kelly entered the engine compartment and cleaned the sea strainer, which was "full of debris and trash." (Ex. E at p. 61, attached to Defs.' Mem. Supp.). In less than five minutes, Kelly had cleaned and replaced the sea strainer. Kelly did not close the seacock to prevent water from entering the vessel during this process. Kelly then left the boat for the night.

On September 2, 2007, Kelly received a call from a friend who informed him that the boat was taking on water. When he arrived at the vessel, the vessel's engine room was filled with water, and the engines were within approximately six inches of complete submersion. Kelly filed a claim with his insurance company, Great Lakes Reinsurance Co. (UK), P.L.C. ("Great Lakes"), who has allegedly spent a few hundred thousand dollars to repair the vessel.

On August 29, 2008, Great Lakes sued Porter, Inc. ("Porter"), the vessel's manufacturer, Charles Industries, Ltd. ("Charles"), the manufacturer of the battery charger, and Louisiana Yachting, the seller, seeking to recover the amounts that it had paid to repair the vessel. That same date, Kelly, in his individual capacity, sued Porter and Charles. Kelly seeks damages for loss of use, emotional and mental pain and suffering and other damages. The suits were consolidated. Kelly later filed an amended complaint, naming Maverick as an additional plaintiff.

II. Summary Judgment Standard

Summary judgment is appropriate when there are no genuine issues as to any material facts, and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A court must be satisfied that no reasonable trier of fact could find for the nonmoving party or, in other words, "that the evidence favoring the nonmoving party is insufficient to enable a reasonable jury to return a verdict in his favor." Lavespere v. Niagara Mach. & Tool Works, Inc., 910 F.2d 167, 178 (5th Cir.1990) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). The moving party bears the burden of establishing that there are no genuine issues of material fact.

If the dispositive issue is one on which the nonmoving party will bear the burden of proof at trial, the moving party may satisfy its burden by merely pointing out that the evidence in the record contains insufficient proof concerning an essential element of the nonmoving party's claim. See Celotex, 477 U.S. at 325, 106 S.Ct. 2548; Lavespere, 910 F.2d at 178. The burden then shifts to the nonmoving party, who must, by submitting or referring to evidence, set out specific facts showing that a genuine issue exists. See Celotex, 477 U.S. at 324, 106 S.Ct. 2548. The nonmovant may not rest upon the pleadings, but must identify specific facts that establish a genuine issue exists for trial. See id. at 325, 106 S.Ct. 2548; Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994).

III. Analysis

A. Motion for Partial Summary Judgment filed by Defendants Louisiana Yachting and Boating Center, L.L.C., Porter, Inc. and Charles Industries, Ltd.

Louisiana Yachting, Porter and Charles (collectively, "defendants") seek summary judgment on all claims filed by plaintiff John J. Kelly in his individual capacity and the claims for loss of use and other non-pecuniary damages (including loss of enjoyment and emotional damages) filed by Maverick.

1. Kelly's Claims in His Individual Capacity

Defendants first argue that because Kelly is not the owner of the vessel, he has no standing to sue in his individual capacity. At his deposition, Kelly admitted that Maverick purchased the vessel and that it did so to avoid tax consequences. (Ex. E, attached to Defs.' Mem. Supp., at pp. 157-58). Citing Louisiana Revised Statute § 12:1329, defendants contend that "a member shall have no interest in limited liability company property." La.Rev.Stat. § 12:1329. Defendants note that Louisiana courts, in such cases as Van Meter v. Gutierrez, 897 So.2d 781 (La.Ct. App.2005), have held that because a limited liability company is a separate juridical entity from its members, that entity alone has the right of action to sue in the event the limited liability company's property sustains damage. Defendants thus argue that all of Kelly's claims in his individual capacity should be dismissed.

Plaintiffs argue that defendants' reliance on the Coast Guard registration, the title or the bill of sale as conclusive ownership of the vessel is misplaced. Citing Southern Bell Telephone & Telegraph Co. v. Burke, 62 F.2d 1015 (5th Cir.1933), plaintiffs argue that a statement in the registry that a corporation solely owns a vessel does not estop an individual owner from proving his sole individual ownership of the vessel.

Plaintiffs note that since this is a diversity action, the question of ownership of a vessel is governed by state law. St. Paul Fire & Marine Ins. Co. v. Vesta Transp. Co., 666 F.2d 932 (5th Cir.1982). Plaintiffs note that Louisiana law has long recognized that the registry is not conclusive of title. Fort Pitt Nat'l Bank v. Williams, 9 So. 117 (1891); see also Prevost v. Bergeron, 70 So.2d 401, 403 (La.Ct.App.1954) ("The registry of vessels only regulates the natural character of the vessel, and does not furnish evidence of ownership, and a change of papers is not necessary to vest title in her purchaser. It is not even prima facie evidence in favor of the party named therein as owner."). Plaintiffs point out that federal courts also recognize this principle. In re Amanda Le, No. 07-34244, 2007 WL 4197515 (S.D.Tex. Nov. 21, 2007).

Kelly is the sole owner of all stock in Maverick. The sole purpose for the creation of the limited liability company, Maverick, was to purchase the vessel and to avoid sales tax. The funds used to purchase the vessel were Kelly's individual funds, he is the personal guarantor of the loan used to finance the vessel, and he is the exclusive operator of the vessel. Accordingly, plaintiffs contend, he has standing to sue in his individual capacity.

In their reply, defendants note that Kelly's affidavit does not dispute his deposition testimony that Maverick owns the vessel. Again citing Louisiana Revised Statute § 12:1329, defendants argue that "a member shall have no interest in limited liability company property." La.Rev. Stat. § 12:1329. Defendants assert that Kelly asks the Court to engage in "reverse veil piercing," a mechanism strongly disfavored by the Louisiana courts. Citing Louisiana case law, defendants maintain that Louisiana courts refuse to allow an individual to recover damages for property owned by a...