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IN RE HORIZON CRUISES LITIGATION

June 5, 2000

IN RE HORIZON CRUISES LITIGATION. IN RE LITIGATION JOINT DISCOVERY M/V HORIZON LEGIONNAIRES DISEASE. CELEBRITY CRUISES INC., AND FANTASIA CRUISING INC., PLAINTIFFS,
V.
ESSEF CORP., PAC-FAB, INC., AND STRUCTURAL EUROPE N.V. (F/N/A SFC), DEFENDANTS.



The opinion of the court was delivered by: Francis, United States Magistrate Judge.

MEMORANDUM AND ORDER

In July 1994, passengers on a pleasure cruise aboard the M/V Horizon contracted Legionnaires' Disease, a potentially serious or even fatal form of pneumonia, as the vessel was sailing between New York and Bermuda. Many of the victims (the "Passenger Plaintiffs") subsequently sued Celebrity Cruises, Inc. and Fantasia Cruising, Inc. (collectively, "Celebrity"), the owners and operators of the Horizon. They asserted claims of negligence, fraud, and breach of contract.

The Passenger Plaintiffs also sued Essef Corp., Pac-Fab, Inc., and Structural Europe N.V. (f/n/a SFC) (collectively referred to as "Essef" or the "Essef Defendants"), who had manufactured and distributed the filter used in the whirlpool spa system on the Horizon where the disease originated. The Passenger Plaintiffs' claims against Essef were based on negligence, strict products liability, and breach of warranty.

Celebrity, in turn, filed a complaint and cross-claims against the Essef Defendants. Celebrity sought indemnification and contribution with respect to the claims of the Passenger Plaintiffs, as well as damages based on products liability and breach of warranty claims. In addition, Celebrity has asserted fraud and negligent misrepresentation claims on the theory that the Essef Defendants falsely represented that the filter at issue met the standards of the National Sanitation Foundation.

These actions were all consolidated for discovery, and in each of them the parties subsequently consented to my presiding over all proceedings including trial pursuant to 28 U.S.C. § 636(c). One of the cases, Silivanch v. Celebrity Cruises, Inc., 95 Civ. 0374(BSJ)(JCF), is currently being tried as a bellwether case, together with the claims asserted by Celebrity against Essef. The Silivanch plaintiffs included in their complaint a demand for punitive damages against both Celebrity and Essef; other Passenger Plaintiffs did not. These other plaintiffs now move pursuant to Rule 15 of the Federal Rules of Civil Procedure to amend their complaints to add claims for punitive damages. The Essef Defendants oppose these motions on the grounds that they are untimely and that punitive damages are unavailable under admiralty law. They also cross-move to strike the punitive damages claims asserted against them by the Silivanch plaintiffs and by Celebrity. Not surprisingly, Celebrity takes the position that while its demand for punitive damages against Essef is viable, the punitive damages claims of the Passenger Plaintiffs are not.

Resolution of these issues turns primarily on a twofold analysis. First, it must be determined to what extent the claims in these cases are governed by general maritime law. Then, to the degree that they are, I must decide whether punitive damages are available under that law.

Discussion

A. Admiralty Jurisdiction and Maritime Law

The threshold question is whether the claims at issue fall within the admiralty jurisdiction. This is significant because "[w]ith admiralty jurisdiction comes the application of substantive admiralty law." East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 864, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986) (citation omitted); see also Yamaha Motor Corp., U.S.A. v. Calhoun, 516 U.S. 199, 206, 116 S.Ct. 619, 133 L.Ed.2d 578 (1996); Friedman v. Cunard Line Ltd., 996 F. Supp. 303, 305 (S.D.N.Y. 1998). With respect to any claim as to which admiralty jurisdiction is unavailable, state law would apply.*fn1

In order to ascertain whether admiralty jurisdiction exists, courts previously utilized a test that focused exclusively on location.

Determination of the question whether a tort is "maritime" and thus within the admiralty jurisdiction of the federal courts has traditionally depended upon the locality of the wrong. If the wrong occurred on navigable waters, the action is within admiralty jurisdiction; if the wrong occurred on land, it is not.

Executive Jet Aviation, Inc. v. City of Cleveland, Ohio, 409 U.S. 249, 253, 93 S.Ct. 493, 34 L.Ed.2d 454 (1972). However, in response to borderline situations that the locality test did not directly address as well as in reaction to cases where that test led to anomalous results, the Supreme Court adopted the additional requirement that the tort be related to a traditional maritime activity in order for admiralty jurisdiction to apply. Id. at 255-61, 93 S.Ct. 493; see also Foremost Insurance Co. v. Richardson, 457 U.S. 668, 673, 102 S.Ct. 2654, 73 L.Ed.2d 300 (1982). As the Second Circuit characterized it, the two-pronged test required an analysis of "situs" and "status." Keene Corp. v. United States, 700 F.2d 836, 843 (2d Cir. 1983).

Whether the status requirement applies at all to a tort occurring on the high seas has not finally been decided. In East River Steamship, the Supreme Court noted that this "additional requirement of a `maritime nexus' — that the wrong must bear `a significant relationship to traditional maritime activity'" — had been developed in the context of torts occurring on navigable waters within the United States. East River Steamship, 476 U.S. at 864, 106 S.Ct. 2295 (citations omitted). The Court declined to decide "whether a maritime nexus also must be established when a tort occurs on the high seas." Id.; see also Friedman, 996 F. Supp. at 307.

Of course, if only the locality test need be met for wrongs committed on the open ocean, then admiralty jurisdiction would apply in this case since the Passenger Plaintiffs were injured as a consequence of a disease contracted while at sea. However, even if the exercise of admiralty jurisdiction requires that there be a substantial relationship to maritime activity in all cases, that test is met as well.

The substantial relationship requirement has been refined by two Supreme Court cases postdating Executive Jet and Foremost. First, in Sisson v. Ruby, 497 U.S. 358, 110 S.Ct. 2892, 111 L.Ed.2d 292 (1990), the Court held that the federal district court had admiralty jurisdiction over claims arising out of a fire caused by a washer/dryer on board a pleasure yacht when the fire spread to other vessels docked at the same marina. Id. at 360, 110 S.Ct. 2892. In reaching this conclusion, the Court identified two critical inquiries: whether the alleged wrong created a potential hazard to maritime commerce and whether it arose out of an activity that bears a substantial relationship to traditional maritime activity. Id. at 363-64, 110 S.Ct. 2892.

In the second case, Jerome B. Grubart, Inc. v. Great Lakes Dredge & Dock Co., 513 U.S. 527, 115 S.Ct. 1043, 130 L.Ed.2d 1024 (1995), the Court found that claims arising out of the flooding of a freight tunnel were subject to admiralty jurisdiction where the flood allegedly resulted from the driving of piles into a riverbed. The Court reasoned that whether there is potential impact on maritime commerce should be analyzed "at an intermediate level of possible generality"; the appropriate inquiry is "whether the incident could be seen within a class of incidents that posed more than a fanciful risk to commercial shipping." Id. at 538-39, 115 S.Ct. 1043. Then, in order to determine whether there is a significant relationship to maritime activity, it is necessary to "ask whether a tortfeasor's activity, commercial or noncommercial, on navigable waters is so closely related to activity traditionally subject to admiralty law that the reasons for applying special admiralty rules would apply in the suit at hand." Id. at 539-40, 115 S.Ct. 1043.

In applying these tests to this case, it is clear that the claims of the Passenger Plaintiffs against Celebrity fall within the admiralty jurisdiction of the Court. As noted above, the locality test is met since the tort occurred on the high seas. This is true notwithstanding the fact that the victims did not exhibit symptoms until they had come ashore. Pursuant to the Extension of Admiralty Jurisdiction Act, 62 Stat. 496, "[t]he admiralty and maritime jurisdiction of the United States shall extend to and include all cases of damage or injury, to person or property, caused by a vessel on navigable water, notwithstanding that such damage or injury be done or consummated on land." 46 U.S.C.App. ยง 740. As the Supreme Court has observed, the purpose of the Act was to invest the admiralty courts with "jurisdiction over `all cases' where the injury was caused by a ship or other vessel on navigable waters, even if such injury occurred on land." Grubart, 513 U.S. at 532, 115 S.Ct. 1043. ...


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