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AMERICAN HOME ASSURANCE CO. v. MASTERS' SHIPS MGMT. S.A.

May 24, 2004.

AMERICAN HOME ASSURANCE COMPANY, NEW YORK MARINE & GENERAL INSURANCE CO., BLUEWATER INSURANCE ASA, GENERALI FRANCE ASSURANCES, HAMBURGER VERSICHERUNG WAG VERS A (CONVERIUM), HAMBURGER VERSICHERUNG WAG VERS B (R), GOTHAER VAG, ING INSURANCE, and "THE ETHNIKI" HELLENIC GENERAL COMPANY S.A., Plaintiff's, -against- MASTERS' SHIPS MANAGEMENT S.A., ENDEAVOUR NAVIGATION S.A., and THE ROYAL BANK OF SCOTLAND PLC., Defendants


The opinion of the court was delivered by: JOHN KEENAN, Senior District Judge

OPINION & ORDER

Procedural Background

This maritime insurance action was brought by a group of underwriters seeking a declaratory judgment that hull and machinery insurance contracts they entered into with the defendants should be deemed void ab initio and that the underwriters are not liable for any claims under those contracts. Pretrial discovery having been conducted, a host of motions are presently before the Court. The defendants seek to have certain orders issued by the magistrate judge overseeing discovery set aside or modified pursuant to Rule 72 of the Federal Rules of Civil Procedure and 28 U.S.C. § 636. In addition, each side has moved for summary judgment. For the reasons set forth herein, each of these motions is denied.

  Facts

  On May 27 and 28, 2002 at Xiangang, China, the M/V SATURN II wais loaded with a substantial cargo of coal. From Xiangang, the SATURN II traveled to Singapore where she received fresh water, fuel and diesel fuel during a stop from June 8, 2002 to June 10, 2002. After the brief layover, the SATURN II headed for Dahej, India. On June 25, 2002, the vessel grounded off the west coast of India.

  Defendants Endeavour Navigation S.A. ("Endeavour") and Masters' Ships Management S.A. ("MSM"), respectively the SATURN II's owner and manager, had entered into hull and machinery insurance agreements with American Home Assurance Co., New York Marine & General Insurance Co., Bluewater Insurance ASA, Generali France Assurances, Hamburger Versicherung WAG VERS A (CONVERIUM), Hamburger Versicherung WAG VERS B (r) V), Gothaer VAG, ING Insurance, and "The Ethniki" Hellenic General Insurance Co. S.A. (collectively "the Underwriters" or "plaintiffs"). Endeavour and MSM, as the named assureds under the policy with the Underwriters, and defendant The Royal Bank of Scotland Plc. ("Royal Bank"), the mortgagee bank and assignee of and loss payee under the policy, claim the vessel is a constructive total loss and demand payment under the policy from the Underwriters. The Underwriters claim, however, that the policy should be ruled void ab intio because the defendants failed to disclose a material fact when negotiating the placement of the policy. According to the Underwriters, they entered into the contracts with the belief that they were covering a fleet of ships, when in fact the coverage was for only one ship. Defendants seek the $6 million the policy promises in the event of a constructive total loss.

  Defendants' Rule 72 Motion

  By Order of this Court, the supervision of all general pretrial discovery was referred to Magistrate Judge Peck. On March 24, 2003, Magistrate Judge Peck issued a Case Management Plan complete with a scheduling order setting forth dates by which aspects of the discovery process were to be completed. The dates selected by Magistrate Judge Peck were ones that had been agreed to and proposed by the parties. Among the pertinent dates, all fact discovery was to be completed by September 17, 2003. Expert disclosures required by Rule 26 of the Federal Rules of Civil Procedure were to have been made by October 17, 2003, with depositions of those experts to be completed by November 17, 2003.

  Endeavour and MSM retained New York Ship Surveyors Corp. ("NYSS") to serve as vessel surveyors and marine engineering experts on their behalf. According to the defendants, NYSS prepared detailed survey reports covering issues relating to the SATURN II's seaworthiness, the cause of the casualty and the extent of the damage to the vessel. Unfortunately for the defendants, they and NYSS substantially disagreed as to the amount of fees to be paid. As a result of this fee dispute, the defendants were unable to use NYSS's reports or offer their employees as experts to be deposed by the plaintiffs. Because defendants had focused exclusively on resolving the fee dispute with NYSS, they were not in a position to comply with the October 17, 2003 deadline for expert disclosure.

  In response to Endeavour and MSM's failure to make timely disclosure, Magistrate Judge Peck ordered on October 21, 2003 ("Order"): 1. Defendant MSM/Endeavour expert report re N.Y.S.hip Surveyors extended to 10/28 but no further extensions will be granted. Also plaintiff will have priority to depose defendant's experts, so this delay may cost defendants from being able to depose plaintiff's experts.

 
2. Defendant MSM/Endeavour did violate a Court order, however. Defendant MSM/Endeavour is sanctioned $1,000 payable to the Clerk of Court by 10/28/03. (If plaintiff wishes to move for costs for its 10/20 letter, it can do so, or perhaps defendant will voluntarily work it out.)
O'Regan Decl. Ex. 3. It is this Order that is the primary subject of defendants' Rule 72 motion. Defendants wish to have Magistrate Judge Peck's October 28, 2003 deadline for expert disclosure set aside in order to allow them to submit a substitute expert's report. Defendants also want the sanctions imposed vacated. In addition, Endeavour and MSM object to a decision by Magistrate Judge Peck preventing them from engaging in additional discovery relating to communications between NYSS arid plaintiffs' counsel.

  Rule 72(a) empowers a magistrate judge to whom a pretrial matter not dispositive of a claim or defense of a party is referred to issue orders as necessary. Fed.R.Civ.P. 72(a). Parties to the litigation may object to an order of the magistrate judge within 10 days and seek relief from the order from the district judge assigned to the case. Id. The standard of review that a district judge is to apply to a magistrate judge's order is deferential, however. The language of Rule 72(a) instructs district courts to modify or set aside a magistrate judge's rulings only when the rulings are "clearly erroneous or contrary to law." Id. A ruling is clearly erroneous if "the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948).

 Request to Set Aside October 28, 2003 Deadline

  Endeavour and MSM filed their motion to modify and set aside the magistrate judge's decision on October 29, 2003. At that time the defendants sought a clarification of the Order with respect to whether the deadline applied only to NYSS or to any expert defendants hoped to enlist. In the event the Court deemed the Order to apply to any and all experts, the defendants requested that this Court modify the deadline to allow them time to find and substitute new experts for NYSS. On November 3, 2003, shortly after this motion was filed, Magistrate Judge Peck clarified ...


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