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Celebrity Cruises Inc. v. Essef Corp.

December 23, 2004

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: James C. Francis IV United States Magistrate Judge

MEMORANDUM AND ORDER

Celebrity Cruises Inc. and Fantasia Cruising Inc. (collectively, "Celebrity) brought this action against Essef Corporation, Pac-Fab, Inc., and Structural Europe, N.V. (collectively, "Essef"), seeking compensation and indemnification for losses incurred as the result of an outbreak of Legionnaires' Disease aboard Celebrity's cruise vessel, the Horizon. Celebrity now moves for partial summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure, seeking to recover from Essef amounts that it has paid to passengers who became ill on the Horizon. Essef, too, moves for partial summary judgment, arguing principally that Celebrity is unable to sustain its claims for certain lost profits and diminished business enterprise value. For the reasons that follow, Celebrity's motion is denied, while Essef's motion is denied without prejudice to renewal in conjunction with the parties' anticipated motions to preclude expert testimony.

Background

The current motions must be viewed against the backdrop of the related cases brought by passengers who contracted Legionnaires' Disease on the Horizon and who sued both Celebrity and Essef. The passenger plaintiffs alleged that they became ill when legionella bacteria flourished in the whirlpool spa aboard the vessel both because the filter, which was designed and distributed by Essef, failed to perform properly, and because Celebrity failed to provide appropriate chemical treatment for the water.

The parties consented to proceed before me pursuant to 28 U.S.C. § 636(c) and agreed to determination of all liability issues in a single bellwether trial. Specifically, the parties stipulated to the following procedure:

a. A jury shall try the Silivanches' case in its entirety as a "bellwether" case. . . . The sequence of such trial, and the effect of the jury's findings therein, are described in paragraphs b. through g. below.

b. The jury shall first try the liability issues arising from the Silivanches' claims against the Celebrity Defendants and the Essef Defendants and the Celebrity Defendants' claims against the Essef Defendants.

c. If the jury finds that one or both of the Celebrity Defendants and one or more of the Essef Defendants are liable on the Silivanches' claims, then the jury shall next determine the Celebrity Defendants' and the Essef Defendants' respective liability on those claims and whether, and to what extent, the Essef Defendants shall indemnify the Celebrity Defendants for damages sustained by the Silivanches.

d. Assuming the jury finds any of the Celebrity Defendants or Essef Defendants liable on the Silivanches' claims, the jury shall next determine which of those defendants, if any, is liable for punitive damages on those claims and the amount of punitive damages to be paid by the defendants found so liable.

e. Thereafter, the jury shall determine the amount of compensatory damages due in the Silivanches' case.

f. The findings of the jury in the Silivanches' case concerning (i) the liability of the Celebrity Defendants and the Essef Defendants, (ii) those Defendants' respective degree of fault and (iii) those Defendants' liability for punitive damages shall be binding on all Plaintiffs . . ., the Celebrity Defendants and the Essef Defendants.

g. In the event that the jury in the Silivanches' case concludes that one or more of the Celebrity Defendants or Essef Defendants is liable on the Silivances' claims, then the trials of the related cases (except those that may settle) shall proceed separately in the sequence determined by the Court and shall be limited to the issues of proximate cause and compensatory damages.

Stipulation and Order dated May 25, 2000 (the "Bellwether Order"), ¶ 4). The jury found both Celebrity and Essef liable to the passengers and allocated fault 70% to Essef and 30% to Celebrity. (Special Verdict Form - Liability (the "Verdict Form"), ¶¶ 1-6 & 14, attached as Exh. E to Declaration of James M. Hazen dated Aug. 31, 2005 ("Hazen Decl.")). The jury further found the Essef defendants liable to Celebrity for fraud, negligence, failure to warn, strict liability, breach of express and implied warranties, and negligent misrepresentation. (Verdict Form, ¶¶ 7-13). With respect to Celebrity's claims, it assigned fault among the Essef defendants 30% to Essef Corporation, 30% to Pac-Fab, Inc., and 40% to Structural Europe, N.V. (Verdict Form, ¶ 15). The jury subsequently assessed punitive damages of $7,000,000 against Essef, awarding $4,200,000 to the passenger plaintiffs and $2,800,000 to Celebrity and awarded compensatory damages to the Silivanches. Thereafter, the remaining passenger damage claims were tried or settled, judgments were entered, and Celebrity's damage claims against Essef were severed. Essef filed a notice of appeal from the judgments that incorporated the bellwether determinations and Celebrity cross-appealed, but the appeals were dismissed by the Second Circuit as untimely. Silivanch v. Celebrity Cruises, Inc., 333 F.3d 355 (2d Cir. 2003). In its opinion, the court characterized the jury verdict as finding, in part, "that Essef had an obligation to indemnify Celebrity in full." Id. at 359.

Litigation of Celebrity's claims against Essef proceeded, and I granted Celebrity's motion to amend and supplement its complaint to include damages for "(1) all costs incurred as a result of the passengers' claims, including awards paid and attorneys' fees; (2) lost revenues, profits, and business opportunities, and (3) loss of business enterprise value." Celebrity ...


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