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Federal Insurance Co. v. Speedboat Racing Ltd.

United States District Court, D. Connecticut

January 23, 2017

FEDERAL INSURANCE COMPANY, Plaintiff,
v.
SPEEDBOAT RACING LTD., Defendant/Third Party Plaintiff
v.
RAMBLER 100 LLC, Third Party Defendant.

          RULING ON SPEEDBOAT['S] AND JACKSON'S MOTION FOR LEAVE TO AMEND ANSWER [Doc. 75]

          CHARLES S. HAIGHT, JR. Senior United States District Judge.

         I. BACKGROUND

         In this vehemently litigated admiralty action, the current litigants, Speedboat Racing Ltd. ("Speedboat"), Alexander E. Jackson, and Rambler 100 LLC ("Rambler") dispute which party is liable for damages to the yacht formerly known as "SPEEDBOAT" (the "Yacht"), a majestic and "highly sophisticated racing sloop, 30 meters long, " which was "designed by Juan Kouyoumdjian of Juan Yacht Design and built by T.P. Cookson Boatbuilders Ltd."[1] Doc. 20 (Speedboat's "Amended Third Party Complaint"), at 3 (¶ 8). Speedboat, Jackson (Speedboat's "Director"), and Rambler entered into a "Share Issuance and Shareholder Agreement" (the "Agreement") on October 14, 2010, which provided that Rambler would have exclusive use of the Yacht in the 2011 Atlantic Ocean Racing Series and be responsible to pay "all operating expenses, repair and maintenance costs for the Yacht and its Equipment, including minor maintenance or major equipment failure incurred during the Term and after redelivery."[2] Doc. 10-3 ("Exhibit C, Lease Agreement, dated October 14, 2010), at 5 (§ 4.1(a)).

         Pursuant to its terms, the Agreement was to be "governed by and construed in accordance with the laws of the State of Connecticut." Id., at 10 (§ 5.4). The Agreement provided Rambler with an ownership interest in Speedboat ("one (1) redeemable share of a nominal par value of U.S. $1.00"), id., at 2 (Preamble), and exclusive use of the Yacht from October 14, 2010, to March 15, 2012, for the purpose of racing the Yacht in the Atlantic Ocean Racing Series, id., at 4 (§ 4.1).

         On August 15, 2011, Rambler raced the Yacht in the 2011 Rolex FastNet Race off the coast of Ireland. Doc. 20 (Speedboat's "Amended Third-Party Complaint"), at 5 (¶ 21). During the course of that race, "[f]acing 23-25 knot headwinds in heavy seas, the Yacht's canting keel snapped off just below the hull exit, whereupon the Yacht capsized, resulting in millions of dollars of damage to the Yacht."[3] Id.

         Consequently, Speedboat submitted a claim to its insurer, Federal Insurance Company ("Federal"), for the damages to the Yacht's "sails, mast, spars and rigging in the amount of $3, 130, 000.00." Doc. 1, at 3 (¶ 15). Federal denied the claim by letter dated October 12, 2012, and commenced the present action against Speedboat. Id., at 4 (¶ 17). In particular, Federal filed a "Complaint in Admiralty" [Doc. 1] seeking declaratory judgment pursuant to 28 U.S.C. § 2201 that, pursuant to the terms of the $5 million marine insurance policy on the Yacht, Federal had no duty to pay Speedboat for the damages that occurred to the Yacht on August 15, 2011. Federal argued that said damages were explicitly excluded from coverage under the following provision of the Policy:

"Spars and Sails." We do not cover any loss to spars running or standing rigging, sail, spinnakers or gennakers that occurs while your yacht is being raced.

Doc. 1, at 1 (¶ 1).

         Federal explained that the damages in question occurred "[d]uring a race" when "the keel failed and the Yacht immediately heeled over, " causing the mast and sails to break off and suffer damage. Id. Therefore, Federal requested "a declaratory judgment claiming that it ha[d] no duty to pay the damages for the mast and sails because they were damaged while the Yacht was being raced[, ] which loss is excluded under the [P]olicy." Id.

         Speedboat answered the Complaint [Doc. 8] and filed a Third-Party Complaint [Doc. 10] against Rambler, alleging that Rambler had breached the Agreement. Speedboat thereafter filed an "Amended Third-Party Complaint" [Doc. 20] pursuant to Federal Civil Rule 15(a)(1)(B), as a "matter of course."[4] In that pleading, Speedboat asserted that "if Plaintiff [Federal was] held to be not responsible to pay Speedboat on its claim for damages to said 'spars and sails, ' this Court should enter a judgment that Rambler is liable to and must pay Speedboat for such damages pursuant to the terms of the Share Issuance and Shareholder Agreement" between Speedboat, Jackson, and Rambler. Doc. 20, at 2 (¶ 2) & Ex. C.

         On August 9, 2016, this Court entered an "Omnibus Ruling, " 2016 WL 4250222, resolving a number of matters in the case. The Ruling approved the joint stipulation of discontinuance [Doc. 43] filed by Federal and Speedboat, which discontinued Federal's action against Speedboat, effectively removing Federal as plaintiff. In addition, the Ruling denied Speedboat's motion to dismiss for lack of subject matter jurisdiction [Doc. 44], holding that this Court possesses admiralty jurisdiction over the pending claims relating to the Agreement pursuant to 28 U.S.C. § 1333. Next, the Ruling granted Rambler's motion to amend or correct its answer and counterclaims [Doc. 46], which included leave to add Jackson as a party. The Court found that the addition of Jackson as a party was not only "permissible, " but likely "required, in light of his participation as a party to the Agreement." Doc. 61, at 52. Finally, the Court denied as moot Speedboat's motion to stay discovery [Doc. 52], and denied without prejudice Rambler's motion to compel discovery [Doc. 57].

         On August 26, 2016, Rambler filed its "Second Amended Answers and Counterclaims to Speedboat's Amended Third-Party Complaint" [Doc. 62]. Five days later, Rambler filed a "Third-Party Complaint" against Jackson [Doc. 63]. On September 16, 2016, Speedboat and Jackson filed Answers to Rambler's Second Amended Counterclaims and Third-Party Complaint [Doc. 70].

         II. PENDING MOTION

         At present, Speedboat and Jackson move, pursuant to Rule 15(a)(2) of Civil Procedure, for leave to amend their Answers [Doc. 70] to Rambler's Second Amended Counterclaims and Third-Party Complaint [Doc. 63] to assert additional affirmative defenses. Their proposed defenses include: "(i) the Yacht was delivered in a safe and seaworthy condition to Rambler, the pro hac vice owner under the Lease Agreement (Twelfth Affirmative Defense); (ii) inapplicability and/or waiver of the implied warranty of seaworthiness (Thirteenth Affirmative Defense); and (iii) preemption of the [attorney's fees and punitive damages provisions of the] Connecticut Unfair Trade Practices Act by federal admiralty law (Fourteenth Affirmative Defense)." Doc. 75, at 1-2.

         In support of their motion, Speedboat and Jackson state that the "proposed amendment is timely, " they "have a good faith basis for asserting their additional affirmative defenses that is not futile, and their proposed amendments will not delay resolution of the dispute or otherwise harm Rambler." Id., at 2. In addition, movants Speedboat and Jackson represent that Rambler "does not oppose" their motion for leave to amend. Id.

         III. DISCUSSION

         A. Standard to Amend Pleadings - Rule 15(a), ...


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