Allianz Glob. Risks U.S. Ins. Co. v. United States

• Decision Date: 28 April 2022
• Docket Number: 21-cv-1202-BAS-BGS
• Parties: ALLIANZ GLOBAL RISKS U.S. INSURANCE COMPANY, et al., Plaintiffs, v. UNITED STATES OF AMERICA, Defendant.
• Court: U.S. District Court — Southern District of California

ALLIANZ GLOBAL RISKS U.S. INSURANCE COMPANY, et al., Plaintiffs, v. UNITED STATES OF AMERICA, Defendant.

No. 21-cv-1202-BAS-BGS

United States District Court, S.D. California

April 28, 2022

ORDER GRANTING THE GOVERNMENT'S MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION (ECF NO. 12)

Hon Cynthia Bashant United States District Judge

Before the Court is Defendant United States of America (“Government”)'s motion to dismiss this subrogation action for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure (“Rule”) 12(b)(1) (“Motion”).^[1] (Mot., ECF No. 12.) Plaintiffs oppose^[2] (Opp'n, ECF No. 13) and the Government replies (Reply, ECF No. 14). The Court finds the Motion suitable for determination on the papers submitted and without oral argument. See Fed.R.Civ.P. 78(b); Civ. L.R 7.1(d)(1). For the reasons set forth below, the Government's Motion is GRANTED.

I. BACKGROUND

A. Pertinent Facts

1. Building Basin No. 1

On January 1, 1991, National Steel and Shipbuilding Company (“NASSCO”) leased from the San Diego Unified Port District (“Port”) Building Basin No. 1 (“Basin”), which is “located at the eastern side of San Diego Bay” in San Diego, California. (Compl. ¶ 5.) On the Basin's premises there is a “graving dock” NASSCO uses “for shipbuilding [and] other work related to vessels[.]” (Id. ¶ 7.) A “graving dock” essentially is a type of “dry dock”: “[a]n enclosed basin into which a ship is taken for underwater cleaning and repairing . . . [that] is fitted with watertight entrance gates which when closed permit the dock to be pumped dry.” Dry Dock, INTERNATIONAL MARITIME DICTIONARY 246 (2d Ed. 1961); Graving Dock, id. at 336 (“A drydock in which ships are repaired as opposed to a building dock, in which ships are built.”).^[3] When the Basin's graving dock was pumped dry and its sea gate closed, the ocean waters from the San Diego Bay “would impart a substantial load to the sea gate, a portion of which was transferred from the gate's structural load member to” a “horizontal steel, structural support beam” (“Beam”). (Id. ¶¶ 21-22.)

2. NASSCO's Shipbuilding Contract with the Navy

On approximately March 9, 2016, the United States Navy (“Navy”) entered a 176-page contract with NASSCO to design, build, and perform other work related to Navy vessels at the Basin (“Contract”). (Id. ¶ 15; Contract No. N0002416C2227A00022, Ex. 1 to Notice of Lodgment, ECF No. 12-2.) The Contract explicitly requires certification of “[d]rydocking and shipping ways employed [by NASSCO] in [its] performance of th[e] [C]ontract . . . in accordance with MIL-STD-1625D (SH), dated 27 August 2009, Safety Certification Program [(SCP)] for Drydocking Facilities and Shipbuilding Ways for U.S. Ships” (“Military Standard 1625D”). (Compl. ¶ 16; Contract 34; see also Military Standard 1625D, Ex. 2 to Notice, ECF No. 12-3.)^[4]

As set forth in Military Standard 1625D, the SCP's purpose is:

To ensure the safety of U.S. Navy ships during docking and undocking operations, while in dock, while under construction, and during launching and transfer operations. The designed capacity of the drydocking facility is to be determined, as well as its current material condition with regard to its foundations, structure, and supporting auxiliary systems, including those for ship protection. Also included is an assessment of operating procedures, manning, and personnel.

(Military Standard 1625D § 1.1.1.) By its terms, Military Standard 1625D and the SCP delineated therein apply to the Basin's graving dock. (Id. § 1.2.)

To “ensure the dock is in satisfactory condition to safely operate[, ]” the SCP requires the facility's “operator, ” here, NASSCO, to “implement a maintenance program subject to Navy external audits at three-year intervals.” (Military Standard 1625D §§ 4.9.1, 4.9.2.) Among other things, the maintenance program mandates the operator to undertake “control inspections” for the purpose of “record[ing] the condition of the facility, ” “identify[ing] deficiencies, ” and “evaluat[ing] the effectiveness of preventative maintenance and deficiency correction procedures.” (Id. § 4.9.3.2.) Components of a facility deemed “[s]tructures” within the meaning of Military Standard 1625D must be evaluated “at 2-year intervals, ” subject to deviation “to accommodate drydock operations and other significant conflicts that prevent accomplishment on schedule.” (Id. § 4.9.3.2(a).) Section 5.2 of Military Standard 1625D sets forth the detailed control-inspection requirements and certification standards for “Graving Docks.” (Military Standard § 5.2.)

While NASSCO-as the Basin's “operator”-is responsible for conducting control inspections (see Military Standard 1625D §§ 4.9.1, 4.9.3.2(b)), the Navy is required to “provide oversight” in connection therewith (id. § 4.9.3.2.1). In particular, Navy personnel “shall”:^[5]

• “[A]ccompany commercial activities during control inspections.” (Id. § 4.9.3.2.1(a));

• “[R]eview the activity's control inspection results for accuracy and completeness and concur with the results based on their observations during the inspections. If the inspection results are determined to be inaccurate or incomplete, the activity shall be required to determine the reason for the discrepancies and to implement corrective action by modifying their inspection procedures or inspector qualifications as applicable to correct the inspection results.” (Id. § 4.9.3.2.1(b));

• “[V]erify qualifications of activity's control inspection personnel[.]” (Id. § 4.9.3.2.1(c));

• “[R]eview inspection instructions for divers and be present during the briefing of the divers to ensure that divers understand their inspection responsibilities.” (Id. § 4.9.3.2.1(d)); and

• “[M]aintain records of control inspection reviews and inspector qualifications for the triennial Navy maintenance audit.” (Id. § 4.9.3.2.1(e).)

Notably, Military Standard 1625D states in its Foreword that “[t]he operating activity, ” i.e., NASSCO, “remains solely responsible for maintaining and operating the facility in a safe manner and condition.” (Foreword ¶ 5, Military Standard 1625D.)

Moreover, the Contract expressly provides “the Government does not assume the risk of and will not pay for the costs of any loss, damage, liability or expense caused by, resulting from, or incurred as a consequence of delay or disruption of any type whatsoever.” (Contract 69-70 (emphasis added).)

3. Control Inspections of the Basin

Plaintiffs allege that at some time prior to July 11, 2018, NASSCO and Navy personnel “observed spalling^[6] of concrete above the Beam and acknowledged a need to repair the spalling in reports.” (Compl. ¶ 26.) Nevertheless, NASSCO and Navy personnel allegedly did not once undertake a control inspection of the Beam, despite the Beam assertedly constituting a “structure” within the meaning of Military Standard 1625D and Military Standard 1625D's requirement that structures must be inspected on a biennial basis. (Id. ¶¶ 25, 27-28.)

4. Sea Gate Failure

On approximately July 11, 2018, the Beam failed apparently due to “gradual, substantial corrosion” (“Incident”). (Compl. ¶ 29; see also id. ¶¶ 34, 36 (alleging post Incident investigation revealed “[s]evere corrosion” of the Beam caused the sea gate failure).) When the Beam failed, the sea gate collapsed, causing ocean water from San Diego Bay to flood the Basin. (Id. ¶ 32; see also Mem. 3.) The Incident allegedly caused damage to property in which NASSCO and General Dynamics Corporation (“GDC”) had insurable interests.^[7]

5. Insurance Claims

After the Incident, NASSCO and GDC submitted insurance claims to Plaintiffs for damages caused by the Beam failure. (Compl. ¶ 37.) Plaintiffs paid insurance benefits on “losses arising from the Incident” corresponding to (1) “business interruption and claim preparation expenses”; (2) “real property damage”; (3) “business personal property/equipment [damage]”; (4) “[lost] inventory”; and (5) “out-of-pocket extra expenses.” (Id. ¶ 39.)

B. Procedural History

1. Complaint

On June 30, 2021, Plaintiffs commenced this subrogation action. (Compl.) The Complaint asserts a single cause of action, which Plaintiffs style as a “negligence” claim. (Id. ¶¶ 56-65.) As to each element of negligence, ^[8] Plaintiffs allege the following:

Duty. Citing California's “negligent undertaking doctrine, ” Plaintiffs allege that the Navy owed NASSCO a duty of “reasonable care and skill” in the performance of “inspection and oversight services” set forth expressly in Military Standard 1625D. (Compl. ¶¶ 57-60 (citing Allred v. Bekins Wide World Van Servs., 45 Cal.App.3d 984, 989 (1975), and Dekens v. Underwriters Labs. Inc., 107 Cal.App.4th 1177, 1181-82 (Ct. App. 2003)).)

Breach. Plaintiffs allege the Navy “negligently performed inspection and/or oversight services” because the Navy “failed to comply” with several provisions of Military Standard 1625D, ” including those provisions mandating that the Navy:

• “inspect or require inspection of the Beam . . . as part of control or structural inspections” pursuant to Sections 4.9.3.2(a) and (c), 4.9.3.2.1(a), 4.9.4.1, 5.2.5.4, and 5.2.5.4.2(a);

• “include or require inclusion of the Beam as an individual item listed on the inspection checklists” pursuant to Sections 4.9.3.2(c) and 4.9.3.2.1(b);

• “require periodic gauging/ultrasonic testing of the Beam” pursuant to Section 5.2.5.4.6; and • “evaluate or require evaluation of the Beam in response to observ[ed] of concrete spalling” pursuant to Section 5.2.5.4.

(Id. ¶ 61.) Plaintiffs do not identify any basis for the Navy's purported breach other than its alleged noncompliance with Military Standard 1625D.

Causation and Damages. Plaintiffs allege that the Navy's purported breach proximately and...