Bensch v. Umar

Citation2 F.4th 70
Decision Date23 June 2021
Docket NumberAugust Term, 2020,Docket No. 20-2268-cv
Parties In the Matter of Christopher J. BENSCH, as Owner of the M/V "Loch Lomond", a 2002 46' Sunseeker Camargue 44, for Exoneration from or Limitation of Liability, Petitioner-Appellant, v. ESTATE OF Ahmed Abdulla UMAR, Ameera Umar, Claimants-Appellees, Waikiki Watercraft, LLC, Defendant.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

James Edward Mercante, (Joseph R. Federici, Jr., on the brief), Rubin, Fiorella, Friedman & Mercante, LLP, New York, NY, for Petitioner-Appellant.

Robert J. Maranto, Jr., Andrews, Bernstein, Maranto & Nicotra PLLC, Buffalo, NY, for Claimants-Appellees.

Before: Livingston, Chief Judge, Cabranes and Lynch, Circuit Judges.

Gerard E. Lynch, Circuit Judge:

This appeal requires us to decide whether maritime complaints seeking exoneration from or limitation of liability pursuant to the Limitation of Liability Act, 46 U.S.C. § 30511 et seq., must contain sufficient factual matter to satisfy the "plausibility" standard applicable to pleadings under Federal Rule of Civil Procedure 8(a), as interpreted by the Supreme Court in Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal , 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). We hold that such maritime complaints must satisfy the plausibility standard. We conclude, however, that the Petitioner's Second Proposed Amended Complaint met that standard, and that the district court exceeded its discretion in denying the motion for leave to amend.

BACKGROUND

The case arises from a tragic boating accident on the Niagara River in August 2018. Petitioner Christopher Bensch was piloting his boat, a 46-foot pleasure craft, in a marked channel on the river. The decedent, Ahmed Abdulla Umar, was operating a jet ski that he had rented from Waikiki Watercraft, LLC ("Waikiki"), with his young daughter as a passenger. Umar fell off the jet ski in front of Bensch's vessel, which struck and killed him. Umar's daughter fortunately survived. As described in more detail below, the parties dispute responsibility for the fatal collision in litigation in both state and federal courts.

I. Legal Background: Exoneration and Limitation of Liability

The Limitation of Liability Act, 46 U.S.C. § 30501 et seq. , limits the liability of a vessel owner to the value of the vessel (and any freight it is carrying, a factor not relevant here) for any damage caused by a collision without the "privity or knowledge" of the owner. Id . § 30505(b). The animating premise of the statute is that the owner of a vessel is generally an absentee who entrusts the vessel to the command of a captain whom the owner has limited ability to supervise or control once the vessel is on the sea. Thus, in what we have described as an effort "to encourage the development of American merchant shipping," the Act loosens the normal rules of respondeat superior in admiralty cases by allowing shipowners to insulate their personal assets (beyond the value of the ship) in cases where any negligence is committed without the owner's privity or knowledge. Complaint of Dammers & Vanderheide & Scheepvaart Maats Christina B.V. , 836 F.2d 750, 754 (2d Cir. 1988), quoting Lake Tankers Corp. v. Henn , 354 U.S. 147, 150, 77 S.Ct. 1269, 1 L.Ed.2d 1246 (1957). This policy, and the literal language of the statute, might suggest that it applies only where the owner lacked knowledge of the accident itself, which occurred out of his sight. But it has long been held that "[p]rivity and knowledge is a term of art meaning complicity in the fault that caused the accident." Blackler v. F. Jacobus Transp. Co. , 243 F.2d 733, 735 (2d Cir. 1957) (internal quotation marks omitted). Thus, the fact that here the owner himself was operating the vessel at the time of the injury does not defeat the limitation of liability action. See id. In effect, the statute creates a federal admiralty forum in which the owner may seek limitation of liability by establishing that he was not at fault with respect to the collision.1

Bensch seeks to avail himself of the benefits of that remedy by filing a complaint asserting that he was not at fault in connection with the death of Umar.

II. Procedural History

On October 30, 2018, Umar's widow, Ameera Umar, brought a wrongful death action on behalf of herself and Umar's estate (together, the "Claimants") in the Supreme Court of New York for Erie County against Bensch and Waikiki, alleging that Bensch operated his boat negligently and that Waikiki failed to provide adequate instruction regarding the proper operation of the jet ski.2 On January 4, 2019, Bensch brought this limitation action against the Claimants in the United States District Court for the Western District of New York, invoking its admiralty jurisdiction and seeking exoneration from or limitation of liability pursuant to the Limitation of Liability Act, 46 U.S.C. 30501 et seq ., and Rule F of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions (the "Supplemental Rules").3

Bensch did not include much detail about the accident in his initial complaint. Besides identifying the action as one for exoneration from or limitation of liability, describing the vessel and its value, and indicating that he had been sued by Claimants for negligence and that the claims asserted would exceed the value of his interest in the vessel, Bensch's initial complaint included only two paragraphs concerning the accident itself. The first addressed Umar's conduct, alleging that Umar "was recklessly operating a personal watercraft (‘Jet Ski’) at a high rate of speed across the channel without regards [sic ] to navigation rules, wakes, water conditions, and marine traffic[,] ... struck the wake of another vessel, and fell off of the Jet Ski directly ahead of Petitioner's Vessel." App'x at 8. As to his own conduct, Bensch alleged only that any damages resulting from the accident "were not due to any fault, neglect, or want of care of Petitioner and occurred without Petitioner's privity or knowledge." Id . On September 26, 2019, Claimants moved to dismiss the complaint for failure to state a claim upon which relief can be granted. On November 8, 2019, Bensch opposed the motion to dismiss and also moved for leave to amend the complaint, attaching a slightly amended version of his complaint (the "First Proposed Amended Complaint"). The only material change from the initial complaint was to add a single sentence stating that "[t]he voyage was a recreational excursion to and from a dock located at 7619 Buffalo Ave, Niagara Falls, N.Y." App'x at 73.4

On January 9, 2020, United States Magistrate Judge Jeremiah J. McCarthy recommended that the motion to dismiss be granted and the motion for leave to amend be denied on grounds of futility. The magistrate judge concluded that while the allegations in the initial complaint adequately pled that Umar was negligent, "the Complaint contains no factual allegations showing that Bensch was not also negligent." App'x at 82. Citing principally cases arising under Rule 8(a) outside the admiralty context, including Ashcroft v. Iqbal , the magistrate judge (whose views on this point were in due course adopted by the district court) ruled that because a court is not bound to accept as true a legal conclusion couched as a factual allegation, Bensch's disavowal of any negligence on his own part was a mere legal conclusion that "fails to plausibly allege a basis for limiting his liability." App'x at 83. The magistrate judge, in short, applied the same pleading standard to Bensch's complaint in this maritime claim for exoneration or limitation that would apply to a complaint in any other civil action under the governing pleading standard announced in Twombly and Iqbal . The magistrate judge further recommended denial on grounds of futility of the motion for leave to amend because the change in the First Proposed Amended Complaint did nothing to address the shortcomings of the initial complaint. See Est. of Umar v. Bensch , No. 18-CV-1414, 2020 WL 3491633, at *4 (W.D.N.Y. Jan. 9, 2020), report and recommendation adopted , No. 18-CV-1414, 2020 WL 3489674 (W.D.N.Y. June 26, 2020).

Bensch responded to the magistrate judge's Report and Recommendation by filing yet another motion for leave to amend the complaint and attaching a second amended complaint (the "Second Proposed Amended Complaint"). The Second Proposed Amended Complaint added a number of additional allegations about Bensch, his boat, and his behavior on the day of the accident, including that Bensch was an "experienced operator," who was "familiar with boating on the Niagara River;" that his boat "was properly outfitted and equipped;" that at the time of the accident Bensch was "keeping a lookout ahead and to each side" and his "visibility was not impaired;" that he observed Umar, who was operating the jet ski "not on any particular course," "suddenly turn[ ] directly in front of [Bensch's] [v]essel's path;" and that he (unsuccessfully) "took appropriate action to avoid collision." App'x at 98.

Nevertheless, the magistrate judge recommended that Bensch's second motion for leave to amend be denied on grounds of bad faith. Because Bensch did not "suggest that [he was] unaware of the pleading requirements of Supplemental Rule F(2) and Iqbal and offer[ed] no excuse for [his] failure to satisfy those requirements," the magistrate judge concluded failing to meet those requirements until the second motion for leave to amend must have been deliberate and in bad faith. App'x at 104-05.

The district court (John L. Sinatra, Jr., J. ) adopted, with some modifications, the substance of the magistrate judge's reports and recommendations discussed above, dismissing Bensch's complaint and denying the motions to amend. The principal modification relevant to this appeal is that the district court denied the second motion for leave to...

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