Colonna's Shipyard v. U.S.A.F. Gen. Hoyt S. Vand.

• Citation: 584 F.Supp.2d 862
• Decision Date: 27 October 2008
• Docket Number: Civil Action No. 2:08cv160.
• Parties: COLONNA'S SHIPYARD, INC., Plaintiff, v. U.S.A.F. GENERAL HOYT S. VANDENBERG, her tackle, engines, etc. in rem, and Reefmakers, LLC, in personam, Defendants, W3 Shipyards, LLC, and Venture Dynamics Enterprises, Inc., and Canadian Artificial Reef Consultants, Inc., Intervenor Plaintiffs, v. U.S.A.F. General Hoyt S. Vandenberg, her tackle, engines, etc. in rem, and Reefmakers, LLC, in personam, Defendants.
• Court: U.S. District Court — Eastern District of Virginia

584 F.Supp.2d 862

COLONNA'S SHIPYARD, INC., Plaintiff, v. U.S.A.F. GENERAL HOYT S. VANDENBERG, her tackle, engines, etc. in rem, and Reefmakers, LLC, in personam, Defendants, W3 Shipyards, LLC, and Venture Dynamics Enterprises, Inc., and Canadian Artificial Reef Consultants, Inc., Intervenor Plaintiffs, v. U.S.A.F. General Hoyt S. Vandenberg, her tackle, engines, etc. in rem, and Reefmakers, LLC, in personam, Defendants.

Civil Action No. 2:08cv160.

United States District Court, E.D. Virginia, Norfolk Division.

October 27, 2008.

COPYRIGHT MATERIAL OMITTED

Bryan Karl Meals, John David Padgett, McGuirewoods LLP, Norfolk, VA, for Plaintiff.

John Early Holloway, Carl David Gray, Hunton & Williams, Patrick Michael Brogan, Davey & Brogan PC, Norfolk, VA, for Intervenor Plaintiffs.

Alexander Nemiroff, Archer & Greiner, Haddonfield, NJ, for Defendants.

OPINION AND ORDER

MARK S. DAVIS, District Judge.

This matter is before the Court on: (1) motions of claimants, City of Key West, Florida ("Key West") and Branch Banking and Trust Company ("BB & T"), to dissolve the arrest of and dismiss the in rem claims against the U.S.A.F. General Hoyt S. Vandenberg ("Vandenberg") for lack of subject matter jurisdiction; and (2) motion of Plaintiff, Colonna's Shipyard, Inc., ("Colonna's" or "Plaintiff), for interlocutory sale of the Vandenberg.¹ As to the first motion, Colonna's filed a response in opposition, and Key West and BB & T failed to file rebuttal briefs. As to the second motion, a response in opposition was never filed by any party or claimant in this action. On October 8, 2008, the Court held oral argument on these and other matters and further permitted the filing of certain supplemental briefs. For the reasons set forth herein, the Court DENIES claimants' motions to dismiss and GRANTS Plaintiffs motion for the interlocutory sale of the Vandenberg.

I. Factual Background²

The City of Key West is the current owner of the Vandenberg, a former Navy vessel first commissioned in the early 1940s. Constructed as a steam powered vessel, the Vandenberg now is indisputably an obsolete ship that was struck from the register of active Navy vessels more than two decades ago. Not only has the Vandenberg sat idle in the James River Ready Reserve Fleet for many years, but it is now unable to navigate under its own power and it is not commercially feasible to update the Vandenberg to do so.

The Vandenberg's obsolete status is illustrated by the fact that ownership of the ship was recently transferred from the United States to the State of Florida, and subsequently to the City of Key West, as part of the "ships to reefs" program so that the Vandenberg could be transformed into an artificial reef and sunk off the coast of Florida. 16 U.S.C. §§ 1220-1220d (2000). After Key West obtained ownership through such program, it contracted with Artificial Reefs of the Keys, Inc. ("Artificial Reefs of the Keys"), a non-profit corporation, to transform the ship into a reef. Artificial Reefs of the Keys then entered into a contract with Reefmakers, LLC ("Reefmakers") who, in turn, entered into a subcontract with Colonna's Shipyard in Virginia. Such subcontract is the subject of the instant lawsuit.

Pursuant to the subcontract between Reefmakers and Colonna's, the Vandenberg was removed from the James River Reserve Fleet and towed to Colonna's Shipyard where it was modified and repaired, certain components were removed, and the ship was readied for towing from Virginia to Florida. According to Colonna's complaint, Colonna's completed the repairs as required by the subcontract, but Reefmakers failed to pay the outstanding balance of $1,639,457.97. Intervenor plaintiffs W3 Shipyards LLC ("W3 Shipyards"), Venture Dynamics Enterprises, Inc. ("Venture Dynamics Enterprises"), and Canadian Artificial Reef Consultants, Inc. ("Canadian Artificial Reef Consultants"), like Colonna's, all claim to be owed money from Reefmakers for services associated with the modification and repair of the Vandenberg. Although it is clear that even after repairs the Vandenberg will never again sail under its own power, the Vandenberg is now capable of being towed from Virginia to Key West, Florida, a distance of approximately 1,000 miles. During the voyage to Florida, the Vandenberg is to travel across open water and a "riding crew" is to be on board during towing. Additionally, the proposed sinking plan indicates that the Vandenberg will transport explosives from Florida to the sinking site where it will be temporarily anchored for two to three weeks as final preparations are made for sinking.

II. Procedural Background

Colonna's instituted the instant breach of contract action against Reefmakers, in personam, and the Vandenberg, in rem, on April 3, 2008, based on Reefmakers' purported failure to pay Colonna's all that was due pursuant to the subcontract discussed above. On that same date, an order of arrest for the Vandenberg was signed by District Judge Walter D. Kelley, Jr. and an admiralty warrant was issued.³ Pursuant to such warrant, the Marshal arrested the Vandenberg and maintained custody over the ship until an agreed order was entered transferring custody to Colonna's. On April 25, 2008, intervening complaints were filed by W3 Shipyards and Venture Dynamics Enterprises. On May 8, 2008, Colonna's complaint, along with a summons, was purportedly delivered to Reefmakers via certified mail at Reefmaker's Moorestown, New Jersey address. Reefmakers challenges the validity of the attempted service and has yet to file an answer, or seek leave of court to file a late answer, to Colonna's complaint.

On June 11, 2008, Colonna's filed a motion for interlocutory sale of the Vandenberg as security was not posted for the release of the ship during the two months following the ship's arrest. Five days later, on June 16, 2008, Key West filed a claim of owner for the Vandenberg and BB & T filed a claim of interest. On that same date, an intervening complaint was filed by intervening plaintiff Canadian Artificial Reef Consultants. On June 25, 2008, Reefmakers filed a motion to compel arbitration based on the arbitration clause contained in the subcontract. Two days later, Colonna's filed a motion for default judgment as to Reefmakers because Reefmakers failed to file an answer or other responsive pleading. On July 3, 2008, Key West and BB & T filed motions to dissolve the arrest of the Vandenberg and to dismiss the in rem claims against it for lack of subject matter jurisdiction.

On October 8, 2008, after the motions were ripe for decision, the Court conducted oral argument, permitting all parties and claimants the opportunity to be heard. The Court declined to continue such hearing based on a purported conflict of interest regarding Key West's counsel's representation of both Key West and BB & T as such conflict was identified to the Court only one day prior to the scheduled hearing. The Court did, however, afford any new counsel that was retained by Key West or BB & T subsequent to the hearing two weeks to submit supplemental memoranda commenting on the matters addressed at oral argument. However, no such memoranda were filed.

III. Discussion — Motion to Dismiss

A. Standard

When a federal court's subject-matter jurisdiction is challenged through a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1), the plaintiff bears the burden of establishing jurisdiction. The Piney Run Pres. Ass'n v. The County Comm'rs of Carroll County, MD, 523 F.3d 453, 459 (4th Cir.2008). A 12(b)(1) motion may either attack the complaint on its face, contending that it fails to allege sufficient facts on which jurisdiction can be based, or it may attack the truth of the jurisdictional allegations contained in the complaint. Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir.1982). If the former procedure is followed, courts must construe the facts in a light most favorable to the plaintiff, whereas if the latter procedure is followed, courts may go beyond the pleadings and consider other evidence, including affidavits and live testimony, to determine if jurisdiction exists. Id. Here, Key West and BB & T do not challenge the veracity of the facts advanced by Colonna's, but contend that the largely undisputed facts establish that the Vandenberg is a non-maritime object falling outside this Court's admiralty jurisdiction. Accordingly, to the extent that any factual disputes exist, the Court will view the facts in the light most favorable to the Plaintiff.

B. Admiralty and Maritime Jurisdiction

Federal courts have original and exclusive jurisdiction, over "[a]ny civil case of admiralty or maritime jurisdiction." 28 U.S.C. § 1333(1); see U.S. Const, art. III, § 2, cl. 1 ("The judicial power shall extend to ... all Cases of admiralty and maritime Jurisdiction."); Norfolk Southern Railway Co. v. Kirby, 543 U.S. 14, 23, 125 S.Ct. 385, 160 L.Ed.2d 283 (2004) (citing the Constitution). A contract dispute falls within federal courts' admiralty jurisdiction if the subject matter of the contract is maritime. However, the Supreme Court has acknowledged some lack of clarity regarding such jurisdiction, stating: "Our cases do not draw clean lines between maritime and nonmaritime contracts." Kirby, 543 U.S. at 23, 125 S.Ct. 385; see Kossick v. United Fruit Co., 365 U.S. 731, 735, 81 S.Ct. 886, 6 L.Ed.2d 56 (1961) ("The boundaries of admiralty jurisdiction over contracts — as opposed to torts or crimes — being conceptual rather than spatial, have always been difficult to draw."). Notwithstanding some admitted confusion in defining which contracts are "maritime," federal courts have consistently held that "a contract to repair ... a ship is maritime." Kossick, 365 U.S. at 735, 81 S.Ct. 886. Federal courts have likewise consistently held that contracts to build a ship or contracts involving work performed on a non-maritime object, such as a "dead ship," are not maritime.⁴ Id.; Hercules Co. v. The...