Fernandez v. Haynie

• Decision Date: 14 November 2000
• Docket Number: No. Civ.A. 4:00CV9.,Civ.A. 4:00CV9.
• Citation: 120 F.Supp.2d 575
• Court: U.S. District Court — Eastern District of Virginia
• Parties: John FERNANDEZ, III, Plaintiff, v. James B. HAYNIE, etc., et al., Defendants.

120 F.Supp.2d 575

John FERNANDEZ, III, Plaintiff, v. James B. HAYNIE, etc., et al., Defendants.

No. Civ.A. 4:00CV9.

United States District Court, E.D. Virginia, Newport News Division.

November 14, 2000.

Rice Arthur Jett, Jr., Philip Norton Davey, Davey & Brogan, P.C., Norfolk, VA, for plaintiff.

William Delaney Bayliss, Williams, Mullen, Clark & Dobbins, Richmond, VA, for defendants.

OPINION AND ORDER

DOUMAR, District Judge.

This matter is before the Court on Defendants James B. Haynie's ("B.Haynie"), James K. Hanie's ("K.Haynie"), and U.S. Enterprises, L.C.'s ("U.S.Enterprises") Motion to Dismiss for Lack of Subject Matter Jurisdiction. For the reasons set forth herein, the motion is DENIED.

I. Factual and Procedural Background

Plaintiff John Fernandez, III ("Fernandez") brought this suit to redress losses incurred resultant to an alleged breach of a contract to procure and maintain marine insurance. Fernandez allegedly contracted with U.S. Enterprises and its brokers/employees, B. Haynie and K. Haynie, to place and maintain with a solvent underwriter an insurance policy on Fernandez's shrimping vessel, the F/V CAPTAIN LYMAN. Fernandez submitted an application for marine insurance to B. Haynie and K. Haynie, and also paid his monthly insurance premiums to them.

On or about August 1, 1997, B. Haynie, K. Haynie, and U.S. Enterprises — collectively doing business as both "Financial Solutions" and "U.S. Vessels" — bound and delivered a marine insurance policy, ostensibly with "United International Limited" and bearing Policy Number VIN97089341 (hereinafter the "United International policy"), to Fernandez and the F/V CAPTAIN LYMAN. The policy covered losses to hull and machinery as well as protection and indemnity risks up to $250,000. The term of this policy was August 1, 1997 to August 1, 1998.

Fernandez faithfully paid the monthly premiums on the policy. Shortly before February 1, 1998, however, without approval from or consultation with Fernandez, B. Haynie and K. Haynie allegedly switched Fernandez's insurance coverage from the policy with "United International Limited" to a new policy ostensibly with "LIC Liberty Insurance Co. A.V.V." (hereinafter the "LIC Liberty policy"). This new policy, bearing Policy Number VIN97089341, was ostensibly on the same terms and conditions as the United International policy. Fernandez was first advised of the change in his insurer on March 2, 1998 when he received a letter from Defendant Tommy Hill ("Hill"), the Managing Director of U.S. Vessel Services Inc. ("U.S.Vessels"), an entity that Fernandez alleges to be the alter ego of both Hill and LIC Liberty.

Meanwhile, on February 1, 1998, Seaman Chauncey A. Pitts ("Pitts") suffered an accident on board the F/V CAPTAIN LYMAN while commercial shrimping in the Gulf of Mexico. As a result of that accident, Pitts suffered a fracture of the left ulna¹ and was taken to the hospital for evaluation and surgery. Pitts was expected to recover within four to six weeks, and Fernandez paid Pitts unearned wages and maintenance, plus an additional $40 for prescription drugs, for the period in which he was expected to be out of work. On March 3, 1998, however, Pitts was diagnosed with osteomyelitis² of the fractured left arm, a condition that Pitts claims is related to the accident. On March 6, 1998, under the instruction of and with funds advanced from U.S. Vessels, Fernandez negotiated a release of all claims with Pitts in exchange for $2,500 in cash and a promise to pay Pitts's outstanding medical bills. After Pitts's settlement with Fernandez, Pitts was incarcerated for possession of crack cocaine and was subsequently diagnosed with brain abscesses, which Pitts claims are related to his left-arm fracture and have caused him to incur $88,181.60 in medical expenses.

On September 8, 1998, Pitts filed suit against Fernandez in Florida state court, alleging claims of Jones Act negligence, unseaworthiness, and failure to pay maintenance and cure (hereinafter, the "Pitts action"). Upon receiving notice of the suit from Fernandez, U.S. Vessels appointed David W. McCreadie, Esq. ("McCreadie") to defend Fernandez and to protect the interests of Fernandez, the F/V CAPTAIN LYMAN, and the insurance underwriters. McCreadie entered an appearance and filed an answer on Fernandez's behalf on October 22, 1998. U.S. Vessels also allegedly paid McCreadie's initial fee in the amount of $1,800 in January 1999.

On August 10, 1999, U.S. Vessels notified McCreadie that, effective August 1, 1999, it was fully dissolved and instructed McCreadie to "expend no more time or money on this matter for or on behalf of U.S. Vessel Services." U.S. Vessels further advised McCreadie that any additional correspondence on the case should be directed to the offices of LIC Liberty, in Panama City, Panama.

The Complaint alleges that despite McCreadie's efforts to communicate with LIC Liberty, Liberty neither paid McCreadie's fees nor assisted in the preparation and coordination of Fernandez's defense to the Pitts action. McCreadie's fees in the amount of $27,646.35 went unpaid, and on November 8, 1999, McCreadie moved to withdraw as Fernandez's counsel. Fernandez opposed McCreadie's motion and offered to personally engage McCreadie as his counsel in the Pitts action, however on November 13, 1999, the Florida trial court granted McCreadie's motion to withdraw. Thereafter, on December 1, 1999, Fernandez, by counsel, tendered his defense to B. Haynie, Hill, Financial Solutions, U.S. Enterprises, and U.S. Vessels, all of whom have refused to defend him in the Pitts action. As a result, Fernandez claims to be defending the merits of that action without any assistance from his insurer.

The Complaint further alleges that Fernandez has met and exceeded his $2,500 deductible under the policy by making payments totaling approximately $15,000 for Pitts's maintenance and cure, as well as his costs and expenses in defending the Pitts action. In addition, the Complaint alleges that Fernandez is exposed to potential liability in the Pitts action for risks covered under the policy, including Pitts's alleged claims for $109,332.53 in cure, additional maintenance, and attorney's fees for failure to pay maintenance. The Complaint also alleges that Fernandez is exposed to liability for McCreadie's unpaid fee in the amount of $27,646.35, in addition to the costs of further legal action in the Pitts case. Fernandez maintains that he has fulfilled all of his obligations under the insurance policy while the Defendants collectively have failed and refused to defend him or otherwise hold him harmless from liability up to the amount of the policy limits.

Fernandez filed the instant suit in this Court on January 21, 2000, and filed an Amended Complaint on February 8, 2000. In his Amended Complaint, Fernandez asserts nine causes of action for breach of contract, breach of warranties, and negligence against B. Haynie, K. Haynie, and U.S. Enterprises. The Defendants contend, and the Plaintiff concedes, that all nine claims against B. Haynie, K. Haynie, and U.S. Enterprises stem from an alleged breach of a contract to procure and maintain a policy of marine insurance. Fernandez's Amended Complaint also asserts two causes of action for misrepresentation against Hill, U.S. Vessel Services, and J.M. Caron ("Caron"), the Director of Marketing for U.S. Vessel Services.³

B. Haynie, K. Haynie, and U.S. Enterprises filed the instant Motion to Dismiss for Lack of Subject Matter Jurisdiction on October 5, 2000, and filed their brief in support of that motion on October 12, 2000. The Plaintiff responded to the instant motion on October 17, 2000, and the Defendants filed their reply brief on November 1, 2000. The Court heard oral argument on the matter on November 7, 2000. Accordingly, the issues have been fully briefed and discussed and the matter is now ripe for determination.

II. Motion to Dismiss

The Defendants move to dismiss this action for lack of subject matter jurisdiction. When considering a motion to dismiss for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1), the Court considers "whether plaintiff[s'] allegations, standing alone and taken as true [plead] jurisdiction and a meritorious cause of action." Dickey v. Greene, 729 F.2d 957, 958 (4th Cir. 1984). Once the existence of subject matter jurisdiction is challenged, the burden of establishing its existence always rests upon the party asserting jurisdiction. See Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir.1991), cert. denied, 503 U.S 984, 112 S.Ct. 1667, 118 L.Ed.2d 388 (1992). The court should regard the pleadings' allegations as mere evidence on the issue, and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment. See id. (citing Adams v. Bain, 697 F.2d 1213, 1216 (4th Cir.1982)).

III. Analysis

A. Introduction

This case raises what appears to be a novel issue both in this Court and in the Fourth Circuit: whether, in the wake of Exxon Corporation v. Central Gulf Lines Inc., 500 U.S. 603, 111 S.Ct. 2071, 114 L.Ed.2d 649 (1991) (removing the per se exception from admiralty jurisdiction for agency contracts), an action on an alleged contract to procure marine insurance is within the grant of admiralty jurisdiction to the federal courts. In support of their Motion to Dismiss, Defendants argue that a contract to procure marine insurance such as the contract at issue in the instant case is preliminary to the actual marine insurance contract and, pursuant to the preliminary contract doctrine, such contracts fall outside the Court's admiralty jurisdiction. See, e.g., Continental Cameras Co. v. Foa & Son Corp., 658 F.Supp. 287, 289 (S.D.N.Y.1987) (stating that "a contract to procure marine insurance is preliminary to the maritime contract, which is the insurance contract," and as such falls outside the court...