Herman Family Revocable Trust v. Teddy Bear

• Citation: 254 F.3d 802
• Decision Date: 08 May 2001
• Docket Number: DEFENDANTS-COUNTER-CLAIMANTS-APPELLEES,PLAINTIFF-COUNTER-DEFENDANT-APPELLANT,PLAINTIFF-COUNTER-DEFENDAN,AND,99-56981,Nos. 99-56865,s. 99-56865
• Parties: (9th Cir. 2001) HERMAN FAMILY REVOCABLE TRUST,HOWARD W. LITTELL,, v. TEDDY BEAR, THE VESSEL TEDDY BEAR, OFFICIAL NO. 569,147, HER ENGINES, TACKLE, FURNITURE, MACHINERY, EQUIPMENT AND APPURTENANCES, ETC., IN REM; MARLINEER INTERNATIONAL, INC., A CORPORATION, IN PERSONAM; TED TATE, IN PERSONAM,
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 802

254 F.3d 802 (9th Cir. 2001)

HERMAN FAMILY REVOCABLE TRUST, PLAINTIFF-COUNTER-DEFENDANT, AND HOWARD W. LITTELL, PLAINTIFF-COUNTER-DEFENDANT-APPELLANT, v. TEDDY BEAR, THE VESSEL TEDDY BEAR, OFFICIAL NO. 569,147, HER ENGINES, TACKLE, FURNITURE, MACHINERY, EQUIPMENT AND APPURTENANCES, ETC., IN REM; MARLINEER INTERNATIONAL, INC., A CORPORATION, IN PERSONAM; TED TATE, IN PERSONAM, DEFENDANTS-COUNTER-CLAIMANTS-APPELLEES.

Nos. 99-56865, 99-56981

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted May 8, 2001--Pasadena, California

Filed June 13, 2001

Ronald P. Kaplan, Los Angeles, California, for the plaintiffs-appellants.

Jack H. Swift, Chula Vista, California, for the defendants-appellees.

Appeal from the United States District Court for the Central District of California;

Alicemarie H. Stotler, District Judge, Presiding D.C. No. CV-98-00664-AHS

Before: Frank J. Magill,^* M. Margaret McKeown and Raymond C. Fisher, Circuit Judges.

The opinion of the court was delivered by: McKEOWN, Circuit Judge

OPINION

Opinion by Judge McKeown

This case illustrates the pitfall of proceeding through trial where the district court lacks subject matter jurisdiction. The case centers on the aborted sale of the vessel Teddy Bear, a 62-foot power boat. Howard Littell, on behalf of a private family trust, engaged in negotiations to buy the yacht from its owner, broker Marlineer International, Inc., but the deal ultimately fell through. Littell sued in federal court, invoking the court's admiralty jurisdiction and its supplemental jurisdiction over state-law claims. After a bench trial, the court determined that it did not have admiralty jurisdiction but nonetheless adjudicated both the federal admiralty claims and a supplemental state-law claim in favor of Marlineer. Littell appeals, challenging the district court's conclusions on the substance of his claims. We do not reach the merits of Littell's appeal, however, because of the lack of jurisdiction. Without admiralty jurisdiction, the court had no authority to adjudicate the merits of the admiralty claims. In addition, absent original admiralty jurisdiction, the district court did not have supplemental jurisdiction under 28 U.S.C. §§ 1367, and the entire case should have been dismissed on purely jurisdictional grounds.

BACKGROUND

Littell and Marlineer commenced dealing in May 1997, when, during a ride on the boat, Marlineer's president, Ted Tate, told Littell that the asking price for the Teddy Bear was $850,000. Littell told Tate that he was interested, but that he could not complete the transaction right away because his financial situation was uncertain. Littell and Tate met again later that summer, at which time they agreed on a price of $750,000; Littell handed over a deposit of twenty dollars but no other terms were agreed upon at that time. Tate said he would prepare the documents to complete the sale.

Over the next six months the parties continued negotiations and exchanged documents, and Marlineer undertook repair and refurbishing work on the yacht. Littell actually moved onto the boat and apparently stayed for several months while he drew detailed schematic drawings of the Teddy Bear's electrical and mechanical systems, for which he later claimed reimbursement. In early December, the trust issued a $15,000 check to Marlineer.¹ Littell's financial situation remained uncertain; he unsuccessfully tried to convince Marlineer to finance part of the transaction, but the broker declined, the deal fell through, and Littell bought another boat.

Littell filed suit in federal court, alleging four causes of action: (1) in rem for foreclosure of a maritime lien against the Teddy Bear, based on work Littell performed and supervised while living on the yacht; (2) in rem against the Teddy Bear and in personam against the other defendants for foreclosure of a maritime lien, based on the monies Littell had transferred to Marlineer; (3) in rem against the Teddy Bear and in personam against the other defendants for foreclosure of a maritime lien, based on Tate and Marlineer's alleged misrepresentation of the value of the yacht and (4) conversion, against all defendants, based on California Civil Code §§ 3336. The complaint invoked the district court's admiralty and maritime jurisdiction, 28 U.S.C. §§ 1333 and 46 U.S.C. §§ 740, and its supplemental jurisdiction over state-law claims, 28 U.S.C. §§ 1367.

At the conclusion of a three-day bench trial, the district court entered judgment for Marlineer and the other defendants on all causes of action and adopted, with modifications, findings of fact and conclusions of law prepared by Marlineer's counsel. The findings of fact and conclusions of law include two pages of legal analysis titled "There is no Admiralty Jurisdiction," which discusses the well-established rule that a suit over the sale of a vessel does not give rise to admiralty jurisdiction:

Here the underlying activity was the attempted purchase and sale of a vessel and the principal dispute relates to activities undertaken in connection with that attempted purchase. Contracts for the sale of a slip are not maritime and admiralty jurisdiction does not apply.

The section concludes, "This court lacks admiralty jurisdiction. Since plaintiffs' only causes of action are brought `in admiralty' and speak to alleged maritime torts, there remains no basis for recovery." The findings of fact and conclusions of law also address Littell's substantive claims, concluding there was no enforceable agreement, no fraud, no negligent misrepresentation, no statutory lien or wrongful arrest, and no conversion under California Civil Code §§ 3336.

DISCUSSION

We must first address jurisdiction. Though the parties have already proceeded through trial and a judgment on the merits, and though neither party actually raised the issue on appeal, we must still determine whether the district court had subject matter jurisdiction. See Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986) ("[E]very federal appellate court has a special obligation to `satisfy itself not only of its own jurisdiction, but also that of the lower courts in a cause under review,' even though the parties are prepared to concede it.") (quoting Mitchell v. Maurer, 293 U.S. 237, 244 (1934)).

The district court's conclusion that there was no admiralty or maritime jurisdiction under 28 U.S.C. §§ 1333 and 46 U.S.C. §§ 740 was based on the venerable principle that a suit arising out of the sale of a vessel does not give rise to admiralty jurisdiction. See, e.g., Magallanes Invest. Co., Inc. v. Circuit Sys., Inc., 994 F.2d 1214, 1217 (7th Cir. 1993); J.A.R., Inc. v. M/V Lady Lucille, 963 F.2d 96, 98 (5th Cir. 1992); Richard Bertram v. The Yacht, Wanda, 447 F.2d 966, 967 (5th Cir. 1971); The Ada, 250 F. 194 (2d Cir. 1918); see also 1 BENEDICT ON ADMIRALTY §§ 186 (Matthew Bender 7th ed. 2000); 29 MOORE'S FEDERAL PRACTICE §§ 703.04[2][c][vii] (Matthew Bender 3d ed. 2000). Littell does not challenge this conclusion on appeal,² and thus we do not disturb it here. See Brooks v. City of San Mateo, 229 F.3d 917, 922 n.1 (9th Cir. 2000) (" `On appeal, arguments not raised by a party in its opening brief are deemed waived.' ") (alteration omitted) (quoting Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir.1999)).

In contrast to our obligation to scrutinize sua sponte a district court's assertion of jurisdiction, we have never held that we have an obligation to examine sua sponte a court's conclusion that it lacks jurisdiction. Indeed, such a circumstance is so unusual that it would rarely arise. The posture of this case is somewhat unusual, however. Although it is unclear why the jurisdiction issue was not decided before trial, nonetheless after trial the district court concluded that it did not have admiralty jurisdiction. Presumably because the court reached the merits of the claims, Littell chose not to appeal the jurisdiction issue. Nor did Marlineer seek to dismiss the appeal on jurisdictional grounds. Typically a determination of lack of jurisdiction would result in a dismissal by the district court, and the appeal would address the jurisdictional ruling rather than the merits. But, then, this appears not to be a typical case.

Despite the district court's holding that it lacked admiralty jurisdiction, it nonetheless adjudicated the admiralty claims. It also adjudicated the state-law claim, purportedly under its supplemental jurisdiction. The supplemental jurisdiction statute provides,

[I]n any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.

28 U.S.C. §§ 1367(a). The statute's plain language makes clear that supplemental jurisdiction may only be invoked when the district court has a hook of original jurisdiction on which to hang it. See id. ("[I]n any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction . . ." ) (emphasis added). As a leading treatise explains,

[I]f the federal claim [is] dismissed for lack of subject matter jurisdiction, a district court has no discretion to retain the supplemental claims for adjudication. The dismissal means that there never was a valid claim within the court's original jurisdiction to which the state claims may be supplemental. Therefore, the district court has no discretion to exceed the scope of its Article III power, and must dismiss the state law claims without prejudice.

(footnote omitted). 16 MOORE'S FEDERAL PRACTICE §§ 106.66[1]; see also Acri v. Varian Assoc., 114 F.3d 999, 1000 (9th Cir. 1997) ("a district court must be sure that it has federal jurisdiction under §§ 1367(a)."). Without the hook of...