Offshore Serv. Vessels, L.L.C. v. Surf Subsea, Inc.

• Decision Date: 17 October 2012
• Docket Number: CIVIL ACTION No. 12-1311
• Parties: OFFSHORE SERVICE VESSELS, L.L.C., ET AL. v. SURF SUBSEA, INC.
• Court: United States District Courts. 5th Circuit. United States District Court (Eastern District of Louisiana)

OFFSHORE SERVICE VESSELS, L.L.C., ET AL.

v.SURF SUBSEA, INC.

CIVIL ACTION No. 12-1311

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA SECTION I

Dated: October 17, 2012

ORDER AND REASONS

Before the Court is a motion¹ to dismiss filed by defendant, Surf Subsea, Inc. Plaintiffs, Offshore Service Vessels, L.L.C., Holiday, L.L.C., Nautical Solutions, L.L.C., Harvey Gulf International Marine, LLC, Hornbeck Offshore Services, LLC, and SEACOR Marine, LLC, have filed a motion² to remand. For the following reasons, the motion to remand is DENIED and the motion to dismiss is GRANTED.

BACKGROUND

Plaintiffs are providers of offshore and subsea services in the Gulf of Mexico who own and operate multipurpose support and supply vessels certified by the U.S. Coast Guard to engage in coastwise trade.³ Plaintiffs allege that Otto Marine, a foreign corporation located in Singapore, purchased a competing 292 foot, Class II, DP multipurpose support and supply vessel known as the M/V SURF CHALLENGER.⁴ Because a foreign corporation could not take title tothe vessel without forfeiting its valuable privilege to work in the U.S. coastwise trade, plaintiffs claim that Otto Marine created Surf Subsea, Inc. ("Surf Subsea") to own and operate the vessel with a U.S. citizen, Francis Wade Abadie, Jr. ("Abadie"), serving as its president and chief executive officer.⁵

Plaintiffs allege that, after the sale, Abadie obtained a Certificate of Documentation ("COD") with a coastwise endorsement for the SURF CHALLENGER by certifying to the Coast Guard that: (1) Surf Subsea's president and chairman of the board are United States citizens; (2) the corporation has no "alien directors;" (3) title to "75% or more" of the stock is owned by U.S. citizens eligible to document vessels in their own right with an endorsement for coastwise trade; and (4) "[b]y no means whatsoever is control in excess of 25% conferred upon or permitted to be exercised by any person who is not a citizen of the United States."⁶ Plaintiffs allege that the Coast Guard then issued a COD with a coastwise endorsement for the vessel, and the SURF CHALLENGER began to engage in coastwise trade in the Gulf of Mexico.⁷

Plaintiffs claim that the vessel was not, in fact, eligible to engage in coastwise trade as represented to the Coast Guard.⁸ Plaintiffs allege that when Hornbeck Offshore Services, LLC ("Hornbeck Offshore") attempted to purchase the vessel from Surf Subsea in August 2011, it was advised that Abadie knew nothing concerning the sale, and that Otto Marine held "the powerand control of the corporation."⁹ Plaintiffs contend that Hornbeck Offshore was advised that while the vessel's documented owner was Surf Subsea, all decision-making authority concerning the sale of the vessel came from Lee Kok Wah, President and CEO of Otto Marine, and Yaw Chee Siew, Chairman of Otto Marine.¹⁰ Plaintiffs claim that Hornbeck Offshore ended the negotiations believing that the vessel had been "sold foreign," and that it had lost, or would lose, its eligibility to engage in coastwise trade.¹¹

On April 13, 2012, plaintiffs filed this lawsuit in Louisiana state court alleging that Surf Subsea has been using the SURF CHALLENGER to illegally compete with plaintiffs for coastwise work that it is not eligible to perform because of its foreign ownership and/or control.¹² Plaintiffs allege that Surf Subsea intentionally and purposefully included false information in its applications for the COD and/or failed to disclose material information to the Coast Guard regarding the foreign ownership and control of Surf Subsea.¹³ Plaintiffs claim that Surf Subsea knew that if the true facts were disclosed, it would not have received a COD with a coastwise endorsement.¹⁴ Plaintiffs claim that Otto Marine and/or other foreign interests exercise total control over the vessel and/or Surf Subsea, and that the U.S. citizens purportedly in control of Surf Subsea have no true power or decision-making authority concerning the ownership of the SURF CHALLENGER.¹⁵

In Count I of their complaint, plaintiffs seek a declaratory judgment pursuant to article 1871, et seq., of the Louisiana Code of Civil Procedure that the COD with a coastwise endorsement issued to the SURF CHALLENGER is invalid because Surf Subsea does not satisfy the citizenship requirements for that federal license.¹⁶ Specifically, plaintiffs seek a final judgment declaring:

(1) that title to at least 75 percent of the stock of [Surf Subsea] is not vested in citizens of the United States, or, alternatively, that although the requisite percentage of stock is titled and vested in United States citizens, it is subject to a trust or fiduciary obligation in favor of a person not a citizen of the United States;

(2) that less than 75 percent of the voting power in [Surf Subsea] is vested in citizens of the United States;

(3) that there exists a contract or understanding by which more than 25 percent of the voting power in [Surf Subsea] may be exercised, directly or indirectly, in behalf of a person not a citizen of the United States;

(4) that there exist other means by which control of more than 25 percent of any interest in [Surf Subsea] is given to or permitted to be exercised by a person not a citizen of the United States; and

(5) that [Surf Subsea] is not a citizen of the United States for the purposes of operating a vessel in the coastwise trade.¹⁷

In Count II of their complaint, plaintiffs seek a permanent injunction pursuant to article 3601(A) of the Louisiana Code of Civil Procedure prohibiting Surf Subsea from operating the SURF CHALLENGER in coastwise trade based upon their allegation that Surf Subsea operatedthe vessel without a valid coastwise endorsement.¹⁸ Plaintiffs allege that they are not required to show irreparable injury to obtain the injunction because Surf Subsea's conduct is unlawful.¹⁹

In Count III of their complaint, plaintiffs seek damages pursuant to the Louisiana Unfair Trade Practices and Consumer Protection Law ("LUTPA"), La. Rev. Stat. § 51:1401, et seq.²⁰ Plaintiffs claim that Surf Subsea has engaged in unfair or deceptive acts or practices by operating the SURF CHALLENGER with an invalid coastwise endorsement and, as such, they are entitled to recover damages for lost business, revenue and/or profits as competing providers of offshore and subsea services in the Gulf of Mexico.²¹ Plaintiffs further claim that Surf Subsea's actions were knowing and intentional such that they are entitled to receive three times the actual damages sustained.²²

On May 21, 2012, Surf Subsea removed the case to this Court on the ground that the claims necessarily turn on substantial questions of federal law.²³ Surf Subsea subsequently filed a motion to dismiss the claims on the grounds that: (1) federal law does not provide an express private right of action for individuals to obtain declaratory or injunctive relief or to recover damages for alleged violations of the vessel documentation laws; (2) Congress did not intend federal courts to imply a private right of action for declaratory or injunctive relief or damages for alleged violations of the vessel documentation laws; (3) federal law preempts any Louisiana statelaw claims based on alleged violations of the vessel documentation laws; and (4) the claims are perempted under state law.²⁴

Plaintiffs responded, in part, by moving to remand the case to state court for lack of subject matter jurisdiction.²⁵ Plaintiffs contend that their state law claims were improperly removed to this Court because they do not raise any federal questions supporting federal jurisdiction.²⁶ Plaintiffs also oppose the motion to dismiss on the grounds that their state law claims are neither preempted by federal vessel documentation and coastwise trade laws nor perempted under Louisiana law.²⁷

For the following reasons, the Court agrees with Surf Subsea that plaintiffs' state law claims necessarily turn on substantial questions of federal law and that the case was properly removed. The Court also agrees that plaintiffs' claims of "fraud-on-the-Coast Guard" impermissibly conflict with federal vessel documentation and coastwise trade laws such that they are preempted in accordance with the U.S. Supreme Court's decision in Buckman Co. v. Plaintiffs' Legal Committee, 531 U.S. 341, 347, 121 S. Ct. 1012, 148 L. Ed. 2d 854 (2001). Because the Court finds that the claims must be dismissed on this ground, the Court does not reach the alternative bases for dismissal raised by the parties.

DISCUSSION

I. Motion to Remand

A. Standard of Law

Plaintiffs contend that this matter should be remanded to state court for lack of subject matter jurisdiction. "[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). A district court must remand a case to state court "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction." 28 U.S.C. § 1447(c). When federal question jurisdiction is challenged by a plaintiff seeking remand, the defendant attempting to establish that removal is proper bears the burden of demonstrating that a federal question exists. In re Hot-Hed Inc., 477 F.3d 320, 323 (5th Cir. 2007) (citing Carpenter v. Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 365 (5th Cir. 1995)). "Any ambiguities are construed against removal because the removal statute should be strictly construed in favor of remand." Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002) (citing Acuna v. Brown & Root, Inc., 200 F.3d 335, 339 (5th Cir. 2000)).

B. Federal Question Jurisdiction

Surf Subsea contends that this Court has subject matter jurisdiction in this matter because the claims necessarily implicate federal...