Sander v. Alexander Richardson Investments, 02-1531.

• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)
• Writing for the Court: Hansen
• Citation: 334 F.3d 712
• Parties: Joseph SANDER; Barbara Sander; Ivy M. Smith; Ruby Smith; Lawson Burford; Mary Burford, Appellees, v. ALEXANDER RICHARDSON INVESTMENTS, doing business as Yacht Club of St. Louis, Appellant.
• Docket Number: No. 02-1531.,02-1531.
• Decision Date: 01 July 2003

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334 F.3d 712 Joseph SANDER; Barbara Sander; Ivy M. Smith; Ruby Smith; Lawson Burford; Mary Burford, Appellees,
v.
ALEXANDER RICHARDSON INVESTMENTS, doing business as Yacht Club of St. Louis, Appellant. No. 02-1531. United States Court of Appeals, Eighth Circuit. Submitted: November 4, 2002. Filed: July 1, 2003. Rehearing Denied: August 12, 2003.

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Teresa A. McNail, argued, St. Louis, MO (John R. Halpern, on the brief), for appellant.

Thomas M. Ward, argued, St. Louis, MO (Russell F. Watters and Craig A. Hansen, on the brief), for appellee.

Before HANSEN,¹ Chief Judge, BEAM and RILEY, Circuit Judges.

HANSEN, Circuit Judge.

Boats owned by Joseph and Barbara Sander, Ivy M. and Ruby Smith, and Lawson and Mary Burford (collectively "the boat owners") were destroyed while moored at the Yacht Club of St. Louis ("Yacht Club") when another boat caught fire. The boat owners sought recovery from the Yacht Club, which defended based on an exculpatory clause in the Boat Space Rental Agreement ("slip agreement") that the Yacht Club had with each of the boat owners. The district court granted recovery to the boat owners, from which the Yacht Club appeals. Siding with the Fifth and Ninth Circuits in an existing circuit split concerning the enforceability of exculpatory clauses in marine contracts, we reverse the district court's judgment.

I.

Ronald and Martha Jessup owned the motor vessel (M/V) A-OK, a houseboat, which they moored at the Yacht Club marina. After noticing a fuel leak near the starboard engine fuel pump, Mr. Jessup approached the Yacht Club's service department to discuss needed repairs. The service manager informed Mr. Jessup that he would be unable to repair it in the time frame Mr. Jessup requested. The Yacht Club's general manager suggested to Mr. Jessup that he hire Charlie Shulte, a Yacht Club maintenance worker, to repair the fuel leak, assuring Mr. Jessup that Mr. Shulte was qualified to perform the repair work. Mr. Jessup hired Mr. Shulte, who determined that the fuel pump needed to be replaced and installed a new pump.

Mr. Jessup returned to the boat three days after Mr. Shulte replaced the fuel pump to show the boat to an interested buyer. After starting the boat and letting it run for a period of time, Mr. Jessup heard a loud thud that was later described as an explosion. Flames engulfed the hatch area where the engines were located. Mr. Jessup was unable to extinguish the flames with a fire extinguisher and the boat became engulfed. The fire spread to other docks of the marina and ultimately destroyed the M/V Never Better, owned

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by the Sanders, the M/V My Prerogative, owned by the Smiths, and the M/V Lady Ellen, owned by the Burfords.

The Jessups brought an action in federal district court seeking exoneration from, or limitation of liability for, all claims arising from the incident. Each of the boat owners filed claims within the suit against the Jessups and the Yacht Club, and the Yacht Club and the Jessups filed claims against each other. The claims against the Yacht Club were premised on a negligence theory, alleging that Mr. Shulte improperly installed the fuel pump, which caused the fire, and that the Yacht Club was liable for assuring Mr. Jessup that Mr. Shulte was qualified to perform the repair, when in fact he was not.

The Yacht Club defended against the boat owners by asserting that an exculpatory clause printed on the back of each boat owner's slip agreement exonerated it from any liability for damages caused by the fire. The clause read as follows:

19. INSURANCE: TENANT AGREES that he will keep the boat fully insured with complete marine insurance, including hull [property] coverage and indemnity and/or liability insurance.

THE LANDLORD DOES NOT CARRY INSURANCE covering the property of the TENANT. THE LANDLORD WILL NOT BE RESPONSIBLE for any injuries or property damage resulting, caused by or growing out of the use of the dock or harbor facilities; that the TENANT RELEASES AND DISCHARGES THE LANDLORD from any and all liability for loss, injury (including death), or damages to person or property sustained while in or on the facilities of LANDLORD, including fire, theft, vandalism, wind storm, high or low waters, hail, rain, ice, collision or accident, or any other Act of God, whether said boat is being parked or hauled by an Agent of LANDLORD or not.

(App. of Exs., tab 2.) The case was tried to the bench and the district court found that the Jessups were not negligent. The court also found that the fire resulted from the improper installation of the fuel pump by Mr. Shulte, an agent of the Yacht Club, and that Mr. Shulte's actions constituted negligence on the part of the Yacht Club. The district court found that the exculpatory clause did not release the Yacht Club from liability for its own negligence because "exculpatory clauses that completely absolve a party from all liability are invalid." (Add. at 10.) The court found alternatively that the exculpatory clause did not clearly and unequivocally indicate that it released the Yacht Club from liability for its own negligence, and that the provision was overreaching because of the unequal bargaining power of the parties. (Id.) The court ordered the Yacht Club to pay $60,000 to the Sanders, $49,400 to the Smiths, and $58,600.50 to the Burfords as the value of their respective boats.

The Yacht Club appeals, arguing that the clause is sufficiently clear to release it from liability stemming from its own negligence, and urging us to adopt the views of the Fifth and Ninth Circuits, which enforce exculpatory clauses that fully exonerate a party from liability for its own negligence. The Yacht Club does not dispute the district court's finding that it was negligent. The Jessups are not parties to this appeal.

II.

The issues of the validity of an exculpatory clause and the construction of a contract, including whether it is ambiguous, are legal issues that we review de novo. Western Forms, Inc. v. Pickell, 308

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F.3d 930, 933 (8th Cir.2002). We will reverse the district court's determination of the parties' intentions in an ambiguous contract and its finding of unequal bargaining power only if those factual findings are clearly erroneous. In re Y & A Group Sec. Litig., 38 F.3d 380, 383 (8th Cir.1994) (parties' intent); Dillingham Tug & Barge Corp. v. Collier Carbon & Chem. Corp., 707 F.2d 1086, 1090 (9th Cir.1983) (unequal bargaining power), cert. denied, 465 U.S. 1025, 104 S.Ct. 1280, 79 L.Ed.2d 684 (1984). Because the subject matter of the contract at issue-the slip rental agreement-is maritime, we apply admiralty law. See S.C. State Ports Auth. v. Silver Anchor, S.A., 23 F.3d 842, 846 n. 3 (4th Cir.1994) ("[C]ontracts for wharfage, dockage, and crane rental are maritime."). "[A]dmiralty jurisdiction brings with it a body of federal jurisprudence, largely uncodified, known as maritime law." La Esperanza de P.R., Inc. v. Perez y Cia. de P.R., Inc., 124 F.3d 10, 16 (1st Cir.1997) (internal quotations omitted).

There is a split in the circuit courts of appeals on the issue of whether, under admiralty law, an exculpatory clause (also called a red letter clause) that fully absolves a party from liability for its own negligence is enforceable. Compare Diesel "Repower," Inc. v. Islander Invs. Ltd., 271 F.3d 1318, 1324 (11th Cir.2001) ("[T]he limitation [in a red letter clause] must not absolve the repairer of all liability and must still provide a deterrent to negligence.") and La Esperanza, 124 F.3d at 19 ("[P]arties may not totally absolve themselves of all liability and, more substantively, the prospective wrongdoer's potential liability should be enough to deter negligence." (internal quotations omitted)), with Royal Ins. Co. of Am. v. S.W. Marine, 194 F.3d 1009, 1014 (9th Cir.1999) ("[E]xcept in towing contracts, exculpatory clauses are enforceable even when they completely absolve parties from liability for negligence." (footnote omitted)) and Theriot v. Bay Drilling Corp., 783 F.2d 527, 540 (5th Cir.1986) (applying federal maritime law and enforcing indemnity agreement that fully exculpated party from liability for its own negligence). We will address that issue shortly, but we turn first to the issue of whether the contract provision at issue was sufficiently clear to absolve the Yacht Club of liability for its own negligence, for it is universally agreed that exculpatory clauses, whether fully exonerating a party from its own negligence or not, must "be clearly and unequivocally expressed." Randall v. Chevron U.S.A., Inc., 13 F.3d 888, 905 (5th Cir.1994) (internal quotations omitted). See also Edward Leasing Corp. v. Uhlig & Assocs., Inc., 785 F.2d 877, 889 (11th Cir.1986) (recognizing that courts will enforce red letter clauses if "the contractual language at issue is clear and unequivocal and clearly indicates the intentions of the parties"); M/V Am. Queen v. San Diego Marine Const. Corp., 708 F.2d 1483, 1488 (9th Cir.1983) (holding parties to an exculpatory clause where the parties' intent is clear).

A. Is the Exculpatory Clause Sufficiently Clear?

The clause at issue here required the boat owner to carry full property insurance on the boat and informed the boat owner that the marina did not carry insurance that covered the boat owner's property, including the boat. It further provided that "THE LANDLORD WILL NOT BE RESPONSIBLE for any injuries or property damage resulting, caused by or growing out of the use of the dock or harbor facilities; that the TENANT RELEASES AND DISCHARGES THE LANDLORD from any and all liability for loss, injury (including death), or damages to person or property sustained while in or on the facilities of LANDLORD, including fire...."

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(App. of Exs., tab 2.) The boat owners argue that it is not enough that the clause released the marina from all liability, it must do more by specifically referring to liability caused by the marina's own...