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CHMM, LLC v. Freeman Marine Equipment, Inc.

United States District Court, D. Oregon, Portland Division

October 30, 2014

CHMM, LLC, Plaintiff,
v.
FREEMAN MARINE EQUIPMENT, INC., Defendant.

FINDINGS AND RECOMMENDATION

JANICE M. STEWART, Magistrate Judge.

INTRODUCTION

Plaintiff, CHMM, LLC ("CHMM"), consisting of three individual members, was and is the owner of a Vessel built by NOBISKRUG GmbH ("Nobiskrug") at its shipyard in Germany. Defendant, Freeman Marine Equipment, Inc. ("Freeman Marine"), manufactured and supplied a weathertight exterior door for installation on the Vessel in order to provide access from the deck to the interior spaces. On or about November 16, 2011, after delivery to CHMM[1] and while the at sea, the door failed and allowed seawater to flood the interior, causing severe damage to the Vessel and its contents. To recover $18 million in economic damages, CHMM filed a Complaint alleging five tort claims against Freeman Marine.

Freeman Marine filed a Motion to Dismiss (docket #11), which was granted in part and denied in part. In particular, this court dismissed: (1) the "First through Fifth Claims for damage to property installed on and integrated into the Vessel prior to its delivery by Nobiskrug to [CHMM];" and (2) that portion of the Sixth Claim alleging a breach of contract, but not that portion of the Sixth Claim alleging breach of the implied warranties of merchantability and fitness for intended purpose (docket #35). This court also granted leave to CHMM to amend its tort claims "[t]o the extent that [it] seeks tort remedies for damage to other property' added after delivery of the Vessel by Nobiskrug to [CHMM]." CHMM has filed an appeal of the dismissal Order (docket #39).

On February 21, 2013, CHMM filed a Second Amended Complaint (docket #37) which alleges the following new tort claims:[2] Negligence (Seventh Claim); Defect in Design (Eighth Claim); Defect in Manufacture (Ninth Claim); Failure to Properly Instruct in the Installation and Use of the Door (Tenth Claim); and Negligent Misrepresentation (Eleventh Claim). The Seventh through Eleventh Claims seek recovery only for "damages to repair, replace and otherwise restore to its pre-incident condition the various other property' that was added to the Vessel after its delivery by Nobiskrug to CHMM and any and all other recoverable damages of any nature whatsoever which have been suffered." Second Amended Complaint, ¶¶ 117, 131, 143, 154, 166.

Freeman Marine has now filed a Motion for Summary Judgment (docket #65) on the basis that CHMM has no standing to sue on the new tort claims.

LEGAL STANDARD

FRCP 56(c) authorizes summary judgment if "no genuine issue" exists regarding any material fact and "the moving party is entitled to judgment as a matter of law." The moving party must show an absence of an issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party does so, the nonmoving party must "go beyond the pleadings" and designate specific facts showing a "genuine issue for trial." Id at 324, citing FRCP 56(e). The court must "not weigh the evidence or determine the truth of the matter, but only determine[] whether there is a genuine issue for trial." Balint v. Carson City, 180 F.3d 1047, 1054 (9th Cir 1999) (citation omitted). A " scintilla of evidence, ' or evidence that is merely colorable' or not significantly probative, '" does not present a genuine issue of material fact. United Steelworkers of Am. v. Phelps Dodge Corp., 865 F.2d 1539, 1542 (9th Cir), cert. denied, 493 U.S. 809 (1989) (emphasis in original) (citation omitted). The substantive law governing a claim or defense determines whether a fact is material. Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th Cir 2000) (citation omitted). The court must view the inferences drawn from the facts "in the light most favorable to the nonmoving party." Farrakhan v. Gregoire, 590 F.3d 989, 1014 (9th Cir 2010), citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

FINDINGS

The Second Amended Complaint does not specify the "other property" that was added after delivery of the Vessel for which CHMM is seeking to recover damages. Therefore, Freeman Marine served an interrogatory on CHMM to identify all damages to the "other property" added post-delivery that are related to the failure of the door. In response, CHMM listed: "(1) Personal Effects/Clothing, $112, 375.90; (2) Paintings, $26, 696.50; and (3) Repair of Crew Cabin 8, which was refit between delivery of the Vessel and the Incident, $74, 740.54." Plaintiff's Response to Interrogatory No. 12 (docket #65-1), pp. 6-7. The captain who works for CHMM testified in his deposition that CHMM's individual members purchased and own the allegedly damaged clothing, paintings and other furnishings placed on the Vessel. Defendant's Motion, Ex. B ("Kercher Depo.") (docket #65-2), pp. 12, 14, 45. Because CHMM does not own this "other property, " Freeman Marine contends that it has suffered no actual loss or damage and, therefore, lacks standing.

I. Lack of Ownership

CHMM has not contested the evidence submitted by Freeman Marine that the personal effects, clothing, and paintings at issue are not owned by CHMM, but by its individual members, guests and/or crew. A fundamental element of any negligence claim is actual loss or damage to the plaintiff caused by the defendant's action. See In re Deepwater Horizon, 732 F.3d 326, 340 (5th Cir 2013). Thus, a party has no standing to recover for alleged negligent damage to property that it does not own. See Northern P. R.R. Co. v. Lewis, 162 U.S. 366 (1896) (plaintiff who has no ownership interest in timber cannot bring action for its allegedly negligent destruction).

As a limited liability company, CHMM has no right to sue on behalf of its members for damages to its members' property. CHMM is a limited liability company organized under the laws of the Republic of the Marshall Islands. Second Amended Complaint, ¶ 3. The Marshall Islands Limited Liability Company Act provides that upon formation, a limited liability company "shall be a separate legal entity." 52 MIRC Part IV, § 9(2). It also adopts Delaware limited liability company law as controlling. 52 MIRC Part IV, § 71. The Delaware Limited Liability Company Act similarly provides that a Delaware limited liability company is a separate legal entity. 6 Del Code Ann § 18-201(b). As a separate legal entity, a limited liability company possesses certain powers and privileges "as are necessary or convenient to the conduct, promotion or attainment of the business, purposes or activities of the limited liability company." 6 Del Code Ann § 18-106(b). This includes the ability to sue and be sued in its own name. Rockstar Consortium U.S. LP, Inc. v. Samsung Elecs. Co., Ltd., Case No. 2:13-CV-00894-JRG, 2014 WL 1998053, at *3 (ED Tex May 15, 2014) (interpreting Delaware law). Because a limited liability company is not interchangeable with its members, it is not the proper party to sue to recover damages to property owned by its members. See, e.g., In re Settoon Towing LLC, No. 07-1263, 2009 WL 4730969, at *5 (ED La Dec. 4, 2009) (under Louisiana law, an LLC, "as a separate legal entity, should not be permitted to bring an action for personal injuries on behalf of its members.").

CHMM improperly seeks to recover for the alleged damages to the personal effects, clothing, and paintings that it does not own. Accordingly, it lacks standing to sue for any loss or damage with respect to such "other ...


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