Friday, February 15, 2013
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Court of Appeal Tosses Ruling on Marine Joint Venture Liability
Owner of Vessel Used for Educational Program Not Responsible for Student’s Death, Panel Says
By KENNETH OFGANG, Staff Writer
The owner of a vessel used by an educational program was not responsible for the death of a teacher who dove from the ship and never resurfaced, the Fourth District Court of Appeal ruled yesterday.
Div. Three said Orange Superior Court Judge Thierry Patrick Colaw erred as a matter of law when he ruled that Chad Ware was in a joint venture with the company that chartered the boat and was found partially responsible for Jeremiah Johnson’s “free-diving” death.
Colaw had granted JNOV to Johnson’s widow, Michelle Simmons, after a jury found Ware not liable. The jury assigned 80 percent of the total liability to Johnson and 20 percent to Rapture Marine Expeditions and ship’s master Scott McClung.
Marine Biology
Rapture Marine Expeditions had for several years chartered the 143-foot Rapture from Certified Marine Expeditions, a company owned by a McClung family trust. The Rapture began taking marine biology students and their chaperones to the Channel Islands, and seasonally to Hawaii, in 1998.
Scott McClung’s father died in 2006, and the trust decided to discontinue its support of the business and put the Rapture up for sale. Ware, whose family was a longtime “friendly competitor” of McClung’s, offered McClung an arrangement that would keep him in business.
The arrangement, according to trial testimony, made Ware the de facto owner of the Rapture, which he then chartered back to Rapture Marine Expeditions. Ware agreed to make the monthly mortgage payments and to maintain, insure, and pay taxes on the vessel for five years, at the end of which he would pay off the balance of the mortgage and become the outright owner.
With the arrangement agreed upon, the Rapture under Ware’s ownership began taking previously scheduled Hawaii trips in January 2007. Ware went along as the ship’s engineer, his brother an uncle and one other employee of his joined the crew, but the rest of the crew were employees of Rapture Marine Expeditions.
‘Free Dive’
In February 2007, Johnson—who had chaperoned other Rapture trips and was experienced in diving and other water sports, died off the island of Lanai. Witnesses testified that he took the “free dive”—one without a breathing apparatus—without warning, while the crew was at the other side of the boat getting snorkelers into the water.
McClung and others donned scuba gear and jumped into the water to try and rescue Johnson. They found him but were unable to revive him after he apparently lost consciousness under water.
Ware sold the vessel, which was renamed the Safari Explorer, soon after.
Johnson’s death led to a plethora of legal proceedings, including the superior court action, a state worker’s compensation claim, a claim for benefits under the federal Longshore and Harbor Workers’ Compensation Act, two declaratory actions regarding insurance coverage, and an in rem action against the vessel. The in rem action was dismissed, but the others were still pending when the case went to trial before Colaw.
The essential allegations of the superior court complaint were that Rapture Marine Expeditions negligently allowed Johnson to dive without supervision and without safety equipment, knowing the dangers. Ware and McClung were later added to the suit by Doe amendments.
Negligence Instruction
Colaw instructed the jury that the negligence of a corporation’s officers and employees is imputed to the corporation, and that it was agreed that the vessel was owned by Ware and operated by Rapture Marine Expeditions and McClung. In closing argument, the plaintiff’s counsel contended that as owner, Ware was negligent in failing to ensure that proper safety protocols were followed and safety equipment in place.
Jurors, however, attributed liability only to the corporation and McClung, and fixed damages at a little over $7.5 million. They were not told prior to reaching the verdict that the parties had entered into a complex “high-low” settlement agreement involving Ware’s insurer, the new owner of the vessel, and Johnson’s employer.
The gist of the agreement was that Simmons would receive a minimum of $1 million, regardless of the jury verdict, and might receive up to an additional $1.5 million if it was determined in one of the declaratory actions that there was that much excess coverage. Simmons agreed not to execute on the superior court judgment, and to drop all other claims.
In opposing the plaintiff’s motion for JNOV, Ware’s counsel argued that there was no basis for a finding of joint venture because the issue had not been addressed by the pleadings, the jury instructions, or the verdict. The plaintiff responded that the complaint’s general allegation that every defendant was the agent of every other defendant placed the issue before the court, and that no jury instruction or special verdict was necessary because there was no dispute that the defendants were joint venturers.
Ware replied that had the issue been properly pled, he would have presented evidence that he did not agree to share in Rapture Marine Expeditions’ profits or losses from the trips, and that he had no control over the vessel during the voyage.
Colaw ruled that Ware was liable as a matter of law because he and the other defendants engaged “in a single enterprise” with the intent to share profits, and with joint control.
Judgment was entered for the plaintiff in the amount of $1.6 million plus interest. Ware was also found liable for costs of nearly $200,000 under Code of Civil Procedure Sec. 998.
The plaintiff argued that the appeal was moot because Ware had no personal exposure under the terms of the settlement agreement. Presiding Justice Kathleen O’Leary, writing for the Court of Appeal, disagreed, citing three reasons—Ware had specifically reserved the right to appeal as part of the settlement agreement; an outstanding judgment, even if not executed upon, might have a negative impact on his business; and the holding that he was a joint venturer might have collateral estoppel effect in other lawsuits.
As for the merits, the presiding justice said the JNOV was procedurally and substantively flawed.
The issue of vicarious liability as a joint venturer, as opposed to direct liability as an owner, was never before the court, O’Leary said, explaining that “Simmons’ complaint was wholly inadequate to raise a joint venture and at no time did she seek to amend her complaint to conform to proof. “ Nor can a JNOV be granted on an issue as to which the opposing party had no opportunity to present evidence and which the jury was never asked to decide, she said.
As to substance, O’Leary went on to say, the evidence was conflicting as to two of the elements of joint venture—whether the defendants agreed to share profits and losses, and whether there was joint control. All of the elements must be proven for a finding of joint venture to be made, she said, rejecting the plaintiff’s contention that in maritime cases, federal law allows such a finding based on a more flexible “totality of the circumstances” approach.
The case is Simmons v. Ware, 13 S.O.S. 861.
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