Spencer v. Alonzo ( 2021 )

United States Court of Appeals
For the First Circuit
No. 19-1112
AFUNDAY CHARTERS, INC.,
Plaintiff,
v.
ABC INSURANCE COMPANY,
Defendant,
SPENCER YACHTS, INC.,
Defendant, Cross-Claimant, Third-Party Plaintiff,
JOSEPH DANIEL SPENCER,
Defendant, Cross-Claimant, Third-Party Plaintiff, Appellant,
v.
SEAN ALONZO; ANTHONY NORMAN SABGA,
Third-Party Defendants, Appellees,
TRINIDAD AND TOBAGO INSURANCE LIMITED; ABC INSURANCE COMPANY,
Third-Party Defendants,
CHUBB CORPORATION; ACE AMERICAN INSURANCE COMPANY; CHUBB
INSURANCE COMPANY, f/k/a ACE AMERICAN INSURANCE COMPANY,
Cross-Defendants.
No. 19-1114
AFUNDAY CHARTERS, INC.,
Plaintiff,
v.
ABC INSURANCE COMPANY,
Defendant,
JOSEPH DANIEL SPENCER,
Defendant, Cross-Claimant, Third-Party Plaintiff,
SPENCER YACHTS, INC.,
Defendant, Cross-Claimant, Third-Party Plaintiff, Appellant,
v.
SEAN ALONZO; ANTHONY NORMAN SABGA,
Third-Party Defendants, Appellees,
TRINIDAD AND TOBAGO INSURANCE LIMITED; ABC INSURANCE COMPANY,
Third-Party Defendants,
CHUBB CORPORATION; ACE AMERICAN INSURANCE COMPANY; CHUBB
INSURANCE COMPANY, f/k/a ACE American Insurance Company,
Cross-Defendants.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Gustavo A. Gelpí, Jr., U.S. District Judge]
Before
Kayatta, Lipez, and Barron,
Circuit Judges.
James W. Stroup, with whom Stroup & Martin, P.A., Alberto J.
Castañer-Padro, III, and Castañer & Cia P.S.C. were on brief, for
appellant Joseph Daniel Spencer.
David Y. Loh, with whom KMA Zuckert LLC was on brief, for
appellant Spencer Yachts, Inc.
Clay M. Naughton, with whom Michael T. Moore and Moore &
Company, P.A., were on brief, for appellees.
May 13, 2021
KAYATTA, Circuit Judge. This admiralty proceeding
arises out of the grounding and constructive total loss of a
brand-new seventy-four-foot yacht. Afunday Charters, Inc., had
purchased the yacht from its builder, Spencer Yachts, Inc. Those
on board the yacht at the time of the grounding included Sean
Alonzo -- who was hired by Afunday's owner, Anthony Norman Sabga
-- and Joseph Daniel Spencer -- an employee of Spencer Yachts.
Afunday sued Spencer and Spencer Yachts, alleging that Spencer
negligently ran the yacht aground and that Spencer and Spencer
Yachts were jointly and severally liable for the yacht's loss.
Spencer and Spencer Yachts each denied responsibility, raised an
affirmative defense of negligence by Afunday's agents Sabga and
Alonzo, and filed a third-party complaint against Sabga and Alonzo.
This appeal arises out of the subsequent dismissal of the third-
party complaints pursuant to Fed. R. Civ. P. 12(b)(6). Afunday
Charters, Inc. v. Spencer Yachts, Inc., Civil No. 16-3141 (GAG),
2018 WL 10878066 (D.P.R. Dec. 18, 2018). We have jurisdiction
over this interlocutory appeal under 28 U.S.C. § 1292(a)(3). And
our standard of review is de novo. For the following reasons, we
affirm.
I.
As in a normal civil action, a defendant in an admiralty
proceeding can file a third-party complaint contending that, if
the defendant is liable to the plaintiff, a third party is in turn
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liable to the defendant. Compare Fed. R. Civ. P. 14(a)(1) ("A
defending party may, as third-party plaintiff, serve a summons and
complaint on a nonparty who is or may be liable to it for all or
part of the claim against it."), with Fed. R. Civ. P. 14(c)(1)
(permitting an admiralty defendant to "bring in a third-party
defendant who may be wholly or partly liable . . . to the third-
party plaintiff"). An admiralty defendant may also file a
different type of third-party complaint, alleging that the third
party is directly liable "to the [original] plaintiff" for the
damages claimed. Fed. R. Civ. P. 14(c)(1). This distinct feature
of Rule 14(c) promotes efficient apportionment of liability in
admiralty suits. See generally 6 Arthur R. Miller, Mary Kay Kane
& A. Benjamin Spencer, Federal Practice & Procedure (Wright &
Miller) § 1465 (3d ed. 2020). Here, Spencer and Spencer Yachts
sought to include both types of third-party claims in their
respective third-party complaints.
Sabga and Alonzo moved to dismiss the third-party
complaints pursuant to Rule 12(b)(6), arguing that, as a matter of
law, Spencer and Spencer Yachts could never have any recovery or
benefit from the complaints. This was so, they contended, because
if Sabga or Alonzo were responsible for the loss, that
responsibility would reduce commensurately any liability of
Spencer or Spencer Yachts to Afunday. Spencer and Spencer Yachts
opposed the motions, arguing that Sabga and Alonzo's negligence
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would not necessarily be attributable to Afunday, a distinct legal
entity. In reply, Afunday, Sabga, and Alonzo all conceded without
reservation or right of rescission that any comparative fault on
the part of Sabga or Alonzo would be attributed to Afunday and
thus reduce to the extent of that fault any liability of Spencer
or Spencer Yachts. Sabga and Alonzo argued that this concession
supported dismissal because it made the third-party complaints
duplicative of Spencer's and Spencer Yachts's affirmative defenses
of negligence.
Some courts applying Rule 14(a) in non-admiralty
proceedings have accepted this precise reasoning. See, e.g.,
Gabriel Cap., LP v. Natwest Fin., Inc., 137 F. Supp. 2d 251, 266
(S.D.N.Y. 2000) (dismissing third-party claim for contribution
"against a plaintiff's agent where that claim [was] identical to
defendant's affirmative defense"); cf. Loreley Fin. (Jersey) No. 3
Ltd. v. Wells Fargo Sec., LLC, No. 12-cv-3723 (RJS), 2017 WL
985875, at *3 (S.D.N.Y. Mar. 10, 2017) (noting that this doctrine
does not apply when "the third-party defendant acts outside of the
scope of its agency"). Rule 14(a) provides a textual toehold for
such a practical approach. It allows a defendant in the original
action to bring a third-party complaint only against one "who is
or may be liable to [the defendant] for all or part of the claim
against [the defendant]." Fed. R. Civ. P. 14(a)(1). Where a third
party's comparative negligence is properly attributed to the
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original plaintiff, a Rule 14(a) complaint against the third party
would do no work because the defendant in the original action will
not be liable for the negligence attributed to the original
plaintiff. So if an original plaintiff's concession means that a
third party can never be liable to a defendant in the original
action for any part of a claim against that defendant, then one
can see how text might welcome practicality in such a case.
Here, though, we have third-party complaints under
Rule 14(c) as well. The fact that there can never be any liability
of Sabga and Alonzo to Spencer or Spencer Yachts does not by itself
preclude the filing of Rule 14(c) complaints against Sabga and
Alonzo, as long as Sabga and Alonzo may be directly liable to the
original plaintiff, Afunday. Spencer and Spencer Yachts
confusingly label the counts of their third-party complaints as
claims for indemnification or contribution, but both complaints
invoke Rule 14(c) and seek the entry of judgment in Afunday's favor
against Sabga and Alonzo. See Fed. R. Civ. P. 14(c)(2) ("The
third-party plaintiff may demand judgment in the plaintiff's favor
against the third-party defendant.").
It is not clear that Spencer or Spencer Yachts have
plausibly pleaded that Sabga and Alonzo are directly liable to
Afunday. Cf. Royal Ins. Co. of Am. v. Sw. Marine, 194 F.3d 1009,
1018 (9th Cir. 1999) (holding that third-party complaints
satisfied Rule 14(c) by referring to the rule and explaining how
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and why third-party defendants were liable to the original
plaintiff). The facts alleged do not suggest that Sabga and Alonzo
acted as individuals rather than as Afunday's agents. And Spencer
and Spencer Yachts have not contended that, as agents, Sabga and
Alonzo would be liable to Afunday. But the district court does
not appear to have relied on this arguable deficiency. And Spencer
and Spencer Yachts also appeal the denial of leave to amend their
third-party complaints to make pellucid the basis for claiming
that Sabga and Alonzo acted independently, on Sabga's behalf. So
we put to one side the issue of whether the third-party complaints'
factual allegations are sufficient to state a Rule 14(c) claim.
We instead train our attention on whether the district
court properly relied on Afunday's concession accepting
responsibility for any fault of Sabga or Alonzo as a basis to
dismiss the Rule 14(c) complaints seeking to assert that the third-
party defendants are directly liable to the original plaintiff.
In the district court's view, the third-party complaints did not
plausibly allege that Sabga and Alonzo "were acting in their own
self-interest," and the court did not discern a difference between
either holding them liable as individuals based on the third-party
complaint or reducing Afunday's recovery in proportion to their
comparative fault based on an affirmative defense. Put another
way, the district court concluded that dismissal was warranted
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because neither Spencer nor Spencer Yachts would incur any
meaningful benefit from impleading Sabga and Alonzo.
Rule 14(c) itself contains no requirement that the
pleading pose a potential benefit. On the other hand, Rule 16
bears on this matter. It grants the district court discretion to
"take appropriate action" to "facilitat[e] . . . the just, speedy,
and inexpensive disposition of the action." Fed. R. Civ.
P. 16(c)(2)(P). It also allows a district court, when appropriate,
to set a separate trial for the adjudication of a third-party
claim, Fed. R. Civ. P. 16(c)(2)(M), and to otherwise "simplify[]
the issues," Fed. R. Civ. P. 16(c)(2)(A). Here, for example, the
court could have simply reserved adjudication of the third-party
complaints until after the respective faults of all parties were
adjudicated in resolving Afunday's claim. At that point, at least
as these parties describe the dispute, there would be nothing left
to decide.
We therefore see no practical difference between
delaying the adjudication of the third-party complaints and
dismissing them. In either event, Spencer and Spencer Yachts would
end up in exactly the same place because they are guaranteed that
any negligence by Sabga and Alonzo would reduce a damage award
against Spencer or Spencer Yachts. Far from creating a risk of
duplicative proceedings, this method of apportioning comparative
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fault obviates the need for follow-on litigation seeking
contribution from Sabga and Alonzo.
If the third-party plaintiffs had shown that dismissal
of their pleadings would harm them, we would likely reverse. When
we explored the possibility of prejudice by asking for supplemental
filings addressing possible prejudice to Spencer or Spencer
Yachts, the Spencer parties pointed to an unsupported assertion
that Sabga's personal insurance would be triggered only by a direct
claim against him. This response hardly answered the question.
Regardless of whether the policy covers the incident, neither
Spencer nor Spencer Yachts will incur any liability or share of
liability for fault attributed to Sabga for actions that Afunday
concedes Sabga performed as its agent.
At oral argument, counsel for the Spencer parties
suggested that the policy, once triggered, would pay for Spencer's
legal defense. But if that is really the reason for objecting to
the district court's ruling, one would have expected that reason
to have been trotted out front and center in the district court,
and certainly in the Spencer parties' various briefs on appeal.
Forfeited arguments in civil cases fare poorly. See Teamsters
Union, Loc. No. 59 v. Superline Transp. Co., 953 F.2d 17, 21 (1st
Cir. 1992). And arguments withheld from the briefs on appeal fare
even worse. See Piazza v. Aponte Roque, 909 F.2d 35, 37 (1st Cir.
1990) ("Except in extraordinary circumstances . . . , a court of
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appeals will not consider an issue raised for the first time at
oral argument."). Noting that even now the Spencer parties do not
explain how the policy works in the asserted manner, we see no
extraordinary circumstances that would justify our consideration
of this argument forfeited in the district court and waived on
appeal.
Spencer and Spencer Yachts have also suggested in their
supplemental filing and at oral argument that discovery against
Sabga might be easier if Sabga and Alonzo are parties to the action
rather than witnesses. But we understand that Sabga and Alonzo --
represented by Afunday's counsel to be Afunday's agents -- will
not attempt to gain any advantage not available to a party. And
if that turns out to be wrong, or if there should develop any
presently unforeseeable prejudice to Spencer or Spencer Yachts due
to the lack of a third-party complaint, the district court on
remand can always revisit the pleadings to the extent necessary.
Fed. R. Civ. P. 15(a)(2) (allowing amendment "when justice so
requires").
II.
For the foregoing reasons, we affirm the judgment of the
district court. Each party shall bear its own costs.
– Dissenting Opinion Follows –
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BARRON, Circuit Judge, dissenting. I read the District
Court to have ruled that the claims for contribution that the
third-party plaintiffs -- Joseph Daniel Spencer and Spencer
Yachts, Inc. ("Spencer")1 -- brought pursuant to Federal Rule of
Civil Procedure 14 against Sean Alonzo and Anthony Norman Sabga
fail plausibly to allege that either man was not acting merely as
an agent of Afunday Charters, Inc., ("Afunday") at the relevant
times, at least given the stipulation by Afunday, Alonzo, and Sabga
that the two men were acting as Afunday's agents. I further read
the District Court to have concluded that, in consequence of that
pleading deficiency, these contribution claims under Rule 14(a)
may not go forward because they are necessarily redundant of
Spencer's own affirmative defense of comparative negligence that
it asserts in response to the claims that Afunday has brought
against Spencer.
But, while Spencer's complaint is hardly as fulsome as
one might hope, it states that Sabga was acting "in his capacity
as the chief executive officer or president of Afunday Charters,
Inc., or alternatively, in his capacity as the sole shareholder of
Afunday Charters, Inc.," (emphasis added), and that Sabga hired
Alonzo. Under the notice pleading standard, see Fed. R. Civ. P.
1 As no party asserts there is any legally meaningful
distinction between Spencer and Spencer Yachts with respect to the
issues before us on appeal, I refer to both third-party plaintiffs
collectively.
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8(a), I cannot see why more was required for Spencer plausibly to
allege that neither Alonzo nor Sabga was acting merely as an agent
of Afunday during the period that mattered. Accordingly, as
Spencer's comparative negligence defense is premised on the two
men having acted as Afunday's agents, I conclude that the District
Court has failed to offer an adequate rationale for dismissing
Spencer's Rule 14(a) claims for contribution against Alonzo and
Sabga insofar as they allege that the two men were acting for
themselves and not for Afunday.
There remains to address the District Court's dismissal
of Spencer's Rule 14(c) claims regarding Alonzo and Sabga. These
claims are not for contribution. They allege instead that the two
men are directly liable to Afunday. Here, too, I read the District
Court to have dismissed the claims based on the understanding that
they could not go forward because they plausibly plead only that
Alonzo and Sabga were acting as Afunday's agents at the times that
mattered and thus necessarily rise and fall with the comparative
negligence defense that Spencer asserts against the claims that
Afunday brings. But, as I have explained, Spencer's complaint
does not allege that the two men were acting only as Afunday's
agents. It alternatively pleads that they were acting for
themselves. Accordingly, I cannot see how the District Court's
dismissal of these Rule 14(c) claims can be upheld either.
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Moreover, I read Spencer's briefing to us to argue that,
even insofar as the Rule 14(c) claims characterize Alonzo and Sabga
as Afunday's agents, they may go forward, notwithstanding the
nature of the comparative negligence defense that Spencer asserts
against the claims that Afunday brings as a plaintiff in its own
right. And, I read the District Court to have dismissed this
variant of Spencer's Rule 14(c) claims based solely on the finding
of redundancy that it made as to the Rule 14 claims generally --
and thus without accounting for this type of claim being one for
direct liability under Rule 14(c) rather than contribution under
Rule 14(a). I thus would require the District Court to address
this variant of Spencer's Rule 14(c) claims on remand as well.
I do recognize that if we were to vacate the order
dismissing Spencer's Rule 14 claims, as I conclude that we must,
then the District Court on remand might well choose to proceed
just as the majority concludes that it is entitled to under Federal
Rule of Civil Procedure 16. But, even if the District Court chose
to follow that course, Spencer then could challenge that exercise
of discretion on appeal by advancing contentions like those that
it has made to us about the advantages that keeping the Rule 14
claims in the case would have in terms of discovery and enforcement
of insurance policy terms. And, were Spencer to do so, we then
would have the benefit of something that we now lack -- an
assessment of those contentions by the adjudicator most conversant
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with the ins and outs of the case. Thus, slow as the usual process
of adjudication may be, I would not short-circuit it by effectively
affirming a ruling that has not yet been made.
For these reasons, I respectfully dissent.
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