Philip R. Martin Travelers Insurance v. Metropolitan Yacht Club, Inc.

Not for Publication in West’s Federal Reporter
United States Court of Appeals
For the First Circuit
No. 09-1730
IN RE: PHILIP R. MARTIN
TRAVELERS INSURANCE CO., ET AL.,
Plaintiffs, Appellants,
v.
METROPOLITAN YACHT CLUB, INC.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Robert B. Collings, U.S. Magistrate Judge]
Before
Boudin, Circuit Judge,
Souter, Associate Justice,*
and Howard, Circuit Judge.
Steven E. Kramer for appellant Donald Salvucci, Robert E.
Kiely, with whom Regan & Kiely LLP was on brief, for appellants
Travelers Insurance Co. and International Marine Underwriters, and
Brian Keane, with whom The Kaplan/Bond Group was on brief, for
appellant Philip R. Martin.
David J. Farrell, Jr., with whom Admiralty Office of David J.
Farrell, Jr. was on brief, for appellees.
August 5, 2010
*
The Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
SOUTER, Associate Justice. The appellee Metropolitan
Yacht Club, Inc. is a non-profit association of voluntary members.
Appellant Phillip R. Martin and other members of the Club applied
and paid for winter wet storage of their boats on Club premises,
where a fire that broke out there destroyed several boats and
damaged others. State investigators concluded that the fire
originated in faulty wiring beneath the dock adjacent to Martin’s
boat; but Martin, concerned about possible claims against him,
petitioned the district court for a decree exonerating him or
limiting his liability under maritime law, 46 U.S.C. § 30501 et
seq. The judicial proceedings ballooned as more Club members with
damaged boats and various insurers joined in, asserting claims
against Martin, the Club, or both.
Eventually the Club moved for summary judgment that it
was liable to no one, including Martin, under governing maritime
law, owing to the fact that members were subject to the following
Club by-law:
“The Club expressly absolves itself . . . and
each member agrees that the Club may absolve
itself from any liability for damages to any
boat, property, appurtenances and contents
thereof . . . . Said absolution from
liability shall include but not be limited to:
(a) Fire; (b) Theft; (c) Vandalism; (d) Water
Damage; (e) Negligent acts or omissions.”
A magistrate judge granted the motion, and Martin and others
brought this interlocutory appeal under 28 U.S.C. § 1292(a)(3). On
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de novo review, Rosario v. Dept. of Army, 607 F.3d 241, 246 (1st
Cir. 2010), we affirm.
There is no claim that the Club was at greater fault than
simple negligence, so the issue is over the effectiveness of the
by-law term of exculpation from negligence liability for property
damage to a Club member. No maritime case in this circuit is
directly on point, although the leading opinion (dealing with
exculpatory language in commercial circumstances) addresses two
points of maritime law of interest here: (1) “an exculpatory clause
limited to barring liability for ordinary negligence would be
valid, assuming it were not inflicted by a monopolist or one with
greatly superior bargaining power”; and (2) a court may sever or
divide an overbroad clause, “retaining those provisions or
applications of them that are permissible.” Broadley v. Mashpee
Neck Marina, Inc., 471 F. 3d 272, 274, 275 (1st Cir. 2006). While
the court did not sever the clause then at issue, it observed that
“[a]ny competent lawyer could write a straightforward exclusion of
liability for negligence that we would sustain.” Id. at 276.
Our road to decision is not as short as this considered
dictum might suggest, however, given some details said to be in
tension with a “straightforward” classification for the exclusion
here. The owners and insurers make much of the fact that the
exculpation clause is contained in a by-law that was bargained for
neither when the boat owners joined the Club, nor when they applied
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for winter storage of the boats. They portray themselves as the
weaker contracting parties outmatched by the Club’s “greatly
superior bargaining power.” But it would be unfair to compare the
clause here either to one inflicted, or to one devised by a
monopolist to extract a benefit from a helpless counterparty. As
an initial matter, there is no monopoly on boat storage; commercial
marinas may be found nearby the Club’s premises. Yet there is a
more fundamental feature of this case in the relationship between
an association and its members that makes the Club’s initial
bargaining power less significant than it would be in a standard
commercial transaction. The limit on liability is one of several
terms of a compact of the members with each other to limit the cost
of membership,1 and every prospective member who joins immediately
shares in its benefits. And by the very nature of such a compact,
the by-laws are voted on by the Club membership, and the limitation
on liability is open to revision by Club members (never attempted
by the boat owners here). Membership agreements of voluntary
associations like the Club were not what the Broadley panel had in
mind when it spoke of monopolies and other situations of uneven
bargaining power.2
1
Another is the requirement that all members annually
contribute eight hours of personal labor (or pay the Club $25.00
for each hour not worked).
2
Cf. Post v. Belmont Country Club, Inc., 60 Mass. App. Ct.
645, 649-50, 805 N.E.2d 63, 68-69 (2004) (noting that the indemnity
clause in a club’s by-laws “was in fact more likely to have worked
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Objection is also made to the omission of the by-law from
the written terms of the “Winter Storage Application” itself (in
contrast to the standard summer slip rental form). But the
appellants’ attempt to rely exclusively on the text of the
application is misplaced. The by-laws govern the relationship
between its members and the Club, and these make binding upon all
members a rule specifically governing application for winter
storage.3 It is simply not reasonable to assert that submission of
such an application proposed a contractual relationship wholly
distinct from membership. Nor do the appellants fare any better
with their suggestion that the Club was deficient in bringing the
by-laws to members’ notice at any time. Since there is no question
that the by-laws were readily available, no more need be said,
given our agreement with the Massachusetts common law rule that a
member generally is responsible for knowing his organization’s by-
laws. Post v. Belmont Country Club, Inc., 60 Mass. App. Ct. 645,
648-49, 805 N.E.2d 63, 67-68 (2004).
in [an individual member’s favor] than not, shielding him and the
other members from increased dues related to payment of claims or
additional insurance costs” and reasoning that “[b]ecause members
retain . . . constant opportunity to ‘negotiate’ changes in the
membership agreement, [such a contract] differs substantially from
that where a consumer, in order to acquire needed goods and
services, is required to accept its terms on a take it or leave it
basis”).
3
That rule, consistent with the limitation of liability by-
law, provides (among other things) that boat owners assume the risk
of property damage.
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Next, the objectors point out that the exculpatory clause
here may be read as going beyond what the court in Broadley thought
was acceptable, since the “absolution” is not limited to simple
negligence; it also applies by reference to specific sources of
damage (fire, etc.) without reference to degree of fault. While
this is true, any supposedly excessive favor to the Club may be
pared down by a process of severance so long as the clause was
devised in good faith and obtained in accordance with reasonable
standards of fair dealing. Broadley, 471 F.2d at 275 (quoting
Restatement (Second) of Contracts § 184). Both conditions are
satisfied here. What has already been said about the nature and
purpose of the amendable by-law answers any question about good
faith, and the consistency with fair dealing is shown by its
clarity in expressly excluding ordinary negligence, whatever else
it may purport to do. See id. (clear and specific disclaimer of
negligence liability would be likely to convey an effective
warning).
Remaining arguments based on standards for reforming
defective contract documents are beside the point here. The Club
does not seek reformation for failure of a document to express the
true agreement, and the by-law is not just another conventional
contract between parties bound solely by commercial terms of
agreement. Indeed, the very fact that the contractual relationship
it governs is between an association and its voluntary members so
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far distinguishes this case from one (such as Broadley) involving
a purely business relationship as to admit of a question whether a
membership corporation in circumstances like these may effectively
contract out of liability for greater fault than ordinary
negligence. But that issue is not before us.4
Affirmed.
4
Nor are there any issues about application of the by-law to
contract as distinct from tort liability, or to the bailment
relationship, matters ruled upon by the magistrate judge but not
pursued here.
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