Nieto-Vincenty v. Valledor

Citations: 22 F. Supp. 3d 153; 2014 U.S. Dist. LEXIS 75678; 2014 WL 2311056Docket: Civil No. 12-1585 (FAB)

Court: District Court, D. Puerto Rico; May 30, 2014; Federal District Court

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Three motions for summary judgment have been filed: one by Jose A. Valledor, Concepcion Valledor, and their conjugal partnership (Docket No. 75), a second by the same defendants along with Zurqui, Inc. d/b/a Sea Watch Divers, Zurqui, and Ronald Jose Valledor (Docket No. 80), and a third by Pal-*156mas del Mar Yacht Club and Marina, PDMYC (Docket No. 81). Additionally, there is a motion to strike (Docket No. 95). The Court has granted the motions at Docket Numbers 75 and 81, granted in part and denied in part the motion at Docket Number 80, and denied the motion to strike at Docket Number 95.

Summary judgment assesses evidence to determine if a trial is necessary. According to Federal Rule of Civil Procedure 56(a), a motion can be granted if the movant shows no genuine dispute regarding any material fact, entitling them to judgment as a matter of law. A "material" fact is one that could influence the suit's outcome, while a "genuine" dispute can be resolved in favor of either party. The movant bears the initial burden of showing the absence of a genuine issue with competent evidence, which may include pleadings, depositions, and affidavits. Once adequately supported, the burden shifts to the non-moving party to demonstrate that a trier of fact could find in their favor. Simply having a minimal amount of evidence is not enough to defeat a summary judgment motion; the opposing party must present substantial evidence. The Court must view the record in the light most favorable to the non-moving party.

The Valledor defendants and Zurqui, Inc. seek summary judgment on three grounds related to their case, which will be evaluated following the motion to strike regarding the plaintiffs' expert witness.

Plaintiffs' written answers to discovery were due on August 30, 2013, with expert reports due on September 3, 2013, and expert names and CVs due by September 6, 2013, with discovery closing on February 7, 2014. On the due date, plaintiffs submitted a preliminary report from their expert, Commander John Deck III. Subsequently, on April 21, 2014, plaintiffs provided a supplemental report from Commander Deck, which led Zurqui, Inc. and the Valledor defendants to file a motion to strike his declaration and prevent his designation as an expert witness. Defendants argued that plaintiffs missed the agreed deadlines for expert designation despite extensions granted. Under Federal Rule of Civil Procedure 37, tardy expert disclosures may be excluded unless justified or deemed harmless. Although the Court recognized the defendants' frustrations due to the plaintiffs' lack of justification for their delays, it found the tardiness harmless since defendants were already aware of the expert's identity and preliminary report. Defendants had also retained their own experts, indicating they could have managed the situation without prejudice. Consequently, the motion to strike was denied, and the Court refused to reopen discovery, warning that future non-compliance by either party, especially the plaintiffs, would incur sanctions.

On July 24, 2011, the M/V Sea Watch sank approximately 3.4 miles off the coast of Humacao, Puerto Rico, while carrying twenty-three individuals, including twenty-one passengers and two crew members, Ronald Valledor and Edwin Sanchez. All passengers were rescued. Plaintiff Alicia Vincenty-Medina was not on board the vessel. Prior to the incident, plaintiff Rafael Ismael Nieto-Vincenty arranged for the transportation of friends and family, paying Valledor $100. The Sea Watch, with a capacity of twenty-two persons, began its voyage from Palmas del Mar Yacht Club and Marina on the morning of the incident. Passengers reported smoke emanating from the vessel from the start, which the crew attributed to normal operations. Midway through the journey, the vessel started taking on water below deck. Valledor and Sanchez were operating the boat during its sinking. A subsequent U.S. Coast Guard investigation could not ascertain the cause of the flooding. On July 25, 2011, Valledor and others attempted to recover personal belongings from the sunken vessel, discovering that the hull had been perforated.

Defendants Zurqui, Inc. and the Valledor defendants argue that plaintiffs, not qualifying as 'seamen' under admiralty law, are therefore not entitled to a warranty of seaworthiness or any associated protections. They assert that the plaintiffs’ first cause of action resembles a warranty of seaworthiness claim, which holds vessel owners liable for injuries to 'seamen' resulting from unseaworthiness. The legal precedent establishes that the duty of seaworthiness is absolute, owed only to a specific class of maritime workers, while non-crew members, like passengers, do not have this claim. Although plaintiffs acknowledge they do not meet the 'seaman' definition under the Jones Act, they assert a breach of the duty of reasonable care in their first cause of action. Defendants concede the validity of this negligence claim but maintain that the unseaworthiness claim is not applicable. The Court interprets the first cause of action as a negligence claim, thus denying defendants' motion for summary judgment regarding the warranty of seaworthiness.

Alicia Vincenty-Medina's claim for negligent infliction of emotional distress is challenged by the defendants on the basis that she was not in the "zone of danger" during the Sea Watch incident, which precludes recovery under maritime law. While plaintiffs acknowledge her absence from the danger zone, they argue that recovery is possible through the "zone of danger," relative bystander, and "physical impact" tests. They assert that her emotional distress was a foreseeable consequence of her husband's danger. The First Circuit has recognized boating accidents as maritime torts but has not definitively ruled on the viability of emotional distress claims in admiralty contexts. Other federal courts have acknowledged such claims based on the Supreme Court's Federal Employers’ Liability Act (FELA) precedent, applying the "zone of danger" test. However, the Ninth Circuit noted that recovery is generally not permitted for those not present at the accident scene. The court holds that the "zone of danger" test governs, limiting claims to those who either experience a physical impact or are at immediate risk of harm due to the defendant's negligence. Since there is no evidence that Alicia was at immediate risk, her claim fails, leading to the granting of defendants' motion for summary judgment, resulting in the dismissal of all her claims with prejudice.

Defendants argue that plaintiffs lack sufficient evidence to support their maritime tort claim, which requires establishing a legal duty, breach of that duty, proximate cause, and damages. Specifically, they contend that the absence of timely expert witness retention prevents plaintiffs from proving breach and causation. However, the Court's denial of the motion to strike allows consideration of both parties' expert reports, revealing genuine factual disputes regarding breach and causation. Plaintiffs' expert, Commander Deck, asserts that the defendants were negligent by overloading the Sea Watch, leading to its sinking. In contrast, defendants' expert, Captain Paul Simpson, contends that the vessel was not overloaded and sank due to a hull breach caused by hitting an obstruction, which he claims is a superseding cause. Consequently, the motion for summary judgment on the maritime tort claim is denied.

Additionally, the Valledor matrimony seeks partial summary judgment, asserting that plaintiffs have not demonstrated any genuine disputes regarding the corporate identity of Zurqui, Inc., which they claim is merely Jose Valledor’s alter ego. As plaintiffs did not oppose this motion, the court may treat it as unopposed, taking the presented evidence as uncontested. Zurqui, Inc., established in Puerto Rico in 2010, has documented corporate structure, bylaws, tax filings, and was the registered owner of the Sea Watch as of March 2011. The lack of opposition from plaintiffs significantly undermines their case against the Valledor matrimony regarding the corporate identity issue.

In diversity cases, the Court follows the choice-of-law rules of the forum state, as established in Wadsworth, Inc. v. Schwarz-Nin. The Court uses the "most significant contacts" test for tort cases and veil-piercing analyses. Critical factors include the corporation's place of incorporation and business, the location of the tortious conduct, and the nature of the relationship between parties. In this instance, all significant contacts were established in Puerto Rico, where Zurqui, Inc. is incorporated and located, and where all relevant interactions and tortious conduct occurred. Therefore, Puerto Rico law is applied to the veil-piercing analysis.

Under Puerto Rico law, corporations are recognized as distinct legal entities, separate from their officers, directors, and shareholders, as per P.R. Laws Ann. tit. 14, 3501 et seq. However, the corporate veil can be pierced in specific circumstances, including to prevent fraud, promote justice, evade statutory obligations, violate public policy, cause inequity, or conceal illegal activities. Factors considered may include undercapitalization, nonpayment of dividends, failure to observe corporate formalities, lack of corporate records, commingling of funds, and misuse of corporate funds.

The burden of proof to pierce the corporate veil lies with the party seeking to do so, requiring "strong and robust evidence." In this case, defendants argued for summary judgment, asserting that plaintiffs failed to present a genuine issue of material fact regarding the corporate identity of Zurqui, Inc. Plaintiffs cited a communication indicating Jose Valledor as a co-owner of the Sea Watch, but this was insufficient to challenge Zurqui, Inc.'s corporate identity or to demonstrate that it was merely Valledor's alter ego.

Defendants provided evidence showing that Zurqui, Inc. adhered to corporate formalities, and the plaintiffs did not demonstrate that recognizing the corporation would lead to any of the specified unjust outcomes. Consequently, the court denied the plaintiffs' claims against Jose Valledor and granted the Valledor matrimony's motion for partial summary judgment, dismissing all claims against them without prejudice.

Palmas del Mar Yacht Club and Marina (PDMYC) seeks partial summary judgment, arguing it is not liable for the Sea Watch’s operations or the safety of its passengers. Plaintiffs claim PDMYC is jointly liable for benefiting from the Sea Watch’s economic activity, allowing it to operate on its premises, and representing it as seaworthy. PDMYC asserts it did not owe a duty of care, having no ownership or operational role in the Sea Watch, which was rented slips at PDMYC's marina along with another charter operator. PDMYC charges commercial operators more for dockage and has never received commissions from these vessels. It allowed the charter operators to display signs without additional fees but did not promote them. PDMYC provided general contact information for charter operators upon request but did not handle payments or receive income from the Sea Watch charter. As of July 24, 2011, PDMYC was unaware of any issues concerning the charter services, and after the Sea Watch sank, the passengers were rescued and returned to PDMYC's facility.

Plaintiffs allege PDMYC is liable based on its public representations about the Sea Watch and its economic benefits derived from its operations, without specific evidence of negligence. In admiralty law, shipowners must exercise reasonable care for those on board, with a duty of care arising from foreseeable injuries or relationships imposing such duties. Courts assess duty by considering accident probability, injury potential, and precaution costs. To prove a joint venture, plaintiffs must demonstrate mutual intent, control, proprietary interest, profit sharing, and loss sharing. PDMYC argues plaintiffs fail to establish a duty of care, referencing a Louisiana case where a marina was found not negligent despite various interactions with charter boat customers, as it lacked control over the vessels. Similarly, plaintiffs have not shown sufficient evidence to imply PDMYC and the defendants operated as a joint entity. Although there is a factual dispute regarding a phone inquiry made by plaintiff Nieto-Vincenty about chartering a boat, undisputed facts reveal that PDMYC’s involvement was limited to permitting signage and charging for slips, without any knowledge of issues concerning Sea Watch Divers’ operations. Thus, evidence does not support PDMYC's liability in the incident related to the Sea Watch trip on July 24, 2011.

The Court found no evidence that PDMYC exercised control over the Sea Watch's care or safety, made representations about the vessel or its captain, acted as an agent for Sea Watch Divers, or engaged in a joint venture with them. Plaintiffs argued that the totality of facts suggested a relationship beyond a simple lessor/lessee arrangement, particularly due to the economic benefits PDMYC received from slip leases. However, this argument was unsupported by legal authority indicating that minimal marina involvement could create a duty of care or establish a joint venture. The Court agreed with prior rulings that the responsibility for the safety of vessels at the marina rested with their owners. As a result, plaintiffs failed to demonstrate any material fact regarding a duty owed by PDMYC or a breach thereof, leading to the granting of PDMYC's motion for summary judgment.

The Court has granted the Valledor matrimony’s and PDMYC’s motions for summary judgment, leading to the dismissal with prejudice of all claims against PDMYC. Claims against Jose Valledor, Concepcion Valledor, and their conjugal partnership are dismissed without prejudice. The Court partially grants and partially denies the motion for summary judgment from Zurqui, Inc. and the Valledor defendants; all claims by Alicia Vincenty-Medina against all defendants are dismissed with prejudice, while claims against Zurqui, Inc. and the Valledor defendants will continue. The motion to strike by Zurqui, Inc. and the Valledor defendants is denied.

The document notes a dispute over the details of a meeting and the nature of a $100 payment, which remains unresolved. The Court previously denied a motion for partial summary judgment by the Valledor matrimony, citing incomplete discovery. Plaintiffs conceded their inability to sustain a claim on the issue of corporate alter ego at that stage. Despite failing to respond to the motion adequately, the Court considered the arguments and exhibits submitted by the plaintiffs. The Court rejected a purchase and sale agreement for the Sea Watch as evidence because it was signed only by the buyer. 

Should the case proceed to trial favorably for the plaintiffs, corporate identity issues may be revisited regarding judgment execution against Zurqui, Inc. The Court notes that the plaintiffs did not support their denials of PDMYC's uncontested material facts as required, resulting in those facts being deemed unopposed. The liability theory presented by the plaintiffs lacks clarity, particularly regarding the claim that PDMYC acted as an agent or broker for the defendants, which is unsupported by evidence. The document also discusses a deposition related to the marina contacted, with PDMYC asserting a distinction from the marina identified by the plaintiffs.