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Tug Construction LLC v. Harley Marine Financing LLC

United States District Court, W.D. Washington, Seattle

September 24, 2019

TUG CONSTRUCTION, LLC, Plaintiff,
v.
HARLEY MARINE FINANCING, LLC, Defendant.

          ORDER DENYING DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS

          BRIAN A. TSUCHIDA, CHIEF UNITED STATES MAGISTRATE JUDGE

         Before the Court is the motion for judgment on the pleadings of Defendant Harley Marine Financing, LLC (“HMF”). Dkt. 19. HMF contends Plaintiff Tug Construction, LLC (“Tug Construction”) is barred by res judicata from reasserting claims in this lawsuit that were settled in a prior lawsuit. In this lawsuit, Tug Construction asserts claims for damages pursuant to the Bareboat Charters for five vessels, including the M/V LELA FRANCO, for unpaid rentals and repair expenses (the “Hire and Expenses Litigation”). In the prior lawsuit, Tug Construction sued for return and possession of the LELA FRANCO after Tug Construction terminated the Bareboat Charter on the LELA FRANCO (the “Possessory Litigation”).

         The Court denies the motion. HMF also filed a motion for protective order, noted for consideration on October 4, 2019, requesting a stay of discovery pending resolution of the motion for judgment on the pleadings. Dkt. 23. The motion for protective order is now moot and therefore, is also denied.

         STANDARDS OF REVIEW

         A. Motion for Judgment on the Pleadings

         “After the pleadings are closed-but early enough not to delay trial-a party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). Judgment on the pleadings is proper where “taking all the allegations in the pleadings as true, the moving party is entitled to judgment as a matter of law.” Milne ex rel. Coyne v. Stephen Slesinger, Inc., 430 F.3d 1036, 1042 (9th Cir. 2005) (quoting Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 713 (9th Cir. 2001)).

         Judgment on the pleadings is improper when the district court goes beyond the pleadings to resolve an issue; such a proceeding must properly be treated as a motion for summary judgment. Fed.R.Civ.P. 12(c); cf. Bonilla v. Oakland Scavenger Co., 697 F.2d 1297, 1301 (9th Cir.1982) (discussing Fed.R.Civ.P. 12(b)(6)), cert. denied, 467 U.S. 1251, 104 S.Ct. 3533, 82 L.Ed.2d 838 (1984). The Court may however, take into consideration such facts as are available from judicial notice such as court filings and other matters of public record. Reyn’s Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006).

         B. Res Judicata

         Under the doctrine of claim preclusion, also known as res judicata, “a final judgment on the merits bars further claims by parties or their privies based on the same cause of action.” Montana v. United States, 440 U.S. 147, 153 (1979). Res judicata “bar(s) all grounds for recovery which could have been asserted, whether they were or not, in a prior suit between the same parties . . . on the same cause of action[.]” Ross v. IBEW, 634 F.2d 453, 457 (9th Cir. 1980). “Res judicata is applicable whenever there is (1) an identity of claims, (2) a final judgment on the merits, and (3) privity between parties.” Stratosphere Litig. L.L.C. v. Grand Casinos, Inc., 298 F.3d 1137, 1143 n.3 (9th Cir. 2002).

         “If reasonable doubt exists as to what was decided in the first action, the doctrine of res judicata should not be applied.” Matter of Braniff Airways, Inc., 783 F.2d 1283, 1289 (5th Cir. 1986); see also Harris v. Jacobs, 621 F.2d 341, 343 (9th Cir. 1980) (refusing to preclude the plaintiff from pursuing its claim when that claim “was not distinctly alleged” in the prior litigation and the court made no findings pertaining to the claim). “Because res judicata may govern grounds and defenses not previously litigated, however, it blockades unexplored paths that may lead to truth . . . It therefore is to be invoked only after careful inquiry.” Brown v. Felsen, 442 U.S. 127, 132, 99 S.Ct. 2205, 60 L.Ed.2d 767 (1979).

         FACTS AND PROCEDURAL BACKGROUND

         A. The Parties

         Tug Construction is a Washington limited liability company based in Seattle, Washington. Tug Construction is the owner of five towing vessels: the DR HANK KAPLAN (Official No.1266463); the EARL W REDD (Official No. 1273621); the LELA FRANCO (Official No. 1258229); the MICHELLE SLOAN (Official No. 1258228); and the RICH PADDEN (Official No. 1266462) (collectively, the “Tugs”). Dkt. 1 (Complaint for Breach of Bareboat Charter Contracts (the Hire and Expenses Litigation)), Introduction, ¶ 1.

         HMF is a Delaware limited liability company based in Seattle, Washington. Id., ¶ 2. HMF chartered the Tugs under five separate Bareboat Charters. Dkt. 1.1–1.5, Ex. A–E.

         HMF states that the Hire and Expenses Litigation is just one of “several recent cases between related parties.” Dkt. 23, p. 3. One of the two owners of Tug Construction (Harley Franco or “Franco”) is engaged in a litigation battle with an investor (Macquarie Capital) over control of Harley Marine Services, Inc., the group of companies of which HMF is a part. See, Matthew Godden and Tobias Bachteler v. Harley Franco, In the Court of Chancery of the State of Delaware, No. 2018-0504-VCL; and Harley Franco v. Macquarie Capital (USA) Inc., et al., In the Superior Court in and for the County of King, No. 18-2-16360-9 SEA. Tug Construction is not a part of either lawsuit. In addition to the Possessory Litigation and this lawsuit, Tug Construction was a party to one other suit as a result of the Macquarie Capital/Franco dispute: a suit brought by HMS claiming sale or charter of the five Tugs involved in the present litigation was barred by a non-competition contract Franco signed. See Harley Marine Services, Inc. v. Harley Franco & Tug Construction, LLC, In the Superior Court in and for the County of King, No. 19-2-08826-5 SEA (the “Noncompetition Suit”). On August 13, 2019, Judge Laura Inveen issued a 15-page decision in the Noncompetition Suit concluding HMS was not so prohibited. Dkt. 28, Webster Decl., Ex. AA (hereinafter “Inveen Decision, Ex. AA”).

         B. The Possessory Litigation – (First Action)

         On March 21, 2019, Tug Construction filed a Verified Complaint for the Arrest of Vessel against the LELA FRANCO, in rem, and against HMF, in personam, in the U.S. District Court for the Central District of California, for return of the LELA FRANCO. Tug Construction, LLC v. M/V LELA FRANCO, O.N. 1258229, No. 2:19-cv-02134 (C.D. Cal.) (Possessory Litigation). See Dkt. 28, Declaration of Jess G. Webster, Ex. F (Verified Complaint).[1] Pursuant to FRCP SUP AMC Rule C(2)(c); E(3)(a), a complaint for the repossession of a vessel must be filed where the vessel is located at that time. The facts preceding this filing are contained in the Verified Complaint and are summarized herein.

         On February 12, 2019 Tug Construction notified HMF that Tug Construction was terminating HMF’s charters on three Tugs, including the LELA FRANCO, “effective February 28, 2019, the last date through which hire for the vessels had been paid.” Dkt. 28, Ex. F at ¶ 12 and Exhibit E thereto.[2] At the time it was notified of the termination, HMF was operating the LELA FRANCO in the vicinity of Los Angeles, California. Id. HMF agreed to return the LELA FRANCO to Tug Construction by March 8, 2019 in the vicinity of Los Angeles, California. Id. at ¶ 14 and Exhibit G thereto. HMF failed to do so and asserted it would return the vessel to Tug Construction by March 15, 2019. Id. at ¶ 15.

         On March 12, 2019, Tug Construction notified HMF that HMF was in breach of its obligation to return the vessel and demanded the LELA FRANCO be returned no later than March 15, 2019. Id. at ¶ 16 and Exhibit H attached thereto. Subsequent emails exchanged between the parties confirmed that HMF would not be returning the LELA FRANCO by March 15, 2019. Id. ΒΆ 17 and Exhibit I attached thereto. HMF failed to ...


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