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Kiribati Seafood Co., LLC v. Dechert, LLP

Superior Court of Massachusetts, Suffolk, Business Litigation Session

April 7, 2016

Kiribati Seafood Company, LLC et al.
Dechert, LLP No. 133283


          Kenneth W. Salinger, Justice of the Superior Court.

         Kiribati Seafood Company, LLC, has sued Dechert, LLP for legal malpractice in handling litigation in Tahiti over damage to a fishing boat. Many of Kiribati's claims and all claims by Olympic Packer, LLC have been dismissed. Dechert moves for summary judgment on Kiribati's remaining claims. Kiribati, in turn, moves for partial summary judgment as to Dechert's liability with respect to the disallowance by a Tahitian appellate court of $1.76 million that had been awarded for claims asserted by Kiribati as the assignee of its insurer's subrogation rights. Dechert also moves to strike parts of Kiribati's summary judgment affidavits. The Court concludes that the contested portion of Kiribati's affidavits must be stricken.

         Dechert is entitled to summary judgment in its favor as a matter of law. First, Dechert's alleged negligence in protecting Kiribati's rights as assignee of its insurer's subrogation interest was not the proximate cause of the Tahitian appellate court's decision. The appellate ruling disallowing this portion of Kiribati's damages was based on an error of law. It was therefore a superseding cause that relieves Dechert of any liability for negligence. Second, Kiribati had to keep its damaged fishing vessel in Tahiti, and incurred substantial costs as a result, because the boat was seized as security for Kiribati's contractual obligations to its local agent. The undisputed facts show that these costs were not caused by any malfeasance on the part of Dechert. Third, Kiribati became liable for the fees and expenses of a receiver appointed by a Washington State court because Kiribati violated that court's order to pay an amount of money into a court account, and not because of any negligence by Dechert. Finally, since Kiribati's substantive claims all fail as a matter of law, Kiribati is not entitled to recover attorneys fees previously paid to Dechert and is also not entitled to seek any punitive damages.

         1. Procedural Background

         The claims in this case arise from legal work by lawyers at Dechert's Paris office who represented Kiribati and Olympic Packer, LLC in a lawsuit against the Port of Papeete, Tahiti. That underlying case concerned damage to a commercial fishing vessel owned by Kiribati and chartered to a joint venture involving Olympic Packer.

         In this lawsuit, Kiribati and Olympic Packer claimed that Dechert was liable for mishandling the underlying litigation. Dechert moved to dismiss the amended complaint. Judge Roach denied the motion with respect to legal malpractice claims asserted under theories of breach of fiduciary duty, negligence, breach of contract, and aiding and abetting the alleged breach of fiduciary duty by Dechert's Paris office (counts I to IV). She allowed the motion to dismiss with respect to Plaintiffs' claims for spoliation of evidence, violation of the federal Racketeer Influenced and Corrupt Organization Act, and violation of G.L.c. 93A (counts V to VII). Plaintiffs later filed a second amended complaint restating the basis for counts I to IV, and dropping the counts that had been dismissed by court order.

         Last year the parties stipulated to the dismissal of certain claims, with prejudice. The stipulation of dismissal identifies eight different theories of liability or recovery that have been dismissed with prejudice. One of the dismissed theories of liability was identified as " Olympic Packer's only remaining claim in the case."

         Kiribati has identified five categories of alleged damages that constitute its remaining claims in the case. They are:

(1) Kiribati's loss on appeal in Tahiti of $1.76 million that had been awarded to Kiribati by the Tahitian trial court based on a subrogation interest assigned to Kiribati by Lloyd's of London;
(2) Kiribati's liability for $900, 000 in mooring fees and related costs for storing and maintaining the damaged fishing vessel in Tahiti;
(3) Kiribati's liability for $1.44 million in legal fees incurred in connection with Kiribati's receivership in Washington State;
(4) the legal fees that Kiribati paid to Dechert (totaling $540, 000) and to Coudert Frères (totaling $340, 000), which is the law firm where the Dechert lawyers who represented Kiribati used to practice; and
(5) unspecified punitive damages under Pennsylvania law.

         Dechert moves for summary judgment in its favor on all remaining claims. Kiribati cross moves for partial summary judgment as to Dechert's liability on the Lloyd's Subrogation Claim.

         2. Undisputed Material Facts

         Many of Kiribati's responses to Dechert's statements of fact assert that " Kiribati is unable to admit or deny this assertion, " without reference to any evidence. The Court deems those facts to be undisputed for the purpose of evaluating the cross motions for summary judgment. Cf. Dziamba v. Warner & Stackpole, 56 Mass.App.Ct. 397, 401, 778 N.E.2d 927 (2002). A statement of material facts served under Superior Court Rule 9A(b)(5) is an offer of proof, not merely a request for admissions. The responding party must do more than assert that a statement is denied or disputed, and cannot create a disputed issue by refusing or stating that it is unable to admit the matter. Rather, the party must also point to admissible evidence that contradicts the statement. " [M]ere assertions of the existence of disputed facts without evidentiary support cannot defeat [a] summary judgment motion." Bergendahl v. Massachusetts Elec. Co., 45 Mass.App.Ct. 715, 718-19, 701 N.E.2d 656, rev. denied, 428 Mass. 1111, 707 N.E.2d 1078 (1998), cert. denied, 528 U.S. 929, 120 S.Ct. 326, 145 L.Ed.2d 254 (1999).

         The following are undisputed facts, as demonstrated in the evidentiary materials submitted in connection with the pending motions, or reasonable inferences that a jury could draw from those facts. The Court " must . . . draw all reasonable inferences" from the evidence presented " in favor of the nonmoving party, " as a jury would be free to do at trial. Godfrey v. Globe Newspaper Co., Inc., 457 Mass. 113, 119, 928 N.E.2d 327 (2010). It has done so.

         2.1. Damage to the Madee and Tahiti Lawsuit

         Kiribati bought and refurbished a fishing vessel that it named the Madee . Kiribati chartered the Madee to Olympic Packer and Dojin Co., Ltd. During its initial fishing voyage in December 2001, the Madee lost one of its rudders in the South Pacific Ocean. The Madee was brought to the Port of Papeete, in Tahiti, for repairs. Kiribati hired a maritime agent to represent its interests in Papeete. This agent arranged for the Madee to be placed in a dry dock owned by the Autonomous Port of Papeete (the " Port"). The dry dock collapsed, causing significant damage to the Madee .

         Since the Tahitian courts are part of the French legal system, Kiribati and Olympic Packer hired two lawyers from the Paris office of the law firm Coudert Frères (Xavier Nyssen, a partner, and Karine Santoul, an associate) to represent them in litigation in Tahiti concerning the dry dock collapse. Coudert filed a lawsuit on behalf of Kiribati and Olympic Packer in February 2003 in the Commercial Court of Papeete. The suit was brought against the Port and others, and sought damages arising from the dry dock collapse. The Port asserted a counterclaim for unpaid moorage fees. Kiribati was also sued by the maritime agent for unpaid fees; that lawsuit was consolidated with the lawsuit between Kiribati and the Port.

         The Commercial Court ordered the conservatory arrest of the Madee in order to secure the maritime agent's claim against Kiribati. This legal order barred Kiribati from removing the Madee from the Port of Papeete. It was in effect for ten years, from April 2003 until February 2013.

         Kiribati was never able to get the Madee repaired. None of the shipyards in Tahiti agreed to submit a bid to repair the Madee . Shipyards in Mobile, Alabama, and Seattle, Washington, submitted repair bids. But Kiribati was unable to obtain a temporary International Load Line Certificate so that the Madee could proceed under its own power to another port for repairs. In any case, Kiribati could not afford to move the Madee to another port, and the Madee remained under conservatory arrest until February 2013.

         Following the dry dock collapse, a Madee crew member named Steven Kleven served as the ship's custodian. Some years later Kiribati settled Kleven's claims for compensation by paying him $180, 000 and giving him title to three skiffs.

         At the time of the dry dock collapse, the Madee was insured under a port risk insurance policy by Certain Underwriters of Lloyd's of London. The policy had a coverage limit of $1.2 million. Eventually Lloyd's paid Kiribati $1, 763, 803.71, including interest and possibly other amounts not subject to the policy limit. As a result, Lloyd's was subrogated to Kiribati's rights against the Port in this amount. Lloyd's joined as a plaintiff in the pending lawsuit in Tahiti in order to pursue its subrogation claim against the Port. In December 2004, Lloyd's assigned to Kiribati all of Lloyd's subrogation rights against the Port. It did so as part of a settlement agreement between Lloyd's and Kiribati concerning the Tahiti lawsuit and continuing claims by Kiribati under its policy with Lloyd's.

         Dechert took over the representation of Kiribati in the Tahiti lawsuit in October 2005, when Nyssen and Santoul left Coudert and joined Dechert's Paris office. Nyssen and Santoul continued to represent Kiribati thereafter. Coudert never merged with Dechert, and Dechert never assumed any of Coudert's liabilities.

         Throughout the litigation between Kiribati and the Port, Larry Crovo served as the " Owners' Representative" in dealing with Coudert and then with Dechert regarding this litigation. Charles Crovo controlled 60.5 percent of the member interest in Kiribati and Olympic Packer from at least January 2008 through September 2011. During that time Nick Coscia controlled the remaining 39.5 percent member interest in both companies.

         In October 2007, Coscia called Dechert's chairman in Philadelphia, and insulted Nyssen and Dechert's other lawyers in Paris. As a result, Larry Crovo instructed Nyssen to deal only with him, and not to communicate with Coscia. Larry Crovo later gave Nyssen permission to communicate directly with Charles Crovo as well. Coscia was aware that the Dechert lawyers had been instructed not to communicate with him.

         2.2. Initial Decisions by Tahitian Courts

         The Commercial Court in Tahiti issued its decision regarding the Madee in January 2008. The Commercial Court recognized the validity of the assignment of Lloyd's subrogation interest to Kiribati, and awarded Kiribati and Olympic Packer close to 488 million Pacific Francs on their claims against the Port.[1] This sum included a recovery of the full $1.76 million in damages claimed under the Lloyd's subrogation interest that had been assigned to Kiribati, plus additional damages that had not been covered by the Lloyd's insurance policy. The Commercial Court also awarded 11 million Pacific Francs to the Port and 41.7 million Pacific Francs to the maritime agent on their claims against Kiribati.

         The Port and the other defendants appealed this decision to the Court of Appeal of Papeete. Dechert filed a brief with the Court of Appeal on behalf of Kiribati in November 2009. In that brief Dechert argued, among other things, that Kiribati was entitled (i) to recover the full amount of damages that Lloyd's had already paid to Kiribati, in Kiribati's capacity as assignee of Lloyd's subrogation interest; and (ii) in addition, to recover all damages in excess of and thus not covered by the Lloyd's insurance policy.

         The Court of Appeal issued an initial decision regarding the damage to the Madee in April 2010. It awarded 160 million in Pacific Francs as provisional damages to Kiribati and Olympic Packer on their claims against the Port, and awarded 30.5 million Pacific Francs to the maritime agent on its claims against Kiribati. This award of 160 million in Pacific Francs to Kiribati was for damages not covered by the Lloyd's insurance policy. Although the court found that Lloyd's assignment of its subrogation interest to Kiribati was valid, it deferred decision on Kiribati's assertion of the rights assigned to it by Lloyd's and asked Kiribati to submit evidence of the consideration provided by Kiribati to Lloyd's for this assignment. The court explained that it wanted to avoid awarding double compensation for the same damage.

         2.3. Transfer of Lawsuit Proceeds

         In May 2010, one month after the initial appellate decision in Tahiti, the Port's insurer wired € 660, 109.26 to an account established by Dechert for the benefit of Kiribati. Before Dechert received these funds, it was informed that Dennis Moran (a lawyer who had previously represented Kiribati) and the Estate of Paul Schultz (a seaman on the Madee who has sued Kiribati for unpaid wages) both claimed liens on any proceeds from the Tahiti litigation. Two days after receiving this payment, Dechert requested authority from the Paris Court of ...

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