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Sharp v. Hylas Yachts, LLC

United States Court of Appeals, First Circuit

September 22, 2017

NELSON R. SHARP; DESTINY YACHTS, LLC, Plaintiffs-Appellees/Cross-Appellants,
v.
HYLAS YACHTS, LLC, Defendant-Appellant/Cross-Appellee, GMT COMPOSITES, INC.; FORESPAR PRODUCTS CORP., Third Party Defendants-Appellees, MASTERVOLT, INC., Third Party Defendant.

         APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Jennifer C. Boal, U.S. Magistrate Judge]

          Jeffrey S. Baker, with whom Baker and Associates, Daniel P. Tarlow, and Copani, Tarlow & Cranney, LLC were on brief, for defendant-appellant.

          Robert E. Collins, with whom Clinton & Muzyka PC was on brief, for third-party defendant-appellee GMT Composites, Inc.

          Stefan L. Jouret, with whom Jouret LLC, Warren D. Hutchison, and LeClair Ryan PC, were on brief, for plaintiffs-appellees.

          Before Lynch, Kayatta, and Barron, Circuit Judges.

          KAYATTA, CIRCUIT JUDGE.

         Following an eleven-day jury trial and verdict, the district court entered judgment against Hylas Yachts, LLC and in favor of plaintiffs Nelson Sharp and his LLC, Destiny Yachts, in the amount of $663, 774 plus interest and costs, on account of numerous defects in a brand-new yacht that Hylas custom built and sold to plaintiffs. Both sides appeal. For the following reasons, neither side persuades us to upset the judgment.

         I. Background

         To frame the principal issues raised on this appeal (Hylas's challenges to the verdict and plaintiffs' challenge to the judgment as a matter of law entered on one of its claims), we summarize the relevant evidence as a reasonable factfinder might have viewed it most favorably to plaintiffs. See Atl. & Gulf Stevedores, Inc. v. Ellerman Lines, Ltd., 369 U.S. 355, 364 (1962); Acevedo-Garcia v. Monroig, 351 F.3d 547, 565 (1st Cir. 2003).

         Our summary begins in June of 2009, when Sharp and Hylas signed a contract for the purchase and sale of a new seventy-foot yacht, to be named "Destiny, " for $1.99 million. A semiretired mechanical engineer with a background in hydraulics, Sharp had owned a boat before-two years prior, he had purchased a fifty-four-foot sailboat from another company-but never a vessel as big as the one he planned to buy from Hylas, a luxury yacht seller in Marblehead, Massachusetts.

         The purchase agreement between Sharp and Hylas included detailed provisions devoted to the yacht's commissioning, the delivery and closing, and assorted warranties. The agreement provided that the yacht would be commissioned in Ft. Lauderdale, Florida, and commissioning would "include all work necessary to install all equipment . . . and place same in good and proper operating condition." The agreement also included a warranty provision in which Hylas guaranteed that the yacht delivered to Sharp would be "of excellent quality, of good workmanship and materials, seaworthy and suitable for its intended use of extended ocean cruising." Hylas agreed "for a period of three (3) years after Delivery, to either fix any warranty defects by the factory or reimburse [Sharp] for the cost incurred in fixing it." And Hylas agreed to indemnify Sharp from claims brought by Hylas's subcontractors and suppliers, and to pay attorneys' fees incurred by Sharp in handling such claims.

         To build the yacht, Hylas contracted with a number of vendors who supplied, installed, and serviced certain components of the yacht. GMT Composites, Inc. supplied the boom (a "long spar used to extend the foot of the sail") and all boom-related components, including the boom-furling system, part of the gooseneck assembly, the mandrel, and the pawl assembly. Forespar Products Corp., another vendor, supplied the mast, the plates connecting the mast to the gooseneck assembly, and other parts of the gooseneck assembly.

         Sharp made a substantial down payment to Hylas on July 12, 2010, from his personal bank account. The remaining balance was paid at closing from a bank account held by Destiny Yachts, LLC, a limited liability company Sharp set up. When Sharp closed on and took possession of the yacht on December 4, 2010, he did so on Destiny Yachts' behalf as its sole member. From that point forward, Destiny Yachts owned Destiny in full.

         After taking possession of the yacht, Sharp sailed from Ft. Lauderdale toward St. Thomas in the Caribbean on December 4. About four or five hours into the maiden journey, Sharp noticed a hydraulic fitting leaking. He turned the boat around and a Hylas employee in Ft. Lauderdale met him the following morning and tightened the fitting. Within a day and a half of Sharp's second departure from Ft. Lauderdale, though, the fitting began to leak again. A more "massive failure" occurred a few days later when the boom came loose, the furling motor connections and hydraulic lines broke, and hydraulic oil spilled on Destiny's deck. When Destiny arrived in St. Thomas, Hylas and GMT arranged for a local rigging company called Island Rigging to repair the boom and the hydraulics.

         Between January 4, 2011, and February 26, 2011, Destiny sailed through the Caribbean to Grenada. The yacht had numerous other problems during its journey, including hydraulic system malfunctions, malfunctions of the electronic throttle, a broken generator, failing battery chargers, and toilet malfunctions. Sharp corresponded repeatedly with Hylas and GMT, expressing his dissatisfaction with the services Hylas was rendering and frustration with the continuing problems his crew was experiencing. Sharp later recalled spending several weeks in Grenada trying to repair the hydraulic system, which continued to fail, and the charging system, which by this point "was almost non-existent." When Sharp could not get these systems repaired, he decided to return to Ft. Lauderdale so that Hylas could effect repairs before Destiny would continue on to the Mediterranean.

         On April 7, 2011, the yacht left Grenada for Ft. Lauderdale. During the trip, the clevis pin fell out of the boom, causing the boom to completely fall off the mast. Sharp eventually put in at Ft. Lauderdale to undergo repairs. Hylas sent the hydraulic system manufacturer to replace the controls for the hydraulic system, and sent the charging system manufacturers to replace the charging system. A GMT technician repaired the damage done when the boom fell.

         Problems continued to arise. They included boom-fitting, mandrel, foot-track, and hydraulic oil issues. Destiny eventually docked in Newport, Rhode Island, where it underwent eight days of repairs. Graham Robertson, who joined the crew as Destiny's captain in June 2011, recalled that GMT performed all of the repairs; nobody from Hylas was involved.

         On June 23, 2011, Destiny left Rhode Island for the Mediterranean. Sharp received an email from Hylas's vice president, Kyle Jachney, the day before the yacht departed, stating that Jachney planned to come see the yacht and conduct sea trials. Destiny departed before Jachney made it, however. While the yacht was sailing across the Atlantic, Robertson noticed that in addition to emerging problems with the mandrel foot track and the sail feeder, the bolts in the boom fitting connecting the boom to the mast appeared to be loosening. Destiny could not be sailed, and had to travel using a motor to get to the Azores for repairs; nobody there could fix it, so it made its way unrepaired to Palma de Mallorca.

         On June 27, 2011, Sharp forwarded to Jachney an email he had received from Robertson describing all of these problems, and Sharp asked Jachney to "provide your insights and suggested course of action." Roughly two weeks later, Sharp, who had at this point made his way to Palma de Mallorca to tend to Destiny, emailed Jachney again to state that he had received no response to his email request, and that he and Destiny's crew were going to "proceed[] to the best of [their] ability to effect a fix that will still salvage part of the Summer in the Mediterranean." Sharp indicated that he would be forced to conduct repair work and he expected Hylas to reimburse him for the work and the value of the lost use of the yacht. He also reminded Jachney that Hylas did not ever provide Destiny's hydraulic system schematics despite Sharp's request for them in early May 2011.

         Taking the advice of mechanics who said some of the parts connecting the boom and mast were undersized, Sharp had the mast connection rebuilt and increased the size of the clevis. Still, subsequent emails he sent to Jachney and David Schwartz, the president of GMT, alerted Hylas and GMT that Destiny continued to experience problems with loosening screws and bolts in the boom along with continual hydraulic leaks.

         On July 31, 2011, Destiny left Palma de Mallorca and experienced more problems, this time with the pawl (the component used to raise and lower the sail). After stopping for more repairs in Sardinia, Destiny resumed its journey through the Mediterranean on August 5, 2011.

         On October 13, 2011, plaintiffs sued Hylas, alleging breach of contract, breach of warranties, negligence, misrepresentation, and violations of Massachusetts General Laws chapter 93A. Hylas impleaded GMT and Forespar, and GMT leveled fourth-party contract claims against plaintiffs based on a bill it issued that was allegedly never paid.

         As Destiny headed back across the Atlantic in November 2011, more screws in the boom-to-mast connection broke or loosened. Robertson noticed that bolts in the gooseneck were shearing; he instructed the crew to check them twice a day, and at least one bolt required tightening at each check. The pawl assembly again had problems, as did the bolts in the gooseneck assembly, so the yacht sailed the last few days into the Carribean under reduced sail. After the yacht made its way to Newport, Rhode Island from Ft. Lauderdale in June 2012, Sharp eventually had the boom replaced in early September 2012. No further significant problems ensued.

         The case went to trial in July 2015. Plaintiffs claimed damages of $1, 019, 066, consisting of $320, 000 in lost charter revenue, $364, 514 in depreciation during the 8-1/2 months when Destiny could not be used, $140, 789 to replace the gooseneck and boom, and assorted lesser amounts for other repairs, travel, lost time, and marina and diversion expenses.

         The jury signed a special verdict form in which they found that Hylas's breach of contract and breaches of implied and express warranties rendered it liable to Sharp in the amount of $663, 774. The jury also found that GMT breached its contract with Hylas and breached an express warranty and implied warranties of merchantability and workmanlike conduct, and that at least one of these breaches proximately caused harm to Hylas. But the jury found that Hylas was entitled to no damages from GMT, the liability findings notwithstanding. The jury found against Hylas on all of its contract claims against Forespar, and found that plaintiffs did not breach a contract with GMT or become unjustly enriched by failing to pay an unpaid bill. A few months later, the magistrate judge found against plaintiffs on their chapter 93A claims. Hylas's post-trial motions were denied, and Hylas and plaintiffs both appealed.

         II. Discussion

         Hylas complains that the jury verdict holding it liable to Sharp for a substantial sum was necessarily inconsistent with the jury's verdict that GMT, the boom supplier, breached contractual commitments and warranties given to Hylas, yet owed Hylas no damages. Hylas also argues that the district court improperly dismissed its indemnification claim against GMT, and that the verdict was tainted by erroneous instructions, improperly admitted evidence, and a failure to hold Sharp accountable for the spoliation of evidence. Plaintiffs, in turn, press on cross appeal the contention that they were entitled as a matter of law to multiple damages and attorneys' fees under Massachusetts state law. Mass. Gen. Laws ch. 93A, § 11. As we will explain, none of these arguments persuade us.

         A. ...


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