Cannot drag an item within a position:relative sub-list

When a sublist is `position:relative`, an item can only be dragged to the bottom of the list.

An example can be seen at http://jsfiddle.net/jdwire/wn4yLj4p/. The list in Item 3 works fine, but if I try to drag an item into the list in Item 5, in which the ol is `position:relative`, the item cannot go anywhere except the bottom of the list.