• The Limitation of Liability Act: A Vessel Owner’s First Line of Defense After a Maritime Accident Occurs
  • August 20, 2014 | Author: Melissa L. Button
  • Law Firm: Cole, Scott & Kissane, P.A. - Miami Office
  • Maritime law, also referred to as admiralty law, is the body of law that governs navigation and shipping. It is a unique area of law that differs from common law and is applied uniformly throughout the country. Maritime law provides a legal framework for issues and accidents that take place on domestic, territorial and international waters. In light of the complexity of maritime laws, the number of law firms and attorneys with the requisite experience and knowledge of maritime law issues is limited. Therefore, as the number of maritime accidents involving personal watercraft and boats continues to rise, the necessity of understanding the rights and remedies available under maritime law for vessel owners has become more important than ever. CSK has been at the forefront of this ever-developing field of law.

    LIMITATION OF LIABILITY ACT

    One unique aspect of maritime law is the ability of a vessel owner to limit her liability after a maritime accident occurs pursuant to the Limitation of Liability Act (“Limitation Act”).1 The Limitation Act was originally enacted in 1851 by Congress to promote the development of the American merchant marine and to put American shipowners on footing equal to shipowners hailing from other commercial seafaring nations.2 Under the Limitation Act, vessel owners have the opportunity to limit their liability to the post loss value of the vessels for a marine casualty. 3 The Limitation Act applies to “seagoing vessels and . . . all vessels used on lakes or rivers or in inland navigation.”4 Claims arising from personal injuries, deaths, fire, collisions/allisions, sinking, salvage and lost cargo have all been held by courts as being subject to the Limitation Act. In addition to the potential for limiting liability, Limitation actions can be extremely useful as a tool to stay any pending lawsuits and to bring all claims together in concursus before a Federal District Court in Admiralty. Notwithstanding that a vessel owner is the party commencing the action, a Limitation action is a defense proceeding because the claimants are seeking damages from the vessel owner.5

    FILING A LIMITATION OF LIABILITY ACTION

    In order to invoke the protections of the Limitation Act, a vessel owner must bring a civil action in Federal District Court by filing a Complaint seeking Exoneration and/or Limitation of Liability.6 Venue is proper in any district where the vessel has been attached or arrested, or if there has been no attachment or arrest, in the district where the vessel owner has been sued. If suit has not yet been commenced against the vessel owner by a claimant, the Limitation complaint may be filed in any district where the vessel is physically present.7

    The Complaint must be filed within six months of the vessel owner and/or the vessel owner’s agent receiving written notice of a potential claim for damages.8 The six month statute of limitations period is strictly enforced by the Admiralty courts and will result in the dismissal of a Limitation action if the Complaint is filed outside of this time period. The Complaint must “set forth the facts on the basis of which the right to limit liability is asserted.”9 It is not enough for the Complaint to state only general allegations related to the underlying accident.10 Rather, the Complaint must elaborate on the voyage on which the casualty arose from which the vessel owner seeks limitation or exoneration or liability occurred and state with particularity the facts or the casualty.11

    In addition to specifying the location of the underlying incident, the Complaint must also set out the date and place of the termination of the voyage on which the casualty occurred, and state with particularly all known outstanding claims related to the voyage and their type.12 The Complaint must also state with particularity the post loss value of the vessel and pending freight, if any, where the vessel currently is located and in whose possession the vessel may be found.

    In addition to filing the Complaint, the vessel owner must also deposit with the District Court, for the benefits of claims, a sum equal to the amount or value of her interest in the vessel and pending freight, or approved security therefor, and in addition such sums, or approved security thereof, as the court may from time to time fix as necessary (“limitation fund”).13 Once the security is deposited, the District Court will enter an injunction staying the further prosecution of claims brought against the vessel owners arising from the subject casualty.14

    The District Court will also establish a “monition” period during which all claimants must file their respective claims against the vessel owner in the limitation action within a specific time under the potential of default.15 This “concursus” of claims allows all actions rising out of the underlying accident to be adjudicated in a single proceeding. Such a concursus provides a great benefit to the vessel owner by requiring all potential litigants in a singular federal forum as opposing to defending multiple claims in several jurisdictions.16

    Once the stay and monition period have been ordered, the vessel owner must provide notice of the stay and monition to all potential claimants.17 Notification is accomplished by publishing the stay and monition order in a newspaper of general circulation in the area where the action was filed.18 The notice must appear in the publication once a week for four (4) consecutive weeks prior to the date fixed for the filing of the claims in the limitation proceedings.19 Further, the notice must be mailed to each person known to have made a claim against the vessel or owner arising from the subject voyage no later than the day of second publication.

    In the case of death, notice must be mailed to the decedent at the decedent’s last known address and also to any person who is known to have made any claim on account of such death.20 After the completion of the four weeks, the vessel owner must obtain an affidavit of publication from the newspaper and file a notice of publication with the District Court. In addition, within thirty (30) days after the expiration of the monition period the vessel owner must mail a notice to each claimant who filed claims in the limitation proceedings advising them of: (1) the name of each claimant, (2) the name and address of the claimant’s attorney (if the claimant has an attorney), (3) the nature of each claim brought in the proceedings, and the (4) amount of each claim.21

    LIMITATION OF LIABILITY ACTION: BURDEN OF PROOF

    The burden of proof in a Limitation action is a bifurcated two-step analysis that is divided between the vessel owner and the claimants.22 The Eleventh Circuit has held that the determination of whether the owner of a vessel is entitled to limitation of liability requires the following analysis: (1) “the court must determine what acts of negligence or conditions of unseaworthiness caused the accident;” and (2) “the court must determine whether the ship owner had knowledge or privity of those same acts of negligence or conditions of unseaworthiness.”23

    The claimants bear the initial burden of establishing that the destruction or loss was caused by acts of negligence or by the unseaworthiness of the vessel.24 If the claimants are unable to meet this initial burden, the vessel owner will exonerated from liability.25 However, if the claimants are able to meet their burden, the burden then shifts to the vessel owner to prove a lack of privity or knowledge of the negligence or unseaworthy condition which caused the accident.26

    If the Limitation action is granted and the court determines that the act of negligence or unseaworthy condition which caused the underlying loss was not within the vessel owner’s privity or knowledge, the court will then distribute the limitation fund to the affected claimant(s). If the claims together exceed the limitation fund, the court must provide for the distribution of the funds “pro rata subject to all relevant provisions of law, among the several claimants in proportion to the amounts of their respective claims, duly proved, saving, however, to all parties any priorities to which they may be legally entitled.”27

    Overall, despite the procedural complexity of bringing a Limitation action, the opportunity of limiting a vessel owner’s liability to the value of their vessel can serve as a powerful defense to claims stemming from personal injury or death. CSK’s unique and extensive experience in this highly specialized field of law enables us to provide clients with the requisite insights and competent representation throughout all phases of such litigation.

    Endnotes

    1 46 U.S.C. §§30501-30512.
    2 Lake Tankers Corp. v. Henn, 354 U.S. 147 (1957).
    3 Id.
    4 46 U.S.C. §30502
    5 3 BENEDICT ON ADMIRALTY, supra note 42, § 11, at 2-5.
    6 46 U.S.C. §30511
    7 Fed.R.Civ.P.Supp. F(9), Supp. Adm. R.
    8 Rodriguez Morira v. Lemay, 659 F. Supp. 89 (S.D.Fla. 1987).
    9 Fed.R.Civ.P.Supp F(2).
    10 In re M/V Sunshine, II, 808 F.2d 762 (11th Cir. 1987).
    11 Fed.R.Civ.P.Supp. F(2).
    12 Id.
    13 Fed.R.Civ.P.Supp. F(1) .
    14 Fed.R.Civ.P.Supp. F(3).
    15 Pickle v. Char Lee Seafood, Inc., 174 F.3d 444 (4th Cir. 1999).
    16 46 U.S.C. §30505, Fed.R.Civ.P.Supp. F(3) and F(4); In re Dammers & Vanderheide & Scheepvaart Maats Christina B.V., 836 F.2d 750, 755 (2d Cir. 1988); Universal Towing Co. v. Barrale, 595 F.2d 414, 417 (8th Cir. 1979).
    17 Fed.R.Civ.P.Supp. F(4).
    18 Id.
    19 Id.
    20 Id.
    21 Fed.R.Civ.P.Supp. F(6)
    22 Carr v. PMS Fishing Corp., 191 F. 3d 1, 4 (1st Cir. 1999).
    23 Keys Jet Ski, Inc. v. Kays, 893 F.2d 1225, 1230 (11th Cir. 1990) (citing Farrell Lines Inc., Jones, 530 F.2d 7, 10 (5th Cir. 1976).
    24 In re Marine Sulphur Queen, 460 F.2d 89, 104 (2d Cir. 1972).
    25 In re Complaint of Messina, 574 F.3d 119, 126-27 (2d Cir. 2009).
    26 Id.
    27 Fed.R.Civ.P.Supp. F(8).