Admiralty Law - Robert S. Glenn, Jr., George M. Earle, and Marc G. Marling

• Publication year: 1999

Admiralty Lawby Robert S. Glenn, Jr.*

George M. Earle** and

Marc G. Marling***

The Court of Appeals for the Eleventh Circuit decided nine admiralty cases with written opinions in 1998. With one exception, these cases did not involve issues of first impression. They instead fell into the following categories: cases that were decided with reference to existing law; a case in which the court's decision put it at odds with the holding of other circuit courts; a case in which the court's holding continued an expansive trend in maritime law; and a case of first impression involving important constitutional issues.

The cases that were decided with reference to existing law were three admiralty jurisdiction cases, two cases involving contracts,¹ one case arising out of tort,² a case involving maintenance and cure, ³ and two cargo cases, one of which is discussed in a fifty page opinion that is a primer of cargo law.⁴ The case that created a conflict among the circuits was a case that arose under the Longshore and Harbor Workers' Compensation Act ("LHWCA").⁵ It was settled and dismissed after the Supreme Court granted certiorari, leaving the Second and Ninth Circuits in conflict with the Eleventh over exactly what a "pier" is under the LHWCA.⁶ The "expansive trend" case involved the relationship between the maritime wrongful death remedy and state wrongful death statutes.⁷ The case raising an issue of first impression, on a return appearance before the court, presented the court with an opportunity to examine the relationship between Eleventh Amendment sovereign immunity and the Limitation of Shipowner's Liability Act and its procedural counterpart, Rule F of the Supplemental Rules.⁸

I. Admiralty Jurisdiction

In Inbesa America, Inc. v. M/V ANGLIA,⁹ the Eleventh Circuit confronted the question of whether a contract between a terminal operator and a vessel charterer which covered dockage, stevedoring, unloading, stuffing and stripping, securing, and wharfage was, as a whole, maritime in nature, thus giving rise to admiralty jurisdiction.¹⁰ Admiralty jurisdiction over contracts involving cargo traditionally exists when the contract is maritime, that is, the contract is concerned with getting a ship and its cargo from one point to another, including the chartering of the vessel, carriage of goods or passengers, loading and discharge of cargo, and obtaining voyage supplies, repairs, and towing.¹¹ The court in Inbesa held that dockage and stevedoring are clearly maritime because charges related to the needs of a vessel lying at a dock, as well as the stowing of cargo aboard that vessel, are maritime in nature.¹² However, the court held that the other categories of service are nonmaritime cargo handling.¹³ In reaching this decision, the court relied upon Luvi Trucking, Inc. v. Sea-Land Services, Inc.¹⁴ "It has long been the rule that contracts involving cargo are maritime only to the extent the cargo is on a ship or is being loaded on or off a ship."¹⁵ The court found that services such as the unloading of trucks and railcars and the stuffing and stripping of containers, while important parts of the transportation of cargo, were not "necessary" for the operation of the vessel.¹⁶ The court drew this distinction between stevedoring and shore-side cargo handling and held shore-side cargo handling to be nonmaritime in nature.¹⁷

As for wharfage, the court noted the term "wharfage" is often synonymous with "dockage," which has been held to be a maritime service.¹⁸ However, in this case, wharfage was a charge assessed on the cargo moving through Inbesa's terminal. Therefore, the court concluded that this wharfage charge was not dockage and was instead related to shore-side cargo handling services.¹⁹ Thus, the Eleventh Circuit reversed the decision of the district court, holding that the district court did not have admiralty jurisdiction over the nonmaritime aspects of the contract because they were separable from the contract.²⁰

In Wilkins v. Commercial Investment Trust Corp.,²¹ the Eleventh Circuit examined whether admiralty jurisdiction existed when investors in a new cruise line posted a letter of credit or advanced funds to pay for refurbishment of the vessel. The investors asserted a maritime lien against the vessel.²² The questions before the court were whether the refurbishment contracts constituted maritime contracts for the purpose of jurisdiction and whether the investors who had paid the refurbishers were subrogated to the refurbishers' maritime lien rights.²³

Traditionally, a prerequisite to contractual maritime liens was that the underlying contract concern a subject matter within admiralty jurisdiction.²⁴ However, in Wilkins the court worked in reverse, first deciding whether the investors held maritime liens by way of subroga- tion. The court found that the investors had not acquired maritime liens because not all creditors whose funds discharge a maritime lien acquire a maritime lien.²⁵ Because the investors' funds were advanced to Royal Company, the operating company which was overseeing the refurbishment, rather than to the owner of the vessel, the court found that the investors had advanced money to pay off a demand by the owner and that it would be "unjust to presume that the vessel would end up encumbered, anyway—because of the Royal companies' apparent default in reimbursing their investors as well as the vessel's refurbishers."²⁶ Therefore, because credit was extended to the operator and not to the vessel itself, no maritime lien existed.²⁷

The court also held that the advances were not made on behalf of the owner or the vessel itself but to a party with no property interest in the vessel.²⁸ Royal Company, the intended operator of the vessel, had agreed to oversee and fund the repairs and refurbishment of the vessel, but did not possess any ownership rights in the vessel. Royal was unable to raise the funds to pay for the expenses. In an effort to raise capital, Royal issued promissory notes to the investors, promising repayment with interest. However, Royal did not have any collateral in the vessel.²⁹ The court found that there was no presumption that the money was advanced on the credit of the vessel, and because the rights of the investors were not subrogated to the maritime liens of the refurbishers, there was no need to investigate further whether admiralty jurisdiction existed.³⁰

In Broughton v. Florida International Underwriters, Inc. ,³¹ the court considered whether a vessel owner's claim for breach of duty by a surplus line insurance broker met the test for admiralty tort jurisdiction.³² The broker placed coverage for the vessel with an insurance company that was alleged to be financially unsound. The insured's shrimp trawler capsized and was totally destroyed. The hull underwriter failed to pay Broughton's claim against his policy. Broughton brought a tort claim under Georgia law against the broker for breach of alleged statutory duties requiring an insurance broker to ensure that an insurance company is financially sound before placing coverage with it and requiring the broker to inform the policy holder if the carrier becomes financially unsound.³³ The court examined whether this was a subject within the scope of admiralty jurisdiction.³⁴

The test for establishing admiralty jurisdiction in a tort case is the locality plus the nexus to traditional maritime activity test,³⁵ often referred to as the "locality plus plus" test. The locality portion of the test requires the tort to have occurred on navigable waters or have been caused by a vessel operating on navigable waters.³⁶ The nexus requirement contains two queries (hence the "plus plus"): first, whether "the incident has a potentially disruptive impact on maritime commerce," and second, "whether the general character of the activity giving rise to the incident shows a substantial relationship to traditional maritime activity."³⁷ The Eleventh Circuit decided Broughton solely on the locality requirement. Because the tort neither occurred on a navigable waterway nor related to a vessel operating on a navigable waterway, the locality test was not satisfied and the circuit court found that the district court did not have subject matter jurisdiction.³⁸

II. Maintenance and Cure

In Aksoy v. Apollo Ship Chandlers, Inc.,³⁹ the Eleventh Circuit addressed the calculation of maintenance and cure payments. Aksoy was a wine steward aboard one of Apollo's passenger vessels who became ill and was unable to work. Aksoy's wages included tips from passengers and a monthly income, comprised of base salary and guaranteed gratuities.⁴⁰

When a seaman is injured or becomes ill, he can bring an action for maintenance and cure that includes three types of recovery. These include maintenance, which is a living allowance; cure, which is compensation for medical expenses; and unearned wages, which are the wages from the date of disability until the expiration of the seaman's employment contract.⁴¹ Collectively, these are referred to as maintenance and cure.⁴²

When Aksoy became ill, Apollo paid him unearned wages consisting of his contract wages and the minimum guaranteed gratuity, even though Aksoy's actual income from gratuities was much more.⁴³ Relying on Flores v. Carnival Cruise Lines, Aksoy argued that he should have been paid his estimated actual earnings rather than the guaranteed minimum.⁴⁴ The court in Flores held that an injured seaman whose income was based primarily on tips could recover lost tip income in an action for maintenance and cure because this remedy was designed to put the seaman in the position he would have been in had he not been injured.⁴⁵

The district court, granting summary judgment for Apollo, distinguished Flores because Aksoy's employment contract provided for a guaranteed minimum gratuity, whereas Flores's contract did not.⁴⁶ The Eleventh Circuit, reviewing the trial court's order de novo, found that Aksoy, like Flores, earned...