A sea of confusion: the Shipowner's Limitation of Liability Act as an independent basis for admiralty jurisdiction.

• Author: Medley, Amie L.

The Shipowner's Limitation of Liability Act of 1851 allowed the owner of a vessel to limit his liability in the case of an accident to the value of the vessel and its cargo if he could show he had no knowledge of or participation in the negligent act that resulted in the loss. In 1911, the Supreme Court decided Richardson v. Harmon, a case which was interpreted for several decades to hold that the Limitation Act formed an independent basis for admiralty jurisdiction. In a 1990 case, the Supreme Court stated in a footnote that it would not reach the question of whether the Limitation Act was an independent basis for admiralty jurisdiction--which several Courts of Appeal took to mean that the Act's continued vitality as a jurisdictional basis was an open question. Since that time, many Courts of Appeal have held that the Limitation Act is not, for a variety of reasons, an independent basis for admiralty jurisdiction.

This Note argues that the Limitation Act continues to form an independent basis for admiralty jurisdiction. It examines the history of admiralty jurisdiction and the Limitation Act and explains why the Limitation Act should form an independent basis for admiralty jurisdiction even for cases in which the facts of the underlying tort claim might not otherwise come within the boundaries of admiralty.

TABLE OF CONTENTS INTRODUCTION I. THE SCOPE OF ADMIRALTY JURISDICTION AND THE LIMITATION ACT AS AN INDEPENDENT BASIS FOR ADMIRALTY JURISDICTION A. The Puzzle of Defining Admiralty Jurisdiction B. The History and Procedure of the Limitation Act C. Establishing the Act as an Independent Basis for Jurisdiction: The Meaning of Richardson v. Harmon D. The Relatively Recent Controversy over the Limitation Act as a Basis of Admiralty Jurisdiction II. THE LIMITATION ACT AS AN INDEPENDENT BASIS FOR ADMIRALTY JURISDICTION A. Proffered Reasons not to Read the Limitation Act as an Independent Basis for Admiralty Jurisdiction B. Why the Limitation Act Should Continue to Be Read as a Basis for Admiralty Jurisdiction CONCLUSION INTRODUCTION

The Shipowner's Limitation of Liability Act, (1) a peculiar and often-criticized creature of admiralty law, allows the owner of a vessel to limit his liability to the value of the vessel following an accident, provided he had no knowledge of the negligence that caused the accident. (2) For example, a common scenario when the Limitation Act was passed involved vessel owners who bought a ship and entrusted it to a captain and crew who were solely responsible for its maintenance and operation. If some event such as a fire or collision took place, the owner could demonstrate a lack of "privity or knowledge" and limit his liability. When the Act was passed in 1851, the goal was to ensure that businessmen would not be deterred from investing in shipping and shipbuilding because of the risk of facing enormous liability due to the actions of a crew. (3) Over time, the Act has been amended and interpreted to apply to all sorts of vessels, ranging from ocean liners to small pleasure boats. It has also become commonplace to argue that the Limitation Act should be abolished: critics have, for example, focused on such issues as the Act's ability to unfairly limit damages in certain cases and the potential for defense attorneys to employ the Act as a strategic weapon. (4)

Based on the natures or localities of underlying claims, many cases in which a vessel owner may wish to invoke the Limitation Act are already obviously within the admiralty jurisdiction of the federal courts. For example, tort claims are swept into admiralty jurisdiction if the event or events giving rise to the claims (1) occurred on navigable waters and (2) had some connection or nexus with traditional maritime activity. (5) In some cases, however, a defendant vessel owner wishes to use the Limitation Act to limit his liability, even though the statute itself (rather than locality or nature) is the only basis for admiralty jurisdiction. (6) In such cases, courts must determine whether the Limitation of Liability Act creates an independent basis for admiralty jurisdiction. Although the practice of seven decades was to answer this question in the affirmative, in recent years several circuit courts have sought to change this long-standing rule. (7)

This Note argues that the Limitation of Liability Act continues to provide an independent basis for admiralty jurisdiction. Part I of this Note discusses the difficulty of identifying the bounds of admiralty jurisdiction or the scope of the Limitation Act. It then analyzes Richardson v. Harmon, (8) the case in which the Supreme Court in 1911 extended admiralty jurisdiction based on the Limitation Act even though the underlying claim could not otherwise have been brought in admiralty. Finally, Part I introduces the controversy, rekindled by a Supreme Court footnote in 1990, over whether the Limitation Act serves (or should continue to serve) as an independent basis for jurisdiction. Part II first examines the reasoning of several Courts of Appeal that have held the Limitation Act not to be an independent ground for admiralty jurisdiction, and argues that these courts have erred in departing from the rule in Richardson. It then explains why the Limitation Act should continue to be read consistently with Richardson as an independent basis for admiralty jurisdiction.

1. THE SCOPE OF ADMIRALTY JURISDICTION AND THE LIMITATION ACT AS AN INDEPENDENT BASIS FOR ADMIRALTY JURISDICTION

   For several decades, it seemed there was little doubt that the Limitation Act constituted an independent basis for admiralty jurisdiction. Scholars stated this rule in treatises, (9) Supreme Court cases cited it, (10) and the Second Circuit in particular applied it in cases that would not have traditionally been classified as maritime claims on the basis of the case facts. (11) It was not until the early 1990s that several Federal Courts of Appeal, including the Seventh, Eighth, Ninth, and Eleventh Circuits, began to hold otherwise, finding instead that in the absence of facts giving rise to maritime jurisdiction vessel owners simply could not get their cases into federal court through admiralty jurisdiction. (12) Section I.A begins with the Constitution's grant of admiralty and maritime jurisdiction, and discusses the history and the current state of that jurisdiction. Section I.B examines the text of the Limitation of Liability Act of 1851, the statute that Congress used to expand admiralty jurisdiction significantly. Section I.C introduces Richardson v. Harmon, the case in which the Supreme Court first extended admiralty jurisdiction based solely on a petition to limit liability, and explains how Richardson set the stage for the circuit split today. Section I.D describes the recent controversy, sparked by a footnote in a Supreme Court opinion, over the Act's status as a jurisdictional basis.

   1. The Puzzle of Defining Admiralty Jurisdiction

      The contours of admiralty jurisdiction have been puzzling and imprecise from the time that Article Ill was written in the late eighteenth century. (13) Article III provides constitutional authorization for Congress to grant the federal courts jurisdiction over "all cases of admiralty and maritime Jurisdiction." (14) Unfortunately, this language offers little or no hint as to what sort of matters actually constitute "admiralty and maritime jurisdiction." The inclusion of the word "maritime" was perhaps meant to imply that the boundaries of "admiralty and maritime" jurisdiction in the United States would be more expansive than was the somewhat limited jurisdiction of English admiralty courts. (15) Admiralty jurisdiction in the United States, for example, would cover "all maritime contracts, torts, and injuries," (16) while in England, many such cases were decided by the common law courts instead of the admiralty courts. (17) The United States has never had admiralty courts separate from other federal courts; instead, the District Courts have the power to hear cases based on admiralty jurisdiction. Until 1966, the District Courts maintained separate dockets for admiralty cases, but they currently appear on the same docket. Even so, some mechanisms specific to admiralty jurisdiction still exist--the general maritime law can be applied where appropriate, and the procedures found in the Supplemental Maritime Rules apply. For example, there is no fight to jury trial in admiralty cases.

      Shortly after ratification of the Constitution, Congress acted upon its Article III power and in the First Judiciary Act of 1789 granted the District Courts "exclusive original cognizance of all civil cases of admiralty and maritime jurisdiction." (18) The language of the Act resembled that of Article HI, but further detailed the jurisdictional grant, seeking to clarify confusion resulting from Article III's general nature. A major priority for Congress in enacting the First Judiciary Act, for example, was to ensure that prize cases involving seizures made at sea or in waters navigable from the sea would be adjudicated in federal courts instead of state courts, which had heard such cases following the Revolutionary War. (19) Two important provisions that initially appeared in the First Judiciary Act and now appear in [section] 1333 granted federal courts jurisdiction over "[a]ny civil case of admiralty or maritime jurisdiction" and over "[a]ny prize brought into the United States and all proceedings for the condemnation of property taken as prize." (20) Within the broad outline of Article III, the Supreme Court has had wide latitude to shape the boundaries of admiralty jurisdiction. (21)

      In the more than two centuries since the passage of the Judiciary Act of 1789, the reaches of admiralty jurisdiction have expanded considerably, both through statutes and judicial interpretation of those statutes. (22) In the early days of admiralty jurisdiction in the United States, the jurisdiction was...