Recent Developments in the Shipowner's Limitation of Liability Act.

• Author: Crais, Arthur A., Jr.

Table of Contents I. Introduction 2 II. Small Passenger Vessel Liability Fairness Act of 2021 2 III. What constitutes "notice" to begin the six-month period to file for 4 limitation/exoneration? IV. Stipulations to Stay Limitation Proceedings 6 A. Personal Contracts and Limitation of Liability 6 B. Adequacy of the Stipulations 8 V. Miscellaneous Limitation Opinions of Interest 11 A. The Flotilla Doctrine and Pure Tort Exception 11 B. Compulsory Pilot Defense 12 C. Statutory Imputation of Privity or Knowledge 13 D. Direct Action and Insurer's Right to Limitation of Liability 14 E. Insufficient Security 15 F. Plausibility Standard for Sufficiency of Limitation Complaint 16 G. Timeliness of filing limitation complaint: A jurisdictional or claims processing rule? 18 VI. Conclusion 19 I. Introduction

This article was prepared for the Loyola Maritime Law Journal's Symposium on the Shipowner's Limitation of Liability Act of 1851 held in February of 2022 at Loyola University New Orleans College of Law in New Orleans, Louisiana. The purpose of this piece is to review recent developments of note in this area of maritime law.

The Shipowner's Limitation of Liability Act has been in effect for 171 years since its enactment in 1851 and has changed little. It was ostensibly passed to afford American shipowners similar advantages that British and other European countries granted their vessel owners, and to stimulate investment in American shipping. (1) International Conventions (2) have largely normalized shipowners' limitation of liability on the international scene. However, the United States is currently not a party to these conventions. Whether the Act is an anachronism outliving its initial purpose or whether it should be amended to conform more to the international maritime conventions is beyond the scope of this article. The Act despite its 171 years of existence continues to generate proposed amendments, novel legal issues and jurisprudence.

2. Small Passenger Vessel Liability Fairness Act of 2021

   On September 22, 2021, Senator Dianne Feinstein introduced a proposed amendment to the Shipowner's Limitation of Liability Act, entitled the Small Passenger Vessel Liability Fairness Act of 2021. (3) H.R.5329, which is the same as the Senate bill, was simultaneously introduced in the House of Representatives by Representative Salud Carbajal. (4) The proposed legislation was introduced specifically in response to the tragic fire on the Dive Boat CONCEPTION on September 2, 2019, which resulted in the loss of 34 lives. (5)

   Both pieces of legislation re-designate Sections 30503 through 30512 as Sections 30521 through 30530. Thus, [section] 30503, Declaration of nature and value of goods becomes [section] 30512; covered vessels under the act would be exempt from this provision. Section 30504, loss by fire is moved to [section]30513 and exempts the vessel owner from liability for merchandise on the vessel damaged by fire unless the owner has privity or knowledge. Small passenger vessels would still be included in this provision. Next, [section]30505 would become [section]30514 which limits the owner's liability to the value of the vessel including pending freight. In the event of multiple owners, the liability is apportioned on a pro-rata basis. This would remain the same. Section 30506 establishes a minimum fund for personal injury and death claims, but this section applies only to seagoing vessels. Section (e) also statutorily imputes privity or knowledge of the master, superintendent or agent prior to the voyage on the owner. This would be moved to [section]30515. At present this provision applies only to "seagoing vessels." However, because some small passenger vessels are presently exempt from this section, they may no longer be exempt if the proposed legislation is enacted.

   Both bills intend to add an additional definition to 46 U.S.C. [section] 30501, "small passenger vessel" to include vessels under 100 gross tons as determined by 46 U.S.C. [section]14502 or an alternative method under either 46 U.S.C. [section] 14302 or [section] 14104 and which vessel carries no more than 49 passengers on overnight domestic voyages and not more than 150 passengers on any other voyage. (6) Wooden vessels built prior to March 11, 1996, carrying passengers overnight are also included. (7)

   One of the more likely controversial provisions in each is 46 U.S.C. [section] 30541, which authorizes the U.S. Coast Guard within 90 days after the bill's enactment to promulgate regulations to provide "just compensation" in a claim against an owner if a covered small passenger vessel is found liable. (8) The proposed legislation does not define "just compensation," which is far too vague. The Death on the High Seas Act ("DOHSA"), for example, explicitly restricts recovery of damages to "pecuniary damages," (9) precluding punitive damages and such non-pecuniary damages as loss of society and loss of love and affection. (10) Would this legislation authorize the Coast Guard to expand damages to include non-pecuniary and punitive damages though precluded by statute? Further, the U.S. Supreme Court has restricted the rights of action for maritime deaths under General Maritime Law and has held that survival actions are not cognizable under General Maritime Law, thus barring recovery for the decedent's conscious pain and suffering prior to death. (11) Could the Coast Guard now create a new survivor's right of action? One must question whether this is also an unconstitutional delegation of authority. Further, even if within its power, it is highly unlikely that the U.S. Coast Guard will take it upon itself to write regulations pertaining to damages that contravenes the established law.

   46 U.S.C. [section] 30541 is added to impute the knowledge of "of the master or the owner's superintendent or managing agent, at or before the beginning of each voyage" to the owner of a covered small passenger vessel. The present provision, [section] 30506(b), exempts "pleasure yachts, tugs, towboats, towing vessels, tank vessels, fishing vessels, fish tender vessels, canal boats, scows, car floats, barges, lighters, or nondescript vessels" (12) from the imputation of the knowledge of the superintendent or owner's managing agent at the beginning of the voyage to the owner of the vessel. If enacted this would be a substantial change in the act as the present imputation of knowledge applies only to "seagoing vessels." A seagoing vessel, based on the little jurisprudence established, includes a vessel that is intended to navigate beyond the Boundary Line in its regular operations. (13) The Boundary Line is 12 nautical miles from the coast. (14)

3. What constitutes "notice" to begin the six-month period to file for limitation/exoneration?

   46 U.S.C. [section] 30511(a) requires the limitation claimant to file for limitation or exoneration from liability within six months of receiving written notice of a claim. In re Eckstein Marine Service, L.L.C. v. Jackson (In re Eckstein Marine Service, L.L.C.), (15) the U.S. Court of Appeals for the Fifth Circuit adopted the standard established by the Second Circuit in Complaint of Morania Barge No. 190, Inc., (16) that written notice must raise only a reasonable possibility the claim will exceed the value of the vessel to satisfy the written notice requirement. In Brown v. Edwards & Richter, L.L.P. (In Re Brown), (17) in which the value of the vessel was de minimis, $2000, and the damage to the pilings of a dock of a marina was far in excess of that amount, the Fifth Circuit held that the notice was sufficient to inform the vessel owner that the damage claim would exceed the vessel's value.

   Additionally, the Eleventh Circuit in Orion Marine Constr., Inc. v. Carroll (18) adopted the test that the written notice must raise a reasonable possibility that the claims will exceed the value of the vessel but was confronted with a host of other res nova issues. Orion was under contract with the Florida Department of Transportation to rebuild a bridge and utilized four barges to drive pilings into the sea floor. (19) Due to the trembling, numerous homeowners maintained that their homes were damaged due to the construction work. (20) The court concentrated on nine complaints filed either with Orion, the Florida Department of Transportation or the third-party administrator of Orion, FARA Insurance. Each was filed six months before Orion filed for limitation of liability. (21) Two early claimants filed a Motion to Dismiss the Limitation Act for lack of subject matter jurisdiction asserting that the limitation complaint was filed more than six months prior to written notice. (22) The trial court permitted limited discovery which revealed a mix of various complaints formal and informal, both orally and in writing. (23) The appellate court grouped the complaints as follows: "(a) oral complaints that were (i) made to and memorialized in writing by Orion or (ii) made to and memorialized in writing by FARA or FDOT and then forwarded to Orion; and (b) written complaints that were (i) made to FARA and then forwarded to Orion or (ii) made to FDOT and then forwarded to Orion." (24)

   First, the panel addressed the procedural issue of whether the six-month filing deadline of the Act is jurisdictional or procedural. (25) Referencing its own precedent in Secretary v. Preston, (26) in which another panel reviewed more recent Supreme Court jurisprudence regarding jurisdictional deadlines and claims processing rules, the Eleventh Circuit held that the six-month filing limitation in the Act is not jurisdictional and is to be considered as a Motion to Dismiss for failure to state a claim under Rule 12(b)(6). (27) That, however, was not the end of the inquiry as the panel then addressed the merits of the claim and whether the limitation action was untimely. In doing so the panel turned to the various groups of claims.

   First, the court examined what written notice...