Eleventh Circuit Affirms Lifting of Limitation Injunction for Single Claimant

In October 2011, Lisa Lynch was allegedly injured on a 26-foot luxury vessel owned and maintained by Offshore of the Palm Beaches, Inc. (“Offshore”).  Lynch’s attorney sent a letter of representation to Offshore and asked for its liability insurance information.  Offshore subsequently sought exoneration or limitation of liability pursuant to the Limitation Act.  All other causes of action against Offshore were enjoined by the district court.

Lynch answered the limitation complaint and asserted a claim for personal injury.  She later moved to dismiss, stay or lift the injunction under the single claimant exception so she could pursue her claim in state court.  Lynch stipulated that Offshore had the right to litigate its entitlement to limitation in the limitation proceeding, that the federal court would determine the limitation fund, that she would not seek determination of theses issues in state court and that she would not seek to enforce a judgment in excess of the limitation fund until these determinations were made.  When it was apparent that Lynch was the lone claimant, the district court lifted the injunction.  Offshore appealed.

Finding that it had jurisdiction under 28 U.S.C. § 1291(a)(1) to review the district court’s order modifying or dissolving an injunction, the United States Court of Appeals for the Eleventh Circuit considered whether the district court abused its discretion in lifting the injunction.  The court went through the well-established limitation procedures and noted that the exclusivity of admiralty jurisdiction in this arena is at odds with the “saving to suitors” clause in 28 U.S.C. § 1333.  The United States Supreme Court has eased this tension in some cases by crafting the single claimant exception.  This exception recognizes that in single-claim scenarios, the specialized admiralty procedure is not necessary.  A district court has discretion to stay the limitation case and allow the claim to proceed in another forum subject to stipulations that protect the vessel owner from judgments in excess of the limitation fund.

Offshore argued on appeal that it was the “suitor” under § 1333 and when it filed its limitation action, its choice of forum was secured.  The court quickly rejected this argument, explaining that Lynch, the limitation claimant, was the suitor whose remedies were saved in § 1333, not the vessel owner.  The court further reasoned that this first-to-file rule advocated by Offshore would expand the Limitation Act from a protection of the vessel owner’s right to limit its liability to a choice of forum to defend claims.  The court also rejected Offshore’s argument that Lynch submitted to federal jurisdiction by filing a claim in the limitation.  Lynch made no Rule 9(h) election and premised her claims on Florida common law.  Accordingly, she was not precluded from having her claim heard in an alternate forum.

Offshore attempted to raise other arguments for the first time on appeal but these arguments were deemed waived by the court as they were not raised at the district court level.  After disposing of the issues properly on appeal, the Eleventh Circuit affirmed the district court’s order lifting the limitation injunction.

Offshore of the Palm Beaches, Inc. v. Lynch, — F.3d —-, 2014 WL 350826 (11th Cir. Feb. 3, 2014).

Southern District of Texas Finds Spar Platform Was Not A Vessel

A federal judge in the Southern District of Texas recently ruled that the oil and gas spar platform on which plaintiff Jerry Riley was injured was not a vessel.  Riley alleged injury to his spine while testing one of the platform’s life vessels.  He brought claims against his employer and the owner of the spar under the Jones Act and general maritime law.  The defendants moved for summary judgment, arguing that Riley’s Jones Act claims were barred because the platform was not vessel.  The court analyzed the characteristics of the platform, noting that it was assembled onsite, had no steering mechanism, no system of self-propulsion, and no raked bow.  It was intended to be used at its location for 25 years and was moored to the seabed by eleven mooring lines.  The platform was connected to two pipelines that transport natural gas and oil.  It was capable of limited movement within an approximately 200-foot radius but had not moved in four years.

The court held that the platform was a permanent structure attached to the seabed and was not practically capable of transportation.  It was, therefore, not a vessel and Riley was not a seaman under the Jones Act.  Riley’s general maritime law claims of unseaworthiness and negligence against the platform owner were also foreclosed because the platform was not a vessel and construction work on fixed offshore platforms does not bear a significant relationship to traditional maritime activity.  Finally, Riley’s claims against his employer were also barred as the LWHCA provided his exclusive remedy.

Riley v. Alexander/Ryan Marine Servs. Co., 3:12-CV-00158, 2013 WL 5774872 (S.D. Tex. Oct. 24, 2013).

Fifth Circuit Holds Punitive Damages Available In General Maritime Law Unseaworthiness Claims

The United States Fifth Circuit Court of Appeals recently joined the national discussion on the availability of punitive damages for an employer’s willful and wanton breach of the general maritime law duty to provide a seaworthy vessel.  The case arose out of an accident aboard a drilling rig where one crew member was killed and three others injured.  The administratrix of the deceased crew member and the other injured crew sued the employer and owner of the rig, Estis Well Service, L.L.C. (“Estis”).  She alleged unseaworthiness under the general maritime law and negligence under the Jones Act.  She also sought “punitive and/or exemplary” damages.  Estis moved to dismiss the claim for punitive damages as being unavailable as a matter of law.  The motion was granted but the judge below, recognizing that the issues presented were “the subject of national debate with no clear consensus,” certified the judgment for interlocutory appeal.

In its opinion, the Fifth Circuit went through a thorough history of the sources of maritime law, the available causes of action, and the attendant remedies.  It observed that punitive damages have historically been available under the general maritime law.  However, in a 1989 Fifth Circuit decision, Miles v. Melrose, 882 F.2d 976 (5th Cir. 1989), the court held for the first time that loss of society damages were unavailable to nondependent parents, reasoning that it would be anomalous for a wrongful death claimant to recover damages for loss of society under the general maritime law even though that claimant could not recover those damages under statutory maritime law.  The following year, the Supreme Court announced a “new age of maritime law” in Miles v. Apex Marine Corp., 498 U.S. 19 (1990) where it recognized that statutory law had become primary, that Congress retained superior authority in admiralty matters, and admiralty courts should look to the relevant statutes for policy guidance.  In Miles, the Supreme Court held that because the Death on the High Seas Act (“DOHSA”) and the Jones Act limited recovery to pecuniary loss, non-pecuniary damages such as loss of society should not be recoverable under a parallel wrongful death action under the general maritime law.

The court explained that Miles did not address punitive damages but did appear to spawn a general principle: “if a category of damages is unavailable under a maritime cause of action established by statute, it is similarly unavailable for a parallel claim brought under the general maritime law.”  This principle was, in turn, extended by lower courts to cover punitive damages claims.  In 1995, the Fifth Circuit held in Guevara v. Maritime Overseas Corp., 59 F.3d 1496 (5th Cir. 1995) that punitive damages were not available in cases of willful nonpayment of maintenance and cure under the general maritime law.  The availability of punitive damages in unseaworthiness claims was not addressed in Guevara.

The extension of the Miles “uniformity principle” was halted in 2009 by the Supreme Court’s decision in Atlantic Sounding Co. Inc. v. Townsend, 557 U.S. 404 (2009)Atlantic Sounding abrogated Guevara and held that the Jones Act was intended to enlarge the protection afforded seaman, not narrow it, and that the Jones Act did not alter the understanding that punitive damages had long been an accepted remedy under the general maritime law.  Reliance on Miles to bar punitive damages was too broad of a reading of a case that only addressed loss of society in maritime wrongful death, not punitive damages in the context of failure to pay maintenance and cure.

In the case presently before the Fifth Circuit, the crew members argued that punitive damages remained available under the general maritime law for unseaworthiness because the cause of action predated the Jones Act, punitive damages were historically available under the general maritime law, and the Jones Act did not address or limit unseaworthiness.  Estis argued along the lines of Guevara that where claimants pursue claims for harm compensable under both general and statutory maritime law, their recovery is limited to the class of damages afforded by the Jones Act and DOHSA.  Because the crew members sought redress for wrongful death and personal injury, types of harm compensable under both general and statutory maritime law, then punitive damages were unavailable.  And although Guevara’s holding that punitive damages were unavailable in the maintenance and cure setting was overruled, its guidance on how to apply the “uniformity principle” from Miles remained intact.

The Fifth Circuit disagreed with Estis, holding that “Townsend abrogated Guevara’s holding because of Guevara’s interpretation of Miles, not in spite of it.”  The court held that the premises of Townsend’s rule—if a general maritime law cause of action and remedy predated the Jones Act, and the Jones Act did not address that cause of action or remedy, then that remedy remains available under that cause of action unless and until Congress intercedes—were satisfied.  Estis advanced several arguments to distinguish Townsend, including that Townsend dealt with maintenance and cure rather than unseaworthiness.  The court was not persuaded by the arguments advanced by Estis and held that punitive damages remain available to seamen as a remedy for the general maritime law claim of unseaworthiness.  The ruling below was reversed and the case remanded for further proceedings.

Importantly, this decision did not address whether plaintiffs were actually entitled to punitive damages but, rather, whether punitive damages were available as a matter of law.  The case was remanded for further proceedings wherein plaintiffs will have to prove their employer’s willful and wanton breach of the general maritime law duty to provide a seaworthy vessel.

McBride v. Estis Well Serv., L.L.C.,— F.3d —-, 12-30714, 2013 WL 5474616 (5th Cir. Oct. 2, 2013).

Second Circuit: Federal Common Law Applies Over Charter Party’s Choice-of-Law Provision in Rule B Attachment Proceeding

Defendant, a Chinese company, contracted with plaintiff, a Liberian company, to transport goods from Brazil to China aboard plaintiff’s vessel.  After a dispute over payment, plaintiff held the vessel and its contents until defendant satisfied the claimed debt.  This allegedly caused plaintiff one million dollars in damages.  Plaintiff commenced arbitration against defendant in London pursuant to the charter party’s arbitration clause.  The arbitration remains pending.

Plaintiff later instituted a separate proceeding in the United States District Court for the Southern District of New York under Rule B of the Supplemental Rules for Certain Admiralty and Maritime Claims to attach property within the district belonging to defendant’s alleged alter-ego.  Plaintiff alleged that defendant and its alter-ego made up a single business enterprise and, as such, it was entitled to pierce the corporate veil and attach the alter-ego’s assets.  The district judge authorized the attachment and defendant’s alleged alter-ego moved to vacate.

The basis of the alter-ego’s motion to vacate was a dispute over what substantive law controlled the issue of whether plaintiff had sufficiently made out a prima facie claim of single business enterprise to support the Rule B attachment.  The alter-ego argued that English law applied by force of the choice-of-law provision in the charter party while plaintiff argued that federal common law applied.  The district court held that English law governed and vacated the attachment.

On appeal, the United States Second Circuit Court of Appeals reversed.  The court held that the charter party’s choice-of-law provision did not govern plaintiff’s collateral single business enterprise claim against the defendant’s alleged alter-ego.  The court drew on maritime choice-of-law principles and held that although federal common law did not govern every claim of this nature, federal common law applied here, primarily due to the collateral claim’s connection to the United States.  The Second Circuit remanded for reconsideration of the prima facie validity of plaintiff’s alter-ego claim under federal common law.

Blue Whale Corp. v. Grand China Shipping Dev. Co., Ltd., 13-0192-CV, 2013 WL 3598839 (2d Cir. July 16, 2013).