“Flotilla Doctrine” Applied and the Court Granted Claimant’s Motion to Increase Security in a Limitation Action

The flotilla doctrine applies where vessels are owned by the same person, engaged in a common enterprise, and under a single command.  The flotilla doctrine requires, for limitation for liability purposes, the owner’s tender of all the vessels in the flotilla, or the value thereof, pending resolution of the underlying claims.

Claimant was allegedly injured when a third party’s vessel collided with the M/V CROSBY MARINER.  Claimant was a crewmember assigned to the M/V CROSBY MARINER.  The M/V CROSBY EXPRESS were transporting a barge together at the time of the accident.  Crosby Marine Transportation, LLC (“Crosby”) owned both the M/V CROSBY EXPRESS and the M/V CROSBY MARINER.  The M/V CROSBY EXPRESS was the lead tug while the M/V CROSBY MARINER was attached to the port side of the barge to stabilize it while under tow.  The decisions pertaining to the speed of the tow and navigation came from the captain of the M/V CROSBY EXPRESS.

Claimant sued Crosby and the owners of the third party vessel.  Crosby filed a limitation action pursuant to the Limitation of Liability Act and supplied security in accordance with the value of the M/V CROSBY MARINER and its pending freight.  Claimant filed a Motion to Increase Security arguing the applicability of the flotilla doctrine.

The Magistrate agreed with the Claimant.

Here, the CROSBY MARINER and the CROSBY EXPRESS were both owned by the same owner, Crosby.  Additionally, both were engaged in a common enterprise, that is, towing the same barge.  Further, both vessels were under Captain Naccio’s command.  Accordingly, the Court finds that the flotilla doctrine applies in this case.

Accordingly, the Court ordered an appraisal of the M/V CROSBY EXPRESS and M/V CROSBY MARINER by a Court-appointed appraiser or for the parties to stipulate and agree to the valuation of both vessels and the freight involved.

Crosby Marine Transp., LLC v. Triton Diving Servs., LLC, CIV. 13-2399, 2014 WL 5026070 (W.D. La. Oct. 8, 2014)

Historical Background Anchors Judge Clement’s McBride Concurrence

On September 25, 2014, the Fifth Circuit Court of Appeals, sitting en banc, rendered its decision in the high-profile case McBride v. Estis Well Service, L.L.C.,12-30714, 2014 WL 4783683 (5th Cir. Sept. 25, 2014)McBride garnered national attention after the Fifth Circuit panel reversed the district court and held that punitive damages were available to seamen as a remedy for the general maritime law claim of unseaworthiness.  731 F.3d 505.  On rehearing, a majority of the Fifth Circuit judges determined that punitive damages were not available.  The majority opinion was about fifteen pages long and was followed by nearly sixty pages of concurring and dissenting opinions.

The first concurrence, penned by Circuit Judge Edith Brown Clement and joined by Circuit Judges Jolly, Smith, and Owen, took a closer look at the historical background that, in Judge Clement’s opinion, mandated the result reached by the majority.  Judge Clement dissected what she viewed as the three main points that McBride relied on and determined that, “[w]hen examined closely, none of these arguments establish McBride’s ultimate contention.”  Id. at *7.

Judge Clement first analyzed and concluded that United States Supreme Court jurisprudence does not require punitive damages in unseaworthiness cases.  The Judge noted that Exxon Shipping Co. v. Baker, 554 U.S. 471 (2008), only addressed the narrow issue of whether punitive damages were preempted by the Clean Water Act and that this narrowness accounted for the Court’s need in Atlantic Sounding Co. v. Townsend, 557 U.S. 404 (2009), to even address the issue of punitive damages in maintenance and cure cases.  According to Judge Clement, this left McBride with “only the thin strand of Townsend.”  McBride at *7.  However, Townsend, a maintenance and cure case, was of little help in light of the “significant differences” between actions for maintenance and cure and unseaworthiness.  Judge Clement cleverly cited to the academic writings of McBride’s own counsel to underscore the well-recognized distinction between the two causes of action. The Judge concluded that “[t]he difference between maintenance and cure and unseaworthiness actions make maintenance and cure cases a poor guide for determining unseaworthiness remedies.”  McBride at *8.

Judge Clement went on to examine the Fifth Circuit’s pre-Miles case law approving punitive damages in unseaworthiness cases, starting with In re Merry Shipping, Inc., 650 F.2d 622 (5th Cir. Unit B 1981).  She concluded that, notwithstanding Merry Shipping and a handful of other cases, there is an absence of actual authority establishing that pre-Jones Act plaintiffs claiming unseaworthiness were entitled to punitive damages.  The Judge characterized the support for such entitlement to punitive damages the result of a “collective judicial ‘oh, hell, why not’ principle” equating the availability of punitive damages in other types of actions to the availability of punitive damages for unseaworthiness.  McBride at *9.

Finally, Judge Clement waded through pre-Jones Act unseaworthiness cases cited by McBride in support of the availability of punitive damages and found only one unseaworthiness case that arguably awarded punitive damages.  The Judge concluded that, even assuming that this case did award punitive damages, one “dust-covered” case should not provide the basis for the general availability of punitive damages in unseaworthiness cases.  This was particularly true when considering the Supreme Court decisions in The Osceola, 189 U.S. 158 (1903) and Pacific Steamship Co. v. Peterson, 278 U.S. 130 (1928) that recognized the remedy for unseaworthiness was an indemnity by way of compensatory damages.

Judge Clement concluded her concurrence by explaining the need for caution “before signing off on an aggressive expansion of punitive damages in the unseaworthiness context.”  McBride at *12.  This is a product of the varying availability of insurance for punitive damages and the direct and indirect impacts such an expansion would have on commercial shipping.  “In light of the potentially sizable impact, this court should not venture too far and too fast in these largely uncharted waters without a clear signal from Congress.”  McBride at *12.

McBride v. Estis Well Serv., L.L.C., 12-30714 (5th Cir. Sept. 25, 2014) (en banc).

Fifth Circuit Addresses Bailment and Eroding Policy Limits After Vessel Sank

 National Liability & Fire Ins. Co. v. R&R Marine, Inc., — F.3d —- (5th Cir. 2014):

This case arises after the sinking, and subsequent salvage, of a vessel owned by Hornbeck Offshore Services. Hornbeck Offshore owned the M/V Erie Service, which was in need of repairs.  Hornbeck entered into a Shipyard Repair and Drydock Agreement with R&R Marine for the repair and refit of two of Hornbeck’s vessels, one being the M/V Erie Service, at R&R Marine’s shipyard.  Per this Agreement, Hornbeck retained access to its vessel and reserved its authority over the vessel with the use of two on-site managers.  Despite Hornbeck’s oversight, it was undisputed that the Erie Service was in the custody of R&R Marine upon delivery.

On September 12, 2007, the National Weather Hurricane Center issued a tropical storm warning which included an area in which R&R Marine’s shipyard was located.  R&R Marine ensured Hornbeck pumps were available should water entry become an issue.  R&R Marine also ensured Hornbeck the shipyard docks were monitored “around the clock.”  However, in anticipation of the weather advisory, R&R personnel evacuated the shipyard and failed to take any precautions, apparently underestimating the severity of the storm.  The following morning, the M/V Erie Service sank.

Hornbeck entered into a time-and-materials salvage bid which totaled $627,324.64.  Hornbeck and R&R Marine demanded National, R&R Marine’s insurer, pay the salvage costs directly.

National sought a declaratory judgment that it was not required to pay the salvage cost.  Hornbeck counterclaimed asserting National’s policy required them to pay for damage to the M/V Erie Service since it was in the custody of R&R Marine, its insured, at the time of loss.  Hornbeck filed a cross-claim asserting R&R Marine’s negligence proximately caused the sinking of the M/V Erie Service.

The district court held R&R Marine was negligent in failing to secure the M/V Erie and that National was required to pay Hornbeck salvage costs, and interest and attorney’s fees associated with said costs.  Both National and R&R appealed.

The Fifth Circuit concluded the district court did not clearly err in finding R&R Marine to be negligent.  Hornbeck had established a prima facie case of negligence, as the M/V Erie Service was delivered to R&R Marine afloat and R&R Marine had full custody of the vessel.  The Court did not agree with R&R Marine that only a limited bailment was created due to the presence of Hornbeck’s on-site managers; to the contrary, the Court determined the district court was not clearly erroneous in finding that neither the presence nor authority of Hornbeck’s personnel affected R&R Marine’s exclusive control and full custody.

R&R Marine next argued Hornbeck was unreasonable in choosing a time-and-materials salvage contract, as opposed to a less expensive, “no cure, no pay” agreement.  Again, the Court determined the district court’s determination of Hornbeck’s reasonableness was not clearly erroneous and therefore upheld its determination.

The district court determined National was liable for the salvage costs associated with the sinking of the M/V Erie Service, as provided by its policy with R&R Marine.  National argued Hornbeck lacked standing as a third-party claimant to bring its counterclaim.  The Court of Appeals, reviewing the district court’s decision de novo, looked to Texas law to determine the parties’ substantive rights.  The Court engaged in an analysis of procedural law application and determined Hornbeck had standing to assert its counterclaim but agreed with National that the district court erred in the total amount of damages awarded in excess of National’s policy limits.  Accordingly, the award to Hornbeck was reduced to $1,000,000.00 plus reasonable attorney’s fees.

Maritime Law Did Not Apply to Guest’s Drunk Driving Accident

The Supreme Court of Texas recently determined that admiralty jurisdiction did not apply to a horrific drunk driving crash simply because the driver responsible for the crash had been drinking on a small, chartered fishing boat.  The facts were not disputed.  A technology company hosted a business retreat at a lodge in Aransas Pass near the Gulf of Mexico.  On that retreat, one of the company’s clients drank excessively on a fishing boat.  The boat returned to the lodge, at which time the client left to drive home.  One-and-a-half hours later, the “significantly intoxicated” client crossed into oncoming traffic and struck a motorcycle.  Both motorcycle riders lost their left legs.  They sued the technology company, arguing that it negligently allowed their client to drink excessively.  Texas does not recognize such social host liability, so the plaintiffs asserted that federal maritime law applied to the case because the client became intoxicated on a fishing boat.

In Jerome B. Grubert, Inc. v. Great Lakes Dredge & Dock Co., the United States Supreme Court announced the test for determining admiralty jurisdiction over tort claims:

A party seeking to invoke federal admiralty jurisdiction . . . over a tort claim must satisfy conditions of location and of connection with maritime activity.  A court applying thee location test must determine whether the tort occurred on navigable water or whether injury suffered on land was caused by a vessel on navigable water.  The connection test raises two issues.  A court, first, must assess the general features of the type of incident involved to determine whether the incident has a potentially disruptive impact on maritime commerce.  Second a court must determine whether the general character of the activity giving rise to the incident shows a substantial relationship to traditional maritime activity.

The Supreme Court of Texas applied the Grubert test to the facts of the case.  It determined that a factual dispute exited regarding the plaintiffs’ ability to satisfy the location test.  The plaintiffs had submitted an expert’s analysis that the drunk driver’s level of intoxication indicated that he had been drinking on the fishing boat.  Therefore the court assumed for sake of argument that there was at least some evidence that a duty owed by the company was breached on the boat.

The plaintiffs were not as successful with the two-part maritime connection test because: (1) the consumption of alcohol by guests (not guides) aboard a small, chartered fishing boat does not pose a threat to commercial shipping; and (2) supervising the consumption of alcohol aboard a small, chartered fishing boat cannot be characterized as “substantially related to a traditional maritime activity.”  Because the plaintiffs could not satisfy the second part of the Grubert test, maritime law did not apply to their case.

Schlumberger Tech. Corp. v. Arthey, — S.W.3d —- (Tex. 2014).