Admiralty lawyers practice in one of the oldest and most specialized areas of the law. It has often been written that the general maritime law of the United States is unique and different than land based law. A prime example of this difference is the Limitation of Liability Act, 46 U.S.C. §§181 - 196 ("Limitation Act"). Clients are often shocked, confused, and upset that they have been sued by a vessel owner filing a limitation of liability proceeding. The clients' reaction of how can we be sued when we have suffered personal injuries, is the same as referring counsel's disbelief.
Given the nature of a limitation of liability proceeding, it is crucial for any lawyer handling a limitation of or exoneration from liability proceeding to firmly grasp the requirements of the Limitation of Liability Act and the defenses available to injured clients to defeat the vessel owner's attempt to limit its liability. If the lawyer does not have a full understanding of all of the nuances of the Limitation of Liability Act, then the case could be tried twice and the client's damages limited to the value of the vessel.
I. What is the Limitation of Liability Act?
The idea of being able to limit a defendant's liability is prevalent throughout the general maritime law of the United States. Many courts and commentators have strongly argued that the right to limit liability is no longer needed as the foundations for the right to limit have long ago been eroded. For example, P&I Clubs are not required to pay for personal injuries pursuant to a protection and indemnity policy's "paid to be paid" language, unless the P&I Club member, or someone on the member's behalf, has paid the claim of an injured person. Vessel owners are permitted to limit their liability for cargo damage under the Carriage of Goods by Sea Act, damage to a vessel being towed under a towage contract, the amount of maintenance owed injured seamen pursuant to collective bargaining agreements and contracts, deaths that occur on the "high seas" and personal injury claims under the Limitation Act.
A vessel owner, pursuant to the Limitation Act, is entitled to limit its liability after a maritime incident or casualty to the post casualty value of the vessel and the pending freight, except when the loss occurred due to its "privity or knowledge." 46 U.S.C. App. §183(a). In other words, privity or knowledge will be found to exist where the acts of negligence or unseaworthiness that caused the casualty were known or should have been know by the vessel owner. Farrell Lines, Inc. v. Jones, 530 F.2d 7 (5th Cir. 1976), rehearing denied 532 F.2d 1375 (5th Cir. 1976).
The Limitation Act applies to all "seagoing vessels, and also to all vessels used on lakes or rivers or in inland navigation, including canal boats, barges, and lighters." 46 U.S.C. App. §186. The term vessel has recently been enlarged by the U.S. Supreme Court in Stewart v. Dutra Const. Co., 543 U.S. 481, 125 S.Ct. 1118 (2005). Owners of pleasure craft, including jet skis and house boats, are permitted to limit liability. Keys Jet Ski, Inc. v. Kays, 893 F.2d 1225 (11th Cir. 1990); Warnken v. Moody, 22 F.2d 960, 962 (5th Cir.1927); In re Guglielmo, 704 F.Supp. 352 (E.D.N.Y.1989) (twenty-one foot motor boat).
The Limitation Act is only applicable to accidents that result in personal injuries and other losses that occur on the navigable waters of the United States. 46 U.S.C. App. §188. A vessel owner is not entitled to limit liability in the event that the casualty took place on a waterway that is not considered to be navigable. Three Buoys Houseboat Vacations U.S.A. Ltd. v. Morts, 921 F.2d 775 (8th Cir. 1990). The Limitation Act does not create independent jurisdiction in the federal courts by "arising under" federal law under 28 U.S.C. §1331 (federal question) or §1337 (commerce, et al.). Id. at 780-81. Federal question jurisdiction is not created by the existence of the Act, because it is really in the nature of a defense for the vessel owner and did not create the injured party's causes of action for personal injury and wrongful death against the vessel owner. Id.
II. Who is Entitled to Limit Liability?
As to who is entitled to limit liability, the Limitation Act merely states "the owner of any vessel, whether American or foreign" can limit its liability. 46 U.S.C. App. §183(a). However, courts have interpreted the word "owner" to include parties other than the registered owner of vessels. Courts include those who exhibit some type of domination or control over the vessel. Dick v. U.S., 671 F.2d 724, 727 (2nd Cir. 1982) ("As a general rule, one who is subjected to a shipowner's liability because of his exercise of dominion over a vessel should be able to limit his liability to that of an owner."). Owners include the following:
1. Those possessing legal title to the vessel.
2. President and sole shareholder of the vessel owning company. Complaint of Lady Jane, Inc., 818 F.Supp. 1470 (M.D.Fla. 1992).
3. United States as owner pro hac vice of Coast Guard auxiliary boats, which become "public vessels" when assigned to government service. Dick v. U.S., 671 F.2d at 728.
4. Owners of the vessel at the time of the casually who have sold the vessel at the time of litigation. In re Complaint of Sheen, 709 F.Supp. 1123 (S.D. Fla. 1989).
5. Charterers who "man, victual, and navigate such vessel at his own expense, or by his own procurement shall be deemed the owner of such vessel." 46 U.S.C. App. §186. As such, demise and bareboat charters have been found to be owners, and time and voyage charterers are not considered owners. The Severance, 152 F.2d 916 (4th Cir. 1946). A demise charterer may only be able to limit if the charter relinquishes possession, command and navigation of the vessel. Guzman v. Pichirilo, 369 U.S. 698 (1962).
A vessel's manager, who employed the towboat's crew, was not permitted to limit its liability as it did not exercise sufficient control or dominion over vessel to be considered an owner pro hac vice, for limitation of liability purposes. In re American Milling Co., Ltd., 409 F.3d 1005 (8th Cir. 2005). Agents of owners and technical managers are not permitted to limit liability. Matter of Oil Spill by Amoco Cadiz, 954 F.2d 1279 (7th Cir. 1992); Norfolk Dredging Co. v. M/V A/V KASTNER, 264 F.Supp.2d 265 (D.Md. 2003).
Even though the P&I insurer of a vessel is not permitted to invoke the Limitation Act, the P&I insurer can rely upon the Act to limit the amount of its exposure for personal injury damages. In order to do so, the vessel owner must first demonstrate it is entitled to limit liability under the Act. If this occurs, then the P&I insurer may not be liable for any amount beyond the vessel owners judicially approved limitation of liability where the terms of the insurance policy, or club rules, limit liability to the vessel owner's liability. Crown Zellerbach Corp. v. Ingram Industries, Inc., 783 F.2d 1296 (5th Cir. 1986).
III. Why a Limitation of Liability is Proceeding Commenced?
Almost every type of loss claim against a vessel, in rem, or its owner, in personam, is subject to the Limitation Act. Hartford Acco. & Indem. Co. of Hartford v. Southern Pac. Co., 273 U.S. 207 (1927). The Act permits limitation "for any embezzlement, loss, or destruction by any person of any property, goods, or merchandise shipped or put on board of such vessel, or for any loss, damage, or injury by collision, or for any act, matter, or thing, loss, damage, or forfeiture, done, occasioned, or incurred...." 46 U.S.C. App. §183(a). Losses that are the result of personal injury and death, collisions, cargo losses, salvage, etc. are subject to limitation under the Act. The Albert Dumois, 177 U.S. 240 (1900); Norwich & N.Y. Transp. Co. v. Wright, 80 U.S. (13 Wall.) 104, 1998 A.M.C. 2061 (1871); Metropolitan Redwood Lumber Co. v. Doe, 223 U.S. 365 (1912).
Certain claims are not subject to limitation of liability. A vessel owner is not permitted to limit its liability for the following types of claims:
1. Wages owed to seamen. 46 U.S.C. App. §189.
2. Maintenance and cure benefits for an injured seaman. Brister v. A.W.I., Inc., 946 F.2d 350 (5th Cir. 1991).
3. Cargo damage claims caused by a deviation not contemplated by the contract of carriage. The Pelotas, 66 F.2d 75 (5th Cir. 1933).
4. Return of unearned freight. In Re Liverpool & Great Western Steam Co., 3 Fed. 168 (S.D.N.Y. 1880).
5. Personal contracts of the shipowner. Richardson v. Harmon, 222 U.S. 96 (1911). This includes payments due under towage and salvage contracts and contracts for vessel repairs, supplies and services. The St. Jago de Cuba, 22 U.S. (9 Wheat.) 409 (1824); Signal Oil & Gas Co. v. Barge W-701, 654 F.2d 1164 (5th Cir. 1981).
6. Preferred Ship Mortgages. Petition of Zebroid Trawling Corp., 428 F.2d 226 (1st Cir. 1970).
7. Environmental claims under the Oil Pollution Act of 1990 and the Clean Water Act.
Complaint of Metlife Capital Corp., 132 F.3d 818 (1st Cir. 1997).
IV. How a Vessel Owner Can Attempt to Limit Liability.
A vessel owner can attempt to limit liability by using two different methods. The vessel owner is permitted to file an action in a federal district court. The Act entitles the vessel owner to a single forum for determining (1) if the vessel and her owner are liable for the injured plaintiff's damages; (2) if the vessel owner may be able to limit its liability to the value of the vessel and pending freight; (3) the amount of the plaintiff's damages; and (4) the manner in which the limitation fund should be disbursed to the injured plaintiff and any other claimant. The procedures for commencing a limitation proceeding are governed by the Act itself and Supplemental Rule F of Certain Admiralty and Maritime Claims. Fed.R.Civ.Supp. Rule F; Alvin B. Rubin, Complex Limitation: The Courts' View, 53 Tul.L.Rev. 1395 (1979). The second method is to assert the Limitation Act as a defense in an answer filed in response to a complaint in either state or federal court.
1. Where Can a Limitation of Liability Proceeding be Filed?
One potential defense to the filing of a limitation proceeding is that the proceeding has been commenced in an improper venue. If venue is improper, then the court has discretion to either dismiss the limitation proceeding or transfer it to a district where it could have originally been filed. Fed.R.Civ.Supp. Rule F(9); In re Complaint of Mike's, Inc., 317 F.3d 894 (8th Cir. 2003); Complaint of Connecticut Nat. Bank, 687 F.Supp. 111, 113 (S.D.N.Y. 1988). The only court of competent jurisdiction to determine a limitation proceeding is a federal district court in admiralty. Norwich & N.Y. Transp. Co. v. Wright, 80 U.S. (13 Wall.) 104, 1998 A.M.C. 2061 (1871).
Rule F(9) governs the proper venue. Where suit has been instituted against a vessel owner in state or federal court, the limitation proceeding must be filed in the federal district court which encompasses the state court, or the district court where the action was filed. Fed.R.Civ.Supp. Rule F(9); Matter of American River Transp. Co., 864 F.Supp. 554 (E.D.La. 1994). Under Rule F(9), if a vessel has been arrested or attached, then the limitation proceeding must be filed in the district where the arrest or attachment is pending.
If the vessel owner has not been sued, the vessel has not been arrested or attached, and the vessel is located in a federal district, then it may be commenced in the district where the vessel can be found at the time the limitation proceeding is commenced. Fed.R.Civ.Supp. Rule F(9).
If a ship has been lost or is in a foreign country and no suit has been commenced nor attachment made in any district, the complaint may be filed in any district. Matter of Bowoon Sangsa Co., Ltd., 720 F.2d 595 (9th Cir. 1983). In situations where the vessel has not been attached or arrested, no suit has been commenced against the owner, and the vessel is on the high seas, the vessel is considered to not be within any district and the proceeding can be commenced in any district. Complaint of Connecticut Nat. Bank, 687 F.Supp. at 113.
2. Statute of Limitations for Filing Limitation Proceeding
A limitation of liability proceeding must be commenced within six (6) months after the vessel owner receives written notice of a claim that may exceed the post-casualty value of the vessel, plus pending freight. 46 U.S.C. App. §185; Fed.R.Civ.Supp. Rule F(1); Matter of Oceanic Fleet, Inc.,
807 F.Supp. 1261 (E.D.La. 1992); In re Complaint of Bayview Charter Boats, Inc., 692 F.Supp. 1480, 1483 (E.D.N.Y. 1988). Courts have concluded that written notice must inform the owner both of "details of the incident" and "that the owner appeared to be responsible for the damage in question." In re Complaint of Okeanos Ocean Research Found., Inc., 704 F.Supp. 412, 415 (S.D.N.Y.1989), citing In re Petition of Allen N. Spooner & Sons, Inc., 253 F.2d 584, 585 (2d Cir.1958).
Courts seem to have articulated two different tests to determine if notice from the injured plaintiff and/or his counsel is appropriate. Under the first test, notice is sufficient where:
(1) The vessel owner is informed of the actual or potential claim;(2) that may exceed the value of the vessel and her pending freight; and (3) the claim is subject to limitation. Doxsee Sea Clam Co., Inc. v. Brown, 13 F.3d 550 (2nd Cir. 1994); P.G. Charter Boats, Inc. v. Soles, 437 F.3d 1140 (11th Cir. 2006); In re Complaint of McCarthy Bros. Co./Clark Bridge, 83 F.3d 821, 829 (7th Cir.1996).
Under the second test, the written notice must: (1) demand a right or supposed right; (2) blame the vessel owner for any damage or loss; and (3) call upon the vessel owner for anything due to the claimant. P.G. Charter Boats, 437 F.3d at 1143; Paradise Divers, Inc. v. Upmal, 402 F.3d 1087, 1090 (11th Cir.2005).
In In re Complaint of Bayview Charter Boats, Inc., 692 F.Supp. 1480 (E.D.N.Y.1988), the court held the following letter sufficient to trigger the six month period: "Please be advised we represent Joseph Russo in connection with the serious personal injuries he sustained on the above date due to the gross negligence of your employee Jack Goeghan in connection with the operation of an outboard motor boat in the course of his employment with Bayview Charter Boats. Please refer this letter to your insurance and/or legal representative and have them contact the undersigned at their earliest convenience."
The court reasoned that the letter clearly informed the vessel owner of the details of the incident and effectively informed the owner that it may be held responsible for the losses at issue. The Spooner court held that "a writing may constitute sufficient notice of claim even if it is couched in tentative terms, referring only to the 'possibility' of legal action." Spooner & Sons, Inc., 253 F.2d at 585.
A series of letters may give a vessel owner sufficient notice of claim to trigger the six-month filing period. Matter of Oceanic Fleet, Inc., 807 F.Supp. 1261 (E.D.La. 1992). In Oceanic Fleet, the court held that four letters, when taken together, gave requisite notice of seaman's claim against the vessel to trigger the six-month period for the vessel owners to file petition for exoneration or limitation of liability. One letter from the seaman's attorney requested the seaman's statement and relevant accident report, two other letters made reference to possibility of lawsuit and to settlement negotiations, and a letter from vessel owners' counsel referred to a possible deposition.
In the event that the six (6) month statue of limitation for filing is not satisfied, then (1) the limitation of liability proceeding may be dismissed from federal court; (2) the order requiring a concoursus of claims in one federal forum be lifted; or (3) the stay preventing multiple actions be lifted.
3. The Limitation Complaint
To file a limitations proceeding, the vessel owner must file a complaint. Under Rule F(2) the complaint shall set forth the following information:
(1) The basis of which the right to limit liability is asserted;
(2) All facts necessary to enable the court to determine the amount to which the owner's liability shall be limited;
(3) The voyage if any, on which the demands sought to be limited arose, with the date and place of its termination;
(4) The amount of all demands including all unsatisfied liens or claims of lien, in contract or in tort or otherwise, arising on that voyage, so far as known to the vessel owner;
(5) What actions and proceedings, if any, are pending thereon;
(6) Whether the vessel was damaged, lost, or abandoned, and, if so, when and where;
(7) The value of the vessel at the close of the voyage or, in case of wreck, the value of her wreckage, strippings, or proceeds, if any, and where and in whose possession they are; and
(8) The amount of any pending freight recovered or recoverable.
The complaint may demand exoneration from as well as limitation of liability. Exoneration is where the vessel owner claims that it is not liable at all to the injured plaintiff and the other claimants.
4. The Concursus
Once the complaint is filed, the court issues a stay of all proceedings against the vessel owner with respect to the incident in question. Fed.R.Civ.Supp. Rule F(3). The court should set a "monition" period for all claimants to file their respective claims in the limitation action or be defaulted. The court also has discretion to permit the filing of a late claim. Fed.R.Civ.Supp. Rule F(4), (5), and (6); Texas Gulf Sulphur Co. v. Blue Stack Towing Co., 313 F.2d 359, 362-63 (5th Cir.1963). The claimant must file an answer to the allegations of the complaint and a claim against the vessel owner.
The court's order, or concursus of claims, requires all claimants to litigate their claims arising out of the casualty to be filed and determined in a single proceeding by the limitation court. The purpose of the concursus is to provide for a marshalling of assets and for a setting of priorities among claims where the asserted claims exceed the value of the vessel and its freight. Where the limitation fund is not sufficient to pay all potential claims, however, a concursus is alleged to be necessary because the claimants will be competing among themselves for larger portions of a limited fund. It is claimed that "the purpose of the limitation proceedings is not to prevent a multiplicity of suits but ... to provide a marshalling of assets‑the distribution pro rata of an inadequate fund among claimants, none of whom can be paid in full." In re Moran Transp. Corp., 185 F.2d 386, 389 (2d Cir. 1950), cert. denied, 340 U.S. 953 (1951).
5. Destruction of the Right to a Jury Trial
Since a limitation proceeding is considered a case in admiralty, there is no right to a jury trial. Ex parte Green, 286 U.S. 437 (1932); Suzuki of Orange Park, Inc. v. Shubert, 86 F.3d 1060 (11th Cir. 1996). However, the same statute that grants the federal courts exclusive admiralty and maritime jurisdiction saves to suitors "all other remedies to which they are otherwise entitled." 28 U.S.C. §1333(1). The "saving to suitors" clause of § 1333(1) embodies a presumption in favor of jury trials and other common law remedies in the forum of the damage claimant's choice. See Odeco Oil & Gas, Drilling Div. v. Bonnette, 74 F.3d 671, 674 (5th Cir.1996).
To reconcile the tension between the exclusive admiralty jurisdiction over Limitation Act claims and the presumption favoring jury trials under the saving to suitors clause, courts have identified a few circumstances under which the damage claimants may litigate the issues of liability vel non, as well as damages, in their chosen fora. See In re Beiswenger Ent. Corp., 86 F.3d 1032, 1038 (11th Cir.1996). Under these exceptions, if the vessel owner is held liable for the claimant's damages in the claimant's chosen forum for an amount exceeding the limitation fund, the parties must return to the admiralty court to litigate the vessel owner's right to limit or be exonerated from liability.
The first exception to exclusive admiralty jurisdiction arises where the limitation fund exceeds the aggregate amount of all the possible claims against the vessel owner. See Lake Tankers Corp. v. Henn, 354 U.S. 147, 152‑53 (1957). This has been referred to as the multiple claimants adequate fund exception. Under this exception, the concursus is not necessary as there is no competition to determine which party will receive the larger share of the limitation fund. By permitting the claimants to litigate their claims before a jury in state court and protecting the vessel owner's right to limit liability to the amount of the limitation fund, a balance is struck between the Limitation Act and the Savings to Suitor Clause.
The second exception is the single-claimant inadequate fund. This exception exists where there is only one claim to the limitation fund, and the singleclaimant enters certain stipulations designed to protect the vessel owner's rights under the Limitation Act. See In re Mucho K, Inc., 578 F.2d 1156, 1158 (5th Cir.1978). The stipulations must protect the vessel's owner's right to litigate its defense of limited liability exclusively by the admiralty court. To do so, the claimant must stipulate the following:
(1) Waiver of any res judicata and issue preclusion defenses with respect to matters reserved for the admiralty court's determination;
(2) Collection on the judgement issued by the state court or other forum will not commence until the limitation proceedings are concluded;
(3) Agreeing that the limitation court has exclusive jurisdiction to determine issue regarding the limitation of liability.
Texaco, Inc. v. Williams, 47 F.3d 765 (5th Cir. 1995).
In Beiswenger Ent. Corp., 86 F.3d at 1039, the court held that multiple claimants may enter appropriate stipulations to create the functional equivalent of the single claimant exception and litigate their liability claims in state court with a jury trial. This is referred to as the multiple-claimants-inadequate fund exception to the vessel owner's right to a concursus. The stipulations agreed to by multiple claimants must:
(1) Waive any res judicata and issue preclusion defenses with respect to matters reserved for the admiralty court's determination;
(2) Agree that collection on the judgement issued by the state court or other forum will not commence until the limitation proceedings are concluded;
(3) Concede that the limitation court has exclusive jurisdiction to determine issue regarding the limitation of liability;
(4) Establish the priority of all claims; and
(5) Be signed by all potential claimants.
Magnolia Marine Transp. v. LaPlace Towing Corp., 964 F.2d 1571, 1575 (5th Cir.1992); S & E Shipping Corp. v. Chesapeake & O. Ry. Co., 678 F.2d 636 (6th Cir. 1982); Universal Towing Co. v. Barrale, 595 F.2d 414, 419 (8th Cir. 1979). The stay and concursus order in a multiple-claimants-inadequate fund situation may be dissolved where the claimants all stipulate to a reduction of their claims to an amount smaller than the limitation fund. Id.
Another method employed to preserve the damage claimants' saving to suitors clause rights was recognized in Fecht v. Makowski, 406 F.2d 721 (5th Cir.1969). In that case, which involved multiple claims to an inadequate limitation fund, the Fifth Circuit held that the damage claimants must be allowed to litigate the vessel owner's negligence in state court, "where it is apparent that limitation cannot be granted." Id. at 722. The Fifth Circuit reversed the lower court's grant of exoneration to the vessel owner:
[W]here no limitation is possible the damage claimants are entitled to have the injunction against other actions dissolved, so that they may, if they wish, proceed in a common law forum as they are entitled to do under the saving to suitors clause. 28 U.S.C. § 1333.... The reason for enjoining state court suits is to distribute effectively a limited fund in a single proceeding, not to "transform the [Limitations] Act from a protective instrument to an offensive weapon by which the shipowner could deprive suitors of their common law rights." Lake Tankers Corp. v. Henn, 354 U.S. 147, 152, 77 S.Ct. 1269, 1272, 1 L.Ed.2d 1246, 1251 (1957). Where no grant of limitation is possible, the basis for granting exoneration vanishes.
Id. at 722‑23. Thus, Fecht establishes that the admiralty court may decide the privity or knowledge issue without first deciding the liability issue‑at least where the boat owner concedes privity or knowledge, or where it is otherwise impossible under any set of circumstances for the vessel owner to demonstrate the absence of privity or knowledge. See also Joyce v. Joyce, 975 F.2d 379, 385 (7th Cir.1992) (where sole allegation against boat owner is negligently entrusting the boat to its operator, the boat owner is necessarily ineligible for limited liability because privity or knowledge is an element of the tort of negligent entrustment).
6. Limitation Fund Must be Established
A condition to filing a limitation of liability proceeding is for the ship owner to
deposit with the court, for the benefit of claimants, a sum equal to the amount or value of the owner's interest in the vessel and pending freight, or approved security therefor, and in addition such sums, or approved security therefor, as the court may from time to time fix as necessary to carry out the provisions of the statutes as amended; or (b) at the owner's option shall transfer to a trustee to be appointed by the court, for the benefit of claimants, the owner's interest in the vessel and pending freight, together with such sums, or approved security therefor, as the court may from time to time fix as necessary to carry out the provisions of the statutes as amended.
Fed.R.Civ.Supp. Rule F(1). The vessel owner shall also give security for costs and, if it elects to give security, for interest at the rate of six (6%) percent per annum from the date of the security. Id. The value of the vessel at the end of the voyage in which the casualty took place is normally the vessel's reasonable fair market value. Gilmore & Black, The Law of Admiralty, note, §10-1 (2d ed. 1975). Should a claimant determine that the security is inadequate, he may file a motion to increase the amount of security and to have the vessel appraised to determine its value and pending freight. Fed.R.Civ.Supp. Rule F(7).
The limitation fund may be increased pursuant to the "flotilla doctrine". Under the flotilla doctrine, the value of all the vessels involved in the completion or performance of a contract must be surrendered to a limitation fund when those vessels are: subject to common ownership; engaged in a single enterprise; and under a single command. Valley Line Co. v. Ryan, 771 F.2d 366 (8th Cir. 1985); Standard Dredging Co. v. Kristiansen, 67 F.2d 548 (2nd Cir. 1933). Two vessels made fast to one another to perform a single contract of carriage constitute a flotilla for purposes of limitation of liability.
Another way to increase the fund is when a seagoing vessel is involved. In these situations, the vessel owner must create an additional limitation fund of up to $240.00 per gross ton of the vessel where the initial fund is inadequate to pay personal injury losses. 46 U.S.C. App. §183(b). "'[S]eagoing vessel' shall not include pleasure yachts, tugs, towboats, towing vessels, tank vessels, fishing vessels or their tenders, self‑propelled lighters, nondescript self‑propelled vessels, canal boats, scows, car floats, barges, lighters, or nondescript non-self-propelled vessels...." 46 U.S.C. App. §183(f).
7. Claimant's and Vessel Owner's Different Burdens of Proof
When a limitation proceeding is tried, a unique burden of proof arises between the vessel owner and the claimants. The claimants are required to show that the personal injuries or loss was caused by the negligence or vessel unseaworthiness. Complaint of Port Arthur Towing Co. on Behalf of M/V Miss Carolyn, 42 F.3d 312 (5th Cir. 1995). In other words, the claimant must establish liability of the shipowner to him. Once this occurs, the burden of proof is then shifted to the vessel owner to show whether the vessel owner had knowledge or privity of those same acts of negligence or conditions of unseaworthiness. Coryell v. Phipps, 317 U.S. 406, 409 (1943); Coleman v. Jahncke Service, Inc., 341 F.2d 956, 958 (5th Cir.1965), cert. denied, 382 U.S. 974 (1966). Moreover, once a claimant satisfies the initial burden of proving negligence or unseaworthiness, the burden of proof shifts to the shipowner to prove the lack of privity or knowledge.
This burden is not met by simply proving a lack of actual knowledge, for privity and knowledge is established where the means of obtaining knowledge exists, or where reasonable inspection would have led to the requisite knowledge. See China Union Lines, Ltd. v. A.O. Andersen & Co., 364 F.2d 769, 787 (5th Cir.1966) cert. denied, 386 U.S. 933 (1967). Thus, knowledge is not only what the shipowner knows but what he is charged with discovering in order to apprise himself of conditions likely to produce or contribute to a loss. See Avera v. Florida Towing Corp., 322 F.2d 155, 166 (5th Cir.1963).
The Limitation Act has been a matter of controversy in this modern age of almost instant communication between the vessel owner and the vessel. It is a very powerful weapon that is used by vessel owners against personal injury claimants. When faced with opposing a limitation proceeding, a claimant's lawyer must have a firm understanding of the Limitation Act and its treacherous currents. If not, then results can be disastrous for the claimant.