A unique feature of maritime law in the United States is the Limitation of Shipowners’ Liability Act (“Limitation Act”), which provides vessel owners with a federal right to limit their liability for damage or injury following a maritime accident. 46 U.S.C. 30505. The Limitation Act is a powerful tool for maritime defense attorneys. It provides a procedure to enjoin all pending suits and to compel them to be filed in a limitation proceeding so that liability may be determined and limited to the post loss value of the shipowner’s vessel and the amount related to services performed by the vessel (i.e. carriage of cargo). This is especially powerful when the vessel has suffered significant damage due to a casualty; thus significantly reducing its post loss value and creating a substantial financial limitation against potential claims. However, timing is everything and turns on the notice provided to the shipowner.
To be afforded protection under the Limitation Act, the shipowner must bring a limitation action in federal court within six months of receiving notice of a claim. Once the shipowner meets the six-month statutory deadline, all related lawsuits pending against the shipowner shall cease and a limitation fund is created. Thereafter, all claimants are required to pursue their claims in the limitation proceeding.
Earlier this year, the Eleventh Circuit in Orion Marine Construction, Inc. v. Dawson, No. 17-11961 (11th Cir. 2019) issued a much-anticipated ruling addressing the scope of the notice provisions under the Limitation Act. The case involves a limitation action filed by Orion after a number of local residents filed complaints alleging damage to their properties. Orion used barges to drive concrete piles into the bay floor to rebuild a bridge pursuant to a contract with the Florida Department of Transportation (FDOT) and the local residents claimed that their homes were damaged by the vibrations caused by such activities. Originally, between 2012 and 2014 only nine local residents brought complaints against either Orion, FDOT or Orion’s third-party administrator, FARA Insurance. There were eventually 247 claims made against Orion, however, for purposes of analysis and the timing requirement, the court focused on the original nine claims. Those nine claims were made before November 11, 2014, and more importantly for purposes of the court’s analysis, unlike the other claims, these were made more than six months before Orion filed suit on May 11, 2015. Of those nine, two of the original complainants, the Dawsons, moved to dismiss Orion’s limitation action for untimeliness arguing that because Orion had received “written notice of a claim” but had not brought a limitation action “within 6 months after a claimant gives the owner written notice of a claim,” the action was time barred as per §30511(a). Orion responded that it did not receive proper notice under the Act because the complaints were (1) not in writing and, (2) they failed to reveal a “reasonable possibility” that the claims would exceed the aggregate value of the barges used during the project. The District Court subsequently dismissed the motion without prejudice.
Discovery revealed that the complaints were not only both oral and in writing, but that they were lodged against various employees at Orion, FDOT, and FARA. Based on this information, Orion maintained the position that none of the nine original claimants had provided written notice to it, two provided written notice to FDOT, and two provided written notice to FARA. Upon renewing their motion, the district court dismissed the limitation action holding that the original complaints triggered a duty to investigate any potential additional claims, which Orion had breached. Orion appealed. The court of appeals considered two main issues: (1) whether the Act’s six month filing requirement constitutes a limitation on the court’s jurisdiction; and (2) whether the nine original claimants provided adequate notice under the Act.
As to the jurisdiction issue, the court held the language of the Act requiring that, “[t]he action must be brought within 6 months” does not demonstrate “Congress imbued the deadline with jurisdictional consequences”. Orion, at 11. Additionally, the court reasoned, as in Secretary v. Preston, 873 F.3d 877 (11th Cir. 2017), the mandatory language “[t]he action must be brought within 6 months” does not impart jurisdictional significance such that the Court’s jurisdiction is not determined by the six month filing requirement. Accordingly, the court held the district court erred in concluding that the court’s jurisdiction is not limited by the six-month filing requirement.
As to the issue of adequate notice, the court joined the Second and Seventh Circuits in adopting the “reasonable possibility” test. The claimants failed to meet the Doxsee/McCarthy (Doxsee Sea Clam Co. v. Brown, 13 F.3d 550 (2d Cir. 1994) and In re Complaint of McCarthy Bros. Co./Clark Bridge, 83 F.3d 821 (7th Cir. 1996)) test because not all of the notices were in writing and demonstrated the “reasonable possibility” of a claim exceeding the value of Orion’s vessels. The court held the Act is straightforward in that it requires only the claimant to give the owner written notice of his or her claim. This notice must reveal a “reasonable possibility” that the claims, even considered in the aggregate, would exceed the value of the vessels.
The court divided the claims into four categories: 1) oral complaints later memorialized in writing by Orion, 2) oral complaints made to FARA and/or FDOT and later memorialized, 3) written complaints provided to FARA then forwarded to Orion, and 4) written complaints made to FDOT then forwarded to Orion. Because a claimant must give notice to the owner, only the notices given to FARA, as Orion’s agent, satisfied the Act’s written notice to owner requirement. None of the notices provided by the claimants revealed the required “reasonable possibility” the claims would exceed the value of Orion’s barges, thereby requiring Orion to initiate a prompt investigation and determine whether to file a limitation action. In fact, because Orion’s preliminary investigation confirmed that the claims would not exceed the value of the barges, there would have been no point in filing a limitation action “other than to clog the courts with [an] unneeded petition.” Id. at 2 (quoting Morania Barge, 690 F.2d 32, 34 (2nd Cir. 1982). The court reversed and remanded the case.
To date, a number of district courts have cited to the decision. However, at least one district court in the Fifth Circuit has strayed from finding that the six-month deadline is non-jurisdictional. See In re United Marine Offshore LLC, 2019 WL 2170642 (W.D. La., April 22, 2019). In other words, because the decision is contrary to the decisions by the Fifth Circuit, it is not binding. The Fifth Circuit continues to follow the proposition that the six-month deadline set forth in the Limitation Act is jurisdictional. Id. As such, a shipowner’s failure to meet the six-month deadline deprives the court of subject matter jurisdiction. Id. In the Tenth Circuit, at least one district court has cited the decision for the “reasonable possibility” standard. See In re United States 2019 WL 1599033 (D. Utah, April 15, 2019).
The Orion decision is favorable to shipowners as it places the burden on claimants to ensure that notice of a potential claim is given to the proper person or entity and that there is a reasonable possibility that the claim will exceed the value of the vessel in question. Nonetheless, when evaluating whether a limitation proceeding should be initiated, one must also be aware of varying procedural requirements in each jurisdiction where the petition may be filed. It remains to be seen if the claimants intend to appeal the Orion decision to the Supreme Court of the United States.