Maritime Update: Judge Halts Prosecution of Claims
On October 22, 2014, United States District Judge Sarah S. Vance, in the case In The Matter of Marquette Transportation, issued a ruling that reinstated an order restricting the prosecution of all claims against Marquette Transportation Company Gulf Island LLC ("Marquette") arising out of a July 7, 2013 vessel collision. This ruling illustrates how the Limitation of Liability Act can be used as a shield to protect vessel owners.
On July 7, 2013, Marquette owned and operated the FATHER SEELOS, which was towing two barges owned by Kirby Inland Marine, LP ("Kirby") when it collided with a vessel owned by John Tran.
Marquette filed a timely complaint in the U.S. District Court for the Eastern District of Louisiana seeking exoneration from or limitation of liability regarding any loss, damage or injury caused by the collision (the "Limitation Action"). The Court issued an order restraining, staying and enjoining the prosecution of any action against Marquette arising from the collision.
To lift the stay, John Tran's widow and others (collectively, the "Tran Claimants") filed a stipulation that included, among other things, agreeing that Marquette is entitled to litigate all issues related to limitation of liability in federal court and that they would not seek to enforce any judgment in excess of the value of the FATHER SEELOS until Marquette's right to exoneration and/or limitation of liability was decided in federal court. The Court lifted the stay "for the limited purposes of permitting claimants to pursue an action against Marquette in Louisiana state court."
The Tran Claimants proceeded to sue Kirby in Louisiana state court as a result of the collision, which prompted Kirby to file a claim in the Limitation Action seeking indemnity and contribution from Marquette for "all survey fees, attorney's fees or any other related costs." Kirby did not agree to be bound by the Tran Claimants' stipulation.
Marquette filed a motion to reinstate the Court's order restraining prosecution of all claims against Marquette.
The Limitation of Liability Act establishes exclusive federal jurisdiction to allow a shipowner to limit liability for damages arising from a maritime accident to "the value of the vessel and pending freight." Although the Act grants exclusive federal jurisdiction, courts have recognized two instances where a federal court must allow a state court action to proceed: (1) when the total amount claimed does not exceed the value of the vessel and pending freight; or (2) when all claimants stipulate that the federal court has exclusive jurisdiction over the limitation proceeding, and claimants will not attempt to enforce an award greater than the liability cap determined by the federal court.
The Court determined that Kirby's claim for indemnity and contribution jeopardized Marquette's right to limited liability because Kirby didn't agree to the Tran Claimants' stipulation. Thus, the Court reinstated the stay.
Why is This Important?
- The Limitation of Liability Act is a valuable shield that can be used by vessel owners in the defense of certain maritime claims.
- A vessel owner facing single or multiple claims as a result of a maritime incident that exceed the value of his or her vessel should act promptly upon receipt of written notice of a claim to preserve the right to seek exoneration from or limitation of liability.
- The filing of new claims in a limitation action may present a golden opportunity to have a stay of all claims reinstated.
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