In Re: The Matter of Taira Lynn Limited No. 7, LLC

Filing 140

ORDER denying 103 Motion to Bifurcate; granting 136 Motion for Leave to File sur-reply. Signed by Chief Judge William H. Steele on 11/26/2013. (mbp)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
IN RE: THE MATTER OF TAIRA
LYNN LIMITED NO. 7, etc., et al.,
PRAYING FOR EXONERATION
FROM OR LIMITATION OF
LIABILITY

)
)
) CIVIL ACTION 13-0318-WS-C
)
)

ORDER
This matter is before the Court on the motion of certain claimants to
“bifurcate the limitation and merits issues and to try the core limitation issues
first.” (Doc. 103). Certain other claimants have joined in the motion. (Docs. 122,
123). Those parties sufficiently interested have filed briefs in support of their
respective positions, (Docs. 104, 130-36), and the motion is ripe for resolution.1
On April 24, 2013, a fire and explosions occurred on the Mobile River.
Several persons injured thereby, including the movants, filed lawsuits in state
court and demanded trial by jury of all issues. Among the defendants in those
actions are the asserted owners of four vessels arguably connected with the
incident. The owners then filed three separate petitions for exoneration or
limitation in this Court. The Court stayed the state actions pending resolution of
the petitions and, upon motion, consolidated the petitions into this action.
The movants propose that the issues herein be bifurcated between, on the
one hand, “core limitation issues” (which they define as the owner’s privity or
knowledge vel non)2 and, on the other, everything else, with the former being
litigated first so that a determination on limitation is obtained and, should
1

The motion for leave to file a sur-reply, (Doc. 136), is granted, as the brief
addresses only cases the movants heavily relied upon, and addressed for the first time, in
their reply brief.
2

The quoted term appears to be the movants’ invention, since the Court’s
computerized searches have failed to uncover any case utilizing it.

limitation be denied, the stay lifted so that all further proceedings (including a
determination of liability vel non) occur in state court. This, they say, is the best
way to resolve (or mitigate) the tension between the Limitation Act and the
“saving to suitors” clause of Section 1333.3
With exceptions and contours not relevant here, a vessel owner may limit
its liability for a maritime casualty to its proportionate interest in the vessel and
pending freight if occasioned “without the privity or knowledge of the owner.” 46
U.S.C. § 30505. “Federal courts have exclusive admiralty jurisdiction to
determine whether the vessel owner is entitled to limited liability. [citations
omitted] In limitation proceedings, as in all admiralty cases, there is no right to a
jury trial.” Beiswenger Enterprises Corp. v. Carletta, 86 F.3d 1032, 1036-37 (11th
Cir. 1996). The saving to suitors clause, in contrast, “embodies a presumption in
favor of jury trials and common law remedies in the forum of the claimant’s
choice.” Id. at 1037.
“Courts have attempted to give effect to both the Limitation Act and the
saving to suitors clause whenever possible, by identifying two sets of
circumstances under which the damage claimants must be allowed to try liability
and damages issues in a forum of their own choosing.” Beiswenger, 86 F.3d at
1037. “The first circumstance arises where the limitation fund exceeds the
aggregate amount of all the possible claims against the vessel owner. … The
second circumstance exists where there is only one claimant.” Id. The movants
acknowledge that neither circumstance is presented here.
As the movants concede, “[t]his case is a classic example of a Limitation
Act case, being the ‘multiple claimants, inadequate fund’ situation ….” (Doc. 104
3

In a perfect world, the movants would have the tension resolved by favoring the
statute signed into law by the chief executive more highly esteemed by posterity, as they
remind the Court (five times) that George Washington was president when the
predecessor to Section 1333 was enacted, Millard Fillmore when the predecessor of the
modern Limitation Act became law. Fortunately for all concerned, the movants
recognize the world is not perfect.

2

at 5). “In genuine ‘multiple-claims-inadequate-fund’ cases, the courts have not
allowed damage claimants to try liability and damages issues in their chosen fora,
even if they agree to return to the admiralty court to litigate the vessel owner’s
privity or knowledge. … Thus, the damage claimants in a true multiple-claimsinadequate-fund case may not proceed against the vessel owner except in the
admiralty court.” Beiswenger, 86 F.3d at 1038. Although the Beiswenger Court
held that claimants can transform such a case “into the functional equivalent of a
single claim case” (and thereby be permitted to try liability and damages issues in
state court) by presenting stipulations adequately ensuring that the vessel owner
will not be exposed to judgments exceeding the limitation fund, id. at 1039-40,4
the movants concede that this avenue is not open to them, because some of the
claimants refuse to enter the necessary stipulations.
The Eleventh Circuit also recognizes a fourth circumstance under which a
claimant may obtain a determination of liability in state court despite the filing of
a limitation petition. “If it is truly impossible under any set of circumstances for
[the limitation plaintiff] to establish its lack of privity or knowledge, then the
limitation action should be dismissed, and the [claimants] should be allowed to try
liability and damages issues in state court.” Suzuki of Orange Park, Inc. v.
Shubert, 86 F.3d 1060, 1064 (11th Cir. 1996) (describing Fecht v. Makowski, 406
F.2d 721 (5th Cir. 1969)). In Fecht, impossibility was shown because the owner
was the operator of the vessel, such that, “[i]f there was negligence in the
operation of the motorboat, only he could have been guilty of it” and, as a matter
of law, “when an owner is in control of and operating his pleasure craft he has
privity or knowledge with respect to its operation.” 406 F.2d at 722-23. The
movants do not suggest that this scenario is in play.

4

The two principal forms of stipulations are those reducing the total amount of all
claims to no greater than the limitation fund and those structuring the priority of the
claims for payment out of the fund. Beiswenger, 86 F.3d at 1039-40.
3

In summary, then, the Eleventh Circuit has recognized four “sets of
circumstances under which the damage claimants must be allowed to try liability
and damages issues in a forum of their own choosing,” and this case falls within
none of them. That would seem to be the end of the matter, but the movants are
undeterred. They seek a state-court resolution of liability by getting a favorable
ruling herein on limitation without also receiving a ruling on liability. The law,
however, is squarely against them.
The determination of whether a shipowner is entitled to
limitation employs a two-step process. First, the court must
determine what acts of negligence or conditions of unseaworthiness
caused the accident. Second, the court must determine whether the
shipowner had knowledge or privity of those same acts of negligence
or conditions of unseaworthiness. Knowledge or privity of any fact
or act causing the accident is not enough for denial of limitation; it is
only knowledge or privity of negligent acts or unseaworthy conditions
which trigger a denial of limitation. [citations and footnote omitted]
And, although the petitioner in limitation bears the burden of proving
lack of privity or knowledge, the initial burden of proving negligence
or unseaworthiness rests with the libellants.
Farrell Lines, Inc. v. Jones, 530 F.2d 7, 10 (5th Cir. 1976); accord Suzuki, 86 F.3d
at 1062-63; Beiswenger, 86 F.3d at 1036. That is, a determination of liability
(consisting of determinations that negligence occurred or that unseaworthy
conditions existed and that such negligence and/or unseaworthiness caused the
accident) must precede a determination of limitation (consisting of a determination
of privity or knowledge vel non). This order of resolution is in effect whether
liability is determined in state court (when one of the three Beiswenger
circumstances exists) or in federal court (when they do not).5
The movants, however, insist that the Supreme Court has affirmatively
“held” that the “best” practice is to routinely resolve the privity or knowledge (i.e.,
limitation) issue without first resolving the liability issue, thereby preserving for
later jury trial in state court all liability issues should limitation be denied. (Doc.
5

The only exception to this order of resolution arises in the Fecht situation, when
limitation is facially impossible.
4

104 at 3-4). All that need be done in order to resolve the privity or knowledge
issue, they say, is for the claimants to “identify” the acts, omissions and/or
conditions which they claim to be negligent or unseaworthy. The limitation court
then assumes for argument that: (1) the acts, omissions and/or conditions occurred
or existed; (2) they rise to the level of negligence or unseaworthiness; and (3) they
caused the accident. The limitation plaintiff then must satisfy its burden of
proving the owner’s lack of privity or knowledge and, if it fails, the limitation
proceeding is dismissed and the claimants return to their state fora. Should the
limitation plaintiff carry its burden, additional proceedings in federal court are
scheduled in order to determine the three elements of liability listed above. (Id. at
21-23).
Proceeding in the manner suggested by the movants arguably would
impinge less on the saving to suitors clause than other possibilities, and the
appellate courts defensibly could have structured the limitation procedure as the
movants propose.6 But they have not done so, at least not so far as the movants’
authorities disclose. At the Supreme Court level, the movants cite a number of
cases but none for the proposition that their proposed bifurcation is appropriate,
much less preferred.
Within the Eleventh Circuit, both Beiswenger and Suzuki embrace the
Farrell Lines formulation quoted above, which explicitly requires the claimants to
“prov[e] negligence or unseaworthiness” before privity or knowledge is addressed.
530 F.2d at 10. The movants insist that Suzuki really favors their position, (Doc.
104 at 22), but the excerpt which they quote specifies that “privity or knowledge is
not measured against every fact or act regarding the accident; rather, privity or
knowledge is measured against the specific negligent acts or unseaworthy
conditions that actually caused or contributed to the accident.” 86 F.3d at 1064
6

As the movants note, (Doc. 104 at 16-21), the Limitation Act does not of itself
compel that liability, as opposed to limitation of liability, be resolved by a federal
admiralty court.
5

(emphasis added). The movants emphasize that “the admiralty court may decide
the privity or knowledge issue without first deciding the liability issue,” 86 F.3d at
1064, but the same sentence of Suzuki limits this proposition to “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.” Id. As Fecht reflects, this impossibility must appear initially, not
for the first time after full consideration of the limitation issue.
In their reply brief, the movants insist that Farrell Lines supports its
position because, when the appellate court says “determine,” it means only
“identify.” (Doc. 135 at 3 & n.5). The suggestion is untenable. For it to be
otherwise, the appellate court must have meant the following nonsense: “The
[identification] of whether a shipowner is entitled to limitation employs a two-step
process. First, the court must [identify] what acts of negligence or conditions of
unseaworthiness caused the accident. Second, the court must [identify] whether
the shipowner had knowledge or privity of those same acts of negligence or
conditions of unseaworthiness.” 530 F.2d at 10. The movants also ignore Farrell
Lines’ explicit statement that the claimants must “prov[e] negligence or
unseaworthiness” before privity or knowledge is addressed. Id.
Also in their reply brief, the movants argue that various trial court decisions
– all from outside the Eleventh Circuit – have ruled that the Farrell Lines
formulation does not obtain when a claimant has filed a state action before the
limitation proceeding is commenced. (Doc. 135 at 10-16). Each of the cases they
cite involved the Fecht scenario and relied directly or indirectly on Fecht. None
supports the proposition that a limitation proceeding, not dismissed based on the
plaintiff’s facial inability to prove absence of privity or knowledge, may proceed
to that issue without first resolving liability.
As discussed above, the recognized means of avoiding a federal
determination of liability in a limitation proceeding are few and narrow. The
movants’ proposed procedure, in contrast, necessarily would apply in every
6

limitation proceeding, so long as a claimant had filed (or expressed interest in
filing) a separate action. It cannot easily be concluded that the Eleventh Circuit
would fling wide open a door it long has intentionally held almost fully shut.
In sum, the authorities made known to the Court carefully restrict the
circumstances under which a claimant may obtain a determination of limitation
prior to a determination of liability, and none approves the movants’ position or
intimates that such approval would be forthcoming upon request. That the
movants would balance differently the competing policies of the Limitation Act
and the saving to suitors clause furnishes the Court no grounds for ignoring rules
long established.
Without any real discussion, the movants assert that, even should liability
be resolved in these proceedings, if limitation of that liability is then denied,
questions of damages and contribution should be resolved in state court. (Doc.
104 at 23). The question appears premature but, in any event, the movants’ failure
to address it adequately precludes the Court from resolving it.
The movants’ principal brief seeks resolution of limitation without prior
resolution of liability on the exclusive ground that their rights under the saving to
suitors clause demand it. In their reply brief, the movants add a second ground:
that, under Rule 42(b), such an ordering of issues would promote convenience,
avoid prejudice and/or expedite and economize resolution of the action. (Doc. 135
at 2, 4-9). “District courts, including this one, ordinarily do not consider
arguments raised for the first time on reply,”7 and the movants identify no reason
to depart from this well-established rule. Even were the Court to consider this
untimely argument, it would exercise its “broad discretion,” (id. at 4), against
invocation of the rule. First, the Court is unpersuaded that Rule 42(b) is
appropriately utilized to reverse the order of resolution established by the Eleventh
Circuit. Second, the movants offer no analysis of Rule 42(b) or the application of
7

Gross-Jones v. Mercy Medical, 874 F. Supp. 2d 1319, 1330 n.8 (S.D. Ala. 2012)
(citing cases and explaining the underlying rationale).
7

its requirements to this case. Third, their only authority for employing the rule in
the limitation context (a case which actually did not invoke Rule 42(b)) involved
“a complex matter requiring special case management provisions,” (Doc. 135 at
6), which conditions have not been shown to exist here.
For the reasons set forth above, the motion to bifurcate the limitation and
merits issues and to try the core limitation issues first is denied.
DONE and ORDERED this 26th day of November, 2013.
s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE

8