In the Matter of the Complaint of Ross Island Sand & Gravel Co.

Filing 28

ORDER DENYING WITHOUT PREJUDICE PLAINTIFF'S MOTION TO INCREASE THE VALUE OF THE LIMITATION FUND 20 (Illston, Susan) (Filed on 5/22/2014)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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United States District Court
For the Northern District of California

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No. C 14-00601 SI

IN THE MATTER OF THE COMPLAINT OF
ROSS ISLAND SAND & GRAVEL CO.,
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ORDER DENYING WITHOUT
PREJUDICE PLAINTIFF’S MOTION TO
INCREASE THE VALUE OF THE
LIMITATION FUND

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Currently before the Court is claimant Ron Green’s motion, pursuant to Supplemental Admiralty

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Rule F of the Federal Rules of Civil Procedure, to increase the value of the limitation fund established

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by plaintiff Ross Island Sand & Gravel Co. Docket No. 20. The motion is scheduled for hearing before

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the Court on May 23, 2014. Pursuant to Local Rule 7-1(b), the Court determines that the matter is

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appropriate for resolution without oral argument and VACATES the hearing. For the reasons set forth

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below, the Court DENIES Green’s motion without prejudice.

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BACKGROUND

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This action involves a previously filed lawsuit between Green, the claimant in the present case,

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and Ross Island Sand & Gravel Co., the plaintiff. On October 21, 2013, Green filed a complaint against

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Ross Island in Alameda County Superior Court, alleging that on November 17, 2010, he was injured

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while working for his former employer, Ross Island, onboard a vessel named the Roller Barge. Green

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brought claims of negligence under the Jones Act, 46 U.S.C. § 30104; unseaworthiness; maintenance,

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found, and cure; and gross vessel owner negligence.

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Ross Island removed that complaint to this Court. Green v. Ross Island Sand & Gravel Co.,

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Case No. 13-cv-5431 SI. Green moved for remand, and on January 23, 2014, the Court remanded the

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action to Alameda County Superior Court, finding that on the face of the complaint, Green’s Jones Act

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claim was properly pled and therefore not removable.1 The case is currently pending in Alameda

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County Superior Court (Green v. Ross Island Sand & Gravel Co., RS 13699924), but is stayed as

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described below.

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On February 7, 2014, Ross Island filed the complaint in this case, pursuant to the Limitation of

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Liability Act, 46 U.S.C. §§ 30501, et seq., seeking exoneration from or limitation of liability against all

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parties, for any and all loss, damages, injury, and other claims of destruction arising out of the injuries

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claimed by Green on November 17, 2010. Complaint ¶ 14. Ross Island claimed the value of the Roller

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Barge after the alleged November 17, 2010 incident did not exceed $35,000.00. Id. ¶ 13.
The case was initially assigned to Magistrate Judge James and subsequently transferred to

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United States District Court
For the Northern District of California

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District Judge Chen. On February 28, 2014, Judge Chen issued Ross Island’s proposed order issuing

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a monition, directing claimants to file and make proof of their claims, and staying any prosecution of

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suits with respect to any claim arising out of the incident on the Roller Barge on November 17, 2010

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until the hearing and termination of this proceeding. Docket No. 14. Thus the Green v. Ross Island

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Sand & Gravel Co. case pending in Alameda County Superior Court was stayed.

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This case was deemed related to the previously filed case between Green and Ross Island, and

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on March 4, 2014, was reassigned to this Court. Docket No. 17. On March 28, 2014, Green filed this

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motion to increase the value of the limitation fund, pursuant to Rule F(7). Docket No. 20.

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LEGAL STANDARD

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The Limitation of Liability Act “allows a vessel owner to limit liability for damage or injury,

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occasioned without the owner’s privity or knowledge, to the value of the vessel or the owner’s interest

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in the vessel.” Lewis v. Lewis & Clark Marine, Inc., 531 U.S. 438, 446 (2001); 46 U.S.C. § 30505. The

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vessel owner first files a complaint in the district court, and then deposits an amount with the court that

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is the equivalent of its interest in the vessel. Fed. R. Civ. P. Supp. Adm. R. F(1). The district court then

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notices all potential claimants and requires them to file claims with the court within a specified time,

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Ross Island subsequently moved for leave to file a motion for reconsideration, which the Court
denied. Id.
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and issues an injunction against any other actions against the owner if they involve related claims. Id.

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F(3)-(4).
Claimants may, however, bring suit in state or federal court for their damage or injury. Although

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28 U.S.C. § 1333(1) grants federal district courts exclusive jurisdiction over “any civil case of admiralty

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or maritime jurisdiction [including suits brought pursuant to the Limitation Act],” it also specifically

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“sav[es] to suitors in all cases all other remedies to which they are otherwise entitled.” This presents

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an obvious tension, particularly where a claimant’s suit is brought in state court while the Limitation

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of Liability action is pending in federal court and has produced a stay or injunction against the state

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court action. “The courts have had to reconcile the functions of the admiralty court in limiting liability

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United States District Court
For the Northern District of California

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under the Limitation Act, which proceeds in equity without a jury, with the claimant’s right to a trial

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by jury for common law and statutory claims.” Newton v. Shipman, 718 F.2d 959, 961 (9th Cir. 1983).

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One way the federal district courts have resolved this conflict is by recognizing the “single claimant

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exception.” In re Ross Island Sand and Gravel, 226 F.3d 1015, 1017 (9th Cir. 2000). Under this

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exception, “if only one claim has been filed and ‘nothing appears to suggest the possibility of another

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claim,’ a district court is required to dissolve its injunction to permit the single claimant to pursue a

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separate action and jury trial.” Id. (quoting Newton, 718 F.2d at 962).

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A single claimant who seeks dissolution of a federal injunction in order to pursue a claim in state

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court, must stipulate “to the district court’s continuing, exclusive jurisdiction to decide the owner’s right

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to limit his liability.” Newton, 718 F.2d at 962. In its most recent opinion discussing the dissolution

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of an injunction in state court pursuant to the Limitation of Liability Act, the Supreme Court explained

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that state courts may adjudicate claims “against vessel owners so long as the vessel owner’s right to seek

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limitation of liability is protected.” Lewis v. Lewis & Clark Marine, Inc., 531 U.S. at 446. The Ninth

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Circuit has not yet addressed the Supreme Court’s opinion in Lewis v. Lewis & Clark Marine, Inc., but

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in an opinion issued eighteen years prior, the Ninth Circuit specified the claimant must: “(1) stipulate

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that the value of the limitation fund equals the combined value of the vessel and its cargo; (2) waive the

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right to claim res judicata based on any judgment rendered against the vessel owner outside of the

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limitation proceedings; and (3) concede the district court’s exclusive jurisdiction to determine limitation

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of liability issues.” Id.; see also In re Ross Island, 226 F.3d at 1017.2

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Pursuant to Rule 7(F), “[a]ny claimant may by motion demand that the funds deposited in court

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or the security given by the plaintiff be increased on the ground that they are less than the value of the

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plaintiff’s interest in the vessel and pending freight.” On a Rule 7(F) motion “any claimant may demand

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that the deposit or security be increased on the ground that it is insufficient to carry out the provisions

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of the statutes relating to claims in respect of loss of life or bodily injury; and, after notice and hearing,

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the court may similarly order that the deposit or security be increased or reduced.”

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United States District Court
For the Northern District of California

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DISCUSSION

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Green argues that Ross Island set the limitation fund low, knowing that Green would not

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stipulate to the amount, thereby preventing him from proceeding with his suit in state court. Motion 3,

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11. Green and Ross Island have been unable to agree on the stipulations required under the “single

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claimant exception,” due to a disagreement as to the value of the limitation fund. See Jacobson Decl.

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Exhs. 1-2. Green claims that he has conceded that this Court has exclusive jurisdiction over the

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limitation issues, has offered to waive the res judicata effect of any intervening state court verdict he

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might obtain, but cannot approve the amount of the limitation fund, as he believes it is inadequate.

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Motion at 3, 6; Jacobson Decl. Exhs. 1, 2.

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Green moves this court to reappraise the value of the limitation fund under the “flotilla doctrine,”

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arguing that other vessels that were present and physically connected to the Roller Barge at the time of

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his injury must be included in the valuation of the limitation fund. Motion at 11-12. According to

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Green, an appraisal value that includes all of the vessels would be accurate; presumably, he would be

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able to stipulate to the increased amount of the limitation fund, move the Court to dissolve the

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injunction, and proceed with his state court case.

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Ross Island argues that the “flotilla doctrine” does not apply in this case and that Green is

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attempting to entice the Court to rule on disputed facts before conducting any discovery. Opp. at 7.

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It appears that in this case, Green has structured his stipulations in line with this statement
from Newton.
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Additionally, Ross Island asserts that Green has not requested an appraisal of the Roller Barge, which

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is the only legitimate basis for filing a Rule F(7) motion, and thus his motion must be denied. Id.
Ross Island asserts that the “flotilla” issue involves disputed facts, as to which evidence will

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have to be taken and findings will have to be made before a final determination. At the same time, this

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issue could be rendered moot if Green’s judgment in state court does not exceed the limitation fund as

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it is currently set, provided that the injunction is lifted and Green’s action can proceed in state court.

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Under these circumstances, courts in other jurisdictions have postponed decision on such issues until

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they become relevant. In Norfolk Dredging Co. v. Wiley, 439 F.3d 205, 210 (4th Cir. 2006), for

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example, the district court stayed litigation of the Limitation of Liability action and dissolved the

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United States District Court
For the Northern District of California

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injunction on the state court proceedings. There, the claimant’s stipulations stated “he does not dispute

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the alleged value of the [vessel], but contends that the Limitation Fund should include all vessels

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contractually engaged in a common enterprise under a single command.” Norfolk Dredging Co. v.

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Wiley, 357 F.Supp. 2d 944, 950 (E.D.Va. 2005) (aff’d 439 F.3d 205 (4th Cir. 2006)). The Court of

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Appeals affirmed the district court’s decision to postpone “resolving the novel question whether to apply

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the flotilla doctrine to determine the size of the limitation fund,” where the claimant stipulated to the

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district court’s exclusive jurisdiction over the Limitation of Liability action and agreed that the ship

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owner’s “liability will be limited to the amount of the limitation fund in whatever amount the district

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court fixes.” Norfolk, 439 F.3d 205. There, the Court of Appeals concluded, “[w]e cannot see how

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saving for another day the question of Norfolk Dredging’s amount of liability prejudice[s] its general

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right to limit liability. . . . [P]ostponing the determination of the final value of the limitation fund in

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a Limitation of Liability action is consistent with the broad power of the district court to manage its

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cases and to reserve the determination of any important, yet potentially irrelevant, issue until later in the

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proceedings.” Id.

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In this case, the Court recognizes Green’s concerns regarding the limitation fund, as he

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contemplates the stipulations necessary to move for dissolution of the injunction on his state court action

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and in particular, the stipulation that the value of the limitation fund equals the combined value of the

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vessel and its cargo. See Newton, 718 F.2d at 962; see also In re Ross Island, 226 F.3d at 1017. A

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reappraisal of the limitation fund, based on the “flotilla doctrine,” may establish a fund value to which
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Green would be willing to stipulate. But, as was noted in Norfolk, the “flotilla” issue in this case

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requires a fact-based assessment and may be rendered moot. The Court, therefore, postpones that

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determination until Green acquires a judgment in state court that exceeds the limitation fund as it is

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currently set, if that happens.
The Court will entertain a motion by Green to dissolve the injunction, provided that Ross

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Island’s rights are protected. As the Supreme Court in Lewis explained, district courts “have discretion

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to stay or dismiss Limitation Act proceedings to allow a suitor to pursue his claims in state court.”

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Lewis, 531 U.S. at 454. Where the district court is satisfied “that a vessel owner’s right to seek

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limitation will be protected, the decision to dissolve the injunction is well within the court’s discretion.”

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United States District Court
For the Northern District of California

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Id. Green may stipulate that the value of the Roller Barge is $35,000, and also maintain his contention

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that the limitation fund should include all vessels in the flotilla. This stipulation, along with his waiver

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of the right to res judicata based on his state court proceeding and his concession that the district court

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has exclusive jurisdiction to determine the limitation of liability issues, will satisfy the stipulation

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requirements under Newton and Ross Island, allowing Green to proceed with his state court case, while

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also preserving his ability to renew the “flotilla doctrine” issue later in the limitation proceedings, if

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necessary.

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The Court, therefore, DENIES Green’s motion to increase the limitation fund, without prejudice.

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IT IS SO ORDERED.

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Dated: May 23, 2014

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SUSAN ILLSTON
UNITED STATES DISTRICT JUDGE

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