Action Watersports of Incline Village, LLC v. Sierra Cloud

Filing 26

ORDERED that Plaintiff-in-Limitation' ad interim stipulation for value (ECF No. 3 ), in the sum of $420,000 with interest at six percent (6%) per year, as security for the amount or value of the Sierra Cloud is approved.It is further ordered that, pursuant to Rule F(3) of the Supplemental Admiralty Rules, all claims, suits, and proceedings against Plaintiff-in-Limitation or its property with respect to the matter in question are stayed and restrained. It is further ordered that Plaintiff-in-Limitation's ex parte application for issuance of notice and order (ECF No. 17 ) is granted. The Court will issue the proposed order attached to the ex parte application (ECF No. 17 -1). However, Plaintiff must publish notice in the San Francisco Chronicle3 once a week for four consecutive weeks. It is further ordered that no later than the date of the second publication of notice, Plaintiff-in-Limitation must mail a copy of the notice to every person l isted in its Certificate of Interested Parties (ECF No. 2 ). It is further ordered that Plaintiff-in-Limitation must mail a copy of the notice to every additional person known to have made a claim against Plaintiff-in-Limitation and/or the Sierr a Cloud relating to the matter in question. It is further ordered that, should Plaintiff-in-Limitation discover additional parties that are appropriate to name in this lawsuit, Plaintiff-in-Limitation may seek leave of Court to amend its complain t and name such parties. It is further ordered that, should the sum of the aggregate claims before the Court not exceed the value of the vessel, the putative claimants may seek leave of Court to dissolve this injunction Signed by Chief Judge Miranda M. Du on 4/27/2021. (Copies have been distributed pursuant to the NEF - DRM)

1
2
3

UNITED STATES DISTRICT COURT

4

DISTRICT OF NEVADA

5

***

6

ACTION WATERSPORTS OF INCLINE
VILLAGE, LLC,

Case No. 3:21-cv-00072-MMD-CLB
ORDER

7
Plaintiff-in-Limitation,
v.

8
9

SIERRA CLOUD, official number 950488,
Defendant.

10
11
12

I.

SUMMARY

13

On or about July 16, 2020, the catamaran vessel Sierra Cloud (“Vessel”) hit a

14

submerged rock while sailing on Lake Tahoe. (ECF No. 17 at 2.) The owner of the Vessel,

15

Action Water Sports of Incline Village, LLC (“Plaintiff-in-Limitation”), subsequently filed a

16

complaint in federal district court seeking exoneration or limitation of liability 1 (ECF No. 1)

17

and identified six individuals as potential alleged injured parties (ECF No. 2). On April 2,

18

2021, the Court issued an Order to Show Cause (“Order”) requiring Plaintiff-in-Limitation

19

to demonstrate that it was entitled to a limitation on its liability. (ECF No. 24.) Specifically,

20

the Court requested Plaintiff-in-Limitation demonstrate it has received “written notice to

21

the vessel owner [that] reveals a reasonable possibility that the claim may exceed the

22

value of the vessel and is subject to limitation.” In re Las Vegas Boat Harbor, Inc., Case

23

No.: 2:20-cv-01457-JAD-VCF, 2021 WL 1033212, at *3 (D. Nev. Mar. 17, 2021). Plaintiff-

24

in-Limitation responded and attached a declaration stating that on December 15, 2020,

25
26
27
28

1Plaintiff-in-Limitation

initiated this action in the Eastern District of California.
United States District Judge Kimberly Mueller transferred the case to this District in
accordance with Supplemental Admiralty and Maritime Claims Rule F(9). (ECF Nos. 8,
10.)

1

counsel received written notice from an attorney asserting that Plaintiff-in-Limitation was

2

liable for injuries sustained by the attorney’s clients. (ECF Nos. 25, 25-1 at 2.)

3

Because the Court finds that Plaintiff-in-Limitation has satisfied the procedural

4

prerequisites, it will grant Plaintiff-in-Limitation’s requested relief. However, the Court

5

notes that Plaintiff-in-Limitation has neither declared nor demonstrated that any claims

6

have been filed which would exceed the value of the Vessel. For the reasons explained

7

below, the Court will also grant putative claimants leave to argue the injunction should be

8

dissolved if the claims in aggregate do not exceed the value of the Vessel.

9

II.

DISCUSSION

10

Plaintiff-in-Limitation seeks exoneration or limitation of its liability relating to the

11

July 16, 2020 incident under the Limitation of Liability Act (“the Act”), 46 U.S.C. § 30501,

12

et seq., and Rule F of the Supplemental Rules for Admiralty or Maritime Claims. It

13

stipulates that the value of the Vessel is $420,000, which it offers as security in conformity

14

with Rule F(1), and seeks to limit its potential liability for all claims to that sum. (ECF No.

15

3.) Plaintiff-in-Limitation argues that because it has received a written notice of claim from

16

the attorney of putative claimants and has timely filed this action, it has satisfied the

17

procedural requirements of Rule F and is therefore entitled to the injunctive relief and

18

notice by publication afforded by the same. The Court agrees, and will issue the injunction

19

and order for notice by publication, but for the reasons explained below will also grant

20

leave to claimants who file with the Court to demonstrate that the sum of their claims do

21

not exceed the value of the Vessel.

22

The Act was “designed to encourage investment in shipping by exempting an

23

investor from a loss greater than the fund he is willing to invest in the enterprise.” Calkins

24

v. Graham, 667 F.2d 1292, 1295 (9th Cir. 1982). Although 28 U.S.C. § 1333 gives federal

25

courts exclusive jurisdiction over “[a]ny civil case of admiralty or maritime jurisdiction,” it

26

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

27

The Supreme Court has interpreted this savings clause and found it “was designed to

28

protect remedies available at common law.” Lewis v. Lewis & Clark Marine, Inc., 531 U.S.
2

1

438, 454 (2001). “Trial by jury is an obvious, but not exclusive, example of the remedies

2

available to suitors.” Id. at 454-55. Accordingly, the Court recognized two exceptions to

3

vessel owners’ general right to consolidate claims in a limitation action in federal courts:

4

(1) “where the value of the limitation fund exceeds the total value of all claims asserted

5

against the vessel owner,” and (2) “where a single claimant brings an action against the

6

vessel owner seeking damages in excess of the value of the vessel.” Id. at 442. The Court

7

further reasoned that “[w]here the value of the vessel and the pending freight exceed the

8

claims, however, there is no necessity for the maintenance of the action in federal court.”

9

Id. at 450 (citing Lake Tankers Corp. v. Henn, 354 U.S. 147, 152 (1957)).

10

In particular, the Court was concerned about reading the Act in a way that unduly

11

burdened the common law rights of claimants. The Court reasoned that expanding the

12

scope of exclusive federal jurisdiction to prevent state court actions:

13
14
15
16
17

would transform the Act from a protective instrument to an offensive weapon
by which the shipowner could deprive suitors of their common-law rights,
even where the limitation fund is known to be more than adequate to satisfy
all demands upon it. The shipowner’s right to limit liability is not so
boundless. The Act is not one of immunity from liability but of limitation of it
and we read no other privilege for the shipowner into its language over and
above that granting him limited liability. In fact, the Congress not only
created the limitation procedure for the primary purpose of apportioning the
limitation fund among the claimants where that fund was inadequate to pay
the claims in full, but it reserved to such suitors their common-law remedies.

18
19

Id. at 451 (quoting Lake Tankers Corp., 354 U.S. at 152-53). After Lewis, district courts

20

have routinely acknowledged the tension between the savings clause in § 1333 and the

21

Act, and have recognized “the district court’s task to reconcile the two.” In re Hyatt Corp.,

22

262 F.R.D. 538, 550-51 (D. Haw. 2009).

23

Likewise, the Court is aware here of its duty to balance Plaintiff-in-Limitation’s right

24

to seek limitation of its liability with the putative claimants’ common-law rights. In its Order,

25

the Court asked Plaintiff-in-Limitation to confirm that it had received a written notice of

26

claim that exceeded the value of the vessel. (ECF No. 24 at 2-3.) In response, Plaintiff-

27

in-Limitation asserts that it has “received written communications from counsel for

28

potential claimants” and its motion is timely. (ECF Nos. 25 at 2, 25-1 at 2.) However,
3

1

Plaintiff-in-Limitation states only “[i]t is believed that the total amount of all claims that may

2

be asserted may exceed the value of the interest of Plaintiff-in-Limitation in the VESSEL

3

and its appurtenances.” (ECF No. 25-2 at 3.)

4

The Court is satisfied the limitation motion is timely,2 but it remains unclear whether

5

the putative claimants’ claims exceed the value of the Vessel. Moreover, Plaintiff-in-

6

Limitation does not describe the type or severity of the injuries alleged, nor does it state

7

whether the letter it received included a demand, or otherwise alleged the aggregate

8

value of the putative claims. While the Court accepts that Plaintiff-in-Limitation may file

9

its limitation action before it has confirmed the asserted claims will exceed the value of

10

the vessel, the Court recognizes that putative claimants’ right to pursue their claims in

11

state court with the benefit of a jury trial would be unduly burdened if the aggregate sum

12

of their claims would not exceed the value of the Vessel. See Lewis, 531 U.S. at 451.

13

Accordingly, the Court will issue Plaintiff-in-Limitation’s requested orders to serve notice

14

by publication and to enjoin suits in other courts in accordance with Supplemental Rule

15

F, but will further grant leave to putative claimants who file their claims in this action to

16

argue that the sum of their claims do not exceed the value of the vessel and that the

17

injunction should be dissolved. See id. at 454 (finding that where “the District Court

18

satisfies itself that a vessel owner’s right to seek limitation will be protected, the decision

19

to dissolve the injunction is well within the court’s discretion”).

20

III.

CONCLUSION

21

It is therefore ordered that Plaintiff-in-Limitation’s ad interim stipulation for value

22

(ECF No. 3), in the sum of $420,000 with interest at six percent (6%) per year, as security

23

for the amount or value of the Sierra Cloud is approved.

24

///

25

///

26
27
28

2In

fact, Plaintiff-in-Limitation has not shown that any communication it received
“reveals a reasonable possibility that the claim may exceed the value of the vessel,” which
would start the statute of limitations. Las Vegas Boat Harbor, Inc., 2021 WL 1033212, at
*3.
4

1

It is further ordered that, pursuant to Rule F(3) of the Supplemental Admiralty

2

Rules, all claims, suits, and proceedings against Plaintiff-in-Limitation or its property with

3

respect to the matter in question are stayed and restrained.

4

It is further ordered that Plaintiff-in-Limitation’s ex parte application for issuance of

5

notice and order (ECF No. 17) is granted. The Court will issue the proposed order

6

attached to the ex parte application (ECF No. 17-1). However, Plaintiff must publish notice

7

in the San Francisco Chronicle3 once a week for four consecutive weeks.

8

It is further ordered that no later than the date of the second publication of notice,

9

Plaintiff-in-Limitation must mail a copy of the notice to every person listed in its Certificate

10

of Interested Parties (ECF No. 2).

11

It is further ordered that Plaintiff-in-Limitation must mail a copy of the notice to

12

every additional person known to have made a claim against Plaintiff-in-Limitation and/or

13

the Sierra Cloud relating to the matter in question.

14

It is further ordered that, should Plaintiff-in-Limitation discover additional parties

15

that are appropriate to name in this lawsuit, Plaintiff-in-Limitation may seek leave of Court

16

to amend its complaint and name such parties.

17

It is further ordered that, should the sum of the aggregate claims before the Court

18

not exceed the value of the vessel, the putative claimants may seek leave of Court to

19

dissolve this injunction.

20

DATED THIS 27th Day of April 2021.

21
22
MIRANDA M. DU
CHIEF UNITED STATES DISTRICT JUDGE

23
24
25
26
27
28

3Plaintiff-in-Limitation

proposed publication in the Las Vegas Review-Journal.
However, because the incident occurred on Lake Tahoe, the Court reasoned that
publication in a major Bay Area newspaper is more likely to reach potential unknown
claimants.
5