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    The Lawletter Blog

    ADMIRALTY: Limitation of Liability—Third-Party Practice

    Posted by Gale Burns on Thu, Apr 10, 2014 @ 10:04 AM

    The Lawletter Vol 39 No 2

    Matt McDavitt, Senior Attorney, National Legal Research Group

         The federal Shipowner's Limitation of Liability Act ("Limitation Act"), 46 U.S.C. §§ 30501–30512 (formerly cited as 46 U.S.C. app. §§ 183 et seq.), is a useful, if often criticized, tool enabling owners of vessels involved in injurious maritime accidents to obtain complete exoneration from liability or to cap their financial liability at the value of the vessel(s) involved, plus any cargo. A shipowner faced with a tort, personal injury, or wrongful death suit may invoke the Limitation Act by filing suit in the appropriate federal district court, forcing all potential claimants to appear in order to decide the limited issues of (a) whether the vessel owner/petitioner may indeed attain the protections of the Act and, if so, (b) what maximum damages may properly be assessed against the shipowner if it is found liable in the tort, personal injury, or wrongful death suit.

         A question that often arises in the Limitation Act proceeding to determine the scope and value of vessel owner liability is whether third-party practice is allowed in such limited-issue actions. A shipowner accused by an injured plaintiff may wish to implead codefendants for the purpose of securing indemnity and contribution from alleged joint tortfeasors. A common scenario in vessel accidents is that shipowners wish to implead the manufacturer or designer of the vessel or its components, the negligence of whom was alleged to be the proximate cause of the injury.

         A review of the spare authority on this topic nationally confirms that a clear split of authority exists regarding this issue. In the Fifth Circuit, the rule is that limitation-of-liability petitioners cannot implead joint tortfeasors into the limitation action, because it is a special statutory proceeding, intended solely to allow a shipowner the opportunity to limit its liability in a separate, defensive action. The leading case nationally asserting this position is Louisiana Department of Highways v. Jahncke Service, 174 F.2d 894 (5th Cir. 1949). In that case, the shipowner/limitation petitioner sought to implead a third person alleged to be jointly liable with the petitioner into the limitation action. The limitation action respondent, Jahncke Service, moved to strike the third-party petition, the court granted Jahncke's motion, and the Department of Highways appealed.

         On appeal, the Fifth Circuit Court of Appeals upheld the decision below, noting that because limitation proceedings are special actions with limited scope, a third party may not be impleaded by the claimant for exoneration from, or limitation of, liability. A later district court decision from New York cites the Jahncke opinion in its explanation as to why limitation-of- liability claimants are not allowed to implead alleged joint tortfeasors into the limitation action:

         Rule 56 of the Admiralty Rules, 28 U.S.C.A. provides: 'In any suit, whether in rem or in personam, the claimant or respondent (as the case may be) shall be entitled to bring in  any other vessel or person (individual or corporation) who may be partly or wholly liable either to the libelant or to such claimant or respondent by way of remedy over, contribution or otherwise, growing out of the same matter.'

         It has been held that a limitation of liability proceeding is a special statutory proceeding and is not a 'suit' within the meaning of the above quoted language. Department of Highways of State of Louisiana v.Jahncke, 5 Cir., 1949, 174 F.2d 894. In that case a claimant in a limitation of liability proceeding sought without success to implead a third party. The decision in the Jahncke case is consonant with the nature and purpose of a limitation of liability proceeding. It is a special proceeding created by statute for a special purpose. It is intended to enable a shipowner to assert his statutory right to limitation of liability in a single proceeding against all claimants. It is a defensive action. Judge Learned Hand pointed this out in Algoma Central & Hudson Bay Ry. Co. v. Great Lakes Transit Corp., 2 Cir., 1936, 86 F.2d 708, 710, where he observed: 'At no time can the  owner recover a dollar by means of it from anybody.' Thus a petitioner may not seek affirmative recovery by filing a cross-libel against a damage-claimant. The Steel Inventor, D.C.S.D.N.Y., 1925 A.M.C. 226; see 2 Benedict on Admiralty 455 (6th Ed. 1940). It has  also been held that a petitioner in a limitation of liability proceeding cannot implead a third party, as petitioner seeks to do here. Petition of Texas Co., D.C.S.D.N.Y.1948, 81 F.Supp. 758; Poling Bros. No. 5-Tom Wogan, D.C.E.D.N.Y., 1937 A.M.C. 1513; but cf., The Clio-The Springhill, D.C.S.D.N.Y., 1948 A.M.C. 75; The City of Boston, D.C.D.Mass.1909, 182 F. 171. . . . [A]llowance of impleading would broaden the issues beyond those appropriate to the limitation proceeding.

    N.J. Barging Corp v. T.A.D. Jones & Co, 135 F. Supp. 97, 99 (S.D.N.Y. 1955) (emphasis added). According to this line of authority, because the sole goal of the limitation proceeding is to establish whether the vessel owner claimant is entitled to full exoneration from, or to limitation of, its liability, this factual determination must be made absent other alleged joint tortfeasors, and the findings of fact developed regarding the vessel owner's proportional fault during the limitation proceeding are res judicata in other legal proceedings. In re Tex. Co., 81 F. Supp. 758, 762 (S.D.N.Y. 1948).

         Another line of cases, however, has unequivocally allowed impleader in Limitation Act proceedings. See, e.g., In re Klarman, 270 F. Supp. 1001 (D. Conn. 1967) (on motion to implead, the district court held that shipowner, as petitioner in limitation proceeding, was entitled to implead deceased's fellow officer, the person petitioner claimed to be truly at fault, together with the town that was the employer of both police officers); In re McAninch, 392 F. Supp. 96 (S.D. Tex. 1975) (owner of shrimping vessel found adrift on the high seas with master and crew all dead from asphyxiation was entitled to implead manufacturer and installer of refrigeration equipment in use on vessel, alleging that this manufacturer was negligent and had breached its contract for the installation and manufacture of such equipment); In re Sandra & Dennis Fishing Corp., 227 F. Supp. 620 (D. Mass. 1964) (corporations that supplied allegedly defective navigational equipment to Coast Guard vessel, and contributed to loss of fishing vessel during rescue operations, could be impleaded on petition of vessel owner in the limitation-of-liability proceeding).

         This split of authority regarding whether impleader is available to Limitation Act petitioners so as to bring alleged joint tortfeasors into the limitation proceeding will likely continue until the Supreme Court addresses the issue or until a clear rule regarding impleader of joint tortfeasors is drafted into the applicable statutes and/or regulations.

    Topics: legal research, The Lawletter Vol 39 No 2, Matt McDavitt, admiralty, liability of vessel owner, Limitation of Liability Act, limitation of liability proceeding

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