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.'

The Lawletter Vol 39 No 1

Charlene Hicks, Senior Attorney, National Legal Research Group

     Forum-selection clauses are commonly used in contracts to specify the location in which the parties agree to resolve any disputes that may arise between them. These clauses are important to businesses that wish to establish predictability and potential cost-savings in future litigation. Even so, until recently a split existed amongst the various federal circuit courts of appeals over the method by which a contracting party can enforce a forum-selection clause when the opposing party has filed a lawsuit in a federal forum other than the one specified in the contract. On December 3, 2013, the U.S. Supreme Court resolved this uncertainty by issuing its opinion in Atlantic Marine Construction Co. v. U.S. District Court, 134 S. Ct. 568 (2013).

     In Atlantic Marine, a subcontract between Atlantic Marine and J-Crew Management called for all disputes arising under the contract to be resolved in state or federal court in Norfolk, Virginia, where Atlantic Marine was based. J-Crew, however, filed a breach-of-contract action against Atlantic Marine in the District Court for the Western District of Texas, invoking that court's diversity jurisdiction. In response, Atlantic Marine asked the district court to dismiss the case or transfer venue to the Eastern District of Virginia. The district court denied this request, and the Fifth Circuit denied a writ of mandamus, which sought to require the district court to transfer venue or dismiss the case.

     In a unanimous opinion written by Justice Alito, the Supreme Court reversed. In so doing, the Court determined that a forum-selection clause is not enforceable by a motion to dismiss under 28 U.S.C. § 1406(a) or Rule 12(b)(3) of the Federal Rules of Civil Procedure. "Instead, a forum selection clause may be enforced by a motion to transfer venue under § 1404(a)[.]" 134 S. Ct. at 575. Under 28 U.S.C. § 1404(a), a district court may transfer a case to another district or division for the convenience of the parties, in the interest of justice.

     In reaching this decision, the Court stated that proper venue under 28 U.S.C. § 1391 is unaffected by contractual forum-selection clauses. Hence, when a case is filed in a district in which venue is proper under § 1391, a party seeking to enforce a forum-selection clause should move to transfer venue to a more convenient federal forum under § 1404(a). If the moving party wishes to transfer the case to a state forum, the motion should be made under the equivalent common-law doctrine of forum non conveniens.

     The Court then described the appropriate standard for granting the transfer request. In ordinary cases seeking the transfer of venue under § 1404(a), courts balance the convenience of the parties and various public-interest considerations to determine whether the transfer would promote the interest of justice. "The calculus changes, however, when the parties' contract contains a valid forum-selection clause, which represents the parties' agreement as to the most proper forum." Id. at 581 (internal quotation marks omitted). In such cases, the parties have preselected the forum they consider most advantageous. Thus, where a forum-selection clause exists, courts are limited to considering public interest factors only in determining whether a transfer of venue is appropriate. Further, the court is to apply the choice-of-law rules of the state that the parties selected as their forum in the contract. Under these standards, the parties' contractual choice of forum "should be given controlling weight in all but the most exceptional cases." Id. (internal quotation marks and bracketing omitted).

     Atlantic Marine is notable because it establishes the framework applicable to any case in which a contracting party seeks to transfer venue from a federal court not specified as the parties' agreed choice of venue in a forum-selection clause to the venue identified in the contract. This should serve to increase contracting parties' confidence that an agreed-upon forum-selection clause will be enforced by the courts, thereby leading to greater predictability and stability in contractual relations.

The Lawletter Vol 39 No 1

Steve Friedman, Senior Attorney, National Legal Research Group

     The doctrine of qualified immunity shields governmental officials "from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights." Harlow v. Fitzgerald, 457 U.S. 800, 818 (1982). For qualified immunity purposes, "clearly established" means that "[t]he contours of the right must be sufficiently clear that a reasonable official would understand that what he is doing violates that right." Anderson v. Creighton, 483 U.S. 635, 640 (1987).

     As recently summarized by the U.S. Court of Appeals for the Eleventh Circuit, there are several ways a plaintiff can prove that a right was clearly established for qualified immunity purposes.

He can, for instance, produce a materially similar case decided by the Supreme Court, this Court, or the highest court of the relevant state. Hoyt [v. Cooks, 672 F.3d 972, 977 (11th Cir. 2012)]. A right can be clearly established, however, even in the absence of precedent. A plaintiff can point to a "broader, clearly established principle [that] should control the novel facts in [his] situation." Mercado v. City of Orlando, 407 F.3d 1152, 1159 (11th Cir. 2005). Finally, a plaintiff may show that an "official's conduct 'was so far beyond the hazy border between excessive and acceptable force that [the official] had to know he was violating the Constitution even without caselaw on point.'" Priester v. City of Riviera Beach, 208 F.3d 919, 926 (11th Cir. 2000) (alteration in original) (quoting Smith v. Mattox, 127 F.3d 1416, 1419 (11th Cir. 1997) (per curiam)).

Morton v. Kirkwood, 707 F.3d 1276, 1282 (11th Cir. 2013).

     Most frequently, however, the parties will attempt to prove whether or not the relevant law was clearly established by citing to factually analogous case law. Typically, this is done by citing to case law that predates the defendant's allegedly unlawful conduct. But can an analogous case that is decided after the events at issue ever be relevant to the clearly established analysis? That question was recently answered in the affirmative as a matter of first impression in the U.S. Court of Appeals for the Sixth Circuit.

     In T.S. ex rel. J.S. v. Doe, No. 12-5724, 2014 WL 443376 (6th Cir. Feb. 5, 2014), the parents of two minor children who had been detained for underage drinking brought a 42 U.S.C. § 1983 suit against the juvenile detention facility and several individuals at the facility, alleging that the suspicionless strip search performed as part of the facility's routine intake process had violated the children's Fourth Amendment rights. On cross-motions for summary judgment, the individual defendants asserted qualified immunity. In support of their motion, the plaintiffs relied on Masters v. Crouch, 872 F.2d 1248 (6th Cir. 1989), which had "held that the suspicionless strip search of pretrial detainees held on minor, nonviolent offenses violated the Fourth Amendment." T.S., 2014 WL 443376, at *2 (citing Masters, 872 F.2d at 1250).

Suzanne Bailey, Senior Attorney, National Legal Research Group

The Lawletter Vol 39 No 1

     A recent decision from the Fourth Circuit Court of Appeals illustrates the risk a public employer takes when it attempts to suppress an employee's speech in order to avoid a potential lawsuit from a member of the public. Ironically, in Durham v. Jones, 737 F.3d 291 (4th Cir. 2013), there is no indication that the feared lawsuit by an arrestee was ever filed, but the defendant county sheriff was held liable to a terminated deputy sheriff for $1.1 million.

     The 42 U.S.C. § 1983 suit of the plaintiff, Deputy First Class Durham, against the defendant, Sheriff Jones, had its genesis in Durham's use of force on a suspectCpepper spray, two forearm blows to the ridge area under the suspect's nose, and two knee blows to the left side of the suspect's body—in the course of assisting a state trooper in the arrest of the suspect, who was fleeing from the trooper on a motorcycle. In a string of escalating requests after Durham had submitted a use-of-force report to his immediate supervisors, detailing the use of force, other supervisors from the Sheriff's Department demanded that he file another use-of-force report, suggested that he go to the hospital to document medical attention as a result of the incident,
and ordered him to charge the suspect with assault and resisting arrest or face assault charges himself. Durham, who had about 20 years' experience in law enforcement, did not incorporate the changes in follow-up reports or file charges against the suspect, but he did document these exchanges with superiors in subsequent reports. After being advised in writing that two specially trained criminal investigators would help him correct the "deficiencies" in his report, Durham contacted his union attorney.

     Two days later, Durham was subjected to a two-hour interrogation by the criminal investigators. He was refused permission to contact his attorney and was required to sign a document containing Miranda warnings. The investigators threatened him with both internal and criminal charges of assaulting the suspect if he did not revise his original report and delete the reports describing the requests of superiors to change the original. In spite of his misgivings about swearing a false oath, Durham ultimately made the changes under the investigators' supervision after they took his gun, ID, and badge. The items were subsequently returned to him. Durham suspected that the investigators wanted to create a better record in case the arrestee filed an excessive force complaint.

     Following the interrogation, Durham filed an internal grievance and requested an outside investigation into the matter. On that same day, Sheriff Jones demoted Durham from Deputy First Class to Deputy and suspended him with pay. After learning that the grievance would be
investigated by the very officials against whom the grievance had been made, Durham prepared a cover letter to a set of documents, which included a memorandum summarizing the events arising from his encounter with the suspect, addressed to his immediate supervisor, his original police report, the deleted follow-up reports, the false police report he created during his interrogation, the signed Miranda form, a copy of the grievance he had filed, and his suspension paperwork. He sent this packet of materials to the County State's Attorney, the Governor, the Police Academy where he had been trained, the state Police Training Commission, and the State Police, as well as to a number of media outlets, such as the local newspaper and two local television stations. He later sent the materials to additional political officials and news outlets until Sheriff Jones ordered him to stop.

The Lawletter Vol 38 No 12

Jim Witt, Senior Attorney, National Legal Research Group

     Over the past decade, a troublesome issue under the Employee Retirement Income Security Act of 1974 ("ERISA") has been resolved in stages. That issue arises when there is a conflict between the identity of the designated beneficiary under an ERISA plan and the named beneficiary's apparent inability under state law to accept the benefits (for instance, due to the beneficiary's waiver of such rights). In 2001, the U.S. Supreme Court in Egelhoff v. Egelhoff, 532 U.S. 141 (2001), held that where the plan participant had neglected to remove his ex-wife as beneficiary under an ERISA-covered insurance plan following the couple's divorce, the designation prevailed over a Washington state law providing that upon a couple's divorce, there is an automatic revocation of the beneficiary designation made by one spouse in favor of the other under a nonprobate asset such as an insurance policy. The Court's ruling also prevented the application of state law with respect to questions of survivorship in the case of simultaneous deaths and with respect to antilapse provisions, slayer's statutes, and the spousal elective share. The basis for the Court's decision was the command of ERISA that the plan administrator's payment of benefits is to be "in accordance with the documents and instruments governing the plan." 29 U.S.C. § 1104(a)(1)(D). The Court noted that allowing the application of state law as to the designation of beneficiaries would result in an undue burden on plan administrators because it would force them to become familiar with the variations among state laws applicable to these different issues.

     In Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, 555 U.S. 285 (2009), although the waiver executed by the named beneficiary/ex-spouse under the decedent-spouse's ERISA-covered savings and investment plan was classified as a "federal common law" waiver, the Supreme Court held that an ERISA plan administrator was still obligated to distribute the benefits in accordance with the beneficiary designation made under the plan. However, the Kennedy Court explicitly left open the question of whether once the benefits were distributed by the administrator, the decedent's estate could enforce the waiver against the plan beneficiary. As the Kennedy Court stated:

Nor do we express any view as to whether the Estate could have brought an action in state or federal court against [the ex-spouse designated beneficiary] to obtain the benefits after they were distributed.

Id. at 300.

The Lawletter Vol 38 No 12

Tim Snider, Senior Attorney, National Legal Research Group

     Issues involving mechanic's liens are infrequently litigated in federal court, and rarely are the issues resolved on constitutional grounds. Yet that happened recently in a case decided by the Fifth Circuit. The case involved Mississippi's "Stop Notice" statute, Miss. Code Ann. § 85-7-181. In Noatex Corp. v. King Construction of Houston, L.L.C., 864 F. Supp. 2d 478 (N.D. Miss. 2012), aff'd, 732 F.3d 479 (5th Cir. 2013), a payment dispute arose between the owner of the project and the general contractor, on the one hand, and a materials and labor subcontractor, on the other hand, with respect to a construction project in Mississippi. The subcontractor claimed that it was owed about $260,000 by the contractor and had not been paid for the project. Pursuant to the Stop Notice statute, the subcontractor provided written notice to the owner that the contractor owed it $260,000 and stated its intention to file a "Laborer's and Materialman's Lien and Stop Notice" in Mississippi chancery court.

     The effect of this notice was that funds in the amount of $260,410.15 were "bound in the hands" of the owner. See Miss. Code Ann. § 85-7-181 ("[T]he amount that may be due . . . shall be bound in the hands of such owner for the payment in full[.]"). Further, under a related section of the Mississippi Code, id. § 85-7-197, the subcontractor's filing of the Stop Notice in the lis pendens record of the chancery court had the effect of establishing its lien priority with respect to the property that was the subject of the dispute. The owner later deposited the $260,410.15 in the registry of the chancery court.