By Lawrence J. Bowles and and Robert H. Nicholas, Jr.
Download in MSWord
| Handling
a Major Casualty: Shipowners' and Shipowners' Attorneys' Response to a
Major Collision*
By Lawrence J. Bowles and and Robert H. Nicholas, Jr. |
Download in MSWord |
Contents
Handling the Major Casualty: Hypothetical Fact Situation
I. Introduction:
Casualty Response Preparations
II. Actions Upon
Receipt of Notice of a Major Casualty
III. Investigation
by Governmental Agencies
IV. Forum Selection
Considerations
V. The Foreign
Sovereign Immunities Act (28 U.S.C. Sec. 1601-1611): Considerations
Relevant to this Case
Vessels
ST BLACK FIN (Tanker) - 35,000 GRT
Time Charterer: Black Gold Oil Co.
(USA)
Owner: Black Fin Corp. (Great Britain)
Registry: Vanatua
British officers; Portuguese crew
Cargo owned by Black Gold.
MV BLUE WAVE (Dry Cargo Vessel) - 17,000
GRT
Owner: Quasi Public Corporation of
the Government of
Xanadu (newly emerged S.E. Asian Nation)
Registry: Liberian
Norwegian officers; Sri Lanka crew
The two vessels are in a collision in foggy weather off the California Coast, approximately forty-five miles off shore. BLUE WAVE is en route to S.E. Asia from San Francisco, and BLACK FIN is en route to Canada from the Middle East. The collision apparently results from error of navigation on both vessels, but helmsman of BLUE WAVE claims unable to put the helm hard over. (Reaches only 25º rudder as opposed to limit of 35º.) Steering engine in working condition after accident, but suspicious scoring in the quadrant at about 28º rudder.
In the collision, there are two deaths of crewmen of the tanker and three crew personal injuries on the cargo vessel. Following the collision, crude oil cargo begins pouring from a ruptured tank of BLACK FIN. On the cargo vessel BLUE WAVE, there is a puncture of a cargo hold and ensuing cargo damage, and a fire erupts.
Various tugs proceed to the scene and, fortunately, one is already nearby. The nearby tug, CLEAN SEAS, diverts from a voyage already in progress and enters into an L.O.F. with the master of the BLACK FIN. It promptly acts to prevent further spillage and escape of oil by patching and booming the vessel. (Tug conveniently happens to have boom equipment, as en route to Alaska to serve as tug and oil containment vessel.) Tug CLEAN SEAS then places line aboard the vessel and tows for several hours but due to inferior quality of the line, it parts.
By this time a larger tug, the SCAVENGER, has come on the scene, and there are certain verbal negotiations concerning entering into an L.O.F., the substance of which negotiations are later disputed. The L.O.F. is not signed. Tug SCAVENGER does put line on board but, subsequently, due to negligent handling of the tug, it rams tanker causing tanker to sink after being holed in another cargo tank. A major oil spill ensues. (The spill is from other tanks of the BLACK FIN. The patch put on by CLEAN SEAS on the first leaking tank holds.) The tug SCAVENGER picks up the surviving officers and crew, and they are brought to San Francisco.
Meanwhile, various efforts to extinguish the fire aboard the cargo vessel have succeeded through assistance of the U.S. Coast Guard standing by. (Vessel's fire-fighting equipment is of no help, as it is misused by the crew.) Despite available commercial assistance, the Coast Guard cutter puts a line aboard and begins towing the BLUE WAVE into port.
Oil spill results in major environmental damage to California Coast, including shellfish and oyster farming in the Tomales Bay Region, damage to Farallon bird sanctuary, and major damage along the beaches, including Sonoma and Mendocino resort properties.
The BLUE WAVE is successfully towed into San Francisco, and general average is declared. The voyage is abandoned, and cargo is put ashore, some being sold for salvage, and the sound cargo is transshipped to destination (at cargo's expense).
Various actions are commenced in San Francisco. The BLUE WAVE and BLACK FIN cargo owners commence action against BLUE WAVE and its owners and BLACK FIN owners. Security is demanded from the BLUE WAVE by BLACK FIN owners and charterers, by BLUE WAVE's own cargo and by various third parties. The cargo on both vessels seeks joint and several (100%) recovery against BLUE WAVE. BLUE WAVE asserts sovereign immunity and further that it cannot be liable for more than proportionate fault to BLACK FIN cargo. BLUE WAVE also raises the defense of error of navigation, the fire statute and the COGSA fire defense to its own cargo.
The tanker owner petitions in San Francisco to limit its liability to essentially zero value. Death and injury claims for the crew of both vessels are filed by well-known San Francisco plaintiffs' lawyers against both owners and vessels who also demand security from BLUE WAVE.
U.S. Coast Guard attempts to conduct an investigation into the cause of the collision and the oil spill and subpoenas witnesses from both vessels.
The BLUE WAVE owners commence action in Great Britain against BLACK FIN's owners and charterers and arrest a ship in a British port owned by Black Gold Oil Company, the charterer of BLACK FIN. The BLACK FIN's owners seek to enjoin the British proceedings based on prior (by one day) San Francisco limitation proceeding.
The tug CLEAN SEAS gives notice it will proceed under the Lloyd's Open Form in a Lloyd's arbitration against BLACK FIN's owners to recover for that pollution which was prevented by its timely assistance. The BLACK FIN's owners deny that they are liable and then in turn commence arbitration proceedings under L.O.F. in London against the owner of the tug SCAVENGER based on a claim of negligent salvage pursuant to TOJO MARU case. Both parties proceeding under L.O.F. demand security be posted at Lloyd's.
The U.S. Government also commences an action in San Francisco to recover cleanup expenses and sues owners of both vessels and, in addition, sues BLUE WAVE and its cargo owners for salvage services rendered by U.S. Coast Guard.
Various towns, landowners, hotel owners, fishermen and fishing companies file claims and actions for environmental damage against both owners and vessels. The State of California also sues for environmental damage under the doctrine of parens patriae.
I. Introduction: Casualty Response Preparations
In a very real and practical sense, casualty response preparations must begin long before any casualty occurs. A shipowner can consider making the following preparations, among others:
Upon receipt of notice of a major casualty, the shipowner and his lead attorney should take several steps, essentially simultaneously:
Depending upon the geographic location of the collision and the nationality of the vessels involved, a casualty of this type could be investigated by a number of different governmental agencies both U.S. (Coast Guard, National Transportation Safety Board, and State) and foreign (the Liberian Government actively investigates casualties). Counsel in charge of the casualty investigation should be prepared to immediately handle this type of investigation and be prepared to have adequate legal representation available to represent both the vessel owner and any officers that may be designated as parties by the investigating agency.
Dealing specifically with the collision facts as presented, since both the BLACK FIN and the BLUE WAVE are foreign flag vessels and the collision took place in international waters, there would most likely not be a U.S. Coast Guard investigative hearing conducted to determine the cause of the casualty. The jurisdiction of the U.S. Coast Guard is limited to investigating casualties involving vessels upon the navigable waters of the United States or involving a U.S. flag vessel wherever the accident may occur, (46 U.S.C. Sec. 239, 46 C.F.R. Sec. 4.03-1). For example, there were no U.S. Coast Guard investigations involving any of the accidents listed below because they occurred outside U.S. navigable waters and did not involve U.S. flag vessel: (1) Grounding of the ARGO MERCHANT, Nantucket Shoals, (2) Collision between the BURMAH AGATE and the MIMOSA off Galveston , Texas and (3) Allision between the GLOBTIK SUN with a Chevron production platform in the Gulf of Mexico.
While it appears from the fact situation as presented that no U.S. Coast Guard investigation would likely be conducted into the cause of the original collision, if the salvage tug SCAVENGER is a U.S. flag vessel, it is conceivable that the Coast Guard could conduct an investigation into the ramming and sinking of the BLACK FIN if caused by this vessel. However, the investigation would most likely be limited to the events which occurred after the collision between the BLACK FIN and BLUE WAVE.
For purposes of our discussion, let us assume that either vessel may have been a U.S. flag vessel or the accident occurred in U.S. navigable waters. Given the magnitude of the casualty, the resulting loss of life and personal injuries, as well as the pollution damage, the Coast Guard, if it had jurisdiction, would most likely conduct some type of marine casualty investigation. Pursuant to the applicable regulations (46 C.F.R. Sec. 4.07-1), the investigative hearing would be charged with the responsibility for determining (1) the cause of the accident, (2) whether there was evidence of any equipment or material failure, (3) whether there was evidence of misconduct, inattention to duty, negligence or a willful violation of the law by any licensed or certified person (U.S. Seaman may have their licenses or certificates suspended or revoked, but monetary penalties only can be assessed against foreign nationals for rules of the road violations), (4) whether there was evidence that any Coast Guard personnel or other government agency personnel caused or contributed to the casualty; and (5) whether the matter should be submitted to a formal Marine Board of Investigation for further investigation pursuant to 46 C.F.R. Sec. 4.09.
In any event, given a casualty of this size, if the U.S. Coast Guard had jurisdiction, counsel should expect at least a full formal hearing by a single officer. This type of proceeding, if multiple parties are involved such as in a collision, is adversarial in nature which means that counsel must be prepared, essentially, to try his case before the investigating officer because parts of any government report may be received in evidence in later litigation. Federal Rule of Evidence 803(8). Counsel representing any party in interest has the right of cross examination and may raise objections to questions raised by opposing counsel which will be ruled on by the hearing officer. Note, however, that the hearing officer is not normally a lawyer and is usually unfamiliar with the rules of evidence. In addition there is no provision in the rules or regulations for appealing an improper or unreasonable ruling.
As part of a formal hearing witnesses will be subpoenaed and required to testify. In addition, parties in interest will be named, i.e., such as the vessel owner, master and or other officers and crew involved in the casualty. In many cases the hearing will begin immediately after the casualty, often within twenty-four hours. This may present a problem for counsel in that adequate time for consulting with witnesses may not be available. In addition, the Coast Guard frequently attempts at an early stage to remove documents from the vessel such as the log books, bell books and course recorder roll. If the Coast Guard removes the documents before counsel arrives, counsel may find that until he has these documents in his possession he is not able to adequately consult with his witnesses before any hearing. Nothing in the Marine Investigation Regulations, 46 C.F.R. Part 4, requires that ship voyage records be turned over to the Coast Guard at an early stage before any hearing. It is usually sufficient to allow the Coast Guard investigator to view the documents or take copies of them. The original documents can be displayed at any hearing, but counsel should carefully protect the originals for use in litigation.
In the event the vessel owner as well as the master and other ship's officers are named as parties in interest, counsel may need to consider obtaining separate representation for each, particularly if there is a possibility that one or more of the parties may be charged or if it appears there is conflict of interest between the parties. This matter should be discussed with ship's personnel involved as well as with the vessel owners' management.
As a final note, counsel should be prepared to address any inquiries, charges, or request for the production of witnesses and/or documents by State agencies. Many states have in recent years taken a more active role as PARENS PATRIAE in the protection of their coast lines from pollution damages caused by oil spills from ships. In some cases states have gone so far as to pass regulatory legislation attempting to control vessel design and operation. To date all such laws have been held unconstitutional, but the threat of state action remains. See Ray v. Atlantic Richfield Co., 435 U.S. 151, 98 S. Ct. 988 (1978); Chevron USA v. Hammond, 1980 A.M.C. 2416 (D. Alaska 1979).
IV. Forum Selection Considerations
To the extent events are subject to control and choice, each lead attorney will commence consideration of all issues as to where litigation would be most advantageous to his client (obtaining necessary advice from competent attorneys in each non-U.S. jurisdiction that may be considered) and make necessary recommendations to try to ensure that the litigation does take place where desired. Obviously, it is not always possible to control these events.
After major casualties it is not unknown to have litigation on various aspects of the matter occur in three or more countries.
Under the hypothetical facts of this case, the choices of forum appear to be relatively limited.
Considering the number of parties likely to claim damages and likely to seek to sue the BLACK FIN's owner and/or charterer in California, consideration must be given to all potential benefits and detriments to litigation in California. Two threshold questions would be (a) Are owner and/or charterer subject to the California courts' jurisdiction on any basis? and (b) Are Owner and/or charterer potentially liable for the damages or part thereof? If they must defend the claims in California in any event then owner and charterer must try to take advantage of the U.S. laws including seeking limitation of liability under 46 U.S.C. Sec. 181-189.
The BLACK FIN's owner's decisions on what forum to select may depend in part on whether other potentially liable parties are suable in one forum or another. Here, the BLUE WAVE and her owner may be subject to suit in California - especially if the BLUE WAVE is towed there for repairs. Also, if the tug SCAVENGER proceeds to San Francisco to discharge the BLACK FIN's crew, she and her owner may be sued there.
Here, since the facts are that the BLACK FIN's owner filed a complaint in the U.S. District Court in San Francisco seeking exoneration from or limitation of liability under U.S. law clearly the BLACK FIN interests concluded that that step was either advantageous to or was necessary for the protection of the BLACK FIN's owner.
However, since neither the BLACK FIN's owner nor any other party apparently takes any action against the SCAVENGER in San Francisco apparently the tug did not call there or did not stay there long enough to be arrested. Also since the BLACK FIN's owner proceeds against the SCAVENGER in London, in arbitration before Lloyd's, apparently the BLACK FIN's owner believes that is his best course of action against the SCAVENGER. We assume the BLACK FIN's owner would have compared the SCAVENGER's limitation fund in the U.S. to that in England in making his decision.
(B) Considerations of the BLUE WAVE's Owner
Since the BLUE WAVE is heavily damaged it seems unlikely that she could possibly complete her voyage. Rather, it appears that she would have had to be towed to some port where the cargo can be discharged and where the vessel can be repaired. Here, the possible choices would include ports in Mexico, Canada or the United States.
We understand there are no adequate repair facilities on Mexico's West Coast. Assuming there are adequate repair facilities in Vancouver, and in various U.S. West Coast ports, including San Francisco, where should the ship be taken to seek the most favorable legal results?
We understand that Canada applies the limitation scheme of the 1957 Brussels Convention (the rate is now about $88 Canadian per limitation ton), that Canada applies the 1910 Brussels Convention regarding proportionate fault recovery by cargo on the opposing ship, but that Canada allows the arrest of commercial ships owned by foreign sovereign governments (The Federal Court Act, Sections 43 (2) and (7)).
The U.S. limitation law will be discussed below. Usually (but not always), cargo interests expect to recover 100% of their damages from the non-carrying ship. (The cargo considerations will be discussed in detail by another speaker.) And while ships owned by foreign sovereign governments are subject to arrest in the U.S., the claimants against such ship should avoid arrest because of the drastic penalty involved (loss of any remedy). In certain instances a sovereign government vessel owner may be liable in personam. (Certain aspects of the sovereign immunity defense under the Foreign Sovereign Immunities Act will be discussed in detail below.)
The owner of the BLUE WAVE would have some very difficult decisions to make. If the BLUE WAVE's owner can be sued in personam in California in any event, it would not be beneficial to take the ship to a Canadian port where the ship might be arrested and where security might have to be posted which might increase the overall exposure, losses and expenses of her owner.
A main issue here would be: are there grounds under which the BLUE WAVE's owner could expect sovereign immunity (under the F.S.I.A.) from any or all claims in the U.S.? This will depend on an analysis of the facts in light of the exceptions to the jurisdictional immunity of a sovereign state under 28 U.S.C. Sec. 1605(a)(2) and (b). (We are assuming that the Government of Xanadu has not waived sovereign immunity by treaty or contract. 28 U.S.C. Sec. 1605(a)(1).)
If, based on an analysis of all the facts in light of the F.S.I.A. there is any possibility of obtaining sovereign immunity for the BLUE WAVE's owner, then her owner must avoid taking any affirmative judicial action that would amount to a waiver of the sovereign immunity defense under 28 U.S.C. Sec. 1607.
For example, if the BLUE WAVE's owner were to file claim in the BLACK FIN's limitation action, a counterclaim could be filed by the BLACK FIN's owner and cross-claims could be filed against the BLUE WAVE's owner by all claimants who file claims in the BLACK FIN's limitation action. British Transport Commission v. United States, 230 F.2d 139 (4th Cir. 1956), aff'd, 354 U.S. 129 (1957); In re Oil Spill by Amoco Cadiz, 491 F. Supp. 161 (N.D. Ill. 1979).
If there is any chance that the BLUE WAVE's owner will be held subject to the in personam jurisdiction of the court then the BLUE WAVE's owner must also consider seeking limitation of liability under U.S. law. However, the filing of a complaint seeking limitation of liability would certainly be a submission to the jurisdiction of the court and a waiver of any possible defense of sovereign immunity.
The BLUE WAVE's owner can overcome this waiver problem by filing conditional claims in the BLACK FIN's limitation action. The BLUE WAVE's owner can also file its own conditional complaint seeking limitation of liability, and, if sued, it can file conditional counterclaims (all of which steps must be timely made to avoid prejudice in the event sovereign immunity is denied.) At the same time it may seek a declaratory judgment on its sovereign immunity defenses. If the court sustains the sovereign immunity defense, the BLUE WAVE's owner would agree to dismiss (a) its own claims from the BLACK FIN's limitation action, (b) its own limitation complaint, and (c) any counterclaims it has filed. This approach was followed in Matter of Rio Grande Transport, Inc., 516 F. Supp. 1155 (S.D.N.Y. 1981).
Apparently to avoid filing any claims in the BLACK FIN's limitation action that could constitute a waiver of the sovereign immunity defense, or for other reasons, the BLUE WAVE's owner chose to sue the BLACK FIN's owner in England. If such suit were allowed, probably ultimately, the BLACK FIN's owner would have to seek limitation of liability under English law.
One advantage to the BLUE WAVE's owner would be to avoid filing claims in the BLACK FIN's limitation action in California where the limitation fund would be very modest and where, under U.S. law (The Catskill, 95 F. 700, 702 (S.D.N.Y. 1899); Petition of Diesel Tanker A.C. Dodge, Inc., 282 F.2d 86, 89 n.1 (2d Cir. 1960)), the limitation fund would be available first to the so-called innocent third parties. Thus, in the U.S., the BLUE WAVE's owner would likely recover little or nothing from the BLACK FIN's limitation fund in any event.
Can the BLACK FIN's owner stop the BLUE WAVE's owner from proceeding in England? Probably not! Consider the collision off Le Havre, between the Norwegian flag RONDA and the U.S. flag LUCILLE BLOOMFIELD, in which BLOOMFIELD's owner sought limitation in the District Court for the Eastern District of Louisiana, posted its U.S. limitation fund there, and obtained the usual order restraining all suits against the limiting owner except in that court. Shortly thereafter, while on another voyage to Europe, and while in an English port, the BLOOMFIELD was arrested and proceeded against by RONDA's owner.
The BLOOMFIELD's owner moved to hold both the RONDA's owner and her U.S. counsel in contempt for violating the injunction issued by the District Court in Louisiana. Bloomfield Steamship Company v. Charles S. Haight, 227 F. Supp. 615 (E.D. La. 1967). Judge Ainsworth held that the injunction had no extra-territorial effect and denied BLOOMFIELD's contempt motion. This decision was affirmed by the United States Court of Appeals for the Fifth Circuit, 363 F.2d 872 (5th Cir. 1966), cert. denied, 386 U.S. 913 (1967).
Meanwhile the RONDA's owner was also sued in New York by cargo interests and RONDA's owner filed a complaint seeking exoneration from or limitation of liability in the District Court for the Southern District of New York. And meanwhile, several cargo interests and the French Government filed suits against both vessels in France for cargo damage and wreck removal because the RONDA ultimately sank and became a total loss in Le Havre.
The BLOOMFIELD interests which had filed claims against the RONDA in RONDA's limitation action in New York moved to have the New York Court stay RONDA's action against BLOOMFIELD in England. The United States District Court for the Southern District of New York also denied BLOOMFIELD's motion. Petition of A/S J. Ludwig Mowinckels Rederi, 268 F. Supp. 682 (S.D.N.Y. 1967), aff'd, 422 F.2d 728 (2d Cir. 1970).
In denying BLOOMFIELD's motion, both the Southern District and the Court of Appeals for the Second Circuit referred to Judge Ainsworth's decision in Bloomfield Steamship Co., 227 F. Supp. 615, that the injunction in BLOOMFIELD's limitation action "had no extraterritorial effect". 268 F. Supp. at 689, 422 F.2d at 732. And the Court of Appeals quoted Judge Ainsworth's conclusion that:
Thus clearly, if the BLUE WAVE's owner does not file any claim in the BLACK FIN's California limitation action, the District Court in California would not enjoin the BLUE WAVE's action against the BLACK FIN in a foreign country - because the limitation injunction has no extra-territorial effect.
However, if the BLUE WAVE's owner ever seeks to file its own limitation action in the U.S., the U.S. court could, as a matter of discretion under the "broad equity powers" of the limitation court, set conditions on the BLUE WAVE's owner's right to seek limitation in the U.S., which conditions could include requiring the BLUE WAVE's owner to discontinue its foreign action against the BLACK FIN.
Whether the BLUE WAVE would ultimately gain any substantial benefit by suing the BLACK FIN's owner in a foreign jurisdiction is open to question. In the RONDA - BLOOMFIELD litigation, BLOOMFIELD was complaining that it would be required to post two limitation funds, one in the United States and one in England. But English law provides some protection for a shipowner in such situation. See Thomas, British Concepts of Limitation of Liability, 53 Tul. L.R. 1205, 1245 (1979); Article 3 (4) of the 1957 Brussels Limitation of Liability Convention. Accordingly, on final settlement between the parties in England, BLOOMFIELD received a partial credit against its own limitation fund for what it had paid to the cargo claimants in the United States and in France. Thus the RONDA did not obtain the BLOOMFIELD's full English limitation fund to itself. RONDA received only a pro-rata amount (less than half) of the BLOOMFIELD's English limitation fund.
Further, what the BLUE WAVE obtains from the BLACK FIN in another jurisdiction with respect to the collision claims probably would have to be added to its own limitation fund in the United States (if it ultimately files a limitation action in California). See O'Brien v. Miller, 168 U.S. 287 (1897); Petition of A/S J. Ludwig Mowinckels Rederi, 268 F. Supp. 682, 690 (S.D.N.Y. 1967).
In outline form, the following F.S.I.A. considerations are relevant to this case:
C. The U.S. District Courts have original jurisdiction of all claims by or against foreign states (28 U.S.C. Sec. 1330, 1332(a)(4)) and any civil action brought in a State court against a foreign state may be removed by the foreign state to the U.S. District Court (29 U.S.C. Sec. 1441(d)) - but in all cases no jury trial is provided for. Venue is governed by 28 U.S.C. Sec. 1391(f).
D. Service of process is governed by 28 U.S.C. Sec. 1605(b)(1) (for maritime lien claims which thereafter are deemed in personam claims (limited to the value of the vessel or cargo on which the maritime lien arose)), and by 28 U.S.C. Sec. 1608 for all other in personam claims.
E. The foreign state defendant's contracts with the forum must be sufficient to satisfy the "minimum contacts" required by International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945), so that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. Texas Trading v. Federal Republic of Nigeria, 647 F.2d 300, 313-315 (2d Cir. 1981).
The background and purpose of the F.S.I.A. and some of the problems in its application are well outlined in the following authorities, among others:
Jet Line Services, Inc. v. M/V Marsa El Hariga, 462 F. Supp. 1165 (D. Md. 1978);
Simmons, Admiralty Practice Under The Foreign Sovereign Immunities Act - A Trap For The Unwary, 12 J. Mar. L. & Com. 109 (1980);
Velidor v. L/P/G Benghazi, 653 F.2d 812 (3d Cir. 1981);
Texas Trading & Milling Corp. v. Federal Republic of Nigeria, 617 F.2d 300 (2d Cir. 1981);
Gemini Shipping, Inc. v. Foreign Trade Organization for Chemicals and Foodstuffs, 647 F.2d 317 (2d Cir. 1981);
Verlinden B.V. v. Central Bank of Nigeria, 647 F.2d 320 (2d Cir. 1981);
Note, Foreign Sovereign Immunities Act - The Second Circuit Construes the Act's Provisions and Considers The Constitutional Limitations Upon Its Application, 13 J. Mar. L. & Com. 105 (1981);
Trendtex Trading Corporation v. Central Bank of Nigeria, [1977] 2 WLR 356 (Court of Appeal);
The I Congreso, [1981] 2 Lloyds L.R. 367 (House of Lords);
Matter of Rio Grande Transport, Inc., 516 F. Supp. 1155 (S.D.N.Y. 1981); and
Gibbons v. Udaras na Gaeltachta, 549 F. Supp. 1094 (S.D.N.Y. 1982).
The available information is sketchy (not untypical of the situation facing an attorney shortly after a majority casualty - at a time when important recommendations must be made to his clients).
We know that the BLUE WAVE is owned by Quasi Public Corporation, of the Government of Xanadu, but the ship is registered in and presumably flies the flag of Liberia and she is manned by Norwegian officers with a crew from Sri Lanka. We know the BLUE WAVE was en route to Southeast Asia (not necessarily to Xanadu alone) from San Francisco. We do not know why the BLUE WAVE was in San Francisco. It appears the BLUE WAVE was carrying commercial cargo, (but we do not know where the cargo was loaded, nor do we know who owned that cargo). The cargo was not necessarily owned by the Government of Xanadu since after the accident general average was declared and the sound cargo was transshipped to destination - at cargo's expense. We know that the BLACK FIN is owned by a foreign corporation and is manned by a foreign crew. And we know that oil pollution damage is caused in the United States.
2. Exceptions to Jurisdictional Immunity (Consideration A)
With the above facts in mind we analyze the relevant exceptions to jurisdictional immunity provided for in the F.S.I.A. to determine whether the claim of sovereign immunity by the BLUE WAVE's owner, the Government of Xanadu, would likely be sustained or defeated.
We assume the Government of Xanadu would be able to provide to the court appropriate affidavits, certified by the United States Department of State and/or other evidence establishing that the Government of Xanadu is a "foreign state" within the meaning of F.S.I.A., 28 U.S.C. Sec. 1603(a) or (b), and is thus entitled to claim sovereign immunity under the F.S.I.A. in the first instance.
We also assume that the Government of Xanadu has not waived its immunity by treaty or contract (28 U.S.C. Sec. 1650(a)(1)) and we assume that the Government of Xanadu has taken no affirmative judicial action in the United States that would amount to a waiver of immunity under 28 U.S.C. Sec. 1607 or, alternatively, if judicial action were taken, it would have been of a conditional nature - i.e., action that would be dismissed if the sovereign immunity defense is sustained.
The remaining relevant exceptions would be those contained in 28 U.S.C. Sec. 1605(a)(2) and Sec. 1605(b). These exceptions turn on whether the action is based upon the "commercial activity" or "act" of the foreign state carried on either in the United States or elsewhere, and, if elsewhere, whether that activity or act caused a "direct effect" in the United States.
Matter of Rio Grande Transport, Inc., 516 F. Supp. 1155 (S.D.N.Y. 1981), concerned claims arising from a collision in the Mediterranean Sea between the YELLOWSTONE, an American flag ship, and the IBN BATOUTA, an Algerian flag ship owned by a national corporation of the Republic of Algeria. As a result of the collision, the YELLOWSTONE sank, her cargo was lost and several of her crewmen were killed or injured.
The YELLOWSTONE's owner, a one-ship corporation, sought limitation of liability in the U.S. District Court for the Southern District of New York and the IBN BATOUTA's owner also received claims in New York. To preserve its rights, the IBN BATOUTA's owner filed conditional claims in the YELLOWSTONE's limitation action and timely filed its own conditional limitation action in New York, at the same time seeking a declaratory judgment on its sovereign immunity defenses.
The facts were that the IBN BATOUTA was en route from Algeria to West Germany, as part of a regular commercial service between Algeria and Northern Germany, as part of a regular commercial service between Algeria and Northern European ports; and that while the IBN BATOUTA's owner had other commercial shipping activities, some of which were carried on in the United States, the IBN BATOUTA's activity had no contact with the United States.
The District Court concluded with respect to the first clause of Sec. 1605(a)(2):
Certainly the operation of the IBN BATOUTA in that case was a "commercial activity" of a "foreign state elsewhere", and the court stated that the "pivotal issue" was whether the collision between the IBN BATOUTA and the RIO GRANDE was an "act" that caused a "direct effect" in the United States. 516 F. Supp. at 1162.
The court found that the collision undoubtedly caused a direct effect on Rio Grande Transport, Inc., which direct effect was located in the United States, because the YELLOWSTONE was the sole source of income of Rio Grande Transport, Inc., a New York corporation. Thus, the court ruled that the collision had a direct effect in the United States.
At the material times the YELLOWSTONE was carrying a cargo of grain to Tunisia, which cargo was owned by a Tunisian Government corporation, and which cargo was being shipped to Tunisia under the U.S. Government's Public Law 480 Program. Based on evidence given by a representative of the U.S. State Department, the court concluded that the loss of Tunisia's grain cargo also had a "direct effect" in the United States because the loss impeded American foreign policy means and objectives. 516 F. Supp. at 1163 n.9.
In Matter of Rio Grande Transport, Inc., the court thus found "direct effects in the United States" with respect to both the YELLOWSTONE's owner and with respect to the owner of her cargo.
However, there were also a number of death and personal injury claims asserted against the IBN BATOUTA's owner by or on behalf of the YELLOWSTONE's American crewmen. Referring to earlier decisions involving deaths and injuries of American citizens in foreign countries caused by foreign state corporations, in which the courts held that the "direct effects" did not extend into the United States (see cases cited at 516 F. Supp. at 1163), the court noted that while it would have subject matter jurisdiction over the claims of the YELLOWSTONE's owner and the claims of the YELLOWSTONE's cargo owners, it would not have subject matter jurisdiction over the wrongful death and personal injury claims of the American seamen on the YELLOWSTONE. ("Direct effects" vis-a-vis personal injury and death claimants will be discussed in detail by another speaker.)
The court then raised the question as to whether the finding of a single direct effect would be sufficient to convey subject matter jurisdiction over all the claims asserted against the foreign government shipowner in that owner's U.S. limitation action, or whether a direct effect must be shown to each claimant on an individual basis. 516 F. Supp. at 1163. The court did not directly answer the question. Instead the court side-stepped the question by referring to the "policies" of the F.S.I.A. and the Limitation Act (both of which favor adjudication of all claims against a shipowner in one action), and the court ruled that it had subject matter jurisdiction over all claims against the IBN BATOUTA's owner in its own limitation action.
Under the hypothetical facts of this case, there is no indication of any regular course of commercial activity with substantial continuing contacts with the United States. If that is correct, the first clause of Sec. 1605(a)(2) may not be used to defeat the Government of Xanadu's claim for sovereign immunity.
In our view the second clause of Sec. 1605(a)(2) is inapplicable. There is no indication that the action is based upon "an act performed in the United States in connection with a commercial activity of a foreign state elsewhere."
Regarding the third clause of Sec. 1605(a)(2), under the hypothetical facts here, while the operation of the BLUE WAVE would likely be considered "a commercial activity of a foreign state elsewhere", and the collision would likely be considered an "act" outside of the U.S. in connection with that "commercial activity", it would be impossible, we think, to find "a direct effect in the United States" with regard to the claims of the BLACK FIN's owner for loss or damage to the BLACK FIN, or with respect to the personal injury or death claims of the BLACK FIN's or BLUE WAVE's crews - all of which are either foreign corporations or foreign citizens who have no connection with the United States.
Clearly, if the litigation concerned only alien plaintiffs against a foreign sovereign state with no relation to the United States, our courts would likely hold they had no power to hear such suit. Verlinden B.V. v. Central Bank of Nigeria, 647 F.2d 320 (2d Cir. 1981).
Thus if the BLUE WAVE's owner takes no affirmative judicial action he could likely defeat the claims of the BLACK FIN's owner and crew and those of his own crew in the U.S.
However, to the extent that the original collision may have caused or contributed to the oil pollution damage to U.S. citizens in California, or to the State of California or its municipalities or to the U.S. Government for clean-up costs, then there would likely be a "direct effect" in the United States and subject matter jurisdiction would likely be found against the BLUE WAVE's owner with respect to such claims.
We do not have sufficient information regarding the BLUE WAVE's cargo to know who owned it, or whether there are grounds on which it might be argued that its loss had a "direct effect" in the United States. If the cargo were owned by foreigners then the cargo interests would be in the same category with the BLACK FIN's owner and the crews of the two ships. But if the BLUE WAVE's owner sues the cargo owner in the U.S. for cargo's general average contribution, then cargo could counterclaim under Sec. 1607 on the ground that the BLUE WAVE's owner had waived its sovereign immunity defense.
If the BLUE WAVE's owner filed a conditional complaint seeking limitation of liability, and immunity were denied as to any claimant, then very likely, under both British Transport Commission v. United States and Matter of Rio Grande Transport, Inc., the court would find subject matter jurisdiction against the BLUE WAVE's owner over all claims asserted against that owner in its own limitation action.
Under Sec. 1605(b), since each of the various claimants against the BLUE WAVE would have maritime tort lien claims against the BLUE WAVE, and if that vessel were taken to California for repairs, etc., and each maritime claimant against the vessel complies with the requirements of service of process under Sec. 1605(b) then the maritime lien claims will be deemed to be in personam claims against the BLUE WAVE's owner - but the court could not award judgment against the BLUE WAVE's owner in an amount greater than the value of the BLUE WAVE at the time the notice of suit were given (namely after the accident).
3. The "Fairness" Standard (Consideration E)
Assuming service has been made under Sec. 1608 then the district court would have statutory personal jurisdiction over the foreign state under Sec. 1330(b) as to any claim the district court has power to hear under Sec. 1330(a). The next consideration is whether there are any constitutional constraints on the district court's exercise of personal jurisdiction over a foreign state. In Texas Trading v. Federal Republic of Nigeria, 647 F.2d 300, 313-316 (2d Cir. 1981), the court reviewed cases involving the application of constitutional due process to suits against foreign states. Referring to International Shoe Co. v. Washington, 326 U.S. 310 (1945) the court stated:
4. Conclusions Regarding the Foreign Sovereign Immunity Defenses of the Government of Xanadu
If the Government of Xanadu takes no affirmative judicial action, then its chances of having its sovereign immunity defenses sustained as to the foreign owner of the BLACK FIN and the foreign crewman on both the BLACK FIN and the BLUE WAVE appear good. We cannot reach any conclusions as to whether the sovereign immunity defense would be sustained with regard to the cargo claims - except that if the BLUE WAVE's owner files suit against those cargo owners for general average contributions then as to those claims it will certainly waive its sovereign immunity defense - unless the suit is conditional and it is willing to waive recovery of general average contributions in order to maintain its sovereign immunity defense.
However, there would probably be no immunity towards the pollution claims from the U.S. Government, state and local governments or private claimants. And pollution suits might well result in very large damage judgments. If the BLUE WAVE's owner fails to file a complaint seeking exoneration from or limitation of liability with respect to the pollution claims in a timely manner, then, for all practical purposes, it will likely waive all right to seek limitation of liability. (This point is discussed further below.) On the other hand, if it files a complaint seeking limitation of liability then the Government of Xanadu would be submitting itself to the jurisdiction of the court probably for all claims that may be asserted against it in the limitation action.
On balance, rather than waive the right to seek limitation as to what would probably be the largest quantum of claims, probably the Government of Xanadu should go ahead and file a conditional complaint seeking exoneration from or limitation of liability and raise its sovereign immunity defenses.
VI. Limitation of Liability under 46 U.S.C. Sec. 181-189
| 46 U.S.C. Sec. 183(a) - | Limit of liability not to exceed value of vessel (after casualty) and pending freight if loss incurred without the privity or knowledge of the owner, extended to "any vessel, whether American or foreign". |
| 46 U.S.C. Sec. 183(b) - | Provides for a maximum limit of $60 per ton for personal injury and death claims if the limitation fund under Sec. 183(a) is insufficient to pay said claims in full. |
| 46 U.S.C. Sec. 183(c) - | Tonnage equals net tonnage plus amount deducted from gross tonnage on account of engine room space. (The limitation tonnage will total roughly 90% of gross tonnage. See ship's Certificate of Admeasurement.) |
| 46 U.S.C. Sec. 183(e) - | Privity or knowledge of the Master or Managing Agent at or prior to commencement of each voyage shall be deemed conclusively the privity or knowledge of the owner of such vessel for personal injury or death claims only. |
| 46 U.S.C. Sec. 185 - | Petition (now complaint) to limit
must be filed within six months, must post bond or adequate security subject
to court approval.
|
Owners (Sec. 183(a)) and bareboat charterers (Sec. 186) clearly have the right to seek limitation of liability. And between the time the limitation statute was first enacted (1851) and the time it was last amended (1936), probably the purpose of the Act (encouraging investments in shipping) was adequately accomplished by granting the right to seek limitation only to owners and bareboat charterers - as they were the parties likely to be operating the ships and they were the parties likely to be sued in the event of a casualty.
More recently, with the development of complex financing, chartering and operating arrangements, parties other than title owners or bareboat charterers may play some part in the operation of a ship and may be sued in the event of a major casualty.
In In re Barracuda Tanker Corp. (the TORRY CANYON), 281 F. Supp. 228 (S.D.N.Y. 1968), rev'd in part, 409 F.2d 1013 (2d Cir. 1969), the time charterer was denied the right to seek limitation. In Amoco Cadiz Lim. Procs., 1979 A.M.C. 1017 (N.D. Ill. 1979), the corporate parent (Standard Oil Company (Indiana)), the operator (Amoco International Oil Company), and an officer of the operator (Claude Phillips) were sued on theories that alleged some degree of ownership. They were denied the right to seek limitation because those parties were neither owners nor bareboat charterers.
In the hypothetical case here, the BLACK FIN's owner clearly may seek limitation, but her time charterer, Black Gold Oil Co. (U.S.A.), if sued, probably would be denied the right to seek limitation.
The complaint shall state the facts and the basis on which the right to limit liability is claimed and shall set forth information which will enable the court to determine the amount to which the owner's liability shall be limited. Fed. R. Civ. P. Admiralty Rule F2. Adequate security approved by the court must be deposited in an amount or value equal to the owner's interest in the vessel and pending freight. Fed. R. Civ. P. Admiralty Rule F1.
In addition, the complaint may demand exoneration from as well as limitation of liability Fed. R. Civ. P. Admiralty Rule F2. The complaint must also state the voyage, if any, on which the demand for limitation arises, the date and place of termination, the amounts of any demands or claims including unsatisfied liens as well as any action currently pending. Fed. R. Civ. P. Admiralty Rule F2. Other facts concerning the vessel itself and the amount of damage to the vessel, whether it was lost or otherwise, must also be included in the complaint. For a detailed list see Fed. R. Civ. P. Admiralty Rule F1-9.
Under 46 U.S.C. Sec. 185 and Rule F, if a vessel owner or bareboat charterer wishes to compel all claimants against him to sue in one court and to compel those claimants to share one limitation fund, such owner of bareboat charterer must file his complaint seeking limitation of liability in federal district court within six months of his receipt of a written notice of claim. The failure to timely file a limitation complaint may result in the loss of the defense of limitation of liability. Cincinnati Gas & Elect. Co. v. Abel, 533 F.2d 1001 (6th Cir.), cert. denied, 429 U.S. 858 (1976).
This point would be of special concern to the BLUE WAVE's owner here. It would likely take more than six months to determine whether his sovereign immunity defenses would be sustained or not. But if he waits beyond the six month period to seek limitation he may lose the right to do so.
An owner or bareboat charterer may raise the defenses of limitation of liability in his answer to any complaint at any time he is sued. The Chickie, 141 F.2d 80 (3d Cir. 1944). But if he is sued by multiple parties, especially if the suits are in different federal courts the owner or bareboat charterer would, at best, have to pay out multiple limitation funds. The defense is not available in state courts. Cincinnati Gas, 533 F.2d 1001.
With respect to a late but still timely filing, see In the Matter of the Complaint of Morania Barge 190 Inc., 690 F.2d 32 (2d Cir. 1982). In this case the Second Circuit reversed the trial court and allowed Morania to file a petition to limit liability well after the six month time limit. The original suit against Morania asked for damages in an amount far less than the value of the barge and pending freight. After the action had been on file for several years, the plaintiffs amended their petition seeking damages in an amount in excess of the value of the barge. Morania immediately filed a petition to limit its liability pursuant to 46 U.S.C. Sec. 183(a). The trial court dismissed the petition on the grounds it was time barred.
On appeal to the Second Circuit, the lower court's decision was reversed and Morania was allowed to file its petition to limit. The appellate court based its decision on the fact that the claimant had maintained in verified bills of particulars for more than four and a half years that its total claims were substantially less than the value of the vessel and that there were no other claims. The court reasoned that if the claimant were allowed to prevail, a vessel owner could be denied its right to limit in any case where the claimant amended the ad damnum clause of its original complaint, seeking damages in an amount greater than the value of the ship and pending freight, after the time limit for filing a petition to limit had expired.
Since the BLACK FIN is registered under the flag of Vanuatu, and the BLUE WAVE is registered under the flag of Liberia, the question can be raised as to the applicability, if any, of the Limitation of Shipowners Liability laws of those countries. Under the Vanuatu and the Liberian statutes, if the vessel owner limits his liability, the funds to be established5 are based upon the vessel's tonnage6 unlike the U.S. law requirement of value after the casualty. The net effect of both the Vanuatu and Liberian laws is to create funds for both personal injury and death claims as well as for property damage regardless of whether the vessels were lost or saved. Obviously, under the facts presented, any party having a claim against the BLACK FIN would want to urge the creation of a limitation fund based upon the law of the vessel's flag which would require the creation of a substantial fund. And obviously, if the BLUE WAVE's owner sought limitation, he would prefer a fund under the Liberian statute if that fund were less than the BLUE WAVE's value after collision.
Foreign limitation laws have been argued before the courts in a number of cases, including, among others:
Black Diamond Steamship Corp. v. Robert Stewart & Sons, Ltd., (the NORWALK VICTORY), 336 U.S. 386 (1949);
In the Matter of the Complaint of Bethlehem Steel Corp., 631 F.2d 441 (6th Cir. 1980);
In Re Chadade S.S. Co. (the YARMOUTH CASTLE), 266 F. Supp. 517 (S.D. Fla. 1967); and
Complaint of Ta Chi Navigation (Panama) Corp. S.A., 416 F. Supp. 371 (S.D.N.Y. 1976).
If under the foreign substantive law, the tort creates no greater liability than that recognized by the foreign limitation law or if the right to recover is co-extensive with the limitation on amount of recovery, Matter of Bethlehem Steel Corp., 631 F.2d at 445, then the foreign limitation law is substantive and may be applied in a U.S. court (but, according to Complaint of Ta Chi, 416 F. Supp. 371, only if the foreign limitation fund is less than the U.S. fund). If the foreign limitation law merely brings the claims into concourse and scales them down proportionately to share in the limitation fund, as under U.S. law, then such laws are procedural and the U.S. limitation law will be applied. Extensive expert testimony from foreign lawyers may be received by the U.S. courts to aid in resolving the issue.
Here, the maritime laws of both Liberia (Chapter 1, Section 30) and Vanuatu (Chapter 3, Section 11) adopt as the general maritime law of those countries the non-statutory general maritime law of the U.S. insofar as U.S. law does not conflict with their statutory laws. And nothing in their statutory laws appears to us to make their limitation laws "substantive" within the meaning applied by our courts. Further, here, since two collisions occurred on the high seas, involving ships flying perhaps three different flags (flag of SCAVENGER unknown), and causing damage to many U.S. citizens, corporations and various state and local governments and the U.S. Government, notwithstanding that the limitation laws of Liberia and Vanuatu are the same (as are their other substantive laws), it would seem unlikely that the laws of Liberia or Vanuatu would be held controlling on limitation of liability in our courts in this case.
6. Application of U.S. Death on the High Seas Act
Another issue which raises the question of the application of foreign law and its impact, if any, on a U.S. limitation proceeding by a foreign vessel owner concerns the application of the U.S. Death on the High Seas Act, (DOHSA), 46 U.S.C. Sec. 761-768. Under this statute, in particular 46 U.S.C. Sec. 764, any action for wrongful death which occurs upon the high seas may be maintained in a U.S. Federal District court and if the substantive law of the vessel's flag state provides a right of action for wrongful death, the action can be maintained "without abatement in respect to the amount for which recovery is authorized, any statute of the United States to the Contrary notwithstanding . . . . " (emphasis added).
The effect of this provision would be to permit a representative of deceased seaman aboard the BLACK FIN or BLUE WAVE, under our facts, to maintain separate causes of action for wrongful death outside the U.S. limitation proceedings due to the fact that the Maritime Laws of Vanuatu and Liberia recognize recovery for wrongful death by appropriate statutes. Chapter 11, Merchant Seaman Maritime Law of Vanuatu, Section 124; Chapter 10, Maritime Laws of Liberia, Section 337. The statutes in question permit actions for damages for the exclusive benefit of the deceased's wife, husband, parent, child or dependent relative against the vessel or owner. The Vestris, 53 F.2d 847 (S.D.N.Y. 1931); Complaint of Ta Chi Navigation, 416 F. Supp. 371, 379 (S.D.N.Y. 1976).
7. Privity or Knowledge of the Owner
In the case of property damage along, in order for a vessel owner to be able to avail himself of the benefits of the act, he must be able to demonstrate that the casualty arose out of circumstances "without the privity or knowledge of such owner or owners . . .", 46 U.S.C. Sec. 183(a). In the case of personal injury or death claims under 46 U.S.C. Sec. 183(e) (seagoing vessels), in addition to the owner, any privity or knowledge of the master, superintendent or managing agent is deemed to be that of the owner.
Three main questions frequently arise:
As to (2), in the corporate vessel owner context, it becomes important to ascertain which employee has the appropriate authority to act, and in what capacity, in order to determine if such employee's privity or knowledge will be imputed to the corporation.
Such factors as the scope of an employee's
authority, his or her supervisory authority and to what extent and where
this authority is exercised must be examined. In the following cases the
privity or knowledge of the employees indicated was imputed to the corporation:
In upholding the district court's ruling denying limitation, the court of appeals discussed the question of privity or knowledge and when it applies to a corporation as a result of the acts of one of its employees. The court noted that, if a corporate officer whose privity and knowledge binds the corporation goes aboard a vessel it owns and takes charge of its navigation, his negligence, which is within his own privity or knowledge, becomes that of the corporation.
In the final analysis, the more control exercised from ashore by the vessel owner, the more likely a court will deny a petition to limit liability by finding the owner had privity or knowledge of the particular defect or negligence which caused the casualty. This is true now, more so than ever, as the U.S. courts continue to look with disfavor on the shipowner's right to limit liability.
As to (3), the categories of owner's failures that can be fatal to a petition to limit liability include the failure to properly inspect the vessel or to provide a system of inspection in order to assure that it is not only seaworthy but that it is reasonably manned and equipped for its intended use and service. The following is a review of some recent cases which have dealt with these issues. For an exhaustive review, see 3 Benedict on Admiralty, "Limitation of Liability, Seaworthiness", at 5-18 to 5-25.
(1) In the Matter of the Complaint of Thebes Shipping, Inc., as owner of the S/T ARGO MERCHANT, 486 F. Supp. 436 (S.D.N.Y. 1980). Following the grounding of the ARGO MERCHANT, on Nantucket Shoals in December of 1976, which resulted in the eventual destruction of the vessel and loss of its cargo of fuel oil, the owner filed a petition to limit its liability. In denying the petition to limit the court found the vessel unseaworthy for a number of reasons and held certain facts to be within the privity and knowledge of the owner.
Principally the court found that the vessel owner had failed to exercised due diligence to assure the proper functioning of the vessel's gyrocompass. Secondly, the shipowner was found to be at fault for its failure to see that the ship's radio direction finder was properly repaired. Thirdly, the vessel owner was negligent in failing to supply the vessel with an up-to-date pilot chart. Finally, the court concluded that the vessel had been grossly mismanaged. The aggregate of these findings provided more than enough reasons to deny limitation.
In addition to the court's specific findings of unseaworthiness, one of the complainants argued that the vessel was unseaworthy for not having a LORAN. The court rejected this argument for the reason that there were sufficient navigation devices on board; however, they had not been properly maintained.
Of interest is the fact that the ARGO MERCHANT casualty predates the 1978 S.O.L.A.S. and MARPOL Protocols, and the Port and Tanker Safety Act of 1978, 48 U.S.C. Sec. 391(a), (hereinafter referred to as 1978 TSPP). Pursuant to the U.S. legislation, which was passed in response to the international agreements, U.S. Coast Guard regulations have subsequently been promulgated requiring any vessel calling at a U.S. port, including Alaska, to be equipped with an electronic position fixing device such as LORAN, satellite navigation, or other approved system, 33 CFR Sec. 164.41.
Other sections of 33 CFR Part 164 covered other requirements for both U.S. and foreign flag vessels trading to U.S. ports, including navigation equipment, charts, and other publications which must be on board, and the tests which must be conducted before entering U.S. waters.
Tankers are required to have more equipment than are other vessels. For example, tankers are required to have two operable radars which must have both a long and short range capability, 33 CFR Sec. 164.37(b). After July 1, 1982, tank vessels in excess of 10,000 gross tons are required to have a Coast Guard approved Automatic Radar Plotting Aid, 33 CFR Sec. 164.38.
(2) In the Matter of the Complaint of Bankers Trust Company as Owner Trustee and Monsanto Company as chartered owner of the SS EDGAR M. QUEENY and In the Matter of the Complaint of Villanueva Compania Naviera, S.A. (owners of the CORINTHOS), 503 F. Supp. 337 (E.D. Pa. 1980), aff‰d in part, rev‰d in part and remanded, 651 F.2d 160 (3d Cir. 1981).
(Note: The following discussion of the decisions of both the trial court and the court of appeals in the QUEENY case should be of particular interest to counsel for both the BLACK FIN and the BLUE WAVE because of the issues raised concerning the alleged mechanical problems of the EDGAR M. QUEENY and the failure of the CORINTHOS to have an inert gas system. Under the facts the BLUE WAVE was reported to have encountered a steering gear problem just prior to the collision and the BLACK FIN, being a tanker and subject to a number of international standards for tankers, including the 1978 TSPP, could be found deficient in certain required equipment.)
After a collision which occurred in the early morning hours of January 31, 1975, the owners of both the EDGAR M. QUEENY and CORINTHOS filed petitions for exoneration from or limitation of liability. At the time of the collision, the CORINTHOS, a 30,705 grt. tank vessel, was moored and the EDGAR M. QUEENY, also a tanker, had recently gotten underway from a nearby dock. The QUEENY was in the process of making a 180º turn and was being assisted by a single tug. During this maneuver the QUEENY, which was under the control of a pilot, failed to complete the turn, and collided with the CORINTHOS. The CORINTHOS exploded and burned, resulting in the loss of the CORINTHOS, the loss of several lives and very heavy property damage.
Upon the trial of the liability issues and the right to limit, the court found that a defective condition of the astern turbine and the astern guardian valve of the EDGAR M. QUEENY had caused a reduction in astern power and contributed to the collision. And the court held that was a matter within the privity and knowledge of the owner and was cause for denying the QUEENY's petition for exoneration and limitation of liability.
With respect to the CORINTHOS, the claim was made that the failure of this vessel to have an inert gas system was the cause of the fire and explosion after the collision and for this reason limitation should be denied. The district court rejected this argument and granted exoneration to the CORINTHOS because of the fact that an inert gas system was not yet required under the existing statutory timetable which would ultimately require its installation.
On appeal, the district court's decision as to the QUEENY was reversed and remanded. The court of appeals rejected the trial court's findings concerning the defective astern turbine and valve. As to the CORINTHOS the court noted that even though there was no statutory requirement for inert gas in effect at the time of the casualty, this did not preclude a finding of vessel unseaworthiness prior to the statutory implementation date. However, the court of appeals went on to state that the CORINTHOS was not unseaworthy at the time of the collision because she was in compliance with then existing U.S. and international safety requirements, and affirmed the district court's decision on the CORINTHOS.
Both the ARGO MERCHANT and QUEENY decisions are significant because of the discussions involving the question of privity or knowledge as it relates to vessel equipment and the need to comply with international or domestic safety and equipment requirements. It is obvious that these decisions raise a number of questions in regard to the facts presented in the BLACK FIN/BLUE WAVE collision.
For example, counsel for the BLUE WAVE, should carefully examine all data surrounding the repair and maintenance of the vessel's steering gear and its bridge navigation equipment such as the radar, gyrocompass and course recorder, if any, as well as any other required equipment which may have been in operation at the time of the casualty.
Concerning the BLACK FIN, since this ship is a foreign flag vessel documented in Vanuatu, counsel could be well advised to check into the applicable safety equipment aboard the vessel in order to determine whether the vessel complies with existing international requirements which are currently being implemented under the 1978 TSPP. In the event Vanuatu is not a signatory to this Convention and has not ratified the protocol, there would be no legal requirement under its law for the BLACK FIN to have the required equipment. However, it is doubtful a vessel not complying with the minimum requirements, would be allowed entry into countries such as the U.S. and Canada both of which have ratified and adopted this international agreement.
The 1978 TSPP, in general, requires the retrofitting of existing tankers with a number of safety and pollution prevention features according to a specified timetable. Retrofitting of existing tank vessels with such equipment as an inert gas system, crude oil wash, segregated ballast systems, redundant steering components, dual radars, collision avoidance navigation equipment, as well as new construction standards for new ships are all covered by the agreement. In any event, if the BLACK FIN is found to have been deficient in certain required equipment or if it had not been properly maintained, its petition to limit could be denied.7
(3) In the Matter of Ta Chi Navigation (Panama) Corporation, S.A. as owner of the SS EURYBATES, In a Cause of Exoneration from or Limitation of Liability, 513 F. Supp. 148 (E.D. La. 1981). This case arose out of a collision between the SS EURYBATES, the petitioner's vessel, and a U.S. Navy vessel the USS DAHLGREN. The trial court, in denying the petition to limit filed by the owners of the EURYBATES, found the vessel's crew including the master to be incompetent and determined that their inability to properly perform their duties was the proximate cause of the collision and resultant damage all of which was within the privity or knowledge of the owner.
(4) In the Matter of the Complaint of Delphinus Maritime, S.A. as Owner of the MV MARI BOEING for Exoneration from or Limitation of Liability, 523 F. Supp. 583 (S.D.N.Y. 1981). The vessel owner filed its petition for exoneration from or limitation of liability subsequent to the grounding of its vessel on a coral reef off the island of Bermuda. The court found the vessel to be unseaworthy in several respects at the beginning of the voyage and denied the owner's petition. The court held that there was sufficient evidence indicating the owner had failed to exercise due diligence in providing the vessel with a competent crew and master experienced in deck cargo stowage. The master was also found to have never made a North Atlantic crossing with a deck cargo. In addition, the court found the vessel deficient for failing to have a large scale chart of Bermuda on board which should have been supplied by the owner.
(5) Waterman Steamship Corporation v. Gay Cottons, 414 F.2d 724 (9th Cir. 1969). This case arose out of the grounding and subsequent loss of the petitioner's vessel the SS CHICKASAW. Following the stranding of the vessel, the owner, Waterman, filed a petition for exoneration from or limitation of liability both under COGSA 46 U.S.C. Sec. 1300-1316, and alternatively under 46 U.S.C. Sec. 183(a). The court denied both exoneration and limitation and found the vessel unseaworthy and concluded that the unseaworthiness was within the privity and knowledge of the owner.
The particular finding involved the negligence of the Captain in failing to check the fathometer after he had been told it was inoperative. This negligence was imputed to Waterman because the master had been given managerial responsibility for repairs to the vessel while it was in the Far East.
On appeal, the court of appeals rejected this finding and concluded that the master's failure to have the fathometer checked at the next port did not support the denial of limitation of liability. However, the court of appeals upheld the denial of limitation on other grounds.
The court of appeals in reviewing the trial court's findings with respect to the vessel's radio direction finder held that the failure of the vessel to have an up-to-date correction card, which was in violation of a specific statutory provision, was sufficient grounds for denying limitation even though this deficiency had been rejected by the trial court as a cause for grounding.
In holding this finding of the trial court clearly erroneous, the court of appeals referred to the Pennsylvania Rule regarding statutory fault and held that this condition which restricted the vessel's ability to take accurate radio bearings made the vessel unseaworthy, a condition within the privity and knowledge of the owner. Clearly this decision makes the point that a vessel owner's obligation to see that its vessel is seaworthy in all respects as it concerns navigation equipment is a non-delegable duty which, if breached, will result in a denial of limitation of liability if such failure can be shown to have been a cause of the casualty.
(6) In the Matter of the Complaint of Farrell Lines Inc. as Owner of the SS AFRICAN NEPTUNE, 378 F. Supp. 1354 (S.D. Ga. 1974); rev‰d and remanded, 530 F.2d 7 (5th Cir. 1976). Following an allision between the petitioner's vessel and a highway bridge which knocked part of the bridge into the water and which resulted in the injury and loss of life of a number of persons in cars which fell from the bridge, the vessel owner filed a petition to limit its liability. The trial court denied the petition on the grounds that the vessel owner was at fault for failing to have in effect safe precautions which would have prevented the vessel's helmsman from incorrectly carrying out a rudder order (i.e., the pilot had ordered 20º left the helmsman steered 20º right). The inadequacy of these procedures according to the district court were (1) insufficient bridge personnel, (2) failure to see the pilot's orders were properly carried out, (3) the watch officer was distracted by having to keep the bell book, (4) the location of the rudder angle indicator did not allow for easy detection of a steering error, and (5) the failure of the master to coordinate procedures with the bridge watch before departure. All of these deficiencies were found to be within the privity and knowledge of the owner.
The Court of Appeals reversed and remanded holding that the trial court's findings were clearly erroneous and that the casualty resulted from an error in the navigation and management of the vessel which was not within the privity or knowledge of the owner.
(7) The LADY GWENDOLEN, [1964] 2 Lloyd's List Law Reports 99, Appeal Dismissed, Court of Appeal [1965] 1 Lloyd's List Law Reports 335.
Guinness, Son & Co. (Dublin), Ltd., owners of the MV THE LADY GWENDOLEN, following a collision between its vessel and the MV FRESHFIELD November 10, 1961 in the River Mensey, sought to limit liability under English law. The LADY GWENDOLEN's owner admitted liability and alleged the collision with the anchored MV FRESHFIELD was caused by the negligent navigation of THE LADY GWENDOLEN's master and that the collision occurred without the actual fault or privity of the owner, Guinness. However, the trial court dismissed the owner's petition to limit on the grounds that the owner had failed to properly instruct its master in the use of radar.
The court in reaching its decision alluded to the fact that the master had a reputation for speed in fog. He had repeatedly over the years kept a tight schedule which could only have been maintained by traveling at full speed in total disregard of the weather. This evidence coupled with the fact that the owner's supervisory personnel failed to ensure that the master and/or the mate of THE LADY GWENDOLEN were properly instructed in the use of radar (including the fact that an operational radar does not entitle or make it safe for a vessel to proceed at full speed in fog) were sufficient grounds to dismiss the petition to limit.
In addition, the court was critical of management for not issuing instructions to its vessels requiring the mate to be on the bridge during periods of restricted visibility. The evidence introduced showed the captain and the helmsman were the only two people in the wheelhouse at the time of the collision.
While this case predates the more recent amendments to the rules of the road, in particular Rule 6 of the new International Rules which recognizes a different standard for radar equipped vessels proceeding in fog, nevertheless, even under the new rules there is no lessening of the obligation on the part of the owner to ensure that navigation personnel are thoroughly and properly trained in the use of radar as well as other types of electronic aids to navigation.
8. Limitation of Liability/The Wreck Act
While no one would argue that the BLACK FIN presents a hazard to navigation in the location it sank due to the extreme depth of water off the coast of California, if the vessel was located within U.S. navigable waters in a shallower location and presented a hazard to navigation, it would have to be removed. If it was not removed by the owner and the cost was paid for by the U.S. Government, the Government could collect this expense from the vessel owner outside the limitation proceeding if such cost was incurred by the Government pursuant to the Wreck Act, 33 U.S.C. Sec. 409, 411, 414, 415 (Rivers and Harbors Appropriation Act of 1899). For holdings that limitation is not available as to wreck removal costs. See University of Texas Medical Branch at Galveston v. United States, 557 F.2d 438 (5th Cir. 1977); Hines, Inc. v. United States, 551 F.2d 717 (6th Cir. 1977).
VII. Pollution Claims, Limitation of Liability Under 33 U.S.C. Sec. 1321 and U.S.C. Sec. 181-189
1. Limitation of Liability to U.S. Government for Cleanup Costs
The relevant subsections of the F.W.P.C.A. are 33 U.S.C. Sec. 1321(f), (g) and (h).
Under subsection (f), the owner or operator of any vessel that discharges oil is liable to the U.S. Government for actual cleanup costs under principles of strict (no-fault) liability. Such dischargers, however, may limit their liability to $150 per gross ton (minimum ($250,000 for tankers), and for inland barges, $125 per gross ton (minimum $125,000). If the discharge was the result of willful negligence or willful misconduct within the privity or knowledge of the owner or operator, the owner or operator will be held liable to the U.S. Government for the full amount of the cleanup costs. The dischargers can escape liability completely if they can prove the discharge was caused solely by (A) an act of God, (B) an act of war, (C) negligence on the part of the U.S. Government; or (D) act or omission of a third party with or without negligence or any combination of (A)-(D).
Subsection (g) uses language very similar to that of subsection (f) and appears to grant to third parties who solely cause discharges of oil the same liabilities, limitations of and exceptions from liability that subsection (f) grants to dischargers.
Subsection (h) states:
As to the sole causes dischargers, the courts have uniformly held that the Government's sole or exclusive remedy for cleanup costs is under the F.W.P.C.A. which preempts all other statutory and judge-made theories of recovery. United States v. Oswego Barge Corp., 664 F.2d 327 (2d Cir. 1981); Steuart Transp. Co. v. Allied Towing Corp., 596 F.2d 609 (4th Cir. 1979); United States v. Dixie Carriers, Inc., 627 F.2d 736 (5th Cir. 1980). Thus, absent willful negligence, etc. the Government cannot recover from a sole cause discharger more than what would be allowed under 33 U.S.C. Sec. 1321(f).
As to sole cause, non-discharging third parties dicta in Bear Marine Services, 509 F. Supp. at 715-719, and in Oswego Barge Corp., 664 F.2d at 341 n.19, indicates that since the third party sole cause non-discharger under subsection (g) is subject to the same strict (no-fault) liabilities that a discharger would have under subsection (f), the Government's sole or exclusive remedy against such third party should also be under the F.W.P.C.A., in which case, such third party should be entitled to the limitations under subsection (g).
However, in United States v. M/V BIG SAM, 505 F. Supp. 1029 (E.D. La. 1981), aff'd in part, rev'd in part and remanded, 681 F.2d 432 (5th Cir. 1982), on reh‰g, 693 F.2d 451 (5th Cir. 1982), the Government was allowed a recovery against a sole cause, negligent, non-discharging third party vessel in excess of the limits contained in subsection (g). The Fifth Circuit Court of Appeals construed subsections (g) and (h) together in a manner inconsistent with the constructions of Bear Marine Services and Oswego Barge Corp., and, in effect, rendered subsection (g) a nullity. Four judges strongly dissented from the denial of Suggestion for Rehearing En Banc. 693 F.2d at 456. A petition for certiorari has been filed.
Given the comments of the Courts of Appeal for the Second and Fourth Circuits, in Oswego Barge Corp., and in Steuart Transp. Co., it does not seem likely that those Courts would follow the Fifth Circuit Court of Appeals.
The Ninth Circuit Court of Appeals apparently would follow the Fifth Circuit. See City of Redwood City, 640 F.2d at 969-970.
It is now up to the Supreme Court to say why Congress went to the trouble of drafting the detailed provisions of subsection (g). It seems unlikely to us that Congress in the same statute, in two consecutive subsections ((g) and (h)) intended first to create a limitation scheme for sole cause non-discharging third parties (subsection (g)), whose liability would be substituted for that of a sole cause discharger under subsection (f), and then intended to immediately destroy the subsection (g) limitation scheme with subsection (h).
A detriment to the Government in proceeding under maritime tort theories under subsection (h)(2) against third parties rather than under subsection (g) of the F.W.P.C.A. is that the Government loses the right to recover its "actual" costs and must prove that its cleanup costs were "reasonable." Burgess v. M/V TAMANO, 564 F.2d 964, 983 (1st Cir. 1977).
For a discussion of what may constitute willful negligence, etc. see Tug Ocean Prince v. United States, 584 F.2d 1151.
2. Limitation of Liability for State Cleanup Costs
Numerous states and Puerto Rico have enacted strict liability statutes requiring cleanup operations and providing remedies for the recovery of state cleanup costs. The F.W.P.C.A. does not apply to state's recoveries of cleanup costs, Steuart Transp. Co., 596 F.2d at 620-621, except that under Sec. 1321(c)(2)(H) a state may be reimbursed for its oil cleanup costs from the U.S. Government's revolving fund established under Sec. 1321(k).
State cleanup claims, based on state strict liability statutes, are subject to limitation of liability under 46 U.S.C. Sec. 181-189; Complaint of Harbor Towing Corp., 335 F. Supp. 1150 (D. Md. 1971); Matter of Oswego Barge Corp., 439 F. Supp. 312 (N.D.N.Y. 1977). Essentially, the conflicts between the state statutes and the federal limitation statute must be resolved in favor of the federal statute by virtue of the Supremacy Clause. Complaint of Harbor Towing Corp., 335 F. Supp. at 1154-1155.
3. Limitation of Liability for Private Cleanup and/or Damage Claims
Private pollution cleanup or damage claimants reap no benefits under the F.W.P.C.A. As with state and local governments (and the U.S. Government, when it proceeds under 33 U.S.C. Sec. 1321(h)(2)), private pollution claimants must proceed under maritime tort doctrines subject to all defences, including those under the Limitation Act, 46 U.S.C. Sec. 181-189.
Another important issue with respect to private pollution claimants is which classes of claimants may be allowed to pursue claims. In Burgess v. M/V TAMANO, 370 F. Supp. 247 (D. Me. 1973), the claims of commercial fisherman and clam diggers were allowed to proceed while the claims of shoreside businessmen, who allegedly lost customers due to the pollution of coastal waters and beaches, in which they did not have a property interest, were dismissed.
4. Conclusions as to Pollution Claims.
(A) As to the U.S. Government's Claim for Pollution Cleanup Costs:
(ii) Even if either the BLUE WAVE's or the SCAVENGER's owner were held to be sole cause non-discharging third parties, it seems unlikely that in the Ninth Circuit they would be allowed the benefits of the limitation of liability in 33 U.S.C. Sec. 1321(g). City of Redwood City, 640 F.2d 963 (unless the Supreme Court reverses M/V BIG SAM, 505 F. Supp. 1029). And certainly if the BLUE WAVE's or SCAVENGER's owners were held in partial fault they would be denied the benefits of subsection (g). However, in any event, they should be entitled to seek the benefits of 46 U.S.C. Sec. 181-189--provided their limitation complaints are timely filed.
ENDNOTES
* This paper was presented at the PACIFIC ADMIRALTY SEMINAR - 1983 was arranged by the San Francisco maritime legal community and was sponsored by The Bar Association of San Francisco. Neither The Bar Association of San Francisco nor the contributors of the materials contained herein make any express or implied warranties concerning their use for any purpose. © 1983, The San Francisco Bar Association. All rights reserved.
1 LAWRENCE J. BOWLES is a founding partner of the firm of Nourse & Bowles, which specializes in maritime litigation involving ship collisions, groundings, products liability, marine insurance, general average, salvage and related technical and legal matters. He graduated from the U.S. Merchant Marine Academy, Kings Point, New York with honors in 1959. He served the United States Navy as a Deck Officer aboard a destroyer for three years and then became an instructor in navigation, seamanship, and the use of radar at the U.S. Naval Academy. He received his law degree from Georgetown University Law Center in 1966 and subsequently practiced maritime law with the firm of Kirlin, Campbell & Keating in New York. He is a member of the Maritime Law Association and the Association of Average Adjusters of the United States.
2 ROBERT H. NICHOLAS, JR. is a general counsel to Exxon Shipping Company. He received his law degree from the University of Texas Law School in 1966. He was formerly an Assistant U.S. Attorney with the United States Department of Justice and also worked for the Marine Department of Gulf Oil. He is a member of the Maritime Law Association, serving on the Coast Guard Committee, Navigation Committee, and Marine Ecology Committee. Mr. Nicholas is also a Commercial Arbitrator with the American Arbitration Association.
3 The Hypothetical Fact Situation was prepared by members of the Pacific Admiralty Seminar 1983.
4 We know of only one other article on the practical aspects of handling a major casualty. See Gerity, The Handling of the Big Case: Practical and Legal Considerations Concerning P&I Involvement in Catastrophes, 43 Tul. L.R. 673 (1969).
5 See Section 79 of Chapter 7 of the Vanuatu Maritime Law and Section 162 of Chapter 5 of the Liberian Maritime Law. For property damage only, a fund of $67 (U.S.) per ton is required. For personal injury and death claims, a fund of $207.70 (U.S.) is required. In cases of both property damage and personal injury and/or death claims, a fund of $207.70 (U.S.) per ton is required with $140.70 per ton being allocated for personal claims and $67 (U.S.) being allocated for property claims. However, if the personal injury or death claims cannot be satisfied out of the initial allocation, the unpaid balance of such claims shall rank ratably with the property claims for payment against the second part of the fund.
6 Tonnage: Section 79 (6) Vanuatu Maritime Law and Section 162 (5) of the Liberian Maritime Law, Vessels under 300 tons shall be deemed 300 tons. For steamships or other mechanically propelled ships, tonnage for limitation purposes is the net tonnage plus the amount deducted from gross tonnage on account of engine room space. For all other vessels the net tonnage controls.
7 Annexed to this paper is a pamphlet explaining the requirements of the 1978 TSPP, reprinted from Exxon Marine, Winter 1982/83, Vol. 27. No. 3.
