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What Act of 1851 governs a shipowner's right to limit its liability?
Limitation of Vessel Owner's Liability Act
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What does the Limitation of Vessel Owner's Liability Act of 1851 permit and what is its exception?
Permit: Shipowner to limit its liability following maritime casualties to the value of the owner's interest in its vessel and pending freight
Exception: The accident occurred without the privity or knowledge of the owner
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Where can one look to determine the limited liability procedure?
- 1) Limitation Act
- 2) Rule F of the Supplemental Rules of Civil Procedure
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How does a party initiate a limitation proceeding?
The shipowner must file a complaint within 6 months of its receipt of a claim in writing (Fed. R. Civ. P. Supp. R. F(1))
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May the complaint seek "exoneration" in his complaint?
Yes - the owner may plead that it is not liable at all and in the alternative that if it is liable it is entiteld to limit its liability
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In what court must the shipowner file the complaint?
Federal District Court ONLY
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Upon filing a complaint for limitation, what must the shipowner do?
Deposit money that is the sum equal to the amount or value of the owner's interest in the vessel and pending freight
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Upon filing the complaint, may a shipowner transfer his interest in the vessel and freight?
Yes - to a trustee
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If the shipowner decides to transfer his interest of vessel/freight to a trustee, what must be included in the complaint?
Any prior paramount liens and any existing liens that arose upon any voyages subsequent to the marine casualty
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Must all other liens be satisfied by the owner as a precondition to its right to limitation?
No - no such requirement either in the Statute or Rule F
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If a motion is filed with the court to have the fund that has been deposited increased on the ground that its less than the value of the owner's interest or that the fund is insufficient to meet all the claims against the owner in repsect to loss of life or bodily injury, who carries the burden of proof?
The movant - the one who files the motion
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Once a court has received all claims and proceedings against the shipowner, what occurs?
The court enjoins the claims and proceedings and gives notice to all parties asserting claims with respect to the incident for which the owner of the vessel has sought limitation, advising the parties to file their claims in the limitation proceeding.
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Who mails this notice the Court administers?
The shipowner
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Why does the Court enjoin all the claims and proceedings?
To ensure that there is a single proceeding, rather than claims of similar matters and issues in multiple cases - it also reduces the load off the Judge
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What does a "concursus of claims" mean?
An agreement of the claims in which Rule F results in a single proceeding
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What are the two situations where a party may maintain its claim outside of the limitation of liability proceeding? [Known as "exceptions to concursus"]
- 1) When the shipowner has deposited with the court an amount in excess of all claims
- 2) Applies to situations where there was but a single claimant who stipulated that the admiralty court had exclusive jursdiction to adjudicate the limitation of liability issues and the claimant would not seek to enforce a damage award in excess of the limitation fund
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May the owner be held liable in an amount in excess of the limitation amount?
NO !!
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Just because the shipowner is permitted to plead exoneration does not mean ---
that he has the right to compel the adjudication of that issue in a federal court
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When a vessel owner files a limitation petition, what is the supposition?
That the limitation fund will be insufficient to pay all claims in full.
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What happens if a vessel owner files a limitation petition and he is held liable?
There is a distribution of funds from the court and the proceeds from the sale of the vessel/ freight by the court on a "pro rata" basis among the claimants in proportion to the amounts of their respective claims
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What is a "pro rata" basis?
In proportion
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What rules are the distributions subject to?
The rules relating to priority of claims
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What is the Limitation Fund equal to?
The amount of the owner's interest in the vessel and pending freight
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When is the value of the vessel determined?
At the termination of the voyage or marine casualty
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If a vessel is at a total loss, what is its value?
Its value is zero.
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What does the Limitation Fund exclude in regards to Insurance?
Insurance proceeds received by a vessel owner as a result of the marine casualty such as where a vessel is at a total loss, are not included in the limitation fund
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What does "pending freight" refer to?
The owner's total earnings for the voyage
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What two types of earnings are included in a "pending freight"?
Includes both prepaid earnings and uncollected earnings
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What is the case of prepaid earnings if the voyage is incomplete?
The prepaid earnings (by contract) are not to be returned to the shippers
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What is the shipowner forced to do if there are personal injuries/deaths associated with the marine casualty and the limitation fund is not adequate to cover such loss in full?
The shipowner must increase that portion of the limitation fund allocable to personal injury and death claims up to a miximum of $420 per ton of the vessels tonnage (46 USC app 183(b)(2000).
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How is the term "seagoing vessel" defined?
A floating marine structure; it excludes pleasures yachts, tugs and towboats.
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In a "pure tort" situation, where two or more vessels in a tug and tow have a marine casualty, who's surrendered?
Only the vessel actively at fault is valued or surrendered for purposes of the limitation fund
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What is the "flotilla rule"?
A method of calculating the ceiling of liability in the event of loss while ships are under tow, using the tonnage of all ships in the flotilla.
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Many courts have limited the application of the Flotilla Rule to those situations in which -- ?
All the vessels belong to the same owner and are under common control as well as engaged in a common enterprise at the time of the marine casualty
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