Fifth Circuit Upholds Dismissal of Untimely Limitation Action

 Lorne Jackson, a crew member of a tug owned and operated by Marquette Transportation Company Gulf-Inland LLC (“Marquette”) was seriously injured when his leg became tangled in a line and pulled into a mooring bit.  On April 28, 2009, about two months after his accident, Jackson sued Marquette in Texas state court for unseaworthiness and negligence.  The state court petition alleged permanent and substantial injury and sought lost earnings, loss of future earning capacity, past and future disability, disfigurement, medical and hospital expenses, pain and mental anguish, and maintenance and care.  Importantly, the petition did not allege or pray for a specific amount of damages but alleged only that the damages sought exceeded the jurisdictional amount. Marquette answered the petition on June 10, 2009.

After the parties engaged in discovery, Jackson demanded $3 million to settle his claims against Marquette.  This demand came on December 2, 2009, approximately seven months after the inception of Jackson’s state court suit.  Marquette rejected the settlement demand and on January 18, 2010 filed a limitation action in the United States District Court for the Southern District of Texas pursuant to 46 U.S.C. § 30501, et seq.  In response, Jackson moved to dismiss.  The district court denied the motion without prejudice and Jackson renewed the motion in July 2010.  The district court granted the renewed motion and Jackson’s state court suit went to trial.  Jackson subsequently won a judgment that exceeded $750,000, the amount at which Marquette sought to cap its liability in the limitation action.  Marquette appealed.

On appeal, Marquette took issue with the district court’s treatment of Jackson’s motion to dismiss as an attack on the court’s subject matter jurisdiction.  Marquette argued, despite precedent from the Fifth and other federal circuit courts of appeal, that filing deadlines can never be jurisdictional.  The Fifth Circuit explained that while many statutory filing deadlines are not jurisdictional, some are, one of them being the Limitation Act’s six-month filing deadline.  Notwithstanding the district court’s original jurisdiction over admiralty claims, Jackson filed his complaint in state court, which precluded removal absent diversity of citizenship or some other independent basis of federal jurisdiction.  Accordingly, the only claim that could proceed in federal court was Marquette’s limitation action, which, of course, requires compliance with the Limitation Act’s filing deadline.

Marquette also argued that its claim was, in fact, filed timely.  According to Marquette, the six-month filing period runs only from the time that the claimant gives to the owner written notice of a claim.  The court below found that this occurred on April 28, 2009, the date Marquette was served with Jackson’s state court suit.  However, Marquette argued that Jackson’s $3 million settlement demand was the first notice it received that Jackson’s claims would exceed $750,000.

The six-month timeline begins to run when written notice reveals a reasonable possibility that the claim will exceed the value of the vessel and the owner might benefit from the protections of the Limitation Act.  This “reasonable possibility” test, first adopted at the circuit court level in Complaint of Morania Barge No. 190, Inc., 690 F.2d 32 (2d Cir. 1982), is designed to relieve the vessel owner of the obligation of posting security and taking other necessary steps to commence limitation when the claimant’s specific representations reveal that a limitation action would be unnecessary.

With respect to Marquette, the Fifth Circuit agreed with the district court that Jackson’s state court petition established a reasonable probability that his claim might exceed $750,000, the value of the tug.  Jackson’s petition alleged “permanent and catastrophic” injuries on board the tug and sought economic and non-economic damages.  The petition did not limit the amount of damages.  The Fifth Circuit emphasized that the claimant need only raise a reasonable possibility that the damages sought will exceed the value of the vessel.  At that point, a vessel owner that seeks to take advantage of the statutory protections of the Limitation Act has the responsibility to investigate the claim and determine whether a limitation action is appropriate.

The court noted that Marquette’s investigation should have indicated that Jackson’s claim might exceed $750,000.  Because Marquette monitored Jackson’s condition pursuant to its cure obligation, it knew that Jackson underwent two surgeries, that his doctors described his knee as globally unstable, that he was awaiting further surgery and that he was unable to walk.  Although Marquette argued its quantum research indicated a judgment value for Jackson’s claims in the $300,000 to $350,000 range, the available evidence did not make the possibility of an award in excess of $750,000 unreasonable.

The court discussed Fifth and Second circuit precedent establishing that a claimant does not have to prove or even allege damages exceeding the value of the vessel for the six-month filing period to begin.  Further, a vessel owner may rely on a claimant’s concession that his claim is for less than the value of the vessel.  Here, Jackson was neither required to plead a specific amount nor did he specifically allege that his claim would not exceed the vessel’s value.  Because of the nature of his injuries and the allegations made in his petition, there was at least a reasonable possibility that his claim might exceed the value of the vessel and Marquette was required to file its limitation action within six months to ensure the statutory protections.

In re Eckstein Marine Serv. L.L.C., 10-20600, 2012 WL 560759 (5th Cir. Feb. 22, 2012)