The Limitation of Liability Act, 46 U.S.C. § 30501 et seq., is a special protection available to a vessel owner (and in some instances vessel charterers) whose vessel allegedly caused damage to persons or property. When certain elements are satisfied, a vessel owner can limit total liability to the value of the vessel and its pending freight. 46 U.S.C. § 30505. In addition, the Act can be utilized by the vessel owner to force all claimants into a single federal forum. 46 U.S.C. § 30511. The vessel owner invokes this special “concursus-like” proceeding by filing a Limitation Proceeding in the appropriate federal forum.
However, the Act contains strict limits on when a Limitation Proceeding can be filed. It states that “the action must be brought within 6 months after a claimant gives the owner written notice of a claim.” Because of the language of the statute, the six month time period can be triggered well before a claimant files a formal lawsuit and the vessel owner receives formal service. Importantly, all that is required is “written notice” of a claim.
In the modern age, “written notice” could take several forms: a letter, an email, or even a text message. A vessel owner who does not appreciate the serious implications of receiving a seemingly informal “written notice” from a potential claimant runs the risk of losing the ability to file a Limitation Proceeding.
In In re the Matter of RLB Contracting, 773 F.3d 596 (5th Cir. 2014), the U.S. Fifth Circuit addressed the timeliness of a Limitation Proceeding. On July 1, 2011, a serious collision occurred between a fishing boat and a dredge. The passengers in the fishing boat sustained injuries; one of them died. Over the next few months, the attorney for the father of the decedent sent several emails to counsel for the dredge owner. In those emails, he advised the dredge owner to preserve evidence and suggested mediation. The dredge owner refused mediation, stating that they were still investigating the collision.
On June 14, 2012, the plaintiff filed a lawsuit against the dredge owner in state court. On that same date, the plaintiff sent the dredge owner an email advising them of the lawsuit. The dredge owner was served with the petition on July 2, 2012. On December 28, 2012, the dredge owner filed a Limitation Proceeding in federal court. Although this was within six (6) months of when the dredge owner was formally served with the petition, it was not within 6 months its receipt of the June 14, 2012 email from plaintiff’s counsel advising that the lawsuit had been filed.
The plaintiff argued that the Limitation Proceeding was untimely and sought to have it dismissed. The district court agreed, and the 5th Circuit affirmed. In doing so, the 5th Circuit provided a very detailed discussion of the “written notice” that could trigger the six (6) month time period for filing a Limitation Proceeding. The court noted in dicta that the pre-suit correspondence, when viewed cumulatively, almost certainly satisfied the requirement. But the Court ultimately held that the June 14, 2012 email – wherein the plaintiff advised that suit had been filed – unquestionably satisfied the notice requirement. Because the dredge company failed to file the Limitation Proceeding within six (6) months of that email, the Limitation Proceeding was dismissed as untimely.
The takeaway from this decision is that whenever possible, a vessel owner should file the Limitation Proceeding within (6) six months of the incident. This guarantees that it is timely. Otherwise, there is a risk that the action may be untimely, and the vessel owner may be subject to defending itself in a potentially undesirable state court venue.