The Eleventh Circuit Defines the Limits of Written Notice Under the Shipowner's Limitation of Liability Act

Orion Marine Constr., Inc. v. Carroll, 2019 WL 1270780, 2019 U.S. App. LEXIS 8244 (11th Cir. Mar. 20, 2019).

By: Spring Gaines

The U.S. Eleventh Circuit faced a conundrum when addressing this appeal out of the Middle District of Florida. Orion Marine Construction (Orion) contracted with Florida Department of Transportation (FDOT) on a bridge construction project that entailed the use of four barges to drive concrete piles into the seabed. Complaints from residents came in about how the vibrations from this activity caused damage to homes, and 247 of the residents eventually filed formal claims. Orion filed a limitation action under the Shipowner's Limitation of Liability Act, which establishes a procedure by which a shipowner can limit its liability for certain claims involving one of its vessels to the value of the vessel plus its then-pending freight.[1] The shipowner must bring the limitation action within six months from written notice by a claimant.  If the owner meets the six-month deadline and creates a qualifying limitation fund, all related lawsuits against the owner cease. This leaves the claimants to pursue their rights in the limitation proceeding. Of the 247 claimants, only nine made complaints more than six months before Orion filed.A certain pair of those nine claimants, the Dawsons, moved to dismiss the limitation action in district court. They argued that Orion received adequate notice of the claims by the rules of the statute more than six months before the limitation was filed, so the action was time barred. This lapse meant that the district court lacked subject matter jurisdiction to decide the case. The district court agreed. This question about notice gave rise to the appeal. The appellate court faced the question on what constitutes adequate written notice under the Act. It moved through a series of four holdings before concluding that the suit was timely filed and consequently reversed and remanded the decision.First, it decided that the six-month filing deadline does not create a barrier to suit as it is a non-jurisdictional claim-processing rule. In so holding, the Eleventh Circuit disagreed with both the Fifth[2] and Sixth Circuits.[3] For a shipowner, the failure to meet the deadline does not deprive the district court of subject matter jurisdiction. In reality, it provides the court with a basis to dismiss on the merits. Second, only written notices given directly to Orion or through its insurance agent, FARA, satisfy the notice requirement. This excludes oral notices later written to paper and complaints given to FDOT because it had no authority to act on Orion’s behalf. To determine the sufficiency of notice, the Eleventh Circuit compared two doctrinal tests, the “Doxsee/McCarthy test” and the “Moreira test.” It concluded that here, the “Doxsee/McCarthy test” is the controlling standard because unlike the “Moreira test,” it includes an element for the value of the vessel. Under the “Doxsee/McCarthy” standard, the notice must reveal that there is a "reasonable possibility" that the claim will exceed the value of the offending vessel(s).Here, the property damage described by nine claimants, even viewed in the aggregate, did not exceed the value of the barges. Third, a shipowner does not have the duty to investigate known or potential claims immediately upon receipt of a claimant's notice. The duty to investigate only arises when the notice reveals a “reasonable possibility” that the claim’s value may exceed that of the vessel(s) in question. Orion sent one of its agents to investigate the alleged property damage and concluded that there was not a reasonable possibility because all of it was minor, cosmetic damage. Lastly, the nine claimants did not provide written notice that revealed a reasonable possibility that the claims would exceed the value of the barges, so the six-month clock did not start. This means that Orion timely filed the suit for a limitation action. The appellate court reversed and remanded.[1] 46 U.S.C. §§ 30501, et seq (2018).[2] In re Eckstein Marine Serv., L.L.C., 672 F.3d 310, 315 (5th Cir. 2012)[3] Cincinnati Gas & Elec. Co. v. Abel, 533 F.2d 1001, 1003 (6th Cir. 1976).