American Tel. & Tel. Co. v. M/V CAPE FEAR

• Decision Date: 01 May 1991
• Docket Number: Civ. A. No. 89-3438 (JHR).
• Citation: 763 F. Supp. 97
• Court: U.S. District Court — District of New Jersey
• Parties: AMERICAN TELEPHONE & TELEGRAPH CO., et al. Plaintiffs, v. M/V CAPE FEAR and M/V LITTLE GULL, their engines, boilers, fishing gear, etc. In Rem, and American Original, Inc., Little Gull, Inc., and Gifford Marine, Inc., Defendants. In the Matter of the Complaint of GIFFORD MARINE INC. as Owner of the F/V CAPE FEAR, Petitioner, For Exoneration from or Limitation of Liability. In the Matter of the Complaint of GIFFORD MARINE INC. as Owner of the F/V LITTLE GULL, Petitioner, For Exoneration from or Limitation of Liability.

763 F. Supp. 97

AMERICAN TELEPHONE & TELEGRAPH CO., et al. Plaintiffs, v. M/V CAPE FEAR and M/V LITTLE GULL, their engines, boilers, fishing gear, etc. In Rem, and American Original, Inc., Little Gull, Inc., and Gifford Marine, Inc., Defendants In the Matter of the Complaint of GIFFORD MARINE INC. as Owner of the F/V CAPE FEAR, Petitioner For Exoneration from or Limitation of Liability In the Matter of the Complaint of GIFFORD MARINE INC. as Owner of the F/V LITTLE GULL, Petitioner For Exoneration from or Limitation of Liability.

Civ. A. No. 89-3438 (JHR).

United States District Court, D. New Jersey.

May 1, 1991.

Hill, Rivkins, Loesberg, O'Brien, Mulroy & Hayden by Douglas R. Burnett, Anthony J. Pruzinsky and Frances C. Peters, Newark, N.J., for plaintiffs/claimants.

Krusen, Evans and Byrne by Peter H. Bach and Mary Elisa Reeves, Collingswood, N.J. for defendants/petitioner.

OPINION

RODRIGUEZ, District Judge:

Presently before the Court is a motion by the plaintiffs/claimants for a judgment on the pleadings, pursuant to Fed.R.Civ.P. 12(c), on the issue of the validity of the defendants'/petitioner's affirmative defense based on the Limitation of Liability Act, 46 U.S.C.A. §§ 181-89 (West 1958 & Supp.1990). In the alternative, plaintiffs/claimants request dismissal of the petitioner's complaint for non-compliance with provisions of the Limitation of Liability Act, or that security be increased to include the value of freight, and that defendants post a bond in place of letters of guarantee. For the following reasons, this Court finds that the Limitation of Liability Act is inapplicable to actions for civil damages brought under the Submarine Cable Act, 47 U.S.C.A. §§ 21-39 (West 1962 & Supp.1990). Therefore, the stay applied against plaintiffs'/claimants' suit, pursuant to our Order of October 30, 1990, is lifted and plaintiffs may proceed with their action to recover the full amount of damages against the defendants.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs/claimants in this action include public companies, incorporated in the United States or in foreign countries, and agencies or ministries of national governments of foreign countries, which are co-owners of a buried submarine international tele-communications cable, named TAT-7, which lands in Tuckertown, New Jersey and Land's End, England.¹ Defendants M/V Cape Fear and M/V Little Gull are two fishing trawlers, and American Original, Inc. and Little Gull, Inc. are their registered owners, respectively. Defendant/petitioner Gifford Marine, Inc. ("Gifford Marine"), indicated as owner of the trawlers according to applications filed with the National Marine Fishery Service, operates out of a marina in Atlantic City, New Jersey, and owns a fleet of vessels which engages in clam dredging in the Atlantic Ocean.

The facts in this action, as alleged by plaintiffs/claimants in their Amended Complaint, are not complex. At approximately 4:42 a.m. on August 10, 1989, the TAT-7 cable was cut in half approximately 43 miles off the coast of New Jersey. At 6:30 a.m. on August 10, 1989, defendants M/V Cape Fear and M/V Little Gull were sighted approximately one half mile from the cable break with their dredging equipment submerged in the water. No other vessels with equipment capable of splitting the cable were spotted in the area. Subsequent camera photography has indicated that the damage to the cable was caused by mechanical contact, indicated by repeated furrows crisscrossing the cable in at least eight places. TAT-7 is indicated on nautical navigation charts so as to warn ships to avoid damaging the cable.

On August 14, 1989, plaintiffs/claimants filed suit against the defendants alleging that one or both of the defendant vessels split the cable with their dredging equipment which constitutes a violation of United States maritime tort law, the Submarine Cable Act of 1888, 47 U.S.C. §§ 21-39 ("Cable Act"), certain international treaties as well as customary international law and request compensation for damages consisting of repair costs and other consequential damages. On that date, this Court issued warrants of arrest for the M/V Cape Fear and M/V Little Gull. However, in lieu of an in rem arrest, plaintiffs agreed to accept a bond or other permissible security.

In their Amended Complaint, filed November 1, 1989, plaintiffs added a second cause of action alleging that defendants have not complied with the agreement to promptly post security and therefore further request, inter alia, that the vessels be arrested and sold to satisfy the plaintiffs' claims.

On October 30, 1989, Defendant Gifford Marine Inc. ("petitioner") filed two Complaints for Exoneration from or Limitation of Liability ("petitions"), pursuant to the security provisions of the Limitation of Liability Act of 1851, 46 U.S.C. §§ 181-189 ("Limitation Act"), and Supp. Fed.R.Civ.P. F,² in which it claimed, inter alia, that even if it is found liable as owner of the F/V Cape Fear and/or the F/V Little Gull, its liability is limited by the Limitation of Liability Act to $590,000.00, the value of its interest in the F/V Cape Fear and $500,000.00, the value of its interest in the F/V Little Gull, at the time of the alleged incident. Gifford Marine then filed a Motion for Ad Interim Stipulation declaring then it was posting security with the Court in these amounts in the form of a letter of undertaking executed on behalf of St. Paul Fire & Marine Insurance Co.

On January 23, 1990, plaintiffs/claimants filed claims and answers to Gifford Marine's petitions, maintaining, inter alia, that the break in the cable was caused by faulty acts of the defendant vessels in violation of the Submarine Cable Act and international law. They further assert that such law supersedes any liability limitation allowed to Gifford Marine provided by the Limitation Act. Furthermore, they contend that there should be no limitation to liability because Gifford Marine has offered insufficient security in both form and amount, in violation of Supp.Fed.R.Civ.P.F. They, therefore, request that Gifford Marine's Complaints for Exoneration from or Limitation of Liability be denied and that the court enter judgment against the defendants/petitioner for all damages and costs to plaintiffs/claimants. On April 2, 1990, the three actions were consolidated.³

Claimants bring this motion for a judgment on the pleadings, on the single issue as to whether petitioner's liability, if any, arising from the break in the TAT-7 cable on August 10, 1989, may be limited, pursuant to 46 U.S.C. § 183(a).

II. LEGAL DISCUSSION

Claimants demand a judgment on the pleadings, pursuant to Fed.R.Civ.P. 12(c). On ruling on a Rule 12(c) motion, a court "must accept as true all of the well pleaded facts alleged in the complaint and may not dismiss the action or claim unless the court is convinced that `the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Bloor v. Carro, Spanbock, Londin, Rodman & Fass, 754 F.2d 57, 61 (2d Cir.1985) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957)). Consequently, for purposes of this motion, we accept as true Gifford Marine's assertions that the alleged misconduct was done without its "privity or knowledge."

This court has jurisdiction pursuant to United States Constitution article III, § 2, cl. 1;⁴ 28 U.S.C.A. § 1333 (West 1966 and Supp.1991); 47 U.S.C. § 33, the jurisdictional statute of the Submarine Cable Act, and 46 U.S.C.A. App. § 740 (West 1975 & Supp. 1991).⁵See Diamond State Tel. Co. v. Atlantic Refining Co., 205 F.2d 402, 406 (3d Cir.1953); Offshore Tel. Co. v. M/V Waterbuck, M/V State Point, 465 F.Supp. 1160, 1163 (E.D.La.1979); All America Cables & Radio, Inc. v. The Dieppe, 93 F.Supp. 923 (S.D.N.Y.1950).

A. The Legislative Acts

1. The Limitation of Liability Act of 1851

The Limitation of Liability Act, 46 U.S.C. §§ 181-195 (originally enacted as the Act of March 3, 1851, ch. 43, 9 Stat. 635) allows the owner of a vessel, liable for damages, to consolidate all claims arising out of an incident and to limit his total liability. See e.g., 46 U.S.C. §§ 183, 185; Supp.Fed.R.Civ. P.F. In particular, 46 U.S.C. § 183(a) provides, in relevant part:

The liability of the owner of any vessel, whether American or foreign ... for any loss, damage, or injury by collision, or for any act, matter, or thing, loss, damage, or forfeiture, done, occasioned, or incurred, without the privity or knowledge of such owner or owners, shall not, except in the cases provided for subsection (b) of this section increasing the limitation amount for cases involving loss of life or bodily injury, exceed the amount or value of the interest of such owner in such vessel, and her freight then pending.

The Limitation of Liability Act was enacted in order to protect, and to encourage investment into, the emerging American shipping industry so as to bolster its competitiveness in the mid-Nineteenth Century particularly with respect to British shipping merchants, who were already protected by a similar English statute. See University of Texas Medical Branch at Galveston v. United States, 557 F.2d 438, 454 (5th Cir.1977), cert. denied, 439 U.S. 820, 99 S.Ct. 84, 58 L.Ed.2d 111 (1978); In re Complaint of Dillahey, 733 F.Supp. 874, 875 (D.N.J.1990); G. Gilmore & C. Black, The Law of Admiralty 820-21 (2d ed. 1975) ("Gilmore & Black"). However, as noted infra, there has been strong criticism of continuing the protections afforded by the Act and many courts have acted to circumscribe its applicability.

2. The Submarine Cable Act of 1888

International submarine cables, such as TAT-7, are governed and protected by international treaties, to which the United States is a ratifying party, including the International Convention for the Protection of Submarine Cables, 24 Stat. 989-1000 (14 March 1884), 25 Stat. 1424 (1 December 1886), 25 Stat. 1425 (7 July 1887)...