American Milling Co. v. Marine, 08-3915.

• Decision Date: 22 October 2010
• Docket Number: No. 08-3915.,08-3915.
• Parties: AMERICAN MILLING COMPANY; UN Limited; HB Marine, Inc., corporations; American Milling LP, a limited partnership, For Exoneration From, or Limitation of, liability, Plaintiffs/Appellants, v. BRENNAN MARINE, INCORPORATED; Pinnacle Barge Co., LLP; Pinnacle Transportation, Inc.; Trustee of the Distribution Trust, formerly known as President Casino, Inc., Claimants/Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

623 F.3d 1221

AMERICAN MILLING COMPANY; UN Limited; HB Marine, Inc., corporations; American Milling LP, a limited partnership, For Exoneration From, or Limitation of, liability, Plaintiffs/Appellants,

v.BRENNAN MARINE, INCORPORATED; Pinnacle Barge Co., LLP; Pinnacle Transportation, Inc.; Trustee of the Distribution Trust, formerly known as President Casino, Inc., Claimants/Appellees.

No. 08-3915.

United States Court of Appeals,Eighth Circuit.

Submitted: Jan. 14, 2010.

Filed: Oct. 22, 2010.

COPYRIGHT MATERIAL OMITTED.

John R. Halpern, argued, Daryl F. Sohn and Alan K. Goldstein, on the brief, St. Louis, MO, for Plaintiffs/Appellants.

John S. Farmer, argued, Raymond L. Massey, Michael D. O'Keefe, and James W. Erwin, on the brief, St. Louis, MO, for Claimants/Appellees.

Before MELLOY, SMITH, and COLLOTON, Circuit Judges.

COLLOTON, Circuit Judge.

This appeal is one of several stemming from an allision between one or more barges and a casino boat on the Mississippi River. The barges broke loose from a towboat belonging to American Milling Co., UN Ltd., HB Marine, Inc., and American Milling LP (collectively, “American Milling”) and damaged The Admiral, a moored casino entertainment ship owned by President Casino, Inc. (“President Casino”).

This court previously addressed the parties' liability from the incident, American Milling's right to limit its liability, and the value of the limitation fund. In re American Milling Co., 409 F.3d 1005 (8th Cir.2005). This appeal involves an interpretation of Supplemental Rule for Admiralty or Maritime Claims F(1) (“Rule F(1)”). This rule outlines the procedure for posting security on a limitation fund and specifies the interest to be paid. Pursuant to Rule F(1), the district court ¹ ordered American Milling to pay interest on its security at a rate of six percent compounded annually, and denied American Milling's motion to deposit the cash value of the security into the court registry at a later stage of the proceedings. We affirm.

I.

On April 4, 1998, the towboat M/V Anne Holly was traveling upstream on the Mississippi River when its tow of barges allided with the Eads Bridge near St. Louis, Missouri, and broke apart. One or more of the loosed barges allided with and damaged The Admiral, which was moored at the Missouri shore just downstream from the Eads Bridge. Two days later, American Milling filed a complaint in the district court seeking to limit its liability to the value of its vessel, pursuant to the Limitation of Shipowners' Liability Act of 1851 (the “Limitation Act”), 46 U.S.C. app. § 183 (current version at 46 U.S.C. § 30505). In accordance with Rule F(1), American Milling also submitted security to establish a limitation fund in the amount of $1.25 million, which the company claimed to be the fair market value of the M/V Anne Holly. President Casino, along with the barge claimants Brennan Marine, Inc., Pinnacle Barge Co., and Pinnacle Transportation, Inc., filed claims against American Milling to recover damages.

After American Milling sold the vessel for $2.2 million ten months after the allision, the district court ruled in January 2001 that the fair market value of the M/V Anne Holly, and hence the value of the limitation fund, was $2.2 million, not $1.25 million. In re American Milling Co., 125 F.Supp.2d 981 (E.D.Mo.2001). The court then directed American Milling “to establish the limitation fund by posting either a corporate surety bond in the amount of $2.2 million, or depositing cash into the court registry in the total amount of $2.2 million.” Id. at 987. American Milling elected to post a bond.

In June 2003, following a trial, the district court determined that American Milling was eighty percent at fault for the allision, and attributed the remaining twenty percent of fault to President Casino. In re American Milling Co., 270 F.Supp.2d 1068 (E.D.Mo.2003). The court also concluded that American Milling was entitled to limit its liability under the Limitation Act to the $2.2 million value of the M/V Anne Holly. Id. This court affirmed those determinations in May 2005, and remanded the case for further proceedings regarding damages. In re American Milling Co., 409 F.3d at 1022.

American Milling moved on remand to deposit the cash value of the limitation fund, along with the simple interest accrued on its security since April 6, 1998, into the registry of the district court. The court initially granted the motion, on the mistaken impression that the request was unopposed, but President Casino filed a motion to set aside the court's order. President Casino's position was that interest on the fund should be compounded annually, and that American Milling should be required to maintain the surety bond throughout the proceedings.

President Casino invoked principles of equity to urge that the security should be maintained in the form most beneficial to the claimants, which in this case was the bond, and that interest should be compounded annually. American Milling opposed the motion to set aside, contending that the “per annum” language of Rule F(1) permitted only simple interest. The company also asserted that because depositing funds with the court is a permissible means of offering security for a limitation fund under Rule F(1), the court could not require American Milling to maintain a bond at the above-market, six percent interest rate specified in the rule. The district court granted the claimants' motion, vacated its order of May 2, 2006, and ordered that the six percent interest on the surety bond be compounded annually.

II.

American Milling first challenges the district court's interpretation of the “per annum” language of Rule F(1) to permit compound interest on the security for the limitation fund. Rule F(1) is part of the Federal Rules of Civil Procedure, and we review the district court's interpretation of the rule de novo. See Burns v. Lawther, 53 F.3d 1237, 1240 (11th Cir.1995).

As other courts have explained, “Rule F evolved as a procedural device to implement the [Limitation Act].” Bouchard Transp. Co. v. Updegraff, 147 F.3d 1344, 1347 (11th Cir.1998). Congress passed the Limitation Act to limit the liability of shipowners to the post-accident value of the vessel at issue and any pending freight. “The apparent purpose of the Act was to encourage shipbuilding in this country and to place the U.S. shipping industry on equal footing with foreign competitors,” who were protected against claims under European maritime codes. Magnolia Marine Transp. Co. v. Oklahoma, 366 F.3d 1153, 1155 (10th Cir.2004) (citing 2 Thomas J. Schoenbaum, Admiralty & Maritime Law § 15-1, at 137 (2d ed. 1994)). The statute, however, did not establish a procedure to implement the limitations on liability that it established. In 1872, the Supreme Court enacted rules to establish a uniform judicial procedure by which a vessel owner could seek to limit its liability under the Limitation Act. Bouchard Transp. Co., 147 F.3d at 1347. Over time, these rules were amended and relabeled, and Rule F was eventually adopted as part of the Federal Rules of Civil Procedure. Id.

Rule F allows a vessel owner to file a complaint in district court to petition for limitation of liability within six months of receiving written notice of a claim. The owner must provide the court with relevant information regarding pending claims and the value of the vessel at issue. The district court determines the vessel's fair market value to establish the size of the limitation fund, from which damages may be paid to claimants. Together with the complaint, the vessel owner is required to provide one of three acceptable forms of security in the amount of the limitation fund. Once the owner files a valid complaint and provides security for the fund, the court enjoins all pending claims against the owner, and consolidates those claims into a special limitation proceeding. The court then determines the liability of the vessel owner and the proportion of the limitation fund payable to successful claimants.

This appeal focuses on the security for the limitation fund, and the interest payable on that security. Rule F(1) states that a vessel owner seeking to limit its liability “shall deposit with the court, for the benefit of claimants, a sum equal to the amount or value of the owner's interest in the vessel and pending freight, or approved security therefor.” If the vessel owner elects to post an approved security, then the rule requires that the owner give security for “interest at the rate of 6 percent per annum from the date of the security.” Rule F(1) (emphasis added).

At issue here is the meaning of the “per annum” language of Rule F(1), and the amount of interest that American Milling must pay on the security that it elected to post. American Milling argues that the “per annum” provision mandates simple interest. President Casino and the other claimants contend that the court's decision to award compound interest was within its equitable discretion. We conclude that the claimants have the better argument.

The operative “per annum” language, standing alone, does not resolve the dispute. “Per annum” is defined in English to mean “in each year” or “annually.” Black's Law Dictionary 1250 (9th ed. 2009). Accordingly, the six percent interest specified in Rule F(1) is an annual rate, but the plain language does not speak directly to whether the interest is to accrue on a compound or simple basis.

Rule F, however, was adopted against a background of law already in place. The provision requiring interest at the rate of six percent per annum from the date of the security dates back to 1891 when it was adopted as part of what was then known as Admiralty Rule 54. The Fairwill, 56 F.Supp. 887, 889 (E.D.Va.1944). In 1920, due to a renumbering and revision process, the interest provision became part of Admiralty Rule 51. See 3 David E.R. Wooley & Antonio J. Rodriguez, Benedict on Admiralty § 5, at...