Baldassano v. Larsen, Civ. No. 5-82-29.

• Decision Date: 02 February 1984
• Docket Number: Civ. No. 5-82-29.
• Citation: 580 F. Supp. 415
• Parties: Joseph BALDASSANO, Plaintiff, v. Donald LARSEN and Union Oil Company of California, Defendants.
• Court: U.S. District Court — District of Minnesota

580 F. Supp. 415

Joseph BALDASSANO, Plaintiff, v. Donald LARSEN and Union Oil Company of California, Defendants.

Civ. No. 5-82-29.

United States District Court, D. Minnesota, Fifth Division.

February 2, 1984.

James J. Schumacher, St. Paul, Minn., for plaintiff.

Robert Mathias, Mathias & Brown, Duluth, Minn., for defendant Larsen.

George G. Eck, Dorsey & Whitney, Minneapolis, Minn., for defendant Union Oil.

ORDER

MILES W. LORD, Chief Judge.

Defendant Union Oil Company of California has petitioned this court to limit its liability for injuries resulting from collision of two small watercraft: a Union Oil pontoon and a speedboat owned by defendant Donald Larsen. By its petition, Union Oil seeks to take advantage of a nineteenth century admiralty statute designed to aid the infant American merchant marine. This court, in an order dated December 20, 1983, indicated that it was rejecting Union Oil's petition; this memorandum will set out the reasons for so doing. Basically, the court finds that this admiralty statute was never designed to cover pleasure boats such as Union Oil's pontoon and that to allow the company to take advantage of this Act would result in a gross miscarriage of justice.

FACTS

Plaintiff Joseph Baldassano was a special employee of Union Oil at an island the company owned and operated on Rainy Lake. Baldassano lived and worked on Curtis Island, cooking for Union Oil employees and their guests.

In the early evening on July 5, 1981, Baldassano and other Union Oil employees who had finished their work went for a recreational ride on a 28-foot pontoon boat owned by Union Oil and operated by William Dunn, a Union Oil seasonal employee. The purpose of the voyage was to pull a surfboard device upon which one person could ride while others remained as passengers on the pontoon. Shortly after leaving the Union Oil dock, the pontoon was struck broadside by a 20-foot speedboat owned and operated by defendant Larsen. Baldassano was thrown from the pontoon by the collision. He was taken first to International Falls Hospital and later to the University of Minnesota Hospital in Minneapolis, where he was diagnosed as having vertebral fractures, spinal cord injuries, and a closed head injury.

Baldassano brought suit against Union Oil and Larsen, and the matter was heard by this court as an admiralty suit with an advisory jury. This court adopted the jury's recommendation that defendant Larsen was negligent in the operation of his vessel and that his negligence was a 75 percent direct cause of Baldassano's injuries. Larsen admitted at trial that he did not see the pontoon until immediatley prior to the collision although the weather was clear and visibility unrestricted. This court also adopted the jury's recommendation that defendant Union Oil was negligent in the operation of its vessel and that this negligence was a 25 percent direct cause of Baldassano's injuries. Union Oil employee Dunn was an untrained crew member, the company having failed to provide any formal boat training for island employees such as Dunn who regularly used its vessels. Dunn had seen the Larsen boat approaching for at least 300 yards and believed that a collision would ensue from the time the Larsen boat was 50 to 100 yards away. He did not signal the Larsen boat with the horn installed on the pontoon, nor did he change his course or direction until immediately before the collision.

Again concurring with the proposal of the advisory jury, this court found that Baldassano sustained damages of $280,000. Therefore, this court ordered judgment against defendant Larsen in the sum of $210,000 and against defendant Union Oil in the sum of $70,000. (Prejudgment interest also was assessed against each defendant.)

Union Oil, citing an admiralty statute allowing ship owners to limit their liability to the value of their vessels, petitioned to reduce its judgment to $7,500, the cost of its pontoon. (Defendant Larsen is not able to limit his liability to the value of his vessel—the speedboat—because, as will be explained below, the limitation statute does not apply when an owner operates the vessel himself in a negligent fashion. The statute insulates only owners who either hire crews or loan their ships to others.) This court rejects Union Oil's petition on two grounds, the most important being that the limitation of liability defense was designed to protect and foster the commercial maritime industry and is not applicable to pleasure craft.

DISCUSSION

A limitation of liability statute was first enacted in 1851 with the express purpose of protecting the fledgling commercial shipping industry in the United States. The statute as it now reads is set out in 46 U.S.C. § 183(a):

The liability of the owner of any vessel, whether American or foreign, for any embezzlement, loss or destruction by any person of any property, goods, or merchandise shipped or put on board of such vessel, or 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 ... exceed the amount or value of the interest of such owner in such vessel, and the freight therein pending.

Shipowners of other nations already enjoyed such protection under the laws of their lands, and it was the intent of Congress in passing this legislation to insure that American shipping no longer be at a competitive disadvantage. See generally, The Main v. Williams, 152 U.S. 122, 14 S.Ct. 486, 38 L.Ed. 381 (1894); Norwich Co. v. Wright, 80 U.S. (13 Wall) 104, 20 L.Ed. 585 (1871). Senator Hamlin of Maine, who introduced the legislation, explained that it was patterned after English law:

Why not give to those who navigate the ocean as many inducements to do so as England has done? ... That is what this bill seeks to do, and it asks no more.

23 Cong.Globe 331-32, 31st Cong., 2d Sess. (Jan. 25, 1851). The Supreme Court, in its first case interpreting the legislation, noted the Act's commercial intent:

The great object of the law was to encourage ship-building and to induce capitalists to invest money in this branch of industry. Unless they can be induced to do so, the shipping interests of the country must flag and decline. Those who are willing to manage and work ships are generally unable to build and fit them. They have plenty of hardiness and personal daring and enterprise, but they have little capital. On the other hand, those who have capital, and invest it in ships, incur a very large risk in exposing their property to the hazards of the seas, and to the management of seafaring men, without making them liable for additional losses and damage to an indefinite amount. How many enterprises in mining, manufacturing and internal improvements would be utterly impracticable if capitalists were not encouraged to invest in them...?

Norwich, 80 U.S. (13 Wall) at 121.

During the last quarter of the nineteenth century, the courts developed an interpretation of the statute that, in the words of two commentators, was "astonishingly favorable" to shipowners. Gilmore & Black, The Law of Admiralty, 820 (2d ed. 1975). Court rulings expanded the statute "beyond belief" as shipowners "reaped an unexpected rich harvest in the benign climate of the latter part of the century when the sun shone on invested capital as it had done in no other period of our history." Id. The statute, which began with the aim of putting American shipowners on an equal footing, ended up giving the Americans a much greater advantage than their foreign counterparts.

And so it came to pass that pleasure craft, which were never mentioned in the act itself nor in the legislative history, nonetheless came to reap the benefits of limited liability. This sweeping expansion of the Act, incredibly, occurred with virtually no discussion.

The Supreme Court has considered at least three cases involving pleasure boats and the limitation of liability. Coryell v. Phipps, 317 U.S. 406, 63 S.Ct. 291, 87 L.Ed. 363 (1943); Just v. Chambers, 312 U.S. 383, 61 S.Ct. 687, 85 L.Ed. 903 (1941), and Spencer Kellogg & Sons v. Hicks, 285 U.S. 502, 52 S.Ct. 450, 76 L.Ed. 903 (1932). In all three cases, the major issue was whether the negligence occurred with the privity or knowledge of the shipowner, which would foreclose the limitation defense. No issue was raised in any of these cases as to whether pleasure craft should be an exception to the Act, and so the Court merely assumed without discussion that the limitation law did apply to these vessels. To date, then, the Supreme Court has not fully and squarely addressed this issue.

Likewise, the Court of Appeals of the Eighth Circuit has considered the issue only in passing, mentioning it in one mere footnote sentence. Pritchett v. Kimberling Cove, Inc., 568 F.2d 570, 573 n. 4 (8th Cir.1977).

Those courts directly and extensively considering the problem have been uniformly troubled by the consequences of permitting pleasure boats to so markedly reduce their liability. "Contemporary thought," wrote the Fifth Circuit Court of Appeals, "finds little reason for allowing private owners of pleasure craft to take advantage of the somewhat drastic—for the injured claimants—provisions of the Limitation Act." Gibboney v. Wright, 517 F.2d 1054, 1057 (5th Cir.1975). Such a situation "is in conflict with our senses of justice and appropriateness," wrote the Fourth Circuit. Richards v. Blake Builders Supply Inc., 528 F.2d 745, 748 (4th Cir.1975). In their treatise, Professors Gilmore and Black state that the limitation act "has become a charter of irresponsibility for a few wealthy individuals" who are granted "a general license to kill and destroy," and they predict that in time this issue will be "of no more than historical interest" because soon courts will find that pleasure boats do not qualify for the Act's protection. Gilmore & Black, at 882, 883. However, courts...