Grindle v. Fun Charters, Inc.

• Decision Date: 31 December 1996
• Docket Number: Civil No. 95-00889 ACK.
• Citation: 962 F.Supp. 1284
• Parties: Louanna GRINDLE et al., Plaintiffs, v. FUN CHARTERS, INC., Magic Island Sports, Inc., Defendants.
• Court: Hawaii Supreme Court

962 F.Supp. 1284

Louanna GRINDLE et al., Plaintiffs, v. FUN CHARTERS, INC., Magic Island Sports, Inc., Defendants.

Civil No. 95-00889 ACK.

United States District Court, D. Hawai`i.

December 31, 1996.

John R. Hillsman, Keith A. Ehrman, San Francisco, CA, Howard G. McPhearson, Law Offices of Howard G. McPhearson, Honolulu, for Plaintiffs.

David W. Proudfoot, Belles Graham & Proudfoot, Lihue, for Defendants.

ORDER DENYING PLAINTIFFS' MOTION FOR JUDGMENT ON THE PLEADINGS

BACKGROUND

KAY, Chief Judge.

This order concerns an obtuse legal question arising out of a tragedy.

On November 1, 1994, Victor Grindle ("Grindle") and his wife Louanna went on an excursion voyage from Kaanapali, Maui. During the voyage, Mr. and Mrs. Grindle entered the water to snorkel. Mr. Grindle experienced grave difficulty in the water and subsequently died.

On November 1, 1995, Louanna Grindle brought suit against "Sea Quest Adventures, Inc.," the purported owner of the vessel involved in the November 1, 1994 incident, on behalf of: (1) herself; (2) Grindle's estate; (3) Grindle's mother, Ella; and (4) Grindle's surviving children, Wade, Peter and Nora (hereinafter "Plaintiffs"). On January 26, 1996, Plaintiffs filed their first amended complaint which substituted Fun Charters, Inc.¹ and Magic Island Sports, Inc. as Defendants in the action (hereinafter "Defendants"). In the first amended complaint, Plaintiffs proffered three causes of action: (1) wrongful death; (2) a survival action; and (3) negligent infliction of emotional distress. The basis for the Court's jurisdiction is 28 U.S.C. § 1332, the diversity statute.

On May 2, 1996, Defendants filed their answer in which they asserted several affirmative defenses including "the defense of Limitations of Liability, pursuant to 46 U.S.C.App. §§ 181 et. seq.." See Defendants' Answer at pg. 3. On October 7, 1996, Plaintiffs filed this motion for partial judgment on the pleadings concerning the viability of Defendants' Limitations of Liability, 46 U.S.C.App. § 181 defense (hereinafter "Limitation Defense"). On November 14, 1996, Defendants filed their opposition to this motion. Plaintiffs filed their reply on November 21, 1996. On December 2, 1996, the Court held a hearing.

STANDARD OF REVIEW

1. JUDGMENT ON THE PLEADINGS STANDARD

Judgment on the pleadings, pursuant to Federal Rules of Civil Procedure 12(c), is proper when the moving party clearly establishes on the face of the pleadings that (1) no material issue of fact remains to be resolved; and (2) it is entitled to judgment as a matter of law. Doleman v. Meiji Mut. Life Ins. Co., 727 F.2d 1480, 1482 (9th Cir.1984).

In reviewing a party's motion under Rule 12(c), the district court views the facts as presented in the pleadings in the light most favorable to the opposing party, accepting as true all the allegations in their papers and treating as false those allegations in the moving party's papers. Hoeft v. Tucson Unified School Dist., 967 F.2d 1298, 1301 (9th Cir.1992); Hal Roach Studios v. Richard Feiner and Co., 896 F.2d 1542, 1550 (9th Cir.1990).

Where the district court goes beyond the pleadings to resolve an issue, the motion properly is treated as one for summary judgment. Fed.R.Civ.P. 12(c); Hal Roach Studios, 896 F.2d at 1550 (9th Cir.1990).

DISCUSSION

Through this motion, Plaintiffs argue that this Court, sitting in diversity, lacks the jurisdiction to address Defendants' limitation defense.

The limitation defense codified in 46 U.S.C. § 181-196 was enacted by Congress in the nineteenth century to encourage investment in the shipping industry. See Vatican Shrimp Co., Inc. v. Solis, 820 F.2d 674, 677 (5th Cir.1987). The provisions allow shipowners in certain situations to limit their liability for damage claims arising out of the vessel to the valuation of the vessel and its pending freight. See Seven Resorts, Inc. v. Cantlen, 57 F.3d 771, 772 (9th Cir.1995); see also Martin J. Norris, The Law of Maritime Personal Injuries, § 7.2. Many complex factors dictate whether the limitation defense applies in a given situation. For purposes of this motion, however, this Court need not determine whether those predicates exist because the only issue before the Court is whether it has the jurisdiction to hear Defendants' limitation defense.

Two methods exist for invoking the limitation defense. Under 46 U.S.C.App. § 185 ("§ 185"), a shipowner can file a petition for limitation of liability in a district court, but must do so within six months of receiving written notice. See 46 U.S.C.App. § 185. To invoke § 185, a shipowner must also post a bond "equal to the amount or value of the interest of such owner in the vessel and freight" with the Court. See 46 U.S.C.App. § 185. The second method for invoking the limitation defense — asserting it as an affirmative defense ____ has none of these procedural requirements. See 46 U.S.C.App. § 183 (" § 183").

The limits of the latter option comprise the basis of this case. Here, Defendants did not file a petition within six months of the complaint.² Thus, Defendants' only basis for asserting the limitation defense is as an affirmative defense.

It is well established that the limitation defense may be asserted as an affirmative defense in any court. See Langnes v. Green, 282 U.S. 531, 543, 51 S.Ct. 243, 247, 75 L.Ed. 520 (1931) ("the owner of the vessel, therefore, can by answer in the state court set up as a defense that he is not liable beyond the value of the vessel, and that value may be determined as appropriately and as easily in that court as in this." (citations omitted)) Oddly, what is not as established is whether a non-admiralty court maintains jurisdiction if the defense is contested. See Ex Parte Green, 286 U.S. 437, 52 S.Ct. 602, 76 L.Ed. 1212 (1932) (holding that a federal District Court properly enjoined proceeding in state court where injured seaman put in issue shipowner's right to limit liability). Relying on this uncertainty, Plaintiffs argue that when a limitation claim is contested, state courts and federal courts sitting in diversity do not have jurisdiction to decide the defense. Plaintiffs cite Hellweg v. Baja Boats, Inc., 818 F.Supp. 1022 (1992) in support of their assertion.

The confusion over this issue can be pinned on the Langnes and Ex Parte Green cases in all their brevity and age. In Langnes, the Supreme Court held that a state court had jurisdiction to determine the limitation defense. 282 U.S. at 540-43, 51 S.Ct. at 247. In Langnes, however, the parties stipulated to the value of the boat and the application of the limitation act was never challenged. Id. at 532-35, 51 S.Ct. at 244. When the plaintiff later contested the application of the limitation act, moreover, the Supreme Court upheld the federal court's injunction against the state court finding that the issue became cognizable only in admiralty. Ex Parte Green, 286 U.S. 437, 52 S.Ct. 602, 76 L.Ed. 1212 (1932). This scenario has convinced courts, like Hellweg, that Langnes and Ex Parte Green stand for the proposition that a non-admiralty court only has jurisdiction over the limitation defense where the parties do not contest its applicability. See 818 F.Supp. at 1023-24.

Although the Court has grave concerns over such a reading,³ the Court need not decide whether a state court has jurisdiction over a contested limitation defense. Rather, the only issue before the Court is whether the defense may be asserted in a federal diversity action.⁴ After all, a district court unlike a state court has jurisdiction over admiralty claims. See U.S. Const. art. III, § 2 ("the judicial power shall extend ... to all Cases of admiralty and maritime jurisdiction.")

The Court finds that to limit a federal court with its conferred admiralty jurisdiction from hearing a § 183 defense makes little sense, other than creating duplicative litigation. Clearly, a federal plaintiff would rather not have its case circumvented by the liability narrowing provisions of § 183. If possible, therefore, a plaintiff, such as the one in this case, will couch its suit in terms having nothing to do with admiralty. Such structured pleading forces the defendant to file another suit in the federal court under § 185 to limit its liability. Although this second court could enjoin the first proceeding,⁵ this Court fails to see any reason why the defendant must file another suit before being able to invoke a provision which the first court had constitutionally conferred jurisdiction to address.

Other circuit courts have recognized that a court in a diversity action should have jurisdiction over the limitation defense. The Second Circuit has stated that: "if a [§ 183] limitation may be pleaded as a defense beyond the six month period, it would be unreasonable to make its availability turn on whether a plaintiff elects to bring suit on the admiralty side or the civil side of the court." Murray v. New York Central Railroad Company, 287 F.2d 152, 154 (1961). The Fifth Circuit has stated that: "In contrast [to a state court action], defensive pleading under section 183 in a federal district court answer does not present the same jurisdictional problems. The district court, having jurisdiction to hear the entire case initially filed with it, can adjudicate and rule on a limited liability issue that is raised in a properly filed answer." Vatican Shrimp Co., Inc. v. Solis, 820 F.2d 674, 678 (5th Cir.1987). Unfortunately, the Ninth Circuit has not addressed the issue, but this Court finds that it would follow its sister circuits and adopt the sensible rule that a federal district court can hear a limitation defense even if it is sitting in diversity.

In so holding, the Court rejects the thoughtful but unpersuasive reasoning in Hellweg v. Baja Boats, Inc., 818 F.Supp. 1022 (E.D.Mich.1992). First, the Hellweg Court distinguished Murray by arguing that it was "bound by the Sixth Circuit, not the Second." Id. at 1024. Moreover, the Sixth Circuit...