Hellweg v. Baja Boats, Inc.

• Decision Date: 06 March 1992
• Docket Number: Civ. A. No. 91-CV-40088-FL.
• Citation: 818 F. Supp. 1022
• Parties: David HELLWEG and Margery Hellweg, and Brian McAllister, Plaintiffs, v. BAJA BOATS, INC., and Courtney Smith, Defendants.
• Court: U.S. District Court — Western District of Michigan

818 F. Supp. 1022

David HELLWEG and Margery Hellweg, and Brian McAllister, Plaintiffs, v. BAJA BOATS, INC., and Courtney Smith, Defendants.

Civ. A. No. 91-CV-40088-FL.

United States District Court, E.D. Michigan, S.D.

March 6, 1992.

Phillip B. Maxwell, Frasco, Freydl & Caponigro, Bloomfield Hills, MI, for plaintiff.

Frank W. Brochert, Plunkett & Cooney, P.C., Detroit, MI, for defendant.

MEMORANDUM OPINION AND ORDER

NEWBLATT, District Judge.

Before the Court is defendants' Motion to Amend Affirmative Defenses, plaintiffs' Response, and defendants' Reply. In their motion, defendants seek to add as an affirmative defense that the liability of defendant Baja Boats, Inc. ("Baja"), for the damages sustained by plaintiffs, is limited to the value of the hull, pursuant to 46 U.S.C.App. § 183. Plaintiffs oppose this motion on the grounds, inter alia, that the Limitation of Liability Act, 46 U.S.C.App. § 181, et seq., can only be entertained by a district court through its exclusive admiralty jurisdiction; and this case is before the Court by way of diversity jurisdiction. For the reasons that follow, the Court finds that it lacks jurisdiction in this diversity action to adjudicate defendants' limitation of liability defense. Therefore, defendants' motion is DENIED.

This action arises out of a boating accident that occurred on January 31, 1990 in the Haulover Inlet, a body of water connecting the Intercostal waterway and the Atlantic Ocean off the shores of Miami Beach, Florida. Defendant Courtney Smith was driving defendant Baja's prototype speed boat at the time of the accident, and plaintiffs allege that the accident was the result of both Smith's negligent operation of the vessel and defendant Baja's negligence in selecting defendant Smith to be the test driver. As a result of this accident, plaintiffs suffered varying degrees of personal injuries. These events precipitated the filing of this suit here against defendant Baja, as manufacturer and owner of the boat, and defendant Smith, as test driver and representative of Baja. In their five Count Complaint, plaintiffs invoke the federal court's diversity jurisdiction, alleging (1) simple negligence against defendant Smith, (2) respondeat superior against defendant Baja, (3) negligent entrustment, (4) dangerous instrumentality strict liability, and (5) loss of consortium.

The legal question raised here is one of first impression. The issue is whether a federal court presiding over a civil action brought pursuant to its diversity jurisdiction can invoke its admiralty jurisdiction to determine the applicability of § 183 of the Limitation of Liability Act as a defense, when admiralty jurisdiction has not been pled as a basis for the district court's jurisdiction over the case. Although the case law makes it clear that a state court cannot entertain such a defense for lack of admiralty jurisdiction, there is no case, either cited by the parties or found by this Court, the holding of which has resolved this question. There is dicta, but even that seems to be contradictory among the courts of appeals. As detailed below, this Court holds that it has no jurisdiction to adjudicate the limitation of liability defense where, as here, the underlying claim is on the civil side of the Court solely pursuant to its diversity jurisdiction.

To decide the issue, it is necessary to consider the two means provided by the Limitation of Liability Act for a boat owner to limit its liability. Under 46 U.S.C.App. § 185, the owner of a vessel may file a petition for limitation of liability in any federal district court sitting in admiralty. This petition, however, must be made within six months after the vessel owner has received a "written notice of claim." In the present case, defendant Baja has filed no such petition. Instead, Baja seeks to limit its liability by way of filing an affirmative defense, asserting the substantive limitation provisions of 46 U.S.C.App. § 183.

Section 183, unlike section 185, does not provide a time limitation. Moreover, unlike a § 185 petition which must be filed with an admiralty court, the defense asserting limitation of liability under § 183 may be pled by way of answer filed in any court, including a state court. Langnes v. Green, 282 U.S. 531, 543, 51 S.Ct. 243, 247-48, 75 L.Ed. 520 (1931); Vatican Shrimp Co., Inc. v. Solis, 820 F.2d 674, 677 (5th Cir.1987); see also Cincinnati Gas & Electric Co. v. Abel, 533 F.2d 1001, 1003 (6th Cir.1976), citing Deep Sea Tankers v. The Long Branch, 258 F.2d 757, 772 (2d Cir.1958) ("It has long been recognized that limitation of liability may be invoked by a shipowner either as a defense in an action seeking damages or by an independent petition in admiralty."). Once the vessel owner's right to limit liability is contested, however, a state court cannot exercise jurisdiction over the matter which is only cognizable in admiralty, over which the federal courts have exclusive jurisdiction. Langnes, 282 U.S. at 543, 51 S.Ct. at 248; Cincinnati Gas, 533 F.2d at 1003; Vatican Shrimp, 820 F.2d at 677. Given that case law, the Court would ordinarily grant defendant's motion to amend, as such a defense can be pled in any court. Yet, when the defense is challenged, as here, the law precludes at least state courts from exercising jurisdiction. The question in this case, as yet unanswered by the courts of appeals, is whether a district court sitting in exercise of its diversity jurisdiction can entertain such an admiralty law defense.

The parties have cited several cases and commentaries which, tangentially and often contradictorily, touch upon the present issue. Primarily, there are three cases out of different circuits that have been cited by both parties: Murray v. New York Central R.R. Co., 287 F.2d 152 (2d Cir.), cert. denied 366 U.S. 945, 81 S.Ct. 1674, 6 L.Ed.2d 856 (1961); Vatican Shrimp, supra (5th Cir.); and Cincinnati Gas, supra (6th Cir.). Of these three, Murray is the most factually consistent with the present action.

In Murray, the plaintiff brought in federal court a civil action, rather than an admiralty action, to recover damages for personal injuries suffered while working on a barge which was being maneuvered by the defendant's tug boat. The defendant, the tug boat's owner, filed an answer claiming the right to limit its liability under 46 U.S.C.App. § 183(a). The district court granted limitation of liability to the defendant and the court of appeals affirmed. 287 F.2d at 153-54. The Second Circuit

found that it was immaterial whether the original claim was filed on the "admiralty side" or the "civil side" of the court. Holding that the owner was not required under these circumstances to file an independent action under Section 185 the court stated "the rule for which appellant contends disregards the desirability of one trial only, where all rights can be fairly decided in a single legal proceeding." 287 F.2d at 153.

Cincinnati Gas, 533 F.2d at 1004. At first glance, viewing the Murray decision alone, it seems that the Second Circuit would allow the Court in this case to entertain defendant Baja's § 183 defense regardless of whether this case is before the Court as a Civil action or as an Admiralty claim. Nevertheless, this Court is bound by the Sixth Circuit, not the Second. Therefore, the Court must consider the Sixth Circuit's view of the reasoning in Murray.

In Cincinnati Gas, the appellee, owner of a marina on the Ohio River, brought suit in state court against the appellant, owner of a tug boat, for the tug boat's collision with and damage of the appellee's marina. In the state court, the appellant moved for partial summary judgment to limit its liability under 46 U.S.C. § 183(a). This defense was contested by the appellee, and, because the state court lacked jurisdiction to entertain the admiralty defense, the state court denied the appellant's motion but stayed the state proceedings to allow the appellant to file a § 185 petition in the federal district court. The district court dismissed the appellant's petition for failure to meet the six months requirement of § 185. 533 F.2d at 1002-03.

Appeal was made to the Sixth Circuit, where that court determined that a state court is competent to render relief by way of limitation of liability only if the plaintiff does not contest the right of the shipowner to limit its liability. Id. at 1003. As noted, in Cincinnati Gas, as in this action, the plaintiff did contest the vessel owner's right to limit its liability.¹ In affirming the district court's dismissal of the appellant's § 185 petition, the court of appeals considered the applicability of the Second Circuit's Murray decision.

Analyzing Murray, the Sixth Circuit in Cincinnati Gas found the Murray court's reasoning "to be persuasive, but not conclusive." 533 F.2d at 1004. The Sixth Circuit noted that in Murray the plaintiff, by including a claim for maintenance, had invoked the admiralty jurisdiction of the district court in his complaint. "Thus, the case was already on the `admiralty side' with respect to one of its claims before the petition for limited liability was filed." Id. The Sixth Circuit further distinguished Murray by pointing out that, unlike the action in Cincinnati Gas, in Murray "the entire case was before the district court from its inception." Id. The Sixth Circuit went on to state that:

It is apparent that there is a difference, in terms of jurisdictional considerations, between transferring an issue for separate trial from one division or "side" of a single court and transferring it for separate trial in an entirely different court system. This is the jurisdictional obstacle which the district court found impassable in this case.... citation omitted. We note also that the strongest argument in Murray related to the desirability of disposing of all issues in a single legal proceeding. This may be achieved in a case such as this one only in a federal court. When the

...