In re Southern Scrap Material Co., LLC

• Decision Date: 25 August 2008
• Docket Number: No. 07-30470.,07-30470.
• Citation: 541 F.3d 584
• Parties: In Re: In the Matter of: SOUTHERN SCRAP MATERIAL COMPANY, LLC, As owner of the Southern Scrap Drydock, in a cause of Exoneration from, or Limitation of Liability. Southern Scrap Material Company, LLC, as owner of the Southern Scrap Drydock, Petitioner-Appellant, v. ABC Insurance Company, Respondent, United States of America, Claimant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

541 F.3d 584

In Re: In the Matter of: SOUTHERN SCRAP MATERIAL COMPANY, LLC, As owner of the Southern Scrap Drydock, in a cause of Exoneration from, or Limitation of Liability.

Southern Scrap Material Company, LLC, as owner of the Southern Scrap Drydock, Petitioner-Appellant, v. ABC Insurance Company, Respondent, United States of America, Claimant-Appellee.

No. 07-30470.

United States Court of Appeals, Fifth Circuit.

August 25, 2008.

Robert H. Murphy (argued), Peter Brooks Sloss, Murphy, Rogers, Sloss & Gambel, New Orleans, LA, for Petitioner-Appellant.

Michelle Terry Delemarre (argued), Bruce Allan Ross, U.S. Dept. of Justice, Washington, DC, for U.S.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before WIENER, BARKSDALE, and DENNIS, Circuit Judges.

DENNIS, Circuit Judge:

In this interlocutory appeal filed pursuant to 28 U.S.C. § 1292(a)(1), Southern Scrap Material Co., L.L.C. ("Southern Scrap"), contends that the district court erred by entering an order partially lifting and/or modifying the injunction it had previously issued in this limitation of liability action to allow the United States of America (the "United States") to pursue a claim against Southern Scrap outside of the context of the Limitation of Liability Act of 1851 (the "Limitation Act"), 46 App. U.S.C. § 183, revised at 46 U.S.C. § 30505 et seq. The United States' claim against Southern Scrap is brought pursuant to the Wreck Act, which is part of the Rivers and Harbors Act of 1899.¹ The United States seeks to hold Southern Scrap personally liable for the full amount of the wreck removal expenses it incurred when it removed Southern Scrap's sunken drydock from the Inner Harbor Navigational Canal (the "Industrial Canal") in New Orleans, Louisiana, after Hurricane Katrina; the cost of this removal far exceeded the post-accident value of the wrecked drydock. The United States asserted during the limitation proceeding that it should be allowed to file its claim as a civil action against Southern Scrap outside of the limitation proceeding because the Limitation Act does not apply to claims brought by the United States under the Wreck Act. Southern Scrap opposed the United States' motion to lift or modify the injunction in the district court, arguing that the Wreck Act does not authorize a statutory action to hold Southern Scrap, as the non-negligent owner of the drydock, personally liable for wreck-removal expenses, and even if it does, Southern Scrap's liability under the Wreck Act is limited by the Limitation Act to the drydock's post-accident value.

The questions presented in this appeal are therefore twofold: (1) whether the United States' claim under the Wreck Act states a claim upon which relief can be granted; and if so, (2) whether the Limitation Act applies so as to limit the United States' recovery on its Wreck Act claim. Viewing the facts alleged in the light most favorable to the United States, as we must at this pleading stage, we conclude that, as a result of the 1986 amendments to the Wreck Act, the United States may bring a statutory action under the Wreck Act to hold Southern Scrap personally liable for the cost of removing its sunken drydock, and that the claim is not subject to the Limitation Act. We therefore AFFIRM the district court's judgment insofar as it is consistent with this opinion. In so holding, we intimate no view as to the ultimate merits of the United States' claim or the defenses or counterclaims that may be asserted by Southern Scrap against it.

I. FACTUAL BACKGROUND

The following facts are taken from the allegations of fact contained in the claim filed by the United States in the limitation proceeding. When Hurricane Katrina struck New Orleans, Louisiana, on August 29, 2005, Southern Scrap was the owner and/or operator of a buoyant drydock located at its facility on the Industrial Canal inside the city. Katrina's surge caused the drydock to break free from its moorings and partially sink in the Industrial Canal against the Florida Avenue Bridge fender system.² The United States Army Corps of Engineers (the "Corps") considered the sunken drydock to be a hazard to navigation in the heavily-used Industrial Canal, which it considers to be part of the navigable waters of the United States, and, accordingly, determined that it should be removed in order to eliminate the hazard. On September 9, 2005, the Corps allegedly contacted Southern Scrap and advised it that the drydock was a hazard that needed to be removed. The Corps contends that Southern Scrap responded that it did not have the resources to remove the drydock in a timely manner but that it would provide blueprints to facilitate the drydock's removal. The Corps then hired Boh Bros. Construction Co. ("Boh Bros.") to remove the drydock from the Industrial Canal, and operations commenced on September 18, 2005. Boh Bros. completed removal of the drydock on December 2, 2005.³ Thereafter, pursuant to 33 U.S.C. § 409, the Corps demanded payment for its removal costs, which it estimated to be about $8,000,000, from Southern Scrap, as the owner and/or operator of the drydock that impeded navigation in the Industrial Canal. To date, Southern Scrap has refused to pay the amount requested by the United States for the cost of removing the drydock from the Industrial Canal.

II. PROCEDURAL BACKGROUND

On April 11, 2006, Southern Scrap filed a petition for limitation of liability in the Eastern District of Louisiana pursuant to the Limitation Act, by which it sought to limit its liability to the post-accident value of the drydock, which it stipulated to be $316,131.64. That same day, in accordance with the Limitation Act, the district court issued an order restraining the filing, commencement, and further prosecution of any legal proceedings against Southern Scrap arising out of the sinking of its drydock outside of the limitation action. The district court's order also required any party with a claim against Southern Scrap based on the damage or costs caused by the sunken drydock to file that claim as part of the limitation action by July 14, 2006. Five parties did so, including the United States, which filed its claim pursuant to the Wreck Act.

On December 22, 2006, the United States filed a motion asking the district court to lift or modify its April 11, 2006 limitation order so that the United States could pursue its claim for the entirety of its wreck removal expenses under the Wreck Act against Southern Scrap outside of the context of the limitation proceeding. On April 26, 2007, the district court granted the United States' motion, thereby allowing it to bring an unlimited personal liability claim under the Wreck Act outside of the context of the limitation proceeding against Southern Scrap for the entirety of the wreck removal expenses. Southern Scrap then timely filed this interlocutory appeal pursuant to 28 U.S.C. § 1292(a)(1). See Complaint of Mucho K, Inc., 578 F.2d 1156, 1157 (5th Cir.1978) (holding that the modification or dissolution of an injunction in a limitation of liability proceeding is appealable as a matter of right under § 1292(a)(1)).

III. STANDARD OF REVIEW

Because we must decide whether the United States is able to state a claim under the Wreck Act in order to resolve whether the district court properly granted the United States' motion to lift or modify the injunction in the limitation proceeding, we treat this matter as if it comes to us in the form of a denial of a Rule 12(b)(6) motion brought by Southern Scrap. We review a district court's determination of a Rule 12(b)(6) motion de novo. Abraham v. Singh, 480 F.3d 351, 354 (5th Cir.2007). When reviewing a motion to dismiss, we must accept all well-pleaded facts as true and view them in the light most favorable to the non-moving party. Baker v. Putnal, 75 F.3d 190, 196 (5th Cir.1996). As the Supreme Court recently emphasized, the "[f]actual allegations must be enough to raise a right to relief above the speculative level, ... on the assumption that all the allegations in the complaint are true (even if doubtful in fact)" and the non-moving party must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, ___ U.S. ___, 127 S.Ct. 1955, 1965, 1974, 167 L.Ed.2d 929 (2007). This standard "simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of" the necessary claims or elements. Id. at 1965.

Furthermore, this Court reviews a district court's statutory construction de novo. See Kaluom v. Stolt Offshore, Inc., 504 F.3d 511, 514 (5th Cir.2007); see also Kemp v. G.D. Searle & Co., 103 F.3d 405, 407 (5th Cir.1997) ("Questions of statutory interpretation are questions of law and thus reviewed de novo.").

IV. DISCUSSION

A. The United States has sufficiently alleged a claim against Southern Scrap upon which relief can be granted under the Wreck Act.

The Rivers and Harbors Act, "an assertion of the sovereign power of the United States" over its navigable waterways pursuant to Article I, § 8 of the Constitution, "was obviously intended to prevent obstructions in the Nation's waterways." Wyandotte Transp. Co. v. United States, 389 U.S. 191, 201, 88 S.Ct. 379, 19 L.Ed.2d 407 (1967). The Supreme Court has "consistently found [the Rivers and Harbors Act's] coverage to be broad," and it has "found that a principal beneficiary of the Act, if not the principal beneficiary, is the Government itself." Id. at 201, 88 S.Ct. 379. The Wreck Act, which is comprised of certain provisions of the Rivers and Harbors Act, viz., 33 U.S.C. §§ 409, 411, 412, 414 and 415, "addresses the problem of obstructions caused by sunken vessels." Univ. of Texas Med. Branch at Galveston v. United States, 557 F.2d 438, 444 (5th Cir.1977). Its purpose is "the protection of other vessels plying the same waters" as the sunken vessels. United States v. Raven, 500 F.2d 728, 732 (5th Cir.1974). "Co...