S. Recycling, L.L.C. v. Aguilar (In re S. Recycling, L.L.C.)

• Decision Date: 07 December 2020
• Docket Number: No. 20-40274,20-40274
• Citation: 982 F.3d 374
• Parties: IN RE: In the Matter of SOUTHERN RECYCLING, L.L.C., as Owner of The M/V Viking and The Barge DBL 134, Praying for Exoneration from or Limitation of Liability Southern Recycling, L.L.C., Petitioner—Appellant, v. Nestor Aguilar; Lorena Aguilar; Dora Mendieta, Individually, as next friend of J.L., III, a minor, and on behalf of The Estate of Jorge Loredo ; and Jane Mary Loredo, Claimants—Appellees, v. Maritime Chemists Services of the Coastal Bend of Texas, Incorporated; James J. Bell ; Clean Water of New York, Incorporated; Independent Testing and Consulting, Incorporated, Third Party Defendants—Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

982 F.3d 374

IN RE: In the Matter of SOUTHERN RECYCLING, L.L.C., as Owner of The M/V Viking and The Barge DBL 134, Praying for Exoneration from or Limitation of Liability

Southern Recycling, L.L.C., Petitioner—Appellant,

v.Nestor Aguilar; Lorena Aguilar; Dora Mendieta, Individually, as next friend of J.L., III, a minor, and on behalf of The Estate of Jorge Loredo ; and Jane Mary Loredo, Claimants—Appellees,

v.Maritime Chemists Services of the Coastal Bend of Texas, Incorporated; James J. Bell ; Clean Water of New York, Incorporated; Independent Testing and Consulting, Incorporated, Third Party Defendants—Appellees.

No. 20-40274

United States Court of Appeals, Fifth Circuit.

FILED December 7, 2020

Jefferson Randolph Tillery, Esq., Sara Barry Kuebel, Catherine Barrett Rice, Esq., Jones Walker, L.L.P., New Orleans, LA, for Petitioner-Appellant.

Roger H. Reed, Law Office of Roger H. Reed, McAllen, TX, for Claimants-Appellees.

Kevin Patrick Walters, Royston, Rayzor, Vickery & Williams, L.L.P., Houston, TX, for Third Party Defendants-Appellees James J. Bell and Maritime Chemist Services of the Coastal Bend of Texas, Incorporated.

Mike Johanson, Johanson Fairless, L.L.P., Sugar Land, TX, for Third Party Defendant-Appellee Clean Water of New York, Incorporated.

James T. Clancy, Jr., Branscomb, P.C., Corpus Christi, TX, for Third Party Defendant-Appellee Independent Testing and Consulting, Incorporated.

Before Clement, Ho, and Duncan, Circuit Judges.

Edith Brown Clement, Circuit Judge:

After an accident during shipbreaking operations killed one worker and injured another, Southern Recycling, L.L.C., brought a petition for exoneration or limitation of liability under the Limitation of Liability Act. 46 U.S.C. § 30501, et seq.

Claimants Nestor Aguilar (the injured worker), Lorena Aguilar, Dora Mendieta (individually, as next friend of Jorge Loredo's son, J.L. III, and on behalf of the estate of Jorge Loredo), and Jane Mary Loredo (collectively, "Claimants") moved to dismiss under Rule 12(b)(1) for lack of admiralty jurisdiction. Claimants argued that the barge Aguilar and Loredo had been working on was no longer a "vessel," and was instead a "dead ship." The district court agreed and dismissed for lack of subject matter jurisdiction. We AFFIRM.

I. FACTS AND PROCEEDINGS

Southern Recycling contracted with Kirby Offshore Marine Operating, LLC ("Kirby") to purchase an articulated tug/barge unit ("ATB") for shipbreaking and recycling. The ATB comprised a tugboat, the M/V Viking, and an oceangoing tanker barge, DBL 134. The parties to the contract agreed that the vessels should be "cleaned of all chemicals, petroleum products, and sludge," so Kirby hired a contractor to clean the vessels. Kirby then transported the ATB from New York to the International Shipbreaking Limited, L.L.C. ("ISL") shipyard in Brownsville, Texas.

ISL, which is an affiliate of Southern Recycling and had custody of the ATB for shipbreaking, began to conduct preliminary shipbreaking activities, including removing deck plates, cutting "small doors" in the cargo tanks, and making cuts to the bow of the barge. ISL workers also began to remove pipes that were part of a heating coil system in the cargo tanks. Unfortunately, because the barge had been used to transport gasoline, other petroleum products, and ethanol, the pipes contained an unknown amount of gasoline. While Aguilar and Loredo were cutting through one such pipe, a spark ignited a pocket of gasoline vapors, causing an explosion and fire that killed Loredo and severely injured Aguilar. Claimants sued for damages in Texas state court. Shortly thereafter, Southern Recycling brought this suit for limitation or exoneration under the Limitation of Liability Act.

"The Limitation of Liability Act does not confer jurisdiction upon federal courts." Guillory v. Outboard Motor Corp. , 956 F.2d 114, 115 (5th Cir. 1992) (per curiam). Instead, courts turn to 28 U.S.C. § 1333(1), which confers admiralty jurisdiction "exclusive of the courts of the States." Admiralty jurisdiction can only attach for Limitation Act purposes when the structure at issue is a "vessel." 46 U.S.C. § 30502. Claimants argued that, because DBL 134 was being broken for scrap when the accident happened, it was a "dead ship"—not a vessel—and the court was without subject matter jurisdiction to hear the limitation claim. In the alternative, Claimants argued that the district court should dismiss under Rule 12(b)(6) or grant summary judgment under Rule 56 for failure to state a claim upon which relief could be granted for the same reason (that the Limitation Act applies only to vessels).

Southern Recycling noted that DBL 134 is still floating in the Brownsville Shipyard and had even been moved since the accident (albeit within the ISL facility). Southern Recycling contended that the cuts were minor and preparatory only, and that DBL 134 retained the essential characteristics of a vessel—including that it still floats. The district court, however, considered photographs of the barge submitted by the parties, including one that depicted "a gaping hole open to the sea down to or below its waterline." The district court concluded in a brief opinion that DBL 134 was a dead ship, not a vessel, that it lacked subject matter jurisdiction, and that the motion to dismiss should be granted. Southern Recycling timely appealed.

II. STANDARD OF REVIEW

"We review a dismissal for lack of subject matter jurisdiction under Rule 12(b)(1) de novo," applying the same standard as the district court. Flores v. Pompeo , 936 F.3d 273, 276 (5th Cir. 2019) (citation omitted). A district court may dismiss a case under Rule 12(b)(1) based on "(1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Barrera-Montenegro v. United States , 74 F.3d 657, 659 (5th Cir. 1996) (quotations omitted). Where, as here, the district court has expressly relied on its resolution of disputed jurisdictional facts, "those findings are reviewed for clear error." Robinson v. TCI/US W. Commc'ns, Inc. , 117 F.3d 900, 904 (5th Cir. 1997).

The burden of proving subject matter jurisdiction lies with the party asserting jurisdiction, and it must be proved by a preponderance of the evidence. Ballew v. Cont'l Airlines, Inc. , 668 F.3d 777, 781 (5th Cir. 2012) ("The plaintiff must prove by a preponderance of the evidence that the court has jurisdiction based on the complaint and evidence.") (citation omitted).

"We review evidentiary rulings," including both denial of an evidentiary hearing and denial of a request for discovery, "for abuse of discretion." Freeman v. United States , 556 F.3d 326, 341 (5th Cir. 2009) (citations omitted).

III. DISCUSSION

Southern Recycling argues first on appeal that the district court applied an inadequately deferential standard of review and should have applied a standard more akin to Rule 12(b)(6) or Rule 56; that is, that the district court should have looked either to the pleadings alone or to the pleadings supported only by undisputed facts. Southern Recycling also contends that the district court substantively erred in its analysis of DBL 134. Because DBL 134 still floats and has been moved on navigable waters since the accident, Southern Recycling argues that it remains a vessel. Finally, Southern Recycling asks us, in the alternative, to find the district court erred in denying Southern Recycling's request for further discovery and to remand.

A.

We address first Southern Recycling's argument regarding the standard of review. The rule is that courts may resolve disputed jurisdictional facts to decide a 12(b)(1) motion, and a district court that does so is entitled to deference unless the decision is "clearly erroneous." Williamson v. Tucker , 645 F.2d 404, 413–14 (5th Cir. 1981). There is, however, an exception to this rule. Citing M.D.C.G. v. United States , Southern Recycling argues that "when the issue of jurisdiction is intertwined with the merits, district courts should ‘deal with the objection as a direct attack on the merits of the plaintiff's case under either Rule 12(b)(6) or Rule 56.’ " 956 F.3d 762, 768–69 (5th Cir. 2020) (quoting Montez v. Dep't of Navy , 392 F.3d 147, 150 (5th Cir. 2004) ). Because the existence of a vessel is a precondition for the Limitation Act to apply, 46 U.S.C. § 30502, Southern Recycling argues that the issue is intertwined with the merits of its limitation claim and that it is entitled to the heightened Rule 12(b)(6) or Rule 56 standards.

Southern Recycling had submitted an affidavit by ISL's president, Chris Green, claiming that "ISL made no cuts to the DBL134's hull below the fully loaded waterline and did not otherwise alter the integrity of the DBL134's hull. In other words, DBL134 still floats." Southern Recycling argues now that this proves DBL 134 remains a vessel, or at least that there are genuine disputes of material fact that preclude summary judgment under the Rule 56 standard. FED. R. CIV. P. 56(a). Because the district court expressly decided the motion to dismiss based on resolution of disputed facts under Rule 12(b)(1), we must first decide whether it was correct to do so.

There is no clear test for when the "intertwined with the merits" exception applies. Southern Recycling argues that it should apply any time the jurisdictional ruling could be dispositive of the claim as a whole. Southern Recycling cites dicta in Ramming v. United States that a dismissal for lack of subject matter jurisdiction "does not prevent the plaintiff from pursuing a claim in a court that does have proper jurisdiction" as implying that the usual 12(b)(1) rule only applies where a party can take their claim elsewhere. 281 F.3d 158, 161 (5th Cir. 2001) (per curiam) (citation omitted). This is not the correct implication to take from Ramming , and we decline to adopt "dispositive" as the test for when the...