United States Court of Appeals,
Fifth Circuit.
No. 94-30403.
Patricia Ann GUEY, as owner of the Baron (now known as the
Hustler, C.G. La. 2317-E.J.), seeking exoneration from or
limitation of liability in re, Patricia Guey, Cross-Claimant-
Appellee,
v.
GULF INSURANCE COMPANY, Cross-Defendant-Appellee,
Shirley Perkins, individually and on behalf of Michael Penn,
Claimants-Appellants.
March 2, 1995.
Appeal from the United States District Court for the Eastern
District of Louisiana.
Before VAN GRAAFEILAND,* JOLLY and WIENER, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
The question presented in this case is whether, under 46
U.S.C.App. § 185, in a limitation of liability proceeding, the
failure to post bond in an amount equal to the owner's interest in
the vessel within six months following notice of a claim is
jurisdictional. We hold that it is not jurisdictional.
I
On July 4, 1992, a boat owned by Patricia Ann Guey, and
operated by Louis Butz collided with another boat operated by Scott
Helmer. Michael Penn, a passenger aboard the vessel operated by
Helmer, was seriously injured. Shirley Perkins, individually and
on behalf of Penn, brought suit against Guey and Butz in state
*
Circuit Judge of the Second Circuit, sitting by
designation.
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court under 28 U.S.C. § 1333, alleging negligent entrustment and
owner responsibility. Approximately two months later on January 7,
1993, Guey brought a limitation of liability action under 46
U.S.C.App. § 185 in the United States District Court for the
Eastern District of Louisiana. Guey did not post security equal to
her "interest in the vessel" as set out in section 185. Instead,
she contended in her affidavit filed with her complaint that her
"interest in the vessel" following the accident was zero dollars
because the amount owed on the boat exceeded its value. On April
23, 1993, Guey filed a cross-claim against Gulf Insurance Company
("Gulf"), which provided insurance coverage on the boat, arguing
that Gulf must post security for the limitation action. On July 2,
1993, the district court ordered Gulf to provide security for
Guey's limitation action in the amount of Guey's interest in the
boat, without reduction by the amount of any outstanding liens on
the boat. Gulf provided this security on July 12, 1993.1 The
district court then stayed all further proceedings pending the
termination of the limitation proceeding. On October 28, 1993,
Perkins answered the complaint and filed a claim for damages in
Guey's limitation action. On June 22, 1994, the district court
denied Perkins's motion for summary judgment, which sought
dismissal of Guey's limitation action on grounds that she, through
Gulf, failed to post security within six months of notice of a
1
The district court originally dismissed without prejudice
the limitation action for failure to post the proper security,
but later vacated this judgment and ordered Gulf to provide the
appropriate security.
2
claim, as allegedly required by 46 U.S.C.App. § 185. The district
court denied summary judgment and held that although Guey and Gulf
failed to post security within six months from the notice of the
claim, "[s]ecurity was posted in a timely manner following the
[district c]ourt's order" to do so. Perkins appeals.
II
A
We review a denial of a motion for summary judgment de novo,
applying the same standard as that used by the district court.
GATX Aircraft Corp. v. M/V Courtney Leigh, 768 F.2d 711 (5th
Cir.1985). Interlocutory orders concerning the amount of security
are appealable. In re Talbott Big Foot, Inc., 854 F.2d 758, 760
(5th Cir.1988).
B
Perkins contends that Guey's and Gulf's failure to post the
required security within six months after receiving notice of
Perkins's claim requires the dismissal of this action. She argues
that such a timely posting of security is required under both Rule
F(1) of the Supplemental Federal Rules of Civil Procedure for
Certain Admiralty and Maritime Claims and 46 U.S.C.App. § 185, and
thus is a jurisdictional prerequisite to this suit.
Rule F(1) provides that:
Not later than six months after receipt of a claim in writing,
any vessel owner may file a complaint in the appropriate
district court ... for limitation of liability pursuant to
statute. The owner (a) shall deposit with the court, for the
benefit of claimants, a sum equal to the amount or value of
the owner's interest in the vessel ..., or approved security
therefor, and in addition such sums, or approved security
therefor, as the court may from time to time fix as necessary
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to carry out the provisions of the statutes as amended ...
SUPP.FED.R.CIV.P. F(1). This rule incorporates in substance 46
U.S.C.App. § 185, which states:
The vessel owner, within six months after a claimant shall
have given to or filed with such owner written notice of a
claim, may petition a district court ... for limitation of
liability within the provisions of this chapter and the owner
(1) shall deposit with the court, for the benefit of
claimants, a sum equal to the amount or value of the interest
of such owner in the vessel ...
46 U.S.C.App. § 185. Upon motion of the claimant, the court can
increase the amount of security provided by the vessel owner on the
ground that the amount provided is less than the vessel owner's
interest in the vessel. SUPP.FED.R.CIV.P. F(7).
C
Together with her complaint, Guey filed Affidavits of Value
establishing the value of the boat after the accident as
$15,730.85, and the debt owed on the boat as $19,045.00. Because
the debt owed on the boat exceeded its value, Guey took the
position that her interest in the boat was zero. She, thus, posted
no security in conjunction with her limitation of liability suit
until the district court ordered her insurance provider, Gulf, to
post adequate security. This posting of security occurred more
than six months after the notice of the initial claim. She argues
that the district court cannot dismiss her case for inaccurately
estimating the value of her interest in the boat. In reliance on
Black Diamond S.S. Corp. v. Robert Stewart and Sons Ltd., 336 U.S.
386, 69 S.Ct. 622, 93 L.Ed. 754 (1949), she argues that posting an
inadequate bond is not a jurisdictional defect, and as such, the
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district court retains jurisdiction even though security is not
properly posted. Black Diamond, 336 U.S. at 395, 69 S.Ct. at 627,
93 L.Ed. at 762.
D
It is clear that neither Rule F nor section 185 by their
express terms mandate simultaneous filing of the complaint and
posting of the security. Instead, the plain language of Rule F and
section 185 requires that only the complaint be filed within the
six months following notice of a claim. The Advisory Committee
Notes following Rule F support this straightforward and unalloyed
reading of the Rule and state that Rule F(1) "make[s] it clear that
the complaint may be filed at any time not later than six months
after a claim has been lodged with the owner," but is silent as to
any possible time limitations on the posting of security.
SUPP.FED.R.CIV.P. F(1) advisory committee's note. Thus, our reading
of the statute indicates that posting the bond within the six
months following notice of a claim is not jurisdictional.
Although Black Diamond's facts are not identical to the facts
of this appeal, we think this case fully supports a conclusion that
the posting of the security within the six-month period is not
jurisdictional. The vessel owner, Black Diamond, filed a petition
and actually posted security, but in an amount that was less than
the value of the vessel. Black Diamond, 336 U.S. at 391, 69 S.Ct.
at 624, 93 L.Ed. at 761. The district court dismissed the petition
on the ground that Black Diamond had failed to file a bond in the
proper amount, that is, in an amount equal to the value of the
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vessel. Id. at 391-93, 69 S.Ct. at 624-26, 93 L.Ed. at 761. The
court of appeals affirmed the dismissal of the petition on
essentially the same grounds assigned by the district court,
although applying a different rationale. Id. at 392, 69 S.Ct. at
625, 93 L.Ed. at 761. The primary question addressed by the
Supreme Court was whether the limitation of liability statute
permitted a concursus of all the claims against the vessel when the
vessel owner did not concede that the total claims against the
vessel exceeded its value, and, consequently, had posted a bond in
an amount less than the value of the vessel. Id. at 389, 69 S.Ct.
at 624, 93 L.Ed. at 760. The Supreme Court, in reaching its
conclusion that Black Diamond was entitled to a concursus
notwithstanding whether the total claims exceeded the value of the
vessel, held that the inadequate bond was not a jurisdictional
defect under section 185. Id. at 395, 69 S.Ct. at 627, 93 L.Ed. at
763. Although the vortex of the controversy in Black Diamond was
not the six-month limitation period, as it seems to be in the case
before us, and although Black Diamond posted some security within
the six-month period when Guey posted none, the clear legal
inference to be drawn from the Black Diamond opinion is that
Perkins has not raised a jurisdictional question in the case before
us today.
Perkins argues, however, that to hold that the posting of the
bond within the six-month period is not jurisdictional conflicts
with the hoary Second Circuit case of Petition of Goulandris, 140
F.2d 780 (2d Cir.1944). Although it is true that the district
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court in that case construed section 185 to require a ship owner to
post adequate security within the six-month prescribed period, the
circuit court's holding was not so precise. Petition of
Goulandris, 140 F.2d at 782. Writing for the court, Judge Swann
observed that the petition for limitation there did not seek the
customary and proper relief contemplated by section 185. Id.
Instead, by refusing to surrender the vessel or to post adequate
security, the vessel owners sought an indefinite postponement of
the limitation proceeding until "further application by the
petitioners." Id. Thus, the court of appeals fashioned a holding
that was essentially fact specific to the case before it: "All we
decide is that the petition as filed, with nothing further done
within the six months, did not satisfy the statutory requirement."
Id.
To be sure, our court has already determined that Petition of
Goulandris does not stand for the proposition that the posting of
the bond is jurisdictional. In Oil Transport v. Verret, 278 F.2d
464 (5th Cir.1960), judgment vacated as moot, 365 U.S. 768, 81
S.Ct. 911, 6 L.Ed.2d 83 (1961)—a case much like ours today—the
bareboat charterer and owner of a sunken vessel filed a limitation
proceeding within six months, but, stating that the sunken vessel
was worthless, failed to post any security within the six-month
period. Oil Transport, 278 F.2d at 465. The trial court denied
the petitioners the benefit of the limitation statute because of
their failure to post security within six months of the filing of
a claim against the vessel. Id. at 466. The case presented the
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question of whether the failure to post adequate security within
the six-month period of time was jurisdictional. Id. Judge
Tuttle, writing for the court, held that when the vessel owner
believes in good faith that the vessel is worthless, no bond need
be posted to claim the benefits of the limitation of liability
statute. Id. In reaching his conclusion, Judge Tuttle observed
that Petition of Goulandris did not require as a jurisdictional
prerequisite the posting of a bond in the good faith circumstances
that he found in the facts before him.
Before concluding, we should observe that although Rule F and
section 185 impose no mandatory time limitations on the posting of
a bond, clearly the better practice is to require timely posting of
a bond, so that the litigation may be expediently resolved. The
district court is free, and, indeed, is encouraged to exercise its
discretion and require prompt filing of the bond once the complaint
is filed. The district court surely may enforce such orders with
the proper sanctions, including dismissal of the limitations
proceedings in the appropriate case. We only hold that under
section 185 the simultaneous posting of security with the
petition—or the posting of security within six months—is not a
jurisdictional requirement.
E
We conclude by observing that although Guey initially posted
no amount of security, her boat insurer, Gulf, promptly filed an
adequate bond when ordered to do so by the district court. We
agree with the district court that in this case "security was
8
posted in a timely manner following the [district c]ourt's order"
to do so. Because we hold that posting security within the six
months following notice of a claim is not a jurisdictional
requisite by the terms of Rule F and section 185 and because the
court did not abuse its discretion in concluding that the security
was otherwise timely posted, we AFFIRM the district court's
judgment denying Perkins's motion for summary judgment.
III
For the foregoing reasons, the judgment of the district court
is
AFFIRMED.
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