United States Court of Appeals,
Eleventh Circuit.
No. 95-2418.
SUZUKI OF ORANGE PARK, INC., as owners of 1993 "Seadoo" Explorer
Serial No. ZZN05228L293, in a cause of action of exoneration from,
or limitation of, liability, Plaintiff-Appellant,
v.
Steven Scott SHUBERT; Sherry Shubert, Defendants-Appellees.
July 1, 1996.
Appeal from the United States District Court for the Middle
District of Florida. (No. 94-1132-Civ-J-16), John H. Moore, II,
Judge.
Before ANDERSON and BLACK, Circuit Judges, and FAY, Senior Circuit
Judge.
ANDERSON, Circuit Judge:
In this admiralty case brought under the Limitation of Vessel
Owner's Liability Act, 46 App. U.S.C. § 181 et seq. (the
"Limitation Act"), appellant Suzuki of Orange Park, Inc. ("Suzuki")
challenges an order of the district court denying by summary
judgment its petition for exoneration from or limitation of
liability. For the reasons set forth herein, we reverse and remand
for further proceedings consistent with this opinion.
I. FACTS
Suzuki is a Florida corporation engaged primarily in the
business of selling recreational watercraft. On September 19,
1993, Suzuki staged a customer relations event near Jacksonville,
Florida, on the waterfront property of a customer. Suzuki invited
numerous other customers, including appellee Steven Shubert, to
attend the event. For the purpose of demonstrating the
recreational watercraft sold by Suzuki, Jerry Blount, the president
of Suzuki, constructed a slalom course on Julington Creek, a
navigable waterway within Florida's territorial waters.
Blount permitted Richard Hall, also a Suzuki customer, to
operate a Seadoo Explorer owned by Suzuki ("the Explorer").
Shubert, along with Billy Joe Mann and Ted Nemic, rode in the
Explorer as passengers. As Hall guided the Explorer through the
slalom course, Shubert fell into the water. It is unknown whether
Mann and Nemic pushed Shubert, whether Hall's driving somehow upset
Shubert's balance, or whether another explanation for Shubert's
fall exists. At the time of Shubert's fall, two other watercraft
followed closely behind the Explorer. The first watercraft was a
"Bombardier GTX," owned and operated by Roy Daniel. The second
watercraft was a "Polaris SL 750," owned by Ronnie Lee Whitaker and
operated by Sean Marr. Daniel's watercraft avoided hitting
Shubert, but Marr's watercraft struck Shubert, causing him to
suffer serious and permanent injuries.
II. PROCEDURAL HISTORY
On June 24, 1994, Shubert and his wife, Sherry, filed a
complaint in Florida state court against Suzuki, Blount, Hall,
Mann, Nemic, Daniel, and Marr. The complaint's allegations against
Suzuki, the vessel owner, are relevant to Suzuki's petition for
limited liability. In summary, the complaint alleges that Suzuki
negligently supervised the demonstration of the Explorer. On
November 22, 1994, Suzuki instituted this limitation action in the
United States District Court for the Middle District of Florida.
Upon approving Suzuki's offer of security and its ad interim
stipulation of $9,000 as the value of the Explorer, the district
court enjoined anyone who had claims arising out of the accident
from proceeding against Suzuki in any other forum. See generally
46 App. U.S.C. § 185; Fed.R.Civ.P. Supplemental Rule F. The court
issued a notice to the Shuberts, admonishing them to file claims
against Suzuki in the limitation proceeding, or else be defaulted.
A copy of the notice was published in a newspaper for purposes of
informing other potential claimants. On February 6, 1995, the
Shuberts filed a timely answer and claim for damages in excess of
the stipulated value of the Explorer, with Shubert seeking to
recover for his personal injuries and Shubert's wife seeking to
recover for loss of consortium. Apparently, no one else filed
timely claims in the limitation action.
The Shuberts also moved for summary judgment, contending that
Suzuki was not entitled to limitation for accidents arising from
the direct negligence of its president, Blount. The district court
agreed with the Shuberts and entered final summary judgment,
denying Suzuki limitation of liability on March 3, 1995. This
appeal followed.
III. DISCUSSION
The Limitation Act limits a vessel owner's liability for any
damages arising from a maritime accident to the value of the vessel
and its freight, provided that the accident occurred without such
1
owner's "privity or knowledge." 46 App. U.S.C. § 183(a). In a
1
46 App. U.S.C. § 183(a) provides:
The liability of the owner of any vessel, whether
American or foreign, for any embezzlement, loss, or
destruction by any person of any property, goods, or
merchandise shipped or put on board of such vessel, or
for any loss, damage, or injury by collision, or for
typical limitation proceeding, the admiralty court determines
whether the vessel owner is entitled to limited liability by
undertaking the following two-step analysis:
First, the court must determine what acts of negligence or
conditions of unseaworthiness caused the accident. Second,
the court must determine whether the shipowner had knowledge
or privity of those same acts of negligence or conditions of
unseaworthiness.
Hercules Carriers, Inc. v. Claimant State of Florida, 768 F.2d
1558, 1563-64 (11th Cir.1985) (quoting Farrell Lines, Inc. v.
Jones, 530 F.2d 7, 10 (5th Cir.1976)). The damage claimants bear
the initial burden of establishing liability (i.e., negligence or
unseaworthiness), and the shipowner then bears the burden of
establishing the lack of privity or knowledge. Id. If limited
liability is granted, the admiralty court oversees the distribution
of the limitation fund among the damage claimants. See generally
In re Dammers & Vanderheide & Scheepvaart Maats Christina B.V., 836
F.2d 750, 755 (2d Cir.1988).
A vessel owner's claim to limited liability must be
adjudicated exclusively in the admiralty court, which sits without
a jury. See Ex Parte Green, 286 U.S. 437, 439-40, 52 S.Ct. 602,
603, 76 L.Ed. 1212 (1932); Newton v. Shipman, 718 F.2d 959, 962
(9th Cir.1983) (per curiam). However, the same statute that grants
the federal courts exclusive admiralty and maritime jurisdiction
saves to suitors "all other remedies to which they are otherwise
entitled." 28 U.S.C. § 1333(1). The "saving to suitors" clause of
any act, matter, or thing, loss, damage, or forfeiture
done, occasioned, or incurred, without the privity or
knowledge of such owner or owners, shall not ... exceed
the amount or value of the interest of such owner in
such vessel, and her freight then pending.
§ 1333(1) embodies a presumption in favor of jury trials and other
common law remedies in the forum of the damage claimant's choice.
See Odeco Oil & Gas, Drilling Div. v. Bonnette, 74 F.3d 671, 674
(5th Cir.1996). To reconcile the tension between the exclusive
admiralty jurisdiction over Limitation Act claims and the
presumption favoring jury trials under the saving to suitors
clause, courts have identified a few circumstances under which the
damage claimants may litigate the issues of liability vel non, as
well as damages, in their chosen fora. See In re Beiswenger Ent.
Corp., No. 95-2272, slip. op. at ----, --- F.3d ----, ---- (11th
Cir.1996).2 Under these exceptions, if the vessel owner is held
liable in the damage claimant's chosen forum for an amount
exceeding the limitation fund, the parties must return to the
admiralty court to litigate the vessel owner's privity or
knowledge.
Another method employed to preserve the damage claimants'
saving to suitors clause rights was recognized in Fecht v.
Makowski, 406 F.2d 721 (5th Cir.1969).3 In that case, which
2
The first exception to exclusive admiralty jurisdiction
arises where the limitation fund exceeds the aggregate amount of
all the possible claims against the vessel owner. See Lake
Tankers Corp. v. Henn, 354 U.S. 147, 152-53, 77 S.Ct. 1269, 1272-
73, 1 L.Ed.2d 1246 (1957). The second exception exists where
there is only one claim to the limitation fund, and the single
claimant enters certain stipulations designed to protect the
vessel owner's rights under the Limitation Act. See In re Mucho
K, Inc., 578 F.2d 1156, 1158 (5th Cir.1978). In In re Beiswenger
Ent. Corp., No. 95-2272, slip. op. at ----, --- F.3d ----, ----
(11th Cir.1996), this Circuit recently held that multiple
claimants may enter appropriate stipulations to create the
functional equivalent of the single claimant exception.
3
In Bonner v. City of Prichard, 661 F.2d 1206 (11th
Cir.1981) (en banc), this court adopted as binding precedent all
of the decisions of the former Fifth Circuit handed down prior to
involved multiple claims to an inadequate limitation fund, the
former Fifth Circuit held that the damage claimants must be allowed
to litigate the vessel owner's negligence in state court, "where it
is apparent that limitation cannot be granted." Id. at 722. Fecht
involved an accident in which one passenger was killed and another
seriously injured when a pleasure boat struck a submerged object.
The boat's owner, who was operating the boat at the time of the
accident, filed a limitation complaint in federal district court.
The owner conceded that limitation was impossible, because "when an
owner is in control of and operating his pleasure craft he has
privity or knowledge with respect to its operation." Id. at 722;
see also id. at 722 n. 4. Nevertheless, the admiralty court, over
the objections of the damage claimants, conducted a full trial on
the liability issues. Concluding that the boat was seaworthy and
its operator free from fault, the court exonerated the boat owner.
See id. On appeal, the damage claimants argued that the admiralty
court should have allowed them to litigate the boat owner's
negligence in state court, while the boat owner argued that he was
entitled to litigate his right to exoneration from liability in the
admiralty court. The Fifth Circuit agreed with the damage
claimants, and reversed the lower court's grant of exoneration:
[W]here no limitation is possible the damage claimants are
entitled to have the injunction against other actions
dissolved, so that they may, if they wish, proceed in a common
law forum as they are entitled to do under the saving to
suitors clause. 28 U.S.C. § 1333.... The reason for
enjoining state court suits is to distribute effectively a
limited fund in a single proceeding, not to "transform the
[Limitations] Act from a protective instrument to an offensive
weapon by which the shipowner could deprive suitors of their
the close of business on September 30, 1981. Id. at 1209.
common law rights." Lake Tankers Corp. v. Henn, 354 U.S. 147,
152, 77 S.Ct. 1269, 1272, 1 L.Ed.2d 1246, 1251 (1957). Where
no grant of limitation is possible, the basis for granting
exoneration vanishes.
Id. at 722-23. Thus, Fecht establishes that the admiralty court
may decide the privity or knowledge issue without first deciding
the liability issue—at least where the boat owner concedes privity
or knowledge, or where it is otherwise impossible under any set of
circumstances for the vessel owner to demonstrate the absence of
privity or knowledge. See also Joyce v. Joyce, 975 F.2d 379, 385
(7th Cir.1992) (where sole allegation against boat owner is
negligently entrusting the boat to its operator, the boat owner is
necessarily ineligible for limited liability because privity or
knowledge is an element of the tort of negligent entrustment).
With the principle of Fecht in mind, we turn to the privity or
knowledge issue in this case. If it is truly impossible under any
set of circumstances for Suzuki to establish its lack of privity or
knowledge, then the limitation action should be dismissed, and the
Shuberts should be allowed to try liability and damages issues in
state court.
The statutory concept of "privity or knowledge" is somewhat
elusive, although the purpose of the Limitation Act provides some
guidance as to its proper application. See Gibboney v. Wright, 517
F.2d 1054, 1057 (5th Cir.1975) ("What is meant by privity or
knowledge is not easy to pin down."); Fecht, 406 F.2d at 722
(citing cases for the proposition that "the meaning of "privity or
knowledge' has been the subject of considerable speculation"). The
Limitation Act was designed to encourage investment in the shipping
industry by limiting the physically remote shipowner's vicarious
liability for the negligence of his or her water-borne servants.
See Tittle v. Aldacosta, 544 F.2d 752, 756 (5th Cir.1977). Thus,
consistent with the statutory purpose to protect innocent
investors, "privity or knowledge" generally refers to the vessel
owner's personal participation in, or actual knowledge of, the
specific acts of negligence or conditions of unseaworthiness which
caused or contributed to the accident. See Coryell v. Phipps, 317
U.S. 406, 411, 63 S.Ct. 291, 293, 87 L.Ed. 363 (1943); American
Car & Foundry Co. v. Brassert, 289 U.S. 261, 264, 53 S.Ct. 618,
619, 77 L.Ed. 1162 (1933) (because the Limitation Act was designed
to protect the innocent investor, the vessel owner remains liable
"[f]or his own fault, neglect and contracts"). Over the years,
however, the courts have broadened privity or knowledge to include
constructive knowledge—what the vessel owner could have discovered
through reasonable inquiry. See, e.g., In re Oil Spill by the
AMOCO CADIZ, 954 F.2d 1279, 1303 (7th Cir.1992) ("The recent
judicial trend has been to enlarge the scope of activities within
the "privity or knowledge' of the shipowner, including ...
requiring shipowners to exercise an ever-increasing degree of
supervision and inspection."); Hercules Carriers, Inc. v. Claimant
State of Florida, 768 F.2d 1558, 1564, 1576 (11th Cir.1985)
("[P]rivity or knowledge is established where the means of
obtaining knowledge exist, or where reasonable inspection would
have led to the requisite knowledge."); McNeil v. Lehigh Valley
R.R., 387 F.2d 623, 624 (2d Cir.1967) ("Negligent failure to
discover constitutes privity and knowledge within the meaning of
the statute."), cert. denied sub nom. Lehigh Valley R. Co. v. Wm.
Spencer & Son Corp., 390 U.S. 1040, 88 S.Ct. 1638, 20 L.Ed.2d 302
(1968).
The shipowner's privity or knowledge is not measured against
every fact or act regarding the accident; rather, privity or
knowledge is measured against the specific negligent acts or
unseaworthy conditions that actually caused or contributed to the
accident. Farrell Lines, Inc. v. Jones, 530 F.2d 7, 10 (5th
Cir.1976) (after determining what acts of negligence or conditions
of unseaworthiness caused the accident, "the court must determine
whether the shipowner had knowledge or privity of those same acts
of negligence or conditions of unseaworthiness"); Avera v. Florida
Towing Corp., 322 F.2d 155, 158 (5th Cir.1963) ("For the problem
always exists ... of determining just what specific acts of
negligence were committed against which the admiralty court
subsequently applies the privity-knowledge yardstick."); see also
Deslions v. La Compagnie Generale Transatlantique, 210 U.S. 95,
122, 28 S.Ct. 664, 673, 52 L.Ed. 973 (1908) ("[M]ere negligence,
pure and simple, in and of itself does not necessarily establish
the existence on the part of the owner of a vessel of privity and
knowledge within the meaning of the statute.").
In the context of a corporate shipowner, the privity and
knowledge of "corporate managers vested with discretionary
authority" is attributed to the corporation. Great Lakes Dredge &
Dock Co. v. City of Chicago, 3 F.3d 225, 231 (7th Cir.1993)
(distinguishing "managerial" employees from "purely ministerial"
employees for purposes of attributing privity or knowledge to the
corporation), aff'd sub nom. Jerome B. Grubart, Inc. v. Great Lakes
Dredge & Dock Co., --- U.S. ----, 115 S.Ct. 1043, 130 L.Ed.2d 1024
(1995); see also Coryell v. Phipps, 317 U.S. 406, 410-11, 63 S.Ct.
291, 293, 87 L.Ed. 363 (1943) (explaining that a corporate
shipowner may not limit its liability where "the negligence is that
of an executive officer, manager or superintendent whose scope of
authority includes supervision over the phase of the business out
of which the loss or injury occurred"); Craig v. Continental Ins.
Co., 141 U.S. 638, 646, 12 S.Ct. 97, 99, 35 L.Ed. 886 (1891) ("When
the owner is a corporation, the privity or knowledge must be that
of the managing officers of the corporation."); Hercules Carriers,
Inc. v. Claimant State of Florida, 768 F.2d 1558, 1574 (11th
Cir.1985) (privity and knowledge of a managing agent, officer or
supervising employee, including supervisory shoreside personnel, is
attributable to the corporation); Continental Oil Co. v. Bonanza
Corp., 706 F.2d 1365, 1376 (5th Cir.1983) (en banc) (explaining
that the attribution of a managing agent's privity or knowledge to
the corporation depends upon the scope of such managing agent's
authority). In the instant case, therefore, the privity and
knowledge of Blount, Suzuki's president, clearly constitutes the
privity and knowledge of Suzuki.
In the case at bar, the district court applied Fecht and held
that limitation is impossible. The court expressly refrained from
deciding what acts of negligence or conditions of unseaworthiness
caused the accident, leaving those issues open for determination by
the state court jury. According to the district court, if the
state court holds Suzuki liable for the accident, Suzuki's
liability would derive solely from Blount's actions. Because
Blount necessarily has privity and knowledge of his own actions,
and because Blount's privity and knowledge is the same as Suzuki's,
the district court denied Suzuki's limitation petition.
We do not believe that the district court's disposition of
this case adequately protects Suzuki's rights under the Limitation
Act. It is true that Suzuki necessarily possesses privity and
knowledge with respect to all of the acts of Blount. If Suzuki
could be held vicariously liable only through Blount, then no doubt
limited liability would be impossible. At this stage of the
proceedings, however, we are reluctant to assume that Suzuki can be
held vicariously liable only through Blount.4 Our reluctance finds
support in this court's decision in In re M/V SUNSHINE, II, 808
F.2d 762, 765 (11th Cir.1987). In that case, a pleasure boat
owner, who was operating his boat when it collided with another
boat, filed a petition for limited liability. See id. at 763.
Following Fecht and explaining that an owner-operator may not ever
limit his liability, the district court dismissed the limitation
petition on a motion to dismiss. This court reversed, holding that
the district court should not have resolved the privity or
knowledge issue without further factual development. We stated:
[I]n most circumstances negligence in operation will be
sufficiently connected to the owner on board his own small
vessel and operating it that he will be found to have privity
or knowledge, but this common sense recognition of how the
facts will usually work out is not an ineluctable doctrine to
be applied at the pleading stage, on conclusory and disputed
allegations, as a substitute for the knowledge necessary to
lead a court to rational decision.
4
In granting summary judgment against Suzuki, the district
court considered only the pleadings filed in the limitation
proceeding, the Shuberts' state court complaint, and a deposition
of Blount.
Id. at 765.
In the instant case, we can envision a set of circumstances
under which Suzuki could be exposed to liability based on the
actions of someone other than Blount. For example, suppose that
the state court finds that Hall and Marr both caused the accident
by operating their watercraft negligently, and that Blount and
Shubert are free from contributory fault. If Hall was acting as
Suzuki's agent at the time of the accident, the court could hold
Suzuki vicariously liable under principles of respondeat superior.5
Despite this imputation of Hall's negligence to Suzuki, Suzuki may
lack privity or knowledge with respect to Hall's negligence.6 This
scenario illustrates why Suzuki's rights under the Limitation Act
may be in jeopardy. It remains possible that Suzuki will have to
pay damages exceeding the limitation fund for acts occurring
without its privity or knowledge. Accordingly, we hold that the
possibility of vicarious liability through parties other than
5
Although it appears that Hall is not an employee of Suzuki,
it would be premature to say that Hall was not acting on Suzuki's
behalf on the day of the accident.
6
If Hall is not a managerial employee of Suzuki, Hall's
privity or knowledge would not automatically be attributed to
Suzuki. This is not to say, however, that if Hall caused the
accident, Suzuki could always demonstrate a lack of privity or
knowledge. For example, in Tittle v. Aldacosta, 544 F.2d 752,
756-57 (5th Cir.1977), the court attributed the privity or
knowledge of a ship's mate to the shipowner, where the shipowner
was on board the ship at the time of the accident, and exercised
"direct command" over the negligent mate. "Unlike owners who are
remote physically and operationally, [the owner present at the
accident] cannot rightfully claim that his investment in a
seagoing enterprise is imperiled by actions of those over whom he
can exercise no immediate control." Id. Accordingly, "where the
operational command of the whole enterprise is in the hands of
the owner then present, he is charged with privity and knowledge
on usual principles for the negligent acts of those under his
effective command." Id.
Blount precludes summary judgment. A genuine issue of material
fact as to Suzuki's lack of privity or knowledge still exists.
Although the Shuberts emphasize that their state court
complaint does not allege that Suzuki is vicariously liable for
Hall's conduct, or for anyone's conduct other than Blount's, the
Shuberts cannot ensure that Suzuki will be held vicariously liable
only through Blount. First, the Shuberts have not executed any
stipulation in the admiralty court binding them to hold Suzuki
vicariously liable for Blount's actions only. Without such a
stipulation, the Shuberts presumably could amend their state court
pleadings to allege that Suzuki is vicariously liable through
someone other than Blount. Second, even if the Shuberts agree not
to pursue vicarious liability through anyone but Blount, the
Shuberts' amended state court complaint names Blount, Hall, Mann,
Nemic, Daniel, and Marr as defendants (along with Suzuki). If
deemed negligent, these parties could file cross-claims against
Suzuki for indemnification or contribution, alleging that Suzuki is
vicariously liable through someone other than Blount (such as
Hall). Cf. In re Beiswenger Ent. Corp., No. 95-2272, slip. op. at
----, --- F.3d ----, ---- (11th Cir.1996) (holding that, for
purposes of determining whether a multiple-claims-inadequate-fund
situation exists, potential claims for indemnity or contribution
from the vessel owner's co-defendants must be considered separately
from the damage claimant's primary claim against the vessel owner).
If Suzuki lacks privity or knowledge with respect to Hall's
actions, see supra, then Suzuki's rights under the Limitation Act
will have been frustrated.
Our decision, reversing summary judgment on the privity or
knowledge issue, is not necessarily fatal to the Shuberts' ability
to try liability and damages issues against Suzuki in state court.
See, e.g., Beiswenger, slip. op. at ----, --- F.3d at ----
(allowing damage claimants in a multiple-claims-inadequate-fund
case to proceed in state court upon filing of appropriate
stipulations). We leave to the parties and the district court on
remand the matter of the feasibility of appropriate protective
stipulations, and the fashioning thereof.
IV. CONCLUSION
We REVERSE the district court's order granting summary
judgment against the appellant, and REMAND this action to the
district court for proceedings consistent with this opinion.