Case Information
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII In The Matter, ) CIVIL 12-00548 LEK-RLP
)
Of )
)
The Complaint of ALOHA )
JETSKI, LLC, a Hawaii Limited )
Liability Company, as Owner )
of a 2010 Yamaha VX110 )
Personal Watercraft and a )
2011 Yamaha VX110 Personal )
Watercraft, for Exoneration )
from or Limitation of )
Liability, )
)
Plaintiff. )
_____________________________ )
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S EX PARTE MOTION FOR ORDER: 1) APPROVING AD INTERIM STIPULATION FOR VALUE, 2) DIRECTING THE ISSUANCE AND PUBLICATION OF REQUIRED NOTICE, AND 3) ISSUING INJUNCTION
Before the Court is Limitation Plaintiff Aloha Jetski LLC’s (“Limitation Plaintiff”) Ex Parte Motion for Order: 1) Approving Ad Interim Stipulation for Value, 2) Directing the Issuance and Publication of Required Notice, and 3) Issuing Injunction (“Motion”), filed on October 11, 2012. Claimants Evangaline Canton, individually and on behalf of and as Representative of the Estate of Kristen Fonseca, Mario Alberto Canton, Monique Sanchez, and Kevin Fonseca, Jr. (“Claimants”) filed their objection on October 12, 2012, and Limitation Plaintiff filed its reply on October 15, 2012. This matter came on for hearing on October 25, 2012. Appearing on behalf of Limitation Plaintiff was Margery Bronster, Esq., and appearing on behalf of Claimants were Patrick McTernan, Esq., and Richard Fried, Esq. After careful consideration of the Motion, supporting and opposing memoranda, and the arguments of counsel, Limitation Plaintiff’s Motion is HEREBY GRANTED IN PART AND DENIED IN PART for the reasons set forth below. [1]
BACKGROUND Claimants filed a complaint in the Circuit Court of the First Circuit, State of Hawai`i on August 13, 2012, and their First Amended Complaint (“state court complaint”) on August 28, 2012. [2] The claims arise out of a jet ski accident that occurred on August 5, 2012, in which Tyson Dagley, while operating a jet ski, collided into a jet ski operated by Claimants’ decedent, Kristin Fonsenca, who suffered fatal injuries. Limitation Plaintiff rented the jet skis to Mr. Dagley and Ms. Fonseca. The state court complaint names as defendants Limitation Plaintiff, and Glenn Cohen, who is Limitation Plaintiff’s sole member and manager, as well as an employee. [Mem. in Supp. of Motion at 2- 4.] The state court complaint alleges that Limitation Plaintiff and Mr. Cohen were negligent, and that Limitation Plaintiff is vicariously liable for the personal negligence of Mr. Cohen.
Limitation Plaintiff filed its Complaint for Exoneration from or Limitation of Liability (“Complaint”) in this Court on October 10, 2012, pursuant to the Limitation of Liability Act, 46 U.S.C. § 30505 et seq. (“Limitation Act” or “the Act”), seeking to invoke the benefits of exoneration from and limitation of liability, and in the same proceeding, to contest its liability and the liability of the jet ski vessels, for any loss or damage arising from the August 5, 2012 incident. [Complaint at ¶ 18.]
I. The Motion
Limitation Plaintiff asks the Court to enter an order approving:
1) the amount, form and content of Plaintiff’s Ad Interim Stipulation for Value (“Stipulation”) filed October 10, 2012; 2) the issuance and publication of Plaintiff’s Notice of Complaint for Exoneration from or Limitation of Liability in the form and content as required by Supplemental Admiralty Rule F(4); and 3) an injunction pursuant to 46 U.S.C. § 30511 and Supplemental Admiralty Rule F(3).
[Mem. in Supp. of Motion at 2.]
Limitation Plaintiff is the owner of the two jet skis involved in the collision: a 2010 Yamaha VX110 Deluxe Personal Watercraft and a 2011 Yamaha VX110 Deluxe Personal Watercraft (“Vessels”). As of August 5, 2012, the combined fair market value of the Vessels was $11,000.00. Limitation Plaintiff tendered to the Court $11,500.00, which represents the value of the Vessels, costs and accrued interest. [Id. at 2-4.] Further, Limitation Plaintiff sought publication of Plaintiff’s Notice of Complaint for Exoneration from or Limitation of Liability (“Notice”) as required by Supplemental Admiralty Rule F(4), and provides a proposed form of publication.
Finally, Limitation Plaintiff seeks to enjoin the state court action, Evangaline Canton, et al. v. Aloha Jet Ski, LLC, et al., Civil No. 12-1-2161-08 (VLC), and all other potential cases arising from the incident until this Limitation of Liability action is resolved by this Court. It argues that, under Supplemental Admiralty Rule F(4), the state court action and all pending discovery must be enjoined. [Id. at 3.]
According to Limitation Plaintiff, at the time of the incident, none of its members, managers, employees, or agents was aboard either of the Vessels. Limitation Plaintiff seeks an injunction restraining the state court action and the commencement of any “claims, actions, or legal proceedings of any kind, nature or description against [Limitation] Plaintiff, its affiliates, agents, employees, managers, members, officers, directors, shareholders, vessels, property, underwriters, and insurers with regard to any and all claims and causes of action” arising from the August 5, 2012 incident. [Id. at 13.] II. Claimants’ Objection
Claimants do not object to the entry of the Stipulation or publication of the Notice; they object to the requested injunction as overly broad, and ask that “any injunction against other proceedings be limited to proceedings against Limitation Plaintiff and its property.” [Mem. in Opp. at 2.] They assert that, although Mr. Cohen is an owner of Limitation Plaintiff, he is not an owner of the Vessels, and he is sued in the state court action “only for his own negligence.” [Id. at 3.] According to Claimants, the Limitation Act and the Supplemental Admiralty Rules do not authorize an injunction against a vessel owner’s employee’s own negligence. [Id. at 6-7.]
III. Limitation Plaintiff’s Reply
In its reply, Limitation Plaintiff argues that
Mr. Cohen is an “owner” because he is the sole member and manager of Limitation Plaintiff, and has possession and control over the Vessels, and is responsible for their maintenance and operation. [Reply at 2-3.]
It further argues that Claimants rely on cases that are
inapplicable here, where Mr. Cohen was not operating the Vessels
involved in the accident, with privity or knowledge of the
negligence. [Id. at 4-5.] In any event, argues Limitation
Plaintiff, whether an owner is negligent must be determined after
an appropriate motion is heard, and not at this time. [Id. at
7.] It states that this Court cannot skip the first prong of the
analysis – what acts of negligence caused the accident – and go
straight to the second prong of privity and knowledge. It
distinguishes the cases relied upon by Claimants, Fecht v.
Makowski,
Limitation Plaintiff asks the Court to grant its Motion in its entirety. [Id. at 12.]
DISCUSSION I. Injunction Under the Limitation Act Generally
The Limitation Act “allows a vessel owner to limit
liability for damage or injury, occasioned without the owner’s
privity or knowledge, to the value of the vessel or the owner’s
interest in the vessel.” X-Treme Parasail, Inc., 2006 WL
4701815, at *2. The statute alters the normal rules of vicarious
liability. “Instead of being vicariously liable for the full
extent of any injuries caused by the negligence of the captain or
crew employed to operate the ship, the owner’s liability is
limited to the value of the ship unless the owner himself had
‘privity or knowledge’ of the negligent acts.” In re City of New
York,
When, as here, a shipowner invokes the protection of the act, a district court is empowered to issue a restraining order or injunction staying all proceedings against the shipowner arising out of the incident. Complaint of Dammers & Vanderheide & Scheepvaart Maats Christina B.V.,836 F.2d 750 , 754 (2nd Cir. 1988); Fed. R. Civ. P. Supplemental Rule F. The district court then typically determines, in a proceeding known as a concursus, issues such as liability, the privity and knowledge of the shipowner, and if necessary, the distribution of the limitation fund. Id. One purpose of the concursus proceeding is to ease the handling of multiple claims arising from the incident. Complaint of Paradise Holdings, Inc.,795 F.2d 756 , 761 (9th Cir. 1986). This avoids “inconsistent results and repetitive litigation.” Id.
In re Complaint of San Francisco Bar Pilots, No. C05-02975 MJJ,
The Limitation Act states, in pertinent part: (a) In General. The owner of a vessel may bring a civil action in a district court of United States for limitation of liability under this chapter. (b) Creation of Fund. When the action is brought, the owner (at the owner’s option) shall--(1) deposit with the Court, for the benefit of claimants–
(A) an amount equal to the value of the owner’s interest in the vessel and pending freight, or approved security; and (B) an amount or approved security, that the court may fix from time to time as necessary to carry out this chapter; (c) Cessation of Other Actions. When an action has been brought under this section and the owner has complied with subsection (b), all the claims and proceedings against the owner related to the matter in question shall cease.
46 U.S.C. § 30511.
Supplemental Admiralty Rule F states, in pertinent part:
(3) Claims Against Owner; Injunction. Upon compliance by the owner with the requirements of subdivision (1) of this rule all claims and proceedings against the owner or the owner’s property with respect to the matter in question shall cease. On application, of the plaintiff the court shall enjoin the further prosecution of any action or proceeding against the plaintiff’s property with respect to any claim subject to limitation in the action.
District courts have some discretion under the case law interpreting the Act: Under Lewis [v. Lewis & Clark Marine, Inc.,
531 U.S. 438 (2001)], “state courts . . . may adjudicate claims . . . so long as the vessel owner’ s right to seek limitation of liability is protected.” Lewis,531 U.S. at 455 . In other words, a district court has discretion to permit injury actions to proceed in state court as long as the court determines that the shipowners’ right to seek limitation of liability is adequately safeguarded.
San Francisco Bar Pilots,
II. Application of the Limitation Act
Here, the parties agree that jet skis are “vessels”
under the Limitation Act. See In re Mission Bay Jet Sports, LLC,
Limitation Plaintiff, a limited liability company, is the title-holder of the Vessels, and Mr. Cohen is its sole member. Limitation Plaintiff argues that Mr. Cohen is an “owner” of the Vessels, and that the Court must enjoin the state court proceeding as to him, as well as Limitation Plaintiff, its agents, employees, and insurers. Claimants assert that the injunction must be limited to Limitation Plaintiff – the limited liability company – and should not extend to Mr. Cohen, any other agents, employees, or insurers.
A. “Owner”
The Court first examines whether Mr. Cohen is an
“owner” under the Act. Courts have held that the term “owner” is
taken in a broad and popular sense, and that title ownership is
not dispositive of the issue of who is an “owner” for purposes of
the statute. In Admiral Towing Co. v. Woolen,
relationship to the vessel is such as might reasonably afford grounds upon which a claim of liability for damages might be asserted against him, a claim predicated on his status as the person perhaps ultimately responsible for the vessel’s maintenance and operation and a claim against which the Limitation Act is designed to furnish protection.
See also Flink v. Paladini,
Mr. Cohen is the sole member of Limitation Plaintiff.
Based on the undisputed evidence currently before the Court,
Mr. Cohen was the person ultimately responsible for the Vessels’
maintenance and operation, and the only person with the authority
to act on behalf of Limitation Plaintiff. For these reasons, the
Court finds that Mr. Cohen is an “owner” entitled to invoke the
protection of the Act. Claimants argue that Mr. Cohen is sued in
the state court proceeding only on the basis of his own
individual negligence; nevertheless, he remains an “owner” under
the Act. Although Claimants’ argument is both logical and
reasonable, the Act does not limit the stay of actions to those
in which the owner is not sued for his own personal negligence.
Rather, the stay appears to be mandatory in all cases. See In re
Pac. Far East Line, Inc.,
B. Non-Owners
Next, the Court addresses whether Limitation Plaintiff
is entitled to a stay of claims against the additional groups
named in its proposed injunction. None of these additional
entities are “owners” under the Act. Limitation Plaintiff argues
that the Court has discretion to include these parties in the
injunction based on Ninth Circuit precedent. The Ninth Circuit
in In re Complaint of Paradise Holdings, Inc.,
Once an owner, who is subject to a claim against
his ship, files a limitation complaint and posts
appropriate security, he is generally entitled to
an injunction enjoining “the further prosecution
of any action or proceeding against the [owner] or
his property with respect to any claim subject to
limitation in the action.” Rule F(3). This
provision applies to both state and federal
proceedings. Indeed, an admiralty court is
generally acknowledged to possess broad injunctive
power to ensure the “orderly and effective
operation of the Limitation Act.” Olympic Towing
Corp. v. Nebel Towing Co.,
It next noted that “[a] major purpose of the Act is to permit the shipowner to retain the benefit of his insurance.” Id. at 762. The majority decided that “[t]his major purpose of the Act could be frustrated if claimants’ action against the captain here were not stayed.” Id. It reasoned as follows:
If claimants successfully pursued their state court remedy prior to the limitation proceeding, the danger of depletion of the insurance coverage would clearly exist. The result would be to deprive the shipowner of insurance protection in the limitation proceeding. When that danger exists, the district court is not precluded by section 187 from staying the state court action against the captain. To read section 187 otherwise would frustrate a major congressional purpose underlying the Limitation of Liability Act.
Id. (citation omitted). The majority concluded that,
it is sometimes inconsistent with the purposes of the Act to permit some limitation-action claimants to proceed in state court against a ship’s captain and crew in advance of an equitable division of the limitation fund among all potential claimants. We hold that in such cases, a district court has discretion to stay the state action or otherwise to shape the limitation proceedings in a manner that promotes the purposes of the Act.
Id. at 763.
The dissent, on the other hand, would have vacated the stay of the state court action, because the “stay is not within the scope of the Act because it stays an action against the vessel’s captain.” Id. at 764 (Ferguson, J., dissenting).
This district court discussed the rationale underlying Paradise Holdings in Matter of Skyrider as follows:
In Paradise Holdings, the Ninth Circuit affirmed the district court’s stay of state court proceedings against a ship’s captain holding that § 187 did not preclude the district court’s actions.795 F.2d at 763 . The court expressed its concern that allowing a state court action to proceed against the Captain could serve to prejudice the owner’s rights. The court noted “[a] major purpose of the Act is to permit the shipowner to retain the benefit of his insurance[,]” id. at 762, and that “‘[t]he reason for requiring the limitation proceeding to be completed first is to permit the vessel owner to receive the benefit of his insurance.’” Ibid., quoting, Olympic Towing,419 F.2d at 235, n.17 . In Paradise Holdings, the Captain was a named insured under the owner’s insurance policy, and the court was concerned that a judgment in the state proceeding against the captain could serve to deplete the insurance fund.795 F.2d at 762 . In this case, the insurance coverage question has not been fully developed yet.
Matter of Skyrider, Misc. No. 89–0128 ACK,
Here, Limitation Plaintiff seeks an injunction
restraining the state court action and the commencement of any claims against “its affiliates, agents, employees, managers, members, officers, directors, shareholders, vessels, property, underwriters, and insurers with regard to any and all claims and causes of action[.]” [Mem. in Supp. of Motion, Exh. A (Proposed Order), at 5.] The Court, in its discretion, finds that the purposes of the Act are not served by granting the broad injunction as sought by Limitation Plaintiff. That is, the Court will not extend the stay to encompass “its affiliates, agents, employees, managers, members, officers, directors, shareholders, vessels, property, underwriters, and insurers with regard to any and all claims and causes of action,” as requested. Rather, the injunction shall be limited to Limitaiton Plaintiff and Mr. Cohen, the “owners” of the Vessels.
Paradise Holdings allows district courts “discretion to
stay the state action or otherwise to shape the limitation
proceedings in a manner that promotes the purposes of the Act[.]”
III. Injunction Order
The Court HEREBY ORDERS, pursuant to the Limitation Act, and Supplemental Admiralty Rule F(3), that the commencement or further prosecution of any and all claims, suits, actions, or legal proceedings of any kind, nature or description whatsoever against Limitation Plaintiff and Glenn Cohen, with regard to any and all claims and causes of action which arise from or relate directly or indirectly, to the August 5, 2012 incident described in Limitation Plaintiff’s Complaint, filed October 9, 2012, including the action Evangaline Canton, et al. v. Aloha Jetski, LLC et al., Civil No. 12-1-2161-08 (VLC), filed in the Circuit
Court of the First Circuit, State of Hawai‘i, are hereby ENJOINED and RESTRAINED, pending the hearing and determination of this proceeding.
CONCLUSION On the basis of the foregoing, Limitation Plaintiff Aloha Jetski LLC’s Motion, filed on October 11, 2012, is HEREBY GRANTED IN PART AND DENIED IN PART. The Court GRANTS the request for an injunction as to Limitation Plaintiff and Mr. Cohen, and denies the request for an injunction as to all other individuals or entities.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, November 27, 2012. /S/ Leslie E. Kobayashi Leslie E. Kobayashi United States District Judge IN THE MATTER OF THE COMPLAINT OF ALOHA JETSKI, LLC, ETC; CIVIL NO. 12-00548 LEK-RLP; ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S EX PARTE MOTION FOR ORDER: 1) APPROVING AD INTERIM STIPULATION FOR VALUE, 2) DIRECTING THE ISSUANCE AND PUBLICATION OF REQUIRED NOTICE, AND 3) ISSUING INJUNCTION
Notes
[1] The Court previously granted Limitation Plaintiff’s request for an order 1) approving Ad Interim Stipulation for Value, and 2) directing the issuance and publication of required notice. [Dkt. no. 18.]
[2] The state court complaint is attached as Exhibit B to Claimants’ Objection, Declaration of Patrick F. McTernan (“McTernan Decl.”).
[3] Although it may be possible for the Court to determine the
limitation issue without first deciding the liability issue, the
matter is not properly briefed at this time, and the Court cannot
make such a determination on the current record. See, e.g.,
Fecht v. Makowski,
[4] Other courts have criticized the decision in Paradise
Holdings. For example, the Fifth Circuit in Zapata Haynie Corp.
v. Arthur,