In re In the Matter of THE COMPLAINT OF RLB CONTRACTING, INCORPORATED, AS OWNER OF THE DREDGE “JONATHAN KING BOYD” and ITS ENGINE, TACKLE, and GEAR FOR EXONERATION OR LIMITATION OF LIABILITY, RLB Contracting, Incorporated, as Owner of the Dredge “Jonathan King Boyd” and its Engine, Tackle, and Gear for Exoneration or Limitation of Liability, Petitioner-Appellant v. Mark Butler, Individually and as Heir to the Estate of Sammi Butler; Joseph Sigle, Individually and on behalf of BS, a minor child; Linda Butler, Claimants-Appellees.
No. 14-40326.
United States Court of Appeals, Fifth Circuit.
Dec. 3, 2014.
It is regrettable that the employer-clients entrusted their money to a fraudster and, as a result of the fraudulent conduct and apparently not any action by the employers themselves, some of those employers are now better off than others; indeed some face the real prospect of double liability. As noted previously, FirstPay‘s remission of clients’ tax funds to the IRS only satisfied the tax obligations of some of its clients while it only partially satisfied the obligations of others and a third set of clients had no tax payments applied on their behalf. We do not know how FirstPay decided which clients’ taxes it would pay and which it would nоt, and we regret that some of the clients remain liable to the IRS for tax payments they had entrusted funds to FirstPay to make. But the employers assumed the risk of FirstPay‘s mishandling of their funds when they selected the firm for vital payroll processing and tax reporting services.
We recognize that the Government has made efforts to minimize distress to those employers who remain liable for taxes by, for instance, waiving otherwise applicable penalties and other measures. We exрect that responsible government officials will continue to proceed with sensitivity to the realities of this painful situation in which these businesses find themselves.
IV.
For the reasons set forth above, the judgment is
AFFIRMED.
Franklin Baldwin Daniel, Essmyer & Daniel, P.C., Darwin John Seidel, Houston, TX, Walter P. Fontenot, Law Offices of Walter Fontenot, Liberty, TX, for Claimant-Appellee.
PER CURIAM:
Petitioner-Appellant RLB Contracting, Inc. (“RLB“) filed this аction under the Limitation of Liability Act (“Limitation Act” or “Act“),
I. FACTS AND PROCEEDINGS
A. Fishing boat accident
On July 1, 2011, the Vessel was engaged in dredging operations near Anahuac in Chambers County, Texas. A fishing boat carrying Mark Butler, his son Joseph Sigle, Sigle‘s son B.S., and Butler‘s daughter S.B., collided with a floating dredge pipe associated with the Vessel. All occupants of the fishing boat were thrown overboard, suffering vаrious physical injuries, and S.B. was killed. The Butlers contend that the dredge pipe was inadequately marked and that RLB had negligently failed to post warnings of ongoing dredging operations. The Coast Guard initiated an investigation shortly after the accident.
B. Legal proceedings
Mark Butler filed suit against RLB in Texas state court on June 14, 2012, and RLB was served with the state court petition on July 2.2 RLB filed its limitation of liability action in federal district court on December 28, 2012, seeking to limit its liability to the $750,000 value of the Vessel.
The Butlers filed a motion to dismiss the limitation action as untimely, contending that RLB had received written notice of the claim more than six months prior to the time it filed the limitation action. According to the Butlers, their counsel had sent RLB‘s counsel numerous emails between July 26, 2011, and June 14, 2012,
The case was referred to a magistrate judge who issued a Report and Recommendation (“R&R“) which concluded that, on the basis of those emails, RLB had received the required notice and thus missed the six-month window for filing a limitation action. The district court, after converting the Butlers’ motion to dismiss to a motion for summary judgment, adopted the R&R, granted summary judgment to the Butlers, and dismissed the limitation action as time-barred.
C. Pre-suit correspondence
At the heart of this dispute is a series of letters, mostly exchanged via email, between RLB‘s two lawyers, Andrew Schulz and Wayne Pickering, and Butler‘s counsel, Frank Daniel. On July 26, 2011, a few weeks after the accident, Daniel sent Schulz a letter via fax, informing him that Daniel had been retained by the Butlers.3 He asked Schulz for “any informаtion [he] or [RLB] may have regarding the cause of the accident, in addition to all witnesses and interested parties.” He also made an overture toward settlement, informing Schulz that Daniel “would welcome the opportunity to discuss with [Schulz] [his] thoughts moving forward.” Finally, Daniel wrote that “[t]his letter will also serve as notice to your client to preserve all evidence as listed in the attached notice.” An attachment to the letter, titled “Notice to RLB Contracting, Inc.,” gave Schulz and RLB “notice not to destroy, conceal or alter any paper or electronic files or other data.” The attachment further noted that “failure to comply with this notice can result in severe sanctions being imposed by the Court {and liability in tort} for spoliation of evidence or potential evidence.” Daniel advised that he expected to obtain this evidence “[t]hrough discovery.”
Schulz responded to Daniel the same day via email. In it, he stated that because “the investigation [was] ongoing, ... any substantive information w[ould] remain part of [his firm‘s] work product until the investigation [was] complete.” These references to “the investigation” meant the Coast Guard investigation of the accident.
On August 19, 2011, Daniel sent Schulz an email stating that “it might behoove [them] to seriously consider mediation before any lawsuit.” Daniel expressly based this recommendation on information that he had gathered about “the nature of the injuries, bystander claims, grаphic photos, [and] the PTSD claims” of his clients and other witnesses, as well as from a meeting with Linda Butler‘s attorney. Daniel referenced the additional pain that his clients would have to endure “if [they] are forced to litigate and go through depositions.”
On August 24, 2011, Schulz wrote to Daniel, rejecting his proposal to mediate and noting that “any attempt to evaluate the case would be futile” until the Coast Guard investigation was complete. Daniel wrote back the next day, reitеrating that mediation was their “best option” as “investigations will only tell us so much.” Schulz responded: “Okay. But I cannot imagine, a carrier just throwing out your number of $3M, without more, just to your clients.” He added that they could “keep the dialogue going.” There was another exchange of emails on October 28, primarily dealing with preservation of the fishing boat for any future litigation.
On June 8, 2012, Schulz received an email from Daniel that he had been instructed to file suit.4 On June 14, Daniel wrote to Schulz and Pickering, advising them that the lawsuit would be heard “in the 253rd with Judge Cain” and indicating that he would send a “courtesy copy of the file-stamped petition.” (There is no evidence in the record that Daniel actually sent the petition bеfore RLB was served on July 2, 2012.)
II. ANALYSIS
A. Standard of Review
A party who contends that a limitation action was not timely filed challenges the district court‘s subject matter jurisdiction.5 We review de novo dismissals under
Both parties relied on evidence outside the pleadings, so the district cоurt converted Butler‘s motion to dismiss into a motion for summary judgment under
We have made the general observation that Rule 12(b)(1) and Rule 56 diverge in their treatment of factual disputes. In this case, however, neither the magistrate judge in the R&R, nor the district court in adopting it, made any relevant factual findings. Furthermore, a review of the record reveals no material factual disputes. Thus, the Rule 12(b)(1) and Rule 56 standards converge, and a straightforward de novo review applies.
B. Limitation of Liability Act
The Limitation Act “allows a vessel owner to limit liability for damage or injury ... to the value of the vessel or the owner‘s interest in the vessel.”12 To invoke the protections of the Act, the vessel owner must bring an action in district court “within 6 months after a claimant gives the owner written notice of a claim.”13 This requirement is jurisdictional.14
We have said that a communication qualifies as “written notice” if it “reveals a ‘reasonable possibility’ that thе claim will exceed the value of the vessel.”15 This standard evokes two inquiries: (1) whether the writing communicates the reasonable possibility of a claim, and (2) whether it communicates the reasonable possibility of damages in excess of the vessel‘s value. Answering these questions requires a “fact-intensive inquiry into the circumstances of the case.”16
The purpose of the “reasonable possibility” standard is to place the burden of investigating potential claims on the vessel owner:
The Limitation Aсt provides generous statutory protection to the vessel owners who reap all of its benefits. When there is uncertainty as to whether a claim will exceed the vessel‘s value, the reasonable possibility standard places the risk and the burdens associated with that risk on the owner. In other words, if “doubt exists as to the total amount of the claims or as to whether they will exceed the value of the ship the owner will not be excused from satisfying the statutory time bar since he may institute a limitation proceeding even when the total amount claimed is uncertain.”17
Assigning the risk of uncertainty to the vessel owner fits the purpose of the six-month limitation, which is “to require
We have said less about what a communication must contain to qualify as such a written notice under the Act. A state court complaint clearly gives notice of the claim itself. A demand need not express a specific quantum of damages so long as there is a reasonable possibility that a claim‘s value will exceed the value of the vessel.21 This court has not, however, addressed what is required for a written communication that is not a filed complaint to qualify as notice.
C. Written Notice
As a threshold matter, to the extent that we have never explicitly held that a written communication may serve as notice under the Act in lieu of a filed complaint, we do so today.22 In this case, that presents three issues: (1) whether a series of letters, none of which constitutes notice on its own, may be considered together to find notice in the aggregate, (2) whether Daniel‘s letters convey a “reasonable possibility” of a potential claim, and (3) whether those letters establish a “reasonable possibility” that the amount of the claim might exceed the value of the Vessel.
1. Aggregate Notice
The Butlers urge us to consider counsel Daniel‘s letters “bundled together” and to evaluate the entire body of correspondence under the Act‘s “written notice” requirement. The statutory text does not foreclose the possibility of aggregate notice; it only requires the claimant to give “the owner written notice,” not a written notice.23 In fact, some district courts, including one in this circuit, have considered a body of correspondence rather than each of its individual constituent parts in a vacuum.24
Moreover, from a practical standpoint, it makes sense to do so. In situations like
Furthermore, it would be an artificial exercise to require a claimant who did engage in a lengthy correspondence to designate the single most favorable writing from the series as the written notice. Far better fоr the record to reflect what actually occurred and for the district court to make its ruling accordingly. Thus, we shall consider whether the entire series of letters satisfies the “reasonable possibility” requirement.
2. “Reasonable Possibility” of Potential Claim
We have not previously addressed the issue of what a writing must contain to give a vessel owner notice of a potential claim. Both RLB and the Butlers analogized to district court cases (primarily from courts outside this circuit) and emerge with two different methodologies for analyzing the facts at hand. RLB starts with an idea of what proper notice of a claim would look like and searches through Daniel‘s emails for statements matching that standard. RLB states that notice must “refer to the cause of [claimants‘] injuries or the types of injuries sustained ... and clearly assert blame on the petitioner.” RLB also tries to disqualify Daniel‘s emails for “providing] no details regarding the claims, injuries, or causes of injuries” and for not mentioning any “demand of a right, specific blame for damage, or call upon something due.” RLB asserts that, even though Daniel‘s emails might have obliquely referred to a potential lawsuit, absent the magic words it sought, RLB “was never put on notice that [the Butlers] would be seeking a claim based on RLB‘s alleged negligence in connection with the vessel.” RLB also claims that it had serious doubts as to the viability of the potential claim because of Butler‘s alleged contributory negligence. The Butlers point out that RLB cannot simultaneously disclaim knowledge of a pending claim and assert knowledge of a potential defense to that claim. Furthermore, the issue here is the “reasonable possibility” that a claim exists, not probability of success on the merits.25
In contrast, the Butlers’ approach is to start with the letters themselves, then consider whether together those letters reveal the reasonable possibility of a pending claim. Daniel‘s first letter instructed RLB “to preserve evidence as if a suit had been initiated“; his email of August 19, 2011, mentioned the evidence he had already gathered and requested mediation “before any lawsuit“; his email on May 30 of the following year discussed state and federal venues for the suit and again requested mediation; finally, his emails of June 8 and 14, 2012, explicitly bring up filing the lawsuit and service of process. According to the Butlers, these statements, when taken together, paint a picture of a pending claim.
The Butlers’ approach is more compatible with the reasonable-possibility test‘s fact-intensive nature, as it starts with the
In its favor, RLB‘s position does invoke the benefits of a bright-line rule: A clear list of required statements and demands would provide guidance to future claimants and vessel owners alike. In addition to being less fact-focused, however, there are two additional problems with this approach. First, regarding damages, we have held that the risk of uncertainty lies with the vessel owner. It would be inconsistent to reverse that risk when it comes to notice of a potential claim. Second, mandating that written notice contain “magic words” or specific elements might well impose a requirement not found in the statutory text.
As the Butlers’ analytical approach appears to be more compatible with our precedent, and as it is factually inconceivable that RLB had no notice of a claim after almost a year of emails discussing the case—culminating in the June 14 missive informing RLB that Butler had actually filed suit—we hold that by June 14, 2012, at the latest, RLB had notice of the Butlers’ claim. This is obviously more than six months prior to the December 28, 2012, filing date of RLB‘s limitation action.
3. “Reasonable Possibility” of Damages in Excess of Vessel‘s Value
To the same extent that RLB had notice of the Butlers’ potential wrongful death suit, it had notice that there was a reasonable possibility of damages in excess of $750,000, even though Daniel‘s emails never gave a specific number. Our recent decision in In re Eckstein Marine Service L.L.C. addressed almost precisely this same issue.28 In that case, the state court plaintiff alleged permanent аnd disabling injuries, but did not provide a specific damages figure. We rejected the vessel owner‘s contention that, without a dollar amount or certainty as to the extent and permanence of the plaintiff‘s injuries, the period for filing a limitation action could not start.29 We concluded that, in light of the severity of the injuries, a vessel owner should have realized the potential for damages in excess of its vessel‘s value (coincidentally, also $750,000), and that any uncertainty was thе owner‘s burden to resolve.30 That is the reason for a six-month grace period. The analogy to this case is clear.31
III. CONCLUSION
The Butlers have established that the pre-suit writings from their counsel to RLB‘s counsel conveyed the reasonable possibility that RLB faced a claim exceeding $750,000, the value of the Vessel. RLB thus had written notice under the Limitation Act earlier than six months before it filed its limitation action. The district court‘s dismissal of RLB‘s complaint as time-barred is AFFIRMED.
PER CURIAM