The Limitation Act in the United States: A Deeper Look
THOMAS H. BELKNAP, JR. Partner
EMMA C. JONES Of Counsel
G. EVAN SPENCER Associate
This article follows on a 2021 MAINBRACE article,“ The Gateway to Federal Court: Admiralty Jurisdiction and Limitation of Liability,” which discussed the practical use of the Shipowners’ Limitation of Liability Act, 46 U. S. C. § 30501, et seq.(“ Limitation Act” or the“ Act”) in admiralty cases in U. S. Federal Courts. Following a recent Marine Casualty Seminar where the authors presented on this topic, this article will expand on the scope of the Limitation Act and provide more detail on the process for a limitation proceeding pursuant to the Limitation Act.
Substantive Characteristics of the Shipowner’ s Limitation Act A vessel owner may be able to limit its liability to the vessel’ s post-casualty value plus then-pending freight( the“ limitation fund”) if it did not have knowledge or privity of the acts of negligence or conditions of unseaworthiness that caused the incident. Whether a potential limitation petitioner is an owner able to limit its liability depends on the degree of control the putative owner exercises over the manning, operation, and navigation of a vessel. This means that entities other than the registered owner may be entitled to limit liability, including vessel managers, shareholders of a vessel-managing entity, former vessel owners, trusts holding legal title, and others. To evaluate whether a given entity may be able to limit liability, it is best to start with the question: Is this entity subject to shipowner’ s liability because of its exercise of control over the vessel? If so, that entity should be a proper limitation petitioner.
A broad range of claims are limitable, from personal injury and death, to collisions and allisions, to cargo losses.“ Personal contracts” of the shipowner— those undertaken at the owner’ s choice after a casualty, are
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not limitable. In addition to personal contracts of the shipowner, other liabilities that are not limitable include liabilities for seaman’ s wages and maintenance and cure, cargo damages caused by a vessel’ s improper deviation, Oil Pollution Act and Clean Water Act liability, and preferred ship mortgages.
Limitation Act claims are most often invoked in commercial cases where claims for damages are high. But the Act has also been invoked to limit liability in recreational settings, which has given rise to changes in the statute to exclude certain small passenger vessels. In 2022, the Act was amended to specifically exclude vessels carrying fewer than 50 passengers on an overnight domestic voyage and fewer than 150 passengers on a non-overnight domestic voyage. This statutory change— largely in response to the M / V Conception fire— takes many domestic sightseeing or recreational vessels outside of the scope of the statute.
Procedural Aspects of a Limitation Proceeding The Federal Rules of Civil Procedure’ s Supplemental Admiralty Rules(“ Admiralty Rules”), which apply to admiralty cases, provide at Rule F( 9) that an action for limitation can be brought( a) in any U. S. judicial district where the vessel has been arrested or attached, or( b) any district in which the vessel has been sued. If no claim has been initiated, the proceedings can be commenced in any district where the vessel is located or, if the vessel is not within any district, then in any district. Depending on the nature of the claim and the location of the parties, the court also could transfer the action to any other district. Practically, petitioner vessel interests generally will commence an action where a casualty occurred, or where there is some nexus to the vessel.
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