The Limitation Act in the United States: A Deeper Look( continued from page 12)
This is often interpreted as requiring a wholly separate fund just for injury and death claims, but that is not quite accurate. Take, for example, a 30,000 GT vessel that is worth $ 20 million after a casualty. The“ supplemental” fund would be $ 12.6 million( 30,000 x $ 420). Now say the other claim in limitation action is for $ 40 million by the other vessel owner in a both-to-blame collision. Do we need a supplemental fund for the injury and death claims? No, because equity subordinates a joint tortfeasor, meaning that the injury and death claims would have priority against the fund. The $ 20 million limitation fund is therefore adequate.
Importantly, any issue regarding a supplemental fund is to be adjudicated at trial on limitation, and not in preliminary proceedings, so claimants cannot demand posting of security for a supplemental fund during the first phase of a limitation trial.
Assessing Whether or Not to File for Limitation Whether or not to file a limitation action requires consideration of a number of factors, including the number of potential claimants, the value of potential claims, the value of the vessel, the viability of the privity and knowledge defense, the strategic value of the limitation injunction, and consent to jurisdiction in the United States. For example, in cases where the value of the vessel exceeds the anticipated claim amounts or only one( or a few) claimant is anticipated, the limitation action may not be desired because the concursus function of the Limitation Act will likely be undermined, as discussed below. However, in cases where the number of claimants is expected to be large( or is unknown) and / or geographically varied, the procedural benefit of bringing all claimants to a single venue may be desirable.
Beyond the procedural and substantive considerations, operations considerations also play a role in whether to file a limitation action or not. For foreign owners that might not otherwise be subject to personal jurisdiction in the United States, filing a limitation action of course voluntarily submits the owner to U. S. jurisdiction for purposes of claims arising out of the casualty. On the other hand, submitting to U. S. jurisdiction to file a limitation action can effectively cut off the potential for multiple vessel arrests or attachments arising out of the casualty when an owner’ s vessels call on U. S. ports.
Pursuing Claims Outside of the Limitation Action One of the procedural benefits of a limitation action is that it functions as a concursus, forcing all claimants to appear in the limitation venue to assert claims arising from the relevant event.
But the court’ s stay order over other proceedings is not permanent. Rather, claims may be pursued outside of the limitation action under special circumstances where the claimant( s) make certain stipulations to protect the rights of the limitation petitioner. Indeed, the principal consideration in whether other claims may move forward— even claims that are not subject to limitation— is whether the limitation petitioner’ s right to limit its liability is maintained.
One of the procedural benefits of a limitation action is that it functions as a concursus, forcing all claimants to appear in the limitation venue to assert claims arising from the relevant event.
( continued on page 14)
13 • MAINBRACE