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In re Aramark Sports and Entertainment Services, LLC

United States Court of Appeals, Tenth Circuit

August 1, 2016

In re: ARAMARK SPORTS AND ENTERTAINMENT SERVICES, LLC, a Delaware limited liability company, as owner of a certain Baja Islander 202 for exoneration from or limitation of liability, Plaintiff - Appellant.

         Appeal from the United States District Court for the District of Utah (D.C. No. 2:09-CV-00637-TC-PMW).

          John R. Lund (Alan S. Mouritsen, with him on the briefs), Parsons Behle & Latimer, Salt Lake City, Utah, for Appellant.

          Daniel Benchoff, (M.E. "Buddy" Rake, Jr., with him on the brief) Rake Law Group, P.C., Phoenix, Arizona, for Appellees.

          Before HARTZ, PHILLIPS, and MORITZ, Circuit Judges.

          HARTZ, Circuit Judge.

         This suit arose out of a recreational boating accident on Lake Powell that claimed the lives of four adults. The boat had been rented from Aramark Sports and Entertainment Services, LLC. Because the accident occurred on navigable waters, the case falls within federal admiralty jurisdiction. See Foremost Ins. Co. v. Richardson, 457 U.S. 668 (1982). Anticipating that it would be sued for damages, Aramark filed in the United States District Court for the District of Utah a petition under the Limitation of Liability Act, 46 U.S.C. §§ 30501-12, which permits a boat owner to obtain a ruling exonerating it or limiting its liability based on the capacity or value of the boat and freight. The district court denied the petition, leaving for further proceedings the issues of gross negligence, comparative fault, and the amount of damages. Aramark appeals the denial. After determining that we have appellate jurisdiction, we hold that the district court erred in its application of admiralty principles of duty and remand for further proceedings.

         I. BACKGROUND

         A. The Accident

         Aramark rents boats out of the Wahweap Marina on Lake Powell, near the Utah-Arizona border. In April 2009 three married couples-the Bradys, the Prescotts, and the Tarantos-went on vacation to Lake Powell. On Friday, April 24 the Bradys and Prescotts went to Aramark's boat rental office at Wahweap to procure a boat for the next day. Mr. Prescott signed a contract to rent a Baja 202 Islander, which is classified in the owner's manual as a Design Category C boat based on its limited "ability to withstand wind and sea or water conditions." Aplee. Supp. App., Vol. 4 at 417. For Category C boats the manual lists a "Maximum wind speed" of 27 knots (31 miles per hour). The manual further states:

The wind speed and wave height specified as the upper limit for your category of boat does not mean that you or your passengers can survive if your boat is exposed to these conditions. It is only the most experienced operators and crew that may be able to operate a boat safely under these conditions. You must always be aware of weather conditions and head for port or protected waters in sufficient time to avoid being caught in high winds and rough water. Do not take chances!

Id. The boaters were never informed of the Baja's Category-C classification.

         When the contract was signed, the National Weather Service (NWS) forecast for the next day on Lake Powell called for breezes from 15-23 miles per hour and gusts up to 37 miles per hour. That forecast was based on data collected at 3:44 a.m. that morning. Before the boaters left, Aramark rental agent Phyllis Coon gave that forecast to Mr. Prescott and told him that he would be given an updated forecast the next morning when they picked up the boat.

         Early Saturday morning the NWS updated its Lake Powell forecast for noon to 6 p.m. on Saturday to call for sustained winds of 25 to 35 miles per hour and gusts as high as 55 miles per hour. When the three couples arrived on Saturday morning to begin their trip, Aramark's boat-rental instructor, who told the boaters about the weather channel on the boat's radio, did not inform them of the updated forecast, nor did they request it. He asked Mr. Brady if he knew how to use the radio and Mr. Brady said he did.

         The group left Wahweap at about 8 a.m. and safely arrived at their planned destination, Rainbow Bridge. On their return trip to Wahweap, they stopped to refuel at Dangling Rope Marina, also operated by Aramark. Aramark employee Scott Bergantz spoke with some of them during the stop. He testified by deposition that because the water was rough he invited the couples to stay at Dangling Rope if they were uncomfortable. This testimony is disputed, and the district court made no findings concerning any offer of hospitality.

         Mr. Brady testified that after his group left Dangling Rope the water was "bumpy" and then "got rough" as they entered a small bay. Aplt. App. at 103. The boat proceeded through a "small opening" and then into "a larger bay, which turned out to be Padre Bay, " at which point "the wind came up like unbelievable. It was ruthless." Id. at 104. At one point Mrs. Brady noticed water at her feet inside the boat and then heard her husband issue a mayday call. The boat sank shortly thereafter. The Bradys were able to reach a rock pile from which they were later rescued. The Prescotts and Tarantos lost their lives.

         B. Governing Law

         Admiralty law is not a commonplace in the Tenth Circuit, so a brief introduction to some relevant law may be useful.

         1. Admiralty and Maritime Jurisdiction

         The United States Constitution extends the "judicial power to . . . all Cases of admiralty and maritime Jurisdiction." U.S. Const. art. III, § 2. The first Congress enacted a statute under that authority, stating: "[T]he district courts shall have . . . exclusive original cognizance of all civil causes of admiralty and maritime jurisdiction; saving to suitors, in all cases, the right of a common law remedy, where the common law is competent to give it." Judiciary Act of 1789, ch. 20, § 9, 1 Stat. 73, 76-77. The second clause is often referred to as the saving-to-suitors clause. The original statute has been amended several times and now reads: "The district courts shall have original jurisdiction, exclusive of the courts of the States, of: (1) Any civil case of admiralty or maritime jurisdiction, saving to suitors in all cases all other remedies to which they are otherwise entitled."[1] 28 U.S.C. § 1333. The Supreme Court has said that despite the change in language, the "substance [of the saving-to-suitors clause] has remained largely unchanged." Lewis v. Lewis & Clark Marine, Inc., 531 U.S. 438, 443-44 (2001).

         That substance is quite broad. For the most part, the saving-to-suitors clause has been construed to permit in personam claims within federal admiralty and maritime jurisdiction to be brought in state court as well as in federal court. See Lewis, 531 U.S. at 445 ("[T]he saving to suitors clause [is] a grant to state courts of in personam jurisdiction, concurrent with admiralty courts."); Grant Gilmore & Charles L. Black, Jr., The Law of Admiralty § 1-13, at 40 (2d ed. 1975) ("Where the suit is in personam, it may be brought either in federal court under the admiralty jurisdiction . . . or, under the saving clause, in an appropriate non-maritime court, by ordinary civil action."). "The right of a common law remedy, so saved to suitors, . . . . includes remedies in pais, as well as proceedings in court; judicial remedies conferred by statute, as well as those existing at the common law; remedies in equity, as well as those enforceable in a court of law." Lewis, 531 U.S. at 445 (internal quotation marks omitted).

         But note that the saving-to-suitors clause preserves "remedies" not "rights." See 28 U.S.C. § 1333(1) ("saving to suitors in all cases all other remedies to which they are otherwise entitled"). Federal maritime and admiralty law still controls the applicable substantive law. The clause's scope "does not . . . include attempted changes by the States in the substantive admiralty law, but it does include all means other than proceedings in admiralty which may be employed to enforce the right or to redress the injury involved." Lewis, 531 U.S. at 445 (ellipsis and internal quotation marks omitted). One particular attraction of proceeding under the saving-to-suitors clause is that there is generally a right to trial by jury in state-court proceedings but, absent some limited statutory exceptions, there is no right to a jury in an action brought under admiralty or maritime jurisdiction. See Romero v. Int'l Terminal Operating Co., 358 U.S. 354, 363, 368-69 (1959); 2 Thomas J. Schoenbaum, Admiralty and Maritime Law § 21-10, at 571- 74 (5th ed. 2011); Fed.R.Civ.P. 38(e) ("These rules do not create a right to a jury trial on issues in a claim that is an admiralty or maritime claim under Rule 9(h).").

         Thus, the exclusive federal jurisdiction expressed at the outset of 28 U.S.C. § 1333 does not live up to its apparent promise. That is not to say, however, that the promise is empty. There is exclusive federal jurisdiction to hear an in rem action against a vessel or other maritime property, "[a] procedure unique to American admiralty practice" in which the "action is brought against the vessel itself as defendant." 2 Schoenbaum, supra, § 21-3, at 535; see Lewis, 531 U.S. at 444 ("[P]roceedings in rem were deemed outside the scope of the [saving-to-suitors] clause because an in rem action was not a common law remedy, but instead a proceeding under civil law"). And state-court proceedings are restricted by the statute employed by Aramark here-the Limitation of Liability Act. We now turn to that statute.

         2. The Limitation of Liability Act

         Congress enacted the Limitation of Liability Act in 1851 "to encourage shipbuilding and to induce capitalists to invest money in this branch of industry." Lewis, 531 U.S. at 446 (internal quotation marks omitted). It was following the lead of other nations. See Norwich & N.Y. Transp. Co. v. Wright, 80 U.S. 104, 120 (1871). In the seventeenth century the Dutch scholar Hugo Grotius had written that "men would be deterred from investing in ships if they thereby incurred the apprehension of being rendered liable to an indefinite amount by the acts of the master." Id. at 116. Various European nations had therefore adopted laws limiting the owner's liability to the value of the ship and freight. See id. at 116-17. In England, for example, once a ship owner confessed liability and paid the value of the ship and freight into court, his exposure would be limited to that sum and he would have the right to stay any suit against him for damages. See id. at 118.

         The current version of the Limitation of Liability Act was codified in 2006 at 46 U.S.C. § 30501 et seq.[2] Its key provision limits the boat owner's liability to the limitation fund-"the value of the vessel and pending freight, " id. at § 30505(a)- provided that the acts giving rise to the damage occurred "without the privity or knowledge of the owner, " see id. at § 30505(b).[3] The vessel's value is measured "after the voyage on which the incident occurred. Thus if the ship is lost, the value is zero." Pickle v. Char Lee Seafood, Inc., 174 F.3d 444, 449 (4th Cir. 1999) (citation omitted) (internal quotation mark omitted). Pending freight is "the total earnings for the voyage, both prepaid and uncollected." In re Caribbean Sea Transp., Ltd., 748 F.2d 622, 626 (11th Cir. 1984). If the limitation fund is insufficient to pay all claims, it is divided by claimants "in proportion to their respective losses." 46 U.S.C. § 30507. For personal-injury or death claims the cap on liability may be increased to $420 times the tonnage of the vessel; but this applies only to a "seagoing" vessel, id. at § 30506-that is, one that "does, or is intended to, navigate in the seas beyond the Boundary Line in the regular course of [their] operations, " In re Talbott Big Foot, Inc., 854 F.2d 758, 761 (5th Cir. 1988); see id. ("The Boundary Line is that line which divides the high seas from rivers, harbors, and inland waters.").

         "[F]ederal courts have exclusive jurisdiction to determine whether a vessel owner is entitled to limited liability." Lewis, 531 U.S. at 442. To govern procedures under the Limitation Act, the Supreme Court promulgated rules a century and a half ago. The current version of those rules is found in Rule F (entitled "Limitation of Liability") of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions. Under Rule F a ship owner seeking limitation must file a complaint "set[ting] forth the facts on the basis of which the right to limit liability is asserted and all facts necessary to enable the court to determine the amount to which the owner's liability shall be limited." Fed.R.Civ.P. Supp. Admiralty Rule F(2). Necessary facts include a description of the voyage, the amount of any pending demands against the owner, and the present value of the vessel. See id. Once the owner files the complaint and deposits with the court or a trustee an amount equal to the limitation fund (or security therefor), plus security for costs and interest, "all claims and proceedings against the owner or the owner's property with respect to the matter in question shall cease"; and if moved to do so by the ship owner, "the court shall enjoin the further prosecution of any action or proceeding . . . subject to limitation in the action." Id. at F(3). If the court grants limitation, it then distributes the limitation fund "pro rata, subject to all relevant provisions of law, among the several claimants in proportion to the amounts of their respective claims, duly proved." Id. at F(8).

         Rule F echoes much of the procedure under prior English law. See generally Norwich, 80 U.S. at 117-20. But it is not identical. One innovation has been in the rule since first promulgated in 1871. Although English practice required the owner to admit his liability at the outset, the Supreme Court thought that such an admission "is, perhaps, not necessary in an admiralty court." Id. at 124. Under Rule F, "[i]n the process of seeking limited liability, the owner [is] permitted to contest the fact of liability, " Lewis, ...

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