Paper by George E. Duncan
In the early morning hours of April 14, 1912, the "unsinkable" Titanic collided with an iceberg while making her maiden voyage from Southhampton, England to New York. In less than three hours, over fifteen hundred of the twenty-two hundred persons who had sailed with her went to their graves with the most modern and luxurious vessel of the times.
Death claims arising out of the Titanic disaster amounted to $ 22,000,000. Additionally, her cargo, the personal effects of the passengers and crew, the mails, and everything connected with the vessel, except fourteen lifeboats and their equipment, became a total loss. The value of the lifeboats saved and of the pending freight in passage monies did not exceed the sum of $ 91,805.54. The White Star Line, owner of the Titanic, which was a British flag vessel, petitioned for limitation of liability in the United States District Court for the Southern District of New York and likewise claimed exemption from liability. The petition prayed that an appraisement be made of the value of the petitioner's interest in the Titanic and of her pending freight and offered to file a stipulation for the payment into court of $ 91,805.54.
The petition for exoneration from or limitation of liability, filed on behalf of the owners of the Titanic, was opposed by a British citizen and an American citizen, who pointed out to the court that since the vessel was lost as a result of a collision with an iceberg on the high seas, the American limitation statute did not apply. Mellor, a British citizen, excepted to the petition on the ground that "the acts by reason of which and for which [the petitioner] claims limitation of liability took place on board a British registered vessel on the high seas" and, therefore, the American law could not apply. On the other hand, Anderson, a citizen of the United States, excepted on the ground that the law of the United States could not apply and that of England was not shown to apply.
The district court, after an exhaustive analysis of all relevant cases, held: (1) the law of no nation has any extraterritorial effect; (2) a ship on the high seas is a part of the country to which she belongs; and (3) the liability for a tort is governed by the lex loci delicti. Therefore, the liability of the owners of the Titanic must be determined under the laws of the United Kingdom. This decision was important, of course, since the English law provided for a tonnage limitation not in effect in the American law, and the limitation fund under the English law for death and personal injury would have been $ 3,750,000.
On appeal, the Circuit Court of Appeals for the Second Circuit merely certified three questions to the United States Supreme Court. The case was argued before the Supreme Court by the ablest proctors of the New York admiralty bar and, on May 25, 1914, Mr. Justice Holmes rendered the opinion of the Court. After briefly reciting the facts of the casualty, the Court stated that a number of actions to recover for loss of life and personal injuries resulting from the disaster had been filed against the vessel owners in federal and state courts, after which petitioners filed a petition for limitation of liability under the laws of the United States and alleged that the loss was occasioned and incurred without the privity or knowledge of petitioners.
In considering the contention of the claimants that the British law should apply and that the petition therefore should be dismissed, Justice Holmes said:
It is true that the act of Congress does not control or profess to control the conduct of a British ship on the high seas. It is true that the foundation for a recovery upon a British tort is an obligation created by British law. But it also is true that the laws of the forum may decline altogether to enforce that obligation on the ground that it is contrary to the domestic policy, or may decline to enforce it except within such limits as it may impose. It is competent therefore for Congress to enact that in certain matters belonging to admiralty jurisdiction parties resorting to our courts shall recover only to such extent or in such way as it may mark out. The question is not whether the owner of the Titanic by this proceeding can require all claimants to come in and can cut down rights vested under English law, as against, for instance, Englishmen living in England who do not appear. It is only whether those who do see fit to sue in this country are limited in their recovery irrespective of the English law. . . .
. . . .
We see no absurdity in supposing that if the owner of the Titanic were sued in different countries, each having a different rule affecting the remedy there, the local rule should be applied in each case.
Although The Titanic has been questioned from time to time and was distinguished by Justice Frankfurter in Black Diamond Steamship Co. v. Robert Stewart & Sons, Ltd. (The Norwalk Victory), it is nevertheless the law today and stands for the proposition that the limitation issue is procedural and not substantive and attaches to the remedy not to the right.
Nevertheless, Judge Mehrtens of the Southern District of Florida, when confronted with the question of whether a Panamanian corporation should be required to file a bond in the amount required by the American statute or the amount required by the Panamanian statute, ordered the petitioner to file the greater amount required by the Panamanian statute. In this case, the Yarmouth Castle, a Panamanian cruise ship, burned and sank on the high seas. The shipowner was sued in the United States and thereupon filed its petition for limitation of liability under 46 U.S.C. §§ 181-185, but the Panamanian law was pleaded in the alternative. The petitioner offered to surrender an ad interim stipulation in the amount of $ 33,000, the suggested value of the strippings of the vessel, together with passage money, and further offered to file such stipulation as the court might fix not to exceed $ 60 per ton. The court found as a fact that the limitation of liability contained in the Panamanian law was substantive rather than procedural and attached specifically to the right.
In so holding, the court wended its tortuous way through The Titanic and The Norwalk Victory:
The Supreme Court held [in The Titanic] that a foreign shipowner may avail itself of United States courts and proceed under the limitation laws of the United States in a single vessel disaster occurring on the high seas. . . . It then held, purely as an exercise in comparing conflicting procedural rules of two jurisdictions [U.S. and England], that the procedural rules of the lex fori, the United States, would control the amount of the bond, if any, that would be required of the shipowner in order to maintain its limitation action in the United States Courts. The Titanic became, and still is, sound authority for that proposition. . . .
. . . .
This Court understands the [Norwalk Victory] language to mean that this Court should examine the Panamanian law as proferred by the parties to determine whether, first, the law of the Republic of Panama recognizes any limitation on a shipowner's liability, and second, whether Panamanian limitation is procedural or substantive in nature.
In further rationalization of his position, Judge Mehrtens, apparently in a subtle reference to "runaway flag" vessel owners, had the following to say:
The Limitation of Liability Act was passed primarily to encourage American shipping to place it on an equal footing with foreign shipping. . . . Judging from the Congressional debates on the Act, it can hardly be said that it was originally enacted for the protection of other foreign shipping interests. If then the only purpose of the Act was to protect and encourage American shipping interests, the reasoning of The Titanic lacks persuasiveness insofar as it would apply the Act to foreign shipping interests. Without more, that American policy would not be contravened if American citizens were allowed to recover a greater sum from Panamanian shipowners than the American Act would allow. Having deliberately sought and obtained the benefits given by a foreign law, there seems no basis in equity and justice upon which the foreign shipowner should be enabled to receive those benefits and yet evade the burdens that may accompany them.
The court then ordered the petitioner to file a stipulation in an amount equal to the value of The Yarmouth Castle, its pending freight, the difference between the face value of its hull insurance and "any other insurance possessed by it and applicable to the claims asserted herein in an amount necessary to cover the value of said claims as pleaded herein or the face amount thereof whichever sum is smaller."
As has been suggested, in this decision Judge Mehrtens came perilously close "to overruling a unanimous decision of the Supreme Court announced by no less a jurist than Justice Holmes." Indeed, it is small wonder that the merits of The Yarmouth Castle were never tried, the parties apparently having determined that the better part of valor was to settle.
In disapproving the Yarmouth Castle decision, Judge Tenney of the Southern District of New York in In Re Ta Chi Navigation (Panama) Corp. S.A., observed:
This [The Yarmouth Castle decision] would appear to run contrary to the holding by Mr. Justice Holmes that the limitation under the United States Limitation of Liability Act might be applied to foreign ships if they are sued in the United States even though they were subject to foreign substantive law. Indeed the opinion in Chadade [The Yarmouth Castle] suggested that the foreign law will be applied as substantive if it sets higher limits of liability than does the United States Limitation of Liability Act. . . .
. . . Chadade, like The Titanic, involved a foreign law which, it would appear, set higher limits of liability. It seems difficult to reconcile the different conclusions reached in the two cases, and since Chadade has apparently never been cited by any court, it certainly cannot be regarded as defining the law in this circuit.
The learned Judge in Chadade suggested that, if his analysis of The Titanic and The Norwalk Victory were not correct, the Titanic should be reexamined in the light of conflict of laws "based upon a more realistic appraisal of world conditions and more responsive to the practicalities of modern maritime commerce." This, however, is a legislative, rather than a judicial prerogative. There is nothing ambiguous about the statute.
Since there has been no decision of the Supreme Court which brings into focus the meaning of The Norwalk Victory vis-a-vis The Titanic, it would appear that the lower courts may continue to play games with the substantive-procedural questions, since it is currently fashionable for certain courts and many commentators to express outrage over the limitation of liability concept. Thus, by "game playing" these courts would resolve "ambiguous statutory provisions" in favor of full recovery and against limitation.
In summary, then, "foreign shipowners, when sued in American Courts, may have the benefit of limitation on the American plan equally with American shipowners." In fact, in many instances, forum shopping is the rule rather than the exception and in certain given situations foreign shipowners, or cargo owners, may prefer the American law as opposed to the laws of other countries, since the Brussels Convention, which proposed international recognition to limitation decrees, has not been ratified, and decrees are therefore only "clothed with domestic, not international recognition."
About the Author
George E. Duncan. LL.B., University of Virginia. Former Member, Texas Bar. Mr. Duncan died on August 9, 1979, after the date of presentation of this paper at the Admiralty Law Institute, but before publication.
Citation
53 Tul. L. Rev. 1046 (1979)