In re: Freedom Unlimited

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

IN ADMIRALTY

CASE NO. 19-61655-CIV-ALTMAN

IN RE:

FREEDOM UNLIMITED,

as Owner of the M/Y Freedom, a 2000 230’ Benetti Motor Yacht

(IMO 8975067) in a Cause of Exoneration from or Limitation of

Liability

_____________________________/

ORDER

On August 21, 2019, the Claimant, Joshua Bonn, filed a Motion to Dismiss, Stay, and/or

Lift the Injunction (the “Motion”) [ECF No. 12]. On September 4, 2019, the Petitioner, Freedom

Unlimited (“Freedom”), filed a Response in Opposition (the “Response”) [ECF No. 19]. And the

matter ripened on September 13, 2019, when Bonn filed his Reply (the “Reply”) [ECF No. 31].

On September 5, 2019, this Court referred the Motion to Magistrate Judge Patrick M. Hunt

for a Report and Recommendation, see Order of Referral [ECF No. 23], which Judge Hunt

submitted on December 19, 2019, see Report [ECF No. 49]. On January 2, 2020, Freedom timely

filed its Objections to that Report (the “Objections”) [ECF No. 49].

STANDARD OF REVIEW

Because Freedom timely objected to the Report’s “disposition,” this Court must review

that disposition—at least those aspects of the disposition to which the Objections are directed—de

novo. FED. R. CIV. P. 72(b)(3).

THE FACTS

In December of 2018, Freedom hired Bonn to work aboard the M/Y Freedom as a

deckhand. See Mot. at 1. Freedom owns the “M/Y Freedom,” a two-hundred-and-thirty-foot motor

yacht built by Benetti in 2000. See Complaint for Exoneration (the “Complaint”) [ECF No. 1] at

1. On January 4, 2019, the M/Y Freedom was moored dockside at a facility near Dania Beach,

Florida, that was owned and operated by the second Claimant, Taylor Lane Yacht and Ship Repair

(“Taylor Lane”). See id. ¶ 8. While Taylor Lane was performing needed repairs on the M/Y

Freedom—including a complete repaint of the yacht—Bonn fell from a scaffold that was erected

on the port side of the vessel and was injured. See id. ¶ 10; Mot. at 2.

In May of 2019, Bonn filed a lawsuit in Florida Circuit Court against both Freedom and

Taylor Lane under the “saving to suitors clause,” 28 U.S.C. § 1331(1). See Mot. at 2–3. On July

3, 2019, Freedom filed in this Court a Petition under the Limitation Act, 46 U.S.C. § 30505 et seq.,

to limit its liability to the value of the M/Y Freedom, see Complaint for Exoneration [ECF No.

1]—which Freedom fixed at $28,893,000, see Ad Interim Stipulation [ECF No. 4]. On July 19,

2019, this Court enjoined the pending state-court action and ordered Freedom to publish notice of

its Petition to potential claimants. See July 19, 2019 Order [ECF No. 7].

Following proper publication of that notice, see Aff. of Proof of Publication [ECF No. 14],

only two claimants—Bonn and Taylor Lane—filed claims in this Court, see Claim by Joshua Bonn

[ECF No. 11]; Claim by Taylor Lane [ECF No. 13]. Specifically, Bonn asserted claims of Jones

Act negligence and unseaworthiness and sought damages for the injuries he sustained aboard the

M/Y Freedom. See Claim by Joshua Bonn at 9–12. Taylor Lane, for its part, sought contractual

indemnification, contractual contribution, and “contractual attorney’s fees.” Claim by Taylor Lane

at 2–5. Bonn then filed his Motion to Dismiss, in which he proffered six stipulations and sought

permission to pursue his common law remedies in state court. See generally Mot.

In his Report, Magistrate Judge Hunt concluded that Bonn’s Motion should be granted. See

generally Report. Relying on the “single claimant exception,” the Report found that Bonn’s

stipulations sufficiently protected Freedom from any excess judgment Bonn might win in state

court. See id. In saying so, the Report discounted Freedom’s argument that Taylor Lane’s claim—

for contractual indemnification and attorneys’ fees—might, when added to Bonn’s judgment,

cause Freedom’s liabilities to exceed the M/Y Freedom’s value. See Report at 2 n.1.

Freedom objects to the Report’s determination that Bonn can, as it were, “cure” the

“multiple-claimants-inadequate-fund” problem where, as here, a second claimant (Taylor Lane)

has asserted a claim for indemnification and attorneys’ fees. See Objections at 2–3. As Freedom

sees it, Bonn cannot—indeed, he does not—stipulate that Taylor Lane’s attorneys’ fees, when

added to whatever judgment Bonn ultimately receives, will be equal to, or less than, the M/Y

Freedom’s value. See id. Without such a stipulation, Freedom says, Bonn should be required to

litigate his claims here in federal court. See id. at 2.

THE LAW

Article III, Section 2 of the United States Constitution vests federal courts with original

jurisdiction over “all Cases of admiralty and maritime jurisdiction.” U.S. Const. art. III, § 2. But,

through Section 9 of the Judiciary Act of 1789—known as the “saving to suitors clause”—

Congress preserved the rights of those injured at sea (“suitors”) to pursue their common law

remedies in the forum of their choosing. See Judiciary Act of 1789, 1 Stat. 73, sec. 9, now codified

at 28 U.S.C. § 1333(1) (“saving to suitors, in all cases, the right of a common law remedy, where

the common law is competent to give it.”); see also Lewis v. Lewis & Clark Marine, Inc., 531 U.S.

438, 445 (2001) (the “saving to suitors clause” grants federal and state courts concurrent

jurisdiction over in personam maritime actions).

In 1851, hoping “to encourage ship building and to induce capitalists to invest money in this

branch of industry,” Congress passed the Limitation Act,1 which “exempt[s] innocent shipowners

from liability, beyond the amount of their interest,” where the liability was incurred without the

owner’s “privity or knowledge.” Norwich & N.Y. Transp. Co. v. Wright, 80 U.S. 104, 121 (1871);

see also Lewis, 531 U.S. at 446. Petitions filed under the Limitation Act are strictly in rem and

must be brought in federal court. See, e.g., Beiswenger Enter. Corp. v. Carletta, 86 F.3d 1032,

1036 (11th Cir. 1996).

Naturally, “[s]ome tension exists between the saving to suitors clause and the Limitation

Act. One statute gives suitors the right to a choice of remedies, and the other statute gives vessel

owners the right to seek limitation of liability in federal court.” Lewis, 531 U.S. at 448. “In

resolving this tension, the ‘primary concern is to protect the shipowner’s absolute right to claim

the Act’s liability cap, and to reserve the adjudication of that right in the federal forum.’”

Beiswenger, 86 F.3d at 1037 (quoting Magnolia Marine Transp. Co., Inc. v. Laplace Towing

Corp., 964 F.2d 1571, 1575 (5th Cir. 1992)). That said, courts may not “transform the Act from a

protective instrument to an offensive weapon by which the shipowner could deprive suitors of their

common-law rights . . . . The shipowner’s right to limit liability is not so boundless. The Act is not

one of immunity from liability but of limitation of it.” Lake Tankers Corp. v. Henn, 354 U.S. 147,

152–53 (1957).

In the 169 years since Congress passed the Limitation Act, federal courts across the country

have developed a set of doctrines to help balance the shipowners’ rights to limit their liability

(under the Limitation Act) against the suitors’ rights to pursue their common law remedies in state

1 Now codified at 46 U.S.C. § 30505 et seq.

court (under the “saving to suitors clause”). One such doctrine, the “single claimant exception”—

triggered when only one claimant responds to the shipowner’s petition—allows the single claimant

to “try liability and damages issues in another forum [e.g. in state court] by filing stipulations that

protect the shipowner’s right to have the admiralty court ultimately adjudicate its claim to limited

liability.” Beiswenger, 86 F.3d at 1037 (citations omitted). “If the state court (or the law side of

the federal court) holds the vessel owner liable for the accident and assesses damages exceeding

the limitation fund, the parties must return to the admiralty court for a determination of the privity

or knowledge issues.” Id. at 1038 (citations omitted).

Problems arise, however, when (as here) multiple claimants come forward. Because no

single claimant can stipulate to the total amount of damages the other claimants might seek, the

claimants may ultimately obtain judgments that, when added together, exceed the vessel’s fixed

value. Id. In these “genuine ‘multiple-claims-inadequate-fund’ cases, the courts have not allowed

damage claimants to try liability and damages issues in their chosen fora, even if they agree to

return to the admiralty court to litigate the vessel owner’s privity or knowledge.” Id. (citing

Pershing Auto Rentals, Inc. v. Gaffney, 279 F.2d 546, 549–50 (5th Cir. 1960)). Instead, the

claimants in a “multiple-claimants-inadequate-fund” scenario must try their cases in the admiralty

court, without the benefit of a jury, before that court may distribute the assets in the limitation fund

via a procedure known as a concursus. See Beiswenger, 86 F.3d at 1036.

To overcome this problem—and to give effect to the guarantees expressed in both the

Limitation Act and the “saving to suitors clause”—federal courts generally allow multiple damage-

claimants to proceed in state court only when all claimants file “appropriate stipulations,” which

in turn create the “functional equivalent” of a single-claim scenario. Id. at 1040. In Beiswenger,

for instance, the Eleventh Circuit affirmed the district court’s decision to allow two damage-

claimants—both of whom had stipulated to limit their damages to the vessel’s value—to proceed

with their negligence action in state court. See Beiswenger Enter. v. Carletta, 162 F.2d 97 (Table)

(11th Cir. 1998) (appeal after remand).

Notably, in Beiswenger, the Eleventh Circuit acknowledged the existence of several

“potential” indemnification-claimants—namely, the petitioner’s co-defendants in the state court

case—who, though they had not yet done so, could one day seek indemnification from the

petitioner for any judgment the damage-claimants might, in the future, win from them. See id. at

1041–42. But, because those indemnification-claimants had not yet filed their indemnification

claims in federal court, the Eleventh Circuit was not faced with the situation presented here: viz. a

damage-claimant (Bonn) who has arguably filed the “appropriate stipulations” and a live—as

opposed to a “potential”—indemnification-claimant (Taylor Lane) who has not.

And the other circuits are decidedly split on the question of whether the presence of a non-

stipulating indemnification-claimant creates an insoluble “multiple-claimants-inadequate-fund”

scenario. Compare S & E Shipping Corp. v. Chesapeake & Ohio Ry. Co., 678 F.2d 636, 645 (6th

Cir. 1982) (indemnification claims are necessarily derivative of the damage claims and thus

present no “multiple claims” at all), and Universal Towing Co. v. Barrale, 595 F.2d 414, 419 (8th

Cir. 1979) (same), with In re Port Arthur Towing Co., 42 F.3d 312, 316 (5th Cir. 1995) (per curiam)

(indemnifications are separate claims and can create “multiple claimant” problems), Gorman v.

Cerasia, 2 F.3d 519, 527 (3d Cir. 1993) (same), and In re Dammers & Vanderheide & Scheepvaart

Maats Christina B.V., 836 F.2d 750, 757 (2d Cir. 1988) (same).

But even those courts—like the Second and Fifth Circuits—that treat indemnification

claims separately from damage claims are divided on the all-important question of how to resolve

the “multiple claimants” issues those claims present. The Fifth Circuit’s view is that, before a

federal court can lift its Limitation Act injunction over a state-court proceeding, all claimants—

damage and indemnification—must agree (or stipulate) to limit their recovery to the value of the

vessel. See, e.g., Odeco Oil & Gas Co., Drilling Div. v. Bonnette, 74 F.3d 671, 675 (5th Cir. 1996).

The Second Circuit, by contrast, has allowed a damage-claimant to overcome the indemnification-

claimant’s refusal to stipulate in the precise circumstance at issue here: namely, where the damage-

claimant “stipulates” not to enforce any judgment in excess of the vessel’s value against either the

vessel owner or “any other liable parties who may cross-claim or claim over against [the vessel

owner].” In re Dammers, 836 F.2d at 759.

In Beiswenger, the Eleventh Circuit agreed with the Second, Third, and Fifth Circuits that

“potential claims for indemnity or contribution from the vessel owner’s co-defendants must be

separately considered.” Beiswenger, 86 F.3d at 1042. And this makes sense. After all, while the

damage-claimant’s stipulation not to enforce an excess judgment against the petitioner might

protect the petitioner from an excess liability vis-à-vis the damage-claimant, it would not preclude

the damage-claimant from pursuing limitless damages against other joint tortfeasors—any one of

whom could then seek indemnification from the petitioner for the full amount of the damage-

claimant’s judgment. And, to the extent the damage-claimant’s judgment might exceed the value

of the vessel, this not-unlikely procedural reality would render moot the Limitation Act’s

guarantees in every single case where the shipowner is either a joint tortfeasor or a contractual

indemnifier. This cannot be the law.

In either event, as between the Fifth Circuit’s all-or-nothing view and the Second Circuit’s

“any other liable parties” approach, the Eleventh Circuit found the latter’s solution to this dilemma

more persuasive and expressly permitted the damage-claimants to supersede the (possible) future

objections of the “potential” indemnification-claimants by stipulating never to enforce any excess

judgment against either the shipowner or any other party who might, in the future, look to the

owner for indemnification. See id. at 1043–44.

With these overarching principles in mind, the Court now turns to the facts of this case.

ANALYSIS

In his Motion, Bonn asks the Court to lift the injunction over his state-court action and to

allow him to pursue his common law remedies there. See generally Mot. And, while Taylor Lane

has refused to stipulate, see Notice of Opposition [ECF No. 28], Bonn has filed stipulations that,

he says, create the “functional equivalent” of a “single claimant” scenario. See Mot. at 5. The

Magistrate Judge agreed. See Report.

In its Objections, Freedom advances three principal responses. First, citing the Fifth

Circuit’s approach to indemnification-claimants, it argues that, under the Limitation Act, all

claimants must stipulate to limitation before a federal court can lift its injunction over a state-court

case. See Resp. at 3–7; Objections at 3–5. Second, it contends that, even if a damage-claimant

could overcome an indemnification-claimant’s refusal to so stipulate, Taylor Lane’s claim for

attorneys’ fees creates a separate “multiple claimants” scenario as to which Bonn’s stipulations are

ineffective. See Resp. at 7–9; Objections at 4–7. Third, it says that, even if this Court ultimately

disagrees with its first two propositions, Bonn’s stipulations are “inadequate on their face.”

Objections at 2 n.1. The Court addresses each argument in turn.

I. The “Single-Claimant Exception”

Freedom starts off on the wrong foot when it mistakenly attempts to distinguish Beiswenger

on the ground that only one damage-claimant appeared in that case. See Resp. at 3–7; Objections

at 3–5. But, in fact, Beiswenger involved two damage-claimants. See 86 F.3d at 1040 (“There is

no question that the personal injury claim asserted by Kathleen Carletta and the wrongful death

claim asserted by the estate of George Myers are separate claims that would ordinarily require a

concursus.”). In any event, the primary thrust of Freedom’s first argument is that, after Beiswenger,

courts in this Circuit should follow the Fifth Circuit’s all-or-nothing view, which requires all

claimants—both damage and indemnification—to stipulate before the district court can lift the

state-court injunction. See Objections at 6 (citing Odeco Oil, 74 F.3d at 675).

But Beiswenger specifically rejected the Fifth Circuit’s view in favor of the Second

Circuit’s more nuanced approach when it held that, with appropriate stipulations “promis[ing] not

to enforce any state court judgment (which would expose [the petitioner] to liability in excess of

the limit) against any party, including [the petitioner’s] co-defendants, until [the petitioner’s] right

to limitation is adjudicated in the admiralty court,” the damage-claimant could “eliminate[] the

possibility that competing claims [would] exhaust the limitation fund before the admiralty court

has the opportunity to determine whether to grant limited liability.” Beiswenger, 86 F.3d at 1043–

44. And, of course, that is precisely what Bonn has done here when he submitted the following

stipulation:

That the Claimant will not seek to enforce any judgment rendered in any court,

whether against the Petitioner or another person or entity that would be entitled to

seek indemnity or contribution from the Petitioner, by way of cross-claim or

otherwise, that would expose the Petitioner to liability in excess of the to be

determined limitation fund, until such time as this Court has adjudicated the

Petitioner’s right to limit that liability.

Mot. at 8–9 (emphasis added).

Notably, the Eleventh Circuit had an opportunity to adopt Freedom’s proposed all-or-

nothing rule in a more recent case and chose not to do so. See Suzuki of Orange Park, Inc. v.

Shubert, 86 F.3d 1060 (11th Cir. 1996). In Suzuki, multiple damage-claimants filed a motion for

summary judgment, which the district court granted. See id. at 1062. As in Beiswenger, a host of

third parties who could seek indemnification—the Petitioner’s co-defendants in the underlying

state-court case—had not yet appeared in the federal action. See id. at 1066. While the Eleventh

Circuit ultimately reversed, it was careful to note that its opinion was “not necessarily fatal to the

[multiple damage-claimants’] ability to try liability and damages issues against Suzuki in state

court,” and cited Beiswenger for the proposition that “damage claimants in a multiple-claims-

inadequate-fund case [can] proceed in state court upon filing of appropriate stipulations.” Id.

(citing Beiswenger, 86 F.3d at 1040). Had the Eleventh Circuit wanted to adopt the Fifth Circuit’s

all-or-nothing view, this portion of the Suzuki opinion—a case that, again, indisputably involved

(potential) indemnification-claimants—would have made little sense.

In any case, because both Beiswenger and Suzuki involved all “potential” indemnification

claims—that is, both tort- and contract-based indemnifications—the Eleventh Circuit never

addressed the question of whether, for purposes of the Limitation Act, contract- and tort-based

indemnification claims should be treated differently. But that distinction is dispositive here—

irrespective of Beiswenger’s ratification of the Second Circuit’s approach—because Taylor Lane,

as noted, seeks only contractual (and not tort-based) indemnification. See Claim by Taylor Lane

at 2–5. And, as the Court explains in more detail below, the Supreme Court has long held that,

under the Limitation Act, contract-based claims are not subject to limitation because their

liabilities arise with—as opposed to without—the owner’s “privity or knowledge.” See, e.g.,

Richardson v. Harmon, 222 U.S. 96, 102 (1911); see also W. E. Hedger Transp. Corp. v. Gallotta,

145 F.2d 870, 872 (2nd Cir. 1944) (L. Hand, J.) (extending this contractual exception under the

Limitation Act to indemnification claims premised on the implied warranty of seaworthiness);

accord S & E Shipping, 678 F.2d at 644 (“We need not decide whether the indemnity claims based

on the license agreement . . . create separate claims rendering this a multiple claims-inadequate

fund case. These indemnity claims are based on a personal contract . . . . Liability stemming from

a personal contract is not subject to limitation under the Act.”).

In short, Taylor Lane’s contractual contribution and indemnification claims do not, as

Freedom suggests, present an intractable “multiple-claimants-inadequate-fund” scenario.

II. Taylor Lane’s Claim for Attorneys’ Fees

But Taylor Lane, in addition to its contractual contribution and indemnification claims, has

also filed a claim for “contractual attorney’s fees.” Claim by Taylor Lane at 5. Because this claim

is undeniably “separate and apart from Petitioner’s alleged liability to Bonn,” Objections at 3—

and given that, at least theoretically, Taylor Lane’s attorneys’ fees may, when added to Bonn’s

state-court judgment, exceed the value of the M/Y Freedom—Freedom contends that Bonn’s

stipulation fails to protect it against an excess judgment, see id. at 5.

Here, Freedom is partly right. Taylor Lane will inevitably have to spend money to defend

itself against Bonn’s state-court complaint. And, unlike its indemnification claims—which derive

from, and are thus subsumed within, whatever damages Bonn ultimately wins—Taylor Lane will

necessarily incur attorneys’ fees and costs that are in addition to whatever judgment Bonn obtains.

In this respect, as Freedom points out, Bonn’s stipulations are inadequate to protect Freedom

against the possibility that the combination of Taylor Lane’s attorneys’ fees and its indemnification

claim will exceed the value of the M/Y Freedom. While the Eleventh Circuit has never spoken

directly on this issue, Freedom is not without ample support from other circuits. See, e.g., Gorman

v. Cerasia, 2 F.3d 519, 525 (3d Cir. 1993) (“[A]ll courts have recognized that a multiple claimant

situation exists where a third party seeking indemnity or contribution also requests attorneys’ fees

and costs associated with its claim.” (collecting cases)).

But the problem is not as insoluble as Freedom suggests because, as the Supreme Court

has long explained, “[t]he limitations acts have long been held not to apply where the liability of

the owner rests on his personal contract.” Coryell v. Phipps, 317 U.S. 406, 410 (1943) (citing

American Car & Foundry Co. v. Brassert, 289 U.S. 261 (1933)); Capitol Transp. Co. v. Cambria

Steel Co., 249 U.S. 334 (1919); Luckenbach v. McCahan Sugar Co., 248 U.S. 139 (1918);

Pendleton v. Benner Line, 246 U.S. 353 (1918)).

The issue first came up in Richardson v. Harmon, where the Court concluded that the

Limitation Act “harmonizes with the policy of limiting the owner’s risk to his interest in the ship

in respect of all claims arising out of the conduct of the master and crew, whether the liability be

strictly maritime or from a tort non-maritime but leaves him liable for his own fault, neglect, and

contracts.” 222 U.S. at 106 (emphasis added).

Six years later, Justice Holmes, speaking for a unanimous Court, affirmed this reading of

the Limitation Act. See Pendleton, 246 U.S. 353. In that case, the vessel owners had entered into

a contract, through which they had warrantied the vessel’s seaworthiness. The vessel sank, and the

owners of the lost merchandise sued the owners, who (like Freedom here) promptly filed in federal

court a petition to limit their liabilities under the Limitation Act. Concluding, however, that the

Limitation Act does not permit a shipowner to limit his contractual liabilities, the district court

lifted the Limitation Act injunction, and the Supreme Court unanimously affirmed. As Justice

Holmes explained:

On the proposition that the petitioner is entitled to limit his liability under the act

of 1884 it is urged that the act is an absolute limit, irrespective of privity or

knowledge, in regard to contracts as well as torts, and that this contract, if it bound

the petitioner at all, did so only as an indirect result of its execution. The last point

hardly is intelligible. . . . The contract was between human beings and the petitioner

by his own act knowingly made himself a party to an express undertaking for the

seaworthiness of the ship. That the statute does not limit liability for the personal

acts of the owners done with knowledge is established . . . . We are not disposed to

disturb the very strong and deliberate intimations of Richardson v. Harmon in their

application to the present case. It is said that the owners did their best to make the

vessel seaworthy and that if it was not so the failure was wholly without the privity

or knowledge of the petitioner. But that is not the material question in the case of

a warranty. Unless the petitioner can be discharged from his contract altogether

he must answer for the breach whether he was to blame for it or not.

Id. at 356–57 (emphasis added).

Seventeen years after Pendleton, Chief Justice Hughes reaffirmed this basic principle: “The

liability thus limited is an imputed liability; it is a liability imputed by law by reason of the

ownership of the vessel. For his own fault, neglect, and contracts the owner remains liable.” Am.

Car & Foundry Co., 289 U.S. at 264 (emphasis added). And, later that same year, the Court

extended this principle to implied contracts. See Cullen Fuel Co., Inc., v. Hedger, Inc., 290 U.S.

82, 88–89 (1933).

Admittedly, none of these cases dealt with the specific issue presented here—whether an

indemnification-claimant’s contractual claim for attorneys’ fees is subject to limitation under the

Limitation Act. And, although the Eleventh Circuit likewise has not squarely addressed this

question, it has cited with approval the Sixth Circuit’s apposite holding in S & E Shipping Corp.

See Beiswenger, 86 F.3d at 1040. In that case, as here, the non-stipulating claimant sought both

indemnification and attorneys’ fees. See S & E Shipping, 678 F.2d at 639. As to the former, the

Sixth Circuit held that indemnification claims—whether contract- or tort-based—present no

“multiple claims” at all because the amount of the indemnification claim is necessarily equal to

the damage-claimant’s state-court judgment. See id. at 645. Thus, in the Sixth Circuit’s view, so

long as the damage-claimant stipulates not to enforce an excess judgment against the vessel owner,

the indemnification-claimant likewise would have no excess judgment to enforce. But, as the

Second, Third, and Fifth Circuits have explained—in holdings Beiswenger found more persuasive,

Beiswenger, 86 F.3d at 1038—the Sixth Circuit’s blanket rule does not, in practice, protect the

shipowner from an excess judgment the damage-claimant might enforce against the owner’s

indemnitee, which that indemnitee might then seek to enforce against the owner.

In any event, as relevant here, the Sixth Circuit ultimately concluded that the indemnitee’s

claim for attorneys’ fees did present a “multiple-claimants-inadequate-fund situation” because that

claim was “separate from any claims for liability” and thus created “the possibility of different and

inconsistent judgments” that could well be “in excess of the limitation fund.” S & E Shipping, 678

F.2d at 646. But, as the Sixth Circuit explained, only tort-based attorneys’ fees—that is, claims

“for attorneys’ fees and costs based on the parties’ relative degree of negligence”—are “necessarily

predicated on the shipowner’s personal conduct and thus may form a separate claim.” Id. at 646

n.18. On the other hand, “attorneys’ fees and costs claims based on [the parties’] license

agreement . . . stem from a personal contract and, therefore, are not subject to limitation.” Id.

(citations omitted).

All of that said, Freedom is right to note that Beiswenger’s approbatory reference to this

portion of S & E Shipping was indisputably dicta. See Objections at 3. And, indeed, even within

this Circuit, district courts are split on the issue. Compare In re Brizo, LLC, No. 9:18-CV-80855,

2019 WL 670696, at *2 (S.D. Fla. Feb. 19, 2019) (refusing to lift injunction because of the

indemnification-claimant’s attorneys’ fees claim (citation omitted)), with In re Parker Towing Co.,

Inc., No. CV 17-0489-WS-C, 2018 WL 1220708, at *5 (S.D. Ala. Mar. 8, 2018) (lifting injunction

despite indemnification-claimant’s attorneys’ fees claim).

Faced with this division, this Court must look—first and always—to the text of the statute

itself. See United States v. Turkette, 452 U.S. 576, 580 (1981) (“In determining the scope of a

statute, we look first to its language.”). The Limitation Act provides, in pertinent part, as follows:

(a) In general.—Except as provided in section 30506 of this title, the liability of

the owner of a vessel for any claim, debt, or liability described in subsection (b)

shall not exceed the value of the vessel and pending freight. If the vessel has more

than one owner, the proportionate share of the liability of any one owner shall not

exceed that owner's proportionate interest in the vessel and pending freight.

(b) Claims subject to limitation.—Unless otherwise excluded by law, claims,

debts, and liabilities subject to limitation under subsection (a) are those arising from

any embezzlement, loss, or destruction of any property, goods, or merchandise

shipped or put on board the vessel, any loss, damage, or injury by collision, or any

act, matter, or thing, loss, damage, or forfeiture, done, occasioned, or incurred,

without the privity or knowledge of the owner.

(c) Wages.—Subsection (a) does not apply to a claim for wages.

46 U.S.C. § 30505.

The question, then, is whether ex contractu claims for attorneys’ fees constitute “claims,

debts, and liabilities . . . arising from any embezzlement, loss, or destruction of any property,

goods, or merchandise shipped or put on board the vessel, any loss, damage, or injury by collision,

or any act, matter, or thing, loss, damage, or forfeiture, done, occasioned, or incurred, without the

privity or knowledge of the owner.”

They do not. To hold otherwise would be to say that, when a shipowner knowingly enters

into a contract by which he promises to pay the debts of another upon the occurrence of a specific

event—and where that event then in fact occurs—the resulting “debts” are “incurred, without the

privity or knowledge of the owner.” As Justice Holmes quipped: “That last point is hardly

intelligible.” Pendleton, 246 U.S. at 356.

“The [Supreme] Court established the personal contract exception because the Act is only

intended to limit the shipowner’s liability for matters beyond his control. A personal contract is

obviously within the control of the shipowner.” S & E Shipping, 678 F.2d at 645 (citation omitted).

Thus, a shipowner’s contractual promise to pay—whether that promise covers indemnification

claims or attorneys’ fees—is a knowing act. And any resulting claim founded on that promise

cannot be said to arise from acts “done, occasioned, or incurred, without the privity or knowledge

of the owner.” 46 U.S.C. § 30505. Put another way, “[t]he attorneys’ fees and costs claims based

on the license agreement . . . stem from a personal contract and, therefore, are not subject to

limitation.” S & E Shipping, 678 F.2d at 646 n.18 (citation omitted).2

In sum, Taylor Lane’s claim for “contractual attorney’s fees,” Claim by Taylor Lane at 5

(emphasis added), is simply not subject to limitation—and, as such, does not create a “multiple-

claimants-inadequate-fund” situation.

III. The Adequacy of Bonn’s Stipulations

Freedom’s final argument is that Bonn’s stipulations are “inadequate on their face.”

Objections at 2 n.1. Bonn submitted the following six stipulations:

1. That the Petitioner, has the right to litigate the issue of whether it is entitled to

limit its liability under the provisions of the Limitation of Liability Act, 46

[U].S.C.§ 181 et seq., in this Court, and this federal Court sitting in admiralty

has exclusive jurisdiction to determine that issue.

2. That the Petitioner has the right to have this Court determine the value and the

Petitioner’s interest in the Vessel, M/Y FREEDOM (IMO 8975067), a 2000

230’ Benetti motor yacht and any other vessel determined by this Court to be a

proper art of the limitation fund, such value and interest to be the value and

interest in the vessel(s) as provided by the applicable federal law immediately

following the incident at issue, and this Federal Court has exclusive jurisdiction

to determine that issue.

2 Of course, had Taylor Lane advanced a tort-based claim for attorneys’ fees, the result might have

been different—but only maybe, because the Limitation Act limits an owner’s liability only for

“claims arising out of the conduct of the master and crew, whether the liability be strictly maritime

or from a tort non-maritime but leaves him liable for his own fault, neglect, and contracts.”

Richardson, 222 U.S. at 106. In conducting this inquiry into whether the tort arose out of the

owner’s “fault, neglect, and contracts”, courts employ a two-step process:

First, the court must determine what acts of negligence or conditions of

unseaworthiness caused the accident. Second, the court must determine whether the

shipowner had knowledge or privity of those same acts of negligence or conditions

of unseaworthiness.

Hercules Carriers, Inc. v. Claimant State of Florida, 768 F.2d 1558, 1563–64 (11th Cir. 1985).

Some torts, then, will be “done, occasioned, or incurred” with the “privity or knowledge of the

owner.” See, e.g., Tittle v. Aldacosta, 544 F.2d 752, 756 (5th Cir. 1977) (“[W]here the operational

command of the whole enterprise is in the hands of the owner then present, he is charged with

privity and knowledge on usual principles for the negligent acts of those under his effective

command.” (citation omitted)). In these cases, the owner will be unable to claim the Limitation

Act’s guarantees.

3. That Claimant will not seek a determination of the issues set forth in paragraphs

(1) and (2) above in any court, or any other forum outside of this limitation

proceeding, and consents to waive any res judicata and issue preclusion effect

the decision, rulings or judgments of any state court, or any other forum outside

of this limitation proceeding might have on those issues.

4. That the Claimant will not seek to enforce any judgment rendered in any court,

whether against the Petitioner or another person or entity that would be entitled

to seek indemnity or contribution from the Petitioner, by way of cross-claim or

otherwise, that would expose the Petitioner to liability in excess of the to be

determined limitation fund, until such time as this Court has adjudicated the

Petitioner’s right to limit that liability.

5. In the event this Court determines that the Petitioner is entitled to limit its

liability, the Claimant agrees that it will not seek to enforce any judgment that

would require the Petitioner to pay for damages in excess of the limitation fund

to be determined by this Court.

6. Furthermore, the Claimant stipulates that no judgment against the Vessel

Owner will be asserted to the extent it exceeds the value of the limitation fund

to be determined by this Court.

Mot. at 8–9.

In Freedom’s view, these stipulations are defective because Bonn must “waive the issue of

preclusion defense with respect to all limitation issues; including language in the stipulation that

protects the vessel owner in case the district court grants exoneration or limitation; and amend

claimant’s subject stipulation so that it provides claimant will not seek to enforce judgment in any

forum, as opposed to just state court.” Id. (citing Beiswenger, 86 F.3d at 1044–45).

Beiswenger did hold that, at a minimum, damage-claimants must: (i) waive the defense of

issue preclusion with respect to all matters reserved exclusively for the admiralty court’s

adjudication, see 86 F.3d at 1044; (ii) promise not to enforce any judgment in excess of the

limitation fund if the admiralty court determines that the petitioner’s liability is subject to

limitation, see id.; and (iii) “protect the vessel owner form litigation by the damage claimants in

any forum outside the limitation proceeding,” id.

But Bonn has satisfied each of these requirements here. In his third stipulation, for instance,

Bonn agreed to waive any “issue preclusion effect the decision” of “any court” might have. Mot.

at 8. In his fifth stipulation, Bonn promised not to “seek to enforce any judgment that would require

the Petitioner to pay for damages in excess of the limitation fund to be determined by this Court”—

if “this Court determines that the Petitioner is entitled to limit its liability.” Id. And, finally, in both

his third and fourth stipulations, Bonn referenced “any court,” id. at 8–9—not, as Freedom

contends, only a “state court,” Objections at 2 n.1. Freedom’s Objections, in other words, misread

and mischaracterize the plain meaning of the words in Bonn’s stipulations.

And, even beyond Freedom’s Objections, the stipulations adequately protect Freedom’s

rights under the Limitation Act.3 In this respect, the stipulations unambiguously guarantee that: (i)

only this Court, sitting in admiralty, will decide whether Freedom’s liability (if any) is “subject to

limitation”; (ii) no claimant will enforce any judgment—against either Freedom or any party who

might cross-claim or counter-claim against Freedom—in excess of the limitation fund until the

question of limitation is adjudicated here; and (iii) Bonn will not seek any determination of the

extent of Freedom’s Limitation Act rights in any other forum.

***

In the Judiciary Act of 1789, Congress guaranteed the rights of suitors injured at sea to

pursue their common law remedies in the courts of their choosing. In 1851, to “induce capitalists

to invest money in this branch of industry,” Norwich, 80 U.S. at 121, Congress passed the

Limitation Act, which, by its terms, limits an innocent shipowner’s liability to the value of his

3 Notably, the Middle District of Florida recently upheld a set of very similar stipulations. See In

re Everglades Airboat Mgmt. LLC, No. 2:14-CV-380-FTM-29CM, 2014 WL 7375515, at *3

(M.D. Fla. Dec. 29, 2014), report and recommendation adopted, No. 2:14-CV-380-FTM-29CM,

2015 WL 307047 (M.D. Fla. Jan. 21, 2015).

interest in the vessel. That Limitation Act “is not one of immunity from liability but of limitation

of it.” Henn, 354 U.S. at 152. For this reason, in construing the delicate interplay between the

rights of injured claimants and the rights of shipowners, the Supreme Court has instructed inferior

courts not to “transform the [Limitation] Act from a protective instrument to an offensive weapon

by which the shipowner could deprive suitors of their common-law rights.” Id.

This Court will follow that admonition here. Bonn has agreed to limit his recovery—

whether against Freedom or against any other party who might look to Freedom for

indemnification—to the M/Y Freedom’s value, at least until this Court resolves the question of

Freedom’s “privity or knowledge.” The Limitation Act requires nothing more—and the “saving to

suitors clause” demands nothing less.

For the foregoing reasons, the Court hereby ADOPTS the Report and Recommendation

[ECF No. 49] as follows:

1. The Motion to Dismiss, Stay, and/or Lift the Injunction [ECF No. 12] is GRANTED

IN PART and DENIED IN PART. The Motion is DENIED insofar as it seeks

dismissal of this case. The Motion is GRANTED to the extent it requests a stay.

2. The Injunction [ECF No. 7] is hereby LIFTED.

3. This case is STAYED pending the state court’s adjudication of Bonn’s tort claims.

4. The Clerk of Court is directed to CLOSE this case for administrative purposes.

5. If, at any time, Freedom believes that Bonn is not adhering to the letter of his

stipulations, it may file a motion to reopen this case.

6. The parties are directed to file a REPORT informing the Court of the status of the

underlying state-court proceedings every ninety (90) days, starting from the date of

this Order. The parties are further directed to promptly notify the Court upon resolution

of the state-court action.

DONE AND ORDERED in Fort Lauderdale Florida, this 18thday of February 2020.

ROY K. ALTMAN

UNITED STATES DISTRICT JUDGE

cc: counsel of record

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