In re Complaint of Lava Ocean Tours Inc.

In the Matter of The Complaint of LAVA OCEAN TOURS INC., a Hawai'i Corporation, as owner of M/V HOT SPOT, O.N. 1277287, for exoneration from or limitation of liability.

CIV. NO. 19-00023 LEK-RLP

UNITED STATES DISTRICT COURT DISTRICT OF HAWAII

May 31, 2019

ORDER GRANTING IN PART AND DENYING IN PART LIMITATION PLAINTIFF'S MOTION TO ENFORCE ORDER DIRECTING RESTRAINING ORDER FILED FEBRUARY 14, 2019 [DKT. NO. 16]

On March 25, 2019, Limitation Plaintiff Lava Ocean Tours Inc. ("Limitation Plaintiff") filed its Motion to Enforce Order Directing Restraining Order Filed February 14, 2019 [Dkt. No. 16] ("Motion"). [Dkt. no. 31.] On April 5, 2019, Claimants/Third-Party Plaintiffs Robert E. Tilton, individually and as next friend of O.T., a minor, and A.T., a minor; Teresa J. Tilton; and Jessica Tilton ("Tilton Claimants"), filed their memorandum in opposition to the Motion, and on April 10, 2019, the Limitation Plaintiff filed its reply. [Dkt. nos. 37, 40.] This matter came on for hearing on April 15, 2019. The Limitation Plaintiff's Motion is hereby granted in part and denied in part for the reasons set forth below.

BACKGROUND

On January 16, 2019, the Limitation Plaintiff filed its Complaint for Exoneration from or Limitation of Liability ("Limitation Complaint"), pursuant to 46 U.S.C. § 30501, et seq. ("Limitation Act" or "the Act"), and Rule F of the Federal Rules of Civil Procedure Supplemental Rules for Admiralty of Maritime Claims and Asset Forfeiture Actions ("Supplemental Rules"). [Dkt. no. 1 at ¶ 22.] The Limitation Complaint seeks exoneration from or limitation of liability for claims arising from the July 16, 2018 lava tour group excursion to the Kilauea Volcano East Rift Zone. [Id. at ¶¶ 1, 6.] The Limitation Plaintiff is the owner of the M/V HOT SPOT, O.N. 1277287 ("the Vessel"), which is a thirty-nine foot vessel used for passenger excursions. [Id. at ¶¶ 1, 4.] Third-Party Defendant Shane Turpin ("Turpin") is the sole corporate officer of, and sole shareholder in, the Limitation Plaintiff. [Motion, Decl. of Shane Turpin ("Turpin Decl.") at ¶ 1.] On July 16, 2018, the Vessel carried forty-nine passengers and three crewmembers to view the ocean entry of the Kilauea Volcano lava flow. [Limitation Complaint at ¶ 6.] The Limitation Plaintiff alleges that, during the voyage, the Vessel was operated in compliance with the United States Coast Guard Marine Safety Information Bulletin 18-008, "Kilauea Volcano Lower East Rift Zone OngoingLava Safety Zones Access Requirements Update," dated July 11, 2018; however, an unforeseeable offshore submarine volcanic event caused lava rock to strike the Vessel in the passenger seating area ("the Incident"). [Id. at ¶¶ 7-8.]

I. Limitation Action

The Limitation Plaintiff alleges it should be exonerated from all liability arising from the Incident, or in the alternative, have its liability limited to "the value of its interest in the vessel at the end of the voyage on July 16, 2018."¹ [Id. at ¶ 23.] In the Limitation Complaint, the Limitation Plaintiff sought a Court order, inter alia: directing all parties with claims against the Limitation Plaintiff arising from the Incident to submit their claims in the instant action, and to file their respective answers, if any, to the allegations in the Limitation Complaint; [id. at pg. 7, ¶ 2;] and restraining the further prosecution of any and all suits already commenced against the Limitation Plaintiff in any court against the Limitation Plaintiff's "agents, servants, and/or employees and/or [the Vessel]" with regard to the Incident, [id. at pgs. 8-9, ¶ 4].

On February 4, 2019, the Limitation Plaintiff posted $300,000 in security pursuant to Supplemental Rule F(1), based on the value of the Vessel after the Incident. [Dkt. no. 7-1.] On February 14, 2019, the Court issued the Order Directing Issuance of Notice, Publication Thereof and Restraining Order ("Restraining Order"), [dkt. no. 16,] which ordered: notice to be issued for all persons asserting claims against the Limitation Plaintiffs to file their claims in the instant limitation action; that said notice be published; and to cease the continued prosecution of any pending actions against the Limitation Plaintiff. [Id. at 3-4.] Specifically, the Restraining Order required that:

the continued prosecution of any and all suits, actions, and proceedings which may have already begun against Limitation Plaintiff LAVA OCEAN TOURS INC. in any court whatsoever to recover damages arising out of, or occasioned by, consequent upon or otherwise arising in connection with the aforesaid accident and the institution and prosecution of any suits, actions or legal proceedings of any nature or description whatsoever in any Court whatsoever, except in this proceeding for exoneration from or limitation of liability, against Limitation Plaintiff LAVA OCEAN TOURS INC. with respect to any claim or claims arising out of the aforesaid accident or otherwise subject to limitation in this proceeding shall cease, be and hereby are, stayed and restrained; . . . .

Id. at 4 (emphases in original).

II. State Court Action

On January 17, 2019, the Tilton Claimants filed their complaint in the Circuit Court of the Third Circuit, State of Hawai'i, under Civil No. 19-1-0023 ("State Court Action"), and filed their first amended complaint ("State Court Complaint") against both the Limitation Plaintiff and Turpin on January 22, 2019. See Mem. in Supp. of Motion at 4.² The State Court Action arises out of the same Incident as the instant limitation action. See id. at 4-5. On January 28, 2019, the Tilton Claimants served a request for production of documents on Turpin. [Id. at 4.] On February 19, 2019, counsel for the Limitation Plaintiff sent a letter to the Tilton Claimants' counsel to remind him that the Restraining Order stayed the proceedings in the State Court Action against both the Limitation Plaintiff and Turpin. [Motion, Decl. of Normand R. Lezy ("Lezy Decl.") at ¶ 5, Exh. 1.] The Tilton Claimants' counsel disagreed as to the scope of the Restraining Order and whether it applied to Turpin in the State Court Action. [Lezy Decl., Exh. 2 (email chain dated 2/19/19 between Mr. Lezy andPatrick McTernan, Esq.).] After some additional correspondence, the Limitation Plaintiff filed its Motion.

III. Motion

The instant Motion seeks an order from this Court to enforce the Restraining Order as to any claims filed against Turpin in any other proceedings related to the Vessel and the Incident, including but not limited to the State Court Action. The Limitation Plaintiff also seeks civil contempt sanctions for the Tilton Claimants' violation of the Restraining Order. The Tilton Claimants argue Turpin was neither identified in the Restraining Order nor is he the owner of the Vessel for the purposes of the Limitation Act, and sanctions are not appropriate.

DISCUSSION

I. Limitation of Liability in General

"The Limitation of Liability Act limits shipowner liability arising from the unseaworthiness of the shipowner's vessel or the negligence of the vessel's crew unless the condition of unseaworthiness or the act of negligence was within the shipowner's 'privity or knowledge.'" In re BOWFIN M/V, 339 F.3d 1137, 1137 (9th Cir. 2003) (per curiam) (quoting 46 U.S.C. § 30505). The purpose of the Limitation Act is to "encourage ship-building and to induce capitalists to invest money in this branch of industry." Lewis v. Lewis & Clark Marine, Inc., 531U.S. 438, 446 (2001) (citations and internal quotation marks omitted). The form of the limitation proceeding directs "all claims against an owner to be aggregated and decided at one time under a single set of substantive and procedural rules, thereby avoiding inconsistent results and repetitive litigation." In re Complaint of Paradise Holdings, Inc., 795 F.2d 756, 761 (9th Cir. 1986) (citing Maryland Casualty Co. v. Cushing, 347 U.S. 409, 414-16, 74 S. Ct. 608, 610-12, 98 L. Ed. 806 (1954) (plurality opinion)). "This objective is especially important where there are multiple claims, which aggregate to more than the limitation fund; the concursus before the admiralty court is designed in part to marshall available assets and to set priorities among the various claims." Id. (citing S & E Shipping Corp. v. Chesapeake & Ohio Railway, Co., 678 F.2d 636, 642 (6th Cir. 1982)).

The Limitation Act provides, in pertinent part:

(a) In general. - The owner of a vessel may bring a civil action in a district court of the United States for limitation of liability under this chapter. The action must be brought within 6 months after a claimant gives the owner written notice of a claim.

(b) Creation of fund. - When the action is brought, the owner (at the owner's option) shall -

(1) deposit with the court, for the benefit of claimants -(A) an amount equal to the value of the owner's interest in the vessel and pending freight, or approved security; and

(B) an amount, or approved security, that the court may fix from time to time as necessary to carry out this chapter; . . .

. . . .

(c) Cessation of other actions. - When an action has been brought under this section and the owner has complied with subsection (b), all claims and proceedings against the owner related to the matter in question shall cease.

46 U.S.C. § 30511.

"The procedure for a limitation action is now found in Supplemental Admiralty and Maritime Claims Rule F," which "sets forth the process for filing a complaint seeking exoneration from, or limitation of, liability." Lewis, 531 U.S. at 448. Rule F of the Supplemental Rules provides, in pertinent part:

(1) Time for Filing Complaint; Security. Not later than six months after receipt of a claim in writing, any vessel owner may file a complaint in the appropriate district court, . . . for limitation of liability pursuant to statute. The owner (a) shall deposit with the court, for the benefit of claimants, a sum equal to the amount or value of the owner's interest in the vessel and pending freight, or approved security

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