In the mid-nineteenth century, Congress passed the “Limitation Act” to induce capitalists to invest money in the maritime and shipping industries. The Act achieves this purpose by exempting allegedly innocent vessel owners from any liability beyond the value of their vessel, i.e. “the limitation fund.” In other words, where a vessel owner is not personally negligent, the full extent of his liability is the limitation fund. The Act applies to all kinds of vessels, including commercial boats, pleasure yachts, and even jet skis. Most commonly, the Limitation Act is invoked where a maritime accident is caused solely by the negligence of the vessel owner’s employee or agent. When faced with liability, a vessel owner may file a petition for protection under the Limitation Act, which must be filed in federal court.
After the vessel owner deposits with the court an amount representing the full value of the vessel, the court issues a stay for all related claims against the vessel owner pending in any other forum, and directs all potential claimants to file their claims against the vessel owner in the federal court within a specified period of time. See Fed. R. Civ. P. Supp. Rules F(3), F(4). In a typical proceeding under the Limitation Act, if the vessel owner is found liable, but limitation is granted, the court distributes the limitation fund among the claimants in an equitable proceeding known as a “concursus.”
Without question, the Limitation Act is an antiquated doctrine that serves to deny justice to victims of horrific maritime accidents. For instance, the owner of a large, successful maritime corporation (i.e. tow boat company, marine salvage company, jet ski rental company) may be entitled to significantly reduce the value of injury claims caused by their employees. Additionally, injury victims are forced to bring their claims in admiralty jurisdiction upon the filing of a limitation petition, which deprives them of a jury trial. As discussed below, there are exceptions to these harsh procedural hurdles that must be utilized in maritime injury cases.