In re: In the Matter of the Complaint of Transporter Marine, Inc.

The owners and operators of the M/V TRANSPORTER filed a petition for exoneration from or limitation of liability under the Limitation of Liability Act after a seaman on board the vessel lost both legs in a shipboard accident. Sometime after the incident, the U.S. Coast Guard instituted administrative proceedings against them for allegedly failing properly to comply with the Coast Guard’s regulations that require marine employers to test for drugs and alcohol all those on board a vessel who are directly involved in a serious marine incident.

In connection with the limitation of liability proceeding, the vessel’s owner and operator obtained an order directing all persons with claims resulting from or incidental to the seaman’s accident to file claims within the limitations of liability proceeding. They contended that the district court’s order required the Coast Guard to assert its claims, fines and penalties under its drug and alcohol testing regulations in the limitation action. The Coast Guard, on the other hand, argued that its drug testing regulations and all proceedings relating to them are subject to the Administrative Procedures Act, did not arise from or in connection with the maritime action underlying the Limitation Act proceeding, were temporally remote from the seaman’s accident and were regulatory in nature and thus not subject to the otherwise broad sweep of the Limitation Act. The district court agreed with the Coast Guard and the vessel’s owners and operators appealed.

The Fifth Circuit affirmed the district court’s ruling, noting that subjecting the Coast Guard’s claim to limitation would go against the expressed intent of Congress to promote safety on the high seas. To allow shipowners to limit their liability in such cases could reduce their incentive to comply with important regulations. The Fifth Circuit further noted that the Limitation Act applies for the most part to limit tort liability and that penalties of the type which the Coast Guard sought to recover in this case did not appear to be among the kinds of maritime misfortune that are subject to the Limitation Act.

The Court when on to note that even assuming, arguendo, that the regulatory duties imposed on the Coast Guard by Congress in connection with drug testing somehow came within the ambit of the Limitation Act, it would still have to determine the statutory scope of the express language of the Act in this context. The Court considered the "voyage test" and the "distinct occurrence" test. Although it found neither test dispositive, it noted that the distinct occurrence test requires a factual inquiry into whether the vessel owner had the time and opportunity to take the necessary action to avoid subsequent liability that is distinct from the initial liability imposing event. The Court observed that the record before it was sufficient to establish definitively that, after the seaman was injured, the vessel’s owners and operators had ample opportunity to comply with the Coast Guard requirements. Therefore, the Fifth Circuit viewed the alleged failure to comply under this construction to be a distinct occurrence giving rise to an independent liability. Because the failure to comply was distinct from and subsequent to the incident in which the seaman was injured which was the basis of the limitation proceeding, the Coast Guard’s action concerning the administrative violations were not subject to the Limitation Act.