TOTE Maritime alleges it exercised due diligence to supply the ill-fated cargo ship with suitable and working engines, personnel, and other necessary equipment, according to recent court filings.
The owners of the TOTE Maritime Puerto Rico container and roll-on/roll-off cargo ship El Faro, which sank in Hurricane Joaquin on Oct. 1, filed a request for exoneration or limitation of liability in U.S. District Court in Florida on Friday.
In the court filing, TOTE and sister companies say prior to the commencement of its last voyage and at all times, they exercised due diligence to supply the ship with “suitable engines, machinery, apparel, appliances, personnel, and other appropriate and necessary equipment, all in good order and condition and suitable for their intended operations.”
They say the captain of the ship monitored Hurricane Joaquin and altered the course of the ship to account for the hurricane’s expected track.
The filing seeks to take advantage of the Shipowners Limitation of Liability Act of 1851, a law that was enacted to help U.S. shipowners compete with companies based in other countries such as Great Britain, and allows shipowners to seek exoneration from or limit their liability in the event of a maritime accident.
One advantage of limitation of liability proceedings is that the court sets a period of time for claims to be filed and orders a “concursus of claims” that forces all claimants into a single proceeding in federal district court rather than making the company subject to litigation in multiple jurisdiction
Also over the weekend, the National Transportation Safety Board announced that the U.S. Navy has located the wreckage of a cargo ship believed to be the El Faro in more than 15,000 feet of water near the vessel’s last known position off the Bahamas.
According to the court filing, the value of the El Faro is zero and the pending freight onboard was worth about $2.1 million. However, the law also creates a supplemental limitation fund to be used for personal injury and death claims that is based on the gross tonnage of the ship. The TOTE companies say that amounts to another $13.2 million and that the combined $15.3 million “is expected to be substantially less than the amount which will be claimed for losses and damages.”
At least three lawsuits — two in state court and one in federal court — have already been filed against the company by the families of seafarers who perished when the El Faro sank on Oct. 1.
The actual complaints filed against companies associated with TOTE do not specify an exact dollar amount other than the $15,000 needed for jurisdiction in Florida state court or $75,000 for jurisdiction in federal court, but flamboyant attorney Willie Gary said at a press conference at the time of filing a lawsuit in Circuit Court in Duval Country, Fla. he would seek $100 million in restitution for his client.
Given there were 28 regular crew members on the ship and five Polish shipyard workers preparing the vessel for a drydocking, the ability of the families of the men and women who perished in the El Faro accident to recover more than the amount of money in the limitation fund may depend on whether their attorneys can “break” the limitation of liability by proving TOTE was negligent or the ship was unseaworthy, and whether the shipowner had “knowledge or privity” of that negligence or unseaworthiness.
The lawsuits that have been filed have made just such allegations. The lawsuit filed by the family of Jackie Jones in federal court, for example, claims the ship was overdue for deferred repair work, that there were “known issues with the steel of the vessel,” that the ship was “routinely overloaded with cargoes,” that “dangerous weather conditions were known,” and that there were “clear opportunities to reasonably alter the vessel’s route” that were disregarded.
“The key in any limitation action is whether the owner of the vessel had privity or knowledge of the cause of the failure of the vessel prior to the commencement of the voyage,” explained Vince DeOrchis, an attorney at Montgomery McCracken Walker Rhoads.
A paper authored by Miami-based attorneys Keith Brias and Richard Rusak in 2006 explained “judicial interpretation of this term has held that privity or knowledge means the shipowner’s personal participation in, or actual knowledge of, the specific acts of negligence or unseaworthiness which caused or contributed to the casualty.” The article notes that because “limitation proceedings are considered admiralty proceedings, there is no right to a jury trial” in such cases.
“When examining privity or knowledge in the corporate owner context, one must determine whether the person with knowledge of the negligence or unseaworthy condition ranks high enough in the corporate structure to make his awareness that of the corporation,” the attorneys wrote. For example, shore-based corporate managers who oversee the vessel’s operations usually have sufficient ranking in the corporation to create privity or knowledge. Captains and crewmembers, on the other hand, generally do not have a high enough position within a corporation to impute privity or knowledge to the vessel owner. However, if the vessel’s master exerts almost exclusive control over the vessel’s business activities, he would be of a sufficient rank in the corporation to impute his knowledge to the corporation.”
The El Faro trial is likely to be a battle of expert witnesses, says DeOrchis. With no survivors and limited physical evidence, “the problem for the judge is where do you draw reality from conjecture.”
That is one reason there is so much interest in the voyage data recorder, or “black box” device, on the ship and whether investigators will be able to recover it.
In an interview, Brais said the exposure of a company such as TOTE to such a lawsuit is limited to their self retention, and that they will be insured through their membership in a protection and indemnity club, a mutual insurance pool.
The El Faro is covered by the Steamship Mutual Mutual Underwriting Association, which is a member of the International Group of P&I Clubs.
Under a complicated pooling and reinsurance agreement, members of Steamship Mutual provide shipowners with an initial layer of protection of $9 million. The pool provides a mechanism for sharing all claims in excess of $9 million up to approximately $7.5 billion.
TOTE seeks exoneration or limitation of liability in El Faro sinking
