Argued
and Submitted June 16, 2017 Honolulu, Hawaii
Amended April 19, 2018
Appeal
from the United States District Court for the District of
Hawaii Alan C. Kay, Senior District Judge, Presiding D.C. No.
1:13-cv-00002-ACK-RLP
Jay
Lawrence Friedheim (argued), Admiralty Advocates, Honolulu,
Hawaii; John C. Gibson, Honolulu, Hawaii; for
Plaintiff-Appellant.
Simon
Klevansky (argued), Alika L. Piper, and Nicole D. Stucki,
Klevansky Piper LLP, Honolulu, Hawaii, for
Defendants-Appellees Dane S. Field, Sea Hawaii Rafting LLC,
and M/V Tehani.
Lisa
M. Volquardsen, Kailua-Kona, Hawaii, for Defendant-Appellee
Kris Henry.
Before: Raymond C. Fisher, Richard A. Paez, and Jacqueline H.
Nguyen, Circuit Judges.
ORDER
AND AMENDED OPINION
SUMMARY[*]
Maritime
Law
The
panel reversed the district court's dismissal of a
seaman's claims in admiralty against a vessel in rem,
issued a writ of mandamus to the district court to award the
seaman maintenance, denied a motion to dismiss the appeal as
moot, and remanded the case to the district court.
The
seaman was injured when the vessel on which he was working
exploded. He sued the vessel in rem, and he sued the company
that owned the vessel and the company's owner and manager
in personam, seeking to enforce his seaman's lien against
the vessel.
The
panel held that it had jurisdiction under 28 U.S.C. §
1292(a)(3) to review the district court's interlocutory
order dismissing the seaman's claims against the vessel
because the order affected the seaman's substantive
rights. The panel concluded that it lacked jurisdiction to
review the district court's denial of summary judgment as
to a maintenance amount, but it treated the notice of appeal
as a mandamus petition.
The
panel held that the district court erred in staying the
action when the vessel owner declared bankruptcy and in
dismissing the seaman's claims against the vessel for
lack of in rem jurisdiction. The panel concluded that the
district court obtained jurisdiction over the vessel when the
seaman filed a verified complaint and the defendants appeared
generally and litigated without contesting in rem
jurisdiction, and the seaman's failure to verify his
amended complaint did not divest the district court of in rem
jurisdiction. The district court did not lose in rem
jurisdiction while the vessel remained in its constructive
custody, and the court's control over the vessel, once
obtained, was exclusive. The vessel owner's later-filed
bankruptcy petition did not divest the district court of in
rem jurisdiction. Moreover, the automatic bankruptcy stay did
not affect the seaman's maritime lien against the vessel,
and the bankruptcy court had no authority to dispose of the
lien through the application of bankruptcy law.
The
panel denied the bankruptcy trustee's motion to dismiss
the appeal as moot after the trustee, with the bankruptcy
court's approval, sold the vessel purportedly free and
clear of the seaman's maritime lien.
The
panel held that the district court erred by denying the
seaman's maintenance requests in full. The panel held
that when a seaman establishes his entitlement to maintenance
and provides some evidence of his actual living expenses, the
burden shifts to the vessel's owner to produce evidence
that the seaman's actual costs were unreasonable. Whether
or not the vessel's owner produces such evidence, the
seaman is entitled to a maintenance award in the amount of
his actual costs up to the reasonable rate in his locality.
The panel issued a writ of mandamus to the district court to
award the seaman maintenance for his undisputed actual and
reasonable expenses of $34 per day, subject to a potential
increase after trial.
ORDER
The
Opinion filed on March 28, 2018, is amended as follows:
1. On
page 9, line 11, of the slip opinion, the word
<Honolulu> is replaced with <his locality> and,
at the end of the sentence, a footnote with the following
text is added:
<Barnes originally presented the district court with
evidence of reasonable costs in Honolulu but subsequently
clarified that Kailua-Kona was the relevant locality.>
The
remaining footnotes are renumbered accordingly.
2. On
page 40, line 8, of the slip opinion, the word
<Honolulu> is replaced with <his locality>
enclosed in regular brackets.
No new
petitions for rehearing or rehearing en banc will be
accepted.
OPINION
NGUYEN, CIRCUIT JUDGE
Chad
Barnes is a seaman who was injured when the boat on which he
was working, the M/V Tehani, exploded. During his recovery,
Barnes received some monetary assistance from either Sea
Hawaii Rafting, LLC ("SHR"), which owned the
Tehani, or Kris Henry, SHR's owner and manager, but those
payments soon stopped. Seeking the ancient maritime remedy of
maintenance and cure, [1] among other relief, Barnes sued the Tehani
in rem and SHR and Henry in personam to enforce his
seaman's lien against the vessel. Although admiralty
courts normally handle such matters expeditiously, that did
not happen here for two reasons.
First,
the district court rejected Barnes's pretrial requests to
enforce SHR's obligation to pay maintenance and cure. The
court concluded that Barnes was entitled to maintenance and
cure and had demonstrated his actual maintenance expenses.
Nonetheless, despite undisputed evidence that Barnes was
entitled to at least some of his actual expenses, the
district court declined to award Barnes any maintenance until
trial.
Second,
when SHR declared bankruptcy after fifteen months of
litigation and shortly before trial, the district court
stayed Barnes's action. The district court concluded that
the Tehani was an asset of the debtor's estate and that
the automatic bankruptcy stay barred proceedings to enforce
Barnes's maritime lien against the vessel. The bankruptcy
court partially lifted the bankruptcy stay to allow the
district court to evaluate Barnes's claims against SHR
but expressly prohibited the district court from issuing any
ruling that would affect the maritime lien's status.
Ultimately,
the district court dismissed Barnes's claims against the
Tehani. The court reasoned that it lacked in rem jurisdiction
because, even though Barnes verified his original complaint,
he failed to verify the amended complaint. Then, while
Barnes's appeal was pending, the bankruptcy trustee-with
the bankruptcy court's approval- sold the Tehani
purportedly free and clear of Barnes's maritime lien. The
trustee subsequently moved to dismiss this appeal as moot.
We
conclude that the district court erred by denying
Barnes's maintenance requests in full, staying the
action, and dismissing the Tehani. The district court
obtained jurisdiction over the vessel Tehani when Barnes
filed a verified complaint and the defendants appeared
generally and litigated without contesting in rem
jurisdiction. The district court did not lose in rem
jurisdiction while the Tehani remained in its constructive
custody. And the court's control over the vessel, once
obtained, was exclusive. SHR's later-filed bankruptcy
petition did not divest the district court of in rem
jurisdiction. Moreover, the automatic bankruptcy stay did not
affect Barnes's maritime lien against the Tehani, and the
bankruptcy court had no authority to dispose of the lien
through the application of bankruptcy law.
When,
as here, a seaman establishes his entitlement to maintenance
and provides some evidence of his actual living expenses, the
burden shifts to the vessel's owner to produce evidence
that the seaman's actual costs were unreasonable. Whether
or not the vessel's owner provides such evidence, the
seaman is entitled to a maintenance award in the amount of
his actual costs up to the reasonable rate in his locality.
Over three years after concluding that Barnes was entitled to
maintenance and had sufficiently proven his actual costs, the
district court has yet to award him any maintenance.
Accordingly,
we deny the trustee's motion to dismiss, reverse the
district court's dismissal of the Tehani, and issue a
writ of mandamus to the district court to award Barnes
maintenance for his undisputed actual and reasonable
expenses-$34 per day-subject to a potential increase after
trial.
I.
A.
Factual Background
Barnes
worked for SHR for six years as a captain and crew member of
the Tehani, a 25-foot rigid hull inflatable boat powered by
twin outboard engines. Barnes took passengers from Honokohau
Harbor on sightseeing and snorkeling trips along the Kona
coast. Henry paid Barnes under the table with personal checks
made out to "cash."
On July
3, 2012, Henry and Barnes were launching the Tehani for a
night snorkeling trip. Henry was in his truck, towing the
Tehani on an attached trailer, and Barnes was onboard the
boat. Henry backed the trailer down the launch ramp until the
vessel was in the water. When Barnes started the starboard
engine, the Tehani exploded. The hatch struck Barnes on his
back and head, propelling him into the ocean.
A Coast
Guard investigation found that the explosion was caused by a
fuel tank with a missing screw in the fuel tank sender. Fuel
leaked into the bilge, where vapors accumulated and ignited
when Barnes started the engine. The investigator concluded
that the incident might have been avoided if Henry had
installed the required flammable vapor detector and
mechanical exhaust system. See 46 C.F.R.
§§ 182.460, 182.480. The boat, which was insured,
was subsequently repaired and returned to service.
Barnes
was less fortunate. SHR lacked insurance to cover his medical
expenses for physical, psychological, and neurological
treatment. Barnes required approximately
12
staples to reattach parts of his scalp. Due to his head
injuries, he can no longer drive a car or swim. He cannot
afford rent and has been living on friends' couches. He
receives approximately $300 per month in disability income
from the State of Hawaii.[2]
B.
Litigation in the District and Bankruptcy Courts
On
January 1, 2013, Barnes filed a verified complaint in
admiralty against Henry, SHR, and the Tehani, claiming
unseaworthiness, various theories of negligence, and
intentional infliction of emotional distress. Barnes sought
maintenance and cure, damages, and attorney's fees. The
three defendants answered the complaint. Despite denying
Barnes's allegation that the Tehani was subject to the
district court's in rem jurisdiction, they did not move
to dismiss the Tehani on that basis but instead proceeded to
litigate the dispute.
Barnes
moved for "summary judgment for payment of maintenance
and cure, " requesting that the district court order
defendants to pay his "reasonable, actual costs of food
and lodging" and medical costs since the date of his
injury until he reached "maximum medical cure." The
district court granted Barnes's motion in part. Noting
that defendants did not dispute that Barnes was injured in
the service of the Tehani, the district court ruled that
Barnes was entitled to maintenance and cure and had not yet
reached maximum cure. Applying the standard for determining a
maintenance rate from Hall v. Noble Drilling (U.S.)
Inc., 242 F.3d 582 (5th Cir. 2001), the district court
concluded that Barnes had shown his actual food and lodging
costs but not the reasonable amount for such costs in his
locality or his actual medical expenses. [3] The court
therefore declined to award either maintenance or cure.
About
four months after the district court's order, Henry
volunteered to pay Barnes $962.83 per month towards
maintenance but stopped after making two payments. Barnes
moved two more times for summary judgment to determine a
daily maintenance rate.[4] The district court denied both motions,
concluding that there were triable issues of fact regarding
reasonable food and lodging costs in Hawaii. The district
court also denied Barnes's separate motion for summary
judgment for payment of cure.
Meanwhile,
Barnes filed an unverified amended complaint, adding a claim
for negligence per se. In answering the amended complaint,
defendants again stated a general denial of Barnes's
allegation that the Tehani was subject to the district
court's in rem jurisdiction but did not specifically
challenge jurisdiction by filing a motion under Federal Rule
of Civil Procedure 12(b) or otherwise bringing the issue to
the district court's attention.
In yet
another summary judgment motion, Barnes asked the district
court to grant relief on his claims for unseaworthiness,
negligence per se, and Jones Act negligence. Two weeks before
the hearing on this motion and just over a month before the
scheduled trial, SHR and Henry filed for bankruptcy
relief-Henry for reorganization under Chapter 13 and SHR for
dissolution under Chapter 7. Pursuant to the automatic
bankruptcy stay, 11 U.S.C. § 362(a), the district court
stayed the proceedings against all three defendants.
The
bankruptcy court, recognizing the district court's
"experience and expertise . . . in matters in admiralty,
" partially lifted the stay as to Henry and SHR so that
the district court could "adjudicate the validity,
extent, amount, and date of perfection of any maritime lien
claim by . . . Barnes against the
[Tehani]."[5] However, the bankruptcy court expressly
kept the stay in place "to bar the enforcement of any
maritime lien." The bankruptcy court expressed concern
that the "limited assets" of SHR's estate did
not warrant the bankruptcy trustee's
"participat[ion] in extended or unlimited litigation in
the District Court."[6]
After
the bankruptcy court partially lifted the stay, the district
court reopened the case. In a subsequent minute order
addressing Barnes's outstanding summary judgment motions,
the district court noted-sua sponte and parenthetically-that
"it lack[ed] jurisdiction over the [Tehani], as [the
vessel] was never arrested." Thereafter, Barnes
attempted several times to verify the amended complaint-a
verified complaint being a precondition of arrest,
see Fed. R. Civ. P. Supp. Adm. & Mar. Cl. R.
C(2)(a)-though Barnes made no attempt to arrest the Tehani.
The trustee in SHR's bankruptcy case conceded to the
district court that defendants' "pre-petition answer
subjected [them] to the [district court's]
jurisdiction." The trustee acknowledged the district
court's previous statement that it lacked in rem
jurisdiction but did not seek dismissal on that ground.
Rather, the trustee argued that Barnes had lost any maritime
lien he had in the vessel through his failure to verify the
amended complaint and invoke the district court's in rem
jurisdiction. Henry also did not seek dismissal for lack of
in rem jurisdiction.[7]
The
district court nonetheless dismissed the Tehani for lack of
in rem jurisdiction and, in the same order, granted Barnes
partial summary judgment on his claim for negligence per se.
In dismissing the Tehani, the district court reasoned that
Barnes's unverified amended complaint- filed after more
than 15 months of litigation-superseded the original verified
complaint; Barnes's attempts to verify the amended
complaint while the bankruptcy stay was in effect were
invalid; verification of the amended complaint was necessary
for his ...