January 15, 2013

DECISION ALERT
Today the Supreme Court issued one decision, described below, of interest to the business community.

• Federal Admiralty Jurisdiction—“Vessel” Status

Federal Admiralty Jurisdiction—“Vessel” Status

Lozman v. City of Riviera Beach, Florida, No. 11-626 (described in the February 21, 2012, Docket Report)

Lozman v. City of Riviera Beach, Florida, No. 11-626

Under federal admiralty and maritime law, a “person providing necessaries to a vessel” has a maritime lien that may be enforced through an in rem civil action against the vessel. 46 U.S.C. § 31342. The Rules of Construction Act, 1 U.S.C. § 3, defines “[t]he word ‘vessel’ [to] include[] every description of watercraft or other artificial contrivance used, or capable of being used, as a means of transportation on water.” Today, in Lozman v. City of Riviera Beach, Florida, No. 11-626, the Supreme Court held that the petitioner’s floating home was not a “vessel” for purposes of that Act.

The Court’s decision in this case will be of general interest to commercial owners of floating structures, including those in the casino, restaurant, and hotel industries. In addition to determining whether disputes over floating structures are subject to federal admiralty jurisdiction and federal tort law, the Court’s decision will likely have consequences for whether these structures are subject to various tax, employment, and safety laws that apply to “vessels.”

Petitioner Lozman owned a two-story floating home, which he kept docked in a marina owned by respondent City of Riviera Beach, Florida. After unsuccessfully attempting to evict Lozman, the City filed a federal admiralty lawsuit in rem against the floating home, seeking a maritime lien for docking fees and damages for trespass. The district court ruled that the home was a “vessel” and awarded the City both docking fees and nominal damages. The Eleventh Circuit affirmed, holding that the home qualified as a vessel because it was “capable” of movement over water. Slip. op. 2.

In a 7-2 opinion by Justice Breyer, the Supreme Court reversed. Focusing primarily on the statutory phrase “capable of being used…as a means of transportation on water” (slip op. 3), the Court reasoned that “‘[t]ransportation’ involves the ‘conveyance (of things or persons) from one place to another’” (id. at 4-5), emphasizing that this definition should be applied “in a ‘practical,’ not a ‘theoretical,’ way” (id. at 5). The Court then concluded that a structure cannot be used as a means of transportation on water “unless a reasonable observer, looking to [its] physical characteristics and activities, would consider it designed to a practical degree for carrying people or things over water.” Id.

Applying this interpretation, the Court determined that Lozman’s home was not a vessel because it had no steering mechanism; did not have the capacity to generate or store electricity; could not propel itself; had a rectangular bottom, “unraked” hull, rooms resembling “nonmaritime living quarters,” and French windows rather than portholes; and could travel over water only by being towed. Slip op. 5-6. In responding to counterarguments raised by the City and its amici, the Court emphasized that the test for “vessel” status does not contain a “subjective element” and instead “permit[s] consideration only of objective evidence of a waterborne transportation purpose.” Id. at 11-12.

Justice Sotomayor filed a dissenting opinion in which Justice Kennedy joined. While agreeing with the Court that “an objective assessment of a watercraft’s purpose or function governs whether that structure is a vessel,” the dissent maintained that the Court had “creat[ed] a novel and unnecessary ‘reasonable observer’ reformulation” of the legal standard (slip. op. 1), and had given unfairly short shrift to existing lower-court case law on Section 3 “vessel” status, which “offer[ed] substantial guidance for how objectively to determine whether a watercraft is practically capable of transport and thus qualifies as a § 3 vessel” (id. at 5). The dissent would have stated the objective test somewhat differently and then remanded for further fact-finding under it.

Any questions about this case should be directed to Dan Himmelfarb (+1 202 263 3035) in our Washington, DC office.

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