In the United States, state and federal courts operate on a dual track, with the difference that state courts are courts of “general jurisdiction” (hearing all cases not specifically reserved to federal courts), while federal courts are courts of “limited subject matter jurisdiction” (hearing cases involving “diversity of citizenship,” raising a “federal question,” or “sounding in admiralty”).
Admiralty and Maritime Subject Matter Jurisdiction
As it relates to admiralty and maritime subject matter jurisdiction, the U.S. Constitution states in Article III, Section 2 that “[t]he judicial Power shall extend. . . to all Cases of admiralty and maritime Jurisdiction…” The first statute defining the boundaries of admiralty jurisdiction was enacted in 1789 (known as the First Judiciary Act. (Chapter 20, section 9, 1 Stat. 73)). The current statutory grant of admiralty jurisdiction, however, can be found at 28 U.S.C. § 1333(1), which gives federal district courts original jurisdiction over “any civil case of admiralty or maritime jurisdiction, saving to suitors in all cases all other remedies to which they are otherwise entitled.” Some kinds of maritime cases—typically those involving in rem remedies against a vessel or cargo—are subject to the exclusive jurisdiction of the federal courts. Under the “savings to suitors” clause, on the other hand, state courts have concurrent jurisdiction over admiralty claims when a state court is competent to grant relief, which is in most instances where in personam jurisdiction may be had in a state court.
In many civil disputes, the application of choice of law principles as well as the jurisdiction in which the lawsuit is filed can have a significant impact on the outcome of a case. This is especially true where one of the parties conducts business in the maritime industry and the other does not. Some parties may prefer that state law be applied to the dispute because of a favorable state statute (such as a statute of limitations) or because the state’s courts have rendered decisions that support the parties’ position on a substantive issue. Others may prefer that federal law apply where it is more advantageous to a party given the facts of the case. Of course, some parties prefer to litigate in federal court rather than state court, or vice versa, for cost or other reasons.
There is a small subset of cases in which the question of whether maritime or admiralty law should be applied arises. One of the most significant decisions addressing that question is Norfolk Southern R. Co. v. James N. Kirby Pty, Ltd., 543 U.S. 14 (2004). In Kirby, the U.S. Supreme Court held that the liability of a rail carrier that transported over land cargo that was brought to the United States from Australia on board ships, through bills of lading calling for carriage from Australia to Huntsville, Alabama, via the Port of Savannah, Georgia, for damage to the cargo that occurred during that leg of the journey should be determined by applying maritime law, because the entire contract of carriage, and not just the ocean segment of it, constituted a maritime contract. More specifically, the court in Kirby determined that the default liability rule in the Carriage of Goods by Sea Act (“COGSA”) ($500 per package) applied to a train wreck that allegedly caused $1.5 million in damages. Continue reading “Analyzing Maritime (or Non-Maritime) Contracts and Practical Considerations for Litigation Strategy”