SALVOR’S ATTEMPT TO ESTABLISH STATE COURT REMEDY MEETS WITH LIMITED SUCCESS

For many years, salvors have argued that state courts should be entitled to hear and decide salvage cases, and that federal courts should not be entitled to exclusive jurisdiction. It has been asserted that state courts are also competent to hear and decide many salvage cases, and especially those cases in which the only defendant is the owner of the salvaged vessel (sued personally or in personam). While it has been conceded that a salvage suit brought against the salvaged vessel itself in rem, to foreclose the salvor’s maritime lien, remains within the exclusive jurisdiction of the federal courts, it has also been asserted that federal and state courts should both have jurisdiction to decide salvage cases brought only against the owner of the salvaged vessel, in personam. In Phillips v. Sea Tow, 276 Ga. 352 (2003), the Supreme Court of Georgia was recently required to decide this issue. The Phillips decision marks the “high water mark” in efforts to establish a marine salvage remedy in state court.

The Phillips case arose from the May 1998 salvage of a 25’ Sport Fishing boat owned by Robert Phillips. The vessel had capsized in the Atlantic Ocean several miles off the coast of Georgia and was salvaged by Sea Tow/Sea Spill of Savannah several days later. For reasons that are not explained in the decision, Sea Tow pursued its $15,000 salvage claim against Mr. Phillips in state, rather than federal court (perhaps in an effort to obtain a jury trial). Attorneys for Mr. Phillips filed a Motion to Dismiss, asserting that salvage claims are within the exclusive jurisdiction of the federal courts, and that the case should be dismissed, since state courts do not have jurisdiction to hear such cases. The trial court granted the Motion and dismissed the case.

The case was then appealed to the Georgia Court of Appeals. The Court of Appeals reversed the trial court’s decision [on different grounds], and held that Sea Tow’s claim could be pursued in state court, since it was “essentially a common law claim for quantum meruit for [the value of] services rendered.” This decision was appealed by the vessel owner to the Supreme Court of Georgia, which had to decide whether the in personam claim against Mr. Phillips could proceed (1) as a salvage claim in state court under admiralty law; or (2) as a claim for quantum meruit under state common law; or (3) should not proceed in state court at all.

All of the parties agreed that in rem salvage claims (brought against the vessel itself) fall exclusively under the admiralty jurisdiction of the federal courts, and that such in rem cases may not be brought in state court. However, the parties disagreed over whether a claim brought only against the vessel owner, in personam, could be brought in state court. Sea Tow argued that the “saving to suitors clause” found in the Judiciary Act of 1789 (28 U.S.C. §1333(1)), gave state courts concurrent jurisdiction with federal courts to hear all in personam claims relating to maritime matters, including salvage claims. The “saving to suitors clause” granted federal courts the power to hear “all cases of admiralty and maritime jurisdiction . . . saving to suitors, in all cases, the right of a common law remedy, where the common law is competent to give it.” Mr. Phillips opposed Sea Tow’s argument, by asserting that marine salvage is a unique remedy to admiralty law. He argued that marine salvage was unheard of under the common law, and therefore cannot be a common law remedy that was preserved for the state courts by the “saving to suitors clause.” Mr. Phillips argued that it didn’t matter whether a salvage claim was asserted against the vessel in rem or against the owner, in personam, it was not a remedy that was preserved for state courts.

The Supreme Court of Georgia acknowledged that both sides had presented strong and well-supported arguments. However, the Court determined that “marine salvage is unique to admiralty law and of a character that was wholly unknown to the common law.” The Court employed a simple analogy to demonstrate its holding. It recognized that if a house was on fire and property was saved from the house by a courageous volunteer, state common law would not provide any remuneration to the volunteer in the form of salvage. On the other hand, the Court recognized that if the same circumstances had occurred at sea, marine salvage law would have granted the successful volunteer a generous salvage reward. The Court therefore held that marine salvage is not a remedy that was recognized by Georgia common law - regardless of whether the claim was asserted against the property itself in rem or against the owner of the property in personam. The Court held that the remedy of marine salvage was not preserved for state courts by the “saving to suitors clause” and that marine salvage claims may not be pursued in Georgia state courts, regardless of whether they are pursued in rem or in personam.

However, the Supreme Court of Georgia did not leave Sea Tow without a remedy. The court recognized that the same events that might support a marine salvage claim in federal court, may also support a claim for quantum meruit in state court. Quantum meruit refers to an implied contract that is inferred from the circumstances and the intention of the parties. When a party renders services without being requested to do so, under circumstances indicating that the party expects to be paid, and the other party accepts the benefit of those services, an implied contract is formed. Under considerations of equity and the doctrine of unjust enrichment, the party benefiting by the services must pay the fair value of those services to the recipient.

After re-examining Sea Tow’s Complaint, the Court determined that it also stated a claim for quantum meruit under state law. Sea Tow could therefore pursue its claim under a theory of quantum meruit in order to recover from the vessel owner the value of its services. The Court noted that upon trial of the case, the jury could consider the peril of the service Sea Tow provided and the value of the property saved in determining the value of the service Mr. Phillips received. While these factors appear to be closely akin to the methodology utilized in determining the amount of a salvage reward, the Court specifically made it clear that Sea Tow could not recover a salvage bounty or reward in the same manner that it could under salvage law. Therefore, Sea Tow was entitled to a jury trial in state court, and may argue at trial the value of its services including the peril involved and the value of the property it saved. However, Sea Tow may not assert that it is entitled to an equitable uplift or bounty for its salvage services in the same manner that it could have if its salvage case had been pursued in federal court.

The salvor in the Phillips case came very close to establishing the right to an in personam salvage remedy in state court. While this attempt to expand the frontiers of salvage law into state court was not successful, it did reaffirm a salvor’s right to pursue the common law remedy of quantum meruit in the event it is ever necessary to pursue such a claim against the owner in state court. While the state court remedy may not be as lucrative as a comparable salvage reward in federal court, the Phillip’s case reaffirmed a salvor’s option to proceed in state court to recover damages based upon quantum meruit.

Stephen F. White is a maritime attorney with the law firm of Wright, Constable & Skeen, LLP in Baltimore, Maryland. You may contact Mr. White at 100 N. Charles Street, 16th Floor, Baltimore, MD 21201-3812. Ph: (410) 659-1304 Fax: (410) 659-1350

© 2003 Stephen F. White