Barnes v. Sea Hawaii Rafting, LLC

Filing bankruptcy won’t divest a district court of maritime jurisdiction, and a bankruptcy court can’t adjudicate maritime lien rights.

- Rochelle Quick Take

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Case Type:
Business
Case Status:
Reversed and Remanded
Citation:
No. 16-15023 (9th Circuit, Mar 28,2018) Published
Tag(s):
Ruling:
1. The commencement of a bankruptcy case by the owner of a maritime vessel, and the plaintiff's failure to verify an amended complaint, do not divest the district court of its exclusive in rem jurisdiction over the vessel that was created by the commencement of a case for the enforcement of a maritime lien. 2. The automatic stay created by the bankruptcy of the owner of a maritime vessel does not affect the plaintiff's maritime lien. 3. A bankruptcy court has no authority to dispose of a maritime lien through application of bankruptcy law.
Procedural context:
An injured seaman, whose maritime lien claim for injuries and maintenance was dismissed by the district court, appealed the district court's rulings that left the plaintiff/appellant high-and-dry with respect to his maritime lien. The bankruptcy trustee for the owner of the vessel on which our intrepid seaman was injured moved to dismiss the appeal because the vessel had been sold free and clear of our seaman's maritime lien in the bankruptcy case.
Facts:
Call him Ishmael. Just kidding. Chad Barnes is a seaman who was injured when the M/V Tehani (referred to in the opinion as a "boat") exploded. The owner of the Tehani, Sea Hawaii Rafting, LLC (SHR), quit paying Barnes. Barnes sued SHR, its owner, and the boat, in rem, in federal district court. Shortly before trial, SHR filed bankruptcy. The district court concluded that the Tehani was an asset subject to (i) administration through SHR's bankruptcy and (ii) the automatic stay. The bankruptcy court lifted the stay to allow [!] the district court to evaluate Barnes' claims against SHR "but expressly prohibited the district court from issuing any ruling that would affect the maritime lien's status." [Ed. note -- I didn't make this up, thus the use of quotes.] The district court dismissed Barnes' claims against the Tehani, reasoning that the SHR bankruptcy deprived the district court of in rem jurisdiction against the Tehani. SHR's bankruptcy trustee then sold the Tehani, purportedly free and clear of Barne's maritime lien. The end result was that Barnes was left with an unsecured claim in the SHR bankruptcy case and a claim against SHR's owner. Barnes then appealed.
Judge(s):
Raymond C. Fisher, Richard A. Paez, and Jacqueline H. Nguyen

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