Supreme Court Casts Shade on Bright Line Test for Vessel Status

The Facts

Lozman was the owner of a 60' x 12' floating home, which the court described as a house-like plywood structure with French doors on three sides containing the various rooms that a house would contain sitting on top of an empty bilge space that kept it afloat. Lozman had the floating home towed to marinas on a handful of occasions, and the farthest it was towed was around 200 miles away. He had a dispute with the marina owned by the City of Riviera Beach, which unsuccessfully tried to evict him from the marina.

The City then brought a federal admiralty suit in rem against the floating home seeking to foreclose on a maritime lien for dockage fees and damages for trespass. Lozman represented himself and asked the district court to dismiss the case on the ground that it lacked admiralty jurisdiction. The court conducted summary proceedings and found that the floating home was a vessel and that it had admiralty jurisdiction. After a bench trial, the court awarded the City damages. The City bought the home at public auction and had it destroyed. The district court had previously ordered the city to post a $25,000 bond as security for Lozman's value in the vessel. Lozman appealed, but the Eleventh Circuit Court of Appeals affirmed, 649 F.3d 1259 (2011). The Eleventh Circuit held that the home was a vessel since it was capable of movement over water and the owner's subjective intent to remain moored indefinitely at a dock could not show to the contrary.

The Supreme Court granted certiorari in light of uncertainty among the circuits concerning application of the term "capable of being used as a means of transportation on water." The court of appeals had held that the home was capable of transportation because it could float, it could be towed, and its shore connections did not render it practically incapable of transportation or movement. In recognizing that it applied the term "capable" broadly, the court of appeals cited with approval a prior Fifth Circuit Court of Appeals case that had used expansive language. The Supreme Court concluded that the Eleventh Circuit's interpretation was too broad and that not every floating structure is a vessel.

The Supreme Court resorted to its own overly expansive language

to state the obvious, a wooden washtub, a plastic dishpan, [etc.] … are not vessels, even if they are artificial contrivances capable of floating, moving under tow, and incidentally carrying even a fair sized item or two when they do so. Rather the statute applies to an "artificial contrivance … capable of being used … as a means of transportation on water."

The court cited a dictionary definition of transportation, that transportation involves the conveyance of things or persons from one place to another. It went on to state that the definition must be applied in a practical, not a theoretical way. It then created the following new test:

Consequently, in our view a structure does not fall within the scope of this statutory phrase unless a reasonable observer, looking to the home's physical characteristics and activities, would consider it designed to a practical degree for carrying people or things over water.

The court analyzed the matter by considering that the fact that it floated was the only thing about it that might lend itself to a floating home being a vessel. It had no rudder or other steering mechanism, its hull was unraked, and it had a rectangular bottom 10 inches below the water. Additionally, it had no special capacity to generate or store electricity. Perhaps the most important factor in the court's view was that it simply did not look like a vessel. The court went so far as to attach a photograph of the floating home to its opinion, which is quite an unusual way for the court to make its point. (This lends itself to the query, are practitioners left to compare the photograph attached to the opinion with their own "vessels" when analyzing vessel status?)

The court went on to note that the lack of self-propulsion was not dispositive but that Lozman's home differed significantly from an ordinary houseboat in that it had no ability to propel itself, and the term "houseboat" typically means a motorized vessel. The court also seemed to attach importance to the fact that Lozman's home had only traveled over water a few times in several years. "In a word, we can find nothing about the home that could lead a reasonable observer to consider it designed to a practical degree for 'transportation on water.'"

Precedent

The court justified its result by stating that the bulk of precedent supported its conclusion and initially cited to Evansville & Bowling Green Packet Co. v. Chero Cola Bottling Co., 271 U.S. 19 (1926), which held that a wharf boat was not a vessel. The wharf boat floated next to a dock but was only used to transfer cargo from ship to dock and ship to ship, and it was connected to the dock with cables, utility lines, and a ramp. Although the wharf boat could be towed, and in fact was towed each winter to the harbor to avoid river ice, it was not used to carry freight from one place to another, nor did it encounter perils of navigation. Should Evansville have been decided differently had it been decided immediately after the Stewart decision?

Next, the court cited the Stewart decision as support, stating that the dredge in Stewart was more like a traditional vessel and had a captain and crew, navigational lights, ballast tanks, and a crew dining area. It was not like an ordinary vessel in that it could navigate only by manipulating its anchors and cables or by being towed. The court noted that, nonetheless, it did move over water every couple of hours. The Stewart court had pointed that dredges ordinarily served a waterborne transportation function because they performed their work by carrying machinery, equipment, and crew over water.

The underlying court in Lozman had pointed out that the definition of vessel in the Stewart case does not require that a watercraft be used primarily for transportation. Stewart had also noted that a watercraft need not be in motion to qualify as a vessel and that a structure may qualify as a vessel even if attached to the land or the ocean floor so long as it was not permanently attached.

Rationale

Interestingly, the Supreme Court goes to great extremes to justify its result. It uses language that is at best silly to describe such extremes for what could be or could not be a vessel and then it uses an oversimplification to make its point. The court seems to believe that by labeling the other approach as "anything that floats," it is easier to rule that the floating home is not a vessel. However, its justifications are weak. The court says there is little reason to classify floating homes as vessels and cites the fact that admiralty law provides special attachment proceedings lest a vessel avoids liability by sailing away and that certain statutes relate to perils of the sea. Certain other admiralty doctrines encourage vessel owners to engage in port-related commerce and state that maritime safety statutes subject vessels to U.S. Coast Guard inspections.

The court then implies that none of this would apply to Lozman's floating home. The fact of the matter is that floating homes can be towed away to escape liability just like a dumb barge. Mr. Lozman's floating home does face special sea dangers, the same as inland barges face when being towed. He does engage in port-related commerce by using marinas and other port facilities. Finally, since when does the law make a determination of vessel status based on whether it is an unnecessary and undesirable inspection burden on the Coast Guard?

The court further justifies its position by stating that state laws consistently treat floating homes as if they were land based. Those statutes, however, are mainly concerned with being able to tax the floating homes and make sure they do not pollute.

The court notes that any test for vessel status should not be based on subjective elements, such as the owner's intent related to the purpose of a vessel. Thus, the court introduces the concept of a so-called objective intent of the reasonable observer. The court suggests that the reasonable observer should look to the physical attributes and the behavior of the structure as objective manifestations of any relevant purpose. In recognizing that its approach is imperfect and not always determinative, the court noted that satisfaction of a design-based or purpose-related criterion is not always sufficient for application of the statutory word "vessel." Certain craft that might have characteristics and activities that would objectively evidence a waterborne transportation purpose or function may still be rendered a non-vessel by later physical alterations. Also, certain craft that might not be designed for transportation may actually be used for such. In short, the court felt that its reasonable observer test is better than the "anything that floats" test in borderline cases in which capacity to transport is in doubt.

The Dissent

Justice Sonia Sotomayor authored a harsh dissent, joined by Justice Anthony Kennedy. The dissent argues that the court created a novel and unnecessary reasonable observer reformulation of existing principles and then erred in its determination under the new standard that the subject floating house was not a vessel. Such opinion notes that Lozman's craft was not permanently moored and that it had not undergone physical alterations sufficient to take it out of vessel status. The reasonable observer test "[h]ad never appeared in any of our cases and the majority's use of it, despite its seemingly objective gloss, effectively (and erroneously) introduces a subjective component into the vessel-status inquiry."

Justice Sotomayor goes on to state that, "By importing windows, doors, room style, and other esthetic criteria into the § 3 analysis, the majority gives our vessel test an 'I know it when I see it' flavor." The dissent characterizes the majority's treatment of the craft's past voyages as "strange" and "confusing." In straining to find that Lozman's craft was a floating home and not a vessel, the majority calls into question the conclusions of numerous lower courts that have found houseboats that lacked self-propulsion to be § 3 vessels. Finally, the dissent concludes that the majority decision works to cause real damage to what has been a settled area of maritime law.

Conclusion

By stretching the facts and using simplistic examples, this majority decision has done more harm than good. There no longer is an objective application of the § 3 standard that can be applied in a predictable fashion. Many maritime industries rely heavily on clear and predictable standards for determining which craft are vessels. Thus, what had been a fairly bright-line approach for determining vessel status based on Stewart v. Dutra now has become fogged over by the creation of the "reasonable observer" test that seems to be based more on aesthetics than anything else. The Lozman decision also would seem to call into question many of the decisions that relate to special-purpose vessels. Seriously, if the reasonable observer viewed a picture of a jacked-up mobile offshore drilling unit, would such observer conclude it was a vessel?