Legal Issues Related to the Allision of the MV Dali with the Francis Scott Key Bridge

The Dali’s Allision

The Events

On March 26, shortly before 1:30 a.m. local time, a large container ship, the MV Dali, lost propulsion and electric power and struck the Francis Scott Bridge, which crosses the Patapsco River at the entry to the Baltimore Harbor. The force of the allision with a pier supporting the major truss caused the bridge to fail catastrophically. Because the onboard pilot was able to issue a distress call prior to the allision, bridge traffic was stopped. Six construction workers doing pothole repairs on the bridge were not able to be notified and died, although two others survived.

Videos of the event and early reporting show that the vessel lost all power, including propulsion and electricity, before the event, when she was under her own power (the tugs that assisted departure from the quay having been dismissed). Apparently, the emergency generators were started, which resulted in a short-term restoration of electric power (the ship’s lights came back on for a very brief time, but then went dark again), but the main engine could not be restarted. The pilot took reasonable response measures—including ordering the anchor to be dropped and ordering the rudder to be moved hard left—but without propulsion the vessel was carried by current and momentum into the bridge pier.

The root cause for the loss of power has not been finally determined at this time. The NTSB is investigating the incident under a memorandum of understanding with the Coast Guard, and (as noted below) reports indicate counsel for the owner/operator are also investigating, as are counsel (and likely experts) retained by claimants.

Some initial reports asserted a potential cause of contaminated fuel. Contaminated fuel is a larger issue in marine transport. Most large vessels today operate on marine diesel engines designed to burn marine fuel oil or heavy fuel oil, also known as bunker fuel oil or Bunker C. Bunker C is literally the bottom of the oil barrel—it is tar-like in consistency and must be heated and maintained at a warm temperature in order to flow. There have been reports of unscrupulous suppliers “extending” the amount of Bunker C by adding waste lubricating or other oils, water, and other materials. While marine engines are generally equipped with filters, and operators generally test fuel when it is being loaded, the presence of contaminants, waxes, and other materials can clog the engine or fuel lines and prevent operation. Reports indicate that the Dali was last bunkered in Shanghai and Korea before transiting the Panama Canal on the inbound voyage. She also called at New York and Norfolk prior to Baltimore. It is unclear whether additional bunkering occurred in New York or Norfolk. Reports say no fuel was lifted in Baltimore.

While there may have been some basis to investigate the quality of the bunker fuel, the NTSB, in the ordinary course of the investigation, also reviews engine controls, power systems, and other equipment and crew actions, and there are reasons to doubt that contaminated fuel was the root cause. Generally, large vessels do not burn Bunker C in particular in US ports because of environmental regulations. Bunker C tends to contain significant amounts of sulfur and other pollutants, and to cause significant emissions. To avoid those environmental issues, vessels will typically burn ordinary diesel fuel (No. 2 oil) while in port. Reports do indicate that the NTSB investigation reviewed fuel records and concluded that contaminated fuel was not an issue.

Rather, the NTSB has noted in preliminary reports:

[d]uring the accident voyage, electrical breakers HR1 and LR1 unexpectedly opened when the vessel was three ship lengths from the Key Bridge, causing the first blackout (loss of electrical power) to all shipboard lighting and most equipment. While examining and testing the vessel’s electrical power distribution system and control circuitry, NTSB investigators (in coordination with vessel crew and parties to the investigation) noted an interruption in the control circuit for HR1’s undervoltage release.

The NTSB removed certain components of the electrical system and portions of the related wiring, as well as interviewed crew members. The NTSB is continuing its review. The failure of the power system while in Baltimore would be consistent with reports that an inspection in Singapore identified issues with engine controls in 2023. Those were not significant enough to cause the vessel to be held, and reports are that the issues were repaired and resolved. NTSB reports also indicate that there were two separate power failures while the vessel was docked in Baltimore. Those were apparently caused by issues unrelated to the electrical system itself: in one instance, the generator’s exhaust stack was blocked, and in the other, there was insufficient fuel pressure.

As of the time of this report, major portions of the bridge wreckage have been removed, the main channel has been reopened to vessel traffic, and the Dali has been moved to Norfolk for repairs. Most of the original crew have been allowed to return home, and a replacement crew operated the vessel during its voyage to Norfolk.

As discussed further below, the vessel’s owner and operator have brought an action to limit their liability. As part of that action, the United States, on September 18, 2024, filed a claim asserting that the statutory basis for limitation has not been met, and alleging further details, apparently based on the NTSB and FBI investigations. The Department of Justice claim alleges:

• The Dali’s engine created heavy vibrations, which adversely affected the step-down transformer and its related circuit breakers. To address the vibrations, the vessel had installed braces (which had themselves cracked and been repaired), and sought to further isolate the transformer by wedging a jury-rigged device from a cargo hook.As the Dali approached the bridge, the circuit breaker on the step-down transformer tripped, cutting all power to the 440-volt electrical panel, cutting all lights, stopping the main engine, and cutting the ability to steer.
• The Dali was equipped to automatically transfer the generator output to a second transformer, but that equipment had been set to “manual,” and thus the transfer could only occur if the crew located the fault, and switched the transformer.
• Applicable regulations would require that with the loss of power, the ship’s emergency generators should have started within 45 seconds, but for reasons not clear, it took additional time for the emergency generators to start. They did start, restoring power to the helm, but the main engine did not restart.
• The emergency generators are fueled by diesel fuel. The US claim alleges that rather than using standard fuel pumps to supply the generators, the Dali had been set to use smaller “flushing pumps,” designed to flush the fuel line between switching fuels, and not for ordinary operation. As a result of the initial power failure, the flushing pumps had been turned off, and did not automatically restart. The generators were thus being supplied only through emergency pneumatic pumps, which could not maintain fuel pressure. As a result, the emergency generators shut down, again blacking out the lights and preventing operation of the helm.
• Without propulsion and lacking any ability to steer, the pilot ordered the port anchor dropped, but the anchor was not set for emergency use and apparently crew were required to take steps to drop the anchor. By the time that occurred, the Dali was within one-half a ship’s length of the bridge, and the anchor was not effective. The pilot also sought to use the bow thrusters, but he was told they were not available.

The US claim alleges that the problems were caused by decisions by the owner and operator to save money, and resulted in a vessel that was not seaworthy and a crew that was not properly trained.

Legal Status

Under US law (consistent with international conventions), a vessel owner/operator is entitled to limit liability to the value of the ship post-event, and the revenue to be received from cargo. On April 1, Grace and Synergy brought a limitation of liability action in federal court in Baltimore, alleging that the value of the vessel would not exceed $90 million, but that is reduced by expected salvage costs of $19.5 million and repair costs of $28 million. To that is added pending freight of $1.17 million. Thus, the owner and operator propose that the stipulated value under the Limitation of Liability Act would be $43.67 million. The Limitation of Liability Act issues are discussed further below.

The City of Baltimore has filed claims asserting that the vessel was unseaworthy and that the crew was not properly trained, and the State of Maryland has retained counsel to file its claims. A local business has filed a class action claim, asserting that the collapse of the bridge caused significant economic injury to local businesses in Baltimore. The families of those killed or injured in the allision are also likely to file suit. Separately, federal authorities opened a criminal investigation into the events, and as noted above, have now filed a claim, alleging more than $100 million in damages and seeking punitive damages. The ability of claimants to proceed at law rather than in admiralty is discussed further below.

The cost to replace the bridge, liability for the lost workers, and other damages are likely to total billions of dollars. The Dali has insurance, but its liability will be controlled under the Limitation of Liability Act. Reports indicate that the State of Maryland has insurance coverage on the bridge for some $300 million, and President Biden has indicated his intent to request federal funding to rebuild the bridge.

The action is likely to take significant time to resolve—there will be interventions, motion practice, and discovery of relevant facts, including as to causation and knowledge of cause, before any substantive decision. Technically, the court will determine only whether the owner/operator can limit liability. Any determination of damages would be tried separately.

The Limitation of Liability Act

While generally under maritime law, the vessel and its owner would be liable for damages arising during the voyage, as noted above, the Dali’s owner and the ship charterer/operator have filed an action under the Limitation of Liability Act (the Act). If the action were successful, their liability for any damages would be limited to the value of the vessel and any freight owed, which the owner and operator claim is a net of some $43 million. Any claimants or potential claimants must intervene in the limitation action in order to have a role in determining whether the vessel or its owner/operator was at fault (limitation of liability is contingent on finding that the vessel and its owner/operator were not negligent or otherwise at fault). A vessel striking a fixed facility is presumed to be at fault, but that presumption is rebuttable. The petition filed by Grace and Synergy alleges that the allision was without fault or negligence by the vessel or the owner/operator, or, in the alternative, if there was fault or negligence, the owner/operator had no knowledge of the underlying fault.

History of the Act

The Act was first passed in 1851 in an effort to bring US maritime law into line with more general admiralty law and thereby to protect US shipowners from risks that were difficult to predict or counter, including perils of the sea (storms) and piracy. At the time of initial passage, because of limitations on communications, the vessel’s actions during any voyage were under the control of the captain and crew, and the owners had only limited, if any, ability to direct activities, and Congress sought to foster investment in shipping by limiting the risk of owners for actions they could not control.

The apparent need for the Act was later described by the Supreme Court in the first case actually brought under it. In Norwich Co. v. Wright, Justice Bradley briefly described the two steamship fires that had resulted in lost lives and cargo and had ultimately led to the Act’s passage. The first was the fire on board the steamship Lexington, which sank while voyaging from New York to Boston on January 13, 1840, killing 139 of the 143 passengers on board. Lacking any basis to limit liability, the shipowners were found liable for the entire value of the cargo even though the fault attributed to them resulted not from the company’s own actions, but from the conduct of a separate carrier, with whom they had contracted to operate the ship. The second incident leading to the passage of the Act occurred in 1849, when the steamship Henry Clay, which had been loaded with cargo and was still docked in New York, caught fire and burned to the waterline. Again, the cargo interests sued the vessel owner and obtained full liability for the shipowners with no evidence of fault.

Perhaps the most famous application of the Act was its effect limiting the damages owed by the White Star Line as a result of the sinking of the Titanic in 1912. Following the sinking and resulting loss of life and cargo, the owners filed an action in the US District Court for the Southern District of New York in limitation and gave notices. The district court initially ruled that British law, not US law, would apply (resulting in a higher limitation amount), but the US Supreme Court reversed and required application of US law. The claims for loss of life amounted to some $22 million, but because the vessel was a total loss, the White Star Line claimed a limitation of only $91,805.54. Writing for the Court, Justice Holmes held that law of the forum, not of the flag state, would apply, and as a result, families of the lost passengers and crew recovered only very limited amounts.

While the Act has been amended several times and it has been recurrently argued that the Act is outdated given modern communications, Congress has not shown any inclination to amend or revise the limitation, and the Act is consistent with international standards.

Substantive Requirements

In order to obtain a determination that liability is limited, the owners must prove that they did not have knowledge of or privity with the negligence or other cause of the incident. Put differently, the Act is focused on limiting the liability of the owner or operator for the actions of the captain and crew, but the vessel itself must have been seaworthy and properly equipped, and the owner/operator must not have had knowledge of any underlying negligence. To determine an owner’s entitlement to limit its damages, a court must engage in a two-part analysis. The court must determine (1) whether negligence or unseaworthiness caused the accident, and (2) whether the shipowner was privy to, or had knowledge of, the causative agent.

In the case of the Dali, because the vessel struck a stationary object, the vessel is presumed to be at fault, that is, it is presumed that a navigation error or other fault caused the vessel to strike the stationary object. Generally, “[t]his presumption operates to shift the burden of proof—both the burden of producing evidence and the burden of persuasion—onto the moving ship.” Thus, the owners and operator must focus on whether the vessel was seaworthy, and whether they had privity with or knowledge of the fault or issue.

Privity or knowledge is not tantamount to actual knowledge or direct causation. All that is needed to deny limitation is that the shipowner, by prior action or inaction set[s] into motion a chain of circumstances which may be a contributing cause even though not the immediate or proximate cause of a casualty. . . .

The test of privity or knowledge is objective, not subjective, i.e., the owner and operator are deemed to know what they objectively should have known or would have learned from reasonable or prudent inspection.

In the case of Dali’s allision with the Francis Scott Key Bridge, the NTSB’s investigation and its reports are likely to carry significant weight in determining the underlying cause. As noted above, the preliminary reports establish that there was an electrical fault (apparently an undercurrent) that caused the circuit breaker to open, resulting in the initial blackout. While the emergency generators started, the main engine could not be restarted, and thus the Dali lacked any propulsion power and could not be steered away from the bridge pier. The underlying cause of the electrical fault remains under investigation, but the US claim alleges underlying facts that suggest a lack of proper maintenance in light of the effects of vibration, and a failure by the crew to have properly set systems to allow automatic responses to loss of power, and to have proper equipment in place to maintain fuel to emergency generators.

On October 24, 2024, the Department of Justice issued a press release announcing that Grace Ocean Private and Synergy Marine have agreed in settlement to pay $101,980,000 to resolve the US claim described above. This payment is more than twice the amount in limitation alleged in the Grace/Synergy action, and is just less than the US claim of $103,0878,056. The DOJ press release makes clear that the settlement resolves only the US claim, and not the claim of the State of Maryland or the other claims described above. The release is also silent on the issue of whether Grace and Synergy would now waive the limitation of liability as to other claims.

Procedural Issues

As described above, the owners/operator of the Dali have filed the action in limitation and given notice. Parties with claims must intervene in the action and the court will proceed under admiralty rules.

Functionally, claimants bear the burden of initially going forward to show unseaworthiness or negligence causing the incident. If that showing is made, the owners then bear the burden of proof to establish lack of privity or knowledge. Because the event was an allision with a stationary object, under the Oregon Rule, once the claimants establish the fact of the allision (which is briefly stated in the initial filing), the burden will shift to the owners/operator to demonstrate the vessel was seaworthy and/or that they had no privity with or knowledge of any fault.

Because the limitation action is heard in admiralty, the issues will be tried before the court. Discovery and motions practice will proceed in the ordinary course, and the NTSB investigation will proceed in parallel and is likely to have significant impact on findings of fact.

It is typical in limitation actions under the Act that in order to protect its exclusive jurisdiction to determine any limitation, the district court will issue a stay to prevent any claimant from bringing any other proceeding to establish liability or seeking damages. However, the courts have also allowed claimants to request a lifting of the stay where the claimants stipulate that (1) they would not enforce a judgment beyond the alleged value of the vessel and her pending freight unless and until the district court established a higher value or denied the owner’s right to limitation and (2) none of their claims have priority over any other and that they would be paid from the limitation fund on a pro rata basis; or where the claim(s) do not exceed the claimed value in limitation; or there is a single claimant.

The Saving to Suitors Clause

While generally federal courts have exclusive jurisdiction over claims in admiralty, including maritime torts, there is a significant exception under the Saving to Suitors Clause in 28 U.S.C. § 1331, implementing the constitutional grant of admiralty jurisdiction. While Article III, Section 2, of the Constitution has “extend[ed]” federal jurisdiction to “all Cases of admiralty and maritime Jurisdiction” (emphasis added) in implementing the clause from the time of the First Judiciary Act and since, Congress excepted cases where the common law already granted a remedy. Section 1331(1) provides the federal courts with 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.”

The Supreme Court discussed the Saving to Suitors Clause at length in the Lewis v. Lewis & Clark Marine, Inc. case, where Justice O’Connor stated:

What the drafters of the Judiciary Act intended in creating the saving to suitors clause is not entirely clear and has been the subject of some debate. . . . This Court theorized that the saving to suitors clause was “inserted, probably, from abundant caution, lest the exclusive terms in which the power is conferred on the District Courts might be deemed to have taken away the concurrent remedy which had before existed. This leaves the concurrent power where it stood at common law.”

The Court’s view is clear that while the clause preserves state court jurisdiction over some claims that would otherwise lie in admiralty, the states cannot change or add to the scope of remedies:

The “right of a common law remedy,” so saved to suitors, does not . . . include attempted changes by the States in the substantive admiralty law, but it does include all means other than proceedings in admiralty which may be employed to enforce the right or to redress the injury involved. It includes remedies in pais, as well as proceedings in court; judicial remedies conferred by statute, as well as those existing at the common law; remedies in equity, as well as those enforceable in a court of law.

Because the claims by the state, the city, and private plaintiffs for property damage and loss or life/personal injury would all appear to be the types of claims that fall within the Saving to Suitors Clause, it is likely that those claimants could seek to bring those claims in state court (and those claims might be subject to diversity jurisdiction)—as long as the claimants stipulated that they were subject to the final determination of any limitation on liability and that any distribution from the limited fund would be pro rata. Bringing the claims in the state forum would preserve the claimants’ right to a jury trial.

Comments

The increasing size of commercial vessels has raised significant issues about port navigation and the impact of accidents or events.

• The collapse of the Francis Scott Key Bridge caused the closure of the Port of Baltimore until the debris and the vessel could be cleared and the navigation channel reopened. Full navigation has been restored in the main channel as debris was cleared. In the interim, ships that were in port could not depart, and those included several transport vessels that are part of the US emergency maritime supply fleet for US armed forces if they were deployed abroad. Port operations were suspended, resulting in job losses or layoffs for longshoremen and related workers. Trade that would otherwise route through Baltimore was shifted to other ports, including cruise departures and some freight, but Baltimore was a major hub for car transport, and it is not clear that other East Coast ports have the underlying infrastructure to handle that traffic, and to handle coal traffic.
• The collapse of the bridge has also focused attention on the susceptibility of other bridges to similar events. A trade group report in 2018 described the issues and the significant frequency of such events. Many of the major bridges in port areas are of earlier design and are at risk of single-point failures. Since the Skyway Bridge collapsed in 1980 after being struck by a freighter, bridge designs have been updated to include greater protection, usually in the form of fenders, larger islands around piers, or other structural improvements.
• Such events are unusual but foreseeable. Even before the Francis Scott Key Bridge event in March, earlier in 2024 a freighter cut a major bridge in Guangzhou, China, and a bridge in Argentina was struck (though it did not collapse).
• Press reports have identified a number of US bridges that predate updated standards and have limited protection against allision. Even in those instances where fenders or other protections have been installed, vessel size has been increasing, which results in increased force in the event of an allision. The Dali is a Neo-Panamax and is not among the largest container ships. The increasing use of large vessels has (as the Maritime Law Committee reported to the Section in 2019) increased the risk that channels can be blocked or other damage can occur, even if the frequency of the events has not increased. Even if an allision or collision does not occur, the grounding of a vessel can block a channel for an extended time period. For example, in 2021, the Suez Canal was blocked for six days by the grounding of a container ship, MV Ever Given, which had successfully avoided a collision, but only by turning into the canal bank and becoming grounded.
• Maritime traffic is an essential part of the global supply chain, and the integrated consideration of port safety, traffic, cost, and risk to other infrastructure has now come under increased scrutiny. In this event, as required by local regulations, the Dali had a local pilot on board. Had the tugs remained with the vessel until passage under the bridge, the event could have been prevented, but requiring tugs and pilots adds to port costs.
• The effort by the owner/operators of the Dali to seek limitation on their liability is appropriate under existing law, but is likely to again raise questions about the effect of statutory limitation, where, as here, the damages exceed the statutory amount. Of course, the issue may be moot, if the owner/operators are denied the limitation. If limitation is granted, both the owners and the insurers will benefit from the limitation and the cost of replacement will fall on taxpayers.