Vatican Shrimp Co., Inc. v. Solis
| Decision Date | 17 March 1987 |
| Docket Number | 86-2601,Nos. 86-2412,86-2579,s. 86-2412 |
| Citation | 820 F.2d 674 |
| Parties | In the Matter of the Complaint of VATICAN SHRIMP COMPANY, INC., As Owner of the VESSEL VATICAN for Exoneration from or Limitation of Liability, Petitioner-Appellant, v. Gabriel SOLIS, Respondent-Appellee. In re VATICAN SHRIMP CO., INC., Petitioner. Gabriel SOLIS, Plaintiff-Appellee, v. VATICAN SHRIMP CO., INC., Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
June 23, 1987.
Keith H. Uhles, T. Mark Blakemore, Royston, Rayzor, Vickery & Williams, Brownsville, Tex., for appellant.
Barry R. Benton, Brownsville, Tex., for appellee.
On Petition for Writ of Madamus to the United States District Court for the Southern District of Texas.
Appeals from the United States District Court for the Southern District of Texas.
Before GARWOOD, JOLLY and HILL, Circuit Judges.
Vatican Shrimp Company, Inc. ("Vatican Shrimp"), the owner of the F/V VATICAN, petitioned a federal district court, under 46 U.S.C. Sec. 185, to limit its liability in a Jones Act case that had been filed and was pending in a Texas state court. The district court dismissed the section 185 petition as untimely, and Vatican Shrimp then removed the case to federal court. The district court remanded the case to state court and imposed Rule 11 sanctions against Vatican Shrimp on grounds that the court had already decided the limitation of liability issue upon which it based removal. We hold that the district court properly dismissed the section 185 petition and that the order of remand is not subject to our review. Finally, the district court erred in sanctioning Vatican Shrimp, and we reverse on that issue.
The appellee, Gabriel Solis, was a crew member on the F/V VATICAN when, in April 1983, an anchor line struck and injured his wrist, later treated for a contusion with no fracture. Approximately sixteen months after the accident, on October 12, 1984, Solis filed a Jones Act claim in Texas state court, alleging negligence and unseaworthiness on the part of the vessel and its owners and seeking $700,000 in damages. In its state court answer, Vatican Shrimp raised the defense of exoneration from or limitation of liability to the value of the F/V VATICAN and its pending freight, which Vatican Shrimp assessed at $200,331.83. On April 17, 1986, one and one-half years after the suit was filed, Vatican Shrimp petitioned the federal district court for limitation of liability under 46 U.S.C. Sec. 185 1 and for restraint of the state court trial. The district court temporarily restrained the state court proceedings, but it later dismissed Vatican Shrimp's section 185 petition as untimely. Vatican Shrimp appealed.
On May 15, 1986, Vatican Shrimp removed the case from state to federal court under 28 U.S.C. Sec. 1441. Because it had previously ruled that Vatican Shrimp could not limit its liability in the federal courts, the district court, on the plaintiff's motion, entered an order remanding the case to state court. In the same order, the district court sanctioned Vatican Shrimp under Fed.R.Civ.P. 11, for $750 in attorney's fees. Vatican Shrimp then filed a petition for writ of mandamus challenging the order of remand and also appealed the Rule 11 sanctions.
Vatican Shrimp's appeal of the dismissal of its section 185 petition, its petition for writ of mandamus regarding the district court's remand of the case to state court, and its challenge to the district court's imposition of the Rule 11 sanctions have been consolidated for the purposes of this appeal.
This court has not previously addressed the first question that Vatican Shrimp raises that is, under what circumstances does a federal court have jurisdiction to adjudicate a contested claim for limitation of liability when the shipowner has pled limitation defensively in a properly filed state court answer. To date, this question has only been addressed by the Sixth Circuit which held that defensive pleading in a state court answer alone was not an adequate procedural method for attaining federal adjudication of the limitation claim. In the Sixth Circuit, a shipowner, who faces litigation in state court, "acts at his peril" if he does not file a petition for limitation in a federal court under 46 U.S.C. Sec. 185 within six months of receiving written notice of the claim. Cincinnati Gas & Elec. Co. v. Abel, 533 F.2d 1001, 1005 (6th Cir.1976).
We hold that on the facts of the case now before us, Vatican Shrimp's section 185 petition was untimely, and Vatican Shrimp's defensive pleading in the state court answer did not provide the federal court with jurisdiction to hear the shipowner's limitation claim.
In reaching our holding, in addition to the case law, we have reviewed the background of the Limitation of Liability Act of 1851, 46 U.S.C. Secs. 181-96 (1982) (amended 1936) ("the Act"). Congress passed the Act in 1851 in an effort to provide American shipowners with benefits equal to those of their foreign competitors. The Act was primarily patterned after the English limitation act, 26 Geo. 3, ch. 86 (1786). Under the Act, a vessel owner, American or foreign, can restrict its liability, resulting from any occurrence for which the vessel is liable, to the value of the vessel and its pending freight. See Volk and Cobbs, Limitation of Liability, 51 Tul.L.Rev. 953 (1977) [hereinafter cited as Volk & Cobbs]; see also G. Gilmore & C. Black, The Law of Admiralty Secs. 10-1 to -3 (1975) [hereinafter cited as Gilmore & Black].
The Act provides shipowners with two procedural methods for limiting their liability. Signal Oil & Gas Co. v. Barge W-701, 654 F.2d 1164, 1172 (5th Cir.1981). Under 46 U.S.C. Sec. 185, a shipowner may file a limitation petition in federal district court. Congress amended this section in 1936 by adding a time bar that requires a vessel owner to file its petition in federal court within six months of receiving "written notice of claim."
The second method has its source in 46 U.S.C. Sec. 183, 2 which, unlike section 185, imposes no time bar. Section 183, which has remained virtually unchanged since its enactment in 1851, sets forth generally the Act's substantive provisions that permit a vessel owner, in the absence of privity or knowledge, to limit liability to the owner's interest in the vessel and its pending freight. A shipowner can "set up [limitation] as a defense" by pleading the general substantive provisions of section 183 in an answer filed in any court, including a state court. Langnes v. Green, 282 U.S. 531, 543, 51 S.Ct. 243, 247-48, 75 L.Ed.2d 520 (1931). However, once the shipowner's right to limit liability is contested, only a federal court may exercise jurisdiction of the matter because the cause becomes cognizable only in admiralty. Id.
In the "Green Cases," decided before the six-month filing period was added to section 185, the Supreme Court established the proper procedure that a shipowner should follow to limit liability in a single claimant case that is originally filed in state court. Id.; Ex Parte Green, 286 U.S. 437, 52 S.Ct. 602, 76 L.Ed.2d 1212 (1932). In Langnes v. Green, a crew member sued the vessel owner in state court to recover for personal injuries. The parties stipulated to the value of the vessel, and the vessel owner's right to limit liability was not contested. Nevertheless, two days before the state trial was scheduled to begin, the vessel owner petitioned a federal district court to limit his liability under section 185. The district court enjoined the state court proceedings and tried the case on the merits. The Supreme Court, addressing the issue of the crew member's right to pursue a common law remedy in state court, ordered the district court to remand the case, holding that under the saving to suitors clause, 28 U.S.C. Sec. 1333(1), the state court had jurisdiction to decide the crew member's claim. The Court made it clear, however, that if a vessel owner's right to limit liability were contested (which it had not been), a federal court would have "exclusive cognizance of such a question." Langnes, 282 U.S. at 543, 51 S.Ct. at 248. As a precautionary measure, the Court instructed the district court to retain the section 185 petition in the event that limited liability should become a contested issue in the state court action. Id. at 541-43, 51 S.Ct. at 247-48.
Following remand to the state court, the crew member did, in fact, challenge the vessel owner's right to limit liability. Ex Parte Green, 286 U.S. at 440, 52 S.Ct. at 603. The district court once again granted the vessel owner's motion to restrain the state court proceedings. On appeal, the Supreme Court held that because the owner's right to limited liability had been put into issue, "the cause became cognizable only in admiralty," and the district court, having retained the vessel owner's section 185 petition, was "authorized to resume jurisdiction and dispose of the whole case." Id.
We apply the procedure prescribed in Langnes but modify it to reflect the 1936 amendment to section 185. 3 That is, we recognize that shipowners may choose to set up the defense of limitation of liability under either method: by pleading the substantive provisions of section 183 in a properly filed answer in any court, or by filing a section 185 petition in a federal district court. However, if a shipowner is sued in state court, the owner's failure to file a section 185 petition in a federal district court within six months after receiving written notice of the claim will result in forfeiture of the right to limit liability should the claimant contest the limitation defense. 4 This is so because solely filing in the state court an answer in which limitation is pled obviously does not provide a federal court with jurisdiction to act. In contrast, defensive pleading under section 183 in a federal...
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