Complaint of Dammers & Vanderheide & Scheepvaart Maats Christina B.V.

• Decision Date: 06 January 1988
• Docket Number: No. 292,D,292
• Citation: 836 F.2d 750
• Parties: In the Matter of the Complaint of DAMMERS & VANDERHEIDE & SCHEEPVAART MAATS CHRISTINA B.V., Petitioners, as Owners of the M/V CHRISTINA for Exoneration From or Limitation of Liability. DAMMERS & VANDERHEIDE & SCHEEPVAART MAATS CHRISTINA B.V., Petitioners- Appellants, v. Fran CORONA and Ana Corona, Respondents-Appellees. ocket 87-7396.
• Court: U.S. Court of Appeals — Second Circuit

Page 750

836 F.2d 750

1988 A.M.C. 1674

In the Matter of the Complaint of DAMMERS & VANDERHEIDE & SCHEEPVAART MAATS CHRISTINA B.V., Petitioners, as Owners of the M/V CHRISTINA for Exoneration From or Limitation of Liability DAMMERS & VANDERHEIDE & SCHEEPVAART MAATS CHRISTINA B.V. Petitioners- Appellants, v. Fran CORONA and Ana Corona, Respondents-Appellees.

No. 292, Docket 87-7396.

United States Court of Appeals Second Circuit.

Argued Sept. 28, 1987.

Decided Jan. 6, 1988.

Philip S. LaPenta, New York City (Gulmi & LaPenta, New York City, of counsel), for petitioners-appellants.

Jorden Pederson, Brooklyn, N.Y. (George J. Duffy, Brooklyn, N.Y., of counsel), for respondents-appellees.

Before VAN GRAAFEILAND, MESKILL and NEWMAN, Circuit Judges.

MESKILL, Circuit Judge:

In this appeal, petitioners-appellants Dammers & Vanderheide and Scheepvaart Maats Christina B.V., two Dutch corporations, challenge an order of the United States District Court for the Southern District of New York, Ward, J., that vacated portions of its earlier stay and allowed respondents-appellees Fran and Ana Corona to proceed with a state court tort action against the appellants. The tort action was instituted after Fran Corona was injured while working as a longshoreman aboard the M.V. CHRISTINA, a vessel owned and operated by the appellants. ¹ The appellants thereafter petitioned the district court for exoneration from or limitation of liability pursuant to the Limitation of Shipowners' Liability Act (Act), 46 U.S.C. Sec. 181 et seq. (1982). In accordance with the provisions of the Act, the district court enjoined the Coronas from pursuing their state court action. However, after the Coronas filed a stipulation conceding certain rights of the appellants and recognizing certain aspects of the district court's jurisdiction over the matter, the district court vacated that portion of its earlier order that had restrained the appellees' state litigation. See In re Dammers & Vanderheide, 660 F.Supp. 153 (S.D.N.Y.1987). It is from this decision that appellants now appeal to this Court. We affirm.

BACKGROUND

On June 18, 1984, Fran Corona was working as a stevedore aboard the CHRISTINA while the vessel was being unloaded at a pier in New York City's East River. During the unloading operation, a wire rope on one of the CHRISTINA's deck cranes snapped and a hatch cover fell on top of Corona. He suffered injuries that ultimately resulted in the amputation of an arm and a leg.

Fran Corona and his wife, Ana, subsequently initiated a lawsuit against the appellants in the New York Supreme Court for New York County. Fran Corona sought $25 million for his injuries and his wife sought $10 million for loss of consortium. Appellants then instituted this action in the United States District Court for the Southern District of New York seeking exoneration from or limitation of liability pursuant to the terms of the Act. The Act provides that the liability of a shipowner incurred as a result of a maritime accident "without the privity or knowledge of such owner ... shall not ... exceed the amount or value of the interest of such owner in such vessel, and her freight then pending." 46 U.S.C. Sec. 183(a). To secure the protection of the Act, a shipowner must file with the district court security equal to the value of its interest in the ship and its cargo. See 46 U.S.C. Sec. 185; Fed.R.Civ.P. Supplemental Rule F(1)-(2). The appellants complied with this requirement and the district court approved appellants' offer of security and their stipulation of approximately $7.6 million as the value of the CHRISTINA and her cargo. ² Then, pursuant to 46 U.S.C. Sec. 185 and Fed.R.Civ.P. Supplemental Rule F(3), Judge Ward enjoined the prosecution of any pending or future suits arising out of this accident against the shipowners in other forums, pending the resolution of the limitation of liability proceeding.

In the meantime, the Coronas had instituted other state court actions against the CHRISTINA's builder, charterer and architect, and against the companies that manufactured and inspected the vessel's deck cranes. ³ The appellees also initiated efforts to have the district court vacate its order restraining their suit against the appellants. After two unsuccessful attempts, the Coronas filed with the court a third amended stipulation. Relevant portions of that stipulation provide as follows:

(4) Claimant, Fran Corona, and Ana Corona, his wife, hereby agree and concede that Plaintiffs Dammers & Vanderheide and Scheepvaat Maats Christina B.V., are entitled to and have the right to litigate all issues relating to limitation of liability pursuant to the provisions of 46 U.S.C. Sec. 183(a) in this Court.

5) Claimant, Fran Corona and Ana Corona, his wife, will not seek in the action pending in the Supreme Court, State of New York in which a jury trial has been demanded, any judgment or ruling on the issue of plaintiffs' right to Limitation of Liability; and hereby consents [sic] to waive any claim of res judicata relevant to the issue of Limitation of Liability based on any judgment which may be recovered in said State Court Action.

6) Claimant Fran Corona, and Ana Corona, his wife, hereby stipulate that in the event there is a judgment or recovery in the State Court action in excess of SEVEN MILLION SIX HUNDRED SEVENTY-ONE THOUSAND ($7,671,000.00) DOLLARS whether against the plaintiffs, or any other liable parties who may cross-claim or claim over against the plaintiffs, in no event will claimant Fran Corona, and Ana Corona, his wife seek to enforce said excess judgment or recovery insofar as same may expose plaintiffs to liability in excess of SEVEN MILLION SIX HUNDRED SEVENTY-ONE THOUSAND ($7,671,000.00) DOLLARS pending the adjudication of Limitation of Liability in this Court.

7) Claimant's wife, Ana Corona, hereby stipulates and agrees that the claim of Fran Corona will have irrevocable priority to her per quod claim.

8) The claimant, Fran Corona, and his wife, Ana Corona, stipulate and agree that if the plaintiffs, Dammers & Vanderheide and Scheepvaat Maats Christina B.V., are held to be responsible for attorneys['] fees and costs which may be assessed against them by a co-liable defendant or party seeking indeminification [sic] for attorney fees and costs then such claims shall have priority over the claim for Fran Corona and his wife, Ana Corona.

Third Amended Stipulation at paragraphs 4-8.

Judge Ward concluded that the appellees' third amended stipulation was sufficient to protect the right of the shipowners to seek limited liability under federal law and he therefore vacated his earlier order insofar as it had enjoined the Coronas' prosecution of their state court action against appellants. Otherwise, the district court retained jurisdiction over the entire matter and "continue[d] the stay against entry of judgment and consequent enforcement of any recovery achieved in [the state court] proceeding pending the outcome of this limitation proceeding." 660 F.Supp. at 160. We must now consider whether the district court was correct and whether the safeguards embodied in the appellees' third amended stipulation and the district court's decision sufficiently protect the shipowners in accordance with the Act.

DISCUSSION

I.

This case forces us to confront a recurring and inherent conflict in admiralty law: the apparently exclusive jurisdiction vested in admiralty courts by the Limitation of Liability Act versus the presumption in favor of jury trials and common law remedies embodied in the "saving to suitors" clause of 28 U.S.C. Sec. 1333 (1982). ⁴ Attempts to resolve this tension "ha[ve] been troublesome for the courts." Jefferson Barracks Marine Service, Inc. v. Casey, 763 F.2d 1007, 1009 (8th Cir.1985). But, as two noted admiralty authorities have pointed out, those courts should not necessarily be faulted, as they have been asked "to implement, at one and the same time, two inconsistent and contradictory policies." G. Gilmore & C. Black, The Law of Admiralty Sec. 10-18, at 864 (2d ed. 1975).

The original purpose of the Limitation of Liability Act was "to encourage the development of American merchant shipping." Lake Tankers Corp. v. Henn, 354 U.S. 147, 150, 77 S.Ct. 1269, 1271, 1 L.Ed.2d 1246 (1957). Specifically, "the Act is directed at misfortunes at sea where the losses incurred exceed the value of the vessel and the pending freight." Id. at 151, 77 S.Ct. at 1272. When a shipowner facing potential liability in such a case invokes the protection of the Act, the district court is empowered to "issue a restraining order or an injunction staying all other proceedings [against the shipowner arising out of the same mishap]." Helena Marine Service, Inc. v. Sioux City, 564 F.2d 15, 17 (8th Cir.1977), cert. denied, 435 U.S. 1006, 98 S.Ct. 1875, 56 L.Ed.2d 387 (1978). See also S & E Shipping Corp. v. Chesapeake & Ohio Ry. Co., 678 F.2d 636, 642 (6th Cir.1982); Fed.R.Civ.P. Supplemental Rule F(3). The district court also notifies all potential claimants to file their claims against the shipowner in the admiralty court within a specified time period. See Universal Towing Co. v. Barrale, 595 F.2d 414, 417 (8th Cir.1979); Fed.R.Civ.P. Supplemental Rule F(4).

Thereafter, in a proceeding known as a concursus, the district court, sitting in admiralty without a jury, determines "whether there was negligence; if there was negligence, whether it was without the privity and knowledge of the owner; and if limitation is granted, how the [limitation] fund should be distributed." Universal Towing, 595 F.2d at 417. It is only in this way that the admiralty court can achieve the primary purpose of the Act--"to provide a marshalling of assets [and] the distribution pro rata of an inadequate fund among claimants, none of whom can be paid in full." In re Moran Transportation Corp., 185 F.2d 386, 389 (2d Cir.1950), cert. denied, 340 U.S. 953, 71 S.Ct. 573, 95 L.Ed. 687 (1951)...