Complaint of McCarthy Bros. Company/Clark Bridge

• Decision Date: 03 June 1996
• Docket Number: No. 95-2880,No. AEB1,AEB1,95-2880
• Citation: 83 F.3d 821
• Parties: In the Matter of the Complaint of McCARTHY BROTHERS COMPANY/CLARK BRIDGE, as Owner Pro Hac Vice of Bargefor Exoneration from or Limitation of Liability, Petitioner-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 821

83 F.3d 821

In the Matter of the Complaint of McCARTHY BROTHERS COMPANY/CLARK BRIDGE, as Owner Pro Hac Vice of Barge No. AEB1 for Exoneration from or Limitation of Liability Petitioner-Appellant.

No. 95-2880.

United States Court of Appeals Seventh Circuit.

Argued April 1, 1996.

Decided May 3, 1996.

Rehearing and Suggestion for Rehearing En Banc Denied June 3, 1996.

Andrew Rothschild (argued), Lewis, Rice & Fingersh, St. Louis, MO, for McCarthy Brothers Company/Clark Bridge.

Roy C. Dripps, Gail Renshaw (argued), Lakin Law Firm, Wood River, IL, for Gary Campbell and Commercial Union Ins. Co.

Before CUMMINGS, EASTERBROOK and ROVNER, Circuit Judges.

CUMMINGS, Circuit Judge.

This case involves a conflict between the Limitation of Liability Act, 46 U.S.C.App. §§ 181 et seq. ("Limitation Act"), which gives shipowners a right to seek limitation of liability in federal court for maritime injuries, and the "saving to suitors" clause of 28 U.S.C. § 1333(1), which gives claimants a right to seek common law remedies outside of the federal admiralty forum. Claimant Gary Campbell brought a state court action seeking damages for injuries sustained on a vessel chartered by McCarthy Brothers Company. McCarthy then sought to limit its liability in federal district court. The district court entered an order restraining further litigation in state court and then proceeded to resolve all issues relating to McCarthy's liability and the availability of limitation under the Limitation Act. We now hold that the district court should have abstained on the liability issue, permitting Campbell to proceed in state court under the "saving to suitors" clause, but retained jurisdiction on the limitation questions pending the outcome of the state proceeding.

I.

Campbell was employed by McCarthy as an ironworker on the construction of the Clark Bridge over the Mississippi River near Alton, Illinois. His job was to pre-tie iron rebar for installation in the river bed, which consisted of fastening iron rods together with wire. Campbell worked on Barge No. AEB1, which McCarthy had chartered for the project. The parties dispute whether he was a maritime worker. The barge remained moored most of the time and served as a work deck. However, when the barge was towed to the bridge site for rebar installation, Campbell and other iron workers were sometimes present. Maritime duties on the barge, such as handling lines, were performed by a deckhand.

The accident that produced this litigation occurred on October 29, 1991, approximately six weeks after Campbell commenced working for McCarthy. Work on the barge produced a considerable amount of debris, and the deckhand was responsible for clearing all waste from walkways and work areas. When Campbell returned from retrieving additional supplies, his attention was momentarily diverted and he stepped on a piece of scrap wood, causing him to fall. The parties dispute both the specifics of the fall and the district court's finding that the deckhand was exclusively responsible for clearing debris. Campbell sustained two herniated discs that required surgery.

In 1992, Campbell filed a worker's compensation claim with the Illinois Industrial Commission, which McCarthy's compensation carrier, Commercial Union Insurance Company ("Commercial Union"), began paying. Then on January 28, 1993, McCarthy received the following letter from Campbell's attorney:

NOTICE OF REPRESENTATION AND ATTORNEY'S LIEN

You are hereby notified that we have been retained to represent Gary Campbell for injuries he sustained on or about October 29, 1991, for which he claims you are responsible.

Please be advised that we have a contract with our client whereby we are to receive thirty-three and one third percent (33 1/3 %) of any sums of money paid to him as a result of the injuries and by this letter we are putting you on notice of our attorney's lien.

Any medical authorization in your possession given to you by our client is hereby revoked at the request of our client and you are instructed to take no further action which would involve the use of any prior authorization.

Please forward this letter immediately to your insurance carrier so they may contact us regarding this claim.

On August 31, 1993--more than six months after this letter was sent to McCarthy--Campbell filed a complaint in Illinois state court alleging Jones Act negligence, unseaworthiness, and maintenance and cure. Pursuant to the Limitation Act and on January 27, 1994, McCarthy filed an action in the district court for exoneration or limitation of liability ("limitation action"). On the same day, the district court entered an order restraining further prosecution of the state court action.

The limitation action proceeded in the district court in a rather confused manner. After filing a claim for damages and an answer to McCarthy's district court complaint, Campbell moved to dissolve the federal restraining order so that he could proceed in state court. The district court denied the motion, in part because Campbell failed to make adequate stipulations to protect McCarthy's right to limit liability in the state court proceeding. Commercial Union also filed a claim for damages in the limitation action, claiming the right of recovery from Campbell of any damages he might receive from McCarthy to the extent of payments already made by Commercial Union to Campbell. After completing discovery, both Campbell and McCarthy moved for summary judgment--Campbell on the basis that McCarthy filed its district court petition more than six months after receiving the attorney's lien letter of January 28, 1993, in violation of 46 U.S.C.App. § 185, and McCarthy on the basis that Campbell was not a Jones Act seaman. Thereafter on October 21, 1994, the case was reassigned from Judge Stiehl to Judge Riley upon his appointment to the federal bench. He denied both motions for summary judgment and set the case for bench trial on March 13, 1995. In denying Campbell's motion for summary judgment, Judge Riley stated that the timeliness of McCarthy's petition was not ripe for discussion since the court would not have to reach the issue if Campbell lost on the merits.

After trial, the court issued its memorandum and order. Judge Riley concluded that the January 28, 1993, letter constituted a written notice of claim sufficient to trigger the six-month limitation period set forth in 46 U.S.C.App. § 185, and that McCarthy's limitation action was therefore filed too late. He thus dismissed McCarthy's complaint and "remanded" the case to state court for a determination "of the amount of damages consistent with the terms of this Order." By the "terms of this Order," Judge Riley intended that the state court be bound by five additional conclusions of law in his memorandum and order, that: (1) Campbell was a Jones Act seaman; (2) McCarthy's negligence and the unseaworthiness of Barge No. AEB1 caused Campbell's injuries; (3) Campbell was not contributorily negligent; (4) McCarthy had sufficient privity and knowledge such that it was not entitled to limitation of liability; and (5) McCarthy had failed to prove the value of the limitation fund, which is the value of the vessel and its cargo.

McCarthy appeals the dismissal of its complaint on timeliness grounds as well as each of the district court's additional findings. Neither party argues on appeal that the district court improperly denied Campbell's motion to dissolve the restraining order against the state court proceeding. Contrary to what either party likely expected on appeal, we find that the district court erred in not permitting Campbell to proceed in state court. Only a review of the arcane jurisdictional rules for limitation actions will illustrate why the proceedings in the district court were confused and why this Court ought to raise the issue of abstention sua sponte and permit Campbell to proceed in state court, even though the case was fully tried in district court.

II.

There exists in admiralty law an inherent conflict between the right of claimants to seek common-law remedies before a jury, typically in state court, and the right of shipowners to limit their liability to claimants in federal court. The Limitation Act vests in federal courts exclusive jurisdiction, pursuant to their admiralty jurisdiction under 28 U.S.C. § 1333(1), to decide whether a shipowner's liability should be limited in certain circumstances. We have previously summarized the history and purposes of the Limitation Act, Joyce v. Joyce, 975 F.2d 379, 383-384 (7th Cir.1992), but suffice it to say that the Act encourages ship-building and investment by limiting a shipowner's liability to the amount of his interest in the ship. Norwich & N.Y. Transp. Co. v. Wright, 80 U.S. (13 Wall.) 104, 20 L.Ed. 585. When the federal court exercises its exclusive jurisdiction, it must necessarily enjoin proceedings in state court. But this result is in direct conflict with the "saving to suitors" clause of 28 U.S.C. § 1333(1), which excepts from the district courts' exclusive jurisdiction over admiralty matters the right of suitors to seek "all other remedies to which they are otherwise entitled." The conflict is significant. Claimants have no right to a jury in admiralty actions, Waring v. Clarke, 46 U.S. (5 How.) 441, 458-60, 12 L.Ed. 226, and thus lose their right to pursue common-law remedies before a jury when forced into admiralty court under the Limitation Act.

The typical scenario is as follows. Claimant files a complaint in state court. The shipowner then petitions the district court for limitation of liability pursuant to the Limitation Act, which must be done "within six months after a claimant shall have given to or filed with such owner written notice of claim...." 46 U.S.C.App. § 185. Once properly filed, the district court retains exclusive jurisdiction over the matter and all claims against the shipowner must cease. 46 U.S.C.App. § 185; ...