Magnolia Marine Transport Co., Inc. v. Laplace Towing Corp.

• Decision Date: 25 June 1992
• Docket Number: No. 91-3154,91-3154
• Citation: 964 F.2d 1571
• Parties: In the Matter of MAGNOLIA MARINE TRANSPORT CO., INC., Mississippi Marine Transport Company, Third Party Plaintiff, v. LAPLACE TOWING CORPORATION, et al., Third Party Defendants, Barbara Bordelon FRYE and E.N. Bisso & Sons, Inc., Claimants-Appellants, v. MAGNOLIA MARINE TRANSPORT. CO., INC., et al., Defendants-Appellees. MAGNOLIA MARINE TRANSPORT. CO., INC., et al., Plaintiffs-Appellees, v. Barbara Bordelon FRYE, etc., and E.N. Bisso & Sons, Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1571

964 F.2d 1571

1994 A.M.C. 303

In the Matter of MAGNOLIA MARINE TRANSPORT CO., INC.,

Mississippi Marine Transport Company, Third Party Plaintiff, v. LAPLACE TOWING CORPORATION, et al., Third Party Defendants, Barbara Bordelon FRYE and E.N. Bisso & Sons, Inc., Claimants-Appellants, v. MAGNOLIA MARINE TRANSPORT. CO., INC., et al., Defendants-Appellees.

MAGNOLIA MARINE TRANSPORT. CO., INC., et al., Plaintiffs-Appellees, v. Barbara Bordelon FRYE, etc., and E.N. Bisso & Sons, Inc.,

Defendants-Appellants.

No. 91-3154.

United States Court of Appeals Fifth Circuit.

June 25, 1992.

Thomas Kesasler Foutz, Gauthier & Murphy, Metairie, La., for Frye.

Samuel F. Reynolds, Jr. and Charles E. Lugenbuhl, Lugenbuhl, Burke, Wheaton, Peck & Rankin, New Orleans, La., for E.N. Bisso & Sons.

Ernest Tucker Gore, Henderson, Dantone & Hines, Greenville, Miss., for appellees.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before REAVLEY, HIGGINBOTHAM and DEMOSS, Circuit Judges.

REAVLEY, Circuit Judge:

The district court has decided that the underwriters of a vessel owner's marine insurance policy has standing under the Limited Liability Act to demand that the federal court interpret whether the policy limited the underwriters' liability to the amount of the owner's liability. The district court then refused to permit claimants to proceed in state court against the owner and underwriters without specifically conceding the right of the underwriters to litigate policy interpretation in the admiralty court. The district court consequently stayed prosecution of claims against the shipowner and the underwriters in the state court, and declined to dismiss the underwriters' declaratory judgment suit. We hold that underwriters may not require this federal accommodation, and that limitation of liability protects only the shipowner.

I. BACKGROUND

On February 3, 1988, on the Mississippi River south of Baton Rouge, the M/V SAM LEBLANC collided with a barge in tow of the M/V ERGONOT and then with a second vessel. Captain Joseph Frye, master of the SAM LEBLANC, drowned as a result of this accident. On February 17, 1988 Barbara Frye (Frye), the captain's widow, sued E.N. Bisso & Son, Inc. (Bisso), her late husband's employer, in Louisiana state court. She soon joined as a defendant in that action Magnolia Marine Transport Co., Inc. (Magnolia), owner of the ERGONOT and owner pro hac vice of a barge that struck the SAM LEBLANC. She later joined Magnolia's marine insurance underwriters in a direct action under Louisiana law. Magnolia filed its suit in admiralty to limit liability in the federal district court in August 1988, and Frye and Bisso timely filed claims. The district court set the limitation trial for August 27, 1990. The Louisiana court set Frye's suit for trial on February 19, 1991.

On August 22, 1990 the federal court stayed the limitation action pending the resolution of Frye's state-court suit. Two days later, after Frye had notified the court that she planned to file a direct action in state court, Magnolia and its underwriters filed a declaratory judgment suit in the same federal district court seeking a declaration that Magnolia's underwriters are entitled to limitation of liability under Crown Zellerbach Corp. v. Ingram Indus., Inc., 783 F.2d 1296 (5th Cir.), cert. denied, 479 U.S. 821, 107 S.Ct. 87, 93 L.Ed.2d 40 (1986). The declaratory judgment suit was consolidated with the limitation suit. Pursuant to the motions of Frye and Bisso to stay or dismiss the declaratory judgment suit, the court considered whether the insurers were entitled under Magnolia's policy to limit their liability to Magnolia's liability.

In January 1991, one month before the scheduled state-court trial date, the district court ruled that the interpretation of Magnolia's insurance policy is "necessarily a function of" the limitation suit, and that moving ahead with the federal declaratory judgment suit would not jeopardize Frye's right to common law remedies under the saving-to-suitors clause. Magnolia Marine Transport Co. v. Frye, 755 F.Supp. 149, 152 (E.D.La.1991). The court also

                found the stipulations of Frye and Bisso defective for failing to protect Magnolia's underwriters and to concede that the federal court is the only proper forum to determine whether the underwriters policy permits them to limit liability to the shipowner's liability.  Id. at 152-53.   The court enjoined the state-court trial of claims against Magnolia and its underwriters and denied the claimants' motion to dismiss the declaratory judgment suit.  Id
                

II. DISCUSSION

The Limited Liability Act, 46 U.S.C.App. § 181 et seq. (the Act, or the Limitation Act), provides that the liability of a shipowner for any damage arising from a maritime casualty which is occasioned without the privity or knowledge of the shipowner shall not exceed the value of the vessel at fault together with her pending freight. 46 U.S.C.App. § 183(a). Federal courts have exclusive admiralty jurisdiction of suits brought under the Act, but "saving to suitors ... all other remedies to which they are otherwise entitled." 28 U.S.C. § 1333. This statutory framework has created "recurring and inherent conflict" between the saving-to-suitors clause of § 1333, with its "presumption in favor of jury trials and common law remedies," and the "apparent exclusive jurisdiction" vested in admiralty courts by the Act. In re Dammers & Vanderheide & Scheepvaart Maats Christina B.V., 836 F.2d 750, 754 (2d Cir.1988).

When a shipowner files a federal limitation action, the limitation court stays all related claims against the shipowner pending in any forum, and requires all claimants to timely assert their claims in the limitation court. Id. at 755. The court takes jurisdiction to entertain those claims without a jury, Waring v. Clarke, 46 U.S. (5 How.) 441, 458-60, 466, 12 L.Ed. 226 (1847), and ensures that the shipowner who is entitled to limitation is not held to liability in excess of the amount ultimately fixed in the limitation suit (the limitation fund). Lake Tankers Corp. v. Henn, 354 U.S. 147, 152-53, 77 S.Ct. 1269, 1272, 1 L.Ed.2d 1246 (1957). The court's primary concern is to protect the shipowner's absolute right to claim the Act's liability cap, and to reserve the adjudication of that right in the federal forum. Langnes v. Green, 282 U.S. 531, 543, 51 S.Ct. 243, 247, 75 L.Ed. 520 (1931).

Lake Tankers makes "crystal clear" that the Act is directed at maritime misfortunes where the losses claimed exceed the value of the vessel and freight. 354 U.S. at 151, 77 S.Ct. at 1272. Where the claim does not exceed that value, the saving-to-suitors clause dictates that the admiralty court must allow suits pending against the shipowner in a common law forum, in this case the state court, to proceed. Id., at 150-54, 77 S.Ct. at 1271-73; Dammers & Vanderheide, 836 F.2d at 755. But even when the claim does exceed that value, the claimant still may prefer the state court, for example if the claimant possesses a related claim against a party who is not protected by the Act. See, e.g., In re Complaint of McDonough Marine Service, Div. of Marmac Corp., 749 F.Supp. 128, 130 (E.D.La.1990) (claim against barge manufacturer). Consequently, the claimant may decide to reduce the claim pending against the shipowner in the admiralty court to the value of the limitation fund.

The claimant who wishes to pursue a state court claim in this manner must first make certain stipulations in the admiralty court to preserve the shipowner's rights. The claimant must stipulate that the admiralty court reserves exclusive jurisdiction to determine all issues related to the shipowner's right to limit liability, and that no judgment against the shipowner will be asserted to the extent it exceeds the value of the limitation fund. Upon the claimant's filing sufficient stipulations, the admiralty court should allow the claimant to proceed even when the claim exceeds the limitation fund. Langnes, 282 U.S. at 540-41, 51 S.Ct. at 247; In re Two "R" Drilling Co., 943 F.2d 576, 578 (5th Cir.1991).

When the shipowner is beset by multiple claimants, admiralty courts also are concerned that there be one federal forum for the resolution of all competing Frye and Bisso filed stipulations in this case, ¹ and Appellees Magnolia and its underwriters do not contest that these stipulations adequately protect Magnolia's interests. Rather, the underwriters urge that the stipulations are incomplete because the claimants failed to concede the underwriters' right to litigate their liability in the limitation action. The underwriters further contend that the federal court has exclusive jurisdiction to interpret their marine insurance policy. The district court agreed with the underwriters' arguments, and therefore decided to lift the stay of the limitation suit, proceed with the declaratory judgment suit, and enjoin the claimant's state court suit against Magnolia and the underwriters.

                claims.   See In re Complaint of Midland Enterprises, Inc., 886 F.2d 812, 815 (6th Cir.1989).   But even in multiple-claimant cases, admiralty courts still should allow state court claims to proceed under proper stipulations.   See Dammers & Vanderheide, 836 F.2d at 755-60.   Multiple claimants may reduce their claims to the equivalent of a single claim by agreeing and stipulating as to the priority in which the claimants will receive satisfaction against the shipowner from the limited fund.  S & E Shipping Corp. v. Chesapeake & O.R. Co., 678 F.2d 636, 644 (6th Cir.1982).   Under such stipulations, "the state court proceeding could have no possible effect on the [shipowner's] claim for limited liability in the admiralty court...."  Lake Tankers, 354 U.S. at 152-53, 77 S.Ct. at 1272-73.   In that circumstance, "the provisions of the Act ... do not control."  Id
                

A. THE ADMIRALTY PROCEEDING AND THE UNDERWRITERS

We first note that the Act...