Magnolia Marine Transport Co. v. Frye, Civ. A. No. 90-3053 "I".

• Decision Date: 15 January 1991
• Docket Number: Civ. A. No. 90-3053 "I".
• Citation: 755 F. Supp. 149,1991 AMC 1190
• Parties: MAGNOLIA MARINE TRANSPORT CO., et al. v. Barbara B. FRYE, et al.
• Court: U.S. District Court — Eastern District of Louisiana

755 F. Supp. 149

1991 AMC 1190

MAGNOLIA MARINE TRANSPORT CO., et al. v. Barbara B. FRYE, et al.

Civ. A. No. 90-3053 "I".

United States District Court, E.D. Louisiana.

January 15, 1991.

Frank J. Dantone, Tucker Gore, Henderson, Duke, Dantone & Hines, Greenville, Miss., for plaintiffs.

Thomas K. Foutz, Gauthier & Murphy, Metairie, La., for Barbara B. Frye.

Charles E. Lugenbuhl, Samuel F. Reynolds, Jr., New Orleans, La., for E.N. Bisso & Son, Inc.

ORDER AND REASONS

MENTZ, District Judge.

Before the Court is defendant, Barbara Frye's motion to dismiss the declaratory judgment suit filed by Magnolia Marine Transport Company and its insurers. The declaratory judgment action seeks to have this Court determine the construction of certain insurance policy language that may allow the insurers to limit their liability. By Minute Entry dated December 3, 1990, the Court took this matter under submission on the briefs. In that same Minute Entry the Court consolidated the declaratory judgment suit with the limitation action involving the same parties.¹ The limitation action had been previously stayed by the Court. In addition, the Court also directed the parties to file briefs on the issue of whether the stay of the limitation proceeding should be lifted, allowing the Court to interpret certain insurance policy language for the purpose of deciding whether plaintiff, Magnolia Marine Transport Company's insurers should be allowed to limit their liability to plaintiff's potential liability. Accordingly, after reviewing the motion, memoranda of counsel, the record and the law, the Court denies the motion to dismiss the declaratory judgment action; additionally, the Court must lift the stay of the limitation case and thereby enjoin further state court proceedings, all for the reasons set forth below.

Facts

On February 10, 1988, Joseph Frye was employed by E.N. Bisso & Son, Inc. as a captain of the tugboat M/V SAM LEBLANC. On that morning a collision occurred between the M/V SAM LEBLANC and a the M/V ERGONOT, a vessel operated by Magnolia Marine Transport Company ("Magnolia Marine"). Following this collision, another vessel, the M/V POINTE COUPEE collided with the M/V SAM LEBLANC, at which time Joseph Frye disappeared overboard and drowned.

On February 17, 1988, the decedent's wife, Barbara Frye, individually and on behalf of her minor children and the estate of Joseph Frye ("Frye claimants") filed a state court suit for damages under the Jones Act, 46 U.S.C.App. § 688, and the General Maritime Law. E.N. Bisso & Son, Inc. ("Bisso claimants") and Mississippi Marine Company, owner of the M/V SAM LEBLANC, were named as defendants in the state court petition. Magnolia Marine and its various insurers were added by a later filed supplemental and amending petition.

Magnolia Marine, as owner and/or owner pro hac vice of the M/V ERGONOT, subsequently filed in this Court an action for exoneration from or limitation of liability in accordance with Rule 9(h) of the Federal Rules of Civil Procedure, 46 U.S.C.App. § 181, et seq., and Rule F of the Supplemental Rules for Certain Admiralty and Maritime Claims. Thereafter, an order was issued staying Barbara Frye's previously filed state court action. The Frye and Bisso claimants are the only claimants in the limitation action. At a conference with the Court held August 22, 1990, five days before the limitation trial, the claimants in the limitation proceeding represented to the Court that it appeared Magnolia Marine's insurance policy might not allow its insurers to limit their liability. The claimants also stated that they wished to have the state court determine whether a direct action therefore existed against the insurers. The claimants also represented that such a determination would "moot" the necessity of a limitation trial. Considering that the state court proceeding might render the limitation moot, and because Magnolia Marine presented no convincing authority to the contrary, the Court stayed the limitation action and ordered it closed for statistical purposes. The Frye claimants filed the instant motion to dismiss the declaratory judgment due to the ongoing state court suit.²

Analysis

The issue before the Court is whether construction of the insurance policy language is more properly addressed by this Court as a part of the limitation proceeding, or whether, on the other hand, the Frye claimants and the Bisso claimants may have the state court interpret the policy language before this Court has determined Magnolia Marine's right to limit liability.

The Frye and Bisso claimants maintain that it is proper for the state court to interpret Magnolia Marine's policy of insurance. They argue that if the state court decides the underwriters have no limitation defense based on their policies, neither of the claimants will have to execute on any judgment against Magnolia Marine.³ If, however, the state court upholds the underwriters' policy defense of limitation, then all parties would have to return to this Court for a trial on Magnolia Marine's right to limit liability.

Magnolia and its insurers argue that the policy language is necessarily a limitation issue. If the state court determines that the "magic language" is contained in the policy, the state proceeding can go no further, since Magnolia Marine and its insurers would all then be entitled to attempt to limit their liability in this Court. See Crown Zellerbach Corp. v. Ingram Industries, Inc., 783 F.2d 1296 (5th Cir.1986) (en banc). Conversely, in the event that the state court determines the "magic language" is not contained in the policy, Magnolia and its insurers would be subject to a potential judgment without having had the benefit of attempting to limit liability, an exclusively federal remedy.

This is a classic case of putting the proverbial cart before the horse. There is no reason why the state court case should proceed before all limitation issues are resolved. In states that provide for direct actions against insurers, those insurers are not liable for any amount beyond the shipowner's judicially approved limitation of liability. Crown Zellerbach, 783 F.2d at 1300-03. Depending on the construction of the particular policy language, an insurer may be subject to the protections of the Limitation Act, 46 U.S.C.App. § 181, et seq. The Frye and Bisso claimants maintain that while this may be so, Magnolia Marine and its insurers have no right to have the policy language, which may allow Magnolia's insurers to limit their liability, interpreted by a federal court. The issue then becomes whether interpretation of Magnolia Marine's policy is more properly a function of the limitation proceeding, which is exclusively federal in nature; or, whether interpreting that policy language is a necessary part of Barbara Frye's maritime savings to suitors⁴ rights in the state court proceeding.

The Court finds that interpreting such insurance policy language is necessarily a function of the limitation proceeding and does not interfere with Mrs. Frye's right to a common law remedy under the savings to suitors clause. See Schoenbaum, Admiralty and Maritime Law, § 14-4, p. 486 and n. 7 (1987). Under the savings to suitors clause, the Frye claimants are guaranteed a remedy, not a non-federal forum. Fogleman v. Tidewater Barges, Inc., 747 F.Supp. 348, 355 (E.D.La.1990) (citing Poirrier v. Nicklos Drilling Co., 648 F.2d 1063, 1066 (5th Cir. Unit A June 1981)). Mrs. Frye's state court rights are...