Texaco, Inc. v. Williams ( 1995 )

United States Court of Appeals,
Fifth Circuit.
No. 94-30191.
TEXACO, INC., as owner, praying for exoneration from and/or
limitation of liability, et al., etc., Petitioners-Appellees,
v.
Paul WILLIAMS and Harrison Ellender, Claimants-Appellants.
March 21, 1995.
Appeal from the United States District Court for the Eastern
District of Louisiana.
Before REYNALDO G. GARZA, DeMOSS and BENAVIDES, Circuit Judges.
REYNALDO G. GARZA, Circuit Judge:
Background
On August 24, 1993, a fire and an explosion occurred on the
T/B BUSTER LEE, a barge owned by Texaco, Inc. (Texaco) and bare
boat chartered by Texaco Exploration and Production, Inc. (TEPI).
Appellants Ellender and Williams, employees of TEPI, were severely
burned in the accident. Appellant Ellender filed a Jones Act claim
in Louisiana state court. On October 18, 1993, Texaco and TEPI
filed a complaint in federal court seeking exoneration from or
limitation of liability. The district court issued an order
staying Ellender's state court action and restraining Williams from
filing a similar state claim. Appellants filed answers in the
limitation proceeding, seeking damages in excess of $8 million.
These claims exceeded the value of the vessel, valued by Texaco at
$125,000. Claimants then filed a motion to lift the stay, seeking
1
to pursue their rights under the savings to suitors' clause.1 The
district court denied their motion and this appeal ensued.
Discussion
The issue before this Court involves "a recurring and
inherent conflict" between the exclusive jurisdiction vested in
admiralty courts by the Limitation of Liability Act2 and the common
law remedies embodied in the saving to suitors clause of 28 U.S.C.
§ 1333.3 The Limitation Act provides that the liability of a
shipowner shall not exceed the value of the vessel at fault and her
pending freight if the casualty occurred without the privity or
knowledge of the shipowner. Federal courts have exclusive
jurisdiction over suits invoking the Act, "saving to suitors ...
all other remedies to which they are otherwise entitled."4
When a shipowner invokes the Act the federal court may stay
all other proceedings against the shipowner arising out of the same
accident and require all claimants to timely assert their claims in
the limitation court. The purpose of the limitation is to preserve
the right of the shipowner to limit its liability in a federal
forum to the value of the vessel and her pending freight.5 The
1
28 U.S.C. § 1333.
2
46 U.S.C.App. § 183.
3
In re Dammers & Vanderheide & Scheepvaart Maats Christina
B.V., 836 F.2d 750, 754 (2d Cir.1988).
4
28 U.S.C. § 1333.
5
Magnolia Marine Transp. v. LaPlace Towing Corp., 964 F.2d
1571, 1575 (5th Cir.1992) (citing Langnes v. Green, 282 U.S. 531,
543, 51 S. Ct. 243, 247, 75 L. Ed. 520 (1931)).
2
problem is that "one statute [gives the complainant] the right to
a common-law remedy, which he [may seek] in the state court; and
another statute [gives the shipowner] the right to seek a
limitation of liability in the federal district court."6 The
courts have attempted to resolve this conflict by creating
exceptions to the exclusive jurisdiction of the federal courts.
Initially, two exceptions were recognized: (1) the
single-claim-inadequate-fund situation, and (2) the
multiple-claim-adequate-fund situation. In Ex parte Green,7 the
Supreme Court held that a single claimant seeking damages in excess
of the limitation fund may proceed outside of the limitation action
if the claimant agreed not to raise issues to be decided in the
limitation court. In Lake Tankers Corp. v. Henn,8 the Supreme
Court faced the issue of multiple claims that exceeded the
limitation fund. The Court held that the claimants could proceed
outside of the limitation proceedings if they relinquished their
rights to damages in excess of the amount of the limitation fund.9
The Court reasoned that in this situation, the "state proceeding
could have no possible effect on the petitioner's claim for limited
liability"; both the shipowner's right to limit liability in a
federal forum and the claimants' rights to pursue their state law
6
Langnes, 282 U.S. at 539-40, 51 S.Ct. at 246.
7
286 U.S. 437, 52 S. Ct. 602, 76 L. Ed. 1212 (1932).
8
354 U.S. 147, 77 S. Ct. 1269, 1 L. Ed. 2d 1246 (1957).
9
The respondent filed stipulations agreeing to neither
increase the claims, nor to enter into a judgment in excess of
these amounts, and waived any claims of res judicata.
3
remedies under the savings to suitors clause were protected. Under
this backdrop, the Fifth Circuit has held that, with proper
stipulations, claimants may proceed outside the limitation action.
In Magnolia Marine Transport v. LaPlace Towing Corp. multiple
claimants sought to recover damages in excess of the limitation
fund pursuant to their saving to suitors rights, that is, outside
of the limitation action. This Court reasoned that a singular
claimant may pursue a state court claim after filing several
stipulations. First, the claimant must stipulate that the
admiralty court reserves exclusive jurisdiction to determine all
issues related to the shipowner's right to limit liability.
Second, the claimant must stipulate that no judgment will be
asserted against the shipowner to the extent it exceeds the value
of the limitation fund. "But even in multiple-claimant cases,
admiralty courts still should allow state court claims to proceed
under proper stipulations."10 Multiple claimants may reduce their
claims to the equivalent of a single claim by stipulating to the
priority in which their claims will be paid from the limitation
fund. Similarly, in In re Two "R" Drilling Co.11 this Court held
that a shipowner's rights are protected when multiple claimants
file proper stipulations. A deckhand drowned while working for Two
"R" Drilling Co., and the widow brought claims on behalf of her
children, the deceased, and herself. The plaintiff filed
10
Magnolia, 964 F.2d at 1576 (citing In re Dammers, 836 F.2d
at 754).
11
943 F.2d 576 (5th Cir.1991).
4
stipulations conceding the right of the shipowner to litigate all
issues relating to limitation of liability in a federal forum and
agreed not to enforce a judgment in excess of the limitation fund.
This Court approved of the procedure and affirmed the district
court's ruling to lift the stay, stating, "[w]here the claimant
concedes the admiralty court's exclusive jurisdiction to determine
all issues relating to the limitation of liability, the district
court should lift any stay against the state proceeding."12
Recently, in Odeco Oil and Gas Co. v. Bonnette13 this Court
faced the very issue presently before this Court. Odeco was
performing safety drills on a fixed platform in the Gulf of Mexico,
when five members of the crew boarded an escape capsule suspended
90 feet above the water. Someone in the capsule pulled the wrong
lever, releasing the capsule from the platform; the capsule
plunged into the Gulf seriously injuring all of its passengers.
Odeco filed an action for a declaratory judgment and, in the
alternative, to limit its liability in federal court. The district
court issued an order staying any further litigation against Odeco
arising from this incident. The claimants filed personal injury
suits in state court and filed answers in the district court,
requesting that the stay be lifted. The district court lifted the
stay, allowing the claimants to pursue their claims in state court.
The Odeco court stated, "claims may proceed outside the
12
Id. at 578 (citations omitted).
13
4 F.3d 401 (5th Cir.1993), cert. denied, --- U.S. ----,
114 S. Ct. 1370, 128 L. Ed. 2d 47 (1994).
5
limitation action (1) if they total less than the value of the
vessel, or (2) if the claimants stipulate that the federal court
has exclusive jurisdiction over the limitation of liability
proceeding and that they will not seek to enforce a greater damage
award until the limitation action has been heard by the federal
court."14 This Court reasoned that if the claimants seek to take
advantage of their savings to suitors remedies in state court, we
must accede to this choice if the shipowner's rights to limit are
protected by stipulations.
Appellee contends that we should not lift the stay for two
reasons. First, by following Odeco and lifting the stay we are
creating a third exception to the exclusive jurisdiction of our
admiralty courts. The Supreme Court has authorized only two
exceptions: the single-claimant-inadequate-fund and
multiple-claimant-adequate-fund exceptions. If a claimant proves
that it meets one of these exceptions, then it must enter into
stipulations to protect the shipowner's rights. Entering into
stipulations does not in and of itself create an exception.
Though we find this reasoning persuasive it is not in accord
with Fifth Circuit law. The case law is clear that if all
claimants stipulate that the federal court has exclusive
jurisdiction over limitation issues and the claimants will not seek
to enforce a greater damage award than the limitation fund, the
14
Odeco, 4 F.3d at 404.
6
claimants may proceed outside of the limitation action.15 While we
may have reservations concerning the breadth of this exception16 and
the correctness of condoning a multiplicity of law suits,17 some of
which will be duplicitous, we are bound to follow Fifth Circuit
law.18
Second, Appellee argues that Odeco is "entirely different and
distinguishable" from the facts presently before this Court.
Texaco sought exoneration from or limitation of liability.19
15
Complaint of Port Arthur Towing M/V MISS CAROLYN, 42 F.3d
312, 316 (5th Cir.1995); Odeco, 4 F.3d at 404.
16
But Odeco indicates that this should not be the focus of
our concern. "If the purpose of the Limitation Act were to
accomplish judicial efficiency as well as limitation of
liability, this case would clearly call for [a] concursus
proceeding. But the Supreme Court explained in Lake Tankers, 354
U.S. at 152-53, 77 S. Ct. 1272-73, that liability may and should
be limited consistent with preserving the claimants' right to
proceed in the fora of their choice." Odeco, 4 F.3d at 404-05
(emphasis added).
17
But see Pershing Auto Rentals, Inc. v. Gaffney, 279 F.2d
546, 550-51 (5th Cir.1960) (citing Petition of Texas Co., 213
F.2d 479, 482 (2d Cir.) (stating that the "purpose of limitation
proceedings is not to prevent a multiplicity of suits but, in an
equitable fashion, to provide a marshalling of assets—the
distribution pro rata of an inadequate fund among claimants, none
of whom can be paid in full"), cert. denied, 348 U.S. 829, 75
S. Ct. 52, 99 L. Ed. 653 (1954)); Petition of Moran Transp. Corp.,
185 F.2d 386, 389 (2d Cir.1950) (stating the same), cert. denied,
340 U.S. 953, 71 S. Ct. 573, 95 L. Ed. 687 (1951).
18
See Port Arthur Towing Co., 42 F.3d at 316 (stating that
when the shipowner is not exposed to liability beyond the
limitation fund the savings to suitors clause controls); Odeco,
4 F.3d at 404-05 (quoted supra ); Magnolia Marine Transport, 964
F.2d at 1576 (stating that under proper stipulations, multiple
claimants should still be allowed to proceed with their state
court claims).
19
Rule F of the Supplemental Rules for Certain Admiralty and
Maritime Claims provides that "[t]he complaint may demand
exoneration from as well as limitation of liability." Therefore,
7
Echoing the district court, Appellee contends that the case before
us is a "serious exoneration" suit and Odeco did not discuss
exoneration. Accordingly, Odeco should be restricted to suits
seeking limitation of liability only.
We find this argument unpersuasive for two reasons. First,
shipowners routinely seek exoneration and limitation of liability
in the alternative. In fact, Odeco filed a declaratory judgment
action requesting the court to determine that the capsule was not
a vessel, that the injuries were not caused by the vessel's
negligence, and that any action for damages was barred by § 905(a)
of the Longshore and Harbor Worker's Compensation Act. Though the
Odeco court did not label this action as one of exoneration, we
must recognize it for what it is. If any court had entered a
declaratory judgment on one of these issues, Odeco would have been
exonerated. For this reason, we find that "exoneration" was before
this Court in Odeco. Second, Appellants have agreed to stipulate
that the limitation court is not bound by any decisions by other
courts on issues relating to limitation of liability and
exoneration. Therefore, the shipowner's right to limit liability
and litigate the issue of exoneration in federal court is protected
by stipulation. For these two reasons, we are compelled to follow
Odeco.
Texaco may assert its exoneration claim along with its limitation
claim. Accord Providence and New York Steamship Co. v. Hill Mfg.
Co., 109 U.S. 578, 595, 3 S. Ct. 379, 390, 27 L. Ed. 1038 (1883)
(stating that the questions to be settled in the proceedings are
"first, whether the ship or its owners are liable at all ... and,
secondly, if liable, whether the owners are entitled to a
limitation of liability").
8
During oral argument Appellants agreed to enter into
stipulations that would protect any rights Appellee alleged in the
federal court pleadings, including the right to receive
exoneration, and agreed to consolidate their suits and litigate
them in one state trial. We direct the district court to evaluate
these new stipulations, and to consider the following issues and
suggestions in determining the adequacy of the stipulations.
First, if a direct action claim has been or may be asserted against
the underwriters of Texaco and TEPI in state court, then the
stipulations may include a waiver by Williams and Ellender
similarly protecting these insurance carriers from collection of
any state court judgment unless and until the federal court's
limitation of liability proceeding determines that Texaco and TEPI
were not entitled to either exoneration from or limitation of
liability.20 Second, the district court should determine if any
potential derivative actions exist; if so, then the stipulations
should cover these as well. Third, the district court should
determine if the casualty gave rise to any environmental claims
that were timely filed; if so, the stipulations should require
20
We note that "the Act itself affords ... underwriters no
right of limitation." Magnolia, 964 F.2d at 1576. This opinion
should not be construed to create a right for underwriters to
limit their liability or to take shelter under stipulations
protecting the shipowner. Any right to limit an underwriter's
liability is purely contractual in nature. "[T]he underwriters
are not entitled to a stipulation in their favor." Id. (emphasis
added). We are not requiring the claimants to enter into
stipulations protecting the underwriters; however, because the
claimants were so willing to enter into any stipulation, so as
"to take advantage of the perceived magnanimity of ... [state]
juries," we are suggesting this stipulation. Odeco, 4 F.3d at
405.
9
joinder of the claimants. If the stipulations cover all potential
claimants and adequately protect Texaco's right to receive
exoneration or to limit liability, then the stay should be lifted,
allowing Appellants to pursue their saving to suitors remedies.
We reverse the district court's refusal to lift the stay, and
remand this action to the district court to evaluate the adequacy
of Appellants' new stipulations consistent with this opinion.
REVERSED and REMANDED.
10