## F I L E D United States Court of Appeals Tenth Circuit 

### MAY 3 2004 

### PATRICK FISHER Clerk 

### PUBLISH UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

MAGNOLIA MARINE TRANSPORT COMPANY, as owner of the Robert Y. Love, its Engines, Tackle, etc., in a cause of exoneration from or limitation of liability,

Petitioner-Appellee,

_____________________________ STATE OF OKLAHOMA,

Movant-Appellant. No. 03-7023

Appeal from the United States District Court for the Eastern District of Oklahoma (D.C. No. 02-CV-615-P)
Greg S. Eldridge, Assistant Attorney General (E. Cl yde Kirk, Assistant Attorney General, with him on the briefs), Litigation Sectio n, State of Oklahoma, for Movant-Appellant. Michael Burrage of Burrage Law Firm, Durant, Oklaho ma (Sean Burrage of Taylor, Burrage, Foster, Mallett, Downs & Ramsey, C laremore, Oklahoma, with him on the brief), for Petitioner-Appellee.

Before SEYMOUR , McKAY , and O’BRIEN , Circuit Judges.

SEYMOUR , Circuit Judge.-2-

This appeal arises out of a tragic accident in whic h a tugboat owned by Magnolia Marine Transport Company (Magnolia) collid ed with the Interstate 40 bridge over the Arkansas River near Webbers Falls, Oklahoma. Magnolia filed a petition in district court in Mississippi for limit ation of liability under admiralty law. Meanwhile, the State of Oklahoma filed a suitfor damages against Magnolia in Oklahoma state court, which Magnolia removed to federal district court. Thereafter, the Mississippi district court transferred Magnolia’s limitation petition to the federal court in Oklahoma. The State filed a motion to dismiss the limitation petition on Eleventh Amendment grounds, which the district court denied. An order denying a motion to dismiss on th e basis of state sovereign immunity is immediately appealable under the collat eral order doctrine. P.R. Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc. , 506 U.S. 139, 146-47 (1993); Innes v. Kan. State Univ. (In re Innes) , 184 F.3d 1275, 1277 (10th Cir. 1999). The State appeals, and we affirm.

I. On May 26, 2002, the “M/V ROBERT Y. LOVE,” a tugboat owned and operated by Magnolia and piloted by Captain William Joe Dedmon, was pushing two empty barges up the Arkansas River in Oklahoma. As the tugboat neared the Interstate 40 bridge, Captain Dedmon suffered a for m of cardiac arrhythmia that-3-

caused him to lose consciousness for several minute s. While Captain Dedmon was unconscious, the tugboat pushed the barges into the bridge, causing the bridge to collapse into the river. Several vehicle s plunged off the damaged overpass. Fourteen people died and five suffered i njuries. The subsequent search and rescue, repair, loss of use, and clean-up costs required the State of Oklahoma to expend more than fifty-eight million dollars. One week after the accident, Magnolia filed a petit ion in federal district court in Mississippi invoking the procedures of the Limitation of Shipowners’ Liability Act, 46 U.S.C. §§ 181-189. The next day, the State filed suit for damages in Oklahoma State court. After removal of the State’s suit and transfer of Magnolia’s limitation petition, the parties’ leg al actions were consolidated in federal district court in Oklahoma. Positing “thatunder the United States Constitution, the State of Oklahoma cannot be prohi bited from pursing [sic] its claim against Magnolia in the courts of Oklahoma, n or can the State be forced, without its consent, to pursue its claims in federa l court,” the State claimed it was “entitled to sovereign immunity from this limitatio n proceeding and from the Limitation Act.” Aplt. App. at 77. We now conside r the State’s appeal from the district court’s denial of the its motion to dismis s on immunity grounds.-4- II. The Limitation of Shipowners’ Liability Act is at t he heart of this appeal. Because issues pertaining to it are somewhat unfami liar in our landlocked circuit, we begin with an explication of the Act’s central f eatures and the procedures employed to implement them. “Limitation of liability is an important theme of a dmiralty law.” 2 T HOMAS J. S CHOENBAUM , A DMIRALTY & M ARITIME L AW§ 15-1, p. 136 (2d ed. 1994). A feature of continental European sea codes since med ieval times, it came to English admiralty law in the eighteenth century and to this country in 1851 as the Limitation of Shipowners’ Liability Act. Id. at § 15-1, p. 136-37. The Act provides for the enjoining of pending suits againstshipowners and their consolidation in a single federal court “so that li ability may be determined and limited to the value of the shipowner’s vessel and freight pending.” Id. at § 15-1, p. 137. The apparent purpose of the Act was to enc ourage shipbuilding in this country and to place the U.S. shipping industry on equal footing with foreign competitors who enjoyed such limitation procedures at home. Id. Because the Act was “badly drafted even by the stan dards of the time,” the Supreme Court codified a procedure for its implemen tation in Rule F of the Admiralty Rules. Id. at § 15-1, p. 137; § 15-4, p. 144. Rule F provide s a single forum for the determination of “(1) whether the ves sel and its owner are liable at-5-

all; (2) whether the owner may in fact limit liabil ity to the value of the vessel and pending freight; (3) the amount of just claims; and (4) how the fund should be distributed to the claimants.” Id. at § 15-5, p. 144. While a shipowner may only file a petition for limitation in admiralty jurisdi ction in federal district court, he or she may plead limitation as a defense to an acti on seeking damages in federal
or state court. Id. at § 15-5, p. 144-45 & n.6. As a condition of limitation, the shipowner shall deposit with the court, for the benefit of cl aimants, a sum equal to the amount or value of the owner’s interest in t he vessel and pending freight, or approved security therefor, and in addition such sums, or approved security therefor, as the court f rom time to time may fix as necessary . . . .
F ED
. R. C IV
. P. Supp. Rule F(1). In addition, the security post ing must include six percent yearly interest. 2 S CHOENBAUM , § 15-5, p. 147. Once a shipowner deposits this sum, the court will stay all other pr oceedings against the shipowner relating to the incident at issue and compel claima nts to file for recovery in the limitation court under penalty of default. Id. at § 15-5, p. 147-49. The burden of proof in a limitation proceeding para llels that in a standard suit for damages. Claimants against the shipowner must prove the vessel’s negligence or unseaworthiness caused their losses. If they so prove, the burden shifts to the shipowner to prove there was no “desi gn, neglect, privity or knowledge” on his or her part. Id. at § 15-5, p. 150. “If the shipowner is not-6-

exonerated,” but the court finds he or she is entit led to limitation of liability, “payment to claimants is made on a pro-rata basis,” generally out of the “security deposited with the court.” Id. at § 15-7, p. 155.

III. The State of Oklahoma insists its constitutional so vereign immunity from suit prevents Magnolia from invoking the procedures of the Limitation of Shipowners’ Liability Act as to the State’s claim f or damages. The logical starting point for our analysis of this propositionis the text of the Eleventh Amendment to the United States Constitution. The Eleventh Amendment mandates that “[t]he Judicia l power of the United States shall not be construed to extend to any suitin law or equity, commenced or prosecuted against one of the United States by Citi zens of another State, or by Citizens or Subjects of any Foreign State.” U.S. C ONST . amend. XI. The question we must first answer, therefore, is whether Magnoli a’s limitation petition constitutes a suit “commenced or prosecuted against ” the State of Oklahoma. For reasons we explore below, the answer to that questi on is no. The State advocates a different starting point for our analysis. Oklahoma would have us begin with “the two-prong test enunci ated by the United States Supreme Court” in College Savings Bank v. Florida Prepaid Postseconda ry-7-

Education Expense Board, 527 U.S. 666 (1999). Aplt. Br. at 2. In that ca se, the Court “recognized only two circumstances in which an individual may sue a State”: (1) where Congress has authorized the suit pursuant to its enforcement power under the Fourteenth Amendment, and (2) where the State has waived its sovereign immunity. Florida Prepaid, 527 U.S. at 670. In urging these two exceptions to sovereign immunity as this court’s an alytical starting point, the State misses a crucial distinction between Florida Prepaid and the case before us.
In Florida Prepaid, College Savings Bank sued Florida Prepaid Postsec ondary Education Expense Board, an arm of the State of Flo rida, for violations of the Lanham Act. Id. at 671. Clearly, the Bank’s suit was a “suit agai nst a state,” which the Court presupposed in recognizing “only tw o circumstances in which an individual may sue a State .” Id. at 670 (emphasis added). Here, to the contrary, the State of Oklahoma has su ed Magnolia for damages. Magnolia neither named the State as a def endant in its limitation proceeding nor served process upon the State. The limitation proceeding merely provides a forum for establishing a shipowner’s rig ht to limitation of liability and managing disbursement of a limitation fund to claim ants who prove Magnolia is liable to them. The limitation proceeding thus lac ks the traditional characteristics of a suit against the State. The State argues that whether Magnolia’s limitation proceeding is a suit1 Ex Parte Young , 209 U.S. 123 (1908). -8- against a state is irrelevant to Eleventh Amendmentanalysis. According to the State, the Supreme Court “has repeatedly held that even though a state is not named a party to an action, the suit may nonetheles s be barred by the Eleventh Amendment.” Aplt. Rep. Br. at 2. In support of th is argument, the State cites Edelman v. Jordan , 415 U.S. 651 (1974), and Ford Motor Co. v. Department of Treasury , 323 U.S. 459 (1945). The State is correct that p laintiffs in neither case named a state as a party. Edelman and Ford Motor , however, were both suits against state officers

. See Edelman , 415 U.S. at 653; Ford Motor Co. , 323 U.S. at 460. Any language in either case implying that a s tate need not be a party in order for its sovereign immunity to bar the suit se rved only to explain that the legal fiction of the “officer suit” under Ex parte Young 1 would not be allowed to circumvent sovereign immunity when the monetary rel ief ordered by the court required payment from the public treasury. See Edelman , 415 U.S. at 664 (officer suit “does not extend so far as to permit a suit wh ich seeks the award of an accrued monetary liability which must be met from t he general revenues of a State”); Ford Motor Co. , 323 U.S. at 462 (“Where relief is sought under ge neral law from wrongful acts of state officials, the sove reign’s immunity under the Eleventh Amendment does not extend to wrongful indi vidual action . . . . Where, however, an action is authorized by statute againsta state officer in his official2 See Fed. Mar. Comm’n v. S.C. State Ports Auth. , 535 U.S. 743, 754 (2002)

(citing the cases the State relies on as holding El eventh Amendment immunity applies to suits by Indian Tribes, foreign nations, and federal corporations, as well as to suits by private parties in state court, in a dmiralty proceedings, and by a state’s own citizens under federal question jurisdi ction). -9- capacity . . . the Eleventh Amendment operates to b ar suit.”). These cases are inapposite to a case such as this one where neitherthe state, nor its agency, nor its officer is a defendant. The State derides as mere “semantics” any emphasis on the Eleventh Amendment’s application only to suits “commenced orprosecuted against” a state, and insists the Supreme Court has carried st ate sovereign immunity beyond the “literal wording of the Eleventh Amendment.” Aplt. Rep. Br. at 7-8. The Supreme Court has undeniably extended the protectio ns of state sovereign immunity beyond the text of the Eleventh Amendment. See Alden v. Maine , 527 U.S. 706, 713 (1999) (holding that “the sovereign i mmunity of the States . . . is [not] limited by[] the terms of the Eleventh Amendm ent”). The State cites eight cases in which the Supreme Court has arguably broad ened the Eleventh Amendment’s reach and urges us to broaden it yet ag ain in the case before us. The cases the State cites are unhelpful, however. Although the cases involved new parties or fora beyond the literal language of the Eleventh Amendment, 2 each case is unquestionably a suit against a state

. See Fed. Mar. Comm’n v. S.C. State Ports Auth. , 535 U.S. 743, 747-48 (2002) (cruise ship company sued state agency-10-

for violation of the Shipping Act); Alden , 527 U.S. at 711 (probation officers sued state for violation of overtime provisions of the F air Labor Standards Act); Blatchford v. Native Village of Noatak, 501 U.S. 775, 778 (1991) (village brought equal protection challenge to state commission’s de nial of funds allegedly due and sought payment of those funds); Ford Motor Co. , 323 U.S. at 460 (manufacturing corporation sued state officer for t ax refund); Monaco v. Mississippi , 292 U.S. 313, 317 (1934) (Monaco sued Mississippi to recover on bonds issued by the state); In re State of New York, 256 U.S. 490, 495 (1921) (canal boat owners sued state officer for damages c aused by vessels chartered by the state); Smith v. Reeves , 178 U.S. 436, 437 (1900) (railroad company sued s tate treasurer to recover overpaid taxes); Hans v. Louisiana , 134 U.S. 1, 1 (1890) (citizen sued state to recover on bonds issued by S tate). Oklahoma points to no case in which the Supreme Court has extended Eleven th Amendment immunity beyond suits against a state, and we decline to do so in this case. We return, therefore, to the question of whether Ma gnolia’s limitation petition constitutes a suit against the State of Ok lahoma. We agree with every court that has addressed this issue: the limitation proceeding is not a suit against the state. See Bouchard Transp. Co., Inc. v. Updegraff , 147 F.3d 1344, 1349 (11th Cir. 1998); In re Abaco Treasure Ltd. , 1993 A.M.C. 1976, 1977 (S.D. Fla. 1993); In re Sand Bar I, Inc. , 1992 WL 84277, at *1 (E.D. La. 1992). The-11-

Limitation of Shipowners’ Liability Act creates a d efense which, as noted above, may be pled in a limitation petition invoking the p rocedures established in Rule F or in a shipowner’s answer to a suit brought in state or federal court. 2
S CHOENBAUM , § 15-5, p. 144-45. If a shipowner chooses to fil e a petition for limitation under the federal court’s admiralty juri sdiction, any claimant (including a state) must file its claim against the shipowner in the same court or risk taking none of the limitation fund as damages. Id. at § 15-5, p. 147-49. But this federal proceeding for administering a limited fund does no t transform the shipowner’s defensive position under the Act into an offensive one. Citing the Eleventh Circuit’s decision in Bouchard Transport Co. , the district court in this case analogized the limitati on proceeding to an “in rem admiralty action where the state does not have poss ession of the res.” Aplt. App. at 256-57. As in such an in rem proceeding, no specific entity is named as a defendant or formally served with process. Id. at 257. In addition, the court administering the limitation proceeding controls th e res at issue–the limitation fund–and the vessel remains under the control of th e shipowner. Id. In California v. Deep Sea Research , 523 U.S. 491, 507-08 (1998), the Supreme Court held, “[b]ased on longstanding precedent resp ecting the federal courts’ assumption of in rem admiralty jurisdiction over vessels that are not i n the possession of a sovereign, . . . the Eleventh Amend ment” poses no bar to a federal-12-

court’s in rem jurisdiction where the res is not in the possession of the State. The district court found the similarities between the a ction in Deep Sea Research and this case militated against dismissal on sovereign immunity grounds. Aplt. App.
at 257-58. The State maintains the better analogy is between t he limitation proceeding and a federal interpleader action naming state defe ndants, held barred by the Supreme Court in Cory v. White , 457 U.S. 85, 90-91 (1982). But in Cory , the Controller of the State of California and the Attor ney General of the State of Texas were the named parties. Id. at 85. And as noted by the court in Sand Bar I, “[u]nlike interpleader . . . cases, this limitation proceeding is not an attempt to resolve competing claims to a res . It is a statutory procedure to determine the

amountof recovery potentially to be split among claimant s.” Sand Bar I, 1992 WL 84277, at *2 (emphasis in original). In contras t to an interpleader action, “recovery [in a limitation proceeding] is only poss ible if those claimants succeed in proving the Petitioner’s liability . . . .” Id. (emphasis in original). In our judgment, neither Deep Sea Research nor Coryprovides the closest analogy to limitation proceedings. Rather, decisio ns examining the role of sovereign immunity in bankruptcy are more on point and instruct us to affirm the district court’s refusal to dismiss this limitationproceeding on sovereign immunity grounds.-13-

As explained by the Fifth Circuit, [i]n a bankruptcy case, in its simplest terms, a de btor turns over his assets, which constitute the estate, for liquidatio n by a trustee for the benefit of creditors according to their statutory p riorities. Bankruptcy law modifies the state’s collection righ ts with respect to its claims against the debtor, but it also affords the state an opportunity to share in the collective recovery. Texas v. Walker , 142 F.3d 813, 822 (5th Cir. 1998). Just as the c ourt assumes jurisdiction over the estate in bankruptcy, a shipo wner in a limitation proceeding turns over to the court a sum equal to his or her i nterest in a vessel and pending freight. F ED
. R. C IV
. P. Supp. Rule F(1). The court administering a limi tation proceeding stays other suits seeking collection fro m the shipowner, 2
S CHOENBAUM , § 15-5, p. 147-49, much as a bankruptcy petition acts as a stay of further actions against the debtor pursuant to 11 U .S.C. § 362. While a creditor’s ability to collect upon a debt and a claimant’s abi lity to collect against a shipowner are altered by these administrative schem es, their consolidation of claims is meant to ensure equitable distribution an d prevent premature extinction of a limited estate or fund.
In Walker , the Fifth Circuit addressed an objection to bankr uptcy proceedings styled much like Oklahoma’s objection t o Magnolia’s limitation action. See Walker , 142 F.3d at 820. Recognizing that the state’s co ntentions regarding immunity were “not specious,” id. , the court characterized the immunity argument as follows:-14-

The argument for an Eleventh Amendment bar would as sert that although the State was not a named defendant in Wal ker’s bankruptcy case, it was an indirect party because i ts legal rights were adjudicated and altered . . . when the bankruptcy c ourt discharged Walker’s debt . . . . . . . [D]ischarging the debt owed to the state eith er restrains the state from acting by enjoining it from collecting t he debt, or compels the state to act by forcing it to file a proof of c laim in bankruptcy court to collect the debt. The state is thus prese nted with a Hobson’s choice: either subject yourself to federal court ju risdiction or take nothing . . . . If the state does nothing, it is p ermanently barred from collecting its debt and receiving a pro rata share of the debtor’s estate. Id. at 821-22 (footnotes omitted). The court, neverth eless, rejected the state’s Eleventh Amendment argument, noting the state’s “ke y assumption is the equation of a bankruptcy case with a suit againstthe state, but this assumption is flawed.” Id. at 822 (emphasis in original). While that same co urt had previously held that Congress’s abrogation of sovereign immunity as to adversary actions brought against a state under the Bankruptcy Code was unconstitutional in light of the Supreme Court’s recent sovereign immunity jurisprud ence, In re Fernandez , 123 F.3d 241, 244 (5th Cir. 1997), in nonadversary bankruptcy suits such as those in Walker , the court held the Eleventh Amendment presented n o bar. Walker , 142 F.3d at 820, 822. We believe the similarities between bankruptcy and limitation proceedings illustrate the inapplicability of the Eleventh Amen dment to Magnolia’s petition in the district court. As the Supreme Court noted in the bankruptcy case of Gardner3 We recognized the continuing vitality of this princ iple in Straight v. Wyo.

Dep’t of Transp. , 143 F.3d 1387, 1392 (10th Cir. 1998). -15- v. New Jersey , 329 U.S. 565, 573-74 (1947), “[i]f the claimant i s a State, the procedure of proof and allowance is not transmittedinto a suit against the State because the court entertains objections to the clai m. The State is seeking something from the debtor. No judgment is sought a gainst the State.” 3 The same is true in a limitation proceeding under admiralty law.

IV. In sum, the State’s invocation of sovereign immunity stands the relationship between the parties on its head: it is the State th at seeks recovery from Magnolia in this case. Because Magnolia’s limitation procee ding does not implicate the State’s immunity from suit under the Eleventh Amend ment, the district court properly denied the State’s motion to dismiss. We AFFIRM

.