Opinion ID: 6925
Heading Depth: 2
Heading Rank: 1

Heading: staying the state court proceedings

Text: 11 A shipowner facing potential liability for a maritime accident may file suit in federal court seeking protection under the Act, a statute that permits a shipowner to limit his liability for damages or injuries arising from a maritime accident to the amount or value of the interest of such owner in such vessel, and her freight then pending, 4 if the accident occurred without the shipowner's privity or knowledge. 5 When a shipowner files a complaint seeking limited liability, the federal district court stays all related claims against the shipowner pending in any forum, and requires all claimants to assert their claims in the limitation court. 6 This accords with the federal courts' exclusive jurisdiction of suits brought under the Act. 7 12 Although it has granted such exclusive jurisdiction to the federal courts, Congress has also  'sav[ed] to suitors ... all other remedies to which they are otherwise entitled'  (the saving-to-suitors clause). 8 We have previously recognized that this statutory framework has created 'recurring and inherent conflict' between the saving-to-suitors clause, with its 'presumption in favor of jury trials and common law remedies,' and the 'apparent exclusive jurisdiction' vested in the admiralty courts by the Act. 9 In connection with this tension, we have noted that [t]he 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. 10 13 The Act therefore is directed at maritime misfortunes in which the losses claimed exceed the value of the vessel and its freight. 11 But when a shipowner is not exposed to potential liability in excess of that amount, the shipowner's absolute right to limit its liability is not implicated and 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. 12 Over the years, courts have identified several exceptional circumstances in which a district court must permit a state action to proceed, even though a limitation action has been filed in federal court. Today we must determine whether the district court was here faced with such a situation.
14 As we recently explained, [c]laims may proceed outside the limitations action (1) if they total less than the value of the vessel, or (2) if [all] claimants stipulate that the federal court has exclusive jurisdiction over the limitation of liability proceeding and that [the claimants] will not seek to enforce a greater damage award until the limitation action has been heard by the federal court. 13 In this case, multiple claimants sought more in damages than the total value of the vessels and their pending cargo; thus, to proceed in state court, all claimants were first required to enter into a stipulation that would protect the shipowner's right to limit its liability.
15 The district court denied Jarreau's motion to lift the order staying his state court action, finding that the claimants had not entered into a stipulation sufficient to protect PATCO's interests. Jarreau argues that this was error, insisting that both he and Verdin, the only other crew member remaining in the suit at that time, had proposed an adequate stipulation. 16 But the record is clear that the stipulation proposed by Jarreau and Verdin was inadequate to protect PATCO's right to limit its liabilities: That agreement would not have bound all necessary parties. Even though they eventually agreed between themselves to the terms of a proposed stipulation, Jarreau and Verdin never convinced JWT to enter into it. Yet JWT was a codefendant with a cross claim against PATCO seeking damages, attorneys' fees and costs. Indeed, the fact that Jarreau, Verdin, and JWT were unable to arrive at an acceptable stipulation among themselves was confirmed when they informed the district court that they had abandoned all efforts to obtain a mutually agreeable stipulation, after which Jarreau and Verdin proceeded to try their cases before that court. 17 On this point the law is clear: When the aggregate of the damages being sought by all claimants exceeds the value of the concursus, actions in state court cannot proceed unless all claimants enter into a stipulation that adequately protects the shipowner which has filed a complaint in federal court seeking to limit its liability. 14 We recently stated that a claimant in this context includes a codefendant who is asserting a cross claim for indemnification, costs, and attorneys' fees. 15 As none dispute that JWT was doing precisely that, or that JWT refused to enter into a stipulation with Jarreau and Verdin, PATCO would have been exposed to a multiple claimant/inadequate fund situation had Jarreau been permitted to pursue his action in state court. 16 Clearly, then, the trial court would have abused its discretion had it lifted its earlier order staying Jarreau's state court proceeding. 17 In sum, not only was the district court's decision to deny Jarreau's motion to lift the stay entirely proper, it was required by law.