Opinion ID: 583906
Heading Depth: 2
Heading Rank: 3

Heading: The Stay of the State Court Proceeding

Text: 58 In assessing the propriety of the Trial Court's action in staying the state court proceedings, there are two circumstances which are determinative and must be kept clearly in mind: first, in exercising the injunctive power, the Trial Court relied expressly and exclusively on Rule F(3) of the Supplemental Rules for Certain Admiralty and Maritime Claims and not on any general injunctive power derivative from the pendency of the declaratory judgment action in the same consolidated matter as the panel opinion infers; and second, there were two claimants in the limitation of liability proceeding, Mrs. Frye for the death of her deceased husband Joseph, and Bisso for the damages to its vessel; and the aggregate of their claims exceeded the value of the Magnolia Marine vessel which is the subject of the limitation of liability proceeding. In short, the exercise of the injunctive power was attendant to the standard and historic powers given to the federal district court in limitation of liability proceedings; and this was what is characterized as a multiple-claims-inadequate-fund case. Since the decision in Pershing Auto Rentals, Inc. v. William C. Gaffney, et al., 279 F.2d 546 (5th Cir.1960, John R. Brown), the law of this Circuit has been fixed that trial of all claims must occur in the limitation of liability proceeding when multiple claims either exceed the fund or there is reasonable apprehension that they will. There are only two special circumstances when a federal court may permit a claimant or claimants to first try the issue of liability vel non and damages in actions outside of the limitation of liability proceeding: first, where there is only one claimant, Langnes v. Green, 282 U.S. 531, 51 S.Ct. 243, 75 L.Ed. 520); and second, where there are multiple claimants who stipulate that their claims in the aggregate do not exceed the value of the vessel tendered in the limitation of liability proceeding, Lake Tankers Corp. v. Henn, 354 U.S. 147, 77 S.Ct. 1269, 1 L.Ed.2d 1246 (1957). The Trial Court in our present case recognized that neither of these special situations permitting trial outside of the limitation of liability proceeding exist in the present case. If the Trial Court had simply terminated its discussion at that point, his ruling on this action would have been unassailable, but the Trial Court went on to discuss the need for the stipulations filed in this case to address rights of the marine underwriters. It was that additional language which prompted the panel majority to spend an inordinate amount of time explaining (i) why marine underwriters are not entitled to the benefits of the Limitation of Liability Act; (ii) why the marine underwriters are not entitled to concursus of claims; and (iii) why the District Court erred in merging Magnolia's statutory limitation rights with the insurer's contractual rights, all of which is unnecessary and immaterial. Bottom line, this Circuit has never approved the form and content of a stipulation to be filed by a claimant in a multiple-claim-inadequate-fund case because all of those cases are to be first tried in the limitation of liability proceeding. To the extent that the panel opinion seems to say that the Trial Court should devise an alternate form of stipulation, I suggest that the panel is making new law inconsistent with settled precedent in this Circuit. 59 Furthermore, the stay order as issued by the Trial Court prohibits state court actions against Magnolia Marine and/or its insurers. There is clear and express authority in this Circuit for that injunctive relief applying to both the shipowner, Magnolia Marine, and its marine insurers. Guillot v. Cenac Towing Co., 366 F.2d 898 (1966). Speaking for this Court in that case, Judge John R. Brown stated: 60 That means that as to the direct action against the insurers of the shipowner as such, the injunction was proper and the trial thereof must be stayed until disposition of the limitation proceedings. at p. 905. 61 Consequently, even it the panel majority is correct that the Trial Court erred in not dismissing the marine insurers declaratory judgment action, the Frye and Bisso claimants are still not entitled to try first their suit against the marine underwriters in a state court proceeding under the Louisiana Direct Action Statute. 62 Finally, I want to register my disagreement with the inference, which the panel opinion attempts to create on page 1578 of its opinion, that the issues to be litigated in the Federal Limitation of Liability Proceeding relate only to issues affecting the shipowner's right to limitation, such as ownership, privity knowledge, and valuation. See Guillot v. Cenac Towing, 366 F.2d 898, 906 (5th Cir.1966). First of all, the Guillot opinion, as mentioned above, should have been cited by the panel majority (but was not) for the proposition that the injunctive relief issued by the District Court under Rule F(3) against any direct action in the state court was proper equally as to the marine insurers as to the owner of the vessel involved in the limitation of liability proceeding. Rather the panel opinion selects a phrase out of the second part of the Guillot opinion dealing with the propriety of a simultaneous state court action against the corporate officers of the Shipowner and converts that selected phrase from a specific recognition, of two elements (privity and knowledge) which are clearly exclusive to the limitation of liability proceeding, to a general classification of all exclusive elements which it is not. In my view, the elements of fault and liability are absolutely essential elements of the determination of the shipowner's right to limit liability. Certainly in this case involving collisions in Louisiana waters between three navigating vessels and the potential of a direct action in state court against marine underwriters, the words of Justice Clark in effecting the compromise in Cushing are controlling and determinative: 63 Our only interest is to make certain that such actions [against insurance companies under the Louisiana Direct Action Statute] do not interfere with the Federal Limitation Proceeding. To do this we need only require that the limitation proceeding be concluded first and the owner's liability settled under. 347 U.S. at p. 425, 74 S.Ct. at p. 616 (emphasis added) 64 I believe, therefore, that the panel opinion muddies what I thought would have been the settled waters of our Circuit's juris prudence that trial in the limitation of liability proceeding would encompass all issues relevant to a determination of whether the shipowner is entitled to be exonerated from or limited as to its liability for the casualty involved. I think the panel opinion is in error in suggesting that such a determination can be made only as to issues affecting the shipowner's right to limitation, such as ownership, privity, knowledge, and valuation without including all issues regarding liability.