Court Opinion

ID: 8915172
Source: CourtListenerOpinion
Date Created: 2022-11-27 04:43:09.000235+00
Date Added: 2024-06-11T17:08:54.708522
License: Public Domain

CORNELIA G. KENNEDY, Circuit Judge.
I concur in the result reached by the majority and in the opinion except that portion which holds that Chessie’s independent claim of indemnity based on the parties’ relative degrees of negligence and its claim of contribution among joint tort-feasors are derivative of the Myhres’ claim against S&E. Op. at 645.
The majority holds that Chessie’s claims for indemnity and contribution are merely derivative of the Myhres’ claims against S & E. The majority’s analysis would permit Chessie to raise its claims in state court against S&E without a stipulation from Chessie that any state court judgment for contribution or indemnity in its favor and *647against S & E will be res judicata, or a stipulation that the District Court retains exclusive jurisdiction to decide all questions relating to limitation of liability.
As the majority recognizes, once a shipowner has filed for protection under the Limited Liability Act even a single claimant may not proceed with a state court action against a shipowner unless the claimant first stipulates that any state court judgment will not be res judicata on the extent of the shipowner’s liability, and that only the District Court will determine the value of the fund from which judgments will be paid and decide whether a given claim is subject to the limitation provisions. Langnes v. Green, 282 U.S. 531, 541-542, 51 S.Ct. 243, 247, 75 L.Ed. 520 (1931); Universal Towing Co. v. Barrale, 595 F.2d 414, 418 (8th Cir. 1979). If there remains a risk that continuation of the state court proceedings will deny a shipowner the protection afforded by the Limited Liability Act it is an abuse of discretion for the District Court to permit the state court proceedings to continue.
That risk could exist here on remand. Chessie asserts that it is entitled to either contribution or indemnity from S & E under Ohio law in the event the Myhres obtain a favorable judgment against Chessie in state court. A court assuming as the majority does that Chessie can recover no more from S & E than the Myhres can, because its claims derive from the Myhres’, would not require Chessie to stipulate that the admiralty court may decide all limitations questions before letting Chessie proceed in state court. The following would then be possible. The Myhres could win a large judgment against Chessie and S & E jointly in the state court, say $1,000,000. Chessie could also win a judgment in state court entitling it to contribution from S & E for anything it pays the Myhres in excess of one-half the judgment, or $500,000. Because of the stipulation they have filed with the District Court the Myhres could collect no more from S & E than the value of the limitation fund as determined by the District Court. If the fund contains only $250,000 as S & E alleges, then Chessie, jointly and severally liable, would be obligated to pay the Myres the unpaid balance of the judgment, or $750,000. Under its right to contribution Chessie would be entitled to recover from S & E any excess over $500,000 that it paid the Myhres, or $250,-000. Since Chessie did not stipulate that any state court judgment in its favor would not be res judicata on the limitation question it would then have a $250,000 claim against S & E that was not subject to limitation. The result would be that S & E would have to pay a total of $500,000 on account of the injury to Mr. Myhre when under the Limited Liability Act it should only have been liable for the value of the vessel, or $250,000. This is a clear violation of the Limited Liability Act.*
There is caselaw to support the majority’s position but it is not persuasive. See Universal Towing Co. v. Barrale, supra, 595 F.2d at 419; Helena Marine Service, Inc. v. Sioux City, 564 F.2d 15, 19 (8th Cir. 1977), cert. denied, 435 U.S. 1006, 98 S.Ct. 1875, 56 L.Ed.2d 387 (1978); In re Republic of (South) Korea, 175 F.Supp. 732, 735 (D.Or. *6481959). Each of these courts states that a third party’s claim for indemnity from the shipowner is merely derivative of the plaintiff’s claim against the shipowner, so does not create a risk of unlimited liability that prevents the state court proceeding from continuing. In fact, if the third party claim is derivative of anything it is derivative of the plaintiff’s claim against the third party, not plaintiff’s claim against the shipowner. The third party’s claim against the shipowner arises because the plaintiff has succeeded against the third party, not because the plaintiff may have succeeded against the shipowner.
Universal Towing and the majority both assume that a third party’s indemnification or contribution from a shipowner cannot increase the shipowner’s liability beyond the plaintiff’s limited recovery from the shipowner. See 595 F.2d at 419; ante 645. The assumption is unwarranted. A plaintiff’s state court judgment against the shipowner is subject to limitation only because the plaintiff was required to file a stipulation to that effect before his state court lawsuit could proceed. The plaintiff’s stipulation had no effect on his potential recovery from the third party or that third party’s claim for contribution or indemnity. Absent a stipulation from the third party there is no assurance that the shipowner’s liability to the third party will be limited.
The majority also contends that only one damages award may, in effect, be enforced against the shipowner. This is true in the sense that there is only one total damage award to the plaintiff and the third party may recover from the shipowner no more than it was required to pay the plaintiff. However, although a judgment in favor of a third party for indemnity or contribution will not increase the total award the plaintiff receives, it may alter the proportion paid by the shipowner and third party. If the majority’s position prevails the award will be subject to limitation to the extent it is asserted by the plaintiff but not to the extent it is asserted by the third party. This happens because a party claiming indemnity or contribution is not limited to the rights of the plaintiff against the co-defendant or bound by plaintiff’s partial waiver of his rights. It asserts its own rights which arise by statute or at common law.
The fact that a third party’s claim against a shipowner is derivative of the plaintiff’s claim against the third party rather than the plaintiff’s claim against the shipowner distinguishes this case from Petition of Humble Oil & Refining Co., 210 F.Supp. 639 (S.D.Tex.1961), aff’d sub nom., Humble Oil & Refining Co. v. Reagan, 311 F.2d 576 (5th Cir. 1962). In Petition of Humble Oil a workmen’s compensation insurance company paid a claim to the estate of a deceased seaman. The seaman’s estate then sued the shipowner and the insurance company claimed a right to be subrogated to any recovery the estate won from the shipowner to the extent of the payment it had already made. The court properly held that this claim of subrogation, which would arise only if the estate recovered against the shipowner and could come from no source other than plaintiff’s recovery against the shipowner, was derivative of the estate’s claim and did not create a risk of unlimited liability. In Petition of Humble Oil, there was no third party claim against the ship. The insurance company’s claim was against any award the estate received. By contrast, in the instant case Chessie’s potential claim against S & E would not be satisfied out of any award S & E must pay the Myhres. It arises independently and would arise, if at all, because the Myhres did not receive sufficient money from S & E.
For these reasons I think Universal Towing, Helena Marine, and Republic of (South) Korea are in error. I would instead follow the dictum of Judge Learned Hand in W. E. Hedger Transportation Corp. v. Gallotta, 145 F.2d 870, 872 (2d Cir. 1944), quoted in the majority’s footnote 16. It is a mistake to say that Chessie’s indemnity and contribution claims are merely derivative of the Myhres' claim against S & E. They are separate claims based on what Chessie must pay to the Myhres, not limited by what S & E must pay the Myhres, and must be sepa*649rately dealt with before the state court action can properly proceed.
As stated previously, I concur in the remainder of the majority’s opinion.

 Chessie might also assert a claim for common law indemnity on the ground that even if it was negligent its negligence was passive, while S & E was actively negligent and so is primarily responsible for the injury to Mr. Myhre. We need not consider the likelihood that Chessie will actually prevail on this indemnity theory. In another case a third party claiming indemnity from a shipowner will prevail, and the rule laid down by the majority exposes that shipowner to unlimited liability in this Circuit.
Consider the following example for which I have borrowed the names of the parties in this lawsuit. The Myhres obtain a judgment against both Chessie and S & E jointly for $1,000,000. On the theory that it was only passively negligent and S & E was actively negligent Chessie obtains an indemnity judgment against S & E for whatever it must pay to satisfy the Myhres’ judgment. On these facts, S & E would pay the Myhres no more than the value of the limitation fund, or $250,000. Thus, Chessie would have to pay the Myhres $750,-000 but would be entitled to collect that amount from S & E. Because of our Court’s decision in the instant case there would be no bar to Chessie’s collecting that money from S & E. This is flatly inconsistent with the protection afforded shipowners by 46 U.S.C. § 185.