Court Opinion

ID: 3003430
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:43:48.32437+00
Date Added: 2024-06-11T11:45:52.749141
License: Public Domain

In the

United States Court of Appeals
               For the Seventh Circuit

No. 08-1545

A MERICAN R IVER T RANSPORTATION C OMPANY,

                                                    Plaintiff-Appellee,
                                  v.

A NTOINETTE R YAN,
                                                             Defendant.

A PPEAL OF:

   K ERRIE L. V ESOLOWSKI,
                                                 Claimant-Appellant.

             Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
               No. 07 C 218—Elaine E. Bucklo, Judge.

   A RGUED F EBRUARY 11, 2009—D ECIDED A UGUST 27, 2009

 Before B AUER, R IPPLE and W OOD , Circuit Judges.
  W OOD , Circuit Judge. When a barge pushed by a
towboat owned and operated by American River Trans-
2                                               No. 08-1545

portation Company (“Artco”) collided with a motor
boat, passenger Kerrie Vesolowski was injured. After
Vesolowski sued Artco for negligence in the Circuit
Court of Cook County, Artco filed a complaint in federal
court under the Shipowner’s Limitation of Liability Act
(“Limitation Act”), 46 U.S.C. §§ 30501 et seq., seeking
exoneration from, or limitation of, liability. This appeal
considers whether the district court had the authority
to stay Vesolowski’s state suit while it decides if Artco
is entitled to limitation or exoneration. After initially
permitting such a stay, the district court changed its
mind, ordered Vesolowski to dismiss the suit, and found
her in contempt for maintaining it. Because we find that
the law permits Vesolowski to maintain her suit under
stay, we reverse the judgment of dismissal and remand
for further proceedings consistent with this opinion.

                              I
   On September 14, 2006, a motor boat driven by Jason
Aardema collided with a barge pushed by the Donna
Jean, a towboat owned and operated by Artco. Three
passengers on the motor boat—Vesolowski, Antoinette
Ryan, and Mark Bigos—were injured in the collision.
After Vesolowski followed up with her state-court negli-
gence action against Artco, Artco turned to the federal
court for relief. Under the Limitation Act, a shipowner’s
liability is limited to the value of the ship, so long as the
owner proves that the acts and losses were “done, occa-
sioned, or incurred, without the privity or knowledge
of the owner.” 46 U.S.C. § 30505(b). But determining
No. 08-1545                                              3

whether a shipowner qualifies for limited liability takes
time. To protect the potentially qualified shipowner
during that time, the Limitation Act requires that
“[w]hen an action has been brought under this section . . .
all claims and proceedings against the owner related to
the matter in question shall cease.” § 30511(c). Artco
accordingly coupled with its complaint a request for an
injunction under § 30511(c). The district court responded
with the following order, issued under the authority of
Supplemental Rule F of the Federal Rules of Civil Proce-
dure on January 24, 2007:
   FURTHER ORDERED that the institution and pros-
   ecution of any suits, actions or legal proceedings of
   any nature or description whatsoever in any court
   whatsoever, against the Petitioner or the M/V DONNA
   JEAN in respect of any claim arising out of or con-
   nected with the said voyage and incident, exception
   in this proceeding, be hereby stayed and restrained
   until the hearing and determination of this pro-
   ceeding . . . .
In compliance with this order, Vesolowski stayed her
state suit against Artco.
  The state-court suit remained stayed for a year, until
January 2008, when Artco filed a motion asking the
district court to find Vesolowski, Ryan, and Edward
Bigos (the administrator of Mark Bigos’s estate) in con-
tempt and to impose sanctions against them. Unlike
Vesolowski, Ryan, and Bigos had filed state-court actions
against Artco after the January 24 injunction, and the
bulk of Artco’s motion addresses them. Only four sen-
4                                             No. 08-1545

tences describe why Vesolowski—as opposed to Ryan
and Bigos—should be punished. Those sentences allege
that Vesolowski filed a “Third Amended Complaint
naming Artco as a defendant” and that the district
court’s orders “prohibit Artco from being sued at all.” We
pause to note that the first assertion mischaracterizes
the facts. Vesolowski did file a Third Amended Com-
plaint in December 2007 adding new defendants, but
those new defendants did not include Artco. Artco
had been named as a defendant since Vesolowski’s
first complaint, which was filed before the January 24
injunction. Artco’s motion also discusses a November 29,
2007, order of the district court that denied Aardema’s
request to modify the injunction. But Aardema, unlike
Vesolowski, initiated his state claim against Artco after
the January 24 injunction.
  Although it did not mention these points earlier, Artco
now suggests that there were two additional justifica-
tions for its motion seeking a contempt order and sanc-
tions against Vesolowski. First, Vesolowski had filed a
Second Amended Complaint in October 2007 changing
the allegations against Artco; she added two new theories
of negligence—failure to sound proper whistles and
failure to exhibit proper lights—and she supplied rule
numbers for her original allegations. Second, Artco com-
plains, Vesolowski asked the state court to remove her
case from the bankruptcy calendar, where it had been
placed in error. The suit remained stayed at all times
and, while Artco attended the state hearings, Artco never
had to respond to Vesolowski’s actions or answer the
complaint.
No. 08-1545                                                  5

   Artco’s motion for contempt and sanctions was
originally noticed for presentment on January 30, but
the district court cancelled the hearing after Vesolowski
filed her response. The court granted Artco’s motion
for contempt and sanctions on February 5 with the follow-
ing explanation:
    Artco’s motion for contempt and sanctions for
    repeated violations of the court’s orders of January 24,
    2007 and November 29, 2007 against Antoinette
    Ryan, Kerrie Vesolowski and Edward Bigos is
    granted. . . . As I have said before, there is no exception
    to the statute barring the state court action against
    Artco that is applicable here, nor have respondents
    argued that they fall within one of the eliminated
    exceptions under which courts have allowed the
    filing of state actions. Therefore, under the law they
    may not continue any action against Artco in state court,
    even if the action is stayed. They are protected by the
    fact that they can file an action for contribution in
    this court, as I have previously stated. The state
    court actions against Artco shall be dismissed within
    one week. Respondents shall pay Artco’s costs in
    bringing this motion.
(emphasis added). Vesolowski obeyed the order and
dismissed her state-court action, but she filed a motion
for reconsideration. After the district court denied that
motion, she filed this appeal. This order matters to
Vesolowski because if it stands, she loses the ability to
sue Artco in state court (and thus to have a jury decide
her negligence claims), because Illinois’s two-year statute
of limitations for personal injury claims, see 735 ILCS 5/13-
6                                               No. 08-1545

202, will have run by that time, and the parties have
not directed our attention to any tolling rule that would
permit a late filing.

                             II
  Our assessment of the district court’s order is compli-
cated by Artco’s shifting explanation for it. Artco’s argu-
ment to the district court, abbreviated as it was, seems
to have been that the Limitation Act and the January 24
injunction prevent Vesolowski from maintaining her
state suit, even if that suit is stayed. The district court
appears to have agreed, though the order fails to distin-
guish Vesolowski from Bigos and Ryan and does not
explain why a stay is not a satisfactory way of meeting
the requirement of § 30511(c) that “all claims and pro-
ceedings against the owner related to the matter in ques-
tion shall cease.”
   On appeal, Artco adopts yet another argument: the
order to dismiss the suit, it urges, is a sanction for
Vesolowski’s prosecution of the state suit. Artco now
concedes that Vesolowski could have maintained her
suit under stay so long as she refrained from “prosecuting”
it. We therefore have two possible explanations for
the district court’s order: (1) Vesolowski cannot main-
tain her suit under stay (or, in other words, nothing less
than dismissal will do once § 30511(c) is invoked); and
(2) Vesolowski violated the injunction by prosecuting
the suit and the order to dismiss the suit is a sanction.
We need not guess which of these lay behind the
district court’s order because, as we discuss below, neither
reason justifies requiring Vesolowski to dismiss her suit.
No. 08-1545                                                7

  But Artco’s federal complaint is still pending, and so
the first thing we must address is our jurisdiction over
Vesolowski’s appeal. Under 28 U.S.C. § 1292(a)(1), this
court has jurisdiction over modifications of injunctions.
We do not, however, have jurisdiction over orders inter-
preting injunctions. See ACORN v. Illinois State Bd. of
Elections, 75 F.3d 304, 306 (7th Cir. 1996). Artco, which
has a vested interest in avoiding immediate review of
the February 5 order, insists that it merely interprets
the January 24 injunction. Vesolowski defends appel-
late jurisdiction with the arguments that the February 5
order altered the legal relationship between the parties
and that it is sufficiently distinct from the underlying
merits of Artco’s suit to fall within the collateral order
doctrine. We take these points in turn.
  To determine the consequences of a contempt order,
we must “look beyond the characterization given the
contempt order by the parties and the district court to
the actual effect of that order.” Motorola, Inc. v. Computer
Displays Int’l, Inc., 739 F.2d 1149, 1155 (7th Cir. 1984). As
Vesolowski notes, the key question is whether the order
“alters the legal relationship between the parties,” id., or
“raises new substantive issues or material,” Buckhanon
v. Percy, 708 F.2d 1209, 1213 (7th Cir. 1983).
  The January 24 injunction ordered that the “institution
and prosecution” of suits be “stayed and restrained.” No
one asserts that Vesolowski instituted a brand new
lawsuit after the date of that injunction. The dispute
revolves around the question whether, after that date,
she prosecuted her action. Nothing in the January 24
8                                               No. 08-1545

injunction said anything about dismissing existing litiga-
tion; indeed, the very use of the word “stay” implied
that Vesolowski could go to the state court and put
that lawsuit on ice until the federal proceedings were
concluded. That is what she did. Not until the order of
February 5 did the district court say anything to the
contrary. In the latter order, it said, in essence, that a
stay was not good enough; instead, it wrote, “under
the law [Vesolowski] may not continue any action
against Artco in state court, even if the action is stayed.”
The February 5 order therefore alters the January 24
injunction by requiring the dismissal of previously filed
state suits. Artco argues that the later order cannot be
a modification because it does not use words like “mod-
ify” or “enjoin,” but, as Motorola and Buckhanon make
clear, it is the substance that matters. The substance
here—an order requiring Vesolowski to dismiss her
state suit and thereby costing Vesolowski her choice of
forum and the opportunity to have a jury trial—alters
the legal relationship between the parties and changes
the original injunction. The order therefore modifies
the injunction and we have jurisdiction over it under
§ 1292(a)(1).
   Artco resists this conclusion with a final argument
based on Moglia v. Pacific Employers Ins. Co., 547 F.3d
835 (7th Cir. 2008). That case, it contends, precludes this
court from classifying a contempt order as an injunction.
But Moglia (which, importantly, was a case in which
appellate jurisdiction was governed by 9 U.S.C. § 16(b))
addressed a different question from the one before us.
It held that an order requiring a Trustee in bankruptcy to
No. 08-1545                                              9

sign a hold-harmless agreement was not immediately
appealable as an injunction. Moglia did not address
the question here—whether a particular order that, in
part, holds a party in contempt may at the same time
modify a preexisting injunction. It therefore provides
no support for Artco’s position.
  We add for the sake of completeness that if we are
wrong, and the better characterization of the order to
dismiss the state suit is as something that merely
interprets the earlier injunction, that would not be the
end of our appellate jurisdiction. Two possible theories
remain. First, under this alternative view, the February 5
order would meet the criteria of the collateral order
doctrine. The contempt order is reviewable as a final
order because it is conclusive, “resolve[s] important
questions separate from the merits” and is “effectively
unreviewable on appeal from the final judgment in the
underlying action.” Swint v. Chambers County Comm’n,
514 U.S. 35, 42 (1995); Motorola, Inc., 739 F.2d at 1154.
Second, depending on how broadly one construes the
provision authorizing interlocutory appeals in admiralty
cases, 28 U.S.C. § 1292(a)(3), it is possible that this too
might be a source of jurisdiction. (There is some debate
over whether it is limited to interlocutory appeals after
a determination of liability, but prior to quantification
of damages, or if it operates more expansively. See 16
C HARLES A LAN W RIGHT, A RTHUR R. M ILLER & E DWARD H.
C OOPER, F EDERAL P RACTICE AND P ROCEDURE § 3927 (2d ed.
1996). We need not resolve that issue, since we are
satisfied that our jurisdiction is secure in any event.) We
may therefore proceed to the merits.
10                                                No. 08-1545

                              III
  This court reviews both a contempt finding and a
district court’s ruling on a Limitation Act injunction
for abuse of discretion. See Stotler & Co. v. Able,
870 F.2d 1158, 1163 (7th Cir. 1989); In re Ill. Marine Towing,
498 F.3d 645, 649 (7th Cir. 2007). As always, we
review legal conclusions de novo. Id.
   As we have already noted, there are two possible justifi-
cations for the district court’s order to dismiss the
stayed state suit: first, that § 30511(c) can be satisfied only
by a dismissal of the state-court suit, and second, that
the court ordered the dismissal as a sanction for some
act that Vesolowski took that amounted to “prosecuting”
her suit. While Artco seems to have abandoned the
first theory by conceding that a stay is a permissible way
of complying with the statute (and thus Vesolowski can
keep her suit before the state court as long as it is
stayed), we want to clear up any confusion on this point.
  The Limitation Act requires that all claims and pro-
ceedings “cease” while the federal courts determine
whether the shipowner has a right to limited liability.
46 U.S.C. § 30511(c). But this provision must be inter-
preted in conjunction with the “savings to suitors” clause
in 28 U.S.C. § 1333(1), which reserves to suitors in admi-
ralty or maritime cases their common-law remedies. These
remedies include the right to select a forum and the
right to demand a jury trial—two remedies Vesolowski
loses if she must dismiss her state claim. See Lewis v. Lewis
& Clark Marine, Inc., 531 U.S. 438, 455 (2001); Pickle v. Car
Lee Searfood, Inc., 174 F.3d 444, 449 n.2 (4th Cir. 1999).
No. 08-1545                                                11

The district court believed that claimants, including
Vesolowski, are protected by the ability to file suit in
the federal proceedings. But the “savings to suitors”
clause, as interpreted in Lewis, reserves for Vesolowski
the right to pursue her claim in state court if the owner
fails to prove its right to limited liability. See also
In re McCarthy Brothers Co., 83 F.3d 821, 826-27 (7th Cir.
1996) (describing the conflict between the “savings to
suitors” clause and § 30511(c) as “significant” because
claimants have no right to a jury trial in admiralty
actions in federal court, and holding that a federal court
must allow a claimant to proceed in state court if the
owner fails to prove her right to limited liability).
  Because Vesolowski has the right to pursue the common-
law remedies afforded her in state court, the word
“cease” in § 30511(c) cannot be limited to the idea of
termination; it must also include forbearance or suspen-
sion. The Fourth Circuit so found when addressing
this issue. See Pickle, 174 F.3d at 449 n.2. Moreover, inter-
preting “cease” to permit the continuance of a suit
under stay respects the Supreme Court’s warning in Lake
Tankers Corp. v. Henn, 354 U.S. 147 (1957), that interpreting
the Limitation Act in a way that prevents claimants
from proceeding in their state cases “would transform
the Act from a protective instrument to an offensive
weapon by which the shipowner could deprive suitors of
their common-law rights . . . .” 354 U.S. at 152. Interpreting
the Limitation Act to require the dismissal of pre-existing
state suits—when combined with statutes of limitations
and the time required to resolve federal complaints—
would allow any shipowner to deprive a suitor of her
12                                             No. 08-1545

common-law rights by filing a meritless Limitation Act
complaint. Such an interpretation is flatly inconsistent
with the “savings to suitors” clause, and for that reason
we reject it. We hold that a suitor can maintain her pre-
existing state claim so long as she stays the suit during
the pendency of the Limitation Act proceedings.
  As neither the January 24 injunction nor the law
requires Veslowski to dismiss her state suit, the only
remaining point that we need to address is whether the
district court abused its discretion, on the assumption
that it ordered Vesolowski to dismiss her state suit as a
sanction. In our opinion, it did. First, we do not view the
minor steps that Vesolowski took in the state court as
“prosecuting” the action. The suit remained stayed at
all times; Artco was never required to respond to the
amended complaints; the addition of new defendants in
December 2007 did not affect Artco; and the addition
of rule numbers and two additional theories of breach
did not alter the underlying claim of negligence.
Moreover, even if we assume that Vesolowski’s actions
did amount to “prosecution,” ordering Vesolowski to
dismiss her state-court action as a sanction would be
an abuse of discretion. A civil contempt order is
designed “to compel obedience to a court order or to
compensate the contemnor’s adversary for the injuries
which result from the noncompliance.” De Manez v.
Bridgestone Firestone N. Am. Tire, LLC, 533 F.3d 578, 590
(7th Cir. 2008) (internal quotation marks omitted). On
these facts, there is no reason to believe that such a
drastic sanction was necessary to achieve those goals.
In addition, even if Vesolowski crossed the line by filing
No. 08-1545                                            13

the Second Amended Complaint, she took that action
in October, and Artco neither objected at the time nor
bothered to mention this in support of its motion for
sanctions. The district court never discussed these
issues and never explicitly found that Vesolowski prose-
cuted her suit. Given these circumstances, we are loath
to assume, as Artco urges, that the district court ordered
Vesolowski to dismiss her complaint as a sanction
for prosecuting the suit.
  We R EVERSE the order of contempt and sanctions
against Vesolowski and R EMAND for further pro-
ceedings consistent with this opinion.

                          8-27-09