In re Illinois Marine Towing, Inc.

498 F.3d 645

In the Matter of the Complaint of ILLINOIS MARINE TOWING, INCORPORATED a Corporation, for Exoneration from, or Limitation of Liability.

No. 06-2104.

United States Court of Appeals, Seventh Circuit.

Argued April 11, 2007.

Decided August 20, 2007.

Gary T. Sacks, argued, Goldstein & Price, St. Louis, MO, for Plaintiff-Appellant.

Karen L. Kendall, Craig L. Unrath, argued, Heyl, Royster, Voelker & Allen, Ralph D. Davis, Janssen Law Center, John P. Edmonds, Peoria, IL, Michael A. Snyder, Snyder McGovern, Chicago, IL, for Defendants-Appellees.

Before CUDAHY, KANNE, and WOOD, Circuit Judges.

CUDAHY, Circuit Judge.

Illinois Marine Towing, Inc. ("IMT") was involved in a marine collision which resulted in injuries and one death. After the injured parties commenced lawsuits in state court, IMT filed a petition in the federal district court to limit liability pursuant to the Limitation of Shipowners' Liability Act, 46 U.S.C. § 30505. On the basis of this petition, the district court enjoined the state court proceedings. The claimants filed a motion to modify the stay of their state court actions, attaching stipulations which conceded the district court's exclusive jurisdiction over all limitation of liability issues and waived any claim of res judicata. The district court found that these stipulations adequately protected IMT's interest in limiting its liability and therefore granted the claimants' motion to modify the stay and allow them to litigate in state court. At the same time, the district court maintained jurisdiction to decide whether IMT's liability should be limited. IMT appeals the district court's decision. We affirm.

I. Background

This case involves personal injuries and a death that resulted from a drunken boating collision on May 21, 2004. Joshua Broughton, Tim Flemming, Stephen Turner and Eric Allen were passengers in a 17-foot pleasure boat driven by Casey Barnick. Barnick, who was allegedly intoxicated, crashed the boat into a 200-foot barge, Barge RMT 315, owned by Inland Marine Services, Inc. The barge was being towed by a tug boat, the M/V Herman Crown, owned by IMT. Billy Joe Thomas, an employee of IMT, was piloting the tug and barge across the Illinois River. As a result of the crash, Broughton, Flemming and Turner were injured and Allen died. On July 2, 2004, claimants Broughton and Flemming filed suit in state court against Barnick and Inland Marine Services, Inc. Thereafter, claimant Turner was added as a plaintiff and IMT and Thomas were added as defendants.

On February 23, 2005, IMT filed a Complaint for Exoneration from, or Limitation of, Liability in district court pursuant to the Limitation Act, 46 U.S.C. § 30505, and Rule F of the Supplemental Rules of Certain Admiralty and Maritime Claims of the Federal Rules of Civil Procedure ("Rule F"). In accordance with Rule F, the district court enjoined the institution or prosecution of other lawsuits regarding the casualty. Five parties—Broughton, Flemming, Barnick, Turner and the Estate of Eric Allen ("the claimants")—filed claims in the district court against IMT.

On January 25, 2006, the claimants filed a "Joint Motion to Modify Stay" seeking to resume litigation of their claims in state court. The claimants attached the following stipulations to the motion:

1. Claimants concede and agree that The United States District Court for the Central District of Illinois has exclusive jurisdiction over all limitation of liability issues which arose out of a collision occurring on or about May 21, 2004 between a pleasure vessel operated by Casey A. Barnick and the M/V Herman Crown and Barge RMT 315;

2. Claimants concede and agree to waive any claim of res judicata respecting any limitation of liability issues as might arise in the event of entry of judgment in any state court or other proceeding based upon the facts of the above-mentioned collision . . .;

3. Claimants concede and agree that should a judgment be obtained in any state court or other proceeding on behalf of any one of more of the Claimants, and should this United States District Court for the Central District of Illinois determine that limitation of liability is appropriate, Claimants will only seek their respective pro-rata proportional share of the limitation fund as measured by their respective proportions of any judgment obtained in the state court or other proceeding;

4. Claimants concede and agree that if a judgment is obtained in any state court or other proceeding on behalf of any one or more of the Claimants, and should this United States District Court for the Central District of Illinois determine that limitation of liability is appropriate, Claimants will in no event seek any amount beyond the value of the limitation fund as determined by the United States District Court for the Central District of Illinois; and

5. Claimants concede and agree that this United States District Court for the Central District of Illinois has exclusive jurisdiction to determine the value of the limitation fund, and so long as the Claimants have an opportunity to obtain an independent appraisal or related valuation, will stipulate to the value as determined by this United States District Court for the Central District of Illinois.

(R. 84-2.) Additionally, on March 21, 2006, Billy Thomas filed a "Waiver of Claim," which stated in pertinent part:

Billy Joe Thomas . . . hereby waives any claim for indemnity, contribution, or any other relief that he now has or may have in the future against Illinois Marine Towing, Inc. for any legal liabilities he may incur as a result of the collision which is the subject matter of the Complaint of Illinois Marine Towing, Inc. for Exoneration From or Limitation of Liability. Further, Billy Joe Thomas warrants that in the event any judgment is entered against him in favor of any party, he will not enter into any agreement which purports to assign any right of Billy Joe Thomas against Illinois Marine Towing, Inc.

(R. 104 at 1.) Thomas's waiver contained a "Reservation of Counterclaim," stating: "Nothing in this Waiver of Claim is to be construed as a waiver of any counterclaim which Billy Joe Thomas may have in the event that Illinois Marine Towing should sue Billy Joe Thomas for contribution or indemnity for liabilities arising out of the subject collision." (Id.) Over IMT's objections, and on the basis of the claimants' stipulations and Thomas's waiver, the district court granted the claimants' motion and modified the injunction to permit the claimants to pursue their actions in state court, while reserving the question whether IMT is entitled to limitation of liability for its own consideration. IMT appeals the district court's decision, arguing that the claimants' stipulations are not a sufficient basis for the modification of the injunction.¹

II. Discussion

Before turning to the merits of this appeal, we must first determine the appropriate standard of review. IMT contends that we should review the district court's order de novo; the claimants contend we should review for abuse of discretion. Generally, we review a district court's ruling on an injunction under the Limitation Act for abuse of discretion. See Lewis v. Lewis & Clark Marine, Inc., 531 U.S. 438, 451, 121 S.Ct. 993, 148 L.Ed.2d 931 (2001); In re Holly Marine Towing, Inc., 270 F.3d 1086, 1090 (7th Cir.2001); In re McCarthy Brothers Co., 83 F.3d 821, 832 (7th Cir.1996). Here, the district court considered a legal question— whether stipulations can transform multiple claims into a single claim within a Limitation Act proceeding—as part of its decision to lift the injunction. We review the district court's legal conclusions de novo. Doe v. Smith, 470 F.3d 331, 338 (7th Cir.2006); see also Odeco Oil & Gas Co. v. Bonnette (Odeco II), 74 F.3d 671, 674 (5th Cir.1996). We review for abuse of discretion the district court's finding that the stipulations in the present case adequately protect IMT's interests and specific decision to lift the injunction. See Lewis, 531 U.S. at 451, 121 S.Ct. 993; Holly Marine, 270 F.3d at 1090; McCarthy Brothers Co., 83 F.3d at 832.

Congress passed the Limitation Act in 1851 "to encourage ship-building and to induce capitalists to invest in this branch of industry" by limiting shipowners' potential liability for maritime disasters. Lewis, 531 U.S. at 446, 121 S.Ct. 993 (quoting Norwich Co. v. Wright, 13 Wall. 104, 80 U.S. 104, 121, 20 L.Ed. 585 (1871)) (internal quotation marks omitted). The central provision of the Limitation Act provides in relevant part: "[T]he liability of the owner of a vessel for any claim, debt, or liability . . . shall not exceed the value of the vessel and pending freight . . . [so long as] any loss, damage, or injury by collision . . . [occurs] without the privity or knowledge of the owner." 46 U.S.C. § 30505.² The procedure for a limitation action is defined in the Federal Rules of Civil Procedure, Supplemental Admiralty and Maritime Claims Rule F ("Rule F"), which sets forth the following process:

The district court secures the value of the vessel or owner's interest, marshals claims, and enjoins the prosecution of other actions with respect to the claims. In these proceedings, the court, sitting without a jury, adjudicates the claims. The court determines whether the vessel owner is liable and whether the owner may limit liability. The court then determines the validity of the claims, and if liability is limited, distributes the limited fund among the claimants.

Lewis, 531 U.S. at 448, 121 S.Ct. 993.

Some tension exists between the Limitation Act and the saving to suitors clause, 28 U.S.C. § 1333(1). See id. Specifically, the requirement of the Limitation Act that the federal district court adjudicate (for multiple claimants) both the question of liability and whether limitation is appropriate—commonly referred to as the concursus³ requirement—deprives claimants of their right to pursue their actions in state...