United States Court of Appeals,
Fifth Circuit.
No. 95-30041.
ODECO OIL AND GAS COMPANY, DRILLING DIVISION and Odeco Drilling
Services, Inc., Plaintiffs-Appellants,
v.
David J. BONNETTE, et al., Defendants-Appellees,
Shell Oil Company and Shell Offshore Inc., Movants-Appellees.
Feb. 14, 1996.
Appeal from the United States District Court for the Eastern
District of Louisiana.
Before WIENER, EMILIO M. GARZA and BENAVIDES, Circuit Judges.
EMILIO M. GARZA, Circuit Judge:
Odeco Oil & Gas Company and Odeco Drilling Services, Inc.
(collectively "Odeco") appeal the district court's order partially
lifting its stay of a tort action in Texas state court in which
Odeco is a defendant. We vacate and remand.
I
While conducting safety drills on a fixed platform in the Gulf
of Mexico, five Odeco employees were injured when an escape capsule
free-fell ninety feet, and crashed into the ocean.1 Fearing
litigation, Odeco filed a declaratory judgment action in federal
court and sought to limit its liability pursuant to the Limited
Liability Act, 46 U.S.C.App. § 183 et seq. ("Limitation Act"). The
1
The facts and procedural history of this case are more
fully developed in a prior opinion. See Odeco Oil & Gas Co.,
Drilling Division v. Bonnette, 4 F.3d 401 (5th Cir.1993) ("Odeco
I"), cert. denied, --- U.S. ----, 114 S.Ct. 1370, 128 L.Ed.2d 47
(1994).
1
district court stayed all litigation against Odeco arising out of
the incident in order to determine Odeco's right to limitation.
Four of the injured parties ("injured claimants") then filed
suit in Texas state court, and filed a motion in federal district
court to lift the stay preventing them from suing Odeco in state
court. In accordance with principles of maritime law, the injured
claimants stipulated to Odeco's right to limit its liability in
federal court. The district court granted the injured claimants'
motion to lift the stay, and dismissed Odeco's declaratory judgment
action. On appeal, we affirmed the dismissal of Odeco's
declaratory judgment action, but vacated the district court's
lifting of the stay. We were concerned that potential claims for
contribution and indemnity in the state court proceeding could,
without proper stipulations, frustrate Odeco's right to limit its
liability. We remanded the case to the district court to consider
the effects of any potential claims for contribution and indemnity
on Odeco's right to limitation. Odeco Oil & Gas Co., Drilling
Division v. Bonnette, 4 F.3d 401, 405 (5th Cir.1993) ("Odeco I"),
cert. denied, --- U.S. ----, 114 S.Ct. 1370, 128 L.Ed.2d 47 (1994).
On remand, the district court allowed state-court defendants
Shell Oil Company and Shell Offshore, Inc. (collectively "Shell"),
and Whittaker Corporation2 to file contribution and indemnity
claims against Odeco in both state court and in the limitation
2
Shell owned and operated the fixed platform upon which the
accident occurred. Whittaker Corporation designed and
manufactured the capsule.
2
proceeding.3 Shell and Whittaker Corporation would not, however,
stipulate as to Odeco's right to limitation. In order to proceed
in state court, the injured claimants entered into a "Second
Amended Stipulation" designed to protect Odeco's right to
limitation vis-a-vis Shell's and Whittaker Corporation's claims for
contribution and indemnity.4 The district court ruled the
stipulation adequate, and partially lifted its stay to allow the
tort action in state court to proceed against Odeco and the other
defendants.5 Odeco appeals, asserting that the district court
erred in partially lifting the stay. Odeco claims that the Second
3
Whittaker Corporation seeks contribution from Odeco in the
event that Whittaker is found liable to the injured claimants.
Shell seeks indemnity for defense costs and attorneys' fees along
with legal and contractual indemnity and contribution should
Shell be held liable.
4
The claimants stipulated that all issues of limitation
would be litigated in federal court, free from any claims of res
judicata. The claimants also stipulated that they would not seek
recovery from Odeco in excess of $30,000, until the district
court had determined Odeco's right to limitation. Nor would the
claimants pursue claims against Shell and Whittaker in excess of
$30,000 to the extent that those claims would flow back to Odeco
and expose Odeco to total liability in excess of $30,000. The
claimants further stipulated that Shell's and Whittaker
Corporation's defense indemnification claims against Odeco, for
attorney's fees and costs, would take precedence over any
recovery by the claimants. We note that the $30,000 figure is
the alleged value of the vessel and its freight, the true value
of which has not been determined by the district court.
5
The district court's order allows the injured claimants to
pursue their claims in state court against all defendants, Shell
to pursue its claims against Odeco for legal and contractual
indemnity and contribution, and Whittaker Corporation to pursue
its claim against Odeco for contribution. The district court
maintained the stay in all other respects, including disallowing
Shell from pursuing its claim for defense indemnification and
attorneys' fees. The order also precludes Shell and Whittaker
Corporation from utilizing res judicata or issue preclusion to
undermine Odeco's right to limitation.
3
Amended Stipulation inadequately protects its rights under the
Limitation Act.
II
Whether a stipulation adequately protects a party's rights
under the Limitation Act is a question of law which we review de
novo. See In re Complaint of Port Arthur Towing Co. ex rel. M/V
MISS CAROLYN, 42 F.3d 312, 316-17 (5th Cir.) (reviewing de novo the
adequacy of a stipulation under the Limitation Act), cert. denied,
--- U.S. ----, 116 S.Ct. 87, 133 L.Ed.2d 44 (1995). We review a
district court's decision to lift a stay for abuse of discretion.
Id. at 317; Magnolia Marine Transport Co. v. LaPlace Towing Corp.,
964 F.2d 1571, 1582 (5th Cir.1992).
A shipowner facing potential liability for an accident
occurring on the high seas may file suit in federal court seeking
protection under the Limitation Act. The Limitation Act allows a
shipowner, lacking privity or knowledge, to limit liability for
damages arising from a maritime accident to the "amount or value of
the interest of such owner in such vessel, and her freight then
pending." 46 U.S.C.App. § 183(a). The Limitation Act is designed
to protect shipowners in those cases in which "the losses claimed
exceed the value of the vessel and freight." Magnolia Marine
Transport Co., 964 F.2d at 1575. A shipowner's right to
limitation, however, is cabined by the "saving to suitors" clause.
See 28 U.S.C. § 1333(1) (giving federal district courts exclusive
jurisdiction over "[a]ny civil case of admiralty or maritime
jurisdiction," but "saving to suitors in all cases all other
4
remedies to which they are otherwise entitled"). The saving to
suitors clause evinces a preference for jury trials and common law
remedies in the forum of the claimant's choice. See Magnolia
Marine Transport Co., 964 F.2d at 1575 (citing In re Complaint of
Dammers & Vanderheide & Scheepvaart Maats Christina B.V., 836 F.2d
750, 754 (2d Cir.1988)). Although tension exists between the
Limitation Act and the saving to suitors clause, "the [district]
court's primary concern is to protect the shipowner's absolute
right to claim the Acts's liability cap, and to reserve the
adjudication of that right in the federal forum." Magnolia Marine
Transport Co., 964 F.2d at 1575.
In mediating between the right of shipowners to limit their
liability in federal court and the rights of claimants to sue in
the forum of their choice, federal courts have developed two
instances in which a district court must allow a state court action
to proceed: (1) when the total amount of the claims does not
exceed the shipowner's declared value of the vessel and its
freight, and (2) when all claimants stipulate that the federal
court has exclusive jurisdiction over the limitation proceeding,
and that the claimants will not seek to enforce a damage award
greater than the value of the ship and its freight until the
shipowner's right to limitation has been determined by the federal
court. See, e.g., Texaco, Inc. v. Williams, 47 F.3d 765, 768 (5th
Cir.), cert. denied, --- U.S. ----, 116 S.Ct. 275, 133 L.Ed.2d 196
(1995). In both instances, allowing the state court action to
proceed is contingent on protecting the "absolute" right of the
5
shipowner to limit his or her liability. In re Complaint of Port
Arthur Towing Co., 42 F.3d at 316; Odeco I, 4 F.3d at 405.
At issue in this case is whether the Second Amended
Stipulation adequately protects Odeco's right to limit its
liability. Specifically, the question before this court is whether
the parties seeking contribution and indemnity are "claimants"
within the meaning of the Limitation Act, and therefore must
actually sign the stipulation before the injured claimants may
proceed in state court.6
We believe that we have previously resolved the question of
whether parties seeking contribution and indemnity are "claimants"
within the meaning of the Limitation Act. See In re Complaint of
Port Arthur Towing, Co., 42 F.3d at 316 (recognizing that "a
"claimant' in this context includes a codefendant who is asserting
a cross claim for indemnification, costs, and attorneys' fees");
Odeco I, 4 F.3d at 405 (vacating stay to allow the district court
to examine possible claims for contribution and indemnity because
those claims "if preserved and matured, could cause a multiple
6
The injured claimants argue on appeal that the district
court abused its discretion in allowing Shell and Whittaker
Corporation to file their cross-claims for contribution and
indemnity after the time for filing such claims had expired. See
Supplemental Rules for Certain Admiralty and Maritime Claims F(4)
(setting forth procedures by which the district court shall limit
the amount of time to file claims in the limitation proceeding,
but allowing that "[f]or cause shown, the court may enlarge the
time within which claims may be filed"). It is within the
district court's sound discretion to allow or deny the filing of
claims outside the prescribed time period. Lloyd's Leasing Ltd.
v. Bates, 902 F.2d 368, 371 (5th Cir.1990). After careful review
of the record, we cannot say the district court abused its
discretion in allowing Shell and Whittaker Corporation to file
their claims after the claims period expired.
6
claimant-inadequate fund situation to arise"); see also Gorman v.
Cerasia, 2 F.3d 519, 525 (3d Cir.1993) (noting that "all courts
have recognized that a multiple claimant situation exists where a
third party seeking indemnity or contribution also requests
attorneys' fees and costs associated with its claim"). Codefendant
cross-claims for indemnity and contribution are liabilities that
must be addressed in order to protect the shipowner's rights under
the Limitation Act. See Gorman, 2 F.3d at 526-27, 528 (explaining
how claims for indemnity and contribution, as well as claims for
attorneys' fees, can frustrate a shipowner's right to limitation).
Therefore, parties seeking indemnification and contribution from a
shipowner must be considered claimants within the meaning of the
Limitation Act.
As we have previously held, in order to proceed in state
court, all claimants must sign the stipulation protecting the
shipowner's rights under the Limitation Act. In re Complaint of
Port Arthur Towing, Co., 42 F.3d at 316. This rule is a prudent
attempt to balance the inherent conflict between the Limitation Act
and saving to suitors clause. Although the claimants' interest in
litigating in the forum of their choice is substantial, we will
accede to that choice only "if it is accompanied by stipulations
fully protecting Odeco's right to limit liability and agreeing to
abide by an admiralty court determination of the right to limit."
Odeco I, 4 F.3d at 405. The shipowner's right to limitation takes
precedence over the claimant's rights to proceed in the forum of
their choice.
7
Faced with Shell's and Whittaker Corporation's unwillingness
to sign a stipulation, the district court made a valiant effort to
both protect Odeco's rights, and allow the injured claimants to
proceed in state court. The injured claimants, however, have only
partial control over Odeco's potential liabilities. The amount of
Odeco's liability to Shell is governed not only by the amount the
injured claimants recover, but also by an agreement between the
defendants which specifies how liability, defense costs, and other
losses will be shared. In addition, the record indicates that
Whittaker Corporation may seek indemnification from Odeco for its
defense costs. We are not in a position to predict the possible
developments in the state court proceedings. Given, for example,
the differing applications of state indemnity law, and the possible
differing interpretations of indemnification and contribution
agreements, we cannot be certain that the Second Amended
Stipulation, signed solely by the injured claimants, will fully
protect Odeco's limitation rights. Without such certainty, the
federal forum must remain the sole forum for adjudicating the
claims against Odeco. See Odeco I, 4 F.3d at 405 n. 7 (explaining
that Pershing Auto Rentals, Inc. v. Gaffney, 279 F.2d 546 (5th
Cir.1960), mandates that the federal forum remain the sole forum
unless all claimants stipulate as to the shipowner's right to
limitation). Accordingly, we hold that the district court abused
its discretion in allowing the state court action to proceed in the
absence of a stipulation, agreed to by all claimants, protecting
8
Odeco's right to limitation.7
III
We VACATE the district court's order partially lifting the
stay of the Texas state court proceedings and REMAND for further
proceedings consistent with this opinion.
7
Odeco also argues that in order for a stipulation to
adequately protect a shipowner's rights, it must recognize a
shipowner's right to seek "exoneration" in federal court.
Exoneration is not mentioned in the Limitation Act, but the
Supplemental Rules for Certain Admiralty and Maritime Claims
states that a complaint seeking limitation may also demand
exoneration. See Supplemental Rules for Certain Admiralty and
Maritime Claims F(1) ("The complaint may demand exoneration from
as well as limitation of liability."). Although we have noted
that "shipowners routinely seek exoneration and limitation of
liability in the alternative," Texaco, Inc., 47 F.3d at 769, we
have never held that exoneration is a necessary element in every
stipulation. Having determined that the stipulation, as written,
inadequately protects Odeco's rights to limitation, we need not
decide whether exoneration is a necessary element of an adequate
stipulation. The district court declined to include exoneration
in the stipulation, and made no explicit findings concerning
Odeco's desire to seek it. Accordingly, we leave this question
to a subsequent case where the issue is more squarely presented.
9