UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
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Nos. 99-30424
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In Re: In the Matter of: TIDEWATER INC.,
Appellee-Cross-Appellant,
TIDEWATER MARINE INC., TWENTY GRAND OFFSHORE, INC.,
Plaintiffs-Appellees-Cross-Appellants,
v.
TINA A. STELLY, individually and on behalf of her unborn child,
Claimant-Appellant-Cross-Appellee,
con w/No. 99-30454
In Re: In the matter of: TIDEWATER INC., In the matter of the
Complaint of Tidewater, Inc., Tidewater Marine, Inc. and Twenty
Grant Offshore, Inc., as Owners and Operators of the M/V Geerd
Tide for Exoneration From or Limitation of Liability,
TINA A. STELLY, individually and on behalf of her unborn child,
Claimant-Appellant-Cross-Appellee,
v.
TIDEWATER INCORPORATED, In the matter of the Complaint of
Tidewater Inc, Tidewater Marine Inc and Twenty Grant Offshore
Inc as Owners and Operators of the M/V Geerd Tide of
Exoneration From and Limitation of Liability; TIDEWATER MARINE
INC; TWENTY GRAND OFFSHORE INCORPORATED,
Plaintiffs-Appellees-Cross-Appellants.
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_____________________________________________________
Appeals from the United States District Court
for the Western District of Louisiana
______________________________________________________
April 18, 2001
Before REYNALDO G. GARZA, STEWART, and DENNIS, Circuit Judges.
REYNALDO G. GARZA, Circuit Judge:
This dispute arises out of the collision of the M/V Mallard,
a twenty-six foot recreational crew boat, and the M/V Geerd Tide,
a one-hundred foot crew boat, in Louisiana territorial waters.
When the vessels collided, the M/V Mallard capsized and six of
her passengers drowned. One passenger was seriously injured but
survived. None of the twenty-nine people aboard the M/V Geerd
Tide died or suffered serious injury.
Following the collision, Tidewater, Inc., Tidewater Marine,
Inc. n/k/a Tidewater Marine L.L.C., and Twenty Grand Offshore,
Inc.(collectively referred to as “Tidewater”), owners and owners
pro hac vice of the M/V Geerd Tide, filed a Complaint for
Exoneration from or Limitation of Liability in federal district
court pursuant to Chapter 8 of Title 46 of the United States Code
(“the Limitation Act”), which limits a vessel owner’s liability
to the value of the vessel and its pending freight. Vermillion
Corp., owner of the M/V Mallard, filed a separate limitation
proceeding in the same court. Later, the federal district court
consolidated the Tidewater and Vermillion limitation proceedings,
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and entered an order enjoining the commencement or prosecution of
any and all suits against Tidewater or Vermillion arising out of
the collision.
Representatives of the six decedents, the worker’s
compensation carrier of three hunting camp employees aboard the
M/V Mallard, the owners of the M/V Mallard, the owners’ insurer,
and the Captain of the M/V Geerd Tide filed claims in the
Tidewater limitation proceedings. The claimants in the Tidewater
proceeding moved the district court to lift the stay and allow
them to proceed against Tidewater in Louisiana state court. The
claimants stipulated that they would not enforce a state court
judgment beyond the alleged value of the Tidewater vessel and her
pending freight unless and until the district court established a
higher value or denied Tidewater’s right to limitation of
liability. Also, the claimants stipulated that none of their
claims has priority over any other and that they would be paid
from the limitation fund on a pro rata basis.
The district court denied the claimants’ motion to lift the
stay. The district court reasoned that this Court requires all
claimants and all potential claimants to join in the stipulations
and that the passengers and crew of the M/V Geerd Tide constitute
a “readily discernible group of potential claimants” who had not
joined in the stipulations. These claims were settled while this
appeal was pending, leaving Tina A. Stelly, individually and on
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behalf of her unborn child, the only remaining claimant in the
Tidewater limitation proceeding. Stelly appeals this decision.
Tidewater filed a cross-appeal “out of an abundance of caution”
to urge the following additional support for the district court’s
ruling: (1) a stipulation regarding appellees’ right to
exoneration is necessary, (2) appellants’ stipulation regarding
priority of claims is inadequate, and (3) since appellee-
Tidewater is a claimant in the Vermillion limitation proceeding,
its failure to join in the stipulation precludes lifting of the
stay.
I.
Whether a stipulation adequately protects a party’s rights
under the Limitation Act is a question of law that this Court
reviews de novo. See Odeco Oil and Gas Co. v. Bonnette, 74 F.3d
671, 674 (5th Cir. 1996). This Court reviews a district court’s
decision to lift a stay for an abuse of discretion. See id.
II.
The first issue for our discussion is whether the district
court erred by denying the claimants’ motion to lift the stay of
state court proceedings on the ground that potential claimants
had not joined in the requisite stipulations. This issue
involves “a recurring and inherent conflict” between the
exclusive jurisdiction the Limitation Act vests in admiralty
courts and the common law remedies embodied in the saving to
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suitors clause of 28 U.S.C. § 1333. Texaco, Inc. v. Williams, 47
F.3d 765, 767 (5th Cir. 1995). Federal courts have exclusive
jurisdiction over suits by shipowners invoking the Limitation Act
and may stay all other proceedings while such a suit is pending.
See id. The saving to suitors clause, on the other hand, allows
a claimant to seek common law remedies against a shipowner in
state court. See id. This Court has attempted to resolve the
conflict by allowing claimants to proceed against shipowners in
state court only after filing stipulations designed to protect
the shipowners’ rights under the Limitation Act. See id. at 767-
68. The issue here is whether all claimants required to join in
these stipulations have done so. Tidewater argues that all
claimants as well as all potential claimants must join in the
stipulations, and, since two dozen persons aboard the M/V Geerd
Tide constitute potential claimants who have not joined in the
stipulations, the stay cannot be lifted.
In Texaco v. Williams, this court stated that “if the
stipulations cover all potential claimants . . . then the stay
should be lifted.” Id. A careful reading of Texaco reveals that
this Court was concerned with three specific types of potential
claims: (1) direct action claims against the shipowners’
underwriters, (2) derivative claims, and (3) timely filed
environmental claims. Id. Texaco did not address whether
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persons who fail to file claims directly against the shipowner
long after the accident are “potential claimants.”
However, in In re M/V Miss Robbie, the shipowner “raised the
specter” of potential claims by yet unnamed claimants in an
attempt to defeat the claimant’s motion to lift the stay. 968
F.Supp 305, 306 (E.D. La. 1997). The court held that “potential
claimants” do not exist “where there are currently no third
parties involved in any suit, state or federal, and no potential
third parties [are] known to the claimant.” Id. at 308. The
court reasoned that to hold otherwise would allow shipowners to
“hold claimant’s savings to suitors rights hostage with the cry
of potential threats to its limitation rights in the form of
third party claims . . . which do not exist and in all actuality
may never be asserted.” Such a holding, the court reasoned,
would effectively eviscerate the savings to suitors clause of 28
U.S.C. § 1333. See id.
Here, as in Miss Robbie, there are no claims pending in any
state or federal court and the only “potential claimants”
proffered by appellee have failed to file any claim for nearly
three years. Furthermore, the “potential claimants” from the M/V
Geerd Tide have different employers, different workmen’s
compensation benefits, and different insurance coverage
applicable to any injuries they might assert. So, these
“potential claimants” have a status much different from those who
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have already filed claims. In sum, while the shipowner here
argued that the two dozen passengers aboard the M/V Geerd Tide
could have seen the accident and could have been injured, the
shipowner did not argue that any of those passengers were
actually put in a position where a cause of action accrued to
them, which they have merely not yet brought in a court. We
think that delaying recovery to the claimants who did file suits
in state court and are parties to the limitation proceedings on
the mere speculation that others exist to whom a cause of action
has accrued is clearly stretching Texaco’s “potential claimant”
language too far. Therefore, the district court erred when it
concluded that the stay could not be lifted because “potential
claimants” had not joined in the stipulations.
III.
We now turn to the issue of whether the claimants’
stipulations are otherwise adequate to support lifting of the
stay. Tidewater argues that the stipulations are inadequate to
protect its rights under the Limitation Act in three other
respects. First, the stipulations fail to protect its right to
exoneration. Second, the stipulation that the claims would be
paid on a pro rata basis does not adequately prioritize the
claims so as to preserve the Limitation Act’s liability cap.
Third, since it is a claimant in the Vermillion limitation
proceeding, Tidewater claims that it must make certain
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stipulations in that proceeding before the stay in the Tidewater
proceeding can be lifted.
A.
An exoneration stipulation is not needed. On two occasions,
this Court has reserved ruling on the issue of whether an
exoneration stipulation is required before a stay may be lifted.
See Odeco Oil & Gas Co. v. Bonnette, 74 F.3d 671, 675 n.7 (5th
Cir. 1996); Texaco v. Williams, 47 F.3d 765, 769 (5th Cir. 1995).
District courts in this circuit are divided on the issue.
Compare In re Falcon Inland, Inc., 2 F.Supp. 2d 835 (E.D. La.
1998)(Fallon, J.), and In re TT Boat Corp., 1999 WL 380863 (E.D.
La. 1999)(Duval, J.). Those cases that do not require an
exoneration stipulation stand on firmer ground. See generally In
re Falcon Inland, Inc., 2 F.Supp. 2d 835 (E.D. La. 1998).
The Limitation Act itself does not expressly provide the
shipowner with a right to exoneration. See In re Falcon Inland,
Inc., 1997 WL 399600, *4 (E.D.La. 1997)(Clement, J.). However,
The Federal Rules of Procedure provide that a limitation claimant
“may demand exoneration.” Fed. R. Civ. Proc. Supp. Rule F. In
Falcon Inland, the court noted that Rule F uses the permissive
verb “may” and reasoned that the word “shall” would have been
used if the exoneration issue were reserved exclusively to
federal courts. In re Falcon Inland, Inc., 2 F.Supp. 2d 835, 836
(E.D.La. 1998)(Fallon, J.). Additionally, since the Limitation
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Act itself does not grant a right to exoneration, the tension is
between the saving to suitors clause and Rule F, not the
Limitation Act. See id. Supplemental Rules cannot enlarge the
substantive rights conferred on shipowners by the Limitation Act.
See 28 U.S.C. § 2072(b). In Lake Tankers Corp. v. Henn, the
Supreme Court said, “we read no other privilege for the shipowner
into [the Limitation Act’s] language over and above that granting
him limited liability.” 354 U.S. 147, 150 (1957). Requiring an
exoneration stipulation would enlarge shipowners’ rights under
the Limitation Act and abridge claimants’ rights under the saving
to suitors clause. Therefore, an exoneration stipulation is not
required before the stay can be lifted. See United States v.
Sherwood, 312 U.S. 584, 589 (1941)(holding that the act
authorizing the courts “to prescribe rules of procedure in civil
actions gave it no authority to modify, abridge or enlarge the
substantive rights of litigants”); In re Dammers & Vanderheide,
836 F.2d 750, 760 (2d Cir. 1988)(“If claimants have a substantive
right to pursue their cause of action under the ‘saving to
suitors clause,’ it can hardly be abrogated by a federal
procedural rule”)(internal quotation omitted).
B.
The claimants’ stipulation to payment of claims on a pro
rata basis adequately prioritizes the claims. Tidewater argues
that this stipulation is inadequate because it does not protect
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its rights under the Limitation Act. However, this Court has
noted that the purpose of limitation proceedings is to provide a
“‘distribution pro rata of an inadequate fund among claimants.’”
See Texaco v. Williams, 47 F.3d 765, 769 n. 17 (5th Cir.
1995)(citing Pershing Auto Rentals, Inc. v. Gaffney, 279 F.2d
546, 550-51 (5th Cir. 1960)). Therefore, since the claimants
have stipulated to a manner of distribution consistent with the
purpose of the Limitation Act, the district court correctly
concluded that a stipulation to a pro rata distribution is
sufficient to protect appellees’ rights under the act.
C.
Tidewater’s failure to join in the stipulations does not
prevent lifting of the stay. Tidewater is a claimant in the
Vermillion limitation proceedings and, as such, contends that it
must make certain stipulations in that proceeding before the stay
in the Tidewater proceeding can be lifted. In support of its
position, Tidewater cites this Court’s decision in In re Port
Arthur Towing Co., 42 F.3d 312 (5th Cir. 1995). However, in Port
Arthur, this Court affirmed the district court’s decision to deny
lifting of the stay where a limitation plaintiff was also a
claimant in the proceeding with the stay at issue. See id. at
316. In contrast, Tidewater is a claimant in the Vermillion
proceeding, not in the proceeding with the stay at issue in this
case. As the district court concluded, Tidewater’s failure to
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stipulate in the Vermillion proceeding is irrelevant in
determining whether the stay should be lifted in the Tidewater
proceeding. To hold otherwise would allow shipowners to hold out
and ensure the claimants’ failure at an attempt to make the
necessary stipulations.
CONCLUSION
All “potential claimants” have joined in stipulations which
adequately protect Tidewater’s rights under the Limitation Act.
For this reason, the district court’s denial of the claimants’
motion to lift the stay is reversed and the stay is lifted to
allow claimants to prosecute common law claims in state court
pursuant to the saving to suitors clause of 28 U.S.C. § 1333.
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