In Re: Seabulk Off ( 1998 )

Revised November 13, 1998
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
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No. 97-31224
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In Re: In the Matter of:
SEABULK OFFSHORE, LIMITED,
as Owner and/or Operator of the M/V Seabulk Beauregard,
for Exoneration from or Limitation of Liability,
SEABULK OFFSHORE, LIMITED,
as Owner and/or Operator of the M/V Seabulk Beauregard,
for Exoneration from or Limitation of Liability,
Petitioner-Appellant,
VERSUS
CHARLES HONORA
and
APACHE CORPORATION,
Claimants-Appellees.
_________________________
Appeal from the United States District Court
for the Eastern District of Louisiana
_________________________
October 26, 1998
Before SMITH, DUHÉ and WIENER, Circuit Judges.
JERRY E. SMITH, Circuit Judge:
Seabulk Offshore, Limited (“Seabulk”), appeals the denial of
its motion to stay proceedings against its insurers in a limitation
of liability action. Finding no abuse of discretion, we affirm.
I.
On July 3, 1997, there was an allision between the M/V SEABULK
BEAUREGARD and a gas wellhead. Later that day, Seabulk, the owner
of the BEAUREGARD, filed a complaint in the United States District
Court for the Eastern District of Louisiana seeking exoneration
from or limitation of liability pursuant to Rule F of the
Supplemental Rules for Certain Admiralty and Maritime Claims, the
Federal Rules of Civil Procedure, and 46 U.S.C. §§ 181-189. That
same day, the district court entered an order (the “July 1997
order”) staying and restraining all litigation of claims arising
from the accident against Seabulk or “any of its property with
respect to any claims for which complainant seeks exoneration from
or limitation of liability . . . until the hearing and
determination of this proceeding.” The court refused Seabulk’s
request to include its insurers in its stay order.
On July 8, several passengers filed suit in the United States
District Court for the Southern District of Texas against Seabulk,
several of its associated entities (“Seabulk entities”), Ocean
Energy Inc., Rucks Inc., Carmel Petroleum Company, and Apache
Corporation, the owner of the gas wellhead. Apache subsequently
filed suit in the Southern District of Texas against Seabulk, the
Seabulk entities, Ocean Energy Inc., Rucks Inc., and Carmel
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Petroleum Company.
Seabulk moved to amend the stay order to include the Seabulk
entities and its insurers. On October 9, the court entered an
order (the “October 1997 order”) modifying the July 1997 order to
include the Seabulk entities, but declined to modify the order to
include Seabulk’s insurers. Seabulk appeals the October 1997
order, and Apache Corporation has intervened in the appeal.
II.
We have been willing to review appeals of interlocutory
injunctions entered in the course of limitation proceedings,
pursuant to 28 U.S.C. § 1292(a)(1).1 We first announced this
willingness in Pershing Auto Rentals, Inc. v. Gaffney, 279 F.2d
546, 548 (5th Cir. 1960), holding that the “action of the Supreme
Court . . . argues convincingly that the Court regards orders
[modifying a limitation injunction] as appealable.” Following
Pershing, we have continued to assert jurisdiction under
§ 1292(a)(1) in appeals of limitation stay orders. See Magnolia
Marine Transp. Co. v. LaPlace Towing Corp., 964 F.2d 1571, 1580
(5th Cir. 1992); Treasure Salvors, Inc. v. Unidentified Wrecked &
Abandoned Sailing Vessel, 640 F.2d 560, 565 (5th Cir. Mar. 1981).
We have refused, however, to assert jurisdiction under
1
“[T]he courts of appeals shall have jurisdiction of appeals from . . .
[i]nterlocutory orders of the district courts of the United States . . .
granting, continuing, modifying, refusing or dissolving injunctions, or refusing
to dissolve or modify injunctions.”
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§ 1292(a)(1) if the district court’s order “merely enforces or
interprets a previous injunction.” In re Complaint of Ingram
Towing Co., 59 F.3d 513, 516 (5th Cir. 1995). We look beyond the
terms used by the parties and the district court to the substance
of the action. “A mere allegation that the order has modified
rather than interpreted an injunction will not suffice to vest the
court with appellate jurisdiction.” Id. (citing Motorola, Inc. v.
Computer Displays Int'l, Inc., 739 F.2d 1149, 1155 (7th Cir.
1984)).
To distinguish between a modification and an interpretation,
we focus on whether provisions of the district court’s subsequent
order are implicit in the terms of the original injunction. “An
interlocutory appeal may be taken only if the order modifies the
terms of the injunction; a modification of the legal basis for the
injunction is not appealable.” 19 JAMES W. MOORE ET AL., MOORE’S FEDERAL
PRACTICE § 203.10[4][a], at 203-25 (3d ed. 1998).
In Ingram, the district court issued three orders relating to
the shipowner Ingram’s action seeking limitation of liability. The
first order granted a stay to Ingram and its insurer pending
limitation proceedings; the second modified that stay by remanding
to state court claims against defendants other than Ingram; the
third was issued after a state court suit was brought against
Ingram’s insurer. In this last order, the district court found
that its first order had prohibited suits against Ingram’s insurer.
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The claimants appealed the third order, but we dismissed the appeal
for want of jurisdiction, saying that the third order “merely
explained that the [claimants] had misinterpreted the January 1994
order.” Ingram, 59 F.3d at 516.
The denial of Seabulk’s request to include its insurers
constitutes a “refusal to modify” under § 1292(a)(1). The order
reads, “[T]he petitioner’s motion will be denied as to the proposed
modification to include the mover’s insurer.” Unlike the third
order in Ingram, the October 1997 order did not simply explain the
meaning of the July 1997 order. Rather, it addressed the issue
whether the underwriters should be included and refused to modify
the July 1997 order.2
III.
The Limitation Act, 46 U.S.C. §§ 181-189, permits a shipowner
to limit liability to the value of the vessel and its freight.
This protection is narrowed, however, by “saving to suitors in all
2
Once an order under § 1292(a)(1) has been deemed appealable, the “entire
order, not merely the propriety of injunctive relief,” comes within our scope of
review. Magnolia, 964 F.2d at 1580 (quoting Marathon Oil Co. v. United States,
807 F.2d 759, 764 (9th Cir. 1986)). See also Mercury Motor Express, Inc. v.
Brinke, 475 F.2d 1086 (5th Cir. 1973) (explaining that once case is properly
before appellate court, the permissible scope of review extends to related orders
not specifically appealed).
We asked Seabulk to brief a second possible ground of jurisdiction under
28 U.S.C. § 1292(a)(3), which provides for review of interlocutory orders in
admiralty cases. Seabulk conceded in its brief that Ingram settles this question
by refusing to assert jurisdiction over a similar stay order. See Ingram,
59 F.3d. at 517 (5th Cir. 1995) (“Because the [stay order] did not determine the
rights and liabilities of the parties, it is not appealable under the admiralty
interlocutory appeal exception. 28 U.S.C. 1292(a)(3).”).
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cases all other remedies to which they are otherwise entitled.” 28
U.S.C. § 1333(1). The “saving to suitors” clause seeks to protect
a claimant’s right to “jury trials and common law remedies in the
forum of the claimant’s choice.” Odeco Oil & Gas Co. v. Bonnette,
74 F.3d 671, 674 (5th Cir. 1996); see also Magnolia, 964 F.2d at
1575. Thus, federal courts have had to balance the rights of the
claimant to pursue its state lawsuits against the shipowner's right
to limited liability.
In this circuit, this conflict between federal and state law
has often arisen when state direct action suits are brought against
a shipowner’s insurers under Louisiana’s direct action statute,
L.R.S. 22:655. In this situation, the direct action suits threaten
to deplete the shipowner's insurance coverage and frustrate its
right to limit liability. See Magnolia, 964 F.2d at 1579 n.6.
The Supreme Court addressed this potential conflict between
Louisiana and federal law in Maryland Cas. Co. v. Cushing, 347 U.S.
409 (1954). Unfortunately, a deeply split Court failed to reach
any conclusive holding. Four Justices who felt that the Louisiana
law should be struck down were nevertheless forced to vote with
Justice Clark to uphold the Louisiana statute but remand the action
against the insurers to be delayed until after the limitation
proceeding. See id. at 423 (Frankfurter, J. concurring).
Because it has been difficult to determine what the “4-1-4
riddle of [Cushing]” stands for, this circuit has traditionally
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given itself latitude to develop practical solutions. See Guillot
v. Cenac Towing Co., 366 F.2d 898, 900 (5th Cir. 1966). In some
cases, this has meant requiring the stay of actions against
insurers pending the outcome of limitation proceedings. See, e.g.,
Magnolia, 964 F.2d at 1579; Guillot, 366 F.2d at 905; Tokio Marine
& Fire Ins. Co. v. Aetna Cas. & Sur. Co., 322 F.2d 113, 116 (5th
Cir. 1963).
We have declined, however, to establish an ironclad rule
requiring a stay of a direct action lawsuit against a shipowner’s
insurers. Most recently, we held that while underwriters may be
included in such a stay order, this action “is not the only
possible strategy and that other methods may achieve an equivalent
result.” Magnolia, 964 F.2d at 1579-80.
The question, then, is whether the “strategy” thus far
followed by the district court may achieve the “equivalent result”
of including the insurers in the limitation stay order. We review
the decision to refuse to modify a stay order for abuse of
discretion. Odeco, 74 F.3d at 674.
We have held that allowing a state court action to proceed is
“contingent on protecting the absolute right of the shipowner to
limit his or her liability,” Magnolia, 964 F.2d at 1581 (internal
citations omitted), but a district court should be given
“considerable latitude in devising practical solutions to avoid or
lessen judicial administrative conflicts . . .,” Guillot, 366 F.2d
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at 905. As intervenor Apache has suggested, the district court
could choose to stay execution of the judgment against Seabulk’s
insurers on the first $727,000 of Seabulk’s insurance policy (the
stipulated value of the vessel and freight). Alternatively,
following the suggestion of this court in Magnolia, 964 F.2d at
1580, the court could choose to require the claimants to stipulate
that Seabulk has a priority claim on the insurance proceeds. Under
either alternative, the claimants could preserve their choice of
forum rights, as envisioned by the saving to suitors clause,
without depleting Seabulk’s liability protections. There may be
other courses of action that we have not mentioned that also may
achieve the appropriate result.
The larger point is that the district court is in the best
position to decide how to balance the complicated competing
interests. The court must follow Magnolia to the extent that it
requires the protection of Seabulk’s insurance coverage, but it is
not required, as a matter of law, to select the path of immediately
staying all proceedings against insurers. See Magnolia, 964 F.2d
at 1579-80. While the court may later issue a stay protecting
Seabulk’s insurers, it is within the court’s discretion to refuse
to issue such a stay until it can determine what is the best
strategy to pursue.
AFFIRMED.
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