In Re: Seabulk Off

• Court: Court of Appeals for the Fifth Circuit
• Decided: November 16, 1998
• Docket: 97-31224
• Status: Published

Opinion

Revised November 13, 1998

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT _______________

No. 97-31224 _______________

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

2 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.”

3 § 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.

4 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).”).

5 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

6 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

7 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.