In the Matter of the Complaint of Unterweser Reederei, Gmbh. Zapata Off-Shore Company v. M/s Bremen and Unterweser Reederei Gmbh

428 F.2d 888, 1970 U.S. App. LEXIS 8593, 1970 WL 31663

• Court: Court of Appeals for the Fifth Circuit
• Decided: June 19, 1970
• Docket: 27497
• Status: Published

Opinions

GEWIN, Circuit Judge:

Unterweser Reederei, GMBH (Unterweser), seeks review of an- order of the district court denying a stay of the limitation action Unterweser had filed in that court and enjoining Unterweser from proceeding further with litigation concerning the same subject matter in an English court. The limitation action was brought after Zapata Off-Shore Company (Zapata) filed a complaint in admiralty against Unterweser and its tug Bremen.

Unterweser, a German corporation, contracted with Zapata, a Delaware corporation, with its principal place of business in Houston, Texas, to tow Zapata’s drilling barge Chaparral¹ from Venice, Louisiana to Ravenna, Italy. The tow-age contract contained a forum selection clause providing that any dispute must be litigated before the High Court of Justice in London, England. On 5 January 1968, the Unterweser tug Bremen² departed Venice, Louisiana with the Chaparral in tow. During the morning of 9 January 1968, the Chaparral sufferred a casualty while proceeding in the Gulf of Mexico. Pursuant to instructions from Zapata, Bremen made for Tampa Bay, the nearest port. Promptly upon arrival, Bremen was arrested by a United States Marshal and her master served with a copy of Zapata’s complaint seeking $3,500,000 in damages from Bremen and Unterweser.³

Unterweser filed a motion praying in the alternative that the district court (1) dismiss for want of jurisdiction, (2) decline jurisdiction on the basis of forum non conveniens, or (3) stay further prosecution of the action.⁴ Unterweser subsequently instituted an action against Zapata in the High Court of Justice in London, claiming moneys due under the towage contract and damages for breach of contract. Zapata was served with the summons of that court; it appeared and moved that the English court dismiss its process. The High Court of Justice denied Zapata’s motion holding that it had jurisdiction of the action. This determination was affirmed by the English Court of Appeal which held the forum selection provision of the contract to be reasonable and found no circumstances which would require it to deny enforcement of the agreement.

Before the English Court .of Appeal had rendered the above decision, Unterweser filed a complaint in the district court seeking exoneration or limitation of liability arising from the casualty.⁵ Consequently the district court entered the -usual injunction restraining claimants from proceeding outside the limitation court regarding the events of 9 January 1968. Zapata filed its claim in the limitation proceedings asserting the same cause of action as in its original action. Unterweser filed objection to Zapata’s claim and counterclaimed against Zapata alleging the same claims embodied in its English action plus an additional salvage claim.

Zapata moved for an injunction restraining Unterweser from litigating further in the High Court of Justice. Unterweser moved to stay its own limitation proceeding pending a determination of Unterweser’s suit in the English court. The district court denied the requested stay and enjoined Unterweser from proceeding in any other court regarding the same matter prior to a determination of the limitation action.⁶ Unterweser appeals from these orders, and we affirm.

I

We shall first comment on the power of the district court to restrain Unterweser from proceeding with its action in England. A court of equity has the traditional power to enjoin parties, properly before it, from litigating in another court. This power has been exercised where the foreign litigation would: (1) frustrate a policy of the forum issuing the injunction; (2) be vexatious or oppressive; (3) threaten the issuing court’s in rem or quasi in rem jurisdiction; or (4) where the proceedings prejudice other equitable considerations.⁷ We must now determine whether this traditional power of the Chancellor appertains to a district court sitting in a limitation proceeding.

Prior to the decision below there has been scant judicial discussion of the power of an admiralty court to enjoin a party bringing a limitation action from contemporaneous litigation in foreign courts. Our research has added little of significance to the authority cited by the district court. The principal decision on the question was rendered by the Second Circuit in The Salvore.8 In that case, the owners of cargo damaged while on board the Salvore brought a libel in the district court. The Salvore’s owner sued the cargo claimants in an Italian court for abuse of process, and subsequently brought a limitation proceeding in the district court. On a motion by the cargo claimants, the district court held that it was without power to stay the limitation proceeding or to compel the shipowner to discontinue its Italian suit. In reversing, the Second Circuit relied on the Supreme Court’s description of a limitation proceeding as “the administration of equity in an admiralty court; look[ing] to a complete and just resolution of a many cornered controversy.” ⁹ It stated:

The limitation proceeding was an appeal to a court of admiralty, which is a court of equity, * * * and the appellee [shipowner], seeking equity, should willingly do equity. *, * * It must be willing to bring in all the controversies in the limitation proceedings, for it has invoked the court’s aid.¹⁰

In A. C. Dodge, Inc. v. J. M. Carras, Inc.,¹¹ the Second Circuit relied on its Salvore decision in affirming an order of the district court dissolving an injunction entered against claimants in the shipowner’s limitation proceeding, and providing that it would be reinstituted only if the shipowner obtained a stay of an action which it was simultaneously pursuing in another federal court. Unterweser seeks to distinguish these cases on the ground that neither involved an injunction of the sort issued in the present case. In Salvore and Dodge, the courts sought to coerce the shipowner by conditioning the continuance of the injunction, that restrained claimants from litigating outside the limitation court, on voluntary forebearance of the shipowner’s foreign action. We find no implication in these cases which would influence us to hold that district courts are impotent to accomplish directly what these courts sought to effect circuitously. To the contrary, the court in Salvore expressly stated:

The court first securing jurisdiction has the authority and power of enjoining the parties to the litigation from proceeding in another jurisdiction. And the court has an undoubted authority to control all persons and things within its own territorial limits.¹²

Unterweser emphasizes the third case of the trilogy cited in the district court’s opinion, Petition of A/S J. Ludwig Mowinckels Rederi.¹³ There the district court refused to enjoin litigation in an English court by a shipowner participating in a limitation proceeding before the district court. Though there is indication in the opinion that the Mowinckels court felt itself limited to the type of order fashioned in Salvore and approved in Dodge, we agree with the position of the district court below that Mowinckels was based on a determination that any restraint of the shipowner was improper under the attendant circumstances.

Since the district court entered its orders below, Mowinckels has been affirmed by the Second Circuit.¹⁴ The opinion on appeal supports the interpretation given Mowinckels by the district court in the instant case. Citing Salvore and Dodge with approval, the Second Circuit stated:

There can be no question * * * that one purpose of the Limitation Act is a concursus or concourse of claimants, and that in an appropriate situation the court may have power to enjoin persons within its jurisdiction with respect to their activities abroad.¹⁵

The opinion makes it clear that the district court’s action was based on the equitable considerations of that case, and implies no general limitation on a district court’s equitable powers in a limitation action.

Concededly, the lower court could have restrained Mowinckels’ continuance of its collision action in the English courts. But it declined to do so. We can find no fault in this decision. Under the circumstances of this case the lower court’s decision was an appropriate exercise of its discretion.¹⁶

Unterweser also draws our attention to the proposition, quoted by the district court in Mowinckels from British Transport Commission v. United States,¹⁷ that:

“[N]o compulsion could be exerted on foreign claimants to file claims” and * * * “an injunction against suits being filed in foreign jurisdictions would be ineffective unless comity required its recogition.” ¹⁸

This practical observation is not pertinent to the present situation. Unterweser is not merely a potential claimant outside the jurisdiction of the district court; it is a party which has invoked, albeit reluctantly, that' very jurisdiction. Though a domestic court has no power to restrain the courts of a foreign nation, it has admitted power to deal with litigants properly before it. An exercise of the latter power is not the assumption of the foriher.¹⁹ With both Unterweser and substantial amounts of its assets before, the district court, it need not resort to comity to enforce its order.

Unterweser also seeks to distinguish the foregoing authorities since none of these cases involved a forum selection clause. We are of the opinion that this clause is only relevant in determining whether the district court properly refused to stay the limitation proceeding, and, on the facts of this case, does not affect the power of the district court to grant injunctive relief. The implications of the forum clause will be considered in the next section of this opinion. For the moment we conclude that Unterweser’s petition for limitation subjects it to the full equitable powers of the district court.²⁰ In a proper case, these include the power to enjoin a petitioning shipowner from litigating in a foreign forum. As this court observed in Guillot v. Cenac Towing Co.,²¹ “In the Admiralty the Chancellor now goes to sea and has adequate equitable reserves.”

II

Unterweser contends that the district court erred in refusing to stay the limitation action pending a determination of its English suit. It urges that the stay was required by the forum selection clause of the towage contract, which provides: “Any dispute arising must be treated before the London Court of Justice.”

At this point it is helpful to pare two questions that are not involved in this appeal. The district court had jurisdiction of the limitation action. We do not understand Unterweser to seriously contend that this jursdiction was defeated by the presence of the forum clause.²² Neither are we asked to determine whether Zapata has breached the towage contract by filing the libel in the district court. The question we must decide is whether the district court was obliged to decline to exercise admitted jurisdiction under the facts of the present case.

In Carbon Black Export, Inc. v. The SS Monrosa,²³ this court reversed an order of the district court declining jurisdiction of a libel filed by a cargo shipper. The district court, relying on Wm. H. Muller & Co. v. Swedish American Line, Ltd.,²⁴ had upheld a forum selection clause contained in the bills of lading designating Genoa, Italy as the exclusive situs for legal proceedings,²⁵ finding that the libellant had not shown the clause to be unreasonable. This court held that the forum clause did not apply to in rem proceedings. In holding that the district court erroneously declined in personam jurisdiction over the shipowner, this court stated:

In essence, the motion [to decline jurisdiction] was based upon Clause 27 as buttressed by the doctrine of forum non conveniens. Any consideration of such a question starts with the universally accepted rule that agreements in advance of controversy whose object is to oust the jurisdiction of the courts are contrary to public policy and will not be enforced.²⁶

This court professed no comment on the Second Circuit’s decision in Muller distinguishing it on its facts. The Supreme Court granted certiorari to resolve an indicated conflict between Carbon Black and Muller,²⁷ In SS Monrosa v. Carbon Black Export, Inc.,²⁸ the Court dismissed the writ as improvidently granted though it approved this court’s interpretation of the forum clause as having no application to in rem actions. Any remaining antagonism between the two opinions was relieved when Muller was overruled by the Second Circuit sitting en banc in Indussa Corp. v. SS Ranborg.²⁹

In Insurance Co. of North America v. N. V. Stoomvaart-Maatschappij,³⁰ the district court was requested to decline jurisdiction on the basis of a forum clause which was more broadly drawn than the clause in Carbon Black and analogous to the provision in the instant contract.³¹ In denying the request the court stated:

Here the jurisdictional provision involved in Clause 22 refers to “Any action,” obviously referring to both in personam-and in rem actions. Nevertheless, the Fifth Circuit’s holding in Carbon Black is applicable and such an attempt to oust the Court of its jurisdiction in advance will be stricken herewith as being contrary to public policy and unenforceable.³²

As one commentator has reluctantly observed, the Carbon Black decision, “At the very least * * * stands for the proposition that a choice of forum clause will not be enforced unless the selected state would provide a more convenient forum than the state in which suit is brought.” ³³ We conclude that the forum selection clause, in and of itself, did not compel the district court to stay proceedings in the limitation action so that the parties might litigate in England pursuant to its provisions.

It was within the sound discretion of the district court to decline jurisdiction on the basis of forum non conveniens.³⁴ But apart from the forum selection clause itself the circumstances supported a retention and determination by the district court.³⁵ Though the towage contract envisioned a long voyage with potentional exposure to the jurisdiction of numerous states, the flotilla never escaped the Fifth Circuit’s mare nostrum, and the casualty occurred in close proximity to the district court. A considerable number of potential witnesses, including Zapata’s crewmen who were aboard the Chaparral, reside in the gulf cost area of the United States. Preparations for the voyage were made in this area, and, after the casualty, inspection of the damage and repair work was conducted there. The testimony of Bremen’s crewmen, residing in Germany, is available by way of depositions already taken in the proceedings. The only other nation having significant contacts with, or interest in, the controversy is Germany.³⁶ England’s only relationship is the designation of her courts in the forum clause.

Zapata, the only claimant in the limitation action, is a United States citizen. The discretion of the district court to remand the case to a foreign forum was consequently limited.³⁷ This is especially true since, as the court noted, there are indications that Zapata’s substantive rights will be materially affected if the dispute is litigated in an English court. The towage contract contained the following exculpatory provisions:

1. * * * Urag [Unterweser], their masters and crews, are not responsible for defaults and/or errors in the navigation of the tow.

2. (b) Damages suffered by the towed object [Chaparral] are in any case for account of its owners.

These provisions are apparently contrary to public policy and unenforceable in American courts.³⁸ However, according to the affidavit of F. D. Bateson, Zapata’s English maritime law expert, these clauses would be held prima facie valid and enforceable by an English court.³⁹ The district court was entitled to consider that remanding Zapata to a foreign forum, with no practical contact with the controversy, could raise a bar to recovery by a United States citizen which its own convenient courts would not countenance.

Moreover, it is doubtful that Unterweser would benefit even if we ignored Carbon Black and somehow resurrected the Muller rule. The minority of jurisdictions which recognize forum selection provisions, as prima facie valid, deny enforcement where the clause is shown to be unreasonable.⁴⁰ One commentator, advocating this position, elaborated on the question of reasonableness:

[E]ffect should be denied the clause if there is reason to believe that the courts of the selected state would deal unfairly with the plaintiff or would deny him relief to which he was entitled,

Likewise, effect should be denied the clause if the selected state is a seriously inconvenient one for the trial of the action, as might be true in a situation where the occurrence sued upon took place in a distant place from which, if the trial were to be held in the selected state, it would be necessary to transport large numbers of witnesses.⁴¹

On the facts of the present case the district court did not choose to disturb the original choice of forum.⁴² We do not feel it abused its discretion in this regard.

III

Having declined to stay the limitation action, we feel it was proper for the district court to restrain Unterweser from proceeding in any other court. The Supreme Court, regarding limitation proceedings, has stated:

[T]his court has by its rules and decisions given the statute a very broad and equitable construction for the purpose of carrying out its purpose, and for facilitating a settlement of the whole controversy over such losses as are comprehended within it, and that all the ease with which right can be adjusted in equity is intended to be given to the proceeding.⁴³

Unlike the situation faced by the district court in Petition of A/S J. Ludwig Mowinckels,⁴⁴ the instant case involves only two contestants, both of whom are properly before a court of competent jurisdiction. It was within the court’s discretion to determine, as it did, that allowing simultaneous prosecution of the same action in a foreign forum thousands of miles away would result in “inequitable hardship” and “tend to frustrate and delay the speedy and efficient determination of the cause.”⁴⁵ On the facts of the present case, we find no abuse of that discretion.

In accordance with the foregoing, the order of the district court is affirmed.

1 . A self elevating drilling barge, 180 feet in length and 205 feet in breadth, of 4750 gross tons.

2 . A deepsea tug, 178 feet in length, 40 feet in beam, of 1200 gross tons and 7500 horsepower. Bremen was built and registered in Germany arid manned by a crew of 23.

3 . Bremen was released from arrest on 26 January 1968, after Unterweser had furnished a letter of undertaking in the amount of $3,500,000.

4 . This motion was denied by the district court on 29 July 1968, after Unterweser had filed its limitation action. Unterweser sought to have this order certified in order to take an immediate appeal pursuant to 28 U.S.C. § 1292(b). The district court refused to certify the order, finding that the question had been mooted by the filing of Unterweser’s limitation action and the consequent stay of Zapata’s original action.

5 . See 46 U.S.C. § 185 et seq.

6 . In re Unterweser Reederei, GMBH, 296 F.Supp. 733 (M.D.Fla.1969).

7 . 7 J. Moore, Federal Practice § 65.19 (2d ed. 1953).

8 . 36 F.2d 712 (2d Cir. 1929).

9 . Id. at 713, quoting Hartford Acci. & Indemn. Co. v. Southern P. Co., 273 U.S. 207, 216, 47 S.Ct. 357, 71 L.Ed. 612 (1927).

10 . 36 F.2d at 713. An analogous proposition is embodied in the decision of this court in Beal v. Waltz, 309 F.2d 721 (5th Cir. 1962). There, this court upheld the district court’s refusal to modify its injunction to allow the shipowner to plead a favorable state court judgment as res judicata in the limitation proceedings he had filed in the district court. This court stated:

There was no equity in the position of appellant. He could not successfully claim the right in the Federal limitation proceeding to restrain claimant in the state court suit, and still obtain the advantage of the litigation there * * * 309 F.2d at 724.

11 . 218 F.2d 911 (2d Cir. 1955). This case arose from a collision in the Delaware River. Appellant shipowner filed a limitation petition in the United States District Court for the Eastern District of New York. The owner of the other vessel involved in the collision moved that the court dissolve its prior injunction because appellant was prosecuting a libel against it in Federal District Court in Maryland.

12 . 36 F.2d at 714.

13 . 268 F.Supp. 682 (S.D.N.Y.1967). The complex litigation involved in this case arose from a collision off the coast of France. Many of the claims were being litigated in England, and cargo claimants were proceeding with actions against both vessels in French courts. As the court below properly observed, the Mowinckels case was influenced by the fact that no one court could obtain control of the entire litigation arising from the collision.

14 . Petition of Bloomfield S. S. Co., 422 F.2d 728 (2d Cir. 1970).

15 . Id.

¹⁶

17 . 354 U.S. 129, 142, 77 S.Ct. 1103, 1 L.Ed.2d 1234 (1957).

18 . 268 F.Supp. at 690. Also see In re Bloomfield S. S. Co., 227 F.Supp. 615 (E.D.La.1964), aff’d sub nom., Bloomfield S. S. Co. v. Haight, 363 F.2d 872 (5th Cir. 1966), cert. denied, 386 U.S. 913, 87 S.Ct. 864, 17 L.Ed.2d 785 (1967).

19 . Steelman v. All Continent Corp., 301 U.S. 278, 57 S.Ct. 705, 81 L.Ed. 1085 (1937); 7 J. Moore, supra note 4.

20 . Petition of A/S J. Ludwig Mowinckels Rederi, 268 F.Supp. 682, 689-690 (S.D.N.Y.1967). See British Transp. Comm’n v. United States, 354 U.S. 129, 77 S.Ct. 1103 (1957).

21 . 366 F.2d 898, 904 (5th Cir. 1966).

22 . See 6A A. Corbin, Contracts § 1445 (1962). Also see note 35 infra.

23 . 254 F.2d 297 (5th Cir. 1958), cert. dismissed, 359 U.S. 180, 79 S.Ct. 710, 3 L.Ed.2d 723 rehearing denied 359 U.S. 999, 79 S.Ct. 1115, 3 L.Ed.2d 986 (1959).

24 . 224 F.2d 806 (2d Cir. 1955). In a cargo consignee’s libel against the carrier, the Second Circuit held that a forum clause contained in the bill of lading should be respected unless shown to be unreasonable. See note 29 infra.

25 . The forum clause in Carton Black provided :

Clause 27 — Also, that ño legal proceedings may be brought against the Captain or ship owners or their agents in respect to any loss of or damage to any goods herein specified, except in Genoa, it being understood and agreed that every other Tribunal in the place or places where the goods were shipped or landed is incompetent, notwithstanding that the ship may be legally represented there.

26 . 254 F.2d at 300-301. The position of this court in Carton Black reflects what is apparently the majority view regarding forum selection clauses. Annot., 56 A.L.R.2d 300 (1957); 1 E. Benedict, Admiralty § 22a (6th ed. 1940, Supp. 1968).

27 . 358 U.S. 809, 79 S.Ct. 43, 3 L.Ed.2d 54 (1958).

28 . 359 U.S. 180, 79 S.Ct. 710 (1959).

29 . 377 F.2d 200 (2d Cir. 1967). The Indussa Court held that Muller was inconsistent with the Carriage of Goods by Sea Act, 46 U.S.C. §§ 1300-1315. COSGA also applied to the shipment in Carton Black, but we are unable to read that case as applying only to such shipments.

30 . 201 F.Supp. 76 (E.D.La.1961).

31 . The clause in Insurance Co. of N. Am. provided:

Clause 22 — -Any action with regard to any dispute or claim arising under this bill of lading and the contract evidenced thereby shall be brought before the Court at Amsterdam to the exclusion of any other court unless the Carrier appeals to another jurisdiction or voluntarily submits himself thereto.

32 . 201 F.Supp. at 78.

33 . Reese, The Contractual Forum: Situation in the United States, 13 Am.J.Com.L. 187, 191-192 (1964).

34 . Swift & Co. Packers v. Compania Colombiana Del Caribe, S. A., 339 U.S. 684, 70 S.Ct. 861, 94 L.Ed. 1206 (1950). See Canada Malting Co. v. Paterson S. S., Ltd., 285 U.S. 413, 52 S.Ct. 413, 76 L.Ed. 837 (1932).

35 . In a footnote to its brief, Unterweser states:

At oral argument on its Motion, counsel advised the District Court that Unterweser did not intend to press its Motion for Dismissal for Lack of Jurisdiction, nor did it intend to press the forum non conveniens argument. It was recognized that the Court did have m rem jurisdiction over BREMEN, and it was further recognized that after the fact inconvenience to the parties was not controlling upon the question of enforceability of the contract clause providing for a London forum and English law. Furthermore, upon analysis, there was no strong balance of convenience favoring either the U. S. forum or the London forum, quite apart from consideration of the Towage Contract. (Emphasis in original)

36 . Unterweser is a German national. The Bremen was built and is registered in Germany and her 23 crewmen are all German nationals. The towage contract was executed by Unterweser in Bremen, Germany.

37 . Swift & Co. Packers v. Compania Colombiana Del Caribe, S. A., 339 U.S. 684, 70 S.Ct. 861 (1950); Burt v. Isthmus Dev. Co., 218 F.2d 353 (5th Cir.), cert. denied, 349 U.S. 922, 75 S.Ct. 661, 99 L.Ed. 1254 (1955). Annot., 90 A.L.R.2d 1109 § 9 at 1125 (1963).

38 . Dixilyn Drilling Corp. v. Crescent Towing & Salvage Co., 372 U.S. 697, 83 S.Ct. 967, 10 L.Ed.2d 78 (1963); Bisso v. Inland Waterways Corp., 349 U.S. 85, 75 S.Ct. 629, 99 L.Ed. 911 (1955).

39 . The affidavit stated in part:

It is my opinion that the above quoted exculpatory clauses, under English law, are not against the public policy of England, and would be held to be prima facie valid and enforceable by an English Court should a cause of action be filed in England either by way of original action or by way of counterclaim. * * *

Unterweser does not take issue with Mr. Bateson’s interpretation of English law.

40 . Central Contracting Co. v. Maryland Cas. Co., 367 F.2d 341 (3d Cir. 1966); General Motors Overseas Operation Div. v. S. S. Goettingen, 225 F.Supp. 902 (S.D.N.Y.1964); Chemical Carriers, Inc. v. L. Smit & Co.’s Internationale Sleepdienst, 154 F.Supp. 886 (S.D.N.Y.1957).

41 . Reese, supra note 33 at 189.

42 . Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 67 S.Ct. 839, 91 L.Ed. 1055 (1947).

43 . Hartford Accident & Indem. Co. v. Southern P. Co., 273 U.S. 207, 215, 47 S.Ct. 357, 359, 71 L.Ed. 612 (1927).

44 . 268 F.Supp. 682 (S.D.N.Y.1967), see note 13 supra.

45 . See Petition of Bloomfield S.S. Co., 422 F.2d 728 (2d Cir. 1970).