Opinion
CIVIL ACTION No. 02-0669 SECTION I/2
April 9, 2003
ORDER AND REASONS
Pending before the Court is the motion of plaintiffs, Dorothy and Jackson Bower, to remand this action to the state court from which it was removed and for sanctions. Defendant Steamship Mutual Underwriting Association (Bermuda) Limited ("Steamship") opposes the motion. For the following reasons, plaintiffs' motion to remand is GRANTED.
Rec. Doc. No. 2. Plaintiffs' motion alternatively requests that the district court abstain in favor of the pending Louisiana state court proceeding. The court need not reach that issue in view of this Order and Reasons.
Background
Jackson Bower, a guest passenger, was injured when he slipped and fell aboard the M/V DELTA QUEEN on May 30, 2001. In January, 2002, he and his wife filed this lawsuit in state court for his personal injuries and her loss of consortium, alleging that they have "an admiralty and maritime claim within the meaning of the Savings [sic] to Suitors clause, 28 U.S.C. § 1333, 50 that it can be brought in Louisiana state court." In addition to naming the corporation which owned the M/V Delta Queen, Delta Queen Steamboat Co., THE ("Delta Queen") as a defendant, plaintiffs sued Delta Queen's insurer, Steamship Mutual Underwriting Association (Bermuda) Limited ("Steamship"), pursuant to the Louisiana Direct Action Statute, La. R.S. § 22:665. In October, 2001, American Classic Voyages and its subsidiary corporation, Delta Queen, filed a petition for bankruptcy relief pursuant to Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware, resulting in an automatic stay of actions against Delta Queen pursuant to 11 U.S.C. § 362.Steamship removed this case to federal court alleging three bases for removal jurisdiction: (1) bankruptcy jurisdiction pursuant to 28 U.S.C. § 1334 because the action "is related to" an ongoing Chapter 11 bankruptcy proceeding; (2) diversity jurisdiction pursuant to 28 U.S.C. § 1332 because plaintiffs are citizens of California, Steamship is a foreign corporation whose principal place of business is in a foreign country, and the amount in controversy exceeds $75,000.00; and (3) admiralty jurisdiction pursuant to 28 U.S.C. § 1333 because the action arises under the admiralty and maritime laws of the United States. Plaintiffs filed this motion to remand.
Rec. Doc. No. 1.
Rec. Doc. No. 2.
On May 7, 2002, this district court entered an order staying the action and it dismissed plaintiffs' motion to remand without prejudice to the parties' right to reurge the motion once the bankruptcy stay was lifted. Plaintiffs filed a motion in bankruptcy court in Delaware for relief from the automatic stay.
Rec. Doc. No. 13.
Rec. Doc. No. 18, Exhibit "B" to Steamship's supplemental memorandum in opposition to motion to remand ("Opposition").
The U.S. Bankruptcy Court in Delaware lifted the automatic stay "to the extent necessary to permit the amount of plaintiffs' claim to be liquidated in state or federal court" (emphasis added), and it ordered the debtors to deposit $150,000.00 in an interest bearing account of debtors' Delaware counsel in order "to adequately protect the maritime lien asserted" by plaintiffs. This district court subsequently granted plaintiffs' unopposed ex parte motion to reopen the action and plaintiffs, thereafter, reurged their motion to remand.
Rec Doc. No. 18, Opposition, Exhibit "c".
Rec. Doc. No. 15.
Rec. Doc. No. 16.
Analysis
Removal jurisdiction must be strictly construed because federal courts are courts of limited jurisdiction and because removal of a case implicates significant federalism concerns. Carpenter v. Wichita Falls Independent School District, 44 F.3d 362, 365 (5th Cir. 1995) (citations omitted). The party invoking federal subject matter jurisdiction bears the burden of establishing that jurisdiction. Id.; St. Paul Reinsurance Company, Ltd. v. Greenberg, 134 E.3d 1250, 1253 (5th Cir. 1998), citingGaitor v. Peninsular Occidental Steamship Co., 287 F.2d 252, 253-54 (5t1. Cir. 1961)28 U.S.C. § 1333 provides in pertinent part that, "[t]he district courts shall have original jurisdiction, exclusive of the courts of the States, of . . . [a]ny civil case of admiralty or maritime jurisdiction, saving to suitors in all cases all other remedies to which they are otherwise entitled." A plaintiff who has an admiralty claim may choose to seek enforcement of that claim by filing his in personam lawsuit in state court against an in personam defendant. An in personam lawsuit filed in state court pursuant to the saving to suitors clause of 28 U.S.C. § 1333 is not removable solely because it might have been filed in federal court. "Rather, removal of an admiralty action filed in state court is possible only if jurisdiction is based on other grounds, such as diversity or a statutory provision." Rivas v. Energy Partners of Delaware, 2000 WL 127290 *3 (E.D. La. 2000) (Duval, J.), citing Tennessee Gas Pipeline v. Houston Casualty Co., Inc., 87 F.3d 150, 153 (5Lh Cir. 1996); Morris v. T.E. Marine Corporation, 2000 WL 1099654 at *1 (E.D. La. 2000) (Feldman, J.)
See Linton v. Great Lakes Dredge Dock Co., 964 F.2d 1480, 1484 (5th cir. 1992). In Linton, the court explained that admiralty claimants may file either in personam or in rem claims, which may be simply described as:
1) in personam, in which the defendant is a "person" (including corporations) and in which collection of a judgment involves tracing assets, garnishing them, etc. with all the attendant difficulties of collection; 2) in rem, in which a "vessel" (or other property) is the defendant and in which a judgment becomes a lien on the vessel (or other property) and may be enforced and collected by sale of the vessel (or other property), a sale which conveys title "good against the world." Gilmore Black, § 1-12.964 F.2d at 1484 n. 6.
Plaintiffs, alleging that this case was improperly removed, move to remand this action to state court. They argue that removal based upon admiralty jurisdiction pursuant to 28 U.S.C. § 1333 was improper because they filed an in personam admiralty claim in state court. Defendant, Steamship, contends that in seeking to lift the stay in bankruptcy court, the plaintiffs indicated that they wanted to liquidate their claim in order to protect their maritime lien rights.
While it is true that state courts lack jurisdiction over in rem proceedings which arise out of maritime liens because "the saving to suitors clause does not reach actions in rem, the suit filed by plaintiffs in state court is not an in rem action, but an in personam lawsuit. In their state court petition, plaintiffs did not name the vessel as a defendant, state that they were seeking to foreclose on a preferred maritime lien, or seek the arrest and interlocutory sale of the vessel. They filed an ordinary lawsuit against the vessel owner and its insurer. As such, it is a maritime claim which "may be removed to federal court only by non-forum defendants and only where there is complete diversity of citizenship." In re Dutile, 935 F.2d 61, 63 (5th Cir. 1991). See also, Foret v. Smith Marine Towing Corp., 1994 WL 721433 at *1 (E.D. La. 1994) (Vance, J.).
Lewis v. Lewis Clark Marine, Inc., 531 U.S. 438, 452, 121 s.ct. 993, 1003, 148 L.Ed.2d 931 (2001).
A maritime lien is:
[A] privileged claim upon maritime property, such as a vessel, arising out of services rendered to or injuries caused by that property. The lien attaches simultaneously with the cause of action and adheres to the maritime property even through changes in ownership until it is either executed through the in rem legal process available in admiralty or is somehow extinguished by operation of law.
1 Thomas J. Schoenbaum, ADMIRALTY AND MARITIME LAW, § 9-1 (3rd Ed. updated by 2003 Pocket Part). It is a charge on property to secure the payment of a debt. Id.; Associated Metals and Minerals Coro. v. Alexander's Unity MV, 41 F.3d 1007, 1011-12 (5th Cir. 1995) (a preferred maritime lien is a maritime lien on a vessel for damages arising out of a maritime tort, citing 46 U.S.C. § 31301 (5)(B).
Petition, Attachment to Rec. Doc. No. 1.
Steamship next argues that there is subject matter jurisdiction pursuant to 28 U.S.C. § 1332, diversity of citizenship. According to plaintiffs' petition, plaintiffs are California residents. Defendant, Delta Queen, is a citizen of Delaware, where it was incorporated, and of Louisiana, where it has its principal place of business. Steamship is deemed a citizen of Louisiana as is its insured, Delta Queen. An action may not be removed on the basis of diversity of citizenship if any defendant is a citizen of the state in which the action was brought. 28 U.S.C. § 1441 (b). This action may not properly be removed on the basis of diversity of citizenship jurisdiction.
Petition, Attachment to Rec. Doc. No. 1. Defendant, Steamship, has not disputed the citizenship allegations in the petition.
Pursuant to 28 U.S.C. § 1332 (c)(1), for purposes of federal diversity jurisdiction, a corporation is deemed to be a citizen of both the state of its incorporation and the state in which it has its principal place of business. In addition, "in any direct action against an insurer of a policy or contract of liability insurance, . . . such insurer shall be deemed to be a citizen of the State of which the insured is a citizen. . . ." Id.
Finally, defendant, Steamship, states in its original notice of removal that this action is removable on the basis of bankruptcy jurisdiction pursuant to 28 U.S.C. § 1334. Because one of the defendants, Delta Queen, has filed for relief in bankruptcy, it argues that this Court has "related to" bankruptcy jurisdiction. 28 U.S.C. § 1334 (b) provides in pertinent part that:
[T]he district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.
"The general test for determining whether a civil proceeding is "related to' bankruptcy is "whether the outcome of the proceeding could conceivably have any effect on the estate being administered in bankruptcy." Nickum v. Brakegate, Ltd., 128 B.R. 648, 650 (C.D. Ill. 1991), quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984). "Futhermore, an action is related to bankruptcy "if the outcome could alter the debtor's rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate." Id.
The bankruptcy court having jurisdiction of the bankruptcy proceeding of defendant, Delta Queen, has entered an order maintaining the stay of the action against Delta Queen, but allowing the plaintiffs to liquidate their claims against Steamship in "State or Federal Court." Because the plaintiffs? claims against Delta Queen, the debtor in bankruptcy, remain stayed, and the bankruptcy court has acknowledged that the plaintiffs may liquidate their claim in state or federal court, the fact that this action may be "related to" a bankruptcy proceeding will not prevent its remand. Accordingly,
Attachment to Rec. Doc. No. 15.
As noted, 28 U.S.C. § 1334 provides for original, but not exclusive, jurisdiction of cases which are "related to" estates being administered in bankruptcy. Further, in its supplemental memorandum in opposition to motion to remand and/or abstain, defendant, Steamship, concedes that while the case may have been properly removed pursuant to 28 U.S.C. § 1334 as "related to" a bankruptcy proceeding, its only arguable basis for retaining jurisdiction is pursuant to 28 U.S.C. § 1333 as an admiralty claim. For the reasons stated above, the court finds that this action was not removable as an admiralty claim.
IT IS ORDERED that the motion of plaintiffs, Dorothy and Jackson Bower, to remand is GRANTED; IT IS FURTHER ORDERED that this action is hereby REMANDED to the Civil District Court for the Parish of Orleans, State of Louisiana;
IT IS FURTHER ORDERED that the motion of plaintiffs, Dorothy and Jackson Bower, for sanctions is DENIED.