New Admiralty Case - Stays of Tort Cases Pending Limitation Action

Ah, the Limitation Act, 46 U.S.C. s 30501.  Roughly digested, it provides a cap or limit on the damages a tortfeasor faces for maritime wrongs.  The limit is set, by statute, as the value of the vessel plus freight.  The typical tort scenario is:  maritime injury occurs, victim files suit in state court asserting negligence, the vessel owner files a suit in federal court which is essentially a valuation trial as to the value of the vessel.  The statute says that during the pendency of the federal limitation action, the state court proceeding "shall cease."  46 U.S.C. s. 30511(c).

So, what happens to the state court suit?  Is it just stayed pending limitation action, or does cease require the suit to be dismissed?  And, if it is dismissed is the state law statute of limitation tolled while the limitation action is litigated?

The Court of Appeal for the Seventh Circuit resolved these questions today.  In American River Transportation Company v. Ryan, the Seventh Circuit ruled that "cease" really means "stayed."  Opinion can be downloaded here.  In American River, the federal district court was entertaining a limitation action while a state court negligence suit was stayed.  The party seeking limitation sought to have the district court require the dismissal of the state court suit, citing the "cease" language of the Limitation Act.  The court initially just stayed the action, but then reversed itself and sanctioned the state court plaintiff for not dismissing the state court suit.

The Seventh Circuit reversed.  It held that "cease" in the Limitation Act was satisfied by a "stay" of the state court proceeding.  It found compelling the fact that if the state court suit was dismissed, it would be time barred by the applicable statute of limitation.  It found that result to be illogical.  Thus, it interpreted "cease" to require a stay or cessation of the state court proceedings pending resolution of the Limitation action.