UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT
*fn*: February 5, 1985.
IN THE MATTER OF THE OHIO RIVER COMPANY, OWNER OF BARGE ORG-2515, FOR EXONERATION FROM OR LIMITATION OF LIABILITY, PETITIONER-APPELLANT,
EDWARD L. CARRILLO, JR., INDIANA GRAIN COOPERATIVE & INDIANA FARM BUREAU COOPERATIVE, DEFENDANTS (CLAIMANTS)-APPELLEES
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 80 C 5159- William T. Hart, Judge.
Appellant Ohio River Company appeals from the denial of its motion to vacate a dismissal without prejudice of its complaint for exoneration from or limitation of liability. We reverse.
Appellee Edward L. Carrillo, Sr. sustained injuries while loading grain onto a barge owned by appellant.*fn1 He sued appellant (and two other parties) for negligence in Illinois state court, seeking $300,000 in damages. Pursuant to the Limitation of Liability Act (the "Act"), 46 U.S.C. §§ 181-189, appellant filed an admiralty action in federal court for exoneration from liability or alternatively for limitation of its liability to the value of the barge.*fn2
The district court enjoined prosecution of the state court until February 25, 1981, when, on motion of appellant, it lifted the injunction and continued the admiralty proceeding. The court held a status hearing on December 15, 1981, where it learned that the state court action had yet to proceed to trial. The status hearing was continued for a year. Shortly thereafter, the cause was reassigned to a new judge, who sua sponte dismissed it without prejudice but with leave to reinstate. Appellant moved to vacate the dismissal, voicing concerns over potential difficulties it might experience when and if it later refiled the admiralty complaint. The court denied the motion and this appeal followed.*fn3
We initially note that the order before us is final and appealable under 28 U.S.C. § 1291. While appellate court occasionally treat dismissals without prejudice as interlocutory, they do so only when lower courts, either expressly or by implication, retain jurisdiction over the disputes to permit complainants to save by amendment otherwise deficient pleadings.*fn4 The court below, however, found no problem with the pleadings; it merely sought to dismiss an inactive case from its docket without prejudicing appellant's ability to revive the action upon termination of the state court proceeding. And though the dismissal order contemplates that appellant may eventually refile its admiralty complaint, the court, by dismissing the action, has terminated its jurisdiction over the original complaint. This is enough to render the order appealable.
Proceeding to the merits of the case, appellant argues that only a stay of the admiralty action can fully protect its rights under the Act and, conversely, that a dismissal, however framed, could lead to adverse collateral consequences when and if it decides to reinstate its complaint. Just as federal court cannot hear cases outside of their jurisdiction, neither can they decline to consider disputes properly before them (absent special circumstances not present here).*fn5 As a general practice, federal courts should stay rather than dismiss actions when they decline to proceed on the merits because of the pendency of a related state court proceeding. Cf. Board of Education of Valley View v. Bosworth, 713 F.2d 1316, 1322 (7th Cir. 1983); Evans Transportation Co. v. Scullin Steel Co., 693 F.2d 715, 717-18 (7th Cir. 1982); Northern Cheyenne Tribe v. Adsit, 721 F.2d 1187, 1188 (9th Cir. 1983); Mahaffey v. Bechtel Assoc. Professional Corp., 226 U.S. App. D.C. 7, 699 F.2d 545 (D.C. Cir. 1983); Williams v. Red Bank Bd. of Educ., 662 F.2d 1008, 1023-24 (3d Cir. 1981). Should the state court fully resolve the dispute, then the practical effect of a stay will be identical to that of a dismissal. But should an issue remain, the parties can revive the action "without the obligation to file again and the fear that the statute of limitation will have run," since the federal court will have retained its jurisdictional tie to the case. Bosworth, supra, at 1322.
Adherence to this procedure is especially warranted in the context of petitions for limitation of liability. A shipowner seeking the Act's protection must file a complaint in federal court within six months of receipt of notice of a claim. 46 U.S.C. § 185. Court strictly construe this time limit and resolve and ambiguity against the shipowner. Maryland Casualty Co. v. Cushing, 347 U.S. 409, 437, 98 L. Ed. 806, 74 S. Ct. 608 (1954) (Black, J., dissenting); Cincinnati Gas & Electric Co. v. Abel, 533 F.2d 1001, 1005 (6th Cir. 1976). See also 3 Benedict on Admiralty, § 15, at 2-19 to 2-21 (1983). A dismissal, as opposed to a stay, of a timely-filed petition raises the unresolved question of whether later reinstatement of the previously dismissed action complies with the six-month filing requirement. Cf. Rubenstein v. Bryant, 522 F.2d 1351 (5th Cir. 1975).
Despite the district court's obvious effort to craft an order that insures appellant's ability to pursue its federal rights in the future, we conclude that the better course would have been to follow the more common procedure of retaining jurisdiction over the limitation action by staying it. See, e.g., Langnes v. Green, 282 U.S. 531, 75 L. Ed. 520, 51 S. Ct. 243 (1931). This would avoid any uncertainty arising out of sticky questions of statutory interpretation without materially altering the posture of the case. Accordingly, we reverse and remand to the district court with instruction to vacate the dismissal and to stay the action.