The opinion of the court was delivered by: Matthew F. Kennelly, District Judge
MEMORANDUM OPINION AND ORDER
Holly Marine Towing, Inc. is the owner of a barge called the HMT 7. On September 17, 1999, Holly chartered the barge to Baker Heavy & Highway, Inc. pursuant to a written charter agreement. On September 24, 1999, the HMT 7 was moored in the Chicago Sanitary and Ship Canal under the Interstate 55 highway overpass. A mechanical platform lift owned by Baker, and manufactured by JLG Industries, Inc., fell off the barge into the canal. Lonny Staal and John Gindl, two workers employed by Baker, were injured; Gindl died from his injuries. Gindl's estate and Staal each filed suit in state court against JLG, Baker, and Holly. Staal's suit was filed on June 1, 2000, and Gindl's was filed on August 21, 2000.
On August 4, 2000, Holly filed a complaint in this Court pursuant to the Limitation of Liability Act, 46 U.S.C. app. §§ 181-196, seeking exoneration from or limitation of its liability. The Act provides that the liability of a shipowner for damages arising from a maritime accident which occurs "without the privity or knowledge of the owner" shall not exceed the value of the vessel and its freight. Id. § 183(a). The Act was adopted in 1851, at a time when Congress sought to encourage the country's then-fledgling shipping industry, a purpose furthered by "exempting innocent shipowners from liability, beyond the amount of their interest." Norwich & New York Transportation Co. v. Wright, 80 U.S. 104, 121 (1871); Tug Allie-B, Inc. v. United States, 273 F.3d 936, 946-47 (11th Cir. 2001). It has been commented that the Act's original purpose has long since become obsolete, see Maryland Casualty Co. v. Cushing, 347 U.S. 409, 437 (1954) (Black, J., dissenting), but the statute nonetheless remains on the books.
The Limitation of Liability Act establishes a procedure by which a shipowner may, within six months after receiving written notice of a claim, file a petition in federal court for limitation of its liability. The owner must deposit with the court a sum equal to the value of its interest in the vessel and freight, or approved security for that amount. Once that is done, the court enjoins the prosecution of other actions against the shipowner and directs all persons with claims to file them in the federal court. Id. § 185. This so-called "concursus," see Maryland Casualty, 347 U.S. at 417, establishes "a single forum for determining whether the vessel owner is liable, and, if so, for determining whether the owner may limit its liability, assessing the value of the limitation fund and the claims on the fund, and deciding how the fund will be distributed." Mediterranean Shipping Co. S.A. Geneva v. POL Atlantic, 229 F.3d 397, 402 (2d Cir. 2000); see also, e.g., S&E Shipping Corp. v. Chesapeake & Ohio Ry. Co., 678 F.2d 636, 642 (6th Cir. 1982). If the shipowner fails to establish its right to limitation, the original plaintiffs are released to pursue their original claims in full. The ordinary procedure is to allow the original plaintiffs to return to the forum they originally chose once the limitation proceeding is concluded, though the plaintiffs may elect to proceed in federal court, which can keep the case pursuant to its admiralty jurisdiction. See, e.g., Pickle v. Char Lee Seafood, Inc., 174 F.3d 444, 449 (4th Cir. 1999); Great Lakes Dredge & Dock Co. v. City of Chicago, 3 F.2d 225, 231 n. 9 (7th Cir. 1993); Wheeler v. Marine Navigation Sulphur Carriers, Inc., 764 F.2d 1008, 1011 (4th Cir. 1985); Fecht v. Markowski, 406 F.2d 721, 723 n. 7 (5th Cir. 1969). The court conducting the limitation proceeding may hear and determine all matters related to the original limitation proceeding, including claims among the parties to the concursus, see British Transport Commission v. United States, 354 U.S. 129, 137, 138-39 (1957), though it is not clear that determination of the original plaintiff's claim may be forced into federal court over the plaintiff's objection.
Upon approval of Holly's proposed security (amounting to $10,900), Judge Ronald Guzmán entered an order enjoining all persons and entities from instituting or prosecuting any action arising from "the matters and things set forth in [Holly's] Complaint," see Order dated August 14, 2000, and directing the publication of notice advising all persons with claims relating to the accident to file them in this Court. Claims were filed by Staal, Gindl, and JLG — the latter in anticipation of a claim for contribution against Holly. Holly filed counterclaims against JLG and Baker, seeking contribution from both under state law and indemnity from Baker pursuant to the terms of their charter agreement.
Baker ultimately took the position that it is a "bareboat charterer" and thus stands in the same position as a shipowner for purposes of the Limitation of Liability Act. See generally Mediterranean Shipping, 229 F.3d at 400; Blanco v. United States, 775 F.2d 53, 58 (2d Cir. 1985). In early August 2002, it was given leave to file (without objection by Holly) an affirmative defense to Holly's counterclaim asserting its purported right to limitation of liability. Around the same time, Baker asserted the same affirmative defense in the Gindl and Staal state court actions.
The discussion at a status hearing on August 20, 2002 reflects that Baker assumed that its filing of the limitation defense had the effect of including its assertion of limitation as part of the concursus initiated by Holly's petition and entitled it to have its claim for limitation of liability determined by this Court. For purposes of establishing a discovery schedule, the Court made the same assumption, and we set the schedule based on the premise that all controversies arising from Staal and Gindl's injuries would be determined here. But we did not undertake to determine that issue at the time — provisionally or finally — and thus the other parties were not called upon to address whether Baker's actions sufficed to produce its desired result.
Holly has now asked the Court to approve a proposed settlement that it has negotiated with Gindl and Staal. The proposed settlement involves payment of half of Holly's limitation fund to each state court plaintiff ($5,450 each). It is conditioned on Gindl and Staal being able to return to state court and pursue their claims in the forum they originally chose.
Baker objected to the proposed settlement. It argued, among other things, that the exhaustion of the limitation fund without dealing with the claims of JLG and Baker to the fund would contravene the purpose of the Limitation of Liability Act. Baker also argued that it was entitled to have its request for limitation of its own liability determined in this Court.
In response, Holly argued that the proposed settlement effectively would dispose of all of the claims made against it, thus terminating the "concursus." First, it argued that as a matter of admiralty law, under McDermott v. AmClyde, 511 U.S. 202 (1994), the settlement with Gindl & Staal would bar all further contribution claims against Holly, and that JLG and Baker, if ultimately found liable to Gindl and/or Staal, would be entitled to a credit equal to Holly's proportionate share of the fault. Second, Holly stated that upon approval of its settlement, it would dismiss its contribution claims against JLG and Baker, leaving only its contractual indemnity claim against Baker. Though that claim arises under admiralty law and thus can remain in this Court pursuant to our admiralty jurisdiction, it is not a claim as to which Baker, as a bareboat charterer, is entitled to seek the protection of the Limitation of Liability Act, as the Act does not apply to claims based on contract. Mediterranean Shipping, 229 F.3d at 403; S&E Shipping, 678 F.2d at 644-45. Holly stated that it took no position on whether Baker's filing of a limitation defense in the state court was effective to entitle Baker to have that issue determined in this Court.
The Court ordered further briefing and argument on the question of what could and should remain in this Court and on the question of approval of the proposed settlement. As part of their submissions, Gindl and Staal argued that Baker's assertion of the limitation of liability affirmative defense did not enable Baker to invoke this Court's jurisdiction. They argued that Baker's assertion of the defense in the state court cases did not confer jurisdiction on this Court to decide the question of limitation of Baker's liability, and that Baker's assertion of a limitation defense to Holly's counterclaim (the only document in which Baker had asserted the defense in this Court) had no effect on Gindl and Staal's claims.
Baker responded by arguing that the "concursus" established by Holly's filing of its petition for limitation of liability covered not just claims against Holly, but all claims relating to the entire controversy. Thus, Baker argued, once it later raised the issue of limitation of its own liability in response to the Gindl and Staal claims — even though it did so only by filing an affirmative defense in state court — it was entitled to have this Court determine that issue as well, irrespective of the disposition of Holly's limitation claim.
Determination of whether Baker has properly invoked this Court's jurisdiction to determine the limitation of its liability is critical to the question of whether the Court should approve Holly's proposed settlement with Gindl and Staal. If Baker's limitation claim is properly before this Court, the settlement cannot be approved, because we would be unable to return the remainder of the controversy to state court, at least not until Baker's entitlement to limitation is determined.
The issue is a knotty one. First of all, as noted earlier, it is clear from the August 20, 2002 colloquy — which occurred within a few days after Baker had filed its limitation defense in both state and federal courts — that Baker assumed at that point that its request for limitation would be determined here. For this reason, one cannot fault Baker for failing to take steps after that date to preserve its right to do so. But that does not resolve the issue now before the Court, for ...