Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

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DEERING v. NATIONAL MAINTENANCE & REPAIR (December 2, 2010)

On March 11, 2009, the Mississippi River was at flood stage. Vincent Deering, a riverboat pilot for National Maintenance & Repair, was operating a towboat moving barges at a National facility. Deering had difficulty controlling the boat (because, he alleges, of a defective steering mechanism). Another boat offered assistance but ended up making matters worse. The towboat sank and Deering suffered serious injuries. Deering filed suit in state court under the Jones act and admiralty law. National filed a Limitation of Liability Act petition in federal court. Under that Act, a shipowner’s liability is limited to the ship’s value (here, according to National, a $30,000 salvage value). The federal court stayed the state action, Deering refiled his claims in federal court, and National filed a counterclaim for the value of the ship. Deering moved for dismissal of the counterclaim. Judge Herndon (S.D. Ill.) granted the motion on the grounds that counterclaims that are, by their very nature, setoffs to Jones Act claims, are not allowed. National appeals.

In their opinion, Seventh Circuit Court of Appeals Judges Posner, Kanne, and Williams affirmed. As it frequently does, the Court first addressed its jurisdiction. National relied on § 1292(a)(3), which allows interlocutory appeals from orders "determining the rights and liabilities of the parties." The principal purpose of this section is to allow appeals from liability determinations in admiralty cases before the usually separate and frequently costly relief proceedings. Although that is not the situation here, the Court noted that the appeal presented a case to those in which interlocutory appeals are allowed in non-admiralty cases: it involved a controlling question of law, the issue is separate from both the personal injury claim and the liability limitation petition, and none of the facts relevant to the underlying claims are relevant to the appeal. Also noting that other courts have allowed jurisdiction in these circumstances, the Court concluded that it did have jurisdiction to hear the appeal. The Court proceeded to the merits. The Federal Employers' Liability Act (FELA), which is incorporated by reference into the Jones Act, provides that "any . . . device whatsoever" that is intended to exempt a common carrier from liability is void. Here, the only purpose of the counterclaim is to act as a setoff to Deering's personal injury claim. Relying on the plain language of the statute, the state of the law at the time it was enacted, and public policy, the Court concluded that National's counterclaim was a void "device" under the Jones Act. The Court distinguished the Fifth Circuit's decision in Withhart, in which the court held that a counterclaim was not such a device. Withhart was a Jones Act case but relied principally on a prior FELA case. The Court noted several fundamental differences between the Jones Act and FELA that the Withhart case did not address that could have distinguished the case from the earlier precedent. It also questioned the correctness of both decisions. In the end, though, it merely distinguished Withhart. There was no limitation of liability issue in Withhart. The Court concluded that the "one-two punch" -- the combination of a property damage counterclaim and a limitation of liability petition that would wipe out a substantial injury claim -- was not allowed by the Act.