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Media Alerts - Williamson v. Recovery Limited Partnership - Sixth Circuit
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November 20, 2013
  Williamson v. Recovery Limited Partnership - Sixth Circuit
Headline: The Sixth Circuit declines to follow the majority of its sister circuits, which allows a defendant to bring an interlocutory appeal simply because its claim is part of a broader admiralty suit, claiming that the majority's interpretation would render the final-judgment rule a nullity in admiralty cases.

Area of Law: Admiralty Law; Civil Procedure (federal jurisdiction)

Issues Presented: (1) Did the district court properly find that the plaintiffs' action was not time-barred? (2) Did the district court err in granting the plaintiffs' summary-judgment motion against the business-entity defendants? (3) Did the district court abuse its discretion in granting a preliminary injunction against two of the defendants?

Brief Summary: The plaintiffs were hired to help find and recover a century-old shipwreck and its cargo, which contained many tons of gold. The first round of litigation over the gold began in the late 1980s; the litigation has now spanned three decades. The latest round of litigation was brought by the plaintiffs, who are still waiting to receive their promised compensation. After the plaintiffs sued, both defendants counterclaimed, and this appeal consolidated several of these claims and counterclaims. The Sixth Circuit held that the plaintiffs' suit was not time-barred under 46 U.S.C. § 80107(c) because section 80107(c) applies only to pure salvors. The Sixth Circuit also upheld the district court's grant of summary judgment against the business-entity defendants because the defendants' evidence was too vague or irrelevant to sufficiently establish their counterclaims. Finally, the Sixth Circuit ruled that the district court did not abuse its discretion in granting a preliminary injunction against the property of two defendants because the defendants failed to present the correct legal argument to the court and, therefore, forfeited the opportunity to raise the issue on appeal.

Significance: This is the first case in which the Sixth Circuit had to interpret the admiralty exception to the final-judgment rule. The Sixth Circuit refused to follow its sister circuits' narrow reading of the rule because that reading would render the final-judgment rule a nullity in admiralty cases by "effectively strik[ing] out the word 'cases' and replac[ing] it with the word 'claims.'"

Extended Summary: The plaintiffs, a group of employees and one company, were hired by the defendants to help find and recover the Central America, a ship that sunk in 1857 while transporting many tons of gold. As a condition of their employment, the plaintiffs had to sign both an employment contract and a nondisclosure agreement. The nondisclosure agreement provided that the employees would receive a share of the "net recovery" in exchange for their silence about the recovery effort. Although the parties began removing millions of dollars in gold from the Central America in 1988, the plaintiffs have never received any compensation.

This "salvo of litigation began in 2005 and 2006," and, in 2011, the parties filed cross-motions for summary judgment. The defendants asserted "a two-year statute of limitations for actions in salvage and three counterclaims." The district court rejected the defendants' time-bar argument and granted summary judgment against all of their counterclaims. The defendants filed an interlocutory appeal. While the appeal was pending, the district court granted (1) the plaintiffs' motion for prejudgment attachment to certain assets belonging to some of the defendants and (2) an injunction against two defendants, preventing them from divesting themselves of property that could be used to fulfill a judgment against them.
The defendants took an interlocutory appeal of the order.

This consolidated appeal addressed several complex questions about federal jurisdiction and admiralty law. When the plaintiffs asserted that the Sixth Circuit lacked jurisdiction to hear the defendants' appeal of summary adjudication of their counterclaim and the prejudgment-attachment order, the Sixth Circuit had to decide, for the first time, how it should interpret 28 U.S.C. § 1292(a)(3). Section 1292(a)(3) provides an exception to the final-judgment rule and grants courts the authority to hear appeals of interlocutory decrees in admiralty cases. The Sixth Circuit declined to adopt the majority view, which advocates "a narrower interpretation [of the statute] that looks to the nature of each individual claim involved in the interlocutory appeal, as opposed to the nature of the broader suit." The Sixth Circuit instead applied the plain-language rule because the majority view "would effectively strike out the word 'cases' and replace it with the word 'claim.'"

The Sixth Circuit noted that its interpretation of the statute was supported by Rule 9(h)(2) of the Federal Rules of Civil Procedure. According to Rule 9(h)(2), "'[a] case that includes an admiralty or maritime claim . . . is an admiralty case within 28 U.S.C. § 1292(a)(3).'" Because the case is an admiralty case under Rule 9(h)(2) and because the district court's summary-judgment order determined the rights and liabilities of the parties, the Sixth Circuit determined that it had jurisdiction over the interlocutory appeal under § 1292(a)(3). Therefore, the court addressed the merits of the defendants' appeal in their entirety.

The Sixth Circuit first addressed the defendants' argument that the plaintiffs' entire case was time-barred under 46 U.S.C. § 80107(c). According to section 81007(c), a civil action to recover remuneration for salvage services must be brought within two years after the salvage services were performed unless the plaintiff has not had "a reasonable opportunity to seize the . . . salvaged vessel within the jurisdiction of the court." In holding that section 80107(c) did not apply in this case, the Court noticed two basic points: (1) the plaintiffs were not suing on their employment contracts, which could have been deemed to provide "salvage services"; instead, they were suing on their nondisclosure agreements; and (2) under admiralty law, a person who provides services under an employment contract does not meet the definition of a "pure" salvor, i.e., a person who voluntarily helps a ship in distress. Accordingly, the Sixth Circuit held that the plaintiffs' case was not time-barred under section 80107(c).

Next, the court addressed the district court's grant of summary judgment against the business-entity defendants' counterclaims, noting that the counterclaims were interlinked; therefore, if the defendants' breach-of-contract claim did not survive summary judgment, the defendants' remaining counterclaims would also fail to survive summary judgment. The Sixth Circuit affirmed the district court's grant of summary judgment against the entity defendants' counterclaims because, even when viewed in a favorable light, the defendants' evidence was too vague or irrelevant to establish the elements for any of the counterclaims.

Finally, the Sixth Circuit addressed the district court's preliminary-injunction orders. The defendants argued that (1) the district court had no jurisdiction to hear the plaintiffs' motion, (2) the district court did not have authority to grant a preliminary injunction, (3) the district court abused its discretion in granting the injunction, and (4) the district court set the bond "unconstitutionally low." In addressing the defendants' arguments that the district court lacked jurisdiction to hear the plaintiffs' motion, the Sixth Circuit held that the defendants forfeited their opportunity to raise this argument on appeal because they failed to argue that the district court lacked authority to grant the equitable remedy of a preliminary injunction to protect a future potential remedy at law.

In addressing the defendants' argument that the district court abused its discretion in granting the preliminary injunction, the Sixth Circuit noted that it was required to give deference to the district court because all the defendants' arguments related to the district court's fact finding and its balancing of the factors. After analyzing the factors and giving deference to the district court, the Sixth Circuit found that the district court did not abuse its discretion in granting the preliminary injunction.

Link to Full Opinion: http://www.ca6.uscourts.gov/op...s.pdf/13a0288p-06.pdf

Panel: Boggs, Suhrheinrich, and Murphy

Argument: June 14, 2013

Date of Issued Opinion: October 2, 2013

Docket Number: 11-3723/12-3949

Decided: Affirmed as to all issues over which the court had jurisdiction.

Case Alert Author: Theodora Eisenhut

Counsel: ARGUED: Christopher L. Trolinger, FARLOW & ASSOCIATES LLC, Dublin Ohio, for Appellants. Michael J. Frevola, HOLLAND & KNIGHT, LLP, New York, New York, for Appellees. ON BRIEF: Christopher L. Trolinger, FARLOW & ASSOCIATES LLC, Dublin Ohio, for Appellants. Michael J. Frevola, HOLLAND & KNIGHT, LLP, New York, New York, Michael R. Szolosi, Sr., MCNAMARA AND MCNAMARA, L.L.P., Columbus, Ohio, for Appellees.

Author of Opinion: Circuit Judge Boggs

Case Alert Circuit Supervisor: Professor Tammy Asher

    Posted By: Mark Cooney @ 11/20/2013 01:42 PM     6th Circuit  

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