Smithland Towing & Construction, LLC et al

Filing 223

OPINION & ORDER: The Court denies without prejudice Stewart's motion for judicial approval of her settlement with Hutco (DN 215 ). cc: Counsel (JM)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
PADUCAH DIVISION
In re
Smithland Towing & Construction LLC,
as Title Owner, and WRBM d/b/a Western
Rivers Boat Management, Inc. as Operator
and Owner pro hac vice of the William E.
Strait, no. 2070550, for exoneration
from or limitation of liability
No. 5:18-cv-113-BJB
* * * * *
OPINION & ORDER
Alice Stewart, widowed by a shipyard explosion, has filed a motion for judicial
approval of her settlement with Hutco Services, Inc., her husband’s employer.
Although many claims run between many parties in this limitation-of-liability action,
a claim by Stewart directly against Hutco apparently isn’t among them.1 Nor is any
claim by her two minor children, whom the Hutco settlement would also bind. DN
215. Given her guardianship of those two minors, Stewart confidently asserts that
“Kentucky law requires the approval of the settlement by this court,” pointing to KRS
§ 387.125(6). Id. at 2. That provision states: “Subject to the approval of the court in
which the action, claim, or proceeding has been filed, a guardian may settle or
compromise the action, claim, or proceeding on behalf of the ward.” But the Court is
not nearly as confident that this Kentucky procedural rule applies in a federal
admiralty case. And even if that provision does apply, it is hardly clear that KRS
§ 387.125(6) requires judicial approval of a settlement between parties that aren’t
formally adverse before this Court.

Smithland Towing & Construction LLC and WRBM LLC filed this lawsuit after a
towboat owned by Smithland Towing and operated by WRBM—the WILLIAM E. STRAIT—
exploded on January 19, 2018, while being rebuilt at the First Marine Shipyard. Complaint
(DN 1) ¶ 10. Alice Stewart is the widow of Quentin Stewart, a worker killed by the explosion.
See Answer, Claim, and Third-Party Complaint (DN 19) at 5. Stewart answered the
limitation complaint, asserted a claim under Kentucky’s wrongful-death statute against
Smithland Towing and WRBM, and (in the same document) filed a third-party complaint
against First Marine Shipyard, Joe Rupcke, Four Rivers Marine Coating, and Thermal
Control and Fabricating LLC. That claim asserted diversity jurisdiction and alleged that
these parties negligently caused Quentin Stewart’s death. Id. at 1, 4, 9. Billy Koonce,
another worker who was injured in the explosion, and Rosemary Wright, whose husband was
also killed by the explosion, filed third-party complaints against Hutco—asserting that it
negligently caused the explosion. Id. at 4; DNs 26, 27.
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Stewart’s motion raises at least three tricky questions: jurisdiction, statutory
interpretation, and justiciability.
A. To start, what is the basis for the Court’s jurisdiction? The limitation
complaint, filed by Smithland Towing & Construction LLC, invoked the Court’s
admiralty jurisdiction. See DN 1 (“Jurisdiction in this [limitation] action exists
pursuant to admiralty and maritime jurisdiction of the United States Courts, 28
U.S.C. § 1333[.]”). Stewart’s third-party complaint invoked diversity jurisdiction,
and pled admiralty jurisdiction in the alternative. Third-Party Complaint (DN 19)
¶ 1 (“Jurisdiction of this court, with regard to third party claims, is based on 28
U.S.C.A. § 1332, diversity of citizenship …. In the alternative, Alice Stewart asserts
maritime jurisdiction against these third party defendants pursuant to 28 U.S.C.A.
§ 1333.”).
The basis for jurisdiction—admiralty or diversity—matters for at least two
reasons.
First, it bears on the question whether state law (like KRS § 387.125(6))
applies. In diversity cases, substantive state law and federal procedural law apply
under the Erie doctrine. See generally Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938).2
Federal courts that have considered the question have held that “judicial approval of
settlements involving minors [is] a matter of substantive state law.” Goesel v. Boley
Int’l (H.K.) Ltd., 806 F.3d 414, 419 (7th Cir. 2015) (collecting cases). So if the Court
is sitting in diversity, state law appears to apply, meaning the judicial-approval
statute is at least potentially before the Court.
In admiralty cases, however, deciding whose law applies is more complex.3
“The exercise of admiralty jurisdiction … does not result in automatic displacement

“Stated in general terms, Erie’s core doctrine is that the substantive law to be applied
in any federal case is state law, except when the matter before the court is governed by the
United States Constitution, an Act of Congress, a treaty, international law, the domestic law
of another country, or federal common law.” WRIGHT & MILLER, FEDERAL PRACTICE &
PROCEDURE § 4501 (3d ed. 2023).
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One of the problems with the lack of adversarial briefing here is that the content of the
“federal” rule that would apply outside a typical Erie situation isn’t entirely clear. The
parties haven’t pointed to a rule authorizing minor settlements without judicial approval in
admiralty. On the other hand, neither is the Court aware of an admiralty rule similar to
Kentucky’s requiring judicial approval of minor settlements. And it may well be that if
admiralty does apply, the substantive rule of decision doesn’t even change because federal
law, though formally applicable, would simply absorb the state rule on point. See generally 1
ADMIRALTY & MARITIME LAW § 4:4 (6th ed. 2023) (“[S]ince the body of federal maritime
statutes and judicially created general maritime law is not a complete system, judges in
admiralty cases frequently adopt state law rules through a process of ‘borrowing,’ thereby
incorporating state law doctrines into the general maritime law.”); cf. Great Lakes Ins. Co v.
Raiders Retreat LLC, 143 S. Ct. 999 (2023) (granting certiorari to decide whether a rule of
federal common law governs the enforceability of maritime contracts’ choice-of-law provisions
that displace state conflict-of-law laws).
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of state law.” Yamaha Motor Corp., U.S.A. v. Calhoun, 516 U.S. 199, 206 (1996).
Determining whether state law applies “is one of the most perplexing issues in the
law.” 1 ADMIRALTY & MARITIME LAW § 4:4 (6th ed. 2023); see also Wright & Miller,
§ 3671.3 (“[T]he comparatively small role that state law plays within the realm of
admiralty is somewhat puzzling[.]”). Furthermore, whether and to what extent this
inquiry preempts, absorbs, or displaces the typical Erie inquiry remains unclear.
Some commentators have recognized, with confidence rivaling Stewart’s, that “the
Erie doctrine applies, whatever the ground for federal jurisdiction, to any issue or
claim which has its source in state law.” Wright & Miller, § 4520 (quoting Maternally
Yours v. Your Maternity Shop, 243 F.2d 538, 540 n.1 (2d Cir. 1956)). This would
appear to reach “an action in admiralty under the wrongful-death statute of a state,”
such that “the substantive law of the state is applicable.” 2 AM. JUR. 2d ADMIRALTY
§ 107. Elsewhere, however, the same authorities equivocate: In “admiralty and
maritime matters” and other areas where “there is a strong national or federal
concern originating from the Constitution,” “an Erie analysis is unnecessary….”
WRIGHT & MILLER § 4514.
Second, the basis for jurisdiction sets the framework for deciding which state’s
law applies. “A federal court sitting in admiralty must apply federal choice of law
rules.” State Trading Corp. of India, Ltd. v. Assuranceforeningen Skuld, 921 F.2d
409, 414 (2d Cir. 1990). A federal court sitting in diversity, in contrast, applies the
choice-of-law rules of the state in which it sits (in this case, Kentucky). Klaxon Co. v.
Stentor Electric Mfg. Co., 313 U.S. 487, 496 (1941). Presumably one (or both) of these
choice-of-law rules could direct the Court to apply the law of Louisiana (where
Stewart and her minor children appear to live) rather than the law of Kentucky
(where the accident underlying the limitation action occurred).
Perhaps out of solicitude for the Court’s approval, or perhaps out of neglect,
Stewart gives no attention to these difficult questions.
B. Even assuming KRS § 387.125(6) applies in federal court, it’s not clear that
this Court must approve the settlement. The statute provides:
“A guardian may institute or defend actions, claims, or proceedings in
any jurisdiction for the protection of the ward’s estate. Subject to the
approval of the court in which the action, claim, or proceeding has been
filed, a guardian may settle or compromise the action, claim, or
proceeding on behalf of the ward. If the action, claim, or proceeding has
not been filed in any court, the District Court of the county where a
guardian qualified shall approve the settlement or compromise.”4

Federal courts apparently haven’t given much attention to KRS § 387.125(6), perhaps
because parties rarely ask them to weigh in on issues related to guardianship. Kentucky
courts haven’t considered the statute in any great depth, either. Though one Justice of the
Kentucky Supreme Court stated in a dissent that it does apply in situations like this, in which
the parties to the settlement aren’t (yet) litigating before the court: “Whether settled prior to
a formal complaint for damages is filed or after, KRS § 387.125(6) requires that any
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Has an action been “filed” in this Court “on behalf of the ward” or “for the
protection of the ward’s estate”? That question of state statutory interpretation is no
less murky than the jurisdictional issues surveyed above. The text of § 387.125
speaks to two types of settlements requiring approval: an “action, claim, or
proceeding” that already “has been filed,” and one in which “the action, claim, or
proceeding has not been filed in any court.” If a claim is pending, the court
adjudicating it is the one that must review. If a claim is not pending in any court,
then “the District Court of the count where a guardian qualified” is the relevant
tribunal.5
The papers don’t indicate that Stewart has filed a claim on behalf of the minors
in this jurisdiction. Stewart filed her answer, claim, and third-party complaint as
“administratrix of the Succession of Quentin Stewart,” the deceased father. DN 19
at 1. She did not sue as the guardian or representative of the children. Nor did she
sue Hutco, which apparently isn’t adverse to Stewart in any claim in this lawsuit:
Stewart’s answer, claim, and third-party complaint do not assert any claim or defense
against Hutco. Rather, Hutco is (or rather was, given a subsequent notice of
settlement) fighting with other parties over who is liable for the explosion. It asserted
a claim against Smithland Towing in the limitation action, see DN 54, and is a thirdparty claimant and defendant with respect to claims filed by other limitation
claimants, see, e.g., DNs 26, 27.6 So this does not appear to be a “court in which the
action, claim, or proceeding has been filed … on behalf of the ward.” § 387.125(6).
True, Stewart brought this motion on behalf of the children. But the statute
appears to divert such a motion either to the court in which claims have already been
filed or to the court that qualified the guardianship. This Court is neither.

settlement for claims be approved by the court.” Coons ex rel. Coons v. McDonald-Burkman,
2020-SC-506, 2021 WL 5050761, at *6 (Ky. S. Ct. Oct. 28, 2021); see also Lawson ex rel.
Lawson v. Dawson, No. 2003-CA-448-MR, 2004 WL 1909357, at *4 (Ky. Ct. App. Aug. 27,
2004) (“KRS § 387.125(6) allows a duly appointed guardian to compromise and release a claim
on behalf of a minor with court approval.”) Neither opinion, however, confronts a case in the
same posture as this one. And neither offers any limiting principle for a rule that would in
theory require judicial pre-approval of any contract made on behalf of a minor, at least so
long as it surrendered some potential cause of action.
Stewart does not explain what or where is “the county where a guardian qualified.” But
the 27th Judicial District Court for the Parish of St. Landry, Louisiana, is the court that
appointed her the guardian of her children. DN 215 at 2 n.3. That is also where she resides.
DN 19 at 1.
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Hutco, First Marine, Smithland Towing, and WRBM recently filed a notice of settlement,
explaining that they have “agreed between themselves to jointly contribute funds to settle
the claims of the claimants herein, and … to waive, release and dismiss all claims and crossclaims” asserted against each other. DN 221 at 1. But Wright’s claim and Koonce’s claim
against Hutco appear to remain pending.
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C. It’s not even clear that a case or controversy within the meaning of Article
III exists between the non-party minors and the non-adverse Hutco. If parties reach
an agreement before ever joining in federal litigation, why would a federal judge need
(or be allowed) to sign off on what is, in effect, a purely private contract? After all,
federal courts “lack jurisdiction to exercise judicial power when it would have no real
consequences for the parties and would only rubberstamp an agreement the parties
memorialized in writing and consummated before ever arriving on a federal court’s
doorstep.” NLRB v. Constellium Rolled Products Ravenswood, LLC, 43 F.4th 395,
398 (4th Cir. 2022). “[O]nce the parties reach agreement, would the underlying
disputes even qualify as ‘Cases’ and ‘Controversies’ as used by the framers of Article
III?” Lexington Ins. Co. v. Ambassador Group, LLC, 581 F. Supp. 3d 863, 866 (W.D.
Ky. 2021).
Importantly, this point wouldn’t necessarily undermine the authority of a state
court—say, “the District Court of the county where a guardian qualified”—to approve
a settlement. Article III doesn’t limit their jurisdiction as it does this court’s.
ASARCO Inc. v. Kadish, 490 U.S. 605, 617 (1989) (“[T]he constraints of Article III do
not apply to state courts.”). Federal jurisdiction, however, is assumed not to exist. It
must be affirmatively established by the party invoking the Court’s authority based
on the parties and claims before the Court. See Global Tech., Inc. v. Yubei (XinXiang)
Power Steering Sys. Co., Ltd., 807 F.3d 806, 810 (6th Cir. 2015) (“[T]he party invoking
federal jurisdiction has the burden to prove that jurisdiction.”).
In some limited circumstances, to be sure, federal courts exercise Article III
authority to formally bless the resolution of existing claims. See, e.g., Kokkonen v.
Guardian Life Ins. Co. of America, 511 U.S. 375, 381 (1994) (acknowledging that “the
terms of [a] settlement agreement” may be “made part of the order of dismissal”). But
the soundness of even those limited exertions of “ancillary jurisdiction” are not
without controversy. Compare Michael T. Morley, Non-Contentious Jurisdiction and
Consent Decrees, 19 U. PA. J. CONST. L. ONLINE 1, 3 (2016) (questioning federal
jurisdiction when “all interested parties affirmatively agree and seek the same
relief.”), with James E. Pfander & Daniel D. Birk, Article III Judicial Power, the
Adverse-Party Requirement, and Non-Contentious Jurisdiction, 124 YALE L.J. 1346,
1355 (2015) (questioning strict adverseness requirement given historical examples of
“non-contentious jurisdiction”). Regardless, this settlement doesn’t appear to resolve
any claims pending before this Court. And because the minors are not parties, any
“inherent authority” to approve settlements involving minor parties wouldn’t appear
to apply. See Egan ex rel. Keith v. Jackson, 855 F. Supp. 765, 775 (E.D. Pa. 1994)
(discussing “the Court’s inherent duty to protect the interests of minors and
incompetents that come before it.”); see also Alexandra N. Rothman, Bringing an End
to the Trend: Cutting Judicial “Approval” and “Rejection” out of Non-Class Mass
Settlement, 80 FORDHAM L. REV. 319, 332 (2011) (discussing judicial approval of
settlements involving minors).

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***
To be clear, if the statute did control and if the dispute were properly before
this Court, no factual or legal reasons would appear to call into question the
appropriateness or lawfulness of the settlement between Hutco and Stewart’s minor
children. That observation, however, carries the significant caveat that Stewart’s
motion does not attach the settlement agreement, but instead a document that
identifies only the total settlement amount and proposed allocation.
That
information remains under seal, but appears to be consistent with KRS
§ 411.130(2)(b). So while the limited information before the Court gives it no
substantive pause regarding the settlement submitted for approval, the parties
haven’t established the basis for the Court to exercise jurisdiction over that
settlement. Or, for that matter, that this Court’s approval is even necessary for the
children and widow to settle with Hutco and move on from this lawsuit. On that
basis, the Court denies Stewart’s motion without prejudice.

December 29, 2023

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