Judicial Injunction Order No Exception to the Limitation Stay in the Fifth Circuit | ZFZ Postcard Cases

A federal judge recently issued an order that circumvented the limitation of liability stay under U.S. law.

The order enforced by injunction what was only permissible by stipulation (ie. the parties’ agreement entered in court).

The judge ordered a stay on all proceedings, even though only one of three limitation claimants had agreed to the terms of the stipulation. The judge also excepted the state court proceeding from the stay, so long as no judgment was enforced and res judicata was not asserted, in accordance with a permitted exception to the stay under the Odeco case.

The Fifth Circuit Court of Appeals vacated the order, reinforcing the power of the Limitation Act’s stay on other proceedings, stating that the Odeco exception applies only when all claimants make the stipulation.

Read more on the decision here.