July 17, 2008
Welcome to the July 17, 2008, issue of Admiralty Update, the copyrighted and trademarked e-newsletter on developments in U.S. Coast Guard regulations and state and federal court decisions of interest to commercial and recreational mariners.
It is written, edited, and produced by Frederick B. Goldsmith
and E. Richard Ogrodowski of Goldsmith & Ogrodowski, LLC, based in Pittsburgh, Pennsylvania, U.S.A.
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We are pleased to announce that our firm celebrated its second anniversary on April 1, 2008.
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This issue's photo depicts Crescent Towing
Company’s 5,000 HP Z-Drive tractor tug, the M/V POINT CLEAR, headed
downbound on the Mississippi River just below downtown New Orleans, enroute to meet a ship on a busy day this past May.
Recent U.S. Coast Guard Notices in the Federal Register
Proposed Amendment to OPA 90 and CERCLA Regulations
The Coast Guard has proposed amending regulatory requirements relating to financial responsibility under the Oil Pollution Act of 1990 (“OPA 90”) and the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). Under the proposed amendments, the Coast Guard would eliminate the requirement in 33 C.F.R. § 138.65 that original or copies of Certificates of Financial Responsibility (“COFR”) be carried aboard covered vessels. The National Pollution Funds Center (“NPFC”) would issue all COFRs in electronic form, and copies of the COFRs could be downloaded from the NPFC’s website. The Coast Guard also intends to increase COFR application fees from $150 to $200 and the COFR certification fees from $80 to $100. The proposed amendments will also increase the financial responsibility requirements to comport with the Delaware River Protection Act of 2006, which increased the limits of liability for vessels. See 73 Fed. Reg. 6642 (Feb. 5, 2008).
Coast Guard Withdraws Proposed Rule Regarding Propeller Injury Avoidance
The Coast Guard has withdrawn a 2001 proposed rulemaking that would require owners of non-planing recreational houseboats with propeller-driven propulsion located aft of the transom to either install a propeller guard or use a combination of other devices to avoid propeller injuries. After receiving nearly two hundred (200) comments regarding the proposed rule, the Coast Guard determined that the costs would be significantly higher than originally estimated. The proposed rule also lacked a practical definition of the term “houseboat.” The Coast Guard is exploring more cost-effective options to address its concerns about propeller injuries. See 72 Fed. Reg. 59,064 (Oct. 18, 2007).
Vessel Documentation Now Cheaper and Easier
Effective October 31, 2007, the National Vessel Documentation Center no longer requires certain original documents to be provided for recording. In addition, there is no additional fee for filing by facsimile. See 72 Fed. Reg. 58,762 (Oct. 17, 2007).
Ed. Note: The NVDC website has also been revamped and is now even
more practical and user-friendly:
http://www.uscg.mil/hq/cg5/nvdc/
Recent State & Federal Court Maritime Decisions
U.S. Supreme Court: Punitive Damages for EXXON VALDEZ Oil Spill Recoverable, But Cannot Exceed Compensatory Damages
In Exxon Shipping Co. v. Baker, 128 S.Ct. 2605, 2008 WL 2511219 (June 25, 2008), the U.S. Supreme Court confronted three issues: (1) whether a corporate shipowner can be liable for punitive damages based upon the reckless acts of its managerial employees; (2) whether the Clean Water Act preempted the availability of punitive damages under maritime common law; and (3) whether the punitive damages awarded in the aftermath of the EXXON VALDEZ oil spill—$2.5 billion—were excessive under maritime common law. The Supreme Court was evenly split (Justice Alito recused himself from the case, leaving 8 justices) on the issue of corporate liability for managerial employee conduct; accordingly, the Ninth Circuit’s decision permitting recovery of punitive damages was upheld. A majority of the Supreme Court held that in passing the Clean Water Act, which provides for civil penalties for oil spills in navigable waters, Congress did not intend to “occupy the entire field of pollution remedies,” and thus punitive damages were recoverable. Finally, the Supreme Court held that the punitive damages award was excessive: since Exxon Shipping Co. had not exhibited “exceptional blameworthiness,” the Supreme Court held that a maximum ratio of 1:1 (punitive damages to compensatory damages) would be recoverable. The case was thus remanded for consideration of a punitive damages award not to exceed $507.5 million.
U.S. Fifth Circuit Court of Appeals: Post-Stewart, Partially Constructed Watercraft Not a Vessel
In Cain v. Transocean Offshore USA, Inc., 518 F.3d 295 (5th Cir. Feb. 21, 2008), the Fifth Circuit held that the CAJUN EXPRESS—a fifth-generation semi-submersible mobile offshore drilling rig that was only partially constructed—was not a vessel. The Fifth Circuit distinguished its jurisprudence regarding the vessel status of partially-constructed watercraft from the Supreme Court’s 2005 opinion in Stewart v. Dutra Construction Co., 543 U.S. 481, 125 S. Ct. 1118 (2005), which broadly held that any “watercraft practically capable of maritime transportation, regardless of its primary purpose or state of transit at a particular moment,” was a vessel. Because the CAJUN EXPRESS lacked vital equipment, could lay pipe only under limited weather conditions, lacked requisite certification from the Coast Guard, and was not fit for marine service, the CAJUN EXPRESS was not yet a vessel under the Jones Act. The Fifth Circuit noted that its bright line rule—that a structure becomes a vessel only upon the completion of its construction—is consistent with the Supreme Court’s concern that watercraft (and the workers on it) not oscillate in and out of vessel (and Jones Act) status.
Louisiana Federal District Court: Barge Owner Entitled to Exoneration from Liability, Towing Company Entitled to Limitation of Liability, in Wake of Breakaway During Hurricane Katrina
In In re Ingram Barge Co., 2008 WL 906303 (E.D. La. Mar. 31, 2008), a barge owned by Ingram carrying a full load of dry cement broke free from its moorings after Hurricane Katrina made landfall. The claimants alleged that the barge broke through the flood wall of the Inner Harbor Navigational Canal and caused flooding in the Lower Ninth Ward and parts of St. Bernard Parish; the vessel owners denied that the incident and any resultant damages were caused by the fault of the vessels or any person over whom the vessel owners had control, and asserted, among other things, that studies had found that the flood wall breach had actually occurred before the barge even reached that area.
Due to the complexity of the case, the district court inverted the traditional process of the limitation of liability proceeding, addressing the "privity and knowledge" aspect in Phase I and reserving the determination of causation for Phase II. In Phase I, the court found that neither Ingram (the barge owner) nor the towing company had privity to or knowledge of the state of the moorings of the barge at the time of Hurricane Katrina. In Phase II, the court found that a bailment of the barge had occurred, and that none of the claimants' theories of negligence against Ingram, the barge owner, had merit and, in any event, any such acts or omissions were not the cause of the barge breaking free of its moorings. The court found, however, that the towing company was negligent in failing to properly secure the barge with additional line. Ingram was therefore exonerated, and the towing company, because it had no privity to or knowledge of the actual state of the barge's moorings, was entitled to limit its liability.
U.S. Second Circuit Court of Appeals: New York City Not Entitled to Limitation of Liability in Ferry Disaster
In In re City of New York, 522 F.3d 279, 2008 WL 817945 (2d Cir. Mar. 27, 2008), the Second Circuit upheld the Eastern District of New York’s denial of the City of New York’s petition to limit its liability in the wake of the 2003 Staten Island Ferry disaster, which killed ten passengers and destroyed 1500 square feet of a pier. The Second Circuit looked to Coast Guard regulations governing “passenger vessels”—these regulations did not directly apply in this case because the Staten Island Ferry transported passengers for free—which required a second crewmember to be “on watch in or near the pilothouse.” Because the City’s director of ferry operations (who was sentenced to one year and one day in prison after pleading guilty to seaman’s manslaughter in connection with the incident) failed to enforce either the Coast Guard regulation or the City’s own “two-pilot rule,” the Second Circuit found that the director was negligent and that the City had privity to and knowledge of the negligence. Accordingly, the Second Circuit affirmed the denial of the City’s petition to limit its liability to the value of the ferry.
U.S. Fifth Circuit Court of Appeals: Casino Barge Not Practically Capable of Navigation Was Not “Vessel” When Blown Across Highway During Hurricane Katrina
In In re Silver Slipper Casino Venture, LLC, 264 Fed. Appx. 363 (5th Cir. Jan. 31, 2008)(unpublished), the district court dismissed a casino barge owner’s Limitation of Liability Act complaint for lack of admiralty jurisdiction. The Fifth Circuit held that the dismissal was proper, as the three-story casino barge was permanently moored to a marina and was therefore not a “vessel” under the Supreme Court’s test in Stewart v. Dutra Construction Co. The Fifth Circuit rejected the casino barge owner’s argument that the casino barge was “in navigation” when Hurricane Katrina blew the casino barge across a highway and into a hotel, holding that the “unfortunate fact” that the Hurricane loosened the barge from its moorings “did not transform a non-vessel into a practically navigable watercraft.”
U.S. Eleventh Circuit Court of Appeals: No Salvage Award in Absence of “Maritime Peril”
In Cape Ann Towing v. M/Y Universal Lady, 268 Fed.Appx.
901, 2008 WL 647095 (11th Cir. Mar. 11, 2008)(unpublished), the Eleventh Circuit affirmed the district court’s award to a towing company of only quantum meruit damages rather than a salvage award. The towing company claimed that the defendant motor yacht was in reasonable apprehension of maritime peril and sought $487,500. The district court disagreed, finding that the peril presented by a hurricane had already passed and that the yacht was secured by rope to another yacht in a marina without any damage that would have put her at risk of sinking. The Eleventh Circuit also affirmed the district court’s method of calculating the quantum meruit award (which totaled $2,706.37), eschewing the “per foot of vessel charge” typically used in salvage situations, since the towing company had not acted as a salvor.
U.S. Eleventh Circuit Court of Appeals: Equitable Tolling of Contractual Limitation Period Permitted
In Booth v. Carnival Corp., 522 F.3d 1148, 2008 WL 857680 (11th Cir. Apr. 1, 2008), the Eleventh Circuit held that filing a claim in a court with competent subject matter jurisdiction can equitably toll a contractual limitation period. Steve Booth died in a fatal scuba diving accident while a passenger aboard a Carnival cruise ship. Victor Booth, as representative of Steve Booth’s estate, filed a wrongful death action in state court, despite language on Steve Booth’s ticket that only the federal district court for the Southern District of Florida was an appropriate venue. While the state court action was pending—but after expiration of the one-year contractual limitation period specified in the ticket—Victor Booth filed an identical federal action in the proper district court. After the state action was dismissed on venue grounds, the district court, and later the Eleventh Circuit, held that equitable tolling of the one-year limitation period to file claims in federal court was warranted because Victor Booth had filed a claim in a court with subject matter jurisdiction. The Eleventh Circuit distinguished the case of Bailey v. Carnival Cruise Lines, Inc., 774 F.2d 1577 (11th Cir. 1985), which held that equitable tolling of a Death on the High Seas Act claim was not warranted because the original lawsuit was filed in state court, which lacked subject matter jurisdiction.
Louisiana Federal District Court: Seaman’s Release Invalid When Inadequate Medical and Legal Advice Provided
In Transocean Offshore USA, Inc. v. Catrette, 2007 WL 1557338 (E.D. La. May 29, 2007), the Eastern District of Louisiana invalidated a seaman’s release despite express findings that the consideration of $4,000 was “not fundamentally inadequate” and that the employer had not engaged in any fraud, coercion, or overreaching. After injuring his shoulder in January 2003, David Catrette informed Transocean in March 2003, that he had injured his shoulder. He continued to work for Transocean through December 2003. Upon his voluntary retirement in 2004, he informed Transocean that he continued to experience pain in his shoulder. A claims agent working on behalf of Transocean advised Catrette that an MRI revealed that there was no tear in his shoulder. The claims agent failed to mention that both a radiologist and orthopedist had detected evidence of arthritis in that shoulder. In addition, the Transocean attorney who reviewed the release with Catrette (who had no legal representation of his own) merely read the contract aloud, stopping occasionally to ask if Catrette understood what was being read to him. The district court held that “[u]nder no factual circumstances would simply reading the release contract to the seaman and informing the seaman that the medical evaluation showed nothing wrong be sufficient . . . to effect a valid release.”
U.S. Fifth Circuit Court of Appeals: District Court Abused Its Discretion by Failing to Conduct Evidentiary Hearing on Seaman’s Motion to Vacate Order of Dismissal of His Personal Injury Action Following Settlement Negotiations
In Steverson v. GlobalSantaFe Corp., 508 F.3d 300 (5th Cir. Nov. 15, 2007), the Fifth Circuit held that the district court abused its discretion in failing to conduct an evidentiary hearing on a seaman’s motion to vacate the dismissal of his personal injury action against his employer. The district court dismissed the case after the parties appeared to reach a settlement. The seaman asserted that it was his understanding that a settlement had not been reached, that he had 30 days to accept or decline the settlement
offer. Eight days after the district court dismissed the case, the seaman informed his counsel that he would not sign the release; he then terminated his counsel's services. The seaman subsequently informed the court of his disagreement with the settlement within 30 days. Given the well-settled law that any agreement or settlement involving the relinquishment or settlement of a seaman’s rights was subject to careful scrutiny, the Court held that the district court abused its discretion in reviewing the evidence. The Fifth Circuit noted that the seaman was in a different room during negotiations, and there was nothing in the record to show the seaman's knowing relinquishment of his rights. Accordingly, the Fifth Circuit reversed the district court’s denial of the seaman’s motion to vacate the dismissal.
Texas Appellate Court : Post-injury Arbitration Agreement Was Not Substantively Unconscionable and Was Not Rendered Invalid Because It Diminished Seaman’s Substantive Rights
In In re Weeks Marine, Inc., 242 S.W.3d 849 (Tex. App.--Hou.
[14th Dist.] Dec. 20, 2007), the Court determined that a “Claim Arbitration Agreement” between an injured seaman and his employer was neither void nor substantively unconscionable. The seaman argued that the agreement—which called for the employer to advance certain sums to the employee in exchange for the employee’s agreement to arbitrate any potential claim—was invalid because it diminished his substantive rights. The Court reasoned there is a strong policy favoring arbitration agreements, even in the maritime context (except in the employment contracts of seaman), and that even in the absence of such policy, the seaman presented no evidence that he had received inadequate consideration for entering into the agreement. Likewise, the agreement in question could not be viewed as so one-sided as to be substantively unconscionable. The appellate court left open the question of whether the agreement was procedurally unconscionable, i.e., whether it was procured through fraud or duress, as such determination was for the trial court to make.
New York Court of Appeals: Post-Injury Arbitration Agreement Between Employer and Employee Not Void Under “Ward of the Admiralty” Doctrine
In Schreiber v. K-Sea Transportation Corp., 879 N.E.2d 733 (N.Y. Nov. 27, 2007), the New York Court of Appeals determined that a post-injury agreement between an employer and employee that contained a clause compelling arbitration of the employee’s Jones Act claim was not barred by the seaman’s status as a “ward of the admiralty.” The Court also opined that the agreement was not a “contract of employment” excluded from the scope of the Federal Arbitration Act and was not void under the Federal Employers' Liability Act. The Court emphasized that its opinion did not undermine the vitality of the “ward of admiralty doctrine,” but was simply a decision holding that such a doctrine does not automatically outweigh the policy favoring arbitration. The Court remanded the case for hearing to determine whether the employer had deceived the employee into signing the agreement.
U.S. Fifth Circuit Court of Appeals: Forum Selection Clause in Seaman’s Employment Agreement Does Not Per Se Violate Public Policy
In Calix-Chacon v. Global International Marine, Inc., 493 F.3d 507 (5th Cir. July 19, 2007), the district court concluded that a forum selection clause in an employment agreement between an injured seaman and his employer could not be enforced because such a clause violated Article 2 of the Shipowner’s Liability Convention of 1936. The Fifth Circuit remanded, explaining that the Supreme Court has made clear that the Shipowner’s Liability Convention simply restates the rule as it exists under the general maritime law. The Fifth Circuit explained that, on remand, the burden of establishing the unreasonableness of the forum selection clause falls on the party seeking to set the clause aside. The Fifth Circuit further held that when making its factual findings, the district court should apply the factors outlined by the United States Supreme Court in M/S Bremen v. Zapata Off-Shore Co.
U.S. Ninth Circuit Court of Appeals: Fistfight Over Seaman’s Unpaid Wages Gives Rise to Admiralty Jurisdiction
In Gruver v. Lesman Fisheries Inc.,
2007 WL 1614851 (9th Cir. June 6, 2007), the Ninth Circuit held that a fight between a seaman and his former maritime employer over unpaid wages can give rise to federal admiralty jurisdiction. The seaman, Jeff Gruver, suffered broken ribs and a punctured lung as a result of the altercation. The Ninth Circuit found that Gruver’s tort claim satisfied both the “location” and “connection” tests for admiralty jurisdiction. The location test was satisfied because the fight occurred on a fishing vessel. The court found that the connection test was also satisfied, as the physical injuries sustained by Gruver had a potentially disruptive impact on maritime commerce (he was hospitalized for several days and was unable to work as a deckhand on scheduled fishing trips) and the general character of the activity giving rise to the incident—the failure to pay wages for maritime services performed aboard a commercial vessel—bore a substantial relationship to traditional maritime activity. The Ninth Circuit observed that virtually every activity involving a vessel on navigable waters will give rise to admiralty jurisdiction. Accordingly, it reversed the district court’s dismissal of the matter for lack of subject matter jurisdiction.
Washington State Appellate Court: City’s Duty to Warn Is Satisfied by Including Notice of Location and Clearance of Power Lines in NOAA Charts
In Alprin v. City of Tacoma, 139 Wash. App. 166, 159
P.3d 448 (June 5, 2007), the Washington Court of Appeals upheld the district court’s grant of summary judgment in favor of the City of Tacoma, which had strung six power transmission lines between towers on opposite shores between Henderson Bay and Burley Lagoon near Gig Harbor, Washington. The mast of plaintiff Scott Alprin’s sailboat struck the overhead power lines, causing injuries to Alprin and his boat. The trial court held, and the Court of Appeals agreed, that Tacoma had satisfied its duty to warn by noting the location and clearance of the power lines in the pertinent NOAA chart. The Court of Appeals held that any boater, including a recreational boater, is charged with knowledge of all warnings and hazards contained in the NOAA charts. The court also found that comparative negligence did not come into play, as Alprin’s negligent conduct was the sole cause of his injuries.
California Federal District Court: Unpaid, Recreational Sailing Enthusiast Not a Seaman
In Knight v. Longacker, 2007 WL 1864870 (N.D. Cal. June 28, 2007), a district court granted the defendant sailboat owner’s motion for summary judgment on the plaintiff’s claims of Jones Act negligence, general maritime law unseaworthiness, and maintenance and cure. The plaintiff, Heather Knight, was a weekend sailing enthusiast, who sustained injuries while participating in an amateur sailboat race on San Francisco Bay. Using the Supreme Court’s Chandris v. Latsis test, the district court found that Knight was not a seaman: while Knight clearly contributed to the function of the vessel—she generally would trim the jib or spinnaker—she did not have a substantial connection to the vessel in either duration or nature. Knight was an unpaid volunteer in a recreational sport, and she maintained full-time land-based employment as a language instructor. The fact that she was part of the “crew” was irrelevant in the court’s analysis. The district court thus dismissed all of Knight’s claims, save for a general maritime law negligence claim, which did not require Knight to be a seaman to assert.
U.S. Fifth Circuit Court of Appeals: No Loss of Society Damages for Non-Dependent Survivors of Deceased Longshoreman
In In re American Transportation Co., 490 F.3d 351 (5th Cir. June 19, 2007), the Fifth Circuit held in an interlocutory appeal that the divorced parents of a deceased longshoreman could not recover loss of society
damages because they had not been financially dependent on their son. Citing the Supreme Court cases of Mobil Oil Corp. v. Higginbotham and Miles v. Apex Marine Corp., as well as Fifth Circuit cases such as Sistrunk v. Circle Bar Drilling Co.—all of which denied the survivors of seamen the right to recover for loss of society in a maritime wrongful death action—the court observed that “it would be anomalous to expand the class of beneficiaries of nonseamen who may recover for loss of society in the aftermath of the Supreme Court’s denial of any such recovery to the beneficiaries of seamen.” The Fifth Circuit did not address whether dependent survivors of a longshoreman may recover for loss of society, though this case appears to hammer another nail in the coffin of the Supreme Court’s 1974 decision in Sea-Land Services Inc. v. Gaudet, which permitted the dependent survivors of a longshoreman to recover for loss of support, but which has been roundly criticized in the wake of the Supreme Court’s decision in Miles.
U.S. Fifth Circuit Court of Appeals: State Tort Claims Against Vessel Owners Permitted Under LHWCA in Absence of Cognizable § 905(b) Claim
In McLaurin v. Noble Drilling (U.S.), Inc.,
2008 WL 2132863 (5th Cir. May 22, 2008), the Fifth Circuit held that a longshoreman who cannot assert a § 905(b) claim against a vessel owner may nonetheless assert a state tort claim against the vessel owner under § 933 of the LHWCA. The district court found that longshoreman Mark McLaurin could not maintain a § 905(b) claim against the vessel owner, Noble Drilling, because McLaurin was injured ashore and failed to meet the “situs” test for a § 905(b) negligence claim. The district court dismissed McLaurin’s state tort claims, citing § 905(b)’s exclusivity provision. The Fifth Circuit reversed, holding that maritime workers may attempt to recover against a vessel owner for negligence under § 905(b) or against a vessel owner as a third-party tortfeasor under § 933. The type of negligence alleged by the worker dictates which provision of the LHWCA applies.
U.S. Third Circuit Court of Appeals: Punitive Damages Not
Recoverable in Maintenance and Cure Claim
In Kopacz v. Delaware River & Bay Authority, 248 Fed. Appx. 319 (3rd Cir. Sept. 12, 2007), a ferry employee, Jan Kopacz, allegedly received injuries during an automobile accident on Defendant Delaware River and Bay Authority’s (“DRBA”) ferry. DRBA did not believe that the car accident occurred, there were no witnesses to the alleged accident (besides Kopacz), and there was no evidence that any other accident aboard the ship could have caused Kopacz’s injury. Additionally, Kopacz had a history of health problems, of which the DRBA was aware, that could have accounted for Kopacz’s injuries. The jury found that Kopacz had not been struck and injured by the car, but nonetheless found that DRBA wrongfully withheld Kopacz’s maintenance and cure. The district court granted DRBA’s post-verdict motion for judgment as a matter of law, finding that there was no evidence to support a finding that DRBA unreasonably withheld Kopacz’s maintenance and cure. In affirming the district court’s decision, the Third Circuit further held that the employee was not entitled to attorney’s fees, costs, prejudgment interest on the jury award of maintenance, or punitive damages.
As for the punitive damages issue, the Third Circuit wrote:
"As both parties' briefs reflect, case law addressing the issue
of punitive damages in admiralty cases has generally turned on an
analysis of Miles v. Apex Marine Corp., 498 U.S. 19, 111 S.Ct.
317, 112 L.Ed.2d 275 (1990). In Miles, the Supreme Court held
that '[i]t would be inconsistent with our place in the
constitutional scheme were we to sanction more expansive remedies in
a judicially created cause of action in which liability is without
fault than Congress has allowed in cases of death resulting from
negligence.'"
"We have not yet directly addressed whether Miles proscribes
recovery of punitive damages for failure to provide maintenance and
cure. We have previously recognized, however, as Kopacz
concedes, that the majority of courts do not allow punitive damages
for even arbitrary and willful refusal to pay maintenance and cure.
O'Connell v. Interocean Mgmt. Corp., 90 F.3d 82, 84 (3d
Cir.1996). Although the Miles case addressed a wrongful
death action brought under general maritime law, the holding is
applicable in this case because the failure to provide maintenance
and cure is similarly 'a judicially created cause of action in which
liability is without fault.' Accordingly, we will follow the
majority of courts and hold that punitive damages are not
recoverable for the Delaware River and Bay Authority's failure to
provide maintenance and cure."
U.S. Eleventh Circuit Court of Appeals: Attorney’s Fees and Punitive Damages May Be Awarded Upon Showing of Employer’s Willful and Arbitrary Refusal To Pay Maintenance and Cure to Employee
In Atlantic Sounding Company, Inc. v. Townsend, 496 F.3d 1282 (11th Cir. Aug. 23, 2007), the Eleventh Circuit held that despite a split among the federal Circuits on the issue and in spite of the Supreme Court’s decision in Miles v. Apex Marine Corp.—which held that punitive damages were not available under the Jones Act or DOHSA (but which was silent about the availability of punitive damages in connection with maintenance and cure claims)—a seaman is entitled to attorney’s fees and punitive damages upon a showing that their employer was willful or arbitrary in
its refusal to pay the seaman maintenance and cure. Although the employer argued that uniformity should require the denial of punitive damages under general maritime law because Miles determined such damages were unavailable under the Jones Act, the Court opined that Miles did not undermine the Eleventh Circuit’s prior rulings concerning the recoverability of punitive damages in maintenance and cure actions. The Eleventh Circuit thus held that the district court did not err in denying the employer’s motion to strike the seaman’s request for punitive damages.
Ed. Note: Weeks Marine advises the Eleventh Circuit denied
Atlantic Sounding and Weeks Marine's petition for rehearing en banc
and thus these parties will be filing a petition for writ of
certiorari to the U.S. Supreme Court, given the split amongst the
circuits on the issue of the recoverability of punitive damages in a
maintenance and cure action.
U.S. Sixth Circuit Court of Appeals: Maintenance Rates Specified in Collective Bargaining Agreement Are Enforceable Regardless of Whether the Maintenance Rates Actually Cover Crewmember’s Daily Food and Lodging Expenses
In Skowronek v. American Steamship Co., 505 F.3d 482 (6th Cir. Oct. 12, 2007),
cert. dismissed, 2008 WL 2113036, 76 USLW 3630 (July 17,
2008), the Court considered the validity of the maintenance rate
specified in the collective bargaining agreement ("CBA") between
American Steamship and the SIU. The CBA established a
maintenance rate of $56/week for ill crew members and
$300/week for injured crew members. Due to this
differential treatment as between ill and injured crewmen, the
district court granted the motion for summary judgment motion of
Larry Skowronek, an ill crewmember, and awarded him the
injured crewmember rate. The Sixth Circuit reversed,
holding that a legitimately-negotiated CBA which sets a maintenance rate for ill crewmembers
at an amount significantly less than the crewman's actual food and lodging expenses
is nonetheless enforceable. Citing its decision in Al-Zawkari
v. American Steamship Co., 871 F.2d 585, 588 (6th Cir. 1989),
the Court held that "the burden [to overcome the CBA maintenance
rate] properly rests on the plaintiff to produce evidence that a
bona fide negotiation did not take place, that the CBA was unfair,
or that he was not adequately represented."
The Sixth Circuit noted that it, the First, Second, Fifth, Ninth,
and Eleventh Circuits have each concluded that maintenance rates
specified in a CBA will be enforced, regardless of whether they
actually cover a crewmember's daily food and lodging expenses.
The federal appellate court exception is the Third Circuit's
decision in Barnes v. Andover Co., L.P., 900 F.2d 630, 640
(3d Cir.1990).
The Court concluded:
"As stated above, our precedent, like that of our sister
circuits, affords a presumption of negotiation to a rate of
maintenance specified in a collective bargaining agreement and
recognizes that it is not appropriate for courts to engage in
legislation of dollar figures in connection with privately
negotiated maintenance rates. Al-Zawkari, 871 F.2d at 588.
Because Skowronek has failed to produce any evidence demonstrating
that the CBA was not a legitimately negotiated agreement, that his
interests were not adequately represented in the negotiation
process, or that the agreement as a whole is unfair, he has not
rebutted the presumption of negotiation. Accordingly, our
precedent requires us to give binding effect to the maintenance rate
at issue. Id. We refuse to examine it in
isolation, as it is but one of many terms of the CBA."
Ohio Federal District Court: Shipowner’s Alleged Failure to Intervene in Seaman’s Performance of Job Duties When He Was Exhausted Irrelevant to Unseaworthiness Claim
In Becker v. Olgebay Norton Marine Service Co., 517 F. Supp. 2d 991 (N.D. Ohio Oct. 19, 2007), a seaman’s widow claimed the shipowner’s failure to assist the allegedly exhausted seaman caused him to have a fatal heart attack. The Court held the shipowner’s alleged failure to intervene did not give rise to a claim of unseaworthiness. Furthermore, the Court found that causation was lacking, despite the widow’s claims that the seaman would have survived if he had done less work on the vessel. Likewise, the Court held that, while the seaman’s work was hard and strenuous, the widow had failed to show that this strenuous work was dangerous or unsafe.
U.S. Ninth Circuit Court of Appeals: Evidence of Seaman’s Drug and Alcohol Use Relevant to Seaman’s Negligence and Unseaworthiness Claims
In Peake v. Chevron Shipping Co., 245 Fed. Appx. 680 (9th Cir. Aug. 22, 2007)(unpublished), the Ninth Circuit determined that the district court’s exclusion of evidence of an injured seaman’s drug and alcohol use was improper, as such evidence was relevant to the seaman’s underlying negligence and unseaworthiness claims. Such evidence, the Court concluded, suggested an explanation for the seaman’s absences and tended to disprove the seaman’s claim that his injuries were caused by the shipowner. Because the danger of unfair prejudice did not substantially outweigh the probative value of the excluded evidence, the Ninth Circuit determined the lower court had abused its discretion in excluding this evidence.
U.S. First Circuit Court of Appeals (Applying
Massachusetts Law): In Absence of Special Circumstances, Marine Insurance
Broker Has No Duty to Recommend Higher P&I Coverage Limits
In AGA Fishing Group, Ltd. v. Brown & Brown, Inc., 2008 WL 2687494 (1st Cir. July 10, 2008), Plaintiff AGA Fishing Group Limited was forced to sell the GEORGIE J, a scallop fishing vessel, and its scallop license, to settle claims against AGA when a crewman was injured aboard the GEORGIE J and recovered an award greater than the $1 million P&I limits covering the vessel. AGA was insured through
an insurance brokerage Defendant Flagship Group, Limited.
[From independent web research, it appears clear that Flagship was a
broker, distinct from an underwriter, although this is not plain
from the opinion itself]. Flagship produced the policy. Brown & Brown is Flagship's parent company. Other fishing vessels home-ported in New Bedford, including those insured
through Flagship, carried $5,000,000 in P & I coverage. For AGA to increase its P & I coverage for the Georgie J from $1,000,000 to $5,000,000 it would have cost another $5,000 in premium, which AGA claimed it would have paid had defendants’ agent recommended the higher limits. AGA claimed the defendants owed it a duty to recommend an adequate level of P & I coverage and breached this duty when they did not recommend higher limits.
The First Circuit affirmed the district court’s grant of summary judgment for the defendants because AGA failed to establish a duty on the
broker's part to ensure that AGA was adequately covered. Citing Massachusetts law, the appellate court wrote: “"There is no general duty of an insurance agent to ensure that the insurance policies procured by him provide coverage that is adequate for the needs of the insured…Such a duty only arises under ‘special circumstances of assertion, representation and reliance.’”
The appeals court found AGA failed to prove “special circumstances” were present because neither of the insurer’s agents “made any representation or assertion that coverage was sufficient or that AGA could rely on them to recommend sufficient coverage. A plaintiff must be able to show a specific assertion and subsequent reliance to establish special circumstances.”
U.S. Second Circuit Court of Appeals: P&I Policy’s Pay-to-be-Paid Provision Satisfied Through Serial Claim Payment Procedure
In In re Prudential Lines, Inc., 2008 WL 2446140 (2nd Cir. June 19, 2008), the Court construed a “Proposed Payment Structure” involving a series of transactions whereby the Bankruptcy Trustee would make a payment of a claimant's claim and then submit the payment to the insurer for indemnification. The Trustee would use the proceeds of the indemnity payment to pay further claims, then seek further indemnification, and repeat the process until all claims were paid.
The court described the details of the Proposed Payment Structure:
“(1) Within the limits of the $300,000 retention, the Trustee pays claims of Claimants. (Presumably, the Trustee would not pay until it received the Insurer's approval (or a court order) as to the validity and amount of the particular claim and the propriety of the payments structure.) (2) These Claimants return to the Trustee (in exchange for a deferred claim) the portion of the payment attributable to the deductible amount, plus their pro-rata share of any setoff. (3) The Trustee seeks and receives indemnification from the Insurer in the amount of the claim payment, minus the deductible and the Claimant's ratable share of the setoff. (4) The Trustee uses the reimbursed funds to make further payments to Claimants. (5) The process repeats itself until all Claimants are paid. (6) After this process is complete, any remaining cash will be distributed to the Claimants pro-rata on their limited claims for recovery of the amounts attributable to the deductible and setoff.”
The appeals court overruled the P&I insurer’s objections to this regime as violative of its policy’s indemnity/pay-to-be-paid provision.
District of Columbia Federal District Court: Under Oil Pollution Act, Relevant Question Is Not Whether Willful Misconduct Was Proximate Cause of Oil Spill, But Whether “Incident” Was Caused by Willful Misconduct of Responsible Party
In Water Quality Insurance Syndicate v. United States, 522 F. Supp. 2d 220 (D.D.C. Nov. 29, 2007), the district court held that the
Coast Guard's National Pollution Funds Center erred when it focused only on the oil spill or discharge rather than on the broader series of events leading up to the spill, as contemplated by the statutory term “incident.” The court held that the decision of the responsible parties to knowingly send an unseaworthy vessel to sea, together with other negligent and intentional acts, constituted reckless disregard and willful misconduct under the Oil Pollution Act of 1990 (“OPA”). Additionally, the insurer, as guarantor, could bring its own independent and direct claim as a “person” under OPA for compensation from the Fund, as the insurer paid for removal costs that it was not required to pay under the terms of its insurance policy with the polluter.
Florida Federal District Court: Holds Unconstitutional Federal Statute Requiring License to Engage in Salvage Off Florida Coast
In Towboat One, Inc. v. M/V WATERDOG, 2008 WL 2609505 (S.D.Fla. June 24, 2008), the Court addressed 46 U.S.C. § 80102, entitled “License to salvage on Florida coast,” which provides:
(a) Licensing requirements.--To be regularly employed in the business of salvaging on the coast of Florida, a vessel and its master each must have a license issued by a judge of the district court of the United States for a judicial district of Florida.
(b) Judicial findings.--Before issuing a license under this section, the judge must be satisfied, when the license is for--
(1) a vessel, that the vessel is seaworthy and properly equipped for the business of saving property shipwrecked and in distress; or
(2) a master, that the master is trustworthy and innocent of any fraud or misconduct related to property shipwrecked or saved on the coast.
The suit arose from a dispute of payment for salvage services. The Court described the history of the statute in question: “The statute in question is a peculiar remnant of the early nineteenth century, passed in its original form when Florida was still a territory....It was originally addressed to ‘wreckers,’ which was the term then used to describe those who engaged in the practice of salvaging on the Coast of the Florida Keys….Its principal purpose was to combat the problem of nefarious characters who would place lanterns near the reefs, obscuring the ships captains' view of the lighthouses around the Florida Keys, in hopes of drawing merchant ships into the surrounding reefs. It was later codified as part of the United States Code….”
The plaintiff argued that the statute puts in place an unconstitutional licensing system. The Court agreed, finding that “the issuance of licenses is not contemplated in the grant of judicial power found in Article III, Section 1 of the Constitution. Since an Article III court can exercise no other power than the judicial power, any action outside those contemplated in the Constitution's grant of judicial power is ultra vires, and thus unconstitutional.”
Finding the license purportedly issued under the licensing statute in question unconstitutional and thus not vesting any duties or establishing any rights upon those wreckers or salvors holding the license, the Court found “it cannot be argued that the lack of a license subjects a wrecker or salvor to less than full recovery.”
The Court continued:
“…the basis for the Complaint is not the ex parte issuance of a salvaging license itself, but the recovery of fee owed for salvaging services performed without a license. Therefore, for the reasons fully expressed in [In re Beck, 526 F.Supp.2d 1291 (S.D.Fla.2007)—a previous decision of the Court addressing the statute’s constitutionality], the Court finds that 46 U.S.C. § 80102 is unconstitutional. Any obligations it was thought to place upon Plaintiff to procure a license are of no force and effect; thus, Defendants' Third Affirmative Defense, addressing Plaintiff's lack of a license, makes a constitutionally untenable argument and is without merit. Pursuant to Federal Rule of Civil Procedure 12(f) Defendants' Third Affirmative will be struck from their Answer.”
Virginia Federal District Court: Foreign Repairs on Oil Tanker Sufficient to Require Stripping of U.S. Coastwise Endorsement
In Shipbuilders Council of America v. U.S. Dept. of Homeland Security, 2008 WL 1847401 (E.D.Va. April 24, 2008), Plaintiffs Shipbuilders Council of America, Crowley Maritime Corporation, and Overseas Shipholding Group, Inc. filed suit under the Administrative Procedure Act to challenge a decision by the United States Coast Guard's National Vessel Documentation Center to issue a coastwise endorsement to the oil tanker SEABULK TRADER after work was completed on the vessel in a foreign yard.
Under the Merchant Marine Act of 1920, a/k/a “the Jones Act,” only vessels that maintain a “coastwise endorsement” may engage in the U.S. coastwise trade, which is trade “between points in the United States” under 46 U.S.C. § 55102(b). The suit concerned the Second Proviso of the Jones Act, which permanently disqualifies an otherwise eligible vessel that is “later rebuilt outside the United States” from engaging in coastwise trade, under § 12132(b). As the Court noted, “a vessel is deemed to have been rebuilt in the United States only if the entire rebuilding, including the construction of any major component of the hull or superstructure, was done in the United States,” citing § 12101(a).
The Court discussed the Coast Guard’s regulations appearing at 46 C.F.R. § 67.177(a) -(b) for determining when a vessel is “rebuilt” outside the United States. These regulations provide:
“A vessel is deemed rebuilt foreign when any considerable part of its hull or superstructure is built upon or substantially altered outside of the United States. In determining whether a vessel is rebuilt foreign, the following parameters apply:
(a) Regardless of its material of construction, a vessel is deemed rebuilt when a major component of the hull or superstructure not built in the United States is added to the vessel.
(b) For a vessel of which the hull and superstructure is constructed of steel or aluminum-
(1) A vessel is deemed rebuilt when work performed on its hull or superstructure constitutes more than 10 percent of the vessel's steelweight, prior to the work, also known as discounted lightship weight.
(2) A vessel may be considered rebuilt when work performed on its hull or superstructure constitutes more than 7.5 percent but not more than 10 percent of the vessel's steelweight prior to the work.
(3) A vessel is not considered rebuilt when work performed on its hull or superstructure constitutes 7.5 percent or less of the vessel's steelweight prior to the work.”
After a detailed review of the Coast Guard’s decision to allow the vessel to continue to engage in the U.S. coastwise trade, the Court concluded:
“Because the existing record does not support the Coast Guard's issuance of the coastwise endorsement for the Seabulk Trader, the Court will remand this matter to the Coast Guard with instructions to revoke the coastwise endorsement. The agency, in its discretion, may initiate further proceedings with respect to the Seabulk Trader so long as those proceedings are consistent with this opinion.”
Lagniappe
Congress Retroactively Repeals Venue Provision of Jones Act
With the passage of the National Defense Authorization Act for Fiscal Year 2008, Pub. L. No. 110-181, § 3251, 122 Stat. 3 (2008), Congress amended the Jones Act, repealing the venue provision in 46 U.S.C. § 30104(b). The amendment retroactively takes effect as of October 6, 2006, when the Jones Act was recodified from 46 U.S.C. App. § 688. This change is consistent with the Supreme Court’s interpretation of the venue provision of the pre-2006 version of the Jones Act, i.e., that Congress did not intend to infuse any meaning in the term “corporate residence” different than that in the general federal venue statute, 28 U.S.C. § 1391(c). See Pure Oil Co. v. Suarez, 384 U.S. 202, 207, 86 S. Ct. 1394, 1397 (1966). Some district courts appeared to believe that Congress intended for the 2006 amendments to substantively change the Jones Act venue provision. See Corley v. Osprey Ship Mgmt., Inc., No. 06-CIV-60275, 2007 WL 201263 (S.D. Fla. Jan. 24, 2007) (holding that venue in Jones Act case would only be proper where corporate defendant was incorporated or had its principal office). By repealing the venue provision, venue will now presumably be proper anywhere a corporate defendant does business.
Reader Feedback
“The case mentioned in your [June
6, 2007, issue's] Lagniappe section reminds me of a case in which I was recently involved and the plaintiff sought $4.7 trillion from my client. He also stated he was proceeding in admiralty because, as he explained in court, man is a vessel!”
Robert P. Vining, Esq.
King, LeBlanc & Bland, PLLC
Houston, TX
Ed. Note: In his response to Vining's bank client's Motion to Dismiss, the plaintiff avers:
"1. Plaintiff, a living sovereign soul of the sovereign state of Texas, is a man of God, and everywhere He plants His feet is standing in God's Kingdom. Plaintiff is a Sui Juris Individual, making a special appearance, acting without benefit of counsel at the present time and is a man who adheres strictly to the truth and the law... Whereas, a car is LIKE a 'vessel' because the corporations use maritime law that has come ashore. It has come ashore after the flood during Noah's time.... "
(Emphasis in original)
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The Water Quality Insurance Syndicate
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TBS Adjusting, Inc.
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Locke Lord Bissell & Liddell, LLP
Houston, TX
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the loop and fully informed. Very much appreciated. And for what it’s worth, I like your Lagniappe critter, notwithstanding Elena’s objections.
:-) Aloha.”
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Leong Kunihiro Leong & Lezy, LC
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