November 5, 2008
Welcome to the November 5, 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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This issue's photo
depicts a barge fleeting area along the right descending bank of the
Mississippi River below downtown New Orleans this past May.
News from G&O:
Russ Giancola was recently
licensed in West Virginia. Thus, all three G&O lawyers are now
licensed in West Virginia and Pennsylvania. Fred Goldsmith is
also licensed in Ohio and both Fred Goldsmith and Rich Ogrodowski
are admitted to the U.S. District Court for the Eastern District of
Michigan (Detroit).
Fred Goldsmith will be
speaking with neurosurgeon Howard Tung, M.D. on "Evaluating and
Attacking Questionable Modalities in Treatment of Back Injury--Is
Surgery Really Necessary" at the Defense Research Institute's
Complex Medicine Seminar November 13-14, 2008, in San Diego.
Fred was also named a 2008 Pennsylvania Super LawyerSM by
Philadelphia and Law & Politics magazines, for now the third year in
a row.
Rich Ogrodowski, who
Chairs the Younger Lawyers Division of the Western Pennsylvania
Chapter of the Federal Bar Association, will moderate a continuing
legal education seminar entitled "Judicial Views on the Use of
E-Discovery Experts at the Rule 16 and 26(f) Conferences and as
Court-Appointed 'Special Masters'" on December 3, 2008, at the U.S.
Courthouse in Pittsburgh. This is the third in a series of
CLEs on E-Discovery Rich has moderated for the FBA in conjunction
with the U.S. District Court for the Western District of
Pennsylvania. Rich also recently authored "When and How to
Take a Written Statement," for the Fall 2008 issue of Trials &
Tribulations, published by the Trial Tactics Committee of the
Defense Research Institute.
And last but certainly not least, Lisa
M. Bowman has joined our firm as a legal assistant.
Lisa's previous experience working in a frontline role at two
hospitals has been an asset in our analysis of the medical aspects
of cases.
Recent U.S. Coast Guard Notices in the Federal Register
Coast Guard increases Financial Responsibility Requirements to Match Increased Limits Under Delaware River Protection Act
In the
September 17, 2008,
Federal Register the U.S. Coast Guard updated the COFR limits to comport with the Delaware River Protection Act. The new limits are effective October 17, 2008, yet COFRs need not be updated until January 15, 2009. The rulemaking also provides that an original paper COFR need not be kept aboard the vessel, as adherence to the rule will be tracked electronically.
NVSAC to Meet December 10-11, 2008
The Coast Guard's Navigation Safety Advisory Council will next
meet on the above dates in Washington, DC, per the notice in the
November 6, 2008, Federal Register.
Recent State & Federal Court Maritime Decisions
U.S. Supreme Court to Decide Recoverability of Punitive
Damages for Willful Failure to Pay Maintenance & Cure
In Atlantic Sounding Co., Inc. v. Townsend,
498
U.S. 19 (1990),
U.S. Second Circuit Court of Appeals: EFT Payment Subject to Rule B Attachment; Foreign Forum Selection Clause No Obstacle
In Consub Delaware LLC v. Schahin Engenharia Limitada, 543
F.3d 104 (2d Cir. Sep. 23, 2008), Consub, owner of a submarine cable maintenance vessel, and Schahin entered into an agreement with English choice of law and forum clauses. After a proceeding was filed in England, Consub then filed a complaint under Rule B in the U.S. District Court for the Southern District of New York, and about two weeks later intercepted via attachment in the Southern District an approximately $4 million unrelated Electronic Funds Transfer payment Schahin was making to a third party. Interestingly, Schahin wired the funds from its bank in Brazil to a bank in Switzerland and its bank only routed the funds through U.S. banks because they required conversion from Brazilian reais into U.S. dollars. The Court held the EFT funds were the property of the company who originally possessed the funds, Schahin, and the Electronic Funds Transfer was subject to a maritime attachment while it was in the hands of the intermediary bank in New York. The Court further held the forum selection clause in the parties’ agreement did not deprive it of jurisdiction and thus did not preclude the attachment.
New York Federal District Court: Contract for Sale of Vessel Within Admiralty Jurisdiction
In Kalafrana Shipping Ltd v. Sea Gull Shipping Co., 2008 WL 4489790 (S.D.N.Y. Oct. 2, 2008), in the context of reviewing the presence of admiralty jurisdiction sufficient to support a Rule B attachment, the court altered the longstanding rule in the Second Circuit and in other Circuits, including the Fifth Circuit, that a contract for the sale of a vessel is not a maritime contract. At issue was a contract for the purchase of a launched ship which had been operational for some time, and which also required certain pre-delivery repairs to the ship. The Court found the contract a maritime contract and at the very least a mixed contract given the vessel repair aspects.
U.S. Eleventh Circuit Court of Appeals: Dockside Riverboat Casino Is a “Vessel”; Lease of Land, Only 5% of Which Was Used as Wharf,
Is Not a Maritime Contract
In Board of Commissioners of the Orleans Levee District v. M/V BELLE OF ORLEANS, 535 F.3d 1299 (11th Cir. July 25, 2008), the Eleventh Circuit held that a fully-operational riverboat casino which broke free from her moorings and collided with piers, docks, and other structures of the South Shore Harbor Marina during Hurricane Katrina’s landfall was a vessel for purposes of admiralty jurisdiction. The riverboat was moored to the shore with steel cables and had electrical, computer, and phone cables running to a shore-side source. The Eleventh Circuit focused on the facts that the BELLE OF ORLEANS was afloat, was capable of transportation with or without the assistance of a tow, was operated with a captain and a crew aboard, and had maintained her engines and equipment in working order. The court disapproved of the Fifth Circuit’s 2006 opinion in
De La Rosa v. St. Charles Gaming Co. and the Seventh Circuit’s 2006 opinion in
Tagliere v. Harrah’s Illinois Corp., both of which considered the watercraft owner’s intentions concerning the future transportation use of the watercrafts in conducting their vessel analyses. Because the BELLE OF ORLEANS was a vessel operating in a navigable waterway, the Eleventh Circuit held that the district court had admiralty jurisdiction over the Board’s tort claims for damages to its piers and docks. Nevertheless, the district court lacked in rem jurisdiction over the Board’s contract claims for the BELLE OF ORLEANS’s alleged failure to pay rent in connection with the vessel’s lease of “certain portions of land, wharf, and water bottom in the Marina.” The lease agreement involved five parcels of land; only Parcel 1, which comprised less than 5% of the total land leased under the agreement was used as a wharf, while the other four parcels had “no maritime flavor.” Since the lease agreement was not “wholly maritime in nature,” the Eleventh Circuit held that the lease was not a maritime contract giving rise to a maritime lien.
Maryland Federal District Court: Unloading of Helicopter from Vessel May Constitute Salvage, Giving Rise to Admiralty Jurisdiction
In Sullivan v. General Helicopters, Int'l, 564 F. Supp. 2d (D. Md. July 10, 2008), stevedores at the Port of Baltimore were unable to unload a helicopter from the M/V FRANCONIA. As a result, the stevedores called Sullivan’s Garage, which successfully unloaded the helicopter from the ramp to the pier. When Sullivan’s was not paid, it sued the corporate owners of the helicopter, seeking a salvage award of $250,000 for its assistance in moving the helicopter. The defendants filed a motion to dismiss for lack of subject matter jurisdiction and failure to state a claim. The district court held it had jurisdiction over the salvage claim, finding both the “locality” and “connection” prongs of the Grubart test had been satisfied: the helicopter was located on navigable waters because it was sitting on a ramp (a means of egress of a vessel in navigable waters), and the essential nature of Sullivan’s task—unloading cargo from a vessel—was traditional maritime activity. The district court also held that Sullivan’s complaint raised a plausible inference that the helicopter was facing a “marine peril” when it was moved to the pier, and that the complaint adequately alleged that Ceres Marine Terminal, the alleged bailee of the helicopter, had a pecuniary interest in the helicopter. The district court further held that Sullivan’s could not enforce a lien on the helicopter by having it arrested and sold, as Sullivan’s failed to file an in rem action. Lastly, the court held that the parent company of the helicopter owner could not be sued on an “alter ego” theory of liability, absent any allegation of gross undercapitalization, insolvency, failure to observe corporate formalities, or injustice or fundamental unfairness.
U.S. Fifth Circuit Court of Appeals: Limitation Act Does Not Limit Recovery Under Wreck Act
In In re Southern Scrap Material Co., LLC, 541 F.3d 584 (5th Cir. Aug. 25, 2008), the Fifth Circuit held that under the Wreck Act, the government had the right to recover from a drydock owner the actual costs (about $8 million) of removing a sunken drydock from the Industrial Canal and that the owner could not limit its liability to the value of the drydock under the Limitation Act (about $300,000). The Court held the Limitation Act does not limit the amount of costs recoverable under the Wreck Act, as the Wreck Act’s purpose is to ensure the navigable waters of the United States remain navigable. Thus, the Court held, the Wreck Act trumps the Limitation Act.
Louisiana Federal District Court: “Act of God” Defense Unavailable for Sailing Vessel into Port of New Orleans Just Before Hurricane Katrina Struck
In Crescent Towing & Salvage Co. v. M/V Chios Beauty, 2008 WL 3850481 (E.D. La. Aug. 14, 2008), the Court concluded that the “Act of God” defense was unavailable where a ship’s captain and its shoreside management failed to make all reasonable precautions to ensure the safety of their vessel, a foreign-flagged bulk carrier, in light of readily available hurricane warnings. Among other human failings, the Court faulted the ship’s captain and management for sailing the ship into the Port of New Orleans even though radio and satellite weather forecasts, including those available aboard the ship, projected Hurricane Katrina to strike there.
Mississippi Federal District Court: Negligent Ship Pilot Personally Liable for Over $800,000 in Damages
In Osprey Ship Management, Inc. v. Foster, 2008 WL 4371376 (S.D. Miss. Sep. 18, 2008), the Court found a Pascagoula Bar Pilot negligent for his failure to review the plans for the entire voyage and mistakenly relying on a floating buoy to fix his position. The Court held the pilot allowed the ship to veer outside of the intended channel and strike a submerged submarine launch structure. The Court found the pilot had failed to complete the necessary paperwork beforehand which would have entitled him to limit his liability under the Port of Pascagoula Tariff. The Court found the pilot 50% negligent and personally liable for $826,051.59 in damages, half the ship’s losses, and the ship 50% contributorily negligent for its crew’s failure to monitor the pilot and intervene.
U.S. Fifth Circuit Court of Appeals: Plaintiff Contributorily Negligent For Concealing Prior Injuries
In Johnson v. Cenac Towing Inc., 2008 WL 4330553 (5th Cir. Sep. 24, 2008), Johnson had twice injured his back while working for prior employers, had been disabled for over one year, and received various treatments for the prior injuries including steroid injections, yet concealed these injuries when he applied for employment with Cenac. The Fifth Circuit ruled the intentional concealment constituted contributory negligence. “It appears that contributory negligence may be found where a seaman has concealed material information about a pre-existing injury or physical condition from his employer; exposes his body to a risk of re-injury or aggravation of the condition; and then suffers re-injury or aggravation injury.” Thus, the Court held Johnson’s damages under his negligence and unseaworthiness claims should be reduced. Further, the Court found such willful concealment barred Johnson’s recovery of maintenance and cure under
McCorpen v. Ent. Gulf S.S. Corp., 396 F.2d 547 (5th Cir. 1968), which decision the Court reaffirmed.
U.S. Ninth Circuit Court of Appeals: Maintenance and Cure Payments May Be Subject to Withholding for Child Support Obligations
In Aguilera v. Alaska Juris F/V, O.N., 535 F.3d 1007 (9th Cir. July 9, 2008), Rafael Aguilera sued his employer, Fishing Company of Alaska (“FCA”), for withholding a portion of his maintenance and cure payments in satisfaction of a child support order FCA received from the state of Texas. The Ninth Circuit approved this practice, noting that “Congress expressly recognized that a seaman’s wages are subject to attachment under a valid support order.”
See 46 U.S.C. § 11109(a). Finding no basis to distinguish between a seaman’s “wages” and maintenance and cure with respect to § 11109, and finding that maintenance and cure payments fell within the definition of “resources” for purposes of determining child support liability under Texas law, the Ninth Circuit held that FCA properly withheld portions of its maintenance and cure payments to satisfy its duties under the child support order.
Connecticut Federal District Court: No Injunctive Relief Against Would-Be Salvors and No In Rem Jurisdiction Against Yet-to-Be-Salvaged Cargo
In Weeks Marine, Inc. v. Cargo of Scrap Metal Ladened Aboard Sunken Barge Cape Race,
571 F.Supp.2d 334 (D. Conn. July 31, 2008), Weeks Marine, Inc. (“Weeks”) filed an in rem action against a cargo of scrap metal aboard the barge CAPE RACE, which sank in 1984. Claiming to be the first salvor seeking to obtain the scrap metal, Weeks sought injunctive relief to prevent rival salvors from interfering with Weeks’s salvage operations. Weeks also sought to have the court order the arrest of the cargo and appoint a Weeks diver to serve process. The district court held that Weeks was not entitled to injunctive relief because such relief is an in personam remedy, and the court only had in rem jurisdiction in the case. Moreover, Weeks failed to show that it was likely to suffer irreparable harm if injunctive relief was not granted, as no other potential salvor had attempted to salvage the cargo in the 24 years since it sank. The court also ruled that it lacked in rem jurisdiction to order the arrest of the cargo, because Weeks had not yet recovered any part of the cargo. The court thus denied Weeks’s requests without prejudice, enabling Weeks to maintain a future in personam action against rival salvors that appear likely to interfere with Weeks’s salvage operations and to renew its attempts to proceed in the in rem action once cargo has actually been salvaged.
U.S. Third Circuit Court of Appeals: Uberrimae Fidei Is Well-Entrenched Principle of Admiralty Law; Misrepresentation of Purchase Price Is Material
In AGF Marine Aviation & Transport v. Cassin, 2008 WL 4379062 (3d Cir. Sept. 29, 2008), Richard Cassin’s 85-foot charter yacht sank off the coast of Grenada. Upon discovering that Cassin misrepresented the purchase price of the yacht—Cassin paid only $400,000 for the yacht in 1997, but represented that the purchase price was $600,000 in both his application for financing and his applications for insurance on the yacht—the insurer, AGF Marine Aviation & Transport, sought a declaration from the district court that the insurance policy was void from inception. The policy provided that “any dispute shall be adjudicated according to well established, entrenched principles and precedents of substantive United States Federal Admiralty law.” The Third Circuit held that while the binder in effect at the time the yacht sank did not have the choice of law provision, it nevertheless incorporated the terms of policies in current use by AGF, which had the “well established, entrenched principles” choice of law provision. The Third Circuit recognized that there is a general agreement among the Circuits (with the notable exception of the Fifth Circuit) that
uberrimae fidei is a well-entrenched doctrine in admiralty law. The Court further held that a misrepresentation of the purchase price is material, even where appraisals of the yacht at the time it was purchased matched the stated (higher) price. Finally, CIT Group/Sales Financing, the lienholder on the yacht, was not entitled to recover under the policy independently of Cassin, as CIT was a mere loss payee. Thus, the Court held the insurance policy void from inception.
Connecticut Federal District Court: Marine Insurer Entitled to Void Policy for Breach of Captain’s Warranty; Loss Payee Had No Greater Rights Than Insured
In Northern Assurance Co. of America v. Rathbum, 567 F. Supp. 2d 316 (D. Conn. July 25, 2008), the owner of a commercial fishing vessel failed to comply with a policy warranty which required the insured to identify the captain(s) and when hiring additional or replacement captains to “provide the Company with information concerning their experience, qualifications and general reputation within the industry as soon as possible.” Five months after changing captains and not notifying the insurer, the vessel ran aground and sank. The Court held the insurer was entitled under Connecticut law to void the policy from inception due to the insured’s breach of the policy’s notification warranty, that the insurer needn’t show the warranty breach caused the loss, and that the warranty breach also bound the loss payee.
Pennsylvania Federal District Court: Ships Built in Philadelphia Shipyard with Parts Made and Assembled Abroad Do Not Violate Jones Act Cabotage Provisions
In Philadelphia Metal Trades Council v. Allen, 2008 WL 4003380 (E.D. Pa. Aug. 25, 2008), the court upheld a ruling by the U.S. Coast Guard’s NVDC which allowed Aker Philadelphia Shipyard, Inc. to incorporate ship components (engine room macro equipment modules) made by foreign manufacturers in the construction of product tankers intended for the U.S. Coastwise trade. The Coast Guard’s regulations deem a vessel to be “United States built” if “[a]ll major components of its hull and superstructure are fabricated in the United States” and “[t]he vessel is assembled entirely in the United States.” 46 C.F.R. § 67.97.
U.S. Third Circuit Court of Appeals: Employer Can Establish Manifestation (and thus Entitlement to Section 8(f) Relief) Under LHWCA Only by Demonstrating Actual or Constructive Knowledge of Employee's Pre-Existing Disability
In C&C Marine Maintenance Co. v. Bellows, 538 F.3d 293 (3d Cir. Aug. 6, 2008), C&C asserted medical records of its employee, Roger Bellows, showed his arthritis pre-existed his May 3, 2000, on-the-job accident. C&C sought relief from the Benefits Review Board’s affirmance of the ALJ’s decision awarding permanent disability benefits under the LHWCA and denying C&C partial relief under Section 8(f) of the LHWCA. The Court denied C&C any relief, finding among other things it failed to show actual or constructive knowledge of Bellows’ pre-existing arthritic condition in his leg. C&C argued that medical records showing Bellows’ pre-existing injury must have existed. The Court held, however, there must be more than a subjective belief in the existence of such records for there to be actual or constructive knowledge of the disability entitling the employer to relief from the special fund under Section 8(f).
Lagniappe
Indiana Federal District Court: $250-$350/Hour Reasonable Rates for Experienced Maritime Counsel
In Olson v. HMS Westpac Express, 2008 WL 4192066 (S.D. Ind. Sep. 8, 2008), in awarding attorney’s fees for
wrongful failure to pay maintenance and cure, a federal magistrate judge determined $350/hour was a reasonable rate for maritime plaintiff’s personal injury counsel Dennis M. O’Bryan and $250/hour was appropriate for his colleague, Howard M. Cohen.
Reader Feedback
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Graydon S. Staring, Esq.
Of Counsel, Nixon Peabody, LLP
San Francisco, California
Ed. Note: Mr. Staring is a former President of the Maritime Law Association of the United States and served as counsel in many
sea-changing U.S. Supreme Court decisions including Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102 (1987) (limits of personal jurisdiction), Scindia Steam Navigation Co. v. De Los Santos, 451 U.S. 156, 1981 AMC 601 (1981) (Section 905(b) duties under the Longshore & Harbor Workers Compensation Act), and Miles v. Apex Marine Corp., 498 U.S. 19, 1991 AMC 1 (1990) (unavailability of nonpecuniary damages for wrongful death of a seaman).
“Thanks Fred - and I want to say that you guys do a great job. It is nice to have a source that summarizes the latest in maritime law. Each time that you do the summary, I find a case that applies to one that I am handling, or on an issue that my clients could face. The latest issue was no different. Thanks for the hard work.”
Sterling J. Stires, Esq.
Law Offices of Charles S. LiMandri, APC
Rancho Santa Fe, California
“Thank you very much for your [June 17, 2008 issue], contents noted with great pleasure and interest. We confirm acting accordingly and we again appreciate your kind assistances.”
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Dahroug Advocates
Maritime Lawyers and Shipping Consultants
Port Said, Egypt
“We appreciate the variety of your selection of cases from across the Districts. Keep the newsletters coming.”
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Cassidy & Black, P.A.
Miami, Florida
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Lisa Borkowski
President
ASAP Marine Documentation & Registration, Inc.
Ft. Lauderdale, Florida
“Thanks, Fred, but the crawfish is still lousy! Its eyes are set in its head.”
Elena Gonzales
Director of Risk Management
CGB Enterprises, Inc.
Mandeville, Louisiana
“Excellent newsletter. Thanks for the update. Please consider this as a motion to replace the crawdad with a flounder, preferably fried.”
Charles Raley, Esq.
Raley & Raley, P.C.
Savannah, Georgia
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