February 2024 Longshore/Maritime Update (No. 297)
Notes from your Updater:
On December 14, 2023, the IRS announced an increase in the rate for business mileage, beginning on January 1, 2024, to 67 cents per mile, up 1.5 cents. The rate for medical mileage was lowered to 21 cents per mile.
On December 29, 2023, the California Court of Appeal reversed the judgment of the state superior court in connection with the environmental impact of the continued operation of the China Shipping Container Terminal located in the Port of Los Angeles and remanded the case with instructions for the superior court to remedy violations of the California Environmental Quality Act that were identified by the superior court as well as additional violations identified by the court of appeal. See Natural Resources Defense Council, Inc. v. City of Los Angeles, No. D080902, 2023 Cal. App. LEXIS 1015 (Cal. App. 4th Dist. Dec. 29, 2023), certified for publication (Jan. 22, 2024) (O’Rourke).
President Biden re-nominated Julie Su to be Secretary of Labor on January 9, 2023. She has been serving as acting Secretary of Labor since last March when he initially appointed her. She has not received a Senate confirmation vote because of opposition in the Democratic Party and lack of support in the Republican Party.
On January 11, 2024, the Department of Labor issued this notice:
Notice of Final Rule Adjusting Penalty Amounts
The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 requires the Department of Labor (DOL) to annually adjust its civil money penalty levels for inflation. The Department calculates the adjustments based on a cost-of-living formula provided by the Inflation Adjustment Act.
On January 11, 2024, DOL promulgated a final rule adjusting penalties for 2024. The rule makes upward adjustments to the following penalties assessed by the Office of Workers’ Compensation Programs under the Black Lung Benefits Act:
- 20 C.F.R. 725.621
Failure to file required reports.
- 20 C.F.R. 726.302
Failure to secure payment of benefits.
The increased penalty levels apply to any penalties assessed after January 15, 2024, whose associated violations occurred after November 2, 2015.
The final rule is available on the Federal Register’s website at:
On January 12, 2024, the Supreme Court agreed to hear a non-maritime case presenting a procedural question in arbitration cases that has divided the appellate courts (Smith v. Spizzirri, No. 22-1218). This is the question that the Court will consider:
This case presents a clear and intractable conflict regarding an important statutory question under the Federal Arbitration Act (FAA), 9 U.S.C.1-16.
The FAA establishes procedures for enforcing arbitration agreements in federal court. Under Section 3 of the Act, when a court finds a dispute subject to arbitration, the court “shall on application of one of the parties stay the trial of the action until [the] arbitration” has concluded. 9 U.S.C. 3 (emphasis added). While six circuits read Section 3’s plain text as mandating a stay, four other circuits have carved out an atextual “exception” to Section 3’s stay requirement-granting district courts discretion to dismiss (not stay) if the entire dispute is subject to arbitration. In the proceedings below, the Ninth Circuit declared itself bound by circuit precedent to affirm the district court’s “discretion to dismiss” despite “the plain text of the FAA appear[ing] to mandate a stay.”
The panel candidly acknowledged the 6-4 circuit conflict, and a two-judge concurrence emphasized “the courts of appeals are divided,” asserted the Ninth Circuit’s position is wrong, and urged “the Supreme Court to take up this question”–an issue this Court has twice confronted but reserved in the past.
The question presented is:
Whether Section 3 of the FAA requires district courts to stay a lawsuit pending arbitration, or whether district courts have discretion to dismiss when all claims are subject to arbitration.
On January 17, 2023, the Supreme Court heard oral argument in Loper Bright Enterprises v. Raimondo, No. 22-451, the case challenging the authority of the National Marine Fisheries Service to require fishing vessels to carry federal observers. The Court is considering whether it should overrule the use of Chevron deference.
In our September and October 2023 Updates, we reported that after the State of Texas installed buoys on the Rio Grande River near Eagle Pass, Texas, the United States brought suit in the United States District Court for the Western District of Texas under the Rivers and Harbors Appropriation Act of 1899 against Texas and its Governor, Greg Abbott, seeking the removal of the floating barrier. On September 6, 2023, Judge Ezra granted a preliminary injunction, ordering Texas to reposition the buoys and other material comprising the floating barrier to the bank of the Rio Grande on the Texas side of the river. See United States v. Abbott, No. 1:23-cv-853 (W.D. Tex. Sept. 6, 2023). Texas filed a notice of appeal to the Fifth Circuit, and on September 7, 2023, a panel of the Fifth Circuit issued a stay of the order. See United States v. Abbott, No. 23-50632 (5th Cir. Sept. 7, 2023) (per curiam). On December 1, 2023, a divided panel of the Fifth Circuit dissolved the stay and held that the granting of the preliminary injunction was not an abuse of discretion. Writing for the majority of the panel, Judge Douglas held that the Rio Grande River satisfied the broadened definition of navigability for the Government’s regulatory power, rejecting Texas’ argument that the River is not currently capable of interstate commerce for the segment of the River involved in the controversy. Judge Douglas found sufficient evidence of the historical navigability of the River at the location where the floating barrier was installed. Judge Douglas also found sufficient evidence to support the argument of the United States that the barrier was an obstruction to the navigable capacity of the Rio Grande. Finally, Judge Douglas held that the district court had sufficiently considered and rejected Texas’ self-defense argument that it had the constitutional right to declare itself invaded and to protect itself. Judge Willett dissented from Judge Douglas’ rulings on each point. He disagreed that the “sketchy” historical accounts and “historical anecdotes” of activity on the River had any bearing on the analysis of the navigability of this segment. Thus, he addressed the alternative finding of the district judge that the segment of the Rio Grande River was currently navigable, reasoning that “reasonable improvements” could not make it susceptible of commercial use. United States v. Abbott, No. 23-50632, 2023 U.S. App. LEXIS 31841 (5th Cir. Dec. 1, 2023). See January 2024 Update. On January 17, 2024, the full Fifth Circuit granted rehearing en banc, noting that the panel opinion from December 1, 2023 was vacated. See United States v. Abbott, No. 23-50632 (5th Cir. January 17, 2024) (en banc).
On January 18, 2024, Judge Norton of the United States District Court for the District of South Carolina held that Christopher Pyatt, a member of Local 1422 of the International Longshoremen’s Association, who was struck by a car while walking across the street to the Local’s hiring hall in Charleston, South Carolina (he had to park across the street because there were no parking spots available at the hiring hall), plausibly alleged an agency relationship between the ILA and the Local because the ILA had imposed an emergency trusteeship over the Local (and also plausibly alleged direct control over the allegedly tortious conduct that injured Pyatt). Therefore, Judge Norton declined to dismiss the suit brought by Pyatt against the ILA. See Pyatt v. International Longshoremen’s Association Local 1422, No. 2:23-cv-5772, 2024 U.S. Dist. LEXIS 9289 (D.S.C. Jan. 18, 2024).
On January 19, 2024, Judge Curiel of the United States District Court for the Southern District of California considered the cruise line’s motion to dismiss in the class action suit brought against Carnival Corp. (“the world’s largest leisure travel company”), alleging that the cruise line violated federal and state wiretap and hacking laws by counting, collecting, and cataloguing every keystroke and cursor movement on its website at carnival.com (where users browse and book cruises), including intercepting personal information such as the user’s passport number, driver’s license number, date of birth, electronic and home address, and payment information. Judge Curiel declined to dismiss the wiretap and invasion of privacy claims, but he ordered the plaintiffs to replead their claim under the Computer Fraud and Abuse Act. See Price v. Carnival Corp., No. 23-cv-236, 2024 U.S. Dist. LEXIS 10175 (S.D. Cal. Jan. 19, 2024).
On January 22, 2024, the United States Supreme Court agreed to hear oral argument on the objection of the United States to the recommendation of the Special Master to enter a consent decree based on the agreement to share water of the Rio Grande River entered into by Texas, New Mexico, and Colorado. See Texas v. New Mexico, No. 141, original proceeding.
The courts continue to face challenges to the appointment of administrative law judges in the wake of the Supreme Court’s Lucia decision. On January 22, 2024, the Fifth Circuit rejected the challenge to the authority of an administrative law judge hearing Social Security cases. The claimant, whose claim was denied, argued that Nancy Berryhill was unlawfully serving as acting Social Security Commissioner in July 2018 when she ratified the appointment of the administrative law judge who later denied the claimant’s claim. The Fifth Circuit held that Berryhill was lawfully serving as acting Commissioner at the time of the ratification of the appointment of the administrative law judge and, accordingly, affirmed the grant of summary judgment by the district court in the claimant’s suit seeking judicial review of the denial of her claim. See Seago v. O’Malley, No. 23-40001, 2024 U.S. App. LEXIS 1414 (5th Cir. Jan. 22, 2024) (Haynes).
On the LHWCA Front . . .
From the federal district courts
Court hearing limitation action brought by owner of vessel that exploded at shipyard during rebuild declined to approve settlement between family of shipyard worker who was killed and his employer, a shipyard subcontractor, questioning the authority to exercise jurisdiction over the settlement; In re Smithland Towing & Construction LLC, No. 5:18-cv-113, 2023 U.S. Dist. LEXIS 231665 (W.D. Kent. Dec. 29, 2023) (Beaton).
The tugboat WILLIAM E. STRAIT exploded while being rebuilt at the First Marine Shipyard in Calvert City, Kentucky. Three workers were killed in the explosion, including Quentin Stewart of Opelousas, Louisiana, an employee of Hutco Services, one of the subcontractors working on the rebuild. The owner and operator of the tug brought this action in federal court in Kentucky, seeking to limit liability, and Stewart’s widow, Alice, brought a claim in the limitation action under the Kentucky wrongful death statute as well as a third-party complaint against the shipyard and several contractors (other than Stewart’s employer, Hutco, which was brought into the suit by claimants employed by other entities). Alice Stewart entered into a settlement with Hutco (of her claim and the claims of her two minor children) and sought approval of the settlement under a Kentucky statute providing for court approval of a settlement involving minors by the court in which the claim is proceeding. In the absence of adversarial briefing, Judge Beaton first evaluated the basis for the court’s jurisdiction over the settlement. He noted that the limitation action was filed under the court’s admiralty jurisdiction, but Stewart’s third-party claim (that did not name Hutco) invoked diversity jurisdiction and admiralty as an alternative. If the court sat in diversity, Judge Beaton believed that the state law would appear to apply as judicial approval of minor settlements is a matter of substantive state law. If the court sat in admiralty, the issue was more complex. Judge Beaton did not find it clear whether minor settlements are authorized in admiralty without judicial approval, and it was equally unclear whether state law should play a role within the realm of admiralty with respect to the approval of the settlement. And, to make the situation even less clear, the settlement with the employer was not of a claim brought in the suit, so it was “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.” Judge Beaton questioned why a federal judge would be allowed “to sign off on what is, in effect, a purely private contract?” Consequently, Judge Beaton declined, without prejudice, to approve the settlement, reasoning that “the parties haven’t established the basis for the Court to exercise jurisdiction over that settlement.”
Georgia court had personal jurisdiction over owner and manager of vessel in suit brought by longshore worker who was injured in Savannah even though it was the time charterer who directed the vessel to Savannah; Valmont v. HSL Husum Shipping Ltd., No. 4:22-cv-305, 2024 U.S. Dist. LEXIS 2946 (S.D. Ga. Jan. 5, 2024) (Baker).
Tim Valmont was injured while employed as a longshore worker on the M/V HAMMONIA HUSUM during cargo operations at the Garden City Terminal in Savannah, Georgia. Tim and his wife Linda brought this suit in Georgia state court against the owner and manager of the vessel, asserting a negligence claim under Section 5(b) of the LHWCA, and the defendants removed the case to federal court. Arguing that the vessel was time chartered to Maersk Line at the time of the incident, the owner and manager moved for summary judgment that they were not subject to personal jurisdiction in Georgia as they had not purposefully availed themselves of the protections of Georgia law. Citing the division of responsibility in the time charter, the defendants argued that they were not involved in decisions affecting the vessel’s ports of call and did not direct the vessel to any port. Valmont responded that the charter was not a bareboat charter and that the defendants employed and remained responsible for the actions of the crew. Valmont focused his claim on breach of the turnover duty for failing to maintain the hatch cover on the vessel and failing to warn of its dangerous condition. He argued that the conduct that led to the hatch being poorly maintained may have occurred prior to docking of the vessel in Georgia, but the turnover duty could only have been breached at the moment the vessel was turned over to the stevedore in Savannah. Judge Baker agreed with Valmont that the defendants may not have had control over the ports to which the charterer directed the vessel; however, the defendants purposefully availed themselves of the Georgia forum when their employees voluntarily entered the jurisdiction aboard the vessel, and the defendants were responsible for the tortious acts of the defendants’ crew that were committed when the vessel entered the jurisdiction and turned over the ship. Thus, Judge Baker declined the defendants’ motion for summary judgment based on lack of personal jurisdiction.
And on the maritime front . . .
From the federal appellate courts
Fifth Circuit affirmed dismissal of DEEPWATER HORIZON opt-out death claim for lack of expert evidence on general causation, rejecting the argument that the failure to compel production of medical records would have cured the defect; Keyes v. BP Exploration & Production, Inc., No. 23-30365, 2024 U.S. App. LEXIS 132 (5th Cir. Jan. 3, 2024) (per curiam).
Ellis Keyes alleged that his deceased mother, Christine C. Keyes, who lived in Chalmette, Louisiana, suffered health conditions due to her work in cleanup of the spill from the Macondo/DEEPWATER HORIZON blowout. He brought this suit in federal court in Louisiana against BP Exploration, seeking to recover for her injuries and death. BP moved for summary judgment after Keyes failed to submit an expert report to prove general causation, and Keyes responded that expert testimony was not required to establish specific causation because the alleged injuries fell within the common knowledge of a juror. However, Judge Morgan noted that Keyes had still failed to produce expert testimony establishing general causation, which is required in toxic tort cases. Therefore, she dismissed the claims for his mother’s injuries. See September 2023 Update.
Ellis Keyes, pro se, appealed the dismissal to the Fifth Circuit, arguing primarily that Judge Morgan should have granted his motion to compel his medical providers to produce his mother’s medical records, which would have provided the expert evidence on causation. As in the district court, however, Keyes was unable to explain how the records would have given expert testimony on general causation, and he criticized the requirements for expert testimony (“more than adequate importance has been placed on medical doctor expert recording of the event circumstances as if the words of a medical doctor were of supernatural nobility to create existence from nothing”). The Fifth Circuit disagreed and affirmed the dismissal of the case, warning Keyes that it was “inappropriate to include derogatory comments about a district-court judge or about the judiciary in general in documents filed with the court” (“deny justice to us for the purpose of siding with the defense of BP as have many seduced by its wealth and influence;” “There is a strong professional curtesy [sic] existing within the judiciary of loyalty to fellow associates of the bar association to the detriment of ordinary plain people similar to myself where claim to the exclusive license to the practice of law is unconstitutionally taken from individuals like myself who make up the vast majority of we the people, creating vast inequalities within the judicial system so that the lawyers and judges work in harmony to allow these prejudicial predetermined fixed findings”).
Eleventh Circuit had interlocutory appellate jurisdiction over grant of summary judgment in marine insurance case, but it lacked appellate jurisdiction over the appeal of other orders; Great Lakes Insurance SE v. Crabtree, No. 23-12020, 2024 U.S. App. LEXIS 187 (11th Cir. Jan. 3, 2024).
Great Lakes provided hull insurance for the S/V BRANDISON, owned by Bryan and Bethea Crabtree. The vessel was damaged in a fire at the Cracker Boy Boat Works in Riviera Beach, Florida, and Great Lakes denied coverage, claiming that the policy was a temporary binder, that the policy expired because the Crabtrees did not provide required materials, and that the Crabtrees made material misrepresentations in their application. Great Lakes brought a declaratory judgment action in federal court in Montana and voluntarily dismissed the suit when the attorney for the Crabtrees agreed to accept service in Florida. Great Lakes then brought suit against the Crabtrees in federal court in Florida and dismissed that action as well. Great Lakes then sued the Crabtrees in federal court in Montana, again, and the judge transferred the case to the federal court in Florida. While the federal actions were proceeding, the Crabtrees filed suit against Great Lakes in the circuit court in Miami-Dade County, Florida. The Crabtrees filed counterclaims in the federal action for breach of contract and extracontractual remedies under Montana and Florida law. Great Lakes based its federal action on admiralty jurisdiction and moved for a bench trial on its claims and those of the Crabtrees. Judge Altman agreed that the insurer’s suit on the policy on the vessel was based on a maritime contract and was within the admiralty jurisdiction. The Crabtrees argued that they were entitled to a jury trial on their counterclaims because Great Lakes was only pursuing a declaratory judgment in its complaint, and the Crabtrees were pursuing damages against Great Lakes. Judge Altman did not believe that distinction made any difference as the counterclaim arose out of the same operative facts and marine policy that are at issue in the declaratory judgment action, and the Rule 9(h) designation by the plaintiff trumps the demand for a jury trial from the defendant in a counterclaim arising out of the same facts. Judge Altman also disagreed with the insured’s argument that Great Lakes had raced to the courthouse to deprive the Crabtrees of their right to a jury trial and was engaged in gamesmanship, citing the statement of the Montana judge that it was the Crabtrees who appeared to be engaged in gamesmanship with their agreement to accept service in Florida. Finally, Judge Altman noted that the Crabtrees implied, but “to their credit, they never explicitly argue,” that the court could not exercise admiralty jurisdiction because the fire occurred on land. Judge Altman noted that admiralty jurisdiction over contracts is implicated by the nature of the contract (marine insurance) and not by the location where the boat was damaged by the fire (contract jurisdiction is “conceptual” and not “spatial” as with respect to torts). Accordingly, Judge Altman granted Great Lakes’ motion for a bench trial of the case. See February 2022 Update.
Great Lakes and the Crabtrees then filed cross-motions for summary judgment in the federal action. The Crabtrees previously raised the two-dismissal rule pursuant to Rule 41(a)(1) (the second dismissal must be dismissed with prejudice), but Judge Christensen denied their motion to dismiss, concluding that the prior dismissals were attributable to gamesmanship on the part of the Crabtrees. The Crabtrees raised the argument again, and Great Lakes argued that, despite the clarity of Rule 41, the two-dismissal rule should not apply when one of the dismissals was not unilateral (citing cases from the Second Circuit and the Ninth Circuit that the two-dismissal rule does not apply when the defendant agreed to one of the dismissals). As Judge Altman sits on a district court within the Eleventh Circuit, he responded: “But in the world of the law, two plus nine doesn’t always equal eleven.” Judge Altman recognized that the two-dismissal rule is “potentially harsh,” but he believed that “we must apply it as written.” Finally, Great Lakes argued that Judge Christiansen’s prior ruling should be conclusive, but Judge Altman disagreed. She issued her order in the third suit (the case currently pending), and it was not a final judgment on the issue. Thus, Judge Altman held that the court had the authority to reconsider the order on a motion for summary judgment, and he granted summary judgment to the Crabtrees. See July 2023 Update.
After the grant of the Crabtrees’ motion for summary judgment, Great Lakes filed a notice of appeal. Great Lakes sought to appeal from the granting of the motion for summary judgment as well as three other orders issued by the district court. The Eleventh Circuit noted that no final judgment had been entered in the case as there were still issues remaining with respect to the Crabtrees’ counterclaims. However, as this case was filed in admiralty, and as the order granting summary judgment did resolve the rights and liabilities of the parties as to the claims in the summary judgment order, the Eleventh Circuit held that there was appellate jurisdiction over the appeal as to the order granting summary judgment pursuant to 28 U.S.C. Section 1292(a)(3), although the other orders entered in the case were not reviewable because they did not dispose of any admiralty claims or complete determine liability between the parties. Therefore, the appeal was partially dismissed for lack of jurisdiction.
Fifth Circuit retracted language about removal of admiralty cases but continued to affirm its prior decision that the district judge correctly denied the motion to remand after he dismissed the non-diverse defendant as improperly joined because that defendant had filed a limitation action and the stay was in effect; In re N&W Marine Towing, LLC, No. 23-30112, 2024 U.S. App. LEXIS 500 (5th Cir. Jan. 8, 2024) (Wilson).
Trey Wooley, a deckhand on the M/V ASSAULT, injured his hand while helping to replace severed face wires for the tow of the M/V NICHOLAS in the Mississippi River (the incident occurred during the overtaking of the NICHOLAS by the cruise ship MAJESTY OF THE SEAS. The owner of the NICHOLAS filed a limitation action in federal court in New Orleans, and Wooley, his employer, and the cruise line filed claims in the limitation action. Wooley also brought an action in state court in New Orleans that was removed to federal court. Wooley moved for bifurcated trials in the limitation action on the issues of liability and damages, with liability to be determined in a bench trial and damages to be decided later by a jury in the separate action (in order to preserve his right to a jury trial under the Saving to Suitors Clause). Citing Judge Barbier’s decision in Bertucci Contracting, Judge Guidry found bifurcation to be unwarranted, as the issues of limitation and damages turned on the same evidence and testimony, and the time and resources of the court and parties would be better served through a single trial on all issues. Therefore, he denied the motion to bifurcate. (See September 2021 Update). Wooley and the owner of the NICHOLAS settled their claims with the cruise line, and Wooley’s employer assigned its claims to Wooley. Wooley and his employer then filed a motion to lift the stay in the limitation action with stipulations as a single claimant. As the stipulations satisfied the requirements for lifting the stay, Judge Guidry lifted the stay in the limitation action to allow Wooley to pursue a separate action against the owner of the NICHOLAS. See October 2021 Update.
The owner of the NICHOLAS appealed to the Fifth Circuit (jurisdiction over an appeal from an interlocutory order lifting an injunction, under Section 1292(a)(1)), and the Fifth Circuit reviewed the lifting of the stay for an abuse of discretion, although Judge Higginson noted that the adequacy of the stipulations was a question of law that was reviewed de novo. After the settlements and assignment, Wooley was the sole claimant and filed a stipulation that he would not seek to recover in excess of the value of the limitation fund until there was an adjudication of limitation in the exclusive jurisdiction of the limitation action. Judge Higginson agreed that the stipulation recognized the exclusive jurisdiction of the district court and protected the right to limitation of the vessel owner. He then addressed the vessel owner’s argument that the district court abused its discretion in lifting the stay (so that Wooley could proceed in state court) because Wooley’s suit was pending in federal court after a snap removal of the suit that he filed in Louisiana state court. Judge Higginson did not consider that argument to be relevant to the lifting of the stay as the court had previously held that proper stipulations permitted lifting of the stay for state and other forums. Whether the other forum would be state or federal court had not been decided as Judge Guidry had not ruled on Wooley’s motion to remand. The propriety of the removal was not the issue on appeal as Judge Guidry properly lifted the stay based on the single-claim stipulation regardless of whether Wooley pursued his Saving-to-Suitors case in state or federal court. See May 2022 Update.
Back in the district court, Judge Guidry addressed the motion to remand the suit that was filed by Wooley in state court. The suit was removed to federal court based on diversity (and admiralty). The defendants argued that although N&W was a Louisiana company and was nondiverse from Wooley, it was improperly joined in the suit because the limitation stay was in effect at the time the suit was filed. Judge Guidry agreed that N&W was improperly joined, and he dismissed N&W from the case. Consequently, the removal was proper as there was complete diversity between Wooley and the other defendants. As Wooley settled with the other defendants, Judge Guidry dismissed the state suit. The only claim remaining in the limitation action was Wooley’s claim, and Judge Guidry stayed the limitation action to allow Wooley to pursue a claim against N&W in Louisiana state court. Both parties appealed, and, writing for the Fifth Circuit, Judge Wilson agreed that N&W was improperly joined in the suit brought in state court, reasoning that “Wooley could not state a claim in state court against N&W by operation of the Stay Order, leaving the state court no choice but to dismiss Wooley’s claims against N&W.” Consequently, Judge Guidry properly dismissed N&W without prejudice, and the case was properly removed based on diversity. Although N&W had been improperly joined, it argued that Judge Guidry erred by dismissing it from the case. N&W argued that Wooley did not “anchor his case in state court by requesting a jury or asserting a Jones Act claim against his employer, Turn Services.” Judge Wilson answered that the failure to assert a Jones Act claim did not change the fact that there had to be an independent basis, other than admiralty, to remove the case to federal court. He added that once N&W was determined to have been improperly joined, it was necessary that N&W be dismissed, regardless of whether there was another basis for jurisdiction. Judge Wilson also stated that, although the Saving-to-Suitors clause does not guarantee a non-federal forum, “a defendant retains a ‘heavy burden’ to show that removal is proper.” N&W argued that once the district court determined that removal was proper, his maritime claim against N&W could act as a jurisdictional hook. Judge Wilson rejected that argument, stating: “Essentially, N&W’s contention seems to be that so long as the district court had diversity jurisdiction over some party, then the district court could extend that jurisdiction to any party, even one nondiverse from Wooley. This is wrong.” He also rejected the arguments that the entire case should have remained in federal court because federal courts have exclusive jurisdiction over in rem actions and that the 2011 revisions to the removal statute made a substantive change in removal jurisdiction over maritime cases (noting the dictum in the Fifth Circuit’s Barker decision, which cited dictum in Dutile, which actually stated that “admiralty and general maritime claims fall within the category of ‘any other [civil] action’ governed by the second sentence of § 1441(b). As such, they are ‘removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which the action is brought.’”). Finally, N&W argued that Supplemental Rule F only permitted the district court to stay the action that had been brought in state court and did not allow its dismissal. Judge Wilson rejected that argument as the authority to dismiss the case did not come from Rule F but from the improper joinder doctrine. As the Fifth Circuit determined that N&W was improperly joined and its citizenship did not count for the diversity jurisdiction, the court denied Wooley’s appellate contentions, concluding that N&W was properly dismissed from the case, the motion to remand was correctly denied, and the separate suit was dismissed when the other defendants settled. See November 2023 Update.
N&W Towing moved for rehearing en banc, arguing, inter alia, that there was removal jurisdiction based on the court’s admiralty and maritime jurisdiction, and the panel should not have affirmed the dismissal of N&W. The panel of the Fifth Circuit withdrew its previous opinion and issued a new opinion to address the argument about removal of admiralty cases. The full court then denied the request for en banc rehearing. Writing again for the Fifth Circuit, Judge Wilson noted the “lack of clarity” in the Fifth Circuit decisions about removal of maritime cases in the absence of an independent basis for jurisdiction and cited the decisions of the court in Riverside Construction and Sangha v. Navig8 ShipManagement for the proposition that “there is no binding precedent from this circuit.” Although N&W urged the court to clarify the question by en banc rehearing, it was not necessary for the court to do that in this case, answering that N&W did not offer authority for the district court to maintain claims in federal court against an improperly joined party, despite improper joinder. Judge Wilson reasoned that there were no viable claims against N&W outside the limitation action at the time Wooley filed the suit in state court or when it was removed, and that once the party was improperly joined, that party should be dismissed without prejudice. Judge Wilson summarized: To accept N&W’s argument would be to conclude that the district court should have retained jurisdiction over a case with no defendants, all to resurrect the claims against an improperly joined one. This cannot be so.” Accordingly, Judge Wilson agreed that Judge Guidry had properly severed and dismissed without prejudice the state court petition.
Contract to inspect and repair lifeboats on offshore platform was maritime, and the Louisiana Oilfield Indemnity Statute did not invalidate the indemnity obligations in the contract; Earnest v. Palfinger Marine USA, Inc., No. 22-30582, 2024 U.S. App. LEXIS 795 (5th Cir. Jan. 11, 2024) (Southwick).
Jeremy Earnest, Brandon Dupre, and other workers on Shell Oil’s Auger tension-leg platform located on the outer Continental Shelf in the Gulf of Mexico off the Louisiana coast were injured or killed while Shell was conducting a quarterly test of the lifeboats on the platform. A lifeboat containing the workers was lowered into the ocean, disconnected, and operated in the Gulf. The lifeboat was then reconnected and hoisted back to the platform but fell to the ocean because of the failure of a corroded cable that attached the lifeboat to the platform. Suits were brought in Louisiana state court against Palfinger Marine, alleging it was responsible as the owner and manufacturer of the control release cables and release handle to the hooks for the lifeboat. Some of the suits named Shell as a defendant under Section 5(b) of the LHWCA. The defendants removed the suits to federal court in Louisiana, and Shell moved for summary judgment, arguing that the claim under Section 5(b) was only available for a maritime tort and that maritime law did not apply to the incident. Before addressing the issue of admiralty jurisdiction, Judge Summerhays concluded that the incident occurred on an OCSLA situs, that the workers’ employment furthered mineral development on the OCS, and that the accident would not have occurred but for their employment on the platform. Therefore, the OCSLA provided jurisdiction over the accident. Judge Summerhays then addressed whether admiralty law applied and held that, although the accident involved a lifeboat that fell to the ocean, the accident was inextricably linked to the operation of the platform. It was a test of the hook, cable, and davit system on the platform in which the platform equipment failed. Judge Summerhays disagreed with two district court decisions holding that maritime law applied to accidents involving lifeboats, reasoning that the lifeboats were not used in connection with traditional maritime activities. As he held there was no maritime jurisdiction over the claim against Shell, Judge Summerhays dismissed the Section 5(b) claim. See April 2022 Update (Dupre v. Palfinger).
After Judge Summerhays ruled that maritime law did not apply to the accident and that Louisiana law applied as surrogate federal law pursuant to the OCSLA, Palfinger moved to dismiss the claims for punitive damages that were asserted under the general maritime law. Judge Summerhays reiterated that the OCSLA applied as the lifeboat was physically connected to the platform and was being lifted toward its berth on the platform at the time of the accident. As he had held that Louisiana law applied, and as the plaintiffs set forth no provision of Louisiana law that would allow punitive damages, Judge Summerhays dismissed the claims for punitive damages.
Judge Summerhays then addressed the choice of law for the contract between Shell and Palfinger for the maintenance of the lifeboats, as the contract contained a provision for Shell to indemnify Palfinger for death or injury of Shell employees. Palfinger argued that the contract was governed by maritime law under which the indemnity was valid. Shell argued that the contract was governed by Louisiana law, under which the indemnity was invalid. Judge Summerhays analyzed two en banc decisions of the Fifth Circuit to reach his decision on the applicable law, Grand Isle Shipyard v. Seacor Marine and In re Larry Doiron, Inc. The court in Grand Isle rejected tort analysis to determine the law applicable to a contract and instead used a focus-of-the-contract test. Thus, a claim would arise on an OCSLA situs if a majority of the performance under the contract was to be performed on an OCSLA situs, such as the tension-leg platform, and it was immaterial that the location of the accident was on navigable waters. As the majority of the work under the Shell-Palfinger maintenance agreement was to occur on the Auger platform, an OCS situs, Judge Summerhays then addressed the question whether maritime law applied to the contract in accordance with the Fifth Circuit’s test to determine the applicable law for OCS situses, applying the test from the Doiron case. As the contract involved services to facilitate the drilling or production of oil and gas on navigable waters, the question became whether the contract provided (or the parties expected) that a vessel would play a substantial role in the completion of the contract. Reasoning that the work (inspecting components of the lifeboats and the davits and cables) occurred on the platform and did not require a vessel, Judge Summerhays held that maritime law did not apply to the contract. Palfinger finally argued that the contract was inherently and historically maritime as it involved lifeboats. However, even assuming that he could consider an argument that differed from the analysis required by Doiron, Judge Summerhays answered that just because lifeboats were involved did not make the contract maritime, as the lifeboats were functioning as safety equipment supporting oil and gas exploration on a platform and not functioning as vessels in maritime commerce. Turning to application of the Louisiana Oilfield Indemnity Act, Judge Summerhays held that the contract pertained to a well as the services were necessary to sustain the manpower for the platform to produce oil and gas from wells. Therefore, the LOIA applied and voided the indemnity. Finally, Palfinger sought to apply Texas law pursuant to the choice-of-law provision in the contract, but Judge Summerhays followed the long-standing rule in the Fifth Circuit that the choice of state law in the OCSLA is mandatory, and contractual provisions cannot alter it. Consequently, he dismissed the indemnity claim against Shell (Palfinger’s tort indemnity claim also failed under Louisiana law).
Shell Oil Co. and Shell Offshore moved for summary judgment on Earnest’s claims that they were negligent in maintaining and inspecting the hook and cable system for the lifeboat, and Judge Summerhays agreed that Shell Oil and Shell Offshore had no liability under the general maritime law or the LHWCA as state law applied. However, he found sufficient evidence of a triable issue under state law whether Shell Oil and Shell Offshore were informed of the defective cable, and he denied summary judgment to them. See September 2022 Update.
Shell Offshore filed a supplemental memorandum in support of its motion for summary judgment, arguing that Judge Summerhays had not addressed the immunity afforded Shell Offshore as an LHWCA borrowing employer. Judge Summerhays then addressed the Ruiz factors, beginning with the most critical factor–who had control over the employee and the work that he was performing. The declaration of an employee of Shell Exploration, however, established that Earnest worked for Shell Exploration, the work was controlled and supervised by Shell Exploration and its employees, Shell Exploration had the right to discharge its employees, and it paid them. Shell Offshore, claimed that the Shell Exploration employees were borrowed servants of Shell Offshore by an agency relationship created under a contract between Shell Offshore and Shell Exploration (the contract provided that Shell Exploration was authorized to act on Shell Offshore’s behalf). However, the contract also provided that the Shell Exploration employees remained employees of Shell Exploration, and Shell Offshore did not point to any facts or legal authority that the agency provision in the contract rendered Shell Exploration employees borrowed employees of Shell Offshore. Accordingly, Judge Summerhays declined to reconsider his denial of summary judgment to Shell Offshore as an LHWCA borrowing employer. See October 2022 Update.
Palfinger appealed to the Fifth Circuit the decision that the contract between Palfinger and Shell was not maritime. Writing for the Fifth Circuit, Judge Southwick began with the agreement of the parties that the Auger Tension Leg Platform was not a vessel. Judge Southwick then addressed the application of the Fifth Circuit’s en banc decision in Doiron (setting forth a test to determine whether a contract involving oilfield operations is maritime). He summarized: “The focus of this analysis is on the contract and the parties’ expectations, and the role of the vessel should be viewed in light of what is considered classically maritime.” Judge Southwick noted that Judge Summerhays had focused on the “use of a vessel” in determining whether the contract provided for (or the parties expected) that a vessel would play a substantial role in the performance of the contract. Judge Southwick reasoned that the Doiron test allows a finding that a contract is maritime when a vessel is not the object of the contract but requires the use of a vessel. However, the test “does not require the opposite finding when the maintenance and repair of vessels are the purposes of the contract, as such are traditional maritime activities.” This turned the application of the test to the issue of whether the lifeboats are vessels, as the contract pertained solely to the lifeboats and their physical and operational connection to the platform. Applying the Lozman test, he considered the lifeboats to be vessels, even though they could also be described as safety equipment on the platform. Finally, Judge Southwick considered the argument that the lifeboats were not, themselves, engaged in maritime commerce. Judge Southwick answered that under Doiron the questions are whether the purpose of the contract is to provide services to facilitate the drilling or production of oil and gas on navigable waters, and the second question is whether the contract anticipated substantial use of a vessel. It was not necessary that the vessel itself be engaged in maritime commerce.
Addition of claims for contribution, indemnity, and attorney fees of other defendants changed the limitation action to a multiple-claimant situation, requiring stipulations of the other claimants in order to lift the stay; however, the injunction was too broad and was limited to claims against the owner; In re Williams Sports Rentals, Inc., No. 22-16928, 2024 U.S. App. LEXIS 969 (9th Cir. Jan. 16, 2024) (Miller).
The death of Raeshon Willis in a jet-ski accident in South Lake Tahoe returns to the Update (June 2019, November 2019, December 2019, August 2020, and January 2022 Updates). Willis, an employee of Zip, Inc. and Berkeley Executives, was on a work trip with fellow employees Thomas Smith and Kai Petrich. As part of a team-building activity, Smith and Willis were riding together in Lake Tahoe on a wave runner that was rented from Williams Sports Rentals. Smith was operating the wave runner when it hit a wave, and Willis was thrown overboard and drowned. Williams Sports Rentals filed a limitation action as the owner of the wave runner (posting security of $5,000), and Willis’ mother sought to lift the limitation stay so she could litigate her claim against Williams Sports Rentals in state court. Judge Mendez declined to lift the federal stay, and the Ninth Circuit ordered Judge Mendez to reconsider his analysis. Instead of lifting the stay, however, Judge Mendez ruled that the owner of the jet ski should be exonerated and dismissed the case. The Ninth Circuit then ordered Judge Mendez to lift the stay in the limitation action, and Judge Mendez considered that order to be “unequivocal.” Although agreeing to lift the stay, Judge Mendez did address whether the trial of the limitation question should proceed in federal court or await the trial of the liability issue in the state court (based on efficient use of judicial resources). As the Sacramento federal courthouse was closed to the public until further notice, Judge Mendez held that the limitation action should be stayed until the completion of the suit in state court.
Willis’ mother had filed a suit in state court in Alameda County against Zip, Inc., Berkeley Executives, Smith, and Petrich. After the limitation stay was dissolved, his mother added Williams Sports Rentals as a defendant. Williams Sports Rentals twice moved to transfer the case from the Alameda County Superior Court to the South Lake Tahoe Branch of the El Dorado Superior Court, and the judge transferred the case, concluding that a trial in El Dorado County would be vastly more convenient than a trial in Alameda County (the principal place of business of Zip and Berkeley and the residence of Smith and Petrich). The Court of Appeal, however, held that the trial court abused its discretion in granting the transfer because Williams Sports Rentals had not carried its burden to show that both the convenience of witnesses and the ends of justice would be promoted by a transfer. The lower court had found that it “cannot determine what delay might result from changing venue,” and that was insufficient to satisfy the requirement that the ends of justice would be promoted by the transfer. Consequently, the appellate court issued a peremptory writ of mandate directing the superior court to vacate its order transferring the case.
The basis for the lifting of the stay of the federal limitation action was that only the Willis estate had filed a claim in the limitation action, and the Willis estate filed the necessary stipulations for a single-claimant exception. The court lifted the federal stay of state-court litigation and substituted a stay of the limitation proceeding pending a resolution of liability in the suit in state court. Several parties in the Willis state-court suit filed cross-claims for indemnity and attorney fees against Williams Sports Rentals. The cross-claimants declined to stipulate to Williams Sports Rentals’ limit of liability. One of the insurers of a cross-claimant also sought to intervene in the limitation action. Williams Sports Rentals then sought to lift the stay of the limitation action as the limitation action no longer presented a single-claimant situation. Chief Judge Mueller agreed that the federal action no longer presented a single-claimant exception, and she lifted the stay of the federal action and enjoined the state-court litigation. See January 2023 Update. On May 9, 2023, Chief Judge Mueller set aside the default judgment entered against Kai Petrich and allowed Petrich and two insurers to intervene in the limitation action.
The Willis estate filed a notice of appeal of the order finding that the case no longer fell within the single claimant exception and lifting the stay of the federal action, and the estate moved the district court to stay proceedings in the limitation action pending resolution of the appeal. The estate argued that it had a substantial case for relief on the merits of its appeal because the cross-claims against Williams Sports Rentals were “manifest shams” that did not threaten the right to limitation in “any real way.” Chief Judge Mueller did not find any support for that argument in the briefing and continued to conclude that the single claimant exception no longer applied. The estate also argued that the injunction was overbroad because it enjoined not just the state proceedings that had been filed against Williams Sports Rentals but the continued prosecution of any legal proceedings. As there was no indication of any other proceedings, Chief Judge Mueller did not find any likelihood of success on the part of the estate. Finally, the estate argued that it would suffer irreparable harm during the pendency of the appeal because the breadth of the injunction would cause “disorder” (arguing that the Ninth Circuit would probably not decide the validity of the injunction before the estate lost the June 2023 trial date in state court). However, the deadline to try the state case did not expire until 2026, and a stay of the proceedings in the federal limitation action would not affect the June trial setting because the court had already enjoined the state action. Therefore, there was no showing of irreparable harm in the decision not to stay the proceedings in the limitation action. See June 2023 Update.
The Ninth Circuit set forth the lengthy procedural history of the case that resulted in the appellate court’s previous holding that the case involved a single claimant and that Willis had entered the necessary stipulation to lift the stay in the limitation action. However, the assertion of claims for indemnity, contribution, and attorney fees changed the analysis. Willis agreed to the stipulation that she would not seek damages from Williams Sports Rentals beyond any limitation imposed by the federal court, but the other parties made no such stipulation. Writing for the Ninth Circuit, Judge Miller noted that there is a split in the circuit courts on the issue of whether contribution and indemnity claims create a multiple-claimant situation. He did not have to take a position on the circuit-court split, however, as the claimants also sought attorney fees, and he held that the claims for attorney fees created a multiple-claimant situation. Willis argued that the new claimants should be disregarded because the Ninth Circuit had previously held that the case presented a single-claimant situation, but Judge Miller answered: The record no longer reflects that, and we are not required to pretend that it still does.” He also rejected the argument that the court should disregard the new claims as shams, reasoning: “With a limitation fund of $5,000 to cover pending claims for wrongful death, survival, indemnity, contribution, and attorney’s fees, the district court could fairly conclude that an injunction was necessary to protect [Williams Sports Rental’s] limitation right. Judge Miller then addressed the breadth of the injunction, which barred prosecution of “any legal proceedings of any nature” except in the limitation action. Thus, the injunction barred Willis from pursuing claims in state court against any party, not just the owner—Williams Sports Rentals. Judge Miller recognized that the district court has discretion to stay the action against other parties when the parties share an insurance policy and it is necessary to protect the owner’s insurance. However, the other parties had no claim to the insurance maintained by Williams Sports Rentals, and a judgment against the other parties would not impair the owner’s right to limit its liability. Accordingly, Judge Miller vacated the injunction with instructions to narrow it to proceedings against Williams Sports Rentals.
Employer of seaman did not owe a duty to the seaman with respect to a chain on the dock on which the seaman tripped; Campbell v. Delma Ann, LLC, No. 23-35088, 2024 U.S. App. LEXIS 1062 (9th Cir. Jan. 17, 2024) (per curiam).
Danny Campbell, a deckhand on the F/V DELMA ANN, fell over an unmarked chain on the Port of Newport’s commercial marina while taking out the trash from the vessel. The chain was used by the Port to temporarily secure a broken finger pier on the dock and was hanging about one inch above the dock. Campbell brought this suit under the Jones Act against his employer/vessel owner (Delma Ann) and against the Port for negligence. The Port brought a cross-claim against Delma Ann for indemnity based on the Moorage License Agreement between Delma Ann and the Port, and Delma Ann moved for summary judgment on the Jones Act claim and on the indemnity claim. Although the employer owes a duty to provide a seaman with a safe place to work, Judge McShane noted that the duty does not extend to premises over which the employer has no dominion or control or an opportunity to correct. Even if the vessel’s captain failed to warn Campbell of the chain (the captain had complained to the Port’s maintenance office and had stumbled over the chain himself), Judge McShane held that the failure was insufficient to establish negligence as there is no duty of the vessel owner with respect to the dock area controlled by a third party. Judge McShane also rejected the assertion that Delma Ann violated federal or state regulations and was negligent per se, concluding that the regulations did not apply. To support its claim based on the Moorage License Agreement, the Port argued that it was entitled to indemnity for injury resulting from the acts or omissions of Delma Ann or its employees. The Port argued that it was not necessary that Delma Ann be found negligent as long as its acts or omissions contributed to the injury. In this case, Campbell and the Port argued that Campbell was distracted while carrying the trash because another crewmember called out to him and tossed him another bag of trash. Campbell turned around to get the additional bag and tripped when he turned back to continue. Judge McShane was “unpersuaded,” citing the fact that Delma Ann did not have dominion or control over the area and reasoning that the agreement did not require indemnity for injuries that were not caused by the licensee. See December 2021 Update.
Campbell appealed from the grant of summary judgment on his Jones Act claim, arguing that the Supreme Court’s decision in O’Donnell had superseded the decision of the Ninth Circuit in Todahl that a Jones Act employer is not liable for injuries occurring on premises over which it has no dominion or control, but the Ninth Circuit disagreed and continued to adhere to its limitation on the duty of the seaman’s employer. Campbell also alleged that Todahl was distinguishable because the seaman in that case was injured on personal activities ashore, but Campbell was performing his duties as a deckhand by removing garbage from the vessel. However, the Ninth Circuit was not willing to create such a distinction. Finally, Campbell argued that the Port’s negligence in installing and maintaining the chain should be imputed to the employer under the operational activities rule as articulated by the Supreme Court in Hopson v. Texaco. However, the employer did not delegate any activities to the Port (the slip rental agreement with the Port precluded the Port from performing any activities on behalf of the vessel), and merely allowing the vessel to be moored at the Port did “not constitute the performance of a vital operational activity.” Thanks to Matthew Ammerman of Houston, Texas for bringing this decision to our attention.
From the federal district courts
Expert opinions of medical providers listed as hybrid witnesses on causation were not stricken at the stage of a motion in limine; evidence that water was sprayed toward the stage where the passenger fell together with the passenger’s testimony that he felt water on the deck when he was directed to run on the stage sufficiently established a dangerous condition and notice to the cruise line; Hornsby v. Carnival Corp., No. 22-cv-23135, 2023 U.S. Dist. LEXIS 229353 (S.D. Fla. Dec. 22, 2023) (Bloom).
Chaundra Hornsby and her minor son (T.K.) were passengers on the CARNIVAL VICTORY. T.K slipped and fell while participating in the Dr. Seuss interactive stage show in the Caribbean Lounge on the ship (allegedly on the wet floor from water sprayed on the crowd by a crew member). Hornsby brought this suit in federal court in Florida against the cruise line, and the cruise line filed a motion for summary judgment, a motion to strike the expert opinions from the plaintiff’s hybrid witnesses (treating doctors), and a motion in limine. Considering the motion to strike, Judge Bloom initially held that the treating doctors were not retained experts and were subject to the less onerous disclosure requirements of Rule 26(a)(2)(C). Hornsby argued that the doctors could offer causation and prognosis opinion testimony, but the cruise line argued that the plaintiff could not offer causation and prognosis testimony from the doctors based on their specialized knowledge (rather than their treatment of T.K.) without complying with the Daubert requirements. It was unclear at this stage of the proceedings whether the opinions were subject to the Daubert standard, and Judge Bloom accordingly reserved ruling on the admissibility of the opinions. The cruise line sought to preclude Hornsby from introducing the total amount billed for medical expenses, as opposed to the amount actually paid, but Judge Bloom was bound by the Eleventh Circuit’s Higgs decision and declined to grant the motion with the cruise line reserving the right to challenge Higgs on appeal. Turning to the motion for summary judgment, the cruise line argued that Hornsby could not prove that T.K. slipped on water that was sprayed onto the stage by a crew member. Judge Bloom cited the video taken by a passenger showing a crew member “haphazardly spraying water into the crowd” from the rear with “water misting onto the stage.” Together with T.K.’s testimony that he felt water on the stage where he slipped, Judge Bloom found sufficient evidence of causation even though neither T.K. nor Hornsby saw the water fall to the stage. This evidence was likewise fatal to the cruise line’s argument that the evidence failed to establish a dangerous condition. Finally, the cruise line argued that Hornsby had failed to establish constructive notice of the dangerous condition because there were no prior similar incidents. Judge Bloom disagreed, reasoning that the absence of prior incidents did not show that the cruise line lacked actual or constructive notice that its crew members spraying water toward the stage and then directing the passenger to run on the stage may create a dangerous condition. Therefore, Judge Bloom denied the cruise line’s motion for summary judgment.
Vessel owner failed to sufficiently allege authority of insurance broker to issue policy, but the owner was given one more opportunity to plead agency for a claim against the insurer for breach of the insurance contract; Magi v. Rich, No. 20-8881, 2023 U.S. Dist. LEXIS 229082 (D.N.J. Dec. 26, 2023) (Quraishi).
This litigation involves the insurance coverage for a small vessel that allided with another vessel. Mark and Marie Magi are recreational boaters who own a 21-foot Aquasport. William Rich owns a 36-foot Contender. On November 3, 2019, Mark Magi was fishing from his vessel about three miles east of Barnegat Inlet on the New Jersey coast when Rich’s vessel struck the port side of the stationary Magi vessel, injuring Mark. On August 19, 2019, broker Sea Insure sent a yacht insurance application to Rich, and Rich claimed that he provided all the requested information needed for Sea Insure to bind coverage with insurer Markel. However, Sea Insure did not obtain coverage with Markel until after the accident. Magi brought this action in federal court in New Jersey against Rich (and against Magi’s insurer, GEICO, seeking uninsured/underinsured boater coverage), and Rich filed a third-party action against Sea Insure and Markel. Sea Insure and Markel moved to dismiss the third-party complaint, and Judge Quraishi held that the claim for breach of contract against Markel had to be dismissed because the policy did not take effect until four days after the accident. Rich also alleged a claim of equitable estoppel against Markel based on alleged misrepresentations by Sea Insure on behalf of Markel (as an agent of Markel). Markel cited the provision in the insurance application that the applicant must submit a fully completed application and premium in order for coverage to be considered. Although that provision militated against the estoppel claim, it did not dispel it entirely as it was plausible that Rich may have been misled into believing that he would have coverage when he supplied the information based on alleged misrepresentations by Sea Insure. Whether Markel could be held liable for Sea Insurer’s misrepresentations required an examination of the contractual relationship between Markel and Sea Insure to determine the actual authority of Sea Insure as well as consideration of evidence whether Sea Insure was vested with apparent authority. Thus, Judge Quraishi did not dismiss the equitable estoppel claim against Markel (or the similar claim against Sea Insure). With respect to the claim against Sea Insure for breach of contract, Judge Quraishi noted that, under New Jersey law, the claim against an insurance broker for failing to obtain proper insurance sounds in negligence and not in contract. Accordingly, he dismissed the claim against Sea Insure for breach of contract. Besides the negligence claim, Rich pleaded a claim against Sea Insure for professional malpractice based on breach of a fiduciary duty to provide services within the standards accepted by insurance brokers. As that claim contained several statements followed by a legal conclusion that the conduct amounted to professional liability that caused him harm, Judge Quraishi reasoned that it failed the pleading requirements set forth in Iqbal. Thus, he dismissed that count without prejudice. Similarly, Judge Quraishi held that the fraud claim failed the heightened pleading standard set forth in Rule 9 and would have to be repleaded. See March 2023 Update.
Rich filed an amended third-party complaint against Markel in response to the court’s caution that the amended complaint would be “his final opportunity to plead a breach of contract claim against Markel.” Rich’s amended complaint did not assert that Markel directly entered into a contract with Rich. Instead, he alleged that Sea Insure, acting as agent for Markel, created the insurance contract that was binding on Markel. However, Rich’s amended third-party complaint lacked any specificity as to whether Sea Insure was exercising actual authority or apparent authority and was devoid of factual allegations to support either claim. Accordingly, the pleading of “little more than a bald legal conclusion” was insufficient to state a plausible claim of breach of contract against Markel. Describing the allegations as coherent, but not plausible, Judge Quraishi held that it would not be futile to afford Rich one additional opportunity to amend his third-party complaint, encouraging him to “revisit the entirety of his pleading to clarify the role(s) that he is alleging [Sea Insure] played in the circumstances that led to this suit.”
Inadequate security resulted in rejection of another ad interim stipulation; In re Estero Island Parasail, Inc., No. 2:23-cv-1090, 2023 U.S. Dist. LEXIS 229362 (M.D. Fla. Dec. 27, 2023) (Dec. 27, 2023) (Dudek).
Estero Island Parasail, Inc., owner of a 2009 Nautical Rib that was involved in an accident near Estero Island, Florida in which passenger Carol Bardon was injured, filed this action in federal court in Florida seeking to limit liability. Estero Island asked the court to approve the ad interim stipulation in the amount of $30,000 and issue the customary monition. However, Estero Island did not deposit any amount, bond, or letter of undertaking with the court. Instead, Estero Island promised to submit a bond if a demand was made by any claimant or “after the entry of an Order confirming the report of a commissioner to be appointed to appraise the amount of value of the Petitioner’s interest in the Vessel.” Magistrate Judge Dudek noted that this promise was like the language that was rejected by Magistrate Judge Tuite in the Mongelli case (see September 2023 Update and October 2023 Update) [it was also similar to the promise in the Freedom Marine case, see November 2023 Update and December 2023 Update]. As the promise was insufficient, Magistrate Judge Dudek declined, without prejudice, to approve the ad interim stipulation or issue the monition.
102 prior fleetwide incidents did not establish proximate cause of sexual assault on a cruise ship passenger by other passengers; J.F. v. Carnival Corp., No. 22-21332, 2023 U.S. Dist. LEXIS 229839 (S.D. Fla. Dec. 27, 2023) (Martinez).
J.F., a passenger on the CARNIVAL HORIZON, brought this suit in federal court in Florida against the cruise line, asserting that she was sexually assaulted by two of three boys who were passengers on the vessel (Zion, Daniel, and Jesus, although the cruise line was never able to identify a passenger named Jesus matching the description of him given by J.F.). J.F. spent time with Daniel and Zion during the first three days of the cruise in Club o2 (an activity group for passengers aged 15 to 17). On another night, J.F. spent the evening at the Club and later joined a group with Daniel, Zion, and Jesus. As it approached 1:00 a.m., J.F. said that she needed to check in with her parents, and the group offered to accompany J.F. to her room, except Zion asked to stop by his room first to get a phone charger. When they reached Zion’s room, J.F. followed Zion inside to get a tissue from his restroom, and Daniel locked the door with Zion and Jesus also in the room. Prior to being locked in the room, J.F. felt safe on the ship, and none of the assailants had tried to kiss or touch her in an inappropriate manner. When J.F. tried to leave the locked room, she asserts that Jesus picked her up and put her on the bed where she was sexually assaulted by Daniel and Zion. J.F. then grabbed her clothing and left the cabin with no one attempting to stop her from leaving. J.F. did not report a sexual assault to the cruise line during the cruise. J.F. brought two counts against the cruise line–direct liability for negligence and vicarious liability for negligence. The cruise line moved for summary judgment on the ground that the sexual assault on J.F. was not foreseeable, and J.F. responded with documentation of 102 incidents, the majority of which occurred in passenger staterooms. Judge Martinez began by noting that the foreseeability determination must have some connection to the events that gave rise to the negligence claim because the “cruise line’s duty is to protect passengers from a particular injury.” Judge Martinez held that J.F.’s reliance on the fleetwide incident reports was too high a level of generality to establish constructive notice of the risk to J.F., ignoring too many variables. As the passenger failed to produce evidence that the cruise line had knowledge of the specific dangers that caused J.F.’s assault, there was insufficient evidence to establish foreseeability for the specific attack. Therefore, Judge Martinez dismissed both the direct and vicarious liability claims.
Suit against manufacturer of engine that failed and caused Army helicopter to crash was not barred by the political question doctrine, but non-pecuniary damages were not recoverable for the death claim because DOHSA was applicable; Rivera-Lopez v. General Electric Co., No. 4:19-cv-211, 2023 U.S. Dist. LEXIS 230378 (S.D. Ga. Dec. 28, 2023) (Wood).
Emil Rivera-Lopez was killed, and the other members of the flight crew of an Army helicopter were injured, when one of the engines on the helicopter failed and the helicopter crashed off the coast of Yemen. The injured crew members and the beneficiaries of Rivera-Lopez brought suit in federal court in Georgia against eight companies that were involved in the manufacture of the helicopter, and General Electric moved to dismiss the complaint as non-justiciable based on the political question doctrine (adjudicating the claims and defenses would require the court to question “core military decision-making”). The plaintiffs sought damages from General Electric for allegedly failing to properly install the No. 7 B-nut on the engine. Judge Wood reasoned that the allegations did not raise any issues as to the military’s discrete responsibility with regard to the engine—the allegations were limited to the fault of General Electric, and there was no allegation that challenged the decision to use General Electric to manufacture the engine. Judge Wood then turned to General Electric’s defenses. General Electric pointed to an investigative report that the failure of the crew to rapidly recognize and respond to the engine failure was a contributing factor to the accident. However, no discovery had been completed in this case, and Judge Wood considered it to be premature to decide that an examination of military decisions was necessary. She agreed that a “discriminating inquiry” could be conducted upon completion of discovery. There was only a possibility that the Army’s decision-making would be implicated, and there were judicially manageable standards that the court could use to resolve the case (as the issue was not about the training exercise but the manufacture of an engine). Finally, Judge Wood agreed that the Death on the High Seas Act applied to the claim of Rivera-Lopez, and she dismissed the request for non-pecuniary damages, including emotional distress damages and punitive damages. However, Judge Wood declined to dismiss the pleading of the injured plaintiffs for punitive damages, reasoning that they had viable claims for negligence and strict liability, and a punitive damage claim is derivative of the tort claims.
Judge dismissed counts in passenger’s complaint against cruise line for medical malpractice and negligence/gross negligence but declined to dismiss the claims for assault and battery, unlawful imprisonment, and conversion/theft; Allbert v. Hollard America Line, N.V., No. 23-cv-93, 2023 U.S. Dist. LEXIS 230990 (W.D. Wash. Dec. 29, 2023) (Zilly).
Aurelia Emily Allbert was a passenger on a 35-day round-trip cruise from California to Hawaii and Tahiti on the ZUIDERDAM (her husband remained in New York). She claims that shortly after departing from San Diego, she was sexually assaulted in her cabin by three different men on three occasions (believed to be the ship’s food and beverage manager, a man who allegedly owns a Holland American entity, and a traveling lecturer). She says she was troubled greatly by these incidents, but she did not report them to the ship’s management. Allbert also experienced other annoying incidents, including a broken mini-fridge, a water leak, a noisy passenger in the adjoining cabin, and problems with her security access card. She was treated disrespectfully when she requested a new card, believing the treatment was the result of racial discrimination because she was born and raised in China. She also complained that the crew confiscated bottles of alcoholic beverages that she purchased ashore and intended to sell when she returned home to New York. As the crew declined to address her complaints, Allbert decided “to do something dramatic to get management’s attention.” While the vessel was moored in Raiatea, she climbed over a railing onto a narrow platform above the water and waited for the crew to ask her what she was doing. The crew eventually brought her back on deck, and she was informed that she should prepare to leave the vessel. While she was packing, the ship’s doctor told her to report to the medical center right away, but she was concerned about what might happen in the medical center. The doctor denied her requests to speak to her husband or friends but told her that she could return to her cabin if she had a blood test. Once she was in the medical center, she claims she was injected with an unknown medication without consent. Before passing out, she heard the ship’s security manager ask another member of security to turn off his body camera. She was held in the medical center without consent for five days and was denied her requests for a change of clothing. She believes she was injected with anti-psychotic medications. She claims that the doctor incorrectly diagnosed her with mania and psychotic symptoms after consulting with an osteopath in Miami who had some training in psychiatry (she claims that the diagnosis was to justify her detention in the ship’s medical center). When the vessel reached Tahiti, the ship’s doctor arranged for an ambulance to take Allbert to a psychiatric hospital in Papeete (charging $16,000 to her credit card without her consent for the medical treatment in the ship’s medical center). A physician at the hospital called the vessel and was informed that the cruise line would pay for Allbert’s return travel to New York, but the cruise line failed to arrange the travel, and Allbert remained in the hospital for 6 ½ weeks, where she alleges she was subject to multiple depressing conditions and was sexually assaulted by a hospital staff member. The hospital billed her $89,000 for her stay. The hospital then released Allbert with a “clean bill of health,” but she did not have money to travel home, and social services in Tahiti placed her in two shelters for another 6 ½ weeks where she claims that she was sexually assaulted by a local man on probation. Eventually, local immigration authorities required the cruise line to arrange for her travel, and she then brought this action in federal court in Washington against the cruise line, its affiliates and subsidiaries, employees, and independent contractors for breach of contract, negligence, unlawful imprisonment, assault and battery, intentional infliction of emotional distress, conversion/theft, and medical malpractice. Allbert argued that the cruise line breached its contract, identifying only the website statement that the employees are committed to providing a truly extraordinary experience for the passengers. Judge Zilly held that this assertion was insufficient to state a claim for breach of contract and that Allbert would be allowed to amend to identify specific provisions of the contract that were breached. Albert alleged that the cruise line had a duty to ensure that its passengers were not exposed to acts of aggression, sexual advances, or discriminatory treatment and that it breached the duty by failing to train and/or monitor its employees and independent contractors. As she did not plead any facts alleging that the cruise line negligently implemented and operated a training program that caused the individuals to sexually assault her or that caused the doctor to provide inadequate medical care or failed to investigate or take corrective action after receiving notice of an employee’s unfitness, the negligence claim was dismissed with leave to amend (Judge Zilly similarly dismissed claims that suggested that the cruise line should be held liable for the intentional conduct of its employees and independent contractors). In response to the claim for unlawful imprisonment (intentional deprivation of movement or freedom to remain in the place of one’s lawful choice), the cruise line argued that its crew’s conduct was justified by Allbert’s actions on the vessel. Taking Allbert’s allegations as true for the motion to dismiss, Judge Zilly did not consider the defense and denied the motion to dismiss. For the claim of assault and battery for six sexual assaults and the injection of anti-psychotic drugs without her consent, Judge Zilly could not tell whether Allbert was alleging that the cruise line was liable for its own negligence or whether Allbert was claiming that the cruise line was vicariously liable for the criminal actions of individuals committed outside the scope of their employment. Therefore, he dismissed the claim with leave to amend. Judge Zilly then considered whether the allegations of intentional infliction of emotional distress were sufficient to cross the high bar of conduct that is so outrageous and extreme as to go beyond all bounds of decency. Allbert’s allegation regarding her security access card, the state of her cabin, and the confiscation of alcoholic beverages did not rise to that level, and the allegations with respect to the actions of the doctor were insufficient “in light of Plaintiff’s decision to climb over the vessel’s railing.” Therefore, this count was dismissed with leave to amend. In response to the claim for conversion/theft for confiscation of alcoholic beverages and charging her credit card for the care she received in the ship’s medical facility, the cruise line argued that Allbert could not recover noneconomic damages. Judge Zilly answered that she might not recover noneconomic damages, but she alleged that she suffered financial harm. Therefore, he declined to dismiss the count alleging conversion/theft. Finally, Allbert alleged that the vessel’s doctor and the osteopath in Florida committed medical malpractice when they diagnosed her with mania and psychotic symptoms. As Judge Zilly was uncertain whether Allbert was asserting these claims against the cruise line or the doctor (the shipowner is only liable if it negligently selects the physician), he dismissed this count with leave to amend. See August 2023 Update.
After Allbert filed an amended complaint, the cruise line moved to dismiss the counts, and Judge Zilly noted that he had previously denied the motion to dismiss the claims for unlawful imprisonment and conversion/theft, and he declined to dismiss the amended claims for the same reasons previously stated. Judge Zilly also declined to dismiss the claims for assault and battery as the amended complaint named the assaulting employees, she described where the events occurred, and she alleged the nature of the offensive contact. With respect to the claim for medical malpractice, Allbert now asserted a claim for misdiagnosis by the doctor of the ship’s medical center, Le Roux Viljoen. However, she did not join him in the suit or take any steps to bring him into the case, and her allegations as to how her diagnosis or care were substandard were only described in conclusory allegations. Therefore, Judge Zilly dismissed the medical malpractice claim with prejudice. Finally, Judge Zilly reasoned that the amended complaint made only conclusory statements of the elements of a negligence/gross negligence claim. As the complaint failed to support the conclusory allegations, Judge Zilly dismissed the negligence/gross negligence claims with prejudice.
Isiah Ambo was injured while working for Turn Services as a deckhand on the M/V SIR BARTON. Ambo brought this suit against Turn Services in federal court in Louisiana seeking to recover under the Jones Act and general maritime law (including a claim for maintenance and cure). Turn Services filed a motion for partial summary judgment on Ambo’s entitlement to cure, arguing that its cure obligation was satisfied because Ambo was eligible for Medicaid benefits. In response to Chief Judge Brown’s request, Ambo submitted evidence of payment of medical bills by the Louisiana Department of Health, but he argued that there were still outstanding bills and that he might be hampered in his demands for reimbursement from Medicaid with a ruling that his eligibility for Medicaid satisfied the cure obligation. Turn Services submitted evidence from the Louisiana Department of Health indicating that Ambo was eligible for Medicaid along with evidence that the invoices that had not been paid by Medicaid had been fully paid (after audit) by Turn Services. Chief Judge Brown began her analysis by providing a summary of the transition from Public Health Service Hospitals, which provided free treatment to seamen before the hospitals were closed in 1981. She explained that the cure obligation was satisfied by Medicaid if the seaman qualified for Medicaid and there were adequate healthcare providers to treat the seaman within a reasonable distance who accepted payment from Medicaid. As Ambo could not provide evidence to dispute that he was eligible for Medicaid and was receiving Medicaid benefits, Chief Judge Brown held that Turn Services’ cure obligation had been satisfied. Accordingly, she granted summary judgment on the cure claim because Ambo was eligible for Medicaid and Turn Services had paid in full any outstanding medical expenses. Chief Judge Brown did note that the employer remained obligated to pay any out-of-pocket medical expenses incurred by the seaman.
Magistrate Judge awarded attorney fees under Local Rule C(7) of the Southern District of Florida after the arrest of the vessel was vacated and, additionally, because exigent circumstances did not exist for the arrest; Nimbus Boat Rental Corp. v. Garcel, No. 1:22-cv-22645, 2024 U.S. Dist. LEXIS 1997 (S.D. Fla. Jan. 3, 2024) (Louis).
This case involved the arrest of the F/V NIRVANA in federal court in Florida by Nimbus Boat Rental Corp., which alleged that Angel Garcel and his company (Jet Skis in Miami) unlawfully deprived Nimbus Boat Rentals of possession and title to the vessel. In obtaining the arrest of the vessel, Nimbus Boat Rentals certified that there was an emergency based on exigent circumstances. Garcel and Jet Skis filed a verified statement of interest in the vessel and requested vacatur of the arrest. After a hearing, Magistrate Judge Louis recommended quashing the warrant of arrest and release of the vessel, and Judge Moore adopted the recommendation. Magistrate Judge Louis then considered an award of attorney fees to the defendants pursuant to Local Admiralty Rule C(7), which provides that “if the Court orders the arrest to be vacated, the Court shall award attorney’s fees, costs, and other expenses incurred bv any party as a result of the arrest,” and that if the arrest was predicated upon a showing of “exigent circumstances,” “and the Court finds that such exigent circumstances did not exist, the Court shall award attorneys’ fees, costs and other expenses incurred by any party as a result of the seizure.” Harmonizing the general rule that each party to a lawsuit ordinarily bears its own attorney fees with the principle that attorney fees can be recovered in wrongful seizure cases, Magistrate Judge Louis noted that the judges in the Southern District of Florida required bad faith to award attorney fees under Rule C(7). Nimbus did not object to the award, and Magistrate Judge Louis noted that fees were also justified based on the finding that no exigent circumstances existed at the time Nimbus certified the existence of exigent circumstances. Magistrate Judge Louis did reduce the hours requested and reduced the attorney rates from $725 per hour and $550 per hour to $600 per hour and $300 per hour, and she reduced the paralegal rate from $325 per hour to $125 per hour.
Defective complaint that was filed on the last day of the extension given for the statute of limitation and that had to be refiled the next day was not untimely; American affiliate that signed the bill of lading as the agent of the carrier was not bound by the bill of lading; International Cargo Loss Prevention, Inc. v. Mediterranean Shipping Co. (USA) Inc., No. 23-cv-1312, 2024 U.S. Dist. LEXIS 3233 (S.D.N.Y. Jan. 3, 2024) (Clarke).
International Cargo Loss Prevention, insurer of a cargo of frozen shrimp that was damaged during a shipment from Ennore, India to Chicago, Illinois, brought this suit in federal court in New York against the ocean carrier, Mediterranean Shipping Co., and Mediterranean Shipping Co. (USA), which signed the Sea Waybill as agent for the carrier. International Cargo Loss filed the complaint on February 15, 2023, the deadline agreed by the parties to file suit in an agreement to extend the statute of limitation in the Carriage of Goods by Sea Act. The next day, February 16, 2023, the clerk of court notified International Cargo Loss that the complaint was deficient because the attorney signature was incomplete, and the civil cover sheet lacked sufficient information. International Cargo Loss re-filed the complaint later that day, but the defendants moved to dismiss the complaint on the ground that it was filed outside the one-year limitation period in the Carriage of Goods by Sea Act. The defendants argued that the initial filing did not “comply with the rules,” and that the operative filing was on February 16. Judge Clarke disagreed, answering that the filing error did not void the date of the original filing for purposes of the statute of limitation. As International Cargo Loss did not unreasonably delay in the re-filing, the complaint was considered to have been filed on February 15 and was not time-barred. Mediterranean Shipping USA argued that it should be dismissed from the suit because it signed the Sea Waybill as agent of the carrier. International Cargo Loss argued that the case against Mediterranean Shipping USA should not be dismissed because the complaint alleged that Mediterranean Shipping USA was a party to the Sea Waybill and because it was charged with administering the loss and had the power to bind the carrier in accordance with the damage to the cargo. Judge Clarke responded that International Cargo Loss had not alleged any facts to support Mediterranean Shipping USA manifesting an intent to be bound by the Sea Waybill. The conclusory allegation that Mediterranean Shipping USA breached the contract of carriage was insufficient to state a claim against it, and Judge Clarke dismissed Mediterranean Shipping USA from the suit. Thanks to Michael F. Sturley, Fannie Coplin Regents Chair at the University of Texas School of Law, for bringing this decision to our attention.
Passenger who slipped in puddle on cruise ship presented fact questions of notice for her direct liability claims and of the involvement of a crew member acting within the course of his employment for her vicarious liability claims; Hostert v. Carnival Corp., No. 21-cv-23701, 2024 U.S. Dist. LEXIS 2603 (S.D. Fla. Jan. 4, 2024) (Altman).
Kimberly Hostert, a passenger on the M/S HORIZON, claimed that she was injured when she slipped and fell on a wet, foreign substance on the exterior portion of Deck 11 on her way to a “Dive-in” movie. She brought this suit in federal court in Florida against the cruise line, asserting claims for negligent maintenance, failure to warn, and vicarious liability. The cruise line moved to dismiss the claims, and Judge Graham agreed that the claims for negligent maintenance and failure to warn were insufficient because only conclusory allegations were presented for the notice to the vessel of the dangerous condition. The counts alleged that the defendant should have been aware of the danger due to the length of time the condition had been present or because of the recurring nature of the condition. However, Judge Graham held that there were no facts alleged to support the allegations. For the vicarious liability count, Hostert alleged that the slippery condition was created by a crewmember inadequately cleaning and drying the area, leaving it wet. Although the cruise line argued that Hostert was merely recasting her negligent maintenance and failure to warn claims, Judge Graham took the pleading as stated and held that Hostert was not required to plead notice for the third count. Consequently, he dismissed the first two counts without prejudice and denied the motion to dismiss the third count. See September 2022 Update.
After “some litigation,” the cruise line moved for summary judgment on all of Hostert’s claims. The cruise line challenged the three counts of direct liability on the ground that it lacked actual or constructive notice of the dangerous condition, but Judge Altman found a sufficient fact question for resolution by the jury. He held that it was probably sufficient that Debra Gardner, an unrelated passenger, testified that the deck was wet at least 45 minutes before Hostert slipped. However, he also noted that there was evidence that a crew member was walking and cleaning in the immediate vicinity of the puddle a few minutes before Hostert fell, and he cited the cruise line’s procedures with respect to use of warning signs and removal of spills. The cruise line responded that Hostert had not produced passenger complaints or prior incidents that would place the cruise line on constructive notice of slippery conditions in the area where Hostert fell. Judge Altman easily disposed of that argument in view of the evidence of notice discussed above as well as the fact that there had been falls on similar flooring. In response to the cruise line’s argument that the evidence did not establish that the area where Hostert fell was unreasonably slippery when wet, Judge Altman stated: “But that’s absurd. Of course wet floors are dangerous. That’s why Hostert slipped and fell. That’s why all of the plaintiffs in all of the cases we’ve cited above slipped and fell. And its why Carnival’s own procedures make clear that wet floors are dangerous.” Turning to the vicarious liability claim, Judge Altman cited the testimony of the unrelated passenger that she saw a crew member, wearing a uniform, cleaning tables, throwing away trash, and emptying ashtrays in the area where Hostert slipped, a few minutes before the fall. The employee walked through the area where Hostert slipped. Although the cruise line argued that this was insufficient evidence to establish that the worker was a crew member, Judge Altman answered that “we can’t imagine that guests regularly dress up in uniform, voluntarily clean tables and ashtrays, throw away other people’s trash, and then accept cash tips from passengers for doing so.” For the same reason, Judge Altman rejected the argument that there was no evidence that the crew member was acting in the course of his employment, calling the argument “absurd” and reasoning: “we don’t see how the decision to spend one’s time cleaning ashtrays and throwing out other people’s trash could be ‘actuated, at least in part,’ by anything other than a desire ‘to serve the master[.]’” Finally, the cruise line argued that Hostert failed to establish that any negligence of the cruise line or its crew caused the deck to become wet or Hostert’s fall. Judge Altman initially noted that Hostert was not arguing that the cruise line or crew caused the floor to be wet and was arguing about the response of the cruise line/crew to the wet floor. Citing its own accident report, the cruise line claimed that the cause of the accident was instead Hostert’s fault for failing to check/monitor her surroundings. Aside from the fact that the report was probably inadmissible hearsay, Judge Altman criticized the argument that Hostert did not look down at the floor, noting that it was dark because the overhead lights were off. He stated that “it’s probably fair to say that reasonable people don’t walk around looking down at the floor—because, if they did, we should expect many more accidents from people bumping into things and, on cruise ships especially, falling overboard. Consequently, he denied the cruise line’s motion for summary judgment.
Misrepresentations (I did not know my husband was a felon or that his license was suspended) allowed insurer to void policy on vessel based on the uberrimae fidei doctrine; insurer was allowed to seal the testimony of its underwriting representative; Markel American Insurance Co. v. McRae, No. 1:22-cv-915, 2023 U.S. Dist. LEXIS 2428 (M.D.N.C. Jan. 5, 2024) (Webster).
Amy McRae obtained an insurance policy with Markel on a newly purchased vessel in the amount of $580,000, based on an application for insurance she presented on her behalf and on behalf of her husband, Richard McCrae. A few months later, Richard and a friend were using the boat, and it crashed into the Georgetown Rock Jetties in South Carolina. During its investigation of the claim, Markel uncovered discrepancies and nondisclosures in the representations in the application for insurance. The misrepresentations included that Richard did not have a previous felony conviction, he had not had his license suspended within the past three years, that the boat had been insured during the 30 days prior to the submission of the application, and that another insurance company had not refused insurance on the boat in the past three years. The nondisclosure was that Richard had recently received a ticket for a motor vehicle violation. Amy had excuses for each of the misrepresentations/nondisclosure, such as that she was unaware that her husband was a convicted felon. Markel denied the claim and brought this action in federal court in North Carolina against Amy and Richard McRae, seeking a declaration that the policy was void. Markel moved for summary judgment that the policy should be voided based on the doctrine of uberrimae fidei, adding to the foregoing a misrepresentation that Amy said she would operate the boat about 95% of the time, but the McRaes planned that Richard would be the operator 95% of the time. The McRaes responded with their explanations, arguing that there were fact issues to be resolved, including whether the misrepresentations and nondisclosure would have impacted the decision to issue the policy. The McRaes initially argued that maritime law did not apply, but they did not make that argument in their response, and Magistrate Judge Webster found that the claim fell “squarely under maritime and admiralty law.” He also agreed that uberrimae fidei is a “longstanding federal maritime doctrine that applies to marine insurance contracts.” Turning to the excuses, Magistrate Judge Webster answered: “While these explanations are informative, they do not withstand analysis under uberrimae fidei. Lack of knowledge does not excuse the insured party, neither does an unintentional misrepresentation or a mistake.” Magistrate Judge Webster then rejected the argument that the misrepresentations were not material, reasoning that driving and criminal history and the boat’s insurance history are reasonably part of the analysis “of any prudent insurer,” and that misrepresentations concerning past moving violations and who would operate the boat are “inherently material to the eligibility analysis.” Accordingly, Magistrate Judge Webster recommended that the policy be found void. Finally, Markel moved to seal the transcript of the deposition of its underwriting representative on the ground that it contained underwriting policies, procedures, practices, and other proprietary and confidential information. As the motion was publicly docketed for more than two months, Magistrate Judge Webster ordered that the transcript be sealed, finding that the public’s right of access was outweighed by the confidential, business nature of the testimony.
Judge declined to reconsider his decision addressing the liability of a freight forwarder and non-vessel operating common carrier under state law in connection with the injuries sustained by workers who were unloading a container that was allegedly improperly secured; Suazo v. Ocean Network Express (North America), Inc., No. 20-cv-2016, 2024 U.S. Dist. LEXIS 2837 (S.D.N.Y. Jan. 5, 2024) (Ramos).
In our April 2023 Update, we discussed the decision of Judge Ramos of the United States District Court for the Southern District of New York, addressing the liability of a freight forwarder and non-vessel operating carrier under New York law in connection with injuries to two workers who were unloading a shipment of marble slabs from a container that they allege was improperly secured. On January 5, 2024, Judge Ramos declined to reconsider his decision.
Release arising from replacement of engines on yacht was a maritime contract, and its choice of Virginia law was upheld; Virginia law also applied to fraud and fraudulent concealment claims; vessel owner failed to establish claims of fraud and fraudulent concealment under state law; yacht owner presented fact questions on breach of oral warranties, but it was not entitled to recover consequential damages; What Hurts, LLC v. Volvo Penta of the Americas, LLC, No. 2:22-cv-552, 2024 U.S. Dist. LEXIS 3063 (E.D. Va. Jan. 5, 2024) (Davis).
What Hurts purchased a 60-foot yacht that was designed and manufactured by Midnight Express, a Miami-based boat provider. The vessel was equipped with engines manufactured by Seven Marine, a subsidiary of Volvo Penta. The engines came with a limited warranty administered by parent company Volvo Penta. There were performance issues with the engines, and repairs were unsuccessful. Eventually, Volvo Penta agreed to provide replacement engines together with a limited warranty for the replacement engines. In a release, What Hurts agreed to waive all claims related to the original engines. After the installation of the replacement engines, What Hurts continued to complain about performance, replaced the engines, and brought this suit in federal court in Florida against Volvo Penta. The suit was transferred to federal court in Virginia in accordance with the forum-selection clause in the release, and Volvo Penta moved for summary judgment on the claims brought in the suit, fraud, fraudulent concealment, and breach of express warranty. Chief Judge Davis first had to determine what law to apply to the claims, and he decided that the release was a maritime contract because the vessel had been fully constructed and launched before the parties agreed to the modification for the engines. As the release addressed modification of a vessel and not original construction, he held that the contract was maritime. However, he held that claims involving fraud and fraudulent concealment were not maritime because they did not occur on navigable waters. There was a question whether the parties were diverse, but the court had supplemental jurisdiction over the tort claims that let them be brought in the suit in which there was admiralty jurisdiction over the contract warranty claim. Chief Judge Davis then held that Virginia law applied to the warranty claim under the release in accordance with the choice-of-law provision in the release and that Virginia law applied to the tort claims because Virginia had the most substantial relationship to the tort claims. Chief Judge Davis then addressed the merits of the claims for fraud and fraudulent concealment and held that the evidence fell short of fraud. Accordingly, he dismissed the tort claims. What Hurts argued that Volvo Penta made oral warranties that were not included in the release. There was no merger clause in the release, and Chief Judge Davis found sufficient evidence to survive the motion for summary judgment that Volvo Penta had made an oral warranty that the replacement engines would work together on the vessel. Although Volvo Penta argued that What Hurts could not establish its claim for breach of warranty without an expert, Chief Judge Davis did not find any authority that expert testimony was necessary to establish the elements of the warranty. Accordingly, he denied summary judgment to Volvo Penta on the warranty claim except to the extent What Hurts sought recovery of consequential damages, which he found to have been successfully disclaimed in the release under Virginia law.
Passenger who fell on wet area near the water slide on the vessel sufficiently pleaded notice of the dangerous condition to the cruise line with evidence of a cone and warning signs and sufficiently pleaded that the dangerous condition was not open and obvious; Williams v. MSC Cruises, S.A., No. 23-22340, 2024 U.S. Dist. LEXIS 3307 (S.D. Fla. Jan 5, 2024) (Scola).
Sally Williams, a passenger on the SEASIDE, slipped and fell when she stepped down into the area to the left of the water slide on the vessel. She brought this suit against the cruise line in federal court in Florida, asserting five counts of negligence. The cruise line moved to dismiss the complaint on the ground that Willaims failed to plausibly plead notice of the cruise line and that Williams failed to plausibly plead that the condition was not open and obvious with respect to the count of failure to warn. In support of notice, Williams argued that the cruise line had placed warning signs in the area and that there was a yellow “CAUTION” cone in the area as well as signs saying: “CAUTION FLOOR SLIPPERY WHEN WET.” Although the cruise line argued that the signs were insufficient to demonstrate notice of the particular condition, the slippery floor, Judge Scola considered them to suffice, noting that the signs depicted a stick figure slipping and “literally” warned that the floor was slippery when wet. Consequently, Judge Scola declined to dismiss the counts on the grounds that notice was insufficiently alleged. The cruise line argued that the condition was open and obvious because a reasonable person would appreciate “that there may be water at the end of a water slide.” Judge Scola answered that this expectation did not mean that a reasonable person “would have appreciated just how slippery the area was.” It is one thing to expect water on the floor; it is another to appreciate the danger. Therefore, Judge Scola held that Williams plausibly pleaded that the danger was not open and obvious.
After entry of a default judgment in favor of RMK Merrill Stevens on its claim for repairing, painting, and storing the defendant’s vessel in the suit brought in federal court in Florida, Magistrate Judge Reid addressed the plaintiff’s claim for attorney fees. The plaintiff sought fees at hourly rates for 2022 of $625 for senior partners, $475 for partners, $250-$450 for associates, $175 for senior paralegals, and $150 for paralegals. The plaintiff sought fees at hourly rates for 2023 of $625 for senior partners, $500 for partners, $350-$450 for associates, $175-$200 for senior paralegals, and $150 for paralegals. Magistrate Judge Reid agreed, reasoning: “The changing legal landscape in South Florida—along with the Court’s knowledge and experience concerning reasonable attorneys’ fees—warrants a finding that the hourly attorney and paralegal rates here are reasonable.” However, Magistrate Judge Reid did reduce the hours of associates, finding that “the number of hours expended on certain tasks exceeds what is reasonable under the circumstances.”
Court lacked admiralty jurisdiction over action brought by owner of vessel that was hauled out of the water and placed over land for repair; In re Luce, No. 0:22-cv-61379, 2024 U.S. Dist. LEXIS 3713 (S.D. Fla. Jan. 8, 2024) (Singhal).
Burton S. Luce brought the M/V CONCERT GRAND to Playboy Marine Center for a bottom paint job. The vessel was hauled out of the water and put on blocks and jack stands. Randy Mueller, a crew member on the vessel, returned to the vessel to retrieve personal items, and he used a forklift to board the vessel and to leave the vessel. The forklift jolted as it lowered Mueller from the stern, and Mueller fell on the ground. Luce then brought this action in federal court in Florida, seeking exoneration/limitation of liability. Playboy Marine filed a claim in the suit and moved to dismiss the action for lack of subject matter jurisdiction. Luce argued that the vessel satisfied the locality test because of its position with Playboy Marine’s travel lift, about 10 to 15 feet from the haul out slip, where it could be easily returned to the water. Luce also argued that jurisdiction applied to a contract between a vessel owner and repair facility for work on a vessel as long as the vessel was not withdrawn from navigation. As the several steps involved in the paint job would span several days, Judge Singhal concluded that the vessel had been withdrawn from navigation. He also held that it failed to satisfy the locality test because the vessel was not on navigable waters and the injuries to the crew member did not occur on navigable waters (the forklift was fully situated on land) [would the seaman have a claim under the Jones Act for his injury ashore?]. Although Judge Singhal held that the locality test was not satisfied, he also held that the nexus test was not satisfied, reasoning that the vessel posed a minimal threat to maritime commerce when it was withdrawn from navigation and the land-based tort did not have a substantial relationship to traditional maritime activity. As he held that the Limitation Act did not apply in the absence of admiralty jurisdiction, Judge Singhal did not have to address whether the personal contract doctrine applied.
Claim on Marine Cargo Policy for damage in warehouse was maritime, but tort claims were subject to state law, allowing the plaintiff to obtain a jury trial on all claims; Exist, Inc. v. Tokio Marine America Insurance Co., No., 22-cv-1679, 2024 U.S. Dist. LEXIS 4591 (S.D.N.Y. Jan. 9, 2024) (Torres).
Exist purchased a Marine Cargo Policy from Tokio Marine to cover its goods (apparel, sportswear, and textiles) during ocean carriage, domestic inland transit, and storage in specified warehouses. The parties disputed the amount owed under the policy from a flood at one of Exist’s warehouses in Fort Lauderdale, Florida, and Exist brought this suit against Tokio Marine in federal court in New York, asserting claims under the policy as well as extra-contractual claims. Exist brought the suit under the court’s diversity jurisdiction and demanded a jury trial. However, Tokio Marine argued that the court had admiralty jurisdiction and argued that the case should be tried without a jury. The policy contained a choice-of-law provision for maritime law or, in its absence, New York law. Judge Torres began his analysis of whether the claims would be presented to a jury by stating: “Whether a jury trial is proper in the instant case depends on the law that applies to Exist’s claims” [is it the applicable law or the basis pleaded for jurisdiction?]. Judge Torres then considered the contract claims and noted that under Kirby, a contract covering both maritime and non-maritime transit is subject to admiralty jurisdiction as long as the maritime aspect of the contract is not insubstantial. As the contract’s subject matter was primarily on navigable waters, Judge Torres held that the claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment were governed by admiralty law, and did not entitle Exist to a jury trial. However, the tort claims for conversion, fraud, and civil conspiracy did not occur on navigable waters and did not involve a potentially disruptive effect on maritime commerce. Therefore, admiralty law did not apply to the tort claims. As such, Exist was entitled to a jury trial on the tort claims under the Seventh Amendment. Citing Fitzgerald, Judge Torres held that, as the claims all arose from the same set of facts, Exist was entitled to a jury trial on all the claims.
The M/V INTO THE BLUE, owned by Do Young Park, was struck by a wave while on navigable waters near Brooklyn, New York, causing the occupants of the boat to fall to the deck. Jiyhun Lee, a guest on the vessel, brought an action against Park in New York state court, and Park brought this action seeking limitation of liability in federal court in New York. The court’s order required claims to be filed by December 30, 2022, and Park mailed notice to the attorneys for Lee and published notice of the suit in the South Shore Tribune. On March 10, 2023, Lee moved for an extension of time to file an answer and claim in the limitation action, and Park opposed the request on the ground that Lee did not have good cause for the late filing. Magistrate Judge Henry reasoned that the showing of excusable neglect was “quite weak.” Lee claimed that her counsel did not receive a hard copy of the notice by mail because of a “clerical error,” but acknowledged that her counsel did receive an electronic notification from the state court when Park’s attorneys informed the state court about the stay issued by the federal court. Lee’s counsel argued that “the electronic notification was not a formal ‘notice’ that would have alerted him to the filing deadlines.” On the other hand, there was “no demonstrable prejudice to any party” if the court allowed the late filing as no trial was scheduled, discovery had not yet started, and no other claimants had asserted a claim. Finding that permitting the filing of the claim would “serve the ends of justice,” Magistrate Judge Henry recommended that Lee be permitted to file an answer and claim.
Conclusory/boilerplate allegations of notice were not sufficient to establish notice in passenger’s suit against cruise line; Rafie v. NCL (Bahamas) Ltd., No. 23-23972, 2024 U.S. Dist. LEXIS 4909 (S.D. Fla. Jan. 9, 2024) (Scola).
Carole S. Rafie was a passenger on the SPIRIT for a cruise around the South Pacific. She was injured while descending stairs outside the Stardust Theater on the ship. Attributing her fall to the vessel navigating through an area of rough seas or adverse weather, she brought this action against the cruise line in federal court in Florida with a single negligence count. The cruise line moved to dismiss the suit, arguing that Rafie did not allege any facts to establish that the cruise line was on notice of the dangerous condition that caused her fall. Rafie did not respond to the motion, but Judge Scola reviewed the complaint and agreed that it only contained conclusory, boilerplate allegations that the cruise line knew or should have known of the dangerous condition of the stairs when the ship navigated through rough seas/weather. As Rafie did not request leave to amend, Judge Scola dismissed the complaint with prejudice.
Judge declined to grant rehearing in Macondo/DEEPWATER HORIZON opt-out cases where the plaintiffs sought to introduce expert opinions that had been rejected in the other opt-out cases; Collier v. BP Exploration & Production, Inc., Nos. 17-3131, 17-4614, 17-4616, 17-4647, 2024 U.S. Dist. LEXIS 4979 (E.D. La. Jan. 10, 2024) (Vance).
Patrick Collier, Judith Turner, Vickey Michelle Turner, and Reginald Edward Johnson claimed exposure to crude oil and dispersants from the DEEPWATER HORIZON/Macondo spill. These plaintiffs did not timely present the expert reports of Dr. Jerald Cook to support the general causation requirement for their claims. BP moved to exclude Dr. Cook’s opinions and, in the absence of expert evidence of causation, that it should be granted summary judgment. Judge Vance agreed and dismissed these suits. The plaintiffs moved for reconsideration, arguing that the court should reconsider the decision on the submission of the expert opinions. The plaintiffs recognized that timely production of the reports would not change the outcome as Dr. Cook’s opinions had been rejected in the other cases where they were timely filed. As this argument presented no basis for reconsideration, Judge Vance declined to grant reconsideration on this contention. The plaintiffs also argued that the court should consider the affidavit of Dr. Linda Birnbaum even though they did not assert that argument in response to the motion for summary judgment. Noting that other judges had been unmoved by the opinions of Dr. Birnbaum, Judge Vance was likewise unpersuaded, concluding that the affidavit did not constitute new evidence that would justify reconsideration. As nothing cited by the plaintiffs would change the ultimate outcome, Judge Vance denied the motions for reconsideration.
Agreement to lease chassis for inland transportation of containers that arrive at ports by vessel was not a maritime contract that would permit a Rule B attachment; Trend Intermodal Chassis Leasing LLC v. Zariz Transport Inc., No. 3:23-cv-1143, 2024 U.S. Dist. LEXIS 5021 (N.D. Tex. Jan. 10, 2024) (Horan).
Zariz contracts with its customers to provide inland transportation of containers that are offloaded from vessels (Zariz does not unload the containers from the ships). Zariz leases Trend’s intermodal chassis to facilitate the inland transportation. Zariz admitted that it owed more than $500,000 to Trend, and Trend filed this action in federal court in Texas and sought an attachment of Zariz’s accounts with JP Morgan Chase Bank and Kuehne + Nagel. Zariz filed an emergency motion to vacate the attachments, arguing that the court lacked subject matter jurisdiction, and Magistrate Judge Horan began his determination with the requirement that the plaintiff had to have a prima facie maritime claim against the defendant for an attachment. Trend argued that the principal objective of its contract with Zariz was maritime commerce—to transport marine containers that arrive at ports on vessels. Magistrate Judge Horan reviewed the contract and found nothing indicating that the parties agreed (or expected) that a vessel would play a substantial role in the completion of the contract. Magistrate Judge Horan noted that there are cases in which chassis have been considered to be maritime property, but he responded that not all contracts concerning chassis are maritime contracts. He concluded that the lease agreement was not maritime, that the court lacked subject matter jurisdiction, and that the attachments should be vacated. He also declined to stay his ruling pending appeal, stating that he was unwilling to continue holding the garnishee’s money when he did not believe there was a likelihood of success on appeal.
Passenger’s identification of similar accidents was sufficient to plead notice to defeat the cruise line’s motion to dismiss; passenger’s allegations of negligent training and negligent design defeated the cruise line’s motion to dismiss, but the passenger had to replead the allegation of negligent supervision; Spotts v. Carnival Corp., No. 23-cv-22906, 2024 U.S. Dist. LEXIS 5126 (S.D. Fla. Jan. 10, 2024) (Altman).
Donal Spotts was injured when he slipped and fell in a large puddle of water on the Lido Deck of the CARNIVAL PRIDE. He brought this suit against the cruise line in federal court in Florida, asserting counts for negligent maintenance, negligent failure to warn, negligent training, negligent supervision, and negligent design. The cruise line filed a motion to dismiss all of the counts, and Judge Altman began with the argument that Spotts failed to allege actual or constructive notice with sufficient particularity. Spotts pleaded that the cruise line had identified more than 40 prior instances of a passenger slipping on the wet floor of the Lido Deck, with more than half of those occurring on the CARNIVAL PRIDE. The cruise line argued that Spotts did not provide enough information to analyze whether the incidents met the requisite substantial similarity doctrine and that the incidents were too remote in time. Judge Altman disagreed, answering that the allegations were sufficient at the motion to dismiss stage of the pleadings to plausibly allege notice to the cruise line. With respect to negligent training, Spotts alleged a duty of care to train crew members to inspect, clean, dry, and warn passengers about dangerous conditions, that the cruise line trains its crew to inspect and maintain the decks in a clean and dry condition and to warn of wet conditions, and that the cruise line failed to comply with its duties because, had the cruise line fulfilled its duties, the dangerous condition would not have existed or there would have been warnings. Judge Altman considered these allegations to state a claim for negligent training. Judge Altman did not find the negligent supervision allegations to be sufficient because they simply alleged the negligent acts of the crew and that the cruise line failed to supervise the crew. As Spotts did not allege that the cruise line knew or should have known that the crew were unfit or that it failed to investigate or take corrective action, Judge Altman held that Spotts would have to replead his claim for negligent supervision. The cruise line challenged the pleading that the cruise line was negligent in approving, designing, constructing, or selecting the flooring for the Lido Deck. Spotts pleaded that the ship was constructed to the cruise line’s specifications, that the cruise line participated in the approval of the selection and installation of the flooring, that the cruise line had the right to approve or reject the flooring, and that the cruise line should have known that the flooring it chose and installed was unreasonably dangerous. Judge Altman believed that “Spotts has done just enough to state a claim for negligent design” with his claim that the cruise line participated in or approved of the design of the area. Finally, the cruise line argued that the complaint was an impermissible shotgun pleading because it contained an introductory description of the incident followed by five negligence counts that adopted and realleged the facts in the description of the incident. Judge Altman rejected the cruise line’s claim, as the five negligence counts were separately pleaded without comingling and without committing “the sin of not separating into a different count each cause of action or claim for relief.”
Intervention of insurer for seaman’s employer (seeking to recover maintenance and cure payments) in suit against employer and third-party contractor was denied as untimely; Ayala v. Work Boat Electrical Services, L.L.C., No. 22-1235, 2024 U.S. Dist. LEXIS 6548 (E.D. La. Jan. 12, 2024) (van Meerveld).
The OPR VESSEL, owned by 4Ocean, is a repurposed offshore supply vessel used to remove plastic and other debris from the ocean. 4Ocean contracted with Work Boat Electrical Services to install a 208-volt circuit to a davit arm while the vessel was docked at Superior Shipyard in Golden Meadow, Louisiana. Durby Stevens Stanley Ayala, a deckhand employed by 4Ocean, was assisting the captain in placing a new small boat in a cradle on the second deck of the OPR VESSEL using a newly installed electric hydraulic boat davit. The electrical box on the davit exploded, injuring Ayala. The investigation report concluded that the explosion was likely caused by the continuous overcharging of the battery by the power supply, producing oxygen and hydrogen. A spark ignited the hydrogen gas. Ayala brought this suit against 4Ocean and Work Boat Electrical in federal court in Louisiana, and Ayala filed a motion for partial summary judgment that the OPR VESSEL was unseaworthy as a matter of law and that he was not comparatively at fault. He argued that the ship was unseaworthy based on the evidence that the electrical box exploded and that the cause of the explosion was immaterial to the unseaworthiness. 4Ocean did not contend that the vessel was not unseaworthy and instead argued that it should receive indemnity from Work Boat Electrical because it manufactured and installed the unseaworthy control box. As it was undisputed that a component of the OPR VESSEL exploded and caused Ayala’s injury, Judge Barbier agreed that the cause of the explosion was immaterial to the determination of whether the vessel was unseaworthy, and he granted summary judgment that the vessel was unseaworthy. As to comparative negligence, the captain testified that Ayala was not doing anything wrong, and 4Ocean pointed to no evidence of comparative fault. Accordingly, Judge Barbier granted summary judgment that Ayala was not negligent. See January 2024 Update.
The case was set for trial on January 22, 2024, and on December 6, 2023, Markel American Insurance Co., insurer for 4 Ocean, sought to intervene in the case to seek reimbursement of the maintenance and cure payments it had made to and on behalf of Ayala. Later in December, the court continued the trial setting in the case due to the unexpected death of the Ayala and the liability expert for 4Ocean, resetting the date for trial to April 18, 2024. Magistrate Judge van Meerveld then addressed the request of Markel to intervene. She noted that the parties agreed that Markel had an interest that would permit it to intervene. However, she found that the motion was “objectively late.” She noted that Markel had been paying for maintenance and cure since August 2019, yet it only sought to intervene in the suit (filed in May 2022) a month before the scheduled trial in January 2024. She added that Markel had offered no explanation why it waited so long to assert its claim against Work Boat Electrical, and she found that the late intervention would be prejudicial to that defendant. Finally, she found that Markel would suffer no prejudice because it could bring a separate suit against Work Boat Electrical to recover the maintenance and cure. Consequently, she denied Markel’s motion to intervene.
From the state courts
Foreign insurer’s hiring of investigator to take EUO of beneficial owner of BVI company who moved to Florida after yacht fire in the BVI did not subject the insurer to personal jurisdiction in Florida; Promenade Charters V.I., Ltd. v. Caribbean Insurers Marine Ltd., No. 3D22-1324, 2024 Fla App. LEXIS 69 (Fla. App. 3d Dist. Jan. 3, 2024) (Lindsey).
Promenade Charters is a British Virgin Islands entity that owned a yacht in the British Virgin Islands. The yacht was insured by Caribbean Alliance Insurance, an insurer incorporated in Antigua and Barbuda. The yacht was damaged by a fire in the British Virgin Islands, and Promenade Charters made a claim for the full limit of coverage. The insurer responded with a request for an examination under oath of Promenade Charters’ beneficial owner, Kenneth Webb, who moved to Florida within a week of the fire. The insurer engaged Nautilus Investigations to conduct the examination in Florida. Following the examination, Promenade Charters brought this suit against the insurer in state court in Miami-Dade County, Florida, asserting that the insurer was licensed to do business in Florida and that it conducted continuing and systematic business in Miami-Dade County. The complaint also alleged that the insurer conducted business in Florida through its agent, Nautilus Investigations. The insurer moved to dismiss the claim for lack of personal jurisdiction, and Judge Walsh held a limited evidentiary hearing at which the insurer’s representative testified that the insurer was a foreign entity that did not conduct business in Florida, that Nautilus was only hired to receive the statement from Webb, and that this was the first and only time the insurer had ever hired Nautilus. Judge Walsh dismissed the suit, and Promenade Charters appealed. Promenade Charters argued that Nautilus had full authority to adjust and settle the claim, but there was no evidence from Nautilus or the insurer to support that proposition. Promenade Charters also argued that the policy was a contract requiring performance in part in Florida because the insurer failed to pay Webb in Florida where he had moved. However, the policy was silent as to the place of payment, and the appellate court agreed that its language of the policy did not require performance in Florida. Consequently, the Florida appellate court affirmed the dismissal of the suit for lack of personal jurisdiction.
Judge denied motions to dismiss for lack of personal jurisdiction and for summary judgment on the merits by officer of vessel owner who was sued in New York involving a claim that arose in Brazil; Great Lakes Insurance SE v. American Steamship Owners Mutual Protection and Indemnity Association Inc., No. 157295/2021, 2024 N.Y. Misc. LEXIS 181 (N.Y. Cty. Sup. Jan. 12, 2024) (Crane).
The American Club insured the M/V ADAMASTOS, registered to Adamastos Shipping, an entity allegedly owned and controlled by George and Efstathios Gourdomichalis, who were also officers in Phoenix Shipping and Trading, which managed and operated the vessel. Great Lakes brought this suit in New York state court, alleging that Great Lakes also issued policies insuring the vessel and that the American Club, Shipowners Claims Bureau, Adamastos Shipping, Phoenix Shipping, and George and Efstathios Gourdomichalis negligently failed to comply with the requirements of a terminal in Brazil where the vessel was to be loaded (requiring that the vessel be detained in Brazil). Great Lakes also alleged that the defendants conspired to abandon the vessel in Brazil so that the defendants could avoid millions of dollars in claims resulting from the failure of the vessel to complete the voyage. Great Lakes also argued that the defendants then wrongfully terminated the vessel’s coverage with the American Club, leaving Great Lakes with the liability for all claims. As the American Club transferred the handling of the matter to its New York office, and as communications among the defendants about the matter were with the New York office, the appellate court held that the allegations were sufficient to establish personal jurisdiction over the defendants in New York. The court also held that Great Lakes stated a cause of action for negligence against the Gourdomichalis defendants by alleging that they had a duty to ensure that the vessel was seaworthy and breached that duty, and the claim was timely because the three-year statute of limitations was equitably tolled because of the allegation that the defendants concealed the scheme and failed to notify Great Lakes of the incident. However, the appellate court held that Great Lakes did not state a negligence cause of action against the American Club and Shipowners Claims Bureau, finding no duty under the insurance contract (although the lower court permitted Great Lakes to replead its claims based on fraud). See May 2023 Update.
The vessel was chartered by Pacific Gulf from Adamastos Shipping, and Pacific Gulf sub-chartered the vessel to Integris, which sub-charted the vessel to Marubeni, which arranged for a cargo of soybeans to be transported by the vessel. Marubeni filed a cargo claim for $32,650,000 against Integris, and Integris commenced an arbitration against Pacific Gulf, which commenced an arbitration against Adamastos Shipping. An arbitrator found that Adamastos Shipping must indemnify Pacific Gulf for its losses, and Marubeni settled its arbitration for $18 million. Great Lakes Insurance, on its behalf (it funded the settlement pursuant to its charterer’s liability insurance for Integris) and as subrogee of Pacific Gulf asserted a negligence claim against the defendants. George Gourdomichalis moved to dismiss the complaint against him for lack of personal jurisdiction, and Judge Crane noted that Great Lakes, as plaintiff, had the ultimate burden of proving personal jurisdiction. However, George had the initial burden to establish a prima facie case that he was not subject to jurisdiction, and he did not proffer admissible evidence to do so. Judge Crane found that the record established that George procured the vessel’s insurance policy from the American Club on behalf of Phoenix and Adamastos and corresponded with the American Club and Shipowners Claims Bureau in New York in connection with the events in Brazil. There was also evidence that George had meetings in New York as a board member of the American Club. Therefore, she declined to dismiss the case against George for lack of personal jurisdiction. Judge Crane then considered George’s motion for summary judgment that he owed no duty, there was no breach, that the plaintiff’s claim was barred by the economic loss rule, and the claim was time barred. The evidence established that Adamastos Shipping, not George, owned the vessel, that Phoenix Shipping managed the vessel, and that Phoenix procured the insurance policy with the American Club. However, George did not produce admissible evidence to establish that, as a corporate officer, he was not personally liable for his participation in the alleged commission of the tort by the corporation. As to the economic loss rule, Judge Crane held that it did not apply in this context, citing a New York case for the proposition that the economic loss rule does not apply beyond the context of products liability. Accordingly, the complaint against George was severed, and Judge Crane held that it would continue to trial.
Kenneth G. Engerrand
President, Brown Sims, P.C.
1990 Post Oak Blvd
Houston, TX 77056
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New Orleans, LA 70130
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Gulfport, MS 39507
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To the extent the [first amended complaint] alleges that the Court’s jurisdiction is under 28 U.S.C. § 1333, which governs admiralty and maritime cases, that is incorrect because this case has nothing to do with admiralty or maritime issues. The contract in question involved the purchase and sale of marijuana within the state of California and did not involve, for example, navigable waters, ships, or seafaring.
Kornea v. Miller, No. 22-cv-4454, 2023 U.S. Dist. LEXIS 223949, *22 (S.D.N.Y. Dec. 14, 2023) (Parker).
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© Kenneth G. Engerrand, January 31, 2024; redistribution permitted with proper attribution.