November 2024 Longshore/Maritime Update

October 31
2024


November 2024 Longshore/Maritime Update (No. 306)

Notes from your Updater:

In our September 2024 Update we discussed the decision of the Seventh Circuit in In re Lion Air Flight JT 610 Crash Appeal of Laura Smith, holding that the Death on the High Seas Act, not state law, provided the remedy for the beneficiaries of passengers who died in the crash of Lion Air Flight JT 610 into the Java Sea and that the beneficiaries were not entitled to a jury trial in federal court. On September 10, 2024, the Seventh Circuit declined to grant rehearing or rehearing en banc. See In re Lion Air Flight JT 610 Crash Appeal of Terrence Buehler, No. 23-2359, 2024 U.S. App. LEXIS 23032 (7th Cir., Sept. 10, 2024); In re Lion Air Flight JT 610 Crash Appeal of Laura Smith, No. 23-2358, 2024 U.S. App. LEXIS 23057 (7th Cir. Sept. 10, 2024).

In our July 2023 Update we reported that Judge Block of the United States District Court for the Eastern District of New York addressed the request by Simon Kinsella, a resident of the Wainscott hamlet of the Town of East Hampton, New York, for a preliminary injunction to halt construction of the South Fork Wind Farm, located 35 miles east of Montauk Point, Long Island, and the cables that export the energy produced by the windmills to the onshore electric grid in East Hampton (the offshore cables would involve seafloor construction in an area known for Atlantic cod spawning, and the onshore cables would run through trenches where the groundwater was contaminated with perfluoroalkyl and polyfluoroalkyl substances). Kinsella brought suit in federal court in New York against the Bureau of Ocean Energy Management and the Department of Interior, seeking to bar the construction of the project. The farm’s developer, South Fork Wind, intervened as a defendant. Kinsella objected to the approval of the project by the Bureau of Ocean Energy Management, arguing that the project would result in irreparable harm to the drinking water near the onshore portion of the project and would harm the Atlantic cod population near the offshore portion of the project. Finding that Kinsella had not established irreparable harm, Judge Block denied the request for a preliminary injunction. See Kinsella v. Bureau of Ocean Energy Management, No. 23-cv-2915, 2023 U.S. Dist. LEXIS 87437 (E.D.N.Y. May 18, 2023). On September 23, 2024, Judge Block dismissed the suit, holding that Kinsella lacked standing to pursue his claims against the federal defendants and failed to state a claim against the wind farm’s developer. See Kinsella v. Bureau of Ocean Energy Management, No. 23-cv-2915, 2024 U.S. Dist. LEXIS 171497 (E.D.N.Y. Sept. 23, 2024).

On September 30, 2024, Nancy J. Griswold, Acting Director for the Division of Federal Employees’, Longshore and Harbor Workers Compensation, issued FECA Bulletin No. 24-06:

FECA BULLETIN NO. 24-06

September 30, 2024

Subject: Alternative Streamlined Process for Carrier Submission of Proposed Initial Decisions in Cases under the War Hazards Compensation Act (WHCA)

Purpose: To assist in timely issuing WHCA claim decisions, the Office of Workers’ Compensation Programs (OWCP) will permit insurance carriers to voluntarily submit proposed claim decisions that OWCP claims examiners (CE) may adopt and approve where all of the required legal elements of the claim have been satisfied.

Background: The WHCA affords coverage for the injury/death of an employee within the meaning of the Defense Base Act, if the injury or death proximately results from a war risk hazard as defined by the WHCA.

Under Section 104 of the WHCA, private insurance carriers or self-insured employers may seek reimbursement for payments made in conjunctions with a WHCA-covered injury. 20 CFR 61.100 states “The Office shall reimburse any carrier that pays benefits under the Defense Base Act or other applicable workers’ compensation law due to the injury, disability or death of any person specified in Sec. 61.1(a), if the injury or death for which the benefits are paid arose from a war-risk hazard. The amount to be reimbursed includes disability and death payments, funeral and burial expenses, medical expenses, and the reasonable and necessary claims expense incurred in processing the request.”

The Office of Workers’ Compensation Programs, Division of Federal Employees’, Longshore, and Harbor Workers’ Compensation (DFELHWC), administers cases and claims under the WHCA. DFELHWC claims staff review claims and make determinations regarding whether a claimed injury is covered under the WHCA, and then whether any payments are reimbursable. If a claim is accepted, claims staff issue letters notifying the claimant, generally a private insurance carrier and their representatives, that DFELHWC has found an injury to be covered under the WHCA (for convenience, WHCA claimants for reimbursement will be referred to as carriers in the remainder of this bulletin). Then, claims staff issue a subsequent letter outlining which claimed payments are approved for reimbursement, and which are not approved. If a case is denied, claims staff issue formal decisions with appeal rights explaining that decision.

In examining how to make WHCA case processing more efficient, DFELHWC has developed a streamlined acceptance letter process, utilizing proposed acceptance decisions that will be drafted by carriers. These are documents similar to a legal brief setting forth the specific facts and application of law to those facts that the carrier believes warrants a favorable decision. They are presented to OWCP for consideration, and, where appropriate, may be adopted by OWCP as the basis for approving a claim.

Actions:

  1. Upon initial submission of Form CA-278, Claim for Reimbursement of Benefit Payments and Claims Expense under the War Hazards Compensation Act, an insurance carrier may in its discretion submit a proposed acceptance decision together with the claim form.
  2. If the carrier chooses to submit a proposed acceptance decision, it must be in the format as provided in the attachment to this Bulletin.
  3. Upon receipt of a new Form CA-278 and properly formatted proposed acceptance decision, the CE will review the evidence submitted to verify the information in the proposed acceptance and ensure that all evidentiary requirements are met to approve the claim.
  4. If the claim is approvable and the carrier’s proposed acceptance decision accurately reflects the facts and law of the claim, the CE may issue an approval letter adopting the proposed decision as the basis for the claim determination.
  5. If the claim is approvable but the CE disagrees with all or part of the carrier’s reasoning in the proposed acceptance decision, the CE should modify the proposed acceptance decision to reflect the relevant facts and law more accurately or draft a new decision approving the claim.
  6. If the claim is not approvable, the CE should develop the case per established protocols, developing the claim as needed or denying it if a denial is warranted.

Disposition: This Bulletin is to be retained until otherwise revised or incorporated into Part 4 of the FECA Procedure Manual.

NANCY J. GRISWOLD
Acting Director for
Division of Federal Employees’, Longshore and Harbor Workers’ Compensation

A Sample Proposed Acceptance Decision was attached to Bulletin 24-06 and is available at FECA Bulletins (2020-2024) | U.S. Department of Labor (dol.gov).

On September 30, 2024, Judge Evanson of the United States District Court for the Western District of Washington agreed with groups challenging the Nationwide Permit issued by the Army Corps of Engineers authorizing installation of structures to be used in finfish aquaculture operations, concluding that the permit failed to comply with the obligations of the Corps under the Rivers and Harbors Act of 1899 and the National Environmental Policy Act. See Don’t Cage our Oceans v. U.S. Army Corps of Engineers, No. 22-cv-1627, 2024 U.S. Dist. LEXIS 177843 (W.D. Wash. Sept. 30, 2024).

On October 1, 2024, Magistrate Judge Faruqui of the United States District Court for the District of Columbia, recommended denial of the motion to dismiss filed by Swiss resident Vladislav Osipov, who is charged by the United States with several crimes in connection with alleged efforts to avoid sanctions involving the luxury yacht TANGO owned by Russian Victor Vekselberg. Magistrate Judge Faruqui invoked the fugitive disentitlement doctrine to insist that Osipov appear in the proceeding before being allowed to raise defenses in a motion to dismiss (describing Osipov as a fugitive who is “trying to have his cake and eat it too” with his moving to dismiss the charges “from the comfort of his residence in Switzerland”). See United States v. Osipov, No. 1:22-cr-369, 2024 U.S. Dist. LEXIS 181957 (D.D.C. Oct. 1, 2024). Osipov filed a timely objection.

On October 8, 2024, the Fifth Circuit held that a party that orders taxable articles to be shipped to the United States for resale but is otherwise uninvolved in the importation process is an importer (deriving almost all of the benefits of importation) for purposes of the obligation to pay excise tax under the Internal Revenue Code. See Texas Truck Parts & Tire, Inc. v. United States, No. 23-20588, 2024 U.S. App. LEXIS 25395 (5th Cir. Oct. 8, 2024) (Douglas).

Fane Lozman’s long-running disputes with the City of Riviera Beach, Florida continue after he twice defeated the City in the United States Supreme Court (including the 2013 decision that resulted in Justice Breyer’s definition for a vessel, “a reasonable observer, looking to the [structure’s] physical characteristics and activities, would consider it designed to a practical degree for carrying people or things over water”). Lozman’s latest appeal to the Eleventh Circuit, in which he challenges the city’s development plan as a taking of his property, resulted in dismissal of the suit for lack of subject matter jurisdiction as it was not ripe for judicial review. See Lozman v. City of Riviera Beach, Florida, No. 23-11119, 2024 U.S. App. LEXIS 26114 (11th Cir. Oct. 16, 2024) (Pryor).

As we noted in our April 2022 and June 2022 Updates, Judge Bloom of the Southern District of Florida held that four cruise lines violated the Helms-Burton Act (unlawfully trafficking in property confiscated by the Cuban Government) when they used the Havana Cruise Port Terminal. Havana Docks Corp. v. Carnival Corp., Nos. 19-cv-21724, 19-cv-23588, 19-23590, 19-cv-23591 (S.D. Fla. Mar. 21, 2022). The cruise lines moved to certify her order for an interlocutory appeal, but, on May 13, 2022, Judge Bloom declined the request. On December 30, 2022, Judge Bloom signed final judgments against MSC Cruises, Royal Caribbean Cruises, and Norwegian Cruise Line, each in the amount of $109,848,747.87 in treble damages (including interest) plus attorney fees and costs, and a final judgment against Carnival Corp. in the amount of $109,671,180.90 in treble damages (including interest) plus attorney fees and costs. (S.D. Fla. Dec. 30, 2022). On October 22, 2024, the Eleventh Circuit held that Havana Docks’ limited property interest had expired at the time of the alleged trafficking by the cruise lines and reversed the judgments against the cruise lines. See Havana Docks Corp. v. Royal Caribbean Cruises, Ltd., Nos. 23-10151, 10171, 2024 U.S. App. LEXIS 26649 (11th Cir. Oct. 22, 2024) (Jordan).

On October 28, 2024, Judge Kearney of the United States District Court for the Eastern District of Pennsylvania agreed with the Philadelphia Port Authority and two other upriver ports and vacated the permit granted by the Corps of Engineers for Diamond State Port Corp.’s new port on the Delaware River at Edgemoor, Delaware, downriver from Philadelphia. See Greenwich Terminals LLC v. United States Army Corps of Engineers, Nos. 23-cv-4283, 24-cv-1008, 2024 U.S. Dist. LEXIS 195510 (E.D. Pa. Oct. 28, 2024).

On the LHWCA Front . . .

From the federal district courts

Shipyard, whose employee was injured while engaged in rescue efforts of passengers on Museum boat who fell into the water from the Museum’s boat, did not owe a duty to the Museum in connection with the Museum’s third-party claim against the shipyard in the suit by the injured worker against the Museum; however, the Judge allowed the Museum’s claim for common-law indemnity against the shipyard to proceed along with its contribution claim; In re Maine Maritime Museum, No. 2:21-cv-238, 2024 U.S. Dist. LEXIS 176539 (D. Me. Sept. 30, 2023) (Torresen).

Opinion

Maine Maritime Museum filed a limitation action in federal court in Maine after the knock-down of its SCHOONER MARY E while the vessel was carrying passengers on a Kennebec River cruise that set out from Bath, Maine. Three individuals filed claims in the limitation action, and each settled with Maine Maritime Museum. After the time passed for the filing of additional claims, the Museum filed a motion for default and for a decree of exoneration as to all non-appearing claimants. Judge Torresen held that the complaint did not plead sufficient facts to support a decree of exoneration, even if all of the facts were accepted as true (thin on facts and heavy on legal conclusions). Consequently, she declined to hold that the Museum should be exonerated. For the same reason, she declined to find that the Museum had established that it was without privity or knowledge and entitled to limitation of liability. See August 2022 Update.

A few months later, with the understanding that the Museum had mailed notice to known potential claimants, Judge Torresen granted the Museum’s motion for entry of default judgment and exoneration against claimants who had not timely brought claims. Three months later, James Dotson filed a motion for relief from the judgment of default and exoneration, arguing that he was an employee of a company that was involved in the rescue effort (Bath Iron Works) and that he was injured during the rescue. He claimed that he did not receive any mailed notice and that he did not see the printed notice in the Portland Press Herald as he lives an hour away from Portland in Boothbay, Maine. He alleged that he received notice by reading about settlements on Facebook. The Museum objected that Dotson did not have standing to file the motion because he was not a party to the action, but Judge Torresen disagreed, citing a decision from the Fifth Circuit that persons who “could have been parties to the action” have standing to file a Rule 60 motion. She then addressed the merits of the motion and the Museum’s argument that it was only required by Supplemental Rule F to mail a copy of the notice to every person known to have made a claim against the vessel. However, in this case, Judge Torresen had ordered the Museum to do more than what is required by Rule F. Before she would enter a default and exoneration, she ordered the Museum to mail notice to “all known potential claimants.” As the Museum was aware of Bath Iron Works’ involvement in the rescue, Judge Torresen believed that it was “extremely unlikely” that first responders like Dotson “were not known potential claimants.” In weighing the equities, Judge Torresen noted that the Limitation Act “has been roundly criticized,” and she added: “I am aware of no other area of the law wherein a potential tortfeasor can race into court to force the people it may have injured to file their claims within months of an incident upon pain of losing all right to do so.” Finding it “particularly disturbing” that the Museum would fight to preclude the claim of a rescuer for its vessel, Judge Torresen granted Dotson’s motion for relief from the judgment. See April 2023 Update.

The Museum moved for reconsideration of the order granting relief to Dotson and, alternatively, asked the Judge to certify the order for an interlocutory appeal. The Museum obtained medical records reflected that Dotson had obtained counsel earlier than previously disclosed, which went to the question of whether Dotson was diligent in preserving his claims. Judge Torresen answered that it did not matter whether counsel was engaged a few weeks earlier because that fact would not change the conclusion that the Museum had failed to comply with the order to provide mailed notice to all known potential claimants (which would include Dotson). In any event, the few weeks were not so significant as to justify the extraordinary remedy of reconsideration. Turning to the certification issue, Judge Torresen agreed that there were two controlling questions of law, whether Dotson had standing to bring a motion for reconsideration and whether the Museum was required to issue direct notice to Dotson. Additionally, the appeal, if successful, would advance the ultimate termination of the case because the case would be over. Judge Torresen did not believe that there was a substantial ground for difference of opinion on the issue of standing, and she responded that the Museum was missing the point on the requirement that the Museum notify Dotson. She reasoned that the issue was never whether Dotson was entitled to direct notice under Rule F (4). Instead, the issue was whether Dotson was entitled to direct notice pursuant to the order issued by the court. Accordingly, Judge Torresen did not consider this case to present the exceptional case where an immediate appeal was necessary, and she declined to certify the case for an interlocutory appeal. See June 2023 Update.

The Museum filed a third-party complaint against Bath Iron Works (a full-service shipyard), asserting that Dotson was employed by the shipyard and was aboard the patrol vessel SEA ARK 1 when he was injured rescuing passengers of the MARY E. The Museum brought seven counts, maritime negligence, breach of statutory duty, breach of duty as a Jones Act employer, breach of duty as an LHWCA employer, implied contractual indemnification, and contribution. The Museum argued that the SEA ARK 1 was not equipped with an appropriate boarding ladder (or other means to bring people aboard from the water), that its freeboard was too high, and that it had a configuration of hull and rails that prevented safe boarding from the water. Bath moved to dismiss the claims for failure to state a claim, and Judge Torresen addressed each of the claims. With respect to negligence, she explained that a Good Samaritan has a duty of care to the rescued party only if it put the party in a worse position or if the rescued party lost the chance to have someone else conduct the rescue in reliance on the efforts of the Good Samaritan, which were not alleged by the Museum. And, even if Bath owed a duty, the Museum did not allege any recoverable damages as Dotson’s injuries were not injuries sustained by the Museum, and the Museum is not entitled to attorney fees under the American Rule applicable in maritime cases. For the statutory breach, the Museum alleged that Bath had a duty to render assistance under 46 U.S.C. Section 2304(a) (the master shall render assistance to an individual found at sea in danger of being lost). The parties argued about the application of the statute, but Judge Torresen noted that neither party addressed “the most glaring problem” with the claim—the statute is a criminal statute that does not provide for a private right of action in a civil case. Moreover, even if breach of the statute did give rise to a cause of action in tort, Judge Torresen believed that the contours of the duty would be established by the Good Samaritan doctrine that afforded no cause of action. As for the claims that Bath breached its duties as a Jones Act or LHWCA employer, Judge Torresen held that the Museum was outside the employer-employee relationship with Bath, so the Museum had no right to recover based on the Jones Act or LHWCA. Judge Torresen rejected the claim for implied contractual indemnity because there was no contractual relationship between Bath and the Museum. The Museum argued that a special relationship arose between the parties when Bath undertook to provide rescue marine rescue services, but Judge Torresen could find no case that a rescuer entered into an implied agreement with the vessel owner whose vessel put an individual in the water. However, Judge Torresen was not prepared at the motion-to-dismiss stage to dismiss a common-law indemnity claim when there was also a contribution claim pending that would involve the same factual development. Therefore, she allowed the claim for common-law indemnity to proceed.

And on the maritime front . . .

From the United States Supreme Court

Supreme Court declined to address duty of towed vessel when facing a force majeure event (hurricane) or whether parole evidence could be used to alter the terms of a written contract; Paragon Asset Co. v. American Steamship Owners Mutual Protection and Indemnity Association, Inc., No. 24-223, 2024 U.S. LEXIS 4294 (U.S. Oct. 14, 2024).

Opinion [Fifth Circuit]

When Hurricane Harvey made landfall near Corpus Christi, Texas as a Category 4 hurricane, the drillship DPDS1 was docked with two tugs helping to keep the drillship in place. Nonetheless, the drillship broke free from its moorings, propelling the two tugs (ENTERPRISE and ARCTURUS) into adjacent semisubmersible rigs (owned by Noble) damaging the rigs, sinking one tug, and damaging the other. The drillship grounded in the ship channel, and the tug CONSTELLATION was assigned to assist the drillship. Later, when the hurricane came back ashore, the drillship refloated and allided with a research pier. The owners of the drillship and tugs brought limitation actions, and claims and counterclaims were filed in the limitation action. A question arose in the limitation action brought by Paragon whether limitation was proper with respect to the drillship DPDS1. Before the storm, Paragon had moved the DPDS1 to Port Arthur, Texas, removing two of its thrusters before the voyage. The drillship was cold stacked with no maintenance and no running equipment, and it deteriorated accordingly. When the dock in Port Arthur was no longer available, the DPDS1 was towed to the Gulf Copper dock near Corpus Christi in May 2017. Paragon was unable to find a buyer for the drillship, and it appeared likely that the drillship would have to be scrapped. Nonetheless, the drillship remained fully outfitted with cranes, winches, electrical generators, and navigational lights, and a two-person maintenance crew stayed aboard to secure the craft and monitor its equipment. As Hurricane Harvey approached Corpus Christi in 2017, Paragon sought to tow the drillship offshore and obtained certification of its seaworthiness from a surveyor. However, the DPDS1 was at the dock when the Hurricane struck. The DPDS1 remained afloat after the storm and was towed back to the Gulf Copper dock and then to Brownsville, Texas, where it was scrapped. Paragon filed a motion for partial summary judgment, seeking a ruling that the DPDS1 was a vessel for purposes of the Shipowners’ Limitation of Liability Act. Judge Rodriguez agreed with Paragon, reasoning that the craft was capable of carrying things or people over water and that a reasonable observer would conclude that it was a vessel based on its physical characteristics and activities. Although the claimants in the limitation action cited Paragon’s intent to scrap the vessel, Judge Rodriguez noted the recent Fifth Circuit decision in Southern Recycling (see January 2021 Update), in which the owner transported a barge to a shipyard to be scrapped. The barge lost status as a vessel when the contractor cut gaping holes in the bow that prevented the barge from transporting people or property. As the DPDS1 still appeared to a reasonable observer to be capable of serving as a vessel, Judge Rodriguez held that it was a vessel subject to limitation of liability. See March 2021 Update.

Judge Rodriguez held a bench trial and noted that there were two discrete events for which liability had to be apportioned, the initial breakaway of the drillship and the damages incurred from that breakaway, and the subsequent refloating and allision with the research pier. Judge Rodriguez held that Paragon was solely at fault for the initial breakaway and the damages resulting from that breakaway; however, he allocated fault for the refloating and damage to the research pier at 50% for Paragon and 50% for Signet, owner of the CONSTELLATION. Signet and Paragon disputed whether a master charter agreement or Signet’s tariff provided for the allocation of responsibility between the parties. There was a dispute in the testimony whether the hiring of the tugs was pursuant to the master charter agreement, and Judge Rodriguez resolved the dispute by concluding that Signet did not agree that the master charter agreement would govern the work. As to the tariff, Judge Rodriguez found an oral agreement that Signet would work under the terms of the tariff, and he agreed that the oral agreement was valid under the general maritime law. Paragon raised defenses to application of the tariff, including that the tariff did not cover services to vessels that are aground or in distress. However, Judge Rodriguez held that a party may waive a provision in a contract intended for that party’s benefit and that Signet did that in this case. Paragon also argued that the tariff could not govern because it was a contract of duress or of adhesion, but Judge Rodriguez did not find either defense applicable, and he also concluded that Paragon’s conduct had ratified the agreement to work under the tariff. Accordingly, liability between Paragon and Signet was allocated in accordance with the provisions of the tariff. See May 2022 Update.

Judge Rodriguez then issued a lengthy opinion, reiterating his findings of fault, denying limitation for Paragon because its managing agents had privity with the design of the mooring system and with Paragon’s decision regarding evacuation, assessing damages, and applying the tariff to the damages. Signet sought damages for the constructive total loss of the ENTERPRISE, and Judge Rodriguez awarded $1,735,607.78 for wreck removal, $41,412.17 for surveyor expenses, and $3,600,000 for the damage to the vessel (fair market value before the accident minus salvage value). Judge Rodriguez denied recovery for loss of charter hire under the established rule that the owner is not compensated for loss of use in the case of a total loss. With respect to the ARCTURUS, which was not a constructive total loss, Judge Rodriguez awarded $1,517,311.08 in repair costs, $37,055.74 in salvage expenses, and $54,225.74 in surveyor fees. Judge Rodriguez rejected Signet’s claim for profits from lost charter hire, reasoning that the evidence supported the conclusion that any profits would have been significantly lower and may have been fully elusive in the dampened market after Hurricane Harvey. Under the tariff, Judge Rodriguez held that Signet was entitled to contractual indemnity from Paragon for damage to the Noble semisubmersible rigs and awarded judgment to Signet for its $875,000 settlement for the Noble rigs. As the tariff provided for indemnity proportionate to fault, as Signet and Paragon both settled with the University of Texas for the damage to its research pier, and as the parties agreed that their settlements did not reflect liability beyond 50% of the damage to the pier, Judge Rodriguez held that neither party was responsible to indemnify the other with respect to the damage claim presented by the University of Texas. Although Signet requested pre-judgment interest at an initial rate of 5% to 6% and a rate of 17.5% after mid-2019, Judge Rodriguez considered that rate to be excessive and awarded pre-judgment interest at 4%. See September 2022 Update.

Signet then sought recovery of attorney fees, expenses, and costs from Paragon in connection with the Noble and Paragon claims and costs in connection with the Signet claim. Signet argued that, with respect to the Noble claim, that it was the prevailing party as Judge Rodriguez held that Paragon was 100% responsible for the allision of the Signet tugs with Noble’s rigs and the tariff required that Paragon indemnify Signet to the extent of Paragon’s negligence. Additionally, the tariff provided for recovery of attorney fees, expenses, and costs by the prevailing party. Although Paragon argued that Signet could only recover amounts incurred after the entry of judgment (which made it the “prevailing party”), Judge Rodriguez agreed with Signet that the natural construction of the provisions allowed Signet to recover the fees, expenses and costs for litigating the claim. With respect to Signet’s fees, expenses, and costs for defending against Paragon’s claim for damages to the drillship, Paragon argued that Signet did not recover indemnity from Paragon so as to invoke the indemnity clause. Judge Rodriguez noted that Paragon did not recover indemnity because Paragon did not prove its entitlement to recover from Signet. If Paragon had proven it was entitled to recover, the tariff would have required Paragon to indemnify Signet. Therefore, Signet was the prevailing party and entitled to fees, expenses, and costs, As Signet was the prevailing party with respect to its claim, it was entitled to recover taxable court costs. Judge Rodriguez then addressed the request of Signet for $1,515,842.75 in attorney fees. Paragon challenged over 4,600 billing entries, and Signet accepted some of the objections, reducing the request by $109,593.75. Judge Rodriguez overruled the challenges based on block billing, clerical functions, travel time, and work on claims/issues that were part of the common issues but also related to issues upon which it did not prevail or claims involving other parties; however, Judge Rodriguez did sustain objections to work that was solely devoted to the Gulf Copper claim, the UT claim, or the American Club and to work that was on issues not pursued in the litigation. He awarded $1,362,042.84 in fees, non-taxable expenses of $353,499.48, and taxable costs of $60,072.48. As no appeal had been taken, Judge Rodriguez declined to rule on Signet’s request for appellate attorney fees and costs (without prejudice), stating that it was an issue to be addressed “following the resolution of an appeal.” See April 2023 Update.

Paragon appealed to the Fifth Circuit, arguing that the court should apply a “towage law” standard of duty to Signet’s provision of services to Paragon, that the court should reverse Judge Rodriguez’s determination that a force majeure defense was not available, and that the court should reverse his determination on the contract governing the services. Writing for the Fifth Circuit, Judge Higginson rejected all of the arguments. Paragon argued that Judge Rodriguez erred when he applied general maritime negligence law rather than towage law (that would shift to Signet a duty to keep the drillship from harming others’ property). Judge Higginson noted that Judge Rodriguez rejected the argument on the ground that Signet never undertook the tow of the drillship and that Paragon did not relinquish custody of the drillship to the tugs (reasoning that helping keep the drillship moored to the dock during the storm did not constitute a tow). Paragon cited cases that it claimed stood for the proposition that towage law did not require a tug’s provision of motive power to a vessel in transit. Judge Higginson agreed with Signet, however, that the cited cases involved an actual or contemplated voyage or movement, rather than an assist designed to keep a vessel from moving, and that they did not apply to the situation where the tugs could not hold a drillship at the dock when the drillship’s mooring system failed. Paragon next challenged the holding that Paragon could not rely on a force majeure defense because its “delayed decision and inadequate mooring system represented unreasonably deficient actions,” arguing that Judge Rodriguez held Paragon to a standard of perfection rather than reasonability (using a “nautical rear view mirror”). The parties did not dispute that Hurricane Harvey was an Act of God that was sufficient to activate the force majeure defense, but Judge Rodriguez concluded that Paragon did not take reasonable actions considering what it knew about the deficiencies in its mooring system and under the circumstances that were reasonably anticipated. Judge Higginson noted that the Paragon drillship was the only one of five that did not successfully evacuate from Port Aransas before the storm. Finally, Judge Higginson agreed with Judge Rodriguez that that the services provided by Signet were governed by the Tariff. He reasoned that maritime law permits oral agreements to incorporate the terms of a written document, such as a tariff, and he held that the course of dealing between Paragon and Signet satisfied that standard: “Signet provided services, Signet invoiced under the Tariff, and Paragon paid without complaint.” Although the Tariff excluded assistance to a dead ship or services during heightened port conditions, Judge Higginson answered that the exclusion was for the benefit of Signet, and Signet could waive the provision. Accordingly, the Fifth Circuit affirmed the rulings of Judge Rodriguez.

The owner of the drillship sought rehearing en banc, and on May 29, 2024, the Fifth Circuit denied both panel rehearing and rehearing en banc, with no member of the panel or judge in regular active service requesting a poll for rehearing en banc. See June 2024 Update. The owner of the drillship then sought a writ of certiorari to the United States Supreme Court, presenting two questions:

  1. Whether, under federal maritime law, the unambiguous terms of a written maritime contract cannot be altered by parol evidence, as this Court has held, or can be contradicted and nullified by parol evidence where one party later claims certain terms were ‘intended for its benefit’, as the Fifth Circuit has now held.
  2. Whether, under federal maritime law, a shipowner facing a force majeure event has a duty to exercise ordinary reasonable care, as this Court has held, where hindsight analysis cannot be used to determine the reasonableness of the shipowner’s actions, as held in the Eleventh Circuit and other federal courts, or if this duty requires a shipowner to act upon predictions only verifiable through hindsight knowledge, a new standard imposed by the Fifth Circuit.

On October 14, 2024, the Supreme Court declined to issue a writ of certiorari without requesting a response from Signet.

From the federal appellate courts

Evidence of a latent defect precluded summary judgment based on the mechanical breakdown exclusion in insurance policy on yacht; Geico Marine Insurance Co. v. Miller, No. 23-12611, 2024 U.S. App. LEXIS 26185 (11th Cir. Oct. 17, 2024) (per curiam).

Opinion

Terry and Ericka Miller are owners of a 2002 Viking Yacht Cruiser that they insured with Geico Marine for the period from July 17, 2021 to July 17, 2022.  The vessel’s prior owner rebuilt the starboard engine, and the vessel underwent a sea trial in the Atlantic Ocean off the coast of Florida on November 17, 2021. During the sea trial, the engine made an abnormal noise and was shut down. The engine was disassembled, and the mechanic on the vessel determined that there was a connecting rod bearing failure that resulted in other damage to the engine. The Millers filed a claim with Geico, which denied the claim based on the policy’s mechanical breakdown exclusion and brought this action in federal court in Florida, seeking a declaratory judgment that the policy did not cover the loss. The policy also contained an exclusion for the cost to repair or replace a part that failed as a result of a latent defect, but that exclusion excepted the immediate consequential property damage that results from the failure. The issue whether damage was caused by a latent defect was presented by cross-motions for summary judgment, and Judge Moody granted summary judgment to Geico, concluding that the record lacked evidence of a latent defect and that the loss was excluded by the mechanical breakdown exclusion. On appeal, the Eleventh Circuit disagreed with Judge Moody on the lack of evidence of a latent defect. The appellate court cited the testimony of Geico’s corporate representative, based on the report of an expert for both the Millers and Geico, that the most likely cause of the rod bearing failure (as outlined by the expert) was having debris on the bearing surface or bearing back and that Geico “would agree that the issue would be latent.” He agreed that a latent issue meant a latent defect. The evidence of a latent defect presented the question whether there was coverage for a latent defect despite the mechanical breakdown exclusion. Geico argued that the exclusion for damage based on a mechanical breakdown trumped the coverage permitted under the exception to the latent defect exclusion. The Eleventh Circuit cited the rule that courts analyzing problems of marine insurance causation apply the rule of proxima non remota spectatur (the immediate not the remote cause is considered) and held that the provisions reflected that the issue was whether a mechanical breakdown or latent defect was the proximate cause of the damage. As there was evidence from which a reasonable fact finder could conclude that the latent defect was the efficient cause of the engine failure, the appellate court reversed the summary judgment in favor of Geico.

Failure of clean-up workers to present evidence of the threshold level of toxin to establish general causation resulted in summary judgment on their BELO claims arising from the Macondo/DEEPWATER HORIZON blowout; In re Deepwater Horizon BELO Cases (Jenkins, Siples), Nos. 23-11535, 11538, 11539, 2024 U.S. App. LEXIS 26402 (11th Cir. Oct. 18, 2024) (Pryor).

Opinion Jenkins, Siples

Lester Jenkins and Dwight Siples, Jr., brought Back-End Litigation Option cases against BP, asserting that their chronic sinusitis was cased by exposure to crude oil and dispersants during their clean-up operations after the Macondo/DEEPWATER HORIZON blowout. Jenkins worked from June 2010 to January 2011, 10 to 12 hours a day, 5 to 6 days a week, wading into the ocean to scoop tarballs out of the surf. Siples decontaminated tractors, loaders, and other vehicles from July 2010 to September 2010. Jenkins and Siples engaged Dr. Michael Freeman and Dr. Gina Solomon as experts, and the experts opined that there was a causal relationship between unspecified chemicals associated with the spill and chronic sinusitis. However, they did not identify the harmful level of exposure for crude oil, dispersants, or the chemicals associated with them. BP moved to exclude the opinions of the experts and for summary judgment, and Magistrate Judge Cannon issued a 79-page recommendation granting summary judgment after excluding the expert opinions for failing to identify a minimum level of exposure for the general causation requirement in these toxic tort cases. Judge Rodgers adopted the recommendation, and Jenkins and Siples appealed to the Eleventh Circuit. Writing for the court of appeals, Chief Judge Pryor rejected the workers’ argument that the threshold level of toxin is only relevant to specific causation. He also rejected the argument that the lower court erred when it required the experts to analyze general causation for specific chemicals contained in crude oil or dispersants, rather than for oil and dispersants generally. Concluding that Magistrate Judge Cannon and Judge Rodgers did not err in finding that the experts did not support their opinions with the required threshold dose or with epidemiology, dose-response relationship, or background risk of disease, Chief Judge Pryor affirmed the striking of the expert opinions and the grant of summary judgment in the absence of expert opinions on causation.

Fifth Circuit held that a bank account must be found within the geographic jurisdiction of the district in order to be attached under Rule B, and that the funds in the account must be available for withdrawal by the depositor; Ultra Deep Picasso Pte. Ltd. v. Dynamic Industries Saudi Arabia Ltd., No. 23-20357, 2024 U.S. App. LEXIS 26442 (5th Cir. Oct. 18, 2024) (Wilson).

Opinion

Ultra Deep brought this action in federal court in Texas (Southern District of Texas) alleging that Dynamic Industries Saudi Arabia failed to pay for subsea diving support vessels for offshore operations of Saudi Aramco. Ultra Deep requested attachment of assets of Dynamic that were held by or at Riyad Bank, and the court ordered the attachment. Dynamic filed a restricted appearance and moved to dismiss the suit for lack of personal jurisdiction, improper venue, and for forum non conveniens. As the jurisdiction over Ultra Deep was supplied by the Rule B attachment, Magistrate Judge Ho recommended that the motion be denied (noting that the attachment allowed Ultra Deep to ensure the availability of security pending determination of the merits in arbitration). Dynamic did, however, raise series questions whether Dynamic had property within the district to support the attachment, submitting evidence that it had no bank accounts within the district and evidence from the garnishee that Dynamic had no account with the bank in the United States. Magistrate Judge Ho suggested that the proper procedural vehicle to address this issue was to request a vacatur of the attachment order. Consequently, Magistrate Judge Ho denied the motion to dismiss without prejudice to filing a motion to vacate the attachment order. See March 2023 Update.

Judge Bennett adopted Magistrate Judge Ho’s recommendation, and Dynamic and Riyad Bank filed a motion to vacate the attachment. Ultra Deep argued that Dynamic’s property at Riyad Bank was within the Southern District of Texas because any accounts maintained by Riyad Bank worldwide are located in the district for purposes of a maritime attachment under Rule B. The bank responded that it has an agency in Houston that is not a full branch of the bank. The agency provides loans, guarantees, and stand-by letters of credit to facilitate business in Saudi Arabia, but it does not hold or accept deposits, allow withdrawal of funds, or access client accounts held by Riyad Bank in Saudi Arabia. Ultra Deep acknowledged that Riyad Bank held no property of Dynamic in the district, but it argued that the presence of the Houston agency of Riyad Bank satisfied Rule B. Magistrate Judge Ho recommended granting the motion to vacate, and Judge Bennett agreed. Ultra Deep then appealed to the Fifth Circuit. Writing for the Fifth Circuit, Judge Wilson noted that Rule B required that the defendant not be present within the district. The Second Circuit, in the Aqua Stoli case, added the requirement that the defendant’s property must be present within the district. Judge Wilson then had to decide whether Rule B requires that the attached property lie within the jurisdictional bounds of the district or whether the attached property only needs to be in the hands of the garnishee, within the court’s reach, regardless of the location of the property. Judge Wilson compared the nature of an in rem proceeding under Rule C, reasoning that the Rule B attachment “hinges on not just the attaching court’s in personam jurisdiction over a garnishee, but also on its in rem jurisdiction over the asset sought to be attached, i.e., that the asset be ‘present within the geographical jurisdiction of the court.’” Therefore, the requirement that the property be found within the district harmonized Rule B with the fundamental requirements of Rule C. The adoption of this requirement then presented the question of how Rule B applies to bank accounts—is the bank account found within the geographic jurisdiction of the district? Judge Wilson looked to the law of the forum state (Texas) and noted that in our modern banking system accounts have become increasingly fungible and intangible. He was persuaded that, for the purposes of Rule B, the accounts are located wherever they are available for withdrawal by the depositor. Applying that rule, Judge Wilson reasoned that Riyad Bank does not have branches in the Southern District of Texas from which funds can be withdrawn (rejecting the argument that Texas law gives the local agency the authority to accept deposits and receive and transmit money, answering that the evidence established that the agency did not exercise that authority). As Ultra Deep did not show that any Dynamic property held by Riyad Bank was located within the Southern District of Texas, Judge Wilson held that the court properly vacated the attachment.

From the federal district courts

Magistrate Judge held that the vessel owner had alleged a non-spurious claim for punitive damages against the vessel’s hull insurer under New York law and could proceed with discovery on the claim for punitive damages; Clear Spring Property & Casualty Co. v. Arch Nemesis, LLC, No. 22-cv-2435, 2024 U.S. Dist. LEXIS 162527 (D. Kan. Sept. 10, 2024) (James).

Opinion

Jamie and Kimberly McAtee, who are residents of Kansas, sought to purchase a yacht to use in Cabo San Lucas, Mexico. They were referred to Off the Hook Yacht Sales and started working with its boat broker Al DiFlumeri. The McAtees purchased the yacht (moored in Texas) through their company, Arch Nemesis, intending to move the yacht to Cabo San Lucas for commercial and personal purposes. Arch Nemesis worked with an insurance broker, West Coast Real Estate and Insurance, to place insurance on the yacht, and West Coast worked with Concept Special Risks, an independent underwriter acting for insurer Clear Spring Property and Casualty. Clear Spring issued the policy to Arch Nemesis on February 14, 2022, and Arch Nemesis paid premiums to its broker, West Coast. The yacht sailed to Mexico with no issues. On May 28, 2022, the designated captain took the yacht out without permission, and it ran aground on rocks, causing the yacht to sink. Arch Nemesis submitted an insurance claim, and Concept conducted an investigation and issued a reservation letter stating that the policy was void from its inception and that the claim was excluded. Arch Nemesis responded to the reservation letter, and Clear Spring followed with a denial of the claim and this declaratory judgment action in federal court in Kansas based on the court’s admiralty jurisdiction. Arch Nemesis counterclaimed against Clear Spring (pleading both contractual and extracontractual claims) and filed third-party claims against Concept (fraud and negligent misrepresentation), Off the Hook Yacht Sales (negligence and negligent misrepresentation), and West Coast (constructive fraud, negligent misrepresentation, negligence, and breach of contract). Arch Nemesis based its claims on the court’s diversity jurisdiction and demanded a jury. Off the Hook and Concept moved to dismiss the complaint against them for lack of personal jurisdiction. The Off the Hook defendants are North Carolina and Maryland limited liability companies that did not solicit business from Arch Nemesis. No representatives of the entities had ever visited Kansas, and the yacht never entered Kansas. However, the broker for Off the Hook, DiFlumeri, communicated with McAtee in Kansas, and Judge Crabtree believed that the communications with a Kansas resident to purchase a boat established minimum contacts with Kansas to justify specific jurisdiction over the Off the Hook defendants. Concept is incorporated and operates under the laws of the United Kingdom, but Judge Crabtree was persuaded that there were minimum contacts with Kansas because Concept’s engagement with Arch Nemesis, a Kansas LLC, spanned the application process and the claim handling. Concept argued that, as a foreign company, it was not properly served with process because it was not served under the Hague Convention. Arch Nemesis responded that it could serve Concept under the insurance policy provision for suit on Mendes & Mount in New York. Concept responded that it was neither a signatory nor a party to the insurance contract, leaving Judge Crabtree to determine Concept’s status under the policy and whether it fell within the term “Underwriters” in the clause addressing service. Judge Crabtree complained that the parties had “left the court rudderless in a sea of potentially applicable law,” so he reasoned that the court was sitting in diversity and that the court would apply the law of the forum (Kansas) under the well-known rule from Klaxon v. Stentor, in the absence of a showing that a different law should apply. Judge Crabtree noted that the parties argued “ardently” about whether the contractual choice-of-law provision could bind Concept as a non-signatory, but in order “to resolve this non-signatory question by applying the choice of law specified in the contract seems circular.” In the absence of a binding contractual choice of law, Judge Crabtree applied the law of the forum, Kansas. As the insurance contract did not define the term “Underwriters,” and as Judge Crabtree declined to find that the contract bound Concept as a non-signatory under the other theories proposed by Arch Nemesis, Judge Crabtree concluded that Concept had not been properly served. Judge Crabtree gave Arch Nemesis the opportunity to serve Concept properly within 90 days.

As Clear Spring based its declaratory judgment complaint on the court’s admiralty jurisdiction, Clear Spring moved to strike the jury demand of Arch Nemesis on its counterclaim against Clear Spring. Magistrate Judge James noted that the courts are split on the issue that she described as “whether Plaintiff’s election to proceed under admiralty without a jury should take priority over Defendant’s Seventh Amendment right to a jury under the saving to suitors clause merely because Plaintiff filed its declaratory judgment claims first.” Agreeing with Arch Nemesis, Magistrate Judge James reasoned that neither the Seventh Amendment nor any statute or rule forbids jury trials in maritime cases, and that the result sought by Clear Spring would “incentivize a race to the courthouse in cases such as this.” That left the issue whether the insurer’s claims should also be tried to the jury even though they were brought pursuant to Rule 9(h). Magistrate Judge James stated, “Trying first either Plaintiff’s declaratory judgment claims to the court or Defendant’s counterclaims to the jury would necessarily prejudice the other by determining the entirety of the issue before the other has its opportunity to litigate in its chosen mode of trial.” As “the mere fact that Plaintiff won the race to the courthouse and filed its declaratory judgment action first should not deprive Defendant of its constitutional right to a jury trial,” Magistrate Judge James ordered that the entire case would be tried to a jury. See November 2023 Update.

Concept sought a “second bite from the proverbial apple,” renewing its motion to dismiss on the ground that the court did not possess personal jurisdiction over it. There were two intervening events. First, Arch Nemesis did properly serve Concept. Second, third-party defendant, West Coast Real Estate & Insurance, filed cross-claims against Concept and other third-party defendants. Concept argued that the issue of personal jurisdiction was not present in the earlier ruling that addressed whether there was sufficient service of process. Arch Nemesis responded by producing additional evidence to substantiate Concept’s contacts with Kansas. Although Judge Crabtree recognized that he could reconsider a decision on personal jurisdiction that was made at the stage of a motion to dismiss, he did not find the basis to do so when the case was still at the same stage in the proceeding and when the evidence was essentially the same, reasoning: “To reconsider Concept’s personal jurisdiction objection now would waste judicial resources and interfere with the court’s Rule 1 mandate to secure a speedy determination of this action.” Judge Crabtree then addressed the personal jurisdiction of Concept for the cross-claims filed by West Coast Real Estate. Judge Crabtree responded that “the court’s personal jurisdiction over Concept on Arch Nemesis’s third-party claims, as provisionally determined by the court’s previous Order—enables the court to exercise pendent personal jurisdiction over West Coast’s cross-claim, even if no independent basis for it exists.”

Judge Crabtree then considered the objection to the decision of Magistrate Judge James that the entire case would be tried to the jury, even though the case was brought as an admiralty case with a Rule 9(h) designation. The parties each argued that the majority of appellate decisions supported their position, and Judge Crabtree noted that the Fifth and Eleventh Circuits supported a non-jury trial and that the Fourth and Ninth Circuits supported a jury trial. The tie-breaking case was the Koch Fuels case from the Eighth Circuit, which took a middle path. Nonetheless, Judge Crabtree reasoned that “none of this majority-minority squabbling matters all that much” as there was still a split in the caselaw, and the Tenth Circuit (in which Kansas sits) was silent on the issue. Accordingly, Judge Crabtree could not find that Magistrate Judge James misapplied the law in an opinion that took one side in the circuit split. Judge Crabtree also agreed with the reasoning that a jury trial was appropriate because the declaratory judgment context of the case presented a “flipped-parties posture” with respect to the jury demand. Had the insurer not won the race to the courthouse by filing the declaratory judgment action on the same day that it denied the claim for coverage, Arch Nemesis would have brought the suit, and its demand for a jury would have governed the litigation. Clear Spring took issue with the “unseemly” and “inappropriately outcome-driven” order (citing Magistrate Judge James’ statement, “Plaintiff’s argument is akin to that of the boy who killed his parents and threw himself on the mercy of the court as an orphan”), but Judge Crabtree did not believe that he should “reject a magistrate judge’s order because its tone missed the mark.” Therefore, he denied the objection to the order for a jury trial on all issues. See September 2024 Update.

The issue of punitive damages was then considered in the context of Clear Spring’s objection to discovery related to punitive damages. Although our long-suffering readers know that the Update does not generally summarize opinions confined to discovery disputes, we do discuss opinions in which discovery is related to an important substantive or procedural point. Clear Spring argued that Arch Nemesis’ claim for punitive damages under New York law was spurious, so that discovery related to punitive damages was irrelevant, reasoning that a fraud claim is not actionable when it shares common facts with the claim for breach of contract. Arch Nemesis responded that a fraud claim is cognizable if it is based on a misrepresentation of present facts and not a misrepresentation of future intent to perform under the contract—in this case, issuing a marine insurance policy to Arch Nemesis knowing it had not met the requirements to be covered under the policy. Magistrate Judge James stated that the standard to establish a non-spurious punitive damage claim was lower than the requirement for a dispositive motion. She held that Arch Nemesis had sufficiently alleged a punitive claim under New York law by asserting that Clear Spring’s conduct was “directed at the public generally” because of an alleged practice of issuing policies while being aware that the Recommendations Warranty had not been met and would serve as the basis for denial of an insured’s claim. Arch Nemesis cited ten other cases in which Clear Spring attempted to avoid covering a loss based on the Recommendations Warranty, and that Clear Spring uses a standard application form that does not mention anything about having to complete survey recommendations before a policy actually offers coverage. As Arch Nemesis had made a sufficient showing of a non-spurious claim for punitive damages, Magistrate Judge James held that Arch Nemesis could request discovery related to punitive damages.

Marina that suffered dock damage during hurricane was able to establish causation collectively against the vessels that remained docked during the storm even though the marina could not attribute specific damage to a particular vessel; In re Palafox Marina Hurricane Sally Litigation, No. 3:20-cv-5943, 2024 U.S. Dist. LEXIS 170582 (N.D. Fla. Sept. 16, 2024) (Wetherell).

Opinion

Marina Management Corp. owns and operates the Palafox Pier Yacht Harbor marina in Pensacola, Florida on land that it leases from the City of Pensacola. The dock system at the marina was installed in 2005 or 2006 (after Hurricane Ivan), consisting of floating docks affixed to pilings. The marina suffered substantial damage in 2020 when Hurricane Sally made landfall near Pensacola, and Marina Management argued that the damage was caused, in part by the failure of boat owners to remove their boats from the marina before the hurricane as they were contractually obligated to do under their dockage agreements. The dockage agreements required boat owners to remove their boats when a tropical storm or hurricane watch was issued within 100 miles of the marina, and Marina Management asserted that the provision was triggered when a tropical storm watch was issued. The dockage agreements provided that the boat owners would be liable for all damages caused by the owners’ boats to Marine Management’s property (including the docks and pilings), regardless of fault. Marine Management and its experts could not identify what specific damage was caused by which boat. Instead, the experts calculated the additional force that the boats individually and collectively exerted on the docks and opined that the docks would have survived the hurricane were it not for the increased force exerted by the boats. The experts could not quantify the extent to which other factors, such as the hurricane itself (or the allegedly defective breakwater) may have contributed to the damage, but a nearby marina that was empty of boats during the hurricane only suffered minor damage. The owners of 29 of the boats that remained at the marina filed actions in federal court in Florida seeking exoneration/limitation of liability, and the court ruled that the boat owners had a contractual obligation to remove their boats and that the requirement did not violate public policy. The court also held that causation for the breach of contract claims was governed by the “substantial factor” test that did not require Marina Management to show what specific damage was caused by each boat or the proportionate part played by each boat owner’s breach. Marina Management and the boat owners then filed cross-motions for summary judgment with respect to causation, and Judge Wetherell applied Florida law as the dockage agreements contained a Florida choice-of-law provision (despite the boat owners’ argument that the substantial factor test contravenes the proportionate share rule applicable under the general maritime law). Judge Wetherell noted that the boat owners agreed in the dockage agreements that a boat left in the marina during a hurricane “will cause serious and substantial damage to marina property” and “will cause the [docks] to be destroyed.” Combining the contractual admissions with the testimony of Marina Management’s experts that all of the boats left in the marina contributed in a substantial way to the destruction of the marina based on their individual and collective increase to the force exerted on the dock, Judge Wetherell believed the evidence was sufficient to establish that each owner’s breach of the agreement was a substantial factor in the marina’s damages. Judge Wetherell explained that the fact that the experts could not attribute specific damage to a particular boat was not necessary given the experts’ “commonsensical (and mathematically supported) testimony that the increased force that the boats individually and collectively exerted on the dock to which they were moored contributed in a substantial, non-trivial way to that dock’s failure.” Judge Wetherell added that even though other factors contributed to the marina’s damages, the boat owners were jointly and severally liable for the marina’s damages. Thus, Judge Wetherell held that the marina had established the causation element of its contract claims against the boat owners.

Judge declined to reconsider ruling that contract to provide production operators for offshore platform was not a maritime contract, and the pass-through indemnity and insurance obligations in favor of a vessel owner were invalidated by the state anti-indemnity statute; In re Offshore Oil Services, Inc., No. 21-cv-1522, 2024 U.S. Dist. LEXIS 169938 (E.D. La. Sept. 20, 2024) (Papillion).

Opinion

Tyrone Felix, an employee of Island Operating, was injured during a personnel basket transfer from the deck of the M/V ANNA M to a platform that was owned and operated by Fieldwood Energy. Offshore Oil Services, owner of the ANNA M, brought this limitation action in federal court in Louisiana, and it filed a third-party action against Inland Operating seeking pass-through indemnity and insurance coverage from Inland Operating pursuant to the terms of a Master Services Contract between Inland Operating and Fieldwood. Inland Operating moved for summary judgment on the indemnity/insurance claim, arguing that the indemnity/insurance obligations were voided by the Louisiana Oilfield Indemnity Act. Under the Contract, Inland Operating supplied production operators to man Fieldwood’s platforms producing oil and gas on the outer Continental Shelf off the Louisiana coast. In order to determine whether the indemnity/insurance provisions were valid, Judge Morgan had to decide what law to apply to the Contract. Pursuant to the Fifth Circuit’s en banc Doiron decision, the critical issue was whether the Contract provided or the parties expected that a vessel would play a substantial role in the completion of the contract. Judge Morgan noted that the work order did not reference a vessel, and the Master Services Contract only mentioned use of a vessel with respect to transportation, including loading or unloading equipment. The court in Doiron stated that transportation was not to be considered in determining whether the contract contemplated substantial use of a vessel, and Judge Morgan noted that cases extended that analysis to the loading and unloading of vessels. Although Offshore Oil cited testimony from a Fieldwood corporate representative that work from vessels was not typically done but was part of the agreement, Judge Morgan stated that the expectations of the parties require “a shared expectation” that a vessel will play a substantial role, and Island Operating did not share that expectation. Consequently, Judge Morgan concluded that Louisiana law was applicable. She then addressed whether the LOIA applied and concluded that it did because the work pertained to a well that was related to exploration, development, production, or transportation of oil or gas. Thus, the indemnity and insurance requirements were invalid. Judge Morgan did note the Meloy exception that would allow Offshore Oil to recover its attorney fees and costs from Inland Operating in the event Offshore Oil were found not to be at fault, and she denied the motion for summary judgment with respect to defense costs. See April 2023 Update.

Offshore Oil moved for reconsideration of the granting of summary judgment in favor of Island Operating, arguing that the intervening decision from the Fifth Circuit in Earnest v. Palfinger (see February 2024 Update) reflected that maritime law, not Louisiana law and the LOIA, applied to the Master Services Contract between Inland Operating and Fieldwood. Earnest held that a contract to repair lifeboats on an offshore platform was maritime, noting that courts should consider what is “classically maritime” in determining the role of a vessel in the completion of the contract (under the Fifth Circuit’s Doiron test for determining what is a maritime contract). Judge Papillion did not consider that the panel decision in Earnest was a significant departure from the en banc decision in Dorion. He noted that the portion of Doiron on which Judge Morgan relied (marine transportation to a worksite is maritime, but it is not considered in evaluating whether a contract for other services is maritime) was not involved in Earnest. Thus, there was no reason to reconsider Judge Morgan’s application of Doiron, and Judge Papillion denied the motion for reconsideration.

Master Service Contract for offshore drilling unambiguously waived recovery for consequential damages and provided that the sole remedy against the driller for loss of the well was to redrill the well, resulting in the driller recovering attorney fees and costs to defend the claim based on the indemnity provision in the Master Service Contract; Ensco Offshore, LLC v. Cantium, LLC, No. 24-cv-371, 2024 U.S. Dist. LEXIS 169940 (E.D. La. Sept. 20, 2024) (Ashe).

Opinion

This case involves a dispute between the owner of offshore drilling rigs (Ensco) and the operator of offshore oil and gas platforms (Cantium). Ensco filed the suit in federal court in Louisiana seeking to recover for unpaid invoices. The complaint alleged subject matter jurisdiction in two paragraphs. One paragraph stated: “This Court has original jurisdiction over this action as it arises out of a maritime contract governed by federal maritime law. 28 U.S.C. § 1331(1) [sic].” The second allegation stated: “Additionally, or alternatively, this Court has federal question jurisdiction over this action pursuant to 28 U.S.C. § 1333 [sic], as the action arises out of the laws of the United States. Specifically, this action arises out of the Outer Continental Shelf Lands Act . . . .” The complaint did not contain a specific designation with respect to Rule 9(h) and did not demand a jury. Cantium filed an answer and counterclaim, alleging that Ensco was liable for failing to provide adequate equipment and personnel and failing to perform operations in a workmanlike manner. Cantium included a jury demand in its answer and counterclaim. Ensco then filed an amended complaint with a Rule 9(h) designation and a motion to strike Cantium’s jury demand. In assessing whether to strike the jury demand, Judge Ashe only considered the original complaint because the amended complaint was filed after Cantium had answered and demanded a jury. Judge Ashe noted that when the complaint does not expressly cite Rule 9(h), the courts look to the totality of the circumstances to determine if the plaintiff made the required statement to invoke the court’s admiralty jurisdiction under Rule 9(h). Cantium relied on the decision of the district court in LeBlanc v. Panther Helicopters in which Judge Barbier held that the complaint’s allegation that the court had jurisdiction over the case pursuant to admiralty jurisdiction and pursuant to LHWCA Section 5(b) and that the claimant brought suit pursuant to the OCSLA was not a sufficient identification of the claims under Rule 9(h). Judge Ashe was persuaded, however, by the Fifth Circuit’s T.N.T. decision in which the court held that the allegation that the suit was “for breach of contract, civil and maritime, and for maritime tort” was a sufficient “simple statement asserting admiralty or maritime claims under the first sentence of Rule 9(h).” As in T.N.T., the allegation that the action “arises out of a maritime contract governed by federal general maritime law” constituted a Rule 9(h) designation. Therefore, Judge Ashe struck Cantium’s jury demand. See May 2024 Update.

Ensco then filed a motion for partial summary judgment on Cantium’s counterclaim in which Cantium sought more than $22.8 million for loss of the Kings Hill Well and more than $4.5 million in other damages as a result of Ensco’s failing to provide competent people, failing to provide adequate equipment, and failing to perform in a workmanlike manner. Ensco argued that the Master Service Contract between the parties contained a release for all consequential damages and that the sole remedy for a lost well is for Ensco to redrill the well to its prior depth at a negotiated redrill rate (but only if the loss was due to Ensco’s gross negligence or willful misconduct). With respect to the claim for consequential damages, Cantium argued that the limitation in the indemnity section that it did not apply to gross negligence should be applied to the provision in the contract that neither party would be liable to the other for consequential damages. Judge Ashe disagreed, stating: “No reasonable interpretation of the MSC results in applying the gross negligence exception from section 15.16 to limit the parties’ waiver of consequential damages in section 15.21.” As the waiver of consequential damages was unambiguous, Judge Ashe agreed that Ensco was entitled to summary judgment on the claims for consequential damages. Judge Ashe then addressed the provision in the contract that Cantium’s sole remedy when a well is lost or damaged is to have Ensco redrill the well at the redrill rate—if the well was lost because of Ensco’s gross negligence or willful misconduct. As Ensco had already redrilled the well, it fulfilled its sole responsibility to Cantium and was not liable for any other damages for the loss of the well. See September 2024 Update.

Ensco then moved for summary judgment for breach of contract that Cantium’s nonpayment of invoices was a breach of contract (resulting in damages of approximately $9 million) and, alternatively, that it was entitled judgement on its quantum meruit claim because it provided valuable services and materials that were accepted by Cantium. Cantium responded that Ensco was not entitled to summary judgment because there were genuine issues of fact whether Ensco’s performance fell below industry standard and violated the terms of the Master Service Contract. Judge Ashe agreed that there were fact issues that prevented summary judgment with respect to the contractual performance. And Ensco was not entitled to summary judgment on the claims for quantum meruit and promissory estoppel as there is a valid contract between the parties. Ensco also asserted a claim against Cantium for attorney fees and defense costs to defend Cantium’s counterclaim based on the indemnity provision in the Master Service Contract. Judge Ashe noted that the counterclaim sought damages that are the types of consequential damages for which the parties mutually waived the right to recover. The indemnity provision in the contract imposed an indemnity obligation that was not limited to claims brought by third parties. Thus, the contract “is reasonably construed as imposing a contractual penalty on a party who brings one or more of those waived claims, as Cantium did here.” Accordingly, Judge Ashe held that Ensco was entitled to recover its attorney fees and costs to defend the counterclaim.

Contradictory statements in seaman’s deposition and declaration in response to the vessel owner’s motion for summary judgment were sufficient to create fact disputes on negligence and unseaworthiness; superseding cause doctrine is applicable to the seaman’s conduct, not just acts of third parties, but the doctrine was not applicable and comparative fault applied when the seaman’s acts were not independent of the defendants’ alleged negligent acts; Merced v. United States, No. 3:22-cv-1160, 2024 U.S. Dist. LEXIS 170092 (D. Ore. Sept. 20, 2024 (Immergut).

Opinion

Jaime Merced was injured while working as a seaman on the SS PACIFIC TRACKER, owned by the United States, while the vessel was moored in Portland, Oregon. Merced’s supervisor, Bosun Kevin Kellum, placed a portable A-frame ladder to the right-hand side of the fixed ladder, so that Merced could tighten the bolts securing a cover plate on top of a vent. Merced, who was standing on the fixed ladder, encountered difficulty with one of the bolts. Kellum told Merced to stop work and to take the workers’ morning coffee break. Kellum walked away, and Merced continued working briefly and then stepped onto the portable ladder. The portable ladder fell over, and Merced fell to the deck. Merced brought this suit in federal court in Oregon against the United States under the Jones Act and general maritime law (unseaworthiness and maintenance and cure), and the United States moved for summary judgment on the claims for negligence and unseaworthiness. The United States argued that Merced unexpectedly side-stepped to the portable ladder that he knew was unsupported and unsecured. Merced answered that he did not know the portable ladder was unsecured and that Kellum should have been holding the ladder when Merced attempted to thread one more bolt. The United States objected to Merced’s “sham” declaration that he and his co-workers always tied off the step ladder and did not hold it for each other when working on the vents, citing his deposition testimony that “somebody has to be there holding it.” Judge Immergut did not find the contradictions to be sufficiently clear and unambiguous to apply the sham affidavit rule, and she concluded that there were fact disputes with respect to negligence and unseaworthiness (inappropriate footpads on the ladder for the deck surface). The United States also argued that Merced acted recklessly by side-stepping to the portable ladder, and this act was a superseding cause that should cut off any liability for negligence and unseaworthiness. Merced argued that the doctrine of superseding cause only applies to intervening acts of third parties, but Judge Immergut disagreed and held that Merced’s conduct could be a superseding cause. However, Judge Immergut explained that the doctrine applies where the injury was brought about by a later cause of independent origin that was not foreseeable. She answered that Merced’s alleged negligence did not operate independently of the negligence of the United States, and Merced’s acts were not so unforeseeable as to create a break in the chain of causation. Rather, the actions of the parties reflected a situation of comparative fault. The United States also moved for summary judgment on Merced’s claim for maintenance and cure, citing the joint statement of agreed facts that Merced had reached maximum medical improvement and that the United States had paid for all related medical expenses. Although Merced responded to the motion with a contention that he had not reached maximum recovery, Judge Immergut held him to his stipulation and granted summary judgment. Finally, the United States sought to strike the opinions of Merced’s marine safety expert, Captain Pinetti, with respect to the use and function of ladders, arguing that the opinions were a matter of common knowledge. Judge Immergut declined to exclude the testimony, reasoning that appropriate types of ladders, securing of ladders, and methods of movement between ladders are not common knowledge. She also held that failure to consider all facts and reliance on disputed facts were not reasons to exclude the testimony and were better left for cross-examination.

Breach of warranty for annual certification of fire extinguishing equipment in vessel insurance policy voided coverage even though the failure occurred before the inception of the policy and it had not been a year since the inception of the policy; Accelerant Specialty Insurance Co. v. Dagga Boy, LLC, Nos. 23-cv-2796, 23-cv-2803, 2024 U.S. Dist. LEXIS 170927 (E.D. La. Sept. 23, 2024) (Zainey).

Opinion

This litigation presents an insurance dispute involving the M/V DAGGA BOY (owned by Dagga Boy, LLC). The DAGGA BOY, a 53-foot Hatteras recreational vessel, was damaged by fire while moored for repairs at a dock located in New Orleans, Louisiana. The vessel was insured by Accelerant Specialty with a Private and Pleasure Yacht Insuring Agreement that contained a forum-selection clause for the federal district court where the insured or its insurance agent resides. After Accelerant denied the claim on the ground that Dagga Boy had breached policy warranties that, according to Accelerant, voided the policy ab initio, the vessel owner filed suit against Accelerant in state court in Orleans Parish, Louisiana, demanding a jury. Accelerant responded by filing a declaratory judgment action in federal court under the court’s admiralty jurisdiction and by removing the suit brought in state court, citing diversity (and admiralty) as the jurisdiction for the removal. Once both cases were in federal court, Accelerant moved to dismiss the case that was originally brought in state court, asserting that the suit violated the forum-selection clause in the insurance agreement, and the cases were consolidated. The parties disputed the reason that Accelerant was seeking to dismiss the state action. The vessel owner argued that Accelerant was seeking to avoid the Louisiana bad-faith allegations in the state suit and to deny the owner its right to a jury trial (arguing that the basis for removal was diversity for which the owner would be entitled to a jury trial). Accelerant responded that choice-of-law was not an issue as the insurance agreement also contained a choice-of-law provision for entrenched admiralty law/New York law, and Judge Zainey agreed that choice-of-law was not at issue for the motion to dismiss. However, Judge Zainey did not believe that dismissal was necessary as he held that the court had subject matter jurisdiction over both cases. Recognizing that the question of whether the cases would be heard before a jury was still at issue, Judge Zainey advised that Accelerant must move to strike the jury demand within 30 days of the entry of the scheduling order. See November 2023 Update.

Accelerant then filed a motion to strike the jury demand and to dismiss the suit filed by the insured in state court. Accelerant argued that had it left the insured’s suit in state court, the state judge would have been required to dismiss the suit in order to give effect to the policy’s forum-selection clause, and that the same result should be reached after the case was removed to federal court. Judge Zainey initially stated that Accelerant was “on stronger footing” in having the jury demand stricken in the suit filed in federal court under the court’s admiralty jurisdiction; however, the situation was different with respect to the suit that was filed in state court in violation of the forum-selection clause. That suit was removed to federal court based on diversity, and the insured had a right to a jury trial in that suit under the Seventh Amendment. The fact that the suit was improperly filed in state court was now a moot point as it was pending in the correct federal forum after removal. Once it was removed based on diversity, Dagga Boy was entitled to a jury trial even if maritime law was the applicable law. As Accelerant’s motion sought dismissal of the state-filed suit or the striking of the jury trial in that action, Judge Zainey denied the motion. See April 22024 Update.

Accelerant and Dagga Boy then filed cross-motions for summary judgment on the issue of coverage. Accelerant argued that Dagga Boy breached the fire suppression warranty, which voided the coverage under New York law (applicable under the choice-of-law provision selecting New York law in the absence of admiralty law). The warranty provided that if the vessel is fitted with fire extinguishing equipment, it is warranted that all fire extinguishing equipment “is tagged and certified annually or in accordance with the manufacturer’s recommendations, whichever is more frequent.” The warranty also provided: “The tanks of such equipment are weighed annually or in accordance with the manufacturer’s recommendations, whichever is more frequent.” The policy became effective on May 7, 2022. The fire occurred in December 2022. The last certification of the equipment was in April and May of 2020, two years before the inception of the policy. Accelerant argued that the warranty required that the certification have occurred at least one year before the inception of the policy, and the failure to do so breached the warranty. Dagga Boy replied that it was not in breach of the warranty because the equipment had to be certified annually (once a year), and that meant that it had until May 2023 (a year after the policy inception) to certify the equipment. As the loss occurred only 7 months into the policy term, Dagga Boy contended that it was not yet in breach of the annual inspection obligation. Dagga Boy argued that the warranty obligation could not precede the inception of the policy. Dagga Boy asserted that the requirement was ambiguous because it did not specify when the one-year period began and ended. Without that specification, the period could have begun at the policy’s inception. Judge Zainey disagreed with Dagga Boy, reasoning that the requirement for annual certification unambiguously meant “a recurring obligation that takes place every year, not every few years, to ensure that the equipment is in good working order when it is needed.” Judge Zainey stated that it did not matter that the lapses in annual certifications pre-dated the inception of the policy as “Dagga Boy warranted that the vessel’s fire suppression equipment was certified annually.” As the annual certification was already two years overdue, Judge Zainey held that Dagga Boy breached the warranty. After the Supreme Court’s decision in Great Lakes v. Raiders Retreat, it was clear that the breach of the warranty did not have to be causally related to the loss under New York law. Therefore, Judge Zainey held that Accelerant did not owe coverage for the damage to the DAGGA BOY.

Judge declined to dismiss insurers of vessel owner in seaman’s injury suit against the vessel owner and its insurers despite the amendment to the Louisiana Direct Action Statute that no longer allows suits against both; Maise v. River Ventures, L.L.C., No. 23-cv-5186, 2024 U.S. Dist. LEXIS 170928 (E.D. La. Sept. 23, 2024) (Barbier).

Opinion

Seaman Todd Maise was injured when he fell while exiting a barge in tow of the M/V INDEPENDENCE, owned and operated by his employer, River Ventures. Maise brought this suit in federal court in Louisiana against River Ventures under the Jones Act and general maritime law, and on April 29, 2024, he filed an amended complaint adding River Ventures’ insurers as defendants pursuant to the Louisiana Direct Action Statute. After the Direct Action Statute was amended, effective on August 1, 2024, to eliminate the joint suit against the insured and insurer except in limited circumstances, the insurers moved to dismiss the direct-action claims against them. Judge Barbier agreed that, under the current version of the statute, there was no direct cause of action against the insurers. He also agreed that the Direct Action Statute is procedural in nature and that amendments to procedural statutes apply retroactively. However, Judge Barbier reasoned that the dismissal of the insurers a month before trial would not provide Maise with sufficient notice and an opportunity to be heard with respect to the claim that was proper at the time it was brought. Therefore, he denied the motion to dismiss the direct action claims against the insurers.

Terms and conditions incorporated into estimate for repair work at shipyard limited the shipyard’s liability to the vessel operator to the cost of repairing the damage, up to a limit of $100,000, with no recovery for consequential damages; S/Y Paliador, LLC v. Platypus Marine, Inc., No. 3:22-cv-5591, 2024 U.S. Dist. LEXIS 172634 (W.D. Wash. Sept. 24, 2024) (King).

Opinion

S/Y Paliador, LLC bareboat chartered the S/Y PALIADOR from AMIkids, Inc. Paliador member Edward Roach managed the vessel, and Tim Forderer served as the vessel’s captain. Roach and Forderer agreed to take the vessel to the Platypus Marine shipyard in Port Angeles, Washington for proactive maintenance work, including renewal of the anti-fouling paint. The sales manager for Platypus, Amanda Kennedy, emailed a cost estimate to Forderer, and the estimate stated that the work would be done pursuant to Platypus’s standard terms and conditions (eventually Forderer signed and returned the estimate and terms/conditions). Forderer responded by voicemail that Platypus could do the work, and Kennedy asked for a deposit, which was completed by phone. Kennedy sent Forderer an email with the terms and conditions along with a request for the vessel’s registration and proof of insurance. Forderer then took the vessel to the shipyard, but when the ship was being hauled out of the water, the straps slipped, and the vessel’s paint was damaged. The parties reached an impasse as to the repair and contracted painting, and the vessel was returned to Paliador. Paliador then sold the vessel with a discount of $100,000 for the damage to the paint. The parties disputed what it would cost to repair the damage. Paliador claimed that it would cost approximately $122,000, and Platypus estimated it would charge $55,000. Paliador brought this suit in federal court in Washington, seeking to recover damages for negligence, breach of maritime contract, conversion, fraud and misrepresentation, and violation of the Washington Consumer Protection Act. Platypus moved for summary judgment on all of the claims, arguing that the terms and conditions bound Paliador to the limited remedy of repair with a damage cap of $100,000 (and preclusion of consequential damages such as loss of use). Paliador argued that the agreement of the parties only included terms and conditions that had been provided before Paliador agreed to the estimate on the phone and made the down payment. Judge King responded that the estimate stated that the terms and conditions “shall become the contract between the parties,” and that the terms and conditions would be provided upon request (and were provided thereafter). Judge King also rejected the argument that the terms were limited in scope, reasoning that they provided that they applied to any changes to the work requested by Paliador and agreed to by Platypus. Judge King then held that the limitation to repair of the damage and exclusion of consequential damages were valid under the general maritime law. She therefore granted summary judgment that Paliador’s remedies are limited to repair up to the lesser of $100,000 or the value of the work performed by Platypus. There were fact questions with respect to the claim for breach of contract, but the limitation of liability/exculpatory provisions precluded the claim for negligence. Without having to decide whether the contract precluded claims for conversion and fraud/misrepresentation, Judge King held that the claims failed as a matter of law. Finally, with respect to the claim for violation of the Washington Consumer Protection Act, the parties spent a significant part of their briefing on the issue whether maritime law preempts the state claim. Judge King did not have to address that issue, instead holding that Paliador failed to prove a violation.

Competing assertions whether notice letter was mailed/received defeated summary judgment on timeliness of limitation action; In re Alsem Construction, LLC, No. 2:23-cv-287, 2024 U.S. Dist. LEXIS 172794 (E.D. La. Sept. 24, 2024) (Guidry).

Opinion

The Leo Kerner Bridge, a swing bridge connecting Jean Lafitte to Barataria in Jefferson Parish, Louisiana, was damaged after the landfall of Hurricane Ida from the allision of three vessels on August 29, 2021. One of the vessels was the Deck Barge 7137UF, owned and operated by Alsem Construction. The Louisiana Department of Transportation entered into a contract to construct a temporary bridge, and on November 22, 2021, the Department sent a letter to Douglas Alsem, registered agent and officer for Alsem Construction, notifying Alsem Construction that the Department intended to hold it liable for the damage to the bridge caused by the barge. More than 6 months later, on July 18, 2022, the Department filed suit against Alsem Construction and others in state court in Jefferson Parish, Louisiana (Alsem Construction was served on July 20, 2022). Alsem Construction was later named as a defendant in two additional actions. On January 20, 2023, six months from service of the suit but more than six months after the notice letter, Alsem Construction filed this action in federal court in Louisiana, seeking exoneration/limitation of liability. The Department and the plaintiffs in the other suits filed claims in the limitation action and then moved for summary judgment, seeking dismissal of the limitation action as untimely (arguing that the suit was filed more than six months after the notice letter). Alsem Construction responded that, although the letter was allegedly mailed via the United States Postal Service, it never received the letter, and its first notice was the suit that was served on July 20, 2022. The claimants cited the mailbox rule that a letter appropriately addressed and placed in the United States mail is presumed to have been received. Judge Guidry noted that the mailbox rule does not result in a conclusive presumption. Thus, when opposed by evidence that the letter was not received, there is a fact issue that must be weighed by the fact finder. Based on the declaration from Douglas Alsem that he did not receive the letter, Judge Guidry declined to grant summary judgment to the claimants.

Judge believed custodial fees for arrested vessel were unreasonable and ordered payment of a reduced amount; Island Gardens Deep Harbour LLC v. M/Y DESLIZE, No. 22-cv-22991, 2024 U.S. Dist. LEXIS 173374 (S.D. Fla. Sept. 25, 2024) (Becerra).

Opinion

Island Gardens arrested the M/Y DESLIZE in Miami based on a lien for necessaries for dockage fees in the amount of $60,026.90. Island Gardens moved to appoint RMK Merrill Stevens as substitute custodian, attaching RMK’s schedule for its services at $9.57 per foot per day (the rate charged by the U.S. Marshal). However, the motion stated that RMK would provide custodial services at a cost substantially less than the Marshal, and Judge Martinez approved the substitute custodian with an order stating that RMK would provide security, wharfage, and routine services at a cost substantially less than that required by the Marshal. Thereafter, Florida Auto Advantage filed an intervention, seeking to recover $412,500 plus amounts for advances for insurance, based on its first preferred ship mortgage (perfected with the British Virgin Islands Shipping Registry). Eventually, the vessel was sold to Florida Auto Advantage for $475,000, and RMK sought custodial fees of $399,751.58, based on a rate of $9.01 per foot per day. Florida Auto objected, arguing that the amount was unreasonable, noting that Island Gardens only charged $5.40 per foot per day when it provided dockage and other services for the DESLIZE. Florida Auto added that RMK had docked the vessel against a seawall on an unused part of its yard and did not provide security to prevent entry to the facility or the vessel. It argued that a reasonable rate would be $3.60 per foot per day. RMK responded that it provided more than dockage, including regular inspections and on-call availability, and that its rates were consistent with those of other substitute custodians in the district for large vessels (between $6.00 and $19.77 per foot per day). Judge Becerra cited three cases in the district in which custodia legis expenses were awarded in excess of the rate sought by RMK, but there was no objection to the rate in those cases. She also pointed out that Florida Auto did not challenge RMK serving as substitute custodian or the rate it proposed, and Florida Auto too no action move the vessel to a less expensive custodian. Considering the range of rates approved for substitute custodians, Judge Becerra concluded that the reasonable rate is $5.00 per foot per day. She declined to rule, at this time, how much would be paid by Island Gardens and Florida Auto.

Forensic analyst hired to search and collect text messages from the phones of the plaintiff and his wife was not an expert witness who had to be disclosed and provide a report; physician who is an expert in neurology and pain management was qualified to give an opinion on the cause of the blood clot and pain in the plaintiff’s leg, and his methodology was reliable; Sylvester v. Talos Energy Offshore, LLC, No. 22-cv-5192, 2024 U.S. Dist. LEXIS 173963, 175070 (W.D. La. Sept. 25, 2024) (Hicks).

Opinion Varley

Opinion Domangue

Wood Group contracted with Talos Energy to supply production operators on Talos Energy’s production platforms in South Marsh Island Block 130 on the outer Continental Shelf of the Gulf of Mexico. One of the workers Wood Group supplied to Talos Energy, Brian Spears, was working as a crane operator during the transfer of Joseph Sylvester, a crane mechanic employed by Gulf Crane Services, to a Talos Energy platform. Sylvester alleges that he was injured during the transfer to the platform from the M/V MISS PEGGY ANN when the personnel basket swung rapidly causing Sylvester to slam violently into a box on the deck of the vessel. Sylvester brought this suit in federal court in Louisiana against Talos Energy, Wood Group, and Rodi Marine (owner/operator of the MISS PEGGY ANN). Talos Energy and Wood Group moved for summary judgment, asserting that both Sylvester and Spears were borrowed employees of Talos Energy and, therefore, both Talos Energy and Wood Group could not be held liable for the negligence of Spears because Sylvester is barred by the LHWCA from recovery for the negligence of a fellow servant. Sylvester argued that Wood Group had a greater burden than Talos because Talos only needed to prove that Sylvester was a borrowed employee of Talos, but Wood Group had to prove that both Spears and Sylvester were co-borrowed employees. Sylvester also argued that Louisiana law was applicable under the OCSLA, and that, under Louisiana law, Wood Group remained vicariously liable for the negligence of its nominal employee, Spears, even if he was found to be a borrowed employee of Talos Energy. Judge Hicks agreed that Wood Group would still be liable for the negligence of Spears, and then he turned to the application of the Ruiz factors to determine if Sylvester was a borrowed employee of Talos Energy. Judge Hicks found a fact question on the most important factor (which party had control of Sylvester), and the remaining factors were not overwhelmingly in favor of Sylvester being a borrowed employee. Therefore, Judge Hicks denied Talos Energy’s motion for summary judgment. He stated that the jury would resolve the disputed facts, and then the court would determine the borrowed employee status as a matter of law. See October 2024 Update.

Sylvester was injured on September 23, 2021, and he notified his wife about the incident by a text on that day. Sylvester produced text messages from that day, but the defendants sought text messages from his phone and his wife’s phone for a longer period. Magistrate Judge Whitehurst ordered that the defendants be allowed to examine the phones for text messages from September 23, 2021 to September 24, 2021, and the defendants retained Simon Varley, a forensic analyst, to search and collect text messages for those dates. Sylvester moved to strike Varley’s testimony because the defendants did not identify Varley as an expert (or produce an expert report), reasoning that Varley is an expert because he searched and extracted data with a specialized software and tool using his specialized knowledge. Judge Hicks answered that Varley was not acting as an expert in this case and that his testimony was purely about collection of evidence and e-discovery and not about the actual case. He was not given any details about the case or documents or depositions to review. He was not asked to testify whether the texts were fabricated or to interpret the messages. As long as he limited his testimony to the specific assignment from the defendants, the defendants did not have to disclose Varle as an expert or produce an expert report.

Sylvester was diagnosed with a blood clot and deep vein thrombosis, and he underwent a surgical procedure to remove the blood clots. He then began complaining of low back pain, and he underwent a lumbar fusion. However, the pain in his leg got worse, and an ultrasound revealed new blood clots in his left leg that caused swelling and pain. The defendants retained Dr. Chad Domangue as an expert in the fields of neurology and pain management, and he examined Sylvester and reviewed his medical records. Dr. Domangue opined that Sylvester’s symptoms were related to his vascular abnormalities and not his lumbar spine. Sylvester moved to strike Dr. Domangue’s opinion as exceeding the scope of his expertise. Sylvester argued that Dr. Domangue is not qualified to give an opinion regarding vascular issues, but Judge Hicks rejected that argument, citing his training in the diagnosis and care of vascular conditions. Sylvester also objected that Dr. Domangue failed to consider the opinions of the defendants’ vascular expert, but Judge Hicks answered that Dr. Domangue had reviewed the medical records, including imaging studies and narrative records. Finally, Sylvester argued that Dr. Domangue’s opinions were unsupported by reliable principles and methodology. However, Judge Hicks reasoned that experts in neurology and pain management consider alternate explanations for the patient’s symptoms, and his opinion on vascular issues being a potential causal factor was proper, stating: “It makes sense for an attending physician, like Dr. Domangue, to consider a vascular abnormality explaining Mr. Sylvester’s ongoing symptoms and swelling.” After considering the data from the records and examination, Dr. Domangue ruled out a lumbar injury as the cause of the clotting “because it did not fit the data.” Therefore, Judge Hicks held that there were no grounds to exclude the opinions of Dr. Domangue.

Judge declined to reconsider ruling that cooks and crane operators on a lift boat did not fall within the seaman exception in the FLSA to preclude recovery for overtime; Adams v. All Coast, LLC, No. 6:16-cv-1426, 2024 U.S. Dist. LEXIS 173964 (W.D. La. Sept. 25, 2024) (Summerhays).

Opinion

William Adams filed this collective action on behalf of himself and other employees who performed maritime jobs on All Coast’s lift boats, seeking overtime pursuant to the Fair Labor Standards Act. Adams contended that the workers “spent most of their time doing something completely terrestrial: operating cranes attached to the boats to move their customers’ equipment on and off the boats, the docks, and the offshore rigs” (the crane operators were joined in the action by cooks on the liftboats). All Coast contended that the crane operators (and cooks) fell within the seaman exclusion to the overtime rules in the FLSA, and Judge Milazzo agreed, reasoning that the work served the liftboats’ operation as a means of transportation (the second criterion promulgated by the Department of Labor to determine if an employee is a seaman). Judge Milazzo ruled that it did not matter whether the workers spent 10% or 100% of their time operating the crane, because crane operation is seaman’s work that aids the vessel as a means of transportation. However, Judge Clement, writing for a panel of the Fifth Circuit, noted that an example provided in the regulation stated that assisting in loading or unloading of freight at the beginning or end of a voyage was not connected with operation of the vessel as a means of transportation. The work performed by the crew was performed while the liftboats were stationary, never under weigh, so that the work was not seaman’s work by the language of the regulation. All Coast countered with dictionary definitions of the term seaman from the time of the enactment of the FLSA (because the term seaman is not defined in the FLSA), asserting that the Department of Labor regulations are only persuasive and do not have the force of law. However, after reviewing the various definitions, Judge Clement concluded that they reinforced the thrust of the regulations that a seaman’s duty must serve the ship’s operation “as a ship.” As the work was performed when the liftboats were jacked up, Judge Clement answered that the workers were not engaged in seaman’s work when operating the cranes. The case was therefore remanded to Judge Milazzo to re-evaluate the work performed by the employees. The ruling on the crane operators implicated the summary judgment on the claims of the cooks as well. The Fifth Circuit has held that cooks are usually seamen under the FLSA because they cook for seamen. As the ruling that the crane operators were seamen was reversed, Judge Milazzo would have to reconsider the status of the workers for whom the cooks were cooking. That would include an analysis of whether the cooks were cooking for other workers or passengers on the liftboats and the amount of time spent cooking for seaman and non-seaman (but the court should not conflate the FLSA determination with the duration test enunciated by the Supreme Court in Chandris v. Latsis in deciding whether a worker is a Jones Act seaman). See March 2021 Update.

All Coast sought rehearing en banc, but the full Fifth Circuit declined to grant rehearing en banc. The court did withdraw the previous opinion and Judge Clement issued a substituted opinion in which she held that the crane operators were seamen when they performed nautical tasks when the lift boats were under weigh and even when the boats were jacked up. However, their duties operating the cranes were not the work of seamen for the FLSA, distinguishing work for the upkeep or maintenance of the boats or cranes. Essentially, the workers “were not performing duties that were necessary to the operation of the liftboats as boats, but merely as platforms for the hydraulic cranes.” With respect to the cooks, Judge Clement noted that a cook is a seaman when he cooks for seamen. On remand, Judge Milazzo will have “to determine how much time the cooks spent preparing food for the crew when they were not performing seamen’s work, and how much time they spent preparing food for non-crew members.” Judge Jones, joined by Judge Elrod, dissented, reasoning that “crane operations are a sine qua non of the liftboat’s function as a means of transportation.” She believed that the court’s holding upended the longstanding expectations as to the seaman exemption and cautioned that the “splice and dice” interpretation of the exemption rendered it “practically worthless.” See November 2021 Update.

Back in the district court, All Coast filed another motion for summary judgment, arguing that an expanded summary judgment record revealed that the decision of the Fifth Circuit “was clearly wrong” because the vessel-based crane operation performed by the workers was seaman’s work. Judge Summerhays found the argument to be problematic as the Fifth Circuit had explicitly held that the workers were not performing seamen’s work when they were operating the cranes, and the argument was now “plainly foreclosed.” All Coast also argued that the Supreme Court’s decision in Loper Bright (see July 2024 Update) overruled the deference given by the Fifth Circuit to the Department of Labor’s interpretive regulations with respect to the term “seaman” as used in the FLSA. Judge Summerhays rejected the argument, answering that the Fifth Circuit did not rely on Chevron deference (overruled in Loper Bright) in its decision in this case. Accordingly, Judge Summerhays denied the motion for summary judgment.

Judge dismissed negligence claims of oyster grower against vessel owner for failing to establish the when, where, and how the specific owner damaged the oyster beds, but the oyster grower pleaded a trespass claim that survived a motion to dismiss; In re Sunland Construction Co., No. 2:23-cv-1665, 2024 U.S. Dist. LEXIS 174216 (E.D. La. Sept. 26, 2024) (Guidry).

Opinion

Michael Bianchini brought suit in state court in Plaquemines Parish, Louisiana against Sunland Construction and Venture Global Gator Express, seeking to recover for damage to oyster leases in the coastal waters of Plaquemines Parish allegedly caused by dredging, pile driving, and other activities during the construction of natural gas pipelines in the vicinity of his oyster leases. Venture Global removed the suit to federal court in Louisiana (based on the original admiralty jurisdiction of the federal court) where it was consolidated with a limitation action filed by Sunland Construction. Michael Bianchini moved to remand the case, arguing that original admiralty jurisdiction is not a basis for removal and, following the majority of district courts (the issue remains unresolved in the Fifth Circuit as noted in the N&W Marine case, see February 2024 Update), Judge Guidry remanded the case to state court. See April 2024 Update.

The claim of Raymond Bianchini, Jr., in Sunland’s limitation action was still pending, and Sunland moved to dismiss the claim for failure to state a claim. Sunland relied on the decision in Shelley v. Hilcorp (see August 2023 Update) in which Judge Fallon dismissed the complaint of oyster growers because they did not provide the “when, where, what, or why, or how” any specific defendant “individually caused damage to the plaintiffs’ oyster beds.” The Fifth Circuit agreed that the oyster growers were unable to allege “which of the approximately eighteen Defendants were negligent” in In re Settoon (see August 2024 Update). Although Bianchini tried to distinguish the cases, asserting that he had clearly attributed negligence to Sunland, Judge Guidry noted that Bianchini identified 16 other vessels that did not belong to Sunland, and there were no specific dates or time frame to explain when Sunland allegedly damaged the leases (the complaint also failed by alleging only conclusory facts on Sunland’s negligence). Therefore, the negligence count was dismissed with leave to replead. However, Judge Guidry did not dismiss the claim for a civil trespass, concluding that the allegation that each vessel purposefully navigated into Bianchini’s waters without permission, causing damage to his oyster beds, was sufficient to allege a trespass claim under Louisiana law.

Judge declined to strike opinions of experts for beneficiaries of Navy sailor who died from mesothelioma allegedly caused by the defendants’ products; fact issues as to the government’s knowledge of the dangers of asbestosis resulted in denial of summary judgment on the government contractor defense for the failure to warn claim; punitive damages, loss of consortium, pain and suffering, and loss of future earnings were not available in wrongful death case brought by the beneficiaries of Navy sailor; Judge granted summary judgment to the plaintiffs on the defendants’ sophisticated user/intermediary and superseding cause defenses; Smargisso v. Air & Liquid Systems Corp., No. 23-cv-1414, 2024 U.S. Dist. LEXIS 174828 (N.D. Cal. Sept. 26, 2024) (Lin).

Opinion

As part of his service in the Navy as a boiler technician on the USS HOLLISTER, William Ankiel, Jr., operated the boilers in the fire rooms, repaired valves, pumps, and boilers, and cleaned machinery spaces. He was diagnosed with mesothelioma in 2022 and passed away shortly thereafter. His beneficiaries brought this suit in federal court in California against equipment suppliers, alleging that Ankiel’s mesothelioma was caused by exposure to asbestos while handling insulation, gaskets, and packing manufactured by the defendants. Defendant Warren Pumps objected to the opinions of Dr. David Zhang on the basis that he relied on the “every exposure” theory (every exposure to asbestos, no matter how small, contributes to the total dose and is a substantial factor in causing disease). Judge Lin disagreed, reasoning that just because he did not perform a quantitative dose reconstruction did not mean that his opinion was deficient. Judge Lin reasoned that Dr. Zhang’s testimony was useful in combination with the testimony of Dr. Perry Gottesfeld about the total amount of fibers inhaled by Ankiel from each of his activities on the ship (allowing the jury to decide whether the level of cumulative exposure was high enough to have been a substantial factor in causing Ankiel’s mesothelioma. Judge Lin also found sufficient Dr. Zhang’s opinion that “cumulative significant exposures to each company’s asbestos-containing products substantially contributed to the development of [Ankiel’s] malignant mesothelioma.” Judge Lin rejected the objection to the use of Dr. Marty Kanarek as a general causation expert. Although Dr. Kanarek did not provide a quantitative dose reconstruction, he detailed the relationship between asbestos and mesothelioma, and the jury could combine his testimony with witness testimony on the number of times Ankiel performed operations and the proportion of equipment belonging to each defendant to get an estimate of the total dosage to which Ankiel was exposed. Similarly, Judge Lin denied Warren’s objections to Dr. Perry Gottesfeld and Dr. Arnold Brody with respect to the contribution of asbestos exposure to the development of disease because the experts did not say that each exposure was a substantial factor in developing the disease. Warren and IMO (formerly DeLaval) moved for summary judgment on the merits of Ankiel’s claims, but Judge Lin found sufficient evidence that Ankiel was exposed to their asbestos-containing products and exposure to each of their products was a substantial factor in Ankiel’s development of mesothelioma. Warren moved for summary judgment on the claims for failure to warn and design defect based on a government contractor defense. The plaintiffs did not oppose the motion with respect to design defect, and Judge Lin granted summary judgment on that claim. However, with respect to failure to warn, the parties produced conflicting evidence about the government’s knowledge of the dangers of asbestos, resulting in denial of the motion on the failure to warn claim (and denial of the plaintiff’s cross-motion). Judge Lin then addressed the defendants’ motion for summary judgment on the damages that are recoverable by the plaintiffs, Ankiel’s successor in interest and children. Judge Lin concluded that the claims for punitive damages were not historically available for negligence and strict liability claims, and that non-pecuniary losses were not available in the parallel Jones Act claim. As the suit was brought for wrongful death, for the losses sustained by the plaintiffs, Judge Lin held that loss of future earnings and pain and suffering were not recoverable. Finally, Judge Lin granted summary judgment to the plaintiffs on the defendants’ sophisticated user/intermediary and superseding cause defenses.

Magistrate Judge declined to decide applicability of Himalaya Clause and Clause Paramount on a motion to dismiss; Frutera Agrosan Export SPA v. GT USA Wilmington, LLC, No. 23-cv-248, 2024 U.S. Dist. LEXIS 176108 (D. Del. Sept. 27, 2024) (Fallon).

Opinion

Frutera Agrosan is an exporter of grapes from Chile. It claims that 16 shipments of grapes in March and April of 2022 from Chile to Wilmington, Delaware were damaged because terminal operator GT USA Wilmington failed to fumigate and timely deliver the grapes. Frutera brought this suit in federal court in Delaware against GT USA and others, pleading five counts against GT (breach of duties as a marine terminal operator, warehouseman, and bailee; negligence, breach of contract; breach of duties as a logistics broker; and breach of the warranty of workmanlike service). GT USA moved to dismiss the claims against it for failure to state a claim (arguing that the Carriage of Goods by Sea Act preempted all of Frutera’s state and common law claims), and Magistrate Judge Fallon noted that similar suits were filed by Chilean grape shippers against carriers and receiving ports, and the cases were transferred to and consolidated in the United States District Court for the Southern District of New York (where motions to dismiss are pending). GT USA argued that COGSA applied to all downstream entities (including GT USA) for the post-discharge period via a Himalaya Clause and a Clause Paramount in the Sea Waybills. Frutera responded that the Sea Waybills incorporated Chilean law, not COGSA, and that the Sea Waybills did not extend to GT USA. Magistrate Judge Fallon declined to resolve this dispute on a motion to dismiss, reasoning that she would have to assess the intent of the parties to determine whether Chilean law or COGSA was meant to apply to the Sea Waybills (she cited the language in Kirby that a contract of carriage must be construed “consistent with the intent of the parties”). She concluded that GT USA’s arguments “are best left for determination upon a more fully developed factual record.”

Judge dismissed seaman’s claims for nonpecuniary damages for mental anguish, bodily injury/disfigurement, and punitive damages that were unrelated to his maintenance and cure claim, and he granted summary judgment on the unseaworthiness claim for a land-based injury that was caused by the placement of a D-ring by a shoreside crew; opinions of safety expert on the tripping hazard were excluded as within the common understanding of the jury;  opinion of economist with respect to future wage loss was improper because the increase in wages doubly accounted for inflation, and his opinion as to wage loss after the seaman reaches 61 was inadmissible unless there was evidence that the seaman would have worked past 61; Sanders v. Weeks Marine, No. 23-cv-7317, 2024 U.S. Dist. LEXIS 176748 (E.D. La. Sept. 27, 2024) (Ashe).

Opinion

Pedro Sanders claims that, while serving as a seaman on the dredge JS CHATRY, operated by Weeks Marine, he tripped and fell over a D-ring while retrieving supplies from a shack on land (Sanders asserts that the supply shack is pulled into place at the worksite using D-rings that are supposed to be buried). Sanders brought this suit in federal court in Louisiana against Weeks Marine under the Jones Act and general maritime law, seeking to recover economic loss and medical expenses as well as mental anguish, pain and suffering, bodily impairment and disfigurement, punitive damages, and attorney fees. Weeks Marine moved to dismiss the claims for nonpecuniary damages that are not available to a Jones Act seaman (specifically, mental anguish and bodily impairment/disfigurement) and the claim for unseaworthiness (as the accident occurred on land). Weeks Marine also moved to exclude or limit the opinions of Sanders’ safety expert, Robert Borison, and his economic loss expert, Max Lummis. Judge Ashe agreed with Weeks Marine’s damage arguments, dismissing the claims for mental anguish (but not pain and suffering), bodily impairment and disfigurement, and any other nonpecuniary damages (excluding those related to his claim for maintenance and cure). In support of his unseaworthiness claim, Sanders argued that the land-based shack was put in place by the crew of the dredge without conducting a job safety analysis, which was evidence of an improperly trained crew—an unseaworthy condition. Judge Ashe disagreed with Weeks Marine that the unseaworthiness remedy was foreclosed simply because the accident occurred on land; however, he noted that no appurtenance of the ship was involved in the accident. As to the claim of an unseaworthy crew, Judge Ashe responded that Sanders testified that it was a shoreside crew that set up the shack, and he added that the lack of a job safety analysis is not evidence of an incompetent crew. Therefore, Judge Ashe granted summary judgment on the unseaworthiness claim. Turning to the experts, Borison opined that Weeks Marine failed to provide Sanders with a safe place to work because it did not remove or bury the D-ring. Judge Ashe agreed with Weeks Marine that the tripping hazard from the D-ring was not highly technical or hard to understand and was within the common understanding of the jury. Therefore, he excluded Borison’s opinions. Finally, Weeks argued that Lummis’ opinions about Sanders’ future lost wages should be excluded because he doubly accounted for inflation (he increased Sanders’ wages by .83% per year and then applied a .56% discount rate). Weeks Marine also argued that Lummis should not be permitted to testify to lost wages beyond Sanders’ statistical work-life expectancy of 61 years because there was no evidence that he would work longer. Sanders responded that it was proper to increase Lummis’ wages by .83% to account for both individual and broad societal forces or, alternatively to use a revised calculation with no wage growth but a modified discount rate. Judge Ashe agreed that Lummis’ calculation doubly accounted for inflation because the increase was based on a statistical wage growth rate developed by the Bureau of Labor Statistics that is inflation-adjusted. That analysis violated the Fifth Circuit’s Culver II decision that allowed consideration of wage increases as a result of factors other than inflation. As the calculations were “wrong as a matter of law,” Judge Ashe held that they must be excluded. However, in the interest of justice, he gave Lummis 14 days to amend his report using proper methodology, and he gave Weeks Marine 14 days to obtain an amended report as well as the opportunity to re-depose Lummis. As to the work-life expectancy, Judge Ashe held that Lummis could testify as to lost wages up to ages 62 and 70 if Sanders first presents evidence that he would work past his statistical work-life expectancy.

Vessel owner’s failure to disclose two DUI convictions in application for insurance for his vessel voided the coverage; Accelerant Specialty Insurance Co. v. Bida, No. 23-cv-10069, 2024 U.S. Dist. LEXIS 177510 (S.D. Mich. Sept. 29, 2024) (Goldsmith).

Opinion

Michael Bida submitted an application for insurance for his vessel to Concept Special Risk, seeking a policy with Accelerant Specialty Insurance on his vessel, the BLUE BIRD. The application asked if the owner or any named operator had ever been convicted of a criminal offense, and Bida answered “no.” He also denied any convictions in the section specific to operators. Accelerant issued the policy on the vessel, and a month after the coverage began, Bida reported that the vessel ran aground near Cucumber Island, off the coast of Georgia. During Accelerant’s investigation of the loss, it discovered that Bida had two criminal convictions, a DUI in Arizona in 2004 and a DUI in Arizona in 2006. When asked why he did not disclose the convictions, Bida answered that his legal counsel told him the convictions would be removed from his record after seven years, so he believed there was no reason to disclose something that was not on his record. Although a third-party claims administrator initially advised that Accelerant would proceed with settlement, that advice was retracted and Bida was told that the materiality of the undisclosed convictions would be submitted to the underwriters. The underwriters found the nondisclosure to be a material misrepresentation, and Accelerant denied the claim and brought this suit in federal court in Michigan, seeking a declaration that the policy was void (Bida counterclaimed for breach of contract). Accelerant moved for summary judgment, and Judge Goldsmith noted that the policy contained a choice-of-law clause for New York law in the absence of well-established, entrenched principles of admiralty law. The parties did not dispute the application of admiralty law, and Judge Goldsmith applied maritime law to evaluate whether Biden violated the doctrine of uberrimae fidei and whether the violation voided coverage. As Biden did not dispute that he failed to disclose the convictions, the only issue to be resolved was whether the nondisclosure was material. Accelerant provided an excerpt from its underwriting manual, stating that it “should not consider offering insurance for anyone with drug or alcohol convictions including driving under the influence of alcohol unless there is an extenuating circumstance and a Director has agreed to our offering terms.” Bida argued that the language of the excerpt was not conclusive, but Judge Goldsmith distinguished wording in other cases and held that the language in this case was indicative of materiality. Accelerant also submitted the declaration of the managing director/senior underwriter for Concept who testified that DUIs are always material and, at the very least, an additional premium would be charged. He stated that if Bida had truthfully disclosed the convictions, he would have been charged approximately 10% more in premium. Bida objected to the declaration as self-serving, but Judge Goldsmith believed it was competent and admissible and sufficient to establish materiality. Judge Goldsmith also rejected Bida’s argument that the testimony was inadmissible because the underwriter had not been identified as an expert witness, answering that his testimony was admissible as lay opinion. Bida also argued that the application was confusing because the application contained a separate request for violations/suspensions (including auto) in the past five years. He argued that it was reasonable to assume that the insurer was only seeking convictions in the past five years. However, Judge Goldsmith noted that there were two questions about convictions that contained no time limit, and it was unreasonable to believe that the limit in the question on violations/suspensions would apply to the unlimited request for criminal convictions. Finally, Judge Goldsmith rejected the argument that there was a fact question on materiality in light of the initial statement of the claims adjuster. The adjuster explained that it was not his role to determine materiality and that he was simply mistaken in his initial report. His mistake was not evidence of materiality. Therefore, Judge Goldsmith granted summary judgment to Accelerant that the policy was void, and he stated that the ruling should also apply to Bida’s counterclaim, despite the fact that Accelerant did not file a motion for summary judgment on the counterclaim. Judge Goldsmith gave Bida 10 days to file a memorandum explaining why the counterclaim should not be dismissed, and Bida did not file a memorandum.

Judge excluded expert opinions on causation in BELO claims of workers involved in cleanup after the Macondo/DEEPWATER HORIZON spill and granted summary judgment on their claims in the absence of expert evidence; In re Deepwater Horizon Belo Cases (Wesley Covert, Jeffrey Lawrence, Taurus Lewis Gill McGee), Nos. 3:19-cv-963, 3:21-cv-3287, 3:23-cv-59, 3:22-cv-18367, 3:18-cv-2364, 2024 U.S. Dist. LEXIS 176462 (N.D. Fla. Sept. 30, 2024); In re Deepwater Horizon Belo Cases (Culliver), Nos. 3:19-cv-963, 3:21-cv-4942, 2024 U.S. Dist. LEXIS 177707 (N.D. Fla. Sept. 30, 2024) (Rodgers).

Opinion Covert, Lawrence, Lewis, McGee

Opinion Culliver

Wesley Covert, Jeffrey Lawrence, Taurus Lewis, and Gill McGee claim that they suffer from chronic dermatitis or eczema allegedly caused from exposure to toxic chemicals during their performance of cleanup work on the Florida Gulf Coast after the Macondo/DEEPWATER HORIZON blowout and spill. Vincent Culver claims that he contracted prostate cancer that was caused by his work in the cleanup of the spill. The workers filed Back-End Litigation Option cases against BP to recover for their injuries, and these cases were transferred to the federal court in Florida. BP moved to exclude the opinions of the workers’ general causation experts and for summary judgment, and Magistrate Judge Cannon recommended the granting of the motions. The workers objected to Magistrate Judge Cannon’s recommendations, and Judge Rodgers began with analysis of the experts. Covert, Lawrence, Lewis, and McGee designated two general causation experts, Dr. Peter Elsner, who has expertise in dermatoxicology and epidemiology, and Dr. Michael Freeman, a forensic epidemiologist. Dr. Elsner opined that exposure to petroleum compounds and dispersants (and their aerosols) may cause acute dermatitis that may develop into chronic dermatitis over time. Dr. Freeman opined that there is a general causal relationship between exposure to the chemicals released into the environment during the spill and an increased risk of chronic eczema and dermatitis. Magistrate Judge Cannon recommended exclusion of the opinions because the epidemiological evidence only addressed acute dermal outcomes and not chronic disease. Although the experts stated that the connection between the acute condition and the chronic condition was well-recognized and made common sense, there was no supportive scientific evidence. Additionally, the experts failed to prove the harmful level of exposure required for general causation. Therefore, Judge Rodgers agreed with the recommendation that the opinions should be excluded. The workers finally argued that the court should apply a lesser “featherweight” causation standard instead of the maritime “substantial factor” standard, but Judge Rodgers rejected the featherweight standard for toxic tort cases. Turning to the experts in the Culliver case, Dr. Benjamin Rybicki (epidemiologist) and Dr. James J.J. Clark (toxicologist), Magistrate Judge Cannon identified flaws in Dr. Rybicki’s methodology. As there is an absence of a strong association between exposure to polycyclic aromatic hydrocarbons (PAHs) and prostate cancer in the epidemiological literature, Dr. Rybicki relied on insufficient secondary methodologies. Additionally, the studies had dissimilar exposure scenarios, varying PAH chemical mixtures, and long-term high-dose exposures, and he failed to identify a harmful level at which PAHs can cause prostate cancer in humans. Culliver responded that there are not more relevant epidemiological studies that have been completed, but Judge Rodgers responded that “the fact that the science to support his claim does not yet exist is no excuse in the Daubert context.” Culliver also argued that Dr. Rybicki should not be required to identify a threshold harmful dose of PAH exposure because he relied on epidemiology, but Judge Rodgers answered that even epidemiology requires consideration of a dose-response relationship. Judge Rodgers explained that a precise numerical threshold is not required; however, “there must be at least some general level or range identified in the scientific literature at which the exposure becomes harmful to human health.” Although there was no need to address specific causation in light of the absence of evidence of general causation, Judge Rodgers did agree with Magistrate Judge Cannon that Culliver’s experts, Dr. Rybicki and Dr. Clark, failed to satisfy the specific causation standard. In the absence of evidence of causation, Judge Rodgers affirmed the summary judgment recommendations on the BELO claims of Covert, Lawrence, Lewis, McGee, and Culliver.

Unseaworthiness of the barge involving wastage in the hull (and not towing the vessel beyond its navigation limit in the Gulf of Mexico) was the cause of the capsizing of the barge, resulting in exoneration of the tug; In re LA Carriers, LLC, No. 22-cv-4987, 2024 U.S. Dist. LEXIS 176735 (E.D. La. Sept. 30, 2024) (Papillion).

FOF/COL

This litigation arises from the capsizing of the barge, D/B AMBITION, in the Gulf of Mexico while in tow of the tug, M/V KAREN KOBY, owned by LA Carriers. LA Carriers bought this suit in federal court in Louisiana, seeking exoneration/limitation of liability, and Rigid Constructors, owner of the barge, filed a claim for the loss of the barge, salvage costs, and loss of future income. The case was tried by Judge Papillion, who announced his findings of fact and conclusions of law, concluding that LA Carriers was entitled to exoneration from liability. Rigid created the AMBITION in 2020 by mounting an e-crane material handler on top of two mated deck barges. A few months later there was corrosion/wasting on a bottom plate, and Rigid welded a steel box over one corroded area, while epoxy was placed over other areas. In 2022, a metal box was welded over a split in the port bow after the barge struck a rock jetty. Prior to June 2022, the barge had been towed by several companies, including in the Gulf of Mexico, without incident. LA Carriers already knew from a tow in February 2022, that the barge was not ABS certified, did not have a Plimsoll line on its hull, and would have to be towed “near coastal” with conditions that do not exceed 4-6 feet on a voyage that is not longer than 48 hours. LA Carriers was contacted in June of 2022 to tow the AMBITION in the Gulf of Mexico between the Calcasieu River jetties and the Southwest Pass at the entrance to the Mississippi River and then to Myrtle Grove. As an uninspected barge with no load line, the barge was restricted to transiting within 12 nautical miles of the coast (although the Captain of the KAREN KOBY, Chester Murphy, believed the limit was 25 miles). The tow proceeded more than 12 miles from the coast, but it encountered mild conditions of 2 to 4 feet. Early in the morning of the second day of the tow, the movement slowed, and the crew discovered that the barge was listing. Half an hour later, the barge capsized to port in approximately 50 feet of water, approximately 18 nautical miles from the Louisiana coast. Judge Papillion began by noting that when a barge sinks in calm water for no immediately ascertainable cause, in the absence of proof of improper handling, the sinking is presumed to be the direct result of its unseaworthiness. He found credible the testimony of an expert in metallurgical engineering and failure analysis who examined the barge after it capsized, performed ultrasonic testing on its hull, and discovered severe metal wastage that included a corrosion hole that was about 25 feet long. Judge Papillion concluded that the cause of the failure of the AMBITION was its unseaworthiness due to corrosion and wastage and not because of the pounding effect of rough seas. Thus, he found that any violation of a rule or statute by taking the barge more than 12 miles offshore was not the cause of the capsizing. Judge Papillion noted that if unseaworthiness of the towed vessel is apparent or disclosed, the tug has a duty to take reasonable steps to determine the condition and take action to save the tow. However, he found that the condition was latent and that LA Carriers did not have a legal duty to conduct the type of inspection that would have revealed the latent defects. As the cause of the loss was the unseaworthiness of the barge, Judge Papillion exonerated LA Carriers.

Judge found that seaman’s affidavit in response to his employer’s motion for summary judgment was not so inconsistent with his deposition testimony to be excluded as a sham and presented a fact question of negligence and unseaworthiness (and resulted in denial of summary judgment on the Primary Duty Doctrine); use of prescription medication on the vessel for the seaman’s long-standing back injury was not willful misconduct for denial of his claim for maintenance and cure; Catlett v. Atlantic Capes Fisheries, Inc., No. 1:23-cv-1941, 2024 U.S. Dist. LEXIS 176900 (D.N.J. Sept. 30, 2024) (O’Hearn).

Opinion

Larry B. Catlett, Sr., a commercial fisherman who began oystering at the age of 17, has a history of back pain. An MRI in 2015 reflected degenerative changes in his low back before he went to work for ACF Salt Oyster Co. in 2018. Although he was referred to as “deck boss,” Catlett worked alongside the crewmembers with the sleds that contained the hexcyls where the oysters are placed to grow. He started taking Percocet in June 2020 for constant low back and right leg pain, but his patient relationship with the prescribing medical center was terminated when he tested positive for Hydrocodone which the medical center had not prescribed. After August 2021, Catlett was treated at a different facility, and there was no evidence of noncompliance with his prescription medication. An MRI in September 2021 revealed multilevel disc disease and facet arthropathy with multilevel foraminal narrowing. The incident involved in this case occurred a year later on August 2, 2022, when Catlett claims he hurt his back while harvesting oysters from a sled. He testified in his deposition that he was pulling hexcyls in and out of the wheel; however, he later asserted that he was injured while pushing and pulling the wheel. Catlett took a Percocet before he began working and another around lunchtime. Catlett brought this suit in federal court in New Jersey against ACF Salt Oyster as a seaman under the Jones Act and general maritime law, and ACF Salt Oyster sought summary judgment on the Jones Act, unseaworthiness, and maintenance and cure claims. ACF Salt Oyster first argued that Catlett’s certification, in opposition to the motion for summary judgment, should be stricken under the sham affidavit rule as it contradicted his prior deposition testimony. Judge O’Hearn reviewed the statements and agreed that Catlett testified in his deposition that he was injured while attempting to remove one of the hexcyls and stated in his certification that he was injured while pushing and pulling on the wheel. However, Judge O’Hearn did not believe that the certification was so different from and contradictory that it should be stricken. She considered the certification to amplify the statements made by Catlett in the initial Incident Report that he was injured pushing and pulling wheels that would not turn. His employer could have asked about inconsistencies in the deposition but did not try to clarify the differences. She held that the inconsistencies were for the fact finder to decide (Judge O’Hearn did strike portions of his certification that were not based on personal knowledge or were legal or expert conclusions). With respect to negligence, ACF Salt Oyster argued that because Catlett testified in his deposition that he injured himself pulling and pushing on a hexcyls, the theory raised in his sham certification should be disregarded. Having rejected the objection to the certification, Judge O’Hearn found a fact question whether Catlett was injured while pushing and pulling on a wheel that would not turn (along with the similar statement in the Incident Report). Judge O’Hearn also rejected the “selective overview” submitted by ACF Salt Oyster to argue that Catlett did not suffer an injury from the incident on August 2, finding evidence of aggravation of his long-standing back problems. Finally, ACF Salt Oyster argued that Catlett’s claim that he had not been trained in the safe manner to harvest oysters and clean the hexcyls failed because he was trained and, in fact, it was Catlett who trained other crew members. Catlett admitted that he trained the new crew members; however, he denied that he had personally received training, and Judge O’Hearn found a fact question whether his employer was negligent. The same lack of training together with the condition of the sled described in the certification, were used by Judge O’Hearn to deny summary judgment on the unseaworthiness claim. In opposition to the claim for maintenance and cure, ACF Salt Oyster argued that Catlett did not suffer an injury in the incident, he committed misconduct by working on the vessel in violation of Coast Guard regulations by taking Percocet while working, and he concealed his back injury. Judge O’Hearn’s prior ruling with respect to aggravation answered the first argument, and she rejected the assertion that the use of Percocet violated governmental regulations as the regulations involved drug testing protocols. Judge O’Hearn did not believe that the use of Percocet was sufficient to constitute willful misconduct because the defendant did not have a policy precluding use of medication while working and did not proffer any medical or expert opinion for a link between the taking of the medication and the injury. As to concealment, ACF Salt Oyster did not inquire about Catlett’s medical condition when it hired him, and it certainly became aware of the condition during his employment as he had back pain while he worked and took medication in front of the crew while he was working. Finally, ACF Salt Oyster cited the Primary Duty Doctrine to argue that his negligence as the deck boss in failing to delegate tasks to co-workers was the cause of his injury. Judge O’Hearn noted the narrowing of the Doctrine in several circuits to apply only where the plaintiff’s injury is solely caused by a breach of his employment duty. Although the Third Circuit has not addressed the viability of the doctrine, Judge O’Hearn believed that there were disputed facts about whether Catlett assumed a duty and as to the cause of his injury. Therefore, summary judgment was not appropriate.

Judge agreed with recommendation for denial of the motion for summary judgment of the supplier of helicopters on which the Navy mechanic worked that allegedly contained asbestos that caused his fatal lung cancer and denial of summary judgment on the government contractor and derivative sovereign immunity defenses; McInnis v. Hexcel Corp., No. 1:22-cv-1087, 2024 U.S. Dist. LEXIS 176995 (D. Del. Sept. 30, 2024) (Noreika).

Opinion

Malcolm A. McInnis served as a naval helicopter mechanic on the USS MIDWAY, ENTERPRISE, NEW ORLEANS, and RANGER, repairing Sikorsky SH-3 helicopters at sea and at naval bases. The helicopters allegedly contained component parts made with asbestos that McInnis would routinely handle and replace. McInnis was diagnosed with lung cancer and died, and his widow brought suit in state court in Philadelphia, Pennsylvania against suppliers of products that allegedly contained asbestos. The case was removed to federal court in Pennsylvania and was transferred to the federal court in Delaware. Sikorsky and Hexcel moved for summary judgment, and Magistrate Judge Fallon noted that the parties agreed that the claims were governed by maritime law when McInnis worked on naval vessels and under California law when he worked on naval bases. Hexcel argued that the plaintiff had not presented evidence that McInnis worked in the vicinity of its adhesives or honeycomb core during his time in the Navy or that any honeycomb to which he may have been exposed contained asbestos. The plaintiff produced evidence that McInnis had worked with Hexcel products, but the witnesses could not identify specific Hexcel products that contained asbestos. Accordingly, Magistrate Judge Fallon recommended that Hexcel’s motion be granted. Judge Fallon found sufficient facts of exposure to asbestos-containing materials used in the helicopters to deny Sikorsky’s motion. Sikorsky objected that the testimony relied on by the plaintiff was hearsay because the witness learned the parts contained asbestos through parts manuals that had not been produced in discovery. However, Magistrate Judge Fallon held that hearsay statements can be considered in response to a motion for summary judgment if they are capable of admission at trial. Magistrate Judge Fallon also found sufficient evidence that Sikorsky did not supply a bare-metal helicopter and that the helicopters were equipped with asbestos-containing components. Therefore, she recommended denial of Sikorsky’s motion. Magistrate Judge Fallon then addressed Sikorsky’s government contractor (Boyle) and derivative sovereign immunity (Yearsley) defenses. She found fact disputes that caused her to recommend denial of both defenses (noting that “ordinarily . . . defendants are not entitled to summary judgment pursuant to the government contractor defense”). Finally, Magistrate Judge Fallon recommended granting the defendants’ motion to exclude Dr. Peter Tkacik (mechanical engineer) as an expert because he lacked experience in industrial hygiene, occupational health, or material science as it relates to asbestos and because he did not review materials, such as drawings or specifications for the alleged asbestos-containing component parts of the helicopter, but she recommended denial of the defendants’ objections to the expert opinions of Dr. Arthur Frank, a board-certified physician in the field of Internal and Occupational Medicine and an expert on disease caused by asbestos, and Dr. Jonathan Gelfand, a practicing pulmonologist who has been giving expert testimony since the 1990s. See September 2024 Update.

Sikorsky objected to the recommendations of Magistrate Judge Fallon, and Judge Noreika rejected each of the objections. Sikorsky again argued that the evidence for asbestos content of components was based on hearsay in parts manuals and other sources. However, Judge Noreika held that it was not necessary to address that issue because the record contained evidence sufficient to support the inference that the helicopter parts contained asbestos. Judge Noreika also held that there was sufficient evidence for the fact finder to infer that Sikorsky “required” the use of asbestos-containing products for its helicopters to work as intended, giving rise to a duty to warn regarding asbestos-containing parts it did not manufacture or supply under the test set forth in Air & Liquid Systems v. DeVries. Finally, Judge Noreika agreed with Magistrate Judge Fallon that there were fact disputes that resulted in denial of Sikorsky’s government contractor defense and derivative sovereign immunity defense.

Maritime law allows a standalone contribution claim without having to plead a separate tort claim; Paulk v. Tennessee Valley Authority, Nos. 5:22-cv-15, 5:22-cv-105, 5:22-cv-114, 2024 U.S. Dist. LEXIS 177333 (N.D. Ala. Sept. 30, 2024) (Maze).

Opinion

The Tennessee Valley Authority is a corporate instrumentality of the United States that is statutorily charged with the development and regulation of the Tennessee River system, including the Guntersville Reservoir (a large impoundment on the Tennessee River in northeast Alabama). The TVA acquired real estate outside the original river channel property and then deeded some of the property to Jackson County, Alabama by an Indenture. The Indenture gave Jackson County the right to construct and maintain piers, docks, and other facilities on the property and in the abutting water. The Indenture reserved to the United States the right to enter the area to carry out any functions, activities, or programs provided for in the TVA Act and that the TVA was liable for injuries or property damaged caused by the sole negligence of the TVA. As part of Jackson County Park and Marina, Jackson County designed, built, owned, operated, and maintained Dock B, a wood-framed covered dock with a metal roof and two uncovered and 36 covered slips. The DIXIE DELIGHT, a 43-foot liveaboard houseboat owned by Tim Parker, was berthed in slip 36 of Dock B—the slip closest to the shore. A fire broke out on the vessel, and the fire spread to neighboring vessels and to Dock B. As the fire spread to the dock, it prevented occupants of vessels located farther from shore from using the dock to make it to shore, resulting in injuries and deaths. The fire originated in the inner walls within the hull of the DIXIE DELIGHT between the electrical panel and its storage closet. Each of the slips on Dock B had a breaker box and a meter box to deliver and meter electricity. Jackson County had performed maintenance work on the slip 36 breaker box less than two weeks before the fire. Suits were filed in federal court in Alabama against the TVA, seeking to recover for the injuries, deaths, and property losses, and suits were also filed against Jackson County and others in Alabama state court. The TVA moved to dismiss the federal suits for several reasons. The TVA argued that the plaintiffs could not hold it liable as owner of the dock or submerged land, but Judge Maze did not have to address the issue of whether the TVA owned the dock because the plaintiffs alleged that it owned, managed, and/or controlled the dock. Noting that the contractual agreements gave the TVA rights of inspection, that the TVA performed inspections, and that the plaintiffs alleged that the TVA voluntarily assumed a duty to warn of hazards based on findings from its inspections, Judge Maze concluded that the plaintiffs had alleged enough facts to support a finding of control of the dock by the TVA to survive a motion to dismiss. The TVA next argued that the Indenture with Jackson County provided that the TVA would not be liable for injuries, deaths, or property damage unless caused by the sole negligence of the TVA. As the plaintiffs brought suits alleging the negligence of both the TVA and the County and the negligence of the TVA was based on the deficiencies in the construction and operation of the dock by the County, the TVA argued that the incident could not have resulted from the sole negligence of the TVA and the claims against the TVA had been released. Judge Maze responded that the Indenture was an indemnification agreement from the County and not a release of third parties. Additionally, Judge Maze reasoned that it would be redundant for the County to indemnify the TVA from liability to third parties if the third parties had released the TVA from that liability. Judge Maze also rejected the argument that the plaintiffs’ entry onto Dock B was under the County’s title, so the plaintiffs could have no rights against the TVA that are greater than the rights of the County. He could not conclude that the language extended beyond the County and, at most, provided that the County would indemnify the TVA for the injuries/damages. Additionally, Judge Maze reasoned that, even if the language did operate as a release, the sole negligence exception precluded granting a motion to dismiss. Judge Maze noted that the plaintiffs asserted that the TVA undertook the duty to inspect and warn, which could make it liable for its own conduct and not only vicarious liability for the failings of the County. Finally, Judge Maze rejected arguments that the TVA was not liable under the Good Samaritan Doctrine or because the County had superior knowledge, as those issues were better resolved after discovery. See September 2023 Update.

As noted, the plaintiffs filed suits in federal court against the TVA as well as suits in Alabama state court that included as defendants the City of Scottsboro and the Electric Power Board of the City of Scottsboro. In the federal proceedings, the TVA filed a third-party complaint against Scottsboro, Jackson County, the Electric Power Board, and Parker. The TVA eventually dismissed its claims against Parker; however, Scottsboro and the Electric Power Board filed fourth-party complaints against Parker, seeking contribution for his share of the liability. Parker moved to dismiss the contribution claims, arguing that they should have been brought against him in the state actions as a compulsory counterclaim and, alternatively, that contribution is not a standalone claim under the general maritime law. Judge Maze rejected both arguments. He noted that the TVA was not a party to the state action, and Scottsboro and the Electric Power Board only requested contribution from Parker if the court found them liable on the TVA’s third-party complaint. Thus, Scottsboro and the Electric Power Board could not have been called upon to assert contribution in the state court for a claim that only arose later in the federal proceeding. Judge Maze also held that contribution is a standalone claim in maritime cases, arising when a tortfeasor pays more than his share of a judgment. He noted that under Rule 14(c) a defendant may implead a third-party defendant either for contribution or indemnity or to tender the third-party defendant to the plaintiff. Thus, Scottsboro and the Electric Power Board were free to use the impleader rule to bring a contribution claim, and they did not need to bring a separate tort claim. There was also no issue with the statute of limitations for the contribution claim.

District Judge agreed with Magistrate Judge’s recommendations that the Harter Act, not COGSA, applied to loss of/damage to machinery stowed on deck during shipment to the United States, and it voided the shipper’s risk clauses in the bills of lading; the Harter Act did not void the limitation provisions in the bill of lading, and the packaging of the machines resulted in the liability of the vessel owner and NVOCC being limited to the amounts provided in their bills of lading for 50 packages (50 machines); liability of freight forwarder was limited in accordance with the provision in the Master Transportation Services Agreement with the shipper as the incorporation of COGSA did apply to the shipment; AGCS Marine Insurance Co. v. M/V IMABARI LOGGER, No. 22-cv-9283, 2024 U.S. Dist. LEXIS 177346 (S.D.N.Y. Sept. 30, 2024) (Schofield)

Opinion

Weatherford Artificial Lift Systems purchased 50 Rotaflex Machines (used in oil production on non-flowing wells) that were to be shipped from Tianjin, China to Everett, Washington. Weatherford contracted with freight forwarder Air Express/DHL Global Forwarding, which arranged for the shipment on the M/V IMABARI LOGGER through a charter with Pacific Basin and with Non-Vessel Operating Common Carrier Danmar Lines. During the voyage, 26 of the machines were lost overboard, and others sustained damage. Twenty-four of the machines were discharged in Everett, Washington. There were three documents at issue in determining the rights of the parties. Weatherford entered into a Master Transportation Services Agreement with Air Express. Pacific Basin agreed with DHL Global Forwarding (China) for the charter of the IMABARI LOGGER, and Pacific Basin issued a billing of lading listing DHL Global Forwarding (China) as the shipper and DHL Global Forwarding as the consignee. The number and kind of packages listed: “50 packages.” It added that 50 packages were shipped on deck at shipper’s risk and that the carrier was not responsible for any loss or damage howsoever arising. The bill of lading also provided that it was subject to the Hague Rules, and it contained a limitation of liability for £100 per package. Danmar issued an Express Sea Waybill listing Shandong Weatherford as the shipper and Weatherford as the consignee. It provided that the shipment was governed by the Carriage of Goods by Sea Act, and it listed “50 packages” under the heading for the number and kind of packages. It also contained the provision that 50 packages were shipped on deck at shipper’s risk; however, the bill of lading contained a calculation for ocean freight based on cubic meters, although the carrier’s liability for a shipment to which COGSA applied was limited to $500 per package or per the freight unit billed for goods not packaged. The bill reiterated that goods stated to be carried on deck were carried without responsibility of the carrier for loss or damage. Weatherford and its insurance carrier (AGCS Marine Insurance) brought this suit in federal court in New York against the vessel and Danmar entities, and they brought a separate action against Air Express in federal court in Texas. The cases were consolidated in the New York action. Danmar and Air Express filed a joint motion for summary judgment, and the owner of the vessel filed a motion for summary judgment. All of the defendants sought exoneration based on the “shipper’s risk” clause in the bills of lading. Alternatively, Danmar and Air Express moved to limit their liability to $21,200, and the vessel owner moved to limit its liability to either £4,200 or, alternatively £510,005. Magistrate Judge Lehrburger first addressed whether the case was governed by COGSA or the Harter Act, which are “compulsorily” applicable to shipments of goods to and from the United States. As COGSA does not regulate cargo that is stated to be carried on deck, and as neither bill of lading purported to extend COGSA to on-deck cargo, Magistrate Judge Lehrburger held that the Harter Act governed the shipment of the machines on the deck of the IMABARI LOGGER. Magistrate Judge Lehrburger then considered the validity of the exoneration of liability. As the Harter Act invalidates provisions by which carriers seek to exonerate themselves from negligence in loading, stowage, custody, care, or delivery of cargo, Judge Lehrburger held that the defendants could not use the clauses to avoid liability (he added that the clauses would also be void under federal common law). Judge Lehrburger then addressed the limitation clauses in the bills of lading, rejecting Danmar’s argument that it was entitled to invoke the limitations in the Pacific Basin bill of lading and holding that the defendants’ liability would be determined in accordance with the provisions of their respective bills of lading. Although Weatherford and AGCS argued that the limitations on liability were invalid under the Harter Act, Magistrate Judge Lehrburger disagreed, answering that the Harter Act does not allow complete exoneration, but it does not prohibit limitations on liability. Magistrate Judge Lehrburger then addressed whether the limitation should be based on 50 packages or a volume in cubic meters. He noted that the machines were prepared for shipment by placing them in bubble wrap covered by sheet metal and packaging foam and braided cables. Magistrate Judge Lehrburger had no doubt that this preparation qualified the machines as packages. As the Pacific Basin bill of lading repeatedly referred to the cargo as 50 packages, and as it contained no other indication of a unit of measurement to determine liability, Magistrate Judge Lehrburger granted partial summary judgment to Pacific Basin, limiting its liability to £100 per package (he did note that at some point the amount of the limitation might be so low as to be, in effect, the equivalent of an exoneration that would violate the Harter Act, but that issue was not raised in this case). With respect to the Danmar bill of lading, the limitation was in the amount of $500 per package or per freight unit billed for goods not packaged. As Magistrate Judge Lehrburger concluded that the machine was packaged, he held that Danmar should be granted partial summary judgment limiting its liability to $500 per package. The final issue was the liability of Air Express pursuant to the Master Transportation Services Agreement with Weatherford. The Agreement incorporated COGSA, as applicable, for international transportation by air, ocean, road, or rail, and for all services not governed by the statute, the liability was limited to 8.33 Special Drawing Rights per kilo. Based on his previous analysis, Magistrate Judge Lehrburger held that COGSA did not apply to the on-deck shipment. Although Weatherford and AGCS argued that the Agreement should be governed by the Harter Act in the absence of the applicability of COGSA, Magistrate Judge Lehrburger answered that a freight forwarder does not generally fulfill the same functions as a carrier; however, the evidence reflected that Air Express performed tasks outside the limited role of a freight forwarder. Nonetheless, it was not necessary to decide whether the Harter Act applied because the limitation of liability was not an exoneration and was not invalidated if the Harter Act applied. Therefore, Magistrate Judge Lehrburger recommended that the liability of Air Express should be limited to 8.33 SDR per kilo (the bill of lading described the shipment as 1427.7 MT). See October 2024 Update.

The parties did not object to the recommendation against application of the contractual exonerations of liability because the bills of lading were governed by the Harter Act and not by COGSA. The parties did object to the recommendations on the limitations of liability, and Judge Schofield rejected all of the objections. AGCS argued that Danmar’s limitation of liability to $500 per package was not applicable because the Harter Act has no provision that limits the liability of a carrier. Judge Schofield considered that argument to be “patently incorrect, as it would mean that the Act’s silence on any subject not addressed in the few sparse sections of the Act . . . should be read as an intent to override any proscription on that subject.” Judge Schofield also agreed that Pacific Basin’s liability should be limited to £100 per package in accordance with the Pacific Basin bill of lading. AGCS argued that the limitation should be deleted by the clause in the bill stating that any provisions in the bill that are contrary to the Hague Rules should be read as if they were deleted. Judge Schofield answered that the argument was incorrect because the limitation of liability was not contrary to the Hague Rules, which, like COGSA, do not apply to on-deck cargo unless the parties contract otherwise. AGCS then disputed the recommendation on the number of packages, arguing that the preparations of the machines for transportation did not conceal the machines nor facilitate handling. Judge Schofield reasoned that packaging often serves more than one function, agreeing with Danmar and Pacific Basin that the modifications to prepare the machines for transport rendered them packages. Judge Schofield then addressed Danmar’s argument that it was entitled to rely on the lesser limitation in the Pacific Basin bill of lading pursuant to the clause in its bill allowing it to rely on an “underlying bill of lading” issued by a subcontractor (which would include Pacific Basin as owner of the vessel). However, Judge Schofield responded that Weatherford did not have sufficient notice of the terms of the Pacific Basin bill to allow Danmar to enforce its limitation on liability. Although the Danmar bill stated that copies of the terms of the underlying bill of lading were available upon request, Judge Schofield held that this language was insufficient to create a basis for Danmar to rely on the Pacific Basin bill. Danmar argued that AGCS asserted rights derived from the Pacific Basin bill in this litigation, but Judge Schofield did not believe that reliance established that Weatherford was provided sufficient notice at the time the parties entered into the bill of lading. Finally, Judge Schofield agreed with the recommendation that the liability of Air Express be limited to 8.33 Special Drawing Rights per kilo. Judge Schofield agreed that the Master Transportation Services Agreement adopted COGSA as the governing law for liability, but she responded that COGSA was inapplicable to the on-deck shipment. As the contractual limitation stated that all services not governed by a specific statute or convention would be limited to 8.33 Special Drawing Rights per kilo, that limitation and not COGSA’s package limitation was applicable. Thanks to Michael F. Sturley, Fannie Coplin Regents Chair at the University of Texas School of Law, for bringing this decision to our attention.

Judge applied American maritime law and declined to dismiss on grounds of forum non conveniens a suit brought on behalf of Canadian military members who were killed in the crash off the coast of Greece of a helicopter that was designed and manufactured in the United States; Cousins v. Sikorsky Aircraft Corp., No. 23-cv-2629, 2024 U.S. Dist. LEXIS 178398 (E.D. Pa. Sept. 30, 2024) (Savage).

Opinion

The representatives of the estates of six Canadian military members who died in a helicopter crash during a training mission off the coast of Greece brought this suit in federal court in Pennsylvania against Sikorsky Aircraft, the company that designed and manufactured the helicopter. The plaintiffs asserted that the helicopter’s automated flight system overrode the pilot’s manual controls, causing the helicopter to nosedive into the sea. The plaintiff asserted products liability claims under the Death on the High Seas Act. Sikorsky performed work on the helicopter in Florida, Connecticut, Colorado, Minnesota, Maryland, Alabama, and Pennsylvania (the site of the final production but later closed). Sikorsky moved to dismiss the case on the basis of forum non conveniens, arguing that the decedents were Canadian citizens, the accident was investigated by Canadian authorities, the helicopter was owned, operated, and maintained by the Canadian Air Force, which collaborated in the design, that evidence critical to the defense was in Canada, and the claims implicated Canada’s national security interests. The plaintiffs answered that the helicopter was designed, manufactured, and assembled in the United States, the electronic flight control system that they claim caused the crash was installed in Pennsylvania, and the initial flight test (by one of the decedents) was conducted in Pennsylvania. Judge Savage first addressed whether Canada is a suitable alternative forum, and he agreed that it is because Sikorsky is amenable to process and the claims are cognizable there. He added that Nova Scotia is less favorable to the plaintiffs because there is no strict liability and punitive damages are not available (stating that “DOHSA does not preclude recovery under Pennsylvania’s survival statute”), but the fact that the law is less favorable does not render the forum inadequate. Although the plaintiffs argued that their choice of forum should be entitled to a strong presumption of convenience, Judge Savage disagreed as they are not citizens of the forum; however, he did grant more deference to their choice than is typically given to foreign plaintiffs in light of the connection of Sikorsky and relevant evidence to the plaintiffs’ choice of forum. Judge Savage then considered the private and public interest factors in the context of the Lauritzen factors to determine applicable law. Citing the allegiance of the defendant and its base of operations in comparison to the other Lauritzen factors, Judge Savage held that American maritime law applied and that it would not be a burden for the citizens of Pennsylvania to determine whether a corporation that placed the helicopter into the stream of commerce from Pennsylvania is liable. He denied the motion, concluding that the difficulties raised by Sikorsky did not override the plaintiffs’ choice of forum based on access to evidence critical to the claims.

Magistrate Judge recommended that the vessel owner’s failure to disclose losses and its breach of the fire suppression warranty voided insurance coverage for damage to vessel; Clear Spring Property & Casualty Co. v. Wello & Mom, LLC, No. 21-cv-24234, 2024 U.S. Dist. LEXIS 179000 (S.D. Fla. Sept. 30, 2024) (Reinhart).

Opinion

After Wello and Mom’s vessel LOLOTTE partially sank, it made a claim with its insurer, Clear Spring Property & Casualty Co. Clear Spring denied the claim based on Wello and Mom’s failure to disclose material facts in the insurance application and its breach of the fire suppression warranty, and Clear Spring filed a declaratory judgment action in Florida federal court in admiralty. A few months later, Wello and Mom brought a suit against Clear Spring in state court in Miami-Dade County, Florida, and Clear Spring filed a motion to dismiss in the state court based on the forum-selection clause in the policy that provided for exclusive jurisdiction in federal court, in particular the federal district court in which the insured (or its insurance agent) resides. Judge Diaz dismissed the state suit, and Wello and Mom argued on appeal that the forum-selection clause was unenforceable because it was not negotiated and because it deprived Wello and Mom of the right to a jury trial. Citing the “well-entrenched rule of federal admiralty law” favoring the enforcement of forum-selection clauses in maritime contracts (including marine insurance policies), Judge Gordo, writing for the Florida Third District Court of Appeal, held that the presumption of validity of the clause applied notwithstanding the insured’s argument that it was deprived of the right to a jury trial. As Wello and Mom did not establish that enforcement was unreasonable and “so gravely difficult and inconvenient” as to deprive the insured of its day in court, the appellate court affirmed the decision of the lower court to dismiss the state suit. See January 2024 Update.

Wello and Mom moved for rehearing and clarification, and the Florida Court of Appeal denied the motion but withdrew its prior opinion and substituted an opinion that contained a clarification (limitation to a maritime forum-selection clause as highlighted below). The sentence setting forth the court’s response to Wello and Mom’s contention that the policy’s forum-selection clause should be deemed unenforceable as it was not negotiated and deprived Wello and Mom of the right to a jury trial originally stated: “Contrary to Wello’s arguments, a forum selection clause which is not the subject of negotiations often retains its enforceability.” (Citing Carnival Cruise Lines v. Shute). The revised opinion states: “Contrary to Wello’s arguments, an admiralty and maritime forum selection clause which is not the subject of negotiations often retains its enforceability.” (Citing Carnival Cruise Lines v. Shute). See April 2024 Update

Meanwhile, in the federal action, Clear Spring and Wello and Mom filed cross-motions for summary judgment. Wello and Mom (owned by Roy and Amelia Cisneros) purchased the 2003 Sunseeker LOLOTTE in 2003 for $94,000. In 2016, Wello and Mom applied for insurance   through Concept Special Risks (listing the purchase price at $180,000), and a policy was issued by Great Lakes Insurance. The vessel had losses in 2016 and 2018, and Great Lakes denied one claim and paid the other through a settlement. In July 2018, Wello and Mom applied for insurance through Concept Special Risks, and a policy was issued by Great Lakes. For loss history for the past 10 years, Wello and Mom listed “none.” It continued to list none for the renewals for 2019, 2020, and 2021. The 2021 policy, issued by Clear Spring, afforded hull coverage of $230,871, and was in place at the time of the partial sinking in September 2021. Clear Spring argued that the policy was void ab initio because Wello and Mom failed to disclose the prior losses. Wello and Mom responded that it was not obligated to disclose the losses because it had replaced the engine after the losses. The policy contained a choice-of-law clause for New York law in the absence of well-established, entrenched maritime law, and Magistrate Judge Reinhart applied the maritime law doctrine of uberrimae fidei that a material misrepresentation on the application is grounds for voiding the policy (even if the misrepresentation is a result of mistake, accident, or forgetfulness). He summarily rejected the argument that the vessel involved in the loss was not the same vessel that experienced the losses in 2016 and 2018 because of the replacement of the engines, stating: “New engines or not, there is no dispute that the Hull Identification number remained the same, so the response to the loss question was inaccurate.” He concluded that no reasonable jury could conclude that the omission did not materially affect the calculation of the risk. Magistrate Judge Reinhart then considered, under New York law, whether breach of the fire suppression warranty voided the policy even though the breach played no role in the loss. The last tag on the system was in 2019, and Wello and Mom’s principal, Roy Cisneros, asserted that to the best of his knowledge he had hired an individual to certify/tag the system as necessary since the purchase of the vessel. That tag reflected that the validity of the certification expired a year later, in 2020, prior to the loss. Accordingly, Magistrate Judge Reinhart recommended that the policy also be declared void for breach of the fire suppression warranty. Therefore, he recommended that the court grant Clear Spring’s motion and deny Wello and Mom’s motion, and Wello and Mom timely objected.

Judge declined to transfer shipyard’s in rem action from the location where the vessel repair was conducted to the location where the operator of the vessel filed its bankruptcy action; Marisco, Ltd. v. M/V HERCULES, No. 23-cv-239, 2024 U.S. Dist. LEXIS 178523 (D. Hawaii Oct. 1, 2024) (Otake).

Opinion

Marisco, Ltd. owns and operates a shipyard in Kapolei, Hawaii. It contracted with Great Eastern Group to perform repair on the M/V HERCULES, owned by GulfMark Americas, and it performed work on the vessel between March and May of 2023. Marisco asserts that GulfMark monitored the status of the repair and hired surveyors who assisted with the work. GulfMark paid some vendors directly, and, according to Marisco, indicated that it intended to pay Marisco for the work. Marisco’s invoices in the amount of $572,154.57 were not paid, and it brought this suit in federal court in Hawaii against the vessel and Great Eastern. Before the vessel was arrested, GulfMark made a restricted appearance (as owner) and provided a bond for security for the vessel. Great Eastern did not appear and filed a bankruptcy proceeding in the Southern District of Florida. Marisco moved to amend its complaint in Hawaii to bring claims against GulfMark, in personam, for unjust enrichment and quantum meruit, and GulfMark moved to transfer the case to the Southern District of Florida where Great Eastern’s bankruptcy proceeding is pending. Although the parties disputed whether transfer was appropriate in light of the fact that the in rem action could not have been brought in Florida (the vessel was not in Florida), Judge Otake assessed the convenience of the parties and held that, on balance, the shipyard’s choice of Hawaii where the work was performed, should not be upset. Therefore, Judge Otake declined to transfer the case.

Federal judge stayed the employer’s declaratory judgment action with respect to maintenance and cure after the seaman brought suit in state court seeking to recover for Jones Act negligence, unseaworthiness, and maintenance and cure; AK Victory, Inc. v. Duop, No. 24-cv-426, 2024 U.S. Dist. LEXIS 178975 (W.D. Wash. Oct. 1, 2024) (Coughenour).

Opinion

Pidor Duop fractured his leg in June 2022 while working as a seaman on a fishing boat owned by AK victory. AK Victory paid maintenance and cure until a physician determined in February 2023 that Duop had reached maximum cure. AK Victory reinstated maintenance and cure in October 2023 when Duop experienced renewed leg pain, and in February 2024, Duop sought treatment for lower back pain. AK Victory disputed whether Duop’s back pain resulted from the injury on the vessel, and it brought this action in federal court in Washington, seeking a declaration that his back condition did not stem from the injury on the vessel. A month later, Duop filed suit against AK Victory in state court in King County, Washington, asserting claims under the Jones Act and general maritime law for unseaworthiness and maintenance and cure (although the initial pleading disclaimed back injuries, Duop amended his complaint to seek recovery for his back). Duop moved to dismiss the federal action or, alternatively, to stay the federal action pending resolution of the suit in state court. Judge Coughenour weighed the factors guiding the inquiry whether federal declaratory relief is appropriate when there is ongoing litigation in state court. The issues are federal, so there were no determinations of state law in this case. However, it did appear that there was an element of forum shopping with the timing of the federal suit. Most important, however, Judge Coughenour believed that it would be a poor expenditure of judicial resources for the federal court to address issues that are similar to those pending in the state proceeding, reasoning that “both federal and state courts will need to wade into a morass of treatment reports, doctor testimony, and forensic experts to understand the impacts of the gangway incident.” He concluded: “Judicial economy and comity counsel against this voyage.” Therefore, he decided to stay the federal matter pending disposition of the state suit.

From the state courts

Oral agreement/estoppel after expiration of slip rental agreement did not alter the provision in the agreement for payment of a daily transient rate when the agreement could only be modified in writing; commission for sale of vessel was not owed when the sale of the boat was not consummated because the marina asserted a possessory lien on the boat for the unpaid slip rental charge; Lee’s Ford Dock Inc. v. Morgan, Nos. 2023-CA-448, 2023-CA-474, 2024 Ky. App. Unpub. LEXIS 550 (Ky. App. Sept. 27, 2024) (Goodwine).

Opinion

Lee’s Ford is a marina located on Lake Cumberland in Pulaski County, Kentucky. Wesley Morgan, who owns a houseboat, executed a slip rental agreement with Lee’s Ford for one year, ending on March 31, 2015, with a rate of $6,250 per year.  The agreement contained a daily transient rate for usage of the slip ($1.40 per linear foot) that applied if the vessel remained after the end of the agreement without renewal. The boat remained at the slip after the agreement expired, but a few months later, Morgan executed an addendum to the agreement, expiring on March 31, 2016, at an annual rate of $6,500 (containing the transient rate in the event the boat remained after the expiration). Morgan also signed a listing agreement with Lee’s Ford’s brokerage company, Top Shelf Marine Sales, giving it the exclusive right to broker the sale of Morgan’s boat. The boat remained at the slip after the addendum to the slip rental agreement expired, and Morgan eventually sold the boat on July 16, 2016. Morgan claims that he agreed with the owner of Lee’s Ford and Top Shelf that he could keep the boat at the slip until the buyer moved the boat on July 31, 2016, and he submitted a slip rental payment of $550. However, Morgan could not deliver the boat because Lee’s Ford asserted a possessory lien on the houseboat (under Kentucky law and the slip rental agreement) and refused to release the boat to Morgan. Morgan filed suit in state court in Pulaski County, Kentucky, alleging that Lee’s Ford wrongfully asserted a possessory lien on the houseboat, along with claims of trespass to chattels, wrongful conversion, and punitive damages. Lee’s Ford and Top Shelf filed a counterclaim, asserting a claim for dock fees from April 1, 2016 to July 20, 2016 plus a 3% commission on the sales price of the boat (3% of $350,000–$10,500). The parties filed cross-motions for summary judgment, and Judge Henrickson awarded Lee’s Ford $17,404.80 for the period from April 1, 2016 to July 20, 2016, and he awarded a commission to Top Shelf. Both parties appealed, and, writing for the Court of Appeals, Judge Goodwine agreed that Lee’s Ford could collect the transient rate. Although Morgan argued that equitable estoppel/promissory estoppel barred Lee’s Ford from collecting the daily transient rate based on its acceptance of a regular quarterly payment after the expiration of the 2015 agreement, the contract provided that any amendment had to be in writing, and the mere acceptance of the payment after the lapse of the agreement did not establish that Lee’s Ford would not collect the transient rate. Judge Goodwine also held that Lee’s Ford had a valid possessory lien under the contract and Kentucky law, so Lee’s Ford properly detained the boat until its lien was paid. The appellate court did reverse the award of a sales commission as the contract for sale could not be completed because Morgan could not deliver the boat and had to refund the purchase money.

Insurer’s action to collect premiums on marine policy was for breach of contract, subject to Louisiana’s 10-year prescription statute for breach of contract and not its 3-year statute for suit on an open account; Diamond Services Corp. v. Cobbs, Allen & Hall of Louisiana, Inc., No. 2024 CA 0085, 2024 La. App. LEXIS 1563 (La. App. 1 Cir. Sept. 27, 2024) (Penzato).

Opinion

Dual Corporate Risks issued a marine insurance policy to Diamond Services Corp. (for the period from March 10, 2018 to March 10, 2019) and paid a deposit premium with the total premium to be determined at the end of the policy term. After the policy expired, Dual conducted an audit and sent a letter to Diamond seeking the remaining premium of $660,000. Diamond disagreed and filed this action against Dual and others in state court in St. Mary Parish, Louisiana. The case was removed to federal court, remanded to state court, and, on January 25, 2023, Dual filed a demand for the unpaid premium. Diamond responded that the claim was barred by the three-year prescriptive period under Louisiana law for actions on an open account. Dual argued that the case was timely under the 10-year prescriptive period for an action for breach of contract. Judge Comeaux agreed that the 3-year period applied and dismissed the demand as prescribed. The Louisiana Court of Appeal disagreed, holding that the demand was for breach of contract subject to the ten-year prescriptive period.

Kenneth G. Engerrand

President, Brown Sims, P.C.


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Quote:

From Judge Kent of the United States District Court for the Southern District of Texas in Bradshaw v. Unity Marine Corp., 147 F. Supp.2d 668, 670 (S.D. Tex 2001):

Before proceeding further, the Court notes that this case involves two extremely likable lawyers, who have together delivered some of the most amateurish pleadings ever to cross the hallowed causeway into Galveston, an effort which leads the Court to surmise but one plausible explanation. Both attorneys have obviously entered into a secret pact–complete with hats, handshakes and cryptic words–to draft their pleadings entirely in crayon on the back sides of gravy-stained paper place mats, in the hope that the Court would be so charmed by their child-like efforts that their utter dearth of legal authorities in their briefing would go unnoticed. Whatever actually occurred, the Court is now faced with the daunting task of deciphering their submissions. With Big Chief tablet readied, thick black pencil in hand, and a devil-may-care laugh in the face of death, life on the razor’s edge sense of exhilaration, the Court begins.

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© Kenneth G. Engerrand October 31, 2024; redistribution permitted with proper attribution.

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