As noted by the court in International Matex Tank Terminals v. Director OWCP (Dwayne D. Victorian), No. 18-60662 (5th Cir. November 25, 2019) its decision was one of first impression addressing the situs of injury and whether a facility can be called a “terminal” as the term is used, but not defined, in 33 U.S.C. § 903(a). To have jurisdiction under the Longshoreman and Harbor Workers’ Compensation Act (LHWCA) 33 USC § 901 et. seq, a claimant must satisfy a dual test of status and situs. Furthermore, the Fifth Circuit has addressed situs as having both geographic and functional components.

Clearly, an injury occurring while an employee is working over navigable waters satisfies both components of the situs requirement. When the site of the injury moves landward, to be covered under the LHWCA, the employee must show that his accident occurred in an area that borders on or is continuous with navigable waters. New Orleans Depot Services Inc. v. Zepeda, 718 F.3d382 (5th Cir. 2013) (en banc). Once this geographic component is met, the test to establish the functional component of the situs test depends on whether the injury happened in one of the specifically enumerated sites under § 903(a), a pier, walk, drydock, terminal . . ., or in the general category of “other adjoining area.” The determination of the functionality of an enumerated site is whether the site has “some maritime purpose.” Thibodeaux v. Grasso Production Management, Inc. 370 F.3d 486, 493 (5th Cir. 2004). If the area is not one of the enumerated areas, but is an “other adjoining area,” the employee needs to show that the area is one that is “continually used by an employee in loading, repairing, dismantling, or building vessels.” Zepada, 718 F.3d at 389.

In the instant case, the facility where the employee was injured abutted navigable waters and, therefore, satisfied the geographic component of the situs test. The Administrative Law Judge (ALJ) who found that the employee was covered under the LHWCA based his decision on a conclusion that the facility where the accident occurred satisfied the functional component because it was a “terminal” under 903(a) that had “some maritime purpose.” This finding classifying the employer’s facility as a “terminal”, among other findings of the ALJ, was appealed by the employer to the Benefits Review Board, where it was affirmed, and then to the 5th Circuit.

The 5th Circuit noted that the LHWCA did not define “terminal,” nor had the court done so in any earlier decision. The court indicated that in defining “terminal” the ALJ looked to an OSHA regulation, Webster’s Dictionary and a definition invoked by the Supreme Court. The OSHA regulation defined a marine terminal as “wharves, bulkheads, quays, piers, docks, and other berthing locations and adjacent storage or adjacent areas and structures associated with a primary movement of cargo or materials from vessels to shore or shore to vessel ….” Webster’s Dictionary defined terminal as “of, relating to, situated at, or forming an end or boundary, relating to or occurring at the end of a section or series, either end of transportation line, as a railroad.” Finally, the ALJ relied on a state commission’s definition of marine terminal, which the Supreme Court cited as useful: “an area which includes piers, which is used primarily for the moving, warehousing, distributing or packaging of water borne freight or freight to or from such piers, and which, inclusive of such piers is under common ownership or control.”  Northeast Marine Terminal Co. v. Caputo, 432 U.S. 249, 268, N. 30 (1977).

The ALJ’s approach in defining “terminal” was found to be reasonable and the court adopted the finding and affirmed. The court as well affirmed the finding that the facility had some maritime purpose, indicating that not every square inch of an area must be used for maritime activity. Coastal Production Services, Inc v. Hudson, 555 F.3d426 (5th Cir. 2009).

Although the employer tried to couch its facility as a manufacturing plant, the court noted in affirming the ALJ’s decision, that it was determined that there was substantial evidence of record supporting the finding that the facility shipped and received the overwhelming majority of its liquid bulk product from vessels that were docked at the site and had 60 storage tanks for the liquid bulk product that was unloaded directly from ships to tanks and stored there. Furthermore, the ALJ found that no tanks were dedicated solely to the processes of “manufacturing,” again noting that a covered situs need not be used exclusively or even primarily for maritime purposes as long as it is customarily used for significant maritime activity.

Worker Sleeping in LHWCA Zone of DangerIn Expeditors and Production Service Company, Inc. v. Director, OWCP (Garrick Spain), No. 18-60895 (5th Cir. Nov. 4, 2019)(not to be published)¹, the United States Court of Appeals for the Fifth Circuit affirmed the lower administrative rulings finding that an employee injured in his living quarters was, indeed, covered under the Longshore & Harbor Workers’ Compensation Act (LHWCA). Mr. Spain was employed by Expeditors and Production Service Company (Expeditors) to work for Anadarko Petroleum as a shipping and receiving dispatcher. He slipped and fell at a mobile home trailer provided by Anadarko, injuring his neck, back, pelvis, right hip, and shoulder, for which he claimed compensation benefits.

Anadarko operates two facilities at Port Fourchon, Louisiana, C-Port 1 and C-Port 2, that are 1.5 miles apart. Spain worked mostly at C-Port 1 servicing two rigs on the Outer Continental Shelf. His schedule required working in weekly shifts with at least 12 hours of daily work expected and with him remaining on call for the rest of the day. Due to these hours, his employer required him to live in an on-premise trailer at C-Port 2. The trailer was about 500 feet from the water but was within the perimeter fence that surrounded C-Port 2, on the same side of the public road as the rest of the terminal, and no large building separated the quarters from the water.

Mr. Spain filed for benefits under the Longshore & Harbor Workers’ Compensation Act, 33 U.S.C. § 901 et seq. and its extension, the Outer Continental Shelf Lands’ Act (OCSLA), 43 U.S.C. § 1331 et seq. The Administrative Law Judge and Benefits Review Board addressed Mr. Spain’s coverage under the LHWCA and did not see a need to address coverage under OCSLA. Expeditors stipulated that Mr. Spain was a maritime employee and conceded that C-Port 2 was a maritime terminal. It, however, disputed whether Mr. Spain was injured on a maritime situs. They argued that the C-Port 2’s living quarters should be excluded from the general finding of the parcel as a situs, and, furthermore, that because most of Spain’s duties occurred at C-Port 1, it was an error of law to find LHWCA jurisdiction for him at C-Port 2.

Since the living quarters were within the perimeter fence that surrounded C-Port 2, it was held that they were also part of a maritime situs, as the test applied was whether the situs in question was within a contiguous terminal area that adjoined water and not separated from waters by facilities not used for maritime purposes.

The employer also argued that because Spain’s injury occurred where he lived rather than where he worked, he should not be able to claim benefits. The Fifth Circuit in citing its prior decisions, indicated that: “the test of recovery [under the LHWCA] is not a causal relationship between the nature of employment of the injured person and the accident …. All that is required is that the obligations or conditions of employment create the zone of special danger out of which the injury arose.” O’Leary v Brown-Pacific-Maxon, Inc., 340 U.S. 504, 506 (1951). The underlying facts supporting the decisions of the lower courts found that Spain was always on call, assigned to live at C-Port 2, and not permitted to leave the living quarters during the 12 hours of day he was not performing his duties.

With these factual findings and applicable case law, the Fifth Circuit affirmed the Benefits Review Board’s decision upholding the initial decision from the Office of Administrative Law Judges.

¹ 5th CIR. R. 47.5 provides that unpublished opinions are not generally precedent. I have, nevertheless, decided to report on this case due to the factual setting involved and the expansive determination of situs applied to these facts.

Maritime attorney and Offshore Winds contributor Robert J. Stefani is quoted in today’s Baton Rouge edition of The Advocate explaining a unique aspect of maritime bankruptcies.

Stefani explains that much of what would usually be unsecured debt in a nonmaritime context may be secured via a maritime lien, depending on whether the vessels have an outstanding mortgage and the value of the vessels. Stefani has previously discussed maritime liens extensively for Offshore Winds.

“I’ve been involved in cases where all the maritime lien claimants are paid 100 cents on the dollar and I’ve seen cases where they were unsecured creditors and get what is normal in a bankruptcy, which is very little,” Stefani said in The Advocate.

The article focused on the bankruptcy of Houston-based Epic Companies and its subsidiaries, and can be found here. Stefani is not involved with that case.

SCOTUS - Unseaworthiness ClaimIn Dutra v. Batterton, No. 18-266, the Supreme Court of the United States, on June 24, 2019, determined that punitive damages are not allowed for injured vessel crew members seeking remedies for vessel unseaworthiness. In addressing a split between the Ninth Circuit on one hand and the First, Fifth, and Eleventh Circuits on the other hand, the Supreme Court resolved the issue by applying its previous decisions in Miles v. Apex Marine Corp., 498 U.S. 19 and Atlantic Sounding Co. v. Townsend, 557 U.S. 404. In Miles, the Supreme Court indicated that it should look primarily to legislative enactments for policy guidance, recognizing that it may supplement these statutory remedies, where doing so would achieve uniform vindication. In Atlantic Sounding, it allowed recovery for punitive damages, but justified its departure from the statutory remedial scheme based upon the established history of awarding punitive damages for certain maritime torts, including maintenance and cure. In accordance with these decisions, the Supreme Court considered whether punitive damages have traditionally been awarded for claims of unseaworthiness, whether conformity with parallel statutory schemes would require such damages, and finally, whether the Supreme Court was compelled on policy grounds to allow punitive damages for unseaworthiness claims.

In reviewing the historical application of punitive damages for the breach of the duty of seaworthiness, the court could find no underlying support for the application of punitive damages. Furthermore, the court determined it could not sanction a novel remedy unless it was required to maintain uniformity with Congress’s clearly expressed policies. In examining the Jones Act, it found no such expressed policy. Finally, it could find no other policy reasons for justifying the application of punitive damages in this context. Continuing, the court pointed out a bizarre disparity that would occur if punitive damages were allowed. A mariner could then make a claim for punitive damages if he was injured aboard a vessel, but his estate would lose the right to seek punitive damages under Miles if he died from his injuries. Additionally, in weighing the international aspects of the application of punitive damages, in an unseaworthy context, it determined that to do so would create significant competitive disadvantages for American shippers.

NOTE: This post was co-authored by William L. Pardue, a Loyola University New Orleans College of Law student who is spending part of his summer working at King & Jurgens. 

Carmona v. Leo Ship Mgmt, Inc.; No. 18-20248, 2019 WL 2067296* (5th Cir. May 10, 2019).

This Fifth Circuit decision addressing a court’s personal jurisdiction over a foreign company proceeds from the U.S. District Court for the Southern District of Texas. In 2014, Jose Carmona, a longshoreman, was injured when a bundle of pipes he was rigging for discharge from the hold of a vessel broke free and fell, injuring his ankle and lower leg. Carmona sued the ship’s manager, Leon Ship Management (“LSM”), in state court in Houston pursuant to 33 USC 905(b) of the Longshore and Harbor Workers’ Compensation Act, alleging that LSM breached its duty to: (1) properly stow the pipes; (2) minimize hazards associated with falling pipes; (3) take precautions to protect workers; (4) provide a safe work environment; (5) turn over the vessel in a safe condition for discharging cargo; (6) warn of hidden dangers; and (7) intervene. LSM was a Philippine company with no business presence in Texas. It had contracted with the ship’s ownership interests to provide crew in addition to other necessities.

Following removal, the district court subsequently dismissed the case for lack of personal jurisdiction. The Fifth Circuit reversed and remanded, in part, holding that (i) defendant purposely availed itself of the benefits and protections of Texas, and (ii) the defendant’s failure to minimize cargo hazards or take safety precautions to protect workers also arose from defendant’s contacts with Texas. The court, however, affirmed the lower court’s decision dismissing the claim involving improper stowage as this activity did not occur in Texas and was performed by a different company.

The specific issue in this case was whether, notwithstanding the occurrence of an accident in the forum state, the alleged act of the foreign defendant resulted from a purposefulness of the defendant’s presence in the forum. In other words, should jurisdiction be established by the defendant’s mere presence in the forum or should there be an accepted purpose for the defendant’s presence. The court noted that, although tortious conduct within a forum ensures the existence of contacts, it does not always guarantee that such contacts were deliberate.

Here, LSM purposely availed itself of the benefits and protections availed by the State of Texas when its employees voluntarily entered the jurisdiction aboard the vessel. The court further noted that, although LSM did not have any control over the vessel’s itinerary, nor control over the vessel’s course under the ship management agreement, it nonetheless was required to share relevant information regarding the ship’s schedule and port information with the owner of the vessel. Since LSM knew about the planned route to Texas to deliver cargo, it purposely directed its activities at the forum state. Furthermore, LSM’s employee was alleged to have inspected the cargo before discharge operations began. Accordingly, the court found that LSM purposely availed itself to the state’s benefits and protections, because it reasonably should have anticipated being “hauled into court for torts committed there.”

With regard to the issue of specific jurisdiction, the court noted that “[a] plaintiff bringing multiple claims that arise out of different forum contacts of the defendant (as is the case here) must establish specific jurisdiction of each claim.” The parties do not dispute that a third party stowed the pipes outside the United States. Thus, the claim that the pipes were improperly stowed resulting in the tort does not stem from LSM’s activities in Texas. As such, the Fifth Circuit affirmed this holding and remanded the case to the district court to determine whether the exercise of personal jurisdiction with regard to the other claims of Carmona met with “traditional notions of fair play and substantial justice,” that had yet to be addressed.

The Ninth Circuit in Warren Iopa v. Saltchuk-Young Brothers, et al, (9th Cir. No. 17-70415, March 4, 2019) affirmed the lower courts’ denial of the claimant’s petition for attorney fees under LHWCA as being made untimely. In this case, Mr. Iopa was successful in obtaining benefits before an Administrative Law Judge (ALJ) for temporary disability. In the Order granting the disability payments, the ALJ recognized the claimant’s counsel right to have the employer pay his fees and costs and provided him with 21 days within which to file a fee petition. It was not until approximately 280 days later that Iopa’s counsel filed his fee petition; however, the petition improperly addressed work performed before the Office of Workers’ Compensation Programs (OWCP) and not before the Office of Administrative Law Judges (OALJ). At the request of the OALJ, claimant’s counsel filed a corrected petition approximately four months later. The ALJ then issued an Order striking the first petition due to his lack of authority to award fees for work performed before the OWCP and striking the second petition based upon the finding of untimeliness.

On appeal, claimant’s counsel argued that fee petitions were subject to a relatively lenient standard adopted by the BRB in 1986 in Paynter v. Director OWCP, 9 Black Lung Rep. 1-190 (BRB 1986) where it was stated “the loss of an attorney’s fee is a harsh result and should not be imposed on counsel as a penalty except in the most extreme circumstances”. In 2015, however,  the Rules of Practice and Procedure for Administrative Hearings Before the OALJ were revised providing the following provision: “When an act may or must be done within a specific time, the judge may, for good cause, extend time . . . [o]n motion made after the time has expired if the party failed to act because of excusable neglect.”  29 CFR § 18.32(b)(2).

In evaluating whether the more lenient standard would be applicable, the panel of the Ninth Circuit indicated that, while the Paynter holding may have previously served as a primary guide in determining whether to strike a fee petition, the 2015 revision of the Rules of Practice and Procedure for Hearings Before the OALJ requiring a showing of “excusable neglect” for untimely claims could not be ignored.

In applying the newer standard, the panel indicated that, in determining whether circumstances constituted “excusable neglect”, the Supreme Court had set forth the following four-factor test in Pioneer Investment Service Co. v. Brunswick Associates, Ltd Partnership, 113 S.Ct. 1489 (1993): 1) the danger of prejudice to the debtor, 2) the length of the delay and its potential impact on judicial proceedings, 3) the reason for delay, including whether it was within the reasonable control of the movant, and 4) whether the movant acted in good faith. 113 S.Ct. at 1497.

In applying the four-factor Pioneer analysis, the court found that the ALJ appropriately found that the first factor – prejudice – weighed against a finding of excusable neglect. The ALJ determined that the respondents demonstrated that they would be prejudiced by the delayed finding, because their “memory of the details of the case” and ability “to recall each back and forth between the parties for the purpose of contesting the validity of the amount of time claimed for a given item” was affected by the substantial delay. The ALJ also found that the second factor – length of delay – weighed strongly against the finding of excusable neglect because the delay, as noted above, was substantial. The panel of the Ninth Circuit additionally approved of the ALJ’s finding that the third factor – the reasons for the delay – weighed against finding of excusable neglect, as none of the reasons stated by claimant’s counsel for the delay were convincing or pervasive or were beyond his control as supported by case law. Although claimant’s counsel noted several challenges in managing his case load, particularly following the departure of the associate who managed the case, it was noted the Supreme Court had previously held that “[W]e give little weight to the fact that counsel was experiencing upheaval in his law practice.”  Pioneer, 113 S.Ct. at 1499.  In completing its analysis and affirming the result below, the Ninth Circuit determined that the question of good faith had no weight in the case.

In Air & Liquid Systems Corp., et al. v Devries, et al., No. 17-1104 (March 19, 2019) the U.S. Supreme Court held that a product manufacturer, in a maritime tort context, has a duty to warn when its product requires incorporation of a part that the manufacturer knows or has reason to know that the integrated part is likely to be dangerous for its intended uses and the manufacturer has no reason to believe that the product users will realize that danger. In this instance, the plaintiffs were two Navy veterans who were exposed to asbestos on ships and developed cancer. They sued companies that produced equipment for three Navy ships. The equipment required asbestos insulation or asbestos parts to function as intended, but the manufacturers did not incorporate the asbestos into their products. Instead, the manufacturers delivered their equipment to the Navy without asbestos, leaving the Navy to add the asbestos to the equipment later.

In the district court, the defendants raised the “bare metal defense” which provides that, if a manufacturer did not itself make, sell, or distribute the part or incorporate the part into the product, the manufacturer is not liable for harm caused by the integrated product – even if the product required incorporation of the part and the manufacturer knew that the integrated product was likely to be dangerous for its intended uses.

The plaintiffs appealed to the Third Circuit, at which time that court reversed and remanded, imposing a foreseeability rule that provides that a manufacturer may be liable when it was foreseeable that its product would be used with another product or part, even if the manufacturer’s product did not require use or incorporation of that other product or part.

The manufacturers appealed to the U.S. Supreme Court, which found a third and more centralized approach to be appropriate in this maritime context. This approach, as noted above, imposes on the manufacturer a duty to warn when its product requires incorporation of a part and the manufacturer knows or has reason to know that the integrated product is likely to be dangerous for its intended uses. The court indicated that requiring the product manufacturer to warn when its product requires incorporation of a part that makes the integrated product dangerous for its intended uses is especially appropriate in the context of maritime law, which has always recognized a ‘special solicitude for the welfare’ of sailors.

The maritime rule adopted by the Supreme Court will encompass all the following circumstances, so long as the manufacturer knows or has reason to know that the integrated product is likely to be dangerous for its intended uses and the manufacturer has no reason to believe the product users will realize that danger: (a) a manufacturer directs that the part be incorporated; (b) a manufacturer itself makes the product with a part that the manufacturer knows will require replacement with a similar part; or (c) a product would be useless without the part.

LIENING IN: Best Practices for Suppliers Navigating CIMLA – Part 2

This post is the second installment in a series examining the elements suppliers of maritime goods or services must prove to establish and enforce the supplier’s potential maritime lien under the Commercial Instruments and Maritime Liens Act (“CIMLA”), 46 U.S. Code § 31342 et. seq. Previously, we discussed examples of goods or services that constitute “necessaries.” This installment examines the requirement that the necessaries be provided “to a vessel.” Suppliers should pay particular attention to this element because it often turns on something that is wholly or partially within the supplier’s control: sales and invoicing practices.

Explicit designation of each vessel supplied is particularly important in bulk contracts or when services are provided to a fleet of vessels. Merely showing that the necessaries ended up on a particular vessel is insufficient to establish that the necessaries were provided to the vessel by the supplier, rather than by the vessel owner. A supplier who fails to document the specific vessel for which services or supplies are intended risks a finding that the services or goods were provided to the vessel owner or charterer personally rather than to a particular vessel. In that situation, no lien attaches. See Silver Star Enterprises, Inc. v. Saramacca MV, 82 F.3d 666, 670 (5th Cir. 1996) (A supplier furnishing containers to a fleet of vessels was not entitled to a maritime lien because the containers “were leased in bulk and not earmarked for use on board the M/V SARAMACCA”); Itel Containers Int’l Corp. v. Atlanttrafik Express Serv. Ltd., 982 F.2d 765, 769 (2d Cir. 1992) (The container supplier “did not ‘furnish’ the containers ‘to any vessel’” as required by CIMLA).

Explicitly earmark necessaries for a named vessel

The most effective way to ensure that necessaries are provided to a vessel within the meaning of CIMLA is to explicitly earmark the necessaries for a named vessel. This can be accomplished (1) in instruments generated prior to the actual contract, such as quotes, RFPs, or bid proposals; or (2) in sales order confirmations. Courts also view invoices and receipts naming the vessel to which goods or services were provided as evidence that the supplier delivered the necessaries to the named vessel. If necessaries are furnished to multiple vessels, the supplier may issue a separate invoice for each vessel. Alternatively, an invoice may be itemized by vessel to ensure that the specific vessel to which particular necessaries were provided is clearly identifiable.

In the next installment, we will discuss on whose order necessaries must be provided to a vessel to give rise to a maritime lien under CIMLA. Future installments will analyze the remaining substantive requirements for a necessaries lien under CIMLA as well as defenses to and priority of the maritime lien for necessaries.

Read Part 1: What Qualifies as Necessaries Under the Commercial Instruments and Maritime Liens Act?

NuStar Energy Services v. M/V COSCO AUCKLANDIn NuStar Energy Services, Inc. v. M/V COSCO AUCKLAND, No. 17-20246 (5th Cir. Jan. 14, 2019), the U.S. Fifth Circuit concluded NuStar, the physical supplier of bunkers/marine fuel to the M/V COSCO AUCKLAND, lacked standing to appeal the district court’s ruling that O.W. Bunker Far East (S) Pte Ltd., the contract supplier of bunkers, had validly assigned its maritime lien against that vessel to ING Bank N.V. In line with its earlier decision of Valero Mktg. & Supply Co. v. M/V ALMI SUN, 893 F.3d 290, 295 (5th Cir. 2018) and other decisions of the Second, Ninth and Eleventh Circuits, the Fifth Circuit concluded that NuStar did not hold a maritime lien against the vessel even though the vessel interests were aware that NuStar would physically supply the bunkers, and the vessel’s employees oversaw and accepted the delivery of the fuel.

Because NuStar did not have a valid maritime lien, the district court’s conclusion that OW Far East had assigned its maritime liens to ING Bank would not affect NuStar in any concrete way and thereby rendered NuStar’s interest in challenging the validity of the assignment moot. Accordingly, the Fifth Circuit concluded it lacked jurisdiction to review the district court’s ruling that OW Far East validly assigned its maritime lien to ING Bank.

The Fifth Circuit noted in closing: “Of course, our inability to review the district court’s judgment as to ING means that this case is not resulting in circuit precedent on the question whether the liens are assignable to ING. So to the extent this issue arises in other OW Bunker cases in this circuit, it remains an open question.”  While there still is no precedent emanating from the U.S. Fifth Circuit concerning the validity of the assignments of maritime liens to ING Bank, the decisions of other courts have confirmed the validity of such assignments.  See Barcliff, LLC v. M/V DEEP BLUE, 876 F.3d 1063, 1074-75 (11th Cir. 2017); ING Bank N.V. v. M/V TEMARA, ___ F. Supp. 3d ___ (S.D.N.Y. 2018), on remand; NuStar Energy Servs., Inc. v. M/V COSCO AUCKLAND, 2016 WL 9307626 at *6 (S.D. Tex. 2016), appeal dismissed on this point.

NOTE: King & Jurgens, LLC and its predecessor, King, Krebs & Jurgens, PLLC, have represented ING Bank N.V. in scores of maritime arrests and attachments of vessels in the ports of the United States to collect for non-payment of bunkers contractually supplied by the OW Bunker Group. King & Jurgens, LLC, however, was not involved in the NuStar litigation discussed in this blog post.

In Sira Cruz v. National Steel and Shipbuilding Company; Peterson Industrial Scaffolding, Inc., Civil Action No. 17-55441 (December 19, 2018) (9th Cir.), a case that may only be noteworthy for practitioners in the Ninth Circuit, the Court applied a borrowed employee defense to a longshoreman’s claim against a third party. The defendant, in this personal injury case, was the borrowing employer of the plaintiff who was paid compensation under the LHWCA by her nominal employer. She then turned around to sue the defendant who then raised the borrowed employee defense. In a case of first impression for the Ninth Circuit, the summary judgment granted the defendant in the district court was affirmed specifically stating that the defense was applicable where the employee was covered by the LHWCA, allowing the Ninth Circuit to make the rare statement that “we join the Third, Fourth, Fifth, and Eleventh Circuits …”  Id. at p. 3-4.