As anticipated previously, the en banc Fifth Circuit in In re Larry Doiron, Inc., jettisoned the two-tier, six-factor test of Davis & Sons, Inc. v. Gulf Oil Corp. in favor of a new “simplified” test to determine whether “a contract for the performance of specialty services to facilitate the drilling or production of oil and gas on navigable waters is maritime,” and thereby adopted a conceptual approach. Doiron at 2.

The new tests are as follows: “Is the contract one to provide services to facilitate the drilling or production of oil and gas on navigable waters?” Doiron at 12. If so, “does the contract provide or do the parties expect that a vessel will play a substantial role in the completion of the contract”? Id. If so, then the contract is maritime in nature.

Under circumstances in which it is unclear as to the scope of the contract or the parties’ expectations as to whether vessels will be involved, the en banc Court indicated that the following factors of Davis & Sons may provide clarity: (1) the work actually performed under the contract; (2) the extent of vessel involvement in the job required by the contract at issue; and (3) the extent to which the vessel’s crewmembers (i.e., seamen) perform work under the contract at issue.

In the wake of this decision, it appears that contracts to perform well casing services from drilling vessels will remain maritime contracts. I anticipate that wireline and coiled tubing activities on a well that required the use of a vessel should now be viewed as maritime contracts. Accordingly, this decision has expanded the number of energy service contracts that will qualify as maritime in nature, and thus, the contract provisions concerning choice of law, indemnity and insurance will be determined under the general maritime law (absent a choice of law provision adopting state law).

Retirement Under LHWCAOn January 3, 2018, the United States Court of Appeals for the Fourth Circuit in Russell Moody v. Huntington Ingalls Incorporated, No. 16-1773 (4th Cir., 01/03/2018), reversed a ruling of the Benefit Review Board that had earlier overturned the finding of an Administrative Law Judge that granted benefits to a retired employee. Russell Moody, a shipyard employee, suffered a workplace injury, but did not undergo surgery until after he retired. He sought disability benefits for a two month, post-surgery recuperation during which he was not medically cleared for work.

Mr. Moody had worked for Huntington for 45 years when due to a change in his assignment to a different shift, he decided to retire. On August 1, 2011, he gave his requisite 90-notice of retirement to be effective October 31, 2011. On September 19, 2011, Mr. Moody injured his right shoulder while working in the shipyard. Even though the injury was going to require surgery, Mr. Moody continued to work for Huntington. It was not until after he retired, as scheduled, that he underwent shoulder surgery. According to his physician, he needed to remain “out of work” until February 16, 2012, and then had limitations effective through March 28, 2012, after which he would have no restrictions.

Huntington paid the cost of surgery but refused to pay Mr. Moody temporary total benefits asserting that because Mr. Moody had retired, the temporary recovery from the surgery had not caused him to lose any wages. The Administrative Law Judge nevertheless ruled in Mr. Moody’s favor and awarded temporary benefits. The judge concluded that Mr. Moody was totally incapacitated during the recovery period, noting that had Mr. Moody undergone surgery immediately after the accident, Huntington would have had to pay disability benefits to him.

The Benefits Review Board disagreed and concluded that Mr. Moody was not entitled to any disability benefits because he voluntarily retired before the onset of his workplace injury’s debilitating effects. The Board reasoned that the voluntary retirement resulted in a total loss of ability to earn wages, such that no injury would cause any further loss of economic capacity.

The Fourth Circuit reversed the Benefits Review Board’s decision indicating that while Mr. Moody’s injury did not cause him to lose any income during his recuperation, it did deprive him of the ability to work during that period. The fact that Mr. Moody had retired did not undermine the fact that but for the recuperation from surgery, he would have been capable of performing active employment, if he had chosen to do so. The Fourth Circuit stated, “to decide otherwise would not only deprive Moody of his rightful benefits, but would also confer a windfall on Huntington:  it is undisputed that Moody would have received disability benefits had he undergone surgery immediately, rather than discharging his duties in good faith, and Huntington would have had to pay for another drive.”  (p. 7.) The Court distinguished whether there was an actual economic loss from there being an incapacity to earn wages. In so doing, it stated, “because the LHWCA compensates workers for their inability to earn wages due to injury, workers are entitled to disability benefits when an injury is sufficient to preclude the possibility of working.” It felt that the LHWCA compensates the deprivation of economic choice when it is caused by workplace injury. As such, voluntary retirement is not a form of total incapacity.

Due to their increasing size, specialization and technological sophistication, today’s vessels present attractive “big-ticket” financing opportunities. However, commercial vessels, regardless of type, will inevitably incur maritime liens, which are priority claims that arise by operation of law, and are enforceable against the vessel in rem. Lenders therefore must be cognizant of, and account for, the special attributes of maritime liens in evaluating and documenting these types of transactions, whether structured as loans or leases.

This article discusses the characteristics of maritime liens, the priority of these liens in relation to the desired first-priority secured position of a lender or lessor, and prudent practices for assessing and mitigating the risks posed by such liens. The focus of this article is on transactions involving commercial (as opposed to recreational or fishing) vessels documented under the laws of the United States.  Continue Reading Don’t Lien on Me: Identification and Mitigation of Maritime Lien Risks in Marine Lease/Loan Transactions

On September 27, 2017, the Fifth Circuit in U.S.A. v. Don Moss, Curtis Dantin, Grand Isle Shipyard, Incorporated, and Christopher Srubar, No. 16-30516 (5th Cir. September 27, 2017), issued a decision affirming the District Court’s dismissal of criminal charges against a number of oil field contractors resulting from a welding accident that occurred on an offshore oil platform located on the Outer Continental Shelf on November 16, 2012. The platform owner and leaseholder, Black Elk Energy Offshore Operations, LLC, in September of 2012, interrupted its oil and gas production on West Delta 32 to begin construction projects on its three-platform production facility. In pursuing these construction projects, it contracted with a number of different companies to provide workers connected with the project. On November 16, 2012, during welding operations, a fatal explosion occurred killing three men and injuring others.

Criminal indictments were issued three years later pursuant to Outer Continental Shelf Lands Act 43 USC §§ 1331, et. seq. (OCSLA) with the government contending that contractors were criminally liable because they failed to obtain proper authorization to weld, failed to conduct appropriate pre-work inspections and failed to ensure the construction area was safe for hot work as required by OCSLA safety regulations. The contractors moved for dismissal of the charges against them. The District Court Judge issued an Order dismissing the charges against the contractors based upon his analysis of each of the regulatory provisions cited in the indictments. He concluded that none of the OCSLA regulations applied to oilfield contractors. Central to this analysis, the Court pointed out that each of the three specific provisions of the OCSLA regulations underlying the charged criminal violations imposed regulations addressed to “You.” Under OCSLA regulations, “You” is a defined term:

You means a lessee, the owner or holder of operating rights, a designated operator or agent of the lessee(s), a pipeline right-of-way holder, or a State lessee granted a right-of-use and easement. 30 CFR § 250.105.

The District Court held this definition did not include contractors, subcontractors or service providers. The government timely appealed.

On appeal, the government relied on four main arguments. First, the government contended that a plain reading of OCSLA subjects any person, including contractors and their employees to criminal penalties for violating the regulations promulgated under the statute. 43 U.S.C. § 1350(c). Second, OCSLA regulations governed the appellees’ conduct because they were the “person[s] actually performing the activit[ies],” and are thus “jointly and severally responsible” under the 30 CFR § 250.146(e). Third, the Courts had upheld both civil and criminal penalties imposed under similar statutory and regulatory schemes. Fourth, OCSLA regulations supported civil and criminal penalties for any person “responsible for a violation” of the regulations. 30 CFR § 250.1402.

Under 43 U.S.C. § 1350(c), the government argued that the contractors were criminally liable as that provision stated that any person who knowingly or willfully violated a regulation that was designed to protect health, safety or the environment may be subject to criminal penalties under OCSLA. The government argued that under OCSLA’s definition of a “person” the contractors clearly fell within its ambit. In response, the contractors asserted that OCSLA precluded the government from criminally prosecuting them as they were not holders of OCSLA leases or permits. In citing 43 USC § 1348(b), the contractors argued that OCSLA identified those people who were required to comply with OCSLA regulations by stating “it shall be the duty of any holder of a lease or permit under this subchapter” to comply with regulations governing workplace safety and health for their own employees and those of any “contractor or subcontractor.” They argued that because Section 1348(b) specifically imposed the duty on lessees and permittees, and equally specifically referenced, but did not impose its regulatory duties on contractors and subcontractors, they were textually excluded from those duties. Ergo, if they were not parties given a duty to comply, criminal penalties should not be imposed.

The panel of the Fifth Circuit thought that the contractors’ arguments were well-stated, even more so given the government’s failure ever before to seek criminal penalties against a contractor in the 60 plus year history of the OCSLA. It was noted that the government’s past inactions spoke volumes about the scope of its regulatory authority. The court, however, stated that to resolve the appeal it did not need to decide whether OCSLA and its criminal liability provision could extend to contractors. Assuming arguendo that the provisions of OCSLA could apply to these contractors, it proceeded to determine whether the specific regulations would support the criminal indictments.

In addressing the specific regulations alleged to have been violated by the contractors, the Court indicated that the government ran up against the regulatory definition of “You.” It found that all of the welding regulations that formed the basis of the criminal indictment only referenced “You.” The government sought to circumvent the plain language of the definition of “You” by citing language in 30 CFR § 250.146(e) pertaining to joint and several responsibility for compliance with OCSLA regulations. The Fifth Circuit, however, indicated that “joint and several responsibility” was a term of art reserved for civil, rather than criminal liability, and noted that the government failed to cite any cases that demonstrated support for joint and several criminal liability.

The court further noted that the drafting history of the definition of “You” and the prior public statements of the regulating agencies responsible for OCSLA confirmed that the specific regulations did not apply to contractors. In addressing whether the regulations that were specifically directed at lessees could also extend penalties to contractors, the Court noted that the virtual non-existing past enforcement of OCSLA regulations against contractors confirmed that the regulations were never intended to apply to them, noting also that the government had not issued civil indictments for non-compliance against contractors prior to 2011.

In addressing the government’s more generalized argument that regulations may result in criminal liability for anyone who fails to comply with them, the Court indicated that the argument ignored the rule that a general provision of a comprehensive regulatory scheme must yield to more specific, conflicting provisions. It stated that “the appellees were indicted under three provisions of 30 CRF § 250.113, all of which are directed at “You,” not at just any person, and Section 250.146(c), which was previously addressed, does not impose criminal liability beyond the definition of “You.”  It stated that because the applicable regulatory definitions unambiguously excluded contractors, more general liability provisions did not control.

Finally, the Court addressed the government’s position with regard to its prior non-enforcement of regulations against contractors where the government indicated that subcontractors always had fair notice of their potential exposure to civil penalties and criminal liability as an interpretation of its regulatory directives. The Court chose not to apply the Auer v. Robins deference standard as it appeared that the government’s interpretation conflicted with its earlier and consistently held view. It felt that there had not been fair notice to contractors of this potential liability and because this involved a criminal liability, as opposed to civil exposure, the enforcement of the governmental agency’s interpretation of its regulations in this instance, would be a violation of the contractors’ due process rights.

Whether this last part of the Fifth Circuit’s decision leaves open the possibility of subsequent acceptance of the governmental agencies’ interpretation of these existing regulations as applying to contractors, in light of its previous statements, appears to be speculative.

Greek Shipowner TaxGreek shipowners have agreed to extend a voluntary tax contribution to the Greek government, which I previously blogged about, for an additional year due to the fact that Greece is still struggling with its debt crisis. Members of the Union of Greek Shipowners (UGS) approved the extension of the agreement for the voluntary tax payments, which was originally signed in 2013 and was set to expire at the end of 2017. The current measure will extend the agreement with the Greek state until the end of 2018.

In 2013 it was agreed that shipowners would make a total of $530 million in contributions, in addition to the tonnage tax which they are already required to pay along with other taxes, over a four year period. We will wait and see if this generous voluntary contribution will help the Greek government achieve its fiscal targets.

Joanne Mantis Attorney New Orleans

Guest blogger Joanne Mantis is a multilingual attorney in the New Orleans office of King, Krebs & Jurgens. She is admitted to both the Louisiana and Greek Bar, and represents a variety of clients both domestically and internationally. 

 

energy service contracts work bargeIn 1990, the U.S. Fifth Circuit rendered its decision in Davis & Sons, Inc. v. Gulf Oil Corp., through which the Court attempted to harmonize the existing state of the law to determine whether a contract to supply a work barge and crew to service various wells, tanks and flowlines within the Black Bay oilfield in Louisiana’s territorial waters was maritime or not. This gave rise to the following “decision tree” in analyzing whether other energy services contracts involving vessels were maritime: (1) had the jurisprudence already determined the issue and, (2) if not, did the analysis of six factors provide the solution as to whether the contract is maritime. Legal scholars and the Fifth Circuit decried the inconsistencies in the subsequent decisions as to whether various types of contracts were maritime or not. The outcome of the analyses often decided whether the contractual indemnity and insurance terms were enforceable under the general maritime law or void under anti-indemnity statutes. Contracting parties were dismayed by the unpredictability of the result absent litigation.

All that may soon change. In Larry Doiron, Inc. v. Specialty Rental Tools & Supply, L.L.P., No. 16-30217 (5th Cir. 2017), the Fifth Circuit undertook the Davis & Sons analysis and affirmed the district court’s summary judgment that a contract to perform flow–back services to improve performance of a natural gas well, which eventually required the use of a crane barge, was a maritime contract, and thus the indemnity terms were interpreted and enforced under the general maritime law. However, Judge Davis issued a special concurring opinion, in which he urged the en banc Fifth Circuit to throw the Davis & Sons test overboard and thereafter simplify the test for when a contract is maritime or not, as follows: whether the contract’s primary purpose is to provide services aboard a vessel located on navigable waters, which services promote or assist in oil or gas drilling or production. The petition for rehearing en banc remains pending as of this writing.

Last Employer Rule in Occupational DiseaseOn May 17, 2017, the United States Court of Appeals for the Fifth Circuit rendered a decision affirming an Administrative Law Judge’s decision in Bollinger Shipyards, Inc., et al. v. Director, OWCP, et al., No. 16-60370.  This matter arose as a claim filed under the Longshore and Harbor Workers’ Compensation Act, 33 USC § 901 et. seq.  The plaintiff, Kenneth Worthy, filed a claim against his past employer, Bollinger Shipyards, Inc., for an occupational illness as a result of exposures to hazardous substances, including welding fumes, sandblasting dust, industrial cleaning solvents and other fumes and chemicals resulting in a diagnosis of chronic, obstructive pulmonary disease (COPD).

After a number of years working as a welding supervisor occasioning his exposure to the above-noted fumes, Mr. Worthy was examined by a physician in 2008, who indicated that he could no longer wear a respirator, as required by his job, due to airway obstruction. Mr. Worthy had been out of work due to other injuries at that time, and upon his attempt to return to work after recovering from these injuries, Bollinger required him to be again examined with regard to his pulmonary condition. On March 22, 2010, the company physician, Dr. Bourgeois, diagnosed Mr. Worthy with COPD based upon the results of a pulmonary function test. At that time, Mr. Worthy was told by the physician that he could not return to work and was advised to see a pulmonologist. It was also recommended that he apply for Social Security Disability.  Instead of doing this, Mr. Worthy applied for work with a separate employer and worked as a welding supervisor from March 29 – May 18, 2010, when he was fired for sleeping on the job.

After Mr. Worthy filed his claims against Bollinger for his respiratory condition, he was seen by yet another physician that performed a further pulmonary function test which gave similar results as were obtained in March 2010. This doctor also indicated to Mr. Worthy that he could not return to any job that exposed him to fumes or dust.

At the trial of the matter before an Administrative Law Judge, Bollinger asserted that it was not liable for Mr. Worthy’s occupational disease due to the fact that Mr. Worthy was exposed to further lung irritants while in the employ, however short-lived, of a later maritime employer. The issue presented addressed the application of the “last employer rule” as defined by the Second Circuit’s widely-adopted rule in Travelers Insurance v. Cardillo, 225 F.2d 137 (2nd Cir. 1955).  Under this rule, the responsible employer in occupational disease cases is the last employer during whose employment the claimant was exposed to injurious stimuli, prior to becoming aware that he was suffering from an occupational disease.

The application of this rule usually arises in the situation where the individual has terminated his employment as a result of a diagnosis identifying a disability and limitations precluding the claimant’s continued work. In the instant, however, after Mr. Worthy was diagnosed with COPD, he sought and obtained further employment for several months performing similar duties as he had for Bollinger. Under these facts, Bollinger argued that the ALJ should have focused solely on the date of disability (last date of employment) to determine the last responsible employer, citing Liberty Mutual Insurance v. Commercial Union Insurance, 978 F.2d 750, 756 (1st Cir. 1992). The Fifth Circuit determined that it did not need to address the situation when diagnosis and disability dates were different because the Administrative Law Judge found that both of these events occurred on March 22, 2010, and this issue was not truly raised by Bollinger before the Benefits Review Board, and was therefore forfeited.

Bollinger also attempted to avoid liability by asserting that Mr. Worthy’s pulmonary condition was made worse after his brief stint of work with the subsequent employer based upon a post-employment pulmonary function test indicating a decline in pulmonary functioning. The Fifth Circuit, noting the standard discretion applied to fact finding of an ALJ, refused to accept this prong of Bollinger’s appeal and indicated that the ALJ was not convinced by the evidence submitted by Bollinger supporting this conclusion.

Jones Act RJSIn a move hailed as a win for international offshore marine contractors and oil companies operating in the Gulf of Mexico and decried as a setback for domestic shipping interests, the U.S. Customs and Border Protection (“CBP”) has withdrawn its proposal to modify and revoke certain previous interpretations of the Jones Act relating to articles and equipment carried on vessels for use in offshore oil and gas operations. The CBP’s May 10, 2017 action halts further consideration of an action that was hotly debated and could have had a significant impact on foreign-flag vessel operations in the Gulf.

The Jones Act restricts the transportation of merchandise between points in the United States to coastwise-qualified U. S.-flag vessels. By application of the Outer Continental Shelf Lands Act, this restriction extends to structures affixed to the seabed on the U. S. Outer Continental Shelf in connection with the specified activities, including exploration for or production of oil and gas. A key exception, widely relied upon by international marine contractors and their oil company customers, relates to the transportation of “vessel equipment,” which includes articles used in “furtherance of the mission” or “fundamental to the operation of” a vessel. Carriage of this “vessel equipment” is not restricted to U.S.-flag vessels and instead may be done by foreign-flag vessels.

The CBP’s original January 18, 2017 proposal would have modified a 1976 ruling concerning the applicability of this exception to a dive support work barge engaged in the construction, maintenance, repair and inspection of offshore petroleum-related facilities. The CBP proposed to rewrite that ruling on the basis that it was inconsistent with the Jones Act. CBP also planned to revoke or modify almost 30 other rulings interpreting the applicability of the Jones Act to numerous operations including pipe and cable laying, well stimulation, lift boats, and sub-sea construction.

CBP’s retreat was perhaps foreshadowed by the agency’s February 8, 2017 extension of the comment period through April 18, 2017.  It also highlights the ongoing battle between domestic and foreign operators in the Gulf of Mexico, with the former contending that the CBP’s stricter interpretation of the coastwise laws would create jobs and stimulate economic activity in the Gulf, and the latter arguing to the contrary on both points and also citing the lack of Jones Act-qualified vessels to do the work that the foreign flagged vessels would be precluded from doing.  The move also was viewed by some as another example of the Trump administration’s reversal of executive action by the outgoing Obama administration.

This regulatory skirmish points up the need for vessel operators and the companies that employ them in the Gulf of Mexico to make sure they are complying with the complicated web of interpretations of the Jones Act when planning new projects and other operations in the Gulf.  As illustrated by Furie Operating Alaska’s recent agreement to pay a $10 million penalty, if operators overlook, or worse, as was alleged in Furie’s case, intentionally violate, the Jones Act, they do so at their peril.

2017 Longshore Conference

The 2017 Annual Longshore Conference was held last week at the Intercontinental Hotel in New Orleans. The annual conference, which is presented by Loyola University New Orleans College of Law in conjunction with the U.S. Department of Labor, is a two-day program/CLE for maritime practitioners and industry professionals handling claims arising under the Longshore and Harbor Workers’ Compensation Act (LHWCA), Defense Base Act (DBA) and other extension acts.

This year’s programming kicked off with a session dedicated to recent decisions under the LHWCA, including a discussion of Bis Salamis Inc, v. Dir. Office of Workers’ Comp. Programs, 819 F. 3d 116 (5th Cir. 2016), a Fifth Circuit case regarding the effect of a claimant’s credibility (or, more accurately, lack thereof) on establishing causation. The Bis Salamis case was the subject of an earlier Offshore Winds blog post by Doug Matthews. Day One’s programming continued with a question and answer session with the Office of Administrative Law Judges, who discussed case assignments and allotments, how the various district offices operate, and provided guidance in practicing before the OALJ. The ALJs took questions from audience members, several of which were directed to what lawyers can do to help speed up the process of judicial decision-making in claims before the Department of Labor. The (not-so-helpful) response of the ALJs in a nutshell? Write better and more concise briefs.

Following the ALJs were presentations on the interplay between other benefits schemes (such as state workers’ compensation statutes) and the LHWCA; trends and forecasts in DBA claims and the business of military contracting in general; and an eye-opening presentation regarding pain management and the opioid crisis in America. Day Two included presentations addressing several other timely topics of interest to Longshore and DBA practitioners, including Section 22 modifications and trends, professionalism in settlement negotiations, and a panel of District Directors of the Office of Workers’ Compensation Programs, who discussed practicing before the OWCP.

Some takeaways from the Conference:

  • The issue of whether a particular claimant was injured on a covered situs under 33 U.S.C. § 903(a) continues to be frequently litigated, and often turns on whether the claimant’s injury occurred in an “adjoining area” within the meaning of the Act;
  • Similarly, while the issue of whether a structure is a vessel under the LHWCA continues to be frequently litigated, it is becoming more well-settled that a very large tension leg platform is not a vessel, due to the lack of self-propulsion, steering mechanism, and rudder, and its dedicated time on site; and
  • Under the LHWCA, traumatic injuries get a one year statute of limitations; but occupational diseases get a two year statute of limitations. With respect to claimants experiencing delayed expression PTSD, it can be difficult determining which limitations period applies.

The Loyola Longshore Conference is held annually in New Orleans.

Bosarge v. Cheramie MarineIn defending personal injury claims, defendants frequently have to deal with jury interrogatories that infer the plaintiff actually experienced an incident that caused or contributed to his complaints, despite there being a question as to whether an incident occurred. For example, the first question the jury often is asked to answer is a variant of whether the defendant was negligent in causing plaintiff’s injuries – thereby creating the impression that a compensable accident has occurred.

In Bosarge v. Cheramie Marine, L.L.C., No. 16-30187 (5th Cir. Jan. 10, 2017), the U.S. Fifth Circuit in a per curiam decision concluded that the district court did not abuse its discretion in submitting the following interrogatory as the first question the jury needed to answer: “Do you find by a preponderance of the evidence that Plaintiff Richard Bosarge had an accident on July 18, 2014?” The evidence at trial conflicted on this point. Capt. Bosarge testified that his lower back was allegedly injured while he was in his bunk and the vessel struck a large wave. Cheramie Marine presented countervailing evidence that the waves were not violent, Capt. Bosarge stated that he thought his back was hurting from being seasick, and further that Capt. Bosarge did not report to the Master of the vessel as having had any accident at all.1 Accordingly, where there is evidence that no accident occurred, defendants now can cite to the Fifth Circuit’s Bosarge decision as authority to submit a similar jury interrogatory.

________
1 Capt. Bosarge’s claim for maintenance and cure was dismissed based on the jury’s finding that he intentionally concealed material medical facts concerning his prior low back complaints in accordance with McCorpen v. Central Gulf S.S. Corp., 396 F.2d 547 (5th Cir. 1968) and its progeny.