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Jim Bercaw is a member at King, Krebs & Jurgens, P.L.L.C., and practices in the areas of offshore and maritime litigation, as well as commercial and corporate transactions, including compliance with applicable government regulations, risk assessment and management. His practice includes representation of companies in marine, oil and gas, and construction industries. He also advises clients in a wide variety of contracts, including master service agreements, vessel and aircraft charters, and public and private works and supply contracts.

Jim is motivated by familiarity with and enjoyment of the practice, saying "There are real world problems, requiring timely and correct solutions, and I enjoy being a part of that process." Between a deep knowledge and understanding of recurring issues, coupled with the ability to craft novel and efficient resolutions of any disputes, his contributions take on regulatory changes in the offshore industry.

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.

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.

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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.

Maritime ContractMany of the indemnity provisions Master Service Agreements use in the energy and construction industries contain the term “invitee” in the definition of “Owner Group” and “Contractor Group”. However, the term “invitee” is rarely defined itself. Drafters should strongly consider jettisoning the term “invitee” from the definition of “group”. For most contracts applicable to worksite operations, the terms “contractor” and “subcontractor” are substantially easier to understand and to apply.

In the absence of a contractual definition, the courts will have to resort to judicial definitions of “invitee” in order to give meaning to the indemnity provision. In Grogan v. W&T Offshore, Inc., No. 15 – 30369 (5th Cir. Jan. 27, 2016), the U.S. Fifth Circuit Court of Appeals had to interpret indemnity provisions in which both “groups” included the undefined term “invitee”.[1] W&T agreed to defend and indemnify Triton from the claims of W&T’s invitees, and Triton agreed to defend and indemnify Triton from the claims of Triton’s invitees.

Tiger was hired by W&T to provide hydrogen sulfide (H2S) monitoring services and personnel, training and equipment during the operation of Triton’s vessel. Mr. Grogan, an employee of Tiger, was injured when he fell to the deck of the Triton vessel on which he had worked while attempting to board a personnel basket.

The Fifth Circuit adopted the parties’ reliance on the Louisiana judicial definition of invitee in Blanks v. Murco Drilling Corp., 766 F.2d 891 (5th Cir. 1985) to supply the applicable definition of invitee in a maritime contract.  (It remains to be seen whether this Louisiana land–based definition is applied by other coastal courts in interpreting “invitee” in their maritime contracts.) Under Blanks, an invitee is “a person who goes onto premises with the expressed or implied invitation of the occupant, on business of the occupant or for their mutual advantage.”  Id. at 894.

The district court denied cross–motions for summary judgment, finding disputed material facts as to whose invitee Mr. Grogan qualified; the issues were ultimately resolved through trial on submitted memoranda and evidence including deposition transcripts.

On appeal, the Fifth Circuit first concluded that even though Triton owned the premises, W&T exercised sufficient control (presence of a company man, establishment of the order of work, etc.), that W&T qualified as an occupant for purposes of Mr. Grogan’s status as W&T’s invitee. Thereafter, the court of appeals concluded that even though Triton impliedly consented to Mr. Grogan’s working from the Triton vessel, and that Triton indirectly benefitted from his presence, it was W&T that ultimately benefitted from Mr. Grogan’s presence and services.  As a result, the district court did not err in concluding Mr. Grogan was the invitee of W&T, not Triton.

[1] King, Krebs & Jurgens, the author, and his partner, Jack Jurgens, represented W&T Offshore in the district court and on appeal.

Pre-Judgment Interest RateThe current post-judgment interest rate in federal court is the infinitesimally meager rate of 0.22% (that is 22 hundredths of a percent, not 22 percent) as per statute, 28 U.S.C. § 1961(a). In contrast, the rate of pre-judgment interest is within the discretion of the district court (and therefore rarely disturbed on appeal), and furthermore the award of pre-judgment interest is “well–nigh automatic”. See Gator Marine Serv. Towing, Inc. v. J. Ray McDermott & Co., 651 F.2d 1096, 1101 (5th Cir. Unit A 1981) and Reeled Tubing, Inc. v. M/V CHAD G, 794 F.2d 1026, 1028 (5th Cir. 1986).

In Offshore Marine Contractors, Inc. v. Palm Energy Offshore, L.L.C., No. 14-30059 (5th Cir. Mar. 2, 2015), the Fifth Circuit affirmed the district court’s setting the pre-judgment interest rate at 1.5% per month, based on the invoices of the party claiming payment. The Fifth Circuit confirmed that the rate of pre-judgment interest can be based on the creditor’s actual cost of borrowing money, state law, or “other reasonable guideposts indicating a fair level of compensation”, including interest rates set forth on invoices. The purpose supporting an award of pre-judgment interest was to compensate the creditor for the use of funds to which it was entitled from the debtor which had use of those funds prior to the judgment, and accordingly, the Court rejected as irrelevant the argument that the judgment debtor never agreed to the invoice rate. By affirming the award of 1.5% per month, the spread between pre-judgment and post-judgment interest rates was 18%.

In the near future, it is expected judgment debtors will cite to the applicable state law governing usurious interest rates. Nevertheless, the Offshore Marine decision provides creditors with jurisprudential support for a pre-judgment interest rate of 1.5% per month, which translates to 18% per year – not a bad rate of return in this economy.

File the Limitation ComplaintOn December 3, 2014, the Fifth Circuit, in In re:  RLB Contracting, Inc., No. 14–40326 (5th Cir. Dec. 3, 2014), concluded that an ongoing exchange of correspondence between counsel for a dredge involved in a maritime casualty and counsel for the wrongful death and personal injury claimants satisfied both prongs of the “reasonable possibility” test for written notice of a claim and thereby began the six month statutory period for the dredge owner to have filed its complaint for exoneration and/or limitation of liability. These issues have been previously explored in this Blog in 2012 and in 2013.

To satisfy the “reasonable possibility” test sufficiently to start the six month period, the correspondence to the vessel owner (or its counsel) must convey a “reasonable possibility” that a potential claim exists and a “reasonable possibility” that the amount of the claim might exceed the value of the vessel. The court observed that no magical language is necessary and that the vessel owner, not the dead or injured claimants, bears the risk in the event of a wrong guess or a tactical error.

It should be noted that from a procedural perspective, the Fifth Circuit affirmed the district court’s judgment of dismissal under the de novo standard. The failure to timely file the Limitation Complaint is a jurisdictional defect, subject to de novo review, even though the “reasonable possibility” inquiries are fact–intensive and based on the circumstances of the case. Because the district court considered matters outside of the pleadings, it had applied a summary judgment procedure in its analysis of the correspondence exchanged between counsel. Summary judgments likewise are subject to a de novo standard. For good measure, the Fifth Circuit concluded that its review of the record did not reveal any dispute of material fact and thus summary judgment was procedurally proper.

Vessel owners should take note: the correspondence from claimants’ counsel is sufficient to start the six month period to file a limitation complaint, regardless of when the claimants ultimately decide to file suit. Once more, we stress what by now should be obvious – when in doubt, file the complaint for limitation.

On September 25, 2014, the en banc Fifth Circuit, in McBride v. Estis Well Serv., L.L.C., No. 12-30714 (5th Cir. Sept. 25, 2014), concluded in a brief opinion that the Supreme Court’s decision of Miles v. Apex Marine Corp., 498 U.S. 19 (1990), and its limitation on recovery to pecuniary damages, precluded Jones Act seamen from recovering punitive damages either for Jones Act negligence or general maritime law unseaworthiness. Six judges dissented from the en banc decision, which was supported by nine judges for reversal of the previous panel decision.

This reporter previously commented on the panel decision here, with the observation that punitive damages were not dead yet. The majority en banc opinion has now clarified that punitive damages have “expired and gone to meet their Maker.”

A petition for certiorari to the Supreme Court is an almost certainty. Whether this issue obtains the interest of the requisite four Justices remains to be seen.

After protracted and expensive litigation overseas, you obtain a judgment against the defendant. There remains one series of hurdles left to cross: the defendant refuses to pay that judgment and has no assets in the country where the litigation was conducted. However, the defendant (or possibly one or more of its numerous alter egos) has assets in the United States. What should you do to collect on the judgment? If the underlying claim would be considered a maritime claim under U.S. law, one option is filing an enforcement action in federal district court under its admiralty subject matter jurisdiction, 28 U.S.C. § 1333.

In D’Amico Dry Ltd. v. Primera Maritime (Hellas) Ltd., No. 11-3473-cv (2nd Cir. June 12, 2014), the Second Circuit concluded that U.S. district courts have admiralty subject matter jurisdiction over an action to enforce the judgment of a foreign tribunal where the underlying claim on which the judgment was rendered would be considered maritime under U.S. law. D’Amico and Primera executed a forward freight agreement (“FFA”), a futures contract (i.e., contractually enforceable wager) contingent upon the parties’ accurately predicting future market rates for the shipment of goods. Under the FFA, Primera was obligated to pay D’Amico and failed to do so. In accordance with the forum selection and choice of law provisions of the FFA, D’Amico filed suit in the Commercial Court of the Queen’s Bench Division of the English High Court of Justice, which rendered a substantial judgment against Primera.

When Primera failed to pay the English judgment, D’Amico filed suit to enforce that judgment in New York federal court under its admiralty jurisdiction. The district court granted Primera’s motion to dismiss for lack of subject matter jurisdiction because the English judgment was rendered by the Commercial Court and not the Admiralty Court and, additionally, English law would not consider D’Amico’s claim as being maritime.

On appeal, the Second Circuit concluded that the proper inquiry in an enforcement action brought under the district court’s admiralty jurisdiction was whether the underlying claim on which the judgment was based was a maritime claim under U.S. law. The Court recognized that many foreign tribunals do not have admiralty courts even though the foreign tribunals adjudicate maritime claims. Thus, whether a foreign judgment was rendered by a foreign admiralty court was of no moment. Additionally, after a review of various “theoretical and practical reasons”, the Second Circuit concluded that whether a claim is maritime should be determined under U.S. law and not the law of the foreign court that rendered the judgment that is the subject of the enforcement action.

PRACTICE NOTE:  The Second Circuit expressly distinguished its holding from the federal court’s subject matter jurisdiction over enforcement actions brought under the court’s “federal question” jurisdiction, 28 U.S.C. § 1331.  For enforcement suits based on “federal question” jurisdiction, the federal court must have a jurisdictional basis independent of the fact that the judgment was rendered by another federal court.

The U.S. Fifth Circuit Court of Appeals recently concluded that Jones Act seamen can recover punitive damages for their employer’s willful and wanton breach of the general maritime duty to provide a seaworthy vessel, in McBride v. Estis Well Serv., L.L.C., No. 12 – 30714 (5th Cir. Oct. 2, 2013). The jurisprudential history behind this result resembles a slowly rebounding yo – yo that oscillates over a period of decades.

In 1981, the Fifth Circuit concluded that punitive damages may be recovered under the general maritime law upon a showing of willful and wanton misconduct by the ship owner in the creation or maintenance of unseaworthy conditions. In re Merry Shipping, Inc., 650 F.2d 622, 623 (5th Cir. Unit B 1981). However, the health of the Merry Shipping decision took a turn for the worse, starting with the Supreme Court’s 1990 decision of Miles v. Apex Marine Corp., 498 U.S. 19, 27 (1990), in which the Supreme Court concluded that the pecuniary damages limitations under both the Jones Act, 46 U.S.C. § 30104, and the Death on the High Seas Act (DOHSA), 46 U.S.C. § 30301 et seq., likewise limited the damages recoverable by the seaman’s estate for wrongful death caused by the unseaworthiness of the vessel under the general maritime law. Although the recoverability of punitive damages was not before the Supreme Court, a plethora of intermediate appellate court decisions seized on the pecuniary damages limitation of the Miles decision for general maritime law claims involving seamen to conclude that punitive damages, which were clearly non – pecuniary, were likewise not recoverable under the general maritime law for vessel unseaworthiness.

The death of Merry Shipping was initially reported by the en banc Fifth Circuit in Guevara v. Maritime Overseas Corp., 59 F.3d 1496 (5th Cir. 1995) (en banc), which concluded that Miles effectively had overruled Merry Shipping and that punitive damages were not available under the general maritime law for willful nonpayment of maintenance and cure. Id. at 1513. In light of the Guevara decision, those few remaining doubtful jurists ultimately concluded that punitive damages were not available to a Jones Act seaman in an action for unseaworthiness under the general maritime law.

Fourteen years after Guevara, the Supreme Court, in Atlantic Sounding Co., Inc. v. Townsend, 557 U.S. 404 (2009), restored the availability of punitive damages for maintenance and cure claims under the general maritime law. The Townsend Court reached this conclusion for two reasons:  (1) the general maritime cause of action for maintenance and cure preceded the enactment of the Jones Act and (2) punitive damages were an available remedy under the general maritime law when the Jones Act was enacted. Because the Jones Act did not expressly address either maintenance and cure or punitive damages, both remained available after its passage in 1920. Id. at 414 – 15. In so holding the Townsend court abrogated the Guevara decision.

Following the precedent of Townsend, the Fifth Circuit in McBride has completed this particular cycle of the punitive damages yo – yo and reinstated the holding of the 1981 Merry Shipping decision. Punitive damages are once again available to seamen who are injured or killed by the ship owner’s willful and wanton misconduct in creating an unseaworthy condition. McBride at 2 & 20. Or as the hapless villager tried to explain in Monty Python and the Holy Grail:  “But I’m not dead yet!”

The scenario may be all too familiar. A vessel owner is involved in a commercial relationship with a valuable customer, when a marine casualty involving the vessel occurs. The customer makes a written demand on the vessel owner to pay the costs of repair plus consequential damages. Liability on the part of the vessel owner is not a lock, but fairly clear. The quantum of damages is substantial, but the potential consequential damages are uncertain. Settlement negotiations are ongoing, and partial payments are made. Moreover, there is always the commercial relationship to consider. At what point should the vessel owner file a complaint for limitation of its liability, pursuant to the Shipowners’ Limitation of Liability Act, or risk it being found untimely for failure to file within six months of receipt of a written claim?

In In re: Marquette Transportation Company, L.L.C., No. 12 – 31182 (5th Cir. May 31, 2013), the Fifth Circuit concluded that if the customer’s initial demand letter revealed a “reasonable probability” that the claim will exceed the value of the vessel, then the vessel owner must file the limitation complaint within six months of receipt of that letter. “When there is uncertainty as to whether a claim will exceed the vessel’s value, the reasonable possibility standard places the risk and the burdens associated with that risk on the owner.”  Id. at 4. As I have previously cautioned, “If in doubt, file the Complaint for Limitation of Liability.”

Under the particular facts of this case, Great Lakes’ dredge ran aground while under the tow of Marquette’s tug, requiring repairs that were not completed until 17 days later. On February 24, 2011, Great Lakes made a written demand on Marquette, stating Marquette was negligent and that Great Lakes would hold Marquette responsible for repairs in excess of $600,000, as well as consequential damages. The parties engaged in settlement negotiations, and reimbursement for certain repairs were made, but it was not until December 7, 2011, that Great Lakes finalized its calculations of its consequential damages, and made written demand on Marquette in excess of $4.5 million. Within six months of receipt of the December letter, Marquette filed its limitation complaint and posted a bond for the limitation fund in the amount of $2.1 million.

The district court and Fifth Circuit concluded that Marquette should have filed the limitation complaint within six months of receipt of the initial demand letter, even though the quantum of consequential damages was uncertain. As a result, Marquette’s limitation complaint was dismissed as untimely.

In the wake of the revisited tests of vessel status by the Supreme Court in Stewart vs. Dutra Construction Company, 543 U.S. 481 (2005) and Lozman v. City of Riviera Beach, Fla., 133 S.Ct. 735 (2013), it remains to be seen whether floating oil and gas production structures, such as SPARS and tension leg platforms (“TLP”), retained their non-vessel status. In Mooney v. W&T Offshore, Inc., No. 2:12-cv-969 (E.D. La. Mar. 3, 2013), District Judge Lance M. Africk recently concluded that the MATTERHORN SEASTAR, a TLP secured to the Outer Continental Shelf off the coast of Louisiana, was not a vessel as a matter of law. The plaintiff had filed suit against W&T Offshore, Inc., the owner and operator of the MATTERHORN SEASTAR, under the Jones Act, the Longshore and Harbor Workers’ Compensation Act (“LHWCA”), and general maritime law for alleged personal injuries he claimed to have received while working on the MATTERHORN SEASTAR. The plaintiff’s potential recovery against W&T under the foregoing statutes and general maritime law depended on whether the MATTERHORN SEASTAR is a vessel. 

The MATTERHORN SEASTAR is a floating oil and gas production structure that has been secured to the seabed since 2003 by six mooring tendons, seven casing production risers, and two export pipelines, and it will remain in that moored location until at least 2020. Its buoyant hull had been towed to the moored location, where it was secured to the seabed by the mooring tendons, which tendons in turn were affixed to suction pilings driven hundreds of feet below the seafloor. Subsequently, the oil and gas production and processing equipment that comprised the top-sides of the TLP was installed on top of the hull. Thereafter, the production risers and pipelines were connected to the top-sides equipment. It would take W&T several months of preparation and activities, including the removal of the topsides from the hull, before the hull could be ready for towage away from the moored location. Lastly, the MATTERHORN SEASTAR has no system of self-propulsion, no raked bow, and is not intended to be towed or moved except as part of the initial positioning and ultimate removal of the hull from its moored location. 

Under the Rules of Construction Act, 1 U.S.C. § 3, as expanded by the Stewart and Lozman decisions, the current tests for whether a structure qualifies as a vessel is whether the structure is practically capable of being used as a means of transportation on the water, including whether a reasonable observer would consider the structure to be designed to a practical degree for carrying people or things over water. Based on the undisputed evidence, Judge Africk concluded that no reasonable observer would consider the MATTERHORN SEASTAR to be designed to a practical degree for carrying people or things over water. Moreover, it was only theoretically possible, and thus not practically possible, for the TLP to participate in maritime transportation. As a result, the MATTERHORN SEASTAR was not a vessel, and the plaintiff’s claims against W&T under the Jones Act, the LHWCA, and general maritime law were dismissed with prejudice. King, Krebs & Jurgens, including the author, represented W&T in its successful motion for partial summary judgment.