- evaluate debt service obligations and ability to pay;
- assess potential for financial covenant default;
- reach out to lenders to obtain waivers/amendments to credit facilities; and
- identify assets that can be sold.
The U.S. Fifth Circuit recently reversed and rendered a District Court’s finding of future lost wages so that it was based on statistical work life expectancy rather than Social Security retirement age. In the recent unpublished Fifth Circuit opinion, Mark Barto vs. Shore Construction, LLC; McDermott Inc., No. 14-31326, the Court affirmed a finding of Jones Act negligence against a derrick barge owner, an award for future general damages, and the award for cure against the plaintiff’s nominal employer. However, with regard to the plaintiff’s future lost wages, the decision focused on the District Court’s adoption of the plaintiff’s economist’s supposition that the plaintiff would work until his Social Security retirement age of 67 was reached rather than to an age supported by statistical work life expectancy. The Fifth Circuit reversed the District Court’s finding of future lost wages and reduced the amount as would be appropriate in determining that the plaintiff would have only worked until the age of 55.8 rather than 67.
NOTE: This post was authored for the firm by Amanda James, a Loyola University New Orleans College of Law student who is spending part of her summer working at King, Krebs & Jurgens. — RJS
Parties to maritime contracts frequently include requirements that one or the other party or both of them will use their “best efforts” to perform duties described in the contract. But they also frequently give little thought to what the phrase “best efforts” actually means to them and, perhaps more importantly, what a court will say it means should a dispute arise.
Our review of relevant case law indicates that if you want someone to be contractually obligated to use his “best efforts,” the contract should specifically state what the parties mean by this. Maritime courts often look to state contract law when interpreting the parties’ respective obligations under maritime contracts. While state law offers varying approaches to enforcing “best efforts” provisions, two predominate approaches are evident in the relevant case law:
- Certain courts will not enforce a “best efforts” provision at all if it lacks an explicit standard.
- Other courts will look to the contract and/or the particular circumstances of the dispute to determine whether a party used its “best efforts” to perform a duty.
The first approach is epitomized by the Fifth Circuit in Kevin M. Ehringer Enterprises, Inc. v. McData Services Corp., in which the court held that a “best efforts” provision must include guidelines in order to be enforceable. These guidelines do not have to be detailed. For example, “best efforts to prepare . . . as promptly as practicable” was good enough for the Fifth Circuit in Herrmann Holdings, Ltd. v. Lucent Techs., Inc. On the other hand, an agreement between a charterer and an owner to “use their best efforts and renew this charter in two year intervals . . . ,” was deemed too vague by the court in Orgeron Bros. Towing, LLC v. Higman Barge Lines. Requiring objective standards for enforceability appears to be a minority position, adopted only by the Fifth Circuit applying Texas law and by a Louisiana district court following the Fifth Circuit precedent in Kevin M. Ehringer Enterprises, Inc.
In the second approach, exemplified by the court in Ashokan Water Services, Inc. v. New Start, enforceability is not dependent upon the inclusion of explicit guidelines. Rather, the court is able to infer standards from other contract provisions. This seems to be the more popular position, affirmatively adopted by courts in Maryland, New York, and California. Courts may also determine whether or not a party used his “best efforts” by looking at the circumstances of the case. Under this approach, the court will engage in a fact-intensive inquiry into what a reasonable (read “average, prudent, comparable”) person would have done. To that end, courts will consider the party’s intent, experience, expertise, financial status, opportunities, abilities, goals, and basically anything else that might be relevant.
While this fact-intensive approach may make it difficult to predict an outcome, the California court in California Pines Property Owners Assn. v. Pedotti did delineate a few things that “best efforts” does not mean:
- It does not mean you are a fiduciary;
- It does not mean you have to make every conceivable effort;
- It does not mean you have to ignore your own interests;
- It does not mean you have to spend yourself into bankruptcy;
- It does not mean you have to incur substantial losses; and
- It is not the same thing as the implied covenant of good faith and fair dealing (but it might require you to act in good faith if you’re in Alabama, Louisiana, Maryland, or New York).
The bottom line is that including “best efforts” provisions in a maritime contract can be a good practice, but only if the contract includes guidelines as to what constitutes the party’s “best efforts.” Otherwise, if a dispute arises, the provision may be interpreted as having no meaning at all or in a manner that the parties did not intend.
The 25th Biennial Admiralty Law Institute kicked off with great success on March 11, 2015. Informative presentations continued on March 12-13, building on the theme of this year’s conference, “Symposium on Maritime Personal Injury and Death: Jurisdiction to Judgment.”
Thursday, March 12th: The second day of the Admiralty Law Institute began with a panel discussion of punitive damages. Punitive damages has been a hot topic since McBride v. Estis, where the Fifth Circuit, sitting en banc, reversed its own panel opinion. The panel had concluded that punitive damages could be recovered by a seaman for the alleged unseaworthiness of a vessel. In September 2014, the en banc court reversed that panel and held that the statutory remedies provided by the Jones Act could not be supplemented, and thus a seaman cannot recover punitive damages for death or personal injury based on unseaworthiness. The Supreme Court is considering granting certiorari, so the availability of punitive damages in such cases will likely remain controversial.
Thursday’s program also emphasized themes such as alternative dispute resolution and maritime disaster. A panel discussion moderated by Patricia Krebs addressed a shift in the litigation of maritime disputes from expensive and formal arbitration to more flexible and informal mediation.The following panel, entitled “Effective Settlement Negotiations” similarly addressed practical aspects of dispute resolution.
Two of Thursday’s panels discussed the Deepwater Horizon incident. The first focused on government regulation and class society rules post-incident. The other, which panel included attorneys from both sides of the Deepwater Horizon litigation and Magistrate Judge Sally Shushan, provided an illuminating recount of the effective strategies employed by Judge Barbier in helping to move such a massive case towards resolution.
Friday, March 13th included a panel discussion of the recent Coffin v. Blessey Marine Services, Inc. decision, in which the Fifth Circuit held that tankermen (i.e., individuals responsible for loading and unloading tank barges as part of their duties as crew of a tow) were seaman whilst loading and unloading the vessel, and thus exempt from the overtime requirements of the Fair Labor Standards Act.
The conference was not all work and no play; as was the case Wednesday, both Thursday and Friday featured opportunities for participants to mix and mingle with their colleagues. On Thursday, the Young Lawyers group hosted a networking mixer at the Foundation Room of the House of Blues for registrants in practice fewer than six years. Following the programming on Friday was the Tulane Maritime Law Alumni luncheon at Galvez.
The next Institute, which shall focus on commercial aspects of admiralty and maritime practice, will be held in October of 2016.
March 11, 2015, marked the first day of the 25th Biennial Admiralty Law Institute. Held at Tulane University in New Orleans, the ALI is the oldest and largest continuing legal education program devoted entirely to maritime law. The theme of this year’s conference is “Symposium on Maritime Personal Injury and Death: Jurisdiction to Judgment,” and Wednesday’s presentations were certainly in keeping with that theme. Some highlights from ALI’s first day:
First up was a panel discussion of recent developments in the ancient law of maintenance and cure. The panel noted that, despite the many modern improvements to the seaman’s lot, such as union contracts, vacation allowances, and disability pensions, the entitlement to maintenance and cure remains diligently guarded by the courts. The panel also discussed developments in the case law, such as the inability of the employer to turn a blind eye to accessible evidence corroborating the maintenance and cure claim, the scope of the seaman’s duty to disclose a pre-existing condition, and latent illnesses of the seaman–a subject that pushes the limits of the course and scope analysis.
Another topic up for discussion was cruise ships. The discussion was divided into two parts. First, regulation and compliance, followed by passenger and crew claims. A major topic of discussion was recent developments in the 11th Circuit regarding ship’s physicians. In the 5th Circuit the law remains that a ship’s physician, like a concessionaire, is not an employee or agent of the ship and thus no right of action exists against the shipowner for the medical malpractice or negligence of the on-board physician. As has been stated more often than once, ships are not floating hospitals. However, obtaining personal jurisdiction over the ship’s doctor in such cases is nearly impossible, so aggrieved parties are often left with no avenue of recovery. It seems the law is changing in the 11th Circuit, with a recent case holding the shipowner liable on an apparent agency theory.
Wednesday’s other presentations addressed attorney-client privilege and the admiralty practitioner, vessel status and jurisdiction (which included a very interesting discussion of the Lozman case) and removal of maritime cases. All presentations were followed by lively, and occasionally heated, questions and comments from the attendees. The day was capped off with a very well-attended cocktail reception at the lovely New Orleans Board of Trade.
Thursday’s topics include punitive damages, arbitration and mediation of maritime disputes, and litigating maritime disasters.
On Thursday, March 12, 2015, the Department of Labor Office of Workers Compensation Program (OWCP) filed in the Federal Register (Volume 80, No. 48) a direct final rule and request for comments with regard to changes to OWCP regulations intended to broaden the acceptable methods by which claimants, employers and insurers can communicate with OWCP and each other. The direct final rule becomes effective on June 10, 2015, without further action unless OWCP receives significant adverse comment to the rule by May 11, 2015. The notice issued by the OWCP provides that the revisions are procedural in nature and that they will apply to all matters pending on the date the rule is effective. These revisions either codify current practice or broaden the methods by which documents and information may be transmitted under the LHWCA.
In general the rules now recognize email transmission of documents as a means for communication between parties as long as the parties have either in writing or by email provided confirmation that the receiving party agrees to accept electronic transmission if it is sent through a reliable method. The rules also provide for a replication of this agreement. The revisions also provide for the use of the OWCP SEAportal method for serving documents on a District Director’s office, but does not exclude the existing means for delivery of documentation whether by mail, facsimile or hand delivery.
As we all know, the devil is in the details. It is therefore recommended that the LHWCA employer, insurer and practitioner review these revisions to be in compliance by their effective date.
The 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.
In John Horton v. Maersk Line, Limited, Case No. 14-14450 (11 Cir., 02/27/2015) the 11th Circuit issued an unpublished decision finding that the International Safety Management Code (the “Code”) did not create vessel duties to a longshoreman over and above that established in Scindia.
The plaintiff, John Horton, a longshoreman, was working aboard the M/V SEALAND CHAMPION when a twist lock dislodged from a container due to crane operator mishandling of the container, causing it to fall and strike the plaintiff on the head. Mr. Horton sued the crane operator’s employer and obtained a significant settlement, and then brought this suit against the vessel owner and other parties. Some of the issues addressed in the opinion by the 11th Circuit, including spoliation of evidence and exclusion of experts, lack noteworthiness.
The 11th Circuit’s decision, however, is of some note as it refused to apply the International Safety Management Code as a basis for vessel negligence. The Code was implemented by Congress as part of the International Convention for the Safety of Life at Sea in 46 U.S.C. Sections 3201-3205 and CFR regulations 33 CFR Sections 96.200-96.390. The Court determined that the plaintiff could not rely on the Code, indicating that the plaintiff cited no authority that recognized the Code as modifying the duties set out in the Longshore Act and recognized in Scindia Steam Navigation Co. v. De Los Santos, 451 US 156 (1981). In the implementing statute accepting the Code, Congress directed that compliance with the Code was to be achieved through regulations that are “consistent” with it and provided penalties for non-compliance. The 11th Circuit agreed with a lower court decision indicating that, “Congress merely desired to participate with other maritime nations in achieving safety goals [though the Code], but did not intend to change long-established rules of law which govern liability and its allocation in general maritime law.” citing Calderon v. Offen, 2009 WL 3429771, at *4 (SD Fla. 10/20/2009)
The 11th Circuit felt that attributing to the ship owner a duty to supervise cargo loading and unloading as provided for in the Code would run directly contrary to the Supreme Court’s interpretation of the Act; namely, that a duty to supervise a stevedore would “saddle the ship owner with precisely the sort of non-delegable duty that Congress sought to eliminate”. Scindia 451 U.S. at p. 169.
The U. S. Fifth Circuit recently held that an injured seaman was precluded from recovering maintenance and cure where he intentionally provided false information during a pre-employment physical conducted by a previous employer that was later acquired by his current employer. Although the current employer did not conduct its own pre-employment physical, the Fifth Circuit found that under the particular circumstances presented (i.e. when a company purchases another entity and keeps the predecessor’s seaman in its employ) a re-examination of the seaman was not required. The holding, Meche v. Douret, et al., No. 14-30032 (5th Cir. Jan. 22, 2015) does not change prior case law holding that misrepresentations made to unrelated previous employers will not impact the seaman’s right to recover. However, the case is a conservative extension of the McCorpen rule, as articulated in McCorpen v. Central Gulf Steamship Corp., 396 F.2d 547 (5th Cir. 1968), which is one of the few vehicles a maritime employer or ship owner can use to defeat a maintenance and cure claim. In order to establish a McCorpen defense, the employer/ship owner must show:
- An intentional misrepresentation regarding medical history;
- The misrepresentation was material to the decision to hire; and
- A connection between the misrepresentation and the injury complained of. (See also Brown v. Parker Drilling Offshore Corp., 410 F.3d 166, 171 (5th Cir. 2005).)
In Meche, as in many other cases, the seaman had filed several prior lawsuits related to the same condition (low back injury). However, the seaman falsely stated in his pre-employment medical history questionnaire that he had no such problems with his back or any illness, injury or claim arising out of his previous employment.
Meche argued that he did not intentionally conceal his prior medical history because his daughter actually filled out the form and he did not “read and write very well.” The Court acknowledged that, where a seaman “lacks the requisite literacy skills to understand and complete the questionnaire,” his failure to disclose may not be intentional. However, in Meche it was found that the seaman did understand what was written in the form which he acknowledged through his signature.
To avoid “illiteracy” arguments in subsequent litigation, employers and owners should be mindful of the seaman’s English literacy skills when having them fill out such forms and take steps to ensure they understand the forms they are completing.
In cases where the employer does not conduct a pre-employment physical, the employee is required to disclose past illnesses or injuries only when, in the seaman’s own opinion, the employer would “consider it a matter of importance.” On the other hand, where a physical is performed, the “subjective” element is removed, and a mariner may be barred from recovery whenever he conceals material medical facts during a pre-employment physical designed to elicit such information. The McCorpen rule, and its recent extension, emphasize the importance of pre-employment physicals and detailed medical questionnaires as a means of mitigating exposure to subsequent maintenance and cure claims by seamen with sometimes lengthy histories of injury and litigation.
Guest blogger Mike Vincenzo is a Member in King, Krebs & Jurgens’ New Orleans office who has been defending clients in complex litigation scenarios for two decades, with a particular focus on casualty and personal injury cases in the maritime, aviation, and air medical industries. He is admitted to practice law in Louisiana.
On 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.