OWCP Announces Staff Changes

On November 16th, OWCP announced that effective November 27, 2016, there will be a change in leadership in the Divisions of Longshore and Harbor Workers’ Compensation and Federal Employees’ Compensation. On that day, the current DFEC Director, Doug Fitzgerald, will assume the role of Longshore Director. Tony Rios, the current Longshore Director, will become the DFEC Director.

It was also announced that Rholanda Basnight is serving as the Acting District Director in the Second District Office (New York).

The Maritime Lien

The August 31, 2016, bankruptcy of container shipper giant Hanjin Shipping Co. Ltd. has thrown ports and retailers around the world into confusion.  With its fleet of more than 100 container ships, Hanjin is South Korea’s largest container carrier, seventh largest in the world, and accounts for eight percent of trans-Pacific trade volume for the U.S. Market.  Worldwide ports and companies that provide necessary services and supplies to its ships have denied them access for fear of not being paid.  This has stranded billions of dollars of cargo at sea.  On September 9, 2016 courts in South Korea and the United States cleared the way for Hanjin to spend $10 million to unload four ships headed to the U.S. west coast.  The ships will be allowed to dock and unload their cargo without fear of seizure by creditors. However, Hanjin ships have been seized in in ports in China and Singapore.

 

Given these circumstances, now is a good time for a brief review of the maritime lien which often is the only security that a provider of necessaries to a ship can rely upon.  Simply stated, the maritime lien is designed to furnish security to a creditor, and to enable the vessel to obtain goods and services even though it may be a world away from its home port.  The notion of the maritime lien arose in those long ago days when there did not exist technology that facilitated rapid communication and financial transactions.  Then suppliers of goods and services were reluctant to do business with vessels whose owners were unknown to them or located far away.  After receiving goods or services, the vessel could sail away leaving the owner unpaid.  To ensure payment, the master or vessel’s agent or representative was enabled to pledge the vessel as security.  In the United States the Federal Maritime Lien Act, 46 U.S.C. § 31301, et seq., first enacted in 1910, codified the maritime lien to all suppliers of “necessaries” to a vessel on the order of the owner, master, or charterer.  The lien, which is a non-possessory property right or privilege, attaches to the ship and its appurtenances.  It gives the aggrieved provider the right to seize the vessel, force its sale, and extract payment.  Maritime liens can attach to a vessel under a number of circumstances such as personal injury, property damage, preferred ship mortgages, seaman’s wages, or contractual disputes.  As a result, the courts have ranked the liens in order of priority, with those ranked first having first claim on assets realized from the sale.

 

The Act defines “necessaries” as including “repairs, supplies, towage, and the use of a dry dock or marine railway”. § 31301.  The courts have been more inclusive and recognized services of a marine surveyor, taxi fare for crew member to get to the vessel, insurance premiums, and gambling equipment furnished to a cruise ship.  Also included are pilotage, wharfage and dockage, stevedoring services, advances made by the ship’s agent, damage to cargo, and bills for unpaid bunkers or other necessaries.

 

The lien attaches when the supplies or services are provided.  While it is not necessary to record or file a maritime lien, it is recommended that the lien holder file a formal Notice of Lien with the U. S. Coast Guard Office of Vessel Documentation, if the vessel is documented.  The Coast Guard has General Instructions for Filing and Recording of liens that are easily accessible.  If not documented, the lien may be filed where the shipowner’s headquarters are located.  The benefit of filing is that it serves to notify the public of the lien.  The cost is negligible.  The lien follows the vessel, even if sold.  The lien is extinguished if the vessel is lost or destroyed.

 

The lien can be enforced only by filing a complaint in federal court, which has original jurisdiction, naming the vessel as a defendant and petitioning the Court to arrest the vessel pursuant to a warrant of arrest issued by the Court.  Acting on the warrant the U.S. Marshall is authorized to serve the Master and take custody and control of the vessel by placing a custodian aboard.  The vessel remains in the jurisdiction of the Court until ordered released by the Court.  This can be an expensive.  A deposit (as much as $10,000) is required to cover marshal costs, costs of custodian and insurance.

 

Once arrested in order to achieve its release, the vessel’s owner must file an answer and claim of ownership.  To secure its release, the owner must post security approved by the Court.  This may be a bond, cash, or letter of undertaking.  The amount is usually equal to the lien, plus interests and costs.  If no agreement as to the value can be agreed upon by the parties the Court may exercise its discretion and set the amount.  If security is not provided the Court may, after due process has run its course, order the vessel sold and the proceeds distributed to the lienholder.  If there are multiple lienholders, the funds are distributed by order of privilege.  Vessels may be seized wherever found and if not in a U.S. port will require the U.S. lienholder to access the courts in that country which has jurisdiction over the vessel.

 

It is important to note that there are circumstances where a lien may be lost or waived.  In charter agreements between the owner and bareboat charter there may be provisions that provide that any services furnished are for the account of the charterer, not the vessel.  This may not be binding on the provider if the provider has no knowledge of the provision.  A lien may be lost if the holder waits an unreasonable period of time to enforce it and the owner is prejudiced.  This is left to the discretion of the Court which will rule after hearing the evidence.  Prompt action is always the best course for the provider to set.

 

Thanks to Robert Jablon, Associated Press, and Lisa Richwine, Reuters, for their informative articles on the Hanjin bankruptcy.

Fighting Liability and Presenting Poor Experts Lead to Unanticipated Expenses

On June 10, 2011, the M/V Salvation, a steel-hulled tug owned and operated by the defendant struck the Ekwata, a vessel that was privately owned by the plaintiff, on the Atchafalaya River.  At the time of the allision, the Ekwata was moored at the fleeting facility.  Prior to the allision, the Salvation’s captain knew that the Atchafalaya River was experiencing historic water levels, which created the potential for extreme cross-currents and required him to exercise extreme caution.  Nonetheless, he proceeded down the river without assistance from another tug, and upon arriving at a holding position in the river, left the controls for a cup of coffee while the on-duty deckhand, who was supposed to be on watch, was below deck.  Before the captain returned to the controls, the river’s current had taken control of the Salvation. After unsuccessfully attempting to regain control, the captain decided to allide with the Ekwata to avoid damaging the two barges in the Salvation’s tow.

 

Plaintiff filed suit for the resulting damages to the Ekwata in the United States District Court for the Western District of Louisiana invoking the court’s admiralty jurisdiction.  Up to and through trial, the defendant contested liability despite the captain’s admission to his actions and the facts described above. This fight would later prove costly for the defendant.

 

After bench trial, the district court found the defendant to be at fault and concluded that the Ekwata was a constructive total loss.  The district court awarded the plaintiff $322,890, representing the pre-casualty value of the Ekwata, less the value of the materials and equipment the plaintiff could have preserved following the accident.  The district court also awarded $295,436.09 in attorney’s fees and costs to the plaintiff, finding that the defendant’s handling of the case was “an abuse of the process and bad faith”.

 

Defendant appealed the matter to the United States Court of Appeals for the Fifth Circuit (“Fifth Circuit”).  Among several assignments of error, the defendant asserted that the district court was erroneous in imposing attorney’s fees as a sanction for its handling of the case.  Defendant urged that it had a good faith basis for questioning the plaintiff’s pre-casualty valuation and thus the district court was not justified in awarding attorney’s fees as a sanction for its handling of the case.  Defendant further argued that the award was excessive.

 

The Fifth Circuit upheld the district court’s award of attorney’s fees.  It noted the district court’s finding that the defendant contested liability up to and through trial even though it “clearly knew the extent of its liability based on the circumstances of the case and the actions of its captain… [and] was fully aware of the fact that [plaintiff] had no liability whatsoever for this allusion.”  It further noted the district court’s finding that the defendant “presented two experts who were so lacking they could not even properly name the vessel [at issue].”

 

Defendant urged that the fee award was unwarranted because defendant had a good faith basis to challenge the quantum of damages and proceed with same through trial.  The Fifth Circuit held that even if defendant’s contention was true, it did not justify defendant’s intransigence on liability or the means by which defendant presented its defense on damages.  The Fifth Circuit highlighted defendant’s use of one expert who, according to the district court’s findings, opined on value “without including any comparables, without considering the equipment on the vessel, and without reliable underlying information” and a second expert who, according to the district court, “not only failed to correct the glaringly incorrect information set forth in [the first expert’s] report, but incorporated it into his own.”  The Fifth Circuit affirmed these decisions as well as the award of $295,436.09 in attorney’s fees.

 

This case illustrates the value the courts place on candidly presenting facts and evaluations of those facts at trial.  While the defendant in this case may have had its reasons to dispute liability, counsel and clients should always work together to analyze their trial strategy and ensure that the fight being fought is not undue.  This can be a hard balance to strike when stepping up to the attorney’s duty of fervently defending his or her client.  The case also illustrates the need for counsel to ensure the competency of the experts they retain.  Here, the defendant’s insistence on fighting liability where the court saw no grounds to do so and the presentation of experts who demonstrated brazen unpreparedness led to costs no one wants to incur.

 

Moench v. Marquette Transportation

Loyola Holds Day With the DOL Program

Loyola Law School, in cooperation with the United States Department of Labor, will hold its Day With the DOL program on Friday, October 14, 2016 at the Pan-American Life Center, 601 Poydras Street, New Orleans.

Topics include:

Handling Claims Before OWCP
• Administration of Claims and How to Navigate Your Way
• Medical Oversight Within OWCP’s Authority
• Resolution of Disputes

Pain Management and the Opioid Crisis
• What is Medically Necessary and Reasonable
• Guidelines for Pain Management
• Impact on Maximum Medical Improvement and Return to Work

Question and Answer Session with OWCP and OALJ

Speakers include Administrative Law Judge Larry W. Price, District Director David A. Duhon, Dr. Patrick H. Waring, Arthur J. Brewster and Alan G. Brackett. For information and registration, go to:

http://www.cvent.com/events/a-day-with-the-department-of-labor-new-orleans/event-summary-101f7527f4ff408a8df37d07bbc106fe.aspx.