A Maritime, Longshore and Defense Base Act Blog

Archive for September, 2011

The Turkish-flagged vessel of Company #1 allided with the Greek-flagged vessel of Company #2 in the Port of Lagos, Nigeria.  Company #1 is a Turkish company, and Company #2 is a Greek company.  Following the allision, the Greek-flagged vessel required temporary repairs in Nigeria and then extensive repairs in Turkey.  Because the repairs caused loss of use damages, Company #2 sued Company #1 in the Eastern District of Louisiana after Company #2 arrested Company #1′s vessel during an unrelated call to a U.S. port.   An interlocutory appeal was granted by the Fifth Circuit to consider which country’s law–U.S. or Nigeria–applied to the controversy.  Importantly, Nigerian law does not recognise loss of use claims. 

The Supreme Court previously articulated eight factors a court should consider when determining whether U.S. or foreign law applies: (1) the place of the wrongful act; (2) the law of the flag; (3) the allegiance of domicile of the injured party; (4) the allegiance of the defendant shipowner; (5) the place of the contract; (6) the inaccessibility of the foreign forum; (7) the law of the forum; and (8) the shipowner’s base of operations.  Hellenic Lines, Ltd. v. Rhoditis, 398 U.S. 306 (1970); Lauritzen v. Larsen, 345 U.S. 571 (1953).  Here, the Fifth Circuit agreed with the lower court’s decision that Nigerian law should apply.  “Applying the law of the place of the wrongful act promotes stability in maritime law and comity between nations, key concerns in the international choice-of-law context.”  The loss of use damages all arose from the Nigeria allision, and as the situs of the wrongful act, Nigerian law governs. 

Kriti Filoxenia Special Mar. Enter. v. Yasa H. Mehmet Motor Vessel, No. 10-31232, 2011 WL 4436621 (5th Cir. 2011).

In 2008, nineteen years after Exxon’s supertanker Exxon Valdez grounded on Bligh Reef fracturing its hull and spilling millions of gallons of crude oil into Prince William Sound, the U.S. Supreme Court considered the question of whether the award of $2.5 billion in punitive damages was greater than maritime law should allow in the circumstances.  Exxon Shipping Company v. Baker, 128 S.Ct. 2605 (2008).  

In the lower court trial, Phase I, the jury found Exxon and Hazelwood reckless (and thus potentially liable for punitive damages) under instructions providing that a corporation is responsible for the reckless acts of employees acting in a managerial capacity in the scope of their employment.  In Phase II, the jury awarded $287 million in compensatory damages to some of the plaintiffs.  Others had settled their compensatory claims for $22.6 million.  In Phase III the jury awarded $5,000 in punitive damages against Hazelwood and $5 billion against Exxon.  The Ninth Circuit upheld the Phase I jury instruction on corporate liability and ultimately remitted the punitive damages award against Exxon to $2.5 billion.  Exxon then appealed to the Supreme Court.

The Court found the punitive damage award against Exxon was excessive as a matter of maritime common law, and that “in the circumstances of this case the award should be limited to an amount equal to compensatory damages.”  In doing so, the Court noted that although some state studies showed the dollar amount of awards growing over time, most accounts showed that the median ratio of punitive to compensatory awards remained less than 1:1.  Continuing, the Court stated that the data did not show a marked increase in the percent of cases with punitive damage awards.  The real problem was the stark, unpredictability of punitive damages.  Stating that courts are concerned with fairness as well as consistency, the available data suggested that the spread between high and low individual awards was not acceptable.  In coming to this conclusion, the Court found that a penalty should be reasonably predictable in its severity so that even the “bad person” can look ahead with some ability to know what the stakes are in choosing one course of action or another.  The Court considered the option of setting a hard dollar punitive cap, but rejected this because there is no “standard” tort or contract injury, thus making it difficult to settle upon a particular dollar figure as appropriate across the board.  The Court found the more promising alternative was to peg punitive awards to compensatory awards, using a ratio or maximum multiple.  The Court found that this is a model used in many states, and an analogous of federal statutes allowing multiple damages.  The question was what ratio would be most appropriate.  To arrive at its answer, the Court analyzed studies reflecting the judgment of juries and judges in thousands of cases as to what punitive awards were appropriate in circumstances reflecting the range from the least blame -worthy conduct, to malice and avarice, to recklessness, to gross negligence.  The Court found that the data in question put the median ratio for the entire gamut a less than 1:1, meaning that the compensatory award, in most cases, exceeds the punitive award.  Accordingly, the Court found that a 1:1 ratio was a fair upper limit in maritime cases.

In recent years the issue of punitive damages has been the subject of several noteworthy cases, all of which trend toward expansion of its use.  In Atlantic Sounding Co v. Townsend, 129 S.Ct. 2561 (2009), the Supreme Court overruled longstanding case law and found that as a matter of general maritime law, a seaman is entitled to seek punitive damages for his employer’s alleged willful and wanton disregard of its maintenance and cure obligation.  This ruling has opened the door for plaintiffs to try to expand the claims and causes of action for which punitive damages may be recoverable.  In Wagner v. Kona Blue Water Farms, LLC, 2010 WL 3566731, the United States District Court in Hawaii ruled that punitive damages are available under the general maritime law claims of unseaworthiness, citing the Ninth Court of Appeals’ decision in Evich v. Morris, 819 F.2d, 256 (9^th Cir. 1987).  In Rogers v. Resolve Marine, 2009 WL 2984199, a case decided here in the Eastern District of Louisiana, plaintiff, a Jones Act seaman, moved to amend his Complaint to claim punitive damages for the alleged gross, willful and wanton  negligence of his employer in causing his injuries.   Judge Barbier did not specifically rule that he would recognize this cause of action, but did allow the amendment “in light of the movement of the law in this area, to avoid re-trial in the event the law changes.” 

On March 16, 2011, U.S. Senator Sheldon Whitehouse (D-RI) introduced Senate Bill 592 entitled The (Maritime Liability Fairness Act.)  Here Senator Whitehouse, quoting directly the Supreme Court’s reasoning in Baker, introduced legislation stating “Except as otherwise provided in its title, in a civil action for damages arising out of a maritime tort, punitive damages may be assessed without regard to the amount of compensatory damages assessed in this action.” 

This is evidence of a continuing trend towards the expansion of rights of recovery and punitive damages in the maritime law.  Following the Deep Water Horizon event, Senate Bill 3755 entitled “A Bill to Ensure Fairness in Admiralty and Maritime Law” was filed.  It would have eliminated the right to seek limitation of liability by vessel owners in all but a few scenarios, eliminate the cap on punitive damages, allow the award of non-pecuniary damages (loss of care, comfort and companionship) in claims for death on the high seas and allowed non-pecuniary damages in Jones Act claims.  This bill stalled during the legislative process.

Nevertheless, the mood of Congress and the judiciary appears to be moving for a more liberal philosophy when it comes to the type and amount of damages available to maritime workers.  We can expect to see continued attempts by counsel for injured maritime workers to expand the circumstances when punitive damages can be awarded.

This morning, the Supreme Court of the United States granted certiorari in a Longshore and Harbor Workers’ Compensation Act decision out of the Ninth Circuit: Roberts v. Sea-Land Servs., 625 F.3d 1204 (9th Cir. 2010).  Note: the Ninth Circuit styled this case as Roberts v. Director, OWCP.

As reported on SCOTUSBlog, the Court is going to consider one question: “Whether the phrase ‘those newly awarded compensation during such period’ in Longshore Act § 6(c), applicable to all classes of disability except permanent total, can be read to mean ‘those first entitled to compensation during such period,’ regardless of when it is awarded.”

The Navigable Waters post on this case is available here.

In the United States, there are twelve Courts of Appeals which are known as “circuit courts.”  All fifty states, as well as the District of Columbia, are divided into various circuits.  These courts are intermediate appellate courts; the last step before the Supreme Court of the United States.  Over time, each circuit court has developed its own identity and reputation.  The circuit courts can decide issues differently, sometimes because of geographical, political or ideological differences.  When a circuit court decides an issue differently from a court in another circuit, a “split” is created.  Lower courts in a circuit (i.e. district courts) are bound by their appellate court’s decisions.  Those same courts are not bound by another circuit court’s decision.

In the Defense Base Act (“DBA”) context, the applicable federal circuit law is determined by statute.  Section 1653(b) of the DBA states: “Judicial proceedings provided under sections 18 and 21 of the Longshoremen’s and Harbor Workers’ Compensation Act in respect to a compensation order made pursuant to this Act shall be instituted in the United States district court of the judicial district wherein is located the office of the deputy commissioner whose compensation order is involved if his office is located in a judicial district, and if not so located, such judicial proceedings shall be instituted in the judicial district nearest the base at which the injury or death occurs.”

If the office of the deputy commissioner (now known as ”district director”) controls which circuit’s caselaw to apply, then only a limited numberof circuit’s will have precedent in DBA cases because there are only a limited number of district director offices.  As seen on the Division of Longshore and Harbor Workers’ Compensation’s contact page, there are offices in Boston, New York, Baltimore, Norfolk, Jacksonville, New Orleans, Houston, San Francisco, Honolulu, Seattle and Longbeach, with the National Office situated in Washington, D.C.  Under this scheme, only the legal intreptations from the 1st, 2nd, 4th, 5th, 9th and 11th circuits would constitute potentially precedential caselaw in DBA claims, to the exclusion of the interpretations made by the 3rd, 6th, 7th, 8th, 10th and D.C. circuits.  For claimants residing in twenty-seven States and the District of Columbia, their cases will be analyzed using the law of a federal circuit court that is not their own.   An injured longshoreman and an injured DBA claimant living next door to each other in Chicago, Illinois, will have different interpretations from different circuits–the 5th and the 7th–applied to their claim.  As such, it is important to know the interpretations of the Longshore and Harbor Workers’ Compensation Act and the DBA that are employed by the applicable circuit.

Below is a chart that identifies the federal circuit for each State.  To the far right, the chart identifies the controlling circuit caselaw based on the district director’s office.  If the State’s name is written in “all caps,” then the typical circuit law that applies to that state has been displaced by the DBA’s judicial proceedings statute.

Section 1651(c) of the Defense Base Act (“DBA”) is the provision entitled, “Liability as exclusive.”  It states: “The liability of an employer, contractor…under this Act shall be exclusive and in place of all other liability of such employer, contractor, subcontractor, or subordinate contractor to his employees (and their dependents) coming within the purview of this Act, under the workmen’s compensation law of any State, Territory, or other jurisdiction, irrespective of the place where the contract of hire of any such employee may have been made or entered into.”  42 U.S.C. § 1651.

Recently, the Southern District of Texas had the opportunity to address the DBA’s exclusivity provision.  The decedent worked as a truck driver for Defendant contractor in Iraq.  Camp Anaconda was under constant threat of the hijack of convoy trucks, which were then used as explosive devices; therefore no unaccompanied convoys were permitted to attempt to enter the Camp.  Members of decedent’s convoy misinterpreted a radio command, which resulted in decedent’s convoy returning to the entrance of Camp Anaconda unaccompanied.  As a result of the standing order, decedent was shot by a United States military gunner.  The decedent’s daughter filed complaints for wrongful death, negligence, fraud and fraud in the inducement, and intentional infliction of emotional distress, among others, in the Southern District of Texas.  The court relied on the exclusivity provision of the DBA, as well as the recent decisions in Fisher and Jones to deny all of Plaintiff’s claims on grounds of preemption, except for her IIED claim.  See 42 U.S.C. §1651(c); Fisher v. Halliburton, 703 F.Supp. 2d 639, 643 (2010); Jones v. Halliburton Co., No. 4:07-cv-2179, 2011WL2066621 (S.D.Tex., May 24, 2011).  Intentional torts fall outside the scope of workers’ compensation schemes like the DBA.

Martin v. Halliburton, No. H-09-0328, 2011 WL 3925404 (S.D. Tex., Sept. 2, 2011).

After working for nine years as an officer for the Kansas Department of Corrections, Claimant went to work for Employer in Kosovo, where she would apprehend fugitive parolees.  She started her new job on April 17, 2004.  Her first day of work, however, was marred with tragedy when she and five others were shot by a Jordanian soldier.  Three victims died.  It was not until April 16, 2006, that Claimant filed a claim for benefits under the Longshore and Harbor Workers Compensation Act (“LHWCA”), as extended by the Defense Base Act, for her underlying psychological injuries.  The question presented to the United States Court of Appeals for the Second Circuit was whether this claim was barred by the statute of limitations for failure to timely file a claim.

Section 13 of the LHWCA contains a statute of limitations, offering different filing periods based upon whether or not the underlying injury was a “traumatic injury” or an “occupational disease.”  Claimant’s psychological claim was treated as a “traumatic injury,” which gave her a one-year period in which to file the claim.  Under Section 13(a), “[t]he time for filing a claim shall not begin to run until the employee or beneficiary is aware, or by the exercise of reasonable diligence should have been aware, of the relationship between the injury or death and the employment.”  

The key for the Second Circuit was whether Claimant knew or should have known that the injury would permanently impair her earning power.  Employer argued that substantial evidence supported its denial.  For instance, Claimant (1) changed assignments for Employer; (2) sought psychological counseling from the Army; (3) obtained a prescription for sleeping and anti-anxiety medication from a psychiatrist; (4) submitted to a psychological evaluation ordered by Employer and even sought an independent psychological evaluation; and (5) was experiencing symptoms of PTSD.  The Second Circuit disagreed, determining that while Claimant may have recognized she was psychologically distressed, her work was largely unaffected for one year after the shooting.  Therefore, Claimant timely filed a claim within one year of the time when she knew or should have known that she had suffered a permanent impairment of her earning power.

Dyncorp Int’l v. Director, OWCP, — F.3d —-, 2011 WL 3873793 (2d Cir. 2011).

Note: The Second Circuit mis-quoted Section 13(a), exchanging “reasonable diligence” for “due diligence.” 

Using data compiled by the Bureau of Labor Statistics, the Department of Labor made a final determination as to the national average weekly wage that will go into effect on October 1, 2011.  The final calculations are slightly higher than the estimated increase.

National Average Weekly Wage: $647.60

Maximum Compensation: $1,295.20

Minimum Compensation: $323.80

Percentage Increase: 3.05%

In March 2010, Houston Casualty Company filed an Interpleader in the high profile consolidated USDC suits arising out of the July 2008 collision between a tug/oil tow and an ocean tanker in the Port of New Orleans.  Houston Casualty was the excess liability insurer of DRD Towing, owner of the towboat MEL OLIVER whose oil tow struck the upbound TINTOMARA which led to a catastrophic pollution event. 

Due to the various claims filed against DRD, its primary liability carrier filed an interpleader action within three weeks of the casualty and deposited its primary limits into the court registry. One and a half years later, the towboat’s excess insurer, Houston Casualty, filed a similar interpleader action and deposited its $9-million policy limits with the court.  The owner of the oil barge, ACL, opposed the Houston Casualty’s motion to deposit the policy limits, arguing the excess carrier must also deposit prejudgment interest on the interpleader sums in order to be released from liability for the casualty. 

ACL argued that Houston Casualty unreasonably delayed filing its action to deposit funds and thereby unjustly benefited from retaining its funds and depriving the potential claimants of the legal interest that would have accrued if the funds had been deposited sooner.  U.S. District Judge Ivan Lemelle agreed with ACL and ordered Houston Casualty to pay $495,369.86 in accrued pre-judgment interest at the rate of 3.5%.   

On appeal, the U.S. Fifth Circuit reversed Judge Lemelle, observing that an excess insurer’s liability does not arise until the primary carrier’s limits are exhausted.  Because the primary policy was not yet exhausted by judgments or settlements at the time Houston Casualty filed its interpleader, the 5^th Circuit panel ruled that Houston Casualty neither “unreasonably” delayed nor was “unjustly” enriched by not filing its interpleader earlier. Consequently, Houston Casualty was not required to pay pre-judgment interest on its policy limits.

Gabarick v. Laurin Maritime (America) Inc. et al, CA No. 08-CV-4007 (5 Cir. 2011).

In a published decision, the United States Court of Appeals for the Fourth Circuit discussed burdens of proof and the “true doubt” rule with respect to Longshore and Harbor Workers’ Compensation Act (“LHWCA”) claims.  In Ceres Marine Terminals, Inc., v. Green, the court was presented with a hearing loss claim that had conflicting audiological reports.  Claimant’s audiologist stated that Claimant had a 3.75% binaural hearing loss, but Employer’s audiologist determined that there was no hearing loss.  Following a formal hearing, the Administrative Law Judge (“ALJ”) determined that Claimant had the burden of proof, but that the ALJ was entitled to average the two audiograms to determine the amount of hearing loss.  Significantly, the ALJ determined that both audiograms were entitled to “equal probative value,” and this finding was not challenged on appeal.

Seventeen years ago, the Supreme Court decided Director, OWCP v. Greenwich Collieries, 512 U.S. 267 (1994).  There, the Court reviewed whether the “true doubt” rule, which “shifts the burden of persuasion to the party opposing a benefits claim and grants benefits to a claimant if the evidence is equally balanced” complied with the Administrative Procedure Act (“APA”).  5 U.S.C. § 556.  It did not.  The APA provides that the proponent of a rule has the burden of proof.  As such, “when the evidence is evenly balanced, the benefits claimant must lose.”  Greenwich Collieries, 512 U.S. at 281. 

Here, Claimant failed to meet his burden of proof to establish disability.  Even if the Fourth Circuit accepted Claimant’s arguments, and confirmed the hearing loss “was in equipoise,” the Supreme Court made it “abundantly clear” that “when evidence is evenly balanced, the benefits claimant must lose.” 

Ceres Marine Terminals, Inc. v. Green, — F.3d —-, 2011 WL 3891891 (4th Cir. 2011).

Via a contract with a staffing company, Claimant became employed by a catering company, and was assigned to work as a part of the galley/cooking staff.  Claimant alleged that he was injured aboard a vessel while working for the catering company, and he filed Jones Act negligence claims against both parties and their insurers.  Subsequently, insurance and indemnification disputes developed between the defendants and their insurers, which were rooted in the issue of whether Claimant was a Jones Act seaman.  The trial court, ruling on motions and cross-motions for summary judgment, found that Claimant was a Jones Act seaman, and concluded that the Longshore and Harbor Workers’ Compensation Act was inapplicable; therefore, the catering company was required to defend and indemnify the staffing company.  The defendants later settled with Claimant, and a Joint Motion and Order of Dismissal was granted.  Appellants now argued that the trial court erred in granting the motions for summary judgment on the issues of Jones Act seaman status, indemnity and defense against the catering company.

The court looked to the Chandris test for seaman status, which asks 1) whether the employee’s duties contributed to the function of the vessel or accomplishment of its mission; and 2) whether that employee had a connection to a vessel in navigation which was substantial both in terms of duration and nature.  Chandris, Inc.  v. Lastis, 515 U.S. 347, 368 (1995).  The parties did not dispute the first element, as Claimant was employed as a cook on a quarters barge, and was also responsible for cleaning the barge.

Appellants challenged Claimant’s connection to the vessel, arguing that because Claimant was randomly assigned to work for various customers, he did not have an employment connection to a particular vessel or fleet of vessels under common ownership.  They further maintained that while some of claimant’s assignments were to vessels, some were to fixed platforms.  The court noted that under Parker v. Jackup Boat Service, LLC, 542 F.Supp.2d 481 (E.D. La. 2008), “merely being ‘subject to reassignment [to a non-seaman role or status] … at some point later in time is of no moment’ and does not in itself defeat a worker’s seaman status.”  Id. at *4.  Further, seaman status cannot be denied due to the nature of third-party contracting for a vessel’s operation or the manner in which work is assigned by a third party.  Bertrand v. Int’l Moring & Marine, Inc., 700 F.2d 240 (5^th Cir. 1983). 

Here, the court ruled that summary judgment on seaman status should not have been granted due to conflicting evidence on the connection issue, including the fact that the president of the catering company testified that Claimant worked for defendant for 153 days at seven different job sites, and worked with five of the company’s customers.  Further, Claimant could not recall where most of his assignments took place, but they included a mix of dive boats, drilling ships, and platforms.  An employee of the staffing company, however, testified that Claimant was assigned to a vessel or identifiable fleet of vessels.  The court also found there were genuine issues of material fact regarding satisfaction of the duration element, because of similar discrepancies in the testimony with regard to where and how Claimant spent his time while employed by the catering company.

Becnel v. Chet Morrison, Inc., No. 2010-CA-1411 (La. App. 4 Cir. 8/31/11); — So. 3d —-, 2011 WL 3853115.