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

Fifth Circuit: Maritime Carpenter Not Covered by LHWCA

The Fifth Circuit recently issued a new decision addressing the limits of jurisdiction under the Longshore and Harbor Workers’ Compensation Act.  The claimant, a maritime carpenter, was allegedly injured at the employer’s waterside fabrication yard in Houma, La.  At the time of the incident, the claimant was assisting in the construction of a housing module that was to be incorporated into a tension leg offshore oil platform in the Gulf of Mexico.  The claimant filed a claim under the LHWCA, alleging he was covered by the Act as a shipbuilder, or in the alternative that he was covered by its extension under the Outer Continental Shelf Lands Act.


Following a formal hearing, the Administrative Law Judge determined that the claimant was not covered by the Act and denied benefits.  The Claimant appealed to the Benefits Review Board, which affirmed the ALJ’s decision.  The Claimant appealed again to the U.S. Fifth Circuit Court of Appeals.


The Fifth Circuit evaluated the purpose of the housing module as an eventual component part of the platform.  The Court turned to the Supreme Court’s Lozman and Dutra decisions to determine what constitutes a “vessel”.  Because the platform was not practically intended for maritime transportation, it did not qualify as a vessel.  Further, because the housing module was not a vessel, the claimant was not engaged in maritime employment as a shipbuilder at the time of the incident and therefore did not meet the “status” requirement of the LHWCA.  The Court then turned to the Supreme Court’s recent decision in Pacific Operators Offshore v. Valladolid to determine whether he was covered under OCSLA.  In Valladolid, the Supreme Court held that for a claimant to be covered under OCSLA, he must establish a “substantial nexus” between the injury and extractive operations on the OCS.  The Fifth Circuit concluded that the claimant’s onshore job of building a dining quarters for an offshore platform was too attenuated from OCS operations and therefore he was not covered by the OCSLA.  The Court affirmed the denial of benefits.


Baker v. Gulf Island Marine Fabricators, LLC

Drilling Rig Exclusion Precluded Insured’s Reimbursement Claim Against Excess Insurer

The U.S. Fifth Circuit Court of Appeals recently addressed an insurance coverage question involving an excess insurer and an offshore injury.  The Plaintiff was injured while working on a drillship in the Gulf of Mexico.  Plaintiff filed a lawsuit in 2011 pursuant to the Jones Act and general maritime law in the U.S. District Court for the Western District of Louisiana.  Later that year, his employer was named as a third party defendant.  The employer filed cross claims against its primary insurer in 2012 and against its excess insurer 2014.  The Jones Act employer eventually settled with the Plaintiff, but maintained its claims for reimbursement against its two insurers.


The excess insurer moved for summary judgment and argued the excess insurance policy excluded coverage.  Specifically, the policy contained an exclusion for “any liability or expense arising out of the ownership, use or operation of drilling rigs, drilling barges, drilling tenders, platforms, flow lines, gathering stations and/or pipelines, but this exclusion shall not apply to craft serving the foregoing such as crew, supply, or utility boats, tenders, barges or tugs.”  The District Court agreed the injury occurring on a drillship fell within this exclusion and dismissed the employer’s claim for reimbursement against the excess insurer.  The employer appealed to the Fifth Circuit.


On appeal, the employer argued in part that the excess insurer waived coverage defenses by not raising them until 2014 and not issuing a reservation of right letter.  Under Louisiana law, waiver occurs when there is 1) an existing right, 2) knowledge of its existence, and 3) an actual intention to relinquish it or conduct so inconsistent with the intent to enforce the right as to induce a reasonable belief that it has been relinquished.  The Court found the excess insurer satisfied the first two elements by possessing the coverage defense and having knowledge of the accident as early as 2011.  The employer argued that the excess insurer’s conduct of not raising the coverage defense for three years satisfied the third element and effectively waived the insurer’s right to assert a coverage defense.  The Fifth Circuit determined that because the excess insurer was not made a party to the case until three years after the lawsuit being filed, there was no evidence that the excess insurer had assumed defense of the employer with the intention or conduct of eventually denying coverage.  In other words, the insurer’s conduct prior to being brought into the lawsuit did not create a belief that it intended to waive the coverage defense, which was asserted in its initial filings.  Thus, the excess insurer had not waived its right to lodge a coverage defense and the Fifth Circuit affirmed the dismissal of the employer’s claim against its excess insurer.


Richard v. Dolphin Drilling

Plaintiff’s Construction Defect Claims Against Offshore Spar Manufacturer Dismissed

In June 2011, an offshore worker was injured on a spar (a floating platform shaped like a giant buoy) on the outer continental shelf when he was struck in the face with the flange of a valve.  He filed a personal injury lawsuit against the manufacturer of the spar, McDermott, Inc., alleging his injury was caused by defective design and construction of the spar.


McDermott filed a motion for summary judgment, arguing that the plaintiff’s right of action was perempted under Louisiana law.  McDermott asserted that because plaintiff was covered by the Outer Continental Shelf Lands Act (OCSLA), the law of the adjacent state (Louisiana) applied as a surrogate to federal law.  McDermott then pointed to a Louisiana statute, La. R.S. 9:2772, which provides a five year peremptive period in which to bring an action arising out of deficiencies in the design or construction of immovable property.  Because McDermott delivered the finished spar to its customer (plaintiff’s employer) in 2004, plaintiff’s design defect claim filed in 2013, was time barred.  The District Court agreed with McDermott and dismissed plaintiff’s claims.  Plaintiff appealed to the U.S. Fifth Circuit Court of Appeals.


On appeal, plaintiff argued that La. R.S. 9:2772 did not apply to his claim because the spar was not an immovable, which was a matter of first impression for the Court.  The Fifth Circuit had previously determined that a spar is not a vessel for purposes of the Jones Act, but no court had ever addressed whether a spar is immovable property under Louisiana law.  The Court noted that fixed platforms are considered immovable property.  The Court further noted that the spar in question was permanently moored to the ocean floor, was intended to remain in its location for its twenty year life, and it would take months of planning to move the spar.  The Fifth Circuit concluded that enough similarities exist between a spar and fixed platform that a spar is immovable property under Louisiana law.  Thus, plaintiff’s design defect claims were dismissed as time barred by state law.


Hefren v. McDermott, Inc.