By Glen T. Oxton by Glen T

Vol. 17, No. 2 Second Quarter 2019

Joshua S. Force, Editor-in-Chief Robert J. Zapf, Managing Editor

EPRESENTATIVE ORTGAGEES IN Inside This Issue R M PREFERRED SHIP MORTGAGES REPRESENTATIVE MORTGAGEES IN * PREFERRED SHIP MORTGAGES By Glen T. Oxton By Glen T. Oxton ...... 65 Ship mortgage law in the United States (and in the Marshall Islands, Liberia and Vanuatu, which have MANAGING EDITOR’S INTRODUCTORY NOTE adopted the general maritime law of the United States) Robert J. Zapf ...... 67 is often difficult to ascertain. The relevant statutes lack WINDOW ON WASHINGTON detail, leaving many questions unanswered. As courts often say, there is no federal law of mortgages. Instead, By Bryant E. Gardner ...... 74 courts look to analogous state laws to interpret the AVOIDING A JURY TRIAL FOR JONES ACT federal mortgage statute. As a consequence, change in SEAMEN’S INJURY CLAIMS: IT CAN BE DONE! the practice of ship finance occurs slowly. Rules are followed and forms are used because things have By Marissa M. Henderson, Esq...... 82 always been done that way, and outdated theories enjoy RECENT DEVELOPMENTS ...... 90 an unjustifiably long lifespan.

TABLE OF CASES ...... 107 Two notions that ought to be retired are the fiction that a BENEDICT’S MARITIME BULLETIN EDITORIAL ship mortgage transfers title in the vessel to the mort- BOARD...... 110 gagee and its corollary that only a trustee and not a mere agent may be a representative mortgagee for multiple CONTRIBUTING AUTHORS TO THIS ISSUE.... 112 lenders.

The corollary is said to result from the fictional transfer of title in the vessel to the mortgagee, and that an agent may not hold title to property.1 The first proposition reflects obsolete chattel mortgage law, and the second is simply wrong. Ship mortgages have evolved from a

* A graduate of Dartmouth College and Vanderbilt Law School, former naval officer, former partner in Healy & Baillie, LLP and Blank Rome, LLP, Glen Oxton handles maritime transactions from Mamaroneck, New York. 1 The latter might be based on the concept that an agent cannot be the record owner of a vessel because the statute requires the owner’s name to be recorded. A mortgage lien, however, does not convey title to the mortgagee, as discussed below. (Continued on page 68) 17 Benedict’s Maritime Bulletin 66 Second Quarter 2019

EDITORIAL BOARD Joshua S. Force Robert J. Zapf Dr. Frank L. Wiswall, Jr., Editor Emeritus Bruce A. King Dr. James C. Kraska Dr. Norman A. Martinez- Gutie´rrez Francis X. Nolan, III Anthony J. Pruzinsky REPORTERS/ ASSOCIATE EDITORS Lizabeth L. Burrell Edward V. Cattell, Jr. Matthew A. Marion Marc Marling Howard M. McCormack Michael B. McCauley Graydon S. Staring JoAnne Zawitoski COLUMNIST Bryant E. Gardner EDITORIAL STAFF James Codella Practice Area Director Cathy Seidenberg Legal Editor

A NOTE ON CITATION: The correct citation form for this publication is: 17 BENEDICT’S MAR.BULL. [65] (Second Quarter 2019)

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal or other expert assistance is required, the services of a competent professional should be sought. From the Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations.

Copyright ß 2019 LexisNexis Matthew Bender. LexisNexis, the knowledge burst logo, and Michie are trademarks of Reed Elsevier Properties Inc., used under license. Matthew Bender is a registered trademark of Matthew Bender Properties. 17 Benedict’s Maritime Bulletin 67 Second Quarter 2019

MANAGING EDITOR’S INTRODUCTORY NOTE

We begin this edition with an interesting article by Glen Oxton on the slow changing law and practice relating to ship mortgages. Glen points out that many forms in current use invoke concepts that are outdated and no longer reflective of the law, including the concept that a mortgage transfers title to the mortgagee, and that there can be no representative mortgagees. Glen reviews the history behind these concepts and discusses the current law that does away with these archaic concepts. Our next offering is our usual column by Bryant Gardner, ‘‘Window on Washington.’’ This time, Bryant gives a very detailed review of current Chinese outlook, practices, and intentions with respect to advancing its interests in the South and East China Seas. He also gives a detailed look at U.S. and international reactions to these ambitious Chinese plans. Next we present a very interesting article by Marissa Henderson on developments in the way seaman personal injury claims can be handled and how the exposure to large awards against owners and their insurers can be managed and reduced. Both defense and plaintiffs’ counsel should be aware of this more recent approach to the handling of these claims. Last but not least, we conclude with the Recent Development case summaries. We are grateful to all those who take the time and effort to bring us these summaries of developments in maritime law. Once again, we encourage our readers to submit photos, artwork, poems, or thought pieces to enhance the enjoyment of reading our publication. As always, we hope you find this edition interesting and informative, and ask you to consider contributing an article or note for publication to educate, enlighten, and entertain us.

Robert J. Zapf 17 Benedict’s Maritime Bulletin 68 Second Quarter 2019

REPRESENTATIVE MORTGAGEES IN PREFERRED SHIP MORTGAGES By Glen T. Oxton (Continued from page 65) chattel mortgage title theory to a more modern and Chattel mortgages were based on the title theory: realistic lien theory2 under which an agent may serve A chattel mortgage is an instrument by which as a representative mortgagee.3 As Professor Lloyd the title to personal chattels is transferred to a noted in 1923: mortgagee as security for the payment of a debt ...with a condition that upon payment... [T]he mortgage of to-day does not mean the the title shall revest in the mortgagor; but if the same thing to the parties that it did to their debt is not paid ...the title becomes absolute in ancestors when borrowing money to go to law in the mortgagee.’’6 the Crusades. The creditor’s security is no 4 longer physical but legal. In distinguishing mortgages in real property, the authors said: A. Background There is a manifest difference between a mort- The law of mortgages has been shaped by two competing gage of real and a mortgage of personal theories: the title theory and the lien theory. Under the property. The former is merely a security for title theory, the mortgage is viewed as a conveyance of the debt; the mortgagee has only a chattel title to the mortgagee with the owner having a right of interest, and the freehold remains in the mort- possession until an event of default occurs. Upon default, gagor. A chattel mortgage, however, is more the owner may redeem the mortgage by paying the than a mere lien or security. By the latter the indebtedness or lose all rights to the vessel. Under the legal title to the property is transferred, subject lien theory the mortgage is seen as creating a statutory to be defeated by the payment of the mortgage lien in favor of the mortgagee that is enforceable if a debt.7 default occurs. The mortgagee’s title in the chattel was acknowledged In the late 19th century security interests in personal to be only theoretical: property were governed by chattel mortgage law. Chattel mortgages on ships existed at that time but they Before default in the condition of the mort- were considered non-maritime obligations that were not gage, the legal title to the mortgaged chattels enforceable in admiralty even though they had to be is in the mortgagee. ... But while this is so recorded in the office of the collector of customs.5 technically and theoretically, yet practically, the substantial title remains in the mortgagor with all the incidents of legal title. He retains the use, control and benefit of the property subject to the mortgage. When entitled to 2 This is illustrated by South Lafourche Bank & Trust Co. v. M/V Noonie G, 2017 U.S. Dist. LEXIS 93748 (E.D. La., June possession before default, he can exercise 19, 2017) (the ‘‘NOONIE G’’) discussed below. many powers which ordinarily accompany 3 An agent as a representative ship mortgagee has been upheld the legal title to property. He may maintain in two bankruptcy decisions: In re Muma Services, Inc., 322 an action for conversion against any wrong- B.R. 541, 2005 Bankr. LEXIS 494 (Bankr. D. Del., March 30, 2005); In re Dixie Pellets, LLC, 2010 Bankr. LEXIS 5624 doer taking the property even against the (Bankr. N.D. Ala., May 13, 2010), discussed below. mortgagee; he may sell the mortgaged property 4 William H. Lloyd, Mortgages-The Genesis of the Lien Theory, 32 Yale L.J. 233, 246 (1923). 5 The Law of Chattel Mortgages and Conditional Sales, 6 Griffin and Curtis, 2d Ed. 1916 (Cornell University Library Chattel Mortgages at 2. Digital Collection) at 189-95 (‘‘Chattel Mortgages’’). 7 Id. 17 Benedict’s Maritime Bulletin 69 Second Quarter 2019

and convey good title subject to the mortgage; York Trust Co. v. S.S. Westhampton,11 the Court held and, in many cases, the property may be seized that the mortgagee ‘‘holds legal title to the mortgaged and sold by virtue of an execution against property, the SS. WESTHAMPTON.’’ But the Court did him.8 not expressly acknowledge the fiction or discuss the fact that title to the vessel also appeared to be in the regis- In any case, the transfer of title to the mortgagee cannot tered owner. The Court’s conclusion was based solely be taken literally: on the granting clause of the mortgage, which stated But while the Anglo-American lawyer is in part: familiar with a form of chattel mortgage ‘‘By these presents does hereby grant, bargain, which contains words indicating a transfer of sell, remise, release, convey, assign, transfer, title to the mortgagee, such as ‘‘bargain, sell mortgage, deliver and pledge, or cause to be and convey,’’ there is a risk that under the laws granted’’ the SS. WESTHAMPTON.12 of some foreign countries such words might be taken literally and result in the exposure of the The Court noted that for a mortgage to have preferred mortgagee to liability for contracts or torts of status, it must first be a ‘‘valid’’ mortgage, citing 46 the ship, or, where the foreign law requires the U.S.C.A. § 922(a) (‘‘A valid mortgage...shall have ship to be majority-owned by nationals, to the preferred status.’’). However, the Court did not cite loss of registry of the ship under the laws of her any source of law or other guidance as to the standards foreign flag.9 for determining validity. The sole factor examined by the Court was the lack of validity of the debt based on a The Ship Mortgage Act of 1920, 66 P.L. 261, 41 Stat. violation of federal law requirements as to citizenship. 1000 (the ‘‘SMA’’) brought ship mortgages within This principle has been followed by other courts.13 admiralty jurisdiction and provided mortgagees with a priority in rem lien on the vessel. Notably, Congress As all of the States adopted the Uniform Commercial did not provide the mortgagee with a right in admiralty Code (the ‘‘UCC’’), the last being Louisiana in 1990, to enforce its purported title. Had it done so, the mort- chattel mortgages became obsolete. What then does gagee’s priority would be that of an owner: subordinate ‘‘mortgage’’ mean in the SMA and the CIMLA (defined to all maritime liens; and on payment of the debt the below)? According to the NOONIE G (discussed below), vessel would have to be re-conveyed to the mortgagor. Instead, Congress created the ship mortgage lien. The SMA states that ‘‘a preferred mortgage shall constitute a 11 lien upon the mortgaged vessel’’10 Chemical Bank New York Trust Co. v. S.S. Westhampton, 358 F.2d 574 (4th Cir. 1965) (rehearing en banc denied 1966). A bond issued to a German bank was secured by a ship mort- There is an anomaly in the SMA’s requiring a ‘‘mortgage in favor of a citizen trustee. The Court held that the bond gage’’ to obtain the lien. In 1920, and for the next several was void because it constituted a transfer of an interest in the decades, a mortgage meant a chattel mortgage. Thus, vessel to a non-citizen under Section 37 of the Shipping Act of one had to engage in the fiction of conveying title to 1918 (then 46 U.S.C.A. § 835(b), and now 46 U.S.C. § 56102) for which consent of the Maritime Administration was the mortgagee in order to create a chattel mortgage in required but was not obtained, and that, consequently, the order to obtain the lien. mortgage was void. 12 S.S. Westhampton, 358 F.2d at 584. Practitioners persisted in using the fiction of title 13 Merchants Nat’l Bank of Mobile v. Ward Rig No. 7, 634 conveyance to the mortgagee. In Chemical Bank New F.2d 952, 958 (5th Cir. 1981) (‘‘We are examining the validity of the ship mortgage which does not require a promissory note, only a debt which is being secured.’’); Tropicana Shipping, S.A. v. Epresa Nacional ‘Elcano’ de la Marina Mercante, 366 F.2d 729 (5th Cir. 1966) (‘‘... it is well established that the validity of a mortgage is dependent only on the existence of a debt actually secured by the mortgage and not on the description of the debt contained in the instrument. The actual 8 Chattel Mortgages at 4. existence of a subsisting debt at the time of foreclosure may 9 be established by parol testimony, and where it is established George deF. Lord and Garrard W. Glenn, The Foreign Ship that the notes or bonds, or other evidence of indebtedness Mortgage, 56 Yale L.J. 923 (1947). described in the mortgage did not exist, the mortgage may, 10 46 U.S.C.A. § 951 (now 46 U.S.C. § 13325). nevertheless, be foreclosed.’’) 17 Benedict’s Maritime Bulletin 70 Second Quarter 2019 it means an instrument that complies with 46 U.S.C. provisions of the SMA were incorporated in the §§ 13321 and 13322, regardless of its form. Commercial Instruments and Maritime Lien Act of 1989 (Public Law 100-710) (‘‘CIMLA’’). The CIMLA Section 9-104 of the original version of the UCC (now made modest substantive changes but retained the basic 9-109) excluded transactions from Article 9 to the extent structure of the SMA. The CIMLA eliminated require- that a federal statute governed the rights of parties and ments for endorsement of mortgages on registry third parties in particular types of property. The official certificates, affidavits of good faith, and separate comment indicated that the SMA was one of the statutes discharge amounts for multiple vessels and non-vessel contemplated and further noted: property. It eased citizenship requirements for mort- 16 [T]he Ship Mortgage Act is far from a compre- gagees, and clarified security for revolving credit loans. hensive regulation of all aspects of ship B. A Ship Mortgage Conveys No Property mortgage financing. ... If problems arise Both the SMA and its successor provide a mortgagee under a ship mortgage which are not covered with a statutory mortgage lien enforceable in admiralty by the Act, the federal admiralty court must in rem.17 Enforcement of the lien is by a court sale of the decide whether to improvise an answer under vessel. Nothing in the act or in the process of foreclosure ‘‘federal law’’ or follow the law of some state inevitably results in a transfer of title to the mortgagee. with which the mortgage transaction has A typical mortgage provision authorizes the mortgagee appropriate contacts. ... Thus, if the federal to sell the vessel in a private sale by granting a power of statute contained no relevant provision, this attorney in favor of the mortgagee which would not be Article could be looked to for an answer. required if the mortgagee already held title. In addition, if On many occasions the courts have referred to state law, the mortgagee is the owner, the remedy on default would including the UCC, to resolve ship mortgage issues. In be a possessory action under Rule D, not foreclosure. The their analyses, the courts do not look to state law as it archaic conveyance language in a ship mortgage today is, existed in 1920 but instead review current state law.14 accordingly, meaningless. In Hozie v. Vessel Highland The NOONIE G indicates that this principle remains Light,18 the Court said: valid following recodification of the SMA to the The Ship Mortgage Act expressly states that a CIMLA (defined below). ‘‘preferred mortgage is a lien....’’ 46 U.S.C. However, until the NOONIE G decision, the issue of § 31325(a). Thus, the Bank had a lien and not a whether a ship mortgage must be a chattel mortgage did title interest in the Vessel. See 3 Witkin, not reach the courts. As a result, many practitioners Summary of California Law, § 13, at 438 continued to use forms of mortgage that contain a (‘‘[A] mortgagee obtains only a lien, notwithstanding an apparent transfer of the legal title; granting clause similar to the one in the Westhampton (quoted above) which purports to transfer title to the i.e., the transfer, if intended merely as security, mortgagee.15 is treated as a mortgage.’’). In the recent case of the NOONIE G,19 a ship mortgage Coincidently, at about the time Louisiana adopted the was challenged on the ground that it was not a valid UCC, the US maritime laws were re-codified and the mortgage under state law and therefore could not be a preferred mortgage under the CIMLA. Ironically, the 14 E.g. Custom Fuel Services, Inc. v. Lombas Industries, Inc., alleged defect was that the mortgage was in the form 805 F.2d 561 (5th Cir. 1986); J. Ray McDermott & Co. v. The of a Louisiana chattel mortgage and this had been Vessel Morning Star, 431 F.2d 714 (5th Cir. 1970); Morgan Guaranty Trust Co. v. Hellenic Lines, Ltd., 621 F. Supp. 198 (S.D.N.Y. 1985); First Federal Sav. & Loan Assoc. v. Zequeira, 288 F. Supp. 384 (D.P.R. 1968); United States v. 16 Richard B. Barnett, US Ship Mortgage Law Relaunched, Caprice, 427 F. Supp. 1035 (D.N.J. 1976); Bergren v. Davis, 8 Int’l Fin. L. Rev. 27 (1989). 287 F. Supp. 52 (D. Conn. 1968); Southland Financial Corp. v. 17 Oil Screw Mary Evelyn, 248 F. Supp. 520 (E.D. La. 1965); In re Former 46 U.S.C.A. § 951, now 46 U.S.C. § 31325. McLean Industries, Inc., 76 B.R. 328 (Bankr. S.D.N.Y. 1987). 18 Hozie v. Vessel Highland Light, 1998 U.S. Dist. LEXIS 15 E.g. Simpson v. Lady Nell, 2013 U.S. Dist. LEXIS 136091 23076 (C.D. Cal., June 1, 1998). (W.D. Wash., Sept. 23, 2013) (the ‘‘ship mortgage conveys to 19 South Lafourche Bank & Trust Co. v. M/V Noonie G, 2017 Plaintiffs the whole of the vessel Lady Nell’’). U.S. Dist. LEXIS 93748 (E.D. La., June 19, 2017). 17 Benedict’s Maritime Bulletin 71 Second Quarter 2019 rendered obsolete by the adoption of the UCC. Rejecting as to the identity of the owner and its citizenship.23 In this argument, the Court held: practice, the mortgagee is not named as the owner. In addition, under 46 C.F.R. § 67.167(b): The Defendants in effect contend that, even if all six [statutory] requirements are met, the A Certificate of Documentation together with Ship Mortgage Act imposes an additional any endorsement(s) thereon becomes invalid requirement for the mortgage to be valid— immediately, except as provided in § 67.161, that the underlying mortgage be valid under when: the law of the state in which it was executed. (1) The ownership of the vessel changes in After conducting a thorough review of the whole or in part. ... language of the Ship Mortgage Act, applicable Clearly, there is no transfer of title in a mortgage or the case law, and numerous secondary sources, the Court finds no such requirement.20 documentation of all mortgaged vessels would be invalid. As Lord Mansfield said in 1781, ‘‘It is an The Court identified six requirements as to the form affront to common sense to say the mortgagor is not of a mortgage, citing 46 U.S.C. § 13321. The mortgage the real owner.’’24 must:21 Maritime liens, like mortgage liens, are enforceable in (1) identify the vessel; admiralty in rem.25 For both types of liens the enforce- (2) state the name and address of each party to ment procedure consists of arrest of the vessel and a the instrument; public auction under court supervision. The lien is then satisfied out of the proceeds of the vessel (after (3) state, if a mortgage, the amount of the direct paying the expenses of the court’s possession). or contingent obligations...that is or may become secured by the mortgage, excluding Maritime liens are often characterized as a ‘‘special interest, expenses, and fees; property interest’’ in the vessel.26 It is ‘‘special’’ (4) state the interest of the grantor, mortgagor, because unlike common law liens, it does not depend or assignor to the vessel; on possession of the vessel.27 It is a ‘‘property interest’’ because it is a right in rem. The lien attaches to the (5) state the interest sold, conveyed,22 mort- vessel itself and is not defeated by a subsequent sale gaged, or assigned; and or the insolvency of the owner.28 But this is to say (6) be signed and acknowledged. nothing more than it is an in rem lien. The lien is not property; it is a statutory right. It is nonsensical to refer Thus, any requirement that a ship mortgage include a to title to a statutory lien. Nor is there any registry for transfer of title to the mortgagee would have to be such purported titles. The requirement to record a mort- contained in the CIMLA or in the mortgage cases gage is for the purpose of providing notice of the lien included in the general maritime law. No such require- to other potential creditors. As stated in House Report ment exists. 100-918, p. 19 (September 15, 1988) discussing the Not only does a mortgage not require transfer of title to recodification of the SMA: the mortgagee, any such transfer would cause serious problems under other laws. To document a vessel, a statement must be made under the penalty of perjury 23 46 C.F.R. §17.141; CG-1258. 24 Quoted in William H. Lloyd, Mortgages-The Genesis of the Lien Theory, 32 Yale L.J. at 237 (1923). 25 20 NOONIE G, 2017 U.S. Dist. LEXIS 93748 at *15. Notwithstanding this similarity, mortgage liens are not maritime liens because they must be recorded, priority is 21 NOONIE G, 2017 U.S. Dist. LEXIS 93748 at *13. based on first in time and they are not subject to laches. 22 Section 13321 covers all types of instruments that are to be 26 Schoenbaum, Admiralty and Maritime Law § 9:1 (6th Ed. filed, including a ‘‘bill of sale, conveyance, mortgage, assign- 2018). ment or related instrument.’’ The terms ‘‘sold’’ and ‘‘conveyed’’ 27 in paragraph 5 of the quoted section refer to bills of sale and The China, 74 U.S. 53, 68 (1868). conveyances, not mortgages. 28 The Young Mechanic, 30 Fed. Cas. 873 (C.C.D. Me. 1855). 17 Benedict’s Maritime Bulletin 72 Second Quarter 2019

However, the mortgage is not valid as to notice which a trustee was appointed. The trustee stipulated to to third parties for purposes such as estab- the validity of the ship mortgages, indicating that there lishing priorities until it is filed, since third was no reasonable basis for challenging them. Under parties will not have had the opportunity to Section 704(5) of the Bankruptcy Code,31 the trustee know of its existence until then. has a duty to ‘‘object to the allowance of any claim that is improper.’’ C. Agent as a Representative Mortgagee 32 Even if contrary to the law, a ship mortgage was viewed Dixie Pellets was a Chapter 11 bankruptcy case in which 33 as a conveyance of property, there is no reason an agent the debtor commenced an adversary proceeding challen- may not be a mortgagee (leaving aside US citizenship ging certain maritime lien claims and other claims but requirements). stipulated to the validity of a US ship mortgage in favor of Bank of New York Mellon Trust Company as ‘‘collateral The nature of an agency relationship does not preclude agent for the lenders.’’ If there were any grounds to chal- an agent from holding mortgage rights for another, lenge the ship mortgage, the debtor would have included whether those rights are viewed as a jus in re, an interest such a claim in its adversary proceeding. in property, a quasi-interest in property, or merely the right to a statutory lien. Section 14B of the Restatement A representative mortgagee is the real party in interest in 2d of Agency (1958) reads: the enforcement of a preferred mortgage lien. The real party in interest under the federal rules is the mortgagee One who has title to property which he agrees named in the mortgage notwithstanding that all of the to hold for the benefit and subject to the control benefit may go to another. In Avondale Shipyards v. of another is an agent-trustee and is subject to Tank Barge ets 2303,34 the Court said: the rules of agency. The effect of Rule 17(a) is that the action must Comment (a) states in part: be brought by the party who, according to the Agents and trustees are both fiduciaries, and governing substantive law, is entitled to enforce the right. there is no antithesis between the relations. An agent may or may not hold a title for the *** principal, but he is always subject to the prin- It is clear in this case that ITT [the named cipal’s directions. A trustee always holds a mortgagee], not GECO, is the actual mort- legal or equitable title for the beneficiary, but gagee on the preferred mortgage giving rise he may or may not be subject to the benefi- to the lien from which ITT seeks priority. ciary’s control. ... [Emphasis added]. Thus, ITT is entitled to enforce the rights There is nothing in the SMA, the CIMLA, or any federal conferred by Section 951. Under Rule 17(a), case involving preferred mortgages that prohibits an ITT therefore also is the real party in interest, agent acting for one or more lenders from being a mort- although it may ultimately gain nothing, and gagee. Moreover, two courts have upheld mortgages in GECO and/or Ocean Capital stand to benefit which an agent was the mortgagee.29 from the judgment.

In Muma Services,30 Wachovia Bank was the mortgagee If a court sitting in admiralty were presented with in several US ship mortgages ‘‘as agent for itself’’ and the issue of whether an agent may be a mortgagee, the other lenders. The case was a Chapter 7 liquidation in analogous state law to which it would refer is the UCC. Under the UCC:

31 11 U.S.C. § 704(5). 29 In re Dixie Pellets, LLC, 2010 Bankr. LEXIS 5624 (Bankr. 32 N.D. Ala., May 13, 2010); In re Muma Services, Inc., 322 B.R. In re Dixie Pellets, LLC, 2010 Bankr. LEXIS 5624 (Bankr. 541, 2005 Bankr. LEXIS 494 (Bankr. D. Del., March 30, N.D. Ala., May 13, 2010). 2005). 33 Case 10-00038, Doc 1, 04/09/10. 30 In re Muma Services, Inc., 322 B.R. 541, 2005 Bankr. 34 Avondale Shipyards v. Tank Barge ets 2303,1987U.S. LEXIS 494 (Bankr. D. Del., March 30, 2005). Dist. LEXIS 4253, at *13 (E.D. La., May 27, 1987). 17 Benedict’s Maritime Bulletin 73 Second Quarter 2019

‘‘Secured party’’ means: (A) a person in whose Coast Guard documentation would have made favor a security interest is created or provided no difference in the actions of either of the for under a security agreement, whether or not intervenors. any obligation to be secured is outstanding; (B) a person that holds an agricultural lien; The preference for using a trustee and not an agent may (C) a consignor; (D) a person to which accounts, have grown out of citizenship restrictions for mortgagees of vessels under US flag (later eased by the chattel paper, payment intangibles, or promis- CIMLA). In his article, Some Problems in Vessel Finan- sory notes have been sold; (E) a trustee, 38 indenture trustee, agent, collateral agent, or cing – a Lender’s Lawyer’s View, Edward H. Mahla discusses issues involving multiple lenders, and implies, other representative in whose favor a security interest ... is created or provided for;or(F)a without citing any authority, that if a trustee was not person that holds a security interest arising under used each lender would have to be recorded as a mort- [specified sections of the UCC].35 gagee. He focuses on the requirement of citizenship affidavits for each mortgagee and the endorsement of Under NY UCC 9-502(a): the certificate of registry, both of which have eliminated.

A financing statement is sufficient only if it: D. Liberia, the Marshall Islands and Vanuatu In 1948, Liberia, with the help of American attorneys, a. Provides the name of the debtor adopted maritime and corporate laws that were modelled b. ‘‘provides the name of the secured party or on US statutes, including the SMA, in which many a representative of the secured party;’’ and sections were verbatim copies of the US versions. In addition, the Liberian law incorporated by reference c. Indicates the collateral covered. [Emphasis the general maritime law of the United States to the added]. extent that it did not conflict with any Liberian statutes. A failure to indicate the representative capacity of a In 1990, while Liberia was suffering a disastrous civil war, secured party does not affect the sufficiency of the financing statement.36 both the Marshall Islands and Vanuatu adopted maritime laws following the Liberian model, including the incor- The relationship between a representative mortgagee poration by reference of United States general maritime and its lenders is a matter entirely between themselves. law. The US recodification in 1989 was not followed by None of the other creditors, a bankruptcy trustee, or the the other countries but Liberia and the Marshall Islands borrower has any legitimate interest in the nature of both eliminated endorsements and good faith affidavits the relationship or whether it is a trust or an agency. and made certain other updates, while the law in As the court noted in First State Bank v. Towboat Vanuatu has remained fairly static. The main aspects of Chippewa,37 in rejecting the contention that a loan parti- these laws, however, remain sufficiently similar to the cipant should have been named as the mortgagee: CIMLA that the American ship mortgage cases referred to above are relevant in these other jurisdictions. [The owner] quite properly points out that E. Conclusion neither [creditor] acted to its detriment or was misled by the non-appearance of American The purported conveyance of title in a ship mortgage is Bank as a mortgagee, that the $130,000 mort- an archaic fiction that should be abandoned. Even when gage was a matter of public record, and that the the mortgage contains conveyance language, an agent appearance of American Bank as mortgagee in may be a representative mortgagee for lenders.

35 NY UCC 9-102(73) (emphasis added). 36 NY UCC 9-503(d). 37 First State Bank v. Towboat Chippewa, 402 F. Supp. 27, 34 38 Edward H. Mahla, Some Problems in Vessel Financing – a (N.D. Ill. 1997). Lender’s Lawyer’s View, 47 Tul. L. Rev. 629, 640 (1972-73). 17 Benedict’s Maritime Bulletin 74 Second Quarter 2019

WINDOW ON WASHINGTON

BIG TROUBLE IN LITTLE CHINA By Bryant E. Gardner

Over the last decade, the Chinese Communist Party The CCP’s maritime and expansionist goals have not (CCP) has increasingly turned its eyes toward the gone unnoticed in Washington. Opening a hearing of sea—looking to protect and control essential trade lanes, the Senate Foreign Relations Committee in March establish a protective perimeter off its coast which 2019, new Chairman Senator Jim Risch (R-ID) stated envelops Taiwan, develop force projection capabilities, ‘‘Today, China steals our intellectual property and uses and ensure dominion over near sea resources. By 2015, it to put our people out of work. It intimidates its neigh- China’s Military Strategy declared: bors, including close U.S. allies while increasing its military capabilities in the South and East China Seas. The traditional mentality that land out-weighs sea China exports corruption and its authoritarian model must be abandoned, and great importance has to across the globe. It uses cheap financing as a debt trap, be attached to managing the seas and oceans and and has built a police state that the Chinese Communist protecting maritime rights and interest. It is neces- Party uses to limit free expression that contradicts the sary for China to develop a modern maritime party line.’’2 Senator Risch’s concerns are shared by military force structure commensurate with its many U.S. lawmakers. national security and development interests, safeguard its national sovereignty and maritime rights Across Capitol Hill at a hearing before the Asia and and interests, protect the security of strategic Pacific Subcommittee of the House Committee on SLOCs (sea lines of communication) and over- Foreign Relations, Chairman Ted Yoho (R-FL) observed seas interests, and participate in international that during the 19th Communist Party Congress cooperation so as to provide strategic support in October 2017, Xi Jinping proclaimed a new era 1 for building itself into a maritime power. in which China would make greater contributions to mankind, including ‘‘the spread of socialism with Chinese characteristics.’’ Rep. Yoho remarked, ‘‘I think 1 U.S. DEFENSE INTELLIGENCE AGENCY,CHINA MILITARY POWER: MODERNIZING A FORCE TO FIGHT AND WIN, 64 (2019) (quoting CCP STATE COUNCIL,CHINA’S MILITARY STRATEGY (May 2 2015)). See also PEOPLE’S REPUBLIC OF CHINA,VISION AND Hearing before the Senate Foreign Relations Comm., U.S.- ACTIONS ON JOINTLY BUILDING SILK ROAD ECONOMIC BELT AND China Competition, 116th Cong. (March 13, 2019) (Statement 21ST-CENTURY MARITIME SILK ROAD (2015). of Chairman Sen. Jim Risch (R-ID)). 17 Benedict’s Maritime Bulletin 75 Second Quarter 2019 that’s still called communism,’’ and acknowledged that and displacement of the United States to his hopes the Chinese model would be a compromise achieve global preeminence in the future.5 between communist leadership and free market liberal- Upon reviewing the 2018 Strategy, former Chairman ization have increasingly given way to a realization that oftheSenateArmedServicesCommitteeJohn the Chinese model is a byword for one-party authoritarian McCain (R-AZ) remarked: ‘‘The National Defense rule.3 Yoho also noted that, ‘‘[if] the developing world Strategy offers a new framework for thinking about believes [CCP General Secretary Xi Jinping]’s lies, Xi the global challenges we face and that places China may succeed in building an alternative order of subser- squarely at the top of our priority list. As we turn our vient strongmen who will meekly go along with China’s focus to great power competition and near-peer threats, global ambitions in exchange for patronage in their own we must face up to the true nature of the reality of spheres of influence.’’4 Chinese power and ambition.’’6 More tangibly, the United States’ 2018 National Like all aspiring great powers, China’s maritime ambi- Defense Strategy marks a reorientation from interna- tions are instrumental towards both its regional and tional terrorism toward peer and near-peer threats global goals. In the first instance, the CCP appears to posed by China and Russia, and a return to the era of seek undisputed domination over its near seas; in the great power competition: second, it seeks to establish a long-term global maritime Today, we are emerging from a period of stra- transportation infrastructure and aid network through its tegic atrophy, aware that our competitive ‘‘Belt Road Initiative’’ (BRI). military edge has been eroding. We are facing increased global disorder, characterized Territorial Expansion & Dispute in the South China by a decline in the long-standing rules-based Sea & East China Sea international order—creating a security envir- The strategic importance of the South China Sea (SCS) onment more complex and more volatile than and East China Sea (ECS) is hard to overstate. The SCS any we have experienced in recent memory. abuts the Strait of Malacca, one of the major choke Inter-state strategic competition, not terrorism, points of global maritime commerce, and the SCS and is now the primary concern in U.S. national the ECS together form a protective arc around the coast security. of The People’s Republic of China, enveloping the China is a strategic competitor using predatory ‘‘renegade’’ Republic of China (Taiwan). Trillions of economics to intimidate its neighbors while goods transit through the SCS and ECS annually, as militarizing features in the South China Sea. raw materials come into China and manufactures go out to Europe, the United States, and the world. The ... SCS alone has 190 trillion cubic feet of natural gas China is leveraging military modernization, and 11 billion barrels of oil and is one of the top five 7 influence operations, and predatory economics most productive fishing zones. The Department of to coerce countries to reorder the Indo-Pacific Defense states that, ‘‘the South China Sea plays an region to their advantage. As China continues important role in security considerations across East its economic and military ascendance, asserting Asia because Northeast Asia relies heavily on the flow power through an all-of-nation long-term

strategy, it will continue to pursue a military 5 U.S. DEPARTMENT OF DEFENSE,SUMMARY OF THE 2018 modernization program that seeks Indo- NATIONAL DEFENSE STRATEGY OF THE UNITED STATES OF Pacific regional hegemony in the near-term AMERICA:SHARPENING THE AMERICAN MILITARY’S COMPETITIVE EDGE, Introduction (2018). 6 Hearing before the Senate Armed Services Comm., Hearing on the United States Pacific Command, 115th Cong. (March 15, 2018) (Statement read by Sen. Inhofe (R-OK)). 3 Hearing before the House Comm. on Foreign Affairs, 7 Hearing before the Senate Foreign Relations Comm., U.S.- Subcomm. on Asia and the Pacific, U.S. Responses to China Competition, 116th Cong. (March 13, 2019) (Statement China’s Foreign Influence Operations, 115th Cong. of Oriana Mastro, Assistant Professor of Security Studies, (Mar. 21, 2018) (Statement of Chairman Ted Yoho (R-FL)). Edmund A. Walsh School of Foreign Service, Georgetown 4 Id. University, Washington, D.C.). 17 Benedict’s Maritime Bulletin 76 Second Quarter 2019 of oil and commerce through South China Sea shipping Maritime Militia (PAFMM)9 and Chinese Coast Guard lanes, including more than 80 percent of the crude oil vessels, backed up at a distance by the rapidly devel- flowing to Japan, South Korea, and Taiwan.’’8 oping People’s Liberation Army Navy (PLAN). The CCPpreferstodeploythePAFMM,andsometimes The CCP’s apparent goal, for at least the last decade, has the Chinese Coast Guard, in order to avoid escalation been to establish dominion over the SCS and ECS. CCP and direct conflict.10 These ‘‘civilian’’ vessels—operating strategy in the SCS and ECS has been characteristically in a gray area between combatant and non-combatant Chinese. The strategy, not unlike what it is pursuing status—effectively harass and block U.S. Navy vessel with the BRI, is to incrementally inch forward such movements in conjunction with rapidly evolving cyber that no one movement is sufficient to politically justify and anti-satellite weapons, while PLAN and island-based retaliation from the United States or its allies, but which installations in the area are increasingly able to mount a in the end results in Chinese domination—sometimes credible kinetic defense short of a major U.S. action. referred to by analysts as ‘‘shaving the salami.’’ In the SCS and ECS, the CCP began by setting out fishing and U.S. Navy Admiral Philip Davidson, testifying in April merchant vessels, then around December 2013, the CCP 2018 before the Senate Armed Services Committee in commenced building up various reefs and islands and connection with his nomination to become Commander, building structures and lengthy runways upon them to U.S. Pacific Command (PACOM), revealed that ‘‘China service that activity, and then ultimately integrating the is now capable of controlling the South China Sea in entire cluster to achieve what is generally referred to as all scenarios short of war with the United States.’’11 Anti-Access Area-Denial (A2AD). The new Chairman of the Senate Armed Services Committee, James Inhofe (R-OK), analogized what The A2AD strategy involves deploying asymmetric, China is doing in the South China Sea to something low cost capabilities to erode U.S. military supremacy ‘‘like you’re preparing for World War III.’’12 and complicate any otherwise black and white conflict issues, blocking the U.S.’s ability to come to the aid of Disagreements between the United States allied nations allies or to respond to incidents before the incident is and China in the SCS and ECS are rooted in both terri- effectively over. There is a gradual and even impercep- torial disputes and in disagreement about coastal states’ tible shift in presence toward the disputed area to rights under the law of the sea. develop critical mass and presence, followed by a rapid overrun or pivotal shift in control over the area, relying upon the political unpalatability and intimidation 9 The Defense Intelligence Agency has reported that ‘‘The of conventional war to deter any effective counter offen- PAFMM is a subset of China’s national militia, an armed sive sufficient to uproot the occupying party—similar to force of civilians available for mobilization to perform basic support duties. Militia units organize around towns, villages, what was seen with the ‘‘little green men’’ operating urban sub districts, and enterprises, and they vary widely from without uniforms in the Crimea before its absorption by one location to another. The composition and mission of each Russia. The strategy seeks to counter America’s Desert unit reflects local conditions and personnel skills. In the South China Sea, the PAFMM plays a major role in coercive activ- Storm / Shield type operations in which it masses forces ities to achieve China’s political goals without fighting, part of and then attacks decisively—by never giving time for broader Chinese military doctrine that states that confronta- such a logistical build-up, instead making the operation tional operations short of war can be an effective means of an effective fait accompli before the United States can accomplishing political objectives.’’ U.S. DEFENSE INTELLI- GENCE AGENCY,CHINA MILITARY POWER:MODERNIZING A mass a decisive countering force. FORCE TO FIGHT AND WIN, 79 (2019). 10 In China’s asymmetrical SCS / ECS campaign, the CCP The Chinese Coast Guard has rapidly increased and moder- nized its forces. The force’s large patrol ship fleet has doubled deploys a maritime militia of lightly armed merchant since 2010 to more than 130 vessels, making it by far the and fishing vessels called the People’s Armed Forces largest coast guard force in the free world. In 2018, the CCP transferred the Chinese Coast Guard from the State Oceanic Administration to military control. Id at 78. 11 8 CONGRESSIONAL RESEARCH SERVICE,CHINA’S ACTIONS IN CONGRESSIONAL RESEARCH SERVICE,CHINA’S ACTIONS IN SOUTH AND EAST CHINA SEAS:IMPLICATIONS FOR U.S. INTERESTS, SOUTH AND EAST CHINA SEAS:IMPLICATIONS FOR U.S. INTERESTS, Summary (Jan. 31, 2019). SUMMARY (Jan. 31, 2019) (quoting DEPARTMENT OF DEFENSE, 12 ANNUAL REPORT TO CONGRESS [ON]MILITARY AND SECURITY Hearing before the Senate Armed Services Comm., China DEVELOPMENTS INVOLVING THE PEOPLE’S REPUBLIC OF CHINA at and Russia, 116th Cong. (January 29, 2019) (Statement of 41 (May 15, 2017)). Sen. Inhofe (R-OK)). 17 Benedict’s Maritime Bulletin 77 Second Quarter 2019

In the first instance, the U.S. challenges China’s basic other hand, contend that the United Nations Convention territorial claims over its ECS and SCS ‘‘island’’ on the Law of the Sea (UNCLOS) gives them the right to outposts. Every land feature claimed or occupied by regulate military activities in their EEZ. This dispute China is challenged by another neighboring claimant appears to be the root of numerous air and water naviga- state—such as the Philippines, Japan, or Vietnam— tional run-ins between the United States and China, often with a clearer line of title from Spanish, British, including most notoriously the 2001 incident during or French Colonial rule. And even assuming one or which a Chinese fighter collided with a U.S. Navy another state may have lawful title, other states are not EP-3 electronic surveillance aircraft flying approxi- required to confer upon either claimant the right to mately 65 miles off the coast of China, forcing the unilaterally assert interference with freedom of naviga- EP-3 to crash land on Hainan Island, China. Observers tion until proper title is resolved. Even if title had been have generally disagreed on the question of whether the resolved, many of the features occupied by China are U.S. position would benefit from ratifying UNCLOS. low-tide elevation features (submerged at high tide) or On the one hand, ratification would give the U.S. artificial islands or installations, which do not generate greater standing and help lock-in the U.S. position on maritime zones of sovereignty. And, at all events, navigational rights. On the other hand, China’s position assuming the feature in question is an island with clear far exceeds UNCLOS as reflected by its total disregard title and deserving of a maritime zone, coastal state of a July 12, 2016 award issued under UNCLOS, which maritime zones are determined from the baselines of ruled strongly against China and in favor of the Philip- the coastal state, which may not be from every coastal pines’ claims, and commentators have speculated that rock—contrary to the CCP’s apparent assertions. ratification of UNCLOS would do little in the Chinese disputes. Beyond the territorial disputes, the CCP disagrees with the U.S. and the broader international community over The EEZ freedom of navigation issue is particularly whether a nation has a right under international law to thorny because it has implications beyond the China freely navigate military vessels within the exclusive near seas. Overturning the principle of freedom of the economic zone (EEZ) of a coastal state—assuming for seas for all EEZs would overthrow hundreds of years of argument that the Chinese-manufactured features are legal tradition and significantly change the legal regime actually China’s and that they do generate sovereign governing a huge portion of the world’s surface, maritime zones. The U.S. and its allies contend that including some of its most strategically important international law gives coastal states the right to regulate waters. economic activity such as mining and fishing, but it does not give coastal states the right to regulate military activ- The dispute is not without pedigree. Hugo Grotius, ities in the EEZ beyond their 12 nautical mile territorial largely considered the father of international law, was 13 a proponent of the idea that the world’s seas should be waters. China and a small minority of nations, on the treated as global commons, whereas John Selden, in his 1635 book ‘‘Closed Sea,’’ put forth the idea that the sea could be appropriated by the coastal sovereign. As a 13 Argentina, Brazil, China, Indonesia, Iran, Malaysia, the Maldives, Oman, and Vietnam contend that warships have contemporary commentator observed: no automatic right of passage; 23 other developing countries (including Brazil, Malaysia, and Vietnam) insist that military A very old debate has been renewed in recent activities such as close-in surveillance and reconnaissance years: is the sea a commons open to the free within the EEZ infringe upon coastal states’ security rights use of all seafaring states, or is it territory and are therefore not protected by freedom of navigation prin- subject to the sovereignty of coastal states? Is ciples. Hearing before the Senate Foreign Relations Comm., U.S.-China Competition, 116th Cong. (March 13, 2019) it to be freedom of the seas, as Dutch Jurist (Statement of Oriana Mastro, Assistant Professor of Security Hugo Grotius insisted? Or is it to be closed Studies, Edmund A. Walsh School of Foreign Service, Geor- seas where strong coastal states make the getown University, Washington, D.C.). The U.S. Navy Office of Legislative Affairs, however, provided different nations to rules as Grotius’ English archnemesis John the Congressional Research Service when specifying countries Selden proposed? with restrictions inconsistent with UNCLOS that would limit the exercise of high seas freedoms by foreign navies operating Customary and treaty law of the sea sides with outside the 12-mile limit. CONGRESSIONAL RESEARCH SERVICE, Grotius, whereas China has in effect become a CHINA’S ACTIONS IN SOUTH AND EAST CHINA SEAS:IMPLICATIONS FOR U.S. INTERESTS, No. R42784 at 8-9 (Jan. 31, 2019). partisan of Selden. Just as England claimed 17 Benedict’s Maritime Bulletin 78 Second Quarter 2019

dominion over the approaches to the British power without provoking a countervailing military Isles, China was to make the rules governing response.17 She described the BRI as ‘‘the most signifi- the China seas. Whose view prevails will ulti- cant initiative for building and exercising power mately determine not just who controls waters, globally,’’ and since 2013 over 70 countries have lands, and atolls, but also the nature of the signed contracts for projects under BRI, with China system of maritime trade and commerce. investing over $614 billion in ports, railways, airports, What happens in Asia could set a precedent and other infrastructure hubs.18 The Commander of that ripples out across the globe. The PACOM testified in 2018 that BRI is five times the outcome of this debate is a big deal.14 amount of funding provided by the United States under the Marshall Plan—but whereas the Marshall According to the U.S. National Oceanic and Atmo- Plan was designed to lift up Europe, BRI is designed spheric Administration (NOAA), EEZs account for to lift up China.19 The Assistant Secretary of Defense for approximately 30.4% of the world’s oceans.15 They Indo-Pacific Security Affairs opined in March 2019 that are also the most strategically and economically valu- China is using BRI ‘‘to erode the sovereignty of other able ocean spaces, and permitting coastal states to countries and induce them to behave in accordance with control navigation through them would have far Chinese interests,’’20 and Admiral Phil Davidson, the reaching ramifications for U.S. strategic doctrine and new Commander of PACOM (since rechristened the potentially threats to trade routes as well. ‘‘Indo-Pacific Command’’ (INDOPACOM)), testified:

Belt-Road Initiative & the Maritime Silk Road Beijing offers easy money in the short term, but these funds come with strings attached: China’s maritime and extraterritorial ambitions do not unsustainable debt, decreased transparency, stop at the ECS and SCS. More recently, China has restrictions on market economies, and the embarked upon the BRI to reestablish infrastructure potential loss of control of natural resources. linking China with Europe and the world beyond. Beijing’s actions in this regard have military From a global trade and power projection viewpoint, ramifications as well. Beijing touts its need to the most significant portion of the BRI is the ‘‘Maritime safeguard its citizens abroad and defend its Silk Road.’’ Seventy percent of the world’s container expanding global interests in order to justify traffic already flows through Chinese owned or invested increased permanent PLA overseas basing ports,16 and the Maritime Silk Road would build upon and presence. Beijing is also exploiting that to establish greater Chinese influence all along and growing debt burdens to access strategic infra- at both ends of Chinese trade and supply chains. structure in the region.21 A recent witness before the Senate Foreign Relations Committee described the BRI as being, at its core, about the CCP’s attempts to use its growing economic clout to establish itself as the preponderant regional 17 Hearing before the Senate Foreign Relations Comm., U.S.- China Competition, 116th Cong. (March 13, 2019) (Statement of Oriana Mastro, Assistant Professor of Security Studies, Edmund A. Walsh School of Foreign Service, Georgetown University, Washington, D.C.). 14 CONGRESSIONAL RESEARCH SERVICE,CHINA’S ACTIONS IN 18 Id. SOUTH AND EAST CHINA SEAS:IMPLICATIONS FOR U.S. INTERESTS, No. R42784 at 5 (Jan. 31, 2019) (quoting James R. Holmes, 19 Hearing before the Senate Armed Services Comm., United Has China Awoken a Sleeping Giant in Japan? THE DIPLOMAT States Pacific Command, 115th Cong. (March 15, 2018) (March 1, 2014)). (Statement of Adm. Harris, Commander PACOM). 15 Id. 20 Hearing before the House Armed Services Comm., Indo- 16 Hearing before the Senate Foreign Relations Comm., U.S.- Pacific U.S. Military Activities / Security Challenges, 116th China Competition, 116th Cong. (March 13, 2019) (Statement Cong. (Mar. 27, 2019) (Statement of Randall Schriver, Assis- of James Talent, Commissioner, U.S.-China Economic and tant Secretary of Defense, Indo-Pacific Security Affairs, Office Security Review Commission, Washington, D.C.). The U.S.- of the Secretary of Defense). China Economic and Security Review Commission was 21 Hearing before the House Armed Services Comm., Indo- created by Congress in 2000 to provide oversight regarding Pacific U.S. Military Activities / Security Challenges, 116th the impact China’s World Trade Organization (WTO) acces- Cong. (Mar. 27, 2019) (Statement of Admiral Philip Davidson, sion would have on the U.S. economy and national security. Commander, INDOPACOM). 17 Benedict’s Maritime Bulletin 79 Second Quarter 2019

Rep.TedYoho(R-FL),ChairmanoftheAsiaand Africa Command’s (AFRICOM) headquarters at Camp Pacific Subcommittee of the House Committee on Lemonnier. The installation is situated along the Bab-el- Foreign Affairs in 2018, opined that the CCP sells the Mandeb Strait in the Gulf of Aden, with 12.5% to 20% BRI as ‘‘a new option for other countries and nations of global trade passing by.25 Already there have been who want to speed up their development while preser- reports of tensions between the U.S. and Chinese at the ving their independence,’’ which appears to be a dog location, including allegations of military grade lasers whistle for nations looking for development aid used to disable U.S. pilots. In May 2018, AFRICOM without the strings of democratic liberalization so Commander Tomas Walhauser told Congress he is often conditional to U.S. aid packages.22 concerned with Chinese takeover of the commercial port in Djibouti restricting U.S. access.26 In connection Testifying in April 2018 before the Senate Armed with China’s investment in the port project, Djibouti has Services Committee in connection with his nomination taken on public debt equivalent to 88% of its gross to become the next Commander of PACOM, Admiral domestic product. This raises questions about how Davidson stated: Djibouti will reject Chinese demands for more influ- Ultimately, BRI provides opportunities for ence, more control, priority docking and customs China’s military to expand its global reach processing, other insidious A2AD measures available by gaining access to foreign air and maritime to a host client state. Furthermore, China plans to port facilities. This reach will allow China’s invest in ports in Cameroon, Guinea, Madagascar, military to extend its striking and surveillance Mozambique, Namibia, and Madagascar.27 operations from the South China Sea to the That China’s BRI may be a predatory ‘‘loan to own’’ Gulf of Aden. Moreover, Beijing could program is not wholly fanciful. Unable to get financing leverage BRI projects to pressure nations to from other frequent lenders such as India, Sri Lanka deny U.S. forces basing, transit, or operational turned to China to develop Port Hambantota. The finan- and logistical support, thereby making it more cing required use of a designated Chinese construction challenging for the United States to preserve company, without open competitive bidding, and the international orders and norms.23 Chinese made clear that they expected intelligence From a maritime perspective, BRI appears to still be sharing regarding activities at the port. The local port in its early stages, but the marks of progress are hard operators were unable to generate revenues from the to miss. port sufficient to service their debt to the Chinese, which bore increasingly onerous terms as Sri Lanka Chinese investment in Africa, which touches three of the fell deeper into the debt trap. Ultimately the debt world’s eight major maritime choke points, has sparked burden became unsustainable, and in December 2017 great interest in Western capitals, and Washington is no Sri Lanka handed over the port and 15,000 acres of exception. In 2009, China surpassed the United States as surrounding land to China under a ninety-nine-year Africa’s largest trading partner, and one fifth of African lease. The port is strategically situated along a key government external debt is owed to China alone.24 commercial and military sea lane, a few hundred miles In 2017, the PLAN opened its first overseas military off the coast of India, a major Chinese rival.28 base in Djibouti, Africa, almost adjacent to the U.S. Unlike the original Silk Road, China’s Maritime Silk Road and BRI extend to the American backyard once 22 Hearing before the House Comm. on Foreign Affairs, embraced by the Monroe Doctrine. Originally, the BRI Subcomm. on Asia and the Pacific, U.S. Responses to was not supposed to extend across the Atlantic. But in China’s Foreign Influence Operations, 115th Cong. (Mar. January 2018, at a meeting in Santiago, Chile, between 21, 2018). 23 CONGRESSIONAL RESEARCH SERVICE,CHINA’S ACTIONS IN SOUTH AND EAST CHINA SEAS:IMPLICATIONS FOR U.S. INTERESTS at 29 (Jan. 31, 2019). 25 Id. 24 Hearing before the Senate Armed Services Comm., 26 Id. Subcomm. on Emerging Threats and Capabilities, China’s 27 Presence / Investment in Africa, 115th Cong. (Dec. 12, Id. 2018) (Statement of Judd Devermont, Director of the Africa 28 Maria Abi-Habib, How China Got Sri Lanka to Cough Up Program, Center for Strategic and International Studies). a Port,NEW YORK TIMES (June 25, 2018). 17 Benedict’s Maritime Bulletin 80 Second Quarter 2019

China and 33 members of the Community of Latin and local opposition because Greece, after receiving multiple Caribbean States (CELAC), China announced its expan- bail-outs, was under European Union pressure to sell off sion of the BRI into the region. Offering $250 billion in state assets including the Piraeus port.34 After investing Latin America investment over the next decade, China is $600 million euros in the port, it has become the fastest- already the leading trade partner of many Latin Amer- growing port and COSCO expects Piraeus to become the ican nations, including Argentina, Brazil, and Chile.29 number one port in the Mediterranean.35 COSCO also In December 2018, Panama became the first Latin owns majority stakes in Port Zebrugge, Belgium and American country to formally join the BRI. Valencia, Spain, and COSCO or other Chinese entities hold sizeable stakes of 20%-40% in terminals located in On Grand Bahama Island, fifty-five miles from the the ports of Valencia, Spain; Genoa, Italy; Bilbao, Spain; U.S. mainland, a Hong Kong company has invested Rotterdam, Netherlands; Istanbul, Tukey; and Antwerp, $3 billion in a deepwater container port expected to 36 30 Belgium. On March 23, 2019, Italy became the first G7 reap the benefits of a widened Panama Canal. and largest European country to formally join BRI, Florida Senator Marco Rubio (R-FL), who chairs the expected to lead to $2.8 billion worth of Chinese invest- Western Hemisphere Subcommittee of the Foreign ments in port infrastructure in Trieste, Genoa, and Relations Committee, has indicated he is ‘‘very Palermo.37 Italy’s announcement came the day after concerned’’ about Chinese influence in the Caribbean French President called for a unified European approach and Latin America, noting, ‘‘It’s a big problem. We’re 31 in response to China, and will likely lead to increased focused on it.’’ In June 2013, CCP General Secretary friction between Italy and the European Union. Xi Jinping committed $3 billion to the Caribbean region. So far, at least five Caribbean nations have signed up for On the heels of the Italy announcement, U.S. Secretary the BRI: Trinidad and Tobago, Dominica, Antigua and of State Mike Pompeo tied China’s SCS/ECS campaign Barbuda, Grenada, and the Dominican Republic, which together with its BRI initiative as part of the same received $600 million for power grid upgrades in expansionist effort and indicated the U.S. is ‘‘saddened’’ November 2018.32 to see countries signing up for the BRI because he thinks the counterparties to China ultimately end up with the China’s ambitions are not limited to developing nations. short end of the stick. Of course, expressions of disap- In 2016, China’s state-owned China Ocean Shipping pointment and chastisement are not enough to check Company (COSCO) took a controlling interest in China’s maritime aspirations. America’s ‘‘pivot to Athens’ Piraeus Harbor, signaling it intends to use it Asia’’ remains a work in progress. To date, U.S. action as a main platform for the maritime silk road, with in the South and East China Seas relies largely on Chinese companies now using the COSCO-controlled ‘‘freedom of navigation’’ exercises. In response to the asset as their principal port of entry to Southern 33 BRI, the U.S. Congress recently passed the BUILD Europe. The deal went forward in the face of strong 38 Act, which aims to overhaul U.S. foreign assistance.

The BUILD Act consolidates and aligns much of the U.S.’s current foreign investment assistance machinery

29 Fabian Cambero & Dave Sherwood, China Invites Latin 34 America to Take Part in One Belt, One Road,REUTERS Piraeus Port: Dragon’s Head on the Belt and Road, (Jan. 22, 2018). HELLENIC SHIPPING NEWS (Nov. 26, 2018). 30 Rachel Oswald, Caribbean Islands Becoming Hot 35 Id. Spots for Chinese Investment,CONGRESSIONAL QUARTERLY 36 Joanna Kakissis, Chinese Firms Now Hold Stakes in Over (Mar. 25, 2019). a Dozen European Ports, NPR (Oct. 9, 2018) (China 31 Id. Merchant Port Holdings also holds large stakes in Casablanca, 32 Id. Dunkirk, Istanbul, Le Havre, Malta, Marseilles, and Nantes.) 37 33 Hearing before the House Comm. on Foreign Affairs, Andrew Chatzky, China’s Belt and Road Gets a Win in Subcomm. on Europe, Eurasia, and Emerging Threats, Italy,COUNCIL ON FOREIGN RELATIONS (Mar. 27, 2019); Holly Chinese Investment and Influence in Europe, 115th Cong. Ellyatt, Is Italy Playing with Fire When it Comes to China?, (May 23, 2018) (Statement of Phillippe Le Corre, Senior CNBC (Mar. 27, 2019). Fellow, Mossavar-Rahmani Center for Business and Govern- 38 Better Utilization of Investments Leading to Development ment at Harvard University’s John F. Kennedy School of Act of 2018, Pub. L. No. 115-254, Division F, 132 Stat. 3186, Government). 3485 (Oct. 5, 2018). 17 Benedict’s Maritime Bulletin 81 Second Quarter 2019 in a new International Development Finance Corpora- China’s influence along key trade routes with the dedi- tion (IDFC) which will be the successor to the Overseas cated goal of developing the ‘‘Maritime Silk Road’’. No Private Investment Corporation (OPIC). Working in matter how this all breaks, it is a good bet that China will coordination with the US Agency for International be a growing force in the maritime sector in coming Development (USAID), the IDFC will have increased years, and will continue to attract close scrutiny from flexibility and additional funding authority to deploy Washington. new financial products and incorporate more private capital into infrastructure products in developing ‘‘It’s all in the reflexes.’’ nations. To the extent the BUILD Act hews true to its Jack Burton, Big Trouble in Little China benevolent aims, it may be playing by different rules than the BRI, which many contend exists to project 17 Benedict’s Maritime Bulletin 82 Second Quarter 2019

AVOIDING A JURY TRIAL FOR JONES ACT SEAMEN’S INJURY CLAIMS: IT CAN BE DONE! By Marissa M. Henderson, Esq.* Maritime lawyers, marine insurers, vessel operator risk to effectively implement a program of post-injury managers: what is your gut reaction when I ask, ‘‘Can arbitration agreements, and what to expect when they you get a Jones Act seaman to arbitrate his personal are in place.3 Hopefully, by then readers will be con- injury claims?’’ vinced to incorporate post-injury arbitration agreements into their risk management plans. If so, we have a few I’m pretty sure your initial thought is, ‘‘No, of course suggestions on who to consult to get started. not.’’ You may even be more cerebral in thinking, ‘‘That would be nice, but a seaman’s right to a jury trial in a What Are Claims Arbitration Agreements and Why forum of his choice is protected under the Savings to Choose Arbitration Anyway? Suitors Clause of the Constitution.’’1 Technically, that would be a true statement. But there is a way to contract By ‘‘post-injury claims arbitration agreement’’ I mean a around a Jones Act seaman’s right to a jury trial—an written agreement between an injured seaman and his absolutely enforceable way to do it. And it could save employer to bring any claims he may have relating to his vessel operators literally millions of dollars by avoiding injuries in an arbitration forum rather than in a court. the risk of a jury trial. So, let’s talk about post-injury Let’s unpack that. The seaman is already injured when claims arbitration agreements. he signs the agreement. It is not something he signs before he starts working—indeed, caution is warranted This article’s focus is to dispel the myth that arbitration because an arbitration agreement for future claims as agreements with seamen are unenforceable and to part of a seaman’s employment contract is entirely unen- encourage vessel operators to use post-injury arbitration forceable in the United States. Section 1 of the Federal 2 agreements. First, I will address the reasons a vessel Arbitration Act (‘‘FAA’’) expressly excludes them from operator would want to offer its injured seamen some- the FAA’s purview.4 thing to persuade them to arbitrate their injury claims. Then I will discuss the law surrounding post-injury arbi- How could having seamen elect an arbitration forum tration agreements. Spoiler alert—they have beat every for their injury claims be so beneficial to the vessel legal challenge thrown at them, except perhaps relating operator/Jones Act employer? Two words—no jury. to true cases of unfair dealing with a seaman or their At the risk of stating the obvious, members of the incapacity to contract. Finally, I will address more prac- crew who are injured in the service of a vessel can sue tical information on best practices for a vessel operator their employer in negligence under the Merchant Marine Act of 1920, commonly known as the Jones Act, and they are entitled to a jury trial. Vessel owners are thus put in a difficult spot with injured crew—they owe them the ancient seafarer’s remedy of maintenance and cure * Marissa M. Henderson is a partner in the boutique maritime and transportation firm in Norfolk, Virginia, Ventker Henderson, PLLC. She is licensed to practice law in both Virginia and North Carolina. 1 The Savings to Suitors Clause, part of the statute setting forth the original jurisdiction of federal district courts, protects 3 Some vessel operators, namely cruise lines, can get their a seaman’s right to a trial by jury for their injury claims against Jones Act seamen to agree to arbitrate future claims, including their employer. It states, ‘‘The district courts shall have original Jones Act and personal injury claims, by including an agree- jurisdiction, exclusive of the courts of the States, of (1) Any ment in the employment contract. Agreements that ‘‘envisage civil case of admiralty or maritime jurisdiction, savings to performance abroad’’ are covered under the United Nations suitors in all cases all other remedies to which they are other- Convention on the Recognition and Enforcement of Foreign wise entitled.’’ 28 U.S.C. § 1333. Arbitral Awards, which was adopted by the United Nations 2 This article began, in a much simpler form, as a paper in 1958, 21 U.S.T. 2517, 330 U.N.T.S. 33, and implemented in submitted as part of a maritime contracts panel for the theUnitedStatesin1970by9U.S.C.§§201–208.The American Bar Association’s Admiralty and Maritime Law operative provision setting forth which arbitration agreements Committee’s seminar, Admiralty Disruption, on March 22, are covered by the Convention is 9 U.S.C. § 202. 2019, in New Orleans, Louisiana. 4 9 U.S.C. § 1. 17 Benedict’s Maritime Bulletin 83 Second Quarter 2019

(medical care and a daily rate for subsistence), yet all cure) in exchange for the agreement to arbitrate, courts the while they are dealing with a potential plaintiff will enforce the arbitration agreement. who can sue them for literally millions of dollars for personal injuries and economic losses. This situation, So back to why a vessel operator would want to make shared only with railroad employers, is unique among crew arbitration agreements part of its risk management employers in our country. Under state and federal program. Let me be clear (and a bit repetitive)—vessel operators can save millions of dollars in Jones Act liabi- worker’s compensation statutes, all other employers must provide medical and disability compensation for lity exposure and (sorry, fellow defense lawyers) a ton in workers injured on the job, but they are otherwise Jones Act defense costs by effectively implementing post-injury arbitration agreements as part of their risk immune from being sued by their employees. It is these claims for which the injured seaman can sue his management strategy. The reduced loss record from employer—negligence, unseaworthiness, and a refusal lower exposure results in hard savings in protection to provide maintenance and cure—that we are concerned and indemnity (‘‘P&I’’) insurance premiums, which is with here. the insurance vehicle that typically covers this risk. I have interviewed risk managers for large vessel opera- What is the consideration for a claims arbitration tors who used these arbitration agreements over a agreement, you may ask, such that it is an enforceable significant period of time, and they will fully back up contract? Simple—the employer promises to provide the these claims of cost savings. injured seaman something above and beyond what the employer has a duty to provide him (or her) under This risk of jury exposure for Jones Act and related the law. Typically, the employer agrees to pay the claims is high for vessel owners. Indeed, the very risk seaman advanced wages, over and above the daily of a jury trial puts significant pressure on owners maintenance rate, while he or she is recovering from and their underwriters to settle. Without any cap on what a jury can award for pain and suffering, and injury. The wage advances would be credited against a future settlement for those lost wages. It is well-settled when pitting a seaman against a larger employer, the in contract law that an agreement to pay something risk of a runaway jury issuing a huge verdict is real. Plaintiff’s lawyers often use the risk of a jury trial as sooner than it is due is an agreement supported by substantial consideration.5 Having defended maritime their best leverage (in an otherwise mediocre case) at operators for some time, I can say with confidence that mediation. In sum, and to state the obvious to anyone many Jones Act employers already provide injured crew familiar with Jones Act claims, jury trial exposure for advance wages (or crew shares for fishing vessels). Yet, Jones Act claims poses a significant risk for vessel they get nothing for it except goodwill in treating owners. While seamen cannot contract away their employees properly (valuable, clearly), and often they Jones Act remedy, they can be persuaded to contract around a judicial forum in which to bring their claims. get sued anyway. Employers choosing to provide wages during the injury recovery period should know That is the beauty of post-injury claims arbitration they can benefit from their generous wage policy by agreements. The trade-off for avoiding an unpredictable jury is that arbitral awards are not appealable except on conditioning wages or other benefits on the seaman’s written agreement to arbitrate any claims relating to the very limited grounds, such as fraud. That trade-off is injury. As long as the employer agrees to provide the well worth it to avoid a jury exposure in a Jones Act injured seaman some benefit over and above what he personal injury case. or she is legally entitled to (i.e., above maintenance and Some practitioners have had bad experiences with arbitration and consider the cost and effort of arbitration to provide little advantage over judicial litigation. This is especially the case when commercial disputes are 5 Agreements to pay money early against a future payment or involved. Indeed, arbitration can be complex, costly, settlement are supported by bargained-for consideration. E.g., and slow. For that reason, care should be taken to In re OSG Ship Mgmt., No. 14-16-240, 2016 Tex. App. LEXIS write into these arbitration agreements provisions to 13785 (Tex. App. Houston 14th Dist. Dec. 29, 2016) (noting avoid or reduce many of those concerns, including agreement was supported by consideration because seaman was ‘‘getting the money early’’ under an advance payment designating a sole arbitrator and specifying arbitration plan that could in the future add up to his maintenance and cure benefits). 17 Benedict’s Maritime Bulletin 84 Second Quarter 2019 before a private ADR provider.6 Since many Jones Act seaman and the employer have ‘‘admittedly signed’’ cases currently go to mediation, maritime lawyers and after the injury.10 Seamen have nonetheless challenged risk managers will already have their go-to ADR post-injury arbitration agreements, arguing that because provider and neutrals. I also recommend expressly the agreement was made with an employer, and refer- adopting any expedited rules of the ADR provider. ences employment-type terms such as compensation or For example, JAMS, a global ADR provider, has expe- maintenance and cure, that they are unenforceable dited arbitration procedures under its comprehensive employment contracts under the FAA. These arguments rules and a streamlined set of rules for claims under have all failed. $250,000 or when adopted by agreement.7 With these In 2016, the United States District Court for the provisions in place in the arbitration agreement, many of the objections to arbitration—costs and being as Southern District of Florida examined the prior cases complex as judicial litigation—can be eliminated. on this issue, finding ‘‘courts have uniformly held that post-incident agreements to pay a seaman advanced wages are non-employment agreements under the Legal Challenges FAA.’’11 For example, the United States Court of Appeals for the Fifth Circuit had previously held that The Federal Arbitration Act ‘‘Exclusion’’ for a written agreement that was a partial release by a Employment Contracts seaman of his injuries to date, with an agreement to The widespread belief that seamen cannot be forced to arbitrate later-arising injuries related to the same incident, arbitrate their injury claims arises from the language of and which acknowledged the seaman’s ‘‘maintenance the Federal Arbitration Act (‘‘FAA’’) that expressly and cure’’ rights, was not subsumed into the seaman’s carves out from its purview ‘‘contracts of employment employment contract and thus not excluded from the of seamen.’’8 As such, courts have no authority to compel FAA.12 Likewise, the United States District Court for arbitration based on arbitration clauses in a seaman’s the Eastern District of Louisiana found a post-injury employment contract.9 Thus, marine employers cannot arbitration agreement was not part of the seaman’s have vessel crewmembers agree to arbitrate future employment contract because there was no language in disputes or injury claims as part of a new hire package. the agreement indicating acceptance of the agreement However, when an agreement is executed after the was a condition of continued employment.13 The New seaman’s accident and injury, courts will almost univer- York Court of Appeals reached the same conclusion at sally compel arbitration based on an agreement that a around the same time.14 As the United States Court of Appeals for the Second Circuit has explained: Although the FAA exempts from its coverage ‘contracts of employment of seamen,’ the 6 Owners want to avoid any argument that a high filing fee serves as a barrier to a seaman enforcing his or her rights under Supreme Court has strongly suggested that the Jones Act. In at least one case, an employer had to over- arbitration agreements such as the one at come this argument, and it agreed (after moving to compel issue in this case do not constitute ‘contracts arbitration) to advance the filing fee. Barbieri v. K-Sea Transp. Corp., 566 F. Supp. 2d 187, 191, 195 (E.D.N.Y. 2008) (noting the AAA had a $10,000 filing fee for the claimant under the Commercial Arbitration Rules, and compelling arbitration on the condition that K-Sea pays any filing fees not waived by the AAA). 7 Rules 16.1 & 16.2, JAMS Comprehensive Arbitration Rules and Procedures, avail. at https://www.jamsadr.com/ 10 Vane Line Bunkering, Inc. v. Hooper, No. 16-21348, 2016 rules-comprehensive-arbitration/#Rule-16-1 (accessed on U.S. Dist. LEXIS 184372, *6 (S.D. Fla. July 6, 2016) (enfor- Mar. 31, 2019); JAMS Streamlined Arbitration Rules and cing post-injury seaman’s arbitration agreement). Procedures, available at https://www.jamsadr.com/files/Uploads/ 11 Documents/JAMS-Rules/JAMS_streamlined_arbitration_rules- Id. at *7. 2014.pdf (accessed on Mar. 31, 2019). 12 Terrebone v. K-Sea Transp. Corp., 477 F3d 271, 279 (5th 8 9 U.S.C. § 1. Cir. 2007). 13 9 One exception is if the employment contract is governed not Nunez v. Weeks Marine, Inc., No. 06-3777, 2007 U.S. Dist. by the FAA but by the United Nations Convention. See discus- LEXIS 10807, *10-11 (E.D. La. Feb. 13, 2007). sion in footnote 4 regarding agreements covered by the U.N 14 In re Schreiber v. K-Sea Transp. Corp., 879 N.E.2d 733, Convention. 737 (N.Y. Ct. App. 2007). 17 Benedict’s Maritime Bulletin 85 Second Quarter 2019

of employment’ where the arbitration agreement Seamen have invoked this doctrine to attempt to turn is ‘not contained’ in a broader employment on its head the strong federal policy in favor of arbitra- agreement between the parties.15 tion agreements. The FAA establishes a ‘‘clear and unequivocal presumption in favor of arbitration and There can be little doubt that any future challenge that an requires that courts ‘rigorously enforce agreement to agreement between an injured seaman and his or her arbitrate.’’’18 Per the FAA, a written arbitration agree- employer to arbitrate the seaman’s claims is a ‘‘contract ment is prima facie valid, and the party opposing it has of employment’’ under Section 1 of the FAA (and unen- the burden to prove the agreement was the result of forceable) will be dead in the water (forgive my pun). fraud, coercion, overreaching, or some ground that would justify invalidating any contract.19 By contrast, Seamen as ‘‘Wards of the Admiralty’’ under the wards of the admiralty doctrine, releases with Another argument that has been raised in various forms seamen are highly scrutinized, and vessel owners have a is that an arbitration agreement with a seaman should heavy burden to prove a release ‘‘was executed freely, be more closely scrutinized than any other arbitration without deception or coercion, and that it was made by agreement because seamen deserve ‘‘special solicitude’’16 the seaman with full understanding of his rights.’’20 from the courts. I refer to the ‘‘wards of the admiralty’’ These arguments have repeatedly failed, however, doctrine. As the United States Supreme Court has explained, because arbitration agreements, unlike releases, do not affect substantive rights. An agreement to resolve claims [Seamen] are emphatically the wards of the in arbitration rather than in a jury trial is not a release of admiralty; and though not technically incap- any rights.21 Similarly, courts have rejected arguments able of entering into a valid contract, they are that the right to a trial by jury is a special, substantive treated in the same manner, as courts of equity right created by Congress under the Jones Act.22 Addi- are accustomed to treat young heirs, dealing tionally, a seaman’s lack of counsel when signing a with their expectancies, wards with their claims arbitration agreement has been rejected as guardians...[.] If there is any undue inequality grounds to invalidate an arbitration agreement.23 in the terms, any disproportion in the bargain, any sacrifice of rights on one side, which are Moreover, as at least one court has noted in this context, not compensated by extraordinary benefits on ‘‘there is something antiquated in the idea that seamen the other, the judicial interpretation of the are less capable than other people of making contracts transaction, is that the bargain is unjust and unreasonable, that advantage has been taken of the situation of the weaker party, and that pro tanto the bargain ought to be set aside as 18 Barbieri, 566 F. Supp. at 193 (quoting Sphere Drake Ins. inequitable.17 Ltd. v. Clarendon Nat’l Ins. Co., 263 F.3d 26, 30 (2d Cir. 2001)). 19 See FAA,9U.S.C.§2(‘‘[A]nagreementinwritingto submit to arbitration an existing controversy arising out of such a contract ...shall be valid, irrevocable, and enforceable, 15 Harrington v. Atlantic Sounding Co., Inc., 602 F.3d 113, save upon such grounds as exist at law or in equity for the 121 (2d Cir. 2010) (internal citations omitted) (citing, among revocation of any contract.’’). other cases, Gilmer v. Interstate/Johnson Lane Corp., 500 20 U.S. 20, 25 n.2 (1991)). Garrett, 317 U.S. at 344. 21 16 In a recent products liability case in a maritime context, the See Harrington, 602 F.3d at 124 (‘‘By agreeing to arbitrate United States Supreme Court reaffirmed its ‘‘‘special solici- a statutory claim, a party does not forgo the substantive rights tude for the welfare’ of those who undertake to ‘venture upon afforded by the statute; it only submits to their resolution in an hazardous and unpredictable sea voyages.’’’ Air & Liquid Sys. arbitral, rather than a judicial, forum.’’) (quoting Mitsubishi Corp. v. Devries, 203 L. Ed. 373, 383 (2019) (quoting Amer- Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. ican Export Lines, Inc. v. Alvez, 446 U.S. 274, 285 (1980)). 614, 628 (1985)); Terrebone, 477 F.3d at 284 (same). 22 17 Garrett v. Moore-McCormack Co., 317 U.S. 239, 246-47 Nunez, 2007 U.S. Dist. LEXIS at *17 (‘‘There is nothing in (1942) (quoting Harden v. Gordon, 11 F. Cas 480, 485, F. Cas. the Jones Act that states a Plaintiff may not waive the right to a No 6047 (C.C.D. Me. 1823)); see also Karim v. Finch Ship- jury trial. In fact, a seaman does in effect waive his right to a ping Co., 374 F.3d 302, 310 (5th Cir. 2004) (‘‘Seamen...are jury trial when he files his claim under Rule 9(h) of the Federal wards of admiralty whose rights federal courts are duty-bound Rules of Civil Procedure.’’). to jealously protect.’’). 23 See, e.g., Barbieri., 566 F. Supp. 2d at 193. 17 Benedict’s Maritime Bulletin 86 Second Quarter 2019 for themselves.’’24 Regardless of the viability of the A seaman challenging the validity of an entire contract doctrine, all courts considering the issue have found containing an arbitration agreement faces an uphill the ‘‘wards of the admiralty’’ doctrine does not shift the battle. He or she has the burden of proof and will not burden of proof in cases concerning the enforceability of be saved by the traditional ‘‘ward of the admiralty’’ a post-injury arbitration agreement. The FAA’s strong doctrine. Indeed, standard contract law applies and can policy in favor of arbitration and the presumptive validity bite the seaman; a seaman can ratify a voidable contract of arbitration agreements outweighs any concern that a by taking the money offered. The Fifth Circuit in seaman needs special protection by courts. Harrington noted just that.28

In any event, vessel owners should try to avoid lengthy What Challenges are Left? legal battles (in a judicial forum) by designating that Certain fundamental challenges to the validity of a any claims as to the validity of the entire agreement contract as a whole pose the greatest risk to post- shall be determined in arbitration.29 As the United injury arbitration agreements. Post-injury arbitration States Supreme Court recently noted in New Prime agreements can be challenged just as all other contracts Inc. v. Olivera,30 ‘‘[u]nless a party specifically chal- may be challenged—for fraud, fraud in the inducement, lenges the validity of the agreement to arbitrate, both duress, incapacity, or overreaching. As noted above sides may be required to take all of their disputes— (n. 19) Section 2 of the FAA states ‘‘an agreement in including disputes about the validity of their broader writing to submit to arbitration an existing controversy contract—to arbitration.’’ All disputes about whether a arising out of such a contract...shall be valid, irrevoc- claim is arbitrable can be designated to the arbitrator, able, and enforceable, save upon such grounds as exist at except for the question of whether a contract falls under law or in equity for the revocation of any contract.’’25 the purview of FAA and is therefore enforceable.31 In other words, if the seaman was duped, and can prove However, for our purposes, that question has already it, or if he was drunk or high or there is some other been decided uniformly and repeatedly in many courts: public policy reason to invalidate the seaman’s agree- a post-injury agreement with a seaman, containing an ment, the contract can be struck down. For example, in In re Schreiber (another K-Sea Transportation case), the 28 New York Court of Appeals (New York’s highest court) The Court instructed the lower court on remand to determine whether the seaman lacked mental capacity and/or was was concerned that the seaman was misled by the intoxicated when he signed the agreement, but in so doing the language of the arbitration agreement into believing he Court noted that the seaman may nonetheless have ratified the would not have to pay filing fees. The arbitration clause (voidable) contract by cashing the checks. Harrington,602 noted that the company would advance up to $750 of the F.3d at 126. 29 arbitration filing fee, but the AAA filing fee turned out to Vane Line Bunkering, Inc. v. Hooper,2016U.S.Dist. LEXIS at *10-11, citing Buckeye Check Cashing, Inc. v. be $10,000. As such, the court (after rejecting all other Cardegna, 546 U.S. 440, 445 (2006) (compelling arbitration legal challenges to the arbitration agreement), held an and leaving challenges to the contract containing the arbitra- evidentiary hearing to determine whether K-Sea acted tion agreement as a whole for the arbitrator). in good faith or intentionally misled and induced 30 New Prime Inc. v. Olivera, 139 S. Ct. 532, 538 (2019). the seaman into signing the agreement.26 However, the 31 There may be some confusion that the New Prime case court noted that, under the FAA, the seaman bore the undercuts the strong federal policy in favor of arbitration. 27 I disagree. The Court merely held that whether a contract is burden to prove the agreement was invalid. removed from the FAA’s coverage under Section 1 (excluding certain contracts of employment) is an antecedent question for a court to determine, not an arbitrator. New Prime, 139 S. Ct. at 538 (determining whether the contract at issue, an agreement 24 In re Schreiber, 879 N.E.2d at 738 (noting the ward of the between a truck driver labelled an independent contractor and admiralty doctrine has shown some signs of erosion). a trucking company, was a ‘‘contract of employment’’ under 25 9 U.S.C. § 2. Section 1 of the FAA). The Court found the agreement to drive 26 was a ‘‘contract of employment’’ within Congressional intent, In re Schreiber, 879 N.E.2d at 739. because it was an agreement to perform work, whatever the 27 Interestingly, it appears the large AAA filing fee was also a label given to the worker by the company. The Court’s intent surprise to the vessel owner. See Barbieri, 566 F. Supp. 2d at was not to restrict the coverage of the FAA. The gravamen of 194-95 (noting company witnesses testified they did not know the opinion is that the courts must determine on their own what the AAA filing fee would be and noting the seaman failed whether the statutory authority to compel arbitration exists in to show the company intentionally misled him or acted in bad a given situation; that question cannot be delegated to an faith when negotiating the contract). arbitrator. 17 Benedict’s Maritime Bulletin 87 Second Quarter 2019 agreement to arbitrate any claims relating to his or her (or whatever the benefit) and agree to arbitrate, or he or injuries, falls under the purview of FAA, and federal she can receive just what the law requires the employer to courts have statutory authority to compel arbitration. provide, maintenance and cure, and sue for more later. Also, it should be clear any advanced wages received How to Do it Right: Some Best Practices to Implement would be credited against any future claim the seaman an Arbitration Program makes for lost wages. A shorter, rather than a long agreement, is better in my mind. It is certainly easier to argue I have simple guidance here—vessel operators should later that someone understood what he or she signed be up front and honest. They are giving a benefit to the when a contract is one page and has simple, direct seaman to get a benefit. Also, timing matters. This is not language. a time to do any ambulance chasing with an arbitration agreement to be signed in one hand and a check for Back to the personal element of an effective program. advanced wages in the other! Seamen should be given The risk manager should cultivate a reputation of time to treat and return home for recuperation. Thus, treating injured crew members fairly but firmly, some wage advances (or some other benefit) can be on behalf of the company. Logistically, when an unre- offered before an agreement is signed. A well-executed presented crewmember reaches maximum medical program will have one or two key people as the spokes- improvement and (hopefully) returns to work, the risk person for an arbitration agreement and for any future manager can bring him or her in to discuss settling all settlement. A cover letter explaining the agreement with their claims relating to their injuries. A face-to-face a blank wage/arbitration agreement can be mailed meeting is preferable and more likely to succeed. The or given to the injured seaman, to be followed up portion of the wages not advanced can be offered, along with a conversation with the company spokesperson. with another amount on top of that at the discretion of That person, usually the risk manager, should have a the risk manager. Some generosity should be exercised controlled and consistent message across the board so that crewmembers are encouraged to try to negotiate with all injured seamen. The person serving as the settlements on their own. For example, a $10,000 wage face of the company must be credible and candid, and loss representing one-third wages that were not provided available to answer all questions. As Alton Peralta,32 the in the advanced wage/arbitration agreement, plus former risk manager at K-Sea Transportation (‘‘K-Sea’’) another $10,000 on top of that, as a settlement for a (a party in three published opinions defeating challenges minor injury with a full recovery seems reasonable in to these agreements during his tenure), explained to exchange for the release all of the seaman’s Jones Act me, you cannot take the personal out of a personal and related claims.33 Companies can, of course, take a injury claim. harder line with injured Jones Act seamen, but the risk is that the injured crewmembers feel confused or pressured A simple way for a company representative to explain and consult a lawyer sooner rather than later or never. an arbitration agreement is to note the seaman is giving Even in a different risk management culture than up a public jury trial and judicial forum in favor of I propose, however, the use of post-injury arbitration a private hearing before a private arbitrator. Again, agreements can be tailored to the program. the company ‘‘face’’ of the arbitration agreement can candidly explain the company is offering a benefit over and above what the law requires for maintenance, because a private forum is better for the company. The seaman should understand the company gets some benefit. The seaman should also be told this is his 33 or her choice, he or she can elect advanced wages Settling with unrepresented Jones Act seamen is a quandary for vessel owners. As long as a detailed, red letter release is used (consult a maritime lawyer, please!), indicating things such as this unrepresented seaman can (i) read, (ii) understands he is giving up all his rights regarding the injury, (iii) had a chance to get counsel but chose not to, and other safeguards such as a video or audio recording of the execution are used as 32 Mr. Peralta is now a Marine Claims Manager with Crum & needed, a red letter release (using actual red print for certain Forster, in Jersey City, New Jersey. He is quick to credit items) with an unrepresented seaman should hold up against Thomas M. Canevari, Esq., of Freehill Hogan & Mahar, for challenge. The use of court reporters and/or video recording guiding K-Sea in its claims arbitration agreements program. the reading and signing of the agreement may also be prudent. 17 Benedict’s Maritime Bulletin 88 Second Quarter 2019

Bill Neubrand,34 the former risk manager at the marine arbitration. Ironically, then, the result of an arbitration transportation company Vane Brothers (‘‘Vane’’), for agreement program is very few actual arbitrations! example, reports they preferred to settle with repre- As Mr. Neubrand experienced, once a crewmember’s sented crewmen, to reduce the risk of a seaman being lawyer realized he or she could not beat the arbitra- able to overturn the release later under the heightened tion agreement, they would seek to negotiate a scrutiny courts give to releases with ‘‘wards of the settlement directly or request non-binding mediation. admiralty.’’ However, counsel representing Vane’s In Mr. Neubrand’s experience, then, plaintiff’s lawyers crew members, with minor exceptions, did not challenge simply do not like arbitration. the arbitration agreement. By the time Vane imple- Indeed, Mr. Neubrand has indicated that once Vane mented its program under Bill Neubrand in 2012, it was firmly established in the law that a post-injury ‘‘won’’ its first arbitration with a shockingly favorable agreement with a Jones Act seaman to arbitrate his ninety percent comparative fault finding against the personal injury claims is enforceable. K-Sea, another seaman in a case of very serious injuries, Vane was maritime transportation company, had won three cases not afraid of going to arbitration. Most readers can in 2007 and 2008 (Barbieri, In re Schreiber,and understand that the chances of a jury allocating ninety Terrebone), so plaintiff’s lawyers by and large stopped percent of fault to a severely injured, sympathetic 35 seaman are essentially nil. But a seasoned former challenging these agreements. judge, serving as an arbitrator, will objectively apply Since Vane prevailed on another legal challenge to post- tort law principles to assess if a seaman bears compara- injury arbitration agreements as recently as 2016,36 tive fault for his accident or injuries, and, if so, assign an other vessel operators should expect little legal chal- appropriate percentage of fault. This distinction between lenge to such agreements. Indeed, it seems plaintiff’s triers of fact probably explains why plaintiff’s lawyers lawyers were even dissuaded from taking claims from do not like taking Jones Act claims to arbitration. K-Sea’s crews. Mr. Peralta learned from plaintiff’s lawyers he knew well that they had been approached Not being afraid to walk away from a negotiation is a by K-Sea crewmembers to take their Jones Act case, powerful position. Having an arbitration agreement in place with a Jones Act seaman provides this confidence. but the lawyers instead advised the crewmembers to negotiate a settlement directly with K-Sea and Both Vane and K-Sea’s settlement figures for its Jones Mr. Peralta. Vane, as noted above, preferred its crew Act claims decreased significantly with arbitration members to have reasonable lawyers represent them to agreements in place. This should be music to defense work out a reasonable settlement with an air-tight counsel, vessel owners’, and marine insurer’s ears! release. Both approaches work, and each company Indeed, with an effective risk management program that will find the path that works best for it as it executes includes claims arbitration agreements, most injured the program. crew will sign the agreements, few claims will actually One point is worth emphasizing—with an effective go to arbitration, and a high percentage of claims can be post-injury arbitration agreement program in place, settled at favorable numbers. This is not a fairy tale. It was the experience of the former risk managers for two most injured claimants will choose to settle in lieu of large vessel operators, K-Sea and Vane, who had claims arbitration agreements in place for a long time and survived various legal challenges. The beauty of imple- 34 Mr. Neubrand currently lives in Baltimore, Maryland, and menting the program is that many vessel operators are he is affiliated with Dominion Maritime Adjusters, LLC. He already paying its injured crew advanced wages. For has spoken on this subject, and his experiences at Vane, before the American Institute of Marine Underwriters and the Inland them, then, there would be no additional cost to imple- Waters and Towing Committee of The Maritime Law Associa- ment this program. tion of the United States. He is available to help implement claims arbitration agreements into vessel operators’ risk management programs. Mr. Neubrand can be reached at bneu- Conclusion [email protected]. In sum, vessel operators facing Jones Act liability 35 The notable exception was Mr. Hooper in the 2016 Vane case, cited herein. should consider implementing a policy of offering injured seamen a financial incentive to agree to arbitrate 36 Vane Line Bunkering, Inc. v. Hooper, No. 16-21348, 2016 U.S. Dist. LEXIS 184372 (S.D. Fla. July 6, 2016). any claims arising from the incident. The strong federal 17 Benedict’s Maritime Bulletin 89 Second Quarter 2019 policy in favor of arbitration established by the FAA their arbitration agreements streamlined arbitration makes such agreements almost universally enforced. procedures of chosen arbitration services to further Indeed, a seaman who has signed an arbitration agree- control the costs of defense at arbitration. ment faces an uphill battle to fight a motion to compel arbitration, and absent substantial proof of fraud, deceit, There are not many legal strategies to reduce Jones Act or overreaching, courts will compel arbitration. The exposure and P&I premiums. The use of post injury arbitration agreements is a largely untapped method ‘‘wards of the admiralty’’ arguments to support invalidating post-injury agreements with seamen have fallen vessel operators can do so. It does not exploit seamen on deaf ears, because the seaman is not being asked to or take away any of their substantive rights. But it does turn the tables on plaintiff’s lawyers by taking away their contract away any of his substantive rights. An agreement to arbitrate is akin to a forum selection clause, ace in the hole—a risk of a jury’s verdict—replacing it affecting procedural rather than substantive rights. with a binding ruling by a rationale trier of fact, an Thus, unlike in many other contexts in which marine arbitrator. Forget the myth; post-injury arbitration agree- employers find themselves at a disadvantage defending ments are enforceable under the FAA and courts have claims by their injured seamen, the employer with a recognized this time and again. If for some reason a signed post-incident claims arbitration agreement has court fails to compel arbitration, the operator is no worse off than if it had no agreement. Many vessel an upper hand. This strategy eliminates the risk posed by a jury trial, in favor of a binding, non-appealable operators already offer wage advances above the main- arbitral decision. With costs of defending Jones Act tenance rate without any quid pro quo, thus wasting a wonderful opportunity to reduce their Jones Act liability claims averaging in the six-figures, and with Jones Act liability exposure also at increasingly high levels, the exposure. What is there to lose? Get started on the road to savings and a more rationale Jones Act defense benefit of avoiding protracted, risky Jones Act litigation 37 can be substantial. Employers can and should adopt in program!

37 Of course, I would be happy to work with companies wanting to implement a program of post-injury claims arbitration agreements. My law partner, Dave Ventker, and I are also happy to speak to stakeholders on this subject, such as vessel operator groups and marine underwriters and claims adjusters. I can be reached at [email protected]. 17 Benedict’s Maritime Bulletin 90 Second Quarter 2019

RECENT DEVELOPMENTS

Admiralty Jurisdiction allegedly breached was not alleged to be a maritime contract, which would establish admiralty jurisdiction. The in personam actions were brought pursuant to state Allvette LLC v. Arete Automobili Sp.z.o.o., 2019 U.S. law, thus, the Court did not have original jurisdiction. Dist. LEXIS 31663 (S.D. Ga. Feb. 27, 2019) Submitted by JAP Plaintiff filed a complaint seeking an in rem action for the arrest of a certain vehicle pursuant to Rule D of the Federal Rules of Civil Procedure Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Brown v. Fairhope Yacht Club, 2019 U.S. Dist. LEXIS Actions, and seeking damages and other remedies for 9306 (S.D. Ala. Jan. 17, 2019) a state law breach of contract claim. No Defendant Plaintiffs in these consolidated actions filed suit against answered the Complaint nor appeared in the action. the Fairhope Yacht Club for wrongful death and After Plaintiff moved for a default judgment, the personal injuries arising out of the defendant’s hosting Court held a hearing in which it explained the necessity of the 2015 Dauphin Island Race, a sailboat race. of following the proper procedure and notice require- Due to predicted bad weather on the morning of the race, ments for obtaining a default judgment and that Plaintiff the yacht club initially canceled the race, but it later had the burden of establishing that the Court has juris- rescinded that cancelation although the start time was diction over this action. pushed back. While the race was in progress, a series of Plaintiff’s Complaint stated that the Court has subject thunderstorm and severe weather warnings were issued matter jurisdiction over its claims pursuant to 28 U.S.C. by the National Weather Service, and the Coast Guard § 1331 and pendent jurisdiction over the state law informed the race committee of the potential for severe claims. It appeared from the Complaint that Plaintiff weather. Severe weather entered Mobile Bay, and one contended that the court has admiralty jurisdiction, wind gust of at least 73 miles per hour was recorded. thus vesting subject matter jurisdiction in the Court The race committee did not share any weather warnings under Section 1331. The Court found that Plaintiff has over the radio despite their awareness of those condi- not established that its claims arise under § 1331, and tions. When the bad weather struck, most of the race thus that section did not vest the Court with subject participants were still on the water. 10 boats sank. 40 matter jurisdiction. The Court found the more appro- people fell into the water, and six of them died. Many priate statute that could vest the Court with subject others were injured. matter jurisdiction is 28 U.S.C. § 1333. The defendant moved to dismiss the complaints Plaintiff’s in rem claim and its in personam breach of asserting that the district court lacked admiralty jurisdic- contract claim were intertwined such that it sought tion. The motions were assigned to a United States possession of a certain vehicle as a remedy for Defen- Magistrate Judge who issued a report recommending dants’ alleged breach of contract to sell Plaintiff said that the district court deny the motion to dismiss. vehicle. Nevertheless, whether Plaintiff’s basis for The court found that the locality test was satisfied invoking the Court’s admiralty jurisdiction was couched because the plaintiffs alleged that some negligent acts in its in rem claim or breach of contract claim, Plaintiff occurred on navigable waters because the race officials had not yet established that the Court has admiralty failed to provide any warnings of impending weather jurisdiction. while the officials were on a vessel in Mobile Bay. Regarding the breach of contract claim, ‘‘[t]o support Further, the court found the locality test satisfied admiralty jurisdiction in a breach of contract action, where the injuries took effect on water even if the negli- the underlying contract must ordinarily be a maritime gent act occurred on land. contract.’’ In the Complaint, the contract that was 17 Benedict’s Maritime Bulletin 91 Second Quarter 2019

The court further found that an accident involving Citing Bowman v. Pan American World Services, sailing and over 100 sailboats across a commercial ship- Inc., 704 F. Supp. 695, 696 (E.D. La. 1989), the Court ping channel had a potentially disruptive effect on acknowledged that the SIAA authorizes suit against the maritime commerce. Finally, the court found that the United States in three situations. First, where there is an navigation of vessels on navigable waters, even sail- injury is caused by a vessel owned by the United States. boats in races and pleasure boating, was a traditional Second, where there is an injury caused by a vessel maritime activity. Thus, there was a substantial relation- operated by the United States. Third, where there is an ship between the sailboat race and traditional maritime injury caused by a vessel operated for the United States. activity. MMA is one of six federally recognized state maritime Submitted by KMM academies. In support of academies like MMA, the Maritime Administration (‘‘MARAD’’), an agency within the Department of Transportation, provides Maine Maritime Academy v. Fitch, 2019 U.S. Dist. direct payments, tuition assistance, and assistance LEXIS 25082 (D. Me. Feb. 15, 2019) with instruction and course development. 46 U.S.C. §§ 51501-51511. In addition, the Secretary of Transpor- This dispute arises out of injuries allegedly suffered by tation is authorized to provide vessels to state maritime Janis Fitch while working aboard the Maine Maritime academies for use as training ships and to provide Academy (‘‘MMA’’) Training Ship, the STATE OF limited fuel assistance. MAINE. MMA argued that it is an agent of the United States, as a MMA first filed a complaint seeking a declaration, matter of law, because the United States owns the pursuant to 28 U.S.C. § 2201, that it is not obligated training ship. It further contended that it qualified as to pay maintenance and cure to Fitch, and, alternatively, an agent of the United States because the United States a declaration that Sodexo is obligated to indemnify retains overall direction and control of the vessel for the MMA for any liability for Fitch’s injury. Sodexo purpose of training officers in the merchant marine of the provided food services to the MMA, both on-campus United States. and aboard the training ship. Sodexo was Fitch’s immediate employer. On the other hand, the United States and Fitch countered that government ownership of the training ship is not Fitch answered MMA’s complaint, and filed a counter- enough to make MMA an agent of the United States as claim against MMA and a cross-claim against Sodexo a matter of law. Fitch and the United States further for Jones Act negligence, unseaworthiness, and mainte- contended that MMA is not an agent of the United nance and cure. Sodexo filed a cross-claim against MMA. States because MARAD did not give consent for MMA Fitch then amended her cross-claim and counterclaim to to act as its agent, MARAD did not exercise sufficient add a third-party claim against the United States. control over MMA’s operation of the training ship, and MMA moved to dismiss Janis Fitch’s counterclaim for MMA used the training ship for its sole benefit. lack of subject matter jurisdiction and for failure to state The Court disagreed with MMA’s argument that the a claim upon which relief can be granted. MMA also regulations support its claim that MARAD implicitly moved for judgment on the pleadings. consented to have MMA act as its agents. The Court Because this case was governed by the Suits in Admir- noted the MARAD Agreement was silent as to any alty Act (‘‘SIAA’’), which waives the sovereign agency arrangement. While the United States has an immunity of the United States for certain cases in admir- overarching interest in the cultivation of a competent alty, the central question before the Court was whether merchant marine, the Court held that the MMA went MMA is an agent of the United States for purposes of too far in its contention that MMA, by operating the the SIAA’s exclusivity provision, which provides that a training ship, was doing the Government’s business plaintiff, who can sue the United States under the SIAA, and acting on MARAD’s behalf. Lastly, the Court cannot also bring an ‘‘action arising out of the same concluded that the venture as a whole did not support subject matter against the officer, employee, or agent of a finding that MMA is an agent for purposes of the the United States.’’ 46 U.S.C. § 30904. SIAA. Because MMA is not an agent of the United 17 Benedict’s Maritime Bulletin 92 Second Quarter 2019

States under the SIAA, the court declined to dismiss regulation that imposes a mandatory duty; (2) that statute Fitch’s counterclaims against MMA. or regulation involves maritime safety; and (3) the injury suffered is of the type that the statute or regulation sought Submitted by SPB to protect.

Applying these rules, the Eighth Circuit agreed with the Allision lower court that the Coast Guard’s order did not fall within the Pennsylvania Rule and thus Ingram Barge did not rebut the presumption of its negligence under Dakota, Minnesota & Eastern Railroad Corporation v. the Oregon Rule. Specifically, the Eighth Circuit Ingram Barge Company, 2019 U.S. App. LEXIS 8539 reasoned that the Truman-Hobbs Act is a funding (8th Cir. 2019) statute and not directly related to maritime safety. But This case involves the interplay between the Oregon that did not end the analysis. The Eighth Circuit further Rule, the Pennsylvania Rule, and the comparative reasoned that the Oregon Rule and Pennsylvania Rule fault regime after an allision on the Mississippi River. both relate to issues of duty and breach, not to causation In 1880, the Secretary of War authorized construction of or percentage of fault. Thus, while Ingram Barge cannot the Sabula Railroad Bridge across the Mississippi River avoid liability under those longstanding rules, DM&E’s between Illinois and Iowa. As constructed, the bridge failure to abide by the Coast Guard’s order may still be provided vessels a 154-foot-wide channel of navigation. relevant to a factfinder when apportioning fault and In 1996, the Coast Guard issued an order to alter the related damages. Sabula Railroad Bridge under the Truman-Hobbs Act. In conclusion, the Eighth Circuit held that the lower The order declared the bridge to be an ‘‘unreasonable court erred by ruling that DM&E cannot be compara- obstruction to the free navigation of the Upper Missis- tively negligent for the allision because it had no sippi River,’’ and directed the then-owner to expand it to affirmative legal duty to widen the Sabula Railroad at least 300 feet in width. As of the time of this dispute, Bridge from 154 feet to 300 feet. Specifically, without all owners, including Plaintiff-Appellee (‘‘DM&E’’), the opining on how fault should be apportioned, the Eighth current bridge owner, have ignored this order and the Circuit held that the lower court may have based bridge remains its original width. its factual finding that Ingram Barge was 100% at On April 24, 2015, towboat M/V Aubrey B. Harwell fault on that erroneously stated rule of law. It thus struck the Sabula Railroad Bridge while pushing vacated the decision and remanded the case back to empty barges upriver. In response, DM&E sued Defen- district court. dant-Appellant Ingram Barge Company for negligence Submitted by VCR in the United States District Court for the Northern District of Iowa. After a bench trial, the lower court found Ingram Barge negligent for the allision and stated COGSA that DM&E cannot be comparatively at fault because the Coast Guard’s order did not constitute a legal duty to widen the channel under the Pennsylvania Rule. Bristow US LLC v. Wallenius Wilhelmsen Logistics, AS, The issue before the Eight Circuit became whether a 2019 U.S. Dist. LEXIS 32320 (S.D.N.Y. Feb. 28, 2019) barge owner’s failure to meet the Pennsylvania Rule Helicopter owner filed a maritime action against ship precludes the ability to prove a bridge owner’s compara- owner seeking to recover damages to a helicopter, tive fault during an allision. The appellate court held it which occurred while it was being loaded onto the vessel. does not. In arriving at this holding, the Eighth Circuit The vessel owner moved for partial summary judgment began by explaining the Oregon Rule: there is a rebut- table presumption that barge owner breaches its duty of on the issue of whether damages were limited to $500 care when it allides with a stationary object. Next, in by the United States Carriage of Goods by Sea Act (‘‘COGSA’’). pertinent part, the court explained the Pennsylvania Rule: the barge owner may rebut the Oregon Rule presumption The United States District Court for the Southern if it shows that the bridge owner (1) violated a statute or District of New York held that the helicopter owner’s 17 Benedict’s Maritime Bulletin 93 Second Quarter 2019 damages were limited to $500 regardless of whether the In the Eleventh Circuit, constructive notice is estab- helicopter qualified as one ‘‘package’’ or one ‘‘customary lished when the hazard exists for a sufficient period of freight unit’’ within the meaning of COGSA. time that a defendant should have eliminated the danger. Keefe v. Bahama Cruise Line, Inc., 867 F.2d 1318, 1322 The Court found that this holding was clear from the (11th Cir. 1989)) (‘‘Because all agreed that [defendant] face of the bill of lading. Under ‘‘No. of units or had not been put on actual notice of the danger, the packages,’’ and alongside the goods described as crucial question was whether the shipowner ought to ‘‘AW139 CIVIL HELICOPTER, USED,’’ it recites have known of the peril to its passengers, the hazard ‘‘1.’’ The bill of lading also listed three other units or having been present for a period of time so lengthy as packages, two of which consisted of a ‘‘MAIN ROTOR to invite corrective measures.’’); Erickson v. Carnival BLADE BOX,’’ and the last of which consisted of a Cruise Lines, Inc., 649 So. 2d 942, 943 (Fla. 3d DCA ‘‘HORIZONTAL STABILIZER CRATE.’’ Below, and 1995) (constructive notice to shipowner of defective summing up, the bill of lading recited, following a line condition requires that defective condition existed reading ‘‘Total no. of containers or packages received by aboard the ship for sufficient interval of time to invite Id. the Carrier in words,’’ the response: ‘‘Four Unit(s).’’ corrective measures). The Court found that this this made clear that the helicopter was a single unit. In evidence was surveillance footage showing several crewmembers walking in the area where Plaintiff Submitted by SPB slipped. The court stated that while this could certainly indicate that the substance was undetectable — or, contrary to Plaintiff’s claim, not present whatsoever — Cruise Lines the law required that the court draw all reasonable infer- ences in Plaintiff’s favor as the non-moving party.

Underwood v. NCL (Bah.) Ltd., 2019 U.S. Dist. LEXIS The court denied Defendant’s motion because Plaintiff’s 23585 (S.D. Fla. Feb. 12, 2019) description of events, coupled with the surveillance footage showing the area where the fall occurred in This action arose when Plaintiff slipped and fell on the fifteen minutes leading up to the incident, estab- Defendant’s cruise ship in the area of a self-serve lished a genuine issue of material fact as to whether water station in a bar. Defendant moved for summary Defendant needed to take corrective action and elimi- judgment arguing that Plaintiff failed to establish that nate the hazardous condition. Defendant had been placed on notice about the alleged risk-creating condition. Plaintiff, in opposition, con- Submitted by SMM tended that a triable issue of material fact existed concerning the presence of water on the deck, claiming Damages that the record as a whole established that the puddle that allegedly caused her fall existed for a period of time that could lead a reasonable factfinder to determine Defendant had constructive notice of the hazardous Barrios v. Centaur LLC, 2019 U.S. Dist. LEXIS 16990 condition. (E.D. La. Feb. 1, 2019) In order to succeed on her claim against Defendant Defendant Centaur was hired by United Bulk Terminals under general maritime law, Plaintiff had to prove: to build a concrete containment wall around its dock (1) a dangerous condition existed that caused the facility. Plaintiff Barrios was a member of the construc- claimed injury; (2) Norwegian was on actual notice of tion crew employed by Centaur. Centaur leased a barge the dangerous condition; and (3) if Norwegian did not to assist in the construction project. United Bulk Term- have actual notice, it was on constructive notice that the inals hired River Ventures to provide a crew boat to dangerous condition existed for an interval of time suffi- ferry Centaur workers and equipment from the parking cient to allow for corrective action. The sole issue before lot to the area of the dock where they would work. On the court was whether or not Norwegian had been placed January 25, 2016, the Centaur crew loaded a portable on constructive notice about the alleged risk-creating generator on to the crew boat for transportation to the condition. barge. Plaintiff was involved in lifting the generator 17 Benedict’s Maritime Bulletin 94 Second Quarter 2019 from the crew boat to the barge. He had one foot on each and its Trustee (collectively ‘‘OW Bunker’’) and NCL vessel when they began to separate from each other. (Bahamas) Ltd. (‘‘NCL’’) concerning a sale of bunkers Plaintiff feel into the water, pulling the generator on in October of 2014. top of him and sustained serious injuries. After NCL and OW Bunker executed the October At trial, the court found that the captain of the crew boat 2014 contract for the bunkers supply, OW Bunker did not moor the crew boat to the barge, but was subcontracted with OW Bunker Malta, a fellow member attempting to hold the vessel against the barge using of the O.W. Bunker Group, to provide the bunkers for the his engines. The court found this was negligent and NORWEGIAN SPIRIT. In turn, OW Bunker Malta that tying off the crew boat to the barge would have subcontracted with EKO Industrial and Commercial prevented the separation. The court further found the Petroleum Company (‘‘EKO’’), to be the physical supplier captain’s negligence to be the sole cause of the accident. of the bunkers. Three separate contracts controlled the It declined to assess any fault to Centaur for failing to transaction: NCL contracted with OWB USA, which train its crew in proper lifting techniques. The court also contracted with OWB Malta, which contracted with EKO. found that plaintiff’s straddling the two vessels was EKO delivered the bunkers to the NORWEGIAN not negligent because he had no reason to believe he SPIRIT. EKO invoiced OWB Malta, and OWB USA captain could not hold the vessel steady as he had done invoiced NCL, calling for payment within 30 days of on previous occasions. the invoice. Before payment became due, O.W. Bunker The court found plaintiff had significant injuries Group became insolvent, and OW USA filed for bank- including vertigo, dizziness, and hearing loss because ruptcy. EKO threatened arrest of the NORWEGIAN of the accident. Plaintiff had already undergone cervical SPIRIT if it was not paid for the bunkers. As the surgery and additional cervical surgery was likely in the NORWEGIAN SPIRIT was on a cruise with thousands future. The court found plaintiff could return to light of passengers, NCL acquiesced to EKO’s demand for and sedentary work that would earn much less than payment. OW USA’s liquidating trustee demanded his previous employment. The court awarded plaintiff payment for the bunkers. When NCL refused OW damages as follows: USA’s demand, the trustee notified NCL that it would seek London Arbitration. NCL brought this action seeking to enjoin the London Arbitration and a declara- Past medical expenses: $289,301.68 tion that NCL’s debts to OW USA were satisfied. Future medical expenses: $587,509.87 NCL contended that EKO caused the forum selection Past lost wages: $65,647 clause in the OW USA terms and conditions to be varied by insisting that its terms and conditions be applied to Future lost earnings: $1,140,636 the transaction. The terms and conditions insisted by General damages: $975,000 EKO called for any disputes to be adjudicated in Loss of consortium: $250,000 Piraeus, Greece. Total: $3,308,094.55 The District Court found that NCL was likely to succeed on the merits because EKO insisted that its terms and conditions applied to the transaction as OWB Malta was Submitted by KMM aware of EKO’s standard terms and conditions, and agreed to them by accepting OWB Malta’s Order. As such, the Court found that Clause L.4 of OW USA’s Forum Selection Clause terms and conditions would be triggered to vary the forum selection clause. The District Court granted a preliminary injunction of the London Arbitration. NCL (BAHAMAS) Ltd. v. O.W. BUNKER USA, INC.,745 Fed. Appx. 416 (2d Cir. 2018) OW USA timely appealed to the United States Court of Appeals for the Second Circuit. The United States District Court for the District of Connecticut entered a preliminary injunction enjoining Two provisions were of particular importance to this arbitration in London between Appellants OWB USA appeal. First, the O.W. Bunker terms and conditions 17 Benedict’s Maritime Bulletin 95 Second Quarter 2019 specified that English law governed the contract, and admiralty jurisdiction and file suit in federal court. The that OW Bunker could refer disputes under the contract court noted plaintiff’s right to bring the case under the to arbitration in London. Second, the terms and condi- savings to suitors clause, depriving the federal court of tions provided that the forum-selection clause could jurisdiction. be varied. Submitted by KMM To determine whether NCL was likely to succeed on the merits and to resolve whether the forum-selection clause in OW Bunker’s terms and conditions was varied, the Jones Act Second Circuit looked to whether EKO (1) insisted that its terms and conditions applied; and, (2) insisted that its terms and conditions applied to NCL specifically. Lomax v. Marquette Transportation,2019U.S.Dist. LEXIS 941 (E.D. La. Jan. 3, 2019) The Second Circuit concluded that the District Court’s factual findings regarding EKO’s insistence were insuf- Plaintiff, Marcus Lomax, was a Jones Act seaman ficient to resolve the dispute because there were no injured aboard his employer’s vessel when he was findings demonstrating that EKO’s terms and conditions struck in the face by a grinder while grinding an over- were requirements. The Second Circuit held that the head deck. The matter proceeded to a bench trial, and the District Court could not hold that NCL was likely to district court issued its Findings of Fact and Conclusions succeed on the forum selection clause issue without of Law in the matter. The court noted that plaintiff was such a finding of insistence. A preliminary injunction using a 13-pound grinder on the underside of the over- was therefore not warranted. head deck with his arms extended above his head. Although plaintiff was provided a face mask to wear The Second Circuit vacated the preliminary injunction while doing this work, he did not wear it. When the by the District Court, and remanded the matter to grinder hit a rust pocket, plaintiff lost control of the consider whether EKO insisted that its terms and condi- grinder, and it fell back and hit plaintiff in the face, tions apply to NCL. knocking him to the ground. Submitted by SPB Plaintiff’s expert testified that the grinder used by plaintiff was too heavy and awkward to use in overhead work. In the expert’s opinion, a smaller grinder should Siliakus v. Carnival Corp., 2019 U.S. Dist. LEXIS have been used. The defendant had prohibited use of 14097 (S.D. Fla. Jan. 28, 2019) smaller grinders because there were issues with the Plaintiff was a passenger on defendant’s cruise ship. Her smaller grinders operating above their rating capacity, ticket included a forum selection clause requiring that but plaintiff’s expert said that equipment could be any suits against defendant be filed in federal court in purchasedtoremedythatissue. The district court Miami or in state court if the federal court lacked subject concluded defendant was negligent in not having matter jurisdiction. Plaintiff filed suit for injuries provided a more appropriate tool to complete the work allegedly sustained in state court in Miami alleging at hand. The court further found the vessel to be unsea- that her complaint was ‘‘at law’’ and ‘‘in personam’’ worthy because use of the overhead grinder was unsafe pursuant to the savings to suitors clause. She also method of work. noted that there was no diversity of citizenship. Defen- The court further found plaintiff negligent for failing to dant removed the case to federal court based on the wear a face mask. The court found that plaintiff would mandatory forum selection clause. Plaintiff moved to not have sustained injuries to his mouth if he had worn a remand to state court. face mask, although the court noted that a face mask The district court granted the motion to remand. The would not have prevented damage to plaintiff’s back court noted that the savings to suitors clause allows and neck. The court further noted that plaintiff failed plaintiff to bring an action in state court and that the to exercise stop work authority to report unsafe equip- forum selection clause cannot confer subject matter ment and did not request alternative tools to do the work. jurisdiction on a federal court. The court found that The court apportioned 75% of the fault to defendant and plaintiff was not required to invoke the district court’s 25% to the plaintiff. 17 Benedict’s Maritime Bulletin 96 Second Quarter 2019

As a result of the accident, plaintiff needed oral surgery, up in court. The court found that the fact that a lien is extractions, implants, and bone grafting. His treating barred by laches does not give rise to a claim for neurosurgeon also testified that plaintiff would need a wrongful arrest because the lienholder has a right three-level lumbar facet fusion in the future. The court to determine whether laches applies. The court also further found plaintiff to be capable of returning to declined its inherent authority to sanction the plaintiff sedentary work. and would not second guess plaintiff’s litigation strategy because it was not ‘‘obviously vexations or In summary, the court awarded plaintiff the following wanton.’’ Thus, the court denied the motion for damages damages, reduced for his contributory negligence: for wrongful arrest.

Past earnings loss: $138,835.50 Submitted by KMM Loss of future earning capacity $318,106.64 Future medical expenses: $65,250 LHWCA General damages: $112,500 Total: $634,692.14 Patton v. United States Department of Labor, 2018 U.S. App. LEXIS 35260 (2d Cir. Dec. 17, 2018) Submitted by KMM Pro se Petitioner William Patton (‘‘Patton’’), sought review of an order of the United States Department of Labor Benefits Review Board (the ‘‘Board’’) affirming the Laches denial of Patton’s claim for disability and medical benefits under the Longshore and Harbor Worker’s Compensation Act (‘‘LHWCA’’), 33 U.S.C. § 901 et seq., and the World Fuel Services (Singapore) PTE v. M/V Varesia, dismissal of his LHWCA discrimination claim. 2019 U.S. Dist. LEXIS 8873 (E.D. La. Jan. 18, 2019) The United States Court of Appeals for the Second In 2012, plaintiff contracted to provide fuel to the defen- Circuit affirmed the Board’s order and denied the peti- dant’s vessel. The vessel’s charterer paid part of the tion for review. Regarding Patton’s claim for disability invoice and then went into bankruptcy in Germany. benefits for a work-related hernia injury he suffered in Plaintiff did not participate in the bankruptcy. In 2015, March 2002, which accrued no later than the date of his plaintiff sent a letter to the vessel’s owner demanding surgery in November 2003, he was required to seek payment for the fuel. Another letter was sent a year later, benefits under the LWHCA before November 2004 and plaintiff attempted to have the vessel arrested in because claims under the LHWCA are subject to a Australia. Finally, in late 2016, plaintiff filed a complaint one-year statute of limitations. However, the evidence for arrest of the vessel but waited several weeks until it established that Patton did not file his disability claim requested service of the warrant of arrest just before the until April 2008, well after the one-year limitations vessel was scheduled for departure. The owner moved to period expired. Thus, the Appellate Court held that the dismiss the arrest as barred by laches given the lapse of administrative law judge’s (‘‘ALJ’’) correctly concluded time between the provision of fuel and arrest of the that Patton’s claim for disability benefits for a hernia vessel. The district court granted the motion. The plaintiff injury was untimely. appealed, and the Fifth Circuit affirmed the finding that The Second Circuit also found that the ALJ was correct the claim was barred by laches. that the LHWCA’s tolling provision did not apply as The vessel owners then moved the district court for the claim was time barred. Under 33 U.S.C. § 930(f), damages for wrongful arrest of the vessel arguing that the limitations period for filing a claim for benefits is plaintiff acted in bad faith by obtaining the warrant and tolled if the employer ‘‘has been given notice’’ or ‘‘has then delaying service of the warrant until just before the knowledge’’ of the claimed injury and ‘‘fails, neglects, vessel’s scheduled departure. The district court found or refuses to file’’ a particular report. The Second Circuit that there was a bona fide dispute over the validity of noted that, while Patton’s employer did not file the the lien and a legitimate belief that the lien would stand required report until May 2007, substantial evidence 17 Benedict’s Maritime Bulletin 97 Second Quarter 2019 supported the ALJ’s finding that the employer did not he was performing beyond mere suggestion of details or know Patton suffered a work-related injury until that cooperation; (2) Plaintiff was performing Fieldwood’s time. Thus, Section 930(f)’s tolling provision was work; (3) there was an agreement, understanding, or never triggered. meeting of the minds between Waukesha and Field- wood; (5) Waukesha did not terminate its relationship Further, the Second Circuit concluded that the ALJ’s with Plaintiff prior to the incident made the basis of this denial of disability benefits for chronic obstructive lawsuit; (6) Fieldwood furnished the tools and place for pulmonary disease (‘‘COPD’’), and an alleged work- Plaintiff’s performance; (7) Plaintiff did not work for related psychological injury was supported by substan- Fieldwood for a considerable length of time; (8) Field- tial evidence. Regarding Patton’s COPD, the ALJ gave wood did not have the right to discharge Plaintiff; substantial weight to the opinions of two doctors, both and (9) Fieldwood did not have the obligation to pay of whom concluded that Patton’s COPD was unlikely to Plaintiff. have been caused or aggravated by his employment. As to Patton’s alleged psychological injury, while there was The court held that Plaintiff was Fieldwood’s borrowed conflicting evidence provided by Patton’s doctor, a employee and therefore Fieldwood could invoke the general practitioner with no expertise in psychology, exclusive remedy provisions of the LHWCA to bar the Second Circuit agreed that the ALJ was entitled to Plaintiff’s tort action. Since the jury found that Field- rely on medical evidence suggesting that Patton suffers wood’s co-defendants were not negligent, the Court from an anxiety disorder that manifested well before he rendered judgment for the Defendants. began working for his current employer. Submitted by SMM Finally, the Second Circuit found that the ALJ properly dismissed Patton’s LHWCA discrimination claim. Patton failed to establish a prima facie case of discrimi- Limitation of Liability nation. Accordingly, the Second Circuit found that the ALJ properly dismissed Patton’s discrimination claim. In re Brizo, LLC, 2019 U.S. Dist. LEXIS 25553 Submitted by SPB (S.D. Fla. Feb. 19, 2019) Petitioner, Brizo LLC, instituted a limitation of liability Raicevic v. Wood Grp. PSN, Inc., et. al., 2019 U.S. Dist. action in the United States District Court for the LEXIS 24114 (S.D. Tex. February 14, 2019) Southern District of Florida in connection with an incident involving a scuba diver cleaning a vessel hull. This action arose when Plaintiff slipped and fell while Subsequent to filing suit, five claimants, including working as a production technician on a fixed offshore Urielil Carbajal and Rosalia Ixba, as personal represen- drilling platform owned by Fieldwood. At the time of tatives of the estate of Luis Ixba, filed claims. Claimants his injury, Plaintiff was working pursuant to a Master Carbajal and Ixba moved to stay the case before the Services Contract (MSA) between his employer, Court so that they could proceed against Brizo LLC in Waukesha Pearce, and Fieldwood. Fieldwood argued a state court action. Other claimants, Eastern Marine and that Plaintiff was a borrowed employee when he was Zachary Staggs, opposed the Motion to Stay. The hurt and thus Plaintiff’s lawsuit was barred under the Southern District of Florida denied Claimants Motion exclusive remedy provisions of the LHWCA. to Stay on two grounds. First, the fact that all of the Plaintiff argued that Fieldwood failed to ‘‘secure claimants did not agree to the Motion to Stay required payment of compensation’’ within the meaning of the it to be denied based on precedent from the United States LHWCA and therefore could not assert the borrowed- Court of Appeals for the Fifth Circuit. Second, some of employee defense. The Court found that Fieldwood the claimants asserted an entitlement to attorney’s fees, secured payment of compensation under the LHWCA which meant that such claimants may recover more from by purchasing an LHWCA workers’ compensation the vessel owner than the limitation fund. Case law insurance policy. provided that in limitation of liability actions in which The jury’s pertinent findings were follows: (1) Field- there is a claim for attorney’s fees, allowing some clai- wood did not have control over Plaintiff and the work mants to proceed with their separate state court actions 17 Benedict’s Maritime Bulletin 98 Second Quarter 2019 would be inconsistent with the purpose of the Limitation contract with Central Boat Rentals to reimburse Act. Therefore, the Court denied Claimants’ Motion to all cure expenses. The court found that the parties’ Stay without prejudice and provided Claimants with the counsel and claims adjusters discussed a reimburse- opportunity to reach a mutual agreement to stay. ment schedule but that there was no evidence that 4-K Marine had obligated itself to reimburse payments Submitted by JAY for the back injury. Submitted by KMM Maintenance & Cure

Dukes v. Crosby Tugs, LLC., 2019 U.S. Dist. LEXIS In re 4-K Marine, L.L.C. v. Enterprise Marine Services, 24698 (E.D. La. Feb. 15, 2019) L.L.C. (In re 4-K Marine, L.L.C.), 914 F.3d 934 Plaintiff, Joseph Dukes, allegedly injured his back (5th Cir. 2019) while working on a vessel for Defendant Crosby Tugs, Enterprise Marine owned and operated a tug boat LLC. Dukes sued Crosby Tugs under the Jones Act that was pushing a flotilla of barges on the Mississippi for injuries associated with this alleged accident. In his River. The tug made contact with another tug owned original employment application with Crosby Tugs, by 4-K Marine and operated by Central Boat Rentals. Dukes denied that he ever suffered a back injury; Two members of the crew of the second tug were however, Dukes later testified that he injured his back allegedly injured in the allision. Central Boat Rentals in a parachuting accident and suffered recurrent and 4-K Marine filed a petition for limitation of liability. low back pain prior to working at Crosby Tugs. Based The two crew members filed claims as did Enterprise on Dukes’s failure to make these disclosures in his Marine. employment application, Crosby Tugs moved for partial summary judgment claiming that it could deny Central Boat Rentals filed a counterclaim against Enter- maintenance and cure benefits under the McCorpen prise seeking to recover amounts Central Boat Rentals defense. paid out as cure to one of the injured members of the crew. Enterprise had already reimbursed some cure The United States District Court for the Eastern District payments and maintenance payments, but it refused to of Louisiana granted Crosby Tugs’s partial summary reimburse payments for back surgery. Only the counter- judgment motion. The court applied the facts of the claim proceeded to trial. case to the three prongs of the McCorpen defense, i.e., (1) the seaman concealed or misrepresented medical At trial, the district court found the seaman’s back facts; (2) such facts were material to the employer’s problems predated the allision and that he had withheld decision to hire; and (3) a causal link existed between issues about his pre-existing medical conditions and the pre-existing disability that was concealed and the medications. Thus, the court held that the seaman was alleged injury during the voyage. Dukes’s failure to not entitled to payment for the back surgery and that provide his pre-existing condition on his employment there was no right of reimbursement owed to Central application was concealment and such a concealment Boat Rentals. The court also refused to order Central was material because Crosby Tugs may have declined Boat Rentals to reimburse 4-K Marine for amounts it to hire Dukes for a physical job had it known of such a had received in reimbursement. Central Boat Rentals pre-existing injury. The court noted that causation was a appealed the court’s findings. ‘‘closer question’’ because Dukes’s pre-existing injury The court concluded that no right of reimbursement for was a muscle strain whereas the alleged injury in the the back surgery was owed because the court found the lawsuit was a disc herniation. In relying on past cases, seaman’s injury did not result from the allision of the tug the Court determined that the pre-existing injury was boats. The court found that Central Boat Rentals could causally related to the alleged injury in the lawsuit. have investigated the claim for cure and could have Therefore, the Court granted Crosby Tugs’s partial refused payment given the defenses available to a main- summary judgment motion. tenance and cure claim. The court further found there Submitted by JAY was no evidence that 4-K Marine had entered into a 17 Benedict’s Maritime Bulletin 99 Second Quarter 2019

Martin v. L & M Botruc Rental, LLC, 2019 U.S. Dist. expert or to submit separately the names of three poten- LEXIS 1398 (E.D. La. Jan. 3, 2019) tial experts for the court to consider. Plaintiff was a seaman working on defendant’s vessel. Submitted by KMM While attempting to attach a mud hose to the crane hook on an adjacent jack-up drilling rig, he was struck in the back by the crane hook. Plaintiff filed a motion Marine Insurance for summary judgment that he is entitled to cure from his employer. After the accident, plaintiff was treated by Dr. Dietze, a neurosurgeon. Dr. Dietze recommended Int’l Marine, L.L.C. v. Atl. Specialty Ins. Co., 2019 U.S. lumbar surgery for which the defendant approved App. LEXIS 4222 (5th Cir. Feb. 12, 2019) payment. This action arose when an underwater sonar device, After lumbar surgery, plaintiff complained of thoracic called a towfish, being used by Tesla struck the pain. Dr. Dietze initially stated that plaintiff had mooring line of an offshore drilling rig owned by Shell reached maximum medical improvement. Later, Dr. causing substantial damage. Tesla had chartered a vessel Dietze administered thoracic spinal injections and an owned by Int’l Marine, LLC and Int’l Offshore Services, MRI. Thereafter, Dr. Dietze changed his opinion and LLC (‘‘International’’) to pull the towfish. A second recommended that plaintiff undergo thoracic spinal vessel owned by Sea Eagle, Inc. followed the towing fusion surgery. Defendant refused to pay for the vessel during the operation to pick up the sonar signals. surgery. Shell sued Tesla and International for damages, and both Tesla and International sought indemnity from Sea Eagle Defendant insisted that there was a dispute whether and sued Sea Eagle’s two insurers claiming they had been plaintiff was actually injured because the accident added as additional insureds on the two policies (MCL was unwitnessed. It further relied on the opinion of policy and bumbershoot policy taken out by Sea Eagle’s Dr. Awasthi who examined plaintiff at defendant’s sister company) insuring Sea Eagle’s vessel. request. Dr. Awasthi did not find that plaintiff had any thoracic injury. The United States Court of Appeals for the Fifth Circuit upheld the district court’s holding that Tesla and Inter- Given the disputed opinions of the physicians, the national were not entitled to indemnity because the court found summary judgment on cure would be inap- allision did not arise out of or relate in any way to the propriate. The court refused to give deference to plaintiff’s operation of Sea Eagle’s vessel, as the indemnity portions treating physician, especially because Dr. Dietze had of the Master Service Agreement (MSA) between Tesla issued conflicting opinions on the need for thoracic and Sea Eagle required. The Fifth Circuit vacated the surgery and initially opined that plaintiff was at maximum district court’s ruling on the coverage issue and remanded medical improvement. The court also found that there for further proceedings on the claims. Importantly, the was an issue of material fact as to whether surgery Fifth Circuit affirmed the district court’s finding that would be curative or palliative. Sea Eagle’s vessel made no contribution to the negligent Thus, the court denied the motion for summary judg- act causing the subject damages. ment. It did, however, note that the seaman’s claim for The insurers moved for summary judgment on whether maintenance and cure can warrant an evidentiary Tesla and International were insureds on the MCL and hearing. Thus, the court severed the issue of cure from bumbershoot policies covering Sea Eagle’s vessel. The the rest of the case and determined that an evidentiary district court granted the insurers’ motion and Tesla and hearing on the necessity of the thoracic spinal fusion International appealed. would go forward. Tesla was not named an insured under the MCL policy, The court also granted a motion by the defendant to so in order to be covered it had to satisfy the conditions appoint an independent medical expert on the necessity in the policy’s blanket additional insured endorsement. for surgery. The court found that a third, independent That endorsement afforded coverage to an entity not opinion would assist the court in its resolution. The specifically named in the policy if (1) Sea Eagle, the court then instructed the parties to try and agree on an named insured, was obligated by an ‘‘insured contract 17 Benedict’s Maritime Bulletin 100 Second Quarter 2019 to include’’ that organization as an additional insured to two vessels time-chartered by Clearlake Shipping and (2) the liability for which the organization sought PTE Ltd., appealed from orders and a partial final coverage arose out of Sea Eagle’s work, which included judgment, denying NuStar’s motion for summary work or operations performed by Sea Eagle or on Sea judgment and dismissing its claims to maritime liens Eagle’s behalf, and materials, parts or equipment furn- against the vessels. The United States Court of ished in connection with such work or operations. Appeals for the Second Circuit affirmed the United States District Court for the Southern District of The Fifth Circuit, applying Louisiana law, ruled that Sea New York’s holding that the bunker subcontractor Eagle was only obligated to name Tesla as an additional had no maritime lien. insured for the ‘‘service’’ Sea Eagle provided to Tesla, whichwaslimitedtoprovidingTeslawithavesseland The District Court ruled that, under the Commercial crew. Thus, Sea Eagle was obligated to obtain insurance to Instruments and Maritime Liens Act (‘‘CIMLA’’), cover Tesla’s liability only for third-party property damage NuStar was not entitled to maritime liens because that arose from or was connected with the provision of the it provided the fuel on the order of an entity other than vessel and its crew. Since the vessel and its crew did not the owner or a person authorized by the owner of the contribute to the damages caused by the allision, the Fifth vessels. Circuit ruled that Sea Eagle was not obligated by the MSA On appeal, NuStar contended principally that it was to include Tesla as an additional insured for the subject entitled to the claimed liens in light of CIMLA’s plain damages. Based on the same reasoning, the court found text and purpose and as a matter of equity, regardless of that Tesla failed to satisfy the second criteria. NuStar’s lack of contractual privity with the vessels’ There were also two criteria that Tesla had to satisfy to owner or charterer or their agent. qualify as an additional assured under the bumbershoot Citing their recent decision in Temara, which involved policy. First, Sea Eagle’s sister company must have been events not substantially dissimilar to those here, the obligated by the MSA to provide Tesla with the type of Second Circuit found no error in the District Court’s coverage the bumbershoot policy affords. Second, if that interpretation of CIMLA, or its ruling that maritime obligation existed, Tesla was covered only in respect of liens may not properly be granted based on principles operations by or on behalf of the sister company. The Fifth of equity. In addition, as NuStar failed to point to any Circuit ruled that Tesla was not entitled to coverage under evidence that the owner or charterer or their agent the bumbershoot policy stating that just as with the MCL directed that NuStar be the physical supplier, the policy, the MSA obligated Sea Eagle to obtain insurance Second Circuit held that NuStar’s claims did not fall protecting Tesla from third-party claims stemming from within the subcontractor exception because there was the ‘‘service’’ the sister company provided—the use and no significant evidence that the owner intended that operation of the second vessel. The court ruled that the NuStar be engaged as a subcontractor. claim for which Tesla sought coverage did not stem from that ‘‘service.’’ The court further ruled that Tesla Submitted by SPB failed to satisfy the second criteria because the operation was not on behalf of Sea Eagle, instead, Sea Eagle’s sister company was working on behalf of Tesla. Nustar Energy Services v. M/V Cosco Auckland, 2019 U.S. App. LEXIS 1226 (5th Cir. Jan. 14, 2019) Submitted by SMM COSCO, a vessel owner, entered into an arrangement with COSCO Petroleum to provide fuel bunkers to Maritime Liens its vessels. COSCO Petroleum then contracted with Chimbusco Americas, an agent with authority to bid the vessel. Chimbusco contracted with OW Far East to Clearlake Shipping Pte Ltd. v. Nustar Energy Services, supply the bunkers, and OW Far East subcontracted the Inc., 2018 U.S. App. LEXIS 35522, (2d Cir. Dec. 19, 2018) work to OW USA. OW USA, in turn, subcontracted with plaintiff NuStar, who physically supplied the fuel to the This case is one of the many resulting from the financial vessels. NuStar’s invoices were not paid, and the OW collapse of OW Bunker. Interpleader Defendant NuStar Bunker entities went into bankruptcy. NuStar sued and Energy Services, Inc., a physical supplier of marine fuel arrested the vessels, asserting a maritime lien. 17 Benedict’s Maritime Bulletin 101 Second Quarter 2019

ING was a secured creditor of the OW Bunker entities. Calloway purchased a vessel in 2012 and took posses- The entities assigned ING their interests in any maritime sion of the vessel, transporting it across the country liens. ING then asserted a maritime lien against the and delivered it to an agent and shipyard for the COSCO vessels. purpose of repairs. Repairs took place at the facilities of defendant Mayer Yacht Services. At all times, the The district court held that NuStar did not hold a valid work was approved by an individual working on maritime lien because it delivered the fuel on behalf of behalf of the vessel owner. Some of defendant’s repair subcontractors, not on the order of the vessel or a party invoices went unpaid. Mayer Yacht Services filed two authorized by the owner. The court then noted that OW maritime liens against the vessel with the United States Far East had a contract with a party authorized to bind Coast Guard, but the liens were never renewed or rein- the vessels so it did have a maritime lien that was validly scribed. assigned to ING. Thus, the court concluded that ING was entitled to the money owed OW Far East for the sale RSDC Holdings, now the owner of the vessel, filed suit of the fuel. NuStar appealed the rulings disputing its seeking a declaratory judgment canceling the lien. maritime lien and awarding recovery to ING. Mayer Yacht Services filed a counterclaim and third- party claim for payment of its unpaid invoices. While NuStar’s appeal was pending, the United States Court of Appeals for the Fifth Circuit held in a different The matter went to trial. The court found that the repairs case involving OW Bunkers that the vessel’s mere aware- were all authorized by an agent of the vessel’s owner ness of the identity of the party physically supplying the and ratified by the owner. Thus, the court found that fuel did not mean that the fuel was being delivered on the the owner was liable to Mayer Yacht for the unpaid order of the vessel or on behalf of its agent, thus denying invoices. The court further found that the failure to a maritime lien to the fuel supplier. See Valero Mktg. & renew the lien notices did not affect the validity of the Supply Co. v. M/V Almi Sun, 893 F.3d 290 (5th Cir. liens. The court found that laches did not bar the claim 2018). That holding precluded NuStar’s appeal of the to enforce the liens and that any delay did not prejudice dismissal of its maritime lien claim so the Fifth Circuit either RSDC or the initial owner. Thus, the court upheld the district court’s judgment in favor of the vessel. refused cancelation of the lien and rendered judgment in favor of Mayer Yacht Services for the value of the The Fifth Circuit took up NuStar’s appeal of the judgment unpaid invoices. in favor of ING. Before addressing the merits of the appeal, the Fifth Circuit determined that NuStar lacked a Submitted by KMM cognizable interest in the question of ING’s right to a lien. The court observed that a ruling in favor of ING would not result in a judgment in favor of NuStar because the court U.S. Oil Trading LLC v. M/V Vienna Express, 2018 had already concluded that NuStar did not have a mari- U.S. App. LEXIS 35632 (2d Cir. Dec. 19, 2018) time lien against the vessel. NuStar also concluded that U.S. Oil Trading LLC (‘‘USOT’’) was the physical if the Fifth Circuit rejected the assignment of liens to supplier of bunkers to vessels. The United States District ING, the funds would then go into the bankruptcy Court for the Southern District of New York held that resulting in payment to various unsecured creditors, USOT was not entitled to a maritime lien on the vessels including NuStar. The Fifth Circuit rejected this argument it supplied because there was no contractual or agency finding that it was too speculative that payment for the fuel relationship with the vessels or with an authorized entity would ever find its way to NuStar. Thus, in the absence of specified under the Commercial Instruments and Mari- a showing that it was likely that NuStar would receive a time Liens Act (‘‘CIMLA’’). favorable judgment regarding the validity of ING’s claim, the Fifth Circuit concluded that it lacked jurisdiction over On appeal, USOT principally contended that the District the appeal of the judgment in favor of ING. Court erred in finding it was not entitled to a maritime lien in the absence of a contractual or agency relation- Submitted by KMM ship with the vessels or with an authorized entity specified in the CIMLA. USOT also argued that it was entitled to maritime liens because Hapag’s purchase RSDC Holdings, LLC v. M.G. Mayer Yacht Services, Inc., orders specified that USOT was to be the physical 2019 U.S. Dist. LEXIS 16991 (E.D. La. Feb. 1, 2019) supplier of the bunkers. 17 Benedict’s Maritime Bulletin 102 Second Quarter 2019

The United States Court of Appeals for the Second Plaintiffs claimed they signed the releases under Circuit concluded that purchase orders and admissions economic duress. The Court rejected these arguments by Hapag in these actions permitted a conclusion as the ‘‘ward of admiralty’’ doctrine did not apply and that Hapag directed that USOT be the subcontractor Plaintiffs failed to show they had no reasonable alter- to supply the fuel, thereby bringing USOT within an native course of action other than signing the release. established exception that allowed maritime liens to Therefore, the Court affirmed the district court’s be asserted by subcontractors whose selection was dismissal of Plaintiffs’ claims. controlled or directed by the vessel’s owner/charterer. Submitted by JAY Thus, Second Circuit vacated the judgments and remanded for trial on the issue of whether Hapag directed that USOT be the physical supplier sufficient Chartis Prop. Cas. Co. v. Inganamort, No. 12-04075 to allow USOT to be entitled to a maritime lien. (WHW)(CLW), 2019 U.S. Dist. LEXIS 45806 (D.N.J. Submitted by SPB Mar. 20, 2019) The Plaintiff insurer brought this action seeking a declaratory judgment that a policy did not provide Practice and Procedure coverage for the sinking the Defendant’s Sportfish vessel.

Barber v. BP Expl. & Prod., Inc. (In re Horizon), 2019 The Plaintiff and Defendant cross moved for Summary U.S. App. LEXIS 4734 (5th Cir. 2019) Judgment. This appeal arose from the Deepwater Horizon oil spill. The United States District Court for the District of New Shortly after the spill, BP established the Gulf Coast Jersey held that Defendant did not meet its burden to Claims Facility (GCCF) to pay claims from the spill. provide sufficient evidence for a rational juror to find Jelp Barber and Johnny’s Clams (‘‘Plaintiffs’’) received that the amount of rainfall was sufficiently fortuitous to payments under the GCCF for damages associated with have caused the sinking of the boat. The District Court the spill and, to receive final payment, signed releases held that the question of whether the rainfall indicated not to sue BP. in the data was ‘‘extraordinary’’ to be ‘‘fortuitous’’ was a legal question. The Court reasoned that ‘‘heavy rainfall’’ Plaintiffs, along with more than 1,000 other plaintiffs, is a term that requires context to determine if the rainfall filed suit in the United States District Court for the was sufficiently heavy so as to be ‘‘fortuitous.’’ The Court Eastern District of Louisiana against BP claiming stated that for a rainfall to be ‘‘heavy’’ in south Florida economic losses from the spill. The court ordered BP sufficient to trigger the ‘‘fortuitous loss’’ rule, there must to file dispositive motions regarding plaintiffs who had be sufficient evidence, likely from either meteorological signed releases. BP filed such motions with the releases date or publicly available reports as to the rain’s severity. attached as exhibits. The court granted BP’s motions to The Court held that because the Defendant presented no dismiss. such evidence from which a fact-finder could find that Plaintiffs appealed and argued that the district court rainfall caused the vessel to sink, the Defendants had not converted the motions to dismiss into a summary judg- met their initial burden. ment motion by considering the releases, and Plaintiffs As such, the Court granted the Plaintiff’s Motion for were not given a reasonable opportunity to present mate- Summary Judgment. rial pertinent to the motion. The United States Court of Appeals for the Fifth Circuit rejected this argument as Submitted by SPB the district court made it clear that it was considering matters outside of the pleadings and Plaintiffs had months to present opposing material. Plaintiffs also Horizon Navigation Ltd. v. Progressive Barge Line, argued that the district court should have applied the Inc., 2019 U.S. Dist. LEXIS 446575 (E.D. La. Feb. 5, ‘‘ward of admiralty doctrine,’’ thus placing the burden 2019) on BP to show that Plaintiffs’ releases were executed Horizon Navigation was the owner of a vessel chartered freely, with a full understanding and without deception. to Ausca Shipping. Ausca was obligated to provide and 17 Benedict’s Maritime Bulletin 103 Second Quarter 2019 pay for any fuel for the vessel. Ausca contracted with arbitration under the Federal Arbitration Act could not Glander International Bunkering to provide fuel for the be thwarted. The court found Progressive’s interests vessel. Glander International subcontracted the work to were still protected by its third-party claim against Chevron, who then contracted with defendant Progres- Ausca. The court concluded that any claims by Horizon sive to provide the fuel. Chevron instructed Progressive against Ausca tendered by the Rule 14(c) third-party to increase the fuel delivery from 1,600 metric tons to complaint would be stayed pending the outcome of any 1,650 metric tons. arbitration. Progressive’s claims against Ausca would proceed in litigation. Progressive never told the vessel that the amount of fuel being provided had been increased. At the time of Submitted by KMM delivery, the Progressive crew overfilled the vessel’s bunker tanks resulting in a spill of fuel on to the vessel and into the Mississippi River. Horizon filed Jupiter Wreck, Inc. v. Unidentified Wrecked & Aban- suit against Progressive for damages it incurred as a doned Sailing Vessel, 2019 U.S. App. LEXIS 6748 result of the fuel spill. Progressive filed a third-party (11th Cir. March 6, 2019) complaint against Ausca and tendered Horizon’s This appeal concerned the remains of a Spanish Galleon Complaint to Ausca Shipping pursuant to Rule 14(c) (Vessel) that sunk off the coast of Florida in the late of the Federal Rules of Civil Procedure. Progressive seventeenth century, and currently lies about 100 alleged that Ausca was obligated under tort and contract yards offshore in the Jupiter Inlet. The underlying case to provide the proper amount of fuel and notify the originated in 1987 when Jupiter Wreck, Inc. filed an in vessel of the amount of fuel to be delivered. Ausca rem action seeking declaratory and injunctive relief— moved to dismiss the claims against it or, alternatively, namely, to acquire title to the Vessel and to enjoin all to stay the Rule 14(c) tender on the grounds that any parties from interfering with its salvage activities claims between it and Horizon were subjected to arbi- (Jupiter Wreck I). After Jupiter Wreck moved for a tration under the terms of their charter agreement. preliminary injunction, the court granted the motion The court found that Progressive’s direct claims against ‘‘to the extent that [Jupiter Wreck sought] relief as Ausca stated a claim for negligence. The court found against any persons or entities other than the State’’ that there were sufficient allegations that Ausca knew butdeniedthemotion‘‘tothe extent that [Jupiter that it was ordering more fuel than the vessel could hold Wreck sought] relief as against the State.’’ The district but did not communicate that fact to anyone on board court reasoned that the State of Florida’s Eleventh the vessel and that the risk of harm of overfilling the Amendment immunity from suit prevented Jupiter vessel were reasonably foreseeable. The court found that Wreck from ‘‘gaining title or full possession of the the damages were within the risks created by Ausca’s res...without the consent to suit by the State.’’ After alleged negligence. Thus, the court denied Ausca’s the decision, Jupiter Wreck and Florida entered into an motion to dismiss the direct claim by Progressive. agreement that governed the parties’ rights and liabil- ities and ‘‘recognizes the yearly distribution...of Considering the Rule 14(c) tender, the district court artifacts recovered from the [ ] vessel.’’ At the parties’ noted that the United States Court of Appeals for the request, the district court dismissed the case and closed Fifth Circuit had previously considered this issue under it for statistical purposes but retained jurisdiction to nearly identical facts in Texaco Exploration & Produc- administer the annual distribution of recoveries. tion Co. v. AmClyde Engineered Products Co., 243 F.3d 906 (5th Cir. 2008) and concluded that the liberal The instant appeal arose out of the 2014 distribution. joinder policy in maritime cases provided for in a Jupiter Wreck sought a distribution of five salvaged Rule 14(c) tender did not supersede the right to enforce coins and requested a status conference. After the district contractual arbitration under the Federal Arbitration Act. court ordered Florida—a nonparty—to respond, Florida The district court noted that in Texaco Exploration, the made a limited appearance to oppose the status confer- charterer and vessel owner were already engaged in arbi- ence. The court granted in part the motion for distribution tration, whereas Horizon had never initiated arbitration and denied the request for a status conference. Jupiter with Ausca and apparently had no intention of doing so. Wreck appealed, arguing that Florida should not be The district court concluded this was a distinction allowed to challenge the distribution and oppose the without a difference because the right to enforce status conference without consenting to suit. 17 Benedict’s Maritime Bulletin 104 Second Quarter 2019

Jupiter Wreck first argued that Florida did not have to any stevedore. Thus, there was no duty to warn. As standing to challenge the district court’s jurisdiction such, the district court granted summary judgment in over the ongoing salvage because it was not a party to favor of the vessel owner. the suit. This argument failed because (1) standing Submitted by KMM concerns were not implicated here, and (2) Florida made no such jurisdictional challenge. The court found first, standing concerns were not implicated Products Liability because Florida had not requested the federal courts to adjudicate any issue. The Court found second, that Florida had not challenged the district court’s subject Lalonde v. Royal Caribbean Cruises, Ltd., 2019 U.S. matter jurisdiction. Dist. LEXIS 3610 (S.D. Fla. Jan. 9, 2019) Given Jupiter Wreck’s underlying motive—to acquire Plaintiff was a passenger on defendant’s cruise ship. On title to the recovered artifacts—the Court construed the the cruise, plaintiff went on the FlowRider, an amuse- appeal as a motion for reconsideration. The law of the ment attraction on the deck of the vessel that simulates case doctrine prohibits a court from revisiting an issue riding on a wave. Plaintiff alleges that the instructor on once it has been decided in pending litigation, thus the the ride negligently let go of his wrist causing plaintiff to Court rejected the motion. Because Jupiter Wreck fall and be pushed into a wall. As a result of striking the unsuccessfully argued that Deep Sea Research consti- wall, he alleged significant personal injuries. tuted a change in controlling law in 2012, the Court could not consider the merits of its argument. Accord- Plaintiff filed suit, and one of the claims was for strict ingly, the Appellate Court rejected what they construed products liability. The defendant moved to dismiss this to be a motion for reconsideration. claim. The court found that a strict products liability claim was permissible under maritime law and could Submitted by JAP be brought against a seller of the product, including manufacturers or entities within the distribution chain. The court found a strict products liability claim was not Troutman v. Seaboard Atlantic Ltd.,2019U.S.Dist. available against a designer of the product. Rather, the LEXIS 4132 (S.D. Fla. Jan. 8, 2019 claim had to be brought against a seller of the product. Plaintiff, Anthony Troutman, was a longshoreman who As plaintiff made no allegation that the defendant sold was assigned to assist in securing containers to be the FlowRider, it found that a strict products liability loaded onto a vessel owned by the defendant. Plaintiff claim was not viable, and the court granted to the climbed on an elevated walkway to secure cargo on an motion to dismiss this claim. upper deck. The deck had no fence on the edge, and Submitted by KMM plaintiff knew this was the case. He lost his balance and fell six to eight feet to the deck below. Usually, the deck below the walkway was loaded first so the Punitive Damages containers would reduce the risk of a fall from the walkway, but the containers for the lower level were not ready for loading on the vessel so the stevedoring In re Rodi Marine LLC, 2019 U.S. Dist. LEXIS 28382 company proceeded to load the upper deck first in spite (E.D. La. Feb. 22, 2019) of the danger of working on the walkway. Further, no one instructed plaintiff to secure the cargo to the upper deck, This case arose out of a maritime allision on April 18, and plaintiff could have requested a safety harness. 2017 between the M/V WILDCAT and a fixed platform located in the Gulf of Mexico. At the time of the allision, Plaintiff filed suit against the vessel owner, and the the M/V WILDCAT was chartered by Fieldwood Energy, vessel owner moved for summary judgment. The court LLC (‘‘Fieldwood’’) and carried Fieldwood employees, found no violation of the turnover duty because the including Claimants, Antonio Smith (‘‘Smith’’) and stevedore made the decision to load the upper deck Lionel Every (‘‘Every’’). On May 31, 2017, Rodi before the lower deck. Further, the hazard posed by Marine, LLC as the owner and operator of the M/V the upper deck without a fence was open and obvious WILDCAT, filed a complaint for exoneration from or 17 Benedict’s Maritime Bulletin 105 Second Quarter 2019 limitation of liability, under Rule 9(h) of the Federal engaged in ‘behavior that is more than merely negligent; Rules of Civil Procedure and Rule F of the Supple- rather, [the court] looks for ‘gross negligence’ ...‘reck- mental Rules of Admiralty and Maritime Claims. less or callous disregard for the rights of others’ ... or Subsequently, Smith and Every filed claims against ‘actual malice or criminal indifference.’’’ Therefore, the Rodi Marine, LLC, Rodi Marine Management, LLC, Court ordered that Antonio Smith and Lionel Every be and GJR Marine, LLC (‘‘Rodi’’), alleging they suffered given leave to file amended answers and claims to injuries as a result of Rodi’s negligence and the M/V include factual allegations to support their claims for WILDCAT’s unseaworthiness. Claimants sought punitive damages and provided that claimants could general, compensatory, and punitive damages. Rodi file amended answers and claims in accordance with sought to dismiss Smith’s claim for punitive damages the Court order. The court denied Defendant’s the and moved for judgment on the pleadings with respect to motion to dismiss without prejudice. Every’s claim for punitive damages. Submitted by JAP Rodi argued that § 905(b) of the Longshore and Harbor Workers’ Compensation Act (‘‘LHWCA’’) governs the claims of Claimants and that § 905(b) does not allow Seamen punitive damages. Claimants argued that they brought claims under general maritime law, not under the LHWCA, and that general maritime law allows for puni- Lee v. Nacher Corp., 2019 U.S. Dist. LEXIS 11228 tive damages. Claimants also argued that should the (E.D. La. Jan. 24, 2019) Court determine the provisions of the LHWCA, apply Lee filed suit against his employer Nacher Corporation the LHWCA allows recovery of punitive damages in alleging that he was working on a rig in the Gulf of cases involving gross negligence. Mexico when he sustained injuries. He filed suit under The Court in its analysis determined that Claimants’ the Jones Act and general maritime law alleging that he claims were governed by § 905(b) of the LHWCA. was a seaman. Nacher moved for summary judgment on The United States Court of Appeals for the Fifth plaintiff’s claim for seaman status. Circuit has not determined whether punitive damages The court noted, first that the structure on which plaintiff are awardable in an action brought by a longshoreman was injured was not a drilling rig but a stationary or covered offshore worker under the LHWCA. production platform. Thus, it was not a vessel. The However, the Fifth Circuit has permitted recovery of court also found that plaintiff spent less than 30% non-pecuniary damages in actions brought under the of his employment with Nacher in the service of a LHWCA and has noted ‘‘that the LHWCA does not vessel. The court refused to consider any time that Lee explicitly limit damages recoverable to ‘pecuniary spent in transit to and from stationary platforms. damages,’ as do the DOHSA [Death on the High Seas The court also found that time spent on vessels doing Act] and the Jones Act.’’ Other district courts within the work related to a stationary platform did not apply to the Fifth Circuit have found punitive damages are recover- 30% threshold for determining seaman status. Thus, the able in actions brought under the LHWCA. court granted summary judgment in favor of Nacher The Court agreed that punitive damages may be Corporation. awarded under the LHWCA. To recover punitive Submitted by KMM damages, Claimants must demonstrate the defendant 17 Benedict’s Maritime Bulletin 106 Second Quarter 2019

Contributors JAY Jeffrey A. Yarbrough Moseley, Prichard, Parrish, Knight & Jones [email protected] JAP Joni Alexis Poitier Moseley, Prichard, Parrish, Knight & Jones [email protected] KMM Kevin M. McGlone Sher Garner Cahill Richter Klein & Hilbert, L.L.C. [email protected] SMM Shea Michael Moser Moseley, Pritchard, Parrish, Knight & Jones [email protected] SPB Samuel P. Blatchley, Esq. Holbrook & Murphy [email protected] 17 Benedict’s Maritime Bulletin 107 Second Quarter 2019

TABLE OF CASES

Air & Liquid Sys. Corp. v. Devries, 203 L. Ed. 373 Custom Fuel Services, Inc. v. Lombas Industries, Inc., (2019) ...... 85 805 F.2d 561 (5th Cir. 1986) ...... 70

Allvette LLC v. Arete Automobili Sp.z.o.o.,2019 Dakota, Minnesota & Eastern Railroad Corporation v. U.S. Dist. LEXIS 31663 (S.D. Ga. Feb. 27, Ingram Barge Company, 2019 U.S. App. LEXIS 2019) ...... 90 8539 (8th Cir. 2019) ...... 92

American Export Lines, Inc. v. Alvez, 446 U.S. 274 Dukes v. Crosby Tugs, LLC., 2019 U.S. Dist. LEXIS (1980) ...... 85 24698 (E.D. La. Feb. 15, 2019) ...... 98

Avondale Shipyards v. Tank Barge ets 2303, 1987 U.S. Erickson v. Carnival Cruise Lines, Inc., 649 So. 2d 942 Dist. LEXIS 4253 (E.D. La., May 27, 1987) ..... 72 (Fla. 3d DCA 1995) ...... 93

Barber v. BP Expl. & Prod., Inc. (In re Horizon), 2019 First Federal Sav. & Loan Assoc. v. Zequeira, 288 F. U.S. App. LEXIS 4734 (5th Cir. 2019) ...... 102 Supp. 384 (D.P.R. 1968) ...... 70

Barbieri v. K-Sea Transp. Corp., 566 F. Supp. 2d 187 First State Bank v. Towboat Chippewa, 402 F. Supp. 27 (E.D.N.Y. 2008) ...... 84 (N.D. Ill. 1997) ...... 73

Barrios v. Centaur LLC, 2019 U.S. Dist. LEXIS 16990 Garrett v. Moore-McCormack Co., 317 U.S. 239 (E.D. La. Feb. 1, 2019) ...... 93 (1942) ...... 85

Bergren v. Davis, 287 F. Supp. 52 (D. Conn. 1968) .... 70 Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991) ...... 85 Bowman v. Pan American World Services, Inc., 704 F. Supp. 695 (E.D. La. 1989) ...... 91 Harden v. Gordon, 11 F. Cas 480, 485, F. Cas. No 6047 (C.C.D. Me. 1823) ...... 85 Bristow US LLC v. Wallenius Wilhelmsen Logistics, AS, 2019 U.S. Dist. LEXIS 32320 (S.D.N.Y. Feb. 28, Harrington v. Atlantic Sounding Co., Inc., 602 F.3d 113 2019) ...... 92 (2d Cir. 2010) ...... 85

Brown v. Fairhope Yacht Club, 2019 U.S. Dist. LEXIS Horizon Navigation Ltd. v. Progressive Barge Line, 9306 (S.D. Ala. Jan. 17, 2019) ...... 90 Inc., 2019 U.S. Dist. LEXIS 446575 (E.D. La. Feb. 5, 2019) ...... 102 Buckeye Check Cashing, Inc. v. Cardegna,546U.S. 440 (2006) ...... 86 Hozie v. Vessel Highland Light, 1998 U.S. Dist. LEXIS 23076 (C.D. Cal., June 1, 1998) ...... 70 Chartis Prop. Cas. Co. v. Inganamort, No. 12-04075 (WHW)(CLW), 2019 U.S. Dist. LEXIS 45806 In re 4-K Marine, L.L.C. v. Enterprise Marine Services, (D.N.J. Mar. 20, 2019) ...... 102 L.L.C. (In re 4-K Marine, L.L.C.), 914 F.3d 934 (5th Cir. 2019) ...... 98 Chemical Bank New York Trust Co. v. S.S. Westhampton, 358 F. 2d 574 (4th Cir. 1965) ...... 69 In re Brizo, LLC, 2019 U.S. Dist. LEXIS 25553 (S.D. Fla. Feb. 19, 2019) ...... 97 Clearlake Shipping Pte Ltd. v. Nustar Energy Services, Inc., 2018 U.S. App. LEXIS 35522 (2d Cir. Dec. 19, In re Dixie Pellets, LLC, 2010 Bankr. LEXIS 5624 2018) ...... 100 (Bankr. N.D. Ala., May 13, 2010) ...... 68, 72 17 Benedict’s Maritime Bulletin 108 Second Quarter 2019

In re McLean Industries, Inc., 76 B.R. 328 (Bankr. NCL (BAHAMAS) Ltd. v. O.W. BUNKER USA, S.D.N.Y. 1987) ...... 70 INC.,745 Fed. Appx. 416 (2d Cir. 2018) ...... 94

In re Muma Services, Inc., 322 B.R. 541, 2005 Bankr. New Prime Inc. v. Olivera, 139 S. Ct. 532 (2019) .... 86 LEXIS 494 (Bankr. D. Del., March 30, 2005) ..... 68, 72 Nunez v. Weeks Marine, Inc., No. 06-3777, 2007 U.S. In re OSG Ship Mgmt., No. 14-16-240, 2016 Tex. App. Dist. LEXIS 10807 (E.D. La. Feb. 13, 2007)...... 84 LEXIS 13785 (Tex. App. Houston 14th Dist. Dec. 29, 2016) ...... 83 Nustar Energy Services v. M/V Cosco Auckland, 2019 U.S. App. LEXIS 1226 (5th Cir. Jan. 14, 2019) ...... 100 In re Rodi Marine LLC, 2019 U.S. Dist. LEXIS 28382 (E.D. La. Feb. 22, 2019) ...... 104 Patton v. United States Department of Labor, 2018 U.S. App. LEXIS 35260 (2d Cir. Dec. 17, 2018) ...... 96 In re Schreiber v. K-Sea Transp. Corp., 879 N.E.2d 733 (N.Y. Ct. App. 2007) ...... 84 Raicevic v. Wood Grp. PSN, Inc., et. al., 2019 U.S. Dist. LEXIS 24114 (S.D. Tex. February 14, 2019) .... 97 Int’l Marine, L.L.C. v. Atl. Specialty Ins. Co., 2019 U.S. App. LEXIS 4222 (5th Cir. Feb. 12, 2019) ...... 99 RSDC Holdings, LLC v. M.G. Mayer Yacht Services, Inc., 2019 U.S. Dist. LEXIS 16991 (E.D. La. Feb. 1, J. Ray McDermott & Co. v. The Vessel Morning Star, 2019) ...... 101 431 F.2d 714 (5th Cir. 1970) ...... 70 Siliakus v. Carnival Corp., 2019 U.S. Dist. LEXIS Jupiter Wreck, Inc. v. Unidentified Wrecked & 14097 (S.D. Fla. Jan. 28, 2019) ...... 95 Abandoned Sailing Vessel, 2019 U.S. App. LEXIS 6748 (11th Cir. March 6, 2019) ...... 103 Simpson v. Lady Nell, 2013 U.S. Dist. LEXIS 136091 (W.D. Wash., Sept. 23, 2013) ...... 70 Karim v. Finch Shipping Co., 374 F.3d 302 (5th Cir. 2004) ...... 85 South Lafourche Bank & Trust Co. v. M/V Noonie G, 2017 U.S. Dist. LEXIS 93748 (E.D. La., June 19, Keefe v. Bahama Cruise Line, Inc., 867 F.2d 1318 (11th 2017) ...... 68, 70 Cir. 1989) ...... 93 Southland Financial Corp. v. Oil Screw Mary Evelyn, Lalonde v. Royal Caribbean Cruises, Ltd., 2019 U.S. 248 F. Supp. 520 (E.D. La. 1965) ...... 70 Dist. LEXIS 3610 (S.D. Fla. Jan. 9, 2019) ...... 104 Sphere Drake Ins. Ltd. v. Clarendon Nat’l Ins. Co., 263 Lee v. Nacher Corp., 2019 U.S. Dist. LEXIS 11228 F.3d 26 (2d Cir. 2001) ...... 85 (E.D. La. Jan. 24, 2019) ...... 105 Terrebone v. K-Sea Transp. Corp., 477 F3d 271 (5th Lomax v. Marquette Transportation,2019U.S.Dist. Cir. 2007) ...... 84 LEXIS 941 (E.D. La. Jan. 3, 2019) ...... 95 Texaco Exploration & Production Co. v. AmClyde Maine Maritime Academy v. Fitch, 2019 U.S. Dist. Engineered Products Co., 243 F.3d 906 (5th Cir. LEXIS 25082 (D. Me. Feb. 15, 2019) ...... 91 2008) ...... 103

Martin v. L & M Botruc Rental, LLC, 2019 U.S. Dist. The China, 74 U.S. 53 (1868) ...... 71 LEXIS 1398 (E.D. La. Jan. 3, 2019) ...... 99 The Young Mechanic, 30 Fed. Cas. 873 (C.C.D. Me. Merchants Nat’l Bank of Mobile v. Ward Rig No. 7, 634 1855) ...... 71 F.2d 952 (5th Cir. 1981) ...... 69 Tropicana Shipping, S.A. v. Epresa Nacional ‘Elcano’ Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, de la Marina Mercante, 366 F.2d 729 (5th Cir. Inc., 473 U.S. 614 (1985) ...... 85 1966) ...... 69

Morgan Guaranty Trust Co. v. Hellenic Lines, Ltd., 621 Troutman v. Seaboard Atlantic Ltd.,2019U.S.Dist. F. Supp. 198 (S.D.N.Y. 1985) ...... 70 LEXIS 4132 (S.D. Fla. Jan. 8, 2019) ...... 104 17 Benedict’s Maritime Bulletin 109 Second Quarter 2019

Underwood v. NCL (Bah.) Ltd., 2019 U.S. Dist. LEXIS Vane Line Bunkering, Inc. v. Hooper, No. 16-21348, 23585 (S.D. Fla. Feb. 12, 2019) ...... 93 2016 U.S. Dist. LEXIS 184372 (S.D. Fla. July 6, 2016) ...... 84, 86, 88 United States v. Caprice, 427 F. Supp. 1035 (D.N.J. 1976) ...... 70 World Fuel Services (Singapore) PTE v. M/V Varesia, 2019 U.S. Dist. LEXIS 8873 (E.D. La. Jan. 18, U.S. Oil Trading LLC v. M/V Vienna Express, 2018 U.S. 2019) ...... 96 App. LEXIS 35632 (2d Cir. Dec. 19, 2018) ...... 101

Valero Mktg. & Supply Co. v. M/V Almi Sun, 893 F.3d 290 (5th Cir. 2018) ...... 101 17 Benedict’s Maritime Bulletin 110 Second Quarter 2019

BENEDICT’S MARITIME BULLETIN EDITORIAL BOARD Contact Information

Joshua S. Force (Editor-in-Chief) Sher Garner Cahill Richter Klein & Hilbert, L.L.C. New Orleans, LA [email protected]

Robert J. Zapf (Managing Editor) Thousand Oaks, CA [email protected]

Bruce A. King Dr. Norman A. Martinez-Gutie´rrez (Immediate Past Chairperson (International Maritime Law; Scholarly Notes and Papers) Marine Financing Committee) IMO International Maritime Law Institute Maritime Law Association P.O. Box 31, Msida MSD 01 MALTA [email protected] [email protected]

Dr. James C. Kraska Francis X. Nolan, III Howard S. Levie Professor of International Law (Marine Finance) The Stockton Center for the Study of International Law Vedder Price P.C. United States Naval War College 1633 Broadway, 47th Floor 686 Cushing Road New York, NY 10019 Newport, Rhode Island 02841-1207 [email protected] [email protected]

Anthony J. Pruzinsky (Admiralty Practice and Procedure) Hill Rivkins LLP 45 Broadway, Suite 1500 New York, NY 10006-3793 [email protected] 17 Benedict’s Maritime Bulletin 111 Second Quarter 2019

Reporters/Associate Editors Contact Information

Lizabeth L. Burrell Edward V. Cattell, Jr. (MLA Affairs, Uniformity) (Rivers and Towage, Pilotage and Limitation) Curtis, Mallet-Prevost, Colt & Mosle LLP Hollstein Keating Cattell Johnson & Goldstein, P.C. New York, NY Philadelphia, PA [email protected] [email protected]

Matthew A. Marion Marc Marling (Environmental) (Technology) Marion Partners Williams Mullen Rowayton, CT Norfolk, VA

Howard M. McCormack Michael B. McCauley (Marine Arbitration and General Average) (Recreational Boating) Burke & Parsons Palmer Biezup & Henderson, LLP, New York, NY Philadelphia, PA [email protected]

JoAnne Zawitoski Graydon S. Staring (Stevedoring, Terminals and Ports) (Editor Emeritus, American Maritime Cases) Semmes Bowen & Semmes Past President, Maritime Law Association of Baltimore, MD the United States [email protected] Retired from Lillick and Charles LLP and Nixon Peabody LLP, San Francisco [email protected]

Columnists Contact Information

Window on Washington Bryant E. Gardner Winston & Strawn LLP Washington, DC [email protected] 17 Benedict’s Maritime Bulletin 112 Second Quarter 2019

CONTRIBUTING AUTHORS TO THIS ISSUE Contact Information

Glen T. Oxton Oxton Law Mamaroneck, New York [email protected] Marissa M. Henderson Ventker Henderson, PLLC Norfolk, Virginia [email protected] 17 Benedict’s Maritime Bulletin 113 Second Quarter 2019

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