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Publication in Customs Bulletin Weekly is not notice to Customs

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of International Trade ruled that publication of a case in the Customs Bulletin Weekly is not sufficient notice to the US Customs and Border Protection (CBP) to invoke the deemed liquidation rule. The US Court of Appeals for the Federal Circuit ruled in 1996 on the liquidation of various antidumping duties. The case was summarized and reported in 1997 in the Customs Bulletin Weekly, a government publication compiled and published by what was then the US Customs Service. CBP did not assess duties and accrued interest against Travelers (the importer’s surety) until 2005. Travelers contended that it should not be liable for the interest subsequent to the 1996 court decision. CBP asserted that it had no proper notice of the court decision. The court in this case ruled that publication of the earlier decision in the Customs Bulletin Weekly does not impute knowledge of the decision to Customs employees. We will leave it to the reader to draw useful lessons from this decision.

Travelers Indemnity Co. v. United States, No. 06-00151 (CIT, September 29, 2008).

Uberrimae fidei reigns supreme

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the Third Circuit ruled that the federal maritime doctrine of uberrimae fidei applies to a claim under a maritime insurance policy for loss of a yacht where the insured misrepresented the purchase price of the yacht. In 1997, the insured purchased the yacht for $400,000. He then obtained financing and insurance for the yacht, asserting that he paid $600,000 therefor. The insurance company did not discover the disparity until the insured filed a claim after the yacht sank. The court upheld its refusal to pay the claim.

AGF Marine Aviation & Transport v. Cassin, No. 07-1640 (3rd Cir., September 29, 2008).

Electronic funds transfers are subject to maritime attachment

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the Second Circuit ruled that funds that are subject to an electronic funds transfer are property subject to a maritime attachment while they are in the hands of an intermediary bank. The court further found that an agreement between the parties providing for exclusive jurisdiction over disputes arising from those agreements in the courts of England does not prevent one party from seeking a maritime writ of attachment in the United States.

Consub Delaware LLC v. Schahin Engenharia Limitada, No. 07-0833-cv (2nd Cir., September 23, 2008).

Injury on ship transiting to OCS facility controlled by general maritime law

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the Fifth Circuit ruled that an action for personal injury brought by an offshore platform worker injured while being transported by a vessel on the high seas is controlled by general maritime law, rather than the Outer Continental Shelf Lands Act (OCSLA). The dispute in the instant case was between the worker’s employer and the owner of the vessel on which he was injured. The employer and the owner had entered into an indemnity agreement regarding such claims. Such indemnity agreements are disfavored under the OCSLA, but are generally permissible under general maritime law.

Grand Isle Shipyard v. Seacor Marine, No. 07-31019 (5th Cir., September 22, 2008).

Seaman may be contributorily negligent by concealing prior injury

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the Fifth Circuit ruled that a seaman who intentionally concealed his prior back injuries may be found contributorily negligent, with the effect that his recovery of damages under the Jones Act or for unseaworthiness should be proportionally reduced. Such concealment also worked as a bar to recovery of maintenance and cure.

Johnson v. Cenac Towing Inc., No. 07-30113 (5th Cir., September 24, 2008).

Consultant liable for misstatements of principal

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the Tenth Circuit ruled that a non-employee consultant to a public company can be civilly liable for material misstatements and omissions in reports filed by the company, knowing that the misstatements and omissions will reach investors. This is not a maritime case, but the principle of expanded liability adopted by the court should be expected to find its way into maritime jurisprudence.

SEC v. Wolfson, No. 06-4035 (10th Cir., September 2, 2008).

Accounting firm liable to third party for negligent opinion letter

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the Fifth Circuit upheld a jury verdict in favor of an insurance company that had provided a surety bond to a company that manufactured oil rigs, vessels, and other large maritime equipment and against an accounting firm that audited the manufacturer’s financial statements and provided an opinion letter. The manufacturer’s financial condition was not good at the time of the audit and worsened by the time the insurance company provided its coverage. The manufacturer soon entered into bankruptcy and the insurance company had to pay various claims. The insurance company sued the manufacturer’s officers and directors, as well as the accounting firm. The officers and directors settled the suits against them. The accounting firm went to trial and the jury ruled that it was liable. The accounting firm appealed. The appellate court affirmed, holding, in part, that the accounting firm failed to provide sufficient evidence to show that the insurance company had assumed the risk of a known danger.

Travelers Casualty v. Ernst & Young LLP, No. 07-60379 (5th Cir., September 8, 2008).

EPA may inspect a ship for PCB

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the Fourth Circuit ruled that the Environmental Protection Agency (EPA) has authority under the Toxic Substances Control Act (TSCA) to obtain and exercise an administrative warrant to inspect ships containing regulated chemical substances. In the instant case, the owner of an obsolete US Navy ship announced plans to have the ship towed to a foreign port for renovation and conversion. The EPA learned that the ship probably had polychlorinated biphenyl (PCB) on board in quantities subject to regulation and might well be scrapped rather than renovated. The agency sought permission from the owner to inspect the ship, but was denied. It then sought an administrative warrant from the local federal district court. Over the objection of the owner, the court issued the administrative warrant and issued an injunction prohibiting removal of the ship until the warrant was executed. The owner appealed. The appellate court ruled that an agency with the statutory authority to inspect a premises has the inherent authority to obtain and execute an administrative warrant to enforce that authority. In this case, the application for the warrant was found to be supported by probable cause. In addition, the court ruled that the ship was a premises subject to inspection under TSCA.

United States v. M/V SANCTUARY, No. 07-2123 (4th Cir., August 25, 2008).

Kingman Reef a possession of the US Government

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the Ninth Circuit affirmed the dismissal of the claim of a private investment company to Kingman Reef, a low-lying coral atoll approximately 930 miles south of Honolulu. The court found that the federal government had not abandoned its claim of interest in the atoll. Note: The atoll has no intrinsic value, but the surrounding waters and seabed are rich in natural resources.

Kingman Reef Atoll Investments v. United States, No. 07-16817 (9th Cir., September 4, 2008).

Warehouse-to-warehouse clause interpreted

Wed, 15 Oct 2008 17:20:20 GMT

In an unpublished decision, the US Court of Appeals for the Eleventh Circuit ruled that coverage under a marine insurance policy with a standard warehouse-to-warehouse clause terminates when the covered cargo is unloaded from the ship and placed in a warehouse under the insured’s dominion and control, even if the insured intends to later move the cargo to another location. In the instant case, plaintiff insured imports raw lumber that it chemically treats at its domestic treatment facilities and then resells. Defendant insurer provides marine insurance for plaintiff’s imported cargoes. This dispute involves two cargoes of raw lumber were imported by the insured. The cargoes were delivered to the Port of Gulfport, Mississippi in August 2005 and placed in a warehouse owned by the Mississippi State Port Authority, but leased by plaintiff for the temporary storage of cargoes until they could be transferred to one of its treatment facilities. While some of the raw lumber was in the Gulfport warehouse, Hurricane Katrina struck, destroying the warehouse and the raw lumber located therein. Plaintiff insured filed a claim for its losses, which defendant insured denied as outside the coverage of the policy. Plaintiff brought suit, asserting claims of breach of contract and bad faith. Plaintiff contended that the warehouse-to-warehouse clause was ambiguous and should be construed against the insurer. The court held that the clause was not ambiguous in this situation.

Great Southern Wood Preserving v. American Home Assurance Co., No. 07-14446 (11th Cir., August 22, 2008).

Wreck Act not subject to Limitation of Liability Act

Wed, 15 Oct 2008 17:20:20 GMT

In a case of first impression, the US Court of Appeals for the Fifth Circuit ruled that the Limitation of Liability Act is not applicable to a claim by the federal government for wreck removal under the Wreck Act where the vessel sank in a waterway without fault or neglect by the owner. In the instant case, a floating drydock sank in the Industrial Canal in New Orleans during passage of Hurricane Katrina. The US Army Corps of Engineers determined the wreck to be a hazard to navigation and directed the owner to remove it. The owner asserted that it lacked the financial capability to undertake removal and brought an action to limit its liability to the current value of the vessel. The government removed the sunken vessel and asserted that its claim under the Wreck Act was not subject to the limitation action. After reviewing the wording and legislative history of the 1986 amendments to the Wreck Act, the court the action under the Wreck Act is not controlled by the Limitation of Liability Act.

In the Matter of Southern Scrap Material LLC, No. 07-30470 (5th Cir., August 25, 2008).

Breach of warranty by insured excuses payment by insurer

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the First Circuit ruled that breach of a warranty contained in a maritime insurance contract will excuse the insurers from payment regardless of any causal connection to the loss. In the instant case, defendant insured obtained a marine insurance policy from plaintiff insurers. The policy provided, in part, that defendant insured warranted the vessel’s fire extinguishing equipment was properly installed and maintained in good working order. After the vessel sank and a claim was presented by the insured, plaintiff insurers discovered that the vessel’s fire extinguishing system had not been inspected or certified within the year preceding the loss and that the automatic engine room fire extinguisher system had been disconnected. There was, though, no evidence that the breach of this particular warranty was directly related to the loss of the vessel. The court held that the breach of the express warranty by the insured, without more, was sufficient to excuse the insurers from payment under the policy.

Lloyd’s of London v. Pagan-Sanchez, No. 07-1709 (1st Cir., August 21, 2008).

Passengers entitled to equitable tolling of limitation period

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the Ninth Circuit ruled that passengers with a claim against a cruise ship operator are entitled, on the facts presented, to equitable tolling of the statute of limitations based on the timely filing of a state court action and the prompt filing of a federal court action after the state action was dismissed under the forum selection clause in the cruise contract. In the instant case, plaintiffs purchased passage on defendant’s cruise ship. Plaintiffs alleged that they contracted a serious gastrointestinal illness while on board. Suit was filed in state court within the one-year time provided for in the cruise contract. The state court later dismissed the action because the forum selection clause in the cruise contract provided that suit must be brought in federal court. Plaintiffs filed an identical action against defendant in federal court the same day that the state action was dismissed. Unfortunately, the one-year limitation period had expired by this time. The federal district court dismissed the new action as time-barred. Plaintiffs appealed. The appellate court reversed, holding that plaintiffs did not sleep on their rights, but merely filed their action in an improper venue. There was no evidence that defendant was prejudiced by the delay.

Oltman v. Holland America Line, No. 07-35135 (9th Cir., August 19, 2008).

Treasure salvage contracts interpreted as maritime

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the Second Circuit ruled that contracts to participate in a treasure salvage venture are maritime in nature and are interpreted under federal admiralty law. In the instant case, plaintiffs contracted to assist in the search for and salvage of the wreck of the S.S. CENTRAL AMERICA in exchange for a share of the total recovery. When they were not compensated by the principal salvors, they brought suit and had various assets of the defendants attached. Defendants moved to have the suit dismissed and have the attachments vacated. The district court refused to dismiss the suit and vacated only a few of the attachments. Defendants appealed. In addition to upholding the refusal to dismiss the suit, the appellate court also found no equitable reason to vacate the attachments. Plaintiffs were represented by James Shirley and Michael Frevola of Holland & Knight LLP.

Williamson v. Recovery Limited Partnership, No. 07-0548-cv(L), (2nd Cir., August 22, 2008).

Interpretation of defense and indemnification clause

Wed, 15 Oct 2008 17:20:20 GMT

In an unpublished opinion, the US Court of Appeals for the Fifth Circuit ruled that a defense and indemnification clause in a Master Time Charter Agreement required the charterer to defend and indemnify the vessel owner from suit for personal injury brought by an employee of a company hired by the charterer. The plaintiff was injured while swinging from a fixed platform to the jump deck of the vessel. The court held that the plaintiff was an invitee of the charterer, even though the charterer was not physically present on the vessel.

Brown v. Sea Mar Management, LLC, No. 07-30112 (5th Cir., August 11, 2008).

Maintenance and cure subject to withholding for child support

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the Ninth Circuit ruled that maintenance and cure payments are subject to withholding for child support, so long as those payments constitute income under relevant state law. The court noted that seaman’s wages are subject to attachment for the support and maintenance of the spouse or minor children and could find no reasoned basis to distinguish between a seaman’s wages and a seaman’s maintenance and cure payments in this regard.

Aguilera v. F/V Alaska Juris, No. 07-35148 (9th Cir., August 4, 2008).

Guard service

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the Fifth Circuit issued a decision in a case involving an allegation that the government engaged in prosecutorial vindictiveness. The interesting point about the case, from the maritime perspective, is not that the lower court’s dismissal of the indictment was reversed, but that the defendant in the case was a convicted felon who apparently later gained employment as the general manager of a security company that provided guard service for ships when such service was required by the Department of Homeland Security.

United States v. Saltzman, No. 07-30716 (5th Cir., July 22, 2008).

Gaming vessel subject to admiralty jurisdiction for tort

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the Eleventh Circuit ruled that a gaming vessel, even though not regularly getting underway, is subject to admiralty jurisdiction in tort where it is documented with the US Coast Guard and is fully capable of getting underway. In the instant case, the owner of the gaming vessel was under a long term contract with plaintiff Board of Commissioners whereby the Commissioners leased land along the shore of Lake Pontchartrain to the vessel owners. The lease payments were based, in part, on revenues from the gaming vessel. When Hurricane Katrina struck the New Orleans area, the gaming vessel broke loose from its moorings and damaged the pier and related structures. The gaming vessel also suffered significant damage. The vessel owners ceased operations and quit paying on the lease. While the vessel was undergoing repairs at a shipyard in Mobile, plaintiff Commissioners brought suit against the vessel in rem for damages to the pier and for breach of the lease. The federal District Court ruled that the gaming vessel was not a vessel for purposes of admiralty jurisdiction. The Commissioners appealed. The appellate court ruled the gaming vessel was a vessel for purposes of admiralty jurisdiction and held that it was subject to liability in admiralty for tort. The court then examined the lease contract and found that, while it was of a maritime nature, it was not sufficiently maritime to support a maritime lien because it did not pertain directly to and was not necessary for commerce or navigation upon navigable waters.

Board of Commissioners v. M/V Belle of Orleans, No. 06-13614 (11th Cir., July 25, 2008).

EPA regulation re incidental discharges exceeded authority

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the Ninth Circuit upheld the decision of the federal District Court and ruled that a regulation promulgated by the Environmental Protection Agency (EPA) exempting from the National Pollutant Discharge Elimination System (NPDES) certain discharges "incidental to the normal operation of a vessel" exceeded the agency’s authority under the Federal Water Pollution Control Act (FWPCA). The court noted that establishment of a permitting program need not be overly onerous. The appellate court noted that the district court had set a deadline of September 30, 2008 for establishment of such a program. It stated that, if an extension of the deadline is needed, the request should be addressed to the district court.

Northwest Environmental Advocates v. Environmental Protection Agency, No. 03-5760 (9th Cir., July 23, 2008). Note: What started out as a challenge to the ballast water discharge program snowballed into an assault on a wide variety of routine vessel discharges. Congress is addressing some, but not all, of these issues, and unfortunately focusing most of its attention on discharges from recreational vessels. It is time for Congress to adopt an over-arching solution for all vessels, preferably one that provides for a uniform national program.

USCG may not ignore right whales when designating routing measures

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the District of Columbia reversed a decision of the federal District Court that had sanctioned the failure by the US Coast Guard to consider the impact on the endangered North Atlantic right whales in its designation of ship routing schemes. Various environmental advocacy groups had brought suit against the National Marine Fisheries Service (NMFS) for failure to issue an emergency rulemaking requiring ship speed reductions in waters frequented by the right whales and against the Coast Guard for failure to consider the impact on right whales in its designation of vessel routing measures under authority of the Ports and Waterways Safety Act. The District Court had granted motions for summary judgment in favor of the two agencies. The environmental advocacy groups appealed. The appellate court found that the failure of the Coast Guard to consider the impact on right whales in its designation of vessel routing measures constituted final agency action and was thus reviewable. It remanded the case to the District Court to review on the merits the allegations of the environmental advocacy groups regarding the Coast Guard’s responsibility to consider the impact on North Atlantic right whales in its designation of vessel routing measures.

Defenders of Wildlife v. Gutierrez, No. 07-5278 (DC Cir., July 18, 2008).

LNG facility expansion halted due to leakage concerns

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the District of Columbia vacated an order of the Federal Energy Regulatory Commission (FERC) granting permission for expansion of the liquefied natural gas (LNG) facility at Cove Point. A local natural gas distribution company that receives natural gas from the facility sought review of the expansion order, arguing that the expansion project would cause severe leakage throughout its distribution system. The court found that substantial evidence supports FERC’s conclusion that any threat of leakage is due to defects in the local distribution company’s system. The court also found, though, that substantial evidence does not support FERC’s conclusion that the local distribution company can address safety concerns before the project’s in-service date. The matter has been remanded to FERC so that it can more fully address whether the expansion project can go forward without causing unsafe leakage.

Washington Gas Light Company v. FERC, No. 07-1015 (D.C. Cir., July 18, 2008).

Maritime economic loss doctrine

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the Fifth Circuit ruled that a maritime plaintiff is restricted to warranty remedies when a defective product damages only the product itself. In the instant case, plaintiff’s helicopter made an emergency landing in the Gulf of Mexico due to engine trouble. The pilot and passenger escaped safety, but the helicopter inverted and was a total loss. Evidence indicated that the problem was the result of a manufacturing defect on the part of the engine manufacturer. The helicopter owner brought suit against the engine manufacturer and the helicopter manufacturer, alleging post-sale failure to warn of a pre-sale product defect. The court held that, under US maritime jurisprudence, such economic loss, when not accompanied by damage to other property, is recoverable, if at all, only for breach of warranty.

Turbomeca, S.A. v. Era Helicopters LLC, No. 07-30885 (5th Cir., July 16, 2008).

Open and obvious danger exonerates shipowner

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the Fifth Circuit ruled that a shipowner is not liable for injuries incurred by a longshore worker injured while unloading cargo when the dangerous condition of the cargo was open and obvious. The longshore worker was injured when struck by a falling steel coil that was about to be unloaded. The worker sued the ship owner and others for failing to exercise reasonable care to turn the ship over to the stevedore in such condition that a reasonably competent stevedore could safely unload it. That steel coil and others had shifted during the voyage due to heavy weather. The court found that the dangerous condition of the cargo was open and obvious, and that the stevedore should have taken appropriate precautions.

Kirksey v. Tonghai Maritime, No. 07-40616 (5th Cir., July 15, 2008).

Insurance company not liable for insufficient coverage

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the First Circuit ruled that, absent special circumstances, an insurance company is not liable to an insured for not recommending a higher amount of coverage. In the instant case, plaintiff fishing vessel owner insured the vessel for $1 million protection & indemnity (P&I) coverage. This level of coverage was never changed during the 16 years that plaintiffs owned the vessel. An injured crewmember brought suit for damages and the judgment well exceeded the insurance coverage limits, resulting in seizure and sale of the vessel. Plaintiffs sued their insurance company for negligence, asserting that the insurance company had an obligation to recommend higher coverage. The court ruled that there is no general duty of an insurance agent to ensure that the insurance policies procured provide coverage that is adequate for the needs of the insured. A plaintiff in such a case must be able to show a specific assertion of coverage recommendation and a subsequent reliance on that assertion to establish special circumstances in order to allow for liability to obtain.

AGA Fishing Group Limited v. Brown & Brown, Inc., No. 07-2408 (1st Cir., July 10, 2008).

Puerto Rico Ports Authority entitled to sovereign immunity

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the District of Columbia ruled that the Puerto Rico Ports Authority (PRPA) is an arm of the Government of the Commonwealth of Puerto Rico and entitled to sovereign immunity. This decision reverses an earlier ruling by the Federal Maritime Commission (FMC) and effectively ends complaints filed by various maritime interests against the PRPA before the FMC.

Puerto Rico Ports Authority v. Federal Maritime Commission, No. 06-1407 (D.C. Cir., July 8, 2008).

Apportionment of liability when both vessels violate COLREGS

Wed, 15 Oct 2008 17:20:20 GMT

The US Court of Appeals for the Ninth Circuit upheld the determination of the federal district court regarding allocation of liability in a collision case where both ships had violated the International Regulations for Preventing Collisions at Sea (COLREGS). In the instant case, defendant’s tanker was entering Puget Sound. In accordance with federal law, it hired two of plaintiff’s vessels to provide escort service. In accordance with the pre-arranged transit plan, one of the escort vessels was to be tethered to the stern of the tanker and the other escort vessel was to position itself on the tanker’s port shoulder. Plans called for the two escort vessels to rendezvous with the tanker by proceeding on a course of 058 degrees true at 12.5 knots while the tanker, which was approaching from the Pacific Ocean, would proceed on the same course, but at 15 knots, until the appropriate positions were attained. The escort vessel that was to be on the tanker’s port shoulder failed to correct its course as steered to account for wind and currents. The ensuing collision nearly capsized the escort vessel. The court found the colliding vessels each violated two COLREGS. It also found that the vessels were operating in concert and pursuant to agreed maneuvers (although this did not necessarily excuse violations of the COLREGS). It then found that the actions of the escort vessel were more serious as regards causation. The court also found that the master of the escort vessel had serious medical and alcohol problems that may have impacted his situational awareness and that the owner had a duty to conduct further inquiry before allowing this individual to serve as master of the escort vessel. The federal district court allocated 70% of the liability against the owner of the escort vessel and 30% of the liability against the owner of the tanker. In affirming this allocation, the appellate court stated: "it is precisely this type of fact-intensive decision that is committed by our precedent to the district court for its determination."

Crowley Marine Services v. Maritrans Inc., No. 07-35237 (9th Cir., July 3, 2008).