hawaiioceanlaw.com

Bills at the Lege: Barrels, Boom, Unlimited Liability and Molasses

The Hawaii Legislature recently introduced several bills relating to the ocean environment and maritime industry here.  

First up, an increase in barrel tax from five cents per barrel to fifteen.  Follow it here.

Next, a requirement that barge-based fuel transfers use containment boom during transfer operations.  Follow it here.

And, the biggie, an amendment to Hawaii Revised Statutes Chapter 342D Water Pollution which provides for "unlimited liability" for any owner or operator of a vessel engaged in the commercial transport, storage on vessel or transfer of any "oil, hazardous substances, or unnatural or artificial substance" resulting from the spill or incurred by the State in responding to the release.  And, for those of you who learned a lot about the molasses trade in the past year, the bill defines "unnatural or artificial substance" as "the release of any substance in a quantity, duration, or form that disrupts or causes damage to the natural ecosystem of the ocean."

Finally, if you were wondering whether the State was going to proceed against Matson for the molasses spill, you should note that the Attorney General is seeking an emergency appropriation for hiring experts and outside counsel, for: "its impending lawsuit by the State against Matson for damages caused by the molasses spill in Honolulu Harbor."

Are Cruise Ships Public or Private Nuisances? S. Carolina SCT Says No Standing to Challenge

It is a rare day that my legal interests of zoning law and ocean governance are discussed in a single case, but thanks to the South Carolina Supreme Court, I must say:

 

The case is Carnival Corporation v. Historic Ansonborough Neighborhood Association and the original opinion can be found here.

In South Carolina, several citizen's groups and interested associations brought a suit against a cruise ship operator alleging nuisance and zoning violations and sought an injunction.  The groups complain about the use of Charleston's terminal to berth the Fantasy.  The groups alleged that the noise pollution and passenger operations disrupted the historic district where it berthed.

Carnival (and the municipal defendants) filed a motion to dismiss asserting that the plaintiffs failed to state a claim because they lack standing and that the cruise ship operations were not governed by the zoning ordinances asserted.  

Strangely, before the trial court decided the motion, the case was transferred to the South Carolina Supreme Court, invoking the court's original jurisdiction.    That court ordered a special referee to conduct a hearing and then make a recommendation on the motion to dismiss.

The court, reviewing the special referee's recommendation, found that the plaintiffs lacked standing to assert any of the claims brought.  The court found that the plaintiffs claimed only generalized grievances and not particularized harm, which is fatal to a party's standing to proceed.  All of the environmental impacts, traffic, smokestacks, soot, zoning, other environmental laws are suffered by the public at large and are not particular to any one person or group.  [Under S. Carolina law, typically the State itself makes these claims].

As to the zoning claims, S. Carolina law did provide for standing for violations of zoning ordinances, but only for adjacent property owners.  Added to the lack of particular damage to any person or group, the court found standing lacking to make these claims.

The court concludes by imploring the plaintiffs to seek redress elsewhere:

In our constitutional system of government with its separation of powers, courts exercise the limited constitutional function of the "judicial power." S.C. Const. art. V, § 1. Accordingly, courts are limited to resolving cases and the powers inherent in that function. Courts are not bodies for the resolution of public policy and generalized grievances. Harms suffered by the public at large, like those Plaintiffs allege here, are to be remedied by the legislative and executive branches. If existing laws and regulations or their enforcement fail to protect the public from harm, it is incumbent upon the public to seek reform through their elected officials or failing that, at the ballot box.

Sound advice.

New 11th Circuit Case on Seamen's Wage Act - Wallace v. NCL

The Eleventh Circuit Court of Appeals just handed down a decision regarding a wage claim brought by several stewards onboard a NCL cruise ship.  The decision is Wallace v. NCL and the opinion can be found here.

The decision is lengthy but wage appeals are pretty rare, hence this post.

The summary is:

This appeal involves the claims of six senior stateroom stewards (“Seafarers”) who worked aboard cruise ships operated by NCL. They assert that NCL has not paid them their full wages because their compensation does not take into account the amounts they were required to pay their helpers to complete their work on embarkation days. Consequently, they contend NCL is liable for compensatory and penalty wages under the Seaman’s Wage Act, 46 U.S.C. § 10313, et seq. (“the Act”). The district court awarded them compensatory but not penalty wages. The only substantive issue in this appeal concerns the Seafarers’ argument that the district court erred in not awarding them penalty wages.

After careful review, and with the benefit of oral argument, we affirm.

Enjoy.

U.S. Liability for Damage to Vessels Suspected of Drug Smuggling - Ninth Circuit Decision

The Ninth Circuit Court of Appeals just handed down a decision relating to the federal government's liability for suspected drug smugglers' vessels, damaged during the law enforcement investigation.  The case is Tobar v. United States and the opinion can be found here.

The U.S. Coast Guard suspected an Ecuadorian fishing boat of illicit activities.  With authorization of the Ecuador government, the Coast Guard boarded the boat, searched for drugs and towed the boat to Ecuador.  The crew brought various tort claims against the U.S. government.

The government argued that it was immune from the claims of Ecuadorian citizens.The trial court agreed.

On appeal, the Ninth Circuit found that the United States had waived sovereign immunity under the Public Vessels Act.  Under that Act, the United States does allow for citizens of foreign countries to bring claims in federal court if their own country would give a forum to a United States citizen.  This is called reciprocity.  So, the litigants put forth evidence of what Ecuador law would be if an American brought the same damage suit in its courts.  The Ninth Circuit found that Ecuador would give a forum.

The government then sought to avoid liabilty by arguing that the discretionary function exception to the Federal Tort Claims Act barred liability.  If the government has the discretion to act or not act, then liability cannot be found.  But, the Public Vessels Act does not have an explicit discretionary function exception, like the FTCA does.  The Ninth Circuit, and other circuits, have read into the Public Vessels Act, a discretionary function exception and the Ninth Circuit followed that logic here.

Finding that the government did not have discretion to NOT pay damage claims, the Ninth Circuit remanded the matter to the trial court for a trial.

I don't see any circuit splits, but the Supreme Court may be interested in a court-inserted exception to a statute.  Stay tuned.

Coast Guard - You Want Your Boat Back? We Set Bond Amount - Angelex v. US

Hot off the Press:  the Fourth Circuit Court of Appeals just issued a decision arising out of a "Magic Pipe" case and the shipowner's attempt to post a bond allowing the offending vessel to sail.  The case is Angelex, Ltd. v. United States of America and the opinion can be found here. 

The United States is a signatory to the MARPOL treaty of 1978 which seeks to eliminated international pollution from the marine environment.  To implement the treaty, Congress enacted the "Act to Prevent Pollution from Ships", codified at 33 U.S.C. 1901-15.  The Act and the regulations implemented under the Act's authority require ships to maintain an Oil Record Book which records discharges of oil. During a Coast Guard inspection of Angelex's vessel, the inspector discovered that the oily water separator was bypassed and a crewmember advised the inspector that oily water was discharged. That discharge was not noted in the Oil Record Book.

As is customary, the Coast Guard requested that the Customs Service withhold "clearance" so that the vessel could not depart from the U.S. port.  The Act does allow shipowners to post a bond which, if approved, would allow the vessel to sail.  The Coast Guard and shipowner tried to negotiate a bond amount, but could not reach an agreed upon sum.  The shipowner brought suit and with the judge's assistance reached an agreement as to bond amount, subject to approval by Coast Guard Headquarters.  Headquarters did not approve the agreed-upon conditional amount.  The judge issued an order directing the bond amount and other terms.  The government appealed.

The Fourth Circuit overruled the district judge's decision.  It found that under the Act to Prevent Pollution from Ships, the Coast Guard had fully discretionary authority to set the bond amount.  Therefore, the courts had no jurisdiction under the Administrative Procedures Act.  Also, because the statute had a provision that allowed a claim against the government for unreasonable detention.  This safeguard against overreach by the government made the shipowner's requested injunctive relief to be beyond the federal court's power.

Liability for Oil Spills, Warranties for Safe Berth - Third Circuit Decision in Athos I

The Court of Appeals published a decision in the Athos I oil spill.  It is a consolidated case arising from a limitation action and an action to apportion liability for oil spill clean up costs, to the tune of $180 million.

The opinion is lengthy and I'm still digesting it.  But, it can be found here and is a must read for practitioners involved in litigation over pollution cleanup cost recovery.

The introduction is reproduced below:

As the oil tanker M/T Athos I neared Paulsboro, New Jersey, after a journey from Venezuela, an abandoned ship anchor lay hidden on the bottom of the Delaware River squarely within the Athos I‘s path and only 900 feet away from its berth. Although dozens of ships had docked since the anchor was deposited in the River, none had reported encountering it. The Athos I struck the anchor, which punctured the ship‘s hull and caused approximately 263,000 gallons of crude oil to spill into the River. The cleanup following the casualty was successful, but expensive. 

This appeal is the result of three interested parties attempting to apportion the monetary liability. The first party (actually two entities consolidated as one for our purposes) includes the Athos I‘s owner, Frescati Shipping Company, Ltd., and its manager, Tsakos Shipping & Trading, S.A. (jointly and severally, "Frescati"). Although Frescati states that the spill caused it to pay out $180 million in cleanup costs and ship damages, it was reimbursed for nearly $88 million of that amount by the United States (the "Government")—the second interested party—pursuant to the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq. In order to recoup the unreimbursed losses, Frescati made claims in contract and tort against the third interested party—a set of affiliates known as CITGO Asphalt Refining Company, CITGO Petroleum Corporation, and CITGO East Coast Oil Corporation (jointly and severally, "CARCO")—which requested the oil shipped on the Athos I and owned the marine terminal where it was to dock to unload its oil. Specifically, Frescati brought a contract claim for CARCO‘s alleged breach of the safe port/safe berth warranty (jointly and severally, ―safe berth warranty‖) it made to an intermediary—Star Tankers, Inc.—responsible for chartering the Athos I to CARCO‘s port, and alleged negligence and negligent misrepresentation against CARCO as the owner of the wharf the Athos I was nearing when it was holed. The Government, as a statutory subrogee that stepped into Frescati‘s position for the $88 million it reimbursed to Frescati under the Oil Pollution Act, has limited its claim for reimbursement from CARCO to Frescati‘s contractual claim pursuant to a limited settlement agreement.

Following a 41-day bench trial, the District Court for the Eastern District of Pennsylvania held that CARCO was not liable for the accident under any of these theories. The Court, however, made no separate findings of fact and conclusions of law as required by Federal Rule of Civil Procedure 52(a)(1). That calls for a remand to set out these mandated matters. However, for the sake of efficiency, we discuss—and, to the extent necessary, make holdings on—the legal issues appealed.

In regard to the contractual safe berth warranty, the Court determined that Frescati (and the Government as a subrogee) could not recover on their contractual claims. First, Frescati was not a party to the agreement that contained the warranty between CARCO and Star Tankers, and was not an intended beneficiary of that agreement. Furthermore, even if Frescati could claim the protection of the warranty, it was only a promise by CARCO to exercise due diligence and not an unconditional guarantee; moreover, sufficient diligence existed here. In any event, the warranty was excused because CARCO specified the port ahead of the Athos I‘s arrival, placing the burden on the Athos I‘s captain to accept it as safe or reject it under what is called the ―named port exception."

For reasons elaborated below, we disagree with all three of these rulings. Instead, we hold that the Athos I—and by extension, its owner, Frescati—was an implied beneficiary of CARCO‘s safe berth warranty. We conclude as well that the safe berth warranty is an express assurance of safety, and that the named port exception to that warranty does not apply to hazards that are unknown to the parties and not reasonably foreseeable. We cannot be sure, however, that this warranty was actually breached, as the District Court made no finding as to the Athos I‘s actual draft nor the amount of clearance actually provided. 

If on remand the District Court rules in favor of Frescati on its contractual warranty claim, its negligence claim becomes unnecessary. If this issue is reached, we do not agree with the District Court‘s conclusion that CARCO cannot be liable in negligence because the anchor lay outside the approach to CARCO‘s terminal—the area in which CARCO had a duty to exercise reasonable care in proving a safe approach. As such, the District Court would need to resolve the appropriate standard of care required, whether CARCO breached that standard, and if so, whether any such breach caused the accident. Conversely, we find no error with the Court‘s holding that CARCO‘s alleged misrepresentation as to the depth of its berth was geographically (and hence factually) irrelevant to the ultimate accident. In addition, we conclude that the Government has waived reliance on a partial settlement agreement with CARCO that, the Government contends, precludes CARCO from making certain equitable defenses to the Government‘s subrogation claims. In this context, we affirm in part, and vacate and remand in part for additional factfinding on the contractual (and possibly negligence) claims.

Fifth Circuit En Banc Decision on Longshore Act

The Fifth Circuit, en banc, just reversed an earlier panel decision in a Longshore Act case which turned on the situs of the injury and whether it met the jurisdictional requirements of the Longshore and Harbor Worker Compensation Act.

En Banc decision is here.

Per the Court:

In particular, the BRB found that the claimant’s employment activities with NODSI took place in an area or location “adjoining” navigable waters“customarily used by an employer in loading [or] unloading . . . a vessel” and therefore NODSI’s facility met the situs requirement of the Act. We conclude that because the NODSI facility where Mr. Zepeda worked did not border on navigable waters, it was not a covered situs and Mr. Zepeda is entitled to no benefits under the Act from Petitioner NODSI. We therefore vacate the award of the BRB as against NODSI and remand for further proceedings.

Circuit Split ALERT....  Stay tuned.

New Ninth Circuit Admiralty Case - Himalaya Clause, Bills of Lading and Statutes of Limitation

The Ninth Circuit just issued a decision regarding guarantor liability for unpaid amounts following shipment of goods under several bills of lading.

The case is Clevo, Co. v. Hecny Transportation, Inc. and the original opinion case be found here.

From the court's syllabus (which is a handy-dandy tool the Ninth Circuit is using to provide a snapshot of the opinion:

Affirming the district court’s summary judgment in an admiralty action filed bya seller of computer parts, the panel held that misdelivery claims against a freight forwarder were barred by a one-year limitations period set forth in bills of lading.

The panel held that a guarantee, which established no express statute of limitations, was initially effective to place the seller and the freight forwarder in direct contractual privity. That initial relationship was modified when the bills of lading issued. By operation of a Himalaya clause, the benefit of the one-year statute of limitations in the bills of lading was extended beyond the non-vessel-operating common carrier that issued the bills of lading to the freight forwarder, an agent of the carrier.

Houseboat Redux - Eleventh Circuit Reinstates Lawsuit

According to this report in the Miami Herald ("Houseboat activist Fane Lozman wins again; says he will seek million from city over civil rights"), the fellow who recently prevailed in the U.S. Supreme Court in Lozman v. City of Riviera Beach, No. 11-626 (Jan. 15, 2013) isn't giving up.

The Herald reports:

The 11th Circuit Court of Appeals reinstated a 2008 lawsuit Lozman filed against the city, claiming it repeatedly violated his civil rights by hiring a private investigator to trail him, kicking him out of public meetings and, at one point, having him arrested when he refused to leave.

"Today felt just a tad lower than winning at the Supreme Court," Lozman said shortly after the decision was announced. "The Supreme Court ruling was a 10. Today was a 9½."

...

But, while the high court’s ruling may have stung more, the 11th Circuit’s could be more costly.

When the nation’s high court in January ruled that the city improperly used ancient maritime law to seize and ultimately destroy Lozman’s 60-foot two-story floating home, the possible damages were somewhat fixed. City officials were faced with the prospect of paying Lozman for the $167,000 he claims it would cost to replace his home, the $300,000 he spent for attorneys and an undetermined amount to reimburse him for the money he shelled out for living expenses after his home was destroyed.

However, he said, if he succeeds in proving that the city violated his constitutional rights, the damages could skyrocket.

"If I was the city, I’d be concerned," he said. "That’s a seven-figure sum.

Download the 11th Circuit opinion here.

Lozman v. City of Riviera Beach, No. 11-15448 (11th Cir. Apr. 1, 2013)

New Maintenance and Cure - 5th Circuit - No Restitution for Employers

There is something about the sea that makes humans poetic.

As a corollary, there is something about maritime cases that make judges very eloquent. Case in chief - consider this closing from Boudreaux v. Transocean Deepwater, Inc., Maintenance and Cure decision of the Fifth Circuit Court of Appeals:

We are offered no reason to depart from precedent. There is only the change of advocates and judges, by definition irrelevant to the settling force of past jurisprudence — always prized but a treasure in matters maritime. All this against the cold reality that the sea has become no less dangerous, and the seaman no less essential to maritime commerce. 

As my faithful readers are aware, seamen enjoy a worker-compensation-type benefit called maintenance and cure.  It is an age-old common law duty on employers of seamen to treat and care for their injured sailors.

In this case, an employee brought a maintenance and cure claim against his employer.  The employee failed to disclose serious back problems in his pre-employment medical questionnaire, affirmately saying "no" to several inquiries about his back trouble.  Less than five months after his hire, he claimed an injury to his back.  The employer paid maintenance and cure benefits for five years.  The employee later brought suit for additional maintenance and cure and for punitive damages.  The employer obtained summary judgment on the employee's claim after discovery revealed the non-disclosure.  Then, the employer brought a counterclaim for restitution, seeking the earlier maintenance and cure payments made to the employee.

The district court, assuredly mindful of the facts, recognized a heretofore unknown right of restitution in maritime law, and granted summary judgment on the counterclaim.  The Fifth Circuit reversed this decision and found that maritime law has never recognized such a cause of action and policy reasons underlying the maintenance and cure claim vitiated any attempt to move the law towards recognizing such a cause of action.