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Ninth Circuit - Jones Act is Constitutional

The Ninth Circuit struck down a challenge to the constitutionality of the Jones Act or Merchant Marine Act of 1920.  The case was Novak v. United States and the opinion can be found here.

The litigated component of the Jones Act (rest easy merchant mariners, you didn't lose your worker compensation causes of action) was the requirement that any ship carrying cargo between two points in the United States - say Long Beach and Honolulu - be "built in the United States."  

Per the Court:

Plaintiffs’ theory is that, by excluding foreign competition, the cabotage provisions have created “an essentially monopolistic Hawaiian ocean shipping market” that has resulted in “high prices” and “a de facto duopoly” of two established firms in the Hawaii-mainland shipping market. Plaintiffs contend that all Hawaii residents and businesses, including themselves, have been harmed not only by the increased shipping costs, but also by the resultant inflated cost of doing business in Hawaii because higher shipping costs lead to higher prices for imported goods. Plaintiffs assert that interstate trade between Hawaii and the rest of the United States has been significantly stifled to such an extent that the effect of the Jones Act’s restrictions amounts to “an unlawful restraint of trade and interstate commerce, thereby violating the Commerce Clause of the United States Constitution.” Plaintiffs filed this action against the United States, asserting a single cause of action under the Commerce Clause.

The basic issue on appeal is the Standing doctrine which requires you to be the right plaintiff with an injury caused by some conduct and that injury can be redressed by a favorable decision.

The Ninth Circuit rejected this challenge to the Jones Act because the harm alleged by plaintiffs - increased prices for goods purchased in Hawaii - was not caused by the Jones Act itself, but was rather based on the prices set by the shipping companies carrying the cargo.  As such, absent showing that BUT FOR the Jones Act, the prices would have assuredly been less, the Plaintiffs did not have standing to bring the challenge.

Classically, amendment of a complaint could cure a standing problem, so the Ninth Circuit analyzed whether amendment could cure the problem.  Under the federal rules, amendment of complaints should be allowed, unless it would be futile.  Or, if the amended complaint would fail for any reason, the court won't allow you to amend it.

In this case, the Ninth Circuit found the Jones Act to be a valid exercise of Congress' commerce clause powers.

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.

 

 

New Jones Act Case from 11th Circuit - Harrisson v. NCL - Appeals From Remand Orders

OK, now that Thanksgiving is out of the way, I have a queue of cases to get out to my loyal followers.

First up, a Jones Act case from the Eleventh Circuit Court of Appeals, Harrisson v. NCL (Bahamas) Ltd., original opinion can be found here.  The case is REALLY about federal appellate court jurisdiction, so if you are only interested in substantive Jones Act cases, this isn't the post for you.

The claimant brought a Jones Act suit for negligence and for maintenance and cure in state court.  NCL removed the matter to federal court and sought an order to enforce an arbitration provision in the claimant's employment contract.  The district court found the arbitration provision to be void for violating public policy and remanded the matter to state court.

NCL appealed.  Typically, federal appeals courts do not have jurisdiction to hear appeals from orders remanding cases to state court.  28 U.S.C. 1447 (d). There are two exceptions:  1) where the remand order is based on grounds other than jurisdiction or a defect in the removal procedure or 2) where there are orders that lead to, but are separate from, remand orders that have conclusive effect on the state court proceeding.

The Eleventh Circuit found that neither exception to the statutory bar existed and dismissed the appeal.

Judge Hall dissented and found this was not a remand order only, but that it was an order denying a motion to compel arbitration which would be appealable under the Federal Arbitration Act, 9 U.S.C. 16(a)(1)(C).  Under Eleventh Circuit precedent, Lindo v. NCL (Bahamas) Ltd., 652 F.2d 1257 (11th Cir. 2011), see my post here,  these arbitration provisions in employment agreements are enforceable.

Stay tuned to this one.  The Federal Arbitration Act and the cases interpreting it have the potent effect of closing the federal courts to a wide range of claims that arise under written agreements to arbitrate.  If a litigant can bring a claim in state court, if the arbitration provision is found to be a violation of public policy and the matter remanded to state court, it could circumvent the overarching federal policy in favor or arbitration.  Most courts tend to institutionally favor arbitration, with correlative impacts on the number of jury trials conducted.

New Jones Act Case from 5th Circuit - Scope of Employment

There is an adage:  bad facts make bad law.  But, there is a corollary that not every wrong has a remedy.

The Fifth Circuit has a new Jones Act case that highlights this corollary.  The case is Beech v. Hercules Drilling Company, LLC and it can be found here.

Facts:  two oil rig workers.  One brings a firearm to the rig (in violation of company policy) and shows it to another worker.  The gun inadvertently goes off mortally wounding the worker.  Worker's widow brings a Jones Act suit and obtains a judgment at trial.

On appeal, the employer argued that the injury was not in the scope of the firearm owner's employment.

Analysis:  as an initial matter, it is crucial to note that the Jones Act is not a worker compensation statute.  It is liberally construed in favor of injured workers, but Jones Act liability is rooted in negligence, not strict liability.

So, in this case, the employer is only vicariously liable for its employees, when those employees are acting within the scope of their employment.  As the court noted:

One of those common law principles that still carries “great weight” in the FELA and Jones Act context is that an employer may be vicariously liable for its employee’s negligence under the doctrine of respondeat superior so long as the negligence occurred “in the course of employment.” See, e.g., Landry v. Oceanic Contractors, Inc., 731 F.2d 299, 303 (5th Cir. 1984); Sobieski v. Ispat Island, Inc.,
413 F.3d 628, 632 (7th Cir. 2005) (“[V]icarious liability may extend to FELA or Jones Act employers under the traditional doctrine of respondeat superior.

So, the question turns on whether the firearm owner was acting in the scope of his employment.  On the applicable legal test, the circuits appear to have split.  The Seventh Circuit, in Baker v. Baltimore & Ohio R.R. Co., 502 F.2d 638, 641-42 (6th Cir. 1974) adopted a business interests test where an employee could be in the scope of his/her employment when actually in the service of his employer AND doing those things incident to that service.

Ultimately, the Fifth Circuit analyzed the facts under both tests and found that the firearm owner was not acting in the scope of his employment, nor was his handling of the firearm incidental to his employment.

 

SCOTUS - New Cert Petition Regarding Damages in Maritime Case

Hat tip to SCOTUSBLOG for their Petition of the Day.

This is an interesting case that arises in the maritime context, but could have broad impact across all civil litigation.  The case is Icicle Seafoods, Inc. v. Clausen. 

The Questions Presented are:

1. Whether, in determining the ratio between compensatory and punitive damages for purposes of applying federal limits on punitive damages, court awarded attorney’s fees are properly included as compensatory damages.

2. Whether, and to what extent, punitive damages in maritime cases may exceed the 1:1 ratio between compensatory and punitive damages applied by the Court’s Exxon decision.

This case arises from the Washington Supreme Court in a decision regarding the Jones Act and maintenance and cure remedy.  The Washington court had approved an award of attorneys' fees for a willful and wanton failure to pay maintenance and cure.  The court then affirmed a punitive damage award but did not apply the Exxon Shipping Co. v. Baker compensatory damages to punitive damages ratio, instead allowing a roughly 3:1 ratio.

One to watch for sure. 

New Jones Act Case From Fifth Circuit - Manderson v. Chet Morrison Contr, Inc.

New maritime personal injury case from the Fifth Circuit Court of Appeals.  It is Manderson v. Chet Morrison Contr, Inc., 2012 U.S. App. LEXIS 18 and can be found here.

At first blush, this seems like a straightforward case involving Jones Act and Maintenance and Cure claims.  But it sets out the law for personal injury claims and defenses as well as attorney's fee claims for maintenance and cure claims.

New Jones Act Case From Fourth Circuit - Aggarao v. MOL Ship Management Company

New Jones Act case from the Fourth Circuit Court of Appeals.  The case is Aggarao v. MOL Ship Management Co., 2012. U.S. App. LEXIS 5525 and the original opinion can be found here.

Facts:  A seaman was injured onboard the M/V Asian Spirit in Chesapeake Bay, near Baltimore, Maryland.  The "devastating" injury resulted in paraplegia.  His employ was pursuant to an employment agreement which contained an arbitration provision, a choice of law provision and a claims provision.  After his initial treatment, defendants offered to repatriate the seaman to the Philippines, pursuant to his employment agreement.  Out of concern for his followup medical care, the seaman refused. He eventually brought suit for maintenance and cure, unseaworthiness, wages, Jones Act and general maritime law.  The Defendants sought to compel arbitration in the Philippines, pursuant to the employment agreement.  The trial court concluded that the arbitration provision governed the dispute and found venue in the United States wanting.

Issue on appeal:  does the arbitration provision, as enforced by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, preclude jurisdiction in the federal courts of the United States?

Analysis:  the Fourth Circuit enforced the arbitration provision and affirmed the trial court's decision, but it also vacated the dismissal by the trial court, holding that a "stay" of the litigation pending resolution of the arbitration was appropriate.  Further, the Fourth Circuit remanded the case to hear Plaintiff's maintenance and cure which, the Court found, were required to be heard (on Plaintiff's motion for preliminary injunction) as to maintain the status quo vis a vis his medical condition.

New Limitation Case From Fifth Circuit - Eckstein Marine Service v. Jackson

Those pesky statutes of limitation.  Usually such statutes operate to prevent plaintiff's untimely claims.  But, in this case, the statute of limitation acted to preclude a defendant's limitation of liability defense.

The case is new from the Fifth Circuit Court of Appeals, it is Eckstein Marine Service v. Jackson, 2012 U.S. App. LEXIS 3480 and can be found here.

In the maritime context, federal law allows shipowners to limit their liability for certain actions by bringing a limitation action in federal court.  46 U.S.C. 30501.  With certain exceptions, a vessel owner can have their liability capped at the value of the vessel.  But, the limitation statute has a six month statute of limitation. [Author note:  not intended to be funny, but it is].

In this case, the shipowner filed the limitation action eight and half months after it was served with a state court complaint.  The trial court dismissed and the appeals court affirmed.

On appeal, the owner argued that the state court complaint did not give the owner notice that its liability could exceed the value of the vessel.  The owner cited a Second Circuit case, Complaint of Morania Barge No. 190, which held that an owner only needed to file the limitation action if there was a "reasonable possibilty" that its liability would exceed the value of the vessel.

The appeals court reviewed the allegations in the state court complaint noting that the injuries alleged were "permanent and catastrophic" with damages sought for past loss of earning, future loss of earning capacity, disability, disfigurement, medical expenses and pain and mental anguish.  No dollar figure was sought, so the owner argued it wasn't on notice until much later (when the statute of limitation would not bar its limitation action).

The appeals court noted that a "reasonable possibility" is not a particularly "stringent" standard and affirmed the dismissal of the limitation action.

New Jones Act Case From Fouth Circuit - Holloway v. Pagan River Dockside Seafood

New Jones Act case from the Fourth Circuit Court of Appeals.  While the Jones Act claim is what prompted this post, it is actually more of a civil procedure case that goes to the heart of federal court jurisdiction, so Civ Pro wonks- take heed.

The case is Holloway v. Pagan River Dockside Seafood, 2012 U.S. App. LEXIS 3897 and the original opinion can be found here.

Facts:  Plaintiff had an "oral" contract to "lease" a boat from Defendant who then paid him for his catch of oysters or crabs and deducted a "fee" for the lease payment.  While unloading his catch, he was injured by a conveyor belt.  He brought suit as a Jones Act seaman against his "employer."

The trial court granted a motion to dismiss for want of subject matter jurisdiciton under Federal Rule of Civil Procedure 12(b)(1).  The notional "employer" argued that the Plaintiff had not satisfied the statutory requirement of proof that he was a Jones Act seaman in their employ.  The trial judge granted the motion and Plaintiff appealed.

This case turns on the difference between dismissal for lack of subject matter jurisdiction, under 12(b)(1), and dismissal for failure to state a claim, under 12(b)(6). 

The Fourth Circuit thought everybody got it wrong: 

The parties, and indeed the district court, have quite blurred the fundamental difference between a Rule 12(b)(1) motion for lack of subject matter jurisdiction and a Rule 12(b)(6) motion for failure to state a claim, failing to recognize the distinction between the Rules.

 

 

 

 

 

 

 

Ouch.  Bench slap.

The opinion goes on to explain that jurisdiction is different than having a defective complaint.  Plaintiff's failure to allege facts that prove his statutory cause of action, i.e. Jones Act seaman status, should be resolve by a motion challenging the sufficiency of the complaint; i.e. 12(b)(6) - failure ot state a claim, 12(c) - judgment on pleadings, or 56 - summary judgment; and not on jurisdictional grounds.

Jones Act suits are claims that the federal courts have the power to hear.  Ergo, the courts have jurisdiction to hear them.  If plaintiffs cannot prove they are entitled to relief under the Jones Act, then defendants can file an appropriate motion, or if there are contested facts at issue, the court must try them.

New Jones Act Case from Fifth Circuit - Manderson v. Chet Morrison

New Jones Act case from the Fifth Circuit Court of Appeals.  It is Manderson v. Chet Morrison Contractors, Inc., 2012 U.S. App. LEXIS 18 and can be found here.

The facts don't seem to be controversial:  an engineer on a vessel was hospitalized and received treatment for ulcerative colitis, diabetes and a liver condition.  He did not return to work.  He brought a Jones Act suit, claiming relief under general maritime law, the Jones Act, maintenance and cure and for attorney's fees.

At trial, the claimant was denied relief for his Jones Act and general maritime law claims, but was awarded relief for maintenance and cure and attorney's fees related to that claim.  In awarding attorney's fees, the trial court found that the employer was arbitrary and capricious in failing to pay maintenance and cure payments.

On appeal, the claimant challenged the denial of Jones Act and his maritime law claims, but the appeals court agreed with the trial court's handling of those claims.

As to maintenance and cure, the employer challenged the cure award under the "collateral source rule."  For those non-tort types out there, the collateral source rule bars a tortfeasor from reducing the damages awardable to the plaintiff by referencing sources of compensation (like health insurance) that are independent of the tortfeasor. Therein is the rub:  maintenance and cure is a very, VERY strict requirement for employers of seamen.

So, the court did not allow a reduction for medical payments paid by the claimant's health insurer.  As anyone who has read their health insurer's explanation of benefits (THIS IS NOT A BILL) form, what doctors charge is not what insurance companies pay.  The court in this instance only awarded maintenance and cure damages for what was actually paid to the doctors.  SIDE NOTE:  for those that think it unfair to pay the claimant for injuries paid for by a third party, under Hawaii law, the health insurer has a statutory, contractual and equitable lien against any recoveries that relate to injuries they provided benefits to treat. 

The court rejected the trial court's award of attorney's fees.  In responding to the demand for maintenance and cure, the employer referred the demand to its carrier which investigated the claim.  In two months, the claim was brought.  Based on these facts, the appeals court declined to find the employer's position arbitrary and capricious.