Michael G. Chalos Presents at Gallagher Marine Systems 2021 North American Regulatory Seminar

Michael G. Chalos of Chalos & Co, P.C. attended and presented at the Gallagher Marine Systems (GMS) 2021 North American Focus Training and Regulatory Seminar on August 19, 2021 in Galloway, New Jersey. Mr. Chalos presented on the best practices for voluntary reporting of potential non-compliance issues and the consequences of failing to do so.  enactment and enforcement of IMO 2020 in the United States.

To learn more about GMS, please visit their website at https://www.gallaghermarine.com/.

For more information on vessel compliance and voluntary reporting in the United States (and elsewhere), please do not hesitate to contact us with any questions at  info@chaloslaw.com.

Updated COVID-19 Courthouse Protocols in New York

Due to the recent uptick in COVID-19 cases in the U.S., both State and Federal Courthouses are continually updating their protocols to ensure safe access to the Courts.  We briefly summarize the current procedures being implemented in New York.

Both the Southern District of New York (“SDNY”) and New York state courts continue to prohibit entry to each courthouse for individuals who have flu-like symptoms; have recently tested positive for COVID; have been directed to quarantine, isolate or self-monitor at home; had close contact with a person testing positive for COVID; or have returned from international travel within the last 10 days (unless you returned 8-10 days ago and took a viral COVID test 3-5 days after  return).  While each Court is maintaining stringent guidelines if potentially exposed to COVID-19, the requirements for those that are vaccinated vary.

  • Southern District of New York:
    • If unvaccinated, visitors are required to have their temperature taken and answer questions related to potential exposure to COVID-19 to determine if the visitor may be allowed to enter.
    • All those in the courthouse are required to wear a face mask regardless of vaccination status.
    • Testifying witnesses and attorneys speaking from semi-enclosed podiums outfitted with HEPA filters may be allowed to remove their face mask at the discretion of the presiding Judge.
    • Everyone must adhere to safe social distancing rules, by standing or sitting at least six (6) feet away from other individuals, and abide by all health and hygiene signage throughout the courthouses, including signage regarding masks, social distancing, occupancy restrictions, and hand washing.
  • New York State Courts:
    • Beginning on September 7, 2021, all non-vaccinated court employees will have to submit to weekly COVID-19 testing. Vaccinated staff will not be tested and are able to obtain a special card which verifies their vaccination status.
    • To enter the Court, one will need to show proof of vaccination or wear a mask.
    • Vaccinated visitors are not required to wear a face mask.  Unvaccinated Court Users are required to submit to a temperature screening and a COVID-19 risk assessment inquiry before entering a court facility and will be required to wear a mask, maintain social distancing, and follow the health and safety instructions of court personnel.
To read a copy of the SDNY Ninth Amended Standing Order, please click here.

To read a copy of the SDNY Bankruptcy Court’s General Order, please click here.

To watch Chief Judge DiFiore’s most recent video message, please click here. For a transcript of the message, click here.

If you have any questions, contact us at info@chaloslaw.com

Failure to follow Service Requirements Leads to Vacatur of Default Judgment

Petitioner Commodities & Minerals Enterprise Ltd. (“Commodities & Minerals”) entered into a Transfer Management Contract with CVG Ferrominera Orinoco, C.A. (“CVG”) to manage and operate CVG’s iron ore transfer system.  CVG is a Venezuelan state owned company responsible for the exploration of iron ore.  Following allegations of breach of the underlying Transfer Management Contract, Commodities & Minerals commenced arbitration pursuant to the contract.  Commodities & Minerals won a final award against CVG in the amount of $188 million dollars in damages, plus interest.

On December 19, 2019, Commodities & Minerals filed a petition in the Southern District of Florida to recognize and confirm the award as a judgment of the Court.  Petitioner served CVG with a copy of the petition, but did not serve a summons issued by the Clerk of the Court.  CVG never appeared in the action and the Court entered an Order confirming the award and granting default judgment against CVG on or about September 23, 2020.  Shortly thereafter, Respondent CVG filed a motion to vacate the Order and final judgment on the grounds that Commodities & Minerals failed to properly serve the petition with a summons as required by the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. §1608.  Commodities & Minerals argued in response that service was properly effectuated because: (1) service of the petition complied with the Federal Arbitration Act (“FAA”), (2) CVG had actual notice of the action, and (3) service was proper under FSIA.

District Judge Darrin P. Gayles of the United States District Court for the Southern District of Florida rejected Petitioner’s arguments and vacated the judgment.  The District Court held that since the FAA does not provide any guidance on how to serve an instrumentality of a foreign state, the proper procedural rule to consult for compliance with service requirements is Fed. R. Civ. P. Rule 4.   Pursuant to Rule 4(j), a party must serve an instrumentality of a foreign state in accordance with 28 U.S.C. §1608, which requires that a summons be served on a party with the complaint (i.e., petition). The Court concluded that Commodities & Minerals failed to comply with a material requirement of FSIA by its failure to serve the petition with a summons. Furthermore, the District Court found that under FSIA, actual notice must be accompanied by substantial compliance with the statute, simply giving ‘notice’ or ‘potential notice’ of the action cannot substitute for the statutory requirement to serve a summons with the petition. The Court held that Commodities & Minerals’ failure to serve CVG with a summons was fatal to its position and vacated its prior Order and Default Judgment.  Judge Gayles also pointed out that in a related action between the parties, service of process in a similar manner been held insufficient by District Judge Goodman due to a failure by Commodities & Minerals to obtain and serve a summons on CVG in that action.

As of July 20, 2021, Commodities & Minerals has re-filed its petition against CVG to recognize and enforce the arbitration award and has obtained a summons issued by the District Court Clerk to effectuate service in compliance with Rule 4 and the FSIA.

To read a copy of the Order, please click here. For more information on the Recognition and Enforcement of Arbitration Awards, please do not hesitate to contact us at info@chaloslaw.com.

Second Circuit Holds PDVSA Waived Ability to Argue Impossibility Defense based upon U.S. Sanctions  

On July 9, 2021, the United States Court of Appeals for the Second Circuit issued a summary order affirming the decision issued by the United States District Court for the Southern District of New York granting a partial final judgment against Venezuela’s state owned oil company, PDVSA Petroleo, S.A. (“PDVSA”), relating to its default on a $150 million Note issued by Plaintiff, Dresser-Rand Company (“Dresser-Rand”).

The Note Agreement which PDVSA failed to pay under specifically stated that payment was “absolutely, irrevocably, and unconditionally guaranteed,” and “the obligations of the Guarantor hereunder are unconditional and absolute and not subject to any reduction, limitation, impairment or termination for any reason.”  The Note Agreement further stated that the obligations of the Guarantor (PDVSA) were not subject to any “defense or setoff, counterclaim, recoupment or termination, whatsoever by reason of the invalidity, illegality or unenforceability of any of the guaranteed obligations.”  The Second Circuit reviewed the language contained in the Note Agreement in accordance with New York law which holds that a contractual guarantee stated by plain terms, in broad, sweeping and unequivocal language may foreclose any challenge to the enforceability and validity of the documents which establish a defendant’s liability for payments arising under an agreement as well as any other possible defenses.

PDVSA sought to argue in the Second Circuit that it could not have waived impossibility or illegality of performance as a defense because U.S. Sanctions prohibited PDVSA from making payments to Dresser-Rand absent a license granted by OFAC.  PDVSA further argued that the U.S. Sanctions blocking transactions between U.S. entities and PDVSA made it legally impossible for it to pay under the Note Agreement after it first defaulted on its payments in 2019.

The Second Circuit held that in view of the plain and broad language contained in the Note Agreement, PDVSA’s wavier of defenses in the Note Agreement, and the established enforceability of such provisions in New York, PDVSA had waived its impossibility defense.  The Second Circuit also held that by failing to timely raise the impossibility defense in the District Court, PDVSA forfeited its argument that its breach of the Note Agreement was excused for reasons of public policy and the potential illegality of making payments due to the U.S. sanctions in place at the time of default.

To read a copy of the Summary Order, please click here.

If you have any questions, contact us at info@chaloslaw.com

Biden Administration Weighs in on 28 U.S.C. § 1782 Dispute

As previously reported, there is a split in U.S. courts on the issue of whether a district court may order a person or entity in its district to give discovery (either documents or a deposition) for use in a foreign private arbitration pursuant to 28 U.S.C. § 1782. The Fourth and Sixth Circuit Courts of Appeals have held that the statute permits the use of the discovery tool even when the underlying proceeding is a foreign private arbitration. The Second, Fifth, and Seventh Circuit Courts of Appeals have ruled that private arbitral bodies are not “tribunals” under the statute and therefore the use of Section 1782 is not permitted in aid of a foreign arbitration. The U.S. Supreme Court has only addressed Section 1782 once in a decision from 2004, but that matter did not specifically address the question of whether discovery was permissible for use in a foreign arbitration. However, the U.S. Supreme Court did write that the “tribunal” definition in the statute was “unbounded by categorical rules” and quoted from a 1965 law review article by Professor Hans Smit which stated that the legislative history of the statute intended to include “arbitral tribunals.” Intel Corp. v. Adv. Micro Devices, Inc., 542 U.S. 241 (2004). The Court’s dicta in the Intel Corp. decision led to many different results in the lower courts around the United States.

Given the split of authority among the Circuit Courts on the issue, the U.S. Supreme Court granted certiorari on March 22, 2021 in the case arising from the Seventh Circuit Court of Appeals. Servotronics Inc. v. Rolls-Royce PLC, et al., No. 20-794. The petitioner and respondents have filed their respective opening briefs on the merits of the appeal and numerous third parties have filed amicus curiae briefs for the Supreme Court’s consideration on the issue. On June 28, 2021, the United States of America, through the Solicitor General’s office filed an amicus curiae brief in support of the respondents. The government argued that the United States has a substantial interest in the resolution of the question and application of Section 1782, because the statute plays an important role in “encouraging international cooperation, facilitating the resolution of foreign disputes, and fostering international comity.” The United States utilizes Section 1782 to present to courts letters rogatory and letters of request that are received through the Department of State or the Department of Justice. The government’s brief argues that a review of the background of the existing law and Congress’ objective in undertaking the statute’s revisions in 1964 was meant to merely put foreign quasi-judicial entities (and intergovernmental bodies) on the same footing with foreign courts. Bluntly, in no way was it meant to sweep up private, commercial foreign arbitrations into Section 1782’s ambit.

The government offers two (2) public policy arguments in further support of the position that Section 1782 does not apply to foreign private arbitration. First, that such a broad interpretation of “proceeding in a foreign or international tribunal” would create significant tension with the Federal Arbitration Act which narrowly limits available discovery in connection with arbitration. The government argues that by permitting discovery in aid of foreign arbitrations under Section 1782, parties to foreign arbitration would have broader access to court-assisted discovery than parties in domestic arbitration. In addition, the government argues that if the Supreme Court were to permit such a broad interpretation, it could potentially be used by a future party in an “investor-state arbitration.” Investor-state arbitration permits a foreign investor to arbitrate a claim directly against the government of the state in which the investment is held or was sought to be made. The government argues that investor-state arbitrations share many of the features of private commercial arbitration and it could not have possibly been the intent of Congress to have Section 1782 apply to treaty-based investor-state arbitration when it enacted the language in the 1964 version of Section 1782, because that type of arbitration did not exist. Furthermore, the government argues that permitting Section 1782 discovery in investor-state arbitrations would jeopardize the predictability and efficiency of those types of arbitrations.

The United States has requested ten (10) minutes of argument time at the upcoming oral argument, which has not yet been set by the Court. Respondents have agreed to cede ten (10) minutes from its oral argument time to the government. It is anticipated that oral argument will be set during the fall October 2021 Term. It is unlikely a decision will be issued prior to December 2021 at the earliest, and most likely not until the first half of 2022.

A copy of the amicus curiae brief by the United States, can be found here.

If you have any questions, contact us at info@chaloslaw.com

Is the U.S. Planning to Remove Certain Sanctions on the Iran Oil and Shipping Industries?

Reuters is currently reporting that Iran claims the United States has agreed to remove all sanctions on Iran’s insurance, oil, and shipping industries.  Iran also claims the U.S. is planning to remove a number of high-ranking officials from the U.S. Specially Designated Nationals list (SDN).  The U.S. and five (5) other world powers have been in talks with Iranian officials since April to work towards restoring the 2015 Joint Comprehensive Plan of Action (“JCPOA”).  The talks remain ongoing in Vienna.

We are closely monitoring the situation and will provide further updates when there is official U.S. regulatory action to report.

For more information, please contact us at info@chaloslaw.com

A Return to Normal: All New York Judges and Staff to Return to In-Person Work

On April 19, 2021, New York Chief Judge Janet DiFiore issued a message requiring all judges and court staff, including clerks, officers, and other employees, to return to in-person work effective Monday, May 24, 2021. The order comes on the heels of the state of New York resuming civil and criminal jury trials on March 22, 2021. The return to in-person work for all staff marks the end of the work-from-home measures which had been in place for fourteen (14) months. As part of the press release, Chief Judge DiFiore stated: “It is time to return to our normal and full courthouse staffing levels in order to support the fuller resumption of in-person operations, including jury trials and other proceedings in our courts.”

Notwithstanding the return to in-person work for staff, New York courts will continue to utilize virtual and telephonic court proceedings developed and implemented in response to the coronavirus pandemic.   Chief Judge DiFiore confirmed that plans are being drafted to ensure protocols for the effective use of technology for conferences and hearings (which do not require in-person attendance by attorneys and parties) are in place so as to limit the number of people in the state courthouses to maintain safe occupancy levels.   The return of normal operations is both welcome and critical, as Judges and staff attempt to dig out from the backlog of cases caused by the pandemic.

For more information, please contact us at info@chaloslaw.com.

Chalos & Co Obtains Defense Verdict in Jones Act Case

Michelle Otero Valdés of Chalos & Co’s Miami Office and her husband Manuel F. Valdés successfully defended a yacht owner against a former employee’s Jones Act negligence claim in a 1-week Zoom trial in the U.S. District Court for the Southern District of Florida. The case arose after the yacht’s chief stewardess was allegedly injured after hitting a wake while aboard the yacht’s tender during a purported sea trial of the tender. The plaintiff alleged she was in the course and scope of her employment with the yacht at the time of her accident aboard the tender and sought over $2 million in damages.

The case was first won at the trial level by Ms. Otero Valdés on summary judgment, as the district court found the crewmember failed to present a genuine issue of fact as to whether she was acting within the course and scope of her employment when she was injured. The crewmember appealed that decision to the Eleventh Circuit Court of Appeals, which remanded the case back to the trial court, stating that in evaluating whether the crewmember was within the course and scope of her job with the yacht, the trial court needed to evaluate the case under the guidance provided in Fowler v. Seaboard Coastline R.R. Co., 638 F.2d 17, 20 (5th Cir. Unit B Feb. 1981). The Eleventh Circuit found that Fowler stands for the proposition that acts that are incidental to an employee’s work can fall within the course of her employment, even is the employee is not performing her customary job duties. Fowler, 638 F.2d at 20 (discussing the meaning of “within the scope of employment” to determine liability under the Federal Employers’ Liability Act (“FELA”), 45 U.S.C. § 51). However, a reading of Fowler makes clear that Jones Act protections do not cover personal activity engaged in by the employee for a private purpose and having no causal relationship to her employment. Id. at 18-19.

The Eleventh Circuit also relied on Beech v. Hercules Drilling Co., L.L.C., 691 F.3d 566, 572 (5th Cir. 2012), which states that “to hold an employer vicariously liable under the Jones Act for one employee’s injury caused by the negligence of a co-employee, a plaintiff must show that the injured employee and the employee who caused the harm were both acting in the course of their employment at the time of the accident”. Again, the court focused on the course and scope of employment as it pertained to the captain and his piloting of the alleged tender during the purported sea trial at the time the plaintiff was injured.

After carefully reviewing all the evidence in the case after it was remanded, the trial court found that the plaintiff had not met her burden to show that she was acting within the course and scope of her employment on the day of her accident. The court concluded that she was engaged in a family outing with the captain who was her then boyfriend, her daughter and a married couple that were personal friends of the couple. The court determined that the activity was not advancing a business interest of the yacht owner and it was not foreseeable to the yacht owner that the activity was to be engaged in by either the plaintiff or the captain. The court noted that the Jones Act does not apply to private acts by a crewmember and emphasized that the Jones Act is not a strict liability scheme.

If you are interested in receiving a copy of the Eleventh Circuit decision or wish to contact us to discuss the case further, please feel free to contact us at mov@chaloslaw.com.

The Ninth Circuit Weighs In on the Knowledge Requirement in Clean Water Act Criminal Prosecutions

On March 4, 2021, the United States Court of Appeals for the Ninth Circuit issued an opinion reversing the conviction of Defendant James P. Lucero under the Clean Water Act (the “CWA”) and remanding the case to the United States District Court for the Northern District of California for a new trial. Lucero was charged with three (3) counts of knowingly discharging a pollutant near the San Francisco Bay in violation of the CWA.  A jury found Lucero guilty on all three counts and he was sentenced to thirty (30) months in prison. Lucero appealed his conviction to the Ninth Circuit and argued for reversal of the conviction on the following grounds: (1) the jury instructions erroneously omitted the knowledge element contained in the CWA; (2) the definition of “waters of the United States” is unconstitutionally vague; and (3) the narrower April 2020 regulatory definition of “waters of the United States” should be applied retroactively to his case.

As for the first challenge to the conviction, the government argued that the knowledge requirement under the CWA should be interpreted to extend only to the phrase “into water” and not to “waters of the United States.” In a split 2-1 decision, the Ninth Circuit agreed with the government’s position, holding that Congress intended the broadest possible protection against water pollution. The Court held that the phrase “waters of the United States” is simply a jurisdictional element to connect the CWA to Congress’s powers under the Commerce Clause and to confine the constitutional boundaries without extension to every “water” in the United States.  Circuit Judge Bade dissented in this portion of the decision, holding: “the ‘waters of the United States’ element substantively defines the discharge prohibition because it plays an integral role in ‘defin[ing] the evil Congress seeks to prevent’ through the CWA, no other statutory or regulatory provision can plausibly substitute for it in this role, and the majority’s chief reason not to read both “waters of the United States” and “into water” (substantively—the rule against surplusage—), is unconvincing given the use of the definitional provisions across the CWA.”

Although the Court agreed with the government’s interpretation of “knowingly,” the Ninth Circuit held that reversal and remand is necessary because the jury instructions failed to adequately convey the knowledge element to the jury. The Court noted that the government had the burden to prove that Lucero knew he was discharging the pollutants “into water.”  The Court interpreted the CWA to require that for a defendant to knowingly add a pollutant, the defendant “must know that he discharged an enumerated substance from a conveyance, and that the substance was discharged into water.” To require knowledge by a defendant of dumping “into water” is to ensure that a defendant knows he is committing a crime targeted by Congress. The Ninth Circuit further held that the jury instruction erroneously omitted the CWA’s mens rea element and provided that nowhere in the instruction did it indicate that Lucero had to know he discharged the pollutant “into water.” Finally, the Court held that the failure to include the knowledge element in the jury instruction was not harmless error and as such the conviction had to be reversed as a matter of law.

The remaining arguments by Lucero were rejected by the Court.  The Ninth Circuit held that the regulation defining “waters of the United States” is not unconstitutionally vague and noted that although the regulations definitions are complex, they provide an ascertainable standard for when “wetlands” and “tributaries” constitute jurisdictional waters of the United States. The Ninth Circuit also rejected the third argument made by Lucero, holding that the 2020 regulation is to be applied prospectively and is not a judicial interpretation of an existing law that is to be applied retroactively to Lucero’s case.

To read the full opinion, please click here.

For more information about the Clean Water Act or other environmental laws and regulations, please do not hesitate to contact us at info@chaloslaw.com.

ENRD Releases Memorandum of Policies and Priorities – But the Impact May be Short-Lived

On January 14, 2021, outgoing Assistant Attorney General Jeffrey Bossert Clark released a memorandum outlining the Environment and Natural Resources Division’s (ENRD) enforcement principles and priorities  for the “robust enforcement of our nation’s environmental laws.”  AAG Clark emphasized eight (8) general principles which are at the forefront of ENRD’s consideration for civil and criminal enforcement and also summarized five (5) areas which had been a priority for the Trump Administration.  Pursuant to the Trump Administration directives, ENRD was tasked with focusing on (1) clean water, clean air, and clean land; (2) maintaining the integrity of environmental programs; (3) fighting fraud and recovering taxpayer funds; (4) combating violent and organized crimes; and (5) protecting workers, competitiveness, and the infrastructure during the past administration.

AAG Clark was sworn into the role as head of the ENRD on November 1, 2018. Prior to that, he was in private practice at Kirkland & Ellis. He had also served in the ENRD during the George W. Bush Administration from 2001 – 2005.   The memorandum is a summary of the approach taken by the Justice Department’s chief environmental enforcement arm during what was often characterized  by observers as a pro-business and anti-environment Administration.  Some of the more interesting guideposts from the memorandum include the following instructions to DOJ attorneys:

  • ENRD enforcement actions should be premised solely on existing legislation of the statute and not the legislative history, agency guidance documents, and/or executive order policy announcements.
  • ENRD attorneys should respect the corporate form and not simply group affiliated and/or related entities together.  The ENRD “should give due respect to the policy judgment of lawmakers to create and maintain the corporate form.”
  • Criminal enforcement should be rare and reserved for instances when there is a requisite and demonstrable criminal intent.  The Department must avoid unnecessary “overcharging” of crimes.
  • Settlements should impose remedies consistent with applicable statutory authority and the payment of any settlement funds to third parties is prohibited (citing Attorney General June 5, 2017 Memo).  In addition, except where Congress has specifically provided otherwise, the use of Supplemental Environmental Projects (SEPs) is prohibited.  SEPs were often provided as a settlement option to an alleged environmental violator to reduce overall monetary liability by agreeing to fund an environmental project.

It can be expected that as soon as a new Assistant Attorney General for the ENRD is appointed and sworn in, a new memorandum with revised policy goals and instructions reflecting the Biden Administration will be issued.  Anticipated Attorney General Merrick Garland will certainly have a strong voice in directing the approach of the ENRD as well.  One of the first changes that may be instituted is the reintroduction of the SEP program, a policy which had been very popular during the Obama administration (and had been used for decades before that by the Environmental Protection Agency and DOJ).  There is at least one (1) lawsuit pending in the U.S. District Court for the District of Massachusetts seeking to reintroduce the program on the grounds that the Justice Department’s current interpretation and application of the law prohibiting the use of SEPs is a violation of the Administrative Procedures Act.  Underscoring the Administration’s focus on the environment, during his first day in office, President Biden has already signed executive orders to re-enter the Paris Climate Agreement and to suspend work on the Keystone XL pipeline.  It is expected that robust instructions to federal agencies to investigate and enforce Clean Air Act and Clean Water Act violation(s), among others, will also be a top priority of the Biden Administration.

A copy of the Memorandum can be found here.

For more information on administrative, civil, or criminal environmental enforcement actions, please do not hesitate to contact us at info@chaloslaw.com