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Following a rare grant of petition for rehearing, the Fifth Circuit Court of Appeals reversed its earlier decision allowing Daewoo International Corp. to seize an iron shipment prior to arbitrating a contract dispute. In a 2-1 decision, the Fifth Circuit held that Daewoo failed to meet certain procedural requirements required by the Louisiana non-resident attachment statute and therefore the attachment was properly vacated by the district court.

Daewoo International Corporation (“Daewoo”) and Thyssenkrupp Mannex GmbH (“Thyssenkrupp”) separately contracted with America Metals Trading LLP (“AMT”) to purchase pig iron. AMT never delivered the pig iron under either contract. In response to the breaches of contract, Daewoo sued AMT in federal court, and Thyssenkrupp sued AMT in Louisiana state court. In 2012, both companies obtained attachments of AMT’s pig iron, which was located within the Eastern District of Louisiana. In 2013, Thyssenkrupp intervened in the federal proceedings and obtained a federal writ of attachment over the pig iron. Several months later, Thyssenkrupp successfully sought to vacate Daewoo’s attachment in federal court. After the vacatur, the only valid remaining writ was from the state court, to Thyssenkrupp. Daewoo appealed.

The Fifth Circuit originally held that Daewoo could seize the pig iron prior to commencing arbitration against AMT, leaving in place Daewoo’s attachment as security for a potential future arbitration award. Thyssenkrupp argued that the Fifth Circuit panel wrongly concluded that Daewoo could rely on the Louisiana attachment statute to obtain security. Article 3542 of the Louisiana Code of Civil Procedure allows attachments in aid of any “action for a money judgment.” The panel agreed to rehear the case, and ruled 2-1 that a suit to compel arbitration is not an action for a money judgment. Critically, Daewoo did not file a suit to confirm an arbitral award, instead it filed suit to compel arbitration. “A motion to compel arbitration seeks an order requiring a party to take an action – namely to arbitrate the dispute. Accordingly, a suit seeking to compel arbitration is not an ‘action for a money judgment,’ and Daewoo’s suit seeking to compel arbitration cannot underlie a Louisiana non-resident attachment writ.”

Daewoo could have rectified this under Article 3502, if it met the requirements and for good cause shown. Article 3502 of the Louisiana Code of Civil Procedure allows, in limited circumstances, for attachments to be issued before the suit underlying the attachment is brought. The Fifth Circuit held that Daewoo had not met these requirements. “[B]ecause attachment is a ‘harsh’ remedy, the Louisiana statutes ‘providing for a Writ of Attachment . . . must be strictly and literally complied with,” and that “failure to do so renders a granted writ a ‘nullity’ . . . The record does not disclose that Daewoo strictly and literally complied with Article 3502’s requirements.” Daewoo did not invoke Article 3502 when it sought a writ, and the district court did not grant Daewoo permission to file a petition on “the first judicial day after the issuance of the writ.”

In the dissent, Circuit Judge James E. Graves, Jr. said the suit to compel arbitration is “clearly” an action for a money judgment, and that he would vacate the district court’s judgment.

To read the full opinion of the Fifth Circuit, please click here.

For more information about the Court’s decision, please do not hesitate to call on us at info@chaloslaw.com.

 

On March 28, 2018, the United States Court of Appeals for the Ninth Circuit reversed in part a decision from the District of Hawaii in Barnes v. Sea Hawaii Rafting, 2018 AMC 939 (9th Cir. 2018), holding that a bankruptcy court’s automatic stay does not affect a seafarer’s maritime lien.

In Barnes, Captain Barnes sustained major injuries when the vessel he worked on, the M/V Tehani, exploded. Barnes filed a verified complaint against the M/V Tehani, in rem, the company that owned the vessel (Sea Hawaii Rafting, LLC, hereinafter “SHR”), and SHR’s owner and manager, Kris Henry (hereinafter “Henry”), in personam. Barnes brought causes of action for unseaworthiness, negligence, intentional infliction of emotional distress, and maintenance and cure.

Barnes moved for summary judgment for payment of maintenance and cure until he reached “maximum medical cure.” The district court denied his request and ruled that although Barnes was entitled to maintenance and cure, he had yet to reach maximum cure because Barnes did not present reasonable costs in his locality for food and lodging, or actual medical expenses. Thereafter, Barnes filed an amended complaint, a motion for summary judgment for his claims for unseaworthiness, negligence per se, Jones Act negligence, and two (2) motions for reconsideration. Before the hearing on Barnes’ second motion for summary judgment, defendants Henry and SHR filed for Chapter 7 bankruptcy protection which automatically stayed the proceeding in the district court. The bankruptcy court partially lifted the stay for Barnes’ claims against SHR but refused to lift the stay to enforce any maritime lien against the defendants.

Subsequently, the district court dismissed Barnes’ suit for lack of in rem jurisdiction because of Barnes’ failure to verify the amended complaint. Barnes appealed the dismissal and the district court’s denial of his maintenance request. While his appeal was pending, the bankruptcy court approved, inter alia, the sale of the M/V Tehani. The Ninth Circuit held that the district court erred when it concluded that it lacked in rem jurisdiction. Furthermore, the Ninth Circuit issued a writ of mandamus and further held that Barnes was entitled to maintenance and cure.

More importantly, the Ninth Circuit held that the bankruptcy court did not have jurisdiction to dispose of Barnes’ maritime lien for three (3) reasons:

1. The bankruptcy stay did not apply to Barnes’ maritime lien for maintenance and cure. The Ninth Circuit ruled that a seafarer’s maritime lien is a “sacred lien[]” and Congress would not have extinguished this long-standing principle under the Bankruptcy Code.
2. The bankruptcy court did not have jurisdiction to dispose of Barnes’ maritime lien because the district court acquired in rem jurisdiction when Barnes filed his verified complaint and obtained “constructive control” over the M/V Tehani at that moment.
3. Even if the bankruptcy court had in rem jurisdiction, the court did not have the authority to sell the M/V Tehani. The Ninth Circuit concluded that property subject to a maritime lien follows “into the hands of a bona fide purchaser” and cannot be divested except through an in rem proceeding through the application of admiralty law.

The Ninth Circuit’s holding is contrary to the Second Circuit decision in Universal Oil Ltd. v. Allfirst Bank, 419 F. 3d 83 (2d Cir. 2005), where the court upheld the bankruptcy court’s subject matter jurisdiction that extinguished the maritime liens on various vessels.

Going forward, if a bankruptcy debtor’s assets include a vessel, extra care must be taken by the court and by the debtor in determining its disposition. If the vessel is subject to a maritime lien, the parties must first proceed in admiralty to address the lien prior to any sale.

To read the full opinion of the Ninth Circuit, please click here.

For more information about the Court’s decision, please do not hesitate to call on us at info@chaloslaw.com.

 

In an unpublished decision, the Ninth Circuit Court of Appeals ruled in favor of Exxon Mobil Corporation and Exxon Shipping Company (collectively “Exxon”) on the amount of pre-judgment and post-judgment interest to be paid on a prior settlement. See Nautilus Marine Enterprises, Inc. v. Exxon Mobile Corporation, No. 17-35337, 17-35278 (9th Cir. July 18, 2018).

Claimants, Nautilus Marine Enterprises, Inc. and M. Thomas Waterer (collectively “NME”) sued Exxon for damages arising from the 1989 Exxon Valdez oil spill. In 2006, the parties entered into a settlement agreement. Exxon agreed to pay NME for damages incurred in 1992 and 1993. The parties disagreed on the amount of interest to be paid, and have been litigating the issue ever since.

The district court held that NME was entitled to pre-judgment interest through November 1, 2006, as per the parties’ agreement. NME argued the court erred in limiting the interest period and argued for a larger award which includes a longer period of interest. On appeal, the Ninth Circuit affirmed the district court, finding that by executing the agreement, NME agreed to limit its recovery of pre-judgment interest to this period. Both the district court and the Ninth Circuit strictly interpreted the parties’ prior agreement.

The district court awarded post-judgment interest running from the issuance of its February 14, 2017 judgment. NME argued post-judgment interest should have accrued from the date a prior 2007 judgment was entered. The 2007 judgment was appealed by Exxon, and was subsequently reversed and vacated. The Ninth Circuit again affirmed the district court, holding post-judgment interest runs from the final 2017 judgment, not from the earlier judgment which was vacated.

In rendering its opinion, the appellate court considered argument from Exxon that the district court violated the best evidence rule when it considered testimony of NME’s counsel about how settlement payments would be allocated. In a declaration, NME’s counsel referenced several written agreements, which were never provided to the court. The Ninth Circuit ultimately determined the district court’s consideration of this testimony was harmless and likely did not change the outcome of the case.

To read the full opinion of the Ninth Circuit, please click here.

For more information about the Court’s decision, please do not hesitate to call on us at info@chaloslaw.com.

There have been a significant number of bunker-quality related engine problems following the supply of fuel in the U.S. Gulf region from February through May of this year, particularly in the Houston area. This includes blended fuel oils such as IFO 380, and has caused fouled fuel pump plungers, sticking and/or seizing fuel pumps, and filter blockages. There have also been reports of increased sediment levels at separators and fuel filters. Most troubling, the standard fuel oil test methods found in ISO 8217 may not detect these problems. Some fuels were found with adulterants and contaminants, including a phenolic compound with significant adhesive qualities. The contamination could lead to engine failure and loss of propulsion with potentially catastrophic results.  The USCG has issued a safety alert.

If you have experienced any of the above issues, or if you bunkered in the U.S. Gulf region between February and May of 2018, you may be entitled to compensation, including claims against the upstream supplier of the contaminated and adulterated bunkers.  If you have suffered damages as a result of a such a supply or would simply like to learn more about the legal rights and remedies available to you under U.S. law, please contact us for more information at info@chaloslaw.com.

On May 10, 2018 the United States Court of Appeals for the Eleventh Circuit issued an unpublished opinion which reinforced the need for parties to strictly adhere to all requirements of the Federal Rules of Civil Procedure. In Olena Goncharenko v. Royal Caribbean Cruises, Ltd., No. 17-13069 (11th Cir., May 10, 2018), the Eleventh Circuit Court of Appeals affirmed the District Court of the Southern District of Florida’s order striking the Appellant’s expert witness and order granting summary judgment to the Appellee. In Goncharenko, Plaintiff Olena Goncharenko (“Goncharenko”) brought suit against Royal Caribbean Cruises, LTD (“Royal Caribbean”) for negligence. Goncharenko was a passenger on board the cruise ship Anthem of the Seas operated by Royal Caribbean. Goncharenko was allegedly injured when one of the cruise ship’s ice cream machines struck her in the head.

Prior to trial, the district court issued a scheduling order that required the parties to disclose expert witnesses by February 7, 2017. Goncharenko provided an email to Royal Carribbean that purported to be Goncharenko’s expert witness disclosure. Although technically timely, the email failed to disclose the names of the witnesses or other information required by the Federal Rules of Civil Procedure. Goncharenko attempted to supplement the disclosure two (2) days later with an email which included names, but no other information concerning the witnesses’ expert opinion(s). Plaintiff further amended the disclosure once Royal Caribbean moved to strike the expert witnesses. The Magistrate Judge granted the motion to strike the expert witnesses and the District Judge affirmed the decision over Plaintiff’s objections.

When a party seeks to provide testimony using an expert witness, Federal Rules of Civil Procedure Rule 26(a)(2)(A) provides that, “a party must disclose to the other parties the identity of any witness it may use at trial to present evidence under Federal Rules of Evidence, 702, 703, or 705.”  Fed. R. Civ. P. 26(a)(2)(A). Any party seeking to call a witness at trial must disclose, “(i) the subject matter on which the witness is expected to present evidence under Federal Rules of Evidence, 702, 703, or 705; and (ii) a summary of the facts and opinions to which the witnesses is expected to testify.” Fed. R. Civ. P. 26(a)(2)(C).

The Eleventh Circuit held that the district court did not abuse its discretion in striking Goncharenko’s expert witnesses. Goncharenko provided insufficient disclosures under Rule 26(a) with vague references as to the opinion(s) of the experts and little to no information provided to the Defendant. In affirming the district court decision, the Eleventh Circuit cited to Federal Rules of Civil Procedure Rule 37 which holds, “If a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing or at a trial unless the failure was substantially justified or is harmless.” Although Goncharenko submitted her initial email timely, it lacked the identity of the witnesses and provided insufficient references to the subject matter on which the witnesses were to opine and testify. As a result, the Eleventh Circuit Court affirmed the district court’s decision to strike the witnesses. The decision was costly for the Plaintiff, as she could not meet her burden to establish medical causation of her injuries once the medical experts were struck. Therefore, the Court entered summary judgment in favor of Defendant Royal Caribbean.

To read the full opinion of the Eleventh Circuit, please click here.

For more information about the Court’s decision, please do not hesitate to contact us at info@chaloslaw.com.

In an order issued yesterday (May 10, 2018), the United States Court of Appeals for the Eleventh Circuit affirmed a decision from the Northern District of Florida in Martin Energy Services, LLC v. M/V Bravante IX et al., No. 17-10899, awarding Martin Energy Services, LLC (“Martin”), a physical supplier of bunkers, the fair value of the fuel provided. The Court held that Martin can recover in quantum meruit for the benefit of the fuel Martin delivered to Boldini Ltd. (“Boldini”).

Boldini arranged to have fuel provided to its vessel, the M/V Bravante VIII, in Panama City, Florida, by contacting O.W. Bunker & Trading do Brasil, who in turn contacted two (2) affiliated O.W. Bunker entities. The transaction was structured as a sale of fuel by Martin, not to Boldini, but to O.W. Bunker USA Inc., who in turn sold the fuel to another O.W. Bunker affiliate, who then contracted to sell the fuel to Boldini. Martin subsequently delivered the fuel to the M/V Bravante VIII on credit. Shortly thereafter the O.W. Bunker entities worldwide filed for bankruptcy, and having not received payment from its contractual counterparty, Martin filed an admiralty action against Boldini for breach of contract and quantum meruit, seeking payment for the delivered fuel. Boldini asserted a cross-claim for interpleader against all parties with competing claims to the payment sought by Martin, including cross-defendant ING Bank, a secured lender of the O.W. Bunker entities. Boldini deposited the funds owed for the fuel into the registry of the district court, and was discharged from further liability.

The district court determined that Martin had a valid quantum meruit claim against Boldini and awarded Martin the fair value of the fuel (USD 286,000) for providing and delivering the fuel. ING Bank was awarded the amount the O.W. Bunker entities would have received as “resellers” of the fuel (USD 3,900).

The district court found Martin had conferred a benefit to Boldini by providing the fuel to the Bravante VIII, which Boldini knew of, accepted, retained, and memorialized in a bunkering certificate acknowledging delivery. The district court determined it would be inequitable for Boldini to retain the benefit of the fuel without paying for it.

The district court applied Florida law, as “neither statutory nor judicially created maritime principles provide[d] an answer” and “the application of state law [did] not frustrate national interests in having uniformity in admiralty law.” Under Florida law, a subcontractor can recover in quantum meruit from the owner, even though the subcontractor had a contract with the general contractor, if the owner had received a benefit from the subcontractor’s work and the owner had not paid for that work under the owner’s contract with the general manager.

The Eleventh Circuit concurred with the district court, noting that: “in the absence of a valid contract claim against Boldini, and with the relevant O.W. Bunker entity in bankruptcy and unpaid, Martin can recover in quantum meruit from Boldini for the benefit of the fuel Martin delivered and provided to Boldini.”

To read the full opinion of the Eleventh Circuit, please click here.

For more information about the Court’s decision, please do not hesitate to call on us at info@chaloslaw.com.

Chalos & Co, P.C. is pleased to announce the addition of Alan Van Praag to our firm. Alan brings with him many years of maritime and international law experience and we are excited to have him on our team.

Alan can be reached at the following numbers and email address:

Tel: +1-516-714-4300
Direct: +1-561-965-7373
Mobile: +1-917-250-7228
Fax: +1-866-702-4577
Email: avanpraag@chaloslaw.com

The Florida Bar – International Law Section has just published its Winter 2018 edition of International Law Quarterly, focusing on international aspects of maritime, admiralty, and transportation law and features two (2) articles by Chalos & Co – International Law Firm.

Michelle Otero Valdés and Megen M. Gold co-authored Rough Waters Ahead . . . Navigating Maritime Liens and Arrests – Why the Advice of Maritime Counsel Remains Crucial Prior to Arresting a Ship. This article highlights complex U.S. legal issues regarding maritime liens and offers insight into the necessity of retaining the advice of competent counsel to avoid wrongfully arresting a vessel and the extensive litigation that may follow.

In addition, George M. Chalos and Patrick W. Carrington co-authored Maritime Arbitration – A Preferred Alternative Dispute Resolution Mechanism. This article highlights the fascinating history of arbitration in the United States and discusses its benefits in cases involving specialized industries including maritime actions and other commodity trading disputes.

For more information on these specific articles, please do not hesitate to call on us at info@chaloslaw.com.

For more information concerning the Florida Bar – International Law Section, and to view an archive of past editions of International Law Quarterly including the Winter 2018 Edition, please visit their website here.

Several lawsuits have been filed across the United States following the U.S. Supreme Court’s January 22, 2018 decision in National Association of Manufacturers v. Department of Defense, 583 U.S. ___ (2018). The U.S. Supreme Court held that challenges to the Waters of the United States Rule (“WOTUS Rule” or “Clean Water Rule”) must be brought in federal district court. An in-depth analysis of the Supreme Court decision can be viewed here.

The WOTUS Rule is a 2015 regulation published by the U.S. Environmental Protection Agency (“EPA”) and the U.S. Army Corps of Engineers (“USACE”) to clarify which waters are protected by the Clean Water Act. It was published in response to concerns about lack of clarity over the scope of the Clean Water Act. In October of 2015, the U.S. Court of Appeals for the Sixth Circuit issued a nationwide stay on the implementation of the WOTUS Rule. The U.S. Supreme Court’s decision that the U.S. Courts of Appeals lacked jurisdiction over legal challenges to the WOTUS Rule resulted in the imminent lifting of the Sixth Circuit’s nationwide stay that has blocked the implementation of the Rule.

On February 6, 2018 the EPA and USACE finalized a rule adding an applicability date to the 2015 WOTUS Rule. This “applicability date” rule delays the application of the WOTUS Rule for two (2) years, or until February 6, 2020. The EPA and USACE are currently working through the process of repealing and replacing the WOTUS Rule, pursuant to an Executive Order issued by President Trump on February 28, 2017. The delay in applicability date would ensure the WOTUS Rule will not take effect while that process is ongoing.

On the same date the EPA issued the “applicability date” rule, several states filed suit against E. Scott Pruitt, as Administrator of the EPA; the EPA; Ryan Fisher, as acting Assistant Secretary of the Army for Civil Works; and the USACE (the “Agencies”), challenging the EPA’s “applicability date” rule and seeking the WOTUS Rule take immediate effect. The suit was brought by twelve (12) Attorneys General from the states of New York, California, Connecticut, Maryland, New Jersey, Oregon, Rhode Island, Vermont, and Washington, the Commonwealth of Massachusetts, and the District of Columbia (the “States”). The States, led by New York Attorney General Eric Schniederman, claim the Agencies violated required legal processes and ignored legal obligations to protect water supplies when they delayed the WOTUS Rule. The States claim “[t]he agencies have suspended the Clean Water Rule without consideration of the extensive scientific record that supported it or the environmental and public health consequences of doing so. . . . The agencies have undertaken this redefinition with inadequate public notice and opportunity for comment, insufficient record support, and outside their statutory authority, illegally suspending a rule that became effective more than two years ago.”

In response, on February 7, 2018 a coalition of agricultural and business groups, led by the American Farm Bureau Federation (“AFBF”), filed a request in the U.S. District Court for the Southern District of Texas for a nationwide preliminary injunction prohibiting the Agencies from enforcing, implementing, applying, or otherwise giving effect to the WOTUS Rule. The AFBF believe that were the WOTUS Rule to take effect, dry ditches, drains, and even low spots on farm fields will be considered “Waters of the United States” under the Rule. Notably, these areas are often completely free of water. The WOTUS Rule would give the government power over vast swaths of dry land.  This, they claim, would create legal risks for farmers, ranchers, property owners, and business. AFBF and the other plaintiffs claim that the EPA’s repeal and replace process will be subjected to legal challenges, and that a nationwide preliminary injunction keeping the WOTUS Rule from going into effect is imperative. These continued legal challenges create uncertainty for private land owners, who could face heavy civil and criminal penalties due to the continued jurisdictional issues around the WOTUS Rule.

These two (2) lawsuits have been filed in separate federal district courts within weeks of the U.S. Supreme Court’s decision. Additionally, several environmental organizations have filed suit against the Agencies in the U.S. District Court for the District of South Carolina, claiming the Agencies violated the Administrative Procedure Act. Other states, including Alabama, Florida, Georgia, Indiana, Kansas, Kentucky, South Carolina, Utah, West Virginia, and Wisconsin have asked the U.S. Court of Appeals for the Eleventh Circuit to send their challenge of the WOTUS Rule back to district court so that they may request an injunction. It is likely that more suits will be filed, creating even more uncertainty around the future of the WOTUS Rule.

For more information about these lawsuits, or the WOTUS Rule, please do not hesitate to call on us at info@chaloslaw.com.