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Chalos & Co, P.C. – International Law Firm is proud to announce that Kerri M. D’Ambrosio has been recognized as Super Lawyers Rising Star for maritime and transportation law and litigation in the New York Metro area.  Once a year, attorneys are invited to nominate their top colleagues, who they personally observed in action, to be recognized in Super Lawyers Magazine.  Each candidate is evaluated on twelve (12) indicators of professional achievement. The Rising Star distinction is based on this peer review process and is awarded to only the top 2.5% of attorneys under the age of 40.  Ms. D’Ambrosio is one (1) of only three (3) female maritime and transportation law practitioners to receive such a prestigious honor.

Ms. D’Ambrosio is a graduate of New York University and Hofstra University School of Law, cum laude, in May 2008.   Ms. D’Ambrosio was selected as the recipient of the Hofstra Law Review’s 2008 Kenneth S. Horton Award of Excellence for her service and dedication; is a member of the Maritime Law Association of the U.S. and serves on the Board of the Propeller Club for the Port of NY/NJ as Secretary.   She also serves on the Board of Directors for Arts for All; a non-profit organization dedicated to bringing the arts to underprivileged children throughout the New York City area.  Ms. D’Ambrosio is admitted to practice in the states of New York and Connecticut, as well as the Southern and Eastern Districts of New York, the District of Connecticut, the Southern District of Texas, and the Second Circuit Court of Appeals.

In Chirag v. MT Marida Marguerite, The United States Court of Appeals for The Second Circuit affirmed the United States District Court for the District of Connecticut, holding that the District Court correctly dismissed the case on forum non conveniens grounds and for lack of personal jurisdiction over the primary defendants.

Bahri Chirag (“Chirag”) and Dangwal Sandeep (“Sandeep”) sued the MT Marida Marguerite Schiffahrts (“MT Marida”), Marida Tankers, Inc. (“MTI”), and Heidmar, Inc. (“Heidmar”) under a variety of tort and regulatory compliance theories, all of which “arise under the Jones Act, and the General Maritime Law of the United States.”  In the fall of 2010, Somali pirates commandeered the MT Marida, in the Gulf of Aden, off the coast of Yemen. The MT Marida was a German owned and operated, Marshall Island flagged vessel, staffed by Indian crew members.  The vessel was sailing from India to Belgium at the time of its capture and remained under the control of Somali pirates for eight (8) months. The pirates tortured the crew in hopes of receiving ransom monies.  The plaintiffs, Chirag and Sandeep, were two of the Indian crew members that were held hostage aboard the MT Marida.

The District Court dismissed the complaint with respect to the MT Marida due to lack of personal jurisdiction.  First, the Second Circuit held that the District Court had not abused its discretion in denying jurisdictional discovery, as Plaintiffs had failed to even make a prima faciecase for jurisdiction over the MT Marida and held that there was no American interest in the case.   The Second Circuit found that the District Court correctly applied the law of the forum state, Connecticut to determine whether the Court had personal jurisdiction over the vessel.  The Due Process Clause requires that for personal jurisdiction to exist over a nonresident defendant, certain minimum contacts must exist between the nonresident and the forum state such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.  The Second Circuit held there was “no plausible allegation that the MT Marida had sufficient continuous and systematic contacts with Connecticut that invoked the protections and benefits of Connecticut’s laws” and therefore the District Court did not err in dismissing the complaint against MT Marida.

The Second Circuit affirmed the District Court’s decision to dismiss the complaint with respect to MTI and Heidmar on forum non conveniens grounds.  Under Second Circuit law there are three (3) factors to consider when determining whether to dismiss a case for forum non conveniens. First, the Court must determine the degree of deference properly granted to the plaintiff’s choice of forum.  Second, the Court must consider whether the alternative forum proposed by the defendants is sufficient to adjudicate the issue. Third, the Court must balance the private and public interests implicated in the choice of forum. The Second Circuit held that the District Court properly found that the Plaintiff’s choice of forum should receive less deference because Plaintiffs are nationals and residents of India.  Furthermore, that an adequate and alternative forum exists in Germany as Defendants are amenable to process in Germany and the German courts are able to adequately adjudicate negligence claims.  Finally, the private and public interests weigh in favor of litigating the case in an alternative forum, given the fact that the documents, exhibits, witnesses, etc. are all located in foreign countries and that there  are no public factors in favor of maintaining a case which would require the application of foreign choice of law analysis and none of the parties, laws, or claims have a nexus to the United States.

To read a copy of the Second Circuit’s decision, click here.

For more information about the Court’s decision and how it may apply to specific facts and circumstances, please do not hesitate to contact us at info@chaloslaw.com

The U.S. Supreme Court has issued its decision in the closely watched case of Yates v. United States.  In a colorful opinion, rife with aquatic and fishing references, the Court ruled that grouper were not a “tangible object” under 18 U.S.C. 1519 (Sarbanes-Oxley).  Justice Ginsburg wrote for the plurality in a four-one-four decision, in which Justice Alito concurred in the holding only, but argued for a more narrow application of the Court’s opinion.

In August 2007, a federal agent conducted an inspection of Captain John Yates’ commercial fishing vessel in the Gulf of Mexico.  During the inspection it was determined that the catch contained undersized red grouper, purportedly in violation of applicable U.S. law and  regulation.  Captain Yates was instructed to keep the measured, undersized fish segregated from the catch, so that the fish could be processed in port.  When the vessel returned to port, the segregated fish did not match the previously recorded sizes and three (3) fish were missing completely.  Crew members admitted that Captain Yates had instructed them to throw the fish overboard, and they had replaced the segregated fish with other grouper that were closer in size to the permissible length requirements.

Prosecutors sought to convict Captain Yates of not only a violation of 18 U.S.C. § 2232(a), which makes it a crime to destroy or remove property to prevent seizure; but also obstruction of justice pursuant to 18 U.S.C. § 1519, for destroying, concealing, and covering up the undersized fish to impede a federal investigation.  Section 1519 was crafted by Congress in response to a perceived gap in the obstruction of justice statutes, which came to the forefront as a result of the Enron case.  The statute applies when an individual, “knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence” a federal investigation.  Federal prosecutors alleged that in this case, the grouper were a “tangible object” and therefore prosecution under § 1519 was warranted.  Captain Yates argued that the statute was a “documents offense”, and therefore should apply only to objects (like hard drives or logbooks), which are similar in nature to a document or record.  The District Court had misgivings about applying such an expansive reading to 1519, but ultimately followed Eleventh Circuit precedent and affirmed his conviction and sentenced Captain Yates to thirty (30) days in prison.  On appeal, the Eleventh Circuit affirmed, finding the language of the statute to be “plain.”

In reversing the Eleventh Circuit, Justice Ginsburg wrote that while a fish is no doubt an object that is tangible, for the Court to hold that § 1519 applies to “any and all objects”, would cut loose the statute “from its financial-fraud mooring.”  The Court applied various statutory construction canons including: “ordinary and plain meaning” of the words in the text; Congressional intent (as reflected by legislative history, statute caption, and other identifying factors); noscitur a sociis (the meaning of an unclear word or phrase to be governed by the words surrounding it); and ejusdem generis (in statutory construction, when a general word follows specific words, the general words are construed to embrace objects which are similar in nature to the preceding specific words). The U.S. Supreme Court’s ultimate conclusion was: “A tangible object captured by § 1519 . . . must be one used to record or preserve information.”

While the decision will serve to limit the federal government’s use of § 1519 in future prosecutions, the real key to the holding will be whether any of the Court’s statutory analysis can be applied in other contexts to not only challenge the overreach of criminal prosecutions, but also federal agencies and their broad interpretation of U.S. law and regulations.

For more information on the background of the case and additional legal issues of interest, check out  the prior blog posts by Michelle Otero Valdés (of the Chalos & Co Miami office) on the case here and here.

To read a copy of the U.S. Supreme Court’s decision, click here.

For more information about the decision and how it may apply to specific facts and circumstances, please do not hesitate to contact us at info@chaloslaw.com.

In a recent decision, the Ninth Circuit Court of Appeals affirmed the District Court’s award of summary judgment in favor of a shipowner, holding that the shipowner could not be held civily vicariously liable for damages caused by an employee’s assault of the Plaintiff/Appellant because the assault was not within the course and scope of the crew member’s employment.  Ferguson v. Horizon Lines, LLC, Docket No. 12-17748 (9th Cir. 2015)

In Ferguson, the Plaintiff, a security guard at an entry gate facility at the Port of Oakland, brought claims against Horizon Lines LLC (“Horizon”) arising from an 2010 assault and sexual harassment by Andrei Tretyak; a seaman working for and employed by Horizon.  Ferguson alleged claims against Horizon for, inter alia, vicarious civil liability, negligent hiring, and negligent supervision.  The District Court for the Northern District of California granted summary judgment in favor of Horizon on all of Ferguson’s claims and Ferguson appealed.  In affirming the District Court’s grant of summary judgment in favor of Defendant Horizon, the Ninth Circuit first determined that California law governed because the assault took place entirely on land- i.e. – at an entry gate facility at the Port. The Court next determined that to prevail on her vicarious claims against Horizon, Ferguson was required to present evidence proving that her assailant, Tretyak, was acting “within the scope of [his] employment” with Horizon when he assaulted her.  The Court noted that under California law, an intentional tort is considered “within the scope of employment” if it has a “casual nexus to the employees work” or was “an immediate outgrowth thereof.”  Because Tretyak’s actions were “the result of only propinquity and lust” and were not “fairly attributable to work-related events or conditions”, the Ninth Circuit concluded that the assault was not within the scope of his employment and, as such, Horizon could not be vicariously liable for same.

Although the Ninth Circuit relied on California state law in reaching its decision, the same standard (i.e. – whether the employee was acting within the course and scope of his/her employment) applies in imposing both criminal and civil vicarious liability in federal cases including, inter alia, cases involving alleged violations of the Act to Prevent Pollution from Ships (“APPS”) and related statutes.  The Ferguson decision confirms that the acts of crew members who violate company policies and/or otherwise act outside of the scope of their employment cannot give rise to civil or criminal vicarious liability on the ship owner and/or operator employing the crew member.  This is particularly significant in criminal maritime cases, where the burden of proof is higher and the prosecution must prove all elements of the offense beyond a reasonable doubt.

To read a copy of the Ninth Circuit’s decision, click here.

For more information about the Court’s decision and how it may apply to specific facts and circumstances, please do not hesitate to contact us at info@chaloslaw.com.

In a recent decision, the First Circuit Court of Appeals formally recognized the doctrine of uberrimae fidei (i.e. – “utmost good faith”) as an established principle of federal admiralty law and, finding that the appellant had violated this doctrine, affirmed the District Court of Puerto Rico’s findings that the appellant’s insurance policy had properly been voided by its marine insurer.  Catlin (Syndicate 2003) at Lloyd’s v. San Juan Towing and Marine Services, Inc., No. 13-2491 (1st Cir. 2015).

Catlin arose from 2011 sinking of the PERSEVERANCE; a floating drydock purchased by San Juan Towing and Marine Services, Inc. (“SJT”) in 2006.  At the time of SJT’s purchase of the PERSEVERANCE for USD 1,050,000 in 2006, the drydock was valued at USD 1,500,000.  SJT subsequently made improvements to the floating drydock which increased its value to USD 1,750,000.  The PERSEVERANCE was insured for this value with RLI Insurance Company (“RLI”) until RLI canceled the policy in February 2011; despite the drydock’s depreciation and SJT’s efforts to sell the PERSEVERANCE for more than USD 1 million less than its insured value.  Following RLI’s cancellation of the floating drydock’s insurance policy, SJT, through its broker, procured a marine insurance policy with Catlin.  SJT’s broker represented that the PERSEVERANCE’s prior insurance coverage was for USD 1,750,000, but did not provide any further information on the floating drydock’s value or condition.  The Catlin policy, which became effective in April 2011, insured the PERSEVERANCE for USD 1,750,000.  The floating drydock subsequently sank.  Refloating took nearly one (1) month to complete due to substantial rust and decay to the underside of the PERSEVERANCE, which SJT was aware of but had failed to disclose to Catlin at the time it sought coverage.  The drydock was ultimately sold for scrap, and SJT filed a claim with Catlin in the sum of USD 1,750,000; alleging the total loss of the vessel.

Catlin subsequently filed a declaratory judgment action against SJT, seeking to void the Policy under the doctrine of uberrimae fidei.  Under this doctrine, an insured must act with “utmost good faith” in applying for an insurance policy and disclose all known circumstances that would materially affect the insurer’s risk.  The District Court ultimately conducted a bench trial and concluded that SJT had failed to comply with the doctrine of uberrimae fidei in its application for the Policy and was therefore barred from recovery under the Policy.  SJT appealed.

On appeal, the First Circuit first considered whether federal admiralty law or local Puerto Rican law applied.  The Court recognized that the Jones Act grants Puerto Rico more power to legislate in the admiralty and maritime field than if it were a state and allows for Puerto Rican legislation that is inconsistent with federal admiralty law.  However, the Court rejected SJT’s argument that the Puerto Rican Code controlled as to whether representations made during negotiations to obtain coverage affected SJT’s ability to collect on the Policy, noting that the provision of the Puerto Rican Code relied upon by SJT expressly excluded ocean marine insurance.  Concluding that the Catlin Policy was an “ocean marine insurance policy” based on the Policy’s inclusion of “hull” coverage and the description of the PERSEVERENCE falling within this definition, the Court determined that the Policy was excluded from the Puerto Rican Code’s more lenient provisions regarding representations made during Policy negotiations.  Having concluded that federal admiralty law was to apply, the Court next considered whether the doctrine of uberrimae fidei was an established rule of admiralty law.  Citing policy reason and its own prior decisions in which it has applied uberrimae fidei, as well as the longstanding history and consistent application of the doctrine by the majority of the Circuit Courts, the Court held that uberrimae fidei is an established admiralty rule within the First Circuit.

Finally, the Court considered whether SJT had violated the doctrine of uberrimae fidei under the facts and circumstances of the case.  The Court determined that despite advertising that sale of the PERSEVERANCE at USD 800,000 in April 2011 – the same month the Catlin Policy took effect – SJT failed to disclose this fact; the true value of the floating drydock; what SJT paid for the floating drydock; or the level of deterioration of the drydock at the time that the Policy was sought.  The Court determined that these were material facts required to be disclosed to Catlin in applying for the policy, and that nondisclosure violated uberrimae fidei.  As such, the First Circuit affirmed the District Court’s ruling (but modified the decision to reflect that the insurance contract was deemed valid until voided at Catlin’s election, as opposed to voided ab initio as the District Court had held).

To read a copy of the First Circuit’s decision, click here.

For more information about the Court’s decision and how it may apply to specific facts and circumstances, please do not hesitate to contact us at info@chaloslaw.com.

In In re Deepwater Horizon, (Case No. 13-0670), the Supreme Court of Texas ruled that BP was not covered under Transocean insurance policies for damages arising from subsurface pollution because under the parties drilling contract, BP assumed liability for such claims.

Transocean owned the Deepwater Horizon, a semi-submersible, mobile offshore drilling unit. In April 2010, the Deepwater Horizon sank in the Gulf of Mexico after burning for two (2) days following an onboard explosion.  At the time of the incident, the Deepwater Horizon was engaged in exploratory drilling activities under a drilling contract between BP and Transocean. The drilling contract required Transocean to maintain certain minimum insurance coverage for the benefit of BP.  Ranger Insurance Ltd. (“Ranger”) was the primary liability insurer, providing at least $50 million of general liability coverage.  Transocean also had several excess liability insurers providing four layers of excess coverage of at least $700 million above the Ranger policy coverage.

The United States Court of Appeals for the Fifth Circuit certified two (2) questions to the Supreme Court of Texas for their analysis relating to the extent of the insurance coverage afforded to BP as an “additional insured” under the primary and excess policies procured by Transocean.   Transocean and its insurers disputed that BP was entitled to coverage for liabilities it expressly assumed in the drilling contract, because the terms of the contract limited the additional-insured’s obligation to liabilities assumed by Transocean.  In analyzing the questions presented, the Texas Court analyzed the terms of the drilling contract between the parties.  Additionally, in the drilling contract, Transocean agreed to indemnify BP for above-surface pollution regardless of fault and BP agreed to indemnify Transocean for all pollution risk Transocean did not assume (i.e. – subsurface pollution).

The Supreme Court of Texas stated that BP’s status as an “additional insured” was inextricably intertwined with the limitations on the extent of coverage that was afforded under the Transocean policies.  The Court, in applying the only reasonable construction of the drilling contract’s “additional insured” provision, found that BP’s status was limited to the liabilities Transocean assumed under the contract.   Because Transocean did not assume liability for subsurface pollution in the drilling contract, Transocean was not obligated to name BP as an additional insured for that particular risk.  Since there was no obligation to provide insurance for that risk, BP lacked the status as an “insured” for any damages arising from subsurface pollution and was not entitled to coverage under the Transocean insurance policies for damages arising from subsurface pollution because BP, not Transocean, assumed liability for such claims.

To read a copy of the Supreme Court of Texas’s Decision, click here.

For more information about the Court’s decision and how it may apply to specific facts and circumstances, please do not hesitate to contact us at info@chaloslaw.com.

An article co-authored by George M. Chalos and Kerri D’Ambrosio of Chalos & Co, P.C. – International Law Firm has been featured in the January 2015 edition of the Newletter of the Southern District of New York Chapter of the Federal Bar Association.  The article, entitled “The Rule B Afterlife: Five Years after Jaldhi”, discusses the continued use of Rule B of the Supplemental Admiralty Rules to the Federal Rules of Civil Procedure as a powerful tool for parties to obtain security for their maritime claims;  to obtain jurisdiction over an elusive counterparty; and/or to enforce judgments and/or arbitration awards in the United States.

To read a copy of the article click here.

For more information about the Federal Bar Association and, specifically, the Southern District of New York Chapter, please visit their websites at fedbar.org and fbasdny.org.

For more information about how Rule B may be utilized under a specific set of facts and circumstances, please do not hesitate to contact us at info@chaloslaw.com.

The amendments outlined by the U.S. Department of the Treasury and the U.S. Department of Commerce do not completely eliminate the embargo against Cuba, but rather serve to ease several restrictions that have been in place.  Specifically, the amendments are meant to more easily facilitate travel to Cuba for authorized persons, raise the limit on remittances to Cuba, allows U.S. financial institutions to open correspondent accounts at Cuban financial institutions, and initiate new efforts to increase Cubans’ access to telecommunications equipment.

The greatest impact on individuals relates to the ability to more freely travel to Cuba without the requirement to obtain a specific license for each entry to Cuba.   From now on, general licenses will be made available to authorized travelers in one of twelve (12) categories; (1) family visits; (2) official business of the US government, foreign governments, and certain intergovernmental organizations; (3) journalistic activity; (4) professional research and professional meetings; (5) educational activities; (6) religious activities; (7) public performances, clinics, worships, athletic and other competitions and exhibitions; (8) support for the Cuban people; (9) humanitarian projects; (10) activities of private foundations or research or education institutions; (11) exportation, importation, or transmission of information or informational materials; and (12) certain export transactions that may be considered for authorization under existing regulations and guidelines.  Travel by tourists to Cuba is still restricted.

Under the former regulations, U.S. persons were only allowed to remit US $500.00 to assist Cuban nationals per quarter.  With the new amendments in place, U.S. persons are now allowed to provide a remittance of US $2,000.00 on a quarterly basis for general donative remittances to Cuban nationals.  Further, donative remittances for humanitarian projects, support for the Cuban people and support for the development of private businesses in Cuba will no longer require a specific license to move forward.  Eliminating the requirements for a specific license to engage in these transactions are meant to help to empower the Cuban people to fight for democracy.

The new regulations will also have a substantial impact on American business dealings with Cuba.  The BIS will now permit American companies to export telephones, computers, and internet technology to Cuba and send these supplies to private Cuban firms.  The ability to export telecommunications equipment will likely have the greatest impact on the Cuban economy by providing additional ways to communication and trade with the world through the use of this new equipment.  Though export licenses will generally still be required, a new exception to the export license requirement has been added to allow the exports of goods that generally support the Cuban people.  Wide ranges of goods will likely fall into this category and allow for the export of a large amount of new goods to the Cuban people.

The new OFAC regulations also make significant changes to the shipping sector by creating new exceptions to the “180 day rule” set forth in 31 CFR section 515.207, which bars vessels from the U.S. for 180 days after calling Cuba to engage in the trade of goods or the purchase or provision of services. I have previously blogged on this restriction.  The new regulation (31 CFR section 515.550) provides for the following exceptions from the vessel ban as follows; (i) shipment of cargoes exported under Commerce Department authorization including agricultural, medical, telecommunications, and other permitted goods; (ii) carriage of students, faculty, and staff that are authorized to travel to Cuba; and (iii) vessels engaged in the exportation or re-exportation to Cuba from a third country of most agricultural commodities, medicine, or medical devices.  The Department of Commerce’s rules still do not allow vessels to depart the U.S. for Cuba without an export license.  Although vessels that have traded in Cuba now will not have to wait 180 days before heading to the U.S., a vessel wanting to travel from the U.S. to Cuba is still going to need an export license to do so.

The steps taken by President Obama, the U.S. Department of the Treasury and the U.S. Department of Commerce are essential to help improve the lives of the Cuban people and in normalizing the relationship between the U.S. and Cuba, however, until the U.S. Congress takes formal action to fully normalize relations with Cuba many restrictions still remain in place. Before engaging in any activities with Cuba, individuals and business should give careful consideration to the new regulations to ensure compliance.

To read a copy of the White House Fact Sheet on these new policies click here.

To read a copy of the Amendments to the Cuban Assets Control Regulations issued by the U.S. Department of the Treasury’s Office of Foreign Assets Control click here.

To read a copy of the Amendments to the Export Administration Regulations issued by the U.S. Department of Commerce click here.

For more information on these new regulations and how it may apply to specific facts and circumstances, please do not hesitate to contact us at info@chaloslaw.com.

New York State, along with thirty-one (31) other U.S. States, have now adopted the Uniform Interstate Depositions and Discovery Act (“UIDDA”), promulgated by the National Conference of Commissioners on Uniform State Laws (“NCCUSL”).  New York has codified the UIDDA rules in section 3119 of the Civil Practice Law and Rules (See 31 C.P.L.R. 3119).

The UIDDA sets forth an efficient and inexpensive procedure for litigants to depose out of state individuals and obtain discoverable materials located in other states.  Before the enactment of the UIDDA in New York, practitioners seeking to obtain discovery located outside the state for use in a New York trial court were required to obtain a commission or letters rogatory from the New York trial court.  Attorneys were then required to proceed to the foreign jurisdiction in which the documents or witnesses were located to obtain a second order from the foreign court to enforce the New York commission and obtain the necessary discovery.  This lengthy process often required the assistance of local counsel and proved to be costly and time consuming.

By enacting the UIDDA, New York attorneys are now able to present a subpoena to the clerk of the court (in a state that has also enacted the UIDDA) where evidence and/or witnesses are located to obtain discovery.  The clerk of the court then issues the subpoena for service without the need for additional judicial intervention.  The terms of the subpoena must incorporate the same terms as would be required by local discovery laws in the state where discovery is sought, must include the contact information for all counsel of record and any party not represented by counsel, and must be served in accordance with the discovery state’s law.  Any motion to quash, enforce, or modify a subpoena issued pursuant to the UIDDA is to be brought in and governed by the rules of the state where the discovery is located.

The UIDDA eliminates the requirements of getting two (2) court orders authorizing discovery and is likely to lead to a much more efficient and cost effective discovery process by limiting judicial oversight and the need to obtain local counsel in the discovery state.

To read a copy of the Uniform Interstate Depositions and Discovery Act click here.

To read a copy of Section 3119 of the the New York Civil Practice Law and Rules click here.

For more information about the interstate discovery process, please do not hesitate to call on us at info@chaloslaw.com

As of January 1, 2015, ships trading in designated control areas are required to use fuel oil with a sulfur content of no more than 0.10% (and no more than 3.5% outside of emission control areas).  The industry has been preparing for these stricter rules and requirements under MARPOL Annex VI, Regulation 14, which were adopted in October 2008 and entered into force in July 2010, but it has remained an open question as to how the United States would handle enforcement.  On January 15, 2015, the Environmental Protection Agency (“EPA”) released its Penalty Policy Letter which sets forth the manner in which the agency intends to assess civil penalties for violations of the fuel sulfur standards in Emission Control Areas (“ECA”) under MARPOL Annex VI and the United States implementation of MARPOL, the “Act to Prevent Pollution from Ships” (APPS), 33 U.S.C. 1901, § et seq.  Under APPS, the EPA may assess civil penalties up to USD 25,000 per day, per violation.  The policy letter sets forth the EPA’s methodology for how violations will be reviewed and evaluated, describing the agency’s plans to achieve deterrence through penalties that remove economic benefit of noncompliance and discussing the adjustment factors which will be taken into consideration to obtain a fair and equitable penalty.  The policy letter provides information about how the agency will be treating a variety of scenarios including: (1) Evaluating the economic benefit obtained. (2) Assessing the gravity component of the noncompliance, for both actual fuel sulfur violations in the North American ECA and record keeping violations.  (3) Adjustments to the penalty amount based on a variety of fact specific characteristics, including but not limited to, degree of willfulness or negligence, history of cooperation, history of non-compliance, litigation risk, ability to pay, and performance of a supplemental environmental project (SEP).

The methodologies and stated goals of the EPA Policy Letter are nothing new, and in fact follow the structure of previous EPA policy letters on civil penalties and statute-specific approaches to penalties which have been in force at the agency since 1984.  However, there are some interesting legal issues and questions which should be kept in mind going forward.  First, who is going to be the target of potential penalties?  The Owner, Operator, and even Charterers may all be in the potential crosshairs.  An evolving area of law is whether there is personal jurisdiction over the Operator/ISM Manager of the vessel at all for alleged violations pursued by the government, as commercial civil case law has developed in such a way that makes it clear that the Courts of the United States do not have personal jurisdiction over these foreign entities that have no connection to the United States.  In addition, the EPA makes clear in the first footnote that it is only addressing the civil penalty component of APPS, and specifically reserves the right of the Coast Guard to make and enforce its own penalty policies and regulations for matters not referred to the EPA.  The Coast Guard regularly refers alleged violations of MARPOL Annex I and APPS for criminal prosecution and it remains to be seen whether the Coast Guard will take a similar approach with sulfur content fuel violations.   Only time will tell.

A copy of the EPA January 15, 2015 Policy Letter can be accessed here.

For more information about MARPOL, the Act to Prevent Pollution from Ships, and/or Environmental Protection Agency / Coast Guard regulations and rules enforcing same, and how these laws and regulations may apply to specific facts and circumstances, please do not hesitate to contact us at info@chaloslaw.com.