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On April 13, 2017, the United States Court of Appeals for the Eleventh Circuit affirmed a decision from the Southern District of Georgia in Miller v. Navalmar (UK) Ltd., No. 16-11967, 2017 U.S. App. LEXIS 6372 (11th Cir. 2017), granting summary judgment in favor of the owner of the vessel CARRARA CASTLE and its charterer against a longshoreman injured during a loading operation.  In Miller, Plaintiff Tyrone Miller brought a negligence action under Section 905(b) of the Longshore and Harbor Workers’ Compensation Act (LHWCA) against defendants Navalmar (UK) Ltd. (“Navalmar”) and Grieg Star Shipping II AS (“Grieg”). Miller was seriously injured after falling thirty-two feet when a plywood board that he had placed over a gap in the cargo stack at the instruction of the stevedores SSA/Cooper Stevedoring (“SSA”) gave way.

The Eleventh Circuit, confirmed that while there is no general duty of supervision or inspection and may rely generally on the stevedore to avoid exposing longshoremen to unreasonable hazards, there are three (3) distinct duties owed by a shipowner during cargo operations. These duties are (1) the turnover duty, (2) the active control duty, and (3) the duty to intervene. See Howlett v. Birkdale Shipping Co., 512 U.S. 92, 98 (1994).  Miller alleged breach of the active control duty based on Grieg’s written cargo safety and storage procedures which Plaintiff alleged required a duty of care toward longshoremen engaged in cargo operations.    The Court held that Grieg’s mandatory loading instructions (provided to SSA) were consistent with industry practice and that Grieg was still relying on SSA for safe cargo loading operations. The passive guidance did not constitute direct involvement in loading operations, which is required before an active duty is imposed on the shipowner or charterer.  As there was no direct involvement, the Court found Grieg did not owe Miller a duty of reasonable care.

Miller also alleged that Grieg and Navalamar breached the duty to intervene because they knew a fall hazard existed on the vessel and were required to remedy the condition when it became apparent that stevedore SSA failed to do so.  A shipowner has a duty to intervene to protect a longshoreman once cargo operations have begun, even if it is not actively involved. However, this duty to intervene requires that the shipowner not only become aware that the ship or its gear poses a danger to the longshoreman, but also that the stevedore is failing, unreasonably, to protect the longshoremen. Lampkin v. Liber. Athene Transp. Co, 823 F.2d 1497, 1501 (11th Cir. 2014). The Court held that even if the defendants had knowledge of a dangerous condition in the CARRARA CASTLE’s hull, Miller made no showing they had actual knowledge of the stevedore’s failure to remedy the problem. The duty to intervene is exceedingly narrow and “[o]only the most egregious decisions by the stevedore are ‘obviously improvident.’” Harris v. Pac. Gulf-Marine, Inc., 967 F. Supp. 158, 165 (E.D. Va. 1997). The Eleventh Circuit ultimately held that the district court did not err in finding the Defendants lacked actual knowledge regarding the stevedore’s inability, or failure, to remedy a dangerous hazard on the vessel, and consequently they had no duty to intervene in a routine cargo loading operation.

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.

On March 9, 2017, The Supreme Court of the State of Washington held that punitive damages are available to plaintiffs under a general maritime unseaworthiness claim. See Tabingo v. Am. Triumph LLC, No. 92913-1, 2017 Wash. Lexis 328 (Mar. 9, 2017). In Tabingo, Plaintiff Allan Tabingo, brought a Jones Act negligence claim and multiple general maritime claims, including one for unseaworthiness, against defendants American Triumph LLC (“American Triumph”) and American Seafoods Company LLC (“American Seafoods”). Tabingo was working as a deckhand on a fishing trawler when he had two fingers amputated by a hydraulic hatch due to a broken control handle. Tabingo alleged that American Seafoods knew about the broken control handle for two (2) years prior to the incident, but failed to repair it. Tabingo sought to recover punitive damages under his general maritime claim for unseaworthiness.

Defendants challenged Tabingo’s claim for punitive damages. The Superior Court held that based on Washington state and federal law, a seafarer is not entitled to punitive damages under a general maritime claim because the measure of damages available in a Jones Act negligence claim and unseaworthiness claim are identical. Tabingo filed a direct interlocutory petition for review to the Supreme Court of Washington, which was granted.

The Supreme Court of Washington reversed the Superior Court, holding that a seafarer may recover punitive damages under a common-law unseaworthiness claim. Defendants argued that Miles v. Apex Marine Corp., 498 U.S. 19 (1990) was controlling. In Miles, the family of a dead seaman sought to recover punitive damages for a wrongful death claim, which the U.S. Supreme Court held were not available as Congress had explicitly limited wrongful death claims to pecuniary loss. The Washington State Supreme Court rejected the application of Miles and held that a more recent U.S. Supreme Court case, Atlantic Sounding Co. v. Townsend, 557 U.S. 404, 129 S. Ct. 2561 (2009), was applicable. The Court was persuaded that Townsend was controlling because in that case, the U.S. Supreme Court held that a seaman could recover punitive damages from his employer’s willful and wanton disregard for its maintenance and cure obligations, i.e. another general maritime claim, whereas Miles was limited to wrongful death claims.

The Court reasoned that a seafarer could bring both a Jones Act negligence claim and a common-law unseaworthiness claim and recover under both theories in the same action. The Court also held that such a result was warranted since the Jones Act was not designed to narrow protection to seafarers but, rather to enlarge it. Since Congress has not directly addressed the damages available for an unseaworthiness claim, punitive damages are not barred from recovery. Finally, the Court concluded with a policy argument that its holding was consistent with the historic charge to Courts to protect seafarers as wards of the admiralty courts.

To read the full opinion of the Supreme Court of Washington, please click here.

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

On January 30, 2017, Michelle Otero Valdés of Chalos & Co, P.C., spoke as part of the American Conference Institute’s 6^th Annual Forum on Admiralty and Maritime Claims and Litigation in Miami, Florida.  Mrs. Otero Valdés focused her presentation on a number of decisions from the Second, Third, and Eleventh Appellate Circuits regarding personal jurisdiction over foreign entities.  Most notably, Mrs. Otero Valdés discussed the Third Circuit’s finding in Athos I that a terminal could be held liable for damage to a vessel which occurred on the way to the terminal or at anchorage under a safe berthing warranty. See Frescati Shipping Co. v. Citgo Asphalt Ref. Co., 718 F.3d 184 (3d. Cir. 2013). This finding implies new obligations for charterers and wharfingers to scan for and detect possible obstructions to avoid breach of warranty and negligence liabilities.

In the Second Circuit, she explained a recent finding that a diving accident in navigable waters can bring admiralty tort jurisdiction because of the possibility of such an accident affecting other vessels and disrupting maritime commerce.  See Germain v. Ficarra, 824 F.3d 258 (2d. Cir. 2016).  Additionally, the Second Circuit also denied personal jurisdiction where a foreign entity that merely had a representative office, which was not enough to show the company was “at home” in the state.  See CLdN Cobelfret Pte. Ltd. v. ING Bank N.V., 2016 U.S. Dist LEXIS 159788 (S.D.N.Y. 2016).  Finally, Mrs. Otero Valdés discussed a recent decision within the Eleventh Circuit finding that the Court did not have jurisdiction when a passenger sued for an injury occurring on an excursion during a cruise because the excursion company’s agreement to indemnify a cruise line, along with various other contacts in the state, did not establish general jurisdiction over that company.  See Thompson v. Carnival Corp.,  174 F.Supp.3d 1327 (S.D.F.L. 2016).

To learn more about the American Conference Institute, please visit https://www.americanconference.com/

For more information about this event or Mrs. Otero Valdés’ discussion, please do not hesitate to call on us at info@chaloslaw.com.

On September 28, 2016, the U.S. District Court for the District of Puerto Rico, in Q.B.E. Segueros v. Moralex-Vazquez, 2016 U.S. Dist. LEXIS 133822 (D. P.R. 2016), held that the recent abolishment of the uberrimae fidei doctrine by the U.K. Marine Insurance Act of 2015 does not compel U.S. courts to follow so as to ensure uniformity in the marine insurance market.

Plaintiff QBE Segueros (“QBE”) brought an action against Carlos Morales-Vazquez (“Morales”), seeking a declaratory judgment that Morales’s marine insurance policy was void ab initio, because Morales breached a “warranty of truthfulness.” Morales counterclaimed, alleging breach of contract and entitlement to consequential damages.  Morales later moved for a judgment on the pleadings.

QBE had issued to Morales a marine insurance policy. The policy stated that it “shall be void and without effect” if the insured made a false statement or misrepresentation with respect to the insurance. During the term of the policy, Morales’s yacht sustained fire damages, and Morales filed a claim with QBE. In the claim, Morales failed to disclose a 2010 incident giving rise to a claim to a separate insurer, when asked a question of whether he had any accidents or losses in connection with a vessel he owned.

Morales pointed out that the U.K. Insurance act of 2015 abolished the uberrimae fidei doctrine and argued that the U.S. Supreme Court had instructed federal courts to adopt uniform and harmonious application of American and English marine insurance law.  The “Uberrimae fidei” doctrine (meaning “of the utmost good faith”) requires the insured to disclose to the insurer all known circumstances that materially affect the insurer’s risk.  Thus, under the doctrine, when an insured fails to disclose to the insurer all circumstances known to it and unknown to the insurer which ‘materially affect the insurer’s risk,’ the insurer may void the marine insurance policy at its option.

The District Court rejected Morales’s argument reasoning that uberrimae fidei is a recognized federal law in the First Circuit and is bound by same until otherwise instructed by the First Circuit Court of Appeals or by the U.S. Supreme Court. The Court recognized that “is true that [the Supreme Court] and other American courts have emphasized the desirability of uniformity in decisions here and in England in interpretation and enforcement of marine insurance contracts”, but the Supreme Court made it clear in Standard Oil Co. v. United States, 340 U.S. 54, 58 (1950), that “this does not mean that American courts must follow House of Lords’ decisions automatically.”

For more information, please do not hesitate to contact us at info@chaloslaw.com.

On August 9, 2016, the United States Court of Appeals for the Ninth Circuit affirmed a decision from the Central District of California in Mitsui Sumitomo Insurance USA, Inc. et. al. v. Tokio Marine & Nichido Fire Insurance Company, Ltd., No. 14-56337, granting summary judgment against one insurance company in a dispute over equitable contribution claims.

Plaintiffs-Appellants Mitsui Sumitomo Insurance USA, Inc. and Mitsui Sumitomo Insurance Company of America (collectively referred to as “Mitsui”) brought an action against Defendant-Appellee, Tokio Marine & Nichido Fire Insurance Company (“Tokio”), for equitable contribution, under the assumption that both carriers provided coverage for the same level of risk. Precedent had held that where two (2) or more insurers independently provide primary insurance on the same risk for the insured, the carrier who pays the loss or defends a lawsuit against the insured is entitled to equitable contribution from the other insurer. However, the Court found that Tokio and Mitsui did not share the same level of risk, because Tokio was providing an excess policy, whereas Mitsui was the primary insurer. For that reason, Mitsui’s claim failed and the district court granted summary judgment in favor of Defendant-Appellee Tokio.

In addition to the contribution claim, Mitsui filed a bad faith claim for improper venue against Tokio pursuant to F.R.C.P. 12(b)(3). The parties had freely negotiated the forum-selection clause, and ultimately selected Japan as the forum to resolve any disputes and agreed that Japanese law would apply. In its ruling, the Ninth Circuit stated that forum selection clauses are prima facie valid and should not be set aside unless the party challenging enforcement of such a provision can show that the clause is unreasonable under the circumstances. The Ninth Circuit found no such showing by Mitsui and affirmed the district court’s dismissal of the bad faith claim. Finally, the Ninth Circuit denied Tokio’s request for attorneys’ fees, stating that Tokio had provided no statutory authority that entitled it to fees.

Accordingly, the Ninth Circuit held that because Mitsui and Tokio did not share the same risk, Mitsui’s claim for equitable contribution must fail, and affirmed the district court’s decision.

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 contact us at info@chaloslaw.com.

On August 1, 2016, the United States Court of Appeals for the Fifth Circuit affirmed a decision from the Western District of Louisiana in Raylin Richard v. Dolphin Drilling, No. 16-30003, affirming a grant of summary judgment in favor of Valiant, the third party defendant-appellee.  The Fifth Circuit held that a clear and unequivocal exclusion of coverage in the insurance policy agreement precluded coverage in that particular instance.  The case involved an incident in which the original plaintiff, Raylin Richard, was injured while working on a drillship for his employer, Dolphin Drilling.  Richard sued in January 2011, and Offshore was later brought into the suit as a third party defendant.  Offshore brought a crossclaim against Liberty Mutual Insurance, its primary insurer, and against Valiant, its excess insurer.

In its answer, Valiant asserted that it did not owe coverage, pursuant to the “drilling rig exclusion” of its policy with Offshore, which stated that no coverage was owed for “any liability for, or any loss, damage, injury, or expense caused by, [or] resulting from… [the] operation of drilling rigs.” Valiant moved for summary judgment on the ground that this exclusion absolved it of coverage liability. In response, Offshore argued that: 1) a drillship is not a drilling rig, 2) the drilling rig exclusion does not preclude coverage, and 3) Valiant waived its right to assert coverage defenses by (among other things) waiting three months to raise its policy defenses. The district court rejected Offshore’s reasoning, and the appellate court agreed.

In granting summary judgment, the court cited Reynolds v. Select Props., Ltd., 634 So.2d 1180, 1183 (La. 1994), which held that “the parties’ intent, as reflected by the words of the policy, determine[s] the extent of coverage.” Louisiana law further holds that when the words of a contract are clear and explicit, “no further interpretation may be made in search of the parties’ intent.” La. Civ. Code art. 2046.  The policy exclusion states that coverage does not apply to “any liability for… or expense arising out of the ownership, use or operation of drilling rigs.” The district court found that the accident giving rise to the claim occurred on a drilling rig, and that the term “clearly encompasses” drillships. The court based its decision, in part, on Cash v. Liberty Ins. Underwriters, Inc., 624 F. App’x 854, 855 (5th Cir. 2015), a Fifth Circuit decision upholding a nearly identical policy exclusion. The Fifth Circuit concluded from the plain language of the policy “that the parties intended to exclude platforms from coverage.” Id. at 860. Had the parties intended otherwise, they would have drafted contractual language to reflect that intent. Id.

Offshore’s third argument, that Valiant waived its right to assert coverage defenses, by waiting until 2014 to raise such defenses, was also unconvincing to the Court. Under Louisiana law, “waiver occurs when there is an existing right, a knowledge of its existence and an actual intention to relinquish it or conduct so inconsistent with the intent to enforce the right as to induce a reasonable belief that it has been relinquished.” Steptore v. Masco Constr. Co., 643 So. 2d 1213, 1216 (La. 1994). The district court concluded that Valiant possessed an existing right, knew of the right, and did not relinquish its rights. The Fifth Circuit affirmed.

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 contact us at info@chaloslaw.com.

On June 1, 2016, the United States Court of Appeals for the Second Circuit reversed a decision of the United States District Court for the Northern District of New York in In Re Germain, 15-665, finding that admiralty tort jurisdiction was present and holding that a vessel owner may bring a limitation of liability action for injuries sustained by a passenger while diving off the recreational vessel when it was anchored in shallow, yet navigable waters in Lake Oneida.

Appellee Matthew Ficarra (“Ficarra”) and three (3) other guests left on Appellant Bruce Germain’s (“Germain”) thirty-eight (38) foot motorboat, Game Day, for an excursion on Lake Oneida in New York.  The group sailed through a federal shipping lane up to Three Mile Bay, located less than a nautical mile from said lane.  As the group prepared for the return voyage, Ficarra dived off the port side into the water on two (2) occasions, including making a backflip from the back of the boat that resulted in him suffering a serious spinal cord injury causing paralysis and quadriplegia.  As part of the rescue efforts, local rescue and police boats arrived at the scene.

On June 16, 2014, Ficarra sued Germain in the New York State Supreme Court, asserting claims for negligence under New York law.  The Complaint alleged that Germain was negligent for failing: (1) to operate, captain, anchor, maintain, or control his vessel in a safe and reasonably prudent manner to protect the safety and welfare of his boat’s passengers; (2) to properly and adequately instruct his passengers on safe boating and diving practices; (3) to properly and adequately inspect the area in which his boat was anchored; and (4) to adequately warn his passengers of the dangerous conditions existing at the time of the aforementioned incident.

Germain removed the action to the United States District Court for the Northern District of New York, and petitioned that he be exonerated, or his liability limited, under the Limitation of Liability Act of 1851, 46 U.S.C. §§ 30501-12 (“Act”), and Rule F of the Supplemental Rules for Admiralty of Maritime Claims and Asset Forfeiture Actions (“Rule F”).  The District Court found that Ficarra’s claim did not meet the modern test for admiralty tort jurisdiction, and thus admiralty subject matter jurisdiction over Germain’s petition for limitation did not exist.  The negligence claim was remanded, and Germain’s limitation petition dismissed.  Germain appealed the District Court’s dismissal of his limitation petition.

On appeal, the Second Circuit stated that admiralty cases involving petitions for limitation of liability can be pursued while a state court proceeding takes place.  The Court also reiterated the Act is a particularity of the maritime and admiralty area that provides exoneration from or limitation of liability for “damages caused by the negligence of his captain and crew.” A petition under the Act can only proceed if the Court has admiralty subject matter jurisdiction over the underlying facts of the case.

The Second Circuit held that the “location” test for jurisdiction had been met, because the incident took place in navigable waters.   The Second Circuit then proceeded to determine whether the matter met the “modern test” for admiralty tort jurisdiction (“modern test”), which contains two prongs: (1) whether a tort occurring in a body of water presents a potential disruption to maritime commerce; and (2) whether the general character of the activity giving rise to the incident has a substantial relationship to traditional maritime activity.

The Second Circuit stated that Ficarra’s maritime emergency response could have affected other vessels in the area and found that a passenger who jumped from a vessel onto open navigable waters has a “more than fanciful potential to disrupt maritime commerce.”  In addition, the Second Circuit stated that Germain’s maritime activity was the transport and care of passengers onboard of a vessel on navigable waters, which constituted a substantial relationship to traditional maritime activity.  Accordingly, the Second Circuit held that modern test was met, stating that for purposes of admiralty tort jurisdiction, it does not matter whether a vessel is taking part in commercial or recreational activities, as long as it is on navigable waters.  Thus, the District Court’s emphasis on the recreational nature of Germain’s vessel was held to be misplaced and admiralty tort jurisdiction was found.

To read a copy of the Second Circuit’s Opinion, 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.

On May 20, 2016, the United States Court of Appeals for the Second Circuit affirmed a decision of the Southern District of New York in Fireman’s Insurance v. Great American Insurance, No. 14-cv-1346, holding that under the doctrine of uberrimae fidei, as well as Mississippi Common law, an insurance contract is void ab initio if the insured is found guilty of misrepresenting material facts which a prudent and reasonable insurance underwriter would have otherwise taken into consideration when determining whether to issue a policy.

Fireman’s Fund Insurance Company (“Fireman’s Fund”) and a marine construction firm Signal International, LLC (“Signal”) appealed a decision from the Southern District of New York which had granted summary judgment to Great American Insurance Company of New York (“Great America”) and Max Specialty Insurance Company (“MSI”).  Fireman’s Fund, Great American and MIS underwrote insurance policies that included coverage for a dry dock that Signal owned in Port Arthur, Texas.  Signal had failed to disclose material information regarding the poor condition of the dock and the repairs needed when contracting with Great American and MSI for insurance coverage.  In addition, Signal was aware of the negative reports on the state of the dry dock and had ignored several repair recommendations from various sources.  After obtaining pollution and excess property insurance coverage for the dry dock from Great American and MSI, Signal’s dock sank.  Great American and MSI argued that their policies did not cover the costs of removing the dry dock from the Sabine-Neches Waterway and cleaning up the site.   Instead, Firemen’s Fund paid for the costs of the dry dock clean-up and removal and subsequently filed an action against Great American and MSI seeking reimbursement of those fees.

The Second Circuit affirmed the District Court’s decision to void the marine insurance contracts between Signal and Great American.  The Second Circuit stated that the primary objective of the pollution policy coverage for the dry dock was to insure against the risk of liability for pollutants emitted during Signal’s ship repair and maintenance operations, which would affect marine commerce.  When marine commerce is affected, an insurance contract can be considered a marine contract, and thus subject to the uberrimae fidei doctrine.  In applying the doctrine to the specific facts at issue, the Second Circuit Court stated that Signal should have disclosed all facts within its knowledge that were material to the risk being insured.  Because Signal did not reveal to Great American the numerous reports detailing the poor condition of the dock, the contract was declared void ab initio.  The Court reiterated that the uberrimae fidei doctrine imposes a duty of utmost good faith on the insured, and that all material information subject to consideration by a prudent and reasonable insurance underwriter should be revealed, without need of an inquiry.

Furthermore, the Second Circuit also reached a similar conclusion under Mississippi Common law, affirming the District Court’s opinion that insurer MSI could also void ab initio its insurance contract with Signal.   Here, the excess property insurance policy held by MSI was not categorized as a marine insurance contract by the District Court.   However, under Mississippi law the insured may not mislead nor misrepresent material facts to an otherwise prudent underwriter who relied on them in making an insurance decision.  Signal provided MSI with its own submission report when applying for coverage and presented a favorable report on the condition of the dry dock.  The Second Circuit stated that MSI should have been provided with any negative reports prepared by engineers and the like, as a prudent and reasonable insurance underwriter would have reviewed same before taking a decision on whether or not to write the policy. The Court finally stated that providing the positive report to MSI amounted to an affirmative representation by Signal of the dock’s condition.

Accordingly, the Second Circuit presently stands clear on the issue that, under admiralty law, insurance contract must be entered into with the utmost good faith as required by uberrimae fidei.

To read a copy of the Second Circuit’s Opinion, 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 FBA SDNY Chapter, along with the Admiralty Law Committee of the FBA, will host a brown bag lunch panel discussion on maritime law at the US Courthouse (40 Foley Square, Room 145) on Friday May 6, 2016.  Doors open at 11:30 a.m. with presentations to following from 12:00 p.m. to 1:00 p.m. All are welcome to attend (although space is limited).  Participation in the event is free.

The agenda is evolving, however, anticipated topics for discussion include:

• The Southern District of New York’s admiralty and maritime law history;
• Prejudgment & ex parte security and enforcement actions;
• Recognition of arbitral Awards;
• Effective Use of Rules B, C and E;
• Perspectives from the Bench, Clerk’s Office and U.S. Marshals Service; and
• Recent maritime law developments.

The panel will be moderated by George M. Chalos,  Chair of the Admiralty Law Committee for the SDNY Chapter of the Federal Bar Association, and feature the following speakers:

• Hon. John G. Koeltl, U.S. District Judge, SDNY;
• Hon. Victor Marrero, U.S. District Judge, SDNY;
• Andrew D’Agostino, Project Manager, SDNY; and
• Kevin Kraemer, Deputy U.S. Marshal, SDNY

To RSVP to the event visit maritimefba.eventbrite.com.

For more information on the event click here.

On March 14, 2016, the Fifth Circuit Court of Appeals entered an Opinion in United States of America v. Matthaios Fafalios, 15-30146, vacating the judgment of conviction against the chief engineer of the TRIDENT NAVIGATOR and remanding the matter to the District Court for the Eastern District of Louisiana for entry of a judgment of acquittal in accordance with Fed. R. Crim. P. 29.    Matthaios Fafalios, a Greek seafarer, was wrongfully charged and convicted in December 2014 for the crime of “failing to maintain an oil record book aboard a foreign-flagged merchant sea vessel, in violation of 33 U.S.C. § 1908(a) and 33 C.F.R. § 151.25.”   At the close of the government’s evidence at trial, Mr. Fafalios moved for judgment of acquittal pursuant to Fed. R. Crim. P. 29 on the grounds that the government failed to prove beyond a reasonable doubt that he was the “Master or other person in charge” of the Vessel and therefore he was not legally required under the Coast Guard’s regulations to maintain the Oil Record Book while in United States waters in accordance with 33 C.F.R. § 151.25(j).   The District Court for the Eastern District of Louisiana denied the motion for judgment of acquittal, and Fafalios sought appellate review of the conviction by the Fifth Circuit Court of Appeals.

In a decision that was openly critical of the government, the Fifth Circuit carefully reviewed the language contained in the applicable statutes and regulations, confirming that where the language is unambiguous, the Court should not look beyond the plain language of the statute or regulation.  The Court stated unequivocally that “under the plain language of the regulations, only the ‘master or other person having charge of the ship’ is responsible for maintenance of the oil record book.”  Notwithstanding, the government attempted to offer several reasons for why the conviction should be upheld, all of which were addressed and rejected by the Fifth Circuit.  First, the government challenged the applicability of Rule 29, arguing that Fafalios should have moved to dismiss the indictment before trial allowing the government an opportunity to correct any insufficiency.  The Court disagreed.

In addition, the Fifth Circuit rejected the prosecutor’s argument that the Chief Engineer’s responsibility to sign and record bilge water operations in the Oil Record Book was a “continuing obligation.”  The Court held that any failure by Fafalios to make a required entry occurred while he (and the Vessel) were still in international waters and therefore the United States did not have jurisdiction over such an offense, as the “failure to sign an oil record book while in international waters, standing alone, is not a violation of either APPS or its attendant regulations.”  In addition to relying on its own past precedents, the Court concluded that the regulation’s requirement for the record book to be signed “without delay” implied that the offense was committed as soon as the book was not signed, and that different language would have been used by the drafters if a continuing obligation was intended.  The Court further rejected the government’s alternative argument that Fafalios was obligated, as the Vessel’s Chief Engineer, to comply with the regulations’ requirement for the ship, itself, to “maintain” an oil record book, finding that such argument was “foreclosed by traditional rules of statutory construction, not to mention common sense.”  The Fifth Circuit criticized the government’s “strained reasoning” as to why this duty should extend to Chief Engineers, finding that there was “no convincing explanation” as to why the ship’s duty (to maintain an accurate oil record book in U.S. waters) should be delegated to a chief engineer, especially when the applicable statutes permit an in rem cause of action against the ship.

Recognizing the lack of merit to the case, the government’s argument that the Coast Guard had a well-known practice of enforcing oil record book regulations against chief engineers which was rejected out of hand by the Fifth Circuit as “being without merit.”  The Court of Appeals highlighted that the Coast Guard’s past practices did not provide a reason to deviate from the regulation’s plain language.

Finally, in rejecting what it referred to as an “unusual” policy argument, the Fifth Circuit stated that it was unpersuaded by the government’s concerns that reading the regulation to impose the duty to maintain the record book only on the vessel’s master would cause chief engineers to falsify records and conceal their falsification from the master.  In addition, the Fifth Circuit found the government’s argument to be nothing more than a “contrived hypothetical.”

George M. Chalos, George A. Gaitas, and Briton P. Sparkman represented Mr. Fafalios during his criminal trial in the Eastern District of Louisiana.  George M. Chalos presented the oral argument to the panel for the Fifth Circuit on December 4, 2015.  To listen to the oral argument, click here.

To read a copy of the Fifth Circuit’s Opinion, 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.