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

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

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

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

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

A copy of the Memorandum can be found here.

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

Michelle Otero Valdés of Chalos & Co, P.C. – Miami to speak at IUA Market Briefing Webinar January 26, 2021

We are pleased to announce that Mrs. Otero Valdés together with Corey D. Ranslem of International Maritime Security Associates, Inc. (IMSA) will be presenting via webinar at the International Underwriting Association (IUA) Market Briefing to discuss cyber security issues within the maritime industry, case studies, and the keys to cyber security planning and cyberattack “avoidance.”  The webinar will take place on January 26, 2021 at 10:00 a.m. EST.

To register for the program please click here.

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

District Court Dismisses Federal Charges in Duck Boat Tragedy

Earlier this year, we reported on the decision issued by Chief Magistrate Judge David Rush of the Western District of Missouri recommending that all federal criminal charges against the Captain (and two (2) shore-side managers) of a duck boat, which tragically sank on Table Rock Lake in Missouri in July 2018 and led to the deaths of seventeen (17) people, be dismissed for lack of admiralty jurisdiction. The government filed numerous objections to the findings of fact and conclusions of law in the Magistrate Judge’s Report and Recommendation.  Both sides filed supplemental briefing and other supporting documents for the District Court’s review.  The government’s chief argument was that the Magistrate Judge erred in holding that the navigability of Table Rock Lake was a legal issue on which prior Eighth Circuit precedent binds the Court.  Specifically, the Report and Recommendation had relied on a decades old civil case (Edwards v. Hurtel, 724 F.2d 689, 689-90 (8th Cir. 1984)), in which the district court and Eighth Circuit had taken judicial notice that the lake was recreational in nature and not used for commercial shipping and/or otherwise navigable.  The government argued that the facts of the instant criminal matter, show “that the physical characteristics of the lake can, and do, support interstate commercial shipping, and that goods and people are currently transported on the lake across state lines for profit,” are different.  The government argued that it should have been permitted the opportunity to prove its facts at trial and the prior Circuit Court precedent relied upon in the Report and Recommendation is inapplicable and non-binding based on the facts of the present case.

As the Magistrate Judge’s recommended opinion would result in the dismissal of the case if accepted, the District Court Judge was required to conduct an independent review of the record, hearing transcript, parties’ briefing, and applicable law before rendering a final decision.  On December 3, 2020 District Judge Douglas Harpool issued a single page Order adopting the Report and Recommendation in full and dismissing the case (and all charges) against the defendants for lack of admiralty jurisdiction.  No independent analysis of the government’s objections or arguments was provided by the District Court. The Clerk of the Court promptly entered the judgment closing the case. The government has since appealed the decision to the Eighth Circuit Court of Appeals.  A briefing schedule will be set by the Circuit Court for early 2021.

A copy of the Order adopting the Report and Recommendation and dismissing the case can be found here.

For any questions about the decision or to learn more about the criminalization of admiralty matters in the United States, please contact us at info@chaloslaw.com.

Briton P. Sparkman Presents CLE at Maritime Law Association Fall Meeting

On November 5, 2020, Briton P. Sparkman of Chalos & Co, P.C. attended and presented at the Maritime Law Association Virtual Fall Meeting for the Uniformity Committee on U.S. Maritime Law.  Mr. Sparkman’s presentation was on the split in recent Circuit Court of Appeals opinions interpreting the ability of district courts to grant discovery in aid of a foreign proceedings pursuant to 28 U.S.C. § 1782.  Specifically, the different approaches taken by the Second, Fifth, and Seventh Circuits in holding that such discovery is not available for foreign private arbitration and the Fourth and Sixth Circuits which have said that it is. The meeting also included a presentation by Committee Chair, Professor Michael Sturley on Circuit conflicts in cargo law.

The presentation provided Continuing Legal Education (“CLE”) credit for the 85+ attendees of the meeting and was recorded to be added to the MLA’s CLE library in the near future.

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


On October 8, 2020, the United States Court of Appeals for the Second Circuit issued an unpublished opinion affirming judgment of the United States District Court for the Southern District of New York, that a vessel operator’s bankruptcy and voluntary termination of various service contracts relieved the shippers of any obligation to pay liquidated damages under the contract.  In re: The Containership Company (TCC) A/S, 19-3394 (2d Cir. Oct. 8, 2020).  Plaintiff, The Containership Company (TCC), provided trans-Pacific container-shipping services between Los Angeles, California and various ports in China.  TCC entered into several service contracts with shippers who agreed to ship a “minimum quantity commitment of cargo” on board vessels chartered by TCC for the period of April 2010 – April 2011. The contracts between TCC and the shippers provided for liquidated damages for any shortfall in the minimum quantity commitment. On or about April 7, 2011, TCC announced that it would discontinue its trans-Pacific shipping services and cancelled the remaining scheduled sailings. After withdrawing the previously chartered vessels and terminating all employees, TCC sent demand letters to Defendants alleging they had failed to meet the minimum quantity commitment.

TCC initiated bankruptcy proceedings in Copenhagen, Denmark and obtained Chapter 15 recognition of the foreign bankruptcy proceeding in the United States Bankruptcy Court for the Southern District of New York. Shortly thereafter, TCC commenced seventy-six (76) adversary proceedings against Defendants, each containing a single claim for breach of the service contracts. The Bankruptcy Court recommended that judgment be entered in favor of the Defendant shippers on the basis that TCC’s discontinuation of the trans-Pacific service constituted voluntary termination of the service contracts and relieved Defendants of their remaining minimum quantity commitments.  The District Court affirmed the Bankruptcy Court’s order.

On appeal, the Second Circuit agreed that under the plain language of the contracts, TCC’s discontinuance of service constituted termination of the contracts which excused all parties from penalty or further contractual obligations. The Second Circuit further concluded that TCC’s discontinuance of its trans-Pacific service deprived Defendants of the opportunity to fulfill their minimum quantity commitments under the contracts and excused Defendants from complying with any other contractual obligations. TCC’s alternative argument that the contracts had been breached before the voluntary discontinuance because the shippers had not “shipped the goods evenly” over the contract term was rejected out of hand by the Court on the basis that the contracts did not contain any objective or clear guidelines against which to measure such efforts. Accordingly, the Second Circuit affirmed the judgment in favor of the shippers.

To read the full opinion, please click here.

For more information about the Second Circuit decision or U.S. Bankruptcy law as it relates to maritime contracts and claims, please do not hesitate to contact us at info@chaloslaw.com.

Is the Duck Boat Tragedy a Seaman’s Manslaughter Case?

On Friday September 4, 2020, Chief Magistrate Judge David Rush of the Western District of Missouri issued a report and recommendation that all federal charges against the master of the duck boat that sank on Table Rock Lake Missouri in 2018 be dropped for lack of admiralty jurisdiction.   The duck boat tragedy on July 19, 2018 resulted in the deaths of seventeen (17) people who were onboard the Stretch Duck 7 when it sank during a storm.   Kenneth McKee was the master of the vessel during the incident and was charged in a 47-count Second Superseding Indictment alleging violations of the Seaman’s Manslaughter statute (18 U.S.C. § 1115) and the gross negligent operation of a vessel (46 U.S.C. § 2302(b), a misdemeanor).  In addition, Charles Baltzell (the operations supervisor and manager) and Curtis Lanham (the general manager of Ride the Ducks Branson) were charged with the same conduct on an aiding and abetting theory of liability (18 U.S.C. § 2).

The Seaman’s Manslaughter Act was first enacted by Congress in the early 19th Century to “provide for the better security of the lives of passengers on board of vessels propelled in whole or in part by steam.” Act of July 7, 1838, ch. 191, 5 Stat. 304 (1838).  Congress intended criminal liability to attach to “every captain, engineer, pilot, or other person employed. . .”, who negligently caused the death of persons on board a vessel. Id. The degree of negligence required was purposefully lower than other manslaughter statutes due to the inherently dangerous nature of operating a wooden vessel filled with “combustible materials.” Van Shaick v. United States, 159 F. 847, 851 (2d. Cir. 1908).  Courts have held that the historical application of the statute is to hold “any degree of negligence” by a person in charge of the operation of a vessel responsible for the death of a person.  United States v. O’Keefe, 426 F.3d 274, 278 (5th Cir. 2005)(collecting cases).  A conviction under the statute can result in a fine and/or imprisonment of up to ten (10) years.

In the case, the Defendants moved to dismiss the Indictment on numerous grounds, including lack of admiralty jurisdiction, as the alleged crimes occurred on Table Rock Lake which is not “navigable” as a matter of law under binding Eighth Circuit precedent, and therefore the federal court lacks subject matter jurisdiction.  Magistrate Judge Rush issued a twenty-one (21) page report and recommendation which carefully analyzed the Court’s exercise of subject matter jurisdiction in the case and concluded that the charges against the Defendants should be dismissed.  In a two-part analysis, the Court found that there was general criminal subject matter jurisdiction over the charges because they are offenses against the laws of the United States.  However, that is not the end of the inquiry and in order to proceed with the case to a jury, the prescriptive reach of the statute (and by extension the Court’s jurisdiction to hear the case) is defined by whether the Court has admiralty jurisdiction.

In analyzing the Seaman’s Manslaughter Act, the Court found that the statute in question contains “no reference to high seas, territorial waters, or admiralty jurisdiction. In fact, the statute doesn’t even mention water.”  However, in reviewing the statute’s history and relying extensively on the Fourth Circuit Court of Appeals decision in United States v Allied Towing, 602 F.2d 612 (4th Cir. 1979), Magistrate Judge Rush ruled that the statute was enacted pursuant to the ability of Congress to create and modify admiralty laws.  Accordingly, in order to have jurisdiction to prosecute the charged offenses, the federal court must have admiralty jurisdiction to hear the case.  The Court next reviewed the applicable standard to determine whether there was admiralty jurisdiction present.  Article III, § 2 of the Constitution confers admiralty jurisdiction over all admiralty and maritime cases to the federal courts involving waters that navigable in fact.  To determine navigability, Courts in the Eighth Circuit utilize the contemporary navigability test which limits the concept of “navigability” to a “present capability of waters to sustain commercial shipping.”  The Court ruled that the question of navigability on Table Rock Lake has been well-settled pursuant to binding Eighth Circuit precedent for over thirty-five (35) years, as it is a lake that has been used exclusively for recreational activities and not in any way capable of supporting commercial shipping. Edwards v. Hurtel, 724 F.2d 689, 689-90 (8th Cir. 1984).  A fact which has not changed since the Edwards case was decided by an en banc panel of the Eighth Circuit.

The Court also rejected the government’s argument that the Commerce Clause of the Constitution could in some way impart jurisdiction over the crimes, ruling that the clause relates to the regulatory powers of Congress, not the subject matter jurisdiction of the Court.  Magistrate Judge Rush lamented the tragic death of the seventeen (17) men, women, and children on Table Rock Lake, but ruled that there was no direct application of federal law to this case given the lack of admiralty jurisdiction.  As such, the Court ruled that the right to prosecute Defendants for the tragedy is reserved for the State of Missouri’s general police powers and recommended dismissal of all charges.  Under the federal rules of criminal procedure, the United States has fourteen (14) days to file objections to the Magistrate Judge’s Report and Recommendation (i.e. on or before September 18, 2020).  Assuming the government makes objections, the District Court must consider de novo any objection to the recommendation and may “accept, reject, or modify the recommendation, receive further evidence, or resubmit the matter to the magistrate judge with instructions.”

Given the complex statutory and jurisdictional issues pending in this matter and the fact that the government pursued forty-seven (47) counts in this case, it is anticipated the United States will file objections to the District Judge.

A copy of the Report and Recommendation can be found here.

For any questions about the decision or to learn more about the criminalization of admiralty matters in the United States, please contact us at info@chaloslaw.com.

Second Circuit Court of Appeals Confirms That U.S. Discovery is Not Available in Aid of Foreign Private Arbitration

The Second Circuit Court of Appeals issued a decision re-affirming its prior precedent that 28 U.S.C. § 1782(a), which authorizes federal courts to compel the production of materials for use in a “foreign or international tribunal”, does not extend to foreign private arbitration.  In re: Application and Petition of Hanwei Guo, 19-781 (2d Cir. July 8, 2020) (citing with approval NBC, Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184 (2d Cir. 1999)). As previously reported, U.S. Courts have been divided on the issue of whether the U.S. discovery statute extends to private arbitrations in light of the 2004 U.S. Supreme Court decision which held the tribunal definition in the statute was “unbounded by categorical rules.” Intel Corp. v. Adv. Micro Devices, Inc., 542 U.S. 241 (2004).  The Intel decision quoted from a 1965 law review article by Professor Hans Smit which stated that the legislative history of the statute intended to include “arbitral tribunals.” Id. Over the past fifteen (15) years federal courts have debated whether the reference intended to expand the statute’s application or was merely a passing reference in dicta.

In Guo, the petitioner was seeking discovery from four (4) investment banks in aid of an arbitration pending before the China International Economic and Trade Arbitration Commission (“CIETAC”). It was undisputed that CIETAC was developed by the People’s Republic of China in 1954 as part of the China Council for the Promotion of International Trade, but CIETAC’s jurisdiction over disputes is restricted to private parties who have selected CIETAC arbitration by contract (and some contractual disputes between investors and Chinese governmental entities which are governed by separate rules). The district court denied the petition, holding that pursuant to binding Second Circuit precedent of NBC, discovery was not permitted under § 1782(a) for use in a private commercial arbitration.  The district court also held that CIETAC was closer to a private arbitral body as opposed to a state-sponsored adjudicatory tribunal and therefore the application for discovery was foreclosed by NBCGuo appealed both issues.

The Second Circuit revisited the issues and analysis of both NBC and Intel, holding unequivocally that the distinct question raised by NBC – whether a private international arbitration tribunal qualifies as a “tribunal” under § 1782 – was not before the U.S. Supreme Court in Intel.  The Second Circuit reviewed the recent decisions by both the Sixth Circuit Court of Appeals and Fourth Circuit Court of Appeals (discussed here) and pointed out that while those courts came to different conclusions on the issue of whether the statute can be used in aid of foreign private arbitration, neither Court actually relied upon Intel to suggest the Second Circuit’s holding in NBC had been overruled by the U.S. Supreme Court. Accordingly, the Second Circuit found that since Intel did not address (or cast ‘sufficient doubt’) on the reasoning or holding of NBC, then the decision remained good law and binding precedent in the Second Circuit.  NBC’s holding can only be overruled by the full panel of Second Circuit Judges sitting en banc or by the U.S. Supreme Court.

The Second Circuit further stated that the dicta from Intel is not even necessarily at odds with the prior decision in NBC, holding: “Professor Smit’s reference to “arbitral tribunals” does not necessarily encompass private tribunals, particularly in light of his view, expressed in a 1962 article cited in NBC, that “an international tribunal owes both its existence and its powers to an international agreement.” Hans Smit, Assistance Rendered by the United States in Proceedings Before International Tribunals, 62 Colum. L. Rev. 1264, 1267 (1962); see also NBC, 165 F.3d at 189. Intel’s indirect reference to “arbitral tribunals” can thus be read consistently with NBC as referring solely to state-sponsored arbitral bodies.” Id., at p. 17.  The Second Circuit ruled that neither Professor Smit’s article nor the reference to same in Intel cast any doubt upon the analysis in NBC that the legislative intent of Congress in drafting § 1782(a) did not intend to include private commercial arbitration.

The Second Circuit also affirmed the district court’s ruling on the second issue pending on appeal. Holding that CIETAC was a private commercial arbitration and not a state sponsored tribunal.  In answering the question, the Second Circuit ruled that the inquiry does not turn on the origins of the administrative entity, or even a single fact or factor, but requires the Court to assess whether the body in question “possesses the functional attributes most commonly associated with private arbitration.”  Id., at p. 21.   The Second Circuit found that CIETAC operates much like any other private commercial arbitration with minimal involvement by the Chinese government, and therefore § 1782 discovery was not available.

There are now firmly two (2) Circuit Courts (the Second and Fifth Circuits) which have ruled post-Intel that discovery pursuant to § 1782 is not available in foreign private arbitrations and two (2) Circuit Courts (the Fourth and Sixth Circuits) which have ruled that it is available.  It appears more likely than ever that the issue may be destined for the U.S. Supreme Court to resolve the circuit split.  Congress could always take up the issue and amend the law to make clear whether foreign private arbitrations are included.  However, given the fact that the statute’s last amendment from 1964 which added the word “tribunal” is still the subject of considerable litigation fifty-five (55) years later, helpful clarification from Congress is unlikely anytime soon.

The Second Circuit’s July 8, 2020 decision, In re: Application and Petition of Hanwei Guo, can be found here.

Texas Courts and Covid-19

As coronavirus cases continue to climb in Texas, courts are adapting to the changing circumstances. The Federal Courthouses for the Southern District of Texas in the Houston and Galveston Divisions had previously re-opened in May.  However, due to a rise in cases in Harris County and the surrounding areas, the Courthouses have been re-closed to the public through July 10, subject to further developments and guidance from local health officials.

In addition, the Supreme Court of Texas has recently issued its Eighteenth Emergency Order regarding Covid-19. This revised order extends a ban on all jury proceedings to September 1, 2020. The order also removes a previous requirement that parties consent to online proceedings, and grants all courts the ability to modify or suspend any deadlines through September 30, 2020. This wide discretion will continue to allow courts to operate while delaying large in-person gatherings until it is safe, or sufficient protective measures have been put in place.

Along with the Supreme Court’s revised order, the Governor of Texas issued an order requiring Texans living in counties with more than 20 coronavirus cases to wear a face covering over the nose and mouth while in a business or other building open to the public, as well as outdoor public spaces, whenever social distancing is not possible.

To read a copy of the Eighteenth Emergency Order Issued by the Supreme Court of Texas click here. 

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