Lloyd’s List Podcast: Magic Pipes and Whistleblowers

In the latest edition of Lloyd’s List weekly podcast, Tomer Raanan met with George Chalos to discuss “Magic Pipes and Whistleblowers” and the US government’s use (and misuse) of whistleblower rewards in its regulation and prosecution of the foreign Flag shipping industry. Additionally, George shares his experience and advice on the benefits of creating a culture of compliance and how vessel operators can be proactive in recognizing red flags and taking corrective action.

A link to the podcast can be found here:

For more information on the US law matters, please contact us at info@chaloslaw.com.

District Court Dismisses Seaman’s Manslaughter Charge Against Captain In Dive Boat Tragedy

In a recent decision on September 1, 2022, District Judge Wu of the Central District of California dismissed the seaman’s manslaughter charge against Captain Jerry Boylan, the captain of the dive boat Conception which caught fire and sank off of Santa Cruz Island in September 2019 and killed 34 people.  In USA v. Boylan, the District Court dismissed the charge for Seaman’s Manslaughter, 18 U.S.C. § 1115, because the Indictment failed to allege “gross negligence” as an element of the charge, a fatal defect to the indictment.  Captain Boylan argued that Congress is presumed to have incorporated common law meanings in the terms it uses in the statutes, and therefore a showing greater than simple ‘negligence’ was a required element of the charge.

The Government argued that the charge need only allege simple negligence to establish the elements of the crime based on the plain language of the statute, which holds: “Every captain, engineer, pilot, or other person employed on any steamboat or vessel, by whose misconduct, negligence, or inattention to his duties on such vessel the life of any person is destroyed . . . shall be fined under this title or imprisoned not more than ten years, or both.” 18 U.S.C. § 1115 (emphasis added).  The district court acknowledged that there was no specific precedent from the Ninth Circuit Court of Appeals on the issue and then performed a comprehensive comparative analysis of other decisions from the Ninth Circuit Court of Appeals and Fourth Circuit Court of Appeals which had reviewed and defined the required elements under 18 U.S.C. § 1112, i.e. the Involuntary Manslaughter statute. In the historical review of decisions, the Court relied on the Ninth Circuit’s comments that the Circuit had “consistently held that involuntary manslaughter” requires gross negligence. United States v. Garcia, 729 F.3d 1171 (9th Cir. 2013).

The district court summarized, “it is difficult for this Court to understand why gross negligence would be required for an involuntary manslaughter conviction under Section 1112 but not for a conviction under Section 1115. Neither statute facially requires gross negligence, but common-law understandings incorporate that requirement into an involuntary manslaughter charge under Section 1112. The Government itself has described its charge against Defendant under Section 1115 as “Seaman’s Manslaughter,” but has been unable to convincingly explain why a similar incorporation of common-law understandings should not occur under that statute.” See p. 7.

Judge Wu found that based on applicable Ninth Circuit and Supreme Court cases involving interpretation of legislative text, there must be a requirement for ‘gross negligence’ as an element of conviction under Section 1115 (even though not expressly stated in the statute), and therefore it must be a required element of the charging indictment.  Accordingly, the Court dismissed the charge against Captain Boylan without prejudice.  The government filed an appeal of the decision to the Ninth Circuit Court of Appeals on September 7, 2022 and the matter has been assigned appellate number 22-50198.

To read a copy of the opinion, please click here.

If you have any questions about the Seaman’s Manslaughter Act, please contact us at info@chaloslaw.com.

Southern District of New York Strikes Expert Interpreting Marine Insurance Policy

On June 21, 2022, Magistrate Judge Gorenstein of the Southern District of New York (S.D.N.Y.) issued an Opinion & Order in Navigators Insurance Company v. Goyard, Inc., 20-cv-6609, striking Plaintiff’s expert on the basis that his opinion was an impermissible legal conclusion interpreting the insurance contract at issue.

In 2019, Navigators Insurance Company (“Navigators”) issued a marine cargo insurance policy to Goyard.  The policy provided coverage for goods during shipping and when held in certain specified locations.  In June 2020, various goods were damaged and/or stolen from Goyard’s NYC location.  Goyard submitted a claim under the policy seeking to recover losses associated with damage and theft of the goods.  Navigators denied the claim and sought declaratory relief for a finding that the losses were not covered under the policy because of a “strikes, riots and civil commotion” exclusion.

Navigators expert prepared a report opining on the meaning and effect of various provisions of the policy as they applied to the claim and concluded that Goyard’s stolen goods were not covered, as they were taken by looters participating in riots.  In turn, Goyard moved to strike the expert opinions on the grounds that it would not help the trier of fact as required by Fed. R. Evid. 702(a).

The Court granted the motion to strike the report, holding that the expert report was an impermissible legal analysis of the policy which usurps the trier of facts role in finding the facts and applying those facts to the law.  In support of the decision, the Court performed a detailed analysis of Fed. R. Evid. 702(a), focusing on the fact that an expert’s primary function is to help the trier of fact and while an expert may opine on an issue of fact within the jury’s province, he/she may not give testimony stating ultimate legal conclusions.

To read the full opinion, please click here.

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

Maritime Risk Podcast: Why are Marpol detentions and prosecutions still occurring?

In the latest edition of The Maritime Risk Podcast, Shoreline CEO Captain Thomas Brown sat down with George Chalos to discuss MARPOL detentions and prosecutions in the United States.  Specifically, the discussion centered around the question: “Why are MARPOL prosecutions in the US as prevalent today as they were 25 years ago?”  The podcast can be accessed and listened to here:  https://www.shoreline.bm/podcasts/marpol-prosecutions-us/, as well as Apple and Spotify.

For assistance or additional information regarding MARPOL and/or APPS, please contact us at info@chaloslaw.com.

U.S. Supreme Court Rules 1782 Discovery Not Available for Private Arbitration

Over the past twenty (20) years, there has been a split in the U.S. District and Circuit Courts as to whether 28 U.S.C. §1782, which permits district courts to order testimony or the production of evidence “for use in a proceeding in a foreign or international tribunal”, applies to private adjudicatory bodies such as foreign private arbitrations.   Our prior summaries of the legal tug of war which has taken place over the past thirty (30) months, can be accessed here.  Previously, the Sixth Circuit and Fourth Circuit Courts of Appeals had ruled that the answer was yes; while the Second, Fifth, and Seventh Circuits had all ruled that the statute did not cover private arbitrations.  District courts around the country came down on both sides.  Two (2) recent cases were consolidated so that the U.S. Supreme Court could resolve this disputed question.

Writing for a unanimous court, in ZF Automotive US, Inc., et al. v. Luxshare, Ltd., (consolidated with Alixpartners, LLP, et al. v. The Fund for Protection of Investors Rights in Foreign States), 596 U.S. __ (2022), Justice Barrett delivered the opinion of the U.S. Supreme Court this morning, Monday June 13, 2022.  In a short opinion, the Court held that the statute reaches “only governmental or intergovernmental adjudicative bodies, and neither of the arbitral panels involved in these cases fits that bill.” Although the lower courts had analyzed lots of different aspects of the statute and legislative history, the U.S. Supreme Court held that the “key phrase for purposes of this case is “foreign or international tribunal.’”  Id., p. 1. Justice Barrett points out that if, the word “tribunal” stood alone, that would be good reason to include private arbitral bodies as those types of bodies for which discovery could be ordered as the word is generally understood to be quite broad.  Id., at p. 6.   However, tribunal does not stand alone and when read in context with “foreign or international,” the U.S. Supreme Court held that tribunal, with those modifiers, “is best understood as an adjudicative body that exercises governmental authority.”  Id., at 7.  Comparing the definitions and meanings of the words, the Court summed up the phrase as follows: “So understood, “foreign tribunal” and “international tribunal” complement one another; the former is a tribunal imbued with governmental authority by one nation, and the latter is a tribunal imbued with governmental authority by multiple nations.” Id., at p. 9.

Although the U.S. Supreme Court resolved the question by simply reviewing and interpreting the statutory language, the remainder of the opinion explained that the Court’s holding and 1782’s focus on governmental and intergovernmental tribunals is further confirmed by both the statute’s history and the comparison to the Federal Arbitration Act (“FAA”), 9. U.S.C. §1, et seq.  The Court explained that the primary purpose of 1782 was comity with other nations; so why would Congress lend the resources of the district courts to aid purely private bodies adjudicating purely private disputes abroad, which by way of example could “include everything from a commercial arbitration panel to a university’s student disciplinary tribunal.” Id., at p. 10.  Finally, to allow broader discovery than the FAA allows domestically in the United State would place the statute in great tension and a “notable mismatch” between discovery available in foreign arbitrations compared to limited discovery available from district courts in domestic arbitrations. Id., at p. 11.

In assessing whether either of the bodies in the cases before it were “governmental or intergovernmental” the U.S. Supreme Court explained they were not.  The first case was a private arbitration and the opinion rejected the idea that simply because a private arbitration was subject to the laws which govern and enforce them, that does not turn the panel into a “governmental adjudicative body.” Id., at 12.  The ad hoc arbitration panel was a harder question for the Court to answer, though ultimately the ruling was that the ad hoc panel although involving foreign nations, it was not the intent of Russia and Lithuania for the panel to exercise governmental authority, rather it simply was the result of an agreed mechanism for the formation of an arbitration panel to resolve a private dispute, all of which occurred because of the parties voluntary consent to arbitration; not because “Russia and Lithuania clothed the panel with governmental authority.” Id., at p. 15. In closing, the opinion left open that future sovereigns may imbue an ad hoc arbitration panel with official authority.  Under such a limited case, 1782 would be available.

A copy of the U.S. Supreme Court’s Opinion may be read here.

For assistance or additional information, please contact us at info@chaloslaw.com.

Chalos & Co, P.C. Obtains Complete Defense Verdict Following a Bench Trial in the Eastern District of New York

Michael Chalos and co-counsel Frank Ambrosino, with the assistance of Melissa Russo, successfully defended HMS Bounty Organization, LLC (“HMS Bounty”) and Robert Hansen (collectively the “Defendants”), in a recent bench trial before the Honorable Diane Gujarati in the United States District Court for the Eastern District of New York.  Judge Gujarati issued her decision on April 11, 2022 finding that the Plaintiff, Acadia Insurance Company (“Acadia”), had failed to prove any of its claims against the Defendants and granted judgment in favor of Defendants.

In 2014, Acadia filed a declaratory judgment action against Defendants seeking to have an insurance policy issued to the Defendants for the HMS BOUNTY (the “Vessel”) (a wooden replica of the famous British naval vessel) declared void ab inito, or alternatively, to find that there was no coverage under the policy based on alleged breaches of the duty of utmost good faith, absolute implied warranty of seaworthiness, implied negative warranty of seaworthiness, implied negative modified warranty of seaworthiness, crew warranty and compliance, express warranty of seaworthiness and warranty to comply with state and federal regulations.

The Vessel was purchased by the Defendants in 2001 to be utilized as an authentic square-rigged sailing vessel for educational and training purposes.  The Vessel was operated as an uninspected recreational vessel and a moored attraction vessel throughout the entire time the Defendants owned the Vessel.   In 2008, Plaintiff began providing protection & indemnity and hull & machinery coverage to the Vessel.  The Vessel was lost on October 29, 2012 after encountering Hurricane Sandy on its final voyage.  When the Vessel left New London, Connecticut several days before the loss, the testimony indicated that it was in good condition and the weather encountered was pleasant.  The intended heading of the Vessel was to avoid the hurricane. However, due to Sandy’s erratic changes of direction coming up the east coast of the United States, the Vessel’s course was altered by its Master on several occasions to avoid the storm. It was not until the Vessel sailed for two (2) days that the weather started to worsen, when the Vessel’s and the hurricane’s paths crossed. As a result of the heavy weather encountered, the bilge pumps and generators failed and were unable to keep up with the water ingress.  The Court found that the evidence presented was that the Vessel never intended to sail through Hurricane Sandy but rather planned to avoid the hurricane up until the moment it was encountered.  Acadia was promptly notified of the loss of the Vessel; paid the policy limits for hull & machinery, liability and loss of earnings portions of the policies; and, nearly six (6) months later issued its first reservation of rights letters and thereafter nearly two years later filed an action to recover the payments made.

Judge Guajarati engaged in a detailed analysis of the various types of seaworthiness warranties contained in the policy issued for the Vessel.  The Court was clear that the burden was on the insurer (i.e. – Acadia) to prove the unseaworthiness of the Vessel.  After hearing multiple fact and expert witnesses, the Court found that Acadia had failed to prove by a preponderance of the evidence that the Vessel was unseaworthy at the time the policy was first issued, subsequently renewed, or at the time of the loss.  The Court also held that while Acadia highlighted certain facts they believed indicated that the Defendants violated the duty of utmost good faith, those same facts were not shown to be material or to have been relied upon by Acadia when making their decision to bind coverage.  While Acadia also raised claims related to crew warranties and violations of federal regulations, the Count found that Plaintiff had not articulated what regulations with respect to the crew had been violated.  Finally, the Court held that the Defendants had carried their burden to show that the loss of the Vessel was caused by several covered perils of the sea under the Acadia policy.

To read a copy of the decision, click here.

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

OFAC Issues Determination to Expand Russian Sanctions to Marine Sectors

On March 31, 2022, the Office of Foreign Assets Control (“OFAC”) issued a “Determination Pursuant to Section 1(a)(i) of Executive Order 14024.”  This determination allows the Department of Treasury in conjunction with the Secretary of State to sanction any person who operates in the electronic, aerospace, and marine sectors of the Russian economy.  OFAC has not specially defined what it considers to be the “marine sector.”  Given the broad inclusion of additional industries subject to sanctions, we expect OFAC will specifically define the types of entities within each sector to be targeted.  We will continue to monitor OFAC guidance and provide updates as they become available.

To read a copy of the Department of Treasury Determination Click Here.

To read a copy of Executive Order 14024 Click Here.

If you have any questions as to how the sanctions may impact you, contact us at info@chaloslaw.com.

Chalos & Co, P.C. Featured in Benedict’s Maritime Bulletin

George M. Chalos and Briton P. Sparkman were recently published in Benedict’s Maritime Bulletin for their article, “Case of First Impression – Is an Agreement on Security a Maritime Contract?”  The article provides a detailed analysis of the Third Circuit Court of Appeals’ decision in Nederland Shipping Corporation v. United States of America, 2021 U.S. App. LEXIS 33920 (3d Cir. Nov. 16, 2021).  The Third Circuit reversed the district court’s dismissal for lack of subject matter jurisdiction in a landmark ruling, holding that the primary objective of the Agreement on Security was maritime commerce and therefore it was a maritime contract subject to the Court’s admiralty jurisdiction.  The Third Circuit also found that the vessel owner had the right to pursue the statutory cause of action for damages in the district court pursuant to 33 U.S.C. § 1904(h).

To read the article in full, please download here.  Reprinted from 20 BENEDICT’S MAR. BULL. [1] (First Quarter 2022) with permission.

For more information about the article and/or 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.

President Biden Issues Executive Order Banning all Russian Energy Imports into United States

Earlier today, President Biden issued an Executive Order (“EO”) prohibiting Russian energy imports in the United States.  The EO specifically states that additional sanctions are needed to expand the previously issued EO’s due to the Russian Federation’s unjustified, unprovoked, unyielding, and unconscionable war against Ukraine is a violation of international law and threatens the peace, stability, sovereignty, and territorial integrity of Ukraine.

The new energy ban prevents U.S. persons from importing into the United States Russian origin crude oil, petroleum, petroleum fuels, oils, and products of their distillation, liquified natural gas, coal, and coal products.  The EO also prohibits U.S. persons from making new investments into the Russian energy sector.  The goal of the latest EO is to further deprive the Russian government of the economic resources needed to continue its invasion of Ukraine.

We will continue to monitor the ever changing Russian sanctions landscape.  If you have any questions as to how the newly imposed sanctions may impact you, contact us at info@chaloslaw.com

To read a copy of the latest executive order click here.