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.

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On October 8, 2020, the United States Court of Appeals for the Second Circuit issued an unpublished opinion affirming judgment of the United States District Court for the Southern District of New York, that a vessel operator’s bankruptcy and voluntary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

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

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

Melissa Russo of Chalos & Co, P.C. Set to Speak at CMA Conference October 16th

On October 16, 2020, Melissa Russo of Chalos & Co, P.C. – New York, will be speaking at the 35th annual Connecticut Maritime Association (CMA) conference in Stamford, Connecticut.  This year, CMA has teamed up with SHIPPINGInsight to create the first ever “North American Shipping Week” from October 12-16, 2020, set to focus on technology, innovation, and the commercial aspects of shipping.  Ms. Russo will be speaking during the CMA’s legal session on the ever-changing landscape of U.S. sanctions.

To register for the conference and see the latest agenda, click here.

For more information, please do not hesitate to contact us at

Virtual Courthouse Auction for the Interlocutory Sale of the M/V EVOLUTION Held in South Carolina

Since mid-March individuals, businesses, and the Court system have turned to virtual meetings and video conferencing in response to the need to practice safe social distancing in the wake of the COVID-19 pandemic.  A byproduct of the need to shelter-in-place has been the opportunity to increase efficiency and connectivity around the world through technology.  This intersection of traditional Court business with the assistance of virtual video conference capabilities was recently on full display in Charleston, South Carolina.

U.S. District Judge Richard Gergel of the United States District Court for the District of South Carolina issued an order authorizing the interlocutory sale of the M/V EVOLUTION.  The Vessel had been under attachment and arrest since January 31, 2020, after numerous Plaintiffs had filed lien and contract claims for unpaid services and necessaries provided to the Vessel.  The Vessel’s Owners were unable (or unwilling) to post substitute security for the release of the Vessel.  Accordingly, in mid-April, Judge Gergel granted the Plaintiffs’ motion seeking to sell the Vessel.  Traditionally, vessel auctions in the United States are required to be administered by the U.S. Marshals Service “on the Courthouse steps” and the highest in-person bidder that presents a certified check representing ten percent (10%) of the purchase price wins the rights to buy the vessel free and clear of all liens, claims, and encumbrances.

In the case of the M/V EVOLUTION, the Court (and the parties) recognized that a traditional in-person auction was not going to be possible as the Courthouse had limited accessibility to the public and South Carolina remained under a directive limiting gatherings to fewer than ten (10) people.  Furthermore, with travel and self-quarantine restrictions in place, there was significant concern that a sufficient number of bidders would not be able to attend.  This presented the serious risk that the auction would not even obtain the minimum bid price of $1,250,000.  Accordingly, District Judge Gergel authorized the auction to proceed both in-person and virtually through the use of a secure Zoom meeting.   The Court appointed London-based ship broker CW Kellock & Co. Ltd. to serve as the broker for the auction in an effort to promote interest in the Vessel and assist in administering the auction.

The custodian for the Vessel conducted a walkthrough survey by video and photos, all of which were available for prospective bidders to view prior to the auction.  The Court permitted participants to satisfy the earnest money requirement through the transmission of funds to the trust account(s) of local South Carolina law firms instead of requiring the traditional hard copy check in-person.  The virtual public auction was held on May 19, 2020.

The vessel sale was administered by the Deputy Marshal for the District of South Carolina in conjunction with the broker.  To streamline the proceedings from the Courthouse and obtain a sufficient signal, the in-person auction was relocated to the corner of the parking lot with a laptop propped up on the trunk of a red convertible.  All those in attendance outside the Courthouse made sure to practice safe social distancing.  Individuals and companies from around the world were able to “log-in,” participate, and observe the proceedings.  The virtual auction was successfully completed with Wickwar Shipping Ltd. achieving the highest bid of $1,340,000.00.  The sale was confirmed by the Court on May 26, 2020.

These are indeed uncertain times we all are facing, but one thing COVID-19 has taught everyone is that the show must go on, even virtually. We look forward to the practice of law post-COVID-19 as law firms and Courthouses adjust to the “new normal” and hopefully the continued use and integration of virtual conference platforms for Court hearings, auctions, and other proceedings.

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SMART PHONES: What is Your Right to Privacy?

In a recent decision out of the Western District of Washington, District Judge Coughenour ruled that the FBI violated the Fourth Amendment’s protection against unlawful searches when an agent switched on a suspect’s phone to look at his lock screen without a search warrant.  The lock screen showed the name “STREEZY” under the time and date, which is the alleged alias of the defendant Joseph Sam.  In ruling that the FBI’s search was unlawful, Judge Coughenour focused on the physically intrusive nature of the search as it involved manipulating the device to power on the phone.  Decades of U.S. Supreme Court precedent have held that physical manipulation of an object by law enforcement for the purposes of evidence gathering without a warrant is a violation of the Fourth Amendment and unconstitutional.  In extending this protection to a phone lock-screen, Judge Coughenour cited to other cases of “physical manipulation” such as a GPS tracking device placed on a car, squeezing a bag, and moving stereo equipment to view concealed serial numbers.  See United States v. Sam, No. 2:19-cr-115-JCC (W.D.Wa. May 18, 2020).

In another recent case from the District of Connecticut, Judge Bolden found that there was not a Fourth Amendment violation where police turned on a phone which the defendant claimed was “not his” at the time of the arrest.  The phone was in the defendant’s pocket and was used by law enforcement to establish the defendant had been calling the victim from that phone.  In denying the defendant’s motion to suppress (and subsequent motion for a new trial), the District Court found that turning a phone on and viewing the lock screen was not an unlawful search where the defendant disclaimed ownership of the phone and the lock screen did not reveal any personal information.  United States v. Hamlett, No. 3:18-cr-24 (VAB), 2019 U.S. Dist. LEXIS 125248 (D. Conn. July 26, 2019).

It will only be a matter of time before U.S. Courts of Appeal and the U.S. Supreme Court will be tasked with providing clarity on what constitutes a “search” of increasingly “smart phones.” As encryption technologies evolve, the legal discussions around privacy and security will become increasingly more complex as it relates to search and seizure protections afforded by the Fourth Amendment.

A copy of Judge Coughenour’s opinion can be found here.

For any questions about the decision or Fourth Amendment protections, please contact us at

New York State Court Update – Electronic Filing of NEW CASES Set to Resume

On May 18, 2020, Chief Judge DiFiore released a message announcing the start of limited in-person court operations in the Finger Lakes, Mohawk Valley, Southern Tier, North Country and Central New York regions.  Jury operations remain suspended.  These regions have also started accepting the filing of new non-essential matters via the New York State Court Electronic Filing System (“NYSCEF”).  Courthouse traffic will be limited and courts will continue using the virtual technology implemented over the past two (2) months.

On May 20, 2020, Chief Administrative Judge Lawrence K. Marks issued a memorandum announcing that starting May 25, 2020, all electronic filings, including new non-essential cases,  would resume in the five (5) New York City Counties, as well as Nassau, Suffolk, Dutchess, Orange, Putnam, Rockland, Sullivan, Ulster and Westchester counties via the NYSCEF.  In-person court operations remain suspended in these counties as to date, they have not yet met the benchmarks required to participate in Governor Cuomo’s regional reopening plan.

Courts across the state have also adopted new protocols and safety measures to be maintained going forward as limited in-person operations begin, including deep cleaning of court facilities before resumption of operations, upgraded regular cleaning, the availability of masks and gloves for court personnel, sanitizing agents for visitors, installation of plexiglass barriers in certain courthouse locations, and placement of blue tape indicators in public areas to ensure physical distancing.    For sure, the reopening of electronic filing for all matters is great progress in broadening access to civil litigation and we are hopeful that the downstate counties will reopen for limited in-person operations in the near future.

To read Judge DiFiore’s message please click here.

To read Judge Marks’ memorandum please click here.

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