chalos

George M Chalos attended and presented at the World Shipping Law Forum on Friday, 25th January 2019 in N.J.V. Athens Plaza, in Athens Greece.   Over 100 leading lawyers and industry executives addressed various emerging international and domestic legal issues, including blockchain, smart contracts, traditional ship finance, private equity and environment law, with an emphasis civil, administrative and criminal enforcement actions.

Following a rare grant of petition for rehearing, the Fifth Circuit Court of Appeals reversed its earlier decision allowing Daewoo International Corp. to seize an iron shipment prior to arbitrating a contract dispute. In a 2-1 decision, the Fifth Circuit held that Daewoo failed to meet certain procedural requirements required by the Louisiana non-resident attachment statute and therefore the attachment was properly vacated by the district court.

Daewoo International Corporation (“Daewoo”) and Thyssenkrupp Mannex GmbH (“Thyssenkrupp”) separately contracted with America Metals Trading LLP (“AMT”) to purchase pig iron. AMT never delivered the pig iron under either contract. In response to the breaches of contract, Daewoo sued AMT in federal court, and Thyssenkrupp sued AMT in Louisiana state court. In 2012, both companies obtained attachments of AMT’s pig iron, which was located within the Eastern District of Louisiana. In 2013, Thyssenkrupp intervened in the federal proceedings and obtained a federal writ of attachment over the pig iron. Several months later, Thyssenkrupp successfully sought to vacate Daewoo’s attachment in federal court. After the vacatur, the only valid remaining writ was from the state court, to Thyssenkrupp. Daewoo appealed.

The Fifth Circuit originally held that Daewoo could seize the pig iron prior to commencing arbitration against AMT, leaving in place Daewoo’s attachment as security for a potential future arbitration award. Thyssenkrupp argued that the Fifth Circuit panel wrongly concluded that Daewoo could rely on the Louisiana attachment statute to obtain security. Article 3542 of the Louisiana Code of Civil Procedure allows attachments in aid of any “action for a money judgment.” The panel agreed to rehear the case, and ruled 2-1 that a suit to compel arbitration is not an action for a money judgment. Critically, Daewoo did not file a suit to confirm an arbitral award, instead it filed suit to compel arbitration. “A motion to compel arbitration seeks an order requiring a party to take an action – namely to arbitrate the dispute. Accordingly, a suit seeking to compel arbitration is not an ‘action for a money judgment,’ and Daewoo’s suit seeking to compel arbitration cannot underlie a Louisiana non-resident attachment writ.”

Daewoo could have rectified this under Article 3502, if it met the requirements and for good cause shown. Article 3502 of the Louisiana Code of Civil Procedure allows, in limited circumstances, for attachments to be issued before the suit underlying the attachment is brought. The Fifth Circuit held that Daewoo had not met these requirements. “[B]ecause attachment is a ‘harsh’ remedy, the Louisiana statutes ‘providing for a Writ of Attachment . . . must be strictly and literally complied with,” and that “failure to do so renders a granted writ a ‘nullity’ . . . The record does not disclose that Daewoo strictly and literally complied with Article 3502’s requirements.” Daewoo did not invoke Article 3502 when it sought a writ, and the district court did not grant Daewoo permission to file a petition on “the first judicial day after the issuance of the writ.”

In the dissent, Circuit Judge James E. Graves, Jr. said the suit to compel arbitration is “clearly” an action for a money judgment, and that he would vacate the district court’s judgment.

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 call on us at info@chaloslaw.com.

 

On March 28, 2018, the United States Court of Appeals for the Ninth Circuit reversed in part a decision from the District of Hawaii in Barnes v. Sea Hawaii Rafting, 2018 AMC 939 (9th Cir. 2018), holding that a bankruptcy court’s automatic stay does not affect a seafarer’s maritime lien.

In Barnes, Captain Barnes sustained major injuries when the vessel he worked on, the M/V Tehani, exploded. Barnes filed a verified complaint against the M/V Tehani, in rem, the company that owned the vessel (Sea Hawaii Rafting, LLC, hereinafter “SHR”), and SHR’s owner and manager, Kris Henry (hereinafter “Henry”), in personam. Barnes brought causes of action for unseaworthiness, negligence, intentional infliction of emotional distress, and maintenance and cure.

Barnes moved for summary judgment for payment of maintenance and cure until he reached “maximum medical cure.” The district court denied his request and ruled that although Barnes was entitled to maintenance and cure, he had yet to reach maximum cure because Barnes did not present reasonable costs in his locality for food and lodging, or actual medical expenses. Thereafter, Barnes filed an amended complaint, a motion for summary judgment for his claims for unseaworthiness, negligence per se, Jones Act negligence, and two (2) motions for reconsideration. Before the hearing on Barnes’ second motion for summary judgment, defendants Henry and SHR filed for Chapter 7 bankruptcy protection which automatically stayed the proceeding in the district court. The bankruptcy court partially lifted the stay for Barnes’ claims against SHR but refused to lift the stay to enforce any maritime lien against the defendants.

Subsequently, the district court dismissed Barnes’ suit for lack of in rem jurisdiction because of Barnes’ failure to verify the amended complaint. Barnes appealed the dismissal and the district court’s denial of his maintenance request. While his appeal was pending, the bankruptcy court approved, inter alia, the sale of the M/V Tehani. The Ninth Circuit held that the district court erred when it concluded that it lacked in rem jurisdiction. Furthermore, the Ninth Circuit issued a writ of mandamus and further held that Barnes was entitled to maintenance and cure.

More importantly, the Ninth Circuit held that the bankruptcy court did not have jurisdiction to dispose of Barnes’ maritime lien for three (3) reasons:

1. The bankruptcy stay did not apply to Barnes’ maritime lien for maintenance and cure. The Ninth Circuit ruled that a seafarer’s maritime lien is a “sacred lien[]” and Congress would not have extinguished this long-standing principle under the Bankruptcy Code.
2. The bankruptcy court did not have jurisdiction to dispose of Barnes’ maritime lien because the district court acquired in rem jurisdiction when Barnes filed his verified complaint and obtained “constructive control” over the M/V Tehani at that moment.
3. Even if the bankruptcy court had in rem jurisdiction, the court did not have the authority to sell the M/V Tehani. The Ninth Circuit concluded that property subject to a maritime lien follows “into the hands of a bona fide purchaser” and cannot be divested except through an in rem proceeding through the application of admiralty law.

The Ninth Circuit’s holding is contrary to the Second Circuit decision in Universal Oil Ltd. v. Allfirst Bank, 419 F. 3d 83 (2d Cir. 2005), where the court upheld the bankruptcy court’s subject matter jurisdiction that extinguished the maritime liens on various vessels.

Going forward, if a bankruptcy debtor’s assets include a vessel, extra care must be taken by the court and by the debtor in determining its disposition. If the vessel is subject to a maritime lien, the parties must first proceed in admiralty to address the lien prior to any sale.

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 call on us at info@chaloslaw.com.

 

In an unpublished decision, the Ninth Circuit Court of Appeals ruled in favor of Exxon Mobil Corporation and Exxon Shipping Company (collectively “Exxon”) on the amount of pre-judgment and post-judgment interest to be paid on a prior settlement. See Nautilus Marine Enterprises, Inc. v. Exxon Mobile Corporation, No. 17-35337, 17-35278 (9th Cir. July 18, 2018).

Claimants, Nautilus Marine Enterprises, Inc. and M. Thomas Waterer (collectively “NME”) sued Exxon for damages arising from the 1989 Exxon Valdez oil spill. In 2006, the parties entered into a settlement agreement. Exxon agreed to pay NME for damages incurred in 1992 and 1993. The parties disagreed on the amount of interest to be paid, and have been litigating the issue ever since.

The district court held that NME was entitled to pre-judgment interest through November 1, 2006, as per the parties’ agreement. NME argued the court erred in limiting the interest period and argued for a larger award which includes a longer period of interest. On appeal, the Ninth Circuit affirmed the district court, finding that by executing the agreement, NME agreed to limit its recovery of pre-judgment interest to this period. Both the district court and the Ninth Circuit strictly interpreted the parties’ prior agreement.

The district court awarded post-judgment interest running from the issuance of its February 14, 2017 judgment. NME argued post-judgment interest should have accrued from the date a prior 2007 judgment was entered. The 2007 judgment was appealed by Exxon, and was subsequently reversed and vacated. The Ninth Circuit again affirmed the district court, holding post-judgment interest runs from the final 2017 judgment, not from the earlier judgment which was vacated.

In rendering its opinion, the appellate court considered argument from Exxon that the district court violated the best evidence rule when it considered testimony of NME’s counsel about how settlement payments would be allocated. In a declaration, NME’s counsel referenced several written agreements, which were never provided to the court. The Ninth Circuit ultimately determined the district court’s consideration of this testimony was harmless and likely did not change the outcome of the case.

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 call on us at info@chaloslaw.com.

There have been a significant number of bunker-quality related engine problems following the supply of fuel in the U.S. Gulf region from February through May of this year, particularly in the Houston area. This includes blended fuel oils such as IFO 380, and has caused fouled fuel pump plungers, sticking and/or seizing fuel pumps, and filter blockages. There have also been reports of increased sediment levels at separators and fuel filters. Most troubling, the standard fuel oil test methods found in ISO 8217 may not detect these problems. Some fuels were found with adulterants and contaminants, including a phenolic compound with significant adhesive qualities. The contamination could lead to engine failure and loss of propulsion with potentially catastrophic results.  The USCG has issued a safety alert.

If you have experienced any of the above issues, or if you bunkered in the U.S. Gulf region between February and May of 2018, you may be entitled to compensation, including claims against the upstream supplier of the contaminated and adulterated bunkers.  If you have suffered damages as a result of a such a supply or would simply like to learn more about the legal rights and remedies available to you under U.S. law, please contact us for more information at info@chaloslaw.com.

On May 10, 2018 the United States Court of Appeals for the Eleventh Circuit issued an unpublished opinion which reinforced the need for parties to strictly adhere to all requirements of the Federal Rules of Civil Procedure. In Olena Goncharenko v. Royal Caribbean Cruises, Ltd., No. 17-13069 (11th Cir., May 10, 2018), the Eleventh Circuit Court of Appeals affirmed the District Court of the Southern District of Florida’s order striking the Appellant’s expert witness and order granting summary judgment to the Appellee. In Goncharenko, Plaintiff Olena Goncharenko (“Goncharenko”) brought suit against Royal Caribbean Cruises, LTD (“Royal Caribbean”) for negligence. Goncharenko was a passenger on board the cruise ship Anthem of the Seas operated by Royal Caribbean. Goncharenko was allegedly injured when one of the cruise ship’s ice cream machines struck her in the head.

Prior to trial, the district court issued a scheduling order that required the parties to disclose expert witnesses by February 7, 2017. Goncharenko provided an email to Royal Carribbean that purported to be Goncharenko’s expert witness disclosure. Although technically timely, the email failed to disclose the names of the witnesses or other information required by the Federal Rules of Civil Procedure. Goncharenko attempted to supplement the disclosure two (2) days later with an email which included names, but no other information concerning the witnesses’ expert opinion(s). Plaintiff further amended the disclosure once Royal Caribbean moved to strike the expert witnesses. The Magistrate Judge granted the motion to strike the expert witnesses and the District Judge affirmed the decision over Plaintiff’s objections.

When a party seeks to provide testimony using an expert witness, Federal Rules of Civil Procedure Rule 26(a)(2)(A) provides that, “a party must disclose to the other parties the identity of any witness it may use at trial to present evidence under Federal Rules of Evidence, 702, 703, or 705.”  Fed. R. Civ. P. 26(a)(2)(A). Any party seeking to call a witness at trial must disclose, “(i) the subject matter on which the witness is expected to present evidence under Federal Rules of Evidence, 702, 703, or 705; and (ii) a summary of the facts and opinions to which the witnesses is expected to testify.” Fed. R. Civ. P. 26(a)(2)(C).

The Eleventh Circuit held that the district court did not abuse its discretion in striking Goncharenko’s expert witnesses. Goncharenko provided insufficient disclosures under Rule 26(a) with vague references as to the opinion(s) of the experts and little to no information provided to the Defendant. In affirming the district court decision, the Eleventh Circuit cited to Federal Rules of Civil Procedure Rule 37 which holds, “If a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing or at a trial unless the failure was substantially justified or is harmless.” Although Goncharenko submitted her initial email timely, it lacked the identity of the witnesses and provided insufficient references to the subject matter on which the witnesses were to opine and testify. As a result, the Eleventh Circuit Court affirmed the district court’s decision to strike the witnesses. The decision was costly for the Plaintiff, as she could not meet her burden to establish medical causation of her injuries once the medical experts were struck. Therefore, the Court entered summary judgment in favor of Defendant Royal Caribbean.

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 contact us at info@chaloslaw.com.