Legal Watch: Volume 2

Prepared by William H. Bode
Bode & Grenier, LLP
1150 Connecticut Ave., NW
Washington, D.C. 20036
Telephone: 202-862-4300 | Email: wbode@bode.com

VESSEL OWNER'S DUTIES TO WORKERS LIMITED BY THE LONGSHORE AND HARBOR WORKER'S COMPENSATION ACT

Case Summary: Plaintiff sued the owner and builder of the M/V LEIV ERIKSSON, a self-propelled, semi-submersible drilling vessel, after Plaintiff was injured while cleaning an onboard compartment. Plaintiff was employed as a labor foreman by Friede Goldman Offshore, a completion and outfitting contractor. The vessel was 98% complete when Plaintiff injured his knee while removing fluids from a fluid-filled compartment. Plaintiff alleged that Defendants violated their duties to provide workers with a safe workplace. The Federal District Court in Eastern Louisiana stated that Plaintiff's claim was governed by the Longshore and Harbor Worker's Compensation Act, and that the Act imposes three legal duties upon vessel owners. First, a vessel owner is required to exercise ordinary care under the circumstances to ensure that the vessel is in such a condition that workers can perform their duties with reasonable safety ("the Turnover Duty"). Second, a vessel owner must exercise reasonable care to prevent injuries to workers in areas of the vessel that remain under the owner's control while the work is performed ("the Control Duty"). Finally, if a vessel owner knows that a worker is engaged in hazardous work, and is obviously exercising poor judgment, the vessel owner has a duty to eliminate the hazard ("the Duty to Intervene"). The court granted summary judgment for Ocean Rig, Inc., the owner of the vessel, on the Turnover Duty and the Duty to Intervene. Plaintiff was permitted to move forward regarding the Control Duty.

LESSON: Vessel owners should be aware of these three duties regarding the safety of workers. Vessels must always be turned over to contractors in a safe condition, vessel areas controlled by the owner during work must be safely maintained, and owners must timely intervene if they observe hazardous conditions or poor judgment by a contractor. Vessel owners limit their liability to contractors and workers under the Longshore and Harbor Worker's Compensation Act when they observe these three duties. (Garry v. Exxon Mobile Corporation, et al.)

RAILWAY SHIPPER NOT PROTECTED BY HIMALAYA CLAUSES CONTAINED IN CONTRACTS FOR MULTI-CONTRACT SHIPPING ENDEAVOR

Case Summary: Kirby Ltd. sold ten containers of machinery to General Motors, and hired International Cargo Control, Ltd. to arrange for the transportation of the machinery from Sydney, Australia, to Huntsville, Alabama. International Cargo Control, a freight forwarder, hired Hamburg Sud, a German company, to ship the machinery from Sydney to Huntsville. The ten containers of machinery arrived in Savannah, Georgia without incident. Hamburg Sud engaged Norfolk Southern Railway to transport the cargo from Savannah to Huntsville. En route to Huntsville, the Southern Railway train derailed, and the machinery suffered $1.5 million in damage. Kirby sued Norfolk Southern to recover the loss. Kirby and International Cargo Control entered into a bill of lading, as did International Cargo Control and Norfolk Southern. Both bills of lading contained Himalaya clauses, which limit the carrier's liability to $500.00 per container. The Eleventh Circuit found that neither of the bills of lading limited Kirby's recovery against Norfolk Southern. Kirby was not a party to International Cargo Control's bill of lading with Norfolk Southern, and Norfolk Southern was not designated as a beneficiary of Kirby's bill of lading with International Cargo Control. Therefore, Kirby could recover damages from Norfolk Southern in excess of the $500.00 per container limit.

LESSON: Be sure to consult counsel when evaluating shipping contracts to ensure that all appropriate parties are designated as beneficiaries. Retention of counsel is particularly important when shipping contracts involve multiple parties and intermediaries such as freight forwarders. (Kirby, et al. v. Norfolk Southern Railway)

CARMACK AMENDMENT LIMITS CARRIER'S LIABILITY FOR STOLEN CARGO PURSUANT TO RELEASED VALUE PROVISION

Case Summary: Skyway Freight Systems contracted with Bullocks Express to transport 4,300 Palm Pilot-brand personal organizers from Salt Lake City to four locations within the United States. The cargo was stolen while in transit. Skyway filed suit against Bullocks, and Bullocks attempted to limit Skyway's recovery to $5.00 per pound of stolen cargo - the amount specified in the contract's released value provision. Skyway claimed that the contract's released value provision did not apply when the carrier was "severely negligent," and that Bullocks was severely negligent in its handling of the Palm Pilots. The United States District Court for Central Utah ruled that the "severe negligence" provision of the contract was unenforceable pursuant to the Carmack Amendment. Bullocks' liability was limited to $5.00 per pound of stolen cargo.

LESSON: The Carmack Amendment, a 1906 amendment to the Interstate Commerce Act, governs many aspects of carrier liability for lost or damaged goods. The Amendment supersedes contract terms. As a result, it is vital to be aware of the Carmack Amendment's terms when drafting and negotiating contracts to ship goods across state boundaries. (Bullocks Express Transportation, Inc. v. XL Specialty Insurance, et al.)

CARRIER'S LIABILITY LIMITED BY CARRIAGE OF GOODS BY SEA ACT WHEN CARGO TEMPORARILY OFFLOADED

Case Summary: Schramm, Inc. sold a mobile drilling rig for $160,725.42 to San Rafael S.R.L. of Cochabamba, Bolivia. Schramm contracted with Shipco Transport, Inc. to transport the rig from Baltimore, Maryland to Bolivia. Shipco contracted with the M/V CSAV GUAYAS to transport the rig. While the M/V CSAV GUAYAS was docked at an intermediate port in Charleston, South Carolina, the vessel's operator ordered that the rig be off-loaded so that it could be re-stowed on a lower deck. While on the dock in Charleston, the rig fell over and was irreparably damaged. Schramm filed suit against Shipco to recover the loss. Shipco attempted to limit its liability to $500.00 based upon COGSA. Schramm contended that COGSA only applies to goods that are in the control of the shipper, and that COGSA ceased to limit Shipco's liability the moment the rig was offloaded. The Fourth Circuit held that re-stowage at an intermediate port is a common activity, and that the rig was never discharged from Shipco's control; COGSA therefore applied, and limited Shipco's liability to $500.00.

LESSON: Carriers may offload and re-stow cargo at an intermediate port without incurring liability in excess of that set forth in COGSA or the applicable bill of lading. (Schramm, Inc., et al. v. Shipco Transport, Inc., et al.)

JONES ACT PROVIDES CAUSE OF ACTION TO EMPLOYEE INJURED WHILE WORKING ON ANCHORED BARGE

Case Summary: Plaintiff was injured as a result of a gas tank explosion while employed as a Production Operator by Coastal Production Services. Plaintiff's duties included navigating a twenty-seven foot aluminum crew boat between anchored barges in Louisiana waters to check gauges, wellheads, and caissons. Plaintiff filed suit under the Jones Act, which provides a cause of action for individuals who qualify as "seamen." Coastal maintained that Plaintiff was not a "seaman" under the Act. The United States District Court for the Eastern District of Louisiana held that Plaintiff's crew boat qualified as a "vessel," and that the archored barge upon which the incident occurred may also qualify as a "vessel." In addition, the Court permitted Plaintiff to put forth evidence to show that his "duties contributed to the function of the vessel," and that he had a connection to the vessel that was "substantial in terms of both its duration and nature."

LESSON: The Jones Act provides protection and legal remedies to employees classified as "seamen." Employees who have any connection to boats or barges should be considered potential "seamen" for risk management purposes. The evaluation of an employee as a "seaman" for purposes of the Jones Act is a highly fact-specific determination, and fraught with uncertainty. (Hart v. Forest Oil Corporation, et al.)

NEGLIGENT MISREPRESENTATION CLAIM PERMITTED AGAINST AMERICAN BUREAU OF SHIPPING FOR NEGLIGENT CERTIFICATION AND CLASSIFICATION OF VESSEL

Case Summary: While being towed by the M/V EAST COAST outbound in the Mississippi River Gulf Outlet, the vessel LIBERTY TRADER was struck and severely damaged by the dredge CALIFORNIA. The LIBERTY TRADER nearly sank, was intentionally stranded, and its cargo was damaged. The unseaworthiness of the LIBERTY TRADER was a factor in the severity of the damage. In the ensuing litigation, multiple parties filed claims, counter-claims, and third-party claims. The litigants included entities associated with the LIBERTY TRADER, EAST COAST and CALIFORNIA, as well as corporations with an interest in the cargo. Corporations associated with the LIBERTY TRADER claimed that American Bureau of Shipping, which had certified the LIBERTY TRADER as a Class A1 Barge, negligently represented the seaworthiness of the LIBERTY TRADER. The Federal District Court in Eastern Louisiana ruled that the LIBERTY TRADER interests could pursue a cause of action for negligent misrepresentation against American Bureau of Shipping for its inaccurate certification and classification of the LIBERTY TRADER.

LESSON: If there is uncertainty regarding the accuracy of a vessel's certification and classification in the wake of an incident, litigation against the certifying entity can be a fruitful option. (In re: Dann Marine Towing, LC and Fladel-Mar, Inc.)

Please address any comments or questions to Mr. Bode at 202-862-4300 or wbode@bode.com

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