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Transgender Rights Take Center Stage in Discrimination Lawsuit Filed Against Saks Fifth Avenue

Posted in Labor and Employment Law

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By Erin L. Kilgore

On January 26, 2015, Saks Fifth Avenue withdrew a pleading that had sparked the attention of federal agencies and gender rights activists. In so doing, Saks abandoned its previously-pled position that Title VII of the Civil Rights Act of 1964, the federal anti-discrimination statute, does not protect transgender individuals. Gender rights activities tout the withdrawal as a victory.

A detailed discussion of the lawsuit and recent pleadings can be found here.

By way of brief background, the plaintiff, a former selling associate at a Saks Houston store, filed suit against Saks & Company and alleged that she was discriminated against because of her transgender status and because she failed to conform to gender-based stereotypes. In December 2014, Saks filed a motion in which it asserted, inter alia, that Title VII’s prohibition on sex discrimination does not protect transgender employees. Although legally supported, in the “court of public opinion,” Saks’ legal argument drew much criticism.

Ultimately, on January 26, 2015, Saks withdrew its motion “in contemplation of litigating the matter on the merits rather than asserting its legal defenses under Rule 12(b)(6) of the Federal Rules of Civil Procedure at this time.” In its motion, Saks maintained that it did not discriminate against the plaintiff, and that its policies and procedures are effective in ensuring a diverse workplace free of harassment and discrimination.

Shortly after Saks withdrew its motion, the United States Department of Justice filed a 16-page Statement of Interest in the lawsuit, citing its “strong interest in ensuring the proper interpretation and application of Title VII in order to eliminate unlawful employment discrimination” and “setting forth its views regarding the scope of Title VII’s coverage with respect to claims of sex discrimination by transgender individuals.” In particular, the DOJ noted that both of the federal agencies charged with enforcing Title VII (the DOJ and the Equal Employment Opportunity Commission) “have determined that Title VII’s prohibition of discrimination ‘because of . . . sex’ necessarily proscribes discrimination because of transgender status.” The DOJ specifically “request[ed] that the Court hold that Title VII’s ban on sex discrimination encompasses discrimination on the basis of gender identity, including transgender status.”

Although the Saks lawsuit is still in somewhat early stages, the DOJ’s pleadings filed in that case provide employers with a detailed view of the federal agency’s position and legal arguments on this issue. Employers can expect the EEOC will raise similar legal arguments in similar cases, to the extent it has not already done so. In case there was any doubt, it is clear that issues related to the scope of Title VII’s prohibition on sex discrimination will remain a significant topic in 2015.

 

Not Even Mardi Gras is Immune from Labor Issues

Posted in Labor and Employment Law, Louisiana In General

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By Erin Kilgore and Ed Hardin

“Throw me something, mister!” A labor dispute between dock workers and shipping companies on the West Coast has delayed shipments of signature Mardi Gras beads to the Big Easy (along with countless other items stuck in gridlock).

The longshoremen in question have been working without a collective bargaining agreement since July, when the prior CBA expired. However, on top of the contract negotiations, labor and management at ports on the West Coast each blame each other for a current cargo backlog that has left goods stranded. The Associated Press has reported  that the Pacific Maritime Association (which represents terminal operators and shipping lines) accuses members of the International Longshore and Warehouse Union of intentionally slowing down work in order to gain bargaining leverage. On the other hand, the union contends that employers are cutting-back jobs and asking for only half of the normal labor force to move the cargo. Additional background information regarding the dispute can be found here  and here.

Locally, the contract dispute is raising concerns in New Orleans that the throws will not arrive in time for Mardi Gras. Businesses in New Orleans are considering alternative options and making adjustments, including diverting products through different ports and using different modes of transportation.

The shipping companies have warned that they are on the verge of a full shutdown. For Mardi Gras revelers, this dispute serves as a reminder that the National Labor Relations Act and bargaining issues can have far-reaching consequences beyond the worksite.

 

Good News for Good Works: Qualified 501(c) (3) Bonds Give Non-Profits the Opportunity to Finance the Acquisition or Renovation of Property

Posted in Business and Corporate, Municipal Finance and Bonds

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By Angela W. Adolph

Non-profit organizations have the opportunity to finance the acquisition or renovation of property where they do their good works using qualified 501(c)(3) bonds, which often provide better financing terms and rates than those available from traditional lenders. The proceeds of qualified 501(c)(3) bonds may also be used by the non-profit organization for working capital or to acquire other kinds property, within certain limits.

To be eligible for qualified 501(c)(3) bond financing, the non-profit organization must be exempt from taxation under section 501(a) of the Internal Revenue Code. The organization also must qualify as an “exempt organization” under section 501(c)(3). The organization must maintain its exempt status as long as the bonds are outstanding.

A non-profit organization that shares a building with a for-profit entity may still be eligible for qualified 501(c)(3) bonds. Such a “mixed use” or “multipurpose” facility may be financed in part with qualified 501(c)(3) bonds. The portion that is bond financed must be used by the exempt organization for its exempt purposes or by a governmental unit. The portion used by the private entity must be financed with taxable financing or sources other than bond proceeds. The allocations between the different uses of the facility must be made in proportion to the benefits derived, directly or indirectly, by the various users of the facility. The allocations of the bond proceeds and other sources of funds, and the use of the facility by various parties, must be reasonable and consistently applied.

At least 95% of the net proceeds of the bonds must be used to finance facilities owned and used by the exempt organization or a governmental unit for its related activities. As with other types of qualified private activity bonds, qualified 501(c)(3) bonds have some inherent private use. Use by an exempt organization in its related activities counts as a “good use.”

What about the other 5% of net proceeds? No more than 5% of the net proceeds of the bond issue may be used for any private business use, known as “bad use.” If the exempt organization uses the bond proceeds or bond-financed facilities in an unrelated trade or business activity, it is considered bad use. Costs of issuing the bonds are included in the 5% permitted private business use.

Although exempt organizations cannot use the bond-financed facilities for an unrelated trade or business, or “bad use,” they may contract with a private party to provide services, which may result in private business use. The typical example would be a management contract with a private party to operate a portion of the facility. Fortunately, the IRS has provided safe harbors regarding management service contracts.

With respect to debt service on qualified 501(c)(3) bonds, no more than 5% of the payment of the debt service on the bonds may be directly or indirectly:

  • secured by an interest in property used or to be used for a private business use, or
  • secured by payments in respect of such property, or
  • derived from payments in respect of property, or borrowed money, to be used in a private business.

Of course, interest and principal payments made by the exempt organization are not included, because the exempt organization is treated as a governmental unit.

Qualified 501(c)(3) bonds are not subject to state volume limits, but the aggregate outstanding face amount of qualified 501(c)(3) bonds that may be allocated to an exempt organization is limited to $150 million. Capital expenditures incurred by a 501(c)(3) organization may be financed with proceeds of tax-exempt bonds without regard to the $150 million limitation. And, this limitation does not apply to qualified hospital bonds.

The general rules regarding private activity bond rules are applicable to qualified 501(c)(3) bonds, including limits on the average maturity of the bonds, limits on the types of facilities that can be financed, notice and approval requirements, limits on costs of issuance, change in use rules, arbitrage and rebate rules, and advance refunding rules.

 

Industrial Development Revenue Bonds 101

Posted in Business and Corporate, Louisiana In General, Municipal Finance and Bonds, New Orleans/Louisiana Recovery

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By Angela W. Adolph

Federal tax law generally provides that tax-exempt bonds can only be issued to finance property for governmental or public use. If the property to be financed with bonds would be privately used, i.e., in a trade or business, the interest generated from the bonds will be included as income for federal income tax purposes. However, there are a few exceptions for certain non-profit corporations and other facilities that, although privately owned and operated, provide enough of a public benefit to qualify for the exception. Small issue manufacturing bonds, also known as Industrial Development Bonds (IDBs), are such an exception.

Manufacturing facilities include any facility used in the manufacture or production of tangible personal property, including processing that results in a change in the condition of such property. It also includes facilities that are directly and ancillary to the core manufacturing facility if they are located on the same site and not more than 25% of net bond proceeds are used for such ancillary facilities, i.e., office facilities.

IDBs may be issued in two amounts:

(1) Up to $1 million. This limit includes the outstanding amount of prior small issues with the same principal user or related person. However, capital expenditures are not taken into account.

(2) Up to $10 million. This limit includes prior small issue bonds and capital expenditures paid or incurred during the six-year period surrounding the bond issue with the same principal user or related person. The capital expenditures limit is $20 million minus the amount of the proposed bonds. Capital expenditures include (a) any expenditure chargeable to the capital account of any person (except to replace property due to catastrophic loss), (b) moved equipment that is acquired within the six-year measurement period, and (c) certain governmental expenditures that solely benefit the principal user or related person. Leased equipment can be excluded if leased from a manufacturer or leasing company.

These issues are subject to an outstanding limit of $40 million, which includes all exempt facility bonds, other small issue bonds, and qualified redevelopment bonds that are issued for the same substantial user.

There are a number of rules that govern the issuance of such bonds:

(1) The bonds are subject to state volume cap and must be allocated to the project by the Governor’s office.

(2) 95% of the proceeds must be used to provide the facility.

(3) Not more than 2% of the proceeds may be used for costs of issuance.

(4) Costs to be reimbursed include expenditures paid within 60 days prior to the adoption of an official intent resolution to issue the bonds.

(5) All costs must be reimbursed not more than 18 months after the facility is placed in service or 3 years after the allocation of bond proceeds to the expenditure, whichever is earlier.

(6) The weighted average maturity of the bonds cannot exceed 120% of the average economic life of the facilities to be financed.

(7) Not more than 25% of the bond proceeds may be used to acquire land.

(8) There must be a TEFRA hearing for public comment.

(9) A substantial user or related party cannot purchase the bonds.

Bonds issued under this exception cannot be used to finance working capital or inventory and may only be used to finance property or items that are capital in nature, i.e., depreciable under Section 167. IDB bond proceeds may be used to finance existing facilities and used equipment if:

(1) For a structure other than a building, an amount equal to at least 100% of the acquisition price is spent on rehabilitation of the structure.

(2) For an integrated building with equipment, an amount equal to at least 15% of the acquisition price is used for rehabilitation.

There are a number of Louisiana statutes that address industrial development and create conduit issuers. La. R.S. 51:1151, et seq. authorizes the incorporation of industrial development boards as private corporations of municipalities or parishes. These boards are authorized to issue revenue bonds, which require approval by the State Bond Commission and the Department of Economic Development. La. R.S. 51:1157; La. R.S. 51:1157.1. La. R.S. 51:1789 authorizes the issuance of revenue bonds in enterprise zones for business or industry. La. R.S. 39:551.1 authorizes parishes and municipalities to issue bonds to encourage the location or expansion of industrial facilities. La. R.S. 39:551.2 authorizes the creation of industrial districts, and La. R.S. 39:551.3 authorizes the creation of industrial parks. La. R.S. 39:991 authorizes the issuance of bonds to acquire plant sites and industrial plant buildings.

The procedure to issue an IDB is fairly straightforward:

(1) Apply to conduit issuer to issue bonds for the project.

(2) Complete conduit issuer’s preliminary approval process.

(3) Apply to State Bond Commission (and Department of Economic Development, as applicable) for preliminary approval.

(4) Complete SBC’s preliminary approval process.

(5) Conduct public hearings.

(6) Obtain final approval from conduit issuer.

(7) Obtain final approval from SBC (and DED, as applicable).

(8) Price and issue bonds.

The process takes about 90 – 120 days to complete.

 

EPA Proposes Changes to Oil Spill Dispersant Use

Posted in Environmental Litigation and Regulation, Uncategorized

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By Lee Vail

Dispersants are one of the tools available to mitigate detrimental impacts to shorelines and wildlife exposed to oil spills. In response to the Deepwater Horizon incident, the EPA authorized use of surface and subsurface dispersants. In mid-January 2015, the EPA announced that it would soon publish proposed rules in the Federal Register to address future use of dispersants.

Responses to oil spills are subject to the National Oil and Hazardous Substances Pollution Contingency Plan (NEP). The NEP was promulgated in the early 1990’s and is codified at 40 C.F.R. Part 300. Subpart J establishes the procedure and criteria for listing dispersants authorized for use in a spill. These chemicals are listed in the NCP Product Schedule.

The proposed changes affect various parts of the NCP with the majority of the changes affecting dispersant use. These requirements are generally located in 40 C.F.R. §300.900 – 920. As a general matter, the EPA proposal requires a greater availability of data concerning a dispersant, such as its efficacy and toxicity, coupled with instructions for its application in the field. The focus of the proposal is to assure that decision makers, such as the On-Scene Coordinator, Regional Response Team, and Area Committees have sufficient information to develop “preauthorization” plans, make informed decisions, and when needed, monitor the dispersant’s performance where application occurs over a period of time.

In addition, the EPA is proposing to minimize the ability to claim Confidential Business Information (CBI). Under the proposal, the only information that qualifies as CBI is “the concentration and the maximum, minimum, and average weight percent of each chemical compound or microorganism in your product.” (Proposed revision to §300.950(b)). The CBI claim, along with the confidential information, must be submitted at the same time as the information that supports the request to list a chemical in the NCP Product Schedule.

Comments will be accepted on the proposal during a 90-day period following publication in the Federal Register. Publication is anticipated before the end of January 2015. Comments will only be accepted through the official docket: EPA-HA-OPA-2006-0090.

 

Buying Generic for Louisiana Public Works Act Projects

Posted in Construction Law

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By Jessica Engler

In public bid projects, it is not uncommon to see project specifications that specify particular brands “or their equivalent.” Louisiana law prohibits the use of name-brand specifications, known as “closed specifications,” so the propriety of these specifications is debatable. La. R.S. 38:2212(T). To comply with the statute, these brand particulars are generally interpreted to be illustrative rather than mandatory. Despite this prohibition, some owners have tried to restrict the product brands used in their projects through indirect means.

The Louisiana Second Circuit Court of Appeals addressed an attempt to limit product brands in Akers v. Bernhard Mechanical Contractors, 48,871 (La. App. 2 Cir. 4/16/14), 137 So. 3d 818. In Akers, the City of Shreveport advertised and received public bids for the renovation and remodeling of a fire maintenance facility. The City awarded the general contract to A&R General Contractors (“A&R”), and Bernhard Mechanical Contractors (“Bernhard”) won the mechanical subcontractor for the project. Bernhard then solicited a proposal for a ventilation system, including the vehicle exhaust system, from David Akers.

The City’s project specifications for the vehicle exhaust system stated that all products must be “equal to” those made by Nederman. Akers submitted and Bernhard accepted a bid for a system made by Ventaire. In Akers’ submittal to the City, Akers identified his intent to use Ventaire and his belief that Ventaire was equal to Nederman. Bernhard’s agreed and forwarded the submittal to A&R, who forwarded it without comment to the City’s Architect and Engineer for approval.

Initially, the City’s Architect approved the submittal with only two non-related corrections. Deeming this an approval of the Ventaire system, Bernhard told Akers to order the system. One month later, the City’s Chief of Fire Maintenance noticed that the Ventaire system was being used and told the City Engineer. The City Engineer then told Akers that he had not yet received the submittal, so the submittal was not approved.

The City’s Chief of Fire Maintenance considered the Nederman system to be superior to the Ventaire system. Akers and Bernhard’s manager maintained that the two systems were functionally equivalent and that documents showed that the City Architect had originally approved the Ventaire system. The City Engineer then determined that Ventaire lacked “prior approval,” and this was why he did not approve the submittal. The City Architect then officially rejected Akers submittal for “no prior approval.” Despite Akers having already ordered the Ventaire system, the City chose to install a Nederman system, some of Akers’ equipment, and paid Akers a fraction of his bid.

The Trial Court found that Akers’ proposal was accepted by the City and that the Ventaire system was “substantially the same” as the Nederman system. On appeal, the City argued that “Addendum Number (2)” of the contract required prior approval for Akers’ bid and reads, in pertinent part:

Any changes, which may affect construction or proper installation of materials, equipment or fixtures, not specifically mentioned in this addendum, shall be brought to the attention of the Architect in writing before submission of the bid.

The City argued that this clause required Akers to seek prior approval for his bid, which listed a Ventaire system instead of the Nederman, and since Akers did not request prior approval, the City had the right to reject the equipment even if it was equal to Nederman.

The Second Circuit rejected this argument. The fire maintenance facility is a public work subject to the restrictions of public bid law, including the prohibitions on closed specifications. La. R.S. 38:2211 et seq. The purpose of this law is to secure free and unrestricted competition among bidders, to eliminate fraud and favoritism, and to avoid undue or excessive costs. Louisiana Assoc. Gen’l Contractors, Inc. v. Calcasieu Parish School Bd., 586 So. 2d 1354 (La. 1991). The Court stated that the owner cannot reject a bid from a different supplier if the equipment was functionally equivalent to the name-brand product. In reviewing the two products, the Second Circuit agreed with the District Court’s finding that the differences between the Nederman and Ventaire systems were merely superficial. The Court also found it telling that the City’s Architect and Engineer were ready to proceed with the Ventaire system had the Fire Chief not raised the objection. Accordingly, the Second Circuit affirmed the District Court’s finding that the two systems were functionally equivalent, and thus the City had no basis to request prior approval. With the Akers decision, the Louisiana Second Circuit has removed another avenue that a project owner may attempt to improperly limit the products used for publicly funded projects.

 

Louisiana – Movie Capital of the World

Posted in Film and Entertainment

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by Meg Alsfeld Kaul

Louisiana has been home to well more than 300 productions since 2006.  Interestingly, Kean Miller works closely with clients and industry professionals in a variety of legal service areas, including production legal, economic development and tax incentives, tax credits, business and corporate matters, dispute resolution, and intellectual property.  Recently, CBS declared Louisiana as the “Movie Capital of the World.” Click here to read why.

U.S. Fifth Circuit Rules that Shore-Based Vessel Repair Supervisor is Jones Act Seaman

Posted in Admiralty and Maritime

By Dylan Thriffiley

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Naquin v. Elevating Boats, L.L.C., — F.3d —, 2014 WL 917053, No. 12-31258 (5th Cir. Mar. 10, 2014)

(Davis and Milazzo, J.; Jones, J. dissenting)

In a decision that will undoubtedly have a lasting impact on marine insurers and their shipyard insureds, a divided panel of the U.S. Fifth Circuit held that a vessel repair supervisor at a Houma shipyard qualifies as a Jones Act seaman.

Plaintiff, Larry Naquin, Sr., was employed as a vessel repair supervisor at his employer’s shipyard facility in Houma, Louisiana. Naquin was not assigned to a particular vessel but instead spent seventy percent of his time repairing, cleaning, painting and maintaining lift-boat vessels at the shipyard. Ordinarily, he worked aboard the lift-boats while they were moored, jacked up or docked in the shipyard canal. The remaining thirty percent of his time was spent working in the shipyard’s fabrication shop or operating the shipyard’s land-based crane.

On November 17, 2009, Naquin was operating the shipyard’s land-based crane, when the crane suddenly failed and toppled over onto a nearby building. Naquin himself was able to escape the crane house but not without sustaining a broken left foot, a severely broken right foot, and a lower abdominal hernia.

A jury held that Naquin was a Jones Act seaman and that EBI’s negligence caused his injury, awarding him $1,000,000 for past and future physical pain and suffering, $1,000,000 for past and future mental pain and suffering, and $400,000 for future lost wages. Elevating Boats (“EBI”) appealed, contending that Naquin was not a Jones Act seaman, that the district court provided erroneous seaman status jury instructions, that the evidence was insufficient to establish EBI’s negligence, and that the district court erred in admitting evidence of Naquin’s cousin’s husband’s death.

In a split decision, authored by Judge Eugene Davis and joined by Judge Milazzo, District Judge for the Eastern District of Louisiana (sitting by designation), the U.S. Fifth Circuit affirmed the district court’s judgment on seaman status and liability. It then vacated the damages award, due to the jury’s reliance on emotional anguish resulting from the death of a third party.

Despite EBI’s argument that ship repairmen are expressly included in the jobs listed in the Longshore and Harbor Workers’ Compensation Act, the Fifth Circuit rejected this argument, noting that while the court had previously agreed with EBI’s position in Pizzitolo v. Electro-Coal Transfer Corp., 812 F.2d 977 (5th Cir. 1986), that decision was specifically overruled in this regard by the Supreme Court in Southwest Marine, Inc. v. Gizoni, 502 U.S. 81 (1991). Because Naquin’s work contributed to the function of EBI’s fleet of vessels, and because his connection to that fleet was substantial, the Fifth Circuit upheld the jury’s finding that Naquin was a Jones Act seaman, despite the fact that the vessels were usually docked, Naquin was not often exposed to the dangers of the sea, and he spent nearly every night in his own land-based home.

Judge Jones issued a strong dissent, opining that while Naquin’s work contributed to the function of a vessel, that his connection to the vessel(s) was not substantial. As noted by Judge Jones “if a jury could hold Naquin is a seaman, then it could so conclude as to any shore-based worker who maintained EBI’s on-board computers or went aboard the lift-boats to gas them up before they left the repair yard.” Judge Jones argued that the majority opinion did not properly interpret the concept of a “vessel in navigation” where Naquin was a dock worker who performed repairs to vessels at the dock. She points out that the majority’s conclusion is irreconcilable with the “basic point” in Chandris v. Latsis, 515 U.S. 347, 368 (1997), that land-based employees are not seamen.

This opinion has significant implications for shipyard operators and the vessels they service, as the circuit courts continue to expand the definition of Jones Act seaman status.

 

Fifth Circuit Recognizes Subrogation Lien In Jones Act Case

Posted in Admiralty and Maritime

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By Amanda Howard

In Chenevert v. Travelers Indemnity Co., No. 13-60119 (5th Cir. March 7, 2014), the Fifth Circuit formally recognized that an insurer providing and making voluntary payments to an injured employee under the Longshore and Harbor Workers’ Compensation Act 33 U.S.C.A. § 901 et seq (“LHWCA”), specifically 905(b), is entitled to a subrogation lien against the settlement recovery by the employee of Jones Act damages obtained for the same injuries for which the insurer has already compensated the employee.

Mr. Chenevert filed a personal injury lawsuit against his former employer, GC Constructors (“GC”), after he allegedly sustained injuries while working as a crane operator on the deck of a barge owned by GC in May of 2007. At the time of his injury, Travelers Indemnity Co. (“Travelers”) provided coverage to GC for Mr. Chenevert’s injuries under the LHWCA. The Travelers policy specifically excluded coverage for bodily injuries to a master or a member of the crew of any vessel. Between May 2007 and May 2010, Travelers paid benefits under the LHWCA in excess of $275,000, but discontinued those benefits in May of 2010, when Mr. Chenevert sued GC in federal court alleging negligence under the Jones Act and “seaman” status. Travelers then put Mr. Chenevert and GC on notice that it would seek reimbursement of the amounts paid under the LHWCA from any recovery Chenevert received in his Jones Act lawsuit.

After Chenevert and GC reached a settlement in the Jones Act case, Travelers sought and was granted leave to file a motion to intervene for the first time. Travelers filed its motion to intervene wherein it asserted its right to subrogation as a result of its payments of LHWCA indemnity and medical benefits made to Chenevert prior to the filing of his Jones Act lawsuit. As part of their final resolution, the parties agreed to interplead $277,728.72 into the court’s registry pending resolution of the dispute between Chenevert and Travelers. The Magistrate to whom this issue was assigned ultimately denied Travelers right to recoup its payments basing his decision on the legal tenant that no right of subrogation can arise in favor of an insurer against its own insured. The Magistrate also found that Travelers had not demonstrated an interest relating to the subject property or transaction and that Travelers had untimely moved to intervene in the case. Travelers appealed the decision to the United States Fifth Circuit.

On appeal to the U.S. Fifth Circuit, the court felt that the rule of law relied upon by the Magistrate would not apply in this factual setting as Travelers did not insure GC against Jones Act liability. Moreover, the court noted that the LHWCA itself grants subrogation liens to the employer’s insurers when compensation benefits are paid. The panel cited its previous holdings in Peters v. North River Ins. Co., 764 F.2d 306 (5th Cir. 1985) (recognizing the employer/insurer’s compensation lien in a third party suit), Taylor v. Bunge Corp., 845 F.2d 1323 (5th Cir. 1988) (recognizing insurer’s right to recovery in 905(b) claim against the employer as a vessel owner) and Massey v. William-McWilliams, Inc.. 414 F.2d 675 (5th Cir. 1969), which recognized a ship owner-employer’s right to a credit for amounts paid under the LHWCA that bear reasonable relation to the items of loss compensated under a Jones Act claim. The court felt the right to assert a subrogation lien by Travelers as a logical extension of this line of cases and it saw no difference between the insurer in the Massey case and Travelers in the instant case asserting a lien against a 905(b) recovery as opposed to a lien against a Jones Act recovery.

In answering this question, the U.S. Fifth Circuit specifically stated, “we perceive no sound reason why an insurer’s right of reimbursement against a Jones Act recovery should be different from its right of reimbursement against a 905(b) recovery. Arguably, an insurer has an even stronger equitable claim to repayment from a Jones Act recovery.” The court further acknowledged that “a worker who succeeds in a Jones Act claim is necessarily a seaman, and therefore not entitled to LHWCA benefits. It would be particularly unfair to deny the insurer the right to recover the benefits it has paid in such a situation.” The court reasoned that “by paying LHWCA benefits on behalf of GC, Travelers acquired a repayment lien that is independent of, and cannot be nullified by, GC. If this were not so, an employer and employee could easily settle around the insurer’s lien and prevent any possibility of recovery by the insurer.” The U.S. Fifth Circuit thus reversed the district court and remanded.

 

 

Work Related Stress: It Comes With The Job for a Jones Act Seaman

Posted in Admiralty and Maritime

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By Daniel B. Stanton

In a recent decision, the Eleventh Circuit in Skye v. Maersk Line Limited, Corp., 751 F.3d 1262 (11th Cir. 2014), reversed a district court ruling awarding damages to a Jones Act seaman for injuries stemming from “excessive work hours and an erratic sleep schedule.” The Court’s decision in Skye reaffirms a now decades old prohibition on recovery under the Jones Act for injuries resulting from work-related stress.

From 2000-2008, the Plaintiff, William Skye, was employed as chief mate aboard a vessel operated by defendant, Maersk. During this time, Skye worked between 90 and 105 hours per week for periods of 70 to 84 days at a time. In 2003 Skye was diagnosed with a benign arrhythmia, and his cardiologist suggested that he get more rest. By 2008, Skye was experiencing headaches, back aches, and was diagnosed with a left ventricular hypertrophy, or thickening of the heart wall. In 2011, Skye brought a Jones Act negligence suit against his employer, Maersk, alleging that Maersk negligently failed to provide sufficient crew, reasonable working hours, and adequate rest hours. At trial, a jury awarded Skye $2,362,299.00, which the district court reduced to $590,574.75 as a result of Skye’s comparative fault. Maersk moved for a judgment as a matter of law, alleging that Skye’s injuries were not cognizable under the Jones Act based on Consolidated Rail Corp. v. Gottshall, 512 U.S. 532 (1994). The district court denied Maersk’s motion and rendered judgment in favor of Skye.

On appeal, the Eleventh Circuit noted that the Jones Act does not recognize all work-related injuries. The “central focus” of the Jones act is protection from “physical perils.” The Court found that Skye’s case failed for the same reasons as the case of the plaintiff in Gottshall. In Gottshall, the plaintiff’s complaint was similar to that of Skye’s. Both complained of injuries stemming from long hours and job-related stress. The Gottshall court, denied recovery to the plaintiff because work-related stress is “not caused by any physical impact.” Consistent with the precedent set by Gottshall, the Eleventh Circuit refused to expand the definition of “physical perils” to include an “arduous work schedule and an irregular sleep schedule.” The Court noted that it was not the development of a physical injury that brought a claim within the ambit of the Jones Act, but rather the cause of the injury. For an employer to become liable for an employee’s injury, it must be the result of a physical impact. Accordingly, the Court vacated the judgment of the district court and rendered judgment as a matter of law in favor of Maersk.

The Eleventh Circuit’s ruling in Skye reaffirms the common-sense understanding that work-related stress comes standard with all jobs. Similarly, individuals have varying levels of tolerance for stress. An employer should not become responsible for employee injuries resulting from an employee’s inability to manage work-related stress in an at-will employment relationship.

 

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