Admiralty and Maritime

BSEE

By Michael J. O’Brien

Scott Angelle, a native of Breaux Bridge, Louisiana, has been appointed by the Trump Administration to head the Bureau of Safety and Environmental Enforcement (“BSEE”).  Mr. Angelle first held public office in the late 1980’s. He has since served as a Parish President, Secretary of Louisiana’s Department of Natural Resources, and, most recently, as Chairman of the Louisiana Public Service Commission. Under his leadership as Louisiana’s Secretary of the Department of Natural Resources, the state’s coastal permitting system was reformed, providing for efficient permitting while increasing drilling rig counts in Louisiana by more than 150 percent during his tenure. Mr. Angelle has also served as Chairman of the Louisiana State Mineral Board, and as a member of the Louisiana State University Board of Supervisors, Southern States Energy Board, and the Louisiana Coastal Port Advisory Authority.

Mr. Angelle will become BSEE’s fourth director since it was established six years ago. BSEE was formed after the Deepwater Horizon explosion to promote safety, protect the environment, and conserve resources offshore through “vigorous regulatory oversight and enforcement.”

BSEE is headquartered in Washington D.C. and supported by regional offices in New Orleans, Louisiana, Camarillo, California, and Anchorage, Alaska.  These regional offices review applications for permits to drill, ensure safety requirements are met, conduct inspections of drilling rigs and offshore production platforms, investigate offshore accidents, issue Incidents of Non-Compliance and have the authority to fine companies through civil penalties for regulatory infractions.

Mr. Angelle’s post does not require Senate confirmation; as such, he will start working as the head of BSEE Tuesday, May 23, 2017. Secretary of the Interior, Ryan Zinke, issued the following statement about Mr. Angelle: “Scott Angelle brings a wealth of experience to BSEE, having spent many years working for the safe and efficient energy production of both Louisiana’s and our country’s offshore resources. As we set our path towards energy dominance, I am confident that Scott has the expertise, vision, and the leadership necessary to effectively enhance our program, and to promote the safe and environmentally responsible exploration, development, and production of our country’s offshore oil and gas resources.”

 

By J. Eric Lockridge

Large and small offshore service companies are turning to the Bankruptcy Code for help with restructuring their balance sheet, and turning to Washington for help with generating more work.

One of the largest offshore service companies in the world, Tidewater, announced this week that it will file a Chapter 11 bankruptcy petition in Delaware on or before May 17, 2017. This is not a surprise to the markets. Tidewater received notice from the New York Stock Exchange in April that it is at risk of being delisted before the end of the year because its average stock price sat below $1.00 per share for too long. Tidewater’s press release announcing the upcoming bankruptcy says the company has secured broad support from secured creditors for a pre-packaged plan that will effectuate a form of debt-for-equity swap. The plan will also reject certain sale-lease back agreements for a portion of Tidewater’s fleet. Expect a fight over lease-rejection damages.

A smaller operator focused on the Gulf of Mexico, GulfMark Offshore, also announced this week that it is planning a Chapter 11 filing. Offshore Support Journal reported that GulfMark Offshore’s most recent SEC filing discloses the company will likely file a Chapter 11 bankruptcy petition on or before May 21, 2017. The company is working with advisors to secure support for a restructuring agreement that will include a backstop commitment from certain note holders and a debt-for-equity swap.

Some in the offshore industry are lobbying the White House and others to extend the “America First” agenda to the offshore-service industry in hopes that might provide a boost. For example, see Harvey Gulf’s recent open letter to President Donald Trump here. Many in the offshore service industry would like to see the current administration enforce regulations requiring proper plugging and abandonment (P&A) of many non-producing or low-producing wells in the Gulf of Mexico’s shallow water. They have to be careful about how loudly they push that agenda, however, or they may alienate the very exploration and production (E&P) companies that would hire them. Many E&P companies would like to see enforcement of those regulations delayed as long as possible, and at least until the price of oil is higher.

Enforcing P&A obligations would likely create thousands of jobs and boost the economy along the Gulf Coast, where President Trump received strong electoral support. The House Majority Whip, Rep. Steve Scalise (R-LA), represents a district along the Louisiana coast that is home to scores of offshore service companies and their vendors, which gives that industry some important clout on Capitol Hill. Delaying enforcement of P&A obligations and/or making them less onerous might be more consistent with a “regulation-roll-back” agenda and with the interests of many E&P companies, several of which have strong ties to the current administration and deep relationships in Congress.

Will Washington take any action to provide some relief for offshore service companies, their employees, vendors, and lenders? How will an increase in Chapter 11 cases for offshore service companies affect the industry and the companies that have (so far) avoided bankruptcy? Kean Miller and many of our clients will keep a close watch as events unfold.

 

7th

By Erin Kilgore and Scott Huffstetler

On April 4, 2017, the Seventh Circuit Court of Appeals ruled that sexual orientation discrimination is prohibited by Title VII of the Civil Rights Act of 1964.

As previously noted, there has been much debate among the courts regarding the meaning of the term “sex” under Title VII and whether discrimination based on sexual orientation and/or transgender status falls within the scope of Title VII’s protection. With yesterday’s 8-3 ruling, the Seventh Circuit became the first appellate court to interpret Title VII’s prohibition on discrimination based on “sex” as barring discrimination based on sexual orientation.   The ruling is consistent with the Equal Employment Opportunity Commission’s interpretation of Title VII and is particularly significant given that the Seventh Circuit is considered among the relatively conservative federal appellate courts. Additional information regarding the decision can be found here.

This decision is only binding on employers in the Seventh Circuit (which encompasses Illinois, Indiana, and Wisconsin).   Courts in other jurisdictions have reached the opposite conclusion. For example, just a few weeks ago, a panel of the Eleventh Circuit Court of Appeals, another conservative jurisdiction, ruled that Title VII does not protect employees from discrimination on the basis of sexual orientation.  The Supreme Court may ultimately weigh-in on this issue to resolve the emerging split among the appellate courts.

The Fifth Circuit (which encompasses courts in Louisiana, Mississippi, and Texas) has not held that Title VII prohibits discrimination based on sexual orientation. Nevertheless, all employers should be aware of this decision. It is likely that attorneys, advocates, and federal agencies will rely on this ruling in an effort to expand the scope of Title VII in other jurisdictions.

 

 

GOM

By Tod J. Everage

With less than one week on the job, newly-confirmed Secretary of the Interior, Ryan Zinke announced that BOEM will offer 73,000,000 acres of lease space located in the Gulf of Mexico for oil and gas exploration. Proposed Lease Sale 249 is currently scheduled for August 16, 2017, and will include all unleased areas of federal waters in the GOM. The sale will be livestreamed from New Orleans.

This sale is the first under the new Outer Continental Shelf Oil and Gas Leasing Program for 2017-2022 (Five Year Program). The plan includes two GOM lease sales each year, including all available blocks in the combined Western, Central, and Eastern GOM. It is estimated that there are approximately 211 million to 1.118 billion barrels of oil and 0.547-4.424 trillion cubic feet of gas available for production in those available leases. The available land for lease includes approximately 13,725 unleased blocks located between 3-230 miles offshore, and ranging in depth between 9-11,115 feet of water.

Excluded from the lease sale are blocks subject to the Congressional moratorium established by the Gulf of Mexico Energy Security Act of 2006; blocks that are adjacent to or beyond the U.S. Exclusive Economic Zone in the area known as the northern portion of the Eastern Gap; and whole blocks and partial blocks within the current boundary of the Flower Garden Banks National Marine Sanctuary. The full text of BOEM’s press release can be found here.

The current Five Year Program [2012-2017] will have its final lease sale today, March 22, 2017, which includes approximately 48 million acres off the coast of Louisiana, Mississippi, and Alabama comprised of 9,118 blocks. The sale will be livestreamed started at 9 am via BOEM’s website.

A United States Coast Guard Cutter of the Marine Protector class. This is an 87' vessel capable of 30+ knots and it is used for law enforcement, and search and rescue operations.

By Michael J. O’Brien

U.S. Coast Guard Form 2692 has been used for over forty (40) years to report marine casualties, commercial diving casualties, or outer continental shelf related causalities. Recently, the Form received a long overdue update. The new version of the form, effective as of 2017, is available here as well as the Coast Guard Home Port.  The new version of the form allows the document to be filled out electronically and to add a digital signature. There are also revised addendum forms for barge involvement, personnel casualties, witnesses, and any chemical testing. Further, the form’s data fields have been streamlined to align with statutory and regulatory language.

Please be sure to use new 2692 Form for all future incidents rather than the old form as we have received reports that the Coast Guard has rejected submissions using the old form.

BSEE

By Tod J. Everage

On February 3, 2017, BSEE issued its first Notice to Lessees (NTL) of 2017, advising of the revised OCSLA Civil Penalty Assessment Matrix. For the second time in 6 months, BSEE has increased the maximum civil penalty to $42,704 per day per violation, up from $42,017 per day per violation that was set in July 2016. These new changes were effective for all civil penalties assessed on or after February 3, 2017, even if the alleged violation predated February 3, 2017. The new matrix is shown below.

OCSLA Civil Penalty Assessment Matrix

February 3, 2017

GENERALIZED MATRIX FOR OCSLA CIVIL PENALTY ASSESSMENTS IN $/DAY/VIOLATION

Enforcement Code

Category A Category B Category C

W

$5,250-42,704

($15,750)*

$10,500-42,704

($21,000)*

$21,000-42,704

($26,250)*

C

$10,500-42,704

($21,000)*

$15,750-42,704

($26,250)*

$31,500-42,704

($36,750)*

S

$15,750-42,704

($26,250)*

$21,000-42,704

($31,500)*

$36,750-42,704

($38,850)*

Note: W=Warning, C=Component Shut-in, and S=Facility Shut-in

* = Starting Point for Assessment

Category A

Category B

Category C

Threat of injury to humans.

Threat of harm or damage to the marine or coastal environment, including mammals, fish and other aquatic life (threat may or may not involve endangered/threatened species).

Threat of pollution.

Threat of damage to any mineral deposit or property.

Injury to humans that results in 1-3 days away from work or 1-3 days on restricted work or job transfer.

Minor harm or damage to the marine or coastal environment, including mammals, fish, and other aquatic life (harm to aquatic life did not involve an endangered/threatened species).

Pollution caused by liquid hydrocarbon spillage of up to 50 barrels (bbls).

Minor damage to any mineral deposit.

Minor property damage equal or less than $25,000.

Additional incidents required to be reported under 30 CFR 250,188, except (a)(6), (b)(1), (b)(4).

Loss of human life.

Injury to humans that results in more than 3 days away from work or more than 3 days on restricted work or job transfer.

Serious harm or damage to the marine or coastal environment, including mammals, fish, and other aquatic life (harm to aquatic life involved numerous individuals or involved one or more members of an endangered/threatened species.

Pollution caused by liquid hydrocarbon spillage of more than 50 barrels (bbls).

Serious damage to any mineral deposit.

Serious property damage greater than $25,000.

The full text of the NTL can be found here.

ml

By Tod J. Everage

Until the U.S. 5th Circuit gets an opportunity to directly address the continued viability of Scarborough v. Clemco Industries, 391 F.3d 660 (5th Cir. 2004) in the wake of Atlantic Sounding v. Townsend, 557 U.S. 404 (2009), we are likely to see a lack of harmony among the district court judges considering this issue. Scarborough specifically protects third parties (see oil and gas companies) against punitive damage exposure (see uninsured) from injured seamen employed by their contractors (see vessel companies). We have been following the EDLA commentary on Scarborough as its erosion would significantly raise the potential liability of those companies who contract for the use of vessels. See previous posts here and here for more background on the Scarborough fight in the Eastern District of Louisiana. Recently, one of the two EDLA Judges holding the view that Scarborough was no longer good law reversed his course, resulting now in a 7-1 score in favor of Scarborough, further reducing concern for an unpredictable judicial roulette on this issue.

In a nutshell, Scarborough was the legal consequence of a long line of jurisprudence in the 5th Circuit holding that punitive damages were not available under the Jones Act or General Maritime Law (“GML”) that began with Miles v. Apex Marine, 498 U.S. 19 (1990). Where Miles protected the Jones Act employers from punitive damages, Scarborough protected all other third party defendants, such as oil and gas companies who had hired those Jones Act employers. In 2009, Townsend reined in the expanding prohibitions on punitive damages by finding that they could be awarded under GML for the employer’s willful and wanton failure to pay maintenance and cure. Townsend very directly and explicitly abrogated Guevera v. Maritime Overseas Corp., 59 F.3d 1496 (5th Cir. 1995) which had previously held just the opposite. That abrogation is relevant here because the Scarborough court cited Guevera favorably and extensively in its analysis.

Though Townsend definitely overruled Guevera, it also re-affirmed Miles, which remains a pillar of maritime jurisprudence in this area. Plaintiff attorneys view Townsend as a means to reverse the expansion of Miles and have renewed their attack on those judge-made roadblocks to the availability of punitive damages. With oil and gas companies being viewed as the “deep pockets” in lawsuits, Scarborough’s protection of those companies has become a popular focus.

After Townsend, several judges re-affirmed Scarborough with little more than lip service, as it seemed clear that Townsend was limited to maintenance and cure issues and the district courts could not “assume the Fifth Circuit has changed its position on personal injury claims falling outside the scope of Townsend.” See In re: Deepwater Horizon, 2011 WL 4575696 (E.D. La. 9/30/11) (Barbier, J.); see also O’Quain v. Shell Offshore, Inc., 2013 WL 149467 (E.D. La. 1/14/13) (Berrigan, J.); In re: International Marine, LLC, 2013 WL 3293677 (E.D. La. 6/28/13) (Lemmon, J.); Bloodsaw v. Diamond Offshore Mgmt. Co., 2013 WL 5339207 (E.D. La. 8/19/13) (Vance, J.); Ainsworth v. Caillou Island Towing Co., 2013 WL 3216068 (E.D. La. 10/21/13) (Brown, J.). Despite the perceived clarity, Judge Barbier foresaw the potential dispute that could arise on this issue given the underlying reasoning in Townsend. (“Though this conclusion is not without doubt given the Supreme Court’s recent decision in [Townsend]…”). In Todd v. Canal Barge Co., 2013 WL 5410409 (E.D. La. 9/25/13), Judge Fallon provided the first true analysis of the continued validity of Miles and its progeny after Townsend. Therein, Judge Fallon acknowledged the limitations of Townsend and the re-affirmation of Miles, and dismissed the plaintiff’s claims for punitive damages for negligence and unseaworthiness. This opinion makes his later decision in Collins all-the-more anomalous.

In 2014, the U.S. 5th Circuit decided McBride v. Estis Well Service, LLC, 768 F.3d 382 (5th Cir. 2014), wherein the en banc panel also held that Townsend was narrowly limited to maintenance and cure claims. McBride acknowledged the continued vitality of Miles to preclude all other forms of punitive damages claims under GML or the Jones Act, though it did not directly mention Scarborough. Judge Fallon then got another opportunity to address Scarborough in light of both Townsend and McBride. See Collins v. ABC Marine Towing, LLC, 2015 WL 5254710 (E.D. La. 9/9/2015). Therein, Judge Fallon distinguished Miles and McBride and was persuaded by Townsend’s abrogation of Guevera, which he felt served as the foundation for Scarborough. Judge Fallon held that Scarborough was “effectively overruled” by Townsend, finding that it was “inconsistent with current Supreme Court precedent.” He did not cite to his prior ruling in Todd just a year prior. This decision served as the first major blow to formerly-protected third party, non-Jones Act employers in the EDLA.

Shortly thereafter, Judge Morgan joined the majority, issuing two opinions upholding Scarborough. See Howard Offshore Liftboats, LLC, 2015 WL 7428581 (E.D. La. 11/20/15); Lee v. Offshore Logistical and Transports, LLC, 2015 WL 7459734 (E.D. La. 11/24/15). A few months later though, Judge Zainey issued an opinion against Scarborough, relying heavily on Judge Fallon’s reasoning in Collins. See Hume v. Consolidated Grain & Barge, Inc., 2016 WL 1089349 (E.D. La. 3/21/16). Judge Morgan again re-affirmed her confidence in Scarborough in Lewis v. Noble Drilling Services, 2016 WL 3902597 (E.D. La. 7/19/2016).

Heading into the 2017, only Judges Fallon and Zainey had rejected the continued viability of Scarborough and its punitive damages prohibition, while at least six of their colleagues held differently. Then, unexpectedly, Judge Fallon changed his mind and joined the majority. See Wade v. Clemco Indus., No. 16-00502 (E.D. La. 2/1/2017). Wade presented Judge Fallon with yet another opportunity to directly address Scarborough; but, this time his analysis and holding were fundamentally different. Wherein Collins, he focused on Scarborough’s reliance on Guevera, in Wade, he instead focused on Miles. Judge Fallon was also persuaded this time by McBride: “It has become clear since the en banc opinion in McBride that in wrongful death cases brought under general maritime law, a survivor’s recovery from employers and non-employers is limited to pecuniary losses.” Quite differently than holding that Scarborough was “effectively overruled,” this time he noted that McBride gave it “clarity and vitality.” As a consequence, Judge Fallon dismissed the plaintiff’s punitive damages claims against the third parties who were not the plaintiff’s Jones Act employer. This is good news for third party defendants finding themselves on the wrong end of a Jones Act lawsuit in the EDLA, as there is now only one judge’s opinion in favor of (and seven against) allowing punitive damage claims to proceed against them. Since these decisions are interlocutory in nature, they do not get appealed by right, and all prior cases have settled before the 5th Circuit could comment. Nevertheless, we will keep an eye out for any further developments, hoping that the remaining judges who get an opportunity to consider this issue fall in line with the legally-sound majority.

Beautiful sunset framed from the bow of a luxury cruise ship in a vast, calm ocean.

By McClain Schonekas

Princess Cruise Lines Ltd. (“Princess”), a subsidiary of Carnival Corporation, agreed to plead guilty in the Southern District of Florida to seven felony charges stemming from deliberate acts of pollution at sea and intentional acts to cover up the pollution. Princess agreed to pay a steep, $40 million penalty— the largest-ever criminal penalty for deliberate vessel pollution—under the terms of its plea agreement with the government.

Back in August 2013, an engineer on Princess’ cruise ship the Caribbean Princess quit his job and reported the use of a so-called “magic pipe” to illegally discharge oily waste off the coast of England. The chief engineer and senior first engineer of the vessel ordered a cover-up, including the removal of the magic pipe and instructing subordinates to lie. The British Maritime and Coastguard Agency (“MCA”) investigated and ultimately shared its information with the U.S. Coast Guard. The Coast Guard subsequently examined the ship upon its arrival in New York City. Later, in March 2014, the Department of Justice’s investigative team inspected the vessel and found incriminating evidence. Eventually, Princess and the government reached a deal where Princess admitted to multiple acts of wrongdoing.

Pursuant to the factual statement in the plea agreement, Princess admitted that illegal discharges took place on the Caribbean Princess as far back as 2005 and that it engaged in a conspiracy to knowingly discharge oily mixtures in U.S. navigable waters. Princess admitted to using multiple bypass methods to transfer oily waste overboard and admitted to attempting to cover up its actions upon learning that a former engineer had blown the whistle. Ultimately, Princess’ employees’ attempts to cut costs, at the expense of the environment, backfired into a magical mess for the company.

To read more about this case, please see click here.

BSEE

By Michael J. O’Brien

In an earlier blog post here we highlighted the facts in Island Operating Co., v. Jewell, et al., Civil Action No. 16-145, currently pending in the Lafayette Division of the Western District of Louisiana. The central issue in Island Operating is whether a contractor that provides personnel to perform work on the Outer Continental Shelf can be issued an Incident of Non-Compliance (“INC”) and/or a civil penalty by BSEE for a failure to comply with the safety and environmental duties imposed by the Outer Continental Shelf’s Lands Act (“OCSLA”) and Part 250 of the Code of Federal Regulations. In a trial ruling on the briefs, Judge Doherty held that the duty to comply with the safety and environmental standards under OCSLA flows only to a lease holder or a permit holder; thus, offshore contractors such as Island cannot be issued an INC or a civil penalty from BSEE. In a day in age when nearly every offshore platform is ran or maintained by contractors, the very agency created to regulate offshore platform safety has no authority to do so against those contractors, per Judge Doherty. And, her ruling appears to be legally sound given the actual language of OCSLA.

Prior to this ruling, only two legal writings really touched on this issue, though neither of which boiled it down as succinctly and straightforwardly as Judge Doherty. First, in 2012, the Director of BSEE issued Interim Policy Document No. 12-07 (effective August 15, 2012) stating that BSEE would increase its INC’ing of contractors for serious violations of BSEE regulations. This came as a direct result of the Deepwater Horizon incident. The Director stated that it was BSEE’s position that any person performing an activity under a lease issued or maintained under OCSLA was subject to BSEE’s regulations and compliance, including contractors. His statement was based presumably in part on 30 CFR §250.146(c), which broadly encompasses contractors performing such activities. Second, Judge Milazzo from the EDLA recently held that the BSEE regulations could not serve as a basis for criminal penalties against contractors, though she only acknowledged that BSEE civil and regulatory authority over contractors had not yet been established. She was the first to affirmatively say that the OCSLA regulations did not extend to contractors, but her holding was in a criminal context and her analysis was heavily focused on the regulations rather than OCLSA. The USA has appealed her ruling to the U.S. 5th Circuit, which has extended briefing to respond to Judge Doherty’s recent ruling.

Judge Doherty, however, started her analysis with the language of OCSLA itself. Judge Doherty’s opinion focused on three sections of OCSLA. She first highlighted 43 U.S.C. §1332 (entitled: “Definitions”) that determines which types of juridical entities are subject to the entire act. Specifically, Section 1332 provides that “persons” are subject to the act, and they are defined as (in addition to a natural person) an “association, estate, a political subdivision of a state, or a private, public, or municipal corporation.” Next, Judge Doherty examined 43 U.S.C. §1348(b) (entitled: “Enforcement of Safety and Environmental Regulations”) which identifies which “persons” a duty is imposed as to safety and environmental issues, namely the duty to maintain all places of employment in compliance with occupational health and safety standards. Based on the plain language of the Section 1348, the duty to maintain places of employment and operations within the area of a lease or permit in compliance with safety, health, and environmental regulations falls – on “any holder of a lease or permit” granted under OCSLA. Section 1348 does not list any other types of party upon whom that duty falls. Last, Judge Doherty noted that 43 U.S.C. § 1350 (entitled: “Remedies and Penalties”) delineates the type of penalties allowed against those who violate the safety and environmental issues.

Reading these three statutes together, Judge Doherty held that a party who is neither a lease holder nor permit holder, such as Island, is not identified in 43 U.S.C. §1348 as having a duty related to environmental and safety standards. Accordingly, Island cannot be found to have violated a duty with which it is not charged. Further, Island cannot be subject to a regulatory penalty or fine from BSEE. According to Judge Doherty, “OSCLA’s plain language, when read in context, is clear, and does not embrace contractors, such as Island within the duty created by §1348(b).” Only lease holders and permit holders are therefore subject to OCSLA’s mandates.

Without OCSLA governance, offshore contractors are similarly not subject to Part 250, which are simply OCSLA’s implementing regulations. This is so despite the express language contained in §250.146(c) that applies the duty to any person who performs an activity on the OCS under a lease. However, Judge Doherty emphasized the distinction between the authorizing statute (OCSLA) and its implementing regulations (Part 250). She held that the regulations used to simply implement the statute cannot expand the scope of the statute beyond what the statute itself provides. As was also supported by the legislative history, OCSLA clearly does not include contractors within its scope, and thus, the BSEE regulations must be confined to that scope.

Judge Doherty’s decision that BSEE does not have the authority to enforce OCSLA’s regulations against a non-lease holder or non-permit holder will have far reaching consequences given BSEE’s recent history of issuing INC’s and civil penalties to contractors for accidents and injuries on the Outer Continental Shelf. Though it remains to be seen how BSEE will react to this decision in other jurisdictions, at least according to Judge Doherty, BSEE can only issue INC’s and civil penalties against the lessees and permit holders, i.e. – platform owners. Operators can neither be INC’ed nor fined. It is almost a certainty that BSEE will appeal this decision to the United States Fifth Circuit Court of Appeals. At a minimum, this decision should serve as the basis for appeal of any BSEE INC’s issued to contractors going forward. We will soon publish another article addressing the potential implications of this decision (or any future 5th Circuit decision) on other aspects of contractor liability on the OCS and certainly continue to monitor this case as it makes its way through the appeals.

Tugboat sailing in a stormy day off the Portuguese coast during its activity of oil tankers and other ships support

By Michael J. O’Brien

The doctrine of maintenance and cure mandates that an employer pay an injured seaman a per diem living allowance for food and lodging comparable to what the seaman was entitled to while at sea. The injured seaman is also entitled to payment of medical expenses incurred in treating an injury or illness. The duty to pay maintenance and cure extends until the seaman has reached maximum medical improvement (MMI). However, the point at which a seaman reaches MMI can be a thorny issue, particularly since punitive damages are available to a seaman whose employer has arbitrarily and capriciously terminated maintenance and cure benefits. Many employers will request an independent medical examination (IME) to assist in the investigation of whether the seaman has reached MMI. Quite often, an employer will terminate maintenance and cure based on the opinions of the IME physician, expecting that its reliance on the medical opinion of the expert medical professional would not be arbitrary or capricious. Unfortunately, a recent decision by Judge Carl Barbier of the Eastern District of Louisiana demonstrates that an employer that terminates maintenance and cure benefits simply because an IME physician opines that a seaman has reached MMI does so at its own peril.

In Weeks Marine, Inc. v. Rodney Watson, 2016 WL 3027430 (E.D. La. May 27, 2016), Watson claimed to have been injured on September 24, 2014, when he was struck by a large steam table that toppled over in the galley in rough seas. On September 27, 2014, Watson was taken to a North Carolina physician with complaints of left hip and knee pain. Next, Watson was evaluated by an orthopedist on October 2, 2014. An MRI was recommended to investigate possible knee ligament or meniscus damage. His employer refused to authorize or pay for this diagnostic test. Thereafter, on October 16, 2014, Watson returned home to Louisiana and began treating with a local orthopedic surgeon. An IME was performed on January 15, 2015 by a physician chosen by Watson’s employer. The IME physician opined that there were no objective findings or a need for additional medical treatment. The IME physician also found Watson to be at MMI. Based on the opinions of the IME physician, Weeks terminated Watson’s maintenance and cure benefits on January 15, 2015.

Watson continued to treat with his choice of his physician who never found him to be at MMI. Eventually, Weeks contacted Watson and ordered him to return to the vessel and resume his duties. Watson refused due to his ongoing physical symptoms and he was terminated. Watson then retained an attorney and began treating with a Houston, Texas orthopedic surgeon. MRI studies revealed possible injuries to the left knee as well as to the cervical and lumbar spine. At his employer’s request, Watson returned to the IME physician on June 15, 2015, for his own MRI. The MRI was reported as normal, and Weeks declined to reinstate either Watson’s maintenance or cure.

As of Watson’s last medical appointment with his Houston orthopedist, it was recommended that he undergo a two-level cervical disc fusion, left knee arthroscopy, a radio frequency neurotomy procedure, and continued observation. The Houston physician further related the need for this treatment and surgery to the September 24, 2014 vessel incident. As of the date of trial, Weeks had not paid any medical bills since January 15, 2015 (the date of the first MMI opinion by the IME physician). Unpaid medical expenses were $56,582.00. The parties stipulated that accrued maintenance was payable at $20 per day and totaled $9,340 as of May 17, 2016.

Procedurally, Weeks filed a Complaint for Declaratory Judgment declaring that it was not obligated to make maintenance and cure payments beyond January 15, 2015. Watson responded by filing a Complaint for Damages alleging negligence under the Jones Act, unseaworthiness of the vessel, and compensatory and punitive damages for Weeks’ willful failure to pay maintenance and cure. The two Complaints were consolidated for a bench trial.

Following the bench trial, Judge Barbier held that Weeks was negligent and the vessel unseaworthy. There was no comparative negligence on the part of Watson. Judge Barbier further found that there was credible medical evidence that Watson required a two-level cervical fusion at the cost of $125,000, as well as a left knee arthroscopy and lumbar radiofrequency neurotomy.

In deciding the issue of punitive damages, Judge Barbier reiterated that the maintenance and cure duty must be liberally interpreted for the benefit and protection of the seaman. Any ambiguity or doubt related to maintenance and cure must also be resolved in favor of the seaman. He highlighted that the ship owner bears the obligation to investigate a seaman’s maintenance and cure claim and examine all medical evidence in determining whether maintenance and cure is owed. Further, if a ship owner unilaterally decides to stop paying maintenance and cure and the seaman reasserts his rights by bringing action against the ship owner, the ship owner meets his burden of proof only by providing “unequivocal evidence” that the seaman has reached MMI. See Johnson v. Moreland Drilling Co., 893 F.2d 77, 79 (5th Cir. 1990). Critically, Judge Barbier held that a second opinion contrary to the treating doctor’s opinions regarding diagnosis or prognosis of an injured seaman does not provide the unequivocal evidence required for termination of maintenance and cure benefits. This is in contrast to the existing case law out of the EDLA that has found a Jones Act employer was not arbitrary or capricious when it terminated maintenance in cure based upon its IME doctor’s MMI opinion that conflicted with the treating physician’s opinion. See Great Lakes Dredge and Dock Co. v. Martin, 2012 WL 3158870 (E.D. La. 2012) (Lemelle); Lodrigue v. Delta Towing, LLC, 2003 WL 22999425 (E.D. La. 2003) (Vance). That being said, each case must be evaluated on its own facts.

Based on this rationale, Judge Barbier found that the employer arbitrarily terminated Watson’s maintenance and cure benefits on January 15, 2015. Indeed, Judge Barbier put no faith in the opinion of the IME physician and rejected the physician’s “incredible and biased testimony at trial.” Thus, in addition to his other damages, Watson received $100,000 in punitive damages for willful failure to pay maintenance and cure as well as $50,000 in attorney’s fees incurred for his maintenance and cure claim.

This decision will be well known in the maritime plaintiff’s bar and used to threaten similar claims for punitive damages when a Jones Act employer relies heavily on its IME physician’s opinion in terminating maintenance and cure benefits. While specific circumstances in this case certainly affected the analysis, Jones Act employers should proceed with caution before terminating benefits on the basis of their own IME in light of this decision.