By Carey J. Messina and Kevin C. Curry

Do you want to find out more information about the organization asking you for money?

The Internal Revenue Service has launched a new tool on IRS.gov that gives fast and easy access to information about exempt organizations.  The new tool is called the Tax Exempt Organization Search (“TEOS”).

You can now find the following information at TEOS:

  • TEOS provides images of an organization’s Forms 990, 990-EZ, 990-PF and 990-T filed with the IRS.  Initially, only 990 series forms filed in January and February 2018 will be available.  New filings will be added monthly.
  • TEOS is more friendly, which provides access to the search tool using smartphones or tablets.
  • Users can access favorable determination letters.  These are issued by the IRS when an organization applied for and met the requirements for tax-exempt status.  A limited number of determination letters will be available.  Eventually, determination letters issued since January 2014 will also be available.

You can determine whether an organization:

  • Is eligible to receive tax-deductible contributions.
  • Has had it tax-exempt status revoked because it failed to file required forms or notices for three consecutive years.
  • Has filed a Form 990-N annual electronic notice with the IRS; this applies to small organizations only.

Publicly available data from electronically-filed 990 Forms is still available through Amazon Web Services.

This can be a useful tool to determine whether or not your donation to an organization will be deductible for income tax purposes, and to some extent generally how an organization is using its contributions.

By A. Edward Hardin, Jr.

America’s dad, America’s newscaster, and Louisiana’s Secretary of State all recently occupied headlines regarding allegations of sexual misconduct.  Last month, a Norristown, Pennsylvania jury found Bill Cosby guilty of three counts of sexual assault.  This was the same Bill Cosby who played the role of Dr. Cliff Huxtable on The Cosby Show in the 1980s and early 1990s, was formerly known as “America’s Dad,” and was named as the greatest television dad of all time.  That same week, former NBC News anchor Tom Brokaw was accused of making unwanted advances toward a former NBC correspondent.  Then, May kicked off with the announcement that Louisiana’s Secretary of State, Tom Schedler, had resigned amid allegations of sexual harassment by a former employee.  These recent headlines clearly demonstrate the need for effective policies and training at all levels on issues of sexual harassment and discrimination.  If employers ignore training opportunities and the chance to get ahead of the issues, you or your business may be in the next round of headlines.  Be proactive, it’s important.

For more on these recent headlines, see the following links:

By R. Lee Vail, P.E., Ph.D.

On May 17, 2018, the Environmental Protection Agency (“EPA”) released a proposed revision to the Risk Management Program (“RMP”) rule following its reconsideration of the Obama era revisions.  The proposal strips out much of those additions.  According to the Rule Fact Sheet, the reconsidered rule will maintain consistency with the Occupational Safety and Health Administrations’ (“OSHA”) Process Safety Management (“PSM”) regulation, address safety concerns raised in petitions, will reduce compliance cost, and revise compliance dates.  Specifically, the proposed rule will rescind many prior changes including:

  • Requirements for third-party audits;
  • Safer technology and alternatives analysis;
  • Incident investigation root cause analysis; and most other minor changes to keep RMP consistent with PSM;
  • Most of the added requirements related to public information availability; and
  • Supervisor training requirements.

A public hearing is planned for June 14, 2018 and the rule will have a 60 day comment period.  For more information, click here.

Stay tuned as more analysis will follow in the coming weeks.

by Stephen C. Hanemann

Increasingly common in coastal Louisiana – and even more so during a depressed, offshore, oilfield-services market – is the strained relationship between a marine lender and a vessel owner secondary to the lender asserting creditor’s rights against the vessel through a pre-existing security instrument. In one such dispute, lender, South Lafourche Bank & Trust Co. filed an action to enforce a Promissory Note secured by a Preferred Ship Mortgage against Guilbeau Boat Rentals, owner of the marine vessel NOONIE G.[1]

Conforming to the vessel finance protocol, Gilbeau’s authorized representative executed a Preferred Ship Mortgage encumbering the NOONIE G, pledging the vessel as collateral for the loan made by the Bank. A note, also executed by Gilbeau, was issued with and further secured by the Preferred Ship Mortgage. After several months of alleged non-payment on the note, the Bank instituted legal action to collect the debt owed. The Bank filed a Motion for Summary Judgment seeking a declaration that its mortgage was valid under the Ship Mortgage Act. Guilbeau filed a Motion to Dismiss the Bank’s action, alleging that the mortgage was invalid under Louisiana law and therefore not valid under the Act. Guilbeau claimed that the Act did not provide a valid basis for the Court to exercise subject matter jurisdiction over Guilbeau because the Bank’s financing documents were structured in the form of a Louisiana collateral chattel mortgage, and that such instrument was no longer valid for mortgaging immovable property under Louisiana law.

In its analysis, the Court examined the origin of the Ship Mortgage Act and determined that it was passed by Congress so that vessel-mortgage liens could be enforced in federal courts under admiralty jurisdiction. The Court examined the historically-ineffective nature of state court enforcement of ship mortgages. The Court found that state courts were not permitted to affect maritime liens and ship mortgages executed before the Act, and found that those instruments executed before the Act provided unsatisfactory protection of a ship mortgagee’s security interest.

Thus, the Act was designed to stimulate private investment in U.S. shipping and to protect the United States as the principal source of credit for shipping activities. Further, the Act aimed to induce private-investment capital in shipping projects and to create certainty in financing U.S. vessels. In passing the Act, Congress recognized the need for exclusive admiralty court jurisdiction in vessel foreclosure proceedings. And while state law may serve to supplement maritime law, it must yield when it interferes with a determination made under the Act.

In the matter of the NOONIE G, the Court considered the vessel owner’s argument that a mortgage held to be invalid under state law disqualifies the instrument as valid under the Act. The Court found that the Act itself included no requirement that a mortgage on a U.S. vessel be valid under the laws of the particular state to be an enforceable Preferred Ship Mortgage. The Act actually contains six (6) principal requirements, which are conditions precedent for a valid Preferred Ship Mortgage.[2] The Guilbeau Court found that the Bank’s mortgage met each of the six (6) requirements of the Act and was, therefore, a valid ship mortgage. The Court decided that it need not determine whether the mortgage would have been a valid collateral chattel mortgage under Louisiana law. But the Court did recognize the maxim that state law may otherwise be instructive to resolve mortgage disputes when the Act does not provide sufficient guidance.[3]

In conclusion, notwithstanding the validity of a Preferred Ship Mortgage under the laws of a particular state, if a vessel mortgage meets the six (6) basic requirements under the Act, it shall be a valid Preferred Ship Mortgage. Accordingly, a federal court determining the question of enforcement of a valid Preferred Ship Mortgage shall enjoy federal question admiralty jurisdiction over the subject dispute.[4] The Court, consequently, denied Guilbeau’s motion to dismiss for lack of subject-matter jurisdiction, and granted the Bank’s motion seeking a declaration of its mortgage validity.

******************************************

[1] S. Lafourche Bank & Trust Co. v. M/V NOONIE G, No. 16-2880, 2017 WL 2634204 (E.D. La. June 19, 2017).

[2] 46 U.S.C. § 31301 (2017).

[3] The Court determined that it need not address the validity of the collateral mortgages on movable property under state law secondary to Louisiana’s adoption of the Uniform Commercial Code Art. 9. But this commentator feels strongly that the concept of the collateral mortgage, as it pertains to vessels, is alive and well in Louisiana, provided that such document meets the requirements of a UCC Art. 9 security instrument.

[4] 46 U.S.C. § 31325(c) (2017).

by Tod J. Everage

On February 12, 2017, a fishing charter boat, the M/V SUPER STRIKE, carrying several paying customers collided with an offshore service boat, the M/V MISS IDA, during a fishing trip. Claims were asserted by the passengers against both vessels and operators in their respective limitation suits. Recently, dispositive motions were filed against the claims asserted by two passengers – whose only alleged damages were for emotional distress resulting from the collision – claiming they were within the “zone of danger.” See In re TK Boat Rentals, (Civ. No. 14-1545) (E.D. La. March 21, 2018).

According to the U.S. 5th Circuit, the “zone of danger” rule permits a plaintiff to recover for emotional injuries that “result from the witnessing of peril or harm to another if the plaintiff is also threatened with physical harm as a consequence of the defendant’s negligence.” Plaisance v. Texaco, Inc., 966 F.2d 166, 168 (5th Cir. 1992). This rule extends to Jones Act seaman for fear of physical injury to themselves as well. Naquin v. Elevating Boats, LLC, 744 F.3d 927, 938 (5th Cir. 2014). Like many similar issues, the Jones Act extension was borne out of a FELA case from the U.S. Supreme Court. See Consol. Rail Corp. v. Gottshall, 51 US 532, 548 (1994). In order to recover though, the plaintiff must show that he suffered actual injuries.

The U.S. 5th Circuit has not yet recognized recovery under the “zone of danger” rule for passengers under the general maritime law. See Barker v. Hercules Offshore, Inc., 713 F.3d 208, 224 (5th Cir. 2013). In TK Boat Rentals, the district court commented that the “zone of danger” rule was merely a threshold requirement for a plaintiff to recover for emotional injuries. Because the plaintiffs could not prove they suffered any objective injuries, the Court dismissed their claims without having to make the determination of whether the “zone of danger” rule even applied to them.

One plaintiff, Nick Siria, admitted that he did not suffer any personal injuries as a result of the collision and that he had not and did not plan to seek any medical or psychological treatment as a result of the collision. He claimed he had a few “tense” moments and reactions when he returned to the water and later dealt with a car pulling out in front of him, but he did not elaborate any further. The Court found these statements to be too vague and conclusory to demonstrate an emotional injury and dismissed his claims. The second plaintiff, Tracy Edwards, argued he should recover damages because he too was in the “zone of danger” of the collision. Edwards similarly offered a vague affidavit wherein he alleged he suffered emotional and physical injuries, but provided no description of either injury. Looking to his deposition, the Court could only find testimony that Edwards jumped into the river at the time of the collision and that he found the water to be cold. He sought no medical or psychological treatment. Edwards testified that he now has a fear of the water and could not participate in a snorkeling trip because of the collision; he had no problems fishing from a boat though. The Court was not persuaded that Edwards could support his claims with such limited evidence and dismissed his emotional injury claims as well.

The idea of a physical or real manifestation of injuries is a common one among the courts. While a physical injury (in the traditional sense of the word) is not necessarily needed, there must be some evidence that the plaintiff suffered an injury sufficient to be compensated for it. For example, emotional distress may “physically” manifest itself as a psychological disorder or condition – so long as it is capable of objective determination. See, e.g., Haught v. Maceluch, 681 F.2d 291, 299 n.9 (5th Cir. 1982). It seems that a threshold point would be to show that the plaintiff sought some sort of treatment for his complained of “injuries.” Self-serving affidavits and vague testimony will not cut it. Given the fact-intensive question, courts will evaluate these claims on a case-by-case basis.

The U.S. 1st Circuit more recently commented on this issue in Sawyer Brothers, Inc. v. Island Transporter, No. 16-2470 (1st Cir. April 3, 2018). Though the U.S. 5th Circuit hasn’t yet extended the “zone of danger” rule to passengers under the general maritime law, the U.S. 1st Circuit officially took that step. “Given its application to seaman, we see no principled basis for imposing the more restrictive physical impact test upon passengers alleging NIED under the general maritime law.” In so doing, the 1st Circuit joined the 11th Circuit (Chaparro v. Carnival Corp., 693 F.3d 1333, 1338 (11th Cir. 2012) (per curiam) and the 9th Circuit (Stacy v. Rederiet Otto Danielsen, A.S., 609 F.3d 1033, 1035 (9th Cir. 2010), affirmatively allowing such claims. This is not to say that the U.S. 5th Circuit would not join these Circuits, they simply have not yet been forced to pick a side.

The Sawyer Brothers Court dropped a notable footnote in its opinion – the Court would not extend the prohibition of bystander claims set forth in Gottshall to general maritime claims. The Court reasoned that the likelihood of witnessing a death or serious injury of a family member is far greater on the water than on a railroad. In other words, a maritime plaintiff in the 1st Circuit may be allowed to recover if he/she suffered an objective emotional injury as a result of witnessing a death or serious bodily harm to a close family member. Such claims are forbidden under FELA. The 1st Circuit went on to analyze the scope of the “zone of danger” and the provided examples of sufficient physical manifestations of emotional injuries. The plaintiffs in Sawyer Brothers suffered gastrointestinal distress, limb and chest pain, stress-induced shingles, and high fever – all of which were deemed satisfactory to maintain a claim.

While the U.S. 5th and 9th Circuits disagree often on major issues, it remains to be seen if the 5th would disagree with the aforementioned Circuits who have extended “zone of danger” rule to passengers under the general maritime law.

by R. Blake Crohan

The EDLA recently determined that the Insurance Service Office’s (ISO) “Louisiana Changes” endorsement does not expand the scope of Louisiana’s direct action statute. In Menard v. Gibson Applied Technology and Engineering, 2017 WL 6610466 (E.D. La. Dec. 27, 2017), the plaintiff was a senior field technician working offshore in the Gulf of Mexico and was allegedly injured during a personnel basket transfer from a support vessel to a floating, semi-submersible oil-exploration platform. Plaintiff sued several companies along with one of their insurers, ACE American Insurance Company (ACE). ACE filed a motion for summary judgment arguing that the plaintiff could not maintain a direct action against ACE. ACE argued that because its policy was not written or delivered in Louisiana, and neither the accident nor alleged injury occurred in Louisiana, Louisiana’s direct action statute did not apply and the plaintiff could not file a lawsuit directly against ACE.

The parties did not dispute that the policy was not written or delivered in Louisiana – the policy was not issued in Louisiana and the policy was delivered to the insured in Texas. Further, the accident occurred on the Outer Continental Shelf in the Gulf of Mexico. It is well settled in the EDLA that an accident or injury occurring in the Gulf of Mexico or on the Outer Continental Shelf does not occur “within Louisiana” for purposes of Louisiana’s direct action statute. See Signal Oil & Gas Co. v. Barge W-701, 654 F.2d 1164, 1175 (5th Cir. 1981); Joyner v. Ensco Offshore Co., No. 99-3754, 2001 WL 333114, at *2-3 (E.D. La. Apr. 5, 2001).

Nevertheless, the plaintiff argued that the ISO’s “Louisiana Changes” policy endorsement made him a third-party beneficiary and granted him a right to bring a direct action against ACE. The endorsement was entitled “Louisiana Changes – Legal Action Against Us” and was numbered “CG 01 18 12 04.” The court recognized that these ISO endorsements must be attached to all commercial general liability policies covering risk in Louisiana. The endorsement provided: “A person or organization may bring a ‘suit’ against us including, but not limited to a ‘suit’ to recover on an agreed settlement or on a final judgment against an insured. . . .” Plaintiff argued that the endorsement expanded the right of action described in the Louisiana direct action statute; and alternatively, if it is ambiguous, it should be construed against the drafter – ACE. The court held that the endorsement did not make plaintiff a third-party beneficiary because the parties to the contract had no such intent. Rather, the endorsement merely embodied Louisiana’s direct action statute. Therefore, the endorsement did not expand the plaintiff’s right to bring a direct action against ACE, when he could not satisfy the direct action factors themselves. Accordingly, the Court granted ACE’s motion for summary judgment and dismissed the plaintiff’s direct action claims against ACE.

The Eastern District’s decision in Menard reaffirms that all prerequisites to Louisiana’s direct action statute must be satisfied or a plaintiff’s direct action suit will be dismissed. Further, Menard makes clear that insurers including the ISO’s Louisiana Changes – Legal Action Against Us policy endorsement number CG 01 18 12 04 are not contractually expanding their risk to unwanted and unexpected litigation in Louisiana, where the elements of the direct action statute are not met.

By Stephen C. Hanemann

In matters of international trade, a bill of lading often serves as the contract of carriage between a shipper and carrier for transportation of goods. A Himalaya clause is a provision contained in certain bills of lading protecting carrier’s servants, agents, and independent contractors from third-party claims by limiting shipper’s rights to bring suit against carrier only. When courts enforce the Himalaya clause contained in such a bill of lading, carrier’s agents, servants, and independent contractors are generally immune from legal actions brought by the shipper. Global Oil Tools, Inc. v. Expeditors International of Washington, Inc., et al, a recent case out of the Eastern District of Louisiana, illustrates the concept of claim preclusion secondary to Himalaya clause enforcement.

Global Oil Tools, Inc., (“Shipper”) contracted with Expeditors International of Washington, Inc. (“Carrier”) to arrange for the transatlantic shipment of two containers from New Orleans, Louisiana to Constanta, Romania. Carrier booked carriage for the containers aboard the M/V BAVARIA, a ship operated by Hapag-Lloyd. Ports America, a stevedoring company, loaded the containers onto the M/V BAVARIA.

Shipper twice delayed the shipment of goods, but ultimately, due to a miscommunication between Hapag-Lloyd and Ports America, the ship set sail on March 28, 2016 with Shipper’s containers. The containers arrived at Constanta, Romania, on April 23, 2016. On May 27, 2016 Shipper approved Carrier’s issued bill of lading dated March 28, 2016. Shipper had intended to sell its cargo on arrival in Romania, but the sale was never consummated. Shipper filed suit against Carrier, Hapag-Lloyd, and Ports America seeking damages for the allegedly erroneous shipment of goods.

Hapag-Lloyd and Ports America filed motions for summary judgment invoking the application of the Himalaya clause in the bill of lading. While bills of lading are customarily construed against a carrier, the issuing party, contracts for carriage of goods by sea must be interpreted by their terms, consistent with the intent of the parties. In this transaction Carrier’s bill of lading, by inclusion of a clause paramount, incorporated the provisions of COGSA (“Carriage of Goods by Sea Act”). 46 U.S.C. § 30701 note sec., 13. Although COGSA applies of its own force from the time when the goods are loaded on to the ship until the time when they are discharged from the ship, the clause paramount provides that COGSA shall govern before loading as well.

The Himalaya clause in Carrier’s bill of lading stated that Shipper shall make no claim or allegation against any person other than Carrier, including Carrier’s servants, agents, or independent contractors. By approving the bill of lading terms, Shipper entered a covenant not to sue any party involved in the transportation of its containers except for Carrier. Under the simple language of the bill of lading itself, Shipper contractually relinquished any rights it may have had to sue either Hapag-Lloyd or Ports America.

Despite Shipper’s arguments attacking the enforceability of the bill of lading, there exists significant custom under general maritime law in favor of enforcing bills of lading even when executed after the shipment of goods is complete. In holding that the bill of lading and its terms, including the Himalaya clause, applied to Shipper’s shipment, the Court found that the Shipper had sufficient notice of the bill of lading, and that Shipper explicitly approved the bill of lading after the goods arrived in Romania. Following in line with the jurisprudential precedent of the Second Circuit, Fifth Circuit, Ninth Circuit, and U.S. Supreme Court, the Eastern District held that the Himalaya clause in the bill of lading, containing a covenant not to sue Carrier’s subcontractors, was enforceable.  Notwithstanding the inclusion of the Himalaya clause, the Bill of Lading preserved Shipper’s right to sue Carrier, as well as Carrier’s right to sue its subcontractors. Thus, the bill of lading did not violate public policy or any fairness doctrine. Shipper’s covenant not to sue parties other than Carrier precluded Shipper’s right to sue Hapag-Lloyd and Ports America. Thus, Hapag-Lloyd and Ports America were entitled to summary judgment dismissing Shipper’s claims.

by Michael J. O’Brien

In 2016, District Judge Sarah Vance ruled that the heirs of a self-employed commercial fisherman who died while fishing in state territorial waters could recover non-pecuniary damages.  In Re: Marquette Transp., 182 F.Supp. 3d 607 (E.D. La 2016) (citing Yamaha Motor Corp USA v. Calhoun 516 U.S. 1999 (1996)). [Editor’s Note: See blog post on In re Marquette here]. Judge Vance first reiterated that a non-seafarer is someone who is neither a seaman covered by the Jones Act nor a longshore or harbor worker covered by the LHWCA. Based on this reasoning, the In re Marquette decedent was found to be a non-seafarer. Further, his survivors could pursue state law remedies and recover non-pecuniary damages under state law. Two years later, Judge Vance recently revisited Yamaha to address a separate but similar issue:  whether the spouse of an injured non-seafarer can recover damages pursuant to state law claims for loss of society and consortium.

In Van Horn, et al. v. Chubb Ins. Co., et al., No. 1711969, (E.D. La 4/03/18). The injured Plaintiff, Muriel Van Horn, was a race official for sailing regattas on Lake Pontchartrain. On the day in question, Mrs. Van Horn boarded a boat for transport to her official’s position. While traveling on Lake Pontchartrain, the boat operator suddenly accelerated his vessel over the swells of the lake. The boat left the water’s surface, assumed a nearly vertical position in the air, and violently slammed down on the water. As a result, Mrs. Van Horn fractured her right tibial plateau. She required major surgery and ongoing medical care. Mrs. Van Horn and her husband sued the boat operator and others for damages under the General Maritime Law as well as Louisiana Law in supplement to General Maritime Law. Specifically, Mr. Van Horn asserted Louisiana state law claims for loss of consortium and society as a result of his wife’s injuries. Defendants took exception to Plaintiffs’ claims and moved to dismiss all claims for loss of consortium and society.

In support of their claims, the Van Horns argued that claims for loss of consortium and society are available to the spouse of a non-seafarer injured in territorial waters when authorized by state law per Yamaha. Note that Yamaha’s “non-seafarer” and “territorial waters” requirements were met as it was undisputed that Mrs. Van Horn was a non-seafarer injured in Louisiana’s territorial waters. Further, Louisiana law permits the spouse of an injured person to recover damages for loss of consortium and society. As such, the Van Horns alleged that they were well within their rights to maintain these non-pecuniary claims.

Alternatively, the Defendants suggested that Yamaha was limited solely to wrongful death actions.  Defendants cited the Eleventh Circuit’s decision in In Re: Amtrak “Sunset Limited” Train Crash, 121 F.3d 1421 (11th Cir. 1997), where that circuit held that Yamaha does not extend to personal injury actions because state wrongful death actions had a historical basis in admiralty. The Eleventh Circuit’s rationale was that no General Maritime cause of action for wrongful death existed prior to 1970; thus, admiralty courts looked to state law to provide a remedy for the deaths of non-seamen in territorial waters.  By contrast, the General Maritime Law has long recognized a personal injury cause of action, such that admiralty courts did not need to rely on state law for remedies in cases of personal injury.  As such, according to Defendants (and the Eleventh Circuit), Mr. Van Horn should be unable to maintain his loss of consortium and society claims.

While Judge Vance admitted that the Eleventh Circuit’s argument had “some force,” she was not persuaded that the Yamaha Court endorsed separate remedies for personal injuries and wrongful deaths of non-seafarers in territorial waters.  Indeed, given the absence of conflict between state remedies and federal law as well as the “clear trend toward consistent treatment of maritime personal injury and wrongful death actions”, Judge Vance found that Yamaha was applicable to personal injuries within territorial waters. As such, Louisiana laws governing loss of consortium damages may supplement General Maritime Law with regard to personal injuries of non-seafarers in territorial waters. Accordingly, Judge Vance held that Mr. Van Horn claims of loss of consortium and society could proceed.

by Michael J. O’Brien

It is now well settled in the United States Fifth Circuit Court of Appeals that a seaman cannot recover punitive damages on an unseaworthiness claim. McBride v. Estis Well Service, 768 F.3d 382 (5th Cir. 2014) (en banc). Specifically, the U.S. Fifth Circuit has held that punitives are non-pecuniary losses and therefore may not be recovered under the Jones Act or General Maritime Law. However, this opinion is not shared by the Ninth Circuit Court of Appeals.  Indeed, in the matter of Batterton v. Dutra Group, 880 F.3d 1089 (9th Cir. 2018), the Ninth Circuit held that the opposite was true and allowed a seaman to pursue punitive damages on his unseaworthiness claims.

In a prior case, Evich v. Morris, 819 F.2d 256 (9th Cir. 1987), the Ninth Circuit held that punitive damages were available under General Maritime Law for claims of unseaworthiness and for failure to pay maintenance and cure.  Dutra relied on the Fifth Circuit’s line of cases as well as the Supreme Court’s decision in Miles v. Apex Marine Corp. that Evich had been overruled.

The sole question before the Ninth Circuit in Dutra was whether punitive damages were an available remedy for unseaworthiness. While noting that the Fifth Circuit’s leading opinions in McBride are “scholarly and carefully reasoned” the Ninth Circuit found that McBride’s dissenting opinions, which argue that punitive damages are available on unseaworthiness actions, were more persuasive.  In forming its opinion, the Ninth Circuit chose to adopt a broad interpretation of the U.S. Supreme Court’s decisions in Atlantic Sounding Co. v. Townsend, 557 US 404, 129 S.Ct. 2561 (2009).

In Townsend, the Supreme Court held that punitive damages were available to Jones Act seamen for the willful failure to pay maintenance and cure. The Townsend Court held that “historically, punitive damages have been available and awarded in general maritime actions” and “nothing in Miles v. Apex Marine or the Jones Act eliminates that availability.” The Fifth Circuit in McBride interpreted Townsend to only apply to maintenance and cure. The Ninth Circuit in Dutra took a far more expansive interpretation. Relying on the Townsend Court’s notation that punitive damages had historically been available and awarded in general maritime actions, the Ninth Circuit found no persuasive reason to distinguish maintenance and cure actions from unseaworthiness actions with respect to the damages awardable. Accordingly, a seaman may bring a claim for punitive damages if he falls within the jurisdiction of the Ninth Circuit.

This decision has yielded a clear split between the Ninth Circuit and Fifth Circuit on the issue of whether punitive damages are available in an unseaworthy action. Splits in circuit courts of appeals are typically addressed by the United States Supreme Court. As such, it will ultimately fall to the highest court in the land to resolve this compelling issue.

By Tod J. Everage

Recently, the US Fifth Circuit addressed three maritime tenets in the same case: McCorpen defense, unseaworthiness, and regulatory governance. While these issues can be rather straightforward in the typical case, the facts in Thomas v. Hercules Offshore Services, LLC (5th Cir. March 2, 2018) provided an interesting review of each. The specific issues addressed in this case were: (1) whether OSHA regulations are preempted by Coast Guard regulations on an “uninspected” MODU; (2) whether a raised doorsill constituted a negligent or unseaworthy condition by creating a tripping hazard; and (3) whether a McCorpen defense can be made when the employee passed a pre-employment physical.

Plaintiff was a galley hand employed by Hercules on the HERCULES 264, a mobile offshore drilling unit (MODU). She tripped on the raised doorsill leading out of the bathroom, measuring two inches high and approximately three inches wide. Plaintiff sued in the Middle District of Louisiana alleging negligence under the Jones Act, unseaworthiness under general maritime law, and a claim for maintenance and cure benefits. Hercules began paying M&C from the date Plaintiff’s injury was reported. Hercules eventually filed two dispositive motions addressing its liability and asserting a McCorpen defense; the district court granted both motions.

The first issue on appeal was whether the MDLA erred in holding that the HERCULES 264 was an inspected vessel, such that OSHA regs were preempted by the Coast Guard CFR’s. Plaintiff insisted that the MODU was an uninspected vessel. In Chao v. Mallard Bay Drilling, 534 US 235 (2002), the US Supreme Court held that inspected vessels were governed by Coast Guard regulations, which preempt OSHA regulations; on uninspected vessels though, OSHA is not preempted. In 46 USC § 3301(1)-(15), Congress clearly set forth a list of 15 types of vessels that are deemed inspected vessels – MODUs are not on that list. Hercules argued that though the HERCULES 264 was not an inspected vessel under the statute, the Coast Guard had issued a Certificate of Compliance and a Report of Inspection for the HERCULES 264, making it an “inspected” vessel.

Hercules also argued that the Coast Guard regs preempt OSHA regs on the Outer Continental Shelf (OCS), where the HERCULES 264 was drilling. Specifically, the Coast Guard had promulgated regulations respecting the design and equipment standards for MODUs, including the construction of accommodation spaces on those units. See 46 CFR § 108.197. The regs also address design requirements of wash spaces, toilet spaces, and shower spaces. See 46 CFR § 108.205. Citing back to Mallard Bay Drilling, the 5th Circuit was persuaded by the Coast Guard’s promulgation of these regulations as an exercise of the Coast Guard’s authority sufficient to preempt OSHA regulations. Thus, the HERCULES 246 would be treated as an inspected vessel and the Coast Guard regulations would apply.

The second issue was whether the HERCULES 264 was unseaworthy for having raised doorsills, creating tripping hazards. After affirming the district court’s ruling that Plaintiff had failed to present any evidence that the raised doorsill created an unsafe condition, the Court concluded that it also did not make the HERCULES 264 unseaworthy. Notably, the design of the doorsill did not violate any applicable Coast Guard regulation. In fact, certain regulations actually called for higher doorsills than the two-inch one Plaintiff had tripped over. This fact alone was sufficient to dismiss Plaintiff’s negligence and unseaworthy claims.

The last issue addressed Hercules’s successful McCorpen defense. McCorpen is the US 5th Circuit’s longstanding shield against fraudulent claims for Maintenance and Cure. It allows a Jones Act employer to terminate its M&C obligation when the employee has willfully concealed a preexisting medical condition. The three prongs of defense are: (1) the seaman intentionally misrepresented or concealed medical facts; (2) the nondisclosed facts were material to the employer’s decision to hire the seaman; and (3) there is a link between the withheld information and the injury that is the subject of the complaint.

In her hiring process, Plaintiff filled out a medical questionnaire and underwent a pre-employment physical – which she passed with no restrictions. On her forms, she signed that she had never sustained any injury or sought medical attention for a physical problem. She also checked the boxes indicating she had never received treatment for any neck, back, or leg pain, among others. In her deposition though, she admitted to two prior car accidents which required medical treatment for neck, back, and leg pain. This satisfied the first prong of McCorpen.

Next, the 5th Circuit rejected Plaintiff’s argument that passing the pre-employment FCE negated the materiality of her concealment. The 5th Circuit has consistently held that the materiality factor is satisfied if the employer asked specific questions about the relevant pre-existing injury on its application forms. Plaintiff’s ability to perform physical tasks at the time of hiring was irrelevant. As to the third factor, the 5th Circuit found a direct link between the concealed pre-existing injuries and the injuries complained about in this case. A Jones Act employer need not prove that that the prior injuries are the sole causes of the current injuries; nor do the present injuries have to be identical. Here, Hercules showed that Plaintiff had received months of medical treatment for neck, back and leg pain after each of her previous car accidents, and reported pain in those same areas after her fall on the HERCULES 264. Therefore, the 5th Circuit affirmed the district court’s ruling on this issue as well.

Despite this finding, Plaintiff was entitled to keep the more than $44,000 she received in Maintenance benefits prior to the district court’s ruling. Though it may be difficult pre-suit, Jones Act employers should immediate begin investigating their employee’s injury claims with an eye towards supporting a McCorpen defense, if available; especially, if the potential cure exposure is significant.