Admiralty and Maritime

By Stephen C. Hanemann

The Carriage of Goods by Sea Act (“COGSA”) provides that it shall “apply to all contracts for carriage of goods by sea to or from ports of the United States in foreign trade.” In matters involving international trade, contracts for carriage – involving goods shipped to or from the United States via a foreign seaport – are those covered by a bill of lading or any similar document of title. In GIC Services, LLC v. Freightplus (USA), Inc., 120 F. Supp. 3d 572 (E.D. La. July 29, 2015); rev’d in part 866 F. 3d 649 (5th Cir. August 8, 2017), the EDLA recently held that a shipment of cargo from Texas to Nigeria, covered by a bill of lading, constituted a contract of carriage subject to COGSA.

GIC Services, LLC contracted with Freightplus (USA), Inc. to ship a tugboat, the M/V REBEL, to Lagos, Nigeria. Freightplus contracted with Industrial Maritime Carriers to provide a vessel on which the REBEL was to be carried. When GIC learned that the REBEL was actually delivered to Warri, Nigeria rather than Lagos, it instituted an action for damages against Freightplus.

In addition to the myriad of disputed issues arising out of the shipment of the tugboat, the carrier and shipper disputed the carrier’s right under COGSA to limit its liability to the $500 per package limitation. Freightplus maintained that its actions did not cause GIC’s losses, but even if they did, the carriage was governed by COGSA and Freightplus’ liability should be capped at $500, the COGSA per-package-damages limitation.

Freightplus filed a third-party complaint against IMC claiming that IMC was liable for losses and damages sustained by GIC. Although GIC paid Freightplus the full amount for freight, the payment was never remitted to IMC. Consequently, IMC claimed entitlement to a maritime lien against the REBEL, in rem, for unpaid freight charges for its carriage.

Evaluating the COGSA limitation issue first, the district court ruled that the per-package limitation under COGSA is rendered ineffective if the carrier is responsible for an unreasonable deviation from the contract of carriage. Finding that Freightplus did, in fact, cause or contribute to an unreasonable deviation from the contract of carriage, the Court held that Freightplus was not entitled to the COGSA per package limitation, and that it would answer in damages for all losses incurred by GIC due to the transportation errors. The Court considered, among other factors, Freightplus’ failure to deliver the goods at the port named in the Bill of Lading. The Court found that GIC made a prima facie case against Freightplus for committing an unreasonable deviation under COGSA not only because the tugboat was delivered to the wrong destination port, Warri, Nigeria, and not Lagos, but also secondary to Freightplus issuing an erroneous bill of lading.

The district court assessed $1,860,985 in damages against Freightplus in favor of GIC, but also found that IMC was responsible to pay 30% of that amount due to its contributory fault. But the trial court denied IMC’s claim of lien against the REBEL, in rem. The U.S. 5th Circuit affirmed the amount of damages awarded to GIC, as well as the allocation of fault between IMC and Freightplus.  However the 5th Circuit disagreed with the district court’s finding that IMC was not entitled to assert a maritime lien against the REBEL, in rem.

The 5th Circuit set out the well-settled maritime legal principal that that a maritime lien exists in favor of a ship owner over cargo for charges incurred during the course of that cargo’s carriage. Further, the 5th Circuit explained that maritime law permits an action in rem against the cargo itself and, therefore, IMC was entitled to obtain a maritime lien against the REBEL. Despite arguments to the contrary, the lien remained valid because the ocean carrier (IMC) took no action to release any source liable for unpaid freight from liability. The district court indicated that a different standard might apply concerning a carrier’s intent to release a liable source for unpaid freight from liability in the context of an in personam action and an in rem action, but the 5th Circuit disagreed and concluded that the district court erred in barring IMC’s maritime lien against the REBEL.

By Tod J. Everage

For nearly 30 years, district courts within the US 5th Circuit have evaluated whether maritime or state law applies to oil and gas service contracts using the 6-factor test from Davis & Sons, Inc. v. Gulf Oil Corp., 919 F.2d 313 (5th Cir. 1990). The Davis factors focused mainly on the nature of the work being performed and included the following questions: (1) what does the specific work order in effect at the time of the injury provide? (2) what work did the crew assigned under the work order actually do? (3) was the crew assigned to work aboard a vessel in navigable waters? (4) to what extent did the work being done relate to the mission of that vessel? (5) what was the principal work of the injured worker? and (6) what work was the injured worker actually doing at the time of injury? The arduous test has repeatedly been a subject of criticism in the 5th Circuit.

Seizing the opportunity, the 5th Circuit in In re Larry Doiron, Inc., voted to rehear the case en banc to finally rid itself of the Davis-inducing headaches. We previously wrote about this case after its first panel decision here. Upon initial consideration, the 5th Circuit applied Davis to a flow-back services contract, finding it to be a maritime contract. The Circuit Court’s decision fell in line with many other Davis cases that – even after weighing the 6 factors – seemed to primarily turn on the use of a vessel for the work. See here for example. Seeing that factor as gaining primacy, the 5th Circuit simplified the test down to two factors focusing more on the maritime nature of the contract rather than the work itself.

Indeed, the 5th Circuit noted that “most of the prongs of the Davis & Sons test are unnecessary and unduly complicate the determination of whether a contract is maritime.” And, the evaluation of those factors often required the Court to parse through minute factual details to determine what was going on. Take this case for example. The 5th Circuit had never evaluated a flow-back contract before. Thus, to answer the 2nd factor, the Court was forced to analogize flow-back services to casing, wireline, and welding services. The en banc panel found that exercise did nothing more than add “to the many pages dedicated to similar painstaking analyses in the Federal Reporter.” The Court also found the 3rd, 4th, and 6th factors equally irrelevant to finding whether a contract was maritime or not.

Though its own Davis-based jurisprudence had been leading the Court towards a test focused on the necessity of a vessel, the 5th Circuit looked to the U.S. Supreme Court for affirmation. In Norfolk So. Railway Co. v. Kirby, 543 US 14 (2004), the Supreme Court held that a claim for money damages for cargo damaged in a train wreck (on land) was governed by maritime law. Its analysis was based on a finding that the two bills of lading covering the transport of the cargo from Australia to Alabama were maritime contracts. Even though the train crashed on land, the Court found dispositive that the “primary objective” of these bills was “to accomplish the transportation of goods by sea from Australia to the eastern coast of the United States.” It was the nature of the contract that persuaded the Court, which was maritime commerce.

With that guidance in mind, the 5th Circuit set out a “simpler, more straightforward test.” The first question to ask is whether the contract is one to provide services to facilitate the drilling or production of oil and gas on navigable waters? This question will avoid having to delve into the actual services performed and more into the location of those services. If the services are intended to be provided on the water, the next question is whether the contract provides or whether the parties expect that a vessel will play a substantial role in the completion of the contract. If the answer is “yes” to both questions, the contract is maritime. Paring the test from 6 to 2 allows reviewing courts to “focus on the contract and the expectations of the parties.”

Though the other four Davis factors were tossed aside, they were not tossed away. The 5th Circuit left open the possibility of using those factors when dealing with an unclear contract. However, by doing so, it seems inevitable that all parties who face an unfavorable application of state or maritime law will claim the contract is unclear and find ways to evaluate the discarded factors anyway; especially those involving disputed oral work orders. We shall see.

Lawyers are notorious for mucking up the works and over complicating seemingly straightforward issues. Try finding a one-page contract for any services nowadays that isn’t written in 6 point font. The 5th Circuit’s en banc decision is a breath of fresh air. After years of debating why wireline work is not inherently maritime but why casing work is, maritime lawyers now have a much simpler (in theory) test to aid in predicting the applicable law to a contract, which can have serious ramifications depending on the outcome.

By Daniel Stanton

On September 28, 2017, President Trump granted a ten day waiver of the Jones Act for the island of Puerto Rico, a U.S. territory, in an effort to facilitate the island’s recovery from Hurricanes Irma and Maria.  The waiver went into effect immediately and alleviates the Jones Act’s restriction against the transport of passengers and cargo between U.S. ports, which includes Puerto Rico, by foreign flagged, foreign owned, or foreign crewed vessels.   A similar waiver was issued for the states of Texas and Florida in response to Hurricanes Harvey and Irma.

The Merchant Marine Act of 1920, commonly known as the Jones Act, was developed to afford protections to the then fledgling U.S. maritime industry.  In an effort to foster U.S. shipbuilding, shipping, and seafaring, the Jones Act required vessels transporting passengers and goods between U.S. ports to be built in the U.S., to be owned by U.S. individuals or entities, and to be U.S. flagged.  The Jones Act also required all licensed crewmembers serving aboard vessels engaged in trade between U.S. ports to be U.S. citizens.  The Jones Act also established a system of legal rights, remedies, compensation benefits, and procedural requirements for injured American seaman, much like state and federal workers’ compensation schemes.

By Michael J. O’Brien

Yesterday, the U.S. Fifth Circuit Court of Appeals released its decision in USA v. Don Moss, et al., 2017 WL 4273427 (5th Cir. 2017) affirming the Eastern District’s ruling that oilfield contractors cannot be held liable for criminal violations of the Outer Continental Shelf’s Lands Act (OCSLA), 43 U.S.C.§ 1331, et seq.  This is an important decision for all offshore contractors who were concerned about the Government’s intended criminalization of offshore accidents.

Moss stemmed from the November 16, 2012, explosion aboard the West Delta 32 Oil Production Platform located in the Gulf of Mexico. On November 16, 2012, independent contractors of the platform owner were performing repairs and modifications to the platform when the fatal explosion occurred. Three contractors were killed, several others were injured and oil was discharged into the Gulf.

Three years after the explosion, the USA issued criminal indictments against the owner/operator of the platform and the owner’s independent contractors that were working aboard the platform. In addition to charges related to the Clean Water Act, the contractors were also charged with multiple counts of knowing and willfully violating OCSLA’s regulations. At the district court level, the contractor defendants moved to dismiss the OCSLA charges on the grounds that the OCSLA regulations do not apply to oilfield contractors. The District Court agreed and dismissed the OCSLA charges against the contractors. The DOJ filed a timely appeal.

Central to the analysis of the District Court was OCSLA’s definition of the term “You” under the “BSEE Regulations” within the Code of Federal Regulations. 30 CFR §250.105 defines “You” as a “lessee, the owner or holder of operating rights, a designated operator or agent of the lessee(s), pipeline right-a-way holder, or a state lessee granted a right of use easement.” The District Court held that the definition of “You” “does not include oilfield contractors, subcontractors, or service providers.”

The Fifth Circuit agreed with the District Court’s analysis of the definition of “You.” Finding that the definition of “You” is unambiguous and limited in scope, the Moss Court held that the definition excludes contractors. Thus, the relevant OCSLA statues place criminal exposure squarely on the lessees and permitees not only for their own misfeasance, but also for that of the contractors and subcontractors they hire. The Fifth Circuit also noted that when the OCSLA regulations were first proposed, the intent was to hold operators responsible for their contractors’ actions and not to expand regulatory liability to contractors.

The Fifth Circuit was also influenced by the fact that for over a sixty (60) year period, the USA had only sought to enforce civil penalties against owner/operators, and it had never successfully criminally prosecuted a contractor under OCSLA. Indeed, the Federal Government did not regulate or prosecute oil field contractors as opposed to lessees, permitees, or well operators under OCSLA. Significantly, in March 2011, BSEE conducted a public workshop for oil and gas companies and advised in “bold fully capitalized underlined text” that the definition of “You” does not include a contractor. BSEE had also gone on record in 2010 that it “does not regulate contractors; we regulate operators.”

It was only until 2012, after the Deepwater Horizon Spill and a few months before the West Delta 32 explosion, that BSEE issued an “Interim Policy Document” opining that contractors may be liable for civil penalties under OCSLA. This change in policy was not entirely surprising given the view of the offshore industry by the administration at that time. However, the document made no mention of holding contractors criminally liable. As such, the Fifth Circuit determined that the consistency of over sixty (60) years of prior administrative practice in eschewing direct regulatory control over contractors, subcontractors, and individual employees supported the District Court’s conclusion that OCSLA regulations neither apply to, nor do they potentially criminalize, contractor conduct.  The “virtually non-existent past enforcement” of OCSLA regulations against contractors confirms that the regulations were never intended to apply to contractors. Ultimately, the Fifth Circuit held that while it was “novel” for the government to indict contractors for OCSLA violations, no judicial decision has supported such an indictment which was “at odds with a half  century of agency policy.”

Interestingly, the Fifth Circuit also commented on the pending appeal in the matter of Island Operating, Co. v. Jewell, 2016 WL 7436665 (W.D. La. 2016) where the District Court held that contractors could not be subject to a regulatory penalty or fine under OCSLA for Incidents of Non-Compliance (INC). In Moss, the Fifth Circuit indicated that it would not defer to the USA’s new policy position that contractors can be liable for civil and criminal penalties citing the 2011 “about face” that “flatly contradicts” the USA’s earlier interpretation of OCSLA’s regulations. The Fifth Circuit’s decision can easily be read to predict how the court will come down in Island Operating. So, while it is settled within the U.S. Fifth Circuit that the Federal Government (through BSEE) cannot criminalize a violation of Part 250 of the CFR’s (the BSEE Regs), this should not be read to expand that prohibition of criminal enforcement against contractors should other federal statutes, such as the Clean Water Act, be violated.

A tow is pushing a barge up the Mississippi River. This single barge will be connected with others for a longer haul.

By McClain R. Schonekas

The M/V HANNAH C. SETTOON, owned and operated by Settoon Towing, L.L.C. (“Settoon”), was towing two crude oil tank barges on the Mississippi River when an attempted passage around the M/V LINDSAY ANN ERICKSON and its tow went badly resulting in a spill of 750 barrels of crude oil. The spill closed a 70-mile stretch of the river to vessels for 48 hours for cleanup and recovery. The United States Coast Guard named Settoon the strictly liable Responsible Party under the Oil Pollution Act of 1990 (“OPA 90”) (codified at 33 U.S.C. §§ 2701–2762), requiring it to carry out the cleanup and remediation. Settoon subsequently filed a Limitation of Liability proceeding seeking to limit its civil liability to the total value of the vessel and its freight. Marquette Transportation Company, L.L.C. (“Marquette”), owner of the M/V LINDSAY ANN ERICKSON, filed a claim. Settoon filed a counterclaim against Marquette seeking contribution under the OPA, general maritime law, or both.

Following a four-day bench trial on liability, the district court found both parties at fault for the collision, apportioning 35% of fault to Settoon and 65% to Marquette. The district court also found that Settoon, the Responsible Party, was entitled to contribution for purely economic damages from Marquette, in proportion to its liability. Marquette appealed, arguing that OPA 90 does not allow a Responsible Party to obtain contribution from a partially-liable third party, and even if it does, the district court clearly erred in its allocation of fault. A unanimous panel anchored by an experienced admiralty jurist affirmed the district court.

Judge Southwick, writing for the panel, methodically analyzed the applicable provisions of OPA 90 and dissected Marquette’s statutory argument, ultimately disposing of it. Simply stated, Marquette argued that the right to contribution from a jointly negligent party did not arise under OPA 90. Instead, Marquette contended that any contribution it owed was based on general maritime law and therefore limited by the Robins Dry Dock bar to purely economic damages.[1]

Highlighting the relevant section of OPA 90, at 33 U.S.C. §§ 2709,[2] the panel held “that contribution is available under the OPA.” Despite its clever argument, the panel rebuffed Marquette’s invitation to apply general maritime law and the Robins Dry Dock bar to purely economic damages. The Court stated,

We conclude that the most reasonable interpretation of the language of the OPA, as confirmed by the Act’s legislative history, grants to an OPA Responsible Party the right to receive contribution from other entities who were partially at fault for a discharge of oil. Specifically, a Responsible Party may recover from a jointly liable third party any damages it paid to claimants, including those arising out of purely economic losses.[3]

Unsurprisingly, the panel also quickly disposed of Marquette’s argument that the district court clearly erred in its allocation of fault. AFFIRMED.

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

[1] In Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303 (1927), a time-charterer of a steamship brought an action against the Dry Dock Company to recover for loss of use of the steamer whose delivery was delayed by the Dry Dock Company’s negligence. The Court found that the time-charter had no cause of action against the Dry Dock Company for the loss of use of the vessel because, among other reasons, the docking contract between the vessel owner and the Dry Dock Company was not for the time-charterer’s direct benefit.

[2] This Section states, “A person may bring a civil action for contribution against any other person who is liable or potentially liable under this Act or another law. The action shall be brought in accordance with section 2717 of this title.”

[3] In re Settoon Towing, L.L.C., No. 16-30459, 2017 WL 2486018, at *10 (5th Cir. June 9, 2017).

Offshore oil rig drilling platform in the gulf of Thailand 2015.

By Daniel B. Stanton

In the recent U.S. Fifth Circuit case of In re Larry Doiron, Inc., 849 F.3d 602 (5th Cir. 2017), the Court considered an often pivotal question in many offshore personal injury cases: is the contract governing the relationship of the parties a maritime contract?

While this issue is not new to the offshore oil and gas industry, it is often one that is hotly contested because of the impacts that follow the determination that a contract is maritime in nature or not. One of the most significant issues resting on this determination is the enforceability of the indemnity provisions which are often included in service contracts. Under general maritime law, indemnity provisions are generally enforceable; under Louisiana law, indemnity provisions are often unenforceable as a result of the Louisiana Oilfield Indemnity Act (“LOIA”). Thus the determination that a contract is maritime in nature, and therefore governed by general maritime law, can have a significant impact on the relationship between the parties to an offshore personal injury action.

In this case, Plaintiff Peter Savoie, an employee of Specialty Rental Tools & Supply (“STS”), was injured while performing flow-back services on an offshore natural-gas well owned by Apache. Savoie’s services were provided under a master services contract (“MSC”) between Apache and STS which contained a common indemnity provision that required STS to defend and indemnify Apache and its “Company Group” from all claims for bodily injury made by STS employees. Like most service contracts, the MSC operated as a broad blanket agreement that did not describe individual tasks, but contemplated their performance under subsequent oral and written work orders.

Prior to his injury, Savoie attempted several different methods to complete the flow-back process on Apache’s well. After these methods proved unsuccessful, Savoie determined that additional equipment would be needed to perform the operation, including a hydraulic choke manifold, a flow-back iron, and a hydraulic gate valve. Because these pieces of equipment were too heavy to manipulate by hand, a crane barge would be required to move them to and from the wellhead. Apache’s on-site representative made arrangements to procure the necessary equipment. The crane barge was supplied by Larry Doiron, Inc. (“LDI”). Savoie was injured during the process of rigging down the LDI crane. When Savoie made a claim against LDI for his injuries, LDI demanded defense and indemnity from STS under the Apache/STS MSC. STS countered that the MSC was governed by Louisiana law, and as a result of the LOIA, the indemnity provisions of the MSC were rendered ineffective. No party disputed that LDI was part of the Apache “Company Group” to which the indemnity obligation flowed, and ruling on cross-motions for summary judgment, the district court found that the contract was maritime in nature and therefore STS was bound to defend and indemnify LDI. STS appealed the district court’s ruling.

The issue before the Fifth Circuit Court of Appeals was simple: what law applied to the indemnity provision of the MSC, maritime law or Louisiana law? But to answer this question, the Court had to examine not only the MSC, but also the oral work order for the use of LDI’s crane barge. First, the Court looked to the MSC and asked the following question: how have contracts for flow-back services historically been treated by courts? Having not previously considered contracts for flow-back services, the Court compared the work to wireline and casing work. Under prior decisions of the Court, contracts for wireline work had traditionally been found to be non-maritime and contracts for casing had traditionally been found to be maritime. The distinction being that wireline services often do not require the use of a vessel, while casing work often does. The Court then considered the task at issue in the present case, flow-back work, and found that the work could be performed either exclusively from a well platform or could require a vessel. Thus based on historical precedent, it was unclear to the Court whether the contract for flow-back services was a maritime or non-maritime contract.

Because the historical treatment of the contract as maritime or non-maritime was unclear, the Court went on to consider the specific facts surrounding the work that produced the Plaintiff’s injury. The Court evaluated the events in light of six factors that were developed by the Court in Davis & Sons, Inc. v. Gulf Oil Corp., 919 F.2d 313 (5th Cir. 1990):

1) [W]hat does the specific work order in effect at the time of injury provide? 2) [W]hat work did the crew assigned under the work order actually do? 3) [W]as the crew assigned to work aboard a vessel in navigable waters[?] 4) [T]o what extent did the work being done relate to the mission of that vessel? 5) [W]hat was the principal work of the injured worker? and 6) [W]hat work was the injured worker actually doing at the time of injury?

Under this framework, the Court found 4 of the 6 factors supported a conclusion that the contract at issue was maritime in nature.

Under the first factor, neither party could produce any documents describing the work order under which the LDI crane barge was procured, but the Court found that the MSC did have language that contemplated the use of vessels to perform work thereunder. Therefore, because the use of vessels during STS’s work for Apache was contemplated by the parties, imposing a maritime obligation on STS should come as no surprise. Under the second factor, the Court found that because the flow-back operation could not be completed without the use of a vessel; this factor favored maritime status. The fourth and sixth factors likewise counseled towards a maritime contract. The Court found that the mission of the vessel at issue was solely the performance of STS’s flow-back work. Plaintiff was also injured by equipment affixed to the vessel – the crane.

Only the third and fifth factors gravitated towards a finding that the contract was not maritime in nature according to the Court. Under these factors, the Plaintiff was neither assigned to work aboard a vessel in navigation nor employed to perform maritime-related work.

Having worked through the applicable analysis, the Court found that the contract at issue – the specific work order for the performance of back-flow services under the MSC – was a maritime contract. As a result, LDI’s demand for defense and indemnity was valid and enforceable, and the district court properly granted judgment in favor of LDI.

While the contractual issues at play in offshore personal injury cases are often less flavorful than the tort issues, they can have substantial impacts nonetheless. With litigation costs rising and the potential for substantial damage awards, contractual defense and indemnity provisions offer very valuable protections to the parties. And while elsewhere in the world, the distinction between a maritime contract and a non-maritime contract may be inconsequential, in the Louisiana oil patch the determination can result in the nullification of these important and valuable protections. Furthermore, this determination may not be as simple as reading the choice of law provision or evaluating the governing service agreement. Fortunately, the Fifth Circuit continues to provide guidance for navigating the sticky issues that arise on the Outer Continental Shelf where maritime law, state law, vessels, seamen, production platforms, and production personnel all interact.

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By Zoe Vermeulen

In the recent case of Halle v. Galliano Marine Service, L.L.C., No. 16-30558, 2017 WL 1399697 (5th Cir. Apr. 19, 2017) the U.S. Fifth Circuit addressed for the first time whether ROV technicians, who are traditionally Jones Act seamen, qualify as seamen under the Fair Labor Standards Act (“FLSA”). The Court found that the plaintiff, an ROV technician assigned to an ROV support vessel, was not an FLSA seaman. In reaching its decision, the Court reiterated the important difference between a Jones Act seaman and a seaman for purposes of the FLSA.

Under the Jones Act, the term “seaman” is construed broadly to provide protection for a larger group of individuals. Seamen are exempt from the FLSA, so the term is construed narrowly, to ensure that more workers enjoy the benefits granted by the FLSA. The Court was clear that “the definition of ‘seaman’ in the Jones Act is not equivalent to that in the FLSA.”

The FLSA requires employers to provide overtime pay to any employee who works more than forty (40) hours in a workweek, unless the employee is subject to an exemption. Again, “seamen” are exempt from the FLSA’s overtime requirements. Under the FLSA, an employee is a “seaman” if: (1) the employee is subject to the authority, direction, and control of the master; and (2) the employee’s service is primarily offered to aid the vessel as a means of transportation, provided that the employee does not perform a substantial amount of different work. These criteria are very fact specific.

In Halle, there was a dispute as to whether the plaintiff was subject to the authority, direction, and control of the master of the ROV support vessel. Thus, the first factor was not dispositive. In analyzing the second factor, the Court found that the ROV technician plaintiff lived on the ROV support vessel and operated the ROV, which was attached to the support vessel, to perform industrial tasks in the water. He occasionally communicated GPS coordinates to the captain of the support vessel, but did not otherwise help ensure that the support vessel navigated safely or in any particular manner from point A to point B. The plaintiff did not control the vessel’s path to its intended target, steer, anchor, make any navigational decisions, or take any navigational actions. The plaintiff, and other ROV technicians, could not even see if there were navigational issues affecting the support vessel. Under these facts, the Court found that the plaintiff’s service was not “primarily offered to aid the vessel as a means of transportation.” As the plaintiff – a Jones Act seaman – could not meet the second prong of the test, he could not be a seaman for FLSA purposes.

This case provides valuable guidance to maritime employers in classifying employees for FLSA purposes. Employers should never assume that because a worker qualifies as a Jones Act seaman, he or she will automatically be exempt from the overtime requirements of the FLSA. While both the Jones Act and the FLSA employ the term “seaman,” Halle underscores the different tests for seaman status under these Acts. Litigants are cautioned not to borrow an analysis of this term under one Act for use in the other.

Misclassifying an employee as “exempt” can expose employers to back pay, liquidated damages, and attorneys’ fees. And with a recent increase in FLSA claims, correct employee classification is as critical now as ever.

Close-up close-up shots of the tracks

By Michael J. O’Brien

In the recent case of BNSF Railway Co. v. Tyrrell, the U.S. Supreme Court rejected a blatant forum shopping attempt by two railway employees and limited future lawsuits against out-of-state railroads. In BNSF Railway Co., Robert Nelson of North Dakota and Kelli Tyrrell of South Dakota filed separate suits against BNSF Railroad in a Montana State Court pursuant to the Federal Employer’s Liability Act (“FELA”) 45 U.S.C. §51 et sec. which makes railroads liable for on-the-job injuries to their employees. Nelson allegedly injured his knee while working for BNSF in the State of Washington. Tyrrell claimed that her husband died of cancer he contracted after being exposed to chemicals while working for BNSF in South Dakota, Minnesota, and Iowa. Despite the fact that neither Plaintiff resided in Montana, nor sustained any injuries in Montana, they filed their lawsuit against BNSF in that state based upon BNSF’s alleged contacts in Montana.

BNSF was incorporated in Delaware and it maintained its principle place of business in Texas. It operates railroad lines in 28 states, however, it maintained less than 5% of its workforce and approximately 6% of its total track mileage in Montana. Nelson and Tyrell claimed that these contacts with Montana were sufficient for them to sue the railroad in Montana. BNSF disagreed.

After Tyrrell and Nelson filed suit, BNSF moved to dismiss both of their lawsuits for lack of personal jurisdiction. The Montana Supreme Court ultimately denied the motion allowed these cases to move forward holding that Montana Courts could exercise general personal jurisdiction over BNSF because §56 of FELA authorizes State Courts to exercise personal jurisdiction over railroads “doing business” in the state. The Montana Supreme Court further observed that Montana law provides for the exercise of general jurisdiction over “all persons found within the state.” Thus, because of BNSF’s many employees and miles of track in Montana, the Montana Supreme Court concluded that BNSF was both “doing business” and “found within” the state such that both FELA and Montana law authorized the exercise of personal jurisdiction.

The U.S. Supreme Court granted certiorari to resolve whether §56 of FELA authorizes State courts to exercise personal jurisdiction over railroads that do business in states but are neither incorporated, nor headquartered in that state. The Supreme Court also examined whether the Montana Court’s exercise of personal jurisdiction in these cases comported with constitutional due process.

A solid majority of the Court rejected the two theories upon which Nelson and Tyrrell had relied on to justify jurisdiction over BNSF in Montana. First, the Court held that FELA does not itself create a special rule authorizing jurisdiction over railroads simply because they happen to be doing business in a particular place. Next, the Court ordered that an exercise of jurisdiction over BNSF must still be consistent with due process. Thus, the Montana rule that allowed Courts in the state to exercise jurisdiction over “persons found” in Montana did not help the Plaintiffs as it violated due process.

The Supreme Court repeatedly mentioned that BNSF was not incorporated in Montana, and it did not maintain its principle place of business in that state. Further, BNSF was not so heavily engaged in activity in Montana “as to render it essentially at home” in that state. The Supreme Court noted that a corporation that operates in many places can “scarcely be deemed at home in all of them.” Thus, the business that BNSF did in Montana may be sufficient to subject the railroad to specific personal jurisdiction in maritime for claims related to the business activity in Montana. However, simply having in state business did not suffice to permit the assertion of general jurisdiction over claims like Nelson’s and Tyrrell’s that were completely unrelated to any activity occurring in Montana.

Last, it is important to note that this holding is also relevant in maritime cases. Indeed, since FELA case law is applicable to Jones Act cases, BNSF Railway Co.’s holding will, by extension, also limit forum shopping by Jones Act seaman under the same reasoning.

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.