The U.S. 5th Circuit has finally weighed in on the application of the collateral source rule to Longshore benefits. Back in June, we discussed the latest case out of the EDLA discussing this issue. On November 17, 2016, the U.S. Fifth Circuit came to the same conclusion: a plaintiff may only recover the amount actually paid by the LHWCA insurer, not the amount billed. This decision finally settles the dispute that arises in nearly every Longshore case where a Plaintiff demands reimbursement for all medical expenses billed by the provider, including all amounts written off. In more serious cases, the difference can be substantial.

In this case, the plaintiff was injured on the M/V THUNDERSTAR, a 65-foot crewboat owned and operated by Bozovic Marine. Plaintiff was a 70-year-old contract consultant. When Plaintiff realized he couldn’t board the platform from the THUNDERSTAR without a liftboat present, he instructed the captain to bring him back to Venice. During the voyage in rough seas, Plaintiff fell to the floor in the wheelhouse. He suffered back injuries. The medical bills for Plaintiff’s treatment totaled $186,080, but the LHWCA carrier paid only $57,385 in satisfaction of those bills. After a bench trial to Judge Minaldi in the WDLA, the Court ruled that Bozovic Marine was 90% negligent. Plaintiff was awarded $984,395. Judge Minaldi ruled that the collateral source rule barred any discount of the medical expenses that the Longshore carrier was billed, but not required to pay; so, Plaintiff received the full $186,080 in medical expenses billed.

The collateral source rule bars a tortfeasor from reducing his liability by the amount plaintiff recovers from independent sources. Davis v. Odeco, Inc., 18 F.3d 1237, 1243 (5th Cir. 1994). In its simplest form, the rule asks whether the tortfeasor contributed to, or was otherwise responsible for, a particular income source. If not, the income is considered “independent of (or collateral to) the tortfeasor”, and the tortfeasor may not reduce its damages by that amount. Davis, 18 F.3d at 1243. Without the rule, a third party income source would create a windfall for the tortfeasor. In Davis, the 5th Circuit stated, “the current application of the collateral source rule thus turns on the character of the benefits received, as well as the source of those benefits.” Davis, 18 F.3d at 1244. Because the Longshore comp benefits were provided by Plaintiff’s employer and not Bozovic Marine, the collateral source rule applies here, and Bozovic Marine is liable for the medical expenses paid on behalf of the Plaintiff.

The next issue then was whether Bozovic Marine was liable for the amount billed by the medical provider or the amount paid by the Longshore carrier. Plaintiff argued that the Bozovic Marine should not benefit from the Plaintiff’s employer’s LHWCA carrier negotiating a reduced rate on the medical bills and therefore, under the collateral source rule, should have to pay the Plaintiff the full billed amount of the medical bills. Bozovic Marine argued that the Plaintiff was not out of pocket any money for the medical bills, so he should only get to recover the amount of the bills actually paid on his behalf.

The 5th Circuit noted that there was no direct authority regarding the treatment of written-off LHWCA medical expenses in a maritime-tort context, so it looked to persuasive authority on the issue. For example, the Court commented that Mississippi law allows a plaintiff to recover write-offs, but Texas law does not. In Louisiana, a plaintiff may recover a write-off if the plaintiff provided consideration for the benefit or suffered a diminution in patrimony. See Bozeman v. State, 879 So.2d 692, 705-6 (La. 2004). Further, the 5th Circuit had previously ruled that a seaman could only recover the amount paid in cure benefits owed, not the amount billed. See Manderson v. Chet Morrison Contractors, Inc., 666 F.3d 373, 381 (5th Cir. 2012).

The Court found the rationale behind Manderson persuasive and most applicable here, stating: “like maritime cure, LHWCA creates a no-fault basis for paying a longshoreman’s medical expenses. 33 U.S.C. § 904(b) … When a third-party tortfeasor is responsible for the employee’s injury, cure and LHWCA insurance function in the same manner: the employer (or its insurer) has an immediate duty to pay medical expenses even though it is not at fault.” The Court thus concluded that “LHWCA medical-expense payments are collateral to a third-party tortfeasor only to the extent paid; in other words, under those circumstances, plaintiff may not recover for expenses billed, but not paid.” Applying this reasoning, the 5th Circuit reduced Plaintiff’s award to compensate only for the $57,385 paid by LHWCA, which resulted in a savings of nearly $130,000 for Bozovic Marine.

There were other interesting issues on appeal in this case worth reading in the opinion, but the collateral source rule’s application to LHWCA benefits will have the most lasting and meaningful effect on Longshore and maritime-tort cases going forward.

As fundamental as the concept of jurisdiction might be, it is often assumed to exist and therefore glazed over in a plaintiff’s petition or a defendant’s notice of removal. But jurisdiction is one of the foundational elements upon which our judicial systems, both state and federal, are built. Thus, it is a necessary element of every case that has ever been – whether it is addressed in a written opinion or not. Often bound up with the issue of jurisdiction is the thornier issue of the substantive law applicable to a case. And, the law that prevails may be the difference between the life and death of a case. Recently, in the case of Frickey v. Shell Pipeline Company, L.P., No. 15-4884 (Nov. 14, 2016), the Eastern District of Louisiana reminded us of the importance of a court’s jurisdictional basis and law that accompanies that determination.

Plaintiff in this case was a commercial crabber who spent much of his life plying the waters of South Louisiana for sport and trade. On the night of March 21, 2014, Plaintiff was piloting his 16-foot mud boat on a frogging outing with a friend. At approximately 8:30 p.m. that evening while traveling through the Avondale Ring Canal (aka “Marcello’s Canal”) in search of his quarry, Plaintiff’s boat struck a submerged pipeline belonging to Shell. The pipeline was marked by an unlit, but large and reflective sign warning of the presence of a submerged petroleum pipeline. Plaintiff was allegedly injured during the allision and subsequently filed suit on September 30, 2015, in the EDLA invoking the court’s admiralty and diversity jurisdiction.

The issue of the court’s jurisdiction came into question on a motion for summary judgment filed by Shell seeking the dismissal of Plaintiff’s suit for lack of jurisdiction. And at first glance, admiralty jurisdiction may have seemed obvious: a fisherman, hurt on a vessel while traveling over water. But the question of the existence of admiralty jurisdiction is not so easily determined. Starting at the beginning, the court explained that its admiralty jurisdiction flows forth from Article III of the U.S. Constitution in which federal district courts were vested with jurisdiction over cases of “admiralty or maritime jurisdiction.” And quoting the U.S. Supreme Court, the primary purpose of federal admiralty jurisdiction is to “protect commercial shipping.” With this goal in mind, a two-part test for determining whether admiralty jurisdiction exists over a tort action has been developed, but in its evaluation of Plaintiff’s claim, the district court did not make it past the first requirement: the tort must occur on navigable waters or be caused by a vessel on navigable waters.

Considering the Avondale Ring Canal, the court found the canal to not be a navigable waterway. To be a navigable waterway, the waterway must be used or must be capable of being used in its ordinary condition as a “highway for commerce.” An artificial canal can be a navigable water body if it connects ports and places in different states as part of a “highway of commerce.” But the courts of the Eastern District have previously found that drainage ditches that provide outlets for rainwater are not navigable waterways. As can be seen in the repetitive use of the word by the court, navigability is “inexorably” tied to being susceptible to use for commercial purposes. The evidence produced in this case demonstrated that the Avondale Ring Canal was a manmade drainage canal on private property. It had been constructed for the sole purpose of water drainage and flood protection. And of pivotal importance, as a result of its shallow depth and debris littered bed, it had no capacity to support commerce. Plaintiff produced no evidence that the Avondale Ring Canal had ever been used to support commerce or had ever been determined to be a “navigable” waterway by any government entity. Plaintiff simply failed to produce any evidence that would support the contention that the Avondale Ring Canal did support or was susceptible of supporting commerce. Because the Plaintiff’s alleged injury did not occur on a navigable waterway, the court did not possess admiralty jurisdiction and could not apply substantive maritime law.

In addition to admiralty jurisdiction, Plaintiff also invoked the court’s diversity jurisdiction because all of the parties were citizens of different states. But with diversity jurisdiction comes the application of the host state’s prescriptive periods. And in Louisiana, torts have a one-year prescriptive period as opposed to the three-year prescriptive period for maritime personal injury actions. Plaintiff’s suit was filed more than a year after his alleged injury. Therefore, the suit was time barred under Louisiana law, and the court, after finding that admiralty jurisdiction did not exist and therefore maritime law did not apply, dismissed Plaintiff’s case in its entirety.

As the plaintiff in this case learned, jurisdiction is a pivotally-important element of any case. Not only can it determine which court can hear a plaintiff’s case, but in some instances it may also dictate the law applicable to the plaintiff’s claims. And, especially in cases of personal injuries occurring on the often shallow waters of South Louisiana, it may determine whether a plaintiff has a case at all.

In November 2016, the Eastern District of Louisiana again confronted the “marshland” involved in categorizing a contract as maritime or non-maritime. In In re: Crescent Energy Services, LLC, No. 15-819 (E.D. La. Nov. 7, 2016), the court held that a contract to plug and abandon a well in Louisiana waters was maritime in nature.

Crescent Energy Services, LLC brought a limitation action as owner of the spud barge S/B OB 808 after its employee, a crewmember of the OB 808, was severely injured in a well blowout. Crescent had been hired by Carrizo Oil & Gas, Inc. to plug and abandon one of Carrizo’s offshore wells, located in Louisiana state waters. The contract between the parties included a standard contractual indemnity provision that, if enforceable, required Crescent to indemnify Carrizo for the crewmember’s injuries.

Crescent and Carrizo brought cross motions for summary judgment asking the court to decide whether the contract between them was maritime or non-maritime. If the contract was maritime, the indemnity provisions therein would be valid and enforceable. But, if the contract was non-maritime and instead subject to Louisiana law, the Louisiana Oilfield Anti-Indemnity Act would void the indemnity obligations.

Crescent and Carrizo were parties to a Master Service Agreement governing all dealings between them. Additionally, the plug and abandon work being performed at the time of the injury was done pursuant to a Turnkey Bid. The Turnkey Bid discussed the specifics of the plug and abandon work and listed the equipment to be used in the job, which included a quarter barge, tug, and cargo barge. To determine whether a contract is maritime, the U.S. Fifth Circuit in Davis & Sons v. Gulf Oil Corp., 919 F.2d 313 (5th Cir. 1990) instructed courts to look to the historical jurisprudential treatment of similar contracts and conduct a fact-specific inquiry. That inquiry considers six factors: (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 the 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?

In deciding that the contract was maritime, the court focused on the historical jurisprudence of similar contracts. It acknowledged that both parties had authority in their favor, but ultimately determined that because the plug and abandon work required the use of a vessel and was performed at all times on a vessel, the case law favored a maritime finding. The court distinguished a Fifth Circuit case holding that a contract for wireline services (which were also part of the plug and abandon operations here) was non-maritime by noting that the wireline services contract “did not address in any way the use of a ship.”

Conversely and importantly, here, the contract called for three vessels, including a vessel specifically designed for plug and abandon work to “perform the function for which that vessel was designed,” and it would not have been possible to plug and abandon the well without the use of a vessel. In doing so, the Court reiterated that the inquiry will turn more on the necessity of vessel for the work than the type of work being performed. In other words, even though plug and abandon work is not itself maritime by nature, the fact that Crescent had to do its work from a vessel made the contract maritime. Accordingly, the court found that the work done by the crew of the OB 808 was inextricably intertwined with maritime activities and the contractual indemnification of Carrizo was enforceable

The court’s reasoning was clearly heavily influenced by the contracted for, and actual use and necessity of vessels to perform the plug and abandon work. This result is consistent with existing case law and provides future litigants further guidance that contracts requiring the use of a vessel will most likely be considered maritime. See also Davis & Sons, Inc., supra; Clay v. ENSCO Offshore Co., No. 14-2508, 2015 WL 7296787 (E.D. La. Nov. 18, 2015). However, given the long and sometime brackish history in this area of law and the valuable nature of indemnity coverage, we do not expect this to be the last fight over the maritime nature of an oilfield contract.

On November 18, 2016, the Occupational Safety and Health Administration (“OSHA”) issued a final rule “revising and updating its general industry standards on walking-working surfaces to prevent and reduce workplace slips, trips, and falls, as well as other injuries and fatalities associated with walking-working surface hazards.” 81 Fed. Reg. 82494 (Nov. 18, 2016) .  Regulations related to Walking-Working Surfaces are located at 29 C.F.R. 1010 Subpart D. Included in the rule are requirement relating to floors, ladders, stairways, runways, dockboards, roofs, scaffolds, and elevated work surfaces and walkways. The new rule incudes:

  • new design, performance, and use requirements for fall protection system to reflect advances in technology and industry best practices;
  • added flexibility to utilize personal protection systems (e.g., fall arrest, travel restraints, and work positioning systems) in lieu of guardrails;
  • harmonization of general industry and construction system and equipment requirements;
  • incorporation of provisions from recently adopted standards, included but not limited to requirements from Appendix C (Mandatory) of the Powered Platforms for Building Maintenance; and
  • incorporation of requirements from national consensus standards (e.g., Workplace Walking/Working Surfaces and Their Access, ANSI/ASEE A1264.1-2007, Personal Fall Systems, ANSI/ASSE Z359.1-2007, and Window Cleaning, ANSI/IWCA 1-14.1-2001.

This rule generally becomes effective and enforceable on January 17, 2017. Several of the requirements are not effective until a later date.

In the wake of yesterday’s news that a Texas federal judge issued a nationwide injunction halting the FLSA overtime regulations, scheduled to become effective December 1, 2016, many employers are asking “what now.”  The answer will continue to develop.  For now, though, here are some initial things to keep in mind:

  1. Realize that the regulations scheduled to go into effect on December 1, 2016 are now halted nationwide.  This means that for the time being, the minimum salary threshold remains at $23,660 a year ($455 per week).
  2. Realize that this decision is not final and is subject to change.  The federal court only issued a preliminary injunction.  The next procedural step (if the parties choose to continue) is for discovery to be conducted, a trial on the merits, and a decision on whether a permanent injunction should be issued.  It is possible the judge could change his decision at the permanent injunction stage of the case.  Regardless of the outcome at that stage, appeals will be available to the U.S. Court of Appeals for the Fifth Circuit and the U.S. Supreme Court.  Although this scenario is less likely in the Fifth Circuit, with the passing of Justice Antonin Scalia, it is possible that the U.S. Supreme Court could ultimately rule in the U.S. Department of Labor’s favor.  Of course, that assumes the Department continues to pursue this matter and continues to pursue official enactment of the regulations.  Recall that the Department is an executive agency, which after January, will be under President-Elect Donald Trump.  Given the differences between President Barack Obama and President Trump’s labor initiatives, it is possible that President-Elect Trump will instruct the Department not to continue pursuing this case.  There are many variables and all of these scenarios will take months, or even years, to play out.  The point is the case needs to be monitored and employers need to be prepared for the different scenarios.
  3. Realize that not all the changes that may have been made in response to the new regulations related to the salary basis test.  Many employers used the change in the regulations to address other components of the FLSA that were not affected by the ruling, such as classifications.  To the extent changes like this were made, they were not altered by the ruling.

As is easily seen, the outcome of this saga remains to be seen.  For now, employers can be thankful this Thanksgiving for a reprieve from what was about to become a major change in the FLSA.

A federal district judge in Texas has entered a nationwide injunction which prevents the U.S. Department of Labor’s new FLSA minimum salary level rule from going into effect on December 1, 2016.  Prior to today, the DOL’s new rule would have nearly doubled the minimum weekly salary required in order to be exempt under the so-called white collar exemptions (the executive, administrative and professional employee exemptions).

The court found that the Department of Labor exceeded its authority when it issued the final rule in May 2016.   The court also found that the Department of Labor ignored Congress’s intent by raising the minimum salary level such that it supplants the duties test.  The court’s preliminary injunction ruling will preserve the status quo until the court makes additional determinations related to the Department of Labor’s authority and the final rule’s validity.

Until further notice, the minimum salary threshold remains at $23,660 a year ($455 per week).  Stay tuned for further analysis.

On Friday, November 18, 2016, the IRS announced an automatic extension of the Affordable Care Act deadlines for distributing the 1094-B/1095-B and 1094-C/1095-C forms to employees. This relief gives applicable employers an additional 30 days (from January 31, 2017 to March 2, 2017) to deliver these forms to employees. This relief only applies for the 2016 reporting year.

The IRS did not change the deadlines for filing the Forms 1094 and 1095 with the agency. The deadline for filing these forms by mail is February 28, 2017. Employers filing electronically have until March 31, 2017.

Similar to 2015, the IRS also announced it would not penalize employers for incorrect or incomplete forms for 2016 as long as they make good faith efforts to comply. This relief is not available for covered employers who fail to timely file the forms. Although there is much talk about repealing and replacing the ACA once the new administration takes office, until Congress acts (which likely won’t happen until after the 2016 reporting deadlines have passed) we recommend that employers comply with the current requirements to avoid unnecessary penalties or fines.

Stay tuned for future anticipated changes!

Could a decision on the challenge to the U.S. Department of Labor’s new salary basis rule be coming soon? Employment Law360, a national, daily legal news service, reported this morning that a Texas Federal Judge would decide by Tuesday, November 22, whether to stop the new overtime rules from taking effect on December 1.

The Judge is hearing a suit by several states and business groups who are collectively trying to stop the new rule that raises the minimum salary to qualify for the exemption from the Federal minimum wage and overtime requirements. Stay tuned.

Record breaking voter turn out is expected on Tuesday.   Employers should be aware that neither federal nor Louisiana law requires an employer to give an employee time off to vote, but Louisiana law does forbid employers from discriminating against an employee based on his or her political beliefs.  It also prohibits all employers from attempting to control the votes of their employees.

Louisiana employers with 20 or more employees cannot  prevent their employees from “participating in politics.”  Thus, employers should treat requests for time off to vote the same as other requests for time off. With respect to exempt employees who are granted a couple of hours off to vote during the day, the federal Fair Labor Standards Act does not allow employers to dock their salary for such partial day absences even if they have exhausted their accrued available vacation or other paid time off.

Recent cases have highlighted the importance of seller contractually protecting and retaining ownership over communications that, pre-closing, are subject to the attorney-client privilege. The absence of such language in a merger or asset/stock purchase agreement can lead a court to conclude that such communications are owned by the buyer/surviving corporation.

Such was the result in Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLP, 80 A.3d 155 (Del. Ch. 2013), where more than a year post-closing, after the buyer sued the seller for allegedly fraudulently inducing buyer to enter into the merger, the seller asserted ownership over pre-merger privileged communications maintained on the surviving corporation’s computer system.

The court ruled in the buyer’s favor and held that the surviving corporation owns and controls such communications, noting that the seller had not been proactive in either protecting the communications from seller’s access, or contractually preserving ownership. The court specifically noted that under Delaware law, all property, rights, privileges, etc. become property of the surviving corporation (the same is true under Louisiana law, LSA-R.S. 12:1-1107); a contrary result can only be achieved by contractual agreement.

Accordingly, a clause addressing ownership and control over such communications, and proactively protecting them from disclosure, is critical.