Admiralty and Maritime

By Stephen C. Hanemann

Practically speaking, a houseboat is still a vessel. But the same is not true for every floating house. And just when we thought that the highest tribunal in the land had a fast hold on its commitment to expanding the definition of a vessel, the Supreme Court issues a holding that not only creates confusion by curtailing its existing definition, but also indicates a new method for determining if a floating structure is, in fact, a vessel.(1)   Owners of residences afloat throughout the United States admiralty jurisdiction, now wonder, “Is my houseboat a vessel?” Houseboat owners, you are not alone! Maritime attorneys and judges alike try to answer the same question secondary to the Supreme Court’s recent contribution to the ever-developing jurisprudence attempting to define a vessel.

The controversial subject of the Supreme Court’s latest vessel status pronouncement arose in 2006 when Fane Lozman docked his 60’x 12’ floating home in a marina owned by the City of Riviera Beach, Florida. Lozman’s abode — equipped with French doors on 3 sides, a sitting room, bedroom, closet, kitchen, and an office — remained at the Riviera Beach Marina until the City, despite the absence of admiralty jurisdiction, filed an in rem suit against the vessel, purchased the home at auction, and destroyed it. The district court and the 11th Circuit Court of Appeals both found admiralty jurisdiction to exist holding that the home was a vessel. The Supreme Court reversed the judgment of the Court of Appeals finding that Fane Lozman owned nothing more than a floating house.
 


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By Scott D. Huffstetler

The Occupational Safety and Health Administration (OSHA) is seeking public comments regarding a proposal for a new online whistleblower complaint form. The form, which would allow whistleblowers to electronically submit whistleblower complaints directly to OSHA, is part of OSHA’s proposal to revise the information collection requirements for handling retaliation complaints filed

By Michael J. O’Brien

The question of whether a Medicare Set Aside (MSA) is required in a Jones Act and/or personal injury case continues to be without a definitive answer. However, in Sippler v. Trans Am Trucking, Inc., 10-CV-03550, the United States District Court for the District of New Jersey ruled in an unpublished opinion that a MSA is not necessary in a personal injury matter.

To recap: the Medicare Secondary Payer Statute (MSP) assigns primary responsibility for medical bills of Medicare recipients to private health plans when a Medicare recipient is also covered by private insurance. These private plans are therefore considered primary under the MSP. Medicare acts as the secondary payer responsible only for paying amounts not covered by the primary plan. The MSP bars Medicare payments where a payment has already been made or can reasonably be expected to be made by a primary plan. (1)

Medicare payments are subject to reimbursement to the appropriate Medicare Trust Fund once the U.S. government receives notice that a third party payment has been or could be made with respect to the same item or service. If an MSP reimbursement is not made, the MSP authorizes the government to bring an action against any entity which is required or responsible to make payment under primary plan and against any other entity that has received payment from that entity. Note that “any entity” includes the parties to a lawsuit and their legal counsel.
 


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By Sean T. McLaughlin

The overriding royalty interest (commonly known as “ORRI”) is prevalent in the oil and gas industry. A party who obtains an ORRI in a lease will receive a set percentage of the production that is obtained from the lease. The lease between the landowner and the lessee usually reserves an ORRI to the landowner as compensation for granting the lease, and the lease also specifically describes how that ORRI will be calculated.

Since the Outer Continental Shelf (“OCS”) off the coast of the United States is owned by the U.S. government, parties wishing to drill for oil and gas on the OCS are required to obtain those leasing rights from the U.S. government. Pursuant to federal regulation, the U.S. government, as lessor, receives a set royalty on all production that is obtained from an OCS lease.

Other parties besides the landowner can obtain ORRI’s. For instance, an investor may contribute funds towards the project in the hopes that the lease will be productive. Also, a geologist may perform surveys of a lease and receive an ORRI as compensation. Or, the lessee may wish to reduce its risk and capital outlay by sub-letting the drilling operation to another entity. In these instances, the ORRI is created by way of an agreement separate and apart from the lease between the landowner and the lessee. Oftentimes those ORRI agreements will state that the ORRI it grants “shall be calculated and paid in the same manner and subject to the same terms and conditions as the landowner’s royalty under the lease.” Ordinarily, that language makes calculating everyone’s (the landowner and any investors) ORRI a matter of simple mathematics.


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By Tod J. Everage

The U.S. Fifth Circuit recently issued its ruling in Beech v. Hercules Drilling Co., No. 11-30415, 2012 WL 3324283 (5th Cir. Aug. 14, 2012), clarifying its standard for finding an employer vicariously liable for the actions of its employees under the Jones Act. In doing so, the Fifth Circuit reversed a ruling by Judge Carl Barbier of the U.S. District Court for the Eastern District of Louisiana which found that the co-employee of a Jones Act plaintiff was acting in the course and scope of his employment when he accidentally shot and killed the plaintiff on the Jones Act employer’s jack-up rig.


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A Kean Miller admiralty and maritime team recently represented AAA Holdings, LLC (AAA), the vessel buyer, against the vessel seller, Marine Worldwide Services, Inc. (MSW) in SPSL OPOBO Liberia, Inc. v. Marine Worldwide Services, Inc., 2011 WL 4509646 (5th Cir. 2011), the U.S. Fifth Circuit affirmed the district court’s ruling that a seller of a

By Lee Vail

On October 15, 2010, the former Bureau of Ocean Energy Management, Regulation and Enforcement (“BOEMRE”) issued new regulations, incorporating in its entirety and making mandatory the implementation of the American Petroleum Institute’s Recommended Practice 75 (API RP 75).  The rule requires development of Safety and Environmental Management Systems (SEMS) plans by “a lessee, the owner or holder of operating rights, a designated operator or agent of the lessee(s), a pipeline right-of-way holder, or a state lessee granted a right-of-use and easement.” 30 C.F.R § 250.105. According to BOEMRE, “the purpose of SEMS is to enhance the safety and cleanliness of operations by reducing the frequency and severity of accidents.” This final rule applies to all Outer Continental Shelf oil and gas and sulphur operations and the facilities under BOEMRE jurisdiction including drilling, production, construction, well workover, well completion, well servicing, and DOI pipeline activities.

Responsibility for developing and implementing a SEMS program lies with the lessee (or owner or holder of an operating right), unless it delegates the responsibility to another (likely the operator). Contractors are not responsible for developing the plan; however if compliant, contractor procedures may be incorporated into the lessee’s/operator’s SEMS plan.
 


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Maritime attachment is a powerful procedure that allows an aggrieved party to garnish any of the defendant’s property located within a particular federal judicial district.  Attachment is especially powerful because the garnished property can be used to ensure satisfaction of a claim, even if the property within the judicial district is not related to the claim that has been filed there.  This right can prove invaluable for securing payment of claims from a foreign defendant who cannot be easily traced down and sued.  This particular species of attachment is unique to admiralty law and is only available to satisfy "admiralty" or "maritime" claims, including contractual obligations that are separable from an non-maritime aspects of a contract. 


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By Michael J. O’Brien

The spoliation of evidence doctrine concerns the intentional destruction of relevant evidence by a party. In the event that relevant evidence is spoiled (i.e., intentionally destroyed), the court may exercise its discretion to impose sanctions on the responsible party. The seriousness of the sanctions that a court may impose depends on the consideration of: (1) the degree of fault of the party who altered or destroyed the evidence; (2) the degree of prejudice suffered by the opposing party; and (3), whether there is a lesser sanction that will avoid substantial unfairness to the opposing party and, where the offending party is seriously at fault, will serve to deter such conduct by others in the future. Exclusion of spoiled evidence is a drastic sanction the courts generally try to avoid. However, the court may issue an instruction that will allow the jury to infer that the party spoiled the evidence because the evidence was unfavorable to the party’s case.


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By R. Lee Vail

In Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc, 617 F.3d 1296 (Fed. Cir. 2010), the Federal Circuit reversed a district court’s summary judgment decision that no patent infringement occurred when a US company made an offer to sell to another US company when the sale negotiations occurred outside of the US.

Transocean filed suit for infringement of patents related to an improved apparatus for conducting offshore drilling. In order to drill for oil and other offshore resources, drilling rigs must lower several components to the seabed including the drill bit, casings, BOB’s, and the drill string. A conventional offshore drilling rig utilizes a derrick with a single top drive and drawworks that can only lower one element at a time in a time consuming process. Transocean patented a specialized derrick to improve the efficiency of lowering the above components. The specialized derrick included “two stations – a main advancing station and an auxiliary advancing station that can each assemble drill strings and lower components to the seabed.” Id. at 1301. This duel-activity rig could significantly decrease the time required to complete a borehole. Id at 1302. Transocean sued Maersk rig for infringement of the specialized derrick patent.
 


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