Tulane Maritime Law Journal Updates

Last week USDC Judge Barbier issued the first set of rulings in the Deepwater Horizon Case.  Judge Barbier dismissed a group of the claims against BP.  The claims dismissed were mostly comprised of environmental groups who were not seeking monetary damages.  

The journal will be following the case and frequently posting tidbits as rulings come down. 

TMLJ Alumni, Ian Taylor, with Lewis, Kullman, Sterbcow, & Abramson, has been working on this case!  This is an exciting opportunity, and the journal is proud to see their alumni doing great things! 

A railroad employee filed a negligence action against his employer under FELA.  The employee was injured while engaging in switching the rail carts, and claimed 1) his employer required him to utilize unsafe switching equipment, and 2) his employer failed to properly train him to use the equipment.  

In a 5-4 decision, the Supreme Court of the United states held: the appropriate standard for establishing liability under FELA is whether or not the railroad's negligence played a party in bringing about the injury, not the common-law proximate cause standard for negligence. 

For the full opinion, please visit: http://www.supremecourt.gov/opinions/10pdf/10-235.pdf 

The Carnival Splendor (a 952-foot Panamanian-flagged ship carrying 3,299 guests and 1,167 crew members) is currently stranded 130 miles of the coast of Mexico after losing power.

The vessel lost power at approximately 6:00 a.m. Monday, November 8, 2010, following a fire in its aft engine room.  The blaze was extinguished without injury to passengers or crew. However, engineers have not been able to restore power to the ship, which has been operating on auxiliary generators since the fire.  Several key hotel systems, including air conditioning, hot food service and telephones remain out of service.

At the request of the U.S. Coast Guard in San Diego, the Navy diverted the U.S.S. Ronald Reagan from training maneuvers to assist the Carnival Splendor.  Earlier Tuesday, the aircraft carrier was receiving by airlift thirty-five pallets (containing 10,000 pounds of food and supplies) for the cruise ship, with which it is scheduled to rendezvous Tuesday afternoon.

Additionally, tugboats are en route to the ship to tow the vessel the 130 miles to Ensenada, Mexico and are expected to arrive sometime Tuesday.

According to a letter Thursday from Fred Bartlit, Jr., the lead investigator for a federal probe of the Gulf oil disaster, BP and Halliburton knew of potential flaws in the cement slurry used to reinforce the oil well below the Deepwater Horizon rig before it exploded on April 20, 2010. 

The letter, to the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, said that tests in February on a cement slurry similar to what was used on the Macondo well showed instability -- and that both companies had the data.  The news caused Halliburton stock to drop in value by almost 8 percent by the end of trading Thursday, to $31.68 a share. 

Bartlit emphasized in his letter that cementing failures are a known hazard in the oil industry, with specific tests such as a "negative pressure test" and "cement evaluation logs" designed to identify cementing problems. However, he wrote, workers at BP and possibly the company that operated the Deepwater Horizon rig, Transocean, "misinterpreted or chose not to conduct such tests at the Macondo well."

A commission hearing on the disaster is scheduled for November 9, but Bartlit's letter said he was notifying the commission about the cement slurry issue immediately in order to "facilitate [its] consideration of their implications for offshore drilling safety."

Russia's state-run United Shipbuilding Corporation (USC) may sell 20 to 30 percent of its shares in an initial public offering in 2013, according to USC President Roman Trotsenko.  Russia accounts for approximately only 0.4 percent of global civilian shipbuilding and slightly over three percent in military shipbuilding, and USC is currently engaged in exclusively military production.  However, USC has announced plans to move towards added civilian output in the future in an attempt to create a Russian corporation analogous to the American shipbuilder Northrup Grumman.  In addition to its potential IPO, USC is currently in the process of valuing the shipbuilding assets of United Industrial Corporation with an eye towards purchasing those assets.

A Somali pirate who pleaded guilty to charges that he and three other men hijacked a U.S.-flagged vessel off the coast of Somalia and took hostage its captain.  That man, Abduwali Abdukhadir, will be sentenced Today, Tuesday, October 19, 2010. 

Prosecutors say that Muse acted as the ringleader when he and this three cohorts seized the U.S.-flagged Maersk Alabama by force about 350 miles off the coast of Somalia on April 8, 2009.  Once on board, the armed men demanded the ship be stopped, then abducted and held the captain of the ship, Richard Phillips, hostage on a lifeboat for four days. The USS Bainbridge, a U.S. Navy destroyer, came to the assistance of the vessel, and in radio communications, the pirates threatened to kill Phillips if they were not guaranteed safe passage away from the scene, authorities have said.  Four days after the hijacking began, Muse boarded the Bainbridge and demanded safe passage for himself and the others in exchange for Phillips' release, according to a criminal complaint.  According to authorities, Muse was then taken into custody, and while he was away from the lifeboat, Navy SEALs shot and killed the three remaining pirates.

During his plea on May 18, 2009, Muse apologized for his actions and blamed the incident on the Somali government.  "What we did was wrong. I am very sorry for all of this," Muse said. "All of this happened because of the government in Somalia," he added.  In addition to the Maersk Alabama, Muse was charged with participating in the hijacking of two other vessels in late March and early April of 2009.  Muse told the court that he and the three other men had agreed to "capture any ship that came by."  He added that he did not recognize the U.S. flag on the Maersk Alabama.

Muse could receive a maximum sentence of almost 34 years behind bars.

 

In a 6-3 decision handed down on June 21, 2010, the Supreme Court overturned a Ninth Circuit ruling and declared that the Carmack Amendment does not apply to a shipment that originates overseas and travels under a single through bill of lading. Therefore, the forum selection clause in the bill of lading, which obliged the parties to litigate disputes in Tokyo, was binding.

The case, Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., No. 08-1553 (June 21, 2010) arose out of a carriage of goods agreement that originated in China and was to terminate at inland destinations in the United States. The bills of lading required “K” Line to arrange delivery of the goods by any method of transportation it chose, and included a “Himalaya Clause,” extending the bills’ defenses and liabilities to parties subcontracted to perform services that would accomplish the bills’ objectives. The bills also contained a Tokyo forum selection clause. A K-Line vessel transported the goods from China to California, and they were then transferred to Union Pacific for rail carriage. The cargo was allegedly destroyed when a Union Pacific train derailed in Tyrone, Oklahoma.   

The cargo owners filed suit in the Superior Court of California, Los Angeles County, and were removed to the United States District Court for the Central District of California, whereupon the defendants moved to dismiss based on the agreements’ forum selection clause. The District Court granted the motion, but the Ninth Circuit Court of Appeals reversed and remanded, because it concluded that the Carmack Amendment applied to the inland portion of the carriage and superseded the parties’ forum selection clause.

The Supreme Court granted certiorari on the question of whether the Carmack Amendment applies to the inland portion of overseas shipments on a through bill of lading. If Carmack applied, then its venue provisions would trump the parties’ forum selection clause. If, as the defendants argued, the Carriage of Goods by Sea Act (“COGSA”) applied, then the parties are free to adopt a (enforceable) forum selection clause, as was established in Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 537-39 (1995). Though COGSA only applies to shipments to or from ports in the United States, the statute allows parties to extend its terms by contract to cover the entire length of an intermodal journey. See Norfolk Southern R. Co. v. James N. Kirby Pty. Ltd., 543 U.S. 14 (2004). The Court analogized its Kirby holding, where it found that Congress intended for parties to extend COGSA’s terms to inland, domestic segments of an international journey when using a through bill of lading, to the present case.

The cargo owners, on the other hand, argued that the Carmack Amendment applied to the domestic inland portion of the transportation. Because Carmack has its own venue provisions, the argument went, those would trump the party’s forum selection clause. The Court parsed the text of the Carmack Amendment and concluded that it requires only the receiving rail carrier—not the delivering or connecting rail carrier—to issue a bill of lading. This is because, the Court reasoned, “[i]f Carmack’s bill of lading requirement did not refer to the initial carrier, but rather to any rail carrier that in the colloquial sense ‘received’ the property from another carrier, then every carrier during the shipment would have to issue its own separate bill,” which would be contrary to the purpose of Carmack.

By limiting the requirement to issue a bill of lading to only the receiving rail carrier, the Court was able to easily distinguish between through bills of lading and a journey that required separate bills of lading. A rail carrier who takes on goods that have traveled overseas on a through bill of lading is not a “receiving” carrier, by the Court’s reasoning, because it does not issue its own bill of lading. The rail carrier in that situation is not really receiving the property for domestic rail transportation, as Carmack requires. By contrast, where there is no through bill of lading, the first rail carrier in the United States is the receiving rail carrier and must issue a Carmack bill of lading. Citing Reider v. Thompson, 339 U.S. 113 (1950). Here, the Court found that K-Line was not a “receiving” rail carrier, and neither was Union Pacific, because the latter served merely as the “delivering” carrier, who would never be required by Carmack to issue a bill of lading.

The Court then discussed Carmack’s venue provisions, which require that suit be brought against the receiving rail carrier in the judicial district in which the point of origin is located, while suit against the delivering carrier or an intermediate carrier can be brought in various other districts. § 11706(d)(2)(A), (A)(i). The Court reasoned that because Carmack’s venue provisions clearly contemplate a point of origin within the United States, Carmack cannot be intended to apply to carriages like the one in this case. “Indeed, if ‘K’ Line were a receiving carrier in a case where the journey’s ‘point of origin’ was China, there would be no place under Carmack to sue ‘K’ Line, since China is not within a judicial district ‘of the United States or in a State Court.’” Citing § 11706 (d)(1).

The Court found support for its interpretation of Carmack in its statutory history, and invoked the maxim of statutory interpretation that “[w]here the text permits, congressional enactments should be construed to be consistent with one another” when it evaluated the consistency between Carmack and COGSA under this interpretation. In the interest of modern intermodal transport, the Court found that this interpretation reflected the same interests displayed in Kirby: uniformity, efficiency, and predictability. The Court noted that the parties had chosen a venue that was mutually acceptable, and the forum selection clause was “an indispensable element in international trade.” Quoting The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 13-14 (1972). Finally, the Court dismissed the cargo owners’ argument about the not-yet-ratified Rotterdam Rules: “[n]othing in the Rotterdam Rules…requires every country to mandate a different regime to govern the inland rail leg of an international through shipment[.]”  The Court declined to address the instances where goods are received in the United States for export or where goods are received in adjacent foreign countries for import into the United States.

 Justice Sotomayor authored a dissent, and was joined by Justices Stevens and Ginsburg. The dissent argued that as the default legal regime for rail transport of cargo in the United States, the Carmack Amendment applies to the inland leg of a multimodal shipment traveling on an international through bill of lading. Sotomayor found that the absence of a bill of lading is not dispositive of the question of Carmack liability, and that it is the rail carrier’s provision of transport subject to the jurisdiction of the Surface and Transportation Board that establishes Carmack liability. Finding that the Board would have jurisdiction over this shipment (“[o]nce a first domestic rail carrier subject to the Board’s jurisdiction receives property in the United States, Carmack attaches”), Sotomayor concluded that Carmack and its venue provisions should have applied. Because, the dissent argues, nothing in the statute requires that the receiving carrier take goods from the point at which they originate, that the cargo originated in China is unimportant. To the dissent, “[a]s long as there is a receiving rail carrier in the United States…Carmack attaches.”