Firm News

Fifth Circuit affirms Summary Judgment in favor of Firm’s client dismissing lawsuit based on Himalaya Clause

Royal SMIT tried to ship a few of its transformers from the Netherlands to Louisiana. It contracted with an intermediary to arrange the transport. The transformers were allegedly damaged along the way, so Royal SMIT and its insurers tried to sue the actual carriers with whom the intermediary had contracted. The district court concluded they were precluded from doing so because of a Himalaya Clause in the through bill of lading, and granted summary judgment in favor of the carriers. That decision was appealed, and on 2 August 2018, the United States Fifth Circuit Court of Appeal affirmed and upheld the enforceability of the "covenant not to sue" contained in the Himalaya Clause of the through bill of lading that governed the shipment.

The case involved the shipment of three large electrical transformers and related accessory parts from Rotterdam to an inland destination in the United States (St. Gabriel, Louisiana). After a multimodal shipment by ocean vessel, railroad and truck, upon arrival at the final destination, the Shipper alleged that the three transformers had sustained damage in excess of $1.6 million due to "excessive vibration." Suit was filed by the Shipper against the Non-Vessel Operating Common Carrier (NVOCC), Central Oceans, with whom the Shipper had contracted to transport the cargo, as well as against Central Oceans' subcontractors who actually moved the cargo, the ocean carrier, the railroad carrier and the trucking carrier. Each of the actual carriers had entered into contracts directly with Central Oceans; none were in direct contractual privity with Royal SMIT.

In connection with the shipment, Central Oceans issued a through bill of lading to the Shipper governing the transportation of the transformers from Rotterdam all of the way to St. Gabriel. The Himalaya Clause of the Central Oceans bill of lading contained an express waiver of all claims against the subcontractors of Central Oceans, with the net result that claims could only be brought against the NVOCC, who was identified as the carrier under the through bill of lading. The ocean carrier and other actual carriers sought refuge under the through bill's covenant not to sue the NVOCC's subcontractors, and filed a Motion for Summary Judgment, requesting dismissal of plaintiff's claim. The Shipper argued that it did not intend to enter into a covenant not to sue the NVOCC's subcontractors and that the covenant in the bill of lading should not be binding on it, based upon an earlier contract with Central Oceans. The district court disagreed, granted the Motion for Summary Judgment, and dismissed with prejudice the claims against the firm's client, based upon the Himalaya Clause, holding that the Shipper's only claim was against the NVOCC.  The Fifth Circuit rejected the same arguments on appeal, and affirmed, ruling for the first time that such covenants not to sue were enforceable under COGSA, thereby aligning itself with earlier decisions of the Second and Ninth Circuits.

The case is significant to the extent that similar clauses exist in many multimodal through bills of lading and provide protection to the individual carriers who subcontract with an NVOCC to perform the actual carriage. Obviously, this decision does not protect an actual carrier from a later claim for indemnity by the NVOCC who contracted with it directly. However, any such claims will be subject to the statute of limitations and other protections contained in the underlying contract between the NVOCC and the actual carrier. Moreover, the NVOCC will have the burden to establish when the alleged damage to the subject cargo occurred and apportion responsibility to each respective carrier, which can often be difficult to do in a multimodal situation.

Link to case

If you have any questions concerning this case, or any other aspect of multimodal transportation, please do not hesitate to contact John Musser at jmusser@mrsnola.com.

 

Important updates on Filipino seaman cases

  • Filipino seamen on foreign flag vessels must sign a standard contract regulated by the Philippine government, known as the POEA contract, which requires arbitration of any injury claims against the employer in the Philippines under Philippine law. But awards in the Philippines are comparatively low, and Filipino seamen have been trying for years to escape the arbitration and choice of law clauses in the POEA contract. Those efforts have been almost entirely rejected in the U.S., so two (2) enterprising Filipino seamen recently sought to pursue claims in the Marshall Islands, a former U.S. protectorate that applies U.S. general maritime law and one of the largest ship registries in the world.

Peter Sloss had previously reported on one of our cases, Asignacion v. Rickmers, in which a Filipino seamen injured on a Marshall Islands flag vessel while in New Orleans sought, without success, first to avoid the arbitration clause and pursue claims in the Louisiana courts, and then to avoid the Philippine arbitral award. In April 2015, the U.S. 5th Circuit Court of Appeals held that the Philippine arbitral award was enforceable, ending Asignacion’s bid to pursue personal injury claims in the U.S. courts. Asignacion v. Rickmers, 783 F.3d 1010 (5th Circuit 2015). 

After losing in the U.S., Asignacion filed suit on the same claims in the Marshall Islands.   On June 20, 2018, the Marshall Islands Supreme Court upheld the High Court’s dismissal of Asignacion’s Marshall Islands suit as time barred, ending Asignacion’s final attempt to escape the POEA contract and the arbitral award issued pursuant to that contract.

  • Also of interest, in another suit in the Marshall Islands, Mongaya v. AET MCV Beta LLC, et al, plaintiff argued that Marshall Islands law precluded enforcement of the arbitration and choice of law clauses in the POEA contract as to all Filipino seamen serving on Marshall Islands flag vessels. In a decision issued today, the RMI Supreme Court rejected plaintiff’s arguments and held that the POEA contract’s requirement of arbitration in the Philippines under Philippine law is enforceable in the RMI.  The full opinion can be found here – Link to opinion.

 

Firm Addresses U.S. Fifth Circuit Court of Appeals Decision in In re Larry Doiron, Inc.

Peter B. Tompkins and Tarryn E. Walsh partnered with Skuld North America Inc.’s Pamela Milgrim to prepare an article for Skuld Offshore’s newsletter, The Field, addressing the U.S. Fifth Circuit Court of Appeals en banc decision in In re Larry Doiron, Inc. – an important decision attempting to clarify the test to be applied in determining whether an offshore contract is governed by state law or maritime law. The article can be reviewed here.

 

Firm Successfully Defends Hotel Owner in Personal Injury Case Filed by a Hotel Guest

On January 22, 2018, the United States Court of Appeals for the Fifth Circuit affirmed a June 28, 2017 summary judgment granted by the United States District Court for the Eastern District of Louisiana in favor of a hotel owner in a personal injury case filed by a hotel guest. The guest claimed in his lawsuit that he fractured his wrist in 2015 when he stepped on a hose that was obstructing a wet, slippery walkway. He underwent right wrist surgery shortly after his alleged accident.

The patron testified that as he walked on a brick sidewalk on the hotel property while it was drizzling, his feet began to slide, and he “became very frightened that [he] would fall, so [he] saw a hose on the ground and mistakenly thought it would be less slippery of a surface.” The guest intentionally stepped on the hose in order to stabilize his footing and slipped and fell, breaking his wrist. The guest presented no evidence to establish that the hose obstructed the walkway.

The Court held that the guest could not establish the first element of the Louisiana Merchant Statute - that the condition presented an unreasonable risk of harm - because the wet walkway and the hose were open and obvious. Citing Eisenhardt v. Snook, 8 So.3d 541, 544 (La. 2009), the Court stated that a “landowner is not liable for an injury which results from a condition which should have been observed by the individual in the exercise of reasonable care, or which was as obvious to the visitor as it was to the landowner.” The Court rejected the guest’s contention that Louisiana law requires evidence of others’ awareness of the defect in order to establish that the condition is open and obvious to all. Based on the guest’s testimony regarding his observation of the hose, his sketch of the hose and surrounding area, and evidence of sufficient lighting in the area, the Court was persuaded that there was no fact issue with respect to whether the hose was open and obvious.

Since the guest was unable to prove the first element of the Merchant Statute, an essential element of his claim, the Court of Appeals affirmed summary judgment.

Link to case

   

Firm Successfully Defends Shipowner in Personal Injury Case Filed by a River Pilot

On January 26, 2018, the United States Court of Appeals for the Fifth Circuit affirmed a June 19, 2017 summary judgment granted by the United States District Court for the Eastern District of Louisiana in favor of a shipowner in a personal injury case filed by a river pilot. The pilot, who had bilateral hip replacements in 2009, claimed in his lawsuit that he injured his left hip in 2016 while boarding a ship using a combination ladder (a combination of a Jacob’s ladder and an accommodation ladder). He underwent left hip revision surgery one month after his alleged accident.

While the pilot testified that he injured his left hip climbing the combination ladder, when he saw his orthopedist four days after the alleged accident (during an appointment that had been scheduled before the alleged accident), he reported that he had left hip clicking and pain that developed gradually two months earlier. He did not mention that he injured his hip while boarding a ship four days earlier.

Since the medical issue of whether the pilot’s left hip injury and revision surgery were caused by the normal progression or wear of his artificial hip or instead caused by trauma is complex and not within the common knowledge of a lay person, the pilot was required to prove medical causation with expert medical testimony. Significantly, none of the doctors who examined the pilot after the alleged accident testified that his left hip injury and revision surgery were, more likely than not, caused by boarding the ship. Thus, the pilot was unable to prove medical causation, an essential element of his claim, and the Court of Appeals affirmed summary judgment.

Link to case

 

The Boom That Went Boom

How an insurer’s neglect turned a relatively minor property damage claim into an oversized problem

The firm recently witnessed the consequences of an insurer’s failure to properly understand its obligations to a third- party claimant under Louisiana law. The case provides useful lessons for all insurance companies exposed to property damage claims in Louisiana.

The firm’s client, a stevedoring company in New Orleans, needed repairs to the boom of one of its cranes. The boom was removed from the crane and loaded onto a third-party carrier’s tractor-trailer for transport to a repair shop in Baton Rouge, about 80 miles away. But the tractor-trailer overturned as it was leaving the Port of New Orleans, damaging the boom and requiring significant repairs before the boom could safely be put back in use.

The trucking company’s cargo insurers appointed an adjusting company in Oklahoma and an appraiser in Mississippi to adjust the boom damage claim. The appraiser inspected the boom and gathered estimates for the repairs, indicating repeatedly to the stevedore that the insurer would authorize repairs once he had the necessary repair estimates. But the appraisal process dragged out, and it took four months before the appraiser submitted his appraisal of the accident-related damage to the adjusters in Oklahoma. The stevedore, as well as the crane repair shop handling the repairs, then made numerous requests to the trucking company’s insurer, through its appraiser and adjustor, for authorization to proceed with the proposed repairs. But the insurer never responded to those requests and ultimately stopped communicating with both the stevedore and repair shop altogether. Finally, six months after the accident, faced with prolonged silence from the trucking company’s insurers, the client proceeded with the recommended repairs in order to get its boom repaired and its crane back in service.

In addition, because the crane was out of service for an extended period due to the accident, the stevedore client was required to rent a substitute crane so that its daily business operations would not be drastically affected, at a cost of $30,000 per month. The client began asking the trucking company’s insurers about payment for the rental crane shortly after the accident and continuously submitted rental invoices to the trucking company and its insurers. The insurers’ policies expressly excluded coverage of loss of use damages, but the insurers never disclosed that pertinent fact to the stevedore. As a result, the stevedore, thinking its rental expenses were covered, cooperated with the trucking company’s insurers even while those insurers were dragging out the appraisal process.

After having dealt with months of inaction on the insurers’ part, the stevedore/client filed suit against the trucking company and its insurers. In addition to claims for the physical damage to the boom and its loss of use, the client alleged bad faith claims against the trucking company’s insurers under two Louisiana statutes, La. R.S. 22:1892 and La. R.S. 22:1973. Although those statutes primarily address an insurer’s obligations to its own insured, both statutes also impose on an insurer certain obligations to third-party claimants.

Section 1892 requires, inter alia, that a tortfeasor’s insurer shall make a third- party claimant a written offer to settle a property damage claim within 30 days of receiving satisfactory proof of the loss. If the insurer arbitrarily fails to make the requisite settlement offer, it shall be liable for a penalty equal to 50% of the amount the insurer is found to owe, plus reasonable attorneys’ fees.

Section 1973 penalizes an insurer for, inter alia, misrepresenting pertinent facts and/or policy provisions to a third-party claimant. Importantly, for the purposes of Section 1973, the Louisiana Supreme Court has interpreted “misrepresentation” to include an insurer’s failure to disclose material facts or policy provisions. An insurer who breaches that statute can be liable for damages caused by its misrepresentation or non-disclosure, and also a penalty of up to two times the damages awarded under the statute.

The boom case was tried to a Louisiana state court jury. The jury found that the accident-related damage to the boom was only about $67,000, and the loss of use from the accident was $60,000. Both of those awards were reduced by the stevedore’s 20% comparative fault. But the jury also found that the trucking company’s insurers breached their statutory duties to the stevedore client under both of the bad faith statutes, R.S. 22:1892 and R.S.22:1973. The jury specifically found that the insurers breached Section 1973 by misrepresenting and/or failing to disclose pertinent facts and/or policy provisions, and the insurers breached Section 1892 by arbitrarily failing to make the stevedore a timely written settlement offer. These findings tacked on more than $400,000 in additional damages, penalties and attorneys’ fees, increasing the judgment in this modest property damage claim to more than $500,000. The case then settled after trial on terms favorable to the stevedore client.

This case contains valuable lessons for all insurers handling claims in Louisiana. To be sure, the trucking company’s insurers had behaved badly – actively misleading the claimant and withholding critical information about their policies. But the insurers’ mistake arose from their failure to understand that Louisiana law imposes certain duties on insurers toward third-party claimants, and an insurer can pay a hefty price if it fails to understand and comply with those duties.

 

The Louisiana Bar Journal recently published an article by John Musser and Tarryn Walsh entitled "Try a Little Less Tenderness: A Proposal for Presenting Expert Testimony".

John has served as an editor of the Bar Journal since 2011.

http://files.lsba.org/documents/publications/BarJournal/Feature1-Musser-Dec17-Jan18.pdf

 

If you have any questions concerning this case, or any other aspect of multimodal transportation, please do not hesitate to contact John Musser at jmusser@mrsnola.com.