B. U.S. Circuit Courts
1. First Circuit
The First Circuit, in Aadland v. Boat Santa Rita II, Inc., vacated a District Court judgment denying recovery to a sea captain seeking damages from a vessel and her owners. The plaintiff, Magnus Aadland, captained the vessel on a commercial scalloping trip that departed from Massachusetts. Aadland fell ill with a Streptococcus infection a few days into the trip and, upon return to land, was hospitalized for over seven combined months across two inpatient admissions and required years of outpatient care thereafter. Most of the care was covered by private health insurance plans held by Aadland’s wife through her employer and later purchased by Aadland himself. The defendants paid Aadland $238,374 in “advance” payments for medical expenses, reimbursed Aadland for his out-of-pocket medical expenses, and paid an additional $400,000 to Aadland’s health insurer to resolve all insurance-related claims.
Three years after the incident, Aadland brought suit against the vessel and her owners alleging they breached their duty of cure, which was triggered by Aadland’s on-ship illness. The duty of cure arises under federal common law and dictates that a vessel and her owners are liable for necessary medical expenses resulting from a seaman who falls sick or is wounded in the service of the ship. Aadland sought damages equal to the total “sticker price” of the healthcare he received to treat the infection, compensation for pain and suffering that resulted from the defendants’ delay in providing him with payments for cure, and punitive damages. After a bench trial, the District Court ruled in favor of the defendants, holding that: (1) Aadland had reached the point of maximum medical recovery, which terminated the defendants’ ongoing duty to make cure payments; (2) the defendants had satisfied their duty of cure up to the maximum medical recovery point; and (3) Aadland’s claims for emotional distress and punitive damages failed because Aadland could not show the defendants willfully withheld cure payments. Aadland appealed to the First Circuit.
The First Circuit vacated in part and reversed in part. On the issue of whether the defendants breached their duty of care to Aadland, the Court cited favorably Gauthier v. Crosby Marine Service, Inc., a Fifth Circuit case holding that where a seaman alone purchases medical insurance and relies on it to pay the costs of the care he receives to treat an on-ship illness or injury, the ship owner is not entitled to set off the amount that the healthcare providers received from the seaman’s health insurer against the ship owner’s cure obligation. Because the District Court improperly distinguished Gauthier by its facts, the First Circuit remanded this issue, instructing the District Court to conduct further fact-finding on whether Aadland truly purchased his health insurance alone. If so, Gauthier’s no-offset rule would apply. On remand, the First Circuit also held that the proper measure of the ship owners’ cure obligation is not the “sticker price” of the healthcare Aadland received ($1.2 million), but instead is the amount the insurance company actually paid to satisfy Aadland’s medical charges ($600,000). The District Court was tasked with assessing the amount of cure the ship owners have already provided to Aadland for the purposes of the damages calculation.
As to Aadland’s “bad faith” delay-of-cure claim, the First Circuit similarly vacated and remanded because the District Court’s judgment on this claim relied upon its incorrect conclusion that Gauthier did not apply. Finally, the First Circuit reversed the District Court’s determination that Aadland had reached the point of maximum medical recovery in July 2019. According to the Court, the burden is on the ship owner to provide evidence that further medical treatment would not result in an improvement of the seaman’s condition. Instead, the District Court incorrectly placed the burden on Aadland to show evidence that his condition was still improving with continued medical care.
2. Third Circuit
Great Lakes Insurance SE v. Raiders Retreat Realty Co., LLC arose after a yacht ran aground in July 2019, incurring over $300,000 in damage. Raiders owned the vessel and had previously purchased $550,000 of insurance from marine insurer Great Lakes (GLI). After Raiders filed a claim under its policy, GLI denied coverage on the ground that Raiders had not timely ordered recertification and inspection of its fire extinguisher, even though the accident was entirely unrelated to fire.
GLI initially filed suit against Raiders seeking a declaratory judgment that the insurance policy was void from its inception due to the rogue fire extinguisher. Raiders responded with five counterclaims, including three extra-contractual claims arising under Pennsylvania law. However, the insurance policy contained a choice-of-law provision mandating the application of New York law. Although federal admiralty law precedent from The Bremen v. Zapata Off-Shore Co., 401 U.S. 1 (1972), holds that forum-selection provisions are unenforceable “if enforcement would contravene a strong public policy of the forum in which the suit is brought,” the District Court declined to apply The Bremen to this case or consider whether there was strong Pennsylvania public policy precluding the application of New York law. According to the District Court, because choice-of-law provisions in maritime insurance contracts are presumptively valid under federal maritime law, the public policy interests of a forum state cannot override the federal principle favoring enforcement of the choice-of-law provision. The District Court therefore dismissed Raiders’ three Pennsylvania law claims. Raiders filed an interlocutory appeal on these counts.
On appeal, the Third Circuit vacated and remanded. First, the Court addressed its jurisdiction over the interlocutory appeal. Although federal district courts have clear jurisdiction over maritime cases under 28 U.S.C. § 1333(1), federal courts of appeals only possess jurisdiction over interlocutory appeals in admiralty cases where the order appealed from conclusively determines the merits of a claim or defense. The Court asserted its jurisdiction over Raiders’ appeal because the District Court’s decision to dismiss the Pennsylvania law claims entirely foreclosed certain of Raiders’ counterclaims, which conclusively determined the rights and liabilities of the parties. Additionally, the Court noted that choice-of-law determinations in maritime cases are treated as determinations on the merits, and therefore are immediately appealable.
Moving to the question presented, the Third Circuit held that the District Court should have applied The Bremen by considering whether applying New York substantive law under the choice-of-law clause would have contravened strong public policy of Pennsylvania. According to Raiders, enforcing the choice-of-law clause here would contravene Pennsylvania’s public policy of protecting insureds in Pennsylvania from bad faith and unfair trade practices by insurance companies. The Court viewed this argument as worthy of the District Court’s consideration, rejecting GLI’s contention that The Bremen—which addressed a forum selection clause—was wholly irrelevant to the present choice-of-law clause dispute. The Third Circuit further held that The Bremen actually aligns with federal maritime insurance contract principles, such that it is reasonable to conclude that a strong public policy of the forum state in which suit is brought could render unenforceable the choice of state law in a maritime insurance contract. The Third Circuit remanded the case to the District Court with instructions to consider whether Pennsylvania has a strong public policy that would be thwarted by applying New York law to this dispute.
3. Fifth Circuit
Douglass v. Nippon Yusen Kabushiki Kaisha presented the Fifth Circuit with an important question of personal jurisdiction. In an en banc opinion, the Circuit held that federal courts lack personal jurisdiction over a foreign corporation for federal claims arising from injuries and deaths of American naval personnel in a collision in foreign waters. In 2017, a container ship chartered by Nippon Yusen Kabushiki Kaisha (NYK), a Japanese corporation, collided with American destroyer USS Fitzgerald in Japanese waters. The collision caused the death of seven American naval sailors and injured dozens of others.
Representatives of the decedent sailors sued NYK in federal court, asserting wrongful death and survival claims under the Death on the High Seas Act. The injured sailors and their families sued NYK separately for negligence and loss of consortium. NYK moved to dismiss both suits for want of personal jurisdiction. NYK pointed to the following facts:
- NYK is incorporated and headquartered in Japan;
- NYK only calls port in the United States for seven percent of its worldwide port calls;
- NYK possesses only 25 employees in the United States through its subsidiaries;
- The collision with the USS Fitzgerald occurred in Japanese waters;
- The ACX Crystal, the container ship that collided with the Fitzgerald, was on an intra-Asia trade route and has never called port in the United States.
The District Court dismissed the claims, holding that NYK did not have sufficient contacts with the United States to justify the exercise of personal jurisdiction. Notably, although this admiralty dispute is governed by the Fifth Amendment Due Process Clause rather than the Fourteenth Amendment Due Process Clause traditionally used to assess personal jurisdiction, the District Court held that the due process tests are identical under either Amendment. On appeal, a Fifth Circuit panel affirmed, but two judges expressed skepticism at binding Circuit precedent equating the Fifth and Fourteenth Amendment due process tests. The plaintiffs moved for rehearing en banc.
On rehearing, the Fifth Circuit affirmed. The majority noted that it has been widely held, both within the Fifth Circuit and in other Circuits, that personal jurisdiction analysis is substantively identical under the Fifth and Fourteenth Amendment Due Process Clauses. According to the majority, the two clauses use the same language and serve the same purpose of protecting individual liberty by guaranteeing limits on personal jurisdiction. Although only the Fourteenth Amendment raises federalism concerns because it binds states rather than the federal government, the majority held that the principal objective under either Amendment is to prevent against the burden of a defendant’s submitting to the coercive power of a forum with little interest in the dispute. The only distinction is that the Fifth Amendment assesses a defendant’s contacts with the United States as a whole, as opposed to the state-specific analysis governing Fourteenth Amendment personal jurisdiction. In this case, the result was that United States courts lack general jurisdiction over NYK under the Fifth Amendment because NYK is domiciled in Japan, and similarly lack specific jurisdiction over NYK because, pursuant to settled Supreme Court precedent in cases such as Bristol-Myers Squibb Co. v. Superior Court, the plaintiffs’ claims do not arise out of NYK’s contacts with the United States. Finally, the majority rejected the plaintiffs’ argument that different personal jurisdiction standards should apply in admiralty cases, concluding that such an argument was unsupported both textually and in case law.
Douglass is also noteworthy for the fact that five Fifth Circuit judges joined a sixty-page dissent authored by Judge Jennifer Walker Elrod, which principally contends that an originalist interpretation shows distinct differences between the Fifth and Fourteenth Amendment tests for personal jurisdiction. The dissent’s reasoning would have subjected NYK to general personal jurisdiction in the United States due to the fact that NYK was doing enough systematic and continuous business in the United States to be on fair notice that it could be subjected to suit in federal courts. We anticipate a petition for certiorari may be filed in this case and will provide any further updates in future issuances.
4. Eleventh Circuit
In Maglana v. Celebrity Cruises, Inc., the Eleventh Circuit declined to enforce an arbitration clause included in the plaintiffs’ employment agreements. Ryan Maglana and Francis Bugayong, on behalf of a putative class of Filipino crewmembers employed by Celebrity, sued for false imprisonment and intentional infliction of emotional distress stemming from Celebrity’s handling of the early days of the COVID-19 pandemic. On February 10, 2020, Celebrity’s Millennium cruise ship stopped carrying passengers, who were let off in Singapore due to fears of the impending outbreak. For the next three months, the Millennium sailed without passengers to the Philippines, Hawaii, and Mexico, before eventually docking in San Diego. Hundreds of employed crew members were not allowed to leave the cruise ship during the duration of this period, and Celebrity denied many of their requests permission to disembark for return to the Philippines.
Celebrity terminated Maglana and Bugayong for cause on March 30 after they took an expensive bottle of scotch from the ship’s bar, but Celebrity forced the plaintiffs—along with hundreds of still-employed crewmembers—to remain on board virtually without pay until May 26, when Celebrity finally repatriated the plaintiffs along with 200 other Filipino crewmembers. Maglana and Bugayong filed a class complaint on May 21 in the Southern District of Florida. Celebrity moved to compel arbitration because the plaintiffs’ employment agreements contained agreements to arbitrate in the Philippines any disputes “arising from” or “relating to” their employment with Celebrity. The District Court compelled arbitration, and the plaintiffs appealed.
The Eleventh Circuit reversed. First, the Eleventh Circuit addressed the question of whether the courts or the arbitrator should decide the arbitrability of the plaintiffs’ tort claims. The plaintiffs’ employment agreements delegated to the arbitrator “exclusive authority” to resolve the issue of arbitrability, but Celebrity had elected to waive this clause by expressly asking the District Court to intervene and enforce the arbitration provision. Since Celebrity itself asked the federal courts to rule on the merits, the Eleventh Circuit proceeded to do so. The panel concluded that the district court erred in its interpretation of the arbitration clauses as covering the plaintiffs’ intentional tort claims based on Celebrity’s conduct after it had terminated the plaintiffs’ employment. Because the agreement to arbitrate only extended to claims “arising from” or “relating to” Maglana and Bugayong’s employment with Celebrity, and the plaintiffs’ intentional tort claims arose from their period of detainment on the Millennium after their employment had already been terminated, the Eleventh Circuit held that the claims were not covered under the arbitration clauses. The plaintiffs are therefore free to pursue their tort claims in federal district court.
C. Federal District Courts
1. Southern District of Florida
In Green v. Carnival Corp., a District Court in Florida denied Carnival Cruise Line’s motion to dismiss four tort claims raised by passenger Courtney Montrez Green, arising from a slip-and-fall accident that he suffered in the buffet area of a cruise ship. Because the accident involved alleged torts committed aboard a ship sailing in navigable waters, the District Court applied general maritime law to the dispute, as developed through federal common law.
Plaintiff Green first raised negligent failure-to-warn and negligent failure-to-maintain claims stemming from the spill that caused the slip-and-fall. The Court noted that cruise lines owe their passengers a duty to warn of known or foreseeable dangers, but only if the cruise line has actual or constructive notice of the unsafe condition. Constructive notice can be established through evidence of prior incidents where substantially similar conditions prevailed on the cruise line, and where those conditions caused a prior accident. Since Green offered specific facts supporting 15 prior substantially similar incidents to his own slip-and-fall, and also alleged that the spill did not pose an “open and obvious” danger to him and other passengers, the District Court held that Green alleged sufficient facts to infer Carnival may have been on constructive notice of the danger caused by the spill.
Green also raised a vicarious liability claim against Carnival based on the actions of its cruise ship employees. Carnival attempted to dismiss on the ground that Green failed to identify specific employees and specific actions that were allegedly negligent, and also argued that Green impermissibly raised a vicarious liability claim in order to circumvent the requirement that Carnival be on notice of the danger to be held liable. The Court disagreed with both arguments. First, the Court held that plaintiffs need not allege the names of negligent employees at the motion to dismiss stage for vicarious liability claims. Further, cruise ship case precedent shows passengers need not establish that a ship owner had actual or constructive notice of a risk-creating condition in order to hold the ship owner liable for negligent acts of its employees. The only exception is if a plaintiff alleges vicarious liability solely to bypass the notice requirement for the underlying tort claims, which did not occur here.
Finally, the Court allowed Green’s claim for negligent failure to follow procedures and policies to proceed. Carnival alleged that this claim was a “shotgun pleading” that raises no new facts or legal theories, and instead merely recites generalizations of the prior Counts. The Court disagreed, finding that the plaintiff pointed to specific Carnival Cruise procedures and policies related to floor spills that allegedly were not followed when the accident occurred. All four claims therefore may proceed.
2. Southern District of Georgia
On March 25, 2022, Glynn County, Georgia filed suit against the owners, the managers, the local agent, and the salvor of the vehicle carrying vessel MV Golden Ray. The Golden Ray capsized off the Georgia coast in September 2019 while carrying hundreds of gallons of heavy bunker fuel on board, creating one of the largest maritime environmental disasters in United States history. The Complaint raises claims under the Federal Oil Pollution Act of 1990 (OPA 90), along with other federal and state common law claims.
Glynn County’s Complaint raises interesting issues under OPA 90. First, the Complaint demands a jury trial, but the validity of this demand depends upon the basis for federal court jurisdiction over the case. On one hand, if the suit falls within the federal court’s admiralty jurisdiction, the parties have no right to a jury trial. However, if the suit instead falls within the court’s federal question jurisdiction due to the fact that OPA 90 is a federal statute, then the right to a jury trial is preserved. The County argues the mere fact that the oil spill occurred in navigable waters does not require invocation of admiralty jurisdiction, especially where the principal claims arise from a federal statute. However, it is the facts, not the parties, which dictate the basis for federal court jurisdiction. Second, OPA 90’s responder immunity section will likely shield the salvor from liability—absent gross negligence—for any further oil spilled in the course of its salvage of the Golden Ray. However, it is less clear whether the remaining defendants, if found liable, will have to bear the salvor’s share of overall liability due to the salvor’s immunity. If the defendants are held jointly and severally liable, the answer is yes. But if purely several liability applies, the answer is likely no.
We will monitor any further developments in this case in future reports.
3. Southern District of New York
Matter of Energetic Tank, Inc. arose from the August 2017 collision of a naval destroyer and an oil tanker within the Singapore Strait. The Navy’s U.S.S. McCain suddenly veered in front of the oil tanker Alnic, causing the tanker to pierce the broadside of the McCain. Ten Navy sailors were killed, dozens more were injured, and both vessels sustained significant damage. The Petitioner, owner of the Alnic, filed a complaint seeking exoneration from liability for the collision, alleging that the McCain was 100 percent at-fault for the accident. Over forty parties, including the injured sailors, decedents of the deceased sailors, and the U.S. government, then raised civil claims against the Alnic owner. In November 2021, the District Court conducted a bench trial on the issue of apportionment of liability between the Petitioner and the United States.
In its opinion resulting from the bench trial, the Court apportioned 80 percent of fault to the McCain and 20 percent of the fault to the Alnic, while also declining to limit the Alnic owner’s liability. As an initial matter, the Court found that Singapore law applied to substantive matters of liability arising from the accident. The elements of negligence under Singaporean law closely mirror those of United States admiralty law (duty, breach, causation, and damages). Singapore applies proportionate comparative fault rules for apportioning liability between multiple negligent parties, with Courts determining each party’s proportionate share of fault via “broad commonsensical assessment.”
Under the Singapore negligence framework, the Court found that the primary fault fell onto the crew of the McCain, which was the vessel that initially lost control and veered in front of the Alnic. The McCain commanders made numerous errors, including providing inadequate training for its crew on basic steering functions; neglecting to address well-known issues with the vessel’s new navigation system; assigning critical navigation duties to inexperienced crew members; declining to stop outright even after the crew had lost control of steering; and failing to transmit crucial location data about the ship’s course and speed. Although no one individual was fully responsible for the incident, a series of systemic failures principally caused the crash.
The Court also apportioned “significant” fault to the Alnic for its poor reaction to the impending crisis. For one, the Alnic’s crew outright neglected to try to stop the vessel or turn out of the way, even once it became obvious that a collision with the McCain would be inevitable absent swift action. The crew also failed to do anything to mitigate the scope of damage in the moments after the collision with the McCain. Instead of taking manual control of the ship after the collision, the Alnic’s captain instead let the autopilot continue to steer, which caused the tanker to rip a massive hole in the bow of the McCain that was entirely avoidable. Even worse, the Alnic’s crew made false logs after the collision in an attempt to cover up their decisions. The Court found that this bad faith decision was especially severe in the admiralty context where log books are heavily relied upon by finders of fact.
Finally, the Court declined to limit the Alnic owners’ liability for the actions of their crew. Under the Limitation of Liability Act, vessel owners’ liability is limited to the value of the ship and pending freight unless the owner himself had privity or knowledge of the negligent acts. The Court found that the ship owners—through the actions of their delegated ship management company—failed to meet the burden to prove they lacked privity or knowledge of the negligence aboard their ship. The ship management company knew months before the collision that the tanker often relied on deficient staffing practices and that its crew was in need of remedial training following an audit, yet the company did nothing.
Based on the 80/20 damages split, the Alnic owner goes down with the ship in spite of its much lower share of overall fault. The owner recovered 80 percent of the $442,445 of damages caused to the Alnic, while the United States recovered 20 percent of the $185,000,000 of damages caused to the U.S.S. John McCain. Once netted, the Alnic owner owes $36,646,044 in damages to the United States, plus nearly $8,000,000 in pre-judgment interest.
D. State Courts
1. Florida District Court of Appeal
In D-I Davit International-Hische GMBH v. Carpio, the Florida District Court of Appeal granted defendant Davit DE’s motion to dismiss two state law claims stemming from the death of a seaman during a Norwegian Cruise Lines lifeboat and rescue drill. In reversing the trial court, the Court of Appeal determined that Florida lacks personal jurisdiction over Davit DE.
In 2016, Diogenes Carpio worked as a seaman aboard a Norwegian Cruise Lines vessel in navigable waters around Bermuda. During a routine drill, a wire on the davit supporting a rescue boat snapped, causing Carpio to fall six stories to his death. Carpio’s wife sued multiple defendants, including Davit DE, a German corporation that manufactured the malfunctioning davit. Davit DE is the parent company of Davit US, an agent that does business in Florida. The Complaint primarily based personal jurisdiction on after-sales inspection contracts solicited in Florida that were executed by Davit US “and/or” Davit DE.
According to the Court of Appeal, the facts alleged in the Complaint were insufficient to establish general or specific jurisdiction over Davit DE. For general jurisdiction, Davit DE refuted that it engages in business in Florida, and the plaintiff failed to allege any facts showing that Davit DE itself engaged in any business activities in Florida. Davit DE could have been subject to Florida jurisdiction if it exerted “substantial control” over its U.S. affiliate, but the plaintiff failed to allege this either. The plaintiff also failed to establish specific jurisdiction over Davit DE. Under Florida’s long-arm statute, specific jurisdiction is only established if both (i) the defendant does one of the enumerated elements of a claim within Florida, and (ii) the plaintiff’s cause of action arose from the acts occurring in Florida. On the strict products liability claim, Davit DE designed, manufactured, and installed the davits at issue in Germany, and any Davit DE maintenance personnel boarded the vessel in New York and performed inspection work at sea. On the breach of implied warranty claim, the plaintiff failed to establish a Florida-specific link stemming from the contract for purchase of the davit. The contract for the davit was instead executed in Germany.
Due to a lack of either general or specific jurisdiction, the Court of Appeal dismissed the claims against Davit DE.
2. Maryland Court of Special Appeals
InterMoor, Inc. v. U.S. Wind, Inc. raised the question whether Maryland state courts possess jurisdiction to enforce a mechanic’s lien over a meteorological tower located roughly ten nautical miles from the Maryland shoreline. In 2019, InterMoor and U.S. Wind entered into a contract whereby InterMoor would transport and install a meteorological tower on the Outer Continental Shelf, which would collect raw wind data for an offshore wind farm located on nautical property in which U.S. Wind held leasehold interests. Two months later, U.S. Wind informed InterMoor that it was terminating the Agreement. InterMoor contended that U.S. Wind owed $4.8 million for the value of InterMoor’s work, services, and material provided in connection with the transportation and installation of the Tower.
Once U.S. Wind refused to pay, InterMoor filed a complaint for a mechanic’s lien pursuant to Maryland law in the state court physically closest to the project site. In support of state court jurisdiction, InterMoor explained that the federal Outer Continental Shelf Lands Act permits state lien laws to be applicable as federal surrogate law. InterMoor further alleged that Maryland lien law should apply because Maryland was the State adjacent to the project site, no federal maritime law applies of its own force, and there is no conflict between State and Federal law. The Maryland circuit court disagreed, holding that InterMoor did not allege sufficient facts to show that state courts possess jurisdiction beyond the Seaward Boundaries of the State of Maryland, defined as the three miles of submerged lands immediately off the coast line.
On appeal, the Maryland Court of Special Appeals affirmed. The Court started with the Maryland Constitution, which prescribes state courts jurisdiction over “the respective counties and Baltimore City.” The Court saw no basis for expanding circuit court jurisdiction to property beyond the border of the county in which the court sits. The Maryland Code similarly limits circuit court jurisdiction to the borders of its county. Furthermore, Maryland case law dating back to 1835 holds that state courts cannot assert jurisdiction over property located beyond the court’s territorial jurisdiction. These jurisdictional limits apply to mechanics liens, which are statutorily created in rem proceedings that can only be issued by the circuit court of the county in which the land or part thereof is located. Further, the Court of Special Appeals rejected InterMoor’s argument that the Outer Continental Shelf Lands Act authorizes application of the law of the adjacent state, noting that this provision merely governs choice-of-law in federal court and does not confer fundamental jurisdiction to state courts over these disputes. Since the project site was located outside the territory of any Maryland county, InterMoor could not seek enforcement of a mechanics lien in state court.
3. Massachusetts Supreme Court
In Armstrong v. Secretary of Energy and Environmental Affairs, the Massachusetts Supreme Court was tasked with resolving a clash between the ancient public trust doctrine and modern land development. Under the public trust doctrine, the government holds tidelands in trust for the benefit of the public for traditional, water-dependent uses such as fishing, fowling, and navigation. Massachusetts’ Waterways Act delegated public trust issues to the Department of Environmental Protection (Department), which has authority to make licensing decisions for uses of tidal lands. The Department promulgated regulations setting certain specifications for buildings within 100 feet of protected tidelands and creating an “override” clause that allowed the Secretary of Energy and Environmental Affairs (Secretary) to approve substitute specifications as part of a municipal harbor plan. If the Secretary invokes the “override” authority, the Department effectively must license the project under the Waterways Act.
In 2018, the Secretary approved the Boston Planning and Development Agency’s municipal harbor plan, which covers two sites located within 100 feet of the Boston Harbor’s coastal tidelands. The two sites at issue—both of which contemplate construction of tall towers—deviate substantially from the specifications typically enforced by the Department pursuant to its public trust authority. Multiple plaintiffs brought an action in state court, seeking a declaratory judgment that the Department’s regulations delegating municipal harbor plan approval authority to the Secretary were invalid. The lower court granted partial summary judgment to the plaintiffs, finding that the Department’s delegation was ultra vires.
On appeal, the Massachusetts Supreme Court affirmed. The Court held that the Department has no authority to so extensively delegate its public trust duties to preserve and protect the public’s interest in tidelands. The State legislature expressly tasked the Department with public trust duties, and the Department was not able to forego this responsibility in the name of administrative convenience or preservation of agency resources. The Court also held that the reasonableness of the Secretary’s impermissibly delegated decisions is irrelevant; because the public trust doctrine involves a special, unusually valuable form of public property, delegating the responsibilities requires express legislative direction. Moving forward, the Department of Environmental Protection is free to consider—but cannot be bound by regulation to adopt—the Secretary of Energy and Environmental Affairs’ input when making licensing determinations.
III. Other Notable Developments
A. Legislative and Regulatory Developments
1. Offshore Wind
As the Biden administration continues to create new incentives encouraging the development of offshore wind generation, maritime law is poised to play a large role in resolving legal disputes arising from this new renewable energy source.
In September 2022, a senior Defense Department (DoD) official testified before the House Natural Resources Committee on potential cybersecurity concerns related to an ambitious floating offshore wind facility proposed off the coast of California. Although the Pentagon supports the administration’s offshore wind policy, the military also has concerns about the potential for foreign actors to interfere with America’s early warning defense radars by gaining access to the giant offshore wind turbines proposed as part of the California wind project. The DoD is especially concerned with “nefarious” foreign investment and ownership of the offshore wind facilities, noting that much of the foreign involvement in analogous East Coast offshore facilities has come from companies affiliated with U.S. allies in Europe. There are also concerns that the facilities could interfere with military operations along the California coast.
To ameliorate some of these concerns, the DoD is negotiating a series of stipulations with the Department of the Interior’s Bureau of Ocean Energy Management for the eventual lease sale of California’s Morro Bay and Humboldt Wind Energy Areas. For instance, the DoD has confirmed it must be able to order the wind turbines to curtail and cease operations under certain circumstances. Renewable energy project developers are eager to learn the exact contours of these stipulations—and in advance of the upcoming lease auction—in order to determine whether the restrictions may materially affect the financial viability of operating offshore wind facilities.
2. Ocean Shipping Reform Act of 2022
In June 2022, President Biden signed into law the Ocean Shipping Reform Act of 2022 (OSRA). Backed by broad bipartisan support, OSRA enacts a series of reforms designed to curb ocean container carriers’ anticompetitive business practices that have contributed to nationwide supply chain issues. Consumer advocates largely support the new legislation, pointing to the fact that the global container shipping industry is dominated by a few large alliances that operate with antitrust immunity under the Shipping Act of 1916.
OSRA strengthens the Federal Maritime Commission’s (FMC) oversight authority over the operating practices of global ocean shipping lines operating in U.S. ports. The Act also implements numerous changes intended to mitigate container shippers’ near-unfettered price control, including:
- New rules requiring carriers to list certain information in invoices for demurrage and detention (D&D) charges, along with a requirement that the FMC initiate a rulemaking to further define prohibited D&D practices;
- Establishment of a complaint procedure before the FMC, where common carriers bear the burden of proof regarding the reasonableness of the D&D charges they assess;
- Prohibitions on retaliation against a shipper for filing a complaint with the FMC or patronizing another carrier, whether by unreasonably refusing cargo space when available or other discriminatory methods;
- Authorization for the FMC to conduct a rulemaking to add more “essential terms” that must be included in Service Contracts; and
- Authorization for the FMC to register national shipping exchanges for ocean transportation in U.S. foreign commerce.
The FMC initiated an OSRA-required rulemaking the day after the law’s passage and expects to have a Final Rule in effect by December 2022.
B. Industry Developments
1. Lithium-Ion Battery Liability
The quantity of lithium-ion batteries shipped at sea has ballooned in recent years, fueled primarily by the global expansion of the markets for wind generation, solar generation, and electric vehicles. These batteries are often container shipped by themselves, but also are shipped as component parts of finished cars, power tools, and appliances. However, with great power comes great liability—lithium-ion batteries are prone to create complicated fires that are especially hot and are resistant to water.
As the incidence of lithium-ion battery fires aboard cargo vessels increases, shipping industry participants should stay aware of the scope of liability resulting from these accidents. For instance, the cargo owners of goods containing lithium-ion batteries may be held liable for injuries or losses to other parties caused by a battery fire. Companies facing potential lithium-ion battery liability should check their insurance policies to ensure they cover extended liabilities such as loss or damage to the vessel itself and property belonging to other parties. Additionally, proper cargo labeling is imperative; an unlabeled container carrying lithium-ion batteries not only poses dangers to the shipping crew, but also can lead to the rejection of otherwise meritorious insurance claims on the grounds of misdeclaration.
2. Autonomous Ships
Over the past six months, new Maritime Autonomous Surface Ships (MASS) projects have come online and are quickly becoming integrated into mainstream shipping. In April 2022, the world’s first electric autonomous containership, Yara Birkeland, commenced its first regular voyage from Norway. The ship is currently manned with crew members, but the ultimate goal is to remove the crew entirely. The Zhi Fei, another autonomous vessel, also entered commercial service in China in April. The MAS400 also completed the first autonomous transatlantic voyage in June 2022, traveling from Plymouth, U.K. to Halifax, Nova Scotia.
Autonomous vessels present a unique opportunity not only to streamline global commercial shipping operations, but also to automate important military security and ocean data collection functions. Although autonomous vessels avoid many of the safety concerns facing autonomous vehicles, they nevertheless pose regulatory challenges that are being addressed both nationally and internationally. The International Maritime Organization’s Maritime Safety Committee is developing a non-mandatory goal-based MASS code, which should be ready for adoption in late 2024. However, the MASS code initially will only apply to cargo ships, leaving lingering questions regarding rules for other categories of automated vessels such as tugs, survey vessels, offshore vessels, and passenger vessels.
C. International Developments
1. Detention of Ukrainian Naval Vessels
For the past three years, Ukraine has proceeded in arbitration against Russia under Article VII to the United Nations Convention on the Law of the Sea (UNCLOS). In late 2018, three Ukrainian naval vessels nearing the Kerch Strait were intercepted by Russian ships on the ground that the Ukrainian vessels unlawfully crossed the Russian state border. Russia arrested both the vessels and the 24 servicemen on board, and shortly thereafter commenced criminal proceedings against the arrested Ukrainian servicemen. Five months later, Ukraine raised arbitral claims against Russia, alleging that Russia violated the immunity of the three Ukrainian vessels in breach of UNCLOS. Russia raised preliminary jurisdictional objections, which were litigated in a hearing in The Hague in October 2021.
On June 27, 2022, the Arbitral Tribunal issued an award on Russia’s preliminary objections. The Tribunal held that the events leading up to the arrest of the Ukrainian vessels constituted “military activities” that are excluded from the Tribunal’s jurisdiction. However, the events following the arrest of the vessels do not constitute “military activities” and therefore may be adjudicated on the merits by the Tribunal. The Tribunal rejected Russia’s further jurisdictional objections and ordered continuation of the proceedings on the merits. Russia must submit a Counter-Memorial by December 27, 2022.
2. Spanish Yacht Claim
In August 2022, a London court blocked insurance company Generali from pursuing Spanish court proceedings against rival insurance company QBE over a maritime dispute. A yacht insured by QBE allegedly damaged an underwater power cable linking the Spanish islands of Mallorca and Menorca, causing €7.7 million in property damage and hydrocarbon pollution. Generali paid the entirety of the damages to Red Eléctrica de España, a partial owner of the cable. Generali then sued QBE in the Spanish court, arguing that QBE should be liable for the damages as the yacht’s insurer. However, QBE’s insurance policy for the yacht included a London arbitration clause. Generali sought to circumvent the arbitration clause by claiming the terms as written only covered QBE UK, whereas the yacht’s insurance policy has since been transferred to QBE Europe during the course of Brexit. The London court disagreed on multiple grounds. First, the Court held that English courts, as the seat of the arbitration clause, have sole jurisdiction to determine whether the clause is governed by English law and/or is enforceable as a matter of public policy. The Spanish court proceeding therefore was enjoined. The London Court further held that QBE Europe could seek to enforce the arbitration policy even though it was not a direct signatory; although QBE Europe was not a party to the insurance agreement, QBE Europe has obligations arising under the elements of the arrangements in question Therefore, QBE Europe can seek to enforce those elements—including the arbitration clause.
