On March 30, 2020, the United States Supreme Court issued a decision that can impact the way Charter Party Agreements are negotiated. Particularly, given the present COVID-19 orders that purport to limit whether vessels can enter certain ports, orders that appear to change on a daily basis, this decision should serve notice to those negotiating Charter Party Agreements.

CITGO Asphalt Refining Company, et al. v. Frescati Shipping Company, Ltd., et al. No. 18-565 (March 30, 2020) resolves the interpretation of a “safe berth” clause in a shipping contract. In a 7-2 ruling, the Court held that a “safe berth” clause establishes a warranty of safety, thereby imposing liability for an unsafe berth regardless of a party’s diligence in selecting the berth. See Id at 1.

The facts of the case date back to 2004 when CITGO and related companies contracted with Frescati Shipping Co. for the shipment of crude oil from Venezuela to New Jersey. Frescati, the operator and owner of the oil tanker M/T Athos I, had chartered the tanker to Star Tankers. The oil tanker was then sub-chartered by Star Tankers to CITGO Asphalt Refining Company and others (collectively CARCO). Shortly before reaching her destination, M/T Athos I allided with an anchor in the Delaware River from an abandoned ship, puncturing the hull of the oil tanker and causing 264,000 gallons of crude oil to spill into the river. As the owner of the oil tanker, Frescati was required pursuant to the Oil Pollution Act (“OPA 90”) to clean up the spill and pay all associated costs. The total cost of the cleanup was $133 million. Under OPA 90, Frescati’s liability was limited to $45 million. As such, the Oil Spill Liability Trust Fund reimbursed Frescati for the additional $88 million. Frescati and the Federal Government sued CARCO alleging that CARCO had breached the “safe berth” clause in the subcharter agreement between CARCO and Star Tankers. The “safe berth” clause in the subcharter agreement provided as follows:

“SAFE BERTHING – SHIFTING. The vessel shall load and discharge at any safe place or wharf, or alongside vessels or lighters reachable on her arrival, which shall be designated and procured by the Charterer, provided the Vessel can proceed thereto, lie at, and depart therefrom always safely afloat, any lighterage being at the expense, risk and peril of the Charterer.” Id at 18.

Frescati as an intended third-party beneficiary of the subcharter agreement, and the United States alleged that the clause obligated CARCO to choose a berth that was safe and that would allow the oil tanker “to come and go ‘always safely afloat.’” Id. at 1. The Third Circuit agreed with Frescati and the United States and held that the “safe berth” clause embodied an express warranty of safety “made without regard to the amount of diligence taken by the charterer.” Id at 4. With that said, the Third Circuit found that CARCO was liable for breaching the warranty. Id at 5.

The Supreme Court granted certiorari to resolve the issue of whether the “safe berth” clause merely imposes a duty of diligence or is a warranty of safety.[1] Id. “The former interpretation allows a charterer to avoid liability by exercising due diligence in selecting a berth; the latter imposes liability for an unsafe berth without regard to the care taken by the charterer.” Id. CARCO argued that the Court should adopt the Fifth Circuit’s interpretation that “safe berth” clauses impose a duty of due diligence on the charterer rather than strict liability.

As Justice Sotomayor writing for the majority pointed out, the “analysis starts and ends with the language of the safe-berth clause.” Id at 6. To the majority, the fact that the clause did not expressly use the term “warranty” is not persuasive as “[i]t is well settled as a matter of maritime contracts that ‘[s]tatements of fact contained in a charter party agreement relating to some material matter are called warranties,’ regardless of the label ascribed in the charter party.” Id at 7 citing to Davison v. Von Lingen, 113 U. S. 40, 49–50 (1885) (a stipulation going to “substantive” and “material” parts of a charter party forms “a warranty”). Accordingly, what is important is whether the “safe berth” clause contains a statement of material fact as to the condition of the selected berth. Id. In response to CARCO’s argument that the “safe berth” clause contains limitations on liability, the Court held that there was no basis for this argument given the language of the charter party. Id at 10. CARCO attempted to allege that the “safe berth” clause does not embody a warranty of safety relying on Atkins v. Disintegrating Co., 18 Wall. 272 (1874) and Orduna S. A., 913 F. 2d 1149. Although the Court agreed that the Fifth Circuit in Orduna held a similarly unqualified “safe berth” clause to impose a duty of due diligence, the Fifth Circuit considered only tort law and policy considerations rather than purporting to interpret the language of the clause at issue in the instant case. Id at 14. Instead, the Court was more persuaded by the long line of decisions of the Second Circuit interpreting the language of “safe berth” clauses to establish a warranty of safety. Id at 12.

After careful review of the line of cases presented by CARCO, Frescati and the United States, the Court concluded that although charterers are free to contract around the language establishing a warranty of safety, the plain meaning of the “safe berth” clause in the instant case “unambiguously establishes a warranty of safety.” Id at 15.

In their dissenting opinion, Justice Thomas and Justice Alito held that the plain language of the “safe berth” clause does not include a warranty of safety. Furthermore, they pointed out that “the majority’s opinion applies only to this specific contract. . .” Id at 27. The dissent suggests a narrow reading of the majority’s holding and does not contemplate that the agreement between Star Tankers and CARCO was based on an industry standard form contract, the Asbatankvoy Charter Party Agreement. The standard form contract is a widely used charter form that was produced by the Association of Ship Brokers and Agents. As such, the Asbatankvoy “safe berth” clause is standard in most charter party agreements. Thus, the majority’s interpretation that the “safe berth” clause creates a warranty of safety will undoubtedly have far-reaching implications in the maritime industry and to an extent, will allow for consistency. As Justice Sotomayor emphasized, the majority’s decision “does no more than provide a legal backdrop against which future [charter parties] will be negotiated.” Id at 15 citing Kirby, 543 U.S., at 31-32. “Charterers remain free to contract around unqualified language that would otherwise establish a warranty of safety, by expressly limiting the extent of their obligations or liability.” Id at 16.

“Safe berth” provisions take a variety of forms and are commonly used between owners and charterers in the maritime shipping industry. BIMCO as the world’s largest shipping association with more than 1,900 members from over 120 countries has created standard charter parties, bills of lading and other standard agreements that parties can use as is or edit to reflect the parties’ specific business needs. Certain contract clauses are widely used because they provide certainty and consistency of obligations and responsibilities, thereby reducing the possibility of disputes. The Supreme Court’s recognition that “safe berth” clauses appear in different contracts throughout the shipping supply chain only reinforces the importance of its ruling to the shipping industry. The Court’s decision provides clarity to owners and charterers regarding the interpretation of the “safe berth” clause, as a warranty imposing liability on charterers for breach even in the absence of fault. Moreover, the ruling provides “stability and consistency required to conduct business.” See Brief of Amici Curae BIMCO, The International Association of Independent Tanker Owners and the International Association of Dry Cargo Shipowners at 13.

Additionally, this ruling has several potential implications for shipowners and charterers operating in the midst of the COVID-19 pandemic. Given the current COVID-19 pandemic, charterers need to be aware as to whether a port affected by the virus is a safe port to ensure compliance with the Charter Party Agreement. After all, it is the obligation of the charterer in these types of agreements to select ports which are safe. At present, it is difficult to say whether a port is safe or what the appropriate measure is to delineate a port as safe. Most commercial ports around the world are still operating and open despite the spread of COVID-19. With the need for continued transportation and discharge of containers, bulk, oil, chemicals, and gas to meet global demand, it is unclear how “safe berth” clauses will affect charterers in the current climate. The definition of safety is clearly an evolving concept as so many factors must be taken into consideration. In addition to political or civil unrest, lack of navigational aids, negligence of pilots, high congestion at a port and certain physical characteristics of a port, the maritime industry now also needs to consider the spread of a global pandemic during the course of its operations.

[1] The Fifth Circuit has held that the “safe berth” clause only imposes a duty of diligence, contradicting the Second Circuit, which has held that the “safe berth” clause establishes a warranty of safety.

July 18, 2019–MG+M’s Jeff McLucas successfully defended the summary judgment dismissal of a wrongful death civil case stemming from the shooting, and ultimate death, of a drive-by shooting victim in Boston that occurred on a public sidewalk adjacent to a housing development. Holloway v. Madison Trinity Limited Partnership, 2019 WL 3227215, Appeals Court of Massachusetts No. 18-P-1323 (July 18, 2019).

The decedent was shot by unidentified individuals who were never apprehended, initially paralyzed and eventually passed away from complications stemming from her injuries. The Plaintiff brought negligence claims against the operator and manager of the adjacent housing development claiming that the Defendants failed to provide adequate security in the area or to warn her about the dangers presented by criminal activity in the neighborhood. Massachusetts Superior Court Justice Paul Wilson granted summary judgment in favor of the Defendants finding that there was no legally actionable duty of care running from the Defendants to the decedent in the circumstances presented by the case. MG+M successfully defended the appeal of the dismissal.

The subject shooting incident occurred on a public street and sidewalk adjacent in the neighborhood known as Orchard Gardens which was previously operated as a public housing project by the Boston Housing Authority (BHA) and known as Orchard Park. The neighborhood was substantially redeveloped in the late 1990s and subsequently operated by the Defendants pursuant to an agreement with the BHA. Orchard Park was plagued by widespread drug trafficking and violence which persisted after the neighborhood was developed into Orchard Gardens. Continue Reading MG+M Prevails at Massachusetts Appeals Court in Wrongful Death Shooting Case

A unique feature of maritime law in the United States is the Limitation of Shipowners’ Liability Act (“Limitation Act”), which provides vessel owners with a federal right to limit their liability for damage or injury following a maritime accident. 46 U.S.C. 30505. The Limitation Act is a powerful tool for maritime defense attorneys. It provides a procedure to enjoin all pending suits and to compel them to be filed in a limitation proceeding so that liability may be determined and limited to the post loss value of the shipowner’s vessel and the amount related to services performed by the vessel (i.e. carriage of cargo). This is especially powerful when the vessel has suffered significant damage due to a casualty; thus significantly reducing its post loss value and creating a substantial financial limitation against potential claims. However, timing is everything and turns on the notice provided to the shipowner.

To be afforded protection under the Limitation Act, the shipowner must bring a limitation action in federal court within six months of receiving notice of a claim. Once the shipowner meets the six-month statutory deadline, all related lawsuits pending against the shipowner shall cease and a limitation fund is created. Thereafter, all claimants are required to pursue their claims in the limitation proceeding.

Earlier this year, the Eleventh Circuit in Orion Marine Construction, Inc. v. Dawson, No. 17-11961 (11th Cir. 2019) issued a much-anticipated ruling addressing the scope of the notice provisions under the Limitation Act. The case involves a limitation action filed by Orion after a number of local residents filed complaints alleging damage to their properties. Orion used barges to drive concrete piles into the bay floor to rebuild a bridge pursuant to a contract with the Florida Department of Transportation (FDOT) and the local residents claimed that their homes were damaged by the vibrations caused by such activities. Originally, between 2012 and 2014 only nine local residents brought complaints against either Orion, FDOT or Orion’s third-party administrator, FARA Insurance. There were eventually 247 claims made against Orion, however, for purposes of analysis and the timing requirement, the court focused on the original nine claims. Those nine claims were made before November 11, 2014, and more importantly for purposes of the court’s analysis, unlike the other claims, these were made more than six months before Orion filed suit on May 11, 2015. Of those nine, two of the original complainants, the Dawsons, moved to dismiss Orion’s limitation action for untimeliness arguing that because Orion had received “written notice of a claim” but had not brought a limitation action “within 6 months after a claimant gives the owner written notice of a claim,” the action was time barred as per §30511(a). Orion responded that it did not receive proper notice under the Act because the complaints were (1) not in writing and, (2) they failed to reveal a “reasonable possibility” that the claims would exceed the aggregate value of the barges used during the project. The District Court subsequently dismissed the motion without prejudice. Continue Reading “Close, But Still No Cigar”: Timing is Everything When Seeking Limitation or Exoneration Under the Limitation of Shipowners’ Liability Act

On June 24, 2019, the United States Supreme Court issued a much-anticipated decision in Dutra Group v. Batterton, No. 18-266 (June 24, 2019). The decision settles and resolves a longstanding circuit split on whether a seaman has the right to recover punitive damages under a claim of unseaworthiness. In a 6-3 ruling, the Court held that a plaintiff may not recover punitive damages on a claim of unseaworthiness. See Id at 2.

In Dutra, the Plaintiff, Christopher Batterton (“Batterton”) filed a personal injury action alleging that, while working on a scow near Newport Beach, California which was owned by Dutra Group, he was injured when his hand was caught between a bulkhead and a hatch that blew open as a result of unventilated air accumulating and pressurizing within the component. Id at 9. Batterton sued Dutra and asserted a variety of claims, including negligence, unseaworthiness, maintenance and cure, and unearned wages. Id. He sought to recover general and punitive damages. Dutra moved to strike Batterton’s claim for punitive damages, arguing that they are not available on claims for unseaworthiness. Id. The District Court denied Dutra’s motion, 2014 WL 12538172 (CD Cal., Dec. 15, 2014), but agreed to certify an interlocutory appeal on the question, 2015 WL 13752889 (CD Cal., Feb. 6, 2015). Id. The United States Court of Appeals for the Ninth Circuit affirmed and held that punitive damages are available for seaworthiness. Dutra Group v. Batterton, 880 F. 3d 1089, 1096 (CA9 2018). The United States Supreme Court granted certiorari to resolve the division between the circuits. Continue Reading Miles v. Apex Marine Lives: U.S. Supreme Court Rejects Punitive Damages for Claims of Unseaworthiness

 MG+M Boston Attorneys Kevin Hadfield and Christos Koutrobis successfully obtained judgment on the pleadings for its client in Shepard v. AG Realty Investment, LLC, WWM-CV18-6014773-S, a personal injury case brought in the Connecticut Superior Court for the Judicial District of Putnam.

Plaintiff, a police officer, was attacked and bitten by a dog while executing a search warrant at an apartment building owned by MG+M’s client. In his complaint, Plaintiff stated that the dog was owned by a friend of the landowner’s tenant. Plaintiff claimed that the landowner should nevertheless be held liable because he was aware of, but did nothing to quell, significant alleged criminal activity on the premises. The alleged criminal activity resulted in Plaintiff’s need to be present on the property in his official capacity as well as the subsequent dog bite. Plaintiff asserted premises liability negligence claims in his complaint.

MG+M moved to strike the Plaintiff’s complaint for failure to state a claim. As grounds for its motion, MG+M argued that pursuant to the common law “firefighter’s rule,” a landowner owes no duty of care to a first responder that enters the premises within the scope of his official duties. In fact, the Connecticut Supreme Court has made clear that “under the firefighter’s rule, the landowner generally owes the firefighter or police officer injured on his property only the duty not to injure him willfully or wantonly . . . .” Levandovski v. Cone, 267 Conn. 653, 654 (2004) (internal citations and quotations omitted).

Plaintiff opposed MG+M’s motion, asserting that the claims were based on principles of “ordinary” negligence, rather than premises negligence, and were therefore excluded from the protections afforded by the firefighter’s rule. Plaintiff attempted to draw parallels between his case and Sepega v. DeLaura, 326 Conn. 788 (2017), in which the Connecticut Supreme Court permitted a case sounding in ordinary negligence to proceed against a landowner that actively barricaded himself into a house, forcing the officer to break the door down, resulting in injuries. The Superior Court rejected Plaintiff’s comparison, and held that the Sepega Defendant’s “active” negligence created an immediate hazard for the Plaintiff who had already entered the premises, which was distinguishable from the “passive” defective premises negligence allegations set forth in Plaintiff’s complaint.

In its memorandum of decision granting MG+M’s motion, the Court highlighted Plaintiff’s failure to allege that AG Realty had any knowledge of the presence of the dog that allegedly attacked the Plaintiff and also failed to assert factual allegations that would suggest willful or wanton misconduct on the part of the defendant. The Court struck plaintiff’s complaint and entered judgment on the stricken complaint in MG+M’s favor.

This common-sense application of the “firefighter’s rule” affirms the protections afforded to landowners from lawsuits by first responders, who may enter their premises at any time, from any direction, without invitation or warning, and without prior notice and opportunity to the landowner to remedy potential defects on the property. The rule prevents landowners from being held to an unreasonable standard of care, in that they would otherwise be compelled to keep all parts of their property in a condition uncalled for relative to the normal use for which the premises are utilized.