Legal Roundup for the Energy Sector

02 January 2019

U.S. Supreme Court Asked To Resolve Split In Circuits On Whether Jones Act Seamen Can Recover Punitive Damages For Vessel Unseaworthiness

In 2014, the United States Fifth Circuit Court of Appeals sitting en banc(1) held that injured Jones Act seamen cannot recover punitive damages for their vessel owner/employer’s breach of its general maritime law duty to provide a seaworthy vessel.

Earlier this year the United States Ninth Circuit Court of Appeals expressly disagreed with the Fifth Circuit on this issue and found that punitive damages can be awarded to Jones Act seamen for their own injuries in general maritime law unseaworthiness claims.

The vessel owner recognized the Ninth Circuit had already allowed punitive damages for general maritime law unseaworthiness but argued the earlier decision had previously been overruled by the United States Supreme Court. The Ninth Circuit held otherwise, and the vessel owner recently filed a petition for a writ of certiorari(2) of the decision to the Supreme Court.

The disagreement mainly arises from the difference in the circuit courts’ interpretations of the Supreme Court’s prior decisions.

Although the Supreme Court only grants writs in a very small number of cases, the Supreme Court may consider doing so to resolve the split in authority between the Fifth and Ninth Circuits.

This issue is extremely important to vessel/drilling rig operators in the marine and energy industries as this decision will either limit or expand vessel owners/ employers’ exposure. Additionally, any decision will impact the significant litigation risk that punitive damages pose to marine and energy companies, which in certain jurisdictions are not insurable.

  1. In law, an en banc session (French for “in bench”) is a session in which a case is heard before all the judges of a court (before the entire bench) rather than by a panel of judges selected from them.
  2. The word certiorari, which comes Latin for “to be more fully informed.” A type of writ by which an appellate court decides to review a case at its discretion.

UK Supreme Court Overturns Appeal Court On Cargo Claim Burden Of Proof

The UK Supreme Court has overturned the Court of Appeal judgment on the order and burden of proof in cargo claims, setting aside the Court of Appeal’s decision in that the burden of proof was on the cargo owner to show negligence on the part of the carrier, which would prevent him from relying on defences under Article IV Rule on the Hague Rules.

In the High Court the judge held that there was a circularity between Article III rule 2 and Article IV rule 2(m) of the Hague Rules. This would mean that, once the claimants had shown that the coffee bags were delivered in a damaged condition, the onus was on the carrier to establish inherent vice or inevitability of damage and to disprove negligence.

In the Court of Appeal the judge criticised the High Court judge’s decision. The higher court held that, once the carrier had shown a prima facie case for the application of the exception of inherent vice in article IV rule 2(m), the burden then shifted to the cargo claimant to establish negligence on the part of the carrier, such as to negate the operation of the exception.

However, following a detailed review of the decisions in the first instance and on appeal, the Supreme Court overturned the Court of Appeal judgment.

The Supreme Court unanimously held that the carrier had the legal burden of disproving negligence for the purpose of invoking an exception under Article IV rule 2 of the Hague Rules, just as he has for the purpose of Article III rule 2.

Applying this approach to the Rules, the carrier was therefore responsible for loss or damage during the voyage unless it can prove:

  • on a balance of probability that the loss or damage was not caused by any breach of Article III rule 2 (the duty to take reasonable care of the cargo) or
  • that one of the defences in article IV rule 2 applied.

The carrier seeking to rely on one of these defences also needed to prove that there was no negligence on his part which caused the damage, despite any reasonable steps taken to care for the cargo.

In the context of inherent vice, if the carrier was to be able to rely on the Article IV rule 2(m) exception, it needed to show either:

  • that it took reasonable care of the cargo but the damage occurred nonetheless
  • that whatever reasonable steps might have been taken to protect the cargo from damage would have failed in the face of its inherent propensities.

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