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Maritime Update: Personal Jurisdiction Decision in Shifting Cargo Case

Bill Schwartz - 

In the Fifth Circuit case decided May 10, 2019 of Jose Carmona v Leo Ship Management, Inc., the court affirmed in part the decision of the trial court that no jurisdiction existed as to the claim for shifting cargo; i.e. that was due to the fact the stowage (the tort) occurred out of the United States. However, the appeals court remanded to the lower court to decide if jurisdiction existed as to the other claims for liability.

As a stevedore, Jose Carmona was tasked with unloading cargo from the M/V Komatsushima Star in April 2014. While he was rigging a bundle of pipes in the ship’s hold, the pipes fell and injured his ankle and lower leg. He sued Leo Ship Management, Inc. (“LSM”), a foreign corporation that managed the ship. In noting that LSM had no control over the ship’s ports of call, the district court dismissed for lack of personal jurisdiction. The trial court held the company did not purposely avail itself of the privilege of conducting activities in Texas.

The plaintiff then appealed this decision to the Fifth Circuit Court of Appeals.

By way of background, LSM was found to be a Philippine corporation with its principal place of business in Manila. None of its employees, officers, shareholders or directors had ever resided in Texas, and the company did not own or rent property in the state. LSM solicited no business in Texas and has never contracted with a Texas resident to render performance. However, LSM contracted with the owners of the M/V Komatsushima Star to serve as the ship manager. In that capacity, LSM supplied and supervised the crew and arranged for necessary repairs and maintenance to ensure compliance with the laws “of the places where [the vessel] trades.”

As noted above, a third party loaded the pipes aboard the ship outside the United States. Despite that fact, Carmona sued LSM in state court. He claimed negligence under general maritime law and the Longshore and Harbor Workers’ Compensation Act (“LHWCA”). Specifically, he alleged that LSM breached its duty to (1) stow the pipes properly; (2) minimize hazards associated with falling pipes; (3) take precautions to protect workers; (4) provide a safe work environment; (5) turn over the vessel in a safe condition for discharging cargo; (6) warn of hidden dangers; and (7) intervene to protect the stevedores.

LSM removed the state court filing to federal court and then moved to dismiss for lack of personal jurisdiction. Again, as noted above, the district trial court ruled no personal jurisdiction existed.

In evaluating whether due process permitted the exercise of specific jurisdiction, the appeals court needed to consider (1) whether the defendant had minimum contacts with the forum state, i.e., whether it purposely directed its activities toward the forum state or purposefully availed itself of the privileges of conducting activities there; (2) whether the plaintiff’s cause of action arose out of or resulted from the defendant’s forum-related contacts; and (3) whether the exercise of personal jurisdiction was fair and reasonable. If the plaintiff established the first two prongs, the burden shifted to the defendant to make a “compelling case” that the assertion of jurisdiction was not fair or reasonable.

The Fifth Circuit found that LSM purposely availed itself of Texas when its employees voluntarily entered the jurisdiction aboard the vessel. Although LSM had no control over the vessel’s course, the ship management agreement contemplated that the ship would travel to locations throughout the world. Moreover, the contract required the ship’s owners “to maintain close communication with” LSM, “shar[ing] relevant information regarding [the] ship’s schedule” and “port information.” Notably, LSM received actual notice that the ship would be departing for Texas. LSM thus was found to have purposely availed itself of the benefits and protections of the forum state because it reasonably should have anticipated being haled into court for torts committed there.

However, despite this finding, LSM presented undisputed evidence that a third party had stowed the pipes aboard the ship while it was outside the United States. Unlike Carmona’s other allegations, the claim that the pipes were improperly stowed was found by the Fifth Circuit not to stem from LSM’s activities in Texas. Instead, the alleged tortious conduct was found to have occurred outside the United States at the hands of a third party. As a result, they upheld the district court decision to dismiss, for lack of personal jurisdiction, the claim of failure to load the pipes properly.

As far as the remaining claims, the 5th Circuit remanded back to the district trial court for consideration whether the exercise of personal jurisdiction accords “with traditional notions of fair play and substantial justice.”

Click here to view the entire case.

If you have any questions regarding this maritime matter, please contact Bill Schwartz at (504) 569-2900 or wschwartz@bhbmlaw.com.


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