2010

Hawaii’s Intermediate Court of Appeals just published an opinion regarding the applicability of Hawaii’s General Excise Tax to charter vessels.  The case is Reel Hooker Sportfishing, Inc. v.  State of Hawaii – Department of Taxation and can be viewed here.

The main legal issue in this case is to what extent Hawaii’s state taxes can reach commercial operations in the federal domain.  Ben Lowenthal has a great post on the legal issues here.

Federal law (33 U.S.C. s. 5(b)) provides:

No taxes, tolls, operating charges, fees, or any other impositions whatever shall be levied upon or collected from any vessel or other water craft, or from its passengers or crew, by any non-Federal interest, if the vessel or water craft is operating on any navigable waters subject to the authority of the United States, or under the right to freedom of navigation on those waters, except for (1) fees charged under section 2236 of this title; (2) reasonable fees charged on a fair and equitable basis that (A) are used solely to pay the cost of a service fo the vessel or water craft; (B) enhance the safety and efficiency of interstate and foreign commerce; and (C) do not impose more than a small burden on interstate or foreign commerce; or (3) property taxes on vessels or watercraft, other than vessels or watercraft that are primarily engaged in foreign commerce if those taxes are permissible under the United States Constitution.

When you read the statute, it seems to be explicit in its prohibition on what taxes a non-Federal interest may assess against vessels.  The ICA disagreed with this position and upheld the GET on these vessel operators.

My take on this case is from a broader context.  Under U.S. Constitutional law, the state’s ability to regulate commerce on navigable waters stems solely from the Submerged Lands Act.  Absent some delegated authority in the Submerged Lands Act, the State does not have the authority to regulate commerce.  To be sure, however, this principle is honored in the breach with states pushing their enforcement authority beyond their territorial land mass and into the ocean.  See my posts on shark tour bans (Honolulu here, Maui here).

This issue formed the crux of the argument in the UFO Chuting case (see my post here –  and the amicus brief we filed sets out the Submerged Lands Act issue). 

Conceptually, this case makes sense:  a Hawaii business, collecting revenue on Hawaii’s land mass, receiving the benefits of Hawaii’s legal system and government should pay taxes on the revenues obtained therein.  But, the revenue they are collecting are for services provided outside the State of Hawaii and outside of the authority delegated to it by the Congress in the Submerged Lands Act.  Has the Congress stated what ability states have to tax these vessel operations?  Yes, in the the statute excerpted above.

It’ll be interesting to see what happens next.  An application for certiorari to the Hawaii Supreme Court?  U.S. Supreme Court cert petition?  Stay tuned.

  
 

If a tree falls in the woods…..

Or, if a worker is killed on land but his injury is caused by an Outer Continental Shelf activity, can he recover under the Outer Continental Shelf Lands Act?

The Ninth Circuit just released this case which addresses the applicable standard for determining application of the Outer Continental Shelf Lands Act.  The opinion is in the case of Valladolid v. Pacific Operations Offshore and can be downloaded here.

As the Court begins:

In this case, we consider whether an employee must be injured on the outer continental shelf to be eligible for workers’ compensation benefits under the Outer Continental Shelf Lands Act (“OCSLA”), 43 U.S.C. § 1331 et seq.

The two other circuits that have considered this question have reached conflicting conclusions.

Conflicts between the circuits.  Signal one for a good case to go to the Supreme Court.  Ninth Circuit decision.  Signal two.

Facts: Roustabout was killed onshore, while working on activities related to an offshore oil platform.  Widow files for state worker’s compensation benefits, benefits under the Outer Continental Shelf Lands Act and the Longshore Harbor Workers Compensation Act.  The OCSLA and LHWCA benefits are denied.

Proceedings: As required by federal law, the claim was adjudicated by an Administrative Law Judge with an appeal to the Benefits Review Board.  This appeal followed.  The proceedings below:

The ALJ denied Petitioner’s OCSLA claim on the grounds that Valladolid’s injury had occurred outside the geographic situs of the outer continental shelf. The ALJ denied the LHWCA claim on two grounds: (1) Valladolid was not engaged in maritime employment, and (2) he was not injured on a maritime situs. The Benefits Review Board (“BRB”) upheld the ALJ’s denial of the OCSLA benefits under the “situs-of-injury” test, and affirmed the denial of LHWCA benefits on the maritime situs ground. The BRB did not reach the maritime employment issue.

The compensation scheme is as follows:

Under the OCSLA workers’ compensation provision, LHWCA benefits are extended to:

[the] disability or death of an employee resulting from any injury occurring as the result of operations conducted on the outer Continental Shelf for the purpose of exploring for, developing, removing, or transporting by pipeline the natural resources, or involving rights to the natural resources, of the subsoil and seabed of the outer Continental Shelf.

43 U.S.C. § 1333(b). The outer continental shelf is comprised of “all submerged lands lying seaward and outside of the area of lands beneath navigable waters”—that is, submerged lands lying outside the territorial jurisdiction of the states. Id. § 1331(a); see id. § 1301(a)(2). State jurisdiction over offshore lands generally extends three miles from the coast line, though in certain cases not relevant here, it may extend further. See id. § 1301(a)(2).

Precedent:

In Curtis v. Schlumberger Offshore Service, Inc., 849 F.2d 805 (3d Cir. 1988), the Third Circuit rejected the situs-of-injury test and held that a claimant need only satisfy a “but for” test in establishing that the injury occurred “as the result of” operations on the outer continental shelf. Id. at 809-11. Accordingly, an employee injured in a car accident on his way to meet a helicopter that would take him to an offshore platform was eligible for OCSLA disability benefits. Id. at 806, 811.

However, in Mills v. Director, Office of Workers’ Compensation Programs, 877 F.2d 356 (5th Cir. 1989) (en banc), the Fifth Circuit adopted a situs-of-injury requirement for OCSLA claims. Under Mills, an OCSLA claimant must show that the injury occurred on an outer continental shelf platform or on the waters above the outer continental shelf, in addition to satisfying the “but for” test. Id. at 362; see also Becker v. Tidewater, Inc., 586 F.3d 358, 366-67 (5th Cir. 2009); Pickett v. Petroleum Helicopters, Inc., 266 F.3d 366, 368 (5th Cir. 2001); Sisson v. Davis & Sons, Inc., 131 F.3d 555, 558 (5th Cir. 1998). Thus, a welder injured during the onshore construction of a platform destined for the outer continental shelf was not eligible for OCSLA disability benefits. Mills, 877 F.3d at 357, 362.

Result:  I’ll spare you the 10 pages of discussion of persuasive but not binding precedent, the legislative history (Shh, don’t tell Justice Scalia – per his concurrence in Jerman v. Carlislehe doesn’t like it), and the canons of statutory construction.  The Ninth Circuit rejected Mills and held that the OCSLA did not require the situs of the injury to be on the Outer Continental Shelf.

One to watch. 

Did an unsecured barge cause the New Orleans levee break during Hurricane Katrina?  The questions answered here are: who should pay to defend it?  And, does the terminal owner’s insurance company cover it?

A new maritime insurance case from the Second Circuit Court of Appeals answers some of the above (the insurance stuff anyway). The case…

On March 24, 2010, the Supreme Court heard oral argument in the case of Kawasaki Kisen Kaisha v. Regal Beloit Corporation and Union Pacific Railroad Company v. Regal-Beloit Corporation.  The oral argument transcript can be downloaded here.  My earlier post with briefs and decision below here.

This issue is which liability framework applies to cargo that is transported under a bill of lading but has some damage while on U.S. railways.  COGSA and the bill of lading is one framework.  The Carmack Amendment which governs rail carrier liability is another.

While the issue is a bit for the admiralty/interstate commerce wonks among us, the transcript yielded some gems:

Best “Canons of Statutory Interpretation in a Nutshell” Quote: 

MR. BALLENGER: Well, Your Honor, we don’t think that it is necessary for this Court to read the statute in a countertextual way. You just have to do what this Court has always done and read the statute as a whole, including giving some weight to that provision which is in the text of the statute and reading the rest of the statute in light of it.

Best “Random Thoughts of the Chief Justice” Quote:

CHIEF JUSTICE ROBERTS: This may not have anything to do with anything. Is there a reason the STB doesn’t appear on your brief?

Best “Those Darn Publishers of the U.S. Code” Quote:

JUSTICE SCALIA: Okay. Wait a minute now.

MR. YANG: I’m sorry –

JUSTICE SCALIA: The paragraphing you say is wrong?

MR. YANG: From 5a to 6a, you will see 5a is the 1978 version of Carmack that was enacted in the 1978 codification.

JUSTICE SCALIA: Right. MR. YANG: The current version is reflected on the facing page. There was no paragraph indentation in 1978. And in 1995 when Congress changed the text, it did include a paragraph indentation, but the committee report — the conference report is very clear that Carmack was not changed. Also –

JUSTICE SCALIA: So all — you are saying that — I think what you are saying is that all we have to use the statutory statement that “nothing was meant to be changed or” is to say, well, that paragraphing in 3 is just wrong, right?

MR. YANG: Well, I don’t know — you mean the indentation?

JUSTICE SCALIA: The indentation.

MR. YANG: The indentation was inadvertent. And I would actually direct the Court to 73a, which is the other part of Carmack that now exists for motor transportation and freight forwarders. There is no indentation. The current version of the other half of Carmack does not provide the indentation. The indentation is inadvertent. And in ’95 — the ’95, which –

JUSTICE SCALIA: I’m losing you. 73a?

Best “Foreign Law-Phobes Watch Out! I see a Cite to Europe Law Coming” Quote:

JUSTICE SOTOMAYOR: I think Justice Breyer asked you why it made sense that there would be two rules in effect for what happens on the ocean and what happens on land; and if we had it, wouldn’t it create great difficulty. I think — you may correct me.

JUSTICE BREYER: Your point was –

MR. FREDERICK: That’s how the world –

JUSTICE BREYER: — if it creates such difficulty, why were the railroads in favor of it before?

MR. FREDERICK: Correct. And that’s how -that’s how Europe operates. Europe has separate conventions for rail and road that apply to damage that occur on land and the European nations have acceded to the various versions of Hague rules –

JUSTICE BREYER: Anything here that says on land? Anything in Carmack that says on land?

Best “I hope Chief Justice Roberts Nodded at Justice Sotomayor” Quote:

CHIEF JUSTICE ROBERTS: And that’s a different question with respect to liability and claims than with respect to venue.

MR. FREDERICK: Correct. And let me address that if I might.

JUSTICE SOTOMAYOR: Could I just — just briefly before you answer the Justice — the Chief.

MR. FREDERICK: Sure.

[The Chief Justice reminded counsel of his question later on.]

Best “Don’t Show Me No Stinkin’ Letter Briefs” Quote:

JUSTICE SCALIA: Wait. You say we have to defer to a letter brief in another case?

MR. FREDERICK: No –

JUSTICE SCALIA: I think most of my colleagues would not defer to a letter brief in this case. And you are saying that we owe deference to a letter brief in another case?

MR. FREDERICK: That is what this Court held –

JUSTICE SCALIA: Which I didn’t agree with, it seems to me.

Best “What Does “In” Mean” or “How Do You Politely Read a Statute to a Justice” Quote:

JUSTICE BREYER: Can we go back one more second? Can you just give me the citation in Carmack -not COGSA, but Carmack — that would get our intermodal shipment out of the board’s jurisdiction? Because what I’m thinking about is the intermodal shipment and the boat sinks near Hawaii. Okay? Now, on your reading of Carmack, not COGSA, what gets that shipment sunk in Hawaii — or Midway or Guam or someplace — what gets them out of Carmack? Which words?

MR. FREDERICK: Well, the — on 62A, the petition appendix defines the general jurisdiction.

JUSTICE BREYER: And it includes transport just as you defined it between the United States and another place — United States and a place in a foreign country.

MR. FREDERICK: Yes.

JUSTICE BREYER: So that’s what this is. This is a shipment between Shanghai and San Francisco.

MR. FREDERICK: And at (a)(2) — will you look at (a)(2), please? (A)(2) says jurisdiction under paragraph 1 applies only to transportation in the United States.

JUSTICE BREYER: Oh, sorry, between a place in — oh, transportation in the United States.

MR. FREDERICK: In the United States.

JUSTICE BREYER: Between a place in.

MR. FREDERICK: Exactly.

JUSTICE BREYER: Thank you.

MR. FREDERICK: Yes, thank you.

(Laughter. )

Whoa.  The legislative staff has been busy at the State Capitol. 

Last month, we reviewed H.B. 1808 which was pending before the Hawaii Legislature relating to the definition of shoreline that attempted to assist in the definition of the demarcation of property between the State and oceanfront landowners (earlier post here).

The bill has been revised and has passed the House.  Current version of H.B. 1808 is here.  (I have also subscribed to the Leg’s very cool feature which allows for status updates through RSS fee, hat tip to the Leg).

From the bill:

SECTION 1. The legislature finds that there are many shoreline areas throughout the state where the overgrowth of vegetation inhibits lateral access and transit along the beach, thereby denying the public of use and enjoyment of the public domain. The area seaward of’ the shoreline is part of the State’s conservation district and is regUlated by the department of land and natural resources. Although natural vegetative overgrowth exists along beach areas, there is also evidence in many areas of vegetative overgrowth into the beach area induced or cultivated by private property owners. The department does not have the funding nor should it be financially responsible for the removal of induced or cultivated vegetation by private landowners which interfere or encroach seaward of the shoreline.

The legislature further finds that beach transit corridors are similar to public sidewalks in the sense that they are for public use. To maintain beach transit along the shoreline, provisions similar to those  pertaining to the maintenance of sidewalks are needed when induced or cultivated vegetation interferes or encroaches into the beach transit corridor.

The purpose of this Act is to reaffirm a longstanding public policy of extending to public use and ownership as much of Hawaii’s shoreline as is reasonably possible by ensuring the public’s lateral access along the shoreline, by requiring the removal of the landowners’ induced or cultivated vegetation that interferes or encroaches seaward of the shoreline.

The bill also purports to criminalize the failure of a landowner to maintain vegetation that encroaches on the access areas. 

Interesting twist.  The bill defines says that land seaward of the property boundary is the beach transit corridor. And, provides:

However, in areas of cliffs or areas where the nature of the topography is such that there is no reasonably safe transit for the public along the shoreline below the private property lines, the counties by condemnation [shall] may establish along the makai boundaries of the property lines public transit corridors which shall be not less than six feet wide.

(b) Along beach transit corridors where the abutting landowner’s human-induced, enhanced, or unmaintained vegetation interferes or encroaches with beach transit corridors, the department of land and natural resources may require the abutting landowner to remove the landowner’s interfering or encroaching vegetation. “

So, the counties (which typically do not have an ownership stake in the shoreline) may condemn “along the makai boundaries” to make a corridor? 

Lot to digest with this bill. Stay tuned.

The Court of Appeals for the Second Circuit just published a decision that presents the question of what happens when two federal policies (protection of merchant seamen and preference for arbitration) run headlong into the other.  The policies are codified in the Jones Act (46 U.S.C. s. 688) and the Federal Arbitration Act (9 U.S.C.

Hawaii's Intermediate Court of Appeals just issued a Summary Disposition Order in a case involving landowner's rights and obligations in waters in a manmade waterway or ditch. The case is Ham Young v. Lee and is available here.

[Author's Note:  while the ocean, and the regulation and use of the ocean, is the thrust of this…

On Tuesday, President Obama issued an Executive Order relating to the Somalia piracy situation.  The Executive Order took effect immediately.  It purports to “block” payments, transfers or donations of property to several classes of individuals related to the crisis in Somalia.

The text of the Executive Order, the concurrently released message to Congress and the Annex are provided below.  When reviewing the legality of such an Executive Order, the starting point is to identify the statutory authorization for such an action.  As President Truman found out during the Korean War, the Executive Branch of the federal government is constitutionally constrained by its inability to legislate and any actions which purport to legislate are unconstitutional.  See Steel Seizure Case.

In this case, as you would expect, the President does have wide authority in the realm of international financial transactions and national defense.  See 50 U.S.C. s. 1702.  The maritime community is abuzz about this E.O. (hat tip to the Maritime Law Association of the U.S. for sending me the attached documents). Stay tuned.

The E.O. states:

I, BARACK OBAMA, President of the United States of America, find that the deterioration of the security situation and the persistence of violence in Somalia, and acts of piracy and armed robbery at sea off the coast of Somalia, which have repeatedly been the subject of United Nations Security Council resolutions (including Resolution 1844 of November 20, 2008; Resolution 1846 of December 2, 2008; Resolution 1851 of December 16, 2008; and Resolution 1897 of November 30, 2009), and violations of the arms embargo imposed by the United Nations Security Council in Resolution 733 of January 23, 1992, and elaborated upon and amended by subsequent resolutions (including Resolution 1356 of June 19, 2001; Resolution 1725 of December 6, 2006; Resolution 1744 of February 20, 2007; Resolution 1772 of August 20, 2007; Resolution 1816 of June 2, 2008; and Resolution 1872 of May 26, 2009), constitute an unusual and extraordinary threat to the national security and foreign policy of the United States, and I hereby declare a national emergency to deal with that threat.

I hereby order:

Section 1. (a) All property and interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person, including any overseas branch, of the following persons are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in:

(i) the persons listed in the Annex to this order;

and

(ii) any person determined by the Secretary of the Treasury, in consultation with the Secretary of State:

(A) to have engaged in acts that directly or indirectly threaten the peace, security, or stability of Somalia, including

but not limited to:

(1) acts that threaten the Djibouti Agreement of August 18, 2008, or the political process; or

(2) acts that threaten the Transitional Federal Institutions, the African Union Mission in Somalia (AMISOM), or other international peacekeeping operations related to Somalia;

(B) to have obstructed the delivery of humanitarian assistance to Somalia, or access to, or distribution of, humanitarian assistance in Somalia;

(C) to have directly or indirectly supplied, sold, or transferred to Somalia, or to have been the recipient in the territory of Somalia of, arms or any related materiel, or any technical advice, training, or assistance, including financing and financial assistance, related to military activities;

(D) to have materially assisted, sponsored, or provided financial, material, logistical, or technical support for, or goods or services in support of, the activities described in subsections (a)(ii)(A), (a)(ii)(B), or (a)(ii)(C) of this section or any person whose property and interests in property are blocked pursuant to this order; or

(E) to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to this order.

(b) I hereby determine that, among other threats to the peace, security, or stability of Somalia, acts of piracy or armed robbery at sea off the coast of Somalia threaten the peace, security, or stability of Somalia. (c) I hereby determine that, to the extent section 203(b)(2) of IEEPA (50 U.S.C. 1702(b)(2)) may apply, the making of donations of the type of articles specified in such section by, to, or for the benefit of any person whose property and interests in property are blocked pursuant to subsection (a) of this section would seriously impair my ability to deal with the national emergency declared in this order, and I hereby prohibit such donations as provided by subsection (a) of this section.

(d) The prohibitions in subsection (a) of this section include but are not limited to:

(i) the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any person whose property and interests in property are blocked pursuant to this order; and

(ii) the receipt of any contribution or provision of funds, goods, or services from any such person.

(e) The prohibitions in subsection (a) of this section apply except to the extent provided by statutes, or in regulations, orders, directives, or licenses that may be issued pursuant to this order, and notwithstanding any contract entered into or any license or permit granted prior to the effective date of this order.

Sec. 2. (a) Any transaction by a United States person or within the United States that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate any of the prohibitions set forth in this order is prohibited.

(b) Any conspiracy formed to violate any of the prohibitions set forth in this order is prohibited.

Sec. 3. For the purposes of this order:

(a) the term “person” means an individual or entity;

(b) the term “entity” means a partnership, association, trust, joint venture, corporation, group, subgroup, or other organization;

(c) the term “United States person” means any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States;

(d) the term “Transitional Federal Institutions” means the Transitional Federal Charter of the Somali Republic adopted in February 2004 and the Somali federal institutions established pursuant to such charter, and includes their agencies, instrumentalities, and controlled entities; and

(e) the term “African Union Mission in Somalia” means the mission authorized by the United Nations Security Council in Resolution 1744 of February 20, 2007, and reauthorized in subsequent resolutions, and includes its agencies, instrumentalities, and controlled entities.

Sec. 4. For those persons whose property and interests in property are blocked pursuant to this order who might have a constitutional presence in the United States, I find that because of the ability to transfer funds or other assets instantaneously, prior notice to such persons of measures to be taken pursuant to this order would render those measures ineffectual. I therefore determine that for these measures to be effective in addressing the national emergency declared in this order, there need be no prior notice of a listing or determination made pursuant to section 1(a) of this order.

Sec. 5. The Secretary of the Treasury, in consultation with the Secretary of State, is hereby authorized to take such actions, including the promulgation of rules and regulations, and to employ all powers granted to the President by IEEPA and the UNPA, as may be necessary to carry out the purposes of this order. The Secretary of the Treasury may redelegate any of these functions to other officers and agencies of the United States Government consistent with applicable law. All agencies of the United States Government are hereby directed to take all appropriate measures within their authority to carry out the provisions of this order.

Sec. 6. The Secretary of the Treasury, in consultation with the Secretary of State, is hereby authorized to submit the recurring and final reports to the Congress on the national emergency declared in this order, consistent with section 401(c) of the NEA (50 U.S.C. 1641(c)) and section 204(c) of IEEPA (50 U.S.C. 1703(c)).

Sec. 7. The Secretary of the Treasury, in consultation with the Secretary of State, is hereby authorized to determine that circumstances no longer warrant the blocking of the property and interests in property of a person listed in the Annex to this order, and to take necessary action to give effect to that determination.

Sec. 8. This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.

Sec. 9. This order is effective at 12:01 a.m. eastern daylight time on April 13, 2010.

BARACK OBAMA

The White House issued a message to Congress re Somalia regarding this Executive Order and also published the Annex with the names of the individuals now “blocked.”

This is an interesting case that has been comprehensively covered by my partner, Robert Thomas, on his blog, www.inversecondemnation.com.  But, it is an important shoreline precedent and deserves mention here.

Simply put, can a shoreline property owner be liable, under the Rivers and Harbors Appropriation Act of 1899, 33 U.S.C. s. 401, when structures that were lawful when constructed become unlawful (in trespass) through a property boundary that shifted shoreward through erosion? The Ninth Circuit opinion which answered that question, YES, is here.  The case is Sharp v. United States and this petition for Supreme Court review is certainly one to watch.

By way of factual background, aWashington shorefront property owner had erected a “shoreline defense structure” on then-dry land.  The land near the structure eroded and the structure then jutted out into now-tidelands.  Those tidelands were owned by the Lummi Indian Nation who, joined by the federal government, sued the property owner for trespass.

This case is the logical follow-on to another Rivers and Harbors case, United States v. Alameda Gateway, Ltd. 213 F.3d 1161 (2000)[Note: Robert rep’d landowner in that case].  In that case, the Ninth Circuit held:

Although § 10 does not explicitly mention the maintenance of structures in navigable waters, in the sense of keeping structures in place, we have interpreted the RHA as making unlawful the failure to remove structures prohibited by § 10, even if they were previously legal.

The problem with Alameda Gateway is that the statute prohibits the “creation of any obstruction” and “build or commence the building of any …bulkhead, jetty or other structure.”  44 U.S.C. s. 403.  The statute doesn’t say anything about failing to remove structures.

Lots here.  Still digesting, stay tuned for more posts.

 

New admiralty case from the First Circuit Court of Appeals.  Side note:  Justice David Souter participated in this panel by designation, following Justice Sandra Day O’Connor’s pattern of an active retirement.

This is a case about maritime lien asserted by a subcontractor whose materials were eventually installed on a vessel. The court did not allow the lien to…