LA Port/Enviro Group Redevelopment Pact Questioned

Confusion abounds over a Port of Los Angeles settlement with an environmental coalition over the redevelopment of the TraPac container terminal at the port.

Port officials are questioning whether signatures on the agreement are valid and how this impacts the agreement itself.

In early 2008, LA port commissioners approved a memorandum of understanding between the port and a group of 20 environmental and community groups that allowed the environmental impact report for the much-delayed TraPac terminal expansion to move forward unopposed. The groups had threatened to sue the city to stop the project, which the groups claimed did not “move fast enough or far enough” to reduce pollution from the terminal’s expanded operations.

The decade-old TraPac development project seeks to modernize and expand the 176-acre container terminal to 243 acres. The expansion would also provide the terminal with on-dock rail, expanded berthing capabilities, and improved gate traffic flow by the realignment of a connecting street.

Despite the settlement being approved by the port commission in April 2008, it was not signed until 15 months later on July 15 of this year. Signing for the port was S. David Freeman, who had been president of the commission when the agreement was devised.

The problem is that Freeman resigned from the commission two months earlier in May of this year, raising the issue of whether Freeman's signature on the agreement is legal. Adding more confusion is that the one valid port signature on the agreement document, Executive Director Geraldine Knatz, is not dated.

The issue came up as the LA commission was set to transfer $4 million into a community mitigation fund created as part of the agreement.

Polaris SoCal Terminal Development to Continue

Canadian aggregate firm Polaris Minerals, which has been trying to develop a sand and gravel terminal at the Port of Long Beach, reported Monday that a continuing decline in construction demand through all areas served by Polaris had resulted in a 50 percent drop in revenue during the third quarter and a 38 percent drop in revenue for the first nine months of the year.

Polaris, based in British Columbia and one of the largest aggregate firms on the West Coast, reported third-quarter revenues of $4.52 million, off 50 percent from the year-ago period. Revenue for the first nine months of the year fell to $13.66 million, off 38 percent compared to the same period in 2008.

During the third quarter, the publicly traded Polaris reported a net loss of $5.23 million compared with a net loss of $3.24 million during the third quarter of 2008. The firm also reported a net loss $9.96 million during the first nine months of the year compared with a net loss of $7.63 million in the same period a year ago.

As of Sept. 30, 2009, the firm reported working capital of $11.2 million (including cash of $5.9 million) and no long-term debt.

Polaris CEO Herb Wilson said that the firm expects to see a turnaround by 2010, with an acceleration thereafter.

"As a consequence, we have continued to pursue terminal developments," said Wilson. "In the Port of Long Beach, we have entered into a nine month option to lease an existing marine aggregates terminal in the port and have commenced due diligence. This site, which is permitted for 3 million tons per year throughput, offers the potential for an early and low cost entry into the greater Los Angeles market. At the successful conclusion of due diligence, the company intends to proceed with the sale of the [port's] Pier B land acquired in 2008."

Wilson added that an additional terminal development at the Port of San Diego is also moving forward.

Guam Shipyard Misuse Appears Settled

In what appears to be a conclusion to the misuse of a shipyard as a commercial port facility in Guam, the Port Authority of Guam will take over handling of cargo still at the shipyard on a one-time basis.

The port determined that it would be unsafe to transfer the 270 pieces of odd-sized construction material, including steel beams up to 140 feet long, from the shipyard– where another shipment was illegally loaded on a vessel in August– to the commercial port by truck.

Port workers will handle the loading of the material at the shipyard and charge the cargo owner the same as if the material moved through the regular commercial port. The cargo owner, Watts Constructors, already paid the PAG $88,000, or the equivalent of what it would have cost to use the commercial port, for the first shipment. About two-thirds of the original cargo still remains at the shipyard, bound for Hawaii.

Under Guam law, commercial cargo can only be handled through the PAG-run commercial port.

DiMichael to Leave NIT League

The National Industrial Transportation League has announced that general counsel Nicholas J. DiMichael will step down from his position at the end of the year, citing a desire to spend more time with his family.

DiMichael, a 21-year veteran of the NIT League who will continue to serve several clients through the law firm of Thompson Hine, will be succeeded by NIT League colleague, Karyn Booth.

At its annual meeting next week, the NIT League– which represents more than 600 companies conducting industrial and/or commercial shipping throughout the United States and internationally– will honor DiMichael with its “Executive of the Year” award.

According to the NIT League, during his tenure DiMichael played a key role in key legislation regarding motor carrier rates, the creation of the Surface Transportation Board, and various ocean shipping regulatory and reform efforts.

YRC Goes for Debt-Equity Swap, Raises Bankruptcy Specter

Struggling transportation giant YRC Worldwide announced a $536.8 million debt for equity exchange offer Monday that company officials hope will steer the firm to solid financial ground.

YRC officials said that if the offering does not work, the firm will likely file for bankruptcy and if Chapter 11 does not work, liquidation might be the only option.

The publicly traded firm recently reported losing $158.7 million during the third quarter, or $2.67 per share. Shares in YRC have slid 59 percent since the start of the year and 71 percent from last November.

YRC, the parent of such trucking companies as Roadway, Yellow, Holland and New Penn, said it will buy back just under $537 million in debt notes with shares of the company’s common stock and new Class A Convertible Preferred Stock equal to 95 percent of its current shares. The deadline for the offering is Dec. 7, though the firm acknowledged that this could be extended.

Officials of the Overland Park, Kansas-based firm said in a statement that YRC believes the exchange will improve the company's capital structure, decrease its cash interest expense and enhance its near-term liquidity.

Members of the International Brotherhood of Teamsters working for YRC will receive stock options. This is on top of options worth up to 15 percent of the firm's common stock offered to workers earlier this year for wage and pension concessions.

DHS Completes Northern Border RPM Installations

The Department of Homeland Security announced Thursday that the nation's northern border ports of entry are now set up to scan 100 percent of commercial truck traffic for radioactive cargo.

DHS said that the drive-through radiation portal monitors, which can also be used on automobiles, are now in place and operational at all northern border ports of entry.

The federal agency currently scans 100 percent of commercial traffic entering the US through southern border ports of entry and 98 percent of all cargo containers offloaded at US ports.

The main goal of the monitors is detect nuclear material or a completed nuclear or radiological weapon before it enters the US.

CMA CGM Seeks Credit Line

Ocean carrier CMA CGM is looking to shore up company operations with a $400 million loan as the carrier attempts to restructure its $5.6 billion in debt.

The family-owned Marseille, France-based carrier is looking for the additional credit line as founder and CEO Jacques Saadé has reportedly agreed "in principle" to changes in governance demanded by creditors that hold $4 billion of the firm's outstanding debt, according to French weekly business magazine Challenges. These changes include Saadé's ouster, an agreement to look for outside investors and renegotiation of 49 outstanding ship construction orders.

Two weeks ago, when media reports of the creditors' demands for his ouster surfaced, Saadé openly denied them.

“I can’t imagine that any of our financial partners would try to take advantage of this period,” Saadé said, especially considering that CMA-CGM expects to move into the black “in coming months.”

CMA CGM, the third-largest carrier in the world, spent $1.2 billion in operating expenses during the first half of the year. The firm reportedly had remaining reserves as of June 30 of $599 million, or $601 million short of the total amount needed to operate in the first six months of the year.

LA Port Reports 2005-2008 Air Emissions Down

The Port of Los Angeles said that total air pollution emissions from port operations were down 16 percent in 2008 compared to 2007, and down 23 percent compared to 2005.

The data was part of the port's latest annual air inventory report– covering the year 2008– that was released last week.

The report, available on the port's website, said that diesel particulate matter– often seen as tailpipe or smokestack soot– dropped 12 percent in 2008 compared to the previous year. Diesel particulate matter, according to the port, also fell 31 percent between 2005 and 2008.

The port, along with the neighboring Port of Long Beach, which issues its own air inventory reports, first began issuing annual reports in 2005. Subsequent studies use the 2005 report as a baseline of comparison.

The LA report also said that oxides of nitrogen, or NOx, a smog-forming emission, also fell in 2008 by 18 percent compared to 2007. NOx declined in 2008 by 20 percent compared to the 2005 numbers.

Emissions of oxides of sulfur, or SOx, another smog-forming component, increased in 2008 by 5 percent compared to 2007 but was down 32 percent compared to the baseline year of 2005.

All told, the Port of Los Angeles-generated emissions accounted for about 7 percent of the total Southern California air basin pollution in 2008, a 2 percent drop from 2007 according to the port figures.

It is worth noting that from 2007 to 2008, cargo volume through the port fell by 7 percent while increasing 5 percent from 2005 to 2008.

Maersk Seeks to Rejoin Trans-Pac Pact

Ocean carrier Maersk plans to rejoin the Trans-Pacific Stabilization Agreement, an industry discussion group of ocean carriers covering the majority of trans-Pacific cargo volume.

Maersk, the world's largest ocean carrier, left the group in 2004 over disagreements with TSA decisions regarding rates and stabilization in the trans-Pacific routes. The TSA has been trying to woo the carrier back since. Since a reorganization of the group in 2007 under Neptune Orient Lines CEO Ron Widdows, the TSA has attracted or lured back the world's three largest carriers, including Maersk, MSC and CMA CGM.

Maersk's membership would bring the TSA roster to 15 carrier members and boost the TSA's coverage to more than 90 percent of trans-pacific cargo.

The TSA, which is allowed under the auspices of federal maritime law to provide a legal forum for carriers to discuss such things as cost-savings measures and rates, cannot formally set rates or assign capacity.

The move by Maersk, which supporters believe will help bring more stability to the trans-pacific, comes at a time when trans-Pacific carriers have suffered losses on the order of $3 billion.

Special Feature: Insurance and the Law - Seaworthiness Defined

By: Marilyn Raia (As seen in the November issue of Pacific Maritime Magazine)

The concepts of seaworthiness and its opposite, unseaworthiness, can be found in many aspects of maritime law. Despite their pervasive presence, the concepts are not easily defined. A vessel that is seaworthy in one circumstance may not be seaworthy in another. Moreover, what was considered a seaworthy vessel a decade ago may no longer be so because of technological advances.

Over the years, the courts have fashioned various definitions of seaworthiness. In the mid-nineteenth century, the US Supreme Court in E.J. Dupont de Nemours & Co. v. Vance 60 US 162 (1857) agreed with the following standard for the seaworthiness of a cargo ship:

To constitute seaworthiness of the hull of a vessel in respect to cargo, the hull must be so tight, staunch, and strong, as to be competent to resist all ordinary action of the sea, and to prosecute and complete the voyage without damage to the cargo under deck.

In seamen’s personal injury cases, the courts have held that to be considered seaworthy, a vessel, including her crew and appurtenances, must be reasonably safe to use and perform her assigned tasks. Stated another simpler way, to be seaworthy, a vessel must be reasonably fit for her intended purpose. In the towing context, a seaworthy vessel is one that is sufficiently staunch to withstand the normal and expected rigors of the tow.

Presumption of Unseaworthiness

A vessel is not required to be in perfect condition to be seaworthy. Moreover, the mere happening of an accident aboard a vessel does not raise a presumption the vessel was unseaworthy. However, a presumption of unseaworthiness does arise if the vessel’s equipment fails under normal use. A presumption of unseaworthiness also arises if the vessel sinks without explanation in fair weather and calm seas. A certificate from a classification society or marine surveyor is not conclusive as to a vessel’s seaworthiness.

In any context, a deteriorated hull, inoperable equipment and missing equipment are obvious indicia of unseaworthiness. However, a vessel can be held unseaworthy for a wide variety of reasons, many not readily apparent. While not intended to be an exhaustive list of conditions rendering a vessel unseaworthy, below are some conditions not related to the hull or equipment, which should not be overlooked by the vessel owner.

Inadequate Manning

A vessel must have an adequate number of crewmembers who are properly licensed if required for their positions, and who are competent to perform their assigned work. The vessel owner must also assign the proper number of crewmembers to perform tasks aboard the vessel. For example, in American President Lines, Ltd. v. Welch, 377 F.2d 501 (9th Cir. 1967), the district court held the vessel owner 50 percent liable for the back injury suffered by the third assistant engineer. The third assistant engineer undertook repair of the lube pump, which the court found to be a two-man job. The vessel owner had not provided a second man to assist him for the entire task, resulting in a finding of unseaworthiness due to improper manning. The court also found the third assistant engineer 50 percent at fault for not requesting assistance. Other courts have declined to find an unseaworthy condition when the injured party fails to request assistance and other crewmembers are available to assist with a job requiring more than one person such as a heavy lift.

Safety Equipment

A vessel owner has an obligation to furnish the crew with protective gear as well as safety and lifesaving equipment aboard the vessel. The failure to do so can result in a finding of unseaworthiness. For example, in Lasseigne & Sons, Inc. v. Bacon, 1987 AMC 2251 (D. Or. 1987), a fishing vessel capsized and her crew of three drowned. The district court held the fishing vessel to have been unseaworthy because it did not provide a suitable life raft and survival suit for each of the crew members.

In Webb v. Dresser Industries, 536 F.2d 603 (5th Cir. 1976), a crew member of an ocean surveying vessel was ordered ashore in Seward, Alaska in winter to get supplies for the vessel. Large amounts of snow and ice had accumulated on the ground making the walking conditions very hazardous. While taking inventory of the supplies, the crewmember slipped on the snow and ice, injuring himself. The appellate court affirmed the trial court’s finding the vessel was unseaworthy because the vessel owner failed to provide the crew member with proper boots to wear while walking in the snow, particularly when wet weather gear was provided to the scientists working aboard the vessel. The court declined to impose a duty on the vessel owner to supply every crewmember with boots for shoreside conditions that foreseeably might be encountered. However, it did hold the vessel owner had a duty to provide appropriate footwear to those crewmembers who were ordered to work under reasonably foreseeable adverse conditions.

Manuals and charts

Modern day vessels can be equipped with many different types of equipment, some more technologically complex than others. Not every crewmember knows how to operate every piece of equipment aboard the vessel. The vessel should maintain adequate and current manuals as reference guides. Their absence could render the vessel unseaworthy.

A vessel can also be found unseaworthy due to the failure to have current or sufficiently detailed charts aboard. In re Complaint of Thebes Shipping, Inc., 486 F. Supp. 436 (S.D.N.Y. 1980), involved the grounding of the Argo Merchant off Nantucket Island on December 15, 1976. The November 1976 Pilot Chart of the North Atlantic Ocean was aboard the vessel but not the December 1976 issue. There were some differences in the direction of the currents in the area of the grounding on the two charts. The district court held the vessel to have been unseaworthy for many reasons including the lack of a current pilot chart. Similarly, in In re Complaint of Delphinus Maritima S.A., 1981 AMC 2362 (S.D.N.Y. 1981), the vessel went aground on a coral reef near Bermuda while seeking a port of refuge where the cargo on board could be re-secured. The court held the vessel unseaworthy for, among other things, failing to have a large-scale chart of Bermuda or its adjacent waters because Bermuda would be a logical port of refuge on the voyage from the US East Coast to the Mediterranean.

Vessel Scheduling

A vessel’s schedule can also be the basis for a finding of unseaworthiness. In In re Complaint of Armatur, S.A., 710 F. Supp. 390 (D.P.R. 1988) the master had been on the vessel for nearly one year without a break. The court held the vessel’s demanding schedule led to the master’s fatigue and grounding of the vessel while he was on watch, and rendered the vessel unseaworthy. Frequent violation of the federal law specifying the maximum hours a seaman may work may also render the vessel unseaworthy. That a seaman may have to work more than the maximum hours because of exigent circumstances may not necessarily render the vessel unseaworthy.

Establishing a published port of call schedule and pressuring the master to adhere to the schedule may also lead to a finding the vessel was unseaworthy if the vessel encounters heavy weather and the master does not reduce speed or change course in order to comply with the vessel owner’s instructions to meet that schedule. Further, a vessel sailing with the knowledge it may be subject to arrest or detention at a subsequent port because of outstanding debts, may be held “financially unseaworthy” and liable for cargo damage proximately caused by the arrest or detention.

Duty to Provide Seaworthy Vessel

The duties imposed on vessel owners regarding the seaworthiness of their vessels can vary depending on the circumstances. A vessel owner owes an absolute duty to crewmember-employees to provide them with a seaworthy vessel. But, with respect to passengers, there is no such duty. Rather, a vessel owner has a duty only to exercise reasonable care under the circumstances. With respect to the owners of cargo carried aboard a vessel, the vessel owner has a non-delegable duty to exercise due diligence at the beginning of the voyage to make the vessel seaworthy.

There are no fixed criteria setting the standard for a vessel’s seaworthiness. As a general rule however, a vessel will be found seaworthy if it is reasonably fit for its intended purpose, whether that be as a towed vessel, a towing vessel, a cargo-carrying vessel or a passenger-carrying vessel. In addition to deterioration of the vessel’s hull and equipment, conditions not directly related to the vessel’s hull and equipment may lead to a finding of unseaworthiness and the imposition of liability. Whether a vessel owner has a duty to provide a seaworthy vessel in the first instance and the effort needed to make the vessel seaworthy will depend on the circumstances.

Marilyn Raia is of counsel to Bullivant Houser Bailey and works in the firm’s San Francisco office. She specializes in maritime and transportation law and can be reached at marilyn.raia@bullivant.com.