Can a Bankruptcy Court order the sale of a vessel “free and clear” of a seaman’s maritime lien for maintenance and cure under Bankruptcy Code § 363? According to the Ninth Circuit’s recent ruling in Barnes v. Sea Hawaii Rafting, No. 16-15023 (Mar. 28, 2018), the answer is no: absent a lienor’s consent, only a court sitting in admiralty has the power to extinguish a maritime lien.
A Shipboard Accident Leads to Litigation and Bankruptcy
In Barnes, the plaintiff in the court below was the captain of the vessel M/V Tehani, a 25-foot rigid hull inflatable boat used for sightseeing and snorkeling voyages out of Honokohau Harbor in Hawaii. In July 2012, a faulty fuel tank caused an explosion aboard the Tehani, and the captain suffered serious injuries requiring extensive medical treatment. Lacking insurance through his employer, the captain sued the boat’s owner, Sea Hawaii Rafting, LLC (“Sea Hawaii”), and its owner/manager, Kris Henry for maintenance and cure under federal admiralty law, and also sued the Tehani in rem. All three defendants answered the plaintiff’s complaint, and the parties proceeded to litigate for some fifteen months.
Foreign clients investing in the U.S. know there are risks of litigation and conflict that they might not anticipate when conducting business at home. One area, however, that is usually a particularly rude surprise are the U.S. laws relating to environmental matters, particularly relating to environmental contamination of land. One might think that a party not at fault for creating contamination would be safe, but that's not always the way U.S. law works when it comes to Superfund sites. These are sites around the U.S. where hazardous substances in the environment threaten human health or the environment, and clean-up is required.
Thanks to a system of “joint and several” liability, each potentially responsible party may be responsible for the entire cleanup of a site absent contributions from others. Potentially responsible parties in Michigan alone, were reported by the Michigan government to have contributed over $599 million to Superfund clean-up before 2016. Paying even a small percentage of such figures can be costly.
Our next installment in our Doing Business in the U.S. series explains the essential structure of U.S. laws governing such environmental risks. It tells you who can be held liable, and what defenses to liability are possible. It tells you how to avoid assuming liability inadvertently when investing in real estate. There is an old adage: An ounce of prevention is worth a pound of cure. These words of wisdom are particularly apt in describing how a bit of caution before investing in real estate can significantly reduce the risk of substantial liability under environmental laws. Enjoy!
Foster Garvey’s International practice group comprises a cross-disciplinary group of attorneys practicing in areas ranging from business transactions, immigration, maritime, government regulatory work, transportation and logistics and estate planning. The group members include bilingual and multicultural attorneys who are well-versed in handling these subject matters in a cross-border context. A number of attorneys have been actively practicing in the international arena since the early 1970s.