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Legal Watch: Volume 9

Prepared by William H. Bode
Bode & Grenier, LLP
1150 Connecticut Ave., NW
Washington, D.C. 20036
Telephone: 202-862-4300 | Email: wbode@bode.com

VESSEL MUST BE TURNED OVER TO STEVEDORES IN REASONABLY SAFE CONDITION TO AVOID LIABILITY IN BARGE CLEANING ACCIDENTS

Case Summary: Rufus Martin, an employee of Jore Marine Services, drowned after the Bobcat he was operating plunged from a barge into the Duwamish River at the Port of Seattle. Mr. Martin was performing barge cleaning pursuant to Jore Marine's contract with Alaska Cargo Transport, the barge's bare-boat charterer. He was sweeping the deck of the barge with the sweeper attachment of a 5,500 pound Bobcat. The Bobcat made contact with a wire and post fence surrounding the deck, destroyed the fence, and plummeted into the Duwamish River, drowning Mr. Martin. Mr. Martin's estate alleged that Alaska Cargo Transport turned over the barge to Jore Marine in unsafe condition because the wire and post fence was not strong enough to prevent Mr. Martin's Bobcat from falling from the barge. The Court stated that Alaska Cargo Transport had a responsibility under the Longshore & Harbor Workers Act to turn over the barge to Jore Marine in a condition under which barge cleaning could be performed with reasonable safety. However, the Court did not impose liability on Alaska Cargo Transport, because the wire and post fence was obviously not strong enough to stop a Bobcat, and Mr. Martin operated the Bobcat in an unsafe manner.

LESSON: Vessels must be turned over to stevedores for cleaning and unloading in reasonably safe condition. It is vital to establish via contract whether the vessel owner, the charterer, the company who owns the transported goods has responsibility for this "turnover duty." If a terminal operator has the responsibility for this turnover duty, it must ensure that the vessel is provided to stevedores in reasonably safe condition. (Martin, et al. v. City of Seattle, et al.)

FACILITY OPERATOR'S EXERCISE OF PURCHASE OPTION AT CONCLUSION OF LEASE UPHELD

Case Summary: In June 1995, IFC Credit Corporation leased gasoline tanks and other equipment to Bulk Petroleum for use at Bulk's gasoline facilities. The lease included an option to purchase the equipment at the end of the lease's 72-month term. The option to purchase was priced at $31,419.40 or the fair market value of the equipment. IFC's interest in the lease was later transferred to Finova Capital Corp. Prior to the conclusion of the lease term, Bulk, IFC, and Finova negotiated regarding the fair market value of the equipment, but did not reach an agreement. Immediately prior to the expiration of the lease, Bulk sent Finova a check for $31,419.40, and noted on the check and in an accompanying letter that the check represented full payment of the purchase option. Finova deposited the check, and did not return the tendered funds, but sued Bulk more than one year later alleging breach of the lease agreement. The Court found that Bulk did not breach the lease agreement, because the price of the purchase option was in dispute, Bulk sent the check and letter to the proper Finova representative, and Finova accepted the payment as full compensation.

LESSON: It is important to schedule negotiations regarding purchase options well in advance of the lease conclusion date. Even if a terminal operator is not able to reach an agreement with the lessor, a tender of funds may protect the operator's interest in the leased equipment. Terminal operators should consult counsel prior to any unilateral tender of funds relating to a purchase option, as there are numerous legal requirements that must be observed to protect the operator's rights under the lease. (IFC Credit Corp. v. Bulk Petroleum Corp., et al.)

Please address any comments or questions to Mr. Bode at 202-862-4300 or wbode@bode.com.

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