Turn a Vessel Master into an Employee of the Foreign Management Company

LLF attorney Richard Martin recently published “Vessel-Master Questions” in the Louisiana Association for Justice publication, “Louisiana Advocates,” June and July, 2019 editions. This is Part 2 of a 2 part series.

Vessel-Master Questions

Louisiana maritime trial lawyers often encounter an overseas management company that operates blue-water vessels that visit our local ports.

If a negligence claim arises under the Jones Act or Section 905b, several questions present themselves: How do you obtain personal jurisdiction over the foreign-vessel-management company that has no officers, employees, or agents for service in the United States? Is a vessel’s master fair game for service as the operator’s “managing agent”? If the vessel’s master is not the operator’s managing agent, is he and can he be served as its “borrowed employee”?

This article focuses on two issues: Service under Louisiana law and how to turn the vessel’s master into an employee of the foreign-management company.

Service Under Louisiana Law

Even if the vessel’s master is not a “managing agent” under Rule 4(h)(1)(B), he might still be “an employee of suitable age and discretion” under Rule 4(e)(1) which applies the service provisions of La. C.C.P. art. 1261 B(2). There might be another way for the district court to find that service of process under Fed. R. Civ. P. 4(h)(1)(B) upon a vessel master was proper.

Rule 4(h)(1)(A) and Rule 4(e)(1)
Another subsection of Rule 4 provides an additional method for service of process on a foreign corporation. This is subsection (h)(1)(A)¹ which refers to Rule 4 (e)(1).² In turn, Rule 4 (e)(1) references “following state law for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service is made….” This catch-all section of Rule 4(e)(1) leads to La. C.C.P. art. 1261 B(2), which provides one final way to validate service on a vessel master even if the federal court doesn’t buy the “managing agent” argument.

La. C.C.P. art. 1261 B(2)
Rule 4(e)(1) refers to “following state law for serving a summons”. This means turning to La. C.C.P. art. 1261 B(2) which provides the means by which Louisiana allows a foreign corporation to be served.³

First, note that Subsection B(2) uses the words “any employee”. The article does not impose any service restrictions based upon the employee’s corporate office or title. Second, the article states that this employee can be served at “any place where the business of the corporation is regularly conducted”. The article does not impose any limitations based upon the type of scale of the business conducted. Similarly, it does not define “regularly”.

In Terry,⁴ Raymond International filed a third-party complaint against Manitowoc and served Manitowoc’s sole employee in Louisiana.⁵ Manitowoc objected to the personal jurisdiction of the court, but the district court denied its motion to dismiss. A jury later found that Manitowoc was forty percent responsible for Plaintiff’s injuries.

Manitowoc appealed the issue of personal jurisdiction and the U.S. Fifth Circuit thereafter discussed the district court’s exercise of personal jurisdiction over Manitowoc through service upon its sole in-state employee:

The only remaining inquiry under the three-part test for personal jurisdiction is whether there was proper service of process on Manitowoc. Under Rule 4(d)(3)⁶ of the Federal Rules of Civil Procedure, service on a corporation may be accomplished by delivering copies of the summons and complaint to “a managing or general agent.” The parties have devoted most of their attention to whether service on Elmer Nagel was adequate service under this provision. Raymond notes that the Lone Star case itself held that “[i]f a corporation’s business is so substantial as to render the corporation amenable to suit in the state, its principal agent in charge of activities within that state meets the test of a ‘managing agent.’ ” 212 F.2d at 152. Because Nagel was Manitowoc’s only employee in Louisiana at the time of the suit, Raymond contends that he clearly was “in charge of activities within that state,” and thus is a “managing agent” under Lone Star.

Although the language of the Lone Star test for a managing agent seems to extend to Nagel, it is not clear that the rationale behind the language also is applicable. Nagel was the lone Manitowoc employee in Louisiana, but most of Manitowoc’s business in Louisiana was conducted from the company’s Houston office. Thus, Nagel was not in charge of the activities which gave rise to Manitowoc’s amenability in the state. Moreover, it is not clear that Nagel exercised the supervisory functions required for “managing agent” status under Rule 4(d)(3). For these reasons, we express no view as to whether Nagel was a “managing agent” within the meaning of Rule 4(d)(3).

Under Rule 4(d)(7),⁷ the plaintiff also may serve the defendant “in the manner prescribed by the law of the state in which the district court is held.” Article 1261(2)⁸ of the Louisiana Code of Civil Procedure permits service on a corporation “[b]y personal service on any employee of suitable age and discretion.” Nagel is such an employee and we hold that service on Nagel was proper under this provision. Although Manitowoc renews its argument that Louisiana law limits the state’s long arm jurisdiction to causes of action arising from contacts with the state, this objection is beside the point. The company’s amenability to process is established under the federal standard of International Shoe. Federal law eliminates any need to determine whether Manitowoc was amenable under the Louisiana long arm statute. The only component of personal jurisdiction we must test is service of process. Here, service was accomplished under Rule 4(d)(7), “in the manner prescribed by state law.” Because Manitowoc was amenable to service in Louisiana under the federal standard of amenability, and because service was proper under Rule 4(d)(7), Manitowoc was brought within the personal jurisdiction of the district court in this action.⁹

Louisiana state appellate courts have interpreted Article 1261 the same way as the U.S. Fifth Circuit did in Terry. See, e.g., Gerhardt¹⁰ and Scott Fence.¹¹

How Do You Turn the Vessel’s Master Into the Foreign Management Company’s Employee?

Let’s suppose that the federal district judge is skeptical about the vessel’s master being a “managing agent” for purposes of service of process under Rule 4(h)(1)(B). You want to portray the master as an employee of the foreign management company but he’s actually employed by a separate crew manning service. What can you do?

Maybe the vessel master is the “borrowed employee” of the foreign management company?¹²  The U.S. Fifth Circuit has held that where the “borrowed employee” doctrine applies, both employers are subject to suit under the Jones Act. See, e.g., Guidry¹³.

In Hopson,¹⁴ the employer contracted its employees through an “independent contractor” manning agency so as to avoid liability as a Jones Act employer. But in Archer,¹⁵ the Eleventh Circuit rejected this ploy:

“If the law were to recognize this contractual arrangement a something other than an agency relationship, the result would be anomalous. In this case, a cruise ship has contracted for its entire food and beverage service, thus completely insulating itself from any and all liability which might arise from that service. If the ship owner or operator can contract for its food and beverage service, then it may also contract for its crew members, its engineers, its maintenance, its housekeeping, and hospitality staffs. The logical extension of this notion is theat the ship owner or operator could contract for its entire operation. In such a manner, the ship owner or operator would escape all accountability for the ship’s condition and the conduct of those working aboard. In every instance in which the ship owner or operator has historically been held accountable, an independent contractor allegedly unrelated to the ship would be the responsible party.”

The question of whether a worker is a “borrowed employee” is a question of law for the district court to determine.¹⁶ The “analysis used to determine that question is fact driven.”¹⁷ The borrowed servant doctrine was originally recognized by the U.S. Supreme Court as a way of holding the borrowing employer liable under respondeat superior for the negligence of any employee he had borrowed.¹⁸

Then, in Ruiz,¹⁹ the U.S. Fifth Circuit set out nine factors which must be considered when determining borrowed employee status.²⁰ Ruiz applies to Jones Act cases,²¹ the employer need not be the owner of the vessel,²² and independent contractors may be liable under the Act.²³

Further, a third person who borrows a worker may become the employer if the borrowing employer assumes sufficient control over the worker.²⁴

If the factors set forth in Ruiz are applied to a vessel master employed by a foreign manning company, he might become the borrowed employee of the vessel operator. If so, he’s fair game for service of process under Rule 4(e)(1), you beat the inevitable Rule 12(b)(5) motion, the vessel becomes the borrowing employer’s “regular place of business”, and you probably have both International Shoe and Rule 4(k)(2) personal jurisdiction over a very surprised foreign vessel operator.

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1. (h) Serving a Corporation, Partnership or Association. Unless federal law provides otherwise or the defendant’s waiver has been filed, a ….. foreign corporation ….. must be served:
   (1) in a judicial district of the United States:
   (A) in the manner prescribed by Rule 4(e)(1) for serving an individual……
2. (e) Serving an Individual Within a Judicial District of the United States. Unless federal law provides otherwise, an individual—other than a minor, an incompetent person, or a person whose waiver has been filed—may be served in a judicial district of the United States by: (1) following state law for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service is made….
3. B. If the corporation has failed to designate an agent for service of process, if there is no registered agent by reason of death, resignation, or removal, or if the person attempting to make service certifies that he is unable, after due diligence, to serve the designated agent, service of the citation or other process may be made by any of the following methods:
   * * *
   (2) By personal service on any employee of suitable age and discretion at any place where the business of the corporation is regularly conducted.
4. Terry v. Raymond International, Inc., 658 F.2d 398, 400-01 (5th Cir. 1981).
5. He was a maintenance employee who serviced cranes in Louisiana.
6. Now Federal Rule 4(h)(1)(B).
7. Now Federal Rule 4(e)(1).
8. Now La. C.C.P. art. 1261 B(2).
9. Terry, 658 F.2d at 403.
10. Gerhardt v. American Diesel Equipment, Inc., 569 So.2d 80, 81-82 (La. App. 4th Cir. 1990) citing Yaniga v. Coleman American Moving Services, Inc., 483 So.2d 1226, 1227 (La. App. 4th Cir. 1986) (“Code of Civil Procedure Article 1261 states that when a corporation no longer has a registered agent for service of process due to death, resignation or removal, service of citation may be made … on an officer, director, or resident agent or on any employee of suitable age and discretion”.)
11. Scott Fence Industries, Inc. V. Neuenhaus, 490 So.2d 1132, 1134 (La. App. 5th Cir. 1986) (LSA-C.C.P. art. 1261 provides that service of process on a corporation is made by personal service on any one of its agents for service of process. If the corporation has failed to designate an agent …..then service may be made “at any place where the business of the corporation is regularly conducted,” either by personal service on any officer, director or resident agent or by personal service on “any employee of suitable age and discretion.”)
12. Yes, this is the very same game played by fixed platform owners to defeat third-party injury claims and limit the plaintiff to a compensation remedy.
13. Guidry v. South Louisiana Contractors, Inc., 614 F.2d 447 (5th Cir. 1980).
14. Hopson v. Texaco,383 U.S. 262 (1966).
15. Archer v. Trans/American Services, 834 F.2d 1570, 1573 (11th Cir. 1988).
16. In re Weeks Marine, Inc., 88 F.Supp.3d 593, 597 (M.D. La. 2015); Melancon v. Amoco Production Co., 834 F.2d 1238, 1244 (5th Cir.1988), quoting Gaudet v. Exxon Corp., 562 F.2d 351, 356 (5th Cir.1977), cert. denied, 436 U.S. 913, 98 S.Ct. 2253, 56 L.Ed.2d 414 (1978).
17. Fairley v. Murphy Exploration & Production Co., 58 F.Supp.3d 641, 645, No. 13–6495, 2014 WL 5780579, at *4 (E.D. La.2014).
18. Standard Oil v. Anderson, 212 U.S. 215, 29 S.Ct. 252, 53 L.Ed. 480 (1909).
19. Ruiz v. Shell Oil Co., 413 F.2d 310 (5th Cir. 1969).
20. The nine Ruiz factors are:

1. Who had control over the employee and the work he was performing, beyond mere suggestion of details or cooperation?
2. Whose work was being performed?
3. Was there an agreement, understanding or meeting of the minds between the original and borrowing employer?
4. Did the employee acquiesce in the new work situation?
5. Did the original employer terminate his relationship with the employee?
6. Who furnished the tools and the place of performance?
7. Was the new employment over a considerable length of time?
8. Who had the right to discharge the employee? And,
9. Who had the obligation to pay the employee?

21.    Hall v. Diamond M. Co., 635 F.Supp. 362 (E.D. La.1986), on remand from 732 F.2d 1246 (5th Cir.1984);       Dennis v. Calm C’s, Inc., 2011 WL 3898045 (E.D. La.2011).
22. Barrios v. Louisiana Construction Materials Co., 465 F.2d 1157 (5th Cir. 1972).
23. Mahramas v. American Export Isbrandtsen Lines, Inc., 475 F.2d 165 (2d Cir. 1973).
24. Ruiz, supra.