Solano v. Gulf King 55, Inc.

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 99-40995
Summary Calendar

RAYMUNDO CERRATO SOLANO

Plaintiff-Appellee
v.

GULF KING 55, INC; GULF KING SERVICES, INC; GULF KING 55 IN REM

Defendants-Appellants

____________________________________

VICTOR MANUEL URBINA

Plaintiff-Appellee
v.

GULF KING 55 INC; GULF KING SERVICES, INC; GULF KING 49, IN REM;
GULF KING 49, INC
Defendants-Appellants

____________________________________

ALFRED HODGSON DENIS

Plaintiff-Appellee
v.

GULF KING 49, INC; GULF KING SERVICES, INC; GULF KING, IN REM

Defendants-Appellants

____________________________________

LARRY HANSACK
Plaintiff-Appellee

v.
GULF KING 50, INCORPORATED; GULF KING SERVICES, INCORPORATED; GULF
KING 50, IN REM
Defendants-Appellants

_____________________________________

MILTON PASOS
Plaintiff-Appellee

v.

GULF KING 46, INC; GULF KING SERVICES, INC; GULF KING 46, IN REM

Defendants-Appellants

_____________________________________

MAURICIO WILLIS GUILLERMO

Plaintiff-Appellee
v.

GULF KING 50, INC; GULF KING SERVICES, INC; GULF KING 50 IN REM

Defendants-Appellants

_____________________________________

ROY DERIH WILLIAM GUTIERRES

Plaintiff-Appellee
v.

GULF KING 51, INC; GULF KING SERVICES, INC

Defendants-Appellants
_____________________________________

JOSE MARTINEZ YANES

Plaintiff-Appellee
v.

GULF KING 51, INC; GULF KING SERVICES, INC; GULF KING 51, IN REM

Defendants-Appellants
_____________________________________

BENIGNO JIRON MENDEZ
 Plaintiff-Appellee

v.

GULF KING 43, INC; GULF KING SERVICES, INC; GULF KING 43, IN REM

Defendants-Appellants
_____________________________________

GILBERTO GAMBOA
Plaintiff-Appellee

v.

GULF KING 39, INC; GULF KING SERVICES, INC; GULF KING 39, IN REM

Defendants-Appellants

Appeals from the United States District Court
for the Southern District of Texas

June 5, 2000
Before SMITH, BARKSDALE and PARKER, Circuit Judges.
ROBERT M. PARKER, Circuit Judge:

Ten plaintiff seamen brought work-related personal injury

actions against defendant vessel owners under the Jones Act.

Defendants (collectively “Gulf King”) filed a consolidated motion

for summary judgment claiming that Nicaraguan law governs the

claims. The district court denied the motion, then certified the

choice-of-law question for consolidated interlocutory appeal. We

reverse.

FACTS AND PROCEDURAL HISTORY

In each of the ten consolidated cases, the plaintiff is a

Nicaraguan citizen and domiciliary who filed a complaint seeking

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damages for personal injuries, as well as maintenance and cure as

a consequence of alleged injuries that occurred while working as a

crew member on a Gulf King vessel. The claims arise from unrelated

injuries occurring on different dates on various vessels owned by

defendants. Each plaintiff has asserted causes of action based on

the Jones Act, 46 U.S.C. § 688 (1994) and the general maritime laws

of the United States; no plaintiff has asserted any action against

any defendant based on the laws of Nicaragua or any other country.

Each plaintiff was hired in Nicaragua to work aboard one of

the Gulf King vessels engaged in shrimping operations exclusively

in the territorial waters of Nicaragua. The plaintiffs were paid

with Nicaraguan currency, in Nicaragua for their work aboard the

vessels, and all original payroll and employment records pertaining

to their service aboard the vessels originated in Nicaragua. All

decisions concerning Plaintiffs’ employment aboard Gulf King

vessels were made in Nicaragua. The Plaintiffs’ alleged injuries

all occurred within twelve nautical miles of the Nicaraguan

shoreline.

All vessels involved in these cases have been located in

Nicaragua since 1994, and have not returned to the United States or

conducted fishing operations outside Nicaraguan territorial waters

at any time relevant to these suits. The vessels have not been

operating under general maritime principles of international

commerce, but rather were operating under license, regulations and

control of the Nicaraguan government. Although each vessel is

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documented under the laws of the United States and flies the

American flag, each vessel flies the Nicaraguan flag above the

American flag, in accordance with Nicaraguan law. Nicaraguan-

imposed regulations include the issuance of an annual license to

take fish and shrimp from Nicaraguan territorial waters, the

issuance of zarpe prior to each fishing trip restricting the scope

and duration of that trip, physical safety inspections and vessel

manning requirements, compensation and benefit obligations. The

vessels are not subject to United States Coast Guard safety

requirements or inspections.

Based on these facts, Gulf King moved for summary judgment and

urged the district court to apply Nicaraguan law and dismiss all

causes of action asserted by the Plaintiffs. Plaintiffs countered

with additional facts, including that the owners of the Gulf King

vessels are closely held Delaware corporations with their principal

place of business in Aransas Pass, Texas. The owners of 96% of the

stock of the corporations are United States citizens and Texas

residents. Gulf King owns forty-three (43) shrimping vessels,

thirty-four (34) of which operate exclusively in Nicaragua. The

Nicaraguan Fleet Manager and Captains answered to and were in

regular daily contact with Gulf King management in Texas. Gulf

King financed its vessels primarily through two loans: one in the

amount of $6,200,000.00 from the Small Business Administration and

one in the amount of $15,000,000.00 from the United States

Department of Commerce, National Marine Fishery Service. Because

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both loans were made by United States agencies, Plaintiffs

characterize Gulf King as “owing it all to United States

taxpayers.” Finally, 100% of the shrimp from the Nicaraguan

vessels were imported to the United States and sold to American

consumers.

ANALYSIS

We review the denial of summary judgment de novo. See Webb v.

Cardiothoracic Surgery Assocs., P.A., 139 F.3d 532, 536 (5th Cir.

1998). Summary judgment is proper if the evidence shows the

existence of no genuine issue of material fact and that the moving

party is entitled to judgment as a matter of law. FED. R. CIV. P.

56(c).

The question of whether the Jones Act and the general maritime

law of the United States apply or whether Nicaraguan law controls

these maritime injury claims is governed by the Supreme Court

trilogy of Lauritzen v. Larsen, 345 U.S. 571 (1953), Romero v.

International Terminal Operating Co., 358 U.S. 354 (1959) and

Hellenic Lines Ltd. v. Rhoditis, 398 U.S. 306 (1970). In

Lauritzen, the Supreme Court enumerated seven factors that bear on

this choice of law question: (1) the place of the wrongful act; (2)

the law of the flag; (3) the allegiance or domicile of the injured;

(4) the allegiance of the defendant shipowner; (5) the place of

contract; (6) the inaccessibility of the foreign forum; and (7) the

law of the forum. See 345 U.S. at 583-90. Lauritzen taught that

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courts should ascertain and value the enumerated points of contact

between the transaction and the governments whose competing laws

are involved. See id. at 582. Lauritzen stressed that the law of

the flag is generally of cardinal importance, see id. at 584-86,

and suggested that the last two enumerated factors should be given

very little weight. See id. at 589-91. The list of seven factors

in Lauritzen was not intended as exhaustive. See Rhoditis, 398

U.S. at 309. The “shipowner’s base of operations is another factor

of importance in determining whether the Jones Act is applicable;

and there well may be others.” Id. These eight factors have come

to be known as the “Lauritzen-Rhoditis factors.” See, e.g.,

Schexnider v. McDermott International, Inc., 817 F.2d 1159, 1161

(5th Cir. 1987). Each factor is to be weighed to determine whether

all the factors add up to the necessary substantiality of contacts

between the transaction at issue and the United States. See

Rhoditis, 398 U.S. at 309 n. 4. Moreover, each factor must be

tested in light of the underlying objective, which is to effectuate

the liberal purposes of the Jones act. See id., citing Bartholomew

v. Universe Tankships, Inc., 263 F.2d 437, 441 (2d Cir. 1959).

The district court correctly set out the eight factors gleaned from

Supreme Court precedent and made the following findings as to their

application.

The district court looked first to the law of the flag. See

Lauritzen, 345 U.S. at 583 (emphasizing the “cardinal importance”

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of the law of the flag). The district court found that the law of

the flag factor favors applying United States laws because the Gulf

King vessels in question flew the American flag. While each of the

vessels flew the Nicaraguan flag as well, Plaintiffs offered

testimony that the Nicaraguan flags served as an indication that

the vessels were authorized to fish in Nicaraguan territorial

waters, rather than a sign of Nicaraguan ownership or registration.

Second, the district court examined what it termed the “next

most crucial factor,” the base of operations factor from Rhoditis,

398 U.S. at 310. In a preliminary ruling, the district court

concluded that the overwhelming American flavor of Gulf King’s

operation favored application of American law. See Solano v. Gulf

King 55, Inc., 30 F. Supp. 2d 960, 963 (S.D. Tex. 1998). However,

on reconsideration, the district court reversed itself, noting that

the location from which a vessel’s day-to-day operations are

controlled is considered the base of operations, even where the

defendant is a wholly owned subsidiary of an American corporation.

See Fogleman v. ARAMCO, 920 F.2d 278, 284 (5th Cir. 1991).

The district court then listed three other factors that

favored application of Nicaraguan law: (1) Plaintiffs are

Nicaraguan citizens who maintain their residences in that country;

(2) the place of the employment contracts was Nicaragua; and (3)

the alleged wrongs occurred in the territorial waters of Nicaragua.

Weighing in opposite those considerations, the district court found

8
that the allegiance of defendants to the United States favored

application of American law. Finally, the district court found

that the two remaining factors – the accessibility of Nicaragua as

a forum and the law of the forum – were not relevant to the

determination.

The factors governing choice of law appeared closely divided

to the district court, with the two factors traditionally

considered the most important – choice of flag and base of

operations – each favoring opposite conclusions. The district

court then found itself bound to consider the national interests to

be served by the choice of American law, citing Schexnider, 817

F.2d at 1161. The district court rejected Gulf King’s argument

that American interests would be served by the application of

Nicaraguan law, which would reduce costs whenever one of their

employees is injured on the job, thus making an American

corporation more competitive in the international marketplace.

Instead, the district court noted that Gulf King realizes

substantial savings due to the low wages paid to the Nicaraguan

seamen they employ and that Gulf King has a duty to provide for its

employee’s welfare. The district court therefore found that “[i]t

is certainly within the national interest that the United States

government, which has propped up Defendants with . . . loans, not

be perceived as officially or implicitly sanctioning the [ruthless

exploitation of other countries’ labor pools].”

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 On appeal, Gulf King challenges the district court’s

application of the Lauritzen-Rhoditis factors. The Supreme Court

developed the factors in cases involving vessels engaged in

commercial or maritime activities that traveled the high seas,

passing through territorial waters of more than one nation. The

weight accorded the choice of law factors in the context of those

cases was dictated by the international nature of the vessels’

regular activities, the fortuity of the location of the plaintiffs’

alleged accident or injury and the need to establish a uniform,

consistent law onboard a ship that traveled through waters of more

than one sovereign nation. See Phillips v. Amoco Trinidad Oil Co.,

632 F.2d 82, 87 (9th Cir. 1980). Accordingly, in the context of

those cases, the Supreme Court gave substantial weight to the law

of the flag and the allegiance of the defendant ship owner. See

id. Subsequently, the Fifth Circuit has applied the Lauritzen-

Rhoditis factors to cases where neither the seaman nor the vessel

was engaged in traditional, blue-water maritime activities crossing

through waters of competing nations. See Chiazor v. Transworld

Drilling Co., 648 F.2d 1015, 1019 (5th Cir. 1981), overruled on

other grounds, In re Air Crash Disaster, 821 F.2d 1147, 1163 n. 25

(5th Cir. 1987). In Chiazor, the plaintiff brought suit to

recover damages resulting from an accident which occurred on a

submersible drilling rig off the Nigerian coast. See id. at 1016.

Given the permanent location of the rig, we determined that “such

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factors as place of wrongful act, allegiance or domicile of the

injured and place of contract, which may be less substantial in the

shipping context, tend to take on added significance under the

present circumstances.” Id. at 1019. In sifting through the

factors and determining how to weigh them in a case involving a

fixed drilling platform, we relied on the Ninth Circuit opinion in

Phillips v. Amoco Trinidad Oil Co., 632 F.2d 82 (9th Cir. 1980).

Like Chiazor, Phillips concerned an action for damages for personal

injuries occurring on a drilling platform in Trinidad’s territorial

waters. See id. at 83-84. Phillips held that the law of the flag

should not be accorded controlling weight and the allegiance of the

defendant shipowner had diminished importance, while the place of

the wrongful act, the allegiance and domicile of the plaintiff

workers and the place of contract should be given greater weight.

See id. at 87.

We conclude that the facts of this case are more analogous to

an injury occurring on a fixed drilling platform than on a vessel

in traditional maritime commerce. For that reason, we find that

the district court erred in the weight it accorded the Lauritzen-

Rhoditis factors in this case. When we discount the law of the

flag and allegiance of the defendants factors which favor

application of United States law, and accord more weight to the

Plaintiffs’ citizenship and residence, the place of the employment

contracts and the place of injury, all of which were in Nicaragua,

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it is clear that the calculus ultimately dictates application of

Nicaraguan law. We note, further, that the district court’s

assumption that the application of United States law would allow

the Plaintiffs a more generous recovery, while almost certainly

correct, was not a valid consideration in its choice-of-law

analysis. “The fact that the law of another forum may be more or

less favorable to a plaintiff, however, does not determine choice

of law.” Fogleman, 920 F.2d at 284.

CONCLUSION

For the foregoing reasons, we reverse the district court’s

choice of law determination and remand this case for further

proceedings consistent with this opinion.

REVERSED and REMANDED.

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