february 2013 | vol. 6, no. 3 the drive to make the right ... · february 2013 | vol. 6, no. 3 a...

February 2013 | Vol. 6, No. 3

A Supplement to Massachusetts Lawyers Weekly

The drive to make the right choiceBy Timothy C. Kelleher III

This year, MATA haschosen to make one ofour priority projects astatewide program called“End Distracted Driv-ing.” MATA members arevolunteering to go to lo-cal high schools to speak

to students about the very real and tragicfacts about driving while distracted.

Whether it is texting, dialing a cell

phone, eating, drinking, grabbing some-thing or anything else that takes their at-tention away from the roadway, studentsmust appreciate the potential harmfulconsequences that can resultfrom their decision. This isan issue that must be ad-dressed now and I truly be-lieve we will all be safer if wecan convince people to simply make theright choice: stop driving while distracted.

As trial attorneys, we see the heart-breaking results of motor vehicle colli-

sions and injuries caused by a momentarychoice or action that changes the lives ofindividuals and families forever. We knowthe importance of keeping families safe

— from faulty products,flawed vehicles, dangeroustoys and a myriad of carelessacts that bring danger intothe everyday lives of people

in our communities. This program not only gives us the op-

portunity to go into local communitiesand use our skills to prevent tragedies by

educating and communicating with thepublic and students throughout the state,but it also gives us the chance to make avital difference in our society today.

MATA members have been enthusias-tic and generous with their time and ded-ication to the “End Distracted Driving”program. They are taking this messageand bringing it to those most at risk: stu-dents, the least experienced and the mostlikely to be distracted.

We premiered this program at a pressContinued on page 11

Navigating obstacles created by cruise lines in shore excursion tragediesBy Robert D. Peltz and Carol L. Finklehoffe

The allure of exotic foreign portsand exciting new excursions formthe centerpiece of the advertisingcampaigns of cruise lines, whether inthe broadcast, print or electronic me-dia. They include: • parasailing in St. Thomas• zip lining in Costa Rica• snorkeling in the lagoons of

Bermuda• jungle-trekking by ATV in

Cozumel• alpine hiking on Alaskan glaciers

Port excursions are not directed tojust the adventurous, but to even theolder and more timid passengers, ex-tolling the virtues of:• driving the scenic mountains of

Tortola• learning the secrets of the cooks of

Caribbean by visiting local villagesin Dominica

• Visiting the Mayan ruins at Tulum

Over the past decade, the numberof passengers cruising with NorthAmerica’s largest cruise lines has ex-ploded. According to industry figures,the number of passengers has dra-matically increased from 9.5 millionin 2003 to over 16 million passengersforecasted in 2012. As the industry it-self is quick to admit, at least to itsshareholders and tour excursionpartners, the continued developmentof new and existing excursions hasplayed a major role in this growth.

Nevertheless, at the first sign of anexcursion gone awry, the cruise lineshave been quick to try and disassoci-ate themselves from responsibility fortheir own creations. In an effort to in-sulate themselves from liability, thecruise lines have utilized a system ofdisclaimers, which attempt to hidethe true character of their relation-ships with their tour operating part-ners. These disclaimers are typicallyburied in the fine print in the passen-ger’s ticket of passage and in self-

Continued on page 3

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PRESIDENT’SMESSAGE

2 MASSACHUSETTS ACADEMY OF TRIAL ATTORNEYS February 2013

By Howard T. Saperston

After a liability or workers’ compensationcase settles, clients find themselves seekingthe most effective way to maximize theirsettlement, a pursuit that can often disruptimportant government benefits.

One major government program di-rectly affected by settlement is Medicare.The Centers for Medicare and MedicaidServices take the position that Medicare’sfuture exposure on liability and workers’compensation settlements must be pro-tected and consideration of Medicare’sinterests must be documented.

Medicare secondary payer lawsIn an effort to clear up confusion for

individuals with insurance who are alsoMedicare beneficiaries, the MedicareSecondary Payer laws were instituted un-der Section 1862(b)(2) of the Social Secu-rity Act.

Essentially, if an individual is injuredand has group health insurance, auto orliability insurance, workers’ compensa-tion, or a select few other types of insur-ance, those insurance companies are re-

sponsible for paying for the medical serv-ices related to the injury or illness forwhich the individual has received a re-covery. If that payment does not cover thefull cost of services, Medicare then be-comes responsible for the balance of pay-ment as the “secondary payer.”

When an individual receives a workers’compensation or a liability settlementthat includes funds for future medical ex-penses, Medicare is not responsible forreimbursing those future medical expens-es. As written in the Medicare SecondaryPayer laws, current and future Medicarebeneficiaries are required to considerMedicare’s interests.

The Medicare Set-Aside has becomethe preferred vehicle for protectingMedicare’s interests. The Centers forMedicare and Medicaid Services, a divi-sion of the Department of Health andHuman Services, is the body responsiblefor establishing standards and guidelinesand reviewing proposed MSA allocations.However, a lack of clear direction fromCMS has created much confusion overthe past decade, leaving Medicare benefi-ciaries vulnerable to costly mistakes in

the MSA process. For your client, thesemistakes can lead to denial of coveragefor future medical expenses if CMS be-lieves that Medicare’s interests have notbeen appropriately considered.

The four-step processBalancing your client’s Medicare eligi-

bility with the obligation to consider thegovernment’s interests is no simple task.Employing a step-by-step approach tothe MSA process can help ensure that allbases have been covered and that yourclient will be protected from losing futureMedicare benefits.1) Advising to the need for a legalopinion to determine if a Medicare Set-Aside is required —Determine the antic-ipated settlement amount, the potentialneed for and cost of future medical care re-lated to the injury, and the client’s Medicarestatus. If necessary, get an expert legalopinion as to the necessity for a MSA.2) Determining the allocation— In-

volve an expert allocator early in theprocess who will take the time to under-stand a complete picture of your client’smedical requirements, both covered andnon-covered. The MSA allocator you se-lect should be determined by the compa-ny’s treatment of covered and non-cov-ered medical expenses, as the inclusion

of these expenses builds case value andcan potentially lead to a higher settle-ment recovery.3) Preparing for future compliance

— Plaintiffs can choose to self-administertheir MSAs, but self-administrationopens the door for accounting errors andmisuse of funds. A professional adminis-tration firm is generally the best optionfor ensuring that compliance is met whenadministering the MSA.4) Implementing the most cost-ef-fective funding solution —MSAsshould be funded with annuities becauseof their inherent tax savings. There aretwo options for the type of annuity—ei-ther a structured settlement annuity or asingle premium immediate annuity. Al-though the structured settlement annuityoffers the benefit of tax-exempt growth,the SPIA is typically a less expensive op-tion with greater flexibility, as it offers liv-ing commutation (the ability to commuteall or a portion of the annuity’s presentvalue during the client’s lifetime).

By taking a logical, documented ap-proach to the Medicare Set-Asideprocess, you do your client the service ofmaximizing their settlement while pro-tecting their Medicare eligibility andcomplying with the Medicare SecondaryPayer laws.

Howard T. Saperston is a founder and member of Milestone Consulting, a comprehensive set-tlement planning and management firm. Milestone is proud to be a Diamond Club Partnerwith MATA. For more information, visit www.milestoneseventh.com.

Medicare Set-Asides: a practical approach to protecting your client

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serving statements inserted intothe cruise lines’ contracts with theirtour operators.

There is typically a wide diver-gence, however, between theseself-serving statements and thefacts on the ground when it comesto describing the cruise lines actualrelationship with its excursionpartners. Overcoming these inac-curate self-serving and inaccuratedescriptions contained in the car-rier’s written and electronic mate-rials therefore typically becomesthe first order of business.

Contrary to these disclaimers,the most accurate description ofthe relationship between the carri-er and its tour operating partnersis best characterized by the joint venture.Nevertheless, because of the degree ofcontrol maintained by the carrier, variousother agency relationships are equally as

applicable in most cases. This arti-cle will discuss the nature of thesevarious relationships, strategiesfor holding both the carrier andtour operator responsible for theirconduct and the discovery whichwill be helpful in the process.

Holding the tour operator responsible

Although most of the attentionin excursion cases is typically fo-cused on holding the cruise lineresponsible for its negligence, it isimportant not to overlook thecase against the tour operator.Sometimes, one gets lucky andthe tour operator is located in theU.S. Virgin Islands, Puerto Rico or

some other domestic location. Most of thetime, however, that is not the case. Never-theless, that is not reason for despair.

Since all of the cruise lines based inNorth America have forum selection claus-

es, which require suit to be filed in the juris-diction where they maintain their base ofoperations, the carriers have a vested inter-est in keeping their perceived home courtadvantage. As a result, the contracts be-tween the cruise lines and their tour opera-tor partners sometimes require the latter towaive jurisdictional defenses and agree tobe sued in the forum selected by the carrierin its ticket. As with any contract, some ofthese clauses are drafted better than othersand more clearly express this intention. Forexample, the clause contained in Princess’contract with its tour operators provides:

Tour Operators agree to submit topersonal jurisdiction in Los AngelesCounty, California by providing shoreexcursions or related services toPrincess Cruise Lines, Ltd. and Carnivalpassengers. Tour Operators waive anyand all objections they may have to ju-risdiction or venue in Los AngelesCounty, California. Liability coveragemust respond to claims brought in theUnited States based on an incident aris-ing from one of the Tour Operator’sprograms or related services.

Although the intent of this clause is ap-parent, its loose wording has allowed someoperators to argue that it only refers to

claims between the carrier and the excur-sion provider.

The jurisdiction clause contained in thetypical Royal Caribbean contract, however,is much better drafted in providing:

Operator acknowledges that pur-suant to its agreement with the guests,all disputes and matters whatsoeverarising under, in connection with or in-cident to the cruise ticket agreementbetween the guest and the Cruise Lineshall be litigated, if at all, in and before acourt located in in Miami, Florida,U.S.A., [or such other jurisdiction asmay be specified in the agreement withthe guest] to the exclusion of the courtsof any other state, territory or country.Operator shall take no steps that con-tradict these arrangements.

Operator hereby irrevocably consentsto the exclusive jurisdiction of any stateor Federal court located in Miami/DadeCounty in the state of Florida in theevent any action is by either party pur-suant to this Agreement. Operatorhereby waives any venue or other ob-jection that it may have to any such ac-tion or proceeding being brought in anyState or Federal court located in Mia-mi/Dade County.

February 2013 MASSACHUSETTS ACADEMY OF TRIAL ATTORNEYS 3

Continued from page 1

Navigating obstacles created by cruise lines in shore excursion tragedies

Robert D. Peltz is board certified in practice, a civil trial proctor in admiralty and presently serv-ing his fourth term as chair of the MLA’s Passenger and Cruise Ship Committee. He has writtenextensively regarding maritime issues and practices with Leesfield & Partners in Miami.

Carol L. Finklehoffe specializes in maritime litigation and has written and lectured extensivelythroughout the country on numerous admiralty issues. She is licensed to practice in Massachu-setts, Florida and California and practices with Leesfield & Partners in Miami. Continued on page 5

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By Lori A. Cianciulli

In Bolman v. Plymouth Rock AssuranceCorporation, 82 Mass. App. Ct. 135 (2012),the Appeals Court decided that pre-awardinterest is an element of compensatorydamages available to plaintiffs who arbi-trate their underinsured motorist claims.

Bolman, who brought an underinsur-ance claim against Plymouth Rock on be-half of her mother’s estate, had arguedthat both state law and the terms of theMassachusetts Standard Automobile In-surance Policy afford policyholders theright to receive pre-award interest as anelement of compensatory damages. Theinsurer disagreed on the availability ofpre-award interest as an element of dam-ages payable under the policy.

The parties proceeded to arbitrate theextent of the personal injury damages suf-fered by the plaintiff’s decedent, while re-serving the issue of interest for the court.Following an arbitrator’s award in the fa-vor of the estate, the plaintiff sought tohave the award confirmed in SuperiorCourt and to have a judgment enter in fa-vor of the estate which included both pre-and post-award interest. The SuperiorCourt confirmed the arbitrator’s awardand entered judgment that included post-award interest only. Bolman appealed.

In July 2012, the Appeals Court ruledthat indeed the estate was entitled to re-ceive pre-award interest on the net arbi-trator’s award as part of its compensatorydamages. The court accepted the plain-tiff’s argument that long standing caselaw held that an award of interest waswithin the authority of the arbitrator andfurther that such an award of interest ispart of the compensatory damages aplaintiff “is legally entitled to recover”from a tortfeasor under G.L.c. 175,§111D. Therefore, the plaintiff was alsoentitled to recover interest in an underin-surance claim pursuant to the terms ofthe policy, which mirrored the statute.

Having decided that interest was partof compensable damages which could beawarded in an underinsurance arbitrationand that the issue was properly reservedto the court, the Appeals Court turned towhether pre-award interest should havebeen awarded to the plaintiff by the Su-perior Court.

The court noted that a claim for under-insurance benefits properly is consideredto be a contract action under well-estab-lished Massachusetts caselaw and that incontract actions, interest automatically isadded to damages “at the contract rate, ifestablished, or at the rate of twelve percent per annum from the date of thebreach or demand” pursuant to G.L.c.

231, §6C. Furthermore, the court contin-ued, “[i]f the date of the breach or de-mand is not established, interest shall beadded . . . at such contractual rate, or atthe rate of twelve per cent per annumfrom the date of the commencement ofthe action.” The court, considering thePlaintiff’s request de novo, concluded thatpre-award interest ought to have beenadded to the arbitration award from thedate the plaintiff commenced her Superi-or Court action.

Since Bolman was decided, I have beenasked some very practical questions bycolleagues regarding how this case mightimpact future underinsured motorist arbi-trations. The following responses arebased on my interpretation and under-standing of the court’s decision:

Does the plaintiff have to ask thearbitrator to award pre-award interest in order to receive it?

Yes, just as one would ask that any oth-er element of compensatory damages beawarded. I suggest that in plaintiff’s de-mand for arbitration and in the arbitra-tion memo plaintiff should specifically re-quest an award of interest.

Is the arbitrator required to grant arequest for pre-award interest?

While the Appeals Court specificallynoted in Bolman that the interest ought tobe “automatically” added to the arbitra-tion award, there is no “requirement” thatan arbitrator award any element of com-pensatory damages to a plaintiff. Howev-er, the feedback I have received in the sixmonths since this case was decided isthat arbitrators are “automatically” addingpre-award interest to the award.

If the arbitrator fails to award pre-awardinterest, does the plaintiff have anyrecourse in the Superior Court?

No. It is well established in Massachu-setts that there are virtually no grounds toappeal an arbitrator’s decision.

When does pre-award interest begin to run?

G.L.c. 231, §6C states that in contractactions interest is added “at the contractrate, if established, or at the rate of twelveper cent per annum from the date of thebreach or demand.” Furthermore, “[i]f thedate of the breach or demand is not estab-lished, interest shall be added . . . from thedate of the commencement of the action.”

The date of “demand” refers here to de-mand for payment of benefits under thepolicy, not the date of demand for arbitra-tion. The insurer’s obligation is to com-pensate its policyholder for damages suf-

fered as the result of an underinsuredtortfeasor. It is when the policyholdermakes demand for those first party insur-ance benefits that the clock for intereststarts running. A plaintiff should be sureto establish at arbitration the date it sentthe insurer a letter demanding payment ofunderinsurance benefits, and request thatpre-award interest run from that date.

In Bolman, a Petition to Appoint an Ar-bitrator pursuant to G.L.c. 251 was filedin Superior Court some two years prior tothe underinsurance arbitration and pre-award interest was added from the dateof filing of that action.

Does the plaintiff need to prove theinsurance company breached theinsurance contract in order to get pre-award interest in an underinsuredmotorist arbitration?

No, a plaintiff does not have to allegeor prove that the insurer breached the in-surance contract. The Bolman court heldthat pre-award interest is an element ofcompensatory damages. The insurer’sconduct is not an issue in an underinsur-ance claim. The issue in a claim for under-insurance benefits concerns the amountof total compensatory damages sustainedby the plaintiff as a result of the tortfea-sor’s negligence. Arbitration is simply theprescribed method of determining thedamages caused by the tortfeasor if theparties cannot agree.

Is the plaintiff limited to theunderinsurance policy limits incollecting pre-award interest?

Yes, because pre-award interest is anelement of compensatory and not con-tractual damages, plaintiff is limited todamages up to the available policy limits.If an underinsurance claim was instead abreach of insurance contract claim, theplaintiff would not be bound by the policylimits in recovering damages.

How is pre-award interest calculated ifthe parties have agreed to handle theirown offsets and do not disclose the policylimits to the arbitrator?

It is often the case that the parties willagree to calculate their own offsets forbodily injury and PIP payments that havebeen made, rather than disclose theamounts of those payments to the arbi-trator. Also, many times parties will nottell the arbitrator the amount of the un-derinsurance policy. In such cases theplaintiff might consider requesting thatthe arbitrator make a finding as to the be-ginning date of the pre-award interestand note in his decision that interestshould run at 1 percent per month fromthat date until the date of his decision,leaving the mathematical calculation tothe parties. Of course, the plaintiff is alsoentitled to have post award interest ap-plied to the arbitrator’s total award, in-cluding pre-award interest, from the dateof the decision until the date the award ispaid in full.

Can the plaintiff still bring the matter ofpre-award interest to the Superior Courtinstead of having the arbitrator decide it?

Bolman did not change the longstand-ing Massachusetts case law in that regard.It is presumed that all issues and disputesbetween the parties have been placed be-fore the arbitrator, unless there is a clearwritten indication that the parties havewithheld a particular issue or claim fromthe arbitrator’s consideration. Absent ei-ther a stipulation between the parties or astatement in the arbitrator’s written deci-sion that an issue was reserved to thecourt, the court will not consider anyclaims that were within the purview ofthe arbitrator.

The fact that the parties in Bolman stip-ulated that the matter of interest be re-served to Superior Court was noted in thearbitrator’s decision. The Appeals Courtmade it clear that without that expressreservation, it would not have consideredthe issue of pre-award interest.

Now that the Appeals Court has clari-fied that pre-award interest is an elementof compensatory damages available in thearbitration of underinsured motoristclaims pursuant to both the StandardMassachusetts Automobile InsurancePolicy and c. 175, and arbitrators are re-portedly “automatically” awarding inter-est, there seems little reason to reservethe issue to the court going forward.

PRESIDENTTimothy C. Kelleher III, Esq.

SECRETARYAnnette Gonthier Kiely, Esq.

PRESIDENT-ELECTJ. Michael Conley, Esq.

IMMEDIATE PAST PRESIDENT Andrew Abraham, Esq.

TREASURER Charlotte E. Glinka, Esq.

EDITOR-IN-CHIEFJ. Michael Conley, Esq.

PUBLISHERS/EDITORSPaul D. Dullea, Esq.

Sheila Sweeney

PRINTING AND PRODUCTIONMassachusetts Lawyers Weekly

Pre-award interest in arbitrations

Lori A. Cianciulli is a civil trial attorney and mediator practicing in Beverly. She representsindividuals and small businesses in civil litigation, mediation and trial of matters includingpersonal injury, employment discrimination, business and commercial disputes, as well asdisability claims (ERISA and individual disability plans). Cianciulli is a graduate of SmithCollege and Suffolk University Law School. She is an active participant in various Massa-chusetts bar association boards and committees and is a contributor to various seminars andpublications for MCLE and others.

February 2013 5

Even in the absence of a broad jurisdic-tional clause, however, a strong argumentcan be made to establish jurisdiction overthe foreign tour operator in the UnitedStates.

Most tour operators have ongoing andcontinuous business activities with the various cruise lines and other commercialentities, which can be used to establish ju-risdiction. These purposeful contacts in-clude entering into repeated consecutivecontracts with multiple cruise lines, repeat-ed and ongoing direct communicationswith cruise lines in the forum state, sub-mission of invoices to and receipt of pay-ment from the forum state, solicitation ofbusiness by providing advertising and in-formational literature, in person meetingswith cruise line representatives in the fo-rum state for the purpose of securing andmaintaining business relationships, and at-tendance at industry conferences such asSeaTrade.

All of the major North Americancarriers — Carnival, Royal Caribbean,Celebrity, Princess, NCL and Silversea —are members of the Florida CaribbeanCruise Association. The FCCA serves as theliaison between the carriers and excursionoperators in the Caribbean. In addition tohosting social functions, educational pro-grams and conferences, the FCCA also setsforth various policies and procedures ap-plicable to tour operators located in theCaribbean. One of the most significant ofthese requirements is that each tour opera-tor maintain liability insurance in theamount of at least $2 million per incident.

To ensure that such coverage is placedwith reputable carriers, so as to protect itscruise line members, the FCCA generallyrequires that the coverage be maintainedthrough a broker located in Miami, Florida.At this time, the broker is AON, however,in the past, it has used Royal Marine. Notonly does this arrangement provide a sig-nificant amount of liability coverage for theexcursion operations, but it also providesan additional basis for establishing jurisdic-tion to the extent that it is necessary in aparticular case.

Accordingly, the first subpoena whichshould go out in any excursion case is toAON or its successor in order to establishthe existence of such insurance and to ob-tain the various applications, correspon-dence and other documents between theexcursion partner and the broker.

Joint ventureMany of the district court decisions ana-

lyzing joint venture claims in the shore ex-cursion context have retreated to a formal-istic resuscitation of the need to establisheach of the following elements: (1) a com-munity of interest in the performance of acommon purpose; (2) joint control or rightof control; (3) a joint proprietary interest inthe subject matter; (4) a right to share in theprofits and (5) a duty to share in any losses.

A number of those cases have over-con-strued the Supreme Court’s decisions inBell Atl. Corp. v. Twombly and Ashcroft v.

Iqbal as requiring the passenger to pleadfacts supporting each of these elements inorder to state a cause of action.

The cases that have construed Twomblyand Ashcroft to require pleaders to returnto the overly technical pleading require-ments of times long past, have also tendedto misconstrue the substantive require-ments for establishing a joint venture inthe first place. In Fulcher’s Point PrideSeafood, Inc. v. M/V Lady Mary, the 11thU.S. Circuit Court of Appeals’ seminal jointventure case, the court criticized blind ad-herence to the idea that it was necessary toestablish all five elements by holding:

[T]hese elements cannot be appliedmechanically. No one aspect of the rela-tionship is decisive. [citation omitted].The factors . . . are not a checkpoint.They are only sign posts, likely indicia,but not pre-requisites . . . The courtmust consider the total circumstances ofan agreement to determine the status asa joint venture . . . The facts that indicatethe existence of a joint venture, do nothave to be met point for point.

Accordingly, the court went on to affirmthe lower court’s conclusion that a jointventure existed, even in the absence of anagreement to share in profits and losses.

Nevertheless, the better approach is toattempt to develop facts in support of eachof the five elements, since some districtjudges tend to consider them essential toestablish the relationship, despite the 11thCircuit’s admonitions to the contrary.Therefore, while the fact that the carrierand operator share revenues from the saleof tickets to the excursions is an importantfactor, the true nature of the relationshipgoes much deeper and clearly supports theexistence of a joint venture.

The starting point begins with the recog-nition that although cruise lines are con-sidered to be common carriers, cruising isnot at all about transportation. Instead, it isabout entertainment, both on and off ofthe vessel. As such, visits to the ports of callare recognized by the courts as the sinequa non of the “cruising experience.”

As such, an integral portion of eachcruise line’s business plan is to develop andimplement exciting port excursions. There-fore, while the revenue generated fromthese excursions is important to the carri-er’s bottom line, an equally important ben-efit is the impact which these excursionshave on drawing passengers to their shipsin the first instance. Accordingly, the carri-er’s “profit” from these excursions is notlimited to simply the generation of revenuefrom the sale of tickets as it also includesthe enhancement and profitability of itsoverall product — the “cruise experience.”

The same effect benefits the tour opera-tor as well. By successfully performing ex-cursions for well-known cruise lines, thetour operator also boosts its own profes-sional image, increasing its ability to sell itsexcursions to other cruise lines in additionto hotels, travel agencies and other entities.


Navigating obstacles created by cruiselines in shore excursion tragedies

Continued on page 6

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Therefore, the sharing of profits goes be-yond just the division of revenue. This con-cept of “profit” was relied upon by the 11thCircuit in Fulcher’s to establish that the par-ties were each gaining a material joint ben-efit out of the venture.

The same is true with the other side ofthe ledger as well. Cruise lines devoteenormous amounts of resources to theirexcursions. Shoreside, each carrier main-tains a department or designated group ofindividuals whose job duties include thecreation and development of excursions,the recruitment and screening of partnersto implement them and the subsequentsupervision and monitoring of their activi-ties to ensure compliance with companysafety and financial rules. Each of the carri-er’s vessels also contains designated shoreexcursion staff, whose job involves explain-ing, selling and promoting excursions, or-ganizing the passengers to participate atthe appointed time and acting as liaisonswith the tour operator or partner to imple-ment the excursion itself.

The tour operator likewise has its own ex-penses incurred in employing personnel,purchasing and maintaining equipment,vessels and vehicles, purchasing insuranceand operating the excursion. Accordingly,when the excursion is unsuccessful, bothparties suffer considerable losses. The carri-er’s losses continue in such circumstances,since it is then required to expend the re-sources necessary to go back to the drawingboard to create a replacement excursion.Therefore, there is a true sharing of the prof-its and losses inherent in this relationship.

For a variety of reasons, cruise lines alsostructure these relationships in order to re-tain considerable amounts of control overthe operation of the excursion. This is typi-cally done in a number of ways. Cruiselines set the selling price, retaining the solediscretion of offer and provide passengerrefunds, establish start and finish times, setstaff appearance guidelines, set driver re-quirements, establish the types of policiesand procedures tour operators must havein place (preventive maintenance pro-grams, emergency plans and procedures).

More importantly, cruise lines maintainthe “right of control” the tour operator’s op-erations. This includes retaining the au-thority to inspect, supervise and monitorall aspects of the tour operator’s opera-tions. This includes but is not limited to re-view of maintenance facilities and pro-grams, tour operator emergency situationplans, and training of employees. Cruiselines also maintain the “right of control” asthey have the ability to request changesand modifications to the excursions, andthe ability to refuse to allow certain per-sonnel or employees to participate in theprovision of tours to its passengers. Absentthe tour operator’s compliance with thecruise lines requests, the cruise line has theability to suspend or terminate business.

Cruise lines maintain consider controlover their tour operator partners. It istherefore important to establish and showthe day-to-day relationship and operationof the parties and not rely on self-servingstatements in the cruise line generateddocuments.

Direct negligenceAlthough passenger tickets and other

shipboard documents seek to disclaim thecarrier’s liability for injuries occurring dur-ing shore excursions, 46 U.S.C. §30509 in-validates any contractual provision seek-ing to insulate a cruise line from liabilityfor its own negligence on voyages whichtouch a U.S. port. As a result, many shoreexcursion cases focus on the direct negli-gence of the carrier as a means of circum-venting such contractual waivers. Al-though earlier were generally limited tothe carrier’s duty to warn its passengers oflatent dangers, more recent cases have at-tacked the cruise lines failure to properlyscreen, select, monitor and supervise itstour operator partners.

Since the earlier forum selection clausesdid not mandate filing in federal court, thefirst group of excursion decisions camefrom the Florida state courts. In an oftencited 1985 opinion, Florida’s 3rd DistrictCourt of Appeal, whose jurisdiction in-cludes Miami, recognized a duty to warnpassengers of “dangers known to the carri-er in places where the passenger is invitedto, or may reasonably be expected to visit.”Accordingly, the court upheld a claimbased upon the failure warn passengers ofcriminal activity in a high crime area ofNassau where the passengers had been di-rected by the ship’s crew.

More recent cases coming out of Flori-da’s federal district courts have taken asomewhat inconsistent approach to failureto warn claims. At one extreme is the deci-sion in Isbell v. Carnival Corp., in which apassenger brought suit for injuries sus-tained as a result of being bitten by a poi-sonous snake during the course of a jungleriver excursion in Belize.

The court granted the cruise lines’ mo-tion for summary judgment on thegrounds that the danger was open andobvious even though the passenger hadasked the cruise director whether theywould encounter any snakes in responseto which he replied “any 90 year oldwoman could safely enjoy the excursion.”Other decisions have also held carriersimmune from liability arising from dunebuggy crashes and falls on uneven terrainwhile hiking on glaciers utilizing similarrationales.

Several cases have also held that the car-riers duty to warn is limited to specific dan-gers in specific locations. Accordingly, inKoens v. Royal Caribbean Cruises Ltd., thecourt held that it was not enough for apassenger, who was robbed during thecourse of an excursion in Nassau to showthat the carrier had knowledge of highcrime in the city. Instead, the passengerwas required to show that the cruise linehad knowledge of excessive criminal activ-ity in the specific area of the city where therobbery took place.

On the other hand, a number of caseshave taken a much more expansive view ofthe carrier’s duty to warn. In Fojtaske v. NCL(Bahamas) Ltd., the court upheld a claim bya passenger for failing to warn it of the dan-gers of a ship sponsored zip-lining excur-sion in Costa Rica. Similarly, in Belik v. Carl-

son Travel Group, the court denied the carri-er’s motion to dismiss a claim brought by apassenger who had allegedly been encour-aged to jump into shallow water adjacentto a Señor Frogs Restaurant, which washosting an unlimited drinking party.

A significant factor in the failure to warncases is whether the passenger was partici-pating in an excursion operated by thecruise line as opposed to a truly independ-ent and unrelated third party. Where theexcursion is sold by the carrier, the courtshave been more likely to impose the dutyupon it to warn of hazards, which other-wise might be considered open and obvi-ous. For example, in Haese v. Celebrity Cruis-es, Inc., the court denied the carrier’s motionto dismiss the passenger’s complaint seek-ing recovery for catastrophic injuries occur-ring while participating in a parasailing ex-cursion sold by the cruise line, while inJoseph v. Carnival Corp., it was held thatthere was no duty to warn of the dangerswhile participating in a parasailing activitywhich the passenger had purchased itselfduring the course of an excursion.

Although carriers often rely on the fail-ure to warn cases to argue that their onlyduty is to warn the passenger of dangers ofwhich they had notice, the duty to warn isonly one aspect of its legal duty. The cruiseline also has the duty to exercise reason-able care for its passenger’s safety in thefirst instance. Accordingly, recent caseshave also recognized that carriers may benegligent for failing to comply with otherlegal obligations. Some of these cases havebeen based upon the failure to properly re-cruit and/or screen tour operators, espe-cially where they have utilized sub-stan-dard or defective equipment or incompetent personnel.

Other legal duties have been recognizedby virtue of the carrier’s retention of signifi-cant aspects of control over the excursion.Generally, cruise lines require their touroperator partners to comply with extensiverules and regulations, which are normallyset forth in a voluminous tour operatorsmanual. Although each company’s manualvaries, they typically contain numerous di-rectives relating to the selection and train-ing of personnel, the manner in which ex-cursions are operated and the use andmaintenance of equipment. Accordingly, anumber of cases have successfully assertedthat the carrier was directly negligent forfailing to live up to these obligations.

Misleading advertising and misrepresentation claims

Some attorneys have attempted to assertcauses of action based upon misleadingadvertising under either the common lawor Florida statutes. Generally, however,these efforts have not been very successful.

In considering motions to dismiss suchclaims, a number of courts have appliedRule 9 (b)’s heightened pleading require-ments, which require a party alleging fraudor mistake to “state with particularity thecircumstances constituting fraud or mis-take.” Based upon existing 11th Circuitprecedent, some district courts have heldthat this standard further requires the

plaintiff to set forth the time and place ofeach reported misrepresentation.

Other cases have further raised thepleading bar by requiring the plaintiff toplead facts establishing each of the ele-ments of common law fraud in the induce-ment as well as the carrier’s knowledge ofthe specific danger and the manner inwhich the excursion was unsafe.

Even where the plaintiff has alleged suf-ficient facts to support a cause of action formisleading advertising or misrepresenta-tion, some cases have held that such caus-es of action are essentially contractual innature and therefore do not allow the re-covery of non-economic damages.

Cases asserting statutory violations haveeven been less successful. Claims broughtunder Florida’s Unfair and Deceptive TradeAct have been side-tracked by the provi-sion of the statute which exempts personalinjury and wrongful death claims from itsoperation.

Apparent agencyA number of cases have taken the same

overly formalistic interpretation of thepleading requirements necessary to sustainclaims based upon apparent agency asthey have with those based upon jointventure. These cases have required theplaintiff to plead facts supporting each ofthe three elements normally required toestablish such claims: (1) representationsby the principle that the agent is author-ized to act on its behalf; (2) a reasonablebelief of the existence of such an agencyrelationship; and (3) reasonable reliance onsuch belief to the plaintiff’s detriment.

Although other decisions have only re-quired the plaintiff to comply with Rule 8’snotice pleading provisions, the practice hasdeveloped in the Southern District to cre-ate extensive pleadings quoting from volu-minous publicity brochures, web pagesand other documents prepared by thecruise lines. While these complaints tendto resemble “War and Peace” rather thanthe notice pleadings envisioned by Rule 8,they generally avoid dismissal.

In an effort to attack apparent agencyclaims at the pleading stage, carriers willoften argue that their tickets of passage,which typically include clauses indicatingthat shoreside excursion operators are in-dependent contractors, make it impossiblefor the passenger to establish the elementof reasonable reliance. In the 11th Circuitthere is also authority to support argumentthat the defendant may refer to documentsoutside of the pleadings in support of amotion to dismiss, where the document isreferred to in the complaint and central tothe Plaintiff’s claim.

Therefore, from a strategic standpoint, itis a good idea not to attach a copy of theticket to the complaint, nor to even refer toit, unless it is absolutely necessary in orderto avoid such attacks.

Actual agencyIn order to establish a claim based upon

actual agency, the passenger must setforth sufficient allegations to establish the



Continued on page 9


By Don Keenan

Major truth No. 1: The image of trial lawyers, both to thepublic and to the jury panels, is toxic.

We know from the Reptile that the“code” for the plaintiff’s trial lawyer is“liar.” Right after liar comes more precon-ceptions, such as “ambulance chaser,”“manipulator,” “bully,” “egotist,” “narcis-sist,” etc.

We teach a lot of authentic techniquesto change our image once in the court-room, starting with voir dire and openingstatement and continuing throughout thecase; however, let us visit the second ma-jor truth.

Major Truth No. 2: You begin to change the code/perception of the trial lawyer in thecommunity, well before the courtroom.

I firmly believe that within the heart ofvirtually all plaintiffs’ lawyers is compas-sion and genuine care for other people.Thus, we do not need to change ourmindset. We just need to funnel our activ-ities to match what is already inside us.

Major truth No. 3: Writing a check to a nonprofit does not cut it.

Let me explain why this is absolutelytrue, as shown through many focus groupsdone at the request of trial lawyers wishingto understand the average person’s reac-tion to the content of their website.

Many trial lawyers list with pride thenumber of charities they give money toand, in fact, list just how much moneythey donated right on their website. Thetrial lawyers are shocked when I report

the following general comments by focusgroup participants: “The only reason thatfat cat lawyer is giving money is to get thetax deduction,” and “Trial lawyers don’tcare about charities, they only care abouthow much tax they’re going to pay andthat’s the motivation for giving the mon-ey, not charity.”

There is another common element, andthat is the trial lawyers who list on theirwebsite the boards they serve on. Onceagain, the trial lawyers are shocked when Itell them the focus group comments: “Theonly reason that lawyer is serving on thoseboards is to get more cases,” and “Being onthe board for the Head Injury Foundation,Cerebral Palsy Association and even theBoy Scouts and United Way organizationsjust gives that lawyer access to a ton ofnew cases and that’s why he/she is servingon it.”

The negative preconceptions don’t stopthere. One of the focus group folks will al-ways say, “That trial lawyer thinks we’re stu-pid and that this over-pandering is going towork on me, but we all know the real rea-son they give money to charities and serveon boards and my feeling about triallawyers goes down further because of it.”

I have done these focus groups in virtu-ally every geographical area of the countrywith the same negative comments. Weshoot ourselves in the foot by listing thatstuff on our websites, thinking it is some-how going to change our image. Clearly, itonly backfires.

Major truth No. 4: Actions speak louder than words.

The lawyer who actually takes his orher money and puts it directly into a char-

itable activity has the opposite perceptionas those check writers and board servers.These same negative focus group partici-pants flip their opinion on trial lawyerswhen they see them actually participatingin a project.

Say the project is a safety preventionproject, the comments go in a positive di-rection and sound something like this:“By doing a safety project and preventinginjuries and death, this trial lawyer is ac-tually decreasing the amount of businesshe/she is going to get, so obviouslyhe/she is doing it for the right reasons.” Itdoes not have to be a safety project to getthe warm and fuzzies from the generalpublic and jurors; it can be any communi-ty project.

Major truth No. 5: It is easier to docommunity projects than you think.

I was once a check writer. At the end ofthe year, I would always write checks tosome of the big charities. Then, during theInternet boom of the early 1990s, I realizedthe web gave me access to find out howthese charities were using my money. Tosay I was shocked and appalled would bean understatement. I saw that normally,after they paid overhead, fundraising costsand high salaries, that approximately 10cents out of every dollar I gave actuallywent to the intended purpose.

It was not me but my secretary (backwhen we had secretaries) who told methat we could use that money to do com-munity projects ourselves, without put-ting such an embarrassing amount backinto the intended project.

So for a couple of years we did exactlythat, putting money back into some proj-

ects that I will share later in futurecolumns. Then, in 1992, I decided to formmy own 501(c)(3) nonprofit corporation,the Keenan’s Kids Foundation(www.keenanskidsfoundation.com),which is celebrating its 20th anniversarythis year.

We made it very clear that the founda-tion was not a grant-giving foundation(that is, writing checks to other founda-tions). Instead, we took every dime de-posited into the foundation and fundedour own projects — some big, whichmost firms would not be able to do, andsome small, which even the sole practi-tioner could do very easily.

Two years ago, the National Associa-tion of Trial Lawyers executives invitedme to give a presentation at their annualconvention in Denver to outline all theprojects we have done and how we mightbe able to help lawyers around the coun-try duplicate. They asked me whether Iwould be willing to write a series ofcolumns to be reprinted in trial lawyerpublications, and while it has been a longtime coming, here we are in 2013 com-mencing with these columns.

Over the coming year, I intend to givetrial lawyers a salad bar of the availablehands-on activities that can be done inthe community through these columns.So as we welcome the New Year, I inviteyou to stay tuned and see what hits yourheart and what you can do.

UMBRELLA TRUTH: Each and every trial lawyer can play a

part in changing the public/jurors’ per-ception of us through much-neededcommunity projects.

Giving back and changing the image of trial lawyers

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following elements: (1) acknowledgmentby the principal (carrier) that the agent(tour operator) will act for it; (2) theagent’s acceptance of the undertaking;and (3) the principal’s control over the ac-tions of the agent. As with other types ofclaims, the degree of specificity required atthe pleading stage varies dramaticallyfrom judge to judge.

The evidence necessary to establishcontrol in this context is essentially thesame as with the joint venture claim dis-cussed above.

The decision not to attach a copy of theticket is important in establishing claimsbased upon actual, as well as apparentagency. As with apparent agency claims,carriers often utilize the ticket language toattack claims of actual agency at the plead-ing stage as well. Therefore, the decisionnot to attach the ticket and to further avoidany reference to it in the complaint, if pos-sible, will avoid such challenges.

Third-party beneficiary claimsAnother theory of recovery sometimes

asserted in shore excursion cases is thethird party beneficiary claim. In theseclaims, it is generally argued that the pas-senger is a third party beneficiary of thecontract between the cruise line and shoreexcursion operator. In order to assert such

a claim against the cruise line, however, itis important to remember that one mustallege that the carrier (and not the tour ex-cursion operator) breached the agreement.Accordingly, such claims have generally fo-cused upon the carrier’s obligation to ini-tially screen the tour operator and there-after monitor, supervise or audit itsperformance.

As with the other basis of recovery, somecases have taken an overly technical viewof the required pleadings and held that thepassenger must set forth specific factual al-legations establishing the intent of the car-rier and operator to benefit the passengerthrough the contract. Other cases, howev-er, have concluded that while a specific in-tent to benefit the third party is a critical el-ement of the claim that Federal Rule ofProcedure 9(b) only requires intent to bealleged generally.

One of the problems with such claims,however, is that it is obviously necessary toplead the existence of the contract betweenthe tour operator and the cruise line. Sincethese contracts typically contain a self-serving disclaimer regarding the relation-ship between the two, the pleading of thethird party beneficiary claim opens thedoor to allowing the cruise line to arguethe terms of the contract in support of itsmotion to dismiss. Accordingly, the betterpractice is often to forgo such claims.

Ticket disclaimers, waivers and exculpatory clauses

As discussed above, cruise lines and theirexcursion partners typically utilize a varietyof ticket disclaimers, waivers and contractprovisions to evade responsibility for in-juries occurring during excursions. Evenwhere it is possible to avoid having to over-come such provisions at the pleading stage,they will generally arise like the proverbialphoenix later on when it comes time for thefiling of summary judgment motions.

Typically these provisions will take anumber of different forms. The passengerticket will invariably contain a clause de-scribing shoreside excursion operators (aswell as ship’s medical personnel and con-cessionaires) as independent contractors.The contract between the carrier and theexcursion operator will also contain similarself-serving language. In addition both thecruise line and the excursion operator willalso generally require the passenger to signa liability release or waiver in order to par-ticipate in the activity.

One of the most effective ways to avoidgetting trapped by the independent con-tractor language in the ticket and tour op-erator contract is to avoid focusing yourclaims on either document. Instead, it isimportant to look to the actual relationshipbetween the carrier and shoreside excur-sion operator, which is typically established

by both a series of documents as well as anestablished course of dealing.

For example, in addition to the tour op-erator contract, the carrier will also publisha detailed tour excursion manual, whichestablishes various duties, guidelines, poli-cies and procedures governing its relation-ship with the shoreside excursion operator.This document generally invests the carrierwith considerable control over the opera-tion of the excursion and helps define theactual nature of the relationship.

As part of its IMO-mandated safetymanagement system, the carrier will alsotypically have a number of other rules, reg-ulations and guidelines applicable to theoperation of shoreside excursions, whichwill also help fill out the nature of this rela-tionship. Over time, a course of dealingmay also develop that is based upon in-dustry practice, tradition or routine, ratherthan written documentation. Therefore, itis important to look to the full spectrum ofthe relationship and to all of the docu-ments, practices and other sources, whichimpact upon it.

Where the excursion involves more thana minimal nature of risk, it is likely that thepassenger will be required to sign a liabilitywaiver or release in order to participate init. The legal issues involving the validity ofsuch documents differ between the carrier



Continued on page 11

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The drive to make the right choiceconference at the State House on Feb. 4with a special guest, Joel Feldman, aPennsylvania attorney who lost his 21-year-old daughter Casey to a distracteddriver in 2009. He has since dedicatedhimself to The Casey Feldman Founda-tion, a nonprofit dedicated to stoppingdistracted driving by educating youngpeople throughout the country and tellingthem about the tragic consequences ofmulti-tasking while driving. He has beenthe leader in trying to educate studentsand make them aware of the horribleconsequences for all involved — the driv-er, the victim and the victim’s family.

MATA members throughout the stateare taking time out of their daily sched-ules to visit local high schools and speakat assemblies and classrooms filled withthe audience we most want to reach and

educate. MATA has prepared materialsfor anyone who would like to join us inthis important effort and we welcomeany and all volunteers.

This is one of the most important vol-unteer programs any MATA member canjoin. Most of the time, we hear abouttragic incidents well after they have oc-curred, and the outcome is irreversible.By volunteering in MATA’s “End Distract-ed Driving” program, I am confident thatwe will contribute to preventing some ofthese predictable incidents from ever oc-curring. We can do that by convincingstudents to simply make the right choice.What could be more important in our so-ciety when it comes to people driving onour roads today?

Please join all of us at MATA as wecontinue our commitment to making adifference in our communities.


and the excursion operator. As noted earli-er, the courts have refused to enforce suchagreements in favor of the cruise line byvirtue of 46 U.S.C. §30509, which prohibitsa carrier from attempting to limit liabilityfor injuries caused by its negligence in voy-ages which touch upon a U.S. port. Al-though the statutory prohibition also in-cludes the negligence of the carriers“agents” so far there are no reported casesconstruing whether it applies equally to ashoreside tour operator.

In the event that 46 U.S.C. §30509 isfound not to apply to a shoreside excur-sion operator, the validity of the waiverwould likely be determined by the lawdesignated in passage contract. If the pas-sage contract does not contain a choice oflaw provisions then the law of the forumwill be determinative.

Limitation of liabilityAlthough the scope and operation of the

Limitation of Liability Act is beyond theparameters of this article, it should be keptin mind that most cases considering the is-sue have found it to be applicable to in-juries occurring from the operation ofrecreational “vessels,” such as jet skis, para-sailing boats and the like. Therefore, it ispossible that this is an issue which may befaced in some excursion cases. Where ap-plicable, however, limitation only applies tothe vessel owner or bareboat charterer,which would generally preclude the carrierfrom taking advantage of it in those cir-cumstances where the excursion is operat-ed by a local shoreside entity.

Applicable lawThe applicable law governing an excur-

sion case is often an important issue. Forexample, the damages recoverable for anon-wage earning decedent will vary dra-matically depending upon whether theDeath on the High Seas Act or the forumstate’s wrongful death act will be applica-

ble. If the case is governed by DOHSA, thedecedent’s beneficiaries will be limited totheir pecuniary losses, while under moststate wrongful death acts they are entitledto seek much more substantial non-eco-nomic damages. Therefore, the applicabili-ty of maritime law, the forum state’s law oreven the law of the location where the in-cident occurred may be a significant issuein excursion cases.

A court must have admiralty jurisdic-tion before general maritime law will ap-ply to a cause of action. Admiralty juris-diction is established when (1) the tortoccurred “on or over navigable waters” orthe injury on land was “caused by a vesselon navigable waters”; and (2) the activityhas a maritime nexus. A party seeking toinvoke federal admiralty jurisdiction mustsatisfy both conditions, location and ma-rine nexus.

Alternatively, the Admiralty ExtensionAct can be used to establish admiralty ju-risdiction. This Act provides that admiral-ty jurisdiction “shall extend to and in-clude all cases of damage or injury, toperson or property caused by a vessel onnavigable water, notwithstanding thatsuch damage or injury to be done or con-summated on land.”

Courts have taken an expansive view ofadmiralty jurisdiction and stated that inmodern maritime commerce “the shore isnow an artificial place to draw a line. InDoe v. Celebrity Cruises, Inc., the 11th U.S.Circuit Court of Appeal’s seminal opinionon the subject, the court found that admi-ralty jurisdiction applied to a shore side in-cident where a passenger claimed she wasraped by her shipboard waiter in a localpark in Bermuda. The court held that thelocation prong of admiralty jurisdictionwas satisfied because scheduled stops at aport-of-call are an integral part of the on-going cruise. The court reasoned that thepassenger was “no less a cruise passengerthe moment she stepped off the ship at theport-of-call than she was the moment be-

fore she stepped off.” Based upon the decision in Doe, courts

have routinely found that admiralty juris-diction and law applies for injuries occur-ring during shore excursions. However,just because an incident happens during ashore excursion does not automaticallymean that maritime law will apply. Ineach case the location and maritimenexus requirements must be met. There-fore each case must be analyzed on a caseby case basis.

Notwithstanding the finding of mar-itime jurisdiction, a cruise line may assert achoice of law provision in their ticket con-tracts designating some law other thangeneral maritime law as the governing lawto be applied. If, however, there is a disputeas to which law applies, courts will applythe admiralty choice of law analysis in de-termining whether general maritime lawor some other state or foreign law applies.

The Supreme Court has set out a non-exhaustive list of factors to be consideredwhen determining which law to apply inadmiralty tort cases. These factors include:(1) place of the wrongful act; (2) the flagof the vessel; (3) domicile of the injuredparty; (4) domicile or allegiance of theship owner; (5) the place of the contract;(6) accessibility of a foreign forum; (7) lawof the forum; and (8) shipowner’s base ofoperation.

Even where a matter is governed bygeneral maritime law, claims can be sup-plemented by state wrongful death statuteand survival statutes. In Yamaha Motor Cor-poration, U.S.A. v. Calhoun, the court held

that the exercise of admiralty jurisdictiondoes not result in the automatic displace-ment of state law. In Calhoun, state reme-dies were applied to supplement liabilityand damages claims in wrongful deathcases in which no federal statute specifiesthe appropriate relief and the decedentwas not a seaman, longshoreman worker,or person otherwise engaged in maritimetrade. State law will also supplement per-sonal injury claims that occur in state terri-torial waters.

Although they typically retain betweenhalf and two-thirds of the price paid bytheir passengers for shoreside excursionssold on their ships and web sites, the cruiselines seek to avoid their responsibility forinjuries occurring during these activities byusing self-serving ticket and contract lan-guage to distort the true nature of their re-lationships with their tour operators.

In order to educate both judges and ju-ries, it is therefore necessary to show thecritical importance of such excursions tothe cruise “experience” marketed by thecarriers and the true nature of their rela-tionship with those they have selected tocarry out this integral portion of their cen-tral business plan. Because the defense willtypically present a narrow view limited tothe self-serving language inserted into thecontract documents, the successful presen-tation of such claims by the plaintiff re-quires providing the broader context nec-essary to explain both the importance ofthese activities to the carrier’s core businessas well as its overriding control over theiroperation.



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