Seattle Maritime Law Blog : Seattle Maritime Lawyers & Attorneys : Mikkelborg Broz Law Firm : Collision and Salvage, Fisheries, Jones Act : Seattle, Washington

 Senators Ron Wyden (D-OR) and Lisa Murkowski (R-AK) have co-sponsored a  bill (S. 3276) introduced in the U.S. Senate to provide owners of fisheries Capital Construction Funds (CCFs) with an election to terminate their fisheries CCFs and make a one-time withdrawal of their CCFs without imposition of interest penalties on the withdrawal.  The withdrawal would be subject to income taxes, but not interest or other penalties.  Once the election is made, the owner would no longer qualify for use of a fisheries CCF in the future.   

Fisheries CCFs were originally authorized in 1976 to encourage investment and modernization in the U.S. fishing fleet.   Commercial fishing vessel owners were allowed to deposit a portion of their fishing-related earnings into a savings account (CCF account) on a tax deferred basis.  Funds and earnings from the CCF account could be withdrawn on a tax-free basis so long as used to acquire or rebuild U.S. flag fishing vessels, but the taxpayer received a diminished tax basis in the new or improved vessel to the extent of the taxpayer’s use of CCF funds.  Non-qualified withdrawals from CCF accounts, i.e. not used to acquire or rebuild fishing vessels, resulted in the imposition of income taxes on the withdrawal, plus substantial interest penalties.  As the U.S fishing fleet is now overcapitalized, with too many vessels, the funds in fisheries CCFs represent a potential for further overcapitalization in the fisheries.  Nationally, there are an estimated 3,600 CCF accounts containing roughly $220 million. 

Jess G. Webster
Mikkelborg, Broz, Wells & Fryer, PLLC*
1001 Fourth Avenue, Suite 3600
Seattle, WA 98154
Ph. (206) 623-5890
Cell (206) 612-3051
Fx. (206) 623-0965
E-mail: JGWebster@Mikkelborg.com
*Member of LawPact®, an international association of independent business law firms

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By Jess Webster

Harrington v. Atlantic Sounding Co., Inc., Case No. 07-4272-CV (2nd Cir., April 16, 2010).

Harrington, as seaman, suffered back injury while working on vessel owned by defendant Weeks Marine. Upon Harrington requesting financial support for prescribed back surgery, defendant weeks sent Harrington a “Claim Arbitration Agreement,” under which defendant agreed to advance Harrington 60 % of his usual wages as an advance against settlement provided Harrington agreed to arbitrate all claims.

Harrington brought suit in U.S. District Court and the defendant moved to dismiss the lawsuit, or stay the lawsuit pending arbitration pursuant to the arbitration agreement. The District Court denied the defendant’s motion finding the arbitration agreement to be unenforceable as matter of law under Section 6 of the Federal Employer’s Liability Act (“FELA”), 45 U.S. C. 56.

Court of Appeals noted Jones Act, 46 U.S.C. 30104, incorporated FELA and the case law interpreting FELA, and noted the body of case law invalidating agreements restricting an injured employee’s right to bring suit in an eligible forum, such as agreements restricting the employee’s choice of venue. Over a strong dissent, the majority of the court distinguished this body of law to find the arbitration agreement at issue to be enforceable. In doing so, the majority of the court relied largely upon the strong federal policy favoring arbitration under the Federal Arbitration Act (“FAA”), despite the fact that the FAA expressly excludes agreements for the employment of seamen.

While arbitration clauses in seamen’s employment agreements are prohibited, maritime employers and their insurance adjustors will likely rely upon this decision and increase efforts to secure post-injury arbitration agreements from injured seamen.
 

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