How an Llc Was Protected After a Maritime Tragedy and Several Law Suits

How an LLC was protected after a maritime tragedy and several law suits

BUS311

Professor Martin Sweaney

April 18th, 2011

How an LLC was protected after a maritime tragedy and several law suits

On March 11th 2008 an explosion occurred on a diving vessel, the M/V Jillian Morrison, causing the death of 3 persons and injuring several others during abandonment operations of a subsea pipeline in Federal waters of the Gulf of Mexico. Ryan Erickson wrote (2008):

On March 12th 2008 , within 24 hours after the accident, attorneys for Jillian Morrison, LLC, Chet Morrison Diving, LLC, Chet Morrison Contractors, Inc. and Chet Morrison Services LLC filed a complaint for exoneration form of Limitation of liability in the US District Court for the Eastern District of Louisiana in New Orleans (file number 08-1255) (para. 1).

Attorneys of the Morrison group filed a petition for protection of liability of the Morrison companies against the loss of life, bodily injury, and other damages resulting from the accident under the Limitation of Liability Act which limited the assets to the salvage value of the MV Jillian Morrison, LLC (Erickson, 2008).

With this "complaint of exoneration", the Morrison group received absolution and protection of their assets against future law suits related to the accident of the vessel. The corporation protected its assets against various lawsuits through use of its LLC and the expeditious filing in a Federal Court even before the cause of the accident was known. Would this action be considered ethical? This was a travesty of justice against individuals and outside companies who were harmed by limiting their ability to be justifiably compensated for individual loss. Cumulative damages to individuals and other companies involved may actually be larger than the claimed assets of the LLC. Because the issues of maritime accidents are very difficult to decipher, this paper will only address the use of LLC's to protect the individuals, the Jones Act, and a brief commentary on the Limit of Liability Act which limit the value of the assets of the companies owned by Chet Morrison.

Assets protection of the Morrison companies

The Chet Morrison owned companies provide comprehensive engineering, construction, diving, fabrication, pipeline, ship repair and well services for the oil and gas industry (CMC, n.d.). Chet Morrison is the CEO of Chet Morrison, Inc. and its subsidiaries. Being in the maritime industry, these companies learned how to protect themselves by assuring that each of their assets would be set up as individual companies; and, specifically each vessel, whether a dive support vessel, and inland vessel, or an offshore vessel were set up as an individual LLC.

By establishing each vessel as a company, and registering them as LLC's they are covering any injuries, losses or lawsuits against them individually as independent companies, in this manner protecting the related subsidiaries. The limited liability is a desired tool used by owners and investors in order to protect their personal assets (Liuzzo & Bonnice, 2010). The members (owners) are protected from any debts of the company. As some of the lawsuits are still being heard in court, much of the information has not been published. This paper will address how the ingenuity of the owner and attorneys for Chet Morrison, Inc. utilized the law to the full benefit of their own interest and legally limiting the rights of the victims to seek justifiable damages.

Inside & Outside Liability Protection

The focus of the LLC legislation was to enable a member or manager of an LLC to have their name undisclosed in a lawsuit against the company (Mintz, 2011). Having an LLC formed instead of a corporation or a partnership insulates the individual from the business risks in case of a lawsuit. Robert Mintz, Attorney at Law states "the purpose of asset protection planning is to allow the member to engage in a business activity while protecting his other assets from the risks associated with the business" (Mintz, 2011, para.4)

Contrary to a corporation, an individual member of an LLC is not responsible for claims or judgments against the company. What this means that any members or managers of an LLC cannot be sued as a result of any claim related to their company. As an advantage, the members and managers of Chet Morrison LLC's are protected from the various lawsuits in relation to the accident on March 11, 2008. Robert Mintz, attorney at law, writes on his article of Outside Liability Protection of an LLC, that a property of an LLC cannot be seized by a creditor of a member. However, he discloses that even though the creditor cannot reach the property directly, he can do so indirectly by seizing the member's ownership interest in a foreclosure. The maritime accident of the M/V Jillian Morrison resulted in several lawsuits against Chet Morrison Contractors. However, the victims could only claim against M/V Jillian Morrison LLC, thus diminishing the amount to the salvage value of the M/V Jillian Morrison and its insurance coverage. This maritime tragedy caused the death of 3 persons and left 11 severely injured.

Insulating the risks of Morrison's companies

The expeditious filing performed by the attorneys of Chet Morrison Contractor and its subsidiaries 24 hours after the accident was the first move from the attorneys representing the firm. Filing the "complaint of exoneration" in a Federal Court prevented the lawsuits from being held in different courts in the various states where the plaintiffs resided and protected the other subsidiaries from being sued as a result of this accident. With these decisions, the firm saved hundreds of thousands of dollars in legal fees and court costs in other states or locales where the lawsuits would be originated and protected the assets of the remaining of the subsidiaries and the parent company. It also took the case into the Federal court system, thereby avoiding decisions by a jury on amounts of any damages to be awarded to the plaintiffs in the various lawsuits.

Free of judgments liens

When attorneys for the Morrison group filed a petition for protection of liability of the Morrison companies against the loss of life, bodily injury, or other damages resulting from the accident, they limited the lawsuits to affect only the assets of the Jillian Morrison, LLC (Erickson, 2008). By this action, they freed the Morrison group from judgments of liens. Now,

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