The Case of Inocencio Castanho Versus Brown & Root, Lloyd's of London, John Connally, William Simon, et al ...

The giant Dallas-based oil service group Halliburton, one of the biggest names in the offshore oil business, is at the center of a David vs. Goliath legal battle over the rights of foreign workers employed by the U.S. corporations which dominate this highly lucrative industry.

For the last two years, Halliburton's subsidiary, the Jackson Marine Corporation, has been trying to prevent a severely injured Portuguese seaman from suing for $15 million damages in American courts. The seaman was paralyzed while working in English waters aboard an oilfield supply ship owned by a Jackson Marine offshore affiliate.

The case is being bitterly contested by Jackson Marine and its insurers, Highlands Insurance (another Halliburton subsidiary) and Lloyd's of London, only partly because it is believed to be the largest single personal injury claim resulting from an injury to an offshore oil industry worker. Also at stake are more than 200 other personal injury or fatality cases which foreign employees of American offshore multinationals have brought before courts in Britain, Norway, and Holland.

If the Portuguese seaman wins, lawyers expect many of these cases to be switched to the United States, where damages awarded can be five times higher than in the countries where the injuries occur or where the subsidiary companies are registered.

The rights of foreign employees of some American corporations like Halliburton are currently minimal because the workers are hired by subsidiaries that often are no more than letter-box operations. These firms are incorporated in tax havens like Switzerland, Panama, or the Netherlands Antilles, where they actually have few if any assets. This arrangement not only lowers the parent company's tax liability, it also reduces the risk of costly and embarrassing lawsuits brought by the families of dead or injured foreign workers, because the tax shelters provide workers with little legal protection.

This is no small benefit: in the North Sea's British sector alone, more than 100 workers have been killed and more than 450 seriously injured. Many of these cases involved foreign employees of American-owned corporations.

Recently, however, a U.S. Federal Appeals decision has given foreign workers new hope by affirming the right of Inocencio Castanho, paralyzed from the neck down by an accident in British waters, to sue Jackson Marine in Texas, the company's home base. The case could go to trial in the next six months.

Inocencio Castanho is now 34 years old. He is married with two small sons. In 1976 he left his work as a poorly paid fisherman in a small village in northern Portugal to find a job as a seaman in the North Sea oil field. The lure was the much higher and more regular wages-at least twice what he could earn as a fisherman in one of Europe's poorer countries. He was hired for $600 a month as an oiler, on the Jackson Marine supply boats operating in the North Sea.

The Jackson Marine boats were working for a much bigger Halliburton subsidiary, Brown & Root. One of the world's leading marine contractors, Brown & Root, like Jackson Marine, operates in offshore oil fields from the Gulf of Mexico to Indonesia, building drilling platforms and laying pipelines.

It is a major profit earner for Halliburton whose net income last year was $500 million. Ten years ago, before the oil exploration boom, Halliburton earned just $56 million. Earlier this year Forbes magazine ranked Halliburton as the fifteenth most valuable company on Wall Street-with market value of almost $10 billion-and among the 50 biggest U.S. companies in sales and profits.

Halliburton's directors include leading Republicans Anne Armstrong, former U.S. ambassador to Britain and now a Reagan advisor, and ex-Treasury Secretary William Simon. I n his latest report to stockholders, chairman John P. Harbin declares: "Your company tries to be a good corporate citizen in many ways." The story of Inocencio Castanho and his struggle for just compensation brings that claim into question.

On the morning of February 11, 1977, Castanho, the oiler on the Jackson Marine owned ship `American Moon,' was assisting the German chief engineer to refuel the supply ship's oil tank before leaving the English port of Great Yarmouth. The cold weather prevented the oil, which was being gravity-fed into the tank from drums on the deck, from flowing very freely. So the chief engineer attached the oil drum to a compressed air line intending to force the oil out faster by pressure.

He instructed Castanho to stand by the drum to check the air flow. When it still moved sluggishly, the chief engineer increased the pressure. Castanho says he warned the engineer that the drum was swelling dangerously, but the chief engineer told him to do as he was told. "I had to obey his orders, what else could 1 do?" The chief engineer denies this conversation occurred.

No one denies, however, what then happened. Under pressure, the oil drum exploded. The connector valve linking the air line to the drum sheared off. It hit Castanho in the neck like a piece of shrapnel. Driving half its four-inch length into his neck, it penetrated his spinal column, immediately paralyzing him from the neck down. Doctors who examined him estimated that if the valve had hit Castanho a centimeter higher it would have killed him by preventing him from breathing.

After a year's hospitalization, Castanho returned to Portugal in April, 1978. There he lived until very recently in a cramped, damp slum dwelling without water or sanitation, a place condemned as totally unsuitable for him by both local doctors and an expert retained by Jackson Marine's lawyers. Lacking funds, however, he had to stay there for almost three and a half years until he moved into a new apartment financed through his lawyers.

Even with the new, more suitable home, Castanho must still depend totally on his wife Albertina. Although most of his medical bills are paid by Jackson Marine, which still pays him at his 1977 salary, Castanho cannot afford a nurse. So his wife must wash, dress and feed him as well as help him urinate and defecate. "Only death is worse than being in my position," Castanho says. His wife admits that sometimes it all seems too great a burden. "They should be going through what I have been going through since my husband's accident," she says of Jackson Marine and its insurers.

Castanho's case epitomizes the legal vacuum into which foreign workers in the offshore oil industry fall. In Castanho's case, for instance, the complicated structure makes even the identity of his actual employer a matter of some confusion.

Castanho signed a contract with Jackson Marine S.A., a Panamanian company which owned all the Jackson supply ships. This was a tax- and cost-saving device. As "flag of convenience" ships, the `American Moon' and its sister ships did not have to pay American wages or comply with U.S. safety regulations.

To add to the tax savings. Jackson Marine crews signed their contracts in Rotterdam, where Jackson Marine Services (another subsidiary) and Brown & Root had offices. According to company officials, Jackson Marine Services was Castanho's employer, because it provided the crews on most Jackson ships.

Jackson Marine Services is registered in Curacao, the Netherlands Antilles tax haven island off the coast of Venezuela. It had no real office or operations in Curacao, nor any assets there. The company was run by a local trust company official who rubber-stamped decisions made by the Jackson Marine Corporation head office in Aransas Pass, Texas.

This complicated arrangement meant that when Castanho was injured in England he wasn't covered by Britain's free National Health Service because he was a Portuguese national employed on a Panamanian ship by a Netherlands Antilles company under a contract signed in Holland. Nor was he eligible for the limited help available in Portugal because he was working abroad. To provide for himself and his family Castanho had to sue.

Castanho's legal battle began in England in September, 1977, when he sued Brown & Root (which ran the Jackson Marine North Sea operations) and Jackson Marine S.A., partly at the behest of Jackson Marine's own lawyers, whose motives seem less than altruistic. They knew the company was liable for damages because responsibility for Castanho's accident lay with the ship's chief engineer. {This was formally admitted in June, 1978.)

To cut losses, Jackson Marine offered a deal to Castanho, who desperately needed money. If-and only if-Castanho took legal action in England, Jackson Marine would make an interim payment of $13,000. Castanho did not know then how he could take legal action in the U.S., so he agreed to the offer.

Jackson Marine and its insurers must have been greatly relieved that he accepted this offer. Unlike the unschooled Castanho, they knew that English courts would probably award no more than $500,000 to a quadriplegic-a far cry from the $3 million settlement possible in the United States. This discrepancy exists because in England, judges make personal injury awards, while in America it is juries, which are almost always more generous, who decide.

As an English judge later remarked, "One can almost hear the sigh of mingled astonishment and relief breathed by those concerned ... No better policy could be pursued from the insurers' point of view than to encourage the issue of those proceedings in this country and to confine them there."

With Castanho seemingly locked into an English legal action, Jackson Marine was in no rush to settle and in no mood to make any further interim payments to ease Castanho's financial problems. In December, 1978, Castanho had to resort to a court order to make Jackson Marine pay $36,000 which he needed to buy the land for a new, custom-built home which still has not been built.

By this time, however, Castanho had made contact with two Houston lawyers who specialize in personal injury cases. They advised him that under the United States law known as the Jones Act he could sue Jackson Marine Corporation in its home base of Texas and thereby stand to collect a much larger award. Designed to protect American seamen on the high seas, the Jones Act has in recent years been extended by the courts to cover non-American employees of American-owned corporations operating in the offshore oil industry.

Castanho launched an American action in the District Court of Harris County, Texas in February, 1979. To avoid further. complicating the issue he dropped the English action three months later. Jackson Marine and its insurers immediately began legal moves to force Castanho to continue to site in England and so keep his case out of the Texas courts.

At first, they succeeded. In November, 1979 a High Court judge in London ruled that because Castanho had begun his action in England and had accepted some $50,000 in interim payments he must continue it there. The judge said it would be "unjust" to expose Jackson Marine to the possibility of a "grossly excessive" award by a court in Texas.

But in April, 1980, Castanho successfully appealed that ruling. Declared Lord Justice Shaw of the English Court of Appeals: "It would in my view be less than humane to deny to such a victim the opportunity to pursue his claim for compensation wherever it will evoke the most generous response. Yet this is exactly what has been and is being attempted in the course of this litigation." The case, he said, was "about money, not morality." Castanho was free to sue in Texas.

Jackson Marine tried to stop him yet again by lodging a final appeal with Britain's highest court, the House of Lords. But in December, 1980, the company lost that one as well. Announcing the verdict, Lord Scarman stated: "Texas is as natural and proper a forum for suing a group of Texas-based companies as England."

That seemed to be the end of the battle in England, but all the while Jackson Marine and its insurers had been busy fighting a similarly aggressive rearguard legal action in Texas. They claimed that Castanho had no legal basis for suing in Texas because he was employed by a corporation from Curacao or Panama, not Texas; the corporation that employed him didn't do business in Texas; and he had been injured in British waters while working aboard a Panamanian ship. He should sue in England or Panama or Curacao.

These arguments were first put before the state court, but Castanho's lawyers had the case moved to federal court because they thought it would be more sympathetic to their arguments on jurisdiction. In 1980 the federal judge rejected Jackson Marine's arguments. His decision was upheld by the Federal Court of Appeals in June this year.

But the legal battle is far from over. Jackson Marine and its insurers, Highlands Insurance and Lloyds, are represented by two of the biggest law firms in Houston-Vinson & Elkins (John Connally's firm) and Royston, Rayzor, Vickery & Williams. The lawyers have lodged notice of further appeals and are prepared to take the case all the way to the Supreme Court. Legal costs are well on the way toward one million dollars.

Meanwhile, more than four years after he was crippled, Inocencio Castanho still struggles to survive on his inflation-eroded salary while patiently waiting for the money that could make his and his family's lives at least bearable. The insurers have made several settlement offers, but Castanho's lawyers say none have been large enough to provide for Castanho's needs in the remaining 15 to 20 years of his life. (In return for financing Castanho's case, his lawyers will take 40 percent of any award.)

Even if Castanho does manage finally to win a full and just settlement, other injured foreign workers employed by American corporations in offshore oil fields may not fare as well.

Companies have learned from experience how costly cases like Castanho's, resulting from accidents in the North Sea, can be. In 1980 alone, for instance, three widows of British divers shared some $1.5 million in a case settled against Oceaneering International. And two widows of English and Norwegian divers shared $1.37 million in a case against Ocean Systems.

Many other cases are still pending in the U.S. courts, including two others brought against Jackson Marine. The widow of a Portuguese seaman from a village only a mile or so from the Castanho home is suing over the death of her husband, who disappeared after being allowed to go swimming while at sea in the Gulf of Mexico. And the widow of a British captain is suing over the death of her husband, who was stabbed by a crewman in the Persian Gulf. Both widows are claiming $1.5 million against Jackson Marine, which is contesting each case on grounds of no jurisdiction.

These cases and up to 200 more could be greatly influenced by the precedent set in Inocencio Castanho's legal battle.

For Castanho, however, the day-to-day battle for survival is a more immediate concern. He faces the risk of another winter knowing that even the slightest chest infection could prove fatal because he cannot cough and could easily contract pneumonia. "I think they are just waiting for me to die because it will be cheaper," he says of his former employers and their insurers. "They are businessmen and they see it as business."

Michael Gillard is a journalist with Granada Television in Britain which recently broadcast a documentary on the Castanho case.