Case:     United States v. American Commercial Lines, L.L.C., No. 16-31150, ___ F.3d ___ (5th Cir. 11/7/17).

Factual Background

In July of 2008, nearly 300,000 gallons of oil spilled into the Mississippi River in New Orleans when a tugboat towing an oil-filled barge veered across the river into the path of an ocean-going tanker.  American Commercial Lines (“ACL”) owned the tug MEL OLIVER, and bareboat chartered its tug to DRD Towing.  DRD then operated the MEL OLIVER under a time charter to ACL.  At the time of the collision, the MEL OLIVER, which was pushing ACL’s barge DM-932 fully laden with oil, was operating without a captain who had effectively abandoned the vessel several days earlier.  The Steersman left in charge was allegedly sound asleep at the wheel at the time of the collision as he had been working for nearly 36 straight hours.  The TINTOMARA, a tanker, collided with the DM-932, causing the barge to break away and ultimately sink in the Mississippi River resulting in the spill of approximately 300,000 gallons of oil into the River.  As owner of the leaking barge, ACL was deemed the responsible party under the Oil Pollution Act of 1990 (“OPA ’90”).

In the liability trial between the vessel interests, the judge held that DRD was 100% responsible for the collision and that ACL and TINTOMARA interests were free from fault.  DRD was also prosecuted and convicted of violating federal laws in connection with its operation of vessels and destruction of evidence.  The U.S. government filed suit against ACL and DRD under OPA ’90 seeking to recover the $20 million in cleanup costs incurred in connection with the spill.[1]  DRD filed for bankruptcy, and a judgment was ultimately issued in favor of the government and against ACL for $20 million.  ACL appealed, arguing two things: (1) it was entitled to a complete defense to OPA ’90 liability under 33 U.S.C. § 2703(a), or (2) it was entitled to limit its liability pursuant to 33 U.S.C. § 2704(a).  The Fifth Circuit rejected both arguments and affirmed the $20 million judgment against ACL.

1. ACL was not Entitled to a Complete Defense to OPA ’90 Liability under 33 U.S.C. § 2703(a)

33 U.S.C. § 2703(a) provides that a Responsible Party under OPA is entitled a complete defense if it can establish “ by a preponderance of the evidence, that the discharge . . . of oil and the resulting damages or removal costs were caused solely by—(1) an act of God; (2) an act of war; (3) an act or omission of a third party, other than an employee or agent of the responsible party or a third party whose act or omission occurs in connection with any contractual relationship with the responsible party . . . or (4) any combination of paragraphs (1), (2), and (3).”  ACL argued that the spill was the result of an act or omission of a third party (DRD) and that the spill did not occur “in connection with” ACL’s contractual relationship with DRD.  The Fifth Circuit noted that the issue of whether the conduct occurred “in connection with” the contractual relationship was one of first impression.  The Court held, however, that interpreting “in connection with” in the context of the OPA ‘90 policy of broad liability results in a “but for” analysis—if the third party’s conduct that caused the spill would not have occurred “but for” the contractual relationship, then the third party’s conduct occurred “in connection with” the contractual relationship.[2]  In the instant case, it was clear that DRD’s conduct (negligent operation of the MEL OLIVER) would not have occurred “but for” the contractual relationship between ACL and DRD because absent the charter agreements (where DRD agreed to crew the MEL OLIVER and charter DRD’s services to ACL), DRD would not have been operating the MEL OLIVER and transporting ACL’s fuel-filled barge, and the spill would not have occurred.  Accordingly, the Court concluded that ACL was NOT entitled to exoneration under 33 U.S.C. § 2703(a).[3]

2. ACL was not Entitled to Limit its Liability under OPA ’90 pursuant to 33 U.S.C. § 2704(a)

The Court went on to reject ACL’s argument that it was entitled to limit its liability pursuant to 33 U.S.C. § 2704(a), which generally limits the liability of a responsible party to a specified dollar amount based on the tonnage of the vessel from which oil was discharged.  The Court noted that the limits on liability of § 2704(a) “do not apply if: the incident was proximately caused by—(A) gross negligence or willful misconduct of, or (B) the violation of an applicable Federal safety, construction, or operating regulation by, the responsible party, an agent or employee of the responsible party, or a person acting pursuant to a contractual relationship with the responsible party . . . . 33 U.S.C. § 2704(c)(1).”  Clearly DRD’s conduct constituted gross negligence or willful misconduct; the issue, therefore, was whether DRD was acting “pursuant to a contractual relationship with” ACL.[4]  While “pursuant to” is narrower than “in connection with”, the Court held that the “pursuant to” language “is satisfied if the person who commits the gross negligence, willful misconduct, or regulatory violation does so in the course of carrying out the terms of the contractual relationship with the responsible party.”[5]  Here, DRD’s gross negligence/willful misconduct was committed in the course of carrying out the terms of the contractual relationship with ACL, so ACL was not entitled to limitation.

The Fifth Circuit affirmed the district court’s granting of summary judgment finding that ACL was not entitled to any defenses under OPA ’90 and ordering ACL to pay the United States $20 million in cleanup costs. While it is not altogether surprising that the Court declined to leave the government stuck with the $20 million in cleanup costs, it is significant to note that ACL was essentially held accountable for DRD’s illegal conduct (which expressly violated the terms of the charters).  The clear takeaway from this case is that Congress (and the courts) have gone to great lengths to impose liability on the “responsible party” under OPA ’90.

[1]              OPA ’90 holds statutorily-defined “responsible parties” strictly liable for pollution-removal costs and damages associated with oil spills. It provides that “each responsible party for a vessel or a facility from which oil is discharged…is liable for the removal costs and damages…that result from such incident.”  33 U.S.C. § 2702(a).  With respect to vessels, the “responsible party” is “any person owning, operating, or demise chartering the vessel.”  33 U.S.C. § 2701(32)(A).

[2]              United States v. American Commercial Lines, L.L.C., No. 16-31150, p. 8, ___ F.3d ___ (5th Cir. 11/7/17).

[3]              Id. at pp. 10-11.

[4]              Id. at p. 12.

[5]              Id.

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