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Supreme Court rejects Indiana barge company’s oil spill appeal

June 19, 2018

An Indiana-based barge company lost its bid Monday to have the Supreme Court of the United States hear a case of first impression over whether the company was liable under the Oil Pollution Act of 1990 for an oil spill caused by the tug boat operator.

American Commercial Barge Line LLC (formerly American Commercial Lines LLC), headquartered in Jeffersonville, paid more than $70 million in cleanup costs and damages resulting from a collision that spilled nearly 300,000 gallons of oil into the Mississippi River in July 2008. The federal government then sued American Commercial to recoup the $20 million the United States spent on removal costs and damages.

The U.S. District Court for the Eastern District of Louisiana granted the government’s motion for partial summary judgment, finding American Commercial was not entitled to any liability defenses under OPA, and ordered the company to pay the $20 million. A unanimous panel of the 5th Circuit Court of Appeals affirmed in an opinion filed Nov. 17, 2017.

American Commercial filed a petition for a writ of certiorari in February 2018 with the Supreme Court. The company argued the justices should take the appeal to confirm that it has limited liability under OPA for the costs and damages from the oil spill.

However, the Supreme Court denied the petition.

The oil spill happened July 23, 2008, when an American Commercial barge being pushed by the tug boat Mel Oliver collided with an ocean-going tanker Tintomara. American Commercial owned the tug boat but the company had entered into two charter agreements with DRD Towing to operate the vessel.

After the collision, the federal government prosecuted DRD and some of its crew members for criminal violations of federal environmental law. During the investigation, DRD admitted to allowing its employees to work without appropriate licenses or qualifications, and to work more hours than permitted by U.S. Coast Guard safety regulations.

American Commercial argued before the 5th Circuit that it is entitled to the third-party defense that the OPA provides. The Act states a responsible party is not liable for removal costs and damages if a third party’s actions, which caused the damage, occurred “in connection with any contractual relationship with the responsible party.”

Pointing to the language of the Act, American Commercial contended DRD’s acts were not “in connection with” but rather directly violated the terms of the contract. Noting the case was one of first impression in looking at the language of the Oil Pollution Act, the 5th Circuit gave a broader meaning to the phrase “in connection with.”

Judge Stephen Higginson wrote for the court, “…the meaning of ‘connection’ is broad enough to encompass acts that are not specifically contemplated, or even acts that are specifically not contemplated, in a contract. A contrary reading would permit responsible parties to circumvent OPA by easily contracting out of liability, a result Congress specifically sought to avoid.”

Next, American Commercial asserted it was entitled to OPA’s general limit on liability. The Acts includes a provision that states the limits on liability do not apply if the incident was caused by “… a person acting pursuant to a contractual relationship with the responsible party.”

The barge company argued that in order to void the limits on liability, the acts that caused the spill must be authorized by the contract.

Again, the court was presented with a matter of first impression since the “pursuant to” language is not defined in the statute. Ultimately, the 5th Circuit disagreed with American Commercial, ruling the “pursuant to” language is satisfied if the person commits the gross negligence, willful misconduct or federal regulatory violations while carrying out the terms of the contractional relations.

Higginson wrote, “Reading the statute to require that the negligent or wrongful act itself be ‘pursuant’ to the contract would be nonsensical; it would be a rare contract indeed that specifically contemplated gross negligence, willful misconduct, or the violation of federal safety regulations. Exceptions to the statutes are to be construed narrowly, but ACL’s proposed construction would read the exception out of the statute altogether.”

In its petition to the Supreme Court, American Commercial countered it never argued, nor does the statute require, that the violation be authorized by the contract. The company stated violations, negligence and misconduct can occur while a party is working under a contract and, on such occasions, the responsible party would not be entitled to the Act’s limitations on liability.

“Here, however, the criminal actions of DRD and its employee (John) Bavaret were wholly not in compliance or conformity with the Charters and therefore were not taken ‘pursuant to’ the Charters,” American Commercial wrote in its petition. “Despite the terms in the Charters requiring DRD to comply with all laws and regulations and to properly man the tug, DRD engaged in the deliberate, criminal act of improperly manning (the tug boat). It cannot be contended that such deliberate, criminal acts were taken ‘pursuant to’ the Charters. Criminal conduct is never pursuant to a legal contract.”

The case at the Fifth Circuit was U.S. v. American Commercial Lines, LLC, 16-31150.

  

 

  

 

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