Don’t Fall Asleep at the Helm- 5th Circuit Goes Broad on OPA Interpretation

In two issues of first impression, the 5th Circuit Court of Appeals read the complete defense provisions for oil spills under the Oil Pollution Act (“OPA”) to strictly construe the defenses and make them only very narrowly available.

On November 7, 2017, the 5th Circuit issued its opinion in United States v. American Commercial Lines, L.L.C., cause no. 16-31150, 2017 WL 5146110 (5th Cir. 2017). The two issues presented involved the meaning of “in connection with any contractual relationship” under 33 U.S.C. § 2703(a)(3) and “pursuant to a contractual relationship” under 33 U.S.C. § 2704(c)(1) – two critical provisions in the Oil Pollution Act of 1990 (“OPA”) that can provide a defense/limitation of liability to the otherwise strict liability under OPA. In both instances, the Court interpreted these phrases broadly to find that the District Court correctly granted summary judgment in favor of the United States, declaring that American Commercial Lines, L.L.C. could not invoke the defense provisions and thus was fully responsible for all costs of the 2008 oil spill resulting from the collision of the tug M/V MEL OLIVER and her tow with the tank vessel TINTOMARA.

As important contextual background, this litigation involved an oil spill in the Mississippi River after an tank barge laden with crude oil was towed into the path of an ocean-going tanker the TINTOMARA in July 2008.[1] The tug boat towing the oil barge was owned by American Commercial Lines, L.L.C. (“ACL”), but operated by DRD Towing Company (“DRD”) under two charter party agreements between ACL and DRD. Under these agreements, DRD agreed to crew a series of tugboats owned by ACL and charter its services back to ACL.[2] The M/V MEL OLIVER was one of the tugboats operated by DRD under the agreements.

The crew DRD assigned to the M/V MEL OLIVER included a captain with a valid United States Coast Guard Master of Towing Vessels license, a Steersman with an Apprentice Mate license, and two deckhands. The captain was the only crewmember authorized under Coast Guard regulations to operate tugboats on the lower Mississippi.[3]

On July 20, 2008, the captain for the M/V MEL OLIVER left the vessel to go on shore leaving the Steersman in charge. Two days later, while the Captain was still on shore, ACL had the M/V MEL OLIVER tow one of its oil barges to pick up fuel from a facility in Gretna, Louisiana. ACL was unaware that the M/V MEL OLIVER’s captain was not present on the tug. Additionally, at that time, the steersman had been working for 36 hours with only 2 short naps in violation of Coast Guard “12-hour rule” regulations. On July 22nd at 2:00 pm the M/V MEL OLIVER with the fuel barge in tow arrived at the fuel facility and then departed on July 23rd at 12:30 am. Approximately an hour after departure, the M/V Mel with the fuel barge in tow began travelling erratically and turned to cross the path of the TINTOMARA, whose crew attempted to hail the M/V MEL OLIVER by radio and sound its alarm, but with no response. The TINTOMARA was unable to change course and eventually the fuel barge towed by the M/V MEL OLIVER collided with the TINTOMARA resulting in 300,000 gallon oil spill into the Mississippi River.[4] After the collision, the steersman was found to be slumped over the steering sticks of the M/V MEL OLIVER and non-responsive.[5]

ACL paid $70 million for removal costs and damages as the OPA-defined responsible party and the United States paid the remaining $20 million.[6] This lawsuit was brought by the United States seeking a declaration that ACL was not entitled to any liability defenses under OPA and seeking a judgment ordering ACL to pay the United States $20 million. The United States filed a summary judgment motion on its claim, which was granted by the district court. Subsequently ACL appealed that decision to the 5th Circuit.[7]

So, what was the 5th Circuit dealing with then when it was interpreting “in connection with” and/or “pursuant to” a “contractual relationship” under OPA?

In response to the Exxon Valdez oil spill, Congress enacted OPA to create a strict liability scheme for statutorily defined “responsible parties” for pollution removal costs and any damages associated with oil spills.[8] While OPA generally provides defenses and limitation of liability for any responsible party, those defenses/limitation do not apply in 2 different scenarios:

[a] responsible party is not liable for [i.e. has a complete defense against] removal costs or damages . . . if [that] party establishes, 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).[9]

33 U.S.C. §2703(a)(3); and

[the limitation of liability provisions 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 operation regulation by, the responsible party, an agent or an employee of the responsible party, or a person acting pursuant to a contractual relationship with the responsible party . . . . [10]

33 U.S.C. §2704(c).

In connection with any contractual relationship … ”

ACL contended that it was entitled to a complete liability defense under 33 U.S.C. § 2703(a)(3), arguing that it was the non-contractual conduct of a contracted party that caused the spill.[11] The dispute at the 5th Circuit centered around whether DRD’s acts and omissions that caused the oil spill “occurred in connection with th[e] contractual relationship” between ACL and DRD.[12] Both ACL and the United States agreed that DRD’s acts and omissions were the sole cause of the oil spill.

The Court noted that the phrase “in connection with” is “capacious” and could include things that are either logically or causally bound up in each other,[13] and thus is broad enough to encompass acts or omissions that “would not have occurred but for that contractual relationship.”[14] Accordingly, the Court went on to provide a broad “but for” test with respect to the “in connection with a contractual relationship” language:

Conduct does not automatically occur “in connection with” a contractual relationship by the mere fact that a relationship exists. . . . Rather, the conduct must be causally or logically related to the contractual relationship. Accordingly, the third party’s acts or omissions that cause a spill [to] occur “in connection with any contractual relationship” between the responsible party and the third party whenever the acts or omissions related to the contractual relationship in the sense that the third party’s acts and omissions would not have occurred but for that contractual relationship.[15]

The Court noted that this interpretation, reading “in connection with” broadly in order to narrowly limit the third-party defense, was within Congress’ intent when enacting OPA. The Court further rejected ACL’s arguments – that DRD’s acts and omissions were not “in connection with” their contract because that contract required compliance with all applicable laws and regulations – on the basis that the phrase “in connection with” is not “in compliance with.” Moreover, “[a] contrary reading would permit responsible parties to circumvent OPA by easily contracting out of liability, a result Congress specifically sought to avoid.”[16]

Based on the above, the Court concluded that “but for” the charter agreements between ACL and DRD, DRD would not have been operating the M/V MEL OLIVER and transporting ACL’s fuel barge, and therefore the spill would not have occurred.[17]

This ruling by the 5th Circuit is not far from a previous interpretation argued by the Coast Guard’s National Pollution Funds Center (“NPFC”) in Buffalo Marine Services Inc. v. U.S., 663 F.3d 750 (5th Cir. 2011). In Buffalo Marine, the 5th Circuit was addressing NPFC’s interpretation and found that their interpretation was entitled to deference under the Administrative Procedure Act.[18] The NPFC interpreted “in connection with” to include “acts or omissions occurring in connection with an indirect contractual relationship with the responsible party.” Thus, the NPFC has interpreted the phrase as including acts occurring in connection with a commercial fuel delivery even where “a chain of agents or contracts stands between the party delivering the fuel and the party receiving the fuel.”[19] While the 5th Circuit was not addressing for itself the meaning of this phrase in OPA, the seeds were sown when it found that NPFC’s broad interpretation was entitled to deference in 2011.

“Pursuant To a Contractual Relationship…”

Separate and apart from the complete defense under OPA §2703(a), there is also a general provision in OPA providing for a limit on liability, unless a spill was “proximately caused by gross negligence, willful misconduct, or federal regulatory violations committed by a person acting pursuant to a contractual relationship with the responsible party.”[20] Here, ACL contended that it was entitled to the liability limitation, whereas the government contended that ACL’s conduct fell within this exception due to the gross negligence/willful misconduct/violation of federal regulations by DRD. The issue turned on whether DRD’s acts were “pursuant to a contractual relationship.”

The Court again engaged in an ordinary language analysis of “pursuant to” as this term is not defined by the statute.[21] Intriguingly, the Court noted that “pursuant to” is certainly narrower than “in connection with,” however, is not so narrow that it only covers actions that are authorized by the contract at issue, as ACL attempted to argue.[22] The Court found that this language was still relatively broad, stating

[a]ccordingly, 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.”[23]

The Court noted that ACL’s proposed reading of §2704(c) would be nonsensical, as it would be rare for a contract to even contemplate a party acting with gross negligence, willful misconduct, or in violation of a federal safety regulation.[24]

ACL further attempted to argue that because DRD’s acts were in fact criminal, that §2704(c)’s exception to liability does not apply as it only addresses gross negligence, willful misconduct, or regulatory violations.[25] The Court, however, refused to accept this argument noting that “there is no principled basis on which to distinguish between the negligent acts that would lift the general limits on liability and the criminal acts that would not.”[26] Further, to do so, would defeat the purpose of OPA.[27] Based on this the 5th Circuit concluded that ACL was not entitled to the limitation on liability under 33 U.S.C. § 2704(c)(1).

The 5th Circuit is the first Circuit Court to address these issues under OPA and the nuanced issues of how “contractual relationships” may affect the complete defense/limitation of liability provisions of OPA. Based on the 5th Circuit’s rulings, the exceptions and limitations to liability are narrow and may trigger full liability under OPA if a “responsible party” is not wary and falls asleep at the helm.

[1] United States v. American Commercial Lines, L.L.C., 2017 WL 5146110, at *1 (5th Cir. 2017).

[2] Id..

[3] Id. (citing 46 C.F.R. § 10.107(b) (requiring that Steersman “be under the direct supervision and in the continuous presence of a master”); 46 C.F.R. § 15.401 (prohibiting mariners from serving in any positions that exceed the limits of their credentials).

[4] Id. at *1–2.

[5] Id.

[6] Id. at *1.

[7] Id. at *2.

[8] Id. at *2–3 (citing Buffalo Marine Servs Inc. v. United States, 663 F.3d 750, 752 (5th Cir. 2011)).

[9] 33 U.S.C. § 2703(a) (emphasis added).

[10] 33 U.S.C. § 2704(c)(1) (emphasis added).

[11] American Commercial Lines, L.L.C., 2017 WL at *3.

[12] Id.

[13] *4.

[14] Id.

[15] Id. (citing Westwood Pharm., Inc. v. Nat’l Fuel Gas Distrib. Corp., 964 F.2d 85, 89 (2d Cir. 1992) (addressing similar language under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”)).

[16] Id. at *5 (citing S. Rep. No. 101-94, at 13).

[17] Id.

[18] Buffalo Marine, 663 F.3d at 754.

[19] Id.

[20] American Commercial Lines, L.L.C., at *5 (quotation marks removed) (citing 33 U.S.C. § 2704(c)(1)).

[21] Id.

[22] Id.

[23] Id..

[24] Id.

[25] Id..

[26] Id. at *6.

[27] Id. (“There is no reason to think that Congress intended to lift the limits on liability for spills caused by conduct that is forbidden by federal regulation but to reimpose those limits for spills caused by conduct considered so dangerous or risky that it is also subject to criminal penalties. Such a distinction would run counter to OPA’s purpose of encouraging compliance with the very rules and regulations intended to prevent oil spills in the first instance.”).