Recent Verdict on Bunker Spill Case Brings Clarity to Third-Party Fault and Limitation of Liability Defenses

Eugene J. O'Connor, Montgomery McCracken

The case of US v. American Commercial Lines, LLC, No. 16-31150 (5th Cir. Nov. 7, 2017), is the latest chapter in the litigation stemming from the collision between a barge and a tanker on July 28, 2008 which resulted in the barge spilling approximately 300,000 gallons of oil into the Mississippi River near New Orleans. The barge was under tow by the tug MEL OLIVER, which was owned by American Commercial Lines ("ACL") who had hired another company, DRD Towing Company ("DRD"), to operate it.  The tug's captain was the only member of the crew with a valid Coast Guard license but he was ashore at the time of collision. The conn had been left to an unlicensed apprentice mate or "steersman" who was not authorized to operate the vessel without continuous supervision. At the time of the collision he was found slumped over the steering gear and non- responsive, having worked almost continuously for 36 hours in violation of Coast Guard regulations. 

The government prosecuted DRD, the captain and the steersman for criminal violations of federal environmental law.  All three pled guilty to certain counts of violating the Ports and Waterways Safety Act and/or the Clean Water Act.

The government also sued ACL and DRD to recover the almost $20 million it had spent responding to the spill.  DRD declared bankruptcy. The government moved for summary judgment against ACL as the Responsible Party ("RP") under OPA, and the district court granted summary judgment and ordered ACL to pay the government in full.  ACL then filed this appeal.

ACL contended that it was entitled to a complete defense to liability under Oil Pollution Act of 1990 ("OPA")  because a third party, the tugs' operator DRD, caused the spill.  The US responded that this third-party defense was not available because DRD's conduct occurred "in connection with a contractual relationship" with ACL.  The issue for the Fifth Circuit Court of Appeals was whether DRD's acts or omissions occurred "in connection with any contractual relationship" between these parties. 

The Court of Appeals first noted that the meaning of the "in connection with" terminology was a case of first impression. It concluded that under commonly accepted definition and usage "connection" was a "capacious" term that encompassed not only things that are "logically or casually" related but also those that are simply "bound up" with one another.  It held that a third-party's acts or omissions occur in connection with a contractual relationship with the RP, if said acts or omissions "would not have occurred but for that contractual relationship." In this respect, the Court of Appeals recognized that the design and intention of Congress in enacting OPA was to promote prompt response to oil spills and also to prevent future spills by imposing heavy financial consequences to encourage RPs to take all available precautionary measures.  One way to achieve this goal was to limit the third-party defense when the third party was in a contractual relationship with RP. The Court of Appeals held that DRD's acts or omissions were incurred in connection with its contractual relationship with ACL and therefore ACL was not entitled to a complete defense under OPA.

In the alternative, ACL argued that it was entitled to invoke OPA's limited liability provision.  The US countered that DRD's conduct fell within OPA's exception to limited liability because the spill was caused by the gross negligence, willful misconduct or violation of federal regulations by DRD while acting pursuant to its contractual relationship with ACL. 

The Court of Appeals again agreed with the US.  The appellate court noted that the term "pursuant to" was another matter of first impression and concluded that this language applied if the person does so in the course of carrying out the terms of the contractual relationship with the responsible party.  The appellate court found that the fact that DRD's conduct here gave rise to criminal violations did not take it outside OPA's exception to limited liability.  The appellate court also determined that there is "considerable overlap" between gross negligence, willful misconduct or violations of federal regulations on one hand, and criminal violations on the other, and saw no logical basis to distinguish between negligent acts that would constitute exceptions to limited liability and criminal acts which would not.

Lastly, the Court of Appeals rejected ACL's reliance on the doctrine of "respondeat superior".  ACL contended that under common law, employers are not responsible for intentional torts or criminal acts of their employees if committed outside the scope of their employment.  However, the appellate court noted that the liability of an RP for spills caused by the negligence ort misconduct of a contractually related third party under OPA was a creature of statute taking priority over common law. Further, even under common law, employees are liable for the intentional torts of their employees if they were acting within the scope of their employment, i.e. performing work assigned by the employer.  The appellate court ultimately held that, ACL was not entitled to limit its liability because the spill was caused by the gross negligence, willful misconduct or federal regulatory violation of DRD while acting pursuant to its contractual relationship with ACL. 

The Fifth Circuit Court of Appeals therefore affirmed the district court's grant of summary judgment against ACL in all respects. RPs are not entitled to avoid OPA liability by claiming that the incident was caused by assisting tugs, or also by a wide range of contractual partners or service providers such as charterers, stevedores, repairmen or cargo shippers, depending on the facts of a given case.  However, even though this holding precludes asserting sole party fault when the act or omission in question arises from a contractual relationship between the parties, OPA expressly reserves the RP's right to seek contribution from a third party who is potentially liable under "this Act or any other law" which would include, e.g., theories of liability under general maritime law.