Two OPA Issues of First Impression Equal One Costly Result

Oil Pollution Act Violations

The government also sued ACL and DRD under the Oil Pollution Act (OPA) to recover cleanup costs from the spill. DRD declared bankruptcy and dissolved the company. ACL had already paid $70 million for cleanup and damages, but the government had incurred an additional $20 million for which it sued to recover. The district court granted summary judgment for the government against ACL. It appealed.

The oil was discharged from ACL's barge so it was a responsible party under OPA. There are limits of liability under OPA based on the tonnage of the discharging vessel. However, the limits of liability 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).

The court held that, under these facts and circumstances, there was no limit of liability of the responsible party.

OPA also provides a complete defense to liability under four enumerated circumstances, as follows:

[a] responsible party is not liable for 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).

33 U.S.C. § 2703(a).

To take advantage of the defense, a responsible party must also establish that it "exercised due care with respect to the oil concerned" and that "it took precautions against foreseeable acts or omissions" of the third party. 33 USC § 2703(a)(3)(A)-(B). ACL contended it was entitled to the third-party defense or to limit its liability. The trial court and the appellate court disagreed.

The Court's Decision: "In Connection with"

ACL contended DRD caused the spill. The parties agreed DRD's conduct was the sole cause. They disagreed on whether DRD's acts or omissions occurred in connection with the contractual relationship. The Fifth Circuit noted the meaning of "in connection with" in § 2703(a)(3) was one of first impression. The court used the dictionary definition of "connection" and defined it as "whenever the acts or omissions relate to the contractual relationship in the sense that the third party's acts and omissions would not have occurred but for that contractual relationship"—a very broad interpretation in the government's favor.

Consequently, the court concluded that the third-party defense should not be available where a spill is caused by third-party acts or omissions that would not have occurred but for the contractual relationship between the third party and the responsible party. ACL made a number of arguments as to why it should be entitled to the third-party defense, but none were bought by the trial or appellate court. In the author's view, this was brought on by DRD's egregious conduct in causing the spill and the government's need to exact monetary retribution from someone.

The Court's Decision: "Pursuant to"

ACL also contended it was entitled to OPA's general limit on liability. The government responded that DRD's conduct fell within the exception for gross negligence, willful misconduct, or federal regulatory violations committed by "a person acting pursuant to a contractual relationship with the responsible party." 33 USC § 2704 (c)(1).

Incredibly, this case presented a second issue of first impression, the meaning of "pursuant to" under that section of OPA. Again, the court turned to dictionary definitions and found "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."

ACL argued that the statute should require the negligent or wrongful act itself to be "pursuant" to the contract, in other words, that the specific act or omissions that cause the spill must be authorized by the contract. The court found this position to be "nonsensical" as no contract contemplates gross negligence, willful misconduct, or regulatory violations. ACL also argued that the statute left out criminal violations to which the court chastised as an argument "without principled basis."

Conclusion

In the author's opinion, admittedly second guessing, this was the wrong case for ACL to take to the Fifth Circuit Court of Appeals, now leaving vessel owners (and their insurers) with broad definitions of two important terms in OPA in this circuit. Two issues of first impression decided in the government's favor equal one costly result.