On November 7, 2017, the United States Court of Appeals for the Fifth Circuit affirmed a decision in favor of the U.S. government seeking reimbursement for $20 million in spill response costs from the party responsible for the spill. In reaching the decision, the Court found that the plain language of the Oil Pollution Act of 1990 (“OPA 90”) does not provide for a third-party defense for liability when the responsible party has ‘any contractual relationship’ with that party, even if the third party commits acts that were not contemplated in the contract.

The case involved a collision between a barge under tow and an ocean-going tanker. At the time of the collision, the tugboat was owned by American Commercial Lines (“ACL”) and was being operated by DRD Towing (“DRD”). Pursuant to the parties’ contract, DRD had all responsibility to crew the tugboat in question. At the time of the incident, the responsible tug, the M/V MEL OLIVER, was being impermissibly operated by a steersman without proper licensing. Immediately after the collision, the steersman was found slumped over the steering sticks and non-responsive. There was no dispute that the collision was the fault of the tug. As a result of the collision, 300,000 gallons of oil was spilled into the Mississippi River. ACL, owner of the tugboat, spent approximately $70 million in removal costs and damages, while the U.S. government incurred approximately $20 million to remedy the spill. The District Court for the Eastern District of Louisiana awarded $20 million in damages to the U.S. government and ACL appealed.

ACL sought to avail itself of a complete defense under the “third-party defense” of section 2704(c)(1) of OPA 90, or in the alternative, limit its liability proportionate to the tonnage of the tug pursuant to section 2703(a). The Fifth Circuit rejected ACL’s appeal arguments as inconsistent with both the ordinary meaning and the purpose of OPA 90. ACL argued that DRD was a third-party whose acts or omissions caused the incident and that those actions were not taken ‘in connection with’ the contractual relationship between the parties as DRD had failed to comply with all laws and regulations. The Court held that the plain language of OPA 90 refers to “any” contractual relationship with the responsible party, broadly encompassing all acts logically connected and pursuant to that relationship. In reaching the decision, the Court adopted a “but for” test: 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. In the alternative, ACL asserted that the specific acts or omissions that caused the spill must have been authorized by the contract in order to fall within an exception from limited liability. The Fifth Circuit stated that the “pursuant to” language of the limitation on liability section of OPA 90 is satisfied if the person who commits gross negligence, willful misconduct, or applicable regulatory violation does so in the course of carrying out the terms of the contractual relationship.

To read the full opinion of the Fifth Circuit, please click here.

For more information about the Court’s decision, please do not hesitate to call on us at info@chaloslaw.com.