Appeals Court affirms shipping company’s liability in '08 oil spill recovery payment dispute

By Anna Aguillard | Jul 22, 2014

U.S. 5th Circuit Court of Appeals

NEW ORLEANS – The U.S. Court of Appeals for the Fifth Circuit has affirmed a district court’s decision, holding a shipping company liable for recovery in an oil spill clean up case.

On July 23, 2008, near New Orleans on the Mississippi River, an ocean-going tanker collided with an unmanned barge owned by American Commercial Lines LLC, damaging the barge and spilling oil into the river. In accordance with the Oil Pollution Act of 1990 (OPA), the Coast Guard then began directing oil spill cleanup. The Coast Guard determined American Commercial Lines LLC (ACL) to be the party responsible for payment. ACL then entered into a contract with the Environmental Safety and Health Consulting Services (ES&H) and the United States Environmental Services (USES) to provide cleanup services.

According to the Oil Pollution Act of 1990 (OPA), the party determined responsible must reimburse all cleanup fees to its contractors within 90 days. At the end of the 90-day period, ACL had withheld $3.9 million from ES&H, and $4.4 million from USES. The OPA allowed ES&H and USES two options to obtain these funds: either sue ACL for the entire amount, or file a claim with the Oil Spill Liability Trust Fund, which would then provide a portion of the debt. Both the ES&H and the USES filed claims with the fund, and each received $3.1 million and $1.5 million, respectively.

Following payment, the United States sued ACL to recover the funds paid to ES&H and USES and to penalize them for failing to pay the entire amount owed. ACL objected to the suit, contending that, among other things, ES&H and USES failed to provide proper documentation for the costs incurred during recovery. ACL then attempted to bring ES&H and USES into the suit as third-party defendants, claiming that each party was partly responsible for the payment under federal common law and general maritime law.

The United States, ES&H, and ESES each filed a motion to dismiss ACL’s attempt to bring third-party defendants into the suit. The District Court granted the motion, concluding that the procedure for payment responsibility established by OPA explicitly displaces both federal common law and general maritime law.

ACL immediately filed an appeal, claiming that the district court erred in its decision that the OPA outlines “explicit” procedure for recovery responsibility, and that ES&H and USES could be held liable to recover fees under federal common law and general maritime law.

The Fifth Circuit Court rejected ACL’s appeal, and affirmed the District Court’s decision. In his judgment, Judge Stephen Higginson cited Congress’s purpose for creating the OPA as “to create a single Federal law providing cleanup authority, penalties, and liability to oil pollution.”

This “carefully calibrated scheme” of Congress’s suggests that Congress intended it to be an exclusive and explicit remedy for oil pollution recovery, he wrote. The court ruled that the OPA was created to provide rapid cleanup and payment of oil spills, and that allowing procedure to be governed by federal common law or general maritime law would inhibit this explicit purpose.

The court outlines the proper way for ACL to raise its contentions regarding liability for the disputed costs – it must first establish that EH&H’s and USES’s bills were “unnecessary, unreasonable, or not in compliance with relevant statutory criteria” in order to show that the fund’s payments were “arbitrary and capricious.”

The case was heard by Circuit Judges Stephen A. Higginson, E. Grady Jolly and Emilio M. Garza.

Case No. 13-30358.

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