A multimillion-dollar case stemming from the 2004 oil spill in the Delaware River is being sent back to the district court by the U.S. Court of Appeals for the Third Circuit.
The owner of the tanker, Frescati Shipping Co., paid $180 million to clean up the 263,000 gallons of oil that spilled after the hull of the ship was pierced by a 9-ton anchor that had been left on the riverbed, it told the court. Frescati was reimbursed for $88 million by the U.S. government under the Oil Pollution Act of 1990 and sought to recoup the rest from Citgo, which had ordered the oil and owned the pier where the ship was docking when it was punctured.
After a 41-day bench trial, the district court held that Citgo wasn’t liable.
However, the Third Circuit disagreed with several of the trial court’s findings.
"Although remand is appropriate because the district court failed to set out a separate findings of fact and conclusions of law as required by Federal Rule of Civil Procedure 52(a)(1), our legal conclusions also make it necessary to remand for factual findings," Third Circuit Judge Thomas Ambro said in In re Petition of Frescati Shipping. He wrote the opinion on behalf of a three-judge panel that included Judge Joseph A. Greenaway Jr. and Federal Circuit Judge Kathleen M. O’Malley, who was sitting by designation.
The case will go back to the U.S. District Court for the Eastern District of Pennsylvania to be heard by U.S. District Judge Joel Slomsky, who has been assigned the case following the retirement of U.S. District Judge John P. Fullam. Fullam presided over the trial and issued the opinion.
Fullam had rejected the argument that the accident had occurred in waters that qualified as an "approach" to Citgo’s berth.
"To accept Frescati’s argument would have the effect of potentially expanding the definition of ‘approach’ to the entire anchorage or to the entire Delaware River," Fullam wrote in his 2011 opinion.
As the owner of a dock, Citgo had no responsibility to guarantee a safe transit through the anchorage or to scan or survey the anchorage for hazards within that area, Fullam found.
Rejecting Frescati’s contract claim, Fullam found that Citgo "fulfilled its duty of due diligence, and I also find that the port and berth were generally safe. Hundreds of vessels anchored in the anchorage during the time the anchor is known to have been in the river."
Fullam had concluded that "the fault for the casualty lies with the anchor’s former owner, who abandoned it in the river without notifying anyone."
The Third Circuit, though, held that Frescati was an implied beneficiary of Citgo’s safe berth warranty that the company had made to an intermediary that was responsible for chartering the boat to port.
Whether or not the warranty was actually breached remains an open question, the appeals court held, since the district court had made no specific finding as to the positioning of the boat.
The holding that Frescati could benefit from the safe berth warranty led the Third Circuit to settle a question of first impression in the circuit — the comprehensiveness of such a warranty.
"Though the district court did not need to reach this legal issue after determining that Frescati was not a third-party beneficiary, it nonetheless concluded — as an alternate holding — that the safe berth warranty was not breached because ‘Carco fulfilled its duty of due diligence,’" Ambro said, quoting from Fullam’s opinion. Carco is the group of Citgo affiliates named in the action.
"We part from this holding, as we believe the court incorrectly relied on Orduna S.A. v. Zen-Noh Grain, which held that the safe berth provision was not a full warranty but required only due diligence," Ambro said. Orduna was issued by the Fifth Circuit in 1990.
He then cited the long-held understanding that a port is unsafe and in violation of the safe berth warranty when a ship can’t reach the port without harm in normal conditions.
The Third Circuit chose to follow the Second Circuit, which held in its 1935 opinion in Cities Service Transportation v. Gulf Refining that "promising a safe berth effects an ‘express assurance’ that the berth will be as represented," Ambro said.
He also explained in a footnote that adherence to the Second Circuit’s view advances uniformity of maritime law on the Mid-Atlantic seaboard.
"Hence we conclude that the safe berth warranty is an express assurance made without regard to the amount of diligence taken by the charterer," Ambro said.
John Kimball of Blank Rome in New York represented Frescati and declined to comment.
Richard Whelan of Palmer Biezup & Henderson in Philadelphia represented Citgo and couldn’t be reached for comment.
(Copies of the 58-page opinion in In re Petition of Frescati Shipping, PICS No. 13-1117, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •