Tuesday, June 13, 2017

U.S. Fifth Circuit Greenlights Contribution Action for Purely Economic Damages Under Oil Pollution Act (OPA)

Originally published by Raymond T. Waid and Patrick Reagin.

In Settoon Towing, L.L.C. v. Marquette Transportation Company, L.L.C., No. 16-30459 (5th Cir. Jun. 9, 2017), the United States Fifth Circuit Court of Appeals held for the first time that a Responsible Party under the Oil Pollution Act of 1990 (“OPA”) has a statutory claim for contribution to recover purely economic damages from a partially liable third party.

Settoon arose out of a February 2014 collision on the Mississippi River near Convent, Louisiana.  A tug owned by Marquette collided with an oil-carrying barge owned by Settoon as the Marquette tug attempted to overtake the Settoon flotilla.  As a result of the collision, approximately 750 barrels of light crude oil discharged into the river.

Following the spill, the U.S. Coast Guard designated Settoon the OPA Responsible Party.  Under the OPA, the Coast Guard is empowered to designate the source of a spill (here, the oil-carrying Settoon barge) a Responsible Party strictly liable for cleanup costs regardless of fault in causing the spill.  The statute is designed to promote quick, efficient cleanup and internalize costs within the petroleum industry.  It is up to the Responsible Party to then turn around after the cleanup and seek recovery from other potentially liable parties in contribution.  The target and scope of this contribution action formed the subject of the Settoon appeal.

Following resolution of the OPA cleanup, Settoon initiated Limitation proceedings in the Eastern District of Louisiana.  Through those proceedings, Marquette was found 65% at fault in the spill-causing collision.  The issue on appeal concerned whether this finding of partial liability permitted Settoon to seek contribution from Marquette for purely economic damages paid to third parties.  The OPA expressly permits third parties to file claims with the Responsible Party for recovery of purely economic damages caused by the spill (e.g., fishermen harmed by closure of a waterway).  These types of damages, however, have long been prohibited under the general maritime law (the default body of federal common law governing maritime cases) under the familiar Robins Dry Dock rule.  Whether Settoon could recover these types of damages in contribution from Marquette hinged on whether the OPA created its own statutory right to contribution or whether it merely incorporated by reference the default right to contribution available under the general maritime law.

Without belaboring the fine details here, the Fifth Circuit engaged in an extensive statutory analysis of the OPA and related federal strict liability schemes.  The court concluded that the OPA does create a statutory right to contribution for a Responsible Party to recover against other potentially liable parties.  Because the OPA also holds a Responsible Party strictly liable for purely economic damages, Responsible Parties are permitted to seek contribution for these types of damages against partially liable third parties.  In the context of Settoon, this amounted to a difference of $1,450,000 in recoverable damages.

The Settoon holding is notable because it provides significant relief to Responsible Parties under the OPA who may now recoup a broader array of costs associated with a spill.  The holding also increases the scope of potential damages to third parties targeted in contribution actions by the initial OPA Responsible Party tasked with the cleanup.  A copy of the United States Fifth Circuit Court of Appeals decision is available here.

The aftermath of a spill event is often a chaotic, high pressure environment—one in which prompt, informed response is imperative.  Liskow & Lewis has extensive experience counseling parties in the wake of spill events of all levels of severity and is a recognized leader in this field.

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