High Court Holds Citgo Liable for Oil-Spill Cleanup Costs

WASHINGTON (CN) — After buoying around lower courts for more than 13 years, an admiralty case over a 2004 oil spill in the Delaware River was settled Monday by the Supreme Court when the justices ruled Citgo must pay for most of the cleanup costs.

In a 7-2 opinion penned by Justice Sonya Sotomayor, the high court ruled that the language of the safe-berth clause in the voyage charter at issue establishes a warrant of safety.

(AP Photo/Mark Tenally)

The oil tanker Athos, owned by Frescati Shipping Company Ltd., struck a submerged anchor in the Delaware River as it made its way to New Jersey, spilling over 200,000 gallons of oil into the waterway.

Three Citgo companies – Citgo Asphalt Refining Company, Citgo Petroleum Corporation and Citgo East Coast Oil Corporation – controlled the port in Paulsboro, New Jersey, and chartered the oil tanker.

Frescati and the U.S. government paid for the cleanup in the immediate aftermath of the spill. However, the Oil Pollution Act of 1990 allows the government to recoup the funds from liable parties after the fact, so Frescati and the government sued Citgo to recover those costs.

The case – which marks the Supreme Court’s third dip into maritime law in over a year –made two trips to the Philadelphia-based Third Circuit, which ruled in March 2018 that Citgo must pay most of the $100 million-plus bill .

Citgo appealed and argued before the high court last November that it had done its contractually obligated due diligence by selecting a known safe harbor.

But the justices ruled against the oil refiner’s subsidiaries Monday, finding them financially responsible for the spill.

Sotomayor wrote the court’s interpretation of the case “starts and ends with the language of the safe-berth clause” – if a chartering company cannot plot a safe course for a ship, it constitutes a breach of those conditions. She said it was irrelevant that the clause did not use the term warranty.

“Here, the safety of the selected berth is the entire root of the safe-berth clause: It is the very reason for the clause’s inclusion in the charter party. And crucially, the carter’s assurance of safety is not subject to qualification or conditions,” Sotomayor wrote. “There leaves no doubt that the safe-berth clause establishes a warranty of safety, on equal footing with any other provision of the charter that invokes express warranty language.”

The majority rejected Citgo’s argument that ship captains also had a duty to evaluate a chartered route and reject or accept it based on safety.

“On its face, the vessel master’s duty creates no tension with the charterer’s duty. And it strains common sense to insist (as the dissent does) that the vessel master implicitly has a separate, dueling obligation regarding the safety of berth, when the clause explicitly assigns that responsibility to the charterer,” the 16-page majority opinion states.

Justice Clarence Thomas wrote a dissenting opinion and was joined by Justice Samuel Alito. Thomas wrote that the majority’s finding of a warranty of safety in the safe-berth clause is “the wrong rule and finds no basis in the contract’s plain text.”

“First of all, the contract…contains no express warranty of safety by the charterer, though the parties repeatedly used express language to create warranties elsewhere in the contract,” Thomas wrote. “In contrast, they did not state that the charterer ‘warrants’ the safety of the place of discharge in the safe-berth clause.”

He added, “By conflating an action with an outcome, the majority converts every obligation tangentially related to safety into a warranty of safety.”

Thomas said the majority’s decision implies two competing warranties in the safe-berth clause – one from the charterer and another from the ship master. The clause says nothing about a charterer’s responsibility to ensure a port was safe, he wrote.

“It states only that the charter ‘shall … designat[e]’ a place or wharf. The majority infers from CARCO’s selection of the Paulsboro berth that CARCO believed the place or wharf was safe,” Thomas wrote, referring to the three Citgo firms. “But that is not a state­ment of fact; it is an inference.”

The dissent notes that the majority’s ruling only applies to the specific contract at issue.

“I appreciate the majority’s desire to interpret the safe-berth clause in a manner that provides clarity to the mari­time industry,” Thomas wrote. “The plain meaning of the contract’s text, however, does not support the majority’s interpretation.

Citgo President and CEO Carlos Jordá said in a statement Monday that the majority’s ruling is a “disappointing result to a very long story.”

“While we obviously have different views regarding the merits of our case, we respect the court’s interpretation and can finally close this chapter on the Athos case,” he said.

Clay Maitland, managing director of the Marshall Islands Ship Registry and a maritime attorney, said the court’s decision came as no surprise. It had long been established by other courts that the safe-berth clause constituted a warranty, he said.

“That has been the established law,” said Maitland, who did not represent any party in the case.

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