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Federal Court in PAs Eastern District Issues Decision in $177 Million Maritime Case

By MarEx 2011-04-18 11:47:04

On April 12, 2011 Senior United States District Court Judge John P. Fullam issued his decision in one of the largest maritime cases ever tried in the Eastern District of Pennsylvania.  The decision  adjudicated the consolidated case of In re petition of Frescati Shipping Co., Ltd… and US vs. Citgo Asphalt Refining Company...*

The case stemmed from the November 26, 2004 oil spill from the single hull tanker M/T ATHOS I into the Delaware River south of Philadelphia, which was the third largest oil spill in US history.   The M/T ATHOS I struck a submerged nine-ton anchor, ripping two holes in the vessel’s single hull and resulting in the spillage of some 200,000 barrels of heavy crude oil into the river. The abandoned anchor was struck in Federal Anchorage No. 9.

At stake in the case were more than $177 million in damages stemming from the collision and subsequent cleanup and remediation.   The Plaintiffs -- Frescati, Tsakos and the USA -- sought to blame defendant CITGO Asphalt Refining Company and two other CITGO defendants as the operators of an asphalt refinery terminal in Paulsboro, New Jersey for the oil spill.

In its decision, the Court rejected all of Plaintiffs’ liability and contractual arguments and held that CITGO had no responsibility whatsoever for Federal Anchorage No. 9, the abandoned anchor, or the oil spill. 

This was an important decision for terminal operators such as CITGO because it limited the terminal’s responsibility to its immediate berth area and confirmed that terminals have no legal responsibility to survey federal waters outside their berth areas.   Judge Fullam specifically rejected Plaintiffs’ argument that Federal Anchorage No. 9, the area where the ATHOS I struck the anchor, constituted 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.”

The CITGO defendants were represented in the case by two maritime specialist law firms: the Philadelphia law firm of Palmer Biezup & Henderson, LLP and the New Orleans firm of Chaffe McCall, L.L.P.

*In re Petition of Frescati Shipping Co, Ltd., as Owner of the M/T Athos I and Tsakos Shipping & Trading, S.A., as manager of the Athos I for Exoneration from Limitation of Liability (Civil Action 05-CV-305-JF)

Consolidated with

United States of America  vs. Citgo Asphalt Refining Company, Citgo Petroleum Corporation, and Citgo East Coast Oil Corporation (Civil Action 08-CV-2898-JF)

Discussion of Findings

The case concerned the damages caused by the fully laden single hull oil tanker ATHOS I striking a submerged anchor in Federal Anchorage no. 9 of the Delaware River near Paulsboro, NJ  while transiting to a discharge berth at  the CITGO asphalt refinery. 

Parties to the case are several CITGO companies collectively known as CARCO*; Frescati Shipping Co., Ltd. and Tsakos Shipping & Trading S.A., respectively owners and managers of the ATHOS I  (collectively referred to as “Frescati”); and the United States government, which managed an extensive cleanup of the Delaware River following the collision.

Judge Fullam concluded that CARCO is not liable either in tort or in contract.   Specifically, he rejected all tort claims brought by Frescati:

    * Judge Fullam rejected Plaintiffs’ argument that Federal Anchorage No. 9, the area where the ATHOS I struck the anchor, constituted an “approach” to CARCO’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.”

    * The Plaintiffs suggested that CARCO should have known of the presence of the submerged anchor in Federal Anchorage No.9, but Judge Fullam found that CARCO had no responsibility to guarantee a safe transit through the anchorage or to scan or survey the anchorage for hazards within that area.

    * The plaintiff claimed that CARCO’s internal change of its acceptable draft next to its berth at the end of the refinery season was a misrepresentation upon which the Captain of the ATHOS I relied.  Judge Fullam rejected this argument because it did not involve the area where the casualty occurred and because the acceptable draft at the berth was factually irrelevant to the incident. He found no misrepresentation had occurred  and that “To the extent that Frescati attempts to recast these claims as a breach of an express or implied warranty, I find that no warranty was breached, and that the berth was safe for the ATHOS I.”

Judge Fullam also found in favor of CARCO with regard to all contractual claims asserted by Frescati and the government :

    * He disagreed with Plaintiffs’ contention that they were third party beneficiaries of warranties contained in the bill of lading and voyage charter party, and found that in any case, CARCO did not breach any contractual warranties. He wrote that ”CARCO 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”

    * He concluded that a finding of liability pursuant to the claimed warranties were also precluded by  the “named port exception,” a doctrine which holds that “[w]hen a charter names a port … and the master proceeds there without protest, the owner accepts the port…as a safe port, and is bound to the conditions that exist there.”

Judge Fullam concluded: “After hearing all of the evidence, I am of the opinion that the fault for the casualty lies with the anchor’s former owner, who abandoned it in the river without notifying anyone.”

*CITGO Asphalt Refining Company, CITGO Petroleum Corporation, and CITGO East Coast Oil Corporation

____

PHOTO: Aerial photo of the vessel taken the day after the incident showing an obvious list to port.  At that time it was anchored within Federal Anchorage Area No. 9 where the incident occurred.