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Shipowner Wins in Oil Spill Litigation

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By MarEx 2016-09-08 03:08:20

Following an eight-week trial in the U.S. District Court for the Eastern District of Pennsylvania, Montgomery McCracken partners, won a $71.5 million judgment against CITGO Asphalt Refining and related companies in connection with a 2004 oil spill in the Port of Philadelphia.  

The partners, John J. Levy, Alfred J. Kuffler, Eugene O’Connor, Timothy J. Bergère and Tricia J. Sadd, represented the Frescati Shipping and Tsakos Shipping & Trading the Greek owners and operators of the M/V Athos I. The tanker was chartered by CITGO to transport oil from CITGO facilities in Venezuela to a CITGO asphalt refinery in Paulsboro, NJ.

On November 26, 2004, while the Athos I was attempting to dock at CITGO’s Paulsboro refinery on the Delaware River, her hull was punctured by a nine-ton anchor abandoned on the river bed. The anchor punched a hole in a cargo tank allowing over 264,000 gallons of heavy crude oil to spill into the river, closing the Port while emergency responders scrambled to contain the spill under difficult tidal and weather conditions.  

The oil spill response took nearly six months, involved over 1,100 oil spill response workers on both sides of the river across three states and cost in excess of $143 million.  The vessel also suffered millions of dollars in damages and was out of commission for many months.  

The vessel owners sued CITGO for breach of a maritime “safe berth” warranty, and for negligence in failing to clear the approach to its berth of dangerous obstructions like the anchor. 

This was the vessel owners’ third major legal victory arising from the incident. Early in the case, the vessel owners requested that the U.S. Coast Guard take over the oil spill cleanup, which it agreed to do in 2005, thereby saving the owners about $60 million in additional costs. 

The owners then petitioned the U.S. Coast Guard’s National Pollution Fund Center for reimbursement of certain of the response costs under provisions of the Oil Pollution Act of 1990.  

In 2006, those efforts paid off when the Fund allowed the vessel owners to limit their liability, and reimbursed nearly $88 million of the vessel owner’s spill response costs. Gene O’Connor, with support from Fred Kuffler, was instrumental in pursuing the limitation action before the Fund.  

According to O’Connor, “this was a major oil spill, one of the most expensive in the country after the Exxon Valdez, and until and until the Deepwater Horizon incident in the Gulf, was one of the largest reimbursements from the Fund. The Coast Guard took great care reviewing the supporting documentation and the vessel’s petition for limitation, and we were gratified by the outcome.” 

Kuffler was also impressed with the way the vessel owners conducted themselves from the moment of the spill. “Oil spill response in a busy port like Philadelphia, in winter weather, poses great challenges. Here, the vessel owners and their response contractors did an exemplary job on the spill response, working seamlessly with the Coast Guard in one of the best managed and most successful oil spill responses in this country. I believe this is one of the only spill responses to ever receive a commendation from the Coast Guard, and the vessel owners should be very proud of that recognition.” 

A second victory for the vessel owners was obtained in 2013 when the U.S. Court of Appeals for the Third Circuit reversed an earlier trial court ruling in favor of CITGO. In that decision, the appellate court determined that the vessel owners were entitled to pursue their safe berth warranty and wharfinger negligence claims, and that CITGO, as the terminal operator, had a duty to assure the safety of the approach to its berth, as well as the berth itself.  

The case was remanded to the trial court, where it was assigned to the Honorable Joel H. Slomsky, following the retirement of the original trial judge. The vessel owners then proceeded to trial against the CITGO companies for reimbursement of the remainder of their losses, amounting to just over $55 million.

The most recent victory came on July 25, 2016, when, after hearing a battery of fact and expert witnesses on maritime safety, vessel navigation, ship drafts, ballasting procedures, metallurgy, tides, and response cost control, Judge Slomsky handed the vessel owners a complete victory, awarding all of the requested damages, plus prejudgment interest over a period of 11 years, which added $16 million to the judgment.  

The final award was just over $71.5 million. John Levy, who led the successful trial team, said “when every issue is so vigorously challenged at trial, as CITGO’s lawyers did here, it is difficult to predict an outcome. But we had a high degree of confidence in the credibility of our witnesses and the soundness of our theory about how this casualty occurred.  

“At the end of the day, the Court agreed with our experts and our theory of the case. We are especially pleased that the Court accepted all of the evidence on damages, resulting in a complete recovery for our clients.”

Of no less importance to the vessel owners, Judge Slomsky found that there was no fault on the part of the vessel or its crew, ruling that at the time of the incident, the vessel was seaworthy and being competently navigated. Judge Slomsky’s ruling echoes earlier findings of the U.S. Coast Guard’s own investigation of the incident in 2006, which found no fault by the vessel or its Master.  

According to Levy, “winning the damages was of course important, but what was most gratifying was the Court’s vindication of the vessel, the Captain and his crew. The court found that the accident happened despite the reasonable actions of the Captain and his crew.”

Judge Slomsky also rejected CITGO’s claims that the vessel was not seaworthy. “The vessel owners here have a well-earned reputation for operating seaworthy vessels with competent and professional crews, and that is just what the Court found,” said Levy.

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.