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Buffalo Marine Services Inc. v. United States

Court of Appeals for the Fifth Circuit
663 F.3d 750, 2011 WL 5865225 (2011)
ELI5:

Sections

Rule of Law:

Under the Oil Pollution Act of 1990, the 'third-party defense' to strict liability is unavailable if the third party's act occurs in connection with any contractual relationship with the responsible party, which includes indirect contractual chains involving intermediaries.


Facts:

  • In August 2004, the tanker TORM MARY required a delivery of fuel bunkers while in the Neches River.
  • The entities responsible for the tanker (the Torm) initiated a transaction to purchase fuel, contracting with a seller named Bominflot.
  • Bominflot utilized a broker, LQM Petroleum Services, and subsequently hired Buffalo Marine Services to physically deliver the fuel to the tanker.
  • Buffalo Marine dispatched a tug and barge to the TORM MARY to perform the prearranged delivery.
  • As the barge approached, the captains of the tug and the tanker communicated via radio to coordinate the operation, and the tanker's chief engineer began preparing mandatory 'Declaration of Inspection' paperwork.
  • The fuel delivery never occurred because the Buffalo Marine barge collided with the TORM MARY during the approach.
  • The collision ruptured the tanker's skin and fuel tank, causing approximately 27,000 gallons of heavy fuel oil to spill into the river.
  • The Torm and Buffalo Marine coordinated a cleanup effort that cost approximately $10.1 million.

Procedural Posture:

  • The vessel owners and insurers submitted a reimbursement claim to the National Pollution Funds Center (NPFC), seeking to exonerate the Torm and designate Buffalo Marine as the sole third-party cause.
  • The NPFC denied the claim and a subsequent motion for reconsideration, ruling that a contractual relationship barred the defense.
  • Buffalo Marine and the insurers filed a lawsuit seeking review of the agency decision in the United States District Court for the Eastern District of Texas.
  • The parties filed cross-motions for summary judgment.
  • The District Court granted summary judgment in favor of the United States (the government) and denied the plaintiffs' motion.
  • Buffalo Marine and the insurers appealed the decision to the United States Court of Appeals for the Fifth Circuit.

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Issue:

Does the 'third-party defense' exception under the Oil Pollution Act apply to a responsible party when the oil spill was caused by a subcontractor with whom the responsible party had only an indirect contractual relationship through a series of intermediaries?


Opinions:

Majority - Judge Patrick E. Higginbotham

No, the responsible party cannot claim the third-party defense because the phrase 'any contractual relationship' in the Oil Pollution Act encompasses indirect contractual arrangements, including those involving a chain of agents. The Court applied the Chevron deference framework to the National Pollution Funds Center's (NPFC) interpretation of the statute. First, the Court found that Congress did not explicitly define whether 'contractual relationship' requires direct privity, making the statute ambiguous. Second, the Court determined the NPFC's broad interpretation was a permissible construction. The Court noted that the word 'any' implies a broad scope and that 'contractual' covers relationships relating to a contract, not just the contract itself. Furthermore, the legislative history indicates the OPA was modeled after CERCLA, which explicitly includes indirect relationships. Finally, the Court reasoned that a narrow interpretation would undermine the Act's strict liability scheme by allowing parties to avoid liability simply by inserting intermediaries into the transaction chain. Since the Torm ordered fuel and Buffalo Marine was there to deliver it, a contractual connection existed.



Analysis:

This decision significantly reinforces the strict liability nature of the Oil Pollution Act (OPA). By affirming that 'any contractual relationship' includes indirect chains of subcontractors and intermediaries, the Fifth Circuit prevents vessel owners (responsible parties) from insulating themselves from liability by hiring third parties through brokers or layers of contractors. Practically, this means that if a vessel orders services (like fuel delivery), and the subcontractor delivering those services causes a spill, the vessel owner remains strictly liable and cannot shift the blame to the subcontractor to access the Oil Spill Liability Trust Fund. It forces vessel owners to bear the risk of the agents they set in motion, directly or indirectly.

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