220 F.3d 370 (5th Cir. 2000), 99-30002, Canal Barge Co. v Torco Oil Co.

Docket Nº:99-30002
Citation:220 F.3d 370
Party Name:CANAL BARGE COMPANY, INC., Plaintiff-Appellee, v. TORCO OIL COMPANY; GULFSTREAM TRADING, LTD. COMPANY, Defendants-Appellants.
Case Date:July 20, 2000
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

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220 F.3d 370 (5th Cir. 2000)

CANAL BARGE COMPANY, INC., Plaintiff-Appellee,



No. 99-30002

United States Court of Appeals, Fifth Circuit

July 20, 2000

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[Copyrighted Material Omitted]

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Appeal from the United States District Court For the Eastern District of Louisiana.

Before KING, Chief Judge, and DUHE and DeMOSS, Circuit Judges.

DeMOSS, Circuit Judge:

Torco Oil Company ("Torco") appeals the magistrate judge's final judgment, after a bench trial, awarding $90,766 to Canal Barge Company, Inc. ("Canal Barge") for damages arising from the alleged contamination and loss of use of a barge. Finding no error on the part of the magistrate judge, we affirm.


On July 11, 1996, Gulfstream Trading, Ltd. ("Gulfstream") agreed to purchase 18,000 barrels of reconstituted fuel oil, also known as spent lube oil, from Torco. Under the agreement, the delivery was to occur between July 23 and July 25, 1996, at Torco's Chicago facility. The purchase agreement further provided that an independent surveyor, Saybolt Inc. ("Saybolt"), would conduct pre-loading and post-loading inspections of the spent lube oil. Gulfstream had the responsibility for procuring transportation.

As a result, Gulfstream's broker Seahull contacted Canal Barge to transport the spent lube oil. Canal Barge agreed to provide the tank barge CBC-501 to transport the oil from Chicago to Louisiana.1

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CBC-501 is a double-skinned tank barge assigned to Canal Barge's "clean" fleet. Canal Barge divides its barges into three separate fleets: 1) the "dirty" fleet, 2) the "clean" fleet, and 3) the "chemical" fleet. Both ships in the dirty and clean fleets transport petroleum products, including spent lube oil. Those in the former primarily transport heavy oil products such as No. 6 oil and are rarely, if ever, cleaned while those in the latter concentrate on transporting light oil products. Unlike the dirty barges, the clean ones are periodically cleaned between loadings.

During the time of the charter agreement with Gulfstream, CBC-501 was dedicated to a long-term contract with Citgo Petroleum Corporation ("Citgo") for the transportation of clean lube oil from Louisiana to Illinois. For the CBC-501's return voyage to Louisiana, Canal Barge often practiced "backloading" other petroleum products, including spent lube oil. The charter agreement with Gulfstream was consistent with that practice. After backloading spent lube oil, a clean barge must be cleaned prior to being loaded with clean lube oil.2 In the present case, CBC-501 was scheduled for a cleaning after transporting the spent lube oil contracted for on July 11.

After offloading Citgo's clean lube oil, the CBC-501 was towed to Torco's Chicago facility to load the spent lube oil from Torco's Tank 101. That tank is approximately 50 years old and was purchased by Torco from Amoco in 1981. It has been dedicated to spent lube oil storage and has never been cleaned by Torco. Since Torco's purchase, Tank 101 has been drained to its lowest level no more than one or two times.

When the CBC-501 arrived at the facility on July 26, Torco did not have enough barrels of oil in Tank 101 to fulfill the 18,000 barrel contract. Therefore, Torco officials determined to get every drop out of Tank 101 that they could and to load it onto the CBC-501. Normally, whenever Tank 101 contained an insufficient quantity of oil to fulfill a contract, Torco's practice was to monitor the transfer from the tank to the barge and to shut off the pump before the level of liquid in the tank fell to the bottom and the pump started sucking air. But at the time of loading the spent lube oil onto the CBC-501, the gauge on Tank 101 that discloses the quantity of product in the tank, as well as the amount being pumped out, was broken. The Torco worker assigned to monitor the pump hose permitted the pump to suck air for five to ten minutes.

After the loading was complete on July 27, the CBC-501 traveled to Louisiana, arriving on August 4, 1996. That day, unloading of the spent oil lube occurred, but nearly 188 barrels could not be discharged. Before loading, there had only been 37 barrels of oil from the prior cargo on board the CBC-501. Because of the discrepancy, Saybolt made a letter of protest on behalf of Gulfstream. Of the oil that had been discharged from the CBC-501, Saybolt analyzed and determined those barrels of oil as meeting Gulfstream's specifications. The analysis was not designed to test for the presence of benzene.

On August 6, the CBC-501 arrived at T.T. Coatings, Inc.'s ("TTC") facility for its scheduled cleaning. After butterworthing the barge, TTC officials observed at the bottom of the tanks a three to four inch residue of heavy, black, tar-like sludge on which a person could walk without sinking. The sludge looked more like No. 6 oil bottoms or shore tank bottoms rather than residue from spent lube oil. According to

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Canal Barge's expert Richard Silloway, Torco's hose sucking air while draining Tank 101 allowed for the shore tank bottoms to flow into the barge. Such bottoms consist of a suspension of solids and semisolids in liquid, which precipitate out from the liquid over time, settle to the bottom, and are not generally pumped out or pumpable through the tank's system. In the present case, Silloway testified that the tank bottoms became entrained in the liquid as the tank was drained, and they were sucked out with the oil. The resulting sludge could not be removed from the barge by the ordinary cleaning process.

On August 8, TTC moved the CBC-501 to its repair yard because TTC officials believed that the cleaning would take two to three weeks and TTC had a three-week backlog of orders to do at the cleaning plant. During this time, Canal Barge had the barge's boiler replaced, which took two to three days. Canal Barge also notified Gulfstream about the sludge problem on August 9, to recover its costs pursuant to the charter agreement.3 It further submitted two bids for the cleaning to Gulfstream on August 16, but Gulfstream refused to pay for the cleaning and disposal costs. Moreover, Gulfstream did not inspect the barge or attempt to reclaim the 188 barrels of sludge. On August 30, the barge was returned to the cleaning facility, and the cleaning began on September 4.

TTC officials testified that whenever it cleans heavy tank bottoms, federal and state regulations require testing of the material for hazardous components. TTC hired Environmental Analysts, Inc. ("EAI"), to do the analysis, and EAI reported that the material was found to contain hazardous materials as per Environmental Protection Agency ("EPA") regulatory thresholds promulgated in 40 C.F.R. part 261 and that the hazardous constituent was .971 parts per million (ppm) of benzene. The regulatory threshold for benzene in solid waste is .5 ppm. Pursuant to 40 C.F.R. part 261 and EAI's report, TTC officials determined that the material was hazardous.

On September 16, TTC began to muck out the sludge by hand and shovel into drums for disposal. TTC officials testified that there was no market for this material and that it had to pay a third party to dispose of the waste. The certificate of disposal and some testimony indicated that the sludge was eventually used for energy recovery. After the sludge was removed, the CBC-501 underwent additional hot-water and chemical cleaning and was placed back into service on October 25, 1996, 80 days after arriving at the TTC facility. Canal Barge incurred total costs of $60,966 for the necessary cleaning, disposal, and inspections.

Because Gulfstream failed to pay for the costs of cleanup, Canal Barge filed suit against Gulfstream and Torco. Canal Barge charged Gulfstream with breach of contract and negligence and averred a negligence claim against Torco.4 After a bench trial, the magistrate judge made findings of fact and conclusions of law, ruling in favor of Canal Barge and holding Gulfstream and Torco jointly and severally liable. But the magistrate judge reduced the amount by $5,720 because some of the disposal costs were wrongly calculated in the total costs. In addition to the cleanup costs, the magistrate awarded demurrage charges of $35,520.5 While laid up for

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cleaning, the CBC-501 was unable to perform its contract work with Citgo. All of Canal Barge's other clean barges were in operation, and the company had no other comparable ships. Although Canal Barge utilized some smaller barges from its spot market to service the Citgo contract, a Canal Barge official testified that those barges were in an active market and would have been used for other jobs. Despite the lack of documentation, the magistrate judge credited the testimony of Canal Barge's official and allowed lost profits or detention charges of $480/day.6 This appeal by Torco ensued.


When a judgment after a bench trial is on appeal, we review the findings of fact for clear error and the legal issues de novo. See Gebreyesus v. Schaffer & Assocs., Inc., 204 F.3d 639, 642 (5th Cir. 2000) (quoting FDIC v. McFarland, 33 F.3d 532, 536 (5th Cir. 1994)). Under the clearly erroneous standard, we will reverse only if we have a definite and firm conviction that a mistake has been committed. See Mid-Continent Cas. Co. v. Chevron Pipe Line Co., 205 F.3d 222, 229 (5th Cir. 2000). "The burden of showing that the findings of the district court are clearly erroneous is heavier if the credibility of witnesses is a factor in the trial court's decision." Dunbar Medical Sys., Inc. v. Gammex, Inc., 216 F.3d 441, 453 (5th Cir. June 21, 2000) (quotation marks omitted). That's because "due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses." Fed. R. Civ. P. 52(a); Torch, Inc. v. Alesich, 148 F.3d 424, 426 (5th Cir....

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