Buffalo Marine Servs. Inc. v. United States, 10–41108.

• Decision Date: 22 November 2011
• Docket Number: No. 10–41108.,10–41108.
• Citation: 2012 A.M.C. 91,663 F.3d 750,74 ERC 1008
• Parties: BUFFALO MARINE SERVICES INCORPORATED; Limit (No. 2) Limited; New York Marine & General Insurance Company, Plaintiffs–Appellants, v. UNITED STATES of America, Defendant–Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

2012 A.M.C. 91

663 F.3d 750

74 ERC 1008

BUFFALO MARINE SERVICES INCORPORATED; Limit (No. 2) Limited; New York Marine & General Insurance Company, Plaintiffs–Appellants,

v.UNITED STATES of America, Defendant–Appellee.

No. 10–41108.

United States Court of Appeals, Fifth Circuit.

Nov. 22, 2011.

George M. Chalos (argued), Chalos & Company, P.C., Oyster Bay, NY, for Plaintiffs–Appellants.

Sarah Susan Keast, Trial Atty. (argued), U.S. Dept. of Justice, Washington, DC, for Defendant–Appellee.

Appeal from the United States District Court for the Eastern District of Texas.

Before JONES, Chief Judge, and HIGGINBOTHAM and SOUTHWICK, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

This appeal arises out of an oil spill on the Neches River. Appellants challenge the National Pollution Funds Center's final claim determination denying reimbursement for costs arising from the spill. The district court rejected appellants' challenge to the agency's claim determination. We affirm.

I.

In August 2004, a barge and a tug owned by appellant Buffalo Marine Services, Inc. (“Buffalo Marine”) attempted to dock alongside the TORM MARY, a large tanker ship, in order to deliver fuel that had been ordered by entities responsible for the tanker ship (collectively, “the Torm”). The fuel delivery never took place. Buffalo Marine's barge collided with the TORM MARY, rupturing the vessel's skin and adjacent fuel-oil tank. As a result of the rupture, approximately 27,000 gallons of heavy fuel oil spilled into the Neches River. Buffalo Marine, the Torm, and their insurers coordinated the clean-up effort, assessed at a cost of $10.1 million.

The Oil Pollution Act of 1990 (“OPA”) creates a strict-liability scheme for the costs of cleaning up oil spills: “each responsible party for a vessel ... from which oil is discharged ... is liable for the removal costs and damages ... that result from such incident.”¹ The “responsible party” for a vessel is “any person owning, operating, or demise chartering the vessel.”² The liability of the responsible party is capped at a dollar limit that is set by statute; the limit is based on the gross tonnage of the responsible party's vessel.³ If the cleanup costs exceed the statutory limit, the responsible party can seek to have those excess costs reimbursed by the Oil Spill Liability Trust Fund.⁴ In this case, because the oil spilled from the TORM MARY, the Torm was the “responsible party” under the OPA's strict liability scheme.

However, a responsible party may have a complete defense to liability under § 2703(a)(3) if it “establishes, by a preponderance of the evidence,” that the oil spill was “caused solely by ... an act or omission of a third party, other than ... a third party whose act or omission occurs in connection with any contractual relationship with the responsible party.”⁵ Section 2703(a)(3) also requires a showing that the responsible party exercised due care with respect to the spilled oil and that it took precautions against the foreseeable acts or omissions of the third party to whom it is attempting to shift liability.⁶

On March 16, 2007, the owners and insurers of the three vessels involved in the spill jointly submitted a request for reimbursement of their cleanup expenses to the Coast Guard's National Pollution Funds Center (“NPFC”), which is the agency charged with administering the Oil Spill Liability Trust Fund. ⁷ The request sought to declare Buffalo Marine the sole “third-party” cause of the spill, exonerate the Torm, substitute Buffalo as the formal “responsible party” for cleanup costs, and limit Buffalo Marine's liability to $2 million—the approximate value of the barge—pursuant to the OPA.⁸

On November 8, 2007, the NPFC denied the claim, concluding that the claimants had not established by a preponderance of evidence that Buffalo Marine's acts were not “in connection with any contractual relationship with the responsible party.” The NPFC denied the claimants' motion for reconsideration of its decision. Buffalo Marine and its insurers then sought review of the NPFC's decision in the district court. After the parties filed cross-motions for summary judgment, the district court granted the government's motion for summary judgment and denied the plaintiffs' motion for summary judgment. Buffalo Marine and its insurers timely appealed.

II.

At the heart of this case are the contractual relationships formed in the course of the transaction through which the Torm purchased the fuel that was being delivered when the spill occurred and through which Buffalo Marine attempted to deliver the fuel to the TORM MARY. Four parties were involved in the fuel-purchase transaction: the Torm, the end buyer of the fuel; Bominflot, Inc. (“Bominflot”), the seller of the fuel; LQM Petroleum Services, Inc. (“LQM”), the broker that acted as an intermediary between the Torm and Bominflot; and Buffalo Marine, the delivery agent hired by Bominflot to deliver the fuel to the Torm.

Appellants argue that the NPFC's decision should be overturned, and the district court reversed, because the Torm and Buffalo Marine did not have a “contractual relationship” and because the Torm satisfied the other elements of its third-party defense. The government argues that the Torm and Buffalo Marine had at least an indirect contractual relationship and that the acts that allegedly caused the spill occurred in connection with that contractual relationship, precluding a successful third-party affirmative defense under § 2703(a)(3). Alternatively, the government argues that if this court rejects its position, we should remand the case to the agency so that it can determine whether the Torm satisfies the other elements of its defense.

III.

We review a grant of summary judgment de novo, applying the same standard as the district court.⁹ The Administrative Procedure Act (“APA”) allows a federal court to overturn an agency's ruling “ ‘only if it is arbitrary, capricious, an abuse of discretion, not in accordance with law, or unsupported by substantial evidence on the record taken as a whole.’ ”¹⁰ The court starts from “a presumption that the agency's decision is valid, and the plaintiff has the burden to overcome that presumption by showing that the decision was erroneous.”¹¹ The agency's factual findings are reviewed to determine only “whether they are supported by substantial evidence.”¹² The agency's legal conclusions are reviewed de novo, except for questions of statutory interpretation, where the court owes “substantial deference to an agency's construction of a statute that it administers.”¹³ Review is “highly deferential to the administrative agency whose final decision is being reviewed.”¹⁴

IV.

This case turns on two issues: (1) whether the NPFC's interpretation of 33 U.S.C. § 2703(a)(3) deserves deference and (2) whether the NPFC's determination in this case, given the NPFC's interpretation of the statute, was arbitrary, capricious, not in accordance with law, or unsupported by substantial evidence. Because we find that the agency's interpretation of the statute is entitled to deference and that its determination that the Torm is not entitled to a third-party defense was not arbitrary, capricious, or otherwise unreasonable, we need not reach the other arguments raised by the parties.

A.

We first consider whether the NPFC's interpretation of the OPA deserves deference. To determine whether a “responsible party” is entitled to a complete defense based on the act or omission of a third party, the NPFC must evaluate whether the alleged third-party “act or omission occur[red] in connection with any contractual relationship with the responsible party.” ¹⁵ The NPFC interprets the phrase “act or omission occur[ring] in connection with any contractual relationship” to include acts or omissions occurring in connection with an indirect contractual relationship with the responsible party. Thus, the NPFC has concluded that the phrase includes acts occurring in connection with a commercial fuel delivery even where “a chain of agents or contracts stands between the party delivering the fuel and the party receiving the fuel.”¹⁶ Direct privity of contract is not required.

Deference to an agency's interpretation of a statute “is governed by the classic two-step framework from Chevron USA v. Natural Resources Defense Council, Inc.: If Congress ‘has directly spoken to the precise question at issue,’ ” the reviewing court “ ‘must give effect to [Congress's] unambiguously expressed intent,’ ” but “ ‘if the statute is silent or ambiguous,’ ” the court “must defer to the agency's interpretation so long as it is ‘based on a permissible construction of the statute.’ ”¹⁷

At Chevron step one, Congress has not spoken directly to the precise question at issue. Although the OPA states that “[f]or purposes of subsection (a)(3) ... the term ‘contractual relationship’ includes, but is not limited to, land contracts, deeds, easements, leases, or other instruments transferring title or possession,”¹⁸ with certain exceptions not applicable here, it does not explicitly define the phrase “any contractual relationship.” In addition, the statute does not specify whether a third party must be in direct privity of contract with the responsible party for an act or omission of the third party to occur “in connection with [a] contractual relationship with the responsible party.”¹⁹ “Nor is its language so clear as to only permit a single interpretation.”²⁰ Therefore, we proceed to Chevron step two.

At Chevron step two, we find that the NPFC's interpretation of the phrase “in connection with any contractual relationship with the responsible party” is based on a permissible construction of § 2703(a)(3) for at least four reasons.

First, appellants' argument that the NPFC's interpretation does not deserve deference presumes that the phrase “contractual relationship” is interchangeable with the term “contract.” While the drafters of the statute could have...