Citgo Asphalt Ref. Co. v. Frescati Shipping Co.

• Citation: 206 L.Ed.2d 391,140 S.Ct. 1081
• Decision Date: 30 March 2020
• Docket Number: No. 18-565,18-565
• Parties: CITGO ASPHALT REFINING COMPANY, et al., Petitioners v. FRESCATI SHIPPING COMPANY, LTD., et al.
• Court: United States Supreme Court

140 S.Ct. 1081

206 L.Ed.2d 391

CITGO ASPHALT REFINING COMPANY, et al., Petitioners

v.FRESCATI SHIPPING COMPANY, LTD., et al.

No. 18-565

Supreme Court of the United States.

Argued November 5, 2019

Decided March 30, 2020

Derek A. Walker, J. Dwight LeBlanc, Jr., Douglas L. Grundmeyer, Chaffe McCall, L.L.P., New Orleans, LA, Richard Q. Whelan, Frank P. DeGiulio, Palmer, Biezup & Henderson LLP, Philadelphia, PA, Carter G. Phillips, Jacqueline G. Cooper, Richard E. Young, Jordan B. Cherrick, Lucas Croslow, Sidley Austin LLP, Washington, DC, John G. Bissell, Strong Pipkin Bissell & Ledyard, L.L.P., Houston, TX, for Petitioners.

Noel J. Francisco, Solicitor General, Joseph H. Hunt, Assistant Attorney General, Edwin S. Kneedler, Deputy Solicitor General, Erica L. Ross, Assistant to the Solicitor General, Charles W. Scarborough, Anne M. Murphy, Attorneys, Department of Justice, Washington, DC, for Respondent.

John J. Levy, Alfred J. Kuffler, Eugene J. O'Connor, Timothy J. Bergère, Montgomery, McCracken, Walker & Rhoads, LLP, Philadelphia, PA, Jack A. Greenbaum, Mission Viejo, CA, Sarah E. Harrington, Thomas C. Goldstein, Erica Oleszczuk Evans, Goldstein & Russell. P.C., Bethesda, MD, for Respondents.

Carter G. Phillips, Washington, DC, for the Petitioners.

Erica L. Ross, Washington, DC, for the Federal Respondent.

Thomas C. Goldstein, Bethesda, MD, for the Private Respondents.

Justice SOTOMAYOR delivered the opinion of the Court.

In 2004, the M/T Athos I , a 748-foot oil tanker, allided¹ with a nine-ton anchor abandoned on the bed of the Delaware River. The anchor punctured the tanker's hull, causing 264,000 gallons of heavy crude oil to spill into the river. As required by federal statute, respondents Frescati Shipping Company—the Athos I 's owner—and the United States covered the costs of cleanup. They then sought to reclaim those costs from petitioners CITGO Asphalt Refining Company and others (collectively CARCO), which had chartered the Athos I for the voyage that occasioned the oil spill. According to Frescati and the United States, CARCO had breached a contractual "safe-berth clause" obligating CARCO to select a "safe" berth that would allow the Athos I to come and go "always safely afloat."

The question before us is whether the safe-berth clause is a warranty of safety, imposing liability for an unsafe berth regardless of CARCO's diligence in selecting the berth. We hold that it is.

I

A

During the relevant period, the Athos I was the subject of a series of contracts involving three parties: Frescati, Star Tankers, and CARCO. Frescati owned the Athos I . Star Tankers, an operator of tanker vessels, contracted with Frescati to charter the Athos I for a period of time. CARCO then contracted with Star Tankers to subcharter the Athos I for the inauspicious voyage resulting in the oil spill.

Pertinent here is the subcharter agreement between Star Tankers and CARCO. In admiralty, such contracts to charter a vessel are termed "charter parties." Like many modern charter parties, the agreement between Star Tankers and CARCO was based on a standard industry form contract. It drew essentially verbatim from a widely used template known as the ASBATANKVOY form, named after the Association of Ship Brokers & Agents (USA) Inc. (ASBA) trade association that publishes it.

At the core of the parties' dispute is a clause in the charter party requiring the charterer, CARCO, to designate a safe berth at which the vessel may load and discharge cargo. This provision, a standard feature of many charter parties, is customarily known as a safe-berth clause. The safe-berth clause here provides, as relevant, that "[t]he vessel shall load and discharge at any safe place or wharf, ... which shall be designated and procured by the Charterer, provided the Vessel can proceed thereto, lie at, and depart therefrom always safely afloat, any lighterage being at the expense, risk and peril of the Charterer." Addendum to Brief for Petitioners 8a.² The charter party separately requires CARCO to direct the Athos I to a "safe por[t]" along the Atlantic seaboard of the United States. Id. , at 24a.

Pursuant to the charter party, CARCO designated as the berth of discharge its asphalt refinery in Paulsboro, New Jersey, on the shore of the Delaware River. In November 2004, the Athos I set out on a 1,900-mile journey from Puerto Miranda, Venezuela, to Paulsboro, New Jersey, carrying a load of heavy crude oil. The vessel was in the final 900-foot stretch of its journey when an abandoned ship anchor in the Delaware River pierced two holes in the vessel's hull. Much of the Athos I 's freight drained into the river.

B

After the Exxon-Valdez oil spill in 1989, Congress passed the Oil Pollution Act of 1990 (OPA), 104 Stat. 484, 33 U.S.C. § 2701 et seq. , to promote the prompt cleanup of oil spills. To that end, OPA deems certain entities responsible for the costs of oil-spill cleanups, regardless of fault. § 2702(a). It then limits the liability of such "responsible part[ies]" if they (among other things) timely assist with cleanup efforts. § 2704. Responsible parties that comply with the statutory conditions receive a reimbursement from the Oil Spill Liability Trust Fund (Fund), operated by the Federal Government, for any cleanup costs exceeding a statutory limit. § 2708; see also § 2704.

Although a statutorily responsible party must pay cleanup costs without regard to fault, it may pursue legal claims against any entity allegedly at fault for an oil spill. §§ 2710, 2751(e). So may the Fund: By reimbursing a responsible party, the Fund becomes subrogated to the responsible party's rights (up to the amount reimbursed to the responsible party) against any third party allegedly at fault for the incident. §§ 2712(f), 2715(a).

As owner of the Athos I , Frescati was deemed a "responsible party" for the oil spill under OPA. Frescati worked with the U.S. Coast Guard in cleanup efforts and covered the costs of the cleanup. As a result, Frescati's liability was statutorily limited to $45 million, and the Fund reimbursed Frescati for an additional $88 million that Frescati paid in cleanup costs.

C

Following the cleanup, Frescati and the United States each sought recovery against CARCO: Frescati sought to recover the cleanup costs not reimbursed by the Fund, while the United States sought to recover the amount disbursed by the Fund. As relevant here, both Frescati and the United States claimed that CARCO had breached the safe-berth clause by failing to designate a safe berth, and thus was at fault for the spill.

After a complicated series of proceedings—including a 41-day trial, a subsequent 31-day evidentiary hearing, and two appeals—the Court of Appeals for the Third Circuit found for Frescati and the United States. The court first concluded that Frescati was an implied third-party beneficiary of the safe-berth clause in the charter party between CARCO and Star Tankers, thereby allowing the breach-of-contract claims by Frescati and the United States to proceed against CARCO. In re Frescati Shipping Co. , 718 F.3d 184, 200 (2013). The court then held that the safe-berth clause embodied an express warranty of safety "made without regard to the amount of diligence taken by the charterer," and that CARCO was liable to Frescati and the United States for breaching that warranty. Id. , at 203 ; In re Frescati Shipping Co. , 886 F.3d 291, 300, 315 (2018) (case below).

We granted certiorari, 587 U.S. ––––, 139 S.Ct. 1599, 203 L.Ed.2d 754 (2019), to resolve whether the safe-berth clause at issue here merely imposes a duty of diligence, as the Fifth Circuit has held in a similar case, or establishes a warranty of safety, as the Second Circuit has held in other analogous cases. Compare Orduna S. A. v. Zen-Noh Grain Corp. , 913 F.2d 1149 (CA5 1990), with, e.g. , Paragon Oil Co. v. Republic Tankers, S. A. , 310 F.2d 169 (CA2 1962). The former interpretation allows a charterer to avoid liability by exercising due diligence in selecting a berth; the latter imposes liability for an unsafe berth without regard to the care taken by the charterer. Because we find it plain from the language of the safe-berth clause that CARCO warranted the safety of the berth it designated, we affirm the judgment of the Third Circuit.

II

Maritime contracts "must be construed like any other contracts: by their terms and consistent with the intent of the parties."

Norfolk Southern R. Co. v. James N. Kirby, Pty Ltd. , 543 U.S. 14, 31, 125 S.Ct. 385, 160 L.Ed.2d 283 (2004) ; see also 2 T. Schoenbaum, Admiralty & Maritime Law § 11:2, p. 7 (6th ed. 2018) ("[F]ederal maritime law includes general principles of contract law"). " ‘Where the words of a contract in writing are clear and unambiguous, its meaning is to be ascertained in accordance with its plainly expressed intent.’ " M&G Polymers USA, LLC v. Tackett , 574 U.S. 427, 435, 135 S.Ct. 926, 190 L.Ed.2d 809 (2015) (quoting 11 R. Lord, Williston on Contracts § 30:6, p. 108 (4th ed. 2012) (Williston)). In such circumstances, the parties' intent "can be determined from the face of the agreement" and "the language that they used to memorialize [that] agreement." 11 Williston § 30:6, at 97–98, 112–113. But "[w]hen a written contract is ambiguous, its meaning is a question of fact, requiring a determination of the intent of [the] parties in entering the contract"; that may involve examining "relevant extrinsic evidence of the parties' intent and the meaning of the words that they used." Id. , § 30:7, at 116–119, 124 (footnote omitted).

A

Our analysis starts and ends with the language of the safe-berth clause. That clause provides, as relevant, that the charterer "shall ... designat[e] and procur[e]" a "safe place or wharf," "provided [that] the Vessel can proceed thereto, lie at, and depart therefrom always safely afloat." Addendum to Brief for Petitioners 8a. As even CARCO acknowledges, the clause plainly imposes on the charterer at least some "duty to select a ‘safe’ berth." Brief for Pet...