Great Am. Ins. Co. v. United States
| Citation | 55 F.Supp.3d 1053 |
| Decision Date | 09 July 2014 |
| Docket Number | Case No. 12–cv–9718 |
| Parties | Great American Insurance Company, et al., Plaintiffs, v. United States of America, Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
Stephanie A. Espinoza, William Phillip Ryan, Warren J. Marwedel, Marwedel, Minichello & Reeb, P.C., Chicago, IL, for Plaintiffs.
Eric S. Pruitt, AUSA, United States Attorney's Office, Chicago, IL, Sarah Susan Keast, David Fautsch, United States Department of Justice, Washington, DC, for Defendant.
Plaintiffs Great American Insurance Company of New York and Gulf Coast Marine, LLC, both subrogees and assignees of Plaintiff Egan Marine Corporation, filed this action against Defendant United States of America, seeking judicial review of the decision by the National Pollution Funds Center (“NPFC”) to deny their claims under the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq., for reimbursement of oil removal costs following a barge explosion on January 19, 2005. Currently before the Court are cross-motions for summary judgment filed by the parties [33 and 38]. For the reasons set forth below, the Court denies Defendant United States' motion for summary judgment [33], grants in part Plaintiffs' cross-motion for summary judgment [38], sets aside the NPFC's determination, and remands this matter to the NPFC for further proceedings.
Plaintiff Egan Marine Corporation (“EMC”) at all relevant times owned and operated the tank barge EMC 423 and the motor vessel (“M/V”) LISA E. Dennis Egan serves as president and sole shareholder of EMC. On January 19, 2005, the M/V LISA E was towing the EMC 423 as it transported clarified slurry oil on the Chicago Sanitary and Ship Canal. At approximately 4:30 p.m., there was an explosion aboard the EMC 423 that caused a fire on the barge. At the time of the explosion, EMC 423 was carrying 14,272 barrels of clarified slurry oil. As a result of the explosion, Alexander Olivia, an Egan Marine employee who was aboard the barge, died, and 4,718 gallons of oil spilled into the canal.
Cleanup and removal activities were undertaken at the direction of the United States Coast Guard, with Service Welding and Shipbuilding, LLC (“SWS”), a limited liability company owned by Mr. Egan, serving as the primary removal contractor. As insurers of EMC, Plaintiffs Great American Insurance Company (“GAIC”) and Gulf Coast Marine, LLC (as agent for Northern Assurance Company of America and Markel America Insurance Company) (“Gulf Coast”) paid more than $8.6 million in costs associated with the removal effort. The United States of America, directly and as subrogee to claimants of the Oil Pollution Act's Oil Spill Liability Trust Fund (“the Fund”), also incurred removal costs as a result of this incident. As discussed in more detail below, EMC, SWS and Plaintiffs sought to recover their removal costs from the Fund through administrative claims to the National Pollution Funds Center (“NPFC”) initiated in January 2008, while the United States attempted to recover its removal costs from EMC in an affirmative lawsuit filed in June 2008 in this district.
On January 11, 2008, Plaintiffs submitted claims to the NPFC seeking reimbursement of removal costs incurred on behalf of EMC and SWS. In support of these claims, Plaintiffs argued that EMC was entitled to full exoneration from liability and recovery of all clean-up and removal costs under 33 U.S.C. § 2703 because the incident was solely caused by acts or omissions of third parties. Alternatively, they argued that EMC was entitled to a limitation of its liability in the amount of $2,000,000, and the recovery of removal costs over this amount, under 33 U.S.C. § 2704(a)(1)(B). (Id. ¶¶ 35, 36, 38). This limitation of liability applies unless an incident was proximately caused by the gross negligence or willful misconduct of, or a violation of an applicable federal safety, construction or operating regulation by, the responsible party or its agent. 33 U.S.C. § 2704(a)(1). Plaintiffs also maintained that SWS's expenses should be reimbursed because the company was not a “responsible party” under the Act. (Id. ¶ 42).
The NPFC denied the claims on February 20, 2008, finding (in part) that EMC was guilty of gross negligence because one of its employees had caused the explosion by using a propane torch near an open standpipe. This decision, however, was based on a non-final draft of the Coast Guard's Report of Investigation, prepared by Lt. Mark Hamilton. When the NPFC discovered that it had considered a draft report, it rescinded the decision and “ordered a de novo adjudication.”
On June 2, 2008, the United States filed suit against EMC in the Northern District of Illinois seeking to recover removal costs that it incurred as a result of the oil spill. Specifically, the United States argued that EMC was not entitled to limited liability and was instead fully liable for all costs because the explosion resulted from the company's negligence, gross negligence, and/or violations of applicable federal safety regulations—specifically, an EMC employee's alleged use of a propane torch near an open standpipe. While this case was pending, the NPFC held Plaintiffs' administrative claims in abeyance, “contending that the decision on the issue of limitation of liability was central to the litigation, and would be decided by the court.”
After a bench trial, Judge Harry Leinenweber issued a decision on October 13, 2011, finding that the United States had failed to prove that EMC was guilty of gross negligence, willful misconduct, or a violation of any regulation that caused or contributed to the explosion on the EMC 423 and the resulting oil spill. Judge Leinenweber explained that “[b]ecause the Government has proved neither that a propane torch was being used nor the standpipe was open this Court cannot accept the Government's theory of the cause of the explosion.” United States v. Egan Marine Corp., 2011 WL 8144393, at *3 (N.D.Ill. Oct. 13, 2011). As a result, “the limitation of liability does apply in this case, and the Government is not entitled to recover additional funds from EMC.” Id. at *4 (emphasis in original).
On June 11, 2012 (about eight months after Judge Leinenweber's ruling), the NPFC denied Plaintiffs' claims for reimbursement of removal costs incurred on behalf of EMC and SWS. The NPFC stated that Plaintiffs and their insureds failed to meet their burden of proving by a preponderance of the evidence the actual cause of the explosion, including the source of ignition. As a result, the NPFC said it could not “determine that the claimant has demonstrated entitlement to a limit of liability where exceptions may apply that are dependent on the circumstances of the incident that bear on proximate causation.” With respect to SWS, the NPFC found that given Mr. Egan's ownership of both EMC and SWS, SWS “ha[d] not established its third party claimant status because there [wa]s evidence that Service Welding may have been an owner or operator at the time of the incident and therefore a responsible party.”
Attached to the NPFC's denial was an “Appendix A” of “Documentation and Evidence Reviewed and Considered” in reaching the decision. This appendix included a list of unrelated violations committed by several EMC barges from 1994 through 2004, only one of which pertained to the EMC 423. The appendix also cited to testimony from Lieutenant Commander Dean Firing of the Coast Guard that EMC did not have a “positive” reputation. Finally, Appendix A summarized testimony from nearly every deponent in the lawsuit filed by the United States (No. 08 C 3160), but omitted any reference to eyewitness Bobby Griffin, who saw the explosion from the Cicero Avenue Bridge. The appendix cursorily acknowledged the presence of a second eyewitness, William Arrington, but said nothing about his testimony that prior to the explosion, he did not see anyone on the barge, or anyone using a propane torch.
Plaintiffs submitted a timely Request for Reconsideration, and on September 21, 2012, the NPFC issued a new decision agreeing with Plaintiffs' objections to the use of Appendix A. Specifically, the NPFC stated:
[T]o the extent the appendix includes conjecture as to what violations may have occurred if the cause of the explosion had been established, it is irrelevant to the determination. In hindsight, it is an unnecessary appendix and to the extent it has created confusion, it was ill-advised. As Claimants rightly state, the appendix failed to include a list of all evidence available for review, including the deposition testimony of an eyewitness. In reconsidering the first determination, the NPFC reviewed again all evidence in the record.
Nevertheless, after “perform[ing] a de novo review of the complete claim submission and the entire record,” the NPFC affirmed that Plaintiffs were not entitled to limited liability under the OPA because “the cause of the explosion remains unknown” and “it is fundamental that the cause of an incident must be explained in order to demonstrate entitlement to a limitation of liability.” The NPFC rejected the argument that collateral estoppel required a finding of limited liability based on Judge Leinenweber's ruling given the “differing evidentiary standards, burden of proof, identity of the parties and nature of the relief sought * * *.” The agency instead concluded that the district court had not decided whether Plaintiffs had “demonstrated an entitlement to a limitation of liability”—only that “the Government had failed to prove its theory of the cause of the incident by a preponderance of the evidence, and therefore could not recover costs from [EMC].”
With respect to SWS, the NPFC reversed its...
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