Mid–Valley Pipeline Co. v. Sunoco Pipeline, L.P.

• Decision Date: 24 January 2012
• Docket Number: Civil Action No. 2:11–235–DCR.
• Citation: 847 F.Supp.2d 982
• Court: U.S. District Court — Eastern District of Kentucky
• Parties: MID–VALLEY PIPELINE CO., Plaintiff, S.J. LOUIS CONSTRUCTION, INC., Defendant and Third–Party Plaintiff, v. Sunoco Pipeline, L.P., Third–Party Defendant.

847 F.Supp.2d 982

MID–VALLEY PIPELINE CO., Plaintiff,S.J. LOUIS CONSTRUCTION, INC., Defendant and Third–Party Plaintiff,

v.Sunoco Pipeline, L.P., Third–Party Defendant.

Civil Action No. 2:11–235–DCR.

United States District Court,

E.D. Kentucky,

Northern Division,

at Covington.

Jan. 24, 2012.

Brian M. Johnson, Bingham Greenebaum Doll LLP, Lexington, KY, Debra Djupman, Jay M. Levin, Reed Smith, LLP, Philadelphia, PA, Kathleen M.K. Owen, Reed Smith, LLP, Pittsburgh, PA, for Plaintiff/Third–Party Defendant.

Christopher David Wiest, Cincinnati, OH, for Defendant and Third–Party Plaintiff.

MEMORANDUM OPINION AND ORDER

DANNY C. REEVES, District Judge.

This matter is pending for consideration of defendant S.J. Louis Construction, Inc.'s (“S. J. Louis”) motion to dismiss. [Record No. 14] S.J. Louis asserts that Defendant Mid–Valley Pipeline Co. (“Mid–Valley”) is not entitled to indemnification or reimbursement for any fines imposed under the Clean Water Act. It also argues that Counts I and II of the Complaint—both of which assert claims under common law negligence theories—are either preempted by federal law or are otherwise inapplicable. Additionally, it contends that the claims outlined in Count III seeking indemnification and contribution under Kentucky law are preempted by the Oil Pollution Act of 1990. Therefore, it seeks to dismiss those claims that arise under Kentucky law, so that the only issue remaining would be whether S.J. Louis was “solely responsible” for the oil spill under the Oil Pollution Act. For the reasons explained below, the Court will grant the motion in part, and Mid–Valley's claim for indemnification under Kentucky law will be dismissed. Mid–Valley will be allowed to proceed on all other claims outlined in its Complaint.

I. Background

This case arose from the rupture of an oil pipeline (“the Pipeline”) owned by Mid–Valley and extending from Texas to Ohio. [Record No. 1, ¶ 9] A sewer pipe stretching through several counties in northern Kentucky intersects with the Pipeline in Burlington, Kentucky. [ Id., ¶¶ 10, 12] In 2008, S.J. Louis was hired to work on a portion of the sewer pipe that runs through Burlington. [ Id., ¶ 11] At their point of intersection, the sewer pipe runs beneath the Pipeline. Therefore, to reach the sewer pipe, S.J. Louis was required to excavate under the Pipeline “to the depth of approximately 20 feet below the ground surface.” [ Id., ¶ 12] Mr. Williamson, a representative from Mid–Valley was present during the excavation, to advise S.J. Louis, monitor the proceedings, and take “certain steps to prevent damage to the [P]ipeline.” [Record No. 14–1, p. 3] However, according to the Complaint, “Mr. Williamson did not have control over the job site.” [Record No. 1, ¶ 18]

By early October, the digging had been completed with the Pipeline exposed. On the morning of October 3, 2008, S.J. Louis employee James E. Robben was using a track hoe to finish-grade the bottom of the excavation site, when the “bucket of the track hoe curled, the boom of the track hoe rose, and the bucket struck the Pipeline, puncturing it.” [ Id., ¶¶ 20, 21, 25] As a result, “over 150,000 thousand barrels of crude oil were released from the Pipeline.” [ Id., ¶ 31] Despite Mid–Valley's efforts to mitigate the environmental effects of the spill, “a substantial amount of crude oil was absorbed in 3,376 tons of soil” and a “minimal amount” of oil entered Gun Powder Creek. [ Id., ¶¶ 28–30, 32, 34] Because of S.J. Louis' actions, Mid–Valley has had to repair the Pipeline and engage in extensive remediation activities, including oil recovery efforts. [ Id., ¶ 33–35]

To date, Mid–Valley has incurred costs of $1,271,869.56 to “repair the Pipeline, recover the spilled oil, remediate the environmental effects ... and conduct emergency activities to contain the spilled oil.” [ Id., ¶ 35] It has “also incurred damages in the form of lost revenue and increased operating expenses.” [ Id.] Additionally, due to the environmental impact of the spill, Mid–Valley has incurred Environmental Protection Agency (“EPA”) fines under the Clean Water Act, in the approximate amount of $275,000.¹ [ Id., ¶ 36]

Mid–Valley filed suit against S.J. Louis on September 22, 2011, to recover these costs. The Complaint contains three counts. Count I asserts a claim under common law negligence. Count II asserts an alternative claim under a theory of res ipsa loquitur while Count III seeks indemnification under the Federal Oil Pollution Act. [ Id., ¶¶ 37–49] S.J. Louis filed its motion to dismiss these claims on October 14, 2011. [Record No. 14]

Mid–Valley is pursuing this action under the theory that S.J. Louis punctured the Pipeline and, therefore, should bear all costs associated with the oil spill. To that end, Mid–Valley has asserted a claim for damages under a negligence theory. Additionally, it seeks indemnification and contribution from S.J. Louis under the relevant provisions of the Oil Pollution Act of 1990 (“OPA”). S.J. Louis seeks to dismiss the common law negligence counts of Mid–Valley's Complaint. [Record No. 27, p. 12] It argues that Mid–Valley is not entitled to recover fines levied by the EPA under the Clean Water Act. [Record No. 14–1, p. 5] Moreover, it maintains that Counts I and II—as well as the claims in Count III that rely on Kentucky law—are preempted by the OPA. Finally, it asserts that Mid–Valley has failed to state a claim for relief under the doctrine of res ipsa loquitur. [ Id., p. 11]

II. Legal Analysis

When evaluating a motion to dismiss under Rule 12(b)(6), the Court must determine whether the complaint alleges “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). The plausibility standard is met “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). Although the complaint need not contain “detailed factual allegations” to survive a motion to dismiss, “a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (internal quotation marks and alteration omitted).

A. The Clean Water Act

Mid–Valley seeks damages from S.J. Louis for the fines it will be required to pay to the EPA.² However, S.J. Louis contends that these fines are not recoverable under the Clean Water Act. It asserts that “allowing a party to seek repayment of penalties it has been forced to pay defeats the purpose of the environmental statutes in question.” [Record No. 14–1, p. 5]

The Federal Water Pollution Control Act Amendments of 1972 (“FWPCA”), as amended by the Clean Water Act of 1977 (“CWA”), provide for civil penalties for owners or operators of vessels from which oil is accidentally discharged. 33 U.S.C. § 1251 et seq. Under the CWA, any “owner, operator, or person in charge” of a facility from which a harmful quantity of oil is discharged into navigable waters, “shall be subject to a civil penalty in an amount up to $25,000 per day of violation or an amount up to $1,000 per barrel of oil ... discharged.” 33 U.S.C. § 1321(b)(7)(A). The CWA also contains a “savings clause,” which preserves certain rights against third parties who might have caused or contributed to the discharge of oil:

The liabilities established by this section shall in no way affect any rights which (1) the owner or operator of a vessel or of an onshore facility or an offshore facility may have against any third party whose acts may in any way have caused or contributed to such discharge, or ...

33 U.S.C. § 1321(h). The savings clause “preserves the right of contribution in favor of a discharger against a third party whose fault contributed to the discharge.” United States v. Bear Marine Servs., 509 F.Supp. 710, 716 (E.D.La.1980) (noting that this conclusion is supported “by both the clear language of the statute, and its legislative history”); see Frederick E. Bouchard, Inc. v. United States, 583 F.Supp. 477, 482 (D.C.Mass.1984) (“The clear intent of this provision is to preserve pre-existing ... remedies at least as against any non-discharging third party not solely responsible for causing an oil spill.”).

S.J. Louis attempts to cabin the applicability of the savings clause in several ways. First, it points to a decision from the Southern District of New York that interprets the term “liabilities” to exclude any penalty imposed pursuant to Section 1321(b)(6).³ [Record No. 14–1, p. 5 (citing Tug Ocean Prince, Inc. v. United States, 436 F.Supp. 907, 926 (S.D.N.Y.1977)) ] However, as Mid–Valley points out, this interpretation was expressly rejected by the Second Circuit in Montauk Oil Transportation Corp. v. Tug “El Zorro Grande”, 54 F.3d 111, 113 (2d Cir.1995). The court in Montauk Oil held that when a discharge is caused by the negligence of a third party, the responsible party may seek indemnification for civil penalty imposed as a result of the discharge. Id. at 113–15 (“The word ‘liabilities' as used in section 1321(h) is broad enough to encompass the civil penalties that are imposed under section 1321(b)(6).”).

According to S.J. Louis, allowing Mid–Valley to recover for its negligence would “negat[e] the very purpose of imposing the civil penalty in the first place.” [Record No. 27, p. 9] It refers to a Ninth Circuit's decision in Glacier Bay, United Cook Inlet Drift Ass'n v. Trinidad Corp. to support this argument. 71 F.3d 1447 (9th Cir.1995). However, Glacier Bay is inapplicable. That case involved a lawsuit against the United States alleging negligence in the preparation of nautical charts. Id....