Pennzoil Producing Co. v. Offshore Exp., Inc.

• Decision Date: 18 October 1991
• Docket Number: No. 90-3276,90-3276
• Citation: 943 F.2d 1465
• Parties: PENNZOIL PRODUCING COMPANY, et al., Plaintiffs-Appellees Cross-Appellants, v. OFFSHORE EXPRESS, INC., et al., Defendant-Appellant Cross-Appellee, v. UNITED GAS PIPE LINE COMPANY, Defendant-Appellee. UNITED GAS PIPE LINE COMPANY, Plaintiff-Appellee, v. OFFSHORE EXPRESS, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1465

943 F.2d 1465

1994 A.M.C. 1034

PENNZOIL PRODUCING COMPANY, et al., Plaintiffs-Appellees Cross-Appellants, v. OFFSHORE EXPRESS, INC., et al., Defendant-Appellant Cross-Appellee, v. UNITED GAS PIPE LINE COMPANY, Defendant-Appellee.

UNITED GAS PIPE LINE COMPANY, Plaintiff-Appellee, v. OFFSHORE EXPRESS, INC., Defendant-Appellant.

No. 90-3276.

United States Court of Appeals Fifth Circuit.

Oct. 18, 1991.

James O.M. Womack, Andrew C. Wilson, Burke & Mayer, New Orleans, La., for defendant-appellant, cross-appellee.

Donald R. Abaunza, Liskow & Lewis, New Orleans, La., for Pennzoil, et al.

Charles R. Talley, Ernest L. Edwards, Jr., Lemle, Kelleher, Kohlme & Kellehery, New Orleans, La., for United Gas Pipeline Co.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before JOHNSON, WIENER and BARKSDALE, Circuit Judges.

JOHNSON, Circuit Judge.

This case requires this Court to review a decision of the district court 735 F.Supp. 195, apportioning damages resulting from an allision of an offshore utility vessel with a natural gas pipeline. Finding no reversible error, we affirm the district court's judgment in all respects.

I. Facts and Procedural History

The facts found by the trial court are as follows. On a dark and foggy night in March 1986 Captain Joseph Corey was at the helm of the M/V GREEN CANYON EXPRESS, a 185' utility vessel owned by Offshore Express, Inc. The vessel was proceeding north through the Houma Navigation Canal, towards Houma, Louisiana. Captain Corey had posted a lookout in the wheelhouse, but visibility was so restricted by the fog that the lookout could not see both banks of the canal at the same time. Accordingly, Captain Corey was navigating by radar, splitting the banks of the canal. Captain Corey knew the canal was at a low water stage, but he was not using his fathometer, and, the district court found, he was running at an imprudently high speed. It is not entirely clear why, but for some reason Captain Corey veered away from the canal's dredged deep water channel. At about 3:20 in the morning the vessel struck the DuLarge natural gas pipeline, owned by United Gas Pipeline Co., about 25' outside of the dredged channel. The pipeline ruptured, and the escaping gas exploded into flames. ¹

The DuLarge pipeline was constructed in the 1940s, well before the Houma Canal was built in 1961. The pipeline crossing has no permit from the Corps of Engineers; rather, the pipeline was retroactively authorized by a nationwide blanket permit for structures completed before December 18, 1968. That blanket permit requires that the authorized structures, including the DuLarge pipeline, present "no interference with navigation." 33 C.F.R. § 330.3(b). When the canal was first dredged in 1961 United Gas lowered the portion of the pipeline which was to pass beneath the dredged channel, and posted "Do not dredge" signs on the canal's original banks to warn of the existence of the pipeline. The original banks of the canal, however, have long since disappeared. The canal passes through marshland, and since its construction its banks have eroded significantly; as a result, the canal has widened considerably. Originally 150' across, by March 1986 the canal was 600' wide in places. Moreover, due to the erosion of the banks, the dredged channel--maintained 150' wide and 15' deep--does not consistently lie along the midline between the canal's banks. United Gas knew this, but never lowered the portions of the pipeline on either side of the dredged channel.

To protect it from damage by passing vessels, the pipeline was buried in the mud at the bottom of the canal. In October 1985 United Gas probed the depth of the pipeline to ascertain its location; at that time the pipeline was covered with about two feet of mud. Shortly after that probe, however, the U.S. Army Corps of Engineers dredged the channel. United Gas did not regularly inspect the pipeline, and the pipeline was not checked again after the dredging to see if it was still covered by mud. After the pipeline was ruptured by the M/V GREEN CANYON EXPRESS, portions of the pipeline were removed and were discovered to have barnacle growth around its entire circumference; since barnacles do not grow under mud, it was evident that the pipeline had not been buried. Also, an examination of the hull of the vessel indicated that when the vessel struck the pipeline, the pipeline was about four feet below the waterline, and the water is approximately five or six feet deep at that point in the canal. In light of all of these facts, the district court found it more likely than not that at the time of the allision the pipeline, which was about 12" in diameter, was at least partly exposed above the mud line.

The damages caused by the allision of the vessel with the pipeline were not confined to the pipeline and the vessel. A nearby natural gas well, the A.L. Voisin No. 1 Well, owned by Pennzoil, ² also suffered physical damage. When the pipeline ruptured and exploded, safety devices on the Voisin well, which was connected to the pipeline, sensed the drop in pressure and automatically caused the well to stop producing gas, or "shut-in." While this ordinarily might not have been a particularly troubling development, the Voisin well was "flow critical" or "rate sensitive," meaning that if the well remained shut in for an extended period of time it would not be possible to restart production. Pennzoil knew this. Nevertheless, in the three weeks it took United Gas to replace the pipeline, Pennzoil took no action to preserve the well even though it had on hand, at the well site, equipment which would have allowed it to "flare" the well. "Flaring" the well would have allowed Pennzoil to restart the well's production: rather than flowing the gas into the pipeline, it would be shunted as it came out of the well bore and burned off as it flowed out of the shunt pipe into the air a safe distance from the wellhead.

The district court found that Pennzoil could have flared the well legally and safely. Nonetheless, Pennzoil did not attempt to flare the well. If Pennzoil had flared the well, the district court found, its total losses would have been 1) the gas it burned off in the three weeks it took to replace the pipeline and 2) whatever costs were associated with flaring the well. These damages, the district court determined, would have amounted to $150,000. As it turned out, by the time the pipeline was replaced Pennzoil was unable to resume production from the well, and lost proven reserves of gas worth about $1.1 million.

Pennzoil brought this action against Offshore Express. Offshore Express impleaded United Gas as a third party defendant. Pennzoil added a claim of its own against United Gas, and United Gas filed a claim against Offshore Express. All of the claims were consolidated, and the case was tried to the court. The trial judge held Offshore Express and United Gas each 50% at fault for the accident, but allowed Pennzoil to recover only $150,000 because of Pennzoil's failure to mitigate its damages. He also held that Offshore Express was not entitled to limit its liability to the value of its vessel. Offshore Express appeals, arguing 1) that the trial judge's findings as to the negligence of Captain Corey, the master of its vessel, were clearly erroneous and incorrect as a matter of law, 2) that United Gas was wholly at fault, 3) that Pennzoil cannot recover for damages to its gas well under the rule of Robins Dry Dock, and 4) that Offshore Express is entitled to limit its liability to the value of its vessel. Pennzoil cross-appeals, arguing 1) that the district court applied the wrong legal standard in reducing the amount of its recoverable damages, and 2) that the district court's findings of fact as to Pennzoil's failure to mitigate its damages were clearly erroneous. United Gas has not appealed.

II. Issues Raised by Offshore Express' Appeal

A. Standard of Review

It is well settled law that, as in most federal actions, in maritime actions the "clearly erroneous" rule applies to the review of the factual findings of the trial court. Thus we must accept the district court's findings of fact unless, upon reading the record and examining the exhibits, we are convinced that they are demonstrably incorrect. Fed.R.Civ.P. 52(a); Candies Towing Co., Inc. v. M/V B & C ESERMAN, 673 F.2d 91, 93 (5th Cir.1982). ³ To borrow a phrase from former Chief Judge John R. Brown, the findings of the district court in this case "float well above that Plimsoll Line." Candies Towing, 673 F.2d at 93. Each of the trial court's findings are well supported by the evidence.

B. Comparative Fault

The central thrust of Offshore Express' argument to this Court is that United Gas, by failing to prevent its pipeline from becoming an obstruction to navigation, was at fault for this accident and should be held solely liable for it. Part of Offshore Express' position is undoubtedly correct. It certainly is true that United Gas was at fault. It failed to prevent its pipeline from becoming an obstruction to navigation as required by the blanket permit. The district court so found and held United Gas liable for the allision. United Gas has not appealed from that ruling; this Court need not and cannot reexamine it.

It certainly is not true, though, that because United Gas was at fault it must be held solely liable for the allision. For Offshore Express to advance such an argument is to overlook one of the most fundamental precepts of admiralty jurisprudence: in 1975 the Supreme Court held, in United States v. Reliable Transfer Co., 421 U.S. 397, 95 S.Ct. 1708, 44 L.Ed.2d 251 (1975), that damages in admiralty cases are to be apportioned on the basis of the comparative fault of the parties. Thus, the question before this Court is not whether United Gas was at fault, but whether the district court correctly held that Offshore Express was also at fault for the...