Water Quality Ins. Syndicate v. Nat'l Pollution Funds Ctr.
| Decision Date | 27 January 2020 |
| Docket Number | 19 Civ. 6344 (PAE) |
| Parties | WATER QUALITY INSURANCE SYNDICATE, Plaintiff, v. NATIONAL POLLUTION FUNDS CENTER and UNITED STATES OF AMERICA, Defendants. |
| Court | United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York |
At issue in this case is a debt for $57,243.39 that the United States seeks to impose on Genesis Marine, LLC ("Genesis"), for Coast Guard response costs the United States incurred under the Oil Pollution Act of 1990 ("OPA"), 33 U.S.C. § 2701 et seq., in connection with the lightering of two of Genesis's oil-carrying barges after they ran aground in the Mississippi River in early April 2014. This incident was the subject of a separate action that this Court, following a January 2018 bench trial, resolved in a lengthy written decision issued in April 2018. The Court there resolved a dispute between two of Genesis's insurers, Water Quality Insurance Syndicate ("WQIS") and Starr Indemnity and Liability Co. ("Starr"), regarding their respective responsibility for the far more substantial salvage costs incurred by Genesis in connection with that incident. See Starr Indem. & Liab. Co. v. Water Quality Ins. Syndicate, 320 F. Supp. 3d 549 (S.D.N.Y. 2018) ("Starr"), aff'd, 775 F. App'x 4 (2d Cir. 2019).
In this action, WQIS, Genesis's pollution liability insurer—standing in Genesis's shoes—claims that the United States and its National Pollution Funds Center (together, the "NPFC") wrongly seek to impose the $57,243.39 debt ("the debt") on Genesis. WQIS emphasizes that the NPFC's legal theory for claiming such a debt under the OPA—that the stranded barges posed "a substantial threat of discharge of oil"—was rejected by this Court in Starr as factually baseless, after a thorough review of witness testimony and extensive documentary evidence regarding the lightering of the barges. And, WQIS notes, the Court in Starr expressly rejected the written testimony of a Coast Guard representative who had claimed that the barges posed such a threat, and on whose identical claim the NPFC relies in seeking to impose the debt on WQIS. WQIS asserts that the NPFC, in imposing the debt, failed adequately to consider this Court's decision—or the decision's summary affirmance, in which the Second Circuit expressly affirmed this Court's finding on that point—was arbitrary and capricious, and otherwise violated the Administrative Procedure Act ("APA"), 5 U.S.C. § 701 et seq. WQIS seeks declaratory relief.
The NPFC now moves to dismiss, on two grounds: that venue is improper in this District for an action challenging its imposition of the debt; and that WQIS's complaint fails to state a claim.
For the reasons that follow, the Court dismisses WQIS's lawsuit, solely for lack of venue.
Between January 5 and 9, 2018, this Court held a bench trial in a lawsuit brought by one of Genesis's maritime insurers, Starr, against another, WQIS, concerning responsibility for costsincurred arising out of the grounding and ensuing salvage of two oil barges (the GM-5001 and the GM-5002) in the Mississippi River in April 2014. See Starr, 320 F. Supp. 3d at 552-53. Starr had reimbursed Genesis for its salvage costs and was assigned the right to sue on Genesis's behalf. Id. at 552. Starr then sued WQIS in this Court, for declining to reimburse Genesis for approximately $2.8 million in salvage costs. Id.; see also id. at 571. Starr claimed that WQIS was responsible for covering these costs under several provisions of a policy under which WQIS had insured Genesis for costs incurred as the result of oil spills and incidents giving rise to a "substantial threat" of an oil spill. Id. at 552. Although the grounding of Genesis's barges undisputedly had not caused any spill, Starr claimed that the barges' grounding had presented a substantial threat of a discharge, so as to trigger the WQIS policy. Id. at 552-53. WQIS disputed that. Id. at 553.
At trial, the Court heard extensive evidence. This included live testimony from five witnesses—three fact and two expert witnesses (one from each side). See id. The Court also received written testimony from several witnesses, and excerpts from deposition testimony of others. See id. The Court also received extensive exhibits, including detailed records and time logs recounting the protracted salvage efforts. See id. The parties also jointly stipulated to various undisputed facts. See id.
Salient here, the Court received written testimony of U.S. Coast Guard Chief Petty Officer Heather Norman, in the form of a sworn declaration, PX-22 in Starr ("Norman Decl."). See Starr, 320 F. Supp. 3d at 553. Norman had been designated as the Coast Guard's on-scene officer with respect to the salvage efforts, although she had been present for only one day of these efforts. Id. at 561. The Coast Guard, pursuant to its Tuohy regulations, had declined to make Norman available for either deposition or live testimony. Id. at 563. The Courtnevertheless agreed, over WQIS's objection, to receive Norman's written declaration. See id. at 553 n.1.
In a 46-page written decision, the Court held, unequivocally, that the barges did not pose a substantial threat of discharge; that the salvage efforts with respect to the barges had not been undertaken for the purpose of mitigating such a discharge but instead had been undertaken to free the grounded barges; and that, had Genesis not undertaken the salvage efforts it did, the Coast Guard would not have ordered Genesis to do so. See id. at 553. The Court therefore held that none of the provisions of WQIS's insurance policy were triggered, and that this policy, therefore, did not cover the costs Genesis incurred. Id.
In so ruling, the Court drew extensively on the above evidence. The Court chronicled the sequential plans for lightering the two barges, drawing on contemporaneous records, including the daily reports of the salvor, T&T Salvage LLC ("T&T"). See id. at 556-60. The Court also reviewed in detail the actions of the Coast Guard with respect to the incident. See id. at 560-65. In finding that the barges did not pose a substantial risk of discharge, the Court found particularly influential the analysis of WQIS's expert, George Randall; T&T's daily reports of the salvage; T&T's conduct of the lightering options; and the Coast Guard's conduct. See id. at 570-78. As to the latter, the Court held that, notwithstanding the later claim in Officer Norman's declaration that the barges had presented such a risk, the Coast Guard's words and deeds "did not bespeak a real-time assessment of a substantial threat of discharge." Id. at 574.
The Court accordingly held that WQIS was not liable for the salvage costs incurred by Genesis under any of the policy provisions at issue, and thus was not liable to Starr, and entered judgment for WQIS. See id. at 578.
In a summary order issued on May 29, 2019, the Second Circuit affirmed. See Starr, 775 F. App'x at 8. The Circuit found no error in this Court's conclusions that the barges had not presented a substantial risk of discharge. See id. at 7-8. Rejecting Starr's principal claim on appeal, the Circuit further found no error in this Court's finding that the Coast Guard had never determined that the barges posed a substantial risk of discharge. See id. at 6-7.
On January 25, 2018, following the close of evidence at trial but before the Court's written decision had issued, the NPFC wrote to WQIS, stating that the Coast Guard had determined that the barges in fact had posed, under the OPA, a substantial risk of discharge. See FAC ¶ 21. It requested payment by WQIS of an NPFC invoice in the amount of $57,243.39, reflecting costs incurred by the Coast Guard in connection with the salvage efforts undertaken in response, allegedly, to that risk. See id.; see also id., Ex. C (NPFC letter and invoice).
On May 2, 2018, WQIS responded to the NPFC, alerting the NPFC to this Court's April 25, 2018 decision. Id. ¶ 22. WQIS asked that the NPFC withdraw its demand for recovery of the alleged response costs. Id., Ex. D. The NPFC thereafter opened an "administrative review" of WQIS's alleged debt, in the course of which WQIS submitted its arguments and evidence. See id. ¶¶ 23-24; see also id., Exs. E-F. This evidence consisted of this Court's decision and a substantial subset of the evidence adduced at trial. See id., Ex. F Appendix A.
In a letter dated April 15, 2019, the NPFC's review officer, Mark L. McEwen, issued his determination. See id. ¶ 26. He found, drawing on Officer Norman's written declaration to this effect, that the barges had posed a substantial risk of discharge, and therefore determined that WQIS's disputed debt of $57,243.39 was valid and owing. See id.; see also id., Ex. G. On May 30, 2019, WQIS informed McEwen of the Second Circuit's affirmance of this Court's decision, including its specific affirmance of this Court's assessment that, in real time, the Coast Guard had not found a substantial risk of discharge. Id. ¶ 27; see also id., Ex. H.
The NPFC, however, declined to reopen the administrative review of the disputed debt to consider the Second Circuit's summary order. Id. ¶ 28. It sent a letter, dated June 14, 2019, to WQIS, notifying WQIS that it had referred the debt to the U.S. Department of the Treasury, Bureau of Fiscal Service, for immediate collection. See id. ¶¶ 28, 30; see also id., Ex. I. A notice to WQIS, dated June 12, 2019, from that Bureau stated that, in the event WQIS failed timely to pay this debt, WQIS would further incur interest and penalties. Id. ¶ 30; see also id., Ex. J.
On July 9, 2019, WQIS brought this action against the NPFC and the United States. Dkt. 3 ("Compl."). Its Complaint sought declaratory relief to determine its rights and liabilities with respect to the NPFC's determination that its January 25, 2018 invoice for $57,243.39 was due and owing. Id. ¶ 6. WQIS claimed that...
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