We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
30 August 2017
In a noteworthy case of first impression,(1) the US Court of Appeals for the Fifth Circuit ruled that the responsible party for an oil spill may obtain contribution for purely economic damages from another tortfeasor under the Oil Pollution Act 1990 irrespective of the general maritime law's economic loss rule. This decision provides some comfort to statutorily designated responsible parties that are held strictly liable in the first instance for significant costs relating to clean-up, remediation and third-party damages resulting from an oil spill.
In Settoon Towing v Marquette Transportation two tug and barge flotillas collided in the Mississippi River resulting in an oil spill. As a result, a 70-mile stretch of the river was closed to vessels for approximately 48 hours for oil spill clean-up and recovery. The spilled oil originated from a barge in the Settoon flotilla; thus, Settoon was named the responsible party by the US Coast Guard pursuant to the Oil Pollution Act. As the responsible party, Settoon was strictly liable to pay for removal costs and damages arising under the act which resulted from the incident.(2)(3) Settoon subsequently brought a claim against Marquette seeking contribution under the act for the costs of clean-up, remediation and third-party damage claims that it had paid as the responsible party. After a trial on the merits, the district court determined that both parties were at fault and apportioned 65% of the fault for the collision to Marquette and 35% to Settoon. The district court permitted Settoon to recover contribution from Marquette for Marquette's 65% proportion of the damages, including the damages for purely economic losses. Marquette appealed.
On appeal, the Fifth Circuit primarily addressed the issue of whether contribution is permissible for purely economic damages under the act. Under the US general maritime law, it is well established that a party may not recover damages for purely economic losses.(4) However, the act departs from the general maritime law set out in Robins Dry Dock and permits recovery of purely economic losses.(5) The statutory language of the act pre-empts the general maritime law for claims under the statute.
Settoon argued that its contribution claim arose under the act, which permits the recovery of purely economic losses, thus entitling it to contribution from Marquette for those damages. Marquette, on the other hand, argued that Settoon's contribution claim arose under the general maritime law and thus was subject to the Robins Dry Dock rule prohibiting the recovery of purely economic losses.
After a detailed and thorough analysis of the act's statutory language, legislative history and applicable court decisions, the Fifth Circuit agreed with Settoon that contribution is available under the act.(6) The court held that the act grants a responsible party the right to receive contribution from other entities that were partially at fault for a discharge of oil. This right to contribution extends to any damages paid to claimants under the act, including those arising out of purely economic losses.(7) Settoon was seeking contribution for damages paid to claimants under the act, including those for purely economic losses, and thus was entitled to contribution from Marquette.
This decision is noteworthy because it solidifies the act's departure from the US general maritime law to permit the recovery of purely economic losses and extends that right to a responsible party seeking contribution from a partially liable third party. This provides a strictly liable responsible party with the ability to recover a larger portion of its costs from a partially liable third party, which can amount to significant relief.
For further information please contact please contact Michael Harowski at Fowler Rodriguez by telephone (+1 504 523 2600) or email (firstname.lastname@example.org). The Fowler Rodriguez website can be accessed at www.frfirm.com.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.