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Case: 11-2576 Document: 003111310875 Page: 1 Date Filed: 07/01/2013





IN THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT



No. 11-2576

IN RE: PETITION OF FRESCATI SHIPPING COMPANY, LTD., AS OWNER

OF THE M/T ATHOS I AND TSAKOS SHIPPING & TRADING, S.A., AS

MANAGER OF THE ATHOS I FOR EXONERATION FROM OR LIMITATION

OF LIABILITY

No. 11-2577

UNITED STATES OF AMERICA,

v.

Appellant,









CITGO ASPHALT REFINING COMPANY;
CITGO PETROLEUM CORPORATION;

CITGO EAST COAST OIL CORPORATION

Appeal from the United States District Court

for the Eastern District of Pennsylvania

District Court Nos. 2-05-cv-00305/2-08-cv-02898

PETITION FOR REHEARING OR REHEARING EN BANC

Derek A. Walker
J. Dwight LeBlanc, Jr.
Douglas L. Grundmeyer
CHAFFE McCALL, L.L.P.
2300 Energy Centre
1100 Poydras Street
New Orleans, Louisiana 70163
(504) 585-7000



Carter G. Phillips
Jacqueline G. Cooper
Richard E. Young
SIDLEY AUSTIN LLP
1501 K Street, N.W.
Washington, D.C. 20005
(202) 736-8000

Additional Counsel On Inside Cover





Case: 11-2576 Document: 003111310875 Page: 2 Date Filed: 07/01/2013



Attorneys for Appellees CITGO Asphalt Refining Company, CITGO Petroleum

Corporation, and CITGO East Coast Oil Corporation





Richard Q. Whelan
Frank P. DeGiulio
PALMER, BIEZUP & HENDERSON
LLP
190 N. Independence Mall West
Suite 401
Philadelphia, PA 19106
(215) 625-9900











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TABLE OF CONTENTS

TABLE OF AUTHORITIES .................................................................................... ii

REQUIRED STATEMENT FOR REHEARING EN BANC PURSUANT
TO THIRD CIRCUIT RULE 35.1 ............................................................................ v

INTRODUCTION ..................................................................................................... 1

FACTUAL AND PROCEDURAL BACKGROUND .............................................. 1

REASONS FOR GRANTING THE PETITION ....................................................... 3

I.

II.

THE PANEL’S HOLDING THAT FRESCATI IS A THIRD-PARTY
BENEFICIARY IS CONTRARY TO DECISIONS OF THIS COURT
AND OTHER FEDERAL COURTS .............................................................. 3

THE PANEL’S HOLDING THAT A CHARTER CONTRACT’S
SAFE BERTH CLAUSE IS A GUARANTEE CONFLICTS WITH
THE RULING OF ANOTHER CIRCUIT ...................................................... 8

III. THE PANEL’S HOLDING REGARDING THE SCOPE OF
CARCO’S DUTY TO PROVIDE A SAFE APPROACH TO ITS
BERTH PRESENTS A QUESTION OF EXCEPTIONAL IM-
PORTANCE .................................................................................................. 12

CONCLUSION ........................................................................................................ 15

CERTIFICATE OF SERVICE ................................................................................ 17











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CASES

TABLE OF AUTHORITIES

Page(s)

Asher v. Chase Bank USA, N.A.,

310 F. App’x 912 (7th Cir. 2009) ......................................................................... 5

Atl. & Gulf Stevedores, Inc. v. Revelle Shipping Agency, Inc.,

750 F.2d 457 (5th Cir. 1985) ................................................................................ 5

Bariteau v. PNC Fin. Servs. Grp., Inc.,

285 F. App’x 218 (6th Cir. 2008) ......................................................................... 5

BP Oil Int’l, Ltd. v. Empresa Estatal Petroleos De Ecuador (Petroecuador),

No. 04-20911, 2008 WL 162889 (5th Cir. Jan. 16, 2008) ................................... 5

Cities Serv. Transp. Co. v. Gulf Ref. Co.,

79 F.2d 521 (2d Cir. 1935) ................................................................................... 8

Coca-Cola Bottling Co. v. Coca-Cola Co.,

988 F.2d 386 (3d Cir. 1993) ................................................................................. 6

In re Complaint of Nautilus Motor Tanker Co.,

85 F.3d 105 (3d Cir. 1996) ................................................................................. 12

In re Complaint of Nautilus Motor Tanker Co.,

862 F. Supp. 1260 (D.N.J. 1994), aff’d, 85 F.3d 105 (3d Cir. 1996) ................. 13

Crumady v. The Joachim Hendrik Fisser,

358 U.S. 423 (1959) .............................................................................................. 6

Delta Mech., Inc. v. Garden City Grp., Inc.,

345 F. App’x 232 (9th Cir. 2009) ......................................................................... 5

Doe v. Pa. Bd. of Prob. & Parole,

513 F.3d 95 (3d Cir. 2008) ................................................................................... 4

Dravo Corp. v. Robert B. Kerris, Inc.,

655 F.2d 503 (3d Cir. 1981) ................................................................................. 4



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E.I. Dupont de Nemours & Co. v. Rhone Poulenc Fiber & Resin

Intermediates, S.A.S.,
269 F.3d 187 (3d Cir. 2001) ................................................................................. 4

Flexfab, L.L.C. v. United States,

424 F.3d 1254 (Fed. Cir. 2005) ............................................................................ 3

In re Freschati Shipping Co.,

No. 05-305, 2011 WL 1436878 (E.D. Pa. Apr. 12, 2011) ....................... 9, 11, 13

M.F. v. State Exec. Dep’t Div. of Parole,

640 F.3d 491 (2d Cir. 2011) ................................................................................. 5

The Moorcock,

14 P.D. 64 (Eng. 1899) ....................................................................................... 14

Orduna S.A. v. Zen-Noh Grain Corp.,

913 F.2d 1149 (5th Cir. 1990) ........................................................................ 9, 10

Osprey Ship Mgmt., Inc. v. Jackson Cnty. Port Authority,

No. 05-390, 2007 WL 4287701 (S.D. Miss. Dec. 4, 2007), aff’d sub.
nom. 387 F. App’x 425 (5th Cir. 2010) .............................................................. 14

Paragon Oil Co. v. Republic Tankers, S.A.,

310 F.2d 169 (2d Cir. 1962) ............................................................................. 6, 8

Park S.S. Co. v. Cities Serv. Oil Co.,

188 F.2d 804 (2d Cir.1951) .................................................................................. 8

Pierce Assocs., Inc. v. Nemours Found.,

865 F.2d 530 (3d Cir. 1988) ................................................................................. 5

Retro Television Network, Inc. v. Luken Commc’ns, LLC,

696 F.3d 766 (8th Cir. 2012) ................................................................................ 5

Robins Dry Dock & Repair Co. v. Flint,

275 U.S. 303 (1927) .............................................................................................. 4

Scindia Steam Navigation Co. v. De Los Santos,

451 U.S. 156 (1981) .............................................................................................. 6

Sioux Honey Ass’n v. Hartford Fire Ins. Co.,

672 F.3d 1041 (Fed. Cir.), cert. denied, 133 S. Ct. 126 (2012)............................ 4



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Smith v. Burnett,

173 U.S. 430 (1899) ............................................................................................ 12

Smith v. Cent. Ariz. Water Conservation Dist.,

418 F.3d 1028 (9th Cir. 2005) .............................................................................. 3

Sonat Marine Inc. v. Belcher Oil Co.,

629 F. Supp. 1319 (D.N.J. 1985), aff’d, 787 F.2d 583 (3d Cir. 1986) ............... 12

In re T.L. James & Co.,

33 F. App’x 703 (5th Cir. 2002) ........................................................................... 5

Venore Transp. Co. v. Oswego Shipping Corp.,

498 F.2d 469 (2d Cir. 1974) ................................................................................. 8

Waterman S.S. Corp. v. Dugan & McNamara, Inc.,

364 U.S. 421 (1960) .............................................................................................. 6

W. Bulk Carriers, K.S. v. United States,

1999 A.M.C. 2818 (E.D. Cal. 1999) ................................................................... 14

STATUTES AND RULE

33 U.S.C. § 905(b) ..................................................................................................... 6

33 U.S.C. §§ 2701 et seq. ........................................................................................... 2

Fed. R. App. P. 35(b)(1)(B) ....................................................................................... 8

OTHER AUTHORITIES
Julian Cooke et al., Voyage Charters (3d ed. 2007) ................................................ 11

P. Hartman, Safe Port/Berth Clauses: Warranty or Due Diligence?, 21 Tul.

Mar. L. J. 537 (1997) .......................................................................................... 10








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REQUIRED STATEMENT FOR REHEARING EN BANC

PURSUANT TO THIRD CIRCUIT RULE 35.1





I express a belief, based on a reasoned and studied professional judgment,

that the Panel decision is contrary to decisions of this Court, and that consideration

en banc is necessary to secure and maintain uniformity of decisions in this Court,

i.e., the Panel’s decision on the third-party beneficiary issue is contrary to Doe v.

Pennsylvania Board of Probation & Parole, 513 F.3d 95 (3d Cir. 2008). In addi-

tion, the Panel’s decision involves questions of exceptional importance because it

(1) widens an acknowledged circuit conflict on the question whether a safe berth

provision in a voyage charter contract is a guarantee of the safety of the berth, ra-

ther than a duty of due diligence; (2) creates unprecedented tort liability in the mar-

itime industry by construing a wharf owner’s duty to provide a safe approach to its

berth to extend to routes selected exclusively by a vessel’s navigators in publicly

maintained waters over which the wharf owner does not exercise dominion or con-

trol; and (3) creates chaos in maritime contracting and the orderly carriage of

goods by sea by making non-contracting parties intended beneficiaries of contracts

to which they were not signatories.



























/s/ Carter G. Phillips
Carter G. Phillips
Counsel for Appellees



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INTRODUCTION



The Panel’s decision upends decades of settled expectations in both contract

and tort law concerning risk-allocation in the maritime setting. First, its ruling on

the legal standard for third-party beneficiary status conflicts with decisions of this

Court and other federal courts. Second, the Panel widened a circuit conflict on the

scope of a commonly-used provision in charter contracts. Third, its ruling expand-

ing a wharf owner’s duty to provide a safe approach to its berth to the limitless

navigational paths of vessels, rather than a finite geographical area controlled by

the wharf owner, is unprecedented and will create substantial new liabilities, uncer-

tainty, and confusion for wharf owners. Each ruling will have profound impact in

and beyond the maritime industry, and independently warrants either panel rehear-

ing or rehearing en banc. Collectively, they indisputably warrant rehearing.

FACTUAL AND PROCEDURAL BACKGROUND

The Panel reversed the result of a 41-day bench trial that found CITGO As-

phalt Refining Company, CITGO Petroleum Corporation, and CITGO East Coast

Oil Corporation (collectively, “CARCO”) not liable for damages arising from an

oil spill caused when the oil tanker Athos I struck an uncharted anchor abandoned

by an unknown party in the Delaware River. The incident occurred approximately

900 feet from CARCO’s berth in Federal Anchorage No. 9, which is maintained

exclusively by the federal government for public use. The ship owner, Frescati

1

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Shipping Company, Ltd., and its manager Tsakos Shipping & Trading, S.A (col-

lectively, “Frescati”), had chartered the ship to Star Tankers Inc. (“Star”) in 2001

via a standard industry form contract known as a “time charter,” which granted

Star authority to subcharter the ship for specific voyages. Three years later, Star

chartered the ship to CARCO for a single voyage under a “voyage charter” con-

tract to which Frescati was not a party. That contract provided that CARCO would

designate a “safe place or wharf” for the discharge of cargo.

As the “responsible party” under the Oil Pollution Act (“OPA”), 33 U.S.C.

§§ 2701 et seq., Frescati paid $133 million in cleanup expenses, $88 million of

which was reimbursed by a federal fund. Seeking to recoup its unreimbursed loss-

es, Frescati asserted against CARCO (1) claims for alleged breach of its contract

with Star (joined by the U.S., which had reimbursed the $88 million), and (2) neg-

ligence claims in its role as the wharf owner. The district court found CARCO not

liable. The Panel reversed and remanded for further fact-finding, ruling that

Frescati’s contract claims are viable because (1) it is a third-party beneficiary of

the contract between CARCO and Star; and (2) the “safe berth” clause in the voy-

age charter guaranteed the berth’s safety. It also held that Frescati’s negligence

claim is viable because CARCO’s duty as wharf owner to provide a safe approach

to its berth extended to the route chosen by the vessel’s navigators in an area of the

2

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river that CARCO does not maintain or control. These unprecedented rulings cre-

ate amorphous legal standards that will confound maritime commerce.

REASONS FOR GRANTING THE PETITION



THE PANEL’S HOLDING THAT FRESCATI IS A THIRD-PARTY
BENEFICIARY IS CONTRARY TO DECISIONS OF THIS COURT
AND OTHER FEDERAL COURTS.

The Panel’s holding that Frescati was a third-party beneficiary of the voyage

I.



contract between CARCO and Star conflicts with well-settled standards – includ-

ing those of this Court – for proving intended beneficiary status. Unless reversed,

it will expose contract parties to an array of claims by third parties to whom they

never intended to extend enforceable rights.

The Panel’s standards were fatally flawed. First, the Panel characterized the

issue of whether the contract itself established a third-party beneficiary relationship

as “a question of law.” Op. at 23. As other Circuits have held, however, the issue

of third-party beneficiary status is not a pure question of law, but rather a mixed

question of law and fact that is reviewed de novo.1

Second, the Panel held that, “[a]s Frescati is not a party to CARCO’s prom-

ise to Star Tankers to provide a safe berth, there must be some showing that it was

nonetheless an intended beneficiary.” Id. (emphasis added). That standard, how-

ever, falls woefully short of the “compelling evidence” standard adopted by this

1 See, e.g., Flexfab, L.L.C. v. United States, 424 F.3d 1254, 1259 (Fed. Cir. 2005);
Smith v. Cent. Ariz. Water Cons. Dist., 418 F.3d 1028, 1034 (9th Cir. 2005).

3

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Court in applying federal common law. Doe v. Pa. Bd. of Prob. & Parole, 513

F.3d 95, 106-07 (3d Cir. 2008) (intended-beneficiary status not expressly provided

by contract is “conferred only if circumstances compel [a court] to recognize such a

status in order to effectuate” parties’ intent; plaintiff was not intended third-party

beneficiary because there was “no compelling evidence that” the contracting parties

“implicitly intended to give legally enforceable rights”) (emphases added).

The Panel’s “some evidence” standard is also inconsistent with this Court’s

use of a more stringent standard for intended-beneficiary status when applying

state law,2 and with the holdings of the Supreme Court and other Circuits that

third-party beneficiary status is an “exceptional privilege” that “should not be

granted liberally.” See Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303, 307

(1927); Sioux Honey Ass’n v. Hartford Fire Ins. Co., 672 F.3d 1041, 1056 (Fed.

Cir.), cert. denied, 133 S. Ct. 126 (2012). The Panel’s standard dramatically eas-

ing the evidentiary burden cannot be reconciled with those precedents.

In addition, the Panel’s standard stands in stark contrast to the heightened

standards for third-party beneficiary status applied by other Circuits in maritime

and other federal common law cases that mirror Doe’s “compelling evidence”


2 See Dravo Corp. v. Robert B. Kerris, Inc., 655 F.2d 503, 511 (3d Cir. 1981) (re-
quiring “clear indication” that parties intended plaintiff to benefit) (emphasis add-
ed); E.I. Dupont de Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermedi-
ates, S.A.S., 269 F.3d 187, 196 (3d Cir. 2001) (intent to benefit third party “must be
a material part of the parties’ purpose” in entering contract) (emphasis added).

4

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standard.3 Indeed, some Circuits have held that there is a presumption that a

stranger to a contract is not a third-party beneficiary, unless it clearly appears from

the contract that such was the parties’ intention.4 Here, the voyage charter was en-

tirely devoid of any such evidence of intent.

The Panel also failed to follow this Court’s holding that in resolving third-

party beneficiary issues, a court must consider the context in which the contract

was written – including the type of contract and industry involved. See Pierce

Assocs., Inc. v. Nemours Found., 865 F.2d 530, 535 (3d Cir. 1988). Here it is well-

established that a vessel owner has no privity of contract with a subcharterer, and is

not a third-party beneficiary of the voyage charter. See Br. for Appellees at 68-70

(Apr. 2, 2012) (“Appellees’ Br.”). The surrounding factual circumstances – in-

cluding that Star and CARCO identified only Star as the “owner” in the voyage

charter and Frescati’s negotiation of a different safe berth clause in its own contract

3 See, e.g., M.F. v. State Exec. Dep’t Div. of Parole, 640 F.3d 491, 496 n.7 (2d Cir.
2011) (following Doe); In re T.L. James & Co., 33 F. App’x 703 (5th Cir. 2002);
Atl. & Gulf Stevedores, Inc. v. Revelle Shipping Agency, Inc., 750 F.2d 457, 459
n.3 (5th Cir. 1985). The Fifth Circuit rejected a third-party beneficiary claim under
general maritime law because “there [was] no contractual language in either the
bill of lading or the charter party evidencing a clear intent” to benefit the third par-
ty. BP Oil Int’l, Ltd. v. Empresa Estatal Petroleos De Ecuador (Petroecuador),
No. 04-20911, 2008 WL 162889, at *3 (5th Cir. Jan. 16, 2008).
4 See, e.g., Retro Television Network, Inc. v. Luken Commc’ns, LLC, 696 F.3d 766,
769 (8th Cir. 2012); Delta Mech., Inc. v. Garden City Grp., Inc., 345 F. App’x 232,
233 (9th Cir. 2009); Asher v. Chase Bank USA, N.A., 310 F. App’x 912, 921 (7th
Cir. 2009); Bariteau v. PNC Fin. Servs. Grp., Inc., 285 F. App’x 218, 220-21 (6th
Cir. 2008).

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with Star – confirm that Frescati was not an intended beneficiary of that contract.

The Panel’s reasoning does not withstand scrutiny. First, its reliance on

Crumady v. The Joachim Hendrik Fisser, 358 U.S. 423 (1959), and Waterman S.S.

Corp. v. Dugan & McNamara, Inc., 364 U.S. 421 (1960), is misplaced. Op. at 24-

25. Both decisions held only that if a shipowner pays damages to a longshoreman

injured because the vessel was “unseaworthy,” the shipowner may obtain indemni-

fication from the longshoreman’s employer (the stevedore) based on the steve-

dore’s implied warranty to perform its services in a workmanlike manner. Here,

there is an express written warranty, and CARCO did not contract with Frescati.

Moreover, those cases are of dubious precedential value, since Congress subse-

quently abolished the shipowner’s right of indemnification recognized therein.5

Second, the Panel incorrectly asserted that unless Frescati is a third-party

beneficiary, Star would receive a “windfall” because it would “collect on

CARCO’s safe berth warranty but not be required to pass on those remedial dollars

to the ship’s ultimate owner.” Op. at 26. Star, however, could not recover damag-

es from CARCO without demonstrating loss, see Coca-Cola Bottling Co. v. Coca-

Cola Co., 988 F.2d 386, 409 (3d Cir. 1993), and is unlikely to be able to do so be-

5 See 33 U.S.C. § 905(b); Scindia Steam Navigation Co. v. De Los Santos, 451 U.S.
156, 164-65 & nn.11-12 (1981). Similarly, Paragon Oil Co. v. Republic Tankers,
S.A., 310 F.2d 169 (2d Cir. 1962), Op. at 24-25, was decided before Congress abol-
ished the shipowner’s right to indemnification. Moreover, the discussion cited by
the Panel was dicta. The alleged third-party beneficiary’s claim was dismissed by
the district court, and the dismissal was not appealed. 310 F.2d at 171.

6

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cause Star has not been required to pay damages to Frescati and has not been

named a “responsible party” under OPA.6 Furthermore, Star’s defenses and reme-

dies are the subject of a pending (but stayed) London arbitration commenced by

Frescati against Star pursuant to their time charter contract. See Op. at 12.7

More fundamentally, the Panel opinion has serious ramifications for all con-

tracts, maritime and otherwise, because a purported third-party beneficiary could

invoke the Panel’s diluted standard in any contract case. By weakening the re-

quirements for third-party beneficiary status, the opinion exposes all contract par-

ties to unintended liability to non-parties. In the maritime industry, which relies

heavily on contracts, the Panel’s opinion will cause substantial uncertainty and will

disrupt commerce, to the detriment of the general public. This issue therefore pre-

sents a question of exceptional importance that warrants rehearing.


6 See Appellees’ Br. at 5, 7-8. Moreover, denying Frescati third-party beneficiary
status does not leave it without a remedy: if Frescati is exonerated of fault for the
oil spill, it can assert a claim to recover its uncompensated costs from the federal
fund. See Op. at 15 n.6. By contrast, the Panel opinion would result in a windfall
to Frescati, because the Panel’s interpretation of the safe berth clause in the voyage
charter is more favorable to Frescati than the due-diligence standard in the same
clause in Frescati’s time charter with Star. Op. at 26 n.10.
7 Given its meritless position, Frescati’s likely motive in claiming third-party bene-
ficiary status is to circumvent its arbitration with Star (where Star’s safe berth
clause promises only due diligence) and obtain a ruling from a U.S. court that the
clause is a guarantee – thereby enabling it to obtain damages from CARCO, with
which it has no contract.



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II. THE PANEL’S HOLDING THAT A CHARTER CONTRACT’S SAFE
BERTH CLAUSE IS A GUARANTEE CONFLICTS WITH THE
RULING OF ANOTHER CIRCUIT.

The Panel acknowledged that the scope of a charterer’s safe berth obligation



presented “a question of first impression in [this] Circuit” and that its ruling on this

question widened an existing circuit conflict because it rejected the view of the

Fifth Circuit. Op. at 27, 32-33. This circumstance alone presents a “question of

exceptional importance” that warrants rehearing en banc. Fed. R. App. P.

35(b)(1)(B). In addition, on a crucial issue of maritime law, the Panel erroneously

imposed unprecedented liability on a charterer that bore no fault for the loss.

The charter contract between Star Tankers and CARCO contains the follow-

ing “safe berth” language, see J.A. 1222, which is standard industry wording:

“[t]he Vessel shall load and discharge at any safe place or wharf, . . .
which shall be designated and procured by the Charterer, provided the
Vessel can proceed thereto, lie at, and depart therefrom always safely
afloat. . . .”


The Second Circuit has long adhered to the view that such a clause guarantees the

safety of the berth: “the charter party [is] itself an express assurance, on which the

master [is] entitled to rely, that at the berth ‘indicated’ the ship would be able to lie

‘always afloat.’” Cities Serv. Transp. Co. v. Gulf Ref. Co., 79 F.2d 521, 521 (2d

Cir. 1935) (per curiam); Park S.S. Co. v. Cities Serv. Oil Co., 188 F.2d 804, 805-06

(2d Cir. 1951); Paragon Oil Co. v. Republic Tankers, S.A., 310 F.2d 169, 173 (2d

Cir. 1962); Venore Transp. Co. v. Oswego Shipping Corp., 498 F.2d 469, 472-73

8

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(2d Cir. 1974) (voyage charterer “had an express obligation to provide a complete-

ly safe berth”) (emphasis added).

The Fifth Circuit rejected this approach in Orduna S.A. v. Zen-Noh Grain

Corp., 913 F.2d 1149, 1156-57 (5th Cir. 1990). After acknowledging the Second

Circuit’s position and discussing criticism of it, the Fifth Circuit found:

[N]o legitimate legal or social policy is furthered by making the char-
terer warrant the safety of the berth it selects. Such a warranty could
discourage the master on the scene from using his best judgment in
determining the safety of the berth. Moreover, avoiding strict liability
does not increase risks because the safe berth clause itself gives the
master the freedom not to take his vessel into an unsafe port.


Id. at 1157. The Fifth Circuit therefore rejected the Second Circuit’s view, which

“impose[s] liability without fault on the charterer,” and held instead that a safe

berth clause merely “imposes upon the charterer a duty of due diligence to select a

safe berth.” Id. at 1156-57.

The district court adopted the Fifth Circuit’s “due diligence” standard, rea-

soning that the Second Circuit’s “unconditional guarantee” approach would

“impos[e] strict liability” upon the charterer. 2011 WL 1436878, at *6. The Panel,

however, expressly “part[ed] from th[e] holding” of the Fifth Circuit and the dis-

trict court, and instead ruled that the safe berth clause “is an express assurance

made without regard to the amount of diligence taken by the charterer.” Op. at 27,

33; id. at 33 n.17 (emphasizing the “strict nature” of the warranty and rejecting the

argument that it “applies only to known hazards”).

9

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The resulting conflict between the Fifth Circuit and this Circuit (and the Se-

cond Circuit before that) on this important issue of maritime law presents a ques-

tion of “exceptional importance.” The issue is a recurring one, since safe berth

clauses are standard provisions in charter contracts. Commentators have noted that

the uncertainty and unfairness of different legal regimes in different Circuits is par-

ticularly detrimental in an area where commercial activity “depend[s] on consistent

application of law.” P. Hartman, Safe Port/Berth Clauses: Warranty or Due Dili-

gence?, 21 Tul. Mar. L. J. 537, 554 (1997) (arguing that charterers with identical

clauses should not be subject to different legal standards and liability with respect

to vessel damage, based on the “twist of fate” of where the litigation occurs).

The Panel’s reasons for rejecting the “due diligence” approach are unsound,

and ignore the onerous and unwarranted liability its ruling would impose upon

charterers. The Panel’s main rationale was that the charterer, as the party that se-

lects the port, is “normally” in a “better position” than the ship master “to appraise

a port’s more subtle dangers.” Op. at 31. Even if this premise were “normally”

correct – a proposition that the Fifth Circuit found unconvincing, Orduna, 913 F.2d

at 1156 – using it as the basis for imposing strict liability on charterers ignores the

facts and circumstances of particular cases, and thereby reduces the incentives of

masters and vessel owners to exercise due care, id. at 1157. It also ignores the

10

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modern sources of information and sophisticated equipment available to navigators

who ultimately determine whether a port is safe.

In addition, as this case starkly illustrates, the Panel’s approach inevitably

results in liability on wholly “innocent” charterers. Julian Cooke et al., Voyage

Charters ¶ 5.129 (3d ed. 2007). CARCO had no knowledge of the abandoned ship

anchor (in a publicly maintained waterway) that caused the casualty. See 2011 WL

1436878, at *2 (finding no evidence that CARCO “knew or had reason to believe

that the anchor was in the river”). Yet under the Panel’s ruling, it could be liable

for millions in damages, even though it exercised due diligence and bears no fault

for the oil spill. The due diligence standard avoids such manifestly unjust results.8

The Panel’s holding that CARCO can be liable under the safe berth clause is

also unprecedented and goes beyond even the Second Circuit’s approach because it

extended the charterer’s safe berth obligation – which is typically invoked to ad-

dress liability for vessel damage – to encompass OPA clean-up costs and damages.

No previous court has interpreted a safe berth clause to render a charterer such as

CARCO liable without fault for OPA removal costs and damages. Moreover, im-

posing this liability on CARCO cannot be squared with OPA because the party at

fault for the casualty was the unknown anchor-dropper and, based on the sole fault

8 The Panel’s assertion that the fact that some safe berth clauses expressly adopt a
due diligence standard “suggests that the understood default is to impose liability
on the charterer without regard to the care taken,” Op. at 32-33, ignores that parties
often adopt contract terms that mirror – rather than change – the common law rule.

11

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of a third-party, Frescati could recover 100% of its damages from the federal fund

(not CARCO). Rehearing en banc should be granted to address the Panel’s un-

precedented extension of the scope of a charterer’s safe berth obligation.9

III. THE PANEL’S HOLDING REGARDING THE SCOPE OF CARCO’S
DUTY TO PROVIDE A SAFE APPROACH TO ITS BERTH PRE-
SENTS A QUESTION OF EXCEPTIONAL IMPORTANCE.



Frescati’s negligence claim alleges that CARCO breached its duty as a wharf

owner under maritime law to provide a safe approach to its berth. Pursuant to this

duty, a wharf owner “is not the guarantor of the vessel’s safety,” but only has a du-

ty to exercise reasonable diligence to furnish a safe berth and “to maintain a safe

approach” such that a vessel can “enter, use and exit a wharfinger’s dock facilities

without being exposed to dangers that cannot be avoided by reasonably prudent

navigation and seamanship.” In re Complaint of Nautilus Motor Tanker Co., 85

F.3d 105, 116 (3d Cir. 1996); see Smith v. Burnett, 173 U.S. 430, 433 (1899). The

wharf owner’s duty extends only to the berth and its approach, and not to “sur-

rounding[]” areas or the general “vicinity.” 85 F.3d at 116; see also Sonat Marine

Inc. v. Belcher Oil Co., 629 F. Supp. 1319, 1326-27 (D.N.J. 1985), aff’d, 787 F.2d

583 (3d Cir. 1986) (duty does not extend to “adjacent areas”).


9 There is no merit to the Panel’s assertion that CARCO’s counsel conceded at oral
argument that the safe berth clause – if applicable – includes the federal anchorage.
Op. at 28 n.11 and 33. CARCO’s counsel correctly acknowledged that “the port
would encompass the anchorage,” Oral Arg. Tr. at 63, but he did not say that the
safe berth clause, which is the clause at issue here, extends to the anchorage.

12

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The district court ruled that the anchorage where the accident occurred –

which is maintained by the federal government and “open for the passage of all

ships” – “was not within the approach to CARCO’s berth.” 2011 WL 1436878, at

*4. The Panel, however, held that the accident did occur within the “approach” by

employing a new “moving target” definition of that term that is entirely dependent

on the route to the berth chosen unilaterally by the vessel, through waters which

the wharf owner does not maintain or control:

[W]hen a ship transitions from its general voyage to a final, direct
path to its destination, it is on an approach. . . . [I]n most instances,
the approach will begin where the ship makes its last significant turn
from the channel toward its appointed destination following the usual
path of ships docking at that terminal.

Op. at 44-45. This unprecedented extension of a berth’s “approach” to include

publicly used and maintained waters warrants rehearing because it presents a ques-

tion of exceptional importance under federal maritime law.

The Panel stated that the geographic scope of a wharf owner’s duty has been

“largely unaddressed” by courts and that the basis for its new standard was a “sug-

gestion” in an amicus brief. Op. at 42, 44. The Panel’s standard has no support in

federal regulations or custom, and is contrary to decisions of courts that have re-

fused to extend a wharf owner’s duty to waters that they do not maintain or con-

trol, including a district court in this Circuit, in an opinion affirmed by this Court.

In re Complaint of Nautilus Motor Tanker Co., 862 F. Supp. 1260, 1275-76 (D.N.J.

13

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1994) (wharf owner did not violate duty where ship grounded approximately 125

feet from ship berth, because this was a “surrounding area for which [the wharf

owner] was not responsible”), aff’d, 85 F.3d 105; see also Osprey Ship Mgmt., Inc.

v. Jackson County Port Auth., No. 05-390, 2007 WL 4287701, at *11 (S.D. Miss.

Dec. 4, 2007), aff’d sub. nom. 387 F. App’x 425 (5th Cir. 2010) (wharf owner’s

duty did not extend to area of river over which it had “no jurisdiction”); W. Bulk

Carriers, K.S. v. United States, 1999 A.M.C. 2818 (E.D. Cal. 1999) (approach did

not include channel maintained by U.S., even though vessel had to cross it to reach

berth).10

The Panel’s newly-minted rule extending the wharf owner’s duty to the

“usual path” of navigation, including transit through federal project waters, impos-

es unprecedented liability and will give rise to confusion and litigation. The “path”

to a wharf is a decision within the sole province of a vessel’s navigators and local

pilots, and it varies from ship to ship based on the tides, currents, winds and num-

ber of assisting tugboats. There is no “usual path,” and a wharf owner cannot pre-

dict or control navigational decisions, including when a vessel takes its “last signif-

icant turn” or is “on an approach.” By defining a wharf owner’s duty in terms of

10 The Panel’s sole authority for the proposition that lack of control is not disposi-
tive is the appeal decision in The Moorcock, L.R. 14 P.D. 64 (Eng. 1889), see Op.
at 46-48, but that decision expressly disclaims that a wharf owner can be held lia-
ble for waters beyond its control. 14 P.D. at 70 (“I do not wish it to be understood
that I at all consider this is a case of a duty on the part of the [owners of the jetty]
to see that the access to the jetty is kept clear.”).

14

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third parties’ navigational choices, rather than a fixed geographical area, the Pan-

el’s inherently uncertain approach puts wharf owners at the peril of trying to pre-

dict what a court will determine to be the “usual path.” The Panel’s acknowledg-

ment that “there will be close and difficult cases” is a gross understatement. See

Op. at 45. All cases will become close and difficult.

Moreover, by imposing on wharf owners an affirmative duty to locate and

remove hidden obstructions in their now expansively-defined approaches, the Pan-

el has placed a costly, onerous and amorphous burden on wharf owners. It is whol-

ly unknowable what types of survey techniques and methods will satisfy a wharf

owner’s duty, how often surveys must be undertaken, or how wharf owners are

supposed to coordinate their responsibilities in publicly-used waterways. In this

case, for example, 31 other terminals operate along the river, and vessels arriving

at other terminals sail through, and anchor in, the federal anchorage. The confu-

sion and burdens created by the Panel’s standard present a question of exceptional

importance that warrants rehearing.

The petition for rehearing or rehearing en banc should be granted.

CONCLUSION



15

Case: 11-2576 Document: 003111310875 Page: 23 Date Filed: 07/01/2013

Respectfully submitted,















/s/ Carter G. Phillips



Attorneys for Appellees CITGO Asphalt Refining Company, CITGO Petroleum

Corporation, and CITGO East Coast Oil Corporation










Derek A. Walker
J. Dwight LeBlanc, Jr.
Douglas L. Grundmeyer
CHAFFE McCALL, L.L.P.
2300 Energy Centre
1100 Poydras Street
New Orleans, Louisiana 70163
(504) 585-7000

Richard Q. Whelan
Frank P. DeGiulio
PALMER, BIEZUP & HENDERSON
LLP
190 N. Independence Mall West
Suite 401
Philadelphia, PA 19106
(215) 625-9900






Carter G. Phillips
Jacqueline G. Cooper
Richard E. Young
SIDLEY AUSTIN LLP
1501 K Street, N.W.
Washington, D.C. 20005
(202) 736-8000







16

Case: 11-2576 Document: 003111310875 Page: 24 Date Filed: 07/01/2013



CERTIFICATE OF SERVICE



I hereby certify that on the date listed below I electronically filed the forego-
ing with the Court using the CM/ECF system, which sent notification of such filing
to the following counsel:

Jack A. Greenbaum
John D. Kimball
Blank Rome LLP
405 Lexington Avenue
The Chrysler Building
New York, NY 10174-0000
Email: [email protected]
Email: [email protected]

Alfred J. Kuffler
Montgomery, McCracken, Walker
& Rhoads, LLC
123 South Broad Street, 28th Floor
Philadelphia, PA 19109-0000
Email: [email protected]

John J. Levy
Montgomery, McCracken, Walker
& Rhoads, LLC
457 Haddonfield Road
Liberty View, 6th Floor, Suite 600
Cherry Hill, NJ 08002-0000
Email: [email protected]

Matthew M. Collette
United States Department of Justice
Civil Division, Room 7212
950 Pennsylvania Avenue, N.W.
Washington, D.C. 20530-0000
Email: [email protected]

Anne Murphy
United States Department of Justice
Appellate Section

17

Case: 11-2576 Document: 003111310875 Page: 25 Date Filed: 07/01/2013



In addition, the following counsel were served by the means indicated:

Civil Division, Room 7644
950 Pennsylvania Avenue, N.W.
Washington, D.C. 20530-0000
Email: [email protected]

William J. Honan
Holland & Knight LLP
31 West 52nd Street
New York, NY 10019
Email: [email protected]

George R. Zacharkow
Mattioni Limited
399 Market Street, Suite 200
Philadelphia, PA 19106
Email: [email protected]



George M. Chalos (U.S. Mail)
Chalos & Co.
55 Hamilton Avenue
Oyster Bay, NY 11771

Eugene J. O’Connor (Email)
Chalos O’Connor
366 Main Street
Port Washington, NY 11050
Email: [email protected]

Timothy J. Bergere (Email)
Montgomery, McCracken, Walker
& Rhoads, LLC
123 South Broad Street, 28th Floor
Philadelphia, PA 19109-0000
Email: [email protected]





18

Case: 11-2576 Document: 003111310875 Page: 26 Date Filed: 07/01/2013




July 1, 2013
















































/s/ Carter G. Phillips
Carter G. Phillips
SIDLEY AUSTIN LLP
1501 K Street, N.W.
Washington, DC 20005
(202) 736-8000

Counsel for Appellees

19

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ADDENDUM



Case: 11-2576 Document: 003111263228 Page: 1 Date Filed: 05/16/2013
Case: 11-2576 Document: 003111310875 Page: 28 Date Filed: 07/01/2013

PRECEDENTIAL


UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

________________



No. 11-2576

________________



IN RE: PETITION OF FRESCATI SHIPPING
COMPANY, LTD., AS OWNER OF THE M/T

ATHOS I AND TSAKOS SHIPPING & TRADING, S.A.,
AS MANAGER OF THE ATHOS I FOR EXONERATION

FROM OR LIMITATION OF LIABILITY








________________

No. 11-2577

________________



UNITED STATES OF AMERICA,













Appellant





v.


CITGO ASPHALT REFINING COMPANY; CITGO

PETROLEUM CORPORATION;

CITGO EAST COAST OIL CORPORATION

________________

Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D.C. Civil Action Nos. 2-05-cv-00305 / 2-08-cv-02898)

Case: 11-2576 Document: 003111263228 Page: 2 Date Filed: 05/16/2013
Case: 11-2576 Document: 003111310875 Page: 29 Date Filed: 07/01/2013

Trial District Judge: Honorable John P. Fullam

District Judge: Honorable Joel H. Slomsky?

________________



Argued September 20, 2012




Before: AMBRO, GREENAWAY, Jr.,

and O‘MALLEY,?? Circuit Judges



(Opinion Filed: May 16, 2013)



Amelia Carolla, Esquire
Reisman, Carolla & Gran
19 Chestnut Street
Haddonfield, NJ 08033

Stacy A. Fols, Esquire
R. Monica Hennessy, Esquire
Melanie A. Leney, Esquire
John J. Levy, Esquire
Montgomery, McCracken, Walker & Rhoads
457 Haddonfield Road
Liberty View, 6th Floor, Suite 600
Cherry Hill, NJ 08002



? Judge Slomsky was assigned to this matter following the
retirement of Judge Fullam, who presided at trial and ruled on the
merits.

?? Honorable Kathleen M. O‘Malley, United States Court of
Appeals for the Federal Circuit, sitting by designation.

2


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Case: 11-2576 Document: 003111310875 Page: 30 Date Filed: 07/01/2013

Leona John, Esquire
Alfred J. Kuffler, Esquire
John G. Papianou, Esquire
Tricia J. Sadd, Esquire
Timothy J. Bergere, Esquire
Montgomery, McCracken, Walker & Rhoads
123 South Broad Street, 28th Floor
Philadelphia, PA 19109

Jack A. Greenbaum, Esquire (Argued)
John D. Kimball, Esquire
Blank Rome
405 Lexington Avenue
The Chrysler Building
New York, NY 10174

Eugene J. O‘Connor, Esquire
George M. Chalos, Esquire
Chalos, O‘Connor and Duffy
366 Main Street
Port Washington, NY 11050




Counsel for Appellants
Frescati Shipping Company, Ltd.
Tsakos Shipping & Trading, S.A.


Tony West
Assistant Attorney General
Zane David Memeger
United States Attorney
Matthew M. Collette, Esquire
Anne Murphy, Esquire (Argued)
United States Department of Justice

3


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Case: 11-2576 Document: 003111310875 Page: 31 Date Filed: 07/01/2013

Counsel for Appellant
United States of America

Appellate Section, Civil Division
950 Pennsylvania Avenue, N.W.
Washington, DC 20530

Stephen G. Flynn, Esquire
Sarah S. Keast, Esquire
Sharon Shutler, Esquire
United States Department of Justice
Torts Branch, Civil Division
P.O. Box 14271
Washington, DC 20044-4271




Frank P. DeGiulio, Esquire
Charles P. Neely, Esquire
Kevin G. O‘Donovan, Esquire
Richard Q. Whelan, Esquire (Argued)
Palmer, Biezup & Henderson
190 North Independence Mall West, Suite 401
Philadelphia, PA 19106

Michael B. McCauley, Esquire
Palmer, Biezup & Henderson
1223 Foulk Road
Wilmington, DE 19803

Robert B. Fisher, Jr., Esquire
Thomas D. Forbes, Esquire
Douglas L. Grundmeyer, Esquire
J. Dwight LeBlanc, Jr., Esquire
Jonathan C. McCall, Esquire

4


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Case: 11-2576 Document: 003111310875 Page: 32 Date Filed: 07/01/2013

Ivan M. Rodriguez, Esquire
Derek A. Walker, Esquire
Charles P. Blanchard, Esquire
John L. Robert, III, Esquire
Daniel A. Tadros, Esquire
Chaffe McCall
1100 Poydras Street
2300 Energy Centre
New Orleans, LA 70163






William J. Honan, Esquire
Chester D. Hooper, Esquire
Lissa D. Schaupp, Esquire
K. Blythe Daly, Esquire
F. Robert Denig, Esquire
Holland & Knight
31 West 52nd Street
New York, NY 10019



George R. Zacharkow, Esquire
Mattioni Limited
399 Market Street, Suite 200
Philadelphia, PA 19106




Counsel for Amici Appellees

Counsel For Appellees
Citgo Asphalt Refining Company
Citgo Petroleum Corporation
Citgo East Coast Oil Corporation

Counsel for Amici Appellants

5


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Case: 11-2576 Document: 003111310875 Page: 33 Date Filed: 07/01/2013

________________



OPINION OF THE COURT

________________


AMBRO, Circuit Judge

Table of Contents

Factual and Procedural Background ........................................ 9
I.
A. The Tanker and Its Charters .......................................... 9

B. The Accident ................................................................ 12

C. The Cost of the Accident ............................................. 14

D. Control of the Waters .................................................. 15


E. The District Court Proceedings ................................... 18
II. Jurisdiction and Standard of Review ..................................... 20
III. Rule 52 ................................................................................... 21
IV. The Contractual Safe Berth Warranty ................................... 22

A. Was Frescati a Third-Party Beneficiary of the Safe
Berth Warranty? ......................................................... 23

B. The Scope of the Safe Berth Warranty ....................... 27

C. Was the Safe Berth Warranty Breached? ................... 33

D. The Named Port Exception ......................................... 37
V. The Tort Claims .................................................................... 40
A. Negligence .................................................................. 41


i. The Scope of the Approach ............................... 42
ii. Was the Athos I Within the Approach to

Occurred? ........................................................... 46
iii. Potential Breach of Duty to Maintain a Safe
Approach ............................................................ 48
iv. Causation ........................................................... 50


B. Negligent Misrepresentation ....................................... 52

CARCO‘s Terminal When the Accident

6


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VI. Effect of the Government‘s Settlement With CARCO ......... 54
VII. Conclusion ............................................................................ 56
Appendix A ........................................................................... 58


As the oil tanker M/T Athos I neared Paulsboro, New Jersey,
after a journey from Venezuela, an abandoned ship anchor lay
hidden on the bottom of the Delaware River squarely within the
Athos I‘s path and only 900 feet away from its berth. Although
dozens of ships had docked since the anchor was deposited in the
River, none had reported encountering it. The Athos I struck the
anchor, which punctured the ship‘s hull and caused approximately
263,000 gallons of crude oil to spill into the River. The cleanup
following the casualty was successful, but expensive.

This appeal

is

three

the result of

interested parties
attempting to apportion the monetary liability. The first party
(actually two entities consolidated as one for our purposes)
includes the Athos I‘s owner, Frescati Shipping Company, Ltd., and
its manager, Tsakos Shipping & Trading, S.A. (jointly and
severally, ?Frescati?). Although Frescati states that the spill caused
it to pay out $180 million in cleanup costs and ship damages, it was
reimbursed for nearly $88 million of that amount by the United
States (the ?Government?)—the second interested party—pursuant
to the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq. In order
to recoup the unreimbursed losses, Frescati made claims in contract
and tort against the third interested party—a set of affiliates known
as CITGO Asphalt Refining Company, CITGO Petroleum
Corporation, and CITGO East Coast Oil Corporation (jointly and
severally, ?CARCO?)—which requested the oil shipped on the
Athos I and owned the marine terminal where it was to dock to
unload its oil. Specifically, Frescati brought a contract claim for
CARCO‘s alleged breach of the safe port/safe berth warranty
(jointly and severally, ?safe berth warranty?) it made to an
intermediary—Star Tankers, Inc.—responsible for chartering the
Athos I to CARCO‘s port, and alleged negligence and negligent

7


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Case: 11-2576 Document: 003111310875 Page: 35 Date Filed: 07/01/2013

misrepresentation against CARCO as the owner of the wharf the
Athos I was nearing when it was holed. The Government, as a
statutory subrogee that stepped into Frescati‘s position for the $88
million it reimbursed to Frescati under the Oil Pollution Act, has
limited its claim for reimbursement from CARCO to Frescati‘s
contractual claim pursuant to a limited settlement agreement.


Following a 41-day bench trial, the District Court for the
Eastern District of Pennsylvania held that CARCO was not liable
for the accident under any of these theories. The Court, however,
made no separate findings of fact and conclusions of law as
required by Federal Rule of Civil