American Steamship Owners Mutual Protection and Indemnity Association, Inc. v. United States of America

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

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AMERICAN STEAMSHIP OWNERS MUTUAL

PROTECTION AND INDEMNITY

ASSOCIATION, INC., AS SUBROGEE OF

BOSTON MARINE TRANSPORT, INC.,

MEMORANDUM & ORDER

Plaintiff,

18-CV-02652 (KAM)(ST)

-against-

UNITED STATES OF AMERICA, U.S.

DEPARTMENT OF HOMELAND SECURITY,

U.S. COAST GUARD AND U.S. COAST

GUARD NATIONAL POLLUTION FUNDS

CENTER,

Defendants.

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MATSUMOTO, United States District Judge:

Before the court are cross-motions for summary

judgment by plaintiff American Steamship Owners Mutual

Protection and Indemnity Association, Inc. (“American Club” or

“Plaintiff”), as subrogee of Boston Marine Transport, Inc.

(“BMT”), and Defendants, United States of America, United States

Department of Homeland Security (“DHS”), United States Coast

Guard (“Coast Guard”), and U.S. Coast Guard National Pollution

Funds Center (“NFPC”). Plaintiff seeks judicial review, under

the Administrative Procedures Act (“APA”), 5 U.S.C. § 701, et

seq., of NFPC’s final agency actions denying American Club’s

claim for reimbursement of alleged oil spill damages under the

Oil Pollution Act of 1990 (“OPA”).

BACKGROUND

I. Regulatory Framework

A. The Oil Pollution Act of 1990

The OPA is the primary federal legislation addressing

oil spills into navigable waters of the United States and onto

its shorelines. Enacted in the wake of the Exxon Valdez oil

spill, the OPA amended the Clean Water Act and addressed the

wide range of issues associated with preventing, responding to,

and paying for oil pollution incidents. See 33 U.S.C. §§ 2701-

2761. The OPA imposes an effective maritime oil spill regime by

establishing “uniform and predictable rules that encourage

prevention, quick cleanup, and reasonable compensation.” Steven

R. Swanson, Opa 90 + 10: The Oil Pollution Act of 1990 After Ten

Years, 32 J. Mar. L. & Com. 135 (2001); see also S. Rep. No.

101-94, at 2-3 (1989).

B. Responsible Parties

Under the OPA, the Coast Guard must immediately be

notified of an oil spill and is responsible for taking charge of

cleanup operations. The Coast Guard designates the source of

the discharge, known as the “responsible party,” or “RP.” 33

U.S.C. § 2714(a). If the source of discharge was a vessel, the

responsible party is generally the vessel’s owner or operator.

Id. § 2701(32). Responsible parties are generally liable for

removal costs and damages resulting from the spill, up to

applicable limits of liability. Id. § 2704; see In re Settoon

Towing Co., 859 F.3d 340, 344 (5th Cir. 2017) (RPs are “strictly

liable for cleanup costs and damages and first in line to pay

any claims for removal costs or damages that may arise under

OPA.”) (citations and internal quotation marks omitted).

A responsible party’s liability is capped at a dollar

limit based on the gross tonnage of the RP’s vessel. 33 U.S.C.

§ 2704(a)(1-2). If the cleanup costs exceed the statutory

limit, the responsible party can seek to have those excess costs

reimbursed by the Oil Spill Liability Trust Fund (“Fund”). Id.

§§ 2708, 2713.

C. The Oil Spill Liability Trust Fund

The National Pollution Funds Center (“NPFC”) was

commissioned in 1991 to implement Title I of the OPA, 33 U.S.C.

§§ 2701-2720. Among other duties, NPFC is responsible for

administering the Fund. See id. § 2712, 26 U.S.C. § 9509. The

Fund is a pillar of the OPA framework.1 One of its core purposes

is to pay claims by any person or organization that has incurred

uncompensated removals costs2 or suffered damages from an oil

spill. 33 U.S.C. § 2712(a). In addition to paying claims for

1 In the past, the Fund has been financed by a per-barrel excise tax

collected on petroleum produced in or imported to the United States.

2 “Removal costs” are defined as “costs of removal that are incurred

after a discharge of oil has occurred or, in any case in which there is a

substantial threat of a discharge of oil, the costs to prevent, minimize, or

mitigate oil pollution from such an incident.” 33 U.S.C. § 2701(31).

uncompensated removal costs and damages, the OPA enumerates five

other types of expenses that the Fund may pay for: (1) oil

removal consistent with the National Contingency Plan; (2)

damages to natural resources; (3) cleanup following a discharge

from a foreign offshore unit; (4) federal administrative costs

necessary for enforcing OPA; and (5) loans to assist fishermen.

Id. § 2712.

D. Compensable Claims

The OPA defines a “claim” as “a request, made in

writing for a sum certain, for compensation for damages or

removal costs resulting from an incident.” 33 U.S.C. § 2701(3).

Under limited circumstances, the Fund may reimburse a claim

submitted by a responsible party for its uncompensated removal

costs and damages. Id. § 2713(b)(1)(B). A responsible party

must demonstrate that either an absolute defense or limited

liability applies before the Fund can reimburse removal costs or

damages. Id. § 2708(a). Moreover, the responsible party’s

recovery is limited to the extent its total removal costs and

damages, plus the amounts paid to third parties for claims

asserted under 33 U.S.C. § 2713, exceeds the statutory cap on

the responsible party’s liability. Id. § 2708(b).

The OPA also limits the types of damages for which a

claimant or responsible party may seek compensation. Pursuant

to 33 U.S.C. § 2702(b), damages are: (1) injuries to natural

resources; (2) injuries to or economic losses from the

destruction of real or personal property; (3) losses of

subsistence use of natural resources; (4) Government losses of

revenues; (5) losses of profits or earning capacity as a result

of loss or destruction of real or personal property or natural

resources; and (6) costs of increased public services. 33 U.S.C.

§2702(b). In addition, 33 U.S.C. § 2701(5) clarifies that the

damages specified in § 2702(b) include, “the cost of assessing

these damages.”

Individuals and entities harmed by an oil spill may

file claims against the responsible party for damages. However,

to promote settlement and avoid litigation, the OPA establishes

specific procedures, which claimants must follow. Generally,

third-party individuals or businesses injured by an oil spill

must first present their claims to the responsible party, 33

U.S.C. § 2713(a). To facilitate third-party claims

adjudications, the OPA requires the responsible party to

advertise its designation as the RP, and the procedures by which

damages claims may be presented to it. Id. § 2714(b); 33 C.F.R.

§§ 136.309–136.313. Once the responsible party pays the third-

party claimant, the responsible party may seek reimbursement

from the Fund as permitted by 33 U.S.C. §§ 2708(b) and

2713(b)(1)(B), and in the manner prescribed by applicable

regulations. Under such circumstances, the responsible party,

as a subrogee, stands in the shoes of the third-party claimant

and accedes to the third party’s rights.

E. Claim Procedures

NPFC is responsible for adjudicating claims made to

the Fund. The specific manner of making claims to the Fund and

making payments from the Fund are set forth in 33 C.F.R. Part

136, “Oil Spill Liability Trust Fund; Claims Procedures;

Designation of Source; and Advertisement” (“Claims

Regulations”); see also 33 U.S.C. § 2712(e)(1) (“The President

shall . . . publish proposed regulations detailing the manner in

which the authority to obligate the Fund . . . shall be

exercised.”); id. § 2713(e) (“The President shall promulgate . .

. regulations for the presentation, filing, processing,

settlement, and adjudication of claims under this Act against

the Fund.”).

Each claim must be in writing for a “sum certain for

each category of uncompensated damages or removal costs []

resulting from the incident.” 33 C.F.R. § 136.105(b). The

Claims Regulations further specify that each claim must include,

at a minimum:

A general description of the nature and extent of the

impact of the incident, the costs associated with

removal actions, and damages claimed, by category as

delineated in Subpart C of this part, including, for

any property, equipment, or similar item damaged, the

full name, street and mailing address, and telephone

number of the actual owner, if other than the

claimant.

(Id. § 136.105(e)(4).) Each claim must also state “[t]he

reasonable costs incurred by the claimant in assessing the

damages claimed.” Id. § 136.105(e)(8). This “includes the

reasonable costs of estimating the damages claimed, but not

attorney’s fees or other administrative costs associated with

preparation of the claim.” Id. Additionally, a claimant must

provide any other information that NPFC deems “relevant and

necessary to properly process the claim for payment.” Id. §

136.105(e)(13). If NPFC initially denies a claim, a claimant

may seek reconsideration. Id. § 136.115(d).

II. The Administrative Record

A. The Oil Spill and Removal

Shortly before midnight, on December 13, 2012, BMT’s

single-hulled tank barge, Boston No. 30 (“BOSTON 30”), arrived

at the New York Terminal in Elizabeth, NJ, where it began

loading over 20,000 barrels of fuel oil from the facility.

(Administrative Record (“AR”), US013607.)3 Loading was completed

late on the morning of December 14. (Id.) Hours later, a

3 In a case under the Administrative Procedure Act (“APA”), the

Administrative Record sets forth the universe of relevant material facts

reviewable by a court. See generally Nat. Res. Def. Council, Inc. v.

Muszynski, 268 F.3d 91, 97 (2d Cir. 2001) (review is “limited to examining

the administrative record”). Defendants provided the court and Plaintiff

with courtesy copies of the Administrative Record, which, due to file size

constraints, was not filed on the electronic docket. Citations to the

Administrative Record are captioned herein with the Bates prefix “US___.”

tugboat towed BOSTON 30 through the Arthur Kill Waterway and

Kill Van Kull Waterway to the Mayship Repair Contracting Corp.

(“Mayship Repair” or “Mayship”) shipyard in Staten Island.

(Id.)

That evening, shortly after BOSTON 30 commenced

transferring oil to another barge, a crewmember noticed oil in

the water between the two vessels. (US013607.) Crews of both

vessels immediately halted the oil transfer. (Id.) A sorbent

boom was placed around both barges. (Id.)4 The National

Response Center (“NRC”)5 was notified about the potential spill,

but tank soundings onboard both ships did not immediately reveal

the spill’s source. (Id.) Around midnight the next day, BOSTON

30 resumed the oil transfer, but ceased operations soon

thereafter, once more oil was discovered in the water between

the two barges. (Id.) In all, the BOSTON 30 released

approximately 30,000 gallons of oil into the water. (Id.)

Major oil response activities commenced immediately.

(US000699.) Meredith Management Group (“Meredith Management” or

“Meredith”) was engaged to supply personnel for incident

management services. (Id.) Clean Harbors Environmental and

4 A sorbent boom is a selective absorbent that soaks up oil, but not

water. It is used to surround oil spills and sheens on top of water sources

to prevent further contamination.

5 The NRC is the designated federal point of contact for reporting all

oil discharges into the environment, anywhere in the United States and its

territories, and is staffed by the USCG.

Clean Harbors Cooperative were also hired to provide additional

oil spill response personnel and related services. (Id.) The

majority of oil spill removal operations ended on January 4,

2013, but additional monitoring and maintenance were needed to

deal with oil staining on the piers, bulkheads, and shorelines

of Mayship. (US000700.) By the week of May 1, 2013, the Coast

Guard, New York State Department of Environmental Conservation,

and BMT agreed that all of the oil had been removed from

surrounding areas—the cleanup was therefore complete. The Coast

Guard’s investigation disclosed that the source of the spill was

a rupture in the hull of BOSTON 30, which occurred in transit

between the New York Terminal and Mayship Repair’s shipyard.

(US000699.)

B. Responsible Party and Vendors

BMT accepted designation as a responsible party under

the OPA, 33 U.S.C. § 2714, for the December 2012 oil spill.

(US000702.) BMT’s subrogated primary insurer was Great American

Insurance Company of New York (“Great American”). (US012617)

Plaintiff, American Club, insured BMT pursuant to an excess

coverage policy. (Id.) After the spill, BMT and its subrogated

insurers, including Plaintiff (collectively, “Claimants”),

undertook cleanup efforts and retained vendors to resolve third-

party damage claims. Among them, Claimants retained Meredith

Management to provide personnel, equipment, and material for

incident management, including cleanup response and claims

management. (US012622.) Meredith, in turn, hired Global Risk

Solutions (“GRS”) to “[p]rovide personnel, equipment and

materials to administer third-party claims as directed by

[Meredith] and the American Club.” (US009517.)

GRS’s mission was two-fold. First, GRS determined the

area impacted by the discharge and investigated and estimated

the type and quantity of damage claims that could be expected.

(US012619.) Second, GRS assessed and initiated settlement of

the individual damages claims. (Id.) GRS employees were paid

for services pursuant to an “agreed rate schedule,” which varied

according to the employee’s position. (US009518.) The GRS team

assigned to the BMT spill included an office manager, a home

office executive, a project manager, a technical/IT supervisor

to handle IT support and databases, two telephone operators to

answer the toll-free calls and information line, and three

adjusters/assessors. (US012619-20.) Claimants paid GRS

$1,296,924.32 for its services (“GRS Payment”). (US012618.)

C. Claims Process

On December 11, 2015, with the spill remediated and

third-party claims resolved, BMT and its insurers submitted a

claim to the Fund, pursuant to 33 U.S.C. § 2708, seeking to

avoid or limit their liability for the spill under the OPA.

(US000001-687 (“Original Claim”).) On March 23, 2017, NFPC

denied Claimants’ request for a full reimbursement from the

Fund, exceeding $17 million in removal costs and third-party

property damages, and rejected Claimants’ assertions of absolute

defenses from liability. (US000688-716 (“Original Decision”).)

On the other hand, NFPC found Claimants were entitled to limited

liability under 33 U.S.C. § 2704(a), because BMT timely accepted

responsibility for the oil spill, while cooperating with and

assisting removal operations. (Original Decision 24.) NPFC

held that Claimants were entitled to reimbursement of

$8,352,718.14 in removal costs from the Fund, over and above

their liability limit. (Id. 25-26.)6

After the Original Decision, NPFC continued to

adjudicate the removal costs and damages claims submitted to the

Fund for reimbursement. Notably, NPFC reserved decision on

whether certain third-party damages that Claimants paid, and now

sought compensation for, were eligible for reimbursement by the

Fund. (Original Decision 4.) In addition to removal costs,

Claimants sought reimbursement from the Fund for sums paid to 77

third-party claimants for incident-related damages. (See

US006871-9516.) Claimants paid these sums to resolve claims by

recreational boat owners for damages from the spill, such as oil

stains to their boats, floats, and lines. (Id.) NPFC found 43

6 The NFPC reimbursed Claimants based on their total asserted removal

costs of $15,190,226, less the limit of liability applicable to BOSTON 30,

$6,408,000, minus an additional $429,508.69 of claimed costs ineligible for

compensation. (Id. 27.)

third-party claim payments were OPA-compensable and reimbursed

the Claimants accordingly. (US012621.)

Claimants also sought reimbursement for amounts paid

to Dan Belson, a Marine Surveyor, who inspected vessel damages

for 47 third-party boats (“Belson Demand”). The NFPC awarded

Claimants with a $13,905 reimbursement from the Fund, including

for Belson’s assessment of injuries to the third parties’

property. (US009508-16 (“Belson Decision”).) NFPC determined

that “Capt. Belson’s job was damage assessment,” because his

costs comprised estimation of damages to vessels owned by third

parties, including inspecting vessels for damages and providing

a report of those inspections. (Belson Decision 6.) Captain

Belson’s inspections, in turn, “included identification of the

damages, repair valuations and photographs of the damages.”

(Id. 6-7.) Moreover, Captain Belson “personally visited local

marinas to inspect each claimant’s boat and assess the damage,”

gauge the extent of oil-related damage, the repairs needed to

restore the boat to its pre-spill condition, disentangle any

damages not caused by the spill, and thus extricate any non-

compensable third-party damages claims. (Id. 5-6.) NFPC

therefore determined the Belson Demand was almost entirely

reimbursable, given Claimants’ thorough documentation of Captain

Belson’s invoices, including linking Belson’s costs to specific

claims. (See generally Belson Decision.)

D. The GRS Decision

1. The GRS Demand

Claimants sought reimbursement for the $1,296,924.32

GRS Payment from the Fund (“GRS Demand”). GRS assisted

Claimants with adjudicating claims made by third parties against

BMT as a result of the oil spill. (US012618.) The purchase

order for GRS’s services states that Meredith Management

retained GRS, on behalf of BMT, to “[p]rovide personnel,

equipment and materials to administer third-party claims . . .

.” (US012607; US009517.) After its initial review of the GRS

Demand, NPFC requested additional corroboration of the “work

performed by each GRS employee each day,” including a “detailed,

hourly breakdown” of each employee’s activity. (US012447; see

also US012619.) On April 27, 2017, Claimants responded with

additional documentation for the GRS Payment, including an

Affidavit in Support by Adam Gutman, Office Supervisor for GRS

during the BOSTON 30 project. (US012619; see also US012440-45

(“Gutman Aff.”).)

In his affidavit, Mr. Gutman described GRS’s two-phase

approach to the project that Meredith Management engaged the

firm to perform. In the initial phase, GRS performed a damages

assessment and exposure analysis by canvassing and investigating

the area impacted by the oil spill. (Gutman Aff. ¶ 4.) GRS’s

primary goal in this phase was to analyze and estimate the type

and quantity of damage claims that third parties could be

expected to submit. (Id.) Once GRS’s team was assembled, the

second phase involved assessing the individual third-party

property damage claims, and “amicably resolving those claims”

with the third parties. (Id.) Mr. Gutman explained that GRS

maintained “Daily Reports/Work Logs” setting forth each

employee’s daily work hours, as well as “a general activity

description for the work performed.” (Id. ¶ 5.) “[F]or the

benefit of the Fund,” Mr. Gutman also provided a more detailed

description of the work completed by each employee during the

project, “so that the Fund can confirm that the work performed

by the GRS professionals involved the assessment of, or was

completed in furtherance of the assessment of, third party

property damage claims.” (Id.)7

The Gutman Affidavit also attached an Excel

spreadsheet setting forth details about the individual third-

party property claims. (US012448.) The spreadsheet identified

the GRS adjuster/assessor assigned to each individual property

damage claim, and contained an activity log with specific

activity notes for each claim, listed by date and claim number.

(Id.) The affidavit also attached field note excerpts for two

7 For example, Mr. Gutman stated that Tony Satira, GRS’s Project Manager,

was “responsible for the overall management and direction of the Project

Team,” was “deeply involved in the first phase of the project, involving the

initial assessment and analysis of the impacted area, and assessing the

likely liability exposure from the oil spill.” (Id. ¶ 8.)

adjusters/assessors, Charles LaBella and Peter Townsend. (Id.)

Claimants’ counsel insisted to NPFC that the supplemental

documentation “readily demonstrate[d] that the work performed by

GRS concerned assessment of third party damage claims.” (Id.)

2. Initial Decision

On May 5, 2017, NPFC preliminarily denied the GRS

Demand. (US012604-12 (“Initial GRS Decision”).) NPFC

concluded, based on the description of GRS’s work in purchase

orders and invoices, that GRS’s costs for administering a third-

party claims program, including travel and living expenses for

employees to manage the claims process, constituted non-

reimbursable administrative costs. (Id. 5-6.) Even though

damage assessment costs may be reimbursable for valid, paid

claims under §§ 2701(5) and 2702(b) of the OPA, NPFC ascertained

“no authority for reimbursing costs associated with

administering a claims process and adjudicating claims.” (Id.

6.) Here, NPFC found the claimed costs were “expenses incurred

by the responsible parties when they retained GRS for

establishing a claims program.” (Id.)

The NPFC Claim Supervisor (hereinafter,

“Adjudicator”), detailed additional impediments to reimbursing

Claimants for the GRS Demand. Chief among them, was

insufficient documentation of GRS’s compensable time and

activities. The Adjudicator explained that, even if GRS’s

damage assessment activities fell within the definition of

damages, the record was “insufficient for the NPFC to determine

to what extent the GRS services were attributable to damage

assessment for properly paid claims versus other non-compensable

activities, such as claims administration, adjudication,

management and settlement, which are not compensable.” (Initial

GRS Decision 8.) Here, the costs of “running an entire program

to assess potential liability for an RP and handle all potential

claims and actual claims,” did not, in NPFC’s view, constitute

“reasonable” costs of assessing claimed damages. (Id.) The

Adjudicator further noted that the two GRS adjusters who

personally visited local marinas to inspect third-party boats

and dockside personal property for damages, were merely

verifying the damage assessments that Captain Belson performed.

(Id. 6-7.)

In addition, the Adjudicator noted the daily activity

reports accompanying the GRS Payment invoices were “very general

and provide few details of the work performed.” (Id. 7; e.g.,

US009626 (Daily Activity Report for Charles LaBella, dated Dec.

29, 2012 (“Resume Assessment of Potential Liability exposure in

the vicinity as a result of the Oil Spill. Report to Command

Post located at Marriott – Newark.”)).) The Adjudicator also

found Claimants’ supplemental production deficient. By and

large, Peter Townsend and Charles LaBella’s notes related to

claims administration or reports of oil removal operations, and

did not show how much time was spent on each activity. (Initial

GRS Decision 7-8.) Some of the notes also represented work

related to claims that were not submitted to NPFC for

reimbursement. (Id. 8.) And although the spreadsheet attached

to the Gutman Affidavit provided “better details of the work

performed,” it did not provide the time spent on each activity

and reinforced the predominantly administrative nature of GRS’s

work. (Id.)

3. Application for Reconsideration

On June 2, 2017, Claimants requested reconsideration

of the Initial Decision. (US012620.) In a letter dated July

18, 2017, Claimants asserted that NPFC erred in denying the GRS

Demand. In the main, Claimants argued that the Adjudicator

erred by characterizing GRS’s work as administrative, rather

than as damage assessment activity. (Id.) Claimants also

argued that, even if some invoices included administrative

costs, the GRS Payment should have been at least partially

reimbursed. (Id.) Finally, Claimants asserted that NPFC erred

by denying compensation for GRS costs associated with non-

compensable claims. (Id.)

Along with the July 18 letter, Claimants furnished two

supporting declarations for NPFC’s consideration, one by Captain

Tom Neumann, Meredith Management’s President and Senior Response

Manager (US012535-37 (“Neumann Decl.”)), and a supplemental

submission by Adam Gutman (US012524-34 (“Gutman Decl.”)). Mr.

Gutman insisted that the “actual work performed by GRS was

principally damage assessments,” even though the description of

GRS’s work in purchase orders and invoices suggested otherwise.

(Gutman Decl. ¶ 4.) Mr. Gutman retroactively attributed 92% of

GRS’s initial phase work “exclusively to damage assessments.”

(Id. ¶ 5.) In addition, Mr. Gutman pushed back against the

Adjudicator’s observation that GRS duplicated work performed by

Captain Belson. Mr. Gutman stated that Captain Belson did not

begin his damage assessments until February 12, 2013, at which

point GRS had already spent 57 days assessing oil spill damages.

(Id. ¶ 8.) Mr. Gutman further asserted that GRS’s repair cost

valuations in Phase Two were essential to performing damage

assessments. (Id. ¶ 10.) According to Mr. Gutman, the

administration of third-party boat claims was the sole reserve

of Meredith Management, implying that GRS was focused on

assessment activities. (Id. ¶ 13.) Mr. Gutman added that GRS’s

business interruption expert, Michael Perullo, handled the

“complex and extremely time consuming” task of assessing

business interruption damages. (Id. ¶ 14.)

In his declaration, Mr. Gutman provided an estimated

allocation of time spent by each GRS employee on assessment

activities versus assessment-related activities, as reflected in

the following chart:

Other Type of

Direct Damage

GRS Employee Damage Assessment-

Assessment Work

related Work

David Huff, Home

35% 65%

Office Executive

Tony Satira,

35% 65%

Project Manager

Adam Gutman,

Officer 75% 25%

Supervisor

Chris Heywood,

0% 100%

Tech/IT

Michael Perullo,

Business 95% 5%

Interruption

Charles LaBella,

95% 10%

Adjuster/Assessor

Peter Townsend,

95% 10%

Adjuster/Assessor

L.D. Maestas,

95% 10%

Adjuster/Assessor

Frank Ziegler,

Kristina Anolfo, 0% 100%

Operators

(See id. ¶¶ 16(a-i); US012567.)8

Captain Neumann also characterized GRS’s work as

assessment activities, and echoed Mr. Gutman’s contention that

Meredith Management had responsibility for administrative

matters. (See generally Neumann Decl.) According to Captain

Neumann, the GRS initial Incident Assessment Team arrived to the

scene of the oil spill on December 15, 2012, and reported to him

8 Despite Mr. Gutman’s distinction between assessment work and

assessment-related work, Claimants reiterated their “position that all work

performed by GRS was damage assessments . . . .” (US012567 (emphasis in

original).)

as the BOSTON 30 Incident Management Team representative. (Id.

¶ 5.) Captain Neumann explained that, as part of the damage

assessment process, GRS developed composite repair costs using

repair estimates from local marine repair facilities, a

“significant and time-consuming undertaking.” (Id. ¶ 8.) As

individual claims were submitted, GRS employees “entered the

claim information into their computer system, thus initiating

the claimant-specific damage assessment activities which

included multiple site visits, documenting the claim,

determining the cost of repairs, researching the pre- and post-

incident value of each boat, and coordination with the oil

removal crews to ensure mitigation of the impact of the cleanup

as well as minimizing additional impact from the free floating

oil.” (Id. ¶ 9.)

4. Final Decision

On October 21, 2017, NPFC denied the GRS Demand on

reconsideration, the final agency action with respect to the GRS

Demand. (See US012616-28 (“GRS Decision”).) NPFC undertook a

de novo review of Claimants’ entire submission, including

supplemental records. The NPFC Adjudicator clarified that,

“[u]nless the RP/Claimants have shown that the GRS fees are

damages within the definition of damages under OPA, the [Fund]

is not authorized to reimburse this portion of the claim.” (Id.

6.) Although the Adjudicator acknowledged that GRS likely

performed some assessment activities, the record ultimately did

not suffice to establish that GRS’s services were attributable

to damage assessment activities for claims compensable under the

OPA. (Id.) Specifically, the record lacked sufficient

documentation of personnel hours and expenses specifically

related to individual claims. (Id. 8.)

NPFC first addressed GRS’s third-party claims

management costs. The Adjudicator allowed that a responsible

party might choose to engage a firm for the purpose of

organizing and managing a third-party claims program that

involves review and adjudication of claims, but affirmed that

“costs to manage the third-party claims program are not OPA

damages that may be reimbursable from the Fund.” (GRS Decision

7.) Moreover, while Claimants’ supplemental documentation

included invoices that showed the time and rates for GRS’s

adjusters, they did not establish the amount of time spent on

each of the paid claims or activities performed. (Id.) These

deficiencies left NPFC unable to calculate GRS’s damage

assessment costs. In any event, the Adjudicator determined that

GRS’s invoices substantially pertained to non-assessment

damages. (Id.)

The Gutman and Neumann Declarations did not alter

NPFC’s conclusion, and in fact, only corroborated that GRS

incurred costs that were not solely related to the assessment of

individual damages. (GRS Decision 8.) As the Adjudicator

noted:

Captain Neumann explains in his Declaration that the

GRS Incident Assessment Team’s initial responsibility

was to review the impact of the spill on private and

commercial property and provide a more detailed plan

for assessing and estimating the damages. Mr. Gutman

explains in his Declaration that the initial

investigations and assessments were used to determine

how to staff and organize the GRS team that would be

working on the damage assessment project. These

initial costs were not associated with conducting

assessment for specific claims but to determine how to

organize the claims management program. While they

may not have been administrative costs associated with

specific claims—Mr. Neumann states that administrative

costs for individual claims were conducted by Meredith

Management—they were costs to administer the claims

management program itself.

(Id.)

The Adjudicator also found Captain Neumann’s

statements at odds with the record. Specifically, Captain

Neumann’s statement that Meredith Management provided

administrative support contradicted the purchase order for GRS’s

services, which stated that GRS would “[p]rovide personnel, and

materials to administer third-party claims as directed by [the]

Meredith/GA-ERT and the American Club.” (GRS Decision 9.)

Likewise, the Payment Recommendation Form attached to each

invoice noted that GRS’s responsibilities were to “handle third-

party damage claims and management . . . .” (Id.) In sum, NPFC

could not determine the extent, by a preponderance of the

evidence, that GRS’s adjusters/assessors performed damage

assessment activities, as opposed to non-compensable activities,

such as claims administration, adjudication, management, and

settlement. (Id. 7, 9.)

Next, the Adjudicator addressed Claimants’ reliance on

33 C.F.R. § 136.105(e)(8), which states that each claim for

reimbursement from the Fund must include “[t]he reasonable costs

incurred by the claimant in assessing the damages claimed.”

(GRS Decision 8-9.) The regulation continues, “[t]his includes

the reasonable costs of estimating the damages claimed, but not

attorney’s fees or other administrative costs associated with

preparation of the claim.” Claimants posited that the text’s

specific exclusion of administrative costs associated with claim

preparation, implied that all other administrative costs were

reimbursable. (Id. 10.) NPFC rejected Claimants’

interpretation, and affirmed that costs associated with

administering a claims process are not assessment costs, but

rather another category of administrative costs that are not

recoverable under the OPA. (Id.) Thus, GRS costs incurred for

claims administration, such as answering the toll-free claims

and information line, developing project-specific databases, and

furnishing IT support, were non-compensable.

NPFC also rejected Claimants’ post hoc allocation of

each GRS employees’ time spent performing “direct damage

assessment activities,” versus “other type of damage assessment-

related work.” (GRS Decision 11.) The Adjudicator noted the

lack of any OPA or Claims Regulations provisions authorizing the

Fund to issue reimbursements based on “an unsupported estimated

percentage of costs,” such as that provided by Mr. Gutman.

(Id.) As the Adjudicator explained, the OPA and Claims

Regulations establish a claims process based on individual,

singular claims, which reimburses damages within that single

claim, as well as costs associated with assessing the damages

for that one claim. (Id.) In other words, the Fund did not

reimburse costs incurred a generalized claims process, without

evidence that said costs pertained to a specific, compensable

claim. Thus, Mr. Gutman’s allocations, even if credited, did

not help the Adjudicator link GRS’s costs to specific claims.

Further, the Activity Log spreadsheet provided by

Claimants in their April 27, 2017 submission, which listed the

third-party claims presented to GRS, claims numbers, and a

general description of the GRS personnel activities associated

with each third-party claim, omitted specific personnel time and

expense information relating to damage assessment activities.

(Id.) This omission prevented NPFC from calculating OPA-

compensable damage assessment costs. After the Initial

Decision, NPFC advised Claimants that, “if an adjuster was

inspecting a particular [third-party] claimant’s vessel on a

specific day you should provide documentation that shows the

time he started and finished that inspection along with other

activities he performed that day.” (Id.) Claimants failed to

provide NPFC with such records for the GRS Payment. By

contrast, NPFC reimbursed the Claimants for the Belson Demand

because Captain Belson documented the hours he worked and

invoiced for each boat. (Id.) Thus, unlike the GRS Demand, the

Belson documentation demonstrated “the connection between

specific costs and specific damages . . . .” (Id.)

Finally, NPFC rejected Claimants’ argument that they

were entitled to reimbursement for the costs of assessing third-

party claims that Claimants themselves ultimately denied. (GRS

Decision 13.) The Adjudicator reasoned that, even though the

Claims Regulations define damages to include the costs of

assessing the damages, “[i]f there are no compensable damages,

by deduction, there are no reasonable costs of assessing them.”

(Id.)

E. The Mayship Decision

1. The Mayship Demand

On April 28, 2014, counsel for Mayship submitted a

$1,253,446 demand to Claimants for losses caused by disruption

and interruption of shipbuilding and repair work at Mayship’s

Staten Island shipyard. (See US012662-65.) According to

Mayship, the “overwhelming presence of the clean-up crew and

[their] equipment” in response to the oil spill, substantially

interfered with the performance of the company’s work for almost

two months. (US012662-63.) Mayship claimed the spill and

subsequent removal operations caused business interruption, and

resultant lost profits, in relation to six vessels: (1) Barge

III for Circle Line - $36,319; (2) Manhattan vessel for Circle

Line - $36,319; (3) BOSTON 30 for BMT - $79,960; (4) Sterling

Equipment Barge - $60,540; (5) Sterling Dredge Barge - $710,194;

and (6) Trevcon Barge - $330,114. (US012665; US013600.) On

October 31, 2014, Mayship agreed to settle its demand against

Claimants in exchange for a payment of $575,000 (“Mayship

Payment”). (US0012680-84; US013600.) Claimants, in turn,

sought reimbursement from the Fund for the settlement payment

(“Mayship Demand”). (US013601.)

At the outset, NPFC expressed skepticism about the

Mayship Demand, noting the absence of “any argument or

justification by the RP/Claimants for payment of this claim

other than submitting it for reimbursement of amounts paid to a

third party claimant.” (See US013601.) On May 5, 2016, the

NPFC advised Claimants’ counsel that the Mayship Demand lacked

sufficient documentation to support payment from the Fund.

(US006103.) NPFC requested documentation to substantiate

Mayship’s lost profits, the relationship between the oil spill

and Mayship’s loss, and evidence supporting Mayship’s valuations

of lost business. (Id.)9 In response, Claimants provided the

following:

(1) a January 31, 2014 letter from Mayship Repair’s

counsel, Flora Edwards, Esq., which attached

contractual documents related to the Trevcon and

Sterling vessels, as well as correspondence regarding

some of the planned work; (2) notes and documents of

Michael Perullo, an accountant hired by GRS to oversee

the claim; (3) correspondence regarding Trevcon’s

breach of contract and liquidated damages claim

against Mayship Repair arising from the oil spill; (4)

correspondence between Sterling and Mayship Repair

allegedly showing how the vessel contracts were

impacted by the oil spill; and (5) financial

statements for 2011 through 2014.

(See generally US012687-874; see also US013602.)

2. Initial Decision

On April 17, 2017, the NPFC preliminarily denied the

Mayship Demand. (See US013595-604 (“Initial Mayship

Decision”).) The Adjudicator examined each component of the

Mayship Demand but could not ascertain what work was planned for

the Barge III and the Manhattan vessels before the oil spill,

much less how the claimed amount was determined. (US013600.)

9 NPFC specifically requested the following information:

(1) work being done and the associated contracts for each of the

vessels upon which the damages are based; (2) how the liquidated

damages claimed were due to the oil spill; (3) proof that oil

spill and/or the response caused the company net losses of

profit; (4) explanation and calculation showing losses for six

vessels; (5) how the spill caused each of the claimed losses; (6)

proof the spill caused the claimed delays; (7) complete audited

financial statements for 2011 through 2014; (8) the source for

Mayship Repair’s claim calculations, specifically the demand

summary and loss analyses; and (9) an explanation of how BMT

arrived at the $575,000 settlement figure with Mayship Repair and

the documents underlying that calculation.

(Id. (edited for length and clarity).)

Likewise, NPFC was unable to determine how the Claimants

arrived at amount sought for the Sterling Equipment Barge

repairs. (Id.) As for the BOSTON 30, although BMT had

requested an estimate from Mayship on January 8, 2013 for

certain repairs, the request post-dated the oil spill, which

cast doubt that the spill had caused Mayship to lose BMT’s

business. (Id.) Mayship also had a contract with Sterling

Equipment, Inc. (“Sterling”), for the new vessel construction of

Sterling Dredge Barge, and with Trevcon Construction Co., Inc.

(“Trevcon”), for the Trevcon Barge. (Id. 6-7.) Claimants

asserted that, as a result of construction delays caused by the

spill, Mayship not only lost profits on both contracts, but also

incurred liquidated damages under the Sterling contract. (Id.

7.)

Overall, NPFC was not persuaded by the documentation

of Mayship’s business interruption losses. (Initial Mayship

Decision 8.) The Adjudicator noted that Mayship’s shipyard was

impacted by the oil spill and subsequent remedial efforts, but

the evidence failed to demonstrate how the spill and removal

impacted Mayship’s business. (Id.) According to the decision,

only one document in the record even mentioned the oil spill, a

February 26, 2013 email from Sterling, recalling a statement by

Mohammad Adam, Mayship’s President, that Mayship could not

complete repairs due to the spill. (Id.) The Adjudicator

nevertheless construed the email as confirmation that Sterling

instructed Mayship Repair to proceed with repairs. (Id.)

At bottom, NPFC determined the evidence was

insufficient to show that the oil spill caused Mayship to lose

business. (Initial Mayship Decision 9.) The Adjudicator also

could not determine how the Claimants arrived at the settlement

figure of $575,000, and noted that Claimants did not articulate

any explanation or calculation to support the Mayship Payment.

(Id.) “Without knowing how the RP/Claimants arrived at the

amount paid,” the Adjudicator explained, “NPFC cannot determine

whether the payment was proper or whether it was the result of a

negotiated settlement alone.” (Id.)

Similarly, NPFC could not determine which components

of Mayship’s losses Claimants actually paid for. (Initial

Mayship Decision 9.) One such component, a liquidated damages

claim paid by Mayship to Sterling as a result of construction

delays, and supposedly deducted from the settlement with

Claimants, was deemed non-compensable for two reasons. First,

Mayship’s contract with Sterling permitted delays for

circumstances beyond Mayship’s control. (Id.) The stipulated

completion date was December 15, 2012, only two days after the

oil spill incident, by which time the vessel presumably would

have been close to completion. (Id.) Second, the Adjudicator

observed that Mayship performed its shipyard construction in dry

docks, not in the water, making it less plausible that the oil

spill caused delays in construction. (Id.) As for the Trevcon

Barge, the Adjudicator could not reconcile the alleged two-month

work delay caused by the oil spill, with Mayship Repair’s six-

month delinquency in completing vessel construction. (Id.)

Finally, Mayship’s financial statements suggested the

company’s earnings were somewhat volatile, and its business only

sporadically profitable, making it difficult to gauge the cause

of Mayship’s financial downturn. (Initial Mayship Decision 10.)

Mayship Repair had net income of $550,658 for the year ending

June 30, 2012, and a net income of $34,269 for the fiscal year

ending June 30, 2013. (Id.) But in 2011, Mayship operated at a

net loss of $104,965, and a net loss of $313,725 in 2014. (Id.)

The Adjudicator therefore questioned whether the oil spill

actually caused Mayship’s business losses, given the company’s

year-to-year financial volatility. (Id.)

3. Application for Reconsideration

Claimants formally sought reconsideration of the

Initial Mayship Decision on May 9, 2017. (See US013514.) On

July 18, 2017, Claimants submitted additional documentation to

NPFC in support of the Mayship Demand. (See generally US013531-

76.) Claimants’ submission included an Affidavit in Support

from Mr. Adam, Mayship’s President (US013553-66 (“Adam Aff.”)),

and a Declaration in Support from Michael Perullo, a CPA

employed by GRS during the relevant period (US013567-76

(“Perullo Decl.”)).

a. Supporting Documentation

Mr. Adam explained that Mayship’s business activities,

which consisted of new vessel construction, and repair and

conversion services10 for existing vessels, were severely

impacted by the December 13, 2012 oil spill. (Adam Aff. ¶¶ 4,

6.) Mr. Adam’s affidavit sought to substantiate components of

the Mayship Demand, specifically, the six contracts directly

impacted by the oil spill, including four for vessel repairs,

and two for vessel construction:

Circle Line Barge III and Manhattan (Lost Jobs 1 & 2):

Mayship customarily provided dry dock services for its

longstanding clients pursuant to “an oral contract and/or

general understanding.” (Adam Aff. ¶ 9.) One such client, New

York Cruise Lines, Inc., the parent company of Circle Lines

Sightseeing Yachts (“Circle Line”), requested dry dock services

for four Circle Line vessels from December 7, 2012 through

January 15, 2013. (Id. ¶ 10.) Other than a November 1, 2012

letter from Cruise Lines’ CEO, Mr. Adam stated that Mayship had

no contemporaneous written contracts or documents memorializing

10 Such services include maintaining and servicing engines, steel

fabrication, welding piping, repairing, painting, scraping, and other

services.

the services provided (e.g., bottom scraping, painting, and

general maintenance) or the fees it charged. (Id. ¶¶ 10-12.)

Mayship anticipated performing the Circle Line repairs

over the course of December 2012, allotting two to three weeks

per vessel. Mayship’s capacity—only three dry docks—

necessitated staggered deliveries of Circle Lines’ vessels. The

first two would be delivered at the beginning of December, and

the subject vessels would be delivered in the latter half of the

month. (Id. ¶ 13.) The oil spill occurred before the Manhattan

and Barge III vessels were delivered to Mayship. (Id. ¶ 14.)

The spill forced Mayship to suspend operations completely for

two weeks, between December 15 and 30, 2012. (Id. ¶ 15.)

Remedial efforts, specifically the containment boom placed in

the spill area, also blocked access to Mayship’s dry docks,

preventing vessels from entering or exiting. (Id. ¶¶ 15-16.)

At the time of the spill, Mayship’s three dry docks were

occupied by two other Circle Line vessels and a Sterling barge.

(Id. ¶ 16.) As a result, Mayship could not accommodate the

Manhattan and Barge III, and New York Cruise Lines was compelled

to send the vessels elsewhere for the needed repairs. (Id.)

Mr. Adam estimated that losing the Barge III and

Manhattan jobs cost Mayship $72,638. (Adam Aff. ¶¶ 17-18.)11

11 Mr. Adam calculated that Mayship Repair would have charged $39,500 per

vessel; expended approximately 100 man hours each for the Manhattan and Barge

This figure were based principally on data enclosed in two

letters from Mayship’s counsel, dated January 31 and April 28,

2014. (See id.)

BOSTON 30 (Lost Job 3): On January 8, 2013, Mayship

received an email from Anthony DiCunzolo of BMT, requesting an

estimate for routine vessel maintenance. (Adam Aff. ¶ 20.) Mr.

Adam sent Mr. DiCunzolo a $150,000 estimate for Mayship’s

services. (Id. ¶ 22.)12 Mr. Adam further estimated that Mayship

would have expended $70,040 in costs to complete the project,

resulting in earned profits of $79,960. (Id.) The continuous

presence of spill response and cleanup crews, their vehicles and

equipment, and the containment boom in particular, conspired to

bar access to Mayship’s dry docks, and caused Mayship to forfeit

the BOSTON 30 opportunity. (Id. ¶ 23.) In mid-January 2013,

BMT decided it could not delay the project any longer, and

turned to a different shipyard to perform the repairs and

maintenance. (Id. ¶ 24.)

Sterling Equipment, Inc. – Barge Repair (Lost Job 4):

Sterling, another longstanding Mayship customer, approached

Mayship in mid-December 2012 for a barge repair project. (Adam

Aff. ¶ 25.) Mr. Adam prepared an estimate of the repairs. (Id.

III, at an average labor cost of $24.31 per hour; incurred $3,181.00 in costs

for materials. (Id. ¶ 18.)

12 The Adam Affidavit attached a handwritten itemized estimate for the

price quoted to BMT. (Id.)

¶¶ 26-28.) He assumed total costs of $20,180, comprising 274

hours of labor, at $70 an hour, as well as $1,000 expensed for

materials to complete the work. (Id. ¶ 27.) Mr. Adam deduced

that Mayship would have charged Sterling $80,720 for the work,

because the cost to fulfill a project of that size is usually

25% of the contract price. (Id. ¶ 28.) Therefore, Mayship’s

anticipated profits would have been $60,540. (Id.)

The Sterling Barge was delivered to Mayship and placed

in its dry dock in the middle of December 2012, but spill-

related interference and subsequent cleanup prevented Mayship

workers from performing the contracted repairs. (Adam Aff. ¶

29.) In February 2013, Mr. Adam was forced to inform Sterling

that, due to the spill, Mayship could not perform the repair

work in a timely manner. (Id. ¶ 30.)

Sterling Equipment, Inc. – Dredge Barge Construction

(Delayed Job 1): In August 2012, Mayship entered into a

contract with Sterling for construction of a new dredge barge,

with a contemplated delivery date of December 15, 2012,

eventually extended to December 28. (Adam Aff. ¶ 33.) As a

result of the spill, however, construction was not completed

until May 15, 2013. (Id.) The initial contract price for

construction was $1.9 million, but contract modifications

ultimately pushed the price to $3,240,940. (Id. ¶ 34.) Mayship

initially anticipated fulfillment costs exceeding $3 million,

resulting in estimated profits of $206,612, but the oil spill

and ensuing cleanup increased Mayship’s labor and other costs.

(Id. ¶¶ 35-36.) In the end, Mayship absorbed an actual loss of

$302,642 on the project. (Id. ¶ 36.) Mr. Adam calculated that

Mayship suffered lost profits of $509,254, the sum of its actual

loss and anticipated profits, as a result of the oil spill.

(Id.)13

The Adam Affidavit described additional aggravating

factors. The Sterling construction contract included a

liquidated damages provision: for every day past the vessel’s

stipulated due date, Mayship was to pay $10,000 to Sterling.

(Adam Aff. ¶ 37.) Sterling assessed total liquidated damages of

$200,940 due to the construction delays. (Id.) Mayship’s

losses thus swelled to $710,194. (Id. ¶ 38.)

Trevcon Construction Co., Ltd. – Load Lined Deck Barge

Construction (Delayed Job 2): Trevcon agreed to pay Mayship

$1,387,500 for a new vessel construction. (Adam Aff. ¶¶ 44-45.)

Mayship anticipated profits of $88,454. (Id. ¶ 46.) As a

result of the oil spill, costs increased to the point where

Mayship incurred an actual loss of $241,660 under the contract,

and an expectation loss of $330,114. (Id. ¶ 47.) Mr. Adam

13 Mr. Adam explained that it is difficult, if not impossible, for Mayship

to replace its highly-skilled welders and laborers once retained for

construction, so Mayship continues to pay the workers even if circumstances

prevent them from performing their jobs. (Id. ¶ 39.)

calculated that Mayship lost profits totaling $1,253,446 as a

result of the oil spill. (Id. ¶ 50.)

Claimants adduced further support for the Mayship

Demand from Mr. Perullo, whose role it was to assess and

evaluate the Mayship’s losses for GRS. (Perullo Decl. ¶ 4.)

According to Mr. Perullo, GRS “stressed [to Mayship] that valid

claims for lost profits and/or earning capacity must be

substantiated by proof that the damages were caused by the [oil

spill], and that the amounts claimed were appropriate.” (Id. ¶

5.) Mayship originally asserted a business interruption claim

in excess of $3 million, but ultimately whittled its demand to

$1,253,446. (Id. ¶¶ 6-7.) According to Mr. Perullo, GRS

corroborated the lost profits for the four lost jobs by

“subtracting the costs to fulfill each job from the gross

contract price for each job.” (Id. ¶ 8.) GRS was satisfied

that Mayship lost the jobs due to the oil spill “based on

[GRS’s] thorough review of this matter[.]” (Id.)

As for the two Delayed Jobs, Mr. Perullo focused on

the “Earnings from Contracts,” set forth in Mayship’s financial

statements from 2011-2014, to assess the impact of the oil

spill. (Id. ¶¶ 17,19.) Mr. Perullo reported that, in FY2013,

the year of the spill, Mayship derived 37% of its revenue from

the Sterling dredge barge construction, albeit with -5% gross

profit. (Id. ¶ 22.) The Trevcon barge construction constituted

12% of FY2013 revenue, but at -21% gross profit. (Id. ¶ 23.)

In total, the two Delayed Jobs accounted for gross losses

comprising 9% of recognized revenue. (Id. ¶ 24.) Mr. Perullo

also noted that Mayship lost money on another high value

contract in FY2013, unrelated to the oil spill, but stopped

short of providing further detail. (Id. ¶ 25.) Mr. Perullo

added that “fluctuations in the number of high value contracts

[Mayship enter into] are indicative of the market conditions

within which Mayship operates.” (Id. ¶ 26.) He also

acknowledged that “the nature of Mayship’s business and size

make it difficult to corroborate the impact of business

interruption by conducting a macro-level Financial Statement

analysis.” (Id. ¶ 27.)

As for the Mayship Payment, Mr. Perullo stated that

GRS was able to corroborate $213,810 in business interruption

losses for the four Lost Jobs. (Perullo Decl. ¶ 30.) Citing

Earnings from Contracts for FY2013 and 2014, Mr. Perullo

concluded that Mayship incurred an actual Gross Loss of $142,069

for the Sterling Job, in addition to $200,940 in liquidated

damages, meaning the Sterling Job actually lost $349,009. (Id.

¶ 33.) According to Mr. Perullo, the actual Gross Loss for the

Trevcon Job was $182,566. (Id.) Mr. Perullo calculated that

Mayship lost $738,713 in the aggregate for the four Lost Jobs

and two Delayed Jobs. (Id. ¶ 34.) Further, Mayship treated the

liquidated damages component as a contractually obligated price

reduction under GAAP. (Id. ¶ 35.) In conclusion, Mr. Perullo

stated that “the $575,00 settlement ultimately agreed upon was a

substantiated bona fide financial exit for Boston Marine given

the multivariate controllable and uncontrollable circumstances

surrounding the [oil spill].” (Id. ¶ 36.)

b. COTP Order

On August 15, 2017, NPFC notified Claimants’ counsel

that it had obtained copies of the US Coast Guard’s Captain of

the Port Order 126-12 (“COTP Order”), which suspended operations

at the pier leased by Mayship beginning on December 20, 2012.

(US013688.) The COTP Order deemed Mayship’s pier unsafe for

personnel and vessels, and prohibited commercial vessels from

mooring or using the pier, due to safety concerns relating to

structural integrity and debris in the aftermath of Hurricane

Sandy. (Id.) NPFC also referred to a letter from Mr. Adam,

dated February 25, 2013, requesting an extension of time to

complete a final survey and acknowledging the pier’s need for

emergency repairs. (Id.) Although the COTP Order was rescinded

on December 10, 2013, NPFC believed the records “indicate[d]

that Mayship Repair was prohibited from operating due to

structural safety and hazardous navigation conditions and not

oil spill response operations.” (Id. (emphasis added).)

On September 15, 2017, Claimants’ counsel responded

that the COTP Order had no impact on Mayship’s vessel repair or

vessel construction operations, because the pier in question was

500 feet away from the dry docks where Mayship performed its

vessel repairs. (US013478.) Moreover, Mayship performed its

construction operations on land in a large warehouse, and in an

outdoor workspace. (US013478-79.) Accordingly, Claimants

stated that the pier’s closure did not affect Mayship’s repair

or construction activities, and had no impact on its business

interruption losses asserted in the Mayship Demand. (US013479.)

Finally, on November 13, 2017, Claimants submitted a

supplemental declaration from Mohammad Adam. (US013509-11

(“Adam Supp. Decl.”).) In pertinent part, Mr. Adam explained

that Mayship “undertook certain efforts in order to limit the

financial effects that the oil spill had on its business,” but

the success of those efforts was constrained because the oil

spill remediation completely incapacitated Mayship’s ability to

use its dry docks. (Id. ¶ 5.) As such, losses could not be

mitigated with alternative business contracts. (Id.) Nor was

it possible to reduce labor costs because, as detailed in the

Adam Affidavit, Mayship was obligated to continue paying its

employees given uncertainty about the duration of the oil spill

fall out, and the difficulty of replacing Mayship’s highly

skilled laborers on short notice. (Id. ¶ 6.)

4. Final Decision

On November 16, 2017, NPFC denied the Mayship Demand

on reconsideration, the final agency action on the matter.

(US013606-17 (“Mayship Decision”).) NPFC first considered

whether the oil spill and cleanup impacted Mayship’s business

operations. (Id. 6.) The Adjudicator acknowledged that “some

evidence” suggested Mayship’s business was impacted during the

period from December 15, 2012 though January 4, 2013. (Id.)

Removal actions were conducted at Mayship’s premises, and the

Adam Affidavit stated that Mayship’s operations were completely

suspended for two full weeks between December 15 and 30, 2012,

because cleanup crews were mobilized on Mayship’s premises.

(Id.) Claimants also provided Ticket Records from August 1,

2012 to October 16, 2013 for welder, labor, and supervisor time

for Sterling barge construction activities. (Id.) Notably, the

employees working on the Sterling barge did not record time from

December 15, 2012, the date of the spill, through December 30,

2012, but began recording their time again on December 31, and

recorded it continually through May 20, 2013. (Id. 6-7.)

Claimants also provided no time records for the four Lost Jobs.

(Id. 7.)

More fundamentally, although Mr. Adam attested to the

continued presence of cleanup crews, Claimants did not provide

specific evidence of such presence. (Mayship Decision 7.) In

fact, the Adjudicator found “no indication of a continued

presence of response crews.” (Id. 8.) The record only revealed

“intermittent monitoring and response activities” at Mayship

facilities after January 4, 2013, when the majority of removal

actions were completed, and some periodic monitoring thereafter.

(Id. 7-8.) The Adjudicator also noted that the absorbent boom

was placed landside of the piers and docks, in a manner that

presumably would not impede vessel access to the premises or dry

docks. (Id. 8.) In sum, the Adjudicator found by a

preponderance of the credible evidence that there was no

continued presence of oil spill response personnel that impacted

the activities or productivity of Mayship’s employees. (Id.)

Next, NPFC considered whether the COTP Order impacted

Mayship’s operations and purported business interruption losses.

NPFC recounted that, in October 2012, Hurricane Sandy caused

significant storm surge levels. (Mayship Decision 8.)

Following the oil spill, US Coast Guard responders investigated

the Mayship repair facility and noted significant debris in the

waters and the vicinity of Mayship’s facility and pier, which

posed a pollution and navigation hazard. (Id.) The COTP Order,

dated December 20, 2012, effectively suspended operations at

Mayship’s pier, and was not rescinded until December 10, 2013.

(Id. 8-9.) Notwithstanding Claimants’ assertion that the COTP

Order had no bearing on Mayship’s drydock operations, NPFC

acknowledged that the COTP Order may have been broad enough to

plausibly interfere with Mayship’s business activities. (Id.

9.) For instance, the COTP Order suspended all pier operations,

and prohibited all commercial vessel movements involving the

pier. (Id.) And though the COTP Order did not expressly

reference Hurricane Sandy, the Adjudicator noted that news

articles around the time of the storm quoted Mr. Adam describing

Sandy’s severe impact on Mayship’s shipyard, and including $2.5

million in estimated damages to equipment and facilities. (Id.)

Finally, NPFC considered whether the $575,000

settlement payment to Mayship was compensable under the OPA.

(Mayship Decision 10.) NPFC concluded that, even if removal

actions were solely to blame for Mayship’s business interruption

losses, Claimants did not substantiate that Mayship lost

$575,000 in profits from December 15, 2012 to January 4, 2013,

the period of major removal operations. (Id.) The Adjudicator

explained that as a responsible party, BMT and its subrogated

insurers, Plaintiff and Great American, were free to pay a third

party without taking the OPA or Claims Regulations into account.

(Id.) But, once Claimants sought reimbursement from the Fund,

they became OPA “claimants” and, therefore, bound by the

requirements of the OPA statute and Claims Regulations. (Id.)

There was “persuasive evidence” in the record that the $575,000

Mayship Payment was a “negotiated settlement,” untethered to

“actual documented losses resulting from a two-week suspension

of operations for removal actions.” (Id.) The Adjudicator

noted that no written contracts or cancellation records were

provided for the four Lost Jobs. (Id. 11.) Further, the

Release and Settlement Agreement executed between Mayship and

Claimants on October 31, 2014, did not discuss the rationale for

the settlement or describe the lost value for any of the

contracts. (Id.)

The Adjudicator commented that Mr. Perullo calculated

total losses of $537,773 in his declaration, bolstering the

inference that the Mayship Payment, which exceeded that sum by

nearly $40,000, was a product of negotiation rather than actual,

verified losses. (Mayship Decision 12.) The Adjudicator

further implied that Mayship’s financials were unpersuasive as

evidence of lost profits, and further remarked that the $575,000

settlement exceeded Mayship’s combined annual profits for fiscal

years 2011 to 2014. (Id.; see also id. n.38.) Moreover, the

Adjudicator emphasized Mr. Perullo’s concession that neither he

nor Claimants were in possession of Mayship’s financial

statements when the settlement was executed, thereby supporting

that the Mayship Payment was the product of a negotiated

settlement, rather than a contemporaneous calculation of

Mayship’s legitimate business interruption losses. (Id.) Thus,

NPFC found that the Mayship Demand sought reimbursement for a

negotiated settlement, which is not permitted under the OPA,

rather than lost profits due to removal actions, which are

compensable. (Id.)

F. Federal Lawsuit

On May 4, 2018, the American Club filed the instant

action in the Eastern District of New York, seeking judicial

review of the GRS and Mayship Decisions, pursuant to the APA.

(ECF No. 1, Complaint ¶ 1.) On July 25, 2019, Plaintiff served

its motion for summary judgment, which seeks a court order

setting aside NPFC’s determinations. (ECF No. 26, Notice of

Motion for Summary Judgment.) With respect to the GRS Decision,

Plaintiff contends, inter alia, that NPFC misconstrued the

distinction between assessment costs and administrative costs,

resulting in an arbitrary and capricious determination. (ECF

No. 28, Plaintiff’s Memorandum of Law in Support of Motion for

Summary Judgment (“Pl.’s Mot.”) 9.) As for the Mayship

Decision, Plaintiff contends NPFC ruled in contradiction to its

own factual findings that Mayship’s business was directly

impacted by the oil spill. (Id. 27, 30.)

STANDARDS OF REVIEW

I. Summary Judgment

Pursuant to Federal Rule of Civil Procedure 56, “[a]

motion for summary judgment may properly be granted — and the

grant of summary judgment may properly be affirmed — only where

there is no genuine issue of material fact to be tried, and the

facts as to which there is no such issue warrant the entry of

judgment for the moving party as a matter of law.” Rogoz v.

City of Hartford, 796 F.3d 236, 245 (2d Cir. 2015) (quoting

Kaytor v. Electric Boat Corp., 609 F.3d 537, 545 (2d Cir. 2010))

see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986).

A dispute is genuine “if the evidence is such that a reasonable

jury could return a verdict for the nonmoving party.” Anderson

v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

Typically, in deciding a motion for summary judgment,

the court must resolve all ambiguities and draw all reasonable

inferences in favor of the nonmovant. See Zalaski v. City of

Bridgeport Police Dep’t, 613 F.3d 336, 340 (2d Cir. 2010). To

defeat a motion for summary judgment, the non-moving party must

identify probative, admissible evidence from which a reasonable

factfinder could find in his favor. Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 256-257 (1986). If, as to the issue on

which summary judgment is sought, there is any evidence in the

record from any source from which a reasonable inference could

be drawn in favor of the nonmoving party, summary judgment is

improper. Chambers v. TRM Copy Ctrs. Corp., 43 F.3d 29, 37 (2d

Cir. 1994) (citations omitted).

In an APA case, the court relies on the administrative

record for the material facts to determine if the agency’s

decision exceeds the agency’s statutory authority or is

arbitrary and capricious or an abuse of discretion. Miller v.

United Welfare Fund, 72 F.3d 1066, 1071 (2d Cir. 1995) (“[A]

district court’s review under the arbitrary and capricious

standard is limited to the administrative record.”); Brezler v.

Mills, 220 F. Supp. 3d 303, 307 (E.D.N.Y. 2016) (“[B]ecause this

is an APA review, the Court has relied upon only the

administrative record in reaching its holding.”). When a party

seeks review of agency action under the APA, the “entire case on

review is a question of law” such that “[j]udicial review of

agency action is often accomplished by filing cross-motions for

summary judgment.” Connecticut v. U.S. Dep’t of Commerce, No.

04 Civ. 1271(SRU), 2007 WL 2349894, at *1 (D. Conn. Aug. 15,

2007) (citing Am. Bioscience, Inc. v. Thompson, 269 F.3d 1077,

1083-84 (D.C. Cir. 2001)); Glara Fashion, Inc. v. Holder, No.

11-CV-889, 2012 WL 352309, at *5 (S.D.N.Y. Feb. 3, 2012)

(whether agency action is arbitrary or capricious is legal

question to be resolved on agency record).14

II. Scope of Review Under the APA

The APA instructs courts to “hold unlawful and set

aside agency action” that is “in excess of statutory . . .

14 It follows that Rule 56.1 Statements of Material Facts are not required

on APA review. Just Bagels Mfg., Inc. v. Mayorkas, 900 F. Supp. 2d 363, 372

n.7 (S.D.N.Y. 2012) (statements of undisputed facts are not necessary in an

APA review case because review presents only a question of law); Glara

Fashion, 2012 WL 352309, at *1 n.1 (no Rule 56.1 Statement required in APA

case because court’s decision is based on administrative record) (citing Am.

Bioscience, 269 F.3d at 1083).

authority.” 5 U.S.C. § 706(2)(C). In reviewing an agency’s

statutory authority, or lack thereof, “the question . . . is

always whether the agency has gone beyond what Congress has

permitted it to do.” Nat. Res. Def. Council, Inc. v. Nat’l

Highway Traffic Safety Admin., 894 F.3d 95, 108 (2d Cir. 2018)

(quoting City of Arlington v. F.C.C., 569 U.S. 290, 297–98

(2013)).

A. Statutory and Regulatory Interpretation

The analysis differs depending on whether the agency

decision rests on an interpretation of a statute or regulation.

If the agency is exercising authority pursuant to statute, and

is charged with administering that law, then the two-step

Chevron analysis controls. See Chevron U.S.A., Inc. v. Nat.

Res. Def. Council, Inc., 467 U.S. 837, 842 (1984); see also

Arlington, 569 U.S. at 296–301 (when “confronted with an

agency’s interpretation of a statute it administers,” courts

should apply Chevron to “ambiguit[ies] that concern[ ] the scope

of the agency’s statutory authority”). At step one, Chevron

instructs the court to consider “whether ‘Congress has directly

spoken to the precise question at issue’ because, if ‘the intent

of Congress is clear, that is the end of the matter.’” New York

v. F.E.R.C., 783 F.3d 946, 954 (2d Cir. 2015) (quoting Chevron,

467 U.S. at 842). To determine if Congress spoke clearly, the

court employs “the ordinary tools of statutory construction.”

Arlington, 569 U.S. at 296. These tools include the “statutory

text, structure, and purpose as reflected in [the statute’s]

legislative history,” and, if the text is ambiguous, “canons of

statutory construction.” Catskill Mountains Chapter of Trout

Unltd., Inc. v. Envtl. Prot. Agency, 846 F.3d 492, 512 (2d Cir.

2017).

If the statute is “silent or ambiguous with respect to

the specific issue,” the court moves on to step two. Chevron,

467 U.S. at 843. At step two, “the question for the court is

whether the agency’s answer is based on a permissible

construction of the statute.” Id. This “inquiry is

deferential, asking only whether the agency’s interpretation is

‘reasonable,’ while ‘respect[ing] legitimate policy choices’

made by the agency.” New York, 783 F.3d at 954 (alteration in

original) (quoting Chevron, 467 U.S. at 843–44, 866). Still,

under either step of Chevron, “[a]n agency construction of a

statute cannot survive judicial review if a contested regulation

reflects an action that exceeds the agency’s authority.” Aid

Ass’n for Lutherans v. U.S. Postal Serv., 321 F.3d 1166, 1174

(D.C. Cir. 2003).

If an agency is interpreting its own regulation,

rather than a statute, it may be entitled to Auer deference.

Auer deference applies only if the regulation at issue “is

genuinely ambiguous.” Kisor v. Wilkie, 139 S. Ct. 2400, 2415

(2019). To determine if a regulation is genuinely ambiguous, “a

court must exhaust all the ‘traditional tools’ of construction.”

Id. (quoting Chevron, 467 U.S. at 843 n.9). An ambiguity can

only be found when the “legal toolkit is empty and the

interpretive question still has no single right answer”; “[i]f

uncertainty does not exist, there is no plausible reason for

deference.” Id. Even where genuine ambiguity lies, an agency’s

regulatory interpretation must still be reasonable to warrant

deference. See id. What’s more, a reasonable interpretation of

an ambiguous rule may not be entitled to deference. For

example, “a court should decline to defer to a merely

‘convenient litigating position’ or ‘post hoc rationalizatio[n]

advanced’ to ‘defend past agency action against attack,’”

because, in order to receive deference, the agency’s

interpretation “must reflect ‘fair and considered judgment.’”

Id. at 2417 (alteration in original) (quoting Christopher v.

SmithKline Beecham Corp., 567 U.S. 142, 155 (2012)).

B. Factual Findings

If the agency action was authorized, the court must

consider whether the agency’s decision “was ‘arbitrary,

capricious, an abuse of discretion, or otherwise not in

accordance with law.’” Camp v. Pitts, 411 U.S. 138, 142 (1973)

(citing 5 U.S.C. § 706(2)); see also United States v. Int’l Bhd.

of Teamsters, 170 F.3d 136, 143 (2d Cir. 1999). In making that

determination, the court’s review is limited to the

administrative record. 5 U.S.C. § 706; Int’l Bhd. of Teamsters,

170 F.3d at 143. “The scope of review under the ‘arbitrary and

capricious’ standard is narrow, and courts should not substitute

their judgment for that of the agency.” Karpova v. Snow, 497

F.3d 262, 267 (2d Cir. 2007) (citation omitted); see also Gully

v. Nat’l Credit Union Admin., 341 F.3d 155,163 (2d Cir. 2003)

(“Our review under these standards is narrow and ‘particularly

deferential.’”) (quoting Erie-Niagara Rail Steering Comm. v.

Surface Transp. Bd., 247 F.3d 437, 441 (2d Cir. 2003)).

Courts “will not disturb a factual finding if it is

supported by reasonable, substantial, and probative evidence in

the record when considered as a whole.” Jian Hui Shao v.

Mukasey, 546 F.3d 138, 157–58 (2d Cir. 2008) (citing Wu Biao

Chen v. INS, 344 F.3d 272, 275 (2d Cir. 2003)) (internal

quotation marks and further citations omitted). This is a very

deferential standard. Only if the agency “offered an

explanation for its decision that runs counter to the evidence

before the agency, or [one] so implausible that it could not be

ascribed to a difference in view or the product of agency

expertise,” will the decision be overturned. Karpova, 497 F.3d.

at 267-268. In other words, the court will uphold an agency’s

decision “so long as the agency examines the relevant data and

has set out a satisfactory explanation, including a rational

connection between the facts found and the choice made.” Id. at

268 (citing Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State

Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)); see also

Gully, 341 F.3d at 163.

DISCUSSION

I. The GRS Decision

Plaintiff challenges the GRS Decision on two broad

grounds. First, Plaintiff asserts NPFC misinterpreted the OPA

and Claims Regulations. Specifically, Plaintiff contends NPFC

misconstrued its regulations by holding that administrative

costs incurred in connection with a third-party damages claim

are generally not eligible for reimbursement. In addition,

Plaintiff challenges NPFC’s reasoning that Claimants’ failure to

link GRS’s invoiced costs with specific third-party claims

warranted denying the GRS Demand. This presents an indirect

challenge to NPFC’s construction of several OPA statutes.

Second, Plaintiff argues that NPFC failed to consider the

evidence before it and imposed an elevated evidentiary burden on

Claimants. Plaintiff’s challenge to the GRS Decision fails on

both grounds, as explained below.

A. NPFC Properly Interpreted the Relevant Law

1. Regulatory Interpretation

Plaintiff contends NPFC predicated the GRS Decision on

an erroneous interpretation of the Claims Regulations.

According to Plaintiff, the GRS Decision is not entitled to

deference because the “clear and unambiguous language” of 33

C.F.R. § 136.105(e)(8) demonstrates that “all administrative

costs not associated with preparation of the claim are

recoverable under OPA,” (Pl.’s Mot. 10), and even if the

regulation was “genuinely ambiguous,” NPFC’s interpretation was

nonetheless unreasonable. (Id. 12-18.) For the reasons

explained below, the court finds NPFC properly construed §

136.105(e)(8) and determined that administrative costs are not

compensable under the OPA.

NPFC denied the GRS Demand partly because the

Claimants could not extricate GRS’s invoices for genuine damage

assessment activities, from general administrative costs for

running a claims-processing program, such as answering the toll-

free claims and information line, developing project-specific

databases, and furnishing IT support. (GRS Decision 10.)

Claimants’ failure to show how much time was spent on each

activity left NPFC unable to rationally distinguish which costs

were properly allocable to compensable assessment activity as

opposed to non-compensable administrative tasks.

Preliminarily, it is worth clarifying the distinction

between assessment and administrative costs. Plaintiff is

correct that the OPA and Claims Regulations do not define

“damage assessment activity.” (Pl.’s Mot. 24.) Coherent

definitions may be reasonably deduced, however, from the

Administrative Record. In the Belson Decision, NPFC listed

numerous examples of compensable assessment costs, including:

estimation of damages to third-party vessels; inspecting vessels

for damages and providing a report thereon; gauging the extent

of oil-related damage and repairs needed to restore a vessel to

its pre-spill condition; and extricating non-compensable third-

party damages from a claim. (See Belson Decision 5—7.)

Plaintiff, a party to the Belson Decision, appears to have

settled on a similar understanding on damage assessment

activities. For example, Mr. Gutman’s Declaration in support of

the GRS Demand described GRS’s assessment activities as

“viewing, observing, investigating, valuing,” and “physical

activities to assess the nature and scope of damage in order to

determine worthiness and value of specific damage.” See Gutman

Decl. ¶ 5. Plaintiff avers that “administrative” costs, by

contrast, involve activities such as logistical support

services, including preparing reports, IT, and maintaining a

database, all of which are reflected in GRS’s invoices, although

Plaintiff notes that “those costs were incurred solely in

furtherance of conducting damage assessments.” (Pl.’s Mot. 10

(record citation omitted).) The Initial GRS Decision also

considered travel and living expenses for employees managing the

claims process to be administrative in nature. (Initial GRS

Decision 5-6.)

Turning to the relevant regulation, it states that

“[e]ach claim must include”:

The reasonable costs incurred by the claimant in

assessing the damages claimed. This includes the

reasonable costs of estimating the damages claimed,

but not attorney’s fees or other administrative costs

associated with preparation of the claim.

33 C.F.R. § 136.105(e)(8) (emphasis added). Plaintiff maintains

that, “associated with preparation of the claim,” modifies, and

thereby limits, the scope of non-compensable “administrative

costs.” (Pl.’s Mot. 9.) Thus, Plaintiff contends that

administrative costs are generally OPA-compensable unless they

are associated with claim preparation. (Id.) The NPFC

Adjudicator disagreed. According to the Adjudicator, “it is not

correct to state that the only administrative costs that are not

recoverable are those associated with claim preparation and that

all other administrative costs are therefore recoverable . . .

.” (Id. 10 (quoting GRS Decision 10).) The court agrees with

NPFC.

Plaintiff proclaims that 33 C.F.R. § 136.105(e)(8) is

clear and unambiguous. To determine if that is so, the court

will utilize the “traditional tools” of construction, looking

particularly to the text and structure of 33 C.F.R. §

136.105(a), and the statute from which it derives authority,

just as the Supreme Court instructed in Kisor. The court notes,

however, that if Kisor curtailed the deference afforded to

interpretations of non-ambiguous regulations, that limitation is

presumably immaterial if the agency’s regulatory interpretation

is nonetheless firmly in accord with regulation’s plain,

unambiguous wording. So it is here.

Plaintiff insists 33 C.F.R. § 136.105(e)(8) authorizes

recovery from the Fund of a discrete, but broad category of

costs: all administrative expenses except those associated with

preparing a claim for damages. But neither the plain wording of

the immediate text, nor the broader regulation of which it is

part, support such an interpretation. The court first considers

the words of the text. Doe v. Leavitt, 552 F.3d 75, 83 (1st

Cir. 2009) (“The plain meaning of the words in the text of a

statute constitutes the proper starting point for interpreting

that statute.”); see also Hughes Aircraft Co. v. Jacobson, 525

U.S. 432, 438 (1999). Subparagraph (e)(8) requires that claims

for reimbursement from the Fund state the costs reasonably

incurred in assessing claimed damages, which, it clarifies,

includes the costs of estimating damages. The text then omits

the administrative costs of preparing the claim, as well as

attorneys’ fees, from the ambit of “reasonable costs.”

Plaintiff asserts that by specifically omitting a category of

administrative cost, the regulation countenances reimbursement

for all other administrative costs. This sweeping

interpretation is unsupported by the text. Under the casus

omissus pro omisso habendus est canon, a law “should not be read

to include matter it does not include.” Envtl. Integrity

Project v. Envtl. Prot. Agency, No. 18-60384, 2020 WL 4686995,

at *6 (5th Cir. Aug. 13, 2020); see, e.g., Lamie v. U.S. Tr.,

540 U.S. 526, 538 (2004) (rejecting construction that “would

have us read an absent word into the statute” because it “would

result not in a construction of the statute, but, in effect, an

enlargement of it by the court”) (citation omitted).

Plaintiff invokes expressio unius est exclusio

alterius, the interpretive canon that expressing one item of an

associated group or series excludes another left unmentioned.

Plaintiff asserts that, “[b]y expressly excluding only those

administrative costs associated with preparation of the claim,

an appropriate reading of this regulation is that other types of

administrative costs, such as those incurred in furtherance

performing damage assessments, are recoverable.” (ECF No. 32,

Plaintiff’s Reply Memorandum of Law in Support of Summary

Judgment and in Opposition to Defendants’ Cross-Motion for

Summary Judgment (“Pl.’s Reply”) 4.)

The Supreme Court has posed the following hypothetical

to illustrate the expresio unius doctrine’s operation: “If a

sign at the entrance to a zoo says ‘come see the elephant, lion,

hippo, and giraffe,’ and a temporary sign is added saying ‘the

giraffe is sick,’ you would reasonably assume that the others

are in good health.” N.L.R.B. v. SW Gen., Inc., 137 S. Ct. 929,

940 (2017). But “[t]he force of any negative implication,” the

Court held, “depends on context.” Id. (quoting Marx v. General

Revenue Corp., 133 S.Ct. 1166, 1175 (2013)). Circumstances must

support a “sensible inference” that the omitted term was

intentionally excluded. Id. (citation omitted). Plaintiff

fails to muster any contextual support that would suggest the

regulation’s drafters omitted reference to all other

administrative costs by design. And as a practical matter,

Plaintiff’s position would impose onerous burdens on the

drafters of agency regulations: drafters seeking to exclude

categories from the scope of a regulation, as § 136.105(e)(8)

does with respect to certain administrative costs, would need to

engage in the cumbersome task of listing every conceivable like

category that the drafters intend to except from the

regulation’s scope.

Reading § 136.105(e)(8) in the context of the Claims

Regulations, its prefatory language, and its neighboring

subparagraphs, with an eye to the regulation’s overall purpose,

further supports NPFC’s interpretation. Section 136.105, titled

“General requirements for a claim,” sets forth pleading

requirements. See Almendarez–Torres v. United States, 523 U.S.

224, 234 (1998) (“[T]he title of a statute and the heading of a

section are tools available for the resolution of a doubt about

the meaning of a statute.”) (internal quotation marks omitted);

see also Antonin Scalia & Bryan A. Garner, Reading Law: The

Interpretation of Legal Texts, at 221 (2012) (“The title and

headings are permissible indicators of meaning.”). Like other

pleading provisions, see, e.g., Fed. R. Civ. P. 8, 9(b), §

136.105’s import is purely procedural. It does not establish

substantive rights, such as entitlement to compensation for

administrative costs. See Johnson v. Ramesh Vemuri, Horizons,

Ctr. for Counseling Servs., No. 94 C 2005, 1994 WL 695527, at *5

(N.D. Ill. Dec. 9, 1994) (finding state law analog to Rule 8 of

the Federal Rules of Civil Procedure is “indisputably a

procedural provision,” that “neither creates nor destroys any

substantive right.”) (citations omitted); see also Colley v.

Procter & Gamble Co., No. 1:16-CV-918, 2016 WL 5791658, at *15

(S.D. Ohio Oct. 4, 2016) (noting that Rule 8, like other Federal

Rules of Civil Procedure, ”do[es] not alter substantive rights

among the parties”). For example, subsections (a) through (d)

of the regulation, which describe a claimant’s burden of proof,

the level of specificity required, when to amend a claim,

amendments to the claim, and signature requirements, are

thoroughly procedural in character. Cf. Erlenbaugh v. United

States, 409 U.S. 239, 244 (1972) (“individual sections of a

single statute should be construed together”).

The relevant provision falls under § 136.105(e), which

begins with prefatory language stating what “[e]ach claim must

include.” Cf. Reading Law, at 219 (“prefatory text can suggest

only which permissible meanings of the enactment should be

preferred”). Subparagraph (e)(8) is but one of thirteen items

that claimants seeking recoveries from the Fund must include in

their claim to attain relief. Other enumerated claim

requirements include information like the “name, street and

mailing addresses” for the claimant, the “date, time, and place”

of the oil spill incident, a “general description of the nature

and extent of the incident,” “[e]vidence to support the claim,”

and communications between the claimant and RP. 33 C.F.R. §

136.105(e)(1), (2), (4), (6), (10). By design, the regulation

requires claimants to bolster their claim with as much

information as possible so that the NPFC can reasonably

determine whether reimbursement from the Fund is warranted.

This is reinforced by the final, catchall provision, which

requires claimants to include in their claim, “any other

information deemed relevant and necessary” by the Director,

NPFC, to properly adjudicate the claim. Id. § 136.105(e)(13)

(emphasis added). Nowhere does 33 C.F.R. § 136.105, or §

136.105(e) in particular, purport to enhance or limit, create or

destroy, any rights or entitlement, as Plaintiff’s construction

would suggest.

Finally, the OPA statute itself, which the Claims

Regulations implement, cuts against Plaintiff’s position, which,

if adopted, would effectively expand the scope of compensable

damages to administrative costs. The OPA defines “damages” as

those “specified in section 2702(b) of this title, and includes

the cost of assessing these damages.” 33 U.S.C. § 2701.

Section 2702(b) begins, “[d]amages . . . are the following,” and

proceeds to enumerate six categories of compensable damages.

The word “are” connotes a fixed, exhaustive list, whereas a word

such as “includes,” suggests a non-exhaustive list. See Bernal

v. NRA Grp., LLC, 930 F.3d 891, 894 (7th Cir. 2019) (“[T]he word

‘including’ generally ‘introduces examples, not an exhaustive

list.’”) (citation omitted). The statute thus recognizes six

types of damages, along with assessment costs therefor, but

nothing more. Thus, there is no authority in the OPA, express

or implied, that allows reimbursement of administrative costs.

2. Statutory Interpretation

Setting aside NPFC’s distinction between recoverable

“assessment” and non-recoverable “administrative” costs,

Plaintiff objects to NPFC’s wholesale denial of the GRS Demand,

despite acknowledging that GRS performed at least some

compensable damage assessment activities. (Pl.’s Mot. 18-19.)

According to Plaintiff, NPFC’s decision not to reimburse any

portion of the GRS Payment was arbitrary and capricious. (Id.)

For example, the Adjudicator stated it was “likely that GRS

performed some activities that would qualify as compensable

assessment costs,” that Meredith Management engaged GRS to

provide expertise to “assess and evaluate the third party damage

claims,” and that some of GRS’s work “likely qualifies as

assessment costs.” (See GRS Decision 6-8.) Plaintiff maintains

that once NPFC determined that some portion of GRS’s work

qualified as compensable OPA damages, NPFC was obliged to

determine the quantum of damage, and not reject the claim in its

entirety. (Pl.’s Mot. 18, 23.)

The court construes Plaintiff’s motion as implicitly

challenging NPFC’s statutory interpretation of the OPA.

Plaintiff’s challenge fails to grasp that the interplay of

several OPA statutes requires a responsible party, or its

subrogee, to link damages and assessment costs for which it

seeks compensation from the Fund, to specific third-party

claims. At bottom, NPFC denied the GRS Demand because

Claimants’ could not link GRS’s costs, whether assessment-

related or administrative, to specific third-party damages

claims. (Id. 6.) Despite NPFC’s repeated requests for

information, Claimants were unable to furnish evidence of the

amount of time GRS’s employees spent working on OPA compensable

third-party claims. This deficiency was fatal to the GRS

Demand. The reason why becomes clear when parsing the text of

the OPA, specifically its provisions governing “claims,”

“damages,” authorized uses of the Fund, and the subrogation

rights of responsible parties.

The Fund is authorized to make payments of claims for

uncompensated damages. 33 U.S.C. § 2712(4). A “claim” is “a

request, made in writing for a sum certain, for compensation for

damages . . . resulting from an incident.” Id. § 2701(3)

(emphasis added). As discussed earlier, “damages” are limited

to six specific categories, among them “injury to . . . real or

personal property, which shall be recoverable by a claimant who

owns or leases that property.” Id. § 2702(b)(2)(B). The “cost

of assessing these damages,” as noted previously, is likewise

included in the scope of damages. Id. § 2701(5). As Defendants

note, “‘these’ is a demonstrative adjective clarifying that the

assessing must be for the damages ‘specified in section

2702(b).’” (ECF No. 30-2, United States’ Cross Motion for

Summary Judgment and Opposition to Plaintiff’s Motion for

Summary Judgment (“Defs.’ Cross-Mot.”) 18.) This clearly

implies that assessment costs are recoverable for only valid,

compensable damage claims, which have occurred as the result of

an oil spill incident.

Further, a responsible party may submit a claim

directly to the Fund for uncompensated sums paid to third

parties who incurred property damage resulting from an oil

spill. 33 U.S.C. § 2713. Under such circumstances, the

responsible party is subrogated to the third-party claimant’s

rights. Id. § 2715. Thus, where responsible parties and their

insurers seek reimbursement from the Fund for payments made on

account of third-party property damage claims, their recovery is

limited to damages that are OPA-compensable. It follows that

the responsible party may only recover assessment costs for

third-party damage claims where the underlying claim itself was

compensable. The logical implication, is that a responsible

party or its insurer must link assessing expenses to a specific,

compensable damages claim, so that NPFC is appropriately

satisfied that any sums disbursed from the Fund constitute an

authorized use of its reserves under 33 U.S.C. § 2712.

NPFC advanced this very construction of the OPA when

it denied the GRS Demand:

The definition of damages includes the costs of

assessing the damages. If there are no compensable

damages, by deduction, there are no reasonable costs

of assessing them. So, when a claimant cannot be paid

for damages for one reason or another, the assessment

costs related to that claim also cannot be paid. If

the damages do not exist or if they were the result of

some other cause, such as Super Storm Sandy, there is

nothing to assess under the OPA, and thus, nothing to

be reimbursed. Thus, the assessment costs associated

with the third party claims denied by either the

RP/Claimants or the NPFC are not reimbursable from the

Fund or to the Fund.

(GRS Decision 13.)15

NPFC’s interpretation flows directly from the plain

text of the relevant OPA statutes—sections 2701, 2702, 2712, and

2715. And even if, arguendo, the above statutes were ambiguous,

NPFC’s interpretation is a manifestly reasonable reading of laws

that it is directly charged with administering, thereby

entitling NPFC’s construction to Chevron deference.

B. The GRS Decision Was Not Arbitrary and Capricious

Having affirmed NPFC’s legal interpretations, the only

remaining question is whether its explanation for denying the

GRS Demand is supported by substantial evidence. The court

finds NPFC properly examined the “relevant data and [] set out a

satisfactory explanation, including a rational connection

between the facts found and the choice made.” Karpova, 497 F.3d

at 268 (citation omitted).

In the main, Plaintiff contends Claimants proffered

sufficient evidence to allow NPFC to determine the extent to

which “GRS services were attributable to damage assessments for

properly paid damage claims versus other non-compensable

activities.” (Pl.’s Mot. 20 (quoting GRS Decision 6).) This

evidence included, inter alia: numerous GRS invoices, with time

15 NPFC provided a substantially identical analysis six months earlier

when it reimbursed Claimants for most of the Belson Demand. (See Belson

Decision 5-7.)

sheets detailing the daily work hours and billing rates for each

GRS employee; employees’ daily activity reports, with brief

narrative descriptions of the work performed; and, the Gutman

Declaration. (Id. 20-21.) Plaintiff maintains the Gutman

Declaration, which estimated how much time each GRS employee

spent working directly on damage assessment duties, should have

allayed NPFC’s particular concerns about the allocation of GRS’s

costs between recoverable and non-recoverable activities. (Id.

21.) But NPFC, in Plaintiff’s view, either improperly ignored

or did not give weight to this evidence. (Id.) By not

crediting Claimants’ submissions, and at least partly

reimbursing the GRS Payment, Plaintiff asserts NPFC “imposed an

elevated evidentiary standard which could not possibly have been

satisfied.” (Id. 22.) The court disagrees.

Claimants had the burden of providing all required

evidence, information, and documents to support the GRS Demand.

See 33 C.F.R. §§ 136.105(a), 135.106(e)(6). Further, the NPFC’s

Director deems what evidence is necessary to support a claim.

Id. § 135.106(a). Here, NPFC considered Claimants’ evidence,

and discussed it in great detail, but ultimately assigned it

little to no weight, or otherwise deemed it insufficient to

establish recoverable costs under the OPA. Ultimately, no

matter how voluminous Plaintiff’s evidentiary submissions,

without credible evidence parsing damage assessment activity

from administrative work, or, more importantly, linking GRS’s

work and hours to specific third-party claims, NPFC lacked a

rational basis to grant Claimants recovery for the GRS Demand.

Plaintiff cites no evidence in the Administrative

Record that suggests NPFC erroneously rejected the GRS Demand.

To begin with, Meredith Management’s purchase order for GRS’s

services states that GRS was to “[p]rovide personnel, equipment

and materials to administer third-party claims . . . .”

(US012607; US009517.) The purchase order says nothing of

assessment activities or damage estimation. After NPFC

initially denied the GRS Demand, Claimants submitted Mr.

Gutman’s Affidavit, which attached a spreadsheet detailing each

GRS adjuster/assessor’s activities with respect to each

individual third-party damage claim. (US012331-84.) Although

the spreadsheet details the work performed by each adjuster for

each third-party claim, it does not convey any information

regarding how much time was actually spent on those activities.

Without this data, NPFC lacked a coherent basis to allocate

costs for compensable claims.

The Gutman Declaration, submitted on reconsideration

after NPFC first denied the GRS Demand, attempted to fill this

gap by breaking down the percentage of time each GRS employee

worked on compensable damage assessment activities, versus

other, assessment-related work. (Gutman Decl. ¶ 16.)

Ultimately, Mr. Gutman’s allocation was ipse dixit, untethered

to contemporaneous records or other competent evidence. The

Adjudicator reasonably decided not to credit the Gutman

Declaration, because neither the OPA nor Claims Regulations

authorize reimbursing a claimant “for an unsupported estimated

percentage of costs incurred by the RP/Claimants to assess

damages for the claims submitted to the RP for adjudication.”

(GRS Decision 11.) Even if the Adjudicator accepted Mr.

Gutman’s allocations, the declaration failed to link the time

spent by GRS employees on purported assessment activities to

specific, compensable third-party claims. Claimants also did

not provide personnel hours and expenses related to individual

third-party claims, or complete field notes, as NPFC requested.

See Jian Hui Shao, 546 F.3d at 157–58 (“[W]hen a petitioner

bears the burden of proof, his failure to adduce evidence can

itself constitute the ‘substantial evidence’ necessary to

support the agency’s challenged decision.”) (citing Zhou Yun

Zhang v. INS, 386 F.3d 66, 78–79 (2d Cir. 2004)).

As an indication of NPFC’s allegedly arbitrary

decision-making, Plaintiff note that Clean Harbors Cooperative

LLC (“Clean Harbors”), an Oil Spill Removal Organization

(“OSRO”) hired to respond to the oil spill, was reimbursed for

apparent administrative costs, including invoices on behalf of

administrative assistants. (Pl.’s Mot. 11.) Defendants note

that this evidence comes through the Affidavit of Attorney

William Pallas, Esq., dated July 25, 2019, a submission

extrinsic to the Administrative Record. (Defs.’ Cross-Mot. 28.)

In any event, the relevant invoice concerns removal costs, which

are recoverable from the Fund under 33 U.S.C. § 2712(a)(1). In

the context of removal costs, which are distinct from “damages,”

the Fund may reimburse charges of an OSRO based on the removal

directions of the Federal On-Scene Coordinator (“FOSC”), who has

broad authority to determine which removal activities should be

conducted and what costs should be incurred during an OPA

incident. 40 C.F.R. Part 300. As Defendants point out, removal

costs thus present a different analysis, “because it depends on

what removal action the FOSC determined to be consistent with

the National Contingency Plan.” 33 C.F.R. § 136.205.

Finally, Plaintiff argues that given NPFC’s

acknowledgement that some of GRS’s costs were likely incurred

performing compensable activities, NPFC should have at least

held an inquest or evidentiary hearing, with live testimony from

GRS witnesses, to ascertain what portion of the GRS Demand was

compensable. (Pl.’s Mot. 22.) Neither the OPA nor Claims

Regulations confer any right to such a hearing. See Bean

Dredging, LLC v. United States, 773 F. Supp. 2d 63, 75 (D.D.C.

2011) (OPA “[does] not confer upon such parties a right to a

formal hearing, a right to present rebuttal evidence or

argument, or really any procedural rights at all.”). Because

the APA does not require a hearing in an informal adjudication,

this court would exceed its authority if it were to “impose

procedures on [NPFC] that are not mandated by the [APA] or by

other statute or regulation. Administrative decisions may be

set aside ‘only for substantial procedural or substantive

reasons as mandated by [the] statute.’” Guitard v. U.S. Sec. of

Navy, 967 F.2d 737, 742 (2d Cir. 1992) (quoting Vt. Yankee

Nuclear Power Corp. v. Nat. Res. Def. Council, Inc., 435 U.S.

519, 558 (1978)).

Accordingly, the court finds the GRS Decision was not

arbitrary and capricious, and will not set it aside.

II. The Mayship Decision

Plaintiff also submits that NPFC’s denial of the

Mayship Demand was arbitrary, capricious, and an abuse of

discretion. (Pl.’s Mot. 27.) For the reasons that follow, the

court declines to set aside the Mayship Decision.

A. Lost Profits

Plaintiff objects to NPFC’s factual analysis in the

Mayship Decision. Although NPFC’s interpretation of the

relevant law is not presently subject to challenge, the court

will briefly discuss the pertinent statutes and regulations

governing claims for lost profits under the OPA.

The OPA recognizes lost profits as allowable damages.

Pursuant to 33 U.S.C. § 2702(b)(2)(E), claimants may recover

damages “equal to the loss of profits or impairment of earning

capacity due to the injury, destruction, or loss of real

property, personal property, or natural resources . . . .”

Beyond a claimant’s general burden of providing all evidence,

information, and documentation to support its claim, see 33

C.F.R. §§ 136.105(a), 136.105(e)(6), the Claims Regulations

impose additional pleading demands on claimants seeking

reimbursement from the Fund for lost profits.

These particular pleading requirements are clearly

designed to aid NPFC in determining the causal link between the

oil spill and removal, on the one hand, and the claimant’s

alleged business interruption losses, on the other. A claimant

“must establish,” inter alia, that: its income was reduced as a

consequence of injury to, destruction of, or loss of the

property or natural resources, along with the amount of that

reduction; the claimant’s earnings or profits in comparable

periods and during the period when the claimed loss was

suffered, based on supporting documents like income tax returns,

financial statements, and similar documents; comparable profits

or earnings for same or similar activities outside of the

affected area; and whether claimant pursued alternative

business, if available, and the amount of income derived

therefrom. 33 C.F.R. § 136.233.

The regulations further limit allowable compensation

for lost profits to the “actual net reduction or loss of

earnings or profits suffered.” 33 C.F.R. § 136.235. In order

to make this showing, a claimant must furnish calculations for

net reductions that clearly reflect adjustments for: “(a) All

income resulting from the incident; (b) All income from

alternative employment or business undertaken; (c) Potential

income from alternative employment or business not undertaken,

but reasonably available; (d) Any saved overhead or normal

expenses not incurred as a result of the incident; and (e)

State, local, and Federal taxes.” Id.

B. The Mayship Decision Was Not Arbitrary and Capricious

Plaintiff argues that NPFC’s refusal to reimburse

Claimants for the Mayship Payment was contrary to the evidence,

and inconsistent with the Adjudicator’s acknowledgement that

there was “some evidence that Mayship Repair was impacted by the

oil removal activities from December 15, 2012 through January 4,

2013.” (Pl.’s Mot. 27 (quoting Mayship Decision 6).) According

to Plaintiff, once NPFC acknowledged that the presence of oil

spill contractors on Mayship’s premises impacted business

operations, it had to “analyze the evidence submitted concerning

the economic impact that the interruption had on Mayship’s

business and, ultimately, make a determination as to the quantum

of business interruption damages suffered by Mayship.” (Id.

28.) Plaintiff claims that “NPFC failed to properly consider”

the evidence before it, such as the “detailed Perullo

Declaration and other evidence submitted in support of the

Mayship claim.” (Pl.’s Reply 14 n.8.)

Contrary to Plaintiff’s assertions, NPFC analyzed and

devoted thorough attention to Claimants’ evidence in its

analysis, and arrived at a well-reasoned conclusion. Even

though NPFC found evidence of cleanup crew presence at Mayship

facilities in the two weeks immediately following the spill,

there was no evidence of a continued presence thereafter, once

major removal operations ceased. (Mayship Decision 7.) The

record indicated only intermittent monitoring activities after

January 4, 2013. The Adjudicator also declined to credit

Claimants’ contention that the absorbent boom in Mayship’s

vicinity impeded access to its dry docks, noting the boom was

placed landside of Mayship’s piers and docks. (Id. 8.) The

Adjudicator also considered the impact of Hurricane Sandy, which

made landfall in October 2012, only two months before the spill.

NPFC acknowledged that Hurricane Sandy may have been an

intervening or superseding cause of Mayship’s alleged losses,

citing Mr. Adam’s statements in news articles about the

extensive damage Sandy wrought on Mayship’s facilities. (Id.

9.) In short, NPFC found that Claimants failed to establish by

a preponderance of the evidence that removal activities

interfered with or impinged upon the productivity of Mayship’s

employees. (Id.)

At the heart of NPFC’s denial, was “persuasive

evidence” that Claimants’ $575,000 payment to Mayship was a

“negotiated settlement,” which lacked a clear basis in Mayship’s

actual documented losses arising from the removal activities.

(Mayship Decision 10.) NPFC found it telling that Claimants

only obtained and produced Mayship’s financial statements in

response to NPFC’s request for additional information. Indeed,

Mr. Perullo conceded that Mayship’s financial statements “were

not made available for [GRS’s] review prior to the resolution of

Mayship’s claim.” (Perullo Decl. ¶ 22.) Without Mayship’s

financials, it is unlikely Mr. Perullo could have rationally

verified Mayship’s lost profits due to the spill. The

Adjudicator thus inferred that Claimants could not have known

the extent of Mayship’s business interruption losses at the time

of the Mayship Payment, if Claimants themselves did not possess

Mayship’s relevant financial statements. (Mayship Decision 10-

11.) Accordingly, the Adjudicator reasonably determined that

the Mayship Payment represented a negotiated settlement, rather

than Claimants’ dollar-for-dollar compensation of Mayship’s

documented lost profits.

The financial statements, moreover, showed that

Mayship sustained a net loss in two of the four years

documented, and that the $575,000 Mayship Payment exceeded

Mayship’s combined annual profits in all four of those years.

(Mayship Decision 11 n.38.) The Adjudicator simply could not

square the Mayship Payment with a credible claim for actual

business interruption losses, given Mayship’s historical

performance. Moreover, Claimants did not provide NPFC with

written contracts or cancellation records for Mayship’s four

Lost Jobs. Without these documents, NPFC could not rationally

determine how Mr. Perullo arrived at a valuation of Mayship’s

losses.

In sum, NPFC reasonably denied the Mayship Demand

because Claimants failed to establish that Mayship’s financial

loss from the Lost or Delayed Jobs was due to the oil spill, and

could not demonstrate how the settlement payment to Mayship was

reflective of actual lost profits. Accordingly, the court

affirms the Mayship Decision.

CONCLUSION

For the reasons set forth above, the court GRANTS

Defendants’ cross-motion for summary judgment, and DENIES

Plaintiff’s motion for summary judgment. Plaintiff has failed

to establish that NPFC’s actions exceeded legal authority, were

arbitrary, capricious, an abuse of discretion, or otherwise not

in accordance with the law. The agency properly complied with

the underlying statute, the Oil Pollution Act of 1990, and the

promulgated regulations, 33 C.F.R. Part 136. Therefore, the

court will not set aside the GRS Decision or the Mayship

Decision, and dismisses the Complaint with prejudice. The Clerk

of Court is directed to enter judgment in Defendants’ favor and

close this case.

SO ORDERED.

Dated: Brooklyn, New York

September 24, 2020

/s/

KIYO A. MATSUMOTO

United States District Judge

Eastern District of New York