Petition for Writ of Certiorari — CITGO Asphalt Refining Company, et al., Petitioners v. Frescati Shipping Company, Ltd., et al.

Supreme Court briefOct 26, 2018

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APPENDIX

APPENDIX A

UNITED STATES COURT OF APPEALS,

THIRD CIRCUIT

————

No. 16-3470, 16-3552, 16-3867 & 16-3868

————

IN RE: PETITION OF FRESCATI SHIPPING COMPANY,

LTD., AS OWNER OF THE M/T ATHOS I AND

TSAKOS SHIPPING & TRADING, S.A., AS MANAGER OF

THE ATHOS I FOR EXONERATION FROM OR

LIMITATION OF LIABILITY

(E.D. Pa. No. 2–05–cv–00305)

————

UNITED STATES OF AMERICA

CITGO ASPHALT REFINING COMPANY;

CITGO PETROLEUM CORPORATION;

CITGO EAST COAST CORPORATION

(E.D. Pa. No. 2–08–cv–02898)

————

CITGO ASPHALT REFINING COMPANY;

CITGO PETROLEUM CORPORATION;

CITGO EAST COAST OIL CORPORATION,

Appellants in Nos. 16–3470; 16–3552

————

FRESCATI SHIPPING COMPANY, LTD.;

TSAKOS SHIPPING AND TRADING, S.A.,

Appellants in No. 16–3867

————

UNITED STATES OF AMERICA,

Appellant in No. 16–3868

————

Argued November 8, 2017

(Filed: March 29, 2018)

————

OPINION

Before: SMITH, Chief Judge, HARDIMAN, Circuit

Judge, and BRANN, District Judge*

SMITH, Chief Judge.

Table of Contents

I. Introduction .....................................................

295

II. Background ....................................................

295

a. Facts ............................................................

295

b. Procedural History ......................................

298

III. Jurisdiction and Standard of Review ..........

300

IV. The Safe Berth Warranty .............................

300

a. The Draft of the Athos I ..............................

301

b. Frescati’s Seamanship ................................

303

V. Wharfinger Negligence ..................................

306

VI. Subrogation and Equitable Recoupment .....

308

a. Subrogation and Subrogee-Specific

Defenses .......................................................

309

The Honorable Matthew W. Brann, United States District

Judge for the Middle District of Pennsylvania, sitting by

designation.

b. Equitable Recoupment ................................

311

VII. Limitation of Liability under the Oil

Pollution Act ................................................

313

VIII. Prejudgment Interest Rate ........................

314

IX. Conclusion .....................................................

315

I. Introduction

After a 1,900–mile journey from Venezuela to

Paulsboro, New Jersey, the M/T Athos I, a singlehulled oil tanker, had come within 900 feet of its

intended berth when it struck an abandoned anchor

on the bottom of the Delaware River. The anchor

pierced the Athos I’s hull, causing approximately

264,000 gallons of crude oil to spill into the river.

The cost of cleaning up the spill was $143 million.

We are presented with the question of how to apportion responsibility for that cost between three parties.

The first party comprises not only the shipowner,

Frescati Shipping Company, Ltd., but also the ship’s

manager, Tsakos Shipping & Trading, S.A. (collectively, “Frescati”). Frescati, through an intermediary,

contracted to deliver crude oil to the second party,

which is made up of several affiliated companies—

CITGO Asphalt Refining Company, CITGO Petroleum

Corporation, and CITGO East Coast Oil Corporation

(collectively, “CARCO”). The oil shipment was to be

delivered to CARCO at its marine terminal in Paulsboro.

After the oil spill, Frescati paid for the cleanup effort,

and was eventually reimbursed $88 million by the

third party to this litigation, the United States, pursuant to the Oil Pollution Act (OPA) of 1990, 33 U.S.C.

§ 2701 et seq. Frescati and the United States now seek

to recover their cleanup costs from CARCO.

II. Background

a. Facts1

The M/T Athos I was a single-hulled tanker ship,

measuring approximately 748 feet long and 105 feet

wide.2 As owner of the ship, Frescati chartered it to an

intermediary which assigned it to a tanker pool.

CARCO sub-chartered the Athos I from the tanker

pool to deliver a shipment of crude oil from Puerto

Miranda, Venezuela, to CARCO’s berth in Paulsboro,

New Jersey. CARCO was the shipping customer as

well as the wharfinger who operated the berth.

The Athos I, carrying CARCO’s shipment, left

Venezuela in mid-November 2004 under the command

of the ship’s master, Captain Iosif Markoutsis. CARCO

had instructed the Athos I to load to a draft3 of 37 feet

or less in Venezuela, and provided a warranty that the

ship would be able to safely reach the berth in

Paulsboro as long as it arrived with a draft of 37 feet

or less. When the Athos I left Venezuela, it had a draft

of 36' 6". Over the course of the Athos I’s journey, the

ship burned fuel and the crew consumed fresh water.

As the ship grew lighter, it rode higher on the water.

By the time it reached the entrance to the Delaware

The facts are undisputed unless otherwise noted.

Single-hulled tanker ships drew the attention of regulators

and the public in the wake of the 1989 Exxon Valdez oil spill off

the Alaskan coast; the Exxon Valdez, like the Athos I, was a

single-hulled tanker. Single-hulled ships were initially subjected

to extra regulation, see, e.g., 33 C.F.R. § 157.455, but have since

been phased out of operation in the United States in favor of

double-hulled ships. See 46 U.S.C. § 3703a.

A ship’s draft is the measurement from the water line to the

bottom of the ship’s hull, known as the keel. As a ship loads cargo,

it becomes heavier and sits lower in the water. Its draft thereby

increases.

Bay, the Athos I was drawing 36' 4". Because the fuel

and fresh water were consumed from tanks located in

the stern, or rear, of the ship, the Athos I was no longer

sailing at an even keel; it was “trimmed by the bow,”

meaning that the bow, or front of the ship, was deeper

in the water than the ship’s stern. To return the ship

to an even keel, the Athos I took on approximately 510

metric tons of ballast to tanks in the rear of the ship.

Although the parties dispute how much the Athos I

was drawing as it approached CARCO’s berth, the

District Court found that the added ballast brought

the ship’s draft to 36' 7".

The Athos I reached the entrance to the Delaware

Bay without incident on November 26th. All vessels

traveling north from the Delaware Bay to the

Delaware River are required to use a Delaware River

Pilot to navigate the waters. At the appropriate time,

a local river pilot, Captain Howard Teal, Jr. boarded

the ship and guided it up the Delaware River until it

reached a section of the river near CARCO’s berth. At

that point, a local docking pilot, Captain Joseph

Bethel, replaced Captain Teal and began to navigate

the ship to its berth at Paulsboro. Captains Teal and

Bethel both engaged Captain Markoutsis in conversations about the Athos I, its passage from the Delaware

Bay to the Paulsboro berth, water depth, underkeel

clearance, and other local conditions. The substance

and sufficiency of those conversations are disputed by

the parties.

CARCO’s berth is on the New Jersey side of the

Delaware River, directly across from Philadelphia

International Airport. To reach the berth from the

main river channel, ships must pass through an anchorage immediately adjacent to the berth. The anchorage,

known as Federal Anchorage Number 9 or the Mantua

Creek Anchorage, is a federally-designated section of

the river in which ships may anchor; it is periodically

surveyed for depth and dredged by the Army Corps of

Engineers, as Corps resources allow. No government

agency is responsible for preemptively searching for

unknown obstructions to navigation in the anchorage,

although the Coast Guard, the National Oceanic and

Atmospheric Administration (NOAA), and the Corps

of Engineers work together to remove or mark

obstructions when they are discovered. Anyone who

wishes to search for obstructions in the anchorage may

do so, but anyone wishing to dredge in the anchorage

requires a permit from the Corps of Engineers.

It was in this anchorage on November 26, 2004, at

9:02 p.m., that the allision occurred.4 The Athos I was

only 900 feet—not much more than the ship’s length—

from CARCO’s berth. The ship was “just about dead in

the water” as Captain Bethel slowly positioned it to

dock. Suddenly, the ship began to list and oil appeared

in the river. At the time of the allision, the ship was

in the middle of a 180° rotation, guided by tugboats,

and moving astern and to port (backwards and to the

ship’s left). The path taken by the Athos I through the

anchorage passed, at its shallowest point, over a 38–

foot shoal. Most of the anchorage was deeper, and the

depth of the river at the site of the allision was at least

41.65 feet at the time.

Captain Bethel immediately called the Coast Guard

to alert them to the spill, while Captain Markoutsis

rushed to the engine room and transferred oil from the

breached cargo tank into another tank. The crew of the

An allision is “[t]he contact of a vessel with a stationary object

such as an anchored vessel or a pier.” Allision, BLACK’S LAW

DICTIONARY (10th ed. 2014).

Athos I was eventually able to stop the leak, but not

before 264,321 gallons of crude oil had spilled into the

Delaware River.

The cleanup effort began almost immediately.

Although it was ultimately successful, it took months

to complete and the efforts of thousands of workers at

a cost of $143 million. The cause of the allision was not

discovered until more than a month later, when an

abandoned anchor was discovered on the riverbed. The

search for the obstruction that caused the allision

proved difficult. An experienced sonar operator using

side-scan sonar conducted the first search shortly after

the allision, but did not recognize the anchor.5 A

second search by the same operator, conducted several

weeks later, eventually discovered the anchor with the

use of side-scan sonar in combination with divers and

magnetometers. The anchor weighed approximately

nine tons and was 6' 8" long, 7' 3" wide, and 4' 6" high.

It has since been removed from the river.

The parties dispute the positioning of the anchor at

the time of the allision. An anchor like the one that

punctured the Athos I has two stable positions. It can

sit at rest in the “flukes-up” or “flukes-down” position.

A flukes-up anchor stands almost upright on its crown,

Side-scan sonar is used to locate objects on the sea floor and

works like a camera, but using sound instead of light to form an

image. Single-beam sonar, by contrast, uses sound to measure the

depth along a single line traced by a sounding mechanism known

as a towpath. If an obstruction is not located along the towpath,

it would not be detected, and even if the towpath crossed an

obstruction, the data would simply show a depth change rather

than the obstruction itself. Before the allision, CARCO used

single-beam sonar to survey its berthing area and a small portion

of the anchorage. The government typically used single-beam

sonar when it surveyed the anchorage for depth and dredging

purposes.

with the flukes pointed upward at a 65° angle, while a

flukes-down anchor has essentially tipped over, with

both the crown and flukes of the anchor lying horizontally on the riverbed. In the flukes-up position, the

anchor sticks up approximately seven feet above the

riverbed, but in the flukes-down position, it rises only

about 3'5" above the riverbed. The District Court found

that the anchor was flukes-up at the time of the

allision, but CARCO asserts that the anchor was

flukes-down, pointing to side-scan sonar data gathered

as part of a geophysical study of the Delaware River

that showed the anchor was flukes-down in 2001,

three years before the allision.6 The anchor was also

flukes-down when it was discovered after the allision.

Between 2001 and the allision in 2004, 241 vessels

went to CARCO’s Paulsboro berth, and many others

have anchored in the anchorage over the years. The

District Court theorized that one of those anchored

ships could have dragged its own anchor chain along

the riverbed, catching on the abandoned anchor and

shifting its position. The court ultimately concluded

that although the actual cause of the anchor’s movement would never be known, at some point between

the geophysical study in 2001 and the allision in 2004,

the anchor shifted from flukes-down to flukes-up. A

flukes-down anchor would not have allided with the

Athos I if the Athos I’s draft was less than 37 feet; a

flukes-up anchor would have.

Now, more than thirteen years after the allision, the

Athos I has been scrapped, the anchor removed from

The anchor was identified in the geophysical study data only

after the allision occurred. The parties agree that in 2001, the

anchor was flukes-down, and that no one was aware of the

anchor’s existence before the allision—except, perhaps, the stillunidentified owner who abandoned it.

the river, and the oil spill cleaned up. What remains is

this case for apportionment of cleanup costs.

b. Procedural History

This case, like the Athos I, has been on a long

journey. Over the past thirteen years, the matter has

been to trial before two different judges and heard on

appeal before two separate panels of this Court. We

briefly summarize that history.

Litigation began shortly after the allision in

January, 2005, when Frescati filed a “Petition for

Exoneration from or Limitation of Liability.” CARCO

and others filed claims for damages associated with

the spill. Frescati then filed a counterclaim against

CARCO for its damages. The United States eventually

reimbursed Frescati for some of its cleanup expenses

pursuant to the OPA, and filed suit against CARCO as

a partial subrogee to some of Frescati’s claims. The

claims of Frescati and the United States against

CARCO were consolidated with CARCO’s counterclaims and defenses, forming the litigation as it exists

today.

The case was first tried in a forty-one-day bench

trial before the Honorable John P. Fullam. Judge

Fullam found that CARCO was not liable for the

casualty in contract, tort, or otherwise; Frescati and

the United States appealed. On appeal, we affirmed in

part, vacated in part, and remanded the case because

the District Court had failed to make appropriate

findings of fact and conclusions of law as required by

Fed. R. Civ. P. 52(a)(1). In re Frescati, 718 F.3d 184,

189, 196–97 (3d Cir. 2013).

We determined, among other things, that Frescati

was a third-party beneficiary of CARCO’s safe berth

warranty, and that the allision occurred in the

10a

approach to CARCO’s terminal, meaning that CARCO

had an unspecified duty of care to Frescati in tort. We

remanded for the District Court to determine whether

Frescati met the conditions for the safe berth warranty

to apply. We also asked the District Court, if necessary, to determine the appropriate duty of care

CARCO owed Frescati and whether CARCO breached

that duty. 718 F.3d at 214–15.

Judge Fullam retired before the case was remanded.

Upon its return to the District Court, the case was

assigned to the Honorable Joel H. Slomsky as a

successor judge pursuant to Fed. R. Civ. P. 63. Under

the terms of that rule, Judge Slomsky certified his

familiarity with the record and recalled more than

twenty witnesses over the course of a thirty-one-day

proceeding.

The District Court held that CARCO was liable to

Frescati, and the United States as Frescati’s subrogee,

for breach of contract. CARCO’s contract included a

provision known as a safe berth warranty, which, for

purposes of this appeal, warrantied that CARCO’s

berth would be safe for the Athos I as long as the ship

had a draft of 37 feet or less and Frescati did not cause

the allision through bad navigation or negligent seamanship. The District Court concluded that CARCO

breached the warranty because the Athos I had a draft

of 36' 7" at the time of the allision, exercised good

navigation and seamanship, and yet still hit an anchor

within the geographic area covered by the warranty.

On appeal, CARCO argues that the Athos I had a draft

much deeper than the warrantied depth of 37 feet, and

that Frescati demonstrated negligent seamanship by

violating several federal maritime regulations relating

to underkeel clearance and safe navigation.

11a

The District Court also found CARCO liable in tort

to Frescati,7 concluding that CARCO had a duty, as

operator of the berth, to search for obstructions in the

approach to its berth. Specifically, the District Court

concluded that CARCO had a duty to use side-scan

sonar to search for unknown obstructions to navigation in the approach to its berth, and to remove any

such obstructions or warn invited ships—like the

Athos I—of their presence. Because CARCO had not

taken any action to search for obstructions, the District

Court held CARCO liable in tort—for the same amount

for which it was liable in contract. The District Court’s

contract and tort holdings independently support the

judgment for Frescati.

CARCO, in a motion for partial summary judgment

before the District Court, asked that its liability, like

Frescati’s, be limited under the OPA. Because CARCO

did not raise the defense until after the first trial

and appeal, almost a decade into this litigation, the

District Court held that the defense was waived, and

in the alternative, that it failed on the merits.

The District Court did, however, partially credit

CARCO’s equitable recoupment defense against the

United States. CARCO argued that the conduct of

three federal agencies—the Coast Guard, NOAA, and

the Army Corps of Engineers—misled CARCO into

believing that the United States was maintaining the

anchorage free of obstructions. In addition, CARCO

argued that equity requires the United States to bear

the cost of the cleanup rather than CARCO. The

District Court ultimately reduced the United States’

The United States is not a party to the tort claim, pursuant

to a partial settlement agreement it reached with CARCO in

2009.

12a

recovery against CARCO by 50%, rather than acceding

to CARCO’s request to eliminate its liability entirely.

Finally, the District Court held that Frescati was

entitled to prejudgment interest at the federal postjudgment rate rather than the higher U.S. prime rate

requested by Frescati.

The District Court ultimately awarded Frescati

$55,497,375.958 on the claims of breach of contract and

negligence, plus prejudgment interest of $16,010,773.75,

for a total judgment of $71,508,149.70. The United

States, after the court’s 50% reduction, was awarded

$43,994,578.66 on its subrogated breach of contract

claim, with prejudgment interest of $4,620,159.98, for

a total judgment of $48,614,738.64.

All three parties now appeal. We will affirm the

District Court’s judgment in favor of Frescati on the

breach of contract claim and the prejudgment interest

award, as well as the District Court’s denial of CARCO’s

motion for partial summary judgment on its limitation

of liability defense. We will vacate the District Court’s

judgment in favor of Frescati on the negligence claim.

We will affirm in part the District Court’s judgment in

favor of the United States with respect to CARCO’s

Frescati’s liability under the OPA for the cost of cleaning up

the spill was limited to approximately $45 million. The United

States reimbursed it for the remaining $88 million of its qualifying cleanup expenses. In addition to the $45 million in OPA

damages, Frescati also incurred roughly $10 million in damages

that fell outside the scope of the OPA’s liability cap—third-party

claims; cleanup expenses for recreational boats; the cost of

removing the anchor and the pump casing from the riverbed; a

settlement with a nearby nuclear power plant that had to shut

down; unrepaired hull damage to the Athos I, and other miscellaneous expenses. Frescati’s contract recovery of $55 million was

based on both its OPA and non-OPA damages.

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liability on the subrogated breach of contract claim,

but because CARCO’s equitable recoupment defense

fails, we will reverse and remand for further proceedings to recalculate damages and prejudgment interest.

III. Jurisdiction and Standard of Review

The District Court had admiralty jurisdiction pursuant to 28 U.S.C. § 1333(1). We have jurisdiction over

this appeal under 28 U.S.C. § 1291.

“On appeal from a bench trial, we review a district

court’s findings of facts for clear error and exercise

plenary review over conclusions of law.” Norfolk S. Ry.

Co. v. Pittsburgh & W. Va. R.R., 870 F.3d 244, 253

(3d Cir. 2017). “A finding of fact is clearly erroneous

when it is completely devoid of minimum evidentiary

support displaying some hue of credibility or bears no

rational relationship to the supportive evidentiary

data.” VICI Racing, LLC v. T-Mobile USA, Inc., 763

F.3d 273, 283 (3d Cir. 2014); In re Frescati, 718 F.3d

at 196.

IV. The Safe Berth Warranty

CARCO promised that the Athos I would be directed

to a location “she may safely get (always afloat),” a

promise known as a safe port or safe berth warranty.

JA at 1211. Such a promise provides, among other

things, “protection against damages to a ship incurred

in an unsafe port to which the warranty applies.” In re

Frescati, 718 F.3d at 197.

A port is deemed safe where the particular

chartered vessel can proceed to it, use it, and

depart from it without, in the absence of abnormal

weather or other occurrences, being exposed to

dangers which cannot be avoided by good navigation and seamanship. Whether a port is safe refers

14a

to the particular ship at issue, and goes beyond

the immediate area of the port itself to the

adjacent areas the vessel must traverse to either

enter or leave. In other words, a port is unsafe—

and in violation of the safe berth warranty—

where the named ship cannot reach it without

harm (absent abnormal conditions or those not

avoidable by adequate navigation and seamanship).

Id. at 200 (quotations and citations omitted). “[T]he

safe berth warranty is an express assurance made

without regard to the amount of diligence taken by the

charterer.” Id. at 203. For our purposes, a safe berth

warranty promises that a ship with a draft less than

the warrantied depth is covered by the warranty in the

absence of bad navigation or negligent seamanship.

Our prior opinion called for the District Court to

resolve three issues on remand: the draft limit beyond

which the safe berth warranty would not apply; the

actual draft of the Athos I at the time of the allision;

and whether the warranty was negated by bad navigation or negligent seamanship. Id. at 204–05, 204 n.20.

As an initial matter, the District Court found that

the safe berth warranty applied to ships drawing less

than 37 feet, a finding neither party challenges on

appeal. The remaining issues, then, are whether the

Athos I had a draft of less than 37 feet, and if it did,

whether bad navigation or negligent seamanship by

Frescati negated the warranty.

a. The Draft of the Athos I

The District Court found that the Athos I had a draft

of 36' 7" at the time of the allision. The court based this

finding on the undisputed draft of the Athos I at the

time of its departure from Puerto Miranda—36' 6"—as

15a

well as expert testimony regarding the condition of the

ship and its estimated draft at Paulsboro.9

CARCO challenges the District Court’s determination of the Athos I’s draft, arguing that the District

Court improperly based its finding on a speculative

assumption about the orientation of the abandoned

anchor. Specifically, CARCO disputes the District

Court’s finding that the anchor shifted from a flukesdown position to a flukes-up position sometime between

2001 and the allision in 2004, a shift that caused the

anchor to intrude within the 37–foot safe depth

promised by CARCO. CARCO argues that the District

Court failed to make a finding as to the precise

mechanism by which the anchor shifted from flukesdown to flukes-up. The anchor’s orientation matters; if

the accident occurred while the anchor was flukesdown, the Athos I necessarily would have had a draft

that exceeded the scope of CARCO’s warranty.10

Frescati’s expert, Anthony Bowman, developed the Seamaster

software program, which allows him to enter the measurements

of a ship—including the weight, dimensions, and strength of all

its constituent parts, such as the hull, cargo, and supplies—and

calculate, among other things, a ship’s draft. Having considered

the ship’s records, information about the ballast tanks, and his

own software, Bowman testified that at the time of the allision,

the Athos I had a draft of 36' 7". The District Court credited his

testimony.

The District Court made undisputed findings of fact as to the

height of the anchor in a flukes-down position (41 inches or 3.42

feet) and the depth of the river at the time and location of the

allision (41.65 feet). Assuming for the moment that the anchor

was flukes-down, as CARCO argues, the allision would not have

occurred unless the Athos I had a draft of at least 38.23 feet, or

just under 38' 3", significantly in excess of the warrantied draft

of 37 feet.

16a

Broadly speaking, the District Court made three

findings of fact related to the anchor’s orientation.

First, the court and parties agree that, three years

before the allision, the anchor was in the flukes-down

position.11 Second, the District Court found that at

some point before the allision, the anchor shifted into

the flukes-up position. Finally, after the allision, the

anchor was eventually discovered back in the flukesdown position—perhaps unsurprising, given the force

of its encounter with the Athos I.

CARCO attacks the second finding, arguing that

there was insufficient evidence in the record to support

the District Court’s suggestion that a “sweeping anchor

chain” could have caught the anchor and shifted it into

the flukes-up position.12

Experts for both sides were able to identify the flukes-down

anchor in a sonar scan performed in 2001 as part of an independent geophysical study.

Ships at anchor move with the tide, back and forth as the

tide comes in and goes out. The anchor chain drags or “sweeps”

across the riverbed as the ship floats, potentially shifting the

position of objects on the riverbed, and leaving scour marks on

the riverbed. Anchor chains also move along the river bottom

when the anchor is pulled back onto the ship. CARCO, for its

part, characterizes the idea that an anchor chain might have

moved the abandoned anchor as “fantastical,” “inexplicabl[e],” an

“astonishing assertion,” “facially implausible,” “pure and wild

speculation,” “pure speculation,” “conjecture,” “speculative and

unsupported,” and, once again, “implausible.” CARCO Opening

Br. 4, 53–55; CARCO Reply Br. 32. The District Court pointed out

that scour marks were found on the river bottom near the site of

the allision, but ultimately decided only that the anchor was in

the flukes-up position at the time of the allision. JA at 78

(“Although the actual cause of the anchor’s movement to a ‘flukesup’ position will never be known, the Court finds that at some

point after December 2001, this movement occurred and the

17a

We find CARCO’s arguments unconvincing, primarily because the “sweeping anchor chain” theory,

however plausible or implausible, is not necessary to

sustain the District Court’s finding. Let us imagine a

piece of furniture (a sofa, perhaps, or an armchair)

that has fallen off the back of a pickup truck onto a

roadway. One driver reports seeing the furniture in

the right lane. A while later, a second driver hits the

furniture. The second driver asserts that the furniture

was in the left lane when he struck it, and provides

evidence to that effect. A highway patrolman shows up

later and finds the furniture once again in the right

lane. A court may find, without committing error, that

the furniture was in the right lane and moved to the

left without making a specific finding as to the precise

method by which the furniture moved from one lane to

the other. Perhaps another driver hit it; perhaps a

pedestrian tried to move it out of the road but did not

finish the job. When credible evidence shows that the

second driver was driving in the left lane, a finding to

that effect does not become error because the furniture

was in the right lane when the first driver passed, or

changed position after—or because of—the encounter

with the second driver.

Here, the record contains sufficient evidence to

support the finding that the anchor was, in fact,

flukes-up at the time of the allision. How exactly the

anchor changed position does not impact our sufficiency determination. As an initial matter, the movement

of the Athos I at the time of the allision and the

damage to its hull are sufficient to show that the

anchor was flukes-up. And substantial evidence unrelated to the anchor showed that the Athos I was

anchor was positioned in a ‘flukes-up’ orientation when it allided

with the Athos I.”).

18a

drawing 36' 7" at the time of the allision—a draft at

which the allision would not have occurred had the

anchor been flukes-down. That is enough to support

the District Court’s finding that the anchor moved

from flukes-down to flukes-up.

The movement of the ship and damage to its hull

shows that the anchor must have been flukes-up. The

District Court found that the Athos I was moving

astern and to port at the time of the allision, a finding

CARCO does not challenge. Based on that movement,

the scoring left by the anchor on the hull, the size and

shape of the two holes the anchor created, and the

damage to the anchor itself also supported the District

Court’s finding that the anchor must have been flukesup at the time of the allision. CARCO’s own expert

witness, on cross-examination, testified that if the

Athos I were moving astern and to port, the damage to

the Athos I’s hull would necessarily require a flukesup anchor.13 JA at 1021–22.

Nor did the District Court base its finding of a 36' 7"

draft on the flukes-up anchor alone. While CARCO

argues that the anchor was flukes-down, and that

therefore the Athos I must have had a deep draft, the

reverse is also true. If the Athos I had a draft of 36' 7",

then the anchor must have been flukes-up. The

District Court credited expert testimony that the ship

had a 36' 7" draft. The ballast tanks contained no extra

liquid that would have affected the ship’s draft, a

finding that CARCO does not challenge on appeal. The

ship left Puerto Miranda with a draft of 36' 6". Visual

observation of the ship by experts and crewmembers

immediately after the allision suggested the Athos I

CARCO’s theory at trial, abandoned on appeal, was that the

ship was not moving astern and to port.

19a

had a 36' 7" draft before the allision. And, on appeal,

CARCO fails to offer any suggestion as to how the

draft might have increased by more than a foot

without the crew’s knowledge or any evidence that the

ballast tanks were faulty.14

We conclude there was no clear error in the District

Court’s determination that the Athos I had a draft of

36' 7" at the time of the allision. The ship was,

therefore, within the scope of CARCO’s safe berth

warranty.

b. Frescati’s Seamanship

A safe berth warranty applies only in the absence of

bad navigation or negligent seamanship. CARCO

argues on appeal that Frescati violated several maritime regulations related to the operation of singlehulled tankers, and that those regulatory violations

serve as sufficient proof of negligent seamanship. The

District Court concluded that Frescati did not violate

any relevant regulations, and enforced the safe berth

warranty. We agree with the District Court that

Frescati did not violate any relevant regulations.

On appeal, CARCO argues specifically that Frescati

violated two federal regulations: 33 C.F.R. § 157.455

and 33 C.F.R. § 164.11. Section 157.455 applied to

certain single-hulled tankers during the period they

were being phased out of operation, while § 164.11

The Athos I passed safely over a 38–foot shoal less than

fifteen minutes before the allision. JA at 203. It seems that if the

Athos I had a draft deep enough to hit the flukes-down anchor (a

minimum of 38.23 feet, see supra note 10), it would have

encountered the 38–foot shoal before it ever encountered the

anchor. A flukes-down anchor would have been deeper than the

38–foot shoal even at the anchor’s shallowest point. JA at 77, 78,

85.

20a

applies to certain ships above 1,600 gross tons. 33

C.F.R. §§ 157.400, 164.01. Both sections applied to the

Athos I at the time of the allision.

Section 157.455 requires the owner or operator of a

single-hulled tanker to provide certain written guidance to the ship’s master for purposes of estimating the

tanker’s underkeel clearance.15 33 C.F.R. § 157.455(a). It

also requires the master to use that guidance to plan

the ship’s passage, estimate the underkeel clearance,

33 C.F.R. § 157.455(a)–(b) reads:

(a) The owner or operator of a tankship, that is not fitted

with a double bottom that covers the entire cargo tank

length, shall provide the tankship master with written

under-keel clearance guidance that includes—

(1) Factors to consider when calculating the ship’s

deepest navigational draft;

(2) Factors to consider when calculating the anticipated

controlling depth;

(3) Consideration of weather or environmental conditions; and

(4) Conditions which mandate when the tankship owner

or operator shall be contacted prior to port entry or getting underway; if no such conditions exist, the guidance

must contain a statement to that effect.

(b) Prior to entering the port or place of destination and

prior to getting underway, the master of a tankship that is

not fitted with the double bottom that covers the entire

cargo tank length shall plan the ship’s passage using guidance issued under paragraph (a) of this section and estimate

the anticipated under-keel clearance. The tankship master

and the pilot shall discuss the ship’s planned transit

including the anticipated under-keel clearance. An entry

must be made in the tankship’s official log or in other

onboard documentation reflecting discussion of the ship’s

anticipated passage.

33 C.F.R. § 157.455(a)–(b).

21a

consult with the relevant pilots who will guide the ship

to its berth, and make a log entry reflecting discussion

of the ship’s underkeel clearance with the pilot. 33

C.F.R. § 157.455(b). Section 164.11 mandates that

the master ensure the pilot is informed of certain

information, including the ship’s draft and tidal

conditions.16 33 C.F.R. § 164.11.

CARCO argues that Frescati was responsible for

three specific violations, each of which allegedly caused

the allision. First, CARCO claims that Frescati failed

to adequately plan the ship’s passage. Second, CARCO

claims that Frescati failed to estimate the Athos I’s

underkeel clearance. Finally, CARCO claims that

Frescati failed to ensure that an adequate master-pilot

exchange occurred, and made no log entry that would

reflect such an exchange.

With respect to planning the passage, CARCO

argues that 33 C.F.R. § 157.455 requires a written

voyage plan. Frescati allegedly violated that requirement by failing to finalize an official voyage plan

33 C.F.R. § 164.11 reads:

The owner, master, or person in charge of each vessel

underway shall ensure that:

....

(k) If a pilot other than a member of the vessel’s crew is

employed, the pilot is informed of the draft, maneuvering

characteristics, and peculiarities of the vessel and of any

abnormal circumstances on the vessel that may affect its

safe navigation.

...

(n) Tidal state for the area to be transited is known by the

person directing movement of the vessel . . . .

33 C.F.R. § 164.11.

22a

document using the Tsakos Voyage Plan form contained in the Tsakos Vessel Operation Procedures

Manual. See JA at 1178–85.

The text of § 157.455 undermines CARCO’s argument. The regulation does not itself require a written

voyage plan. Paragraph (a) of the regulation requires

that Frescati create “written under-keel clearance

guidance,” which must contain “factors to consider”

when evaluating draft, water depth, and weather conditions. Paragraph (b) requires that the master plan

the ship’s passage using those “factors to consider” in

the guidance required by paragraph (a). Nowhere does

this regulation require that the master’s passage plan

be in writing; the only reference to a writing in

paragraph (b) comes in the requirement that some

official log of the master-pilot conference be recorded.

CARCO conflates the passage plan requirement of

paragraph (b)—to consider certain relevant factors

when planning—with the “Voyage Plan” form contained in Frescati’s Vessel Operation Procedures

Manual. See JA at 1180. The Voyage Plan form focuses

on plotting the course of the vessel from berth to berth;

paragraphs (a) and (b) of the regulation, on the other

hand, serve to create a reference list for the ship’s

master of relevant factors to consider when estimating

underkeel clearance.

Frescati satisfied the requirements of paragraph (a)

by providing written underkeel clearance guidance in

Section 3.417 of its Vessel Operation Procedures Manual.

JA at 1191. The Manual appropriately lists factors to

The Vessel Operation Procedures Manual appears to contain

a typographical error listing the appropriate section as 2.4 rather

than 3.4, as it appears in the Table of Contents. See JA at 1189,

1191.

23a

consider, including “sea state and swell,” “tidal conditions,” and “the effect of squat,”18 and suggests to the

master that 10% or 5% underkeel clearance margins

would typically be appropriate. Id.

Furthermore, Frescati satisfied the planning requirement of paragraph (b) because the Athos I’s master,

Captain Markoutsis, considered factors like the sea

state, tidal condition, and the effect of squat. Even

though CARCO provided a safe berth warranty for a

draft up to 37 feet, Captain Markoutsis loaded the ship

to only 36' 6" because he was “afraid” of a 37–foot draft,

and eventually entered the Delaware River with a

draft of 36' 7". In re Frescati, 718 F.3d at 204. The

charts in the Athos I were marked with the 38–foot

controlling draft in the anchorage. JA at 992. Captain

Teal, the river pilot, testified that he and Captain

Markoutsis discussed the draft, wind, visibility, and

tides. We agree with the District Court that Frescati

fully complied with the planning requirement of

§ 157.455(b)—that is, to use the factors listed in the

Vessel Operating Procedures Manual when planning

the passage.

CARCO’s second argument is that Frescati violated

§ 157.455(b) because Captain Markoutsis failed to

estimate the Athos I’s underkeel clearance. The District

Court did not err in finding that Captain Markoutsis

had estimated underkeel clearance. Captain Markoutsis

“Squat is a hydrodynamic phenomenon, which occurs when

a ship is moving through the waters. As a ship moves forward, it

displaces a volume of water. The displaced water rushes under

the keel of the ship and creates a low pressure area causing the

ship to sink down toward the riverbed. The faster a ship is

moving, the more the ship will sink down towards the riverbed.

This process causes a ship to be closer to the riverbed by

increasing a vessel’s draft.” JA at 70 (citations omitted).

24a

discussed the draft, tidal conditions, and anticipated

underkeel clearance with Captain Teal. JA at 801–

802. They estimated that the ship would have at least

1.5 meters’ clearance—nearly five feet. Id. Captains

Bethel and Markoutsis also discussed the draft and

believed they would have sufficient clearance. JA at

833, 837. CARCO highlights that there is no evidence

of written underkeel clearance estimates, but § 157.455

does not require written estimates.

Finally, CARCO argues that the master-pilot exchange

required by § 157.455 and § 164.11 was inadequate. In

general, master-pilot exchanges are intended to allow

the master to share the navigational characteristics of

his ship with the pilot who will be guiding it, and for

the pilot to share local conditions such as weather,

depth, and the tide with the master. Section 157.455(b)

requires that “[t]he tankship master and the pilot

shall discuss the ship’s planned transit including the

anticipated under-keel clearance. An entry must be

made in the tankship’s official log or in other onboard

documentation reflecting discussion of the ship’s

anticipated passage.” 33 C.F.R. § 157.455(b). Section

164.11 requires that the master ensure that

[i]f a pilot other than a member of the vessel’s

crew is employed, the pilot is informed of the

draft, maneuvering characteristics, and peculiarities of the vessel and of any abnormal circumstances

on the vessel that may affect its safe navigation. . . .

[and that the] [t]idal state for the area to be transited is known by the person directing movement

of the vessel.

33 C.F.R. § 164.11(k), (n).

25a

Captain Markoutsis was responsible for discussing

the draft, underkeel clearance, maneuvering characteristics, and tidal state with the two pilots who guided

the Athos I. The testimony shows that Captain

Markoutsis did so, discussing all the relevant information with both pilots, and that he recorded the

conversation on the signed Pilot Card, which served

as sufficient documentation of the master-pilot

conference. The District Court additionally credited

Frescati’s expert witness, Captain Betz, who observed

both Captain Teal and Captain Bethel testify. Captain

Betz opined that the master-pilot exchanges were

adequate and customary in all respects.

Frescati operated the Athos I with neither bad

navigation nor negligent seamanship. Nevertheless,

the allision occurred. The District Court did not err in

concluding that the allision resulted from a breach of

CARCO’s safe berth warranty.

V. Wharfinger Negligence

CARCO wore two hats in its dealings with Frescati,

as a shipping customer and as a wharfinger. These

dual roles exposed CARCO to liability under two

independent legal theories. CARCO’s first role, as a

shipping customer that contracted with Frescati for

delivery of a shipment of crude oil, resulted in CARCO’s

liability under the contractual safe berth warranty,

discussed above. The second, as the wharfinger for the

Paulsboro berth that was the Athos I’s intended

destination, resulted in the District Court’s finding of

negligence and CARCO’s corresponding liability in

tort.

Both theories of liability independently support the

District Court’s judgment against CARCO. As a result,

our decision to affirm the judgment based on CARCO’s

26a

contractual liability means that we are not required to

delve into the District Court’s tort analysis. However,

having reviewed that analysis, we harbor serious

doubts about the appropriateness of the court’s proposed duty of care. For that reason, we are compelled

to make clear that we will affirm the District Court’s

judgment based solely on CARCO’s breach of contract.

A wharfinger’s duty is more limited than that of a

shipping customer who has provided a safe berth

warranty. As we previously wrote:

In the tort context, . . . a wharfinger is not a

guarantor of a visiting ship’s safety, but is bound

to use reasonable diligence in ascertaining whether

the berths themselves and the approaches to them

are in an ordinary condition of safety for vessels

coming to and lying at the wharf. This is not an

unconstrained mandate to ensure safe surroundings or warn of hazards merely in the vicinity.

Instead, a visiting ship may only expect that the

owner of a wharf has afforded it a safe approach.

In being invited to dock at a particular port, a

vessel should be able to enter, use and exit a

wharfinger’s dock facilities without being exposed

to dangers that cannot be avoided by reasonably

prudent navigation and seamanship.

In re Frescati, 718 F.3d at 207 (quotations and

citations omitted). In short, and as a general matter, a

wharfinger’s duty is to use reasonable diligence to

ascertain whether the approach to its berth is safe for

an invited vessel.19

We previously determined that the allision occurred in the

approach to CARCO’s berth—the geographic area within which a

wharfinger’s duty exists—and as a result, CARCO had a duty to

27a

We remanded for the District Court to determine in

the first instance what reasonable diligence required

of CARCO under the circumstances of this case, and

whether CARCO breached that standard. Id. On

remand, the District Court concluded that

a reasonably prudent terminal operator should

periodically scan the approach to its dock for

hazards to navigation as long as ships are being

invited there. In this case, the standard would

require that side-scan sonar be used to search the

approach for obstructions that are potential

hazards to navigation. If an obstruction is located,

a terminal operator is then required to remove it,

and if the terminal operator cannot remove it,

notice of the hazard must be given to incoming

ships by marking it as a hazard and/or warning

ships of its presence.

JA at 132. Because CARCO did nothing to look for

obstructions, the District Court held that it had

breached its duty.

The District Court chose its standard by determining what the “demands of reasonableness and

prudence” required. JA at 129. Citing Judge Learned

Hand’s famous formula from United States v. Carroll

Towing, 159 F.2d 169 (2d Cir. 1947), the court concluded that the precaution of a preemptive side-scan

sonar search would be less burdensome than the probability of an allision multiplied by the serious harm

caused by a spill of toxic substances like crude oil.

We have doubts about the District Court’s balancing

of the cost of preventative measures on one hand and

use reasonable diligence to provide the Athos I with a safe

approach. In re Frescati, 718 F.3d at 211.

28a

the cost of potential accidents on the other. The court

found that a general scan of the approach to CARCO’s

berth and the berth itself would have cost between

$7,500 and $11,000, and would have prevented the

allision. Yet in this very case, the targeted scan of the

area where the allision occurred, conducted only eight

days after the allision, did not identify the anchor. The

first set of 93 side-scan sonar passes conducted by

Frescati’s expert, John Fish—at a cost of $38,577—

identified a pump casing on the river bottom. The

anchor, however, went unrecognized.20 We do not

share the District Court’s confidence that a general

$11,000 scan of the approach and berth would have

“recognized” the anchor with sufficient clarity to

prevent the allision, given that a targeted $38,000

scan for obstructions failed to do so.

Beyond the questionable utility of side-scan sonar as

applied to this case, we doubt whether imposing a

specific duty to require side-scan sonar would be

useful for wharfingers in the ordinary course of their

business. Single-hulled vessels like the Athos I present

unique risks, and have been treated with special care

by regulators. See, e.g., 33 C.F.R. § 157.455. Today, as

a result of those unique risks, such vessels are no

longer permitted to operate in the waters of the United

States. See 46 U.S.C. § 3703a (banning single-hulled

oil tankers in the waters of the United States after

January 1, 2015). Furthermore, side-scan sonar is not

the only method available to detect and recognize

obstructions, as the District Court pointed out.21 Even

Fish testified that the side-scan sonar equipment “detected”

the anchor, but neither he nor anyone else “recognized” it until

after the second set of scans were taken. JA at 927.

The court determined that CARCO should have used sidescan sonar to search for obstructions, but seemed willing to accept

29a

if we were to accept the court’s balancing of cost, risk,

and the magnitude of the potential harm, the high

standard set forth in this case—involving a risky

single-hulled vessel—would not necessarily apply to

future cases, which will necessarily involve only

double-hulled vessels.22

We are not unsympathetic to the position in which

we placed the District Court by asking it to specify

the duty of care at play in this case. The District Court

has conscientiously complied. And we stand by our

previous holding that CARCO had some duty to use

reasonable diligence to provide the Athos I with a

safe approach to its berth—a duty it may or may not

have breached. In re Frescati, 718 F.3d at 211.

Nevertheless, given CARCO’s independent liability in

contract and our decision to affirm on that basis, we

will once again decline to outline precisely what

CARCO’s duty of reasonable diligence entailed.

that other methods of searching for obstructions might accomplish the same purpose. It noted that “side-scan sonar . . . is not

the only method available in the industry to search for hazardous

debris. . . . Since the standard of care involves factual issues, the

methods may vary when the conditions in the approach to each

terminal are examined.” JA at 132 n.109.

Indeed, five years after the Athos I allision, the Norwegian

tanker SKS Satilla, carrying nearly 42 million gallons of crude

oil, allided with a sunken oil rig in the Gulf of Mexico, sustaining

“substantial damage to the port side of her hull.” Findings of Fact

and Conclusions of Law, In re Ensco Offshore Co., No. 4:09–CV–

2838, ECF No. 185 at 3, ¶¶ 6–7 (S.D. Tex. Sept. 30, 2014). But

“[b]ecause the SATILLA [was] a double hulled vessel[,] . . . there

was no discharge of crude oil.” Id. at 3, ¶ 9.

30a

VI. Subrogation and Equitable Recoupment

This litigation does not implicate the interests of

only Frescati and CARCO. The United States reimbursed Frescati for $88 million in cleanup expenses

above the liability limit established by the OPA.

Consequently, the United States became subrogated

to Frescati’s claims, and joined the fray by filing suit

against CARCO in 2008.23

Frescati initially paid for the oil spill cleanup costs

as a “responsible party” under the OPA. See 33 U.S.C.

§ 2702(a). The OPA allows a responsible party like

Frescati to limit its liability to a specified sum; any

cleanup costs above that amount are reimbursed out

of the Oil Spill Liability Trust Fund.24 See 33 U.S.C.

The United States and CARCO reached a partial settlement

agreement before the first trial. Both the United States and

CARCO agreed to forgo any negligence claims they might have

had against one another. The parties agreed that the United

States would pursue only its contract claim against CARCO. As

a result, the United States’ judgment against CARCO was based

solely on CARCO’s contractual liability under the safe berth warranty. CARCO, for its part, reserved in the settlement agreement

each and every substantive and procedural right available

to a defendant . . . including but not limited to the right to

raise affirmative defenses under any theory or doctrine of

law or equity, the right to assert setoff or recoupment and the

right to assert compulsory or non-compulsory counterclaims

other than a Claim for Contribution or Indemnity . . . .

JA at 391.

The Oil Spill Liability Trust Fund, administered by the

Coast Guard, serves much like insurance for the oil transportation industry. Companies that import oil into the United States

pay a per-barrel fee into the Trust Fund. When a tanker vessel

spills oil, the OPA assigns liability for the cleanup to a “responsible party”—typically the owner of the vessel from which the

oil spilled. The responsible party is liable for all cleanup costs

31a

§ 2704. Under this scheme, Frescati’s liability for the

cost of the oil spill cleanup was limited to approximately $45 million. The Trust Fund reimbursed

Frescati for its remaining cleanup costs, which totaled

approximately $88 million. The United States then

became statutorily “subrogated to all rights, claims,

and causes of action that the claimant [Frescati] has

under any other law.” 33 U.S.C. § 2715(a). The United

States pursued these claims against CARCO as a

“person who is liable, pursuant to any law, to the

compensated claimant [Frescati] or to the Fund, for

the cost or damages for which the compensation was

paid.” 33 U.S.C. § 2715(c).

Pursuant to the partial settlement agreement, the

United States limited itself to the same contractual

claims Frescati asserted. Because CARCO was liable

to Frescati in contract, it was also liable to the United

States for the amount the Trust Fund had reimbursed

Frescati: nearly $88 million. But CARCO asserted a

defense against the United States it did not assert

against Frescati—equitable recoupment—and in

response, the District Court reduced the United

States’ judgment by 50%. Both CARCO and the United

States appealed. CARCO argues that the District

Court erred by not eliminating the United States’

associated with the spill. If the costs exceed a liability cap established by the OPA, the Trust Fund reimburses the responsible

party for all expenses above the statutory cap. Liability under the

OPA does not preclude a responsible party from bringing any

claims it has against a third party under any other law. The

United States, to the extent the Trust Fund has reimbursed the

responsible party’s costs, steps into the shoes of the responsible

party as subrogee and may pursue claims against a third party

as if it were the responsible party. Any recovery won by the

United States is returned to the Trust Fund to cover future oil

spill reimbursements.

32a

recovery, while the United States argues that the

District Court should have left the contract judgment

untouched and denied CARCO any equitable remedy.

We conclude that the District Court erred by reducing

the United States’ judgment by 50%. The United

States is entitled to a full recovery.

a. Subrogation and Subrogee-Specific Defenses

As an initial matter, we note that the dispute

between CARCO and the United States presents an

unusual question about the nature of subrogation.

Subrogation itself is not unusual; in general terms, it

“simply means substitution of one person for another;

that is, one person is allowed to stand in the shoes of

another and assert that person’s rights against a third

party.” US Airways v. McCutchen, 569 U.S. 88, 97 n.5,

133 S.Ct. 1537, 185 L.Ed.2d 654 (2013). Most often, it

arises in the insurance context as a procedural mechanism to allow an insurer (the subrogee) to step into

the shoes of its insured (the subrogor) after it has

compensated the insured for harm caused by a third

party. The subrogee, having stepped into the shoes of

the subrogor, is entitled to assert all of the subrogor’s

rights and claims against the responsible third party.

Likewise, the third party—now defending an action

brought by the subrogee—is entitled to assert every

defense it otherwise could have raised against the

subrogor. In that vein, the third party’s liability to a

subrogee cannot be greater than it would have been to

the subrogor. Restatement (Third) of Restitution &

Unjust Enrichment § 24.

All that is unexceptional. The unusual question

presented here is whether a third party may assert a

defense against a subrogee that it could not assert

against the subrogor. As we discussed above, CARCO

is liable to Frescati, the subrogor, in contract.

33a

Consequently, CARCO is liable to the United States,

the subrogee, under that very same contract. But

CARCO wishes to assert a defense against the United

States—namely, that equitable recoupment requires

the United States to bear the loss rather than CARCO

because of the allegedly misleading conduct of three

federal agencies—that it could not assert against

Frescati.

The United States makes a related argument. Its

position is that the equitable recoupment defense,

predicated as it is on the conduct of federal agencies

rather than the contractual relationship between

Frescati and the United States, violates the statutory

subrogation provision of the OPA. Specifically, the

United States argues that it is entitled to “all [of

Frescati’s] rights, claims, and causes of action” under

the OPA. 33 U.S.C. § 2715(a). Frescati’s contractual

right is not limited by CARCO’s claims against the

Coast Guard, NOAA, and the Army Corps of Engineers;

the United States asserting Frescati’s contractual

right should also not be so limited, and to do otherwise

would infringe on the United States’ statutory entitlement. When Frescati has the right to a full recovery

under its contract, the argument goes, so does the

United States.

We agree. CARCO may only assert defenses against

the United States’ subrogated claims which it could

have asserted against Frescati—including any equitable recoupment defense it could have asserted against

Frescati. In its capacity as a subrogee, the United

States should be subject to the same treatment as

Frescati. Just as the United States, as subrogee, may

only assert Frescati’s claims, CARCO, as defendant, is

not entitled to extra defenses because the United

States asserts Frescati’s claims rather than Frescati

34a

itself. Of course, no party is exempt from the Federal

Rules of Civil Procedure. The United States is subject

to the ordinary procedural rules governing counterclaims and third-party complaints, and the OPA does

not bar CARCO from asserting whatever claims it

has against the United States using those recognized

procedural mechanisms where appropriate.25

In this case, the only claim asserted by the United

States is Frescati’s contract claim. In re Frescati, 718

F.3d at 189; JA at 390. It follows that CARCO’s

equitable recoupment defense must be directed toward

the United States’ contract claim. See 718 F.3d at 214

(declining to preclude CARCO from raising “equitable

defense[s] to the Government’s subrogation claims”).

If CARCO had other cognizable claims against the

three federal agencies involved in regulating the

Delaware River and the anchorage, sounding in tort or

otherwise, it was free to assert them in a third-party

complaint or counterclaim, just as the United States

was free to pursue other claims against CARCO.26 In

This issue is complicated by the fact that the specific defense

asserted by CARCO, equitable recoupment, is sometimes pleaded

as a defense, and sometimes as a counterclaim. We do not mean

to imply that CARCO should have pleaded equitable recoupment

as a counterclaim rather than a defense. However it is pleaded,

“recoupment is in the nature of a defense arising out of some

feature of the transaction upon which the plaintiff’s action is

grounded,” and here, the plaintiff’s action is grounded in

Frescati’s contractual right. Bull v. United States, 295 U.S. 247,

262, 55 S.Ct. 695, 79 L.Ed. 1421 (1935). To the extent CARCO

had cognizable claims against the Coast Guard, NOAA, and the

Army Corps of Engineers, it should have asserted those claims

directly, rather than as a defense to Frescati’s now-subrogated

contract claim.

CARCO was also free to waive its claims against the United

States, and vice versa. Indeed, both CARCO and the United

35a

that light, we proceed to analyze CARCO’s equitable

recoupment defense as it applies to the United States’

contractual rights.

b. Equitable Recoupment

Equitable recoupment is a “principle that diminishes a party’s right to recover a debt to the extent that

the party holds money or property of the debtor to

which the party has no right.”27 In re Frescati, 718 F.3d

States waived certain rights in the 2009 partial settlement agreement, including CARCO’s waivers of the rights to bring a “Claim

for Contribution or Indemnity . . . whether based on principles of

common law, contract, quasi-contract or tort,” and “demand that

the court reduce or offset the damages awarded to the United

States . . . based on evidence that the negligence or fault of the

United States in failing to detect, mark and/or remove underwater obstructions to navigation . . . caused or contributed to the

ATHOS I Incident.” JA at 389. At an earlier stage in the litigation, the United States argued that CARCO’s equitable recoupment

defense amounted to a violation of the settlement agreement. The

United States eventually waived that argument by failing to raise

it at the first trial, and so we need not consider it today. In re

Frescati, 718 F.3d at 214.

A classic example of recoupment is a situation in which the

statute of limitations is different for two related claims arising

out of the same transaction—when, for example, the statute of

limitations period during which the United States may file a

claim against a taxpayer for underpayment of the income tax is

longer than the period during which a taxpayer may file a claim

for a refund of overpayment of the estate tax. The taxpayer (in

this case, the estate of a decedent) pays the estate tax and final

year’s income tax. Sometime later, after the statute of limitations

has run on the estate tax overpayment but not the income tax

underpayment, the government claims the taxpayer owes additional income tax for the taxpayer’s final year. Due to the

increased income tax liability for the year, the taxpayer now owes

less in estate tax—but the statute of limitations has already run,

and the taxpayer cannot amend the estate tax return. In an

action brought by the government to recover the extra income tax

36a

at 214 n.35. For an equitable recoupment defense to

succeed, the defendant must possess a claim against

the plaintiff arising from the same transaction or

occurrence as the plaintiff’s suit, seeking relief of the

same kind as that sought by the plaintiff, in an

amount no greater than that sought by the plaintiff.

See Livera v. First Nat’l State Bank of New Jersey, 879

F.2d 1186, 1195 (3d Cir. 1989).

CARCO’s equitable recoupment defense faces at

least two serious obstacles. As an initial matter, the

United States questions whether CARCO possesses a

“claim” against it, rather than a generalized request

for the court to balance the equities. Second, the

United States questions whether CARCO seeks relief

of the same kind as the United States. On both points,

CARCO fails to meet its burden.

CARCO’s claim, such as it is, appears to be that the

equities favor CARCO, and require the United States

to bear the cost of the spill. CARCO argues that the

United States, through the Coast Guard, NOAA, and

the Army Corps of Engineers, had responsibility for

maintaining the anchorage where the allision occurred

free of obstructions. In the alternative, if the agencies

were not responsible to preemptively search for obstructions, CARCO argues they should have more explicitly

made clear that they were not conducting such

searches. CARCO asserts that it reasonably believed,

based on the agencies’ conduct, that the agencies

were maintaining the anchorage free of obstructions.

owed, the taxpayer may assert an equitable recoupment defense

for the amount of the overpayment of the estate tax, even though

the statute of limitations has run and the taxpayer would not

otherwise have been able to recover the overpayment. See

generally Bull v. United States, 295 U.S. 247, 55 S.Ct. 695, 79

L.Ed. 1421 (1935).

37a

Additionally, CARCO argues that equity requires the

Oil Spill Liability Trust Fund to bear the cost of the

cleanup rather than CARCO.28

Though it is not necessary to our holding, we note that these

equities do not appear to favor CARCO. As to agency regulation

and maintenance of the anchorage where the allision occurred,

the District Court held that the agencies did not have a duty to

maintain the anchorage free of obstructions. The United States

does not preemptively search for obstructions in the anchorage,

it is not responsible for doing so, and it did not tell CARCO that

it would do so. To the extent CARCO believed otherwise, CARCO

simply misunderstood the regulatory structure and the responsibilities (and indeed, the capabilities) of the agencies.

Additionally, to the extent—if at all—that the Coast Guard,

NOAA, and the Army Corps of Engineers were responsible for the

Athos I oil spill, reducing the recovery of the United States in this

case would not be equitable. Beyond our concerns relating to

subrogation (equity would certainly not favor reducing Frescati’s

recovery under these circumstances), such a decision would

impose liability on the Oil Spill Liability Trust Fund, not the

responsible agencies. Any recovery based on the United States’

subrogated claim flows back to the Trust Fund, out of which

the United States originally reimbursed Frescati. 26 U.S.C.

§ 9509(b)(3). The Trust Fund is not intended (or allowed by

statute) to be used as a slush fund to cover the liabilities of federal

agencies. See 33 U.S.C. § 2712 (“Uses of the Fund”).

As a final point, the purpose of the Trust Fund is not to absorb

the cost of cleaning up oil spills; indeed, almost the opposite is

true. The OPA creates a strict liability regime for responsible

parties, while capping that liability at a set amount. But the

Trust Fund was not designed to bear those costs indefinitely; the

subrogation provision of 33 U.S.C. § 2715 allows the United

States, on behalf of the Trust Fund, to pursue any claim a

responsible party could have brought against a third party under

any law, in order to recover the money paid out by the Trust Fund

and preserve the Trust Fund’s ability to respond quickly to spills

in the future. The OPA is intended to quickly compensate victims

of spills, minimize environmental damage, and internalize the

costs of oil spills within the oil industry. The subrogation

38a

Equitable recoupment requires more than just a

request to balance the equities. CARCO points out

that although equitable recoupment most often arises

in the context of offsetting monetary claims, as in tax

or bankruptcy cases, it is not necessarily limited to

those situations. See, e.g., Oneida Indian Nation of

New York v. New York, 194 F.Supp.2d 104, 136–37

(N.D.N.Y. 2002) (allowing an equitable recoupment

defense in the context of offsetting requests for declaratory judgments in a land rights case). But CARCO

still must assert some cognizable claim, rather than

simply a request for the Court to reduce the United

States’ damages in the interest of equity. Here,

CARCO has failed to do so.

Neither does CARCO seek the same kind of relief as

the United States. The United States seeks contractual relief, to which it is entitled by operation of

statute. See 33 U.S.C. § 2715. CARCO, by contrast,

seeks equitable relief, or (on another reading) essentially tort-based relief grounded in misrepresentation

by the agencies. The mismatched relief sought by

CARCO and the United States does not support

CARCO’s equitable recoupment defense.

The requirement that a defendant seek the same

kind of relief as has been sought in the plaintiff’s claim

is a fundamental requisite for recoupment. The defense

is not intended to be a catch-all to allow any claims

otherwise barred by time, settlement, or statute to be

heard as equity seems to require. Equitable recoupment is intended to allow only truly similar claims

arising from the same transaction to offset one another

in the interest of equity between the parties. As noted,

provision serves those purposes by letting cleanup costs fall upon

the liable party, rather than with the Trust Fund.

39a

equitable recoupment is well-suited for disputes in

which two claims arise out of the same taxable event

or the same contractual obligation, as often seen in tax

or bankruptcy cases. When, as here, the plaintiff seeks

relief on a contract, the defendant may not resort to

equitable recoupment as a means to assert a noncontractual claim, whether sounding in an equitablebalancing analysis, in tort, or otherwise.

CARCO has failed to meet its burden of establishing

an equitable recoupment defense. It is liable to the

United States in full.

VII. Limitation of Liability under the Oil Pollution

Act

CARCO argues that a provision of the OPA, 33

U.S.C. § 2702(d)(2)(B), limits its liability in this case

to the same extent to which Frescati’s liability was

limited—approximately $45 million. Because CARCO

did not raise this defense with the requisite clarity

until nearly ten years after this litigation began, the

District Court concluded that CARCO waived it. We

agree that the defense was waived.

A District Court’s holding that an affirmative defense

has been waived is reviewed for abuse of discretion.

Cetel v. Kirwan Financial Group, Inc., 460 F.3d 494,

506 (3d Cir. 2006). Waiver is appropriate if the party

raising the defense did not do so at a “pragmatically

sufficient time” and if the opposing party would be

prejudiced if the defense were allowed. Charpentier v.

Godsil, 937 F.2d 859, 864 (3d Cir. 1991).

Whether CARCO raised its defense at a pragmatically sufficient time requires us to determine

when CARCO first raised the § 2702(d)(2)(B) defense.

CARCO argues that it first raised the limitation defense

in its 2005 answer to Frescati’s Amended Counterclaim

40a

by referring to the OPA. The District Court concluded

that CARCO’s answer contained nothing that would

have put Frescati or the United States on notice that

CARCO planned to rely on a limitation of liability

defense. In general, “[a]n affirmative defense . . . ‘need

not be articulated with any rigorous degree of specificity,

and is sufficiently raised for purposes of [Fed. R. Civ.

P. 8] by its bare assertion.’” Moody v. Atl. City Bd. of

Educ., 870 F.3d 206, 218 (3d Cir. 2017) (quoting Zotos

v. Lindbergh Sch. Dist., 121 F.3d 356, 361 (8th Cir.

1997)). Nevertheless, the party asserting the defense

must actually do so, and in a way that gives fair notice

of that defense.

CARCO relies on the averment listed as its “Seventh

Separate Defense,” which reads simply: “The claims

and causes of action set forth in the plaintiffs’ Amended

Counterclaim are barred in whole or in part by the

provisions of the Oil Pollution Act of 1990, 33 U.S.C.

§ 2701, et seq.” JA at 355. Noticeably absent from this

general averment is any specific citation to the

limitation of liability defense or even a description of

the nature of the defense. This is significant, because

the OPA includes a number of potential affirmative

defenses. See, e.g., 33 U.S.C. § 2702(b) (limiting scope

of damages for which the OPA imposes liability);

§ 2702(c) (excluding certain oil spills from OPA

liability); § 2702(d)(1)(A) (shifting liability under the

OPA to a solely responsible third party); § 2702(d)(2)

(limiting the liability of certain parties under the OPA);

§ 2703 (“Defenses to liability”). CARCO’s general

reference to the entirety of the OPA did not provide

adequate information from which Frescati could determine that CARCO was seeking to limit its liability

under § 2702(d)(2)(B). Nor did CARCO develop this

defense at any point before the first trial. For that

41a

reason, CARCO’s unspecified reference to the OPA did

not provide the requisite fair notice to Frescati.

Furthermore, Frescati would be prejudiced if the

defense were allowed. As the District Court found, if

CARCO had asserted its defense in a timely fashion,

fifteen days of depositions and trial testimony from

seven witnesses could have been avoided, along with

the OPA damages phase of the first trial.29

CARCO did not clearly assert the limitation defense

until nearly a decade after this action commenced, and

over a year after the first trial and appeal had

concluded. The District Court appropriately concluded

that CARCO had not raised the defense at a pragmatically sufficient time, and that Frescati would be

prejudiced if the defense were allowed. The District

Court did not abuse its discretion in finding the

defense waived.30

Allowing CARCO to assert the defense after failing to raise

it at a practicable time wastes the District Court’s resources as

well.

Affirmative defenses must be raised as early as practicable,

not only to avoid prejudice, but also to promote judicial

economy. If a party has a successful affirmative defense,

raising that defense as early as possible, and permitting a

court to rule on it, may terminate the proceedings at that

point without wasting precious legal and judicial resources.

Robinson v. Johnson, 313 F.3d 128, 137 (3d Cir. 2002).

It is worth noting that the United States similarly waived a

defense by its failure to raise an argument in the first trial. We

previously held that the United States waived its right to object

to CARCO’s equitable recoupment defense on the basis that it

violated the terms of the partial settlement agreement. In re

Frescati, 718 F.3d at 214.

42a

VIII. Prejudgment Interest Rate

The District Court awarded Frescati prejudgment

interest of just over $16 million. Frescati, in its crossappeal from the District Court’s judgment, argues

that the District Court erred by using the federal

postjudgment interest rate set by 28 U.S.C. § 1961(a)

to determine the amount of the prejudgment interest

award. Specifically, Frescati argues that the District

Court improperly believed itself bound to use the

federal postjudgment rate rather than the higher U.S.

prime rate because Frescati did not present evidence

of its borrowing costs.

An award of prejudgment interest is reviewed for

abuse of discretion. Ambromovage v. United Mine

Workers of Am., 726 F.2d 972, 981–82 (3d Cir. 1984);

see also Sun Ship, Inc. v. Matson Nav. Co., 785 F.2d

59, 63 (3d Cir. 1986). When selecting an interest rate,

the District Court must keep in mind that the rate and

corresponding award “must be compensatory rather

than punitive.” Del. River & Bay Auth. v. Kopacz, 584

F.3d 622, 634 (3d Cir. 2009).

Here, the District Court awarded Frescati prejudgment interest at the one-year Treasury rate—the

same rate used as the federal postjudgment interest

rate. See 28 U.S.C. § 1961(a). Importantly, the District

Court found that the postjudgment rate would “fairly

and adequately compensate Frescati for its losses.” JA

at 183.

Frescati argues that, in the absence of evidence of

borrowing costs, we should require the use of the U.S.

prime rate. We grant that, had the District Court

chosen to use the prime rate, it would not have abused

its discretion even without extensive proof of borrowing costs. Taxman v. Bd. of Educ., 91 F.3d 1547, 1566

43a

(3d Cir. 1996) (en banc). Indeed, the prime rate is

commonly used to approximate the cost the defendant

would have paid to borrow in the market, and at least

one court appears to require it. See, e.g., Gorenstein

Enters., Inc. v. Quality Care-USA, Inc., 874 F.2d 431

(7th Cir. 1989) (requiring use of the prime rate in

certain circumstances); see also Forman v. Korean Air

Lines Co., 84 F.3d 446, 450–51 (D.C. Cir. 1996) (“[T]he

prime rate is not merely as appropriate as the

Treasury Bill rate, but more appropriate . . . .”). In this

Circuit, however, a district court is not constrained to

the use of only the prime rate: “[i]n exercising [its]

discretion, . . . the court may be guided by the rate set

out in 28 U.S.C. § 1961.” Sun Ship, 785 F.2d at 63;

Taxman, 91 F.3d at 1566 (“[A] court ‘may’ use the

post-judgment standards of 28 U.S.C. § 1961(a) [to

calculate prejudgment interest, though] it is not

compelled to do so.”).31

The District Court determined that the federal

postjudgment rate “fairly and adequately compensate[s]

Frescati for its losses.” JA at 183. Under our Court’s

precedent, the District Court acted within its discretion.

IX. Conclusion

The District Court’s order dated August 17, 2016

will be affirmed in part, vacated in part, and reversed

in part. The District Court’s judgment in favor of

Frescati on the breach of contract claim and the prejudgment interest award will be affirmed. The District

Court’s judgment in favor of Frescati on the negligence

claim will be vacated. The District Court’s judgment in

Nor was it an abuse of discretion for the District Court to

adopt a variable interest rate. Interest accumulated for more

than a decade, and during that time prevailing interest rates

changed substantially.

44a

favor of the United States will be affirmed in part with

respect to CARCO’s liability on the subrogated breach

of contract claim, but the judgment will be reversed

and remanded for further proceedings in light of

our equitable recoupment ruling for the purpose of

recalculating damages and prejudgment interest. The

District Court’s order dated April 9, 2015, denying

CARCO’s motion for partial summary judgment on its

limitation of liability defense, will be affirmed.

45a

APPENDIX B

UNITED STATES DISTRICT COURT

E.D. PENNSYLVANIA

————

Civil Action Nos. 05-cv-305 (JHS),

08-cv-2898 (JHS)

————

IN RE PETITION OF FRESCATI SHIPPING COMPANY, LTD.,

AS THE OWNER OF THE M/T ATHOS I, AND

TSAKOS SHIPPING & TRADING, S.A., AS MANAGER OF

THE M/T ATHOS I, FOR EXONERATION FROM OR

LIMITATION OF LIABILITY.

————

UNITED STATES OF AMERICA,

Plaintiff,

CITGO ASPHALT REFINING COMPANY, et al.,

Defendants.

————

Signed 07/25/2016

————

OPINION

Slomsky, District Judge

46a

TABLE OF CONTENTS

INTRODUCTION ........................................

II.

BACKGROUND ...........................................

A. Factual Background ...................................

B. Procedural History .....................................

C. Rule 63 Proceeding .....................................

D. Oil Pollution Act of 1990 ............................

i. Provisions of the Oil Pollution Act of

1990 (“OPA”) ...........................................

ii. Subrogation Under OPA .........................

iii. Oil Spill Response Under OPA ...............

E. Third Circuit Opinion .................................

i. Issues This Court Will Resolve...............

ii. Binding Third Circuit Conclusions ........

III. FINDINGS OF FACT ..................................

A. The Tanker, the Parties, and the Charters...

i. The Tanker ..............................................

ii. The Parties ..............................................

iii. The Charters ...........................................

iv. Vetting the Athos I..................................

v. Voyage Charter Party .............................

vi. Draft Restriction in the Voyage Charter

Party ........................................................

B. Geography of the Delaware River ..............

C. Maintenance of Federal Anchorage

Number Nine ..............................................

47a

D. The Voyage..................................................

i. Athos I’s Departure Draft at Puerto

Miranda, Venezuela ................................

ii. Athos I’s Passage from Puerto Miranda,

Venezuela, to the Entrance to Delaware

Bay ...........................................................

iii. Draft of the Athos I at the Entrance to

Delaware Bay ..........................................

iv. Athos I’s Voyage from the Entrance to

Delaware Bay to Billingsport Range ......

v. Athos I’s Passage from Billingsport

Range into Federal Anchorage Number

Nine .........................................................

vi. The Casualty ...........................................

E. Investigating the Casualty .........................

Locating the Anchor ..............................

ii.

Anchor’s Pre-Incident Orientation .......

iii. Anchor’s Post-Incident Orientation ......

iv. Athos I’s Allision with the Anchor ........

Athos I’s Draft at the Time of the

Allision ...................................................

vi. Athos I’s Underkeel Clearance Before

the Allision ............................................

vii. Post-Incident Inspection of the Athos I ..

viii. Allegations of Poor Navigation and

Seamanship ...........................................

ix. Allegations of Spoliation .......................

F. Oil Spill Response .......................................

48a

G. Costs Incurred from the Casualty..............

H. Prejudgment Interest .................................

IV. CONCLUSIONS OF LAW...........................

A. The Court Has Subject Matter Jurisdiction Over this Case .....................................

B. Breach of Contractual Warranty ...............

i. CARCO Agreed to a Safe Berth Warranty for the Athos I’s Voyage from

Puerto

Miranda,

Venezuela,

Paulsboro, New Jersey ............................

ii. Frescati Was a Third-Party Beneficiary

of the Safe Berth Warranty ....................

iii. The Safe Berth Warranty Is an Express

Assurance that the Port Is Deemed Safe

for an Arriving Vessel .............................

iv. CARCO Warranted a Safe Berth with

the Understanding that the Athos I

Would Be Drawing as Much as 37 Feet

of Water Upon Its Arrival .......................

v. The Athos I Complied with the Draft

Limitations of 37 Feet or Less ................

100

vi. Exceptions to the Safe Berth Warranty

for Poor Navigation and Seamanship Do

Not Apply ................................................

107

vii. CARCO Breached the Safe Berth

Warranty by Failing to Provide Safe

Passage for the Athos I, Which Was

Drawing 36 Feet, 7 Inches, Upon Its

Arrival .....................................................

107

C. Negligence ...................................................

107

49a

i. CARCO Was Negligent in Maintaining

the Approach to Its Berth .......................

107

1. The Third Circuit Found that CARCO

Had a Duty to Maintain a Safe

Approach ..............................................

108

2. The Standard of Care Required

CARCO to Scan the Approach

Periodically Using Side-Scan Sonar

and to Remove or Warn Incoming

Ships of Hazards to Navigation ..........

110

a. Custom Does Not Establish the

Standard of Care ..............................

111

b. A Standard of Care Based on the

“Demands of Reasonableness and

Prudence” Required CARCO to

Periodically Scan the Approach for

Hazards to Navigation Using SideScan Sonar and to Remove the

Hazards or Warn Incoming Ships of

Them .................................................

114

3. CARCO Breached the Standard of

Care By Failing to Search for Hazards

to Navigation and By Failing to

Remove Them or to Warn Incoming

Vessels of Their Presence ....................

118

4. CARCO’s Breach Was the Proximate

Cause of Damage to the Athos I and of

the Oil Spill ..........................................

118

ii. CARCO’s Claim of Negligent Navigation and Seamanship Does Not Defeat

Frescati’s Negligence Claim ...................

120

D. The Pennsylvania Rule Does Not Afford

CARCO Any Relief......................................

120

50a

E. CARCO’s Spoliation and Best Evidence

Motions........................................................

128

F. CARCO’s Equitable Defenses ....................

131

i. CARCO Is Not Precluded from Raising

Equitable Defenses Against the Government by Virtue of the Government’s

Statutory Subrogation Claim under the

Oil Pollution Act of 1990 .........................

134

ii. CARCO’s Defense of Equitable Recoupment Will Reduce the Amount of Reimbursement to the Government ...............

136

iii. CARCO’s Reimbursement to the

Government Will Be Reduced by Fifty

Percent.....................................................

151

iv. CARCO’s Theory of Equitable Estoppel

Does Not Limit the Government’s

Recovery ..................................................

152

v. CARCO’s Theory of Unjust Enrichment

Does Not Limit the Government’s

Recovery ..................................................

155

DAMAGES ...................................................

157

A. Frescati Is Entitled Under Contract and

Tort Law to All Damages Caused by the

Incident .......................................................

157

B. Frescati Has Carried its Burden of

Proving All Damages ..................................

158

C. Damage Categories .....................................

159

i. OPA Removal Costs ................................

159

ii. Non-OPA Response Costs .......................

159

51a

iii. Settlement of Salem Nuclear Power

Plant Claim .............................................

160

iv. Unrepaired Hull Damages......................

161

v. Damages for Vessel and Miscellaneous

Port Expenses..........................................

162

vi. Stipulated Damages ................................

162

D. CARCO Has Not Proven the Affirmative

Defense of Failure to Mitigate Damages ...

163

E. Prejudgment Interest .................................

165

i. Frescati Is Entitled to Prejudgment

Interest at the United States One-Year

Treasury Rate Set in 28 U.S.C. § 1961(a) ...

168

ii. Prejudgment Interest on the Government’s Subrogation Claim Is Awarded

at the Stipulated Rate Set in 33 U.S.C.

§ 2705(b)(4) ..............................................

170

iii. Period of Accrual for Prejudgment

Interest ....................................................

170

iv. Annual Compounding of Interest ...........

171

VI. CONCLUSION ............................................

171

52a

I. INTRODUCTION

On November 26, 2004, as the oil tanker M/T Athos

I approached its final destination in Paulsboro, New

Jersey, it struck an unknown, abandoned ship anchor

on the bottom of the Delaware River. The submerged

anchor punctured the M/T Athos I’s hull, causing

approximately 264,000 gallons of crude oil to spill into

the Delaware River. An extensive cleanup effort

ensued. Although the cleanup was successful, it was

also expensive and led to the instant litigation in this

Court.

II. BACKGROUND

A. Factual Background

At or near the heart of this dispute is the M/T Athos

I (“Athos I”), a single-hulled oil tanker measuring

approximately 748 feet long and 105 feet wide. In re

Frescati Shipping Co., Ltd., 718 F.3d 184, 190 (3d Cir.

2013). It was owned by Frescati Shipping Company,

Ltd. (“Frescati”). Id. At the time of the accident, the

Athos I had been chartered into a tanker pool created

by Star Tankers, Inc. (“Star Tankers”), which is not a

party to this action. Id.

CITGO Asphalt Refining Company, CITGO

Petroleum Corporation, and CITGO East Coast Oil

Corporation (together referred to as “CARCO”) subchartered the Athos I from the Star Tankers pool to

deliver a shipment of crude oil from a facility in Puerto

Miranda, Venezuela, to its asphalt refinery located in

Paulsboro, New Jersey. Id. CARCO vetted the Athos I

for this shipment. Id. at 199. It memorialized the

agreement between itself and Star Tankers in a

voyage charter party, a common form of maritime

contract for shipping services. Id. at 191. This contract

included a safe berth warranty, which triggered two

53a

separate protections: “a contractual excuse for a

master [or captain] who elects not to venture into an

unsafe port, and protection against damages to a ship

incurred in an unsafe port to which the warranty

applies.”1 Id. at 197 (citing 2 Thomas J. Schoenbaum,

Admiralty and Maritime Law § 11-10, at 32-33 (5th ed.

2011)). Frescati, as the owner of the Athos I, is a thirdparty beneficiary of the warranty and relies on the

portion that protects against damages to a ship

incurred in an unsafe port. Id. at 197-98.

On November 26, 2004, the Athos I was nearing its

final destination at CARCO’s asphalt refinery in

Paulsboro, New Jersey. Id. at 192. Around 12:15 p.m.,

the vessel reached the entrance to the Delaware Bay,

where a local Delaware River Pilot named Captain

Howard Teal, Jr. (“Captain Teal”) boarded. Id.

Captain Teal navigated the Athos I up the Delaware

River in a channel, which is a demarcated transit lane

for ships, until it reached the range2 in the channel

closest to CARCO’s Paulsboro berth area. Around 8:30

p.m., a Delaware River Docking Pilot named Captain

Joseph Bethel (“Captain Bethel”) boarded the Athos I

and replaced Captain Teal as the navigator. Id.

Captain Bethel began the final docking maneuver of

the Athos I into the Paulsboro berth. Id. The tide was

relatively low at the time, reaching its lowest point

A safe berth warranty is an “express or implied obligation [ ]

that the charterer will not require the vessel to call at an unsafe

port or enter an unsafe berth to load, discharge, or take on

bunkers.” Robert Force, Admiralty and Maritime Law 50 (2d ed.

2013). The terms “berth,” “terminal,” and “port” may be used

interchangeably throughout this Opinion.

The Delaware River channel is divided into ranges, each of

which is named. For example, there is the Tinicum Range, the

Billingsport Range, and the Mifflin Range.

54a

only fifty minutes prior to the beginning of the docking

maneuver. Id.

CARCO’s Paulsboro facility sits on a jetty on the

New Jersey side of the Delaware River.3 Id. Federal

Anchorage Number Nine (“the Anchorage” or “Anchorage Number Nine”) separates the Delaware River

channel from CARCO’s Paulsboro berth area.4 Id. at

192. The Anchorage is neither owned nor controlled

by CARCO. Id. at 194. Instead, it is maintained by

governmental agencies, such as the United States

Army Corps of Engineers, which conducts intermittent

depth surveys of the Anchorage for dredging purposes.

Id. CARCO retains responsibility over its triangular

shaped Paulsboro berth area. Id.

To reach the berth, Captain Bethel had to maneuver

the vessel from the channel through Federal Anchorage Number Nine, and then to the dock at CARCO’s

berth.5 While in the Anchorage, at 9:02 p.m., Captain

See Appendix (Ex. “A”) for a photograph with a red outline of

the pertinent area. (Ex. P-1153.)

An anchorage is “[a]n area where ships can anchor.” Black’s

Law Dictionary 105 (10th ed. 2014). It is a place designated as

suitable for temporary anchoring and is akin to a parking lot for

vessels.

See Appendix (Ex. “A”) for a photograph and diagram of the

Paulsboro berth area. As the Third Circuit explained,

[T]he Anchorage’s border runs diagonally to CARCO’s

waterfront, ranging between 130 to 670 feet from the face of

its ship dock. Across the Anchorage, the River Channel

begins less than 2,000 feet from CARCO’s berth, a little

more than two-and-a-half lengths of the Athos I. Customarily, a tanker of the Athos I’s size would come up the River,

make a starboard (right) 180° turn into the Anchorage, and

would then be pushed sideways by tugs (i.e., parallel

parked) into CARCO’s pier.

In re Frescati, 718 F.3d at 192.

55a

Bethel was in the process of maneuvering the Athos I

to the dock when the ship began to list heavily to one

side.6 Id. at 192. Oil then became visible in the river.

Id. Ultimately, approximately 264,000 gallons of crude

oil spilled into the Delaware River.7 The cost to remove

the crude oil and to clean affected areas was considerable, and it took months to complete the project.

It was later determined that the Athos I had allided8

with an unknown, abandoned ship anchor located on

the river bottom in Federal Anchorage Number Nine.

In re Frescati, 718 F.3d at 192. The anchor was

exhumed and inspected. Id. It weighed approximately

nine tons and measured 6 feet, 8 inches long, 7 feet, 3

inches wide, and 4 feet, 6 inches high.9 Id. The owner

of the abandoned anchor has never been located.10 Id.

at 193.

List is defined as “to tilt to one side; esp, of a boat or ship.”

Merriam-Webster’s Collegiate Dictionary (11th ed. 2004). Listing

or tilting to one side is caused by a disturbance to the state of

equilibrium aboard a ship, such as an unbalanced load. Id.

As will be noted infra, Frescati witness David Hall testified

that, in his estimation, the amount of crude oil that spilled into

the Delaware River was approximately 264,321 gallons. (Hall Tr.,

170:3-171:21, Mar. 4, 2015.)

An allision is “[t]he contact of a vessel with a stationary object

such as an anchored vessel or a pier.” Black’s Law Dictionary

91 (10th ed. 2014). “In modern practice, the less specific term

collision is often used where allision was once the preferred

term.” Id. Both terms will be used in this Opinion.

See Appendix (Ex. “B-1,” “B-2,” “B-3”) for photographs of the

exhumed anchor. (Ex. D-2022, photographs 1 and 2; Ex. D-1913.)

CARCO speculates that the anchor was used for dredging

operations and was dropped by Government personnel or a

contractor responsible for the dredging. As mere speculation, this

allegation will not be relied upon in reaching a conclusion of law.

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B. Procedural History

This litigation involves an attempt by three parties

to apportion monetary liability for the casualty. Id.

at 189. The first party includes the Athos I’s owner,

Frescati Shipping Company, Ltd., and its manager,

Tsakos Shipping & Trading, S.A. (also referred to as

“Frescati” or “Frescati Plaintiffs”). Id. Frescati alleges

that it spent approximately $143 million for oil

spill cleanup costs and damages. The second party is

the United States Government, which reimbursed

Frescati nearly $88 million, pursuant to the provisions

of the Oil Pollution Act of 1990 (“OPA”), 33 U.S.C.

§ 2701, et seq. Id. Both Frescati and the Government

seek reimbursement for their respective costs from

the third party to this litigation—entities known as

CITGO Asphalt Refining Company, CITGO Petroleum

Corporation, and CITGO East Coast Oil Corporation

(jointly referred to as “CARCO”). Id. CARCO contracted to have the oil shipped on the Athos I from

Venezuela to its refinery in Paulsboro, New Jersey. Id.

Frescati has brought a contract claim against

CARCO for breaching the safe berth warranty

included in the contract that CARCO made with Star

Tankers, Inc. (“Star Tankers”), the intermediary

responsible for chartering the Athos I to transport

crude oil to CARCO’s Paulsboro berth. Id. Frescati is

covered by the safe berth warranty as a third-party

beneficiary. Id. at 197-98. Frescati also has brought a

negligence claim against CARCO for failing to locate,

warn of, and remove the lurking anchor. Id. at 207.

The Government, as a statutory subrogee under OPA

seeking to recover the $88 million it reimbursed

Frescati, has agreed to limit its claim for reimbursement from CARCO to Frescati’s contractual claim for

breach of the safe berth warranty. Id. at 189. This

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limitation was agreed to in a partial settlement agreement with CARCO. Id. The Government therefore has

no negligence claim against CARCO.

Following a forty-one day bench trial in 2010 before

the Honorable John Fullam, a retired Judge of this

Court, Judge Fullam found that CARCO was not liable

for the casualty under any theory of liability. Id.

Frescati appealed. Id. On May 16, 2013, the Third

Circuit affirmed in part and vacated in part the

judgment and held, inter alia, that the Court (Fullam,

J.) did not make appropriate findings of fact and

conclusions of law as required under Federal Rule

of Civil Procedure 52(a)(1).11 Id. The Third Circuit

remanded this action for further consideration by the

assigned successor judge, Joel H. Slomsky. Id. at 214.

On April 1, 2014, this Court (Slomsky, J.) held a

status hearing to discuss the parameters of the case

on remand. During the hearing, counsel for CARCO

noted that because a successor judge has been

assigned to this case, Federal Rule of Civil Procedure

63 applies. The text of this Rule is quoted below. All

parties ultimately agreed that the Rule applied here,

which added a dimension to this case not mentioned

by the Court of Appeals in its remand opinion.

Rule 52(a)(1) provides:

In an action tried on the facts without a jury or with an

advisory jury, the court must find the facts specially and

state its conclusions of law separately. The findings and

conclusions may be stated on the record after the close of

evidence or may appear in an opinion or a memorandum of

decision filed by the court.

Fed. R. Civ. P. 52(a)(1). There is no right to a jury trial in

admiralty litigation. Fed. R. Civ. P. 38(e). The trial is before a

judge. Id.

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C. Rule 63 Proceeding

Rule 63 of the Federal Rules of Civil Procedure

covers a proceeding where “[a] successor judge steps

into the shoes of the original judge in order to finish

something that the original judge had started.” Patelco

Credit Union v. Sahni, 262 F.3d 897, 905 (9th Cir.

2001). A classic example of a Rule 63 proceeding occurs

where a substitute judge must “make a finding of fact

at a bench trial based on evidence heard by a different

judge.” Id. Rule 63 states:

If a judge conducting a hearing or trial is unable

to proceed, any other judge may proceed upon

certifying familiarity with the record and determining that the case may be completed without

prejudice to the parties. In a hearing or a nonjury

trial, the successor judge must, at a party’s

request, recall any witness whose testimony is

material and disputed and who is available to

testify again without undue burden. The successor judge may also recall any other witness.

Fed. R. Civ. P. 63. Rule 63 requires that the successor

judge certify familiarity with the record and determine

that the proceeding may be completed without prejudice to the parties. Id. Certification requires a successor judge to first read and familiarize himself with

relevant portions of the record. Canseco v. United

States, 97 F.3d 1224, 1227 (9th Cir. 1996). A successor

judge may certify familiarity by reviewing the record

before him, which includes examining the docket, the

pleadings, and the transcripts from previous proceedings. See In re Lang, 293 B.R. 501, 510 (10th Cir. 2003)

(finding that a successor judge certified familiarity

with the record because he had “consider[ed] the

evidence produced, the arguments of counsel, and . . .

[the] applicable case law”). By certifying familiarity

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with the record, the court ensures that the parties will

not be prejudiced when the successor judge proceeds

where the original judge left off. 12 Moore’s Federal

Practice § 63.04[3] (3d ed. 2015).

If the successor judge feels that, after certifying

familiarity, factual findings and conclusions of law

can be drawn from the record without prejudice to

the parties, he may dispose of the case. 11 Charles

Alan Wright & Arthur R. Miller, Federal Practice

and Procedure § 2922 (3d ed. 2015). For example, in

Lashbrook v. Kennedy Motor Lines, the district court

noted that the record was sufficiently clear and complete, allowing the successor judge to dispose of the

motion for a new trial without hearing the case again.

119 F. Supp. 716, 717 (W.D. Pa. 1954). However, if the

successor judge feels that questions of law and fact

remain, the recall of witnesses should be permitted.

In limited circumstances, a successor judge may

make a finding of fact based on evidence heard by a

different judge earlier in the proceeding. Fed. R. Civ.

P. 63, Advisory Committee’s note to 1991 amendment.

The Committee’s note to Rule 63 states that:

The revised text authorizes the substitute judge

to make a finding of fact at a bench trial based on

evidence heard by a different judge. This may be

appropriate in limited circumstances. First, if a

witness has become unavailable, the testimony

recorded at trial can be considered by the successor judge pursuant to Fed. R. Evid. 804, being

equivalent to a recorded deposition available for

use at trial pursuant to Rule 32. For this purpose,

a witness who is no longer subject to a subpoena

to compel testimony at trial is unavailable.

Secondly, the successor judge may determine that

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particular testimony is not material or is not disputed, and so need not be reheard. The propriety

of the proceeding in this manner may be marginally affected by the availability of a videotape

record; a judge who has reviewed a trial on

videotape may be entitled to greater confidence in

his or her ability to proceed.

The court would, however, risk error to determine

the credibility of a witness not seen or heard who

is available to be recalled.

Id. At a party’s request, a successor judge must recall

a witness whose testimony is material and disputed,

and who is available to testify again without undue

burden. Fed. R. Civ. P. 63. As noted, the successor

judge may consider an unavailable witness’s trial

testimony as the equivalent of a recorded deposition

available for use at trial pursuant to Rule 32 of the

Federal Rules of Civil Procedure.

Rule 63 also allows a successor judge to recall

witnesses sua sponte. 12 Moore’s Federal Practice

§ 63.05[4][a] (3d ed. 2015). The policy behind this

provision is that the successor judge, not having heard

the witnesses at trial, may be hindered in resolving

issues of credibility.12 Id. For example, in Home

Placement Serv., Inc. v. The Providence Journal Co.,

the First Circuit noted that “[u]ndue prejudice to the

litigants might exist if, for instance, the determination

to be made by the new district judge turned substantially on the credibility of witnesses whom the judge

did not have the opportunity to observe in the context

Although the judge assigned to this case (Slomsky, J.) did

not recall witnesses sua sponte, the policy reason for this

allowance applies equally well to witnesses recalled to testify by

the parties.

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of the original trial.” 819 F.2d 1199, 1204 n.6 (1st

Cir. 1987). This notion is of particular concern in the

instant complex case, where the new judge (Slomsky,

J.) did not see or hear the witnesses who testified at

the trial before Judge Fullam. See, e.g., Thompson v.

Sawyer, 678 F.2d 257, 269-70 (D.C. Cir. 1982) (noting

that the successor judge may be unable to make

determinations in complex civil cases without observing witness testimony).

The parties here contested what evidence from the

original trial could be considered by the successor

judge. Ultimately, on November 17, 2014, this Court

issued an Order on the evidence that would be considered at the Rule 63 proceeding. (Doc. No. 736.)13 The

Order provided:

(1) [T]hat as the successor judge under Fed. R.

Civ. P. 63, the Court will consider the live

testimony of recalled witnesses and the exhibits

introduced therewith at the recall hearing as the

substantive evidentiary record of their testimony

in assessing their credibility and deciding the

merits of this case and (2) that this Court will base

its decision on (and the parties may rely on)

the previous trial testimony of those recalled

witnesses before the original judge only to the

extent that the Court formally admits their prior

testimony into evidence at the recall hearing, as

Fed. R. Evid. 801(d) or other provisions of the

Federal Rules of Evidence or Federal Rules of

Civil Procedure may allow.

This case involves two consolidated actions, Civil Action No.

05-cv-305 and Civil Action No. 08-cv-2898. Unless otherwise

noted, references to the docket are to Civil Action No. 05-305.

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(Doc. No. 736 at 1-2.) Thus, the testimony of recalled

witnesses at the Rule 63 rehearing became part of the

evidentiary record for making credibility determinations, findings of fact, and conclusions of law. This

testimony gave the successor judge an opportunity to

observe witnesses as they testified and be in a better

position to make factual findings based on that

evidence. Prior testimony of recalled witnesses also

could be used as the Federal Rules of Evidence and

Civil Procedure permit. In addition, an unavailable

witness’s trial testimony was the equivalent of a

recorded deposition available for use at the Rule 63

proceeding.14

The Court has made reference only to four unavailable

witnesses in the Findings of Fact. Three witnesses are Captain

Iosif Markoutsis, Chief Mate Georgios Zotos, and Tsakos

President Charalambos Hajimichael. As CARCO explained, “as

foreign nationals they are beyond the Court’s subpoena power

and are therefore considered unavailable.” (Doc. No. 867 at 37.)

The remaining unavailable witness, Captain Virgil Quillen,

testified at the first trial but passed away before the Rule 63

proceeding. The parties agreed that prior testimony from these

unavailable witnesses can be relied upon in making factual

findings. The Court has not made any credibility determination

in regard to these witnesses. The Court has also considered the

trial testimony of other witnesses in accordance with the

requirements of Rule 63, as noted above, and prior deposition

testimony submitted by the parties as evidence at the first trial

before Judge Fullam. See E.D. Pa. Local Admiralty Rule 15(A).

Although the testimony of witnesses fall within the ambit of these

rules, the Court has only referred to the testimony of certain

witnesses in this Opinion. Moreover, the Court agrees with

CARCO that, in a Rule 63 proceeding, credibility determinations

could be made based on the deposition or prior testimony of

an unavailable witness. (Doc. No. 866 at 7-10.) The Court has

followed this mandate but has not found it necessary in this

Opinion to make specific reference to the credibility of these

witnesses.

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On October 22, 2014, this Court certified familiarity

with the record and found that this case could be

completed without prejudice to the parties. The Court

entered the certification before making any substantive rulings in this case. (Doc. No. 723.) On March 4,

2015, the Rule 63 hearing began. More than twenty

witnesses were recalled, resulting in a thirty-one day

proceeding.15

D. Oil Pollution Act of 1990

As the responsible party required to clean up the oil

spill under the Oil Pollution Act of 1990, Frescati did

Near the end of the proceedings, Frescati sought to introduce

rebuttal testimony from four witnesses. (Civil Action No. 082898, Doc. No. 438.) CARCO objected to the introduction of any

rebuttal testimony.

“Rebuttal evidence must generally tend to refute the defendant’s proof.” Bhaya v. Westinghouse Elec. Corp., 922 F.2d 184, 190

(3d Cir. 1990). It is allowed in the limited circumstances where a

“defendant’s witnesses have presented an alternative theory or

new facts or have otherwise created a need for a particularized

response.” Bowman v. General Motors Corp., 427 F. Supp. 234,

240 (E.D. Pa. 1977). Additionally, Rule 611 of the Federal Rules

of Evidence mandates that the Court exercise reasonable control

over the mode and order of examining witnesses and presenting

evidence. This includes controlling “the scope of rebuttal and

surrebuttal.” Paul F. Rothstein, Fed. Rules of Evidence Rule 611

cmt. 1 (3d ed. 2015).

In accordance with the Bowman decision, this Court limited

rebuttal testimony. 427 F. Supp. at 240. The Court explained that

only “anything new presented [by the defense] to the trier of fact

can be the subject of rebuttal.” (Trial Tr., 85:20-21, May 26, 2015.)

Accordingly, the Court disallowed the rebuttal testimony of one

proffered witness in full. The Court also severely limited the

rebuttal testimony of the other three witnesses. (Trial Tr., 91:

24-92:3, 112:20-115:6, May 26, 2015.) Rebuttal testimony was

limited to only new matters that the defense raised in its case-inchief.

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so and incurred approximately $143 million in cleanup

costs and damages. As noted, the Government reimbursed Frescati nearly $88 million. Thus, it is evident

that the statutory scheme of the Oil Pollution Act

heavily influenced the actions of the parties in this

case and the eventual cleanup of the oil spill.

i. Provisions of the Oil Pollution Act of 1990

(“OPA”)

The Oil Pollution Act of 1990 (“OPA”) was passed in

the aftermath of the Exxon Valdez spill in 1989, which

released over eleven million gallons of oil into Alaska’s

Prince William Sound and created an environmental

disaster that cost over $3 billion in cleanup efforts.16

3 Benedict on Admiralty ch. IX, § 112 (7th ed. 2015).

In response, Congress passed OPA to quickly compensate victims, minimize environmental damage, and

Prior to the enactment of the Oil Pollution Act in 1990,

various federal and state laws governed the aftermath of oil

pollution from vessels. 2 Thomas J. Schoenbaum, Admiralty and

Maritime Law § 18-3, at 287 (5th ed. 2011). One of the first

federal statutes was enacted in 1970. It was Section 311 of

the Federal Water Pollution Control Act (“FWPCA”). 33 U.S.C.

§§ 1251-1397. Three years later, in 1973, Congress passed the

Trans-Atlantic Pipeline Authorization Act (“TAPAA”), which

covered Alaskan oil pollution. 43 U.S.C. §§ 1651-1655. Following

this legislation, Congress enacted the Deepwater Port Act of

1974 (“DWPA”), and the Outer Continental Shelf Lands Act

Amendments of 1978 (“OCLSA”) [sic]. 43 U.S.C. §§ 1901-1906;

43 U.S.C. §§ 1801-1866. The most comprehensive legislation

enacted, however, was the Comprehensive Environmental

Response, Compensation, and Liability Act of 1980 (“CERCLA”).

42 U.S.C. §§ 9601-9675. In addition to federal laws governing the

aftermath of oil pollution from vessels, various state laws were

promulgated to address pollution incidents. When the Exxon

Valdez spill occurred, the adequacy of federal and state laws

governing oil spill pollution were examined and resulted in major

legislative changes on the federal level.

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internalize the costs of oil spills within the oil industry. H.R. Res. 1465, 101st Cong. (1989) (enacted).

To meet these goals, Congress established a liability

scheme in which the person or entity that spilled the

oil (i.e., the “responsible party”) must pay initially

for all removal costs, and after doing so, it may then

be entitled to statutorily limit its liability, through

review by and reimbursement from the Government,

after cleanup efforts are underway. 33 U.S.C.

§§ 2703(c), 2713.

OPA makes the responsible party for a vessel from

which oil is discharged liable for removal costs and

damages under 33 U.S.C. § 2702, which provides:

Notwithstanding any other provision or rule of

law, and subject to the provisions of this Act,

each responsible party for a vessel or a facility

from which oil is discharged, or which poses the

substantial threat of a discharge of oil, into or

upon the navigable waters or adjoining shorelines

or the exclusive economic zone is liable for the

removal costs and damages specified in subsection

(b) of this section that result from such incident.

33 U.S.C. § 2702(a). Responsible parties include

owners and operators of both vessels and facilities.

33 U.S.C. § 2701(32). The act imposes strict liability

on those found responsible for discharging oil. 3

Benedict on Admiralty, supra § 112. When there is

more than one responsible party, liability is joint and

several. 2 Schoenbaum, supra, § 18-3, at 289.

Three complete defenses to strict liability are

permitted under OPA. 33 U.S.C. § 2703(a). If the

discharge of oil was caused solely by (1) an act of God,

(2) an act of war, or (3) an act or omission of a third

party, then the spiller will have a complete defense to

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liability. Id. Where an oil spill is caused solely by

an act or omission of a third party (other than the

responsible party), the third party is subject to the

same liability for damages as responsible parties.

2 Schoenbaum, supra, § 18-3, at 292.

OPA encourages rapid private party responses to

environmental disasters. Unocal Corp. v. United

States, 222 F.3d 528, 535 (9th Cir. 2000). Spillers who

immediately cooperate and begin cleanup efforts may

be entitled to limit their liability. In fact, OPA places

a monetary cap on the liability of cooperative responsible parties.17 “Because the Act sets liability limits for

Pursuant to 33 U.S.C. § 2708, a responsible party may be

entitled to a limitation of liability under 33 U.S.C. § 2704. A

responsible party who is entitled to a limitation of liability

may file a claim with the Oil Spill Liability Trust Fund for

reimbursement of the amount that removal costs and damages

exceeded the limitation of liability amount. 33 U.S.C. § 2708(b).

33 U.S.C. § 2704 has rules to determine the total liability of a

responsible party. In the case of a tank vessel or any other vessel,

OPA sets forth the method to calculate the limit on liability based

on tonnage of the vessel. Id.

Specifically, for a tank vessel, the total liability of a responsible

party shall not exceed the greater of:

(A) with respect to a single-hull vessel, including a singlehull vessel fitted with double sides only or a double bottom

only, $3,000 per gross ton;

(B) with respect to a vessel other than a vessel referred to

in subparagraph (A), $1,900 per gross ton; or

tons that is ––

(I) a vessel described in subparagraph (A), $22,000,000; or

(II) a vessel described in subparagraph (B), $16,000,000; or

(ii) with respect to a vessel of 3,000 gross tons or less

that is ––

67a

cooperative responsible parties, an incentive exists for

responsible parties to respond quickly and competently in order to limit the extent of their financial

exposure.” In re Frescati, 718 F.3d at 193 (citing 33

U.S.C. § 2704(a)). Responsible parties in compliance

with OPA may file a claim with the Oil Spill Liability

Trust Fund (“the Fund”), controlled by the United

States Government, for reimbursement of costs beyond

the liability limit.18 33 U.S.C. § 2708(a)(2).

In the instant action, Frescati was able to limit its

liability for cleanup costs to $45,474,000, thus allowing it to recover cleanup costs exceeding that amount

from the Fund. In re Frescati, 718 F.3d at 193. It was

ultimately reimbursed $87,989,157.31 for expenses

arising from the Athos I oil spill.

ii. Subrogation Under OPA

Once the Fund has compensated a claimant, including a responsible party, it is subrogated to all rights

(I) a vessel described in subparagraph (A), $6,000,000; or

(II) a vessel described in subparagraph (B), $4,000,000;

33 U.S.C. § 2704(a)(1). A “tank vessel” includes a vessel that

carries oil in bulk as cargo, and that operates on the navigable

waters, or transfers oil in a place subject to the jurisdiction of the

United States. 33 U.S.C. § 2701(34). For any other vessel, the

limitation of liability is $950 per gross ton or $800,000, whichever

is greater. 33 U.S.C. § 2704(a)(2).

The Fund was established in 1986 and is supported by a tax

of five cents per barrel on imported oil. 3 Benedict on Admiralty,

ch. IX, § 112 (7th ed. 2015). The Fund is available to pay removal

costs and other claims, damages, and expenses incurred in

connection with an oil spill. 2 Thomas J. Schoenbaum, Admiralty

and Maritime Law § 18-3, at 303 (5th ed. 2011). As noted, a

responsible party may file a claim with the Fund to seek

reimbursement for its removal costs and damages incurred as a

result of an oil spill. 33 U.S.C. § 2708.

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the claimant has under any law. 33 U.S.C. § 2715(a).

This Section provides that “[a]ny person, including the

Fund, who pays compensation pursuant to this Act to

any claimant for removal costs or damages shall be

subrogated to all rights, claims, and causes of action

that the claimant has under any other law.” Id. Additionally, OPA has codified in § 2712(f) the Government’s right of subrogation after disbursements from

the Fund. It states that “[p]ayment of any claim or

obligation by the Fund under this Act shall be subject

to the United States Government acquiring by subrogation all rights of the claimant or State to recover

from the responsible party.” 33 U.S.C. § 2712(f).

Subrogation occurs when “‘one person is allowed to

stand in the shoes of another and assert that person’s

rights against’ a third party.” US Airways, Inc. v.

McCutchen, 133 S. Ct. 1537, 1546 n.5 (2013) (citation

omitted) (explaining that “subrogation simply means

substitution of one person for another”). As noted, the

Fund paid Frescati $87,989,157.31 as reimbursement

for its removal costs and damages. By doing so, the

Government was subrogated to all rights, claims, and

causes of action Frescati had under any law in regard

to the removal costs or damages.

iii. Oil Spill Response Under OPA

Oil spill responses under OPA and other federal

laws are highly regulated to ensure that oil removal is

handled as quickly and safely as possible.

First, OPA requires owners and operators of tank

vessels and facilities to create a detailed contingency

response plan, which is referred to as “vessel response

plan,” covering a worst-case scenario oil spill.19 33 U.S.C.

Specifically, a vessel response plan must:

69a

§ 1321(j)(5)(D). Vessel response plans include contractual commitments from oil spill removal contractors,

which are known as Oil Spill Response Organizations

(“OSROs”), to facilitate an immediate response to an

oil spill. 3 Benedict on Admiralty, supra, § 112. These

plans include training programs for response personnel, salvage plans for vessel damage, and firefighting

procedures for vessels carrying flammable cargo. Id.

(citing 33 C.F.R. § 155.4010).

Second, a vessel response plan must identify a

“qualified individual” who acts as a liaison between

the vessel interests and the United States Coast

Guard. The qualified individual has the authority to

implement oil removal efforts, and to represent both

(i) be consistent with the requirements of the National

Contingency Plan and Area Contingency Plans;

(ii) identify the qualified individual having full authority to

implement removal actions, and require immediate communications between that individual and the appropriate

Federal official and the persons providing personnel and

equipment pursuant to clause (iii);

(iii) identify, and ensure by contract or other means

approved by the President the availability of, private personnel and equipment necessary to remove to the maximum

extent practicable a worst case discharge (including a discharge resulting from fire or explosion), and to mitigate or

prevent a substantial threat of such a discharge;

(iv) describe the training, equipment testing, periodic

unannounced drills, and response actions of persons on the

vessel or at the facility, to be carried out under the plan to

ensure the safety of the vessel or facility and to mitigate

or prevent the discharge, or the substantial threat of a

discharge;

(v) be updated periodically; and

(vi) be resubmitted for approval of each significant change.

33 U.S.C. § 1321(j)(5)(D).

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the vessel owner and the protection and indemnity

club, which is known as a “P&I Club.”20 33 U.S.C.

§ 1321(j)(5)(D)(ii).

Third, although responsibility for the oil removal

and cleanup lies with the responsible party, the Government directs the cleanup effort. 2 Schoenbaum,

supra, § 18-3, at 303. OPA provides that the President

has the authority to respond to an oil spill and monitor

all federal, state, and private removal efforts. Id.

(citing 33 U.S.C. § 1321(c)-(d)). The President has

delegated this authority to the Coast Guard as the

government agency responsible for ensuring that oil

is removed from the environment. See 33 U.S.C.

§ 1321(c)(1)(A) (stating that the Coast Guard, by virtue of this delegation of authority, must “ensure effective and immediate removal of a discharge . . . of oil”).

Fourth, the Coast Guard federal on-scene coordinator (who is referred to as the “FOSC”) is responsible

for managing the cleanup efforts. 2 Schoenbaum,

supra, § 18-3, at 303 (citing 40 C.F.R. § 300.1). When

faced with large or complex oil spills, the FOSC will

enlist the help of the Coast Guard’s national strike

force, which is staffed with responders who specialize

in oil spills. 33 U.S.C. § 1321(d)(2)(C). The FOSC must

ensure that cleanup efforts comply with the Government’s plan for responding to oil spills, which is referred to as the national oil and hazardous substances

A P&I Club is a “mutual insurance societ[y].” 2 Thomas J.

Schoenbaum, Admiralty and Maritime Law § 19-12, at 392-94

(5th ed. 2011). Essentially, a P&I Club acts as an insurance

provider for a group of vessels, and provides “third-party liability

insurance covering vessel owners for specific named risks.” Id.

Today, protection and indemnity insurance may cover virtually

all risks. Id.

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pollution contingency plan (the “national contingency

plan”). 33 U.S.C. § 1321(d)(4).

Fifth, the national contingency plan “provides the

organizational structure and procedures for preparing

for and responding to discharges of oil.” 40 C.F.R.

§ 300.1. In particular, it outlines strategic objectives

and priorities regarding oil spill responses. 40 C.F.R.

§ 300.3. It prioritizes oil spill response goals in the

following order:

(a) Safety of human life must be given the top

priority during every response action. This

includes any search and rescue efforts in the

general proximity of the discharge and the

insurance of safety of response personnel.

(b) Stabilizing the situation to preclude the event

from worsening is the next priority. All efforts

must be focused on saving a vessel that has been

involved in a grounding, collision, fire, or explosion, so that it does not compound the problem.

Comparable measures should be taken to stabilize

a situation involving a facility, pipeline, or other

source of pollution. Stabilizing the situation

includes securing the source of the spill and/or

removing the remaining oil from the container

(vessel, tank, or pipeline) to prevent additional oil

spillage, to reduce the need for follow-up response

action, and to minimize adverse impact to the

environment.

to ensure a timely, effective response that minimizes adverse impact to the environment.

(d) All parts of this national response strategy

should be addressed concurrently, but safety

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and stabilization are the highest priorities.

The [F]OSC should not delay containment and

removal decisions unnecessarily and should take

actions to minimize adverse impact to the environment that begins as soon as a discharge occurs,

as well as actions to minimize further adverse

environmental impact from additional discharges.

(e) The priorities set forth in this section are broad

in nature, and should not be interpreted to

preclude the consideration of other priorities that

may arise on a site-specific basis.

40 C.F.R. § 300.317. Thus, safety of all personnel and

stabilization of the damaged vessel are top priorities.

40 C.F.R. § 300.317(d). The plan directs the FOSC to

contain the oil spill as quickly as possible to ensure

these priorities are met. The cost incurred for removal

is not the immediate priority.

The FOSC manages the oil spill response efforts

through the incident command system (“ICS”). The

FOSC works with the responsible party’s designated

incident commander, and state on-scene coordinators

to implement the ICS.21 Essentially, the ICS is an

organized structure through which day-to-day cleanup

efforts are executed. It is split into four sections: planning, operations, logistics, and finance. (LaFerriere

Tr., 37:24-38:4, Mar. 23, 2015.)22

Planning involves creating a daily plan to combat

the oil spill, which is referred to as the incident action

These personnel are referred to as the “unified command.”

Transcript citations refer to a transcript which has four

segments on each page, with the exception of testimony from

unavailable witnesses which was taken from the original trial

transcript.

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plan. This includes daily objectives and work assignments. Work assignments are itemized on standard

forms known as “ICS 204 assignment lists.” The FOSC

must approve the incident action plan each day,

ensuring that it meets the requirements outlined in

OPA and the national contingency plan. 33 U.S.C.

§ 1321(d)(4); 40 C.F.R. § 300.317. Additionally, the

operations section monitors the execution of each

work assignment on the ICS 204 assignments lists.

The logistics section orders, organizes, and delivers

equipment, personnel, and other resources on a daily

basis. Meanwhile, finance is responsible for managing

the daily costs of the operation.

The ICS verifies that the cleanup is being completed. Coast Guard personnel monitor the cleanup

efforts to ensure the tasks are being performed properly. Furthermore, the ICS uses standardized documents as a form of verification, such as the ICS

Incident Status Summary Form, the ICS 211 CheckIn Form, the ICS 213 RR Resource Request Form, and

the ICS 214 Daily Log. The oil spill response is highly

organized and regulated to ensure that oil removal is

handled as quickly and as safely as possible.

E. Third Circuit Opinion

Before moving on in this Opinion to the Findings of

Fact and Conclusions of Law, a review of the Opinion

of the Third Circuit Court of Appeals in this case is

necessary, especially given the information already

discussed above and the guideposts set forth in the

decision. As already noted, an appeal to the United

States Court of Appeals for the Third Circuit was

taken from the decision of the District Court (Fullam,

J.) that CARCO had no liability for the oil spill. On

May 16, 2013, the Third Circuit issued the Opinion

in this case, in which it vacated in part the decision

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of Judge Fullam and directed this Court to resolve

certain issues on remand. In re Frescati, 718 F.3d at

184. The Third Circuit stated, in relevant part:

Although remand is appropriate because the District Court [Fullam, J.] failed to set out separate

findings of fact and conclusions of law as required

by Federal Rule of Civil Procedure 52(a)(1),

our legal conclusions also make it necessary to

remand for factual findings.

We conclude that the Athos I, and Frescati as its

owner, are beneficiaries of CARCO’s contractual

safe berth warranty. This was an express assurance that CARCO’s port would be safe for the

Athos I within the scope of its invitation—that is,

drawing 37 feet or less.23 Therefore, on remand it

will need to be determined whether this amount

of clearance was actually provided. This analysis

may require inquiries into the arriving draft of the

Athos I and, if the vessel was drawing more than

the agreed-upon depth of 37 feet, the depth and

positioning of the anchor.

* * *

We further conclude that, as this case is primarily

a contractual one, analysis of Frescati’s negligence claim is required only if the contractual safe

berth warranty of CARCO is deemed satisfied. In

that event, because we conclude that the accident

occurred within the approach to CARCO’s terminal, the District Court would need to determine

the appropriate standard of care, whether it was

The phrase “drawing 37 feet or less” means that the ship’s

draft, which is the measurement from the water line to the

bottom of the ship’s hull (which is the keel of the ship), was 37

feet or less.

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breached, and if so, was that breach the cause of

the spill. . . .

Finally, we conclude that the Government has

waived its reliance on its partial settlement

agreement in challenging CARCO’s defenses to

liability.24

We thus affirm in part, vacate in part the District

Court’s judgment orders of April 12, 2011 against

Frescati and the Government, and remand for

further proceedings consistent with this opinion.

Further appeals relating to this case will be

referred to the current panel.

With respect to the Government’s waiver, the Third Circuit

stated:

[The Government] thus asks us to preclude CARCO on

remand from raising any equitable defense premised on

the Government’s regulation of the Anchorage. CARCO

responds that it retained unspecified equitable defenses

relevant to defending against, inter alia, the contractual

claims, and that the Government conflates defenses to these

claims with violations of CARCO’s promise to forbear

making claims against the Government sounding in tort to

reduce or offset damages awarded to it. . . .

After hearing oral argument, the District Court denied the

Government’s pretrial motion on the ground “that the

question of subrogation defenses [by CARCO] is better

resolved with the benefit of a full trial record.” J.A. at 101.

CARCO claims that the Government failed to follow up at

trial, and thus waived the issue. We agree, as we see no

indication that the Government renewed its argument at

trial (or argued before us how the issue has not been

waived). Thus, we decline to preclude CARCO from revisiting any previously raised equitable defense to the Government’s subrogation claims.

In re Frescati, 718 F.3d at 214 (alteration in original) (footnotes

omitted).

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Id. at 214-15. Thus, following the direction of the Third

Circuit, this Court will address each of these issues in

turn.

i. Issues This Court Will Resolve

In accordance with the Opinion of the Third Circuit,

this Court has been asked to determine first whether

the contractual safe berth warranty was breached,

and, if necessary, whether CARCO was negligent in

maintaining the approach to its berth. The Third

Circuit held that CARCO conceded that the safe berth

warranty “‘would include the area in and around

Paulsboro,’ including [Federal Anchorage Number

Nine].” Id. at 203. Next, regarding whether the contractual safe berth warranty was breached, the Court

of Appeals noted that the fact “[t]hat similar ships

had successfully berthed at the port is irrelevant to

whether the warranty was actually breached in this

case,” and then directed this Court to determine

whether the port was safe or the warranty breached

based only on facts specific to the Athos I and its

arrival at port rather than those based on similar

ships. Id. at 204. Put another way, the Third Circuit

stated that this Court must “determine whether the

anchor rendered CARCO’s port unsafe for a ship of the

Athos I’s agreed-upon dimensions and draft.” Id. at

203.

To determine whether the warranty was breached,

this Court must first determine whether the safe berth

warranty covered a draft of 37 feet or less. Id. at 204

n.20. The Court of Appeals explained, “it appears that

CARCO warranted a safe berth with the understanding that the Athos I would be drawing as much as 37

feet of water upon its arrival.” Id. at 204. “The Voyage

Instructions indicate that the vessel would be filled

with a quantity of crude oil ‘always consistent with

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a 37 [foot] or less [fresh water] sailing draft at

loadport.’”25 Id. (quoting Voyage Instructions, Ex. P360) (alterations in original). However, as the Third

Circuit noted, “Of course, this is ultimately a factual

matter for remand.” Id. at 204 n.20. Thus, as a preliminary matter, this Court must determine the size of

draft that the warranty covered.

Findings as to the Athos I’s actual draft at the time

of the accident must also be made. This draft must be

found because “the warranty made by CARCO appears

to have covered the Athos I up to a draft of 37 feet.” Id.

at 204. As a result, if the Court concludes that the

Athos I was drawing 37 feet or less without bad navigation or seamanship, then CARCO breached the warranty because the ship was damaged. Id. at 204-05.

The Third Circuit continued that if the Court cannot

determine the draft or if the ship was drawing more

than 37 feet, the Court must determine the amount

of clearance above the anchor. Id. at 205. This

determination would be necessary “to conclude

whether the promised 37 feet of water depth was

actually provided.” Id. Thus, the Court must make a

finding on the draft covered by the warranty and then

determine whether Athos I was drawing that amount

or less. Finally, if the draft cannot be determined, the

Court must determine the clearance provided above

the anchor.

The next issue this Court will decide is whether

CARCO was negligent in maintaining the approach to

In this case, the load port was in Puerto Miranda, Venezuela.

The discharge port was in Paulsboro, New Jersey. Both berths

are located in fresh water ports as opposed to salt water found in

the open seas.

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its terminal. Id. at 207. To determine whether

CARCO was negligent, the Court must make findings

on the applicable standard of care, whether CARCO

breached that standard, and whether such breach

proximately caused the accident. A wharfinger27 “is

‘bound to use reasonable diligence in ascertaining

whether the berths themselves and the approaches to

them are in an ordinary condition of safety for vessels

coming to and lying at the wharf.’” Id. (quoting Smith

v. Burnett, 173 U.S. 430, 436 (1899)). The Court of

Appeals explained, however, that it was insufficiently

informed to determine the standard of care applicable

to such a duty, and that on remand this Court should

delineate the exact standard of care that applies here.

Id. at 211-12.

Additionally, this Court must find whether CARCO

breached the applicable standard of care. Id. In this

regard, the Court of Appeals stated that “[n]egligence

exists where there was a ‘fail[ure] to exercise that caution and diligence which the circumstances demanded,

and which prudent men ordinarily exercise.’” Id. at

211 (quoting Grand Trunk R.R. v. Richardson, 91 U.S.

454, 469 (1875)). The Third Circuit continued, “[i]n

admiralty, the particular duty required under any

Although the Court of Appeals explained that if this Court

“rules in favor of Frescati on its contractual warranty claim, its

negligence claim becomes unnecessary,” id. at 190, this Court will

render a decision on both claims. No party has objected to this

procedure and Frescati and CARCO concurred that the negligence issue also should be resolved by this Court. Substantial

evidence was presented at the Rule 63 proceeding by Frescati and

CARCO on the negligence claim and on defenses to the claim.

A wharfinger—here, CARCO—is the manager or operator of

a commercial wharf.

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given circumstance can be gleaned from statute, custom, or ‘the demands of reasonableness and prudence.’”

Id. (quoting 1 Thomas J. Schoenbaum, Admiralty and

Maritime Law, § 5-2, at 253 (5th ed. 2011)).

Finally, with regard to negligence, this Court must

determine “whether the failure, if any, to meet the

standard of care proximately caused the accident.” Id.

at 212. The Court of Appeals explained, “proximate

cause holds that a negligent defendant is liable for all

the general kinds of harms he foreseeably risked by

his negligent conduct to the class of persons he put at

risk by that conduct.” Id. (internal quotation marks

omitted). Thus, the question of causation turns on

whether prudent behavior would have prevented this

accident from occurring. Id. This requires an inquiry

into the diligence required of a prudent wharfinger

under the circumstances, and “whether a failure to

implement those procedures proximately caused the

accident.” Id. The Court will address each of these

issues in turn.

ii. Binding Third Circuit Conclusions

The Third Circuit made other legal rulings, which

guide this Court’s analysis in this case. First, with

respect to the contractual safe berth warranty, the

Third Circuit concluded, “although Frescati was not a

named beneficiary to the safe berth warranty . . . the

Athos I benefits from this warranty, and Frescati, as

the vessel’s owner, is thus a third party beneficiary.”

Id. at 197-98. A safe berth warranty benefits the

vessel, and therefore “benefits its owner as a corollary

beneficiary.” Id. at 199. Further, it would produce

arbitrary results and create a windfall for CARCO if

the vessel’s owner was deprived of the contractual

benefits. Id. The Court of Appeals concluded that on

remand, “Frescati, as the owner of the Athos I, may

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therefore rely on CARCO’s safe berth warranty as a

third-party beneficiary.” Id. at 200.

Second, the Third Circuit determined the scope of

the safe berth warranty. Guided by the Second Circuit,

the Court of Appeals found that the safe berth warranty is an express assurance for the safety of the

vessel that the berth will be as represented. Id. at 202.

It explained that “a port is unsafe—and in violation

of the safe berth warranty—where the named ship

cannot reach it without harm.” Id. at 200. The Third

Circuit reasoned that the charterer—here, CARCO—

is more likely than the ship owner to be familiar

with the selected port. Id. at 202. Furthermore, the

“‘express assurance’ warranty is most consistent with

industry custom” and the “‘always afloat’ language

plainly suggests an express assurance.” Id. at 202-03.

Thus, the Third Circuit concluded that “the safe

berth warranty is an express assurance made without

regard to the amount of diligence taken by the

charterer.” Id. at 203.

Third, the Court of Appeals determined the scope of

the approach to the berth. It stated that the approach

“should be understood by its ordinary terms, and that

its scope is derived from custom and practice at the

particular port in question.” Id. at 207-08. Thus, the

approach is given its plain meaning, and a ship is on

its approach when it “transitions from its general

voyage to a final, direct path to its destination.” Id. at

209. More specifically, a ship is on its approach when

it “makes its last significant turn from the channel

toward its appointed destination following the usual

path of ships docking at the terminal.” Id. The Third

Circuit concluded, therefore, that the Athos I, while in

the Anchorage, was indeed within the approach to

CARCO’s terminal when the accident occurred. Id. at

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211. CARCO had a duty to “exercise reasonable diligence in providing the Athos I with a safe approach,”

which included the passage through the Anchorage. Id.

III. FINDINGS OF FACT28

A. The Tanker, the Parties, and the Charters

1. This action arises out of an oil spill on the

Delaware River. In re Frescati, 718 F.3d at 189. On

November 26, 2004, an oil tanker named the Athos I

struck an abandoned anchor on the riverbed, puncturing its hull and causing oil to spill into the river. Id. at

192.

i. The Tanker

2. The Athos I is a single-hulled oil tanker measuring approximately 748 feet long and 105 feet wide. Id.

at 190; (Teal Tr., 54:16-24, Mar. 16, 2015).

3. The Athos I is classified as a Panamax-size

tanker, meaning that it is capable of passing through

Many witnesses testified at the Rule 63 proceeding,

including a considerable number of qualified experts. The parties’

experts disagreed on a number of critical issues. The “battle of

the experts” and testimony from other witnesses has compelled

this Court to make a credibility finding on certain witnesses.

Unless otherwise indicated, in the footnotes that follow, this

Court will refer to those witnesses who prevailed in the “credibility” battle and were found to be most credible and reliable by the

Court. In addition, unless otherwise indicated, when the Court

quotes or refers to the testimony of a specific witness, whether in

the body of this Opinion or in a footnote, the Court is finding that

the testimony has been proven as a fact, and that fact is relied on

in reaching conclusions of law in this case. At times, an opposing

contention of a party may be referred to in the Findings of Fact

merely to highlight the positions of the parties on a specific

factual matter. The Court will note, however, which facts are

being found.

82a

the lock chambers of the Panama Canal.29 At the time

of the accident, the Athos I was 21 years old. It was

registered in Cyprus.30

4. A tanker is a “vessel used primarily for transporting bulk liquid cargoes, such as . . . liquid petroleum

products.” Black’s Law Dictionary 1684 (10th ed.

2014). As a large vessel, a tanker is fitted with a series

of tanks in the bottom of the ship in which cargo is

stored during transit.

5. A single-hulled oil tanker like the Athos I has

tanks containing cargo right behind the steel shell

plating of the hull.31 In essence, it has one sheet of steel

separating the outside of the ship from its internal

cargo tanks. In contrast, a double-hulled oil tanker has

an outer hull, which is the outermost boundary of the

ship, and an inner hull. These create a double layer of

protection between the outermost hull and the cargo

tanks.32

See Appendix (Ex. “C”) for photographs of the Athos I.

The Athos I was registered as a Cyprus flagged ship.

(Certificate of Registry, Ex. D-1844.) A maritime flag is “[a] flag

designated for use on a vessel to show in what country the vessel

is registered.” Black’s Law Dictionary 755 (10th ed. 2014). The

flag establishes a ship’s “citizenship” for purposes of protection,

trade, and regulation. 1 Thomas J. Schoenbaum, Admiralty and

Maritime Law § 2-21, at 69 (5th ed. 2011).

The hull is the structural body of the ship. 8 Benedict on

Admiralty, Nautical Glossary (7th ed. 2015).

After the Exxon Valdez oil spill, Congress recognized the

danger posed by single-hulled oil tankers. In response, it enacted

stricter requirements for these vessels, with the eventual phaseout of all single-hulled tankers. 3 Benedict on Admiralty ch. § 112

(7th ed. 2015). At the time of the accident, single-hulled tankers

like the Athos I were grandfathered by the gradual phase-out

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ii. The Parties

6. The first party in this action, the Plaintiffs,

includes Frescati Shipping Company, Ltd., and Tsakos

Shipping & Trading, S.A. In re Frescati, 718 F.3d at

189.

7. Frescati Shipping Company, Ltd. owned the

Athos I. Id.

8. Tsakos Shipping & Trading, S.A. (“Tsakos”) was

the manager of the Athos I pursuant to a contract with

Frescati. Id. It is joined in this litigation with Frescati

Shipping Company, Ltd. as the Frescati Plaintiffs.

(Ship Management Agreement, Ex. P-705 ¶ 2.3.)

9. The second party in this action is the United

States Government (“the Government”), which reimbursed Frescati nearly $88 million for the oil spill

cleanup efforts. In re Frescati, 718 F.3d at 189.

10. The third party in this action, the Defendants,

includes CITGO Asphalt Refining Company, CITGO

Petroleum Corporation, and CITGO East Oil Corporation. Id. They are a set of affiliates known here collectively as “CARCO.” Id.

11. CARCO requested that oil be shipped on the

Athos I from Puerto Miranda, Venezuela, to CARCO’s

asphalt refinery in Paulsboro, New Jersey. Id.

iii. The Charters

12. Before the accident, Frescati chartered the

Athos I to Star Tankers, Inc. (“Star Tankers”), which

placed the Athos I in a tanker pool under a pooling

provision of OPA and were allowed to transport oil, provided that

they met certain conditions. Id.

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agreement. (Star Tankers Pool Agreement, Ex. P355.) Star Tankers is not a party to this action.

13. In admiralty, contracts for service are known as

charter parties.34 A charter party is a highly standardized written contract that provides the terms for one

party (the charterer) to hire the carrying services of a

vessel that is owned by another party. Robert Force,

Admiralty and Maritime Law 44 (2d ed. 2013).

14. Two common types of charter parties were used

in this case: a time charter party and a voyage charter

party. In re Frescati, 718 F.3d at 190-91. “A time

charter party is a contract for the use of the carrying

A tanker pool is a collection of tanker vessels under various

ownership, which are placed under the care of a single administrator, known as a pool manager. The pool manager markets

the vessels in the tanker pool to those companies interested in

hiring vessels to carry cargo, facilitating the employment of each

vessel. A pooling agreement is “[a] contract between shipowners

or others having rights in vessels to cooperate in the management

and operation of all vessels controlled by the group whereby each

ship earns from the pool a share in net pool income proportionately with the ship’s agreed theoretical earning capacity,

as opposed to its actual earnings in the pool.” Black’s Law

Dictionary 1348 (10th ed. 2014). It is essentially the contract used

to set up a tanker pool. It typically covers issues such as the

objective of the pooling agreement, the authority of the pool

managers, the capacity in which the pool managers will act, and

the means by which the pool manager will be paid.

As the Third Circuit explained:

The term “charter party” may be confusing in that it does

not refer to an entity, but a document. This is due to its

historical genesis, deriving from the phrase “charta partita,

i.e., a deed of writing divided.” The charta partita was

literally a divided document, the owner and charterer each

retaining one half of the agreement.

In re Frescati, 718 F.3d at 190 n. 1 (quoting Black’s Law

Dictionary 268 (9th ed. 2009)).

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capacity of a particular vessel for a specified period of

time (months, years, or a period of time between specified dates).” Robert Force, Admiralty and Maritime

Law 44 (2d ed. 2013). Unlike a time charter party

where a “vessel’s employment is put under the orders

of . . . charterers” for a period of time, a voyage charter

party is a contract in which the owner of the vessel

agrees to carry cargo from one port to another on

a particular voyage.35 Julian Cooke et al., Voyage

Charters ¶ 1.1 (3d ed. 2007); Robert Force, Admiralty

and Maritime Law 44 (2d ed. 2013).

15. In October 2001, the Athos I was chartered into

a tanker pool assembled by Star Tankers pursuant

to a time charter party. In re Frescati, 718 F.3d at

190-91. “Under a time charter, the owner [Frescati]

remains responsible for the navigation and operation

of the vessel and the charterer [Star Tankers] assumes

responsibility for arranging the employment of the

vessel, providing fuel and paying for certain cargorelated expenses.” Id. at 191 (alterations in original).

The time charter party allowed Star Tankers to sublet

(or sub-charter) the Athos I to an entity interested in

hiring the vessel to transport its cargo from one place

The Third Circuit noted that:

The fundamental difference between voyage and time

charters is how the freight or “charter hire” is calculated. A

voyage charter party specifies the amount due for carrying

a specified cargo on a specified voyage (or series of voyages),

regardless of how long a particular voyage takes. A time

charter party specifies the amount due for each day that the

vessel is “on hire,” regardless of how many voyages are

completed.

In re Frescati, 718 F.3d at 191 n.2 (quoting David W. Robertson

et al., Admiralty and Maritime Law in the United States 335 (2d

ed. 2008)).

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to another. Frescati remained responsible for keeping

the vessel staffed and serviceable. Id. Thereafter,

CARCO entered into the voyage charter party with

Star Tankers for the Athos I to transport oil from

Venezuela to New Jersey.

iv. Vetting the Athos I

16. CARCO was interested in transporting a load of

crude oil from Venezuela to its asphalt refinery in

Paulsboro, New Jersey. To do so, it vetted the Athos I

to ensure the vessel was fit for transporting its cargo.

(Rankine Tr., 186:17-21, May 26, 2015.) The vetting

process is performed to inspect the condition of each

vessel prior to its employment. (Rankine Tr., 186:1721, May 26, 2015.) It includes a physical inspection

of the vessel, as well as a review of the vessel’s

documentation. (Rankine Tr., 198:9-17, 211:12-19,

May 26, 2015.)

17. In 2004, CARCO hired International Marine

Consultants (“IMC”) to perform the Athos I’s physical

vetting in Corpus Christi, Texas. (Rankine Tr., 9:1210:4, May 27, 2015.)

18. On October 24, 2004, IMC Captain Khushru

Dasoor (“Captain Dasoor”) vetted the Athos I.

(Rankine Tr., 36:5-10, May 28, 2015; CITGO Vetting

Inspection Report, Ex. P-1373.) This included a

physical inspection as well as paper vetting. Paper

vetting was required to ensure that all certificates

were valid, including the Safety Management Certificate, the Document of Compliance, and the International Oil Pollution Prevention. (Rankine Tr., 32:2533:10, 34:19-35:14, May 28, 2015.)

19. The paper vetting of the Athos I included review

of a Q88 Form, which is an online form that is completed by the vessel owner and then downloaded by

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entities interested in employing the vessel for transporting cargo. (Rankine Tr., 198:9-24, May 26, 2015.)

20. After vetting the Athos I, Captain Dasoor gave

the vessel a rating of seven, which is an acceptable

rating. (Rankine Tr., 36:5-10, May 28, 2015.)

21. The Q88 Form did not include information

regarding an incident involving the Athos I that

occurred in March 2004 off the coast of South Korea.

(Rankine Tr., 30:8-10, May 28, 2015.) This incident

occurred while the Athos I was managed and crewed

by another company known as MareGulf, and does not

affect the current matter.36

v. Voyage Charter Party

22. On November 12, 2004, CARCO sub-chartered

the Athos I from the Star Tankers pool to transport a

load of crude oil from Venezuela to its asphalt refinery

in Paulsboro, New Jersey. In re Frescati, 718 F.3d

at 190-91. CARCO’s employment of the Athos I was

pursuant to a voyage charter party. Id. at 191.

Between 2001 and 2004, the Athos I was under the management of MareGulf (“Mare”). (Hajimichael Tr., 29:5-10, Oct. 19,

2010.) Mare supplied the crew and was responsible for the daily

management of the vessel. (Hajimichael Tr., 29:5-10, Oct. 19,

2010.) In March 2004, Korean authorities inspected the vessel

and alleged that one of the crew members bypassed the vessel’s

oily water separator and unlawfully discharged oil into the sea.

(Hajimichael Tr., 91:15-98:10, Oct. 19, 2010.) After the Korean

incident, Frescati replaced Mare with Tsakos as the manager of

the Athos I. (Hajimichael Tr., 108:3-5, Oct. 18, 2010; 4:10-16, Oct.

19, 2010.) Information about the incident was available on the

Internet through the Asia-Pacific Memorandum of Understanding, which is a group that monitors vessel performance.

(Hajimichael Tr., 91:15-92:7, 96:18-97:9, Oct. 19, 2010.) As such,

this information was publicly accessible to CARCO during the

vetting process, but is not relevant to the incident in this case.

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23. CARCO’s particular voyage charter party, based

on a standard industry form, contained a safe berth

warranty. Id.

24. The safe berth warranty provided that: “The

vessel . . . shall, with all convenient dispatch, proceed

as ordered to Loading Port(s) named . . . or so near

thereunto as she may safely get (always afloat) . . . and

being so loaded shall forthwith proceed, as ordered on

signing Bills of Lading, direct to Discharging Port(s),

or so near thereunto as she may safely get (always

afloat), and to deliver said cargo.” (Voyage Charter

Party, Ex. P-357, Part II, ¶ 1). The loading port was

located in Puerto Miranda, Venezuela, and the discharging port was CARCO’s berth in Paulsboro, New

Jersey.

25. It further stated that:

The vessel shall load and discharge at any safe

place or wharf, or alongside vessels or lighters37

reachable on her arrival, which shall be

designated and procured by the Charterer,

provided the Vessel can proceed thereto, lie at,

and depart therefrom always safely afloat, any

lighterage38 being at the expense, risk and peril of

the Charterer. The Charterer shall have the right

of shifting the Vessel at ports of loading and/or

discharge from one safe berth to another on

payment of all towage and pilotage shifting to

next berth, charges for running lines on arrival at

and leaving that berth, additional agency charges

and expense, customs overtime and fees, and any

A “lighter” is a small vessel employed in loading or unloading

larger vessels.

“Lighterage” is the liquid cargo being transported on the

vessel.

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other extra port charges or port expenses incurred

by reason of using more than one berth. Time

consumed on account of shifting shall count as

used laytime except as otherwise provided in

Clause 15.

(Voyage Charter Party, Ex. P-357, Part II, ¶ 9).

26. The safe berth warranty included two separate

protections: “a contractual excuse for a master who

elects not to venture into an unsafe port, and protection against damages to the ship incurred in an unsafe

port to which the warranty applies.” In re Frescati, 718

F.3d at 197.

vi. Draft Restriction in the Voyage Charter

Party

27. The Third Circuit noted that, from the record,

“CARCO warranted a safe berth with the understanding that the Athos I would be drawing as much as 37

feet of water upon its arrival.” Id. at 204.

28. On November 15, 2004, CARCO provided Iosif

Markoutsis (“Captain Markoutsis”), the Captain of the

Athos I, with voyage instructions, which dictated the

Athos I load cargo only up to a draft of 37 feet at Puerto

Miranda, Venezuela.39 (Voyage Instructions, Ex. P360.)

29. The voyage instructions stated that the Athos I

would be filled with a quantity of crude oil “always . . .

consistent with a 37 [foot] or less [fresh water] sailing

Captain Markoutsis was the Captain of the Athos I at the

time of the casualty. Captain Markoutsis testified at the first

trial. He did not testify at the Rule 63 proceeding because he was

unavailable. Therefore, his testimony is being considered for

limited purposes, such as the load draft of the Athos I, and the

crew’s ability to stop the oil leak.

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draft at loadport.” (Voyage Instructions, Ex. P-360).

The voyage instructions further required that after

loading, the Athos I would advise CARCO of the

vessel’s fresh water navigational draft. (Id.) CARCO

had an inspector on site who recorded the loading

draft. (Zotos Tr., 42:19-43:9, 49:14-17, Sept. 27, 2010.)

30. Another draft restriction on the Athos I was

established by the Docking Pilots Association (“DPA”)

Guidelines.40 These guidelines recommend appropriate docking windows for vessels of various sizes during

certain stages of the tide. In 1999, at CARCO’s

request, the DPA established a docking window for the

Paulsboro facility to maximize the number of vessels

that could dock at CARCO’s berth. (Quillen Tr., 11:1012:9, Sept. 2, 2010; DPA Memo., Ex. P-50; P-52.)

CARCO wanted a longer docking window to avoid

demurrage costs, which are incurred for example, when

ships are forced to wait in the channel or Anchorage

before docking to satisfy the narrow docking timeframe.41 This longer window allowed vessels with a

maximum draft of 37 feet, 6 inches to dock at CARCO’s

berth “from the beginning of [the] flood current until

the time of one (1) hour after high water Billingsport

Captain Virgil Quillen (“Captain Quillen”) was working on

behalf of the DPA at the time, and communicated with the

CARCO Port Captain about opening the docking window to allow

ships to berth for longer periods of time. Captain Quillen testified

at the first trial, but passed away before the Rule 63 proceeding,

and therefore was unavailable to testify. His testimony is referred

to for the limited purpose of understanding how the DPA worked

with CARCO to open its docking window as noted.

Demurrage is an agreed rate that is charged to a charterer

when the ship is delayed during the charter for whatever reason

through no fault of the ship. (Rankine Tr., 179:14-18, May 27,

2015.) The cost of a single day’s demurrage for the Athos I was

$42,000. (Voyage Charter Party, Ex. P-357, Part I, ¶ I.)

Range.”

2010.)

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(Ex. P-52; Quillen Tr., 11:10-26:3, Sept. 2,

31. The Court finds in this case that the maximum

allowable draft for the Athos I upon its arrival to berth

at the CARCO dock until the point of actual docking

was at all times 37 feet, as noted in the voyage

instructions, which required that the Athos I be filled

with a quantity of crude oil always consistent with a

37 foot or less sailing draft at load port.

B. Geography of the Delaware River

32. The Delaware River is a major river on the

Atlantic Coast of the United States. Originating in

New York, it forms the entire boundary between

Pennsylvania and New Jersey. It also is part of the

The “tide” is the vertical movement of the water level, meaning that the water level moves above or below an average measurement called “Mean Lower Low Water” (“MLLW”). (Capone Tr.,

208:3-209:3, Mar. 18, 2015.) MLLW is the 19-year average height

of the lowest tide recorded at a tide station. It is essentially “zero.”

Actual water levels may be above or below the MLLW measurement at any given stage of the tide. (Capone Tr., 209:4-12, Mar.

18, 2015.) Tides in the Delaware River are semidiurnal (meaning

that there are two high tides and two low tides each day) and

the range of tide (the difference between high and low tide) is

approximately six feet. (Capone Tr., 208:14-20, 226:14-16, Mar.

18, 2015.) The “tidal current” is the “horizontal component of . . .

water movement.” (Capone Tr., 211:10-16, Mar. 18, 2015.) When

water flows up-river, this is referred to as a flood tide; when it

moves down-river, it is referred to as an ebb tide. (Capone Tr.,

212:11-16, Mar. 18, 2015.) Captain Howard Teal, Jr., a River Pilot

on the Delaware, explained that a flood current is “an incoming

current . . . associated with a slowly rising tide.” (Teal Tr., 87:57, Mar. 16, 2015.) Allowing a ship to dock from the beginning of

the flood current until one hour after high water would have

reduced, at times, the available underkeel clearance between the

riverbed and the bottom of the hull of the ship up to four feet.

(Rankine Tr., 181:16-23, May 27, 2015.)

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boundary between Pennsylvania and New York, and,

for a few miles, the boundary between Delaware and

New Jersey.

33. The Delaware River flows south, where it

empties into the Delaware Bay (and the Atlantic

Ocean) between Cape Henlopen, Delaware and Cape

May, New Jersey.

34. All vessels traveling from the Delaware Bay

north to the Delaware River, including the Athos I, are

required to use a Delaware River Pilot to traverse its

waters. See Del. Code Ann. tit. 23, § 121(a). These

pilots have local knowledge of the surrounding

waterways to safely navigate vessels to their final

destinations.

35. The pilot station where Delaware River Pilots

board ships is located at Cape Henlopen, Delaware.

(British Admiralty Chart 2564, Ex. P-459.)

36. A Delaware River Pilot will generally navigate

a vessel from the entrance to the Delaware Bay north,

up the Delaware River, to its final destination.

37. With larger vessels such as the Athos I,

Delaware River Pilots will generally stay within the

Delaware River Channel, which has been dredged to a

project depth of 40 feet.43 The ship channel is “[t]he

Historically, the Delaware River was not 40 feet deep.

Rather, it has been dredged to 40 feet to promote the shipping

industry. (DePasquale Tr., 40:2-13, Mar. 19, 2015; Teal Tr.,

127:13-19, Mar. 16, 2015.) “Project depth” is the depth to which

the Army Corps of Engineers has dredged the river. (DePasquale

Tr., 40:2-13, Mar. 19, 2015.) If a section of the Delaware River

had a project depth of 40 feet, the Army Corps of Engineers would

conduct depth surveys intermittently in this area. If it found that

the depths were shallower than 40 feet, these sections would be

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part of a navigable body of water where the water is

deep enough for large vessels to travel safely.” Black’s

Law Dictionary 1589 (10th ed. 2014.) It is essentially

the main thoroughfare in the center of the river, and

is analogous to a highway for cars. Ships stay within

channel boundaries because this is generally the

deepest part of the waterway and is known to mariners as the commuting route (or “shipping lane”).44

38. The Delaware River channel is divided into

ranges, each of which is named. (See, e.g., British

Admiralty Chart 2604, Ex. P-461). For instance, if a

ship were travelling north from the Delaware Bay

along the Delaware River, it would pass through the

Tinicum Range, the Billingsport Range, and would

enter the Mifflin Range where it could start its

approach to CARCO’s Paulsboro berth area.

39. On either side of the channel are shallower

waters, shoals, and anchorages. A shoal is “a sandbank or sandbar that makes the water shallow.”

Merriam-Webster’s Collegiate Dictionary (11th ed.

2004). As noted earlier, an anchorage is “[a]n area

where ships can anchor.” Black’s Law Dictionary 105

(10th ed. 2014). It is a place designated as suitable for

temporary anchoring. Merriam-Webster’s Collegiate

Dictionary (11th ed. 2004).

40. Section 7 of the Rivers and Harbors Act of 1915

authorized the establishment of “anchorage grounds

for vessels in all harbors, rivers, bays, and other

navigable waters of the United States whenever it is

manifest . . . that the maritime or commercial interests

dredged to ensure that the shallowest depths were at least 40

feet. This depth allows ships to transit the river safely.

A shipping lane is “[a]n officially approved path of travel that

ships must follow.” Black’s Law Dictionary 1589 (10th ed. 2014).

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of the United States require such anchorage grounds

for safe navigation.” 33 U.S.C. § 471(a).

41. “By 1930, a ‘lack of adequate anchorage room’

was creating a hazard on the Delaware River between

navigating vessels and ‘t

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