Appendix — S.S. Zoe Colocotroni v. Puerto Rico

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8 0 ~ @ 58 Supreme Court. U. S.

F LEO

10 1980

No. 80- Nov

MICHAFL RODAK, JR. CLERK

—— wee

IN THE

Supreme Court of the United States

OCTOBER TERM, 1980

Tue S.S. Zor Cotocorroni, Marsonanza CoMPANIA NAVIERA,

S.A., Cotocorron: Lrp., CoLocorroni Brotuers, 8.A., THE

West or Encianp Saip Owners Mutua ProrTEcTION AND

InpEMnity Association (LuxemBourG) and THe WEsT oF

Encuanp Saip Owners Mutua Insurance ASSOCIATION

(Lonpon) LimITep,

Petitioners,

-against-

Tue CoMMONWEALTH OF Puerto Rico and THE ENviron-

MENTAL QuaLity Boarp or THE COMMONWEALTH OF PUERTO

Rico,

Respondents.

APPENDIX TO THE PETITION FOR A WRIT OF

CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE FIRST CIRCUIT

JoHn W. WALL

30 Rockefeller Plaza

New York, New York 10112

(212) 489-4100

Attorney for Petitioners

Of Counsel:

Owen McGIverRN

Peter S. DEALY

Donovan Leisure Newton & IRVINE

30 Rockefeller Plaza

New York, New York 10112

November 10, 1980

Ee Oe YF

INDEX TO APPENDIX

PAGE

Opinion of the Court of Appeals, filed August 12, 1980 la

Opinion of the Court of Appeals, filed July 10, 1979 .... 49a

Memorandum and Order of the Court of Appeals,

Plod Tame 11, 19 7D ncccsciecsareasncessrecesonssecensessssincssnsesesorsssesson 55a

Opinion of the District Court, filed August 16, 1978,

as amended by Order filed October 4, 1978 ...........-.-.- 57a

Opinion and Order of the District Court, filed

Coton Bh, BGT secinsecccsicnnconsassnnscoshsbasissannsnniimonannenevemssscsas 103a

Opinion and Order of the District Court, filed

Feary TO TGTT cvscranecsnsvncscsinssccsonmessnssotsnsccsapesnisneanetintet 109a

Order of the District Court, filed November 7, 1975 .... 119a

Order of the District Court, filed September 17, 1975 .. 121a

Order of the District Court, dated April 11, 1974.......... 122a

Order of the District Court, dated April 8, 1974 .......... 124a

Magistrate’s Report and Recommendation, dated

RIE Tig ROTO cveinsimcseranccbnvicsiatvecoennisanaspeaeahalaatainaninnan 126a

Memorandum Opinion and Order of the District Court,

Red Pema TI, FTG aise ceccsstcnkiniisieescrsrencccnecp eines 137a

Order of the District Court, filed July 3, 1978 .............. 152a

Order of the District Court, dated June 19, 1978 .......... 155a

Judgment entered August 12, 1980 .00.........eccceeeceeeeeees 159a

Constitutional and Statutory Provisions Involved ...... 160a

Amendment XIV to the Constitution of the

Unidad Bteton, Geen) cvcscsstccpeccncccesinccamneomet 160a

Section 11(29) of the Publie Policy Environ-

mental Act of the Commonwealth of Puerto

Rico, 12 L.P.R.A, § 11381(29) (1978)

Rule 4.7 of the Puerto Rico Rules of Civil Pro-

cedure (Puerto Rico Long-arm Statute),

26 LPB Ang Bp. Thy TR. Ge CIGD necriccvetenvceses 16la

Section 20.030 of the Puerto Rico Insurance Code

(Puerto Rico Direct Action Statute),

BS EaF dks: S Be IE D. sitsciresiierisetnsicetoaenadiaes 162a

Section 11.190 of the Puerto Rico Insurance Code,

OG Ta K. 8 TEED CR) aickncnesvcctasnne 163a

—

UNITED STATES COURT OF APPEALS

For tHe First Crrcuit

No. 78-1543 and No. 79-1468

> ee

CoMMONWEALTH OF Purrto Rico, et al.,

Plaintiff's, Appellees,

Vv.

Ture SS Zor Corocorront,

Her Encines, APPURTENANCES,

ete., et al.,

Defendants, Appellants.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

Argued: March 10, 1980

Filed: August 12, 1980

Before Corrin, Chief Judge,

CampseLL, Circuit Judge, and

Wyzansk1,* Senior District Judge.

Sr i

CaMpBELL, Circuit Judge. In the early morning hours of

March 18, 1973, the SS ZOE COLOCOTRONIT, a tramp oil

tanker, ran aground on a reef three and a half miles off the

south coast of Puerto Rico. To refloat the vessel, the cap-

* Of the District of Massachusetts, sitting by designation.

tain ordered the dumping of more than 5,000 tons of crude

oil into the surrounding waters. An oil slick four miles

long, and a tenth of a mile wide, floated towards the coast

and came ashore at an isolated peninsula on the south-

western tip of the island—a place called Bahia Sucia. The

present appeal concerns an action in admiralty brought by

the Commonwealth of Puerto Rico and the local Environ-

mental Quality Board (EQB) to recover damages for harm

done to the coastal environment by the spilled oil.’

Defendants’ have raised numerous objections to the dis-

trict court’s judgment awarding plaintiffs $6,164,192.09 in

damages for cleanup costs and environmental harm, The

primary objections are that the district court: (1) abused its

discretion in striking defendants’ pleadings on the issue of

liability as a sanction for defendants’ conduct during the

discovery process; (2) erred in considering depositions of

the ship’s master and crew on the issue of liability and in

making findings as to liability after that issue had been

removed from the case; (3) lacked personal jurisdiction

1. Several other actions that were initially consolidated with this

one have been settled or adjudicated. The United States recovered

$840,366.01 in cleanup costs, interest and statutory penalties against

the owners of the oil tanker; we refused to enlarge this award by

adding attorney’s fees and additional prejudgment interest. United

States Vv. M/V Zoe Colocotroni, 602 F.2d 12 (1st Cir. 1979). Local

fishermen and owners of a nearby salt pond settled their claims for

property damage and lost income for $55,000 and $75,000 respec-

tively. A local hotel’s claim for riparian damages and loss of business

was also settled, for $13,500.

2. Defendants in this action are the SS ZOE COLOCOTRONI

(in rem); the owners—Marbonanza Compania Naviera, $.A., Colo-

cotroni, Ltd., and/or Colocotroni Brothers, S.A.; and the insurance

underwriters—the West of England Ship Owners Mutual Protection

and Indemnity Association (hereinafter West of England-Luxem-

bourg) and the West of England Ship Owners Mutual Insurance

Association (hereinafter West of England—London). The two West

of England firms (hereinafter collectively West of England) were

sued under Puerto Rico’s direct action statute, 26 L.P.R.A. § 2003,

as insurers of the ZOE COLOCOTRONI and her owners. West

of England's contention that the district court lacked personal juris-

diction over the two firms is discussed in Part IV infra.

over the underwriters West of England-Luxembourg and

West of England-London; (4) erred in finding plaintiffs

had standing to sue for environmental damages; (5) ap-

plied the wrong standard in measuring damages ; (6) made

certain erroneous findings of fact on damages; and (7)

erred in denying defendants’ Rule 60 motion for relief from

judgment. The facts and circumstances of the oil spill and

its aftermath are set forth in detail in the district court’s

opinion, Commonwealth of Puerto Rico v. SS Zoe Colo-

cotroni, 456 F. Supp. 1327 (D.P.R. 1978). After a brief

review of these facts and of the trial testimony, we will

address defendants’ contentions in turn.

The following facts found by the district court are not in

serious dispute. On March 15, 1973, the ZOEK COLO-

COTRONI departed La Salina, Venezuela, carrying

187,670 barrels of crude oil en route to Guayanilla, Puerto

Rico. For the first two days of the voyage, the vessel pro-

3. Defendants also argue that receipt by the Commonwealth of a

$162,194 grant from the Environmental Protection Agency (EPA)

for litigation expenses in connection with the Bahia Sucia oil spill

constituted “maintenance” in the common law sense. In the alter-

native, defendants argue the amount of the grant should be set off

against any recovery to which the plaintiffs may be entitled. These

arguments are specious. See generally Corbin on Contracts § 1423

(no illegality in assisting another to maintain a suit by advancing the

money to pay costs and expenses, even as a gift, if the advancement

is made for reasons of charity or friendship and not for profit). Sec-

tion 106 of the Federal Water Pollution Control Act, 33 U.S.C.

§ 1256(a), provides that EPA may grant funds to states “for the

prevention, reduction, and elimination of pollution, including en-

forcement directly or through appropriate State law enforcement

officers or agencies.” The regulations define “enforcement” to in-

clude “litigation support activities.” 40 C.F.R. § 35.1513-5(c) (8).

A statutorily authorized government grant intended to further the

purposes of a valid statute does not constitute “maintenance” by the

United States. Cf. Mitchell v. Mitchell Truck Line, Inc., 286 F.2d

721, 727 (Sth Cir. 1961) (Secretary of Labor’s solicitation or

minimum wage complaints pursuant to statutory scheme not “bar-

ratrous”’).

ceeded by celestial navigation. The last star fix, however,

was taken at 1859 hours on March 17, For the next eight

hours, the ship proceeded by dead reckoning. As the vessel

approached the south coast of Puerto Rico, it was, the dis-

trict court stated, “hopelessly lost.” At 0300 hours on

March 18, the ship grounded on a reef. Efforts to free the

tanker by alternately running the engines in forward and

reverse were unsuccessful. After ten minutes, the captain

ordered the crew to lighten ship by emptying the cargo of

crude oil into the sea.*’ By the time the vessel refloated,

some 1.5 million gallons of crude oil—5,170.1 tons—had

poured into the surrounding waters.

The oil floated westward from the site of the spill

throughout the daylight hours of March 18, and began com-

ing ashore after nightfall. Bahia Sucia is a crescent-

shaped bay facing southeastward from the Cabo Rojo

peninsula, which forms the southwest tip of Puerto Rico.

The oil entered Bahia Sucia, washed onto the beaches, and

penetrated the mangrove forests that line the western edge

of the bay. The oil was particularly thick in three areas:

around the rocky tip of the peninsula, in a section of man-

groves known as West Mangrove between a point called

“Hermit One” and an inlet called “Dogman’s Cove,” * and on

the open beach area stretching along the northern edge of

the bay. In addition, as the tide ebbed and flowed, oil

entered the tidal flats behind the mangrove fringe, coating

the roots of mangroves growing deeper in the forest and

soaking into the sediments.

4. The captain was ultimately tried and convicted on a charge of

violating 33 U.S.C. § 1321(b) (5) in connection with the dumping of

the oil. 456 F. Supp. at 1333 n.9.

5. Two hermits—Hermit One and the Dogman—lived in the

West Mangrove area at the time of trial, the Dogman being so called

because of his large collection of canine acquaintances. Neither her-

mit claimed any legal interest in the property. Various local

topographical features were identified in court by reference to these

two eponymous individuals,

A massive cleanup operation, coordinated by the United

States Coast Guard and several Commonwealth agencies,

commenced on the morning of March 19. Cleanup crews,

hampered to some extent by variable winds that blew oil

back and forth across the bay, used booms to attempt to

contain oil floating on the surface. Much of this oil was

pumped out, either directly from the water or from large

holes dug in the beach into which oil was channeled by the

cleanup crews. By March 29, approximately 755,000 gallons

of oil, or about half the amount spilled, had been recovered.

On several occasions during the cleanup, oil was driven by

winds and currents into the eastern edge of the bay in an

area known as East Mangrove. This thin layer of oil was

difficult to remove, but, according to the district court’s

findings, it caused little or no harm to the East Mangrove

forest.

By April, cleanup activities had switched from large-

scale removal of oil to small-scale activities such as manual

beach cleanup and bailing of oil from tidal pockets with

buckets and small boats. Large amounts of contaminated

sands—totaling about 4,500 cubic yards—were removed

from the beach area by bulldozer and by hand. At the end

of April, the major remaining cleanup efforts were halted,

and all further efforts were discontinued after September

24. Despite the cleanup, oil continued to be present in

Bahia Sucia, especially in the stand of mangroves on the

west side of the bay.

One of the plaintiffs’ expert witnesses, Dr. Ariel Lugo

Garces, a wetlands specialist, testified that the ecological

functions of a mangrove forest such as that at Bahia Sucia

included: (1) protecting the shoreline from erosion, storms,

tides, and high winds; (2) providing a habitat for wildlife,

especially birds; (3) providing a protected breeding ground

for fish and shellfish; and (4) acting as a food source for

aquatic creatures of all kinds. Dr. Roger D. Anderson, a

marine biologist who testified for defendants, agreed with

Dr. Lugo that tropical mangroves are an important link in

the food chain that supports fisheries and other marine

resources.

The district court described the Bahia Sucia mangroves

as follows:

“The mangrove that borders on the ocean fringe

throughout Bahia Sucia is a species referred to as

red mangrove (Rhizophora mangle). This mangrove

has both main and prop roots, in which are located

lenticels or pores for gas exchange. These lenticels

facilitate root respiration. Various epibenthic

species such as tree oysters, snails, crabs, sponges

and molluses dwelled in these root systems. In the

waters surrounding these roots, communities of fish,

shrimp and similar floating or swimming organisms

throve. The bottom around the roots was inhabited

by various benthic infauna. The bottom near the red

mangrove was covered with both turtle grass .

and manatee grass... .

Further inland from the fringe, as the interstitial

salinity rises, the red mangrove is supplanted by the

black mangrove (Avecennia nitida). This mangrove

inhabits a zone systematically flooded by the tide,

and rather than prop roots, it has fingerlike breath-

ing tubes (called neumatafors) which rise from the

ground to above high water level. This area pro-

vided a habitat principally for crustaceans such as

crabs and barnacles, and algae grazing snails, bees

and reptiles. There were also benthic infaunal com-

munities similar in nature to those in the bottom

surrounding the red mangrove fringe.”

456 F. Supp. at 1338 (footnotes omitted). The district

6. In the district court, the terms “benthic infauna” and “infaunal

creatures” were used to describe creatures such as worms or clams

living in or under the sediment beneath the mangroves. The term

court noted that the configuration of Bahia Sucia, together

with the prevailing winds and currents, made the bay a

natural trap for floating debris, including small quantities

of petroleum and tar.?’ Nevertheless, the court found that,

at the time of the ZOK COLOCOTRONT oil spill, “Bahia

Sucia was a healthy, functioning estuarial ecosystem, typi-

eal of those found in the Southern coast of Puerto Rico and

similar tropical environments.” 456 F. Supp. at 1339.

The Commonwealth of Puerto Rico and the EQB insti-

tuted the present action on March 19, 1973, invoking the

admiralty jurisdiction of the district court. A six-week

trial, addressed solely to damages, commenced on Novem-

ber 7, 1977.8 Plaintiffs first introduced testimony by expert

witnesses on the impact of the oil spill on Bahia Sucia, the

toxic effects of the oil, and the extent to which oil was still

present four years after the spill. Other experts then pre-

sented proposals for restoring the area and testified to the

costs that would be involved. Rafael Cruz Perez, an engi-

neer, presented a proposal to remove and replace a total

of 164,600 square meters (approximately 40 acres) of oil-

contaminated sediments in the West Mangrove and Hast

Mangrove areas to a depth of one meter. While the details

of the Cruz Perez plan were somewhat sketchy, the geo-

“epibenthic” was used to describe creatures such as shrimp or crabs

that live just above the surface of the sediment, whether in or out

of the water. While defendants have questioned the accuracy of

this terminology on technical grounds, we believe the intended mean-

ing of these terms is clear enough in the record, and we will use

them in the same fashion as the district court.

7. Indeed, the literal English translation of Bahia Sucia is “dirty

bay.”

8. On the first day of trial, the district court judge and counsel

for the parties made an on-site visual inspection of the Bahia Sucia

shoreline.

graphic areas to be affected by the plan apparently con-

sisted of the following. Of the 40 acres of contaminated

sediments to be removed, about 15 acres were on the west

side of the bay in the vicinity of West Mangrove and about

25 acres were on the east side in the vicinity of East Man-

grove. Of the 15 acres on the west side, about 3.5 acres

contained mangroves, approximately half of which were

alive notwithstanding the polluted sediments. Of the 25

acres to be removed on the east side, about 16.5 acres con-

tained mangroves. Cruz Perez thus estimated his plan for

removal of 40 acres of contaminated sediments would

necessarily entail the clearing of some 20 acres of existing

mangroves. Furthermore, Cruz Perez testified, three addi-

tional acres of mangroves in uncontaminated areas would

have to be cleared to provide access for heavy machinery.?

An engineering report submitted by Gabriel Fuentes, a

contractor, estimated the cost of removing the sediments

and mangroves to be $7,176,363.71. Charles Pennock, a

San Juan nurseryman, submitted an estimate of $559,500

for the replanting of 23 acres of mangroves from container-

grown plants (approximately 5,500 trees per acre) and a

five-year maintenance plan.

Dr. Roger J. Zimmerman, a marine biologist from the

University of Puerto Rico, testified concerning a study he

conducted in late 1976 and early 1977 comparing the num-

ber of living organisms found at Bahia Sucia with the

number found in a comparable control area. Dr. Zimmer-

man’s study established no significant differences in wwn-

9. Cruz Perez testified that he made his calculations working

from aerial photographs and from on-site observations. Cruz

Perez’s study showed the size of the various impacted areas in num-

bers of square meters. We have translated these figures into numbers

of acres for ease of reference. According to Cruz Perez's figures,

there were a total of about 12 acres of mangroves in the West Man-

grove area, of which about half were living mangroves in unaffected

sediments. The figures suggest there were also about 2.5 acres of

dead mangroves not impacted by oil. For a further discussion of

the significance of these numbers, see note 25 infra.

ber or type of organisms—either plants or animals—in the

seagrass beds or on the prop roots of the mangroves. The

study did, however, show a substantial disparity in the

number of organisms living on or under the sediments. In

particular, Dr. Zimmerman stated that the number of

molluses (e.g¢., clams, snails) in the Bahia Sucia area was

very small in comparison to the control area. On the other

hand, samples taken in Bahia Sucia found a far larger

number of polychaete worms, especially a genus known as

capitella which often proliferates in areas of acute environ-

mental distress.

Dr. Zimmerman also testified that, subsequent to this

first survey, a second study was undertaken at the behest

of the Environmental Quality Board. This study, again

relying on core samples taken in Bahia Sucia and at a con-

trol site, concentrated on the sediments, where the first

survey had found the greatest impact from the oil. Dr. Zim-

merman stated that the surveyors took their samples

primarily from the vicinity of a small lagoon in the West

Mangrove area where previous studies and visual observa-

tion indicated the oil was heavily concentrated. This study

revealed a marked difference between the two sites in the

numbers of infaunal and epibenthic creatures, according

to Dr. Zimmerman.

Dr. Ariel Lugo Garces, the wetlands expert, testified to

studies he had made indicating the presence of oil in the

mangrove sediments correlated with dead or dying man-

grove trees. The mangroves would not grow back, Dr.

Lugo said, as long as the oil remained in the sediments.

Dr. Lugo also presented a compilation, prepared by him,

of the data gathered by the other Bahia Sucia surveyors,

summarizing the extent of damage to twelve different com-

ponents of the Bahia Sucia ecosystem. Dr. Lugo stated

that he considered his figures conservative, since little data

was available on many other environmental components.

10a

Finally, Dr. Philip E, Sorensen, an economist specializing

in natural resources, discussed the economic theory that

shippers of oil should be required to bear such external

social costs as oil spill damages in order to prevent under-

pricing of their product. “If the producers and consumers

of oil are able to conduct their affairs in such a way as to

transfer to soc-ety a large part of the real cost of producing

and consuming their product,” Dr. Sorensen said, “we'll be

in an inefficient economic situation: one in which the market

price of the commodity will be less than the full social cost

of producing it.” Dr. Sorensen also presented a summary

of plaintiff’s claims for damages, including inter alia the

Commonwealth’s uncontested claim for cleanup expenses

of $78,108.89, the $7.5 million for sediment removal and

mangrove replanting, and Dr, Sorensen’s own estimate of

$5,526,583 as the replacement value of the invertebrate

organisms killed by the oil spill.

Dr. Sorensen testified he arrived at the latter figure by

way of the following calculations. Dr, Lugo’s report had

compiled the results of earlier studies together with the

second Zimmerman survey to provide a table of environ-

mental harms. Concentrating only on the figures from the

Zimmerman study, Dr. Sorensen extrapolated the differ-

ences in number of organisms found in the ten-centimeter

core samples over a square meter area to determine the

net difference in creatures per square meter. Since six

samples were taken at each of the four “stations” in Bahia

Sucia and in the control area, he determined this involved

multiplying the results of each set of six samples by 21.22.

Results from one of the four stations, where more animals

were found at Bahia Sucia than at the control area, were

not included. The net difference was calculated to be

1,138 creatures per square meter. This figure in turn

yielded the sum of 4,605,486 creatures per acre, and a total

of 92,109,720 creatures for the 20 acres of mangroves

allegedly impacted by oil. Dr. Sorensen testified that he

lia

took the 20-acre figure from “the survey and the map

created by Mr. Cruz Perez” and that the 20 acres included

a substantial area in East Mangrove.

To arrive at an estimate of damages, Dr. Sorensen tes-

tified he consulted catalogs from biological supply houses.

From these catalogs he determined that “[m]Jany of these

species sell at prices ranging from $1 to $4.50” and “that

no animal on the list sold for less than 10 cents.” Dr.

Sorensen assigned an average replacement value to each

creature, regardless of species, of six cents. Multiplying

92,109,720 times .06 resulted in an estimate of $5,526,583

as the replacement value of the organisms “missing” from

the Bahia Sucia sediments. Dr. Sorensen also estimated

the cost of a ten-year scientific monitoring program at

$1,393,200. His total estimate of the damages was thus

$14,733,755.60, consisting of $7,176,363.71 for mangrove

and sediment removal, $559,500 for mangrove replanting,

$5,526,583 for the replacement value of organisms,

$1,393,200 for monitoring, and $78,108.89 for cleanup costs.

Plaintiffs’ witnesses were thoroughly cross-examined by

defendants’ counsel. In addition, defendants presented con-

siderable expert testimony of their own, The primary

thrust of this testimony was that the oil originally present

in Bahia Sucia had “weathered” through the action of wind,

waves, sunlight and the elements and was no longer having

major toxic effects on the environment. Defendants’

experts also testified that some of the damaged mangroves

were victims of pre-existing high salinity in West Mangrove

rather than oil pollution. Further testimony indicated that,

10. Dr. Sorensen did not testify that the biological supply houses

actually procured specimens at Bahia Sucia or that the Bahia Sucia

animals were marketable through such outlets. He only stated that

creatures similar to those killed could be replaced by purchasing

them from the catalogs.

12a

in the opinion of defendants’ experts, there were substantial

signs of natural regeneration among the mangroves. Dr,

Edward §, Gilfillan testified, for example, that he expected

the area to be restored by natural processes within ten to

fifteen vears, if not less. He estimated the size of the area

of “continuing damage” in West Mangrove at two and a

half to three acres.

Defendants also offered alternative restoration or

reforestation programs of their own that were less exten-

sive or less costly than plaintiffs’ proposals. Dr. Howard

Teas, a biologist, testified that, in his opinion, it would be

possible, though not necessarily desirable, to remove oil

from the sediments without destroying existing vegetation

by using “an airlift or vacuum such as divers use in un-

earthing treasure ships.” A preferable alternative, Dr.

Teas said, would be to offset damage to the oil-impacted

mangroves by replanting trees at a nearby location where

the mangrove forest had existed several years before. This

proposal would not carry with it the same risk of totally

destroying the environment in the contaminated areas in

order to save it, Dr. Teas said. He suggested that construc-

tion of a canal system to provide sufficient “flushing” action

would permit reforestation of the area west of Bahia Sueia

and north of the Cabo Rojo lighthouse where excess salinity

had apparently killed the mangroves. Dr. Teas testified

that the cost of replanting 15 acres of mangroves through

methods with which he was familiar would he approximately

$75,000 ($5,000 per acre), and that the cost of a ten-year

monitoring program would be about $200,000.

Dr. Roger D. Anderson, a marine biologist testifying for

defendants, attacked Dr, Sorensen’s theory of replacement

value as the measure of damages for small, commercially

valueless invertebrate animals, Dr. Anderson offered as an

alternative his own methodology, based on studies conducted

in Georgia. Citing work done by some of plaintiffs’ ex-

perts as well as other scientists, Dr. Anderson estimated

18a

the value of an acre of tropical mangrove swamp to be

$50,000, based on a complex analysis of the potential signifi-

eance of such land to food supply, energy supply, fisheries,

wood products, aesthetics, recreation and similar factors.

From his analysis of other evidence produced at trial, Dr.

Anderson testified he considered about three acres of the

West Mangrove area to be a total loss, thus producing a

damage figure of $150,000. He stated, however, that his

estimate of $50,000 was a “yardstick” which could be applied

to any number of acres of mangroves that plaintiffs could

show had been substantially damaged. Dr. Anderson

pointed out that plaintiffs’ expert Dr. Lugo had written a

paper, on which Dr. Anderson partly relied, putting a more

conservative valuation of $35,000 to $40,000 per acre on the

mangroves of Bahia Sucia.

Dr. Anderson also offered to testify in behalf of defend-

ants’ proposal that, as an alternative to massive replanting

in the West Mangrove area, reforestation of the Cabo Rojo

peninsula could be attempted. He stated that he was

familiar with this technique of alternate-site restoration,

and that it had been used in several states as a condition for

permitting activities that would result in destruction of cer-

tain areas of marshland. Dr. Anderson’s testimony on this

point was excluded on grounds of irrelevancy. “I am in-

volved here, solely, with establishing a dollar amount of

damages,” the court said. “[W]hether as an alternate

remedy in the settlement, the restoration of other man-

groves, or of these mangroves... could be proposed is out-

side the scope of this case; unless I am shown something to

the contrary.”

Finally, defendants presented testimony by David R.

Stith, a marine contractor with experience in oil spill clean-

up operations, including the Bahia Sucia cleanup. Stith

testified he had prepared an estimate of the cost of remov-

ing the oil-econtaminated sediments from 2.6 to 2.9 acres of

the West Mangrove area using a suction device mounted on

14a

a floating barge. His estimate for this work totaled

$396,859. Stith also offered to testify he had estimated the

cost of constructing a channel system as proposed by Dr.

Teas for replanting at the Cabo Rojo lighthouse. This esti-

mate was $152,310. As with Dr. Anderson’s, the district

court excluded this testimony as irrelevant since it did not

concern the damaged area. The total of defendants’ pro-

posed remedial measures was just under $1 million.

The district court made the following findings on the

issue of damages:

“1. Plaintiffs’ proven claim of damage to marine

organisms covers an approximate area of about 20

acres in and around the West Mangrove. The

surveys conducted by Plaintiffs reliably establish

that there was a decline of approximately 4,605,486

organisms per acre as a direct result of the oil spill.

This means that 92,109,720 marine animals were

killed by the COLOCOTRONT oil spill. The uncon-

tradicted evidence establishes that there is a ready

market with reference to biological supply labora-

tories, thus allowing a reliable calculation of the cost

of replacing these organisms.” The lowest possible

replacement cost figure is $.06 per animal, with many

species selling from $1.00 to $4.50 per individual.

Accepting the lowest replacement cost, and attaching

damages only to the lost marine animals in the West

Mangrove area, we find the damages caused by

Defendants to amount to $5,526,583.20.

2. The evidence is overwhelming to the effect that

the sediments in and around the West Mangrove

continue to be impregnated with oil. The solutions

proposed by Plaintiffs to this problem are unaccept-

able in that they would bring about the total destruc-

tion of this environment without any real guarantee

of ultimate success. Furthermore, there is substan-

15a

tial scientific evidence to the effect that much of the

undesirable effects of the oil in the sediments will be

corrected in time by the weathering processes of

nature. The most affected spots in the West Man-

grove cover an area of approximately 23 acres. It is

the Court’s opinion that these areas can best be re-

established by the intensive planting of mangrove

and restoration of this area to its condition before

the oil spill. The evidence shows that the planting

of mangrove runs at about $16,500 per acre, thus

bringing the cost of replanting 23 acres to $379,5U0.

The evidence further demonstrates that the planting

will require a five year monitoring and fertilizing

program which will cost $36,000 per year or $180,000

for the five years. The total damages thus suffered

by Plaintiffs by reason of the pollution of the man-

grove in the West Mangrove amount to $559,500.

3. Plaintiffs incurred in cleanup costs in the

amount of $78,108.89 which were not reimbursed

from any source, and they are entitled to recover

said damages from Defendants.

42. As explained previously, the affected flora and fauna

were part of a trust held for the people by the Common-

wealth of Puerto Rico. See, Lacoste v. Department of Con-

servation, 263 U.S. 545, 549, 44 S.Ct. 186, 68 L.Ed 437

(1924); Geer v. Connecticut, supra. Perforce, the Com-

monwealth must have the ability to have the corpus of said

public trust reimbursed for the diminution attributable to

the wrongdoers. State Dept. of Environmental Protection v.

Jersey Central Power & Light Co., supra, at 673-674. We

recognize that no market value, in the sense of loss of

market profits, can be ascribed to the biological compon-

ents of the Bahia Sucia ecosystem. The Court will thus

refer to market cost as the most reliable evidence of the

quantum of damages actually sustained, i.e., what is required

to make the Plaintiffs whole. This will compromise the cost

of restoring the affected areas to the condition in which they

were before the occurrences. See Feather River Lumber Co.

v. United States, 30 F.2d 642, 644 (C.A. 9, 1929).”

456 F. Supp. 1327, 1344-45 & n. 42 (D.P.R. 1978).

16a

The judgment of the district court was entered August

22, 1978. During the pendency of their appeal from this

judgment, defendants filed a motion for relief from judg-

ment pursuant to Fed, R. Civ. P. 60(b)" and for correction

of the record pursuant to Fed. R. Civ, P. 60(a). These

motions were denied in the district court by order dated

August 10, 1979. Defendants’ appeal from this order has

been consolidated with the pending appeal of the original

judgment."

TT,

Defendants first contend the district court abused its dis-

cretion by striking their pleadings on the issue of liability

and their petition for exoneration from and limitation of

liability.’ Defendants argue that this sanetion—which

amounted to a default judgment on liability and left open

only the question of damages—was an unreasonably harsh

penalty for any pretrial misconduct they may have en-

gaged in.

The district court acted pursuant to Fed. R. Civ. P. 37(b),

which provides that where a party has failed to obey a

11. See Commonwealth of Puerto Rico v. SS Zoe Colocotroni,

601 F.2d 39 (1st Cir. 1979).

12. In light of our disposition of this case, we do not reach de-

fendants’ appeal from the district court’s denial of their Rule 60

motions. On remand, defendants are free to resubmit to the district

court such of the evidence supporting their Rule 60 motions as is

relevant to the issues remaining to be decided.

13. The Limitation of Liability Act of 1851, 46 U.S.C. § 183,

provides that in the event of an accident “incurred without the privity

or knowledge” of the vessel owner, the liability of the owner for

property damage “shall not . . . exceed the amount or value of the

interest of such owner in such vessel, and her freight then pending.”

Defendants petitioned pursuant to 46 U.S.C. § 185 to have their

liability limited to $650,000—the amount deposited with the court

as security for the vessel. For a discussion of the Act as it relates to

oil pollution litigation, see Mendelsohn & Fidel, Liability for Oil

Pollution-United States Law, 10 J.Mar.L. & Com. 475, 475-477

(1979).

17a

discovery order, the court “may make such orders in regard

to the failure as are just, and among others the following:

“(A) An order that the matters regarding which the

order was made or any other designated facts shall

be taken to be established for the purposes of the

action in accordance with the claim of the party ob-

taining the order;

(B) An order refusing to allow the disohedient party

to support or oppose designated claims or defenses,

or prohibiting him from introducing designated mat-

ters in evidence;

of, or staying further proceedings until the order is

obeyed, or dismissing the action or proceeding or

any part thereof, or rendering a judgment by default

against the disobedient party ....” (Emphasis

added.)

The Supreme Court has stated that the appropriate stan-

dard of review for orders of this nature “is not whether

this Court, or whether the Court of Appeals, would as an

original matter have dismissed the action; it is whether the

District Court abused its discretion in so doing.” National

Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S.

639, 642 (1976) (per curiam); see also Luis C. Forteza e

Hijos, Inc. v. Mills, 534 F.2d 415, 410 (1st. Cir. 1976), The

question is whether the district court’s findings “are fully

supported by the record.” 427 U.S. at 642.

In the present case, the district court found that defend-

ants had exhibited “bad faith and a callous disregard of

their responsibilities in this litigation.” Defendants’ con-

duet, which the district court characterized as “an affront

to this Court’s dignity,” was found to have severely —pre-

judiced plaintiffs’ preparation of their case as well as the

court’s attempts to ensure that the trial proceeded as sche-

18a

duled. These conclusions were based on the following facts,

which appear in the record.

On June 7, 1977, the magistrate convened a status con-

ference at which it was agreed by all parties that discovery

in this long-pending case would be completed by August 1 in

contemplation of a September 7 pre-trial conference and a

November 7 trial date. Depositions of the defendant corpo-

rations were scheduled to be taken in Puerto Rico on July 5,

6and7. A further status conference was slated for August

17. The depositions were duly noticed on June 13.

On July 5, 1977, without prior notice, defendants’ corpo-

rate officials failed to appear for the scheduled deposition

sessions. At plaintiffs’ request, the magistrate convened an

in-chambers conference the same day to consider what re-

sponse to make. At that meeting, counsel for defendants

stated that, contrary to the earlier agreement, his clients

were only willing to be deposed in England in August. The

court ordered defendants’ counsel to ascertain by July 11

whether his clients would be amenable to appearing in

Puerto Rico for depositions during the week of July 26.

A second magistrate’s hearing was set for July 11, at which

time counsel for plaintiffs, if they so desired, were to move

for sanctions and attorneys’ fees."

On July 11, 1977, the court was informed that the parties

had agreed to reschedule the aborted depositions for Aug-

ust 3, 4 and 5, 1977, and that they would be conducted in

Puerto Rico. The magistrate’s hearing was cancelled and

two days later the district court extended the discovery

deadline to August 31, indicating that no further alterations

in the pre-trial schedule would he allowed. At the request

of the United States, the depositions scheduled for August

3, 4 and 5 were eventually moved, with the consent of all

parties, to August 17, 18 and 19. Appropriate notices were

14. Such a motion was in fact made, and on July 29, 1977 the

court ordered defendants to pay $467.25 to the United States and

$750 to the Commonwealth of Puerto Rico and the EQB. No appeal

was taken from that order.

19a

served August 10, and the court gave formal approval to

the change on August 15.

On August 16, counsel for defendants, A. Santiago Villa-

longa, phoned counsel for the Commonwealth of Puerto Rico

to inform him that defendants’ witnesses did not intend to

appear the next day. The witnesses’ appearances would be

superfluous, he said, because defendants intended to admit

liability. This concession was repeated to the magistrate

on the 17th of August by Francisco Bruno, who was sub-

stituting for Santiago as defendants’ counsel at the status

conference previously slated for that day. Like Santiago,

Bruno asserted that the admission of liability obviated the

need for taking further depositions.

At this time, counsel for the United States raised, among

others, the question whether defendants’ admission of

liability extended to a waiver of defendants’ petition to limit

liability to the value of the vessel and cargo. When defend-

ants’ substitute counsel was unable to provide a clear an-

swer, the magistrate ordered defendants to file a written

admission of liability within fifteen days. The magistrate

also agreed to reschedule the pre-trial conference from Sep-

tember 7 to October 25 and confirmed that the trial—now

thought to be limited to the damages issue—would still com-

mence on November 7.

Defendants did not file a written admission of liability

within fifteen days, as ordered, nor did they file any paper

explaining their behavior. When the magistrate learned

that no admission had been filed, he ordered a Some Dis-

position Conference for October 7, 1977 to determine the

present status of the matter. At the conference, defend-

ants’ counsel stated, for the first time, that the August 17

admission of liability was neither authorized by all the de-

fendant companies nor unlimited as to amount. Rather,

said Santiago, the admission was intended to extend only

to the amount of the bond for the vessel—$650,000. The

magistrate thereupon ordered each defendant either to ad-

20a

mit liability without limit as to amount—except for the

limits of applicable insurance policies—by October 14, or

to produce witnesses for deposition on October 17.'° De-

fendants were explicitly warned that failure to comply with

this order could result in the striking of their pleadings and

of the petition for limitation of liability.

On October 14, 1977, instead of admitting liability, defen-

dants moved for a postponement for one week of the deposi-

tions set for October 17, and a rescheduling of the pre-trial

conference slated for October 25. On October 17, plaintiffs

moved the court to strike defendants’ pleadings on liability,

and a hearing before the magistrate was held the same day.

After reviewing the facts recited above in detail,'’® the

magistrate recommended that defendants’ pleadings on

15. Defendants now contend they misunderstood this order and

believed the depositions were to be taken October 19. The record

contradicts this assertion, however, as defendants’ own contem-

poraneous submissions, with one exception, make reference to the

October 17 date, and this is the date which appears plainly in the

court’s written order.

16. Though the magistrate did not explicitly cite earlier conduct

of the defendants, plaintiffs assert that defendants’ earlier conduct

also evidenced their bad faith attitude toward the discovery process.

On June 20, 1973, at the outset of the litigation, the court denied a

motion by Vicente M. Ydrach, a San Juan attorney representing the

West of England firms, to quash a notice of deposition and subpoena

duces tecum issued June 5. Despite an order directing Ydrach to

comply with the subpoena by June 23, he appeared at his deposition

and refused to answer questions or produce documents on the ground

of attorney-client privilege. Defendant West of England-Luxembourg

was subsequently ordered to deposit all subpoenaed documents with

the court so that the magistrate could separate those that were discov-

erable from those that were privileged. The magistrate’s report was

issued March 21, 1974. West of England filed eight motions for

extension before finally submitting its objections to the magistrate’s

report on October 11, 1974. On September 17, 1975, the district

court, adopting the magistrate’s report, ordered West of England to

produce the discoverable documents. The order was not obeyed.

Plaintiffs moved for sanctions. After a hearing, the district court on

November 7 repeated its order to West of England, noting that failure

to comply within ten days would result in all pleadings and defenses

being stricken, all motions being denied, and a default judgment being

entered. This order apparently was obeyed.

2la

liability be stricken, or in the alternative that defendants

pay $21,000 to the affected parties plus $500 for each day

trial would be delayed by postponing the depositions, orig-

inally scheduled for July 5, to October 24. Following a

hearing on October 20, the district court adopted the magis-

trate’s recommendation that defendants’ pleadings, and

their petition for limitation of liability, be stricken.

We believe the record supports the district court’s find-

ing that defendants’ conduct was inexcusably recalcitrant

and that it materially prejudiced plaintiffs’ trial prepara-

tion and the court’s legitimate efforts to keep this pro-

tracted lawsuit moving forward. The fuleruin upon which

this course of conduct turned was defendants’ attempt at

the August 17 status conference to avert the scheduled

depositions by purporting to admit liability so as to make

the depositions unnecessary. Had plaintiffs known the ad-

inission of liability was not meant to exceed the $650,000

already deposited in court, they plainly would not have ac-

ceded to the cancelling of the depositions. All the parties

clearly understood that the “privity and knowledge” of the

owners would be a major issue when plaintiffs sought to

break defendants’ petition for limitation of liability. The

manifest purpose of the depositions scheduled for July 5,

and later for August 17, was to explore the question of priv-

ity, and to try to establish defendants’ knowledge of various

alleged defects in the ZOK COLOCOTRONT’s navigational!

and safety equipment, If defendants intended to admit

liability only within the limits of 46 U.S.C §183, even

though they did not so state, then their assertion that fur-

ther depositions would be unnecessary was highly mislead-

ing. It had the effect of lulling plaintiffs into a false

sense that the issue of liability was settled, at the same

time the approaching trial date made it increasingly un-

likely that sufficient time would be available later for full

discovery to be conducted.

22a

Nothing in defendants’ conduct subsequent to August 17

in any way cured or mitigated the misleading effect of

their purported admission of liability. Ordered to pro-

duce a written admission of liability, spelling out the details

of their concession, within fifteen days, defendants made

no formal response. Ordered again, following the Some

Disposition Conference, either to adinit liability in writing

or to produce witnesses for deposition, defendants did

neither, but instead at the last moment requested yet an-

other delay. As we said under similar circumstances in

affirming the dismissal of a case for want of prosecution,

“There comes a point when the question arises who is

running the court—counsel, or the judge. To this there

can be but one answer.” Higuera v. Pueblo International,

Inc., 585 F.2d 555, 557 (1st Cir. 1978).

Defendants insist the district court exceeded its disere-

tion in striking their pleadings and preventing their de-

fenses from being considered on the merits. They point

out that the enforcement of procedural rules through

punitive default judgments may offend the standards of

due process. See Societe Internationale y. Rogers, 357 U.S.

197 (1958) ; Hovey v. Elliott, 167 U.S. 409 (1897). But the

district court’s response here was not purely punitive—or

“mere punishment” in the words of Hammond Packing Co.

v. Arkansas, 212 U.S. 322, 351 (1909); its actions bore a

direct and reasonable relation to the prejudice defendants’

irresponsible conduct had already created. See 4A Moore’s

P -deral Practice J 37.03 [2.-1] at 37-56. Whether defend-

anis planned all along to limit their unqualified admission

of liability, or whether this idea arose as an afterthought,

they gained a considerable strategic advantage by their

misrepresentations. The district court could protect plain-

tiffs only by either further delaying trial or by holding

defendants to their counsel’s original unqualified admission

of liability. The latter course, which the court adopted,

23a

was somewhat analogous to the imposing of an equitable

estoppel. In the circumstances we see no violation of due

process nor any abuse of the court’s discretion. See Na-

tional Hockey League v. Metropolitan Hockey Club, 427

U.S. 639, 643 (1976); Hammond Packing Co v. Arkansas,

212 U.S. 322, 350-51 (1909) ; Luis C. Forteza e Hijos, Inc. v.

Mills, 584 F.2d 415, 419 (1st Cir. 1976); cf. Note, The

Emerging Deterrence Orientation in the Imposition of Dis-

covery Sanctions, 91 Harv. L. Rev. 1033, 1044-45 (1978).

III.

Defendants next argue that the district court’s attitude

toward them was “poisoned” by the court’s unwarranted

reliance on depositions of the crew and master of the ZOK

COLOCOTRONI to make unnecessary findings on the issue

of liability, see 456 F. Supp. at 1333-36. Defendants

contend that the depositions, which were taken immediately

after the vessel docked in Puerto Rico, were not properly

introduced as evidence, and that they represented an

attempt by the crew and captain to shift blame for the

accident from themselves to the owners. Moreover, defend-

ants argue, it was unnecessary for the court to make any

findings on liability once it had stricken defendants’ plead-

ings. The only purpose served by such findings, accord-

ing to defendants, was to prejudice the court on the issue

of damages.

We agree that the findings on liability were redundant.

It would have been enough if the allegations in the com-

plaint pertaining to liability had been taken as established.

The depositions, moreover, had been received only in sup-

port of plaintiffs’ claim for punitive damages, which was

thereafter abandoned. But we are not persuaded that the

court’s consideration of extraneous liability matters caused

undue prejudice or prevented it from fairly deciding the

damages issue. As we sustain the court’s striking of

24a

defendants’ pleadings, nothing more favorable to defend-

ants could have been found than was found on the issue

of liability, and we do not think the record displays a

judicial attitude that was “poisoned” against the defend-

ants with respect to the issues that remained.’”

IV.

The West of England defendants, insurers of the ZOE

COLOCOTRONI, argue the district court erred in assert-

ing personal jurisdiction over them. The insurers main-

tain they are outside the reach of the District Court for the

District of Puerto Rico because they have no office, sell no

insurance, and purportedly transact no business in Puerto

Rico. To sustain in personam jurisdiction over a foreign

corporation, the court must find both that personal juris-

diction is authorized by the local statute and that the exer-

cise of such jurisdiction does not violate the due process

17. Defendants challenge one further aspect of the district court’s

findings. Based on the depositions and other exhibits of the crew and

master, the court found that the owners knowingly and negligently

permitted the ZOE COLOCOTRONI to depart Venezuela in an

unseaworthy condition. In their brief, defendants assert that the

standard marine insurance contract exempts the insurer from the duty

to cover losses engendered by the owners’ knowing use of an unsea-

worthy vessel. Defendants apparently have reference to Rule 30 (b)

(ii) of the “Rules and List of Correspondents” of West of England,

which provides:

“Notwithstanding anything contained in Rule 15 or any other

agreement between the Association and an insured Owner the

insurance afforded by the Association shall not extend to lia-

bilities, costs or expenses attributable to the willful miscon-

— MY the insured Owner or his Managers.” (Emphasis

added. )

The insurers’ argument is that it is inconsistent to hold them liable in

light of the district court’s findings as to the owners’ degree of fault.

For purposes of this litigation, which involved no cross-claims

between the insurers and the owners, it is enough to say that all the

defendants’ pleadings on liability were stricken—including the

insurers’ defenses based on the terms and conditions of the insurance

contract. As we have herein upheld the striking of the pleadings,

defendant insurers were properly barred from raising this defense

against plaintiffs.

25a

requirement that the nonresident defendant will have cer-

tain “minimum contacts” with the forum state. See World-

Wide Volkswagen Corp. v. Woodson, 48 U.S.L.W. 4079,

4081 (1980); International Shoe Co, v. Washington, 326

U.S. 310, 316 (1945). These contacts must be such that the

assertion of jurisdiction comports with “traditional no-

tions of fair play and substantial justice.” Jd., quoting

Milliken v. Meyer, 311 U.S. 457, 463 (1940).

Plaintiffs advanced two theories in the district court to

justify in personam jurisdiction over West of England.

First, plaintiffs argued that documents obtained from West

of England’s local law firm—Hartzell, Ydrach, Mellado,

Santiago, Perez & Novas of San Juan, Puerto Rico (herein-

after Hartzell)—demonstrated that the Hartzell firm was

actually West of England’s “managing or general agent”

in Puerto Rico, such that the firm was impliedly authorized

to accept service of process on West of England’s behalf.

See Fed. R. Civ. P. 4 (d) (3); 2 Moore’s Federal Practice

1 4.12, 4.22 [1!. These documents consisted primarily of

files of matters handled for defendants by Hartzell, pamph-

lets listing Hartzell as “correspondent” for defendants, and

instructions issued to Hartzell on its duties as a correspon-

dent. The files showed that Hartzell had, among other

things, arranged on behalf of West of England and various

insured owners for the burial of a deceased Egyptian sailor

with appropriate religious observances, for the repatria-

tion by air of several &ther sailors, and for wumerous sur-

veys and other investigations in connection with possible

claims for damage or injury. The district court ruled, how-

ever, that these activities by Hartzell were so “substantially

intertwined with Hartzell’s primary professional func-

tions” as defendants’ retained law firm that it could not

hold Hartzell to be a “managing or general agent” for pur-

poses of accepting service of process on Hartzell’s client.

Plaintiffs’ second argument was related to the first, but

had a narrower focus. Federal Rule of Civil Procedure 4(e)

26a

provides that, constitutional limitations aside, personal

jurisdiction may be asserted over a nonresident defendant

in the district court to the extent permitted by the long-

arm statute of the state in which the court is sitting. See

2 Moore’s Federal Practice J 4.01 [1]. Puerto Rico’s long-

arm statute is expressed in Rule 4.7 of the Puerto Rico

Rules of Civil Procedure which provides, in pertinent part,

“(a) Where the person to be served is not within

Puerto Rico, the General Court of Justice of Puerto

Rico shall have personal jurisdiction over said non-

resident as if he were a resident of the Common-

wealth of Puerto Rico, if the action or claim arises

as a result of the following:

(1) Such person or his agent carries out business

transactions within Puerto Rico.”

32 L.P.R.A., App. II, R.4.7, Rule 4.7 “permits the exercise

of jurisdiction to the full extent of constitutional author-

ity,” limited only by the due process analysis of Interna-

tional Shoe and succeeding cases. Vencedor Manufactur-

ing Co., Inc. v. Gougler Industries, Inc., 557 F.2d 886, 889

(1st Cir. 1977). Plaintiffs argued below that West of

England’s business contacts with Puerto Rico—in par-

ticular, its regular writing of insurance covering vessels

like the ZOE COLOCOTRONI, which visited Puerto Rico

and operated within Puerto Rican waters—satisfied both

the statutory and constitutional tests. The district court

agreed.

We think this conclusion is correct. The essential con-

stitutional question is whether West of England “purpose-

fully avail[ed] itself of the privilege of conducting activ-

ities within the forum State. thus invoking the benefits and

protections of its laws.” Hanson v. Denckla, 357 U.S. 235,

253 (1958). The record makes clear that West of England

did precisely that. The Hartzell files revealed numerous

27a

instances in which ships insured by West of England were

involved in incidents giving rise to claims or potential

claims while the ships were present in Puerto Rican waters.

In each of these instances, West of England’s local corre-

spondent Hartzell was instructed to take actions to fore-

stall claims, to provide services for the shipowners, or to

prepare for any eventual litigation. West of England ad-

vertised to insured shipowners the fact that such services

would be available through its local Puerto Rican corre-

spondent. The contracts of insurance contained no pro-

vision preventing any ship from calling on Puerto Rico, or

limiting coverage in the event it did. Not only do we know

that vessels mentioned in the Hartzell files visited Puerto

Rico, it stands to reason that many other West-insured ves-

sels also did so, as the Hartzell files would name only

vessels on which claims or other noteworthy incidents

occurred. While West of England was not engaged in

selling insurance in Puerto Rico, its retention of the Hart-

zell law firm to perform services for insured owners and

vessels in Puerto Rico demonstrates that West of England

plainly expected its worldwide business of insuring mari-

time risks to embrace the territorial waters of Puerto Rico

with some regularity.

In certain ways, this case poses less difficulty than Amer-

ican & Foreign Insurance Association [AFIA] v. Common-

wealth Insurance Co., 575 F.2d 980 (1st Cir. 1978), where

we upheld the Puerto Rico district court’s jurisdiction over

two nonresident insurance companies operating out of

Colombia. The district court in AFITA found that the in-

surance policy in issue covered a large volume of bottles

regularly shipped from Colombia to Puerto Rico, and that

one of these bottles injured plaintiff when it exploded. As

the nonresident insurers knew from the terms of the policy

both the volume of bottles being shipped and their destina-

tion, we held that the “companies’ undertaking to insure

a substantial subject of insurance in Puerto Rico was

28a

‘voluntary in [a] meaningful sense.’” Jd, at 982, quoting

Vencedor Manufacturing Co., Inc. v. Gougler Industries,

Inc., 557 F.2d 886, 891 (1st Cir. 1977). There was no indi-

cation in AFTA that the insurance companies provided any

substantial services to the insured bottler in Puerto Rico

or that the insurers’ contacts with Puerto Rieo extended

hevond this one series of transactions.

To be sure, as West of England points out, the record in

the present case does not indicate any explicit undertaking

by West of England to insure vessels within Puerto Rican

waters. But this fact, standing alone, does not suffice to dis-

tinguish the American & Foreign Insurance case. West of

England plainly knew that vessels it insured would call on

Puerto Rico from time to time, and it made no apparent

effort to halt or limit this practice. In fact, by advertising

the name of its local correspondent in San Juan, West of

England affirmatively encouraged such commerce. This is

not a case of a single isolated and unpreventable appearance

of an insured vessel in Puerto Rican waters; the record

shows such appearances were a readily foreseeable part of

the normal course of business.

West of England contends, however, that its ability to

foresee that insured vessels would enter Puerto Rican ter-

ritorial waters does not, without more, satisfy the “mini-

mum contacts” test of jurisdiction. The Supreme Court ha:

recently stated that “ ‘foreseeahilitw’ alone has never been a

sufficient benchmark for personal jurisdiction under the Due

Process Clause,” World-Wide Volkswagen Corp. v. Wood-

son, 48 U.S LAW, 4079, 4082 (1980). In Woodson, plaintiffs

brought a products liability action in Oklahoma against the

regional distributor and the retailer of an automobile sold in

New York but involved in an Oklahoma accident. The Court

held Oklahoma’s assertion of jurisdiction over the two New

York corporations to be a violation of due process, since

their only connection with Oklahoma was the fortuity that

the car they sold passed through the state after it had left

their hands.

29a

“The foreseeability that is critical to due process analysis

is not the mere likelihood that a product will find its way

into the forum State,” the Court said. “Rather, it is tha

the defendant’s conduct and connection with the forum is

such that he should reasonably anticipate being haled into

court there.” Jd. at 4082. The reason for this distinction,

according to the Court, is the need to permit “potential

defendants to structure their primary conduct with some

minimum assurance as to where that conduct will and will

not render them liable to suit.” Id.

Woodson is distinguishable from the present case on two

grounds. First, this is not a case of mere foreseeability,

without more, that a single insured vessel would wander

into Puerto Rico by happenstance. Plaintiffs established

that vessels insured by West of england frequented Puerto

Rico regularly over a period of years, and that they were

provided with insurance-related services while there. West

of England was unavoidably aware that it was responsible

to cover losses arising from a substantial subject of insur-

ance regularly present in Puerto Rico, a direct action juris-

diction. Second, the seller of a product such as the auto-

mobile in Woodson ordinarily has no control over where

the buver takes the product after it is sold. If the mere

fortuity of the presence of the seller’s product in another

jurisdiction subjected the seller to suit in that forum, the

seller “would in effect appoint the chattel his agent for ser-

vice of process. His amenability to suit would travel with

the chattel.” Jd. at 4082. By contrast, an insurer such as

West of England has the power through its contracts of

insurance meaningfully to influence the course taken by

insured vessels. By limiting coverage to specified jurisdic-

tions, West of England could be reasonably certain it would

not be haled into court in an undesired forum. In other

words, an insurer is not at the mercy of the insured owners’

unilateral choice of destination in the same way a seller of

chattels is at the merey of the buyer.

30a

Where, as here, the insurer has the means available to

structure its primary conduct so as to control the area

within which it will be subject to direet action, where it

is undoubtedly aware that the objects of its policies are

regularly present in a particular jurisdiction, and where

it not only does not act to curtail such presence but actively

promotes it by providing contractual services in the juris-

diction, we hold that such an insurer is amenable to per-

sonal jurisdiction in the forum.'®

We now turn from procedural matters to the extremely

difficult substantive issues concerning damages. Defend-

ants challenge: (A) the so-called “standing” of Puerto

Rico and the HQB to recover damages for euvironmental

injury; (B) the district court’s failure to limit damages

by commercial or market value standards; and (C) the

approach and data relied upon by the court in assessing

damages.

We turn first to the issue of plaintiffs’ right to bring this

lawsuit. The district court held that the Commonwealth

had “standing” to recover for damages to natural re-

sources, namely the mangrove trees and the various species

of marine creatures living in and around them, on the

theory that the Commonwealth was the “trustee of the

public trust in these resources” and had an interest in them

18. The result we reach is further buttressed by the Supreme

Court’s occasional suggestions that the test for measuring minimum

contracts for insurance companies may be somewhat less stringent

than for other nonresident corporations because of the forum state’s

public policy interest in promoting effective redress for injuries. See

McGee v. International Life Insurance Co., 355 U.S. 220, 223

(1957) ; cf. Hanson v. Denckla, 357 U.S. 235, 252 (1958). Here the

maritime accident resulted in injury to Puerto Rico’s coastal environ-

ment, and plaintiffs represented this forum-related interest.

31a

as parens patriae. 456 F. Supp. at 1337; see M aryland v.

Amerada Hess Corp., 350 F. Supp. 1060 (D. Md. 1972) ;

Maine v. M/V Tamano, 357 F. Supp. 1097 (D. Me. 1978) ;

In re Steuart Transportation Co., No. 76-697-N (H.D. Va.

1980). The court also ruled that the Environmental Quality

Board had standing to proceed as co-plaintiff seeking

similar relief under a state statute authorizing the EQB

to bring damages actions for environmental injuries. 456

I’, Supp. at 1837; 12 L.P.R.A. $1131 (29).

While the parties and the district court speak in terms

of “standing,” we think the question is more properly

whether plaintiffs have stated a cognizable cause of

action.!? Defendants concede that Puerto Rico, as owner

of the real property primarily affected by the oil spill,

see 48 U.S.C. § 749, would, like any private landowner, have

a cause of action in admiralty to recover whatever damages

it could prove under conventional principles for its private

economic loss as measured by diminution of market value

in the coastal land. See 46 U.S.C. § 740. The Common-

wealth made no attempt to show such damages, however.

It seeks relief instead under an asserted right to recover

as a governmental entity on behalf of its people for the

loss of living natural resources on the land such as trees

and animals.”

19. Plaintiffs’ Article III standing is not challenged here, since,

assuming plaintiffs have a valid cause of action, they clearly are the

proper parties to raise it. See Davis v. Passman, 442 U.S. 228, 239

& n.18 (1979).

20. We note at this point several questions which are not pre-

sented in this case, and on which we express no opinion. First, since

the lands in question were all owned by Puerto Rico, we need not

decide whether or in what circumstances a state might have a cause

of action for environmental harm to privately owned land. Second,

since the living natural resources in issue here were all attached more

or less permanently to the land, we also do not decide whether any

cause of action would accrue, and if so what remedies would be

available, where more transitory forms of wildlife such as birds or

fish were damaged. Third, this case does not present the issue of

overlapping state and federal causes of action. While the Federal

32a

Defendants contend that Puerto Rico’s assertion of a

recoverable interest in wildlife and other living natural

resources is undercut by a line of Supreme Court cases

culminating in Hughes v. Oklahoma, 441 U.S. 322 (1979).

* See also Douglas v. Seacoast Products, Inc., 431 U.S. 265,

284 (1977); Toomer v. Witsell, 334 U.S. 385, 402 & n.37

(1948) ; Missouri v. Holland, 252 U.S. 416, 434 (1920) ; ef.

Geer v. Connecticut, 161 U.S. 519 (1896). In Hughes, the

Court formally overruled Geer v. Connecticut, invalidating

on Commerce Clause grounds a state ban on interstate

transportation of wildlife lawfully caught in the state and

completing the long erosion of Geer’s theory of state owner-

ship of wildlife. The court recognized, however, that states

retain an important interest in the regulation and conser-

vation of wildlife and natural resources. “[{T]he general

rule we adopt in this case makes ample allowance for pre-

serving, in ways not inconsistent with the Commerce Clause,

the legitimate state concerns for conservation and protec-

tion of wild animals underlying the 19th Century legal

fiction of state ownership.” 441 U.S. at 335-36. Later

the Court said, “We consider the States’ interests in con-

servation and protection of wild animals as legitimate local

purposes similar to the States’ interests in protecting the

health and safety of their citizens.” Id. at 337.

Plaintiffs argue that a state regulatory interest in wild-

life and other living resources, expressed metaphorically in

the state’s status as “public trustee” of its natural re-

Clean Water Act of 1977 specifically stated that it did not preempt

the imposition by a state of “any requirement or liability with respect

to the discharge of oil or hazardous substance into any waters within

such State,” 33 U.S.C. § 1321 (0) (2), a problem of double re-

covery might be raised under some circumstances. Here, however,

the United States made ao claim for environmental damage (at the

time this case arose there was no federal statute authorizing such an

action) and asserted no legal interest in the affected lands. The

interplay of the state cause of action asserted here with the federal

remedial legislation discussed infra is an issue we therefore leave for

another day.

33a

sources, is sufficient in itself to support an action for dam-

ages to those resources, See, ¢.9., Maryland v. Ame ‘ada

Hess Corp., 350 F. Supp. 1060, 1066-67 (D. Md. 1972).

Defendants reply that, absent a proprietary interest in the

resource actually damaged, a state’s unexercised regulatory

authority over wildlife will not support a proper cause of

action. See, e.g., Commonwealth v. Agway, Inc., 210 Pa.

Super. 150, 232 A.2d 69 (1967)). We see not need to decide

this difficult question in the present case. Here the Com-

monwealth of Puerto Rico, exercising its undisputed author-

ity to protect and conserve its natural environment, has

by statute authorized one of its agencies to maintain actions

of this sort. Under the statute, 12 L.P.R.A. $1131 (29),

co-plaintiff Environmental Quality Board has, among

others, the following duties, powers and functions :

“(29) To bring, represented by the Secretary of Jus-

tice, by the Board’s attorneys, or by a private at-

torney contracted for such purpose, civil actions for

damages in any court of Puerto Rico or the United

States of America to recover the total value of the

damages caused to the environment and/or natural

resources upon committing any violation of this

chapter and its regulations, The amount of any

judgment collected to such effect shall be covered

into the Special Account of the Board on Environ-

mental Quality.”

We read this statute both as creating a cause of action of

the type described by its terms and as designating the EQB

as the proper party to bring such an action. We see noth-

ing in Hughes v. Oklahoma or in the federal Constitu-

tion to prohibit such legislation. Whatever might be the

case in the absence of such a local statute, we think that

where the Commonwealth of Puerto Rico has thus legisla-

tively authorized the bringing of suits for environmental

damages, and has earmarked funds so recovered to a special!

34a

fund, such an action must be construed as taking the place

of any implied common law action the Commonwealth, as

trustee, might have brought. Any other construction would

invite the risk of double recovery and lead to confusion as

to the rights of the two state plaintiffs in their identical

or nearly identical actions. It is unnecessary, therefore,

for us to consider whether, had the legislature of Puerto

Rico not delegated to the EQB the right to maintain such

suits, the Commonwealth would have an inherent right to

bring them itself.

Defendants assert, as a sort of last ditch rebuttal to this

line of argument, that the present action is not authorized

under section 1131 (29), because plaintiff EQB failed to

allege in the complaint “any violation of this chapter and

its regulations.” This assertion is erroneous. In the third

amended complaint, plaintiff specifically alleged a violation

of 24 L.P.R.A. § 595, which provides:

“Tt shall be unlawful for any person, directly or indi-

rectly, to throw, discharge, pour or dump, or permit

to be thrown, discharged, poured or dumped into the

waters, any organic or inorganic matter capable of

polluting or of leading to the pollution of said waters

in such manner as to place them out of the minimum

standards of purity that the Secretary of Health

may establish under section 599 of this title.”

This statute is explicitly made a part of Title 12, chapter

121 by 12 L.P.R.A. § 1132 (b). The “minimum standards of

purity” referred to in section 595 have been promulgated,

and they make clear that any unauthorized discharge of

petroleum into the waters—including the territorial waters

—of Puerto Rico is considered unlawful. See P.R. Rules &

Regulations, Title 24, § 598-5. Defendants’ challenge to the

right of the EQB to maintain this action is thus without

merit.

{Da

Equally unavailing would be any argument that this state

statutory action is not cognizable in admiralty. An oil

spill on the navigable waters is a breach of federal mari-

time law. Maryland v. Amerada Hess Corp., 350 F. Supp.

1060, 1065 (D. Md. 1972); American Waterways Operators,

Inc. v. Askew, 335 F. Supp. 1241, 1247 (M.D. Fla. 1971)

(three-judge court), rev’d on other grounds, 411 U.S. 325

(1973); Califorma v. S.S. Bournemouth, 307 F. Supp. 922,

926 (D. Cal. 1969). Where the injury occurs in the terri-

torial waters of a state, the general rule is that admiralty

will give “broad recognition of the authority of the States

to create rights and liabilities with respect to conduct

within their borders, when the state action does not run

counter to federal laws or the essential features of an ex-

elusive federal jurisdiction.” Just vy. Chambers, 312 US.

383, 391 (1941). See also Romero v. International Termi-

nal Operating Co., 358 U.S. 354, 373-74 (1959). Defen-

dants do not argue, nor could they, that this action runs

counter to the essential features of federal jurisdiction.

See Askew v. American Waterways Operators, Inc., 411

U.S. 325 (1973).

Bb.

Defendants next argue the district court erred in failing

to apply the common law “diminution in value” rale in ¢cal-

culating damages. Under the traditional rule, the measure

of damages for tortius injury to real property is the differ-

ence in the commercial or market value of the property

before and after the event causing injury. See Restatement

(Second) of Torts § 929 (1) (a) (1979). Where the prop-

erty can be restored to its original condition for a sum less

than the diminution in value, however, the cost of restora-

tion may be substituted as a measure of damages. See, e.g.,

Big Rock Mountain Corp. v. Stearns-Roger Corp., 388 F.2d

165, 168-69 (8th Cir. 1968). Defendants introduced evi-

dence at trial tending to show that the market value of

36a

comparable property in the vicinity of Bahia Sucia was

less than $5,000 per acre, based on recent sales. Thus,

defendants contend, damages here could not have exceeded

$5,000 per affected acre even if the land were shown to have

lost all value.

We believe that defendants have misconceived the charac-

ter of the remedy created by section 1131. The EQB is not

concerned with any loss in the market or other commercial

value of the Commonwealth’s land. In point of fact, the

EQB concedes the land has no significant commercial or

market value. The claim, rather, is for the injury—broadly

eonceived—that has been caused to the natural environment

by the spilled oil. The question before us is not whether in

a typical land damage case a claim of this sort could be sue-

cessfully advanced—we assume it could not—but rather

whether Puerto Rico’s statute empowering the EQB to pro-

ceed in cases such as this envisions the awarding of dam-

ages on a different basis than would have been traditionally

allowed.

The district court found that the once flourishing natural

environment of the West Mangrove had heen seriously

damaged by the oil, to the point where some of the under-

lying sediments were no longer capable of supporting any

but the most primitive forms of organic life, such as worms.

The Puerto Rico statute aathorizing this action specifically

empowers the EQB to recover “the total value of the dam-

ages caused to the environment and/or natural resources”

upon a violation of the anti-pollution provisions. 12

L.P.R.A. § 1131 (29) (emphasis added). Implicit in this

choice of language, we think, is a determination not to re-

strict the state to ordinary market damages. Many un-

spoiled natural areas of considerable ecological value have

little or no commercial or market value. Indeed, to the ex-

tent such areas have a commercial value, it is logical to as-

sume they will not long remain unspoiled, absent some

governmental or philanthropic protection. A strict appli-

38a

Similarly, in the Outer Continental Shelf Laiids <Act

Amendments of 1978, Congress provided that the govern-

ment could recover damages for economic loss arising out

of an oil spill, ineluding “it jury to, or destruction of, nat-

ural resources,” 43 U.S.C, $1813 (a) (2) (C), and “loss of

use of natural resources,” id, § 1813 (a) (2) (D). The Sub-

merged Lands Act, which forms the basis for the Outer

Continental Shelf Lands Act, see 43 U.S.C. § 1811 (9), de-

fines “natural resources” as including, “without limiting the

generality thereof, oil, gas, and other minerals, and fish,

shrimp, oysters, clams, crabs, lobsters, sponges, kelp, and

other marine animal and plant life.” 43 U.S.C. § 1301 (e).

While the latter acts do not, by their terms, apply to Puerto

Rico, see 48 U.S.C. § 1301 (2), like the Clean Water Act

they do give some indication that Congress has determined

that it is desirable to provide for environmental damages

apart from the commercial loss, ordinarily measured by a

market value yardstick, suffered by landowners and/or

exploiters of natural resources. This perception is rein-

forced by the section of the OCS Lands Act which provides

that sums the state recovers “shall be available for use to

restore, rehabilitate, or acquire the equivalent of such nat-

ural resources by the appropriate agencies of ... the State, —

but the measure of such damages shall not be limited by the

sums which can be used to restore or replace such re-

sources.” 43 U.S.C. § 1813 (b) (3).

Especially in light of this recent federal statutory activ-

ity, we think that limitation of recovery to those damages

recoverable under the common law “diminution in value”

rule would be inconsistent with the manifest intent of

Puerto Rico’s environmental statute. In enacting section

1131, Puerto Rico obviously meant to sanction the difficult,

but perhaps not impossible, task of putting a price tag on

resources whose value cannot always be measured by the

rules of the marketplace. Although the diminution rule is

24a