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United States v. M/V Santa Clara I

ELR Citation: 26 ELR 20264
Nos. No. 2:92-0389-18, 887 F. Supp. 825/41 ERC 1101/(D.S.C., 05/08/1995) third-party plaintiffs' motions for summary judgment

The court finds genuine issues of material fact precluding summary judgment on the liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) of sellers and consignees of arsenic trioxide and magnesium phosphide shipments that washed overboard or spilled during a storm off the New Jersey coast. The U.S. Environmental Protection Agency ordered the owner and operator of the ship on which the chemicals were being transported to retrieve and dispose of the barrels of arsenic trioxide that washed overboard, and the government required the cleanup of magnesium phosphide that spilled in the ship's hold. The court first holds that the seller and consignee of the magnesium phosphide are not strictly liable—based on the terms of the bill of lading—for the ship owner and operator's damages associated with the magnesium phosphide spill and cleanup. The court finds that the seller failed to comply with government regulations with respect to the labeling of hazardous cargo and in so doing breached its warranty of compliance. However, holding the seller and consignee liable for these damages does not comport with traditional contract law. The correct test to be applied with respect to the bill of lading is whether the damages were foreseeable at the time of the contract considering the remoteness in time and the number of intervening events. The court holds that the number of intervening events is too great to find the seller and the consignee strictly liable. The court notes that even if these damages were foreseeable, clauses in a bill of lading that violate public policy or the duties set forth in the Carriage of Goods by Sea Act (COGSA) are null and void. The court further notes that even the bill of lading, on which the ship owner and operator rely, contains language that requires the carrier's damages to be causally connected to any inaccurate marks. The court next denies the consignee's motion for summary judgment. In admiralty, consignees can be held to be parties to a bill of lading under agency law, and there remain genuine issues of material fact, such as the nature and extent of the corporate relationship between the consignee and the seller.

The court holds that it cannot justify imposing liability for all expenses related to the cleanup and recovery of the arsenic trioxide on the seller and consignee of that substance based solely on the terms of the bill of lading. Under COGSA, 46 U.S.C. app. §1308(8), clauses that relieve the carrier of liability for "loss or damage to or in connection with the goods, arising from negligence, fault, or failure in the duties and obligations" of the carrier or "lessening such liability" of the carrier as provided in COGSA are null and void. The court holds that the financial loss and damage that the ship owner and operator are attempting to recover were incurred "in connection with" the goods and therefore recovery under the terms of the bill of lading requires an analysis to determine if the carrier was in any manner negligent or at fault. The court holds that COGSA, 46 U.S.C. app. §1304(6), is inapplicable because the arsenic trioxide was inadvertently lost overboard.

The court rejects the ship owner and operator's argument that nonculpable shippers who arrange for the shipment of hazardous substances from which there is a later release or threatened release can be held to be potentially responsible owners based on CERCLA §101(20)(A) absent the showing required under §101(20)(B)(ii). The court holds that the loss of the arsenic trioxide constituted a release of a hazardous substance into the environment. The shipping containers and the barrels holding the arsenic trioxide were CERCLA facilities, and the arsenic trioxide, whether in an enclosed barrel or spilled into the ocean, does not qualify under the exception to the definition of a facility as a "consumer product in consumer use." Also, at least some of the expenses the ship owner and operator incurred to recover the arsenic trioxide were necessary and consistent with the national contingency plan. The court's §101(20)(B)(ii) determination, however, precludes summary judgment, because there is a dispute as to which party was the shipper of the arsenic trioxide under the terms of the sales contract, and the statute requires the court to undertake a factual determination as to the causes and circumstances that resulted in the release and whether the release resulted solely from causes and circumstances that were beyond the shipper's control. The court rejects the ship owner and operator's argument that separate liability can be imposed on the owner of the arsenic trioxide on the basis of the threat of release when the barrels became stationary on the ocean floor. The court also holds that ample evidence exists in the record to conclude that the act of God defense is not available to any of the parties.

With respect to the magnesium phosphide, the court holds that there was a release of a hazardous substance into the environment; the drums containing the magnesium phosphide were facilities; and magnesium phosphide, whether in contained and sealed drums or spilled into the environment, does not qualify as a "consumer product in consumer use." When the release occurred, the ship owner and operator were CERCLA common carriers of a hazardous substance that released during transportation and that they are, therefore, CERCLA owners or operators. The court rejects the ship owner and operator's argument that because the magnesium phosphide was not properly noted as a hazardous substance on the bill of lading, the hazardous substance was not actually accepted for transportation. The court, however, denies the consignee's motion for summary judgment on the ship owner and operator's CERCLA claim. The failure to properly identify the magnesium phosphide as a hazardous substance on the bill of lading was a circumstance or condition within the shipper's control under CERCLA §101(20)(B)(ii). Whether that failure contributed to the damages resulting from the release is an issue that must be resolved at trial. Also, the court must determine the identity of the CERCLA shipper.

[A prior decision in this litigation is published at 23 ELR 21257.]

Counsel for Plaintiff
Ben A. Hagood Jr., Ass't U.S. Attorney
U.S. Attorney's Office
170 Meeting St., P.O. Box 978, Charleston SC 29402
(803) 727-4381

Counsel for Defendants
Gordon D. Schreck
Buist, Moore, Smythe & McGee
Five Exchange St., P.O. Box 999, Charleston SC 29402
(803) 722-3400