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CITGO Asphalt Refining Co. v. Frescati Shipping Co., Ltd.

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Supreme Court of the United States
CITGO Asphalt Refining Co. v. Frescati Shipping Co., Ltd.
Term: 2019
Important Dates
Argument: November 5, 2019
Decided: March 30, 2020
Outcome
Affirmed
Vote
7-2
Majority
Sonia Sotomayor • Chief Justice John G. Roberts • Ruth Bader Ginsburg • Stephen Breyer • Elena Kagan • Neil Gorsuch • Brett Kavanaugh
Dissenting
Clarence Thomas • Samuel Alito


CITGO Asphalt Refining Co. v. Frescati Shipping Co., Ltd. is a case argued before the Supreme Court of the United States on November 5, 2019, during the court's October 2019-2020 term. The case came on a writ of certiorari to the United States Court of Appeals for the 3rd Circuit.[1]

The court affirmed the 3rd U.S. Circuit Court of Appeals' decision in a 7-2 ruling, holding a safe berth clause in a voyage charter contract is a guarantee of a ship's safety. Sotomayor wrote, "The charterer’s assurance of a safe berth is the entire root of the safe-berth clause, and crucially, it is not subject to qualifications or conditions."[2] Click here for more information.

HIGHLIGHTS
  • The case: An abandoned anchor in the Delaware River pierced the hull of the Athos I, an oil tanker, causing nearly 264,000 gallons of crude oil to spill into the river. The cost of cleanup was $143 million. Frescati, the shipowner, paid for the cleanup effort and was later reimbursed for $88 million by the U.S. federal government. Frescati and the U.S. sued CITGO, the intended oil recipient, for a portion of the costs.
  • The issue: Whether under federal maritime law a safe berth clause in a voyage charter contract is a guarantee of a ship's safety, as the Third Circuit below and the Second Circuit have held, or a duty of due diligence, as the Fifth Circuit has held.[3]
  • The outcome: The court affirmed the 3rd U.S. Circuit Court of Appeals' decision in a 7-2 ruling, holding a safe berth clause in a voyage charter contract is a guarantee of a ship's safety.[2]


    • You can review the lower court's opinion here.

    Timeline

    The following timeline details key events in this case:

    • March 30, 2020: The U.S. Supreme Court affirmed the 3rd Circuit's decision.
    • November 5, 2019: Oral argument
    • April 22, 2019: The U.S. Supreme Court agreed to hear the case.
    • October 26, 2018: CITGO Asphalt Refining Co. filed a petition with the U.S. Supreme Court.
    • March 28, 2018: The 3rd Circuit affirmed in part, vacated in part, and reversed in part the ruling of the Eastern District of Pennsylvania.

    Background

    In November 2004, the single-hulled oil tanker Athos I was delivering a shipment of crude oil from Puerto Miranda, Venezuela, to Paulsboro, New Jersey. Frescati Shipping Company, Ltd. (Frescati) owned the ship. The delivery was to a party made up of affiliated companies—CITGO Asphalt Refining Company, CITGO Petroleum Corporation, and CITGO East Coast Oil Corporation (CITGO). [4]

    On November 26, 2004, the Athos I hit an abandoned anchor while passing through Federal Anchorage Number 9, a federally designated area of the river where ships may anchor. The anchor pierced the ship's hull, causing 264,321 gallons of crude oil to spill into the Delaware River.[4]

    The cleanup effort cost $143 million. Frescati paid for the cleanup and the U.S. federal government reimbursed the shipowner for $88 million under the Oil Pollution Act of 1990. Frescati and the United States then sued CITGO for a portion of the costs.[4][5]

    Below is a brief timeline of the litigation in the case:

    1. Judge John Fullam of the Eastern District of Pennsylvania found CITGO was not liable to pay for the cleanup effort.
    2. On appeal, the 3rd Circuit affirmed in part, vacated in part, and remanded the case to the district court.
    3. On remand, the district court:
      1. held CITGO was liable to Frescati for breach of contract, holding Frescati was a beneficiary of CITGO's safe berth warranty.
      2. held CITGO had a duty to search for and remove obstructions in the area of its berth.
      3. reduced the U.S. government's recovery against CITGO by 50 percent, partially crediting CITGO's argument that government agencies led the company to believe they were maintaining the area free of obstructions.
    4. CITGO appealed the district court's ruling, arguing Frescati demonstrated negligent seamanship.
    5. All three parties appealed to the 3rd Circuit. The 3rd Circuit:
      1. affirmed the district court's ruling regarding the breach of contract claim.
      2. vacated the district court's ruling in favor of Frescati on the negligence claim.
      3. affirmed in part the district court's judgment in favor of the U.S. regarding CITGO's breach of contract liability.
      4. reversed and remanded the case to recalculate damages and prejudgment interest.[4]

    Questions presented

    The petitioner presented the following questions to the court:

    Questions presented:
    • Whether under federal maritime law a safe berth clause in a voyage charter contract is a guarantee of a ship's safety, as the Third Circuit below and the Second Circuit have held, or a duty of due diligence, as the Fifth Circuit has held.[3]

    Outcome

    In a 7-2 opinion, the court affirmed the judgment of the 3rd U.S. Circuit Court of Appeals, holding a safe berth clause in a voyage charter contract is a guarantee of a ship's safety.[2]

    Justice Sonia Sotomayor wrote the opinion of the court. Justice Clarence Thomas filed a dissenting opinion, joined by Justice Samuel Alito.[2]

    Opinion

    In her opinion, Justice Sotomayor wrote:[2]

    “ The safety of the selected berth is the entire root of the safe-berth clause: It is the very reason for the clause’s inclusion in the charter party. And crucially, the charterer’s assurance of safety is not subject to qualifications or conditions. [6] ”


    Sotomayor emphasized that the decision provided a legal backdrop against which future subcharter agreements with safe berth clauses can be negotiated.[2]

    Dissenting opinion

    Justice Thomas filed a dissenting opinion, joined by Justice Alito. In his dissent, Thomas wrote:[2]

    “ The majority concludes that the safe-berth clause in the contract at issue unambiguously created a warranty of safety by the charterer. Although this interpretation provides a clear background rule for the maritime industry to contract against, it is the wrong rule and finds no basis in the contract’s plain text. I would hold that the plain language of the safe-berth clause contains no warranty of safety and remand for factfinding on whether industry custom and usage establish such a warranty in this case. [6] ”

    Text of the opinion

    Read the full opinion here.

    Audio



    Transcript

    See also

    External links

    Footnotes

    1. ↑ SCOTUSblog, "CITGO Asphalt Refining Co. v. Frescati Shipping Co., Ltd.," accessed June 5, 2019
    2. ↑ 2.0 2.1 2.2 2.3 2.4 2.5 2.6 Supreme Court of the United States, CITGO Asphalt Refining Co. v. Frescati Shipping Co., Ltd., decided March 30, 2020
    3. ↑ 3.0 3.1 Supreme Court of the United States, "Questions presented: 18-565 CITGO Asphalt Refining Co. v. Frescati Shipping Co., Ltd.," accessed June 5, 2019
    4. ↑ 4.0 4.1 4.2 4.3 United States Court of Appeals for the 3rd Circuit, Frescati Shipping Company Ltd. v. CITGO Asphalt Refining Company, decided March 29, 2018
    5. ↑ Oyez, "CITGO Asphalt Refining Co. v. Frescati Shipping Co.," accessed June 5, 2019
    6. ↑ 6.0 6.1 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
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