Court Opinion

ID: 2966959
Source: CourtListenerOpinion
Date Created: 2015-09-22 01:37:32.894499+00
Date Added: 2024-06-11T11:43:11.715462
License: Public Domain

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

GATLIN OIL COMPANY, INCORPORATED,
a North Carolina Corporation,
Plaintiff-Appellee,

v.                                                                   No. 97-2079

UNITED STATES OF AMERICA;
DEPARTMENT OF TRANSPORTATION,
Defendants-Appellants.

Appeal from the United States District Court
for the Eastern District of North Carolina, at New Bern.
Malcolm J. Howard, District Judge.
(CA-96-142-4-H)

Argued: September 21, 1998

Decided: March 2, 1999

Before NIEMEYER and MOTZ, Circuit Judges, and
BUTZNER, Senior Circuit Judge.

_________________________________________________________________

Vacated and remanded by published opinion. Senior Judge Butzner
wrote the majority opinion, in which Judge Motz joined. Judge Nie-
meyer wrote an opinion concurring in part and dissenting in part.

_________________________________________________________________

COUNSEL

ARGUED: Joan M. Pepin, UNITED STATES DEPARTMENT OF
JUSTICE, Washington, D.C., for Appellants. Donna Pyle Walker,
WALKER, WALKER, WENDLANDT & OSOWSKI, L.L.C.,
Anchorage, Alaska, for Appellee. ON BRIEF: Lois J. Schiffer,
Assistant Attorney General, Robert L. Klarquist, Cherie L. Rogers,
UNITED STATES DEPARTMENT OF JUSTICE, Washington,
D.C.; Capt. Derek Capizzi, Lt. Michele Bouziane, National Pollution
Funds Center, UNITED STATES COAST GUARD, Arlington, Vir-
ginia; Lcdr. Peter Simons, Office of Claims & Litigation, UNITED
STATES COAST GUARD, Washington, D.C., for Appellants. Wil-
liam M. Walker, WALKER, WALKER, WENDLANDT &
OSOWSKI, L.L.C., Anchorage, Alaska, for Appellee.

_________________________________________________________________

OPINION

BUTZNER, Senior Circuit Judge:

The United States Coast Guard National Pollution Funds Center
(NPFC or Fund Director) determined that some claims made by
Gatlin Oil Company, Inc., for an oil spill were not compensable under
the Oil Pollution Act (OPA), 33 U.S.C.A. § 2701 et seq. (West Supp.
1998). Gatlin Oil filed suit in the district court, which reversed the
agency action, finding that the Fund Director had acted in an arbitrary
and capricious manner and that Gatlin Oil was entitled to compensa-
tion for all its recovery costs and damages with interest. The district
court remanded the case with directions for further fact finding and
for reconsideration of Gatlin's claim in accordance with the court's
opinion. The United States appealed. We vacate the district court's
judgment and remand the case for further proceedings.

I

The district court's jurisdiction rests on 28 U.S.C.A. § 1331 (fed-
eral question) and 33 U.S.C.A. § 2717(b) (Oil Pollution Act).

Appellate jurisdiction rests on 28 U.S.C.A. § 1291 which autho-
rizes appeals of final decisions. Although a district court's remand to
an agency is not usually within the purview of section 1291, the
Supreme Court has noted an exception that is applicable to this
appeal. The Court explained that an order reversing an agency's
denial of benefits and remanding for proceedings consistent with the

                    2
district court's opinion was a final appealable order within the mean-
ing of section 1291. Sullivan v. Finkelstein , 496 U.S. 617, 625 (1990);
accord Hanauer v. Reich, 82 F.3d 1304, 1306-07 (4th Cir. 1996).

Congress enacted the Oil Pollution Act (OPA or the Act) in the
wake of the Exxon Valdez oil spill to provide a prompt, federally-
coordinated response to oil spills in navigable waters of the United
States and to compensate innocent victims. The Coast Guard adminis-
ters the Act. The owner of an onshore facility is the party responsible
for removal costs of a spill that discharges oil into navigable waters,
or poses a substantial threat to do so, and for damages.
§§ 2701(32)(B), 2702. If, however, the owner of the facility proves
that a third party caused the spill, the owner is afforded a complete
defense. §§ 2702(d)(1)(A), 2703(a)(3). The Act also created the Oil
Spill Liability Trust Fund (Fund) for the payment of uncompensated
removal costs that are consistent with the National Contingency Plan
(Plan) and for the payment of uncompensated damages.
§§ 2712(a)(3),(4), 2713(b)(1)(B). A responsible party that has been
exonerated may claim compensation from the Fund for removal costs
and damages. § 2708(a)(1). It is the amount of compensation that is
at issue in this case.

II

On March 13, 1994, near midnight, a vandal jammed open seven
of Gatlin's above-ground fuel storage tanks causing an oil spill esti-
mated to be in the range of 20,000-30,000 gallons. Vapors from the
discharged oil ignited a fire that burned for several hours before fire-
men were able to stop the flow of fuel and extinguish it. The fire
destroyed a warehouse, the bulk plant, inventory, other property,
loading dock, and several vehicles. The fire consumed a large part of
the discharged fuel.

The local emergency response team initiated measures designed to
prevent and mitigate the spread of discharged oil. State officials
reported the spill to the National Response Center, and the Coast
Guard dispatched the Marine Safety Response Team. The federal on-
scene coordinator (FOSC or federal coordinator) conducted a com-
plete survey of the facility. He estimated that there were approxi-
mately 5,500 gallons of oil in the surrounding ditches. He also

                     3
reported that 10 gallons of oil had seeped through dikes in the ditches
to a creek that flowed to the North Prong of the Bay River.

The federal coordinator directed Gatlin Oil to perform several tasks
in order to prevent further discharge of oil into navigable waters. He
instructed Gatlin Oil to remove oil from the storm ditches and surface
waters, construct under-flow dams in the storm ditches, and remove
oil and oil-contaminated gravel from beneath two of the tanks. Gatlin
immediately began some of these clean-up efforts. Compliance with
the directives of the federal coordinator was confirmed on July 29,
1994.

Prior to his departure, the FOSC made arrangements with the North
Carolina Department of Environmental Management (NCDEM or
North Carolina authorities) to monitor the completion of clean-up
efforts initiated by the federal coordinator. The North Carolina
authorities added additional directives regarding the cleanup of soil
and ground water contamination to comply with North Carolina law.

Gatlin Oil was entitled to a complete defense because an unknown
vandal caused the oil spill, and it was also entitled to present a claim
to the Fund for uncompensated removal costs and damages. It con-
tends that it is entitled to all damages resulting from the discharge of
oil and the ensuing fire. Gatlin Oil claimed $850,000 plus interest.
The Coast Guard contends that Gatlin Oil is entitled to only $6,959
from the Fund.

The Coast Guard determined that Gatlin's damages were limited to
those caused by the 10-gallon discharge into navigable waters, the
5,500 gallons of oil in the ditches, and the oil in the gravel under two
tanks that threatened to discharge into navigable waters.

The district court reviewed the agency's decision under the arbi-
trary and capricious standard of the Administrative Procedure Act.
See 5 U.S.C.A. § 706(2)(A). Agreeing with Gatlin Oil's position, the
district court set aside the agency decision and remanded the case "for
further factfinding and a determination of appropriate compensation
in accordance with [the district court's] decision." The government's
appeal followed.

                     4
III

Because, at this stage of the proceedings, this case turns on the
proper interpretation of the Act, we review the district court's judg-
ment de novo. The two-step process explained in Chevron U.S.A., Inc.
v. National Resources Defense Council, Inc., 467 U.S. 837 (1984),
governs review of an agency's statutory interpretation. First, we must
determine "whether Congress has directly spoken to the precise ques-
tion at issue." Id. at 842. When Congress's intent is clear, both the
court and the agency must apply the statute as Congress intended. If,
however, "the statute is silent or ambiguous with respect to the spe-
cific issue, the question for the court is whether the agency's answer
is based on a permissible construction of the statute." Id. at 843.

The principal dispute between Gatlin and the Coast Guard pertains
to the damages that are compensable within the meaning of section
2702. This controversy is fueled by an ambiguity that exists within
the Act concerning the correct interpretation of the term "incident."
The Act defines "incident" as

          any occurrence or series of occurrences having the same
          origin, involving one or more vessels, facilities, or any com-
          bination thereof, resulting in the discharge or substantial
          threat of discharge of oil.

§ 2701(14) (emphasis added).

The definition of "incident" is not the measure of removal costs and
damages. To ascertain what removal costs and damages are compen-
sable, one must turn to other sections of the Act.

Section 2702(a) provides:

          Notwithstanding any other provision or rule of law, and
          subject to the provisions of this chapter, each responsible
          party for a vessel or a facility from which oil is discharged,
          or which poses the substantial threat of a discharge of oil,
          into or upon the navigable waters or adjoining shorelines or
          the exclusive economic zone is liable for the removal costs

                    5
          and damages specified in subsection (b) that result from
          such incident. (emphasis added).

Section 2702(b)(1)(B) provides:

          any removal costs incurred by any person for acts taken
          by the person which are consistent with the National Contin-
          gency Plan.

Section 2702(b)(2) includes damages for (B) real or personal prop-
erty and (E) profits and earning capacity.

Gatlin Oil relies on the definition of incident in section 2701(14).
In contrast, the Coast Guard interpreted section 2702(a) to compen-
sate only removal costs and damages that resulted from the discharge
of oil into navigable waters or from a substantial threat of discharge
into navigable waters.

The Coast Guard has interpreted the Act to provide that only
removal costs and damages that "result from such incident" are com-
pensible. § 2702(a). The antecedent of "such incident" is the dis-
charge or substantial threat of discharge into navigable waters or
adjacent shorelines. Black's Law Dictionary 1432 (6th ed. 1990)
defines "such" in the following terms:

          Of that kind, having particular quality or character speci-
          fied. Identical with, being the same as what has been men-
          tioned. Alike, similar, of the like kind. "Such" represents the
          object as already particularized in terms which are not men-
          tioned, and is a descriptive and relative word, referring to
          the last antecedent.

Accord A Dictionary of Modern Legal Usage 849 (2d ed. 1995)
("[S]uch is a deictic term that must refer to a clear antecedent."). The
Coast Guard's construction of section 2702(a) is permissible because
it is gramatically correct and it accommodates the purpose of the Act.
Consequently, we adopt it. See Chevron, 467 U.S. at 843. We hold
that the removal costs and damages specified in section 2702(b) are
those that result from a discharge of oil or from a substantial threat
of a discharge of oil into navigable waters or the adjacent shoreline.

                    6
IV

The Oil Spill Liability Trust Fund is charged with the payment of
claims for removal costs determined by the President to be consistent
with the National Contingency Plan and for uncompensated damages.
§ 2712(a)(4). The National Contingency Plan is established by 40
CFR Part 300 for the removal of oil and hazardous substances. Its
scope includes discharges of oil into navigable waters of the United
States and on adjoining shorelines. 40 CFR § 300.3(a)(1). The Fund
is created by 26 U.S.C.A. § 9509. The Plan authorizes the Secretary
of Transportation to establish the National Pollution Funds Center. 40
CFR § 300.5 at 12.

The Act requires the President to promulgate regulations for use of
the Fund. § 2712(e). The validity of these regulations is not an issue
in this case. See § 2717(a). Gatlin Oil's claim for removal costs and
damages had to be presented to the Fund for adjudication pursuant to
the regulations promulgated by the President. §§ 2712(a)(4), 2713(e).

The regulations provide for the adjudication of claims authorized
to be presented to the Fund for

          certain uncompensated removal costs and uncompensated
          damages resulting from the discharge, or substantial threat
          of discharge, of oil from a . . . facility into or upon the navi-
          gable water, [and] adjoining shoreline . . . .

33 CFR § 136.1(a)(1). The Plan authorizes the Coast Guard to predes-
ignate an on-the-scene coordinator to coordinate and direct federal
responses to an oil spill 40 CFR Pt. 300 App E § 3.3.1. The regula-
tions designate this person as the Federal On-Scene Coordinator
(FOSC or federal coordinator). 33 CFR § 136.5(b). The claimant
bears the burden of providing all evidence deemed necessary by the
Fund Director to support its claim. 33 CFR § 136.105.

The regulations also stipulate the claimants' entitlement to com-
pensation for removal costs from the Fund. Section 136.205 provides:

          The amount of compensation allowable is the total of
          uncompensated reasonable removal costs of actions taken

                     7
          that were determined by the FOSC to be consistent with the
          National Contingency Plan or were directed by the FOSC.
          Except in exceptional circumstances, removal activities for
          which costs are being claimed must have been coordinated
          with the FOSC.

Sections 2702, 2712(a)(4) and 2713(e) of the Act and sec-
tion 136.205 of the regulations indicate that the Fund is not a substi-
tute for a tortfeasor. The owner of property that is harmed by a
tortfeasor may have a valid claim against the tortfeasor, but its claim
against the Fund is governed by the Act, particularly sections 2702
(Elements of liability) and 2712 (Uses of Fund), and pertinent regula-
tions.

The Fund Director explained the rationale of his decision as fol-
lows: "OPA under 33 USC 2712 allows for the payment from the Oil
Spill Liability Trust Fund (OSLTF) only for removal costs and dam-
ages set forth in 33 USC 2702 that result from a discharge or substan-
tial threat of discharge into navigable waters." JA 204. The Fund
Director's rationale is consistent with the Coast Guard's construction
of the Act which we adopted in Part III of this opinion. The Fund
Director reduced Gatlin Oil's claim for removal costs to compensate
only items that the federal coordinator determined were consistent
with the National Contingency Plan or that the federal coordinator
directed. See §§ 136.203 (burden of proof), 136.205 (compensation
allowable). The Fund Director allowed removal costs of $2,500. With
regard to loss of earnings and earning capacity, the Fund Director
allowed $4,459 for the time it took Gatlin Oil to carry out the direc-
tions of the federal coordinator. The compensation must be reason-
able.

On remand the district court should determine whether the Fund
Director's allowance of compensation was reasonable. See 33 CFR
§§ 136.205, 136.235. Gatlin Oil is entitled to full compensation for
removal costs that the federal coordinator determined were consistent
with the National Contingency Plan and for costs resulting from
actions he directed. Gatlin Oil is also entitled to full compensation for
loss of earnings and earning capacity caused by the necessity to carry
out the directions of the federal coordinator, including removal of
gravel under two of the tanks. Furthermore, the underlying findings

                     8
of the federal coordinator must not be arbitrary, capricious, or an
abuse of discretion. See 5 U.S.C.A. § 706(2)(A).

As a matter of law, Gatlin Oil cannot recover from the Fund com-
pensation for fire damage because the evidence did not establish that
the fire caused the discharge of oil into navigable waters or posed a
substantial threat to do so. See § 2702(a).

Gatlin Oil relies on Petition of Cleveland Tankers, Inc., 791 F.
Supp. 669 (E.D. Mich. 1992). This case is the only example of an oil
spill and a fire that Gatlin Oil has found; it claims that its situation
is analogous. Appellee's brief 23-24.

Petition of Cleveland Tankers involved a Petition From or Limita-
tion of Liability filed in admiralty by the owners of a tanker that
caught fire at a dock while unloading gasoline. A marina claimed
damages, but its claim was filed late. The shipowner sought dismissal
of the marina's claim under Rule F(5) of the Supplemental Rules for
Admiralty and Maritime Claims. The district court nevertheless
allowed the claim to be filed under Rule F(4) because good cause was
shown for the untimely filing and the limitation proceeding was pend-
ing. The opinion also noted that section 2702(b)(2)(E) of OPA allows
damages against the responsible party for injury to property and that
the marina had alleged such damage. The court, however, did not
undertake in the reported proceeding to adjudicate the marina's dam-
age either in the admiralty case or under OPA. The marina did not
seek compensation from the Fund. 791 F. Supp. at 677-79. At the
most, all that can be gleaned from the case is that the marina's claim
against the shipowner was not dismissed. How it fared in further pro-
ceedings is not shown.

V

Gatlin Oil also seeks reimbursement for the costs of complying
with the directives of the North Carolina enviromental officials. These
state directives required Gatlin Oil to clean up soil and groundwater
contamination. Gatlin Oil argues that the federal coordinator by virtue
of his position assumed responsibility for all of the cleanup. Gatlin
Oil also asserts that the entire oil spill posed a substantial threat of oil
reaching navigable waters. In contrast, the Coast Guard maintains that

                     9
the Fund is not liable for the work performed pursuant to North Caro-
lina directives.

Both the Act and the regulations support the Coast Guard's posi-
tion. Section 2718 of the Act provides in part:

          (a) Preservation of State authorities . . .

          Nothing in this chapter . . . shall--

           (1) affect, or be construed or interpreted as preempting,
          the authority of any State or political subdivision thereof
          from imposing any additional liability or requirements with
          respect to--

          (A) the discharge of oil or other pollution by
          oil within such State, or

          (B) any removal activities in connection with
          such a discharge . . . .

The Act authorizes proceedings by which the Fund may be obli-
gated to assist states. Section 2712(d)(1) provides that "upon request
of the Governor of a State" or pursuant to an agreement between the
President and a Governor, the President may obligate the Fund for
removal costs incurred by a state. Gatlin Oil has not shown any
request by the Governor of North Carolina or an agreement between
the Governor and the President. Procedures for state access to the
Fund are set forth in 33 CFR Part 133. Gatlin did not introduce any
evidence showing compliance with either the Act or the regulations
concerning cleanup costs that the North Carolina authorities directed.
Also, Gatlin Oil has not proved that the contamination of the soil and
groundwater, which was required by North Carolina, posed a substan-
tial threat of a discharge of oil into navigable waters. Moreover,
Gatlin's theory that the federal coordinator is deemed to have directed
all state and federal removal costs is contrary to 33 CFR § 136.205.
The federal coordinator did not determine that the cleanup ordered by
North Carolina authorities was consistent with the National Contin-
gency Plan, and he did not direct Gatlin Oil to comply with North

                     10
Carolina's directives. We conclude that the Fund is not liable for
Gatlin's expenditures that were directed by North Carolina authori-
ties.

VI

Included in the Act's definition of damages are the costs of assess-
ing those damages. See § 2701(5). These costs must be the "reason-
able costs of estimating the damages claimed," not including
attorney's fees or the administrative costs of preparing the claim. 33
CFR § 136.105(d)(8). Gatlin Oil calculated costs under the mistaken
assumption that the Fund should compensate it for all of its damages.
On remand it should be given the opportunity to recalculate its claim
for assessment costs pertaining to those damages recognized by this
opinion.

VII

Gatlin Oil is not entitled to an award of interest against the United
States. The no-interest rule prohibits an award of interest against the
government "in the absence of an express waiver of sovereign immu-
nity from an award of interest." Library of Congress v. Shaw, 478
U.S. 310, 311 (1986). Traditionally, Congress has manifested intent
to make such a waiver expressly. Id. at 318-19. An express waiver of
immunity from interest is not found in the Oil Pollution Act.

The Supreme Court has recognized that the no-interest rule is inap-
plicable in situations where the government has"cast off the cloak of
sovereignty and assumed the status of a private commercial enter-
prise." Id. at 317 n.5. This language is consistent with the Court's
holding in Standard Oil Co. v. United States, 267 U.S. 76 (1925). In
that case, the government issued insurance policies which insured a
steamship and her freight against war risks. Id. at 76-77. When loss
occurred, the payment of interest was questioned. The policies issued
by the government indicated that "claims would be paid within thirty
days after complete proofs of interest and loss had been filed . . . ."
Id. at 79. Furthermore, the insured were permitted to sue the govern-
ment under the policy "in case of disagreement." Id. The Court deter-
mined that the government had assumed the status of a private
insurance company.

                    11
With respect to the Oil Pollution Act, the government does not
issue any policies, nor does it assume any risk on behalf of claimants.
The Act provides limited compensation when the party responsible
for an oil spill is unavailable. It does not function as a private insur-
ance company. For these reasons, Gatlin's reliance on Standard Oil
is misplaced.

Nor does the Postal Reorganization Act of 1970 support Gatlin Oil.
In Loeffler v. Frank, 486 U.S. 549 (1988), Congress established that
the Postal Service's liability was equivalent to any other business. Id.
at 556. Because Congress "launch[ed] the Postal Service into the
commercial world," it is presumed that Congress"waived any other-
wise existing immunity of the Postal Service from interest awards."
Id. (citations omitted); accord Maksymchuk v. Frank, 987 F.2d 1072,
1076-77 (4th Cir. 1993). The Court held that the Postal Service could
be subjected to an interest award in a Title VII suit due to congressio-
nal waiver of immunity.

In contrast, there is no evidence that Congress intended the Oil
Spill Liability Trust Fund to function like a commercial enterprise or
to have liability like that of any other business. An award of interest
against the Fund does not appear to have been contemplated by Con-
gress. The Act contains no provisions that would make such an award
possible.

The Act does establish that a responsible party (or the responsible
party's guarantor) is "liable to a claimant for interest on the amount
paid in satisfaction of a claim . . . ." § 2705(a). A "responsible party,"
in the case of an onshore facility like Gatlin Oil, is defined as "any
person owning or operating the facility, except a Federal agency,
State . . . ." § 2701(32)(B). The federal government is not included in
the definition of responsible party. Id.

While the government is not liable for interest under the Act, it can
recover interest as a cost incurred by the Fund. The Attorney General
is authorized to commence an action on the Fund's behalf to recover
compensation paid by the Fund, as well as costs incurred by the Fund.
See § 2715(c). This section expressly permits the Fund to recover
interest on the money that it had expended. Section 2715(c) does not

                     12
do any more than provide for the reimbursement of the Fund for
expenses it should not have to bear.

We conclude that the Shaw no-interest rule applies to this case.

The district court's judgment is vacated, and this case is remanded
for further proceedings consistent with this opinion.

VACATED AND REMANDED

NIEMEYER, Circuit Judge, concurring in part and dissenting in part:

I concur in Part VII of the majority's opinion, holding that Gatlin
Oil is not entitled to an award of interest against the United States.
I differ with the majority, however, on the proper reading of 33
U.S.C. § 2702 of the Oil Pollution Act ("OPA"), which controls the
disposition of Gatlin Oil's claim for removal costs and damages
resulting from vandals' opening a spigot and setting fire at Gatlin
Oil's facility.

Under 33 U.S.C. §§ 2708 and 2713 of the OPA, Gatlin Oil is enti-
tled to removal costs and damages from the Oil Spill Liability Trust
Fund ("Fund") if it is a party responsible for removal costs and dam-
ages but has a defense that the discharge or threat of discharge of oil
into navigable waters was caused by the act or omission of a third
party. In that case, the responsible party would be entitled to recover
from the Fund "removal costs and damages . . . that result from such
incident." 33 U.S.C. § 2702(a). As a defined term in the OPA, "inci-
dent" means "any occurrence or series of occurrences having the same
origin, involving one or more vessels, facilities, or any combination
thereof, resulting in the discharge or some substantial threat of dis-
charge of oil." 33 U.S.C. § 2701(14). Accordingly, I would hold that
the vandals' opening of an oil storage tank spigot and setting fire to
the oil is an incident for which Gatlin Oil would be entitled to both
its removal costs and its damages.

The majority reads "incident" as used in § 2702(a) to have as its
antecedent the discharge of oil or the threat of discharge of oil, as
referred to earlier in § 2702(a). Its argument is based on the fact that

                     13
the word "incident" is modified by the word"such," suggesting the
limitation of that term in this paragraph to the antecedent as an exam-
ple of "incident."

While I remain convinced that incident must mean the defined
term, even if the interpretation given by the majority is the correct
one, Gatlin would nevertheless be entitled to its damages because
those damages "resulted from" the vandals' discharge of oil, a dis-
charge which both polluted navigable waters and immediately
threatened to pollute navigable waters. That a fire ensued after the oil
spigot was opened should have no bearing on Gatlin Oil's ability to
recover from the Fund. The statutory test -- whether fire damage "re-
sulted from" the discharge of oil that threatened to pollute navigable
waters -- was still satisfied. For these reasons, I would permit Gatlin
Oil to recover all damages flowing from the oil spill incident that
occurred on March 13, 1994, and not restrict its recovery to a portion
of its removal costs.

I would, however, remand this appeal to the district court for recal-
culation of Gatlin Oil's lost earnings resulting from the discharge of
oil. The district court's prior calculation resulted in an award of spec-
ulative damages which I believe is unsupported by the record and in
contravention of § 2702(b)(2)(E).

                     14