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Bean Dredging, LLC, et al v. United States of America

March 29, 2011

BEAN DREDGING, LLC, ET AL., PLAINTIFFS,
v.
UNITED STATES OF AMERICA, DEFENDANT.



The opinion of the court was delivered by: Colleen Kollar-kotelly United States District Judge

MEMORANDUM OPINION

Plaintiff Bean Dredging, LLC*fn1 ("Bean Dredging") commenced this action seeking judicial review of the decision by the National Pollution Funds Center (the "NPFC") to deny Bean Dredging's claim for reimbursement of costs and damages incurred in connection with an oil pollution incident in Humboldt Bay, California in September 1999. The matter previously came before this Court on the parties' cross-motions for summary judgment. The Court resolved those cross-motions and remanded to the NPFC to provide further explanation as to its interpretation of the applicable regulations and the basis for its reasoning. The agency has completed its review on remand and the matter now returns to this Court on the parties' new cross-motions for summary judgment. Presently before the Court are Bean Dredging's [30] Motion for Summary Judgment and the United States' [31] Motion for Summary Judgment. Based upon a searching review of the parties' submissions, the administrative record, the relevant authorities, and the record as a whole, the Court shall DENY Bean Dredging's [30] Motion for Summary Judgment, GRANT the United States' [31] Motion for Summary Judgment, and DISMISS this action in its entirety.*fn2

I. BACKGROUND

The Court assumes familiarity with its prior opinion in this action, which sets forth in detail the factual and procedural background of this case, see Bean Dredging, LLC v. United States, 699 F. Supp. 2d 118 (D.D.C. 2010), and shall therefore only address the factual and procedural background necessary to address the discrete issues currently before the Court.

A. Statutory and Regulatory Background

Congress passed the Oil Pollution Act of 1990 (the "OPA"), 33 U.S.C. § 2701 et seq., in response to the Exxon Valdez oil spill in Prince William Sound, Alaska. Water Quality Ins. Syndicate v. United States, 522 F. Supp. 2d 220, 226 (D.D.C. 2007). The statute, which lays out a comprehensive framework for assessing liability for costs and damages associated with oil spills, was intended "to streamline federal law so as to provide quick and efficient cleanup of oil spills, compensate victims of such spills, and internalize the costs of spills within the petroleum industry." Rice v. Harken Exploration Co., 250 F.3d 264, 266 (5th Cir. 2001).

Title I of the OPA assigns liability to the owners and operators of vessels that discharge oil into the navigable waters of the United States. The statute provides, in relevant part, that "each responsible party for a vessel or a facility from which oil is discharged . . . into or upon the navigable waters or adjoining shorelines . . . is liable for the removal costs and damages . . . that result from such an incident." 33 U.S.C. § 2702(a). This includes all removal costs incurred by the United States government and certain removal costs incurred by third parties. Id. § 2702(b). In certain circumstances, however, a responsible party may seek to limit its financial liability and secure reimbursement for costs incurred. Id. §§ 2704, 2708. To do so, the responsible party must submit a claim directly to the Oil Spill Liability Fund. Id. § 2713(b)(1)(B). The NPFC, which is part of and administered by the United States Coast Guard (the "Coast Guard"), which is in turn a component part of the Department of Homeland Security, is responsible for processing claims for reimbursement under the OPA. The Coast Guard has enacted a comprehensive set of regulations governing the procedures for presenting, filing, processing, settling, and adjudicating such claims. See 33 C.F.R. § 136.1 et seq. The NPFC may deny a claim for reimbursement where certain conditions are not met; as is particularly relevant to the instant action, a responsible party is not eligible for reimbursement if "the incident was proximately caused by . . . the violation of an applicable Federal safety, construction or operation regulation by[] the responsible party, an agent or employee of the responsible party, or a person acting pursuant to a contractual relationship with the responsible party." 33 U.S.C. § 2704(c)(1)(B).

B. The Humboldt Bay Oil Spill and Removal Costs

This action has its origins in an oil spill that occurred on September 6, 1999 in Humboldt Bay, California. See Bean Dredging, 699 F. Supp. 2d at 121. Bean Dredging was the operator of the Dredge Stuyvesant (the "Stuyvesant"), the vessel involved in the incident. Id. The Stuyvesant, a hydraulic hopper dredge, was performing maintenance dredging at the Outer Bar channel of the entrance to Humboldt Bay at the time of the incident. Id.

The immediate cause of the oil spill is not in dispute. The parties agree that the incident was due to oil spilling out of a fifteen-inch fracture in the hull plate of the Stuyvesant's fuel oil tank, almost certainly resulting from the starboard dredge head hitting the fuel oil tank as the vessel executed a turn to port during its dredging operations at approximately 6:00 p.m. on September 6, 1999. See Bean Dredging, 699 F. Supp. 2d at 121-22. As reflected in the Coast Guard's Marine Casualty Investigative Report (the "MCIR"), the incident was likely caused by bad weather and an error in judgment by the vessel's crew. Id. at 122.

The oil spill was first noticed around 7:10 p.m. on September 6, 1999, at which point the Stuyvesant immediately notified the Coast Guard and the National Response Center. See Bean Dredging, 699 F. Supp. 2d at 122. Precautions were taken to minimize the impact of the spill. Id. By early the following morning, the fuel oil had been contained and the Coast Guard allowed the Stuyvesant to return to shore for repairs. Id. The Coast Guard estimated that approximately 2,100 gallons of fuel oil were discharged into the surrounding waters. Id. Bean Dredging contends that it subsequently incurred $8.5 million in uncompensated removal costs and has agreed to pay an additional $7.8 million as part of a settlement. Id.

C. The Initial Administrative Proceedings

On September 2, 2005, Bean Dredging filed a claim with the NPFC seeking reimbursement for removal costs and damages incurred in connection with the Humboldt Bay oil spill. See Bean Dredging, 699 F. Supp. 2d at 122. Bean Dredging sought approximately $11.7 million in reimbursement. Id. On December 14, 2006, the NPFC denied the claim based in part upon its determination that the spill had been caused by the Stuyvesant's violation of two federal operating and safety regulations-specifically, 46 C.F.R. § 44.340 and 46 C.F.R. § 42.09-1.*fn3

A.R. 1-10.*fn4 The former regulation provides, in relevant part, that "[e]ach hopper dredge assigned a working freeboard may be operated at drafts from the normal freeboard to the working freeboard if the . . . [s]eas are not more than 10 feet." 46 C.F.R. § 44.340(a)(1). The latter regulation provides, in relevant part, that "[t]he master of the vessel for which a load line certificate has been issued shall be responsible for the maintenance of such certificate on board such vessel and for compliance with its terms and conditions." Id. § 42.09-1(c). In this case, the Stuyvesant's load line certificate provided that it could be operated at its working freeboard in seas with "[n]ot more than 3 meter waves." A.R. 115. Because the parties are in agreement that the difference between the ten-foot limitation in the first regulation and the three-meter limitation in the load line certificate is immaterial as applied to the facts of this case, the two regulations are essentially coextensive for purposes of the instant litigation. See Bean Dredging, 699 F. Supp. 2d at 124 n.8. Therefore, as framed by the parties, the operative question is whether the Stuyvesant was operating in "seas" greater than ten feet at the time of the incident.

On June 6, 2007, Bean Dredging sought reconsideration of the NPFC's initial denial of the claim. See Bean Dredging, 699 F. Supp. 2d at 123. Bean Dredging tendered two principal arguments: first, Bean Dredging argued that the Stuyvesant was not operating in violation of the regulations identified above; second, Bean Dredging argued that the NPFC's decision contradicted the Coast Guard's MCIR. A.R. 1751-53. With respect to the first argument, Bean Dredging asserted that the term "seas," as used in 46 C.F.R. § 44.340(a)(1), was intended to refer to "significant wave height," A.R. 1752, defined as the average height of the highest one-third of waves encountered over a specified period of time, see Bean Dredging, 699 F. Supp. 2d at 123. In support of its request for reconsideration, Bean Dredging conceded that the Stuyvesant was operating in seas that at times encountered waves in excess of ten feet, but nevertheless maintained that the evidence did not show that the vessel was operating in seas with a significant wave height in excess of ten feet. A.R. 1752-53. With respect to the second argument, Bean Dredging reasoned that, because the Coast Guard's MCIR did not reflect that violations of federal operating or safety regulations had occurred, the NPFC's determination to the contrary was in error. A.R. 1751.

On November 13, 2007, the NPFC issued its final decision affirming the denial of Bean Dredging's claim. A.R. 12-25. With respect to Bean Dredging's first argument, concerning the interpretation of the term "seas," the NPFC implicitly rejected the argument by making no attempt to determine whether the "significant wave height" at the time of the incident was in excess of ten feet and by concluding, without reference to a specific frequency requirement, that the Stuyvesant was in violation of the regulation because the vessel had operated in seas with waves in excess of ten feet. A.R. 20-23. There was, however, no direct explanation as to why the NPFC rejected Bean Dredging's proffered interpretation of the relevant regulation. A.R. 12-26. With respect to Bean Dredging's second argument, the NPFC rejected the suggestion that it was bound by statements or findings in the MCIR, and noted that the mere fact that the Coast Guard elected to institute an administrative penalty against Bean Dredging in lieu of pursuing all possible regulatory violations did not establish the Stuyvesant's compliance with the applicable regulations. A.R. 20.

D. The Present Action Before Remand

Bean Dredging commenced this action on August 28, 2008, seeking judicial review of the NPFC's final decision denying its claim for reimbursement under the OPA. See Compl., Docket No. [1]. On June 5, 2009, the parties filed cross-motions for summary judgment. See United States of America's Mem. in Supp. of Mot. for Summ. J., Docket No. [19-2]; Pl.'s Mem. of P. & A. in Supp. of Pl.'s Mot. for Summ. J. ("Pl.'s Mem."), Docket No. [20]. Oppositions were filed. See United States of America's Resp. to Pl.'s Mot. for Summ. J., Docket No. [23]; Pl.'s Mem. of P. & A. in Opp'n to Def.'s Mot. for Summ. J., Docket No. [22]. Bean Dredging filed a reply; the United States did not. See Pl. Bean Dredging LLC's Reply Mem. in Supp. of its Mot. for Summ. J., Docket No. [24].

On March 30, 2010, this Court issued a decision resolving the parties' cross-motions for summary judgment. See Bean Dredging, 699 F. Supp. 2d at 118-30. As on the administrative level, Bean Dredging tendered two principal arguments in support of its contention that the NPFC's decision to deny its claim for reimbursement was arbitrary or capricious. First, Bean Dredging argued that the NPFC "erred when it misinterpreted and misapplied the meaning of the term 'seas' in 46 C.F.R. § 44.340(a)(1)." Pl.'s Mem. at 14. Second, Bean Dredging argued that the NPFC's decision was arbitrary or capricious because it contradicted the Coast Guard's findings in the MCIR. Id. at 20.

With respect to the first argument, the Court noted that "while it is apparent from review of the NPFC's decision that it rejected Bean Dredging's position, the record is devoid of any explanation as to the reasons for this rejection." Bean Dredging, 699 F. Supp. 2d at 127.

The Court continued:

Although it appears that the NPFC interpreted the regulations at issue to prohibit the operation of a vessel in seas without reference to any specific frequency requirement, there is no actual discussion in the record indicating how the NPFC itself defines "seas" of more than 10 feet, as that phrase is used in 46 C.F.R. § 44.340(a)(1). This is particularly significant because the regulation itself is ambiguous; it does not include any definition of the term "seas" and . . . the term "seas" may have different connotation to different people, i.e., wave height, swell height, combined wave height, wind wave height, etc.

Bean Dredging, 699 F. Supp. 2d at 127. Without "a forthright agency interpretation," the Court was unable to evaluate whether the NPFC's interpretation would be entitled to deference. Id. Similarly, without first knowing the precise contours of the NPFC's interpretation, the Court was unable to reach Bean Dredging's related arguments challenging the NPFC's evidentiary decisions regarding the weather conditions in Humboldt Bay at the time of the incident. Id. at 128 n.11. Therefore, the Court was compelled to remand the action "for further explanation as to the interpretation of the relevant regulations [the NPFC] adopted and its reasons for rejecting the interpretation advanced by Bean Dredging." Id. at 128. The Court's opinion did not otherwise specify or restrict the scope of the agency's review on remand.

While the Court required further information before it could opine on the merits of Bean Dredging's first argument, the same was not true of Bean Dredging's second argument-namely, that the NPFC's decision was arbitrary or capricious because it was inconsistent with the Coast Guard's MCIR. The Court rejected this argument for two independent reasons. First, the MCIR did not contradict the NPFC's final decision; rather, its findings were "entirely consistent" with the NPFC's determination that the Stuyvesant had been operating in seas with waves in excess of ten feet at the time of the spill and that this was the proximate cause of the incident. See Bean Dredging, 699 F. Supp. 2d at 128. Second, even assuming that the MCIR's silence as to whether the Stuyvesant was in violation of the regulations relied upon by the NPFC could be read as an affirmative indication that there were no violations, the NPFC "was under no obligation to reach the same conclusions as reflected in the MCIR." Id. at 129. That is, "the NPFC is not bound by such reports of investigation," Use of Reports of Marine Casualty in Claims Process by the National Pollution Funds Center, 71 Fed. Reg. 60,553, 60,554 (Oct. 13, 2006), and "can reach not only different facts but also different opinions or conclusions than the opinions and conclusions in the MCIR," Use of Reports of Marine Casualty in Claims Process by National Pollution Funds Center, 72 Fed. Reg. 17,574, 17,575 (Apr. 9, 2007). Therefore, the NPFC was "free to conduct a de novo review of the evidence and to reach its own conclusions." Bean Dredging, 699 F. Supp. 2d at 129. In light of these conclusions, the alleged inconsistency between the NPFC's decision and the MCIR is no longer at issue in this action.*fn5

E. The Administrative Proceedings on Remand

On remand, the NPFC revisited the question of the meaning of the term "seas," as used in 46 C.F.R. § 44.340(a)(1) and, on July 15, 2010, issued a supplemental determination reaffirming its denial of Bean Dredging's claim for reimbursement. See Claim Summary/Determination Form ("Suppl. Determination"), Docket No. [29], at 1-14. Surprisingly, "[a]fter carefully considering the issue," the NPFC agreed with Bean Dredging's position that the term "seas" should be defined to mean "significant wave height," which the NPFC in turn defined as "the average height (trough to crest) of the highest one-third of waves encountered by the vessel." Id. at 9. However, the NPFC's current interpretation of the term differs in one respect from the one proffered by Bean Dredging; the NPFC maintains that significant wave height is to be determined in accordance with the informed observations of "a trained mariner" and is not reducible to post hoc data collection and mathematical computation. Id. at 9-11. In this view, "the significant wave heights encountered by a vessel can be determined by a mariner who observes the waves." Id. at 11. After justifying the basis for this interpretation, the NPFC proceeded to explain in detail why, in its judgment, Bean Dredging still failed to establish that it was not in violation of the relevant regulations. Id. at 12-14.

F. The Instant Motions

Following remand, the parties brought new cross-motions for summary judgment. On August 27, 2010, the parties filed their opening memoranda. See Pl.'s Suppl. Mem. of P. & A. in Supp. of Pl.'s Mot. for Summ. J. ("Pl.'s Suppl. Mem."), Docket No. [30]; United States of America's Second Mem. of Law in Supp. of Mot. for Summ. J. ("Def.'s Suppl. Mem."), Docket No. [31-1]. Both parties declined to file opposition and reply memoranda. See Joint Notice in Lieu of Further Pleadings, Docket No. [32]. The motions are therefore fully briefed and ripe for adjudication.

II. LEGAL STANDARD

Both parties agree that the NPFC's decision to deny Bean Dredging's claim for reimbursement is properly analyzed under the "arbitrary or capricious" standard set forth in the Administrative Procedure Act (the "APA"), pursuant to which the reviewing court must "set aside agency action, findings, and conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). Bean Dredging, as the party challenging the agency action, bears the burden of proof. Abington Crest Nursing & Rehab. Ctr. v. Sebelius, 575 F.3d 717, 722 (D.C. Cir. 2009) (citing City of Olmsted Falls v. Fed. Aviation Admin., 292 F.3d 261, 271 (D.C. Cir. 2002)). In assessing the merits of Bean Dredging's challenge, the Court begins with the presumption that the NPFC's action was valid. Grid Radio v. Fed. Commc'ns Comm'n, 278 F.3d 1314, 1322 (D.C. Cir.), cert. denied, 537 U.S. 815 (2002).

Agency action must generally be affirmed on the grounds originally stated by the agency; a reviewing court may not attempt to supply "a reasoned basis for the agency's action that the agency itself has not given." Motor Vehicle Mfrs. Ass'n of the U.S., Inc. v. State Farm Mut.Auto. Ins. Co., 463 U.S. 29, 43 (1983). Nor may counsel's "post hoc rationalizations," offered for the first time on judicial review, substitute for an agency's obligation to articulate a valid rationale in the first instance. El Rio Santa Cruz Neighborhood Health Ctr., Inc. v. U.S. Dep't of Health & Human Servs., 396 F.3d 1265, 1276 (D.C. Cir. 2005). Consistent with these principles, judicial review ...


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