United States v. Egan Marine Corp.

Citations: 808 F. Supp. 2d 1065; 2011 WL 3489811Docket: Case No. 08 C 3160

Court: District Court, N.D. Illinois; August 9, 2011; Federal District Court

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Four motions are currently before the Court, including two dispositive motions. Egan Marine Corporation (EMC) has filed a Motion to Dismiss and a Motion to Strike the Government's Expert Witnesses. Additionally, Exxon Mobil Corporation and ExxonMobil Oil Corporation (Exxon) have submitted a Motion for Summary Judgment, while EMC seeks to strike parts of Exxon's Statement of Material Facts.

The background involves a contract from 1996 between Exxon and Clark Oil Trading Company for the sale of Clarified Slurry Oil (CSO), which EMC transported. On January 18, 2005, EMC’s tanker barge EMC-423 was to load CSO from Exxon’s Joliet refinery. Due to a valve malfunction caused by cold weather, the CSO was transferred from one tank to another, leading to a dispute over the cargo's characteristics. EMC claims the CSO was contaminated with gasoline, while Exxon asserts it met acceptable variances.

Following the loading of approximately 14,000 barrels of CSO, the barge exploded and sank on January 19, 2005, resulting in the death of crew member Alexander Oliva and significant environmental damage from spilled CSO. The Government alleges that Oliva improperly used a propane torch to thaw a pump, causing the explosion, a claim EMC disputes, attributing it instead to the alleged contamination from Exxon.

The Government filed a five-count Complaint on June 2, 2008, later amended, holding EMC responsible for the explosion and spill, seeking over $1.5 million in cleanup costs, additional civil damages under the Oil Pollution Act, and claims under the Rivers and Harbors Act and maritime law. Concurrently, a criminal case was initiated against EMC and the vessel's captain. On September 10, 2008, EMC filed a Third Party Complaint against Exxon for contribution and indemnity, alleging Exxon’s negligence in loading contaminated CSO was a contributing factor to the incident.

The Court dismissed Count 5 of the Amended Complaint at the Government's request on March 30, 2009. EMC alleges the Government has violated discovery rules, claiming these violations undermine its right to a fair trial. EMC seeks dismissal of the remaining counts in the Amended Complaint under Federal Rule of Civil Procedure 37(b)(2) due to the alleged misconduct. Specifically, EMC contends that the Government: (1) improperly seized documents from EMC's offices; (2) altered physical evidence without notification; (3) directed witnesses not to answer deposition questions; (4) delayed the provision of newly discovered evidence; (5) failed to disclose all relevant documents; (6) did not adequately reveal its interactions with Exxon; and (7) withheld documents from a related criminal case. EMC argues that these cumulative violations justify dismissing the Amended Complaint with prejudice.

Under Rule 37(b)(2), the Court can sanction parties for non-compliance with discovery orders, typically necessitating a prior court order for enforcement. Dismissal is considered a severe sanction, appropriate only when the offending party displays willfulness, bad faith, or fault. Although EMC lists numerous discovery violations, none relate to the Government's non-compliance with a court order. Discovery closed on November 26, 2010, but EMC did not file its Motion to Dismiss until December 15, 2010, indicating it was aware of many alleged violations prior to the closure. EMC's concerns about document seizures and deposition issues were also noted but not formally challenged before the discovery period ended.

EMC’s counsel did not object to the Government attorney’s instructions during the depositions of witnesses Reggio and Hann, nor did EMC file a motion to compel answers or the production of missing documents identified during these depositions. EMC's claims of discovery abuses, including allegations of bad faith and willful misconduct by the Government, were deemed insufficient to warrant dismissal of the case. The Court emphasized that EMC could not wait until after discovery concluded to aggregate alleged improprieties for a dismissal motion. Dismissal under Rule 37(b)(2) is a severe sanction that should be applied judiciously. Although EMC's motion raised a discovery dispute, the Court noted it had not been requested to reopen discovery. Consequently, the Court denied EMC’s Motion to Dismiss, stating that EMC may address its concerns regarding the Government's evidence through motions in limine before trial. 

Additionally, EMC moved to strike the Government's expert witnesses—Capt. Brian Hall, Dr. John DeHaan, and Peter Wakefield—claiming they improperly relied on the Marine Casualty Investigation Report (MCIR), which is inadmissible as evidence under 46 U.S.C. 6308. The MCIR, submitted by Commander Mark Hamilton following an accident investigation, cannot be used in civil or administrative proceedings, except in actions initiated by the U.S. The Court confirmed that the broad exclusion under 46 U.S.C. 6308 does not conflict with Federal Rule of Evidence 703, which allows experts to use inadmissible data to form opinions. Since the expert witnesses referenced the MCIR in their reports, EMC argued they should be struck from the disclosures. The Court reiterated that the MCIR is inadmissible for any purpose, thereby preventing its use as a basis for expert opinions.

An expert report referencing a Marine Casualty Investigation Report (MCIR) is not automatically inadmissible, as long as the expert's conclusions do not substantially rely on the MCIR. Hall's expert report, addressing the explosion on the EMC-423, includes the MCIR among 28 sources. EMC contends that Hall's conclusions depend solely on the MCIR, particularly two presumptions: one regarding the use of a propane torch by a crew member and another about the heating system's functionality. Testimony from Jason Hainline and corroborating evidence from Special Agent John Gamboa support the use of the torch, although Hall's assertion that the heating system was inoperable is solely based on the MCIR and is stricken by the Court. Despite this, Hall's opinion remains valid as it can still be supported by other evidence regarding the torch's use. 

DeHaan’s expert opinion, as a forensic scientist, also examines the explosion, using 20 resources including the MCIR. EMC argues his conclusions are based on the MCIR, but only two specific paragraphs directly cite it, which the Court strikes. DeHaan's analysis shows that while he references the MCIR, his central findings primarily rely on other documents, making his opinion largely admissible, except for the noted sections related to the MCIR. All references to the MCIR in DeHaan’s report are stricken, but the core of his findings remains intact.

Wakefield's report concludes that Alexander Oliva, a deckhand, caused the explosion and sinking of Tank Barge EMC 423, but this opinion and any related sections regarding the cause are deemed inadmissible under 6308(a). The report, while mentioning the explosion, primarily focuses on the rosebud torch allegedly used by Oliva, providing background information on propane torches not derived from the MCIR, making this portion admissible. However, all references to the accident's cause, preventive measures, and photographs from the MCIR are struck from the report. EMC’s Motion to Strike the Government’s Expert Witnesses is partially granted and partially denied.

Exxon’s motion for summary judgment addresses three counts brought forth by EMC: indemnity, contribution, and liability under Federal Rule of Civil Procedure 14(c). Before evaluating Exxon’s motion, the court must first resolve EMC’s motion to strike certain facts from Exxon’s Rule 56.1 statement. 

EMC contends that specific paragraphs (36, 65, and 66) contain improper legal conclusions. The court finds that while Paragraphs 36 and 66—asserting that the CSO was "properly monitored"—do not violate Rule 56.1 due to supporting affidavits, Paragraph 65’s claim that the CSO was "fit and appropriate for transportation" is a legal conclusion, thus it is struck. 

Furthermore, EMC argues that Paragraph 68 includes inadmissible facts from the MCIR. Exxon claims this information is based on depositions, but since one of the deponents prepared the MCIR, the court strikes this paragraph as it relies on MCIR findings, violating 6308(a).

EMC seeks to strike various paragraphs from the legal document, primarily concerning testing conducted by independent contractor SGS on the CSO loaded onto the EMC-423, which was done under a contract between Exxon and Clark Oil. EMC argues that these statements are irrelevant to Exxon's motion, citing Harney v. Speedway Super-America, LLC. However, the court finds the testing relevant as it pertains to EMC's allegations of breaches of duty by Exxon, supported by an expert report from Donald Flessner, which indicates contamination of the CSO. SGS's testing occurred on samples taken before and after loading onto the barge, and although EMC contests the accuracy of these tests, the court cannot make factual determinations regarding their validity, thus maintaining their relevance in the case.

EMC also claims that testing performed by STAT Analysis Corporation post-accident on samples from Exxon's tanks and the EMC-423 is irrelevant. The results indicated that the materials were "essentially the same," which is pertinent to EMC's assertion that Exxon loaded contaminated cargo. This testing is linked to EMC’s argument about Exxon's negligence in violating Coast Guard regulations and the duty to warn about the cargo, leading the court to retain these paragraphs.

Regarding the Material Safety Data Sheets (MSDS) provided by Exxon for the CSO, which were last updated in 1999, EMC contends these do not accurately reflect the cargo due to alleged gasoline contamination. The court finds that the MSDS is relevant to determining whether Exxon breached its duty to warn, and it cannot assess the reliability of the MSDS based on perceived contradictions without improperly weighing evidence, so these paragraphs remain.

Finally, EMC and Exxon agree that certain paragraphs present irrelevant issues concerning Exxon's practices at its Joliet refinery. Despite EMC not including these issues in its Third Party Complaint, Exxon's reference to them during discovery justifies their inclusion in the statement of facts. While the court denies EMC's motion to strike these paragraphs, it does not consider them in its summary judgment ruling.

Clark Oil accepted salvaged Crude Synthesis Oil (CSO) from the EMC-423 several months after a ship explosion. The Court disagrees with EMC's assertion that related statements are irrelevant, noting that although Exxon’s Exhibit R lacks specific findings on Clark Oil’s tests of the salvaged CSO, it can be reasonably presumed that the CSO met sales contract standards, implying no contamination beyond acceptable limits. This is pertinent to EMC’s claims against Exxon regarding Coast Guard regulations, the implied warranty of safe cargo, and the duty to warn. The Court denies EMC's motion concerning these paragraphs.

Paragraph 67, based on Irvin Holm's deposition, is upheld by the Court. Consequently, EMC’s Motion to Strike is partially granted—Paragraph 68 and part of 65 are stricken, while the rest of Exxon’s Statement of Facts remains.

Regarding jurisdiction, EMC claims diversity and federal question jurisdiction, and implicitly maritime jurisdiction under 28 U.S.C. 1333(1), due to a tort occurring on navigable waters with a significant relationship to maritime activity. Exxon’s summary judgment memorandum addresses federal common law, the Oil Pollution Act (OPA), and Illinois state law. Despite EMC's lack of explicit maritime jurisdiction pleading, the Court finds that maritime law applies, given the circumstances of CSO loading and the subsequent explosion affecting the Chicago Sanitary Ship Canal.

The Court emphasizes its independent duty to ensure subject-matter jurisdiction is satisfied. Exxon successfully argues the merits of EMC’s maritime claims and notes EMC did not counter claims that Exxon violated Illinois products liability laws, leading to a waiver of those arguments. Consequently, EMC cannot use Illinois products liability as a basis for contribution under 33 U.S.C. 2709.

Summary judgment is appropriate when the moving party demonstrates that no genuine issue of material fact exists and is entitled to judgment as a matter of law, as outlined in Federal Rule of Civil Procedure 56(a). A fact is considered material if it could influence the suit's outcome, and a dispute is genuine if reasonable evidence could lead a jury to rule for the nonmoving party. The court's role is to identify whether a genuine issue of material fact exists without weighing evidence or determining its truth. In this context, all evidence must be viewed favorably for the nonmoving party, and the moving party must show the absence of genuine issues with supporting evidence. If the moving party meets this burden, the nonmoving party must provide specific facts, rather than mere allegations, to demonstrate a genuine dispute exists.

In the case concerning Exxon’s motion for summary judgment, EMC contends that genuine issues of material fact regarding Exxon's negligence as a potential cause of an explosion and subsequent oil spill preclude summary judgment. Maritime law allows for contribution among joint tortfeasors, with liability determined by fault. The Oil Pollution Act (OPA) permits civil actions for contribution against liable parties. Under OPA, a third party is liable for oil spill damages if caused solely by their actions or omissions. EMC claims Exxon breached three duties: violation of Coast Guard regulations, breach of the implied warranty of safe cargo, and failure to warn.

Specifically, regarding the Coast Guard regulation violation, the EMC-423 barge requires inspection to handle certain cargo types, including flammable liquids. EMC argues that due to the presence of a thermal fluid heater, the barge could only carry Grade E cargo, though its certification indicates it was approved for Grade B cargo. The current record lacks evidence proving that the EMC-423 was ineligible to carry Grade B, C, or D cargo when the heater was not operational.

No evidence indicates that the heater on the barge EMC-423 operated when Exxon loaded the CSO or during its transport. EMC did not inform Exxon that the barge's heater impacted its ability to carry anything other than Grade E cargo. Additionally, there is no evidence that the CSO loaded had a flashpoint below 150 degrees Fahrenheit, affirming that Exxon legally loaded Grade E CSO according to 46 C.F.R. 30.10-15. EMC's expert, Flessner, noted contamination by light hydrocarbons but confirmed that testing showed the CSO had a flashpoint above 150 degrees. Consequently, Exxon did not violate Coast Guard regulations, negating EMC's grounds for contribution.

Regarding the implied warranty of safe cargo, EMC contends that Exxon breached this warranty, which asserts that cargo must be fit for carriage and not dangerous. However, since there is no evidence that the CSO was anything other than Grade E combustible liquid, and EMC, as a carrier, had a duty to understand the dangerous nature of its cargo, there is no basis for claiming a breach.

Under maritime law, a shipper must warn of foreseeable hazards associated with cargo that the stevedore or shipowner could not reasonably know. Although Exxon provided an MSDS indicating the CSO had a flashpoint above 141 degrees Fahrenheit, EMC argues that processing changes at Exxon's refinery rendered this document obsolete, supported by Flessner’s report. While Exxon disputes these findings, the court cannot resolve factual disputes at the summary judgment stage. However, EMC's duty to warn claim faces challenges in proving causation, as proximate cause must demonstrate a direct, unbroken sequence leading to the injury, which remains unestablished in this case.

EMC is required to prove that the contaminated cargo, CSO, directly caused the harm and that a warning from Exxon regarding changes in the CSO's properties would have altered EMC's handling of the product. Although EMC acknowledges receipt of a Material Safety Data Sheet (MSDS) from Exxon, which provided warnings about the flammability of the CSO and precautions for its storage, EMC claims the MSDS was too generic and did not address specific contamination issues. However, the MSDS sufficiently warned EMC about potential dangers associated with the CSO. In negligence claims for failure to warn, recovery is not possible if the warned party is already aware of the danger. No evidence links the contamination to the explosion and spill, and Exxon’s failure to warn did not contribute to the incident. The Coast Guard had certified the vessel EMC-423 for Grade B cargo, and there is no indication that the crew would have acted differently had they been informed of the contamination. The court finds that accepting EMC’s argument on causation would require speculation beyond reasonable inference. Consequently, EMC has not established a genuine issue of material fact regarding Exxon’s sole liability for the spill, leading to the dismissal of EMC's contribution claims under the Oil Pollution Act (OPA).

Regarding EMC's indemnity claim against Exxon, applicable laws include the OPA and maritime law, which indicate that EMC is not liable for damages if Exxon is solely responsible. The court notes a split in authority on the active-passive negligence doctrine for indemnity claims, but finds no genuine issue of material fact supporting Exxon’s liability for the explosion and spill under any theory of negligence. EMC fails to demonstrate that Exxon breached its duty or that any breach caused the damages. Therefore, the court grants Exxon’s Motion for Summary Judgment on EMC’s indemnity claim and also on EMC’s Rule 14(c) liability claim, as there are no facts indicating Exxon’s liability for the damages caused by the oil spill.

The court's rulings include: 1) denial of EMC’s Motion to Dismiss; 2) partial granting and denial of EMC’s Motion to Strike the Government’s Expert Witnesses; 3) partial granting and denial of EMC’s Motion to Strike Portions of Exxon’s Statement of Material Facts; and 4) granting of Exxon’s Motion for Summary Judgment.