November

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A S S O C I AT I O N
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INC
NOVEMBER
2013
ASK PAT V. MARTIN
ATHOS 1.
COURT OF APPEALS REVERSES DISTRICT
COURT AND REMANDS FOR FURTHER
FACTUAL FINDINGS. OWNER ENTITLED TO
BENEFIT OF VOYAGE CHARTER SAFE BERTH
WARRANTY. “APPROACH TO BERTH” DEFINED
The Circuit Court of Appeals recently handed down an
opinion concerning the Athos I which substantially reversed
and vacated the District Court Opinion. The court remanded
the case back to the District Court for further factual findings. As the oil tanker M/T Athos I approached the CITCO Terminal
dock in Paulsboro, NJ, to discharge a cargo of Venezuelan
crude oil an abandoned ship anchor lay hidden on the bottom
of the Delaware River squarely within the Athos I’s path and
only 900 feet away from the berth. Although dozens of ships
had docked since the anchor was deposited in the River, none
had reported encountering it. The Athos I struck the anchor,
which punctured the ship’s hull and caused approximately
263,000 gallons of crude oil to spill into the River. The cleanup
following the casualty was successful and expensive. At the
time of the casualty the vessel had turned from the main
channel and was proceeding through a government anchorage
area which the terminal did not own, maintain or control.
At the time of the casualty the Athos I was operating
in the Star Tanker Pool and had been voyage chartered to
CITGO. The subsequent litigation involved the Owner Frescati,
the manager, Tsakos Shipping, CARCO (including CITGO,
the terminal operator and various affiliates) and the U.S.
Government. Claims between the Owner and Star were subject
to arbitration and not part of the court proceedings.
The Court of Appeals Opinion is 57 pages and deals with
some non-maritime issues not particularly relevant to maritime
law and practice. This article will discuss the court’s view of the
safe named port/ berth warranty, the definition of “approach”
whether the Owner is entitled to the benefit of the voyage
charter warranty.
In regard to the contractual safe berth warranty, the District
Court determined that Frescati (and the Government as a
subrogee) could not recover on their contractual claims. First,
Frescati was not a party to the agreement that contained the
warranty between CARCO and Star Tankers, and was not an
intended beneficiary of that agreement. Furthermore, even
if Frescati could claim the protection of the warranty, it was
only a promise by CARCO to exercise due diligence and not an
unconditional guarantee: moreover, sufficient diligence existed
here. In any event, the warranty was excused because CARCO
specified the port ahead of the Athos I’s arrival, placing the
burden on the Athos I’s captain to accept it as safe or reject it
under what is called the “named port exception.”
For reasons elaborated below, the Court of Appeals
disagreed with all three of these rulings. Instead it held
that the Athos I – and by extension, its owner, Frescati was
an implied beneficiary of CARCO’ s safe berth warranty. It
concluded as well that the safe berth warranty is an express
assurance of safety, and that the named port exception to that
warranty does not apply to hazards that are unknown to the
parties and not reasonably foreseeable.
THE CASUALTY At the heart of this dispute is the Athos I, a
single-hulled oil tanker measuring 748 feet long and more than
105 feet wide. It was owned by Frescati at all relevant times.
At the time of the accident, however, the Athos I had been time
chartered into a tanker pool assembled by Star Tankers, who is
not a party to this consolidated action. It was voyage chartered
to CITGO to transport a cargo of heavy crude oil from
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BROKERS
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Venezuela to CARCO’s refinery in Paulsboro, New Jersey.
CARCO’s Paulsboro facility sits on a jetty on the New Jersey
side of the Delaware River. Federal anchorage Number Nine
(“the Anchorage” or “Anchorage Number Nine”) separates the
River channel from CARCO’s port waters. The Anchorage’s
border runs diagonally to CARCO’s waterfront, ranging between
130 and 670 feet from the face of the ship dock. Customarily,
a tanker of the Athos I’s size would come up the River, make
a starboard (right) 180° turn into the Anchorage and would
then be pushed sideways by tugs (i.e. parallel parked) into
CARCO’s pier. The Athos I was following this procedure when
at 9:02 p.m., it suddenly listed to the port side, and oil became
visible in the water. It was later determined that an abandoned
anchor had punched two holes in the Athos I’s hull, causing (as
already noted) roughly 263,000 gallons of crude oil to spill into
the River. At the time of the casualty, the Athos I was only 900
feet from CARCO’s berth, approximately halfway through the
Anchorage.
THE LITIGATION Frescati sued in both contract and tort.
C ontract C laim The first issue was whether Frescati was
entitled to the benefit of the safe port warranty contained in
the voyage charter as it was not a party to that contract.
The Circuit Court held that a safe berth warranty in a voyage
charter, to which the Owner was not a party, benefits the vessel
and its owner as they are endowed with the benefit of the
personal performance that the port is safe.
The next issue addressed by the Court was the scope of the
warranty. Here the Court adopted the traditional formulation
that a port to be safe “the particular chartered vessel can
proceed to it, use it, and depart from it without, in the absence
of abnormal weather or other occurrences , being exposed
to dangers which cannot be avoided by good navigation and
seamanship.” CARCO conceded that this contract warranty
covered the Anchorage.
This warranty is absolute and not governed by concepts
of due diligence. It applies only to the particular vessel on a
particular voyage. In this case, there was no specific finding in
the district court opinion about the draft of the vessel and the
depth of water and the height of the anchor above the sea bed
at the time of transit. Thus, the case was remanded to make
these crucial factual findings.
Next CARCO argued that the named port exception was
applicable. This rule states that when a port is named in the
charter and the master proceeds there, the owner is deemed
to have accepted the conditions that exist there. The Court
rejected this argument on the basis that the exception applies
only to known or apparent risks. Since nobody knew about the
submerged anchor, the Owner did not accept the risk of the
ATHOS 1 hitting it.
The Court concluded that the hazard of the submerged
anchor was not the sort contemplated by the exception. As
explained above, the purpose of the named port exception is
to “relieve” the charterer of purpose of the named port so long
as those conditions were reasonably foreseeable. Here, the
unknown presence of the anchor could not be discovered and
therefore, the exception does not apply.
T ort C laim Should its claims regarding CARCO’s contractual
obligations have failed, Frescati also brought claims in tort
against CARCO as wharf owner and terminal operator for
negligence. It argued that CARCO owed a duty of care to the
vessel to maintain a safe approach to its dock.
CONTINUED ON BACK PAGE >>
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Bill Osmer, Jason Klopfer, Jesper Mehlsen Bab,
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ASBA NEWS
NOVEMBER 2013
CALENDAR OF EVENTS
ASK PAT V. MARTIN - CONTINUED
NOVEMBER 18, 2013
HOLIDAY SOCIAL - WINDFALL, NYC
While CARCO has a duty of due diligence to maintain a safe approach
to its terminal, a court must first determine the geographic scope of that JANUARY 23, 2014
duty.
AGENCY LUNCH & ANNUAL MEETING
Frescati argues that the scope should be inferred as a matter of
HARVARD CLUB, NYC
custom and practice, and CARCO counters that the approach should be a
function of the terminal’s exertion of control over the area that the vessel JANUARY 25, 2014
must transverse to reach the dock. The court rejected this reasoning. It
80 YEARS OF SERVICE - DINNER DANCE
held that CARCO’s duty extended to the entire approach to the dock.
MARITIME PARC - JERSEY CITY, NJ
What is an approach should be given its plain meaning in the
maritime context: when a ship transitions from its general voyage to a
(HOTEL - SOHO GRAND- NYC)
final direct path to its destination, it is on an approach. This is the most
logical construction, and it comports with those cases suggesting that an
approach should be determined from actual practice. It is analogous to
“an airplane on final approach or a golf ball approaching the green. Both
examples capture the intuitive meaning of the term as the beginning of a
final linear path to a fixed point.”
CONCLUSION Although remand is appropriate because the District Court
failed to set out separate findings of the fact and conclusions of law as
required by Federal Rule of Civil Procedure 52(a))1), our legal conclusions
also make it necessary to remand for factual findings.
The Circuit Court concluded that the Athos I, and Frescati as its
owner, were beneficiaries of CARCO’ s contractual safe berth warranty.
This was an express assurance that CARCO’s port would be safe for the
Athos I within the scope of its invitation—that is, drafting 37 feet or less.
Therefore, on remand it will need to be determined whether this amount
of clearance was actually provided. This analysis may require inquiries
into the arriving draft of the Athos I and, if the vessel was drawing more
than the agreed-upon depth of 37 feet, the depth and positioning of the
anchor.
CARCO’s assertion of the named port exception is unavailing. Even if
it were eligible on the type of notice given to the Athos I, its crew did not
have an opportunity to accept a hazard (the anchor) that was unknown
to the parties prior to the accident , and the exception is inapplicable.
Further factual analysis of the tort claim is only necessary if the court
finds that CARCO has satisfied its contractual obligations to provide a
safe port under the terms of the charter.
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