Latest Case: CITGO Asphalt Refining Co. v. Frescati Shipping Co. (Contracts)

Local Control: Massachusetts Law Provides Stronger Protection Against Sexual Harassment than Federal Law

JOANNA L. GROSSMAN

SMU Dedman School of Law professor Joanna L. Grossman comments on a recent decision by a federal district court applying Massachusetts law that demonstrates the power of tough state antidiscrimination laws. Grossman describes the facts of the case and the differences between Massachusetts and federal law and explains why robust state laws have the power to hold institutions liable when they delegate authority to those who abuse it.

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CITGO Asphalt Refining Co. v. Frescati Shipping Co.

Docket: 18-565

Opinion Date: March 30, 2020

Judge: Sonia Sotomayor

Areas of Law: Admiralty & Maritime Law, Contracts, Transportation Law

CARCO sub-chartered an oil tanker from tanker operator Star, which had chartered it from Frescati. During the tanker’s journey, an abandoned ship anchor punctured the tanker’s hull, causing 264,000 gallons of heavy crude oil to spill into the Delaware River. The 1990 Oil Pollution Act, 33 U.S.C. 2702(a), required Frescati, the vessel’s owner, to cover the cleanup costs. Frescati’s liability was limited to $45 million. The federal Oil Spill Liability Trust Fund reimbursed Frescati for an additional $88 million in cleanup costs. Frescati and the government sued, claiming that CARCO had breached a clause in the subcharter agreement that obligated CARCO to select a berth that would allow the vessel to come and go “always safely afloat,” and that obligation amounted to a warranty regarding the safety of the selected berth. Finding that Frescati was an implied third-party beneficiary of the safe-berth clause, the Third Circuit held that the clause embodied an express warranty of safety. The Supreme Court affirmed. The safe-berth clause's unqualified plain language establishes an absolute warranty of safety. That the clause does not expressly invoke the term “warranty” does not alter the charterer’s duty, which is not subject to qualifications or conditions. Under contract law, an obligor is strictly liable for a breach of contract, regardless of fault or diligence. While parties are free to contract for limitations on liability, these parties did not. A limitation on the charterer’s liability for losses due to “perils of the seas,” does not apply nor does a clause requiring Star to obtain oil-pollution insurance relieve CARCO of liability.