Eliezer et al v. Caribbean Petroleum Corporation et al

Filing 663

MEMORANDUM AND ORDER. The Court GRANTS admiralty jurisdiction over the limitation of liability proceedings in the instant case. Because a number of motions remain outstanding, the parties are directed to brief the Court, no later than July 20, 2012, on whether and how the remaining motions before the Court may be disposed of in view of this Opinion. Signed by Judge Francisco A. Besosa on 06/21/2012. (brc)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
ELIEZER CRUZ-APONTE, et al.,
Plaintiffs,
v.

CIVIL NO. 09-2092 (FAB)

CARIBBEAN PETROLEUM CORPORATION,
et al.,
Defendants.

MEMORANDUM AND ORDER
BESOSA, District Judge.
Before the Court are the parties’ briefs regarding whether the
Court has subject matter jurisdiction to hear and adjudicate the
complaint filed by the Cape Bruny parties (collectively, “Cape
Bruny”) for exoneration from or limitation of liability in the
current proceedings.
I.

Procedural History
This class action litigation arises out of an explosion that

occurred on October 23, 2009 at the Gulf Oil Facility in Bayamon,
Puerto Rico.

The most recent amended complaint was filed on

January 7, 2010.

(Docket No. 81.)

thirty-four defendants.

Id.

The complaint identifies

On August 13, 2010, defendants

Caribbean Petroleum Corporation (“CPC”) and Caribbean Petroleum
Refining

LP

(“CPR”)

(jointly

referred

to

as

the

“CAPECO

defendants”) notified this Court of their filing of a voluntary
bankruptcy petition in the United States Bankruptcy Court for the

Civil No. 09-2092 (FAB)
District of Delaware.

2

motion

to

litigation
defendants.

stay
in

the

light

(Docket No. 494.)
proceedings
of

the

against

bankruptcy

The Court granted a
all

parties

filing

by

the

to

the

CAPECO

(Docket No. 533.)

On May 31, 2011, Cape Bruny moved this Court for a partial
lifting of the stay in order to allow the limitation of liability
proceedings to go forward.

(Docket No. 583.)

Cape Bruny alleged

that according to a stipulation in which the Cape Bruny and the
debtors entered, which was approved by the bankruptcy court, this
Court “would be free to take any action it considered appropriate
to resolve the subject matter jurisdiction” question broached by a
number of parties in this action.

(Docket No. 583 at 4-5.)

On

June 3, 2011, the Court granted the motion, and modified the stay
in order to allow this Court “to determine whether it has subject
matter jurisdiction to hear and adjudicate the complaint filed by
the Cape Bruny parties for exoneration from or limitation of
liability” and “to consider and rule on the motion to dismiss filed
by the Total Petroleum Corporation.”

(Docket No. 585.)

The Court

ordered all parties to file briefs on the issues to be considered.
Id.
On July 5, 2011, Cape Bruny filed a memorandum in law in
support of this Court’s admiralty jurisdiction.

(Docket No. 586.)

The Claimants also filed a brief in support of this Court’s
jurisdiction.

(Docket No. 587.)

Total Petroleum Puerto Rico

Civil No. 09-2092 (FAB)

3

Corporation (“TPPRC”) filed a brief arguing that this Court lacks
subject matter jurisdiction.

(Docket No. 588.)

Defendant Harbor

Fuel Service, Inc. a/k/a Harbor Bunkering Corporation (“HBC”) filed
a motion joining TPPRC’s brief regarding this Court’s lack of
subject matter jurisdiction.
Claimants

filed

jurisdiction.

another

(Docket No. 589.)

brief

in

(Docket No. 590.)

support

On July 6, 2011,
of

this

Court’s

On July 7, 2011, Claimant RLI

Insurance Company also filed a brief in support of the Court’s
jurisdiction.

(Docket No. 591.)

On July 19, 2011, the Claimants filed a response in compliance
with this Court’s orders, adopting by reference the motion filed by
Cape Bruny.

(Docket No. 595.)

replies on the same date.
2011, Cape

Bruny

Nos. 598 & 599.)

Cape Bruny and TPPRC filed their

(Docket Nos. 596 & 597.)

and TPPRC

both

filed

On July 26,

sur-replies.

(Docket

The Court limits this motion to addressing

whether or not federal admiralty jurisdiction exists.
II.

Factual Background
The following facts are taken from the third amended class

action complaint filed on January 7, 2010.

(Docket No. 81.)

On

October 23, 2009, an explosion and fire occurred at the Gulf Oil
Facility located in Bayamon, Puerto Rico.

The explosion occurred

during the cargo unloading process of 278,000 gallons of highly
flammable fuel at the marine dock by the vessel M/T Cape Bruny.
The complaint alleges that the M/T Cape Bruny pumped too much fuel

Civil No. 09-2092 (FAB)

4

into the pipelines that connect the marine dock to the storage
tanks in the oil facility.

The Gulf Oil Facility’s computer

monitoring systems were faulty and the two employees working at the
time of the explosion were not able to monitor the mechanical gauge
attached to the storage tank.

As a result of the overpumping of

fuel and the lack of oversight of the operation, the storage tanks
overflowed without detection, and the fuel vaporized and spread
across the Gulf Oil Facility.

Once the vaporized fuel found a

source of ignition, an explosion resulted, affecting the oil
facility and a large part of the metro San Juan area.
III. Applicable Legal Analysis
The parties do not dispute that the applicable legal analysis
turns on whether or not this Court has admiralty jurisdiction over
this matter. Nor do the parties disagree on the applicable Supreme
Court case law.

The historical evolution of the Supreme Court’s

test for determining whether admiralty tort jurisdiction exists in
federal courts warrants a short discussion.

The traditional test

for admiralty jurisdiction, pursuant to 28 U.S.C. § 1333, was
simply based on locality - in other words, the test “asked only
whether the tort occurred on navigable waters.” Jerome B. Grubart,
Inc. v. Great Lakes Dredge & Dock Co., 513 U.S. 527, 531 (1995).
In 1948, however, Congress enacted the Extension of Admiralty
Jurisdiction Act, which extended admiralty jurisdiction “over ‘all
cases’ where the injury was caused by a ship or other vessel on

Civil No. 09-2092 (FAB)

5

navigable water, even if such injury occurred on land.”

Id. at

532.
There have been four major Supreme Court cases that have
qualified the jurisdictional rule established by the Congressional
act.

First, in Executive Jet Aviation, Inc. v. City of Cleveland,

Ohio, the Supreme Court held that the locality test “is not of
itself sufficient” to confer admiralty tort jurisdiction - it is
also required that “the wrong bear a significant relationship to
traditional maritime activity.”

409 U.S. 249, 267 (1st Cir. 1972)

(finding that admiralty jurisdiction did not exist where the crash
of an aircraft on navigable waters bore no significant relationship
to a traditional maritime activity.) Next, in Foremost Ins. Co. v.
Richardson, the Supreme Court held that a collision involving two
pleasure boats on navigable waters “properly states a claim within
the admiralty jurisdiction of the federal courts” because “of the
need for uniform rules governing navigation, the potential impact
on maritime commerce when two vessels collide on navigable waters,
and the uncertainty and confusion that would necessarily accompany
a jurisdictional test tied to the commercial use of a given boat.”
457 U.S. 668, 677 (1982) (finding that the negligent operation of
a non-commercial vessel on navigable waters has a sufficient nexus
to traditional maritime activity to sustain admiralty jurisdiction
in federal court.)

The third Supreme Court decision in our

analysis, Sisson v. Ruby, dealt with a fire on a noncommercial

Civil No. 09-2092 (FAB)

6

vessel at a marina that damaged neighboring vessels and the marina.
The Sisson Court held that admiralty jurisdiction existed because
(1) the “general character” of the incident was of the kind that
could

cause

a

activity” and

“potential

disruption

to

commercial

maritime

because (2) “the storage and maintenance of a boat

at a marina on navigable waters has a substantial relationship to
a ‘traditional maritime activity’”.

497 U.S. 358, 363-365 (1990).

The fourth and final Supreme Court case in our inquiry, Jerome
v. Grubart, Inc. v. Great Lakes Dredge & Dock Co., elucidated the
admiralty jurisdiction test that we apply to this case.

In

Grubart, the Supreme Court found admiralty jurisdiction to exist
where water from the Chicago River poured into a freight tunnel and
flooded buildings in downtown Chicago.

513 U.S. 527 (1995).

The

court held that both parts of the “connection” test established by
Sisson were satisfied:
“as

damage

by

a

first, the incident, generally described

vessel

in

navigable

water

to

an

underwater

structure”, was of the sort to have a “potentially disruptive
impact on maritime commerce”; and second, the “general character of
the activity giving rise to the incident [here, the repair or
maintenance work on a navigable waterway performed by a vessel]
shows a substantial relationship to traditional maritime activity.”
513 U.S. 527, 539-540 (1995).

Civil No. 09-2092 (FAB)
IV.

7

Discussion
In light of the elucidated case law on the subject, the Court

now addresses whether the facts of this case meet the Supreme Court
test to invoke admiralty jurisdiction.
A.

Locality Test
None of the parties appears to contest seriously the fact

that the locality test is met.

See Docket No. 588 at 6 (TPPRC’s

motion claiming that “admiralty jurisdiction in this case is
lacking

.

.

.

because

the

‘connection

test’

is

not

met.”)

Nonetheless, the Court briefly addresses the locality test. As the
Grubart court noted, “[a] court applying the location test must
determine whether the tort occurred on navigable water or whether
injury suffered on land was caused by a vessel on navigable water.”
513 U.S. at 534.

Here, the alleged tortious act is the negligent

discharge of cargo (fuel) from a vessel (M/T Cape Bruny) to a
storage facility.

The M/T Cape Bruny, a chemical/oil products

tanker vessel (Docket No. 81 at 12), was docked in San Juan harbor,
which is indisputably a navigable body of water.

If the M/T Cape

Bruny caused the explosion, it must have done so by negligently
discharging fuel into the pipelines that connected the marine dock
to the storage tanks.

Thus, if the M/T Cape Bruny tanker vessel

committed a tort, it would have done so while on navigable waters,
satisfying the locality test.

Civil No. 09-2092 (FAB)
B.

8

Connection Test
The parties dispute whether or not the facts of the case

satisfy the “connection test” articulated in Grubart.

The Grubart

Court interpreted the Sisson connection test to require that
(1) “the incident has ‘a potentially disruptive impact on maritime
commerce,’” and (2) that “‘the general character’ of the ‘activity
giving rise to the incident’ shows a ‘substantial relationship to
traditional maritime activity.’”
497 U.S. at 363-365, n. 2).

513 U.S. at 534 (quoting Sisson,

Defendant TPPRC alleges that the

incident, which it describes in general terms, is not “within a
class of incidents that pose more than a fanciful risk of impact on
maritime commerce.”

(Docket No. 597 at 4.)

TPPRC is correct that

the appropriate inquiry is not whether the incident did, in fact,
cause disruption to maritime commerce, but instead, whether the
“general

features”

commercial

of

activity.”

the

incident

Grubart,

513

were
U.S.

“likely
at

to

538.

disrupt
TPPRC’s

description of the incident as “an explosion that occurred at an
in-land storage tank”, however, is far too general.
No. 588 at 6.)

(Docket

Alternatively, the Cape Bruny parties describe the

incident as “the discharge of cargo from a vessel to shore.”
(Docket No. 596 at 3.)
The Court finds that the “general features” of the
incident

-

damage

caused

to

an

in-land

facility

during

the

discharge of fuel from a vessel to land - does indeed “satisfy the

Civil No. 09-2092 (FAB)
requirement
activity.”

of

9

potential

disruption

See Sisson, 497 U.S. at 363.

to

commercial

maritime

TPPRC maintains that the

relevant inquiry for the Court is not “the actual effects the
incident in question may have had on maritime commerce, but rather,
on whether in such general terms the incident can be seen within a
class of incidents that pose more than a fanciful risk of impact on
maritime commerce.”

(Docket No. 597 at 4 (emphasis original).)

While TPPRC is correct that the Supreme Court’s inquiries have
indeed been based on the potential disruption on maritime commerce,
this is not to say that the Court should ignore the actual effects
the incident in question caused.

See Grubart, 513 U.S. at 539 (in

finding that damage by a vessel to an underwater structure has a
“potentially disruptive impact on maritime commerce”, the Supreme
Court also noted that “[a]s it actually turned out in this suit,
damaging

a

structure

beneath

the

riverbed

could

lead

to

a

disruption in the water course itself . . . [and] could lead to
restrictions

on

the

required repairs.”)

navigational

use

of

the

waterway

during

Indeed, Cape Bruny alleges, and defendants do

not dispute, that “[t]he vessel was forced to stop its unloading
operations when the storage tanks exploded” and that “[a]fter the
fire the U.S. Coast Guard halted use of the Capeco marine terminal
facility for several weeks, diverting gasoline supplies for Puerto
Rico to ports on the South Coast of the Island.”

(Docket No. 587

at 8; Docket No. 586 at 12 (emphasis original).)

The Court finds

Civil No. 09-2092 (FAB)

10

that the potential disruptive effect of an explosion allegedly
caused by the offloading of fuel from a vessel to an onshore
storage facility on maritime commerce is certainly more than a
“fanciful risk”, because the incident is likely to affect both the
vessel’s discharge operations and the ability of the marina to
accommodate other vessels like it in the future.
Having satisfied the first prong of the “connection
test”, the Court now analyzes “whether the general character of the
activity

giving

rise

to

the

incident

shows

relationship to traditional maritime activity.”
at 539.

a

substantial

Grubart, 513 U.S.

The activity at issue here, the discharge of cargo (fuel)

from a vessel to land, is certainly “substantially related” to a
traditional maritime activity.

As Cape Bruny alleges, tanker

vessels like the M/T Cape Bruny are regularly used to transport
cargo like chemical/oil products in international commerce, and the
safe and efficient off-loading of the cargo is a primary objective
of the vessel’s undertaking. See, e.g., Walker v. Pacific Maritime
Assoc., No. C07-3100, 2008 WL 1734757, at *1 (N.D. Cal. Apr. 14,
2008) (“the unloading of cargo is substantially related to a
traditional maritime activity.”); Poret ex rel. Alyson, Seth Poret
v. Louisiana Lift & Equipment, Inc., No. 02-3642, 2003 WL 1338726,
at *2 (E.D.La. Mar. 12, 2003); Gross v. Tonomo Marine, No. 02-1317,
2004 WL 2093457, at *7 (W.D. Pa. May 25, 2004).

For the reasons

stated, the Court finds that the second prong of the “connection

Civil No. 09-2092 (FAB)
test” has

been

11

satisfied.

Thus,

this

Court

finds

admiralty

GRANTS

admiralty

jurisdiction to exist.
CONCLUSION
For

the

foregoing

reasons,

the

Court

jurisdiction over the limitation of liability proceedings in the
instant case.

Because a number of motions remain outstanding, the

parties are directed to brief the Court, no later than July 20,
2012, on whether and how the remaining motions before the Court may
be disposed of in view of this Opinion.
IT IS SO ORDERED.
San Juan, Puerto Rico, June 21, 2012.
s/ Francisco A. Besosa
FRANCISCO A. BESOSA
UNITED STATES DISTRICT JUDGE