ELR Citation: ELR 20986
No(s). 94-7436 (2d Cir. May 5, 1995)

The court holds that the owner of a barge from which oil spilled into the Hudson River in New York is entitled to indemnification from the responsible tug and its owner for a $3,500 civil penalty assessed under Federal Water Pollution Control Act (FWPCA) §311(b)(6), but is not entitled to indemnification for a fine paid to a state agency. The court first holds that the district court did not err in dismissing the barge owner's indemnification claim related to the fine paid to the state agency. Because the tug owner was not afforded an opportunity to defend the state's claim against settling companies or to participate in the barge owner's settlement with the state agency, the barge owner was required to establish the amount of the tug owner's liability for the spill to avoid forfeiting its indemnity claim. The barge owner failed to prove that the state agency set $225,000 as the amount to be paid for two oil spills, and failed to prove how the $225,000 was divided between the two spills, which had substantially different disastrous results. The court then holds that the barge owner is entitled to indemnification for the $3,500 federal penalty that resulted from the September spill. The tug owner's conceded negligence make it responsible for the damage the barge owner sustained, in this instance the civil penalty imposed under FWPCA §311(b)(6). Former Admiralty Rule 59, recodified in 1921 as Admiralty Rule 56, and subsequently codified in substance as Fed. R. Civ. P. 14(c), furnishes procedural support for the exercise of this concept through interpleader. Had Congress intended to eliminate this traditional rule of equitable indemnity in cases involving federal penalties for oil spillage, it could have done so. Instead, it strengthened the traditional rule by specifically providing for indemnity. The word "liabilities" in FWPCA §311(h) is broad enough to encompass the civil penalties that are imposed under §311(b)(6). Moreover, the absence of §311(f)(1)'s third-party liability defense in §311(b)(6) spillage cases does no more than ensure that the penalty will be paid regardless of fault and regardless of whether the government incurs cleanup costs.

Counsel for Plaintiff
Raymond A. Connell
Connell, Losquadro & Zerbo
17 State St., New York NY 10004
(212) 344-7400

Counsel for Defendants
Stephen J. Buckley
Kenny & Stearns
26 Broadway, New York NY 10004
(212) 422-6111

Before Van Graafeiland, McLaughlin, and Leval, JJ.