On November 5, 2019, the United States Supreme Court heard oral arguments in CITGO Asphalt Refining Co. v. Frescati Shipping Co., Ltd., a March 29, 2018 Third Circuit Court of Appeals decision. The issue before the Court is whether, under federal maritime law, a safe-berth clause in a voyage charter guarantees a ship’s safety, as the Second and Third Circuits have held, or simply a duty of due diligence, as the Fifth Circuit has held.
CITGO Asphalt Refining Co. v. Frescati Shipping Co., Ltd. Background
The case arose out of a casualty in the Delaware River in November 2004. A vessel had nearly completed its 1900-mile voyage when, roughly 900 feet from CITGO’s berth, it struck an abandoned anchor. The vessel’s hull was punctured and it spilled approximately 263,000 gallons of crude oil into the Delaware River. The Third Circuit affirmed a multi-million-dollar district court award against CITGO.
The federal Court Split
The Second and Third Circuit view is that, under a safe berth clause, the charterer bargains for the privilege of selecting the precise place for discharge of its cargo and the ship surrenders that privilege in return for the charterer’s acceptance of the risk of its choice. The Fifth Circuit view rejects the strict liability approach of the Second and Third Circuits and holds that a safe berth clause merely imposes upon the charterer a duty of due diligence to select a safe berth.
The Supreme Court will be called on to resolve this split in authority from federal circuit courts that all have major port cities.