United States Supreme Court Decision on Safe Berth ClausePosted on Tuesday, March 31st, 2020 | Posted in Resources & Publications, Site Blog
Recently, the United States Supreme Court issued its long-anticipated decision in CITGO Asphalt Refining Co. v. Frescati Shipping Co., Ltd.(“ATHOS I”). In a 7-2 majority opinion, the Court affirmed the judgment of the 3rd U.S. Circuit Court of Appeals, holding a safe berth clause in a voyage charter contract is a guarantee of a ship’s safety. Justice Sotomayor wrote, “The charterer’s assurance of a safe berth is the entire root of the safe-berth clause, and crucially, it is not subject to qualifications or conditions.”
The case dates to November 26, 2004, when the single-hulled ATHOS struck an unchartered abandoned anchor and disgorged heavy crude oil into the Delaware River. The case was tried twice, to two different judges in the EDPA, and appealed several times by both parties. Certiorari was eventually granted by the Supreme Court and the case was argued on November 5, 2019, nearly 15 years after the incident.
The issue before the Supreme Court was, “Whether under federal maritime law a safe berth clause in a voyage charter contract is a guarantee of a ship’s safety, as the Third Circuit and the Second Circuit have held, or a duty of due diligence, as the Fifth Circuit has held?”
In ruling that a charterer warrants the safety of the berth, the Supreme Court resolved the split between the Second/Third and Fifth Circuits by following the view prevailing in the Second Circuit, and rejected the Fifth Circuit’s approach that the safe-berth clause imposes an obligation of due diligence upon the charterer in selecting a safe berth.
The Court primarily relied on the “unqualified” language of the safe-berth clause in the charter party and concluded that “the charterer’s duty is absolute: The charterer must designate a berth that is ‘safe’ and that allows the vessel to come and go ‘always’ safely afloat.” According to the majority, “that absolute duty amounts to a warranty of safety.”
In a dissenting opinion, Justice Thomas, joined by Justice Alito, would have held that the plain language of the safe-berth clause did not contain a warranty of safety. The dissenting justices would have remanded the case for fact finding on whether the parties contracted with knowledge of an established industry custom and usage reflecting their intent to impose a warranty.
The majority and dissenting opinions recognize that the Supreme Court’s decision applies to the particular charter party at issue and that contracting parties can negotiate different agreements.
MAIN TAKEAWAYS FROM THE COURT’S OPINION
- If the parties wish to adopt a due-diligence standard with regard to the safe-port/berth obligation in the charter party, they must state so explicitly (as many charter party forms do). Conversely, if the charter party includes a safe-berth clause without more, it shall be interpreted to impose an absolute warranty of safety on the charterer. In the words of the Court, “Charterers remain free to contract around unqualified language that would otherwise establish a warranty of safety, by expressly limiting the extent of their obligations or liability.”
The Supreme Court’s decision resolves a decades long split between the Fifth and Second Circuits, and it will cause a reassessment of responsibility for the safety of berths within in the Fifth Circuit, which encompasses Louisiana, Texas, and Mississippi.
CHAFFE MCCALL’S ROLE
Chaffe McCall and Palmer Biezup were trial attorneys, and Sidley Austin were Supreme Court counsel, on behalf of CITGO.
FOR MORE INFORMATION
Please contact us if you would like more information about this case, or if we can be of service in matters raising similar issues. For additional information, please contact:
Derek A. Walker
The full text of the decision can be found here: supremecourt.gov/opinions/19pdf/18-565_3d93.pdf
Derek A. Walker