18-1563-cv
Starr Indem. & Liab. Co. v. Water Quality Ins. Syndicate


                                   UNITED STATES COURT OF APPEALS
                                      FOR THE SECOND CIRCUIT


                                          SUMMARY ORDER
Rulings by summary order do not have precedential effect. Citation to a summary order filed
on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate
Procedure 32.1 and this Court’s Local Rule 32.1.1. When citing a summary order in a
document filed with this Court, a party must cite either the Federal Appendix or an
electronic database (with the notation “summary order”). A party citing a summary order
must serve a copy of it on any party not represented by counsel.

       At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 29th day of May, two thousand nineteen.

PRESENT:            JOHN M. WALKER, JR.,
                    JOSÉ A. CABRANES,
                    PETER W. HALL,
                                 Circuit Judges.



STARR INDEMNITY & LIABILITY COMPANY, AS
SUBROGOR OF ALL RIGHTS OF GENESIS MARINE,
LLC,

                              Plaintiff-Appellant,                       18-1563-cv

                              v.

WATER QUALITY INSURANCE SYNDICATE,

                              Defendant-Appellee.



FOR PLAINTIFF-APPELLANT:                                       GUERRIC S.D.L. RUSSELL, Nicoletti
                                                               Hornig & Sweeney, New York, NY.
                                                           1
FOR DEFENDANT-APPELLEE:                                      JOHN M. WOODS (Corey R. Greenwald, on
                                                             the brief), Clyde & Co US LLP, New York,
                                                             NY.

       Appeal from an April 25, 2018 judgment of the United States District Court for the
Southern District of New York (Paul A. Engelmayer, Judge).

     UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the District Court be and hereby is
AFFIRMED.

        Plaintiff-Appellant Starr Indemnity & Liability Company (“Starr”) appeals from a final
judgment entered in favor of Defendant-Appellee Water Quality Insurance Syndicate (“WQIS”)
following a three-day bench trial.

         In April 2014, two oil barges owned and operated by Genesis Marine LLC (“Genesis”) ran
aground in the Mississippi River. Genesis designated T&T Salvage LLC (“T&T”) to oversee
lightering and salvage operations for the grounded barges. The barges were successfully lightered
and refloated without incident.

        Genesis was insured under several insurance policies, including Starr’s “Hull & Machinery”
and “Protection & Indemnity” policies, and WQIS’s pollution liability policy. Both Starr and WQIS
disclaimed coverage for the costs incurred by T&T during the lightering and salvage operations.
Eventually, however, Starr agreed to pay the T&T costs in exchange for the assignment of all of
Genesis’s claims against WQIS. Starr then brought this subrogation action against WQIS to recover
the T&T costs. The only issue at trial was which insurer is liable for the T&T costs.

         In a thorough and well-reasoned forty-six-page Opinion and Order, Judge Engelmayer
concluded that WQIS is not liable to Starr for the T&T costs because two necessary conditions for
coverage under the WQIS pollution liability policy had not been satisfied: (1) the barges’ grounding
never posed a “substantial threat of discharge” under the Oil Pollution Act of 1990 (“OPA 90”); and
(2) the lightering and salvage costs were not incurred to mitigate a perceived threat of discharge.

        We assume the parties’ familiarity with the remaining underlying facts, the procedural history
of the case, and the issues on appeal.

                                                    I.

        “We review findings of fact after a bench trial for clear error and accompanying conclusions
of law de novo.” Sleepy’s LLC v. Select Comfort Wholesale Corp., 909 F.3d 519, 527 (2d Cir. 2018). “Mixed
questions of law and fact are reviewed either de novo or under the clearly erroneous standard,

                                                    2
depending on whether the question is predominantly legal or predominantly factual.” Krist v.
Kolombos Rest. Inc., 688 F.3d 89, 95 (2d Cir. 2012) (internal quotation marks and brackets omitted).
“Where there are two permissible views of the evidence, the factfinder’s choice between them
cannot be clearly erroneous.” Id. (internal quotation marks omitted). As trier of fact, the district
court is entitled “to believe some parts and disbelieve other parts of the testimony of any given
witness.” Id. (internal quotation mark omitted). Further, “[w]e are not allowed to second-guess the
bench-trial court’s credibility assessments.” Id.; see also United States v. Murphy, 703 F.3d 182, 189 (2d
Cir. 2012) (“When . . . credibility determinations are at issue, we give particularly strong deference to
a district court finding.”).

                                                   II.

        Starr principally disputes the District Court’s finding that the barges’ grounding never posed
a substantial threat of discharge. Starr maintains that the United States Coast Guard believed the
barges posed a substantial threat of discharge, and that any finding to the contrary is thereby
erroneous. We identify no error—much less clear error—in the District Court’s conclusions that the
Coast Guard made no such “substantial threat” determination and that the grounded barges never
presented a substantial threat of oil discharge.

A. The Coast Guard never determined that the barges presented a substantial threat of
discharge.

        Starr relies almost exclusively on the testimony of Chief Petty Officer Heather Norman
(“Officer Norman”) as evidence of the Coast Guard’s alleged determination that the barges posed a
substantial threat of discharge. In a written affidavit, Officer Norman opined that “the barges
presented a substantial threat of oil discharge,” App. 919 ¶ 34, and that the Coast Guard
“considered [there to be] a substantial threat of discharge so long as the barges remained grounded
with residual oil onboard,” id. at 913–14 ¶ 16.1 According to Starr, the District Court was not



    1
      Pursuant to 5 U.S.C. § 301, the head of an executive department may prescribe regulations that
place limits on how employees can disseminate information gained in the performance of their
official duties. These regulations are generally referred to as Tuohy regulations. See generally United
States ex rel. Tuohy v. Ragen, 340 U.S. 462 (1951); see also 6 C.F.R. §§ 5.41–5.49 (Department of
Homeland Security Tuohy regulations). In the present case, the Office of the General Counsel of the
Department of Homeland Security would not allow the Coast Guard to produce a witness for
deposition; instead, the Coast Guard would only respond in writing to fifteen questions from each
party—with each party to identify ten “direct examination” questions and, after seeing its adversary’s
ten direct questions, five further “cross examination” questions. The parties consented to this
procedure.


                                                    3
entitled to reject or otherwise discredit Officer Norman’s testimony; instead, the District Court was
required to accord Chevron deference to Officer Norman’s testimony because it constitutes the Coast
Guard’s expert interpretation of its own regulations.2 We disagree.

        Officer Norman’s testimony is not entitled to Chevron deference simply by virtue of the fact
that Officer Norman is a Coast Guard officer. See United States v. Mead Corp., 533 U.S. 218, 226–27
(2001) (holding that an agency’s interpretation of a statutory provision is entitled to Chevron
deference when it is promulgated in a form that carries “the force of law,” such as a regulation
promulgated pursuant to notice-and-comment rulemaking). The District Court was entitled to assess
the credibility of her testimony as it would that of any other witness testimony.

         The District Court provided several reasons to discredit Officer Norman’s testimony that
the Coast Guard determined that the grounded barges presented a substantial threat of discharge.
First, due to the strictures imposed by the Coast Guard on Officer Norman’s deposition, neither
party’s counsel could probe the factual basis of Officer Norman’s testimony or subject her
testimony to robust cross and re-direct examination. Second, Officer Norman’s testimony was
uncorroborated and, in fact, largely contradicted by the trial record and by other credible witness
testimony. Indeed, after surveying the documentary evidence and assessing the credibility of all the
witnesses, the District Court concluded that the “trial record is devoid of any contemporaneous
documentation of . . . an expressed concern [about discharge] by the Coast Guard.” SPA 22.

        On appeal, Starr identifies several items of evidence that allegedly corroborate Officer
Norman’s testimony. But the District Court considered this “corroborating” evidence, and
nevertheless concluded that “the Coast Guard did not assess, and its actions were not consistent
with or prompted by a real-time assessment, that the barges posed a substantial threat of the
discharge of oil.” Id. at 18. As we have previously stated, “[w]here there are two permissible views of
the evidence, the factfinder’s choice between them cannot be clearly erroneous.” Krist, 688 F.3d at
95. Accordingly, we find no clear error in the District Court’s credibility assessment of Officer
Norman’s testimony or in its broader conclusion that the Coast Guard did not believe the barges
presented a substantial threat of discharge. Finally, because the District Court did not err in
concluding that there was no “substantial threat” determination by the Coast Guard, it could not
have erred in failing to accord deference—Chevron or otherwise—to a non-existent determination.




    2
      See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 844 (1984) (“We have long
recognized that considerable weight should be accorded to an executive department’s construction
of a statutory scheme it is entrusted to administer, and the principle of deference to administrative
interpretations.”). Chevron has no applicability here because the agency witness was not interpreting a
statute but making an evidentiary fact statement (which the District Court rejected).


                                                   4
B. The grounded barges never posed a substantial threat of discharge.

         Starr contends that even if the Coast Guard made no such official determination, the barges’
grounding still presented a substantial threat of discharge such that Genesis would have incurred
OPA 90 liability had it not acted voluntarily to salvage the barges. This argument turns, of course,
on whether the barges in fact posed a substantial threat of discharge, which is a predominantly
factual inquiry. Again, we find no error in Judge Engelmayer’s careful assessment of the trial record
or in his ultimate conclusion that the barges’ grounding never presented a substantial threat of
discharge.

                                                 III.

        The fact that the barges never posed a substantial threat of discharge does not entirely
dispose of all of Starr’s subrogation claims against WQIS. As the District Court recognized, under
Subsection A(7)(a) of the WQIS policy,3 WQIS could be liable for some of the T&T costs if Genesis
incurred these expenses to mitigate or prevent a threat of discharge that it mistakenly viewed as
substantial. In its Opinion and Order, the District Court unequivocally disclaimed this possibility:
“Genesis and its agents did not lighter the barges . . . to mitigate even a perceived threat of
discharge” SPA 42.

         On appeal, Starr relies principally on the testimony of T&T Manager Deeann Ebanks
(“Ebanks”) as evidence that the T&T costs were incurred to prevent or mitigate a perceived threat
of discharge. Ebanks, when asked whether the main purpose of lightering the barges was to
“remove the threat of pollution,” responded: “Yes. To remove the hydrocarbons . . . [t]he OPA 90
cargo. To get the cargo off.” App. 1113. Ebanks’ statement is susceptible to more than one plausible
interpretation and does not preclude the possibility that the OPA 90 cargo was removed in order to
lighten the barges and dislodge them from the strand. Accordingly, we will not disturb the District
Court’s construction of Ebanks’ testimony or its conclusion that Genesis and its agents did not
lighter the barges to mitigate a perceived threat of discharge.



   3
       Subsection A(7)(a) of the WQIS policy provides coverage for:

                Costs and expenses incurred by [Genesis] for firefighting, salvage or
                removal of wreck or debris of any Vessel(s) or cargo carried aboard
                any such Vessel(s), to the extent that such actions were undertaken
                for the purpose of stopping a discharge or release, or mitigating or
                preventing a substantial threat of a discharge under OPA . . . .

   App. 72 (emphasis omitted).


                                                  5
                                                 IV.

        In a last-ditch effort to salvage its case, Starr attempts to argue that there were two
concurrent causes of loss—the barges’ grounding and the need to mitigate a threat of pollution—
and that the expenses attributable to each of these causes must be allocated accordingly. Starr is
fundamentally mistaken. There is only one cause of loss in this case: the barges’ grounding. Any
consequent need to mitigate pollution is just that—a potential consequence of the loss, not a cause.
This argument therefore fails.

                                          CONCLUSION

        We have reviewed all of the remaining arguments raised by Starr on appeal and find them to
be without merit. For the foregoing reasons, we AFFIRM the April 25, 2018 judgment of the
District Court.


                                                       FOR THE COURT:
                                                       Catherine O’Hagan Wolfe, Clerk of Court




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