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Oil Spill Damages Remanded Due to Sloppy Analysis

By Brett Snider, Esq. on July 22, 2013 | Last updated on March 21, 2019

If anyone can remember law school, did you have a paper that was sent back to you with the damning message "REDO" or "See Me" in fat red ink on the title page?

Well, the Fifth Circuit's decision in U.S. v. Citgo is pretty much their version of that, spanking the Western District of Louisiana court for failing to do the admittedly complicated analysis required to calculate damages from a 2006 Citgo oil spill.

Evidently, even federal courts can be called to task for doing lazy legal analysis.

2006 Oil Spill

The spill in question occurred in Louisiana in 2006, and approximately 756,600 gallons were spilled into the Louisiana waterways, according to Lake Charles’ KPLC-TV.

The district court awarded the U.S. $6 million for Citgo’s violations of the Clean Water Act, but the United States appealed, feeling that this number wasn’t high enough in light of Citgo’s negligence.

Citgo’s Counterclaim in Jurisdiction

Citgo didn’t deny liability for the spill in their appeal to the Fifth Circuit — the damage was caused by failure to properly maintain wastewater containers during storms — but they did deny the district court’s jurisdiction to hear the case under the Clean Water Act.

In the Act’s relevant provision, it prevents federal claims from proceeding while state authorities are “diligently prosecuting” claims arising from the same incident, and Citgo argued that Louisiana’s claims against it were a sufficient bar to subject matter jurisdiction under the Clean Water Act.

The Fifth Circuit disagreed, finding that at the time of the U.S. filing their complaint, Louisiana administrative action against Citgo was “pending” and not being pursued diligently enough to bar this claim.

Calculating Civil Damages

Having dismissed Citgo’s counterclaim, the Citgo court turned to the U.S.’s claim that the district court had failed to calculate the damages properly under the Clean Water Act’s provision (33 U.S.C. Section 1321(b)(8)).

There are two high burdens that faced the Fifth Circuit in telling the district court to redo its analysis:

  1. Reviews of damage calculations must follow a “clear error” standard.
  2. Weighing penalty factors is a “highly discretionary” function of the district court.

Despite these standards which are very deferential to the district court, the Fifth Circuit found that the penalty of $6 million was erroneously calculated, in part because of the ambiguity of one particular factor.

Economic Benefit Left Uncalculated

Among the many factors considered in the Clean Water Act penalty scheme, economic benefit to the polluter (i.e. Citgo) was considered to be left mostly uncalculated by the Fifth Circuit, which was a mistake.

Turning to their sister Circuits, the Fifth found that one could calculate the economic benefit of a polluter’s mistake by finding:

The Fifth Circuit wasn’t asking for accordance with these other Circuits or even a Herculean effort in calculating this amount, just something more than the pathetic range that the district court determined: somewhere between $719.00 and $83 million.

Because this factor is integral to a finding for an award, it can’t be done properly without at least some estimation, so the Citgo court sent it back to the district court with a big “DO OVER” stamp.

Bottom Line

The Fifth Circuit wasn’t particularly pleased to have oil spilled all over so close to their home town, but it was even more disappointed with the district court’s laziness in not calculating the damages properly.

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