Reliance on Government Error in Specifications in Dredging Contract Does Not Exculpate Party from Liability

Reliance on Government Error in Specifications in Dredging Contract Does Not Exculpate Party from Liability

Government Also Liable, Exculpatory Clause in Contract Not Applicable

Contango Operators, Inc. v. Weeks Marine, Inc. 2015 U.S. App. LEXIS 8857, No. 14-20265. (5th Cir. May 28, 2015)

By: Emily Hall

Edited By: Brooke E. Michiels

Weeks Marine (“Weeks”) and the United States appealed a judgment holding them 40% and 60% liable, respectively, for damages suffered by Contango Operators (“Contango”) during a dredging accident.In November 2007, Contango obtained a permit from the Army Corps of Engineers (“the Corps”) to build a submarine pipeline that would cross the Corps-maintained Atchafalaya Channel. The Corps’ Regulatory Division failed to forward this information to the division responsible for providing this kind of information to engineers who prepare dredging contracts. Once completed in April 2008, Contango reported the pipeline’s location to other government agencies, but not to the Corps.In August 2009, the Corps awarded Weeks a contract to dredge the Atchafalaya Channel. The project specifications (“specs”) did not list the Contango pipeline; however, by December 2009 the National Oceanic and Atmospheric Administration (“NOAA”) published updated charts that included the Contango pipeline and the Coast Guard announced its location in a local notice to mariners. Weeks relied solely on the specs from the Corps and did not consult any other materials to locate pipelines. In February 2010, Weeks’ dredging barge struck the pipeline, rupturing it and causing losses.On appeal, Weeks claimed that it was not liable because it did not breach its duty of care by relying solely on the specs as that is the common practice in the dredging industry. It further claimed that the mistake in the specs was unforeseeable. Weeks relied on a prior Fifth Circuit case, Michigan Wisconsin Pipeline Co. v. Williams-McWilliams Co. (551 F.2d 945), which it claimed held that a Corps dredging contractor that justifiably relied on specs provided by the Corps is not liable for resulting damages. However, the Court found that Weeks misinterpreted the Michigan Wisconsin case, and stated that Michigan Wisconsin governs a dredger’s claim against the government, not a third party’s claim against a dredger. The Court further stated that as there was only a minimal burden on Weeks to check for new pipelines, it was still liable. Weeks may have followed the custom of the dredging industry, but a common practice can still be negligent.The Government’s only claim on appeal was that due to an exculpatory clause in its contract with Weeks, it was not liable. The Court found that the clause stated that the permit or its issuance did not provide a basis for liability for damages as a result of current or future activities undertaken in the public interest; it did not suggest the Government was protected from existing sources of liability independent of the permit. The Government invited the Court to review certain materials it claimed clarified the scope of the clause; but, the Court declined to do so, stating that the reasons to review them were unconvincing in light of the permit’s clear language. The Government breached its duty of care under general maritime law by failing to include the Contango pipeline in its specs or notify Weeks of the omission. Congress waived sovereign immunity in cases alleging breaches of that duty, and the Government has no power to escape that duty. The Court made clear that the damage here was foreseeable consequence of dredging even when the dredger is not aware of the pipeline. This liability was independent from the permit and was not protected by the exculpatory clause.The dissenting opinion only disagreed with the majority’s interpretation of the exculpatory clause. It found that the only reason the Government had any duty under admiralty law regarding the pipeline was because the pipeline was in navigable waters. Further, the exculpatory clause stated that by allowing the pipeline to exist in navigable waters, the Government did not assume any liability for damages to the pipeline as a result of current or future activities undertaken by, or on behalf of, the United States.