Vicarious Liability of Vessel Owner for Criminal Acts of Crew under APPS
U.S. v. Oceanic Illsabe Limited, 2018 WL 2089971 (3rd Cir. May 7, 2018)
Congress enacted the Act to Prevent Pollution From Ships (APPS) in 1980 to ratify and codify in the U.S. the 1978 London Protocol Relating to the International Convention for the Prevention of Pollution from Ships, 1973. The U.S. has aggressively prosecuted vessel owners under the Act even if the pollution occurred on the high seas or in a foreign port under the record keeping requirements of U.S. regulations pursuant to London Protocol and Convention. Vessels are required to keep accurate oil record books (ORB) for discharges into the oceans. Many bypass the oil water separator (so called magic pipes) and discharge oily bilge water resulting in pollution. When the engineer does not record the illegal discharge, the owner, captain and engineer are often prosecuted when the vessel enters U.S. internal waters for inaccurate record keeping. Many foreign vessel owners view this as an overreaching and bullying tactic. Yet, ironically, if the illegal discharge on the high seas or foreign port is accurately recorded, the U.S. has no jurisdiction to prosecute for pollution on the high seas or in a foreign port. The ORB is accurate, also. Indictments are brought against the vessel owner, captain and engineer not only for falsifying the record keeping requirement but also for conspiracy, making false statements to the Coast Guard, witness tampering and obstruction of justice.In this case the owner of the vessel, the managing corporation, master and chief engineer and assistant engineer were indicted on numerous counts. A jury returned a guilty verdict resulting in fines and as a special condition of probation the court imposed a ban on ships managed by ship owner, its parent, or any entity related to either of them by reason of shared or common ownership, management, or control from all ports in United States for maximum period of five years or until they paid their financial penalties.The vessel owner and manager maintained that the companies could not be held criminally liable for the criminal acts of the employees. The companies asserted that both had a “zero tolerance” policy regarding pollution. The owner and operator maintained that neither were the employers of the captain or engineer and that only the parent as employer could be held vicariously liable. In addition, they alleged the evidence was insufficient to sustain their vicarious criminal liability.As far as I know this is the first case under APPS in which defendant vessel owner and operator challenged their vicarious liability for the criminal acts of employees. The court held there was sufficient evidence to support that the owner and operator were both employers of the captain and engineer. It adopted the prior holdings of other panels of the U.S. Fourth Circuit Court of Appeals in United States v. Singh, 518 F.3d 236 (4th Cir. 2008) and United States v. Automated Med. Labs., Inc., 770 F.2d 399 (4th Cir. 1985). In U.S. v. Singh, the Fourth Circuit stated that “a corporation is liable for the criminal acts of its employees and agents done within the scope of their employment with the intent to benefit the corporation.” U.S. v. Singh, 518 F.3d at 249. In addition, “Corporate liability can also arise ‘if the employee or agent has acted for his own benefit as well as that of his employer.’” Id. at 250.To determine if the employees were in their scope of employment, the court stated that the standard for purposes of vicarious liability and includes ““acts on the corporation’s behalf in performance of the agent’s general line of work.” Though the acts of the employees were contrary to corporate policy, is of no consequence and does not absolve the corporations from criminal liability. It didn’t help that one of the corporate defendants received copies of the ORB weekly and was on notice of multiple oddities.The corporate defendants also asserted that only the captain is liable to maintain the ORB based on a decision of the U.S. Fifth Circuit Court of Appeals which in U.S. Fafalios, (817 F.3d 155 [5th Cir. 2016]) In that case the Fifth Circuit held that the charges against the engineer for failing to maintain the ORB had to be dismissed because under the regulations only the master of the vessel is responsible "to maintain" that document. In this case as it was asserted the master did not know that the ORB was not properly maintained, the captain and thus the corporations could not be charged with this violation. The court dismissed this “refined legal argument” because the corporation could be charged with the employees aiding and abetting charge for causing the master to fail to maintain the ORB.The corporate defendants also challenged the fines and penalties especially the ban on any vessels or related corporate vessels from doing business in the U.S. In response the panel stated: "It was therefore reasonable for the court to conclude that, if its special condition of probation did not extend to other special-purpose entities managed by Oceanfleet, those entities would continue to operate freely in the ports of the United States. The special condition of probation was thus entirely reasonable and its imposition was not an abuse of the court’s discretion.”
