3rd-party liability could affect oil spill litigation

As fishermen, property owners and beachfront businesses continue to file lawsuits against Amplify Energy Co. over an oil spill that will affect Orange County's coastline access for months, potential third party liability could complicate litigation. Questions remain as to who is responsible for controlling waterway traffic for anchored ships waiting to dock at the Port of Los Angeles and Long Beach, maritime experts say.

An underwater oil pipeline owned by Houston-based Amplify Energy located 5 miles off Huntington Beach ruptured last weekend, spilling an estimated 126,000 gallons of crude oil into the ocean. The rupture created a 13-square mile slick, which deposited oil onto beaches and into wetlands. The company's chief executive stated the rupture is believed to have been caused by a ship anchor that tore the pipeline and dragged it at least 105 feet.

Rotterdam Express, owned by Hapag Lloyd based in Germany, was initially a vessel of interest that was located near the pipeline at the time of the spill, and was investigated by government officials. Nils Haupt, spokesman for Hapag Lloyd, said the vessel is no longer under investigation by the U.S. Coast Guard, and has been released to continue its voyage to Mexico.

Third-party entities could be brought into litigation as direct defendants by plaintiffs or as cross-defendants by Amplify Energy, which may look to share liability for the spill. Much depends on which vessel's anchor might have caused the tear, but also whose directions ship operators followed while they waited to dock.

A worker shortage has caused a massive gridlock of cargo ships and tankers off the coast of Southern California for several weeks.

"Depending on how far offshore the ocean floor pipeline was hit, it is subject to state law when it occurred within three nautical miles from shore," according to maritime law expert John R. Hillsman of McGuinn, Hillsman & Palefsky in San Francisco. "Any incident that occurs further away is subject to the Outer continental shelf Lands Act. If a vessel dropped and dragged its anchor across the pipeline, you now have a maritime tort subject to federal maritime law, which can be pursued in state or federal courts. The incident has to occur on navigable waters and it must have the potential to impact maritime commerce."

Hillsman, who represents plaintiff families of those killed in the 2019 Labor Day boat fire off the Santa Barbara County coast, has not filed any actions against Amplify Energy Co. for the spill.

"Typically, pipeline operators issue notices to mariners to inform them where their pipelines are located," Hillsman explained. There are also navigating maps issued by the National Oceanic and Atmospheric Administration. All pipelines are marked on these charts, Hillsman said.

"You have to know where you are, and where to go. There is a ton of stuff out there in Southern California's ocean floors, like cables, pipelines and sewer systems, all of which are subject to notice to mariners," he said. "Even if I'm a foreign vessel called into Los Angeles, I can't just willy-nilly drop an anchor unless there's an emergency, or my ship has malfunctioned. I can't just do that, especially if I'm just waiting for an opportunity to get into Angels Gate to unload my ship."

Barry Cappello and Leila Noel of Santa Barbara based Cappello Noel filed a proposed federal class action in Santa Ana Wednesday on behalf of beachfront property owners Stephen and Kristin Samuelian. They want to hold Amplify Energy responsible for taking away property owners' access to fishing, surfing, kayaking and for potential diminution of property value. Samuelian v. Amplify Energy et al, 8;21-CV-1658 (C.D. Cal., filed Oct. 6, 2021).

Another proposed class action was filed Thursday by Kelly Weil of Cotchett, Pitre & McCarthy LLP on behalf of a surf company, seeking to hold Amplify Energy and San Pedro Bay Pipeline Co. accountable for strict liability for ultrahazardous activities, public/private nuisance, and lost profits under the federal Oil Pollution Act of 1990. Banzai Surf Co. LLC v. Amplify Energy Co. et al, 8:21-CV-1669 (C.D. Cal., filed Oct. 7, 2021).

"This is one more example of corporations harming people and the environment. We need to prioritize safety and the environment over profits," said Gary Praglin of Cotchett, Pitre & McCarthy.

Cappello, one of the lead plaintiffs' counsel in the federal class action against Plains All American Pipeline stemming from the 2015 Refugio Beach oil spill, contends that it doesn't matter what hit the pipeline. A third party vessel has nothing to do with his clients' claims, Cappello said.

"This case is very similar to the Plains oil spill. There was a break in the pipe and I don't care how it happened. Why was there an alarm? That alarm meant the pipe was broken, and warned them to shut it down, and they didn't," he said. "Whether it's Martians that dug up the pipe and broke it or something else, like a ship anchor, none of it gets Amplify off the hook. These companies go cheap, and don't spend money to maintain these pipelines. It's a 40-year-old pipeline that's seriously corroded, in which case you have potential for serious punitive damages."

Chief Executive Officer Martyn Willsher said Wednesday that Amplify Energy responded and reported the spill immediately and he was unaware of any spillage until 8:09 a.m. Saturday.

But a corrective action order issued by the U.S. Department of Transportation's pipeline safety division contends the control for Amplify Energy's subsidiary Beta Offshore received a low-pressure alarm on the San Pedro Bay Pipeline at 2:30 a.m., indicating a possible failure. The agency said the pipeline was shut down at 6 a.m. Saturday.

Deborah Sivas, an environmental professor at Stanford Law School, has argued in cases to move shipping lanes in accordance with feeding grounds for whales, which she said continuously shift around due to climate change.

"Ships generally have to stay within their lanes because this way you have reduced liability if there's some kind of vessel accident. I know ships are all backed up right now in Orange County, but where can they drop anchor outside the shipping lanes?" Sivas said. "It'd be weird to anchor inside a shipping lane. That's like parking your car on a freeway."

Sivas said Amplify Energy is on the hook for anything that spills outside its platforms. The federal and state government agencies could also pursue Amplify for cleanup, she said.

"There'll be fights between the company and the ship about negligence, apportionment of fault, all kinds of stuff that often go on in big tort fights," Sivas said.

Wylie Aitken, partner at Aitken Aitken and Cohen, said there are several potential theories that could be pursued against potential third parties, given the huge queue of tankers waiting to dock.

"The fact these ships were allowed to congregate and be in the area, the question then becomes: What directions were they taking, and from who? What were they told of the locations of various cable lines and pipes they could come in contact with?" Aitken said. "What government agencies might have been involved in terms of how these ships were being directed?"