Quantcast
Home / Top Legal News / Shipping companies’ argument against hefty fines sinks at 4th Circuit

Shipping companies’ argument against hefty fines sinks at 4th Circuit

The 4th U.S. Circuit Court of Appeals has affirmed $2.7 million in fines levied against a pair of shipping companies based in Greece in a decision that is expected to ripple through the maritime world.

“This case will be discussed throughout the shipping community and I’m sure attorneys for shipping companies will send out warnings on this case about what you should not do,” said S. Scott Bluestein, an admiralty and maritime lawyer in Charleston, South Carolina.

The Greek shipping companies in question, Oceanic Illsabe Ltd. and Oceanfleet Shipping Ltd. were slapped with hefty fines in connection with the illegal dumping of tons of oil sludge and polluted bilge water from a cargo ship ironically named Ocean Hope.

Two crewmembers, chief engineer Cassius Samson and second engineer Rustico Ignacio, both of the Philippines, were sentenced to a year in prison and nine months in prison, respectively, for their roles in the scheme.

Prosecutors said they regularly ordered lower-level crewmembers to pump oily wastewater into the ocean through a bypass hose, colloquially called a “magic pipe,” into the ocean. A third engineer on the ship sent his wife photos and videos of the magic pipe pumping sludge and she passed the evidence to the Coast Guard, which was waiting for the Ocean Hope when it arrived at the Port of Wilmington in July 2015.

Coast Guard investigators discovered that the ship’s oil record book “contained a plethora of inaccurate and false information,” which showed that Oceanic, the owner of Ocean Hope, and Oceanfleet, its managing operator, knew or should have known that the tainted bilge water was not being disposed of properly. The logs also showed that the ship hadn’t offloaded its sludge since September 2014, according to prosecutors.

“It’s amazing that any vessel calling in the United States would think that they’re going to get away with that,” said Wilmington maritime lawyer Geoffrey Losee of Rountree Losee. “If you’re running 10-plus ships, you know how much oil you use. It doesn’t disappear. It goes somewhere.”

Oceanic and Oceanfleet raised a long list of arguments on appeal, but primarily contended that the prosecution’s case was too flimsy to prove that they were criminally responsible under international maritime pollution laws for what happened aboard Ocean Hope.

Their New York-based attorney, George Chalos, declined to discuss the case and said his clients had not yet determined their next step.

Aside from asserting that the government’s evidence was insufficient, Chalos had argued, in part, that Oceanic and Oceanfleet could not be held vicariously liable for the misdeeds of Samson and Ignacio.

Circuit Judge Robert Bruce King rejected the argument, finding that the evidence showed that

“Oceanfleet received and reviewed the Ocean Hope’s oil record book on a weekly basis, and that the [companies] made recommendations to the engine department crewmembers on how to satisfy the Coast Guard’s inspection” in Wilmington.

Chalos also contended that the fines were excessive and that it was improper for the sentencing court to ban the fleet of ships that Oceanfleet and Oceanic amanage from all ports in the United States for a maximum of five years, or until the fines are paid. Oceanfleet manages more than 10 ships, according to the 4th Circuit’s opinion. The court concluded that the punishments were reasonable.

Addressing the excessive fine argument, King noted that Oceanic reported a nearly $5 million profit in 2015, when it was saving time and money by dumping tons of wastewater into the ocean.

As for the ban, King wrote that it was “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.”

Calling the decision “fair,” Bluestein, the Charleston maritime lawyer, said the ruling also “was sent up as a signal to other vessel operators to not try to deceive the Coast Guard or improperly discharge pollution into our oceans.”

The 50-page decision is United States v. Oceanic Illsabe Ltd. (Lawyers Weekly No. 001-080-18). An opinion digest and full text of the opinion is available at nclawyersweekly.com.

Follow Phillip Bantz on Twitter @NCLWBantz

Leave a Reply

Your email address will not be published. Required fields are marked *

*