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United States of America v. Egan Marine Corporation

August 9, 2011


The opinion of the court was delivered by: Hon. Harry D. Leinenweber


Before the Court are four motions, two of which are dispositive: (1) Defendant/Third Party Plaintiff Egan Marine Corporation's (hereinafter, "EMC") Motion to Dismiss; (2) EMC's Motion to Strike Plaintiff United States of America's (hereinafter, the "Government") Expert Witnesses; (3) Third-Party Defendants Exxon Mobil Corporation and ExxonMobil Oil Corporation's (hereinafter, "Exxon") Motion for Summary Judgment; and (4) EMC's Motion to Strike Portions of Exxon's Statement of Material Facts.


In 1996, Exxon and Clark Oil Trading Company ("Clark Oil") entered into a contact under which Exxon sold Clarified Slurry Oil ("CSO") to Clark Oil. EMC, which is based in Lemont, Illinois, transported CSO from Exxon's refinery in Joliet, Illinois, to Clark Oil. On January 18, 2005, EMC's tanker barge EMC-423 arrived at the Joliet refinery to accept a load of CSO for delivery to Clark Oil. Although Exxon intended to load the EMC-423 with CSO from Storage Tank 516, the cold winter weather caused the valve on this tank to malfunction. This forced Exxon to transfer the CSO from Tank 516 to Tank 515. A dispute exists between Exxon and EMC whether the characteristics of the CSO changed during this transfer. EMC argues that the CSO loaded onto the EMC-423 became contaminated with more than 10,000 gallons of gasoline, while Exxon contends that the cargo fell within the variances allowed in the CSO refining process. Under the Exxon--Clark Oil contract, SGS, an independent inspector, tested the quality and quantity of the CSO loaded onto the EMC-423.

After Exxon finished loading approximately 14,000 barrels of CSO on board the EMC-423 from Tank 515, it released the barge from its dock at 6:15 a.m. on January 19, 2005. Later that day, as the barge moved up the Chicago Sanitary Ship Canal propelled by the Lisa E motor vessel, its cargo of CSO exploded, which caused the barge to sink. Alexander Oliva ("Oliva"), a crew member on the Lisa E working on the EMC-423, died in the explosion. Thousands of gallons of CSO spilled into the canal in Chicago near the Cicero Avenue bridge, and the accident temporarily closed and impeded the canal. The Government alleges that Oliva improperly used a propane rosebud torch to thaw a broken pump on the EMC-423. The use of this torch, along with an allegedly improperly opened ball valve on barge's standpipe, caused vapors emanating from the CSO to ignite and explode. EMC denies that the use of a rosebud torch caused the explosion. Rather, it contends that the contaminated CSO Exxon loaded onto the barge caused the explosion.

The Government filed a five-count Complaint on June 2, 2008, followed by an Amended Complaint on July 24, 2008, in which it claims that EMC is the party responsible for the explosion and subsequent spill. Counts 1--3, brought under the Oil Pollution Act (the "OPA"), 33 U.S.C. § 2701, et seq., seek damages of more than $1.5 million for the costs to clean up the spill, disbursements for claims of third parties, and additional civil damages of up to $25,000 for each day of the spill cleanup. Count 4 seeks damages under the Rivers and Harbors Act, 33 U.S.C. §§ 403, 407, and Count 5 claims a violation of general maritime law.

The Government filed an indictment against EMC and the captain and pilot of the Lisa E and EMC-423, Dennis Michael Egan, in a parallel criminal prosecution on January 13, 2010. The criminal case is before Judge James B. Zagel. On September 10, 2008, EMC filed a three-count Third Party Complaint against Exxon for contribution, indemnity, and a maritime claim pursuant to Federal Rule of Civil Procedure 14(c), claiming that Exxon's negligence in loading contaminated CSO on the EMC-423 was the sole or partial cause of the explosion and spill. Upon the Government's request, the Court dismissed Count 5 of the Amended Complaint on March 30, 2009.

Now, EMC claims that the Government has deliberately violated discovery rules during this litigation in such a manner that deprives it of a fair trial, and moves to dismiss the remaining counts in the Amended Complaint pursuant to Federal Rule of Civil Procedure 37(b)(2). EMC also moves to strike three of the Government's experts because it alleges that in preparing their expert reports they improperly relied on the United States Coast Guard's Marine Casualty Incident Report (the "MCIR") for the explosion on the EMC-423 and subsequent oil spill. In addition, Exxon moves for summary judgment on all counts of EMC's Third Party Complaint. In defending itself against Exxon's Motion, EMC moves to strike numerous paragraphs in Exxon's Rule 56.1 Statement of Material Facts. The parties have fully briefed all these motions.


A. EMC's Motion to Dismiss

EMC moves to dismiss the Amended Complaint based on the Government's alleged discovery misconduct. Among the allegations that EMC makes, it claims that the Government (1) seized documents that EMC prepared for its defense in this case when it executed a search warrant on EMC's Lemont offices, and has failed to return important documents to EMC; (2) altered key physical evidence without EMC's knowledge and failed to provide adequate custody logs for physical evidence; (3) instructed two of its witnesses not to answer numerous questions at their depositions; (4) failed to turn over newly found discovery in a timely manner; (5) failed to turn over all discoverable documents that it had in its possession, which EMC learned about at depositions; (6) failed to disclose the extent of its contacts with Exxon; and (7) failed to disclose documents it had obtained and produced in the related criminal prosecution. EMC argues that the cumulative effect of the Government's violations warrants the extreme sanction of dismissal with prejudice of the Amended Complaint.

1. Legal Standard

Under Federal Rule of Civil Procedure 37(b)(2), the Court may sanction a party for failing "to obey an order to provide or permit discovery." FED. R. CIV. P. 37(b)(2)(A). While the Court possesses the inherent authority to sua sponte sanction a party, some form of court order - be it a written or an oral directive - is generally required for the Court to invoke Rule 37(b)(2). See, e.g., Halas v. Consumer Servs., Inc., 16 F.3d 161, 164 (7th Cir. 1994). Dismissal pursuant to Rule 37(b)(2) is harsh, and should be used on a limited basis. See Ladien v. Astrachan, 128 F.3d 1051, 1057 (7th Cir. 1997). Such dismissal is proper "where the offending party has displayed willfulness, bad faith, or fault, and it is a proportionate and otherwise appropriate sanction." Shaw-Reed v. Children's Outing Ass'n, No. 98-2202, 1999 WL 38588, at *2 (7th Cir. Jan. 27, 1999).

2. Merits of EMC's Motion

While EMC alleges a litany of discovery violations by the Government, not one of these allegations stem from the Government's failure to obey a court order. Fact discovery closed on November 26, 2010. ECF No. 138, Feb. 22, 2010. EMC did not file this Motion to Dismiss until December 15, 2010. It appears that EMC knew about many of the alleged discovery violations before discovery closed. For example, the first alleged infraction occurred on April 10, 2009, when federal agents from the United States Coast Guard and the Environmental Protection Agency executed a search warrant at EMC's offices as part of the criminal proceedings. EMC alleges that the agents seized material that related to its trial preparation in this case. Despite having concerns about this seizure, EMC never filed a motion to compel.

Likewise, EMC cites abuses by the Government during depositions of Government witnesses. EMC points to the depositions of Robert Reggio ("Reggio") and Eric Hann ("Hann"), which took place in September 2010, as examples of the Government's attorney improperly instructing its witnesses not to answer questions. It appears, however, that at the Reggio and Hann depositions EMC's counsel did not object to the Government attorney's instructions to the witnesses. Further, EMC did not file a motion to compel answers to the questions objected to during these depositions. EMC also argues that it learned of missing documents during the depositions of Reggio, Hann, and other Government witnesses. Again, it never filed a motion to compel production of these documents - some of which the Government appears to have produced. Regardless, EMC does not establish the necessary bad faith or willfulness, or that it was severely prejudiced, for these alleged discovery abuses to warrant dismissal.

The Court need not address separately every discovery abuse EMC alleges. While EMC argues that the Government engaged in deliberate obstruction, its failure to raise this issue during discovery dooms its motion. EMC cannot stockpile alleged improprieties until after discovery closes and then aggregate them for a dismissal motion. Again, dismissal under Rule 37(b)(2) is a harsh sanction that the Court should use sparingly. See Ladien, 128 F.3d at 1057. Contrary to EMC's argument, Magistrate Judge Susan E. Cox did not rule that this is not a discovery dispute. She simply stated that this motion may be dispositive. ECF No. 205, Dec. 22, 2010. EMC's motion does, in fact, raise a discovery dispute. The Court can reopen discovery, but EMC has not moved for this. Between the timing of this Motion after the close of discovery, and the fact that the allegations do not create the requisite level of prejudice to warrant dismissal, the Court denies EMC's Motion to Dismiss.

The Court notes that EMC may address some of the concerns it has regarding the Government's evidence prior to trial through motions in limine. At this point, however, the Court is not prepared to rule on the admissibility of evidence, or if the Government's alleged alteration of the standpipe by cleaning it warrants sanctions at trial, without complete arguments from the parties addressing these issues.

B. EMC's Motion to Strike Government's Expert Witnesses

EMC moves to strike Government experts Capt. Brian Hall ("Hall"), Dr. John DeHaan ("DeHaan"), and Peter Wakefield ("Wakefield"), alleging that these witnesses improperly included information from and relied on the EMC-423 accident MCIR to prepare their expert reports. After the accident, the Coast Guard, pursuant to 46 U.S.C. § 6301, assigned Commander Mark Hamilton to conduct an investigation into the incident. Commander Hamilton submitted the MCIR to the Coast Guard on March 24, 2008, and it became public on April 6, 2010. The MCIR is inadmissible as evidence in this case:

Notwithstanding any other provision of law, no part of a report of a marine casualty investigation conducted under section 6301 of this title, including findings of fact, opinions, recommendations, deliberations, or conclusions, shall be admissible as evidence or subject to discovery in any civil or administrative proceedings, other than an administrative proceeding initiated by the United States.

46 U.S.C. § 6308(a). The broad exclusion provided by § 6308 is not at odds with Federal Rule of Evidence 703, which allows an expert to use inadmissible facts or data to form the basis of his opinion, due to the "notwithstanding any other provision of law" clause. See Ward Hornblower Proescher, Limitation Proceedings, M/V Jack London Commodore, 1999 AMC 1612, 1615 (N.D. Cal. 1999).

Hall, DeHaan, and Wakefield each list the MCIR as a source used to formulate their opinion, and DeHaan also considered the Hall and Wakefield reports to prepare his report. Therefore, EMC argues, each of these witnesses has been so tainted by the MCIR that the Court should strike them from the Government's expert disclosures and prohibit each from testifying. See id. ("The [MCIR] is inadmissible as evidence for any purpose whatsoever pursuant to 46 U.S.C. § 6308. . . . [T]he parties' expert witnesses cannot use the [MCIR] as the basis for any of their opinions."); see also Eckstein Marine Serv., Inc. v. Crescent Marine Towing, Inc., No. 98-1467, 1999 U.S. Dist. LEXIS 1019, at *2 (E.D. La. Feb. 2, 1999). However, an expert report that simply cites or references an MCIR is not necessarily inadmissible, nor is the expert automatically barred from testifying. See Baker Hughes Oilfield Operations, Inc. v. Seabulk Tankers, Inc., No. 03-1230, 2004 U.S. Dist. LEXIS 6900, at *4 (E.D. La. Apr. 19, 2004). A conclusion that does not rely on and is not substantially based on the MCIR is admissible, as long as any references to the MCIR are stricken. See id.

1. Hall's Expert Report

Hall's report addresses the cause of the explosion on the EMC-423. He lists the MCIR as one of 28 sources he analyzed to develop his report. EMC argues that no other evidence other than the MCIR supports two presumptions in Hall's report. The first presumption is that a crew member used a propane torch on the EMC-423 to heat a cargo pump. The information about a rosebud torch connected to a propane tank being on the EMC-423 exists, however, in the deposition that Hall reviewed of Jason Hainline ("Hainline"), Process Technician at Exxon's Joliet refinery in January 2005. See Hainline Dep., 93:8--97:22, Oct. 20, 2010. United States Special Agent John Gamboa ("Gamboa") corroborates this testimony in his deposition. See Gamboa Dep., 170:24--171:20, Oct. 6, 2010.

Second, EMC argues that Hall based his opinion on the presumption in the MCIR that the EMC-423's heating system did not work. This allegedly forced Oliva to use a propane torch to heat the CSO in the barge's pump, as the CSO can solidify in cold weather. The Government has not produced any evidence that the heating system did not work in any other source that Hall analyzed.

It can be implied in Gamboa's deposition, however, when he states that using a rosebud torch on the pump "was a common occurrence . . . because it would freeze up in inclement weather." Id. at 171:18--20. Presumably, if the heating system worked, using the torch would have been unnecessary. Hall, however, states as a fact that the heating system did not work, which based on a review of the sources he reviewed exists only in the MCIR. Hall, therefore, cannot state as a fact that the system did not work. Therefore, the Court strikes the two references in his report that the heating system was inoperable at the time of the accident.

This presumption, however, is not material to Hall's opinion. Whether the system worked or not, Hall can use as a foundation for his opinion that Oliva used a rosebud torch on the pump. The inoperable heating system is only a potential reason why Oliva would use the torch. While Hall can speculate as to why Oliva used a rosebud torch on the pump, he cannot couch this ...

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