CONTRACT INTERPRETATION | Legal Information Institute

CITGO Asphalt Refining Co. v. Frescati Shipping Co., Ltd.

Issues

Where a charter agreement contains a “safe berth” clause, which provides that the charterer will designate a safe port as the vessel’s destination, is the safe berth clause a warranty for the ship’s safety or a promise that the charterer will exercise due diligence in selecting a safe port?

Court below

United States Court of Appeals for the Third Circuit

This case arises out of an incident in 2004 when the Athos I, a ship that CITGO Asphalt Refining Co. (“CARCO”) had chartered, collided with an abandoned anchor near CARCO’s designated port. This case asks the Supreme Court to decide how to interpret the charter agreement’s “safe berth” clause, under which CARCO was obligated to designate a safe destination port for the Athos I. CARCO argues that, under the safe berth clause, it was obligated only to exercise due diligence in selecting a safe port. Frescati Shipping Co. (“Frescati”), the Athos I’s owner, counters that the clause is better interpreted as a warranty of safety that gives rise to strict liability. The outcome of this case will determine the contours of a charterer’s obligations under safe berth clauses and the degree to which industry actors can efficiently bargain to allocate risks before accidents occur.

Questions as Framed for the Court by the Parties

Whether under federal maritime law a safe berth clause in a voyage charter contract is a guarantee of a ship’s safety, as the U.S. Courts of Appeals for the 2nd and 3rd Circuits have held, or a duty of due diligence, as the U.S. Court of Appeals for the 5th Circuit has held.

CITGO Asphalt Refining Company (“CARCO”) chartered a single-hulled oil tanker, the M/T Athos I, from an intermediary of Frescati Shipping Co., Ltd. and Tsakos Shipping & Trading, S.A. (“Frescati”) to deliver crude oil from Venezuela to CARCO’s berth in New Jersey. Frescati Shipping Co., Ltd. v.

Written by

gshillington

cgrantknight

Edited by

bplastaras

Additional Resources

Jeanne Amy: SCOTUS Grants Cert to Resolve Circuit Split on Safe Berth Warranty: Guarantee of a Ship’s Safety or Due Diligence?, The National Law Review (May 29, 2019).
David Loh: Supreme Court Considers Safe Berth Warranty, JD Supra (June 26, 2019).

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M&G Polymers USA, LLC v. Tackett

Issues

In determining whether retiree health-care benefits provided under collective bargaining agreements should continue indefinitely, how should courts interpret collective bargaining agreements that are silent on the duration of retiree health-care benefits?

Court below

United States Court of Appeals for the Sixth Circuit

When interpreting a collective bargaining agreement that is silent on the duration of retiree health-care benefits, the Sixth Circuit inferred that the health-care benefits are vested (and therefore continue indefinitely). This approach, however, differs from the interpretative approach of other federal appellate courts. The Supreme Court will now resolve this circuit split. M&G Polymers USA, LLC argues that health-care benefits should terminate when the collective bargaining agreement ends unless there is a clear and explicit statement that such benefits should continue indefinitely. In opposition, several M&G retirees argue that, notwithstanding contractual silence, the parties’ intent that health-care benefits should continue indefinitely can be presumed. The resolution of this case will impact both the retention of retiree health-care benefits and the operational costs of American companies.

Questions as Framed for the Court by the Parties

Whether, when construing collective bargaining agreements in Labor Management Relations Act (LMRA) cases, courts should presume that silence concerning the duration of retiree health-care benefits means the parties intended those benefits to vest (and therefore continue indefinitely), as the Sixth Circuit holds; or should require a clear statement that health-care benefits are intended to survive the termination of the collective bargaining agreement, as the Third Circuit holds; or should require at least some language in the agreement that can reasonably support an interpretation that health-care benefits should continue indefinitely, as the Second and Seventh Circuits hold.
Whether, as the Sixth Circuit has held in conflict with the Second, Third, and Seventh Circuits, different rules of construction should apply when determining whether health-care benefits have vested in pure ERISA plans versus collectively bargained plans.

In 1992, Shell Chemical Company (“Shell”) purchased a West Virginia polyester plant from The Goodyear Tire & Rubber Company (“Goodyear”). See Tackett v. M & G Polymers USA, LLC, 733 F.3d 589, 593 (6th Cir. 2013).