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DMC/SandT/08/02
Central Hudson Gas & Electric Corp. v. The Tug M/V Scott Turecamo and Others
United States of America: United States District Court for the Southern District
of New York; William C. Conner; 496 F.Supp. 2d 331; July 25, 2007
SHIPPING: DAMAGE TO UNDERWATER PIPELINE: MEASURE OF DAMAGES: WHETHER PIPELINE
SHOULD BE REPLACED: WHETHER BY RECONFIGURING ITS DELIVERY SYSTEM, PLAINTIFF ‘MADE
WHOLE’: WHETHER DAMAGED PIPELINE SHOULD BE REMOVED
Summary
The United States District Court for the Southern District of New York held that
the correct measure of damages for a public utility company that had lost the
use an underwater pipeline as a result of a barge dragging an anchor across it,
was the cost to reconfigure its pipeline system, not the cost to replace or
repair the pipeline, in circumstances where, by reconfiguring its system after
the accident, the company had achieved a delivery system as good as or better
than it had prior to the accident. The Court also held that the public utility
company was comparatively negligent for not protecting its pipeline from known
hazards.
DMC Category Rating: Confirmed
Case note submitted by Michael P. Smith, an attorney with the
firm Blank Rome LLP, in New York. Blank
Rome are International Contributors to the website for the United States
Facts
Plaintiff, Central Hudson Gas & Electric Corp. ("Central
Hudson"), brought this action seeking damages for losses incurred when an
anchor dragged from a barge being pushed by a tug severed a natural gas pipeline
running across the Hudson River (the "incident"). In response, Central
Hudson reconfigured its pipeline system by building a regulator station on the
west side of the river in order to provide natural gas to its customers, thereby
eliminating the need for a pipeline across the river. Prior to the incident,
Central Hudson had been warned by underwater surveyors that the pipeline was
exposed because it was in part suspended above the river bottom. Central Hudson
was specifically warned that the pipeline was vulnerable to damage by ships’
anchors. Central Hudson sought damages to build a new pipeline across the river,
costs for removing the remnants of the damaged pipeline and other incidental
costs, for a total of US$2,153,931.00 plus prejudgment interest.
Defendants, the owners of the tug and the barge, conceded
liability but contended that Central Hudson had comparative [contributory] fault
for the damage to the pipeline because it failed to take steps to protect it
despite being warned of the pipeline’s vulnerability. In addition, defendants
argued that Central Hudson’s reconfiguration of its system made it as good as
or better than it was prior to the incident and therefore Central Hudson was
only entitled to its costs for reconfiguring the system. Defendants also
contended that Central Hudson was only entitled to costs for abandoning the
damaged pipeline because the only prudent environmental response to the incident
was to abandon the damaged pipeline, not remove it from the river.
Judgment
The Court found that Central Hudson had no need to replace or repair the
pipeline crossing the Hudson River because Central Hudson’s reconfiguration of
its system rendered it more reliable than it was prior to the incident. Also,
the Court concluded that abandonment of the damaged pipeline in place was
"the most environmentally-friendly course of action" because it would
result in the minimal amount of disturbance of pre-existing pollutants in the
sediment of the river bottom. As a result, the Court found that Central Hudson
was entitled to its costs for reconfiguring its system, abandoning the pipeline
in place and other incidental costs, for a total of US$650,471.75. However, the
Court concluded that Central Hudson was twenty-five percent comparatively
negligent for the damages to its pipeline because it took no steps to protect
the pipeline despite being warned of the potential hazard to the pipeline, and
its award of damages was correspondingly reduced to US$487,853.82 plus
prejudgment interest.
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