JANE TRICHE MILAZZO, District Judge.
Before the Court are Defendants Black Elk Energy Offshore Operations LLC and Grand Isle Shipyard's Motion to Dismiss Counts 1 through 11 (Docs. 133, 142); Defendant Don Moss's Motion to Dismiss Counts 9, 10, 11 (Doc. 129); Defendants Grand Isle Shipyard and Curtis Dantin's Motion to Dismiss Counts 4 through 11 (Docs. 138, 146); Defendant Wood Group PSN, Inc.'s Motion to Dismiss Counts 4 through 9 (Doc. 114); and Defendant Wood Group PSN, Inc.'s Motion to Dismiss Count 12 (Doc. 121). For the following reasons, Defendants Black Elk Energy Offshore Operations LLC and Grand Isle Shipyard's Motion to Dismiss Counts 1 through 11 is DENIED (Docs. 133, 142); Defendant Don Moss's Motion to Dismiss Counts 9, 10, 11 is GRANTED (Doc. 129); Defendants Grand Isle Shipyard and Curtis Dantin's Motion to Dismiss Counts 4 through 11 is GRANTED (Docs. 138, 146); Defendant Wood Group PSN, Inc.'s Motion to Dismiss Counts 4 through 9 is GRANTED (Doc. 114); Defendant Black Elk's Motion to Dismiss Counts 4 through 8, as partially adopted from the Wood Group's Doc. 114, is DENIED (Doc. 136); and Defendant Wood Group PSN, Inc.'s Motion to Dismiss Count 12 is DENIED (Doc. 121). The charges in Counts 4 through 11 of the Second Superseding Indictment against Don Moss, Curtis Dantin, the Wood Group PSN, Inc., and Grand Isle Shipyards are DISMISSED.
The charges in the Second Superseding Indictment ("Indictment") arise out of the welding accident and explosion that occurred on an offshore oil platform called West Delta Block 32 Platform E (the "Platform") on November 16, 2012. According to the Indictment, Black Elk Energy Offshore Operations, LLC ("BEE") owned and operated the Platform, located eight nautical miles off the coast of Louisiana. At some point prior to November 2012, BEE ceased oil production on the Platform in order to initiate repairs and other construction projects. One project involved adding a divert valve to the Lease Automatic Custody Transfer ("LACT") unit.
BEE contracted with an engineering firm, represented on the Platform by Defendant Don Moss, to design plans for some of the construction projects. The construction was to be physically completed by crews from Defendant Grand Isle Shipyards, Inc. ("GIS"), supervised on the Platform by Defendant Curtis Dantin. BEE also contracted with Defendant Wood Group PSN, Inc. ("Wood Group") to supply manpower for the Platform. The Wood Group's operators, including the Person-In-Charge ("PIC") Defendant Christopher Srubar, were to support the construction efforts through crane operations and the issuance of necessary permits.
The construction projects required hot work, including welding, grinding, and other activities that may produce a spark. The Outer Continental Shelfs Land Act ("OCSLA") provides certain regulations for performing hot work on an oil platform. Specifically, the regulations state that welding cannot be undertaken outside of a designated area until (1) "[t]he welding supervisor or designated person in charge advises in writing that it is safe to weld;" and (2) the lessee or operator and "the designated person in charge inspect the work area and areas below it for potential fire and explosion hazards."
On the days leading up to the explosion, Srubar performed the required inspections and issued hot work permits for construction work on the Platform. Beginning on November 10, however, Srubar delegated this duty to another Wood Group operator. On Srubar's instruction, this inexperienced operator issued hot work permits on November 10 through 16 by copying the one that Srubar had created on November 9. Neither Srubar nor the operator conducted a pre-work inspection or designated a fire watch on these days.
During construction, it was discovered that the prefabricated piping needed to complete the upgrade of the LACT unit was missing. In order to save time, a BEE manager decided that the piping should be rebuilt instead. This required the construction crews to weld near the LACT unit. No inspection was performed in the LACT area prior to the welding that occurred on November 16, the day of the explosion. On that date, the Wood Group operator copied the previous day's hot work permit, which did not mention the LACT area. In addition, neither the piping nor the tanks in the LACT area were rendered inert prior to the start of construction in the area.
On November 16, Dantin was watching as the crew began to cut the sump line piping leading to the Wet Oil Tank in the LACT area. After the sump line piping was cut, liquid spilled from the piping. Dantin and the crew decided that the liquid was water and continued cutting and welding in the area. Dantin left the area thereafter and returned to his office. At approximately 9:00 a.m., as the workers attempted to weld the cut piping, hydrocarbon vapers escaped from the Wet Oil Tank and were ignited. The ignition set off a series of explosions, killing three workers and injuring others.
The Government alleges that the Defendants are at fault for the explosion and the resulting deaths and pollution. Counts 1 through 3 of the Indictment charge BEE and GIS with involuntary manslaughter. Counts 4 through 8 charge Wood Group, Srubar, BEE, Dantin, and GIS with failing to conduct pre-work inspections on each day from November 11 through 15. Count 9 charges Wood Group, Srubar, Moss, BEE, Dantin, and GIS with failing to conduct a pre-work inspection on November 16. Count 10 charges Moss, BEE, Dantin, and GIS with failing to ensure that the piping and tanks in the LACT area had been rendered inert and were safe to weld near before hot work commenced. Count 11 charges Moss, BEE, Dantin, and GIS with failing to obtain written authorization before performing hot work in the LACT area. Finally, Count 12 charges Wood Group, Srubar, Moss, BEE, Dantin, and GIS with violations of the Clean Water Act.
The Defendants have filed several motions seeking the dismissal of all or part of the charges in the Second Superseding Indictment for failure to state an offense.
Pursuant to Federal Rule of Criminal Procedure 12(b), a party may challenge an indictment for failing to state an offense. "A party may raise by pretrial motion any defense, objection, or request that the court can determine without a trial on the merits."
Several of the defendants have filed motions to dismiss the charges against them. This Court will address the specificities of each motion, as well as those arguments that were repeated by multiple defendants. Because several of the contractors have set forth similar arguments, this Court will first address those arguments together.
Defendants Don Moss, the Wood Group, GIS, and Curtis Dantin (the "Contractor-Defendants") each argue that the statutes under which they have been charged in Counts 4 through 11 do not apply to them, as independent contractors, and thus, should be dismissed.
"[I]n any case concerning the interpretation of a statute the `starting point' must be the language of the statute itself."
This Court will first outline the regulations that the Contractor-Defendants are charged with violating in Counts 4 through 11. Counts 4 through 9 each charge some variation of Defendants with a violation of the OCSLA regulation 30 C.F.R. § 250.113(c)(1)(ii) on each day from November 11 through November 16, the day of the explosion.
Count 10 charges Moss, Dantin, and GIS with violation of 30 C.F.R. § 250.113(c)(3), which states that:
Count 11 charges Moss, Dantin, and GIS with violations of 30 C.F.R. § 250.113(c)(1)(i), which states that:
Although the Contractor-Defendants are charged in different and varying counts of the Indictment, they make similar arguments seeking dismissal of those counts. They argue that they cannot be held criminally liable for violating these regulations because the regulations do not apply to independent contractors. The Government relies on three separate statutes in rebutting this argument: 30 C.F.R. § 250.105, 30 C.F.R. § 250.146, and § 1350 itself. This Court will address each of the Government's arguments in turn.
As evidenced above, each of the OCSLA regulations was drafted in the second person and speak to "You." The Contractor-Defendants allege that they do not fit the statutory definition of "You." In 30 C.F.R. § 250.105, "You" is defined as "a lessee, the owner or holder of operating rights, a designated operator or agent of the lessee(s), a pipeline right-of-way holder, or a State lessee granted a right-of-use and easement." The Indictment clearly alleges that BEE, and not the Contractor-Defendants, was the owner, lessee, and holder of operating rights on the Platform at the time of the explosion. In response, the Government argues that the Contractor-Defendants are included in the term "You" as agents working on behalf of BEE as defined under "traditional agency principles".
In further response, the Government directs this Court to a different OCSLA regulation that it believes supports criminally liability against the Contractor-Defendants. The Government argues that the Contractor-Defendants can be held liable through 30 C.F.R. § 250.146(c), which states that:
The Government contends that pursuant to this statute the Contractor-Defendants can be held liable as the persons "actually performing the activity" because they were acting as agents of Black Elk on the platform during the construction process leading up to the explosion.
The Contractor-Defendants argue that § 250.146 merely requires that the "person actually performing the activity" comply with the OCSLA regulations, and that the regulation does not intend to speak to who is liable. In interpreting a regulation, the Fifth Circuit has held that the court should first look to its plain language.
The Contractor-Defendants convincingly support this point with the legislative history of § 250.146. In the proposed rules promulgated in 1998, the predecessor of BSEE stated the following in reference to the section that would become § 250.146:
This legislative history confirms that § 250.146(c) was intended to speak to compliance, rather than liability. The fact that a contractor must comply with OCSLA regulations does not also mean that it may be held criminally liable for their violation. The issue here is not whether a contactor can act with impunity on the rig but whether it can be held criminally liable for it. Indeed, if Congress had intended to treat contractors as jointly and severally liable for violation of the regulations, there is no reason that it would not have been expressly included contractors in the definition of "You." In fact, the 1998 proposed revisions originally defined "You" as "the Lessee, right-of-way holder, or person acting on behalf of a lessee or a right-of-way holder."
The Government's reading of § 250.146 asks this Court to infer that because contractors must comply with OCSLA regulations, as § 250.146 clearly states, then they must also be held criminally liable for their violation; however, such an inference goes beyond the plain language of the regulation. "[W]here, as here, a regulatory violation carries criminal penalties, the regulation must be strictly construed and cannot be enlarged by analogy or expanded beyond the plain meaning of the words used."
Finally, the Government relies on 43 U.S.C. § 1350(c) to assess criminal liability on the Contractor-Defendants. Section 1350(c) of OCSLA states that:
The Government argues that the term "any person" indicates Congress's intention not to exclude any class of persons from criminal liability. It fails to acknowledge, however, that a regulation cannot be violated by one to which it does not apply. It is axiomatic that a regulation must apply to a person before he or she can be held liable for violating it. The regulations at issue here apply to "You," and, as previously discussed, the Contractor-Defendants are not included in the regulatory definition of "You." Although they are tasked with complying with the regulations, they are not part of the specific and finite group to which the regulations were intended to apply. Therefore, the Government's reliance on 43 U.S.C. § 1350 is likewise unconvincing.
This Court holds that the plain language of OCSLA and its regulations do not support a criminal charge against the Contractor-Defendants. In addition, this Court finds that such a holding comports with the traditional understanding of the OCSLA regulations. Oil and gas operations on the outer continental shelf ("OCS") typically begin with a lessee who contracts with the United States government for the right to develop resources on the OCS.
And indeed, by all accounts contractors were treated differently than lessees or operators under OCSLA. The idea of contractor liability under OCSLA has arisen only in the last several years and no court has ever found a contractor liable for its violation.
Many of the contractors receiving INCs challenged the BSEE's authority to issue them. The first appeal to be adjudicated before the Department of Interior's Interior Board of Land Appeals ("IBLA") resulted in the Island Operating Co. opinion, in which the IBLA affirmed the BSEE's authority over contractors under OCSLA.
This Court agrees with the Contractor-Defendants that this Indictment is an attempt to impermissibly extend the application of the OCSLA regulations to contractors. The Government rests much of its argument on the logic of holding contractors criminally liable for OCSLA violations. While this Court does not disagree that such may be appropriate, it is simply not provided for as the OCSLA provisions are currently written. A change in course to hold contractors liable for OCSLA violations must be initiated legislatively.
For all of the foregoing reasons, this Court holds that the Second Superseding Indictment fails to state an offense against the Contractor-Defendants. Although this Court has found the regulations and statutes at issue to be unambiguous, it notes that any remaining ambiguity would be resolved pursuant to the rule of lenity in the favor of the Contractor-Defendants.
BEE filed a Motion to Dismiss Counts 1 through 11 of the Indictment, adopted in whole by GIS, in which both defendants are charged with involuntary manslaughter and violations of OCSLA. Each of these crimes require a heightened mental state—a wanton or reckless disregard or a knowing and willful action, respectively. In its Motion, BEE argues that the Indictment fails to state an offense against it because it does not allege that it knew of the actions of its agents, the other defendants. In making this argument, BEE relies on the Fifth Circuit's opinion in Standard Oil Co. of Texas v. USA, 307 F.2d 120, 129 (5th Cir. 1962), which addressed the difficult question of when the intentional criminal violations of an agent should be imputed to a corporate defendant. The Government and BEE dispute the implications of Standard Oil and its progeny. BEE contends that Standard Oil stands for the proposition that "knowing, willful and intentional criminal acts of an agent may
This Court agrees with the Government's interpretation of Standard Oil's holding. In Standard Oil, two employees of an oil company falsified documents to benefit a third party.
Subsequent cases have described the rule of Standard Oil as: "that the knowledge or guilty intent of an agent not acting with a purpose to benefit his employer, will not be imputed to the employer, when the latter is sought to be held liable under a statute requiring knowledge or guilty intent."
The Government argues that the requisite mental intent should be imputed to BEE because the actions of the other defendants were intended to benefit BEE. Specifically, it argues that the decision to do hot work on the LACT was made in order to keep on BEE's construction schedule. BEE makes much of the fact that the other defendants' actions ultimately harmed it—to the tune of approximately $10 million in explosion response costs. However, the Fifth Circuit in Standard Oil made clear that the focus is on the agent's intent to benefit. "The act is no less the principal's if from such intended conduct either no benefit accrues, a benefit is undiscernible, or, for that matter, the result turns out to be adverse."
Next, BEE propounds an additional argument for the dismissal of Counts 4 through 8 against it.
BEE argues that § 250.113(c)(1)(ii) does not impose a daily duty to inspect an area where hot work is being performed. Instead, it requires only that an inspection occur before welding "begins," indicating a one-time event. BEE argues that there are several OCSLA regulations that explicitly impose "daily" requirements, suggesting that if the authors of § 250.113 had intended such a duty, they would have said so explicitly.
The Government concedes that the regulation does not impose a daily inspection requirement. Instead, the Government contends that the regulation imposes a "renewing" obligation to perform an inspection each time hot work is begun.
BEE's argument presents a clear legal question: what is the meaning of "begins" in § 250.311(c)(1)(ii)? Does the regulation require, as the Government insists, a "renewing" obligation to perform a pre-work inspection each time hot work is authorized? Or does a single inspection, such as the one alleged in the Indictment, suffice to satisfy the regulation? In analyzing a regulation, the Fifth Circuit requires that the court first look to its plain language.
Finally, the Court will address the Wood Group's Motion to Dismiss Count 12, which charges it with a violation of the Clean Water Act ("CWA"). Wood Group argues that the Government has failed to state an offense against it in Count 12 because the Indictment does not allege a causal link between the Wood Group's actions and the explosion and resulting oil discharge. Count 12 charges several of the defendants under 33 U.S.C. § 1321(b)(3), which prohibits the "discharge of oil or hazardous substances [] into or upon the navigable waters of the United States . . . which may affect natural resources belonging to, appertaining to, or under the exclusive management authority of the United States . . . in such quantities as may be harmful as determined by the President." Wood Group argues that the Indictment fails to allege facts that would support a finding that it was both a proximate and but-for cause of the discharge that resulted from the explosion.
This Court disagrees. An indictment "need not set forth every evidentiary detail necessary to establish the elements of the offense."
In addition, the Wood Group argues that the Indictment fails to state an offense against it because the facts therein do not allege criminal negligence. The Wood Group relies on general Supreme Court precedent discussing mens rea to argue that the CWA requires criminal negligence. The Government correctly rebuts that it is controlling Fifth Circuit law that the Clean Water Act requires only ordinary negligence. Indeed, in United States v. Pruett, 681 F.3d 232 (5th Cir. 2012), the Fifth Circuit explicitly stated that 33 U.S.C. § 1319(c)(1)(A) "requires only proof of ordinary negligence." Accordingly, Wood Group's argument fails on this point as well. The Wood Group's Motion to Dismiss Count 12 is denied.
For the foregoing reasons, Defendants Black Elk Energy Offshore Operations LLC and Grand Isle Shipyard's Motion to Dismiss Counts 1 through 11 is DENIED (Docs. 133, 142); Defendant Don Moss's Motion to Dismiss Counts 9, 10, 11 is GRANTED (Doc. 129); Defendants Grand Isle Shipyard and Curtis Dantin's Motion to Dismiss Counts 4 through 11 is GRANTED (Doc. 138, 146); Defendant Wood Group PSN, Inc.'s Motion to Dismiss Counts 4 through 9 is GRANTED (Doc. 114); Defendant Black Elk's Motion to Dismiss Counts 4 through 8, as partially adopted from the Wood Group's Doc. 114, is DENIED (Doc. 136); and Defendant Wood Group PSN, Inc.'s Motion to Dismiss Count 12 is DENIED (Doc. 121). The charges in Counts 4 through 11 of the Second Superseding Indictment against Don Moss, Curtis Dantin, the Wood Group PSN, Inc. and Grand Isle Shipyards are DISMISSED.
Union City Barge Line, Inc. v. Union Carbide Corp., 823 F.2d 129, 138 (5th Cir. 1987)