United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS December 16, 2003
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
______________________________ Clerk
No. 02-30217
______________________________
In the Matter of: JAMES HAMILTON NEEDHAM; JANELL RENAE COLE
NEEDHAM
Debtors
UNITED STATES OF AMERICA, ET AL.
Appellants,
versus
JAMES HAMILTON NEEDHAM, ET AL.,
Appellees.
___________________________________________________________________
________________________
In the Matter of: JAMES HAMILTON NEEDHAM; JANELL RENAE COLE
NEEDHAM
Debtors
D & C OPERATING INC.
Appellants,
versus
JAMES HAMILTON NEEDHAM; JANELL RENAE COLE NEEDHAM
Appellees.
Appeals from the United States District Court
for the Western District of Louisiana,
Lafayette-Opelousas Division
___________________________________________________________________
Before REAVLEY, JOLLY, and JONES, Circuit Judges.
EDITH H. JONES, Circuit Judge:
This case arises from the efforts of the United States
Coast Guard to compel James and Janell Needham (“Needhams”) to
reimburse the United States, under the Oil Pollution Act (“OPA”),
33 U.S.C. §§ 2701-2720 (2000), for cleanup costs associated with an
oil spill. The bankruptcy court, in the first instance, and the
district court on appeal, held that the Needhams were not liable to
the United States for the cleanup costs because the waters in
question were not navigable, and were therefore beyond the reach of
the OPA. However, for the reasons stated below, we disagree and
therefore reverse and remand.
I. BACKGROUND
On or about January 25, 1999, the Louisiana Department of
Environment Quality (“LDEQ”) received a complaint of an oil spill
in LaFourche Parish, Louisiana. The spill occurred at a facility
known as the Thibodeaux Well when Tommy Jones, a pumper/gauger
employed by Needham Resources, Inc. (“NRI”), pumped oil from a
containment basin into an adjacent drainage ditch. The well is co-
owned by NRI and D&C Operating, Inc. (“D&C”).1 James Needham
(“Needham”) is the sole owner of NRI.
The EPA investigated the spill and contacted James
Needham to discuss the matter. Initially, NRI hired a private
contractor to perform the necessary cleanup, but lacked the
1
D&C owns 90% of the well and NRI, the well operator, owns the
remaining 10%.
2
resources to complete the operation. The EPA and the Coast Guard
then assumed responsibility for the cleanup effort funded by the
Oil Spill Liability Act. Their efforts cost roughly $207,000.2
On February 8, 1998, the Needhams filed a Chapter 11
bankruptcy petition in the Western District of Louisiana.3 The
next day, the United States sued the Needhams, NRI and D&C in
federal court to recover its cleanup costs. The civil suit was and
remains stayed pending resolution of this bankruptcy court dispute
over the government’s proof of claim against the Needhams. D&C
also filed a proof of claim, contingent upon a finding of liability
under the OPA. The Needhams objected to the EPA’s proof of claim,
asserting, inter alia, that the spill did not implicate any
navigable waters subject to federal jurisdiction, and was therefore
not regulated by the OPA.
At the bankruptcy court hearing on the disputed claim,
the United States offered a videotape showing the extent of the oil
spill. Patrick Breaux, an environmental coordinator with the LDEQ,
narrated the video and offered further testimony concerning the
nature and extent of the cleanup. Breaux was the hearing’s only
live witness. Moreover, within a litany of documentary evidence,
the parties submitted a five-page written stipulation addressing a
2
The Oil Spill Liability Trust Fund is directly available to the EPA
and the Coast Guard to fund federal removal costs. See 33 U.S.C. §§ 2712(a);
1321(s)(2000). Moreover, the Fund is available to pay uncompensated removal
costs to third parties. See 33 U.S.C. § 1012(a)(4)(2000).
3
The Needhams’ bankruptcy petition was later converted to Chapter 7.
3
variety of evidentiary and substantive issues. Importantly, the
parties there agreed that the oil, which was originally discharged
into the drainage ditch at Thibodeaux Well, spilled into Bayou
Cutoff, and then into Bayou Folse. Bayou Folse flows directly into
the Company Canal, an industrial waterway that eventually flows
into the Gulf of Mexico.
After reviewing the evidence, the bankruptcy court found
that “neither the drainage ditch nor Bayou Cutoff are navigable
waters nor are they sufficiently adjacent to the navigable waters
to support an extension of the OPA.” In re Needham, 279 B.R. 515,
519 (Bankr. W.D. La. 2001). Thus concluding that the spill was not
subject to federal regulation, the bankruptcy court sustained the
Needhams’ objection to the United States’ proof of claim. The
United States appealed the decision to the district court, which
briefly affirmed, finding no basis to disturb the bankruptcy
court’s conclusions. See United States v. Needham, 2002 WL 1162790
(W.D. La. January 22, 2002).
II. STANDARD OF REVIEW
We review the factual findings of the trial court for
clear error. In re Gerhardt, 348 F.3d 89, 91 (5th Cir. 2003).
Therefore, whether a waterway is navigable-in-fact is subject to
the clearly erroneous standard. See Dardar v. LaFourche Realty
Co., Inc., 55 F.3d 1082, 1085 (5th Cir. 1995)(citing The Daniel
4
Ball, 77 U.S. (10 Wall.) 557, 563 (1870)).4 “Under a clear error
standard, this court will reverse only if, on the entire evidence,
we are left with the definite and firm conviction that a mistake
has been made.” Otto Candies, L.L.C. v. Nippon Kaiji Kyokai Corp.,
346 F.3d 530, 534 (5th Cir. 2003) (citations and quotations
omitted). Conversely, the district court’s statutory interpreta-
tion is subject to de novo review. United States v. Phillips,
319 F.3d 177, 183 (5th Cir. 2003).
III. DISCUSSION
The United States challenges the bankruptcy court’s
conclusion that the oil discharged from the Needham facility did
not contaminate waters regulated by the federal government under
the OPA. It contends that the oil spilled into navigable-in-fact
waters, or at a minimum, into waters adjacent to an open body of
navigable water. Because we agree with the latter argument, we
reverse the bankruptcy court’s decision.
A.
4
This court’s decision in Dardar appears to be in tension with the
Supreme Court’s decision in United States v. Appalachian Elec. Power Co., 311
U.S. 377, 403-404, 61 S.Ct. 291, 297-98 (1940), which suggests a mixed question
of law and fact standard. The Court stated that “[i]n cases involving the
navigability of water courses, this Court, without expressly passing on the
finality of the findings, on some occasions has entered into consideration of the
facts . . . to determine for itself whether the courts have correctly applied to
the facts found the proper legal tests.” Id. In the Court’s view, “[b]oth the
standards and the ultimate conclusion involve questions of law inseparable from
the particular facts to which they are applied.” Id. at 404. Nonetheless, as
will be made clear below, the result in this matter is unchanged regardless of
the standard of review employed.
5
The OPA imposes strict liability upon parties that
discharge oil into “navigable waters,” a term defined in the
statute to mean “the waters of the United States, including the
territorial sea.” 33 U.S.C. § 2701(21)(2000).5 This is
co-extensive with the definition found in the Clean Water Act
(“CWA”). See Rice v. Harken Exploration Co., 250 F.3d 264, 267
(5th Cir. 2001) (citing 33 U.S.C. § 1362(7)(2000)).6 Rice
establishes that the OPA, like the CWA, does not extend federal
regulation to the outermost limits of the Commerce Clause. Id. at
269-70.
Although under both the OPA and the CWA “waters and
wetlands need not always actually be navigable-in-fact to be
protected,” id. at 268, the Supreme Court recently found the
inclusion within “waters of the United States” of certain isolated,
non-navigable waters exceeded the Army Corps of Engineers’
regulatory power under the CWA. Solid Waste Agency of Northern
Cook County v. United States Army Corps of Engineers(“SWANCC”), 531
U.S. 159, 172-74, 121 S.Ct. 675, 682-84 (2001). The Court
emphasized that these isolated bodies of water were neither
navigable-in-fact nor adjacent to open water. Id. at 168.
5
Under the OPA, “each responsible party for a vessel or facility from
which oil is discharged . . . into or upon the navigable waters or adjoining
shorelines . . . is liable for the removal costs and damages . . . that result
from such incident.” 33 U.S.C. § 2702(a)(2000).
6
Rice was the first case in this circuit to examine the contours of
the OPA, and offers a persuasive analysis of its text and legislative history.
250 F.3d at 267-68.
6
SWANCC narrowed, but did not overturn United States v.
Riverside Bayview Homes, 484 U.S. 121, 106 S.Ct. 455 (1985), which
upheld CWA regulations restricting discharges into a non-navigable
wetland adjacent to open waters. Id. at 133.7 To reach this
result, Riverside Bayview Homes interpreted “waters of the United
States” broadly to encompass “all wetlands adjacent to other bodies
of water over which the Corps has jurisdiction . . . .” Thus,
Riverside Bayview Homes, unlike SWANCC, involved a wetland
“adjacent to an open body of water that was actually navigable.”
Rice, 250 F.3d at 268; see also SWANCC, 531 U.S. at 167 (stating
that the wetland in Riverside Bayview Homes “actually abutted on a
navigable waterway”).
Nevertheless, the United States urges this court to
approve its regulatory definition of “navigable waters.” See
40 C.F.R. § 300.5 (2003). This definition includes as “navigable
waters” all “tributaries” of navigable-in-fact waters. See id. at
§ 300.5(d). According to the government, the definition covers all
waters, excluding groundwater, that have any hydrological connec-
tion with “navigable water.” At least two courts appear to have
agreed with this expansive interpretation. See United States v.
Deaton, 332 F.3d 698, 702 (4th Cir. 2003)(asserting authority,
7
As the Court stated in SWANCC: “We said in Riverside Bayview Homes
that the word ‘navigable’ in the statute was of ‘limited effect’ and went on to
hold that § 404(a) extended to non[-]navigable wetlands adjacent to open waters.
But it is one thing to give a word limited meaning and quite another to give it
no effect whatsoever.” 531 U.S. at 682-83 (citation omitted).
7
under the CWA, over wetlands that are “adjacent to, and drain into,
a roadside ditch whose waters eventually flow into the navigable
Wicomico River and Chesapeake Bay”); United States v. Rapanos, 339
F.3d 447, 449 (6th Cir. 2003) (asserting authority, under the CWA,
over wetlands that flow into a man-made drain, which in turn flows
into a creek, which in turn flows into a navigable river).
In our view, this definition is unsustainable under
SWANCC. The CWA and the OPA are not so broad as to permit the
federal government to impose regulations over “tributaries” that
are neither themselves navigable nor truly adjacent to navigable
waters. See Rice, 250 F.3d at 269.8 Consequently, in this circuit
the United States may not simply impose regulations over puddles,
sewers, roadside ditches and the like; under SWANCC “a body of
water is subject to regulation . . . if the body of water is
actually navigable or adjacent to an open body of navigable water.”
Rice, 250 F.3d at 269.9
B.
8
In short, the regulatory definition, if applied in this fashion,
would push the OPA to the outer limits of the Commerce Clause and raise serious
constitutional questions. As noted above, Rice and SWANCC have rejected such an
expansive reading of the OPA and CWA respectively. Accordingly, the regulation
is not entitled to Chevron deference. SWANCC, 531 U.S. at 172-73 (“Thus, where
an otherwise acceptable construction of a statute would raise serious
constitutional problems, [courts] will construe the statute to avoid such
problems unless such construction is plainly contrary to the intent of
Congress.”) (quoting Edward J. DeBartolo Corp. v. Fla. Gulf Coast Bldg. & Constr.
Trades Council, 485 U.S. 568, 575 (1988)).
9
In the end, there must be “a close, direct and proximate link
between . . . [the] . . . discharges of oil and any resulting actual,
identifiable oil contamination of natural surface water that satisfies the
jurisdictional requirements of the OPA.” Rice, 250 F.3d at 272.
8
Using this interpretation of the OPA, we next consider
the bankruptcy court’s findings of fact. Two finding of fact are
critical. First, the court found that the oil spilled only into
the drainage ditch adjacent to the Thibodeaux Well and Bayou
Cutoff. See In re Needham, 279 B.R. at 516-18. The court ruled
that neither the drainage ditch nor Bayou Cutoff were navigable-in-
fact. Id. at 518. Second, the court found that the Gulf of Mexico
was the only open body of navigable water in the vicinity of the
spill. Id. at 518. These findings constitute clear error.
Specifically, it was clear error to disregard the effects
of the spill on Bayou Folse and the Company Canal. The parties’
stipulation of facts contained the following language: “On or
before January 25, 1995, oil was discharged from the Thibodeaux
facility into Bayou Cutoff and Bayou Folse near Thibodeaux,
LaFourche Parish, Louisiana.” (emphasis added). “Under federal
law, stipulations of fact fairly entered into are controlling and
conclusive and courts are bound to enforce them, unless manifest
injustice would result therefrom or the evidence contrary to the
stipulation was substantial.” Quest Medical, Inc. v. Apprill,
90 F.3d 1080, 1087 (5th Cir. 1996)(citations omitted).
There is no basis to disregard the stipulation, and
indeed none has been argued. Not only is the stipulation
consistent with the evidence adduced at the hearing, but in his
opening statement, counsel for the Needhams acknowledged that the
9
residue from the spill was found 10 to 12 miles from the oil well,
i.e., in Bayou Folse.10
As a result of the stipulation, the court should not have
limited its application of the OPA to the spill’s impact on Bayou
Cutoff. Under Rice, and in light of the stipulation, the proper
inquiry is whether Bayou Folse, the site of the farthest traverse
of the spill, is navigable-in-fact or adjacent to an open body of
navigable water. See Rice, 250 F.3d at 269. Either basis is
sufficient to trigger the OPA.
We conclude, because it is undisputed, that Bayou Folse
is adjacent to an open body of navigable water, namely the Company
Canal.11 “[T]he term ‘navigable waters’ is not limited to oceans
and other very large bodies of water.” Rice, 250 F.3d at 269.
Rather, inland waterways may also fall within the definition of
navigable waters. See id. Inland waterways, such as the Company
Canal, are navigable-in-fact “when they are used, or are
susceptible of being used, in their ordinary condition, as highways
for commerce, over which trade and travel are or may be conducted
. . . .” Daniel Ball, 77 U.S. at 563; see also Appalachian Elec.
10
Additionally, Patrick Breaux testified that the oil was visible in
the water “near a point where Highway 90 intersects Bayou Folse.”
11
Whether Bayou Folse is navigable-in-fact is a close question, and one
we need not resolve here. Bayou Folse’s adjacency to the Company Canal is
sufficient to resolve this matter. Moreover, it is unwise for a court to
overreach and resolve issues unnecessarily, particularly when, as is the case
here, the issue involves navigable waters. See Appalachian Elec. Power Co.,
311 U.S. at 408 (concluding that “[w]hen once found to be navigable, a waterway
remains so”).
10
Power Co., 311 U.S. at 409 (a waterway is navigable if it can be
made useful through reasonable improvements); Economy Light & Power
Co. v. United States, 256 U.S. 113, 122, 41 S.Ct. 409, 412 (1921)
(the use of navigable waters may be limited to travel during
seasonal water level fluctuations); but see United States v.
Oregon, 295 U.S. 1, 23, 55 S.Ct. 610, 619 (1935)(waterway is not
navigable where commercial use or susceptibility of use is
“sporadic and ineffective”).
The Company Canal falls within the definition of
navigable waters. At the bankruptcy court hearing, Breaux
testified that “[t]he Company Canal is an industrial corridor
between the Intracoastal Waterway and Bayou LaFourche.” He also
observed that the Company Canal contains “shipyards, repair
facilities, dry docks, [and a] gas freeing operation.” An inland
waterway, such as the Company Canal, that supports commerce, is
unobstructed, and is traversed on a consistent basis is navigable-
in-fact.
Thus, the only remaining question is whether Bayou Folse
is adjacent to the Company Canal. Under Rice, the term “adjacent”
cannot include every possible source of water that eventually flows
into a navigable-in-fact waterway.12 Rather, adjacency necessarily
12
Neither the CWA nor the OPA define the term “adjacent.” The Army
Corps of Engineers defines “adjacent” to mean “bordering, contiguous, or
neighboring.” 33 C.F.R. § 328.3. However, this regulation was invalidated, at
least in part, in SWANCC. Nevertheless, the Corps’ definition comports with the
term’s plain meaning. WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 26 (1986) offers
several definitions: “(a) not distant or far off: nearby but not touching;
11
implicates a “significant nexus” between the water in question and
the navigable-in-fact waterway. See SWANCC, 531 U.S. at 167
(finding that Riverside Bayview Homes turned on the “significant
nexus” between the wetlands and the “navigable waters”); see also
Rice, 250 F.3d at 271 (requiring that the adjacent body of water be
“sufficiently linked” to the navigable-in-fact water). Under this
standard, Breaux’s testimony and the stipulation prove that Bayou
Folse is plainly adjacent to the Company Canal — Bayou Folse flows
directly into the canal. On this basis, the Thibodeaux Well oil
spill implicated navigable waters and triggered federal regulatory
jurisdiction pursuant to the OPA.
IV. CONCLUSION
Under Rice, the OPA permits the recovery of cleanup costs
in only two instances: (1) if oil spills into navigable-in-fact
waters or (2) if oil spills into non-navigable waters (or wetlands)
that are truly adjacent to an open body of navigable water. Here,
the parties stipulated that oil spilled into Bayou Folse. Bayou
Folse is adjacent to the Company Canal, which is an open body of
navigable water. We therefore conclude that the OPA applies to the
(b) relatively near and having nothing of the same kind intervening: having a
common border: abutting, touching: living nearby or sitting or standing
relatively near or close together; and (c) immediately preceding or following
with nothing of the same kind intervening.” Hence, both the regulatory and plain
meaning of “adjacent” mandate a significant measure of proximity. Therefore,
including all “tributaries” as “navigable waters” would negate Rice’s adjacency
requirement, and extend the OPA beyond the limits set forth in SWANCC.
12
spill at issue. Consequently, we REVERSE and REMAND this matter
for consideration of the Needhams’ remaining defenses.13
13
On appeal, the parties submitted supplemental briefs addressing the
remaining questions under the OPA: (1) whether James Needham was an owner or
operator of the facility and (2) whether Needham could establish a third party
affirmative defense. See 33 U.S.C. § 2701(32)(2000); 33 U.S.C. § 2702(a)(2000);
33 U.S.C. § 2703(a)(2000). However, we conclude, in our discretion, that the
bankruptcy court should address these fact-laden issues in the first instance.
See Louisiana World Exposition v. Federal Ins. Co., 858 F.2d 233, 254 (5th Cir.
1988).
13