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Court Issues Opinion On Recoverable Claims In BP Oil Spill Litigation

On August 26, 2011, United States District Judge Carl Barbier issued Order & Reasons in the BP oil spill multi-district litigation addressing the viability of thousands of claims asserted against numerous defendants alleged to have been responsible for the explosion on the J/U DEEPWATER HORIZON and the resulting oil spill on April 20, 2010. Judge Barbier’s Order & Reasons addressed the defendants’ motions to dismiss the category B1 master complaint, which included all claims for private or non-governmental economic losses and property damages. The bundle of plaintiffs failing in category B1 included commercial fishermen, recreational businesses, commercial business, plant and dock workers, Vessel of Opportunity plaintiffs, and those affected by the government-imposed moratorium on offshore drilling in the Gulf of Mexico. The moving defendants included BP, Transocean, Halliburton, Cameron, Weatherford, Anadarko, and Moex. The court’s opinion considered issues of maritime law, state law, and the recoverability of punitive damages. The motions to dismiss ultimately sought dismissal of all non-Oil Pollution Act (“OPA”) included all claims brought under either general maritime law or state law for economic damages.

At the outset, the court addressed Cameron’s argument that the DEEPWATER HORIZON was not a vessel within the meaning of maritime law. The court quickly rejected this argument, noting that mobile offshore drilling units had been classified by courts as vessels since 1959. The mere fact that Cameron’s blowout preventer was attached to the wellhead on the seabed 5,000 feet below the water’s surface did not alter the court’s vessel analysis. The BOP is considered an appurtenance of the rig and, thus, part of the vessel itself.

The court then considered the extent to which it had jurisdiction under the Outer Continental Shelf Lands Act and the general maritime law. The court found that both laws were applicable. OCSLA applied because the explosion and spill involved operations on the Outer Continental Shelf and the damages were connected to those operations. Maritime law also applied because the tort occurred on navigable waters, had a disruptive effect on maritime commerce, and the operations of the rig bore a substantial relationship to maritime commerce.

The court’s conclusion that OCSLA applied required the court to consider whether state law would apply as surrogate federal law as provided for under the statute. The court concluded that state law as surrogate federal law applied only to the extent that federal law did not otherwise apply. In this case, as OPA and the general maritime law were both applicable to the plaintiffs’ claims, state law could not be adopted as surrogate federal law. Plaintiffs argued, though, that state law could supplement remedies under maritime law, rather than be completely preempted by it.

Citing the need for the uniform application of federal law, the court rejected the plaintiffs’ argument. It noted that, while state law could supplement maritime law for occurrences within a state’s borders, it would run counter to principles of maritime law to have state law apply across state borders.

The plaintiffs also asserted that OPA’s saving provisions preserved a claimant’s state law claims. OPA contains two provisions that purport to save application of state law. The first provides that nothing in the act shall “affect or be construed or interpreted as preempting” the state’s authority to impose additional liability with respects to the discharge of oil within a state. The second provision provides that nothing in OPA shall affect the authority of any state “to impose additional liability or additional requirements” relating to the discharge of oil. The court concluded that both provisions were intended to preserve the states’ police power over pollution discharges within their territorial waters. The court held that “although Congress has expressed its intent to not preempt state law, this intent does not delegate to the States a power that the Constitution vested in the federal government.” Having concluded that state law claims could not be asserted in this case, the court dismissed any state common law claims asserted in the plaintiffs’ master complaint.

The court then turned to a consideration of whether OPA displaced the plaintiffs’ claims under the general maritime law. The defendants asserted that the plaintiffs could recover their economic damages claims solely against the “responsible party” under OPA and precluded claims against non-responsible parties. The court noted that general maritime law generally precluded claims for pure economic injury unaccompanied by physical damages, but it also noted an exception to the rule in cases of commercial fishermen, oystermen, shrimpers, and crabbers. Further, the general maritime law provided a remedy to those individuals who suffered physical damages to their property. Moreover, in instances where the defendant’s fault was the result of gross negligence or malicious conduct, general maritime law allowed recovery of punitive damages.

The enactment of OPA in 1990 altered the traditional application of maritime law with respect to economic loss claims. OPA broadened the scope of permissible claims to include those for economic losses, even where unaccompanied by physical damage to the claimant’s property. The issue then was “whether, or to what extent, OPA has displaced any claims previously existing under general maritime law, including claims for punitive damages.”

Previous cases addressing the same issue had concluded that OPA pre-empted the recovery of economic losses and precluded a claim for punitive damages. Judge Barbier, however, felt that two recent opinions from the United States Supreme Court called that analysis into question. The first of the two cases, Exxon Shipping Co. v. Baker, 554 U.S. 471 (20008), addressed whether punitive damages arising out of the Exxon Valdez oil spill in Alaska were preempted by the Clean Water Act. The Baker Court held that there was no clear congressional intent to preempt punitive damages and that preemption was only possible where it was specifically addressed by the statute.

In the second case, Atlantic Sounding Co. v. Townsend, 129 S.Ct. 2561 (2009), the Court allowed recovery of punitive damages for arbitrary and capricious failure to pay a seaman maintenance and cure and held that case law restricting punitive damages in wrongful death cases was not applicable in the maintenance and cure context, which was not governed by any federal statute.

Applying these cases, Judge Barbier found that the plaintiffs had stated a cause of action under the general maritime law against non-responsible parties where they had sustained physical damages to a proprietary interest or fell within the commercial fishermen exception to the economic loss rule. He did not believe there was any express intent in OPA to preempt and bar any maritime law claims against non-responsible parties. In contrast, those plaintiffs asserting only economic loss claims did not have a traditional claim under the general maritime law so their claims were subject to dismissal. The court further found that claims against a responsible party must comply with OPA’s presentment procedures. Thus, general maritime law claims that could have been asserted against non-responsible parties before enactment of OPA cold still be asserted against those parties.

The court further observed that plaintiffs who could assert general maritime law claims against non-responsible parties were also entitled to seek recovery of punitive damages. The court noted that OPA was silent as to punitive damages and did not read that silence as precluding such a recovery. Thus, to the extent claims existed before OPA, those plaintiffs could seek recovery of punitive damages against both responsible and non-responsible parties. The court also concluded that maritime law claims against responsible parties, including the recovery of punitive damages, survived OPA’s saving provision.

The court agreed with the defendants that OPA’s presentment requirement must be followed for claims against responsible parties. However, the court refused to consider, at this time, whether a given claim complied with the claims presentment requirement or whether presentment had, in fact, occurred. These issues were left for another day.

The court also considered whether those plaintiffs asserting claims arising from the moratorium on offshore drilling had stated a cause of action. The defendants countered that such claims had to be dismissed because the moratorium was an intervening or superseding cause of their damages. The court found that OPA does not expressly require proximate cause but rather affords a cause of action if the loss is “due to” or “resulting from” an oil spill. The court declined to define the ultimate standard of causation at this time because it involved a highly factual analysis but ultimately concluded that there were sufficient facts pled to state claims under OPA.

Finally, the court held that the plaintiffs had not stated a cause of action for attorneys’ fees whether under general maritime law or an exception to the American Rule for bad faith conduct. The court found that the bad faith exception was applicable only in instances of actual fraud on the court or bad faith litigation conduct.

In summary, then, the court concluded that OCSLA and maritime law applied in this case, foreclosing the application of state law. Thus, all state law claims were preempted and dismissed. Further, any general maritime law claims alleging economic injury absent physical damage to a proprietary interest were dismissed under the Robins Dry Dock rule, subject to application of the commercial fishermen exception. Claimants under OPA, however, were not required to allege damage to a proprietary interest. Further, OPA did not displace general maritime law claims against non-responsible parties and only displaced maritime law with respect to responsible parties with respect to procedure (the presentment requirement). Further, claims for punitive damages were recoverable under the general maritime law against responsible parties and non-responsible parties.