Roustabout Recovery: A Case Note of Pacific Operators Offshore v. Valladolid

-David Schroeter, J.D./C.L. 2014, Paul M. Hebert Law Center, Louisiana State University.

In January, the Supreme Court of the United States decided a monumental case regarding the benefits afforded to offshore workers: Pacific Operators Offshore v. Valladolid.[1] Pacificresolved a split among the circuits by deciding on the test to be applied in determining liability  for injuries occurring on the outer continental shelf, a test which likely extends liability more than is necessary.[2] The section 1333 (b) of Outer Continental Shelf Lands  Act (OCSLA) extends the coverage of the Longshore and Harbor Workers’ Compensation Act (LHWCA) to injuries “occurring as the result of operations conducted on the outer continental shelf (‘OCS’) for the purpose of extracting natural resources from the shelf.”[3] The Court held that a claimant seeking benefits under the OCSLA “must establish a substantial nexus between the injury and extractive operations on the shelf.”[4] This “substantial nexus” test is overly complicated, and a better solution would have been a proximate cause test, which is substantially easier to administer.

In Pacific, Pacific Operators Offshore operated two drilling rigs on the OCS off the coast of California and an onshore oil and gas processing facility.[5] Pacific employed Juan Valladolid as a laborer.[6] Valladolid spent roughly 98 percent of his time offshore performing maintenance duties, such as cleaning decks and helping to move loads from the platform crane.[7] He spent the remainder of his time onshore, where he also performed maintenance duties, such as removing debris from drain culverts and operating forklifts.[8] While on duty at the onshore facility, Valladolid was killed in a forklift accident.[9]  His widow filed a claim seeking benefits under the extension of LHWCA by OCSLA,[10] which provided for compensation for disability or death of an employee resulting form any injury occurring as a consequence of operations on the OCS.[11]

In an administrative action, the Judge dismissed the widow’s claim, reasoning that Valladolid’s fatal injury was not covered under § 1333(b) because his death occurred on shore rather than on the OCS.[12] The Ninth Circuit reversed and found  that the LHWCA applied to Valladolid’s injury. In so holding, the Court reasoned that according to the extension to the LHWCA provided by the OCSLA, “‘the claimant must establish a substantial nexus between the injury and extractive operations on the shelf’ to qualify for worker’s compensation benefits.”[13]

At the time that the Pacific decision was rendered, there were several different tests to determine liability under the OSCLA extension of the LHWCA liability among the Third Circuit, Fifth Circuit, and Solicitor General.[14] The Third Circuit stated that the coverage of the LHWCA was meant to be expansive, and that § 1333(b) extends to all injuries that would not have occurred “but for” operations on the shelf.[15] Thus, according to the Third Circuit, an employee who worked on an offshore rig who died in a traffic accident on his way to the helicopter transporting him to the rig, would be eligible for coverage because he would not have been injured in the traffic accident “but for” being en route to the rig.[16]

Meanwhile, the Fifth Circuit established a bright-line “situs-of-injury” test by concluding that § 1333(b) coverage should only be given to employees “whose injuries or death occurred on an OCS platform or the waters above the OCS.”[17] While seemingly reasonable on its face, the test leaves room for potentially inappropriate outcomes. For instance, the Fifth Circuit has applied their test to hold a welder injured onshore while building an offshore platform ineligible for benefits under § 1333(b).[18] The decision to hold the welder ineligible may seem appropriate, but what if the welder has a fatal heart attack while walking around the rig? The welder would fit perfectly into the “situs-of-injury” test having died on the platform, but his heart attack could have been brought by conditions completely unrelated to extractive operations on the shelf. There are a limitless number of injuries or deaths similar to the “welder heart attack” example described above that could be given coverage under the “situs-of injury” test. Such a test, while intended to be narrow in scope, would ultimately expand the coverage to include injuries that have no relation to resource operations on the OCS.

The Solicitor General also offered a test that would allow benefits to two categories of injuries: (1) all injuries occurring onboard the OCS to employees of companies who were involved in resource extraction on the shelf, and (2) any injuries occurring off of the OCS to employees who spend a substantial amount of their work time on the shelf involved in extractive operations.[19] The idea behind the Solicitor General’s test is that § 1333(b) should provide coverage to off-OCS injuries only to those employees who are employed by a company extracting on the OCS and who perform work on the OCS itself that is substantial in both nature and duration, even if they are not performing at the time of the injury.[20] This interpretation excludes other employees injured on the OCS, such as accountants visiting the platform, who work for the company but do not have the risk of harm of employees actively extracting products.[21]

The Supreme Court ultimately upheld the Ninth Circuit’s ruling, and in so doing  rejected the “but-for” causation requirement suggested by the Third Circuit, the “situs-of-injury” requirement suggested by the Fifth Circuit, and the test suggested by the Solicitor General which considers actual work contribution to extractive operations on the shelf.[22] However, their decision is inadequate  as it does not provide any guidance as to what constitutes a “substantial nexus.” The phrase “substantial nexus” alone lacks any meaningful construction.[23] By leaving no clear method for lower courts to interpret or implement the test, the Supreme Court’s decision ultimately resolves nothing.[24] The “substantial nexus” test is essentially neutral because it is so unclear that a lower court could apply its existing test, simply claim it utilized the “substantial nexus” test, and glean the same results. In its current form, the test chosen by the Supreme Court is entirely too vague and will likely require judicial precision before having any substantial effect on the interpretation of § 1333.[25]

Justice Scalia, joined by Justice Alito, concurred in the opinion, but stated that the “substantial nexus” test was a “novel legalese with no established meaning in the present context.”[26] The majority admitted as much when it stated that “the test may not be the easiest to administer.”[27] The vagueness of the test creates room for courts to extend liability under the LHWCA when the substantial nexus is attenuated. For example, a court may find a substantial nexus where an accountant wrecks his car on his way to the onshore facility although the injury was not a result of resource extraction.[28] The Supreme Court’s affirmation of the  Ninth Circuit’s “substantial nexus” text was intended to provide a final solution, but it allows for an inappropriate interpretation of the law and inconsistent reasoning.[29] By having no contours for lower courts to follow, there will be no uniform way of deciding coverage under the LHWCA.[30] Each lower court essentially has to decide on their own what they believe constitutes a “substantial nexus,” which leaves room for inconsistent reasoning between the lower courts. By allowing such inconsistencies to be possible, the “substantial nexus” test cannot be said to be the most appropriate interpretation in deciding the scope of the law.

By applying such a broad test, the Court increased the scope of the Act and possible plaintiffs. Effectively, the “substantial nexus” test, without guidelines or instructions from the court, is a limitless standard providing vast discretion to the courts. The broad discretion allows the “substantial nexus” test to cover claimants not intended by the act. As a result, the test needlessly increases litigation and possibly wastes judicial resources.[31] A clearer, more precise test would filter through frivolous claims and recognize meritorious claims. By providing guidance for courts to determine liability under the LHWCA, a different test would close the gates opened by the “substantial nexus” test.[32]

A “proximate causation” test, as proposed by Justice Scalia in his concurrence, is the most appropriate for interpreting the scope of the LHWCA.[33] Proximate cause is “shorthand for a concept: [i]njuries have countless causes, and not all should rise to legal liability.”[34] “The legal construct of proximate cause serves to establish how far down the causal continuum tortfeasors will be held liable for the consequences of their actions.”[35] It is “a foreseeable, natural, and probable cause of the plaintiff’s injury.”[36] Proximate cause has also been described as a showing of “an act or omission that in a natural and continuous sequence, unbroken by any new independent causes, produces the injury without which the injury would not have occurred.”[37] In order to establish proximate causation, a plaintiff must meet three requirements.”[38] First, “that without the misconduct, the injury would not have occurred; this is commonly known as the ‘but for’ rule.”[39] Second, “that the injury was a natural and probable result of the misconduct.”[40] Third, “that there was no efficient intervening.”[41] Proximate cause is the “dominant, immediate, or efficient cause that sets other causes in motion.”[42] “If the conduct [in question] created only a condition or occasion for the harm to occur, it is a remote, not a proximate, cause and is not a substantial factor in bringing about the harm. ”[43]

A similar proximate causation test was issued in regards to a no-fault veterans’ compensation statute in Brown v. Gardner.[44] In Brown, the Supreme Court commented that proximate cause may limit the causal connection between the injury and medical treatment, allowing for a narrowing of the class of compensable cases.[45] The narrowing of compensable cases mentioned in Brown is exactly the outcome needed instead of the unnecessary broadening provided by the “substantial nexus” test to unintended cases.

The theory of proximate cause eliminates excess unreasonable litigation, while protecting claims with merit, by tightening the scope of the LHWCA to those injuries that are proximately caused by the operations on the OCS and rewarding benefits only to those who where intended to recover.[46] This basic tort theory could save offshore companies and the industry millions of dollars by preventing frivolous litigation.[47] In contrast, the “substantial nexus” test has the power to reward those which the Act did not intend to allow recovery.[48] These attenuated rewards could eventually cause financial detriment to the industry by opening the door to excessive lawsuits. By keeping companies away from unnecessary litigation, they will be able to use their funds that would have gone to the litigation to help the industry thrive, and possibly create additional workers compensation funds specific to their company. The resources saved could be used for more fruitful efforts that would benefit a large majority of offshore workers, instead of one unnecessary litigant.

In applying a proximate causation test to the facts of Pacific, the forklift accident at the onshore facility was too attenuated from the extract operations on the shelf to be given coverage by the LHWCA. While “but for” the operations on the shelf the accident would not have happened, the injury was not a natural and probable cause of extraction operations.[49] The forklift was being operated on land and was not directly involved in operations on the OCS.[50]The fact that the accident occurred on land while operating a forklift could be an intervening and superseding act in itself.[51]Even if the extraction operations were hypothetically accepted to be the proximate cause of the accident, the operation and ensuing accident of the forklift would be an intervening and superseding event: it is not immediately foreseeable that during offshore extraction operations, an employee would die from a forklift accident on land.[52] If the conduct in question created only a condition or occasion for the harm to occur, it is a remote, not a proximate, cause and it is not a substantial factor in bringing about the harm.[53] As a result, the extraction operations were not a proximate cause to the forklift death, if anything they were a remote cause.

The Court’s choice of the “substantial nexus” test invites excessive litigation and is difficult to implement.[54] The Supreme Court did not provide instructions or guidelines for applying the “substantial nexus” test for lower courts to follow.[55] This loose, boundary-less test is essentially silence from the Supreme Court on the issue.  Lower courts may simply choose to apply the test they feel is appropriate and label it a “substantial nexus.” The scope of the LHWCA needs to be determined by a more logical and precise test with bounds that are recognizable.[56] The theory of proximate causation is that logical, precise test that’s ease of execution will properly place parameters on the scope of the Act.[57]

Preferred citation: David Schroeter, Roustabout Recovery: A Case Note on Pacific Operators Offshore v. Valladolid, LSU J. Energy L. & Res. Currents (September 14, 2012), http://sites.law.lsu.edu/jelrblog/?p=34.