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Argument preview: Pacific Operators Offshore LLP v. Valladolid

Pacific Operators Offshore LLP v. Valladolid is a tricky case of statutory construction that will be argued at the Court on October 11, 2011.  At issue are the coverage provisions for workers’ compensation benefits under one of many overlapping schemes that are dedicated to that issue.  In this instance the relevant statute is the Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C. § 1331-35. The continental shelf is that area within United States territorial waters that lies at least three miles from the United States coastline.  It places into effect a federal system of workers’ compensation law not dissimilar to the Longshore and Harbor Workers’ Compensation Act (LHWCA), 33 U.S.C. §§ 901-95, which as the name suggests applies to those workers whose work in loading and unloading vessels covers actions that hug close to the coastline.

The operative provision of this statute – Section 1333(b) – offers a primer into the law of proximate causation as it is carried over from the law of tort into the somewhat different context of the workers’ compensation law.  In relevant part, it provides that it applies to cases of death or disability “resulting from any injury occurring as the result of operations conducted on the outer Continental Shelf for the purpose of exploring for, developing, removing, or transporting by pipeline the natural resources, or involving rights to the natural resources, of the subsoil and seabed of the outer Continental Shelf.” The question before the Court is how broadly the words “occurring as the result of operations conducted on the outer Continental Shelf” in connection with these injuries should be read.

Everyone agrees that those accidents that are suffered by workers who are actually working on site on the Continental Shelf are caught within the scope of the statute. Indeed, there would be little point to having the statute at all if that were not the case.  But the question is what kind of connection, if any, is sufficient to establish the needed nexus to offshore operations when the injury that occurs takes place on land, outside the area covered by the statute.

On this issue, the decision in the Ninth Circuit is surely correct to say that the hints and whispers in the legislative history of the OCSLA offer no guidance that is clearer that the statutory language as to what it means.  So the matter becomes one of straight statutory interpretation.

What made this case something of a “gimme” for certiorari is that, with the Ninth Circuit’s decision in this case, there are now three different interpretations of what the language means after Valladolid. The most restrictive of these meanings is found in Mills v. Director, Office of Workers’ Compensation Programs, U.S. Department of Labor (5th Cir. 1989), in which the Fifth Circuit took the position that both the operations and the injury had to take place on site for the plaintiff to recover.  The polar opposite position is found in Curtis v. Schlumberger Offshore Services, Inc. (1988), in which the Third Circuit held that the only requirement was that there be some “but for” connection of the activities on site and the injury; the injury itself could occur just about anywhere once that weak causal connection were established.  The third position in the troika was Valladolid itself, in which the Ninth Circuit agreed with Curtis that the injury itself could be off site, but insisted that there be some substantial connection between that injury on the one hand and the site activities on the other.

Some sense of the difference in positions can be gathered by the factual patterns at issue in each of these three cases.  In Mills the court denied that the OCSLA applied to a welder who was working on land in order to conduct a platform that was to be used off shore.  That decision is clearly correct under a rule that requires that the injury in question take place off shore. But it could be defended even under a broader view of liability on the ground that the platform which is destined for use on the Continental Shelf does not count as “an injury occurring as the result of operations conducted on the outer Continental Shelf,” for the simple reason that before the installation of the platform, there were no operations on the outer Continental Shelf.  Mills could therefore survive as a precedent even if the requirement that the injury occur on site were rejected.

There are great problems at the opposite extreme with Curtis, which took the position that a rig worker who was killed on a New Jersey freeway while traveling to a helicopter that would have lifted him to the site was entitled to coverage.  The argument here is not that this road trip was more dangerous than any other, but rather that “but for” the mission in question, the worker would not have been in position to suffer the risk in question, so that there was the requisite causal connection to the operations on the site – even though there was no particular operation that could be linked with this injury.

The Ninth Circuit took a position in between these two, for it involved a worker who was injured on land while working in an onshore oil flocculation facility, whose function was to sort out the various components of crude oil slurry – oil, gas, water, solids – so that each could be sent along its way.  Valladolid in fact spent ninety-eight percent of his time on the rig, but was injured off site at a facility that was located inland from the coastline, from which it was separated by beach, road and railroad.  The Ninth Circuit treated this case as too close to call for itself, and remanded it to the district court to decide whether the requisite substantial causal connection to site operations could be established.

In my view, this is not a case where moderation is a virtue.  As a reasonably confident prediction, my sense is that the decision will be reversed by the Supreme Court, which will adopt some version of the Mills on-site injury test.  To be sure, there is nothing rigid in the statutory language that says that the injury has to be on site so long as the operations that cause it are on site.  But the best way to understand this statute is in context of the general workers’ compensation laws, which also have to face the question of what kind of causal connection is needed to insure that an accident arises out of, and occurs in the course of, employment.

The point of this test is to make sure that the workers’ compensation scheme does not become a general welfare system.  It may well be that it is critical to relax the demands on any plaintiff to prove negligence to recover in death and disability cases.  But the insistence of the causal nexus is intended to capture the requirement that some flaw in the operations of these facilities is connected to the losses in question.  What is striking about the death on the highway scenario in Curtis is that that injury depends solely on the actions of the individual claimant and bears no relationship at all to any activity, dangerous or otherwise, on the rig.  It becomes from an incentive point of view quite irrational to force the platform or rig operator to internalize costs that are clearly located in the conduct of private individuals.  As a matter of general workers’ compensation law, the positional risk test is generally disfavored with respect to accidents that injure workers while on the premises if they have no relationship to the work itself, as is the case of a worker who gets struck by lightning while on the job, unless there was something about the terrain or the work that increased that party’s risk of injury above that suffered by anyone else.  In this instance the test strikes me as close to absurd.  The Supreme Court will not find anything in the language of this statute that will deflect standard workers’ compensation principles.

I also think that the decision in Valladolid is likely to be reversed for similar reasons.  In this particular case, it does not matter that the decedent spent ninety-eight percent of his time on the platform if the injury itself occurred in the two percent of the time that he was located on dry land.  To be sure, he would, and should recover, for most of his losses. But it hardly follows that he should recover from this one, which is caused by operations only in the sense that he is working on products that come from the platform, but not from any inherent dangers in platform operations.  This case is really no different from the injury to another worker who was killed doing what Valladolid did but who never went out on the platforms.  As regards these particular injuries, I think that the cases are indistinguishable.

There are two other reasons that will back the view that the reference to “operations” requires that these operations increase the risk of loss to a worker in ways that cannot be established here.  The first of these is that coverage rules in compensation cases should be relatively straightforward so that a party knows whether he or she is in or out.  It is pointless to fight over the question of whether the connection is substantial or not.  All the relevant facts are on the table by the time this case reached the Ninth Circuit, so it is unclear what is gained by sending back on remand – probably nothing.  Yet the substantial factor test, which does resonate with tort standards, does not seem to help deal with those issues.  Even the increased risk or hazard test that is normally applied does not help here, because it is hard to think what the baseline should be against which the increase is measured.  It surely cannot be just that the slurry that comes out of the pipe is a dangerous substance, for that is what workers all around the world face all the time.

The second reason is that it seems clear that once Valladolid stepped off the shelf, the stateside workers’ compensation system applied, so that a huge coverage here could lead to the coordination between two different legal regimes, each with its own peculiarities and procedures.  Who needs that to happen?  Clean delineation rules matter.  Indeed, one point made in Curtis was that it seems odd that the OCSLA should apply to accidents that occur outside the three-mile limit but not those just inside it.  But that is the precise point.  We have boundary lines on highways and football fields to determine what is in and out of play.  If that line is used for all sorts of other purposes, there is no reason not to use it here.

My prediction is not based on any inside scoop on how the Justices think about compensation systems.  I assume that they are on balance supportive of a “liberal” interpretation that advances coverage.  But here some coverage will be supplied no matter what happens, so that the institutional features will count for more. Pacific Operators wrote very powerful briefs at both the certiorari and merits stages.  Valladolid’s brief takes the line adopted in the court below.  Both briefs are excellently done, but Valladolid will be vulnerable on the ground that the workers’ compensation law is not just about speedy remedies that avoid protracted litigation.  It is also to deal with the incentive problems. In addition, on textual grounds it fails to persuade me that the definition of “operations” should be so broad that it covers just about anything under the sun.  I can distinguish between the case in which one slips on the site and it is not clear whether the oil should have been cleaned up before a worker was hurt, and injuries that take place on land when others are in charge of the facilities. It is likely that this case will go for the petitioners.  It could be, and should be, nine to zero.

Recommended Citation: Richard Epstein, Argument preview: Pacific Operators Offshore LLP v. Valladolid , SCOTUSblog (Sep. 30, 2011, 4:36 PM),