ISSUE: Outer Continental Shelf Lands Act and the U.S. Supreme Court

On January 11, 2012, the U.S. Supreme Court heard oral arguments in the case of Roberts v. Sea-Land Services, Inc. et al.  I’ve discussed the Roberts case here on the AEU Longshore blog on December 21, 2011, and on January 11, 2012, and I provided an Argument Preview and an Argument Recap that are currently posted on SCOTUSblog.com.

Remarkably, on the same day, January 11, 2012, the Supreme Court issued its decision in another Longshore case (as extended by the Outer Continental Shelf Lands Act (OCSLA)), Pacific Operators Offshore LLP v. Valladolid.  I discussed the Valladolid case on the AEU Longshore blog on March 14, 2011, while the case was still at the Ninth Circuit.

In Valladolid the issue at the Supreme Court was whether Section 1333(b) of the OCSLA contains a situs of injury provision.  In other words, must an injury occur on the outer continental shelf (OCS) to be covered.

Section 1333(b) provides:

“With respect to disability or death of an employee 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, compensation shall be payable under the provisions of the (Longshore Act)”

Looking at this “result of operations” language, the U.S. Court of Appeals for the Fifth Circuit interpreted it narrowly to mean that to be covered under OCSLA an injury must occur on an OCS platform or the waters above the OCS (Mills v. Director, Office of Workers’ Compensation Programs, 877 F. 2nd 356 (5th Cir. 1989)).

Looking at the same language, the U.S. Court of Appeals for the Third Circuit interpreted it broadly to mean that the OCSLA covers all injuries that would not have occurred “but for” operations on the OCS (Curtis v. Shclumberger Offshore Service, Inc., 849 F. 2nd 805 (3rd Cir. 1988)).

Most recently, the U.S. Court of Appeals for the Ninth Circuit read the same language somewhere in the middle, holding that a claimant must establish a “substantial nexus between the injury and extractive operations on the shelf.”  The claimant in Valladolid, although he spent most of his working time on the OCS, was fatally injured working at his employer’s onshore facility.

This conflict among the circuits prompted the Supreme Court to grant Pacific Operators’ petition for review. 

History of this case – The U.S. Department of Labor’s Benefits Review Board (BRB) had affirmed the decision of an Administrative Law Judge (ALJ) denying survivor’s benefits based on the Mills (Fifth Circuit) situs of injury interpretation.  On appeal, the Ninth Circuit reversed and remanded the case to the Board for a reevaluation of the facts of the case using the Ninth Circuit’s “substantial nexus” test.  It is this action by the Ninth Circuit that the Supreme Court has now affirmed.  Thus, the remand to the BRB is back in process.

Aside from establishing that there is no situs of injury test in the OCSLA, thus rejecting the Fifth Circuit’s approach, and ruling out the Third Circuit’s “but for” test, the Supreme Court hasn’t helped much in interpreting the new “substantial nexus” test.  In fact, the Supreme Court concedes that the test “may not be the easiest to administer”.  The Court found that the test, “best reflects the text of Section 1333(b), which establishes neither a situs of injury nor a “but for” test.  We are confident that ALJ’s and courts will be able to determine whether an injured employee has established a significant causal link between the injury he suffered and his employer’s on-OCS extractive operations.”  The Court’s opinion, however, gives virtually no indication as to how the substantial nexus test should be applied, or even how it should be applied in the Valladolid case.

But the Court does use, in my opinion, curious language.  The Court is saying that there must be a significant causal link between the injury and the employer’s OCS operations.  The causal link is not simply between the worker’s job and the employer’s OCS operations.  I don’t yet know the significance of the phrasing, but it seems to introduce elements of risk and causation into the no-fault workers’ compensation scheme.

The Solicitor General, representing the U.S. Government in this case, had suggested a different type of test for coverage, based on the Chandris test for crewmember status under the Jones Act, but the Court rejected it.  One prong of the Chandris test requires an employment connection to a vessel that is substantial in terms of both duration and nature.  Since this was rejected by the Court, and based on the above language requiring some kind of causal link between the injury and the employer’s operations, I’m not sure were we stand right now.

Justice Scalia, joined by Justice Alito, wrote a concurring opinion in which he proposes “proximate cause” as the test for coverage rather than what he terms the even “more indeterminate standard” of “substantial nexus”.  Proximate cause is a test used in tort law, and Justice Scalia prefers to borrow it in this workers’ compensation context because at least the courts have more experience applying it to facts.   

What we have, however, is “substantial nexus” as our test for OCSLA coverage.  But we do not yet have any guidance as to how it will be applied.  It’s up to the Benefits Review Board to articulate their take on the test. 

It seems certain that all employers engaged in covered activities on the OCS have now picked up shore side OCSLA exposures.  Unfortunately, we’ll have to wait for case by case interpretations to tell us how extensive this new exposure will be.

I will keep you up to date on this case, and other OCSLA cases in which the new test is applied.  And you know what I always say.  If there’s any doubt (and there’s plenty here), get coverage.

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