On 26 August 2011 the federal court presiding over the DEEPWATER HORIZON multi-district litigation (“MDL”)(1) issued a 39 page Order ruling on motions to dismiss some of the claims asserted by private parties for economic losses, property damages, punitive damages and attorneys fees against, amongst other defendants, BP, Transocean, and Halliburton.  The Court’s order dismissed numerous claims for economic losses, but ruled that the plaintiffs were entitled to pursue punitive damages claims. Given its bearing on the outcomes of hundreds of claims in the MDL, the ruling will no doubt be appealed.

Plaintiffs Claims and the Defendants Motions

In their Master Complaint (categorized to by the Court as the “B1 Master Complaint”), private claimants(2) alleged strict liability claims under the Oil Pollution Act of 1990 (“OPA”) and the Florida Pollutant Discharge Prevention and Control Act (“Florida Act”).  They also alleged claims for negligence, gross negligence, strict liability for manufacturing and/or design defects and attorneys fees under the general maritime law, and claims for nuisance, trespass and fraudulent concealment (misreporting amounts discharged) under state common law.  The plaintiffs also asserted claims for punitive damages and sought declaratory relief with respect to how settlements might affect the calculation of punitive damages.

While various defendants advanced slightly different arguments as to why all or some of the B1 claims should be dismissed, the thrust of the defendants’ collective arguments centered on the dismissal of all non-OPA claims for purely economic damages and punitive damages resulting from the spill.  In other words, the defendants argued that plaintiffs’ claims for economic losses and punitive damages brought under the general maritime law, the Florida Act, and state common law were preempted by OPA and should be dismissed.

Choice of Law Issues 

The Court found that the defendants’ motions raised a series of questions relating to choice of law, and in particular the interplay between maritime law, OPA and state laws.  The Court noted that the claims fell within its admiralty jurisdiction because the alleged injury occurred on navigable waters and because the explosion and resulting spill caused a disruption of maritime commerce.  Because the claims fell within its admiralty jurisdiction, the Court found that they were governed by maritime law, except to the extent that OPA displaced the maritime law.

Preemption of State Law Claims

The Court next examined the plaintiffs’ arguments that, even though their claims were maritime in nature, state common law or statutory law could “supplement” the maritime law and that a savings clause in OPA preserved their state law claims. The Court rejected these arguments, finding that OPA and the general maritime law applied to the claims, to the exclusion of state common law.  The Court further noted that the incident did not concern conduct within the borders of any particular state and in fact occurred over the Outer Continental Shelf (“OCS”), an area of exclusive federal jurisdiction.  The Court also ruled that, while OPA’s “savings clause” allowed states to impose additional liabilities for discharges of oil, the savings clause was referring to state statutes that impose liability for discharges within state boundaries.

OPA vs. General Maritime Law

The defendants also moved the Court to dismiss plaintiffs’ claims made under the general maritime law, contending that Congress’ enactment of OPA displaced pre-existing federal common law, including the general maritime law, for damage claims covered by OPA.  The defendants argued that OPA was the plaintiffs’ exclusive remedy for economic and property damage claims and that such claims could only be made against the statutorily defined, “Responsible Party.”  They contended that OPA does not allow a plaintiff to assert claims for economic losses and property damage against defendants who are not a Responsible Party under OPA.

In analyzing this aspect of the defendants’ motions, the Court noted that before the enactment of OPA, only persons whose property was directly damaged as the result of an oil spill, and commercial fishermen, could recover economic losses caused by a spill under the maritime law.  Thus, claimants such as fish processors, whose businesses might be impacted by fishery closures following an oil spill, could not recover their losses prior to the enactment of OPA.  OPA greatly expanded the class of claimants who could recover economic losses.

The Court ruled that claimants could recover their economic losses against Responsible Parties under OPA.  It also held that OPA preempted maritime law claims for economic losses against Responsible Parties.

The Court ruled, however, that OPA does not immunize non-Responsible Parties from liability to claimants who, prior to OPA, would have been able to bring claims under the general maritime law.  In fact, the Court mentioned two specific savings provisions found in OPA; one that preserves a state’s authority to impose liabilities for discharges within a state (discussed above), and the other that preserves the application of the general maritime law.  Thus, reaching back to its analysis relating to the state of the general maritime law before OPA, the Court found that the claims by commercial fishermen and those who suffered physical damage were preserved and denied the defendants’ motions to dismiss as to them.

Punitive Damages 

Perhaps most concerning was the Court’s analysis regarding punitive damages.  The B1 Master Complaint contained a claim for punitive damages which the defendants specifically sought to have dismissed.

The Court accurately noted that OPA does not provide for the recovery of punitive damages.  It found, however, that the imposition of punitive damages would not circumvent or frustrate OPA’s liability scheme because “the behavior that would give rise to punitive damages under general maritime law–gross negligence–would also break OPA’s limit of liability.”  The Court thus held that OPA’s silence regarding the recoverability of punitive damages did not mean that punitive damages are not recoverable under the general maritime law.  It found no evidence that Congress intended to preclude the recoverability of punitive damages when it enacted OPA, and denied the defendants’ motion to dismiss the punitive damages claims.

Non-Operating Lessees

The Court dismissed the general maritime negligence claims against two of the defendants, Anadarko and MOEX (which held minority interests in the offshore oil and gas lease), independently from the other defendants because they did not have operational control and the Court found that the Plaintiffs could not allege a plausible action against these two non-operating” defendants.  The Court did not however dismiss potential OPA claims as to Anadarko or MOEX who may ultimately be determined to be Responsible Parties under OPA.

No Attorneys Fees

The Court also determined that plaintiffs did not allege a plausible claim for attorneys’ fees under either general maritime law or a bad faith exception and consequently dismissed that part of their suit as well.
For the full text of the order, please click here.

Keesal, Young & Logan Environmental Law Group

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(1)  On August 10, 2010, the United States Judicial Panel on Multidistrict Litigation issued a Transfer Order assigning nearly 77 lawsuits pending in various federal districts in five gulf coast states (and subsequently another 200 “tag along actions”) to The Eastern District of Louisiana before U.S. District Court Judge Carl J. Barbier.
(2)  Plaintiffs included Commercial Fishermen Plaintiffs, Processing and Distributing Plaintiffs, Recreational Business Plaintiffs, Commercial Business Plaintiffs, Recreation
Plaintiffs, Plant and Dock Worker Plaintiffs, Vessel of Opportunity (“VoO”) Plaintiffs, Real Property Plaintiffs, Real Property/Tourism Plaintiffs, Banking/Retail Business Plaintiffs, Subsistence Plaintiffs, Moratorium Plaintiffs, and Dealer Claimants.

This information has been prepared by Keesal, Young & Logan for informational purposes only and is not legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between you and Keesal, Young & Logan. You should not act upon this information without seeking professional counsel.