Mocondo Well Explosion. of Louisiana s coast. The Deepwater Horizon ( Deepwater ), a mobile offshore

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1 How Did We Get Here? New Orleans Multi-District Litigation Over the Introduction Mocondo Well Explosion The Mocondo well is located in the Gulf of Mexico about 40 miles southeast of Louisiana s coast. The Deepwater Horizon ( Deepwater ), a mobile offshore drilling unit (MODU), was owned by Transocean and hired by BP to drill in the Mocondo well field. On April 20, 2010 the Deepwater Horizon exploded and subsequently caught fire. Eleven workers were killed and sixteen others were injured. Plumes of oil were continuously flowing for months near the Gulf s sea floor close enough to land for oil to begin washing ashore in Louisiana and adjoining gulf coast states. This major man-made ecological disaster, considered the second worst ecological disaster in U.S. history, set in motion a chain of events which would have lasting environmental and legal effects. John J. Costonis, The Macondo Well Blowout: Taking the Outer Continental Shelf Lands Act Seriously, 42 J. Mar. L. & Com. 511, 512 (2011). The parties immediately blamed for the disaster were BP, operating and leasing the Deepwater for oil production purposes, and Transocean who was the owner of the vessel. Id. The Suit Brought by the State of Louisiana The state of Louisiana filed suit in May, one month following the explosion against BP and other defendants. The suit was brought against BP and several 1

2 affiliated defendant companies in Terrabone Parish Louisiana for harm to wildlife and aquatic life caused the defendants. The complaint alleged that a failure to comply with applicable regulations and statutes governing the exploration and production of oil or those regulations regarding the cleaning of oil and contaminants. Louisiana Loses Appeal to Have Suit Against BP Heard In State Court 31 No. 7 Westlaw Journal Environmental 2, Oct. 27, BP was successful in removing the case to District Court, contending that Louisiana s allegations fell under the Outer Continental Shelf Lands Act (OCSLA) which is federal law. OCSLA gives original jurisdiction to controversies arising out of, or in connection with (A) any operation conducted on the outer Continental Shelf. Id. There was no issue of fact to dispute that any damage caused to wildlife, for the asserted reasons, would be in connection with the activities conducted by BP and Transocean on the outer continental shelf. Even if harm came from an improper cleanup response, it would be the activity on the Outer Continental Shelf which necessitated a cleanup response in the first place. There was also a argument made regarding the well-pleaded complaint rule argued by Louisiana. The rule states the federal jurisdiction exists only when a federal question is presented on the face of the plaintiff s properly pleaded complaint. Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). Louisiana s complaint alleging damages to wild life which did not, on its face, contain 2

3 language which would subject it to jurisdiction under OCSLA. Further, they alleged, that removal was not allowed under admiralty law or the 11th Amendment. Judge Barbier disagreed stating that as long as there was jurisdiction under OCSLA the well-pleaded complaint rule did not apply. Louisiana Loses Appeal to Have Suit Against BP Heard In State Court 31 No. 7 Westlaw Journal Environmental 2, Oct. 27, In part because the spill arose out of or in connection with the drilling operations of BP on the Inter Continental Shelf. Ship owner s Limitation of Liability Action Purpose The Goal of a limitation of a Ship owner s Limitation of Liability Action is to limit the liability of the owner against any loss by a person, of property, goods, merchandise on board, damage or injury to the value of the vessel. 30 Miss. C. L. Rev. 237, In addition to limiting liability a limitation action allows a ship owner to provoke a concursus or interpleader in which all claimants would be required to litigate their actions in particular federal court. It also limits the right to a jury trial. Admiralty in a nutshell, Maraist, Galligan and Maraist, pg th ed. (West). In this case Deepwater has already sunk and is basically a total loss in value. So limiting the liability to the value of the vessel, even pre-explosion at about $30 million, would have been detrimental to plaintiffs. The Defendants s Play at Jurisdiction 3

4 Defendant s filed a limitation of liability action in a Texas Federal court. The venue they chose was the Eastern District of Texas. Defendants likely presumed that the Houston venue would be more sympatehetic to oil field and related corporations. They were correct Houston Texas is the central hub for oil industry in the United States. Also Texas in general is not plaintiff friendly as they have undergone massive tort reform within the last decades. The Judge presiding in the district of Houston, Judge Lynn Hughes, may also be sympathetic to oil industry defendants. Judge Hughes, has traveled the world giving lectures on the ethics for the American Association of Petroleum Geologists, a professional association and research group that works with BP and other oil companies. 30 Miss. C. L. Rev. 237 citing Scott Hiaasen & Curtis Morgan, BP Seeks Oil-Tested Judge on Lawsuits, Miami Herald, May 27, 2010 at 1A Front. Needless to say choosing Judge Lynn to preside over the actions would have given the impression of impropriety. He would have likely been bias towards the defendants, however maybe not to the extent as to require impeachment or removal if appointed. Multi-District Litigation Under 28 U.S.C. sec (2000) The Multi-district Litigation (MDL) device, created by legislation in 1968 in response to a crisis caused by large numbers of electrical equipment price-fixing cases flooding the federal courts. Edward F. Sherman, The Bp Oil Spill Litigation and Evolving Supervision of Multi-district Litigation Judges, 30 Miss. C. L. Rev. 4

5 237 (2011). It usually involves the consolidation of a few dozen to a few hundred cases. A panel of federal judges, the U.S. Panel on Multi-district Litigation, could transfer cases with common questions of fact: to a single federal judge for coordinated or consolidated pretrial proceedings. Id. Coordinated discovery was the principal benefit, ensuring that all the cases could share discovery. This allows discovery to be scheduled rationally, it could be less difficult to comply with and also it would avoid wasteful repetition. Over the years the transferee judge to whom the cases were transferred came to assert a more prominent managerial role over the litigation, making dispositive pretrial rulings on motions and encouraging settlement. Id. Perhaps the most critical decision for the Panel in the BP litigation to make was the selection of the judge to whom an MDL case would be transferred to. Geographical locations were a factor. Also considered where the location of witnesses and evidence. Finally availability and experience of the judge were also weighed. Id. at 238. Since the BP oil spill directly affected five states bordering the Gulf of Mexico there were a number of plausible federal district courts to which the federal cases might be transferred. The Eastern District of Louisiana in New Orleans was an obvious choice since the oil spill was closest geographically to that venue and the impact on persons and property was greatest there. Id. Plaintiffs attorneys 5

6 favored the Eastern District of Louisiana it part because of its location to the spill, location to the affected plaintiffs but also because it was likely to render a more favorable outcome than the alternative. On the other hand, attorneys for various defendants favored the district court for the Southern District of Texas in Houston. There were legitimate reasons for the Defendants choosing this venue. Houston was the defendant Transamerica s headquarters. Many of the other defendant companies were oilfield related businesses giving them significant contacts to the oil industry s headquarters. The defendants also petitioned to the panel for the appointment of a particular federal judge in Houston who had considerable experience with oil cases and was considered to be sensitive to the practice of the oil industry. Luckily for the Plaintiffs New Orleans was a more obvious choice given it s proximity and connections with the accident. New Orleans Judges considered included Judge Eldon Fallon and Stanwood Duval; who were not available due to demanding dockets. A New Orleans Judge experienced with MDLs was chosen in Judge Carl J. Barbier. He also had specialized knowledge of and experience in maritime law. Before being appointed the bench he practiced in these areas and also was renowned for his fairness and ability to facilitate cooperation between parties. Id. at

7 After the appointment of transferee Judge Barbier he began working with counsel by holding conferences to establish a method for categorizing and organizing the case which had so many various plaintiffs and defendants. He began by creating a plaintiff and defendant steering committee and appointed liaison counsel for each committee. During the first status conference held on September 16, 2010, about two hundred attorneys from all over the country attended, spilling over into another room. Id. They represented plaintiffs with cases from across the country which were transferred to the MDL as well as the many defendants named at that point in the various complaints which were consolidated. Since the initial conference conferences have included a variety of discovery and case management issues. Id. The Plaintiffs Seeking Economic Damages and Defendants Named in the B1 Master Complaint Parties named as plaintiffs in the B1 master complaints included various bundles of claimants. Categorizing the claimants into bundles of other similar plaintiffs helped to organize the proceedings. Categories of Plaintiffs listed in the B1 Master Complaint included: Commercial Fisherman, Processing and Distributing Plaintiffs, Recreational Business Plaintiffs, Commercial Business Plaintiffs, Recreation Plaintiffs, Subsistence Plaintiffs, Moratorium Plaintiffs, and Dealer Claimants. Named as Defendants in the master complaint were the 7

8 corporations BP Exploration and Production Inc., BP American Production Company and Bp p.l.c. (collectively BP ); Transocean Ltd., Transocean Offshore, Transocean Deepwater, Transocean Holdings(collectively Transocean ); Halliburton M-I; Cameron; Weathorford Anadarko, Anadarko E & P (collectively MOEX ); and MOECO. In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico, on April 20, 2010, 808 F. Supp. 2d 943, 948 (E.D. La. 2011). All of the Defendants, with the exception of MOECO, have filed Motions to Dismiss. Additionally, Drillquip, which has not been named as a Defendant in the Master Complaint, has filed a Motion to dismiss (Rec. Doc. 2107) because of the procedural effect of the Rule 14(c) tender in Transocean s Third-Party Complaint. Id. Plaintiffs allege claims under the general maritime law, the Oil pollution Act of 1990 ( OPA ), 33 U.S.C. sec et seq., and various state laws. In their master complaint Plaintiffs alleged claims for negligence, gross negligence and strict liability for manufacturing and/or design defect. Under various state laws, Plaintiffs allege claims for nuisance, trespass, and fraudulent concealment, and they also allege a claim for strict liability under the Florida Pollutant Discharge Prevention and Control Act, Fla. STat. sec et seq. Additionally, Plaintiffs seek punitive damages under all claims and request declaratory relief regarding any settlement provisions that purport to affect the calculation of punitive damages. In 8

9 re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico, on April 20, 2010, 808 F. Supp. 2d 943, 948 (E.D. La. 2011). THE VARIOUS GOVERNING STATUTES The three statutes which came to light as possibly governing this complex litigation and were determinant on the jurisdiction of the proceeding. Being an environmental and admiralty tort action they include the Outer Continental Shelf Land Act (OCSLA), the Oil Pollution Act of 1990 (OPA), and the Federal Water Pollution Control Act. John J. Costonis, The Macondo Well Blowout: Taking the Outer Continental Shelf Lands Act Seriously, 42 J. Mar. L. & Com. 511, 513(2011). The chief controlling statute is the OCSLA which establishes territory of the United States over seas known as contiguous zones twenty four miles from the baseline of the United states land mass of the United States. Moreover, this extension is an important step in preventing the removal of cultural heritage found within 24 nautical miles of the baseline. Id. citing 43 U.S.C.A (West). OCSLA The facts are undisputed that Deepwater was operating in the Gulf of Mexico approximately forty miles offshore. The location forty miles offshore where Deepwater sat was above the Outer Continental Shelf, triggering OCSLA 9

10 jurisdiction. 43 U.S.C. sec Further the activities of Deepwater were that of petroleum production which further shoehorns it under OCSLA. An accident falls within OCSLA jurisdiction pursuant to 43 U.S.C. sec when the activities causing the injuries in question could be classified as an operation on the OCS involving exploration or production of minerals, and because the case arises in connection with the operation. In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico, on April 20, 2010, 747 F.Supp.2d 704 (E.D.La. 2010). The court determined that whether admiralty jurisdiction applies would not affect the Court s jurisdiction determination, a decision on whether state, admiralty, or other law applies does not need to be addressed at this time. Id. at 709. OPA History and scope After the EXXON VALDEZ spill in 1989, there were large numbers of people who suffered actual economic losses but were precluded from any recovery by virtue of the Robbins Dry Dock rule. Robbins Dry Dock v. Flint, 275 U.S. 303 (1927). Previously an oil spill caused by a vessel on navigable water was governed by many different laws, including general maritime law and the laws of state 10

11 affected by the spill in question. The Robbins Dry Dock rule states that a claimant may not recover damages for economic harm, such as loss of income or profits, unless there has been some injury to the claimant or his property. Id. The exception to this rule is that commercial fisherman whom have claims for purely economic loss resulting from an oil spill. Louisiana v. M/V Testbank, 524 F.Supp 1170, 1173 (E.D.La.1981). These fisherman are akin to seaman under general maritime law. In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico, on April 20, 2010, 808 F. Supp. 2d 943, 958 (E.D. La. 2011). A general maritime negligence cause of action used to be only available to persons who suffered physical damage and resulting economic loss by way of an oil spill. General maritime law also provided for recovery of punitive damages in the case of gross negligence, Exxon Shipping Co v. Baker, 554 U.S. 471, 128 S.Ct. 2605, 171 L.Ed.2d 570 (2008), and strict product liability for defective products E. River S.S. Corp., 476 U.S. 858, 106 S.Ct (1986). In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico, at 959. OPA is a comprehensive statute addressing responsibility for oil spills, including the cost of clean up, liability for civil penalties, as well as economic damages incurred by private parties and public entities. OPA allows recovery for economic losses resulting from or due to an oil spill, regardless of whether the claimant sustained physical damage to the proprietary interest. Id. OPA allows 11

12 recovery for [d]amages equal to the loss of profits or impairment of earning capacity due to the injury destruction, or loss of real property, or natural resources, which shall be recoverable by any claimant. 33 U.S.C. sec. 2702(b)(2)(E). Furthermore, the House Report for the legislation noted that [t]he claimant need not be the owner of the damaged property or resources to recover for lost profits or income. H.R. Conf. Rep (1990), 1990 U.S.C.C.A.N. 779, 781. In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico, at 959. OPA allows maritime causes of action against a Responsible Parties for damages covered by OPA. The actions must comply with OPA s presentment procedure. As to the non-responsible parties, there is nothing in OPA indicating that Congress intended such parties to be immune from direct liability to persons who either suffered physical damage to a proprietary interest and/or qualify for the commercial fisherman exception. Therefore, general maritime law claims that existed before OPA may be brought directly against non-responsible parties. Id. The B1 Master Complaint alleges economic loss claims on behalf of various categories of claimants. Many of those claimants have not suffered physical injuries to their property. The B1 Master Complaint states viable claims against non-responsible parties under the exception to the Robbins Dry Dock rule. Considering that it was not the intent of congress to occupy the entire field, claims against non-responsible parties under general maritime law are not precluded by 12

13 OPA. Any claims which do fall under OPA, however must meet all presentment requirements under it. In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico, on April 20, 2010, 808 F. Supp. 2d 943, 961 (E.D. La. 2011). Admiralty Jurisdiction - Generally Vessel Status Admiralty jurisdiction arises from the conclusion that Deepwater is a Vessel as defined under section 2701(37) of the OPA as well as described in the SCOTUS s opinion in Stewart v. Dutra Construction Company. The Supreme Court indicated that vessel status could be obtained by any watercraft practically capable of maritime transportation regardless of its primary purpose or state of transit at a particular moment. John J. Costonis, The Macondo Well Blowout: Taking the Outer Continental Shelf Lands Act Seriously, 42 J. Mar. L. & Com. 511, 514 (2011). A MODU clearly falls within this definition. Only the defendant Cameron alleged that the Deepwater MODU was not a vessel in navigation at the time of the casualty on April 20, Plaintiffs and all other Defendants agreed that Deepwater was a MODU and at all material times a vessel as understood under maritime law. In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico, on April 20, 2010, 808 F. Supp. 2d at 949. Cameron however argues that although the Deepwater Horizon may have been a vessel during the times it as moved from one drilling location to another, 13

14 it disagreed that it was a vessel at the times it was stationary and physically attached to the seabed by means of 5,000 feet drill pipe. Id. If Cameron had been correct, they were not, this would have vitiated admiralty jurisdiction and general maritime law would not apply. However the court in In re Oil Spill by the Rig Deepwater Horizon in the Gulf of Mexico disagreed with Cameron. Id. Jurisprudence clearly establishes that a mobile offshore drilling unit ( MODU ) is clearly a vessel under the seminal case Offshore Co. v. Robison, where the Fifth Circuit held that a special purpose vessel, a floating drilling platform could be considered a vessel. 266 F.2d 769, 779 (5th Cir. 1959). The facts of that case showed that Offshore 55 was a platform which was used for drilling only. The platform was could not propel under its own power and if moved had to be moved by tugs. A more recent Fifth Circuit decision, Demette v. Falcon Drilling Co., Inc., Co. 280 F.3d n. 18 (5th Cir.2002), also trumped Cameron s argument which specifically held that special-purpose movable drilling rigs including jack-up rigs, are vessels within the meaning of admiralty law. Finally the Supreme Court held a vessel is any watercraft practically capable of maritime transportation. Steward v. Dutra Constr. Co., 543 U.C. 481, 497, 125 S.Ct L.Ed.2d 932 (2005). Also that a watercraft need not be in motion to qualify as a vessel... In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico, on April 20, 2010, 808 F. Supp. 2d

15 The B1 Master complaint alleged that Deepwater was a MODU and used global positioning and thruster technology to remain at it s drilling location. Deepwater was actually floating and at all material times... a vessel afloat upon the navigable waters. Also that it s only physical attachment was a string of 5,000 feet of drill pipe to the bottom of the ocean. Id. Defendant Cameron also Argued that the accident occurred at the blow out preventer BOP which was attached to the ocean floor. This would impair admiralty jurisdiction because... However the Court determined that the drill string and BOP were part of the vessel s gear or appurtenances and therefore part of the vessel. According to Grubart, Inc. v. Great Lakes Dredge & Dock Co., 513 U.S. 527, 535, 115 S.Ct. 1043, 130 L.Ed.2d 1024 (1995). Location and Connection to Maritime Activity To obtain admiralty jurisdiction, over a tort claim, there must be a satisfaction of the conditions both of location and of connection with maritime activity. 28 U.S.C. sec. 1333(1). The location test requires a determination of whether the tort occurred on navigable water. The connection test raises two broad issues. First, a court must assess the general features of the type of incident involved to determine whether the incident has a potentially disruptive impact on maritime commerce. Second, a court must determine whether the general 15

16 character of the activity giving rise of the incident shows a substantial relationship to traditional maritime activity. The Location Test is Readily Satisfied here The B1 Master Complaint alleges that the blowout, explosions, fire, and subsequent discharge of oil, occurred on or from Deepwater and its appurtenances, which was operating on waters overlying the Outer Continental Shelf; i.e., navigable waters. In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico, on April 20, 2010, 808 F. Supp. 2d at 950. The connection test is also met. First, there is no question that the explosion and resulting spill caused a disruption of maritime commerce, which exceeds the potentially disruptive threshold established in Grubart. Second, the operations of the Deepwater bore a substantial relationship to traditional maritime activity. Injuries incurred on land are recognizable in admiralty under the Admiralty Extension Act, 46 U.S.C. sec Id. at 51. If a case falls within the court s admiralty jurisdiction general maritime law will apply. With admiralty jurisdiction comes the application of substantive Admiralty law. Grubart, 513 U.S. at 545, 115 S.Ct [W]here OCSLA and general maritime law both apply, the case is to be governed by maritime law. Tenn. Gas Pipeline v. Houston Cas. Ins. Co., 87 F.3d 150, 154(5th Cir.1996). In re 16

17 Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico, on April 20, 2010, 808 F. Supp. 2d at 951. Conclusion With the various choices in jurisdiction available to the parties in the litigation over the Mocondo well explosion the end result was that of Federal court in New Orleans Louisiana. The winding road of OPA and OCSLA takes us to the place where, all other things being considered, the litigation should fairly be held. Many of the plaintiffs and defendants were familiar with the chosen forum and it was of the closest proximity to the explosion. It has thus far provided a fair forum to litigate this complex dispute which will likely go down in history as a feat in and of itself. 17