The Fifth Circuit in Petrobras America, Inc., et al v. Vicinay Cadenas, S.A., No. 14-20589, (5th Cir. March 7, 2016) considered the choice of law provision under the Outer Continental Shelf Lands Act ("OCSLA").
In this case, Petrobas and its underwriters sued Vicinay Cadena, S..A. to recover $400 million in damages when a tether chain securing a piping system for oil production from the Outer Continental Shelf of the Gulf of Mexico. Petrobas and its underwriters alleged subject matter jurisdiction based on admiralty or, alternatively, under OCSLA; they did not assert Louisiana law applied. Vicinay moved for summary judgment asserting it was entitled to prevail under the maritime law doctrine of economic loss announced in East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858 (1986). The district court assuming maritime law applied, granted the motion. After both parties sought an interlocutory appeal, the underwriters filed a motion to amend to plead Louisiana law as the applicable substantive law under OCSLA. It was denied as untimely.
The first issue addressed by the Fifth Circuit was whether the underwriters waived their choice of law argument by raising it after the summary judgment was granted. Reviewing the OCSLA and applicable jurisprudence, the Fifth Circuit concluded that OCSLA choice of law may not be waived stating "the parties may not avoid, whether voluntarily or inadvertently, the statutory choice."
The Fifth Circuit next addressed what substantive law applied, Louisiana law or maritime law, applying the test enunciated in Union Tex. Peteroleum Cop. v. PLT Eng'g, Inc., 895 F.2d 1043 (5th Cir. 1990): (1) the controversy must arise on a situs cover by OCSLA; (2) Federal maritime law must not apply of its own force; and (3) state law must not be inconsistent with Federal law. The question therefore was whether maritime law applied of its own force under the Grubart location and connection with maritime activity tests. The Fifth Circuit held that the incident failed the connection test because "the incident does not have the potential to disrupt maritime commerce or navigational activities in the Gulf of Mexico." In addition, citing Texaco Exploration & Production v. AmCllyde Engineered Products, Inc. the tort claims are not substantially related to maritime activity and are "inextricably intertwined" with the development and production of the resources of the shelf. 448 F.3d 760 (5th Cir. 2006), writ denied 549 U.S. 1053 (2006).
As a result, because maritime law does not apply of its own force and the other criteria of OCSLA choice of law were satisfied, the Fifth Circuit held that Louisiana law applied. The court reversed the summary judgment and remanded the case for further proceedings under Louisiana law.