Not too Hot, Not too Cold: The “Goldilocks Standard” of OPA 90 Causation. An Answer to the Causation Standard for Economic Damages under OPA 90
In Re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010, Classy Cycles, Inc. v. BP p.l.c., et al., No. 16-05923, 2021 U.S. Dist. LEXIS 172677* (E.D. La. August 26, 2021, Barbier, J.)
Since the BP/Deepwater Horizon litigation began, one of the big questions has been the standard of causation for economic losses pursuant to 33 U.S.C. § 2702(b)(2)(E). Judge Barbier first alluded to the conundrum in 2011 when he confronted the issue at that time; but, he declined to address the parameters stating that it falls between “but for” causation and “proximate cause.”[1] He now provides an answer in the noted case.
Classy Cycles operates a business renting various types of vehicles in Panama City Beach, Florida. It filed a claim for economic damages under 33 U.S.C. § 2702(b)(2)(E) asserting it lost income because of the decline in tourism to Panama City Beach as a result of the BP/Transocean Horizon oil spill. The claimant also asserted it lost business opportunities.[2]
BP filed a Motion for Summary Judgment to dismiss the economic damage claim of Classy Cycles maintaining that the claimant did not have a loss of profits based on its income statements and tax returns.[3] However, Classy Cycles asserted that its income and tax returns were not correct, and loans were wrongly included as income. BP stressed that prior deposition testimony could not be corrected under the “sham affidavit” rule.[4] Judge Barbier did not consider a conflict existed. He denied the Motion for Summary Judgment stating that questions of fact, credibility and evidence of the loans remained.[5] However, he did grant the Summary Judgment on the claim for lost business opportunities as they are not only speculative but also the claimant failed to disclose the claims as required by the court’s pre-trial order.[6]
The court then addressed the primary issue in the BP Motion for Summary Judgment: What is the standard of causation for economic damage claims under OPA 90? It was undisputed that none of the claimant’s property was damaged by oil and that its vehicles were not used on the beach. Also undisputed was that tourism to the area declined after the spill and did not recover for some time thereafter.[7]
Section 2702 (a) places liability on the Responsible Party (BP) “for the removal costs and damages specified in subsection (b) that result from such incident.” Further, § 2702(b)(2)(E) permits a claimant to recover damages for loss of profit or earning capacity “due to the injury, destruction, or loss of real property, personal property or natural resources….” Hence, as Judge Barbier queries: “What does ‘due to’ mean?”[8]
BP abandoned its original argument that the time-honored proximate cause test of tort law should apply (See Moratoria Claims, 168 F. Supp. 3d 908, 914 [E.D. La. 2016]) and stated that a direct causal relationship between the damage and discharge of oil must exist and relied on Blue Water Boating Inc. v. Plains All American Pipeline, L.P., No. 16-3283, 2017 WL 405425 (C.D. Cal. Jan. 26, 2017) for support. Judge Barbier found that case distinguishable because the asserted discharge of oil in that incident was considerably smaller than the BP spill and none of the oil reached the area where the claimant operated its business.[9]
When Congress wrote OPA 90, it knew the meaning of the term “proximate cause” as it is used in 33 U.S.C. § 2704(c)(1) which states: “Subsection (a) does not apply if the incident was proximately caused by . . .”[10] By not using the phrase “proximate cause” and considering the intent of Congress was to expand recovery under OPA 90 “there is little reason for courts to hark back to stock, judge made proximate-cause formulations.”[11]
Likewise, as Congress was aware of “proximate cause,” it was presumably aware of “but for” causation and chose not to use that standard, also and therefore it is excluded. In addition, that causation analysis would be too broad causing a domino effect of potentially limitless liability.[12]
Judge Barbier drew upon the precedential opinion of the Supreme Court in Pacific Operators Offshore, LLP v. Valladolid[13] which similarly rejected the “but for” and “proximate cause” standard interpreting 43 U.S.C. § 1333(b) of the Outer Continental Shelf Lands Act, which extends the Longshore and Harbor Workers’ Compensation Act to injuries “occurring as the result of operations conducted on the Outer Continental Shelf.” In Valladolid, the Supreme Court crafted the “substantial nexus”[14] test to determine if an injury falls within the purview of OCSLA. Thus, as OCSLA uses language similar to OPA 90, (i.e., that result from) in order for a claimant to recover economic damages under OPA 90, “there must be a significant causal link between the injury, destruction, or loss of property or natural resources and the plaintiff’s lost profits or impaired of earning capacity.”[15] In addition, the loss “must have resulted from the discharge or significant threat of discharge of oil.”[16]
Judge Barbier admitted the standard has a great deal of flexibility and likely will depend on the size and extent of any discharge of oil. In the case at bar, if a jury finds that the spill’s damage to water and the beaches in Panama City Beach caused fewer tourists and that Classy Cycles sustained a loss of profit due to the decline in tourism, then it has established a “significant relationship” and entitled to recovery.[17]
Many thanks to Ben Allums, Judge Barbier’s law clerk, for sending us the opinion before it was published by Lexis. There is no WestLaw citation, yet.
[1] See: In re Oil Spill, 808 F. Sup. 2d 943, 966 (E.D. La. 2011).
[2] No. 16-05923, Classy Cycles, Inc. v. BP p.l.c., p. 1-2.
[3] Id. at 2.
[4] Id. at 4.
[5] Id. at 4-5.
[6] Id. at 5-6. Judge Barbier also dismissed claims based on General Maritime Law as well as a claim for punitive damages. Id. at 2-3.
[7] Id. at 7-8.
[8] Id. at 8.
[9] Id. at 9.
[10] Id. at 10-11. 33 U.S.C. § 2704 (c) denies a Responsible Party of the limitation of liability under 33 U.S.C. § 2704 (a) if the discharge was “proximately caused” by the gross negligence, willful misconduct, or violation of a safety regulation by the Responsible Party.
[11] Citing CSX Transp., Inc. v. McBride, 564 U.S. 685, 702 (2011).
[12] No. 16-05923, Classy Cycles, Inc. v. BP p.l.c., p. 11.
[13] 565 U.S. 207, 221 (2012).
[14] Between the “but for” test adopted by the Third Circuit in its interpretation of 43 U.S.C. § 1333 (b) and the “proximate cause” standard advocated by Justice Scalia in his concurring opinion in Valladolid. No. 16-05923, Classy Cycles, Inc. v. BP p.l.c., p. 11-12.
[15] Italics added
[16] Citing 33 U.S.C. § 2702(a).
[17] No. 16-05923, Classy Cycles, Inc. v. BP p.l.c., p. 12.
