Not too Hot, Not too Cold: Fifth Circuit Adopts "Goldilocks Standard" for Economic Damages under OPA 90

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Author: Delaney Norton

            This case¹ arose out of the well known Deepwater Horizon disaster in which an offshore drilling rig suffered a massive blowout resulting in an 87-day discharge of oil into the Gulf of Mexico.² Loggerhead Holdings, Inc., (“Loggerhead”) owned a scuba diving cruise business and asserted that one of its special-purpose vessels, the Nekton Rorqual, encountered oil from the exploded well while traveling and allegedly caused significant damage to numerous components of the vessel.³

            Loggerhead opted out of the class settlement and filed suit against multiple BP entities in the United States District Court for the Southern District of Texas in 2013.⁴ However, litigation against BP centralized all federal claims; thus, the suit was transferred to the Eastern District of Louisiana to join the multi-district litigation.⁵ In 2016, Loggerhead was required to file a new complaint and sought relief for economic⁶ and physical damages⁷ under the Oil and Pollution Act (“OPA”). The court granted summary judgment in favor of BP holding that the lack of evidence failed to support Loggerhead suffered any loss of earnings originating from “the injury, destruction, or loss of real property, personal property, or natural resources,” as required under 33 U.S.C. §2702 (b)(2)(E).⁸ Loggerhead appealed asserting that the trial judge, Judge Barbier, applied the incorrect causation standard was applied to its claim.⁹

            The Fifth Circuit concluded that the reasonable standard to apply in determining claims, such as the one subject to this litigation, should be the substantial-nexus test.¹⁰  In so doing, the court adopted the test advanced by Judge Barbier in an earlier case, In re Oil Spill.¹¹ He drew upon the Supreme Court’s interpretation in  Pac. Operators Offshore, LLP v. Valladolid,¹² of  the phrase “as the result of”¹³ in the Outer Continental Shelf Lands Act and similar language in OPA 90, 33 U.S.C. §2702(a), “that result from such incident.”_¹⁴

            The Fifth Circuit applied this test and relied on disputed facts as supporting evidence in analyzing the possibility of a substantial causal link: (1) the interpretation of the words “canceled” and “rescheduled,”¹⁵ (2) whether the Rorqual was fully operational at the time of the accident even though it was experiencing issues,¹⁶ (3) the presentation of evidence of both parties with regard to the source of the oil that the Rorqual encountered,¹⁷ and (4) the reasons for Loggerhead’s cessation of operations after the Deepwater Horizon disaster.¹⁸

            The Fifth Circuit reversed the district court’s summary judgment of Loggerhead’s § 2702(b)(2)(E) claims reasoning that a reasonable fact-finder could find the required causal link between the Deepwater Horizon disaster and downfall of Loggerhead.¹⁹ Notably, the Court revealed on the fact that despite Loggerhead’s despairing financial distress in the years prior to the Deepwater Horizon disaster, it was still continuing operations for numerous years preceding the disaster.²⁰ Therefore, a present fact in question remains defeating summary judgment – Could Loggerhead have continued to operate, possibly even improve its financial circumstances had the Deepwater Horizon disaster not occurred?²¹

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¹ In re Deepwater Horizon, --F.4th--(2022) U.S. App. LEXIS 24863, 2022 WL 4006944.

² LEXIS 24863 *3, WL 4006944 *1.

³ Id. at *4, Id.

⁴ Id. at *5, Id. *2.

⁵ Id., Id.

⁶ 33 U.S.C. § 2702(b)(2)(E).

⁷ 33 U.S.C. § 2702(b)(2)(B).

⁸ LEXIS 24863 *7, WL 4006944 *2.

⁹ Id. at *8, Id. at *3.

¹⁰ Id. at *10, Id. at *4.

¹¹ 558 F. Supp. 3d 331 (E.D. La. 2021) revised opinion. (The case is more often referred to by Classy Cycles, the claimant.)

¹² 565 U.S. 207, 221 (2012) As explained by Judge Barbier, the Supreme Court in Valladolid requiring a “significant causal link” between the damage and incident, that is, a “substantial nexus.” See 558 F.Supp. 3d at 339.

¹³ 43 U.S.C. § 1333(b); see also, 558 F.Supp. 3d at 339.

¹⁴ Id. at 337.

¹⁵ Id. at *12, Id.

¹⁶ Id. at *13, Id. at *5.

¹⁷ Id. at *13-16, Id. at *5-6.  

¹⁸ Id. at *16, Id. at *6.

¹⁹ Id. at *18, Id.

²⁰ Id., Id.

²¹ Id., Id.