Pacific Operators Offshore v. Valladolid (10-507)
Oral argument: Oct. 11, 2011
Appealed from: United States Court of Appeals for the Ninth Circuit (May 13, 2010)
Juan Valladolid, an employee of the Petitioner, Pacific Operators Offshore, died when a forklift crushed him at Pacific's oil-processing facility on the California coast. Valladolid’s widow filed a claim for federal workers’ compensation under the Outer Continental Shelf Lands Act (“OCSLA”), but the claim was rejected because Valladolid died on land rather than on the outer continental shelf. On appeal, the U.S. Court of Appeals for the Ninth Circuit reversed, holding that OCSLA benefits are not limited to injuries or deaths that occur on the outer continental shelf. Rather, the court held, coverage depends on the existence of a causal nexus between the injury or death and operations on the outer continental shelf. Petitioner Pacific argues that OCSLA contains a strict “situs-of-injury” requirement, while Respondent Valladolid contends that such a requirement would defeat Congressional intent. The Supreme Court’s decision will resolve a longstanding question of statutory interpretation, and may shed light on the Court’s current approach to workers’ compensation laws.
The Outer Continental Shelf Lands Act, 43 U.S.C. §§ 1331-1356 (OCSLA), governs those who work on oil drilling platforms and other fixed structures beyond state maritime boundaries. Workers are eligible for compensation for “any injury occurring as the result of operations conducted on the outer Continental Shelf.” 43 U.S.C. § 1333(b) (2006). When an outer continental shelf worker is injured on land, is he (or his heir):
(1) always eligible for compensation, because his employer’s operations on the shelf are the but for cause of his injury (as the Third Circuit holds); or
(2) never eligible for compensation, because the Act applies only to injuries occurring on the shelf (as the Fifth Circuit holds); or
(3) sometimes eligible for compensation, because eligibility for benefits depends on the nature and extent of the factual relationship between the injury and the operations on the shelf (as the Ninth Circuit holds)?
Whether an injured outer continental shelf worker can collect compensation benefits under the Outer Continental Shelf Lands Act when the injury occurred while working on land.
In 1953, Congress passed the Outer Continental Shelf Lands Act (“OCSLA”) to regulate use of the outer continental shelf, defined as all submerged lands beyond the states’ three-mile coastal jurisdiction. See 43 U.S.C. § 1331(a). OCSLA granted the federal government exclusive jurisdiction over all outer continental shelf lands. See 43 U.S.C. § 1333(a)(1). Additionally, Section 1333(b) of OCSLA extended the Longshore and Harbor Workers’ Compensation Act (“LHWCA”) to the outer continental shelf. See id. § 1333(b). Under that provision, employees injured as a result of operations taking place on the outer continental shelf can collect workers’ compensation benefits. See id.
Juan Valladolid worked for Petitioner Pacific Operators Offshore (“Pacific”), spending ninety-eight percent of his working time on the Hogan, an offshore drilling platform on the outer continental shelf. See Valladolid v. Pac. Operations Offshore, LLP, 604 F.3d 1126, 1129 (9th Cir. 2010). Juan worked as a roustabout, performing cleaning and maintenance duties such as trash removal, washing and painting decks; he also assisted in the loading and unloading of the platform crane. See id. Juan occasionally worked at Pacific’s oil-processing facility, La Conchita, located on the California coast. See id. On June 2, 2004, he was assigned to gather up scrap metal around the La Conchita facility using a forklift. See Brief for Petitioners, Pacific Operators Offshore et al. at 4. Later that day, Juan was found dead, crushed under the forklift. See id. The accident report indicated that he was standing on the forklift to pick fruit when the accident occurred. See id. at 4–5.
Juan’s widow, Respondent Luisa Valladolid, filed a claim for benefits under both LHWCA and OCSLA. See Valladolid, 604 F.3d at 1129. The claims were referred to an Administrative Law Judge (“ALJ”), who denied them both. See id. at 1130. The ALJ’s determination on the LHWCA claim was affirmed by the Ninth Circuit and is not on appeal here. See id. at 1142. However, the ALJ’s decision to deny the OCSLA claim resulted in the legal controversy at issue here. The ALJ rejected that claim because Valladolid’s death occurred on land, not on the outer continental shelf itself. See id. at 1130. The Benefits Review Board affirmed the ALJ’s decision on appeal, agreeing that Section 1333(b) of OCSLA requires that injuries occur on the outer continental shelf in order to trigger coverage. See id.
Respondent Luisa Valladolid then appealed to the United States Court of Appeals for the Ninth Circuit, which reversed. See Valladolid, 604 F.3d at 1142. Departing from the approaches taken in other circuits, the Ninth Circuit held that outer continental shelf workers may be eligible for compensation under OCSLA, even when their injuries occur on land. See id. at 1142. The Ninth Circuit rejected the strict “situs-of-injury” test adopted by the ALJ, requiring instead the existence of a “substantial nexus” or causal relationship between the injury and operations on the outer continental shelf. See id. at 1139.
The Ninth Circuit’s novel approach to Section 1333(b) added one more twist to an issue of statutory interpretation that has split the circuit courts for decades. The U.S. Court of Appeals for the Third Circuit, for example, has rejected the situs-of-injury test and replaced it with a broad “but-for” test, asking whether an injury could be sequentially linked to operations occurring on the outer continental shelf. See Curtis v. Schlumberger Offshore Serv., Inc., 849 F.2d 805 (3d Cir. 1988). In contrast, the U.S. Court of Appeals for the Fifth Circuit has adopted a stringent situs-of-injury test, denying coverage unless the injury actually occurred in or over the waters of the outer continental shelf. See Mills v. Dir., Office of Workers’ Compensation Programs, 877 F.2d 356 (5th Cir. 1989). The Supreme Court granted certiorari to resolve this conflict between the circuits.
In this case, the Supreme Court will decide whether Section 1333(b) of the Outer Continental Shelf Lands Act (“OCSLA”) contains a “situs-of-injury” test limiting compensation coverage to those injuries and deaths that occur on the outer continental shelf. Petitioner Pacific argues that the plain meaning of the statute, as well as a range of policy considerations, support the finding of a situs-of-injury requirement. See Brief for Petitioners, Pacific Operators Offshore et al. at 15–16, 18–21, 30. On the other hand, Respondents Luisa Valladolid and the Director of the Office of Workers’ Compensation Programs (“Workers' Comp Director”) contend that the text of Section 1333(b) precludes the situs-of-injury test. See Brief for Respondent, Luisa L. Valladolid at 23–24; Brief for the Federal Respondent at 17–18. They assert that a status-based test—asking whether the worker engages primarily in operations on the outer continental shelf—is the appropriate inquiry. See Brief for Respondent at 52–53; Brief for the Federal Respondent at 32–33.
Pacific observes that a decision in favor of the situs-of-injury test would provide courts with a bright-line rule to follow when similar factual disputes arise in the future. See Brief for Petitioners at 30–31. According to Pacific, such a rule would ultimately further the goal of judicial efficiency; unlike the “but-for” and “substantial nexus” tests, under the situs test, coverage would depend solely on the location of the injury, a relatively straightforward inquiry for courts to undertake. See id. at 31–33. Thus, if an employee is injured while working on the outer continental shelf, he would be covered under OCSLA—but if he is injured on land, no coverage would be extended. See id. Pacific also adds that this bright-line rule, like all such rules, would reduce the need for litigation, assure that similarly situated workers are treated similarly by courts, and produce more predictable results. See id. at 31–32.
However, Respondent Valladolid claims that Pacific overstates the simplicity and predictability of the situs-of-injury test, noting a barrage of litigation that followed the Supreme Court’s decision to adopt a similar test for the Longshore and Harbor Workers’ Compensation Act (“LHWCA”). See Brief for Respondent at 44–47. The LHWCA situs test limited workers’ compensation benefits to injuries that occurred in the navigable waters of the United States. See id. at 44. Despite the simplicity of this rule, the Court could not define “navigable waters,” and situs-related litigation ensued in many LHWCA cases. See id. at 44–45. For example, in one case, a longshoreman who was knocked from a wharf into the water and died as a result was covered under state workers’ compensation rather than under LHWCA because the proximate cause of the death occurred on land. See id. at 45. Valladolid argues that similar problems will likely arise in the context of OCSLA, as the Court may find it difficult to define in advance the exact geographical boundaries of the outer continental shelf. See id. at 47.
Both parties argue that the outcome of this case may affect companies’ required insurance coverage. See Brief for Petitioners at 33; Brief for Respondent at 47. The Workers' Comp Director contends that Pacific’s situs-of-injury test may require employers to obtain costly dual insurance coverage. See Brief for the Federal Respondent at 29–30. The Workers' Comp Director explains that, under Pacific’s proposed scenario, employers would have to purchase LHWCA insurance for all workers who engage in operations on the outer continental shelf—regardless of whether they are primarily shelf- or land-based workers—while still maintaining state workers’ compensation for workers injured on land or elsewhere. See id. In addition, Valladolid notes that, if an outer continental shelf worker is injured on the high seas (that is, beyond the outer continental shelf), the worker is unlikely to receive either state or federal OCSLA workers’ compensation, forcing the worker to seek damages in tort. See Brief for Respondent at 49–50. The risk of expensive tort suits, in turn, may compel employers to spend additional money on liability insurance, again resulting in double coverage. See id. at 50.
Pacific, on the other hand, argues that the Ninth and Third Circuits’ more expansive causal approaches to compensation are more likely to result in expensive coverage schemes. See Brief for Petitioners at 33–34. Pacific notes, for example, that under these approaches, employers would be forced to purchase both state workers’ compensation and LHWCA insurance for all land-based workers, lest a court finds that any worker’s injuries were the result of company operations on the outer continental shelf. See id. Valladolid, however, points out that employers are already able to obtain dual coverage policies (for both state workers’ compensation and LHWCA) with ease, thus minimizing Pacific’s possible concern. See Brief for Respondent at 48.
At issue in this case is Section 1333(b) of the Outer Continental Shelf Lands Act (“OCSLA”). See 43 U.S.C. § 1333(b). The section allows workers to seek compensations under the provisions of the Longshore and Harbor Workers’ Compensation Act (“LHWCA”) for injury or death resulting from operations conducted on the outer continental shelf (“OCS”). See id. The U.S. Court of Appeals for the Ninth Circuit held that Section 1333(b) does not categorically preclude OCS workers who are injured on land from claiming benefits under LHWCA. See Valladolid v. Pac. Operations Offshore, LLP, 604 F.3d 1126, 1147 (9th Cir. 2010). The Supreme Court must now determine whether to uphold the Ninth Circuit’s ruling, or whether to adopt the “situs-of-injury” test proposed by Petitioner Pacific. See Brief for Petitioners, Pacific Operators Offshore et al. at 14. Pacific argues that an employee injured on land should not be entitled to compensation under Section 1333(b), regardless of whether the employee spent the majority of his time working on the OCS. See id.
Textual and Structural Interpretation of Section 1333(b)
The parties disagree over the plain meaning of Section 1333(b). See Brief for Petitioners at 14–15; Brief for Respondent, Luisa L. Valladolid at 23–25; Brief for Federal Respondent at 17–21. According to Pacific, the plain language of Section 1333(b) unambiguously requires that an injury occur on the OCS in order for workers to claim compensation. See Brief for Petitioners at 14–15. Respondent Luisa Valladolid, on the other hand, asserts that the plain language of the statute simply requires the operation that causes a worker’s injury to be conducted on the OCS, but otherwise imposes no additional location requirement. See Brief for Respondent at 23–24.
Pointing to the phrasing of Section 1333(b), Pacific contends that an injury cannot logically be deemed the result of OCS operations unless it was caused by something that happened on the shelf. See Brief for Petitioners at 15. Therefore, in Pacific’s view, the injury must occur on the OCS itself in order to trigger OCSLA coverage. See id. If coverage is not pegged to the location of the injury, Pacific contends that the causal relationship between the injury and OCS operations could become remote and tenuous, making coverage determinations difficult to resolve. See id. Additionally, Pacific contends that Congress intentionally omitted any textual reference to a situs-of-injury requirement in order to avoid readings that unduly narrowed or expanded the scope of OCSLA. See id. at 16–17. For example, if Section 1333(b) did include an express situs-of-injury requirement, employers in some jurisdictions would be able to argue that the OCSLA did not cover latent diseases; hence, if an employee was exposed to harmful substances on the OCS, but manifested symptoms only later (off the OCS), the employee might be denied coverage because his “injury” did not technically occur on the OCS. See id. at 16. Conversely, the inclusion of a situs-of-injury requirement may also unintentionally expand the coverage of OCSLA—for instance, covering an employee who suffered a heart attack while on the OCS, even if the attack bore no direct relation to OCS operations. See id. at 16–17.
Furthermore, with reference to the neighboring provisions surrounding Section 1333(b), Pacific contends that Section 1333 as a whole was intended to extend federal coverage strictly to the OCS. See Brief for Petitioners at 23–25. Pacific notes that none of the explicit situs requirements listed in the other Section 1333 provisions included areas already governed by state law, such as dry land; rather, all the provisions pointed to specific ungoverned offshore areas, proving that Congress crafted Section 1333 to narrowly address OCS coverage issues. See id. at 24–25. Pacific also supports its reading with the Supreme Court case of Offshore Logistics, Inc. v. Tallentire, which, in a footnote, appeared to confirm that Section 1333 as a whole contained a presumed situs element. See 477 U.S. 207, 220 n.2 (1986); Brief for Petitioners at 27–28. Therefore, Pacific asserts that Section 1333(b) should be read in light of the section’s situs-focused aim. See Brief for Petitioners at 28–29.
Valladolid, on the other hand, proposes that the most natural reading of Section 1333(b) does not require injuries to occur on the OCS, though it does require that the operations causing the injuries take place on the OCS. See Brief for Respondent at 23–24. Valladolid notes that Congress could have easily amended the language of Section 1333(b) to clarify that the provision was limited to OCS injuries—for instance, by stating that coverage would be limited to injuries occurring on the OCS as the result of operations conducted on the OCS. See id. at 27, 39. Valladolid further bolsters her reading of Section 1333(b) by referring to an established principle of statutory construction—namely, that courts should assume that Congress acted intentionally in including or excluding legislative language. See id. at 25–26. Thus, as Section 1333(b) contains no explicit situs-of-injury requirement, Valladolid concludes that courts must treat the omission as purposeful. See id.
Along similar lines, Valladolid contends that the explicit situs references contained in neighboring provisions to Section 1333(b) strongly indicate that the absence of situs language in Section 1333(b) is not accidental. See Brief for Respondent at 25. For example, Valladolid notes that Section 1333(a)(1) expressly extends federal law to the subsoil and seabed of the OCS, as well as to fixtures attached to the seabed. See 43 U.S.C. § 1333(a)(1). Similarly, Section 1333(c) extends the National Labor Relations Act to certain surfaces and structures of the OCS. See id. § 1333(c). Valladolid argues that, as a matter of statutory interpretation, courts should assume that Congress acted intentionally in omitting or including certain language in its legislative enactments. See Brief for Respondent at 25. Thus, according to Valladolid, Congress’s decision to explicitly and specifically outline the geographic scope of every provision other than Section 1333(b) reinforces the argument that Section 1333(b) contains no situs component. See id. at 27.
Legislative History of Section 1333(b)
Pacific asserts that the purpose of Section 1333(b)—much like the purpose of OCSLA as a whole—was to function as a gap filler, addressing the jurisdictional void that existed with respect to workers’ compensation for OCS employees. See Brief for Petitioners at 18. Therefore, in light of this purpose, Pacific argues that Section 1333(b)’s coverage must be strictly restricted to the geographical boundaries of the OCS; Congress did not aim for Section 1333(b) to provide duplicative or superfluous remedies for injuries occurring on land, as land-based remedies were already well developed under state law. See id. at 22–23. However, even conceding that the gap-filling function was not the sole purpose behind Section 1333(b), Pacific contends that a situs-of-injury requirement would contribute to the creation of a uniform and coherent compensation system for OCS employees. See id. at 20–21. Pacific points out that, in the absence of a situs requirement, similarly situated workers may receive unfairly disparate treatment depending on the location of their injury. See id. at 21–22. For example, under Valladolid’s reading, an employee who spends most of his time working on the OCS would receive better compensation for land-based injuries than an employee who suffers similar injuries, but spends most of his time working on land; though the two employees are working on the exact same project—possibly even side by side—and facing the same amount of risk, only the OCS employee is entitled to the more generous OCSLA compensation, owing to the greater amount of time spent on the OCS. See id.
In response, Valladolid points out that, at the early drafting stages of OCSLA, the Senate deleted a provision that would have extended Section 1333(b) coverage to only those workers who could not receive compensation under state law. See Brief for Respondent at 41–42. According to Valladolid, the deletion of this provision indicates Congress’s intention to provide overlapping state and federal coverage: even if an injury occurs on land and is covered by state law, the injured worker is not precluded from claiming compensation under Section 1333(b) of OCSLA. See id.
On the other hand, the Federal Respondent, the Director of the Department of Labor’s Office of Workers’ Compensation Programs (“the Workers' Comp Director”), suggests that OCSLA’s exact legislative history is unclear. See Brief for the Federal Respondent at 27. Therefore, the Workers' Comp Director advises the Court to rely more heavily on Section 1333(b)’s plain text, which is interpreted to logically preclude a situs-of-injury requirement. See id. at 27-28. The Workers' Comp Director proposes and defends yet another compensation standard: bestowing OCSLA benefits solely on workers who spend a substantial amount of time working on the OCS. See id. at 32.
The Court’s decision in this case will likely clarify whether OCSLA extends to injuries and deaths that occur outside the OCS. The decision may also articulate the appropriate test to determine OCSLA's coverage. Petitioner Pacific argues that OCSLA’s plain text, as well as the policy considerations underlying the Act, all indicate that OCS workers injured on land are not eligible for OCSLA compensation. On the other hand, Respondent Valladolid argues that the absence of a clear situs or location requirement—in OCSLA’s text and in its legislative history—favors the conclusion that OCS workers injured on land may be eligible for OCSLA benefits. A judgment for Pacific may lead to a bright-line rule that is easier to administer in the courts, but it may also create gaps in workers’ compensation payments, stranding those employees injured in areas where neither OCSLA nor state laws clearly apply. A decision in favor of Valladolid and the status-based test may, on the other hand, increase the number of employees eligible for OCSLA compensation and therefore intensify the burden on agencies administering workers’ compensation schemes.
Edited by: Edan Shertzer
Litigation Management Magazine: Expanding Coverage: Federal Compensation Coverage for Offshore Oil Industry Workers (Fall 2011)
Mayer Brown: Supreme Court Grants Certiorari in Pacific Operations Offshore, LLP v. Valladolid (Feb. 23, 2011)
Business Insurance: Supreme Court to Hear Case of Worker Killed Offshore (Feb. 22, 2011)