United States: OCSLA Choice Of Law Is Not Waivable, Inadvertently Or Otherwise

Case:   Petrobras Am., Inc. v. Vicinay Cadenas, S.A.
             United States Fifth Circuit Court of Appeals
             Case No. 14-20589, 815 F.3d 211; 2016 U.S. App. LEXIS 4277 (03/07/2016)

In Petrobras America, Inc., et al. v. Vicinay Cadenas, S.A., the United States Fifth Circuit Court of Appeals re-visited whether the choice of law provision under the Outer Continental Shelf Lands Act (“OCSLA”) can be waived, holding that it cannot.

Petrobras America and its Underwriters sued Vicinay Cadenas, S.A., the manufacturer of an underwater tether chain that broke after being installed. The chain secured a pipeline system used for oil production on the Outer-Continental Shelf of the Gulf of Mexico. Petrobras America and its Underwriters alleged subject matter jurisdiction based on admiralty law or, alternatively, under OCSLA. Vicinay moved for partial summary judgment, arguing it was entitled to prevail under the maritime law’s economic loss doctrine. In opposing Vicinay’s motion for partial summary judgment, Petrobras America and its Underwriters did not contest the application of maritime law. The district court, assuming that maritime law applied, granted summary judgment in Vicinay’s favor and an interlocutory appeal from the decision followed.

Underwriters then sought leave to amend their complaint, alleging, for the first time, that Louisiana law, not maritime law, applied to the dispute under OCSLA. The Motion was denied by the district court and the appeal of this ruling was consolidated with the previous interlocutory appeal.

On appeal, Vicinay argued that Petrobras’ Underwriters waived their choice of law argument by not raising it in the district court until the eleventh-hour motion to amend their complaint, which was filed after summary judgment was granted. Vicinay also asserted that the Underwriters confused OCSLA subject-matter jurisdiction, which is conferred on federal courts in 43 U.S.C. § 1349(b)(1)(A) and which cannot be waived, with OCSLA choice of law pursuant to 43 U.S.C. §1333(a), which allegedly could be waived and therefore could not be raised for the first time on appeal.

The Fifth Circuit rejected Vicinay’s arguments, holding that the choice of law prescribed by OCSLA is statutorily mandated and is consequently not waivable by the parties. “Because Congress has delineated among admiralty, federal law and adjacent state law in OCSLA, the parties may not avoid, whether voluntarily or inadvertently, the statutory choice.” The Fifth Circuit reasoned that OCSLA’s choice of law cannot be waived, as it was prescribed by Congress and parties may not voluntarily contract around Congress’ mandate.

The Fifth Circuit distinguished its earlier holding in Fruge v. Amerisure Mutual Insurance Co., 663 F.3d 743, 747 (5th Cir. 2011), explaining that the failure to raise an issue as to the choice of law analysis in Fruge stemmed from a contractual provision, not a statutorily mandated choice of law, and since it was not timely raised before the district court, it was waived. The choice of law provision at issue in Petrobras America, Inc., however, stemmed from a statutory mandate and could not be waived under any circumstances. Because parties cannot choose to avoid Congress’s choice of law provision under OCSLA, a fortiori the provision could not be waived by failure of Underwriters’ to raise the issue below. Accordingly, Underwriters’ choice of law argument had not been waived.

The Fifth Circuit went on to hold that under OCSLA, maritime law did not apply of its own force. Rather, Louisiana law – the law of the state adjacent to the OCSLA situs – applied because the other criteria of OCSLA choice of law were satisfied. Based on its rulings, the Fifth Circuit reversed and remanded for further proceedings under Louisiana law.

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