In re: Oil Spill by the Oil Rig “Deepwater Horizon”

By Brendan Selby

This Comment discusses the ongoing litigation arising from the oil spill around the Deepwater Horizon rig. In particular, it analyzed the causation standard for claims for pure economic loss against the background of maritime common law and OPA’s economic loss provision, which most courts have found to eschew the common law pure economic loss rule. Following the lead of this existing case law, the August 26, 2011 In re: Oil Spill order held that, under maritime common law, pure economic loss claimants in the Deepwater Horizon litigation (excepting fishermen) have no available remedy. However, the order found that OPA expanded the scope of compensable claims beyond the pure economic loss rule. The question is how far, and specifically, what kind of causal relationship must be shown between economic injury and physical damage or loss. Case law suggests that the courts should not blindly import a full-fledged proximate cause analysis into the economic loss provision, but neither should they abdicate their traditional role in formulating fair and reasonable limitations on liability.

This Comment then evaluates competing interpretations of the causation standard contained in OPA’s economic loss provision. The use-right requirement would prohibit recovery for economic loss unless the claimant has “a right physically to obtain or use property or resources that are damaged or lost because of an oil spill.” This requirement provides a (relatively) simple and categorical test, but it is overly inflexible and inconsistent with the best plain language reading of the statutory provision. A factual cause requirement — in the heightened form proposed by Professor Robertson — would make recovery for economic loss dependent on showing that the injury would still have occurred in an imagined world where the spill caused no physical damage. Professor Robertson’s reading departs both from the everyday usage of causation language and from the presumption that Congress would have given a clearer indication had it intended to completely overrule the traditional discretion judges have to define the “harm within the risk” contemplated by the statute. Moreover, it is not reasonable to suppose that Congress intended to create a strange counterfactual that asks fact-finders to speculate whether the economic damages would have occurred under completely different and unrealistic circumstances, i.e., an equally massive spill that somehow causes no physical loss or damage. His test would be exceptionally hard to apply, and would produce strange and, in some cases, unfair results.

Finally, this Comment suggests that a fair and workable alternative to these positions supported by OPA’s language would require that economic loss claimants show that the spill deprived them of the benefit of real property, personal property, or a natural resource that was reasonably necessary for claimant’s commercial activity, including production or sale. Looking beyond the context of the oil spill, if a commercial needs requirement were to succeed in producing equitable outcomes in a litigation as diverse as the Deepwater Horizon MDL, it should lead courts to consider abandoning the strict requirement that pure economic loss claimants (except commercial fishermen) show a proprietary interest. In at least some cases not currently recognized by the common law, courts should protect reasonable investment-backed interests in property or resources needed for commercial activity, regardless of who owns them.

Cite as: Brendan Selby, Comment, In Re: Oil Spill by the Oil Rig “Deepwater Horizon” on the Gulf of Mexico, on April 20, 2010, Order, Aug. 26, 2011, 36 Harv. Envtl. L. Rev. 533 (2012).

[btn link=”” color=”forestGreen” size=”size-l”]View Full Article (PDF)[/btn]