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High court rejects employer's appeal in Outer Continental Shelf Lands Act dispute


WASHINGTON—The U.S. Supreme Court rejected the appeal of an offshore drilling operator Wednesday in a dispute over an employee's eligibility for federal workers compensation benefits under the Outer Continental Shelf Lands Act.

The ruling in Pacific Operators Offshore L.L.P. vs. Luisa L. Valladolid settles a split among federal appeals courts about when employers must pay U.S. Longshore and Harbor Workers' Compensation Act benefits under the OCSLA.

The dispute centered on the OCSLA'S extension of LHWCA benefits to employee deaths or disabilities resulting from “any injury occurring as the result of operations conducted on the Outer Continental Shelf,” court records show.

Juan Valladolid spent 98% of his work time as a roustabout on an offshore drilling platform three miles off California's coast. But he died in a forklift accident while working at a separate Pacific Operations Offshore facility located onshore.

His widow filed for LHWCA benefits, but an administrative law judge dismissed her claim, finding that Mr. Valladolid's fatal injury was not covered under LHWCA because the accident occurred on land, rather than on the Outer Continental Shelf.

The U.S. Department of Labor's Benefits Review Board agreed.

But in May 2010, the 9th U.S. Circuit Court of Appeals found that a “claimant must establish a substantial nexus between the injury and extractive operations on the shelf” to be eligible for benefits under the OCSLA.

To meet that standard, claimants must show their work directly furthers Outer Continental Shelf operations, the appeals court ruled. The 9th Circuit remanded the case to apply its ruling.

But Pacific Operations Offshore appealed, and the U.S. Supreme Court agreed to hear the case to resolve a conflict among federal appeals courts.

The 3rd Circuit, for example, found Congress intended LHWCA coverage to be so expansive that a worker who died in a car accident en route to board a helicopter for a flight to an offshore rig would be eligible for benefits, according to court records.

In contrast, the 5th Circuit concluded that Congress intended to establish “a bright line geographic boundary,” so employees are eligible for benefits only when their death or injury occurs on a platform located on the Outer Continental Shelf.

In the case at hand, Pacific Operations Offshore argued before the Supreme Court that Mr. Valladolid was injured on dry land, so his death did not occur as the result of extraction operations conducted on the Outer Continental Shelf and he was ineligible for LHWCA benefits.

But the Supreme Court concluded that the 9th Circuit’s “substantial-nexus” test is applicable.

“We are confident that (administrative law judges) and courts will be able to determine whether an injured employee has established a significant causal link between the injury he suffered and his employer’s on-OCS extractive operations,” the majority said. “Although we expect that employees injured while performing tasks on the OCS will regularly satisfy the test, whether an employee injured while performing an off-OCS task qualifies—like Valladolid, who died while tasked with onshore scrap metal consolidation—is a question that will depend on the individual circumstances of each case. “

The high court also agreed with the 9th Circuit’s decision to remand the case so the Benefits Review Board can apply its “substantial-nexus” test.

Two of the nine justices hearing the case, however, said in a concurring opinion that while they too would affirm the 9th Circuit’s judgment to remand the case, they would not endorse the 9th Circuit’s substantial-nexus test.