Fifth Circuit's Broad "Significant Nexus" Test Puts Chevron in the Hot Seat

The 5th Circuit recently addressed what constitutes a “substantial nexus” to activities on the Outer Continental Shelf (OCS), extending the Longshore and Harbor Workers’ Compensation Act (LHWCA) to a fatality in state waters.

The decedent was killed by an explosion on a facility in Louisiana waters while employed by a contractor to Chevron.

The decedent’s widow and children sued Chevron for state-law wrongful death. Chevron’s defense relied on which workers’ compensation scheme applied to the decedent’s employment. If the Louisiana State Workers’ Compensation Act applied, Chevron would have been immune from suit. If the LHWCA applied, Chevron would not have been immune.

Chevron filed for summary judgment. The trial court initially agreed that the LHWCA did not apply and Chevron was immune under Louisiana’s compensation act. But the plaintiffs filed a motion for reconsideration, and the trial court decided to put the question to a jury.

The jury sided with the plaintiffs, awarding over $2.9 million. It held that the LHWCA applied because the facility had a substantial nexus to the OCS.

Chevron appealed to the 5th Circuit. Chevron claimed that the jury instructions violated the U.S. Supreme Court’s decision in Pacific Operators Offshore, LLP v. Valladolid, which interpreted the federal law extending LHWCA coverage to OCS activities. Chevron argued that the jury should have been asked if the OCS activities of the decedent’s direct employer (the contractor for Chevron) caused the decedent’s death. Because the contractor had no OCS activities, the LHWCA could not have applied to negate Chevron’s state immunity. Chevron argued that asking the jury instead about Chevron’s OCS activities was legal error.

The 5th Circuit rejected Chevron’s argument. It found that the inquiry is more general and requires a link only between the decedent’s injury and extractive operations conducted on the OCS. The 5th Circuit held there was ample evidence to support the jury’s decision that there was a sufficient link, including that:

• The gas that escaped the valve and fueled the explosion was from the OCS.
• The platform that exploded was connected to two OCS platforms, and gas flow from these platforms had to be shut down because of the accident.
• The decedent’s employer repaired Chevron’s valves extensively.
• The decedent’s employer provided valve services in the past for on-OCS platforms.

Based on these facts, the 5th Circuit refused to disturb the jury’s finding that there was LHWCA coverage.

This decision is significant. It adopted a broad construction of whether LHWCA coverage can be extended to OCS operations that impact platform workers located in state territorial waters.

Please contact any member of Phelps’ Marine and Energy team if you have questions or need compliance advice and guidance.