Source: http://www.texaslawyer.com, March 9, 2016
By: Angela Neville
The U.S. Court of Appeals for the Fifth Circuit recently reversed an earlier ruling of a Houston federal court that threw out a case against Vicinay Cadenas, the manufacturer of underwater tether chains, over an alleged defective marine chain brought by Petrobras America Inc. and certain underwriters at Lloyd’s London.
In 2012, Petrobras and certain underwriters of its construction all-risks insurance policy initiated the case against Vicinay in the U.S. District Court for the Southern District of Texas asserting negligence, products liability and breach of implied warranty claims. In their federal lawsuit, Petrobras and Underwriters contended that in October 2007 Vicinay’s underwater tether chain broke just after being installed to secure Petrobras’ piping system for oil production from the Outer Continental Shelf of the Gulf of Mexico. In addition, Petrobras and Underwriters alleged that when the chain ruptured, it caused the pipeline riser and related equipment to collapse to the sea floor, severing the connection between the wellhead and the surface thousands of feet above. Petrobras asserts that it has incurred $400 million dollars in damages.
The recently issued Fifth Circuit opinion sets out the background of the lawsuit and states that “acting on all parties’ misunderstanding that the case sounds in admiralty, the district court granted summary judgment for Vicinay based upon the maritime law economic loss doctrine.”
After the summary judgment ruling, the underwriters then sought leave to amend their complaint, alleging, for the first time, that Louisiana law, not maritime law, applied to this dispute under the Outer Continental Shelf Lands Act. 43 U.S.Code §1333(a)(2) (OCSLA). The magistrate judge denied the motion, and the district court affirmed that decision.
In contrast, when the case went up on appeal to the Fifth Circuit, the panel of three circuit judges, which included Fortunato Benavides, E. Grady Jolly and Edith H. Jones, had an entirely different view of the choice of law issues in the case.
Upon review of the case, the Fifth Circuit panel held that the choice of law prescribed by OCSLA is statutorily mandated and is consequently not waivable by the parties. The Fifth Circuit held that the applicable law is that of the adjacent state of Louisiana, not admiralty law and, consequently, reversed and remanded the case for the application of Louisiana law.
The law firm of DLA Piper is representing Petrobras in the litigation. The DLA Piper team includes partner and managing partner of the Houston office Ileana Margarita Blanco, New York partner Stanley McDermott and Houston associate Brett Solberg.
“We are pleased with the result,” Blanco said.
The certain underwriters at Lloyd’s London that are plaintiffs in the case are being represented by the Houston office of Hall Maines Lugrin. At Hall, the litigation team includes managing shareholder J. Clifton Hall III; shareholder, director and president George Lugrin IV; and shareholder Karen K. Milhollin. When asked about the case, Milhollin declined to comment.
On the other side of the case, the firm of Norton Rose Fulbright is representing Vicinay. The Norton team includes partners Katherine Mackillop and Kevin O’Gorman and global co-head of international arbitration Mark Baker, all of Houston. None of the attorneys were available for comment.