Continental Oil Co. v. LONDON STEAM-SHIP OWN. MUT. INS. ASS'N

• Decision Date: 23 September 1969
• Docket Number: No. 25372.,25372.
• Citation: 417 F.2d 1030
• Parties: CONTINENTAL OIL COMPANY et al., Appellants-Appellees, v. The LONDON STEAM-SHIP OWNERS' MUTUAL INSURANCE ASSOCIATION, Ltd., Appellee-Appellant. The LONDON STEAM-SHIP OWNERS' MUTUAL INSURANCE ASSOCIATION, Ltd., Appellee-Appellant, v. CONTINENTAL OIL COMPANY et al., Appellants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

417 F.2d 1030 (1969)

CONTINENTAL OIL COMPANY et al., Appellants-Appellees, v. The LONDON STEAM-SHIP OWNERS' MUTUAL INSURANCE ASSOCIATION, Ltd., Appellee-Appellant.

The LONDON STEAM-SHIP OWNERS' MUTUAL INSURANCE ASSOCIATION, Ltd., Appellee-Appellant, v. CONTINENTAL OIL COMPANY et al., Appellants-Appellees.

No. 25372.

United States Court of Appeals Fifth Circuit.

September 23, 1969.

Joseph Newton, Houston, Tex., William R. Tete, Lake Charles, La., for appellant; Fulbright, Crooker, Freeman, Bates & Jaworski, Houston, Tex., Jones, Kimball, Harper, Tete & Wetherill, Lake Charles, La., of counsel.

George W. Renaudin, David B. Connery, Jr., Houston, Tex., Edgar F. Barnett, Lake Charles, La., for appellee; Royston, Rayzor & Cook, Houston, Tex., Hall, Raggio, Farrar & Barnett, Lake Charles, La., of counsel.

Before JOHN R. BROWN, Chief Judge, DYER, Circuit Judge, and GARZA, District Judge.

JOHN R. BROWN, Chief Judge:

Although this case involves a collision between the S/S Kimon and Continental Oil Company's drilling and production platform fixed on the Outer Continental Shelf in the Gulf of Mexico off the coast of Louisiana, that is the simplest thing about the litigation. What complicates it is not necessarily the United Nations complexion of the ship's company or notions of flag of convenience,¹ or the involvement of British underwriters² whose mere mention evokes the strong exciting aroma of Lloyds' Coffee House. The complication comes from a Louisiana statute ostensibly designed to protect the public but long thought of in some quarters as a neat way to gain, through diversity jurisdiction, the benefit of a Seventh Amendment Federal Court jury trial in a civil law state where a jury's verdict carried no more, if as much, appellate weight than that of a Judge.³ It is known as the Direct Action Statute⁴ and legislatively expunges the traditional "no action" clause of a liability policy to permit a party injured in Louisiana to sue the liability insurer directly without going through the process of suit and judgment against the Assured.

Like so much legal jousting, the principle may be worth more than the principal. This is just one more of the irrepressible efforts to force a Delphic answer to what fifteen years later has perhaps turned out to be something less than the riddle⁵ or "grisly spectre"⁶ supposed.⁷ About the only new wrinkle, cf. Mike Hooks, Inc. v. Pena, 5 Cir., 1963, 313 F.2d 696, 1963 A.M.C. 355, is that here the occurrence takes place on, over, or around the high seas many miles beyond even the most extravagant of Louisiana claims of territorial sovereignty but within the area characterized as the Outer Continental Shelf by the Congressional Act⁸ that sought to compromise, if not solve, the rich intramural controversy over oil in the tidelands.

What brings this all about is the damage caused when S/S Kimon, an ocean going vessel, collided with the offshore drilling platform rigged for the exploration for and production of oil, which was fixed to the ocean's floor in the Outer Continental Shelf. The occurrence, although formerly perhaps a nonmaritime claim, was clearly a maritime claim under the Extension of Admiralty Jurisdiction Act.⁹ And it was so treated by Shipowner and drilling platform owner alike.¹⁰ With no indication then, since, or now that the admiralty remedies were in any way incomplete, inconvenient or unavailable¹¹ — either substantively or procedurally — the platform owner filed the instant suit in the Louisiana Federal Court against Shipowner's underwriter under the Louisiana Direct Action Statute (note 4, supra) to recover the identical damages occasioned by the fault of S/S Kimon, her owners, etc. In response to the defendant underwriter's motions¹² the Court dismissed the Louisiana direct action suit. Giving the maritime shoals (see notes 5, 6, and 7, supra) a wide berth, this knowledgeable Louisiana Admiralty Judge set his course solely on Louisiana law. He held that since the accident happened outside of Louisiana, and the Louisiana Courts had held that the Direct Action Statute would not be given extra-territorial effect, the Statute did not apply.

That destination was correct and we affirm, although the course was wrong since the dead reckoning did not reckon with the Outer Continental Shelf Lands Act and specifically whether under it Louisiana's Direct Action Statute has been adopted as federal law and made applicable to this case.¹³ Disclaiming any prescience superior to that of the Trial Judge, Williams v. United States, 5 Cir., 1968, 405 F.2d 234, 239, the course has been plotted for us by the stellar-aided inertial guidance system of the recent intervening decision in Rodrigue v. Aetna Cas. & Sur. Co., 1969, 395 U.S. 352, 89 S.Ct. 1835, 23 L.Ed.2d 360.

The problem facing Congress in establishing a statutory structure for Outer Continental Shelf Lands was what law should be prescribed. The Court in Rodrigue traces the ebb and flow of legislative tides from which came the scheme of federal adoption of applicable adjacent state law as binding federal law. Under this scheme federal law and jurisdiction are the sole sources of governmental power¹⁴ with that federal law coming from (i) federal law and (ii), where applicable, law of the adjacent state.¹⁵

The Court summed up the legislative process, objective and result in this way:

The purpose of the Outer Continental Shelf Lands Act was to define a body of law applicable to the seabed, the subsoil, and the fixed structures such as those in question here on the outer Continental Shelf. That this law was to be federal law of the United States, applying state law only as federal law and then only when not inconsistent with applicable federal law, is made clear by the language of the Act. Section 3 makes it the "policy of the United States" that the affected areas "appertain to the United States and are subject to its jurisdiction, control, and power of disposition." Section 4 makes the "Constitution and laws and civil and political jurisdiction of the United States" apply "to the same extent as if the outer Continental Shelf were an area of exclusive Federal jurisdiction located within a State." Since Federal law, because of its limited function in a federal system, might be inadequate to cope with the full range of potential legal problems, the Act supplemented gaps in the federal law with state law through the "adoption of state law as the law of the United States." Under § 4, the adjacent State\'s laws were made "the law of the United States for the relevant subsoil and seabed and artificial islands and fixed structures erected thereon," but only to "the extent that they are applicable and not inconsistent with * * * other Federal laws."

It is evident from this that federal law is "exclusive" in its regulation of this area, and that state law is adopted only as surrogate federal law.

395 U.S. at 355, 356-357, 89 S.Ct. at 1837-1838, 23 L.Ed.2d at 364-365. But the result obtained because there (i) was no federal law and (ii) there was a state law covering the precise situation.

How different is our case. The damage was caused by collision of S/S Kimon with the structure itself and "when the damage is caused by a vessel admittedly in admiralty jurisdiction, the Admiralty Extension Act see note 9, supra would now make available the admiralty remedy in any event." Rodrigue, supra, at 395 U.S. 360, 89 S.Ct. 1839, 23 L.Ed.2d 367.

Thus there was a fully effective maritime right and remedy. (See note 10, supra.) In this situation is adjacent Louisiana law needed or permitted?

Whether intended as the analytical course in every instance, the Court in Rodrigue started with the inquiry: Was there a federal law? Finding none — which eliminated also the question of inconsistency — the state law which pertained to the occurrence became the exclusive federal law. It could readily do this: On accepted maritime principles for deaths resulting from accidents occurring completely on these "artificial islands", the Death on the High Seas Act — "of its own force under admiralty principles" — did not apply and "the Lands Act deliberately eschewed the application of admiralty principles to these novel structures." Rodrigue, supra at 395 U. S. 355, 89 S.Ct. 1837, 23 L.Ed.2d 364. In terms of Congressional divination the query technically turns on the meaning to be given "applicable" since adjacent laws become federal law only to "the extent that i they are applicable and ii not inconsistent with * * * Federal laws * * *." 43 § 1333(a) (2), (see note 15, supra).

The platform owner contends that the term "applicable" as used in the Outer Continental Shelf Lands Act "can only mean applicable to the subject matter in question." And, the argument continues, since this is a suit involving a policy of liability insurance, the Direct Action Statute by its terms covers that very situation. Thus the Direct Action Statute is "applicable" within the meaning of the Act, and being "applicable" affords its own direct relief.

On such reading the necessity for state law (in the sense of a right being lost in its absence) is not the significant factor. State law becomes merely a matter of affording some gain or benefit or advantage not available if state law can not be invoked. Such a reading, of course, puts almost 100% emphasis on the "not inconsistent * * * with federal laws" element of § 1333(a) (2) — a problem which the platform owners circumnavigate by not only moving the Louisiana law out to sea but moving the occurrence back into Louisiana as though it had taken place on inland waters.¹⁶ That is a lot of fictionalizing. And in more austere words it imputes to Congress the purpose generally to export the whole body of adjacent law onto the Outer Continental Shelf for automatic application to any and all occurrences unless — with the unless being limited to (a) specific provisions within the Act¹⁷ or (b) inconsistent federal law. By whatever...