### IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

No. 14

- 20589

PETROBRAS AMERICA, INCORPORATED; CERTAIN UNDERWRITERS AT LLOYD'S, LONDON AND INSURANCE COMPANIES SUBSCRIBING TO POLICY NO. B0576/JM12318,

Plaintiffs

- Appellants

v. VICINAY CADENAS, S.A.,

Defendant

- Appellee

Appeal s from the United States District Court for the Southern District of Texas

Before JOLLY, JONES, and BENAVIDES, Circuit Judges

. EDITH H. JONES , Circuit Judge : Petrobras America, Inc. (“Petrobras”) and the U nderwriters of its
construction all

- risks insurance policy (“U nderwriters ” ) sued Vicinay Cadenas, S.A. (“Vicinay”) , the manufacturer of a n underwater tether chain that brok e just after being installed to sec ure the piping system for oil production from the Outer Continental S helf of the Gulf of Mexico

. 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 alleges four hundred million dollars in damage

. Acting on all parties’ misunderstanding that the case sounds in admiralty, the district United States Court of Appeals Fifth Circuit 

### FILED March 7, 2016 Lyle W. Cayce Clerk Case: 14-20589 Document: 00513408884 Page: 1 Date Filed: 03/07/2016No. 14

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2 court granted summary judgment for Vicinay based upon the maritime law
economic loss doctrine. The U nderwriters 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 S helf Lands Act (“OCSLA”). 4 3 U.S.C. §1333(a)(2). The magistrate judge deni ed the motion, and the district court affirmed that decision

. We hold that the choice of law prescribed by OCSLA is statutorily mandated and is consequently not waivable by the p arties. On further analysis, we also hold that the applicable law is that of the adjacent state of Louisiana, not admiralty law. Id. Consequently, we reverse and remand for application of Louisian a law

. BACKGROUND
In October 2007 , Petrobras contracted with Technip USA, Inc. (“Technip”), to construct five “free

- standing hybrid riser ” (“FSHR”) system s that move crude oil from wellheads on the seabed to “Floating Production Storage and Offloading” (“FPSO”) facilities on the surface of the sea

. The FPSO
f

acilitie s are independently moored to the seabed and store and offload, but do not transport, the production

. The risers are fixed in place at the wellhead.
F rom above, tether chains connect the upper risers to huge nitrogen

- filled “buoyancy can s , ” which are designed to keep tension in the riser s so that they will not kink and impede the flow of oil. The buoyancy cans float 660 feet beneath the water surface; their tether chains play no role in securing the FPSO facilities. Technip subcontracted to Vicinay the manufacture of the se tether chain s , and Vicinay agreed to produce chain s without welded

- over cracks and defects. Vicinay , however, supplied chain s that contain ed welded

- over cracks. S hortly after insta llation in March 2011 , one of the cha ins broke, causing the loss of the associated FSHR system, loss of use of the FPSO facility, and lost oil and gas production. Case: 14-20589 Document: 00513408884 Page: 2 Date Filed: 03/07/2016No. 14

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3 Petrobras and the Underwriters sued Vicinay in March 2012 in federal
district cour t asserting negligence, products liability, and failure to warn
claims

. They alleged subject matter jurisdiction based on admiralty or, alternatively, under OCSLA; they did not assert that Louisiana law applied

. Vicinay moved for summary judgment , arguing that it was entitled to prevai l under the maritime law ’s economic loss doctrine announced in East River Steamship Corp. v. Transamerica Delaval, Inc. , 476 U.S. 858 , 106 S. Ct. 2295 (1986). 1 Notably, while opposing the motion, Petrobras and the U nderwriters did not contest the applicat ion of maritime law; in fact , they moved to add a fraud claim as an exceptio n to the economic loss doctrine

. The district court , assuming that maritime law applied, granted summary judgment to Vicinay in August 2014 but also granted the motion to a mend

. Both parties filed interlocutory a ppeals of the district court’s order . Only the U nderwriters add ed a fraud claim. Approximately two months later , the U nderwriters filed another motion for leave to amend and asserted for the first time that Louisiana law, not maritime law, applied to this dispute under OCSLA. The magistrate judge
denied the U nderwriters’ motion for untimeliness and lack of good cause. The district court affirmed the ma gistrate judge’s ruling and denied the motion , provoking another appeal by the Underwriters

. All of the parties’ appeals have been consolidated before us

.

1 The economic loss doctrine, distinguishing tort from contract law in admiralty cases, disallows recovery of tort damages to the product itself. See East River , 476 U.S. at 871

- 74, 106 S. Ct. at 2302

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4 DISCUSSION
We review de novo a district court’s decision to grant summary judgment. Grand Isle Shipyard , Inc. v. Seacor Marine, LLC , 589 F.3d 778, 783 (5th Cir.
200 9) (en banc). We consider two issues on appeal

. 2 The first issue is whether the Underwriter s waived their OCSLA choice of law argument by failing to raise it until after summary judgment was granted on the merits

. The second
is whether, under OCSLA , maritime law or Louisiana law, the law of the state adj acent to the OCSLA situs , applied

. 3
I. Waiver As a threshold m atter, Vicinay argues that the U nderw riters wa ived their choice of law argument by not raising it in the district court until the eleve nth

- hour mo tion to amend their complaint, which was filed afte r summary judgment was granted. Vicinay contends that the U nderwriters confuse OCSLA sub ject

- matter jurisdiction, which is conferred on federal courts in 43 U.S.C. § 1349 (b)(1)(A) and cannot be waived , with OCSLA choice of law, 43 U.S.C. §1333 (a) , which allegedly can be waived and therefore should
not be raised for the first time on appeal. It is Vicinay that is confused.
T here is no dispute that , as Petrobras and the Underwriters originally pled, OCSLA provides a basis for subject matter jurisdiction in this case. The incident occurred on the Outer Continental Shelf, and the statutory grant of subject matter jurisdiction over cases and controversies “arising out of or in
connectio n with” operations involving resource exploitation on the Shelf is

2 The parties raise two additional issues: (1) assuming that maritime law applies to this dispute, whether the district court erred in its application of the East River economic loss doctrine; an d (2) whether the district court abused its discretion in denying the U nderwriters’ motion for leave to amend. In light of our conclusion s, the first issue is irrelevant, and the second issue is moot.

3 We consider this choice of law issue because it is alleged that Louisiana state law does not apply the econom ic loss doctrine

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5 straightforward and broad. 43 U.S.C. § 1349 (b)(1)(A); S ee, e.g. EP Operating Ltd. P’ship v. Placid Oil Co., 26 F.3d 563, 569 (5th Cir. 1994). Although federal courts may have jurisdict ion pursuant to OCSLA, however, “they must then turn to the OCSLA choice of law provision to ascertain whether state, federal , or maritime law applies to a particular case.” In re DEEPWATER HORIZON, 745 F.3d 157, 164 (5th Cir. 2014). OCSLA ’s choice of la w provision asserts federal jurisdiction over the subsoil and seabed of the Outer Continental Shelf, over all “artificial islands,” and over installations and devices used in the exploitation of offshore resources, “ other than a ship or vessel. ” 4 3 U.S.C

. §1333(a)(1) . In the following subsection, OCSLA adopts as surrogate federal law the “civil and criminal laws of each adjacent State” to govern the aforementioned areas (generally speaking) “[t]o the extent that [State laws]

are applicable and not incons istent . . . with other Federal laws and regulations

. . . . ” 43 U.S.C. §1333(a) (2)(A). Vicinay’s argument that the OSCLA provisions are waivable runs headlong into this court’s prec edents rejecting parties’ ability to make a “litigation choice ” between maritime and adjacent state law. In re DEEPWATER HORIZON , 745 F.3d at 165 n.7 ; see also Alleman v. Omni Energy Servs. Corp. , 580 F.3d 280, 283 n.2 (5th Cir. 2009) (“parties cannot choose to be governed by maritime law when OCSLA applies”). Because OSCLA’s choice of law scheme is prescribed by Co ngress, parties may not voluntarily contract around Congress’ s mandate. Texaco Exploration & Production, Inc. v. AmClyde Engineered Prods. Co., Inc. , 448 F.3d 760, 772 n.8 (5th Cir. 2006); see also U nion Tex. Petroleum Corp. v. PLT Eng’g, Inc. , 895 F.2d 1043, 1050 (5th Cir. 1990) (“We find it beyond any doubt that OCSLA is itself a Congressionally mandated choice of law provision requiring that the substantive law of the adjacent state is to apply eve n in the presence of a choice of law provision in the contract to the contrary.”). Case: 14-20589 Document: 00513408884 Page: 5 Date Filed: 03/07/2016No. 14

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6 Further, the Supreme Court has held that Section 1333(a) “superse de[s] the normal choice of law r ules that the forum would apply.” In re
DEEPWATER HORIZON , 745 F.3d at 16 6 (citing Gulf Offshore Co. v. Mobil Oil Corp. , 453 U.S. 473, 480

- 81 (1981)). If parties cannot c hoose to avoid Congress’ s choice of law provision under OCSLA, then a fortiori the provision cannot be waived by fai lure to raise the issue below. Vicinay’s reliance upon Fruge v. Amerisure Mutual Insurance Co. , 663 F.3d 743, 777 (5th Cir. 2011), is misplaced. Although that decision upheld waiver of a choice of law argume nt not raised in the district court, the case did n ot involve a statutor il y mandated choice of law. Because Congress has delineated among admiralty, federal law and adjacent state law in OCSLA , the parties may not avoid , whether voluntarily or inadvertently, the statut ory choice

. The Underwriters’ choice of law argument is not waived.
I I

. Admiralty or State Law under OCSLA As has been noted, the OCSLA prescribes t he applicability of either maritime law or adjacent state law as “surrogate federal law” to govern the Outer Continental Shelf

. Hufnagel v. Omega Serv. Indus., Inc., 183 F.3d 340, 349 (5th Cir. 1999)

. These regimes are alternative, not overlapping. In re DEEPWATER HORIZON , 745 F.3d at 166; Baker v. Hercules Offshore, Inc. , 713 F.3d 208, 218 (5th Cir. 2013); Tenn. Gas Pipeline v. Hous. Cas. I ns. , 87 F.3d 150, 154 (5th Cir. 1996) (noting that OCSLA “was not intended to displace general maritime law”).
The U nderwriters and Petrobras contend that th e district court was required to apply Louisiana law, the law o f the adjacent state , while Vicin ay argues that maritime law applies to the dispute

. This court has interpreted
the statute to compel borrowing adjacent state law if three conditions are met:

“ (1) T he controversy mus t arise on a situs covered by O C S LA (i.e. the subsoil, seabed, or artifici al structures permanently or temporarily attached thereto). Case: 14-20589 Document: 00513408884 Page: 6 Date Filed: 03/07/2016No. 14

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7 (2) Federal maritime law must not apply of its own force. (3) The state law
must not be inconsistent with Federal law.” PLT En g’g  ̧ 895 F.2d at 1047 (construing §1333(a)(2)(A)). The decisive question thus becomes whether maritime law “applies of its own force ,” based on the tw in tests of location and connection with maritime activity. Jerome B. Grubart, Inc. v. Great Lakes Dredge & Dock Co., 513 U.S. 527, 534, 115 S. Ct. 1043, 1048 (1995). T he location prong asks whether the incident occurred on “navigable waters” or, if injury occurred on land, whether it was caused by a vessel on navigable waters. In re L a

. Crawfish Producers , 772 F.3d 102 6, 1029 (5th Cir. 2014). T he court must consider where the wr ong “took effect” rather than the locus of the tortious conduct. Id. (citing Eg o rov, Puchinsky, Afanasiev & Juring v. Terriberry, Carroll & Yancey , 183 F.3d 453, 456 (5th Cir. 1999) (per curiam)).
Under t he connection test, t he incident giving rise to the alleged tort must be analyzed at an intermediate level of generality by “assess[ing] the general features of the type of incident involved.” Grubart, 513 U.S. at 534,
115 S. Ct. at 1048 (citing Sisson v. Ruby , 497 U.S. 358, 363, 110 S. Ct. 2892 , 2896 (1990)). Further , the court must consider whether the general character of the activity giving rise to the plaintiff’s injury is substantially related to traditional maritime activity

. Id. W e address each test in turn. A. Loc ation Test The U nderwriters argue t hat the location test is not me t , principally because the tether chain connected the floating buoyancy can to the riser, which in turn was affixed to the seabed. Under the specific terms of OCSLA, adjacent state law sho uld apply

— to the exclusion of admiralty law

— to these “fixed structures erec ted” on the subsoil and seabed. 43 U.S.C. §1333(a)(2)(A). This is a significant argument. Cf. Hufnagel, 183 F.3d at 351

- 52 (location test not met where plaintiff was struck by a chain and hook while engaged in Case: 14-20589 Document: 00513408884 Page: 7 Date Filed: 03/07/2016No. 14

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8 repairs on a fixed offshore drilling platform). 4 T he critical distinction between Hufnagel and this case , of course , is that the tether chain failed deep in the
waters of the Gulf of Mexico, whereas the injury to the plaintiff in Hufnagel
occurred on the deck of a drilling platform and not on or in the sea. Thus, it can be argued that t he tortious activity here “took effect” in navigable water s with the severance of th e riser string

. See In re La. Crawfish Producers , 772 F.3d at 1029

. We do not address this prong further, however, because the breaking of the tether chain fails the admiralty connection test. B. Connection Test Vicinay argues that the connection test is satisfied because maritime commerce was disrupted by the tether chain’s failure, and that failure was “substantially related to traditional maritime commerce.” Further, Vicinay reinforces its substantial relationship contention by noti ng that the FPSO is a
vessel and the tether chain and buoyancy can are “unique to the maritime
world and do not exist on land

- based operations.” We disagree. To show disruption of maritime commerce, Vicinay points out that Petrobras had to suspend a ll oil and gas development operations in the area to investigate the cause of the chain’s failure. T he Supreme Court has cautioned , however, that the type of incident involved m ust not be defined at too high or too low a level of generality; instead the q uestion is “whether the incident could be seen within a class of incidents that posed more than a fanciful risk” to
maritime commerce. Grubart , 513 U.S. at 538

- 39 , 115 S. Ct. at 1051

. T he proper focus is on “potential effects, not the ‘particular facts o f the incident. ’ ”
Id. at 538 , 115 S. Ct. at 1051

. Cases from the Supreme Court and this circuit interpret potential disruption of maritime commerce in terms of the incident’s

4 Far less persuasive, however, and without legal support is the Underwriters’ broader contention that the incident did not occur on “navigable waters” because it took place more than 660 feet below the Gulf of Mexico. Case: 14-20589 Document: 00513408884 Page: 8 Date Filed: 03/07/2016No. 14

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9 effect on the navigability of the waterways

. S ee , e.g. , id. at 539 , 115 S. Ct. at
1051 (noting that damage to an underwater freight tunnel may imperil “the water course itself ,” and “navigational use” could be restricted during repair); Sisson , 497 U.S. at 362 , 110 S. Ct. at 2896 ( a fire on a noncommercial vessel in
a marina may dis rupt maritime commerce because the fire “can spread to nearby commercial vessels or make the marina inaccessible to such vessels”);
In re La

. Crawfish Producers , 772 F.3d at 1029 ( maritime commerce would be disrupted by the “o bstruction of water flows” in Louisiana’s Atachafal aya Basin caused by dredging activities ). Here, expressed in general terms, a component failed on a n underwater
structure in an offshore production installation and caused the structure to fall
to the sea floor

. Such an incident does not have the potential to disrupt

m aritime commercial or navigational activities on or in the Gulf of Mexico. Vicinay’s emphasis that Petrobras halted its dev elopment operations for some period following the failure of the FHSR erroneously relies on the “particular facts of the incident,” Grubart , 513 U.S. at 538, 115 S. Ct. at 1051, rather than general ma ritime and commercial activity. Moreover, the disruption affected oil and gas production and development activities rather than navigation or
trad itional maritime commerce

. Even the involvement of the FPSO, technically a vessel, is unrelated to the disruption of navigation or maritime

commerce activity because the FPSO’s only purpose was to store and process the oil in a fixed location for later tr ansport. Finally, the fact that the buoyancy

can eventually floated to the surface and had to be recover e d provides, under the circumstances taken as a whole, no more than a de minimu s potential to disrupt maritime commerce or navigation. See id. at 538

- 39, 115 S. Ct. at 1051 (more than a fanciful risk to commercial shipping is required). Vicinay’s ar gument that the second prong of the connection test is met is squarely foreclosed by Texaco Exploration & Production v. AmClyde Case: 14-20589 Document: 00513408884 Page: 9 Date Filed: 03/07/2016No. 14

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10 Engineered Products C o., Inc. In AmClyde , Texaco brought negligence and products liability causes of action against a crane manufacturer arising from the failure of a barge

- mounted construction crane that caused the deck of a production platform to collapse into the sea. 448 F.3d 760, 76 6 (5th Cir. 2006)

. Critically , t he platform was affixed to the Outer Continental S helf

. Id

. This court held that the tort claims were not substantially related to traditional maritime activity because they were “inextricably connected with the development of the Outer Continental Shelf and an installation for production of resources there , ” and the d evelopment of resources on the Outer Continental Shelf is not a traditional maritime activity. Id. at 771 ; see also PLT Eng’g , 895 F.2d at 1048 (“ the principal obligation of PLT and the subcontractors was to build the gathering line and connect it to the platform and the transmission
line. These activities are no t traditionally maritime. Rather they are the subjects of oil and gas exploration

. ”). The Amclyde court distinguished Gruba r t as arising from a traditional maritime activity: “ repair or mainten ance work on a navigable waterway performed from a vessel.” 448 F.3d at 771 (citing Grubart , 513 U.S. at 540 , 115 S. Ct. at 1043 ). As in AmClyde, Petrobras’ s products liability, negligence, and failure to
warn tort claims resulting from the failure of th e tether chain are all “inextricably intertwined” with its oil and gas production and development operations on the Outer Continental Shelf . Further , as AmClyde confirms, development on the Outer Continental Shelf is not a traditional maritime activity. Contrary to Vicinay’s argument , Petrobras’ s development of resources on the Outer Continental Shelf was not transformed into a maritime activity because it involved the use of the FPSO facility and a buoyancy can . That t he crane in AmClyde was mounted on a barge did not alter the conclusion that
the resource development activities on a fixed production platform were not maritime in nature; so it is here, particularly because the FPSO facility wa s Case: 14-20589 Document: 00513408884 Page: 10 Date Filed: 03/07/2016No. 14

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11 permanently moored to t he Outer Continental Shelf and wa s no t used for transportation. Likewise , the buoyancy can simply kept tension in the risers to prevent kinks th at would impede the flow of oil. The can and tether chain had nothing to do with a ny traditional maritime activities

. In sum , the rupture of the te ther chain was neither potentially n or actually disruptive to navigation and maritime commerce, nor did it bear a substantial relation to traditional maritime activity. M aritime law does not apply of its own force. Because the other criteria of OCSLA cho ice of law are satisfied, Louisiana law applies to this dispute. CONCLUSION In light of the erroneous adjudication based on maritime law , we REVER SE and REMAND for further proceedings under Louisiana law. The
U nderwriters’ appeal of the district court’s denial of its motion for leave to
amend is DISMISSED as moot. Case: 14-20589 Document: 00513408884 Page: 11 Date Filed: 03/07/2016