Gulf Offshore Co. v. Mobil Oil Corp.

1981-07-01

Headline: Ruling lets state courts hear offshore personal-injury and indemnity suits under the Outer Continental Shelf Lands Act and remands the tax-instruction question for who decides jury guidance on non-taxable damages, affecting offshore workers and companies.

Holding: The Court ruled that state courts may hear personal injury and indemnity suits arising under the Outer Continental Shelf Lands Act and remanded to decide whether Louisiana law or the federal Liepelt rule requires a tax-exemption jury instruction.

Real World Impact:

Allows state courts to hear OCSLA personal-injury and indemnity claims.
May require juries to be told damages are not subject to federal income tax.
Leaves the tax-instruction question to state-law determination on remand.

Topics: offshore injury claims, state vs federal court access, jury tax instruction, indemnity disputes

Summary

Background

A worker on an oil platform above the Outer Continental Shelf was injured during Hurricane Eloise. The injured man sued in a Texas state court, and Mobil sought indemnity from its contractor, Gulf Offshore. The Texas jury awarded $900,000 but the trial court refused the contractor’s request for a jury instruction that personal-injury damages are not subject to federal income tax. The Texas Court of Civil Appeals upheld the judgment, and the Supreme Court agreed to review both whether state courts may hear cases under the Outer Continental Shelf Lands Act (OCSLA) and whether the jury should have been told damages are not federally taxable.

Reasoning

The Court held that nothing in OCSLA shows Congress intended exclusive federal-court control of personal-injury and indemnity suits arising from operations on the Shelf, so state courts may hear such cases. On the tax-instruction issue, the Court noted a recent case (Liepelt) that adopted a federal rule telling juries damages are not federally taxable. Because OCSLA incorporates the law of the adjacent State (here, Louisiana) "to the extent not inconsistent" with federal law, the Court remanded the case to the Texas Court of Civil Appeals to decide first what Louisiana law requires and then whether Liepelt displaces that state rule.

Real world impact

Offshore workers, companies, and insurers may continue to bring or defend OCSLA claims in state courts rather than only in federal courts. Whether juries must be told that awards are not subject to federal income tax will depend on the state-law rule or, if inconsistent, application of the federal Liepelt rule. The remand means the tax-instruction question is not finally resolved here and could change on further proceedings.

Dissents or concurrances

Justice Blackmun (joined by Justices Brennan and Marshall) agreed with the result and the remand but warned against broadly applying Liepelt, urging state courts to give the state rule initial weight and leaving the federal-common-law question open.