Much has been made by progressive bloggers and commentators of the 17 energy investments owned by Judge Martin Feldman of the Federal District Court in New Orleans. Judge Feldman recently granted a preliminary injunction to energy company challengers to the Obama Administration’s May 22, 2010 moratorium on deep water drilling in the Gulf of Mexico. Those commentators missed the point. While Judge Feldman may, or may not, have breached the Canon of Judicial Ethics by deciding a case in which he had a financial interest, it is Chevalier, Allen & Lichman’s view, based on extensive experience in litigation against government agencies in the Federal courts, that Judge Feldman made manifest errors of law by failing to grant deference to the Department of the Interior in its determination that further drilling without additional safety inspections would endanger the public safety, and by allowing the economic interests of drilling companies to carry the weight in the balance of harms.



Judge Feldman articulated the correct “arbitrary and capricious” standard of review for determining the propriety of agency action. He even acknowledged that he could not “substitute his own judgment for that of the agency.” He then proceeded to do so by opining that the Administration’s order, halting 33 exploratory drilling projects at depths in excess of 500 feet or below (out of a total of 3,700 wells in the Gulf of Mexico), and suspension of new permits for the same for a period of six months, is “a blanket, generic, indeed punitive moratorium,” because of the potential economic harm to businesses and workers that may result.

In reaching that decision, Judge Feldman ignores both a long history of jurisprudence concerning the “irreparable harm” and balance of hardships prongs of the standard of review for a preliminary injunction, and the well established deference accorded to the decisions of government agencies, particularly when those agencies are exclusively charged with the safety of industrial or commercial operations.

First, the Federal Department of the Interior has the sole right to regulate the safety of offshore drilling, to the exclusion of the states. That is, Federal law entirely “preempts” state law with respect to offshore drilling safety, thus placing in the hands of the Department of the Interior the exclusive “authority” for ensuring the safety of offshore drilling operations. This arrangement parallels the relationship of the Federal Aviation Administration (“FAA”) to aviation safety with which Chevalier, Allen & Lichman is intimately familiar. In the latter case, the Department of Transportation through its designee, the FAA, has assumed complete control of aircraft operations once the wheels have left the gate, of the safety of aircraft, and of the design and utilization of airspace. Similarly, the Department of Interior, through its designee, the Minerals Management Service (“MMS”) was supposed to have assumed a parallel role with respect to offshore oil drilling. That the MMS did not do its job is a failure of management, but does not vitiate the incidence of ultimate and exclusive responsibility for the safety of offshore oil drilling in the Department of the Interior. Therefore, the determination by the Department of the Interior that deep water drilling safety procedures are inadequate should get substantial, if not total, deference from the court.

That it did not goes to Judge Feldman’s second error. Irreparable injury is a critical predicate to the grant of injunctive relief, and a heavy weight in the balance of harms. While “it has long been held that traditional economic damages can be remedied by compensatory awards, and thus do not rise to the level of being irreparable,” Vaqueria Tres Monjitas, Inc. v. Irizarry, 587 F.3d 464, 485 (2010), an exception exists where the potential economic loss is so great as to threaten the existence of the movant’s business. Id. (In the Vaqueria Tres Monjitas case, Puerto Rican milk producers were, in the last analysis, being required by the regulatory agency to subsidize a competing dairy processor at the expense of their own business integrity. The dispute was between two competing business interests.) Nevertheless, the historic weight of authority holds that the exception is not properly applied where, as here, the dispute is between public safety, i.e., the potential for death resulting from the negligence of both producers and regulators, on the one hand, and economic gain, i.e., six months of revenue from 1% of the Gulf’s drilling operations on the other hand.

As an illustration, and again relying on Chevalier, Allen & Lichman’s long experience in challenges to the determinations of government agencies, where the FAA has made safety determinations, such as that in which a substantial portion of a large air carrier’s fleet was taken out of service to repair a malfunctioning part, a challenge is pointless. This is true even where the action resulted in substantial lost revenue to an already troubled carrier, because the FAA safety determination is given complete deference, even where, in that case, no one had as yet been injured or killed by the safety lapse.

In summary, Judge Feldman’s ruling is unfathomable, not merely because it may (or may not) have been self-serving; not merely because the result of unfettered economic interests ruling in the Gulf had already resulted in 11 dead, and an economy in ruins; but because the court gave substantial deference to the articulated economic interests of the oil companies, and, on that tenuous basis, tipped the balance of harms and granted injunctive relief in their favor.