Case Name: CHESAPEAKE OPERATING, INC., Appellant, v. NABORS DRILLING USA, INC., Appellee; Nabors Industries, Inc., Nabors Drilling USA, Inc., Nabors Loffland Drilling Co., and Nabors Energy Services, Inc., Appellants, v. Chesapeake Operating, Inc. and Chesapeake Energy Corp., Appellees
Court: Texas Courts of Appeals
Jurisdiction: Texas
Decision Date: 2002-11-21
Citations: 94 S.W.3d 163
Docket Number: Nos. 14-00-00173-CV, 14-00-00580-CV
Parties: CHESAPEAKE OPERATING, INC., Appellant, v. NABORS DRILLING USA, INC., Appellee. Nabors Industries, Inc., Nabors Drilling USA, Inc., Nabors Loffland Drilling Co., and Nabors Energy Services, Inc., Appellants, v. Chesapeake Operating, Inc. and Chesapeake Energy Corp., Appellees.
Judges: Justices ANDERSON, FOWLER, SEYMORE, GUZMAN, and Senior Justice McCLOUD joined the majority opinion.
Reporter: South Western Reporter Third Series
Volume: 94
Pages: 163–201

Head Matter:
CHESAPEAKE OPERATING, INC., Appellant, v. NABORS DRILLING USA, INC., Appellee. Nabors Industries, Inc., Nabors Drilling USA, Inc., Nabors Loffland Drilling Co., and Nabors Energy Services, Inc., Appellants, v. Chesapeake Operating, Inc. and Chesapeake Energy Corp., Appellees.
Nos. 14-00-00173-CV, 14-00-00580-CV.
Court of Appeals of Texas, Houston (14th Dist.).
Nov. 21, 2002.
Robert E. Ammons, Maxine D. Goodman, Houston, for appellant (case no. 14-00-00173-CV).
Mark Pharr, Houston, for appellants (case no. 14-00-00580-CV).
Bradley A. Jackson, Elizabeth Wheeler, Mark Pharr, Houston, for appellee (case no. 14-00-00173-CV).
Mark Allen, Houston, for appellees (ease no. 14-00-00580-CV).

Opinion:
MAJORITY OPINION
SCOTT BRISTER, Chief Justice.
Two personal injury claims emerged from a drilling site in a Louisiana wood. Both followed the strangely well-worn path to trial courts in Texas. There, the tangle of Texas and Louisiana oilfield indemnity statutes led two very experienced trial judges to split results, and produced a similar split in this Court on both appeals. With the help of a specially appointed eleventh justice, we find Texas law has the better claim, and follow it for the reasons described below.
The applicable facts are undisputed. In December 1996, Chesapeake Operating, Inc. contracted with Nicklos-Hinton Drilling Company to drill an oil well in Vernon Parish in western Louisiana. Less than a month later — before any injuries occurred — Nabors Industries acquired Nick-los-Hinton, and all rights and obligations under the contract were assigned to Na-bors Drilling USA, Inc. (with Chesapeake's consent). Nabors and Nicklos-Hinton were both Texas corporations, Chesapeake an Oklahoma corporation. It appears from the contracts and correspondence that each party negotiated and signed these agreements in its home state.
The contract was a standard form day-work drilling contract supplied by the International Association of Drilling Contractors (IADC). It contained mutual indemnity provisions protecting each party against suits by the other's employees or subcontractors, regardless of who was at fault. Each party agreed to obtain $1 million in insurance to back up these indemnities. The contract also contained a "Governing Law" paragraph in which the parties agreed that:
This contract shall be construed, governed, interpreted, enforced and litigated, and the relations between the parties determined in accordance with the laws of Texas.
[blank typed-in in original].
Chesapeake hired several subcontractors to perform drilling-related services at the well, including Reeled Tubing, Inc. ("RTI"), a company based in Louisiana, and Quality Pressure Testing ("QPT"), a Texas company. On February 15, 1997, Danny Alms, a Texas resident employed by RTI, injured his shoulder and back while working at the well. Four days later, Dennis Fritz, a Texas resident employed by QPT, slipped, fell, and suffered injuries at the well.
From this common starting point, the paths of Alms and Fritz diverged. Fritz filed suit against Chesapeake, Nabors, and others in Harris County, Texas; Alms sued Chesapeake, Nabors, and others in Brazoria County, Texas. Since both men worked for Chesapeake's subcontractors, Nabors filed cross-actions against Chesapeake in both suits seeking indemnification for all liability and defense costs incurred. In nearly identical motions, Nabors moved for summary judgment on the cross-claims.
The Alms court applied Texas law, granted Nabors' indemnity claim, and severed that claim from the rest of the suit for this appeal. The Fritz court first tried the underlying claims (resulting in a take-nothing judgment against Fritz), then applied Louisiana law, and denied Nabors' indemnity claim for defense costs.
On appeal, a panel of this Court initially reversed the Alms court. Thereafter, Na-bors' appeal in Fritz was submitted to a different panel (without mention by either party that an identical case was pending), and Nabors moved for rehearing in Alms. We granted Nabors' motion for rehearing, consolidated the two appeals, and now withdraw the panel opinion and issue this en banc opinion. Our review of the trial courts' opposite rulings on essentially the same summary judgment evidence is de novo. Minnesota Mining & Mfg. Co. v. Nishika Ltd., 955 S.W.2d 858, 856 (Tex.1996) (stating which state's law governs is a question of law).
I. The Purpose of Indemnities
Before considering each state's indemnity laws, we consider briefly the clauses they limit. At first glance, it appears suspect that an innocent party would agree in advance to pay the costs of a liable party, no matter what happens. Yet indemnity clauses are widespread in oilfield contracts (hence their inclusion in IADC form contracts). Both operators and drilling contractors have urged the Texas Legislature to encourage indemnity provisions under certain conditions. A comparison with sit uations in which there is no indemnity suggests why.
Drilling sites, of course, can be hazardous places. When injuries occur, it is often difficult to tell who is at fault due to the complex nature of the enterprise, the large number of subcontractors usually involved, difficult questions regarding the right to control, and the intersection of premises liability and agency law in drilling operations. As a result, there are usually two disputes to resolve — one pitting the injured party against all those potentially responsible, and another among the defendants to allocate fault and the resulting burden of any settlement or judgment.
Mutual indemnity provisions (if routinely enforced) eliminate the latter dispute. In the standard drilling contract, they allocate costs and liability according to who hired the injured party, not who caused the accident. This eliminates liability and coverage disputes between drilling operators and contractors. In the event of a lawsuit, they need not file cross-actions for contribution, conduct discovery between themselves, or even hire separate lawyers. This may result in a "united front" against a plaintiff, but it may also work to a plaintiffs advantage by shifting money from duplicative defense costs to settlement funds.
But indemnity provisions often fall short of this purpose. This Court and others have been kept busy in recent years resolving indemnity disputes. In the choice-of-law analysis that follows, it must be kept in mind that these clauses will never accomplish their primary purpose as long as there is substantial uncertainty about whether they will be enforced.
II. The Conflicting Indemnity Laws
The parties disagree whether their indemnity clauses should be judged by Texas or Louisiana law. They also disagree whether it makes any difference. As we need not decide which law applies if it makes no difference, we first review the law of each state.
A. Texas Law
Under Texas law, oilfield indemnity clauses are generally void. Tex. Civ. PRac. & Rem.Code § 127.003. But there are several exceptions, including one for indemnities that are mutual and supported by liability insurance. Id. § 127.005; Ken Pe troleum Corp. v. Questor Drilling Corp., 24 S.W.3d 344, 346 (Tex.2000). Additionally, indemnity clauses must meet certain fair notice requirements. Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 509 (Tex.1993). Chesapeake does not dispute that these clauses meet the former, but argues they fail to comply with the latter.
To give fair notice, an exculpatory indemnity clause must be express and conspicuous. Id. at 508-09. Compliance with these requirements is a question of law for the court. Id. at 510. The operative indemnity language here meets the "express" requirement, as it is identical to words the Texas Supreme Court has approved. See Maxus Exploration Co. v. Moran Bros., Inc., 817 S.W.2d 50, 56 (Tex.1991) (holding indemnity "without limit and without regard to the cause or causes thereof or the negligence of any party or parties" met express negligence test). The second requirement — conspicuity—is immaterial if Chesapeake had actual knowledge of the indemnity clauses. Cate v. Dover Corp., 790 S.W.2d 559, 561-62 (Tex.1990). Chesapeake did, because its representative initialed a specific change to the indemnity provisions in this contract. We find Nabors' indemnity claim would be enforceable under Texas law.
B. Louisiana Law
By a similar statute, Louisiana declares oilfield indemnity clauses void and unenforceable if they operate in favor of a negligent party. La.Rev.Stat. ANN. § 9:2780(B) (West 1991). Nabors argues this statute applies only to contractors domiciled in Louisiana, and thus does not apply here. But the statute's language is not so limited. Id. (providing that "[a]ny provision contained in, collateral to, or affecting an agreement pertaining to a well for oil, gas, or water . is void and unenforceable").
In the Fritz case, the jury found Nabors negligent (though only twenty percent at fault). In the Alms case, we presume a jury may find Nabors negligent, since Na-bors' motion failed to prove it was not negligent as a matter of law. In either case, Nabors' indemnity claim would be unenforceable under Louisiana law.
C. Choosing the Law
Because of these differences, this appeal turns on which state's law applies. In determining the law applicable to oilfield indemnity clauses, Texas courts look to sections 187 and 188 of the Restatement (Second) of Conflict of Laws. Maxus, 817 S.W.2d at 53. As relevant for this appeal, those sections provide:
• In a contract without an express choice of law, indemnity is governed by the law of "the state which, with respect to that issue, has the most significant relationship to the transaction," applying the principles stated in Restatement section 6 to the contacts listed in Restatement section 188(2). See Maxus, 817 S.W.2d at 53; Restatement (seoond) of conflict of laws § 188 (1971).
• In a contract with an express choice of law, indemnity is governed by the law chosen by the parties unless (1) there is a state with a more significant relationship to the transaction (applying section 188), and (2) applying the chosen law would contravene a fundamental policy of that state, and (3) that state has a materially greater interest in the determination of the particular issue. See DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 677-78 (Tex.1990); Restatement § 187(2)(b).
Because the parties here expressly chose Texas law, we apply the latter provision. But because the latter incorporates the former, we begin our analysis with it.
III. Section 188: The Most Significant Relationship
A. The Contacts
Restatement section 188 provides that "an issue in contract [is] determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties," taking into account the following five contacts:
(1) the place of contracting,
(2) the place of negotiation of the contract,
(3) the place of performance,
(4) the location of the subject matter of the contract, and
(6)the domicile, residence, nationality, place of incorporation and place of business of the parties.
Restatement § 188(2).
Chesapeake argues the first, second, and last contacts are inconclusive because they are split between two states— Texas and Oklahoma. But we are not comparing the law of Texas and Oklahoma, only Texas and Louisiana. While only one party is domiciled in Texas and negotiated and signed the contract there, that is one more than can be said for Louisiana. Moreover, the parties agree that—with respect to enforcement of these indemnities—the laws of Texas and Oklahoma would reach the same result. Thus, considering Texas to be the state of domicile, place of business, and place of negotiation and contracting complies with (or at least does no harm to) Oklahoma's interests as well.
The third and fourth contacts—the place of performance and the location of the subject matter of the contract —are more difficult to pin down. In Maxus Exploration Co. v. Moran Bros., the Texas Supreme Court considered what law applied to an oilfield indemnity clause when the parties made no choice of law in their contract. 817 S.W.2d at 53. The court held the place of performance was of "paramount importance" in service contract cases. Id.; see also Restatement § 196.
But as the court noted, there are two possible meanings of "the place of performance": (1) where the drilling services were performed, and (2) where the indemnity obligation was performed (by defending against the injured employee's suit). The main performance contemplated by the drilling contract as a whole is the former; but the only disputed performance involved in the two cases before us is the latter. The court and the Restatement tell us that, on occasion, "it is more appropriate to consider the disputed contractual issue separately from the contract as a whole." Maxus, 817 S.W.2d at 54; see Restatement Title C Particular Issues, Introductory Note, at 631-32. Because in Maxus the performance of both was in Kansas, the court did not have to decide the issue.
But we do. Here, the drilling took place in Louisiana, but the suing took place in Texas. Any judgment (in the Alms case) would be entered in Texas, the attorneys' fees (sought in both cases) were incurred in Texas, and indemnification between Nabors and Chesapeake would be made to or from Texas. Thus, we must decide whether the state with the most significant relationship should be determined by looking to the contract as a whole or the indemnity clauses that are disputed.
We believe the latter is the case. While the Texas Supreme Court has not addressed this question again with respect to Restatement section 188, it recently construed identical language in the Restatement concerning choice of law in a tort action. Compare Restatement § 145(1) ("The rights and liabilities of the parties with respect to an issue in tort are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties") with Restatement § 188(1) ("The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties"). In Hughes Wood Products, Inc. v. Wagner, the supreme court found the lower court's holding (that Texas had the most significant relationship to the parties' business as a whole) was immaterial. 18 S.W.3d 202, 205 (Tex.2000). The proper analysis, the court held, must "consider which state's law has the most significant relationship to the particular substantive issue to be resolved." Id. (emphasis in original).
In this appeal, the "particular substantive issue to be resolved" is whether these indemnity clauses are enforceable. Na-bors' claim in both cases is for liability and legal services incurred in Texas, not for drilling services performed in Louisiana. Considering only the particular issue in dispute, the place of performance of that obligation was in Texas.
Chesapeake urges us to adopt the other option in Maxus — that the place of performance is the state where the drilling services were performed. This whole-contract approach to place of performance makes the particular substantive issue irrelevant. Thus, if this lawsuit concerned financing, insurance coverage, workers' compensation, taxes, transportation, or any other side agreement in the parties' drilling contract, the result would always be the same- — Louisiana law governs it all.
Our dissenting colleagues adopt this approach, arguing it will make the law more predictable because contracting parties know in advance where they are drilling, but not where they will be sued. We doubt it was a surprise to these oil companies that an injured Texas resident was likely to sue a Texas company in Texas. But even if this assumption about the parties' expectations is correct here, it certainly will not always be the case. Many oilfield contracts contemplate work in different jurisdictions, or consist of a master service contract that applies to many separate work orders issued over the years for different places. Others concern services that have no single place of performance— such as the transportation of oilfield personnel and products by truck, boat, helicopter, and pipeline. In such cases, the "place of performance" suddenly becomes much less predictable, and subject to after-the-fact arguments about where "most" of the contractual services were performed.
Additionally, using "predictability" to determine the place of performance jumbles the Restatement analysis. The proper approach is to determine the state contacts (such as place of performance) and then apply the Restatement's general principles (such as certainty, predictability, and uniformity). Using a single principle to define the state contacts and to analyze them makes it serve as both cart and horse.
A narrow focus on only one factor and one part of the contract (the place of performance of drilling) is at odds with the Restatement's approach, which requires a broad consideration of all contacts and interests. The place of performance is only one factor in the choice-of-law analysis, and as discussed in the next section, in our view it is not necessarily determinative or even the most important factor. What is determinative is which state has the most significant relationship with respect to the indemnity issue. In this case, performance of the drilling was completed a long time ago. For the last four years, the only fight has been over performance of the indemnities, a fight conducted entirely in Texas. We do not see why Louisiana should set the rules for that fight.
B. Evaluating the Contacts
Next, we must evaluate these contacts according to their relative importance with respect to the particular issue in the cases before us. See Restatement § 188(2). As noted, the domicile of the parties, place of contracting, and place of negotiation all point to Texas; so do the remaining contacts with respect to the particular issue to be resolved (rather than the contract as a whole). We evaluate these contacts not by them number, but by their quality. Minnesota Mining & Mfg. Co., 955 S.W.2d at 856.
As discussed in section IV(A) below, the purpose of both the Texas and Louisiana oilfield indemnity statutes is to prevent large oilfield companies from imposing contracts of adhesion on smaller oilfield contractors. Obviously, a state has a stronger interest in protecting its own citizens than a neighboring state does. Accordingly, "the state where a party to the contract is domiciled has an obvious interest in the application of its contract rule designed to protect that party against the unfair use of superior bargaining power." Restatement § 188 cmt. c. State and federal courts appear generally to follow this principle, applying the law of the parties' domiciles when considering conflicting indemnity laws.
In the most recent and most similar case available, the United States Court of Appeals for the Fifth Circuit held that the domicile of the contracting parties is determinative in an oilfield indemnity choice-of-law analysis. See Roberts v. Energy Dev. Corp., 235 F.3d 935, 943 (5th Cir.2000). In that case — -like ours — the oilfield services and injury occurred in Louisiana, and the parties' contract chose Texas law. The court disregarded the parties' law choice because indemnity was sought against a company domiciled in Louisiana. Id. at 942-43. The court distinguished one of its previous decisions that applied Texas law to similar facts, noting the difference was that the contracting parties in the prior case were both domiciled in Texas. Id. at 943.
In DeSantis v. Wackenhut Corp., the Texas Supreme Court appeared to follow this principle, applying the law of the Texas employee's domicile because Texas law (which restricted noncompetition agreements) was intended to protect him. 793 S.W.2d at 679. But in Maxus, the court refused to apply Texas law to construe oilfield indemnities, even though both companies were domiciled in Texas. 817 S.W.2d. at 57. The court instead applied the law where the contract was performed (both the drilling services and the subsequent liability suit), stating it was more plausible the Texas indemnity statute was intended to protect contractors drilling wells in Texas rather than Texas-domiciled contractors when drilling out of state. Id. The opinion does not address the cases or Restatement commentary that emphasize domicile.
We do not think the result in Maxus applies here for two reasons. First, the Restatement contacts "are to be evaluated according to their relative importance with respect to the particular issue." Restatement § 188(2) (emphasis added). In Max-us, the place of performance outweighed domicile because all services (drilling and indemnity) were performed out of state. Here, the indemnity services and domicile are both in Texas; Maxus does not suggest the drilling location alone outweighs these two combined, especially with respect to the indemnity issue in dispute.
Second, strong policies underlying contract law (discussed in the next section) operated differently in Maxus. There, the contracting companies failed to use the most current drilling contract form, and as a result the indemnity clauses they used were unenforceable. See 817 S.W.2d at 52, 56 (noting amendments without expressly finding provisions invalid under Texas law). The supreme court may have favored Kansas law (which would enforce them) on the principle that companies should be held to their bargains. Here, reaching out to Louisiana law would have the opposite effect, relieving Chesapeake of the indemnity it promised to pay and the insurance coverage it promised to provide.
By giving special weight to domicile, we do not attribute a discriminatory intent to either statute any more than our dissenting colleagues do by construing the statutes territorially. Although they say these laws are defined by "geography" and directed toward "oilfield operations within [each state's] territorial boundaries," in fact the scope of neither statute is so limited. The actual terms of each statute contain no limitations whatsoever, and thus apply to all oilfield contracts everywhere, regardless of where the company or well is located. The choice-of-law question is whether and under what circumstances these statutes can extend that far; by presuming a territorial reach, our colleagues presume the answer.
The Restatement does not presume that state laws stop at the state line; instead, it focuses on which state's interests are the "most significant." A state without oil or oilfield companies may have an economic interest in curbing unfair bargaining in oil-producing states, but its interest is unlikely to be the most significant. We do not discount Louisiana's interest in fair bargaining between foreign companies. But the relationship between those companies and the states where they regularly conduct such bargaining is simply more significant than that of any number of other states where they may be operating for the moment.
Again, we do not make domicile the sole test; like any other contact, it cannot be taken out of context. It is interesting to speculate whether Louisiana law would apply if Alms or Fritz had sued somewhere else, or if the only Texas domiciliary was an assignee or a subcontractor, but we need not decide those cases here. Nor should a concern for the "mischief' domicile may hypothetically create cause us to overlook the mischief that is right before our eyes — having drafted indemnity clauses and purchased insurance to meet Oklahoma and Texas law, the losing party now wants to undo the result.
C. Considering the Principles of Restatement Section Six
Finally, we must apply to these weighted contacts the principles listed in Restatement section 6. See Maxus, 817 S.W.2d at 54; Restatemext § 188(2). Those principles are:
(a) the needs of the interstate and international systems,
(b) the relevant policies of the forum,
(c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue,
(d) the protection of justified expectations,
(e) the basic policies underlying the particular field of law,
(f) certainty, predictability and uniformity of result, and
(g) ease in the determination and application of the law to be applied.
Id. at § 6. In conducting this analysis, we put aside the parties' explicit choice of Texas law, but certainly not the rest of their contract. See Restatement § 188 cmt. b (recognizing that parties expect "the provisions of the contract would be binding upon them," and that this expectation is of "considerable importance").
For the reasons already discussed, we believe the relative policies and interests of Texas and Louisiana (the second and third principles) tip toward Texas, as the state with the strongest interest in fair bargaining by resident businesses. Moreover, Texas has a "strong commitment to the principle of contractual freedom." Churchill Forge, Inc. v. Brown, 61 S.W.3d 368, 371 (Tex.2001). We believe this interest in freedom of contract (and its indispensable partner — contract enforcement) outweighs any interest Louisiana has in voiding a contract between foreign companies regarding foreign litigation. And as noted at the outset, the benefit Texas oilfield companies (and Texas appellate courts) gain by avoiding indemnity disputes is lost if enforcement is rendered uncertain every time a work order calls for crossing a state line.
The justified expectations of the parties and the policies underlying contract law (the fourth and fifth principles) also point to Texas. In contract cases, these two usually agree, as "[protection of the justified expectations of the parties is the basic policy underlying the field of contracts." Restatement § 188 cmt. b; DeSantis, 793 S.W.2d at 677. In this case, the parties explicitly drafted indemnity provisions and purchased insurance to meet Texas law. Neither party expected Louisiana's indemnity statute to apply, unless they had their fingers crossed when they signed. In such circumstances, it would be "unfair and improper" to allow Chesapeake to appeal to Louisiana law to undo the parties' bargain. See Restatement § 6 cmt. g.
Our dissenting colleagues declare these expectations "unjustified" because the parties should have known Louisiana law would apply (though a majority of the Court holds it does not). In other words, this should have been easy for the parties to see, though it has not been so for us. At most, the parties could have known that Louisiana law might apply, but this does not explain why any other expectation was not "justified." We would not be protecting the parties' justified expectations by converting this possibility into a certainty, meanwhile converting mutual promises of $1 million in insurance coverage into a mere "hope" or "desire."
This is not a case in which the parties drafted a contract they knew to be illegal; such a mens rea would require law that is clearer than this has proved to us. When the law of two states might apply and the law of one would void a contract, the Restatement does not prohibit parties from trying to avoid that result. In the only two illustrations included in section 188, hypothetical parties travel to foreign states to enter or enforce contracts they could not at home; yet both illustrations suggest the contracts should be enforced (at least under some conditions) to protect the "justified" expectations of the parties. See Restatement § 188 cmt. e, illus. 1-2.
Certainty, predictability, and uniformity and the needs of the interstate and international systems (the first and sixth principles) also support application of Texas law. Industry and commerce cannot operate in a climate that allows a contracting party who makes a bad bargain to change the terms of a deal at its option. Additionally, while Louisiana law has its occasional peculiarities, they pale in comparison to those of foreign lands where oilfield companies sometimes drill. If Chesapeake is correct that the latter's law always trumps the parties' contract, it will be expensive— sometimes even impossible — to know what the parties' contract is.
Finally, the Maxus court held that ease of determination and application of law (the seventh principle) points to applying the law of the state where the injured party brought suit. 817 S.W.2d at 57. Like place of performance of the indemnities, this cannot be known with certainty until the injured party files suit. Nevertheless, it is one of the principles we must apply, and like all the others points to Texas in the cases before us.
Chesapeake urges us to adopt a strict rule that always applies the law of the state where the well is located — a "lex loci drilling situs." The argument is tempting, if only because it would be much easier to apply than the factors, principles, and balancing of the Restatement. But as discussed above, that will not always be the case. More important, it is not Texas law. For better or worse, the Supreme Court has adopted the Restatement approach, and we must follow the balancing act it requires.
Finally, while the Restatement analysis may create uncertainty in some cases, it certainly did not do so here. Chesapeake can hardly be shocked that Texas law applies, as the indemnity clauses and insurance coverage were specifically drafted to meet Texas law. Moreover, if uncertainty is to be decisive, that goal is often best attained (as the Restatement itself states) by letting the parties choose the law that governs their relations, and giving judicial respect to that choice. See Restatement § 187 cmt. e; DeSantis, 793 S.W.2d at 677. To that important duty we now turn.
TV. Section 187: Contravening Material Policies
Although Texas has the most significant relationship to this dispute, we believe the result would be the same if Louisiana were awarded that distinction. Because the parties chose Texas law in their contract, that choice can be disregarded only if it contravenes a fundamental policy of Louisiana, and Louisiana has a materially greater interest in the determination of this indemnity issue than Texas does. See Restatement § 187(2)(b). For several reasons, we believe neither is the case.
A. Contravening Identical Policies
We do not have to guess the public policy behind the competing indemnity statutes here, because each legislature stated it expressly:
• "The [Texas] legislature finds that an inequity is fostered on certain contrac tors by the indemnity provisions in certain agreements pertaining to wells for oil, gas, or water or to mines for other minerals." Tex. Civ. Prac. & Rem.Code § 127.002(a).
• "The [Louisiana] legislature finds that an inequity is foisted on certain contractors and their employees by the defense or indemnity provisions, either or both, contained in some agreements pertaining to wells for oil, gas, or water, or drilling for minerals." La.Rev.Stat. Ann. § 9:2780(A) (West 1991).
We assume these policies are "fundamental" (as required by the Restatement), especially as each state has taken the unusual step of stating it explicitly. Nevertheless, because the policies are identical, we do not see how one can contravene the other.
It is true the statutory cure adopted by each state is different, although the stated policies are identical. But according to the Restatement the statutes are not in fundamental conflict merely because they would lead to different results. See Restatement § 187 cmt. g. The test is whether the chosen law contravenes a state policy, not the outcome in a particular case. See DeSantis, 793 S.W.2d at 680. A choice-of-law clause is relevant only if it will result in a different outcome; if that difference alone is enough to make policies contravene, then choice-of-law clauses will never be enforced.
The Restatement test requires more than this. A contractual choice of law should be disregarded only if it would "thwart or offend the public policy" of Louisiana, not if it would merely require a different result. See Monsanto Co. v. Boustany, 73 S.W.3d 225, 229 (Tex.2002). If the policies in each state are the same, different approaches do not contravene them just because one is somewhat stricter than the other. See Minnesota Mining & Mfg. Co. v. Nishika, Ltd., 953 S.W.2d 733, 736-37 (Tex.1997) (holding different commercial warranty laws did not contravene one another as both sought to balance rights of manufacturers and consumers).
Our dissenting colleagues attempt to create a fundamental conflict by overstating the extent of Louisiana's law. Louisiana law is not absolute or unqualified— non-negligent parties can enforce indemnities to their hearts' content, and settling parties may attempt to do the same. The only difference between Texas and Louisiana law is how best to limit the abuse of indemnities. Arguments can be made about which state's approach is best. But because both states' policies are identical, if the Texas approach thwarts Louisiana public policy, then it must also thwart its own. We decline to hold that the Texas Legislature was either mistaken or disingenuous in the approach it selected to address the stated policy.
B. Weighing Material Interests
Nor do we believe Louisiana has a materially greater interest than Texas in policing the bargain made by these oilfield companies. As the policy of both statutes is to regulate contractual negotiations, the interests of Texas and Oklahoma — where they actually conducted those negotiations' — ⅛ simply more significant than that of Louisiana — where they did not.
For Louisiana to have a materially greater interest, there would have to be some connection between unfair bargaining (the policy of both statutes) and the location of the well (Louisiana's only contact). The only connection suggested is the protection of injured workers. But the Louisiana Legislature explicitly stated its public policy in this statute, and that was not it. Moreover, this judicially-imagined policy represents a rather fundamental misunderstanding of what indemnities do. Indemnities do not release a company from liability to an injured plaintiff; instead, they add a potential source of recovery should a liable company prove insolvent. Logically, a state that aims to make work sites safer by limiting indemnities should also prohibit workers' compensation or employer's liability insurance for the same reason, as they have the same effect. When weighing fundamental policies, we cannot unfairly tip the scales by tossing on one side fundamental policies that do not apply.
Another court has suggested the Louisiana statute may have the effect (though it is not the stated purpose) of opening up markets for Louisiana companies who will not or cannot sign indemnity contracts. But it appears that some Louisiana companies regularly sign indemnity contracts— often designating non-Louisiana law that would enforce them — only to attack them successfully later as violative of Louisiana's statute. By giving special weight to the law of a party's domicile, we place no barrier in the path of Louisiana companies that wish to continue this practice.
Texas, too, has several material interests that might be considered if policies beyond those explicitly stated come into play. Texas has a strong interest in enforcing its residents' contracts, even those concerning work to be done out of state. In Maxus, the supreme court concluded "[w]e do not read the [Texas indemnity] statute to have an extraterritorial reach, absent some agreement between the parties." 817 S.W.2d at 57 (emphasis added). In English usage, the statement "our rule is A, absent condition B" strongly implies "our rule is not A in the presence of condition B." To give effect to what the Maxus court said, Chesapeake's territorial arguments must yield to its own agreement.
Finally, by requiring indemnities that are mutual and supported by adequate insurance, Texas law increases the probability that injured parties may recover not just a paper judgment, but one that is collectible. Fritz and Alms were not the first Texas residents to be injured while working on a drilling site in Louisiana, and probably will not be the last. A plaintiff with a strong negligence case against a financially weak contractor is clearly better off if that contractor is backed up by an indemnitor and its insurance.
V Conclusion
Little need be said about the importance of oilfield services to this state, its economy, and its people. Texas indemnity law allows companies to substitute insurance in place of uncertain liability, thus limiting their costs and making them more predictable. Getty Oil Co. v. Ins. Co. of N. America, 845 S.W.2d 794, 804 (Tex.1992). Disregarding indemnity clauses (and the insurance agreements behind them) by applying another state's law does just the opposite. In applying Texas law to the two cases before us, we recognize the state's interest that indemnity clauses meet certain requirements, and are enforced when they do. Because these sophisticated parties drafted a contract to meet Texas law, and deemed it to apply, we believe they should have what they bargained for.
For these reasons, we affirm the summary judgment for Nabors in Cause Number 14-00-00173-CV (Alms), and we reverse and remand the judgment against Nabors in Cause Number 14-00-00580-CV (Fritz).
Justices ANDERSON, FOWLER, SEYMORE, GUZMAN, and Senior Justice McCLOUD joined the majority opinion.
Senior Justice WITTIG filed a dissenting opinion in which Justices YATES, HUDSON, and FROST joined.
Justice FROST filed a dissenting opinion in which Justice HUDSON and Senior Justice WITTIG joined.
Justice EDELMAN filed a dissenting opinion.
. The relevant language of the provisions has been quoted in several other cases. See, e.g., Ken Petroleum Corp. v. Questor Drilling Corp., 24 S.W.3d 344, 351-52 nn. 16-17 (Tex.2000). Because these cases do not turn on the particular language of the indemnity clauses, we refrain from including all 738 words here.
. Although our record does not specifically indicate Alms's residence on the day of his accident, his testimony indicates he resided and worked in Texas for some years both before and after the accident.
. Although the jury found both Nabors and Fritz negligent, because it assessed eighty percent of the fault to Fritz, he was barred from recovering against Nabors. See Tex. Civ. Prac. & Rem.Code § 33.001 (barring recovery by claimants whose percentage of responsibility exceeds fifty percent). The jury found Chesapeake (which had settled with Fritz prior to the trial) not negligent. See id. at § 33.003 (requiring jury question to include settling parties).
. The parties have also engaged in related litigation in federal court in Louisiana. Old Republic Ins. v. Chesapeake Operating Inc., No. 991270, 2000 WL 33399807 (W.D.La. Nov.l, 2000) (not designated for publication). There, QPT's insurer sought a declaration that Louisiana law barred enforcement of mutual indemnity clauses between QPT and Chesapeake with respect to the Fritz case. Although the Memorandum Ruling applied Louisiana law in an alternative holding, the federal court held that (1) indemnity for Chesapeake was moot because it had settled with Fritz, and (2) indemnity for Nabors was unavailable as it had no indemnity contract with QPT.
.See Ken Petroleum, 24 S.W.3d at 349 (citing legislative history that operators and contractors requested amendment of Texas Oilfield Anti-Indemnity Act to make it less restrictive).
. See, e.g., Koch Ref. Co. v. Chapa, 11 S.W.3d 153, 157 (Tex.1999); Tovar v. Amarillo Oil Co., 692 S.W.2d 469, 470 (Tex.1985).
. See, e.g., Clayton W. Williams, Jr., Inc. v. Olivo, 952 S.W.2d 523, 527 (Tex.1997).
. See, e.g., Ken Petroleum, 24 S.W.3d at 346 (reversing two appellate courts and holding indemnity obligations enforceable to extent coverage and dollar limits applied equally); Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 511 (Tex.1993) (holding indemnity void because it was not conspicuous); Getty Oil Co. v. Insurance Co. of N. America, 845 S.W.2d 794, 804 (Tex.1992) (holding Texas Oilfield Anti-Indemnity Act inapplicable to additional insured provision); Maxus Exploration Co. v. Moran Bros., Inc., 817 S.W.2d 50, 57 (Tex.1991) (holding Kansas law applied to indemnity); Amerada Hess Corp. v. Wood Group Prod. Tech., 30 S.W.3d 5, 13 (Tex.App.Houston [14th Dist.] 2000, pet. denied) (affirming indemnity for settlement amount as reasonable); Coastal Transp. Co. v. Crown Cent. Petroleum Corp., 20 S.W.3d 119, 128 (Tex.App.-Houston [14th Dist.] 2000, pet. denied) (holding Texas Oilfield Anti-Indemnity Act inapplicable to suit by gasoline terminal against trucking company); Ard v. Gemini Exploration Co., 894 S.W.2d 11, 15 (Tex.App.Houston [14th Dist.] 1994, writ denied) (holding particular indemnity inapplicable to personal injury claims).
.Although Chesapeake is an Oklahoma corporation, neither party asserts that Oklahoma law applies.
. Because of this express holding, the court's final note that "[w]e express no opinion on whether the indemnity provisions at issue would be valid under Texas law" must refer only to the question whether the clauses were supported by mutual insurance contracts. Maxus at 56-58.
. The Restatement alternatively provides that an express choice of law will be enforced if the issue is one the parties could have resolved by explicit agreement. Restatement § 187(1). Here they could not, because Louisiana law (if applicable) would make these indemnity agreements void. See DeSantis, 793 S.W.2d at 678. The Restatement also refuses to respect the parties' choice of law if the chosen state has no substantial relationship to the parties or the transaction. Restatement § 187(2)(a). Here Texas does, as it is Nabors' principal place of business and the locus of part of the contract negotiations. See DeSantis, 793 S.W.2d at 678.
. Oklahoma enforces oilfield indemnity clauses if they (1) are unequivocally clear, (2) result from an arm's-length transaction between parties of equal bargaining power, and (3) do not violate public policy. Kinkead v. Western Atlas Int'l, Inc., 894 P.2d 1123, 1127 (Okla.Ct.App.1993) (enforcing oilfield indemnity). Because the Kinkead court enforced an oilfield indemnity clause, and because Chesapeake designated Oklahoma law to govern its indemnity contract with QPT, such clauses do not appear to violate Oklahoma public policy.
.The location of the contract's subject matter is "significant" when "the contract deals with a specific physical thing, such as land or a chattel, or affords protection against a localized risk." See Restatement § 188 cmt. e. Assuming it applies to service contracts, it does not appear to differ from the "place of performance." See DeSantis, 793 S.W.2d at 679 (finding both factors pointed to Texas in services contract performed there); Diesel Serv. Co. v. AMBAC Int'l Corp., 961 F.2d 635, 641 (7th Cir.1992), overruled on other grounds by Generac Corp. v. Caterpillar Inc., 172 F.3d 971, 974-75 (7th Cir.1999) (finding analysis same for both factors under § 188).
. Although even Chesapeake cites Hughes as dispositive on this point, Justice Wittig finds it inapplicable because the "particular issue" in Hughes was covered by a separate section in the Restatement. Post at 171-72. In other words, he would separately consider the substantive issue only if it is among the nineteen issues listed in Restatement sections 189 to 207. Neither Hughes nor the Restatement suggest any such limitation: "The courts have long recognized that they are not bound to decide all issues under the local law of a single state.... Each issue is to receive separate consideration if it is one which would be resolved differently under the local law rule of two or more of the potentially interested states." See Restatement § 188 cmt. d (emphasis added). Moreover, the supreme court in Maxus would not have mentioned two options if one (the place of performance of the indemnity) was irrelevant absent its own separate section in the Restatement.
. Our analysis does not necessarily "divideQ the law applicable to indemnity and the underlying insuring agreement," as Justice Wit-tig suggests. Post at 182. The Restatement does not apply the law of a state where the insured risk is located "when the contract would be invalid under the local law of the state of principal location but valid under the local law of another state with a close relation to the transaction and the parties." See Restatement § 193 cmt. d. Because Texas has such a close relation, we believe this exception applies.
. We disagree with Justice Frost that by focusing on the indemnity clause (the particular issue), the place of performance "points to no particular state." Post at 191. In Maxus, there is no indication that at the time of contracting the parties knew they would be sued in Kansas, yet the supreme court considered the defense of an injured worker's suit there as a "performance" pointing to that state. See Maxus, 817 S.W.2d at 54. The Restatement does accord less weight to contacts to the degree they are "uncertain or unknown" at the time of contracting. See Restatement § 188 cmt. e. But it discounts them only when they are "purely fortuitous." Id. (suggesting place of contracting is of no significance when one party happens to mail acceptance from a railroad station).
. See, e.g., Davis & Sons, Inc. v. Gulf Oil Corp., 919 F.2d 313, 315 (5th Cir.1990) (holding contract in that case consisted of both blanket agreement and later work orders).
. We also disagree with our dissenting colleagues that the Restatement's focus on the particular issue in dispute will invite forum shopping. It seems very unlikely that many plaintiffs will pick a venue solely to manipulate the enforceability of the defendants' mutual indemnity obligations. Indeed, it is not clear plaintiff's counsel will even know about such clauses before filing suit.
. See, e.g., Roberts v. Energy Dev. Corp., 235 F.3d 935, 943 (5th Cir.2000) (applying Louisiana law to void indemnity owed by Louisiana contractor when most work was performed in Louisiana); Thomas v. Amoco Oil Co., 815 F.Supp. 184, 187 (W.D.La.1993) (applying Louisiana law to void indemnity owed by Louisiana contractor even though all work was performed in Texas); Lyons v. Turner Constr. Co., 195 Ill.App.3d 36, 141 Ill.Dec. 719, 551 N.E.2d 1062, 1063 (1990) (applying Illinois law to void indemnity owed by Illinois contractor even though all work was performed in Texas); Chrysler Corp. v. Skyline Indus. Servs., Inc., 448 Mich. 113, 528 N.W.2d 698, 707 (1995) (applying Michigan law to enforce indemnity between Michigan companies who chose Michigan law, even though all work was performed in Illinois); Reagan v. McGee Drilling Corp., 123 N.M. 68, 933 P.2d 867, 868 (App.1997) (applying Texas law to enforce indemnity between Texas contractors who chose Texas law, even though all work was performed in New Mexico); Finucane v. Interior Constr. Corp., 264 A.D.2d 618, 695 N.Y.S.2d 322, 324-25 (N.Y.App.Div.1999) (applying Oklahoma law to enforce indemnity in favor of Oklahoma contractor when parties chose Oklahoma law, even though all work was performed in New York); cf. Scott v. DelMar Offshore Servs., Inc., 943 F.Supp. 764, 768-69 (S.D.Tex.1996) (applying Louisiana law to void indemnity between Texas companies who chose Texas law because federal Outer Continental Shelf Lands Act required application of Louisiana law); but see Tucker v. R.A. Hanson Co., Inc., 956 F.2d 215, 218-19 (10th Cir.1992) (applying New Mexico law to void indemnity executed in California choosing California law, as all work was performed in New Mexico); Palmer G. Lewis Co., Inc. v. ARCO Chem. Co., 904 P.2d 1221, 1227 (Alaska 1995) (applying Washington law to void indemnity contract because contract was negotiated and performed there, without mentioning domicile of any party); Donaldson v. Fluor Engineers, Inc., 169 Ill.App.3d 759, 120 Ill.Dec. 202, 523 N.E.2d 1113, 1116 (1988) (applying Illinois law to void indemni ty owed by Louisiana contractor because all work was performed in Illinois, even though parties chose California law).
. Unlike the cases before us, the personal injury and indemnity claims were all filed in Louisiana. Roberts, 235 F.3d at 936. Because both the oilfield and the litigation services occurred in Louisiana (as in Maxus), it did not matter whether the place of performance was the former or the latter. Rather than reading the case for what Justice Frost says it "seems to indicate," post at-, we instead rely on what the Fifth Circuit said was decisive — domicile.
. We disagree with Justice Frost's reliance on Gorsalitz v. Olin Mathieson Chem.Corp., 429 F.2d 1033 (5th Cir.1970). That case did not concern oilfield indemnity clauses, and did not address the Maxus options for "place of performance" because it was issued before Maxus, indeed even before the second Restatement itself was published. It is hard to see why Gorsalitz is more persuasive than Roberts, as only the latter is (1) a recent application (2) of the current Restatement (3) in the context of the Texas and Louisiana oilfield indemnity statutes.
. Post at 187.
. Post at 188.
. Justice Frost's complaint that our analysis "effectively withdraws protections for Texas contractors working in states that have more stringent anti-indemnity statutes than Texas," post at 196, is perplexing, as (1) it is her analysis (not ours) that would do so in this case, and (2) it assumes Texas contractors should be protected from their own agreements and their own legislature.
.Our dissenting colleagues confuse our reliance on the parties' indemnity and insurance agreements with reliance on the choice-of-law provision. The careful reader will note we rely in our section 188 analysis only on the former. One cannot analyze justified expectations or the policies underlying contract law without looking at what the parties' contract provided.
. There is no evidence that Chesapeake was "physically present" in Louisiana, as suggested by Justice Wittig. Post at 185.
. Post at 193.
. Webster defines "foster" as "to bring up with parental care; to promote the growth or development of," and "foist" (used in the Louisiana statute) as "to introduce or insert surreptitiously or without warrant; to force another to accept especially] by stealth or deceit." Webster's third new international Dictionary 881, 897 (1993). Whatever the correct choice of law, the Louisiana Legislature has probably made the better choice of words.
. The same is true of Justice Wittig's suggestion that policies contravene if they encourage parties to circumvent application of one state's law. Post at 181. The only reason for a choice-of-law clause is to avoid application of some other law. Nothing in the Restatement suggests an intent to ban such efforts entirely.
. See Ridings v. Danos & Curole Marine Contractors, Inc., 723 So.2d 979, 983 n. 2 (La.Ct.App.1998).
. Texas law impacts the initial contracting stage — an indemnity contract must be mutual and supported by liability insurance when it is entered. Tex. Civ. Prac. & Rem.Code § 127.001-.005. Louisiana law impacts the final resolution stage—an indemnity contract becomes void only when a party is found negligent at trial. La.Rev.Stat. Ann. § 9:2780(A); Meloy v. Conoco, Inc., 504 So.2d 833, 839 (La.1987). Texas law limits overreaching by making powerful negotiating parties add a provision that gives as good an indemnity as they get; Louisiana limits overreaching by striking any provision for indemnity of a party's own negligence. Texas law does not protect weaker negotiating parties from having to pay additional insurance premiums; Louisiana law does not protect weaker negotiating parties from having to pay another's defense costs when neither is negligent.
. Post at 185.
. Amoco Prod. Co. COG-EPCO 1992 Ltd. P'ship v. Lexington Ins. Co., 745 So.2d 676, 680 (La.Ct.App.1999).
. See, e.g., Verdine v. Ensco Offshore Co., 255 F.3d 246, 254 (5th Cir.2001); Roberts, 235 F.3d at 943-44; Matte v. Zapata Offshore Co., 784 F.2d 628, 631 (5th Cir.1986); Meloy v. Conoco, Inc., 504 So.2d 833, 839 (La.1987); Lexington Ins. Co., 745 So.2d at 677.
.Given our analysis of these policies, we do not mean to suggest that choice of law agreements in indemnity contracts are per se enforceable. But the "absent some agreement" condition in Maxus renders overbroad Justice Frost's statement that the supreme court in Maxus "adopted a territorial approach to anti-indemnity statutes." Postal 199.
Senior Justices Don Wittig and Austin McCloud sitting by assignment.