Opinion ID: 4509604
Heading Depth: 2
Heading Rank: 1

Heading: Hercules’ Duty to Indemnify Axon

Text: under the Seahawk Contract The district court concluded that Hercules was required to indemnify Axon under the Seahawk Contract. We agree.
On June 16, 2010, Axon entered a Master Service Agreement (the “Seahawk Contract”) with a company called Seahawk Drilling, Inc. At the time, Seahawk owned the HERCULES 265. Under the Seahawk Contract, Axon was placed on a list of providers who could perform work for Seahawk. When Seahawk had work for Axon, it would submit a work or purchase order for a specific job. Seahawk hired Axon to work on the HERCULES 265. Specifically, Axon was hired to refurbish—among other blowout preventer (“BOP”) equipment—the blind shear rams (“BSRs”), which were part of the BOP stack. The Seahawk Contract provided that it would “remain in force and effect until canceled by either party by giving the other party ten (10) days prior written notice.” An indemnity clause required Seahawk to “release, [d]efend, 7 Case: 18-20453 Document: 00515318964 Page: 8 Date Filed: 02/21/2020 No. 18-20453 indemnify, and hold harmless [Axon] from and against any and all [l]osses arising out of personal or bodily injury, sickness, disease or death or property damage, destruction or loss suffered by any member of Company Group in connection with this [a]greement.” “Company Group” included Axon, its parent, subsidiaries, affiliates, and contractors, and various other parties. Two days after Axon signed the Seahawk Contract, it entered into a similar service agreement with Hercules (the “Hercules Contract”). The Hercules Contract stated that it was to “supersede, amend, and restate any prior service or supply agreements or access agreements between [Hercules] and [Axon].” It was to “apply as a master service agreement to new [w]ork commenced during this Contract.” An indemnity clause provided that “the parties . . . shall release, protect, defend, indemnify and hold harmless the other party and their insurers and subrogees . . . to the extent in each case . . . that such [liability] is caused by the negligence or other legal fault of the indemnifying party.” Seahawk ran into financial trouble and filed for bankruptcy. As part of that proceeding, Seahawk sold assets to Hercules, including the HERCULES 265 and the equipment Axon worked on. Hercules also bought “all of the interests, rights, [c]laims, and benefits arising or accruing to [Seahawk] under any [c]ontracts to which [Seahawk] is a party.” Hercules assumed “the [l]iabilities of [Seahawk] under the terms of any [a]ssigned [c]ontract to the extent that such [l]iabilities are performance obligations, or otherwise attributable to the period from and after the [c]losing.” The Seahawk Contract was assigned to Hercules. The bankruptcy court specifically approved the purchase. The court also indicated that the transactions under the asset purchase agreement (“Purchase Agreement”) would “be specifically performable and enforceable against and binding upon, and not subject to rejection or avoidance by, the [p]urchasers and [s]ellers.” 8 Case: 18-20453 Document: 00515318964 Page: 9 Date Filed: 02/21/2020 No. 18-20453 The agreement closed on April 27, 2011. See In re Seahawk Drilling, Inc., No. 11-20089-RSS, 2011 WL 13323774 (Bankr. S.D. Tex. Apr. 27, 2011). When Plaintiffs sued Axon, it sought defense and indemnity from Hercules under the Seahawk Contract. The district court granted summary judgment for Axon on the issue, holding that the Seahawk Contract controlled the parties’ indemnity obligations for purposes of Plaintiffs’ claims, and that under the contract, Hercules owed Axon defense and indemnity.
The question of indemnity under the applicable contract is reviewed de novo. Chevron USA, Inc. v. Aker Mar. Inc., 689 F.3d 497, 501 (5th Cir. 2012). We may affirm on any ground that was presented to the district court even if it did not ultimately form the basis of the district court’s decision. CQ, Inc. v. TXU Mining Co., 565 F.3d 268, 274 (5th Cir. 2009).
Hercules asserts that the Hercules Contract, not the Seahawk Contract, governs indemnity between Hercules and Axon. Its core argument is that, since the Hercules Contract superseded all previous contracts between the parties, and because Hercules “stepped into the shoes” of Seahawk by assuming its contracts through the Purchase Agreement, the Hercules Contract supersedes the Seahawk Contract and the indemnity provision in the Hercules Contract governs here. We disagree and conclude that the Seahawk Contract governs. We therefore hold that Hercules must release, defend, indemnify, and hold harmless Axon for the claims Plaintiffs make against it. As an initial matter, we conclude that the indemnity provision in the Seahawk Contract was triggered by Plaintiffs’ suit against Axon. The contract requires Hercules to defend and indemnify Axon “from and against any and all [l]osses arising out of . . . property damage, destruction or loss suffered by any member of Company Group in connection with this [a]greement.” “Company 9 Case: 18-20453 Document: 00515318964 Page: 10 Date Filed: 02/21/2020 No. 18-20453 Group” included “any entities for whom [Hercules] is performing services or providing goods.” The group thus includes Walter because Hercules was “performing services” for Walter under the Drilling Contract. And Plaintiffs’ claims against Axon arise in connection with the Seahawk Contract—that is, Plaintiffs claim Axon’s work on the BOP was defective. The next question is whether, as Hercules claims, the Hercules Contract superseded the Seahawk Contract. We hold that it did not, for several reasons. First, the Seahawk Contract was not a prior contract between Hercules and Axon. Axon and Seahawk entered the Seahawk Contract on June 16, 2010. Axon and Hercules entered the Hercules Contract on June 18, 2010. As of that date, Hercules was not a party to the Seahawk Contract, and therefore by its own terms the Hercules Contract could not have “supersede[d], amend[ed], and restate[d]” the Seahawk Contract. See Breaux v. Halliburton Energy Servs., 562 F.3d 358, 366 (5th Cir. 2009) (“no sound basis” for concluding that later contract superseded earlier contract when contracts were not “between the same parties”). Second, the parties to the Seahawk Contract did not cancel it. By its own terms, the Seahawk Contract would “remain in force and effect until canceled by either party by giving the other party ten (10) days prior written notice.” Hercules points to no evidence that any party to the contract gave the required notice to cancel the contract. Third, Hercules fails to point to evidence that Axon’s work on the BOP was performed pursuant to the Hercules Contract. The Hercules Contract provided that it applied “as a master service agreement to new [w]ork commenced during this [c]ontract.” But the record evidence shows that the work Axon did on the BOP was under the Seahawk Contract. The purchase order for the work on the BOP body lists Seahawk as the customer. So do the 10 Case: 18-20453 Document: 00515318964 Page: 11 Date Filed: 02/21/2020 No. 18-20453 purchase orders for the rams. Hercules does not point to contradictory evidence. Contrary to Hercules’ arguments, the revision of a repair data book does not create a fact question on this issue. An Axon executive testified that a revised repair data book was provided to Hercules after its purchase from Seahawk in order to reflect the change. He also testified that the revised version of the work orders “identify and describe the same work performed by Axon” pursuant to the purchase order that identifies Seahawk as the customer. In other words, the records establish that Axon performed work on the BOP and other equipment for Seahawk, and that after Hercules purchased Seahawk’s assets the books were changed to reflect the new ownership, not to show that Axon performed work for Hercules on the BOP equipment. Similarly, the district court’s statement that the BOP was “refurbished by Axon after the [Hercules Contract] was executed” does not show the existence of a material fact dispute. Even assuming that the district court’s statement, without any accompanying citation to evidence, could create a fact dispute, this statement does not establish that Axon performed work for Hercules on the BOP. Rather, it states that at some point after June 18, 2010— the date of the Hercules Contract—Axon performed work on the BOP. The evidence shows that the work on the BOP was performed for Seahawk. Further, Hercules did not finalize its purchase of Seahawk’s assets—including the HERCULES 265—until April 27, 2011. See Seahawk, 2011 WL 13323774. Any work performed on the rig before then would necessarily have been performed on a rig owned by Seahawk, so whether work was performed on the BOP after June 18, 2010 is irrelevant—the relevant question is whether work was performed on the BOP after April 27, 2011. Hercules points to no such evidence. 11 Case: 18-20453 Document: 00515318964 Page: 12 Date Filed: 02/21/2020 No. 18-20453 For these reasons, we hold that the Seahawk Contract governed the obligations of Axon and Hercules with regard to the underlying lawsuit. The district court correctly granted summary judgment for Axon on this issue. 4