Court Opinion

ID: 37867
Source: CourtListenerOpinion
Date Created: 2010-04-25 19:59:24+00
Date Added: 2024-06-11T09:33:26.121805
License: Public Domain

United States Court of Appeals
                                                 Fifth Circuit
                                              F I L E D
                                              March 23, 2005
IN THE UNITED STATES COURT OF APPEALS
        FOR THE FIFTH CIRCUIT             Charles R. Fulbruge III
                                                  Clerk

 No. 03-31005, 03-31038 and 03-31161

         DONALD J. JOHNSON,
                Plaintiff

                v.

    SEACOR MARINE CORP., ET AL.,
               Defendants

        SEACOR MARINE CORP.,
                Defendant-Third-Party Plaintiff-
                Appellee

                v.

     GRAY INSURANCE CO., ET AL.,
                Third-Party Defendant

        GRAY INSURANCE CO.,
                     Third-Party Defendant-
                     Appellant.

          Consolidated with
               03-31038

          DONALD FLEMING,
                     Plaintiff

                 v.

 GRAND ISLE SHIPYARD, INC., ET AL.,
                     Defendants

        SEACOR MARINE, INC.,
                     Defendant-Third-Party
                Plaintiff-Appellant

                 v.

                 -1-
 GRAY INSURANCE CO.; PRODUCTION MANAGEMENT INDUSTRIES, L.L.C.,
                                   Third-Party Defendants-
                                   Appellees

                        Consolidated with
                             03-31161

                      GERALD W.HOFFPAUIR,
                                   Plaintiff

           PRODUCTION MANAGEMENT INDUSTRIES, L.L.C.;
                      GRAY INSURANCE CO.,
                                   Intervenor Plaintiffs-
                                   Counterdefendants-Appellees

                                  v.

                      SEACOR MARINE, INC.,
                                   Defendant-Intervenor
                                   Defendant-Counterclaimant-
                                   Appellant.

   Appeals consolidated from the United States District Courts
        for the Eastern and Western Districts of Louisiana

Before KING, Chief Judge, HIGGINBOTHAM, and DAVIS, Circuit
Judges.

W. EUGENE DAVIS, Circuit Judge:

     This consolidated appeal presents the question of whether a

labor contractor’s contract to hold harmless and indemnify a

vessel operator for injuries, sustained by that contractor’s

employees while riding on the operator’s vessel, is supported by

consideration when the vessel operator owes a pre-existing duty

to an oil company to transport those same employees. We conclude

that the contract is supported by consideration and is

                                  -2-
enforceable.

                               I.

     Production Management Industries, L.L.C. (PMI), a labor

contractor that provides labor and other support services for the

oil and gas industry in the Gulf of Mexico off the Louisiana

coast, entered into contracts with various oil companies to

provide workers for the oil companies’ rigs. Chevron U.S.A., Inc.

(Chevron) and Matrix Oil and Gas Co. (Matrix) - neither of which

is a party to this appeal - are the two oil companies that

contracted with PMI in the instant cases. As part of their

agreements with PMI, Chevron and Matrix contracted to provide

transportation for PMI workers from the shore to the rig. The oil

companies contracted with SEACOR Marine Inc. (SEACOR), a company

that owns and operates vessels used in oilfield operations on the

Louisiana OCS to deliver equipment, supplies and personnel

(including PMI employees) to the rigs.

     On December 20, 1990, Chevron and SEACOR signed a “blanket

time-charter agreement”. This agreement, subject to unilateral

cancellation by either party, set the general terms that would

apply to future vessel charters. The blanket agreement created no

obligation on the part of either party to enter into a charter

for a vessel. On October 7, 1999, Chevron entered into a time-

charter of the SEACOR vessel the Sylvia F; this Time Charter

incorporated the terms of the December 20 Blanket Agreement. On

                               -3-
April 24, 1997, SEACOR entered into a blanket time-charter

agreement with Energy Logistics, Inc. (ELI). On June 3, 2000, ELI

chartered the SEACOR vessel, the Shirley G and incorporated the

terms of the April 24 Blanket Agreement. ELI subchartered the

Shirley G to Gulftran, Inc. (Gulftran) on December 14, 2000. The

next day, Gulftran subchartered the vessel to Matrix. Therefore,

unlike Chevron, Matrix never directly contracted with SEACOR.

     SEACOR, knowing that its obligations under the charter

agreements with the oil companies would probably involve

transporting PMI employees, contacted PMI directly and insisted

that it would not transport any PMI employees until PMI signed a

“Vessel Boarding and Utlization Agreement Hold Harmless” (VBA).

By the VBA’s terms, the provisions of this form contract apply

when a SEACOR vessel transports a contractors’ employees. The VBA

stated that, in exchange for PMI employees being ferried on

SEACOR vessels, PMI would name SEACOR as an additional insured

under PMI’s comprehensive general liability (CGL) policy with

waiver of subrogation rights and deletion of the CGL watercraft

exclusion1. After some deliberation, PMI signed the VBA on July

     1
      The CGL Watercraft Exclusion, which appears on page 2 of 11
of the Gray Insurance Company commercial general liability policy
coverage form, reads as follows:
          “g. ‘Bodily injury’ or ‘property damage’ arising out
               of the ownership, maintenance, use or entrustment
               to others of any aircraft, ‘auto’ or watercraft
               owned or operated by or rented or loaned to any
               insured. Use includes operation and ‘loading and

                               -4-
17, 1999.

     On December 15, 2000, Plaintiffs Johnson and Hoffpauir were

injured while transferring between Matrix operated platforms and

the Shirley G. Plaintiff Fleming was injured while transferring

from a Chevron platform to the Sylvia F on February 1, 2001.

     The three injured PMI employees brought separate suits

against SEACOR. In all three cases, SEACOR filed third-party

complaints against both PMI and Gray Insurance Co. (Gray), PMI’s

CGL insurer, seeking defense and indemnity based on the VBA. Each

               unloading’.

               This exclusion does not apply to:

               (1)   A watercraft while ashore on premises you own
                     or rent;

               (2)   A watercraft you do not own that is:
                     (a) Less than 26 feet long; and
                     (b) Not being used to carry persons or
                          property for a charge;

               (3)   Parking an ‘auto’ on, or on the ways next to,
                     premises you own or rent, provided the ‘auto’
                     is not owned by or rented or loaned to you or
                     the insured;

               (4)   Liability assumed under any ‘insured
                     contract’ for the ownership, maintenance or
                     use of aircraft or watercraft; or

               (5)   ‘Bodily injury’ or ‘property damage’ arising
                     out of the operation of any of the equipment
                     listed in paragraph f.(2) or f.(3) of the
                     definition of ‘mobile equipment’(SECTION
                     V.8.).”

                                -5-
of the three plaintiffs eventually settled against the direct

defendants and trials went forward on SEACOR’s third-party claims

against PMI and Gray.

     As PMI’s insurance carrier for the time relevant to these

cases, Gray routinely furnished insurance certificates reflecting

the nature and extent of PMI’s insurance coverage to PMI’s

contractors. Gray, at PMI’s request, sent an insurance

certificate to SEACOR. At the time PMI asked Gray to send SEACOR

an insurance certificate, Gray was unaware of the existence and

contents of the VBA.

     The individual suits filed by Plaintiffs Johnson,

Hoffapauir, and Fleming were assigned to three different district

judges. Motions for summary judgment were filed in all three

cases seeking a resolution of whether the VBA was supported by

adequate consideration and was enforceable. The district courts’

decisions split on the issue of whether consideration supported

the VBA. In Johnson v. SEACOR, Judge Haik found the agreement

supported by consideration; in Hoffpauir v. SEACOR, Judge Doherty

ruled that the VBA failed for lack of consideration. In Fleming

v. Grand Isle Shipyard, the third case, Judge Lemelle did not

reach the issue. We review a grant of summary judgment de novo,

applying the same standards as the district court. Taita Chem.

Co., Ltd. V. Westlake Styrene Corp., 246 F.3d 377, 385 (5th Cir.

                               -6-
2001).

                                 II.

     The most significant issue on appeal is whether SEACOR can

enforce the VBA. Gray argues that the VBA is unsupported by

consideration and unenforceable because SEACOR owed PMI a

preexisting duty, under the SEACOR contract with the oil

companies, to transport PMI employees to the oil platforms. Under

the preexisting duty rule, a promise to do that which the

promisor is already legally obligated to do is unenforceable2.

According to Gray, SEACOR’s blanket charter agreements3 with the

oil companies create a duty on SEACOR to transport PMI employees

to the Matrix and Chevron platforms. Gray provided summary

judgment evidence that PMI’s employees would have received

transportation from SEACOR even if the VBA was never signed and,

indeed, continued to receive such transportation after PMI

     2
       See JOSEPH M. PERILLO & HELEN H. BENDER, 2 CORBIN ON CONTRACTS §
7.1, at 342 (Revised Edition 1995). See also RICHARD A. LORD, 3
WILLINSTON ON CONTRACTS § 7.36, at 569 (4th ed. 1992)(“As a general
principle, when a party does simply what he has already obligated
himself to do under a contract, he cannot demand any additional
compensation or benefit, and, it is clear that if he takes
advantage of the situation and obtains a promise for more, the
law in general regards it as not binding as lacking
consideration”.); Restatement (Second) of Contracts § 73, comment
c, illustration 4.
     3
      I.e. the December 20, 1990 agreement between Chevron and
SEACOR and the April 24, 1997 agreement between SEACOR and ELI,
which through a series of subcharters reaches Matrix.

                                 -7-
officially withdrew from the VBA.

     All of the most influential treatises urge courts to avoid

using the preexisting duty rule if even minimal consideration

supports the contract. Indeed, Corbin strongly cautions courts

against relying on this rule in formulating their decisions.

     A court should no longer accept this rule as fully
     established. It should never use it as the major premise of
     a decision, at least without giving careful thought to the
     circumstances of the particular case, to the moral desserts
     of the parties, and to the social feelings and interests
     that are involved.

JOSEPH M. PERILLO & HELEN H. BENDER, 2 CORBIN ON CONTRACTS § 7.1, at 342

(Revised Edition 1995). It is well accepted that the mere

exchange of promises is ordinarily sufficient to satisfy the

requirement of consideration. CLAUDE D. ROHWER & ANTHONY M. SKROCKI,

CONTRACTS IN A NUTSHELL § 2.24, at 131 (5th ed. 2000)(“If there is

any legal detriment incurred by the promisee that can be viewed

as a bargained exchange for the promisor’s promise, that is

sufficient. In addressing the existence or non-existence of

consideration, courts have not concerned themselves with the

adequacy of fairness of the consideration but only with finding

the presence of some legal detriment incurred as part of a

bargain.”)

     Thus, even if a contract does not require any performance

that would not have been done in the absence of the contract, as

long as the contracting parties gain some legally enforceable

                                  -8-
right as a result of the contract which they previously did not

have, consideration is present. See Morrison Flying Service v.

Deming National Bank, 404 F.2d 856, 861 (10th Cir. 1968). See

also RESTATEMENT (SECOND) OF CONTRACTS § 73(d) (1981)(“But the

tendency of the law has been simply to hold that the performance

of contractual duty can be consideration if the duty is not owed

to the promisor.”)

     In Morrison Flying Service, the leading case on the subject

of sufficiency of consideration, Cisco Aircraft, Inc. (Cisco)

contracted with the U.S. Forest Service to provide aerial

spraying of timber land in Montana. Cisco then contracted with

Morrison Flying Service (Morrison)for the provision of gas, oil,

and some of the chase aircraft necessary for the performance of

the contract. Prior to beginning work on the contract, Cisco

assigned all the proceeds of the contract to Deming National Bank

(Deming) in exchange for Deming’s financial support of the

project. The president of Morrison, armed with knowledge of this

assignment, wrote to Deming to ensure that Deming would pay

Morrison when Morrison fulfilled its obligations under the

contract with Cisco. Deming provided Morrison with written

confirmation that, once the Forest Service paid the amount due

Cisco, Deming would remit Morrison’s share of the proceeds.

Morrison then proceeded to perform its duties under the

                                 -9-
subcontract with Cisco. The resolution of this case required the

10th Circuit to determine whether adequate consideration

supported Deming’s promise to Morrison. The court, relying on the

Restatement and Corbin, held the contract enforceable. To support

its holding, the court cited two reasons for finding that

consideration supported Deming’s promise:

     (1)   The promisor gets the exact consideration for which he
           bargains, one to which he previously had no right and
           one that he might never have received;
     (2)   there are no sound reasons of social policy for not
           applying in this case the ordinary rules as to
           sufficiency of consideration. The performance is
           bargained for, it is beneficial to the promisor,
           the promisee has forborne to seek a rescission or
           discharge from the third person to whom the duty was
           owed, and there is almost never any probability that
           the promisee has been in position to use or has in fact
           used any economic coercion to induce the making of the
           promise. There is now a strong tendency for the courts
           to support these statements and to enforce the promise.

Morrison Flying Service, 404 F.2d at 861, citing PERILLO, 2 CORBIN

ON CONTRACTS § 176.

     Gray argues that, instead of the “Morrison Rule” we should

apply this Court’s holding in General Intermodal Logistics Corp.

v. Mainstream Shipyards & Supply, Inc., 748 F.2d 1071 (5th Cir.

1984) to the facts of this case.

     In General Intermodal, General Marine Towing Co. (GMT)

entered into a contract with the defendant, Mainstream Shipyards

& Supply, Inc. (Mainstream) to repair and refurbish one of GMT’s

vessels. At the time GMT and Mainstream entered into this

                               -10-
contract, General Intermodal Logistics Corp. (Gilco) owned fifty

percent of the stock of GMT. 10 days before Mainstream completed

the work, Mainstream’s president learned that GMT had transferred

the vessel’s title to Gilco and the vessel would be operated by

Gilco, instead of GMT, in the future. Mainstream then refused to

release the boat to Gilco until Gilco signed a document releasing

Mainstream from all liability arising from the repair of the

ship. Gilco signed the release. See General Intermodal, 748 F.2d

at 1076. This Court, in holding the release unenforceable for

lack of consideration, relied on the fact that “Mainstream had a

preexisting contractual duty to deliver the vessel to GMT or its

successor in interest, and that it had no right to select who

might operate the vessel after it left the shipyard absent a

contractual provision to the contrary”. General Intermodal, 748
F.2d at 1074. This Court recognized the Morrison rule but agreed

with Gilco that it was inapplicable to the facts of its case. Id.

at 1075. The Court distinguished General Intermodal on the

grounds that Gilco was not simply a third party, as Morrison was

in Morrison Flying Service. Rather, Gilco had been involved in

the project from its inception and, as GMT’s direct successor-in-

interest with respect to this particular vessel, was legally

entitled to all rights under GMT’s contract with Mainstream. We

therefore read both Morrison and General Intermodal as supporting

                              -11-
SEACOR’s argument that PMI’s promise to SEACOR was adequate

consideration to support the VBA.

     In the cases before us, even if SEACOR owed a duty to

Chevron and Matrix to transport PMI employees under SEACOR’s

agreements with those oil companies, SEACOR owed no legally

enforceable duty to PMI to do so. If SEACOR chose to prevent PMI

employees from boarding its vessels, only the oil companies had a

remedy against SEACOR. With the creation of the VBA, however, PMI

had a distinct, legally enforceable right to board SEACOR’s

vessels. This is sufficient consideration to form a contract.

     For these reasons, we conclude that the VBA is supported by

consideration and is a legally enforceable contract.

                              III.

     PMI argues next that the VBA’s indemnity terms are not

enforceable under the Louisiana Oilfield Anti-Indemnity Act.

SEACOR argues that this Louisiana statute has no application to

the VBA because it is a maritime contract. This issue was clearly

resolved by this Court’s opinion in Laredo Offshore Constructors,

Inc. V. Hunt Oil Co., 754 F.2d 1223, 1231 (5th Cir. 1985).

     In Laredo, this Court held that “[a]n agreement to transport

people and supplies in a vessel to and from a well site on

navigable waters is clearly a maritime contract”. Laredo at 1231,

citing Hale v. Co-Mar Offshore Corp., 588 F. Supp. 1212, 1215

(W.D.La. 1984). Because the agreements at issue in this case are

                              -12-
solely for the transportation of employees to and from the

platforms, Laredo controls and we hold that the VBA is a maritime

contract which renders the indemnification provisions valid. See

Hollier v. Union Tex. Petroleum Corp., 972 F.2d 662, 664 (5th

Cir. 1992).

                               IV.

     Finally, we must decide whether Gray is contractually

obligated to cover SEACOR’s losses. For the reasons stated above,

the VBA is valid and PMI is obligated to provide SEACOR with

additional insured status on its CGL policy with Gray. Although

the additional insured provision in Gray’s policy is somewhat

ambiguous, we assume for our purposes that Gray’s policy did

provide SEACOR with additional insured status. However, because

the watercraft exclusion was not deleted as to SEACOR, the

additional insured status is irrelevant to the three cases

consolidated here. The watercraft exclusion plainly excludes

coverage to SEACOR4. SEACOR argues further, however, that, even

if the watercraft exclusion excludes coverage, Gray’s insurance

certificate misled SEACOR and Gray is liable to SEACOR under the

theories of negligent misrepresentation and equitable estoppel.

We conclude that SEACOR cannot prevail on either theory.

     In order to prevail on a theory of negligent

     4
      See above, note 2 for language of watercraft exclusion.

                              -13-
misrepresentation, a plaintiff must satisfy the following three

elements: (1) a legal duty on the part of the defendant to supply

correct information; (2) a breach of that duty; and (3) damages

to the plaintiff as a result of justifiable reliance on the

misrepresentation. Brown v. Forest Oil Corp., 29 F.3d 966, 969

(5th Cir. 1994).

     SEACOR cannot satisfy the above test because it can

demonstrate no misrepresentation. The certificate of insurance

contained no incorrect information. Additionally, there is no

evidence of SEACOR’s detrimental reliance on the information

provided by Gray. Indeed, the evidence in the record indicates

that SEACOR did not review these insurance certificates. If

SEACOR cannot demonstrate that it was aware of the contents of

the certificate it certainly cannot demonstrate that it relied to

its detriment on the certificate.

     SEACOR’s equitable estoppel claims similarly fail. The three

elements of an equitable estoppel claim are: (1) a representation

by conduct or word; (2) justifiable reliance thereon; and (3) a

change in position to one’s detriment because of the reliance.

Home Ins. Co. V. Matthews, 998 F.2d 305, 309 (5th Cir. 1993). For

the reasons stated above, in our discussion of the negligent

misrepresentation claim, SEACOR cannot demonstrate justifiable

reliance on the insurance certificate. Additionally, as SEACOR

transported PMI’s employees after the VBA was revoked and also

                              -14-
transported employees of contractors who did not sign the VBA,

SEACOR’s argument is unpersuasive that it would have refused PMI

employees access to its vessels if it had known that the

insurance policy did not cover them.

                               V.

     For the reasons set forth above, in Johnson v. SEACOR Marine

Corp., we affirm the district court’s grant of summary judgment

for SEACOR and against PMI but vacate its judgment against Gray

and remand for further proceedings, if necessary, and for entry

of judgment.

     In Hoffpauir v. SEACOR Marine Corp. and Fleming v. GSI LLC

we vacate the district courts’ orders granting summary judgment

in favor of PMI, affirm the dismissal of Gray and remand those

cases to the appropriate district court for further proceedings,

if necessary, and for entry of judgment.

                              -15-