Court Opinion

ID: 810606
Source: CourtListenerOpinion
Date Created: 2012-10-19 23:20:03+00
Date Added: 2024-06-11T18:00:38.430863
License: Public Domain

Case: 12-20080   Document: 00512026575    Page: 1   Date Filed: 10/19/2012

          IN THE UNITED STATES COURT OF APPEALS
                   FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                   Fifth Circuit

                                                                     FILED
                                                                   October 19, 2012
                                  No. 12-20080
                                                                    Lyle W. Cayce
                                                                         Clerk
ACE AMERICAN INSURANCE COMPANY,

                                            Plaintiff - Appellee

v.

M-I, L.L.C.,

                                            Defendant - Appellant

                  Appeal from the United States District Court
                       for the Southern District of Texas

Before HIGGINBOTHAM, ELROD, and HAYNES, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
        The district court granted a motion for partial summary judgment, finding
that the Outer Continental Shelf Lands Act (“OCSLA”) applied to the parties’
contractual dispute, and thus, pursuant to the OCSLA choice of law provision,
Louisiana law applied, under which the Louisiana Oilfield Indemnity Act
(“LOIA”) invalidated the indemnity provisions.       M-I, L.L.C. (“M-I”) timely
appealed.
        M-I has provided performance fluids management services for British
Petroleum’s (“BP”) drilling operations at multiple locations throughout the
United States for over twelve years. M-I and BP entered into a Master Services
Agreement (“MSA”), effective February 1, 2009, which governed all future
offshore drilling services that M-I would perform for BP on both vessels and
   Case: 12-20080    Document: 00512026575      Page: 2   Date Filed: 10/19/2012

                                  No. 12-20080

stationary platforms in the Gulf of Mexico. Although the MSA included detailed
terms, it did not itself call for the performance of any work. Instead, it provided
that BP would issue work orders for work to be performed by M-I, which M-I was
not obligated to accept. In practice, BP did not issue formal work orders to M-I.
Rather, M-I assigned a team of its employees to work at BP’s offices with BP
employees so that BP could communicate directly to M-I, often orally, when it
needed M-I to perform work.
      The current dispute concerns the MSA’s indemnification provisions and
the insurance agreements supporting M-I’s indemnification obligations.
Specifically, the MSA obligated M-I to indemnify BP for personal injury claims
asserted by M-I employees arising from or relating to performance of the MSA.
The MSA required M-I and BP to support their indemnity obligations with
insurance.   As required, M-I procured from ACE American Insurance Co.
(“ACE”) both a workers’ compensation/employers’ liability policy and a
commercial general liability policy, requiring ACE to indemnify and defend M-I
against workers’ compensation claims brought by its employees and against
claims by its employees arising in the course of their employment.            The
commercial general liability policy also covered M-I’s contractual obligations to
indemnify third-parties such as BP.
      Charles Herandez, a M-I employee who had worked on numerous vessels
and platforms operated by different companies, including BP, was injured in
October 2009 while working aboard the Thunder Horse, a stationary platform
operated by BP. Hernandez filed a workers’ compensation claim against M-I as
well as a personal injury lawsuit against M-I and BP in Texas state court. In
accordance with the indemnity terms in the MSA, BP tendered Hernandez’s
claims in the state court lawsuit to M-I and M-I accepted BP’s tender. M-I
entered into a settlement of all of Hernandez’s claims.
      ACE then filed an action for declaratory judgment, seeking a declaration
that ACE does not owe M-I coverage payments for any claims asserted against

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                                    No. 12-20080

M-I or BP in Hernandez’s suit. M-I filed state law counterclaims against ACE
for breach of contract and violations of Chapters 541 and 542 of the Texas
Insurance Code. M-I moved for summary judgment as to its counterclaims and
ACE moved for partial summary judgment on the applicability of OCSLA to the
dispute. The district court granted ACE’s motion for partial summary judgment.
We affirm.

                                          I.
      The sole issue on appeal is whether, pursuant to the OCSLA, Louisiana
law governs the indemnity provisions. 43 U.S.C. § 1333(a), the OCSLA choice
of law provision, provides:
      (1) The Constitution and laws and civil and political jurisdiction of
      the United States are extended to the subsoil and seabed of the
      outer Continental Shelf and to all artificial islands, and all
      installations and other devices permanently or temporarily attached
      to the seabed, which may be erected thereon for the purpose of
      exploring for, developing, or producing resources therefrom, or any
      such installation or other device (other than a ship or vessel) for the
      purpose of transporting such resources, to the same extent as if the
      outer Continental Shelf were an area of exclusive Federal
      jurisdiction located within a State . . . .

      (2)(A) To the extent that they are applicable and not inconsistent
      with this subchapter or with other Federal laws and regulations of
      the Secretary now in effect or hereafter adopted, the civil and
      criminal laws of each adjacent State, now in effect or hereafter
      adopted, amended, or repealed are declared to be the law of the
      United States for that portion of the subsoil and seabed of the outer
      Continental Shelf, and artificial islands and fixed structures erected
      thereon, which would be within the area of the State if its
      boundaries were extended seaward to the outer margin of the outer
      Continental Shelf . . . .1

      1
          43 U.S.C. § 1333(a).

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                                        No. 12-20080

      If, pursuant to the OCSLA, the adjacent law of Louisiana applies, then the
LOIA would invalidate the indemnity agreements at issue. The LOIA provides:
      Any provision contained in, collateral to, or affecting an agreement
      pertaining to a well for oil, gas, or water, or drilling for minerals
      which occurs in a solid, liquid, gaseous, or other state, is void and
      unenforceable to the extent that it purports to or does provide for
      defense or indemnity, or either, to the indemnitee against loss or
      liability for damages arising out of or resulting from death or bodily
      injury to persons, which is caused by or results from the sole or
      concurrent negligence or fault (strict liability) of the indemnitee, or
      an agent, employee, or an independent contractor who is directly
      responsible to the indemnitee.2

The district court below found that the OCSLA applied, under which the LOIA
invalidated the indemnity provisions. We agree.
      Under United Texas Petroleum Corp. v. PLT Engineering, Inc., three
requirements must be met for state law to apply as surrogate federal law under
the OCSLA. First, “[t]he controversy must arise on a situs covered by the
OCLSA (i.e. the subsoil, seabed, or artificial structures permanently or
temporarily attached thereto).”3 Second, “[f]ederal maritime law must not apply
of its own force.”4 Third, “[t]he state law must not be inconsistent with Federal
law.”5 The parties do not dispute the third requirement—that state law is not
inconsistent with federal law. The district court found all three requirements
were met and granted ACE’s motion for partial summary judgment on the issue
of the OCSLA’s applicability. We affirm the district court’s judgment.

      2
          LA. REV. STAT. § 9:2780(B).
      3
          United Tex. Petroleum Corp. v. PLT Eng’g, Inc., 895 F.2d 1043, 1047 (5th Cir. 1990).
      4
          Id.
      5
          Id.

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                                            II.
       “This Court reviews de novo a district court order granting a motion for
summary judgment, applying the same standards as did the district court.”6
Under Rule 56, “[t]he court shall grant summary judgment if the movant shows
that there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.”7

                                           A.
       Turning to the first requirement of the PLT test, the controversy at issue
must arise on an OCSLA situs, namely the seabed, subsoil, and fixed structures
of the outer Continental Shelf. We find the indemnity dispute arises on an
OCSLA situs, specifically on a stationary platform.
       The situs of the controversy in a contractual dispute depends on the focus
of the contract.8 Under the focus-of-the-contract test, a contractual dispute
“arises under an OCSLA situs if a majority of the work called for by the contract
is on stationary platforms or other enumerated OCSLA situses.”9 In articulating
the focus-of-the-contract test in Grand Isle Shipyard, Inc. v. Seacor Marine LLC,
this Court specifically explained the analysis to be used when the parties have
entered into a blanket agreement that does not itself call for the performance of
specific work.10 It explained:
       As we discussed in Davis & Sons v. Gulf Oil Corp., it is a common
       practice for companies contracting for work in the oilfield to enter

       6
        Greater Hous. Small Taxicab Owners Ass’n v. City of Houston, 660 F.3d 235, 238 (5th
Cir. 2011) (quoting DePree v. Saunders, 588 F.3d 282, 286 (5th Cir. 2009)).
       7
           Fed. R. Civ. P. 56.
      8
        Grand Isle Shipyard, Inc. v. Seacor Marine, LLC, 589 F.3d 778, 784 (5th Cir. 2009)
(en banc).
      9
           Id. at 787.
       10
            Id. at n.6.

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                                      No. 12-20080

      into contracts in two stages. Typically, they first sign a “blanket
      contract” that may remain in place for an extended period of time.
      Later, they issue work orders for the performance of specific work,
      which usually incorporates the terms of the blanket contract. As we
      said in Davis & Sons, where the contract consists of two parts, a
      blanket “contract followed by later work order, the two must be
      interpreted together.”

      Generally, each work order is for a discrete, relatively short-term
      job. Unless a contrary intent is reflected by the master contract and
      the work order, in determining situs in a contract case such as this,
      courts should ordinarily look to the location where the work is to be
      performed pursuant to the specific work order rather than the long
      term blanket contract.11

      We conclude that Grand Isle governs M-I’s appeal. Here, M-I and BP
entered into a “blanket” MSA. Although the MSA included detailed terms, even
stipulating the platforms and vessels on which M-I may perform work for BP, it
did not call for any specific work to be performed. Instead, the MSA required
specific job assignments, such that those job assignments, incorporating the
terms of the MSA, converted the MSA into a contract governing work. Under
the MSA, BP was not obligated to request work from M-I and M-I was not
obligated to accept work orders issued by BP.
      That BP did not issue a formal work order to M-I for Hernandez’s work on
the Thunder Horse is not determinative; the MSA did not require formal work
orders. Some direction was needed to authorize M-I to perform work for BP and
M-I’s creation of service tickets and time sheets, tied to each particular platform
or vessel where M-I performed work under the MSA, provide evidence of the
location where work was to be performed pursuant to the specific work order as
well as the scope of that particular work order. Under Grand Isle we look to the
location of the majority of the work pursuant to the specific work order.
Focusing on the location of the specific work order is not a return to the

      11
           Id. (citations omitted).

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“fortuitous” location of the injury approach. There is nothing fortuitous about
determining the applicable law by looking to the location of the specific work
order.

                                               B.
         Turning to the second requirement of the PLT test, in order for the OCSLA
choice of law provision to apply, maritime law must not apply of its own force.
Determining whether maritime law applies of its own force involves a two-step
inquiry—first, an examination of the historical treatment of contracts of that
type in the jurisprudence and second, a six-factor “fact-specific” inquiry into the
nature of the contract.12 Here, the district court found that maritime law did not
apply because the work Hernandez performed on the Thunder Horse was not
maritime in nature. We agree.
         Under Davis & Sons, Inc. v. Gulf Oil Corp., explicitly endorsed in Grand
Isle, we must analyze whether the particular work order, not the blanket
contract, is maritime in nature.13 Because the relevant contract here—the work
assignment Hernandez was completing on the Thunder Horse—was performed
on a stationary platform, not a traditional maritime activity, it follows that
maritime law does not apply of its own force to the indemnity dispute.

         12
          Davis & Sons, Inc. v. Gulf Oil Corp., 919 F.3d 313, 316 (5th Cir. 1990). The six
factors are: (1) What does the specific work order in effect at the time of injury provide? (2)
What work did the crew assigned under the work order actually do? (3) Was the crew assigned
to work aboard a vessel in navigable waters? (4) To what extent did the work being done
relate to the mission of that vessel? (5) What was the principal work of the injured worker?
(6) What work was the injured working doing at the time of the injury? Id.
         13
          Id. at 315 (“If, as in this case, the contract consists of two parts, a blanket contract
followed by later work orders, the two must be interpreted together in evaluating whether
maritime or land law is applicable to the interpretation and enforceability of the contract’s
provisions. The blanket contract is not of itself complete and calls for no specific work. The
actual contract between the parties therefore consists of the blanket agreement as modified
by the later work order.”).

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                                       III.
      The parties do not dispute the third requirement of the PLT test—that
state law not be inconsistent with federal law. We agree with the district court’s
analysis of the issue and see no need to further address it here.

                                       IV.
      We AFFIRM.

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