Court Opinion

ID: 9680882
Source: CourtListenerOpinion
Date Created: 2023-08-24 07:40:31.444164+00
Date Added: 2024-06-11T18:17:29.766266
License: Public Domain

DON WITTIG, Senior Justice (Assigned),
dissenting.
The narrow and sole disagreement among the members of our court is whether section 187(2)(b) of the Restatement (Second) of Conflict of Laws (1971) calls for the application of Louisiana law.1 We *181believe Louisiana law, not the law of a forum selected by the litigants, should regulate indemnity obligations arising from accidents occurring wholly within Louisiana and arising solely out of the operation of Louisiana wells. Because the majority opinion reads discriminatory intent into both Texas and Louisiana’s anti-indemnity statutes, conflicts with the supreme court’s controlling decision in Maxus Exploration Co. v. Moran Bros., Inc., 817 S.W.2d 50 (Tex.1991), disregards both Louisiana’s greater interest in regulating its own dangerous activities and its disparate public policy, and encourages forum shopping, we respectfully dissent.
Restatement section 187(2)(b) mandates application of the law chosen by the parties unless:
application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.
See § 187(2)(b). We respectfully disagree with the majority opinion’s resolution of every element in section 187(2)(b). We address each in turn.
I. Would application of Texas law be contrary to Louisiana policy?
The majority opinion holds application of the Texas oilfield anti-indemnity statute cannot be contrary to the fundamental policy served by the Louisiana oilfield anti-indemnity statute because the anti-indemnity policies of Texas and Louisiana are the same. According to the majority opinion, the difference between the laws of the two States is one of “approach,” not “policy.” By this synthetic reasoning, the majority opinion reframes the Restatement inquiry into one for which it has an appropriate answer.
The Restatement instructs us that two states’ laws do not conflict merely because they lead to different results in particular cases. See Restatement § 187 cmt. g. The Restatement does not provide, however, that different results are necessarily incompatible with conflict. In the context of non-competition agreements, the Texas Supreme Court determined a conflict would exist because:
An employee of one out-of-state employer might take a competing job and escape enforcement of a covenant not to compete because of the law of another state, while a neighbor suffered enforcement of an identical covenant because of the law of a third state. The resulting disruption of orderly employer-employee relations, as well as competition in the marketplace, would be unacceptable. Employers would be encouraged to attempt to invoke the most favorable state law available to govern their relationship with their employees in Texas or other states.
DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 680 (Tex.1990). By analogy, if the application of Texas law would encourage companies to circumvent Louisiana’s anti-indemnity act by either incorporating or executing contracts outside of Louisiana, then a policy-level conflict is presented.2 See Tucker v. R.A. Hanson Co., 956 F.2d *182215, 219 (10th Cir.1992) (finding policy conflict because companies working in New Mexico could sign contracts in other states and avoid New Mexico’s anti-indemnity statute entirely).
Louisiana’s anti-indemnity statute is designed, in part, to protect workers in Louisiana. See L.A.Rev.Stat. Ann. § 9:2780(A); Fontenot v. Chevron U.S.A., Inc., 676 So.2d 557, 563 (La.1996) (“It is also clear ... that the [Louisiana] Anti-Indemnity Act was designed not only to protect oilfield contractors but also their employees.”). See also Tucker, 956 F.2d at 219 (holding New Mexico anti-indemnity statute protects injured workers). Messrs. Fritz and Alms worked and were injured in Louisiana. The application of Texas law would deny them Louisiana’s worker protections and unquestionably encourage employers to invoke the more favorable law of Texas. Compare Tex. Crv. Prac. & Rem. Code Ann. §§ 127.003, 127.005 (Vernon 1997) (allowing indemnity if backed by insurance) with La.Rev.Stat. Ann. § 9:2780(A) (unqualified denial of indemnity i.e. this type of indemnity is void). To hold otherwise, by any logic, is to rewrite Louisiana law and disregard the statutory interpretation of the Louisiana Supreme Court.
II. Does Louisiana have a materially greater interest in the determination of the law applicable to indemnity? Should the issue of indemnity be separated from the Drilling Contract as a whole?
The majority opinion strives to strengthen its argument that Texas has a greater interest in these indemnity disputes by separating the indemnity obligations from the parties’ other (far more substantial) obligations under the Drilling Contracts. Although the Texas Supreme Court has declined to determine whether oilfield indemnities are “particular issues” to be addressed separately under Restatement sections 187 and 188, we do know that “most issues involving a contract will usually be governed by a single law.” Maxus, 817 S.W.2d at 54 (concerning oilfield indemnity authored by the same organization that authored the contracts at issue here). Only occasionally will separation and identification of the particular issue provide a more helpful basis for choice-of-law questions. Id. “As a rule,” the fact that nearly all the services contemplated by the parties were performable in a particular state “is conclusive in determining what state’s law is to apply.” Id. (citing DeSantis, 793 S.W.2d at 679). To parse and mince one issue, seeks annihilation of the dominate purpose and objective of respecting Louisiana’s right to hold the regulatory reigns over its own industries and defeats Louisiana’s overriding policy of voiding such indemnification.
We think oilfield services contracts should not be fractured in the manner suggested by the majority because to do so divides the law applicable to indemnity and the underlying insuring agreement.3 The insurance contract is subject to the “law of the state which the parties understood was to be the principal location of the insured risk.” See Restatement § 193; GATX Leasing Corp. v. Nat’l Union Fire Ins. Co., 64 F.3d 1112, 1115 (7th Cir.1995). The principal location of the risks insured in these disputes is the location of the well. What is to prohibit today’s losing insurer of Nabors or Chesapeake from hustling across the Sabine and invoking a Louisiana court’s declaration there is no coverage? *183Without coverage, even Texas law prohibits oil field indemnification. The logical consequence of mutual disrespect is open conflict.4
We would follow Maxus and decline to sever indemnity from the drilling activities forming the greater part of the parties’ contract for drilling services in Louisiana. The well services were performed in Louisiana. Maxus, 817 S.W.2d at 54. The accidents out of which these indemnity disputes arose occurred in Louisiana. The insurance obligations which provide the money to satisfy these indemnity claims are governed by Louisiana law. Id. And a Louisiana or other court’s determination of no coverage for an indemnitor would defeat Texas indemnification.
Louisiana has a greater interest in regulating hazardous industries within its borders, a greater interest in the safety and welfare of its own workers, a greater interest in insurance within its borders, and a greater interest in relegation of risk intra state. For multiple reasons, we would hold Louisiana has a materially greater interest in regulating these indemnity obligations.
III. Would, under Restatement section 188, Louisiana law have applied in the absence of a choice by the parties?
A. Is contractual indemnity a “particular issue” under section 188(1)?
The Restatement rations the use of the “particular issue.” A brief exposition of the structure of the Restatement itself is necessary to understand the novelty of the majority opinion in holding that contractual indemnity is a “particular issue.” The general rule for choice of law in tort matters is found in Restatement section 145. For contract matters, the general rules are found at sections 187 and 188. A variety of specific rules for “particular torts,” “particular contracts,” and “particular issues” in contract follow each respective general rule. Each “particular issue” in contract is set forth in sections 198-207, and once denominated as such, refers back to the general rules. In other words, the “particular issue” language in the Restatement contemplates certain, enumerated issues and no others. Problematically, the “particular issue” of which the majority is so fond, is not to be found in the Restatement.
In order to consider only the place of performance of the indemnities, the majority opinion relies upon Hughes Wood Products, Inc. v. Wagner, 18 S.W.3d 202, 205 (Tex.2000). Hughes involved a multi-juris-dictional worker’s compensation dispute, a subject covered by specific rules at sections 181-185 of the Restatement. The Hughes court reversed the court of appeals because it resolved the parties’ dispute with reference only to the general provision in Restatement section 145.5 18 S.W.3d at 205-06. Worker’s compensation, like every authority cited in Hughes, is explicitly identified as a “particular is*184sue” in the Restatement. By contrast, the Restatement contains no special provision for contractual indemnity. Although the majority opinion’s ultimate conclusion that contractual indemnity is a “particular issue” within the meaning of Restatement section 188 may or may not be erroneous, neither Hughes nor Maxus, a contractual indemnity dispute, offer support. Because stare decisis does not support fracturing this contract, we would decline to do so.
B. Application of the principles in Restatement section 6 and the contacts in section 188(2)
As required by section 188(1), the majority opinion applies section 6 and the contacts named in section 188(2) to determine whether Louisiana’s relationship to the parties and the transaction is more significant than Texas’s.6 Again, the majority’s analysis achieves a result which is generally at odds with the law of conflicts. The principles in sections 6 and 188(2) overlap and should be analyzed together. See Restatement § 188(2). The five contacts in section 188(2) represent, in contract actions, four underlying principles. These principles are:
(A) promotion of mutually beneficial relationships among States;
(B) recognition of state interests;
(C) protection of parties’ expectations through certain and predictable results; and
(D) ease in the determination and application of the law to be applied.
See Restatement § 188 cmt. b. The principles recognized in section 6 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. § 6. The majority opinion’s application of these principles can be summarized as follows:
(1) anti-indemnity statutes are meant to protect companies domiciled in the States where the statute is passed;
(2) because neither party is domiciled in Louisiana, neither party could have a justifiable expectation in the applica*185tion of the Louisiana anti-indemnity statute;
(3) because at least one party is domiciled in Texas, the Texas indemnity statute should be applied; and
(4) finality, certainty, and uniformity are best met by applying the law of a state chosen by the parties if at least one of them is domiciled there.
C. Our Application of Section 188(2) and Section 6
We apply the principles in section 6 and the contacts in section 188(2) differently than the majority. First, reliance on the place of performance of the indemnity is improper because it undermines a chief aim of Restatement section 187, which is to recognize and balance competing laws. Section 187 identifies circumstances where the parties’ choice of law should be overridden by state regulation.7 By separating the issue of indemnity from the drilling-services contract as a whole, the majority opinion is able to exalt the place of performance of the indemnity as the chief determinant of choice of law under section 188. Of course, the place of performance of indemnity is left to the whim of the litigants. Because the law of a non-forum state cannot be applied under section 187 unless it would have been applied under section 188, section 187 never alters the litigants’ choice of law for oil-field indemnities under the majority’s reasoning. Section 187 is rendered unacceptably impotent by this rationale. If indemnity was the only “performance” considered, then we might agree with the majority that the only “place of performance” to be considered under section 188(2) is in Texas. But we do not agree that removing all “performances” with links to Louisiana prior to conducting analysis under section 188(2) is a sound approach to conflicts of laws. See Maxus, 817 S.W.2d at 54 (declining to determine whether focus on place of performance of indemnity improper under similar facts).
Second, as we discuss above, we observe and articulate the different policies underlying the Texas and Louisiana anti-indemnity statutes. The majority’s conclusions about Louisiana policy ignore the Louisiana Supreme Court’s explicit assertion that the Louisiana statute is intended to protect injured workers as well as their employers. In any event, we believe the majority’s emphasis on the domicile of the parties is unjustifiably discriminatory and reject the notion that state and federal courts generally apply the law of the parties’ domiciles when considering conflicting indemnity laws.
Third, we do not agree that because the parties’ contract specified Texas law, neither should have reasonably expected the protection of Louisiana’s indemnity statute. See id. We think all persons physically present in the state of Louisiana can reasonably expect application of Louisiana law, especially law meant to override private bargains based upon firmly held public policy. See Maxus, 817 S.W.2d at 53-54 (holding it can be assumed that parties expect application of the law of state where major portion of contract performance occurs). See also DeSantis, 793 S.W.2d at 679 (holding Texas had materially greater interest than Florida in dispute over non-competition agreement because *186employee was a resident of and worked in Texas).8
Fourth, we cannot agree that determination and application of law is eased in these cases by applying to the indemnity issue the law of the state where the injured party brought suit. The majority must concede that choice of law under its reasoning is based in large part upon the domicile of the parties. Domicile and venue are patently ephemeral. And what of the fact that some companies may have multiple domiciles? Under the majority approach, there will be new litigation to determine the domicile of the parties.
Fifth, we believe the needs of the interstate system are strongly implicated in these indemnity disputes. Compare Maxus, 817 S.W.2d at 54 (“The state where the services are to be rendered will also have a natural interest in them.”) with Restatement § 188 cmt. c. (state of party’s domicile has interest in application of its own rule). As the majority notes, our nation’s courts have been kept busy in recent years determining the validity of oilfield indemnities. It is evident there is a need for a uniform analysis that will aid companies in reliably choosing among states’ conflicting laws.9
Sixth, we believe the majority’s reasoning is more likely to diminish, rather than create, certainty, predictability and uniformity. If the majority is correct that the true place of performance is where the injured party files suit, there will be no certainty until that suit is filed.10 Here, under the majority opinion, a simple assignment of either party’s contract rights could have altered the choice of law of indemnity. In fact, there was an assignment by one Texas company to another in these cases. Had the assignments been to a company in a third state, would the law of that state apply? Under the analysis by the majority opinion, assignment or merger of interests could give us yet another result, from the same Louisiana accident. Given the rapidly changing corporate climate in the oil business, under the majority’s reasoning, any major corporate acquisition involving companies domiciled in different states might alter the choice of law for indemnity arising out of hundreds of accidents.11 This result is entirely unpredictable. See Maxus, 817 S.W.2d at 54 (holding that application of law of state where physical performance takes place will be readily ascertainable and thereby create certainty.)
Seventh, it is reasonably clear that the majority opinion offers plaintiffs (and defendants) carte blanche to forum shop. Attorneys may add parties, move their clients, or await corporate mergers to get the indemnification statute they prefer. Finally, as we discuss below, we are comfortable the supreme court has already answered the section 6 inquiry.12
For all these reasons, we would hold Louisiana has a more significant relation*187ship to the parties and the transaction than Texas.
D. Maxus — Has the supreme court already decided this issue?
We believe the supreme court has already held that geography, not domicile, should be emphasized in determining the jurisdictional boundary of the Texas anti-indemnity statute. In Maxus, the court refused to apply Texas law to an oil-field indemnity dispute even though indemnity was sought in Texas. 817 S.W.2d at 54. The court specifically stated that the outcome was dictated by the location of the oil well, writing:
One can argue that the Texas Legislature’s purpose in enacting [the anti-indemnity statute] is to protect Texas contractors who work on mineral wells and mines wherever they may be situated, but we think it more plausible that it had the more limited objective of protecting contractors who drill wells in Texas. We do not read the statute to have an extraterritorial reach, absent some agreement between the parties.
Id. Based on the foregoing, we cannot agree with the majority’s reading of Max-us that a different rule applies merely because the contractor seeking to enforce the indemnity is a Texas domiciliary.13
The majority also would distinguish Maxus from the cases at bar based on the final clause in the excerpt above relating to agreement of the parties. Here, unlike in Maxus, the parties chose which state’s law to apply. However, Restatement section 187(2)(b) requires an examination of the policies underlying the anti-indemnity statutes, assuming no choice of law had been made. See Restatement § 187(2)(b). Thus, the policy identified in Maxus supporting anti-indemnity is relevant; whether the parties actually chose the law of a particular state is not. The error in the majority’s consideration of the parties’ choice is easily seen upon recollection of the premise of conflicts analysis: If the fact that parties chose law was relevant in determining whether their choice should be overruled by public policy, our review would be perfunctory at best.
Conclusion
In Maxus, the Texas Supreme Court joined several other courts in recognizing the location of the performance of the majority of services under a contract determines the “place of performance” for conflicts purposes. See, e.g., Palmer G. Lewis Co. v. ARCO Chem. Co., 904 P.2d 1221, 1227 (Alaska 1995); Tucker v. R.A. Hanson Co., 956 F.2d 215, 218-19 (10th Cir. 1992); Donaldson v. Fluor Eng’rs, Inc., 169 Ill.App.3d 759, 120 Ill.Dec. 202, 523 N.E.2d 1113, 1116 (1998). The stability provided by the geography-based analysis identified in Maxus enables all parties, whether based -in Texas or elsewhere, to easily identify and allocate risks associated with oilfield indemnity obligations.
This entire court believes anti-indemnity statutes cannot be avoided by private bargain. Only the reach of the anti-indemnity statutes is disputed. The question is one of national importance. The geographically restrictive reasoning stated in Maxus best serves the citizens of Texas by reliably respecting the rights of the citizens of Louisiana and of our United States. By contrast, policy determination and conflicts resolution based on domicile or venue are inherently unstable and openly discriminate against our neighbors.14 We respectfully dissent.

. All members of this court agree: (1) Restatement of Conflicts section 187 determines whether the parties' contractual choice of Texas law is permissible. See Maxus Exploration Co. v. Moran Bros., Inc., 817 S.W.2d 50, 53 (Tex.1991); (2) No indemnity is payable if Louisiana law governs these two Drilling Contracts. See La.RevStat. Ann. § 9:2780(A) (West Supp.2001) (declaring null and void and against public policy of the state of Louisiana any indemnity provision that protects an indemnitee from the consequences of its own negligence or strict liability); (3) Indemnity is proper if application of Texas law is also proper. See Tex Civ. Prac. & Rem.Code Ann. §§ 127.003, 127.005 (Vernon 1997) (allowing indemnity agreements if indemnity obligation supported by insurance); (4) The indemnity clauses in the Drilling Contracts at issue meet fair notice requirements required under Texas law. See Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 511 (Tex.1993) (holding indemnity void because it was not conspicuous); (5) The parties could not have resolved the issue of indemnification by explicit agreement. See Restatement § 187 cmts. c, d (capacity, formality, substantial validity are some examples of items not resolvable by agreement); and (6) The State of Texas does not lack a substantial relationship to the parties or the transactions at issue. Id. at § 187(2)(a) (requiring application of law cho*181sen by parties unless law chosen does not bear a substantial relation to transaction or parties).

. The ability to prospectively avoid Louisiana law is reduced by the lack of certainty regarding the venue chosen for the underlying personal injury suit. This latter uncertainty, however, is itself a creature of the majority opinion. If the indemnity obligation is not split away from the contract as a "particular issue,” Texas courts, following Maxus, would nearly always apply Louisiana law and there*182by prevent the wholesale avoidance of Louisiana's worker protections.

. As we discuss below in part III of our opinion, examining indemnities in a vacuum also undermines proper analysis under Restatement sections 6 and 188(2).

. One federal court, in related litigation, agrees with our reasoning. See Old Republic Ins. v. Chesapeake Operating, Inc., No. 991270, 2000 WL 33399807 (W.D.La. Nov.1, 2000) (not designated for publication). While judicial estoppel does not apply, comity would suggest our ruling be consistent, unless against a greater public policy interest of Texas. We do not believe two corporations arguing over attorney's fees is such a policy interest.

. The court held:
The court of appeals erred in failing to consider section 184's application to the exclusive — remedy issue. The Court has often applied more specific sections of the Restatement to address particular choice of law issues. See, e.g., Purcell v. Bellinger, 940 S.W.2d 599, 601 (Tex.1997) (applying section 93 to evaluate the res judicata effect of an out-of-state judgment); Ford Motor *184Co. v. Leggat, 904 S.W.2d 643, 647 (Tex. 1995) (applying section 139 to determine whether another state's attorney-client privilege should apply in a Texas court case); Maxus Exploration Co. v. Moran Bros., Inc., 817 S.W.2d 50, 53-54 (Tex. 1991) (invoking section 196 to determine the law governing contracts for personal services); DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 677-78 (Tex. 1990) (adopting section 187 for evaluating the enforceability of contractual choice of law clauses).
Hughes, 18 S.W.3d at 206, 206 fn. 2.

. Section 188(2) provides:
In the absence of an effective choice of law by the parties (see section 187), the contacts to be taken into account in applying the principles of section 6 to determine the law applicable to an issue include:
(A) the place of contracting;
(B) the place of negotiation of the contract;
(C) the place of performance;
(D) the location of the subject matter of the contract; and
(E) the domicile, residence, nationality, place of incorporation and place of business of the parties.

. It is for this reason any reference to the sophistication and economic size of the contracting parties is inapposite. Whether a company is large or small is immaterial since, under section 187, if the public policy is strong enough, all private persons are prohibited from choosing law. Cf. DeSantis, 793 S.W.2d at 678-80 (no mention of parties’ sophistication or size in analysis).

. The expectation of Louisiana law to the exclusion of Texas law would not be reasonable either.

. One must wonder, were we addressing an Alaskan salmon cannery accident, would Texas cast such extra territorial reach.

. There will be no certainty even after the suit is filed if insurance coverage is contested.

. In mid-March, 2002, for example, Nabors bought Enserco Energy Services Co., Inc., a Canadian enterprise owning 193 service rigs and 30 drilling rigs. Indemnity obligations for all suits arising out of accidents at Enser-co wells would be potentially subject to the Texas oilfield anti-indemnity act and Texas enforcement regardless of the accident situs.

.Maxus determined which state's law applied absent choice by the parties, the same inquiry required under section 6.

. The majority incorrectly interprets the "extraterritorial” reference in Maxus to refer to the domicile of the litigants, rather than the location of the oil well.

. Nabors’s argument is further undermined *188by recent reincorporation in Bermuda. See Nelson Antosh, Five finns answer call of islands, Houston Chronicle, April 21, 2002, at Al. A16.