Court Opinion

ID: 49154
Source: CourtListenerOpinion
Date Created: 2010-04-25 23:56:04+00
Date Added: 2024-06-11T17:18:35.033578
License: Public Domain

United States Court of Appeals
                                                                Fifth Circuit
                                                             F I L E D
                 UNITED STATES COURT OF APPEALS
                      For the Fifth Circuit                   April 23, 2007

                                                         Charles R. Fulbruge III
                                                                 Clerk
                          No. 06-30063

                  FREEPORT-McMoRAN ENERGY, LLC

                                                            Plaintiff
                             VERSUS

       MIKE MULLEN ENERGY EQUIPMENT RESOURCES, INC., ET AL

                                                           Defendants

******************************************************************

 FREEPORT-McMoRAN ENERGY LLC, formerly known as Freeport-McMoran
                           Sulphur, LLC

                                                            Plaintiff
                             VERSUS

                       MIKE MULLEN, ET AL

                                                           Defendants

             BLAKE DRILLING & WORKOVER COMPANY, INC.

                    Defendant - Third Party Plaintiff - Appellant

                             VERSUS

                    GEMINI INSURANCE COMPANY

                                 Third Party Defendant - Appellee

          Appeal from the United States District Court
       For the Eastern District of Louisiana, New Orleans
                          2:04-CV-1592
Before DAVIS, DENNIS, and PRADO, Circuit Judges.

W. EUGENE DAVIS:*

      Blake Drilling & Workover Co., Inc. (“Blake”) appeals an

adverse summary judgment in favor of its insurer, Gemini Insurance

Co. (“Gemini”), holding that Gemini owed no duty to defend or

indemnify Blake against claims asserted by Freeport-McMoran.     We

affirm.

                                 I.

      In June 2004, Freeport-McMoRan Energy, LLC. ("Freeport") filed

suit against Mike Mullen, Blake and others for monetary recovery

and other relief arising out of two contracts for the dismantling

and removal of oilfield rigs and equipment.   The first contract was

entered into on June 13, 2001 (the "2001 PSA") between Freeport and

a company owned by Mullen, Mike Mullen Energy Equipment Resource,

Inc. ("MMEER").     This contract involved the sale to MMEER of

certain rigs and equipment on Freeport's Control Platform Rig and

Main Pass 299 Production Platform No. 2 (“PP-2 Rig”).          This

contract obligated MMEER and others to pay Freeport $530,000 for

the designated rigs and equipment and also required MMEER to sever,

dismantle and remove the purchased equipment along with other

equipment from the platforms.     Freeport alleged that MMEER and

others sold the rigs and equipment MMEER purchased from Freeport to

  *
   Pursuant to 5TH CIR. R. 47.5, the Court has determined that this
opinion should not be published and is not precedent except under
the limited circumstances set forth in 5TH CIR. R. 47.5.4.

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Blake for $1.3 million.       According to the complaint, when Blake

purchased this equipment, Blake expressly assumed MMEER’s removal

obligations under the 2001 PSA.

      On January 15, 2002, Freeport and MMEER entered into a similar

contract   (the    "2002   PSA")    to       purchase    equipment      located   in

Freeport's Power Plant (the “Power Plant Equipment”) and a certain

rig and related equipment located on Freeport’s Main Pass 299

Production Platform No. 1 (the “PP-1 Rig”).                  Freeport alleges that

in this transaction MMEER was acting on behalf of itself and

others, including Blake, who was an "undisclosed principal." Under

the 2002 PSA, MMEER and the undisclosed principals agreed to pay

Freeport $1 million and also allegedly agreed to dismantle and

remove the purchased rig and other equipment from the platform.

      Freeport alleges that after the execution of the 2001 PSA and

the 2002 PSA, Blake removed equipment it purchased from the Control

Platform Rig, the PP-1 Rig, the PP-2 Rig and the Power Plant, but

did not remove other related equipment required to be removed under

the   contracts.     Freeport      claims      that     as    MMEER's   undisclosed

principal with regard to the 2002 PSA and because it assumed the

obligations under the 2001 PSA, Blake is responsible for all

performance obligations under the PSAs, and Freeport can enforce

those obligations against Blake.

      Freeport sought relief under several theories including: (1)

declaratory judgment regarding the contractual obligations of the

parties; (2) specific performance of the contracts;                  (3) breach of

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contract; (4) conversion of equipment removed from the rigs due to

the defendants’ failure to complete the contract; and (5) unjust

enrichment.

     Blake’s assertion of coverage under the Gemini policy focuses

on Freeport’s conversion claims.          The conversion allegations refer

to the "Defendants" generically and allege "the removal of and

taking possession of the Power Plant Equipment and other valuable

equipment over Freeport's objection", and selling this equipment to

third parties and interfering with Freeport's ownership and/or

possession of the equipment.

     Once Blake realized that Freeport was asserting a conversion

claim against it, it tendered the suit to its insurer Gemini, which

promptly denied coverage. Blake then filed a third party complaint

against Gemini. Gemini filed a motion for summary judgment seeking

dismissal of the third party demand.           Blake filed a cross-motion

for summary judgment seeking an order requiring Gemini to defend.

     The   district   court      granted    Gemini's   motion   for   summary

judgment and denied Blake's motion.           The district court read the

complaint as follows: "Freeport is accusing Blake of failing to do

what it was supposed to do under the PSAs."            Relying on Adams v.

Unione Mediterranea di Sicurta, 220 F.3d 659 (5th Cir. 2000), the

court accepted Gemini's position that a conversion cannot be an

accident   when   having   the    equipment    taken   away   was   something

Freeport and Blake bargained for.          Blake appeals.

                                     II.

                                      4
                                        A.

       Gemini's insurance policy covering Blake is a commercial

general liability policy.            The policy covers damages because of

"property damage" if it is caused by an "occurrence" during the

policy period.           An    "occurrence"   is   defined    as    "an   accident,

including continuous or repeated exposure to substantially the same

general harmful conditions."

                                        B.

       The insurer's duty to defend is determined by the factual

allegations of the complaint.           The insurer must furnish a defense

unless the factual allegations of the complaint unambiguously

exclude coverage.             Cute-Togs of New Orleans, Inc. v. Louisiana

Health Service & Indemnity Company, 386 So. 2d 87, 89 (La. 1980).

       Gemini argues that it has no duty to defend because all of the

allegations of the complaint asserting claims against Blake rest on

factual allegations that Blake was an undisclosed principal to the

contracts between Freeport and MMEER and/or assumed the obligations

of the contracts. Gemini asserts that obligations under a contract

cannot be accidental and thus there is no accident or occurrence

that could trigger coverage.            Gemini also argues that Freeport's

conversion claim was not accidental because Freeport's goal was to

rid itself of the equipment.            Blake argues that under Louisiana

law,    an    unintentional       wrongful    taking   or    conversion       is   an

occurrence or accident under a CGL insurance policy.

       As    indicated    above,    Blake’s   argument      for    coverage   under

                                         5
Gemini’s    policy   focuses    on   Freeport’s   allegations     that   Blake

improperly removed and converted equipment off its platforms.              All

of Freeport’s conversion claims against Blake, with the possible

exception    of   those    asserted    in   paragraph   17   of   Freeport’s

complaint, are based on an alleged contractual relationship between

Freeport and Blake. Freeport alleges that because Blake and others

failed to perform all of their obligations under their contracts

with Freeport, Blake and other defendants were not entitled to

remove the equipment and they therefore converted that equipment.

Blake   argues    that    Freeport’s   conversion   claim    asserted    under

paragraph 17 of its complaint concerns Blake’s removal of equipment

that is unrelated to a contract.        We turn first to Blake’s claim of

coverage for property allegedly converted under the allegations set

forth in paragraph 17 of Freeport’s complaint.

     This requires a consideration of one of the contracts at

issue, the 2001 PSA between Freeport and MMEER.               This contract

called for the removal of rigs and equipment from two platforms,

the Control Platform and Main Pass 299 Production Platform No.2.

The rig and equipment to be removed from the Control Platform are

referred to as the Control Platform Rig.          The rig and equipment to

be removed from the Main Pass 299 Production Platform No.2 are

referred to as the PP-2 Rig.           According to the complaint, Blake

purchased the subject rigs and related equipment from MMEER in

2001.

     Blake’s argument focuses on the allegations in paragraph 17 of

                                       6
the Second Amending and Restated Complaint, which states:

           On information and belief, based on information in
      Mullen’s Initial Disclosures, when Blake purchased the
      PP-2   Rig   from   MMEER    (and/or    its   undisclosed
      principal(s)), Blake was aware of, and expressly assumed,
      the removal obligations under the 2001 PSA.

Paragraph 17 is the source of Blake’s alleged contractual tie to

Freeport for obligations arising under the 2001 PSA, because it

alleges that Blake “expressly assumed the removal obligations under

the 2001 PSA.”     Blake notes that this paragraph references the

assumption of obligations only in connection to its purchase of the

PP-2 Rig.   It does not include a reference to the Control Platform

Rig which was also part of the 2001 PSA.        Blake infers from this

omission that the petition alleges at most that it assumed the

obligations related to the PP-2 Rig and related equipment and did

not   allege   assumption   of   obligations   related   to   the   Control

Platform Rig and related equipment.      If Blake is correct, at least

part of Freeport’s conversion claim related to the Control Platform

Rig would be non-contractual or tort based, giving a basis for

coverage under the Gemini policy.

      We disagree with Blake’s reading of paragraph 17. There is no

question that Blake purchased the Control Platform Rig as well as

the PP-2 Rig from Freeport.      Paragraph 17 of the complaint alleges

without limitation that “Blake was aware of and expressly assumed

the removal obligations under the 2001 PSA”, which covers both

properties.     So, contrary to Blake’s restricted reading of the

complaint, Freeport alleged that Blake assumed the contractual

                                     7
obligation to remove the Control Platform Rig along with the other

obligations owed to Freeport under the 2001 PSA.

     Since the Control Platform Rig is the only equipment Blake

points to that was arguably removed and converted without regard

for obligations undertaken by Blake in either contract 2001 PSA or

2002 PSA, the question for a decision therefore narrows to whether

Blake’s alleged removal of equipment under the 2001 or 2002 PSAs

amounts to an “occurrence” under the policy.

     Gemini’s policy defines an “occurrence” as “an accident,

including continuance or repeated exposure to substantially the

same general harmful conditions.”     In North American Treatment

Systems, Inc. v. Scottsdale Insurance Co., the court stated that

“when the word ‘occurrence’ is defined as an ‘accident’, the

occurrence of an unforeseen and unexpected loss constitutes an

‘accident’ and therefore an ‘occurrence.’” 943 So. 2d 429, 444 (La.

App. 1 Cir. 2006)(internal citations omitted).     The court also

noted “that ‘accident is defined from the viewpoint of the victim;

losses that were unforeseen and unexpected by the victim are the

result of an accident.’” Id. See also Adams v. Unione Mediterranea

di Sicurta, 220 F.3d 659, 678 (5th Cir. 2000)(Relying on Black’s

Law Dictionary for the definition of “accident”: as “an event which

under the circumstances is unusual and unexpected by the person to

whom it happens.”)

     Under the allegations of Freeport’s complaint we agree with

the district court that no accident, unexpected event or occurrence

                                8
took place.     Freeport made a bargain to sell certain equipment and

have it removed from its facilities.                 Under the allegations of the

complaint, Blake either assumed the removal obligations or was an

undisclosed principal bound by the original contract and thus also

bargained     for   the    removal      of   this     equipment.         So,    from   the

standpoint of either Freeport, the victim, or Blake, the insured,

the removal of equipment subject to their agreement was not an

accident.     It is true that Freeport alleges that the sale was

conditioned on the removal of other equipment. However, Freeport’s

expectation     that      the    defendants        would   fully   comply       with   the

contractual     terms      and    remove         additional   equipment         does   not

transform the removal of equipment the parties bargained to convey

into an unexpected event or accident.                      Based on this analysis,

Freeport’s complaint does not allege an accident and therefore

there   was   no    occurrence      triggering        coverage     for     Blake   under

Gemini’s CGL policy.

       In Adams, we also held that the conversion on which recovery

was sought in that case was not an “occurrence” under the policy

because it was not accidental or unexpected.                  Because coverage was

not triggered for property damage coverage under the policy we

found it unnecessary to consider policy exclusions. 220 F.3d at

678.    Because the facts asserted in Freeport’s complaint do not

allege an occurrence which is required to trigger coverage in the

first instance, we need not consider exclusionary clauses such as

those   considered        in    Alert   Centre,       Inc.    v.   Alarm       Protection

                                             9
Services, Inc., 967 F.2d 161 (5th Cir. 1992), and Cute Togs of New

Orleans, Inc. v. Louisiana Health Service & Indemnity Company, 386
So. 2d 87 (La. 1980).

     AFFIRMED.

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