Court Opinion

ID: 12183
Source: CourtListenerOpinion
Date Created: 2010-04-25 06:12:32+00
Date Added: 2024-06-11T14:54:52.746302
License: Public Domain

United States Court of Appeals,

                            Fifth Circuit.

                            No. 94-41244.

         Jerry B. HODGEN;    Bobby Sue Hodgen, Plaintiffs,

                                  v.

           FOREST OIL CORPORATION, et al., Defendants,

FOREST OIL CORPORATION; Ronald J. Doucet, Defendants-Third Party
Plaintiffs-Intervenor Defendants-Cross Claim Plaintiffs-Appellants-
Cross-Appellees,

   Forest Oil Corporation, in its capacity as platform owner;
Ronald J. Doucet, Defendants-Third Party Plaintiffs-Intervenor
Defendants-Cross Claim Plaintiffs-Appellants-Cross Appellees,

                                  v.

 A & A BOATS INC.; C & G Marine Service Inc., Defendants-Third
Party Plaintiffs-Intervenor Defendants-Cross Claim Defendants-
Appellees-Cross Appellants,

                                  v.

OPERATORS & CONSULTING SERVICES INC., Third Party Defendant-Cross
Claim Defendant-Appellee,

   Chancellor Insurance Company; Yorkshire Insurance Company
Limited; Cornhill Insurance PLC; Allianz International Insurance
Company Limited; Ocean Marine Insurance Company Limited, Third
Party Defendants-Appellees,

     ALBANY INSURANCE CO., Third Party Defendant-Third Party
Plaintiff-Appellant,

                                  v.

  AETNA CASUALTY & SURETY CO., Intervenor Plaintiff-Third Party
Defendant-Appellee.

                            June 25, 1997.

Appeals from the United States District Court for the Western
District of Louisiana.

Before POLITZ, Chief Judge, and HIGGINBOTHAM and SMITH, Circuit
Judges.

                                  1
     PATRICK E. HIGGINBOTHAM, Circuit Judge:

      In a prior opinion, this panel affirmed the district court's

judgment in part and certified remaining issues to the Louisiana

Supreme Court.   See Hodgen v. Forest Oil Corp., 87 F.3d 1512 (5th

Cir.1996).    The Louisiana Supreme Court declined certification.

The parties subsequently settled all but one of the certified

issues.   We now decide this last issue and hold that the Louisiana

Oilfield Indemnity Act of 1981 ("LOIA"), La.Rev.Stat. Ann. §

9:2780, prevents an oil company from receiving indemnification for

its defense costs as a platform owner if it commits negligence as

time charterer of a vessel.

                                 I.

     We briefly recite the relevant facts, which are set out in

full in our earlier opinion.   Forest Oil contracted with Operators

and Consulting Services ("OCS") for work on an off-shore oil

platform.    The contract provided that OCS would indemnify Forest

"from and against any and all claims, demands, judgments, defense

costs, or suits ... by ... any employees ... of Contractor," even

if Forest was at fault.   Jerry Hodgen, an OCS employee, suffered a

spinal injury when he attempted a swing-rope transfer in rough seas

from a platform owned by Forest to a vessel that Forest chartered

on a non-demise basis. The district court found that Hodgen's suit

stated claims against Forest both in its capacity as platform owner

and in its capacity as time charterer of the vessel.     The court

found Forest negligent in its capacity as time charterer but

faultless in its capacity as platform owner.

                                 2
      Forest subsequently filed a third-party complaint against OCS

and     a    group     of    five    underwriters.             Invoking      the    broad

indemnification clause in the Master Service Agreement, Forest

demanded that OCS and five underwriters pay the costs incurred in

its defense in its capacity as platform owner.

      The district court, however, found that Louisiana law prevents

enforcement of the indemnity clause because Forest was at fault in

its capacity as time charterer.             "Regardless of whether Forest can

be at fault in two different capacities for the purposes of

plaintiff's tort claims against it," the court reasoned, "the fact

remains that Forest is one entity, and the Court has made a

judicial determination that this one entity was at fault in causing

plaintiff's injuries."              Hodgen v. Forest Oil Corp., 862 F.Supp.

1567,       1571   (W.D.La.1994),      aff'd     in    part,    87    F.3d   1512    (5th

Cir.1996).

                                           II.

          Louisiana protects oilfield contractors from oil companies

who press for master service contracts requiring contractors to

provide indemnification even when the oil company is at fault.

Under the LOIA, such indemnification agreements are void "to the

extent that they purport to require indemnification and/or defense

where there is negligence or fault on the part of the indemnitee."

Meloy       v.   Conoco,    Inc.,    504   So.2d      833,   838     (La.1987).1     The

      1
        The relevant portions of § 2780 read as follows:

                      A. The legislature finds that an inequity is foisted
                 on certain contractors and their employees by the defense
                 or indemnity provisions, either or both, contained in

                                            3
legislation "arose out of a concern about the unequal bargaining

power of oil companies and contractors and was an attempt to avoid

adhesionary contracts under which contractors would have no choice

but to agree to indemnify the oil company, lest they risk losing

the contract."   Fontenot v. Chevron U.S.A., Inc., 676 So.2d 557,

563 (La.1996).

      But "[a]n agreement providing for cost of defense in the

event of a meritless suit against the indemnitee is outside the

scope of the Act." Meloy, 504 So.2d at 839.    Forest argues that

because the district court found that Hodgen's suit against it in

its capacity as platform owner did not have merit, it should be

able to collect the costs of defending itself in that capacity.

          some agreements pertaining to wells for oil, gas, or
          water, or drilling for minerals which occur in a solid,
          liquid, gaseous, or other state, to the extent those
          provisions apply to death or bodily injury to persons.
          It is the intent of the legislature by this Section to
          declare null and void and against public policy of the
          state of Louisiana any provision in any agreement which
          requires defense and/or indemnification, for death or
          bodily injury to persons, where there is negligence or
          fault (strict liability) on the part of the indemnitee,
          or an agent or employee of the indemnitee, or an
          independent contractor who is directly responsible to the
          indemnitee.

               B. Any provision contained in, collateral to, or
          affecting an agreement pertaining to a well for oil, gas,
          or water, or drilling for minerals which occur 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.

                                4
The insurers, on the other hand, urge us to deny indemnification

for Forest's defense costs as platform owner because Forest was

found negligent in its capacity as time charterer.

       Entities in oil exploration often wear several hats, and the

law reflects the different capacities in which a company operates

when    assigning   rights   and   responsibilities   attending   these

capacities.    In this case, Hodgen's suit against Forest sounded in

two different bodies of law.       The Outer Continental Shelf Lands

Act, 43 U.S.C. §§ 1301-56, dictated which law would apply to

Hodgen's claims.     As against Forest in its capacity as platform

owner, Hodgen proceeded under 43 U.S.C. § 1333(a)(2)(A), which

incorporates state negligence principles. As against Forest in its

capacity as time charterer, Hodgen proceeded under the Longshore

Workers' Compensation Act, 33 U.S.C. §§ 902(21), 905(b-c), made

available by 43 U.S.C. § 1333(b).

       The LOIA, however, does not speak in terms of an oil company's

capacities, it speaks in terms of contracting entities, the oil

contractor and the indemnitee.          Louisiana strives to protect

contractors from oil companies that want contractors to bear the

risks that accompany their own negligence.       The language of the

statute, as the Louisiana courts have noted, gives it "the broadest

possible meaning," and "does not draw distinctions based on the net

worth or ownership of the contracting parties or the type of

contract involved."    Daigle v. United States Fidelity & Guaranty

Ins. Co., 610 So.2d 883, 887 (La.App. 1st Cir.1992);      see also St.

Amant v. Glesby-Marks Corp., 532 So.2d 963, 964 (La.App. 5th

                                    5
Cir.1988).

      The strength with which Louisiana applies the LOIA to protect

contractors from indemnification was demonstrated in Meloy.             The

Louisiana     Supreme    Court   found   that    the   Act   only   allowed

indemnification if the suit against the oil company was meritless.

Any   fault   by   the   oil   company   would   render   the   contractual

indemnification provision null and void.          Therefore, the supreme

court held that the LOIA prevented an oil company sued by a

contractor's employee from collecting a contribution from the

contractor even if the contractor was concurrently negligent.

Meloy, 504 So.2d at 838.

      As Meloy made clear, a suit must be absolutely meritless for

an indemnification provision to survive.         An oil company found one

percent at fault may not bring a claim against the contractor for

defense costs or damages even if the contractor was at fault.            In

this case Forest was found 85% responsible for the accident, which

fault happened to be in its capacity as time charterer of the

vessel.   It bears noting that Forest's liability as platform owner

and as time charterer both arose from the same incident.             Hodgen

was injured while completing a swing rope transfer, and Forest's

negligence was found to be a cause of that accident.

      In light of the protection that Meloy gives to contractors, we

find it unlikely that the Louisiana Supreme Court would allow a

company found 85% at fault to collect any of its defense costs,

even those incurred in defending a legal theory under which it was

                                     6
found not liable.2          We therefore find that the LOIA precludes

Forest from collecting defense costs incurred in its capacity as

platform owner.

                                       III.

     For the foregoing reasons, the portion of the district court's

judgment denying Forest Oil indemnification for its defense costs

as platform owner is AFFIRMED.

     JERRY E. SMITH, Circuit Judge, dissenting:

     I       respectfully   dissent.        It   is   disappointing   that   the

Louisiana Supreme Court declined to entertain the certification, as

that court is in the best position to construe the statute at hand.

This is a close question, and the majority engages in quite a

respectable analysis, reaching a result that is not unreasonable.

     The majority correctly observes that companies engaged in

offshore oil exploration operate in different capacities that are

governed by wholly different bodies of law.                I would treat the

different capacities as separate and distinct entities under the

Oilfield Indemnity Act, as the purposes of the act are not served

by denying indemnification for Forest Oil's defense costs incurred

in its capacity as platform owner, a capacity in which it is

         2
       Some lower courts in Louisiana have rejected such "dual
capacity" arguments in the context of worker's compensation. See
White v. Naquin, 500 So.2d 436 (La.App. 1st Cir.1986)(disallowing
indemnification by a school board in its capacity as custodian
where the worker's compensation laws disallowed suits against a
school board as an employer); Deagracias v. Chandler, 551 So.2d 25
(La.App. 4th Cir.1989)(disallowing a suit against an employer in
its capacity as the manufacturer of the instrumentality by which
the employee was injured where employer was not liable under the
worker's compensation laws).

                                        7
indisputably free from fault.

                                8