Contract Calling for Work on Fixed Platform Deemed Maritime Contract

Case: Larry Doiron, Inc. v. Specialty Rental Tools & Supply LLP (In re Larry Doiron, Inc.)
U.S. Fifth Circuit Court of Appeals
2017 U.S. App. LEXIS 3331 (5th Cir. La. Feb. 23, 2017)

On October 12, 2005, Apache Corporation and Specialty Rental Tools & Supply (“STS”) entered into a Master Services Contract (“MSC”). The MSC contemplated future tasks to be performed under subsequent work orders. The MSC contained an indemnification agreement, whereby STS was required to defend and indemnify the Apache Company Group against all claims for property damage or bodily injury.

In early 2011, Apache hired STS to perform flow-back services on its offshore well, located in West Lake Verret in the Atchafalaya Basin. The flow-back process was designed to dislodge solid objects from inside the well. The work was to be performed on Apache's fixed production platform. The flow-back services were arranged by an oral work order.

On February 24, 2011, STS sent its employees Peter Savoie and Matt Delahoussaye to perform the flow-back operation. After being unsuccessful that day, Savoie informed Apache that it would need additional equipment to perform the operation, including a flow-back iron, a hydraulic choke manifold, and a hydraulic gate valve. STS also advised it would need a crane barge because the additional equipment was too heavy for the workers to remove from the wellhead. As such, Apache contacted VAS Gauging, Inc., which arranged for Larry Doiron, Inc. (“LDI”) to provide the crane barge POGO3 for use at the Apache well. Robert Jackson was the crane operator.

The underlying accident occurred on the second day of the flow-back operation, when the crane allegedly knocked STS’s employee, Savoie, off balance. He clutched the crane to avoid falling backward but eventually lost his grip, which caused him to fall approximately eight feet onto the deck of the barge. Savoie sustained a crush-type injury as a result of the fall.

LDI later instituted a Limitation Action, which Savoie answered, asserting a claim against LDI. LDI then filed a third-party complaint against STS for defense and indemnity under the MSC. STS ultimately settled with Savoie, and the indemnity claims were severed from the personal injury case. LDI then filed a motion for summary judgment, seeking enforcement of its contractual right to defense and indemnity against STS, arguing that the MSC obligated STS to indemnify LDI against Savoie’s claims. In response, STS filed a cross-motion for summary judgment, arguing that the MSC must be construed under Louisiana law and that the indemnity provision contained therein is void and unenforceable under the Louisiana Oilfield Indemnity Act. The district court granted the motion submitted by LDI and denied the cross-motion submitted by STS.

On appeal, the Fifth Circuit noted the issue was whether maritime or Louisiana state law should be applied to determine the validity of the MSC’s indemnity clause. The MSC called for the application of general maritime law, whenever any performance was contemplated in, on or above navigable waters, whether onshore or offshore. If Louisiana law applied, the Louisiana Oilfield Indemnity Act would have invalidated the defense and indemnity obligation, whereas under general maritime law, the obligation would have been enforceable.

The Fifth Circuit then recognized, to distinguish between maritime and non-maritime contracts, it was bound to apply the legal framework set forth in Davis & Sons, Inc. v. Gulf Oil Corp., 919 F.2d 313 (5th Cir. 1990), “however inexact it may be.” The Davis test, which the Fifth Circuit acknowledged “turns on a minute parsing of the facts,” first requires a determination of the nature of the contract by reference to its historical treatment. If the historical treatment is unclear, the court must then consider six factors: 1) [W]hat does the specific work order in effect at the time of injury provide? 2) [W]hat work did the crew assigned under the work order actually do? 3) [W]as the crew assigned to work aboard a vessel in navigable waters[?] 4) [T]o what extent did the work being done relate to the mission of that vessel? 5) [W]hat was the principal work of the injured worker? and 6) [W]hat work was the injured worker actually doing at the time of injury?

Applying Davis & Sons, the court found no clarity to the historical treatment of contracts like the one at issue because the court had not previously considered flow-back operations. The court then turned to the six-part test, finding no single factor was dispositive. The court, noting the first factor concerns the specific work order in effect at the time of the injury, reasoned that here, however, neither party could produce a written document to establish what the parties contemplated when the particular agreement arose. The MSC referenced vessels by requiring insurance coverage when the “contractor uses any vessels in connection with its work for Company or Company Group.” The court found the language of the MSC thus indicated the parties at least contemplated the use of a vessel during the operations for which Apache would employ STS.

Turning to the second factor, the court noted the STS crew performed a flow-back operation, which is not primarily maritime. Nevertheless, Savoie and Delahoussaye relied on the crane barge to execute the flow-back operation, and Savoie was injured as a result of its use. The Fifth Circuit agreed with the district court noted that the operation “could not have been completed without the use of a crane barge . . . .”

Regarding the fourth factor, which concerns the extent to which the work being done related to the mission of the vessel, the court found the barge was sent to Apache’s well site to serve STS in the execution of its flow-back job. As to the sixth factor, regarding what the injured worker was doing at the time of his injury, the court found Savoie was preparing to disconnect the hydraulic gate valve from the crane. During rigging down, Savoie clutched the crane itself and fell onto the deck of the barge when he lost his grip. Thus, Savoie was injured by equipment affixed to the vessel itself.

The court reasoned only the third and fifth factors militated against applying maritime law. On third factor, regarding whether the crew was assigned to work aboard a vessel in navigable waters, the court conceded neither Savoie nor Delahoussaye was assigned to work aboard the crane barge. Nevertheless, the court pointed out that Savoie made use of the barge by loading and unloading equipment from its deck, conducting safety meetings on board the vessel, and using the crane to install large equipment on the platform. As to the fifth factor, concerning the principal work of the injured person, the court recognized, at the time of his injury, Savoie was principally employed to perform the flow-back operation at issue; he was not commissioned to be a seaman. However, the court suggested his work nevertheless has had a “peculiarly salty flavor.”

Given the above analysis, the court concluded that the oral work order was the relevant contract and that it was a maritime contract. Of note, Judge Eugene Davis issued a concurring opinion, joined by Judge Southwick, urging the Fifth Circuit to consider the case en banc “and simplify the test for determining whether a contract is a maritime contract.” Judge Davis argued “it is time to abandon the Davis & Sons test for determining whether or not a contract is a maritime contract.” Judge Davis believes the Davis & Sons test “relies more on tort principles than contract principles to decide a contract case” and that it “is too flexible to allow parties or their attorneys to predict whether a court will decide if a contract is maritime or non-maritime or for judges to decide the cases consistently.” We will be monitoring to see if a request for rehearing en banc is filed.