Petrobras America Incorporated v. Vicinay Cadenas ( 2019 )

Case: 18-20532 Document: 00514999798 Page: 1 Date Filed: 06/18/2019
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 18-20532 FILED
June 18, 2019
PETROBRAS AMERICA INCORPORATED, Lyle W. Cayce
Clerk
Plaintiff - Appellant
v.
VICINAY CADENAS, S.A.,
Defendant - Appellee
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:12-CV-888
Before HAYNES, GRAVES, and HO, Circuit Judges.
PER CURIAM:*
Petrobras America, Inc. and Vicinay Cadenas, S.A. return to our court in
a suit over an allegedly bad chain made by Vicinay. The district court granted
summary judgment against Petrobras because Vicinay invoked a contractual
release of claims and waiver of losses. Petrobras argued that the release and
waiver were invalid under a Louisiana statute that invalidates prospective
releases of claims based on “intentional or gross fault.” The district court
* 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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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concluded the statute could not save Petrobras’s claims because it did not
require Petrobras to prove “intentional or gross fault.” But, in this context,
Louisiana courts have consistently looked at the underlying facts of a claim,
not the form of the cause of action. We thus REVERSE and REMAND.
I. Background
This case is about a defect in a chain which serves as a critical component
to an offshore oil production system. The plaintiff, Petrobras, is an oil and gas
production company. The defendant, Vicinay, is a manufacturer of marine
chains for use in oil and gas production activities.
Petrobras entered into an Engineering, Procurement, Construction and
Installation Contract (“EPCI Contract”), with Technip USA, Inc. (“Technip”)
for Technip to construct a free-standing hybrid riser system (“FSHR” or “riser
system”) that would move crude oil from wellheads on the ocean’s floor to a
floating production storage and offloading facility at the ocean’s surface.
Technip then contracted with Vicinay for Vicinay to engineer and manufacture
five tether chains that would connect the riser system to buoyancy cans. The
buoyancy cans are meant to keep the riser system from kinking over, thereby
ensuring the unobstructed flow of crude oil from the ocean’s floor to the facility
above.
The EPCI Contract contains two provisions relevant to this case—a
release provision and a waiver provision. The release provided that Petrobras
would release “all [c]laims” against Technip and its subcontractors.
Specifically, Petrobras agreed to:
release, defend, hold harmless and indemnify
Contractor Group from and against any and all
Claims, Losses, or Expenses for personal injury,
illness, death or for loss or damage to property of
Company Group brought by any member of Company
Group directly or indirectly arising out [of] this
Contract . . . regardless whether such claims, losses, or
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expenses are actually or allegedly the result of the sole
or concurrent negligence, strict liability, negligence
per se, product defect, willful and wanton conduct or
other fault of contractor group, whether or not pre
existing this contract, the violation of any municipal,
state or federal statute, or the unseaworthiness of any
vessel, or the unairworthiness of any aircraft.
EPCI § 9.1 (all capitalization of latter clause omitted).
The EPCI waiver provides that each party waives any claim for its own
loss against the other party. In full, the waiver states:
each party hereby waives any claim for its own
consequential loss (as defined below) against the other
party (or the other party’s group) which arises out of
or in connection with this contract, howsoever or by
whomsoever such consequential loss may be caused,
whether due to the neglect or fault, in whole or in part,
of any of the parties or their respective groups, or any
other persons or otherwise, and each party hereby
releases each other party (and such other party’s
group) from any liability for consequential loss of the
releasing party.
EPCI § 9.8.1 (all capitalization omitted).
After Technip’s construction, Petrobras discovered that one of the
buoyancy cans had broken free from its connection to the riser system, and a
portion of the riser system and a tether chain had fallen to the ocean’s floor.
Petrobras alleges that a link in one of the tether chains failed, because Vicinay
made an unauthorized and defective repair weld to one of the links in the
chain.
Earlier in this case, a previous panel of our court considered whether the
Outer Continental Shelf Lands Act (“OCSLA”) required that the dispute be
governed by Louisiana law or maritime law. Petrobras America, Inc. v. Vicinay
Cadenas, S.A. (Petrobras I), 815 F.3d 211 (5th Cir. 2016). The panel held “that
the choice of law prescribed by OCSLA is statutorily mandated,” and “that the
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applicable law is that of the adjacent state of Louisiana.” Id. at 213 (citing 43
U.S.C. § 1333(a)(2)). Accordingly, the panel remanded the case back to the
district court with instructions to proceed under Louisiana law. Id. at 218.
Petrobras filed an amended complaint after Petrobras I. Petrobras
asserted six claims under Louisiana law: (1) products liability based on the
Louisiana Products Liability Act (“LPLA”); (2) redhibition; (3) negligence;
(4) gross negligence; (5) failure to warn; and, (6) fraud/fraudulent inducement.
The district court dismissed all but the LPLA and redhibition claims, because
the LPLA subsumed all the other claims. Petrobras has not appealed the
dismissal of those claims.
Vicinay moved for summary judgment on the remaining two claims,
asserting an affirmative defense of release, based on §§ 9.1 and 9.8.1 of the
EPCI Contract. Petrobras countered that the releases were unenforceable
under Louisiana law, which provides that “[a]ny clause is null that, in advance,
excludes or limits the liability of one party for intentional or gross fault that
causes damage to the other party.” LA. CIV. CODE ART. 2004. The district court
concluded that the release and waiver provisions applied to and were
enforceable against Petrobras’s remaining claims. It determined that the
release and waiver provisions were void only to the extent that the provisions
released Vicinay of reckless conduct—not null in their entirety. Because
neither the LPLA nor redhibition included an element of recklessness or
intent, the district court concluded that Article 2004 did not invalidate the
release and waiver. Petrobras now appeals.
II. Standards of Review
We review de novo a district court’s grant of summary judgment,
applying the same standard as the district court. See Austin v. Kroger Tex.,
L.P., 864 F.3d 326, 328 (5th Cir. 2017) (citing Ford Motor Co. v. Tex. Dep’t of
Transp., 264 F.3d 493, 498 (5th Cir. 2001)). When deciding issues of state law,
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we must consider how the state’s highest court would decide those issues. See
Guilbeau v. Hess Corp., 854 F.3d 310, 311 & n.4 (5th Cir. 2017).
III. Discussion
We first resolve what law applies to this dispute and then turn to the
district court’s conclusion that Petrobras could not use Article 2004 to
invalidate the EPCI Contract’s waiver and release of its LPLA and redhibition
claims.
A. Choice of Law
Vicinay argues that the application and validity of the EPCI Contract’s
waiver and release are governed by Texas, not Louisiana, law. We reject
Vicinay’s argument and apply Louisiana law.
Vicinay acknowledges that we previously held that OCSLA required
Petrobras’s claims to be governed by Louisiana law. See Petrobras I, 815 F.3d
at 218. We have interpreted OCSLA to require the laws of an “adjacent State”
to apply to controversies occurring at an OCSLA situs so long as the claims are
consistent with other federal law and are not maritime claims. See id. at 214,
216. Though Vicinay previously argued that Petrobras’s claims were maritime
claims, it did not argue that Petrobras’s tort claims occurred anywhere but at
an OCSLA situs. It does not claim otherwise now nor does it offer any of the
traditional arguments for supplanting law of the case. Deutsche Bank Nat’l
Trust Co. v. Burke, 902 F.3d 548, 551 (5th Cir. 2018) (describing the three
limited circumstances where a second panel can re-examine a prior panel’s
holding).
Instead, Vicinay argues that though Petrobras’s claims occurred at an
OCSLA situs, a separate analysis should be done for its affirmative defense
based on the EPCI Contract. It cites our decision in Grand Isle Shipyard, Inc.
v. Seacor Marine, LLC, 589 F.3d 778 (5th Cir. 2009) (en banc), for the
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proposition that any “contractual dispute” in an OCLSA case must be resolved
by the “focus-of-the-contract test.” See id. at 781.
Grand Isle involved the question of the determining the situs of the
controversy to determine whether OCSLA law applied. Here, we have already
decided that Louisiana law applies. Petrobras I, 815 F.3d at 218. In Grand
Isle, the claim at issue was an indemnity claim between two parties, neither of
whom had a tort claim against the other. Id. at 782–83. The case was purely
a contractual one, even if the indemnity suit was spurred by a tort claim by a
third party. Id. Vicinay raises a contractual provision as an affirmative
defense to Petrobras’s tort claim. Usually, the same law that governs a tort
claim will govern what defenses may be asserted. See RESTATEMENT (SECOND)
OF CONFLICT OF LAWS § 161 (AM. LAW. INST. 1971). Vicinay has not articulated
any reason why that general principle would not apply in this case.
Nothing in the text of OCSLA indicates that the applicable law for
defenses should be analyzed separately from the applicable law for a claim. As
the statute puts it, the country’s laws and authority “extend[] to the subsoil
and seabed of the outer Continental Shelf,” as well as certain man-made
structures attached to them, “to the same extent as if the outer Continental
Shelf were an area of exclusive Federal jurisdiction located within a State.” 43
U.S.C. § 1333(a)(1). The law that applies in that territory is the law of the
“adjacent State,” so long as “they are applicable and not inconsistent . . . with
other Federal laws.” Id. § 1333(a)(2). OCSLA thus creates zones where any
“controversy,” see Grand Isle, 589 F.3d at 784, that arises must be adjudicated
under the laws of the adjacent state, even when the parties privately contract
for different law to apply and even when the adjacent state’s choice-of-law
principles would incorporate a different body of law. See Petrobras I, 815 F.3d
at 215. The statute does not create exceptions for different parts of a
controversy to be governed by different bodies of law.
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The district court correctly followed our instructions to consider the case
under Louisiana law, and we continue to follow our own instructions under law
of the case. See Bott v. Am. Hydrocarbon Corp., 458 F.2d 229, 231 n.2 (5th Cir.
1972) (concluding that a choice-of-law decision in a previous appeal in the same
suit is law of the case).
B. Enforceability of Release and Waiver
Petrobras argues that the district court erred in its interpretation of
Article 2004, which Petrobras cited to rebut Vicinay’s affirmative defense of
release and waiver under the EPCI Contract. We agree and conclude that
summary judgment was inappropriate on that ground.
Article 2004 restricts private parties’ ability to prospectively waive or
release certain claims. It states: “Any clause is null that, in advance, excludes
or limits the liability of one party for intentional or gross fault that causes
damage to the other party.” LA. CIV. CODE ART. 2004. It includes a similar
provision for contractual clauses that absolve defendants of liability for any
personal injuries, which is relevant for cases discussed later but is not
applicable on the facts of this case. Id.
The district court decided that Article 2004 could not be invoked against
the EPCI Contract’s release and waiver. It reasoned that though Article 2004
would make the release and waiver “unenforceable as to claims of recklessness,
the LPLA precludes Petrobras from asserting such a claim.” The district court
also held, without any detailed analysis, that Article 2004 could not be invoked
to save Petrobras’s redhibition claim. Vicinay defends the district court’s
decision on appeal, arguing that “Article 2004 invalidates contractual
provisions only to the extent there is a cause of action for intentional or gross
fault, without regard to whether the alleged underlying conduct involves
intentional or gross fault.”
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But Louisiana courts have never applied Article 2004 only to causes of
action that include an element of intentional or gross fault. Quite the opposite:
They have looked at the underlying allegations and facts and applied Article
2004 even where the cause of action did not include any such element. For
instance, in Ramirez v. Fair Grounds Corp., a plaintiff sued a premises owner
under two strict liability statutes, neither of which required intent, gross
negligence, or physical injury. See 575 So. 2d 811, 812 (La. 1991). But because
the plaintiff had suffered a physical injury, the Supreme Court of Louisiana
concluded that Article 2004 nullified application of a contractual release. Id.
at 813. The analysis was not focused on the elements of the claim; it was
focused on the nature of the allegations. See also Daigle v. Clemco Indus., 613
So. 2d 619, 623 (La. 1993) (“The present case fits neither category because the
surviving spouse and children did not sustain physical injury and the
defendants were not alleged to have been intentionally or grossly at fault.”
(emphasis added)); Williams v. Kushner, 549 So. 2d 294, 310 (La. 1989)
(“Where physical injury has occurred, a prior agreement cannot act to restrict
the measure of damages.” (emphasis added)). Similarly, a Louisiana court of
appeals examined whether a breach of contract amounted to gross
negligence—and thus triggered Article 2004—even though a cause of action for
breach of contract does not require gross negligence. See Tudor Chateau Creole
Apartments P’ship v. D.A. Exterminating Co., 691 So. 2d 1259, 1262 (La. Ct.
App. 1997). 1 Even the primary case the district court relied on and Vicinay
cites on appeal, Wadick v. Gen. Heating & Air Conditioning, LLC, uses this
mode of reasoning. See 145 So. 3d 586, 599 (La. Ct. App. 2014) (reversing a
1 That court also determined that the defendant’s actions were not intentional
conduct. See Tudor Chateau, 691 So. 2d at 1262. So it could not be argued that the plaintiff’s
claim there could have proceeded under a “bad faith” breach of contract, which might
arguably include an element of intentional fault.
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trial court and concluding that Article 2004 would not invalidate a prospective
release of a breach of contract claim leading to physical injuries even though it
would invalidate it for the same claim leading only to property damage). 2
Another Louisiana court of appeals concluded that Article 2004 could
invalidate a prospective release when a plaintiff sued for redhibition—a result
directly contrary to the district court’s order. See Cameron v. Bruce, 981 So.
2d 204, 205, 208 (La. Ct. App. 2008). The district court’s and Vicinay’s
elemental approach to Article 2004 is thus inconsistent with how every
Louisiana court has approached the issue.
In addition to being inconsistent with how Louisiana courts have
handled Article 2004, the proposed elemental approach leads to strange
results. The most obvious is that it would make Article 2004 irrelevant except
in cases of fraud and the rarest of other cases. See LA. CIV. CODE. ART. 1953.
That is because nearly all Louisiana’s causes of action do not require a plaintiff
to prove any element that amounts to intentional or gross fault. The district
court supposed that Article 2004 would have invalidated the release and
waiver if Petrobras could have asserted a claim of “recklessness.” But
Louisiana has no such cause of action. Instead, it has a general negligence
statute that does not require a plaintiff to prove intentional or gross fault, nor
must the plaintiff necessarily prove personal injury. See LA. CIV. CODE ART.
2315. In some peculiar circumstances like the production of child pornography
or driving while intoxicated, a plaintiff must prove the defendant acted with
“wanton or reckless disregard” to receive exemplary damages. See LA. CIV.
CODE ARTS. 2315.3, 2315.4. But it is doubtful even those infrequently invoked
2 Vicinay’s counsel misstates the holding of Wadick, asserting that the court
“affirm[ed] summary judgment as to ordinary breach.” But Wadick remanded on the
ordinary breach claims as they related to physical injuries stemming from the breach of
contract. See 145 So. 3d at 599–600.
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statutes would fall within the district court’s approach to Article 2004; those
statutes merely enhance damages and are not causes of actions unto
themselves. 3 Thus, under the approach advocated by Vicinay, Article 2004
would be a nullity in nearly every case that was not for fraud. Specifically, it
would never apply to manufacturers of products, given the singularity of the
LPLA as a cause of action.
The district court’s decision to apply the proposed elemental approach
stemmed, in part, from confusion about what the LPLA covers. For Petrobras
to prove that Vicinay violated the LPLA, it does not have to show that Vicinay
acted with intentional or gross fault. See LA. STAT. ANN. § 9:2800.54(D).
Instead, it must prove one of the statutorily enumerated theories, such as an
unreasonably dangerous design or lack of conformance to an express warranty.
See LA. STAT. ANN. § 9:2800.54(B). These theories are similar to, but distinct
from, traditional civil law causes of action. Plaintiffs cannot, however, choose
to sue under other causes of action because the LPLA “establishes the exclusive
theories of liability for manufacturers for damage caused by their products.”
See LA. STAT. ANN. § 9:2800.52. We have affirmed dismissal of product liability
claims that try use other causes of action instead of the LPLA. See, e.g.,
Jefferson v. Lead Indus. Ass’n, Inc., 106 F.3d 1245, 1251 (5th Cir. 1997).
But—and this is where Vicinay’s argument goes awry—plaintiffs can
still sue under the LPLA for conduct that would be considered intentional,
grossly negligent, or reckless, or that would violate other causes of action. The
LPLA is a floor, not a ceiling; Plaintiffs do not have to prove defendants acted
3 Similarly, intentional or gross fault sometimes arise in obscure immunity statutes.
See, e.g., LA. STAT. ANN. § 4:173.1 (providing immunity for those engaged in raising
thoroughbred horses except when damages are caused by “gross negligence”); LA. STAT. ANN.
§ 15:546 (providing immunity for state officials who disclose sex offender information except
when they act “with gross negligence or in bad faith”). But those statutes are generally
invoked by defendants, not by plaintiffs as a cause of action.
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recklessly to establish liability under the LPLA, but they are not barred from
proving the same so long as they meet the statutory requirements. See Stahl
v. Novartis Pharm. Corp., 283 F.3d 254, 262 & n.2 (5th Cir. 2002). Defendants
do not somehow escape liability under the LPLA as their violations become
more egregious. All products liability claims, no matter how minor or major,
are covered by the LPLA.
The district court concluded the opposite, citing another district court for
the proposition that “the LPLA does not allow the plaintiff to recover for willful,
wanton, and reckless conduct.” Ingram v. Bayer Corp., No. 2-352, 2002 WL
1163613, at *2 (E.D. La. May 30, 2002). That statement misdescribes the
“exclusive theories” rule under the LPLA, construing it to be about defendants’
“conduct,” when it is really about plaintiffs’ minimum burden to establish
liability. See Stahl, 283 F.3d at 262 & n.2.
From this faulty premise, the district court implicitly reasoned that since
an LPLA claim does not have to feature intentional or gross fault, Article
2004—which applies when intentional or gross fault is present—would not be
triggered. 4 But, as discussed above, that is incorrect; the LPLA can cover such
conduct.
Because the LPLA covers such conduct and Article 2004 may be invoked
against it, the district court erred. Walking this situation through step-by-
step—plaintiff’s claim followed by defendant’s defense followed by plaintiff’s
exception to the defense—explains how Petrobras’s claims, Vicinay’s defense,
and Article 2004 work. Petrobras bears the burden of proving redhibitory
claim or a violation of the LPLA, focusing on just the elements of that statute.
If Petrobras proves a redhibitory claim or a violation of the LPLA, Vicinay can
4 The district court provided no similar justification for why it concluded the
redhibition claim could not survive.
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then prove its contractual defense under the ECPI. If nothing else happens,
then Vicinay would prevail based upon its affirmative defense. But if
Petrobras could produce evidence in response to the affirmative defense
proving that Vicinay acted with intentional or gross fault in its violation of the
LPLA or redhibition, Petrobras would overcome Vicinay’s affirmative defense
under the contract. Then, so long as Petrobras has proved a redhibitory claim
or a violation of the LPLA’s terms, Petrobras would prevail. The district court
should not assume that Vicinay cannot be liable under the LPLA if it acted
with intentional or gross fault, nor should it look to the elements of the LPLA
or redhibition to determine whether Article 2004 applies.
IV. Conclusion
We REVERSE the district court’s conclusion that Article 2004 cannot be
used to invalidate the EPCI Contract’s release and waiver as applied to
Petrobras’s LPLA and redhibition claims. We REMAND for further
proceedings consistent with this opinion.
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