Diamond Offshore Co. v. A&B Builders, Inc. , 302 F.3d 531 ( 2002 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 01-40366
DIAMOND OFFSHORE COMPANY;
DIAMOND OFFSHORE USA, INC.;
DIAMOND OFFSHORE DRILLING, INC.;
DIAMOND OFFSHORE DRILLING SERVICES INC.,
Plaintiffs-Counter Defendants-
Appellants-Cross-Appellees,
versus
A & B BUILDERS, INC.,
Defendant-Counter Claimant-
Appellee-Cross-Appellant.
Appeals from the United States District Court
for the Southern District of Texas
August 30, 2002
Before EMILIO M. GARZA, BENAVIDES, and STEWART, Circuit Judges.
CARL E. STEWART, Circuit Judge:
Diamond Offshore Co mpany, Diamond Offshore U.S.A. Inc., Diamond Offshore Drilling,
Inc., and Diamond Offshore Drilling Services, Inc. (collectively “Diamond”) appeal the district court’s
entry of final judgment dismissing Diamond’s suit without considering Diamond’s breach of contract
claim. A&B Builders, Inc. (“A&B”) cross-appeals the district court’s order granting partial summary
judgment in favor of Diamond. For the reasons that follow, we affirm the partial summary judgment
ruling in part, reverse and remand in part, and vacate the entry of final judgment and remand for
further proceedings.
FACTUAL AND PROCEDURAL BACKGROUND
Diamond is engaged in the exploration and development of offshore oil and gas wells. A&B
is a contractor that provides repair and maintenance services for offshore oil platforms and drilling
rigs. On April 8, 1997, Diamond and A&B entered into a “Master Service Contract” whereby A&B
agreed to provide services to Diamond from time to time. Paragraph 9 of the Master Service
Contract contains an indemnity provision that specifically applies to claims for bodily injury brought
by employees of either A&B or Diamond, including those that result from the negligence of the
indemnitee. Under this provision, if a Diamond employee is injured by the negligence of A&B,
Diamond agreed to defend and indemnify A&B against any claims brought by Diamond’s employee.
Should an A&B employee be injured by the negligence of Diamond, A&B agreed to defend and
indemnify Diamond and all of the parties for whom Diamond may be working against any claims
brought by A&B’s employees. Paragraph 8 of the Master Service Contract obligates A&B to
purchase various insurance policies, establishes the minimum coverage limits of these policies, and
obligates A&B to waive subrogation against Diamond and name Diamond as an “Additional Named
Assured[].”
Pursuant to the Master Service Contract, Diamond engaged A&B to perform repairs to the
Ocean Concorde, a semi-submersible drilling rig owned and operated by Diamond, that were
necessary so that the Ocean Concorde “could do its usual work.” A semi-submersible drilling rig is
a movable rig that is typically towed to a particular location where it is submerged about fifty feet and
2
then anchored in place to complete the mooring of the rig. The rig’s platform deck is supported on
columns which are attached to large underwater displacement hulls, large vertical caissons, or some
combination of both. The columns, displacement hulls, or caissons are flooded on location.1
Lee E. McMillon (“McMillon”), an employee of A&B, worked aboard the Ocean Concorde
pursuant to the Maser Service Contract between Diamond and A&B. On March 7, 1998, McMillon
was allegedly injured while performing repair services as a welder on the Ocean Concorde. McMillon
maintains that, while welding inside a pollution pan, he was injured when he became trapped by
drilling mud that was spilled on top of him. The welding being done by McMillon at the time of his
alleged injury was necessary to allow the Ocean Concorde to perform its drilling function without
polluting the waters of the Gulf of Mexico. At the time of McMillon’s alleged injury, the Ocean
Concorde was located in navigable waters more than 100 miles offshore in the Gulf of Mexico.
On March 9, 1999, McMillon and his wife sued Diamond, Shell Oil Company (“Shell”),2 and
various Shell-affiliated companies for his injuries in the 212th Judicial District Court of Galveston,
Texas. Diamond made a demand upon A&B for defense and indemnity pursuant to the terms of the
Master Service Contract. When A&B did not respond to this demand, Diamond employed counsel
to defend Diamond in the McMillon suit.
Diamond then initiated the present action against A&B in federal court seeking declaratory
relief and damages for breach of contract. The district court’s general admiralty jurisdiction was
1
THOMAS J. SCHOENBAUM, 1 ADMIRALTY AND MARITIME LAW § 3-9, at 108 n.8 (3d ed. 2001)
(describing semi-submersible rigs and other rigs); HOWARD R. WILLIAMS & CHARLES J. MEYERS,
MANUAL OF OIL AND GAS TERMS 996 (11th ed. 2000) (defining semi-submersible rig).
2
At the time of McMillon’s alleged injury, the Ocean Concorde was working under a contract with
Shell Oil company.
3
invoked pursuant to 28 U.S.C. § 1333. Diamond claimed that A&B refused to act in accordance with
the indemnity provision and failed to reveal whether it obtained liability insurance coverage naming
Diamond as an additional insured. Diamond sought a determination of its rights to indemnification,
insurance, and a defense under the terms of the Master Service Contract. Diamond also sought
damages for breach of contract; specifically, costs and attorneys’ fees incurred in defending the
McMillon suit and bringing this action.3
Diamond and A&B then filed cross-motions for partial summary judgment. On November
17, 1999, the district court denied A&B’s motion. At the same time, the district court granted
Diamond’s motion, determining that: (1) the indemnity provision was valid and A&B owed defense
and indemnity to Diamond in the McMillon suit; (2) the additional-insured provision created an
independent obligation, separate from the indemnity provision, and A&B was obligated to procure
the requisite insurance and name Diamond as an additional insured; and (3) Diamond would be
entitled to recover damages for breach of contract if A&B has failed to procure the requisite
insurance and name Diamond under the contract. The court then entered a final judgment dismissing
the entire case.
On November 19, 1999, Diamond filed a motion to reconsider the district court’s entry of
final judgment, urging the court to retain jurisdiction over Diamond’s claim for damages sustained
as a result of A&B’s breach of contract. The court denied this motion on November 23, 1999.
Diamond appealed and A&B cross-appealed. On August 3, 2000, a panel of this Court
remanded the case to establish “whether McMillon directly qualified for coverage under Section
3
Paragraph 23 of the Master Service Contract provides for recovery of attorneys’ fees and costs
incurred in enforcing the rights delineated in the Master Service Contract.
4
905(b) of the Longshore and Harbor Workers’ Compensation Act (LHWCA), 33 U.S.C. § 905(b).”
On November 3, 2000, the district court entered an order, based upon the joint stipulation of the
parties, finding that McMillon directly qualified for workers’ compensation benefits under the
LHWCA. The district court entered another final judgment on March 9, 2001. Again, Diamond
appealed and A&B cross-appealed.
In this appeal, Diamond challenges the district court’s decision to not consider awarding
damages to Diamond. A&B cross-appeals the partial summary judgment rulings on the indemnity and
insurance provisions.
DISCUSSION
I.
“We review a district court’s decision not to exercise its jurisdiction for an abuse of discretion;
its underlying legal conclusions, de novo.” Bank One, N.A. v. Boyd, 288 F.3d 181, 183-84 (5th Cir.
2002).
Diamond argues that the district court erred in not exercising jurisdiction over its breach of
contract claim. We agree.
The federal courts have a “virtually unflagging obligation” to exercise the jurisdiction
conferred upon them. Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817
(1976); see also Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716 (1996) (“[F]ederal courts have
a strict duty to exercise the jurisdiction that is conferred upon them by Congress.”). Abdication of
the obligation to decide cases under the doctrine of abstention can be justified in “exceptional
circumstances, where denying a federal forum would clearly serve an important countervailing
interest,” such as considerations of “proper constitutional adjudication, regard for federal-state
5
relations, or wise judicial administration.” Quackenbush, 517 U.S. at 716 (citations and internal
quotations omitted). “Unless there is a legitimate reason to abstain, federal courts ‘cannot abdicate
their authority or duty in any case in favor of another jurisdiction.’ ” Vulcan Materials Co. v. City
of Tehuacana, 238 F.3d 382, 390 (5th Cir. 2001) (quoting New Orleans Pub. Serv., Inc. v. Council
of New Orleans, 491 U.S. 350, 358 (1989)). There are four general categories of abstention:
“(1) Pullman-type abstention, to avoid decision of a federal constitutional
question where the case may be disposed of on questions of state law; (2)
Burford-type abstention, to avoid needless conflict with the administration by
a state of its own affairs; (3) abstention to leave to the states the resolution of
unsettled questions of state law; and (4) abstention to avoid duplicative
litigation, now frequently referred to as Colorado River-type abstention.”
Id. (quoting 17A CHARLES ALAN WRIGHT, FEDERAL PRACTICE AND PROCEDURE § 4241 (2d
ed. 1988)).
The district court dismissed Diamond’s breach of contract claim without assigning
reasons. In the district court’s order denying Diamond’s motion to reconsider, however, the
court gave the following explanation for declining to “retain jurisdiction and issue a judgment
for damages upon the conclusion of the state court action”:
The Court has gone to considerable trouble to analyze the underlying contract
and applicable law. Diamond has prevailed on the issue of liability, and has received
a judgment entitled to full res judicata effect. In light of its enormous docket
obligations, and faced with an increase in civil filing this year, the Court sees little
point in keeping this case open to await the eventual disposition of McMillon’s state
court action. While it may be more convenient for Diamond to get a judgment for
damages in this Court, there is no reason why a state court could not enter an equally
valid and effective judgment.
We have considered the grounds asserted in support of the dismissal of Diamond’s breach of contract
claim and find none of them, alone or together, sufficient. The heavy trial docket, the preclusive
effect of the district court’s judgment, the potential for Diamond to incur further damages in the
6
McMillon suit, and the fact that the state court would provide an adequate alternative forum, are not
exceptional circumstances warranting abstention.
A&B maintains, however, that the district court did not abuse its discret ion in deciding to
abstain because the court properly characterized this case as a pure declaratory judgment action and
concluded that abstention was warranted because it would be more appropriate for a state court to
render a judgment for damages after liability and any damages were ascertained in the McMillon suit.
A district court does have broader discretion to decline to hear a claim for declaratory judgment than
a breach of contract claim. See Vulcan Materials, 238 F.3d at 390. Although the district court
repeatedly characterized this case as a “declaratory judgment action,” the court acknowledged that
Diamond requested “a judgment for damages” in its order denying Diamond’s motion to reconsider
and recognized that “Diamond brought this action . . . seeking declaratory relief and damages for
breach of contract” in its request for clarification of this Court’s remand mandate of August 3, 2000.
To the extent that the district court classified Diamond’s suit as a “declaratory judgment action,” the
court erred as a matter of law. Although some of the relief sought by Diamond is declaratory in
nature, Diamond also requested damages for breach of contract–i.e., defense costs in the McMillon
suit–as well as damages arising from enforcing that contract–i.e., attorneys’ fees and costs incurred
in this federal action.4 Inclusion of this request for monetary relief removes this suit from the realm
of a declaratory judgment action.5 See Southwind Aviation, Inc. v. Bergen Aviation, Inc., 23 F.3d
4
Diamond’s First Amended Original Complaint sought “a declaration of their rights under the
Master Services Contract . . . as well as the damages set out below.” Diamond’s prayer for relief
requested a judgment for defense costs, at torneys’ fees, any judgment that may result from the
McMillon suit, any damages that may result from A&B’s breach of contract, and court costs.
5
A&B attempts to avoid this conclusion by arguing that Diamond’s claim for monetary relief is
premature, frivolous, and merely an attempt to avoid application of the district court’s broad
7
948, 950 (5th Cir. 1994) (holding that the district court erred as a matter of law in characterizing a
suit as a declaratory judgment action where the plaintiff sought declaratory relief and “coercive
remedies for breach of contract in the form of damages, attorney’s fees, and injunctive relief”). Thus,
contrary to A&B’s assertion, because Diamond sought both declaratory and monetary relief in this
admiralty action, dismissal of Diamond’s breach of contract claim after applying the abstention
standards for declaratory judgment actions would be inappropriate. See id.; cf. GEICO v. Dizol, 133
F.3d 1220, 1225 n.6 (9th Cir. 1998) (noting that a district court is “without discretion to remand or
decline” claims for monetary relief appended to declaratory judgment actions because they are within
its federal diversity jurisdiction).
A&B also contends, alternatively, that the district court had discretion to dismiss Diamond’s
breach of contract claim under the “exceptional circumstances” test of Colorado River abstention
doctrine.6 This doctrine only applies when there are parallel proceedings pending in federal and state
discretion in declaratory judgment actions. In support of this contention, A&B cites our decision in
PPG Industries, Inc. v. Continental Oil Co.. 478 F.2d 674, 679 (5th Cir. 1973) (stating that when a
party seeks both declaratory and injunctive relief, “[i]f the prayer for injunctive relief could be
determined to be frivolous or premature or otherwise ‘wanting in equity,’ then the suit could be
considered solely a declaratory judgment action” for abstention purposes). There is no indication that
Diamond’s request for monetary relief is either frivolous or made in an attempt to avoid abstention
standards for declaratory judgment actions. Further, despite the fact that Diamond’s total damages
may not be fixed until the conclusion of the McMillon suit, Diamond’s breach of contract claim is not
premature. Thus, we conclude that A&B’s argument is without merit.
6
The Supreme Court has identified six factors to consider in determining whether “exceptional
circumstances” exist that permit a court to abstain out of deference to pending state court
proceedings: (1) “assumption by either court of jurisdiction over a res,” (2) “relative inconvenience
of the forums,” (3) “avoidance of piecemeal litigation,” (4) “the order in which jurisdiction was
obtained by the concurrent forums,” (5) “to what extent federal law provides the rules of decision on
the merits,” and (6) the adequacy of the state proceedings in protecting the rights of the party
invoking federal jurisdiction.” Black Sea Inv. Ltd. v. United Heritage Corp., 204 F.3d 647, 650 (5th
Cir. 2000).
8
court. See RepublicBanc Dallas, Nat’l Assoc. v. McIntosh, 828 F.2d 1120, 1121 (5th Cir. 1987); see
also Union Planters Bank, N.A. v. Gaval, No. 02-1224, 2002 WL 975675, at *4 (E.D. La. May 9,
2002). Suits are “parallel,” for the purposes of determining whether Colorado River abstention
applies, if they “involv[e] the same parties and the same issues.” McIntosh, 828 F.2d at 1121 (quoting
PPG Indus., Inc. v. Continental Oil Co., 478 F.2d 674, 682 (5th Cir. 1973)); see also Mediola v. Hart,
561 F.2d 1207, 1208 (5th Cir. 1977). As Diamond’s federal case against A&B is clearly not parallel
with McMillon’s state court proceeding against Diamond, Shell, and others, we reject A&B’s
contention that the district court had discretion to abstain under the Colorodo River doctrine.
We therefore find that the district court abused its discretion in refraining from exercising
jurisdiction over Diamond’s breach of contract claim.7
II.
We review the grant or denial of summary judgment de novo, applying the same standard as
the district court. Mowbray v. Cameron County, Tex., 274 F.3d 269, 278 (5th Cir. 2001). Summary
judgment is proper “if the pleadings, depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law.” FED. R. CIV. P. 56(c). If the moving
party meets the initial burden of establishing that there is no genuine issue, the burden shifts to the
nonmoving party to produce evidence of the existence of a genuine issue for trial. Celotex Corp. v.
7
A&B argues that this abuse of discretion is harmless because Diamond has sustained no damages.
This argument depends entirely upon A&B prevailing on all of the issues raised in its cross-appeal.
In light of our rulings on those issues below, this case must be remanded to the district court to
address the issue of damages. Thus, A&B’s argument is without merit.
9
Catrett, 477 U.S. 317, 321-22 (1986). We review questions of fact in the light most favorable to the
nonmovant, and we review questions of law de novo. Mowbray, 274 F.3d at 279.
A.
A&B challenges the district court’s ruling that the indemnity agreement is valid. First, A&B
argues that the indemnity provision is void because it directly contravenes § 905(b) of the LHWCA.
Second, A&B maintains that state law governs t he Master Service Contract and invalidates the
indemnity provisions at issue.
1.
A&B argues that § 905(b) of the LHWCA rendered the indemnity clause of the Master
Service Contract invalid. The district court rejected this argument, determining that the indemnity
provision was saved by § 905(c) of the LHWCA. Diamond Offshore Co. v. A&B Builders, Inc., 75
F. Supp. 2d 676, 681-84 (5th Cir. 1999). Section 905(b) prohibits indemnification by the employer
of a covered employee for a claim due to bodily injury brought by the employee against the vessel
(including its owner).8 33 U.S.C. § 905(b). However, if the injured employee is entitled to receive
the benefits of the LHWCA “by virtue of” § 1333(b) of the Outer Continental Shelf Lands Act
(OCSLA), 43 U.S.C. § 1331 et seq., then § 905(c) provides an exception, allowing “any reciprocal
indemnity provision whereby the employer . . . and the vessel agree to defend and indemnify the other
8
Section 905(b) provides in relevant part that:
In the event of injury to a person covered under this chapter caused by the negligence
of a vessel, then such person . . . may bring an action against such vessel as a third
party . . . and the employer shall not be liable to the vessel for such damages directly
or indirectly, and any agreements or warranties to the contrary shall be void.
33 U.S.C. § 905(b).
10
for the cost of defense and loss or liability for damages arising out of or resulting from death or bodily
injury to their employees.” 33 U.S.C. § 905(c).
A&B puts forth two primary grounds in support of its contention that the district court erred
in finding that the § 905(c) exception applied to this case.9 First, A&B argues that there is no
summary judgment evidence that McMillon qualified for LHWCA workers’ compensation benefits
under § 1333(b) of the OCSLA. Second, A&B contends that the indemnity provision is not
“reciprocal.” We address both of these grounds in turn.
A&B contends that the district court erred in concluding that McMillon qualified for LHWCA
workers’ compensation benefits under § 1333(b) because there is no summary judgment evidence that
OSCLA’s situs and status requirements are met. In order to recover LHWCA benefits by virtue of
§ 1333(b), notwithstanding any application of the LHWCA of its own force, the injured worker must
satisfy “status” requirement of § 1333(b) and the “situs” requirement of § 1333(a)(1). Demette v.
Falcon Drilling Co., Inc., 280 F.3d 492, 498 (5th Cir. 2002); see also Mills v. Dep’t of Labor, 877
F.2d 356, 361-62 (5th Cir. 1989) (en banc). The following three locations satisfy the “situs”
requirement of § 1333(a)(1):
(1) the subsoil and seabed of the OCS;
(2) any artificial island, installation, or other device if
(a) it is permanently or temporarily attached to the seabed of the OCS, and
(b) it has been erected on the seabed of the OCS, and
9
A&B’s third argument is without merit. A&B argues that the § 905(c) exception does not
override § 905(b) because McMillon is directly covered by the LHWCA and thereby was not entitled
to receive LHWCA benefits exclusively “by virtue of” the OCSLA. As A&B itself recognizes, this
Court previously rejected this precise argument in Demette v. Falcon Drilling Co., Inc., 280 F.3d 492,
502 (5th Cir. 2002). In Demette, we concluded that the plain meaning of “by virtue of” in § 905(c)
“does not imply exclusivity.” Id. A&B asserts that Demette’s interpretation of § 905(c) “does
violence” to OCSLA. Because we cannot overrule or ignore an earlier panel’s decision, we reject
A&B’s argument. See United States v. Ruiz, 180 F.3d 675, 676 (5th Cir. 1999).
11
(c) its presence on the OCS is to explore for, develop, or produce resources from the
OCS;
(3) any artificial island, installation, or other device if
(a) it is permanently or temporarily attached to the seabed of the OCS, and
(b) it is not a ship or vessel, and
(c) its presence on the OCS is to transport resources from the OCS.
Demette, 280 F.3d at 497.10 Section 1333(b) creates the following “status” test: The LHWCA
applies to injuries “occurring as the result of operations conducted on the [OCS] for the purpose of
exploring for, developing, removing, or transporting by pipeline the natural resources, or involving
rights to the natural resources, of the subsoil and seabed of the [OCS].” 43 U.S.C. § 1333(b); see
also Demette, 280 F.3d at 498.
A&B argues that the district court erred in its situs determination because it applied the wrong
situs test and there is no summary judgment evidence that McMillon’s alleged injury occurred on one
of the three locations that qualify as a § 1333(a)(1) situs under Demette.11 Demette concerned a
10
Section 1333(a)(1) states, in pertinent part:
The Constitution and laws and civil and political jurisdiction of the United States are
hereby extended to the subsoil and seabed of the [OCS] and to all artificial islands,
and all installations and other devices permanently or temporarily attached to the
seabed, which may be erected thereon for the purpose of exploring for, developing,
or producing resources therefrom, or any such installation or other device (other than
a ship or vessel) for the purpose of transporting such resources, to the same extent
as if the [OCS] were an area of exclusive Federal jurisdiction located within a State.
43 U.S.C. § 1333(a)(1)
11
Alternatively, A&B avers that the district court’s situs determination is erroneous because the
undisputed fact that the alleged injury occurred on a LHWCA situs precludes the possibility that it
occurred on an OSCLA situs. To qualify under the LHWCA, an employee must meet a two-pronged
“situs” and “status” test. Green v. Vermillion Corp., 144 F.3d 332, 334 (5th Cir. 1998). The
LHWCA “situs” requirement is met if an employee is injured upon navigable waters. Id. On remand
to the district court, the parties stipulated that McMillon qualified for benefits directly under the
LHWCA and that McMillon’s alleged injury occurred over navigable waters. The district court
agreed that McMillon directly qualified for benefits under the LHWCA. A&B argues that since
McMillon’s alleged injury occurred over navigable waters, this precludes a finding that the alleged
injury occurred on an OCSLA situs, which is an “island.” Again, Demette forecloses this argument.
12
worker who sued the owner an offshore jack-up drilling rig under the LHWCA for injuries sustained
while performing casing work on the rig. Demette, 280 F.3d at 494. The rig owner, a contractor of
the drilling rights owner, sued the injured worker’s employer for defense and indemnity pursuant to
an indemnity agreement between the employer and the drilling rights owner. Id. at 495. This Court
addressed the issue of whether the LHWCA invalidated the indemnity agreement. Id. at 494. In
addressing the applicability of the § 905(c) exception, we considered whether the injury occurred on
an OCSLA situs. Id. at 498. Relying on the text of § 1333(a)(1), we articulated a precise rule that
defines three locations that qualify as an OCSLA situs. Id. at 496-97. Applying this rule to the facts
before us, we held that the situs requirement of § 1333(a)(1) was met because, at the time of the
worker’s injury, the rig was “jacked-up over the OCS” and therefore fell into the second category of
OCSLA situses: the rig “was a device temporarily attached to the seabed, which was erected on the
OCS for the purpose of drilling for oil.” Id. at 498.
Because the district court’s partial summary judgment ruling was in November of 1999, the
court did not have the benefit of our decision in Demette, which was decided when the parties were
briefing this appeal. Instead, the district court relied on our prior decision in Mills. The district court
held that in order to qualify under OCSLA, an employee must satisfy the situs test, i.e., suffer injury
either on a fixed platform over the OCS or over the waters of the OCS. Diamond Offshore, 75 F.
Supp. 2d at 683. Observing that “McMillon was employed as a welder, and was injured in the Gulf
of Mexico more than 100 miles off the Louisiana coast,” the district court concluded that McMillon
In Demette, the parties agreed that Demmette qualified under the LHWCA itself. 280 F.3d at 502
& n.45. This did not impact the court’s conclusion that Demette’s injury occurred on an OCSLA
situs. Id. at 501.
13
satisfied the situs requirement because “he was injured on the navigable waters overlying the Outer
Continental Shelf.” Id.
Diamond counters that the district court applied the correct situs test because Demette did
not limit the situs test established in Mills. Since Demette addressed an injury occurring on a drilling
rig that was attached to the seabed of the OCS, as opposed to floating on the water above the OCS,
Diamond would have us read the Demette situs test as dicta. Diamond claims that construing
Demette otherwise wo uld run afoul of our well-established rule that a panel of this Court cannot
overrule a previous en banc decision. This argument is unavailing. Demette clearly articulated the
rule regarding what qualifies as an OCSLA situs. We conclude that the Demette situs test is binding
and that it does not conflict with our prior decision in Mills. Mills stated that § 1333(b) applies to
workers who “suffer injury or death on an OCS platform or the waters above the OCS.” 877 F.2d
at 362. As we previously explained in Demette, however, Mills does not purport to specify the precise
contours of OCSLA’s situs requirement. Demette, 280 F.3d at 496 (“Neither the Supreme Court nor
this court has parsed the precise language of [OCSLA] to specify the exact contours of the situs test
it establishes. We are called upon to do so today.”). In Mills, we dealt with whether a land-based
welder injured on Louisiana soil qualified for LHWCA benefits under OCSLA. 861 F.2d at 357. We
rejected the worker’s claim, concluding that § 1333(b) includes a situs requirement that the worker
did not satisfy. Id. at 361-62. Thus, Mills held that § 1333(b) does not apply to a land-based injury.
Id. at 362; see also Demette, 280 F.3d at 496 n.10 (“Mills interpreted § 1333(b) and held that it could
not apply to injuries that do not occur on or over the OCS.”).
Our decision in Demette for the first time laid out a precise rule that defines three “locations”
to which OCSLA applies. In light of Demette, it is evident that the district court applied the wrong
14
situs test. Contrary to the district court’s holding, the OCSLA situs test is not satisfied merely
because McMillon’s alleged injury occurred on the navigable waters overlying the OCS. Nonetheless,
if the evidence in the summary judgment record is sufficient to meet the situs requirement set forth
in Demette, we can affirm the district court’s situs determination.
Diamond and A&B dispute whether the summary judgment evidence shows that McMillon’s
alleged injury falls into the second category of OCSLA situses set forth in Demette.12 The second
category is described as follows: “[A]ny artificial island, installation, or other device if (a) it is
permanently or temporarily attached to the seabed of the OCS, and (b) it has been erected on the
seabed of the OCS, and (c) its presence on the OCS is to explore for, develop, or produce resources
from the OCS.” Demette, 280 F.3d at 497. Diamond points to the following competent evidence
in the summary judgment record to support its contention that the second category is met:13 (1)
12
The first and third categories of OCSLA situses are not applicable to this case. With respect to
the first type of OCSLA situs, there is no evidence that McMillon’s alleged injury occurred on the
“the subsoil and seabed of the OCS.” Demette, 280 F.3d at 497. Because the Ocean Concorde is
a semi-submersible drilling rig, which is undisputably a vessel, the requirement that the “device . . .
is not a . . . vessel” precludes the application of the third category. Id. at 497-98 & n.18.
13
Diamond put forth two affidavits by Kenneth A. Bradley (“Bradley”), the Director of Claims for
Diamond, in support of its motion for partial summary judgment. A&B argues that the affidavits
were not competent summary judgment evidence because they were not based on personal
knowledge, and the factual statements are inadmissible hearsay. A&B “objected” to Bradley’s first
affidavit in its motion for partial summary judgment and its response to Diamond’s motion for partial
summary judgment, and to Bradley’s second affidavit in its reply to Diamond’s response to A&B’s
motion for partial summary judgment. Specifically, A&B argued that the affidavits are not competent
summary judgment evidence because they were not based on personal knowledge and did not
affirmatively show that the affiant was competent as required by Federal Rule of Civil Procedure
56(e), and that the affidavit testimony was inadmissible under Federal Rule of Evidence 602. See
FED. R. CIV. P. 56(e) (“Supporting and opposing affidavits shall be made on personal knowledge,
shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the
affiant is competent to testify to the matters stated therein.”); FED. R. EVID. 602 (“A witness may not
testify to a matter unless evidence is introduced sufficient to support a finding that the witness has
personal knowledge of t he matter.”). Thus, A&B contends that the district court erred in not
15
McMillon allegedly was injured over 100 miles offshore in the Gulf of Mexico, (2) the Ocean
Concorde is a semi-submersible drilling rig, (3) the Ocean Concorde was working under a contract
with Shell when McMillon was allegedly injured, (4) Diamond engaged A&B to perform repairs that
were necessary in order for the Ocean Concorde to “do its usual work,” (5) the welding being done
by McMillon at the time of his alleged injury was necessary to allow the Ocean Concorde to perform
its drilling function without polluting the waters of the Gulf of Mexico; and (6) McMillon was
allegedly injured when drilling mud was spilled on top of him while he was welding inside a pollution
pan. While this evidence shows that the Ocean Concorde was on the OCS for the purpose of drilling
for oil and gas, our review of the summary judgment record leads us to conclude that because
Diamond has failed to put forth evidence that the Ocean Concorde was “attached” to and “erected”
on the seabed of the OCS, Diamond has not carried its initial burden of establishing that there is no
genuine issue of material fact on the issue of whether the location of McMillon’s alleged injury
qualifies as an OCSLA situs.
Contrary to Diamond’s contention, the summary judgment evidence does not show that
McMillon’s alleged injury occurred while the Ocean Concorde was physically “attached” to the ocean
granting its objections to the affidavits and failing to strike the affidavits from the record. Bradley
stated in the affidavits that he was the Director of Claims for Diamond, that he had “personal
knowledge of the facts stated” therein, and that he had access to and had reviewed Diamond’s
records as they pertain to information contained in the affidavits. We find that, based on Bradley’s
personal knowledge and his position with Diamond, it was not an abuse of discretion for the district
court to consider the information contained in the affidavits.
In addition to Bradley’s affidavits, Diamond also attempts to rely on McMillon’s state court
petition. McMillon’s petition does not constitute proper summary judgment evidence. See, e.g.,
King v. Dogan, 31 F.3d 344, 346 (5th Cir. 1994) (holding that unverified pleadings do not constitute
proper summary judgment evidence); Johnston v. City of Houston, 14 F.3d 1056, 1060 (5th Cir.
1994) (holding that unsworn pleadings do not constitute proper summary judgment evidence).
16
floor. After the Ocean Concorde was towed to its ultimate location, it would then be anchored to
the seabed. The evidence does not indicate whether McMillon was welding inside a pollution pan
during towing or while the Ocean Concorde was attached to the seabed by its anchors. Diamond
asserts that because the alleged injury occurred when drilling mud was spilled on McMillon, and
drilling mud is only used during the drilling process, the only reasonable inference is that the Ocean
Concorde was engaged in drilling operations and thus attached to the ocean floor by its drilling
mechanisms. Drilling mud is used “from the time a well is begun until the cessation of drilling at that
hole.”14 Am. Petroleum Inst. v. E.P.A., 787 F.2d 965, 971 (5th Cir. 1986). There are a number of
ways, however, that the drilling mud could have spilled into a pollution pan. It is possible that the
drilling mud spilled when the Ocean Concorde was attached t o the ocean floor during drilling
operations, in which drilling mud is necessarily used. It is also possible, however, that the drilling
mud spilled while preparing for drilling in the future or after drilling operations, when the Ocean
Concorde was either attached to the ocean floor or in transit. See, e.g., LeBlanc v. Two-R Drilling
Co., 527 F.2d 1316, 1318-19 (5th Cir. 1976) (explaining that when the drill pipe is removed from the
hole and placed on the pipe rack, drilling mud is spilled from the drill pipe to the drilling floor);
LaCross v. Craighead, AWI, 466 F. Supp. 880, 880-81 (E.D. La. 1979) (describing an incident where
drilling mud spilled onto the deck of a vessel during loading operations when an employee lifted a
torn sack over his head). Drawing all reasonable inferences in A&B’s favor, as we must in reviewing
14
Drilling mud is a heavy drilling fluid that is pumped down the drill pipe, through the drill bit used
to drill the hole, into the hole, upwards between the drill pipe and the walls of the hole, and out into
to a surface pit, where it is purified and begins the cycle again. Drilling mud has numerous functions,
including maintaining hydrostatic pressure control in the hole, lubricating the drill bit, and removing
drill cuttings from the hole. Am. Petroleum Inst., 787 F.2d at 971 (describing drilling mud);
WILLIAMS & MEYERS, supra note 1, at 307, 650 (defining drilling fluids and mud).
17
the district court’s grant of Diamond’s motion for partial summary judgment, a genuine issue of
material fact remains as to whether the Ocean Concorde was attached to the ocean floor. Since there
is no evidence that the Ocean Concorde was connected to the ocean floor by its anchors or through
its drilling mechanisms, and t here is no evidence of any other contact with the seabed, the second
requirement that the Ocean Concorde was “erected” on the OCS at the time of McMillon’s alleged
injury is clearly not satisfied. Thus, because we conclude that there is insufficient summary judgment
evidence to determine whether the location of McMillon’s alleged injury qualified under the second
Demette situs test, partial summary judgment in favor of Diamond on the issue of whether A&B is
obligated to indemnify and defend Diamond under the Master Service Contract was not supported
by the record.
Diamond urges that, inasmuch as the Demette OCSLA situs test is controlling and the
evidence in the summary judgment record is insufficient under Demette, we should remand this case
to the district court with instructions to allow Diamond to supplement the summary judgment record.
We agree.15 In sum, Demette articulated a significantly different rule than had been used here by the
district court in determining whether McMillon’s alleged injury occurred on an OCLSA situs. Neither
the district court nor the parties, in developing the summary judgment record and briefing the cross-
15
A&B asserts that remand is not necessary because the absence of summary judgment evidence
means that Diamond failed to raise a genuine issue of material fact as to whether the location of
McMillon’s alleged injury qualified as an OCSLA situs and, accordingly, the district court should
have granted A&B’s motion for partial summary judgment. Thus, A&B urges this Court to reverse
the district court’s denial of A&B’s motion for partial summary judgment and render judgment in
favor of A&B on Diamond’s claims flowing from the indemnity provision. This argument
misconstrues the summary judgment burden, which shifts to Diamond only if A&B meets the initial
burden of establishing that there is no genuine issue of material fact. See Celotex Corp., 477 U.S.
at 321-22. A&B has produced no evidence that the Ocean Concorde was not “attached” to and
“erected” on the seabed of the OCS at the time of McMillon’s alleged injury. Thus, partial summary
judgment in favor of A&B was properly denied.
18
motions for partial summary judgment, had the benefit of our opinion in Demette. We therefore
reverse the district court’s grant of partial summary judgment on the issue of the validity of the
indemnity provision and remand with directions to allow Diamond to put forth additional summary
judgment proof and reconsider it s ruling that this case arises out of an injury on an OCSLA situs.
This should require only a brief supplement to the record detailing the contact, if any, that the Ocean
Concorde had with the ocean floor at the time of McMillon’s alleged injury, such as its anchors,
drilling mechanisms, and flooded columns, displacement hulls, or caissons, that connected the rig to
the seabed and supported the drilling platform. On remand, the district court should apply the rule
enunciated in Demette to determine whether McMillon’s alleged injury occurred on an OCLSA situs.
As this Court has already concluded that the Ocean Concorde was a device on the OCS for the
purpose of exploring for oil and gas, the district court will need to address whether, at the time of
McMillon’s alleged injury, the Ocean Concorde was “temporarily attached to the seabed of the OCS”
and “erected on the seabed of the OCS” and therefore falls into the second category of OCSLA
situses. Demette, 280 F.3d at 497. Although we reverse the district court’s ruling on this issue and
remand for application of the proper legal standard, we proceed to address A&B’s further arguments
in support of its contention that the district court erred in finding that the § 905(c) exception applied
to this case.
A&B also avers that the district court erred in its status determination. The district court held
that in order to qualify under OCSLA, an employee must also satisfy the “but for” test, i.e., the injury
would not have occurred but for extractive mineral operations over the OCS. Diamond Offshore,
75 F. Supp. 2d at 683 (citing Herb’s Welding, Inc. v. Gray, 766 F.2d 898, 900 (5th Cir. 1985 )).
Moreover, the district court concluded that the “but for” test was satisfied because “the Ocean
19
Concorde was engaged in offshore mineral extracting activities; the Ocean Concorde needed a
pollution plan in order to explore offshore oil; and McMillon would not have been injured but for the
need to weld a pollution plan onto the Ocean Concorde.” Id. We agree that McMillon’s alleged
injury occurred “as the result of operations conducted on the [OCS] for the purpose of exploring for,
developing, removing, or transporting by pipeline the natural resources, or involving rights to the
natural resources, of the subsoil and seabed of the [OCS].” 43 U.S.C. § 1333(b). McMillon was
allegedly injured while performing necessary repairs on the OCS in furtherance of the Ocean
Concorde’s extractive operations on the OCS. McMillon was doing welding work in a pollution pan
on the Ocean Concorde, a semi-submersible drilling rig engaged to work for Shell, over 100 miles
offshore in the Gulf of Mexico. The welding services that McMillon was performing at the time of
his alleged injury were necessary to allow the Ocean Concorde to explore for offshore oil and
perform its drilling function without polluting the waters of the Gulf of Mexico. Thus, this case meets
the OCSLA status requirement set forth in § 1333(b).
A&B’s second argument is that the district court erred in finding that the § 905(c) exception
applied because the indemnity agreement between Diamond and A&B is not reciprocal and therefore
is unenforceable under § 905(b). A&B reads the phrase “reciprocal indemnity provision” in § 905(c)
to require true or complete reciprocity–i.e., equal obligations imposed on both parties.16 Examination
16
To support this reading of § 905(c), A&B cites our decisions in Campbell v. Sonat Offshore
Drilling Co., 979 F.2d 1115 (5th Cir. 1992), and Fontenot v. Mesa Petroleum Co., 791 F.2d 1207
(5th Cir. 1987). In Campbell, we recognized that the completely reciprocal indemnity provisions at
issue satisfied the reciprocity requirement of § 905(c), but we did not establish “complete reciprocity”
as the test. 979 F.2d at 1125. Likewise, in Fontenot, where the vessel owner and vessel charterer
entered into a reciprocal indemnity agreement to indemnify each other “for injuries sustained by [their
own] personnel, contractors, and property,” we merely stated in a footnote that “[t]his type of mutual
provision is precisely the type envisioned in and sanctioned by the 1984 amendments to the
[LHWCA].” 791 F.2d at 1213 n.3. A&B also relies on the sparse legislative history behind the 1984
20
of the indemnity agreement between Diamond and A&B indicates that the agreement is sufficiently
reciprocal to satisfy the § 905(c) exception.
A&B contends that its obligation to indemnify Diamond is more onerous than Diamond’s
corresponding obligation. The indemnity provision in paragraph 9 of the Master Service Contract
obligates Diamond to defend and indemnify A&B against any claims brought by Diamond or its
employees arising out of their work regardless of A&B’s negligence, and obligates A&B to defend
and indemnify Diamond and any parties fo r whom Diamond may be working against any claims
brought by A&B or its employees arising out of their work regardless of Diamond’s negligence.17
A&B argues that this provision impermissibly enlarges A&B’s burden by obligating A&B to defend
and indemnify Diamond, as well as any companies for whom Diamond might be working. A&B
amendments to the LHWCA, which states that § 905(c) “removes the current proscription with
respect to mutual indemnity agreements between employers and vessels as applied to the [OCS] by
virtue of the [OCSLA].” Campbell, 979 F.2d at 1125 n.4 (quoting Pub. L. No. 98-426, reprinted in
1984 U.S.C.C.A.N. 2734, 27774-75). We note that congressional intent to validate mutual indemnity
agreements lends no further support to A&B’s assertion that the indemnity agreements must be truly
reciprocal.
17
Paragraph 9 reads in relevant part:
(a) [A&B] agrees to fully indemnify, release, defend . . . and hold harmless [Diamond] and all parties
for whom [Diamond] may be working . . . against any and all claims, demands or actions for damages
to persons and/or property (including, but not limited to, claims, demands or actions for bodily injury
. . . ), which may be brought against [Diamond] by [A&B] or [its] employees . . . incident to, arising
out of, in connection with, or resulting from, the activities of [A&B], its employees . . . , or in
connection with the work to be done, services to be performed or material to be furnished under this
Contract . . . whether occasioned, brought about, or caused in whole or in part by the negligence of
[Diamond], [or] its . . . employees . . . .”
(b) [Diamond] agrees to fully indemnify, release, defend . . . and hold harmless [A&B] against any
and all claims, demands or actions for damages to persons (including, but not limited to, claims,
demands or actions for bodily injury . . . ), which may be brought against [A&B] by [Diamond] or
[its] employees . . . incident to, arising out of, or in connection with the work to be done, services to
be performed or material to be furnished under this Contract, whether occasioned, brought about, or
caused in whole or in part by the negligence of [A&B], [or] its . . . employees . . . .”
21
protests that because McMillon sued several Shell entities that Diamond was working with, the
indemnity provision may obligate A&B to defend and indemnify those entities in connection with the
McMillon suit. Although A&B’s indemnity obligation extends to parties for whom Diamond may be
working, whereas Diamond’s obligation only covers A&B, we do not find this distinction material
to this appeal, which involves the reciprocity of the indemnity obligations running between Diamond
and A&B. The district court found that A&B is obligated to indemnify Diamond under the Master
Service Contract. The court did not address whether A&B is required to indemnify the various Shell
entities sued in the McMillon suit. Thus, the fact that A&B agreed to defend and indemnify parties
for whom Diamond was working has no effect on the fact that both Diamond and A&B agreed to
defend and indemnify each other for claims brought on behalf of their own employees.
A&B also argues that the indemnity provisions are not reciprocal because A&B agreed to (1)
defend and indemnify Diamond and any parties for whom Diamond may be working from “all liens
and claims for labor or material” provided by A&B or its subcontractors; (2) indemnify Diamond for
“any and all claims, demands and causes of action . . . made by any patentee, licensee, or claimant of
any right or priority to” the equipment furnished and used by A&B; and (3) release Diamond from
any liability for damages to A&B’s surface equipment. These additional provisions concerning liens,
intellectual propert y claims, and property damage are irrelevant to the issue before us, however,
because the only indemnity provisions that are implicated by § 905(b) and § 905(c) are those covering
claims brought by an LHWCA employee against a vessel for damages due to bodily injury or death
of the employee caused by the negligence of the vessel. Under the indemnity provision governing
claims for bodily injury, Diamond and A&B clearly agreed to indemnify each other. See Fontenot
v. Southwestern Offshore Corp., 771 So. 2d 679, 687 (La. Ct. App. 2000) (rejecting employer’s
22
argument that indemnity obligations were not “reciprocal” under § 905(c) because employer and
vessel owner agreed to indemnify each other under the personal injury clause, even if their obligations
differed concerning property damage, liens, and wreckage).
We likewise reject A&B’s argument that the reciprocity of the indemnity provision is
destroyed by A&B’s insurance obligations in the Master Service Contract. An insurance procurement
clause is valid under § 905(b). Sumrall v. Ensco Offshore Co., No. 01-30642, 2002 WL 956960, at
*6 n.12 (5th Cir. May 9, 2002) (“We have determined that differing insurance obligations do not
create additional indirect liability sufficient to implicate the prohibitions of subsection 905(b).”);
Voisin v. O.D.E.C.O. Drilling Co., 744 F.2d 1174, 1176-78 (5th Cir. 1984) (holding that § 905(b)
does not prohibit a valid additional insured provision). Thus, the fact that the insurance provision of
the Master Service Contract required A&B to procure insurance, but that Diamond was not required
to do the same, does not impact the reciprocity of the indemnity agreement. See Sumrall, 2002 WL
956960, at *6 n.12 (“[W]e find that any differences in insurance obligations owed between Premiere
and Santa Fe does not undermine the reciprocity of their indemnification agreement.”). The district
court did not err, therefore, in finding that the indemnity provision is sufficiently reciprocal to meet
the requirement of § 905(c).
2.
A&B also maintains that state law applies to the Master Service Contract as a “gap-filler
under OCSLA” and that the reciprocal indemnity provision is invalid under either Louisiana or Texas
anti-indemnity statutes. See LA. REV. STAT ANN. § 9:2780 (West 1991); TEX. CIV. PRAC. & REM.
CODE ANN. § 127.001 et seq. (Vernon 1999). Presumably, A&B is relying upon § 1333(a)(2) of
OCSLA to argue that either Louisiana or Texas law applies as a surrogate to federal law. Section
23
1333(a)(2) provides that “[t]o the extent that they are applicable and not inconsistent with this
subchapter or with other Federal laws . . . the civil and criminal laws of each adjacent State . . . are
hereby declared to be the law of the United States [on OCS situses as defined by section
1333(a)(1)].” 43 U.S.C. § 1333(a)(2)(A). In order for state law to apply as a surrogate to federal
law, the following three-part test announced in Union Texas Petroleum Corp. v. PLT Engineering
(“PLT”) must be satisfied: (1) the controversy must arise on an OCSLA situs, (2) federal maritime
law must not apply of its own force, and (3) the state law must not be inconsistent with federal law.
895 F.2d 1043, 1047 (5th Cir. 1990). The district court rejected A&B’s argument that state law
applies as a surrogate to federal law to invalidate the indemnity provision, determining that the second
prong of the PLT test was not satisfied because the Master Service Contract is a maritime contract.
Diamond, 75 F. Supp. 2d at 679-81.
On appeal, A&B avers that the third prong of the PLT test is satisfied because federal law
does not mandate that reciprocal indemnity agreements be valid. A&B makes no argument, however,
that the first and second prongs are met in this case. Indeed, as discussed above, A&B argues
strenuously on appeal that OCSLA is inapplicable because the situs requirement of § 1333(a)(1) is
not satisfied. Even assuming that the first and third prongs are satisfied, because maritime law applies
of its own force, neither Louisiana or Texas law applies in this case.
To determine whether the Master Service Contract is a maritime contract, we must consider
the contract’s “historical treatment in the jurisprudence” as well as a six-pronged “fact specific
inquiry.” Davis & Son, Inc. v. Gulf Oil Corp., 919 F.2d 313, 316 (5th Cir. 1990). Under the Master
Service Contract entered into by Diamond and A&B, A&B provided vessel repair services to
Diamond. Contracts for vessel repair services are traditionally treated as maritime. See New Bedford
24
Dry Dock Co. v. Purdy, 258 U.S. 96, 99-100 (1922); Southwest Marine v. United States, 896 F.2d
532, 533 (Fed. Cir. 1990). Thus, the historical treatment of contracts for vessel repair services
supports a determination that the Master Service Contract is a maritime contract.
The six Davis factors also point to the conclusion that this is a maritime contract.18 In this
case, the work order provided that A&B would supply labor and materials to repair the Ocean
Concorde; the crew was performing repair services onboard the Ocean Concorde; the crew was
working on a vessel over navigable waters; the repairs to the Ocean Concorde were necessary so that
the vessel could explore for oil and gas in the Gulf of Mexico; McMillon’s principal work was as a
welder; and McMillon was welding inside a pollution pan at the time of the alleged injury. We
conclude that the Master Service Contract is a maritime contract, and therefore maritime law applies
of its own force. Consequently, state law cannot apply as a surrogate of federal law. Since state law
does not apply in this case, A&B’s argument that state law anti-indemnity provisions govern the
Master Service Contract fails.
B.
Finally, A&B challenges the district court’s ruling that the insurance provision in paragraph
8 of the Master Service Contract is valid and enforceable. The insurance provision obligates A&B
to obtain and maintain several types of insurance policies with stated minimum limits, waive claims
for subrogation against Diamond, and name Diamond as an additional insured. A&B argues that the
18
Under the factual inquiry, the court should consider: “1) what does the specific work order in
effect at the time of the injury provide? 2) what work did the crew assigned under the work order
actually do? 3) was the crew assigned to work aboard a vessel in navigable waters[?] 4) to what
extent did the work being done relate to the mission of that vessel? 5) what was the principal work
of the injured worker? and 6) what work was the injured worker actually doing at the time of injury.”
Davis, 919 F.2d at 316.
25
insurance provision creates a contingent obligation designed to assure performance of the reciprocal
indemnity provision. The district court rejected this argument, determining that the insurance
provision created an obligation independent of the reciprocal indemnity provision. We agree.19
A&B’s argument focuses upon the following language:
The insurance requirements set forth herein are supplementary to and shall not limit
or restrict as to amount, extent or otherwise the indemnity obligations undertaken by
[A&B] in Paragraph (9) herein. . . . . The Naming of [Diamond] as additional Insured
and endorsement as respects of primary insurance shall only apply as respects
liability assumed by [A&B] herein.
Paragraph 8 (emphasis added). A&B insists that the emphasized phrasing makes the validity of the
insurance provision contingent upon the validity of the reciprocal indemnity provision. A&B
maintains that because the reciprocal indemnity provision is invalid, the insurance provision cannot
be enforced. A&B’s argument improperly assumes the invalidity of the reciprocal indemnity
provision. As previously explained, the validity of the reciprocal indemnity provision is dependent
upon whether McMillon’s alleged injury occurred on an OCSLA situs and must be addressed by the
district court on remand. Even assuming the invalidity of the reciprocal indemnity provision,
19
Alternatively, A&B argues that Diamond cannot establish that it suffered damages as a result of
the alleged breach o f the insurance provision. The district court held that “if A&B has failed [to
procure the requisite insurance and name Diamond as an additional insured], that failure constitutes
a breach of contract for which Diamond is entitled to recover damages.” Diamond, 75 F. Supp. 2d
at 685. Neither party moved for summary judgment on Diamond’s breach of contract claim. Thus,
the district court was presented with no evidence that A&B breached the insurance provision, and
evidence regarding the extent of Diamond’s damages caused by A&B’s alleged breach of the
insurance provision was not presented to the district court. The district court did not mention the
issue of damages in its partial summary judgment ruling. Indeed, the district court dismissed
Diamond’s breach of contract claim before reaching this issue. Because A&B did not make this
argument before the district court, we need not consider this issue raised for the first time on appeal.
See Vogel v. Veneman, 276 F.3d 729, 733 (5th Cir. 2002).
26
however, we are no t persuaded that the language A&B has identified was intended to create a
contingent obligation.
The cases cited by A&B do not support the contractual interpretation that it advances.20
Instead, our decision in LeBlanc v. Global Marine Drilling, 193 F.3d 873 (5th Cir. 1999), which was
relied on by the district court, guides our resolution. In Leblanc, an employee of Franks Casing Crew
& Rental Tools, Inc. (“Frank’s”) was injured while performing work for Shell on a drilling rig owned
by Marine Drilling Management Company (“Marine”). Id. at 874. There was a contractual dispute
as to whether Marine was an additional insured under its master service agreement with Frank’s. Id.
Among other arguments, Frank’s maintained that the validity of the additional-insured provision was
contingent upon an indemnity provision, which was barred by § 905(b) of the LHWCA. Id. at 875.
Frank’s relied upon the following contractual language: “[T]o the extent Subcontractor [Frank’s]
assumes liability hereunder, and agrees to indemnify Contractor [Marine], Contractor shall be named
an additional insured in [certain] insurance policies.” Id. We rejected this argument, noting that “[i]f
the parties had determined to condition Marine’s assured status upon the legal enforceability of the
indemnity agreement, they very easily could have done so.” Id. Consequently, we held that Frank’s
was obligated to list Marine as an additional insured in its insurance polices and that this obligation
arose automatically upon Frank’s agreement to indemnify, regardless of the validity of the indemnity
agreement. Id.
If Diamond and A&B had intended to condition A&B’s insurance obligations upon the
validity of the reciprocal indemnity provision, they easily could have done so. The Master Service
20
A&B cites Seal Offshore, Inc. v. American Standard, Inc., 736 F.2d 1078 (5th Cir. 1984), and
Getty Oil Co. v. Insurance Co. of North America, 845 S.W.2d 794 (Tex. 1992).
27
Contract could have explicitly required a valid indemnity agreement as a precondition to the insurance
requirements. Instead, the Master Service Contract merely states that A&B’s insurance obligations
are “supplementary to . . . indemnity obligations undertaken by [A&B] . . . herein,” and that A&B’s
agreement to name Diamond as an additional insured and endorse the procured insurance policies as
primary insurance “shall only apply as respects liability assumed by [A&B] . . . herein.” Consequently,
we conclude A&B’s insurance obligations arose when it agreed to indemnify Diamond in paragraph
9 and agreed to the terms of the Master Service Contract. Thus, the district court did not err i n
holding that the insurance provision in paragraph 8 of the Master Service Contract created an
independent obligation that is valid and enforceable.
CONCLUSION
For the reasons discussed abo ve, we VACATE the district court’s final judgment and
REMAND to the district court for further consideration on the merits of Diamond’s request for
damages for breach of contract. Because we cannot determine from the summary judgment record
whether McMillon’s alleged injury occurred on an OCSLA situs, we REVERSE the district court’s
grant of partial summary judgment in favor of Diamond on the issue of whether the reciprocal
indemnity provision of the Master Service Contract is valid, and REMAND with instructions. In all
other respects, we AFFIRM the partial summary judgment rulings.
AFFIRMED IN PART, REVERSED AND REMANDED IN PART, VACATED AND
REMANDED IN PART.
28