Exxon Mobil Corp. v. Turner Industries Group LLC , 339 F. App'x 441 ( 2009 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
July 31, 2009
No. 08-30557 Charles R. Fulbruge III
Clerk
EXXON MOBIL CORPORATION
Plaintiff - Appellant
v.
TURNER INDUSTRIES GROUP LLC
Defendant - Appellee
Appeal from the United States District Court
for the Middle District of Louisiana
USDC No. 3:07-CV-967
Before JOLLY, DAVIS, and DeMOSS, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:*
This appeal is from the dismissal of a declaratory-judgment action.
Turner, the appellee, was an on-site contractor for Exxon, the appellant.1
Turner’s current and former employees sued Exxon in Louisiana state court for
asbestos-related injuries. Turner and Exxon had a defense-and-indemnity
*
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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .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.
1
The parties’ proper names are Turner Industries Group LLC and Exxon Mobil Corp.
We will refer to Turner Industries Group LLC and its predecessor, Nichols Construction Co.,
collectively as “Turner.” We will refer to Exxon Mobil Corp. and its predecessor, the Humble
Oil & Refining Company, collectively as “Exxon.”
No. 08-30557
agreement, which, in this federal declaratory action, Exxon seeks to clarify. A
magistrate judge recommended dismissing the declaratory action under Federal
Rule of Civil Procedure 12(b)(6) or granting summary judgment under Federal
Rule of Civil Procedure 56. The district court approved the recommendation and
adopted the magistrate judge’s report as its opinion.
On appeal, Exxon raises four arguments: (1) the dismissal was a ripeness
determination, and hence our standard of review is de novo; (2) the dismissal
was erroneous because the declaratory action is ripe; (3) the district court erred
insofar as it relied on the Louisiana Oilfield Anti-Indemnity Act (“LOAIA”) in
determining that the action was prematurely brought; and (4) if the action is not
ripe, the dismissal should have been under Federal Rule of Civil Procedure
12(b)(1).
We hold that the district court dismissed this action under its
discretionary authority accorded by 28 U.S.C. § 2201. We therefore review only
for abuse of discretion, and we hold that the dismissal was not an abuse of
discretion. Furthermore, the district court’s references to the LOAIA do not
constitute reversible error. Because we find no reversible error, we affirm.
I.
Exxon operates a chemical plant and oil refinery in Baton Rouge,
Louisiana. Turner provided construction and maintenance services at the
facility under a blanket cost-plus-work contract. The contract, as amended,
provided that Turner must defend and indemnify Exxon:
from all claims, for injuries to or death of any and all
persons, . . . arising out of or in connection with or by
reason of work done by [Turner] . . . under this contract,
expressly excepting claims, for injuries or death caused
by the sole negligence of [Exxon] . . . .
Eighty-nine of Turner’s current or former employees have asserted
asbestos-related personal-injury claims against Exxon (as well as other
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No. 08-30557
companies, sometimes including Turner) in Louisiana state court. Exxon
demanded defense and indemnity under the blanket contract. Turner declined,
and Exxon filed this declaratory action to clarify its contractual rights.
Turner moved to dismiss the action under Federal Rule of Civil Procedure
12(b)(6) or, alternatively, for summary judgment under Federal Rule of Civil
Procedure 56. It argued that the declaratory action is “premature, as indemnity
obligations are not justiciable before a resolution of the main demand.” The
action is premature and non-justiciable, Turner explained, because the blanket
contract exempts Turner from defending or indemnifying Exxon for Exxon’s sole
negligence. Exxon’s sole negligence in causing asbestos-related injuries requires
a factual, case-by-case determination. Under Louisiana law, this determination
cannot be made until the conclusion of trial on the merits. Turner concluded
that the declaratory action will not be “ripe or justiciable” until the personal-
injury trials end.
Turner also argued on the action’s merits, asserting statutory peremption
as an affirmative defense to any contractual duty of defense or indemnity it
might otherwise owe to Exxon.
Exxon responded that the action is justiciable and that the district court
should exercise its discretionary declaratory-judgment jurisdiction. The action
is justiciable, Exxon contended, for three reasons. First, trial on the merits has
ended in at least four of the underlying personal-injury lawsuits. Second, this
court has ruled that a declaratory action regarding defense-and-indemnity
duties is justiciable “despite the fact that the underlying state court suit ha[s]
not yet reached final judgment.” Am. States Ins. Co. v. Bailey, 133 F.3d 363, 368
(5th Cir. 1998). Third, Turner presented affirmative defenses that affect
Turner’s duties across all of the underlying personal-injury lawsuits.
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No. 08-30557
Exxon contended that the district court should exercise its discretion to
hear the declaratory action because doing so would lower the parties’ litigation
costs, conserve judicial resources, and avoid inconsistent rulings.
A magistrate judge recommended dismissing the action. She explained
that the Declaratory Judgment Act “bestows a choice upon the district court, and
the decision of whether or not to grant a party’s request for declaratory judgment
is left to the district court’s sound discretion.” Exxon Mobil Corp. v. Turner
Indus. Group LLC, No. 07-967-C-M2, at 2 (M.D. La. Mar. 28, 2008) (magistrate
judge’s report and recommendation). She recommended against exercising that
discretion because: (1) Exxon’s right to defense and indemnity depends on a
construction of Louisiana law, which Louisiana state courts can provide just as
well as a federal court; (2) Exxon might be using the declaratory action to forum-
shop; and (3) the declaratory action was “premature”:
This Court cannot resolve the indemnification/defense
cost issue at this time because the Louisiana Supreme
Court has held that, under the Louisiana Oilfield
Indemnification Act (“LOAIA”), an indemnitor’s
(Turner’s) obligation for indemnification/cost of defense
“cannot be determined until there has been a judicial
finding that the indemnitee (Exxon) is liable or that the
charges against it are baseless.” The Louisiana
Supreme Court has further held that, whether an oil
company/indemnitee is free from fault and thus outside
the scope of the Act can only be determined after a trial
on the merits. Since this Court cannot determine
liability on the underlying claims against Exxon and
Turner and those claims have not yet reached judgment
in the state courts, it is premature to request that this
Court resolve the indemnification issue, and any
decision by the Court at this juncture would not
completely resolve that issue.
Id. at 3-4 (citations and footnotes omitted) (quoting Meloy v. Conoco, Inc., 504
So. 2d 833, 839 (La. 1987)).
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No. 08-30557
Over Exxon’s objection, the district court: approved the magistrate judge’s
report and recommendation, granted the Rule 12(b)(6)/Rule 56 motion, dismissed
the action without prejudice, and adopted the report and recommendation as its
opinion. The district court explained in so ruling that the action was “premature
because Turner’s obligation to indemnify and provide cost of defense cannot be
determined until there has been a judicial finding in state court as to the
liability, if any, of plaintiff, Exxon Mobil Corporation.”
Exxon timely appealed. We have appellate jurisdiction under 28 U.S.C.
§ 1291.
II.
We first ask whether the district court dismissed the action for reasons of
non-justiciability or for reasons based on the discretion accorded by the
Declaratory Judgment Act, 28 U.S.C. § 2201.2 The answer determines our
standard of review. See Am. States Ins. Co. v. Bailey, 133 F.3d 363, 368 (5th Cir.
1998) (“We review a district court’s determination that there existed a justiciable
controversy de novo. The decision of a district court to exercise its declaratory
judgment jurisdiction is reviewed for abuse of discretion.” (citation omitted)).
We read the dismissal order to be based on the exercise of discretion. To
be sure, the magistrate judge and the district judge wrote that the declaratory
action is “premature,” which is a term that Turner used when arguing that the
2
The Declaratory Judgment Act, in pertinent part, provides that:
In a case of actual controversy within its jurisdiction . . . any
court of the United States, upon the filing of an appropriate
pleading, may declare the rights and other legal relations of any
interested party seeking such declaration, whether or not further
relief is or could be sought. Any such declaration shall have the
force and effect of a final judgment or decree and shall be
reviewable as such.
28 U.S.C. § 2201(a) (emphasis added).
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No. 08-30557
declaratory action is not ripe. The judges’ usage of “premature” also suggests
non-justiciability: The magistrate judge wrote that the action is premature
because the federal court could not yet completely resolve whether Turner owes
Exxon defense and indemnity. The district court wrote that the action is
“premature because Turner’s obligation to indemnify and provide cost of defense
cannot be determined until there has been a judicial finding in state court as to
the liability, if any, of plaintiff, Exxon Mobil Corporation.”
Nevertheless, our further probing of the magistrate judge’s analysis
unmasks “premature” to mean something different from jurisdictionally “ripe.”
The magistrate judge began the relevant analysis by noting that the Declaratory
Judgment Act “bestows a choice upon the district court, and the decision of
whether or not to grant a party’s request for declaratory judgment is left to the
district court’s sound discretion.” The magistrate judge next recognized that “a
district court . . . must provide an explanation for its actions,” and then followed
with this circuit’s criteria for deciding whether to exercise the court’s declaratory
judgment jurisdiction. As summarized supra Part I, the magistrate judge
applied these criteria and concluded “that it is appropriate for [the district court]
to exercise its discretion and dismiss this matter.” The district court approved
the magistrate judge’s report and recommendation and adopted it as the court’s
opinion. Neither the magistrate judge nor the district judge mentioned ripeness
or, more generally, justiciability when referring to “prematurity.” This action
was not dismissed on grounds of justiciability, but instead was dismissed under
the discretion that the Declaratory Judgment Act accords to the district court.3
3
Furthermore, the action is ripe. A declaratory action is justiciable even if it presents
some issues that a federal court cannot yet adjudicate. See Kunkel v. Continental Cas. Co., 866
F.2d 1269, 1274 (10th Cir. 1989) (noting that declaratory relief need not “entirely dispose of
the matter. . . . Further necessary and proper relief based upon factual disputes not yet
resolved may be sought at a later time.”). Here, trial on the merits has concluded in at least
four of the underlying state-court lawsuits; and Turner has raised affirmative defenses
(statutory peremption and ambiguity of contract) that, if successful, would apply globally to
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No. 08-30557
III.
We turn to whether the action’s dismissal was an abuse of discretion. A
district court’s discretion in choosing whether to hear a declaratory action is
“broad.” Torch, Inc. v. LeBlanc, 947 F.2d 193, 194 (5th Cir. 1991). A district
court:
may consider a variety of factors in determining
whether to decide a declaratory judgment suit. For
example, declaratory judgment relief may be denied [i]
because of a pending state court proceeding in which
the matters in controversy between the parties may be
fully litigated, [ii] because the declaratory complaint
was filed in anticipation of another suit and is being
used for the purpose of forum shopping, [iii] because of
possible inequities in permitting the plaintiff to gain
precedence in time and forum or [iv] because of
inconvenience to the parties or the witnesses.
Id. (quoting Rowan Companies, Inc. v. Griffin, 876 F.2d 26, 29 (5th Cir. 1989).
Here, the magistrate judge assigned the following three reasons for
dismissing the action. First, the underlying personal-injury lawsuits were
pending in Louisiana state court, which “offer[s] a forum in which the
indemnification/defense cost issue can be fully litigated” and which “can apply
Louisiana contract law just as well as this Court.” Second, Exxon may have
initiated the declaratory action to forum-shop. Third, considering the
declaratory action’s primary question—whether Turner must defend and
indemnify Exxon from the state-court lawsuits—was “premature.”
These considerations do not align perfectly with the factors mentioned in
Torch. The Torch factors, however, are illustrative and non-exhaustive. We look
also to the following considerations here: Under Louisiana law, questions of
its defense-and-indemnity duties arising from any of the state-court lawsuits.
Because this action is ripe, we do not consider whether the action, if unripe, should
have been dismissed under Federal Rule of Civil Procedure 12(b)(1).
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No. 08-30557
contractual defense and indemnity that depend on a contractual party’s fault
“cannot be determined until there has been a judicial finding that the [putative]
indemnitee is liable or that the charges against it were baseless.” Meloy v.
Conoco, Inc., 504 So. 2d 833, 839 (La. 1987). This determination can be made
only “after trial on the merits.” Id.4 Trial on the merits has concluded in only
about four of the Turner employees’ state-court lawsuits against Exxon. Some
of the declaratory action’s issues, which include Turner’s defense-and-indemnity
duties arising from pending state-court lawsuits, therefore cannot yet be fully
and finally decided.
The significant number of pending lawsuits, along with the other reasons
provided, sufficiently supports the district court’s decision to dismiss the action
as premature. The dismissal was not an abuse of discretion.
IV.
Exxon’s final contention concerns the report and recommendation’s
references to the LOAIA. The magistrate judge wrote in conclusory fashion that
the “applicable Louisiana law to the issue at bar is the LOAIA.” She also
implied that the Louisiana Supreme Court’s decision in Meloy reaches only those
cases in which the LOAIA applies:
This Court cannot resolve the indemnification/defense
cost issue at this time because the Louisiana Supreme
Court has held that, under the Louisiana Oilfield
Indemnification Act (“LOAIA”), an indemnitor’s
(Turner’s) obligation for indemnification/cost of defense
“cannot be determined until there has been a judicial
finding that the indemnitee (Exxon) is liable or that the
charges against it are baseless.” The Louisiana
Supreme Court has further held that, whether an oil
company/indemnitee is free from fault and thus outside
4
Exxon’s argument that American States Insurance Co. v. Bailey commands otherwise
is without merit. This court decided Bailey under Texas law, not Louisiana law. See 133 F.3d
363 at 369 (“In this diversity case, Texas rules of contract interpretation control.”).
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No. 08-30557
the scope of the Act can only be determined after a trial
on the merits.
Exxon Mobil Corp. v. Turner Indus. Group LLC, No. 07-967-C-M2, at 3-4 (M.D.
La. Mar. 28, 2008) (magistrate judge’s report and recommendation) (quoting
Meloy, 504 So. 2d at 839) (first emphasis added).
Exxon contends that the LOAIA does not apply here: Exxon’s blanket
contract with Turner was an agreement for Turner to provide services at a
chemical plant and oil refinery, and Louisiana courts have held that the LOAIA
does not apply to agreements to perform services at an oil refinery. See Griffin
v. Tenneco Oil Co., 519 So. 2d 1194, 1196 (La. App. 4 Cir. 1988) (holding that the
LOAIA does not apply to an agreement to perform services at a refinery because
“[t]he Legislature was obviously concerned about wells and drilling, not about
pipeline transportation or refining of oil, and this concern is reflected in the
statute”).
We conclude that, irrespective of whether the LOAIA applies, the report
and recommendation’s references to the LOAIA do not constitute reversible
error. As we have described, Louisiana questions of contractual defense and
indemnity that depend on one contractual party’s fault cannot be determined
until the underlying lawsuit’s trial on the merits concludes the fault issues. See
Meloy, 504 So. 2d at 839. This rule applies beyond the context of the LOAIA. See
Suire v. Lafayette City-Parish Consol. Gov’t, 907 So. 2d 37, 51 (La. 2005)
(applying Meloy to a defense-and-indemnity contractual provision that was at
issue in a construction-tort lawsuit). The report and recommendation’s
assertions about the LOAIA thus are surplusage, and we find no reversible error.
V.
For the foregoing reasons, the dismissal of this declaratory action is
AFFIRMED.
9