Freeport-McMoran Energy, LLC v. Mike Mullen Energy Equipment Resources, Inc. , 233 F. App'x 341 ( 2007 )

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
For the Fifth Circuit April 23, 2007
Charles R. Fulbruge III
Clerk
No. 06-30063
FREEPORT-McMoRAN ENERGY, LLC
Plaintiff
VERSUS
MIKE MULLEN ENERGY EQUIPMENT RESOURCES, INC., ET AL
Defendants
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FREEPORT-McMoRAN ENERGY LLC, formerly known as Freeport-McMoran
Sulphur, LLC
Plaintiff
VERSUS
MIKE MULLEN, ET AL
Defendants
BLAKE DRILLING & WORKOVER COMPANY, INC.
Defendant - Third Party Plaintiff - Appellant
VERSUS
GEMINI INSURANCE COMPANY
Third Party Defendant - Appellee
Appeal from the United States District Court
For the Eastern District of Louisiana, New Orleans
2:04-CV-1592
Before DAVIS, DENNIS, and PRADO, Circuit Judges.
W. EUGENE DAVIS:*
Blake Drilling & Workover Co., Inc. (“Blake”) appeals an
adverse summary judgment in favor of its insurer, Gemini Insurance
Co. (“Gemini”), holding that Gemini owed no duty to defend or
indemnify Blake against claims asserted by Freeport-McMoran. We
affirm.
I.
In June 2004, Freeport-McMoRan Energy, LLC. ("Freeport") filed
suit against Mike Mullen, Blake and others for monetary recovery
and other relief arising out of two contracts for the dismantling
and removal of oilfield rigs and equipment. The first contract was
entered into on June 13, 2001 (the "2001 PSA") between Freeport and
a company owned by Mullen, Mike Mullen Energy Equipment Resource,
Inc. ("MMEER"). This contract involved the sale to MMEER of
certain rigs and equipment on Freeport's Control Platform Rig and
Main Pass 299 Production Platform No. 2 (“PP-2 Rig”). This
contract obligated MMEER and others to pay Freeport $530,000 for
the designated rigs and equipment and also required MMEER to sever,
dismantle and remove the purchased equipment along with other
equipment from the platforms. Freeport alleged that MMEER and
others sold the rigs and equipment MMEER purchased from Freeport to
*
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opinion should not be published and is not precedent except under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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Blake for $1.3 million. According to the complaint, when Blake
purchased this equipment, Blake expressly assumed MMEER’s removal
obligations under the 2001 PSA.
On January 15, 2002, Freeport and MMEER entered into a similar
contract (the "2002 PSA") to purchase equipment located in
Freeport's Power Plant (the “Power Plant Equipment”) and a certain
rig and related equipment located on Freeport’s Main Pass 299
Production Platform No. 1 (the “PP-1 Rig”). Freeport alleges that
in this transaction MMEER was acting on behalf of itself and
others, including Blake, who was an "undisclosed principal." Under
the 2002 PSA, MMEER and the undisclosed principals agreed to pay
Freeport $1 million and also allegedly agreed to dismantle and
remove the purchased rig and other equipment from the platform.
Freeport alleges that after the execution of the 2001 PSA and
the 2002 PSA, Blake removed equipment it purchased from the Control
Platform Rig, the PP-1 Rig, the PP-2 Rig and the Power Plant, but
did not remove other related equipment required to be removed under
the contracts. Freeport claims that as MMEER's undisclosed
principal with regard to the 2002 PSA and because it assumed the
obligations under the 2001 PSA, Blake is responsible for all
performance obligations under the PSAs, and Freeport can enforce
those obligations against Blake.
Freeport sought relief under several theories including: (1)
declaratory judgment regarding the contractual obligations of the
parties; (2) specific performance of the contracts; (3) breach of
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contract; (4) conversion of equipment removed from the rigs due to
the defendants’ failure to complete the contract; and (5) unjust
enrichment.
Blake’s assertion of coverage under the Gemini policy focuses
on Freeport’s conversion claims. The conversion allegations refer
to the "Defendants" generically and allege "the removal of and
taking possession of the Power Plant Equipment and other valuable
equipment over Freeport's objection", and selling this equipment to
third parties and interfering with Freeport's ownership and/or
possession of the equipment.
Once Blake realized that Freeport was asserting a conversion
claim against it, it tendered the suit to its insurer Gemini, which
promptly denied coverage. Blake then filed a third party complaint
against Gemini. Gemini filed a motion for summary judgment seeking
dismissal of the third party demand. Blake filed a cross-motion
for summary judgment seeking an order requiring Gemini to defend.
The district court granted Gemini's motion for summary
judgment and denied Blake's motion. The district court read the
complaint as follows: "Freeport is accusing Blake of failing to do
what it was supposed to do under the PSAs." Relying on Adams v.
Unione Mediterranea di Sicurta, 220 F.3d 659 (5th Cir. 2000), the
court accepted Gemini's position that a conversion cannot be an
accident when having the equipment taken away was something
Freeport and Blake bargained for. Blake appeals.
II.
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A.
Gemini's insurance policy covering Blake is a commercial
general liability policy. The policy covers damages because of
"property damage" if it is caused by an "occurrence" during the
policy period. An "occurrence" is defined as "an accident,
including continuous or repeated exposure to substantially the same
general harmful conditions."
B.
The insurer's duty to defend is determined by the factual
allegations of the complaint. The insurer must furnish a defense
unless the factual allegations of the complaint unambiguously
exclude coverage. Cute-Togs of New Orleans, Inc. v. Louisiana
Health Service & Indemnity Company, 386 So. 2d 87, 89 (La. 1980).
Gemini argues that it has no duty to defend because all of the
allegations of the complaint asserting claims against Blake rest on
factual allegations that Blake was an undisclosed principal to the
contracts between Freeport and MMEER and/or assumed the obligations
of the contracts. Gemini asserts that obligations under a contract
cannot be accidental and thus there is no accident or occurrence
that could trigger coverage. Gemini also argues that Freeport's
conversion claim was not accidental because Freeport's goal was to
rid itself of the equipment. Blake argues that under Louisiana
law, an unintentional wrongful taking or conversion is an
occurrence or accident under a CGL insurance policy.
As indicated above, Blake’s argument for coverage under
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Gemini’s policy focuses on Freeport’s allegations that Blake
improperly removed and converted equipment off its platforms. All
of Freeport’s conversion claims against Blake, with the possible
exception of those asserted in paragraph 17 of Freeport’s
complaint, are based on an alleged contractual relationship between
Freeport and Blake. Freeport alleges that because Blake and others
failed to perform all of their obligations under their contracts
with Freeport, Blake and other defendants were not entitled to
remove the equipment and they therefore converted that equipment.
Blake argues that Freeport’s conversion claim asserted under
paragraph 17 of its complaint concerns Blake’s removal of equipment
that is unrelated to a contract. We turn first to Blake’s claim of
coverage for property allegedly converted under the allegations set
forth in paragraph 17 of Freeport’s complaint.
This requires a consideration of one of the contracts at
issue, the 2001 PSA between Freeport and MMEER. This contract
called for the removal of rigs and equipment from two platforms,
the Control Platform and Main Pass 299 Production Platform No.2.
The rig and equipment to be removed from the Control Platform are
referred to as the Control Platform Rig. The rig and equipment to
be removed from the Main Pass 299 Production Platform No.2 are
referred to as the PP-2 Rig. According to the complaint, Blake
purchased the subject rigs and related equipment from MMEER in
2001.
Blake’s argument focuses on the allegations in paragraph 17 of
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the Second Amending and Restated Complaint, which states:
On information and belief, based on information in
Mullen’s Initial Disclosures, when Blake purchased the
PP-2 Rig from MMEER (and/or its undisclosed
principal(s)), Blake was aware of, and expressly assumed,
the removal obligations under the 2001 PSA.
Paragraph 17 is the source of Blake’s alleged contractual tie to
Freeport for obligations arising under the 2001 PSA, because it
alleges that Blake “expressly assumed the removal obligations under
the 2001 PSA.” Blake notes that this paragraph references the
assumption of obligations only in connection to its purchase of the
PP-2 Rig. It does not include a reference to the Control Platform
Rig which was also part of the 2001 PSA. Blake infers from this
omission that the petition alleges at most that it assumed the
obligations related to the PP-2 Rig and related equipment and did
not allege assumption of obligations related to the Control
Platform Rig and related equipment. If Blake is correct, at least
part of Freeport’s conversion claim related to the Control Platform
Rig would be non-contractual or tort based, giving a basis for
coverage under the Gemini policy.
We disagree with Blake’s reading of paragraph 17. There is no
question that Blake purchased the Control Platform Rig as well as
the PP-2 Rig from Freeport. Paragraph 17 of the complaint alleges
without limitation that “Blake was aware of and expressly assumed
the removal obligations under the 2001 PSA”, which covers both
properties. So, contrary to Blake’s restricted reading of the
complaint, Freeport alleged that Blake assumed the contractual
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obligation to remove the Control Platform Rig along with the other
obligations owed to Freeport under the 2001 PSA.
Since the Control Platform Rig is the only equipment Blake
points to that was arguably removed and converted without regard
for obligations undertaken by Blake in either contract 2001 PSA or
2002 PSA, the question for a decision therefore narrows to whether
Blake’s alleged removal of equipment under the 2001 or 2002 PSAs
amounts to an “occurrence” under the policy.
Gemini’s policy defines an “occurrence” as “an accident,
including continuance or repeated exposure to substantially the
same general harmful conditions.” In North American Treatment
Systems, Inc. v. Scottsdale Insurance Co., the court stated that
“when the word ‘occurrence’ is defined as an ‘accident’, the
occurrence of an unforeseen and unexpected loss constitutes an
‘accident’ and therefore an ‘occurrence.’” 943 So. 2d 429, 444 (La.
App. 1 Cir. 2006)(internal citations omitted). The court also
noted “that ‘accident is defined from the viewpoint of the victim;
losses that were unforeseen and unexpected by the victim are the
result of an accident.’” Id. See also Adams v. Unione Mediterranea
di Sicurta, 220 F.3d 659, 678 (5th Cir. 2000)(Relying on Black’s
Law Dictionary for the definition of “accident”: as “an event which
under the circumstances is unusual and unexpected by the person to
whom it happens.”)
Under the allegations of Freeport’s complaint we agree with
the district court that no accident, unexpected event or occurrence
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took place. Freeport made a bargain to sell certain equipment and
have it removed from its facilities. Under the allegations of the
complaint, Blake either assumed the removal obligations or was an
undisclosed principal bound by the original contract and thus also
bargained for the removal of this equipment. So, from the
standpoint of either Freeport, the victim, or Blake, the insured,
the removal of equipment subject to their agreement was not an
accident. It is true that Freeport alleges that the sale was
conditioned on the removal of other equipment. However, Freeport’s
expectation that the defendants would fully comply with the
contractual terms and remove additional equipment does not
transform the removal of equipment the parties bargained to convey
into an unexpected event or accident. Based on this analysis,
Freeport’s complaint does not allege an accident and therefore
there was no occurrence triggering coverage for Blake under
Gemini’s CGL policy.
In Adams, we also held that the conversion on which recovery
was sought in that case was not an “occurrence” under the policy
because it was not accidental or unexpected. Because coverage was
not triggered for property damage coverage under the policy we
found it unnecessary to consider policy exclusions. 220 F.3d at
678. Because the facts asserted in Freeport’s complaint do not
allege an occurrence which is required to trigger coverage in the
first instance, we need not consider exclusionary clauses such as
those considered in Alert Centre, Inc. v. Alarm Protection
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Services, Inc., 967 F.2d 161 (5th Cir. 1992), and Cute Togs of New
Orleans, Inc. v. Louisiana Health Service & Indemnity Company, 386
So. 2d 87 (La. 1980).
AFFIRMED.
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