QBE Syndicate 1036 v. Compass Minerals ( 2023 )

Case: 23-30076 Document: 00516929778 Page: 1 Date Filed: 10/12/2023
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
____________ FILED
October 12, 2023
No. 23-30076 Lyle W. Cayce
____________ Clerk
QBE Syndicate 1036,
Plaintiff—Appellant,
versus
Compass Minerals Louisiana, Incorporated,
Defendant—Appellee.
______________________________
Appeal from the United States District Court
for the Western District of Louisiana
USDC No. 6:20-CV-554
______________________________
Before Smith, Southwick, and Higginson, Circuit Judges.
Stephen A. Higginson, Circuit Judge:
The insurer of two companies that contracted for work at a Louisiana
salt mine filed a declaratory action, asserting that the Louisiana Oilfield Anti-
Indemnity Act applied to invalidate certain indemnification and additional-
insured provisions in their contracts. The insurer contends that the Act
applied to agreements that pertain to “drilling for minerals,” and that these
agreements are thus covered because the salt mine uses a “drill-and-blast”
method for mining salt. Finding no clear and controlling precedent on this
issue of Louisiana law, we CERTIFY two questions to the Louisiana
Supreme Court.
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I.
Defendant-Appellee Compass Minerals Louisiana, Inc. (“Compass”)
is part of a “multi-national mineral company that owns and operates multiple
salt mines in North America and the United Kingdom.” Among Compass’s
locations is its Cote Blanche salt mine, located on Cote Blanche Island in St.
Mary Parish, Louisiana.
At the Cote Blanche salt mine, Compass uses a “drill-and-blast”
mining method. On its website, Compass describes the process as follows:
The drill-and-blast mining method begins by cutting into the
rock salt face using specialized equipment. We then drill holes
into the face and use explosives to break the salt into large
rocks. Front-end loaders and trucks load and haul the salt to a
crusher where it is reduced in size, loaded onto a conveyor belt
and transported to a mill. The mill screens and crushes the
rock salt to the customary size before the salt is hoisted to the
surface.
For underground fire-prevention and electrical support at the Cote
Blanche salt mine, Compass contracted with Louisiana-based companies Fire
& Safety Specialists, Inc. (“FSS”) and MC Electric, LLC (“MCE”). In its
respective purchase orders with each contractor, Compass included an
indemnity provision, under which FSS and MCE agreed to indemnify, hold
harmless, and defend Compass from all claims and liabilities for any damage,
injury, death, loss, or destruction of any kind relating to the parties’
agreement. Each purchase order also included an additional-insured
provision, requiring FSS and MCE to name Compass as an additional insured
on the insurance policies required by the contract.
On August 15, 2019, an electrician employed by MCE died in an
accident at the Cote Blanche salt mine. The decedent, Shawn Clements,
“contacted an energized electrical circuit while attempting to install a new
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circuit for the fire suppression system at the salt mine.” Clements’s family
filed a survival and wrongful-death suit in state court against Compass and
FSS, alleging that a Compass electrician and FSS technician had incorrectly
advised Clements that the fire-suppression system was de-energized.
Plaintiff-appellant QBE Syndicate 1036 (“QBE”) represents that the suit
remains pending in the 16th Judicial District Court for the Parish of St. Mary,
under Case No. 135048.
At the time of the accident, both FSS and MCE held a commercial
general liability policy with QBE. Compass sent a letter to QBE seeking
defense, indemnity, and coverage for the wrongful-death suit, on the basis of
the indemnification and additional-insured provisions of the MCE and FSS
purchase orders.
On May 1, 2020, QBE filed a declaratory action in federal court,
asserting that the indemnification and additional-insured provisions in the
FSS and MCE purchase orders are “null, void, and unenforceable” under
the Louisiana Oilfield Anti-Indemnity Act, La. Stat. Ann. § 9:2780,
(“LOAIA”). In its complaint, QBE contended that LOAIA renders “void
and unenforceable” certain indemnification provisions in “agreement[s]
pertaining to a well for oil, gas, or water, or drilling for minerals which occur
in a solid, liquid, gaseous, or other state.” QBE alleged that Compass uses a
drill-and-blast mining method at the Cote Blanche Salt mine, and that
Compass’s purchase orders with FSS and MCE are covered by the LOAIA
because they are “agreements” “pertaining to . . . drilling for minerals.”
QBE sought a declaration that it “owes no duties to Compass whatsoever in
connection with the [state] lawsuit.”
On August 22, 2022, QBE and Compass filed cross-motions for
summary judgment. QBE argued that, because Compass’s drill-and-blast
method of mining for salt constitutes “drilling for minerals,” as used in the
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statute, the provisions Compass relied on in its purchase orders with FSS and
MCE were void and unenforceable under the LOAIA. Compass disagreed,
arguing in its motion that the LOAIA requires a nexus to a well, which
Compass’s Cote Blanche operations did not have, and that the drill-and-blast
method is “completely different from the exploration and drilling methods
used by oil and gas . . . companies.”
On December 16, 2022, the district court granted Compass’s motion
and denied QBE’s motion, concluding that the LOAIA did not apply to the
purchase orders and therefore did not invalidate the indemnification
provisions. The court concluded that, under this court’s decision in
Transcontinental Gas Pipe Line Corp. v. Transportation Insurance Co., 953 F.2d
985 (5th Cir. 1992), the LOAIA requires that the agreement “pertain to” a
“well,” and it is undisputed that the mining operations at the Cote Blanche
salt mine do not involve a well. Moreover, the court rejected QBE’s
argument that Compass “drill[s] for” salt by using the drill-and-blast method
for breaking a salt wall. It concluded, relatedly, that the term “drilling for
minerals” in the LOAIA “should be construed as referring to the drilling of
a well.” QBE appeals.
II.
The parties agree that Louisiana substantive law—here, the
LOAIA—governs resolution of this diversity case. Gulf & Miss. River Transp.
Co. v. BP Oil Pipeline Co., 730 F.3d 484, 488 (5th Cir. 2013) (citing Erie R.R.
Co. v. Tompkins, 304 U.S. 64, 78 (1938)). As a federal court interpreting
Louisiana law, we would “first look to final decisions of the Louisiana
Supreme Court.” Id. (citation omitted).
Louisiana is one of four states that have passed an oilfield anti-
indemnity act. The parties here dispute the meaning of Louisiana’s Act. The
LOAIA, passed in 1981, nullifies certain contractual defense and indemnity
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provisions as contrary to public policy. As the Louisiana Supreme Court has
explained, the LOAIA “arose out of a concern about the unequal bargaining
power of oil companies and contractors and was an attempt to avoid
adhesionary contracts under which contractors would have no choice but to
agree to indemnify the oil company, lest they risk losing the contract.”
Fontenot v. Chevron U.S.A. Inc., 676 So. 2d 557, 563 (La. 1996).
To that end, the text of the Act says:
A. The legislature finds that an inequity is foisted on certain contractors
and their employees by the defense or indemnity provisions, either or
both, contained in some agreements pertaining to wells for oil, gas, or
water, or drilling for minerals which occur in a solid, liquid, gaseous,
or other state, to the extent those provisions apply to death or bodily
injury to persons. It is the intent of the legislature by this Section to
declare null and void and against public policy of the state of Louisiana
any provision in any agreement which requires defense and/or
indemnification, for death or bodily injury to persons, where there is
negligence or fault (strict liability) on the part of the indemnitee, or an
agent or employee of the indemnitee, or an independent contractor
who is directly responsible to the indemnitee.
B. Any provision contained in, collateral to, or affecting an agreement
pertaining to a well for oil, gas, or water, or drilling for minerals
which occur in a solid, liquid, gaseous, or other state, is void and
unenforceable to the extent that it purports to or does provide for
defense or indemnity, or either, to the indemnitee against loss or
liability for damages arising out of or resulting from death or bodily
injury to persons, which is caused by or results from the sole or
concurrent negligence or fault (strict liability) of the indemnitee, or an
agent, employee, or an independent contractor who is directly
responsible to the indemnitee.
C. The term “agreement,” as it pertains to a well for oil, gas, or water,
or drilling for minerals which occur in a solid, liquid, gaseous, or other
state, as used in this Section, means any agreement or understanding,
written or oral, concerning any operations related to the exploration,
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development, production, or transportation of oil, gas, or water, or
drilling for minerals which occur in a solid, liquid, gaseous, or other
state, including but not limited to drilling, deepening, reworking,
repairing, improving, testing, treating, perforating, acidizing, logging,
conditioning, altering, plugging, or otherwise rendering services in or
in connection with any well drilled for the purpose of producing or
excavating, constructing, improving, or otherwise rendering services
in connection with any mine shaft, drift, or other structure intended
for use in the exploration for or production of any mineral, or an
agreement to perform any portion of any such work or services or any
act collateral thereto, including the furnishing or rental of equipment,
incidental transportation, and other goods and services furnished in
connection with any such service or operation.
La. Stat. Ann. § 9:2780(A)-(C) (emphases added).
QBE argues that the LOAIA applies to Compass’s purchase orders
with FSS and MCE because the agreements pertain to “drilling for minerals”
at the Cote Blanche salt mine—specifically, because Compass uses the drill-
and-blast method for mining salt. QBE therefore contends that the
indemnification and additional-insured provisions in the agreements are null
and void, and it accordingly does not owe coverage for the Clements lawsuit.
QBE’s reading of the LOAIA requires two key interpretive arguments
about the statute. First, the statute must be read to cover operations beyond
just those pertaining to a well. If the statute governs only those agreements
with a nexus to a well, then it does not apply here; it is undisputed that
Compass’s salt mining does not involve a well. Second, even if there is no
“well” requirement, the agreements at issue in this case must “pertain to”
“drilling for minerals,” as that term is used in the statute. If either of these
arguments fails, then the LOAIA does not apply to the agreements here.
A.
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Compass argues, and the district court agreed, that for the LOAIA to
apply, the agreement at issue must pertain to a well. Again, this issue may be
dispositive; it is undisputed that Compass’s operations do not involve a well.
We first address whether this court or the Louisiana Supreme Court
has decided this issue because, if so, we would not look further. See Kelly v.
State Farm Fire & Cas. Co., 582 F. App’x 290, 293 (5th Cir. 2014) (“[O]nce
a panel of this court decides an issue of state law by making an Erie guess, this
court is bound by this decision, unless a subsequent state statute or state
court decision has rendered the panel’s interpretation ‘clearly wrong.’”
(quoting Bustos v. Martini Club, Inc., 599 F.3d 458, 462–63 (5th Cir. 2010));
Howe ex rel. Howe v. Scottsdale Ins. Co., 204 F.3d 624, 627 (5th Cir. 2000)
(“To determine Louisiana law . . . this Court should first look to final
decisions of the Louisiana Supreme Court.” (citation omitted)). “If there is
no ‘clear and controlling precedent’ from that court on a determinative
question of law, then we may certify the question to the court.” Kling v.
Hebert, 60 F.4th 281, 285 (5th Cir.), certified question accepted, 359 So. 3d 499(La. 2023) (citing La. Stat. Ann. § 13:72.1, and La. Sup. Ct. R. XII § 1).
We conclude that, although courts have stated in broad terms that the
LOAIA requires that an agreement pertain to a well, neither this court nor
the Louisiana Supreme Court has addressed the question presented by QBE.
We are “a strict stare decisis court,” meaning that a prior panel’s
“interpretation of state law is ‘no less binding on subsequent panels than are
prior interpretations of federal law.’” Bustos, 599 F.3d at 462 (quoting FDIC
v. Abraham, 137 F.3d 264, 268 (5th Cir. 1998)). Here, Compass and the
district court find support for the LOAIA’s “well” requirement in this
court’s 1992 opinion in Transcontinental Gas, 953 F.2d at 985. The district
court concluded, and Compass urges on appeal, that because the operations
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at the Cote Blanche salt mine do not “pertain to” a well, “under
Transcontinental Gas, ‘the inquiry ends.’”
The Transcontinental Gas opinion weighs in Compass’s favor, but,
because of an explicit disclaimer, the case does not do the work that Compass
asks of it. In Transcontinental Gas, the court addressed whether the LOAIA
covered a natural-gas transportation company’s (“Transco’s”) agreements
with a contractor providing painting, sandblasting, and inspection work on
Transco’s “platforms and pipelines located in the Gulf of Mexico or in the
adjacent marshlands of Louisiana.” Transcon. Gas, 953 at 986. The court
rejected the insurers’ and amici’s arguments that the LOAIA covers “all
contracts touching transportation of natural gas.” Id. at 989-95. In reaching
its conclusion, the court stated that “the threshold requirement for
applicability of the [LOAIA] is that the contract under scrutiny pertain to a
well.” Id. at 991. The court then set out a two-step process for assessing the
LOAIA’s applicability and, in so doing, reiterated multiple times that the Act
requires that the agreement pertain to a well. Id. That proposition may seem
to resolve this case, and Compass argues as much.
But the court in Transcontinental Gas included a footnote indicating
that the “pertains to a well” rule is not as absolute as it seems. Specifically,
in the main text, the court quotes the legislature’s proclamation in subsection
(A) of the statute that “an inequity is foisted on certain contractors . . . by the
defense or indemnity provisions . . . , contained in some [1] agreements
pertaining to wells for oil, gas, or water, or [2] drilling for minerals.” Id. at 990(emphasis and alterations in original). It then included a footnote that says:
“The APS/Transco agreement does not implicate ‘drilling for minerals,’ if
in fact ‘drilling for minerals’ can be extricated from ‘wells.’ Therefore, the
portion of the Act concerned with ‘drilling for minerals’ is not directly at
issue here.” Id. at 990 n.18.
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QBE has seized on this. Its fundamental argument is that “drilling for
minerals” is a separate basis for LOAIA’s application, having nothing to do
with “wells for oil, gas, or water.” Recall that the statute applies to
“agreements pertaining to a well for oil, gas, or water, or drilling for
minerals.” La. Stat. Ann. § 9:2780(A). Thus, the argument goes,
Transcontinental Gas’s rule that an agreement must pertain to a well applies
only if the agreement does not otherwise pertain to “drilling for minerals.”
In other words, only if a party is invoking the “wells for oil, gas, or water”
clause does it need to show a nexus to a well. Otherwise, LOAIA can apply
so long as the agreement “pertain[s] to . . . drilling for minerals.” Id.QBE’s view appears to fairly read Transcontinental Gas. Although the
main text speaks broadly and repeatedly about the LOAIA as a whole, 1
footnote 18 is clear that the “drilling for minerals” language is not at issue in
the case. More importantly, the court in footnote 18 raises the very question
that QBE now asks this court to answer—namely, whether, “in fact, ‘drilling
for minerals’ can be extricated from wells.” Transcon. Gas, 953 F.2d at 990
n.18 (emphasis added). It cannot be right, then, that Transcontinental Gas on
its own terms confirms that even a contract for “drilling for minerals”
requires a nexus to a well.
Accordingly, we conclude that Transcontinental Gas does not hold
that, under all circumstances, the LOAIA requires that a contract “pertain
to a well.” The court explicitly left that question open. Compass and the
district court are incorrect in contending otherwise.
Having so concluded, we must ask: Does the LOAIA apply to only
those contracts that “pertain to a well,” even if those agreements involve
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1
E.g., Transcon. Gas, 953 F.2d at 991 (“[T]he legislature intended the Act to apply
if (but only if) an agreement pertains to a well.”); id. (“[T]he threshold requirement for
applicability of the statute is that the contract under scrutiny pertain to a well.”).
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“drilling for minerals”? Our court’s caselaw has not shed further light on
this question. We have, in numerous cases, reiterated and reinforced
Transcontinental Gas’s rule that the LOAIA applies to those contracts that
pertain to a well, but with no separate analysis of the “drilling for minerals”
clause.2
Nor do we find an answer in state law. The Louisiana Supreme Court
appears to have discussed the meaning of the LOAIA on only three occasions
since the Act’s passage in 1981. Two of those cases say nothing about
whether the LOAIA applies only to agreements that pertain to a well. See
Meloy v. Conoco, Inc., 504 So. 2d 833, 838 (La. 1987) (explaining what types
of contractual provisions are nullified by the LOAIA but without discussion
of what industries, services, or operations are covered); Rodrigue v. LeGros,
563 So. 2d 248, 251-56 (La. 1990) (summarizing the LOAIA only to decide
whether maritime law or the LOAIA should apply to an indemnity provision
and concluding that the maritime law of indemnity applies).
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2
E.g., Tetra Techs., Inc. v. Cont’l Ins. Co., 814 F.3d 733, 743-46 (5th Cir. 2016) (per
curiam) (citing the two-step process from Transcontinental Gas and “conclud[ing] that a
contract for salvaging a platform from a decommissioned oil well has a sufficient nexus to
a well under [the LOAIA]”); Verdine v. Ensco Offshore Co., 255 F.3d 246, 253-54 (5th Cir.
2001) (applying the Transcontinental Gas factors and concluding that the agreements at
issue “pertained to specific wells and that the agreement related to the exploration,
development, production, or transportation of oil, gas, or water”); Roberts v. Energy Dev.
Corp., 104 F.3d 782, 784-85 (5th Cir. 1997) (explaining that the LOAIA nullifies
“indemnity provisions [that] are part of an agreement pertaining to an oil or gas well,” and
concluding that, there, the “nexus [was] strong enough”); U.S. Fid. & Guar. Co. v. Loop,
Inc., 961 F.2d 84, 85 (5th Cir. 1992) (per curiam) (approvingly quoting Transcontinental Gas
as holding that the LOAIA applies “if (but only if) the agreement . . . pertains to a well”
and holding that oil storage wells at a salt dome cavern do not qualify because “the ‘well’
must be a well incidental to the production of oil or gas”); Broussard v. Conoco, Inc., 959
F.2d 42, 44-45 (5th Cir. 1992) (citing Transcontinental Gas’s “well” requirement and
concluding that the contract at issue “pertains to a well”).
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The third case, Fontenot v. Chevron USA, 676 So. 2d 557 (La. 1996), is
the only time after our court’s decision in Transcontinental Gas that the
Louisiana Supreme Court has discussed the LOAIA in any degree of detail.
In Fontenot, the court addressed the applicability of the Act to a provision in
a company’s contract to provide “remedial well services” as well as drilling
and workover operations on several of Chevron’s platforms in the Gulf of
Mexico. Id. at 559. The court explained the purpose of the LOAIA and then
said: “To determine the applicability of Louisiana’s Anti–Indemnity Act,
courts have engaged in a two-step test,” citing Transcontinental Gas. Id. at
564. “First,” the court said, “there must be an agreement that ‘pertains to’
an oil, gas or water well.” Id. “Second, the agreement must be related to
exploration, development, production, or transportation of oil, gas, or
water.” As to the case before it, the parties’ “contract for remedial well
services” “passe[d] these two tests.” Id.Fontenot thus enshrines the “well” requirement in Louisiana law. But
like our court’s caselaw, it is silent as to whether an agreement for “drilling
for minerals” must also pertain to a well.
Lower state courts in Louisiana have followed Fontenot’s guidance3
and applied the “well” requirement. E.g., Palmour v. Gray Ins. Co., 731 So.
2d 911, 914 (La. App. 5 Cir. 1999) (citing Fontenot and Trancontinental Gas
and concluding that, despite that one party was “in the business of
performing oilfield work,” the parties’ “contract to rent a crane to be used
in some unnamed purpose,” was “not an oilfield, gas field or water related
agreement and does not meet the ‘pertains to’ requirement”); Rogers v.
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3
Our court is “not bound by state appellate court decisions,” but “we will not
disregard them ‘unless [we are] convinced by other persuasive data that the highest court
of the state would decide otherwise.’” Transcon. Gas, 953 F.2d at 988 (citation omitted)
(alteration in original).
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Integrated Expl. & Prod., LLC, 265 So. 3d 880, 887-89 (La. App. 4 Cir. 2019)
(citing Fontenot and Transcontinental Gas and concluding that the LOAIA did
not apply because the pipeline operations did not sufficiently pertain to a
well). QBE cites no state case invoking the “drilling for minerals” clause in
a way that avoids the “well” requirement. We have similarly found no such
case.
Accordingly, we find no “clear and controlling precedent” on this
issue of Louisiana law. Kling, 60 F.4th at 287. We conclude that certification
of this question is appropriate.
B.
Moreover, if the LOAIA does not have a “well” requirement, it
remains an open question whether the agreements in this case, which
governed fire-suppression and electrical work at a salt mine, are agreements
“pertaining to . . . drilling for minerals.” La. Stat. Ann. § 9:2780(B).
Because the antecedent question has not itself been answered, it follows that
there is no law—from our court or Louisiana state courts—addressing the
meaning of “drilling for minerals” or the associated exemplar “operations”
listed in subsection (C) of the statute. We conclude that this question—the
application of the LOAIA, as construed to the agreements in this case—is fit
for certification as well.
III. Questions Certified
CERTIFICATE FROM THE UNITED STATES COURT OF
APPEALS FOR THE FIFTH CIRCUIT TO THE LOUISIANA
SUPREME COURT, PURSUANT TO RULE XII, LOUISIANA
SUPREME COURT RULES.
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TO THE LOUISIANA SUPREME COURT AND THE
HONORABLE JUSTICES THEREOF:
A. Style of the Case
The style of the case in which this certification is made is QBE
Syndicate 1036 v. Compass Minerals Louisiana, Inc., No. 23-30076, in the
United States Court of Appeals for the Fifth Circuit. The case is on appeal
from the United States District Court for the Western District of Louisiana.
B. Statement of the Facts
The statement of facts, showing the nature of the cause and the
circumstances out of which the questions or propositions of law arise, is
provided above.
C. Questions of Law to be Answered
We certify the following questions to the Louisiana Supreme Court:
1. Does the Louisiana Oilfield Anti-Indemnity Act, La.
Stat. Ann. § 9:2780, apply to provisions in agreements
that pertain to “drilling for minerals,” even where the
agreement does not “pertain[] to a well”?
2. If the Act applies to agreements that pertain to “drilling
for minerals,” irrespective of the agreement’s nexus to a
well, does the Act apply to invalidate these
indemnification and additional-insured provisions,
contained in contracts for fire suppression and electrical
work in a salt mine, by virtue of the salt mine’s use of a
“drill-and-blast” method for mining salt?
IV.
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We hereby CERTIFY the above questions to the Louisiana Supreme
Court. We disclaim any intent that the Louisiana Supreme Court confine its
reply to the precise form or scope of the legal questions we certify. We
transfer to the Louisiana Supreme Court the record and appellate briefs in
this case with our certification. This panel retains cognizance of this appeal
pending response from the Louisiana Supreme Court.
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