Hodgen v. Forest Oil Corp.

United States Court of Appeals,
Fifth Circuit.
No. 94-41244.
Jerry B. HODGEN; Bobby Sue Hodgen, Plaintiffs,
v.
FOREST OIL CORPORATION, et al., Defendants,
FOREST OIL CORPORATION; Ronald J. Doucet, Defendants-Third Party
Plaintiffs-Intervenor Defendants-Cross Claim Plaintiffs-Appellants-
Cross-Appellees,
Forest Oil Corporation, in its capacity as platform owner;
Ronald J. Doucet, Defendants-Third Party Plaintiffs-Intervenor
Defendants-Cross Claim Plaintiffs-Appellants-Cross Appellees,
v.
A & A BOATS INC.; C & G Marine Service Inc., Defendants-Third
Party Plaintiffs-Intervenor Defendants-Cross Claim Defendants-
Appellees-Cross Appellants,
v.
OPERATORS & CONSULTING SERVICES INC., Third Party Defendant-Cross
Claim Defendant-Appellee,
Chancellor Insurance Company; Yorkshire Insurance Company
Limited; Cornhill Insurance PLC; Allianz International Insurance
Company Limited; Ocean Marine Insurance Company Limited, Third
Party Defendants-Appellees,
ALBANY INSURANCE CO., Third Party Defendant-Third Party
Plaintiff-Appellant,
v.
AETNA CASUALTY & SURETY CO., Intervenor Plaintiff-Third Party
Defendant-Appellee.
June 25, 1997.
Appeals from the United States District Court for the Western
District of Louisiana.
Before POLITZ, Chief Judge, and HIGGINBOTHAM and SMITH, Circuit
Judges.
1
PATRICK E. HIGGINBOTHAM, Circuit Judge:
In a prior opinion, this panel affirmed the district court's
judgment in part and certified remaining issues to the Louisiana
Supreme Court. See Hodgen v. Forest Oil Corp., 87 F.3d 1512 (5th
Cir.1996). The Louisiana Supreme Court declined certification.
The parties subsequently settled all but one of the certified
issues. We now decide this last issue and hold that the Louisiana
Oilfield Indemnity Act of 1981 ("LOIA"), La.Rev.Stat. Ann. §
9:2780, prevents an oil company from receiving indemnification for
its defense costs as a platform owner if it commits negligence as
time charterer of a vessel.
I.
We briefly recite the relevant facts, which are set out in
full in our earlier opinion. Forest Oil contracted with Operators
and Consulting Services ("OCS") for work on an off-shore oil
platform. The contract provided that OCS would indemnify Forest
"from and against any and all claims, demands, judgments, defense
costs, or suits ... by ... any employees ... of Contractor," even
if Forest was at fault. Jerry Hodgen, an OCS employee, suffered a
spinal injury when he attempted a swing-rope transfer in rough seas
from a platform owned by Forest to a vessel that Forest chartered
on a non-demise basis. The district court found that Hodgen's suit
stated claims against Forest both in its capacity as platform owner
and in its capacity as time charterer of the vessel. The court
found Forest negligent in its capacity as time charterer but
faultless in its capacity as platform owner.
2
Forest subsequently filed a third-party complaint against OCS
and a group of five underwriters. Invoking the broad
indemnification clause in the Master Service Agreement, Forest
demanded that OCS and five underwriters pay the costs incurred in
its defense in its capacity as platform owner.
The district court, however, found that Louisiana law prevents
enforcement of the indemnity clause because Forest was at fault in
its capacity as time charterer. "Regardless of whether Forest can
be at fault in two different capacities for the purposes of
plaintiff's tort claims against it," the court reasoned, "the fact
remains that Forest is one entity, and the Court has made a
judicial determination that this one entity was at fault in causing
plaintiff's injuries." Hodgen v. Forest Oil Corp., 862 F.Supp.
1567, 1571 (W.D.La.1994), aff'd in part, 87 F.3d 1512 (5th
Cir.1996).
II.
Louisiana protects oilfield contractors from oil companies
who press for master service contracts requiring contractors to
provide indemnification even when the oil company is at fault.
Under the LOIA, such indemnification agreements are void "to the
extent that they purport to require indemnification and/or defense
where there is negligence or fault on the part of the indemnitee."
Meloy v. Conoco, Inc., 504 So.2d 833, 838 (La.1987).1 The
1
The relevant portions of § 2780 read as follows:
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
3
legislation "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).
But "[a]n agreement providing for cost of defense in the
event of a meritless suit against the indemnitee is outside the
scope of the Act." Meloy, 504 So.2d at 839. Forest argues that
because the district court found that Hodgen's suit against it in
its capacity as platform owner did not have merit, it should be
able to collect the costs of defending itself in that capacity.
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.
4
The insurers, on the other hand, urge us to deny indemnification
for Forest's defense costs as platform owner because Forest was
found negligent in its capacity as time charterer.
Entities in oil exploration often wear several hats, and the
law reflects the different capacities in which a company operates
when assigning rights and responsibilities attending these
capacities. In this case, Hodgen's suit against Forest sounded in
two different bodies of law. The Outer Continental Shelf Lands
Act, 43 U.S.C. §§ 1301-56, dictated which law would apply to
Hodgen's claims. As against Forest in its capacity as platform
owner, Hodgen proceeded under 43 U.S.C. § 1333(a)(2)(A), which
incorporates state negligence principles. As against Forest in its
capacity as time charterer, Hodgen proceeded under the Longshore
Workers' Compensation Act, 33 U.S.C. §§ 902(21), 905(b-c), made
available by 43 U.S.C. § 1333(b).
The LOIA, however, does not speak in terms of an oil company's
capacities, it speaks in terms of contracting entities, the oil
contractor and the indemnitee. Louisiana strives to protect
contractors from oil companies that want contractors to bear the
risks that accompany their own negligence. The language of the
statute, as the Louisiana courts have noted, gives it "the broadest
possible meaning," and "does not draw distinctions based on the net
worth or ownership of the contracting parties or the type of
contract involved." Daigle v. United States Fidelity & Guaranty
Ins. Co., 610 So.2d 883, 887 (La.App. 1st Cir.1992); see also St.
Amant v. Glesby-Marks Corp., 532 So.2d 963, 964 (La.App. 5th
5
Cir.1988).
The strength with which Louisiana applies the LOIA to protect
contractors from indemnification was demonstrated in Meloy. The
Louisiana Supreme Court found that the Act only allowed
indemnification if the suit against the oil company was meritless.
Any fault by the oil company would render the contractual
indemnification provision null and void. Therefore, the supreme
court held that the LOIA prevented an oil company sued by a
contractor's employee from collecting a contribution from the
contractor even if the contractor was concurrently negligent.
Meloy, 504 So.2d at 838.
As Meloy made clear, a suit must be absolutely meritless for
an indemnification provision to survive. An oil company found one
percent at fault may not bring a claim against the contractor for
defense costs or damages even if the contractor was at fault. In
this case Forest was found 85% responsible for the accident, which
fault happened to be in its capacity as time charterer of the
vessel. It bears noting that Forest's liability as platform owner
and as time charterer both arose from the same incident. Hodgen
was injured while completing a swing rope transfer, and Forest's
negligence was found to be a cause of that accident.
In light of the protection that Meloy gives to contractors, we
find it unlikely that the Louisiana Supreme Court would allow a
company found 85% at fault to collect any of its defense costs,
even those incurred in defending a legal theory under which it was
6
found not liable.2 We therefore find that the LOIA precludes
Forest from collecting defense costs incurred in its capacity as
platform owner.
III.
For the foregoing reasons, the portion of the district court's
judgment denying Forest Oil indemnification for its defense costs
as platform owner is AFFIRMED.
JERRY E. SMITH, Circuit Judge, dissenting:
I respectfully dissent. It is disappointing that the
Louisiana Supreme Court declined to entertain the certification, as
that court is in the best position to construe the statute at hand.
This is a close question, and the majority engages in quite a
respectable analysis, reaching a result that is not unreasonable.
The majority correctly observes that companies engaged in
offshore oil exploration operate in different capacities that are
governed by wholly different bodies of law. I would treat the
different capacities as separate and distinct entities under the
Oilfield Indemnity Act, as the purposes of the act are not served
by denying indemnification for Forest Oil's defense costs incurred
in its capacity as platform owner, a capacity in which it is
2
Some lower courts in Louisiana have rejected such "dual
capacity" arguments in the context of worker's compensation. See
White v. Naquin, 500 So.2d 436 (La.App. 1st Cir.1986)(disallowing
indemnification by a school board in its capacity as custodian
where the worker's compensation laws disallowed suits against a
school board as an employer); Deagracias v. Chandler, 551 So.2d 25(La.App. 4th Cir.1989)(disallowing a suit against an employer in
its capacity as the manufacturer of the instrumentality by which
the employee was injured where employer was not liable under the
worker's compensation laws).
7
indisputably free from fault.
8