Fruge Ex Rel. Fruge v. Parker Drilling Co.

United States Court of Appeals
Fifth Circuit
F I L E D
Revised July 31, 2003
July 23, 2003
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
Clerk
02-30659
CARL FRUGE, on behalf of Casey Fruge; DARLA MONK FRUGE, on behalf
of Casey Fruge; DERRICK FRUGE
Plaintiffs-Appellants,
VERSUS
PARKER DRILLING COMPANY, ET AL
Defendants,
ANADARKO PETROLEUM CORPORATION; STOKES & SPIEHLER USA
INCORPORATED; GREG ZIELINSKI INCORPORATED,
Defendants-Appellees.
Appeal from the United States District Court
For the Western District of Louisiana
Before DUHÉ, EMILIO M. GARZA and DeMOSS, Circuit Judges.
DUHÉ, Circuit Judge:
In this suit involving personal injuries on a drilling
platform on the outer continental shelf off the coast of Louisiana,
the district court granted summary judgment to the platform owner
and two independent contractors whom the owner had hired to monitor
the drilling operation. Holding as a matter of law that Appellees
are not subject to strict liability, are not guilty of negligence,
nor responsible for the negligent acts, if any, of the drilling
contractor (another independent contractor not appearing in this
appeal), or for loss of evidence, we affirm.
I.
Defendant-Appellee Anadarko Petroleum Corporation (“Anadarko”)
as principal contracted with Parker Drilling Offshore Corporation
(“Parker”) as drilling contractor to complete a well on Anadarko’s
stationary platform. Plaintiff’s employer, M-I, LLC, was under
contract with Anadarko to provide filtration services for the
project. Plaintiff-Appellant Carl Fruge was operating a filter
unit on the platform when a discharge hose which was part of
Parker’s rig ruptured and injured him.
The ruptured hose was not produced for examination despite
Plaintiff’s demands. The hose is lost. The on-site supervisors
saw the ruptured hose at the time of the accident and several times
after the accident. Those supervisors were employees of
Defendants-Appellees Stokes & Spiehler USA, Inc., and Greg
Zielinski, Inc., with whom Anadarko had contracted to provide
company men for on-the-job supervision.
Fruge sued Parker, Anadarko, Stokes & Spiehler, and Zielinski,
among others. Anadarko, Stokes & Spiehler, and Zielinski moved for
summary judgment on the basis that they were not negligent and did
not exercise operational control over Parker’s drilling operations
so bore no responsibility for Parker’s alleged negligence.
The district court granted all three motions. Fruge's claims
2
against Parker remain in the district court.1
This Court reviews grants of summary judgment de novo,
applying the same standard as the district court, viewing the
evidence in a light most favorable to the non-movant. Coulter v.
Texaco, 117 F.3d 909, 911 (5th Cir. 1997); Coleman v. Houston
Indep. Sch. Dist., 113 F.3d 528, 533 (5th Cir. 1997).
II.
Federal jurisdiction is predicated on the Outer Continental
Shelf Lands Act (OCSLA), 43 U.S.C. § 1331 et seq. OCSLA adopts the
law of the adjacent state (Louisiana) as surrogate federal law, to
the extent that it is not inconsistent with other federal laws and
regulations. Bartholomew v. CNG Producing Co., 832 F.2d 326, 328
(5th Cir. 1987); 43 U.S.C. § 1333(a)(2)(A). Thus the law
applicable is “federal law, supplemented by state law of the
adjacent state.” Rodrigue v. Aetna Cas. & Sur. Co., 395 U.S. 352,
355, 89 S. Ct. 1835, 1837, 23 L. Ed. 2d 360 (1969).
Bearing in mind these principles, we are first asked to
determine whether federal regulations create civil liability beyond
the liability under state law as enunciated in Coulter v. Texaco.
Applying Louisiana negligence law, Coulter held that a principal is
not liable for the actions of its independent contractor unless the
1
Appellate jurisdiction is appropriate, as Fruge noticed
appeals from judgments certified as final under Fed. R. Civ. P.
54(b). We agree with the parties that the timeliness of the appeal
under 28 U.S.C. § 1292(a)(3) is not at issue, because this case
does not arise under admiralty jurisdiction.
3
principal retained “operational control” over the contractor’s work
(discussed infra) or expressly or impliedly approved its unsafe
work practice that led to an injury. Coulter, 117 F.3d at 912.
Fruge argues that Coulter is not an appropriate precedent
because it did not deal with federal Minerals Management Service
("MMS") regulations enacted after Coulter. Those regulations,
according to Plaintiff, place primary responsibility on the mineral
lessee (Anadarko) and its agents (Zielinski and Stokes & Spiehler)
for supervising the operations and maintaining safety over the
operations and equipment — without any regard to “operational
control” or authorization of an unsafe work practice. If a mineral
lessee establishes that it did not maintain operational control,
according to Fruge, it has necessarily violated the federal
regulations, creating liability as a matter of law. The key
regulation, in Plaintiff’s view, charges that the lessee, the
operator, and the person actually performing the activity “are
jointly and severally responsible” for complying with the offshore
MMS regulations. 30 C.F.R. § 250.146(a)&(c). This regulation
further allows the Regional Supervisor to require any or all co-
lessees to fulfill obligations under the regulations or the lease,
if the designated operator fails to fulfill obligations under the
regulations. Id. § 146(b).2
2
The regulation provides as follows:
§ 250.146 Who is responsible for fulfilling leasehold
obligations?
(a) When you are not the sole lessee, you and your
4
The MMS regulations in place at the time of Coulter similarly
carried the concept of responsibility on the parts of both the
lessee and the operator for obligations under the lease and the
regulations.3 The Secretary has considered the law to have
provided for joint and several liability of co-lessees and the
operator since the enactment of OCSLA (1953) and the common law,
co-lessee(s) are jointly and severally responsible for
fulfilling your obligations under the provisions of 30 CFR
parts 250 through 282, unless otherwise provided in these
regulations.
(b) If your designated operator fails to fulfill any of
your obligations under 30 CFR parts 250 through 282, the
Regional Supervisor may require you or any or all of your
co-lessees to fulfill those obligations or other operational
obligations under the [OCSLA], the lease, or the regulations.
(c) Whenever the regulations in 30 CFR parts 250 through
282 require the lessee to meet a requirement or perform an
action, the lessee, operator (if one has been designated), and
the person actually performing the activity to which the
requirement applies are jointly and severally responsible for
complying with the regulation.
30 C.F.R. § 250.146 (2002)(eff. Jan. 27, 2000, 64 Fed. Reg. 72,756
(Dec. 28. 1999)).
3
July 29, 1997, was the decision date of Coulter. The MMS
regulations at that time provided,
§ 250.8 Designation of operator.
In all cases where operations are not conducted by an
exclusive owner of record, a designation of operator shall be
submitted to the Regional Supervisor prior to the commencement
of operations. This designation will be accepted as authority
for the operator, or the operator's local representative, to
act on behalf of the lessee and to fulfill the lessee's
obligations under the Act and the regulations in this part. .
. . In case of a termination [of the authority of the
operator] or in the event of a controversy between the lessee
and the designated operator, both the lessee and the operator
will be required to protect the interests of the lessor.
30 C.F.R. § 250.8 (1988)(emphasis added). This regulation became
effective May 31, 1988, 53 Fed. Reg. 10,596 (April 1, 1988), and
was superseded August 20, 1997, by § 250.8, infra n.4.
5
through the present date.4 Although the regulations
4
The MMS has taken the position, since long before the 1988
regulation quoted in the previous note, that the both lessee and
the designated operator are required to bear the non-monetary
obligations under the lease as well as any obligations under the
regulations. Publishing notice of the superseding regulation
(reproduced below) which used the phrase “joint and several” to
describe non-monetary lease obligations, the MMS expressed its
intention that the regulation simply “[c]larifie[d] [its] position
that co-lessees and operating rights owners are jointly and
severally liable for compliance with our regulations and the terms
and conditions of their OCS oil and gas and sulphur lease for
nonmonetary obligations.” 62 Fed. Reg. 27,948, 27,948-49 (May 22,
1997) (emphasis added). That “clarifying” regulation provided,
§ 250.8 Designation of operator.
This section explains the requirement for designation of an
operator to conduct operations on a lease where the operator
is not the sole lessee (record title owner) and owner of
operating rights.
(a) Each record title owner (lessee) or operating rights owner
for a lease must provide the Regional Supervisor a designation
of operator in each case where someone other than an exclusive
record title and operating rights owner will conduct lease
operations. . . .
(1) This designation of operator is authority for the
operator to act on behalf of each lessee and operating
rights owner and to fulfill each of their obligations
under the Act, the lease, and the regulations in this
part.
. . .
(3) If you terminate a designation of operator or a
controversy develops between you and your designated
operator, you and the operator must protect the lessor's
interests.
. . .
(b) Lessees and operating rights owners are jointly and
severally responsible for performing nonmonetary lease
obligations, unless otherwise provided in the regulations in
this chapter. If the designated operator fails to perform any
obligation under the lease or the regulations in this chapter,
the Regional Director may require any or all of the co-lessees
and operating rights owners to bring the lease into
compliance.
30 C.F.R. § 250.8 (1997)(emphasis added)(effective Aug. 20, 1997,
62 Fed. Reg. 27,954 (May 22, 1997), redesignated as 30 C.F.R. §
250.108 effective June 30, 1998, without any change in substance,
6
63 Fed. Reg. 29,478, 29,479 (May 29, 1998)(renumbering §§ 250.0-
250.26 as §§ 250.100-250.126), and superseded Jan. 27, 2002 by 30
C.F.R. § 250.146 (2002), supra n.2). Further revealing the MMS’s
understanding that joint and several liability had been the law
since before Coulter, the Federal Register reported the following
comment and response relative to proposed § 250.8(a)(1):
Comment: A trade organization commented that the imposition
of joint and several liability should be prospective only
because the Secretary has no authority to issue retroactive
rules.
Response: This rule merely codifies what has been the law
under the OCSLA, since enactment and the common law. As
previously noted, section 5(a)(2)(C)(II) of the OCSLA
describes those who jointly own interests in a lease as
"partners."
62 Fed. Reg. 27,948, 27,950 (May 22, 1997)(emphasis added).
Announcing the regulation as final, the MMS again demonstrated that
it had long held the view that operating rights owners and lessees
are jointly and severally responsible for nonmonetary lease
obligations as well as obligations to comply with MMS regulations
in the following commentary:
Section 250.8 . . . Since joint and several liability is
closely related to the requirement for the designation of an
operator, we have consolidated several provisions of the
proposed rule in a revised §250.8 . . . . Every lessee or
working interest owner who executes the designation of
operator required under the provisions of § 250.8, Form
MMS-1123, acknowledges its joint and several liability.
Comment: Twelve respondents expressed opposition to, or
lack of support for, what they characterized as "the effort to
establish joint and several liability between co-lessees or
between assignors and assignees of OCS leases."
Response: This rule simply clarifies our position that
nonmonetary lease obligations are joint and several among
co-lessees (i.e., multiple lessees) and owners of operating
rights. Section 5(a)(2)(C)(II) of the Outer Continental Shelf
Lands Act (OCSLA) equates multiple lessees to "partners."
Our position on this matter remains the same as it was May
10, 1954, the effective date of the regulations the Department
of the Interior (DOI) issued to implement the OCSLA of 1953.
. . .
As previously noted, each party that executes a designation
of operator agreement recognizes the joint and several nature
of OCS lease obligations. The designation of operator (Form
MMS-1123) designates the entity that the co-lessees authorize
to conduct lease operations as each of the co-lessee's
7
have been modified a number of times, the regulations and
commentary manifest the intention to retain this shared liability
over the years. Nothing in the 2002 regulations preempts Coulter,
and Coulter is therefore still precedent.
Additionally, this Court has held that a violation of the MMS
regulations does not give rise to a private cause of action.
Romero v. Mobil Exploration & Producing North America, Inc., 939
F.2d 307, 310-11 (5th Cir. 1991). The regulations govern the
parties’ joint and several liabilities vis-à-vis the Government,5
not amongst themselves.6 This principle also defeats Fruge’s
"operator and local agent." Each lessee, by execution of the
designation of operator, agrees that "In case of default on
the part of the designated operator, the signatory lessee will
make full and prompt compliance with all regulations, lease
terms, or orders of the Secretary of the Interior (Secretary)
or his representative."
Id. at 27,949 (emphasis added).
5
See, e.g., 62 Fed. Reg. 27,948, 27,950 (discussing 30 C.F.R.
§ 250.8(a)(1)(eff. Aug. 20, 1997), supra n.4) in which the MMS
declared, “While parties to a contract may agree to limit
liability, neither Congress nor the Secretary ever agreed to limit
the liabilities of OCS lessees for operational obligations.”
6
Fruge also argues that the regulations making the duties
joint and several perforce make the duties non-delegable among the
private parties. Discussing joint and several liability of §
250.108, the MMS responded to a comment on a related regulation
making lessees and owners of operating rights jointly and severally
responsible for obligations relating to abandoning well bores (30
C.F.R. § 250.110). In the following exchange, the MMS made clear
that the joint and several liability to the MMS for fulfillment of
lease obligations does not prevent the parties from parsing out the
obligations differently among themselves by contract:
Section 250.110 General requirements. Comment: Two
respondents recommended that paragraph (b) of §250.110,
General requirements, be changed to clarify the extent of
responsibility of prior lessees for obtaining compliance with
8
contention that Anadarko had a duty under the regulations to use
the best available and safest technology to test the hose. Under
the drilling contract, the obligation to maintain and repair
Parker’s equipment and to comply with applicable safety regulations
rested on Parker’s shoulders.7 The OCSLA regulations do not create
an independent duty under Louisiana negligence law. Dupre v.
Chevron U.S.A., Inc., 109 F.3d 230, 231 (5th Cir. 1997).
Therefore, we will follow the guidance of Coulter and Romero,
finding nothing in the MMS regulations to preempt their
application.
III.
Fruge next argues that, regardless of the MMS regulations,
under the Coulter standard, the evidence left a question of fact
accrued obligations.
Response: We have modified the text of this provision to
present its contents in easily understood English. While this
rule determines who is liable to MMS for performance of
nonmonetary obligations, it is not our intention that this
rule preclude private agreements concerning the allocation of
liabilities between and among the affected parties. Nor does
this rule specify against whom we will take enforcement action
if we discover noncompliance.
62 Fed. Reg. 27,948, 27,949-50 (emphasis added). The Secretary
further declared, “MMS has never given its imprimatur to efforts of
lessees to limit their liabilities to MMS, much less created a
property right to such limitations.” Id. at 27,950 (emphasis
added).
7
Master Domestic Daywork Drilling Contract § 503(b) (Parker and
its personnel to "comply with all applicable federal, state, and
local laws, ordinances, rules, regulations, and lease or contract
provisions regarding pollution, safety and the environment"); id.
§ 403 (Parker “responsible for the maintenance and repair” of all
its own equipment).
9
whether Anadarko and its company representatives retained
operational control over the work of its independent contractor,
Parker. To determine whether the exception for operational control
makes a principal liable, we first examine the extent to which
Anadarko contractually reserved the right to control the work.
Coulter, 117 F.3d at 912.
Under the contract between Parker and Anadarko, Parker was
"responsible for the maintenance and repair of all [its own
equipment].” Master Domestic Daywork Drilling Contract § 403.
Parker also was responsible for the “operation and control of the
Drilling Unit,” including supervision and having “final authority
and responsibility for the safety and operation of all systems and
all personnel associated with the drilling operation.” Contract §
502(a). When the contract assigns the independent contractor
responsibility for its own activities, the principal does not
retain operational control. See Coulter, 117 F.3d at 912.
Operational control exists only if the principal has direct
supervision over the step-by-step process of accomplishing the work
such that the contractor is not entirely free to do the work in his
own way. LeJeune v. Shell Oil Co., 950 F.2d 267-270 (5th Cir.
1992); McCormack v. Noble Drilling Corp., 608 F.2d 169, 175 n.9
(5th Cir. 1979). Here, Parker was exclusively responsible for
controlling the details of the work it performed: the contract
provided that Parker “shall be an independent contractor with
respect to performance of all work hereunder. [Anadarko] shall
10
have no direction or control of [Parker] or [Parker's] Personnel
except in the results to be obtained." Contract § 105 (emphasis
added).
The summary judgment evidence shows Anadarko provided on-site
supervision 24-hours per day, via various independent contractors
whose employees reported to Anadarko staff engineers on a daily
basis. The physical presence of a representative of a principal is
not sufficient to show supervision or control. Ainsworth v. Shell
Offshore, Inc., 829 F.2d 548, 550-51 (5th Cir. 1987), cert. denied,
485 U.S. 1034, 108 S. Ct. 1593, 99 L. Ed. 2d 908 (1988); Graham v.
Amoco Oil Co., 21 F.3d 643, 646 (5th Cir. 1994). Periodic
inspections by a principal's "company man" do not equate to that
principal retaining control over the operations conducted by a
drilling crew. Ainsworth, 828 F.2d at 550. “In short, absent an
express or implied order to the contractor to engage in an unsafe
work practice leading to an injury, a principal . . . cannot be
liable under the operational control exception." Coulter, 117 F.3d
at 912.
Summary judgment is appropriate because Plaintiff has failed
to present facts sufficient to distinguish his case from Coulter.
See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S. Ct.
2548, 91 L. Ed. 2d 265 (1986) (summary judgment is appropriate unless
plaintiff can present evidence to support each essential element of
his claim). “This Court has consistently held on similar facts
that a principal, such as [Anadarko], who hires independent
11
contractors over which he exercises no operational control has no
duty to discover and remedy hazards created by its independent
contractors.” Wallace v. Oceaneering Int’l, 727 F.2d 427, 437 (5th
Cir. 1984). On the evidence of record, summary judgment is proper
for Anadarko as well as the employers of Anadarko’s company men,
Zielinski and Stokes & Spiehler, neither of whom are responsible
for the alleged negligent acts of an independent contractor of
their principal.
IV.
As alternative grounds for liability, Fruge argues that
Anadarko or its representatives had custody of the defective hose
that caused Fruge's injuries or that the hose was a component part
or appurtenance to Anadarko’s platform, resulting in custodian or
premises liability under the Louisiana Civil Code. Indisputably,
Parker provided the hose and Parker employees operated its
equipment.
The first requirement for custodial liability under Louisiana
Code articles 2317 and 2317.1,8 is that the "thing" that caused the
injury be in the custody of the defendant. Although the owner is
8
Louisiana Civil Code article 2317 provides, “We are
responsible, not only for the damage occasioned by our own act, but
for that which is caused by . . . the things which we have in our
custody.” Article 2317.1 provides, “The owner or custodian of a
thing is answerable for damage occasioned by its ruin, vice, or
defect, only upon a showing that he knew or, in the exercise of
reasonable care, should have known of the ruin, vice, or defect
which caused the damage,” if the damage could have been prevented
by the exercise of reasonable care.
12
presumed to have custody, a non-owner defendant may have custody
over property if “he exercises direction and control of the thing
and derives some benefit from it.” Coulter, 117 F.3d at 913 &
n. 10. The mere presence of Anadarko's company man does not create
the kind of supervision and control necessary to establish that
Anadarko had custody over the Parker rig or the hose that ruptured.
Neither the presence of company men who monitored the contractor’s
performance nor the limited involvement of engineers “comes
anywhere close to creating the kind of supervision and control
necessary” to establish the principal’s custody over the drilling
rig or the hose for purposes of article 2317. Coulter, 117 F.3d at
914.
As for premises liability under article 2322,9 a prerequisite
to recovery is that Parker’s rig "had become an appurtenance to, or
integral part of, [Anadarko’s] platform by virtue of that rig’s
physical attachment to that structure." Coulter, 117 F.3d at 914.
Things are considered a component part of a construction for
purposes of assessing premises liability under article 2322 if they
are “permanently attached” to a building or other construction
within the meaning of article 466. Coulter, 117 F.3d at 914.
9
Louisiana Civil Code article 2322 makes the owner of a
building “answerable for the damage occasioned by its ruin, when
this is caused by neglect to repair it, or when it is the result of
a vice or defect in its original construction,” if he knew or
should have known of the vice or defect which caused the damage,
and the damage could have been prevented by the exercise of
reasonable care.
13
“Things are considered permanently attached if they cannot be
removed without substantial damage to themselves or to the
immovable to which they are attached.” La. Civ. Code art. 466.
Plaintiff has pointed out no evidence that Parker's rig became
a component part of Anadarko's platform. The only summary judgment
evidence is to the contrary — that the rig moved from platform to
platform without substantial damage to either the rig or the
platform. As such, we hold as a matter of law that the rig is not
an appurtenance for purposes of article 2322. See Coulter, 117
F.3d at 914-918.
Fruge's theories of recovery under articles 2317, 2317.1, and
2322 therefore fail.
V.
Fruge finally argues that according to the two cases decided
at Marocco v. General Motors Corp., 966 F.2d 220 (7th Cir. 1992),
Anadarko should be held liable as a matter of law for loss of the
hose. Those two cases are distinguishable in that each involved
violation of a protective order. See id. at 221.
Here, the hose was lost before the suit was filed, when no
such order to preserve evidence had issued. Moreover, Plaintiff
presented no evidence suggesting bad faith on the part of Anadarko.
Accordingly, we discern no error in the district court’s decision
to dismiss Anadarko despite Plaintiff’s arguments regarding
spoliation of evidence.
VI.
14
After a de novo review of the record, we hold that the
undisputed facts leave no room for finding liability against
Anadarko, Stokes & Speihler, or Zeilinski under the various
theories asserted. Under the Anadarko/Parker contract and based on
the conduct of the parties, Anadarko and its company
representatives did not have operational control over the work
performed by Parker. A violation of MMS regulations, even if one
occurred, does not give rise to a cause of action. The hose that
ruptured was not in the custody of Anadarko or its representatives,
at the time of the accident and the rig was not part of Anadarko’s
platform. We find no error in the decision not to sanction
Anadarko for the loss of the hose. The judgment of the district
court is
AFFIRMED.
15