Fifth Circuit Court Says State, not Maritime, Law Applies in Drilling Services Injury Case

January 22, 2018 by

The Fifth Circuit Court of Appeals in New Orleans has reversed the previous findings of its own panel and a lower court in ruling that state, not maritime, law applies in a case involving a worker injury at an oil and gas production site in navigable waters off the coast of Louisiana.

In In re: Larry Doiron, Inc., No. 16-30217, the court was asked to determine whether maritime law or state law should be used to interpret the indemnity provisions in a master services contract (MSC) between an oil production company and a specialty services provider for work on a stationary production platform in navigable waters.

Although a three-judge Fifth Circuit Court panel in a revised ruling dated March 7, 2017, upheld the decision of a district court finding that maritime law applied to the case, the Fifth Circuit decided to take up Doiron en banc, that is, in the full court.

In its opinion published Jan. 8, 2018, the Fifth Circuit explained that it “took this case en banc to consider modifying the criteria set forth in Davis & Sons, Inc. v. Gulf Oil Corp. for determining whether a contract for performance of specialty services to facilitate the drilling or production of oil or gas on navigable waters is maritime.”

The court explained that the MSC between Apache Corporation (Apache) and Specialty Rental Tools & Supply L.L.P. (STS) included an “indemnity provision running in favor of Apache and its contractors.”

In 2011, Apache issued an oral work order directing STS to perform work on the stationary gas production platform. It was agreed by both parties that a vessel would not be required to complete the work. However, it was later determined that some heavy equipment was needed to complete the job and that in order to lift the equipment into place, a crane would be required.

Apache contracted with Larry Doiron Inc. (LDI) to provide a crane barge and crew to lift the equipment onto the platform. During the process of moving the heavy equipment, “the LDI crane operator struck and injured one of the STS crewmembers, Peter Savoie, with the equipment,” according to the court’s opinion.

Expecting a claim from the injured STS worker, LDI filed a limitation of liability proceeding, and “Savoie filed a claim in the limitation proceeding. LDI, as Apache’s contractor, then filed a third-party complaint against STS, seeking indemnity under the terms of the MSC,” the court explained.

STS then sought summary judgment finding that it owed no indemnity.

At issue was whether the Apache/STS MSC was a maritime contract. “If so, general maritime law permitted enforcement of the indemnity provision. If not, Louisiana law controlled, and the Louisiana Oilfield Indemnity Act (“LOIA”) precluded indemnity,” the written opinion states.

In previous cases, the Fifth Circuit had used the six-factor test established in Davis & Sons “to determine whether a contract is a maritime contract.”

Those six factors, the court wrote, are: “1) what does the specific work order in effect at the time of injury provide? 2) what work did the crew assigned under the work order actually do? 3) was the crew assigned to work aboard a vessel in navigable waters? 4) to what extent did the work being done relate to the mission of that vessel? 5) what was the principal work of the injured worker? and 6) what work was the injured worker actually doing at the time of injury?”

In Doiron, the court decided that not all six factors were relevant to the case. Instead, it “decided to adopt a simpler, more straightforward test consistent with the Supreme Court’s decision in Norfolk Southern Railway Co. v. Kirby” to determine the nature of the contract in Doiron.

Using Kirby as a guide, the court adopted a two-prong test, asking: “First, is the contract one to provide services to facilitate the drilling or production of oil and gas on navigable waters? … Second, if the answer to the above question is ‘yes,’ does the contract provide or do the parties expect that a vessel will play a substantial role in the completion of the contract?”

The court noted that under the oral work order, STS was “to perform downhole work on a gas well that had access only from a platform.” It was only after an unexpected problem occurred that it was a determined that a vessel and crane were needed to lift equipment onto the platform.

“The use of the vessel to lift the equipment was an insubstantial part of the job and not work the parties expected to be performed,” the court said. “Therefore, the contract is nonmaritime and controlled by Louisiana law. The LOIA bars indemnity.”

The court reversed the previous decisions in favor of LDI and granted summary judgment in STS’s favor. LDI’s third-party complaint against STS was also dismissed.