AGIP Petroleum Co. v. Gulf Island Fabrication, Inc.

• Decision Date: 25 March 1996
• Docket Number: Civil Action No. H-94-3382.
• Citation: 1996 AMC 1837,920 F. Supp. 1330
• Parties: AGIP PETROLEUM CO., INC., Plaintiff, v. GULF ISLAND FABRICATION, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

920 F. Supp. 1330

1996 AMC 1837

AGIP PETROLEUM CO., INC., Plaintiff, v. GULF ISLAND FABRICATION, INC., et al., Defendants.

Civil Action No. H-94-3382.

United States District Court, S.D. Texas, Houston Division.

March 25, 1996.

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J. Harrell Feldt, Vinson & Elkins, Houston, Texas, for Plaintiff.

James M. Tompkins, Galloway, Johnson, Tompkins & Burr, Houston, Texas, for Gulf Island Fabrication.

Innes MacKillop, Brown, Sims, Wise & White, Houston, Texas, for McDermott.

Steven L. Roberts, Fulbright & Laworski, Houston, Texas, for Snamprogetti.

Michael P. Morris, Tekell, Book, Matthews & Limmer, L.L.P., Houston, Texas, for Petro-Marine.

ORDER ON SUMMARY JUDGMENT

HUGHES, District Judge.

1. The court adopts the memorandum and recommendation of the United States Magistrate Judge signed February 15, 1996.

2. Gulf Island Fabrication, Snamprogetti USA, McDermott Incorporated, and Petro-Marine Engineering of Texas are granted summary judgment on AGIP Petroleum's tort claims for economic losses.

3. Gulf Island Fabrication, Snamprogetti USA, McDermott Incorporated, and Petro-Marine Engineering of Texas are granted summary judgment on AGIP Petroleum's claims for special, punitive, direct, or consequential damages under negligence and strict liability theories.

4. McDermott, Inc. is granted summary judgment on AGIP Petroleum's claims for special, punitive, direct, or consequential damages under contract and breach of warranty theories.

5. Gulf Island Fabrication, Snamprogetti USA, and Petro-Marine Engineering of Texas are granted summary judgment on AGIP Petroleum's claims for special, punitive, direct, or consequential damages under contract and breach of warranty theories not premised on a willful or deliberate disregard of a contractual duty.

6. Gulf Island Fabrication, Snamprogetti USA, McDermott Incorporated, and Petro-Marine Engineering of Texas are denied summary judgment on AGIP Petroleum's claims for actual compensatory damages other than economic losses based on gross negligence or willful misconduct.

7. Gulf Island Fabrication, Snamprogetti USA, and Petro-Marine Engineering of Texas are denied summary judgment on AGIP Petroleum's contract and breach of warranty claims based on a willful or deliberate disregard of a contractual duty.

8. Gulf Island Fabrication, Snamprogetti USA, McDermott Incorporated, and Petro-Marine Engineering of Texas are denied summary judgment on AGIP Petroleum's claims for breach of contract and breach of warranty for direct damages not contractually excluded.

MEMORANDUM AND RECOMMENDATION

CRONE, United States Magistrate Judge.

Pending before the court are the motions for summary judgment of Defendants McDermott Incorporated (McDermott) (# 30), Snamprogetti USA, Inc. (Snamprogetti) (# 51), Gulf Island Fabrication, Inc. (Gulf Island) (# 53), and Petro-Marine Engineering of Texas, Inc. (Petro-Marine) (# 81). Having reviewed the motions, the submissions of the parties, the pleadings, and the applicable law, the court is of the opinion that the defendants' motions for summary judgment should be granted in part and denied in part.

1. Background

Each of the defendants was involved in the design, manufacture, transportation, or installation of a four pile, sixteen slot drilling/production platform jacket for AGIP to be installed in Grand Isle Block 102 of the Gulf of Mexico located offshore Louisiana. On June 18, 1992, AGIP contracted with Snamprogetti to supervise the design and fabrication of the jacket. Snamprogetti, in turn, hired Petro-Marine to provide design and engineering services. On November 18, 1992, AGIP contracted with McDermott for the transportation and installation of the jacket. On May 5, 1993, AGIP and Gulf Island entered into an agreement for the fabrication of the jacket.

On October 17, 1993, the completed jacket was loaded on a transportation barge and shipped offshore from Houma, Louisiana. It was transported successfully to the installation site and offloaded from the barge. The jacket's mud mats, however, were breaking loose from the structure. Repairs were done in the water, and the jacket was upended into a vertical position for landing. There were still problems with the mud mats, which eventually were removed by divers. The jacket was placed in the desired location on the ocean bed without the mud mats. During pile-driving operations, the jacket sank and toppled over on its side in water 257 feet deep. The jacket was salvaged and towed to shore for inspection and repairs. It was reinstalled successfully on January 27, 1994.

AGIP incurred damages and costs exceeding $15,000,000.00. AGIP's Underwriters paid AGIP up to policy limits for damage to the jacket under builder's risk policy SJ0002 and excess policies SJ0003A and SJ0003B. Underwriters brought suit in the name of AGIP on September 30, 1994, in No. H-94-3382, claiming subrogation rights against Gulf Island for the insured loss. On October 18, 1994, invoking this court's admiralty jurisdiction and its federal question jurisdiction based on the Outer Continental Shelf Lands Act (OCSLA), AGIP brought suit in No. H-94-3547 against McDermott, Snamprogetti, Gulf Island, and Petro-Marine, alleging negligence, gross negligence, products liability, breach of contract, and breach of warranty. AGIP seeks recovery from the parties for uninsured losses — actual compensatory damages, including lost revenue from delayed oil and gas production, as well as punitive damages. On February 17, 1995, No. H-94-3547 was consolidated into No. H-94-3382.

2. The Standard for Summary Judgment

Rule 56(c) provides that "summary judgment shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and identifying those portions of the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Williams v. Adams, 836 F.2d 958, 960 (5th Cir.1988). Once a proper motion has been made, the non-moving party may not rest upon mere allegations or denials in the pleadings, but must set forth specific facts showing the existence of a genuine issue for trial. Celotex Corp., 477 U.S. at 322-23, 106 S.Ct. at 2552-53; Anderson, 477 U.S. at 257, 106 S.Ct. at 2514-15; Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.), cert. denied, 506 U.S. 825, 113 S.Ct. 82, 121 L.Ed.2d 46 (1992). The controverted evidence must be viewed in the light most favorable to the non-movant and all reasonable doubts must be resolved against the moving party. Lujan v. National Wildlife Fed'n, 497 U.S. 871, 888, 110 S.Ct. 3177, 3188, 111 L.Ed.2d 695 (1990); Anderson, 477 U.S. at 255, 106 S.Ct. at 2513-14. Summary judgment is mandated if the non-movant fails to make a showing sufficient to establish the existence of an element essential to nonmovant's case on which it bears the burden of proof at trial. Celotex, 477 U.S. at 322, 106 S.Ct. at 2552. "In such situation, there can be `no genuine issue as to any material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Id. at 323, 106 S.Ct. at 2552-53.

3. AGIP's Tort Claims

The defendants argue that AGIP's claims for lost revenues from delayed oil and gas production under theories of negligence, gross negligence, and products liability are precluded by the "economic loss" rule recognized in admiralty. Defendants' arguments are premised on the assumption that AGIP's cause of action arises under maritime law. AGIP, on the other hand, contends that these claims are not barred because they arise under OCSLA, which applies the law of the adjacent state, here, Louisiana, a jurisdiction that has not adopted the "economic loss" rule.

A. Choice of Law

The purpose of OCSLA is to define a body of law to apply to the seabed, the subsoil, and the fixed structures on the outer Continental Shelf. Rodrigue v. Aetna Cas. and Sur. Co., 395 U.S. 352, 355, 89 S.Ct. 1835, 1837, 23 L.Ed.2d 360 (1969). OCSLA states:

The Constitution and laws and civil and political jurisdiction of the United States are hereby extended to the subsoil and seabed of the outer Continental Shelf and to all artificial islands, and all installations and other devices permanently or temporarily attached to the seabed, which may be erected thereon for the purposes of exploring for, developing, or producing resources therefrom.

43 U.S.C. § 1333(a)(1); see also Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 480, 101 S.Ct. 2870, 2876, 69 L.Ed.2d 784 (1981). OCSLA further provides:

To the extent they are applicable and not inconsistent with this subchapter or with other Federal laws ... the civil and criminal laws of each adjacent State, ... are hereby declared to be the law of the United States for that portion of the subsoil and seabed of the outer Continental Shelf, and artificial islands and fixed structures thereon, which would be within the area of the State if its boundaries were extended seaward to the outer margin of the outer Continental Shelf....

43 U.S.C. § 1333(a)(2)(A). Under OCSLA, the law of the adjacent state is controlling as surrogate federal law with respect to fixed platforms located on the shelf to the exclusion of admiralty and common law. Rodrigue, 395 U.S. at 355, 89 S.Ct. at 1837; Grover v. Exxon Corp., 894 F.Supp....