Chevron Oronite Co. v. Jacobs Field Servs. N. Am., Inc.

• Decision Date: 18 February 2020
• Docket Number: No. 19-30088,19-30088
• Citation: 951 F.3d 219
• Parties: CHEVRON ORONITE COMPANY, L.L.C., Successor in Interest to Chevron Chemical Company, Plaintiff–Appellee, v. JACOBS FIELD SERVICES NORTH AMERICA, INCORPORATED, Successor in Interest to J.E. Merit Constructors, Incorporated, Defendant–Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

951 F.3d 219

CHEVRON ORONITE COMPANY, L.L.C., Successor in Interest to Chevron Chemical Company, Plaintiff–Appellee,

v.JACOBS FIELD SERVICES NORTH AMERICA, INCORPORATED, Successor in Interest to J.E. Merit Constructors, Incorporated, Defendant–Appellant.

No. 19-30088

United States Court of Appeals, Fifth Circuit.

FILED February 18, 2020

Edwin S. Gault, Jr., Spencer M. Ritchie, Forman Watkins & Krutz, L.L.P., Jackson, MS, for Plaintiff-Appellee.

Arthur H. Leith, Esq., Patrick John O'Cain, McGlinchey Stafford, P.L.L.C., New Orleans, LA, for Defendant-Appellant.

Before JOLLY, SMITH, and COSTA, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

Wayne Bourgeois contracted mesothelioma

after he was exposed to asbestos while working at, among other places, the oil refinery of Chevron Oronite Company, L.L.C. ("Chevron"). Bourgeois sued Chevron and several other defendants in state court, and Chevron settled with Bourgeois for $550,000. Chevron sought contractual indemnity from Jacobs Field Services North America, Inc. ("Jacobs"). The district court, after granting partial summary judgment and holding a bench trial on stipulated facts, determined that Chevron was entitled to the full value of the settlement as well as about $256,000 in attorney’s fees and costs. Jacobs appeals, and we affirm.

I.

On September 7, 2016, Bourgeois filed an ex parte petition to perpetuate deposition testimony under Louisiana Code of Civil Procedure Article 1430.1. Bourgeois had been diagnosed with mesothelioma

and was concerned that he might not survive long enough to give his testimony in the ordinary course of litigation. Bourgeois indicated that he would give notice of his deposition to the expected adverse parties, and the state court granted his petition.

Bourgeois was deposed on November 30, 2016. Chevron was represented at the deposition, but Jacobs wasn’t. Bourgeois testified that he’d worked at Chevron’s refinery in Belle Chasse, Louisiana, for several employers, including J.E. Merit. Social Security records show that Bourgeois worked for Jacobs (J.E. Merit’s successor in interest) from 1989 to 1994.

On March 9, 2017, Bourgeois sued Chevron and about two dozen others (but not Jacobs) for exposure to asbestos. Bourgeois alleged, inter alia , that he had contracted mesothelioma

because he was exposed to asbestos during his employment as a welder. Against the "Premises Defendants," including Chevron, Bourgeois asserted negligence and strict liability claims.

On June 30, 2017, Bourgeois was again deposed. As before, Chevron was represented at the deposition, but Jacobs wasn’t. That deposition was supplementary to his first one, and no further testimony was developed as to Bourgeois’s work for J.E. Merit at the Belle Chasse facility.

In July 2017, Chevron discovered a contract (K-2485) with J.E. Merit for work at the Belle Chasse facility that required J.E. Merit to defend and indemnify Chevron. Based on that contract, Chevron sent an initial tender letter to Jacobs on July 24, 2017, demanding that Jacobs defend and indemnify Chevron in the Bourgeois case. But that contract was for certain warehouse services and wasn’t relevant to Bourgeois’s employment as a welder.

Over the following weeks, Chevron’s counsel followed up several times—with Jacobs’s general counsel and its outside counsel—seeking a response to its tender letter. Jacobs responded only sporadically to those messages. Accordingly, Chevron subpoenaed documents pertaining to Jacobs’s work at the Belle Chasse facility, requesting a response to its tender letter. Jacobs finally rejected Chevron’s initial tender on September 19, 2017. Bourgeois died from his illness the next day.

On October 31, 2017, Jacobs produced documents responsive to Chevron’s subpoena, including four contracts—K-2251, K-2542, K-2961, and K-3414—between Chevron and J.E. Merit. Those contracts covered welding work between February 17, 1989, and February 16, 1993, which included the eighteen-to-twenty-four-month period during which Bourgeois worked at the Belle Chasse refinery.

K-2542, K-2961, and K-3414 contained the following provision requiring Jacobs to indemnify Chevron:

[Jacobs] shall indemnify and save harmless [Chevron] from and against any and all loss, damage, injury, liability to or death of any person (including an employee of [Jacobs] or indemnitee) or for loss of or damage to property or for loss or damage arising from liens, attachments or patent infringement, including claims and reasonable attorneys’ fees relating to any of the foregoing, caused in whole or in part by any act or omission by [Jacobs], its employees or agents, in any way connected with this Agreement or [Jacobs’s] performance hereunder whether or not an indemnitee was or is claimed to be concurrently or contributorily negligent, and regardless of whether liability without fault is imposed or sought to be imposed on, one or more of the indemnitees. The foregoing indemnification ... shall not apply where such loss, damage, injury, liability, death or claim is the result of the sole negligence or willful misconduct of an indemnitee.

K-2251’s indemnity provision differs only in that it excludes the word "sole" before "negligence."

On November 7, 2017, Chevron reasserted its tender demand, this time based on the proper contracts. Chevron also updated Jacobs on the status of the Bourgeois suit:

In light of settlement of the underlying suit being imminent and likely to occur as early as next week, please contact me immediately if Jacobs has changed its position on providing a defense and indemnity to Chevron. As stated in our previous correspondence, if Jacobs does not acknowledge its responsibilities, Chevron may proceed against Jacobs for all costs of defense and settlement.

Jacobs continued to deny Chevron’s requests for defense and indemnity. Nevertheless, Chevron kept Jacobs apprised of the status of the settlement negotiations and offered it an opportunity to participate in those discussions. Jacobs still denied Chevron’s demands while reserving all rights and defenses.

On January 24, 2018, after months of negotiations, Chevron settled with Bourgeois for $550,000, which was within the $500,000 to $600,000 range that Chevron had twice communicated to Jacobs. Jacobs didn’t participate in the negotiations and hadn’t commented on the estimated settlement range.

On March 2, 2018, Chevron sued Jacobs under K-2251, K-2542, K-2961, and K-3414’s indemnity provisions. Chevron sought, inter alia , damages "for the cost of settlement and defense in the Bourgeois lawsuit" as well as "attorney’s fees and all costs of these proceedings. ..." Jacobs denied liability.

In August 2018, Chevron and Jacobs moved for summary judgment. In October 2018, the district court issued an order mostly granting Chevron’s motion and mostly denying Jacobs’s. The district court made four rulings: (1) To prevail on its indemnity claim, Chevron had to prove only that it was potentially, rather than actually, liable to Bourgeois; (2) at least one of contracts K-2542, K-2961, and K-3414 applied during the time when Bourgeois worked at the Belle Chasse refinery¹ ; (3) Chevron had shown that it was potentially liable to Bourgeois; and (4) Chevron was entitled to recover attorney’s fees and "ordinary litigation costs" related to its litigation of both Bourgeois and this case.

Those findings left only three issues for trial: (1) "the reasonableness of the settlement of the Bourgeois suit"; (2) the "particular amount of fees"; and (3) "the reasonableness of the amount of attorney’s fees incurred in defending and settling the Bourgeois suit and in prosecuting the instant action." Accordingly, the parties agreed that the court would decide the case based on stipulated facts and briefs filed by the parties.

On January 23, 2019, the district court issued its Findings of Fact and Conclusions of Law. The court made three rulings that cut in Chevron’s favor: (1) Jacobs bore the burden of proof to establish that Chevron’s settlement of the Bourgeois case was unreasonable; (2) Jacobs was liable to indemnify Chevron for the full $550,000 value of the settlement because it hadn’t met that burden; and (3) Jacobs was liable for $107,613.18 in attorney’s fees and costs for the Bourgeois case and $148,256.16 in attorney’s fees and costs for the indemnity suit.²

On appeal, Jacobs challenges the summary judgment and some trial decisions.³ Jacobs avers that the district court erred at summary judgment when it held that (1) Chevron only had to prove its potential liability in the Bourgeois suit, (2) Chevron had established that it was potentially liable, and (3) the contracts at issue entitled Chevron to indemnity, attorney’s fees, and litigation costs for both Bourgeois and this case. As for the trial rulings, Jacobs contends that the court erred when it ruled that Jacobs (1) bore the burden to prove that the Bourgeois settlement was unreasonable and (2) had failed to make that showing.⁴ We consider each contention in turn.

II.

We first evaluate whether, for indemnity, Chevron had to prove actual, rather than potential, liability. Because the district court granted summary judgment on that issue—and because the governing standard of liability is a question of law—our review is de novo . See Liberty Mut. Ins. Co. v. Pine Bluff Sand & Gravel Co. , 89 F.3d 243, 246 (5th Cir. 1996).

Sitting in diversity, we are obligated to "apply the substantive law of the forum state." Meador v. Apple, Inc. , 911 F.3d 260, 264 (5th Cir. 2018), cert. denied , ––– U.S. ––––, 139 S. Ct. 2649, 204 L.Ed.2d 285 (2019). "To determine Louisiana law, we look to the final decisions of the Louisiana Supreme Court." In re Katrina Canal Breaches Litig. , 495 F.3d 191, 206 (5th Cir. 2007). Absent such a decision, "we make an Erie guess, which requires us to employ Louisiana’s civilian methodology, whereby we first examine primary sources of law: the constitution, codes, and statutes." Apache Deepwater, L.L.C. v. W&T Offshore, Inc. , 930 F.3d...