Incident Aboard D/B Ocean King, In re

• Decision Date: 30 August 1980
• Citation: 758 F.2d 1063
• Parties: In re INCIDENT ABOARD the D/B OCEAN KING on
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1063

758 F.2d 1063

1987 A.M.C. 910

In re INCIDENT ABOARD the D/B OCEAN KING on August 30, 1980 CITIES SERVICE COMPANY and Getty Oil Company Plaintiffs-Appellants, Cross-Appellees, v. OCEAN DRILLING AND EXPLORATION COMPANY and Odeco, Inc. Defendants-Appellees, Cross-Appellants Hydril Company, Defendant-Appellee, Cross-Appellant.

No. 83-3519.

United States Court of Appeals, Fifth Circuit.

April 26, 1985.

Liskow & Lewis, Charles M. Steen, Larry M. Roedel, New Orleans, La., for Cities & Getty.

Ross, Griggs & Harrison, Kent Westmoreland, Houston, Tex., for Getty Oil.

Lemle, Kelleher, Kohlmeyer & Matthews, Geo. A. Frilot, III, Michael A. McGlone, James H. Brown, Jr., New Orleans, La., for Odeco & Ocean Drilling.

Earl S. Eichin, Jr., New Orleans, La., for Hydril Co.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before JOHNSON and HILL, Circuit Judges, and BOYLE ^*, District Judge.

JOHNSON, Circuit Judge:

Cities Service Company, Getty Oil Company, and Ocean Drilling and Exploration Company (ODECO) all appeal from the judgment of the district court in litigation arising out of a "blow out" and fire aboard the drilling rig the D/B OCEAN KING allegedly caused by a defective blow out preventer manufactured by Hydril Company. The jury found that Hydril Company, the defendant, was seven percent liable for both personal injury and property damage claims asserted by the plaintiffs Cities, Getty and ODECO. The district court, however, entered judgment against Hydril only on the personal injury claims. Cities, Getty, and ODECO, all assert on appeal that the jury's liability determination should have been applied to the property damage claims as well as the personal injury claims. Hydril cross-appeals challenging the finding of seven percent liability. Cities and Getty also appeal the district court's grant of partial summary judgment in favor of ODECO on Cities' and Getty's claims for the costs of killing the well and for deferred production damages. This Court affirms the grant of partial summary judgment. This Court declines to address the liability findings because this Court determines that the jury was an advisory jury. As such, it was incumbent upon the district court to issue findings of fact and conclusions of law to aid this Court in reviewing the district court's determination of liability. This the district court did not do, and for the reasons stated below, this case is remanded to the district court for it to make those findings.

I. FACTS AND PROCEDURAL HISTORY

A. The Accident

In August 1980, a blow out and fire occurred aboard the D/B OCEAN KING, a jackup drilling rig owned and manned by Ocean Drilling and Exploration Company (ODECO). The OCEAN KING was then engaged in drilling a well off the coast of Texas pursuant to an agreement between Cities Service Company and Getty Oil Company on the one hand and ODECO on the other. Cities Service Company and Getty Oil Company (collectively referred to as "Cities") were the owners of the lease involved. Cities Service Company was designated as the operator of the lease.

Shortly before the blow out and fire aboard the OCEAN KING, the ODECO toolpusher and a Cities Service Company man suspected that a bubble of gas had intruded into the well bore from the surrounding geologic formation. The toolpusher and company man decided to circulate the drilling fluid in the well in an attempt to circulate out the bubble of gas. After the well had been circulated for approximately forty-five minutes, they noticed that drilling fluid coming out of the hole was cut with gas. Shortly thereafter, the blow out preventer was closed and the flow of drilling fluid was directed through the choke. Several hours later the blow out preventer failed at a casing pressure of 3700 p.s.i., allegedly due to the failure of the rubber packing unit in the blow out preventer.

The blow out preventer that allegedly failed was a Hydril GL 5000 blow out preventer. At trial, it was contended that if the Hydril blow out preventer had been functioning properly, the seal around the drill pipe would have prevented the escape of gas and drilling fluid up to a pressure of 5000 p.s.i.; instead, it allegedly failed at a casing pressure of 3700 p.s.i. After the alleged failure of the blow out preventer, the casing pressure on the well continued to climb until it reached 7200 p.s.i. Those on board the rig felt a jolt and the pressure dropped to 4700 p.s.i. On the morning of August 30, 1980, gas pressure overcame the casing pressure on the well and ignited, causing the blow out.

Five persons died in the incident and several more persons were injured. Cities claimed it expended $40.7 million to control the blow out and extinguish the fire. Cities also claimed $37.5 million in lost profits due to deferred or delayed production. ODECO claimed $41.2 million in property damage, and additional lost profits.

B. The Litigation

Numerous lawsuits arose out of the incident aboard the D/B OCEAN KING. Claims were filed for damage to the rig, property damage to the well, lost profits, and the costs of controlling the blow out and extinguishing the blaze. In addition, claims for wrongful death and personal injury were filed on behalf of the employees of the various corporations involved in the venture. In October 1981, the Judicial Panel on Multidistrict Litigation transferred all cases to the Eastern District of Louisiana, where the cases were consolidated for trial. ¹

Prior to trial, ODECO and Cities reached a settlement agreement allocating fault in causing the blow out, but reserving their respective defenses under the drilling contract. Each party contended that the drilling contract waived in advance the damages claimed by the other party, and on this basis motions for partial summary judgment were granted by the district court.

In accordance with their settlement agreement, Cities and ODECO were able to settle the personal injury and wrongful death claims prior to trial, taking assignments of the claimants' rights against the remaining defendants. Thereafter, the case proceeded to trial with ODECO, Cities, and Getty (as plaintiffs) suing Hydril ² under the assignments for personal injury and wrongful death, and also to recover property damages under theories of negligence and strict liability.

The jury returned a verdict finding that the blow out and fire resulted from the fault of the parties in the following percentages: Cities Service Company--55%, ODECO, Inc.--38%, and Hydril Company--7%. The jury assigned percentages of fault identically for both the personal injury claims and the property damage claims. ³ The district court expressly approved the jury's allocation of fault to Hydril. Nevertheless, the district court refused to enter judgment for the plaintiffs on the property damage claims. Motions by the plaintiffs to amend the judgment or in the alternative for a new trial were denied. All parties appeal.

II. THE SUMMARY JUDGMENT ISSUES

At trial, Cities sought to recover from ODECO its costs involved in controlling the blow out and extinguishing the fire, as well as its lost profits attributable to deferred or delayed production. ODECO responded as a defense that certain provisions in the drilling contract allocated those risks to Cities. The district court granted summary judgment based on those contractual provisions. ⁴

A. Article 12

As one facet of its case, Cities sought to recover from ODECO its (Cities') costs incurred in controlling the blow out and extinguishing the resultant fire. In defense, ODECO asserts that Article 12 of the drilling contract allocated those risks and costs to Cities. Article 12 provides In the event a well drilled hereunder shall blow out or crater from any cause it is understood that operator [Cities] shall bear the entire cost and full liability of killing the well and bringing it under control (emphasis added).

Based on this provision, the district court granted ODECO summary judgment. After reviewing Louisiana law, ⁵ this Court concludes that the district court was correct in its assessment.

On appeal, appellant (Cities) asserts that Article 12 of the drilling contract does not bar its claims against ODECO for the costs of extinguishing the fire and controlling the blow out because that provision does not expressly state that it relieves ODECO of its own negligence. Cities suggests that a specific reference to ODECO's negligence must be included in the contract for the court to find that ODECO is released from its own negligence. In support of its position, Cities refers this Court to several Louisiana and Fifth Circuit cases that might be read to require an express reference to negligence in the context of indemnity agreements. See, e.g., Mott v. ODECO, 577 F.2d 273 (5th Cir.1978), cert. denied, 440 U.S. 912, 99 S.Ct. 1226, 59 L.Ed.2d 461 (1979); Aymond v. Texaco, Inc., 554 F.2d 206 (5th Cir.1977); Law v. Sea Drilling Corp., 510 F.2d 242, on rehearing, 523 F.2d 793 (5th Cir.1975) (rehearing denied on other grounds); Green v. Taca International Airlines, 304 So.2d 357 (La.1974); Carriage Meat Co., Inc. v. Honeywell, Inc., 442 So.2d 796 (La.App. 4th Cir.1983); Alan Abis, Inc. v. Burns Electronic Security Services, Inc., 283 So.2d 822 (La.App. 2d Cir.1973). ⁶ Cf. Seal Offshore, Inc. v. American Standard, Inc., 736 F.2d 1078 (5th Cir.1984). This Court notes, however, that the instant case involves an allocation of risk provision in the drilling contract rather than an indemnity provision.

After reviewing these cases, and particularly the more recent cases, this Court concludes Louisiana law does not require an express reference to "negligence" in an allocation of risk provision contained in a drilling contract. Rather, the intent of the parties to the contract is deemed to be the most important consideration. The question here is whether the drilling contract unambiguously demonstrates that the parties intended...