Roberts v. Energy Development Corp.

• Decision Date: 13 December 2000
• Docket Number: No. 99-31150,99-31150
• Citation: 235 F.3d 935
• Parties: (5th Cir. 2000) CYNTHIA ROBERTS, Etc., ET AL., Plaintiffs, v. ENERGY DEVELOPMENT CORPORATION; GRASSO PRODUCTION MANAGEMENT, INC., Defendants-Third Party Plaintiffs - Appellees, v. THE GRAY INSURANCE COMPANY, Third-Party Defendant - Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

Page 935

235 F.3d 935 (5th Cir. 2000)

CYNTHIA ROBERTS, Etc., ET AL., Plaintiffs, v. ENERGY DEVELOPMENT CORPORATION; GRASSO PRODUCTION MANAGEMENT, INC., Defendants-Third Party Plaintiffs - Appellees, v. THE GRAY INSURANCE COMPANY, Third-Party Defendant - Appellant.

No. 99-31150

UNITED STATES COURT OF APPEALS, Fifth Circuit

December 13, 2000

Appeal from the United States District Court For the Eastern District of Louisiana.

Before DUHE, EMILIO M. GARZA, and DeMOSS, Circuit Judges.

DeMOSS, Circuit Judge:

In this appeal, Third-Party Defendant-Appellant Gray Insurance Company ("Gray") appeals from an adverse summary judgment entered against it in an insurance indemnification dispute among various insurance defendants. The underlying claim giving rise to an insurance payment obligation was the death of Kerry Roberts, who died when he fell through the top of an oil storage tank which he was repairing. Surviving family members sued both the owner and the production operator of the storage tank, Energy Development Corporation ("EDC"), and Grasso Production Management, Inc. ("Grasso"), respectively. These defendants then filed third-party complaints against Roberts's employer, Production Management Control Systems ("PMCS") and its insurance company, The Gray Insurance Company ("Gray"), seeking indemnity pursuant to the master service agreement between PMCS and EDC. For the reasons discussed below, we reverse the district court's order granting summary judgment in favor of EDC and Grasso.

I. FACTUAL AND PROCEDURAL BACKGROUND

Kerry Roberts, an employee of PMCS, was killed installing a fire protection device on the top of an oil storage tank owned by EDC when the top of the storage tank collapsed and he fell through and ultimately drowned in the oil stored therein. Roberts was sent to the storage tank by EDC and Grasso, both of which had prior knowledge that the top of the storage tank might be defective since only months prior, a Grasso employee's knee had gone through the top of a companion storage tank. The storage tank at issue was located on EDC's E-5 platform facility in a canal in West Delta Block 83, which is located in Plaquemines Parish, Louisiana. EDC classifies its E-5 platform as an offshore facility but the West Delta Block 83 facility is located in waters within the State of Louisiana.

PMCS limits its services to performing work such as the installation, repair, and testing of safety systems on oil and gas production platforms. The work done on April 29, 1994, the day of the accident, was performed pursuant to a verbal work order issued four days earlier for the installation of a fire safety device on the E-5 tank and platform. The work order was issued from the EDC facility in Plaquemines, Louisiana.

EDC and PMCS had previously entered into a form master service agreement ("MSA") on May 7, 1993, which agreement was prepared by EDC and was quite similar to the MSA entered into by EDC and Grasso. The MSA did not bind EDC to perform any work at all for PMCS and did not identify specific dates, time, or places for performance. The MSA did, though, contain an indemnity provision which required PMCS to carry $1 million in general liability coverage and to designate EDC and EDC's subcontractors as additional insureds. The form MSA also contained a choice of law provision, which provided as follows:

This Contract shall be governed by General Maritime Law of the United States, wherever permissible. Otherwise, the laws of the State of Texas shall apply, excluding, however, any such law which would direct the application of the law of a different jurisdiction.

PMCS is a Louisiana corporation domiciled in Louisiana and EDC is a New Jersey corporation with corporate offices in Ardmore, Oklahoma. The record reveals that most of the work performed by PMCS was done in Louisiana or in her waters, and a very small portion was performed at a facility in the Outer Continental Shelf in the non-territorial waters offshore of Texas, but none was performed in either Texas or her territorial waters.

The insurance provisions of both the EDC/PMCS and the EDC/Grasso MSAs required the contractee's general comprehensive liability policy to provide that EDC be covered as an additional insured under the policy. Each of these entities had general liability policies as follows: PMCS had a $1 million primary policy and a $5 million excess policy, both issued by Gray; EDC's primary policy was issued by Lloyd's for $250,000; and Grasso's primary policy was issued by Lloyd's for $250,000 and it carried an excess policy in the amount of $750,000, also issued by Lloyd's. Both PMCS's and Grasso's excess policies provide that any entity insured under the primary policy is also covered under the excess policy. Undisputedly, each primary policy also contains a provision that a party becomes an additional insured when that status is required by any contract with the named insured. An "endorsement" on the Gray primary policy also contains a schedule of companies to whom primary coverage is to apply. Neither EDC nor Grasso is listed as one of the 27 in the schedule to whom the endorsement explicitly refers.

When the Roberts family sued EDC and Grasso for the death of Kerry Roberts, EDC and Grasso filed third-party complaints against PMCS and its insurer, Gray, for MSA contractual indemnification. PMCS denied the third-party claims and asserted in the alternative that if indemnity was owed EDC, it was to be shared with Grasso, and that if additional insured status was declared, it would be shared with EDC's and Grasso's insurers.

The federal district court originally granted summary judgment to PMCS and Gray based on the Louisiana Oilfield Indemnity Act ("LOIA"), La. Rev. Stat. 9:2780, and dismissed EDC's and Grasso's third-party complaints. EDC and Grasso then settled the underlying claims of the Roberts family against them, with EDC paying the family $544,300 and Grasso paying $816,833.75. EDC and Grasso then appealed the district court's dismissal of their third-party claims against PMCS and Gray.

In Roberts v. Energy Development Corp., 104 F.3d 782 (5th Cir. 1997), a prior panel of our Court affirmed the district court's finding that the contract at issue "pertained to a well" and that the LOIA would bar EDC's and Grasso's claims, but it remanded to the district court for reconsideration of the district court's determination regarding the choice of law provision in the MSA. Specifically, the prior panel remanded for a consideration of whether the LOIA rendered unenforceable the agreement's choice of law provision. The prior panel observed that, in a diversity case, the forum state's conflict laws govern resolution of the enforceability of a choice of law provision, and thus, it remanded for consideration of the viability of the agreement's choice of law provisions in light of Louisiana's conflict articles, La. Civ. Code arts. 3540, 3537, and 3515. See Roberts, 104 F.3d at 786-87.

On remand, the district court concluded that the choice of law provision in the MSA, selecting Texas law, was enforceable and that as a result, the LOIA did not apply. The district court also concluded that while a contractual indemnity clause is otherwise barred by the Texas Oilfield Anti-Indemnity Act ("TOAIA"), Tex. Civ. Prac. & Rem. Code §§ 127.001-127.007 (Vernon Supp. 1996), an "additional insured requirement," like that found in the MSA at issue in this case, does not violate the TOAIA and is valid and enforceable. The court went on to conclude that Grasso's policy would not provide coverage because Roberts was not a Grasso employee. Additionally, the district court ruled that EDC and Grasso would share equally the reimbursement from the $1 million Gray primary policy, that EDC's primary policy would absorb the shortfall after receiving the $500,000 from Gray, and that since Grasso's primary policy had been exhausted by prior claims, Gray's excess policy was to cover the additional liability amount of $316,833.75, which was beyond the $500,000 Grasso would receive from Gray's primary policy. All told, Gray was ordered to pay EDC $500,000 and to pay Grasso $816,833.75.

Gray has now timely appealed all adverse rulings made against it by the district court.

II. DISCUSSION

A. Standard of Review

We review the grant of summary judgment de novo, applying all of the same standards applicable in the district court. See Sherrod v. American Airlines, Inc., 132 F.3d 1112, 1119 (5th Cir. 1998). Summary judgment under Rule 56 of the Federal Rules of Civil Procedure is appropriate only if

. . . the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

Fed.R.Civ.P. 56(c).

Here, the material facts are not in dispute and our disposition hinges on the application of the undisputed facts to the law determined applicable. It is not disputed that should Louisiana law be determined applicable pursuant to the Louisiana conflicts articles, the LOIA would bar any claims against Gray by EDC and Grasso for contribution or indemnity.

B. Analysis

Pursuant to our prior panel's remand, the district court first set about to reconsider whether the choice of law provision in the MSA between PMCS and EDC, which provision selected Texas law as applying except for those such laws "which would direct the application of the law of a different jurisdiction," was enforceable in light of the LOIA. Pursuant to the remand order, the district court analyzed the enforceability of the choice of law provision under Louisiana's conflicts articles. The district court noted that the decision upon which it had previously relied in determining that Louisiana law governed the dispute, that is Matte v. Zapata Offshore Co., 784 F.2d 628 (5th Cir. 1986), was inapplicable, as noted in the prior panel's...