Roberts v. Energy Development Corp.

• Decision Date: 04 February 1997
• Docket Number: No. 96-30026,96-30026
• Citation: 104 F.3d 782
• Parties: Cynthia E. ROBERTS, etc., et al., Plaintiffs, v. ENERGY DEVELOPMENT CORP., et al., Defendants, Third Party Plaintiffs Appellants-Cross Appellees, v. TEST, INC., formerly Production Management Control Systems, Inc., et al., Third Party Defendants, Appellees-Cross Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 782

104 F.3d 782

Cynthia E. ROBERTS, etc., et al., Plaintiffs, v. ENERGY DEVELOPMENT CORP., et al., Defendants, Third Party Plaintiffs Appellants-Cross Appellees, v. TEST, INC., formerly Production Management Control Systems, Inc., et al., Third Party Defendants,

Appellees-Cross Appellants.

No. 96-30026.

United States Court of Appeals Fifth Circuit.

Feb. 4, 1997.

Edward S. Johnson, Salvador A. Pusateri, Johnson, Johnson, Barrios & Yacoubian, New Orleans, LA, for Grasso Production Management, Inc.

Philip E. Henderson, Henderson, Hanemann & Morris, Houma, LA, for Gray Insurance Company and Test Incorporated, formerly Production Management Control Systems Incorporated.

Charles M. Steen, William Joseph Riviere, Phelps Dunbar, New Orleans, LA, for Energy Development Corp.

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

Before WISDOM, DAVIS and DUHE, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

Appellants, Energy Development Corporation ("EDC") and Grasso Production Management Inc. ("Grasso"), challenge the district court's judgment denying its indemnity claim against its contractor Production Management Control Systems ("PMCS") under a master service agreement. We vacate the judgment and remand for further proceedings.

I.

PMCS is a Louisiana oilfield contractor engaged in providing and maintaining pneumatic safety systems for offshore production platforms. EDC is an oil and gas production company, which holds state leases on a number of offshore production fields, including the "Chevron Field" under consideration in this case. Grasso was hired by EDC to operate and maintain EDC's production platforms in that field. EDC and PMCS entered into a master service agreement ("Agreement") under which PMCS agreed to provide EDC with its services as requested by EDC. A choice-of-law provision in the Agreement provided that the general maritime law and Texas law would govern. The Agreement also included indemnity provisions which required PMCS to indemnify EDC and Grasso against liability for any injury suffered by PMCS employees even though caused by EDC's fault.

Pursuant to the Agreement, EDC, through Grasso, issued an oral work order to PMCS to install safety systems on EDC's platforms in the "Chevron Field." PMCS dispatched Kerry Roberts to perform the work. The work order provided for the installation of two safety systems: a level safety high system ("LSH") which is designed to prevent the tank from overflowing onto the platform and a "fire loop" fire safety system. The LSH system is designed to activate when monitors indicate the contents of the oil storage tank have reached an unsafe level. To prevent the wells from continuing to flow and feed oil into the tank, the system shuts down the platform's compressor which pumps "lift gas" into the wells. Without this infusion of "lift gas", the wells stop production. The "fire loop" system operates in a similar manner. If the heat sensors perceive a fire, the safety system shuts down the "lift gas" compressor so that the wells stop producing and do not feed the fire.

At the time of his death, Mr. Roberts was working on EDC's E-5 production platform which is located in Louisiana waters. He was installing a "fire loop" system on the top of an oil storage tank filled with oil. The metal on the top of the tank where he was standing failed. As a result, he fell into the tank and drowned. Mr. Roberts' survivors sued both EDC and Grasso. EDC and Grasso then filed a third party complaint against PMCS seeking indemnification pursuant to the Agreement. PMCS sought summary judgment on grounds that the indemnification provision in the Agreement was void under the Louisiana Oilfield Indemnity Act ("LOIA"). ¹ EDC and Grasso filed a cross motion for summary judgment seeking a determination that the indemnity obligation was enforceable. Mr. Roberts' family settled with EDC and Grasso thus leaving only the indemnity issue to be resolved. The district court found the LOIA applicable to the Agreement and also found that the LOIA voided the Agreement's choice-of-law provision. The court granted summary judgment in favor of PMCS and denied EDC and Grasso's indemnity claim. This appeal followed.

II.

This appeal presents two legal issues for resolution. First, whether the LOIA applies to the Agreement. Second, whether the Agreement's choice-of-law provision is enforceable. We review this grant of summary judgment under the same standard that guided the district court. Lloyds of London v. Transcontinental Gas Pipe Line, 38 F.3d 193, 196 (5th Cir.1994).

A.

The LOIA was enacted generally to protect Louisiana oilfield contractors from over reaching principals who force the contractors through indemnity agreements to bear the risk of the principal's negligence. La.Rev.Stat.Ann. § 9:2780 (1990); ² Rodrigue v. Legros, 563 So.2d 248, 255 (La.1990); Torres v. McDermott, Inc., 12 F.3d 521, 526 (5th Cir.1994). The LOIA therefore nullifies indemnity agreements which protect the principal against its own fault at the expense of the contractor if the indemnity provisions are part of an agreement pertaining to an oil or gas well. La.Rev.Stat.Ann. § 9:2780(A) (1991). The LOIA is broadly written and has been broadly interpreted by the Louisiana courts and this Court. See Copous v. ODECO Oil & Gas, 835 F.2d 115, 117 (5th Cir.1988); Broussard v. Conoco, Inc., 959 F.2d 42, 45 (5th Cir.1992); St. Amant v. Glesby-Marks Corp., 532 So.2d 963, 965 (La.Ct.App. 5th Cir.1988).

Turning to today's case, the LOIA by its terms applies to the work order ³ authorizing Robert's work if the order "pertains to a well" and is "related to the 'exploration, development, production or transportation of oil, gas, or water.' " Johnson v. Amoco Production Co., 5 F.3d 949, 953-54 (5th Cir.1993). EDC and Grasso's only challenge to the applicability of the LOIA is that the work order does not "pertain to a well." This inquiry requires a fact intensive case-by-case analysis. Transcontinental Gas v. Transportation Insurance Co., 953 F.2d 985, 994 (5th Cir.1992); Broussard, 959 F.2d at 44.

EDC and Grasso argue that the work order does not "pertain to a well" because the E-5 platform serviced and received the products of six wells. Our decision in Broussard controls this issue. In Broussard, we held that a catering contract requiring the contractor to feed the production workers and maintain their living quarters on a quarters platform located adjacent to a production platform pertained to a well. We reached this conclusion despite the fact that these workers served multiple wells from the platform. We concluded that the "purpose or function of the facilities covered by the contract was to sustain manpower for production." Broussard, 959 F.2d at 45. We stated that a " 'functional nexus' arises from the fact that production employees are unquestionably necessary for production from a well." Id. See Also Copous, 835 F.2d at 117 (holding the LOIA applied to a contract to renovate living quarters on a manned platform because the living quarters "were essential to the operation" of the platform, and the platform was an integral part of the drilling operation).

The safety systems called for in EDC's work order protect the E-5 platform and personnel working there by stopping the production of the wells feeding the platform in certain emergencies. Significantly, the E-5 platform housed workers who helped maintain the six wells. Therefore, the safety systems called for in the work order--like the catering done in Broussard--sustain the manpower necessary for production. The safety systems, by protecting the equipment on the E-5 platform, provide an additional nexus to the wells. The systems sustain the equipment necessary for production.

EDC and Grasso argue next that this Court's decisions in Transcontinental Gas, Johnson and Lloyds of London require a conclusion that this work order did not "pertain to a well." In Transcontinental Gas, this court considered whether a contract pertained to a well when the contractor provided painting, sandblasting, and other services to a pipeline and related transmission equipment. We rejected the indemnitor's argument that their work pertained to a well because it was performed on the transmission pipeline and equipment. The court held that there is a "point at which the gas no longer can be identified with a particular well, or is so fundamentally changed in processing, commingling, or preparing it for distribution to its ultimate end user, that the gas no longer 'pertains to a well.' " ⁴ Transcontinental Gas, 953 F.2d at 994. Identifying this "point" is important under Transcontinental Gas because work called for in a contract to service transmission equipment transporting gas downstream from this point is not considered work that "pertains to a well." Transcontinental Gas, however, is most relevant in a case where the contract provides for work to be performed to a pipeline or other part of the transmission system and where that work has little, if any, connection to the wells themselves. ⁵

Relying on Transcontinental Gas and its progeny, EDC and Grasso argue that because Roberts was working on a tank holding commingled oil, his work did not pertain to a well. The flaw in EDC and Grasso's argument is the insistence that we focus solely on the location of the work being performed at the time of the accident and the condition of the oil at that location. Broussard teaches that where the contract calls for work necessary to sustain the crew who work on individual wells, the required nexus to a well is established. Here, the purpose of the safety system Mr. Robert's was installing pursuant to PMCS' contract was to preserve the manpower and facilities of production. In an emergency, the wells themselves are shut down. This nexus is strong enough, given the broad scope of the LOIA, to conclude that the work order "pertains to a well." Accordingly, we...