The Offshore Drilling Co v. Gulf Copper & Mfg. Corp.

• Decision Date: 20 April 2010
• Docket Number: No. 08-40885.,08-40885.
• Citation: 604 F.3d 221
• Parties: THE OFFSHORE DRILLING CO., and its Interested Underwriters, Plaintiff-Appellant-Cross-Appellee,v.GULF COPPER & MANUFACTURING CORP., Defendant-Appellee-Cross-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

604 F.3d 221

THE OFFSHORE DRILLING CO., and its Interested Underwriters, Plaintiff-Appellant-Cross-Appellee,v.GULF COPPER & MANUFACTURING CORP., Defendant-Appellee-Cross-Appellant.

No. 08-40885.

United States Court of Appeals Fifth Circuit.

April 20, 2010.

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David Sinnott Bland (argued), Matthew C. Guy (argued), LeBlanc Bland, P.L.L.C., New Orleans, LA, for The Offshore Drilling Co.

Kenneth G. Engerrand, I, Mark C. Clemer, Charles Clayton Conrad (argued), Michael D. Williams, Brown Sims, P.C., Houston, TX, for Gulf Copper & Mfg. Corp.

Appeal from the United States District Court for the Southern District of Texas.

Before GARWOOD, OWEN and SOUTHWICK, Circuit Judges.

LESLIE H. SOUTHWICK, Circuit Judge:

A vessel owned by The Offshore Drilling Company (“TODCO”), was destroyed by fire while berthed at a shipyard owned by contractor Gulf Copper & Manufacturing Corporation. At the time of the fire, Gulf Copper was performing “hot work” on the vessel. In the district court, Gulf Copper sought declaratory relief on the theory that the indemnity provision in its contract with TODCO released Gulf Copper from liability. The district court granted summary judgment for Gulf Copper. On appeal, TODCO contends that genuine issues of material fact exist concerning which party had “control” of the vessel. We find that no disputed fact sufficient to preclude summary judgment appears in the record. We AFFIRM on this question. On the separate issue of liability for attorneys' fees, we REVERSE and REMAND.

I. STATEMENT OF FACTS

TODCO owned a mobile offshore drilling rig, called a “jack-up rig,” that it designated as “THE 256.”¹ Such a rig is on top of a barge that is towed to a site, with the legs of the rig pulled up. Upon arrival, the legs are jacked down to the floor of the sea, and the drilling platform is raised into the air. THE 256 had been out of service for some time. In early 2006, TODCO contracted for its refurbishing prior to being put back into service.

TODCO dealt with a number of contractors on the project. One of those contractors was Gulf Copper, with whom TODCO contracted to perform “hot work,” or welding, to replace corroded steel on the vessel. Gulf Copper also provided the Galveston dock at which the vessel was berthed for the duration of the work. During the two months that repairs were made, other contractors with no relation to Gulf Copper were working on site. TODCO managerial employees were also working on the rig throughout this time period.

On the night of May 13, 2006, a fire broke out on THE 256 while hot work was being performed. The rig sustained serious damage as a result of the fire. No fact-finding was made prior to judgment about where on the rig the fire started or what caused it.

TODCO brought this action against Gulf Copper in the district court, alleging that Gulf Copper's negligence had caused the fire and that Gulf Copper was liable for breach of contract and under a bailment theory. Gulf Copper denied that its actions caused the fire, and further defended on the basis that the parties' contract required TODCO to indemnify Gulf Copper. The relevant language of the contract, which is in Paragraph 5.2(b), is as follows:

Owner shall indemnify Contractor ... against any and all losses [to Owner's property] ... (unless such property is under the control of Contractor at the time at which such loss or damage occurs), which arise from, are incident to, connected with, or result directly or indirectly from the performance of the work ....

The district court's analysis centered on the meaning of “control” in the parenthetical phrase. Specifically, the court held that if TODCO could prove that the vessel was under Gulf Copper's control at the time of the fire, Gulf Copper would not be entitled to indemnity from TODCO.

The parties submitted significant evidence addressing the issue of control. TODCO sought to prove Gulf Copper's control of the vessel with these facts: THE 256 had been berthed for two months in Gulf Copper's shipyard before the fire; Gulf Copper continuously performed work on the vessel and controlled access to the shipyard; Gulf Copper employees were engaged in hot work when the fire started; Gulf Copper conducted periodic safety-related “audits” of the vessel; at least one Gulf Copper foreman testified that he “control [led] the work on the rig;” TODCO employees were not specifically directing any of the work occurring at the time of the fire; and Gulf Copper was responsible for maintaining a “fire watch” on THE 256.

Gulf Copper, on the other hand, introduced evidence that a number of other contractors were working on the vessel during the period before the fire, over whom Gulf Copper had no control. TODCO maintained a consistent and dominant presence on the site, and TODCO's “project management team” directed and supervised the contractors on a daily basis. TODCO also provided an intricate security system operated by a TODCO employee, which was designed to monitor the movements of anyone who sought to come on board the vessel. Gulf Copper's evidence purported to show that TODCO controlled the vessel by means of ownership, security, hiring authority, onsite management, movement of the vessel, and control over ingress and egress to the rig.

In the district court, the parties disputed some of the factual issues. For instance, TODCO contended that none of its employees were on board the vessel the night of the fire, while Gulf Copper maintained that a small TODCO crew was present. Likewise, Gulf Copper insisted that a TODCO employee took control of the site after the fire started, barricading the vessel to prevent further entry. TODCO denied that its employee's action evinced its control over the rig. The evidence also showed that Gulf Copper and TODCO shared some of the same responsibilities on the vessel. Both provided security and safety, and each had its own procedures for assigning and executing work.

The district court granted Gulf Copper's motion for summary judgment. It found the evidence “overwhelming and undisputed” that Gulf Copper did not have control of the vessel at the time of the loss, noting that the contract's wording placed the burden on TODCO to show that it had “transferred or relinquished” control to Gulf Copper sometime prior to the accident. The district court concluded that TODCO had control of the vessel at the time of the fire, and was therefore required to indemnify Gulf Copper for any loss, even assuming Gulf Copper was otherwise responsible for the damage.

In a subsequent order, the district court denied Gulf Copper's request for attorneys' fees. TODCO now appeals the grant of summary judgment to Gulf Copper, while Gulf Copper cross-appeals the district court's refusal to award attorneys' fees.

II. DISCUSSION

The relief being sought in this case is indemnity by one party to a contract to the other for claims between the parties, not for claims made by a third party. With a few limited exceptions not applicable here, Texas law permits indemnity agreements to apply to claims between the parties. See Ingersoll-Rand Co. v. Valero Energy Corp., 997 S.W.2d 203, 208 (Tex.1999). While some Texas appellate courts have stated that the contracting parties generally do not indemnify each other for their own claims, even those courts acknowledge that a specific contract term overrides that limitation. See, e.g., Ganske v. Spence, 129 S.W.3d 701, 708 (Tex.App.-Waco 2004).

The district court stated that there was no dispute that Paragraph 5.2(b) of the contract required TODCO to indemnify Gulf Copper in certain circumstances. The only dispute concerned the control of THE 256 at the time of the damages. A close examination of the arguments in the district court reveals no claim by TODCO that the indemnity provision would not apply to claims between the parties. On appeal, though, TODCO in its reply brief argued that the provision only applied to claims brought by third parties.

This question was not answered by the district court because neither party asked it. Raising it now is too late. Issues not raised in the district court, and certainly issues not raised until appellate reply briefs, are not considered. Hidden Oaks Ltd. v. City of Austin, 138 F.3d 1036, 1045 n. 6 (5th Cir.1998).

The indemnity provision applies to claims between the parties. We now need to decide whether the district court properly resolved how it applied.

A. Summary judgment in favor of Gulf Copper.

We review a district court's grant of summary judgment de novo. Mahaffey v. Gen. Sec. Ins. Co., 543 F.3d 738, 740 (5th Cir.2008). A district court should grant summary judgment when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c)(2). In making this determination, the evidence must be viewed in the light most favorable to the nonmoving party. Mahaffey, 543 F.3d at 740.

TODCO presents its allegations of error in four parts: (1) the district court erroneously found that TODCO presented no evidence of Gulf Copper's control of the entire vessel; (2) the court misinterpreted “control,” which would have excused TODCO if Gulf Copper had been in control of the entire rig at the time of loss; (3) the district court errantly focused on control of the work, not on control of the rig; and (4) TODCO should not have been assigned the burden of proof to show Gulf Copper was not entitled to indemnity. All of these arguments relate to the evidence and the law on the question of control. Consequently, we consider them together.

The district determined that the relevant inquiry was whether Gulf Copper had obtained “control” over the vessel sufficient to preclude indemnity under the contract. In the district court, both parties implicitly agreed that the “property” to be controlled under the agreement was the rig, THE 256. Even in their original appellate briefs, both parties referred only to “control of the vessel”...