Torres v. McDermott Inc.

• Citation: 12 F.3d 521
• Decision Date: 01 February 1994
• Docket Number: FREEPORT-M,No. 93-3053,93-3053
• Parties: Juan R. TORRES, Sr., Plaintiff, v. McDERMOTT INCORPORATED and Freeport-McMoRan, Inc., Defendants.cMORAN RESOURCE PARTNERS, Limited Partnership, Defendant-Third Party Plaintiff-Appellee, v. SECO INDUSTRIES, INC. and the Gray Insurance Company, Third-Party Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 521

12 F.3d 521

Juan R. TORRES, Sr., Plaintiff, v. McDERMOTT INCORPORATED and Freeport-McMoRan, Inc., Defendants.

FREEPORT-McMORAN RESOURCE PARTNERS, Limited Partnership, Defendant-Third Party Plaintiff-Appellee, v. SECO INDUSTRIES, INC. and the Gray Insurance Company,

Third-Party Defendants-Appellants.

No. 93-3053.

United States Court of Appeals, Fifth Circuit.

Feb. 1, 1994.

Philip E. Henderson, Henderson, Hanemann & Morris, Houma, LA, for appellants Seco & the Gray Ins. Co.

George R. Alvey, Jr., Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, LA, for appellee.

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

Before REAVLEY and DAVIS, Circuit Judges, and TRIMBLE ¹, District Judge.

TRIMBLE, District Judge:

Appellant SECO challenges the district court's order enforcing appellee Freeport's indemnity agreement. Because we agree with appellant that the Louisiana Anti-Indemnity Act applies to render the indemnity agreement unenforceable, we reverse and remand.

I. FACTUAL BACKGROUND

Freeport-McMoRan Resource Partners, Limited Partnership (Freeport) and SECO Industries, Inc. (SECO) entered into a contract by the terms of which SECO was obligated to perform the electrical and instrument systems hook-up on a sulphur mining facility being constructed by Freeport. Article I of exhibit "A" to the contract defined the scope of work concisely as follows:

"The COMPANY (Freeport) is constructing a new sulphur mining facility in the Gulf of Mexico southeast of Venice, Louisiana within Block 299 Main Pass ... The Work of this Contract is hook-up of electrical and instrument systems as further defined hereunder."

Article II of exhibit "A" provides the following detailed description of the work to be performed by SECO:

"a) Provision of all labor, equipment, tools, and consumables, except diesel fuel, required for the performance of the Work;

b) Hook-up and disconnection of temporary electrical power;

c) Hook-up and disconnection of temporary facilities, e.g., temporary quarters, water and waste systems, etc.;

d) Installation of lighting fixtures e) Installation of cable tray;

f) Installation and/or termination of all wires and cables required to provide a complete electrical system;

g) Installation and hook-up of all shipped loose instruments;

h) Install instrument cables and fiber optic cables and make terminations;

i) Assist manufacturers' representatives, as required, for the installation or connection of specialized systems, e.g., communications systems and H2 S detection system;

j) Field check-out and testing of electrical systems;

k) Field calibration, check-out and functional testing of instrument systems;

l) Provision of any project materials, as instructed by COMPANY;

m) All scaffolding required for the safe performance of the Work;

n) All Work is to be done in accordance with the drawings and specifications attached hereto."

Freeport's sulphur platform on which the work was to be performed is several miles long and, at the time of the incident giving rise to this litigation, still under construction in certain portions. On other portions, sulphur drilling was in progress through the Frasch process. SECO's work was being performed on an area of the platform still under construction and where there was no drilling in progress.

The plaintiff in this suit, Juan R. Torres, Sr., was an employee of SECO who alleged injury to himself when he claims to have tripped on a defective walkway while carrying a box of electrical equipment. He sued Freeport, which in turn filed a third-party demand against SECO and its insurer, The Gray Insurance Company (Gray), claiming that SECO was its contractual indemnitor. In response, SECO and Gray interposed as its only defense the Louisiana Oilfield Anti-Indemnity Act (LRS-9:2780).

Freeport settled with Mr. Torres for an amount which the parties stipulated was reasonable, leaving for resolution only Freeport's claim against SECO for indemnity. This appeal is from the trial court's grant of summary judgment in favor of Freeport on its indemnity claim. The only issue presented to this court is whether Louisiana's Oilfield Anti-Indemnity Act (LOAIA) invalidates the indemnity arrangement between Freeport and SECO.

II. LEGAL ANALYSIS

The operative provisions of LRS-9:2780 applicable to this case are as follows:

"Subsection B provides:

Any provision contained in ... an agreement ... is void and unenforceable to the extent that it purports to or does provide for defense or indemnity, or either....

Subsection C provides:

The term 'agreement' ... means any agreement ... concerning any operations related to the exploration, development, production, or transportation of ... or drilling for minerals ... or otherwise rendering services in or in connection with any ... structure intended for use in the exploration for or production of any mineral....

Subsection E provides:

This Section shall have no application to public utilities, the forestry industry, or companies who drill with the Frasch process, so long as the work being performed is not any of the operations, services, or activities listed in Subsection C above, except to the extent those services or activities include drilling through the Frasch process."

As indicated above, there was sulphur drilling in progress through the Frasch process in certain areas of the platform, but not where Mr. Torres was working. That part of the platform related to the SECO contract was under construction.

The trial court, in granting summary judgment favorable to Freeport, held the LOAIA inapplicable to the contract sub judice under its interpretation of Subsection E above because the Main Pass Sulphur Mining Facility utilized the Frasch drilling process on its structure. The court reasoned as follows "... SECO suggests that the language only applies to drilling activity which includes the Frasch process, but a plain and reasonable reading of the statute in context indicates otherwise. Through use of the phrase 'those services or activities', the reader is referred back to all of the types of work listed in sub-section C. If the legislature had intended to exempt only drilling activity, it would have so stated or caused the reader to refer back to 'activity' in the singular.

"Furthermore, the interpretation suggested by SECO reduces sub-section E to nothing more than an exemption to the indemnity prohibition for contracts to perform drilling work where the Frasch drilling process will be used. Such a reading renders much of the statute's language superfluous, an effect which this court must avoid in its interpretation. (Citing authority) A reading which includes in the exemption all service work listed in sub-section C which is to be performed on a project where Frasch drilling will be used allows proper meaning to all the language in sub-section E.

"Based on the court's interpretation, companies which employ the Frasch drilling process may have valid indemnity clauses in their service contracts only as to those projects which include Frasch drilling. Accordingly, because Freeport utilizes the Frasch drilling process at the Main Pass Sulpur/sic/ Mining Facility, the indemnity clause in Freeport's contract with SECO for work on that facility is valid, and Freeport is entitled to summary judgment on the basis of that indemnity provision."

The trial court's decision in the instant case followed an earlier Eastern District of Louisiana decision, Knight v. Freeport-McMoRan, Inc., No. 87-4526, decided in August of 1989. In the Knight case, Judge Carr, citing this court's decision in Copous v. ODECO Oil and Gas Company, 835 F.2d 115 (5th Cir.1988), for the proposition that the LOAIA should be broadly construed to nullify indemnity agreements involving the oil industry, held that a contract for renovation of living quarters on an oil platform was sufficiently related to production of oil and gas as to be within the scope of the LOAIA. The trial judge stated:

"Clearly, the above cases dictate a jurisprudential interpretation of the Oilfield Indemnity Act which the Court can apply to the present case. If the Act is to be construed broadly, as the case law tells us it should, then all portions of the Act must be so construed, including of course the Sub-section E Frasch Process exception."

In Knight, the injured worker was an employee of a painting contractor which had covenanted with Freeport Research and Engineering Company (FREC) to perform painting on a sulphur production platform which FREC was renovating with the intention of placing back into production. The court noted that the first sulphur production on the platform following the renovation occurred over two years after plaintiff's injury. Despite this, the court found that FREC, because the renovation work was "closely related" to the "overall purpose" of producing sulphur, was entitled to the exemption in Sub-section E applicable to "companies who drill with the Frasch process." It was the argument of the paint contractor that FREC was not entitled to this exemption because it did not own any drilling equipment for sulphur production and in fact no company began drilling for sulphur on the platform in question until after the employee's injury. The judge in Knight did not even arrive at a consideration of the third clause of Subsection E of the LOAIA. Even though there was no evidence that FREC was itself a company which actually drilled with the Frasch process, the court opined that since renovation of the platform was closely related to production drilling for sulphur through the Frasch method, the exemption applied. In fact, there was no discussion of either the second or the third clauses of Subsection E, the court finding adequate justification for its decision in the broad exception expressed in the first clause without attempting to divine the meaning of the qualifying language found in the last two clauses.

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