Opinion
CIVIL ACTION NO: 02-3595, SECTION: "J" (3)
December 15, 2003
ORDER AND REASONS
Before the Court are Cross Motions for Summary Judgment (Rec. Docs. 20 28) which were set for hearing on December 3, 2003, with oral argument. Both motions are opposed.
Background
On September 15, 1995, American Oilfield Divers, Inc. ("Company") and Curtis Callais Welding, Inc. ("CCW") ("Contractor") entered into a Master Service Agreement ("MSA") where Company employed the services of Contractor for the purchase or lease of goods, equipment, and facilities from Contractor. On August 20, 1998, the MSA was amended to reflect that "Company" would also include Stolt Comex Seaway, Inc. ("Stolt") and its parents, subsidiaries, and affiliates. The indemnity clause in the MSA specifically stated that Contractor would indemnify "Company's Indemnities" which included Company's employees. However, the indemnity clause did not expressly state that Contractors employees would be indemnified by Company. Instead, the language of the contract stated that Company would indemnify CCW.
Attached to the MSA is exhibit A entitled: "Description of Services and Rates Under the Service Agreement." The description of services simply states "Furnish Labor," and the exhibit further states that services will be provided for areas both onshore and offshore.
On or about August 31, 2001, Big Inch Marine Systems, Inc. ("Big Inch"), a subsidiary of Stolt, employed Brian Lane as an offshore supervisor. `Brian Lane was working in the course and scope of his employment at a facility in Terrebonne Parish when he allegedly sustained injuries while inspecting a spool assembly for testing at the Manson Gulf Shop Premises. Specifically, while Laine was inspecting a spool assembly, the jumper which was being lifted by a crane fell and struck Laine. Defendant contends that the accident was caused by improper rigging on the jumper and use of an improper crane. Defendant argues that Triple C Fabricators, Inc.("Triple C")had fabricated the jumper involved in the accident. Defendant argues that Curtis J. Callais, Sr. ("Callais") was the individual who made the decision with respect to the rigging and improper crane selection. Defendant claims that at the time of the accident, Callais was working in the course and scope of his employment with Triple C. On the contrary, plaintiff argues that Callais was working in the course and scope of his employment with CCW.
Following the accident, Brian Lane and his wife, Kimberly Laine ("The Laines"), entered into a receipt, release and settlement of all claims that they may have against Big Inch, Stolt, and/or their insurers and underwriters. This release specifically included CCW and specifically excepted from release Triple C Fabricators and its insurers and underwriters.
On August 20, 2002, Big Inch and the Laines filed separate petitions for damages against Callais individually, Triple C, and Gray Insurance Co. ("Gray") in the 32nd Judicial District Court, Terrebonne, Louisiana. Stolt also filed a suit against Callais, Triple C, and Gray, but that lawsuit was dismissed. On October 23, 2003, Big Inch's lawsuit was also dismissed. However, Big Inch filed a Petition of Intervention into the Laines' lawsuit that is now pending in state court. The Laines made no allegations against CCW.
On December 5, 2002, CCW filed this suit in federal court against Stolt demanding defense and indemnification. Stolt answered stating that Callias was not afforded defense and indemnity under the terms of the MSA. Defendant contends that because Curtis Callais, Sr. is being sued in his individual capacity, the indemnity provision of the MSA does not apply because it only refers to the corporation, CCW. CCW is the only entity which is afforded defense and indemnification from defendant. Defendant further contends that whether Callais was in the course and scope of his employment with CCW is a conclusion of law and should not be considered as evidence in support of a Motion for Summary Judgment. Moreover, according to section 21 of the MSA, the governing law is maritime law.
CCW argues that at the time of the accident, Curtis Callais, Sr. was acting in the course and scope of his employment with CCW. Moreover, Callais signed the MSA which governed the work performed by CCW and its employees. As a result, the indemnity clause of the MSA requires Stolt to indemnify and defend CCW and Callais under the doctrine of respondeat superior as applied by Louisiana courts.
Standard of Review
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment should be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with 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); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). "The party moving for summary judgment bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the record which it believes demonstrates the absence of a genuine issue of material fact. Id. If the dispositive issue is one on which the nonmoving party will bear the burden of proof at trial/ the moving party may satisfy its burden by merely pointing out that the evidence in the record contains insufficient proof concerning an essential element of the nonmoving party's claim. Id. at 325. The nonmovant may not rest upon the pleadings, but must identify specific facts that establish a genuine issue exists for trial. Id.
Discussion
The defendant contends that the MSA did not contain knock-for-knock indemnification whereby Company and Contractor each owed the other identical defense and indemnity obligations. The defendant asserts that the indemnification obligations owed by Contractor (CCW) to Company (Stolt) were much broader than the indemnification obligations owed by Stolt to CCW. Moreover, defendant states that no lawsuits or claims have been asserted against CCW, the only entity entitled to defense and indemnification from defendant. Applying maritime law, defendant argues that the MSA does not cover CCW's employees. Babcock v. Continental Oil Co., 792 F.2d 1346, 1350-51 (5th Cir. 1986).
On the other hand, the plaintiff argues that Louisiana law is applicable and under the doctrine of respondeat superior, the language of the MSA required defendant to defend and indemnify Callais in his individual capacity, as well as CCW. Plaintiff argues that according to Louisiana law, the MSA does cover CCW's employees. Reliance Ins. Co., v. Barnard Burk, Inc., 428 So.2d 1097 (La.App. 1st Cir. 1983).
The pertinent language of the MSA is as follows:
6. INDEMNIFICATION (a) For purposes of this Agreement, the term "Company Indemnities" shall mean [Stolt Comex Seaway, Inc.] and all of its affiliated or parent or subsidiary companies or corporations (including, without limitation, the subsidiary signatories to this Agreement) and all of the aforesaid entities' agents, officers, directors, employees, representatives and insurers, and all of the aforesaid entities' customers for whom Services under this Agreement are directly or indirectly provided during the term of this Agreement.
(b) CONTRACTOR'S indemnification. CONTRACTOR assumes sole responsibility for and shall protect, defend, indemnify and hold the Company Indemnities harmless from and against any and all loss, damage, injury, liability. . . .
(d) COMPANY'S Indemnification. Except as expressly set forth in Sections 6(a) through (c) above, the COMPANY [Stolt] assumes responsibility for and shall protect, defend, indemnify and hold CONTRACTOR [CCW] harmless from and against any and all Losses arising out of, connected with, incident to, or otherwise directly or indirectly resulting from or related to, any injury, illness and/or death to the COMPANY'S employees and personnel or for loss of and/or damages to COMPANY'S property, vessels or equipment, by whomever brought, whether based on statute, tort, contract or quasi contract, and whether or not resulting from the contractual obligations assumed by the CONTRACTOR. Except as set forth in Sections 6(a) through (c) above, such indemnity shall apply whether or not the CONTRACTOR was or is claimed to be passively, concurrently or actively negligent or expressly negligent and regardless whether liability without fault (including but not limited to claims for unseaworthiness of vessels) is imposed or sought to be imposed on the CONTRACTOR.
Because the parties dispute whether Maritime Law or Louisiana law applies, before analyzing the language of the MSA, this Court must first address the issue of subject matter jurisdiction.
Subject Matter Jurisdiction
The plaintiff's complaint alleges that diversity jurisdiction exists under 28 U.S.C. § 1332, and alternatively admiralty jurisdiction exists under 28 U.S.C. § 1333. The defendant denied that diversity jurisdiction exists, but admitted that admiralty jurisdiction is present because 1) the MSA is a maritime contract; and 2) the MSA specifically states that it is to be governed by and construed in accordance with General Maritime Law.
a) Admiralty Jurisdiction
Although the defendant contends that the MSA is a maritime contract, the Fifth Circuit has explained that "Admiralty jurisdiction's boundaries for contracts are difficult to draw." Effjohn Int'l Cruise Holdings, Inc. v. AL Sales, Inc., 346 F.3d 552, 565 (5th Cir. 2003) (citingKossick v. United Fruit Co., 365 U.S. 731, 735 (1961)). "[I]n determining whether a contract falls within admiralty jurisdiction, the true criterion is the nature and subject-matter of the contract, as whether it was a maritime contract, having reference to maritime service or maritime transactions." Id. (citing Exxon Corp. v. Central Gulf Lines, Inc., 500 U.S. 603, 610 (1991)). "The key is `whether the services . . . performed [under] the contract are maritime in nature.'" Id. "Along this line, the `character of the work to be performed' is determinative not `the [contract's] value . . . to the shipping industry.'" Id. (citing Planned Premium Servs. of Louisiana, Inc. v. Int'l Ins. Agents, Inc., 928 F.2d 164, 166 (5th cir. 1991). "If the `essence of the services provided' under the contract is non-maritime, it is not a maritime contract.'" Id.
In Davis Sons, Inc. v. Gulf Oil Corp., the Fifth Circuit explained that "[d]etermination of the nature of a contract depends in part on the historical treatment in the jurisprudence and in part on a fact-specific inquiry." 919 F.2d 313, 316 (5th Cir. 1991). "We consider six factors in characterizing the contract: 1) what does the specific work order in effect at the time of injury provide? 2) what work did the crew assigned under the work order actually do? 3) was the crew assigned to work aboard a vessel in navigable waters; 4) to what extent did the work being done relate to the mission of that vessel? 5) what was the principal work of the injured worker? and 6) what work was the injured worker actually doing at the time of injury? Id. In the present case, the character of the work to be performed under the MSA is unclear. The MSA is very broad, and neither party has produced a work order for the specific job being performed at the time of the incident. However, the briefs indicate that Laine inspected the spool assembly and Callais made the decision with respect to the rigging and improper crane selection; all work was performed on land in Terrebonne Parish. Additionally, defendant neither contends that any person involved in the accident was assigned to a vessel nor mentions the "mission" of any vessel. During oral argument, counsel admitted that the only "relation" that the work had "to a vessel" was that after completion of the work, the "assembly" would be transported by vessel to an offshore location where it would be buried in the seabed. Therefore, after consideration of the MSA, briefs, and arguments by the parties, this Court finds that the MSA is not a maritime contract.
The defendant also argues in the alternative that General Maritime Law applies under the choice of law provision in the MSA. However, because it is hornbook law that the parties may not stipulate to federal subject matter jurisdiction, this Court must next consider whether diversity jurisdiction exists and then, whether the choice of law provision contained in the MSA is applicable.
b) Diversity Jurisdiction:
In its answer, the defendant initially denied the existence of diversity jurisdiction because it claimed to be a foreign corporation with its principal place of business in Louisiana. However, during oral argument, the defendant informed the Court that at the time of the filing of the lawsuit, it did not have its principal place of business in Louisiana. Thus, diversity jurisdiction exists under 28 U.S.C. § 1332 and hence, this Court must next consider whether the choice of law provision contained in the MSA is enforceable.
Choice of Law
In Roberts v. Energy Dev. Corp., the Fifth Circuit addressed a choice of law provision in an indemnity agreement and observed that in a diversity case, the forum state's conflict laws govern resolution of the enforceability of a choice of law provision. 235 F.3d 935, 937 (5th Cir. 2000). Although the court in Roberts specifically addressed a choice of law provision as related to the Louisiana Oilfield Indemnity Act (LOIA), the court explained generally that Louisiana's conflicts articles must determine whether the parties1 choice of law provision is enforceable.Id. at 938. In particular, Louisiana Civil Code Articles 3540, 3537, and 3515 must be analyzed. Id.
Article 3540 states:
All other issues of conventional obligations are governed by the law expressly chosen or clearly relied upon by the parties, except to the extent that law contravenes the public policy of the state whose law would otherwise be applicable under Article 3537. LA. CIV. CODE ANN. art. 3540 (West 1994).
Article 3537 states:
Except as otherwise provided in this Title, an issue of conventional obligations is governed by the law of the state whose policies would be most seriously impaired if its law were not applied to that issue.
That state is determined by evaluating the strength and pertinence of the relevant policies of the involved states in the light of: (1) the pertinent contracts of each state to the parties and the transaction, including the place of negotiation, formation, and performance of the contract, the location of the object of the contract, and the place of domicile, habitual residence, or business of the parties; (2) the nature, type, and purpose of the contract; and (3) the policies referred to in Article 3515, as well as the policies of facilitating the orderly planning of transactions, of promoting multistate commercial intercourse, and of protecting one party from undue imposition by the other. LA. CIV. CODE ANN. art. 3537 (West 1994).
Article 3515 states:
Except as otherwise provided in this Book, an issue in a case having contracts with other states is governed by the law of the state whose policies would be most seriously impaired if its law were not applied to that issue.
That state is determined by evaluating the strength and pertinence of the relevant policies of all involved states in the light of: (1) the relationship of each state to the parties and the dispute; and (2) the policies and needs of the interstate and international systems, including the policies of upholding the justified expectations of parties and of minimizing the adverse consequences that might follow from subjecting a party to the law of more than one state. LA. CIV. CODE ANN. art. 3515 (West 1994).
According to Article 3540, the choice of law provision of the
transactions, of promoting multistate commercial intercourse, and of protecting one party from undue imposition by the other. LA. Civ, CODE ANN. art. 3537 (West 1994).
Article 3515 states:
Except as otherwise provided in this Book, an issue in a case having contracts with other states is governed by the law of the state whose policies would be most seriously impaired if its law were not applied to that issue.
That state is determined by evaluating the strength and pertinence of the relevant policies of all involved states in the light of: (1) the relationship of each state to the parties and the dispute; and (2) the policies and needs of the interstate and international systems, including the policies of upholding the justified expectations of parties and of minimizing the adverse consequences that might follow from subjecting a party to the law of more than one state. LA. CIV. CODE ANN. art. 3515 (West 1994).
According to Article 3540, the choice of law provision of the MSA should apply unless its application is against the pubic policy of the state whose law would otherwise be applicable under Article 3537. Thus, Article 3537 should first be considered by this Court.
In the present case, the balancing test of Article 3537 is difficult to properly conduct as little information is available regarding the specific work done on August 31, 2001, the date of Laine's accident. It is unclear exactly where the parties contracted the MSA or what specific services are covered under the MSA. However, it does appear that the work was being performed on land in Terrebonne Parish. It is also undisputed that Callais is a domiciliary of Louisiana, and both Triple C and CCW have their principal places of business in Louisiana. Moreover, the accident occurred in Louisiana. Further, under Article 3515, Louisiana appears to have the strongest relationship to the parties and to the dispute. Again, this Court has determined that the MSA is not a maritime contract and maritime law does not apply of its own force. Thus, under 3537 and 3515, Louisiana's law would apply to this case absent the choice of law provision in the MSA.
Again turning to Article 3540, Maritime law, as chosen by the parties in the MSA, should apply unless it is contrary to the public policy of Louisiana. The plaintiff argues that Louisiana law applies to the present case and specifically relies on the holding of Reliance, 428 So.2d 1097. In Reliance, the court held that although an indemnity clause of the contract made no mention of "agents, servants, and employees," employees were covered under that contract. Id. at 1102. The court explained that the contract provided broad and comprehensive coverage and purported to cover all possible losses as long as the losses arose "out of Contractor's performance of the work contemplated by this agreement." Id. at 1101-02. As such, to provide broad coverage and then to negate the coverage by holding that it applied in limited circumstances where the "Owner" alone was liable would make the provision incongruous. Id. at 1102. The court went on to explain that the owner's negligence could only attach through the negligent acts of the owner's employees. Id.
Additionally, the contract between plaintiff and defendant required that plaintiff purchase insurance to cover risks, among which was contractual liability to cover the indemnity clause. Reliance, 428 So.2d at 1102. Plaintiff's employees were mentioned in the certificate of insurance. Id. Thus, the court held that the certificate of insurance bolstered the only reasonable interpretation of the indemnity provision which would give the provision any effect — that the parties intended to provide protection for the plaintiff and his employees.Id.
In Reliance the court stated that providing broad coverage and then negating it by applying it in limited circumstances would make the indemnity provision incongruous. The court also stated that the owner's negligence could only attach through the negligent acts of the owner's employees. However, the holding of Reliance appears to be contrary to maritime law as espoused by the Fifth Circuit in Babcock.
In Babcock, the Fifth Circuit addressed an indemnity provision similar to the one in the instant case and concluded that "employees" were not covered under the contract because such coverage was not "expressly" stated. Id. at 1351. The court in Babcock explained that it was bound by controlling precedent to read narrowly the indemnity clauses in the contract. Id. n. 5. The court noted that there was no evidence that the parties intended to include the company's employees. Id. In fact, there was evidence indicating that the contract at issue was changed from previous standard contracts to specifically exclude employees. Id. n. 6. Furthermore, the court rejected arguments that denying the employees indemnity coverage would lead to a ludicrous result because an agreement to indemnify an employer without indemnifying its employees is meaningless. Id. at 1351. The court explained that under the indemnity agreement, the company's defense was assumed, claims were settled against the company, and damages would be indemnified. Id. Thus, the company received benefits, even if its employees did not. Id.
Although maritime law, as espoused in Babcock, is clearly contrary to Louisiana law, as espoused in Reliance, the holding of Reliance is not public policy. Public Policy as defined in Black's Law Dictionary means: "principles and standards regarded by the legislature or by the courts as being of fundamental concern to the state and the whole of society." BLACK'S LAW DICTIONARY 1245 (6th ed. 1999). Thus, under Article 3540, this Court must apply the choice of law provision of the MSA, as agreed upon by the parties. Accordingly, maritime law applies, and this Court finds that the reasoning of Babcock is directly applicable to the present case. Defendant correctly notes that the MSA does not contain knock-for-knock indemnity provisions. The MSA specifically states "Contractor assumes sole responsibility for and shall protect, defend, indemnify and hold the Company Indemnities." The MSA also states that Company Indemnities includes employees. On the other hand, CCW's employees are omitted from the contract. It is certainly arguable that because one portion of the contract expressly includes "employees" and another portion does not, the parties intended this distinction. Moreover, as in Babcock, it is undisputed that CCW would receive benefits under the MSA had CCW been sued by the Laines. Accordingly, summary judgment should be granted for defendant. Therefore;
In fact, CCW was expressly included in the release executed by the Laines.
IT IS ORDERED that Defendant's Motion for Summary Judgment (Rec. Doc. 28) is granted and Plaintiff's Motion for Summary Judgment (Rec. Doc. 20) is denied.