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In re Complaint of Crescent Energy Services, L.L.C.

United States Court of Appeals, Fifth Circuit

July 13, 2018

In re: In the Matter of the Complaint of Crescent Energy Services, L.L.C., Owner and Operator of the S/B OB 808, for Exoneration from or Limitation of Liability
v.
CARRIZO OIL & GAS, INCORPORATED, Third Party Plaintiff - Appellee CRESCENT ENERGY SERVICES, L.L.C., as Owner and Operator of the S/B OB 808, for Exoneration from or Limitation of Liability Petitioner-Appellant
v.
LIBERTY MUTUAL INSURANCE COMPANY, doing business as Liberty International Underwriters; STARR INDEMNITY & LIABILITY COMPANY, Third Party Defendants - Appellants

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

          Before HIGGINBOTHAM, SOUTHWICK, and COSTA, Circuit Judges.

          LESLIE H. SOUTHWICK, CIRCUIT JUDGE:

         This appeal poses the question of whether a particular contract to plug and abandon three offshore oil wells is a maritime contract. The answer matters because it determines where to place financial liability for injuries to an employee of the contractor performing the work. Complicating the appeal is that after the district court ruled, this court altered the several decades-old test for determining whether such contracts were maritime or not. Applying the new test to the facts that are not in dispute in this record, we AFFIRM.

         FACTUAL AND PROCEDURAL BACKGROUND

         In 2015, Carrizo Oil & Gas, Incorporated, needed a contractor to plug and abandon three no longer producing wells located on small fixed platforms in coastal waters of Lafourche Parish, Louisiana. State law obligated Carrizo to decommission these wells. The parties, and so will we, refer to this activity as plugging and abandoning the wells, or "P&A work." We once described such work this way: "Cement plugs are inserted into the wells beneath the ocean floor and the casing pipe is removed." St. Romain v. Indus. Fabrication & Repair Serv., Inc., 203 F.3d 376, 378 (5th Cir. 2000).[1]

         Crescent Energy Services, LLC, an oil and gas industry contractor, submitted a bid for the work. In the bid letter, Crescent noted that the equipment it would use included the "5K P&A Equipment Package," "5K Sand Cutting Casing Cutter Package," a five-person crew to perform the P&A work, and three vessels. The vessels included a quarters barge with a thirty-foot long crane, called the "OB 808"; a tug boat named the "SLYE JOSEPH"; and a cargo barge. The OB 808 was a barge that could operate in shallow water where its spuds or footings would be anchored in the mud to create a stable platform. The OB 808 provided living quarters for the crew and operated as an additional platform for the P&A operations. The OB 808 spud barge required use of a tug boat because the barge was not motorized, and Crescent contracted with another entity for use of the SLYE JOSEPH.

         Carrizo accepted Crescent's bid to plug and abandon the three wells, forming an agreement that we will refer to, because the parties do, as the Turnkey Bid. Those two companies already had an ongoing relationship under a Master Service Agreement, which provides general terms applicable to contracts between the parties "for the performance of work or the provision of services." Included were several paragraphs describing Crescent's obligation to indemnify Carrizo against any claims for bodily injury, death, or damage to property. The Turnkey Bid and the Master Service Agreement together formed Carrizo and Crescent's contract. A document detailing the P&A work breaks the tasks into thirteen steps.

         On February 13, 2015, Crescent's employee Corday Shoulder was severely injured. Shoulder, a pump operator, was sitting on the fixed platform when he was injured. The district court described the event this way:

Before the accident, Shoulder attached a piece of pipe to Carrizo's well and screwed the pipe into a flange. When Shoulder began releasing pressure from the well, the pipe separated from the flange, severely injuring Shoulder's leg.

         In March 2015, Crescent filed a limitation of liability action in the United States District Court for the Eastern District of Louisiana. The suit was brought under Federal Rule of Civil Procedure 9(h) and Rule F of the Supplemental Rules for Admiralty and Maritime Claims, the latter rule specifically governing maritime limitation of liability actions. Crescent asserted the seaworthiness of its vessel and its proper operation, disclaimed any negligence, identified the value of the vessel and offered security in that amount to the court, sought to require all who had claims arising out of the accident to file them in this suit, requested the enjoining of prosecution of claims elsewhere, and demanded exoneration from liability.

         Carrizo in its answer rejected that Crescent had brought a valid limitation of liability action. It claimed the benefit of the insurance applicable to the incident, and also identified Crescent's agreement to indemnify it for claims such as these. Crescent and its insurers would deny that indemnity was owed despite the contractual language, arguing that Louisiana's Oilfield Anti-Indemnity Act applied. See La. Stat. Ann. § 9:2780. As relevant here, that Act voids an agreement in a contract involving "a well for oil, gas, or water" which would require a contractor to indemnify its principal from the latter's own fault in causing death or bodily injury. Id.

         Shoulder and Carrizo both filed claims along with their answers. Carrizo also filed claims against four companies that it alleged were Crescent's insurers. Of those, Liberty Mutual Insurance Company and Starr Indemnity & Liability Company are the only appellants here. Pursuant to an agreement with Carrizo, Crescent has been dismissed from the case. When referring collectively to the only appellants, we label them "Crescent's insurers."

         The parties all filed for summary judgment. The district court granted Carrizo's motion and denied the others. The court relied on the provision in the Master Service Agreement in which Crescent agreed to indemnify Carrizo for injuries to Crescent employees. The court held that indemnification was enforceable against Crescent because the parties had entered a maritime contract. Such a contract made federal maritime law applicable and precluded application of the Louisiana Oilfield Anti-Indemnity Act. Crescent's insurers timely appealed.

         DISCUSSION

         We have either one or two issues to resolve. We know we must determine whether the relevant collection of agreements constitutes a maritime contract. If so, general maritime law applies, and the indemnity provision in the contract is enforceable.

         We are also urged by Crescent's insurers to decide an issue that was not presented to the district court. That issue arises only if the contract in question is a maritime one. We start with that issue, then turn to whether this is a maritime contract.

         A. Inherently local disputes

         The Supreme Court, in a decision central to our resolution of whether the contract in question was a maritime one, observed preliminarily that even when maritime law would otherwise apply, some disputes could be inherently local and maritime law could be displaced:

For not ''every term in every maritime contract can only be controlled by some federally defined admiralty rule.'' Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348 U.S. 310, 313, 75 S.Ct. 368, 99 L.Ed. 337 (1955) (applying state law to maritime contract for marine insurance because of state regulatory power over insurance industry). A maritime contract's interpretation may so implicate local interests as to beckon interpretation by state law.

Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 27 (2004). The Court stated that no specific local interest had been identified by the party seeking application of this rule. Id. Moreover, "when state interests cannot be accommodated without defeating a federal interest, as is the case here, then federal ...


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