Johnson v. PPI Technology Services, L.P. et al
ORDER & REASONS: denying 319 Defendant PPI Technology Services, LP's Motion for Summary Judgment on the Contractual Defense and Indemnification Obligations of Global Oil Consulting, LLC. Signed by Judge Carl Barbier on 3/11/14. (Reference: 11-2773)(sek, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
NO: 11-2773 c/w
APPLIES TO 11-2773
PPI TECHNOLOGY SERVICES,
L.P., et al
SECTION: “J” (3)
ORDER & REASONS
Before the Court is Defendant PPI Technology Services, LP
("PPI")'s Motion for Summary Judgment on the Contractual Defense
and Indemnification Obligations of Global Oil Consulting, LLC (Rec.
("Global Oil") and Plaintiff James Johnson ("Johnson")'s opposition
to the motion (Rec. Doc. 330), and PPI's reply memorandum (Rec.
PPI's motion was set for hearing on February 12, 2014,
on the briefs. Having considered the motion and legal memoranda,
the record, and the applicable law, the Court finds that PPI's
motion should be DENIED for the reasons set forth more fully below.
FACTS AND PROCEDURAL HISTORY
unseaworthiness, and negligence brought under general maritime law
and the Jones Act arising from an attack on the HIGH ISLAND VII, a
jack up drilling rig ("the Rig") located about twelve miles off the
coast of Nigeria. According to Johnson's affidavit submitted in
connection with this motion, he was working in the Middle East in
early 2010 when he learned that John Arriagea ("Mr. Arriagea") was
hiring drilling supervisors for PPI, a Texas-based entity. (Rec.
Doc. 330-3, p. 1) After speaking with Mr. Arriagea and PPI's Vice
alleges that he was offered employment as a drilling supervisor in
Nigeria. (Rec. Doc. 330-3, p. 1) Johnson then worked with another
PPI employee, Sandra Birkline ("Ms. Birkline"), regarding the
details of his employment and his travel to Nigeria. Ms. Birkline
provided Johnson with a Consulting Agreement that he was to sign.
(Rec. Doc. 330-3, p. 1)
He signed the agreement, and it was sent
to a Belizean entity, PSL, Ltd. ("PSL") to be countersigned.
According to Johnson, it was his understanding that PSL was an
international affiliate of PPI and that all contracts similar to
Consulting Agreement on March 10, 2010 and PSL signed the agreement
on March 11, 2010; however, the agreement was to take effect on
March 25, 2010. (Rec. Doc. 319-5)
liability corporation, Global Oil, for tax purposes. (Rec. Doc.
330-7, p. 6, ln. 24; p. 7 ln. 4) According to Johnson, Global Oil
is essentially a "pass through entity," as he was the only member
of Global Oil and the only person who received funds from Global
Oil. Following the creation of Global Oil, Johnson contacted Ms.
Birkline to substitute Global Oil in his place in the Consulting
Agreement. Ms. Birkline proceeded to send a Letter Agreement to
Johnson that purported to make such an amendment. (Rec. Doc. 330-9,
p. 11, ln. 9) The Letter Agreement was signed by Johnson as
President of Global Oil on March 17, 2010 and by a representative
of PSL on March 18, 2010. (Rec. Doc. 319-4)
Around April 17, 2010, Johnson traveled to Nigeria and began
to provide services
as a drilling supervisor aboard the Rig
seemingly went forward without issue until November 7, 2010 when
several Nigerian gunmen attacked the Rig. Johnson alleges that the
gunmen boarded the Rig and led him at gunpoint to his room where
they demanded money. Johnson further alleges that the gunmen then
led him back to the Rig's galley where other crewmembers were
gathered, shooting him in the leg along the way and causing serious
injuries. In addition to his leg injuries, Johnson alleges that he
continues to suffer from Post Traumatic Stress Disorder and has
suffered great economic loss.
Johnson filed suit on November 8, 2011, naming as Defendants
AFREN, PLC (“AFREN”), PPI, PSL, and Transocean, Ltd.. Following the
filing of the original complaint, Johnson added GlobalSantaFe
consolidated with another crewmember, Robert Croke (“Mr. Croke”)’s,
related case on June 20, 2012; however Mr. Croke's suit was
recently dismissed by this Court on other grounds. See March 6,
2014 Order and Reasons, Record Document 364. PPI filed the instant
motion for summary judgment on January 21, 2014.
PPI argues that, pursuant to the Consulting Agreement between
PSL and Global Oil, Global Oil has a contractual duty to defend and
indemnify PPI for Johnson's claims in this matter. In arriving at
this conclusion, PPI asserts that general maritime applies when
determining the validity of the Consulting Agreement and Letter
Agreement, and that under such law, indemnity clauses similar to
the one at issue in this matter are valid and enforceable. Even
though the Consulting Agreement was initially signed by Johnson
individually, PPI avers that it is binding on Global Oil under the
terms of the Letter Agreement. Further, PPI argues that Global Oil
has a duty to defend and indemnify PPI because PPI is either a
subcontractor or affiliate of PSL. Finally, PPI points out that the
indemnity provision expressly lists personal injury claims as
falling under the provision, so Johnson's claims clearly trigger
Global Oil's duty to defend and indemnify PPI.
Relying on Parks v. Dowell Div. of Dow Chemical Corp., 712
F.2d 154 (5th Cir. 1983), wherein the Fifth Circuit declined to
enforce an "indemnity clause" which bound a seaman to release his
Agreement violates public policy unless the indemnity clause was
fully explained and additional consideration was given for the
release of Johnson's rights. Johnson and Global Oil aver that,
because the Consulting Agreement was signed after Johnson had been
verbally hired by PPI, no additional consideration was given for
the release. Further, Johnson and Global Oil contend that the
Letter Agreement had no effect because one cannot amend a contract
that is void.
Alternatively, Johnson and Global Oil argue that
indemnity clause is invalid under those state laws.
argue that, even if federal maritime law does apply, the indemnity
provision would still be invalid because (1) it is more akin to a
release and a seaman should not be allowed to contractually release
his rights, and (2) Global Oil is merely a pass through company, so
the Court should treat the contract as one between PSL and Johnson,
not Global Oil. Finally, Global Oil and Johnson argue that even if
the indemnity clause is upheld, it should not be applicable to acts
of gross negligence.
In its reply, PPI first points out that Johnson and Global Oil
rely heavily on conversations between PPI employees and Johnson
prior to the signing of the Consulting Agreement, and that such
references should be disallowed based on the parol evidence rule.
Further, PPI asserts that the Letter Agreement is valid and that
Global Oil is a valid party to the contract; therefore, the extra
protections for seamen relied on in Parks do not apply in this
matter. Finally, PPI argues that if any state law applies, it is
Mississippi law, and the provision is valid under Mississippi law.
Summary judgment is appropriate when “the pleadings, the
discovery and disclosure materials on file, and any affidavits show
that there is no genuine issue as to any material fact and that the
movant is entitled to judgment as a matter of law.”
v. Catrett, 477 U.S. 317, 322 (1986) (citing FED. R. CIV. P. 56(c));
Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
When assessing whether a dispute as to any material fact exists,
the Court considers “all of the evidence in the record but refrains
from making credibility determinations or weighing the evidence.”
Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d
395, 398 (5th Cir. 2008).
All reasonable inferences are drawn in
favor of the nonmoving party, but a party cannot defeat summary
judgment with conclusory allegations or unsubstantiated assertions.
Little, 37 F.3d at 1075. A court ultimately must be satisfied that
“a reasonable jury could not return a verdict for the nonmoving
Delta, 530 F.3d at 399.
If the dispositive issue is one on which the moving party will
bear the burden of proof at trial, the moving party “must come
forward with evidence which would ‘entitle it to a directed verdict
if the evidence went uncontroverted at trial.’” Int’l Shortstop,
Inc. v. Rally’s, Inc., 939 F.2d 1257, 1263-64 (5th Cir. 1991)
(citation omitted). The nonmoving party can then defeat the motion
by either countering with sufficient evidence of its own, or
“showing that the moving party’s evidence is so sheer that it may
not persuade the reasonable fact-finder to return a verdict in
favor of the moving party.”
Id. at 1265.
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 is insufficient with respect to an essential element of the
nonmoving party’s claim. See Celotex, 477 U.S. at 325. The burden
then shifts to the nonmoving party, who must, by submitting or
referring to evidence, set out specific facts showing that a
genuine issue exists.
See id. at 324.
The nonmovant may not rest
upon the pleadings, but must identify specific facts that establish
a genuine issue for trial.
See, e.g., id. at 325; Little, 37 F.3d
Prior to determining whether the Consulting Agreement and
determine which law applies to the agreements because the standard
by which the agreements will be interpreted differ depending on the
A. Choice of Law
Whether or not certain agreements "constitute a maritime
contract, on the nature and character of the contract, rather than
on its place of execution or performance." Davis & Sons, Inc. v.
citations omitted). Davis proscribes a two-part inquiry which looks
to both "the historical treatment [of similar contracts] in the
jurisprudence" and six factual questions, which ask:
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
3) was the crew assigned to work aboard a vessel in
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?
6) what work was the injured worker actually doing at the
time of injury?
Davis & Sons, Inc., 919 F.2d at 316. “A specialty services contract
related to oil and gas exploration takes on a salty flavor when the
performance of the contract is more than incidentally related to
the execution of the vessel's mission." Energy XXI, GoM, LLC v. New
Tech Eng'g, L.P., 787 F. Supp. 2d 590, 601 (S.D. Tex. Apr. 15,
2011) citing Domingue v. Ocean Drilling & Exploration Co., 923 F.2d
393, 396 (5th Cir. 1991).
1. Historical Treatment of Similar Contracts
The Court in Gilbert v. Offshore Prod. & Salvage, Inc., 95122, 1997 WL 149959 (E.D. La. Mar. 21, 1997) aff'd, 134 F.3d 368
(5th Cir. 1997) found that general maritime law applied to a
contract that provided for a “company man” to supervise and
coordinate the work for which the vessel (a jack-up rig) had
specifically been chartered. Gilbert, 1997 WL 149959 at *5. The
court found that his supervision "enabled the vessel to perform the
function for which it was designed," and went on to note that
"[i]ndeed, as an on site supervisor for the tie-back and completion
jobs, [the supervisor's] work required that he live and work aboard
that special purpose vessel, required the use of a vessel and its
crew, and was therefore inextricably intertwined with maritime
activities." Id. (internal citations omitted). The Court in Energy
XXI, GoM, LLC also applied general maritime law to a contract that
provided for a “company man” where his "position was to supervise
the recompletion operation," which operation "was an integral part
of the primary purpose of a vessel." Energy CCI, GoM, LLC, 787
F.Supp.2d at 603.
2. Davis Factors
Looking to the six Davis factors, factors one and two may be
Consulting Agreement. The Consulting Agreement provided for Johnson
to work aboard the Rig to serve as a "well site supervisor." (Rec.
Doc. 319-5, p.
He was assigned to a jack up drilling rig, which
this Circuit has held is a vessel. Gilbert, 1997 WL 149959 at *5*6. Regarding the third factor, the vessel was positioned in
navigable waters. Further, regarding the fourth factor, the purpose
of the vessel's mission was to drill, which is precisely the
activity that Johnson oversaw. And, finally, Johnson was on the
vessel when he was injured. Id. at *6.
consideration, along with the fact that Johnson and Global Oil
admit that the "underlying work contemplated [by the Consulting
Agreement] was maritime in nature," the Court finds that general
maritime law should apply to the Consulting Agreement and the
Letter Agreement. (Rec. Doc. 330, p. 16)
B. The Consulting Agreement
The disputed indemnity provision states, in pertinent part,
CONTRACTOR shall indemnify, defend and hold COMPANY,
COMPANY'S CLIENT, COMPANY affiliated companies, their
respective subContractors, and their respective officers,
(collectively, "COMPANY GROUP"), harmless from and
against all claims, demands, suits or causes of action
for damage to or loss of any equipment or property of
CONTRACTOR, its affiliated companies (if any), its
subContractors, and their respective officers, directors,
shareholders, members and employees (collectively,
"CONTRACTOR GROUP") and for personal injury to or death
of any member of CONTRACTOR GROUP regardless of whether
such personal injury or death or loss or damage shall
result in whole or in part from the negligence of COMPANY
GROUP or the unseaworthiness of any vessel owned,
chartered or operated by COMPANY GROUP. The indemnity
obligation of CONTRACTOR hereunder shall also apply to
liability of COMPANY GROUP resulting from the application
of the doctrine of strict liability or statutory fault.
(Rec. Doc. 319-5, pps. 2-3). Global Oil and Johnson do not dispute
that PPI falls within the definition of COMPANY GROUP, that Global
Oil and/or Johnson fall under the definition of CONTRACTOR, or that
Johnson's claims fall within this provision. Instead, Global Oil
and Johnson more broadly argue that the entire provision is void
and unenforceable; therefore, this is the only issue before the
Court in the instant motion.
"The interpretation of a contractual indemnity provision is a
question of law." Becker v. Tidewater, Inc., 586 F.3d 358, 369 (5th
Cir. 2009). Under federal maritime law, indemnity clauses in
maritime contracts are generally enforceable, even for a party's
own negligence, as long as the indemnity provision is clear,
express, and unambiguous. Pitre v. Custom Fab of Louisiana, LLC,
12-1074, 2013 WL 4499029, *5 (E.D. La. Aug. 20, 2013)(Milazzo, J.);
McGrath v. Chesapeake Bay Diving, 620 F. Supp. 2d 747, 752 (E.D.
La. 2009)(Barbier, J.); Despite this general rule, the Fifth
Circuit found in Parks that an indemnity provision that obligated
a seaman to indemnify himself for his own injuries was invalid
where the defendants did not offer any proof that the plaintiff was
compensated for the release of his rights or that the clause was
explained to him. Parks, 712 F.2d at 160 (holding that it is
against public policy "to enforce agreements in which seamen have
relinquished their protective rights absent a clear showing that
the agreement is fair and fully compensated.")
The fundamental factual difference between Pitre, which is
relied on by Defendants, and Parks, which is relied on by Johnson
and Global Oil, lies in the identity of the obligor. In Pitre, the
Louisiana, LLC ("Custom Fab"), which had entered into a contract
("Oceaneering"), wherein, using very similar language to that of
the instant Consulting Agreement, Custom Fab agreed to indemnify
Oceaneering for certain liabilities. Pitre, 2013 WL 4499029 at *5.
In Pitre, the Court found that because general maritime law
applied, the indemnity provision should be upheld. Id. at *5-*6. In
Parks, on the other hand, the obligor of the contract at issue was
an individual seaman who agreed to indemnify his employer and other
related entities "for any and all claims, demands or suits arising
out of the work to be performed under the contract." Parks, 712
F.2d at 159. Based on admiralty courts' tradition of protecting
seamen, the Parks court refused to enforce the indemnity provision
absent a showing that the defendants had (1) fully and fairly
explained the indemnity provision to Parks, and (2) had provided
additional compensation to Parks for the release of his rights. Id.
at 160. PSL argues that, because the Consulting Agreement is
between Global Oil and PSL, Pitre should apply, and Johnson argues
that, because he was the original signatory of the contract, Parks
1. Original Agreement Between Johnson and PSL
PSL's insistence on viewing the Consulting Agreement as a
contract between Global Oil and PSL ignores the vital fact that
substituting Global Oil for Johnson in the Consulting Agreement, it
is rather clear that Parks would apply because PSL attempted to
essentially release his claims against the company. Because there
is no evidence that PSL fully explained this provision–and Johnson
even alleges that PPI's representative incorrectly explained the
effect of the Consulting Agreement1–the indemnity provision in the
original Consulting Agreement violates public policy.2 Therefore,
the question becomes whether the Letter Agreement successfully
amended the Consulting Agreement so as to make this an enforceable
contract between two corporate entities under the reasoning in
Though the Court agrees that Johnson's conversations with Ms. Birkline
prior to the signing of the Consulting Agreement are parol evidence, such
conversations are admissible in this context because they are not being relied
on to contradict or explain the Consulting Agreement, but rather are being
used to show that Defendants failed to properly explain the effect of the
As the Court has already found that the provision was inadequately
explained to Johnson, it will not discuss whether Johnson was adequately
compensated for his release.
2. Amendment to the Consulting Agreement/ the Letter Agreement
Between PSL and Global Oil
Following Johnson's signing of the Consulting Agreement, but
prior to the Agreement's effective date, Johnson notified PSL that
he wished to amend the Consulting Agreement by substituting Global
Oil, Johnson's newly formed limited liability company, in his
place. Accordingly, PSL and Johnson, in his capacity as President
of Global Oil, signed the Letter Agreement purporting to make this
substitution. (Rec. Doc. 319-4) PPI contends that based on this
amendment, the indemnity provision should be upheld. The Court
"[A] contract against public policy [is void and] cannot be
made valid by ratification." Theatre Time Clock, Inc. v. Stewart,
276 F. Supp. 593, 599 (E.D. La. Nov. 29, 1967); 17A C.J.S.
Contracts § 252 ("An illegal agreement is void.") According to the
Restatement (Second) of Contracts, a "promise for breach of which
the law neither gives a remedy nor otherwise recognizes a duty of
performance by the promisor is often called a void contract," and
"such a promise is not a contract at all."3
A void contract, such as a contract against public policy differs from
a "voidable contract," which is a contract wherein "one or more parties have
the power, by a manifestation of election to do so, to avoid the legal
relations created by the contract, or by ratification of the contract to
extinguish the power of avoidance." Restatement (Second) of Contracts § 7
(1981) "[A] promise to perform all or part of an antecedent contract of the
promisor, previously voidable by him, but not avoided prior to the making of
the promise, is binding [...] unless the promisor knew or had reason to know
the essential facts of the previous transaction to which the promise relates."
Restatement (Second) of Contracts §§ 85, 93 (1981).
of Contracts § 7 (Comment (a)) (1981); York Grp., Inc. v. Horizon
Casket Grp., Inc., 06-0262, 2007 WL 2120419 (S.D. Tex. July 10,
2007) ("A 'void contract' is defined as a contract that is of no
legal effect, so that there is really no contract in existence at
all.")(internal citation omitted). Therefore, based on the finding
that the indemnity provision in the Consulting Agreement between
PSL and Johnson violated public policy, the Court must also find
that the indemnity provision is void and it is as if the provision
never existed at all. It logically follows then that the subsequent
Letter Agreement, which purported to amend the Consulting Agreement
by replacing Johnson with Global Oil is also without effect with
regard to the indemnity provision because there was no provision to
Agreement created a whole new agreement, as opposed to simply
amending the original agreement, by asking the Court to enforce the
indemnity provision between Global Oil and PPI, PPI implicitly
makes such an argument. The substitution of Global Oil for Johnson
did not, however, create a new agreement because the novation of a
contract cannot arise from an invalid contract. Novation occurs
when there is a substitution in a contract "that has the effect of
adding a party, either as obligor or obligee, who was not a party
to the original duty." Restatement (Second) of Contracts
(1981) A novation has the effect of extinguishing the original duty
and replacing it with a new duty. Id. at §
280(b); Crook v. Zorn,
95 F.2d 782, 783 (5th Cir.1938)(a novation creates "a new contract
in place of the old one.”)
Under general common law, "[t]he
elements of a novation are (1) a previous, valid obligation; (2) an
agreement of the parties to a new contract; (3) the extinguishment
of the old contract; and (4) the validity of the new contract."
F.D.I.C. v. Waggoner, 999 F.2d 826, 829 (5th Cir. 1993)(emphasis
added); Scarboro v. Universal C. I. T. Credit Corp., 364 F.2d 10,
14 (5th Cir. 1966)(elements are similar in most states). Here,
because there was no previously valid agreement, there was no
novation; therefore, the underlying duty did not discharge and a
new obligation was not created.
Accordingly, because the indemnity provision in the original
Consulting Agreement was void, and because the Letter Agreement did
not amend the original Consulting Agreement or create a new
obligation, neither Johnson nor Global Oil have a duty to defend or
indemnify PSL, PPI, or any other member of the Company Group. The
invalidity of the indemnity provision does not effect the validity
of the remainder of the Consulting Agreement because, under the
express terms of the contract, invalid terms are severable. (Rec.
Doc. 319-5, p. 5)
IT IS ORDERED that Defendant PPI Technology Services, LP
("PPI")'s Motion for Summary Judgment on the Contractual Defense
and Indemnification Obligations of Global Oil Consulting, LLC (Rec.
Doc. 319) is DENIED.
New Orleans, Louisiana, this 11th day of March, 2014.
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?