Borman et al v. Shamrock Energy Solutions, L.L.C. et al
Filing
41
ORDER AND REASONS denying 19 Motion to Dismiss for Failure to State a Claim. Signed by Judge Carl Barbier on 2/19/2019. (cg)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
GARLIN BORMAN, ET AL.
CIVIL ACTION
VERSUS
NO: 17-11720
SHAMROCK ENERGY
SOLUTIONS, LLC, ET AL.
SECTION: “J” (1)
ORDER AND REASONS
Before the Court is a Motion to Dismiss (Rec. Doc. 19) filed by Third-Party
Defendants, Linear Controls, Inc. (“Linear”) and First Mercury Insurance Company
(“First Mercury”) (collectively “Defendants”), Third-Party Plaintiff Shamrock Energy
Solutions, LLC’s (“Shamrock”) opposition (Rec. Doc. 22), Defendants’ reply (Rec.
Doc. 27), and Shamrock’s sur-reply (Rec. Doc. 28). Having considered the motion
and legal memoranda, the record, and the applicable law, the Court finds that the
motion should be DENIED.
FACTS AND PROCEDURAL HISTORY
This litigation arises from personal injuries allegedly sustained by Plaintiff
Garlin Borman (“Plaintiff Borman”)—a Linear employee—on or about October 24,
2016 while he was working on an offshore platform located on the Outer Continental
Shelf at Eugene Island Block 189, off the coast of Louisiana and owned by Defendant
Fieldwood Energy (“Fieldwood”). Shamrock also had employees working at the
Fieldwood platform on the date of the incident. At the time of the incident, Fieldwood
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and Shamrock had in full force and effect a Master Services Contract (“MSC”) dated
November 1, 2013, pursuant to which Shamrock provided personnel to work at
Fieldwood’s locations, including Eugene Island. Likewise, Linear and Fieldwood had
in full force and effect a MSC also dated November 1, 2013. Linear was insured by
First Mercury under a policy or policies in effect on the date of the incident.
On October 15, 2017, Plaintiff Borman filed suit in state court against
Shamrock, Shamrock’s employee Bobby Barrow (“Mr. Barrow”), and Fieldwood
alleging negligence. The case was timely removed to federal court. Shamrock
subsequently filed a Third-Party Complaint against Linear and its insurer, First
Mercury, alleging that Linear is obligated to defend, indemnify, and provide
insurance coverage to Shamrock and Mr. Barrow with respect to the claims asserted
by Plaintiff Borman pursuant to the terms of the Linear/Fieldwood MSC. Shamrock
asserted further that Shamrock and Mr. Barrow are entitled to additional insured
status under the insurance policy issued by First Mercury to Linear. On May 11,
2018, Linear and First Mercury filed a motion to dismiss Shamrock’s Third-Party
Complaint pursuant to Rule 12(b)(6), which Shamrock opposes.
PARTIES’ ARGUMENTS
Defendants argue that all claims asserted in Shamrock’s Third-Party
Complaint against them should be dismissed because the pleadings, contracts, and
insurance policy demonstrate that Shamrock cannot and has not stated a claim for
relief against Linear or First Mercury. (Rec. Doc. 19-1 at 6). Defendants first argue
that Shamrock has not sufficiently pled a cause of action against Linear for
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contractual defense and indemnity because the Louisiana Oilfield Indemnity Act 1
(“LOIA”) prohibits indemnification of a party for its own negligence, rendering the
indemnity agreements contained in the MSCs at issue invalid and unenforceable.
(Rec. Doc. 19-1 at 6).
Defendants next argue that Shamrock has failed to plead sufficient facts to
show that it or Mr. Barrow is entitled to additional insured status under the Policy
issued to Linear by First Mercury. (Rec. Doc. 19-1 at 6). Defendants contend that the
Fifth Circuit has consistently held that “contractual provisions requiring a contractor
to extend insurance coverage to cover a principal’s negligent act are void under the
LOIA because such insurance arrangements frustrate its purpose.” (Rec. Doc. 19-1 at
6, 7). For this reason, Defendants argue that the insurance provisions in the MSCs
at issue are void. (Rec. Doc. 19-1 at 7). Defendants note that Shamrock and Mr.
Barrow would be entitled to coverage only upon payment of a Marcel premium to
First Mercury for additional insured benefits. (Rec. Doc. 19-1 at 7). Defendants argue
that under the narrow exception to the anti-indemnity provisions of the LOIA,
Fieldwood’s payment of a Marcel premium does not extend coverage to Shamrock and
Mr. Barrow. (Rec. Doc. 19-1 at 7). Defendants argue further that the
Linear/Fieldwood MSC does not require Linear to name Third-Party Contractors like
Shamrock or members of Third-Party Contractor Groups like Mr. Barrow as
additional insureds. (Rec. Doc. 19-1 at 8). Based on the foregoing, Defendants
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Defendants assert that Louisiana law governs pursuant to the Outer Continental Shelf Lands Act because the
accident at issue involving drilling operations occurred on a fixed platform on the Outer Continental Shelf at Eugene
Island Block 189 off the coast of Louisiana. (Rec. Doc. 19-1 at 6).
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conclude that insurance coverage is not owed directly to Shamrock or Mr. Barrow.
(Rec. Doc. 19-1 at 8).
Shamrock raises three arguments in opposition to the motion to dismiss. (Rec.
Doc. 22). First, Shamrock asserts that the LOIA does not invalidate Shamrock’s
entitlement to defense, indemnity, and additional insured status from Defendants
because Fieldwood—the principal—paid the Marcel premium to have insurance
coverage
extend
to
Linear’s
indemnity
obligations
incurred
under
the
Linear/Fieldwood MSC. (Rec. Doc. 22 at 1, 2). Thus, the cost of insuring the
indemnitees under the contract was not borne by the contractor, Linear. (Rec. Doc.
22 at 1-2). Shamrock argues that, contrary to Defendants’ assertion, Marcel does not
require that the indemnitee seeking indemnity—here, Shamrock and Mr. Barrow—
pay a premium separately from that paid by the principal. (Rec. Doc. 22 at 8).
Shamrock argues that because Fieldwood paid the premium and no part of the
economic burden of liability or insurance was shifted to Linear, finding that
Fieldwood’s premium payment to First Mercury extended Linear’s insurance
coverage to Shamrock and Mr. Barrow does not contravene the LOIA’s purpose. (Rec.
Doc. 22 at 9). While Shamrock acknowledges that no case is directly on point, it
asserts that “application of the Marcel exception under the circumstances of this case
is supported by the purpose of the LOIA . . . and also finds other support in the
jurisprudence.” (Rec. Doc. 22 at 9). Shamrock also emphasizes that Exhibit E to the
Linear/Fieldwood MSC specifically provided that the premium for extending Linear’s
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insurance coverage to cover Linear’s contractual indemnity obligations under the
MSC would be paid by Fieldwood alone. (Rec. Doc. 22 at 13).
Second, Shamrock argues that dismissal of Shamrock’s Third-Party Complaint
on the basis of the LOIA would be premature because the statute only invalidates
contractual provisions requiring indemnification of an indemnitee against loss
resulting from the indemnitee’s own negligence, and no determination of Shamrock’s
negligence has yet been made. (Rec. Doc. 22 at 2). Thus, Shamrock contends that the
applicability of the LOIA to the instant case must await a trial on the merits. (Rec.
Doc. 22 at 15).
Finally, Shamrock challenges Defendants’ assertion that First Mercury does
not owe coverage directly to Shamrock or Mr. Barrow because the insurance
provisions regarding Third-Party Contractors in the Linear/Fieldwood MSC are not
identical to the provision requiring Linear to name Fieldwood as an additional
insured. (Rec. Doc. 22 at 16). Shamrock argues that pursuant to Article 13(f) (i), (ii),
and (iii) of the Linear/Fieldwood MSC, Linear undertook defense and indemnity
obligations to Fieldwood’s Third-Party Contractors (like Shamrock) and members of
Third-Party Contractor Groups (like Mr. Barrow). (Rec. Doc. 22 at 16). Additionally,
Linear agreed that the contractual provisions were intended to create a third-party
beneficiary obligation of Contractor (Linear) in favor of such other Third-Party
Contractor(s) (and any such Third-Party Contractor Group) where the Third-Party
Contractor has included in its own contract with Fieldwood reciprocal indemnity,
insurance, and waiver conditions. (Rec. Doc. 22 at 16-17). Accordingly, Shamrock
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argues that “Shamrock and Barrow, as third-party beneficiaries of the insurance
provisions at issue, are entitled to additional insured status under the insurance
policy issued to Linear pursuant to the policy’s Additional Insured Endorsement.”
(Rec. Doc. 22 at 17). Shamrock further argues that to the extent Shamrock is entitled
to assert a claim for defense and indemnity against Linear, Shamrock is likewise
entitled to assert such a claim in a direct action against First Mercury, as the
exclusions in the First Mercury policy do not apply to an “insured contract” like the
one at issue. (Rec. Doc. 22 at 17).
In reply, Defendants re-assert that the Marcel exception to the LOIA has never
been extended to apply to third parties to the payment of the premium. (Rec. Doc. 27
at 2). Defendants cite Louisiana jurisprudence in support of the argument that any
attempt to derogate from the LOIA by contract renders the affected provisions null.
(Rec. Doc. 27 at 3-4). Defendants also note that the Louisiana First Circuit Court of
Appeal “has recognized that the Marcel exception does not extend to third party
beneficiaries of a contract,” as allowing such a claim would frustrate the purpose of
LOIA. (Rec. Doc. 27 at 4). Thus, Defendants conclude that because the “liabilityshifting indemnity and insurance agreements contained in the MSCs are subject to
the LOIA and are clearly invalid and unenforceable,” Shamrock has not pleaded a
claim against Linear for contractual defense and indemnity or for additional insured
status. (Rec. Doc. 27 at 4).
In its sur-reply, Shamrock first emphasizes that the Marcel exception to the
LOIA “embodies a recognition that in the case of a contractual insurance agreement
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whereby the independent contractor does not pay for the insurance to cover the
indemnity obligation, ‘no shifting occurs,’” and, therefore, the purpose of the LOIA is
not frustrated. (Rec. Doc. 28 at 2). Given that Fieldwood—not Linear—paid the
Marcel premium in this case, Shamrock argues that the insurance agreement at issue
does not frustrate or circumvent the provisions of the LOIA. (Rec. Doc. 28 at 2).
Shamrock asserts that allowing a contractor and its insurer to avoid contractual
defense and indemnity obligations where the premium has been paid in full by the
principal would constitute “an unfair windfall to the contractor and its insurer.” (Rec.
Doc. 28 at 2-3).
Next, Shamrock contends that the Louisiana First Circuit’s decision in
Jefferson is not dispositive because the language upon which Defendants rely is dicta
and, in any event, the intermediate court’s ruling is not binding on this Court. (Rec.
Doc. 38 at 3-4). Shamrock emphasizes that even if this Court finds that the scenario
at issue does not fall squarely within the Marcel exception, “the Louisiana Supreme
Court, if faced with this issue, would find that enforcing Linear’s obligation to defend
and indemnify Shamrock under the facts of this case would not run afoul of the
LOIA.” (Rec. Doc. 28 at 4-5).
Finally, Shamrock argues that even if this Court finds the Marcel exception is
inapplicable in this case, dismissal of Shamrock’s Third-Party Complaint based on
application of the LOIA would be premature until a determination has been made
regarding whether Shamrock was negligent in this case. (Rec. Doc. 28 at 5). Only if
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Shamrock was negligent would the LOIA prohibit enforcement of Defendants’
contractual obligations. (Rec. Doc. 28 at 5).
LEGAL STANDARD
Under the Federal Rules of Civil Procedure, a complaint must contain “a short
and plain statement of the claim showing that the pleader is entitled to relief.” Fed.
R. Civ. P. 8(a)(2). The complaint must “give the defendant fair notice of what the
claim is and the grounds upon which it rests.” Dura Pharm., Inc. v. Broudo, 544 U.S.
336, 346 (2005). The allegations “must be simple, concise, and direct.” Fed. R. Civ. P.
8(d)(1).
“Under Rule 12(b)(6), a claim may be dismissed when a plaintiff fails to allege
any set of facts in support of his claim which would entitle him to relief.” Taylor v.
Books A Million, Inc., 296 F.3d 376, 378 (5th Cir. 2002) (citing McConathy v. Dr.
Pepper/Seven Up Corp., 131 F.3d 558, 561 (5th Cir. 1998)). To survive a Rule 12(b)(6)
motion to dismiss, the plaintiff must plead enough facts to “state a claim to relief that
is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when the
plaintiff pleads facts that allow the court to “draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. A court must accept all wellpleaded facts as true and must draw all reasonable inferences in favor of the plaintiff.
Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232 (5th Cir. 2009); Baker v. Putnal,
75 F.3d 190, 196 (5th Cir. 1996). The court is not, however, bound to accept as true
legal conclusions couched as factual allegations. Iqbal, 556 U.S. at 678. “[C]onclusory
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allegations or legal conclusions masquerading as factual conclusions will not suffice
to prevent a motion to dismiss.” Taylor, 296 F.3d at 378.
DISCUSSION
On the instant motion, the parties agree that (1) Plaintiff Borman is a member
of the Contractor Group under the Linear/Fieldwood MSC; (2) Shamrock is a ThirdParty Contractor under the Linear/Fieldwood MSC; (3) Mr. Barrow is a member of
the Third-Party Contractor Group under the Linear/Fieldwood MSC; and (4) Linear
is a Third-Party Contractor under the Shamrock/Fieldwood MSC. (Rec. Doc. 15 at 5).
Moreover, there is no dispute that the Linear/Fieldwood MSC and the
Shamrock/Fieldwood MSC contain identical language in Articles 13(f) (i), (ii), and (iii)
requiring the Contractor (Linear or Shamrock) to indemnify Fieldwood’s Third-Party
Contractors and Third-Party Contractor Group as specified in the MSC. Specifically,
section (i) of the Linear/Fieldwood MSC provides that where Fieldwood’s Third-Party
Contractors execute cross indemnification and waivers substantially similar to those
contained in Section 13(f)—as Shamrock did here—Linear “agrees to release,
indemnify, protect, defend and hold harmless such other Third-Party Contractor(s)
(and any such Third-Party Contractor Group) from and against any and all claims for
(1) the injury, illness or death of any members of Contractor Group . . . without regard
to whether any such claim is caused, in whole or in part, by the negligence . . . of any
member of the Third-Party Contractor Group . . . .” (See Rec. Doc. 15-1, Exhibit D).
The MSC goes on to provide that the parties to the contract “intend to create a ThirdParty beneficiary obligation of Contractor in favor of such other Third-Party
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Contractor(s) (and any such Third-Party Contractor Group) that have included
reciprocal cross indemnity, insurance support and waiver provisions in their
respective contracts with Company . . . .” (See Rec. Doc. 15-1, Exhibit D). Thus, the
only way that Defendants are not obligated to defend, indemnify and hold harmless
Shamrock and Mr. Barrow in the instant litigation commenced by Plaintiff Borman
is if the abovementioned provisions are unenforceable.
The Louisiana Oilfield Indemnity Act (“LOIA”) provides, in pertinent part:
B. Any provision contained in, collateral to, or affecting an agreement
pertaining to a well for oil, gas, or water, or drilling for minerals which
occur in a solid, liquid, gaseous, or other state, is void and unenforceable
to the extent that it purports to or does provide for defense or indemnity,
or either, to the indemnitee against loss or liability for damages arising
out of or resulting from death or bodily injury to persons, which is caused
by or results from the sole or concurrent negligence or fault (strict
liability) of the indemnitee, or an agent, employee, or an independent
contractor who is directly responsible to the indemnitee.
...
G. Any provision in any agreement arising out of the operations,
services, or activities listed [in the statute] which requires waivers of
subrogation, additional named insured endorsements, or any other form
of insurance protection which would frustrate or circumvent the
prohibitions of this Section shall be null and void and of no force and
effect.
La. Rev. Stat. § 9:2780(B), (G) (emphasis added).
However, in Marcel v. Placid Oil Company, the Fifth Circuit recognized a
narrow exception to the nullifying effect of the LOIA that is triggered where the
principal pays for or obligates itself to pay for the cost of obtaining the insurance
coverage. See Marcel v. Placid Oil Co., 11 F.3d 563, 569 (5th Cir. 1994). The Fifth
Circuit emphasized that “the exception does not apply if any material part of the cost
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of insuring the indemnitee is borne by the independent contractor procuring the
insurance coverage.” Id. at 570.
The parties in this case argue at length over whether the Marcel exception
encompasses the scenario where the insurance premium is paid not by the contractor,
but by the principal in favor of a third-party indemnitee. However, it is not necessary
for the Court to reach that issue at this time. The Court finds that dismissal of the
claims asserted against Defendants in Shamrock’s Third-Party Complaint on the
basis of the LOIA must be denied because it is premature.
In Meloy v. Conoco Incorporated, the United States Court of Appeals for the
Fifth Circuit certified questions to the Louisiana Supreme Court concerning an
indemnity agreement between an oil company and a contractor. 504 So. 2d 833, 835
(La. 1987). In holding that the LOIA nullifies entirely any contractual provision
requiring indemnification where there is negligence or fault on the part of the
indemnitee, the court emphasized that the LOIA, however, “does not apply where the
indemnitee is not negligent or at fault.” Id. at 839. The court held that whether an
indemnitee “is free from fault and thus outside the scope of the [LOIA] can only be
determined after trial on the merits.” Id. (emphasis added). In the case at hand, there
has not yet been a determination regarding whether Shamrock was negligent or at
fault (strict liability) for Plaintiff Borman’s injuries. Accordingly, this Court cannot
determine the enforceability of Defendants’ defense and indemnity obligations to
Shamrock and Mr. Barrow under the Linear/Fieldwood MSC at this time.
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CONCLUSION
Accordingly,
IT IS HEREBY ORDERED that Third-Party Defendants’ Motion to Dismiss
(Rec. Doc. 19) is DENIED.
New Orleans, Louisiana, this 19th day of February, 2019.
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE
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