Superior Derrick Services L L C v. Lonestar 203 et al

Filing 158

ORDER granting 149 Motion for Summary Judgment; denying 152 Motion for Partial Summary Judgment. Accordingly, Lonestars counter-claim againstSuperior is dismissed with prejudice. Signed by Magistrate Judge C Michael Hill on 06/21/2011. (crt,Davenport, M)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
SUPERIOR DERRICK SERVICES, LLC.

*CIVIL ACTION NO. 6:09-0484

VS.

*MAGISTRATE JUDGE HILL

LONESTAR 203, ET AL.

*BY CONSENT OF THE PARTIES
REASONS FOR RULING

Pending before the Court are the Cross Motions for Partial Summary Judgement filed
by Superior Derrick Services, LLC (“Superior”) and Lonestar Drilling Nigeria, Ltd.
(“Lonestar”). [rec. docs. 149 and 152]. Oppositions to each Motion have been filed. [rec.
docs. 155 and 154]. Oral argument on the Motions was held and the Motions were taken
under advisement.
For the reasons which follow, the Motion for Partial Summary Judgement filed by
Superior [rec. doc. 149] is GRANTED and the Motion for Partial Summary Judgement filed
by Lonestar [rec. doc. 152] is DENIED. Accordingly, Lonestar’s counter-claim against
Superior is dismissed with prejudice.
FACTUAL AND PROCEDURAL BACKGROUND
This case arises out of the March 27, 2009 arrest of the drilling barges, LONESTAR
203 and LONESTAR 204. Plaintiff, Superior, arrested these vessels, asserting a maritime
lien against the vessels as a result of an alleged failure to pay sums due under Barge
Refurbishment Contracts and a Turnkey Agreement entered into between Superior and
Lonestar covering refurbishment work on the drilling barges.

Lonestar and Intercontinental Bank, PLC, as operator and owners of the drilling
barges, made a claim to the vessels and filed an Answer. Lonestar additionally filed a
Counterclaim against Superior. In its Counterclaim, Lonestar alleges that Superior has
breached the Barge Refurbishment Contracts and the Turnkey Agreement1 by failing to
timely complete work on the drilling barges by the contractually agreed upon date, April 26,
2008. Accordingly, Lonestar alleges that it is owed stipulated damages set forth in the
Turnkey Agreement in the amount of $25,000.00 per day per barge, with the exception of
twenty-two days where the delay was beyond Superior’s control, for a total, as of March 27,
2009, of $15,650,000.00. Lonestar further seeks other damages resulting from the delay,
including unspecified damages for loss of two year drilling contracts for each vessel and
associated daily lost revenue, as well as demurrage charges of over $12,000,000.00 on a
heavy lift vessel which was waiting to transport the drilling barges to Nigeria. [rec. doc. 11,
Counterclaim, ¶ 2, 3 and 6].
The instant Motions address the contractual meaning of the “due and payable” clause
of the “Final Reconciliation” statement attached to the Turnkey Agreement.
Superior asserts that the “due and payable” clause, which, it argues, may be
interpreted without resort to parol evidence, obligated Lonestar to make payment of the full
contractual amount for work performed under the Turnkey Agreement ($3,396,901.37)
immediately upon execution of the Agreement. When full payment was not received,
1

All three contracts are attached to Superior’s Complaint, and one of the two identical Barge Refurbishment
Agreements and the Turnkey Agreement are attached as exhibits A and G to Superior’s Motion.

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Superior asserts that, under Louisiana law, Lonestar was in breach of the contract and,
accordingly, Superior may not be held liable for any stipulated damages for its purported
delay or non-performance. Accordingly, Superior asserts that Lonestar can have no recovery
on its counter-claim.
Citing common law authority (the Restatement (Second) of Contracts and Williston
on Contracts (4 th Ed.)), Lonestar asserts that the “due and payable” clause, which is properly
interpreted with resort to parol evidence, required Lonestar to make payment of the full
contractual amount for work performed under the Turnkey Agreement ($3,396,901.37) only
when the work was performed. More specifically, Lonestar relies on the common law
principle that, in the absence of evidence of a contrary intention, the performance of the
work must precede payment. Lonestar further asserts that the purpose of the “due and
payable” clause was not to require immediate payment, but, rather, was intended to restrict
any amount that Superior could, at a later time, claim was owed under the Turnkey
Agreement. Accordingly, Lonestar seeks partial summary judgment declaring that Lonestar
was not required to pay the total Turnkey Agreement price prior to Superior’s performance
of its work under the Agreement.
LAW AND ANALYSIS
Standard on Motion for Summary Judgment
Federal Rule of Civil Procedure 56(a) provides that summary judgment shall be
granted “if the movant shows that there is no genuine dispute as to any material fact and the

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movant is entitled to judgment as a matter of law.” 2
Rule 56(e) provides, in pertinent part, as follows:
If a party fails to properly support an assertion of fact or fails to properly
address another party’s assertion of fact as required by Rule 56(c) 3 , the court
may: . . . (3) grant summary judgment if the motion and supporting materials including the facts considered undisputed - show that the movant is entitled to
it . . . .
The Motions for Partial Summary Judgment are properly made and supported. Thus,
neither party may rest upon the allegations in their pleadings, but, rather, must go beyond the
pleadings and designate specific facts demonstrating that there is a genuine issue for trial.
Celotex v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2553-54 (1986).
However, metaphysical doubt as to the material facts, conclusory allegations,
unsubstantiated assertions and those supported by only a scintilla of evidence are
insufficient. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5 th Cir. 1994). Additionally,
summary judgment is mandated against a party who fails to make a showing sufficient to
establish an essential element of that party’s case, and on which that party will bear the

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Rule 56 was revised, effective December 1, 2010, “to improve the procedures for presenting and deciding
summary-judgment motions and to make the procedures more consistent with those already used in many courts.
The standard for granting summary judgment remains unchanged.” See Committee Notes, Rule 56.
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Rule 56(c)(1) provides, in pertinent part, as follows:
A party asserting that a fact cannot be or is genuinely disputed must support the assertion
by: (A) citing to particular parts of materials in the record, including depositions,
documents, electronically stored information, affidavits or declarations, stipulations
(including those made for purposes of the motion only), admissions, interrogatory
answers, or other materials; or (B) showing that the materials cited do not establish the
absence or presence of a genuine dispute, or that an adverse party cannot produce
admissible evidence to support the fact.

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burden of proof at trial. Celotex, 106 S.Ct. at 2552.
Lonestar has submitted evidence in opposition to Superior’s Motion. However,
Lonestar’s evidence fails to demonstrate that there is a genuine issue of disputed material
fact. Accordingly, summary judgment in favor of Superior is appropriate.
LAW AND ANALYSIS
Governing Law
The Barge Refurbishment Agreements dated April 19, 2006, contained a choice of
law clause providing that the agreement “be construed and performed under the laws of the
State of Louisiana.” ¶ 8.1. The Turnkey Agreement contains no such provision. However,
the Turnkey Agreement does provide that, with the exception of those paragraphs which
define the scope of the work, the method of payment for the work, the time for completion
of the work, and the penalty for untimely completion of the work (paragraphs 4 through 7),
it “shall not be construed as a substitution/alteration and therefore does not void any of the
provisions of the Head Barge Refurbishment Agreement.” Thus, while the Turnkey
Contract is a separate contract, it clearly provides that the provisions contained in the
original Barge Refurbishment Agreements, including the choice of law provision, remain in
effect, excepting only the scope of work provisions in those Agreements. Hence, the choice
of law provisions agreed to by the parties in the Barge Refurbishment Agreements remains

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in force, and Louisiana law applies to the issues presented by the instant Motions.4
Rules of Contractual Interpretation
Under Louisiana law, contracts are construed according to the general rules of
interpretation of contracts found in articles 2045-2057 of the Louisiana Civil Code. SWAT
24 Shreveport Bossier, Inc. v. Bond, 808 So.2d 294, 307 (La. 2001). The interpretation of a
contract is the determination of the common intent of the parties with courts giving the
contractual words their generally prevailing meaning. Id. citing La. C.C. arts. 2045 and
2047, and Amend v. McCabe, 664 So.2d 1183, 1187 (La. 1995). To ascertain the parties'
intent, the court must first look to the words and provisions of the contract. French Quarter
Realty v. Gambel, 921 So.2d 1025, 1029 (La. App. 4 th Cir. 2005); Fleet Intermodal
Services, LLC v. St. Bernard Port, - - So.3d - -, 2011 WL 976542, *3 (La. App. 3 rd Cir.
2011). The meaning and intent of the parties to a written instrument is ordinarily determined
from the four corners of the instrument, and extrinsic (parol) evidence is inadmissible either
to explain or to contradict the terms thereof. Ortego v. State, Dept. of Transp. and

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Neither party contests the validity of the choice of law provision in the Barge Refurbishment Agreements,
which select Louisiana law as the governing law. Moreover, it is clear that the choice of law clauses are valid.
“Under federal maritime choice of law rules, contractual choice of law provisions are generally recognized as valid
and enforceable.” Great Lakes Reinsurance (UK) PLC v. Durham Auctions, Inc., 585 F.3d 236, 242 (5 th Cir. 2009).
See also St. Paul Fire & Marine Ins. Co. v. Board of Com’rs, 2011 W L 890934, * 3 (5 th Cir. 2011) (unpublished).
The parties' choice of law clause in an admiralty case will govern “unless the [chosen] state has no substantial
relationship to the parties or the transaction or the state's law conflicts with the fundamental purposes of maritime
law.” Stoot v. Fluor Drilling Servs., Inc., 851 F.2d 1514, 1517 (5 th Cir. 1988). See also St. Paul, supra. The choice
of law clauses here meet both prongs of this test. Louisiana has a substantial relationship to the parties because
Superior is a Louisiana corporation and the work under the contracts at issue was to be performed in Louisiana.
Finally, neither party argues that Louisiana law conflicts with any fundamental purposes of maritime law, or that the
application of Louisiana law would be unreasonable or unjust.

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Development, 689 So.2d 1358, 1363 (La. 1997); Maniscalco v. Lafayette City-Parish, 2011
WL 309560, *3 (La. App. 3 rd Cir. 2011) citing La. C.C. art. 1848; Fleet Intermodal
Services, LLC, - - So.3d - -, 2011 WL 976542 at *3 .
Thus, when the words of a contract are clear and explicit and lead to no absurd
consequences, no further interpretation may be made in search of the intent of the parties.
SWAT 24, 808 So.2d at 307 citing La. C.C. art. 2046; Wooley v. Lucksinger, - - So.3d - - ,
2001 WL 1205136, *28 (La. 2011). The use of extrinsic (parol) evidence is proper only
where a contract is found to be ambiguous after examination of the four corners of the
instrument. Succession of Barreca v. Weiser, 53 So.3d 481, 491 (La. App. 4 th Cir. 2010)
citing Highlands Underwriters Ins. Co. v. Foley, 691 So.2d 1336, 1340 (La. App. 1 Cir.
1997).
The determination of whether a contract is clear or ambiguous is a question of law.
Sims v. Mulhearn Funeral Home, Inc., 956 So.2d 583, 590 (La. 2007). Moreover, when a
contract can be construed from the four corners of the instrument without looking to
extrinsic evidence, the question of contractual interpretation is answered as a matter of law
and summary judgment is appropriate. Id. That is the case herein. The words of the
Turnkey Agreement and the “Final Reconciliation” statement attached thereto are clear and
explicit and lead to no absurd consequences. Accordingly, the Agreement is properly
interpreted from the four corners of the document without resort to parol evidence.

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Analysis
The “due and payable” clause of the “Final Reconciliation” statement attached to the
Turnkey Agreement is clear and unambiguous. The terms of paragraph 2 of the Turnkey
Agreement are also clear and unambiguous. The clear and unambiguous meaning of these
provisions is that Lonestar was required to remit payment of the full remaining balance
under the refurbishment agreements of $3,396,901.37 immediately upon execution of the
Turnkey Agreement.
The “Final Reconciliation” was compiled by the parties “as at 11/03/08" (March 11,
2008), to be effective from December 28, 2007. The document therefore reflects
outstanding sums due for work performed on a time and material basis through December
28, 2007, as well as a contract price for work which was performed under the Turnkey
Agreement from that date forward, which would be performed under the Turnkey
Agreement. Unlike the Barge Refurbishment Agreements, neither the Final Reconciliation
nor the Turnkey Agreement sets forth a “Progress Payment” schedule. Rather, the parties
merely set forth the “Balance due and payable to Superior”, after deducting various credits,
including a prior $5.4 million “payment on account.”
The Turnkey Agreement, which incorporates the Final Reconciliation as an
attachment, like the Final Reconciliation, notes $3,396,901.37 as the “total outstanding
monies due to [Superior].” (¶ 2). Tellingly, the Agreement does not provide that this sum
will be due upon completion as Lonestar suggests, or due at any other time in the future.

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Rather, in the first sentence of paragraph 2, the parties stated that this sum represented
“outstanding” money which was “due” to Superior from Lonestar.
Black’s Law Dictionary defines “due” as “owing”, “payable” and “justly owed”, as
well as “that which the law or justice requires to be paid.” Black's Law Dictionary 499 (6th
ed. 1990). Black's continues, “commonly, and in the absence of any qualifying expressions,
the word ‘due’ is restricted to” mean “that the debt . . . is now (presently or immediately)
matured and enforceable.” Id.
Black’s Law Dictionary defines “payable” as meaning not only “[c]apable of being
paid” but also “justly due” and “legally enforceable.” Black's Law Dictionary 1128 (6th ed.
1990). Black's continues, “A sum of money is said to be payable when a person is under an
obligation to pay it. Payable . . . normally means that the debt is payable at once.” Id. See
also In re Ripley, 926 F.2d 440, 444 (5 th Cir. 1991) (construing the term “payable” under a
provision of the IRC).
Construing these terms together, in the absence of any qualifying language (as for
example, due and payable at a certain date or occurrence in the future), the only reasonable
meaning to be affixed to the words used in the Turnkey Agreement, means the debt
($3,396,901.37) was presently, or immediately, payable.
This interpretation is bolstered by the parties’ use of the term “outstanding” to
describe the “monies due” to Superior in the body of the Turnkey Agreement. Black’s Law
Dictionary defines “outstanding” as “constituting an effective obligation”, as well as an

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“outstanding debt.” Black's Law Dictionary 1102 (6th ed. 1990).
Moreover, the second sentence of the Agreement states that save and except
$3,396,901.37 Lonestar is “not indebted” to Superior for further amounts. As noted by
Superior, the converse of this sentence evidences that the parties agreed that, at the time the
Agreement was executed in March 2008, Lonestar was then indebted to Superior for the
“total outstanding monies due”, namely, the full Turnkey Agreement price of $3,396,901.37.
While Lonestar argues that payment must follow completion of the work, that
argument fails to recognize the dates listed in the contract and the clear and unambiguous
language used by the parties to the Agreement. Although the Turnkey Agreement was
apparently actually signed by Lonestar on March 25, 2008, the parties agreed in the closing
paragraph that the agreement was “executed” on December 28, 2007.
Moreover, although the Final Reconciliation was performed on March 11, 2008, the
delvery date of these vessels was April 26, 2008. Thus, it is clear that the parties
contemplated payment to compensate Superior for work performed both before and after the
Final Reconciliation. Nevertheless, the parties failed to set a payment schedule for the
$3,396,901.37, instead providing that this amount, as a balance, was “due and payable.”
Given that the Final Reconciliation establishes, on its face, that Lonestar was in
arrears on payments for work performed by Superior on a time and materials basis before
the Final Reconciliation, it is entirely reasonable that the parties thereby agreed that
Lonestar would make immediate payment of the full Turnkey Agreement price. This,

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coupled with the words “balance due and payable” in the Final Reconciliation, and
“indebted” and “total outstanding monies” contained in paragraph 2 of the Turnkey
Agreement, leads to the inescapable conclusion that the parties agreed that immediate
payment would be made to Superior by Lonestar for all of the work specified in the
Agreement, even though all of the work had not yet been completed.
It is undisputed that Lonestar failed to pay Superior $3,396,901.37, the full balance
due and payable under the Turnkey Agreement upon execution of the Agreement. To the
contrary, the record establishes that Lonestar made only a minimal partial payment of
$396,901.37, leaving $3,000,000.00, the bulk of the Agreement price, unpaid. Under
Louisiana law, Lonestar’s substantial breach of its payment obligations under the Turnkey
Agreement relieved Superior of its performance obligations. See Olympic Insurance Co. v.
H.D. Harrison, Inc., 463 F.2d 1049, 1053-1054 (5 th Cir. 1972); Commerce Ins. Agency, Inc.
v. Hogue, 618 So.2d 1048, 1052 (La. App. 1st Cir. 1993) (and cases cited therein including
Silverman v. Caddo Gas & Oil Co., 127 La. 928, 54 So. 289 (La. 1911); see also Giddens v.
Alpine Constr. Specialties, Inc., 401 So.2d 1026 (La. App. 2 nd Cir. 1981); C&W Constr. Co.
v. The Travelers Indem. Co., 147 So.2d 706 (La. App. 1 st Cir. 1962).
Accordingly, Superior is not liable for any stipulated damages for its purported delay
or non-performance. See Id.; see also La. C. C. art. 2008 (“An obligor whose failure to
perform the principal obligation is justified by a valid excuse is also relieved of liability for
stipulated damages.”). Summary judgment is therefore proper since Lonestar cannot recover

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on its counter-claim.
Finally, while Lonestar argues, under the common law, that Superior waived its right
to demand immediate full payment of the Turnkey Agreement price by continuing to
perform work under the contract, the Court cannot accept this argument. Louisiana is not a
common law state; Louisiana is a civil law state. Lonestar has cited no Louisiana authority
in support of its waiver argument, and the Court knows of no such authority under Louisiana
law.
Finally, Lonestar’s argument ignores the exception to the common law principle
relied on, applicable here, that there must be an absence of evidence of a contrary intention
for work to precede payment. In this case, as discussed above, both the Final Reconciliation
and the Turnkey Agreement, evidence a contrary intention, that is, that there be full payment
of the Turnkey Agreement price upon execution of the Agreement.
CONCLUSION
For the above reasons, the Motion for Partial Summary Judgement filed by Superior
[rec. doc. 149] is GRANTED and the Motion for Partial Summary Judgement filed by
Lonestar [rec. doc. 152] is DENIED. Accordingly, Lonestar’s counter-claim against
Superior is dismissed with prejudice.
Signed June 21, 2011, at Lafayette, Louisiana.

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