Richard v. Island Operating Co Inc

Filing 100

RULING ON MOTIONS TO DISMISS: For the reasons set out, the motions 57 Motion to Dismiss for Failure to State a Claim, 82 Motion to Dismiss for Failure to State a Claim are DENIED. Signed by Magistrate Judge C Michael Hill on 1/27/2015. (crt,GregorySld, C)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA

BYRON RICHARD

CIVIL ACTION NO. 11-0419

VERSUS

MAGISTRATE JUDGE HILL

ISLAND OPERATING CO., INC., ET AL

BY CONSENT OF THE PARTIES

CONSOLIDATED WITH
JOSEPH FONTENOT

CIVIL ACTION NO. 11-2084

VERSUS

MAGISTRATE JUDGE HILL

APACHE CORP.

BY CONSENT OF THE PARTIES
RULING ON MOTIONS TO DISMISS

The defendant, Fluid Crane and Construction Company, Inc. (“Fluid Crane”), has
filed motions to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) in both of these consolidated
cases, arguing that the relevant Master Service Contract ("MSC") in effect in each of these
cases does not obligate Fluid Crane to provide "Marcel coverage"1 to Island Operating
Company, Inc. ("Island Operating") in either case and, further, that any such requirement
would be null and void under the Louisiana Oilfield Anti-Indemnity Act ("LOAIA")2.
Island Operating opposes the motions on the grounds that the pleadings and
attachments thereto state a valid cause of action and that the basis for the motion to dismiss
assumes facts not in the record which cannot be considered by the Court on a Rule 12(b)(6)

1

Marcel v. Placid Oil Co., 11 F.3d 563 (5th Cir. 1994)

2

La. R.S. 9:2780.

motion.
For those reasons set out below, motions to dismiss are denied.
I. FACTUAL BACKGROUND
Plaintiff, Byron Richard, filed the underlying lawsuit seeking damages for personal
injuries which he sustained on March 21, 2010 while working in the course and scope his
employment as a rigger with Fluid Crane. At that time, Richard was performing services for
XTO Energy, Inc. (“XTO”) on a fixed platform attached to the Outer Continental Shelf
designated as South Marsh Island 142. The platform was located in the Gulf of Mexico off
the coast of Louisiana. At the time of the accident, Fluid Crane and XTO (through Hunt
Petroleum Corp., hereafter “HPC”) were parties to a MSC dated January 26, 2002 as
amended by agreement dated February 6, 2004.
Plaintiff Joseph Fontenot ("Fontenot") was also employed by Fluid Crane when he
was injured on December 5, 2010 while performing services for Apache Corporation
("Apache") on a fixed offshore platform attached to the Outer Continental Shelf designated
as EL 281A, located in the Gulf of Mexico off the Louisiana coast. Fluid Crane and Apache
were parties to a MSC dated November 10, 2010 which governed the work activity being
performed by Fontenot at the time of his accident.
At the time of the accidents involving both plaintiffs, Fluid Crane was covered under
a Commercial General Liability insurance policy issued by First Specialty Insurance
Corporation ("First Specialty"). Fluid Crane had no direct contractual relationship with the

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Island Operating at the time of either of the plaintiffs' accidents.The underlying lawsuits
were both settled by Island Operating who then filed third-party demands against, among
others, Fluid Crane. As against a Fluid Crane, Island Operating claims that Fluid Crane
breached its obligation under the MSCs to provide access to so-called "Marcel coverage" to
Island Operating.
Fluid Crane argues that it complied with its contractual obligations, in both cases,
under the MSCs, but that the premiums were paid only for coverage to XTO and Apache.
Since those were the only premiums paid, only XTO and Apache were named as additional
insureds under the First Specialty policy; Island Operating was not named an additional
insured because First Specialty never received a premium payment for that coverage.
II. LAW AND ANALYSIS
Rule 12(b)(6) Motion to Dismiss Standard
In considering a motion to dismiss for failure to state a claim under Rule 12(b)(6), a
district court must limit itself to the contents of the pleadings, including attachments thereto.
Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000); Fed.R.Civ.P.
12(b)(6). Moreover, it is proper to consider documents that a defendant attaches to a motion
to dismiss, if such documents are referred to in the plaintiff's complaint and are central to
the plaintiff’s claim, as they form part of the pleadings. Id. at 498-499. Finally, in deciding a
Rule 12(b)(6) motion to dismiss, a court may permissibly refer to matters of public record.
Cinel v. Connick, 15 F.3d 1338, 1343 fn.6 (5th Cir. 1994).

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Motions to dismiss for failure to state a claim are appropriate when a defendant
attacks the complaint because it fails to state a legally cognizable claim. Ramming v. United
States, 281 F.3d 158, 161 (5th Cir. 2001). When deciding a Rule 12(b)(6) motion to dismiss,
“[t]he ‘court accepts all well-pleaded facts as true, viewing them in the light most favorable
to the plaintiff.’" In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007)
(internal quotations omitted) quoting Martin K. Eby Constr. Co. v. Dallas Area Rapid
Transit, 369 F.3d 464, 467 (5th Cir. 2004). In other words, a motion to dismiss an action for
failure to state a claim “admits the facts alleged in the complaint, but challenges plaintiff's
rights to relief based upon those facts.” Ramming, 281 F.3d at 161-162 quoting Tel-Phonic
Servs., Inc. v. TBS Int'l, Inc., 975 F.2d 1134, 1137 (5th Cir. 1992).
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to 'state a claim to relief that is plausible on its face.’” Harold H. Huggins
Realty, Inc. v. FNC, Inc., 634 F.3d 787, 796 (5th Cir. 2011) quoting Ashcroft v. Iqbal, 556
U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).
“A claim for relief is plausible on its face ‘when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.’” Harold H. Huggins Realty, Inc., 634 F.3d at 796 quoting Iqbal, 129
S.Ct. at 1949. This includes the basic requirement that the facts plausibly establish each
required element for each legal claim. Coleman v. Sweetin, - - F.3d - - , 2014 WL 958275,

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*4 (5th Cir. 2014) citing Iqbal, 129 S.Ct. at 1949 and Twombly, 550 U.S. at 557. However, a
complaint is insufficient if it offers only “labels and conclusions,” or “a formulaic recitation
of the elements of a cause of action.” Id. quoting Iqbal, 556 U.S. at 678 quoting Twombly,
550 U.S. at 555.
“Factual allegations must be enough to raise a right to relief above the speculative
level. . . .” Twombly, 550 U.S. at 555; Kopp v. Klein, 722 F.3d 327, 333 (5th Cir. 2013).
Thus, “the pleading must contain something more . . . than . . . a statement of facts that
merely creates a suspicion [of] a legally cognizable right of action.” Twombley, 127 S.Ct. at
1965 citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235-236
(3d ed.2004); Lormand v. US Unwired, Inc., 565 F.3d 228, 257 at fn. 27 (5th Cir. 2009). If a
plaintiff fails to allege facts sufficient to “nudge[] [her] claims across the line from
conceivable to plausible, [her] complaint must be dismissed.” Twombley, 127 S.Ct. at 1974;
Malik v. Continental Airlines, Inc., 305 Fed. Appx. 165, 167 (5th Cir. 2008); Mitchell v.
Johnson, 2008 WL 3244283, *2 (5th Cir. 2008).
Applicable law
Both of the accidents which are the subject of the underlying lawsuits occurred on
fixed platforms on the Outer Continental Shelf adjacent Louisiana, therefore, the applicable
law governing this case is Louisiana law pursuant to the Outer Continental Shelf Lands Act,
43 U.S.C. § 1331, et seq. Accordingly, the LOAIA applies to the MSCs at issue in this case.

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The MSC provisions
Both MSCs had identical provisions requiring indemnity and insurance coverage at
the time of these accidents. In the Richard case the MSC was between XTO (HPC) and
Fluid Crane. In the Fontenot case the MSC was between Apache and Fluid Crane. Both
have the following pertinent provisions:
13)

Insurance
A)

Contractor shall secure and maintain, and shall require its
Subcontractors to secure and maintain, during the term of the Contract,
the following insurance coverages with limits not less than the amounts
specified and with companies satisfactory to HPC, and shall furnish
certificates of such insurance satisfactory to HPC before commencing
the Work:
*

C)

*

*

ALL LIABILITY INSURANCE COVERAGE (INCLUDING
EMPLOYER'S LEGAL LIABILITY) CARRIED BY CONTRACTOR
WITH RESPECT TO THE WORK WHETHER OR NOT REQUIRED
BY OTHER PROVISIONS OF THE CONTRACT, SHALL EXTEND
TO AND PROTECT THE HPC GROUP TO THE FULL EXTENT
AND AMOUNT OF SUCH COVERAGE, INCLUDING EXCESS OR
UMBRELLA INSURANCES AND SHALL BE PRIMARY TO, AND
RECEIVE NO CONTRIBUTION FROM, ANY OTHER
INSURANCE OR SELF-INSURANCE PROGRAMS MAINTAINED
BY OR ON BEHALF OF OR BENEFITTING THE HPC GROUP.
THE LIMITS AND COVERAGES OF THE INSURANCES
OBTAINED BY CONTRACTOR SHALL IN NO WAY LIMIT THE
LIABILITIES OR OBLIGATIONS ASSUMED BY THE
CONTRACTOR UNDER THIS CONTRACT OR ANY
OBLIGATION OF CONTRACTOR TO DEFEND, INDEMNIFY
AND HOLD HARMLESS THE HPC GROUP UNDER THIS
CONTRACT. ALL OF THE CONTRACTORS [sic] LIABILITY
INSURANCE POLICIES SHALL NAME THE HPC GROUP AS AN
ADDITIONAL INSURED AND CONTAIN A WAIVER ON THE
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PART OF THE INSURER, BY SUBROGATION OR OTHERWISE,
OF ALL RIGHTS AGAINST THE HPC GROUP. ANY
DEDUCTIBLE UNDER THE CONTRACTOR'S POLICIES OR
INSURANCE SHALL BE THE RESPONSIBILITY OF THE
CONTRACTOR.
In order to avoid the application of the LOAIA, the MSCs contained the following
provision:
14)

Work in or Offshore Louisiana
THE FOLLOWING PROVISIONS APPLY WHERE WORK IS TO BE
PERFORMED IN OR OFFSHORE LOUISIANA, NOTWITHSTANDING
ANY PROVISIONS IN THIS CONTRACT TO THE CONTRARY.
A)

Independent of the consideration paid or to be paid by HPC for the
services provided by Contractor under the Master Service Contract,
and/or any Purchase Order or Work Order that it might be issued
pursuant to this Master Service Contract, HPC shall pay to Contractor's
insurers the premium (if any) arising from the HPC Group being named
as an additional insured on Contractors liability insurance policies,
including contractual liability coverage for the liabilities assumed under
the contract and, if applicable, excess liability or umbrella policies. If
there is to be an additional premium for such coverage, including any
renewal or replacement thereof, Contractor agrees to supply satisfactory
documentation from Contractor's insurer setting forth said additional
premium for said coverage. Contractor warrants and represents that it
has communicated with its insurer(s) regarding this provision of the
Master Service Contract. Notwithstanding the general notice provisions
of Section 29, all notices regarding such insurance shall be sent to
HPC, c/o Purchasing Department. If Contractor does not notify HPC of
any additional premium charged for such coverage, it shall be
conclusively presumed that there is no additional premium charged for
such coverage. Within fifteen (15) days of notice of the additional
premiums charged for such coverage, HPC shall notify Contractor
whether it will pay for the additional premium. If HPC notifies
Contractor that it does not wish to pay the additional premium or fails
to notify Contractor within such fifteen (15) day period, Contractor
shall not be obligated to provide such coverage in favor of the HPC
Group.
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The arguments of the parties
The argument of Fluid Crane is simple and direct. Fluid Crane argues that a literal
reading of paragraph 14 of the MSC does not obligate Fluid Crane to provide additional
insured coverage (Marcel coverage) for the subcontractors of XTO (HPC) or Apache, such
as Island Operating. Furthermore, XTO (HPC) and Apache paid premiums to First Specialty
to provide for additional insured coverage only for coverage for XTO (HPC) and Apache
but neither paid a premium for First Specialty to name Island Operating (or any other
member of the XTO (HPC) or Apache Groups) as additional insureds. Although no
premium was paid, and therefore no coverage was provided, that was the choice of XTO
(HPC) and Apache, but not the obligation of Fluid Crane.
Island Operating argues that there is a missing link in the factual chain which
precludes granting the motion to dismiss. Island Operating argues that there is an
unquestioned obligation on the part of Fluid Crane to arrange for Marcel coverage in favor
of the XTO (HPC) and Apache Groups. If, as is asserted by First Specialty, no coverage was
provided under its policy to the entirety of each "Group" the question which must then be
asked is: Why not? Island Operating argues that the pleadings and attachments thereto do
not answer the question of whether or not Fluid Crane, in fact, satisfied its contractual
obligation, by which it warranted and represented, "that it has communicated with its
insurer(s) regarding this provision of the Master Service Contract".
Island Operating is correct.

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At this stage of the proceedings it is not known whether Fluid Crane fulfilled its
obligation to make known to First Specialty the relevant provisions of the MSCs. If so, and
if it was the choice of XTO (HPC) and/or Apache to pay premiums solely for coverage for
themselves and not for the entire Group then it would appear that Fluid Crane may well have
fulfilled its obligation under the MSCs. If First Specialty was not so notified by Fluid Crane,
then Fluid Crane may well have breached its obligation under the MSCs. The answer to that
question is beyond the pleadings and appears to be clearly an issue of fact to be determined
through discovery.
In Marcel, The Court said:
The LOIA voids oilfield agreements to the extent the agreements contain
provisions for indemnification for losses caused by negligence or fault of the
indemnitee. (footnote omitted). Under the agreement at issue in Patterson, the
employer of the injured plaintiff was required to provide insurance coverage
indemnifying a third party, an arrangement within the reach of the LOIA and
similar to the terms agreed to by Placid and SEE. The agreement provided,
however, that the indemnitee would reimburse the employer for the insurance
premiums. The indemnitee produced evidence documenting its payment of
these premiums over a period of approximately eighteen months. Based upon
this reimbursement, the court concluded that the agreement was not void
because the indemnitee had paid for its own insurance.
*

*

*

We now adopt the exception created in Patterson as law of this Circuit and
find that it has potential application here.FN12 The LOIA is aimed at
preventing the shifting of the economic burden of insurance coverage or
liability onto an independent contractor. If the principal pays for its own
liability coverage, however, no shifting occurs. We see no need to prevent
such an arrangement in order to give effect to the LOIA. Indeed, agreements
such as the one in Patterson may be economically desirable in situations
where it is less expensive for the independent contractor to add the principal
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as an additional insured than for the principal to obtain its own insurance on a
particular operation.
FN12. SEE asserts that the exception should not apply because, unlike
the situation in Patterson, Placid never paid any insurance premiums.
We disagree. As SEE did not procure the insurance, which it had
agreed to do, there were no premiums for Placid to pay. Further, only
two months separated the time the parties entered the agreement at the
end of October 1989 and the time of the accident on January 3, 1990;
in Patterson, the indemnitee had paid premiums for approximately
eighteen months.
11 F.3d at 569-570.
To the extent that this motion by Fluid Crane asks the Court to hold that its obligation
to notify First Specialty as required by the MSCs in this case violates the LOAIA, the Court
declines to do so. The Court sees no material difference between the obligation undertaken
by Fluid Crane here and the obligation enforced by the Court in Marcel against SEE.

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For the above reasons, the Motions to Dismiss are denied.3
January 27, 2015, Lafayette, Louisiana.

3

At oral argument, counsel for Island Operating invited the Court to assist counsel,
and the offshore drilling industry, in discerning the meaning of Marcel as it affects dayto-day business in the Louisiana offshore oil and gas production business.
The Court in Marcel remanded the case to the district court with the following
instructions:

We reverse the district court's summary judgment for SEE and remand
Placid's third-party claims for reconsideration in light of Patterson. If
Placid was responsible for the full cost of obtaining its insurance, the
agreement is similar to that in Patterson and is not void under the LOIA; if
SEE paid any material part of the cost of Placid's insurance, however, the
district court should reinstate its summary judgment in favor of SEE.
11 F.3d at 570.
Specifically, counsel invited the Court to opine on the meaning of the phrase
"material part of the cost" of the insurance coverage. Counsel urged the Court to do so not
only for guidance in this case but for industry-wide guidance as to the meaning Marcel.
The Court declines the invitation.
The Court can only decide those issues properly presented for decision. If and
when this Court is faced with having to decide what the Fifth Circuit meant in Marcel, it
will do so. Until that time comes, however, the Court expresses no opinion.
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