Harvey Gulf International Marine, LLC
Filing
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MEMORANDUM OPINION AND ORDER AFFIRMING the Bankruptcy court's order granting summary judgment. Case terminated on 9/20/2016.(Signed by Judge Gray H Miller) Parties notified.(rkonieczny, 4)
United States District Court
Southern District of Texas
ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
HARVEY GULF INTERNATIONAL MARINE, INC., §
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Appellant,
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v.
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BENNU OIL & GAS, LLC,
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Appellee.
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September 20, 2016
David J. Bradley, Clerk
CIVIL ACTION H-15-2798
MEMORANDUM OPINION AND ORDER
Pending before the court is an appeal by Harvey Gulf International Marine, Inc. (“Harvey
Gulf”) from the Bankruptcy Court’s memorandum opinion granting appellee, Bennu Oil & Gas,
LLC’s (“Bennu”) motion for summary judgment and the amended judgment. Dkt. 2, Ex. 2 at 1597,
1793. After considering the arguments, the related briefing, the evidence of record, and the
applicable law, the Bankruptcy Court’s order granting summary judgment is AFFIRMED. Harvey
Gulf requests oral submission of this matter, but the court does not find it necessary. Therefore,
Harvey Gulf’s request for oral submission is DENIED.
I. BACKGROUND
This case arises out of a Chapter 11 bankruptcy proceeding initiated by ATP Oil & Gas
Corporation (“ATP”) and involves whether Harvey Gulf has a Senior Lien on ATP’s assets, which
are now owned by Bennu. From May 31, 2009, until approximately April 29, 2010, Harvey Gulf
provided towing and transportation services for ATP in connection with certain federal oil and gas
lease blocks on the Outer Continental Shelf—Gulf of Mexico off the coast of Louisiana (“Telemark
Field”). Dkts. 2, 5, 6. There was an undisputed 352-day gap in services from April 29, 2010, until
April 16, 2011. Dkt. 2, Ex. 2 at 425. Harvey Gulf resumed its services on the Telemark Field on
April 16, 2011, and continued working for ATP until April 7, 2012. Id. at 469.
On August 17, 2012, ATP filed a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code. Dkt. 2, Ex. 6. On September 21, 2012, the Bankruptcy Court issued a Final
Debtor In Possession Order. Id. The order defined “Senior Prior Liens” as liens that are senior in
priority to the “Prepetition Liens,” which are those liens that were attached and perfected no later
than June 21, 2010 (“Senior Lien Deadline”). Id. Prepetition liens are valid, binding, enforceable,
non-avoidable and perfected as of August 17, 2012, the date when ATP filed for Chapter 11 relief.
Dkts. 2, 6. On October 17, 2013, the Bankruptcy Court issued a Final Order (A) Approving the Sale
of Certain of the Debtor’s Assets Free and Clear of Claims and Liens and (B) Approving the
Assumption and Assignment of Contracts and Leases. Id. This Final Order approved the sale of
ATP’s interest in the Telemark Field for, inter alia, $55,000,000.00 set aside to fund an escrow
account to satisfy Senior Liens. Dkts. 5 at 8, 6 at 4. For the purpose of determining relative priority
among lien holders, claimants were required to file a Statement of Lien with the earliest date to
which their liens relate back. Dkt. 3, Ex. 2 at 93.
Harvey Gulf claims ATP failed to pay it $2,885,133.50 for the services Harvey Gulf provided
to ATP between February 14, 2012, until April 7, 2012. Dkts. 3, Ex. 2 at 34; 5 at 7. On February
11, 2013, Harvey Gulf filed its original Statement of Lien in the Bankruptcy Court, and then four
days later it filed its Supplemental Lien Identification Statement maintaining that the relation back
date was May 30, 2011, which is after the Senior Lien Deadline. Dkt. 2, Ex. 2 at 475. Seven months
later, on September 4, 2013, Harvey Gulf filed its original complaint listing a different relation back
date of March 30, 2011. Id. at 480. Then about a year and a half after Harvey Gulf filed its original
Statement of Lien, it filed an Amended Lien Identification Statement and a Supplemental and
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Amended Complaint changing the relation back date to May 31, 2009. Id. at 475-481. Harvey Gulf
continues to stand by this date in this appeal. Dkts. 5, 7.
Harvey Gulf contended in the Bankruptcy Court that it has a Senior Lien because a contract
it signed with ATP allowed the relation back date to start when Harvey Gulf first provided services
to ATP, even though the work for which Harvey Gulf seeks to be paid was provided in 2012. Dkt.
5 at 8-11. The key document in this appeal is a Farmout Agreement signed by ATP and Harvey Gulf
with a provision that all work provided by Harvey Gulf “shall not be deemed to be interrupted or
cease for lien purposes.” Dkt. 5 at 5. On August 25, 2015, the Bankruptcy Court granted Bennu’s
motion for summary judgment. Dkt. 2, Ex. 2 at 1597. The Bankruptcy Court found that Harvey
Gulf’s alleged statutory liens did not constitute Senior Liens because the Louisiana Oil Well Lien
Act forecloses Harvey Gulf’s relation back argument. Id. The court issued an amended judgment
on October 6, 2015, consistent with the findings of its memorandum opinion. Id. at 1793. Harvey
Gulf disagreed and timely appealed to this court the Bankruptcy Court’s summary judgment order
and the amended judgment. Dkts. 1, 5. The court will now discuss the standard of review of a
bankruptcy court’s decision and will go on to address Harvey Gulf’s arguments.
II. STANDARD OF REVIEW
In reviewing a decision of the Bankruptcy Court, this court functions as an appellate court,
applying the standards of review generally applied in federal appeals courts. Webb v. Reserve Life
Ins. Co. (In re Webb), 954 F.2d 1102, 1103–04 (5th Cir. 1992). See also Coston v. Bank of Mavren
(In re Coston), 991 F.2d 257, 261 n.3 (5th Cir. 1993) (en banc) (citing Griffith v. Oles (In re Hipp,
Inc.), 895 F.2d 1503, 1517 (5th Cir. 1990)). This court reviews orders granting summary judgment
de novo, guided by the same standard as the Bankruptcy Court: Federal Rule of Civil Procedure 56.
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In re Oparaji, 698 F. 3d 231, 235 (5th Cir. 2012); In re Camey, 258 F. 3d 415, 418 (5th Cir. 2001)
(citing Stults v. Conoco. Inc. 76 F.32 651, 654 (5th Cir. 1996)).
III. ANALYSIS
Harvey Gulf seeks de novo review on whether the Bankruptcy Court erred when it granted
summary judgment and awarded costs against Harvey Gulf after the court ruled that Harvey Gulf did
not have a Senior Lien for its work in 2012. Harvey Gulf contends that the language in the Farmout
Agreement clearly provided that Harvey Gulf’s gap in work would not be deemed a cessation or
interruption in work for lien purposes, and that the lien should run from Harvey Gulf’s original start
date. Dkt. 5.
At issue is whether parties can contract around the requirements listed in the Louisiana Oil
Well and Lien Act (“LOWLA”). This state statute governs whether parties have liens (or
“privileges” in Louisiana) over certain oil, gas, and water well property to secure obligations and
clearly discusses when a privilege is established and extinguished. La. Rev. Stat. §§9:4861, et seq.
Harvey Gulf contends that the language in the Farmout Agreement modified the terms set out in
LOWLA, allowing the parties to disregard any period of interruption or cessation. Dkt. 5 at 3. After
reviewing the applicable Louisiana statutes and case law, the court finds that the Farmout Agreement
is unenforceable as it relates to modifying the relation back requirement set out in LOWLA.1
In order to claim a Senior Lien under the Final Debtor in Possession Order, Harvey Gulf must
establish that its work in 2012 relates back to a date that predated the Senior Lien Deadline of June
21, 2010. The Farmout Agreement is between ATP (farmor) and Harvey Gulf (farmee). Dkt. 5 at
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The court applies Louisiana law because the liens in question were recorded and
perfected in Louisiana.
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5. The relevant provision states:
2.1 Contribution: Notwithstanding the terms and Provisions of the Time Charters
with respect to total per day charter hire rates invoiced by Farmee throughout the
terms of the Time Charters for services provided by Farmee, the percentage of each
invoiced amount as indicated on Exhibit 1 (the “Base Amount”) will be payable in
accordance with the Time Charters and Farmee shall have all available lien rights
under applicable law for the Work, excluding the Farmout Related Services only
(provided however the Parties agree the Work shall not be deemed to have
ceased or interrupted for lien purposes).
Dkt. 5 (emphasis added).
Bennu argues that notwithstanding the contractual provision, Harvey Gulf’s post-gap services
cannot relate back to the initial start date. Dkt. 6. Harvey Gulf cannot modify LOWLA because
these liens are “creatures of statute” and Louisiana case law has held that lien statutes must be strictly
construed. Id. at 8-11; Grand Lodge Knights, Ladies Auxiliary, Juveniles of Honor of America v.
Charles, 70 So. 2d 684, 790 (La. 1953) (“It is well recognized in our jurisprudence that liens and
privileges are stricti juris and that the party who claims or asserts one must be able to put his finger
on the law under which it is granted.”).
Notwithstanding the terms outlined in LOWLA, Harvey Gulf relies principally on a party’s
general freedom “to contract for any object that is lawful, possible, and determined or determinable,”
and argues that private parties creating an exception to LOWLA’s continuity requirement is
permissible so long as the action does not “derogate from laws enacted for the protection of the
public interest.” Dkt. 5; La. C.C. arts. 7, 1971. Harvey Gulf explains that LOWLA was silent as to
whether parties could modify its elements and that the Farmout Agreement does not violate public
policy. Dkt. 5 at 15-16. Harvey Gulf further points out that the cases Bennu cited to were about the
creation of a lien in a contract and do not address whether parties may use contract law to modify
a statutory lien already in existence. Dkt. 7. The court addresses these arguments in turn.
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A. LOWLA’s Statutory Requirements
Both parties agree that LOWLA is the applicable law for the lien in question. Dkts. 5, 6. A
privilege is established if:
(1) The claimant, who is a contractor, laborer, or employee begins rendering services
at the well site.
(2) Movables sold by the claimant to an operator or contractor are delivered to the
well site.
(3) The claimant begins transporting movables to, or persons to or from, the well site.
(4) Property leased by the claimant to an operator or contractor is placed on the well
site for use in operations.
La. Rev. Stat. §9:4864(A).
Harvey Gulf asserts that its privilege began when it rendered services for ATP on May 31,
2009. Dkt. 5. However, pursuant to §9:4864(C), a privilege may not relate back to an earlier date
if there is an interruption or cessation in activity for “more than ninety consecutive days.”
All obligations owed to a claimant arising from operations on the same operating
interest, without a lapse of more than ninety consecutive days between an activity or
event that establishes the privilege as described in Subsection A of this Section, are
secured by a single privilege whether or not such activities are performed or events
occur at different times and under several contracts with different operators or
contractors. If more than ninety consecutive days elapse between such activities
or events, the privileges established before and those established after such time
are separate.
§9:4864(C) (emphasis added).
This court finds that the language of the statute is clear and that Harvey Gulf’s almost oneyear hiatus constitutes a gap that exceeded LOWLA’s ninety-day continuity requirement. The facts
indicate that Harvey Gulf rendered services for ATP during two intervals separated by a 352-day gap
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from April 29, 2010 to April 11, 2011. Dkt. 2, Ex. 2. It is undisputed that the 352-day gap in
services is greater than the statute’s “lapse of more than ninety consecutive days between an activity
or event.” Id. This means that when Harvey Gulf resumed work for ATP after April 16, 2011, a
new relation date was established, separate from Harvey Gulf’s original start date of May 31, 2009.
Harvey Gulf must prove that its alleged 2012 lien predates the Senior Lien Deadline of June 21,
2010, and it failed to do so. The court finds Harvey Gulf’s lien for its 2012 work did not predate
the Senior Lien Deadline because its one-year hiatus prevented it from relating back to May 31,
2009. Accordingly, the court AFFIRMS the Bankruptcy Court’s findings.
B. Whether Parties May Modify LOWLA
The Louisiana Appellate Courts have held that privileges may only be created by statute and
have prohibited liens created by contract. “[P]rivileges are offsprings of the law and cannot be
created by contract.” Smith v. Unity Indus. Life Ins. Co., 13 So. 2d 129, 131 (La. Ct. App. 1943);
Whittington v. Nelson Bros. Const. Co., 141 So. 491, 492 (La. Ct. App. 1932); Capillon v.
Chambliss, 29 So. 2d 171 (La. 1946). Pursuant to Article 3185 of the Louisiana Revised Civil Code,
“Privilege can be claimed only for those debts to which it is expressly granted in this Code.”
La. Stat. Ann. art 3185 (West 2006). Following this logic, the benefits and limitations of a statutory
lien must also arise from the Code and are not for the parties to modify. Harvey Gulf does not point
to any case law where parties were permitted to contractually modify a statutory lien and this court
is unaware of any case law that permits parties to contractually modify the express terms of LOWLA
or any other Louisiana statutory lien. Dkts. 5, 7.
Instead, Harvey Gulf analogizes to cases where parties have the freedom to contract, which
may be applicable to other statutes, but are inapplicable to lien statutes. “[T]he operative effect of
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a privilege may never be extended by implication or analogy to any situation not explicitly and
precisely contemplated by the statute creating it.” Pelican State Associates, Inc. v. Winder, 208 So.
2d 355, 357 (La.App. 1st Cir.1968), writ issued, 252 La. 178, 210 So. 2d 56 (1968) and judgment
reinstated, 253 La. 697, 219 So. 2d 500 (1969). Indeed, Harvey Gulf’s analogy to prescriptive
periods (or statutes of limitation) is inapplicable because the Louisiana Supreme Court held that
“contractual prescriptive periods” may not be lengthened as a matter of public policy but “such
periods may be shortened upon agreement of the parties.” La. Health Serv. & Indem. Co. v.
McNamara, 561 So. 2d 712, 719 (La. 1990) (emphasis added).
Harvey Gulf goes on to describe how the Farmout Agreement does not violate public policy
and that the “purpose of the Oil Well Lien Act is to protect those, like [the plaintiff], who contribute
labor, services, and equipment to the drilling of wells from the default of those who engage them.”
Dkt. 5 at 16 (quoting Guichard Drilling Co. v. Alpine Energy Servs., Inc., 657 So. 2d 1307, 1312
(La. 1995)). To comport with LOWLA’s purpose and to effectuate the intent of the legislature, this
court must interpret the statute strictly and follow the statute’s express terms.
When the wording of a [statute] is clear and free of ambiguity, the letter of it shall not
be disregarded under the pretext of pursuing its spirit. Rather, the law must be
applied as written, and no further interpretation can be made in search of the intent
of the legislature.
La. Stat. Ann. § 1:4. (West 2006). See Taggert v. Our Lady Queen of Heaven Catholic Church,
2004-1331 (La. App. 3 Cir. 2/2/05); 893 So. 2d 1001, 1001, writ denied, 2005-0569 (La. 4/29/05),
901 So. 2d 1072; Patriot Const. & Equip., LLC v. Rage Logistics, LLC., 2015-1136 (La. App. 3 Cir.
4/6/16), 2016 WL 1358526 (“[P]ublic contract laws are to be strictly construed such that the
privileges granted are not extended beyond the statutes.”).
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A strict interpretation of LOWLA would not allow for modification of the statute. The
Farmout Agreement, to the extent that it seeks to modify LOWLA, is not enforceable. Accordingly,
the Bankruptcy Court did not err when it ruled that the Farmout Agreement’s attempt to modify the
requirements of LOWLA was unenforceable. The Bankruptcy Court’s granting of a motion for
summary judgment in favor of Bennu is AFFIRMED.
C. Whether Farmout Agreement is Applicable to Bennu
The court need not decide appellee’s second issue of whether the Farmout Agreement is
unenforceable as to Bennu as a third-party or whether Bennu “stands in the shoes” of ATP because
the issue is not determinative of this case. Dkts. 6, 7.
IV. CONCLUSION
The Bankruptcy Court’s order granting summary judgment is AFFIRMED, and appellant’s
request for oral submission is DENIED.
Signed at Houston, Texas on September 20, 2016.
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Gray H. Miller
United States District Judge
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