By: Chris Ortte
With the proliferation of offshore oil and gas production in the Gulf of Mexico throughout the latter half of the 21st Century and continuing today, the U.S. Fifth Circuit Court of Appeals has been pivotal in the development of admiralty and maritime jurisprudence. Of the more common legal bouts to enter the Fifth Circuit arena is the determination of whether a contract is considered to sound in maritime or non-maritime law. The debate continues as yet another en banc decision covering this topic—In re Larry Doiron—is due to be released in upcoming weeks.
The common narrative amongst these cases involves a master service agreement (“MSA”) that does not set forth specific, individual tasks to be executed between the parties. Rather, it creates a broad agreement, under which subsequent work orders are agreed upon as necessary. Within the MSA are indemnification provisions that will require each party to the contract to “hold harmless” or “to defend and indemnify” each other, as well other subcontractors, from all claims of property damage or bodily injury. The validity of such indemnification provisions rests upon whether the MSA is considered a maritime or non-maritime contract. Under maritime law, these provisions are valid, whereas under certain state laws, i.e., the Louisiana Oilfield Anti-Indemnity Act (“LOIA”), these provisions are null. Distinguishing between the two types of contracts have given lawyers and judges alike fits.
The legal framework of the determination was articulated back in 1990 with Davis & Sons v. Gulf Oil Corp. It consists of six factors for the court to consider: (1) what work was called for by the work order in effect at the time of injury; (2) what work the crew assigned to the work order actually performed; (3) whether the crew was assigned to work on a vessel in navigable waters; (4) the extent to which the work being done related to the vessel’s mission; (5) what was the injured-worker’s “principle” work; and (6) what work the injured-worker was actually performing at the time of injury. As a result, little has been settled since and the test has received much criticism over the years. The Fifth Circuit has rendered numerous noteworthy opinions on the matter, such as, Demette v. Falcon, Grand Isle Shipyard, Inc. v. Seacor Marine, LLC, Campbell v. Sonat Offshore Drilling, Inc., Domingue v. Ocean Drilling and Exploration Co., and Thurmond v. Delta Well Surveyors, to name a few.
Doiron’s appeal in the Fifth Circuit was decided earlier this year in late February. The court held that the relevant contract was an oral work order and that it was a maritime contract. In his concurrence, Judge Davis urged the court to take up the case en banc and simplify the Davis & Sons test, citing the historical criticism it has received. He recognized that most of the factors in the Davis & Sons test primarily aid in determining tort jurisdiction, not contract (an issue more specifically analyzed in Grand Isle Shipyard, Inc. v. Seacor Marine, LLC).
Indemnification provisions in offshore production MSAs are weighty matters to contractors as liability exposure can be significant. Considering the recent slumps in production activity, it could be some time before we are able to determine the effects this upcoming en banc opinion has on these provisions. Undoubtedly, a debate amongst Gulf Coast maritime lawyers will ensue regardless of Doiron’s outcome. Potentially a national debate may inspire the Supreme Court to grant writ. However, this issue has largely been localized to the Gulf Coast due to offshore production being geographically focused in the United States. Stay tuned, folks!
Davidson Meaux is providing this legal update for informational purposes only. This article should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. You should consult your own attorney concerning your particular situation and any specific legal questions you may have.