- Analysis for Maritime Contract Determination Redefined by the U.S. Fifth Circuit
- February 13, 2018 | Author: Richard G. Passler
- Law Firm: Breazeale, Sachse & Wilson, L.L.P. - New Orleans Office
The United States Fifth Circuit Court of Appeals has issued its decision in In re: Larry Doiron, Inc., No. 16-30217 (5th Cir. Jan. 8, 2018)(en banc), completely redefining the analysis for determining whether a contract is considered maritime in nature as a matter of law.
Apache Corporation (Apache) entered a contract with the vessel owner, Larry Doiron, Inc. (Dorian), to provide crane services related to work being performed by another Apache contractor, Specialty Rental Tools & Supply, LLP (Specialty) under a master services agreement (Agreement). Dorian’s crane operator negligently struck and injured a Specialty employee during the performance of the operations.
Dorian initiated limitation of liability proceedings in order to protect itself from a personal injury claim by the injured Specialty employee, who then filed a claim in the limitation action. Dorian then filed a third-party complaint against Specialty seeking indemnity under the terms of the Agreement.
The key issue in the case was whether the Agreement – a contract for the performance of specialty services to facilitate the drilling or production of oil and gas on navigable waters – was a maritime contract. If it was a maritime contract, the general maritime law applied and the indemnity provision was enforceable. If it was not a maritime contract, the Louisiana Oilfield Indemnity Act (Act) applied making the indemnity provision unenforceable.
The district court held that the Agreement was maritime in nature and granted Dorian indemnity from Specialty as provided by the Agreement. The Fifth Circuit originally affirmed on appeal. Unfortunately for Dorian, the Fifth Circuit granted en banc review and revisited its six-factor test for determining whether a contract is maritime in nature.
The district court and the original Fifth Circuit panel had properly considered the prevailing six-factors applicable in the Fifth Circuit based on Davis & Sons, Inc. v. Gulf Oil Corp., 919 F.2d 313 (5th Cir. 1990) for determining whether a contract was maritime in nature, specifically:
1. What does the specific work order in effect at the time of the injury provide?
2. What work did the crew assigned under the work order actually do?
3. Was the crew assigned to work aboard a vessel in navigable waters?
4. To what extent did the work being done relate to the mission of that vessel?
5. What was the principal work of the injured worker?
6. What work was the injured worker actually doing at the time of injury?
Consistent with the US Supreme Court’s decision in Norfolk Southern Railway Co. v. Kirby, 543 U.S. 14 (2004) broadly defining what characterizes a contract as maritime, the en banc Fifth Circuit rejected the prevailing complex fact-based six-factor analysis and unanimously replaced it with a relatively simple two-step approach, specifically:
1. Is the contract one to provide services to facilitate the drilling or production of oil and gas on navigable waters?
2. If so, does the contract provide or do the parties expect that a vessel will play a substantial role in the completion of the contract?
If the answer to both of these questions is “yes”, then the contract is maritime in nature.
Applying its new test to the case before it, the en banc Fifth Circuit reversed the district court concluding that the Agreement was not maritime in nature, resulting in the Act making the indemnity provision in favor of Dorian unenforceable.
Impact to the Maritime CommunityDoiron is a significant change in the law for analyzing maritime contracts. Existing agreements will need to be re-evaluated by the parties to manage their expectations. It will likely have broad implications to the maritime community – including but not limited to those maritime agreements containing indemnity provisions.