Grand Isle Shipyards, Inc. v. Black Elk Offshore Operations, L.L.C.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

GRAND ISLE SHIPYARDS, INC. CIVIL ACTION

VERSUS CASE NO. 15-129

BLACK ELK ENERGY OFFSHORE SECTION: “G” (5)

OPERATIONS, LLC

ORDER AND REASONS

Before the Court is the Trustee of the Black Elk Liquidating Trust, Richard Schmidt’s

(hereinafter “BEEOO”),1 “Motion for Partial Summary Judgment.”2 In this litigation, Plaintiff

Grand Isle Shipyards, Inc. (“GIS”) claims that Defendant BEEOO failed to pay GIS for goods and

services connected to BEEOO’s oil operations.3 BEEOO filed the instant motion for partial

summary judgment, arguing that the workers from D&R Resources, LLC that GIS used for its

services on BEEOO’s platform were borrowed employees of GIS.4 In opposition, GIS argues that

the issue of borrowed employees is not relevant to BEEOO’s breach of contract claim and the

Court has already ruled against this finding in prior litigation.5 Having considered the motion, the

memoranda in support and opposition, the record, and the applicable law, the Court will deny the

motion.

1 Though Richard Schmidt is the active Defendant in the case as the trustee of the Black Elk Liquidating Trust, the

Court refers to Defendant as Black Elk Energy Offshore Operations, LLC (“BEEOO”) for continuity between the

briefings in the record.

2 Rec. Doc. 122.

3 Rec. Doc. 1-1 at 2.

4 Rec. Doc. 122-1 at 1.

5 Rec. Doc. 127.

I. Background

A. Factual Background

In the second amended complaint, GIS alleges that BEEOO breached the terms of the

parties’ agreement by failing to pay for services rendered.6 GIS asserts that BEEOO contracted

with GIS for GIS to provide goods and services in support of BEEOO’s oil operations, but GIS

contends that it never received payment for the services.7 GIS avers that BEEOO is liable for

breach of contract, bad faith breach of contract, and detrimental reliance.8 GIS also seeks relief

through quantum meruit, a well lien act claim under the Louisiana Oil Well Lien Act (“LOWLA”)

and a request for a writ of sequestration and judgment on BEEOO’s property.9

B. Procedural Background

On December 5, 2014, GIS filed a petition against BEEOO in the 17th Judicial District

Court for the Parish of Lafourche, State of Louisiana.10 GIS asserted a claim under the Oil Well

Lien Act.11 On January 21, 2015, BEEOO removed the case to this Court, asserting diversity

jurisdiction.12 On March 17, 2015, BEEOO answered the petition and asserted a counterclaim

against GIS.13 In the counterclaim, BEEOO alleged that GIS engaged in fraud, breach of contract,

breach of warranty, and negligence surrounding GIS’ work on BEEOO’s oil platform West Delta

32 (“West Delta 32”).14 On March 23, 2015, GIS amended the complaint to add claims for breach

6 Rec. Doc. 20 at 2–3.

7 Id. at 3.

8 Id. at 4–5.

9 Id. at 3–4.

10 Rec. Doc. 1-1.

11 Id.

12 Rec. Doc. 1.

13 Rec. Doc. 14.

14 Id.

of contract, bad faith breach of contract, detrimental reliance, and quantum meruit.15 On June 3,

2015, GIS filed a second amended complaint, removing several of the properties for which it

alleged claims.16

On August 11, 2015, certain creditors of BEEOO filed an involuntary petition for relief

under Title 11 of the United States Code against BEEOO in the United States Bankruptcy Court

for the Southern District of Texas.17 On August 19, 2015, this Court issued an order staying and

administratively closing the case in light of the automatic bankruptcy stay.18 On July 13, 2016, the

bankruptcy court issued an order confirming the liquidation plan regarding BEEOO and appointing

Richard Schmidt as the liquidation trustee.19 On May 10, 2018, this Court reopened the case and

substituted Trustee Richard Schmidt in the place of BEEOO.20

At a December 19, 2018 oral argument on GIS’ motion to dismiss, BEEOO admitted that

its fraud and negligence claims were prescribed under Louisiana law.21 Accordingly, on December

26, 2018, the Court dismissed BEEOO’s fraud and negligence claims.22 On May 21, 2019, BEEOO

filed the instant motion for partial summary judgment.23 On May 28, 2019, GIS filed an

15 Rec. Doc. 16.

16 Rec. Doc. 20.

17 See Rec. Doc. 29-2.

18 Rec. Doc. 32.

19 Rec. Doc. 34-1 at 23–24, 26–27.

20 Rec. Doc. 42. Though Richard Schmidt is the active Defendant in the case, the Court refers to Defendant as

BEEOO for continuity between the briefings.

21 Rec. Doc. 70 at 1.

22 Id. at 1–2.

23 Rec. Doc. 122.

opposition.24 With leave of Court, BEEOO filed a reply in further support of the motion on June

4, 2019.25

II. Parties’ Arguments

A. BEEOO’s Arguments in Support of the Motion for Partial Summary Judgment

BEEOO requests that the Court rule that the D&R Resources, LLC (“D&R”) workers used

by GIS on the West Delta 32 can be legally classified as borrowed employees of GIS.26 BEEOO

begins by contending that during litigation in Tajonera v. Black Elk Energy Offshore Operations,

LLC,27 GIS submitted a motion arguing that the workers GIS obtained from D&R were borrowed

employees.28 BEEOO alleges that GIS listed multiple factual allegations in support of its argument

that the D&R workers were borrowed employees of GIS.29 BEEOO avers that it does not dispute

the facts that GIS pled in the Tajonera litigation regarding the D&R workers, and BEEOO now

asserts that applying the Fifth Circuit’s borrowed employee test in Ruiz v. Shell Oil Co.,30 to these

undisputed facts, the nine factors weigh in favor of a finding that the D&R workers were borrowed

employees.31

BEEOO contends that under Ruiz, “[t]he factor of control is perhaps the most universally

accepted standard for establishing an employer-employee relationship.”32 BEEOO insists that the

D&R workers were under the control of GIS because they took orders from GIS’ personnel,

24 Rec. Doc. 127.

25 Rec. Doc. 136.

26 Rec. Doc. 122-1 at 1.

27 Civil Action No. 13-366.

28 Rec. Doc. 122-1 at 1–2.

29 Id. at 2.

30 413 F.2d 310, 312-13 (5th Cir. 1969).

31 Id.

32 Id. at 4 (quoting Perron v. Bell Maint. and Fabricators, Inc., 970 F.2d 1409, 1412 (5th Cir. 1992)).

including GIS’ supervisor Curtis Dantin, and D&R did not supervise the day-to-day activities of

the D&R workers.33 Next, though the contractual agreement between D&R and GIS states that the

D&R workers were independent contractors, in Melancon v. Amoco Prod. Co.,34 the Fifth Circuit

held that the course of conduct controls.35 Based on this, BEEOO asserts that it is uncontested that

the D&R workers were doing the work of GIS, and this course of conduct establishes that D&R

and GIS understood that the D&R workers were borrowed employees.36 BEEOO contends that

day-to-day control of GIS over the D&R workers established that “D&R terminated its relationship

with the employees.”37

Regarding the factor of whether the D&R workers acquiesced in the new work situation,

BEEOO states that the D&R workers did not have a prior work arrangement because they traveled

directly from the Philippines, and there is no evidence that did not consent to the arrangement with

GIS.38 In support of the factor of who furnished the tools for performance, BEEOO argues that

even if the D&R workers supplied coveralls and small tools that they used for work, GIS provided

the other tools, food, and lodging, and this is sufficient under Fifth Circuit case law.39 On the factor

of length of employment, BEEOO contends that the Court previously found this factor was neutral

because the D&R workers only worked on the West Delta 32 for one week prior to the incident.40

33 Id. at 5.

34 834 F.2d 1238, 1244 (5th Cir. 1988).

35 Rec. Doc. 122-1 at 6.

36 Id.

37 Id. at 7.

38 Id..

39 Id. at 8.

40 Id.

BEEOO alleges, however, that the parties “agree that the D&R workers’ employment for GIS was

for a much longer time period.”41

On the factor of who had the right to terminate the employee, BEEOO proffers that “the

Court must determine whether the borrowing employer had the right to terminate its relationship

with the borrowed employee.”42 BEEOO claims that “it is clear” that GIS could remove a D&R

worker from the job if GIS was unsatisfied with the work.43 Likewise, regarding who had the

obligation to pay the employee, BEEOO asserts that regardless of D&R’s role in disbursing payroll

funds to the workers, GIS was responsible for determining the number of hours each D&R

employee worked, the number of overtime hours allowed, and the ultimate payment on these

hours.44 Taking the nine factors together, BEEOO argues that they weigh in favor of borrowed

employee status. 45Accordingly, BEEOO urges the Court to rule that the D&R workers used by

GIS on the West Delta 32 were borrowed employees of GIS.46

B. GIS’ Arguments in Opposition to the Motion for Partial Summary Judgment

In opposition, GIS argues that the Court should deny the motion because the issue of

whether the D&R workers were GIS’ borrowed employees is irrelevant to BEEOO recovering on

its breach of contract claim.47 GIS contends that vicarious liability is only relevant to tort claims,

but BEEOO’s tort claims were already dismissed by the Court as prescribed.48 GIS asserts that

41 Id.

42 Id. at 8–9.

43 Id. at 9.

44 Id.

45 Id.

46 Id. at 9.

47 Rec. Doc. 127 at 1.

48 Id. at 3.

BEEOO conflates tort and contract claims, and in Babin v. Quality Energy Services,49 the Fifth

Circuit cautioned courts that they “must scrutinize tort claims masquerading as contract claims,

especially where a litigant seeks to avoid prescription.”50 GIS avers that Babin applies here and

the Court should not rule on an issue that is not part of BEEOO’s contract claim.51 Nevertheless,

GIS argues that even if the D&R workers were borrowed employees of GIS, “D&R can still be

responsible for the fault of its employees.”52

GIS also argues that, as BEEOO notes, the Court already considered the issue of borrowed

employee status as part of GIS’ motion for summary judgment in the Tajonera case.53 GIS alleges

that in opposition to that motion, BEEOO argued that issues of fact existed regarding the issue of

borrowed employee status.54 According to GIS, the Court reviewed the evidence and found that,

as BEEOO and other parties argued, there were disputed issues of material fact on factors 1, 3, 5,

8, and 9 of the Ruiz factors.55 GIS avers that BEEOO has now changed its position and wants to

argue that there are no disputed issues of fact on the Ruiz factors.56 However, GIS asserts that

“BEEOO offers no additional evidence in connection with its prior denials, other than for its

convenience it has now changed its position. BEEOO offers nothing new in what is really a request

49 877 F.3d 621 (5th Cir. 2017).

50 Rec. Doc. 127 at 3 (citing Babin, 877 F.3d at 625).

51 Id.

52 Id. at 4 (citing Washington v. Fieldwood Energy, LLC, 2018 U.S. Dist. LEXIS 63, *11-12, E.D. La. 2018).

53 Id. at 2.

54 Id.

55 Id. at 2.

56 Id. at 3.

for the Court to reconsider its previous denial of GIS’ Motion for Summary Judgment.”57

Therefore, GIS urges the Court to deny BEEOO’s motion for partial summary judgment.58

C. BEEOO’s Arguments in Further Support of the Motion for Partial Summary Judgment

In reply, BEEOO urges the Court to grant the motion because the issue of borrowed

employee status is both “relevant and undisputed.”59 BEEOO insists that the issue of borrowed

employee status is part of proving vicarious liability of an employer, and vicarious liability is not

a concept that is limited to tort claims.60 BEEOO asserts that vicarious liability is relevant to its

breach of contract claim because GIS will blame D&R workers for any breach of contract, and

BEEOO believes that if the Court declares that GIS is vicariously liable for the D&R workers, this

asserted defense will fail.61 Ultimately, BEEOO desires to prove that GIS is liable for any acts of

its borrowed D&R workers that may have contributed to breach of contract.62

BEEOO also argues that the issue of borrowed employee status is undisputed in this case and

that is all that matters to the Court’s decision.63 BEEOO asserts that in the Tajonera litigation, it merely

filed a “me too” memo in opposition to GIS’ motion for summary judgment, and BEEOO did not offer

any facts or legal arguments of its own in opposition to GIS’ borrowed servant’s argument.64 BEEOO

also alleges that it filed its opposition before it had completed discovery, and by the end of discovery,

it no longer had any facts to contest GIS’ assertion that the D&R workers were borrowed employees.65

57 Id.

58 Id. at 1.

59 Rec. Doc. 136 at 1.

60 Id. at 2.

61 Id.

62 Id.

63 Id. at 1–2.

64 Id. at 3.

65 Id.

BEEOO now highlights that “there are no longer any parties in [this case] who contend that the D&R

workers were not the borrowed servants of GIS,” and GIS has not presented any facts in its opposition

that dispute this issue.66 For these reasons, BEEOO requests that the Court rule that the D&R workers

used by GIS on the West Delta 32 were borrowed employees.67

III. Legal Standard

Summary judgment is appropriate when the pleadings, the discovery, and any affidavits

show that “there is no genuine dispute as to any material fact and the movant is entitled to judgment

as a matter of law.”68 When assessing whether a dispute as to any material fact exists, the court

considers “all of the evidence in the record but refrains from making credibility determinations or

weighing the evidence.”69 All reasonable inferences are drawn in favor of the nonmoving party,

but “unsupported allegations or affidavits setting forth ‘ultimate or conclusory facts and

conclusions of law’ are insufficient to either support or defeat a motion for summary judgment.”70

If the record, as a whole, “could not lead a rational trier of fact to find for the non-moving party,”

then no genuine issue of fact exists, and the moving party is entitled to judgment as a matter of

law.71 The nonmoving party may not rest upon the pleadings, but must identify specific facts in

the record and articulate the precise manner in which that evidence establishes a genuine issue for

trial.72

66 Id. at 1 n.1.

67 Id. at 4.

68 Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986); Little v. Liquid Air Corp., 37

F.3d 1069, 1075 (5th Cir. 1994).

69 Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398–99 (5th Cir. 2008).

70 Galindo v. Precision Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985); Little, 37 F.3d at 1075.

71 Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).

72 See Celotex, 477 U.S. at 325; Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998).

The party seeking summary judgment always bears the initial responsibility of informing

the Court of the basis for its motion and identifying those portions of the record that it believes

demonstrate the absence of a genuine issue of material fact.73 “To satisfy this burden, the movant

may either (1) submit evidentiary documents that negate the existence of some material element

of the opponent’s claim or defense, or (2) if the crucial issue is one on which the opponent will

bear the ultimate burden of proof at trial, demonstrate that the evidence in the record insufficiently

supports an essential element of the opponent’s claim or defense.”74 If the moving party satisfies

its initial burden, the burden shifts to the nonmoving party to “identify specific evidence in the

record, and articulate” precisely how that evidence supports his claims.75 In doing so, the

nonmoving party may not rest upon mere allegations or denials in its pleadings, but rather must

set forth “specific facts showing the existence of a ‘genuine’ issue concerning every essential

component of its case.”76

The nonmovant=s burden of demonstrating a genuine issue of material fact is not satisfied

merely by creating “some metaphysical doubt as to the material facts,” “by conclusory

allegations,” by “unsubstantiated assertions,” or “by only a scintilla of evidence.”77 Rather, a

factual dispute precludes a grant of summary judgment only if the evidence is sufficient to permit

a reasonable trier of fact to find for the nonmoving party. Hearsay evidence and unsworn

73 Celotex, 477 U.S. at 323.

74 Duplantis v. Shell Offshore, Inc., 948 F.2d 187, 190 (5th Cir. 1991) (citing Little v. Liquid Air Corp., 939 F.2d 1293,

1299 (5th Cir. 1991)).

75 Forsyth v. Barr, 19 F.3d 1527, 1537 (5th Cir. 1994), cert. denied, 513 U.S. 871 (1994); see also Morris v. Covan

World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir. 1998).

76 Morris, 144 F.3d at 380 (citing Thomas v. Price, 975 F.2d 231, 235 (5th Cir. 1992); see also Bellard v. Gautreaux,

675 F.3d 454, 460 (5th Cir. 2012).

77 Little, 37 F.3d at 1075.

documents that cannot be presented in a form that would be admissible in evidence at trial do not

qualify as competent opposing evidence.78

IV. Analysis

BEEOO urges the Court to rule that the D&R workers were GIS’ borrowed employees.79

GIS argues that the Court should deny the motion because the issue is irrelevant to BEEOO

recovering on its breach of contract claim.80 BEEOO, however, insists that the issue of borrowed

employee status is relevant because it “anticipates that as part of GIS’ defense, it will be blaming

other parties for the damages sustained by Black Elk.”81 BEEOO likens the issue of borrowed

employee status in this litigation to the issue that arose in the Tajonera litigation.82

However, the Court finds that unlike in the Tajonera litigation, the issue of borrowed

employee status is not properly before the Court in this matter. In the Tajonera litigation, GIS

specifically raised the defense of borrowed employee status in its answers to several of the

negligence claims filed in that litigation.83 Additionally, in Tajonera, GIS filed a motion for

summary judgment specifically requesting that the Court rule upon its asserted defense of

borrowed employee status.84 Conversely, in this litigation, the record does not reflect that GIS has

asserted a borrowed employee defense in any of the pleadings or briefings.85 Under Louisiana law,

tort immunity under the borrowed employee doctrine is an affirmative defense that must be

78 Fed. R. Civ. P. 56(c)(2); Martin v. John W. Stone Oil Distrib., Inc., 819 F.2d 547, 549 (5th Cir. 1987).

79 Rec. Doc. 122-1 at 1.

80 Rec. Doc. 127 at 1.

81 Rec. Doc. 136 at 2.

82 Id. at 3–4.

83 See, e.g., Civil Action No. 13-366, Rec. Docs. 300, 301, 308.

84 Civil Action No. 13-366, Rec. Doc. 394.

85 See, e.g., Rec. Docs. 14, 20.

pleaded and proven by the party asserting the defense.86 There is no longer a pending negligence

claim against GIS, and GIS is directly asserting that it does not consider the issue of borrowed

employee status to be relevant to the claims that remain in the litigation—breach of contract and

breach of warranty.87 Therefore, it appears that in this matter, GIS is neither asserting the defense

of borrowed employee status nor espousing the argument that such a defense will be applicable to

BEEOO’s breach of contract claims.

Despite these assertions by GIS, BEEOO insists that as part of GIS’ defense, GIS may

attempt to blame other parties, such as the GIS workers, for the alleged breach of contract.88

Therefore, BEEOO urges the Court to decide the issue in advance of trial because doing so would

preempt GIS’ ability to place liability on the D&R workers. The Court declines BEEOO’s request

for several reasons. First, BEEOO is engaging in guess work when it “anticipates” that GIS may

raise an argument that the D&R workers’ status precludes a finding of breach of contract. GIS

directly contends that the issue of borrowed employee status is not at issue in the current litigation,

and BEEOO’s anticipation does not actually place the issue before the Court. Where an issue is

not raised, federal courts do not render advisory opinions.89 If the issue of borrowed employee

status is actually raised as a defense by GIS, the Court may address the matter at that time.90

Second, BEEOO does not cite any case law for its assertion that the borrowed employee

defense, as analyzed under Ruiz, is applicable in this litigation. The issue of borrowed employee

86 Billeaud v. Poledore, 603 So. 2d 754, 755 (La. App. 5 Cir. 1992) (citing Brumbaugh v. Marathon Oil Co., 507

So.2d 872, 874–75 (La. App. 5 Cir.), writ denied, 508 So. 2d 824 (La. 1987)).

87 Rec. Doc. 127 at 1–2.

88 Rec. Doc. 141 at 2.

89 “[A] federal court has neither the power to render advisory opinions nor “to decide questions that cannot affect the

rights of litigants in the case before them.” John Doe #1 v. Veneman, 380 F.3d 807, 814 (5th Cir. 2004) (Preiser v.

Newkirk, 422 U.S. 395, 401 (1975)).

90 The Court does not herein address whether a borrowed employee defense will be timely if raised at a later point in

the litigation.

status was applicable in the Tajonera litigation in the context of claims that were rooted in GIS’

negligence. Here, BEEOO’s negligence claim has prescribed and it is unclear that GIS will be able

to utilize the borrowed employee defense in response to a breach of contract claim. Therefore, in

addition to the lack of an actual issue before the Court, the Court will not engage in analysis that

may be inapplicable to the facts at hand.

V. Conclusion

For the foregoing reasons, the Court finds that the issue of borrowed employee status is not

properly before the Court at this time, and the Court will not issue an advisory opinion.

Accordingly,

IT IS HEREBY ORDERED that Trustee Richard Schmidt’s “Motion for Partial

Summary Judgment.””! is DENIED.

NEW ORLEANS, LOUISIANA, this _22nc day of July, 2019.

eget debut □□□□

CHIEF JUDGE

UNITED STATES DISTRICT COURT

°! Rec. Doc. 122.

13