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 Plaintiff Grand Isle Shipyard, Inc.’s (“GIS”) “Motion for Partial

Summary Judgment.”1 In this litigation, GIS claims that Defendant Black Elk Energy Offshore

Operations, LLC (“BEEOO”) failed to pay GIS for goods and services connected to BEEOO’s oil

operations.2 BEEOO filed a counterclaim, alleging that GIS engaged in fraud, breach of contract,

breach of warranty and negligence in GIS’ work on BEEOO’s platform.3 GIS filed the instant

motion for partial summary judgment, arguing that BEEOO is not entitled to attorneys’ fees,

experts’ fees, and costs that arose outside of this litigation.4 In opposition, BEEOO argues that

these fees and costs are part of the foreseeable damages that arose from GIS’ breach of contract.5

Having considered the motion, the memoranda in support and opposition, the record, and the

applicable law, the Court will deny the motion.

1 Rec. Doc. 97.

2 Rec. Doc. 1-1 at 2.

3 Rec. Doc. 4.

4 Rec. Doc. 97-1 at 1.

5 Rec. Doc. 105.

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

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.

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

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 pending BEEOO’s bankruptcy.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 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 March 26, 2019, GIS

14 Id.

15 Rec. Doc. 16.

16 Rec. Dic. 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.

filed the instant motion for partial summary judgment.23 On April 16, 2019, BEEOO filed an

opposition.24 With leave of Court, GIS filed a reply in further support of the motion on April 23,

2019.25

II. Parties’ Arguments

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

In the instant motion, GIS argues that the Court should dismiss BEEOO’s request for

attorneys’ fees, experts’ fees, and litigation costs BEEOO incurred outside of this litigation for two

reasons.26 First, GIS contends that “there is no contract or statute that permits such to be

recovered.”27 Second, GIS asserts that the Louisiana Oilfield Indemnity Act (“LOIA”) and a

contractual limitation preclude these fees and costs.28

Regarding the first argument, GIS avers that Louisiana law “does not allow recovery of

attorney’s fees or costs of litigation unless a specific contract or statute permits attorney’s fees and

costs of litigation.”29 According to GIS, BEEOO has alleged that it is entitled $10,166,189.91 in

damages related to attorneys’ fees, experts’ fees, and costs.30 GIS proffers that BEEOO previously

categorized $2,583,381.66 as “legal;” $4,627,022.24 as attorneys’ fees, experts’ fees, and costs;

23 Rec. Doc. 97.

24 Rec. Doc. 62.

25 Rec. Doc. 63.

26 Rec. Doc. 97-1.

27 Id. at 1.

28 Id.

29 Id. at 1–2.

30 Id. at 9.

and $2,955,786.01 as consulting fees related to an “investigation.”31 GIS argues that “[t]hese fees

and costs are all related to matters extraneous to this civil action, were incurred outside of this civil

action, and these fees and costs were incurred in anticipation of or defense of the Tajonera cases.”32

GIS asserts that under Louisiana law, such fees and costs related to prior litigation are not

recoverable unless “specifically authorized by statute or contract.”33

Here, GIS contends that there is no statutory basis or contractual provision that allows for

the recovery of attorneys’ fees and costs.34 GIS argues that the Alliance Agreement applied to the

welding services GIS performed for BEEOO on November 16, 2012, when the explosion occurred

on the West Delta 32.35 According to GIS, the Alliance Agreement contains no provisions related

to fees and costs.36

GIS contests BEEOO’s assertion that the Master Service Agreement (“MSA”) governs

BEEOO’s counterclaim, because GIS argues that it entered into the MSA with Black Elk Energy,

LLC, not BEEOO.37 However, even assuming that the MSA does apply to BEEOO’s counterclaim,

GIS asserts that none of the MSA’s contractual provisions allow for BEEOO to recover attorneys’

31 Id. at 10. GIS states in the motion that it “recognizes some of the ‘Investigation’ costs may be ultimately proven to

be for purposes other than anticipation of and defense of the personal injury and death claims, and GIS acknowledges

disputed facts preclude summary judgment dismissal of all the ‘Investigation’ category of costs at this time.” Id.

Therefore, GIS avers that it is not asking the Court to sift through the “Investigation” costs and rule that a specific

amount is unrecoverable. Id. GIS states it is only requesting “a ruling from the Court that fees and costs which were

incurred outside of this case are not recoverable. Such a ruling will greatly reduce the evidence produced at trial and

will streamline the issues the court is later called upon to decide in this case.” Id. at 11.

32 Id. at 10.

33 Id. at 11.

34 Id.

35 Id.

36 Id.

37 Id. at 6–7.

fees and costs in this situation.38 First, GIS argues that while the MSA allows for attorneys’ fees

arising from “pollution,” the MSA narrowly defines pollution as including only fuel, lubricants,

and drilling mud, not oil.39 Thus, GIS asserts that BEEOO cannot recover for any fees related to

oil pollution under the MSA.40 Second, GIS contends that the “MSA’s ‘Indemnity and Liability’

clause [] explicitly excludes ‘special, indirect, and consequential damages,’” which GIS argues

includes attorneys’ fees, experts’ fees, and litigation costs.41 Third, GIS contends that the MSA’s

indemnity provision does not require GIS to indemnify BEEOO for BEEOO’s negligence.42 GIS

argues that BEEOO “judicially admitted that its own negligence caused the multiple injuries and

three deaths that occurred on November 16, 2012, in the Factual Basis filed in support of its plea

agreement” in the criminal prosecution.43 GIS contends that “a settling defendant, alleged to be

negligent, could not shift the costs of its own negligence to a third party because its settlement

foreclosed a judicial exoneration of its negligence.”44 Accordingly, GIS avers that it has no

obligation to indemnify BEEOO under the terms of the MSA.45

Next, GIS asserts that LOIA “prohibits BEEOO from recovering its legal fees and litigation

costs connected to the Tajonera case as well as the investigation, evidence collection, and expert

38 Id. at 7–9.

39 Id. at 8.

40 Id. at 13.

41 Id. at 15 (citing Hanover Ins. Co. v. Plaquemines Parish Gov’t, No. 12-1680, 2015 WL 4394079 (E.D. La. 2015)).

42 Id. at 9.

43 Id. at 2.

44 Id. at 11 (citing Tanksley v. Gulf Oil Corp., 848 F.2d 515 (5th Cir. 1988)).

45 Id. at 8–9.

services of ABS Consulting, both before and during the pendency of the Tajonera case.”46 GIS

contends that “[t]he ‘LOIA nullifies completely any provision in any agreement that requires

indemnification where there is negligence or fault on the part of the indemnitee.’”47 GIS argues

that because BEEOO judicially admitted to its negligence in the criminal case, it is negligent under

the terms of LOIA.48 Further, GIS asserts that in Tanksley, the Fifth Circuit also held that “an

indemnitee who settles a personal injury case is not entitled to a subsequent trial to determine that

it was free from fault, and therefore is not entitled to its defense costs.”49 GIS proffers that because

BEEOO settled the Tajonera case before the Court ruled on BEEOO’s negligence, BEEOO is now

precluded from trying to establish its lack of fault or negligence.50 Accordingly, GIS argues that

LOIA “explicitly invalidates the indemnity provisions of the MSA.”51

Additionally, GIS asserts that LOIA “implicitly nullifies any right to recover these fees and

costs as compensatory damages for breach of contract.”52 GIS contends LOIA “embodies such a

strong public policy of the State of Louisiana that a negligent oil platform owner/operator such as

BEEOO cannot evade the LOIA, by claiming the same damages as ‘compensatory’ damages for

breach of contract, when BEEOO could not specifically contract[] for recovery of these same fees

and costs in the MSA.”53 GIS argues that a contrary holding “would thwart the very purpose of the

46 Id. at 12.

47 Id. at 14 (quoting Meloy v. Conoco, 504 So.2d 833, 839 (La. 1987)).

48 Id. at 15.

49 Id. at 14 (citing Tanksley, 848 F.2d at 518).

50 Id.

51 Id. at 19.

52 Id.

53 Id. at 16.

LOIA.”54 Additionally, GIS asserts that indemnity provisions must be strictly construed under

Louisiana law.55

Finally, GIS alleges that if BEEOO’s breach of warranty claim is governed by the MSA,

the only remedy available to BEEOO is remediation of the defective performance.56 Therefore,

GIS insists that BEEOO cannot recover attorneys’ fees and costs under the breach of warranty

claim.57 For the foregoing reasons, GIS argues that there is no basis for BEEOO to recover the

requested attorneys’ fees, experts’ fees, and costs related to prior litigation, and GIS accordingly

urges the Court to find that BEEOO is precluded from seeking these fees.58

B. BEEOO’s Arguments in Opposition to the Motion for Summary Judgment

In opposition, BEEOO argues that the Court should deny summary judgment for three

reasons.59 First, BEEOO argues that GIS mischaracterizes the fees that BEEOO is seeking.60

Second, BEEOO asserts that the MSA does not preclude recovery of attorneys’ fees and costs.61

Third, BEEOO contends that LOIA is not applicable to breach of contract claims.62

First, BEEOO begins its opposition by alleging that many of the fees that GIS classifies as

attorneys’ fees, experts’ fees, and costs related to the Tajonera litigation were unrelated to the

54 Id.

55 Id. at 17.

56 Id. at 19.

57 Id.

58 Id. at 22.

59 Rec. Doc. 105 at 1–2.

60 Id.

61 Id.

62 Id.

Tajonera litigation and were merely costs associated with the West Delta 32 explosion.63 BEEOO

avers that the majority of the fees and costs were related to investigation of the incident, responding

to inquiries from government agencies, search and rescue, clean-up after the explosion, and repair

of the oil platform.64 BEEOO further contends that even if some of the investigation and legal

work was eventually utilized in the Tajonera litigation, it was initially undertaken for a different

purpose.65 Additionally, BEEOO asserts that “GIS wants the Court to dismiss entire categories

outright without providing any level of granular evaluation of work supporting those categories.”66

According to BEEOO, GIS fails to recognize that each law firm was retained for different purposes

and doing different work necessitated by the many legal issues raised by the explosion and

subsequent pollution and regulatory investigations.”67

Second, BEEOO asserts that the MSA’s terms do not preclude the recovery of attorneys’

fees and costs.68 BEEOO clarifies that it “is not making a claim herein for defense and indemnity

from GIS under the MSA.”69 BEEOO argues that “the availability of damages for breach of

contract under Louisiana law includes those damages that were foreseeable in the event that the

obligor failed to satisfy its obligations.”70 According to BEEOO, “the MSA clearly contemplates

that attorneys’ fees and costs are foreseeable consequences of personal injuries, property damage,

63 Id. at 2.

64 Id. at 2–3.

65 Id.

66 Id. at 3.

67 Id. at 3–4.

68 Id. at 9.

69 Id. at 13.

70 Id. at 12 (citing Elliott v. Normand, No. 07-569 (La. App. 5 Cir. 1/22/08); 976 So. 2d 738, 743; La. Civ. Code arts.

1994 and 1995).

breach of contract, and pollution.”71 Therefore, BEEOO argues that the fees and costs associated

with GIS breaching the MSA are foreseeable.72

Next, BEEOO argues that LOIA does not apply to its breach of contract claims.73 “BEEOO

concedes that LOIA, if applicable, would void ‘any provision in any agreement which requires

defense and/or indemnification, for death or bodily injury to persons, where there is negligence or

fault (strict liability) on the part of the indemnitee…’”74 However, BEEOO states that it is not

seeking indemnification from GIS for the death or bodily injury to persons.75 Instead, BEEOO

asserts that it is seeking to recover its direct and foreseeable damages for GIS’ breach of contract.76

Therefore, BEEOO argues that LOIA is inapplicable.77

Alternatively, BEEOO contends that there are disputed issues of material fact as to whether

GIS’ work on BEEOO’s platform “pertains to a well” as required under LOIA.78 According to

BEEOO, GIS’ work aboard the West Delta 32 in November 2012 “included replacing valves on

the production manifold – which commingled production from multiple wells into one output – on

the WEMCO separator, and on the LACT system sump piping (process piping for the custody

transfer meter).”79 Therefore, BEEOO argues that “any argument GIS puts forth in its Motion

71 Id.

72 Id.

73 Id. at 13.

74 Id. (quoting La. R.S. § 9:2780(A)).

75 Id. at 14.

76 Id. at 14–15.

77 Id. at 15.

78 Id. at 13, 15.

79 Id. at 19.

relying upon application of LOIA fails given the material issues of fact and law remaining.”80 As

an additional alternative argument, BEEOO asserts that even if LOIA is applicable, its application

is limited to claims for defense and indemnity brought by GIS employees and contractors for

personal injury and death.81 Therefore, BEEOO argues that LOIA would not preclude it from

recovering expenses that “were completely unrelated to the defense and injury claims in the

Tajonera litigation, even if some of that work was subsequently used for those purposes.”82

Finally, BEEOO contends that additional disputed issues of fact preclude summary

judgment.83 Because the parties dispute whether the MSA applies to the case, BEEOO argues that

the issue of “whether consequential damages are available to BEEOO remains in dispute and

precludes summary judgment as to any damages claim which could be considered under that

umbrella.”84 Additionally, BEEOO asserts that issues of fact preclude a finding of whether the

damages were foreseeable because the question of whether or not damages are foreseeable is a

question of fact.85 Therefore, BEEOO argues that “because there are disputed issues of fact as to

whether the MSA applies, and if so, if LOIA also applies, and if so, if any of BEEOO’s damages

claims fall within a category precluded by LOIA or the MSA,” summary judgment is premature.86

80 Id.

81 Id.

82 Id. at 19–20.

83 Id. at 20.

84 Id. at 20–21.

85 Id. at 21 (citing National Hispanic Circus, Inc. v. Rex Trucking, Inc., 414 F.3d 546, 550 (5th Cir. 2005)).

86 Id. at 22.

C. GIS’ Arguments in Further Support of the Motion for Summary Judgment

In reply, GIS argues that there are three independent reasons to grant GIS’ motion for

partial summary judgment: (1) the American Rule disallows attorneys’ fees as an element of

damages; (2) Louisiana’s public policy mandates that oil platform owner/operators must bear the

risk of their own bad behavior; and (3) the MSA excludes consequential damages.87

First, GIS asserts that BEEOO has not identified a contract provision that allows for

recovery of attorneys’ fees and legal costs or a statute that allows for such recovery in this case.88

GIS contends that this category of expenses is “penal” in nature, not compensatory damages.89

Second, GIS contends that LOIA embodies Louisiana’s strong public policy that oil

platform owners bear the risk of their own bad behavior.90 GIS argues that work on the West Delta

32 “pertained to wells connected to the platform.”91 In support, GIS cites the Factual Basis BEEOO

entered in its criminal case, where BEEOO admitted that “welding of the sump line piping for the

LACT unit upgrade” produced the explosion.92

Third, GIS argues that if the MSA applies it explicitly excludes “special, indirect, and

consequential damages.”93 GIS asserts that this limitation excludes BEEOO from recovering attorneys’

fees and legal costs.94 For these reasons, GIS argues that the motion for summary judgment should be

87 Rec. Doc. 108 at 2.

88 Id. at 2–4.

89 Id. at 2, 4 (citing Benton v. Clay, No. 48,425 (La. App. 2d Cir. 08/07/13); 123 So. 3d 212, 215).

90 Id. at 6.

91 Id. at 8.

92 Id.

93 Id. at 4.

94 Id.

granted and the Court should rule that BEEOO is not entitled to recover attorneys’ fees and litigation

costs incurred outside of this case.95

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.”96 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.”97 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.”98

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.99 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.100

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

95 Id. at 10.

96 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).

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

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

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

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

demonstrate the absence of a genuine issue of material fact.101 “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.”102 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.103 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.”104

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.”105 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

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

qualify as competent opposing evidence.106

101 Celotex, 477 U.S. at 323.

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

1293, 1299 (5th Cir. 1991)).

103 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).

104 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).

105 Little, 37 F.3d at 1075.

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

IV. Analysis

In the instant motion for partial summary judgment, GIS argues that BEEOO is not entitled

to attorneys’ fees, experts’ fees, and costs that arose outside of this litigation.107 In opposition,

BEEOO argues that these fees and costs are recoverable because they are part of the foreseeable

damages that arose from GIS’ breach of contract.108

Pursuant to Louisiana Civil Code article 1994, “[a]n obligor is liable for the damages

caused by his failure to perform a conventional obligation.”109 “Damages are measured by the loss

sustained by the obligee and the profit of which he has been deprived.”110 “An obligor in good

faith is liable only for the damages that were foreseeable at the time the contract was made.”111

“An obligor in bad faith is liable for all the damages, foreseeable or not, that are a direct

consequence of his failure to perform.”112

Under Louisiana law, attorneys’ fees generally are not recoverable unless authorized by

statute or contract.113 This prohibition against fee-shifting is commonly known as the “American

Rule.”114 The Fifth Circuit has explained, “[i]t is beyond peradventure that, under Louisiana law,

attorney’s fees are recoverable only if they are authorized by statute or by contract.”115

107 Rec. Doc. 97-1 at 1.

108 Rec. Doc. 105.

109 La. Civ. Code art. 1994.

110 La. Civ. Code art. 1995.

111 La. Civ. Code art. 1996.

112 La. Civ. Code art. 1997.

113 State, Dept. of Transp. & Dev. v. Williamson, 597 So. 2d 439, 441 (La. 1992) (citing Huddleston v. Bossier Bank

and Tr. Co., 475 So. 2d 1082 (La. 1985)).

114 Zurich Am. Ins. Co. v. Queen's Mach. Co., Ltd, 08-546 (La. App. 5 Cir. 1/27/09), 8 So. 3d 91, 98 (internal citations

omitted).

115 Homestead Ins. Co. v. Gaurentee Mut. Life Co., 459 F. App’x 398, 404 (5th Cir. 2012) (citing Sher v. Lafayette

Ins. Co., 988 So. 2d 186, 201 (La. 2008) (“Louisiana courts have long held that attorney’s fees are not allowed except

Additionally, “[u]nder Louisiana law . . . attorney’s fees characterized as breach of contract

damages are not compensable under Article 1994 and its corresponding statutes,” including both

Article 1996, which applies to an obligor in good faith, and Article 1997, which applies to an

obligor in bad faith.116

As an initial matter, the Court notes that in the instant motion GIS only seeks dismissal of

BEEOO’s request for attorneys’ fees, experts’ fees, and costs that arose outside of this litigation.

Paragraph 12.2 of the MSA provides for the recovery of attorneys’ fees and costs “in any legal

action in which BLACK ELK prevails, in whole or in part, brought against CONTRACTOR based

on a breach of this Agreement.”117 The parties vigorously dispute whether the MSA applies to this

case, and there are clearly genuine issues of material fact in dispute that would preclude summary

judgment on that issue. However, if the MSA ultimately applies to this dispute, BEEOO would be

entitled to recover the costs and attorneys’ fees associated with the prosecution of this case in the

event that BEEOO prevails in whole or in part against GIS.

BEEOO does not point to a contractual provision in the MSA that would allow it to recover

attorneys’ fees and costs related to prior litigation. In fact, BEEOO expressly states that it “is not

making a claim herein for defense and indemnity from GIS under the MSA.”118 Instead, BEEOO

argues that attorneys’ fees and costs that arose outside of this litigation are recoverable because

they are part of the foreseeable damages that arose from GIS’ breach of contract. As discussed

where authorized by statute or contract.”); Hernandez v. Harson, 111 So. 2d 320, 327 (La. 1959); Chauvin v. La Hitte,

85 So. 2d 43, 45 (La. 1956) (“On numerous occasions this court has said that ordinarily attorney’s fees are not

assessable as an item of damages unless provided for by law or by contract. The clear import of the language of the

opinions is that no award of them can be made if not so particularly authorized.”).

116 Homestead Ins. Co., 459 F. App’x at 405.

117 Rec. Doc. 4-1 at 7.

118 Rec. Doc. 105 at 13.

above, Louisiana courts have rejected the argument that attorneys’ fees are statutorily authorized

for the present action.119 It does not appear that Louisiana courts have addressed the issue of

whether a party may recover attorneys’ fees incurred from previous litigation as a category of

damages for breach of contract. However, there is some support for BEEOO’s position.

Other jurisdictions that follow the “American Rule” allow for a “previous litigation

exception.” As explained by the Louisiana Civil Law Treatise:

The previous litigation exception comes into play when, due to the wrongful act of

another, a party is forced to protect his rights or interests by suing a third party, or

by defending a suit brought by a third party. When such is the case, and the party

who so acted later sues the one whose wrongful act prompted the previous

litigation, he may then recover in that suit the fees he had to pay to his attorney for

the original litigation. . . .120

The Fifth Circuit has also recognized that under Louisiana law courts may award attorneys’

fees incurred in prior litigation as economic damages in a subsequent suit.121 In Kadlec Medical

Center v. Lakeview Anesthesia Associates, a Louisiana medical practice terminated a physician

“for cause” after learning that the physician was abusing narcotics.122 When the physician later

applied for medical privileges at a hospital in the State of Washington, the hospital contacted the

medical practice to inquire about the physician’s references.123 In response, the medical practice

provided favorable reports and it did not inform the hospital of the physician's substance abuse

issues.124 The hospital then hired the physician.125 Subsequently, a hospital patient under the

119 Homestead Ins. Co., 459 F. App’x at 405.

120 Saul Litvinoff and Ronald J. Scalise Jr., 6 La. Civ. L. Treatise, Law of Obligations § 12.12 (2d ed.).

121 Kadlec Med. Ctr. v. Lakeview Anesthesia Assoc., 527 F.3d 412 (5th Cir. 2008).

122 Id. at 415.

123 Id. at 416.

124 Id.

125 Id. at 417.

physician’s care was severely injured and the patient’s family sued the hospital.126 The hospital

and its insurer settled the lawsuit, in which they incurred approximately $744,000 in attorneys’

fees and costs.127 The hospital and its insurer then sued the medical practice asserting Louisiana

state law claims for intentional misrepresentation, negligent misrepresentation, strict responsibility

misrepresentation, and general negligence.128 Following trial, the jury awarded the hospital and

insurer attorneys’ fees and costs incurred in the lawsuit with the patient’s family.129 The Fifth

Circuit upheld the award, noting that although there was no Louisiana case directly on point, this

conclusion was consistent with Section 914(2) of the Second Restatement of Torts.130 The

Restatement provides:

One who through the tort of another has been required to act in the protection of his

interests by bringing or defending an action against a third person is entitled to

recover reasonable compensation for the loss of time, attorney fees and other

expenditures thereby suffered or incurred in the earlier action.131

At least one district court confronted with this issue has found that Kadlec does not apply

to breach of contract claims because the reasoning relies on the Restatement (Second) of Torts.132

However, the rationale for allowing recovery of previous litigation expenses set forth in the

Restatement (Second) of Torts is strikingly similar to the “previous litigation exception” set forth

in the Louisiana Civil Law Treatise. Under this exception, BEEOO may be able to recover

126 Id.

127 Id. at 418.

128 Id. at 417–18.

129 Id. at 426.

130 Id.

131 Id.

132 Theriot v. State Farm Mut. Auto. Ins. Co., No. 17-1688, 2019 WL 1320009, at *3 (W.D. La. Mar. 22, 2019)

(Morgan, J.).

attorneys’ fees for the original litigation if it can prove that GIS’ wrongful act prompted the

previous litigation. There are clearly material facts in dispute regarding whether GIS’ wrongful act

prompted the previous litigation. Additionally, the Court notes that neither party has fully briefed

these issues. Accordingly, granting summary judgment at this time would be premature.

GIS cites Tanksley v. Gulf Oil Corp. for the proposition that “a settling defendant, alleged

to be negligent, could not shift the costs of its own negligence to a third party because its settlement

foreclosed a judicial exoneration of its negligence.”133 In Tanksley, a defendant oil company

brought a third-party indemnity claim against one of its contractors.134 The district court dismissed

the claim, finding that the Louisiana Oilfield Indemnity Act nullified the indemnity provision.

LOIA provides:

Any provision contained in, collateral to, or affecting an agreement pertaining to a

well for oil, gas, or water, or drilling for minerals, which occur in a solid, liquid,

gaseous, or other state, is void and unenforceable to the extent that it purports to or

does provide for a defense or indemnity, or either, to the indemnitee to against loss

or liability for damages arising out of or resulting from death or bodily injury to

persons, which is caused by or results from the sole or concurrent negligence or

fault (strict liability) of the indemnitee, or an agent, employee, or independent

contractor who is directly responsible to the indemnitee.135

In Tanksley, the Fifth Circuit held an oil company that settled with the plaintiff was barred by

LOIA from pursuing the contractor for indemnity because the oil company, by choosing to settle

with the plaintiff, voluntarily foreclosed determination of its negligence or fault.136

133 Rec. Doc. 97-1 at 11 (citing 848 F.2d at 515).

134 848 F.2d at 515.

135 La. R.S. § 9:2780(B).

136 848 F.2d at 517–18.

Here, BEEOO has clearly stated that “is not making a claim herein for defense and

indemnity from GIS under the MSA.”!3” Accordingly, the Court need not address the issue of

whether the MSA and LOIA apply. Finally, to the extent that GIS urges the Court to extend LOIA

beyond its express terms to nullify “any right to recover these fees and costs as compensatory

damages for breach of contract,’!3> GIS has not provided any support for this assertion. LOIA

applies to defense and indemnity obligations, and BEEOO is not seeking defense and indemnity

from GIS.

V. Conclusion

For the foregoing reasons, there is a genuine issue of material fact in dispute as to whether

GIS’ wrongful act prompted the previous litigation. Additionally, the Court notes that neither party

has fully briefed these issues. Accordingly, granting summary judgment at this time would be

premature.

Accordingly,

IT IS HEREBY ORDERED that Plaintiff Grand Isle Shipyard, Inc.’s “Motion for Partial

Summary Judgment”!*? is DENIED.

NEW ORLEANS, LOUISIANA, this 23rd day of August, 2019.

COrr-ellta (Ps

D grcette\sburitt (ve

CHIEF JUDGE

UNITED STATES DISTRICT COURT

'57 Rec. Doc. 105 at 13.

138 Td. at 19.

139 Rec. Doc. 97.

20