Borman v. Shamrock Energy Solutions, L.L.C.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

GARLIN BORMAN CIVIL ACTION

VERSUS No.: 17-11720

SHAMROCK ENERGY SECTION: “J” (1)

SOLUTIONS, LLC., et al.

ORDER & REASONS

Before the Court is a Motion for Summary Judgment (Rec. Doc. 61) filed by

Third-Party Plaintiff Shamrock Energy Solutions, LLC (“Shamrock”), an opposition

thereto (Rec. Doc. 65) by Third-Party Defendants, Linear Controls, Inc. (“Linear”) and

First Mercury Insurance Company (“First Mercury”) (collectively “Defendants”), and

Shamrock’s reply (Rec. Doc. 68) to Defendants’ opposition. Having considered the

motion and legal memoranda, the record, and the applicable law, the Court finds that

the motion should be GRANTED.

FACTS AND PROCEDURAL BACKGROUND

This litigation arises from personal injuries allegedly sustained by

Plaintiff Garlin Borman (“Plaintiff Borman”)—a Linear employee—on or about

October 24, 2016 while he was working on an offshore platform located on the Outer

Continental Shelf at Eugene Island Block 189, off the coast of Louisiana and owned

by Defendant Fieldwood Energy (“Fieldwood”). Shamrock also had employees

working at the Fieldwood platform on the date of the incident. At the time of the

incident, Fieldwood and Shamrock had in full force and effect a Master Services

Contract (“MSC”) dated November 1, 2013, pursuant to which Shamrock provided

personnel to work at Fieldwood’s locations, including Eugene Island. Likewise,

Linear and Fieldwood had in full force and effect a MSC (“Linear MSC”) also dated

November 1, 2013. Linear was insured by First Mercury under a policy or policies in

effect on the date of the incident. On October 13, 2016, Linear’s insurance broker,

Howard Risk Advisors, sent Fieldwood an invoice for $22,429.00 for Marcel coverage,

which Fieldwood paid on October 20, 2016.

On October 15, 2017, Plaintiff Borman filed suit in state court against

Shamrock, Shamrock’s employee Bobby Barrow and Fieldwood alleging negligence.

The case was timely removed to federal court. Shamrock subsequently filed a Third-

Party Complaint against Defendants, alleging that Linear is obligated to defend,

indemnify, and provide insurance coverage to Shamrock and Mr. Barrow with respect

to the claims asserted by Plaintiff Borman pursuant to the terms of the

Linear/Fieldwood MSC. Shamrock asserted further that Shamrock and Mr. Barrow

are entitled to additional insured status under the insurance policy issued by First

Mercury to Linear.

On May 11, 2018, Defendants filed a motion to dismiss Shamrock’s Third-Party

Complaint pursuant to Rule 12(b)(6), which Shamrock opposed. On February 19,

2019, the Court issued its Order & Reasons denying Defendants’ Motion to Dismiss.

(Rec. Doc. 41). On March 19, 2019 Plaintiff Borman dismissed his claims against Mr.

Barrow. On August 13, 2019, Shamrock filed the instant Motion for Summary

Judgment (“MSJ”) alleging that Defendants are obligated to defend and indemnify

Shamrock from Plaintiff Borman’s claims in the original suit. Defendants oppose the

MSJ, arguing that it is premature and that there exists a genuine dispute of material

fact as to whether Shamrock is an “invitee” according to the terms of the Linear MSC.

LEGAL STANDARD

Summary judgment is appropriate when “the pleadings, the discovery

and disclosure materials on file, and any affidavits show that there is no genuine

issue as to any material fact and that the movant is entitled to judgment as a matter

of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed. R. Civ. P. 56);

Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). When assessing whether

a dispute as to any material fact exists, a court considers “all of the evidence in the

record but refrains from making credibility determinations or weighing the evidence.”

Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398 (5th

Cir. 2008). All reasonable inferences are drawn in favor of the nonmoving party, but

a party cannot defeat summary judgment with conclusory allegations or

unsubstantiated assertions. Little, 37 F.3d at 1075. A court ultimately must be

satisfied that “a reasonable jury could not return a verdict for the nonmoving party.”

Delta, 530 F.3d at 399.

If the dispositive issue is one on which the moving party will bear the burden

of proof at trial, the moving party “must come forward with evidence which would

entitle it to a directed verdict if the evidence went uncontroverted at trial.” Int’l

Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1264-65 (5th Cir. 1991) (internal

citations omitted). The nonmoving party can then defeat the motion by either

countering with sufficient evidence of its own, or “showing that the moving party’s

evidence is so sheer that it may not persuade the reasonable fact-finder to return a

verdict in favor of the moving party.” Id. at 1265.

If the dispositive issue is one on which the nonmoving party will bear the

burden of proof at trial, the moving party may satisfy its burden by merely pointing

out that the evidence in the record is insufficient with respect to an essential element

of the nonmoving party’s claim. See Celotex, 477 U.S. at 325. The burden then shifts

to the nonmoving party, who must, by submitting or referring to evidence, set out

specific facts showing that a genuine issue exists. See id. at 324. The nonmovant may

not rest upon the pleadings but must identify specific facts that establish a genuine

issue for trial. See, e.g., id. at 325; Little, 37 F.3d at 1075.

DISCUSSION

The issue here is whether Shamrock, as a third-party contractor

employed to perform work on Fieldwood’s offshore platform, is entitled to benefit from

Fieldwood’s payment of a Marcel premium to Linear. Resolving said issue requires

the Court to answer two questions of law: (1) in the absence of a clear definition of

the term “invitee” in a MSC, is a third-party contractor employed to work on a

company’s off-shore platform an “invitee,” and thus considered part of the company’s

Company Group for insurance indemnification purposes; and (2) can a third-party

contractor falling within the Company Group benefit from the company’s payment of

a Marcel premium? The Court answers both questions in the affirmative.

I. SHAMROCK’S MSJ IS NOT PREMATURE AND THERE ARE NO GENUINE

ISSUES OF MATERIAL FACT

In denying Defendants’ Motion to Dismiss, this Court concluded after an

analysis of the relatively convoluted contractual interplay between the parties that

“[t]he only way that Defendants are not obligated to defend, indemnify and hold

harmless Shamrock and Mr. Barrow in the instant litigation commenced by Plaintiff

Borman is if the abovementioned provisions are unenforceable.” (Rec. Doc. 41). As

discussed in more detail in the Court’s aforementioned denial, the Louisiana Oilfield

Indemnity Act (“LOIA”) renders unenforceable indemnity clauses that purport to

indemnify the indemnitee from liability incurred through the indemnitee’s negligence

or fault. La. Rev. Stat. § 9:2780(B), (G).

There is no dispute that the indemnity provision here falls within the LOIA’s

purview. Rather, the question at issue is whether the Marcel Exception to the LOIA

applies and provides Shamrock with the indemnity it seeks. In Marcel, the Fifth

Circuit recognized a narrow exception to the nullifying effect of the LOIA when the

principal pays for or obligates itself to pay for the cost of the indemnitor obtaining the

insurance coverage. See Marcel v. Placid Oil Co., 11 F.3d 563, 569 (5th Cir. 1994).

The Fifth Circuit emphasized that “the exception does not apply if any material part

of the cost of insuring the indemnitee is borne by the independent contractor

procuring the insurance coverage.” Id. at 570.

Here, however, it is undisputed that Shamrock did not pay Linear a Marcel

premium.1 Rather, Shamrock argues they are entitled to benefit from the Marcel

premium Fieldwood paid Linear.2 When briefing Defendants’ Motion to Dismiss, both

parties argued at length over whether the Marcel Exception encompasses the

scenario where the insurance premium is paid not by the indemnitee, but by the

principal in favor of a third-party indemnitee.3 Instead of addressing that unsettled

question of law, the Court denied Defendant’s motion under the Meloy doctrine, which

states that the LOIA can only be applied to an indemnity provision after a trial on

the merits has been held to determine whether the indemnitee was in fact negligent

or at fault. Meloy v. Conoco Incorporated, 504 So. 2d 833, 835 (La. 1987). Because a

trial on the merits in Plaintiff-Borman’s original suit determining Shamrock’s

potential negligence or fault had not occurred at the time of Defendants’ Motion to

Dismiss, the motion was denied for being premature.

Contrary to Defendants’ assertions, the Meloy standard does not apply equally

to indemnitees and indemnitors. Only a motion by the indemnitor asking the Court

to invoke the LOIA and nullify the contractual indemnity provision is premature,

because its success or failure is dependent on the existence of indemnitee’s fault or

negligence. See Meloy 504 So. 2d 833. Shamrock’s motion suffers from no such

temporal deficiency, because it asks the Court to find the LOIA inapplicable. If the

1 A Marcel premium refers to the cost of the indemnitor adding the indemnitee as an additional insured on its insurance

policy.

2 The existence of Fieldwood’s Marcel premium is also undisputed.

3 For the sake of the rest of the order, particularly when this case is analogized to others, it may help to clearly establish

the roles the respective parties in the present case play in the Marcel analysis. Fieldwood is the principal or company.

Shamrock is the third-party contractor or indemnitee. Linear is the indemnitor.

LOIA is inapplicable, then the existence of Shamrock’s negligence or fault is

irrelevant, because Defendants must indemnify it regardless.

Defendants’ claim of a genuine dispute of material fact is similarly inapposite.

The following facts are not in dispute: (1) the language of the two MSC’s, (2) the

nature and location of the work Shamrock was performing for Fieldwood, (3)

Fieldwood’s Marcel payment to Linear. These are the only facts necessary to decide

the issues raised by the parties’ memoranda. Furthermore, the issue Defendant most

strenuously attempts to frame as a genuine issue of material fact, whether Shamrock

is an invitee according to the relevant provisions of the Linear MSC, is an issue

consistently handled by courts at the summary judgment stage. See Alex v. Wild

Control, Inc., No. 07-9183, 2009 WL 2599782 (E.D. La. Aug. 2009); Reynaud v. Rowan

Companies, Inc., No. 98-1326, 1999 WL 65022 (E.D. La. Feb. 1999); Clayton Williams

Energy, Inc. v. National Union Fire Insurance Company of Louisiana, No. 03-2980,

2004 WL 2452780 (E.D. La. Nov. 2004). Therefore, the issues presented by Shamrock

are properly in front of the Court. Considering Defendants’ adoption by reference

pursuant to Rule 10(c) of their memorandums in support of their Motion to Dismiss,

the Court will take into account Defendants’ relevant arguments contained therein.

II. SHAMROCK IS AN INVITEE OF FIELDWOOD UNDER THE MSC

Shamrock argues that it is entitled to benefit from Fieldwood’s Marcel premium as a

member of both Linear MSC’s “Third-Party Contractor Group” and “Company

Group.” (Rec. Doc. 61-3). Both parties agree Shamrock is a member of the “Third-

Party Contractor Group,” but Defendants dispute that Shamrock is a Fieldwood

invitee, and thus a member of the Company Group. The distinction matters because

Shamrock’s claim that Fieldwood’s Marcel payment was intended to benefit

Shamrock is stronger if Shamrock is a member of Fieldwood’s Company Group. See

Durr v. GOL, LLC, No. 18-3742 2019 WL 2330429 (E.D. La. May 2019); see also B. J.

Services Co., USA v. Thompson, No. 08-510, 2010 WL 2024725 (W.D. La. May 2010).

The Company Group is defined as “[Fieldwood] and its parent, affiliates and

subsidiary companies, co-lessees, co-owners, partners, joint venturers, together with

its and all of their respective officers, directors, employees, in-house legal counsel,

agents, representatives, insurers and invitees.” Id. (emphasis added). Shamrock’s

inclusion in the Company Group therefore hinges on the definition of an invitee, but

the Linear MSC does not define “invitee.” Id.

When a contract fails to include a clear definition of “invitee,” courts utilize the

definition elucidated in Blanks v. Murco Drilling Corporation, which defined an

invitee as “a person who goes onto premises with the expressed or implied invitation

of the occupant, on business of the occupant for their mutual advantage.” Brown v.

Sea Mar Mgmt., LLC, 288 F. App'x 922, 924 (5th Cir. 2008) (quoting Blanks v. Murco

Drilling Corp., 766 F.2d 891, 894 (5th Cir. 1985)). Here, Shamrock’s employees were

expressly invited onto the platform by Fieldwood for the mutual benefit of both

companies. See Durr v. 2019 WL 2330429. Thus, Shamrock clearly satisfies the

Blanks definition of an invitee.

Defendants attempt to circumvent Blanks by claiming the Linear MSC

implicitly defines “invitee” by including a separate Third-Party Contractor definition

that Shamrock fulfills (Rec. Doc. 61-3). Although Defendants are correct that a clear

definition of “invitee” in the Linear MSC would supersede the Blanks definition, the

Court is not persuaded such a definition exists.

There is nothing in the language of the Linear MSC that indicates Shamrock

cannot be both a Third-Party Contractor and an invitee. Defendants have cited no

case where a court has refused to apply the Blanks test merely because a potential

invitee satisfied another definition in a contract. On the contrary, there is ample

support for Shamrock’s proposition that a contractually defined contractor or

subcontractor can also be an invitee. See Mills v. Zapata Drilling Co., Inc., 722 F.2d

1170 (5th. Cir. 1983) (stating it is common knowledge that “one may be an invitee

and a contractor simultaneously with the same person); see also Reynaud, 1999 WL

65022 *3 (holding that a subcontractor who met the definition of the term “Operator’s

Personnel” was also an invitee); Clayton, 2004 WL 24552780 (holding the term

“invitees” not mutually exclusive with contractor or subcontractor, rather invitees is

simply a broad term that can include contractors and subcontractors unless explicitly

stated otherwise); Alex, 2009 WL 2599782 (holding that in order to prevent

contractors and subcontractors from being considered invitees the contract must

expressly say so).

The Court finds the decision in Durr v. GOL, LLC particularly instructive.

2019 WL 2330429. In Durr, another judge of this Court had occasion to interpret the

rights of a third-party contractor, Wood Group, sued by a Linear employee while the

employee worked on an off-shore platform owned by Fieldwood and subject to the

Linear MSC. After analyzing the same Linear MSC that is before the Court in the

instant case and applying the Blanks test, the Durr court determined that Wood

Group was an invitee as well as a third-party contractor, and thus part of both the

Third-Party Contractor Group and Fieldwood’s Company Group.4 For the foregoing

reasons, the Court finds that Shamrock is an invitee according to the unambiguous

language of the Linear MSC, and thus a member of Fieldwood’s Company Group.

III. SHAMROCK FALLS UNDER THE MARCEL EXCEPTION TO THE LOIA

BECAUSE OF FIELDWOOD’S PREMIUM

The Court next turns its attention to the application of the Marcel Exception

to Shamrock’s indemnity claim. The Marcel Exception is an exception to the LOIA

that was initially recognized by a district court in Patterson v. Conoco, Inc., 670 F.

Supp. 182 (W.D. La. 1987) and subsequently adopted by the Fifth Circuit in Marcel.

11 F.3d 563 at 569. The question of whether the Marcel Exception covers Shamrock

in this case is one of Louisiana law. In evaluating issues of state law, the Court

“look[s] to the decisions of the state’s highest court.” In re Franchise Services of North

America, Inc., 891 F.3d 198 (5th. Cir. 2018) (citing Temple v. McCall, 720 F.3d 301,

307 (5th. Cir. 2013). If the state’s highest court has yet to address the issue, the Court

is required to “make an ‘Erie guess’ as to how the state’s highest court would resolve

4 Although not raised by Defendants here, Durr also addresses the potential argument that the Fifth Circuit’s decision

in Knox v. Rec Marine Logistics, L.L.C., 716 F.Appx. 370, 372 (5th.Cir, 2018), restricted the definition of invitees to

entities that are part of a parent companies’ corporate structure. The Fifth Circuit’s decision in Knox never mentioned

the term “corporate structure.” The corporate structure argument was merely one of two reasons the district court in

Knox found that Rec Marine was not an invitee. The other was that Rec Marine was never invited aboard the off-shore

platform. Rather, all of Rec Marine’s mutually beneficial work took place in the Gulf of Mexico, and the district court

expressed hesitation in calling the Gulf of Mexico a “premises” that a person could “occupy” according to the Blanks

test. This is the rationale the Fifth Circuit highlighted when upholding the decision. Thus, the only proposition Knox

stands for is that an invitee cannot be “invited” to perform work in the Gulf of Mexico. As Shamrock was invited

aboard the actual platform, Knox has no bearing here.

the issue.” Id. “In making an Erie guess in the absence of a ruling from the state's

highest court, this Court may look to the decisions of intermediate appellate state

courts for guidance.” Howe ex rel. Howe v. Scottsdale Ins. Co., 204 F.3d 624, 627 (5th.

Cir. 2000). Although the Court is not strictly bound by the interpretations of

Louisiana’s lower courts, the Court is “guided by decisions rendered by the Louisiana

appellate courts, particularly when numerous decisions are in accord on a given

issue.” Boyett v. Redland Ins. Co., 741 F.3d. 604. (5th. Cir. 2014).

Neither the Louisiana Supreme Court nor the Fifth Circuit has ever directly

addressed whether a third-party contractor within a Company Group is entitled to

indemnity under the Marcel Exception when the principal, not the third-party

contractor, pays the Marcel premium. Nevertheless, a review of Marcel cases within

the Fifth Circuit makes clear that the underlying rationale of the Marcel Exception

is to encourage the acquisition of insurance for accidents occurring on offshore

platforms, while simultaneously avoiding shifting the economic burden of acquiring

said insurance to faultless indemnitors. See Patterson, 670 F. Supp. 184 (“In fact, the

acquisition of liability insurance by Dupont is an exercise which should be applauded,

not thwarted.”); Marcel, 11 F.3d 569-70 (“The LOIA is aimed at preventing the

shifting of the economic burden of insurance coverage or liability onto an independent

contractor. If the principal pays for its own liability coverage, however, no shifting

occurs. We see no need to prevent such an arrangement in order to give effect to the

LOIA. Indeed, agreements such as the one in Patterson may be economically

desirable.”) Rogers v. Samedan Oil Corp., 308 F.3d 477, 482 (5th. Cir. 2002) (holding

that “no material part of the costs insuring [indemnitee] was born by [indemnitor].

Thus, the [indemnity provisions] fall within the purview of the Marcel Exception, and,

consequently, do not violate the LOIA.”); Hodgen v. Forest Oil Corp, 87 F.3d 1512

(5th. Cir. 1996) (denying a request by a third-party contractor to uphold the

indemnity provisions of a contract because the indemnitor “payed all of the premiums

in full,” not because the indemnitee was not entitled to Marcel protection as a third-

party.)

In addition to the implicit support from the Fifth Circuit, Shamrock’s position

is buttressed by district court decisions within the Fifth Circuit that are directly on

point. In B. J. Services Co., USA v. Thompson, third-party plaintiff Excalibur

Technology Corporation sought enforcement of an indemnity provision when an

employee of B.J. Services brought suit against Excalibur. 2010 WL 2024725.

Excalibur was performing third-party contract work for Conn Energy, and Conn

Energy had a MSC with BJ Services in which BJ Services agreed to indemnify every

member of Conn’s Company Group, including Excalibur. In return, Conn was to pay

a Marcel premium sufficient to cover every member of the Company Group. The court

in B.J. Services held, “BJ Services was obligated to provide insurance coverage to

Conn's subcontractors, yet failed to do so. The cost of the premiums of the additional

insureds was to be passed on to Conn's. Thus, the indemnity provision falls within

the exception created by Patterson/Marcel.” Id. at 8*. B. J. Services is an

unambiguous example of a court upholding a contractual indemnity arrangement

under the LOIA where the principal, Conn, pays the Marcel premium to the

indemnitor, B.J. Services, for the benefit of the third-party indemnitee, Excalibur. Id.

In Durr v. GOL, LLC, discussed supra, the court similarly found that a third-

party contractor, considered part of the Company Group by the terms of the MSC, is

entitled to benefit from the principal’s payment of the Marcel premium “on behalf of

itself and the Company Group.” 2019 WL 2330429 *8.5 The Durr court was guided in

its finding by the twin policy goals of the LOIA and Marcel, to “prevent the shifting

of the economic burden of insurance coverage to the indemnitor” and “commend the

acquisition of insurance” respectively. Id. The same policy goals persuade the Court

that an application of the Marcel Exception in the present case is appropriate.

It is undisputed that the increased costs of providing insurance coverage to

Fieldwood’s Company Group, including Shamrock, were borne by Fieldwood, not

Linear. Thus, the economic cost of another entity’s negligence is not being unfairly

foisted on Linear, and the purpose of the LOIA is not being defeated. La.Rev.Stat.

9:2780 (The LOIA was enacted to halt the “inequity foisted on certain contractors and

their employees by the defense and indemnity provision contained in some

agreements pertaining to wells for oil, gas or water”); see also Marcel, 11. F.3d at 569.

If the indemnitor is not paying any increased costs because of the contractual

provisions, there is no inequity being foisted upon them. Furthermore, allowing

Fieldwood to obtain insurance for its entire company group advances the policy aim

of encouraging insurance coverage. Patterson, 670 F. Supp. 184.

5 As discussed in Part II, supra, the Durr court found the third-party contractor constituted an invitee under the terms

of the Linear MSC by utilizing the Blanks definition of invitee.

Defendants cite several Fifth Circuit and district court cases that are simply

inapposite, as not one addresses the Marcel Exception. Defendants have, however,

provided support in the form of Jefferson v. International Marine, LLC, a Louisiana

First Circuit Court of Appeals decision. 224 So. 3d. 50 (La. App. 1 Cir. July 2017). For

brevity’s sake, it suffices to say that the factual backdrop in Jefferson was virtually

identical to the present case. In both instances, the MSC at issue merely permitted

the principal to pay the Marcel premium for its Company Group, it did not require it.

Id. at 55; see also (Rec. Doc. 61-3).

Unlike the principal in the present case, however, the principal in Jefferson

decided not to pay the Marcel premium, and the third-party contractor sued the

principal for breach of contract for failure to pay the premium. Id. Thus, although the

factual backdrop of the cases is similar, the posture of the suit in Jefferson is

substantially different.

The bulk of the Jefferson court’s analysis focuses on whether, according to the

language of the contract, the principal had an obligation or an option to pay the

Marcel premium. After eventually holding that the principal had only an option to

pay and thereby denying the third-party contractors claim, the Jefferson court stated,

in a one sentence piece of dictum, that “ [f]urthermore, the Marcel Exception does not

extend to third party beneficiaries, such as International, who do not pay for coverage

under the indemnitor's policy.” Id.

The Court is not persuaded that such a cursory piece of dictum by a single

Louisiana appellate court constitutes guidance that should bear heavily on the

Court’s decision. See Boyett, 741 F.3d. 604. Because the Jefferson court based its

holding on other grounds, its comments on the Marcel Exception were “not essential

to the decision and therefore not binding.” In re Queyroze, No. 14-2715 2017 WL

6623885 (E.D. La. Dec. 2017) (citing Judicial Dictum, BLACK'S LAW

DICTIONARY (10th ed. 2014)). Furthermore, the Jefferson opinion did not contain

the requisite “careful consideration” for its statement on the Marcel Exception to be

persuasive dictum. See Autobahn Imports, L.P. v. Jaguar Land Rover North America,

L.L.C. 896 F.3d 340 (5th. Cir. 2018). There was no discussion of the policy underlying

the Marcel Exception or a citation to treatises or other cases discussing the

applicability of the Marcel Exception to third-parties. Although mindful of its duty to

give persuasive weight to state court appellate interpretations of state law, the Court

does not find the dictum in question constitutes such.

CONCLUSION

Accordingly,

IT IS ORDERED that Third-Party Plaintiffs Shamrock Energy Solutions,

LLC’s Motion for Summary Judgment (Rec. Doc. 61) is GRANTED.

New Orleans, Louisiana this 7th day of October, 2019.

CARL J. BAR

UNITED ST DISTRICT JUDGE

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