Marathon Oil Company v. LLOG Exploration Company LLC

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

MARATHON OIL COMPANY CIVIL ACTION

VERSUS NO. 22-1295

LLOG EXPLORATION COMPANY, SECTION “R” (2)

L.L.C.

ORDER AND REASONS

Before the Court is plaintiff Marathon Oil Company’s (“Marathon”)

motion for partial summary judgment.1 Defendant LLOG Exploration

Company, L.L.C. (“LLOG”) opposes the motion.2 For the following reasons,

the Court denies the motion.

I. BACKGROUND

This case arises out of a separate lawsuit, Pigeon Land Company, Inc.

v. Shell Oil Co., et al., filed in the Sixteenth Judicial District Court for Iberia

Parish, Louisiana.3 The plaintiffs in Pigeon Land owned property in the

Bayou Pigeon Field in Iberia Parish that they leased to oil and gas companies

1 R. Doc. 28.

2 R. Doc. 31.

3 R. Doc. 1 ¶¶ 1-2; R. Doc. 28-1 (Pigeon Land Petition).

for exploration and production.4 One such company was Marathon’s

predecessor, Plymouth Oil Company (“Plymouth”), which drilled and

operated two wells on the property pursuant to mineral leases and surface

agreements.5 In 1962, Plymouth conveyed its interests in the property to the

Ohio Oil Company (“Ohio”), which changed its name to Marathon that same

year.6 Marathon ceased operations on the property in 1962 but continued to

hold its interests until 1991,7 at which point Marathon entered into an

Assignment and Bill of Sale (“Assignment”) with LLOG effective as of

January 1, 1991.8 Under the Assignment, Marathon conveyed to LLOG

several itemized interests in the property, including a 25% working interest

in a mineral lease with Lessor Lillian LeBlanc, et al., dated May 6, 1936

(“1936 LeBlanc Lease”).9

In 2019, the owners of the property filed the Pigeon Land lawsuit

against Marathon, LLOG, and others for alleged property damage caused by

the oil and gas operations.10 The Pigeon Land plaintiffs asserted liability

under legal theories of negligence, strict liability, continuing nuisance,

4 R. Doc. 28-1 (Pigeon Land Petition).

5 R. Doc. 28-3 at 2.

6 Id.

7 Id.

8 R. Doc. 8-1 (Assignment).

9 Id. at 5-6.

10 R. Doc. 28-1 (Pigeon Land Petition).

trespass, unjust enrichment, violations of the Louisiana Mineral Code, and

breach of lease agreements.11 Marathon and LLOG each made unsuccessful

demand on the other for defense and indemnity for the claims raised in

Pigeon Land.12 Thereafter, Marathon and LLOG reached separate

settlements with the plaintiffs.13

Marathon then filed this action seeking contractual indemnification

from LLOG for its defense and settlement costs in the Pigeon Land lawsuit

and a declaratory judgment confirming LLOG’s obligations under the

Assignment.14 In support of its claim, Marathon relies upon the following

provision (“LLOG Covenant”) in the Assignment:

[LLOG] covenants and agrees to assume all responsibility for the

interest(s) assigned hereby as of [January 1, 1991], and further

covenants and agrees to protect, defend, indemnify and save

[Marathon] free and harmless from and against any and all costs,

expenses, claims, debts, demands, judgments, causes of action,

liens or liability of whatsoever kind, character or nature arising

out of or incident to or in connection with in any way the making

of this Agreement and Bill of Sale or the ownership, operation,

use, plugging, abandoning, and/or restoration of the above

described land(s), lease(s), well(s), fixtures, equipment or other

personal property from and after [January 1, 1991], regardless of

whether the liability therefor is based upon some alleged act or

omission of [Marathon], of [LLOG], or of some other party.15

11 Id.

12 R. Doc. 1 at 2; R. Doc. 8 at 17.

13 R. Doc. 1 at 2; R. Doc. 8 at 17.

14 R. Doc. 1.

15 R. Doc. 8-1 ¶ 3 (Assignment).

Marathon asserts that, under the LLOG Covenant, LLOG is responsible for

Marathon’s settlement costs and expenses associated with defending the

Pigeon Land lawsuit.16

In its answer, LLOG filed counterclaims against Marathon for a

declaratory judgment regarding Marathon’s duty to defend, indemnify, and

reimburse LLOG for its costs arising out of the Pigeon Land lawsuit.17 LLOG

also seeks to recover defense costs and indemnity, as well as damages for

unjust enrichment, tortious conduct, and breach of contract.18 LLOG relies

upon the following provision (“Marathon Covenant”) in the Assignment in

support of its counterclaim:

[Marathon] covenants and agrees to indemnify and save [LLOG]

harmless from all claims, debts, liens (including discharge of all

liens) and any liability of whatsoever kind, character or nature

that may arise in connection or operations or events occurring

before [January 1, 1991], except those expressly assumed by

[LLOG].19

Marathon now moves for partial summary judgment on LLOG’s

contractual obligations.20 It argues that LLOG is obligated to defend and

indemnify Marathon from the claims raised in Pigeon Land because they

16 R. Doc. 1 at 2.

17 R. Doc. 8.

18 Id.

19 R. Doc. 8-1 ¶ 4 (Assignment); R. Doc. 31 at 4.

20 R. Doc. 28.

arose out of the “ownership, operation, use, plugging, abandoning, and/or

restoration” of the interests transferred under the Assignment.21 LLOG

opposes the motion, contending that the claims against Marathon in Pigeon

Land pertained to operations and events occurring before the January 1,

1991, effective date of the Assignment and are therefore not covered by the

LLOG Covenant.22

The Court considers the parties’ arguments below.

II. LEGAL STANDARD

Summary judgment is warranted when “the movant shows that there

is no genuine dispute as to any material fact and the movant is entitled to

judgment as a matter of law.” 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) (en banc) (per curiam). “When assessing whether a

dispute to any material fact exists, [the Court] consider[s] all of the evidence

in the record but refrain[s] from making credibility determinations or

weighing the evidence.” Delta & Pine Land Co. v. Nationwide Agribusiness

Ins., 530 F.3d 395, 398-99 (5th Cir. 2008) (first citing Reeves v. Sanderson

Plumbing Prods., Inc., 530 U.S. 133, 150 (2000); and then citing Matsushita

21 R. Doc. 28-3.

22 R. Doc. 31.

Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). 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.” Galindo v. Precision Am. Corp., 754 F.2d

1212, 1216 (5th Cir. 1985) (quoting 10A Charles Alan Wright & Arthur R.

Miller, Federal Practice and Procedure § 2738 (2d ed. 1983)); see also Little,

37 F.3d at 1075 (noting that the moving party’s “burden is not satisfied with

‘some metaphysical doubt as to the material facts,’ by ‘conclusory

allegations,’ by ‘unsubstantiated assertions,’ or by only a ‘scintilla’ of

evidence” (citations omitted)). “No genuine dispute of fact exists if the

record taken as a whole could not lead a rational trier of fact to find for the

nonmoving party.” EEOC v. Simbaki, Ltd., 767 F.3d 475, 481 (5th Cir. 2014).

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

burden of proof at trial, the moving party must put forth evidence that 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)

(quoting Golden Rule Ins. v. Lease, 755 F. Supp. 948, 951 (D. Colo. 1991)

(internal quotation marks omitted)). “[T]he nonmoving party can defeat the

motion” by either countering with evidence sufficient to demonstrate the

“existence of a genuine dispute of material fact,” or by “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

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

resolution. See, e.g., id.; Little, 37 F.3d at 1075 (“Rule 56 ‘mandates the entry

of summary judgment, after adequate time for discovery and upon motion,

against a party who fails to make a showing sufficient to establish the

existence of an element essential to that party’s case, and on which that party

will bear the burden of proof at trial.’” (quoting Celotex, 477 U.S. at 322)).

III. DISCUSSION

The parties agree that Louisiana law governs this case. Under

Louisiana law, “[t]he language in an indemnity agreement dictates the

obligations of the parties.” Kinsinger v. Taco Tico, Inc., 861 So. 2d 669, 671

(La. App. 5 Cir. 2003) (citing Meloy v. Conoco, Inc., 504 So. 2d 833 (La.

1987)). Courts use the general rules of contract interpretation to construe

indemnity provisions. Liberty Mut. Ins. Co. v. Pine Bluff Sand & Gravel Co.,

89 F.3d 243, 246 (5th Cir. 1996); see also Berry v. Orleans Par. Sch. Bd., 830

So. 2d 283, 285 (La. 2002) (noting that courts are “guided by the general

rules contained in articles 2045-2057 of the Louisiana Civil Code”). Contract

interpretation “is the determination of the common intent of the parties.”

La. Civ. Code Ann. art. 2045 (2023). “When the terms of a contract are

unambiguous and lead to no absurd consequences, [courts] interpret them

as a matter of law.” Liberty Mut. Ins. Co., 89 F.3d at 246; see also La. Civ.

Code Ann. art. 2046 (2023) (“When the words of a contract are clear and

explicit and lead to no absurd consequences, no further interpretation may

be made in search of the parties’ intent.”).

In contrast, “ambiguity in the terms of a contract gives rise to a fact

question concerning the intent of the parties.” Liberty Mut. Ins. Co., 89 F.3d

at 246 (citation omitted). “A contract is considered ambiguous on the issue

of intent when it lacks a provision bearing on the issue, its written terms are

susceptible to more than one interpretation, there is uncertainty as to its

provisions, or the parties’ intent cannot be ascertained from the language

used.” Guest House of Slidell v. Hills, 76 So. 3d 497, 499-500 (La. App. 1 Cir.

2011) (citing Campbell v. Melton, 817 So. 2d 69, 75 (La. 2002)). The

determination of whether a contract provision is clear or ambiguous is a

question of law. McCary v. Oceaneering Int’l, Inc., 243 So. 3d 613, 616 (La.

App. 1 Cir. 2018) (citing Sims v. Mulhearn Funeral Home, Inc., 956 So. 2d

583, 590 (La. 2007)).

In determining whether an indemnitor is obligated to cover an

indemnitee’s liabilities and costs, the court must strictly construe the

indemnity provision “to cover all losses which reasonably appear to have

been within [the parties’] contemplation.” Foreman v. Exxon Corp., 770

F.2d 490, 496 (5th Cir. 1985) (alteration in original) (quoting Weathersby v.

Conoco Oil Co., 752 F.2d 953, 955-56 (5th Cir. 1984) (internal quotation

marks omitted)) (applying Louisiana law); see also McGill v. Cochran-Sysco

Foods, 818 So. 2d 301, 306 (La. App. 2 Cir. 2002) (citations omitted)

(“Agreements to indemnify are strictly construed.”). Like other contracts, “it

is the terms of the indemnity agreement which govern the obligations of the

parties.” Meloy, 504 So. 2d at 839. The party seeking to enforce the

indemnity agreement bears the burden of proof. McGill, 818 So. 2d at 306

(citations omitted). “As a general rule, one seeking indemnity for a

settlement must show actual liability to recover.” Chevron Oronite Co.,

L.L.C. v. Jacobs Field Servs. N. Am., Inc., 951 F.3d 219, 226 (5th Cir. 2020)

(quoting Sullivan v. Franicevich, 899 So. 2d 602, 609 (La. App. 4 Cir. 2005)

(internal quotation marks omitted)). Louisiana courts recognize an

exception to this rule, requiring the indemnitee to “show only potential,

rather than actual, liability” when the indemnitee’s claim is based on a

written contract of indemnity. Id. (quoting Vaughn v. Franklin, 785 So. 2d

79, 87 (La. App. 1 Cir. 2001) (internal quotation marks omitted)); Rovira v.

LaGoDa, Inc., 551 So. 2d 790, 795 (La. App. 5 Cir. 1989) (citing Terra Res.,

Inc. v. Lake Charles Dredging & Towing Inc., 695 F.2d 828 (5th Cir. 1983)).

With these principles in mind, the Court turns to the provision at issue

in this motion. The LLOG Covenant provides that LLOG will defend and

indemnify Marathon for liabilities arising out of or incident to the

“ownership, operation, use, plugging, abandoning, and/or restoration” of the

assigned interests “from and after” the January 1, 1991, effective date of the

Assignment.23 The terms of this provision apply regardless of whether

liability is based on some alleged act or omission of Marathon, LLOG, or

third party.24 Marathon contends that the plain language of this provision

requires LLOG to reimburse it for expenses incurred from the settlement of

23 R. Doc. 8-1 ¶ 3 (Assignment) (emphasis added).

24 Id.

the Pigeon Land lawsuit. According to Marathon, the claims raised in Pigeon

Land fall squarely within the LLOG Covenant because they were “filed after

January 1, 1991,”25 and relate to the plugging, abandoning, and restoration

of the lands and wellbores covered by the 1936 LeBlanc Lease.26

While it is uncontested that the Pigeon Land lawsuit was filed after

January 1, 1991,27 LLOG contends that the “from and after” language in the

LLOG Covenant refers to the date the conduct underlying the claims

occurred.28 Further, LLOG points to evidence that the claims in the suit

arose out of activities by Marathon and its predecessors in interest on the

property occurring before January 1, 1991.29 For example, LLOG cites the

testimony of Jill Niswonger, corporate representative for Marathon, that on

August 15, 1958, Plymouth notified Shell Oil Company that it discovered a 4-

inch line on the property that was “leaking very badly.”30 Conversely,

Marathon has not pointed to evidence indicating that the liability for which

25 R. Doc. 28-3 at 4 (emphasis added). See also id. at 2 (“LLOG expressly

agreed to defend and indemnify Marathon from ‘any and all’ claims

raised after the January 1, 1991 effective date.” (emphasis added)); R.

Doc. 36 at 6 (“LLOG expressly assumed claims raised after 1991.”

(emphasis added)).

26 R. Doc. 28-3 at 2; R. Doc. 36 at 2.

27 R. Doc. 31-2 ¶ 6; R. Doc. 38 at 1-2.

28 R. Doc. 31 at 4.

29 R. Doc. 31 at 5-9.

30 R. Doc. 31-6 at 15-16.

it seeks indemnification arose from conduct occurring from and after

January 1, 1991. Marathon instead relies on its reading of the “from and

after” language in the LLOG Covenant as covering all claims “filed” or

“raised” from and after January 1, 1991.31

Despite the parties’ conflicting interpretations, the LLOG Covenant is

not ambiguous as a matter of law. See Tex. E. Transmission Corp. v.

Amerada Hess Corp., 145 F.3d 737, 741 (5th Cir. 1998) (“[A] contract

provision is not ambiguous where only one of two competing interpretations

is reasonable or merely because one party can create a dispute in

hindsight.”). Here, the LLOG Covenant states that LLOG must indemnify

Marathon for claims, causes of action, and liabilities “arising out of” certain

events and operations “from and after” January 1, 1991. Nothing in the text

of this provision suggests that LLOG’s indemnification duty is triggered by

the date on which the claims were filed. Rather, the “from and after”

language explicitly ties the indemnification obligation to claims “arising”

from conduct or events that occur from or after January 1, 1991. See Belle

Pass Terminal, Inc. v. Jolin, Inc., 634 So. 2d 466, 480 (La. App. 1 Cir. 1994)

(citing Ransom v. Camcraft, Inc., 580 So. 2d 1073, 1077 (La. App. 4 Cir.

1991)) (noting that contract construction “does not authorize perversion of

31 R. Doc. 28-3 at 2, 4; R. Doc. 36 at 6.

language or the creation of ambiguity where none exists and does not

authorize courts to make a new contract where the language employed

expresses the true intent of the parties”); see also Brown v. R.J. Reynolds

Tobacco Co., 52 F.3d 524, 528 (5th Cir. 1995) (“[A] claim arises when the

injury producing event takes place, not when the claim is filed.” (quoting

Koker v. Armstrong Cork, Inc., 804 P.2d 659 (Wash. Ct. App. 1991) (internal

quotation marks omitted))).

Additionally, the Fifth Circuit has recognized that under Louisiana law,

a contract provision “must be interpreted in light of the other provisions” of

the agreement, and “provisions susceptible to different meanings should be

interpreted ‘to avoid neutralizing or ignoring any of them or treating them as

surplusage.’” Tex. E. Transmission Corp., 145 F.3d at 743 (first quoting La.

Civ. Code Ann. art. 2050; and then quoting Lambert v. Md. Cas. Co., 418 So.

2d 553, 559-60 (La. 1982)); see also Dufrene v. Bernstein, 195 La. 575, 582

(La. 1952) (“[A]ll provisions of a contract should be read together in order to

determine the meaning of each provision.”). The LLOG Covenant must

therefore be interpreted in light of the other provisions of the Assignment,

including the Marathon Covenant. The Marathon Covenant provides in

relevant part that Marathon shall indemnify LLOG for claims “that may arise

in connection or operations or events occurring before” January 1, 1991.32

The language of this provision unambiguously requires Marathon to

indemnify LLOG for conduct that occurred before January 1, 1991, not for

claims that were filed before that date.

Both the LLOG Covenant and the Marathon Covenant notably use the

term “operations” in relation to the types of activities triggering the

respective indemnification duties.33 Under Marathon’s interpretation of the

LLOG Covenant, LLOG is required to indemnify Marathon for claims arising

from Marathon’s own operations of the assigned interests that occurred

before January 1, 1991, as long as the claims are filed after that date. But the

terms of the Marathon Covenant plainly require Marathon to indemnify

LLOG against claims based upon the same pre-1991 operations.

Harmonizing these two provisions under Marathon’s interpretation requires

the Marathon Covenant to be read as covering only those claims that were

filed before January 1, 1991. Such a reading is clearly inconsistent with the

intent of the parties because, as previously noted, the words of the Marathon

Covenant are explicit in its application to claims arising from operations

occurring—not filed—before 1991.

32 R. Doc. 8-1 ¶ 4 (Assignment) (emphasis added).

33 Id. ¶¶ 3, 4.

Marathon does not offer a reasonable interpretation of the Assignment

that would reconcile these two provisions. Instead, Marathon points to the

exception to its own indemnification duty under the Marathon Covenant for

liabilities “expressly assumed by” LLOG.34 Marathon contends that this

exception refers to LLOG’s indemnification duty under the LLOG

Covenant.35 But this argument merely assumes the correctness of

Marathon’s interpretation of its own covenant, which is contrary to its plain

language. And the Marathon interpretation is unreasonable because, to give

effect to Marathon’s argument, the Court would have to read Marathon’s

indemnity obligation for claims arising from operations or events occurring

before 1991 out of the Assignment. The only reasonable interpretation of the

exception is that it applies to paragraph 8 of the Assignment, in which LLOG

assumed the obligation to renegotiate the terms of sale of production subject

to certain preexisting gas purchase agreements covered by the Natural Gas

Policy Act.36 See La. Civ. Code Ann. art. 2049 (2023) (“A provision

susceptible of different meanings must be interpreted with a meaning that

renders it effective and not with one that renders it ineffective.”).

34 R. Doc. 8-1 ¶ 4 (Assignment).

35 R. Doc. 36 at 5-6.

36 R. Doc. 8-1 ¶ 8 (Assignment).

The Court thus finds that the parties unambiguously intended for the

Marathon Covenant to serve as a temporally reciprocal indemnification

provision to the LLOG Covenant. The only reasonable interpretation of the

Assignment is that it allocates liability for claims arising from conduct that

occurred before January 1, 1991, to Marathon, and liability for claims arising

from conduct that occurred after that date to LLOG. See Clovelly Oil Co.,

L.L.C. v. Midstates Petroleum Co., L.L.C., 112 So. 3d 187, 192 (La. 2013)

(“Each provision in a contract must be interpreted in light of the other

provisions so that each is given the meaning suggested by the contract as a

whole.”). Based on this interpretation, Marathon has not demonstrated that

it is entitled to summary judgment for the full amount it paid to settle the

Pigeon Land lawsuit. As noted earlier, LLOG points to evidence indicating

that the Pigeon Land claims arose out of events and operations by Marathon

on the property at issue occurring before January 1, 1991.37 Marathon’s

requested summary judgment must therefore be denied.

LLOG also raises an issue of fact as to whether the Marathon

settlement solely involved interests transferred to LLOG under the

Assignment. Marathon contends that the claims raised against it by the

Pigeon Land plaintiffs relate to the plugging, abandoning, and restoration of

37 R. Doc. 31 at 5-9.

the lands and wellbores covered by the 1936 LeBlanc Lease.38 In support of

its claim, Marathon cites an exhibit attached to the Pigeon Land plaintiffs’

original petition, which identifies twenty-one wells on their property and the

defendant oil and gas companies that operated and controlled them from

1939 to 2010.39 The plaintiffs listed Marathon in relation to only one of the

wells: the Lillian LeBlanc #1 wellbore included in the 1936 LeBlanc Lease.40

Marathon relies on this to demonstrate that the 1936 LeBlanc Lease and

wellbore, which it conveyed to LLOG under the Assignment, were the sole

interests at issue in the Pigeon Land claims against Marathon.41

Although LLOG does not contest that the interest in the 1936 LeBlanc

Lease was at issue in Pigeon Land lawsuit,42 or that this interest was

conveyed under the Assignment,43 it points to evidence that the Pigeon Land

claims against Marathon concerned other wells, agreements, rights of way,

and leases not transferred under the Assignment.44 Specifically, LLOG

points to the Pigeon Land plaintiffs’ answers to Marathon’s interrogatories,

38 R. Doc. 28-3 at 2; R. Doc. 36 at 2.

39 R. Doc. 28-1 at 3, 14-15 (Pigeon Land Petition).

40 Id. at 14-15; R. Doc. 8-1 at 5-6 (Assignment); R. Doc. 28-3 at 5.

41 See R. Doc. 28-3 at 2, 5; R. Doc. 36 at 2.

42 R. Doc. 31-2 ¶ 7 (admitting to paragraph 7 of Marathon’s Statement of

Undisputed Material Facts, R. Doc. 28-4).

43 Id. ¶ 2.

44 Id. ¶2; R. Doc. 31 at 9-10.

which identified a non-exhaustive list of eight mineral leases and right-of-

way agreements “pursuant to which [the plaintiffs] claim[ed] that Marathon

owes or owed any obligation” to them.45 Among the identified agreements,

only the 1936 LeBlanc Lease is also listed as one of the itemized interests

transferred under the Assignment.46 LLOG submits that it had no interest

in the other agreements identified by the Pigeon Land plaintiffs.47 Marathon

offers no evidence to the contrary. Because LLOG has created a material fact

issue as to the interests involved in the Marathon settlement, Marathon’s

motion for summary judgment must be denied.

In summary, Marathon has failed to establish that there are no issues

of material fact and that it is entitled to judgment as a matter of law that its

settlement with the Pigeon Land plaintiff is predicated on conduct or events

occurring after January 1, 1991, and interests assigned to LLOG.

Accordingly, summary judgment is denied on Marathon’s claim that LLOG

has a contractual obligation to indemnify it from all of the claims and

liabilities arising out of the Pigeon Land lawsuit.

IV. CONCLUSION

45 R. Doc. 31-9 at 5-6.

46 See id.; R. Doc. 8-1 at 5-6 (Assignment).

47 R. Doc. 8-1 at 5-6 (Assignment).

Based on the foregoing reasons, Marathon’s motion for partial

summary judgment is DENIED.

New Orleans, Louisiana, this 13th day of July, 2023.

_bernk Yorer_

SARAH S. VANCE

UNITED STATES DISTRICT JUDGE

19