Indemnification after Peremption: District Court Rules a Finding of Negligence is not Required When Original Claim is Perempted

Indemnification after Peremption: District Court Rules a Finding of Negligence is not Required When Original Claim is Perempted 

By: René Tierney

Edited by: Tiffany Morales

Hefren v. Murphy Exploration & Prod. Co., No. 12-1899, 2014 WL 3547474 (W.D. La. July 16, 2014)If the Plaintiff’s claim is preempted by statute and dismissed, may the defendant recover its fees and costs pursuant to an indemnity agreement or must the negligence or fault of that party be determined? The U.S. District Court for the Western District of Louisiana recently addressed this issue in the case of Hefren v. Murphy Exploration & Prod. Co.Murphy Exploration & Production Company (herein “Murphy”) took possession of the FRONT RUNNER Spar from its contractor, McDermott, Inc. (herein “McDermott”), on August 4, 2004. James Hefren (herein “Plaintiff”) was injured while aboard the Spar on June 6, 2011 but did not file suit against Murphy and McDermott for negligence until June 4, 2012 – nearly 8 years after possession was transferred. Murphy filed a Motion for Summary Judgment, which the court granted, successfully arguing that Plaintiff’s tort claim was barred due to the exclusive remedies provided by the Longshore & Harbor Workers’ Compensation Act (herein “LHWCA”) (33 U.S.C. 901 et seq.).McDermott also moved to dismiss Plaintiff’s claim against it. McDermott argued that the FRONT RUNNER Spar was an immovable, and as such, Plaintiff’s negligence claim was perempted by La. Rev. Stat. 9:2772. This statute extinguishes the right or action whether ex contractu, ex delicto, or otherwise unless it is brought within 5 years of the owner having taken possession of the immovable. As Murphy took possession of the immovable on August 4, 2004, Plaintiff’s cause of action for negligence against McDermott was extinguished (perempted) by the time he filed suit on June 4, 2012. The court ruled in favor of McDermott and dismissed the Plaintiff’s claim.McDermott then filed a cross-claim against Murphy, seeking indemnification from Murphy for attorneys’ fees and expenses incurred to defend itself against Plaintiff’s claims pursuant to the terms of the FRONT RUNNER Spar contract. The relevant provisions stated that Murphy would indemnify McDermott if the latter proved it was not negligent or at fault for a claimant’s injuries. McDermott then filed a Motion for Partial Summary Judgment on its cross-claim, which Murphy opposed.McDermott asserted that, as the Plaintiff’s suit was perempted by La. Rev. Stat. 9:2772(A), the court could not decide the issue of whether McDermott was negligent. Moreover, it argued that its claim for indemnity was not invalidated by the Louisiana Oilfield Indemnity Act (herein “LOIA”) (La. Rev. Stat. 9:2780), which voids any indemnity agreement unless the indemnitee is found free from negligence. McDermott cited Melancon v. Conoco Prod., Inc. (834 F.2d 1238) in support. In Melancon, as the plaintiff’s suit against Conoco was barred by the LHWCA, the Fifth Circuit held Amoco was entitled to indemnification for its costs of defense because the court could not reach the issue of Amoco’s negligence.Murphy argued that McDermott’s indemnity claim was premature because McDermott had not yet been found to be free from fault for Plaintiff’s injuries. Until such a determination is made, Murphy argued, the LOIA voided the indemnity agreement. Murphy cited Tanksley v. Gulf Oil Corp. (848 F.2d 515) in support. In Tanksley, the Fifth Circuit distinguished the facts of Melancon, noting that unlike Amoco, Chevron settled and could have proven it was not negligent at trial. Instead, Chevron foreclosed such a determination by settling with the Plaintiff; thus the LOIA voided the claim for indemnity for the amount paid in settlement. ” The LOIA voided an indemnity agreement between Chevron and the contractor.The district court neatly summarized the Fifth Circuit’s rulings in Melancon and Tanksley: there is a distinction between “legal bars,” such as immunity from suit under LHWCA, and other “impediments” to lawsuits, such as voluntary settlements. Legal bars prevent findings of negligence as a matter of law, and as such, LOIA does not apply, and indemnification is possible. The district court did acknowledge that two Louisiana appellate courts take the view that the issue of an indemnitee’s negligence can be determined in a separate trial, and the Louisiana Supreme Court has not taken a position either way.After considering both arguments, the district court concluded that the facts of the instant case were more akin to the facts of Melancon. The critical factor was the difference between prescription (statute of limitations in common law) and peremption (statute of repose in common law) under Louisiana law: the former extinguishes the remedy, while the latter extinguishes the claim itself, and legally bars it. Thus, peremption is more similar to the legal bar at issue in Melancon than it is to voluntary settlements, which, like prescription, extinguishes the remedy.As Plaintiff’s suit was filed against McDermott after the peremptive period, his claim was extinguished by the time he filed suit. McDermott could not be found at fault for Plaintiff’s injuries as a matter of law. The district court concluded that the legal bar of peremption provided by La. Rev. Stat. 9:2772(A) entitled McDermott to recover its costs of defense, attorneys’ fees, and expenses incurred to defend itself against Plaintiff’s suit and granted McDermott’s Motion for Partial Summary Judgment.