Louisiana: Friendly to Oil but not Indemnity
Author: Madeline Hicks
Earnest v. Palfinger Marine USA Inc, No. 6:20-CV-00685, 2022 WL 3365301, at *1 (W.D. La. Civ. R. Aug. 12, 2022).
This case arose out of a 2019 accident when a lifeboat fell from its moorings on a floating tension leg oil and gas exploration platform known as the Auger platform.1 Prior to the accident, Shell Offshore (“Shell”) had engaged Palfinger Marine, USA, Inc. (“Palfinger”) in a purchase and maintenance contract.2 The contract provided, among other things, that Shell must indemnify Palfinger for “death, injury, or disease of any person in [Company Group].”3 In response to the accident, Palfinger asserted a contractual indemnity claim against Shell associated with all personal injury and wrongful death claims arising from the lifeboat accident.4
For its part, Shell contended that the indemnification obligations included in the Shell-Palfinger contract were unenforceable because the contract fell under the choice of law provision of the Outer Continental Shelf Lands Act (“OCSLA”), and as such, that Louisiana law should govern the contract.5 Louisiana’s Oilfield Anti-Indemnification Act, as a matter of policy, renders any provision in any agreement which requires defense or indemnification for death or bodily harm to a person or persons if there is negligence or fault on the part of the indemnitee.6 Predictably, Palfinger attempted to avoid Louisiana law, contesting that because the maintenance contract was a maritime contract, it should be governed by maritime law.7
To determine what body of law governed this contract, the court turned to the Fifth Circuit’s Rodrigue/PLT three prong test for determining whether OCSLA requires the application of state law: (1) the controversy must arise on a situs covered by OCSLA; (2) federal maritime law must not apply of its own force; and (3) state law must not be inconsistent with federal law.8
First, the majority of the contract’s performance took place on the Auger platform, an OCSLA situs, thus satisfying the first prong of the Rodrigue/PLT test.9 Next, the court applied the Dorion test and found that because a vessel did not play a substantial role in the completion of the contract, maritime law did not apply of its own force.10 Finally, the court found that the application of Louisiana law was not inconsistent with federal law, satisfying the third and final prong of the Rodrigue test. Accordingly, the court held that Louisiana law applied to the Shell-Palfinger contract.
Louisiana’s Anti-Indemnification Act categorically precludes indemnity agreements that (1) “pertain to a well for oil, gas, water [. . .] or drilling for minerals,” and (2) are related to “exploration, development, production, or transportation of oil, gas, or water.”11 In order for a contract to “pertain to” a well, the contract’s services must be necessary to sustaining the manpower or equipment needed to produce oil or gas from wells.12 Because the primary focus of the contract, the acquisition and preservation of lifesaving equipment, is central to maintaining the manpower required to produce from a well, the first element of the Anti-Indemnification Act was satisfied.13 As to the second element, there could be no dispute that the Auger platform’s “sole purpose” is exploration and production of minerals on the outer-continental shelf.14 With both elements satisfied, the Court concluded that the Anti-Indemnification Act precluded the indemnity agreement at issue in the Shell-Palfinger contract.
In a final attempt to gain indemnity, Palfinger argued that Shell was liable for “tort indemnity . . . In proportion to their fault as vessel defendants under LHWCA § 905(b).”15 However, the Fifth Circuit has made clear that Louisiana law allows for claims of tort indemnity only when the third party’s negligence was passive.16 However, in this case, the allegations of negligence against Palfinger involve claims of active negligence, thus disabling for a final time claims of tort indemnity.17
1 Earnest v. Palfinger Marine USA Inc, No. 6:20-CV-00685, 2022 WL 3365301, at *1 (W.D. La. Civ. R. Aug. 12, 2022).
2 Id.
3 Id.
4 Id. at *2.
5 Id. at *3.
6 Id.
7 Id.
8 Id.
9 Id. at *4.
10 Id.
11 Id. See also: LSA-R.S. § 9:2780(B) & (C).
12 Earnest, 2022 WL 3365301, at *5.
13 Id.
14 Id.
15 Id. at *6.
16 Id.
17 Id.
