Substantial Role of Vessel Determines Classification of Contract as Maritime: In re Doiron Test Applied

Earnest v. Palfinger Marine U.S.A. Inc., 90 F.4th 804 (5th Cir. 2024).

Authored by: Emma Aucoin

           In the present case, the United States Court of Appeals for the Fifth Circuit addressed whether a contract for the upkeep of lifeboats on an oil production platform is a maritime contract. The contract contains indemnity provisions which would be valid under maritime law if the contract is classified as a maritime contract; however, if the contract is not maritime, the indemnity provisions would be rendered invalid and unenforceable under Louisiana law pursuant to the Louisiana Oilfield Indemnity Act.[1]

           The issue arose from an incident that took place on the Auger Platform, located on the Outer Continental Shelf, owned and operated by Shell Offshore, Inc., Shell Exploration & Production Company, and Shell Oil Company (hereinafter referred to as “Shell”). Coast Guard regulations required the lifeboats on the platform to be kept in “good working order and ready for immediate use at all times.”[2] Shell, as owner, is accountable for compliance and contracted with Palfinger Marine USA, Inc. (Palfinger) to provide the required inspections, maintenance, and repairs for the lifeboats on the platform. Shell agreed to indemnify Palfinger, regardless of fault, for certain liabilities, including the death of a Shell employee.[3]

           Palfinger found a corroded cable on one of the lifeboats while performing an inspection and recommended replacing it, but reported the systems were ready for use. During a routine abandon platform drill and recovery of one of the lifeboats, the corroded cable failed resulting in the death of two workers and an injury to another. Suits were later filed by the injured worker and beneficiaries of the decedents against Shell and Palfinger.

           To correctly categorize the contract, the court explored the Doiron test, beginning with the principle that whether a contract is maritime depends on its “‘nature and character of the contract,’ and its reference to ‘maritime services or maritime transactions.’”[4] In sum, the Doiron two-factor test helps determine whether the contract’s purpose is generating maritime commerce, and that the use of the vessel effectuating this commerce emulates the necessary relationship to traditional maritime activities. This relationship focuses primarily on the parties’ expectations that a vessel “will play a substantial role in the completion of the contract.”[5]

           As to the first factor regarding the vessel’s engagement in maritime commerce – in this case, the lifeboats – the court states that lifeboats are “a required component of ‘drilling and production of oil and gas on navigable waters from a vessel [which] is a commercial maritime activity.’”[6] As per Coast Guard regulations, the presence of the lifeboats coupled with their required upkeep are mandatory in order for Shell to continue operating the platform. Thus, Palfinger’s services “facilitate the [offshore] drilling or production of oil and gas,”[7] which satisfies the first factor of the Doiron test.

           As to the second factor and the main concern on appeal, the Fifth Circuit stated that the trial court’s application of Doiron incorrectly focused on the “use” of the vessel – the lifeboats, in this case – rather than focusing on whether a vessel will play a substantial role in the contract. The latter focal point renders the lifeboats “central to performance of this contract.”[8] Further, the court states that a contract for the inspection, maintenance, and repair of a vessel gives the vessel a substantial role, which is necessary under the Doiron test as opposed to having a merely incidental role.  

           Ultimately, with both factors of the Doiron test satisfied, the Fifth Circuit concluded that the contract is categorized as classically maritime and held that maritime law should apply for the purposes of the enforceability of the indemnity provision in the Shell/Palfinger contract.

[1] La. R.S. 9:2780(B), (C).

[2] Earnest, 90 F.4th at 807.

[3] Id.

[4] Id. at 812.

[5] Id.

[6] Id. at 813.

[7] Earnest, 90 F.4th at 812.

[8] Id. at 813.