Maritime and Admiralty Law News: The United States Fifth Circuit Opts for the Focus-of-the-Contract Test to Determine What Law Applies to a Contractual Dispute Spawned by an Underlying Tort

In an en banc decision, the United States Fifth Circuit Court of Appeals has ruled that the focus of the contract at issue, as opposed to the situs of the underlying tort, determines the situs of the controversy, and therefore, the body of law applicable to the dispute. Grand Isle Shipyard, Inc. v. Seacor Marine, L.L.C., No. 07-31019, WL 4597975 (5th Cir. December 8, 2009). Grand Isle Shipyards, Inc. (“Grand Isle”) and Seacor Marine, L.L.C. (“Seacor”) were both contractors of BP American Production Company (“BP”). Grand Isle repaired and maintained BP’s offshore platforms while Seacor provided transportation for BP and its contractors. Plaintiff Denny Neil (“Neil”), an employee of Grand Isle, was being transported from a work platform to a residential platform (each located in federal waters adjacent to Louisiana) by a Seacor vessel when he was injured in a fall while the vessel was in federal waters.

Neil filed suit against Seacor in the United States District Court for the Southern District of Texas alleging vessel negligence under &sect 905(b) of the Longshore Harbor Worker’s Compensation Act (“LHWCA”). Seacor then tendered its defense and indemnity to Grand Isle pursuant to an indemnity provision which required Grand Isle to indemnify Seacor for bodily harm to its employees, even if caused by Seacor’s negligence. Grand Isle and its insurer filed suit in the Eastern District of Louisiana seeking declaratory judgment that: (1) Grand Isle is not contractually obligated to defend and indemnify Seacor, and (2) Seacor is not entitled to insurance coverage from Grand Isle’s insurer. Grand Isle and its insurer then filed a motion for summary judgment in which it argued that the contractual indemnity provision at issue is invalid under the Louisiana Oilfield Indemnity Act (“LOIA”) which applies through the Outer Continental Shelf Land Act (“OCSLA”) which adopts the adjacent state’s law as surrogate federal law. Seacor filed a cross motion for summary judgment averring that, because the injury occurred on navigable water as opposed to an OCSLA situs, general maritime law applies which does not prohibit the indemnity provision.

To determine whether OCSLA required the application of state law, the Court relied on the three-pronged test the Supreme Court developed in Rodrigue v. Aetna Casualty & Surety Co., 395 U.S. 352 (1969) and applied by the Fifth Circuit in Union Texas Petroleum Corp. v. PLT Engineering, Inc., 895 F.2d 1043, 1047 (5th Cir. 1990). Under that framework, state law will apply through OCSLA if: (1) the controversy arises on a situs covered by OCSLA, (2) federal maritime law does not apply of its own force, and (3) the state law must not be inconsistent with federal law. Id. The case turned on the first prong. The en banc panel held that the contract at issue, and not the situs of the injury, determines that situs of the controversy. It then held that since the contract called for the majority of the work to be done on BP’s platforms, and because these were OCSLA situses, state law, and therefore the LOIA, applies. As such, the indemnity provision is invalid and Grand Isle is not required to indemnify and defend Seacor.