In a highly anticipated ruling, the United States Fifth Circuit Court of Appeals issued its en banc decision in In re: Larry Doiron, Inc., No. 16-30217 (5th Cir. Jan. 8, 2018). The case called upon the court to determine whether a contract for performance of specialty services to facilitate the drilling or production of oil and gas on navigable waters is maritime in nature. In ruling that the particular contract at issue in the case was non-maritime, the Fifth Circuit took the significant step of streamlining and re-framing the analysis for maritime contracts generally.
In Doiron, vessel owner Larry Doiron, Inc. (LDI), was contracted by Apache Corporation to provide crane services in connection with operations being performed by another Apache contractor, Specialty Rental Tools & Supply, L.L.P. (STS) pursuant to a master services contract (MSC). In the course of these operations, the LDI crane operator negligently struck and injured an STS employee. Anticipating a personal injury claim, LDI initiated limitation of liability proceedings. The injured worker filed a claim in these proceedings, following which LDI filed a third-party complaint against STS (the worker’s employer) seeking indemnity under the terms of the MSC. The issue in the case became whether the MSC was a “maritime” contract: if so, general maritime law applied and the indemnity provision would be enforced; if not, the Louisiana Oilfield Indemnity Act (LOIA) applied and the provision was unenforceable.
Both the district court and a panel of the Fifth Circuit on appeal concluded that the contract was maritime in nature, granting LDI the benefit of indemnity protection. However, the Fifth Circuit later granted en banc review, and (much to the presumed chagrin of LDI) unanimously agreed to change the test for analyzing maritime contracts, ultimately to conclude that the MSC was not maritime in nature and therefore subject to the indemnity bar of the LOIA.
Prior to Doiron, the test for maritime contracts in the Fifth Circuit was a complex fact-intensive six-factor inquiry, established in Davis & Sons, Inc. v. Gulf Oil Corp., 919 F.2d 313 (5th Cir. 1990). Under that test, the court asked: (1) what does the specific work order in effect at the time of the injury provide? (2) what work did the crew assigned under the work order actually do? (3) was the crew assigned to work aboard a vessel in navigable waters? (4) to what extent did the work being done relate to the mission of that vessel? (5) what was the principal work of the injured worker? And (6) what work was the injured worker actually doing at the time of injury?
Doiron dramatically revamps the analysis to address substantial criticism and to adhere to the Supreme Court’s guidance in Norfolk Southern Railway Co. v. Kirby, 543 U.S. 14 (2004). Now, in the Fifth Circuit, whether a contract relating to the drilling or production of oil and gas is maritime in nature is the function of a simple two-step analysis: First, is the contract one to provide services to facilitate the drilling or production of oil and gas on navigable waters? If the answer is “yes”, the court next asks, does the contract provide or do the parties expect that a vessel will play a substantial role in the completion of the contract? If so, the contract is maritime in nature.
The Doiron decision marks a significant change in this area of law, but may create more certainty for the issue of maritime contracts which has broad reaching implications for questions of federal jurisdiction and the validity of indemnity clauses in cases involving oil and gas drilling contracts. Liskow & Lewis is committed to remaining at the forefront of developments in all areas of maritime and oil and gas law and is a recognized leader in this field. Our experienced attorneys are available to assist in all aspects of maritime and energy advice, contracts negotiation, and litigation.
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