Lloyds of London v. Transcontinental Gas Pipe Line Corp.

United States Court of Appeals,

Fifth Circuit.

No. 94-40171.

LLOYDS OF LONDON, Plaintiff-Counter-Defendant-Appellee,

TRANSCONTINENTAL GAS PIPE LINE CORPORATION, Defendant-Counter-
Claimant-Appellant.

Nov. 17, 1994.

Appeal from the United States District Court for the Western
District of Louisiana.

Before JOHNSON, HIGGINBOTHAM and DAVIS, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

At issue in this case is the applicability of the Louisiana

Oilfield Anti-Indemnity Act (the "LOAIA") to a contract involving

sandblasting and painting work on an interstate gas transmission

pipeline company's pipelines and platforms in the Gulf of Mexico.

Transcontinental Pipe Line Corporation ("Transco") appeals the

district court's grant of summary judgment in favor of Lloyds of

London. Because we conclude that the summary judgment evidence in

the record is insufficient to support the summary judgment, we

vacate the judgment and remand.

Harrington Enterprises, Inc. ("Harrington") is a Louisiana

contractor engaged in providing sandblasting and painting services

in the offshore oilfields. Transco is a Texas corporation which

owns and operates natural gas pipelines throughout the United

States, including pipelines serving various producing platforms in

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the Gulf of Mexico off the Louisiana and Texas coasts. Transco

purchases gas from producers and transports it through its

pipelines for sale to eventual customers. Transco also transports

gas for others through its pipelines for a fee. Transco does not

produce any oil or gas.

In June 1987, Transco and Harrington entered into a contract

providing for Harrington to perform sandblasting and painting

services on Transco's offshore pipelines and equipment off the

Louisiana and Texas coasts. Specifically, the contract called for

Harrington to furnish:

Labor and equipment for sandblasting and painting platform
structures and platform piping [and] also to furnish labor and
equipment to perform various operations and maintenance
functions as directed by [Transco's] authorized
representative.

The contract also called for Harrington "to protect, indemnify and

save [Transco] harmless from and against all claims, demands, and

causes of action of every kind and character arising in favor of

[Harrington's] employees" and to list Transco as an additional

assured in a comprehensive general liability policy issued to

Harrington by a consortium of insurance companies (hereinafter

"Lloyds").

This action arose from a personal injury suffered by Carl

Fontenot, a Harrington employee. Fontenot allegedly fell from the

top of a sandpot to the deck of a boat while sandblasting and

painting a Transco riser located on a structure in Block 133 of the

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Brazos area.1 The boat was tied to the 133 "A" platform, which at

that time was owned and operated by Cities Service Oil Co., Inc.

("Cities"). Cities owned and operated seven producing wells on 133

"A" that provided gas to the Transco pipelines passing over the

platform.

On the 133 "A" platform, Transco owned and maintained three

incoming pipelines, a meter station, and two outgoing pipelines

which tied into the Transco Central Texas lateral pipeline. The

three incoming pipelines carried gas from fifty-six wells upstream

of the platform. The gas from these fifty-six wells had been

commingled and carried through the Transco pipeline to 133 "A,"

where it was further commingled with the gas from the seven Cities

wells. Before the gas from the Cities wells was commingled with

the upstream gas, it was measured through Transco's meter located

on the 133 "A" platform. Ownership of the gas changed hands at the

meter when the gas was measured. The gas was commingled with the

gas from the upstream wells immediately after it passed through the

meter.

Transco demanded that Harrington and its insurer defend and

indemnify Transco for the injuries. Lloyds denied Transco's claim

for defense and indemnity and filed this suit for declaratory

judgment in the district court, alleging that the LOAIA rendered

the indemnity provisions null and void. Transco responded with a

1
Although Fontenot's injury occurred adjacent to a platform
off the Texas coast, both parties and the district court
consistently applied Louisiana law and never questioned its
applicability. See Johnson v. Amoco Production Co., 5 F.3d 949,
951 n. 2 (5th Cir.1993).

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reconventional demand against Lloyds, seeking a defense to and

indemnity from Fontenot's action. Both parties then filed

cross-motions for summary judgment.

In accordance with 28 U.S.C. § 636(B)(1)(b), the district

court referred the motions to a magistrate judge for review, report

and recommendation. After thorough review and analysis, the

magistrate judge concluded that the LOAIA applied and that the

Transco indemnity provision was unenforceable. Upon de novo

review, the district court accepted the magistrate judge's

recommendation and granted Lloyds' motion for summary judgment and

denied Transco's motion, 847 F.Supp. 48. Transco timely appealed.

II.

This court reviews a grant of summary judgment under the same

standard that guided the district court. Walker v. Sears, Roebuck

& Co., 853 F.2d 355, 358 (5th Cir.1988). The sole issue to be

resolved is the applicability of the LOAIA to the indemnity

provision contained in the contract between Harrington and Transco.

The Louisiana legislature enacted the LOAIA to declare a large

class of hold harmless/indemnity agreements unenforceable. It

reasoned "that an inequity is foisted on certain contractors and

their employees by the defense or indemnity provisions, either or

both, contained in some agreements pertaining to wells for oil,

gas, or water, or drilling for minerals." La.Rev.Stat.Ann. §

9:2780(A) (West 1991). The LOAIA defines "agreement" as "any

agreement or understanding, written or oral, concerning any

operations related to the exploration, development, production, or

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transportation of oil, gas, or water, or drilling for minerals."

Id. § 9:2780(C).

This court considered the application of the LOAIA to

transmission companies in Transcontinental Gas Pipe Line Corp. v.

Transportation Ins. Co., 953 F.2d 985 (5th Cir.1992). That case

also involved an employee who was injured while performing

sandblasting and painting work pursuant to a contract on an

offshore junction platform owned by Transco. Although it rejected

Transco's argument that the LOAIA did not apply to transmission

companies per se, this court refused to read the statute so broadly

as to cover every agreement arising from or connected with the

transportation of gas and oil. Id. at 992. Instead, the court

interpreted the LOAIA to apply only to the limited subset of those

agreements related to the transportation of gas that pertain to a

well. Id.

The Transco court established a two-step process for

determining the applicability of the LOAIA. First, as a threshold

matter, the contract must "pertain to a well." Id. at 991.

Second, the contract must be related to the exploration,

development, production or transportation of oil, gas or water.

Id. The sole dispute in this case is whether the contract

"pertains to a well." We concluded in Transco that the

determination of "whether a contract pertains to a well ...

requires a fact intensive case-by-case analysis." Id. at 994. The

focus of this inquiry is the location of the work required by the

contract. The LOAIA is not applicable if the work required by the

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contract is performed on gas transmission equipment at "a

reasonably determinable point at which the gas can no longer be

identified with a particular well, or is so fundamentally changed

in processing, commingling, or preparing it for distribution to its

ultimate end user, that the gas no longer "pertains to a well.' "

Id. The Transco court listed ten non-inclusive factors relevant to

this determination.2

2
Those factors are:

(1) whether the structures or facilities to which the
contract applies or with which it is associated, e.g.,
production platforms, pipelines, junction platforms,
etc., are part of an in-field gas gathering system;

(2) what is the geographical location of the facility
or system relative to the well or wells;

(3) whether the structure in question is a pipeline or
is closely involved with a pipeline;

(4) if so, whether that line picks up gas from a single
well or a single production platform or instead carries
commingled gas originating from different wells or
production facilities;

(5) whether the pipeline is a main transmission or
trunk line;

(6) what is the location of the facility or structure
relative to compressors, regulating stations,
processing facilities or the like;

(7) what is the purpose or function of the facility in
question;

(8) what if any facilities or processes intervene
between the wellhead and the structure or facility in
question, e.g., "heater treaters," compressor
facilities, separators, gauging installations,
treatment plants, etc.;

(9) who owns and operates the facility or structure in
question, and who owns and operates the well or wells
that produce the gas in question;

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Applying Transco, the district court identified the meter on

the 133 "A" platform as the last reasonably determinable point

before the gas became unrecognizable to the wells on the platform.

The district court held that because the contract envisioned that

Harrington would perform work on the meter, the contract pertained

to a well. Transco argues that the district court erred on a

number of grounds.

Transco first argues that the court improperly focused on the

site of the accident, the 133 "A" platform, in determining that the

contract pertained to a well. Transco contends that by limiting

its analysis to one platform, the court did not consider the entire

contract, which pertained to numerous facilities in two states.

The district court's focus on the 133 "A" platform was not

improper. The district court was charged with determining whether

the contract—which called in broad general terms for Harrington to

perform work on platform structures and piping—pertained to a well.

The platform on which Fontenot was working when he was injured was

a logical beginning point. We cannot fault the district court's

reasoning that if Harrington's work on the 133 "A" platform

pertained to a well, the LOAIA was triggered. The court did not

need to look further to see if the contract pertained to any other

wells. Transco instructs us to examine the facts to see if the

(10) and any number of other details affecting the
functional and geographic nexus between "a well" and
the structure or facility that is the object of the
agreement under scrutiny.

Id. at 995.

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contract envisioned work which pertained to any well. The fact

that the contract also may pertain to numerous other wells or to

objects other than wells is of no consequence.

Transco next challenges the district court's determination

that the meter was the last reasonably determinable point before

the gas could no longer be identified with a particular well.

However, an application of the Transco factors supports this

determination. Under Transco, the seven wells on the 133 "A"

platform constituted one well for purposes of the LOAIA. See id.

at 995 n. 40; see also Nerco Oil & Gas, Inc. v. M.R. Friday, Inc.,

816 F.Supp. 429, 431 (W.D. La.1993). These wells fed gas through

piping owned by Cities into the Transco meter. The gas was not

treated before reaching the meter, except to bring it up to

pipeline standards. The purpose of the meter was to measure the

gas directly from producing wells on the 133 "A" platform before it

entered the transmission pipeline. This gas was not commingled

with gas from other wells until after it passed through the meter.

Thus, there was a sufficient functional and geographical nexus

between the producing wells on 133 "A" and the meter.

Finally, Transco contends that even if we agree with the

district court's focus on the 133 "A" meter, the summary judgment

evidence does not support the conclusion that the contract

contemplated that work would be performed on the meter. Meters are

not referred to in the contract. The district court therefore had

the task of determining from the summary judgment evidence whether

the parties contemplated that Harrington would sandblast or paint

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the meter on platform 133 "A." The sole evidence relating to work

on the 133 "A" meter is the affidavit of Winfard Terme, the

District Manager of Transco. According to Mr. Terme, the meter was

housed inside a small building on the platform and would ordinarily

be hand painted by a Transco employee. Mr. Terme also examined the

invoices from the Harrington job and concluded that no work had

been done on the 133 "A" meter.

The district court concluded that the absence of work by

Harrington on the 133 "A" meter was insufficient to show that the

contract did not envision that work could be performed on the

meter. The court interpreted the contract's requirement of

"sandblasting and painting platform structures and platform piping"

to include the meter, since 133 "A" is a platform structure and

does contain a meter.3

We do not read the contract as calling for Harrington to

sandblast and paint all structures and piping on the platforms. To

the contrary, Harrington could perform only the work it was

directed to perform by Transco. Transco produced summary judgment

evidence that Harrington did not work on the platform 133 "A" meter

and ordinarily would not do so. Transco therefore successfully

established by summary judgment evidence that the contract did not

contemplate work on the meter. Because this determination was

3
At oral argument, counsel for Lloyds suggested that the
contract also envisioned that work would be performed on pipes
upstream of the meter—i.e., on the piping which transported gas
from the Cities wells to the meter. However, that piping was
owned by Cities and thus was not covered by the Transco contract.

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critical to the district court's conclusion that Harrington's work

pertained to a well, we must vacate the summary judgment and remand

this case for further proceedings.

III.

For the foregoing reasons, we vacate the district court's

entry of summary judgment for Lloyds and remand this case to the

district court for further proceedings consistent with this

opinion.

VACATED AND REMANDED.