Lloyds of London, Plaintiff-Counter-Defendant-Appellant v. Transcontinental Gas Pipe Line Corporation, Defendant-Counter-Claimant-Appellee
Docket: 95-31256
Court: Court of Appeals for the Fifth Circuit; December 12, 1996; Federal Appellate Court
Lloyds of London appeals the district court's judgment favoring Transcontinental Gas Pipe Line Corporation regarding a 1987 contract for sandblasting and painting services performed by Harrington Enterprises, Inc. The case centers on the applicability of the Louisiana Oilfield Anti-Indemnity Act (LOAIA), particularly whether the contract involved work at or upstream of the 133A meter, which would void the indemnity provision under LOAIA.
Lloyds contends that the district court made three errors: misinterpreting a previous ruling, incorrectly determining that Lloyds provided no evidence of work upstream of the 133A meter, and improperly assigning the burden of proof to Lloyds. The court found legal error in the district court's contract interpretation and reversed its judgment.
Factual details reveal that Harrington was contracted to perform services on Transco's offshore pipelines and equipment, which included an indemnity clause requiring Harrington to indemnify Transco for claims related to Harrington's employees. The case arose after an incident in which a Harrington employee was injured while working on a Transco riser associated with the 133A platform.
Transco sought defense and indemnification from Lloyds for the employee's injuries, leading Lloyds to file for a declaratory judgment asserting the indemnity provisions were null under LOAIA. The district court initially ruled in favor of Lloyds, granting its summary judgment motion and denying Transco's.
Transco appealed the district court's summary judgment, which had concluded there was sufficient evidence that the contract covered work on the 133A meter. The appellate court disagreed, finding that the contract did not specifically mention meters and relied solely on an affidavit from Winfard Treme, Transco's district manager, which indicated the 133A meter was located inside a building and typically painted by a Transco employee. The court determined that there was no evidentiary support for the district court's conclusion regarding the contract's applicability to the 133A meter, leading to the vacation of the summary judgment and remand for further proceedings.
Upon remand, the district court ruled in favor of Transco, stating that Lloyds did not prove the contract involved work on the 133A meter. Lloyds subsequently filed motions questioning this judgment, which the district court denied, providing additional reasoning that Lloyds failed to demonstrate any work was done or contemplated upstream of the meter station.
Lloyds appealed again, arguing that the district court misinterpreted the previous ruling by requiring work specifically at the 133A meter rather than at or upstream of it. While the court acknowledged the initial misstatement, it found the district court had correctly understood the ruling in its later opinion, rendering the earlier error harmless under Federal Rule of Civil Procedure 61. The appellate court also noted that for the contract to qualify as "pertaining to a well," work must be either at or upstream of the 133A meter, and Transco defended the ruling by asserting that no such work was contemplated in the contract.
Transco argues that the contract stipulated the provision of labor and equipment for sandblasting and painting platform structures, as well as maintenance functions directed by its representative. Transco contends that Lloyds failed to provide evidence of directed work upstream of the meter, leading to Lloyds' loss at the district court. This situation hinges on contractual interpretation rather than specifics of the Louisiana Oilfield Anti-Indemnity Act (LOAIA). The central issue is whether the contract's subject matter includes work at or upstream of the 133A meter, or if it is only supported by extrinsic evidence from years later.
Transco's interpretation of the prior ruling in Lloyds I is incorrect, particularly concerning the term "contemplate." The court clarified that this term was used to indicate a lack of summary judgment evidence supporting work done on the 133A meter, not to suggest that extrinsic evidence was necessary for contract interpretation. Ambiguity must be established first, following Liberty Mutual Ins. Co. v. Pine Bluff Sand & Gravel Co. Inc., before considering external evidence, as confirmed in Rutgers, State University v. Martin Woodlands Gas Co.
Contract interpretation is conducted de novo, and whether a contract has a "plain meaning" or ambiguity is a legal question. Under Louisiana law, a contract is ambiguous if it can reasonably support multiple interpretations regarding the parties' intentions. The court concludes that the contract between Transco and Harrington is clear and unambiguous regarding its applicability to work at or upstream of the 133A meter. The mere potential for one party to dispute the meaning of a provision does not create ambiguity. The court reiterated previous findings that the contract need not involve work at the meter itself, only at or upstream of it, thereby negating the need to consider extrinsic evidence. Under Louisiana law, contracts are interpreted based on their plain meaning, which includes the project's specifications as outlined in the contract's "General Conditions."
Transco's Article 10.0, titled "Painting and Coating Specifications," outlines the requirements for surface preparation and coating application for various components including meter stations, riser assemblies, and platform structures. The term "meter station," which is a recognized technical term in the oil and gas industry, is defined according to industry standards, as provided by Transco's district manager, Winfard Treme. Treme's definition includes the piping and valves both upstream and downstream of the 133A meter, affirming that the contract encompasses this area. Consequently, the contract is deemed to pertain to a well under the Louisiana Oilfield Anti-Indemnity Act (LOAIA), leading to the voiding of its indemnification provision.
The court reverses the district court's judgment for Transco and remands the case with instructions to enter judgment in favor of Lloyds. The main issue for determination is whether the work on the 133A meter was anticipated by the contract. Although Lloyds did not provide evidence of work specifically done on the upstream portion, Transco’s own witness confirmed that services were performed on the 133A platform’s piping and meter station. Additionally, the court clarifies that the contract’s indemnification clause is located in the General Conditions and highlights that a specific phrase relied upon by Transco modifies only certain services, not the initial ones concerning sandblasting and painting. Both parties have applied Louisiana law consistently throughout the proceedings.
