The Fifth Circuit’s Need to Clarify its Test Set Forth in In re Larry Doiron, Inc.—After All, the Southern District of Texas Already Has

by David Scotton, Senior Associate

I. Introduction

A contract’s classification as “maritime” has significant ramifications for parties to a contract. For instance, in In re Larry Doiron, Inc. (“Doiron”), general maritime law (“GML”) governed, which allowed the court to uphold the contract’s indemnity provision.[1] Alternatively, if Louisiana law governed, the indemnity agreement would have been “null and void and against public policy.”[2] Because a contract’s classification as “maritime” can have significant repercussions for parties to a contract, and because parties want predictability in contracts, a judicial mechanism to simplify contract classification is preferable. On January 8, 2018, the U.S. Fifth Circuit Court of Appeals issued an en banc decision designed to simplify maritime contract classification.[3] Post-Doiron, a contract is maritime if it accomplishes two things: (1) it provides services to facilitate the drilling or production of oil and gas on navigable waters; and (2) it provides or the parties also expect that a vessel will play a “substantial” role in the completion of the contract, or the parties so expect.[4] Although designed to simplify maritime contract classification, the opinion’s language conflates all maritime contracts with those involving oil and gas.[5] Post-Doiron, parties to contracts involving vessels and oil and gas can likely expect maritime classification, but those within the Fifth Circuit’s jurisdiction whose contracts may traditionally be “maritime,” but which do not involve oil and gas, are faced with uncertainty as to whether GML or Louisiana law will govern their contracts.

II. Background of the Case

In Doiron, Apache Corporation (“Apache”) entered into a master service contract (“MSC”) with Specialty Rental Tools & Supply (“STS”) to work on Apache’s offshore platform.[6] Apache later placed a work order for STS to remove obstructions from a well.[7] The MSC contained an indemnity provision in favor of Apache and its contractors.[8] The work order did not require a vessel, nor did the parties expect a vessel would be required.[9] After an unsuccessful attempt to perform the work order, however, STS employees discovered they needed a vessel—a crane barge—to perform the work; Apache then contracted with plaintiff Doiron to provide the vessel.[10] STS employees remained unsuccessful and said they needed more equipment; when rigging down, Larry Doiron Incorporated’s (“LDI”) crane operator struck an STS employee.[11] LDI, as a contractor of Apache, filed suit against STS, arguing the contract was maritime and thus the indemnity provision was enforceable.[12]

III. How Should Courts Apply this New Test?

The Fifth Circuit said the new test set forth in Doiron was for maritime contract classification, which is broader than just the oil and gas context, but the opinion’s text qualified the adoption of this test to “this context”: a contract involving the exploration, drilling, and production of oil and gas.[13] The Fifth Circuit also broadly discussed contract classification, which suggests application should, or at least may, extend beyond oil and gas contracts. For instance, the court purports to replace the six-factor test set forth in Davis & Sons Inc. v. Gulf Oil Corp., but Davis & Sons involved a contract covering “onshore and offshore facilities.”[14] The court further said that the Davis & Sons test—the test it claimed to replace—determined whether a contract was maritime; it did not say that the Davis & Sons test determined whether an oil and gas contract was maritime. This statement means the court in Doiron claimed to replace the test designed for maritime contract classification with a two-pronged test regarding oil and gas-specific contracts. Furthermore, the court in Doiron left open the possibility for this test to apply outside the oil and gas field: “If an activity in a non-oil and gas sector involves maritime commerce and work from a vessel, we would expect that this test would be helpful in determining whether a contact is maritime.”[15]

The Fifth Circuit reaffirmed this new approach in In re Crescent Energy Services, the only Fifth Circuit ruling to date regarding this issue of maritime contract classification. In Crescent Energy, the Fifth Circuit stated, “[A]n affirmative answer to both questions [factors set forth in Doiron] is necessary before the label ‘maritime’ may be applied to the contract.”[16] The contract, however, involved plugging and abandoning three offshore wells.[17] The court also stated, “Finally, regardless of what other Fifth Circuit case law there may be, nothing in such case law detracts from the clarity of our 2018 en banc decision in Doiron.”[18] This case likewise involved oil and gas, leaving future parties to contracts involving vessels—but not involving oil and gas—unsure of whether their contracts will be “maritime” post-Doiron. To further confuse the issue, the Eastern District of Louisiana in Mays v. C-Dive L.L.C. acknowledged Doiron and Crescent Energy and said that the Doiron test “requires the court to consider just two questions [the two factors set forth in Doiron] in determining whether a contract is maritime.”[19] Notably, the court did not say that courts should use Doiron only to determine whether oil and gasrelated contracts are maritime.[20]

Clarity to this test began in Texas. In Lightering L.L.C. v. Teichman Group, L.L.C., the Southern District of Texas addressed whether Doiron applied outside of the oil and gas context.[21] In Lightering, OSG Lightering, L.L.C. (“OSG”) sought a declaratory judgment that the MSA did not govern its relationship with T&T Offshore, Incorporated (“T&T”) because the MSA had expired before the accident, and therefore, it did not have a duty to indemnify T&T for its employee’s negligence.[22] T&T cited Doiron and argued that the Agreement was fundamentally not a maritime contract and that the court therefore lacked subject matter jurisdiction.[23] T&T also relied on Norfolk Southern Railway Co. v. Kirby to argue that the court must look at the principal objective of the contract.[24] OSG argued that the agreement was fundamentally a maritime contract and that Doiron’s two-step test was inapplicable because Doiron was limited to maritime contracts involving oil and gas exploration, drilling, and production.[25] Rather, OSG argued its contract was maritime because the proper test came from Kirby, which “require[d] a holistic evaluation of the nature and character of the Agreement, looking at whether its principal objective is maritime commerce.”[26] T&T, on the other hand, argued that Doiron applied because the Fifth Circuit stated that the Doiron test “would be helpful” in other, non-oil and -gas contexts and because it drew support for its holding from other circuits’ considerations of non-oil and -gas contracts in light of Kirby, explaining that those decisions were “not inconsistent” with the Fifth Circuit’s test.[27]

Ultimately, the court held in Lightering that the contract was non-maritime after attempting to reconcile Doiron’s uncertainty with the rationale behind Kirby: the case upon which the Doiron court heavily relied.

Although Doiron limited its holding to the facts of the case, which came from the oil-and-gas sector, the court expressly noted, en banc, that it would expect the same test to apply in a non-oil-and-gas context. Outside the oil and gas context, the test first requires the court to ask whether the activity ‘involves maritime commerce and work from a vessel.’ If so, then the court asks whether a vessel plays a substantial role in completing the contract . . . if . . . satisfied, then the contract’s principal objective is maritime commerce and the contract is maritime in nature.[28]

The court in Doiron did not expressly say it would “expect the same test to apply in a non-oil-and-gas context.” Rather, it said it would “expect that this test would be helpful” in such a situation.[29] Despite that textual distinction between what Doiron said and what Lightering asserted that Doiron said, the Southern District of Texas still took a necessary step in clarifying application of the two-pronged Doiron test.

IV. Conclusion

To help parties predict whether GML or state law will govern contracts that do not involve oil and gas but do involve at least a vessel, the Fifth Circuit should clarify its two-step test set forth in Doiron. By creating a test with an express purpose to “simplify maritime contract classification” and using language limiting it to oil and gas maritime activities, but expecting it to be “helpful” in determining non-oil and -gas activities, the Fifth Circuit made maritime contract classification more confusing. Because of this confusion, the Southern District of Texas applied Doiron to a non-oil and -gas contract, and reverted back to the traditional maritime classification scheme in place of the first oil- and gas-related factor. That approach seems sensible but defeats Doiron’s purpose of creating a new test. To elucidate its own test designed to clarify contract classification, the Fifth Circuit should expressly state that Doiron applies only to maritime contracts involving oil and gas or textually support Lightering’s approach to handling non-oil and -gas contracts in lieu of Doiron.

[1] In re Larry Doiron, Inc., 879 F.3d 568, 571 (5th Cir. 2018).

[2] Id. See also La. Rev. Stat. § 9:2780 (referred to as the “Louisiana Oilfield Indemnity Act”).

[3] Doiron, 879 F.3d at 568.

[4] Id. See also Jean F. Rydstrom, Comment note.—admiralty jurisdiction in matters of contract, 29 A.L.R. Fed. 325 (originally published in 1976).

[5] See generally Doiron, 879 F.3d 568.

[6] Id. at 568.

[7] Id.

[8] Id. at 569.

[9] Id. at 570.

[10] Id.

[11] Id.

[12] Id.

[13] Id.

[14] Davis & Sons, Inc. v. Gulf Oil Corp., 919 F.2d 313, 316 (5th Cir. 1990).The six factors originally set forth in Davis & Sons involved analyzing: (1) what the specific work order in effect at the time of injury provided; (2) the work actually done by the crew assigned under the work order; (3) whether the crew was assigned to work aboard a vessel in navigable waters; (4) the extent that the work being done related to the mission of that vessel; (5) the principal work of the injured worker; and (6) what work the injured worker was actually doing at the time of injury. Id.

[15] Doiron, 879 F.3d 577, n.52.

[16] In re Crescent Energy Servs., L.L.C. for Exoneration from or Limitation of Liab., 896 F.3d 350, 355 (5th Cir. 2018).

[17] Id. at 352.

[18] Id. at 359.

[19] Mays v. C-Dive LLC, No. 16-13139, 2018 WL 3642005, at *2 (E.D. La. Aug. 1, 2018).

[20] Like in Crescent, the contract the court deemed maritime in Mays had a principal obligation to plug and abandon an underwater pipeline used to transport natural gas. Id. at *3.

[21] Lightering LLC v. Teichman Grp., LLC, CV H-17-3374, 2018 WL 3428561, at *1 (S.D. Tex. July 16, 2018).

[22] Id. at *1, *3.

[23] Id. at *3, *8.

[24] Id. at *8 (citing Norfolk S. Railway Co. v. Kirby, 543 U.S. 14 (2004)).

[25] Id.

[26] Id.

[27] Id. at *10.

[28] Id. at 577 n.5, internal citations omitted.

[29] In re Larry Doiron, Inc., 879 F.3d 568, 577 (5th Cir. 2018).