In Barrios v. Centaur, LLC, the Fifth Circuit again considered what makes a contract a maritime one since its simplification of the test in In re Larry Doiron, Inc. Finding that the contract in question was maritime, the Fifth Circuit held that the indemnity provisions within the contact were fully enforceable.
Barrios shows why choice of law is important. Whether Louisiana law or maritime law applies cannot necessarily be contractually agreed by the parties. If a contract is non-maritime and Louisiana law applies of its own force, indemnity provisions may be voided by the Louisiana Construction Anti-Indemnity Statute (as the district court found in Barrios) or the Louisiana Oilfield Anti-Indemnity Act (as was the case in Doiron).
Some contracts are obviously maritime, but where it may be debatable, parties (and their insurers) should consider whether some other law, such as Louisiana law, might apply and invalidate indemnity and insurance obligations.
A party to a contract and its liability insurers may think that they are entitled to indemnification for claims arising out of injuries to the other contracting party’s personnel. However, if the contract is held to be non-maritime, Louisiana law might void that indemnity provision.
Careful consideration in advance as to what law applies and what indemnity contractual indemnity provisions are actually enforceable allows maritime businesses to better manage their risks.
Non-Maritime Contract, According to the District Court
Barrios was an employee of Centaur who was injured while offloading a generator from a crew boat owned by River Ventures to a barge leased by Centaur. Barrios sued River Ventures and Centaur for negligence under the general maritime law.
River Ventures sought contractual indemnity from Centaur. In response, Centaur moved for summary judgment, arguing that the contract with River Ventures was non-maritime, governed by Louisiana law, and, therefore, the indemnity provision was therefore voided by the Louisiana Construction Anti-Indemnity Statute.
The district court agreed, concluding that the contract between River Ventures and Centaur was a “land-based construction contract” governed by Louisiana law, which voided the indemnity obligation.
The Fifth Circuit Reverses
The Fifth Circuit noted that the indemnity dispute between River Ventures and Centaur boiled down to which law governed. The Fifth Circuit looked at the six-factor test it had applied in Davis & Sons. V. Gulf Oil Corp. and how that had been impacted by the Supreme Court’s decision in Norfolk Southern Railway Co. v. Kirby.
The Fifth Circuit had sought to harmonize these two cases with the simpler test for whether a contract was maritime or not as set out in Doiron. In that case, the test had been simplified to: (1) Is the contract one to provide services to facilitate the drilling or production of oil and gas on navigable waters? If yes, (2) Does the contract provide or do the parties expect that a vessel will play a substantial role in the completion of the contract?
In Barrios, the parties disputed how to apply the first prong of the Doiron test outside the oil and gas context. The Fifth Circuit explained that the first prong of the test should be whether the contract was to provide services to facilitate activity on navigable waters. The second prong remained the same, namely that the contract must provide or the parties must expect that a vessel will play a substantial role in the completion of the contract.
The Fifth Circuit held that the first prong was satisfied because the contract called for Centaur to install a concrete containment rail that was designed to prevent coal and petroleum coke from spilling onto the dock or into the river, which could have adverse effects to both commerce and the environment. The second prong was also satisfied because the contract made clear that the barge was expected to play a significant role in the completion of the work. Therefore, the contract was maritime and the indemnity obligations were fully enforceable.