You would think that a Master Service Contract concerning boats and oilfield operations in the Gulf of Mexico would be governed by federal maritime law. In some situations you would be mistaken, says Offshore Oil Services, Inc. v. Island Operating Company, Inc.  

The facts

Fieldwood and Island Operating entered into a MSC through which Island performed production services on Fieldwood’s Gulf of Mexico platforms. Most of the categories of “Work” identified in the MSC were those traditionally associated with production activities. Fieldwood contracted with OOSI for marine transport of equipment and Island’s workers on the platforms.

In the MSC Island agreed to indemnify third-party contractors such as OOSI against claims resulting from injuries to Island employees.

Fieldwood and Island agreed to a work order in which Island would fill “A Operator” positions. These operators would conduct BESE compliance testing and a host of other activities.

Island employee Felix sustained injuries while disembarking from a vessel. OOSI filed a Complaint for Exoneration From and/or Limitation of Liability and Felix filed a personal injury claim. OOSI demanded indemnification from Island.

The question for the court

Did federal Maritime law or Louisiana law govern the dispute? The question was whether transportation vessels would play a substantial role in the performance of the MSC and whether the parties expected as much.

There was no question that the indemnity provision required Island to indemnify OOSI for Felix’s personal injury claims; however Island argued that the Louisiana Oilfield Anti-Indemnity Act rendered the indemnity provision unenforceable. OOSI said federal maritime law controls. The trial court granted summary judgment for Island, concluding that the LOAIA governed the dispute based on a finding that the MSC did not provide that the vessels would play a substantial role in the completion of the contract and that the parties did not expect vessels to play such a role.

The Fifth Circuit affirmed the take-nothing judgment against OOSI. The court applied the choice of law analysis in the Outer Continental Shelf Lands Act. Whether federal maritime law applied of its own force to the MSC depended on the answer to two questions:

Was the contract to provide services to facilitate the drilling or production of oil and gas in navigable waters? The answer was “yes”. Then the court asked if the contract provided or did the parties expect that the vessel would play a substantial role in the completion of the contract? To this question the court said “no”. The result of that “no” was the MSC was a non-maritime contract. There was not a direct and substantial link between the contract and operation of the ship, it’s navigation or its management afloat.

The result was based on the testimony of the parties. A Fieldwood employee testified to the effect that they typically don’t use equipment associated with a vessel but it had been done. Island’s president testified that operators perform no work on vessels. The provision relating to marine transportation concerned transporting workers to the platform and was not a description of actual work the MSC contemplated.

The trial court, affirmed by the Fifth Circuit, ruled that OOSI take nothing. The MSC was not maritime in nature. Thus, the Louisiana Oilfield Anti-Indemnity Act controlled, nullifying Island’s indemnity obligations. (OOSI agreed that if the LOAIA applied, the indemnity obligation would be null, rendering discussion of that question unnecessary).

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