Johnson v. Seacor Marine Corp. , 404 F.3d 871 ( 2005 )

United States Court of Appeals
Fifth Circuit
F I L E D
March 23, 2005
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
Clerk
No. 03-31005, 03-31038 and 03-31161
DONALD J. JOHNSON,
Plaintiff
v.
SEACOR MARINE CORP., ET AL.,
Defendants
SEACOR MARINE CORP.,
Defendant-Third-Party Plaintiff-
Appellee
v.
GRAY INSURANCE CO., ET AL.,
Third-Party Defendant
GRAY INSURANCE CO.,
Third-Party Defendant-
Appellant.
Consolidated with
03-31038
DONALD FLEMING,
Plaintiff
v.
GRAND ISLE SHIPYARD, INC., ET AL.,
Defendants
SEACOR MARINE, INC.,
Defendant-Third-Party
Plaintiff-Appellant
v.
-1-
GRAY INSURANCE CO.; PRODUCTION MANAGEMENT INDUSTRIES, L.L.C.,
Third-Party Defendants-
Appellees
Consolidated with
03-31161
GERALD W.HOFFPAUIR,
Plaintiff
PRODUCTION MANAGEMENT INDUSTRIES, L.L.C.;
GRAY INSURANCE CO.,
Intervenor Plaintiffs-
Counterdefendants-Appellees
v.
SEACOR MARINE, INC.,
Defendant-Intervenor
Defendant-Counterclaimant-
Appellant.
Appeals consolidated from the United States District Courts
for the Eastern and Western Districts of Louisiana
Before KING, Chief Judge, HIGGINBOTHAM, and DAVIS, Circuit
Judges.
W. EUGENE DAVIS, Circuit Judge:
This consolidated appeal presents the question of whether a
labor contractor’s contract to hold harmless and indemnify a
vessel operator for injuries, sustained by that contractor’s
employees while riding on the operator’s vessel, is supported by
consideration when the vessel operator owes a pre-existing duty
to an oil company to transport those same employees. We conclude
that the contract is supported by consideration and is
-2-
enforceable.
I.
Production Management Industries, L.L.C. (PMI), a labor
contractor that provides labor and other support services for the
oil and gas industry in the Gulf of Mexico off the Louisiana
coast, entered into contracts with various oil companies to
provide workers for the oil companies’ rigs. Chevron U.S.A., Inc.
(Chevron) and Matrix Oil and Gas Co. (Matrix) - neither of which
is a party to this appeal - are the two oil companies that
contracted with PMI in the instant cases. As part of their
agreements with PMI, Chevron and Matrix contracted to provide
transportation for PMI workers from the shore to the rig. The oil
companies contracted with SEACOR Marine Inc. (SEACOR), a company
that owns and operates vessels used in oilfield operations on the
Louisiana OCS to deliver equipment, supplies and personnel
(including PMI employees) to the rigs.
On December 20, 1990, Chevron and SEACOR signed a “blanket
time-charter agreement”. This agreement, subject to unilateral
cancellation by either party, set the general terms that would
apply to future vessel charters. The blanket agreement created no
obligation on the part of either party to enter into a charter
for a vessel. On October 7, 1999, Chevron entered into a time-
charter of the SEACOR vessel the Sylvia F; this Time Charter
incorporated the terms of the December 20 Blanket Agreement. On
-3-
April 24, 1997, SEACOR entered into a blanket time-charter
agreement with Energy Logistics, Inc. (ELI). On June 3, 2000, ELI
chartered the SEACOR vessel, the Shirley G and incorporated the
terms of the April 24 Blanket Agreement. ELI subchartered the
Shirley G to Gulftran, Inc. (Gulftran) on December 14, 2000. The
next day, Gulftran subchartered the vessel to Matrix. Therefore,
unlike Chevron, Matrix never directly contracted with SEACOR.
SEACOR, knowing that its obligations under the charter
agreements with the oil companies would probably involve
transporting PMI employees, contacted PMI directly and insisted
that it would not transport any PMI employees until PMI signed a
“Vessel Boarding and Utlization Agreement Hold Harmless” (VBA).
By the VBA’s terms, the provisions of this form contract apply
when a SEACOR vessel transports a contractors’ employees. The VBA
stated that, in exchange for PMI employees being ferried on
SEACOR vessels, PMI would name SEACOR as an additional insured
under PMI’s comprehensive general liability (CGL) policy with
waiver of subrogation rights and deletion of the CGL watercraft
exclusion1. After some deliberation, PMI signed the VBA on July
1
The CGL Watercraft Exclusion, which appears on page 2 of 11
of the Gray Insurance Company commercial general liability policy
coverage form, reads as follows:
“g. ‘Bodily injury’ or ‘property damage’ arising out
of the ownership, maintenance, use or entrustment
to others of any aircraft, ‘auto’ or watercraft
owned or operated by or rented or loaned to any
insured. Use includes operation and ‘loading and
-4-
17, 1999.
On December 15, 2000, Plaintiffs Johnson and Hoffpauir were
injured while transferring between Matrix operated platforms and
the Shirley G. Plaintiff Fleming was injured while transferring
from a Chevron platform to the Sylvia F on February 1, 2001.
The three injured PMI employees brought separate suits
against SEACOR. In all three cases, SEACOR filed third-party
complaints against both PMI and Gray Insurance Co. (Gray), PMI’s
CGL insurer, seeking defense and indemnity based on the VBA. Each
unloading’.
This exclusion does not apply to:
(1) A watercraft while ashore on premises you own
or rent;
(2) A watercraft you do not own that is:
(a) Less than 26 feet long; and
(b) Not being used to carry persons or
property for a charge;
(3) Parking an ‘auto’ on, or on the ways next to,
premises you own or rent, provided the ‘auto’
is not owned by or rented or loaned to you or
the insured;
(4) Liability assumed under any ‘insured
contract’ for the ownership, maintenance or
use of aircraft or watercraft; or
(5) ‘Bodily injury’ or ‘property damage’ arising
out of the operation of any of the equipment
listed in paragraph f.(2) or f.(3) of the
definition of ‘mobile equipment’(SECTION
V.8.).”
-5-
of the three plaintiffs eventually settled against the direct
defendants and trials went forward on SEACOR’s third-party claims
against PMI and Gray.
As PMI’s insurance carrier for the time relevant to these
cases, Gray routinely furnished insurance certificates reflecting
the nature and extent of PMI’s insurance coverage to PMI’s
contractors. Gray, at PMI’s request, sent an insurance
certificate to SEACOR. At the time PMI asked Gray to send SEACOR
an insurance certificate, Gray was unaware of the existence and
contents of the VBA.
The individual suits filed by Plaintiffs Johnson,
Hoffapauir, and Fleming were assigned to three different district
judges. Motions for summary judgment were filed in all three
cases seeking a resolution of whether the VBA was supported by
adequate consideration and was enforceable. The district courts’
decisions split on the issue of whether consideration supported
the VBA. In Johnson v. SEACOR, Judge Haik found the agreement
supported by consideration; in Hoffpauir v. SEACOR, Judge Doherty
ruled that the VBA failed for lack of consideration. In Fleming
v. Grand Isle Shipyard, the third case, Judge Lemelle did not
reach the issue. We review a grant of summary judgment de novo,
applying the same standards as the district court. Taita Chem.
Co., Ltd. V. Westlake Styrene Corp., 246 F.3d 377, 385 (5th Cir.
-6-
2001).
II.
The most significant issue on appeal is whether SEACOR can
enforce the VBA. Gray argues that the VBA is unsupported by
consideration and unenforceable because SEACOR owed PMI a
preexisting duty, under the SEACOR contract with the oil
companies, to transport PMI employees to the oil platforms. Under
the preexisting duty rule, a promise to do that which the
promisor is already legally obligated to do is unenforceable2.
According to Gray, SEACOR’s blanket charter agreements3 with the
oil companies create a duty on SEACOR to transport PMI employees
to the Matrix and Chevron platforms. Gray provided summary
judgment evidence that PMI’s employees would have received
transportation from SEACOR even if the VBA was never signed and,
indeed, continued to receive such transportation after PMI
2
See JOSEPH M. PERILLO & HELEN H. BENDER, 2 CORBIN ON CONTRACTS §
7.1, at 342 (Revised Edition 1995). See also RICHARD A. LORD, 3
WILLINSTON ON CONTRACTS § 7.36, at 569 (4th ed. 1992)(“As a general
principle, when a party does simply what he has already obligated
himself to do under a contract, he cannot demand any additional
compensation or benefit, and, it is clear that if he takes
advantage of the situation and obtains a promise for more, the
law in general regards it as not binding as lacking
consideration”.); Restatement (Second) of Contracts § 73, comment
c, illustration 4.
3
I.e. the December 20, 1990 agreement between Chevron and
SEACOR and the April 24, 1997 agreement between SEACOR and ELI,
which through a series of subcharters reaches Matrix.
-7-
officially withdrew from the VBA.
All of the most influential treatises urge courts to avoid
using the preexisting duty rule if even minimal consideration
supports the contract. Indeed, Corbin strongly cautions courts
against relying on this rule in formulating their decisions.
A court should no longer accept this rule as fully
established. It should never use it as the major premise of
a decision, at least without giving careful thought to the
circumstances of the particular case, to the moral desserts
of the parties, and to the social feelings and interests
that are involved.
JOSEPH M. PERILLO & HELEN H. BENDER, 2 CORBIN ON CONTRACTS § 7.1, at 342
(Revised Edition 1995). It is well accepted that the mere
exchange of promises is ordinarily sufficient to satisfy the
requirement of consideration. CLAUDE D. ROHWER & ANTHONY M. SKROCKI,
CONTRACTS IN A NUTSHELL § 2.24, at 131 (5th ed. 2000)(“If there is
any legal detriment incurred by the promisee that can be viewed
as a bargained exchange for the promisor’s promise, that is
sufficient. In addressing the existence or non-existence of
consideration, courts have not concerned themselves with the
adequacy of fairness of the consideration but only with finding
the presence of some legal detriment incurred as part of a
bargain.”)
Thus, even if a contract does not require any performance
that would not have been done in the absence of the contract, as
long as the contracting parties gain some legally enforceable
-8-
right as a result of the contract which they previously did not
have, consideration is present. See Morrison Flying Service v.
Deming National Bank, 404 F.2d 856, 861 (10th Cir. 1968). See
also RESTATEMENT (SECOND) OF CONTRACTS § 73(d) (1981)(“But the
tendency of the law has been simply to hold that the performance
of contractual duty can be consideration if the duty is not owed
to the promisor.”)
In Morrison Flying Service, the leading case on the subject
of sufficiency of consideration, Cisco Aircraft, Inc. (Cisco)
contracted with the U.S. Forest Service to provide aerial
spraying of timber land in Montana. Cisco then contracted with
Morrison Flying Service (Morrison)for the provision of gas, oil,
and some of the chase aircraft necessary for the performance of
the contract. Prior to beginning work on the contract, Cisco
assigned all the proceeds of the contract to Deming National Bank
(Deming) in exchange for Deming’s financial support of the
project. The president of Morrison, armed with knowledge of this
assignment, wrote to Deming to ensure that Deming would pay
Morrison when Morrison fulfilled its obligations under the
contract with Cisco. Deming provided Morrison with written
confirmation that, once the Forest Service paid the amount due
Cisco, Deming would remit Morrison’s share of the proceeds.
Morrison then proceeded to perform its duties under the
-9-
subcontract with Cisco. The resolution of this case required the
10th Circuit to determine whether adequate consideration
supported Deming’s promise to Morrison. The court, relying on the
Restatement and Corbin, held the contract enforceable. To support
its holding, the court cited two reasons for finding that
consideration supported Deming’s promise:
(1) The promisor gets the exact consideration for which he
bargains, one to which he previously had no right and
one that he might never have received;
(2) there are no sound reasons of social policy for not
applying in this case the ordinary rules as to
sufficiency of consideration. The performance is
bargained for, it is beneficial to the promisor,
the promisee has forborne to seek a rescission or
discharge from the third person to whom the duty was
owed, and there is almost never any probability that
the promisee has been in position to use or has in fact
used any economic coercion to induce the making of the
promise. There is now a strong tendency for the courts
to support these statements and to enforce the promise.
Morrison Flying Service, 404 F.2d at 861, citing PERILLO, 2 CORBIN
ON CONTRACTS § 176.
Gray argues that, instead of the “Morrison Rule” we should
apply this Court’s holding in General Intermodal Logistics Corp.
v. Mainstream Shipyards & Supply, Inc., 748 F.2d 1071 (5th Cir.
1984) to the facts of this case.
In General Intermodal, General Marine Towing Co. (GMT)
entered into a contract with the defendant, Mainstream Shipyards
& Supply, Inc. (Mainstream) to repair and refurbish one of GMT’s
vessels. At the time GMT and Mainstream entered into this
-10-
contract, General Intermodal Logistics Corp. (Gilco) owned fifty
percent of the stock of GMT. 10 days before Mainstream completed
the work, Mainstream’s president learned that GMT had transferred
the vessel’s title to Gilco and the vessel would be operated by
Gilco, instead of GMT, in the future. Mainstream then refused to
release the boat to Gilco until Gilco signed a document releasing
Mainstream from all liability arising from the repair of the
ship. Gilco signed the release. See General Intermodal, 748 F.2d
at 1076. This Court, in holding the release unenforceable for
lack of consideration, relied on the fact that “Mainstream had a
preexisting contractual duty to deliver the vessel to GMT or its
successor in interest, and that it had no right to select who
might operate the vessel after it left the shipyard absent a
contractual provision to the contrary”. General Intermodal, 748
F.2d at 1074. This Court recognized the Morrison rule but agreed
with Gilco that it was inapplicable to the facts of its case. Id.
at 1075. The Court distinguished General Intermodal on the
grounds that Gilco was not simply a third party, as Morrison was
in Morrison Flying Service. Rather, Gilco had been involved in
the project from its inception and, as GMT’s direct successor-in-
interest with respect to this particular vessel, was legally
entitled to all rights under GMT’s contract with Mainstream. We
therefore read both Morrison and General Intermodal as supporting
-11-
SEACOR’s argument that PMI’s promise to SEACOR was adequate
consideration to support the VBA.
In the cases before us, even if SEACOR owed a duty to
Chevron and Matrix to transport PMI employees under SEACOR’s
agreements with those oil companies, SEACOR owed no legally
enforceable duty to PMI to do so. If SEACOR chose to prevent PMI
employees from boarding its vessels, only the oil companies had a
remedy against SEACOR. With the creation of the VBA, however, PMI
had a distinct, legally enforceable right to board SEACOR’s
vessels. This is sufficient consideration to form a contract.
For these reasons, we conclude that the VBA is supported by
consideration and is a legally enforceable contract.
III.
PMI argues next that the VBA’s indemnity terms are not
enforceable under the Louisiana Oilfield Anti-Indemnity Act.
SEACOR argues that this Louisiana statute has no application to
the VBA because it is a maritime contract. This issue was clearly
resolved by this Court’s opinion in Laredo Offshore Constructors,
Inc. V. Hunt Oil Co., 754 F.2d 1223, 1231 (5th Cir. 1985).
In Laredo, this Court held that “[a]n agreement to transport
people and supplies in a vessel to and from a well site on
navigable waters is clearly a maritime contract”. Laredo at 1231,
citing Hale v. Co-Mar Offshore Corp., 588 F. Supp. 1212, 1215
(W.D.La. 1984). Because the agreements at issue in this case are
-12-
solely for the transportation of employees to and from the
platforms, Laredo controls and we hold that the VBA is a maritime
contract which renders the indemnification provisions valid. See
Hollier v. Union Tex. Petroleum Corp., 972 F.2d 662, 664 (5th
Cir. 1992).
IV.
Finally, we must decide whether Gray is contractually
obligated to cover SEACOR’s losses. For the reasons stated above,
the VBA is valid and PMI is obligated to provide SEACOR with
additional insured status on its CGL policy with Gray. Although
the additional insured provision in Gray’s policy is somewhat
ambiguous, we assume for our purposes that Gray’s policy did
provide SEACOR with additional insured status. However, because
the watercraft exclusion was not deleted as to SEACOR, the
additional insured status is irrelevant to the three cases
consolidated here. The watercraft exclusion plainly excludes
coverage to SEACOR4. SEACOR argues further, however, that, even
if the watercraft exclusion excludes coverage, Gray’s insurance
certificate misled SEACOR and Gray is liable to SEACOR under the
theories of negligent misrepresentation and equitable estoppel.
We conclude that SEACOR cannot prevail on either theory.
In order to prevail on a theory of negligent
4
See above, note 2 for language of watercraft exclusion.
-13-
misrepresentation, a plaintiff must satisfy the following three
elements: (1) a legal duty on the part of the defendant to supply
correct information; (2) a breach of that duty; and (3) damages
to the plaintiff as a result of justifiable reliance on the
misrepresentation. Brown v. Forest Oil Corp., 29 F.3d 966, 969
(5th Cir. 1994).
SEACOR cannot satisfy the above test because it can
demonstrate no misrepresentation. The certificate of insurance
contained no incorrect information. Additionally, there is no
evidence of SEACOR’s detrimental reliance on the information
provided by Gray. Indeed, the evidence in the record indicates
that SEACOR did not review these insurance certificates. If
SEACOR cannot demonstrate that it was aware of the contents of
the certificate it certainly cannot demonstrate that it relied to
its detriment on the certificate.
SEACOR’s equitable estoppel claims similarly fail. The three
elements of an equitable estoppel claim are: (1) a representation
by conduct or word; (2) justifiable reliance thereon; and (3) a
change in position to one’s detriment because of the reliance.
Home Ins. Co. V. Matthews, 998 F.2d 305, 309 (5th Cir. 1993). For
the reasons stated above, in our discussion of the negligent
misrepresentation claim, SEACOR cannot demonstrate justifiable
reliance on the insurance certificate. Additionally, as SEACOR
transported PMI’s employees after the VBA was revoked and also
-14-
transported employees of contractors who did not sign the VBA,
SEACOR’s argument is unpersuasive that it would have refused PMI
employees access to its vessels if it had known that the
insurance policy did not cover them.
V.
For the reasons set forth above, in Johnson v. SEACOR Marine
Corp., we affirm the district court’s grant of summary judgment
for SEACOR and against PMI but vacate its judgment against Gray
and remand for further proceedings, if necessary, and for entry
of judgment.
In Hoffpauir v. SEACOR Marine Corp. and Fleming v. GSI LLC
we vacate the district courts’ orders granting summary judgment
in favor of PMI, affirm the dismissal of Gray and remand those
cases to the appropriate district court for further proceedings,
if necessary, and for entry of judgment.
-15-