Dixon v. Sutcliffe Inc ( 1999 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
____________________
No. 98-31294
Summary Calendar
____________________
WILLIE O. DIXON, JR.,
Plaintiff-Appellant,
v.
SUTCLIFFE INC; ET AL,
Defendants,
LSB HOLDING INC; LSB INDUSTRIES INC; JOE REDMON; SUMMIT MACHINE
TOOLS INC,
Defendants-Appellees.
_________________________________________________________________
Appeal from the United States District Court
for the Western District of Louisiana
(97-CV-105)
_________________________________________________________________
Aguust 31, 1999
Before KING, Chief Judge, and JOLLY and DUHE, Circuit Judges.
PER CURIAM:*
Plaintiff-appellant Willie O. Dixon, Jr. appeals from an
adverse judgment whereby the district court granted summary
judgment to defendants-appellees LSB Holding Inc., LSB Industries
Inc., and Summit Machine Tools Inc. in this personal injury
diversity action. We reverse and remand to the district court
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
1
for further proceedings.
I. FACTUAL AND PROCEDURAL HISTORY
This lawsuit stems from an injury suffered by plaintiff-
appellant Willie O. Dixon, Jr. while working on a drilling rig in
Fort Polk, Louisiana. Co-Energy Group, an entity under contract
with the federal government to drill water wells at Fort Polk,
hired Dixon on October 2, 1995 to assist with its drilling
operations.1 Dixon’s injury occurred on October 12, 1995 on a
drilling rig that Co-Energy was leasing from defendant-appellee
Summit Machine Tools Inc. (Summit). Summit is a wholly-owned
subsidiary of defendant-appellee LSB Holding Inc. (Holding),
which in turn is a wholly-owned subsidiary of defendant-appellee
LSB Industries Inc. (Industries).2
After falling behind schedule on its federal contract, Co-
Energy contacted the LSB entities about obtaining additional
drilling rigs. In August 1995, the rig at issue in this lawsuit
was purchased from Sutcliffe, Inc. (Sutcliffe), a Kansas
corporation. Concurrent with the purchase, Sutcliffe was asked
to make certain repairs to the rig. Sutcliffe thereafter
performed the requested repairs and Holding paid Sutcliffe for
the purchase and repairs. Sutcliffe issued title to the rig in
Summit’s name.
Summit and Co-Energy entered into an agreement for the lease
1
Co-Energy and its subsidiary, Cepolk Ltd., will be
referred to collectively as “Co-Energy.”
2
Defendants-appellees Industries, Holding, and Summit will
be referred to collectively as “the LSB entities.”
2
of the rig on August 29, 1995. Summit transferred physical
possession of the rig from Sutcliffe to Co-Energy in mid-
September 1995. The rig went into operation in early October
1995, and the accident occurred on October 12, 1995.
On October 4, 1996, Dixon filed suit in Louisiana district
court, naming as defendants Industries, Holding, Summit,
Sutcliffe, and Joe Redman, a former Co-Energy employee. The LSB
entities removed the matter to the District Court for the Western
District of Louisiana. On September 3, 1998, the LSB entities
moved for summary judgment. The district court granted the
summary judgment motion on October 21, 1998, and, on November 13,
1998, certified the judgment as final pursuant to Federal Rule of
Civil Procedure 54(b). Dixon filed his timely notice of appeal
on November 13, 1998.
II. STANDARD OF REVIEW
We review the district court’s grant of summary judgment de
novo, applying the same standards as the district court. See
Ellison v. Connor, 153 F.3d 247, 251 (5th Cir. 1998); Norman v.
Apache Corp., 19 F.3d 1017, 1021 (5th Cir. 1994). Summary
judgment is appropriate “if the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment
as a matter of law.” FED. R. CIV. P. 56(c). We must view the
inferences to be drawn from the facts contained in the record in
the light most favorable to Dixon, the party opposing the motion.
3
See Connor, 153 F.3d at 247; Norman, 19 F.3d at 1021.
III. DISCUSSION
Dixon argues that the LSB entities, as owners of the rig,
are liable for the harm to him caused by the rig’s defective
condition. The LSB entities contend that they never had
sufficient control of the rig to render them strictly liable
under Louisiana law. The district court agreed, holding that the
LSB entities could not be strictly liable under Article 2317 of
the Louisiana Civil Code because they never had “custody” of the
rig, as that term is used in Louisiana law.
Article 2317 states in relevant part: “We are responsible,
not only for the damage occasioned by our own act, but for that
which is caused by the act of persons for whom we are answerable,
or of the things which we have in our custody.” LA. CIV. CODE ANN.
art. 2317 (West 1997). The term “custody” derives its meaning
from the French concept of garde. See Ross v. La Coste de
Monterville, 502 So. 2d 1026, 1029 (La. 1987). The Louisiana
Supreme Court has explained that the owner of an object
containing structural defects continues to have garde of its
structure, and thus may be liable for resulting injuries, even
though the owner does not have physical possession of the object
at the time that the object causes injury. See id. at 1032(“[W]e conclude that an owner of a thing who transfers its
possession, but not its ownership to another, continues to have
the garde of its structure and is obliged to protect others from
damage caused by structural defects arising before the
4
transfer.”). In Ross, the owner of a ladder who had lent it to a
tenant was held liable for the injuries caused by a structural
defect in the ladder, even though the owner did not have
possession of the ladder at the time of the accident. See id. at
1027-28. On this basis, Dixon argues that the LSB entities
cannot escape liability merely because they did not have
possession of the rig at the time Dixon was injured.
Later cases have clarified the concept of garde. In Ellison
v. Conoco, Inc., 950 F.2d 1196 (5th Cir. 1992), this court
affirmed the grant of summary judgment to a defendant who owned
defective equipment on the ground that the defendant never
acquired garde of the equipment. See id. at 1209. In Ellison,
the injured plaintiff’s employer had designed and manufactured
the equipment that caused the plaintiff’s injury. See id. at
1208. However, due to capitalization problems, the employer had
sold the equipment to the defendant, who immediately leased it
back to the employer. See id. At no time did the equipment
physically change hands. See id. Under these circumstances, we
concluded that “[b]ecause [the defendant] never possessed,
controlled, or operated [the equipment] (and had no part in its
design or manufacture), it follows that [the defendant] was
therefore never in a position to correct defects that might have
arisen,” and thus had not acquired garde. Id. at 1209.
Similarly, in Pickett v. RTS Helicopter, 128 F.3d 925 (5th
Cir. 1997), we affirmed the grant of summary judgment to the
owner of a helicopter on the ground that the owner had never
5
acquired garde of the helicopter. See id. at 933. The relatives
of a pilot killed in a crash argued that the owner of the
helicopter was strictly liable under Article 2317 for a defect in
the helicopter. See id. at 927. However, the owner did not have
possession at the time of the crash, and had purchased the
helicopter with the intention of immediately leasing it to the
pilot’s employer. See id. at 929-30. The owner’s only contact
with the helicopter had been when its agent accepted delivery of
the helicopter at the employer’s place of business and signed a
delivery receipt to that effect. See id. There was no evidence
that the agent had ever inspected the helicopter, and the
employer had exclusive control of the helicopter thereafter. See
id. After examining the relevant case law, we described the
concept of garde as follows:
[I]t is clear that garde attaches to the owner of a thing
when he acquires the substantial power of usage, direction,
and control of the thing, including the practical ability to
discover defects, and remains with him so long as he has
that power, regardless of who has the physical possession at
any given time.
Id. at 932. Because the helicopter’s owner was never in a
position to use, direct, or control the helicopter, and because
the limited contact the owner had with the helicopter did not put
the owner in a position to discover defects, we affirmed the
district court’s grant of summary judgment to the owner. See id.
at 933.
In Alford v. Home Insurance Co., 701 So. 2d 1375 (La. Ct.
App. 1997), writ denied, 709 So. 2d 749 (La. 1998), the defendant
was the owner of equipment that had caused injury to the
6
plaintiff while under lease to a third-party lessee and while in
possession of the lessee. See id. at 1376. The trial court held
that the defendant did not have garde of the equipment and
granted summary judgment. See id. The court of appeals
reversed. See id. at 1378. Although the lease placed the
responsibility for repair and maintenance, as well as the entire
risk of using and operating the equipment, on the lessee, the
court of appeals found that there were material issues of fact
preventing summary judgment, including whether the alleged defect
arose prior to the lease of the equipment and whether it was
intended that the defendant would reacquire possession of the
equipment at the end of the lease. See id. at 1377-78. This
situation differs slightly from our own because there is no
indication from the court’s discussion in Alford that the
defendant did not have possession of the equipment prior to
leasing it to the lessee. Thus, the relevant issue in Alford was
whether, with the transfer of the equipment, garde had been
transferred from the defendant to the lessee, not whether the
defendant ever had garde to begin with.
The question for our decision is whether the LSB entities
ever acquired garde in the first instance. This turns on whether
the LSB entities ever acquired “the substantial power of usage,
direction, and control, including the practical ability to
discover defects.” Pickett, 128 F.3d at 933; see Ellison, 950
F.2d at 1209.
The district court found that the LSB entities did not have
7
garde of the rig because Dale Redman, the person who located the
rig for purchase by the LSB entities and lease to Co-Energy, was
actually working for Co-Energy at the time of the purchase.
According to the district court, Dale Redman and his brother, Joe
Redman, acting as Co-Energy employees, located the rig and
supervised the repairs made to it prior to its transfer to Co-
Energy. The court relied on testimony that, although Dale is a
vice-president of Industries, he took a leave of absence from
Industries to serve as a consultant to Co-Energy on the Fort Polk
project, and on testimony that Co-Energy hired Joe, on Dale’s
recommendation, to serve as drill superintendent on the project
before Joe participated in finding and repairing the rig. These
facts indicated to the district court that it was Co-Energy, not
the LSB entities, that supervised the purchase of the rig and the
repairs made to it prior to its transfer to Co-Energy. According
to the court, the LSB entities never had the power of usage,
direction and control, or the practical ability to discover
defects, and thus never acquired garde of the rig.
After a careful review of the record, we disagree. Drawing
all inferences in favor of Dixon, as we must, we conclude that
there is a genuine issue of material fact as to what entity Dale
Redman was working for at the time that he negotiated the
purchase of the rig, inspected the rig, and directed that repairs
be performed to the rig. Although Dale testified at his
deposition that he was working for Co-Energy at the time he
located the rig, in his affidavit dated a year earlier, he stated
8
“[t]hat at the time Sutcliffe sold the Mayhew 1000 drilling rig
to Summit . . . in 1995, he was a corporate officer of LSB
Industries, Inc.”
Dale’s deposition testimony conflicts with this statement,
but is not entirely to the contrary, and can be interpreted as
consistent with the proposition that Dale served as an agent for
the LSB entities during the purchase and repair of the rig.
During his deposition, he could not remember exactly when he
began working for Co-Energy and testified that it was
“[s]omewhere around August 1995.” Before that time, there is no
dispute that he was a vice-president at Industries. As to the
circumstances surrounding his relationship with Co-Energy, Dale
testified that he was called into a meeting at Industries with
his boss and with representatives of Co-Energy and was asked to
become a consultant for Co-Energy on the Fort Polk project. He
then took a leave of absence from Industries to work for Co-
Energy, which lasted until December 1995. On Dale’s
recommendation, Co-Energy hired his brother, Joe, to serve as
drill superintendent.3
Dale and Joe then went about locating a rig for the LSB
entities to purchase for lease to Co-Energy. Dale looked through
newspapers to locate people selling drilling rigs and found
3
Joe Redman began working for Co-Energy in August 1995.
Before that time he had been self-employed and has never been an
employee of the LSB entities. After his employment with Co-
Energy ended in December 1995, Joe returned to self-employment.
Thus, it is clear that during the relevant time period Joe acted
strictly on behalf of Co-Energy.
9
Sutcliffe. Joe went to look at Sutcliffe’s rig first. Dale
thereafter drove up to Kansas to meet Joe and inspect the rig.
After arriving in Kansas, Dale “looked at the rig, reviewed it
and negotiated the purchase with Mr. Sutcliffe.”
Before the rig was transferred to Fort Polk, Dale and Joe
negotiated with Sutcliffe to perform certain repairs to the rig,
including repairs to the drawworks and the rig brakes. According
to Dale, “I am personally aware that [Joe and I] negotiated
repairs to be made.” Joe was present intermittently during the
repair process. Dale never personally observed the repairs being
made to the rig, but saw that the repairs had been made once the
rig arrived at Fort Polk.
Holding thereafter paid the purchase price of the rig and
also paid for the repairs. Dale instructed Sutcliffe to issue
title to the rig in Summit’s name and also instructed a common
carrier to pick up the rig in Kansas and deliver it to Fort Polk.
Although the record supports the interpretation that Dale
was searching for a rig that met Co-Energy’s needs for the Fort
Polk project and, in this sense, was acting in his capacity as
consultant to the Fort Polk project, there is no evidence that
Co-Energy had the authority to act on behalf of the LSB entities
in negotiating for the purchase of the rig or in directing that
repairs be made to the rig. Moreover, it was the LSB entities,
not Co-Energy, that paid for the rig and the repairs. Thus, the
record also supports the interpretation that Dale was acting as
an agent for the LSB entities during his negotiations surrounding
10
the purchase and repair of the rig. Dale himself admitted that
he acted as a representative of Holding and Summit during these
negotiations. When asked whether he had ever worked for Holding
or Summit he answered that he had “[t]o the extent that [he]
11
purchased some rigs on the instruction of Co-Energy.” Counsel
then asked, “That’s the only time you have ever worked for
[Holding or Summit]?” Dale answered, “That’s correct.”
It is clear that the actions of Dale Redman in locating the
rig, inspecting it for suitability, and directing that repairs be
performed to it were sufficient to confer garde of the rig. Cf.
Pickett, 128 F.3d at 930 (finding that defendant had not acquired
garde where “there is no evidence . . . that [the defendant’s
agent] ever inspected or even laid a hand on the helicopter”).
If Dale can be said to have been acting as an agent for the LSB
entities at the time of the inspection, purchase, and repair of
the rig, which appears possible from the record, then the LSB
entities, through their agent Dale, did have “the substantial
power of usage, direction, and control [of the rig], including
the practical ability to discover defects.” Pickett, 128 F.3d at
933; see Ellison, 950 F.2d at 1209. If the LSB entities did
acquire garde through Dale, the transfer of the rig to Co-Energy
did not divest the LSB entities of garde of the rig because there
is no dispute that, at the end of the project, Co-Energy returned
the leased rig to the LSB entities. Thus, this case differs from
Ellison and Pickett in which the lessor was merely a finance
entity and it was intended that the equipment was always to
remain with the lessee. See Pickett, 128 F.3d at 929-30, 933;
Ellison, 950 F.2d at 1208; cf. Alford, 701 So. 2d at 1378(finding a genuine issue of material fact as to whether the
lessor was to regain possession of the equipment at the end of
the lease). Because there is a genuine issue of material fact as
to Dale Redman’s status during the negotiations for the purchase
12
of the rig that caused Dixon’s injury, summary judgment was
inappropriate.4
IV. CONCLUSION
For the foregoing reasons, we REVERSE the judgment of the
district court and REMAND for further proceedings consistent with
this opinion.
4
We express no opinion as to whether the evidence is
sufficient to establish that all three LSB entities acquired
garde of the rig or whether any of them might still be entitled
to summary judgment. We also express no opinion as to whether
there was sufficient evidence of the existence of a defect that
predated the transfer of the rig from Summit to Co-Energy.
13