United States District Court, S.D. Texas, Houston Division
MEMORANDUM AND OPINION
Rosenthal Chief United States District Judge
number of Lloyd's syndicates and maritime insurance
companies, referred to in this opinion as “the
Underwriters, ” sued Floatec LLC and American Global
Maritime Inc., asserting that they were responsible for the
expensive failure of a major offshore oil-and-gas
construction project. (Docket Entry No. 32). Both Floatec and
American Global Maritime moved to dismiss or compel
arbitration. (Docket Entries No. 29, 30). The court held a
hearing for argument on the motions. At the hearing, the
court requested supplemental briefs. (Docket Entries No. 60,
61). Based on the motions, responses, replies, and the
supplemental briefs, counsels' arguments, and the
applicable law, Floatec's motion to dismiss, (Docket
Entry No. 30), is granted, with prejudice and without leave
to amend. American Global Maritime's motion to dismiss or
compel arbitration, (Docket Entry No. 29), is denied. The
reasons are stated in detail below.
Lloyd's syndicates and a number of maritime insurers
underwrote an Offshore Construction Risk Policy for Chevron
USA, Inc., Statoil Gulf of Mexico LLC, and Marubeni Oil &
Gas USA. The Policy covered construction operations for
Chevron's “Big Foot” deepwater drilling
project in the Gulf of Mexico off the Louisiana coast.
(Docket Entry No. 41 at 12-13). The project was to install an
extended tension-leg platform drilling rig at a site about
225 miles south of New Orleans, in 5, 200 feet of water. The
rig installation involved driving pilings into the seafloor,
connecting “tendons” to the pilings, and
ultimately connecting the tendons to the drilling platform.
(Docket Entry No. 32 at ¶ 13-15). During the attempted
installation in late May and early June 2015, several tendons
fell to the seafloor. (Id. ¶¶ 20-21). The
Underwriters assert that they paid over $500 million to
Chevron under the Policy. (Id. ¶ 30).
and American Global Maritime contracted with Chevron to do
work on the Big Foot project. Floatec provided
“engineering design and analysis” for the tendons
and was “responsible for interface management for the
entire project.” (Id. ¶ 18). The Policy
required Chevron to appoint a Marine Warranty Surveyor, and
Chevron selected American Global Maritime. (Id.
¶ 24). The Marine Warranty Surveyor's duties
included reviewing and approving engineering, design, and
operational aspects of the construction project.
(Id. ¶¶ 24-25). The Underwriters allege
that Floatec and American Global Maritime's work was
deficient and caused the tendons to fail during the rig
Underwriters allege that Floatec owed Chevron a duty of care,
that the engineering work Floatec performed was negligent and
grossly negligent in breach of that duty, and that the
negligence proximately caused the tendon collapse.
(Id. ¶¶ 32-34, 36-38).
American Global Maritime, the Underwriters allege that it
owed them a duty of care that it violated by failing to
competently perform its Marine Warranty Surveyor
duties. (Id. ¶¶ 42- 44). The
Underwriters also allege that American Global Maritime
negligently misrepresented the quality of its work as a
Marine Warranty Surveyor and failed to adequately review the
engineering and design of the project. (Id.
¶¶ 46-49). The Underwriters allege that American
Global Maritime owed them a fiduciary duty, which it breached
by improperly performing its work. The Underwriters allege
that these breaches caused the tendon failure and subsequent
losses. (Id. ¶¶ 51-53). Finally, the
Underwriters allege that both defendants are liable under
Louisiana product-liability and redhibition law.
(Id. ¶¶ 54-59; 61-64).
and American Global Maritime filed motions to dismiss or, in
the alternative, to compel arbitration. The motions present
several interlocking issues, discussed in detail below. Both
defendants argue that they are “Other Assureds”
under the Chevron Policy, and therefore that the Policy's
subrogation waiver and the antisubrogation rule bar the
Underwriters' suit. In the alternative, Floatec and
American Global Maritime argue that their contracts with
Chevron have broad arbitration clauses under which the
Underwriters must arbitrate rather than litigate their
claims. The Underwriters respond that the court must address
arbitrability first, and that the defendants are not Other
Choice of Law
case arises from an effort to install a drilling rig on the
seabed adjacent to Louisiana, bringing it within the
choice-of-law provision in the Outer Continental Shelf Lands
Act. In cases arising on the seabed of the outer continental
shelf or “artificial islands and fixed structures
erected thereon, ” federal courts apply the substantive
law of the adjacent state. Petrobras Am., Inc. v. Vicinay
Cadenas, S.A., 815 F.3d 211, 215 (5th Cir.), order
clarified on reh'g, 829 F.3d 770 (5th Cir. 2016),
and cert. denied sub nom. Vicinay Cadenas, S.A. v.
Petobras Am., Inc., 137 S.Ct. 1066, 197 L.Ed.2d 177
(2017). “Because OSCLA's choice of law scheme is
prescribed by Congress, parties may not voluntarily contract
around Congress's mandate.” Id. Louisiana
substantive law applies regardless of the choice-of-law
provisions in the relevant contracts.
The Order of Decisions
sides argue that, depending on how the court rules on certain
issues, arbitration is proper. However, they disagree about
the order in which the court should address the issues.
Floatec and American Global Maritime argue that, if the court
finds that the Underwriters can sue them as Chevron's
subrogee because they are not Other Assureds, then the
litigation should be dismissed in favor of arbitration under
the arbitration agreements in each defendant's contract
with Chevron. The defendants urge that that decision is
logically made only after deciding whether one or both of the
defendants are Other Assureds under the Chevron Policy.
Underwriters make different arguments as to each defendant.
The Underwriters argue that their claims against American
Global Maritime are not based on subrogation to Chevron's
contractual rights, but rather on independent tort duties
that American Global Maritime owed the Underwriters. The
Underwriters also argue that American Global Maritime waived
its right to arbitrate by seeking a merits determination on
its Other Assured status. As to Floatec, the Underwriters
also argue that Floatec waived its right to arbitrate.
However, they argue that if Floatec did not waive that right,
their claims against Floatec are properly arbitrated because
they are subrogated claims under Chevron's contract with
Floatec. That contract has a broad arbitration clause. Both
Floatec and American Global Maritime respond that all of the
Underwriters' claims are brought as Chevron's
subrogee, under the defendants' contracts with Chevron.
According to the defendants, the court should reach
arbitrability only if it first finds that either Floatec or
American Global Maritime, or both, are not Other Assureds
under the Chevron Policy.
defendants' proposed order of decisions is correct. The
arbitration issue arises only if the court determines that
the Underwriters can bring a subrogated action asserting
Chevron's rights against the defendants. The arbitration
clauses the defendants rely on are in their respective
contracts with Chevron, not in the Policy. If the
Underwriters cannot assert subrogated contract claims based
on Chevron's rights, the arbitration agreements are
“Other Assured” Status
Chevron Policy contains a subrogation waiver that, in
relevant part, provides that the Underwriters cannot bring
subrogated claims against an “Other Assured.”
(Docket Entry No. 29-3 at 57). If the defendants are Other
Assureds, the Underwriters concede that their claims against
Floatec are barred, but they urge that their claims against
American Global Maritime are not based on subrogation rights
and can proceed. The first question is whether either or both
of the defendants are Other Assureds. They are.
Policy contains two provisions that bear on the
defendants' Other Assured status. The first is the
definition of who is an “Assured.” The Policy
defines “Principal Assureds” as:
i. Chevron U.S.A., Inc., Statoil Gulf of Mexico LLC, [and]
Marubeni Oil & Gas (USA) Inc.
ii. Parent and/or subsidiary and/or affiliated and/or
associated and/or inter-related companies of the above as
they are now or may hereafter be constituted and their
directors, officers and ...