United States District Court, S.D. Texas, Houston Division
CERTAIN UNDERWRITERS AT LLOYD'S LONDON AND CERTAIN INSURANCE COMPANIES, et al, Plaintiffs,
CAMERON INTERNATIONAL CORPORATION, et al, Defendants.
MEMORANDUM OPINION AND ORDER
KENNETH M. HOYT UNITED STATES DISTRICT JUDGE.
the Court is the defendant's, Axon, motion for summary
judgment [DE 159], and the plaintiffs', Underwriters,
response [DE 425]. The Court, after a complete and proper
review of Axon's motion, Underwriters' response, the
arguments and supporting documents presented and all
memoranda on file, determines that Axon's motion for
summary judgment should be granted, pursuant to 28 U.S.C.
§ 2201 of the Federal Rules of Civil Procedure.
FACTUAL BACKGROUND AND SUMMARY CONCLUSIONS
factual background giving rise to this suit has been stated
previously and will not be restated at this time. Suffice it
to say, for purposes of this motion, Underwriters filed this
suit as subrogee of plaintiffs, Walter, Tana and Helis, as a
result of well blowout on the Hercules 265 on July 23, 2013,
off the coast of Louisiana in the Gulf of Mexico. At the
time, Hercules was responsible for the crew and operations
although under the supervision of Walter, pursuant to an
Offshore Drilling Contract (“ODC”) between the
two. It is that ODC and its legal interpretation that is the
subject of this motion. See [DE 249, Attachment 1].
previous Memoranda, the Court held that Walter is
contractually obligated to indemnify Hercules under the terms
of the ODC. See [DE 413 Memorandum, pp. 3, 4].
Relying on the terms of the ODC, the Court held that
“Walter [was] obligated to indemnify and hold harmless
Hercules and its affiliates . . . [its] contractors and
subcontractors”. Id. By its motion for summary
judgment, Axon raises the question of whether Axon is a
contractor or subcontractor under the terms of the ODC and,
therefore, entitled to indemnity. Alternatively, Axon raises
a question concerning the standard of proof applicable to
Underwriters strict liability claims against Axon in this
case -- is it a “but for” standard or a
“substantial factor” standard. The Court is of
the opinion that Axon is entitled to subcontractor status
under the terms of the ODC. Therefore, the Court need not
address the question of which standard of proof applies. In
addition, assuming that previous memoranda and orders already
entered by the Court have not addressed the affidavit(s) of
various witnesses, the Court STRIKES them as untimely and
determines that the SEMS Report of findings is unimpeached.
Court also determines that the findings and conclusions of
the BSEE Panel Report are consistent with those in the SEMS
Report and together support the conclusion that the
including the blind shear ram, was overwhelmed by the
ineptitude of Walter personnel that resulted in the blowout
and the erosion of the surfaces in the BOP making it
impossible to obtain and maintain proper seal in the BOP. The
Court's reasoning and conclusions rely, for the most
part, on the SEMS and BSEE Reports and the testimony of
Walter's on site personnel.
CONTENTIONS AND ASSERTIONS OF THE PARTIES
asserts that the blowout preventer (“BOP”)
specifically the blind shear rams, on which Axon performed
repair work, failed to properly close and thereby stop the
well blowout on July 13, 2013. In this regard, Underwriters
contends that the work and/or parts installed were inferior
and as a result the BOP failed to accomplish its intended
suit is based on claims of strict liability, relying on
Louisiana Product Liability Act. See [LA. Rev. Stat.
Ann. § 9:2800.52, et. seq.]. Underwriters
offers that Axon's defenses of contributory
responsibility and/or sole or superseding or intervening
cause for the blowout are not supported by undisputed summary
judgment evidence. State differently, Underwriters claims
that Axon's evidentiary claim, that Axon's
“alleged” defective BOP, did not cause the
blowout on the well, is unfounded.
Axon's Contentions and Assertions
asserts that the issue before the Court is whether
Underwriters can avoid Walter's admission to federal
agencies that the blowout occurred “because the rig
crew failed to close a valve on the BOP.” Axon refers
to Walter's SEMS report provided to the federal
government that the choke line High Closing Ration valve
(“HCR”) was never successfully closed. Therefore,
Axon argues any “alleged defect in the BOP is
immaterial because even assuming a defect in the blind shear
rams, an open HCR valve or any failure of the BOP to function
properly, must be seen as a “but for” cause of
the blowout. Therefore, argues Axon, even if the “blind
shear rams” [had closed and sealed, there was an
alternative route for the gas and particulate [to] escape,
and the blowout would have continued. Axon relies on the
report commissioned by Walter and provided to government
concerning factors that caused or contributed to the blowout.
In light of the fact that Underwriters is a subrogee of
Walter, the Court looks first to the terms of the ODC and
then to the SEMS report concerning liability for the blowout.
SUMMARY JUDGMENT STANDARD/ASSIGNMENT OF CLAIMS
judgment is mandated when the party against whom the motion
is directed fails to show the existence of sufficient
material facts establishing that an element essential to the
movant's claim is disputed. FRCP, Rule 56. “[T]he
nonmoving party must go beyond the pleadings and by . . .
affidavits, or by the ‘depositions, answers to
interrogatories and admissions on file' . . . show that
there is no genuine issue [of a material fact] for trial.
Celotex Corp. v. Catrett, 477 U.S. 317; 324 (1986).
of the terms of a contract, including an indemnity clause, is
a matter of law. Duval v. Northern Assurance Company of
America¸722 F.3d 300, 303 (5th Cir. 2013 (citation
omitted)). However, a court will not construe an indemnity
clause to impose liability for a loss that is not expressly
nor impliedly stated in the contract. Id.
party, an assignor, assigns, its rights under a contract to
an another party, an assignee, the assignee is subrogated to
the rights of the assignor. Factor King, LLC v. Block
Builders, LLC, et. al, 193 F.Supp.3d 651, 656 (2016)
(citations omitted). The rights of the assignor govern or
define the rights of the assignee. Id. Therefore,
defenses to claims that may be asserted against the assignor
are enforceable against the assignee. Id. (citing to
Parish National Bank v. Historic Construction, Inc.,
2002 WL 971392, 2002 U.S. App. Lexis 29391 at 4-5 (5th Cir.
2002). Stated plainly, the rights of an assignee can never
exceed the rights of the assignor.
FINDING OF THE SEMS AND BSEE REPORTS
the well blowout, Walter commissioned a Safety Environmental
Management Systems Accident Investigation Report [SEMS] that
was completed pursuant to federal regulation on August 29,
2014. See [30 CFR Section 250.1919]. The report
addressed the nature of the incident, its escalation and loss
of control, and finally centered on the cause factors for the
blowout. We turn to critical portions of that report for
The SEMS Report
SEMS report defines its scope as “describ[ing] findings
that are based on the evidence examined to date and
reflect[ing] the investigation's current working
understanding of events leading to the blowout.” It was
composed of Dr. Geoffrey R. Egan, (Team Leader) Technical
Director, Intertek AIM, Sunnyvale, California; Dr. Adam T.
(Ted) Bourgoyne, Jr., (Lead Author) P.E., Bourgoyne
Engineering LLC, Baton Rouge, Louisiana; Mr. Darryl
Bourgoyne, (Lead Investigator & Secondary Author)
Technical Consultant to Bourgoyne Engineering LLC, Baton
Rouge, Louisiana; and Dr. Glen Stevick, (BOP Expert),
Principal, Senior Mechanical Engineer, Berkeley Engineering
and Research, Berkeley, California.
question addressed by the investigators was why activation of
blind shear rams, which was the last blowout barrier in place
when flow through the drillpipe could not otherwise be
stopped, did not successfully control the well. The SEMS
report states that the primary factors causing the escalation
of the incident and loss of well control was an ineffective
response to well control after the crew ignored kick
detections and failed to follow well shut-in procedures. The
report also concluded that activating the blind shear rams
did not and could not have established control of the well
because the choke line High Closing Ratio (HCR) valve was
never successfully closed. Therefore, and in light of the
loss of hydraulic control pressure due to
“inflow”, activation of the blind shear rams may
or may not have resulted in a complete closure and sealing of
the blind sear rams.
determining first causes, the investigators determined that
“the first blowout barrier breached was the pressure
overbalance in excess of formation pore pressure that was
being provided by the completion fluid”. A blowout
occurs when formation fluid is allowed to enter the wellbore
as it did in this incident. With the influx of formation
fluids into the wellbore, a “kick”, would have
occurred and the wellbore fluids would kick out of the well
above the rig floor. The investigators concluded that, at
this stage of the blowout, a complete closure of the blind
shear rams would not have stopped it. This is so because the
primary cause of the escalation of the blowout was an
ineffective and inept response by the crew in responding to
well control complications, i.e., kick detection and
delayed well shut-in procedures.
addition, the investigators concluded that the HCR valve
never responded to attempts to close it. The attempt to close
the HCR valve by attempting to actuate the HCR selector valve
from the Toolpusher's remote panel was too late. The
attempt(s) came after the accumulator pressure, and perhaps
most of the pneumatic pressure, had been depleted. Therefore,
the HRC selector valve did not close at the time due to the
fact that the BOP components were eroded away by sand laden
formation fluid. As a result, the hydraulic circuits became
exposed to the blowout fluids resulting in a shutdown of the
investigators also found that the blind shear rams attempted
to close on a tool joint. The blind shear rams are not
intended to cut through a tool joint when forming an
effective seal. Computer simulations performed by the
investigators indicated that the blind shear rams was capable
of cutting the 3-1/2” drillpipe and a portion of the
tapered wall section of the 3-1/2” drillpipe near the
tool joint, but not the thickest part of a made-up tool
The BSEE Panel Report (excerpts)
BSEE also convened a panel to investigate the well blowout on
the Hercules 265.
panel submitted, in relevant part, the following Report of
findings and conclusions:
The Panel found that Walter and Hercules personnel did not
calculate the density of the Zinc Bromide completion fluid
used to maintain a pressure balance within the well to
account for the full range of temperatures that could have
been encountered within the well . . . The Panel concluded
that the crew encountered temperatures higher than expected,
which affected the density of the completion fluid. As a
result, the completion fluid did not effectively maintain the
pressure balance in the well, which resulted in the flow of
hydrocarbons into the well.
The Panel determined that the rig-floor personnel failed to
recognize signs of this “kick” in its early
stages. Crew on the rig floor only became aware that the kick
occurred when completion fluid began to shoot out from the
open end of the annulus and drill pipe . . . The Panel
concluded that the procedures in place for responding to a
loss of well control were inadequate because they did not
consider the potential caustic effects of the completion
fluid on the crew.
Failure to detect the kick before its effects were seen at
the surface also prevented the crew from following their
established well control procedure. The force of the fluid
moving out of the well was strong enough to push the drill
pipe upward and into the top drive. The crew could not
manipulate the drill pipe, which prevented them from
installing the drill pipe safety valve and further limited
their options of reestablishing control of the well.
The Panel found the actions to close the rams came too late;
by the time the attempt to close was made, the well was
already flowing at a pressure exceeding the BOP's
capabilities. The flow of gas up through the well also
carried sand from within the formation. This mixture of gas
and sand traveling at high velocity quickly eroded the
surfaces within the BOP, which would have prevented any
chance of maintaining a proper seal. When the BOP stack was
recovered from the rig, The (sic) Panel was able to
document evidence of this sand cutting on the BOP.
Relevant and Selected Testimonial Evidence
completion of the SEMS Investigation Report, the parties
engaged in deposition discovery. The depositions of Dr. Adam
T. (“Ted”) Bourgoyne, Darryl Bourgoyne and Dexter
Hicks were among those recorded. Dr. Bourgoyne was the lead
author in the preparation of the SEMS Investigation Report.
Darryl Bourgoyne was lead investigator and secondary author
of the Report. The following excerpts of their testimony are
relevant to the Court's conclusions. The excerpted
portions are as follows:
Excerpts from the testimony of Dexter Hicks, a
Did you ever -- the day that the blowout occurred, did you
ever see -- did you ever see, you know, on a five-stand
losses of two-plus barrels?
On the day that the blowout occurred, if you were tripping
out and you saw a two barrel loss and then shortly after that
you saw a one barrel gain, in other words, you saw a switch
from I'm taking losses, now all of a sudden I'm
taking gains, what would you do?
A. If I
would have detected it, I would have monitored it, shut down
and monitored it.
When you say "shut down, " what do you
And would you have done a flow check?
would have left my trip tank on.
If you would have seen a change where you were taking losses
but then you switched to a gain, would that have led you to
do a flow check?
it's detected. If I would've detected a two barrel
gain -- or losses and then again, a one barrel gain, I
would've stopped pipe movement and lined up the circle
and monitored it on my trip tank, my gains and losses
Would you have stopped all movement and monitored it for at
least ten minutes?
[p. 112, ll. 20 through p. 113, l. 22]
Well, you told me -- hold on. You told me a moment ago that
you lowered down, and they set the slips, and at that point
you saw fluid coming out. So before they tried to stab the
TIW, you had already closed the annular. That's what you
said a minute ago. Do you remember that?
And the Hydril, that's the same thing as the annular,
So before you tried to raise up the block, you had already
closed the annular, because that fluid was coming out and you
had to stop it from getting on your guys?
So you've got your annular closed. You then try to lift
up and it doesn't work. What do you do next?
that time, the toolpusher is on the floor, and he asked have
I tried the TIW, and I told him, "No, sir. And he said,
"What you got closed?" And I told him,
"I've got the Hydril closed." He said,
"Why didn't you get the TIW in it?" I told him,
“Because the force of the pipe was pushing up against
the top drive, so the higher I pick up, the higher it come
up." He said, "Well, we'll go down to ...