Experience

In a major decision concerning maritime indemnity contracts, issued on January 11, 2024, the Fifth reinstated Palfinger USA, Inc.'s indemnity claims against Shell Offshore, Inc. that arose from a 2019 lifeboat accident in which two of Shell’s workers were killed and another was injured. Deutsch Kerrigan attorneys Joseph McReynolds and Raymond Lewis represented Palfinger USA. The dispute centered on whether Palfinger's contract to inspect and repair Shell's lifeboats on a tension-leg platform in the Gulf of Mexico  was a maritime contract.

The district court had ruled that the contract was not maritime, ostensibly applying the Fifth Circuit's recent test from its 2018 en banc decision In re Larry Doiron, Inc.  In the district court’s view, the fact that the lifeboats were vessels was not sufficient to establish the maritime nature of Palfinger’s contract. The district court reasoned that the lifeboats weren't functioning as maritime vessels but were serving as safety equipment for oil and gas exploration on the platform and were not engaged “in maritime commerce.”

In reversing the district court's decision, the Fifth Circuit agreed with Palfinger that its contract to inspect and repair the lifeboats, as vessels, regardless of whether the lifeboats were themselves engaged in commerce, was a maritime contract.

Drawing heavily from decisions by the U.S. Supreme Court in North Pacific S.S. Co. v. Hall Bros. Marine Ry. & Shipbuilding Co. (1919) and Norfolk Southern Railway Co. v. Kirby (2004), the Fifth Circuit held that the district court misapplied Doiron by employing a “spatial” analysis that focused on where the work was performed (on the platform), rather than undertaking the requisite "conceptual analysis" of the nature and character of the contract and its relation to traditional maritime activities and maritime services. The requisite “conceptual” analysis, according to the Fifth Circuit, was crucial for properly analyzing the nature of Palfinger’s contract and its proper connection to traditional maritime concerns for “operation, navigation, or management” of the vessels in their use as such.

Considering these principles, the Court said that Doiron’s two-factor test “determines whether maritime law applies of its own force through a contract bearing the type of significant relationship to traditional maritime activities,” a test Palfinger’s contract easily met.

The presence of the lifeboats on the platform, required by Coast Guard regulations as escape craft, satisfied Doiron’s first factor that the contract facilitate Shell’s drilling or production of oil and gas. Doiron’s second factor was satisfied because the parties expected that the lifeboats, as vessels, played a substantial role in the contract’s completion, namely, their inspection and repair. The Court clarified that the second factor did not require that vessels be used, only that they play a substantial role in contract performance. Vessels play just such a substantial role when “the maintenance and repair of vessels are the purposes of the contract, as such are traditional maritime activities.”

Notably, the Court clarified that the vessel itself doesn't have to be engaged in maritime commerce for the contract to be governed under maritime law. In the Court’s view, Doiron’s first factor determines whether the contract’s purpose is to effectuate maritime commerce and “offshore oil and gas drilling is what satisfied” the commercial nature of the contract. “Regardless of whether employing a lifeboat as a lifeboat means its passengers are engaged in maritime activity, the lifeboats are a required component of ‘drilling and production of oil and gas on navigable waters from a vessel[, which] is commercial activity.”