In the Fifth Circuit, for the longest time, deciding whether a contract was maritime involved assessing a litany of factors derived from the court’s Davis & Sons v. Gulf Oil Corporation case, specifically:
- “What does the specific work order in effect at the time of the injury provide?
- What work did the crew assigned under the work order actually do?
- Was the crew assigned to work aboard a vessel in navigable waters?
- To what extent did the work being done relate to the mission of that vessel?
- What was the principal work of the injured worker?
- What work was the injured worker actually doing at the time of injury?”
The above factors generally pertain to a personal-injury scenario, which hardly covers the gamut of potential maritime contracts. In 2004, the Supreme Court issued a landmark decision in Norfolk Southern Railway v. Kirby, which altered the conceptual framework of thinking about when a contract is maritime. There, a train derailment in Alabama damaged goods shipped pursuant to two through bills of lading (meaning bills of lading governing the transport of goods to destination) from Sydney, Australia to Huntsville, Alabama, specifically one issued by the ocean carrier and another issued by an Australian freight forwarding company, presumably a non-vessel operating common carrier (NVOCC) though the court did not refer to it as such. The court found that the rail carrier could limit its liability under the U.S. Carriage of Goods by Sea Act, which applied under both through bills of lading. In doing so, the court noted that “[w]hen a contract is a maritime one, and the dispute is not inherently local, federal law controls the contract interpretation.” The court held that to decide whether a contract is maritime, it could not look to whether a vessel was involved in the dispute, as in a maritime-tort case, but rather to whether the contract refers to “maritime service or maritime transactions.” The court found that the two bills of lading were maritime contracts because their primary objective was to transports goods from Australia to the U.S. East Coast. The principal objective of a maritime contract must be maritime commerce. The court noted that lower court decisions that rely upon geography to define the limits of a maritime contract are not consistent with this conceptual approach, except in a limited sense when the sea components of a contract are insubstantial, in which case the contract is not maritime.
In 2018, the Fifth Circuit en banc decided In re Larry Doiron, which streamlined the criteria for assessing whether a contract is maritime. Doiron involved a master service contract (MSC) between Apache Corporation and Specialty Rental Tools & Supply (STS), pursuant to which an oral work order was issued to perform “flow-back” services on a gas well in Louisiana navigable waters to remove obstructions to the well’s flow. When the efforts to accomplish the job without a vessel failed, Apache hired Larry Doiron, Inc. (LDI) to provide a crane barge to lift the equipment, and during the work LDI’s crane operator struck an STS worker with equipment under hoist. LDI sought indemnity from STS under the MSC. If maritime law applied to the contract, the indemnity clause in the MSC would be enforceable. If Louisiana law applied, the indemnity clause would be void under Louisiana’s Oilfield Indemnity Act (LOIA). Relying upon Kirby, the Fifth Circuit streamlined its methodology for determining whether the MSC was a maritime contract. Applying a two-pronged test, the court held that in this context, whether the contract is maritime depends upon whether, firstly, the contract is “one to provide services to facilitate the drilling or production of oil and gas on navigable waters?” If yes, secondly does the contract “provide or do the parties expect that a vessel will play a substantial role in the completion of the contract?” If so, the contract is maritime. In this case, the court found that the use of the crane barge to lift the equipment was an insubstantial part of the intended work and not the work that the parties expected to perform; consequently, the contract was nonmaritime and controlled by Louisiana law, which barred the indemnity claim.
The Fifth Circuit has cited Doiron a number of times since finding: a contract to facilitate the drilling or production of oil and gas on navigable waters when coupled with the anticipated constant and substantial use of multiple vessels maritime; a dock contract to install a concrete containment rail at a dock is maritime because the contract facilitates activity on navigable waters in which a vessel will play a substantial role in the completion of the contract; and a contract to inspect and repair lifeboats on an oil platform located on the Outer Continental Shelf is a maritime contract because the lifeboats were necessary to perform the job and were a required component of “drilling and production of oil and gas on navigable waters from a vessel,” even though the lifeboats were not aboard a vessel.
Whether a contract is maritime bears on a variety of legal issues—one of which as addressed in Doiron is whether an indemnity clause in the contract is enforceable under maritime law, or perhaps not under state law, such as LOIA or the Texas Oilfield Anti-Indemnity Act. Another is whether the limitations period has run under maritime law, which relies upon the laches doctrine to evaluate whether unreasonable delay and prejudice have occurred. Rather than imposing a bright-line limitation period, maritime law looks to the adjacent state’s law and assesses whether the plaintiff made the claim before or after the expiration of the state’s applicable limitation period. If before, the burden is upon the defendant to show inexcusable delay and resulting prejudice. If after, the burden shifts to the plaintiff to show no unreasonable delay or prejudice to the defendant.
A third issue is whether the prevailing party may recover its attorney’s fees if the contract is silent on that score. Under maritime law, to recover attorney’s fees, the contract must expressly state that intention. By contrast, under Texas law (for instance), attorney’s fees are recoverable for breach of contract in a variety of circumstances.
Another issue is the scope of the governing law. If maritime law applies, its common law authority and uniformity principles apply, which allows the use of legal precedent beyond a particular state’s laws.
Yet another issue is the enforceability of arbitration clauses under maritime contracts. The Supreme Court has recently held that choice of law provisions in maritime contracts are “presumptively enforceable as a matter of federal maritime law, with certain narrow exceptions.” The two exceptions mentioned are when the chosen law would contravene a controlling federal statute, and “when the parties can furnish no reasonable basis for the chosen jurisdiction.” While Texas law favors enforcing arbitration agreements, there are numerous situations when they may not be enforceable, including against non-signatories, when the arbitration clause is outside the scope of the agreement, and when a party expressly or impliedly waives its right to arbitrate a claim, among other scenarios.
Whether a contract is maritime bears upon numerous substantive legal rights of the parties. In the Fifth Circuit, the general test developing is that the courts will construe a contract as maritime when it facilitates activity on navigable waters and the vessel will play a substantial role in either its use or as the object of the contract.
“When Is a Contract Maritime and Why Is That Important?” by Keith Letourneau, was published in Texas Lawyer on September 6, 2024.
Reprinted with permission from the September 6, 2024, edition of the Texas Lawyer © 2024 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited.
