Theriot v. Bay Drilling Corp.

Court of Appeals for the Fifth Circuit
783 F.2d 527 (1986)

ELI5:

Sections

Rule of Law:

A contract involving the use of a vessel for oil and gas drilling on navigable waters is a maritime contract governed by federal maritime law, under which an indemnity provision covering the indemnitee's own negligence is enforceable if the language is clear and unequivocal.

Facts:

Eugene Theriot was employed by Oilfield Services as a torque-wrench operator to work on a drilling barge, the ROME, owned by Bay Drilling Corp.
Bay Drilling Corp. had entered into a drilling contract with Houston Oil & Minerals Corp. (the operator) to provide the barge and services for drilling a well.
On January 28, 1980, Theriot was crossing the keyway deck of the ROME to assemble well head equipment.
He encountered a large, clearly visible area of brown drilling mud approximately six to eight feet in diameter.
Theriot attempted to cross the mud, slipped, and fell, injuring his right knee.
Following the accident, Theriot underwent surgery but later suffered a second fall in March 1981 while working elsewhere.
The contract between Bay Drilling and Houston Oil contained a mutual indemnity clause where Houston Oil agreed to indemnify Bay Drilling 'without limit and without regard to the cause or causes thereof or the negligence of any party.'

Procedural Posture:

Theriot sued Oilfield Services and Bay Drilling in the United States District Court for negligence and unseaworthiness.
Bay Drilling filed a third-party action against Houston Oil for indemnity under their drilling contract.
The insurance carriers (Fidelity and Fireman’s Fund) intervened to recover compensation benefits paid.
The case was severed into three separate trials: seaman status, liability, and damages.
In the first trial, the jury found Theriot was not a seaman; Oilfield Services was dismissed.
In the second trial, the district court found Bay Drilling negligent but Theriot 50% contributorily negligent.
In the third trial, the district court awarded damages for the 1980 injury but excluded damages related to the subsequent 1981 injury.
The district court ruled that the indemnity clause was governed by state law (Texas) via choice-of-law rules and was void against public policy.
Theriot and Bay Drilling appealed the judgments to the United States Court of Appeals for the Fifth Circuit.

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Issue:

Is a contract for drilling operations aboard a submersible drilling barge considered a maritime contract such that federal maritime law, rather than state law, governs the enforceability of an indemnity provision protecting a party against its own negligence?

Opinions:

Majority - Judge Randall

Yes, the drilling contract is maritime in nature, and the indemnity provision is enforceable. The court reasoned that the characterization of a contract as maritime depends on its nature and whether it references maritime services or transactions, rather than the situs of performance. Because the contract specifically addressed the use of the 'Drilling Barge Rome' for oil and gas drilling on navigable waters—a recognized maritime commercial activity—it is a maritime contract governed by federal law. Under federal maritime law, an indemnity clause covering the indemnitee's own negligence is valid if clear and unequivocal. The court found the language 'without regard to... the negligence of any party' to be sufficiently clear to cover Bay Drilling's own negligence, distinguishing it from ambiguous clauses in prior precedents.

Analysis:

This decision reinforces the expansive reach of federal maritime jurisdiction over oil and gas contracts when a vessel is central to the agreement. By establishing that a contract focused on the use of a specific drilling barge is maritime, the Fifth Circuit ensured that uniform federal rules regarding indemnity apply, precluding the application of state anti-indemnity statutes (like the Texas statute applied by the district court). The case also clarifies the 'clear and unequivocal' standard for indemnity provisions, holding that the phrase 'without regard to negligence' is sufficient to shift liability for a party's own fault. Additionally, regarding the negligence claim, the court affirmed that under Scindia, a vessel owner cannot use the 'open and obvious' defense to completely bar recovery if the hazard existed at the outset of operations.

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