951 F.3d 248
5th Cir.2020Background
- 2013 catastrophic blowout on the HERCULES 265 drilling rig; extensive damage and multi-million dollar expenses claimed by Walter and its insurers.
- Axon refurbished/remanufactured blowout-prevention equipment (including blind shear rams, BSRs) under a 2010 service agreement with Seahawk; Seahawk later sold the rig and assigned contracts to Hercules.
- Walter chartered the rig from Hercules under a 2011 Drilling Contract that allocates operational risks and contains detailed Article IX indemnity provisions.
- Plaintiffs (Walter, Underwriters as subrogee, and non-operating interest owners) sued Axon for products liability alleging defective Axon parts caused the blowout; Axon counterclaimed and brought third-party claims seeking defense and indemnity from Hercules and Walter.
- District court granted multiple summary judgments and excluded several expert opinions; it held Hercules must indemnify Axon but also granted summary judgment to Axon on merits of Plaintiffs’ LPLA claims. Parties appealed.
- Fifth Circuit: affirmed that Hercules (by assignment of the Seahawk Contract) must defend/indemnify Axon; reversed district court rulings that Walter must directly indemnify Axon or indemnify Hercules for Axon’s contractual claims; vacated expert-exclusion orders and merits rulings on causation and unreasonably dangerous condition and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Hercules must defend/indemnify Axon under the Seahawk Contract | Axon: Seahawk Contract (assigned to Hercules) requires Hercules to defend/indemnify Axon for claims arising from Axon’s work. | Hercules: Hercules Contract superseded Seahawk Contract and governs, so Seahawk indemnity doesn't apply. | Held: Seahawk Contract governs the BOP work; assignment to Hercules triggered Seahawk indemnity. Affirmed Hercules’ duty to defend/indemnify Axon. |
| Whether Walter must directly indemnify Axon under the Drilling Contract (section 501 and Article IX) | Axon: Section 501 makes Walter ‘‘solely responsible’’ for consequences of operations, so Walter must directly indemnify Axon for Plaintiffs’ claims; specific Article IX provisions also cover Axon as supplier/subcontractor. | Walter: Section 501 does not create direct indemnity; Article IX allocates different, narrower indemnities—some protecting contractors’ subcontractors and some protecting only Hercules. | Held: Reversed. Section 501 does not create a direct indemnity to Axon; Article IX provisions do not support Axon’s broad reading. Summary judgment for Axon on this ground was error. |
| Whether Walter must release/indemnify Hercules for Axon’s contractual claims (circular indemnity) | Axon/Hercules: Contract interpreted to require Walter to indemnify Hercules for liabilities Hercules owes to Axon (producing circular indemnity that would moot Plaintiffs’ recovery). | Walter: Section 911(c) excludes application of Article IX to claims against Hercules that arise solely from indemnity agreements with non-parties; no express shift of contractual obligations to Walter. | Held: Reversed. Section 911(c) bars Walter from indemnifying Hercules for third-party contractual indemnity claims (no express contractual acceptance by Walter). |
| Exclusion/striking of experts (Bellemare, Sones, Bourgoyne, Williams, Rusnak, Adair) | Plaintiffs: Experts provided essential causation and defect opinions; exclusion/strikes were untimely and lacked proper gatekeeping justification. | Axon: Experts’ supplemental reports/affidavits were untimely and offered new, improper opinions; district court should exclude. | Held: Vacated and remanded. Court abused discretion by failing to give reasons/consider required factors for exclusion of Bellemare and other expert materials; district court must reevaluate admissibility with stated reasons. |
| LPLA merits: causation, unreasonably dangerous condition, reasonably anticipated use | Plaintiffs: Expert evidence and witness testimony create fact questions that BSRs failed to seal, preventing shut-in and causing blowout; use of BSRs during an in-progress blowout is reasonably anticipated. | Axon: SEMS/BSEE reports and crew error show no genuine dispute on causation; BOPs are not designed to stop an ongoing blowout and certain uses were not reasonably anticipated. | Held: Reversed summary judgment on causation and unreasonably dangerous prong; genuine fact disputes exist and exclusion of key expert testimony requires remand; reasonably anticipated use also presents fact questions. |
Key Cases Cited
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard and genuine-dispute rule)
- Corbitt v. Diamond M. Drilling Co., 654 F.2d 329 (5th Cir.) (indemnity contracts construed narrowly; express notice required to shift third-party contractual liability)
- Chembulk Trading LLC v. Chemex Ltd., 393 F.3d 550 (5th Cir.) (contract interpretation to avoid rendering provisions surplusage)
- Kumho Tire Co. v. Carmichael, 526 U.S. 137 (expert gatekeeping and Daubert framework applicability to non-scientific testimony)
- North Cypress Med. Ctr. Operating Co. v. Aetna Life Ins. Co., 898 F.3d 461 (5th Cir.) (appellate review of district court’s unexplained procedural rulings and when remand may be unnecessary)
- In re Deepwater Horizon, 785 F.3d 1003 (5th Cir.) (contract interpretation principles in oilfield litigation)
- Breaux v. Halliburton Energy Servs., 562 F.3d 358 (5th Cir.) (contract-scope and parties’ identity in supersession arguments)
- In re Complaint of C.F. Bean L.L.C., 841 F.3d 365 (5th Cir.) (factors for excluding testimony for scheduling-order violations)
- Geiserman v. MacDonald, 893 F.2d 787 (5th Cir.) (four-factor test for sanctioning untimely expert disclosures)
- Stewart v. Capital Safety USA, 867 F.3d 517 (5th Cir.) (causation analysis where a different product or condition could have prevented injury)