Whether a particular contract is “maritime” is a legal question that can often arise in disputes subject to potential adjudication in the U.S. court system. There can be several reasons for this. One concerns determining whether a civil action can be heard in federal court versus state court. If a maritime contract is at issue, a case might be litigated in federal instead of state courts, and/or a plaintiff might have the ability to file an action in federal court for a pre-judgment arrest or attachment of a vessel or other property of a defendant.
While a seemingly simple question, courts and litigants have long struggled with assessing whether or not a particular contract is a maritime one. In 2004, in an effort to provide clarity and guidance on the issue, the U.S. Supreme Court issued its decision in Norfolk v. Kirby in which it held that To ascertain whether a contract is a maritime one, we cannot look to whether a ship or other vessel was involved in the dispute, as we would in a putative maritime tort case. Nor can we simply look to the place of the contract’s formation or performance. Instead, the answer depends upon ... the nature and character of the contract, and the true criterion is whether it has reference to maritime service or maritime transactions.1
The Fifth Circuit Court of Appeals’ Test for Assessing Whether a Contract Is Maritime
The U.S. Fifth Circuit Court of Appeals’ jurisdiction includes the states that generate the majority of oil and gas drilling, exploration, and production activities in the United States’ inshore and offshore waters off the Gulf of Mexico (Texas, Louisiana, and, to a lesser extent, Mississippi and Alabama). It is common practice in that industry for service contracts to contain provisions assigning defense, indemnity, and additional insured obligations between the contracting parties for casualties that occur in the course of work under the contract. Under the U.S. general maritime law, such clauses are generally enforceable. However, several states, such as Texas and Louisiana, have enacted laws limiting the scope and validity of such provisions when the contract at issue concerns oil and gas exploration, drilling, and production activities. Such state laws, if applicable, will control the question of the enforceability of a contract’s defense and indemnity provisions to the exclusion of any other law that might have otherwise have deemed them enforceable.
As a result, the Fifth Circuit and the lower courts within its jurisdiction see a large amount of litigation concerning the enforceability of contractual defense and indemnity provisions in which the controlling question is whether the contract at issue is maritime (or not). For many years, the Fifth Circuit utilized a six-part, highly fact-specific test, often referred to as the Davis & Sons test,2 for answering that question. However, in January of 2018, the Fifth Circuit issued In re Larry Doiron, Inc., 879 F.3d 568 (5th Cir. 2018), which sets forth a new, seemingly simpler test that consists of just two questions:
1. Is the contract one to provide services to facilitate the drilling or production of oil and gas on navigable waters?
2. Does the contract provide or do the parties expect that a vessel will play a substantial role in the completion of the contract?
If the answer to both questions is yes, then the contract is maritime and thus subject to federal maritime law.
Does Doiron Apply to Contracts That Do Not Involve Oil and Gas Activities?
The Fifth Circuit expressly stated in Doiron that it was only dealing “with determining the maritime or nonmaritime nature of contracts involving the exploration, drilling, and production of oil and gas.” Several subsequent decisions, including one from the Fifth Circuit, have applied the new Doiron test to such contracts.3
However, a more difficult question for courts within the Fifth Circuit is whether Doiron also applies to contracts that are potentially maritime even though they do not involve the exploration, drilling, and production of oil and gas. Doiron cannot reasonably be interpreted as holding that any such contract is automatically non-maritime; or, stated another way, it would be unreasonable to read Doiron as holding that every contract that fails to meet the first prong of its test is non-maritime. Indeed, despite its express limitation to oil and gas service contracts, Doiron included a footnote stating that “[i]f an activity in a non-oil and gas sector involves maritime commerce and work from a vessel, we would expect that this test would be helpful in determining whether a contract is maritime.”
But is it? Only two cases have addressed the application of Kirby and Doiron outside the oilfield services arena. The first, Lightering LLC v. Teichman Group, LLC, 328 F. Supp. 3d 625 (S.D. Tex. 2018),4 involved a contract for wharfage, dockside storage of vessel equipment, and, when requested, vessel loading and unloading services. The plaintiffs’ position was that it was a maritime contract; the defendants’ position was that it was not. The plaintiffs argued that because the contract at issue was not one to provide services to facilitate the drilling or production of oil and gas on navigable waters, Kirby, as opposed to Doiron, controlled. The defendants argued that Kirby and Doiron both controlled. The district court sided with the defendants in holding that the contract was non-maritime. However, to reach that conclusion, instead of asking Kirby’s single question or Doiron’s two questions, the district court created a seemingly new threepart test:
Under Doiron and Kirby, determining whether a contract is maritime requires three steps: (1) the activity must be maritime commerce; (2) the activity must involve work from a vessel; and (3) the contract must provide or the parties must expect that a vessel will play a substantial role in completing the contract. If all three are satisfied, then the contract’s principal objective is maritime commerce and the contract is maritime in nature.
So far, the only reported decision applying Lightering is from an Eastern District of Louisiana case, Barrios v. Centaur, LLC,5 which involved a contract for the construction of a containment wall on a dock. The district court led off by noting that Lightering “was first to consider the Doiron test in a non-oil and gas context.” However, the district court did not address or apply Lightering’s three-part test for determining whether a contract is maritime. Instead, it held that the Supreme Court’s Kirby decision “instructs that [courts] should consider whether the ‘principal objective’ of a contract is maritime commerce.” Because the primary objective of the contract at issue was the construction of a concrete lip on a dock, which the district court said “merely facilitates the traditional maritime commerce activity of loading and unloading vessels,” it held that the contract was non-maritime, and it therefore did not need to consider “the other Doiron factors.”
The Doiron opinion is still relatively young and it remains to be seen how it will continue to be used and developed in the courts. However, the Lightering and Barrios decisions arguably reflect Doiron’s potential for conflict with Kirby. For example, would Lightering’s three-part test, which combined elements from both opinions, run afoul of Kirby’s mandate to focus only on whether the contract had maritime commerce as its principal objective? And if the court in Barrios had found the contract at issue did have maritime commerce as its principal objective, which is the Kirby standard, would it have then gone on to apply the “other Doiron factors”? Presumably, the court was referring to the second part of the Doiron test (i.e., whether the contract provided, or the parties expected, that a vessel will play a substantial role in the completion of the contract). However, the use of the plural “factors” could indicate that the court was referring to parts two and three of the Lightering test, not just part two of the Doiron test, or something else entirely—though, of course, there is no way of ever knowing for sure what, if anything, was intended.
The Lightering case resolved by settlement before any of these issues were briefed on appeal to the Fifth Circuit. However, the parties in Barrios recently concluded briefing to the Fifth Circuit, and the question of whether the contract at issue is maritime is front and center. As such, there may be further guidance on these issues in the near future.