     Case: 11-30369   Document: 00511939414   Page: 1   Date Filed: 07/31/2012




          IN THE UNITED STATES COURT OF APPEALS
                   FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                   Fifth Circuit

                                                                  FILED
                                                                 July 31, 2012

                                 No. 11-30369                    Lyle W. Cayce
                                                                      Clerk

CHEVRON USA, INCORPORATED,

                                          Plaintiff
v.

AKER MARITIME INCORPORATED; TECHNIP OFFSHORE
ENGINEERING, INCORPORATED; TECHNIP OFFSHORE MOORINGS,
INCORPORATED; TECHNIP OFFSHORE INCORPORATED,

                                          Defendants-Appellees
v.

OCEANEERING INTERNATIONAL INCORPORATED,

                                          Defendant-Appellant



                  Appeal from the United States District Court
                     for the Eastern District of Louisiana


Before JONES, Chief Judge, PRADO, and SOUTHWICK, Circuit Judges.
LESLIE H. SOUTHWICK, Circuit Judge:
        Following a jury trial, Chevron USA, Inc. was awarded damages from
Aker Maritime, Inc. and its subsidiaries, and from Oceaneering International,
Inc.    That judgment was affirmed in an earlier appeal and is not subject to
further challenge. A bench trial was held on remand to consider remaining
contractual claims. The district court ordered Oceaneering to pay indemnity
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                                      No. 11-30369

and attorneys’ fees to Aker. In this appeal, Oceaneering seeks to reverse those
awards. We AFFIRM.
                FACTUAL AND PROCEDURAL BACKGROUND
       In 2001, there was a significant and costly failure of insignificant-sized
and inexpensive bolts used on an oil production and drilling facility that sits in
2600 feet of water, 150 miles south of New Orleans in the Gulf of Mexico. All the
bolts in the riser system securing the Genesis Spar facility to the Gulf’s floor
had to be replaced when defects in them were found. Chevron, the operator and
part owner of the facility, brought suit to allocate responsibility among several
companies involved in the procurement and installation of the bolts.
       This is the second appeal of a final judgment in the district court. We
excerpt from our earlier opinion those facts that are most important for
understanding the remaining issues:
              Chevron hired Aker Maritime, Inc. (“Aker”) in 1998 to provide
       design and engineering services for the initial construction of the
       riser system. Stability problems plagued the riser system after its
       completion, leading to a crack in the spar’s hull in 2000.
       Oceaneering International, Inc. (“Oceaneering”) repaired the hull at
       Chevron’s request, and Chevron put Aker in charge of designing a
       permanent fix. Large bolts called carriage bolts hold the riser
       system together, and Aker ordered the bolts from Lone Star,
       according to testimony a “well-known” bolt manufacturer that also
       distributed others’ bolts. Aker initially requested eight-inch Grade
       5 carriage bolts, which Chevron had approved. When Lone Star
       responded that it had no Grade 5 bolts, Aker placed an order for
       2,092 Grade 2 carriage bolts, costing a total of $878.64. Instead of
       shipping Grade 2 bolts, Lone Star shipped Grade A bolts1
       manufactured by Oriental Fastener Co. (“Oriental”). At the time,



       1
          Grade A and Grade 2 bolts are similar, but the standards are different in several
respects. The most important difference in this case is that Grade 2 bolts require heating to
a specific temperature [to] keep them from breaking, whereas Grade A certification allows the
manufacturer to determine what level of heat treatment is appropriate. At the time, Oriental
routinely did not heat-treat its bolts at all. [Footnote in original.]

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      Lone Star routinely substituted Grade A bolts for Grade 2 bolts,
      then a widespread practice in the fastener industry.

            Lone Star shipped the bolts to Oceaneering, which was in
      charge of assembling the risers. The bolts were marked “OF,”
      indicating the manufacturer, and arrived in shipping boxes bearing
      the Lone Star mark. They also arrived with a packing slip noting
      that they were either “manufactured or distributed” by Lone Star.
      Oceaneering accepted the bolts, failing to notice the substitution.

             The first bolt failure occurred on July 9, 2001, when a bolt
      head popped off one of the first bolts used in the risers. Jack Couch,
      the project manager for Oceaneering, contacted Aker’s Mike
      Harville and told Harville that he thought the bolts were a “serious
      weak link.” Couch took a picture of the failed bolt and sent it to
      Harville. Harville told Oceaneering that it had applied too much
      torque to the bolt, as Oceaneering was applying torque to Grade 2
      bolts that it believed to be Grade 5 bolts. Oceaneering continued
      assembly of the riser system using the torque appropriate for Grade
      2 bolts, apparently without incident. In August 2001, however,
      Aker took over riser assembly, and Oceaneering sent the parts,
      including the bolts, to Aker. Like Oceaneering’s employees, Aker’s
      employees failed to detect that the bolts were Grade A bolts.

Chevron USA, Inc. v. Aker Mar., Inc., 604 F.3d 888, 890-91 (5th Cir. 2010) (two
footnotes omitted).
      After the riser system was installed, it was discovered during a July 2002
underwater inspection that the heads of several bolts had broken off. Further
investigation resulted in a decision to replace all the bolts.
      In July 2003, Chevron sued Aker, Oceaneering, and other companies no
longer in the suit. After a jury trial, Chevron’s total damages were found to be
almost $3 million. All defendants were found to be negligent, and fault was
apportioned among them. Aker was held to be 35% at fault, the company Aker
contacted to supply the bolts also 35%, and the manufacturer of the bolts 20%.
Oceaneering and the Aker subsidiary that assembled the risers after taking
over from Oceaneering were each found to be 5% at fault. The district court

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dismissed Aker’s indemnity claim against Oceaneering, concluding it was
“trumped” by the jury verdict.
        On appeal, we affirmed the damages award. We also vacated the award
of attorneys’ fees, and reversed and remanded the dismissal of Aker’s indemnity
claims. After our remand order, Aker and Chevron reached a settlement for all
claims against Aker “irrespective of their nature.” On remand, the court found
Oceaneering liable to indemnify Aker for nearly the full settlement amount and
for attorneys’ fees.
        There are two contracts that control the issues raised on appeal. One is
a Contract for Genesis Riser Systems Support Services, entered by Chevron and
Aker in December 1998, which we will call the “Support Contract.” The
contract specifically dealt with the Genesis Spar project. The other is the
Master Service Order and Agreement, entered between Chevron and
Oceaneering in June 1991, which we will call the “Master Agreement.” It is a
general agreement that predates the Genesis Spar project.


                                  DISCUSSION
        On this appeal, Oceaneering argues that neither indemnity nor attorneys’
fees are appropriate because the relevant contracts do not support the awards.
We will discuss the indemnity issues first.


I.      Indemnity
        Whether Aker is entitled to indemnity turns on questions of contract
interpretation. Those questions are legal ones to be reviewed de novo. E.g., Wal-
Mart Stores, Inc. v. Qore, Inc., 647 F.3d 237, 242 (5th Cir. 2011). The contract
and record are reviewed “under the same standards that guided the district
court.” Id. In this diversity suit, we apply the contract interpretation rules of


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the relevant state, which is Louisiana. See Citigroup Inc. v. Fed. Ins. Co., 649
F.3d 367, 371 (5th Cir. 2011). In Louisiana, words and phrases in a contract are
construed using generally prevailing meaning.                La. Civ. Code art. 2047;
Cadwallader v. Allstate Ins. Co., 848 So. 2d 577, 580 (La. 2003).
      The relevant indemnity clause is found in Master Agreement Paragraph
6(b), which was executed by Chevron and Oceaneering:
      CONTRACTOR [Oceaneering] shall be liable to and hold
      INDEMNITEES harmless for any loss of or damage to the property
      of COMPANY [Chevron] (its joint venturers and partners and
      affiliates) arising out of, connected with, incident to directly or
      indirectly2 or resulting from or related to CONTRACTOR’S
      performance of this Agreement, including but not limited to,
      CONTRACTOR’S use of equipment provided by COMPANY (its
      joint venturers and partners and affiliates) or others, regardless of
      the passive, concurrent or active negligence of, and regardless of
      whether liability without fault (including, but not limited to, claims
      for unseaworthiness of any vessel) is imposed or sought to be
      imposed on, INDEMNITEES.

      As      previously    mentioned,     this   contract    predates   Oceaneering’s
involvement on the Genesis Spar. As a master agreement, it appears intended
to apply to a variety of projects on which Chevron may at different times engage
Oceaneering. By its own terms, the indemnity applies to damage “arising out
of, connected with, incident to or resulting from or related to [Oceaneering’s]
performance of this Agreement.” The work Oceaneering was to perform was
described as “underwater services including diving, remote operated vehicles
(ROVs), survey and related services.”
      The Master Agreement defines “Indemnitees,” its importance suggested
by the fact it is the first term in the agreement.
      CHEVRON U.S.A., INC. and all of its affiliated or parent or
      subsidiary companies or corporations, all of its co-owners or joint


      2
          The three words with a strike-through were eliminated by agreement.

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       venturers, and all of the aforesaid entities’ agents, officers,
       employees, representatives or insurers.

We will later quote the language in the Support Contract that makes Aker the
agent of Chevron for certain purposes.
       Oceaneering insists that this claim falls outside the scope of the indemnity
clause. Even if Aker were an agent, which it disputes, Oceaneering’s basic point
is that Aker’s acts as an agent are not related in any way to Oceaneering’s
performance of the agreement.              Oceaneering also argues that the Master
Agreement limits the amount of indemnity, that the Chevron-Aker Support
Contract limits Aker’s ability to recover from Oceaneering, and that Aker was
not a third-party beneficiary of the Master Agreement.
       The task at hand is contract interpretation.                        When construing
indemnification contracts, we will not ignore broad, straightforward language
that unequivocally states an agreement to indemnify. Perkins v. Rubicon, Inc.,
563 So. 2d 258, 259 (La. 1990). This contract unambiguously indemnifies agents
of Chevron, using extremely broad language and going so far as to indemnify
them regardless of their own negligence.3 Independent contractors, on the other
hand, are not listed in this “indemnitees” definition. Thus, whether Aker was
an agent is crucial to determining Oceaneering’s indemnification obligation.
       A.      Was Aker an Agent of Chevron?
       An agency relationship is determined by looking to “the facts surrounding
the two parties.” Smason v. Celtic Life Ins. Co., 615 So. 2d 1079, 1085 (La. Ct.
App. 1993). The subjective belief of third parties does not determine the
existence of an agency relationship. Id. “Under Louisiana law, an agency




       3
         In 2010, the Louisiana legislature passed a bill that will void, as against public policy,
some indemnity clauses that seek to shift liability for an indemnitee’s negligence, but this only
applies to contracts entered into after January 1, 2011. La. Rev. Stat. § 9:2780.1(F).

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relationship cannot be presumed, it must be clearly established.” Matter of
Oxford Mgmt., Inc., 4 F.3d 1329, 1336 (5th Cir. 1993).
      An agency may be created by written agreement. Busby v. Walker, 84 So.
2d 304, 307 (La. Ct. App. 1995). This agency is defined in Support Contract
Paragraph 1:
      (c) CONTRACTOR [Aker] agrees to perform all SERVICES
      hereunder as an independent CONTRACTOR having full control of
      the manner and means of the performance of SERVICES, and not
      as an employee of COMPANY [Chevron]. . . .

      (d) Notwithstanding paragraph (c) of this article 1, CONTRACTOR
      [Aker] may procure equipment, materials, and SERVICES for
      COMPANY [Chevron] as Agent for COMPANY. When
      CONTRACTOR provides such SERVICES as Agent for COMPANY,
      the following provisions of this Article 1 shall govern:

            (i) All purchases of materials, equipment and SERVICES
            including the applicable purchase order and/or contract terms
            therefor shall be subject to COMPANY approval. COMPANY
            will be responsible for providing to CONTRACTOR full
            information as to COMPANY’s requirements for the
            procurement SERVICES to be performed hereunder. In
            performing such procurement SERVICES, CONTRACTOR
            will endeavor to obtain reasonable guarantees and warranties
            favorable to COMPANY from service contractors and from the
            manufacturers of all plant, equipment and other
            manufactured items to be procured hereunder for COMPANY,
            and CONTRACTOR will cooperate with COMPANY in its
            enforcement of such warranties and guarantees obtained.

            (ii) CONTRACTOR’s liability to COMPANY as a result of any
            claims that result from or are in any way connected with the
            acts or omissions of any service CONTRACTOR or
            manufacturer pursuant to any contract entered into by
            CONTRACTOR as Agent for COMPANY shall be limited
            solely to COMPANY’S recoveries from such service
            CONTRACTOR or manufacturer.




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      This language establishes that Aker was Chevron’s agent in its capacity
as a procurer of “equipment, materials, and services” for Chevron. Oceaneering
maintains Paragraph 1(c) controls, arguing the exception in Paragraph 1(d) does
not apply because damages were not caused by Aker acting as an agent to
procure materials. Instead, damages were caused by Aker’s actions as an
independent contractor. We examine next the scope of the agency.
      B.    What was the Scope of the Agency?
      Contracts are construed using their ordinary and prevailing meaning. See
La. Civ. Code art. 2047. The Support Contract explicitly creates an agency
relationship when Aker is “procur[ing] equipment, materials, and services” for
Chevron. Oceaneering maintains this language means Aker is only an agent
when dealing with the supplier. Aker was thus not Chevron’s agent with respect
to Oceaneering because Aker never “procured” anything from Oceaneering.
      “Procurement” means an “act of getting or obtaining something.” Black’s
Law Dictionary 1327 (9th ed. 2009). The plain language of the term extends
beyond Aker’s mere ordering and includes the receipt of the bolts. Receipt and
acceptance of faulty and improper bolts is at the heart of this action. The agency
began with Aker’s initial ordering of the bolts and continued through the
obtaining of possession. Because Chevron required the bolts to be delivered
directly to Oceaneering, procurement continued at least until that delivery.
      The agency provision also refers to purchase orders and contracts between
Aker and a supplier. There were no such written agreements between Aker and
the distributer. We disagree with Oceaneering that the Support Contract
requires purchase orders or contracts as prerequisites to establishing an agency
relationship. When such documentation exists, though, the Support Contract
makes their terms subject to Chevron’s approval.
      Oceaneering further contends that, at a minimum, it should not be
obligated to indemnify Aker for the full amount of its liability because Aker’s role

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as agent-procurer was only partially the source of its 35% liability to Chevron.
Oceaneering maintains that Chevron made claims against Aker for failures in
quality control, inspection, and engineering services, and it was in this capacity
that Aker settled its claims with Chevron. Therefore, Oceaneering maintains
the district court erred in holding it liable for all of Aker’s 35% liability.
      The contention that Aker’s responsibility should be divided in this way is
being raised for the first time on appeal. Arguments not raised in district court
will not be considered absent “extraordinary circumstances.” N. Alamo Water
Supply Corp. v. City of San Juan, Tex., 90 F.3d 910, 916 (5th Cir. 1996).
“Extraordinary circumstances exist when the issue involved is a pure question
of law and a miscarriage of justice would result from our failure to consider it.”
Id. This litigation began over eight years ago. It has gone through two appeals,
multiple proceedings in district court, and a settlement between Aker and
Chevron. The jury found Aker liable for general negligence. Oceaneering did
not propose instructions or a verdict form allowing the verdict to divide Aker’s
fault into subcategories. It did not request a new trial, raise these issues in the
district court on remand, or challenge Aker’s settlement with Chevron.
      In fact, the parties in the district court addressed a different subdividing
of liability. Jurors assigned an additional 5% liability to an Aker subsidiary that
had assembled the risers after Oceaneering stopped doing so. The district court
deducted the amount attributed to Aker’s subsidiary from the total settlement.
Oceaneering did not argue that any further partial reduction was justified.
      These arguments are waived.
      In summary, then, Aker’s arranging for the purchase and delivery of the
bolts to Oceaneering was in the capacity of Chevron’s agent under the Support
Contract. Some of the bolts were then used by Oceaneering in the initial efforts
to assemble part of the riser system. The district court considered that work to
be part of Oceaneering’s performance under the Master Agreement:

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      As Chevron’s receiving contractor, Oceaneering failed to detect that
      Lone Star [the distributor of the bolts] made an unauthorized
      substitution, which gave rise to Chevron’s claims against Aker.
      Hence, this scenario falls within the language of the indemnity
      clause, making Oceaneering liable to Aker.
      The court noted that this indemnity is quite broad, making Oceaneering’s
relatively minor and brief performance of work under its Master Agreement with
Chevron the source of a duty to indemnify Aker, who as Chevron’s agent was
found by jurors to be much more at fault than Oceaneering. Such inequities,
often unpredictable when contracts are written, do not then become a basis to
prevent the contracts from being enforced.
      C.    Limitations on liability
      Oceaneering further maintains that even if Aker is entitled to indemnity,
the Master Agreement limits its indemnity obligation to the applicable insurance
coverage. In the district court there was no determination as to what insurance
was applicable nor was Oceaneering’s insurer a party. As such, Oceaneering
contends judgment against it was in error. But, again, Oceaneering failed to
raise these contentions at any point prior to this appeal and they are waived.
      D.    Other arguments
      Oceaneering raises other arguments. One is that the Support Contract’s
Paragraph 1(d) prohibits Aker from seeking indemnity. It maintains that only
Chevron can pursue an indemnity action against it arising out of Aker’s role as
agent. Oceaneering bases this argument on Support Contract Paragraph 1(d)
subsections (i) and (ii). Paragraph 1(d)(i) states that Aker will obtain reasonable
warranties and “will cooperate with [Chevron] in its enforcement of such
guarantees or warranties obtained.” Chevron initiated this litigation and Aker
cross-claimed. Support Contract Paragraph 1(d)(i) does not prohibit Aker from
cross-claiming in litigation Chevron commences.




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         Subsection 1(d)(ii) does not offer any additional support. It limits Aker’s
liability to Chevron’s recovery against the manufacturer. Oceaneering argues
that the Support Contract’s limitation of Aker’s liability to Chevron
demonstrates that Aker was not granted the right to sue a manufacturer it deals
with as an agent. Although Subsection 1(d)(ii) may make bringing a suit
unnecessary, it does not demonstrate that Aker is prohibited from pursuing a
suit for indemnification against Oceaneering.
         Oceaneering is not a third-party beneficiary of the Support Contract. A
contracting party may stipulate a benefit to a third person, but the intent of the
parties to stipulate such a benefit must be clear. La. Civ. Code art. 1978; Doucet
v. Nat’l Maint. Corp., 822 So. 2d 60, 66 (La. Ct. App. 2002). No clear intent
exists and, thus, Oceaneering cannot rely on the Support Contract’s terms.
         Oceaneering argues that neither is Aker a third-party beneficiary of the
Master Agreement.          Unlike the Support Contract, the Master Agreement
manifests a clear intention to indemnify agents of Chevron. The fact that Aker
was not named as an agent is irrelevant. Oceaneering agreed to indemnify all
agents of Chevron. Who those agents would be in the future under different
projects would not be known at the time of the 1991 Master Agreement.


II.      Attorneys’ fees
         Oceaneering argues the award relied on an incorrect version of the
contract, the court failed to consider certain required factors under our caselaw,
and the fees should have been segregated.
         Our court reviews an attorneys’-fees award for an abuse of discretion. In
re High Sulfur Content Gasoline Prods. Liab. Litig., 517 F.3d 220, 227 (5th Cir.
2008).     To constitute an abuse of discretion, the district court must have
erroneously applied the law or made a clearly erroneous assessment of the
evidence. Id. “A fee award is governed by the same law that serves as the rule

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of decision for substantive issues in the case.” Mathis v. Exxon Corp., 302 F.3d
448, 461 (5th Cir. 2002). That means Louisiana law applies.
      Oceaneering contends the district court abused its discretion by relying on
the wrong version of the Master Agreement when determining attorneys’ fees,
failing to analyze the Johnson factors, and failing to segregate Aker’s fees.
      Regarding the contention that the court applied the wrong version of the
Master Agreement, Oceaneering specifically maintains that the court relied on
the “directly or indirectly” language in Master Agreement Paragraph 6(b) that
was struck from the contract. But, as Aker points out, the court relied upon
“directly or indirectly” as it is employed in Master Agreement Paragraph 6(c),
not 6(b). This provision was not struck from the contract. Thus, the court did
not rely on an incorrect version of the contract.
      The contention that the court did not analyze the Johnson factors similarly
fails. In Louisiana, the amount of an attorneys’-fees award is governed by Rule
1.5 of the Rules of Professional Conduct. State Dep’t of Transp. & Dev. v.
Williamson, 597 So. 2d 439, 442 n.9 (La. 1992). The factors therein are very
similar to those used in the federal “lodestar” method as set out in Johnson v.
Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974), abrogated on other
grounds by Blanchard v. Bergeron, 489 U.S. 87 (1989). The Johnson factors
include the difficulty of the matter, the requisite skill to perform the legal
service, the amount involved, the results obtained, and the ability of the
attorneys. Id. at 717-19. In its opinion, the court stated: “In conclusion, the
complexity of this matter, counsel’s expertise, the amount of money involved,
and the results obtained all require this Court to award Aker the full amount of
attorneys’ fees and costs claimed, without any downward adjustment.” Chevron
USA, Inc. v. Aker Mar., Inc., No. 2:03-CV-2027, 2011 WL 999253, at *4 (E.D. La.
Mar. 17, 2011). Other statements in the same analysis show the court also
considered the time and labor required as well as the customary fee. Id. at *3-4.

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Because the court applied factors essentially identical to those required by
Louisiana law, it did not abuse its discretion.
      Finally, Oceaneering contends that the district court erred in failing to
segregate Aker’s fees. The relevant provision of the Master Agreement reads:

      CONTRACTOR shall promptly pay (I) to any INDEMNITEE all
      costs and attorneys’ fees incurred by such INDEMNITEE resulting
      directly or indirectly from any and all loss, damage, injury, liability
      and claims for which CONTRACTOR is obligated to indemnify such
      INDEMNITEE pursuant to the Paragraph 6 . . . .

This shows that “directly or indirectly” was not struck from Master Agreement
Paragraph 6(c). This clause is broad. It does not require segregation because
the entire litigation is at least indirectly related to Oceaneering’s actions that
resulted in the obligation to indemnify Aker.
      AFFIRMED.




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