Home > TRANSOCEAN ENTERPRISE, INC. v. Ingalls Shipbuilding, Inc.

TRANSOCEAN ENTERPRISE, INC. v. Ingalls Shipbuilding, Inc.

TRANSOCEAN ENTERPRISE, INC.
v.
INGALLS SHIPBUILDING, INC.
No. 2008-CA-01823-SCT.

Supreme Court of Mississippi.

September 24, 2009.

ATTORNEYS FOR APPELLANT: JOHN A. SCIALDONE, TODD G. CRAWFORD, RYAN A. HAHN.

ATTORNEYS FOR APPELLEE: RICHARD P. SALLOUM, J. THOMAS HAMRICK, JR.

BEFORE CARLSON, P.J., LAMAR AND CHANDLER, JJ.

CARLSON, PRESIDING JUSTICE, FOR THE COURT:

1. Ingalls Shipbuilding, Inc., and Transocean Enterprise, Inc., were named defendants in a personal injury action which was settled. Ingalls Shipbuilding, Inc., alleged a claim for contractual indemnity pursuant to a Shipyard Agreement between itself and Transocean Enterprise, Inc. The Circuit Court of Jackson County entered judgment granting Ingalls Shipbuilding, Inc., indemnity, and as a result, Transocean Enterprise, Inc., appealed to this Court.

FACTS AND PROCEEDINGS IN THE TRIAL COURT

2. This matter arises from a lawsuit filed by Ernie Cardwell against Transocean Enterprise, Inc., (Transocean) and Ingalls Shipbuilding, Inc., (Ingalls)[1] in the Circuit Court of Jackson County. Cardwell alleged that he was injured on May 28, 1999, while employed by Coastline Contractors, Inc., (Coastline) and working aboard the drill ship Discoverer Enterprise as a welder/pipe fitter. The Discoverer Enterprise originally was constructed in Spain, before sailing to Ingalls' shipyard in Pascagoula, Mississippi, for installation of a twenty-story drill derrick and various drilling modules. Allegedly, while Cardwell was sitting on the post, the vessel's ballast tanks were adjusted, causing it to shift, which resulted in tension so great that it broke away and ripped the rigging post from the deck. This series of events caused Cardwell to fly approximately twenty feet into the air and land on the ship's deck, rendering him unconscious.

3. Cardwell subsequently filed this personal-injury action for damages against both Transocean and Ingalls. Cardwell's claim was settled for $625,000 ($300,000 paid by Transocean, $300,000 paid by Ingalls, and $25,000 paid by workers' compensation). Ingalls filed a cross-claim against Transocean, alleging that the Shipyard Agreement between them obligated Transocean to defend and indemnify Ingalls.[2] Article XVI of the Shipyard Agreement between Transocean Enterprise and Ingalls stated, inter alia:

BUILDER AND OWNER EACH AGREE TO DEFEND, INDEMNIFY AND HOLD THE OTHER AND THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, AGENTS AND EMPLOYEES AND SUBCONTRACTORS FREE AND HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, CAUSES OF ACTION, JUDGMENTS OR LIABILITIES OF EVERY KIND AND CHARACTER (INCLUDING, WITHOUT LIMITATION, THE COST OF THE SUIT AND REASONABLE ATTORNEYS' FEES) BROUGHT BY ANY INVITEES OF THE INDEMNITOR OR ITS SUBCONTRACTORS OR REPRESENTATIVES OR ANY SURVIVOR OF THE FOREGOING ON ACCOUNT OF INJURY TO OR DEATH OF ANY SUCH PARTIES OR DAMAGE TO THEIR PROPERTY IN CONNECTION WITH THE WORK. THE INDEMNITY OBLIGATIONS ASSUMED IN THE PRECEDING SENTENCE SHALL BE WITHOUT LIMIT AND WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF (INCLUDING PRE-EXISTING CONDITIONS), THE UNSEAWORTHINESS OF ANY VESSEL OR VESSELS OR THE NEGLIGENCE OF ANY PARTY OR PARTIES, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, ACTIVE OR PASSIVE OR GROSS.

4. On January 10, 2008, the Circuit Court of Jackson County, Judge Robert P. Krebs presiding, heard oral arguments,[3] and subsequently, on July 30, 2008, entered an order granting Ingalls indemnity as to Transocean in the amount of $300,000, subject to prejudgment interest; however, Ingalls' request for attorneys' fees was denied. As a result, a Final Judgment, dated August 4, 2008, was entered. On August 14, 2008, Ingalls filed its Motion to Alter or Amend Order and Judgment, seeking attorneys' fees and expenses in defending against Cardwell's claims. Transocean responded that it agreed with the position of Ingalls, "but solely for the reason that if indemnity is owed under the Shipyard Agreement at issue, then Transocean agrees the contract would otherwise provide for the recovery of attorney's fees as a component of this indemnity." (Emphasis added). Thus, Transocean reserved its right to challenge the underlying basis upon which indemnity was awarded. On October 10, 2008, the Jackson County Circuit Court entered its Amended Order and Final Judgment, stating that Ingalls should recover from Transocean "the sum of $300,000 plus its reasonable attorney's fees of $33,619.50 and expenses of $7,881.94 in defending against the claims of Ernie Cardwell in this case, plus prejudgment interest of $118,112.72 calculated at 8% per annum in accord with Section 75-17-1(1) Mississippi Code Annotated from June 15, 2004 . . . plus post-judgment interest of 8% per annum from the date hereof and all costs of suit herein." Transocean timely perfected this appeal.

DISCUSSION

5. Transocean contends that the indemnity provision of the Shipyard Agreement is not triggered because Ernie Cardwell was an independent contractor of Transocean, as opposed to a subcontractor or an invitee. Further, Transocean argues that, even assuming the indemnity provision is triggered, Ingalls' claim is barred by Mississippi Code Section 31-5-41. The issues presented to this Court for consideration are as follows: (1) whether the trial court erred in granting indemnity to Ingalls in its cross-claim against Transocean pursuant to the Shipyard Agreement between these parties; (2) whether the trial court erred by interpreting the contract terms for indemnity to an invitee, when Coastline employee Ernie Cardwell was aboard the vessel as an independent contractor at the time of his alleged injuries; (3) whether the trial court erred in applying Mississippi law over general maritime law, which does not recognize the status of an invitee, and likewise, whether the trial court erred in finding the Discoverer Enterprise was not a vessel capable of navigation; and (4) alternatively, if Mississippi law applies, whether the trial court erred by not applying Mississippi Code Section 31-5-41, which invalidates the indemnity provision at issue. The ultimate issue before this Court is whether the trial court erred in granting indemnity to Ingalls. We thus combine these issues and restate the critical issue before us for the sake of today's discussion.

WHETHER THE TRIAL COURT ERRED IN GRANTING INDEMNITY TO INGALLS IN ITS CROSS-CLAIM AGAINST TRANSOCEAN PURSUANT TO THE SHIPYARD AGREEMENT BETWEEN THESE PARTIES.

6. "In bench trials, a circuit judge's findings are subject to the same standard of review as those of a chancellor." Univ. of Miss. Med. Ctr. v. Pounders, 970 So. 2d 141, 145 (Miss. 2007) (citing Kight v. Sheppard Bldg. Supply, Inc., 537 So. 2d 1355, 1358 (Miss. 1989)). "Our familiar standard of review requires that when a trial judge sits without a jury, this Court will not disturb his factual determinations where there is substantial evidence in the record to support those findings." Ezell v. Williams, 724 So. 2d 396, 397 (Miss. 1998) (citing Yarbrough v. Camphor, 645 So. 2d 867, 869 (Miss. 1994); Omnibank of Mantee v. United S. Bank, 607 So. 2d 76, 82 (Miss. 1992)). Thus, our scope of review affords deferential treatment to the trial judge's findings. City of Greenville v. Jones, 925 So. 2d 106, 109 (Miss. 2006). "[T]his Court ought and generally will affirm a trial court sitting without a jury on a question of fact unless, based upon substantial evidence, the court must be manifestly wrong." Yarbrough, 645 So. 2d at 869 (citations omitted). "The word `manifest,' as defined in this context, means `unmistakable, clear, plain, or indisputable.'" Singley v. Singley, 846 So. 2d 1004, 1007 (Miss. 2002) (quoting Magee v. Magee, 661 So. 2d 1117, 1122 (Miss. 1995)). This Court, however, reviews questions of law de novo. Howard v. Estate of Harper ex rel. Harper, 947 So. 2d 854, 856 (Miss. 2006) (citing Sennett v. United States Fid. & Guar. Co., 757 So. 2d 206, 209 (Miss. 2000)). See also Harrison County v. City of Gulfport, 557 So. 2d 780, 784 (Miss. 1990).

7. Before the trial court, Ingalls argued that Mississippi law should apply over general maritime law, and the trial court agreed. "It has long been held that neither ship construction nor supplying materials for that purpose is a maritime business . . . ." Lowe v. Ingalls Shipbuilding, Div. of Litton Systems, Inc., 723 F. 2d 1173, 1185 (5th Cir. 1984) (citation omitted). "[T]he same reasons which exclude such contracts from admiralty jurisdiction likewise apply to agreements made after the hull is in the water, for the work and material necessary to consummate a partial construction and bring the vessel into condition to function as intended." Thames Towboat Co. v. The Schooner "Francis McDonald" (The Francis McDonald), 254 U.S. 242, 245, 41 S. Ct. 65, 65 L. Ed. 245 (1920); see also Cain v. Transocean Offshore USA, Inc., 518 F. 3d 295, 301 (5th Cir. 2008) ("a structure under construction remains a non-vessel until it is complete and ready for duty upon the sea"). As stated by the trial court, "[w]hile the vessel was able to sail to Ingalls under its own power, it was not in condition that it could perform the type of duty for which it was built, therefore making maritime law inapplicable." The Discoverer Enterprise was built and designed to be a drill ship; therefore, it was not in the condition to function as intended until the twenty-story drill derrick and various drilling modules were installed at Ingalls. Also, the Shipyard Agreement contained a choice-of-law provision which stated that it would be governed by Mississippi law. "[U]nder admiralty law, where the parties have included a choice of law clause, the state's law will govern unless the state has no substantial relationship to the parties or the transaction or the state's law conflicts with the fundamental purposes of maritime law." Stoot v. Fluor Drilling Servs., Inc., 851 F. 2d 1514, 1517 (5th Cir. 1988). As such, the trial court correctly determined that maritime law does not apply and that Mississippi law governs this dispute.

8. The trial court also ruled that Cardwell was an invitee, stating:

"[A]n invitee is a person who goes upon the premises of another in answer to the express or implied invitation of the owner or occupant for their mutual advantage. . . ." Martin v. B. P. Exploration & Oil, 769 So. 2d 261 (Miss. Ct. App. 2000). It is clear that Cardwell was on the Discoverer Enterprise based upon an express invitation to be there. The Court can see no other way, under Mississippi law, to classify Cardwell.

As evidenced by the record, Cardwell was employed by Coastline, and Coastline employees not only performed work assignments at the direction of Transocean, but they actually were housed aboard the Discoverer Enterprise. The trial court did not abuse its discretion in ruling that Cardwell was an invitee under Mississippi law. This Court has held that "an invitee is a person who goes upon the premises of another in answer to the express or implied invitation of the owner or occupant for their mutual advantage." Leffler v. Sharp, 891 So. 2d 152, 156 (Miss. 2004) (citations omitted). Cardwell was aboard the Discoverer Enterprise at Ingalls' shipyard due to the invitation of Transocean via Coastline for the mutual advantage of all parties herein.

9. As discussed by the trial court, with the classification of Cardwell as an invitee, the language of the Shipyard Agreement is clear, and Transocean seemingly has a duty to indemnify Ingalls. However, the trial court failed to address the implications of Mississippi Code Section 31-5-41. This section states:

With respect to all public or private contracts or agreements, for the construction, alteration, repair or maintenance of buildings, structures, highway bridges, viaducts, water, sewer or gas distribution systems, or other work dealing with construction, or for any moving, demolition or excavation connected therewith, every covenant, promise and/or agreement contained therein to indemnify or hold harmless another person from that person's own negligence is void as against public policy and wholly unenforceable.

This section does not apply to construction bonds or insurance contracts or agreements.

Miss. Code Ann. 31-5-41 (Rev. 2008). This statute invalidates indemnity or "hold-harmless" clauses in construction contracts to indemnify another person from that person's own negligence. Id. Although the indemnity clause before us does not specifically state that one party agrees to indemnify the other party against the other party's own negligence, it is void to the extent that it does provide indemnity to Ingalls for Ingalls' own negligence. Ingalls argues that the issue of the applicability of Section 31-5-41 has been waived by Transocean, since Transocean did not timely raise this issue. Transocean asserts that, by specifically pleading (in its answer to the third-party complaint) that Ingalls "failed to state a claim or cause of action upon which relief may be granted" and pleading "all defenses to the validity or enforceability of any indemnity provisions which are available to it under the . . . laws of the State of Mississippi," it has preserved this issue for consideration by us on appeal. Transocean is correct. In Howard v. Estate of Harper ex rel. Harper, 947 So. 2d 854 (Miss. 2006), this Court stated:

In the [defendants'] motion to dismiss, they asserted the Plaintiffs failed to state a claim upon which relief could be granted pursuant to Miss. R. Civ. P. 12(b)(6). We find this assertion is sufficient to preserve the issue for appeal.

Id. at 860. Also, in its pretrial brief, Transocean asserted the application of Mississippi Code Section 31-5-41 (cited and quoted) and stated the following: "the indemnity provisions are rendered invalid and unenforceable by virtue of the application of Mississippi Code 31-5-41"; "accepting Ingalls' argument that Mississippi law applies, the claim for indemnity nevertheless fails because Mississippi invalidates all indemnity provisions in public or private contracts concerning work dealing with construction as against public policy"; and "because Ingalls maintains that Mississippi state law applies by virtue of the choice of law provision in the contract, the indemnity provision is void and unenforceable." In addition, "the courts have the duty and the power to declare void and unenforceable contracts made in violation of law or in contravention of the public policy of the state." Smith v. Simon, 224 So. 2d 565, 566 (Miss. 1969). This Court has exercised this power when contracts are in violation of statutes. Id.

10. The record before us unquestionably reveals that the Shipyard Agreement was for construction of the Discoverer Enterprise to perform as a drill ship. Ingalls even concedes that "this Shipyard Agreement is a contract for ship construction which is not a maritime contract." (Emphasis added). Therefore, we reverse and remand for a determination as to what portion of the settlement, if any, is attributable to Ingalls' negligence, as any indemnification in this context is void pursuant to statute. See Miss. Code Ann. 31-5-41 (Rev. 2008).

CONCLUSION

11. Mississippi Code Section 31-5-41 voids the indemnity provision in the Shipyard Agreement to the extent that it provides for indemnification of Ingalls for Ingalls' own negligence. In that no allocation of fault appears in the record before this court, we reverse and remand to the Jackson County Circuit Court for such determination and entry of judgment accordingly.

12. REVERSED AND REMANDED.

WALLER, C.J., DICKINSON, LAMAR, CHANDLER AND PIERCE, JJ., CONCUR. GRAVES, P.J., DISSENTS WITH SEPARATE WRITTEN OPINION JOINED BY RANDOLPH AND KITCHENS, JJ.

GRAVES, PRESIDING JUSTICE, DISSENTING:

13. The majority reverses the trial court's grant of indemnity to Ingalls, holding that Mississippi Code Section 31-5-41 invalidates indemnity clauses in construction contracts that indemnify a person from that person's own negligence, and that Transocean preserved the issue of the applicability of Section 31-5-41 for consideration on appeal. I disagree that Transocean preserved the issue of the applicability of Section 31-5-41, and therefore I dissent.

14. The majority reasons that Transocean preserved the issue for appeal when, in its answer to the third-party complaint, it pleaded: 1) Ingalls "failed to state a claim or cause of action upon which relief may be granted" and 2) "all defenses to the validity or enforceability of any indemnity provisions which are available to it under the . . . laws of Mississippi. . . ." The majority also points out that Transocean asserted the applicability of Section 31-5-41 in its pretrial brief. It is illogical to argue that Transocean preserved the issue of the applicability of this little-known statute by including in its answer the boilerplate Rule 12(b)(6) defense of "failure to state a claim or cause of action upon which relief may be granted" and the very general pleading of all defenses available under Mississippi law to Ingalls' claim for indemnity. Furthermore, whether or not Transocean raised Section 31-5-41 in its pretrial brief is irrelevant because Transocean filed its pretrial brief six and one-half years after it filed its answer to the third-party complaint.

15. Transocean should be barred from asserting the affirmative defense of the applicability of Section 31-5-41 because Transocean failed to timely raise the defense as required by the Mississippi Rules of Civil Procedure. Rule 8(c) provides that, in pleading to a preceding pleading such as a cross-claim, a party shall set forth all affirmative defenses. Miss. R. Civ. P. 8(c). Similarly, Rule 12(b) provides that all defenses to a claim for relief in any pleading, including a cross-claim, shall be asserted in the responsive pleading thereto if one is required. Miss. R. Civ. P. 12(b). See also Miss. Dep't of Human Servs. v. Guidry, 830 So. 2d 628, 634 (Miss. 2002) (explaining that when a responsive pleading is required, an affirmative defense is waived if not raised by a pleading). Transocean failed to raise the affirmative defense of the applicability of Section 31-5-41 in its answer to the third-party complaint and never amended its answer pursuant to Rule 15(a)[4] to include the defense. There is no evidence in the record that Transocean was even aware of the existence of Section 31-5-41 at or around the time Transocean wrote its answer to the third-party complaint. Transocean did not raise Section 31-5-41 until it filed its pretrial brief in November 2007, six and one-half years after it filed its answer to the third-party complaint.

16. The majority cites only one case, Howard v. Estate of Harper ex rel. Harper, 947 So. 2d 854 (Miss. 2006), as support for its erroneous finding that Transocean preserved the issue of the applicability of Section 31-5-41 for consideration on appeal by pleading a Rule 12(b)(6) defense. In Howard, representatives of the estates of deceased nursing home residents filed suit against the nursing home, a nursing home administrator, and a nursing home licensee. Howard, 947 So. 2d at 856. Among other claims, the plaintiffs alleged medical malpractice, fraud, and breach of fiduciary duty. Id. On appeal to this Court, the nursing home administrator and licensee raised defenses against these three claims. Id. at 860-61. The plaintiffs responded that the administrator and licensee had waived these defenses when the administrator and licensee failed to assert them in either their motion to dismiss (i.e., their original reply papers) or their petition for interlocutory appeal. Id. at 860. In response to the plaintiffs' argument regarding waiver, the Howard Court stated:

In the [defendants'] motion to dismiss, they asserted the Plaintiffs failed to state a claim upon which relief could be granted pursuant to Miss. R. Civ. P. 12(b)(6). We find this assertion is sufficient to preserve the issue[s] for appeal.

Id. The Court, however, offered absolutely no explanation for this finding.

17. Not only is the Howard Court's finding regarding the inclusiveness of a Rule 12(b)(6) defense unsupported, but in a more recent decision, Burleson v. Lathem, this Court specifically stated that a Rule 12(b)(6) defense cannot possibly preserve any and all affirmative defenses and offered a compelling reason why this must be the case.[5] Burleson v. Lathem, 968 So. 2d 930, 936 (Miss. 2007). In Burleson, the defendant failed to assert the affirmative defenses of insufficiency of process and insufficiency of service of process in his initial responsive pleadings or by motion simultaneously therewith, and he failed to amend his answer pursuant to Mississippi Rule of Civil Procedure 15(a) to include these defenses. Id. The defendant argued that he had preserved these defenses by including a catch-all Rule 12(b)(6) defense in his initial answer. Id. The Burleson Court disagreed and held that interpreting Rule 12(b)(6) to preserve all affirmative defenses would "allow the defendant more than one bite at the apple, since he could plead a Rule 12(b)(6) defense in the initial responsive pleadings, with the intent of asserting other Rule 12 defenses at a later time." Id. Moreover, the argument that a Rule 12(b)(6) defense preserves all affirmative defenses is illogical because it "fails to explain the existence of the remaining Rule 12(b) defenses and other affirmative defenses, which would be unnecessary if a party need only assert a Rule 12(b)(6) defense to preserve any objections to allegations set forth in the complaint." Id.

18. Similarly, pleading "all defenses to the validity or enforceability of any indemnity provisions which are available to it under the . . . laws of Mississippi. . . ." cannot be said to preserve any and all defenses against a claim for indemnity, for if it did, there would be no purpose for a party defending against a claim for indemnity to include any other defenses in its answer. As stated above, the defendant unjustly would be allowed multiple bites at the apple, since it could include a very general defense in its initial answer with the intention of asserting other defenses months or, as in this case, years later.

19. Lastly, as noted above, the fact that Transocean raised Section 31-5-41 in its pretrial brief is irrelevant, because Transocean filed its pretrial brief in November 2007, six and one-half years after it filed its answer to the third-party complaint.

20. Therefore, based on the law as well as logic, I must disagree that Transocean preserved the issue of the applicability of Section 31-5-41 for consideration on appeal. Accordingly, I dissent and would affirm the trial court's grant of indemnity to Ingalls.

RANDOLPH AND KITCHENS, JJ., JOIN THIS OPINION.

[1] Ingalls Shipbuilding, Inc., became Northrop Grumman Ship Systems, Inc., in 2002, and in 2008, became Northrop Grumman Shipbuilding, Inc.

[2] Ingalls also argues that the Shipyard Agreement required Transocean to procure liability insurance to protect Ingalls against Cardwell's claims.

[3] The record reflects that both parties, through their attorneys, agreed to submit the issues to the trial judge on briefs and oral arguments, without the benefit of a jury.

[4] Rule 15(a) provides that a party may amend a pleading at any time before a responsive pleading is served, or, if a pleading is one to which no responsive pleading is permitted and the action has not been placed on the trial calendar, the party may amend the pleading within thirty days after it is served. Miss. R. Civ. P. 15(a). After the responsive pleading has been served or the thirty-day period has elapsed (as the case may be), Rule 15(a) allows the party to amend a pleading only by leave of the court or upon written consent of the adverse party. Id.

[5] The majority fails to mention Burleson v. Lathem in its opinion.