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Chevron Oronite Company LLC v. Jacobs Field Services North America, Inc.

United States District Court, E.D. Louisiana

January 23, 2019

CHEVRON ORONITE COMPANY LLC
v.
JACOBS FIELD SERVICES NORTH AMERICA, INC.

         SECTION: M (4)

          FINDINGS OF FACT AND CONCLUSIONS OF LAW

          BARRY W. ASHE UNITED STATES DISTRICT JUDGE

         This matter involves an indemnity dispute that arises out of a series of contracts between Chevron Chemical Company (“Chevron Chemical”), which plaintiff, Chevron Oronite Company LLC (“Chevron Oronite”), succeeds in interest, and J.E. Merit Constructors, Inc. (“J.E. Merit”), which the defendant, Jacobs Field Services North America, Inc. (“Jacobs”), succeeds in interest.[1]On March 2, 2018, Chevron Oronite filed a complaint against Jacobs, seeking to compel Jacobs to indemnify Chevron Oronite in connection with a lawsuit it had settled.[2] Jacobs answered denying that it owed defense or indemnity to Chevron Oronite.[3]

         Pursuant to agreement of counsel at the final pretrial conference, the matter was submitted to the Court for decision on the papers, including the parties' trial memoranda, [4] proposed findings of fact, [5] proposed conclusions of law, [6] and trial exhibits. Having considered the evidence and the arguments of counsel, the Court announces its Findings of Fact and Conclusions of Law pursuant to Rule 52 of the Federal Rules of Civil Procedure. To the extent a finding of fact constitutes a conclusion of law, the Court adopts it as such. To the extent a conclusion of law constitutes a finding of fact, the Court adopts it as such.

         FINDINGS OF FACT

         I. Jurisdiction

         1. The Court has diversity jurisdiction under 28 U.S.C. § 1332 because the parties are citizens of different states and the requisite amount in controversy is satisfied.

         II. The Parties

         2. Plaintiff Chevron Oronite is the successor-in-interest to Chevron Chemical under the series of contracts at issue in this matter.[7]

         3. Defendant Jacobs is the successor-in-interest to J.E. Merit under the series of contracts at issue in this matter.[8]

         4. Chevron Oronite is a wholly-owned subsidiary of Chevron U.S.A., Inc.[9]

         III. The Bourgeois Suit

         5. From 1989 through 1993, Chevron Chemical engaged J.E. Merit to perform maintenance work, including providing welders, at Chevron Chemical's facility in Belle Chasse, Louisiana.[10] Each contract contained a provision requiring J.E. Merit to indemnify Chevron Chemical against loss, damage, injury, liability, or death caused by J.E. Merit or connected with the contract or J.E. Merit's performance under the contract.[11]

         6. Wayne Bourgeois worked as a welder for J.E. Merit from 1989-1994.[12]

         7. In 2016, Bourgeois was diagnosed with mesothelioma.[13]

         8. In March 2017, Bourgeois sued various companies for which he worked, alleging exposure to asbestos.[14] Bourgeois alleged in relevant part that he was exposed to asbestos while working for J.E. Merit at Chevron Chemical's Belle Chasse facility.[15]

         9. Chevron Oronite tendered the lawsuit to Jacobs on July 24, 2017.[16] (The next day, Bourgeois died.[17]) On September 19, 2017, Jacobs rejected the tender, claiming that Chevron Oronite cited an inapplicable contract relating to warehouse workers.[18] Thereafter, Jacobs produced the applicable contracts in response to a subpoena duces tecum issued in the state-court Bourgeois proceeding, and counsel for Jacobs had conversations with counsel for Chevron Oronite regarding settlement negotiations among the parties to the state-court proceeding.[19]

         10. In a letter to Jacobs dated November 7, 2017, Chevron Oronite tendered the lawsuit a second time, referencing the applicable contracts Jacobs had produced in discovery, updating Jacobs about ongoing settlement negotiations, and again inviting it to defend Chevron Oronite in the Bourgeois lawsuit.[20] Jacobs again refused.[21]

         11. Nevertheless, Chevron Oronite continued to apprise Jacobs of the proposed settlement amounts (including Bourgeois' demand to Chevron Oronite of $895, 000 as well as the range between which Chevron Oronite thought it could settle the case) and invited Jacobs' participation in settlement discussions in late November and early December of 2017.[22] Jacobs repeatedly refused.[23]

         12. Chevron Oronite settled the Bourgeois lawsuit on January 24, 2018, for $550, 000.[24]This amount fell in the middle of the settlement range Chevron Oronite had projected and communicated to Jacobs.

         IV. The Indemnity Agreements

         13. As a result of the series of contracts between Chevron Chemical and J.E. Merit, indemnity agreements between Chevron Oronite and Jacobs were in effect when Bourgeois was allegedly exposed to asbestos while employed for J.E. Merit at Chevron's Belle Chasse facility.[25]

         14. The plain and unambiguous language of Section 3.4 of the indemnity agreements provides that Chevron Oronite may recover reasonable attorney's fees in connection with its defense and settlement of the Bourgeois suit and its pursuit of the instant suit against Jacobs.[26]

         15. Section 3.4 of the indemnity agreements also provides for recovery of ordinary costs of litigation.[27]

         V. The Complaint and Answer in the Captioned Case

         16. On March 2, 2018, Chevron Oronite filed a complaint for breach of contract, alleging that Jacobs refused to satisfy its contractual obligation to indemnify Chevron Oronite.[28]

         17. On April 19, 2018, Jacobs filed its answer, generally denying the allegations of the complaint on the basis that Chevron Oronite had no liability to Bourgeois in the underlying Bourgeois case and that Jacobs is not liable to Chevron Oronite for defense and indemnity of that case.[29]

         VI. Summary Judgment

         18. On October 10, 2018, on cross-motions for summary judgment, [30] this Court decided the threshold issue of whether Chevron Oronite was required to establish actual liability or potential liability to Bourgeois when it made demand upon Jacobs for indemnification.[31] This Court held that the summary judgment evidence established the sufficiency of Chevron Oronite's tender under Louisiana law as would call for application of the potential liability standard.[32]Because Jacobs had opportunity following the tender to defend and settle the Bourgeois suit on its own terms, but chose not to, this Court determined that potential liability is the appropriate standard to apply in assessing Jacobs' indemnity obligation under the contracts at issue here.[33]Under this standard, this Court further held that the Bourgeois suit exposed Chevron Oronite to potential liability as to trigger Jacobs' indemnity obligation under the contracts at issue because Chevron Oronite had a reasonable apprehension of liability to Bourgeois.[34] Even assuming that an assessment of potential liability requires some evidence in addition to the claimant's allegations in the underlying suit, this Court held that Chevron Oronite had provided such evidence in the form of Bourgeois' deposition testimony and the testimony of his expert industrial hygienist.[35]

         19. Thus, Chevron Oronite had shown it was potentially liable to Bourgeois in the underlying suit and that it was entitled to attorney's fees and ordinary costs incurred in defending and settling the Bourgeois suit and in prosecuting the instant suit.[36] This ruling left for trial only the issues of (1) the reasonableness of the amount Chevron Oronite paid to settle the Bourgeois suit and (2) the amount of attorney's fees and costs Chevron Oronite should be awarded.[37]

         VII. The Reasonableness of the Bourgeois Settlement

         20. On March 9, 2017, Bourgeois filed suit in state court against numerous defendants, including Chevron Oronite, seeking damages related to mesothelioma caused by his alleged exposure to asbestos.[38]

         21. As to Chevron Oronite, Bourgeois alleged he was exposed to asbestos while working for one and a half to two years as a welder for J.E. Merit at Chevron Chemical's Belle Chasse facility.[39]

         22. Bourgeois was 65 years old when diagnosed with mesothelioma and died from mesothelioma approximately 16 months later.[40] When he died, Bourgeois had been married to his wife for 47 years, and he had three living children aged 44, 39, and 38.[41]

         23. In the underlying case, the Bourgeois plaintiffs sued over two-dozen individually-named defendants grouped in the following categories: “employer defendants”; “premises defendants” (including Chevron Oronite); “premises contractor defendants”; “asbestos abatement contractor defendants”; “asbestos manufacturer defendants”; and “asbestos supplier defendants.”[42]

         24. In perpetuation depositions, Bourgeois testified that he was exposed to asbestos while working at or for certain entities (Avondale, H.B. Fowler, Williams-McWilliams, Good Hope Refinery, Payne & Keller, Chevron, Kostmayer, J.E. Merit, BP Oil Refinery, Performance, Exxon, Tenneco, Shell, Johns-Manville, Monsanto, and Comet Construction) from pipe insulation, fire blankets, gaskets, and gloves manufactured by unknown manufacturers and supplied by unknown suppliers; or from being around his father and brother who worked at or for some of these entities, or workers at Cajun Insulation Company and other unknown insulator workers.[43]Bourgeois was also exposed to asbestos through his use of welding rods manufactured by unknown manufacturers and supplied by unknown suppliers.[44]

         25. In light of these exposures to asbestos, Jacobs argues that Chevron Oronite could have potentially shared liability with at least two-dozen other persons or entities (including Avondale; unknown manufacturers of pipe insulation; unknown suppliers of pipe insulation; unknown manufacturers of asbestos fire blankets; unknown suppliers of asbestos fire blankets; H.B. Fowler; Williams-McWilliams; Good Hope Refinery; unknown insulator workers; Payne & Keller; Kostmayer; J.E. Merit; unknown manufacturers of gaskets; unknown suppliers of gaskets; BP Oil; Performance; Exxon; unknown manufacturers of asbestos gloves; unknown suppliers of asbestos gloves; Tenneco; Shell; Cajun Insulation Company; Johns-Manville; Monsanto; Comet Construction; unknown manufacturers of welding rods; unknown suppliers of welding rods), so that all twenty-four of these other persons or entities should be deemed to share equal responsibility with Chevron Oronite for Bourgeois' mesothelioma.[45] In sum, Jacobs asserts: “Certainly, nothing about the evidence suggests that Chevron Oronite was more or less liable than any other entity Bourgeois identified.”[46]

         26. But the obverse is equally true: there is nothing about the evidence that conclusively establishes that Chevron Oronite's share of the potential liability for Bourgeois' claims was less than the settlement amount as a proportion of the total claim value.

         27. In its submissions to the Court, Jacobs has made no effort to demonstrate that the settlement amount ($550, 000) Chevron Oronite paid to Bourgeois was unreasonable, because Jacobs insists that Chevron Oronite had the affirmative burden to show that the amount was reasonable and that Chevron Oronite has not carried its burden. As a consequence, Jacobs contends that the Louisiana law in effect at the time of the alleged asbestos exposures and on the date of Bourgeois' death requires that the potential damages on Bourgeois' claims be shared equally among all defendants alleged to have caused any asbestos exposure contributing to Bourgeois' mesothelioma.

         28. Jacobs recites the Louisiana law applicable to Bourgeois' claims and any assessment of the reasonableness of a settlement of such claims, to be as follows:[47]

a. The substantive law in effect at the time of an asbestos claimant's “repeated tortious exposures resulting in continuous, on-going damages” is the law that governs a mesothelioma plaintiffs own claim or a survival claim arising from a mesothelioma patient's death. Cole v. Celotex Corp., 599 So.2d 1058, 1066 (La. 1992).
b. The substantive law in effect at the time of a mesothelioma patient's death is the law that governs a wrongful death claim. Meredith v. Asbestos Corp., 707 So.2d 1334, 1336 (La.App. 1998).
c. In 1980, Louisiana adopted a comparative fault system to require loss apportionment in multi-party litigation. “Since the adoption of a pure comparative fault system, it has been the task of the factfinder to allocate shares of negligence.” Keith v. U.S. Fid. & Guar. Co., 694 So.2d 180, 183 (La. 1997).
d. Jacobs urges that, because the alleged exposures at issue here (1989-1993) postdate Louisiana's enactment of a comparative fault regime, determining the probable amount of a total judgment for which Chevron Oronite may have been liable due to the alleged exposures in the Bourgeois case requires consideration of the law applicable both at the time of Bourgeois' death (wrongful death claim) as well as at the time of the alleged exposures (survival claim).
e. Under the post-1980 comparative fault law, fault is apportioned to all liable parties and non-parties, even those immune or whose identity is unknown. See, e.g., Petroleum Rental Tools, Inc. v. Hal Oil & Gas Co., 701 So.2d 213 (La.App. 1997). Evaluating Chevron Oronite's risk of exposure in the Bourgeois case therefore requires consideration of the potential extent to which fault for Bourgeois' mesothelioma could have been allocated to persons and entities other than Chevron Oronite.
f Under Louisiana Civil Code article 2324, had the Bourgeois plaintiffs obtained a wrongful death judgment, Chevron Oronite would have been liable only for that portion corresponding to its own percentage of allocated fault, except that for the period at issue (1989-1993), when the alleged exposures occurred, an immune employer's fault must be reallocated to the other culpable tortfeasors. See, e.g., Fleniken v. Entergy Corp., 780 So.2d 1175 (La.App. 2001).
g. Until Louisiana's 1975 revision of La. R.S. 23:1031.1, the Louisiana Workers Compensation Act did not shield employers from liability in mesothelioma claims. Rando v. Anco Insulations Inc., 16 So.3d 1065, 1071 (La. 2009).
h. In mesothelioma cases, Louisiana courts have in recent years affirmed wrongful death damage awards for surviving spouses in the “high” range of $900, 000 to $2, 500, 000 and for adult children in the “high” range of $250, 000 to $750, 000. See Zimko v. American Cyanamid,905 So.2d 465 (La.App. 2005) ($2, 500, 000 to widow of 55-year-old mesothelioma decedent); Oddo v. Asbestos Corp.,173 So.3d 1192 (La.App. 2015) ($900, 000 to widow of 81-year-old mesothelioma decedent); Williams v. Placid Oil Co.,224 So.3d 1101 (La.App. 2017) ($750, 000 to each adult child of 59-year-old ...

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