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Important New 5th Circuit Case on Choice-of-Law for Indemnity Agreements

11/12/2019

By: David Sharpe

Whether a contract’s indemnity clause is enforceable often turns on what law governs. An indemnity clause that is invalid if a state’s anti-indemnity statute governs might be enforceable if federal maritime law governs.

On Monday, November 11, in Barrios v. Centaur, LLC, No. 18-31203, the U.S. Fifth Circuit Court of Appeals made such a determination, holding that maritime law – not Louisiana’s Construction Anti-Indemnity Statute, LSA-R.S. 9:2780.1 – governed the indemnity clause in a contract that covered improvements to a wharf on the Mississippi River.

But the decision is important beyond its own facts, because Barrios extends the Fifth Circuit’s choice-of-law test for indemnity contracts beyond the oil-and-gas context where, just last year in In re Larry Doiron, Inc., the full en banc court had overhauled its earlier test. Writing for a unanimous panel in Barrios, Judge Jerry Smith extended the Doiron test to other mixed-service contracts, such as the riverside construction contract involved in the case at hand:

In short, Doiron’s two-part test applies as written to all mixed-services contracts. To be maritime, a contract (1) must be for services to facilitate activity on navigable waters and (2) must provide, or the parties must expect, that a vessel will play a substantial role in the completion of the contract.i

Barrios will be an important precedent as courts continue to face questions concerning the enforceability of indemnity and other reallocation-of-risk clauses.

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David Sharpe focuses his practice on risk management in the marine service market. Lugenbuhl's admiralty & maritime law group provides its clients in the onshore and offshore oilfield-service and alternative energy sectors with a wide range of services. More information about the firm's admiralty & maritime practice is available here.

i Barrios v. Centaur, LLC, No. 18-31203 *14 (5th Cir. Nov. 11, 2019), citing In re Larry Doiron, Inc., 879 F.3d 568 (5th Cir.) (en banc), cert. denied, 138 S.Ct. 2033 (2018).

The content of this article is not intended to serve as an exhaustive review of the laws and statutes, and it is not intended to provide legal advice. The opinions expressed through this article may not reflect the opinions of the firm, individual attorneys or clients.

 

 

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