Preview
Filed: 5/15/2019 3:59 PM
JOHN D. KINARD - District Clerk
Galveston County, Texas
Envelope No. 33600861
By: Shailja Dixit
5/15/2019 4:04 PM
CAUSE NO: 17-CV-1242
BLANCHARD REFINING COMPANY § IN THE DISTRICT COURT OF
LLC and MARATHON PETROLEUM §
COMPANY LP §
§
Plaintiffs §
§ GALVESTON COUNTY
v. §
§
INDUSTRIAL SPECIALISTS, LLC §
§
§
Defendant. § 212TH JUDICIAL DISTRICT
DEFENDANT INDUSTRIAL SPECIALISTS, LLC’S
MOTION FOR SUMMARY JUDGMENT
TO THE HONORABLE COURT:
Defendant Industrial Specialists, LLC (“ISI”) files this Traditional Motion for Summary
Judgment regarding Plaintiffs Blanchard Refining Company LLC’s and Marathon Petroleum
Company LP’s (collectively “Marathon”) claims for declaratory judgment and breach of the Major
Service Contract between Blanchard Refining Company LLC and ISI dated March 14, 2013
(“Contract”). ISI respectfully requests that this Court grant its motion pursuant to Texas Rule of
Civil Procedure 166a, and in support thereof, would show the following:
I. INTRODUCTION
“The game is rigged, but you cannot lose if you do not play”—The Wire
The genesis of this lawsuit is Marathon’s desire to achieve what it did not bargain for and
what is expressly prohibited by Texas law: a judgment holding ISI 100% responsible for every
dollar paid out by Marathon to settle the lawsuits arising out of the fire that occurred inside the
Marathon-owned Galveston Bay Refinery on January 11, 2016. Knowing that it could never
recover anything more than 49% of any judgment rendered against it in those lawsuits, Marathon
sought to rig the game by purportedly settling the entire case (rather than just its own liability).
Marathon now seeks to weaponize that settlement in this indemnity lawsuit against ISI, excluding
the participation of the underlying plaintiffs and the remaining defendants, and attempting to
circumvent the proportionate responsibility framework codified by Chapter 33 of the Texas Civil
Practice and Remedies Code. Texas law prohibits such maneuvers precisely because it abhors this
kind of satellite litigation over the construction of indemnity contracts.
II. SUMMARY OF THE ARGUMENT
Marathon’s claim for contractual indemnity is barred for three reasons.
First, because Texas law prohibits a party from settling more than its proportionate share
of a common liability, Marathon’s settlement is solely attributable to its own negligence and thus
beyond the scope of the plain language of ISI’s indemnity obligation.
Second, Marathon’s contention that its proportionate share of responsibility for the January
11, 2016 fire was not greater than 50 percent means it would not have been required to pay for
damages attributable to any other party’s proportionate fault. Consequently, because the Contract
only requires ISI to indemnify Marathon for money it was legally obligated to pay as a result of
ISI’s (and potentially other parties’) proportionate responsibility, the absence of joint and several
liability ensures that the settlement is beyond the purview of the relevant indemnity language.
Third, Marathon’s proposed construction of the Contract seeks a form of “comparative
indemnity” that requires compliance with the express negligence rule. As the Contract does not
expressly state that ISI is required to indemnify Marathon in situations in which their concurrent
negligence causes a harm, the indemnity provision is unenforceable as a matter of Texas law.
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III. BACKGROUND FACTS
The Contract
ISI provides specialty industrial and mechanical services to the oil and gas industry. On
March 14, 2013, ISI entered into the Contract with Blanchard Refining Company LLC. 1 The
Contract had a term of five years beginning on the date it was signed and ending on March 13,
2018.2 Under the Contract, Marathon had the right to request that ISI “perform services (including
any supervision, labor, equipment, materials, deliverables, and any other items necessary to
perform the work requested. . . by issuing a Job Order” to ISI.3 Marathon also had the right to
make changes to the scope of work requested at any time, including, but not limited to, changes
related to: 1) the drawings, designs or specifications; 2) the method, manner or sequence of work;
and 3) the speed with which the work was completed.4 All work performed by ISI was subject to
“inspection, testing, and approval” by Marathon.5 The Contract also contained the indemnity
provision that is the subject of this lawsuit.6
The Q1 2016 Turnaround Project
The Galveston Bay Refinery (“Refinery”), located in Texas City, Texas, off the entrance
to the Houston Ship Channel, is among the largest refineries in the United States. Owned and
operated by Marathon, it has the second largest refining capacity in the country and employs almost
1
Major Service Contract between ISI and Blanchard Refining Company LLC dated March 14, 2013 and
attached hereto as “Exhibit A-1” to the Affidavit of Elizabeth Smith labeled “Exhibit A.”
2
Id. at §1.1.
3
Id. at §2.2.
4
Id. at §3.1.
5
Id. at §4.2.
6
Id. at §13.1.
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2,000 people.7 Pursuant to the Contract, and under a Purchase Order dated September 9, 2015,
Marathon requested that ISI perform fireproofing and refractory services in a large-scale
maintenance turnaround at the Refinery entitled the“1Q2016 FCCU3 TAR.”8 The project included
maintenance and repair of the regenerator vessel in the Fluid Catalytic Cracker Unit 3 (“FCCU3”).9
The January 11, 2016 Fire
During the overnight shift on January 10-11, 2016, there were upwards of 60 people
working inside the FCCU3 regenerator vessel.10 During that shift, ISI employees were inside the
regenerator either chipping refractory material from the interior of the cyclones or cleaning up at
the bottom of the vessel.11 Employees of AltairStrickland, LLC (“ASI”) (who provided cyclone
removal services), Excel Scaffolding (who provided scaffold erection and demolition services),
and Marathon were also present inside the regenerator.12 Employees of Certified Safety, Inc.
(“CS”) performed hole and fire watch services and were stationed outside the regenerator at the
manways located at the third and eighth levels thereof.13 Innovative Ventilation Systems, Inc.
(“IVS”) provided the ventilation systems for the work inside the regenerator.14
7
Marathon’s Original Petition dated October 9, 2017 at p. 2, attached hereto as “Exhibit B.” See also
“Galveston Bay Refinery: Texas City, Texas,” at
http://www.marathonpetroleum.com/Operations/Refining_and_Marketing/Refining/Galveston_B
ay_Refinery/ accessed on April 2, 2019.
8
“Purchase Order” dated September 9, 2015 and attached hereto as “Exhibit A-2” to the Affidavit of
Elizabeth Smith. See also Exhibit B at p. 4.
9
Exhibit B at p. 4.
10
Marathon’s Galveston Bay Refinery Incident Investigation Report attached hereto as “Exhibit C” at p.
6.
11
Id. at 6; see also Exhibit B at p. 4.
12
Exhibit C at p. 6-7.
13
Id. at p. 6-7.
14
Id. at p. 4.
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In the early morning hours of January 11, 2016, a fire broke out inside the FCCU3
regenerator.15 As a result of the fire, Charles Espinoza, an ISI employee, sustained severe burns
and lung, vocal cord, and eye injuries.16 Fourteen other ISI employees and one CS employee also
claimed to have suffered various physical/emotional injuries in the aftermath of the fire and
subsequent evacuation.17
The Underlying Lawsuits
In the weeks that followed the fire, Charles Espinoza, Espinoza’s family, the other 14 ISI
employees, and a CS employee, Sara Sandoval (collectively “Claimants”),18 filed four lawsuits in
four different courts asserting negligence claims against Marathon, CS, ASI, and IVS. 19 On
August 25, 2016, those four cases were transferred to the 56th Judicial District Court of Galveston
County, Texas for pre-trial proceedings in the matter captioned No. 16-MDL-0000, In Re:
Blanchard Refining Galveston Bay Refinery FCCU3 Fire Litigation (collectively “Underlying
Lawsuits”).2021 ISI was not named as a defendant in the Underlying Lawsuits, though itwas
15
Exhibit B at p. 4.
16
Id.
17
Id.
18
The Claimants include Eleazar Chavez, Jesus Diaz, Charles Espinoza, Alyssa Espinoza, Cassandra
Espinoza, Dominic Espinoza, Patrick Espinoza, Omar Estrada, Christian Fuentes, Baldemar
Garcia, Eva Arevalo de Hernandez, Abel Herrera, Brandon Herrera, Jose Herrera, Ernesto Jiminez,
Jesus Munoz, Scott McCrory, Saul Mediola, Sara Sandoval, and Samuel Solache.
19
Exhibit B at p. 4-5.
20
Id. at p. 5.
21
The “Underlying Lawsuits” include the following matters:
Cause No. 16-0375; In re Blanchard Refining Galveston Bay Refinery FCUU3 Fire
Litigation; Before the Judicial Panel on Multidistrict Litigation;
Case No. 16-MDL-0000; In re Blanchard Refining Galveston Bay Refinery FCUU3 Fire
Litigation; In the 56th Judicial District Court of Galveston County, Texas;
Case No.16-MDL-001; Charles Espinoza, et al., v. Marathon Petroleum Company, LP, et
al.; In the 56th Judicial District Court of Galveston County, Texas;
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designated as a responsible third party pursuant to Texas Civil Practice and Remedies Code
Section 33.004 via a joint motion by Marathon, ASI, IVS, and CS on March 8, 2017.22
The Settlement
On August 1, 2017, shortly after a lengthy mediation, Marathon, along with ASI, CS, and
IVS, attempted to settle the entirety of the Underlying Lawsuits for a total of approximately $104
million (“Settlement”).23 ISI did not participate in the Settlement.24 In fact, the text of each of the
various settlement agreements contains the following (or similar) language:
The Parties further agree that the releases contemplated in this
Agreement do not encompass or include any claims that any Party
has or may have against Industrial Services LLC (“ISI”), Brand
Energy & Infrastructure Services, Inc. (“Brand”) or their respective
parents, subsidiaries, affiliates, successors, and assigns. Neither ISI
nor Brand is a party or third-party beneficiary to this Agreement.25
The breakdown of the payments of the $104 million settlement is as follows:26
Case No. 16-MDL-002; Solache v. Marathon Petroleum Co., LP; In the 56th Judicial
District Court of Galveston County, Texas;
Case No.16-MDL-003; McCrory v. Altair Strickland, LLC et al.; In the 56th Judicial
District Court of Galveston County, Texas; and
Case No.16-CV-0111; Herrera, et al., v. Marathon Petroleum Co., LP; et al.; In the 56th
Judicial District Court of Galveston County, Texas.
22
Exhibit B at p. 5; see also Defendants’ Motion for Leave to Designate Industrial Specialists, LLC and
Excel Contractors, Inc. as Responsible Third Parties in 16-MDL-0001 dated March 8, 2017.
23
Exhibit B at p. 6.
24
Marathon’s Motion for Partial Summary Judgment dated December 12, 2017 at p. 4.
25
Full and Final Settlement and Release Agreement between Eleazar Chavez, Marathon, ASI, CS, and IVS
dated September 14, 2017 and attached hereto as “Exhibit D” at ¶4.
26
Mediated Settlement and Rule 11 Agreement between Marathon and ASI dated August 1, 2017, and
Mediated Settlement and Rule 11 Agreement between Marathon and CS dated August 2, 2017, and
Mediated Settlement and Rule 11 Agreement between Marathon and IVS dated August 2, 2017,
collectively attached hereto as “Exhibit E.”
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Party: Contribution:
Marathon $86 million
IVS $11 million
ASI $2 million
CS $5 million
ASI and CS paid their respective contributions directly to Marathon, who in turn paid the
Claimants.27 In addition to its $2 million contribution, ASI also entered into a letter agreement
with Marathon in which its parent company, EMCOR Industrial Services, Inc. (“EMCOR”),
agreed to provide Marathon with a 3% rebate on all work performed for it by EMCOR, calculated
on an annual basis, until the rebate equals or exceeds $16 million.28 As a result of the Settlement,
the Claimants have all executed final releases against Marathon, ASI, CS, and IVS.29 With all
other disputes settled, Marathon initiated this lawsuit seeking indemnity from ISI for the full
amount it paid out in the Settlement.
IV. SUMMARY JUDGMENT EVIDENCE
In support of this Motion, ISI relies upon, incorporates by reference, and asks the Court to
take judicial notice of all pleadings on file in this case. TEX. R. EVID. 201(b)(2). The non-movant’s
pleading may constitute summary judgment evidence if it contains judicial admissions negating a
cause of action. Lyons v. Lindsey Morden Claims Mgmt., 985 S.W.2d 86, 92 (Tex. App.—El Paso
1998, no pet). Under Texas Rule of Civil Procedure 166a(d), ISI submits and gives notice of its
intent to use the following exhibits, including unfiled discovery, in support of this Motion:
27
Exhibit E.
28
August 1, 2017 Letter Agreement between Marathon and EMCOR, attached hereto as “Exhibit F.”
29
Exhibit B at p. 6.
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EXHIBIT: DESCRIPTION: DATE:
A Affidavit of Elizabeth Smith 5/14/2019
A-1 Major Service Contract between ISI and Blanchard Refining 3/14/2013
Company LLC
A-2 Purchase Order 9/9/2015
B Marathon’s Original Petition 10/9/2017
C Marathon’s Galveston Bay Refinery Incident Investigation Report N/A
D Full and Final Settlement and Release Agreement between Eleazar 9/14/2017
Chavez, Marathon, ASI, CS, and IVS
E Mediated Settlement and Rule 11 Agreements between Marathon, 8/1/2017-
ASI, CS, and IVS, respectively
8/2/2017
F Letter Agreement between Marathon and EMCOR 8/1/2017
G Marathon’s Responses to ISI’s First Set of Requests for Admissions 4/8/2019
V. STANDARD OF REVIEW
To prevail on a traditional summary judgment motion, a party must show that no genuine
issue of material fact exists and that it is entitled to summary judgment as a matter of law. TEX.
R. CIV. P. 166a(c); Provident Life & Acc. Ins. Co. v. Knott, 128 S.W.3d 211, 215-16 (Tex. 2003).
A defendant moving for summary judgment on the plaintiff’s cause of action assumes the burden
of showing as a matter of law that the plaintiff has no cause of action. See Lear Siegler, Inc. v.
Perez, 819 S.W.2d 470, 471 (Tex. 1991). The defendant does not need to disprove all the elements
of the plaintiff’s cause of action; it must disprove only one. S.W. Elec. Power Co. v. Grant, 73
S.W.3d 211, 215 (Tex. 2002). “To prevail on a breach of contract claim, a plaintiff must show (1)
the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3)
breach of contract by the defendant; and (4) damages sustained as a result of the breach.” Davis
v. Texas Farm Bur. Ins., 470 S.W.3d 97, 104 (Tex. App.—Houston [1st Dist.] 2015, no pet.). ISI
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will conclusively show that itdid not breach the Contract and is thus entitled to judgment as a
matter of law.
VI. ARGUMENT AND AUTHORITIES
A. The plain language of Section 13.1 of the Contract only requires ISI to indemnify
Marathon for liabilities, losses, or damages that did not result from Marathon’s
negligence.
The central dispute in this case relates to Section 13.1 of the Contract, the relevant part of
which provides:
[ISI] AGREES TO PROTECT, INDEMNIFY, HOLD
HARMLESS, AND DEFEND [MARATHON] AND THE
OFFICERS, DIRECTORS, EMPLOYEES, WORKMEN,
AGENTS, SERVANTS AND INVITEES OF [MARATHON]
(ALL HEREAFTER REFERRED TO AS “INDEMNITEES”),
FROM AND AGAINST ALL LOSSES, DAMAGES
(INCLUDING PUNITIVE DAMAGES), DEMANDS, CLAIMS,
SUITS AND OTHER LIABILITIES, INCLUDING ATTORNEY
FEES AND OTHER EXPENSES OF LITIGATION OR DEFENSE
(ALL HEREINAFTER REFERRED TO AS “CLAIMS”)
BECAUSE OF:
(i) BODILY INJURY, INCLUDING DEATH AT ANY TIME
RESULTING THEREFROM
...
WHICH OCCUR, EITHER DIRECTLY OR INDIRECTLY, IN
CONNECTION WITH PERFORMANCE OF THE WORK
CONTEMPLATED HEREUNDER OR BY REASON OF [ISI]
AND ITS EMPLOYEES, WORKMEN, AGENTS, SERVANTS,
SUBCONTRACTORS AND VENDORS BEING PRESENT ON
COMPANY’S PREMISES, EXCEPT TO THE EXTENT THE
LIABILITY, LOSS, OR DAMAGE IS ATTRIBUTABLE TO
AND CAUSED BY THE NEGLIGENCE OF COMPANY, OR
EXCEPT TO THE EXTENT AS LIMITED BY APPLICABLE
LAW.30
30
Exhibit A-1 at § 13.1 (emphasis added). For purpose of brevity, ISI has substituted itself for the word
“Contractor” and “Marathon” for references to “Company and its Affiliated Companies” and the
like. ISI does not dispute that Marathon Petroleum Company LP is an “Affiliated Company” within
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“Indemnity provisions are to be strictly construed, pursuant to the usual principles of
contract interpretation, in order to give effect to the parties’ intent as expressed in the agreement.”
MEMC Electronics Materials, Inc. v. Albemarle Corp., 241 S.W.3d 67, 71 (Tex. App.—Houston
[1st Dist.] 2007, pet. denied) (emphasis added). “In construing a contract, [a court] must ascertain
and give effect to the parties’ intentions as expressed in the writing itself.” El Paso Field Services,
L.P. v. MasTec North America, Inc., 389 S.W.3d 802, 805 (Tex. 2012) (citing Italian Cowboy
Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 333 (Tex. 2011)). To discern the
parties’ intent, the court must “examine and consider the entire writing in an effort to harmonize
and give effect to all the provisions of the contract so that none will be rendered meaningless.” Id.
(citing J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003)).
Based on these canons, Section 13.1 requires ISI to indemnify Marathon for certain
“Claims,” which is defined to include “losses,” “damages,” “demands,” “claims,” “suits,” and
“other liabilities.” However, the exception to ISI’s indemnity obligation—which Marathon admits
is germane—applies only to liabilities, losses, or damages. To wit, Marathon contends that this
provision requires ISI to indemnify it for any “losses and liabilities” it incurred as a result of the
January 11, 2016 fire that were not the result of Marathon’s negligence, defined, in this instance,
as the “portion attributable to or caused by parties, factors, acts, omissions, events, or
circumstances” other than Marathon’s negligence.31 As a result, Marathon must establish that its
Settlement payment constitutes either a liability, loss, or damage as a pre-requisite to any trial on
the allocation of fault.32
the meaning of the Contract. See also Affidavit of Clair S. Winebar at ¶3, attached as Exhibit B to
Marathon’s Motion for Partial Summary Judgment dated December 12, 2017.
31
Marathon’s Motion for Partial Summary Judgment dated December 12, 2017 at p. 6.
32
See infra, VI.D
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B. Marathon could only be liable for proportionate responsibility attributable to
other parties if it was found at least 51% responsible in the Underlying Lawsuits.
Under Texas law, the Underlying Lawsuits, like all tort cases, would have been governed
by the Proportionate Responsibility Statute codified in Chapter 33 of the Texas Civil Practice and
Remedies Code. See TEX. CIV. PRAC. & REM. CODE §33.002(a)(1). For each cause of action,
Chapter 33 requires the trier of fact to determine the percentage of responsibility for causing or
contributing to the harm for which recovery of damages is sought for each: 1) plaintiff; 2)
defendant; 3) settling party; and 4) responsible third party. TEX. CIV. PRAC. & REM. CODE
§33.003(a). In the Underlying Lawsuits, the juries would have been required to allocate
responsibility between the respective Claimants, Marathon, ISI, ASI, CS, and IVS. Crucially,
Chapter 33 limits the liability of each responsible party as follows:
(a) Except as provided in Subsection (b), a liable defendant is
liable to a claimant only for the percentage of the damages found
by the trier of fact equal to that defendant's percentage of
responsibility with respect to the personal injury, property
damage, death, or other harm for which the damages are allowed.
(b) Notwithstanding Subsection (a), each liable defendant is, in
addition to his liability under Subsection (a), jointly and
severally liable for the damages recoverable by the claimant
under Section 33.012 with respect to a cause of action if:
(1) the percentage of responsibility attributed to the defendant
with respect to a cause of action is greater than 50 percent; or. . .
TEX. CIV. PRAC. & REM. CODE §33.013 (emphasis added). The implication is simple: unless
Marathon’s percentage of responsibility was found to be greater than 50 percent, itwould only
have been liable for the percentage of total damages that are equal to its percentage of negligence.
In the absence of a finding that Marathon’s fault was greater than 50 percent, it would not have
been required to pay for damages attributable to the percentage of fault assigned to ISI, ASI, CS,
or IVS, and it would not have any claim for indemnity under any construction of the Contract. See
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Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407,424 (Tex. 2011) (“[b]ecause none
of the contractors was attributed a percentage of responsibility greater than 50%, the proportionate
responsibility statute does not permit joint and several liability”).
C. Texas law prohibits Marathon from settling more than its own fault precisely to
prevent defendants from enriching themselves in satellite litigation.
The raison d’être of Marathon’s entire strategy—settle the Underlying Lawsuits and then
bring suit against ISI—is simple: Marathon wishes to be indemnified for 100% of the $86 million
it paid out in the Settlement, which it could not achieve if fault was allocated in the Underlying
Lawsuits. Instead, even if Marathon’s construction of Section 13.1 is correct, which ISI expressly
denies,33 the most Marathon could have successfully recovered is 49% of its total liability, which
amounts to $42.14 million. 34 In this scenario, the difference between what Marathon could have
recovered had it joined its indemnity claim in a trial of the Underlying Lawsuits and what it is
seeking in this case is demonstrated by the chart below:35
Hypothetical Joint and Several ISI’s Hypothetical What Marathon seeks
Share of Liability: Indemnity Obligation in from ISI in this
Marathon’s Underlying Lawsuits: Lawsuit:
Fault:
0% No $0 $86 million
30% No $0 $60.2 million
60% Yes $34.4 million $34.4 million
For the self-evident reasons illustrated above, Marathon is transparently attempting to use its
Settlement of the Underlying Lawsuits to circumvent the joint and several liability scheme
33
See infra at Section VI.E
34
See supra at Section VI.B
35
This does not account for a settlement credit based upon the rebate agreement evidenced by Exhibit F.
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enumerated by Chapter 33 and the plain language of the Contract. Marathon admitted as much in
its previous briefing to this Court:
In the underlying lawsuit, as in any negligence suit brought under
Texas’ proportionate responsibility statute, Marathon Plaintiffs
faced the risk of being found more than 50% responsible and held
jointly and severally liable for the entire judgment – both the
portions attributable to the Marathon Plaintiffs and the portions
attributable to ISI (as a designated responsible third party) and the
other defendants. [internal citation omitted]. Marathon Plaintiffs
settled that entire risk and now seek to recover that for what they
legally contracted – indemnity from ISI for the settlement funds
other than the share attributable to Marathon Plaintiffs’ own
36
negligence.
Marathon’s candor belies the fact that, regardless of the risk of joint and several liability, it could
not settle all liabilities resulting from the January 11, 2016 fire as a matter of law. “[A] defendant
can settle only his proportionate share of a common liability and cannot preserve contribution
rights under either the common law or the comparative negligence statute by attempting to settle
the plaintiff’s entire claim.” Beech Aircraft Corp. v. Jinkins, 739 S.W.2d 19, 21-22 (Tex. 1987)
(emphasis added); see also Pearce v. Vince Hagan Co., 834 S.W.2d 108, 109 (Tex. App.—Fort
Worth 1992, writ denied). In other words, when Marathon agreed to pay the Claimants $86 million
in the Settlement, that $86 million could only settle Marathon’s proportionate fault. Marathon
could not settle the fault of ISI, ASI, CS, or IVS. 37 The Supreme Court of Texas announced this
rule to prohibit exactly what Marathon is attempting here—a settlement that does not result in
saving time or judicial resources but instead only serves to enrich a defendant seeking indemnity
for more than it could have recovered normally.38
36
Marathon’s Response to Defendant’s Post Hearing Brief dated January 23, 2018 at p. 3. (emphasis
original).
37
As ASI, CS, and IVS participated in the Settlement, they settled the entirety of their fault regardless.
38
Despite Marathon’s protestations that it only seeks to recover indemnity from ISI for settlement funds
“other than the share attributable to the Marathon Plaintiffs” it has yet to admit that it could not
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The law announced in Jinkins remains in effect today and has repeatedly been re-affirmed.
To wit, construing Jinkins, a later Supreme Court of Texas opinion stated “this court held that a
joint tortfeasor could settle only its proportionate share of a common plaintiff’s cause of action.”
International Proteins Corp. v. Ralston-Purina Co., 744 S.W.2d 932, 934 (Tex. 1988). “[A]
defendant can legally settle only his proportionate share of the common liability of the plaintiff’s
cause of action.” Herzog Contracting Corp. v. Burlington Northern Railroad Co., No. 14-96-
000864-CV, 1997 WL 473681 (Tex. App.—Houston [14th Dist.] Aug. 21, 1997, no pet.) (mem.
op., not designated for publication).
Marathon will no doubt protest that it is not seeking contribution from ISI but rather
contractual indemnity, and that this distinction renders Jinkins and its progeny irrelevant. Setting
aside that the type of fault-based indemnity sought is merely a contribution scheme codified by
contract, Marathon’s self-serving reading of Jinkins is entirely too narrow, as the Court’s rationale
is directly applicable in the instant case:
We see no advantage in allowing defendants responsible for the
plaintiff’s injuries a right to, in effect, buy the plaintiff’s claims and
prosecute the other jointly responsible parties. It is not apparent that
such settlements will result in any significant savings of time or
resources. We can, however, envision that the settling defendant’s
unusual posture as surrogate plaintiff, co-defendant and cross-
plaintiff will confuse a jury and possibly prejudice the remaining
parties.
Jinkins, 739 S.W.2d at 21-22. Marathon’s suit creates the exact “unusual posture” that the Court
sought to avoid, and its strategy runs afoul of the Court’s justification for announcing the rule that
a party could only settle its own fault. Specifically, Marathon’s actions spawned an inefficient
have been liable for fault attributable to ISI unless it was found at least 51% at fault. In seeking
the full amount of the Settlement, it seeks reimbursement for losses that could not have been
attributable to anyone other than Marathon.
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lawsuit that saves neither time nor judicial resources while creating a confusing new alignment of
the parties in an attempt to reconstruct a trial allocating fault for the January 11, 2016 fire without
input from any of the injured Claimants or other contractors. This posture is likely to confuse the
jury and prejudice ISI. “While the courts favor settlement of disputes and incline to enforcing
parties' agreements toward that end, we do not do so when. . . the result is worse than if the parties
had not settled.” State Farm Fire and Cas. Co. v. Gandy, 925 S.W.2d 696, 714 (Tex. 1996).
Moreover, the 14th Court of Appeals has expressly rejected the argument that Marathon
makes in this case—that the risk associated with joint and several liability enabled them to settle
more than their own fault:
Of course, where a solvent defendant finds itself among
insolvent co-defendants, it may, as a practical matter, be willing
to pay more in settlement than its estimated percentage share of
liability in order to avoid being subjected to joint and several
liability for all of the damages, and then having no co-defendant
from whom contribution can be recovered. However, under
section 33.015(d), Beech, and State Farm, its settlement payment
will nevertheless be deemed to represent only its proportionate
share of the common liability and entitle it to no claim for
contribution.
Herzog, 1997 WL 473681 at n.3 (emphasis added). As in Herzog, the fact that Marathon assessed
that it was at risk of being held joint and severally liable does not invalidate the blackletter rule
announced by Jinkins. Consequently, Marathon’s $86 million settlement can only be attributed to
its own proportionate fault for the damages sustained by the Claimants in the January 11, 2016
fire. Because Marathon admits that it is not entitled to seek indemnity for its own fault,39 ISI is
entitled to summary judgment.
39
Marathon’s Motion for Partial Summary Judgment dated December 12, 2017 at p. 6.
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D. Under Marathon’s theory of the case, it could not have suffered a liability, loss, or
damage attributable to any other party.
Even if the Court allows Marathon to pursue an indemnity claim premised on the assertion
that it could settle other parties’ fault, its indemnity claim still fails as a matter of law.
In similar situations, courts in Texas and the Fifth Circuit have consistently required parties
seeking insurance and/or indemnity coverage for amounts paid out in a settlement to prove that
those amounts are actually covered by the relevant policy or agreement. Enserch Corp. v. Shand
Morahan & Co., Inc., 952 F.2d 1485, 1494 (5th Cir. 1992) (“We cannot allow an insured to settle
allegations against it (some of which might be covered by its insurance, some of which might not)
for its policy limits and then seek full indemnification from its insurer when some of that settled
liability may be for acts clearly excluded by that policy”). “The damages recited in either a
judgment or a settlement of the underlying lawsuit must be apportioned between claims covered
by the policy and those that are not.” Bain Enterprises LLC v. Mountain States Mutual Cas. Co.,
267 F.Supp. 3d 796, 822 (W.D. Tex. 2016) (quoting Wilcox. v. American Home Assur. Co., 900
F. Supp. 850 (S.D. Tex. 1995)). “The burden of apportioning damages between covered and non-
covered claims, however, rests on the insured.” Id. Consequently, Marathon has the burden to
demonstrate that the damages for which it seeks indemnity (i.e. the Settlement) are either a liability,
loss, or damage covered by Section 13.1 of the Contract. Because the plain meaning of each of
those words in this context require a legal obligation, Marathon has done just the opposite.
1. The Settlement is not a liability, loss, or damage unless Marathon can
demonstrate that it would have been legally obligated to pay for ISI’s (or
potentially other parties’) proportionate responsibility.
The Contract does not define the terms “liability,” “loss,” or “damage.” Consequently,
they should be given their “common, ordinary meaning” while reading them “in context and in
light of the rules of grammar and common usage.” Anadarko Petroleum Corp. v. Houston Cas.
-16-
Co., No. 16-1013, 2019 WL 321921 (Tex. Jan. 25, 2019) (citing RSUI Indem. Co. v. The Lynd Co.,
466 S.W.3d 113, 118 (Tex. 2015)). To determine a word’s common meaning, Texas courts
“typically look first to their dictionary definitions and then consider the term’s usage in other
statutes, court decisions, and similar authorities.” Id. (citing Tex. State Bd. Of Exam’rs of Marriage
& Family Therapists v. Tex. Med. Ass’n., 511 S.W.3d 28, 35 (Tex. 2017)).
Under Texas law, there is a clear distinction “between an obligation to indemnify the
inde
Preview
Filed: 5/15/2019 3:59 PM JOHN D. KINARD - District Clerk Galveston County, Texas Envelope No. 33600861 By: Shailja Dixit 5/15/2019 4:04 PM CAUSE NO: 17-CV-1242 BLANCHARD REFINING COMPANY § IN THE DISTRICT COURT OF LLC and MARATHON PETROLEUM § COMPANY LP § § Plaintiffs § § GALVESTON COUNTY v. § § INDUSTRIAL SPECIALISTS, LLC § § § Defendant. § 212TH JUDICIAL DISTRICT DEFENDANT INDUSTRIAL SPECIALISTS, LLC’S MOTION FOR SUMMARY JUDGMENT TO THE HONORABLE COURT: Defendant Industrial Specialists, LLC (“ISI”) files this Traditional Motion for Summary Judgment regarding Plaintiffs Blanchard Refining Company LLC’s and Marathon Petroleum Company LP’s (collectively “Marathon”) claims for declaratory judgment and breach of the Major Service Contract between Blanchard Refining Company LLC and ISI dated March 14, 2013 (“Contract”). ISI respectfully requests that this Court grant its motion pursuant to Texas Rule of Civil Procedure 166a, and in support thereof, would show the following: I. INTRODUCTION “The game is rigged, but you cannot lose if you do not play”—The Wire The genesis of this lawsuit is Marathon’s desire to achieve what it did not bargain for and what is expressly prohibited by Texas law: a judgment holding ISI 100% responsible for every dollar paid out by Marathon to settle the lawsuits arising out of the fire that occurred inside the Marathon-owned Galveston Bay Refinery on January 11, 2016. Knowing that it could never recover anything more than 49% of any judgment rendered against it in those lawsuits, Marathon sought to rig the game by purportedly settling the entire case (rather than just its own liability). Marathon now seeks to weaponize that settlement in this indemnity lawsuit against ISI, excluding the participation of the underlying plaintiffs and the remaining defendants, and attempting to circumvent the proportionate responsibility framework codified by Chapter 33 of the Texas Civil Practice and Remedies Code. Texas law prohibits such maneuvers precisely because it abhors this kind of satellite litigation over the construction of indemnity contracts. II. SUMMARY OF THE ARGUMENT Marathon’s claim for contractual indemnity is barred for three reasons. First, because Texas law prohibits a party from settling more than its proportionate share of a common liability, Marathon’s settlement is solely attributable to its own negligence and thus beyond the scope of the plain language of ISI’s indemnity obligation. Second, Marathon’s contention that its proportionate share of responsibility for the January 11, 2016 fire was not greater than 50 percent means it would not have been required to pay for damages attributable to any other party’s proportionate fault. Consequently, because the Contract only requires ISI to indemnify Marathon for money it was legally obligated to pay as a result of ISI’s (and potentially other parties’) proportionate responsibility, the absence of joint and several liability ensures that the settlement is beyond the purview of the relevant indemnity language. Third, Marathon’s proposed construction of the Contract seeks a form of “comparative indemnity” that requires compliance with the express negligence rule. As the Contract does not expressly state that ISI is required to indemnify Marathon in situations in which their concurrent negligence causes a harm, the indemnity provision is unenforceable as a matter of Texas law. -2- III. BACKGROUND FACTS The Contract ISI provides specialty industrial and mechanical services to the oil and gas industry. On March 14, 2013, ISI entered into the Contract with Blanchard Refining Company LLC. 1 The Contract had a term of five years beginning on the date it was signed and ending on March 13, 2018.2 Under the Contract, Marathon had the right to request that ISI “perform services (including any supervision, labor, equipment, materials, deliverables, and any other items necessary to perform the work requested. . . by issuing a Job Order” to ISI.3 Marathon also had the right to make changes to the scope of work requested at any time, including, but not limited to, changes related to: 1) the drawings, designs or specifications; 2) the method, manner or sequence of work; and 3) the speed with which the work was completed.4 All work performed by ISI was subject to “inspection, testing, and approval” by Marathon.5 The Contract also contained the indemnity provision that is the subject of this lawsuit.6 The Q1 2016 Turnaround Project The Galveston Bay Refinery (“Refinery”), located in Texas City, Texas, off the entrance to the Houston Ship Channel, is among the largest refineries in the United States. Owned and operated by Marathon, it has the second largest refining capacity in the country and employs almost 1 Major Service Contract between ISI and Blanchard Refining Company LLC dated March 14, 2013 and attached hereto as “Exhibit A-1” to the Affidavit of Elizabeth Smith labeled “Exhibit A.” 2 Id. at §1.1. 3 Id. at §2.2. 4 Id. at §3.1. 5 Id. at §4.2. 6 Id. at §13.1. -3- 2,000 people.7 Pursuant to the Contract, and under a Purchase Order dated September 9, 2015, Marathon requested that ISI perform fireproofing and refractory services in a large-scale maintenance turnaround at the Refinery entitled the“1Q2016 FCCU3 TAR.”8 The project included maintenance and repair of the regenerator vessel in the Fluid Catalytic Cracker Unit 3 (“FCCU3”).9 The January 11, 2016 Fire During the overnight shift on January 10-11, 2016, there were upwards of 60 people working inside the FCCU3 regenerator vessel.10 During that shift, ISI employees were inside the regenerator either chipping refractory material from the interior of the cyclones or cleaning up at the bottom of the vessel.11 Employees of AltairStrickland, LLC (“ASI”) (who provided cyclone removal services), Excel Scaffolding (who provided scaffold erection and demolition services), and Marathon were also present inside the regenerator.12 Employees of Certified Safety, Inc. (“CS”) performed hole and fire watch services and were stationed outside the regenerator at the manways located at the third and eighth levels thereof.13 Innovative Ventilation Systems, Inc. (“IVS”) provided the ventilation systems for the work inside the regenerator.14 7 Marathon’s Original Petition dated October 9, 2017 at p. 2, attached hereto as “Exhibit B.” See also “Galveston Bay Refinery: Texas City, Texas,” at http://www.marathonpetroleum.com/Operations/Refining_and_Marketing/Refining/Galveston_B ay_Refinery/ accessed on April 2, 2019. 8 “Purchase Order” dated September 9, 2015 and attached hereto as “Exhibit A-2” to the Affidavit of Elizabeth Smith. See also Exhibit B at p. 4. 9 Exhibit B at p. 4. 10 Marathon’s Galveston Bay Refinery Incident Investigation Report attached hereto as “Exhibit C” at p. 6. 11 Id. at 6; see also Exhibit B at p. 4. 12 Exhibit C at p. 6-7. 13 Id. at p. 6-7. 14 Id. at p. 4. -4- In the early morning hours of January 11, 2016, a fire broke out inside the FCCU3 regenerator.15 As a result of the fire, Charles Espinoza, an ISI employee, sustained severe burns and lung, vocal cord, and eye injuries.16 Fourteen other ISI employees and one CS employee also claimed to have suffered various physical/emotional injuries in the aftermath of the fire and subsequent evacuation.17 The Underlying Lawsuits In the weeks that followed the fire, Charles Espinoza, Espinoza’s family, the other 14 ISI employees, and a CS employee, Sara Sandoval (collectively “Claimants”),18 filed four lawsuits in four different courts asserting negligence claims against Marathon, CS, ASI, and IVS. 19 On August 25, 2016, those four cases were transferred to the 56th Judicial District Court of Galveston County, Texas for pre-trial proceedings in the matter captioned No. 16-MDL-0000, In Re: Blanchard Refining Galveston Bay Refinery FCCU3 Fire Litigation (collectively “Underlying Lawsuits”).2021 ISI was not named as a defendant in the Underlying Lawsuits, though itwas 15 Exhibit B at p. 4. 16 Id. 17 Id. 18 The Claimants include Eleazar Chavez, Jesus Diaz, Charles Espinoza, Alyssa Espinoza, Cassandra Espinoza, Dominic Espinoza, Patrick Espinoza, Omar Estrada, Christian Fuentes, Baldemar Garcia, Eva Arevalo de Hernandez, Abel Herrera, Brandon Herrera, Jose Herrera, Ernesto Jiminez, Jesus Munoz, Scott McCrory, Saul Mediola, Sara Sandoval, and Samuel Solache. 19 Exhibit B at p. 4-5. 20 Id. at p. 5. 21 The “Underlying Lawsuits” include the following matters: Cause No. 16-0375; In re Blanchard Refining Galveston Bay Refinery FCUU3 Fire Litigation; Before the Judicial Panel on Multidistrict Litigation; Case No. 16-MDL-0000; In re Blanchard Refining Galveston Bay Refinery FCUU3 Fire Litigation; In the 56th Judicial District Court of Galveston County, Texas; Case No.16-MDL-001; Charles Espinoza, et al., v. Marathon Petroleum Company, LP, et al.; In the 56th Judicial District Court of Galveston County, Texas; -5- designated as a responsible third party pursuant to Texas Civil Practice and Remedies Code Section 33.004 via a joint motion by Marathon, ASI, IVS, and CS on March 8, 2017.22 The Settlement On August 1, 2017, shortly after a lengthy mediation, Marathon, along with ASI, CS, and IVS, attempted to settle the entirety of the Underlying Lawsuits for a total of approximately $104 million (“Settlement”).23 ISI did not participate in the Settlement.24 In fact, the text of each of the various settlement agreements contains the following (or similar) language: The Parties further agree that the releases contemplated in this Agreement do not encompass or include any claims that any Party has or may have against Industrial Services LLC (“ISI”), Brand Energy & Infrastructure Services, Inc. (“Brand”) or their respective parents, subsidiaries, affiliates, successors, and assigns. Neither ISI nor Brand is a party or third-party beneficiary to this Agreement.25 The breakdown of the payments of the $104 million settlement is as follows:26 Case No. 16-MDL-002; Solache v. Marathon Petroleum Co., LP; In the 56th Judicial District Court of Galveston County, Texas; Case No.16-MDL-003; McCrory v. Altair Strickland, LLC et al.; In the 56th Judicial District Court of Galveston County, Texas; and Case No.16-CV-0111; Herrera, et al., v. Marathon Petroleum Co., LP; et al.; In the 56th Judicial District Court of Galveston County, Texas. 22 Exhibit B at p. 5; see also Defendants’ Motion for Leave to Designate Industrial Specialists, LLC and Excel Contractors, Inc. as Responsible Third Parties in 16-MDL-0001 dated March 8, 2017. 23 Exhibit B at p. 6. 24 Marathon’s Motion for Partial Summary Judgment dated December 12, 2017 at p. 4. 25 Full and Final Settlement and Release Agreement between Eleazar Chavez, Marathon, ASI, CS, and IVS dated September 14, 2017 and attached hereto as “Exhibit D” at ¶4. 26 Mediated Settlement and Rule 11 Agreement between Marathon and ASI dated August 1, 2017, and Mediated Settlement and Rule 11 Agreement between Marathon and CS dated August 2, 2017, and Mediated Settlement and Rule 11 Agreement between Marathon and IVS dated August 2, 2017, collectively attached hereto as “Exhibit E.” -6- Party: Contribution: Marathon $86 million IVS $11 million ASI $2 million CS $5 million ASI and CS paid their respective contributions directly to Marathon, who in turn paid the Claimants.27 In addition to its $2 million contribution, ASI also entered into a letter agreement with Marathon in which its parent company, EMCOR Industrial Services, Inc. (“EMCOR”), agreed to provide Marathon with a 3% rebate on all work performed for it by EMCOR, calculated on an annual basis, until the rebate equals or exceeds $16 million.28 As a result of the Settlement, the Claimants have all executed final releases against Marathon, ASI, CS, and IVS.29 With all other disputes settled, Marathon initiated this lawsuit seeking indemnity from ISI for the full amount it paid out in the Settlement. IV. SUMMARY JUDGMENT EVIDENCE In support of this Motion, ISI relies upon, incorporates by reference, and asks the Court to take judicial notice of all pleadings on file in this case. TEX. R. EVID. 201(b)(2). The non-movant’s pleading may constitute summary judgment evidence if it contains judicial admissions negating a cause of action. Lyons v. Lindsey Morden Claims Mgmt., 985 S.W.2d 86, 92 (Tex. App.—El Paso 1998, no pet). Under Texas Rule of Civil Procedure 166a(d), ISI submits and gives notice of its intent to use the following exhibits, including unfiled discovery, in support of this Motion: 27 Exhibit E. 28 August 1, 2017 Letter Agreement between Marathon and EMCOR, attached hereto as “Exhibit F.” 29 Exhibit B at p. 6. -7- EXHIBIT: DESCRIPTION: DATE: A Affidavit of Elizabeth Smith 5/14/2019 A-1 Major Service Contract between ISI and Blanchard Refining 3/14/2013 Company LLC A-2 Purchase Order 9/9/2015 B Marathon’s Original Petition 10/9/2017 C Marathon’s Galveston Bay Refinery Incident Investigation Report N/A D Full and Final Settlement and Release Agreement between Eleazar 9/14/2017 Chavez, Marathon, ASI, CS, and IVS E Mediated Settlement and Rule 11 Agreements between Marathon, 8/1/2017- ASI, CS, and IVS, respectively 8/2/2017 F Letter Agreement between Marathon and EMCOR 8/1/2017 G Marathon’s Responses to ISI’s First Set of Requests for Admissions 4/8/2019 V. STANDARD OF REVIEW To prevail on a traditional summary judgment motion, a party must show that no genuine issue of material fact exists and that it is entitled to summary judgment as a matter of law. TEX. R. CIV. P. 166a(c); Provident Life & Acc. Ins. Co. v. Knott, 128 S.W.3d 211, 215-16 (Tex. 2003). A defendant moving for summary judgment on the plaintiff’s cause of action assumes the burden of showing as a matter of law that the plaintiff has no cause of action. See Lear Siegler, Inc. v. Perez, 819 S.W.2d 470, 471 (Tex. 1991). The defendant does not need to disprove all the elements of the plaintiff’s cause of action; it must disprove only one. S.W. Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002). “To prevail on a breach of contract claim, a plaintiff must show (1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of contract by the defendant; and (4) damages sustained as a result of the breach.” Davis v. Texas Farm Bur. Ins., 470 S.W.3d 97, 104 (Tex. App.—Houston [1st Dist.] 2015, no pet.). ISI -8- will conclusively show that itdid not breach the Contract and is thus entitled to judgment as a matter of law. VI. ARGUMENT AND AUTHORITIES A. The plain language of Section 13.1 of the Contract only requires ISI to indemnify Marathon for liabilities, losses, or damages that did not result from Marathon’s negligence. The central dispute in this case relates to Section 13.1 of the Contract, the relevant part of which provides: [ISI] AGREES TO PROTECT, INDEMNIFY, HOLD HARMLESS, AND DEFEND [MARATHON] AND THE OFFICERS, DIRECTORS, EMPLOYEES, WORKMEN, AGENTS, SERVANTS AND INVITEES OF [MARATHON] (ALL HEREAFTER REFERRED TO AS “INDEMNITEES”), FROM AND AGAINST ALL LOSSES, DAMAGES (INCLUDING PUNITIVE DAMAGES), DEMANDS, CLAIMS, SUITS AND OTHER LIABILITIES, INCLUDING ATTORNEY FEES AND OTHER EXPENSES OF LITIGATION OR DEFENSE (ALL HEREINAFTER REFERRED TO AS “CLAIMS”) BECAUSE OF: (i) BODILY INJURY, INCLUDING DEATH AT ANY TIME RESULTING THEREFROM ... WHICH OCCUR, EITHER DIRECTLY OR INDIRECTLY, IN CONNECTION WITH PERFORMANCE OF THE WORK CONTEMPLATED HEREUNDER OR BY REASON OF [ISI] AND ITS EMPLOYEES, WORKMEN, AGENTS, SERVANTS, SUBCONTRACTORS AND VENDORS BEING PRESENT ON COMPANY’S PREMISES, EXCEPT TO THE EXTENT THE LIABILITY, LOSS, OR DAMAGE IS ATTRIBUTABLE TO AND CAUSED BY THE NEGLIGENCE OF COMPANY, OR EXCEPT TO THE EXTENT AS LIMITED BY APPLICABLE LAW.30 30 Exhibit A-1 at § 13.1 (emphasis added). For purpose of brevity, ISI has substituted itself for the word “Contractor” and “Marathon” for references to “Company and its Affiliated Companies” and the like. ISI does not dispute that Marathon Petroleum Company LP is an “Affiliated Company” within -9- “Indemnity provisions are to be strictly construed, pursuant to the usual principles of contract interpretation, in order to give effect to the parties’ intent as expressed in the agreement.” MEMC Electronics Materials, Inc. v. Albemarle Corp., 241 S.W.3d 67, 71 (Tex. App.—Houston [1st Dist.] 2007, pet. denied) (emphasis added). “In construing a contract, [a court] must ascertain and give effect to the parties’ intentions as expressed in the writing itself.” El Paso Field Services, L.P. v. MasTec North America, Inc., 389 S.W.3d 802, 805 (Tex. 2012) (citing Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 333 (Tex. 2011)). To discern the parties’ intent, the court must “examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless.” Id. (citing J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003)). Based on these canons, Section 13.1 requires ISI to indemnify Marathon for certain “Claims,” which is defined to include “losses,” “damages,” “demands,” “claims,” “suits,” and “other liabilities.” However, the exception to ISI’s indemnity obligation—which Marathon admits is germane—applies only to liabilities, losses, or damages. To wit, Marathon contends that this provision requires ISI to indemnify it for any “losses and liabilities” it incurred as a result of the January 11, 2016 fire that were not the result of Marathon’s negligence, defined, in this instance, as the “portion attributable to or caused by parties, factors, acts, omissions, events, or circumstances” other than Marathon’s negligence.31 As a result, Marathon must establish that its Settlement payment constitutes either a liability, loss, or damage as a pre-requisite to any trial on the allocation of fault.32 the meaning of the Contract. See also Affidavit of Clair S. Winebar at ¶3, attached as Exhibit B to Marathon’s Motion for Partial Summary Judgment dated December 12, 2017. 31 Marathon’s Motion for Partial Summary Judgment dated December 12, 2017 at p. 6. 32 See infra, VI.D -10- B. Marathon could only be liable for proportionate responsibility attributable to other parties if it was found at least 51% responsible in the Underlying Lawsuits. Under Texas law, the Underlying Lawsuits, like all tort cases, would have been governed by the Proportionate Responsibility Statute codified in Chapter 33 of the Texas Civil Practice and Remedies Code. See TEX. CIV. PRAC. & REM. CODE §33.002(a)(1). For each cause of action, Chapter 33 requires the trier of fact to determine the percentage of responsibility for causing or contributing to the harm for which recovery of damages is sought for each: 1) plaintiff; 2) defendant; 3) settling party; and 4) responsible third party. TEX. CIV. PRAC. & REM. CODE §33.003(a). In the Underlying Lawsuits, the juries would have been required to allocate responsibility between the respective Claimants, Marathon, ISI, ASI, CS, and IVS. Crucially, Chapter 33 limits the liability of each responsible party as follows: (a) Except as provided in Subsection (b), a liable defendant is liable to a claimant only for the percentage of the damages found by the trier of fact equal to that defendant's percentage of responsibility with respect to the personal injury, property damage, death, or other harm for which the damages are allowed. (b) Notwithstanding Subsection (a), each liable defendant is, in addition to his liability under Subsection (a), jointly and severally liable for the damages recoverable by the claimant under Section 33.012 with respect to a cause of action if: (1) the percentage of responsibility attributed to the defendant with respect to a cause of action is greater than 50 percent; or. . . TEX. CIV. PRAC. & REM. CODE §33.013 (emphasis added). The implication is simple: unless Marathon’s percentage of responsibility was found to be greater than 50 percent, itwould only have been liable for the percentage of total damages that are equal to its percentage of negligence. In the absence of a finding that Marathon’s fault was greater than 50 percent, it would not have been required to pay for damages attributable to the percentage of fault assigned to ISI, ASI, CS, or IVS, and it would not have any claim for indemnity under any construction of the Contract. See -11- Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407,424 (Tex. 2011) (“[b]ecause none of the contractors was attributed a percentage of responsibility greater than 50%, the proportionate responsibility statute does not permit joint and several liability”). C. Texas law prohibits Marathon from settling more than its own fault precisely to prevent defendants from enriching themselves in satellite litigation. The raison d’être of Marathon’s entire strategy—settle the Underlying Lawsuits and then bring suit against ISI—is simple: Marathon wishes to be indemnified for 100% of the $86 million it paid out in the Settlement, which it could not achieve if fault was allocated in the Underlying Lawsuits. Instead, even if Marathon’s construction of Section 13.1 is correct, which ISI expressly denies,33 the most Marathon could have successfully recovered is 49% of its total liability, which amounts to $42.14 million. 34 In this scenario, the difference between what Marathon could have recovered had it joined its indemnity claim in a trial of the Underlying Lawsuits and what it is seeking in this case is demonstrated by the chart below:35 Hypothetical Joint and Several ISI’s Hypothetical What Marathon seeks Share of Liability: Indemnity Obligation in from ISI in this Marathon’s Underlying Lawsuits: Lawsuit: Fault: 0% No $0 $86 million 30% No $0 $60.2 million 60% Yes $34.4 million $34.4 million For the self-evident reasons illustrated above, Marathon is transparently attempting to use its Settlement of the Underlying Lawsuits to circumvent the joint and several liability scheme 33 See infra at Section VI.E 34 See supra at Section VI.B 35 This does not account for a settlement credit based upon the rebate agreement evidenced by Exhibit F. -12- enumerated by Chapter 33 and the plain language of the Contract. Marathon admitted as much in its previous briefing to this Court: In the underlying lawsuit, as in any negligence suit brought under Texas’ proportionate responsibility statute, Marathon Plaintiffs faced the risk of being found more than 50% responsible and held jointly and severally liable for the entire judgment – both the portions attributable to the Marathon Plaintiffs and the portions attributable to ISI (as a designated responsible third party) and the other defendants. [internal citation omitted]. Marathon Plaintiffs settled that entire risk and now seek to recover that for what they legally contracted – indemnity from ISI for the settlement funds other than the share attributable to Marathon Plaintiffs’ own 36 negligence. Marathon’s candor belies the fact that, regardless of the risk of joint and several liability, it could not settle all liabilities resulting from the January 11, 2016 fire as a matter of law. “[A] defendant can settle only his proportionate share of a common liability and cannot preserve contribution rights under either the common law or the comparative negligence statute by attempting to settle the plaintiff’s entire claim.” Beech Aircraft Corp. v. Jinkins, 739 S.W.2d 19, 21-22 (Tex. 1987) (emphasis added); see also Pearce v. Vince Hagan Co., 834 S.W.2d 108, 109 (Tex. App.—Fort Worth 1992, writ denied). In other words, when Marathon agreed to pay the Claimants $86 million in the Settlement, that $86 million could only settle Marathon’s proportionate fault. Marathon could not settle the fault of ISI, ASI, CS, or IVS. 37 The Supreme Court of Texas announced this rule to prohibit exactly what Marathon is attempting here—a settlement that does not result in saving time or judicial resources but instead only serves to enrich a defendant seeking indemnity for more than it could have recovered normally.38 36 Marathon’s Response to Defendant’s Post Hearing Brief dated January 23, 2018 at p. 3. (emphasis original). 37 As ASI, CS, and IVS participated in the Settlement, they settled the entirety of their fault regardless. 38 Despite Marathon’s protestations that it only seeks to recover indemnity from ISI for settlement funds “other than the share attributable to the Marathon Plaintiffs” it has yet to admit that it could not -13- The law announced in Jinkins remains in effect today and has repeatedly been re-affirmed. To wit, construing Jinkins, a later Supreme Court of Texas opinion stated “this court held that a joint tortfeasor could settle only its proportionate share of a common plaintiff’s cause of action.” International Proteins Corp. v. Ralston-Purina Co., 744 S.W.2d 932, 934 (Tex. 1988). “[A] defendant can legally settle only his proportionate share of the common liability of the plaintiff’s cause of action.” Herzog Contracting Corp. v. Burlington Northern Railroad Co., No. 14-96- 000864-CV, 1997 WL 473681 (Tex. App.—Houston [14th Dist.] Aug. 21, 1997, no pet.) (mem. op., not designated for publication). Marathon will no doubt protest that it is not seeking contribution from ISI but rather contractual indemnity, and that this distinction renders Jinkins and its progeny irrelevant. Setting aside that the type of fault-based indemnity sought is merely a contribution scheme codified by contract, Marathon’s self-serving reading of Jinkins is entirely too narrow, as the Court’s rationale is directly applicable in the instant case: We see no advantage in allowing defendants responsible for the plaintiff’s injuries a right to, in effect, buy the plaintiff’s claims and prosecute the other jointly responsible parties. It is not apparent that such settlements will result in any significant savings of time or resources. We can, however, envision that the settling defendant’s unusual posture as surrogate plaintiff, co-defendant and cross- plaintiff will confuse a jury and possibly prejudice the remaining parties. Jinkins, 739 S.W.2d at 21-22. Marathon’s suit creates the exact “unusual posture” that the Court sought to avoid, and its strategy runs afoul of the Court’s justification for announcing the rule that a party could only settle its own fault. Specifically, Marathon’s actions spawned an inefficient have been liable for fault attributable to ISI unless it was found at least 51% at fault. In seeking the full amount of the Settlement, it seeks reimbursement for losses that could not have been attributable to anyone other than Marathon. -14- lawsuit that saves neither time nor judicial resources while creating a confusing new alignment of the parties in an attempt to reconstruct a trial allocating fault for the January 11, 2016 fire without input from any of the injured Claimants or other contractors. This posture is likely to confuse the jury and prejudice ISI. “While the courts favor settlement of disputes and incline to enforcing parties' agreements toward that end, we do not do so when. . . the result is worse than if the parties had not settled.” State Farm Fire and Cas. Co. v. Gandy, 925 S.W.2d 696, 714 (Tex. 1996). Moreover, the 14th Court of Appeals has expressly rejected the argument that Marathon makes in this case—that the risk associated with joint and several liability enabled them to settle more than their own fault: Of course, where a solvent defendant finds itself among insolvent co-defendants, it may, as a practical matter, be willing to pay more in settlement than its estimated percentage share of liability in order to avoid being subjected to joint and several liability for all of the damages, and then having no co-defendant from whom contribution can be recovered. However, under section 33.015(d), Beech, and State Farm, its settlement payment will nevertheless be deemed to represent only its proportionate share of the common liability and entitle it to no claim for contribution. Herzog, 1997 WL 473681 at n.3 (emphasis added). As in Herzog, the fact that Marathon assessed that it was at risk of being held joint and severally liable does not invalidate the blackletter rule announced by Jinkins. Consequently, Marathon’s $86 million settlement can only be attributed to its own proportionate fault for the damages sustained by the Claimants in the January 11, 2016 fire. Because Marathon admits that it is not entitled to seek indemnity for its own fault,39 ISI is entitled to summary judgment. 39 Marathon’s Motion for Partial Summary Judgment dated December 12, 2017 at p. 6. -15- D. Under Marathon’s theory of the case, it could not have suffered a liability, loss, or damage attributable to any other party. Even if the Court allows Marathon to pursue an indemnity claim premised on the assertion that it could settle other parties’ fault, its indemnity claim still fails as a matter of law. In similar situations, courts in Texas and the Fifth Circuit have consistently required parties seeking insurance and/or indemnity coverage for amounts paid out in a settlement to prove that those amounts are actually covered by the relevant policy or agreement. Enserch Corp. v. Shand Morahan & Co., Inc., 952 F.2d 1485, 1494 (5th Cir. 1992) (“We cannot allow an insured to settle allegations against it (some of which might be covered by its insurance, some of which might not) for its policy limits and then seek full indemnification from its insurer when some of that settled liability may be for acts clearly excluded by that policy”). “The damages recited in either a judgment or a settlement of the underlying lawsuit must be apportioned between claims covered by the policy and those that are not.” Bain Enterprises LLC v. Mountain States Mutual Cas. Co., 267 F.Supp. 3d 796, 822 (W.D. Tex. 2016) (quoting Wilcox. v. American Home Assur. Co., 900 F. Supp. 850 (S.D. Tex. 1995)). “The burden of apportioning damages between covered and non- covered claims, however, rests on the insured.” Id. Consequently, Marathon has the burden to demonstrate that the damages for which it seeks indemnity (i.e. the Settlement) are either a liability, loss, or damage covered by Section 13.1 of the Contract. Because the plain meaning of each of those words in this context require a legal obligation, Marathon has done just the opposite. 1. The Settlement is not a liability, loss, or damage unless Marathon can demonstrate that it would have been legally obligated to pay for ISI’s (or potentially other parties’) proportionate responsibility. The Contract does not define the terms “liability,” “loss,” or “damage.” Consequently, they should be given their “common, ordinary meaning” while reading them “in context and in light of the rules of grammar and common usage.” Anadarko Petroleum Corp. v. Houston Cas. -16- Co., No. 16-1013, 2019 WL 321921 (Tex. Jan. 25, 2019) (citing RSUI Indem. Co. v. The Lynd Co., 466 S.W.3d 113, 118 (Tex. 2015)). To determine a word’s common meaning, Texas courts “typically look first to their dictionary definitions and then consider the term’s usage in other statutes, court decisions, and similar authorities.” Id. (citing Tex. State Bd. Of Exam’rs of Marriage & Family Therapists v. Tex. Med. Ass’n., 511 S.W.3d 28, 35 (Tex. 2017)). Under Texas law, there is a clear distinction “between an obligation to indemnify the inde