MDC Enegy LLC v. Crosby Energy Services Inc. et al. was an indemnity dispute in which the players were many and the facts complicated.
But first
Here is the report on the case, with lots of details omitted:
There were two Master Services and Supply Contracts:
- Between MOF as “Contractor” and MDC as “Company”;
- Between Crosby as “Contractor” and MDC as “Company”. That agreement included MDC affiliate Reeves in the “Company Group”.
In a suit by an employee of MOF against Crosby and its employee Marrufo, Crosby/Marrufo demanded contractual defense and indemnity from MDC and its related entities. Crosby/Marrufo were performing under both agreements and claimed to be additional insureds as subcontractors under the Crosby-MDC agreement.
Crosby/Marrufo’s contention: MOF was a Contractor of MDC but also a subcontractor of the MDC entities under the Crosby-MDC agreement and therefore included in the definition of “Company Group”. Because MOF was part of the Company Group, Crosby/Marrufo as “Contractor” were entitled to be indemnified by the MDC entities.
MDC’s contention: It owed no indemnity because MOF was MDC’s Contractor, and “Company Group” included only subcontractors. (The parties agreed that if MOF was not a subcontractor of any entity included in the definition of “Company Group” then the MDC entities were not required to defend Crosby/Marrufo.)
The Question:
Did MOF fall within the definition of ”Company Group” in the Crosby-MDC agreement? That depended on the interpretation of “subcontractor” as used in the Crosby-MDC agreement.
What is a “subcontractor” anyway?
The Court interpreted the plain and ordinary meaning of the unambiguous contract term “subcontractor”, which Merriam-Webster defines as “an individual or business firm contracted to perform part or all of another’s contract”. Black’s Law Dictionary and the Fifth Circuit pretty much agree.
The Crosby-MDC agreement used “Contractor” to refer to Crosby and “contractor” when the word did not mean Crosby. “Subcontractor” appeared in both agreements as a defined term in the definition of Contractor Group. “Subcontractor” was defined to mean contractors retained by Crosby.
The record was devoid of evidence that MOF’s work comported with the definition of “subcontractor” under the Crosby-MDC agreement. The evidence demonstrated that MOF was not a subcontractor of any entity listed in the agreement’s definition of “Company Group”. The court referred to “creative but ultimately unpersuasive arguments” to overcome the absence of a contract from which Crosby took a portion.
The Texas mineral lien statute.
MOF did not meet the statute’s definition of “mineral subcontractor’. There was no contractual relationship between MOF or MDC on the one hand and any MDC entity on the other. The statute requires a contractual link between the principal party (Party A), mineral contractor (Party B), and mineral subcontractor (Party C) in order to meet the definition.
The evidence demonstrated that MOF was a Contractor, not a subcontractor. MOF was not included in the definition of Company Group in the Crosby-MDC agreement for whose conduct MDC owed Crosby/Marrufo indemnity.
The result
MDC had no duty to defend, indemnify and provide insurance coverage to Crosby/Marrufo.
Peter Yarrow RIP
Sam Moore RIP
[View source.]
