Maxus Exploration Co. v. Moran Bros.

Moran Bros., Inc. (Moran) (defendant), a Texas company, agreed to drill an oil well in Kansas for Diamond Shamrock Exploration Co., now Maxus Exploration Co., (Diamond Shamrock) (plaintiff), a Delaware corporation. The contract was negotiated in Texas and included an indemnity clause in which both parties agreed to indemnify the other for personal injuries sustained by its employees—even if caused by the other’s negligence. One of Diamond Shamrock’s employees was injured while Moran was drilling the well. The employee sued Moran in federal court in Kansas. Moran filed a “cross-action” claim for indemnity against Diamond Shamrock. The employee was awarded a $2.7 million judgment against Moran for its negligence. Moran settled with the employee and Diamond Shamrock paid approximately half of the settlement and Moran paid the balance. Both parties reserved their right to seek indemnity from each other. Thereafter, Diamond Shamrock filed an action in state court in Texas against Moran to contest the validity of the indemnity provision. Shamrock contended Texas governed and it would have voided or limited its obligation to indemnify Moran, and alternatively, under Kansas law, the provision was not specific enough and thus not enforceable. Moran contended the provision was valid under both Texas and Kansas law. Both parties moved for summary judgment, and the trial court, taking judicial notice of Kansas law, upheld the indemnity provision and granted summary judgment for Moran. Diamond Shamrock appealed, and the court of appeals, applying Texas law, held that the indemnity provision was valid and affirmed the trial court’s decision. Diamond Shamrock again appealed.