Leading engineering and construction company McDermott International helped build the multibillion-dollar Freeport LNG facility, but after a June 2022 explosion at the plant, the company found itself facing two-fold litigation: FLNG’s insurers were trying to recoup more than $1.3 billion in insurance payments and FLNG was bringing a design defect claim.
If facing roughly $2 billion in potential liability wasn’t complex enough, both cases were brought as adversary proceedings in the bankruptcy case in the Southern District of Texas of McDermott’s joint venture partner, Zachry Construction.
“To begin with, disputes over the execution of [engineering, procurement and construction] contracts are themselves thorny, as they involve sophisticated counterparties, heavily negotiated contracts, a variety of subcontracts, and the exigencies of work on multibillion-dollar construction projects,” McDermott’s outside counsel at Baker McKenzie, Jack Massey, explained in setting the scene.
“McDermott [found] itself facing different plaintiffs — FLNG itself and its subrogee insurers — while shaping a defense along with its joint venture partners Chiyoda and Zachry,” Massey said. “Topping it off, both cases present extremely technical engineering issues — the standard for designing and safely operating an LNG plant in the subrogation case and the design of some of the world’s largest plant motors in the defect case.”
With an aggressive approach to litigation, McDermott has seen the dismissal of the subrogation claim, which is currently on appeal, as well as the dismissal of the consequential damages portion of the defect lawsuit.
The successful, early outcomes of those cases prompted Massey to nominate the McDermott legal team for the 2025 Houston Corporate Counsel Award for Business Litigation of the Year. McDermott GC Rachel Clingman and her team, senior director of legal compliance Barry White, vice president of corporate legal and securities Kim Wolford and senior litigation counsel Katie Brien, are one of two finalists for the 2025 Houston Corporate Counsel Award for Business Litigation of the Year.
The award will be presented by the Association of Corporate Counsel’s Houston Chapter and The Texas Lawbook on Thursday at the Four Seasons in Houston.
Massey explained the role of each member of the team and why they’re such a formidable opponent when their forces are combined.
“Rachel leads the team, lends her own world-beating trial lawyer experience to evaluating key claims and issues, and drives strategy,” he said. “Here, Rachel led in evaluating potential jurisdictional and venue issues, developing the legal framework for the defense and focusing the effort.”
Wolford, he said, is “the nexus for assessing in detail how discrete issues or arguments in one claim might affect the company” in other cases.
“She is essentially the corporate complement to Katie Brien, looking at the disputes from the perspective of companywide risk management and providing invaluable guidance, access and support,” he said.
White, Massey said, takes on the role of “project execution lawyer” who is “a true master of the construction business.” Massey called him “a projects specialist with world-beating experience in disputes, operations and deal structuring issues related to big infrastructure projects.”
“There are very few people who know EPC contracting and execution as well as he does, and most of them are operations-side executives rather than lawyers,” Massey said. “He’s unmatched in understanding why specific disputes are happening and thinking about how to tackle them.”
That leaves Brien to round out the team, whom Massey praised as “one of the best younger lawyers I know.”
“I really believe that, so I’ll write it again: she’s one of the best younger lawyers I know,” he wrote in his nomination form. “Results-oriented, aggressive, responsible and able, she gets the job done and is a delight to work for.”
Brien reflected on the difficulties of coordinating a defense strategy in the FLNG litigation while simultaneously dealing with the overlay of a bankruptcy proceeding, calling the intersection “fascinating.”
“It’s more complicated and involved than a lot of disputes, even disputes over EPC contracts, which are themselves complex,” she said. “It took a full court press inside of our legal department to keep up with all of the issues arising from the FLNG disputes. But we also knew it wouldn’t help things to be reactive — we wanted to take the initiative, drive the litigation, and improve our position. And I give our team credit for really keeping focused on that point and getting us in position for early and enormous wins on motion practice.”
The Litigation and the Partnership
According to the Federal Energy Regulatory Commission, an explosion and fire broke out at the Freeport LNG facility on June 8, 2022, as a result of failed piping. In a root cause analysis conducted in the wake of the incident that left the plant closed for months, FERC and the Pipeline and Hazardous Materials Safety Administration pinpointed the cause of the failure as “the warming and expansion of LNG within the piping and an improperly isolated pressure relief valve.”
“The warming and expanding LNG increased the pressure within the piping resulting in a rupture and release of LNG, in both vapor and liquid form,” the report reads. “The LNG vapor then encountered an ignition source and exploded, forming a short-lived fireball. Debris from the explosion caused a breach of smaller diameter piping nearby causing a secondary small LNG pool fire. This incident caused damage to Freeport LNG Terminal facilities but did not extend outside the fence line of the facilities, and no offsite structures were damaged. No injuries or fatalities occurred at the site and no injuries or fatalities occurring outside the fence line were reported to federal authorities.”
Brien, senior principal counsel in McDermott’s litigation department, said after the initial filing of the two lawsuits, it took some investigating for the team to begin to understand the scope and the stakes of the claims the company faced.
“The first action filed did not specify an amount so we began researching internally what we could find out with respect to what insurance payments were made and their amounts,” she said. “Once we uncovered articles identifying the estimated amount of insurance payments made — which was later confirmed by the second filing — we realized this was going to be a large litigation that required all hands on deck, and quick action.”
Assembling the team of in-house lawyers and outside counsel to take on the litigation was headed up by Clingman, McDermott’s executive vice president and chief legal officer. Her experience as a trial attorney and litigator was key to managing the high-profile dispute, Brien said.
“Not only does she lead the team well, she also provides valuable guidance to outside counsel,” she said.
Clingman put Brien and Stacie Brownell in charge of leading factual investigations, managing outside counsel and advising on litigation risks. Business line legal team members White and Ammar Dadabhoy were tasked with providing guidance and insight on ongoing projects involving the joint venture members and Wolford was called on to bring her restructuring and bankruptcy experience to the team.
After the internal team was in place, McDermott began building its outside counsel ranks, tapping Baker McKenzie and The Kim Law Firm, noting those firms had previously “delivered excellent results for McDermott,” Brien said.
“They have a proven track record as complex litigators, trial lawyers and EPC specialists,” she said. “Not only does our legal team trust them, but our key business leaders trust them.”
The kudos go both ways. Massey called McDermott’s legal team “expert” when it comes to dispute strategy and litigation management.
“So, you feel like you’re with the pros from the minute you’re engaged, and you know your work is going to be collaborative, scrutinized, purposeful and ultimately valued as a result,” he said.
But it was more than just prior successes that caused the McDermott team to partner with those firms on this monumental litigation. Brien said what sets those two apart “is their continuous effort to familiarize themselves with the company.”
“Like all companies, McDermott has gone through many changes,” she said. “John Kim and Baker McKenzie keep abreast of our business operations, relationships, industry and risk tolerance so their advice and recommendation is tailored to furthering McDermott’s overall future vision for the company.”
While the complexity of the case was amplified by being part of a corporate bankruptcy proceeding, the McDermott team also saw advantages to using that forum — because U.S. Bankruptcy Judge Marvin Isgur was overseeing all of the litigation claims relating to FLNG, there was a streamlining effect on key issues in the case, and the court had a broader contextual understanding of the operations and Zachry’s restructuring.
There was another looming challenge in the case, too: developing a unified defense strategy among the joint venture partners in a case where each partner had varying priorities and competing interests.
“This can create tension in maintaining a consistent legal strategy and messaging,” Brien said. “To manage this, the JV partners entered into a joint defense agreement to encourage open communication. This allowed all internal and external legal teams to maintain continuous contact and ensure each step in the litigation was strategic and did not backfire.”
Brien pointed to the team’s unwavering trust and confidence in outside counsel as one of the most important things that led to the desired outcome.
“With a claim alleging such a high dollar amount, there is always anxiety — no matter how sure you are of your position,” Brien said. “However, it is much easier to maintain confidence when there is a respectable amount of trust to depend on.”
In November 2024, Judge Isgur freed McDermott, Zachry and Chiyoda from litigation stemming from the June 2022 explosion at the Freeport LNG facility.
At a hearing a few days before granting the motion to dismiss, Judge Isgur heard from lawyers for the joint venture partners who built the multibillion-dollar megaproject, who argued the plain language of the agreement between them and FLNG required dismissal of the adversary proceeding.
“Imagine the situation of trying to get financing when you potentially face a long-term tail of billions of billions of dollars of potential consequential loss,” John Thomas of Hicks Thomas, who represents Zachry, argued. “You just couldn’t do these projects. These [engineering, procurement and construction] companies couldn’t do these projects, and companies like FLNG and Golden Pass would not have these very profitable facilities without these types of provisions that prevent a long-term liability tail following them for decades into the future.”
At that hearing, about four minutes before he issued an oral ruling from the bench dismissing the subrogation, Judge Isgur told counsel for the insurers that he wasn’t inclined to adopt his arguments.
“I’m not even following a little bit of your argument, just so you know,” he said. “It seems obvious that you’re wrong.”
Judge Isgur’s brief, two-page written order came two days later.
“This single order concerns the two adversary proceedings and the main case. The court recommends that any appellate court consolidate these matters for appeal,” he wrote. “The terms and conditions of this order are immediately effective and enforceable upon its entry. This court retains jurisdiction with respect to all matters arising from or related to the enforcement of this order.”
The appeal of Judge Isgur’s ruling has been assigned to U.S. District Judge Charles Eskridge. Brien recalled the day Judge Isgur’s ruling granting the motion to dismiss the subrogation case came down as a hard one to top.
“But we also prevailed in defeating the consequential damages portion of the motor defect claim, which reduced the scope of that dispute (and the risk to the company) enormously,” she said, noting Judge Isgur granted McDermott’s 12(b)(6) motion to dismiss FLNG’s gross negligence claim related to the installation of motors at the plant.
Prevailing at that early stage with the court finding no plausible claim for gross negligence, after FLNG had been granted a chance to replead its claims, was “powerful vindication for our company,” Brien said.
“Smart, aggressive practice from our combined legal team, and the teams of our codefendants, got us these early wins,” she said. It’s great to get out from under the weight of two really big claims.”
Inner Workings of the Team
Another lawyer who served as outside counsel to McDermott in these matters, Kirkland partner John R. Luze, heaped praise on the team’s ability and “complimentary skill sets.” He said the team also treats outside counsel “as trusted partners.”
“Each time the McDermott team faces a strategic decision point, the team excels at stepping back to make sure that decision is made within the context of the broader commercial picture,” he said. “This holistic approach to discrete problem-solving stems from their dual hat roles as both litigators and dealmakers. While the McDermott team is always prepared to protect their rights, McDermott’s size and reputation in its industry means that an adversary one day may be a deal partner the next day, and McDermott legal team keeps this reality top of mind when making strategic decisions and giving advice in both litigation and transactional matters.”
John Kim of The Kim Law Firm sees a variety of reasons why the McDermott team has been so effective.
“The team is very active in the community … they are a fair and key promoter of diversity, development and fair hiring practices with respect to outside counsel … they are proponents of developing young lawyers,” he said. “Above all, they demand civility in even the most adversarial circumstances. These are not just professional traits but personal ones as well. They lead by example and walk the walk.”
Kim said the team’s integrity extends beyond the litigation context.
“These folks are good people [with] great personal and business ethics and integrity,” he said. “They live by the motto that one’s word should match their deeds… They teach, not preach.”
Brien said it wasn’t just confidence in the internal and external litigation teams, but confidence in the work other McDermott employees do, including those on teams building massive projects, that helped achieve this litigation win.
“[McDermott] is a great company and the best in the world at building liquified natural gas facilities,” she said. “We’re all proud to work here. We also know just how good our operations, engineering, and commercial people are — the ones who build the huge infrastructure that almost no one else can — and place the highest value on their reputations. So, it’s important to defend the company and its people from these extreme claims from FLNG.”
As Massey put it, those skillsets combine to mean the McDermott legal team “is more than the sum of its parts.”
“It helps that the parts are pretty exceptional!” he said.
Their success and effectiveness working together comes down to a few specific traits, Massey said, starting with the group’s cohesion.
“They stay in contact and act with mutual purpose,” he said.
It’s also about their initiative.
“They never stop moving to identify risks, mitigate and avoid risks, and litigate intelligently when necessary,” he said.
That dovetails nicely with the group’s practicality, Massey said.
“Things aren’t done just because,” he said. “They’re done for good reasons to advance the company’s commercial and legal aims.”
Professionalism rounds out the traits Massey identified.
“[The team has] superb leadership and direction paired with trust in and latitude for junior members to act meaningfully across the full spectrum of in-house responsibilities,” he said. “Taken together, these things create a smart, agile, and capable department.”