Statutory-Employer Tort Immunity Under Louisiana’s Two-Contract Defense Extends to Voluntary Federal Rice-Inspection Arrangements

I. Introduction

In Goodley v. Supreme Rice (5th Cir. Apr. 1, 2026) (per curiam) (unpublished), the Fifth Circuit addressed whether Louisiana’s workers’ compensation exclusivity and “statutory employer” doctrine bar a federal employee’s tort suit against a private company when the employee was injured on the jobsite.

Plaintiff–Appellant Rachel E. Goodley, a federal rice inspector with the Federal Grain Inspection Service (FGIS), was grading rice at Supreme Rice’s facility pursuant to an FGIS inspection dispatched under a long-term Contract Service Agreement. A Supreme Rice employee ran a forklift over her foot. Goodley sought benefits under the Federal Employees' Compensation Act (FECA) and also sued Supreme Rice in Louisiana state court for tort damages. Supreme Rice removed to federal court and obtained summary judgment on the ground that it was Goodley’s statutory employer under Louisiana law and therefore immune from tort liability.

The core issue on appeal was narrow but novel in application: whether Supreme Rice could invoke Louisiana’s “two-contract” statutory employer defense (La. Stat. Ann. § 23:1061(A)(2)) when the “subcontractor” performing a required component of Supreme Rice’s sales obligation was a federal inspection service operating under federal statutes and regulations—and where the inspection program for rice exports is voluntary rather than mandatory.

II. Summary of the Opinion

The Fifth Circuit affirmed summary judgment for Supreme Rice. It held that, on these facts, Louisiana’s “two-contract” defense applied: Supreme Rice had (1) a contract with a third party buyer requiring shipment of rice accompanied by an FGIS certificate, and (2) a separate service contract with FGIS to perform the inspection work necessary to satisfy that obligation. As a result, Supreme Rice was deemed Goodley’s statutory employer and enjoyed tort immunity under Louisiana’s workers’ compensation scheme.

The court emphasized the holding’s limited scope, cautioning that it was not announcing a general rule that regulated entities are always statutory employers of federal inspectors. It nevertheless concluded that the “unique nature” of the voluntary, contract-driven FGIS rice inspection relationship compelled application of the two-contract doctrine here.

III. Analysis

A. Precedents Cited

1. Summary-judgment framework

  • Warfield v. Byron, 436 F.3d 551, 557 (5th Cir. 2 006): cited for de novo review of summary judgment. This established the appellate posture: the Fifth Circuit independently assessed whether Supreme Rice was entitled to judgment as a matter of law.

2. Louisiana workers’ compensation exclusivity and the statutory employer doctrine

  • Allen v. State ex rel. Ernest N. Morial-New Orleans Exhibition Hall Auth., 2002- 1072 (La. 4/9/03), 842 So.2d 373: the opinion’s principal doctrinal anchor. The Fifth Circuit relied on Allen for: (i) the compromise rationale underlying workers’ compensation exclusivity, (ii) the distinction between the “trade, business, or occupation” defense and the “two-contract” defense, and (iii) the elements of the two-contract test, including the proposition that long-standing service agreements can satisfy the “subcontract” element.
  • Kirkland v. Riverwood Int'l USA, Inc., 95 -1830 (La. 9/13/96), 681 So.2d 329: used to explain the historical purpose of statutory employer rules—preventing principals from contracting out essential work to avoid compensation obligations—and to underscore that tort immunity was not always inherent in early versions of the statutory employer concept.
  • Roberts v. Sewerage & Water Bd. of New Orleans, 92- 2048 (La. 3/21/94), 634 So.2d 341: cited for the worker-protective interpretive principles—immunity statutes are strictly construed and “every presumption” favors preserving tort rights absent explicit statutory limitation.
  • Meche v. Farmers Drier & Storage Co., 193 So.2d 8 07 (La. App. 3 Cir. 1967): quoted (via Kirkland) for the classic statement that Section 1061 was designed to prevent contracting out “essential economic activities” to avoid compensation liability.
  • McBride v. Old Republic Ins. Co., 2024-01519 (La. 6/27/25), 413 So.3d 452: cited for the proposition that statutory employment carries a “corresponding tort immunity,” reinforcing the defensive use of statutory employer status in Louisiana.
  • Badeaux v. St. Tammany Par. Hosp. Serv. Dist. No. 1, 2021-1229 (La. App. 1 Cir. 6/3/22), 343 So.3d 230: relied upon for the purpose and articulation of the two-contract theory (to impose a compensation obligation on a principal who contracts with a third party then subcontracts the work).
  • Thomas v. Calavar Corp., 679 F.2d 416 (5th Cir. 1982): cited for the fact-intensive nature of statutory employer determinations.

3. Procedural default and issue preservation

  • Leverette v. Louisville Ladder Co., 183 F.3d 339, 342 (5th Cir. 1999): cited for the general rule that issues raised for the first time in a motion for reconsideration are not considered. The court used this to avoid reaching Goodley’s FECA-conflict argument as properly preserved.
  • Grogan v. Kumar, 873 F.3d 273, 277 (5th Cir. 2017): cited to reject consideration of a Supremacy Clause argument raised for the first time on appeal.

4. Federal compensation (FECA) and interaction with state law

  • United States v. Lorenzetti, 467 U.S. 167 (1984): used to support the premise that FECA’s subrogation/assignment mechanics can operate differently depending on state tort and compensation regimes, and that federal law does not automatically expand to offset changing state tort rules. This undergirded the court’s conclusion that no conflict existed: FECA’s assignment/subrogation only reaches whatever “right of action” state law provides.

5. Novelty and cautious decision-making

  • Levy Gardens Partners 2007, L.P. v. Commonwealth Land Title Ins. Co., 706 F.3d 622, 629 (5th Cir. 2013): cited for the principle that state courts are the final arbiters of state law—framing the Fifth Circuit’s role as applying, not reinventing, Louisiana doctrine.
  • Little v. Llano County, 138 F.4th 834 (5th Cir. 2025) (Higginson, J., dissenting), and Cleveland Hous. Renewal Project v. Deutsche Bank Tr. Co., 621 F.3d 554 (6th Cir. 2010): cited to normalize adjudication of “novel” applications of established rules; novelty does not prevent resolution.
  • McCotter v. Smithfield Packing Co., Inc., 849 F. Supp. 443 (E.D. Va. 1994): cited as a contrasting example where a federal meat inspector was held not to be a statutory employee under Virginia’s “trade, business, or occupation” approach—supporting the Fifth Circuit’s insistence on doctrine- and fact-specific analysis.

B. Legal Reasoning

1. Choosing the correct statutory-employer pathway: “two-contract” vs. “trade, business, or occupation”

The Fifth Circuit treated the case as a straightforward application of Allen’s two independent statutory employer theories. Supreme Rice invoked the “two-contract” defense rather than arguing that FGIS inspection was part of its “trade, business, or occupation.” That choice mattered because, under Allen, the “two-contract” path does not turn on whether the contracted work is the kind of work the principal ordinarily performs.

This framing also disposed of Goodley’s attempt to import “totality of the circumstances” concepts associated with the “trade, business, or occupation” jurisprudence: the court treated those arguments as analytically inapposite.

2. Applying the three elements of the two-contract defense

The court applied Allen’s test: (1) a contract with a third party; (2) work that must be performed under that contract; and (3) a subcontract entered to perform all or part of that work.

  1. Contract with a third party (undisputed): Supreme Rice’s export contract with Agrocomercial Los Samanes SA satisfied element one.
  2. Work required by the third-party contract (the “product vs. work” dispute): Goodley argued Supreme Rice merely sold a product (rice) and was not hired to “perform work,” particularly because the contract contemplated inspection by FGIS rather than Supreme Rice itself. The Fifth Circuit rejected this formal distinction. It treated the obligation to ship rice accompanied by the required inspection certificate as a contractual requirement that necessitated performance of inspection services—work that had to occur for Supreme Rice to deliver what it promised.
  3. Subcontract for part of the work (the “federal regulator” dispute): Goodley argued that the long-term service agreement with FGIS was not the kind of subcontract contemplated by the statute, and that federal inspectors cannot be “subcontractors.” The court answered both points:
    • Relying on Allen, it held that long-standing service agreements can function as the relevant contract for two-contract purposes.
    • It then confronted the harder question—whether a federal inspection service relationship can fit within the doctrine. The court stressed features that made this case different from “regulator must regulate” hypotheticals: (i) rice inspection for export is voluntary under 7 U.S.C. § 1622(h) (unlike mandatory grain inspection under 7 U.S.C. § 77(a)(1) and other mandatory federal inspection regimes), and (ii) certification can be supplied not only by FGIS employees but also by FGIS-licensed non-FGIS inspectors, meaning the service behaves like an optional, contract-procured input into a commercial deal.
    Those characteristics allowed the court to analogize the inspection function to contracted services that are commonly “sublet” to satisfy a buyer-facing contract, rather than to noncontractual governmental obligations owed to the public at large.

3. Rejecting the DMV analogy

Goodley’s DMV example was intended to show the absurdity of treating government licensing as “subcontracted work.” The court distinguished it on two grounds: (1) the inability to “opt out” of licensing requirements, and (2) the absence of the second contract—DMV duties arise from statute, not a service contract with the trucking company. By contrast, Supreme Rice had a contract service agreement for optional inspection services that were commercially demanded by the foreign buyer.

4. FECA and Supremacy Clause arguments

The court largely resolved these on procedural grounds (raised too late), but also provided a merits-oriented explanation: FECA subrogation/assignment under 5 U.S.C. § 8131(a) activates only where state law creates a “legal liability ... to pay damages” and extends only to whatever “right of action” the employee has. Because Louisiana law (as applied here) channels recovery into compensation rather than tort, FECA does not create additional tort rights and does not conflict merely because it contemplates assignment of existing third-party tort claims.

C. Impact

1. Practical effect in Louisiana statutory-employer litigation

Even as an unpublished opinion, Goodley is a detailed roadmap for how defendants may argue that optional federal inspection/certification services can supply the “subcontract” component of La. Stat. Ann. § 23:1061(A)(2) when: (i) the principal’s customer contract requires a certificate, and (ii) the principal separately contracts with a service provider (even a governmental unit) to generate that certificate.

2. Likely boundaries of the holding

The court explicitly limited the decision to “this specific arrangement” and cautioned against reading it as a blanket rule that regulated entities are statutory employers of federal inspectors. Future cases will likely turn on: (a) whether the governmental service is voluntary/contract-procured versus mandatory/statutory, (b) whether market alternatives exist (e.g., licensed private inspectors), (c) whether the certificate is embedded as a deliverable in the third-party commercial contract, and (d) the structure and timing of the service agreement (though Allen reduces the significance of “standing” versus “project-specific” contracts).

3. Incentives and risk allocation

The decision reinforces the core tradeoff of workers’ compensation schemes described in Allen: channeling workplace injuries into predictable, limited compensation while limiting tort exposure. For export-oriented principals in Louisiana, the opinion suggests a viable immunity argument when contract-required certifications are furnished through a separate service relationship that can be characterized as “sublet” performance of contract-required work.

IV. Complex Concepts Simplified

  • Statutory employer: A legal status that treats a company as the “employer” for workers’ compensation purposes even if the injured worker is hired and paid by someone else. The payoff is typically that the statutory employer may owe compensation benefits, but gains immunity from tort suits.
  • Two-contract defense (La. Stat. Ann. § 23:1061(A)(2)): Applies when a principal (1) contracts with a third party to deliver a job or result, and (2) enters a second contract so another entity performs part of that contract-required work. Employees of the second entity can become the principal’s statutory employees.
  • Trade, business, or occupation defense: A different statutory-employer path focusing on whether the contracted work is part of what the principal normally does. The court stressed this was not the theory at issue.
  • Workers’ compensation exclusivity: The “exclusive remedy” rule—if it applies, the injured worker generally cannot also recover tort damages from the employer/statutory employer.
  • FECA subrogation/assignment: FECA may require an injured federal employee to assign existing third-party tort rights to the United States, but it does not create a tort claim where state law supplies none.

V. Conclusion

Goodley v. Supreme Rice applies Louisiana’s two-contract statutory-employer doctrine to a fact pattern involving a federal rice inspector injured at a private export facility. The Fifth Circuit held that where an export contract requires an inspection certificate and the exporter separately contracts for voluntary inspection services under a long-term agreement, the exporter may qualify as the inspector’s statutory employer under La. Stat. Ann. § 23:1061(A)(2), triggering workers’ compensation exclusivity and tort immunity.

The opinion’s significance lies less in expanding doctrine than in clarifying its reach: a governmental inspection relationship can function like a “sublet” contractual service for two-contract purposes when the program is voluntary, contract-procured, and commercially integrated into the principal’s third-party obligations—while leaving open how Louisiana courts might treat mandatory federal inspection regimes or different statutory-employer theories.