Ankor Energy, LLC v. Kelly

271 So. 3d 798
CourtSupreme Court of Alabama
DecidedAugust 24, 2018
Docket1151269; 1160476
StatusPublished
Cited by2 cases

This text of 271 So. 3d 798 (Ankor Energy, LLC v. Kelly) is published on Counsel Stack Legal Research, covering Supreme Court of Alabama primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ankor Energy, LLC v. Kelly, 271 So. 3d 798 (Ala. 2018).

Opinion

BOLIN, Justice.

Ankor Energy, LLC, and Ankor E&P Holdings Corporation (hereinafter referred *800to collectively as "Ankor") appeal from the Escambia Circuit Court's grant of a motion for a new trial in favor of Jerry M. Kelly, Sr., Kandace Kelly McDaniel, Kelly Properties, LLP, and K&L Resources, LLP (hereinafter collectively referred to as "the Kellys"). The Kellys filed a cross-appeal in the event the order granting the motion for a new trial was reversed, arguing that the motion for a new trial was due to be granted on an alternative ground.

Facts and Procedural History

In 2010, Renaissance Petroleum Company, LLC, drilled two oil wells in Escambia County. The wells were known as the Craft-Blackstone 17-5 well ("the 17-5 well") and the Craft-Huxford 18-2 well ("the 18-2 well"). The wells were part of Renaissance's larger project involving over 100 oil and gas leases and ultimately more than a dozen wells. The Kellys own property in Escambia County and entered into two leases with Renaissance. The leases included property near the two wells.

In December 2010, Ankor acquired an interest in Renaissance's project and leases in Escambia County, including the 17-5 well and the 18-2 well. In January 2011, Renaissance and Ankor petitioned the Oil and Gas Board ("the Board") to establish production units for the two wells. A production unit is the maximum area that can be efficiently and economically drained by a particular well. In February 2011, the Board held a hearing to determine what property to include in the production units. The Kellys were represented by counsel at the hearing and argued that their property should be included in the production units. On February 18, 2011, the Board established the production units for the two wells but did not include the Kellys' property. Renaissance continued to operate the project until May 2011, when Ankor took over operations.

In December 2011, Ankor offered to request that the Board include the Kellys' property in the production units. Ankor took the position that it had not drained any oil from the Kellys' property, and Ankor offered to pay royalties to the Kellys but only after the date the Board included the Kellys' property in the production units. The Kellys did not accept the offer.

On February 3, 2012, the Kellys sued Ankor, among others, alleging breach of contract, negligence, wantonness, breach of an implied covenant to develop, breach of an implied covenant to protect from drainage, fraudulent drainage, and tortious breach of implied legal duties.1 Specifically, the Kellys alleged that Ankor failed to include their property in the production units presented to the Board, knowing that their property should have been included. They further argued that they suffered a permanent loss of their oil and gas by Ankor's production and capture of oil and gas from adjacent property, thereby draining oil and gas from the Kellys' property. They asserted that the affirmative acts of Ankor, as the Kellys' lessee, caused drainage of their premises and a substantial depletion or destruction and/or impairment in value of the Kellys' oil and gas interest. With the permission of the court, the Kellys later filed a "restated" amended complaint under seal. The Kellys alleged that the restated complaint contained references to confidential Ankor documents and, pursuant to earlier trial court orders, had to be filed under seal. Ankor filed a motion to strike the restated complaint on several grounds, including arguing that the restated complaint added a new claim alleging waste.

*801In response, the Kellys argued that "waste" in the oil and gas industry refers to operational losses in oil and gas either from surface loss, destruction of the oil and gas, or underground loss. They argued that their original complaint included a claim alleging waste in that they alleged Ankor had a duty to "do nothing to impair" the value of their leases and to use reasonable care to protect the Kellys from drainage or loss by an affirmative act. The Kellys argued that as a proximate result of Ankor's breach of its legal duty not to impair the value of the Kellys' oil and gas interest and its legal duty to use reasonable care to protect the Kellys from drainage or depletion or destruction of their oil and gas interests, Ankor had committed waste. The trial court denied the motion to strike the restated complaint.

At trial, the Kellys withdrew certain of their claims, and the trial court ultimately charged the jury on breach of implied covenants arising under the lease agreements, fraud, wantonness, and waste. The jury returned a verdict in favor of Ankor on all claims. The Kellys filed a motion for a new trial. In their motion, the Kellys alleged, among other things, that a juror had disregarded the trial court's instruction regarding independent research of the issues. The Kellys attached a handwritten affidavit from a juror in which the juror admitted that she had looked in the online Schlumberger Oil Field Dictionary to become familiar with the phrases she heard in testimony such as "Smackover," "How oil migrates," "reservoirs," and "rock formation." In her affidavit, the juror stated that she did not share the results of her online search with other jurors, but that she did use the information to help her understand the proceedings and to help make her decision. The juror signed the affidavit. Counsel for the Kellys notarized the juror's handwritten affidavit.

In response, Ankor filed a motion to strike the juror's handwritten affidavit, arguing that it was an impermissible attempt to impeach the jury's verdict. Ankor further argued that, even if the trial court considered the handwritten affidavit, there was no showing of prejudice to the Kellys. It argued that the handwritten affidavit was silent as to whether this juror would have been inclined to rule in favor of the Kellys had she not considered the meanings of the searched terms. Ankor also argued that, because the juror did not share the information with the other jurors, the search could not have affected the other jurors' decisions.

The Kellys filed a supplemental response, arguing that the terms searched by the juror online were crucial to the issues of waste and drainage. Both parties presented expert testimony on the question of oil migration, and the oil at issue was found in Smackover rock. The Kellys argued that the online search was presumptively prejudicial because those oil-industry terms are not within the knowledge of most jurors. They further argued that the exposure of one juror to extraneous information warrants a new trial.

Ankor filed a supplement to its motion to strike. It argued that the juror's affidavit was not a properly sworn statement. It argued that, because to be guilty of perjury the affiant must be properly sworn, the juror could not be convicted of perjury and that, therefore, the document she signed was not a properly sworn statement.

Ankor attached a second affidavit from the juror in which she stated that counsel for the Kellys had called her numerous times and that she finally had agreed to meet counsel at a McDonald's fast-food restaurant. She further stated that, at the time she signed her statement, she was not swearing to the contents of that statement nor was she aware that it would be "labeled"

*802an affidavit.

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271 So. 3d 798, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ankor-energy-llc-v-kelly-ala-2018.