EXXON MOBIL CORPORATION v. Kinder Morgan Operating LP

192 S.W.3d 120, 2006 Tex. App. LEXIS 1404, 2006 WL 397163
CourtCourt of Appeals of Texas
DecidedFebruary 21, 2006
Docket14-04-01060-CV
StatusPublished
Cited by36 cases

This text of 192 S.W.3d 120 (EXXON MOBIL CORPORATION v. Kinder Morgan Operating LP) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
EXXON MOBIL CORPORATION v. Kinder Morgan Operating LP, 192 S.W.3d 120, 2006 Tex. App. LEXIS 1404, 2006 WL 397163 (Tex. Ct. App. 2006).

Opinion

OPINION

ADELE HEDGES, Chief Justice.

Exxon Mobil Corporation appeals from a take nothing judgment in its lawsuit against Kinder Morgan Operating L.P. “A” f/k/a Enron Liquids Pipeline Operating Limited Partnership, Kinder Morgan, Inc.; ONEOK Bushton Processing, Inc. f/k/a Enron Gas Processing Co. and KN Processing, Inc.; and Enron Liquids Pipeline Co. n/k/a Kinder Morgan GP, Inc. (“appellees”). 1 In 1987, Exxon Mobil and appellees entered into a Gas Processing Agreement under which appellees agreed to process Exxon Mobil’s natural gas. In *123 the present action, Exxon Mobil sued ap-pellees claiming, inter alia, breach of contract, conversion, fraudulent inducement, and fraudulent concealment, all relating to the gas processing relationship. Exxon Mobil’s primary claim is that appellees did not provide it with all of the propane to which it was entitled from the natural gas. The trial court granted a directed verdict favoring appellees on the conversion claim. The jury returned a verdict favoring ap-pellees on all remaining claims. The trial court entered a take nothing judgment in favor of appellees. In three issues, Exxon Mobil contends that (1) the jury’s verdict on the breach of contract claim was against the great weight and preponderance of the evidence; (2) the trial court erred in granting a directed verdict on the conversion claim; and (3) the trial court commented on the weight of the evidence in front of the jury. Under each issue, Exxon Mobil requests that we reverse and remand for a new trial. We affirm.

Background

In 1987, Exxon Mobil produced natural gas from the Hugoton Field in southwest Kansas. Appellees operated a gas processing plant in Bushton, Kansas. The parties entered into a Gas Processing Agreement (“GPA”), under which appel-lees agreed to process Exxon Mobil’s Hu-goton Field gas. 2 The GPA called for appellees to extract liquid and liquefiable hydrocarbons, such as propane, butane, and natural gasoline, out of the natural gas stream. These extracted hydrocarbons were then to be provided to Exxon Mobil as “plant products” based on certain specified percentages. The GPA also required appellees to perform “BTU control activities” so that the remaining natural gas, or “Residue Gas,” leaving the plant would contain an average of no less than 950 BTUs per cubic foot. 3 In order to account for the BTU control activities, the percentage of extracted propane that the GPA allots to Exxon Mobil was expressly made variable. As will be discussed in detail below, Exxon Mobil maintains that the GPA required appellees to vary the amount of Exxon Mobil’s own propane extracted or reinjected in order to meet the BTU requirements in the residue gas stream. Appellees assert that the GPA permitted them to vary the amount of propane provided to Exxon Mobil as a plant product to account for the BTU control activities but did not require appellees to actually use Exxon Mobil’s propane for such activities. 4

The parties operated under the GPA until 1997, when they signed Amendment No. 3. This amendment removed the variability of the percentage of propane received by Exxon Mobil in exchange for a fixed percentage, which was lower than the potential amount in the original agreement but considerably higher than what Exxon Mobil actually had been receiving. The negotiations leading to Amendment No. 3 *124 were prompted by auditing concerns raised by Exxon Mobil. Exxon Mobil asserted that appellees were required to measure propane at the tailgate of the plant, whereas appellees apparently had been measuring in the middle of the plant prior to extraction of inert compounds (such as helium and nitrogen), the presence of which would decrease the share of propane attributable to Exxon Mobil. In its brief, Exxon Mobil acknowledges that the signing of Amendment No. 3 settled the claims relating to this alleged allocation discrepancy.

Exxon Mobil contends that its auditors ultimately discovered additional allocation discrepancies due to appellees’ measuring propane prior to the extraction of water, helium, and nitrogen. On September 1, 2000, Exxon Mobil filed this lawsuit. During the discovery process related to these initial claims, Exxon Mobil asserts that it learned that appellees had been appropriating vast quantities of propane that should have been provided to Exxon Mobil. In short, Exxon Mobil contends that appel-lees varied the amount of propane attributable to Exxon Mobil to account for BTU control but did not actually use Exxon Mobil’s propane for BTU control. Instead, appellees extracted the propane attributable to Exxon Mobil and swapped it for methane, which was used to raise the BTUs of the residue gas stream as necessary. Appellees, or entities related to ap-pellees, then sold the propane for a profit. Exxon Mobil claims that the difference between the value of the propane it was due and the value of the propane it received was around $37 million.

Thus, the fundamental point of contention in this lawsuit is as follows: did the provisions in the GPA mandating the variance of the amount of propane attributable to Exxon Mobil require that its propane actually be used for BTU control, or did those provisions merely provide a method of accounting for BTU control without requiring that only Exxon Mobil’s propane be used for such control activity?

The trial court granted a directed verdict favoring appellees on Exxon Mobil’s conversion claim. The breach of contract, fraudulent inducement, and fraudulent concealment claims were submitted to the jury, which returned a verdict favoring appellees on those claims. Accordingly, the trial court entered a take nothing judgment favoring appellees. On appeal, Exxon Mobil contends that (1) the jury’s verdict on breach of contract was against the great weight and preponderance of the evidence; (2) the trial court erred in granting a directed verdict on the conversion claim; and (3) the trial court commented on the weight of the evidence in front of the jury. 5

Breach of Contract

In its second issue, Exxon Mobil contends that the jury’s verdict on the breach of contract claim was against the great weight and preponderance of the evidence. 6 We utilize the normal standards of review in considering this factual sufficiency challenge. See Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex.2001). *125 Exxon Mobil specifically attacks the jury’s negative answer to Question No. 2 in the charge, which reads as follows:

QUESTION NO. I
Did any defendant fail to comply with the Gas Processing Agreement?
In answering this question, you are to consider only whether [Exxon Mobil] received the number of gallons of plant products that it was entitled to under the terms of the 1987 Gas Processing Agreement.

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Cite This Page — Counsel Stack

Bluebook (online)
192 S.W.3d 120, 2006 Tex. App. LEXIS 1404, 2006 WL 397163, Counsel Stack Legal Research, https://law.counselstack.com/opinion/exxon-mobil-corporation-v-kinder-morgan-operating-lp-texapp-2006.