Grynberg v. Amerada Hess Corporation

342 F. Supp. 1314, 42 Oil & Gas Rep. 564, 1972 U.S. Dist. LEXIS 13728
CourtDistrict Court, D. Colorado
DecidedMay 16, 1972
DocketCiv. A. C-2158
StatusPublished
Cited by3 cases

This text of 342 F. Supp. 1314 (Grynberg v. Amerada Hess Corporation) is published on Counsel Stack Legal Research, covering District Court, D. Colorado primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Grynberg v. Amerada Hess Corporation, 342 F. Supp. 1314, 42 Oil & Gas Rep. 564, 1972 U.S. Dist. LEXIS 13728 (D. Colo. 1972).

Opinion

MEMORANDUM OPINION

WINNER, District Judge.

This case was tried to the Court, and at the conclusion of the trial, time was allowed for the filing of briefs. Excellent briefs have been filed by each of the parties, and the case is now ready for decision. This opinion contains the findings and conclusions required by Rule 52.

The underlying facts are not in substantial dispute. The lawsuits stems largely from two written agreements, an agreement of December 27, 1963, between plaintiff, a Colorado citizen, and Hess Oil & Chemical Corporation, and an agreement of February 1, 1965, between the same two parties. Defendant, a Delaware corporation without principal offices in Colorado, has succeeded to the interests and obligations of Hess Oil & Chemical Corporation under those agreements, and more than $10,-000.00 is in controversy, and diversity jurisdiction exists. In accordance with the terminology of the underlying agreements, for the most part,, the parties will be referred to in this opinion as “Grynberg” and “Hess.”

The agreement of December 27, 1963, was one for the employment of Grynberg by Hess as an independent contractor. He was to utilize his expertise as a petroleum engineer and geophysicist “to conduct oil and gas operations” in Louisiana, Mississippi, Alabama and Arkansas. Regretably, as will be seen later in this opinion, this area definition requires that a Colorado court interpret difficult and obscure provisions of Louisiana and Mississippi statutory and case law. Be that as it may, the agreement was by its paragraph 2 to last for two years or until Grynberg’s death, whichever came first, and it set out certain important definitions. The definitions spelled out by the parties were:

“(a) Program — The plan described herein to utilize Grynberg’s services, information and technical organization as an independent contractor for a two year period in an effort to discover, develop and produce reserves of oil and gas.
“(b) Prospect — Land underlain by a limited, contiguous area of geologic interest thought to be located on or associated with a single anomaly or structural condition favorable to the accumulation of oil or gas and which is appropriate in Grynberg’s judgment *1316 for the drilling of a well or wells in search of oil or gas.
“(c) Property Interest — An oil, gas or mineral lease or interest therein or other right or interest in oil, gas or other minerals or other property, real, personal or mixed, acquired under the terms of this Agreement for the account of Hess.”

The agreement required Grynberg to maintain offices in New Orleans “under the name of Hess Exploration Company, a Division of Hess Oil & Chemical Corporation (an assumed name which shall be registered or filed ... by Hess).” Grynberg was required to assemble technical information in the 4-state area, “together with information on prospective Property Interests on such Prospects, with a view toward Hess either drilling on said Prospects or farming said Prospects out to third parties on advantageous terms.” Grynberg was not permitted to acquire oil and gas interests in the area without the consent of Hess, but it was agreed that if Grynberg submitted information to Hess on a Prospect and it was rejected by Hess, Grynberg could acquire that Prospect.

Grynberg’s duties are spelled out in minute detail, and in paragraph 6, his potential interests are defined:

“A. Out of the property interests acquired by Hess in each Prospect hereunder Grynberg shall own a net profits interest equal to twenty percent (20%) of the Net Income, as herein defined, (which 20% net profits interest is hereinafter referred to as Grynberg’s ‘Net Profits Interest’) derived from the ownership and operation of the Property Interests owned by Hess, its successors and assigns, in such Prospect; provided, however, that Grynberg’s Net Profits Interest shall be contingent upon the Program realizing an aggregate Net Income at the end of the two year period covered by this agreement, computed in the manner provided below.”

The agreement specified detailed accounting procedures to be followed in ascertaining the existence of Net Profits validating Grynberg’s interests, and it creates a purchase option in favor of Hess if Hess desires to sell any “Property Interest in a Prospect ... in which Property Interest and Prospect Grynberg has previously acquired a Net Profits Interest.” The agreement is 24 pages long, and we have hit only a selected few of its highlights.

On February 1, 1965, the parties agreed to terminate their relationship under the December 27, 1963, agreement, such termination to be effective as of October 17, 1964. The termination agreement constituted an exchange of mutual releases with a proviso in Grynberg’s release of Hess “that Grynberg shall be entitled to any interest as provided for and in accordance with the terms of the Agreement with respect only to the prospects submitted by Grynberg and which are listed on Schedule ‘A’ attached hereto.” Schedule A listed seven prospects:

“1. Breton Sound, Block 30, Plaque-mines Parish, Louisiana.
“2. Waynesboro, Wayne County, Mississippi.
“3. Bel Air, Plaquemines Parish, Louisiana.
“4. Bay Springs, Smith County, Mississippi.
“5. Prison Farm, Iberville Parish, Louisiana.
“6. Federal Oil and Gas Leases in Mississippi, Louisiana and Arkansas, acquired for Hess by Grynberg.
“7. Washita-Fredericksburg Oil Pool of the Gitano Field, Jones County, Mississippi.”

Of the seven listed prospects, we are really concerned with only three in which plaintiff claims that oil has been discovered. Those three are:

1. Washita-Fredricksburg Oil Pool of the Gitano Field, Jones County, Mississippi.
2. Prison Farm, Iberville Parish, Louisiana.
*1317 3. Bay Springs, Smith County, Mississippi.

The principal disputes involve the Bay Springs Prospect which is also referred to in the testimony, in the briefs and in this opinion as the Tallahala Creek Field.

As to the other four exceptions from Grynberg’s release of Hess, the record shows:

1. Breton Sound, Block 30, Plaque-mines Parish, Louisiana is a Prospect in which defendant acquired a Property Interest. However, a dry hole was drilled, and the area is of no remaining importance.

2. Waynesboro, Wayne County, Mississippi, stands on the same footing as Breton Sound in that no production was obtained.

3. Bel Air, Plaquemines Parish, Louisiana, is again a Prospect in which defendant acquired a Property Interest. It was never drilled and the leases have expired.

4. Federal Oil and Gas Leases in Mississippi, Louisiana and Arkansas acquired for Hess by Grynberg are leases from which defendant has acquired no benefit.

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Bluebook (online)
342 F. Supp. 1314, 42 Oil & Gas Rep. 564, 1972 U.S. Dist. LEXIS 13728, Counsel Stack Legal Research, https://law.counselstack.com/opinion/grynberg-v-amerada-hess-corporation-cod-1972.