Sundance Energy Oklahoma, LLC v. Dan D. Drilling Corp.

836 F.3d 1271, 2016 U.S. App. LEXIS 16255, 2016 WL 4582173
CourtCourt of Appeals for the Tenth Circuit
DecidedSeptember 2, 2016
Docket15-6103 & 15-6135
StatusPublished
Cited by10 cases

This text of 836 F.3d 1271 (Sundance Energy Oklahoma, LLC v. Dan D. Drilling Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Tenth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sundance Energy Oklahoma, LLC v. Dan D. Drilling Corp., 836 F.3d 1271, 2016 U.S. App. LEXIS 16255, 2016 WL 4582173 (10th Cir. 2016).

Opinion

MORITZ, Circuit Judge.

Sundance Energy Oklahoma, LLC, brought suit against Dan D. Drilling Corporation for damages resulting from the total loss of an oil and gas well. A jury found against Dan D., and the district court denied its motion for a new trial. Dan D. appeals, arguing the district court erred in (1) giving one jury instruction and omitting another; (2) admitting certain evidence; and (3) awarding Sundance attorney’s fees. Finding no reversible error, we affirm.

BackgrouND

Sundance contracted with Dan D. to drill seven oil and gas wells in June 2012. For each of those wells, Sundance and Dan D. executed a single-well contract (collectively, the June 2012 contracts). The June 2012 contracts used an industry-standard International Association of Drilling Contractors (IADC) form, with only minor changes to the form’s language. Notably, in each of the June 2012 contracts, the parties left section 14 of the IADC form, titled “RESPONSIBILITY FOR LOSS OR DAMAGE, INDEMNITY, RELEASE OF LIABILITY AND ALLOCATION OF RISK,” substantially unaltered. App. vol. 16F, 3813. In relevant part, that section provides, “In the event the hole should be lost or damaged, [Sundance] shall be solely responsible for such damage to or loss of the hole.” Id. at 3814. That section further explains:

[I]t is the intent of [the] parties hereto that all releases, indemnity obligations and/or liabilities assumed by such parties under [the] terms of the Contract ... be without limit and without regard to the cause or causes thereof, including but not limited to ... the negligence of any degree or character (regardless of whether such negligence is sole, joint or concurrent, active, passive or gross) of any party or parties .... ”

Id.

Dan D. ultimately drilled only two of the seven wells due to Sundance’s inability to secure proper leases and drilling permits for the other five. In lieu of the undrilled wells, Sundance asked Dan D. to drill a different group of wells — including one known as the Rother well — and hired Tres Management to provide engineering services and an onsite supervisor known as a company man for this work. In early December 2012, Dan D. signed a multi-well contract (the December 2012 contract) for these new wells. And although Sundance received the signed December 2012 contract — which included terms similar to those contained in the June 2012 contracts — Sundance asserts that its in-house counsel never reviewed or signed the con *1274 tract before Dan D. began work on the Rother well.

Despite the absence of an executed contract, Dan D. began drilling the Rother well on December 2, 2012, under the supervision of Tres’ company man. On December 9, 2012, Dan D.’s drill pipe became stuck in the hole. After several failed attempts to remove the drill pipe, the company man instructed Dan D.’s employees to stop pulling on the stuck pipe. A driller on the rig ignored these instructions and continued to try to remove the equipment. During these attempts, the drilling line — a thick, coiled steel rope routed through derrick and used to raise or lower the drill string using a pulley system — parted, and portions of the drill rig known as the traveling blocks fell on the driller, killing him. A medical examiner later determined that the driller had significant quantities of methamphetamine in his blood at the time of the accident.

The Occupational Safety and Health Administration (OSHA) suspended operations for 12 days while it investigated the accident. In its June 19, 2014 technical report, OSHA explained that the accident resulted from fatigue failure of the drilling line — a progressive failure occurring over time. Thé report concluded that “[a] proper ‘cut and slip’ program, visual inspection and attention to the ton-mile history of the rope would have limited the wear accumulated by this drill line.” 1 App. vol. 15B, 3469. OSHA thus issued Dan D. a citation for failing to inspect and properly maintain the drilling line. Dan D. and OSHA settled the citation, and OSHA reduced the fíne in return for Dan D. taking corrective actions at the^ drill site.

Following OSHA’s investigation, Sun-dance replaced Tres’ company man. Under the new company man’s supervision, Dan D. -attempted to fish out the drill pipe stuck in the Rother well. But the wellbore had deteriorated during the 12-day shutdown, making it impossible to. remove the drill pipe. Sundance ultimately decided to plug and abandon the Rother well, resulting in a total loss of the hole.

Sundance sued Dan D. for damages, asserting that Dan D.’s negligence, gross negligence, and breach of implied contract to drill the well in a workmanlike manner resulted in the loss of the hole. Before trial, Dan D. filed several motions in li-mine, including one objecting to the admission of two OSHA narratives as hearsay, and one objecting to the admission of toxicology evidence showing that the deceased driller had methamphetamine in his blood at the time of his death. The district court denied the motion to suppress the toxicology evidence, and denied in part the motion to suppress the OSHA narratives, agreeing to admit only certain portions of those documents.

At the subsequent jury trial, Sundance offered testimony indicating that a driller typically keeps a log of the drilling line’s “ton miles,” i.e., the work done by the line, as measured by the load lifted in tons and the distance lifted or lowered in miles. In fact, Sundance’s expert testified, Dan D.’s failure to track and log the ton miles of the drilling line used at the Rother well was “unheard of’ in the industry. App. vol. 11, 2072. The expert further opined that Dan D. should have slipped and cut the drilling line before or during the drill to prevent the accident. Sundance relied on this testimony at closing to argue that Dan D.’s gross negligence caused the line’s failure or, alternatively, that Dan D. breached an implied contract to drill the Rother well in a workmanlike manner. And, Sundance maintained, the ensuing 12-day shutdown *1275 caused the wellbore deterioration and ultimately resulted in the total loss of the hole.

For its part, Dan D. argued in closing that the jury should attribute most of the fault not to Dan D., but to Tres and its company man. In any event, Dan D. asserted, the exculpatory provisions provided in the IADC standard contract — which state that Sundance is liable for any damage to or loss of the hole, including any loss resulting from Dan D.’s gross negligence — formed part of an implied contract between Dan D. and Sundance. And under these provisions, Dan D. maintained, it wasn’t liable for the loss of the well.

Dan D. also argued to the district court that Sundance owed a non-delegable duty to Dan D., and, accordingly, that any negligence of its independent contractor — i.e., Tres — was imputable to Sundance. But when Dan D. asked the district court to instruct the jury that it should therefore impute any of Tres’ negligence to Sun-dance, the district court denied its request, noting that it “just didn’t see sufficient evidence that this was a non-delegable duty.” App. vol. 11, 2143. And over Dan D.’s objection, the district court instructed the jury that if it found Dan D.

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836 F.3d 1271, 2016 U.S. App. LEXIS 16255, 2016 WL 4582173, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sundance-energy-oklahoma-llc-v-dan-d-drilling-corp-ca10-2016.