White Oak Operating Co. v. BLR Construction Companies

362 S.W.3d 725, 180 Oil & Gas Rep. 87, 2011 WL 4500840, 2011 Tex. App. LEXIS 7792
CourtCourt of Appeals of Texas
DecidedSeptember 29, 2011
Docket14-10-00084-CV
StatusPublished
Cited by25 cases

This text of 362 S.W.3d 725 (White Oak Operating Co. v. BLR Construction Companies) 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
White Oak Operating Co. v. BLR Construction Companies, 362 S.W.3d 725, 180 Oil & Gas Rep. 87, 2011 WL 4500840, 2011 Tex. App. LEXIS 7792 (Tex. Ct. App. 2011).

Opinion

OPINION

KEM THOMPSON FROST, Justice.

An oilfield service company sued an oilfield operator for breach of a master service agreement based upon the operator’s failure to pay an invoice for services rendered following the blowout of a well located in Louisiana. The operator counterclaimed, asserting that the service company breached an oral contract between the parties under which the service company allegedly promised to pay the operator for all costs incurred and damage sustained as a result of the blowout. The operator alleged, in the alternative, fraud based upon an allegation that the service company made this promise with an intent not to perform. The jury found that the operator breached the master service agreement by failing to pay the invoice. The jury also determined that the preponderance of the evidence does not support a finding that (1) the parties entered into the oral contract, (2) the service company committed fraud, or (8) the service company failed to perform its work with due diligence and in a good and workmanlike manner. On appeal, the operator challenges the legal and factual sufficiency of the evidence as to these four findings. Concluding that legally and factually sufficient evidence supports these findings, we affirm the trial court’s judgment.

I, Factual and Procedural Background

In 2005, appellant/defendant/counter-plaintiff White Oak Operating Company, *728 LLC (“White Oak”) entered into a “Master Service Agreement” (“Master Agreement”) with appellee/plaintiff/counter-de-fendant BLR Construction Companies, LLC n/k/a Stallion Oilfield Construction, LLC (“Stallion”). Under section 8 of the Master Agreement, regardless of whether Stallion caused the loss or was negligent, White Oak (1) “shall be liable for the cost of regaining control of any wild well, as well as for cost of removal of any debris,” and (2) “shall assume all responsibility for, including control and removal of, and protect, defend, indemnify and save [Stallion] harmless from and against all claims, demands and causes of action of every kind and character arising directly or indirectly from all ... pollution or contamination which may occur during the conduct of operations hereunder [other than certain pollution or contamination not relevant in the case under review], including, but not limited to, that which may result from ... blowout ... or any other uncontrolled flow of oil, gas, water or other substance.”

White Oak is the operator of the Lawton # 3 well located in Louisiana (“Well”). The Well was completed in February 2007 and was capped in anticipation of the installation of production equipment. During this time, Stallion provided various services to White Oak regarding the Well under the Master Agreement, including building the “location,” laying mats, and permatizing. To perform the permatizing work in question, a Stallion bulldozer operator had to spread crushed limestone around the well site up to the edge of the cellar. On May 23, 2007, Roland Duhon, a Stallion employee, was performing perma-tizing work with a bulldozer at the Well. Duhon was the only person at the Well. While Duhon was performing this work, he noticed what he described as “a small blue plume, which was about 5 or 6 feet high, between ... the Christmas tree and the spool that the Christmas tree was attached to.” Duhon testified that he called a Stallion office and told Todd Miller that he thought he might have hit the wellhead and that it was leaking. Miller asked Du-hon if Duhon could turn it off. But the leak was below the master valve, so Duhon told Miller that there was no valve by which Duhon could shut it off. Duhon talked to Ronnie Powell, Stallion’s safety director, and told him he thought he might have hit the wellhead. The Well continued to leak, leading to a blowout and a wild well.

On May 23, 2007, Powell arrived at the site of the Well, as did Tommy Angelle, the sales manager for Stallion’s construction department. Joe Lauer, a White Oak employee, also arrived on the site that day. There was testimony at trial that (1) An-gelle told Lauer that Stallion would provide services in response to the blowout free of charge; and (2) after receiving approval from Mike Rayburn, White Oak’s executive vice president, Lauer agreed that Stallion could provide services in response to the blowout free of charge.

White Oak has asserted that, based upon statements made by Duhon, Powell, and Angelle to Lauer on May 23, 2007, Stallion and White Oak entered into an oral contract, separate from the Master Agreement, under which Stallion promised to pay White Oak for all costs incurred and damage sustained by White Oak as a result of the blowout (“Alleged Agreement”). White Oak asserts that, under the Alleged Agreement, White Oak promised to (1) forebear any claims it had against Stallion regarding the blowout, (2) allow Stallion to use its own equipment and personnel to minimize the cost to Stallion of controlling the Well, repairing the damage, and containing and cleaning up the pollution and contamination, and (3) keep Stallion on White Oak’s approved vendor list so that Stallion could continue to do business with *729 White Oak. White Oak contends that, under the Alleged Agreement, Stallion agreed to pay for the services rendered by third parties in response to the blowout and for damage to the Well.

Stallion and other contractors provided services over the next four days. By May 27, 2007, the Well was under control. White Oak put a new wellhead on the Well, and at the time of trial the Well was White Oak’s “biggest producer.”

Stallion’s Chief Executive Officer, Craig Johnson, testified that, on May 23, 2007, he and others at Stallion were unaware of the existence of the Master Agreement and that they did not become aware of this agreement until several months later. Johnson also testified that Stallion notified its insurance carrier of the blowout on May 23, 2007, and that Johnson and others at Stallion believed that Stallion’s insurance would cover the costs of Stallion’s liability regarding the blowout.

White Oak paid third-party contractors for services regarding well control, restoration and repair of the Well, and pollution clean up. These third-party charges total approximately $956,000. White Oak sought payment from Stallion to cover the cost of these third-party services. Johnson, Angelle, and Rayburn met on August 17, 2007, to discuss the third-party invoices. Johnson testified at trial that, on August 17, 2007, he was ready to sign a check to pay for White Oak’s third party costs. Shortly after this meeting, Johnson obtained a copy of the Master Agreement. In addition, after this meeting, Johnson learned that there was no insurance coverage due to the terms of the Master Agreement. Stallion then refused to pay White Oak for the third-party costs.

Stallion sued White Oak on October 2, 2007, in the trial court below. Later, on May 12, 2008, White Oak received for the first time an invoice from Stallion requesting payment for the goods and services rendered by Stallion in response to the blowout of the Well (“Post-Blowout Services”). The invoice was dated August 1, 2007. In this invoice, Stallion sought payment in the amount of $357,193.12 (“Invoice”). In an amended petition, Stallion alleged that White Oak breached its obligations to Stallion under section 8 of the Master Agreement and that White Oak was liable to Stallion based upon White Oak’s failure to pay for the Post-Blowout Services.

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Cite This Page — Counsel Stack

Bluebook (online)
362 S.W.3d 725, 180 Oil & Gas Rep. 87, 2011 WL 4500840, 2011 Tex. App. LEXIS 7792, Counsel Stack Legal Research, https://law.counselstack.com/opinion/white-oak-operating-co-v-blr-construction-companies-texapp-2011.