Davis v. Sonat Exploration Co ( 1996 )

UNITED STATES COURT OF APPEALS
Filed 12/9/96
FOR THE TENTH CIRCUIT
WILLIAM H. DAVIS, Trustee of the
Joe D. Davis Revocable Trust,
Plaintiff-Appellant,
No. 95-5248
v. (D.C. No. 94-C-828-H)
(N.D. Okla.)
SONAT EXPLORATION COMPANY,
Defendant-Appellee.
ORDER AND JUDGMENT *
Before BALDOCK and BRISCOE, Circuit Judges, and LUNGSTRUM, ** District
Judge.
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
**
Honorable John W. Lungstrum, District Judge, United States District Court
for the District of Kansas, sitting by designation.
argument. See Fed. R. App. P. 34(f) and 10th Cir. R. 34.1.9. The case is
therefore ordered submitted without oral argument.
Plaintiff William H. Davis, as Trustee of the Joe D. Davis Revocable Trust
(Davis Trust), appeals from the entry of summary judgment in favor of defendant
Sonat Exploration Co. (Sonat) in this diversity action for breach of contract and
related tortious conduct. As explained below, we affirm for substantially the
reasons stated in the district court’s thorough and well-reasoned order granting
Sonat’s motion for summary judgment.
Plaintiff brought suit to recover damages incurred when Sonat, invoking a
buyer’s satisfaction clause included in the parties’ preliminary agreement,
withdrew its offer to purchase certain oil and gas properties from the Davis Trust.
Acknowledging application of the clause, plaintiff claimed Sonat breached its
attendant duty of good faith and fair dealing by relying on environmental
problems which, being insufficient to warrant a reasonable invocation of the
clause in themselves, merely served as a pretext concealing Sonat’s ulterior
motivation to terminate the agreement on impermissible economic grounds. The
district court held plaintiff’s evidence legally insufficient to support such
allegations and, accordingly, granted Sonat’s motion for summary judgment.
We review the grant or denial of summary judgment de novo,
applying the same legal standard used by the district court pursuant
to Fed. R. Civ. P. 56(c). Summary judgment is appropriate if the
pleadings, depositions, answers to interrogatories, and admissions on
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file, together with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled to
judgment as a matter of law. When applying this standard, we
examine the factual record and reasonable inferences therefrom in
the light most favorable to the party opposing summary
judgment. . . .
While the movant bears the burden of showing the absence of a
genuine issue of material fact, the movant need not negate the
non-movant’s claim. . . . If the movant carries this initial burden, the
non-movant may not rest upon its pleadings, but must set forth
specific facts showing a genuine issue for trial as to those dispositive
matters for which it carries the burden of proof. An issue of material
fact is genuine if a reasonable jury could return a verdict for the
non-movant.
Wolf v. Prudential Ins. Co., 50 F.3d 793, 796 (10th Cir. 1995)(citations and
quotations omitted). We note that plaintiff bore the burden of establishing the
conditions precedent to Sonat’s obligations under the parties’ agreement. See
Smith v. Government Employees Ins. Co., 558 P.2d 1160, 1162 (Okla. 1976).
On appeal, the parties dispute the proper legal standard for assessing
Sonat’s invocation of the satisfaction clause. Plaintiff contends the district court
should have applied an objective “reasonableness” standard, while Sonat defends
the court’s use of a subjective “good faith” standard. We need not resolve this
uncertain question of state law. Both parties have argued points involving each
standard. Indeed, plaintiff’s insistence on an objective standard is peculiarly at
odds with his substantial reliance on allegations of pretextual--i.e., subjectively
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improper--conduct. In any event, under either standard the evidence of record
warrants the entry of summary judgment in favor of Sonat.
It is undisputed that the decision to withdraw Sonat’s $600,000 purchase
offer was made exclusively by David Minor, Sonat’s vice president and manager
of its mid-continent region. Minor assertedly based his decision on (1) the
substantial cost of bringing the properties up to Sonat’s high environmental
standards 1 (estimated at $157,000), and (2) the potential for future environmental
liabilities, particularly relating to groundwater contamination. These reasons
match the documented findings and recommendation of Sonat’s operations group,
which was specifically responsible for the assessment of environmental problems
in connection with proposed acquisitions. The affidavit submitted by plaintiff’s
expert, who conceded “a strong possibility that one or more violations of the
Clean Water Act has occurred or will occur” and failed even to address the
substantial cost of bringing the properties up to Sonat’s own standards, 2 does not
effectively undercut Sonat’s unfavorable environmental assessment of the
properties and consequent withdrawal of its purchase offer. Accordingly, we hold
as a matter of law that the pertinent testimonial evidence and documentation
1
Uncontroverted testimony established both the environmental rigor and
commercial rationale for Sonat’s internal standards.
2
Davis Trust employee Oran Hall likewise expressed a conclusory opinion
generally discounting the environmental problems involved without even
addressing Sonat’s environmental standards.
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relating thereto demonstrate an objectively reasonable basis for Sonat’s
withdrawal of its purchase offer.
We also agree with the district court’s rejection of plaintiff’s pretext
evidence. The excerpts from plaintiff’s own deposition ascribing concealed,
improper motivations to Sonat reflect nothing more than his self-described
“assumptions” and “feelings,” admittedly lacking in supporting information or
documentation. Essentially the same is true of the testimony plaintiff relies on
from two Sonat acquisition personnel, who personally disagreed with the
operations group’s recommendation to terminate the transaction they had been
working to consummate. Since the pertinent environmental assessment fell within
the expertise and responsibility of the operations group, whose recommendation
was adopted by a separate executive decisionmaker, the contrary opinions of the
acquisition employees does not evidence either objective or subjective bad faith.
Finally, in both his deposition testimony and appellate briefing, plaintiff
maintains that Sonat’s improper motivation may be inferred from its refusal to
renegotiate the purchase contract with suitable concessions from Davis Trust to
accommodate the environmental deficiencies found. This contention
misconceives the nature and function of the satisfaction clause included in the
parties’ agreement. The nonfulfillment of this condition precedent did not simply
afford Sonat a bargaining advantage in some mandatory contract modification
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negotiations, but, rather, discharged Sonat’s obligations (and Davis Trust’s
corresponding rights) under the agreement altogether. See, e.g., Smith, 558 P.2d
at 1162; Sunray DX Oil Co. v. Great Lakes Carbon Corp., 476 P.2d 329, 336-37
(Okla. 1970); McDaniel v. McCauley, 371 P.2d 486, 488 (Okla. 1962).
The judgment of the United States District Court for the Northern District
of Oklahoma is AFFIRMED.
Entered for the Court
John W. Lungstrum
District Judge
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