QEP Energy Company v. Sullivan ( 2013 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT April 30, 2013
Elisabeth A. Shumaker
Clerk of Court
QEP ENERGY COMPANY,
a Texas Corporation,
Plaintiff-Counter-Claim-
Defendant-Appellee,
v. No. 12-4075
(D.C. No. 2:08-CV-00859-TC)
CHRISTOPHER M. SULLIVAN, (D. Utah)
Defendant-Counter-
Plaintiff-Appellant.
ORDER AND JUDGMENT*
Before BRISCOE, Chief Judge, HOLLOWAY, Senior Circuit Judge, and
TYMKOVICH, Circuit Judge.
Christopher M. Sullivan, an attorney proceeding pro se, appeals from the
district court’s order denying his Fed. R. Civ. P. 60(b) motion to vacate the court’s
previous declaratory judgment construing an oil and gas lease. We have jurisdiction
under 28 U.S.C. § 1291, and we affirm.
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of this
appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
I.
Through an assignment, Sullivan owns an interest in oil and gas produced
under a federal lease. In response to a form question on the assignment asking
“[w]hat overriding royalty or production payments is the assignor reserving,” the
parties wrote “[t]hree Percent (3%) of 8/8, see attached rider.” QEP Energy Co. v.
Sullivan, 444 F. App’x 284, 286 (10th Cir. 2011). The lessee, QEP Energy Company
(QEP), and Sullivan agreed that the referenced rider described a production-payment
interest entitling Sullivan to receive payments capped at $300 per acre. But they
disagreed whether the “three Percent (3%) of 8/8, see attached rider” language
reserved a 3% production-payment interest capped at $300 per acre on the lease, as
QEP contended, or both a $300-per-acre obligation and a separate 3%
overriding-royalty interest, as Sullivan contended. See id. at 288. QEP brought a
declaratory action. Sullivan argued to the district court that the phrase “3% of 8/8”
standing alone is common industry terminology used to reserve an overriding royalty.
Id. at 289. QEP did not challenge that assertion, see id. at 289, but noted that the
language Sullivan emphasized did not stand alone, but included the words “see
attached rider,” which were separated from the “3% of 8/8” phrase by a comma.
The district court entered judgment in favor of QEP, ruling that the phrase
unambiguously referred only to a single 3% production-payment interest. This court
affirmed, also holding that the phrase created a 3% production-payment interest, the
terms of which were further defined in the attached rider. Id. at 292.
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Sullivan then filed a Rule 60(b) motion in the district court asking the court to
vacate its judgment, claiming he had newly discovered evidence that would have
changed the district court’s interpretation of the assignment language. During
Sullivan’s litigation with QEP, QEP was also in litigation with B&A Properties, LLC
over their disputed interpretation of the same assignment as his (the B&A case).
Sullivan discovered depositions in the B&A case in which a QEP expert and
manager, Nibert and Willis respectively, testified that “3% of 8/8” is known in the oil
and gas industry to create an overriding royalty. Aplt. App. at 152-53. Sullivan had
obtained this evidence from the Utah state court hearing the B&A case.
Sullivan sought relief under Rule 60(b)(2), which provides that “the court may
relieve a party . . . from a final judgment . . . for . . . newly discovered evidence that,
with reasonable diligence, could not have been discovered in time to move for a new
trial under Rule 59(b).”1 He argued that Nibert’s and Willis’s deposition testimony
from the B&A case (the B&A depositions) constituted newly discovered evidence;
that QEP was aware of the prevailing industry usage; and that its witnesses had
previously admitted that the “3% of 8/8” phrase creates an overriding royalty.
The district court denied Sullivan’s Rule 60(b) motion. It ruled the B&A
depositions did not constitute newly discovered evidence because Sullivan chose not
to take Nibert’s or Willis’s depositions and chose not to present evidence of industry
1
Sullivan also sought relief under Rule 60(b)(3) and (6), but on appeal, he does
not challenge the district court’s denial of relief under those provisions.
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usage through his own expert witness. It further ruled the B&A depositions would
not have varied its interpretation of the unambiguous phrase in the assignment.
Sullivan appeals.
II.
“We review for abuse of discretion a district court’s denial of a Rule 60(b)
motion, keeping in mind that Rule 60(b) relief is extraordinary and may only be
granted in exceptional circumstances.” Dronsejko v. Thornton, 632 F.3d 658, 664
(10th Cir. 2011) (internal quotation marks omitted). To be eligible for relief under
Rule 60(b)(2), Sullivan must show: “(1) the evidence was newly discovered since the
trial; (2) [he] was diligent in discovering the new evidence; (3) the newly discovered
evidence [was] not merely cumulative or impeaching; (4) the newly discovered
evidence is material; and (5) that a new trial with the newly discovered evidence
would probably produce a different result.” Zurich N. Am. v. Matrix Serv., Inc.,
426 F.3d 1281, 1290 (10th Cir. 2005) (internal quotation marks and citation omitted).
Sullivan contends that he was diligent in discovering the B&A depositions and
that this evidence was material, not cumulative. He argues the district court abused
its discretion in using his failure to depose Nibert or Willis as a lack of diligence
because he was under no obligation to depose them. We disagree. “If a party,
through negligence or a tactical decision, fails to present evidence that was available,
it may not find refuge under Rule 60(b)(2) by finding substantially similar evidence
from a newly discovered source.” Lyons v. Jefferson Bank & Trust, 994 F.2d 716,
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728 (10th Cir. 1993). QEP listed Nibert and Willis as fact and expert witnesses.
Although Sullivan was under no obligation to take their depositions, their opinions
were discoverable had he chosen to depose them. Indeed, the B&A depositions were
publicly available from the court considering the B&A case while Sullivan’s
litigation was pending. And, as the district court further noted, Sullivan chose not to
present his own expert witnesses as to industry usage. See id. at 728 (“The newly
discovered evidence must not be cumulative not only with the evidence that the
moving party actually presented at trial, but also with the evidence that the moving
party could have, had it exercised due diligence, presented at trial.”). We conclude
the district court did not abuse its discretion in concluding Sullivan did not exercise
reasonable diligence.
Further, we see no abuse of discretion in the district court’s conclusion that the
B&A depositions were cumulative and not material. In the B&A depositions, Nibert
and Willis testified that they would interpret the phrase “3% of 8/8” as creating an
overriding royalty if that was the only language and there was no attached rider.
Aplt. App. at 172 (Nibert’s interpretation of the phrase if the contract had no “see
attached rider” phrase and there was no rider attached to the assignment at all); id. at
176-77 (Willis’s interpretation of the phrase if he saw that language alone in the
assignment). Those opinions are consistent with what Mr. Sullivan argued, and QEP
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conceded, on summary judgment. See QEP, 444 F. App’x at 289.2 But as the district
court held, and we affirmed, that phrase does not stand alone in Sullivan’s
assignment form. Id. at 289-90.
Accordingly, the district court did not abuse its discretion in denying
Sullivan’s Rule 60(b) motion. The judgment of the district court is affirmed.
Entered for the Court
William J. Holloway, Jr.
Senior Circuit Judge
2
This court’s panel explained:
Mr. Sullivan argues that “3% of 8/8” is common industry terminology
used to reserve an overriding royalty. He contends that, standing alone,
“Three Percent (3%) of 8/8” specifies an overriding royalty to be paid
out of three percent of 100 percent of gross production from the wells.
QEP does not challenge these contentions. But as QEP points out, the
language Mr. Sullivan emphasizes does not stand alone in the Thomas
Assignment.
QEP, 444 F. App’x at 289.
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